Tony Blair and the Climate Group have written an excellent report, “Breaking the Climate Deadlock: Technology for a Low Carbon Future (PDF).”
While they endorse strong investment in technology development – as the Center for American Progress (CAP) and virtually everyone else does – it is squarely focused on the crucial role that strong government regulations and standards play in achieving the rapid technology deployment needed to meet key 2020 greenhouse gas targets. And it endorses a strong carbon price – as CAP and virtually all serious independent groups do (with a few strange exceptions) – as a necessary means of achieving emissions reductions sufficient to preserve a livable climate.
Let’s start with Blair’s detailed strategy for achieving significant global emissions reductions in 2020 – which is the cornerstone of any real plan to avert catastrophic global warming. Here is the first conclusion from the executive summary:
1.We know the technologies we need, where to deploy them and the investment required.
To put ourselves on a path to meet our emissions goals, we need to reduce global emissions by 19 Gigatonnes (Gt) in 2020 and energy-related emissions by 48 Gt by 2050. In addition to slowing and eventually halting deforestation, the global roadmap for technology development and deployment must focus on four key sectors:
- Power: Approximately 38% of total savings to 2050. Renewable energy, carbon capture and sequestration (CCS), nuclear power and biomass will all be critical areas.
- Transport: Approximately 26% of total savings to 2050. Key technologies include electric and hydrogen fuel cell vehicles, improved efficiency and current and next generation biofuels.
- Buildings: Approximately 17% of total savings to 2050. Key technologies include improved efficiency in building appliances.
- Industry: Approximately 19% of total savings to 2050. Key technologies include CCS for industrial processes, and industrial motor systems.
The total required annual average investment to scale technology up to the required level is approximately $1 trillion between now and 2050. This is equivalent to 40% of global infrastructure investment or 1.4% of GDP . But much of this investment displaces business as usual spending on high-carbon alternatives and so the incremental cost of additional
investment is much smaller. Estimates suggest that a global incremental cost of additional investment of approximately $317bn annually in 2015, rising to $811bn in 2030, is required with an oil price of $60 per barrel. But if the oil price rises to $120 per barrel, this will reduce the cost by $700bn annually – making the incremental additional cost over the period very small or even zero.
The key point is that direct government funding can’t possibly be the primary source of this enormous investment, as I’ve argued repeatedly (see “The only way to win the clean energy race is to pass the clean energy bill“). And that’s why Blair’s second conclusion is one I’ve made many times:
2. The technologies required to meet our 2020 goals are already proven, available now and the policies needed to implement them known.
Over 70% of the reductions needed by 2020 can be achieved by investing in three areas: increasing energy efficiency, reducing deforestation and using lower-carbon energy sources, including nuclear and renewables. We also know that by implementing just seven proven policies these reductions can be delivered:
- Renewable energy standards: Regulation to require or feed-in tariffs to stimulate an increased production of energy from renewable sources, in particular wind and solar, could deliver 2.1 Gt of savings.
- Industry efficiency: Improved motors and other efficiency gains could deliver 2.4Gt of savings.
- Building codes: Improving standards for new build and modernising existing building stock could save 1.3 Gt.
- Vehicle efficiency standards: Driving up standards for vehicle efficiency could save 0.4 Gt.
- Fuel carbon content standards: Reducing the carbon content of fuels could lead to 0.3 Gt of savings.
- Appliance standards: Increasing the energy efficiency of white goods and other appliances could reduce emissions by 0.3 Gt.
- Policies to reduce emissions from deforestation and forest degradation (REDD ): could deliver close to 9 Gt of reductions. All seven policies have already been successfully implemented in countries around the world but need scaling up. While cap and trade systems or other means of creating a carbon price can help provide incentives for businesses to invest in low-carbon solutions, in the short term at least, it is these seven policy measures and direct action and investment by governments that will achieve the targets.
Of course, that is precisely why the climate and clean energy bill passed by the House contains virtually every one of these provisions – except the vehicle and fuel standards, which Obama and Congress have dealt with separately. Yes, the RES is too weak and should be strengthened – as CAP, for one, is trying to do – but the efficiency codes and standards and the REDD funding in the bill are tremendous. As, of course, are Obama’s vehicle efficiency standards (see “Obama to raise new car fuel efficiency standard to 39 mpg by 2016 – The biggest step the U.S. government has ever taken to cut CO2“).
Bottom Line: If you want the kind of fast climate action the climate crisis demands, you must combine aggressive government technology standards with a shrinking carbon cap that drives a rising carbon price.
In the long term, of course, you need steady technology advances plus a pretty high price for CO2. As the Blair reports states:
The pathway for future technologies is clear. We need a global focus on four key sectors: power, transport, buildings and industry. We need to balance mid-term reduction with long-term investment. We need to create a global carbon price to leverage private sector action and provide public support to overcome market failures. The cost is realistic and affordable and will help drive future growth and job creation. The key to success will be finding the political will to make this happen.
How high a CO2 price? The Blair report doesn’t say explicitly, but if you read the report you’ll see they rely heavily on the International Energy Agency’s analysis:
The International Energy Agency’s (IEA) BLUE Map Scenario suggests that 48 Gt of CO2 savings will be required by 2050.
The IEA is also the group that concluded “The total required annual average investment to scale technology up to the required level is approximately $1 trillion between now and 2050.” Again that kind investment can only come from the private sector.
Also the marginal cost of CO2 – what the allowance price would have to rise to – is at least $200 a ton in the BLUE Map scenario, if the key technologies advance to the point where they are sufficiently cost-effective (otherwise the price could be much higher). The IEA’s good news is that:
… the average cost of the technologies needed for BLUE Map is much lower than the marginal, in the range of USD 38 to USD 117 per tonne of CO2 saved.
That’s right, if the aggressive technology strategy turns out more successful than not, the average price of CO2 emissions reductions might be as low as $38/ton of CO2 in the 450 ppm case. But there is no escape from a high marginal cost, a high permit price, certainly above $100 a ton, if you want to have a shot at avoiding catastrophic global warming. You can read more about the IEA study here:
Must read IEA report, Part 1: Act now with clean energy or face 6°C warming. Cost is NOT high – media blows the story
IEA report, Part 2: Climate Progress has the 450-ppm solution about right
So I think the Blair report is another important contribution to climate policy – one that looks very consistent with everything the Center for American progress has argued. You need a carbon price mechanism like cap-and-trade, one that ultimately leads to a serious carbon price post-2020. But for near-term emissions reductions, you can combine a modest carbon price with strong government regulations and standards.
[And yes, I am aware that The Breakthrough Institute has utterly misrepresented the findings of this report and recent work by CAP. What else is new?]