What is the correct carbon price?

From PNAS

Estimating the cost to society from a ton of CO2—termed the social cost of carbon (SCC)—requires connecting a model of the climate system with a representation of the economic and social effects of changes in climate, and the aggregation of diverse, uncertain impacts across both time and space.

A growing literature has examined the effect of fundamental structural elements of the models supporting SCC calculations. This work has accumulated in a piecemeal fashion, leaving their relative importance unclear.

Here, we perform a comprehensive synthesis of the evidence on the SCC, combining 1,823 estimates of the SCC from 147 studies with a survey of authors of these studies. The distribution of published 2020 SCC values is wide and substantially right-skewed, showing evidence of a heavy right tail (truncated mean of $132).

ANOVA (analysis of variance) reveals important roles for the inclusion of persistent damages, the representation of the Earth system, and distributional weighting. However, our survey reveals that experts believe the literature underestimates the SCC due to an undersampling of model structures, incomplete characterization of damages, and high discount rates. 

To address this imbalance, we train a random forest model on variation in the literature and use it to generate a synthetic SCC distribution that more closely matches expert assessments of appropriate model structure and discounting. 

This synthetic distribution has a mean of $283 per ton CO2 for a 2020 pulse year (5% to 95% range: $32 to $874), higher than most official government estimates, including a 2023 update from the U.S. EPA.

Source: Ecochain

In most countries, the carbon price is far too low (though the EU's carbon price has increased since the date of this chart to about US$75), even if we accept the conservative price of $132.  And the truth is that we'll only get falling emissions when the carbon price is set high enough, and keeps on rising each year.  We're a long way from there.

The huge climate impact of the middle classes

From The Guardian

The richest 10% of people in many countries cause up to 40 times more climate-heating carbon emissions than the poorest 10% of their fellow citizens, according to data obtained by the Guardian.

Failing to account for this huge divide when making policies to cut emissions can cause a backlash over the affordability of climate action, experts say.

The world’s richest 10% encompasses most of the middle classes in developed countries – anyone paid more than about $40,000 (£32,000) a year. The lavish lifestyles of the very rich – the 1% – attract attention. But the 10% are responsible for half of all global emissions, making them key to ending the climate crisis.

The Cop28 UN climate summit begins on 30 November, at a time when the window to salvage a livable future for humanity is rapidly closing.

When climate negotiations began in the 1990s, most of the inequality in people’s carbon emissions was between rich and poor nations. Three decades on, the situation has reversed. Now, most of the inequality in emissions between the rich and poor exists within individual countries.

This shift has enormous implications for how the climate crisis can be ended, researchers say, although international support for the poorest and least polluting nations remains vital.

Data from the International Energy Agency (IEA) details the energy-related CO2 emissions per person in 2021 in a dozen major countries, plus the 27-nation EU. In the US, UK, EU and Japan, the richest 10% have carbon footprints about 15 times greater than the poorest 10%. In China, South Africa, Brazil and India, the top 10% cause 30-40 times more emissions than the bottom 10%.

In all cases, the emissions of the top 10% are as high as those of at least the bottom 50%. In the US and China the situation is even less equal: the emissions of the top 10% are higher than the bottom 70% combined. South Africa is the most extreme example, with the footprint of the top 10% as large as that of the remaining 90%.

Transport, especially car use, is a major factor in the sky-high emissions of the richest 10%, with these emissions 20-40 times higher than the transport emissions of the poorest 10% in the countries analysed.

In the US and Canada, road transport makes up about a third of the footprint of the top 10%. The transport emissions of the richest 10% are the same as the transport footprint of the bottom 70% of the population in those countries.

Another major factor is the emissions embodied in the goods that people buy, such as furniture and electronics. These are 20-50 times higher for the richest 10%, and make up about a third of emissions in most countries.

Carbon inequality between countries accounted for two-thirds of all carbon inequality in 1990, but now two-thirds of carbon inequality occurs within nations. This is because emissions in rapidly developing nations, such as China, have approached those in rich nations in recent decades, narrowing the difference between nations. The other key factor, Chancel said, was rising income inequality, particularly in the global south.

“It’s very important to stress that big gaps between countries still remain. But on top of this you now also have a lot of within-country inequality,” he said.

The IEA data shows that the poorest 10% in the US still have a footprint bigger than 90% of those in India.

Globally, the top 10% by income totals 770 million people, with almost two-thirds in high-income countries, according to a report from the Stockholm Environment Institute and Oxfam.

Within the UK, the top 10% are those paid more than £59,000.

The researchers estimated that the projected growth in millionaires, from 0.7% of the global population to 3.3%, would result in accumulated emissions of 286bn tonnes of CO2, about 70% of the emissions budget remaining in 2021 if global heating was to be kept to 1.5C above pre-industrial levels. A more recent estimate of the carbon budget was 250bn tonnes, suggesting the growth in millionaires alone could wipe it out completely.

“I think it is significant that such a small share of humanity will consume so much of the remaining carbon budget,” said Prof Stefan Gössling, of Linnaeus University in Sweden, who led the study. “It will not be enough to just impose taxes on carbon, as the rich can essentially afford to pay the extra amount, while poor people would be more affected.”

Chancel, in a recent report, noted that a “relatively modest” progressive wealth tax of 1.5% on people with $100m or more in assets – 0.001% of the global population – would raise $295bn a year. That is a similar amount to what is needed to protect the world’s people from the growing impacts of the climate crisis.

