The historic agreement on climate change reached in Paris a week ago is not a simple death knell for fossil fuels. Rather, it puts renewed focus on carbon capture and storage, throws a gauntlet down to the transport sector, and raises formidable governance as well as cost challenges for developing and developed countries alike. This is in addition to necessitating changes to electricity market design and grid infrastructure to accommodate more renewables and efficiency. Sonja van Renssen reports on the Paris follow-up through national climate action plans.
“How enforceable is any international agreement?” asks Gary Guzy, a lawyer at Covington & Burling’s Washington office and a former General Counsel at the White House and US Environmental Protection Agency (EPA). “Governments are accountable through transparency.”
Guzy answers critics of the Paris agreement who argue that it does not entail any enforceable obligations. That is why, he says, the transparency provisions were fought over so long and hard at the negotiations of the deal.
“We expect to see people to over-deliver”
Guzy acknowledges there is no international climate police. In the past, Canada, for example, simply stepped out of the Kyoto Protocol when the going got tough. Nevertheless, Guzy, who worked with Bill Clinton in the run-up to the Kyoto protocol, calls the Paris Agreement “extraordinary”. He believes it signifies a “tectonic shift” in climate policy: it is the first time “all recognise that each has to contribute”.
One expert told Energy Post that he believed countries had done nothing less than “re-write the Convention”. This is a reference to the UN Framework Convention on Climate Change (UNFCCC), which since its genesis in 1992 has enshrined the principle of “common but differentiated responsibilities” and with it, a division into developed and developing countries.
National climate action plans
With a single set of requirements for all parties – albeit with differentiation within that – the Paris Agreement opens a new chapter in climate talk history. The big question of course, is will it get implemented? Most experts say yes. “We expect to see people to over-deliver,” says Nick Mabey, CEO of think tank E3G. “Most of the plans give pretty strong domestic benefits in terms of [energy] security and air pollution for example.”
The responses to this question are generally backed up by long lists of what countries are already doing to tackle climate change. Indeed from the perspective of the US, the deal was explicitly crafted to avoid the need for fresh legislation on climate change – meaning it does not have to go to a Republican-dominated Congress for approval.
Many have jumped on the Paris agreement as spelling the end of the fossil fuel era, but the fact is that the INDCs do not foresee the phase-out of gas and coal
National governments have set out their climate plans in national climate action plans called INDCs, or Intended Nationally Determined Contributions (INDCs). What is in these plans is not binding. Having a plan – and updating it every five years – is.
The INDCs are a significant achievement in themselves. Nearly every country that belongs to the UNFCCC – 189 out of 195 – had submitted an INDC by the close of the Paris talks on 12 December. Venezuela, fresh out of an election, was the last country to do so: the plan was announced during the final plenary by the very same Claudia Salerno, Venezuela’s lead climate negotiator, who held up a bloodied hand in the final, traumatic hours of the Copenhagen climate summit six years ago in a symbol of just how messy and surreal that conference had become.
CCS: back from the dead?
“Gas will continue to be seen as an important bridge fuel to help significantly reduce greenhouse gas emissions,” predicts Guzy. “It seems very likely coal use will be supplanted.”
Many have jumped on the Paris agreement as spelling the end of the fossil fuel era, but the fact is that the INDCs do not foresee the phase-out of gas and coal. Indeed, most of the low-carbon scenarios going forward – including the International Energy Agency (IEA)’s World Energy Outlook – still forecast widespread use of fossil fuels for a long time to come.
“With the amount of fossil fuels we still see in the INDCs, CCS is necessary for [limiting temperature rise to] 2 degrees Celsius,” says Thomas Spencer, Director of the Climate Programme at French think tank IDDRI.
“If governments are serious, it has to mean large-scale deployment of CCS and even looking at burning biomass with CCS to take CO2 out of the atmosphere,” concurs Simon Retallack, Director for Policy and Markets at the Carbon Trust, a UK-based organisation helping companies adapt to a low-carbon world. Biomass with CCS would produce net “negative” emissions that give the world a chance of clawing back some of its spent carbon budget.
But governments seem to be moving in the opposite direction. “It is regrettable that our own government has chosen to put an end to our CCS demonstration,” Retallack adds. Just days before the UN climate talks kicked off in Paris, the UK government dropped its £1 billion (€1.4 billion) CCS funding competition. Meanwhile, an international research project (the MILES Project) led by IDDRI warns that the INDCs imply “a significant bet on CCS after 2030, without providing assurances that research, development and deployment… would be sufficient to rapidly assure its commercial viability”.
Transport: elephant in the room
The IDDRI report also finds “little penetration of alternative technologies in the transport sector by 2030” (with the exception of biofuels in Brazil). Yet, the authors note that 2 degrees scenarios suggest that electric vehicles in particular will need to be rolled out “massively” from 2030. Spencer suggests that renewables in transport could follow the same trajectory as renewables in power over the last ten years: the EU has borne the cost of development and ending up making these technologies available to countries like China and India. As a result, at the heart of India’s INDC is a very strong push for renewable electricity.
“The question is can we do this for the next suite of technologies we need? Where will that push come from?” asks Spencer. He suggests that Europe could adopt a “strategic industrial position” around clean transport to service the emerging markets. “I think the US will miss out on this because they don’t have the same pollution problems as in Europe or in China or India.”
