Clean fuels shaping up as fight of the year in Sacramento
New battle lines drawn in fight over low-carbon policy
By Laurel Rosenhall, CALmatters, Mar 5, 2016 Updated: 3/6/16 3:33pm
A Harvard economist known globally for his work on climate change policy sat in the Sacramento office of the oil industry’s lobbying firm recently, making the case that California is fighting global warming the wrong way.
The state has a good cap and trade system, Robert Stavins said, but some of its other environmental policies are weakening it. He pointed to a rule known as the low carbon fuel standard, which is supposed to increase production of clean fuels.
Environmental advocates consider it a complement to the cap and trade program that makes industry pay for emitting carbon; Stavins had other words.
“It’s contradictory. It’s counter-productive. It’s perverse,” he said. “I would recommend eliminating it.”
California’s low carbon fuel policy is shaping up as a major fight this year for the state’s oil industry, an influential behemoth that spent more than $10.9 million lobbying Sacramento last year, more than any other interest group.
“There’s a storm coming,” biofuels lobbyist Chris Hessler told a roomful of clean energy advocates at a recent conference on low carbon fuels. “If we don’t meet this attack vigorously, we’re all going to be in a lot of trouble.”
NEW BATTLE LINES
The oil industry was front and center in the biggest fight to hit the state Capitol last year: a proposal to cut California’s petroleum consumption in half over the next 15 years to slow the pace of climate change. The industry won its battle when lawmakers stripped the oil provision from Senate Bill 350.
But California’s larger oil war is far from over, and the newest battle lines are beginning to emerge.
Gov. Jerry Brown is plowing ahead with plans to cut vehicle oil use in half through executive orders and regulations like the low carbon fuel standard. The standard requires producers to cut the carbon intensity of their fuels 10 percent by 2020. To reach the standard, refineries will have to make a blend that uses more alternative fuels — like ethanol — and less oil.
The program was adopted in 2009 but was locked in a court battle for years. California regulators prevailed, and took action last year to resume the program. Now producers must start changing the way they formulate their fuel or buy credits if their product is over the limit.
That’s led to higher costs for fuel makers, which they are passing on to consumers at a rate of about 4 cents per gallon, according to the California Energy Commission. But the price is likely to keep increasing, the oil industry warns, as it gets tougher to meet the standard that increases over time.
Which is where Stavins’ argument comes in. It goes like this: the cleaner fuels required by the low carbon fuel standard will emit less greenhouse gas. That will reduce the need for fuel producers to buy permits in the cap and trade system (which makes industry pay for emitting climate-warming pollution) and create additional emissions by allowing other manufacturers to buy the pollution permits.
Less demand will also depress prices on the cap and trade market.
Stavins is the director of Harvard’s Environmental Economics Program and part of the Intergovernmental Panel on Climate Change, a prestigious group of experts who review research for the United Nations.
He’s also an advisor to the Western States Petroleum Association, which paid him to make the trip to Sacramento, where he talked with reporters before a day of meetings with lawmakers and business leaders.
Environmental advocates and California clean air regulators reject his view. They say the fuel standard works in harmony with other carbon-reducing programs and it’s an important piece of California’s effort to achieve its climate change goals.
“One of the major goals of the low carbon fuel standard… is to drive innovation of new and alternative low carbon fuels,” said Stanley Young, spokesman for the California Air Resources Board. “The cap and trade program on its own cannot do that.”
Alternative fuel producers gathered in a ballroom near the Capitol days after Stavins’ visit to Sacramento. During a presentation on the rising price of low carbon fuel credits, Hessler, the biofuels lobbyist, warned that the program is coming under “political attack.”
He defended the fuel standard by saying the regulation limits the price of the credits, and the cost to consumers will be kept down as some fuel producers make money by selling credits to others. He urged conference participants to share his information with California policymakers to counter opposition to the low carbon fuel standard.
“We’ve got to be ready for this,” Hessler said.
HOW THINGS COULD GO DOWN
A fight last year over a low carbon fuel standard in the state of Washington may provide some clues about how things could go down here.
