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

Biggest climate election law

From Energy Monitor

Three major changes to EU climate legislation have become law following their final adoption by the EU Council on 25 April, heralding some big changes for businesses and citizens in the coming years. The trio is the key component of the ‘Fit for 55‘ package proposed in the summer of 2021 – to put the EU on a path to reducing its greenhouse gas emissions by 55% by 2030, relative to 1990 levels – and implements European Commission President Ursula von der Leyen’s flagship EU Green Deal.

German MEP Peter Liese, who represented the centre-right European Peoples Party in the negotiations, called the now-adopted ‘Fit for 55’ package “the biggest climate protection law of all time”, dwarfing the US’s Inflation Reduction Act in terms of regulatory change.

CBAM: the world’s first carbon border tax

The move that will get the most international attention is the adoption of the world’s first carbon border tax, called the Carbon Border Adjustment Mechanism (CBAM). Goods imported into the EU from countries with less-stringent climate legislation will have an import duty levied on them to avoid the phenomenon of “carbon leakage” where European companies could move production out of the EU to avoid a carbon price or face unfair global competition if they do not. The EU has given it an unwieldy name because calling it a tax or tariff would have required a unanimous vote in the Council, which would have seen a veto, and also would have been more easily challenged at the World Trade Organization.

Under the political deal reached between the European Parliament and EU Council (national governments) in December 2022, the levy will begin in 2026 and initially apply to imports of steel, cement, aluminium, fertilisers, electricity and hydrogen, which was not in the Commission’s initial proposal but was added by the Parliament. During negotiations, the Parliament also insisted on adding provisions for CBAM’s future application to processed products such as cars, screws and bolts. There is a provision too for applying the levy to indirect emissions from activities like land use change “under certain circumstances” – to be defined, it was a major sticking point in the negotiations and opposed by several national governments including Germany.

Free allowances in the EU Emissions Trading System (ETS) for the industries affected by CBAM will be phased out, the reasoning being that the new regime will protect them in future and the free allowances will no longer be necessary. However, the final phase-out schedule is less generous to industry than the Commission’s initial proposal. Under the deal, free allowances will be cut in half by 2030 and entirely phased out by 2034. The Commission originally envisioned a more gradual phase-out until 2035. Eurofer, the steel sector association, has warned the accelerated timeline “risks wiping out a large part of EU steel exports worth €45 billion [$49.7bn]”.

'Fit for 55' package: a new ETS for buildings and transport

The second law coming onto the books is the launch of a new carbon market covering emissions from fuels used in cars and buildings from 2027. This new ETS will exist alongside the current EU ETS. Under the deal reached in December, the price of carbon from home heating and transport fuels will be capped at €45 per tonne (/t), to avoid the risk of an escalating price making fuel unaffordable for vulnerable parts of society and prompting a 'yellow-vests'-style backlash. The plan is expected to add €0.10 per litre to the price of petrol and diesel. The negotiators also added a provision stating that if energy prices are exceptionally high, the new scheme will be delayed by a year to 2028.

Separately, the main EU ETS has seen its requirements tightened for the current trading period of 2021 to 2030, requiring industrial sectors covered by the system to cut their emissions 62% below 2005 levels by 2030 – a big step up from the existing 43% target. That move is expected to bring the price of carbon back up to €100/t over the coming years, up from current levels of €80–85.

A Social Climate Fund for a 'just' transition

The third 'Fit for 55' element to be enacted this week is an €86.7bn Social Climate Fund to protect vulnerable households and avoid a backlash to the EU's energy and climate agenda. That was increased during negotiations from the €72.2bn originally proposed by the Commission. EU countries will have to submit 'Social Climate Plans' after consulting with local and regional authorities, businesses, unions and civil society.

The Fund will finance temporary direct income support to tackle the increase in road transport and heating fuel prices from the new ETS – with a limit of up to 37.5% of the total estimated price tag of each national plan. It will also cover long-lasting structural investments, including into buildings renovation, the integration of renewable energy, infrastructure for zero and low-emission vehicles, and public transport. The Fund will start in 2026, one year before the carbon price on road and heating fuel kicks in. It will initially be financed via the revenues obtained from auctioning 50 million EU ETS allowances, estimated at around €4bn. Once the new ETS starts up, the fund will be financed from the sales of allowances to cover road and building emissions, up to an estimated €65bn, with an additional 25% contributed from national budgets.

