Paths to a zero-emission world

To avoid the most negative effects of climate change scientists say that temperature increase compared to preindustrial times needs to be restricted to 1,5 degrees, most of which has already occurred (IPCC 2018). The main reason for these temperature increases has to do with emissions of CO2 caused burning of fossil fuels, which provides about 80 % of the energy used in the world today.[1] Thus, to avoid excessive damage from global warning these energy-related emissions need to be reduced to zero before it becomes too late. But how?  Fortunately, IEA – the International Energy Agency –  has risen to the task in a series of recent studies/reports, in particular the nearly four hundred page long “Energy Technology Perspectives”  (IEA 2020a) and the recently released 2020 edition of its annual “World Energy Outlook” (IEA 2020b). A central message is that to reach the target, a lot of innovation will be required. This note discusses the IEA’s strategy for a zero-emission world (and its policy implications).

Electrification

The main strategy favoured by the IEA to deal with the climate challenge is electrification. To avoid the negative effects of climate change, burning of fossil fuels to provide electricity, power machinery, produce heath etc. has to be substituted by electricity produced without emission of climate gasses. What makes this an attractive and realistic option today is the recent progress in renewable energy technology, particularly solar and wind, which in many if not most settings world-wide have become the most cost-effective way to expand production of electricity. As the IEA puts it: “Solar is leading the charge, and becomes the new king of electricity supply” (IEA 2020b, p. 34).

Hence, a necessary step would be a massive increase of global electricity production, mainly through expanding solar and wind. This transition, although economically demanding, seems reasonably straightforward technologically for power production, which accounts for about 40 % global greenhouse gas emissions today. In parallel with this energy-using sectors need to substitute fossil fuels with electricity. In some cases, this may be quite realistic, for example, in the case of passenger cars,  accounting for close to 10 % of global emissions,  battery driven electric vehicles increasingly appear as a realistic and cost-effective solution. In other cases –  commonly termed “hard to abate sectors” – the transition may according to the IEA be more demanding, ,i.e., in need of more innovation, and we discuss some of these challenges in more detail below. Finally, changes on the demand side, e.g., energy savings (improving insulation in buildings for instance) as well as behavioural changes (for example more walking & biking) are emphasized as important steps.

Hard to abate sectors (and the role of hydrogen)

So called “hard to abate sectors” are sectors for which technologies consistent with zero emissions are less mature and/or (much) more expensive than in, say, the power sector or passenger cars. They include long-distance transport, e.g., aviation and shipping, and certain heavy industries, particularly steel, cement and plastics. Together these sectors account for about 15 % of global emissions.

Battery-driven engines are very energy efficient and cost-effective but not practical in long distance aviation and shipping due to the limited range (and, in aviation, heavy weight) of batteries. These sectors, which together account for 3-4 % of global emissions, will therefore most likely continue to depend on burning liquid fuels (or gases) to power machinery. One possibility for doing this sustainably might be to switch to biofuels (which by definition have zero emissions). However, the supply of biofuels is likely to be limited because it competes with other uses, e.g., food production, and may be a threat to biodiversity. Therefore, it is foreseen that these sectors eventually will switch to using hydrogen (or hydrogen-based fuels) as power source, since hydrogen is plentiful, has a high energy content, and does not lead to carbon-emissions when used to power machinery. Hydrogen may be produced  by splitting water into hydrogen and oxygen with the help of electricity, using the well-known technique of electrolysis, resulting in so-called “green” hydrogen. It can also be (and is to some extent today) derived from natural gas but this currently involves carbon-emissions (so-called “grey” hydrogen). To be consistent with the zero emissions target, such carbon-emissions would have to be reliably captured and permanently stored through adoption of CCUS (Carbon capture, use and storage) technology (so-called “blue” hydrogen).

Hydrogen can also perform other functions in the energy system, such as contributing to storing renewable energy for use at times when the wind does not blow or the sun does not shine. However, such storage may also be provided by batteries, a technology in rapid progresses globally. Moreover, hydrogen can be used to produce domestic heating, which may be particularly relevant in countries that already have an infrastructure for distribution of natural gas (that hydrogen may blend in with and eventually substitute for). Nevertheless, since each conversion (from, say, electricity to hydrogen and back to electricity again or – alternatively – to hydrogen-based fuels)  involves some loss of energy, using hydrogen is generally less energy-efficient – and economical – than using electricity directly.

Various technological pathways are available for decarbonizing heavy industries, involving substitutes (wood instead of steel or concrete, for example), increased recirculation, and replacing fossil fuels with electricity or hydrogen.  Hence, the goal of zero-emissions may be feasible in most cases, even if several relevant technologies are still at an early stage, and further innovation and cost-reductions  – and policies supporting these – are seen as necessary. The main exception is cement,  in which case CO2 is released as the result of chemical processes during its production. Currently this constitutes around 3 % of total global emissions.  As a consequence, the cement industry is regarded as a prime candidate for application of carbon capture and storage technology.

