Why NZ’s emissions trading scheme should have an auction reserve price



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New Zealand’s emission reduction target for 2030 is to bring emissions to 30% below 2005 levels, and to be carbon neutral by 2050.
from http://www.shutterstock.com, CC BY-ND

Suzi Kerr, Victoria University of Wellington

While people’s eyes often glaze over when they hear the words “emissions trading”, we all respond to the price of carbon.

Back in 2010, when the carbon price was around NZ$20 per tonne, forest nurseries in New Zealand boosted production. But when prices plunged thereafter, hundreds of thousands of tree seedlings were destroyed rather than planted, wiping out both upfront investment and new forest growth.

Emission prices have since recovered but no one knows if this will last. With consultation underway on improving the New Zealand Emissions Trading Scheme (NZ ETS), the government should seriously consider a “price floor” to rebuild confidence in low-emission investment.




Read more:
A new approach to emissions trading in a post-Paris climate


How a price floor works

If we want to make a smart transition to a low-emission economy, we need to change how we value emissions so people make the investments that deliver on our targets. Implementing a reserve price at auction – or a “price floor” – is a powerful tool for managing the risk that emission prices could fall for the wrong reasons and undermine much needed low-emission investments.

In New Zealand’s ETS, participants are required to give tradable emission units (i.e. permits) to the government to cover the emissions for which they are liable. A limit on unit supply relative to demand reduces total emissions and enables the market to set the unit price.

In the future, the government will be auctioning emission units into the market. A reserve price at auction, which is simple to implement, can help avoid very low prices. If private actors are not willing to pay at least the reserve price, the government would stop selling units and the supply to the market would automatically contract.

The government’s current ETS consultation document suggests that no price floor will be needed in the future because a limit on international purchasing will be sufficient to prevent the kind of price collapse we experienced in the past. However, that assessment neglects other drivers of this risk.

When low ETS prices are a pitfall

Ideally, ETS prices would respond to signals of the long-term cost of meeting New Zealand’s decarbonisation goals and achieving global climate stabilisation. With today’s information, we generally expect ETS prices to rise over time. For example, modelling prepared for the New Zealand Productivity Commission suggests emission prices could rise to at least NZ$75 per tonne, possibly over NZ$200 per tonne, over the next three decades.

However, ETS prices could also fall because of sudden technology breakthroughs or economic downturn. Even though some low-emission investors would lose the returns they had hoped for, this could be an efficient outcome because low ETS prices would reflect true decarbonisation costs. Technological and economic uncertainty imposes a genuine risk on low-emission investments that society cannot avoid.

But there is another scenario in which ETS prices fall while decarbonisation costs remained high. This could arise because of political risk. For example, if a major emissions-intensive industrial producer was to exit the market unexpectedly and it was unclear how the government would respond, or if a political crisis was perceived to threaten the future of the ETS, then emission prices could collapse and efficient low-emission investments could be derailed.

Even when remedies are on the way, it can take time to correct perceptions of weak climate policy intentions. The New Zealand government’s slow response to the impact of low-quality international units in the ETS from 2011 to mid-2015 is a vivid example of this.

A simple and effective solution

With a price floor, an ETS auction will respond quickly and predictably to unpredictable events that lower prices. A price floor signals the direction of travel for minimum emission prices and builds confidence for low-emission investors and innovators. It also provides greater assurance to government about the minimum level of auction revenue to expect.

It is important to note that ETS participants can still trade units amongst each other at prices below the price floor. The price floor simply stops the flow of further auctioned units from the government into the market until demand recovers again and prices rise.

We have three good case studies overseas for the value of a price floor.

  1. The European Union ETS did not have a price floor for correcting unexpected oversupply and prices dropped because of the global financial crisis, other energy policies and overly generous free allocation. It now has a complex market stability reserve for this purpose, although that operates with less ease and transparency than a reserve price at auction.

  2. To counteract low EU ETS prices, the UK created its own price floor as a “top up” to the EU ETS. Although this did not add to global mitigation beyond the EU ETS cap, it did drive down coal-fired generation in the UK.

  3. California’s ETS was designed in conjunction with a large suite of emission reduction measures with complex interactions. Its reserve price at auction has ensured that a minimum and rising emission price has been maintained, despite uncertainties about the impact of other measures.

Keeping NZ on track for decarbonisation

In New Zealand, the Productivity Commission supports the concept of an auction reserve price in its final report on a transition to a low-emissions economy.

