The European Union’s Energy Policy. I. The Emissions Trading System

Summary.  Just prior to entry into force of the Kyoto Protocol in 2005 the European Union adopted a cap-and-trade market mechanism, the Emissions Trading System, to reduce emissions of carbon dioxide and other greenhouse gases.  The System has three phases of operation between 2005 and 2020, the current ending date of the System as devised. 

The System covers 11,000 or more individual facilities.  Phase 1, lasting 3 years, was intended as a trial period.  It suffered from problems in implementation which impeded its effectiveness during this interval.  Phase 2 lasts 5 years and is drawing to an end this year.  In Phase 2 the allocation of emission allowances and operation of the allowance market were optimized, and the coverage of emitting sources is expanded.  Phase 3 is to last to 2020.  Its allowances are to decrease each year, so that greenhouse gas emissions necessarily will fall, to a level about 20% lower than 2005.

The Emission Trading System affords a workable model for a cap-and-trade mechanism for lowering greenhouse gas emissions.  The world’s major emitters of greenhouse gases, China and the U. S., have not implemented national emissions limitation policies.  China, in its current 5 year plan, includes pilot projects using cap-and-trade and carbon taxes.  The U. S. has failed to enact an energy policy, although a cap-and-trade bill passed the lower chamber in 2009.  In order to minimize the significant harms that arise from extreme events ascribed to global warming, the nations of the world should reach agreement as soon as possible on an agreement to limit greenhouse gas emissions and embark on adaptation measures.

Introduction.  This post describes the EU’s Emission Trading System.  The following post considers various technologies envisioned in the EU that contribute to reducing emissions of greenhouse gases.

Climate scientists have determined unambiguously that the long-term global average of temperature has increased since the beginning of the Industrial Revolution (ca. 1850) by about 0.7ºC (1.3ºF) (Intergovernmental Panel on Climate Change (IPCC)).  This is ascribed to the increasing use of fossil fuels for energy that the Industrial Revolution brought on.  Fossil fuels burn to produce carbon dioxide (CO₂), a significant greenhouse gas, in correspondingly increasing amounts.  The trends of fossil fuel use, increasing atmospheric concentration of CO₂, and the rise of the long-term global average temperature correlate closely with each other, and are especially pronounced beginning in the second half of the 20^th century. 

The Fourth Assessment Report of the IPCC, issued in 2007, determined that an essential objective is to limit the accumulation of greenhouse gases in the atmosphere such that the resulting global average temperature rise be less than 2ºC (3.6ºF). It states that “deep cuts in global greenhouse gas emissions are required according to [climate] science” to achieve this objective.  This is because higher global temperatures are predicted to cause damages from altered weather and climate events; these are already occurring, as evidenced variously by increased aridity and drought, or extreme rain and floods, and sea level rise, among other harmful effects, in recent years.

The Kyoto Protocol. In response to earlier assessments by the IPCC and other groups, the United Nations Framework Convention on Climate Change (UNFCCC) established guidelines for reducing humanity’s emissions of greenhouse gases, in the 1990’s.  The Kyoto Protocol, developed in 1998, established the goal of reducing the emission of CO₂ by at least 5%, depending on the nation, below the level for 1990 by the period 2008 to 2012.  The European Union (EU) members at that time acceded to the Protocol with a reduction minimum of 8%, and began implementing programs intended to achieve this goal. The EU has expanded in more recent years, and currently numbers 27 countries, including nations of the former Soviet Union and others, encompassing 500 million people.  The Kyoto Protocol formally entered into force in 2005.  (Nations considered to be developing at the time the Protocol was negotiated, including China, were excluded from coverage.  The U. S. never ratified the Protocol and is likewise excluded.)

Emissions Trading System of the EU.  Even before the entry into force of the Kyoto Protocol, the European Commission established the formalities and the structures for a greenhouse gas emissions trading scheme (ETS) covering its members.  The mechanism for implementing the ETS was a cap-and-trade market mechanism.

In cap-and-trade, allowances granting permission to emit 1 tonne of CO₂ initially are granted to emission sources, based on an assessment of their emissions rate.  (Later, the sources must acquire the allowances by bidding for them in an auction.)  The allowances are transferable, so that an inefficient facility that emits more CO₂ than its allotment must purchase allowances to make up the difference.  The allowances are remitted to the ETS authorities periodically.  More efficient facilities will have excess allowances and can either trade them to a needy facility for an agreed price or save them for later use.  In addition to direct transfers of allowances by purchase, cap-and-trade envisions third-party allowance exchanges which openly buy and sell allowances as trading vehicles in close analogy to other financial exchanges.  The exchanges constitute the best mechanism for establishing a market value for allowances at any given time.  

