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World Bank Looks at Global Carbon Pricing Systems
Posted June 3, 2013 It’s ironic considering all the attention on the struggles of the EU Emissions Trading System, but today over 40 national and 20 sub-national government jurisdictions have either implemented or are considering carbon pricing mechanisms. Global emissions trading schemes map via World Bank This wide-ranging assessment comes from no less an authority than the World Bank, which announced their findings this week in a new report “ Mapping Carbon Pricing Initiatives: Developments and Prospects. ” The Bank’s findings once again underling the growing momentum toward an interconnected global carbon market working to fight climate change and spur the transition to a global clean energy economy. Lessons Learned From EU Struggles Despite international failure to establish an international climate deal through the United Nations, the Bank sees individual carbon pricing initiatives developing faster than ever before – and learning lessons from the EU ETS . These markets are taking shape at the same time international prices on carbon are at historic lows and the prospect of coordinated international emissions reduction measures uncertain. “Even as the first generation of the carbon market stutters…it is progress at the country level that gives hope,” said Rachel Kyte , World Bank vice president for sustainable development. “Carbon pricing is emerging and carbon markets have a future.” Multiple systems feature novel system designs like pricing stabilization mechanisms to make them flexible and adjustable to changing economic situations that may have been unforeseen when they were created. The current glut of allowances and low prices in the EU ETS has been attributed to system inflexibility to handle reduced allocation demand after the economic recession. EU ETS allowance price chart 2008-2013 via World Bank Carbon Pricing Covering 20% Total Global Emissions These emerging schemes could make a massive impact on global emissions. As of 2013, the countries with functioning systems or carbon pricing mechanisms scheduled to start within the next few years collectively emit 10 gigatons of CO2 per year – equal to about 20% of global emissions, or the combined annual emissions of the US and EU. The Bank report highlights cap and trade systems in the EU, California, Kazakhstan , New Zealand, Quebec, the Regional Greenhouse Gas Initiative , and regional markets in Japan, as well as South Korea’s developing system . In addition, carbon taxes are cited in Australia , British Columbia, Denmark, Finland, Ireland, Norway, South Africa , Sweden, Switzerland, and the United Kingdom. Even more promising, the Bank’s report does not fully consider China’s fledgling system , which has begun pilot programs in major cities and will roll out nationally in 2020. “If China, Brazil, Chile, and the other emerging economies eyeing these mechanisms are included, carbon pricing initiatives could…cover almost half of total global emissions,” said Niklas Hohne of report co-author Ecofys. Severe Beijing air pollution image via Shutterstock Linkages And Expanded Targets Boost Value The Bank report also recognizes the value of international system linkages in stabilizing individual systems long-term. Linkages between the EU and Australia and California and Quebec , and potentially the EU and China , will create efficiencies and benefits for each system. However, the Bank cautions linkages need to be carefully timed to allow new systems to become established before connecting to other schemes. Bank analysts also note the growing trend of existing or scheduled systems expanding coverage of domestic emissions, with Australia and Korea now targeting 60% coverage, California eyeing 85% coverage , and New Zealand targeting 100% coverage within a few years. “There may not be a one-size-fits-all,” said Alexandre Kossoy , World Bank senior financial specialist. “But it is clear the foundation of the first generation of market-based instruments is informing what will constitute the future landscape of carbon pricing.” Does Hope Spring Eternal? Ultimately, it all comes down to climate, the ability to fund our transition to a sustainable future, and our inability to come to international agreement on climate policy. World Bank President Jim Yong Kim recently said climate change presents “serious consequences to the economic outlook” of international economies, and the Bank’s report acknowledges current emissions put us on the pathway to a devastating 3.5-4 degree Celsius temperature rise by 2100. If enough carbon pricing systems are online or planned by the next United Nations climate meetings, the power of international carbon markets as an economic and environmental stimulus may be too hard to ignore. Continue reading
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Biomass: Wood Pellets Muscle In On Old Role Of Coal
