David Hone at Sustentavel 2011
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Transcript of David Hone at Sustentavel 2011
Copyright of Royal Dutch Shell plc CONFIDENTIAL
The Green RacePast experience, learning for the future
David HoneSenior Climate Change AdviserGroup CO2
2
Is this really happening?
Fossil fuel use grows – emissions continue to rise
0
2000
4000
6000
8000
10000
12000
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Glo
ba
l fo
ss
il e
ne
rgy
pro
du
cti
on
, mto
e.
Coal
Oil
Natural Gas
Total
Data: BP Statistical Review of World Energy
Progress is being made in developing alternative energy
0
200
400
600
800
1000
1200
1400
1600
1800
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Glo
ba
l no
n-
fos
sil
en
erg
y p
rod
uc
tio
n, m
toe
.
Hydro electricity
Other Renewables
Nuclear
Total
Data: BP Statistical Review of World Energy
But alternative energy is hardly keeping up
0
2000
4000
6000
8000
10000
12000
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Glo
ba
l no
n-
fos
sil
en
erg
y p
rod
uc
tio
n, m
toe
.
Hydro electricity
Other Renewables
Nuclear
Total
Data: BP Statistical Review of World Energy
But alternative energy is hardly keeping up
0
2000
4000
6000
8000
10000
12000
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Glo
ba
l en
erg
y p
rod
uc
tio
n, m
toe
.
Coal
Oil
Natural Gas
Hydro electricity
Other Renewables
Nuclear
Overall Total
Data: BP Statistical Review of World Energy
The story in the 21st century
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2000
4000
6000
8000
10000
12000
14000
2000 2002 2004 2006 2008 2010
Glo
bal
en
erg
y p
rod
uct
ion
, mto
e
Total Fossil EnergyTotal non-FossilTotal Energy Use
Fossil energy86.8%
market share
Fossil energy87.0%
market share
Non-fossil adds 0.3 btoe p.a.
Fossil energy adds 2.3 btoe p.a.
ºC
6 -
5 -
4 -
3 -
2 -
1 -
0 -1990
Glo
ba
l te
mp
era
ture
ris
e Large-scale high-impact
events
Higher
VeryLow
Data: BP Statistical Review of World Energy
Energy Technology Deployment(Shell scenario projections also shown)
“Laws” of Energy Deployment
Law 1
When technologies are new, they go through a few decades of exponential growth, which in the 20th Century was characterized by scale-up at a rate of one order of magnitude a decade (corresponding to 26% annual growth). Exponential growth proceeds until the energy source becomes ‘material’ - typically around 1% of world energy.
Law 2
After ‘materiality’, growth changes to linear as the technology settles at a market share. These deployment curves are remarkably similar across different technologies.
Our response is to “adjust” the system and add layer upon layer of policy, which can raise costs
EU Emissions Trading System delivers a carbon
price into the EU economy
Cos
t to
soc
iety
$
Our response is to “adjust” the system and add layer upon layer of policy, which can raise costs
EU Emissions Trading System delivers a carbon
price into the EU economy
Renewable Energy Targets
UK Carbon Floor Price
Member State Coal Policy
Cos
t to
soc
iety
$
Our response is to “adjust” the system and add layer upon layer of policy, which can raise costs
EU Emissions Trading System delivers a carbon
price into the EU economy
Renewable Energy Targets
UK Carbon Floor Price
Local carbon taxes
Nuclear Energy Policies
Member State Coal Policy
UK Carbon Reduction
Commitment
Cos
t to
soc
iety
$
Energy Efficiency Directive
Our response is to “adjust” the system and add layer upon layer of policy, which can raise costs
EU Emissions Trading System delivers a carbon
price into the EU economy
Renewable Energy Targets
UK Carbon Floor Price
Energy Efficiency Directive
Local carbon taxes
Nuclear Energy Policies
Member State Coal Policy
UK Carbon Reduction
Commitment
“Green” politics and policies
Cos
t to
soc
iety
$
What does this mean ?
• There are physical limits to the rate at which new technologies can be deployed.
• Governments need to design a robust and long term policy framework with a clear objective to encourage change in the energy system.
