Choose a Carbon Fee, Not a Cap and Trade Regime

Summary.   Burning fossil fuels generates carbon dioxide as waste whose socioeconomic costs to humanity are not accounted for in the price of the fuel.   Reducing our dependence on fossil fuel use and mitigation of emission of greenhouse gases have led to valuing carbon either by a fee or use of a cap and trade mechanism; the additional value would limit consumption.  A carbon fee is easy to implement legislatively or administratively, and has been effective in reducing demand for fossil fuels.  Cap and trade regimes are in place in many jurisdictions around the world.  They are administratively complex and bureaucratically onerous, and can be unsuccessful in curbing fossil fuel use.  This post expands on these factors, and concludes that lowering the use of fossil fuels is best accomplished by imposing a fee on carbon.

 

Introduction. 

Human activity generates waste.  Significantly, as we burn more and more fossil fuels to produce the energy that powers modern life, we emit more and more carbon dioxide into the atmosphere.  This substance, an important greenhouse gas, is being released as the waste product of our energy economy.

 

It is imperative to treat manmade carbon dioxide as a cost-bearing waste product because of the harmful effects of the global warming that it produces.  These harms carry enormous costs with them.  Properly accounting for these costs would make it more acceptable to make the investments needed to reduce greenhouse gas emissions.
 

Policy directed toward reducing dependence on fossil fuels and mitigating greenhouse gas (GHG) emissions has long grappled with the alternative policies of imposing a carbon fee on fossil fuels and creating a cap and trade regime.  These may be viewed as policies that affect, respectively, the demand for, and the supply of, fossil fuels.  A carbon fee levies an added cost on fossil fuels directly.  The fee is passed through directly to the consumer, affecting demand. Cap and trade mechanisms, on the other hand, place upper limits on the emission of carbon dioxide (CO₂). 

This post reviews examples of both mitigation mechanisms.  Upon consideration we support the use of a carbon fee in preference to a cap and trade mechanism for mitigation.

A carbon fee is imposed on fossil fuels directly in accordance with the amount of CO₂ produced when burned.  The fee is imposed and collected at, or close to, the source of the fuel.  The value of the fee is then passed along as the fuel is transformed (petroleum to gasoline, for example), and/or transported (all fuels), and is ultimately paid by the consumer.  The level of the fee is set by policymakers, and typically is envisioned to start low and rise periodically until it reaches an intended level.  It is seen that a carbon fee is conceptually and operationally easy to implement.  Clearly the fee operates to constrain demand.

Under cap-and-trade major emitting facilities are allotted allowances each of which licenses the release of a fixed amount, say 1 ton, of CO₂ and other GHGs.  An administrative agency determines the total number of allowances (the cap) and the allotments for each period.  The cap is reduced year by year, thus constraining fuel consumption.  Ideally the emitters would pay for the allowances, frequently through an auction, but at the outset in many regimes they are distributed at no charge.  In any case, as the program matures markets are ultimately set up to auction annual allowances, and for trading them, thereby establishing a price for emissions.  The market price on carbon established in this market deters fossil fuel use. 

There are many problems with a cap-and-trade regime that make it difficult to succeed.  For example, if the supply of allowances is too high or the market demand is too low, their price will fall and the objective of reducing the rate of emissions of CO₂ will be discouraged.  For these and other reasons discussed below, operation of a cap and trade regime is complex, if not cumbersome.  A cap and trade regime may be intricate and top-heavy to administer.

Both cap and trade and a carbon fee 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 had to be priced into the cost of the fossil fuels.
 

Examples of using a carbon tax.

In Australia, Prime Minister Julia Gillard’s government enacted a carbon fee program in 2011.  Initially the carbon fee is US$23.15 per ton of carbon; much of the revenue is to be applied as compensation to businesses and consumers (“cap and rebate”).  After six months of operation, the electricity generation segment of Australia’s energy economy reduced its carbon emissions rate by 8.6%.  Emissions were 7.5 million tonnes lower in the second half of 2012 than for the same period in 2011.  This arose from a decrease in demand and an increase in residential rooftop solar panel use and increased energy-efficiency.   Some coal-burning facilities ceased operating, while more power came from increased hydroelectric generation.  The long-term goal is to reduce emissions by 33 million tonnes per year by 2020.