Thus cap-and-trade mechanisms assign a monetary value to the waste stream that emissions of CO₂ and other greenhouse gases represent.  This has not been done historically; CO₂ has not been considered to be a waste product of our energy economy whose disposal or treatment had to be priced into the purchase value of the fossil fuels from which they originated (see this earlier post).  If allowances are sufficiently scarce, their price will be high enough to serve as an incentive for emitting sources to become more efficient and emit less CO₂.  If the supply of allowances is ample, however, or the market demand is low, their price will fall and the objective of reducing the emissions rate will be discouraged.

Cap-and-trade markets work to reduce emissions by issuing successively lower numbers of allowances into a market region every year.  This limits their supply and should lead to higher prices needed for their purchase.  In addition, as noted above, annual allotments themselves can be issued into an exchange for purchase, rather than being granted at no cost.  The revenue accruing to the issuing agency, here the EU through the ETS, can be used to promote measures for further reduction in use of fossil fuels and in promoting economy-wide efficiency programs.

Operation of the EU Emissions Trading Scheme.  The ETS is being implemented in three phases:

          Phase 1.       2005-2007

          Phase 2.       2008-2012

          Phase 3.       2013-2020.

Since the Kyoto Protocol came into force in 2005, it is clear that planning for Phase I began before that time, and its structure was decided before that date.  As seen below in the chart, emissions allowances in a cap-and-trade regime were already in use prior to 2005.  As an accord intended to govern the operations of 27 sovereign nations, each one had to enact laws codifying the applicability of the ETS structure within its borders.

Phase 1 was characterized as a learning phase.  Its main features were:

• The level of the emissions cap was determined largely by each nation, including additional negotiation with the European Commission;
• It covered only CO₂, and included only power plants with a capacity greater than 20 MW and other industrial facilities; these represented 42% of emissions;
• Allocations of emission allowances relied primarily on recent historical records; they were offered at no cost; and
• Offsets favoring an emitting source from emissions savings reached in projects outside the EU were allowed.

In Phase 2, features that expanded on those above included:

• The level of the emissions cap conformed to the limits of the Kyoto Protocol;
• Emissions of nitrous oxide (N₂O) are partially covered as a greenhouse gas; and
• Limits on emissions from air travel are to begin in 2012.

Phase 3 departs from the earlier phases in important ways:

• National emissions caps are to be replaced by single EU-wide caps covering the entire region; they decrease by 1.74% per year starting in 2010 with the objective of delivering 21% reduction referenced to 2005 by 2020;
• Additional greenhouse gases and a wider range of industries are to be covered;
• Emissions allocations for electric generating plants will not be free; other industries begin with 80% of allowances free but diminishing to none free by 2020; and
• 90% of the allowances will be sold by auction; the proceeds are to be distributed to the member nations according to their 2005 emissions.

Performance of the EU ETS. 

The ETS covers at least 11,000 individual emission sources across the EU.  For additional details concerning the allocation of allowances for Phase 1, see reference 1.

In Phase 1 it turns out that allowances were granted, in certain cases, in excess of need or previous national experience.  Each nation’s specification of the number of allowances it needed was based on historical experience, and acceded to by the EU.  Inadvertently issuance of allowances for Phase 1 was delayed.  For these and other reasons the auction market in these initial years established early prices as high as almost EUR30 per tonne of CO₂ equivalents (tonne, a metric ton), which then fell to EUR0/tonne toward the end of Phase 1 (see the following chart).

Source: Estimations of post-2012 carbon price in Europe, Nicole Dellero (2008)  http://ec.europa.eu/energy/nuclear/forum/opportunities/doc/competitiveness/2008-10-24/areva--co2prices.pdf.

In this chart, each period’s price performance is color coded as shown.  The pale aqua line represents futures trading for (the lower number of) allowances to be granted beginning at the start of Phase 2.  The EU-wide number of allowances for Phase 2 was 11.8% lower than for Phase 1.  Once Phase 2 began in 2008, the actual allowance price and the futures trading for 2009 allowances followed essentially identical paths (see the chart).