Eu votes for "green tariffs" on imports

From The Age

The European Union has struck a political deal to impose carbon tariffs on imports of polluting goods such as steel and cement, in a world-first scheme which aims to support its domestic industries against those from countries with weak climate laws.

The 27-member bloc last year proposed a law to impose a green levy from 2026 on imports of steel, cement, fertilisers, aluminium and electricity, to prevent domestic industry from being undercut by cheaper goods made in countries with weaker environmental rules.

As part of an all-night sitting of European Parliament measures will now also apply to imported hydrogen, and some downstream products such as screws and bolts and similar articles of iron or steel.

The scheme, known as the carbon border adjustment mechanism, has faced criticism from countries with high-carbon exports including Australia, China, Turkey, India as a protectionist measure, although Brussels has said countries could be exempted if they have a domestic carbon price akin to the EU’s, or similar climate change targets. Europe’s target under the Paris accord is to reduce net greenhouse gas emissions by at least 55 per cent on 1990 levels by 2030.

The measure comes amid heightened trade tensions with the United States over the Inflation Reduction Act’s subsidies for green technologies, which the EU has said could disadvantage European firms.

Brussels argues the new schemeis designed to be in full compliance with World Trade Organisation rules and plans for it to apply from October 1 next year, but with a transition period, where the obligations of the importer shall be limited to reporting.

Before the end of the transition period the European Commission will assess whether to extend the scope to other goods at risk of carbon leakage, including organic chemicals and polymers, with the goal to include all goods covered by the current European emissions trading scheme by 2030. They will also assess the methodology for indirect emissions and the possibility to include more downstream products.

Companies importing goods into the EU will be required to buy certificates to cover their embedded carbon emissions. The scheme is designed to apply the same carbon cost to overseas firms and domestic EU industries - the latter of which are already required to buy permits from the EU carbon market when they pollute.

Mohammed Chahim, European Parliament’s lead negotiator on the law, said the border tariff would be crucial to EU efforts to fight climate change.

“It is one of the only mechanisms we have to incentivise our trading partners to decarbonise their manufacturing industry,” he said. “On top of this, it is an alternative to our current carbon leakage measures, which will allow us to apply the ‘polluter pays’ principle to our own industry. A win-win situation.”

Some details on the law, including its start date, will be determined later this week in related negotiations on a reform of the EU carbon market.

Australian industry has said the country had little to fear in the medium term from implementable border adjustments by the EU because only 0.25 per cent of trade with Europe was affected by the current proposal.

However, the scheme will likely expand and similar schemes in the United States, Japan or other economies could affect much more trade.

Australia’s Department of Foreign Affairs and Trade has said it would examine the EU’s proposal to see whether it is WTO compliant.

The department said it was committed to participating in multilateral discussions that promote trade, build sustainable supply chains and share knowledge.

Charity groups have criticised the EU for introducing the measure without lifting climate funding to developing economies, which will likely be hit hardest by the scheme.

Oxfam EU Tax expert Chiara Putaturo said Europeans were responsible for double the carbon emissions as the poorest half of the world.

“Yet, the EU just agreed to pass the buck to those least responsible by forcing them to pay a tariff despite being hardest hit by the climate crisis. EU countries did not even accept to channel revenues to climate finance funds,” she said.

“The EU and EU countries need to increase climate finance funds, especially now that poor countries are going to bear the cost of the carbon tariff.”

Oxfam's criticism is completely wrong.  If developing countries impose a carbon price on their own steel, they won't have to pay green tariffs in the EU.  It's quite simple:  either they pay the tax to themselves, or they pay tax to the EU.  Which makes more sense?  This measure will encourage other countries to introduce their own carbon price.  Which will be a good thing.

Finished coils of rolled steel at BlueScope's Port Kembla steelworks in NSW.CREDIT:BLOOMBERG

Big oil coined carbon footprints to blame us

 From The Guardian

Personal virtue is an eternally seductive goal in progressive movements, and the climate movement is no exception. People pop up all the time to boast of their domestic arrangements or chastise others for what they eat or how they get around. The very short counterargument is that individual acts of thrift and abstinence won’t get us the huge distance we need to go in this decade. We need to exit the age of fossil fuels, reinvent our energy landscape, rethink how we do almost everything. We need collective action at every scale from local to global – and the good people already at work on all those levels need help in getting a city to commit to clean power or a state to stop fracking or a nation to end fossil-fuel subsidies. The revolution won’t happen by people staying home and being good.

But the oil companies would like you to think that’s how it works. It turns out that the concept of the “carbon footprint”, that popular measure of personal impact, was the brainchild of an advertising firm working for BP. As Mark Kaufman wrote this summer:

British Petroleum, the second largest non-state owned oil company in the world, with 18,700 gas and service stations worldwide, hired the public relations professionals Ogilvy & Mather to promote the slant that climate change is not the fault of an oil giant, but that of individuals. It’s here that British Petroleum, or BP, first promoted and soon successfully popularized the term “carbon footprint” in the early aughts. The company unveiled its “carbon footprint calculator” in 2004 so one could assess how their normal daily life – going to work, buying food, and (gasp) traveling – is largely responsible for heating the globe.

The main reason to defeat the fossil fuel corporations is that their product is destroying the planet, but their insidious propaganda, from spreading climate-change denial to pushing this climate footprint business, makes this goal even more worthwhile.