http://www.ft.com/cms/s/0/b83d5050-c3a3-11e2-aa5b-00144feab7de.html#ixzz2VGGRqFHl By Guy Chazan Drax, the UK power supplier, is pushing ahead with what is shaping up to be a huge bet on biomass. The company, which has a big coal-fired power plant in Yorkshire, has launched a £750m investment programme to convert three of its six units to wood pellets, a renewable source of energy. It started commissioning the first converted unit in April. For Dorothy Thompson, chief executive, the attraction of biomass is obvious. “It’s a lot cheaper than offshore wind, there is security of supply and it’s more flexible,” she says. The pellets burnt in biomass boilers are made from the “cheapest part of the forestry industry product – harvested residues and thinnings” – and a “supply chain is developing”. Drax’s interest in biomass is part of a wider industry trend. New EU emissions regulations have put pressure on many of the continent’s old coal-fired power stations but some operators have realised they can keep the plants alive by converting their boilers from coal to wood pellets. The discovery of biomass has given a new lease of life to ageing coal assets that would otherwise have been shuttered. Bloomberg New Energy Finance (BNEF) says between 3.6 and 6.8 gigawatts of biomass generating capacity could be commissioned between 2012 and 2016, though it warned that slow governmental decisions on future subsidies “risks unnerving manufacturers and investors”. Interest has been driven by EU laws that stipulate member states must source 20 per cent of their energy from renewables by 2020. That will not present much of a problem for Germany, with its massive investments in wind and solar power. But the UK and others may struggle, hence the embracing of coal-to-biomass conversion. “It’s an easy, quick and capital-lite way to meet the renewables targets,” says Harry Boyle, an analyst at BNEF. “Coal plants are already connected to the grid and what’s required are relatively minor modifications to an existing asset.” Biomass is also a consistent source of supply, in contrast to the intermittency of wind and solar. Such considerations have pushed the UK to create a generous subsidy regime for the fuel. Previously, developers were awarded half a renewables obligation certificate (ROC) for co-firing coal with biomass. Now, the government is offering operators a whole ROC if they fully convert their boilers to biomass from coal. It was this decision that underpinned Drax’s big investment programme. As a result of this and other subsidies, generating capacity is expected to grow quickly across Europe. BNEF says European pellet demand will rise to 25m-30m tonnes by 2020, up from about 12m tonnes now. Most of that will be imported from outside the EU. Yet biomass remains much more controversial than wind and solar. This is partly because when wood is burnt, it releases carbon dioxide into the atmosphere – just like fossil fuels such as oil, gas and coal. Advocates like Ms Thompson stress that these emissions are neutralised by regrowth in the forest from which the wood was harvested. “You’re not using trapped carbon.” Partly because of that, she says, the carbon footprint of biomass is “70-80 per cent smaller than that of coal”. Environmentalists are unconvinced. A recent study put out by the Royal Society for the Protection of Birds together with Greenpeace and Friends of the Earth says it may take “many years for the end-of-pipe emissions to be neutralised” by regrowth of forests. It disputes the industry’s assertion that pellets used in power generation are made of residues from timber production, saying there is evidence that whole trees are often used. The study claims that the UK government’s proposed sustainability standards for biomass will not prevent wood being used that comes from forests “where management regimes cause problems for biodiversity”. The report’s authors say there is a risk the UK will be “locked into financially supporting an industry that results in increasing greenhouse gas emissions and other serious sustainability issues”. Biomass developers face other difficulties, aside from the objections of green groups. A big challenge is finding enough pellets to supply their hungry biomass boilers. “It takes time to build up the supply chain,” says Ms Thompson. “Each [converted] unit requires 2.3m tonnes of biomass a year – and the total global cross-sea trade is only about 7m tonnes.” So a chunk of Drax’s £750m investment will go on building a wood pellet factory in the southeast of the US to fill Drax boilers. Some people worry about the carbon emissions involved in transporting pellets from the US to Europe. BNEF’s Harry Boyle says the problem is not necessarily the emissions released by tankers bringing huge cargoes of pellets across the Atlantic, but those of trucks transporting the wood from pellet factories hundreds of miles to ports in the US. Continue reading
