Article 6 of the Paris Agreement: A source of international climate cooperation and lower initiative costs
One important topic at this year’s climate negotiations was the formation of procedures for international trade in climate quotas, ensuring, among other things, that double counting is avoided.
‘Voluntary carbon markets’
Today, the EU restricts the use of such carbon credits bought outside the EU. If climate negotiations succeed, this will increase confidence in various ‘voluntary carbon markets’ and increase demand for international projects which cut greenhouse gas emissions.
Allow for more technology transfer
In 2021, it is expected that the turnover of such voluntary credits (i.e CO2 credits that are not directly regulated by national authorities) is expected to reach $1 billion, with a price of well below $10/tonne. The volume in voluntary markets is limited when compared with regulated quota markets, but this volume is increasing and may allow for more technology transfer to emerging economies and access to more affordable climate initiatives for countries and industries with fewer alternatives.
IEA WEO: Advising politicians on increased efforts for climate improvements
This year’s edition of World Energy Outlook (WEO) from the IEA is designed to help COP26 delegates make efficient choices that can drive the energy sector towards net zero emissions.
The policy implementation
The IEA does not paint a very positive picture with regard to the policy implementation of the participating countries in relation to registered ambitions, and it points out that efforts must be considerably strengthened if targets are to be achieved.
On the other hand, the IEA highlights the fat that an increasing degree of electrification is contributing to the rise of a new energy economy driven by political priorities, technological innovation, and a broad desire to tackle climate change.
The IEA estimates that these changes could drive a market that, by 2050, could be larger than today’s oil industry.
Four recommended priorities will be presented for 2030
- Increased pressure on electrification, almost doubling power generation using renewables and nuclear power, etc,
- A sustained strong focus on energy efficiency, including altered consumer behaviour, which can overall contribute to a fall in energy use of one third measured against GDP,
- Almost 80% reduction in methane emissions, especially in oil and gas production and
- Almost tripling investments in advanced, clean technologies, including CCUS, batterers, biofuels, DACCS and synthetic fuels.
GCCSI: Significant increase in CCS projects in development
In GCCSI’s annual status update of CCS projects globally shows that, since 2017, there has been a growing number of CCS projects in development, with a planned capacity of over 140 tonnes of CO2 per year.
102 projects are currently in development
In total, 102 projects are currently in development, while projects that are operational or under construction have remained mostly unchanged since 2013 – 32 projects – with a total capacity of around 40 million tonnes of CO2. In Europe, the UK (18) and the Netherlands/Belgium (10) dominate the synopsis of projects in development. When sorted by emission source, hydrogen production (13) and power generation (10) dominate.
UK appoints two CCS clusters in its first announcement
In October, the UK government annouced that it will enter into negotiations with two industrial clusters to develop CCS infrastructure, to be operational around 2025.
HyNet North West and East Coast Cluster
The chosen clusters are HyNet North West (Merseyside and nearby areas) and East Coast Cluster (Teesside/Humber). By 2030, the Government plans to have established four such CCS clusters, with a combined capacity to capture and store 20-30 MT CO2. Infrastructure development will receive funding from the government’s CCS Infrastructure Fund, which has set aside £1 billion. HyNet will develop a hydrogen net, so that local industry is able to change from fossil fuel-based energy to hydrogen.
24 companies have signed a memorandum of understanding with HyNet, which is led by gas distribution company Cadent and project development company Progressive Energy. East Coast Cluster is led by Northern Endurance Partnership, which consists of the energy companies BP, Eni, Equinor, National Grid, Shell and Total Energies. The purpose is to capture CO2 from various types of local industry and store it in the UK’s side of the North Sea.
A final agreement will be signed by the Minister once necessary socioeconomic assessments have been made. If a deal cannot be made with one of these clusters, the Scottish Cluster is listed as a reserve candidate.
Europe’s energy crisis
A story of a difficult reopening and a difficult transition. The IEA, the World Economic Forum, and many others, have helped to shed light on the causes of the recent energy crisis.