Gasoline fees are very effective in affecting drivers’ travel habits.  The graphic below, characterizing how per capita fuel use reflects the size of the gasoline fee,

 

Sources: New York Times presenting data from the U. S. Department of Energy and the World Bank; http://www.nytimes.com/interactive/2012/09/11/business/Fuel-Taxes-and-Consumption.html?ref=business  

shows that per capita use of fuel for driving in developed countries decreases as the amount of the gas fee increases.  The U. S. has the lowest gas fee, which is correlated with the highest amount of fuel used per capita (horizontal scale). As the gas fee increases (vertical scale), it is seen that most of the benefit appears to be attained by a fee level of about US$2.20 per U. S. gallon.  In Great Britain, where the gas fee is even higher, Ford, the American car maker, sells a model of its compact Focus whose efficiency is 72 miles per U. S. gallon.  In contrast, a Focus model sold in the U. S. gets only 33 miles per U. S. gallon.  Clearly, automakers already have the technology and capability to mass produce highly fuel efficient cars.  This shows that the current state of technology is sufficient to garner significant improvements today.

Gasoline prices affect consumption.   In the U. S. the price of gasoline has fluctuated considerably in recent years for reasons that do not include imposition of a carbon fee.  The Washington Post reported on April 17, 2012 that higher gas prices had led to reduced consumption, and to a move toward the purchase of more fuel-efficient vehicles.

A review of various studies of the interrelationship between price and consumption concluded that “we can be reasonably assured that a rise in gas fees, all else being equal, will cause consumption to decrease”. 

Examples of using cap and trade.

In the U. S. the Regional Greenhouse Gas Initiative (RGGI) encompasses nine northeastern states.  RGGI controls only for emissions from fossil fuel plants that generate electricity, and affects only larger power plants.  RGGI created a CO₂ cap and trade program, with the goal first of stabilizing and subsequently reducing the overall emissions from these plants.  Each state’s base emission amount was established at the outset, and is remaining fixed at that level from 2009 through 2014.  Starting in 2015, the allowances for each state are to be reduced by 2.5% per year, so that by 2018 the emissions will be 10% below the starting level.  Auctions for emission allowances occur quarterly.  RGGI estimates that the auction price increases the cost of electricity to the consumer by only 0.4% to 1%.

In its 19th auction, almost 38 million CO₂ allowances were sold, garnering about US$106 million, or US$2.80 per allowance.  The cumulative amount from all auctions is about US$1.2 billion.  The proceeds are used to rebate portions of electricity bills to consumers, invest in the region’s renewable energy economy, including job training for environmental jobs, and similar objectives.  RGGI has already invested in improvements that will produce significant reductions of CO₂ emissions and save the need for generating major amounts of electricity, as well as the thermal energy needed to drive the generators.

European Union (EU). Even before the entry into force of the Kyoto Protocol in 2005, the European Commission established its greenhouse gas emissions trading scheme (ETS) using a cap and trade market mechanism. As an accord intended to govern the operations of 27 sovereign nations, each country had to enact laws codifying the applicability of the ETS structure within its borders.

It covers at least 11,000 individual emission sources across the EU. The ETS is being implemented in three phases.

Phase 1, operating from 2005 to 2007, was characterized as a learning phase, and included such features as

• The level of the emissions cap was determined largely by each nation independently;
• It included only power plants with a capacity greater than 20 MW, and other industrial facilities; these represented 42% of emissions; and
• Allocations of emission allowances relied primarily on recent historical records; they were offered at no cost.

In Phase 2 (2008-2012), features that expanded on those of Phase 1 included:

• The level of the emissions cap conformed to the limits of the Kyoto Protocol; and
• Limits on emissions from air travel were to begin in 2012.

Phase 3 (2013-2020) departs from the earlier phases in important ways:

• National emissions caps were to be replaced by a single EU-wide cap; they decrease by 1.74% per year starting in 2010 with the objective of delivering 21% reduction referenced to 2005 by 2020;
• 90% of the allowances will be sold by auction rather than being distributed free of cost.

The performance of the ETS is shown below in the graphic.  Emissions allowances in a cap-and-trade regime were already in use in the EU prior to 2005. In Phase 1 it turns out that for a variety of reasons the auction market in these initial years established early prices as high as almost EUR30 (about US$39.20 at that time) per tonne of CO₂ equivalents (blue and lavender lines; tonne, a metric ton), which then fell to EUR0/tonne toward the end of Phase 1 (orange line; see the graphic).