The only potential downside of a price floor is the political courage needed to set its level. It could be set at the minimum level that any credible global or local modelling suggests is consistent with New Zealand and global goals. The Climate Change Commission could provide independent advice on preferred modelling and an appropriate level. The merits of a price floor warrant cross-party support.

If the market operates in line with expectations, then the price floor has no impact on emission prices. But the price floor usefully guards against price collapse when the market does not go to plan.

The government, ETS participants and investors need to understand that international purchasing is not the only driver of downside price risk in the NZ ETS. A price floor would strengthen the incentives for major long-term investments in low-emission technologies, infrastructure and land uses in the face of uncertainty.

To reach New Zealand’s ambitious emission reduction targets for 2030 (a 30% reduction below 2005 levels) and beyond, bargain-basement emission prices need to stay a thing of the past.

This article was co-authored with Catherine Leining, a policy fellow at Motu Economic and Public Policy Research.The Conversation

Suzi Kerr, Adjunct Professor, School of Government, Victoria University of Wellington

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Australia is not on track to reach 2030 Paris target (but the potential is there)



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Australia’s energy emissions fell slightly due to renewable energy, but it’s not enough.
Jonathan Potts/Flickr, CC BY-NC-SA

Anna Skarbek, Monash University

While Australia is coming to terms with yet another new prime minister, one thing that hasn’t changed is the emissions data: Australia’s greenhouse gas emissions are not projected to fall any further without new policies.

Australia, as a signatory to the Paris Agreement on climate change, has committed to reduce its total emissions to 26-28% below 2005 levels by 2030, and reach net zero emissions by 2050.




Read more:
Why is climate change’s 2 degrees Celsius of warming limit so important?


New analysis by ClimateWorks Australia has found Australia has three times the potential needed to reach the federal government’s current 2030 target, but this will not be achieved under current policy settings.

Energy is not the only sector

Australia’s emissions were actually falling for more than half a decade, but have been steadily increasing again since 2013. If Australia sustained the rate of emissions reduction we achieved between 2005 and 2013, we could meet the government’s 2030 target. But progress has stalled in most sectors, and reversed overall.

Emissions are still above 2005 levels in the industry, buildings and transport sectors, and only 3% below in the electricity sector. It is mainly because of land sector emissions savings that overall Australia’s emissions are on track to meet its 2020 target, and are currently 11% below 2005 levels.

Despite the current focus on the energy market, electricity emissions comprise about one-third of Australia’s total greenhouse emissions. So no matter what policies are proposed for electricity, other policies will be needed for the other major sectors of industry, buildings, transport and land.

Fortunately, Australia is blessed with opportunities for more emissions reductions in all sectors.




Read more:
Keeping global warming to 1.5 degrees: really hard, but not impossible


ClimateWorks’ analysis assessed Australia’s progress on reducing emissions at the halfway point from the 2005 base year to 2030, looking across the whole of the economy as well as at key sectors.

We found emissions reductions since 2005 have been led by reduced land clearing and increased forestation, as well as energy efficiency and a slight reduction in power emissions as more renewable energy has entered the market. But while total emissions reduced at an economy-wide level, and in some sectors at certain times, none of the sectors improved consistently at the rate needed to achieve the Paris climate targets.

Interestingly, some sub-sectors were on track for some of the time. Non-energy emissions from industry and the land sector were both improving at a rate consistent with a net zero emissions pathway for around five years. The buildings sector energy efficiency and electricity for some years improved at more than half the rate of a net zero emissions pathway. These rates have all declined since 2014 (electricity resumed its rate of improvement again in 2016).

Looking forward

Looking forward to 2030, we studied what would happen to emissions under current policies and those in development, including the government’s original version of the National Energy Guarantee with a 26% emission target for the National Electricity Market. Our analysis shows emissions reductions would be led by a further shift to cleaner electricity and energy efficiency improvements in buildings and transport, but that this would be offset by population and economic growth.

As a result, emissions reductions are projected to stagnate at just 11% below 2005 levels by 2030. Australia needs to double its emissions reduction progress to achieve the federal government’s 2030 target and triple its progress in order to reach net zero emissions by 2050.

So, while Australia is not currently on track to meet 2030 target, our analysis found it is still possible to get there.




Read more:
What is a pre-industrial climate and why does it matter?