Age-structure of energy assets, cost-concerns and the role CCUS

The IEA, while taking the transition very seriously, is also concerned about its costs, which the organization wants to reduce as much possible. A major challenge in that regard is that many plants in the power sector and heavy industries are built to last for a long time.  Hence,  closing down these prematurely to reduce emissions may appear very costly. The problem is allegedly particularly large in in China and other industrializing countries in Asia where many such plants are of quite recent origin (IEA 2020a, p. 54ff.).

Nevertheless, if the transition can be drawn out in time, premature closures, and the losses they entail, may be much reduced. That may be why the IEA in its main scenario (see below) focuses on reaching net zero as late as 2070, half a century from now. Another possibility for extending the life of these assets recommended by the IEA would be to reduce their emissions through application of  CCUS technology.

CCUS is a typical “end of pipe” pollution-preventing technology. CO2 is captured at the point of emission and transported somewhere for storage (or alternatively use).[2] IEA has promoted CCUS for some time but – in spite of the IEA’s support – the technology has been slow to develop, and then mostly in the oil and gas industry (as a means to increase production by pumping CO2 back into the ground to increase pressure). There is considerable uncertainty about the future costs of CCUS compared to other ways to curb emissions. One cannot just assume that all energy-related technologies will follow the same trajectory as e.g., solar and wind, characterized by rapid learning and  sharply falling costs, for example, this did not happen for nuclear energy (for which costs instead have increased considerably over time, see Seba 2014).  As the IEA points out, the prospects for such rapid progress are highest for small, modular units for which there is a mass market. This may arguably apply to batteries and perhaps electrolysers. But does it hold for CCUS,  for which the need to tailor applications to different industrial and geographical contexts may be larger (and the global market  smaller) ?  Nevertheless, despite these uncertainties, the IEA’s assessment is that CCUS in many cases will be the most cost-effective option for cutting emissions (IEA 2020c).

Scenarios

In its analyses the IEA presents three scenarios for what the future may bring (IEA 2020b). The first is a kind of “business as usual” scenario in which the goal the nations of the world agreed to in 2015 is not realized (not shown below). The second, entitled “Sustainable Development Scenario” (SDS), is consistent with the below 2-degree goal but not the more ambitious 1.5-degree target that nations also agreed to strive for. The implications of adopting this more ambitious target is explored in the third (“Net Zero 2050”) scenario, also labelled the “faster innovation” case, since it requires (much) more innovation(IEA 2020a).  The below figure illustrates the differences in energy-related emissions from now on until 2070 between the two scenarios.

 

Figure 1. Energy-related emissions in the SDS and Net Zero 2050 scenarios

Source: IEA (2020 b), p. 102

 

Thus, in the  IEA’s preferred “SDS” scenario 10 Gt of  CO2 emissions remain in 2050 as the result of continuing (unabated) burning of fossil fuels in production of power, aviation and shipping and heavy industry. This arguably reflects a strong wish for minimizing the cost of the transition, if necessary, at the expense of more ambitious environmental goals.  As pointed out above,  many powerplants, factories, etc., especially in China and other parts of Asia, are of relatively recent origin. Retrofitting these with new, more environmentally friendly technologies to curb emissions, or – alternatively – retiring them early, would incur considerable costs that IEA would like to – if not avoid altogether – so at least keep as low as possible.

Similarly, deployment of zero emission (or low-carbon) fuels in aviation and shipping, which appears  feasible from a technological point of view, are seen as not “commercially viable” yet by the IEA because they currently are (much) more expensive than conventional fossil fuels (IEA 2020a, p.302).  However, burning conventional fuels leads to emissions, so continuing on the received track would clearly not be sustainable.  If switching track to get rid of emissions requires increasing prices, what’s wrong with that? Arguably, this what the (widely accepted) “polluter pays” principle would suggest. Thus, rather than opposing price increases as such, a more constructive approach might be to explore the wider economic consequences of these. In fact, the Energy Transitions Commission, in a recent assessment of this issue, concludes that while it is likely that the use of zero-carbon fuels will add significantly to freight costs and ticket prices, the effects  on living standards are likely to be very small (ETC 2020).

The “faster innovation” case

While the IEA’s preferred SDS scenario requires extensive changes along numerous dimensions, its stated goal of reaching net zero by 2070 already appears a bit outdated, as several governments, and the European Union in particular, have announced earlier deadlines for reaching the same target. This of course makes the more ambitious “Net Zero 2050” scenario (or “faster innovation” case) even more interesting and relevant for policy-making. The key difference between the two scenarios is according the IEA that while the “SDS” scenario is mainly based on existing technology the “Net Zero 2050” scenario relies much more on innovation, i.e., the adoption of technologies that are currently in the process of being tried out (e.g., through prototyping and demonstration projects) but that are not fully commercialized yet (IEA 2020a, p. 91f.). As the IEA notes, the time  gap between early trials and full commercialization can be very long, as numerous historical examples show. To realize the goals of the “Net Zero 2050” scenario this gap needs to be shortened as much as possible, particularly for technologies of critical importance for the transition. A relevant  question is what policy-makers can do to this effect.

