Policy for a net zero UK - Royal Society...1 Science+ Meeting Policy for a net zero UK Professor...
Transcript of Policy for a net zero UK - Royal Society...1 Science+ Meeting Policy for a net zero UK Professor...
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Science+ Meeting
Policy for a net zero UK
Professor Cameron Hepburn
INET at Oxford Martin School
New College and Smith School,
University of Oxford
Grantham Research Institute, LSE
Royal Society, London. 6 December 2017
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1. Pathways to net zero
2. Policy for net zero
3. Performance thus far
4. Addressing the policy gap
5. Negative emissions policies
6. Conclusions
Agenda
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Science suggests that stabilising temperatures at any
level implies net zero emissionsC
O2
Co
nce
ntr
atio
n
(years)
Idealised emissions profiles
falling abruptly to zero at
different times
Source: Knutti & Rogelj (2015)
Even in idealised
emissions scenarios in
which emissions of CO2
are completely stopped
tomorrow, temperatures
will remain flat and not
fall for hundreds of years
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And the Paris Agreement agrees to (try to)
achieve net zero emissions by 2050-2100
• “…holding the increase in the global average temperature to well
below 2oC above pre- industrial levels and pursuing efforts to
limit the temperature increase to 1.5oC,…”
• “…to achieve a balance between anthropogenic emissions by
sources and removals by sinks of greenhouse gases in the second
half of this century…”
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One interpretation of this is that the target is net
zero globally by 2050 (with 5 GtCO2 CDR)
Source: Rockström et al (2017, Science)
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Another interpretation is net zero by 2070, with
around 10 GtCO2 p.a. CDR
Source: Anderson and Peters (2016, Science)
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A domestic net zero commitment has been
promised by UK politicians
Source: BBC News; Guardian
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The implications for the UK appear to be net zero by
somewhere between 2045 and 2070
Source: Pye et al (2017, Nature Energy)
– Cumulative CO2 captured by the UK in these scenarios is around 10 GtCO2 over
the 75 years from 2025-2100 (> 100mt CO2 p.a. cf Drax at 20mt CO2 emissions)
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1. Pathways to net zero
2. Policy for net zero
3. Performance thus far
4. Addressing the policy gap
5. Negative emissions policies
6. Conclusions
Agenda
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Meeting targets that are over 20 – 50 years into the
future requires thinking ahead
Long-term thinking is needed across five policy areas:
1. Technology: larger portfolio of early stage technological “bets”
2. Infrastructure: investment fit for a net zero world
3. Economic: incentives in various guises (especially carbon pricing)
4. Financial: regulation to manage risks of stranded assets
5. Carbon removal: Prognosis is not brilliant; we will also need CDR
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1. Technology: Hitting long-term net zero targets is
likely to be much cheaper with 2x brainpower
• 20 large countries to double clean energy R&D
Mission Innovation (M:I)
Source: breakthroughenergycoalition.com
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1. Technology: calculations based on knowledge
spillovers and analogies suggest > 5x is ideal
Source: Pless et al (in preparation) Inducing and Accelerating Clean Energy Innovation with ‘Mission Innovation’
29.7
5.2
2.2
2
1.1
1
0 5 10 15 20 25 30 35
Europe
United
States
U.S. Dollars (billions)
Current Investment Mission Innovation Target Optimal Investment
– Public R&D spend on renewable energy (excluding hydropower)
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1. Technology: for reasonable risk aversion, a more
diversified portfolio is ideal at this early stage
Source: Way et al (in submission) Wright meets Markowitz
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2. Infrastructure: avoid building assets that may
need to be written off early (e.g. gas and coal)
Source: Based on Pfeiffer et al (2016)
Emissions
Years
1.0
0.5
0.0
Decision point
0 10 20 30 40 50 60 70
Cumulative emissions
from remaining coal
of 10 units
(10 years x 1/year)
Cumulative emissions
from new gas
of 20 units
(40 years x 0.5/year)
Coal
New gas
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3. Economic: a credible long-term carbon price
signal can work wonders…but we don’t have it yet
€ 0
€ 5
€ 10
€ 15
€ 20
€ 25
€ 30
Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16
EU ETS RGGI (Auctions) Kyoto (CERs) California
Price /tCO2
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4. Financial: investors need to have clarity over
business strategies to make their own decisions
• Oxford developed principles for
disclosure to guide on investors
about the risks of fossil investment
• Three suggested questions are:
1. Science: When (year or temperature) does
the company plan to hit net zero emissions?
2. Strategy: What does it’s business plan look
like in an NZE world?
3. Milestones and Metrics: How will the
company measure progress?