The gap to the 2030 target could be more than covered by further potential for emissions reductions in the land sector alone, or almost be covered by the further potential in the electricity sector alone, or by the potential in the industry, buildings and transport sectors combined. Harnessing all sectors’ potential would put us back on track for the longer-term Paris Agreement goal of net zero emissions.

Essentially this involves increasing renewables and phasing out coal in the electricity sector; increasing energy efficiency and switching to low carbon fuels in industry; increasing standards in buildings; introducing vehicle emissions standards and shifting to electricity and low carbon fuels in transport; and undertaking more revegetation or forestation in the land sector.

The opportunities identified in each sector are the lowest-cost combination using proven technologies that achieve the Paris Agreement goal, while the economy continues to grow.




Read more:
Australia can get to zero carbon emissions, and grow the economy


In the next two years, countries around the world, including Australia, will be required to report on the progress of their Paris Agreement targets and present their plans for the goal of net zero emissions. With so much potential for reducing emissions across all sectors of the Australian economy, we can do more to support all sectors to get on track – there is more than enough opportunity, if we act on it in time.The Conversation

Anna Skarbek, CEO at ClimateWorks Australia, Monash University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

How hydrogen power can help us cut emissions, boost exports, and even drive further between refills



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Could this be the way to fill up in future?
CSIRO, Author provided

Sam Bruce, CSIRO

Hydrogen could become a significant part of Australia’s energy landscape within the coming decade, competing with both natural gas and batteries, according to a new CSIRO roadmap for the industry.

Hydrogen gas is a versatile energy carrier with a wide range of potential uses. However, hydrogen is not freely available in the atmosphere as a gas. It therefore requires an energy input and a series of technologies to produce, store and then use it.

Why would we bother? Because hydrogen has several advantages over other energy carriers, such as batteries. It is a single product that can service multiple markets and, if produced using low- or zero-emissions energy sources, it can help us significantly cut greenhouse emissions.

Potential uses for hydrogen.
CSIRO, Author provided

Compared with batteries, hydrogen can release more energy per unit of mass. This means that in contrast to electric battery-powered cars, it can allow passenger vehicles to cover longer distances without refuelling. Refuelling is quicker too, and is likely to stay that way.

The benefits are potentially even greater for heavy vehicles such as buses and trucks which already carry heavy payloads, and where lengthy battery recharge times can affect business models.




Read more:
Could hydrogen fuel cell trucks drive our sustainable transport future?


Hydrogen can also play an important role in energy storage, which will be increasingly necessary both in remote operations such as mine sites, and as part of the electricity grid to help smooth out the contribution of renewables such as wind and solar. This could work by using the excess renewable energy (when generation is high and/or demand is low) to drive hydrogen production via electrolysis of water. The hydrogen can then be stored as compressed gas and put into a fuel cell to generate electricity when needed.

Australia is heavily reliant on imported liquid fuels and does not currently have enough liquid fuel held in reserve. Moving towards hydrogen fuel could potentially alleviate this problem. Hydrogen can also be used to produce industrial chemicals such as ammonia and methanol, and is an important ingredient in petroleum refining.

Further, as hydrogen burns without greenhouse emissions, it is one of the few viable green alternatives to natural gas for generating heat.

Our roadmap predicts that the global market for hydrogen will grow in the coming decades. Among the prospective buyers of Australian hydrogen would be Japan, which is comparatively constrained in its ability to generate energy locally. Australia’s extensive natural resources, namely solar, wind, fossil fuels and available land lend favourably to the establishment of hydrogen export supply chains.

Why embrace hydrogen now?

Given its widespread use and benefit, interest in the “hydrogen economy” has peaked and troughed for the past few decades. Why might it be different this time around? While the main motivation is hydrogen’s ability to deliver low-carbon energy, there are a couple of other factors that distinguish today’s situation from previous years.

Our analysis shows that the hydrogen value chain is now underpinned by a series of mature technologies that are technically ready but not yet commercially viable. This means that the narrative around hydrogen has now shifted from one of technology development to “market activation”.

The solar panel industry provides a recent precedent for this kind of burgeoning energy industry. Large-scale solar farms are now generating attractive returns on investment, without any assistance from government. One of the main factors that enabled solar power to reach this tipping point was the increase in production economies of scale, particularly in China. Notably, China has recently emerged as a proponent for hydrogen, earmarking its use in both transport and distributed electricity generation.