There, Democratic Gov. Jay Inslee proposed a low carbon fuel standard but failed to earn enough support for it in the Legislature. The fuel standard became a bargaining chip for Republicans in negotiations about funding for transportation infrastructure.
Here in California, lawmakers and Gov. Brown are also negotiating a plan to pay for a backlog of repairs to state roads and highways. Brown has pitched spending $36 billion over the next decade with a mix of taxes and other revenue sources.
Republican votes are necessary to reach the two-thirds threshold for approving new taxes. So far, Republicans have balked at the plan, with some suggesting that the fuel standard should be included in the negotiations.
“As we’re having the discussions about transportation funding in general in California, and transportation taxes in particular, this ought to be part of the discussion,” said Assemblyman Jay Obernolte, R-Hesperia.
It’s a message echoed by the president of the Western States Petroleum Association, which advocated against the low carbon fuel standard in Washington.
Catherine Reheis-Boyd said she wants California lawmakers to “take a very hard look” at the low carbon fuel standard as they consider the future of climate change policies and the desire to repair the state’s roads.
“All those things interplay,” Reheis-Boyd said. “That’s a big conversation. I think people across the state are willing to have it, and I think we’re at a pivotal point to have it this year.”
CALmatters is a nonprofit journalism venture dedicated to explaining state policies and politics. For more news analysis by Laurel Rosenhall go to https://calmatters.org/newsanalysis/.
West coast of Greenland. The fastest glacier in the world, Jakobshaven Isbrae, moving at 150 feet per day, dumps ice from the Greenland Ice Sheet into Disko Bay. (Photo: Bruce Melton)
Climate science is way out in front of climate policy. Commitments at the United Nations Climate Conference in Paris pale in comparison to those from the Kyoto Protocol with its beginnings in the Rio Earth Summit in 1992. The cheap and unambiguous solution of removing CO2 directly from the sky has been discredited by the perceived debate. Previously assumed stable ice sheets are disintegrating. It is warmer than any time in the last 120,000 years. The Gulf Stream appears to be shutting down. Nearly 100 submarine glacial valleys beneath the Greenland Ice Sheet tunnel warm subtropical Atlantic water 90 miles beneath the ice. The Intergovernmental Panel on Climate Change (IPCC) says we need to remove more carbon dioxide from our atmosphere than we emit every year (negative emissions). Most importantly, new knowledge about global cooling smog shows that killing coal will create more warming than doing nothing in the most critical decades-long time frames.
The great delay in climate action has dramatically increased climate change impacts and the amount of carbon dioxide that we must now deal with to prevent even greater impacts. Delay has been caused by the debate casting doubt on climate science in ways that have proven to be effective in similar debates about smoking, acid rain and ozone-depleting chemicals. Because of doubt, fundamentally important new climate science has failed to escape the confines of academia and proceed into the public realm where it can move policy – literally – into the 21st century.
Number One: Direct Air Capture
Not new, very real, but often maligned in advocacy and policy discussions, direct air capture (DAC) of carbon dioxide is an important aspect of the failure of traditional climate science education techniques. DAC costs as little as $20 per ton, and once fully industrialized, can remove 50 ppm CO2 from the atmosphere and allow us to approach a safe level of greenhouses gases for less than the $2.1 trillion Americans spent on health care in 2006. (1,2)
Global Thermostat’s pilot project can remove 100,000 tons of carbon dioxide per year for $10 per ton. (Photo:Global Thermostat)Is removing CO2 directly from the atmosphere bad because it will give us incentive to continue burning fossil fuels with all of their other problems? No. Risks from climate change, especially from abrupt change, involve hazards that threaten our civilization. If these risks can be addressed independently from complicated sociological, health and environmental issues associated with fossil fuels, most of the other issues would be moot. We will eventually solve these other problems. But right now, after a generation of delay, we waste even more time attempting to solve all of these other problems when the simple solutions are at hand.