The fall of the allowance price to EUR0/tonne in 2007 has been attributed both to the glut of allowances and to the impending economic slowdown preceding the world financial crisis of the coming years.  Of course, with allowances having no penalty value, sources were free to continue “business-as-usual” rates of emission, rather than to curtail them.  On the other hand, when allowances had a significant price, businesses were able to pass along corresponding price increases to customers, which resulted in windfall profits.

                                             

In Phase 3, in addition to the features itemized above, importantly the EU will centrally receive reports on, and verify, emissions from each facility.

Individual firms can reduce emissions and/or generate market profits under the ETS.  They can optionally phase out coal-fired electricity plants by shifting to renewables or gas, improve efficiency by investing in new equipment and creating cogeneration facilities, obtain offsets from emission-reducing programs outside the EU, if available shift generating or manufacturing loads to more efficient facilities, purchase allowances from more efficient companies, and actively trade on allowance exchanges.

Recent ETS results.

According to EurActive (accessed Jan. 21, 2012) industrial emissions of CO₂ fell in 2009 by 11% from the previous year.  This reflected the diminished economic activity brought on by the global recession.  Overall for the EU, emissions in 2009 fell by 7% year-on-year, due to the recession and the growth of renewable energy sources, according the European Environmental Agency (EEA; accessed Jan. 22, 2012). For 2009, emissions were below the pre-established cap, meaning that EU industrial establishments had surplus allowances that remained unused.  (Under the EU ETS, unused allowances can be saved for future use within a phase, and can even be carried forward to the next phase.  Thus the recession could potentially affect the market price for allowances for many years to come.)  EU emissions for 2010 increased 2.4% year-on-year, but the EEA believes the EU is still on track to achieve its Kyoto Protocol emission reduction objective for 2012.  The increased emissions for 2010 compared to 2009 reflect recovery from the recession in Europe as well as the effects of an unusually cold winter which led to increased heating from fossil fuels.

As of Nov. 22, 2011, EEA states that overall EU emissions for 2010 were 15.5% below the reference level of 1990 emissions.  For the original EU-15 (the EU membership at the time of the Kyoto Protocol), the emissions reduction was 10.7% as of 2010, well ahead of the goal of 8% by 2012 established under the Kyoto Protocol.  The EEA points out that, in order to achieve the EU reduction goal of 20% by 2020, additional measures will have to be implemented.  These would presumably include putting the additional policies identified for phase 3 into practice.

Using alternative data and sources, CO₂ emissions and per capita emissions of the full EU-27, the original EU-15 and the U. S. are compared in the table below.   

CO₂ emissions in 2010 (million tonnes CO₂) and CO₂/capita emissions 1990-2010 (unit: tonne CO₂/person)

	Per capita emissions
	Emis-sions 2010	1990	2000	2010	Change 1990-2010	Change in %	Change in CO2, %	Change in population, %
United States	5,250	19.7	20.8	16.9	-2.8	-14%	5%	23%
EU-27	4,050	9.2	8.5	8.1	-1.1	-12%	-7%	6%
EU-15	3,150	9.1	8.8	7.9	-1.2	-13%	-5%	9%

EU-27 = Full 27 current Member States.

EU-15 = 15 EU Member States at the time the Kyoto Protocol was ratified.

Source: Olivier, J.G.J., Janssens-Maenhout, G., et al., (2011), Long-term trend in global CO2 emissions. 2011 report, The Hague: PBL/JRC (accessed 01/21/12). http://edgar.jrc.ec.europa.eu/news_docs/C02%20Mondiaal_%20webdef_19sept.pdf

Annual greenhouse gas emission trends, and projections to 2020, under the EU ETS are shown in the following graphic.

GHG trends and projections 1990–2020 — total emissions.  Bunkers = fuel oil used in marine shipping.  The dotted line represents the goal for reduction of emissions by 2020 under the EU ETS.  Projections with existing measures represent the policies in place under Phase 2 of the ETS.  Projections with additional measures represent the policies to be implemented under Phase 3. Emissions included in emission trading (EU ETS) represents those portions of greenhouse gas emissions regulated under the ETS during Phase 1 and Phase 2, beginning in 2005.  Source: European Environmental Agency (accessed 01/23/12);

http://www.eea.europa.eu/themes/climate/ghg-country-profiles/trends-and-projections-2011-cp/eu-27_tp2011_country_profile.pdf.