Carbon footprints caught on, and I routinely see people on social media zooming in on individual consumption habits when climate chaos is under discussion. Bill McKibben made the case against them in 2008:

Say you have a certain amount of time and money with which to make change – call it x, since that is what we mathematicians call things. The trick is to increase that x by multiplication, not addition. The trick is to take that 5 percent of people who really care and make them count for far more than 5 percent. And the trick to that is democracy.

That is, private individual actions don’t increase at a rate sufficient to affect the problem in a timely fashion; collective action seeking changes in policy and law can.

Too, the goal of personal virtue is merely not to be part of the problem. It’s not good enough for a bystander to say “I personally am not murdering this person” when someone is being stabbed to death before them (and those of us in the global north have countless ties to systems that are murdering the climate, so we are not exactly bystanders). The goal for those of us with any kind of resources of time, rights and a voice, must be being part of the solution, pushing for system change. To stop the murder.

Underlying this is a conflict in how we imagine ourselves, as consumers or as citizens. Consumers define themselves by what they buy, own, watch – or don’t. Citizens see themselves as part of civil society, as actors in the political system (and by citizen I don’t mean people who hold citizenship status, but those who participate, as noncitizens often do quite powerfully). Too, even personal virtue is made more or less possible by the systems that surround us. If you have solar panels on your roof, it’s because there’s a market and manufacturers for solar and installers and maybe an arrangement with your power company to compensate you for energy you’re putting into the grid.

In my own case, some of what I could tout as personal virtue is only possible because of collective action. I have 100% clean electricity at home because people organized to make that option and the solar and wind power behind it available. I do some of my errands by bicycle because the San Francisco Bicycle Coalition worked for decades to put bicycle paths across the city and otherwise make it safer to get about on two wheels. I can take public transit because there is public transit. Across the Bay, the city of Berkeley led the way in making all-electric houses the standard for the future; more than fifty California cities and counties have followed suit. Paired with the clean electricity California has committed to, this mandate matters. Having an all-electric house or driving an electric car fueled by renewables won’t be a virtuous choice in the future; it’ll just be the norm.

But individual and collective action don’t have to be pitted against each other. Individual choices do add up (they just don’t, in McKibben’s terms, multiply). That vegan options are available at a lot of fast-food chains is because enough consumers have created a profitable market for them. We do influence others through our visible choices. Ideas spread, values spread, habits spread; we are social animals and both good and bad behaviors are contagious. (For the bad, just look at the contagiousness of specious anti-vaccination arguments.)

Vegetarian and vegan diets (and low-meat or no-red-meat diets) have become far more common, creating markets for new products and different menus. But they have not made the beef industry go away or reformed its devastating climate impact. Climate chaos demands we recognize how everything is connected. Seeing yourself as a citizen means seeing yourself as connected to social and political systems. As citizens we must go after the climate footprint of the fossil-fuel corporations, the beef industry, the power companies, the transportation system, plastics, and so much more.

• Rebecca Solnit is a Guardian US columnist. Her most recent books are Recollections of My Nonexistence and Orwell’s Roses

This pretty much how I see it.  Thanks to others switching, I have vegan alternatives in the supermarket.  Thanks to others, I can buy green electricity.  But I also need to vote for effective policies which reduce emissions everywhere.  A price on carbon, for example.  So, yes, do become vegetarian or vegan, do switch your electricity to green sources, do put solar on your roof if you can, do buy an electric car, or a hybrid.  Bur also vote for a party which has a real policy to progressively cut emissions.  Airy-fairy targets 30 years away are no good.  What is their target for 5 years and 10 years out?  This is what matters.

Climate change: does only one thing matter?

 From a Twitter thread by Xavier Helgesen.

[See my take on this, below]

Everything you have been told about stopping climate change is wrong. Buying a Tesla doesn’t matter. Not flying/eating vegan/turning off lights doesn’t matter. As a serial climate entrepreneur (raised over $200 million), I speak from experience. Only one thing matters.

Let’s start at the beginning: what’s the problem? The problem is that it is free to pollute the atmosphere with CO2. Because it is free, lots of business models make sense. Examples: oil extraction, gas stations, global container shipping, international air travel, etc.

Because lots of business models ONLY make sense when pollution is free, a very well-funded PR and lobbying machine sprang up to keep pollution free. At first, they tried to convince people that climate change was not man made. They said it was a “natural climactic cycle”. Eventually this became untenable.

So they settled on a more durable strategy: climate change is a matter of personal responsibility. If you think about it, this is absurd. Just because I didn’t personally spill oil in the Gulf of Mexico doesn’t mean it’s ok if BP does. Unfortunately, it worked. Green became cool, electric cars became cool. People had climate guilt and bought offsets. Urban liberals convinced themselves they were doing something about the biggest problem of our age.

But they weren’t. Because pollution was still free.

Let’s take your Tesla. You retire your gas guzzler and go electric: you reduce your personal emissions. But what happens systematically? That incremental gallon of gas is still sold. All you have done is slightly decrease demand. Congrats, you just made gas [petrol] cheaper.

There is only one solution to this problem. And as much as entrepreneurs hate to hear it, it is a political solution. There must be a high and predictably escalating price on carbon pollution globally. That’s it. Nothing less, nothing more. All fossil fuel business models rely on relatively long-term (20+ years) business plans. A predictably escalating price on carbon destroys these business models.

It also creates a dramatic financial incentive to put carbon back in the ground. Some carbon emitting activities, like international flights and Kobe beef, can withstand a high price on carbon.