So why is DAC so often discounted? A report by the American Physical Society (APS) in 2011 claimed DAC economically infeasible. Because of the ability of DAC to be exceedingly effective, media coverage of this report was widespread. What was not covered in media reporting: the report only considered WWII era technologies, the prestigious journal Nature published a rebuttal identifying the APS omissions and the co-author of the APS report is “a distinguished adviser within British Petroleum [BP].” (3)
Current Policy Is Less Stringent Than 1992 Kyoto Protocol and Negative Emissions
The US commitment at the UN Climate Conference that concluded this month in Paris was for 80 percent emissions reductions below 2005 levels by 2050. Commitments for developed nations under the Kyoto Protocol were 80 percent below 1990 levels by 2020. (4) The current US commitment is 27 percent less with a 30 year delayed target.
The Kyoto Protocol originated with the United Nations Conference on Environment and Development, also known as the Rio de Janeiro Earth Summit, in 1992 and their current greenhouse gas commitments were adopted in 1997. The US was the only party to the never ratify Kyoto that did not sign the original UN treaty. (Photo:CC)Research this fall tells us that if the EU, US and Chinese commitments from the UN Climate Conference in Paris in 2015 are honored, all other countries would have to a commit to climate pollution mitigation seven to 14 times more aggressive than the EU, US and China, to avoid 2 degrees Celsius of warming by 2030. (5)
To get there from here, the 2013 IPCC has made a rare policy statement that plainly states the obvious in that we must create “strong negative emissions.” (6) Put another way, we must remove “strongly” more CO2 from our atmosphere than we emit every year. But when the IPCC closed for new papers, research was not robust enough to talk about the amount of negative emissions.
New work from the France, Japan and Great Britain institutes of sciences and meteorology have new modeling that reveals the true challenge of keeping warming below 2 degrees Celsius. Under the best case scenario, negative emissions of 135 percent of annual emissions are required. For the worst-case scenario that we are currently tracking, negative emissions of 210 percent of annual emissions are required. (7,8)
It’s only logical that delay means that climate policy should be more stringent, not less stringent.
New Science Turns 20 Years of Policy on Its Head: Net Warming
It only makes sense that policy would include all factors contributing to climate change – both warming and cooling – but until recently we have not had the knowledge to understand global cooling pollutants. Because of the risks from small amounts of warming, scientists suggested warming pollutant emissions reductions action a generation ago. Now we have the knowledge to understand the other half of the story.
Beijing, China smog comparison 2005. Global cooling sulfates emitted from burning fossil fuels are a primary component of smog. (Photo: Bobak, CC)The IPCC says that 57 percent of warming that should have already occurred has been masked by global cooling sulfates (smog) emitted mostly from burning coal. (9) Because so much sulfate pollution is created from coal, in the decades-long time frames where sulfates remain active in the atmosphere, stopping coal burning actually creates more net warming than doing nothing. (10)
This does not necessarily mean we must reverse a generation of efforts to control global warming, as coal is still the king of warming in the long-term. It simply means we must thoroughly evaluate current decades-old strategies in light of new knowledge or risk more warming than doing nothing.
Abrupt Change and the Decades-Long Time Frame: Greenland and the Gulf Stream
The Gulf Stream is one segment of a major global ocean current system. Water from the South Atlantic, Caribbean Sea and Gulf of Mexico join near Miami and flow north along the east coast of North America, then across the Atlantic to somewhere between Greenland and Finland before sinking to the bottom of the ocean to flow back south, around the Horn of Africa and east to the Pacific where it surfaces and flows back towards the Atlantic. Because of the Gulf Stream, Europe and northeastern North America have a much milder climate than other land areas at similar latitude.
For a decade or more now, the Gulf Stream has been considered stable enough that abrupt change caused by its shutdown was not a priority. Long-standing science implicated melting or disintegrating ice sheets as a significant trigger of abrupt change in the North Atlantic past but for now, the Gulf Stream was stable.
An iceberg armada disembarks from the mouth of the Ilulissat Icefjord in western Greenland. The Ilulissat Glacier (Jakobshavn Isbrae) drains 7 percent of the Greenland Ice Sheet. (Photo: Bruce Melton)
About 23 times in the last 100,000 years, Earth has experienced abrupt changes that originated with a shutdown/startup of the Gulf Stream due to iceberg discharge and melt in Atlantic sector of the Northern Hemisphere. This evidence is robust in bubbles of air in ancient ice from two mile deep Greenland ice cores and similar evidence from around the globe in numerous other lines of research dating back to the early 1990s. Changes of 9 to 15 degrees Fahrenheit across the globe and 25 to 35 degrees in Greenland happened in a century, or decades-long periods, or as little as several years. (11)
The theory is that freshwater melt from ice floats on salty sea water and creates a blockage in the warm northward flowing waters of the Gulf Stream. When the Gulf Stream shuts down, winter cold freezes the north Atlantic allowing cold air to penetrate much farther south, which has a reverberating cooling effect around the globe.