Europe's adoption of a carbon border tax will encourage other countries to introduce carbon taxes and their own carbon border taxes.  Why not pay taxes to yourself instead of the EU?   For example, the UK could easily avoid a CBAM by introducing its own carbon price, and applying it to imports from non-EU countries, while raising revenue from its own carbon tax.  The same calculus applies to other countries, too.  It's a major step forward.  

Extending a carbon price to cars and buildings is also essential.

The truth is that regulations aren't always effective.  But if everybody pays a price on carbon, it's a powerful incentive to minimise carbon emissions.

Click to see clearer image

See also the Carbon Border Adjustment Mechanism explainer from the EU.

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.

EU Carbon price reaches record high

 Over the last 4 years, the EU's carbon price has risen 8-fold.  It has just reached a record high, E30.47 (US$36, A$49)  You could say, so what?  But it matters.  Because Europe has got tired of doing all the heavy lifting on averting catastrophic climate change.  It also recognises that if carbon emissions produced in the EU are taxed in the EU, while imports from countries without a carbon price are untaxed, then the EU will simply be outsourcing its carbon emissions to the rest of the world.  Which won't help reduce global carbon emissions.

So, starting next year, the EU will apply a "carbon border adjustment" to some imports from countries which don't have a carbon tax.  The details of exactly how this will work are still unclear.  Its impact will be profound.   Any small country which trades with the EU will find it an easy decision to introduce their own carbon price and to in turn apply a "carbon border adjustment" to their imports.  The simplest way will be to link their carbon price to the EU's.  And so, the portion of the world which levies a carbon tax/price will grow steadily.  In the end, even large economies will find it easier to charge for carbon emissions than to keep on opting out.  The two biggest emitters are China and the USA.  They will likely be the longest holdouts.  But the need to cut emissions and the desire for tax-free trade will eventually push them to levy a carbon tax too.  And that will drive global emissions down very fast.

There are many complexities.  The WTO might object to a carbon tax, though they accept VAT, which is similar in that it is levied on imports, but different because it's refunded on exports, while a carbon tax is not, or at least not yet.  The pressure to slash emissions will only build as temperatures rise, floods and droughts increase, and sea levels rise.

Things are getting very ugly

 

Source: Off Target, from the UN Environment Programme
Note:  I believe that the UN is using the convention that methane is 20 times as potent a greenhouse gas as carbon dioxide over 100 years.  The better way to count methane, I think, is its effect over 20 years, when it is 80 times as potent a green house gas as CO2.  This would significantly increase the percentage of emissions from agriculture above the ~20% shown in this table.

Next year, this humungous El Niño could drive temperatures to 1.7 or 1.8 degrees C above pre-industrial levels.  This is, of course, catastrophic.  Things will get very ugly, unless we redouble our efforts to slash emissions.  

What can we do?

First, what can governments do?

✔️ Set a renewable energy target.  The percentage of renewables+nuclear in electricity generation needs to rise by 6-8% a year, or more, if we are to eliminate electricity's emissions before it is too late.

Emissions from electricity generation are just under 30% of total global emissions.  We may not yet be able to go above 90 or 95% renewables in the grid, because we don't have long-term storage to offset periods of dunkelflaute, but we can certainly aim for 90%, and reconsider what we need to do next when we get there. 

How would this work?  Each utility would be required to reach the levels set in the RET each year.  Those which exceeded this target would get credits, those which didn't would have to buy credits, either from their more successful peers, or from the government.   This would encourage utilities to replace coal and gas with wind/solar/batteries/nuclear/hydro. I include nuclear, but in truth, it can't be built fast enough.  But if there is already nuclear available, it shouldn't be closed down. 

If we aim for a maximum of 10% fossil fuels in electricity generation within 10 years, we will have cut emissions by 27%.  And, remember, in principle, every use of energy can be electrified.  So removing fossil fuels from electricity generation is key.