But whereas solar power could feed into a market with ready-made infrastructure (the electricity grid), the case is less straightforward for hydrogen. The technologies to help produce and distribute hydrogen will need to develop in concert with the applications themselves.

A roadmap for hydrogen

In light of this, the primary objective of CSIRO’s National Hydrogen Roadmap is to provide a blueprint for the development of a hydrogen industry in Australia. With several activities already underway, it is designed to help industry, government and researchers decide where exactly to focus their attention and investment.

Our first step was to calculate the price points at which hydrogen can compete commercially with other technologies. We then worked backwards along the value chain to understand the key areas of investment needed for hydrogen to achieve competitiveness in each of the identified potential markets. Following this, we modelled the cumulative impact of the investment priorities that would be feasible in or around 2025.


CSIRO, Author provided

What became evident from the report was that the opportunity for clean hydrogen to compete favourably on a cost basis with existing industrial feedstocks and energy carriers in local applications such as transport and remote area power systems is within reach. On the upstream side, some of the most material drivers of reductions in cost include the availability of cheap low emissions electricity, utilisation and size of the asset.




Read more:
Why is hydrogen fuel making a comeback?


The development of an export industry, meanwhile, is a potential game-changer for hydrogen and the broader energy sector. While this industry is not expected to scale up until closer to 2030, this will enable the localisation of supply chains, industrialisation and even automation of technology manufacture that will contribute to significant reductions in asset capital costs. It will also enable the development of fossil-fuel-derived hydrogen with carbon capture and storage, and place downward pressure on renewable energy costs dedicated to large scale hydrogen production via electrolysis.

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The Conversation

In light of global trends in industry, energy and transport, development of a hydrogen industry in Australia represents a real opportunity to create new growth areas in our economy. Blessed with unparalleled resources, a skilled workforce and established manufacturing base, Australia is extremely well placed to capitalise on this opportunity. But it won’t eventuate on its own.

Sam Bruce, Manager, CSIRO Futures, CSIRO

This article was originally published on The Conversation. Read the original article.

You’ve heard of a carbon footprint – now it’s time to take steps to cut your nitrogen footprint



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Transport and livestock are both significant contributors to nitrogen pollution.
Annalucia/Shutterstock.com

Ee Ling Ng, University of Melbourne; Deli Chen, University of Melbourne, and Xia Liang, University of Melbourne

Nitrogen pollution has significant environmental and human health costs. Yet it is often conflated with other environmental problems, such as climate change, which is exacerbated by nitrous oxide (N₂O) and nitrogen oxides (NOₓ), or particulate smog, to which ammonia (NH₃) also contributes.

One way to understand our nitrogen use is to look at our nitrogen footprint. This is the amount of reactive nitrogen, which is all forms of nitrogen other than inert nitrogen gas, released into the environment from our daily activities that consume resources including food and energy.




Read more:
Nitrogen pollution: the forgotten element of climate change


Our earlier research showed that Australia has a large nitrogen footprint. At up to 47kg of nitrogen per person each year, Australia is far ahead of the US (28kg per person), the second on the leaderboard of per capita reactive nitrogen emissions. Australians’ large nitrogen footprints are created largely by a diet rich in animal protein and high levels of coal use for energy.

The nitrogen footprint

Our new research, published in the Journal of Cleaner Production, takes this concept further by measuring the nitrogen footprint of an entire institution, in this case the University of Melbourne.

The institutional nitrogen footprint is the sum of individual activities at the workplace and institutional activities, such as powering laboratories and lecture theatres in the case of a university.

We calculated that the university’s annual nitrogen footprint is 139 tonnes of nitrogen. It is mainly attributable to three factors: food (37%), energy use (32%) and transport (28%).

The University of Melbourne’s nitrogen footprint in 2015 and projections for 2020.

At the university, food plays a dominant role through the meat and dairy consumed. Nitrogen emissions from food occur mainly during its production, whereas emissions from energy use come mainly from coal-powered electricity use and from fuel used during business travel.

Cutting nitrogen

We also modelled the steps that the university could take to reduce its nitrogen footprint. We found that it could be reduced by 60% by taking action to cut emissions from the three main contributing factors: food, energy use, and travel.

The good news is if the university implements all the changes to energy use detailed in its Sustainability Plan – which includes strategies such as adopting clean energy (solar and wind), optimising energy use and buying carbon credits – this would also reduce nitrogen pollution by as much as 29%.