Sediment cores across the North Atlantic show layers that are full of sand and gravel that are far too heavy to have floated there from land. These layers are called ice rafted debris, have been delivered by iceberg armadas from purging of the North American and Greenland Ice Sheets, and coincide with most of the abrupt changes found in Greenland ice cores. (12)
In the recent past when science could not identify any changes in strength in the Gulf Stream and modeling could not reliably recreate abrupt changes, these events were not as worrisome as today. After all, the North American Ice Sheet was gone.
The Gulf Stream: without it Europe and northwestern North America would be in the deep freeze, or at least colder than present.This new research looks at eight years of Gulf Stream measurement from a new system of buoys, whereas previous work came from ships. Since the buoys went into operation there has been a large but varying 7 percent per year decreases in flow; well over a 50 percent total reduction. (13) It is still not clear if this is from climate change but other evidence is compelling.
Growth rings in deep sea corals off of Nova Scotia show a decisive shift in nitrogen source from cold to warm since the 1970s that is unique in 1,800 years. Nitrogen is a primary nutrient for coral growth and warm water nitrogen is distinctly different from cold water nitrogen. (14) Another compelling piece of evidence supporting a Gulf Stream shutdown caused by pooling melt water comes from the 2013 IPCC report that ice melt and discharge from Greenland has increased over 500 percent in the period between 2000 to 2009, with melt increasing since. (15)
The final and very unambiguous piece of evidence is the “global warming hole” over the North Atlantic. This research comes from Germany’s national science institute and actually shows the cold water melt from Greenland floating like a log jam in a river over the western North Atlantic, just south of Greenland. (16)
Greenland’s global warming hole shown in the average global temperature change from 1901 to 2013 (top). In the bottom image, the dark line and small circles are the modeled temperature response from an excess of fresh water from Greenland melt.
Abrupt change from Greenland melt now appears to be a real threat, not something to consider in the long-term future. Researchers have also finally been able to model a shutdown of the Gulf Stream for the first time in a hindcast from 30,000 to 50,000 years ago. This is a great coup for modeling and foretells a time in the hopefully near-term where we can predict these events and dramatically decrease uncertainty. (17)
The bottom line is that any more warming than we have already seen increases the risk that abrupt change will occur and the risk likely increases nonlinearly. Because current policy also allows what is called temperature overshoot, where emission reductions kick in gradually over time while warming continues, the only way to minimize overshoot is to do as the IPCC suggests and implement strong negative emissions.
Scientists have been warning us that the West Antarctic Ice Sheet disintegration has begun for 10 years. (18) Some of the latest Antarctic research says that only the best case scenario (RCP2.6), where CO2 is limited to 390 ppm (we are 400 ppm today), would keep Antarctica’s contribution to sea level rise less than three feet. In their press release, the principal investigator says the last time CO2 levels were similar to today’s was 3 million years ago and sea level was 66-feet higher. Their work showed, because CO2 is already higher than the best-case scenario, warming in the next 20 years will determine how much of this 66 feet we will experience. (19)
New Antarctic sediment cores show the same ice rafted sand and gravel layers associated with abrupt change as were delivered by iceberg armadas to sediments in the North Atlantic. (20) This research says that about 6,000 to 7,000 years ago Earth reached its peak post-ice age temperature, known as the Thermal Maximum.
Back then, warm ocean waters melted the bottom of the floating part of the West Antarctic Ice Sheet (WAIS). This exposed a high ridge (grounding line) around much of Antarctica that acts like an ice brake – slowing the flow of ice to the sea – and allowed warm water to penetrate much farther beneath the ice sheet. (21) Since the Thermal Maximum, earth has cooled a degree or 2 Celsius and the ice sheet reconnected with the grounding line, up until recently.