• Patience is a virtue.
A policy framework to consider
B CA
Large scale abatement within the electricity sector, transport fuels and some areas of industry. Needs a carbon price to drive deployment.
Energy efficiency measures, land use practices - primarily driven by standards and regulation.
Higher cost technologies still moving down the cost curve. Needs a carbon price with additional support.
Cost of abatement€ / tonne CO2e
AbatementMTonne CO2e
A policy framework to consider
B CA
AbatementMTonne CO2e
Carbon price policy drives project implementation from left to right across the abatement curve
Cost of abatement€ / tonne CO2e
A carbon price in the economy
CO2
Goods and services pass into the economy, with the price of CO2
embedded
Emitters buy allowances from or pay tax to the government Revenue passes
through the treasury and may be used to offset costs to
the consumer, e.g. tax reduction.
$
$
$
New technologies
19
Alternative product
Number of installations
Tech
nolo
g y c
o st
Benefit to deployEarlier deployment through demonstration
Discover & DevelopMust be well funded to drive innovation.
Discover & DevelopMust be well funded to drive innovation.
0
20
40
60
80
100
1 10 100 1000
DeploymentDriven by new features and price.
DeploymentDriven by new features and price.
Demonstration (at scale)A critical step in the early commercialization of a technology
Demonstration (at scale)A critical step in the early commercialization of a technology
New energy technologies – e.g. CCS
20
Power generation without CCS
Number of installations
Tech
nolo
g y c
o st
CO2 priceEarlier deployment through demonstration
Discover & DevelopNeed to refocus and rapidly expand R&D.
Discover & DevelopNeed to refocus and rapidly expand R&D.
0
20
40
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1 10 100 1000
DeploymentTypically driven by the CO2 market
DeploymentTypically driven by the CO2 market
DemonstrationNo early adopters and high start-up costs so this phase will need help.
DemonstrationNo early adopters and high start-up costs so this phase will need help.
A structured policy approach is needed
21
Power Generation / Industry &
Manufacturing
Transport Commercial & Domestic (Buildings)
Discover & Develop
Demonstrate
Deploy
A structured policy approach is needed
Power Generation / Industry &
Manufacturing
Transport Commercial & Domestic (Buildings)
Discover & Develop • Support for infrastructure
(e.g. grids & pipelines)• Support for advanced
fuel development• Urban planning decisions.
• Education and awareness.
Demonstrate • Fiscal support for large-scale demonstrations e.g. CCS projects
• Fiscal support for early 2nd generation biofuel manufacture.
• Public transport infrastructure
• Encouraging radical design to set new standards
Deploy • Carbon price in the economy e.g.“Cap-and-Trade”
• CCS legal framework
• “Fast-track” planning
• Vehicle efficiency standards
• Incentivise fuels based on W-t-W CO2 reduction.
• Consumer behaviour
• Efficiency standards (appliances, air-con)
• Building codes
• Encouraging “electrification”.
Broad energy production and use R&D support
23
Even modest first steps are proving very challenging
Linking can enable a global carbon market . . .
Linkages develop between all systems and more systems appear
2000 2005 2010 2015 2020 2025
Danish-ETS
UK-ETSAustralian ETS / carbon price
State and/or Federal carbon pricing
Norwegian ETS
EU-ETS
CDM evolves to includes sectors
Pre-Kyoto Kyoto Post 2012
Expanding EU-ETS
Japan technology standards
Linkage framework
New technology mechanisms evolve (e.g. for CCS)
China adopts carbon pricing mechanisms
New Zealand ETS
Global shipping “cap-and-trade”
CDMForestry mechanism
Energy politics and policies in the 21st Century
• Reducing emissions needs to remain a clear and unambiguous objective.
• Carbon price mechanisms are effective and can deliver the necessary reductions.
• Layering of additional policies can add to the cost and weaken the carbon price signal.
• A clear long term policy framework is required.
• Complimentary policies can enable new technologies (e.g. CCS) and ready them for deployment.
• Constantly changing the framework undermines its purpose.
http://blogs.shell.com/climatechange
Copyright of Royal Dutch Shell plc CONFIDENTIAL