✔️ Every country should introduce a carbon tax.  It doesn't have to be swingeing to start out with, but it should rise every year, and the pathway should be clear to everybody.  To prevent emission leakage — you tax your industries while others don't tax theirs — you must also tax imports from countries which do not have an R.E.T. or a price on carbon.  (See my posts on a carbon border tax)

✔️ We need to accelerate the replacement of petrol/diesel vehicles (ICEVs) with EVs.  15% of emissions come from transport.  Because even when we reach 100% of sales being EVs, it will take 10-20 years for all ICEVs on the roads to be replaced.  This is too long.  Most countries are nowhere near 100% EV sales, even though this percentage has risen sharply over the last 9 months.   To accelerate this process, we could, for example, ban the import of new and second-hand ICEVs, or slap 100% taxes on them.  By taxing new petrol cars and subsidising EVs, we would drive a wedge between the up-front costs of EVs and ICEVs.  Ethiopia has already done this.  This policy should apply to two and three-wheeled vehicles, too.  Countries which do this deserve reduced carbon border taxes.  And we should press on with bi-mode and battery trains and electric planes.

✔️ We need to replace oil- or gas-based household and industrial heating with heat pumps.  They're four times as efficient as gas, oil, or electric heaters, and so are cheaper to run, but they have higher up-front costs.  They will require government subsidy to start the revolution rolling.  

All of these combined will cut emissions by 50 or more.  If we also switch to low-emission steel and cement, the emissions cuts could reach 65%.

Second, what can you do?

✔️ The steps above will leave mostly agricultural emissions to be reduced, which (but see note on graphic above) are ~20% of emissions. This is too hard for governments to act on — now.   People love their meat too much to give it up.  But it won't go away.  When we've cut emissions by 70%, agriculture will dominate what's left over.  And action will no longer be postponable.  

✔️ Until then, you personally can cut beef, mutton, pork and cow's milk out of your diet, which would more than halve your emissions from the food you eat.  Even better: if land is freed from animal raising, it can be re-wilded, which reduces the level of Co2 in the atmosphere.  Negative emissions!  If you really care about global heating, this is something direct you can do.  You can only force governments to switch to renewables by acting collectively (by voting), and though we shouldn't give up trying to get collective action, we don't need anybody else's permission to eat less meat.  It's something you can start today.

The position is far from hopeless.  We have the technology to slash emissions from electricity generation and transport. What we lack is the will to act.  Perhaps the upcoming Godzilla El Niño will shift the political logjam.  Make it so.

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

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

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.

We must halve emissions by 2035

 From The Guardian

The world needs to cut carbon emissions by nearly a fifth in the next four years, and by close to half within a decade, to avoid overshooting climate targets by a disastrous margin.

Although the “window has closed” on holding temperature rises to 1.5C, in line with scientific advice, limiting the “overshoot” of that target is still possible, according to the UN Environment Programme (UNEP).


But countries are failing to translate their long-term targets on reducing emissions into short-term actions, a report on the “emissions gap” between climate goals and policies has found.

Global carbon output appears to have stalled: the emission levels in 2025 were broadly similar to those of the previous year. But UNEP analysts were wary of calling it a peak or plateau, given the vast uncertainties of geopolitics and an increased reliance on fossil fuels, despite strong growth in renewable energy.

Cutting greenhouse gases by 18% by 2030, and by 45% by 2035, would yield a good chance of limiting temperature rises to 1.7C above preindustrial levels. This would still allow events such as the record heatwaves of the last few months to become frequent and common, but could help prevent them from getting drastically worse.

Governments were warned for years that time was running out, said Inger Andersen, the executive director of UNEP. “[We used to say] there’s still an opportunity if we make this herculean effort [to stay within the 1.5C limit],” she said. “It’s now clear the herculean effort was not made. We procrastinated, and now we are saying this window has closed.”

Nevertheless, she urged countries to keep the 1.5C goal – the centrepiece of the Paris climate agreement. “We can make the overshoot as brief and as short as possible. It’s not time to throw in the towel and give up. This is about how to find our way back, as shortly and quickly as possible.”

Under Donald Trump, the US – the world’s second biggest emitter, after China – has withdrawn from the Paris climate agreement and is threatening to reverse its longstanding trend of falling greenhouse gas emissions.

Bill Hare, the chief executive of the Climate Analytics thinktank, said: “All governments have a job to do, but in particular it is time for major fossil fuel producers such as the US and Saudi Arabia, which produce 20-25% of fossil fuels globally, to stop playing politics and face the scientific reality. Right now they are looking at the fire, denying it exists and pouring more petrol on it, while their own citizens increasingly face searing heat, wildfires and other impacts.”

