Dieter Helm - The Carbon Crunch

THE CARBON CRUNCH

Revised and Updated Edition

Dieter Helm, CBE, is Professor of Energy Policy, University of Oxford, Fellow in Economics at New College, Oxford, and Professorial Research Fellow at the Smith School of Enterprise and the Environment, Oxford. He is Chair of the worlds first Natural Capital Committee.

Copyright 2012 Dieter Helm

This paperback edition first published 2015

The right of Dieter Helm to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.

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Library of Congress Cataloging-in-Publication Data

Helm, Dieter.

The carbon crunch / Dieter Helm.Revised and updated edition.

pages cm

Includes bibliographical references and index.

ISBN 978-0-300-21532-8

1. Energy policy. 2. Renewable energy sources. 3. Energy conservation. 4. Climatic changesPrevention. 5. Greenhouse gas mitigation. I. Title.

HD9502.A2H455 2015

333.79dc23

2015000657

A catalogue record for this book is available from the British Library.

ISBN 978-0-300-21532-8 (pbk)

10 9 8 7 6 5 4 3 2 1

Contents

Figures and tables

Abbreviations

AGR, advanced gas-cooled nuclear reactor

BRICS, Brazil, Russia, India, China, South Africa

CAFE, Corporate Average Fuel Economy

CCGT, combined-cycle gas turbine

CCS, carbon capture and storage

CDM, Clean Development Mechanism

CEGB, Central Electricity Generating Board

CER, Certified Emissions Reduction

CND, Campaign for Nuclear Disarmament

CO, carbon monoxide

CO2, carbon dioxide

CO2e, carbon dioxide equivalence (i.e., including all greenhouse gases)

CSP, concentrated solar power

CTL, coal-to-liquids

EIA, US Energy Information Administration

EU ETS, European Union Emissions Trading Scheme

FGD, flue-gas desulphurization

FiT, feed-in tariff

GDP, Gross Domestic Product

GW, gigawatt

IAM, integrated assessment model

IEA, International Energy Agency

IEM, internal energy market

IMF, International Monetary Fund

IPCC, Intergovernmental Panel on Climate Change

ITF, International Transport Forum

kWh/d, kilowatt-hour per day

LCPD, EU Large Combustion Plant Directive

LNG, liquefied natural gas

MIT, Massachusetts Institute of Technology

MMBtu, million British thermal units

MW, megawatt

NGO, non-governmental organization

NOx, nitrogen oxides

NPV, net present value

OPEC, Organization of Petroleum Exporting Countries

ppm, parts per million

PV, photovoltaics

PWR, pressurized water nuclear reactor

R&D, research and development

REDD, Reducing Emissions from Deforestation and Forest Degradation

ROC, Renewables Obligation Certificate

SOx, sulphur oxides

SPD, Social Democratic Party of Germany

SUV, sports utility vehicle

UEA, University of East Anglia

UNFCCC, United Nations Framework Convention on Climate Change

WTO, World Trade Organization

Preface to the revised and
updated edition

This book was always going to be controversial, and so it has proved. It is designed to be a wake-up call, drawing attention to the fact that very little has been achieved in addressing climate change in the last two decades. The sad fact is that, contrary to most political rhetoric, world leaders (and many non-governmental organizations NGOs and lobbyists) have not come to terms with the nature of the problem, and the flurries of diplomatic activity and major conferences have made little progress.

The underlying position continues to deteriorate. In 2012, another 2 parts per million (ppm) of carbon dioxide (CO2) were added to the atmosphere, followed by another 2.8 ppm in 2013 and roughly the same again in 2014. Roll forward to 2030 and the total will be close to 450 ppm, up from the current 400, and close to twice the pre-industrial levels a Paris agreement notwithstanding. Coal power stations have continued to be built on an enormous scale in China and India. Indeed Europe and notably Germany has been back in the new coal power stations business again, and mining yet more lignite too. Though some action has been taken to reduce the overhang of emissions credits, the European Unions Emissions Trading Scheme (EU ETS) remains pathetically weak, with a carbon price too low to make much difference.

The international negotiations in the run-up to the Paris conference in 2015 have kept lots of bureaucrats and campaigners busy, but still offer little hope of significant progress. China will go on increasing its emissions until 2030, and India is likely to peak even later. In the meantime, consumers fret about their energy bills, and are beginning to mount the inevitable backlash against the renewables policies that they were told would not cost them much. Politicians are as a result scrambling to cut subsidies for current renewables, reinforced by fossil fuel prices which stubbornly refuse to rise as the politicians so confidently predicted, and instead follow the inevitable economic path dictated by supply and demand.

Being controversial, it is not surprising that the first edition attracted some fierce responses, notably from green NGOs. Rather than attack the first part of the book (on causes and responsibilities) or the analysis in the second part (on why current policies and the Kyoto framework have failed to make any serious dent in the growth of emissions), they have targeted the implications in the third part, on what should be done. In particular, it is the proposals on carbon pricing, on gas as a transitionary fuel, and on future renewables and R&D that have been challenged.

On carbon pricing, a number of critics have taken issue with the proposal for border carbon taxes, claiming that this is unrealistic. My argument is that this is what would be required if we seriously want to tackle climate change. Sadly, the evidence thus far is that few, if any, countries really want to do what is necessary to address climate change. If it is agreed that a carbon price is a necessary part of any coherent carbon policy framework, and that what matters is not carbon production but carbon consumption, then border taxes are the natural next step. Critics have also failed to note the underpinnings of my argument for border taxes including the fact that there are lots of border adjustments already in place, and the ways in which the threat of border taxes might incentivize both the US and China to act faster. A border tax approach helps to encourage the US to develop a carbon tax domestically, and China to play up its own carbon pricing. No serious progress will be made without the US and China and, despite all the hype about the Paris negotiations, very little has in fact been made to date. On the contrary, China has decided as its opening gambit not to legally commit to a cap on its emissions until 2030, something which will probably happen by then anyway.

Perhaps the fiercest reactions have been focused on my argument that gas can and should play a key role as a transitionary fuel, replacing coal in the short term. The green NGOs and green political parties have led the way in trying to ban fracking. They are strongly supported by vested interests notably those benefiting from current subsidies for renewables.