There are low carbon, carbon neutral and carbon negative substitutes for nearly everything in our lives. What is missing is the economic incentive. Make it untenable for a politician (left or right) to run for office without solving this problem economically. On the left: we don’t need a “green new deal”. That doesn’t solve the problem. We need a clear economic incentive to not pollute. On the right: carbon pricing is a transparent incentive for business to do the right thing for the planet. Even Exxon supports it.

To conclude the thread, I think many people underestimate how smart and evil the opponents of global action on climate change have been. They have effectively co-opted the goodwill of smart people who care into irrelevant solutions. Let’s get smart on this and let’s solve it.

My thoughts on this:

If you use an EV, you are reducing demand for petrol/diesel, everything else being the same.  And this will reduce the price of petrol, which in turn will increase demand elsewhere.  But the author has confused a shift in the demand curve with a movement along an unchanged demand curve.   Look at the chart below (from EconomicsHelp).  

The chart is a classic supply-demand graph.  Quantity (Q) is shown on the horizontal axis, and price (P) on the vertical axis.  The supply curve slopes up from left to right, because at higher prices, producers are willing to provide more supply.  The demand curve slopes down because at higher prices, less is demanded.  Where the two curves intersect is where the price and the quantity supplied/demanded is in equilibrium.  Now, if EVs take up more of the market, at every price less petrol will be demanded.  The demand curve D1  has shifted to the left, to D2.  The new equilibrium has shifted from P1/Q1 to P2/Q2.  And yes, P2  is below P1, just as Helgesen states.  But quantity has also declined, from Q1 to Q2.  This is precisely why oil companies hate EVs, and spread lies and disinformation about them.  They don't just sell less oil as EVs grow, they also sell it at a lower price.

If you switch your electricity supplier to a 100% green utility, you reduce both the demand for and the price of coal, ceteris paribus, in exactly the same way you affect the oil market when you drive an EV.  

The same applies to other environmental shifts.  When I first became a vegetarian, 40 years ago, there were no meat substitutes for sale.  Now, in supermarkets, there are whole sections devoted to plant-based foods.  Sales of such foods are up 40% over the last year in Oz.  This hasn't happened because of government policy.  It's happened because more and more ppl want to stop animal suffering.   Of course, most ppl continue to eat meat, but arguing that because of that we should give in and eat meat with them, is just silly.

Personal and individual actions have made the world a better place.  That is not to say we don't need a carbon tax.  We do.  But individual and collective changes will work together to reduce emissions.  Both are needed, and while we wait for governments in the pay of fossil fuel companies, we can do what we can, while pressing others to do more.  As I've said before, you can take steps to reduce your carbon footprint:

1.  Buy your electricity from a green supplier
2.  Put solar panels on your roof, if you can
3.  Become vegetarian or vegan.
4.  Buy an EV, or if that's too expensive for you, a hybrid or plug-in hybrid.

And collectively, vote for the political party which will do the most to slash emissions, including introducing a carbon tax which rises every year.  The world needs to halve emissions over the next decade.  Everything we do should be directed towards that goal.

 

Strong action needed to prevent 2 degrees rise

 From BNEF

Setting net-zero emissions targets is suddenly in vogue. Starting with the U.K. in 2019, we now estimate that around 70% of world emissions are either already covered by net-zero legislation, have net-zero emissions legislation under discussion, or occur where net-zero is the policy position of the government.

Then we have the Paris Agreement, which commits signatories to limit global warming to well below two degrees Celsius above pre-industrial levels, aiming at 1.5 degrees. Glasgow, in Scotland, will host the 26th Conference of the Parties, or COP26, to the United Nation’s Framework Convention on Climate Change, known as the UNFCCC in November. This will be the first opportunity to discuss the climate plans of individual countries following the submission deadline for National Determined Contributions, or NDCs, in 2020.

The term net-zero is often used to refer to 1.5-degree climate targets. However, the two are different. The climate is sensitive to the cumulative volume of greenhouse gases in the atmosphere, and not so much the emissions in any one year. Reducing emissions faster early on will result in less cumulative emissions and therefore a greater chance of achieving a 2-degree or 1.5-degree climate target. A slower start over the next decade will mean greater cumulative emissions in 2050, and far less chance of keeping climate change to two degrees or less. To be more exact, the world can emit between 420 gigatons and 1,170 gigatons of carbon dioxide cumulatively from 2018 for a 67% chance of limiting global warming to between 1.5 and 2 degrees Celsius above pre-industrial levels, according to the Intergovernmental Panel on Climate Change’s Special Report on Global Warming of 1.5°C, published in 2018.

We can put this another way. Based on current emissions trends, we are on track to run out of emissions budget to stay within 2 degrees of warming in 2044, and by 2028 we will have exhausted the emissions budget to stay within 1.5 degrees. This underlines the need for immediate, concrete policy action to accelerate decarbonization today: achieving mid-century climate goals will not be sufficient, unless intermediate milestones are also hit.

Delaying meaningful abatement until after 2030, for example, forces very rapid emissions reduction in later years. This may even make it necessary to get to net-zero earlier than 2050 to keep temperature increases well below two degrees. On the other hand, a more rapid initial decline and a longer, flatter tail may ensure we get closer to a 1.5-degree climate target. To be sure, this may imply moving faster than supply chains, public policy, and public sentiment can manage.