Other countries appear to have been affected by US intransigence – pledges made last year on greenhouse gases were noticeably weak, according to UNEP analysis. At the Cop30 climate summit in Brazil last November, governments were supposed to make fresh commitments under the Paris agreement to cut emissions. But the commitments made were nowhere near strong enough.

Even if all of those updated pledges were fulfilled, temperatures would still rise to 2.6C above preindustrial levels, according to UNEP’s projections, endangering life across swathes of the globe. Policy has also not kept up with pledges: on current policies around the world, temperatures would rise to 2.8C. Every five years of greenhouse gas emissions at current levels pushes up forecasts of global heating by 0.1C. Scientists also fear that the greater the margin by which we exceed 1.5C, the greater the likelihood of triggering tipping points in the climate system.

Mohamed Adow, the director of the thinktank Power Shift Africa, said: “The tragedy is that we have the solutions within our grasp. Solar and wind power are growing far faster than anyone expected, yet governments are still failing to move away from fossil fuels quickly enough. The technology is racing ahead while political leadership is dragging its feet.”

The shortfall in countries’ commitments is supposed to be corrected under a Paris agreement mechanism called the “global stocktake”, an assessment of emissions targets next scheduled for 2028. But that has also been thrown into doubt: this week, the UN’s Intergovernmental Panel on Climate Change failed to set a timetable to publish its latest report before the global stocktake, which would prevent governments from assessing their progress against the latest science.

Johan Rockström, the director of the Potsdam Institute for Climate Impact Research and one of the world’s leading climate scientists, said rows over the timing of IPCC reports must not be allowed to stall government action. “If all current national commitments are implemented, global emissions are projected to reach approximately 50 gigatonnes of carbon dioxide equivalent annually by 2035, when they should be below 35 gigatonnes. The science is already clear. Closing that gap is a question of political action, not a lack of scientific evidence,” he said.

One way identified by UNEP to limit warming quickly would be to cut methane, a greenhouse gas 80 times more powerful than carbon dioxide.

18% by 2030 translates to a compound 4.8% per annum reduction.  45% by 2035 is equivalent to 6.5% per annum reduction.  Yet emissions have only just peaked.  Maybe.

So, how achievable are these targets?  Electricity and heat are responsible for 33% of global emissions. Transport for 16%, fugitive emissions (i.e., gas leaks) for 7%.  

Roughly 40% of electricity comes from renewable sources, including hydro.  Suppose we aim for a 2/3rds reduction in total emissions from electricity by 2035.  That would cut total emissions by +-20%, and would require us to produce 80% of electricity from renewables and nuclear.  In other words, for the world as a whole, renewables as a percentage of total generation would have to rise by 4-5% per annum.  Some countries will not achieve this.  Some (the US, for example) are not even trying.  So the rest of us will just have to work harder.  But to raise the percentage of renewables in electricity by 4 or 5% per annum seems perfectly doable.  Australia, for example, is doing this.  If the percentage of wind and solar (currently 17%) rises by 15% per annum, i.e., to 19.6% in 2027, 22.5% in 2028, and 25.9% in 2029, and 29.8% in 2030, then we can do it, easily.  (For the percentage to rise by 15% a year, the absolute amount of renewable energy generated would have to rise faster, because electricity demand is growing.)

Source: Our World in Data

OWID gives different figures (+-25%) for the share of transport here.  So let's say +-20%, of which +-15% is from cars and trucks.  The world is heading fast towards 95% electric land transport.  (Air and sea are another matter.)  In China, for example, where EVs/PHEVs are now 2/3rds of new car sales, emissions from transport fell 16% in Q2, though this was exacerbated by behavioural changes due to the Iran War.  When car and trucks are 100% of sales (5 years?), the emissions of the total car/truck fleet will fall by 6.7% per year, assuming vehicles last 15 years.  Emissions from sea transport will also fall, as 40% of sea transport's emissions come from transporting fossil fuels.  Let's say that by 2035, we cut transport emissions by half.

Fugitive emissions will fall as less coal and gas is mined.  Another 2%?

Total emissions will only fall 32% (20% + 10% + 2%).  That's not enough, though it's much better than nothing.

Switching to renewables would accelerate if we had a carbon tax, which rose each year, and we also taxed imports from countries which didn't have one.  The EU has imposed a carbon border tax, and any country which gets its own carbon tax can avoid paying this tax, which means every country has an incentive to introduce one.