 

CO₂ price evolution in the EU from 2003 to 2009.  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.

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

 

The fall of the allowance price to EUR0/tonne in 2007 has been attributed both to a 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, emission sources were free to continue “business-as-usual”, 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.

The ETS had to cancel its most recent auction in March 2013 because bids received were “significantly” below the actual market rate.  In 2013, the start of Phase 3, about 40% of newly issued carbon emission allowances are being sold at auction for the first time.  The rest are still distributed at no charge.  The price had fallen by 5.6% to EUR3.73 (US$4.86) a metric ton, and reached a low on Jan. 31, 2013 of EUR3.42. 

Longer term the ETS price for emission allowances has fallen drastically, by 90%, in the last five years as demand for energy has fallen because of recessionary conditions among EU countries.  This has led to an oversupply of unused allowances.  The ETS is reevaluating its allocation of allowances, in an attempt to rebalance the trading system and maintain a price on emissions.

The state of California enacted its Global Warming Solutions Act in 2006, establishing mitigation goals through 2020.  The governor at the time, Arnold Schwarzenegger, extended the Act by executive order declaring further stringent mitigation objectives through 2050.  These actions are significant, because California constitutes about 1/6 of the U. S. economy in view of its large size and population.  The Act is also significant because in the U. S. it is the only economy-wide mitigation plan.  Inititally it covers most fixed point sources of emission, including electric generation plants and industrial facilities, beginning now (2012-3).  It will extend to refining and sale of transportation fuels (i.e., distributed sources) in 2015.  The mechanisms for undertaking its mitigation goals include a cap and trade system as well as continuing and expanding California’s historic, successful energy efficiency programs.  State officials and advisors are undertaking to learn lessons from the experience of the European Union’s ETS, seeking to avoid its mistakes.

The state established a rigorous survey of emissions from every potential covered installation in order to allocate emission allowances.  In its first auctions California sold 23.1 million allowances at US$10.09 each, in Nov. 2012, and another 12.9 million allowances at US$13.62 each at the second auction in Feb. 2013.  This works out to revenue from the first two auctions of US$409 million.

 

Analysis

Two major mechanisms have been devised to abate the emission of CO₂, a major greenhouse gas, (aside from the important contribution of increasing the efficiency of energy usage).  One, a cap and trade regime, operates primarily by capping the supply of energy.  (Of course the auction price imposed on allowances has the effect of raising the price of the energy purchased by the consumer, so cap and trade may also have elements of lowering energy demand as well.)  The second, a carbon fee applied in proportion to the amount of CO₂ emitted when the fossil fuel is burned, directly limits demand by raising the price paid for energy.

A cap and trade regime has many disadvantages in comparison to a carbon fee.  Some of these are apparent when considering the case of the European Union.  The factors, many of which are interrelated, include a) a need to account accurately for baseline emissions from each identified source prior to placing the regime in operation; b) a continued need for monitoring emissions from each source as the regime operates; c) a need for a  mechanism to allot allowances both at the outset and in subsequent periods of operation; d) a mechanism or rule for distributing allowances, including determining whether to grant or sell them; e) monitoring use of energy offsets by those installations unable to comply with emissions limits; and f) creating and maintaining the new administrative and bureaucratic offices needed to operate the regime.  It is seen from this incomplete list that a cap and trade regime presents many challenges, requires an extensive bureaucratic structure, and includes many opportunities for mistakes to be made that defeat the objective of constraining emissions.

In contrast, a carbon fee is extraordinarily simple in its operating features and is easy to implement.  A tax rate is established at the outset, covering most or all sources of CO₂ emissions.  In order to achieve its objectives, it would be optimal to start with an insignificant tax rate, and then have the rate increase annually to a level at which it would have a meaningful effect in reducing energy demand.  The example cited in the gasoline fee graphic above provides ample evidence that a carbon fee is easy to apply, has a broad if not universal reach, and achieves its objective according to its magnitude.  It is clear that the simplicity and effectiveness of a carbon fee offers major advantages over use of a cap and trade regime.

