Saturday, September 20, 2014

The 4% club

It seems a Sisyphean (or do I mean Herculean?) task, to cut emissions to zero.  But actually, it isn't.  Small annual declines will over time build to massive cuts.  For example, a cut of 3% per year, cumulated year after year, will equate to a cut of  50% over 20 years, 2/3rds in 36 years (i.e., by 2050) and 93% in 86 years (i.e, by 2100).

Now this is an absolute cut, not a cut relative to growth in the economy.   The use of carbon per unit of real GDP is called the carbon intensity, and that has actually been falling, just not fast enough.  The chart below (source) shows how we need to cut the carbon intensity by 6.2% per year.

What that means is that if real GDP rises 3% per annum, but emissions fall by 3% per annum, then the carbon intensity will fall by 6% per annum.  Growth in developed countries is likely to run at 2-2.5% over the next 10 years.  So if they cut total emissions by 3% a year, their carbon intensity is only falling by 5-5.5% per year, not quite fast enough, but far better than what we have managed to achieve up to now.

The problem is developing economies.  A developing economy goes through a growth cycle as it transitions from emerging through to developed, and that typically involves very rapid growth followed by a steadily diminishing growth trend as it uses up its own resources (labour) while encountering diminishing returns on new investment.    Eventually, even rapidly growing emerging economies reach the trend growth rate set by technological advance and social factors, which seems to be around 2.5%.

So even though China/India/Brazil etc are now growing at 7% per annum, they will eventually grow more slowly than that.  But eventually is too far away.  The BRIC (Brazil, Russia, India,. China) countries are 25% plus of the world economy, and even if they cut their carbon intensity by 6% per year, their emissions in absolute terms will still keep on rising.  The good news is that China, the world's largest emitter, and also, not coincidentally, the world's largest consumer of coal,  had a de-carbonisation rate of 4% in 2013 and looks as if it will do even better this year, since real GDP growth is 7-ish, while carbon imports are declining.  

To achieve a global cut in emissions of 3% per annum, the developed countries need to cut by 4% to allow emerging countries to rise by 1%.   And yet, a cut of that magnitude seems entirely feasible.  With renewables and batteries declining so fast in price, the economic cost of switching is negligible, and in fact new technology may bring new jobs and new growth, just as it has always done in the past.  Once you get past a certain percentage of renewables in total electricity generation, quite modest increases in the total from renewables will produce your 3% decline in total emissions.  Let's say renewables are 20% of total electricity (in fact 22%, but that includes hydro).  A rise of  5% a year every year in the percentage of renewables (i.e., from 20% to 25%, then 25% to 30%, etc.)  will cut total emissions in absolute terms by roughly 5% a year in the early years, accelerating to 10% a year by year 10 (assumes electricity demand growth of 1.5% per annum), and will halve emissions within  9 years.

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