Targeting net-zero decades away has allowed politicians and companies to promise that they will some magical day far in the future achieve net-zero, while continuing to emit now.   And who will still be around in 35 years to make their excuses and explain why we failed?  Instead, every country should set an annual target — to reduce emissions by 5% every year.  That won't get us to net-zero by 2050, but nor will this current charade.  But it will get us on track to cut emissions by 45% by 2037.

It's doable.  Let's stop phiffing and phaffing and shilly-shallying and do it.

Global warming *has* accelerated

 From Open Mind (Tamino)

I won't repeat the whole article.  Read it in full here.

My paper with Stefan Rahmstorf showing that global warming has accelerated was published in Geophysical Research Letters today. The main result is that global warming is NOT proceeding at the same old rate it has been since 1975. It’s going faster.

In this data set [from Berkeley Earth], 2025 turned out to be the 3rd-warmest year on record (as in the other data sets except NASA, where it came in 2nd). When I adjust the data to remove the estimated impact of el Niño, volcanic eruptions, and solar variation, I get this:

The trend is unaffected, but the noise level is much reduced, which enables us to estimate warming rates with less uncertainty. I’ve added a red line to this graph which is a modified LOWESS smooth of the adjusted data.

To test for acceleration we isolated the data since 1975, and the simplest way to test for it is to fit a parabola to the data; if the quadratic term is statistically significant, we can reject the null hypothesis, that the signal is just a straight line. Of course we must correct for autocorrelation of the noise, but still the quadratic term turns out to be strongly significant. We can safely reject the null hypothesis: there has been acceleration.

According to this model, the warming rate right now is the slope at the endpoint of the parabola, which is 0.28 ± 0.05 °C per decade (i.e. between 0.23 and 0.33 °C per decade, 95% CI). I will emphasize that this is the “best estimate” and those are the correct uncertainty levels IF (and this is a BIG IF) the data actually follow a parabola plus stationary noise. If not (which is the overwhelmingly likely case), we can consider the estimate good but not best, and the uncertainty levels are a lower bound on the actual uncertainty.

Another test for acceleration is to find the best fit of a continuous piecewise-linear function which is allowed to change slope at a time chosen by changepoint analysis. This is a challenge to evaluate statistically because we have to allow for autocorrelation and account for the extra degree of freedom to choose the changepoint time. But it can be done, and the best-fit model again turns out to be strongly statistically significant.

Both those models serve excellently to demonstrate the presence of acceleration. But I doubt they are best to estimate what the warming rate is right now, and what it will be in the near future. For that, I offer yet another model, which I will apply to the data since 1880, a continuous piece-wise linear fit (PLF) which is allowed to change its slope every 15 years from 1905 through 2010. I call this model “PLF15”

The PLF15 model not only estimates the signal value, it conveniently gives us an estimate of the average warming rate over each segment between the knots. I can plot the warming rate itself (which for this model is constant during each segment) along with light blue shading to show the uncertainty range.

All these graphs plot the warming rate in °C per year, but when quoting numbers I have followed the custom these days to talk about the rate in °C per decade. According to this analysis, the current estimated rate is 0.31 ± 0.07 °C/decade.

Which estimate is best? I don’t know, but I do know that even 0.24 °C per decade will take us past 2 °C right around the year 2050. The whole point of the Paris agreement is: DON’T GO THERE. My advice: fasten your seat belt, things are going to get ugly.

We need to redouble efforts to cut emissions, or things will get very ugly.  What can we do?

• Set a renewable energy target in every country.  The percentage of renewables+nuclear needs to rise by 6-8% a year, at least.  This will cut emissions by 27% (emissions from electricity generation are +-30% of total global emissions) within a decade.  We may not yet be able to go above 90 or 95% renewables in the grid, because we don't have long-term storage to offset periods of dunkelflaute, but we will have cut most emissions from electricity generation.  
• We must tax imports from countries which do not have an R.E.T. or a price on carbon.  (See my posts on a carbon border tax)
• We need to accelerate the replacement of petrol/diesel vehicles (ICEVs) with EVs.  This is a problem, because even when we reach 100% of sales being EVs, it will take 10-20 years for all ICEVs on the roads to be replaced.  This is too long.  Most countries are nowhere near 100% EV sales.   We could, for example, ban the import of new or second-hand ICEVs, or slap 100% taxes on them.   Ethiopia has already done this.  This policy should apply to two and three-wheeled vehicles, too.  Countries which do this deserve reduced carbon border taxes.
• In rich countries, we need to replace oil- or gas-based household and industrial heating with heat pumps.  Because they have high up-front costs, they will require government subsidy to start the revolution rolling.