Many commentators have urged use of a carbon fee to mitigate emissions.  One of the most consistent over time has been Tom Friedman, columnist for the New York Times, most recently in this article.   His writing and that of others have considered the many uses to which the revenues from pricing carbon could be applied.  This post will not address that discussion; most alternatives are worthy ones.

 
The time to begin abating humanity’s emissions of CO₂, a major greenhouse gas, is now.  The longer we wait, the more firmly we cement our dependence on fossil fuels, and the more CO₂ accumulates in the atmosphere, exacerbating global warming and its damaging effects on human life and welfare.  The simplest, most direct, and highly effective mechanism for reducing dependence on fossil fuels and mitigate emissions of GHGs is to apply a carbon fee.
 

© 2013 Henry Auer

Increasing Greenhouse Gas Emissions from Developing Countries

Summary.  The developing world generally has higher rates of population growth and economic development than do developed countries.  Energy use and greenhouse gas emissions of China and India, the most important examples of developing countries, have grown 4- to 6-fold from 1980 to 2009.  They are projected to continue growing rapidly in coming decades.

To the extent that such development continues without constraint on emissions of greenhouse gases, the world risks exceeding the limit of an increase in worldwide average temperature of 2ºC agreed to by the nations of the world.  Warming worldwide temperatures bring with them increased occurrence of extreme weather events that cause high levels of physical and economic harms.  Instead of expanding use of fossil fuels, the nations of the world should agree on new measures to “decarbonize” energy production and limit greenhouse gas emissions, thereby constraining planetary temperature rise within the agreed limit.

Introduction.  The use of energy, primarily provided by fossil fuels, across the globe has been expanding inexorably over past decades, and is forecast to continue growing by large amounts in coming decades.  Correspondingly the rate of emission of resulting greenhouse gases is also rising dramatically.  Most of this growth originates in the developing countries of the world, which generally are expanding both in their populations and in their economic activity.  Both factors contribute to expanding demand for energy.  This post examines these issues.

Many points are summarized in the main body of this post, with expanded information and data provided in the Details section at the end.

                       

Historical trends for energy use and CO₂ emissions for China and India.  China and India are the largest countries among the non-OECD nations (OECD, Organization for Economic Cooperation and Development, considered to be developed countries; see Note 1; non-OECD countries considered to be developing countries).  They have been growing rapidly in economic productivity, energy use and greenhouse gas emissions over the last two decades.  This post exemplifies the expansion of the energy economies of developing countries by focusing on these two countries. 

In 2009 China was the largest, and India was the fourth largest, consumer of energy in the world (U. S. Energy Information Agency (USEIA) India analysis, Nov. 21, 2011).  As India’s population expands and the national economies of both countries grow (see population and GDP tables below in the section Projected future trends), energy demand is expected to rise significantly.

Past growth in use of fossil fuels by China and India is summarized here.  For more details and graphics please see the Details section below. 

Generally, use of fossil fuels, and especially of coal and oil, has grown 4- to 6-fold, or even more, from 1980 to 2009.  Emissions of CO₂, the greenhouse gas that is the product of burning fossil fuels, likewise grew at comparable rates.

Energy use and emissions for the period from 1997, the year the Kyoto Protocol was agreed on, and the last year in the graphs below, 2009, are evaluated.  The date of the Kyoto Protocol is used here, because, as developing countries, China and India were excluded from coverage by its terms while many developed countries would be bound by it.  For this period:

• coal use by China grew by 241%, and use by India grew by 195%;
• China’s use of oil grew 213% from 1997 to 2009, and India’s grew by 176%; and
• CO₂ emissions from China grew by 250% between 1997 and 2009, and from India by 184%.

Coal is the predominant source of energy in China by far.  Among renewable sources, hydroelectric power constituted 6% of energy consumption.

Coal is a large source of energy for India as well as for China.  It is also significant that 24% of energy in India comes from combustible biomass, much of which originates from animal waste.

Neither country had large energy sources from renewable sources such as wind and solar power as of 2008-2009.