Yellow = a cumulative 17% p.a. decline
Green = straight line decline of 3.5% p.a. on the starting level of emissions
Blue = BNEF's proposal
Purple = "end-loaded" reductions
Black = Business as usual

So what might intermediate milestones need to look like in order to achieve net-zero emissions by 2050 and achieve the Paris Agreement? And how can we divide the effort between different parts of the economy? To help answer this, we have constructed a series of sector emissions budgets.

While there is no single answer, we have applied three principles to do this:

• Principle 1 – There can be no free riders: To achieve global net-zero, every sector of the energy economy needs to start eliminating emissions to be completely carbon free by mid-century.
• Principle 2 – Some sectors face a tougher task than others: Lower expectations this decade for sectors with rapidly growing emissions or few economically viable abatement options.
• Principle 3 – An orderly transition: This is where change occurs incrementally to maintain economic and social security. We can describe this in carbon-budget trajectories by minimizing the annual rate of emissions reductions.

The result is three distinct groups:

• Group 1 sectors include power and road transport as these have cost-competitive abatement options. We assign each a temperature-equivalent net-zero carbon budget.
• Group 2 sectors have rising emissions or few immediately available emissions-reduction options. This group includes most of what are commonly termed “hard-to-abate” sectors, such as steel, chemicals, cement and aviation. For these we have split the emissions budget into two phases – the period to 2030, where we cap emissions growth, and the period from 2030 to 2050, where emissions track down in an orderly fashion to zero.
• Group 3 sectors have immediately available, but less competitive abatement options. This group includes buildings, rail and some industry. For these, the emissions paths slope downward all the way to 2050 but at a slower rate in the near term compared with transport and power.

Adding these sector curves together suggests emissions need to fall by 30% to get on track by 2030 and decline overall by 6% a year to 2040. If achieved, this orderly transition would reach zero emissions in 2050 and achieve the Paris Agreement objective, with climate change of about 1.75 degrees Celsius by 2100.

Based on these budgets, the power sector does much of the heavy lifting this decade, with emissions down 57% by 2030 from 2019 levels. Commercial buildings are down 20% and road transport 11%. Rail emissions decline 41% but from a low base. Harder-to-abate sectors, such as shipping, steel and chemicals, see small emissions reductions over the next decade as current growth levels off. Aviation stands out both because it is the sector where emissions grew fastest to 2019, and because it is the sector most affected by the Covid-19 pandemic. Its slow return to pre-crisis activity levels from 2021 results in an 11% drop in emissions between 2019 and 2030.

Most abatement in our budget occurs between 2030 and 2040, when 43% of all emission reductions takes place. In this period, we have significant abatement activity in road transport and about 48% of emissions reductions in industry. By 2040, power sector emissions are down 89% and emissions from road transport are down 80%.

The last decade sees around 25% of all abatement on our path to net-zero. This is made up of the final 11% of power generation, the last 20% of road transport and around half the effort from hard-to-abate industries such as steel and cement production.

It's interesting to see BNEF's detailed calculations.   I have been working on the estimate that to limit the rise to 1.5 degrees, the world would have to cut emissions by 50% by 2030.  Their estimate is 30%, with a 6% cumulative annual decline thereafter.  I think the declines in electricity generation by 2030 could potentially be greater than 57% because of the widening cost differentials in favour of renewables.  How rapidly EVs replace ICEVs depends on the average life of vehicles.  In developed countries, it's something like 12 years, in developing countries it's longer.   That means it will take that many years for emissions from transport to get to zero after EVs reach 100% of car sales.  The other variable is when EVs reach 100% of vehicle sales.   That is likely to happen much faster than most forecasters estimate, as the cost of batteries and EVs decline.  The other obvious point is that a carbon tax would accelerate reductions in all sectors.

Cost of carbon capture and storage in the US

 Carbon capture and storage is costly.  According to this analysis (below), it will add $50 to $60 to the cost of coal-fired electricity, and $80-$90 to gas-fired.  Lazard's estimate of the cost of new coal is $112/MWh, without subsidy, carbon tax or CCS.  So unless there is a tax credit (= subsidy), forcing coal power stations to introduce CCS will put up the cost of electricity from new coal power stations to ±$170/MWh (1 MWh of coal-fired electricity produces roughly 1 tonnes of carbon).  And the operating cost of existing coal will rise from $41/MWh to $100/MWh.  This compares with the cost of wind + solar + 4 hours of storage of around $40/MWh.   If, instead of a subsidy for CCS, we introduce a carbon tax/price on carbon high enough to make CCS worthwhile, the cost of power from coal will rise anyway.   Either way, coal will just be priced out of the market more quickly.  

A reminder: the EU price on carbon is roughly US$73/tonne.  And the EU  is determined to levy a carbon border tax on imports from countries which don't have a price on carbon, which will drive the global adoption of a carbon tax.  After all, why pay a carbon tax to Europe when you could pay it to yourself?

From The Royal Society

We model the costs of carbon capture and storage (CCS) in subsurface geological formations for emissions from 138 northeastern and midwestern electricity-generating power plants. The analysis suggests coal-sourced CO2 emissions can be stored in this region at a cost of $52–$60 ton−1, whereas the cost to store emission from natural-gas-fired plants ranges from approximately $80 to $90. Storing emissions offshore increases the lowest total costs of CCS to over $60 per ton of CO2 for coal. Because there apparently is sufficient onshore storage in the northeastern and midwestern United States, offshore storage is not necessary or economical unless there are additional costs or suitability issues associated with the onshore reservoirs. For example, if formation pressures are prohibitive in a large-scale deployment of onshore CCS, or if there is opposition to onshore storage, offshore storage space could probably store emissions at an additional cost of less than $10 ton−1. Finally, it is likely that more than 8 Gt of total CO2 emissions from this region can be stored for less $60 ton−1, slightly more than the $50 ton−1 Section 45Q tax credits incentivizing CCS.