Changing habits of air travel and food choices would be a challenge, as this requires altering the behaviour of people from a culture that places tremendous value on travelling and a love for coffee and meat.

Generally, Australians fly a lot compared to the rest of the world, at significant cost to the environment. We could offset the travel, and we do take that possibility into account, but as others have written before us, we should not make the mistake of assuming that emissions offsets make air travel “sustainable”.

The question that perhaps need to be asked, for work travel, is “to travel or not to travel?” Let’s face it, why are so many academic conferences set in idyllic locations, if not to entice us to attend?

Animal products are major contributors to nitrogen emissions, given the inefficiency of conversion from the feed to milk or meat. Would people be willing to change their latte, flat white or cappuccino to a long black, espresso or macchiato? Or a soy latte?




Read more:
Nitrogen from rock could fuel more plant growth around the world – but not enough to prevent climate change


As 96% of the nitrogen emissions occur outside the university’s boundaries, their detrimental effects are invisible to the person on the ground, while the burden of the pollution is often borne far away, both in time and space.

The ConversationBut, as our study shows for the first time, large institutions with lots of staff are well placed to take steps to cut their large nitrogen footprint.

Ee Ling Ng, Research fellow, University of Melbourne; Deli Chen, Professor, University of Melbourne, and Xia Liang, PhD candidate, University of Melbourne

This article was originally published on The Conversation. Read the original article.

New Zealand’s zero carbon bill: much ado about methane



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New Zealand is considering whether or not agricultural greenhouse gases should be considered as part of the country’s transition to a low-emission economy.
from http://www.shutterstock.com, CC BY-SA

Robert McLachlan, Massey University

New Zealand could become the first country in the world to put a price on greenhouse gas emissions from agriculture.

Leading up to the 2017 election, the now Prime Minister Jacinda Ardern famously described climate change as “my generation’s nuclear-free moment”. The promised zero carbon bill is now underway, but in an unusual move, many provisions been thrown open to the public in a consultation exercise led by Minister for Climate Change James Shaw.

More than 4,000 submissions have already been made, with a week still to go, and the crunch point is whether or not agriculture should be part of the country’s transition to a low-emission economy.




Read more:
New Zealand’s productivity commission charts course to low-emission future


Zero carbon options

Many of the 16 questions in the consultation document concern the proposed climate change commission and how far its powers should extend. But the most contentious question refers to the definition of what “zero carbon” actually means.

The government has set a net zero carbon target for 2050, but in the consultation it is asking people to pick one of three options:

  1. net zero carbon dioxide – reducing net carbon dioxide emissions to zero by 2050

  2. net zero long-lived gases and stabilised short-lived gases – carbon dioxide and nitrous oxide to net zero by 2050, while stabilising methane

  3. net zero emissions – net zero emissions across all greenhouse gases by 2050

The three main gases of concern are carbon dioxide (long-lived, and mostly produced by burning fossil fuels), nitrous oxide (also long-lived, and mostly produced by synthetic fertilisers and animal manures) and methane (short-lived, and mostly produced by burping cows and sheep). New Zealand’s emissions of these gases in 2016 were 34 million tonnes (Mt), 9Mt, and 34Mt of carbon dioxide equivalent (CO₂e), respectively.

All three options refer to “net” emissions, which means that emissions can be offset by land use changes, primarily carbon stored in trees. In option 1, only carbon dioxide is offset. In option 2, carbon dioxide and nitrous oxide are offset and methane is stabilised. In option 3, all greenhouses gases are offset.

Gathering support

Opposition leader Simon Bridges has declared his support for the establishment of a climate change commission. DairyNZ, an industry body, has appointed 15 dairy farmers as “climate change ambassadors” and has been running a nationwide series of workshops on the role of agricultural emissions.

Earlier this month, Ardern and the Farming Leaders Group (representing most large farming bodies) published a joint statement that the farming sector and the government are committed to working together to achieve net zero emissions from agri-food production by 2050. Not long after, the Climate Leaders Coalition, representing 60 large corporations, announced their support for strong action to reduce emissions and for the zero carbon bill.

However, the devil is in the detail. While option 2 involves stabilising methane emissions, for example, it does not specify at what level or how this would be determined. Former Green Party co-leader Jeanette Fitzsimons has argued that methane emissions need to be cut hard and fast, whereas farming groups would prefer to stabilise emissions at their present levels.