Recent ocean warming is melting the bottom of the perimeter of the exposed parts of the ice sheet and producing conditions similar to those during the last Antarctic iceberg pulse during the Thermal Maximum. Warm water can now flow in under the ice sheet and create what has been observed in Greenland as 100 times more melt below than above. (22)
Crosson Glacier, Amundson Sea Embayment, West Antarctic Ice Sheet. The glacier emptying into the Amundson Sea Embayment drain a third of the Mexico sized West Antarctic Ice Sheet. Rifting shown in these satellite images is the likely precursor to collapse of this area. (From MacGregor 2012)
Complicating Antarctic’s situation, fresh water from already increased iceberg discharge has formed a freshwater cap around Antarctica that floats on the denser salt water allowing more sea ice to form as freshwater freezes at about 3 degrees Fahrenheit warmer than salt water. More sea ice decreases ocean turbulence, meaning that mid-level waters are warmer, enhancing underice melt. Rifting, a predecessor to collapse, is significantly increasing in the Amundsen Sea Embayment and is visible in satellite imagery. The Amundsen Sea Embayment drains 30 percent of the West Antarctic Ice Sheet, has increased in flow 33 percent in the last 40 years, and is currently responsible for 10 percent of annual sea level rise. (23)
The quickest ice sheet collapse projection today is in the multi-century range, but it is very important to understand that ice sheet collapse modeling is still in its infancy and likely underestimates the speed of collapse once protective ice shelves, discharge glacier tongues have collapsed and the bottom of the ice has melted up off of grounding lines. Evidence for a previous collapse about 120,000 years ago at a reef called Excaret on the Yucatan Peninsula, when our CO2 concentration was 25 percent less than today, found a six- to 10-foot rise in sea level that happened in 100 years or less. (24)
Other new research from Antarctica that demonstrates the possible underestimation of the speed of collapse shows that in 2002, the Rhode Island sized Larsen B ice shelf disintegrated over a two-month period. The Larsen C, the size of Vermont and New Hampshire combined, appears like it to is about to undergo major changes or disintegration. In 2015, two separate lines of research from the British Antarctic Survey and German Institute for Polar Research found that this was likely and imminent. (25)
Submarine Glacial Valleys in Greenland
Researchers at the University of California and California Institute of Technology have discovered that land beneath Greenland is not at all what we had previously believed. The center of Greenland is still depressed below sea level like we have known before, but higher powered radar has allowed us to see finer resolution around the edges. This research found submarine bed channels beneath the ice that are 10 times more widespread than previous work shows, and that extend 50 percent farther inland (90 miles) than previous work in 2013 and 300 percent farther than 2001 work.
An underice river emerges near the west cost of Greenland ice sheet at Point 660, near the Arctic Circle. (Photo: Bruce Melton)
Sixty of the glaciers overlying these submarine valleys drain 88 percent of the ice sheet and are more than 1,000 feet deeper than their glaciers: “meaning they are deep enough to interact with subsurface warm Atlantic waters and undergo massive rates of [underice] melting.” This research concludes: “These results will have a profound and transforming impact… reveal[ing] a more pervasive influence of [underice melting] on these glaciers, which is more consistent with the past two decades of satellite observations.” (26)
The Thermal Maximum: As Warm as 120,000 Years Ago
Tiny ice caps on Baffin Island just west of Greenland have been melting on average over 30 vertical feet per year since; what climate scientists are calling “The Big Melt” began about 2,000 years ago. Scientists have been dating rooted plant remains from the dripping edges of the melting mini ice caps and found that the earliest that ice covered the oldest of them was at least 51,000 years ago when Earth was receiving 9 percent more incoming heat from the sun than today.
