In the run-up to the COP26 climate conference in Glasgow in November, Victor Hill assesses the latest thinking about the transition to net zero in government and in the corporate sector.
Where we agree
The world is getting hotter because man-made emissions of CO2 are accumulating in the atmosphere. The downside risks of allowing climate change/global warming to continue unchecked are becoming more alarming.
A report released by the American Meteorological Society last month asserted that 2020 was the warmest year ever experienced in Europe by “a considerable margin”. The average temperature exceeded the previous record by half a degree Celsius. In climatology that is a massive amount. Temperatures in Europe were 1.9 Celsius above the average from 1981 to 2010. Four years over the past decade – 2014, 2015, 2019 and 2020 – were all more than one degree warmer than average, but even within this cluster 2020 remains an outlier. Berkeley Earth, a climate-science think tank, reckoned that last year was Europe’s hottest since records began about 300 years ago.
Warmer weather correlates with more frequent extreme weather events. Warmer air contains more water vapour and therefore has a greater capacity to precipitate extreme downpours and thus flash floods. One study by the Institute for Technology in Zurich, suggested that between 1981 and 2013 there were 45 percent more days with heavy rainfall in Europe than in the preceding 30 years, causing three times as many floods.
More flooding will also be associated with rising sea levels, especially in low-lying areas such as much of the coastal Netherlands and the English Fens. Globally, sea levels have already risen by about 20 centimetres since 1900; but if the ice caps melt fully, they could rise by another 80 centimetres by the end of this century, according to the European Environment Agency.
Europe has become drier and hotter over the years, with droughts and forest fires becoming more frequent. This may be associated with higher water extraction and consumption by the human population. And that process has been going on since long before the industrial revolution. If you walk in southern Spain, for example around the Sierra Nevada, you will see the remains of dried-up water courses everywhere, just as one observes the same (wadi in Arabic) on the Arabian Peninsula. Thousands of years ago, it seems, there was much more fresh running water around. Clearly, the climate of the planet is in constant flux – and pumping trillions of tonnes of CO2 into the atmosphere over the last 150 years or so has had a tangible impact on whatever natural cycles already existed.
The Arctic is continuing to warm at a faster pace than lower latitudes. The five highest Arctic temperatures have all been recorded since 2014. Some of the worst forest fires of recent years have been in northern locations – Eastern Siberia (Yakutia), Sweden, Washington State and British Columbia.
This summer the US has had a record-breaking wildfire season with 100 blazes burning in 14 states last month. One of the largest fires was the Bootleg fire in southern Oregon which destroyed more than 400,000 acres of forest. Ironically, some of that forest was planted by companies such as Microsoft, to offset carbon. Wildfires have also burned through the Colville Indian Reservation in Washington State where BP purchased more than 13 million carbon-offset credits in 2016 at a cost of $100m. These forests were supposed to sequester carbon for at least a century.
The list of extreme weather events recorded this year is a long one, including ‘super’ monsoons in India and catastrophic fires on the Greek island of Evia. Just yesterday there was a flash flood in New York which took 15 lives – attributed by President Biden to climate change.
The UK recorded the third-hottest year last year after 2006 and 2014. Last year was amongst Britain’s hottest, wettest and sunniest, according to the Met Office’s State of the UK Climate report. Heatwaves and bursts of heavy rain are becoming more common and snow less likely. The extreme cold spells of February 1947 and January 1963 are now unlikely to be repeated. This is just as well, given that our power industry would be unable to cope with a two-month freeze.
On the plus side, April and May of last year, which coincided with the first lockdown, were the sunniest ever. On the minus side, two of the three wettest days ever in the UK occurred last year – 3 October and 15 February. Only 25 August 1986 was wetter. Reliable weather records in England stretch back to 1659 and it seems that 2020 was the third-warmest year since then. The average UK temperature is now 0.8 Celsius higher than its 1961-90 average. That means that the UK is warming slightly more rapidly than the global average.
While public concern hitherto has lagged scientific opinion, that is now changing. An Ipsos Mori poll conducted in the UK in early August found that 32 percent of people regarded climate change as a key concern, exceeded only by the pandemic. This followed the publication of the IPCC report which the UN Secretary General described as putting the world on “code red”. Whether that increased concern translates into a preparedness to pay higher energy bills and new green taxes is another question.