The pale blue bars representing the emissions experience under the EU ETS through 2010 reflect the performance under Phase 1 (2005-2007) and the first three years under Phase 2 (2008-2010).  It is seen that regulated emissions increased during Phase 1, presumably reflecting the initial problems encountered in issuing and pricing emission allowances.  Performance during Phase 2 appears to be improving, as may be expected from the expanded coverage and the improved auction market for allowances.

Emissions projected through 2020 continuing the policies of Phase 2 lead to modest reductions in emissions, but are predicted not to suffice to attain the ETS goal of a 20% reduction by 2020 (dashed line).  Implementing expanded emissions reduction policies such as those of Phase 3 are expected to approach the reduction needed to reach the ETS 2020 goal.

The graphic below compares CO₂ emission of the U. S., EU27 and EU15 over 20 years from 1990 to 2010 with those of China.  Whereas emissions of the EU nations

                          0                                                                 10,000

                                      Millions of tonnes of CO₂

Source: Olivier, J.G.J., Janssens-Maenhout, G., et al., (2011), Long-term trend in global CO2 emissions. 2011 report, The Hague: PBL/JRC. http://edgar.jrc.ec.europa.eu/news_docs/C02%20Mondiaal_%20webdef_19sept.pdf

decreased during this interval, those of the U. S. increased modestly, and show a significant reduction in the second decade of this period.  In contrast, CO₂ emissions for China show a dramatic absolute increase, by about 350%, over the same two decades.  Clearly, China (and other developing countries of the world) need to embark on drastic policies to reduce their emissions in order for global greenhouse gas levels to stabilize at a level that avoids the most extreme of the predicted consequences of continued global warming.

Conclusions

The European Union implemented its Emissions Trading System in 2005; clearly, planning for this program began even before entry into force of the Kyoto Protocol in that year.  Establishing the ETS has been a significant achievement, as it required that each of the 27 current EU members enact enabling legislation built around the supranational framework of the ETS.  Because the EU ETS was the earliest emissions reduction program implemented in the world, achieved legislative backing from every member nation, and established significant goals for reducing greenhouse gas emission, it represents a significant step for the world of limiting emissions and constraining the rise of the planet’s long term average temperature.

The ETS is built around an emissions cap and allowance trading mechanism.  Its first three years of operation, termed Phase 1, was overtly acknowledged to be a trial period.  Indeed this turned out to be necessary, for the mechanism for allocating allowances turned out to be too generous, and the auction market for allowances at the outset was not seamless; the auction price fell to EUR0.  Now nearing the end of Phase 2, the ETS will be smoother in many ways, and will affect a larger number of emissions sources, as the EU enters Phase 3.

In the U. S., cap-and-trade emissions markets underlie the Northeastern states’ Regional Greenhouse Gas Initiative (RGGI; see this post) and California’s Global Warming Solutions Act (see this post).  RGGI has been operating for a few years, although its goals are quite limited.  The U. S. House of Representatives passed an energy bill including a cap-and-trade emissions reduction mechanism in 2009 modeled after the EU ETS, but no action was taken in the Senate and the bill was never enacted into law.

Emissions rates of China and the U. S. are the world’s first and second highest.  Neither nation is bound by the Kyoto Protocol; China because at the time of its negotiation developing countries were excluded from coverage, and the U. S. because the Senate voted unanimously against considering it for ratification.  Since that time, the 193 nations of the UNFCCC have been unable, in spite of annual gatherings, to craft a successor to the Kyoto Protocol, which expires at the end of 2012.  Currently the earliest date for placing a successor agreement in force may be 2020 (see this post on the Durban Platform).   In the meantime, as seen above, China and other countries continue to expand their annual rate of greenhouse gas emissions at a rapid pace as they seek to attain a level of industrialization comparable to that of developed countries.  The U. S., in the absence of a unified national legislated energy policy, continues to create a partial patchwork of various state-based and regional energy programs of differing scope and ambition.

