Climate Change Briefing: Hitting a moving target
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Summary

Moving Targets signal approaching carbon crunch

 

It’s not only the climate that’s changing. The debate over how to tackle it is shifting rapidly and the global agreement due to be signed by world leaders next year could be much more dramatic in its impacts on businesses and households than has been anticipated for most of the past decade.

 

In particular, momentum is growing for a deal that would slam the brakes on the world’s greenhouse gas (GHG) emissions, so that they peak in 2015 and then start to fall. That’s an enormous ask, when GHG emissions are currently soaring by around a billion tonnes a year in carbon dioxide equivalent terms, or over 2%, and the forces driving them up, such as the fast-rising world population and Chinese and Indian economic growth, show little sign of abating. 

 

Do business leaders realise that a change of this scale could be coming down the track? Not to judge by some of the recent evidence. In fact, many of them seem to be relegating climate change in their priorities. A PricewaterhouseCoopers survey this year showed that the main fear of global CEOs was global recession, while climate change was cited as a concern by only 34%, compared with 40% in 2007. Two-thirds of business leaders did not even think climate change was a threat to their business – although four-fifths thought governments should do more about it.

 

 

Copenhagen summit

 

Governments may do just that – but the issue many businesses will face is that the action taken could hit them hard. The key decision point will be a major summit in Copenhagen in December 2009, an occasion that could rival the 1945 Yalta Conference or the 1992 Rio Earth Summit in its historical significance.

 

There are no sure-fire bets on what will happen in Copenhagen, but a number of forces could lead to a deal which is much tougher than anyone expected a few years ago.   These not only include political factors such as the presence of a new US President at what will be seen as a make-or-break moment for civilisation, but a hardening of scientific evidence on global warming and new calculations on what’s needed to combat it..  Of course, if there is a global recession underway, there will be contrary voices urging “it’s the economy stupid”. But equally the environmental choice is likely to be presented in a way that is starker than ever before – essentially to take drastic action now or consign the world to disaster.  However,  those who have studied the economics of mitigating climate change argue that if policies are well designed, the world economy could well benefit from strong action on mitigation, as money generated by carbon trading and taxes can channelled into cuts in other taxes as well as investment in clean energy and more sustainable land use, particularly in developing countries. 

 

THE MOVING TARGETS

When proposed or cited

By whom?

Stabilisation level for CO2 (ppm) – c380ppm in 2008

Cuts in CO2 emissions by 2050

Peak year for CO2 emissions

2001

Scenario cited by IPCC Chairman from Third IPCC Report

550

“..below current levels”

2025

2005

WBCSD

550

Approximately “today’s levels”

2030

2006

Stern Review

400-490 (450-550 of all GHGs in CO2e)

25%

2016-2026

2007

Scenario cited by IPCC Chairman from Fourth IPCC report

350-400 (445-490 of all GHGs in CO2e)

50-85%

2000-2015

2008

James Hansen, NASA

350

“Goals for 2050 are not a sufficient way to look at it”

Stabilisation within a decade

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The targets being proposed by leading thinkers on the issue are moving fast, with the goals getting tougher and the timescales getting tighter. 

 

The timescales are the most obvious factor. In 2001, experts were talking about making greenhouse gas (GHG) emissions peak in 2025.  Up to 2006, they were talking about 2020. Today they’re talking about 2015 or earlier. 

 

 

Keeping to 2°C

 

The change has been driven in large part by a sharper perception of what is needed to have a chance of keeping the rise in global temperatures this century below 2°C above pre-industrial levels. The EU, for example, says limiting warming to 2°C is needed to avoid “massive and irreversible disruption of the global climate system”.  Some believe even the 2°C target is too high, but if it is taken as a basis for examining the issue then the big questions that follow are:

 

·       how thick the blanket of GHGs that surrounds the earth can be allowed to get in order to stay within the 2°C limit? In technical terms, at what level should GHGs be ‘stabilised’?

·       how much we need to cut annual GHG emissions by to keep it to that thickness?

·       and by what date emissions need to stop rising and start falling?

