3E Intelligence

A few pointers to some must-read reports or articles which I discovered in the last ten days:

• Nicholas Stern’s latest report “Key elements of a global deal on climate change“: not much different from his 2006 Stern review for the UK government but rings the alarm bell a bit harder as very little has really changed since then; mentions the 80-90% reduction target again without being concrete about the implications on our way of life (see my earlier: “Welcome to brave new world“);
• Herman Daly’s recent “Steady-State Economy” presentation to the UK’s Sustainable Development Commission: I do not like the term “steady-state” (it will be hard to convince decision-makers to back a concept which reminds them of immobility and state control, although it has nothing to do with both), but Daly still remains one of the greatest thinkers about how to put humanity back on a sustainability path. When will the Commission have the courage to invite him to one of its Green Week or Sustainable Energy week sessions?
• For all of us who think about offsetting their air travel, the Stockholm Environment Institute has done an excellent job reviewing different emissions calculators and offsetting schemes and concluded that they still need a lot of improvement. Read their report “Carbon offsetting and air travel“.
• Greenpeace published a new report questioning the latest “silver bullet”: carbon capture and storage. The report “False hope” is a must-read contribution to a difficult debate which will be in the spotlight during some conferences in Brussels in the next few months. So, if you want to contribute, make sure you get your ammunition
• Last but not least,  another hot topic on the current climate/energy agenda: the sustainability criteria for biofuels. This debate on how best to implement bio-energy standards should be broadened and develop into an “international standard-setting scheme for a sustainable use of natural resources” according to a brilliant paper by Ecologic’s Timo Kaphengst and Stephanie Schlegel.

Jeremy Bentham and Jeroen Van de Veer presented Shell’s latest scenarios Scramble and Blueprints to Brussels policymakers on 7 April. Their visions for the future look pretty grim although they were not very upfront about it and their plea for big government hand-outs for carbon capture and storage raises a lot of questions.

The scenarios had already been presented during the last annual World Economic Forum and therefore I can refer back to other coverage (NY Times) summarising the main findings of the report. But there are a few issues in the report which have not really been picked up by the traditional press media and therefore I would like to draw attention to them here.

It is commendable that Shell recognises most of the “hard truths” about energy supply and demand. “By 2015, growth in the production of easily accessible oil and gas will not match the projected rate of demand growth. While abundant coal exists in many parts of the world, transportation difficulties and environmental degradation ultimately pose limits to growth“. Admittedly “limits to growth” is not a phrase we hear often from industry circles. Nevertheless, Shell also keeps believing in the myth of “abundant coal” although several reports in the last 15 months have clearly demonstrated that coal reserves have been seriously overestimated (see for outstanding coverage of this “peak coal”, David Strahan’s “The Great Coal Hole“).

Shell makes a clear choice for the “optimistic” “blueprints” scenario which presupposes a level of international cooperation at a level not really seen in the past, so it is questionable whether the “scramble” (each nation for itself) future is not much more probable. By the way, the scramble world could easily become a resource-wars-world when some of the big players would get in real supply problems. The current war in Iraq, the debate about the future role of NATO (which is getting a keen interest in natural resources), and the ongoing militarisation of China are signs on the wall.

Moreover, a closer look at some of the figures in the so-called positive “blueprints” scenario makes me wonder whether the other scenario Sell endorses is really so desirable. The CO2 emissions under this preferable blueprints scenario would still be around 25 gigatonnes per year by 2050 (graph on page 37 of the report), basically still at the same level as we have now, whereas everyone knows that the IPCC has recommended reductions of between 60 and 80% before 2050.

Does this mean Shell believes climate change is inescapable? It surely looks this way and its political message from the report seems to underline this. According to Shell the world will still be addicted to fossil fuels for the next forty years. Coal (for power generation and coal-to-liquids for transport) and non-conventional fossil fuels (tar sands in Canada) are Shell’s solutions for this fossil future. Shell’s “joker”: carbon capture and storage, a technological solution which according to experts will not be full commercially available before 2020 (some think even 5 years later). O, yes, and please Mr Government and dear tax payers, could you subsidise the demonstration plants which will be needed to bring this technology to its maturity? This was the main message of Jeroen van de Veer to the Brussels crowd.

My questions to the Shell speakers about the 25 gigatonnes emissions by 2050 and the possible financial burden for the taxpayers in case of big subsidies for carbon sequestration demonstration plants remained, of course, unanswered.