Cap-and-trade acts on the supply side of the energy economy by constraining fossil-fuel based energy output.  Carbon taxes on fossil fuels, if implemented, would act on the demand side, constraining fuel and energy use.  Neither regime is without its problems and detractors, but this writer favors a carbon tax (one example is described in this post) for its directness and simplicity of operation, assuming exceptions to coverage are minimal.  A major objection has to do with a perceived constraint on economic activity because purchasing power may be drained off by the tax.  This can be countered by an annual rebate to fossil fuel consumers; even so the principal objective, creating a psychological restraint of demand would be achieved.  Revenue from the tax should also support deployment of renewable energy, thereby supporting new employment in the energy economy.

The nations of the world need to come together to limit greenhouse gases as soon as possible, in order to minimize the harms arising from global warming.  The EU ETS provides a demonstration of one way to contribute to achieving this goal.

References

1. Estimations of post-2012 carbon price in Europe, Nicole Dellero (2008)  (Slide presentation); http://ec.europa.eu/energy/nuclear/forum/opportunities/doc/competitiveness/2008-10-24/areva--.co2prices.pdf

2. Making Cap-And-Trade Work: Lessons From The European Union Experience, Daniel C. Matisoff, Environment Magazine, Jan.-Feb. 2010; http://www.environmentmagazine.org/Archives/Back%20Issues/January-February%202010/making-capfull.html.

3. Long-term trend in global CO₂ emissions. 2011 report, Olivier, J.G.J., Janssens-Maenhout, G., et al., (2011), The Hague: PBL Netherlands Environmental Assessment Agency and European Commission’s Joint Research Centre; http://edgar.jrc.ec.europa.eu/news_docs/C02%20Mondiaal_%20webdef_19sept.pdf

4. Approximated EU GHG inventory: early estimates for 2010; European Environmental Agency, Copenhagen, 2011;  http://www.eea.europa.eu/publications/approximated-eu-ghg-inventory-2010.

© 2011 Henry Auer 

Drastically Reducing California’s Greenhouse Gas Emissions by 2050

Summary:  California’s Global Warming Solutions Act and Executive Order S-3-05 establish the goal of reducing emissions of greenhouse gases economy-wide in the state by 80% below the level of 1990 by 2050.  The California Science and Technology Council, a non-official group, issued its report, “California’s Energy Future: The View to 2050”, providing a detailed analysis of the state’s current energy landscape, and proposed bold measures to attain the 80% reduction goal.

They found that a 60% reduction was attainable using technologies currently available or ready for scale-up.  A major contributor to this goal is enhancing the energy efficiency of the economy, including fixed buildings and transportation.  Additional components include a) replacing the end use of fossil fuels with electricity and the concomitant elimination of carbon dioxide emissions using carbon capture and sequestration, b) commissioning new nuclear power plants, and c) using renewable energy sources.

CCST found, however, that attaining the full 80% reduction goal was beyond the capability of currently deployable technologies.  This requires extensive research to identify and/or implement fully innovative technologies.

Because of the ever-increasing rate of emission of greenhouse gases and the resulting increase in earth’s long-term average temperature, it is important to implement initiatives such as that in this Report.  Strong support from government funding is needed and appropriate in order to embark on such programs.

 

Introduction.  The need to curtail emissions of greenhouse gases (GHG) around the world has led some nations and regions to develop ambitious programs to limit emissions in coming decades.  The European Commission has developed a plan, currently being implemented by the nations of the European Union, to limit emissions by 20% below the levels of 1990 by 2020, and by at least 80% by 2050 (see this earlier post). 

In the U. S., California enacted similar legislation, its statute AB32, the Global Warming Solutions Act, in 2006 (see this earlier post).  AB32 enacts statutory limits on greenhouse gas emissions only until 2020, requiring reduction to the level of 1990 by that date.  Yet, recognizing that climate scientists have determined that more drastic reductions in greenhouse gas emissions are required in order to minimize global warming, the Governor of California at the time, Arnold Schwarzenegger, issued Executive Order S-3-05, establishing the goal of reducing greenhouse gas emissions by 80% below the level of 1990 by 2050.  The California Air Resource Board’s Climate Change Scoping Plan envisions the bold, novel initiatives that are required to achieve this long-term objective.

California has had a long history of developing programs to conserve energy and limit greenhouse gas emissions, even before passage of AB32 and the Governor's executive order.  Starting in the 1970's, an extensive program of energy conservation (see, for example, “Real Prospects for Energy Efficiency in the United States”, prepared by America’s Energy Future, Panel on Energy Efficiency Technologies (National Academies Press, 2010))  and development of renewable energy has been put in place.  As a result, while the rest of the country continued to expand its use of fossil fuels, and of total consumption of energy, the trend for California remained relatively constant, i.e., it did not increase in tandem with the rest of the country.