 

The thickness of the blanket – the concentration of carbon dioxide in the atmosphere – is now over 380 parts per million (ppm), having soared by about 25% in 200 years from below 300ppm where it had been for all of human history until the industrial revolution began and with it the burning of large volumes of coal, oil and gas and the destruction of vast areas of forests.

 

As a result of these activities, we are now pumping some 38 billion tonnes of GHGs into the air every year, thickening the layer of GHGs by about 2ppm annually (and last year saw a rise of 2.4ppm – tied as the record highest increase with 2005).  

 

 

Moving targets

 

The critical calculation now driving the debate is that made by the Intergovernmental Panel on Climate Change (IPCC), the body set up by the UN to answer these questions and advise policy-makers, in its 2007 report. The report said that to keep to a global rise in temperature of between 2°C and 2.4°C, the concentration of CO2 had to be stabilised at 350-400ppm – which means either below, at, or just above today’s level - with emissions peaking in 2015 or earlier and then being cut by 50 to 85% by 2050.

 

This represents a major toughening of the targets and timescales compared to previous estimates. For example when Robert Watson, the then chairman of the IPCC, addressed international negotiators in 2001, the scenario he highlighted was one in which governments would decide to stabilize the concentration of carbon dioxide at 550ppm, with emissions peaking around 2025.

 

In 2006, when Sir Nicholas Stern produced his report for the UK Government, he tightened the proposed targets, recommending that CO2 should be stabilised between 400 and 490ppm and calculating that stabilising GHG levels at the upper end of the range would require emissions to peak within 10 to 20 years. 

 

By 2007, Watson’s successor, Rajendra Pachauri, addressing the UN, pointed to the IPCC’s latest projection – the scenario in which CO2 had to be stabilised at 350-400ppm with emissions peaking in 2015 at the latest.  This has been taken up by others, including the former UK Prime Minister, Tony Blair, who has taken on the task of seeking to broker agreement between major players. He has repeated the message, saying “the IPCC says we must cut global emissions in half from 1990 levels with a peak in emissions by 2015 if we are to have a reasonable chance of avoiding a greater than 2 degree rise.”

 

Some go much further. James Hansen, Director of NASA’s Goddard Space Science Laboratories, believes it is necessary to take carbon out of the atmosphere and reduce the concentration of CO2 to 350ppm in order to preserve the Arctic’s sea ice and prevent catastrophic flooding.  He has also argued for limiting global warming to 1.7°C to avoid loss of polar ice, widespread flooding and large-scale species extinction. 

 

 

Feedback risks

 

Hansen and others point out that climate change is not simply a linear process in which a given level of emissions leads to a given concentration of GHGs and temperature rise. The climate is a complex system that has many feedback processes whereby one impact leads to another. For example, as ice melts, it loses its reflective quality, or ‘albedo’, and instead absorbs incoming heat, melting faster – a process called the ‘albedo-flip’.  Peter Wadhams, Professor of Ocean Physics at Cambridge University, has shown how the reduction in Arctic sea-ice measured each September – from over 8 million sq km in 1950 to close to 4 million now - is not only shrinking faster that the mean projection of earlier models, but faster that the lower limit of the standard deviation of the models – the ‘plus or minus’ that indicates the range of expected outcomes.

 

As tundra melts, for example in Siberia, there is a risk that vast quantities of methane, a much more powerful GHG than CO2, will be released. Many who study feedbacks believe that the focus on CO2 levels and temperature rises is too narrow and that climate change demands a more holistic ‘systems dynamics’ approach which embraces all elements of the world’s ecology.

 

David Wasdell, International Co-ordinator of the UK-based Meridian programme, has warned of a series of feedback effects, ranging from the albedo-flip and increasing methane emissions to increased volumes of water vapour due to increasing evaporation. He and others believe that the critical factor is the level of ‘radiative forcing’ – or heat – in the climate system – heat being to global warming what a gas burner is to a saucepan. Wasdell says that the key target is to push radiative forcing from its current level of around two watts per square metre down to zero. In his analysis, allowing the global temperature to rise by 2°C would be disastrous because it would entail approximately doubling the power of the heat engine and pushing the climate across a range of dangerous ‘tipping points’ including a major sea level rise. Wasdell therefore advocates moving immediately to a low-carbon, and then a no-carbon economy and then into a phase of carbon removal, using such measures as production of biochar, a form of charcoal that absorbs carbon as well as providing energy. 