In conclusion: the two scenarios in Shell’s new report are in reality scenarios of doom and gloom. It might hurt Shell’s business prospects but we need to kick off from our fossil addiction much faster if we want to give our future generations any chance to have a lifestyle comparable to ours. And in this analysis, carbon capture and storage is no more and no less than what methadone is for regular drug addicts. Should we taxpayers really pay big-time for this?

• In the Guardian, George Monbiot calls carbon capture and storage “another great green scam”. “Like biofuels and micro wind turbines, carbon capture and storage turns out to be another great green scam. It will come too late to prevent runaway climate change; the government has no intention of enforcing it; and even if it had, the technique is likely to boost our carbon emissions“.
• The US now has its own Stern report. An analysis of the Lieberman-Warner Climate Security Act (the leading climate proposal in the Congress)  indicates that the measures foreseen in the proposed legislation would not harm the US economy. But prices for gasoline and electricity would go up seriously. However, the Bush administration tried to keep the release of this report as silent as possible.

• The price of crude oil reached another record on Tuesday, coming very close to 110 dollar per barrel. Where is the “demand destruction” which all smart economists promised us if prices would rise to over 100 dollar. At least some experts remain believable. Last week, Goldman Sachs (the company that predicted 100 dollar oil way back in 2005) said oil prices could climb as high as 200 dollar in case of a “major disruption”.
• WWF has published an excellent analysis of the voluntary carbon offset market. The study provides a very comprehensive comparison of different currently available carbon offset standards using the Clean Development Mechanism (CDM) as a benchmark. It lists the advantages but also the weak points of these instruments. Mandatory reading for anyone interested in the new carbon markets.
• Reuters reports that the International Energy Agency is more upbeat about carbon capture and storage than the big energy companies. According to a report which the IEA will publish in the near future, CCS is less expensive than companies fear. The IEA estimated the costs for CCS at 50 dollar per CO2 tonne. Royal Dutch Shell has recently claimed that it would cost close to 100 dollar per tonne.

The highly praised Shell-Statoil CCS (carbon capture and storage) project in the Norwegian Sea (Draugen) is not financially viable. That is the result of a joint feasibility study undertaken by both energy groups. The two energy companies have therefore decided to bury the project.

This is the second setback in a few months for one of the so-called “miracle” solutions to tackle climate change. In May, BP also decided to abandon one of its planned carbon capture plants in Scotland.

Further reading:

• Energy business review online: Statoil and Shell decide against carbon capture project
• Statoil: Press release “Halten CO2 value chain: Technically feasible, but not commercially viable”
• EurActiv’s LinksDossier on Carbon Capture and Storage

BP yesterday abandoned its plans to build a carbon capture plant in Scotland (Peterhead) after the UK government published its Energy White Paper and delayed a decision on subsidies for the planned poject. The plant, which was developed with the help of other companies such as Shell, was supposed to generate electricity from hydrogen, reducing greenhouse gas emissions by capturing and storing the carbon dioxide. The CO2 would also be used for extra oil recovery from the BP Miller oil field.
Could it be that the successor of Lord Browne is less interested in going “beyond petroleum”?
Further reading:

• BBC News: BP pulls out of green power plant
• The Independent: BP scraps its carbon capture venture

One month after the surprising report on coal reserves by the German Energy Watch Group, there is another report predicting a less rosy future for the black gold. According to Richard Heinberg on Global Public Media, the European Commission’s Joint Research Centre will, within the next few days, publish a new report “The Future of Coal,” prepared by B. Kavalov and S. D. Peteves of the Institute for Energy (IFE).
The three main conclusions of the JRC-financed study will broadly confirm the results of the EWG report. Heinberg summarises them as follows:
• “World proven reserves (i.e. the reserves that are economically recoverable at current economic and operating conditions) of coal are decreasing fast….
• “The bulk of coal production and exports is getting concentrated within a few countries and market players, which creates the risk of market imperfections.
• “Coal production costs are steadily rising all over the world, due to the need to develop new fields, increasingly difficult geological conditions and additional infrastructure costs associated with the exploitation of new fields.”

The study confirms a point I made this week during a conference in Brussels: how can the EU define the right framework for a low-carbon future if even the most elemental information on global energy reserves is lacking? EU Commissioner Piebalgs repeatedly promised to take action to stimulate more transparency in this area. What progress has he made?

The report “The future of coal” was published by the JRC’s Energy Institute after this post was written. Read the full report and a supplemental report by the same organisation on the “Coal of the Future“.