Source: Oxford Martin School
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• Investors must report on ESG / climate
• BS > €500m beyond carbon footprints
• Includes “physical” and “transition” risks
4. Financial: greater disclosure of climate risk is
now being recommended by the TCFD
• Chaired by Michael Bloomberg and
commissioned by the Financial Stability
Board (FSB), Chaired by Mark Carney
Task Force on Climate-related
Financial Disclosures (TCFD)
Sources: fsb-tcfd.org
• TCFD Phase I report (March 2016)
included “forward-looking” disclosures
• TCFD, Unilever CFO and Oxford co-
hosted a meeting in July 2016
• TCFD Phase 2 report (December 2016)
went into much greater detail
French Article 173 of Energy
Transition law – for June 2017
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4. Financial: Failure to manage climate risk might
leave fiduciary investors facing lawsuits
Here’s the logic:
1. Fiduciary investors have duty to control for ‘material risk’
2. A material risk is one that might trigger 5% or more loss in value
3. In present value terms, a 5oC warming path would deliver expected
losses of US $7trn on AUM of US $140trn
4. Therefore clients and beneficiaries might have a legal case against
investment managers who take no action as emissions erode value
5. The odds of a successful case increase as time passes
Sources: Covington et al (2016, Nature)
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5. Carbon removal: With carbon prices low & not
credible, other policies may be necessary on CDR
Source: Millar et al (in preparation)
– One idea is the requirement for mandatory
sequestration of a fraction of extracted carbon
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1. Pathways to net zero
2. Policy for net zero
3. Performance thus far
4. Addressing the policy gap
5. Negative emissions policies
6. Conclusions
Agenda
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There is action but we are not on track to meet
even Paris pledges, which would take us above 3oC
0
1000
2000
3000
4000
5000
6000
7000
8000
1990 1995 2000 2005 2010 2015 2020 2025 2030
GH
G e
mis
sio
ns
[MtC
O2e
q./
yr]
BaU (non climate policy)*
Current policy*
US BR2 'under current measures'
NDC
BaU (non climate policy)*
Current policy*
EU BR2 'with existing measures'
NDC
BaU (non climate policy)*
Current policy (nuclear power share of15% by 2030)*
Current policy (nuclear power share of20% by 2030)*
NDC
EU
U.S.
Japan
U.S.
EU
Japan
-26 to -28% relative to 2005
-40% relativeto 1990
-26% relativeto 2013
Source: Victor et al (2017, Nature)
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The UK legislated the legally-binding fifth
carbon budget after the 2016 EU referendum
Source: CCC analysis based on DECC (2015); Carbon Brief
– The UK has been reducing its emissions, meeting targets so far
– But we were not on track to meet 4th and 5th CBs, even before Brexit
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We remain a very long way from net zero, albeit
with some good progress in a couple of areas
Source: CCC (2017) Meeting Carbon Budgets: Closing the Policy Gap – Fig 2. based on BEIS (2017)
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The big win has been the carbon price floor, which
has all but removed coal from the electricity grid
Source: Aurora (2017)
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But Brexit makes it harder: EU policies contributed
~50% of the emissions reductions intended by 2032
Source: CCC analysis based on DECC (2015); Carbon Brief
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1. Pathways to net zero
2. Policy for net zero
3. UK performance thus far
4. Addressing the policy gap
5. Negative emissions policies
6. Conclusions
Agenda
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Brexit offers some limited opportunities to change
UK climate policy…
1. Ignore 2020 renewables target? The 2020 renewables target (15% of
energy) is ambitious and costly, and the UK is not on track
2. Replace EU ETS? The UK helped establish the EU ETS. Iceland,
Liechtenstein and Norway now participate, and Swiss agreed a link in
2016 after 5 years of negotiations. UK already has a carbon floor price
that works as a fairly complicated carbon tax. Could a serious carbon tax
be politically popular in the UK? Could it facilitate a border adjustment?
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Post-Brexit Britain could convert the CPF to a US
Republican style > $40/t carbon tax…
Source: Climate Leadership Council (2017)
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Reform of electricity markets is needed to fully
integrate renewables at lowest cost
ERCOT (Texas) Germany Irish Market
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20
40
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GW
$/M
Wh
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GW
€/M
Wh
Wind and Solar Capacity
Volume-weighted average price
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-11
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-17
GW
€/M
WH
– As greater renewables are connected, wholesale prices have fallen
– Other services will need to be priced
– Procurement of capacity on a market competitive basis
Source: Farrell et al (in preparation) Is this the end of conventional wholesale electricity markets?
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Key policies on buildings are tighter standards now
(to avoid regret), and moving soon on infrastructure
Source: CCC (2017) Meeting carbon budgets: closing the policy gap
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1. Pathways to net zero
2. Policy for net zero
3. UK performance thus far
4. Addressing the policy gap
5. Negative emissions policies
6. Conclusions
Agenda
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Globally, and in the UK, there may be large potential
in various CCUS and land-based CDR approaches
Source: Hepburn et al (in preparation) Use it or lose it
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We have been reviewing the literature on different
CCU / CO2 removal approaches for RS / NAS
Source: Hepburn et al (in preparation) Use it or lose it
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1. Pathways to net zero
2. Policy for net zero
3. UK performance thus far
4. Addressing the policy gap
5. Negative emissions policies
6. Conclusions
Agenda
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1. The UK should be net zero between 2045-2070 to hit Paris
2. This now requires forward thinking across 5 policy areas:
1. Technology: larger portfolio of early stage technological “bets”
2. Infrastructure: investment fit for a net zero world
3. Economics: incentives in various guises (especially carbon pricing)
4. Finance: regulation to manage risks of stranded assets
5. Carbon removal: Support for CDR / CCUS and potential legal intervention
3. We are not on track.
4. Key priorities to get back on track include accelerating electricity
decarbonisation, planning ahead for buildings and transport to avoid later
regret, getting moving now on land and CDR
Conclusions
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Thank you