 

 

An unprecedented challenge

 

Even if we leave aside these more radical warnings findings and recommendations, the IPCC scenario of stabilising CO2 at 400ppm with a peak in 2015 is an unprecedented challenge in itself. Take just the CO2 emissions from energy. These were around 27 billion tonnes (GT) in 2005 and they are currently expected to rise to at least 32GT in 2015 and at least 34GT in 2030 - according to the International Energy Agency (IEA) - and that is provided all currently proposed environmental policies are implemented.  

 

If the goal is to create a 2015 peak and a 50-85% emissions cut by 2050, then energy related CO2 emissions need to be cut to around 23GT in 2030, below today’s level and a third lower than current environmental policies would achieve. The IEA says this would require: “… immediate policy action and technological transformation on an unprecedented scale.”

 

Some countries might put a moratorium on coal fired power stations, coal being the worst culprit for emissions in the power sector. Others might offer much greater subsides for wind and solar power. Carbon taxes could be introduced, ramping up fuel and power prices. Huge grants and discounts might be offered on insulation, double glazing and all other ways of increasing energy efficiency. Nuclear plants may be accelerated – although their long lead times might mean countries having to ‘overdraw’ their carbon allowances until closer to 2020. Carbon capture and storage (CCS) – the technology that enables CO2 to be piped underground, virtually eliminating emissions from power stations and factories - may be accelerated. James Hansen has called for a global moratorium on coal plants that do not have carbon capture.

 

While many low or no-carbon options exist for power, transport presents major problems. Hybrid cars that run partly on electricity can help reduce emissions to a degree, but all alternative fuels have their own challenges. Hydrogen-powered vehicles appear decades away due to the costs and practical difficulties of manufacturing hydrogen sustainably and storing it in vehicles in sufficient quantities.

 

The biofuels in use today raise a series of issues. They tend to be blended into gasoline or diesel in low proportions, typically 5 or 10%, and so make little dent on emissions. But at the same time, they use food crops such as corn and wheat and have been seen as a cause of rising food prices.  Indeed it seems to many that the main function of today’s biofuels is not environmental at all, but to shift US fuel revenues from the Middle East to the mid-West. However the picture could change dramatically with the advent of next generation biofuels – such as those made from woody crops in which the whole plant is used. If these can be made economically, they hold out the promise of fuels that do not use food crops, have much higher energy content, can be blended in high proportions and avert large volumes of emissions.

 

There are also likely to be large-scale reforestation programmes and other actions to restore nature’s carbon sinks.  R&D programmes are likely to be stepped up to increase the efficiency of renewables, overcome obstacles to hydrogen-powered cars and investigate radical options such as new forms of geo-thermal energy and giant ‘concentrated solar thermal’ installations. 

 

 

The policy dimension

 

What policies will stimulate these programmes? Some of the changes will be incentivised by subsidies and taxes, but many countries are likely to follow the EU’s lead and introduce market-based carbon trading systems that set a limit or ‘cap’ on emissions from a group of emitters – which can be companies or countries – issuing participants with emissions allowances that together add up to the total. Participants who want to emit more than their limit have to buy allowances from others so the overall cap is not exceeded. Over time, the cap can be progressively lowered to reduce emissions.

 

It’s accepted that the developed world – which is largely responsible for the carbon in the air today - would need to accept deeper cuts than the developing world, where growth is strong but emissions-reducing technologies are less advanced.

 

However, the issue cannot be tackled without very deep cuts in the developing world as well - because since 2004, non-OECD emissions of carbon dioxide have been greater than those of the OECD countries, and the gap is growing.