What we disagree about
Even if (nearly) everybody agrees that we must cut our carbon emissions drastically, there are many who doubt that net zero is attainable, even if we can slash emissions relative to current levels. And there are many who say that the cost of achieving even near net zero will be prohibitive without reducing living standards, especially for the poorest. The Peterson Institute for International Economics reckons that the restrictions on CO2 emissions will have a similar impact on the world economy as the 1974 oil shock which ushered in the era of stagflation. The chief executive of Stellantis (BIT:STLA) recently warned that motoring might once again become the preserve of the rich.
Currently, the government line is that there will have to be drastic regulation – such as banning the sale of petrol and diesel-powered cars by 2030, combined with an effective emissions trading scheme (ETS). To work effectively, the ETS will have to be extended to domestic heating, motoring, agriculture and aviation. The cost of energy is sure to rise which will be inflationary across the economy.
But many commentators think there will have to be carbon taxes as well – though these will prove politically toxic and will reduce economic growth according to Bank of England modelling. Carbon taxes will go some way to plug the £34bn fiscal hole left by the steady diminution of fuel and excise duties over time with the electrification of transport. Road taxes, as I discussed recently, are sure to figure in due course.
Some of us remember how Britain ground to a halt in September 2000 when protesting hauliers blocked supplies of petrol from refineries. Within days the petrol forecourts had run dry, and the country nearly came to a bad-tempered standstill. The spark that lit this flame was Chancellor Gordon Brown’s hike in fuel duty – something no Chancellor has attempted since. Could something similar happen with carbon taxes?
Carbon border taxes, where importers would be charged for the carbon footprint of the import, might be a solution but would be complicated to administer and might even prove illegal under World Trade Organization rules.
Now hydrogen comes in turquoise and pink
Two weeks ago, I looked at the hydrogen economy, distinguishing between blue hydrogen (which is distilled from natural gas) and green hydrogen (produced by electrolysing water using renewable electricity). Blue hydrogen is generally made by a process of steam methane reforming, whereby methane (CH4 – one atom of carbon attached to four atoms of hydrogen) reacts chemically with high-pressure steam. This process generates about 5.5 tons of carbon dioxide for every ton of hydrogen produced.
Eco-warriors are vehemently opposed to blue hydrogen even when carbon capture and storage (CCS) is deployed, arguing that it is just a ruse by the oil and gas giants to sustain themselves. CCS is likely to be only 95 percent effective.
Currently, the economics favour blue over green. The cost of producing a kilo of blue hydrogen is $2.50 as against $6 for a kilo of green hydrogen, although the Green Hydrogen Catapult consortium aims to get the cost of green hydrogen down to $2 per kilo by the end of the decade. The cost of electrolysers has fallen by 80 percent over the last five years. At the same time the cost of CCS technology is falling too − the British FTSE-250 engineering company Wood Group (LON:WG) has been working on this.
The UK’s Climate Change Committee (CCC) supports blue hydrogen as a “bridge fuel” to the 2030s. Britain has a huge network of disused pipelines and exhausted gas fields in the North Sea which are ideal for CCS. Huge amounts of CO2 will be compressed and pumped into underground and undersea caverns. However, questions remain as to whether this gas can be kept underground at high pressure for hundreds of years without leakage.
But it turns out that other colours are available. By means of methane pyrolysis, turquoise hydrogen can be released in a high-temperature furnace while solid carbon is produced as residue. Solid carbon (essentially rock) can be sequestered easily without any adverse environmental impact. Volume production of turquoise hydrogen is being evaluated by BASF (ETR:BAS). Reportedly, the energy required for methane pyrolysis is less than that required for steam methane reforming, and the costs of CCS would be obviated.
Then there is, potentially, pink hydrogen. US power giant Exelon Corporation (NASDAQ:EXC) announced this week that it will be producing pink hydrogen (also called red or purple hydrogen) using an electrolyser powered by nuclear electricity at the Nine Mile Point nuclear-power station on the shores of Lake Ontario in New York State. A proton exchange membrane (PEM) electrolyser will be installed at the nuclear plant, becoming operational in 2022.