Increased energy demand
There seems to be a consensus that the main reasons are related to increased energy demand in connection with the post-pandemic reopening of the economy, as well as the failure of energy companies to increase supply quickly enough due to low investments over time. The fact that the crisis has hit Europe harder may be linked to its considerable dependence on imported natural gas, less gas storage than usual and less wind than normal, to name a few reasons. As the reopening happens across the world, it puts pressure on all suppliers of coal and gas. This has increased energy prices, which in turn will drive inflation in society, which can lead to social unrest over time. At its highest in October, gas prices in Europe were 7x what they were a year ago.
Impact Europe’s energy strategies?
Even if the IEA believes that the energy crisis cannot be attributed to the growing dependence on variable renewable power, opinion on this is divided. Nevertheless, it is difficult to estimate how the energy crisis will impact Europe’s energy strategies, and thus its climate efforts. The EU president’s perspective is that the EU is currently too dependent on natural gas, especially from Russia, and that focusing on renewables, batteries and energy security will become more important in the future. Others believe that the EU’s energy transition has not been sufficiently thought out, should have a longer timeline, and should invest more in natural gas to faster phase out coal. Nuclear power and CCS will certainly become more relevant in public debate going forwards.
UN report: A large gulf between climate talk and action
Ahead of the annual climate negotiations, the UNEP published its annual Emission Gap Report, which shows how countries are faring with the implementation of policies to achieve climate goals.
More ambitious Nationally Determined Contributions
This year’s climate negotiations are significant because this is the first time since the Paris Agreement was signed in 2015 that all countries will submit more ambitious Nationally Determined Contributions (NDCs). This year’s report from UNEP notes that the new, updated NDCs, along with already announced plans, will make real positive contributions to the climate.
Nevertheless, the updated NDCs are not nearly enough to meet climate goals; This year’s calculations show that emissions in 2030 will only be 7.5% lower than similar calculations made last year, while they need to be 30% lower by 2030 in order to meet the 2°C goal, and 55% lower for the 1.5°C goal. In concrete figures:
Under current policy, global emissions in 2030 will be 55Gt of CO2, which is on par with current emissions, while the 1.5°C target requires that emissions in 2030 are brought down to 25Gt. UNEP also states that although all stated national ambitions (such as net-zero emissions by 2050) will be fully implemented by those countries who have agreed to them, the global temperature rise in 2100 could be 2.2°C.
G20 still agrees that the Paris Agreement’s climate goals will be met
Ahead of the annual climate negotiations, the UNEP published its annual Emission Gap Report, which shows how countries are faring with the implementation of policies to achieve climate goals.
Stands by the Paris Agreement
In a closing statement, the G20 states that, among other things, it stands by the Paris Agreement and its goal that global warming should be limited to ‘well below 2°C and to pursue efforts to limit it to 1.5°C above pre-industrial level’, and that this must entail ‘meaningful and targeted measures’ in all countries, taking into consideration each country’s capabilities and limitations. The statement allows for continued investment in coal-fired power plants, but does not allow for the financing of such facilities outside of one’s own country. This closing statement does not mention other fossil energy sources, but emphasises the importance of energy security, open energy markets and market stability on the way to achieving climate goals. Among some commentators and the media, there is a general consensus that the G20’s statement is characterised by compromise, and that it isn’t binding.
Refineries on the move: major stakeholders hatch plans targeting climate neutrality
Ahead of the annual climate negotiations, the UNEP published its annual Emission Gap Report, which shows how countries are faring with the implementation of policies to achieve climate goals.
Invest £1 billion to transition power generation
In September, Petroineos (a JV with Ineos and Petro China) announced plans to invest £1 billion to transition power generation and other operational aspects of the refinery and petrochemicals facility at Grangemouth from using natural gas to using hydrogen reformed from natural gas with CCS. Grangemouth is one of four clusters that the British government has identified as hubs for CCS development in the UK. The transition by Petroineos will see CO2 emissions reduced by 1 million tonnes – and will ensure that the facility reduces its overall CO2 emissions by 60% in 2030 when compared with 2005. They plan to store captured CO2 in partnership with the Scottish Acorn project. These changes will help to ensure that the Scottish goals for carbon neutrality are met by 2045, some five years ahead of the rest of the UK.