Read more:
Why methane should be treated differently compared to long-lived greenhouse gases


This would be a much less ambitious 2050 target than option 3, potentially leaving the full 34Mt of present methane emissions untouched. Under current international rules, this would amount to an overall reduction in emissions of about 50% on New Zealand’s 1990 levels and would likely be judged insufficient in terms of the Paris climate agreement. This may not be what people thought they were voting for in 2017.

Why we can’t ignore methane

To keep warming below 2℃ above pre-industrial global temperatures, CO₂ emissions will need to fall below zero (that is, into net removals) by the 2050s to 2070s, along with deep reductions of all other greenhouse gases. To stay close to 1.5℃, the more ambitious of the twin Paris goals, CO₂ emissions would need to reach net zero by the 2040s. If net removals cannot be achieved, global CO₂ emissions will need to reach zero sooner.

Therefore, global pressure to reduce agricultural emissions, especially from ruminants, is likely to increase. A recent study found that agriculture is responsible for 26% of human-caused greenhouse emissions, and that meat and dairy provide 18% of calories and 37% of protein, while producing 60% of agriculture’s greenhouse gases.

A new report by Massey University’s Ralph Sims for the UN Global Environment Facility concludes that currently, the global food supply system is not sustainable, and that present policies will not cut agricultural emissions sufficiently to limit global warming to 1.5℃ above pre-industrial levels.

Finding a way forward

Reducing agricultural emissions without reducing stock numbers significantly is difficult. Many options are being explored, from breeding low-emission animals and selecting low-emission feeds to housing animals off-pasture and methane inhibitors and vaccines.

But any of these will face a cost and it is unclear who should pay. Non-agricultural industries, including the fossil fuel sector, are already in New Zealand’s Emissions Trading Scheme (ETS) and would like agriculture to pay for emissions created on the farm. Agricultural industries argue that they should not pay until cost-effective mitigation options are available and their international competitors face a similar cost.

The government has come up with a compromise. Its coalition agreement states that if agriculture were to be included in the ETS, only 5% would enter into the scheme, initially. The amount of money involved here is small – NZ$40 million a year – in an industry with annual export earnings of NZ$20 billion. It would add about 0.17% to the price of whole milk powder and 0.5% to the wholesale price of beef.

The ConversationHowever, it would set an important precedent. New Zealand would become the first country in the world to put a price agricultural emissions. Many people hope that the zero carbon bill will represent a turning point. It may even inspire other countries to follow suit.

Robert McLachlan, Professor in Applied Mathematics, Massey University

This article was originally published on The Conversation. Read the original article.

Why our carbon emission policies don’t work on air travel



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The Gillard government’s carbon price had no effect on the aviation industry.
Shutterstock

Francis Markham, Australian National University; Arianne C. Reis, Western Sydney University; James Higham, and Martin Young, Southern Cross University

The federal government’s National Energy Guarantee aims to reduce greenhouse gas emissions in the electricity industry by 26% of 2005 levels. But for Australia to meet its Paris climate change commitments, this 26% reduction will need to be replicated economy-wide.

In sectors such as aviation this is going to be very costly, if not impossible. Our modelling of the carbon price introduced by the Gillard government shows it had no detectable effect on kilometres flown and hence carbon emitted, despite being levied at A$23-$24 per tonne.

If Australia is to meet its Paris climate commitments, the National Energy Guarantee target will need to be raised or radical measures will be required, such as putting a hard cap on emissions in sectors such as aviation.




Read more:
Obituary: Australia’s carbon price


Our analysis of domestic aviation found no correlation between the Gillard government’s carbon price and domestic air travel, even when adjusting statistically for other factors that influence the amount Australians fly.

This is despite the carbon price being very effective at reducing emissions in the energy sector.

To reduce aviation emissions, a carbon price must either make flying less carbon intensive, or make people fly less.

In theory, a carbon tax should improve carbon efficiency by increasing the costs of polluting technologies and systems, relative to less polluting alternatives. If this is not possible, a carbon price might reduce emissions by making air travel more expensive, thereby encouraging people to either travel less or use alternative modes of transport.

Why the carbon price failed to reduce domestic aviation

The cost of air travel has fallen dramatically over the last 25 years. As the chart below shows, economy air fares in Australia in 2018 are just 55% of the average cost in 1992 (after adjusting for inflation).

Given this dramatic reduction in fares, many consumers would not have noticed a small increase in prices due to the carbon tax. Qantas, for example, increased domestic fares by between A$1.82 and A$6.86.