Projected future trends

World population growth.  The USEIA issued its International Energy Outlook 2011 (IEO) in September 2011.  The IEO projects population increases among countries of the world in its International Energy Outlook 2011.  Data extracted from this report for the U. S., OECD, China and India include the following:

                   Population growth

Region/country	2008 Actual	2035 Projection	Av. annual % chg.
U.S.	305	390	0.9
OECD	1,209	1,358	0.5
China	1,328	1,450	0.3
India	1,181	1,528	1.0
World	6,731	8,453	0.9

Source: USEIA, International Energy Outlook 2011  http://www.eia.gov/forecasts/ieo/pdf/0484(2011).pdf

World per capita gross domestic product (GDP).  The USEIA projects the growth in economic activity among countries and regions of the world in its IEO.  Data for per capita GDP include the following:

Per capita GDP expressed in purchasing power parity, using 2005 USD

Region/country	2008 Actual	2035 Projection	Av. annual % chg.
U.S.	43,349	65,862	1.5
OECD	30,601	47,887	1.7
China	5,777	23,694	5.7
India	2,692	8,792	4.6
World	9,773	19,123	2.6

Source: USEIA, International Energy Outlook 2011  http://www.eia.gov/forecasts/ieo/pdf/0484(2011).pdf  

Projected future growth in energy use.  (See Details for further information.)

Projections of future energy use drawn from the IEO relate to the USEIA’s Reference case, in which it is assumed that economic growth continues as at present, and that no policy changes are made in the future that are not currently operative.  This is frequently referred to as “business-as-usual”.

In its press release, USEIA states that, largely because of strong economic growth in developing countries (non-OECD countries) including the two leaders, China and India, the world’s energy use is expected to increase 53% between 2008 and 2035.  Energy use is closely tied to the growth in economic activity; the table above shows that per capita GDP is projected to grow by 5.7%/yr in China, and by 4.6%/yr in India, much more rapidly than in developed countries. These two countries alone will be responsible for half of the world’s increase in energy use.

An extract of data presented in the IEO is tabulated in the Details section at the end of this post, following the Discussion.  A graphical presentation of projected energy use is shown here.

Source: USEIA, International Energy Outlook 2011  http://www.eia.gov/forecasts/ieo/pdf/0484(2011).pdf

China and India consumed 21% of the world’s energy in 2008.  Their energy use is expected to more than double over the period shown, constituting 31% of the world’s energy use in 2035.  The annualized rate of increase across all non-OECD countries is 2.3%, whereas for the developed countries (OECD), the annualized rate of increase is only 0.6% (see the graphic above).

Projected growth in CO₂ emissions.  The IEO includes predictions for growth in CO₂ emissions originating from fossil fuels.  Data from the table in the Details section are shown in the chart below.

Source: USEIA, International Energy Outlook 2011  http://www.eia.gov/forecasts/ieo/pdf/0484(2011).pdf

Emissions from India grow by 208% from 2008 to 2035, and those from China grow by 198%.  It is seen that emission growth from the U. S. and from the OECD as a whole are much more modest.  The nations of the European Union, included in the OECD, have embarked on an ambitious program (linked here and here) to reduce emissions by 80% by 2050.  Clearly this falls outside the assumptions of the USEIA Reference case, and is not reflected in the data for the OECD.

The International Energy Agency (IEA) published its World Energy Outlook 2011 (WEO 2011) on Nov. 9, 2011.  It includes projections based on three scenarios.  The Current Policy Scenario (CPS) assumes no additional emissions policies implemented beyond those already in place in 2011.  This inaction is projected to lead to an increase in long-term global average temperature of 6ºC (10.8ºF) by 2035.  The intermediate New Policies Scenario includes policies intended to reduce emissions, but not by enough to stabilize atmospheric CO₂ levels. It is projected to lead to an increase in long-term global average temperature of 3.5ºC (6.3ºF).  The 450 Policy Scenario (450 PS) implements strict controls on new emissions that are intended to stabilize the atmospheric CO₂ concentration at 450 parts per million; this is the level deemed adequate to keep the increase in long-term global average temperature within 2ºC (3.6ºF) above the pre-industrial level.  This upper limit is based on the Fourth Assessment Report of the Inter-governmental Panel on Climate Change (IPCC), which was issued in 2007.

The IEA graphic below compares projections of Total Primary Energy Supply by global regions for two scenarios, CPS and 450 PS.