The California Science and Technology Council (CCST), a non-official group of academic and government officials, recently issued a thorough analysis of the energy landscape accessible to the state, “California’s Energy Future: The View to 2050” (Summary Report, May 2011).  Its objective was to assess the nature and extent of measures needed that might be used to achieve the objectives of S-3-05.  This post summarizes the Summary Report.

CCST points out a significant hurdle in achieving the goal in S-3-05.  Between 2005 and 2050 California’s population is expected to grow by almost 50% to 55 million people.  Furthermore, assuming no major initiatives are taken to curb emissions beyond those already in place, and assuming moderate economic growth the  state will need about twice as much energy by then than at present.

The authors assessed various technologies usable in reducing greenhouse gas emissions, and categorized them into four groups, as shown in the following table.

Technology Bin	Description
Bin 1	Deployed and available at scale now
Bin 2	Demonstrated, but not available at scale or not economical now
Bin 3	In development, not yet available
Bin 4	Research concepts

Source: “California’s Energy Future: The View to 2050” http://www.ccst.us/publications/2011/2011energy.pdf.

By focusing only on technologies in Bins 1 and 2, CCST established that reduction in emissions by 60% was achievable by 2050.  This goal required the following four main courses of action.

1. The building stock in the state should be “aggressively” upgraded to be as energy efficient as possible.  (Increasing the efficiency of buildings has been called “the low hanging fruit” in greenhouse gas reduction programs, summarized in this earlier post).  This includes designing new building codes that optimize energy efficiency in building construction and operation.  It also includes, to the extent possible, retrofitting existing buildings to increase the efficiency of their consumption of energy.  As part of their normal life cycle, buildings not susceptible of retrofitting at reasonable cost should be destroyed and replaced.

2. Generation of electricity should move toward operation that releases as little carbon dioxide to the atmosphere as possible, i. e., use of fossil fuels for electric power should be drastically reduced.  This includes development of renewable sources of energy such as a wind power (see this earlier post) and solar power, the use of biofuels which is essentially carbon-neutral, implementation of carbon capture and sequestration technology (CCS; see the preceding post on this blog) for fossil fuel-driven generation plants, and expansion of  nuclear power generation in the overall energy mix.  The preceding post  characterized CCS as capable of removing 80% of the CO₂ in the flue gas of power plants, while the Summary Report relies on removing up to 90% with the current state of the technology.

Non-stationary sources of carbon dioxide emissions (primarily transportation and freight), and industrial users of energy, should move away from primary (i. e., direct) reliance on burning fossil fuels, and become electrified, to the greatest extent possible.  This entails a major shift for passenger cars away from internal combustion engines toward hybrid electric or pure electric propulsion systems.  Similarly, where feasible, industrial consumers of energy  should also seek to employ electric power for their needs.

3. In order to maximize use of electricity and minimize use of fossil fuels, first, overall electric generation capacity will need to double; second, “aggressive” steps must be taken to have minimal emissions of CO₂ from this expanded generation of electricity; and third, since renewable energy sources such as wind and solar power provide electricity only intermittently while demand persists undiminished, load balancing technology will have to be developed and implemented that itself minimizes further greenhouse gas emissions. This is referred to as zero-emissions load balancing (ZELB).   It is necessary to fill in the short-term variability in supply of power by generating additional electricity using responsive generation.  Technologies useful for ZELB include pumped water storage, thermal storage, and battery storage.  In addition, digital circuitry should be installed to monitor and optimize power usage at individual sites of demand (smart-grid technology).  The Report supports a significant growth of nuclear power as a technology that emits virtually no CO₂, while recognizing that public opinion may oppose it and that current state law prohibits new nuclear plants as long as the U. S. has no plan for permanent storage of nuclear waste.

4.  Energy usage in industries and sectors where electricity is not a convenient source, such as heavy trucks, airplanes, and those needing high heat, should also be shifted to sources that avoid the net release of greenhouse gases.  Principal sources of such energy are various forms of biomass, which represent a cycling of carbon between absorbing CO₂ during growth of biomass products and release of CO₂ when the biomass is burned.