The carbon price may have just been too small to reduce consumer demand – even when passed on to consumers in full.

Consumer demand may have actually been increased by the Clean Energy Future policy, which included household compensation.




Read more:
Carbon pricing is still the best way to cut emissions, if we get it right


https://datawrapper.dwcdn.net/CJiPw/2/

The cost of jet fuel, which accounts for between 30 and 40% of total airline expenses, has fluctuated dramatically over the last decade.

As the chart below shows, oil were around USD$80-$100 per barrel during the period of the carbon price, but had fallen to around USD$50 per barrel just a year later.

Airlines manage these large fluctuations by absorbing the cost or passing them on through levies. Fare segmentation and dynamic pricing also make ticket prices difficult to predict and understand.

Compared to the volatility in the cost of fuel, the carbon price was negligible.

https://datawrapper.dwcdn.net/QssWQ/1/

The carbon price was also unlikely to have been fully passed through to consumers as Virgin and Qantas were engaged in heavy competition at the time, also known as the “capacity wars”.

This saw airlines running flights at well below profitable passenger loads in order to gain market share. It also meant the airlines stopped passing on the carbon price to customers.




Read more:
The Paris climate agreement needs coordinated carbon prices to be successful


A carbon price could incentivise airlines to reduce emissions by improving their management systems or changing plane technology. But such an incentive already existed in 2012-2014, in the form of high fuel prices.

A carbon price would only provide an additional incentive over and above high fuel prices if there is an alternative, non-taxed form of energy to switch to. This is the case for electricity generators, who can switch to solar or wind power.

But more efficient aeroplane materials, engines and biofuels are more myth than reality.

What would meeting Australia’s Paris commitment require?

Given the failure of the carbon price to reduce domestic air travel, there are two possibilities to reduce aviation emissions by 26% on 2005 levels.

The first is to insist on reducing emissions across all industry sectors. In the case of aviation, the modest A$23-$24 per tonne carbon price did not work.

Hard caps on emissions will be needed. Given the difficulty of technological change, this will require that people fly less.

The second option is to put off reducing aviation emissions and take advantage of more viable sources of emissions reduction elsewhere.

By increasing the National Energy Guarantee target to well above 26%, the emission reductions in the energy sector could offset a lack of progress in aviation. This is the most economically efficient way to reduce economy-wide emissions, but does little to reduce carbon pollution from aviation specifically.

The ConversationAirline emissions are likely to remain a difficult problem, but one that needs to be tackled if we’re to stay within habitable climate limits.

Francis Markham, Research Fellow, College of Arts and Social Sciences, Australian National University; Arianne C. Reis, Senior lecturer, Western Sydney University; James Higham, Professor of Tourism, and Martin Young, Associate Professor, School of Business and Tourism, Southern Cross University

This article was originally published on The Conversation. Read the original article.

Why methane should be treated differently compared to long-lived greenhouse gases



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Livestock is a significant source of methane, a potent but short-lived greenhouse gas.
from http://www.shutterstock.com, CC BY-SA

Dave Frame, Victoria University of Wellington; Adrian Henry Macey, Victoria University of Wellington, and Myles Allen, University of Oxford

New research provides a way out of a longstanding quandary in climate policy: how best to account for the warming effects of greenhouse gases that have different atmospheric lifetimes.

Carbon dioxide is a long-lived greenhouse gas, whereas methane is comparatively short-lived. Long-lived “stock pollutants” remain in the atmosphere for centuries, increasing in concentration as long as their emissions continue and causing more and more warming. Short-lived “flow pollutants” disappear much more rapidly. As long as their emissions remain constant, their concentration and warming effect remain roughly constant as well.

Our research demonstrates a better way to reflect how different greenhouse gases affect global temperatures over time.

Cost of pollution

The difference between stock and flow pollutants is shown in the figure below. Flow pollutant emissions, for example of methane, do not persist. Emissions in period one, and the same emissions in period two, lead to a constant (or roughly constant) amount of the pollutant in the atmosphere (or river, lake, or sea).

With stock pollutants, such as carbon dioxide, concentrations of the pollutant accumulate as emissions continue.

Flow and stock pollutants over time. In the first period, one unit of each pollutant is emitted, leading to one unit of concentration. After each period, the flow pollutant decays, while the stock pollutant remains in the environment.
provided by author, CC BY

The economic theory of pollution suggests different approaches to greenhouse gases with long or short lifetimes in the atmosphere. The social cost (the cost society ought to pay) of flow pollution is constant over time, because the next unit of pollution is just replacing the last, recently decayed unit. This justifies a constant price on flow pollutants.