The Royal Society. 
Dating from a time when architecture produced beautiful buildings as a matter of course.

Turning CO2 to rock

Before and after: porous basalt (left) and basalt with mineralised CO2 within its pores (Source: BBC)

 I wrote a piece about this 5 years ago, when it was all still being tested.  And now it's up and running.   Of course, 4000 tonnes a year is very little.  Australia emits 16.8 tonnes a year per person.  So this project removes the annual emissions of about 240 Ozzies―but our total population is ±25 million.   It would be far more cost-effective to cut our emissions by replacing our coal power stations with renewables and our petrol/diesel car and lorry fleet with EVs.    

However, it's instructive to consider the economics of the project.  Iceland is part of the EU emissions trading scheme.  Currently, the price of carbon in the EU is Euro62, which is about US$73.   This article gives the cost of the CarbFix process per tonne of CO2 as US$30.  And because this involves negative emissions, the company would receive the carbon price instead of paying for it.  Or, to put it differently, they would be able to sell the permits created by their negative emissions to companies needing  permits for their positive emissions.  In other words, it would be economical to scale it up to compensate for the 35 billion tonnes of CO2 emitted each year globally.   But, and this is crucial, if we had a carbon price globally, then emissions would plunge, and the negative emissions required to stabilise the world's temperature would be much less as well as being profitable.

Will we get a global carbon price?  The odds are improving.  The EU intends to add a carbon tax to imports from countries which don't have one.  So a price on carbon is likely to become the norm, around the world.  It's becoming clearer and clearer to me that we will only be able to prevent a 2 degrees rise in temperature if we get a carbon tax.

Most CCS (carbon capture and storage) projects are nonsensical.  They would add something like $50 per MWh to the cost of electricity generated by coal, which is already struggling to stay competitive with renewables.  New-build coal is already 2-3 times as expensive as new-build wind and solar; worse, existing, fully depreciated and paid-off coal power stations produce electricity at the same or higher cost than electricity from new-build wind and solar.  CCS would just make coal even more uneconomic.  Yet we may, by 2030, need the kind of CCS developed by CarbFix to "unwind" some of the emissions we will make over the next decades.  And a carbon price would make that feasible.

See also Negative Emissions

From The Guardian

The world’s largest plant designed to suck carbon dioxide out of the air and turn it into rock has started running, the companies behind the project said on Wednesday.

The plant, named Orca after the Icelandic word “orka” meaning “energy”, consists of four units, each made up of two metal boxes that look like shipping containers.

Constructed by Switzerland’s Climeworks and Iceland’s Carbfix, when operating at capacity the plant will draw 4,000 tonnes of carbon dioxide out of the air every year, according to the companies.

According to the US Environmental Protection Agency, that equates to the emissions from about 870 cars. The plant cost between US$10 and 15m to build, Bloomberg reported.

To collect the carbon dioxide, the plant uses fans to draw air into a collector, which has a filter material inside.

Once the filter material is filled with CO2, the collector is closed and the temperature is raised to release the CO2 from the material, after which the highly concentrated gas can be collected.

The CO2 is then mixed with the water before being injected at a depth of 1,000 metres into the nearby basalt rock where it is mineralised.

Proponents of so-called carbon capture and storage believe these technologies can become a major tool in the fight against climate change.

Critics however argue that the technology is still prohibitively expensive and might take decades to operate at scale.

The blue hydrogen scam

 As concern and even panic builds about global heating among hoi polloi, fossil fuel companies are inventing new ways to bamboozle the public.  Subsidies for coal, but called instead "capacity payments"; touchy-feely advertising to distract from what they're actually still doing, i.e., ramping up production of oil, gas and coal; and glitzy new initiatives which sound green as, but are really just extensions to their business model, and will allow/encourage emissions decades into the future.  

One of these is the fabled "hydrogen economy" which starts out by being about green hydrogen (hydrogen made by the electrolysis of water using electricity from renewables) but morphs into "grey hydrogen" which is about hydrogen made from natural gas, with the CO2 produced being released into the atmosphere, because "grey hydrogen" is much cheaper than green hydrogen.  To make this more palatable, the fossil fuel companies have concocted the idea of "blue hydrogen", which is grey hydrogen with the CO2 being pumped into underground storage.  Of course, this ignores the cost (and energy cost!) of compressing the CO2 and then transporting it to where it is to be buried.  

One Ozzie fossil fuel company shamefacedly admitted that their hydrogen breakthrough is really about grey hydrogen, which they call blue hydrogen because at some unspecified point in the future they'll start carbon capture and storage (CCS).  

The video below, from Just Have A Think, shreds the case for grey and blue hydrogen.

A carbon tax would put paid to all these subterfuges, which is why, of course, fossil fuel companies are so adamantly opposed to it.  

The other carbon boondoggle is the ammonia euphoria.  I'll talk about that in another piece.

G-20 countries still support fossil fuels

 From BNEF

Bloomberg Philanthropies and BloombergNEF today released a new Climate Policy Factbook outlining the progress that each G-20 member country has made toward moving to a low-carbon economy. The report was released to increase transparency and inform policy priorities ahead of upcoming international climate negotiations, including the G-20 Summit and Ministerial Meetings, the 75th Session of the U.N. General Assembly, and COP26.