CCST visualized the concepts identified above in the following chart.

Diagram representing steps in achieving reductions in greenhouse gas emissions by 2050. 

Source: “California’s Energy Future: The View to 2050” http://www.ccst.us/publications/2011/2011energy.pdf.

In all panels of the chart, the vertical axis represents greenhouse gas intensity, i.e., the emissions produced per unit of energy consumed.  The horizontal axis is divided between fossil fuel-derived energy (gray-green, left) and electricity (off-white, right) as the primary energy source used in a particular facility or device.  Multiplying the two directions gives the total energy, the area inside a bounded box.  The full box, surrounded by the purple line, represents the total energy projected to be used in California in 2050. 

Panel a) shows this as the starting point (BAU, business-as-usual), before measures are taken to reduce emissions. 

Panel b) shows the effect of implementing efficiency in all uses of energy (symbolized by the compact fluorescent bulb and the light gray arrows). 

Panel c) shows the effect of using more electricity, produced in ways that limit greenhouse gas emissions, and less fossil fuels (symbolized by the plug-in car and the blue arrows).  Panels b) and c) reduce energy usage, compressing the horizontal axis, and shifting the energy area to the right, toward electrification. 

Panel d) shows the effect of moving away from greenhouse gas-emitting fuels by use of biofuels or biomass for combustion (symbolized by the green leaf and the green arrow) and renewable energy for electricity (symbolized by the yellow lightning flash and yellow arrow); these lower the greenhouse gas intensity (vertical axis). 

Panel e) summarizes the results of the steps in panels b), c) and d).

CCST assessed the effects of implementing efficiency measures economy-wide, expanding the use of electricity for providing energy, reducing the use of fossil fuels or use of CCS to generate electricity with reduced emissions, and reducing use of fossil fuels in generating heat energy (items 1-4 above).  They sought to determine which ones singly, or in combinations of two, three or all four measures, were needed to achieve 60% reduction from 1990 emission levels.  None of the simulations based on only one, two, or three measures was adequate for this purpose.  Only implementation of all four technologies sufficed to achieve the desired 60% reduction.  (The reader may turn to the Report for details on the analysis leading to this conclusion.)

Significantly, however, these technologies, drawn from bins 1 and 2 in the table above, were not effective to achieve 80% reduction of emissions.  This means that major investments in research, development and deployment (RD&D) of technologies currently at a seed stage, and of entirely new technologies, have to be undertaken to attain the objective of Executive Order S-3-05.

Strategies for Attaining 80% Reduction in Emissions.  The Summary Report considers eight technologies, many of which currently are classed in bins 3 and 4, above to reach a reduction of 80%.

1. Achieve economical 100% removal of CO₂ with CCS. 
2. Totally remove use of fossil fuels with CCS from generating electricity.  This may be counterproductive if 100% capture of CO₂ were achieved.
3. Develop 100% ZELB.  This could be highly advantageous to attain the emissions goal.  Several technologies requiring extensive RD&D could potentially be applied.
4. Use of biofuels with no net GHG emissions could make a significant contribution to achieving the 80% reduction goal.  However, full life-cycle emissions may be greater than zero.  In addition, land and resource constraints in California may preclude large scale use of biofuels, even if harvested from waste and marginal land sites.
5. A significant contribution could be made by eliciting population-wide changes in behavior and life-style, including use of smaller homes and cars, greater use of public transportation, and comparable changes in the commercial realm as well.
6. Burning biomass when combined with CCS results in net negative emission of CO₂, i.e., the combined result is to remove CO₂ from the atmosphere.  This may be a more advantageous use of biomass than converting it to a biofuel.
7. Hydrogen fuel can be prepared in a few different ways, currently known.  The principal barrier to use of hydrogen is lack of adequate distribution networks, and lack of ways to incorporate hydrogen storage and release in vehicles, for example.  Furthermore, currently fuel cell technology for burning hydrogen is costly.
8. The greatest impact could be achieved by doubling the amount of biofuels.  The technology is accessible; this alternative is hindered only in its negative impact on food production.

By combining many of these technologies the Report assesses that California could actually attain a negative emissions rate, i.e., a net removal of CO₂ from the atmosphere (see Figure 9 and related discussion in the Report). 