Comparison of total world energy supply under the CPS and the 450 PS. Historical data for 1990 and 2008, and projected results under the two policies for 2015, 2020, 2025 and 2035.  Blue: OECD+ (developed countries); Green: OME, other major economies (developing countries); Purple: OC, other countries (developing countries); (see Note 2); Orange: Intl. bunkers, international air and marine transportation.

Source: IEA, 2011 Key World Energy Statistics; http://www.iea.org/textbase/nppdf/free/2011/key_world_energy_stats.pdf

The chart above illustrates annual rates of use of energy, indicating that each year large amounts of the greenhouse gas CO₂ are emitted.  Under CPS, the annual rate keeps increasing, adding to atmospheric concentrations of CO₂ at an ever-increasing rate.  Under 450 the annual rate appears to level off, but each year additional CO₂ still is emitted. 

Nevertheless, it is seen that by 2035, adopting the stringent 450 Policy Scenario results in an overall projected decrease of 22% in total energy needed compared to CPS.  The largest reduction in energy use is from the large economies of the developing world (OME), about 23%; followed by reductions in energy use by other developing countries (OC), about 17%, and reductions by OECD+ (developed countries) of about 13%.

Discussion

The Cancun Agreements were the final product (text and press release) of the 2010 conference, held under the auspices of the United Nations, and were approved by all 193 nations except one. 

Among the commitments made in Cancun, developing countries, on a voluntary basis, submitted “nationally appropriate mitigation actions” planned for coming years to the United Nations supervisory body.  Whereas many countries with smaller economies enumerated detailed goals and steps, countries such as China and India that are major emitters of greenhouse gases provided only brief, more generic, statements of goals (see the table below):

Country	Year for goal	Statement of goal
China	2020	Voluntary measures to reduce CO2 emissions per unit of gross domestic product (GDP; emissions intensity) by 40–45% compared to 2005, increase the share of non-fossil fuels in primary energy consumption to around 15%, and to increase forest coverage by 40 million hectares (99 million acres).
India	2020	Voluntary efforts to reduce emissions intensity of its GDP by 20–25% compared with the 2005 level, excluding emissions from agriculture.

Developing countries such as China have long stressed their improvement of energy intensity, a measure of increasing the efficiency of their use of energy.  Yet, as seen in this post, their absolute amounts of energy used and greenhouse gas emitted continue growing at significant rates, responding to the prodigious rate of expansion of their economies, improvement in energy intensity notwithstanding.

The IEA warned in WEO 2011, according to its press release, that the world will enter “an insecure, inefficient and high-carbon energy system” unless it implements strong new policies to lower future emissions of CO₂ and other greenhouse gases.  Recent developments that signal  this urgency include the Fukushima nuclear accident which has deflated enthusiasm for nuclear energy, turmoil in the Middle East which creates instability in oil supplies and costs, and a strong increase in energy demand in 2010 which led to record high emissions of CO₂.

Fatih Birol, IEA’s Chief Economist, points out that as time passes without significant action to mitigate emissions, the world is becoming “locked in” to a high-carbon energy infrastructure.  Up to the point of changing policy, all preexisting energy-producing and –consuming infrastructure commits the world to continuing its carbon-inefficient energy economy.  They continue to emit CO₂ annually during their service lifetimes according to their originally designed (less efficient) operating specifications.  This is illustrated in the following graphic, which considers that 2010 is the year of commitment.

Lock-in of annual rates of CO₂ emissions from energy-producing and energy-consuming physical installations as of 2010, shown in the various SOLID colors.  Projected additional annual rates of emissions from facilities newly installed after 2010, allowable under the 450 Policy Scenario, are shown in the HATCHED GREEN area at the top of the diagram. 450 envisions that the annual rate of emissions reaches a maximum by 2017 and then begins declining.

© OECD/IEA 2011.  Source: IEA, World Energy Outlook 2011; http://www.worldenergyoutlook.org/docs/weo2011/key_graphs.pdf

In the graphic above emissions from committed infrastructure (solid colors) are projected to decrease year by year as the various facilities age and are removed from service.  The graphic illustrates the maneuvering leeway (green shading) in annual CO₂ emissions that are consistent with the 450 Policy Scenario, which is intended to ensure that the long-term average increase in global temperature is constrained to 2ºC (3.6ºF).  The IEA press release states

“Four-fifths of the total energy-related CO2 emissions permitted to 2035 in the 450 Scenario are already locked-in by existing capital stock…. Without further action by 2017, the energy-related infrastructure then in place would generate all the CO2 emissions allowed in the 450 Scenario up to 2035. Delaying action is a false economy: for every $1 of investment in cleaner technology that is avoided in the power sector before 2020, an additional $4.30 would need to be spent after 2020 to compensate for the increased emissions.”