The nuclear industry snubbed
Alok Sharma, the minister responsible for the preparation for COP26, has been criticised for preventing numerous nuclear bodies from exhibiting in the green zone of the Glasgow Science Centre during the climate-change summit. However, nuclear energy will have to play a significant role in Britain’s energy mix if we are to get anywhere near net zero. In an open letter to Mr Sharma, the General Director of the World Nuclear Association, Sama Bilbao y León expressed his concern that the nuclear industry would not be represented at the conference.
A report last week from the National Grid Electricity Systems Operator (ESO) said that within four years the UK will be running on 100 percent zero-carbon sources for much of the time. Britain’s grid has evolved rapidly. Five years ago, coal accounted for about one quarter of power production – last year it was about 1.6 percent.
Mr Sharma will travel to China next month in an attempt to urge Beijing to cut back on coal-burning before 2026 – the year the Chinese have said they will begin to scale back. There are serious concerns that the COP26 conference will fail in its aim to restrict global warming to no more than 1.5 Celsius above the 1800 level if China does not change tack. US climate envoy John Kerry said in a speech last month that China’s present targets could “knock at least a decade off the timeline for the rest of the world to decarbonise”.
The future of aviation
Europe is making more rapid progress in easing travel restrictions than the UK in what we hope to be the final stages of the coronavirus pandemic. As a result, aviation in Europe is recovering faster than here. But the question is whether global aviation will ever recover to 2019 levels, given the shift to teleworking and the concomitant expected decline in business air travel.
In July, the New Economics Foundation (NEF) proposed a tax on frequent fliers to cut down on carbon emissions from aviation. This would replace existing air passenger duty. Under this policy, a person’s first domestic or international flight from a UK airport each year would incur no charge. Thereafter, the per flight levy would escalate for each additional flight. A-list frequent travellers would be hammered while ordinary folk might still enjoy a holiday.
It is true that the current tax regime on air travel doesn’t make much sense. Kerosene goes untaxed by international treaty (the Warsaw Convention, 1929) and flight tickets remain zero-rated under Britain’s convoluted VAT system. But it would be strange if a carbon tax charged a passenger the same for flying from London to Barcelona as for London to Sydney.
eroFurthermore, the CCC insisted that airline passenger numbers should be capped at 25 percent above current levels. That means either constraining airport capacity or taxing passengers. The culture shift in favour of staycations – surprisingly, British people are booking record numbers of holidays at home for 2022 – may turn out to be permanent.
The government’s plan to reach net zero in domestic flights by 2040 and international aviation in 2050 relies on the ultimate success of hydrogen-powered flight which is still in development. That will be a space to watch.
Zero absolutism doesn’t work
Australia’s prime minister, Scott Morrison, declared last week that the zero-Covid policy which has turned the country into a ‘hermit kingdom’ which even many of its own citizens may not visit, isn’t working. Only New Zealand’s Jacinda Ardern now believes in zero Covid, with Auckland back in lockdown because of just one incidence of Covid-19.
By the same token, a body of opinion is emerging, which says that, realistically, we are never going to get to the ‘promised land’ of net-zero carbon. We might be able to manufacture zero-carbon steel using green (or pink) hydrogen, but zero-carbon cement and building materials remain elusive. Mr Johnson may be a “technological optimist”, but unless there are astonishing breakthroughs which can be successfully commercialised, net-zero carbon without massive reductions in living standards remains more a dream than a goal.
Optimists point to the light-emitting diode (LED), developed 60 years ago, though rolled out universally only recently. LEDs last almost indefinitely and consume very little electricity. But it took a long time for governments to catch on. The problem with imposing an arbitrary target date is that it encourages haste and crowds out the private sector. The result is that poor decisions may be made, such as the likely decision to scrap all gas boilers by 2035 or to push battery-powered electric vehicles in favour of hydrogen-powered vehicles.
Just as many of us have argued that we are going to have to live with coronavirus indefinitely, we are going to have to live with temperatures of at least 1.5-2.0 Celsius above pre-industrial levels for the next three-five generations. That means that we need to start talking about adaptation to and mitigation of climate change – something I’d like to consider here soon.