Focussing on big wins in emissions reduction
The EU could make huge progress in cutting emissions by focussing on a few large power plants.
Emissions from a vast range of sources need to be reduced if targets for limiting climate change are to be reached. Nevertheless huge progress can often be made by concentrating on the largest few sources.
The EUETS illustrates this well. It covers over 11,000 installations. Out of these just 18 lignite and coal power plants, less than 0.2% of total installations, accounted for over 14% of all EUETS emissions in 2016, and 25% of all power sector emissions. Half of these installations, accounting for 57% of emissions from the group, are in Germany.
Just 18 large power plants account for over 14% of emissions covered by the EUETS …
Source: EUTL, Sandbag
Over half these emissions are in Germany …
This concentration of emissions creates a huge opportunity. Replacing the generation from these 18 plants with renewables would by itself achieve all of the emissions reductions required for the EUETS in the 2020s even if there were no other reductions in emissions at all. This is in part because emissions will start the 2020s well below the cap[i]. So the EU can meet its 2030 targets just by eliminating emissions from 18 plants, provided only that emissions elsewhere don’t increase from their 2020 level.
Eliminating these emissions is comparatively straightforward. Renewables are increasingly available at scale and at low cost and over the course of the decade could easily displace this much generation. Even replacing these emissions with generation from gas would reduce emissions by two thirds or more, because current emissions per kWh are so high. And it should not be impossible to redeploy the workers from these plants to do more valuable things like improving insulation in buildings.
Limiting global temperature rises to two degrees implies severe limits on cumulative global emissions. This is not consistent with advanced economies continuing to generate so much from power from highly emissions intensive power plants. Germany has made a huge contribution to the international effort to reduce emissions through its solar power programme, which has been essential in reducing solar PV costs and stimulating global deployment of this technology. However this cannot justify continuing with current policies in the power sector. Measures to target these plants now look like a priority. Such measures could include further reforms EUETS, but will likely also require other action.
The most compelling target would be a date by which emissions must fall to net zero. Such a target would make it clear to all sectors that they need to completely decarbonise by a specified date. At the moment emissions of up to 20% of 1990 levels are allowed even in 2050. This allows each of those sectors where decarbonisation is more difficult – for example parts of industry, agriculture or residential heating – to largely continue in a belief that there will still be plenty of room for them within the 2050 emissions limit, even though this cannot be true for most sectors. This in turn allows them to continue to believe they can carry on indefinitely without taking the steps needed to decarbonise. A date for reaching zero makes it clear this can’t happen.
Setting stringent target for 2060 – at or close to zero – would also give investors in low carbon infrastructure greater confidence, and deter investment in higher carbon alternatives. In the case of the UK and California, a simple extrapolation of their current targets would suggest a 2060 target of a 93% reduction from 1990 by 2050, reaching zero by 2065.
As part of the process of setting these longer term goals the existing 2050 targets need to be at least reaffirmed and preferably tightened. If this is not done there is the risk that policy makers will simply see the problem as having become more distant, and delay action. This is the last thing that the climate needs.
2050 targets may also need to be revised …
As a first step, the EU’s target of 80-95% cuts clearly needs to be made more precise. The current uncertainty of a factor of four in the level of emissions allowed in 2050 is too wide for sensible policy planning.
However the events of the last ten years also raise the question of whether the stringency of the 2050 targets need to be increased, with implications for later periods. The UK Government’s former Chief Scientific Adviser Sir David King and others have suggested that there is a strong case for the UK seeking to reach net zero emissions by 2050[v]. The difference in cumulative emissions in declining linearly to net zero by 2050 instead of by 2065 is substantial, at a little over 3 billion tonnes – equivalent to about 8 years of current UK emissions.
The goal of reaching zero emissions by 2050 is clearly desirable in many ways. However there is a risk that it may have unwanted side effects. The government’s advisory body, the Committee on Climate Change has pointed out that policies are not in yet place even to meet current goals for the fifth carbon budget in around 2030[1]. The route to net zero emissions in 2050 – just over 30 years from now – looks even less clear. Indeed reaching that goal even by 2065 remains challenging. If even tighter targets are introduced they may come to be regarded as unrealistic, which may in turn risk weakening commitment to them. A somewhat slower emissions reduction track may prove a relatively acceptable price to pay for retaining the credibility and integrity of the targets.
Whatever the judgement on this, the need for longer term targets is clear. Governments need to set dates for reaching net zero emissions. These need to be supported by targets for 2060 that specify continued rapid reductions in emissions after 2050, and by reaffirmation of 2050 targets, tightening them as necessary. These new targets will in turn help stimulate the additional actions to rapidly reduce emissions that are ever more urgently needed.
The UK’s carbon budgets are legally binding obligations under the Climate Change Act (2008) to limit total emissions from the UK. Checking whether emissions are within the budget ought to be simple. Measure the UK’s emissions to see if they are at or under budget. If not there’s a problem.
But it does not work that way. For sectors not covered by the EUETS actual emissions are indeed used. However for those sectors covered by the EUETS – power generation and large industry – emissions are deemed always to be equal to the UK’s allocation under the EUETS (which is made up of both auctioned allowances allocated free of charge[1]), whatever emissions are in reality. Actual emissions from the covered sectors could be much higher and carbon budgets would still be met
While this may sound bizarre, there was a logic to it when the rules were established. If UK emissions from the traded sector are above the UK’s allocation UK emitters need to buy in EUAs. If the scheme were short of allowances, as was expected when present accounting rules were set, the additional EUAs bought by UK emitters to cover emissions above the UK’s allocation would lead to reduced supply of EUAs for others. There would in consequently be reduced emissions elsewhere matching the increased emissions in the UK. The approach was therefore to some extent a reliable measure of net emissions. It also aligned with the EUETS having clear National Allocation Plans (NAPs) for EUAs for each Member State, something that no longer exists.
Now this type of accounting no longer makes sense. With a large surplus of allowances in the EUETS, if the covered sectors in the UK emit more than their budget they will simply buy surplus allowances. These allowances would otherwise almost all eventually be placed in the Market Stability Reserve (MSR). Under current proposals (and indeed most likely eventualities), these EUAs would eventually be cancelled. Additional emissions in the UK are therefore not balanced by reductions elsewhere – they simply result in buying surplus EUAs which would never be used. This type of situation is sometimes called “buying hot air”.
To avoid this occurring in future, accounting for carbon budgets needs to change to actual emissions. This will necessarily happen anyway if the UK leaves the EU ETS. UK allocations under the EUETS will no longer exist. Accounting cannot be based on a non-existent allocation.
But even if the UK stays part of the EU ETS the basis of accounting should change to prevent the UK is meeting its carbon budgets by simply buying in surplus EUAs.
The possibility of buying in surplus to cover UK emissions appears quite real. UK emissions were above allocation until quite recently. This was not too serious a problem then, because carbon budgets were being met fairly comfortably anyway. However the situation may recur under the 2020s and early 2030s under fourth and fifth carbon budgets, which will be much more challenging to meet. Total UK emissions could be allowed to rise above those carbon budgets simply as a result of an accounting treatment[2].
When a target applies to a jurisdiction that does not wholly align with the policy instrument there will always be a need to consider circumstances in assessing whether targets are being met. The UK should not be able to meet its carbon budgets simply due to an accounting convention. Current rules were put in place before the current oversupply under the EUETS arose. It is no longer fit for purpose. It should be changed to accounting based on actual emissions whether or not the UK is part of the EUETS.