The leeway emissions are the only portions of the world’s energy economy available for manipulation to reduce overall CO₂ emissions.

The Kyoto Protocol, covering many developed nations but not the U. S., expires in 2012.  It had been the goal of the U. N. conferences in Copenhagen (2009) and Cancun (2010) to negotiate a new treaty to follow Kyoto as it expired.  But the nations of the world could not agree on terms.  In 2011, at the Durban conference conference, this discord was so fundamental that now the goal has been pushed back to reach an agreement by 2015, with the objective of having it come into force by 2020.  Unfortunately, these dates are greatly extended from earlier timelines.  They permit greenhouse gases to be emitted unconstrained and to continue accumulating in the earth’s atmosphere without sanctions in the interim.  Because of the delay, climate scientists are concerned that the global average temperature will increase considerably more than previously hoped.  This would mean severe changes in climate and weather, leading to increased numbers and severity of extreme weather events. 

Greenhouse gas emissions are a global problem, demanding a global solution.  Once emitted into the atmosphere, CO₂ and other greenhouse gases do not carry a label indicating where on the globe they originated from.  Emissions from any country become the greenhouse effect problem of every country.  The increase in the long-term global average temperature, and its attendant extremes of weather events, damages caused and expenses incurred, affect all the nations of the world. 

Rather than continuing the unabated expansion of the use of fossil fuels, and incurring unforeseen expenses caused by extreme weather events, the nations of the world should be decarbonizing their energy.  Comparable amounts of capital could be invested and comparable numbers of new jobs could be created that would be directed to developing renewable sources of energy or to implementing “zero-emissions” use of fossil fuels (exemplified by the experimental technology of carbon capture and storage).  It behooves all nations to embark on greenhouse gas mitigation measures as soon as possible, and not to continue “business-as-usual”.

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Details.

Historical trends for energy use and CO₂ emissions for China and India.

Trends for coal and oil use in China and India are shown below, as these are the principal fossil fuels used in each country for electricity generation and transportation, respectively.  Values for 1997, the year the Kyoto Protocol was agreed on, and the last year in the graph, 2009, are shown.  The date of the Kyoto Protocol is used here, because, as developing countries, China and India were excluded from coverage by its terms.

Use of coal is shown below.

Use of coal 1980-2009, million short tons/year, for China and India.  The scale for China runs from 0 to 3500, and that for India runs from 0 to 700.

Source: USEIA http://www.eia.gov/countries/img/charts_png/CH_coacon_img.png

http://www.eia.gov/countries/country-data.cfm?fips=IN#coal

From 1997 to 2009, coal use by China grew by 241%, and use by India grew by 195%.  For a portion of this period, it is believed that China was commissioning new coal-fired electricity plants at the rate of about two per week.

Total use of oil in thousands of barrels/day between 1980 and 2009 for China and India.  The scale for China runs from 0 to 9000, and that for India runs from 0 to 3500.

Source: USEIA http://www.eia.gov/countries/img/charts_png/CH_petcon_img.png

http://www.eia.gov/countries/country-data.cfm?fips=IN#pet

China’s use of oil grew 213% from 1997 to 2009, and India’s grew by 176%.

China’s use of petroleum increased a further 10% from 2009 to 2010, and is expected to grow at that rate in the next few years  (USEIA China Analysis 2011).  It produces considerable oil domestically, but also imports large amounts, currently about the same as is produced domestically. 

The distribution of the sources of energy for China and India is shown in the chart below, for 2008 or 2009.

Source: USEIA. http://www.eia.gov/countries/cab.cfm?fips=CH;

http://www.eia.gov/countries/cab.cfm?fips=IN.

Coal is the predominant source of energy in China by far.  Among renewable sources, hydroelectric power constituted 6% of energy consumption; China is assertively developing this source.  The total amount of hydroelectric power will expand considerably in 2012 as all the turbines at the Three Gorges Dam begin operating.