A biofuel refinery in Rotterdam
In the Netherlands, Shell announced in September its decision to build a biofuel refinery in Rotterdam to contribute to European climate goals while also helping to meet Shell’s own climate targets. Deliveries from the refinery will partly cover demand for sustainable aviation fuel and biodiesel. The plant will result in a reduction in emissions of 2.8 million tonnes of CO2 per annum. Shell plans to convert its 14 refineries into five “energy and chemical parks”. Its park in Rotterdam is the second such site to be announced, following the launch of an energy park in July in Rhineland, Germany for the production of green hydrogen.
IEA: China can overfulfil its climate goals – but do they want to?
Ahead of the annual climate negotiations, the UNEP published its annual Emission Gap Report, which shows how countries are faring with the implementation of policies to achieve climate goals.
Positive view
The analysis takes its point of departure from the revised targets that China submitted to COP26 last autumn, as well as policies adopted in relation to energy and the climate and ongoing trends. This analysis then seeks to assess whether these targets can be realistically met. Generally, the analysis sets out a positive view of China’s ability to meet its goals, and indeed to overfulfil them. In its rationale, the IEA stresses that China largely has what it will take in terms of technology, finance and political experience, as well as the fact that such a transition will generate an array of positive socioeconomic ripples effects across the country. The IEA’s scenario for a possible accelerated transition concludes that early interventions to reduce the use of coal will give China a reasonable chance of peaking its greenhouse gas emissions by 2025 rather than by 2030 at the latest as the current goal stands.
The country ought to reduce
The Carbon Action Tracker (CAT) is less positive in its most recent updated assessment from September when considering China’s efforts to meet its climate goals, which its classifies as “highly insufficient”. CAT gives weighting to necessary measures in order to meet the climate goals when carrying out its assessments – rather than whether China will meet its own climate targets when carrying out its assessments. Their analysis suggests that China may well overfulfil in terms of its submitted climate goals, but that the country ought to reduce its use of coal and set a date for the phasing out of coal altogether. By way of example, an overview published by the Centre for Research on Energy and Clean Air (CREA) in August shows that in the first half of 2021 alone, China announced new projects relating to coal power and coal-powered steelworks which, if they are built, will result in emissions of up to 150 million tonnes of CO2 per annum.
DNV Energy Transition Outlook 2021: Paris target to be missed in 2029
The report sets out what DNV believes will happen (forecasting) rather than what they believe it will take to achieve specific goals (backcasting).
Forecasts the energy transition globally and in 10 world regions
DnV’s annual Energy Transition Outlook (ETO) was published in September, providing an updated projection of trends around global energy consumption in the run up to 2050 and the associated climate impact. Compared with two years ago (pre-pandemic), DNV’s latest prognosis shows that it will take one additional year before the 1.5°C goal is missed (2029 vs 2028) and four additional years before the 2°C goal is missed (2053 vs 2049). Globally, DnV estimates that the consumption of fossil fuel-based energy in 2050 will be on a par with levels in 1990, with a somewhat altered composition. 6% of emissions from the use of fossil fuel-based energy are expected to be removed through the use of CCS, which is a far lower figure than was set out in last year’s ETO where the estimate was 11%. The reduction in the proportion of CCS is, according to DNV, due to improved data and increased accuracy in associated models in use.
Net Zero in 2050 will not be achieved
The analysis for Europe concludes that Net Zero in 2050 will not be achieved, but that there will be a 74% reduction in CO2 emissions vs 1990. Hydrogen production will quadruple, but new volumes will be used directly (and eventually also converted into synthetic fuels) in new industries and sectors of society. Hydrogen use will be slowed by associated costs. Almost all new hydrogen volumes will come from electrolysis. According to DNV, green hydrogen costs will become competitive against those related to blue hydrogen by around 2030. This development will be driven by falling costs for renewable power and economies of scale achieved by electrolysers. Hydrogen produced from natural gas will be more than halved, and it will be primarily produced in combination with CCS. Sharper falls in gas prices may make blue hydrogen even more competitive and thus slow interest in green hydrogen. In the run up to 2030, DNV anticipates that CCS in Europe will develop rapidly in the chemical and petrochemical industries, as well as in relation to various process-related emissions, rising to as much as 65 million tonnes in 2030.
The Environmental Analysis is prepared by Gassnova’s analysis team.