The Climate Policy Factbook highlights three concrete areas in which immediate government action is needed to limit global warming to 1.5 degrees Celsius: 1) phasing out support for fossil fuels, 2) putting a price on emissions, and 3) encouraging climate risk disclosure. In each of these areas, the report found that the policies of many G-20 countries were significantly off course.

“Winning the fight against climate change requires urgent and bold action across every industry, and we need governments to lead the way,” said Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies and the UN Secretary-General’s Special Envoy on Climate Ambition and Solutions. “Our hope is that G-20 members take this report to heart, use its recommendations to hit their Paris Agreement targets, and show the world the health and economic benefits of building a resilient, sustainable global economy.”

Global groups have been leading the call for robust and credible climate action, especially in these three specific areas ahead of critical climate events this fall. The Net Zero Assets Owners Alliance, which comprises international institutional investors committed to transitioning investment portfolios to net-zero greenhouse gas emissions by 2050, recently came out in support of the adoption of carbon pricing mechanisms to regulate emissions globally. The Alliance has repeatedly called on governments to implement the robust and credible climate policies needed to ensure the objectives of the Paris Agreement are met, as well as manage the costs of climate change and safeguard the stability of the global financial system.

Dr Günther Thallinger, Member of the Board of Management of Allianz SE and Chair of the UN-convened Net-Zero Asset Owner Alliance said: “As of today, policy frameworks across most G-20 countries are not sufficient to drive real economy to net-zero transition to achieve 1.5C with reasonable likelihood. The new NDCs and 2050 net-zero targets from some G-20 countries are warmly welcome, however pledges and targets alone will not be sufficient to change course. The development and publication of credible 2030 emission reduction plans, which create a rising price on carbon and have clear regulatory standards, including on climate-related financial disclosures are urgently needed.”

Phasing out support for fossil fuels, particularly coal, and shifting funding to renewables is core to the COP26 goals and a crucial step to accelerating the clean energy transition. However, the report finds that governments of all 19 individual country members of the G-20 continue to provide substantial financial support for fossil-fuel production and consumption. Although G-20 governments have announced ambitious climate commitments to reach the goals of the Paris Agreement, those same countries have continued providing support for coal, oil, gas, and fossil-fuel power, including $3.3 trillion between 2015 and 2019. At today’s prices, that sum could fund 4,232GW in new solar power plants – over 3.5 times the size of the current U.S. electricity grid.

G-20 nations collectively cut fossil fuel funding by 10% from 2015 to 2019, with eight member nations making notable progress in reducing their fossil fuel subsidies by 10% or more (Argentina, Germany, Italy, Saudi Arabia, South Africa, South Korea, Turkey, and the U.K.). However, to remain in line with the Paris Agreement goals in the lead-up to COP26, the G-20 cannot rely on the actions of a few nations. Every G-20 country must take immediate action to end support of fossil fuel projects and accelerate their coal phaseouts. During the same timeframe (2015-19), eight members increased their support – notably Australia, Canada, and the U.S. – encouraging the use and production of fossil fuels, distorting prices, and risking carbon ‘lock-in’ – where assets funded today continue to emit high levels of emissions for decades ahead.

To effectively lead the phaseout of coal and other fossil fuels ahead of COP26, G-20 countries must also implement emission pricing mechanisms to hold polluters accountable for the true social cost of their actions. To date, 12 G-20 countries have established nationwide prices on greenhouse gas emissions either by a carbon tax or market-based mechanisms, with France and Germany making the most progress in terms of share of emissions covered by a carbon tax or market. This is partially due to their participation in the E.U. Emissions Trading System (ETS), and their own national policies that increased the share of emissions covered by an emission price.

Eight of the countries that have adopted emission pricing have produced mixed results due to lax policies, with either the carbon price set too low or the concessions to emitters too generous. For example, in the U.S., state-level programs cover less than one-tenth of national emissions, collectively, and prices are relatively low. Several G-20 countries, such as Saudi Arabia, Russia, and Brazil, have yet to put a price on greenhouse gas emissions.

Enforcing globally accepted climate-risk disclosure frameworks, like that of the Task Force on Climate-related Financial Disclosures (TCFD), is critical to ensuring climate risks and opportunities are assessed accurately, so financial institutions can consider and price the impact of climate externalities into their credit risk and valuation models. While the G-20 has voiced support for voluntary climate-related reporting, few members have legislated it. Central banks also play an important role in climate-related disclosure alongside their respective G-20 governments by integrating climate risks into the ‘stress tests’ they routinely conduct to test financial institutions’ health and assessing their stability under potential climate scenarios.

“Given that the G-20 accounts for nearly three-quarters of global emissions, progress from those governments in these three areas would mark a huge step forward toward tacking climate change. So far, they have yet to step up to the plate,” commented Victoria Cuming, head of global policy at BloombergNEF and lead author of the factbook.

Countries which say they support the goals of the Paris Agreement, but continue to subsidise fossil fuels are faking it.   When the carbon border tax becomes widespread, these subsidies will have to taken into account.

China's carbon price

 From a Twitter feed by Simon Holmes à Court [lightly edited]

Yesterday, 16 July, China introduced a national carbon trading scheme, based on lessons learnt from pilot programs run in 7 regions between 2013–2020.

The average carbon price in the pilots since 2013 mostly moved between RMB 20-40 (A$4.17–8.34)[US$3.09-$6.17; Europe's carbon price is currently +-US$64].