All of these combined will cut emissions by 50 to 60%.  If we also switch to low-emission steel and cement, the emissions cuts could reach 70%.

That will leave (mostly) agriculture.  Put that in the too-hard basket for now--people love their meat too much to give it up.  But it won't go away.  When we've cut emissions by 70%, agriculture will dominate what's left over.  And action will no longer be postponable.

Japan to cut fossil fuels & up renewables

 From a Twitter feed by Stephen Stapczynski, a Bloomberg business reporter

Japan revises its 2030 power mix targets, cutting fossil fuels and raising renewables in a bid to reduce pollution

The biggest loser? LNG

Under the draft plan, annual LNG power generation is slated to fall roughly 50% by the end of the decade. That's more than coal.  

This is a surprising shift for Japan, the world's top LNG importer that pioneered the industry.

Japan will require less LNG in 2030 than its previous plan, posing a potential dilemma for its suppliers from Qatar to Australia.  

Nuclear power's role in Japan's energy mix remains unchanged from the previous plan: 20-22% of power generation by 2030.  Japan will require 27 of its remaining 36 reactors to resume operations to hit this target.  That won't be easy. only 10 have restarted.

The renewable energy target is just as ambitious.  Japan wants renewables (solar, wind, hydro) to make up 36-38% of the power mix by 2030. That's nearly double current levels and will require solar panels on millions of rooftops. The old target was 22-24%

Japan aims for hydrogen and ammonia-fired power generation to make up 1% of the 2030 power mix.  That's a new addition to the nation’s energy plan. Over the long-term, utilities aim to shift to green hydrogen/ammonia to meet 2050 net-zero goals.

So why is Japan revising its power mix targets?

It is all about its Paris deal commitments.  Earlier this year, Japan strengthened its 2030 Paris goals, raising its target to reduce greenhouse gas emissions to 46% by 2030 from 2013 levels.

Looking further out, Japan will need to significantly reduce its dependence on fossil fuels to hit its 2050 net-zero pledge

That means they must:

> Build a whole lot of offshore wind

> Consume a ton of green hydrogen/ammonia

> Boost energy efficiency

There is no doubt that Japan's revised 2030 energy targets are ambitious. It's unclear if they will be able to meet them.  But the new plan does indicate that the government is shifting its view on LNG, which for a very long time it touted as a cleaner alternative to other fuels.

The 20% nuclear target is incredibly challenging to meet, said Woodmac’s Whitworth, who sees atomic generation only hitting 9% in 2030.  “Over-optimism on nuclear makes the plan look unrealistic and could undermine plans to reduce coal and gas share”

Great analysis from

@BloombergNEF

on Japan's revised 2030 power mix targets BNEF analysts expect gas to make up just 15% (!) of the power mix by 2030, well below coal. Japan seen missing nuclear target, and that gap will be filled with coal (not LNG)

A few thoughts about this plan:

• Is it plausible that the nuclear power stations will be restarted?  It's true that the marginal (operating) cost of nuclear is much lower than those of coal and gas, even if the cost of new-build nuclear is much higher.  But after Fukushima ......?
• Stanczynski talks about rooftop solar.  Surely utility-scale solar will play at least as important a part.   Net solar additions have slowed .  Even at current growth rates, the percentage of solar will more than double by 2030.  At 15% per annum, solar's contribution could exceed 30%.
• Growth in wind power in Japan has been low over the decade.   If the growth rate doubles to 15% p.a., then wind's contribution will reach 8% up from 2% now.  
• A price on carbon will accelerate these shifts.  With the EU introducing carbon border tariffs, Japan, like other countries, will have to decide whether to pay taxes on its exports to the EU, or to levy its own taxes which will be  returned to itself.  It's obvious what makes sense, and indeed the country is cautiously supportive of the EU's carbon border tax.
• None of this is good news for LNG/coal  exporters such as Australia.

EU Carbon price reaches new record high

 No wonder EU emissions are falling so fast, with a carbon price of EU45/tonne (US$54, A$75).  Even without a carbon price, coal is more expensive than wind and solar.  With it, coal is clearly finished.  Meanwhile, the EU is going to start applying a carbon border tax to all imports from countries which currently don't have a carbon price.