But the plants are a lot older than that, because 51,000 years ago was in the middle of the last ice age. The principal investigator, Giff Miller from the Institute of Arctic and Alpine Research, University of Colorado, Boulder, says that the youngest time interval from which summer temperatures in the Arctic were plausibly as warm as today is about 120,000 years ago. Miller is quoted in the American Geophysical Union Journal: “Although the Arctic has been warming since about 1900, the most significant warming in the Baffin Island region didn’t really start until the 1970s, and it is really in the past 20 years that the warming signal from that region has been just stunning. All of Baffin Island is melting, and we expect all of the ice caps to eventually disappear, even if there is no additional warming.” (27)
Baffin Island is the fifth largest island in the world after Greenland. It is located west of southern Greenland in Ninuvit, Canada. The most rapidly melting fringes of northern ice here have been receding by as much as 100 feet every three years since about the turn of the century.
The most astounding part of this research, though, is that some of the plants reemerging from the ice have begun to grow again.
The ancient plants that have begun to grow again on Baffin Island are emblematic of the promise of new direct air capture technologies. There is no known way, as the IPCC says, to make a “large net removal of CO2 from the atmosphere” without using direct air capture. These technologies offer a promise, but we must continue doing everything we know how to do to mitigate for the impacts of climate change and reduce greenhouse gas emissions because right now, everything helps.
Global climate talks received a symbolic boost today, as the G7 group of rich nations threw their weight behind a long-term goal of decarbonising the global economy over the course of this century.
The joint communique from the leaders of Japan, Germany, the US, UK, Canada, Italy and France reaffirms their commitment to the internationally agreed target of limiting warming to less than 2C above pre-industrial levels. It also reiterates their commitment to deep cuts in emissions by 2050.
Today’s declaration goes a step further, however, backing a long-term goal of cutting global greenhouse gas emissions at the “upper end” of 40-70% below 2010 levels by 2050 and decarbonising completely “over the course of this century”.
These milestones are broadly in line with the path to avoiding more than 2C of warming, set out by the Intergovernmental Panel on Climate Change (IPCC) last year. The IPCC said this would require “near zero emissions of carbon dioxide and other long-lived greenhouse gases by the end of the century”.
The 40-70% reduction on 2010 levels by 2050 is the range for 2C set out by research organization Climate Analytics earlier this year. It also just about reaches the 70-95% range of emissions reduction by 2050 that would be consistent with limiting warming to 1.5C. A review of whether to adopt this tougher temperature target is expected to conclude at UN climate talks in Bonn this week.
Powering up Paris?
The G7 declaration calls this year’s UN talks in Paris “crucial for the protection of the global climate” and says: “We want to provide key impetus for ambitious results”. It promises to put climate protection “at the centre of our growth agenda”.
However, the G7 nations only account for 19% of global greenhouse gas emissions. Former Australian prime minister Kevin Rudd argued recently that the larger G20 needed to drive the planned global climate deal.
As such, the good will of the G7 is hardly enough to guarantee success in Paris on its own. In the run-up to the 2009 climate talks in Copenhagen — variously described as a “failure”, “setback” or a “disaster” — the then-G8 group of leading nations said:
“We are committed to reaching a global, ambitious and comprehensive agreement in Copenhagen.”
The same 2009 G8 statement set a goal of cutting emissions by “at least” 50% by 2050 – within the 40-70% range set out by the G7 today. It said developed countries should collectively cut emissions by “80% or more” compared to 1990 levels.
Zero carbon economy
Today’s text does not repeat this promise on developed country emissions. The novel element is its backing for potentially greater global ambition in 2050, along with complete decarbonisation by the end of this century.
Statements from NGOs — and some newspaper headlines — added their own interpretations to this new pledge. The Guardian said the leaders had “agreed on tough measures” that would cut emissions by “phasing out the use of fossil fuels”. The Financial Times headline says “G7 leaders agree to phase out fossil fuels”.
Greenpeace said the text signalled the fossil fuel age was “coming to an end” and that coal, in particular, must be phased out in favour of 100% renewable energy. Christian Aid made similar points, asking global leaders to follow the UK in committing to phase out unabated coal. G7 nations continue to rely on large fleets of coal-fired power stations, whose combined emissions are more than twice Africa’s total.
The G7 language on decarbonisation this century is not specific, however, and does not promise an end to the use of coal or other fossil fuels. Instead, the language could imply reaching net-zero, where any remaining emissions are balanced by sequestration through afforestation or negative emissions technologies.