The below figure compares the transition to net-zero in the two scenarios (SDS versus NZE2050) on some key (technological) dimensions: zero-emission vehicles, renewable energy, and low-carbon gases:

Figure 2. Evolution of selected technologies in the SDS and Net Zero 2050 scenarios.

Source: IEA (2020 b), p. 54

As is evident from the figure both scenarios involve rapid change in these respects compared with status quo. Thus, as the IEA points out, the two scenarios are not qualitatively different. The more ambitious scenario is essentially more of the same but (much) quicker. The largest difference concerns the role of hydrogen, which is assumed to be of minor importance before 2030 in the “SDS” scenario. In contrast, the “Net Zero 2050” scenario assumes a quite extensive roll-out of hydrogen already by 2030, which implies that for example that the transition to low-carbon fuels in shipping and aviation is assumed to be relatively well underway by then. In addition, as mentioned earlier, both scenarios presuppose changes in a number of other domains as well, e.g., in the residential sector and behavioural changes, these changes are also assumed to be quicker in the more ambitious scenario.[3]

Policy challenges

What the IEA has done is to stake out a path to a net zero, characterized by e.g., widespread electrification, massive investments in renewables, and the rolling out of a number of complementary technologies, for example hydrogen and CCUS, some of which are still in the early phase (and in need of continuing innovation). However, while its various reports are very rich in detail when it comes to the technologies critical for the transition, they are much less rich when it comes to HOW policy-makers may go about to make the required changes into reality. This being said,  a central recommendation concerns the  establishment a (long-term) vision for the transition, leading to the adoption of concrete goals and plans for specific sectors (e.g. steel), the progress towards which would need to be tracked (and policies evaluated). Thus, the IEA’s approach may be seen as a revival for the idea of long-term planning, based on a systemic (and holistic) perspective, as a necessary ingredient of public policy making[4]. The IEA is also concerned about the need to communicate the vision to the public and build socio-political support for it (IEA 2020 a, p. 370).  The discussion may be said to have a certain “top-down” flavour, though, there is for example much less focus on actively involving users and the general public in shaping the process to net-zero, something we know has been important in for instance the early phases of the German Energiewende (Fagerberg 2019).

An interesting aspect of IEA’s discussion concerns the role of context for the development of national strategies for net-zero. Although the general features are assumed to be the same everywhere, the balance between the various elements may well differ, depending on local conditions. For example, some parts of the world may have very favourable conditions for expanding wind and solar, making them well placed as locations for producing green hydrogen and exporting this to other countries. Moreover, due to differences in the age-structure of existing plants in the power sector and heavy industries, some countries, particularly China and in other parts of Asia, are seen as more likely candidates for applying CCUS technologies in the pursuit of curbing emissions. However, what extent this will happen also depend on strategic choices by policy makers in these countries, China is for example also the leader in the global solar industry, and may have a wider set options(and ambitions) when designing its path towards net-zero.

Finally, the path towards net-zero as outlined by the IEA depends critically on innovation.  Hence, what is required is policies speeding up innovation in relevant technological (and organizational) solutions. It seems evident that innovation policy, i.e., the mobilization of a broad set of instruments on the supply as well as demand side, must play an important role  bringing this about. Thus, the distinction between energy and innovation policy may increasingly be blurred. This is perhaps as it should be but it raises a number of challenges for governance that the various IEA reports discussed here don’t devote much attention to.

References

Energy Transitions Commission (2020) Making Mission Possible – Delivering a Net-Zero Economy, https://www.energy-transitions.org/publications/making-mission-possible/

Fagerberg, J. (2019) “Mission (im)possible? Mobilizing innovation – and policies supporting it – in the transition to sustainability,” Working Papers on Innovation Studies 20190923, Centre for Technology, Innovation and Culture, University of Oslo, https://ideas.repec.org/p/tik/inowpp/20190923.html

IEA (2020a) Energy Technology Perspectives 2020, IEA, Paris, https://www.iea.org/reports/energy-technology-perspectives-2020

IEA (2020b) World Energy Outlook 2020, IEA, Paris, https://www.iea.org/reports/world-energy-outlook-2020

IEA (2020c) CCUS in Clean Energy Transitions, IEA, Paris, https://www.iea.org/reports/ccus-in-clean-energy-transitions

IPCC (2018) Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty, https://www.ipcc.ch/sr15/

Seba, T. (2014) Clean Disruption of Energy and Transportation: How Silicon Valley Will Make Oil, Nuclear, Natural Gas, Coal, Electric Utilities and Conventional Cars Obsolete by 2030, Silicon Valley, California: Clean Planet Ventures

Notes

[1] Energy related emissions, as defined by the IEA, account for around 80 % of global emissions. Agriculture, forestry and land-use make most of the remaining. See https://ourworldindata.org/emissions-by-sector

[2] However, CO2 can also be sourced directly from the air, so called “direct air capture” (DAC).

[3] See IEA (2020b), chapter 4, p. 139f. (buildings) and p 142-152 (behavioural change).

[4] “A net zero carbon system needs careful long-term and integrated planning covering all parts of the system. The energy system has to be considered as a whole”(IEA 2020b, p. 159).