To start with, the national scheme only covers ~2200 power companies, collectively responsible for ~40% of china's emissions.

Companies that pollute more than a given emissions intensity will be required to purchase carbon units, companies that pollute less can sell credits.  [This is interesting--it's not an absolute limit on emissions but a relative limit, in line with China's target to cut carbon intensity, i.e., carbon emitted per unit of GDP. Carbon intensity may fall even as total emissions rise, if economic growth is high]

The intention is to expand the scheme to include the sectors responsible for the vast majority of CO₂ emissions:

In the first day of trading, "a flurry of trades sent prices surging".   Carbon units opened at RMB 48 (A$10) per tonne, and 4.2mt traded as high as RMB 52.80, where it hit a price cap — prices are not permitted to rise by more than 10% per day.

No doubt china's scheme has plenty of shortcomings, and it won't slash their massive emissions overnight…

But it's ironic (& sad) that "communist" china has emissions trading, while Australia's "free market" gov't destroyed our scheme as their first order of business in 2013/4.

If @HonTonyAbbott, assisted by @Barnaby_Joyce, hadn't killed australia's emissions trading scheme, we'd have just begun our *tenth* year of carbon pricing.

…and Australian farmers would be "exporting" millions of tonnes of CO₂ credits to the EU for ~$80/tonne.

Instead, Australian manufacturers are facing the very real prospect of a carbon border adjustment mechanism #CBAM from both the EU and US. Australia will be subject to a carbon tax — it's just a matter of time — but it won't be on our terms, and the funds will flow offshore.

It's crystal clear. Either we will pay a carbon tax to ourselves (if we introduce one) or we will pay it to other countries (on our exports). And other countries will make the same calculation, which means that, step by step, other countries will also introduce their own carbon taxes, until every country in the world has a price on carbon. Except, possibly, Australia.

You might also like EU's Border Carbon Levy

EU to tax embedded carbon

 From Melbourne's The Age newspaper

The European Union has unveiled a sweeping plan to slash its carbon emissions by 55 per cent before 2030, potentially reshaping the global trading order by imposing border tariffs on nations – like Australia – that do not have some form of carbon price.

“By acting now we can do things another way... and choose a better, healthier and more prosperous way for the future,” European Commission President Ursula von der Leyen said on Wednesday of the plan.

Along with the border tariff, the EU proposes banning the sale of petrol and diesel powered cars within 20 years and planting billions of trees, hiking the tax on jet fuel and providing financial assistance to make homes more energy efficient.

Australia has already repeated its opposition to the proposed carbon tariff [naturally!], which could commence as soon as 2023.

Australian Trade Minister Dan Tehan told the ABC on Thursday morning that such a measure was protectionist and could breach World Trade Organisation regulations[it won't].

The EU argues that a carbon border tariff would simply level the playing field by ensuring that emissions-heavy imported goods such as cement, iron and steel, aluminium, fertilisers and electricity do not undercut European producers who will have to pay more to pollute.

If those goods are coming from jurisdictions where producers pay their own domestic carbon price, that cost would be deducted from the border tariff.

The immediate impact on Australia may be limited because we export few of those goods to Europe.

But by outlining its plan in the months before the crucial COP26 United Nations climate talks in Glasgow in November, the EU is making a bid to create the blueprint for a new world trading order, one that could have profound impacts on Australia’s carbon-intensive exports.

As the world’s largest trading bloc, the EU exerts its own gravity on global trade rules and it is already winning in-principle support from other nations.  The fine-print in the vision will be negotiated for two years as the bloc’s industrial powerhouses and 27 member nations work out how exactly to achieve the 55 per cent reduction, so the final policy may scrap some of the more exacting goals.

Despite Brexit, Britain is expected to introduce measures to allow it to integrate with the EU on trade. On a new website dedicated to explaining the tariff, the EU notes that Japan and Canada have already declared their interest in similar schemes.

A White House official said it was “reviewing” the European Commission’s proposals and broadly welcomed the idea of a carbon border tax and after the announcement Congressional Democrats took a preliminary step toward a similar tax, The New York Times has reported.

One of the key architects of the proposed European plan, former WTO director-general Pascal Lamy, told The Sydney Morning Herald and The Age in a recent interview that a border tariff was a measure of precaution rather than protection.

Unless European politicians succumb to political pressure to maintain free carbon credits to its own high-emission industries as negotiations over the final shape of the policy continue, he says, the model would remain in keeping with WTO rules.

Richie Merzian, a former Australian diplomat and climate negotiator who is now director of the climate and energy program at the Australia Institute, says there is a natural logic to other nations using the EU model as a template.

There is widespread acceptance that it is virtually impossible to reach net zero emissions targets – which 131 nations have either adopted or are considering – without some form of price on carbon, says Merzian.

Adopting the EU’s model will reduce compliance costs for nations pursuing such a goal, he argues.

“The EU is trying to bring forward a new norm,” says Merzian.

It's really simple: do you want another country to collect the taxes on your exports, or do you want to collect them yourself?   If you introduce your own carbon tax, you won't pay the EU / Canadian / Japanese  /UK /US carbon border tax.  The EU carbon border tax will drive the introduction of carbon taxes everywhere.  So much simpler to introduce your own, keep the revenue and avoid carbon border taxes in other countries.  Too bad the right-wing LNP abolished Oz's carbon tax!

Source: 
Carbon border adjustment: a powerful tool if paired with a just energy transition

You might also like: EU's border carbon levy