The most likely method of achieving negative emissions, biomass with carbon capture and storage (BECCS), is controversial because it might require very large areas of land to be set aside for fast-growing trees or other biomass crops.
The G7 “commit to” develop and deploy “innovative technologies striving for a transformation of the energy sectors by 2050”. The communique doesn’t explain which technologies would be considered “innovative”. However, the use of the plural term “energy sectors” perhaps points past electricity generation towards transport, heat and beyond.
The declaration is thin on new financial commitments – despite some high expectations heralded by chancellor Angela Merkel’s announcement in May that Germany would double its contribution to international climate finance by 2020.
The communique says that climate finance is already flowing at “higher levels”. All G7 countries have pledged various sums of money into the UN-backed Green Climate Fund (GCF) over the past year, although all countries’ cumulative contributions are still only around $10bn.
This is well short of the $100bn a year that rich countries have pledged to provide every year by 2020. A significant proportion of this is expected to be channelled through the GCF. So far, there is no clear roadmap on how this money will be scaled up over the next five years – a source of contention for developing countries, which rely upon international donations to implement their own climate actions.
In the statement, the G7 countries pledge to “continue our efforts to provide and mobilize increased finance, from public and private sources”.
This doesn’t equate to a commitment to actually scale up finance, Oxfam’s policy lead on climate Tim Gore tells Carbon Brief:
“They’re saying that it’s higher than it was, and now they’re going to try and maintain it at that higher level. What we were looking for was what Merkel did, and say from the level we’re at now, we’re going up towards 2020.”
The statement also says that the G7 nations “pledge to incorporate climate mitigation and resilience considerations into our development assistance and investment decisions”. This could have particular implications for Japan, which is still investing heavily in coal plants both domestically and abroad.
Despite its shortcomings, the stronger elements of the G7 communique were not easily won. Wording on the long term goal could reverberate at the UN negotiations taking place this week in Germany, sending a message about the pressure that countries such as Japan and Canada are under to toe the climate line.
Both nations have faced criticism for low ambition in their INDCs (still due to be finalised in Japan’s case), yet have nonetheless agreed to a statement pointing towards a decarbonised economy by the end of the century.
Alden Meyer, from the Union of Concerned Scientists, says:
“I think it shows the pressure that some of these laggard countries felt under from other countries and from the public in their own countries to not block the language. This is not a kumbaya moment that all of a sudden has transformed the long term goal discussion, and those who have been resisting good language in this agreement are suddenly going to turn around on decarbonisation in the long term goal. I think that’s the political significance.”
The IMF calls the revelation “shocking” and says the figure is an “extremely robust” estimate of the true cost of fossil fuels. The $5.3tn subsidy estimated for 2015 is greater than the total health spending of all the world’s governments.
The vast sum is largely due to polluters not paying the costs imposed on governments by the burning of coal, oil and gas. These include the harm caused to local populations by air pollution as well as to people across the globe affected by the floods, droughts and storms being driven by climate change.
Nicholas Stern, an eminent climate economist at the London School of Economics, said: “This very important analysis shatters the myth that fossil fuels are cheap by showing just how huge their real costs are. There is no justification for these enormous subsidies for fossil fuels, which distort markets and damages economies, particularly in poorer countries.”
Lord Stern said that even the IMF’s vast subsidy figure was a significant underestimate: “A more complete estimate of the costs due to climate change would show the implicit subsidies for fossil fuels are much bigger even than this report suggests.”
The IMF, one of the world’s most respected financial institutions, said that ending subsidies for fossil fuels would cut global carbon emissions by 20%. That would be a giant step towards taming global warming, an issue on which the world has made little progress to date.
Ending the subsidies would also slash the number of premature deaths from outdoor air pollution by 50% – about 1.6 million lives a year.
Furthermore, the IMF said the resources freed by ending fossil fuel subsidies could be an economic “game-changer” for many countries, by driving economic growth and poverty reduction through greater investment in infrastructure, health and education and also by cutting taxes that restrict growth.
Another consequence would be that the need for subsidies for renewable energy – a relatively tiny $120bn a year – would also disappear, if fossil fuel prices reflected the full cost of their impacts.