In the case of stock pollutants, the social cost increases with constant emissions as concentrations of the pollutant rise, and as damages rise, too. This justifies a rising price on stock pollutants.




Read more:
Cows exude lots of methane, but taxing beef won’t cut emissions


A brief history of greenhouse gas “equivalence”

In climate policy, we routinely encounter the idea of “CO₂-equivalence” between different sorts of gases, and many people treat it as accepted and unproblematic. Yet researchers have debated for decades about the adequacy of this approach. To summarise a long train of scientific papers and opinion pieces, there is no perfect or universal way to compare the effects of greenhouse gases with very different lifetimes.

This point was made in the first major climate report produced by the Intergovernmental Panel on Climate Change (IPCC) way back in 1990. Those early discussions were loaded with caveats: global warming potentials (GWP), which underpin the traditional practice of CO₂-equivalence, were introduced as “a simple approach … to illustrate the difficulties inherent in the concept”.

The problem with developing a concept is that people might use it. Worse, they might use it and ignore all the caveats that attended its development. This is, more or less, what happened with GWPs as used to create CO₂-equivalence.

The science caveats were there, and suggestions for alternatives or improvements have continued to appear in the literature. But policymakers needed something (or thought they did), and the international climate negotiations community grasped the first option that became available, although this has not been without challenges from some countries.

Better ways to compare stocks and flows

An explanation of the scientific issues, and how we address them, is contained in this article by Michelle Cain. The approach in our new paper shows that modifying the use of GWP to better account for the differences between short- and long-lived gases can better link emissions to warming.

Under current policies, stock and flow pollutants are treated as being equivalent and therefore interchangeable. This is a mistake, because if people make trade-offs between emissions reductions such that they allow stock pollutants to grow while reducing flow pollutants, they will ultimately leave a warmer world behind in the long term. Instead, we should develop policies that address methane and other flow pollutants in line with their effects.

Then the true impact of an emission on warming can be easily assessed. For countries with high methane emissions, for example from agriculture, this can make a huge difference to how their emissions are judged.

For a lot of countries, this issue is of secondary importance. But for some countries, particularly poor ones, it matters a lot. Countries with a relatively high share of methane in their emissions portfolios tend to be either middle-income countries with large agriculture sectors and high levels of renewables in their electricity mix (such as much of Latin America), or less developed countries where agricultural emissions dominate because their energy sector is small.

This is why we think the new research has some promise. We think we have a better way to conceive of multi-gas climate targets. This chimes with new possibilities in climate policy, because under the Paris Agreement countries are free to innovate in how they approach climate policy.

Improving the environmental integrity of climate policy

This could take several forms. For some countries, it may be that the new approach provides a better way of comparing different gases within a single-basket approach to greenhouse gases, as in an emissions trading scheme or taxation system. For others, it could be used to set separate but coherent emissions targets for long- and short-lived gases within a two-basket approach to climate policy. Either way, the new approach means countries can signal the centrality of carbon dioxide reductions in their policy mix, while limiting the warming effect of shorter-lived gases.

The new way of using global warming potentials demonstrably outperforms the traditional method in a range of emission scenarios, providing a much more accurate indication of how stock and flow pollutants affect global temperatures. This is especially so under climate mitigation scenarios.

Well designed policies would assist sectoral fairness within countries, too. Policies that reflect the different roles of stock and flow pollutants would give farmers and rice growers a more reasonable way to control their emissions and reduce their impact on the environment, while still acknowledging the primacy of carbon dioxide emissions in the climate change problem.

The ConversationAn ideal approach would be a policy that aimed for zero emissions of stock pollutants such as carbon dioxide and low but stable (or gently declining) emissions of flow pollutants such as methane. Achieving both goals would mean that a farm, or potentially a country, can do a better, clearer job of stopping its contribution to warming.

Dave Frame, Professor of Climate Change, Victoria University of Wellington; Adrian Henry Macey, Senior Associate, Institute for Governance and Policy Studies; Adjunct Professor, New Zealand Climate Change Research Institute. , Victoria University of Wellington, and Myles Allen, Professor of Geosystem Science, Leader of ECI Climate Research Programme, University of Oxford

This article was originally published on The Conversation. Read the original article.