Europe could adopt a “strategic industrial position” around clean transport to service the emerging markets
The European Commission is planning to tackle the greenhouse gas emissions of transport next year, starting with a decarbonisation strategy for the sector by the summer. For Mabey from E3G, the critical question is how fast Europe decides to move to low-carbon and especially electric vehicles: “If Europe sets ambitious targets over the next two years, the world will follow.”
Next year will also be decisive for international aviation. The International Civil Aviation Authority (ICAO) is due to decide on a climate action plan in October. There was no mention of aviation or shipping in the final Paris Agreement but experts say the reference to “global” peaking of emissions puts some pressure on these sectors. Moreover, the main bottleneck to their inclusion in climate action – the question of how to differentiate between countries – has effectively been removed by the Paris deal.
For Mabey, reform of the transport system is the third step of a much broader reform of the energy sector. “We have underestimated the scale of regulatory and market reform that is required. Most countries by the 2020s will be doing what Europe is doing now, which is completely reorganising their power system.”
For him, the first consequence of the INDCs will be a shift from energy systems based on marginal pricing of fossil fuels to systems that can handle decentralised generation from zero marginal cost. He also foresees a completely different grid that incorporates demand-side management and storage. “Europe has the potential to lead on market design,” Mabey believes.
“Governance sounds technical but actually at its heart it’s deeply political. I’m much more worried about those barriers than the barrier of cost and technology going forward”
China is more cautious, held back by its huge incumbent state grid operator, while the US is very innovative in places (especially on demand response), but fragmented. The EU is set to unveil electricity market redesign proposals next autumn.
Step two for Mabey is the integration of three major infrastructure systems: connectivity, gas and heating and cooling. “Heat is a much bigger load on the electricity system than cars. We talk a lot about the role of electric vehicles but heat will happen faster and it’s much harder to manage,” he argues. Beyond heating and cooling lies transport and a reform of the electricity distribution system and transport supply chains.
Underpinning all of these system changes is a need for new governance. This is also at the heart of Europe’s Energy Union project. “Governance sounds technical but actually at its heart it’s deeply political. I’m much more worried about those barriers than the barrier of cost and technology going forward,” says Mabey. He traces evidence of country concerns over this to the text of the Paris Agreement. It has a “massive emphasis on capacity-building”. For Mabey, this is a sign that countries are thinking about how to implement their INDCs and realising the scale of the institutional challenge.
“While the Paris Agreement sets the framework, it is national and regional policy that drives business decision-making,” notes Mark Kenber, CEO of the UK-based non-profit The Climate Group. On Monday, EU Energy and Climate Commissioner Miguel Arias Cañete suggested that it would be up to the next Commission to revisit Europe’s 2030 climate target in light of the Paris Agreement. “I don’t think the EU needs to revisit its 2030 targets at this stage,” agrees Spencer. “The call is for countries to come back to the table by 2020. Right now the name of the game is strong implementation.”
For the EU, this means coming out next year with: ambitious proposals to tackle carbon emissions from transport, tough targets to cut non-ETS emissions from buildings and agriculture as well as transport, ambitious new legislation on renewables and efficiency, and a new electricity market design that accommodates renewables. It also means seeing through a strong reform of the EU Emission Trading Scheme (ETS). “If we [developed countries] don’t show that we are really serious about implementing the INDCs, I think the Paris bargain could become very fragile,” warns Spencer.
“At least some oil and gas companies have seen gas as a transition fuel, as their saviour, but when asked about what the transition is to, they don’t really have an answer”
He continues: “My sense is that by 2020 the EU should be ready either to revise its 2030 target – not because it has to but because everything it has done over the past five years means we are confident of overachieving it – or set a 2035 target.”
Other experts agree that it is essential that Europe embeds the 5-year review cycle of the Paris Agreement into EU law; EU climate and energy policy is currently based on 10-year cycles. In addition, Mabey suggests that the EU could apply the independent verification and transparency rules of the Paris deal to its own modelling work (often criticised as very un-transparent) and to the national climate and energy plans Member States will be required to draw up under the Energy Union.
“What governments have signed up to, whether they are aware of it or not, is a dramatic change in approach to the energy system,” says Retallack. “The biggest achievement of the Paris Agreement is to change the politics of ambition.”
The Carbon Trust has already been approached by businesses asking if they too should now set zero emission targets for themselves. Mabey says: “It’s a tipping point in the financial community from seeing low carbon as risky and high carbon as low risk to the other way round.” But those companies enquiring about zero emission targets are not from the energy sector, admits Retallack.
Kenber says: “At least some oil and gas companies have seen gas as a transition fuel, as their saviour, but when asked about what the transition is to, they don’t really have an answer. The implicit answer is more gas.”
He believes that when faced with the cost of CCS, some oil and gas companies will actually make the leap to renewables instead: “It may turn out much cheaper. I think the smart ones will partner up and down the supply chain.” There is a sense that innovation is a tremendous opportunity for meeting the climate change challenge. It will be telling whether governments and companies really do invest in a new energy system in the next few years. As Australia said at the closing plenary in Paris: “Our work here is done. Now we can go home to implement.”