The Report relies strongly on CCS for both the 60% reduction target and the 80% target.  Achieving the 80% target with CCS includes “reforming” natural gas (methane) to provide hydrogen gas as a fuel and CO₂ as a waste product.  The report recognizes that CCS remains an unproven technology (see the previous post).

Conclusions

CCST has presented a bold, ambitious plan to achieve 80% reduction in greenhouse gas emissions below the levels of 1990 by 2050, in two stages.  First, a reduction of 60% is to be achieved using technologies that are currently either already operating at the commercial scale needed, or that are sufficiently developed that scaling presents no serious problem to implementation.  This stage relies heavily on increased efficiency of energy use in buildings and transportation, and on converting all primary power generation to the generation of electricity and the concomitant capture of CO₂ and its long term storage in geologically secure formations deep underground.  It is envisioned that most transportation vehicles and industrial facilities that currently use fossil fuels will be converted to use the electricity to be provided by the expanded generation capacity instead.  A considerable portion of the new electric capacity will be provided by renewable sources that operate only intermittently, such as solar and wind power.  In order to fill in the periods in which renewables are not active, the Report supports development of electric generating capability producing zero emissions of CO₂, and grid technology that responds to fluctuations in the electricity supply-demand balance.

The second stage brings California’s emissions rate down to 20% of the 1990 level.  The Report finds that this final stage is not achievable with currently-deployed energy technology.  Considerable RD&D expenditures will be needed to reach this goal because the multitude of innovations are only now being identified and developed.

The CCST Report presents a detailed analysis of the present energy landscape in California and the needs projected for the next four decades.  Its proposal to electrify energy usage as much as possible, coupled with extensive implementation of CCS and ZELB, is a bold new initiative.  The Report does not specifically address the contentious issue of pricing CO₂ emissions, other than noting that AB32 operates via a cap-and-trade regime, but does point out that large expenditures of capital are required by the program presented.

It is appropriate to offer state and federal financial incentives for programs such as this one.  Chemical & Engineering News, published by the American Chemical Society, reports on a detailed analysis by Nancy Pfund and Ben Healey of subsidies and tax incentives enjoyed historically by the energy industry.  Subsidies for oil and gas in the U. S. go back as far as 1916 in the form of drilling depreciation and depletion tax breaks.  Average annual subsidies for four energy types are shown below.  (Subsidies for the coal industry were harder to document, and were not presented.)

Source: Chemical & Engineering News, Dec. 19, 2011; http://cen.acs.org/articles/89/i51/Long-History-US-Energy-Subsidies.html

It is seen that for the periods shown, the average annual subsidy for oil and gas was more than 10 times that for renewables, and for nuclear, more than 7 times larger.  During the first 15 years of an industry, when its future is still tenuous, federal subsidies make a big difference for new ventures.  The research found that in this nascent period nuclear energy received 10 times as much government support as renewables, and oil and gas received 5 times as much.   Thus there is a longstanding precedent for federal support for energy in the U. S.

The CCST Report includes many areas that require further RD&D work in order to be serviceable at scale.  In view of the long history of federal support for energy development it is entirely appropriate that federal funding support be provided to aid in the implementation of this emissions reduction program..

“California’s Energy Future: The View to 2050” makes a significant contribution to developing a regime that would significantly limit greenhouse gas emissions by 2050.  It points out the feasibility of the various technologies, highlighting those needing more development, and identifying still others that are still relatively conjectural or poorly demonstrated.  It estimates broadly amounts needed for investment to realize the technologies required.  For these and other reasons the Report deserves serious consideration by policymakers and legislators, both for the state of California and as a model for a national policy.

Critically, it must always be kept in mind that reducing annual rates of greenhouse gas emissions does not have the effect of lowering the world-wide concentration of those gases in the atmosphere in the future.  Reducing emission rates merely slows the accumulation of such gases in the atmosphere.  Thus even if a program such as that presented in this Report succeeds in lowering the rate of emissions significantly by 2050, the overall accumulated concentration of greenhouse gases will still be higher than it is today.  This means that the long-term average temperature around the globe will likewise be higher than it is today, bringing with it worse extremes of weather and climate than the world is already experiencing.  Future climate conditions would not, however, be as severe as they would be under a “business-as-usual” regime in which no remedial actions were taken.  For this reason, it behooves this nation, and the nations of the world, to take concrete steps such as presented in the CCST Report at the earliest possible time.

© 2011 Henry Auer