“These [fossil fuel subsidy] estimates are shocking,” said Vitor Gaspar, the IMF’s head of fiscal affairs and former finance minister of Portugal. “Energy prices remain woefully below levels that reflect their true costs.”
David Coady, the IMF official in charge of the report, said: “When the [$5.3tn] number came out at first, we thought we had better double check this!” But the broad picture of huge global subsidies was “extremely robust”, he said. “It is the true cost associated with fossil fuel subsidies.”
The IMF estimate of $5.3tn in fossil fuel subsidies represents 6.5% of global GDP. Just over half the figure is the money governments are forced to spend treating the victims of air pollution and the income lost because of ill health and premature deaths. The figure is higher than a 2013 IMF estimate because new data from the World Health Organisation shows the harm caused by air pollution to be much higher than thought.
Coal is the dirtiest fuel in terms of both local air pollution and climate-warming carbon emissions and is therefore the greatest beneficiary of the subsidies, with just over half the total. Oil, heavily used in transport, gets about a third of the subsidy and gas the rest.
The biggest single source of air pollution is coal-fired power stations and China, with its large population and heavy reliance on coal power, provides $2.3tn of the annual subsidies. The next biggest fossil fuel subsidies are in the US ($700bn), Russia ($335bn), India ($277bn) and Japan ($157bn), with the European Union collectively allowing $330bn in subsidies to fossil fuels.
The costs resulting from the climate change driven by fossil fuel emissions account for subsidies of $1.27tn a year, about a quarter, of the IMF’s total. The IMF calculated this cost using an official US government estimate of $42 a tonne of CO2 (in 2015 dollars), a price “very likely to underestimate” the true cost, according to the UN’s Intergovernmental Panel on Climate Change.
The direct subsidising of fuel for consumers, by government discounts on diesel and other fuels, account for just 6% of the IMF’s total. Other local factors, such as reduced sales taxes on fossil fuels and the cost of traffic congestion and accidents, make up the rest. The IMF says traffic costs are included because increased fuel prices would be the most direct way to reduce them.
Christiana Figueres, the UN’s climate change chief charged with delivering a deal to tackle global warming at a crunch summit in December, said: “The IMF provides five trillion reasons for acting on fossil fuel subsidies. Protecting the poor and the vulnerable is crucial to the phasing down of these subsidies, but the multiple economic, social and environmental benefits are long and legion.”
Barack Obama and the G20 nations called for an end to fossil fuel subsidies in 2009, but little progress had been made until oil prices fell in 2014. In April, the president of the World Bank, Jim Yong Kim, told the Guardian that it was crazy that governments were still driving the use of coal, oil and gas by providing subsidies. “We need to get rid of fossil fuel subsidies now,” he said.
Reform of the subsidies would increase energy costs but Kim and the IMF both noted that existing fossil fuel subsidies overwhelmingly go to the rich, with the wealthiest 20% of people getting six times as much as the poorest 20% in low and middle-income countries. Gaspar said that with oil and coal prices currently low, there was a “golden opportunity” to phase out subsidies and use the increased tax revenues to reduce poverty through investment and to provide better targeted support.
On renewable energy, Coady said: “If we get the pricing of fossil fuels right, the argument for subsidies for renewable energy will disappear. Renewable energy would all of a sudden become a much more attractive option.
Shelagh Whitley, a subsidies expert at the Overseas Development Institute, said: “The IMF report is yet another reminder that governments around the world are propping up a century-old energy model. Compounding the issue, our research shows that many of the energy subsidies highlighted by the IMF go toward finding new reserves of oil, gas and coal, which we know must be left in the ground if we are to avoid catastrophic, irreversible climate change.”
Developing the international cooperation needed to tackle climate change has proved challenging but a key message from the IMF’s work, according to Gaspar, is that each nation will directly benefit from tackling its own fossil fuel subsidies. “The icing on the cake is that the benefits from subsidy reform – for example, from reduced pollution – would overwhelmingly accrue to local populations,” he said.
“By acting local, and in their own best interest, [nations] can contribute significantly to the solution of a global challenge,” said Gaspar. “The path forward is clear: act local, solve global.”