 

Currently the ‘clean development mechanism’ of the Kyoto Treaty enables developed countries which help cut emissions in the developing world to count those reductions against their own targets. It’s likely that this mechanism would be expanded to provide one of the most important routes for cutting emissions.

 

Looking to the UK alone, regardless of obligations to help the developing world, the task is immense. In its 2007 report, the CBI proposed a series of measures it believed was needed to hit the current 60% GHG reduction target for 2050, with an interim objective of 40% by 2030. Its plans for 2030 included 3000 wind farms, 20 power plants using carbon capture and cars that are 40% more efficient than today’s. If that’s the prescription for the 60% target, what will it be if the world’s sights are set higher and the UK target rises to 80% or even more as a consequence?

 

 

‘Substantial costs’

 

In terms of costs, the modelling done so far has tended to be carried out on a macro-economic and global scale, looking at impacts on global GDP many years hence.  For example Stern said that the dangers of unabated climate change would be equivalent to at least 5% of GDP while each year while the annual costs of stabilising at around 490ppm are likely to be around 1% of global GDP by 2050. This has been crucial in demonstrating that over the long term it will cost less to overcome climate change than deal with its impacts.  However the mantra that ‘the costs of action are less than the costs of inaction’ can be misleading when considering the short term costs for a particular business or household.   People tend to be more interested in their energy bills for 2013 than proportions of GDP in 2030 or 2050.

 

The UN Human Development Report for 2007-08 suggests that there will be an average annual cost of 1.6% of global GDP between now and 2030 to achieve stabilization around the 400ppm CO2 level. 1.6% may not sound a lot but it amounts to around two-thirds of global military spending or around 16 times the annual global aid budget. However, these macroeconomic costs are at the top end of the range, and there are many ways in which governments could reduce costs. When the US Administration published estimates of the costs of a reduction in US CO2 of 30% below business as usual by 2010 (starting in 2007), it came up with costs that looked well below the 1.6% of the UNHDR, if the benefits from reduced air pollution are taken into account.  The IPCC also appears to give some reassurance, saying that stabilizing temperature at an increase of 2.0 to 2.4°C – by stabilising emissions at around 400ppm CO2 - would cost the global economy a maximum of less than 3.0 % of its GDP by 2030, which means a loss of only around 0.12 % of growth per annum.

 

However the front-loading of the burden by targeting a peak in 2015 may impose its own costs. Stern warned that stabilising at 400ppm CO2 is “likely to be very costly because it would require around 7% per year emission reductions.” He says: “Achieving this could mean, for example, a rapid and complete decarbonisation of non-transport energy emissions, halting deforestation and substantial intensification of sequestration (ie CCS) activities.”

 

Probably the best that can be said on costs currently was articulated by Dr Fatih Birol, Chief Economist of the IEA, who said of the 2015 peak scenario that “Exceptionally quick and vigorous policy action by all countries, and unprecedented technological advances, entailing substantial costs, would be needed to make this case a reality”.  (Tomorrow’s Company is now exploring the possibility of a project to calculate some of the costs that businesses and households would face as a result of seeking to bring emissions to a peak by 2015.)

 

 

A global five year plan?

 

Targeting 2015 as the peak year for GHGs will also raise issues beyond climate change. 2015 is already the deadline set by the UN for the achievement of the ‘Millennium Development Goals’, set in 2000, including ending extreme poverty, halting the spread of HIV/AIDS and providing universal primary education.

 

If the urgency of all these challenges is set out starkly and the prior commitments of politicians are invoked, then this may well force leaders to agree to an integrated global five year plan to deal with all of them, if only because of the political cost of being seen to fail.  Integration of these tasks has a logic to it as the money used to penalise GHG emissions in trading and taxes could be switched towards development as well as cleaner energy. 

 

But the stakes are very high and the spectre of recession also hangs over the scene. However, any business or individual weighing up the odds has to factor in the chance that these major environmental and development issues will assume centre stage in public policy by 2010, with massive implications for lifestyles, business models and economics. The credit crunch may be occupying minds today, but the carbon crunch may be the dominant story of the next decade.

 

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