The graphic shows that coal is a large source of energy for India as well as in China.  It is also significant that 24% of energy in India comes from combustible biomass, much of which originates from animal waste.

Other than hydroelectric power, neither country had large energy sources from renewable sources such as wind and solar power as of 2008-2009.

Carbon dioxide emissions attributed to the burning of fossil fuels for the two countries are shown below.

Total carbon dioxide emissions from use of fossil fuels 1980-2009 for China and India, million metric tons/year.  The scale for China runs from 0 to 8000, and that for India runs from 0 to 1800.

Source : USEIA http://www.eia.gov/countries/img/charts_png/CH_co2con_img.png

http://www.eia.gov/countries/country-data.cfm?fips=IN#cde

CO₂ emissions from China grew by 250% between 1997 and 2009, and from India by 184%.  It is noteworthy that, as expected, the trajectory of emissions from China closely resembles the pattern of its coal use (see earlier graphic, above).

Projected future growth in energy use.

Consumption of all fossil fuels is projected to grow dramatically during this period.  Use of coal is projected to increase from 139 quadrillion Btu in 2008 to 209 quadrillion Btu in 2035, a change of 50%.  China alone is responsible for 76% of the increase in use of coal.  India and other Asian countries also contribute significantly (19%) to this increase, at least in part because coal is cheaper to use than other sources of energy. 

Use of energy in transportation of people and goods is projected to grow through 2035 in the Reference case, almost entirely from non-OECD countries.  As non-OECD countries grow economically, the demand for transportation services grows significantly, especially the demand for personal cars.  Energy consumption in transportation almost doubles, growing at a rate of 2.6%/yr in the non-OECD countries, but only at 0.3%/yr in OECD countries.

Renewable energy across the globe is provided largely by hydroelectric generation and wind; solar generation currently plays a much smaller role.  In OECD countries, the major growth in renewables through 2035 is expected to come from wind and solar power, as potential hydroelectric sites are already fully developed.  In non-OECD countries, however, hydroelectric generation is still growing at a fast pace as dam sites continue to be exploited.

Electricity generation in China is expanding very rapidly, and is expected to continue to do so (USEIA China Analysis 2011).   In 2008 the generating capacity was 797 GW of which almost 80% was generated from coal.  It is expected that by 2020 the capacity will double to 1,600 GW, and to generate 3 times as much electricity by 2035 as was produced in 2009.  To accommodate this increased capacity, the Chinese are also aggressively expanding their transmission grid.  Since most of the generating capacity comes from conventional thermal sources supplied largely by burning coal and natural gas, it is to be expected that emissions of CO₂ will increase correspondingly.  The government of China expects that thermal generation capacity will increase from 652 GW in 2009 to 1,000 GW in 2020.  Coal will remain the principal fuel because of its domestic abundance, although older plants will be decommissioned in favor of larger, more efficient generators.  Natural gas will play a small but increasing role in the future.

Among renewable sources, hydroelectric power plays a larger role in China than in any other country, and will continue to grow.  For instance the massive Three Gorges Dam will become fully operational in 2012.  Wind power is expanding at a rapid rate, but even so remains a miniscule fraction of China’s electric generating portfolio.

Electricity generation in India.  India had about 177 GW of generating capacity in place in 2008 (USEIA India analysis).  Conventional thermal generation (mostly coal) provided 80% of that, with hydroelectric generation providing most of the remainder.  Nuclear and renewable power provided only a few percent of India’s electricity.  About 35% of the population lacks access to electricity, mostly in rural areas, representing over 400 million people.  Even in the main cities there are frequent blackouts.

Projections of future energy use under the USEIA’s Reference case are drawn from IEO and tabulated here.

Source: USEIA, International Energy Outlook 2011  http://www.eia.gov/forecasts/ieo/pdf/0484(2011).pdf

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Notes:

1. Current OECD member countries included in this IEO are the United States, Canada, Mexico, Austria, Belgium, Chile, Czech Republic, Denmark,

Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom, Japan, South Korea, Australia, and New Zealand.

2. OECD+: OECD as in Note 1 plus Bulgaria, Cyprus, Latvia, Lithuania, Malta and Romania;

OME (other major economies), Brazil, China, India, Indonesia, Russian Federation and Middle East;

OC (other countries), the world other than OECD+ and OME.

© 2011 Henry Auer