ENERGY WATCH #4 - December 20, 2018
The European Commission has just published its annual scenarios report including its projection as to when greenhouse gas emissions need to drop to net zero. For the past four years, the average global de-carbonisation rate showed a 2.6% per year drop. Even the best performing economy in 2017 in terms of carbon intensity reduction – China – only achieved a drop of 5.2% (source: PwC). This won’t get us to 1.5 degrees. What’s needed is a strategy that includes the implementation of renewable energy sources on course for 78% of total power. That will enable the de-carbonisation rate to rise to 9% per year, which is required. EPW considers the implications to the power sector of staying within the scientifically preferred 1.5 degrees of average temperature rise.
Tensions were running high even before the latest UN climate talks had started following the publication of the Intergovernmental Panel on Climate Change’s (IPPC) latest scientific report challenging the current ambition of global efforts to reduce greenhouse gas (GHG) emissions.
For many years, limiting global warming to within no more than a 2 degree rise in average temperatures, based on pre-industrial levels, was a de-facto target for negotiators to work towards.
Now, the IPPC – backed up by the views of 70 scientists – says that 2 degrees of warming is not a “guardrail up to which all would be safe”. Instead, the world should “push the defence line as low as possible” and aim to limit warming to 1.5 degrees.
The special report highlighting the likely impacts of 1.5 degrees warming, received short shrift from the US, Russia, Kuwait and Saudi Arabia, among others, whose negotiators merely ‘noted’ its existence, refusing to ‘welcome’ it. Saudi Arabia’s senior negotiator Ayman Shasly said: “We all know it will cost the world a great deal of cost and all elements to achieve 1.5 degrees. The storyline of the entire report shows that it is achievable, it’s doable, let’s all do it together, which is not fair. What is the equity in this? Where is history in this?”
The European Commission’s Joint Research Centre’s (JRC) latest analysis, also launched at COP 24, provides some of the answers in assessing the likely differences between meeting a 2 degree and a 1.5 degree rise.
Right now, emissions and energy consumption trends show we are not on track to meet either of the goals. But JRC’s Global Energy and Climate Outlook 2018 predicts that to hit the 1.5 degree goal, global GHGs have to drop to net zero by 2065, and by 2080 to meet the 2 degrees target – both of which are technically possible and at relatively low cost to the overall economy. “While this clearly would come with increased investment needs, the overall costs would be equivalent of less than one week of economic activity lost for a given year. The economy would grow, decoupled from greenhouse gas emissions,” it claims.
Comparisons made as to the economic impacts across regions between the Nationally Determined Contributions (NDC) and the 2 degrees scenarios it lays out shows that long-term decarbonisation goes hand-in-hand with high, yearly per capita consumption growth rates in fast-growing, low and middle-income countries.
Achieving higher ambition levels than the NDCs – which leaves the likes of Saudi Arabia and the US so nervous – “can be done at relatively low costs,” argues the report. “While GDP and consumption are expected to decline relative to the NDC scenario in 2050, investment will increase to build the capital stock required for a low emission economy.”
To achieve this, the global energy system and energy consumption patterns will need to undergo a “profound and accelerated transformation” to reach global annual decarbonisation rates of 6.1% per year and 9.0% per year during the period 2015 to 2050 for 2 degrees and 1.5 degrees respectively. During the five year period to 2016, this figure was 1.9% a year.
Central to mitigation efforts would be an expanding use of renewables and an increasing role of electricity in the energy being consumed. The analysis suggests that greater use clean energy sources will account for 27% of the required emission reductions, non-CO2 abatement for 20%, improved energy efficiency for 17%, and electrification of final energy demand and land use both for 10%.
In its scenario presentation for a 2 degree limit:
- GHGs from the power sector would fall from 24% of the total in 2015 to just 11% in 2050
- Almost a quarter of electricity was renewable in 2015 (23%); above a quarter would be non-renewable in 2050 (29%);
- fossil fuel share (without carbon capture and storage) in power generation would drop from 61% in 2015 to 7% in 2050;
- coal power generation would decrease by a factor of 9 over 2015–2050.
Should total installed power generation capacity increase from 6.5 TW globally in 2015 to about 9.7 TW in 2030 and 17.8 TW in 2050, as the report projects, so too will capital equipment demand. Total investments required in the energy sector for supply and energy transformation, including fossil fuel production, power, hydrogen and biofuels, would reach US$24 trillion during the 2010 to 2030 period and US$40 trillion over 2030 to 2050 in the 2 degrees scenario. Such investment still represents around 6-7% of total investment levels of the economy during the projection periods. The share was 7% during the 1990-2015 period, according to JRC.
Hitting the 1.5 degree limit demands a “deeper transformation” of the economy and the energy system. The analysis suggests that in terms of global GDP, the 1.5 degree scenario leads to a reduction of 1.3% relative to the NDC scenario. “In 2050, investment is 0.1% higher than in the NDC scenario, but a faster transition earlier on increases investment to 2.2% above the NDC scenario value in 2025,” it says, highlighting that the costs will vary from country to country. For example, India is one of the regions where the difference between achieving the 2 degree and 1.5 degree goal is more pronounced, largely because of the non-CO2 emissions impact of its agricultural sector, the abatement of which could be costly.
Clearly, JRC sees the power sector as an essential piece of the global decarbonisation puzzle, not just for its technological diversity but also its “strong and relatively quick reaction to climate policies”.