Climate panic

 From The Economist

The ground under the German town of Erftstadt is torn apart like tissue paper by flood waters; Lytton in British Columbia is burned from the map just a day after setting a freakishly high temperature record; cars float like dead fish through the streets-turned-canals in the Chinese city of Zhengzhou. All the world feels at risk, and most of it is. Six years ago, in Paris, the countries of the world committed themselves to avoiding the worst of climate change by eliminating net greenhouse-gas emissions quickly enough to hold the temperature rise below 2°C. Their progress towards that end remains woefully inadequate. But even if their efforts increased dramatically enough to meet the 2°C goal, it would not stop forests from burning today; prairies would still dry out tomorrow, rivers break their banks and mountain glaciers disappear. And even if everyone manages to honour their pledges, there is still a risk that temperatures could eventually rise by 3°C above pre-industrial levels.

What happens when climate panic occurs?  I feel that that isn't far away.

Well, for a start, net-zero by 2050 will be unceremoniously dumped, and the net-zero target will be brought forward by at least a decade.  The world would go on a war footing to cut emissions.  

Just how fast could we cut emissions?  To cut emissions by 50% by 2030 would require that emissions would have to fall by a cumulative 7.5% per annum.  Could we do that without a catastrophic collapse in economic activity?  Well, in a word, yes.  

Roughly 30% of the world's emissions come from baseload electricity and another 12% from variable electricity (gas peaking).  Wind and solar are already cheaper than coal and (in gas-importing countries) than gas too.   We can take the grid to 85% wind and solar with 4 hours of storage.   The remainder could be supplied by nuclear, hydro, biomass, wave power or green gas (hydrogen or green ammonia or green methane, produced from surplus renewable electricity).  And climate panic may well reduce public hostility to nuclear power.  Existing nuclear generators will prolly be allowed to continue.  SMRs (small modular reactors) may be built, though they're unlikely to be ready in time.

Another 16% of global emissions come from road transport.  Governments could simply ban the sale of new internal combustion engine cars, lorries and buses, and they probably will, not from 2030 or 2035 bur from 2025 or earlier.  They will set stringent annual targets to get to this point, or they will introduce big subsidies for EVs, or both.  With climate panic, a slow recasting of our economies will be ditched in favour of a very rapid adjustment.  With an average life of 10 years, it will take 10 years for the whole fleet to transition to plug-ins, so that process will have to be accelerated.  There will be 'cash for clunkers' programs, designed to take aging petrol cars and trucks off the roads.  Petrol (gasoline) will be taxed more heavily.  ICEV licence fees will be upped.

And governments will be looking at every source of emissions.  Iron and steel will have to switch to making steel with green hydrogen or methane.  Air travel will be taxed heavily unless it's electric or fuelled by carbon-neutral jetfuel.  

All land clearing and forest burning would have to stop immediately.  The world would have to apply sanctions in the form of diplomatic pressure and import tariffs and bans to the countries  where this is worst: Australia, Brazil, Indonesia, Borneo.  And don't think we won't.  As climate panic builds, the pressure to conform will be irresistible.

Agriculture won't be given a free pass any more, either.  Cows will be fed seaweed, to cut emissions.  Governments may even become frightened enough to tax meat. 

But above all, the world needs a carbon tax and an end to fossil fuel subsidies.  The EU's border carbon tax will be a powerful goad for the rest of the world to introduce their own carbon taxes.  Climate panic will remove any opposition to their spread.  Climate free-loaders will get short shrift.

Together, these measures could cut emissions by 90%.   Most of that could happen in the first 10 years.  And these measures, rapidly effected, would in fact limit the rise in global temperatures to 1.5 degrees  above pre-industrial levels.

The world has been repeatedly warned.  The warnings have been brushed off or ignored.  Instead of a gradual adjustment over decades, starting decades ago, we have phaffed and dithered and allowed ourselves to be lied to by oil and coal companies.  And now a modest  1 or 2% a year decline will not do.  We will need a 15% per annum decline to cut emissions by 90% by 2035, to prevent temperatures rising by more than 1.5 degrees.  

As the Economist says: 'There will be nowhere safe.'  And the public is beginning to realise this, and is both frightened and angry.  Expect serious steps to cut emissions.