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Directions to 2050Directions to 2050A New International FrameworkA New International Framework
The scale of the challenge The scale of the challenge
Post Copenhagen ArchitecturePost Copenhagen Architecture
Sector based agreements Sector based agreements
Enabling large scale action Enabling large scale action
A global COA global CO22 market market
David HoneGroup Climate Change AdviserShell International B.V.
2
A new direction
is needed
The way we produce and use energy today is not sustainable
3
Very demanding reductions are called for
Effective action requires:
• Global emissions to fall by at least 50% relative to 1990 by 2050;
• Global average per capita emissions that will – as a matter of basic arithmetic – need to be around 2 tonnes (T) by 2050 (20 GT divided by 9 billion people): this figure is so low that there is little scope for any large group to depart significantly above or below it;
• Agreement by developed countries to take on immediate and binding national targets of 20% to 40% by 2020, and to commit to reductions of at least 80% by 2050;
Key Elements of a Global Deal
Nicholas Stern
4
The implications are clear
0
2
4
6
8
10
12
14
16
18
20W
orld
OE
CD
no
n-O
EC
D
US
A
Jap
an
EU
-27
Afr
ica
Mid
dle
Ea
st
Ru
ssia
La
tin A
me
rica
Asi
a
Ch
ina
Ind
ia
20
50
"ta
rge
t"
Em
iss
ion
s, t
on
ne
s C
O2
pe
r p
ers
on
5
Key Levers in the Economy
CO2 emissions = people GDP energy CO2
person unit GDP unit energy
Only four factors govern the outcome, being:
• Population Number of people
• Standard of Living GDP per person
• Energy Intensity Energy per unit of GDP (efficiency of the economy)
• Carbon Intensity CO2 per unit of energy (reflects the energy source)
x x xX X
6
Pathways to 2050
0
50
100
150
200
250
300
350
400
450
$0 $20,000 $40,000 $60,000
GDP per capita, US$ 2000 (ppp)
En
erg
y p
er
ca
pit
a,
GJ
Improving energy efficiency
2025
2050
Falling CO2 emissions per unit of energy
2008
Wealthy developedDevelopedLeading developingDeveloping
7
The prospect of emission targets looms
0
50
100
150
200
250
300
350
$0 $10,000 $20,000 $30,000 $40,000
GDP per Capita, US$ ppp (2000)
En
erg
y p
er C
ap
ita
, GJ
Finland
Romania
“Developed” countries with Kyoto Targets
“Developed” countries with Kyoto Targets
KoreaTaiwan
Singapore
China Thailand
Malaysia
Rapidly emerging economies in AsiaRapidly emerging economies in Asia
8
Two pathways to consider
No target under the Kyoto ProtocolOpportunity to respond to the
market through the Clean Development Mechanism
National action agreementsNational policies and measures
Sectoral agreementsFunding via market mechanismsUse of clean-technology funds
Direct recruitment to cadre of nations with
targets
National emission target
2013 - 2020
2013 - 2020
2018 - 20302008 - 2012
9
Abatement
GtCO2e per year in 2030
B CA
Large scale abatement within the electricity sector.
Some land restoration.
Energy efficiency measures, land use practices, avoided
deforestation.
Higher cost technologies still moving down the
cost curve
The global abatement curveCost of abatement
€/tCO2e
10
The anatomy of a dealCost of abatement
€/tCO2e
Abatement
GtCO2e per year in 2030
B C
Targeted systems for agriculture and deforestation D
A
Developed
Developing
Less Developed
Absolute targets
National policies and measures:SD-PAMs, NAMAs, without access to international project mechanisms.
Large scale action in the electricity (and transport) sector driven by international project mechanisms and clean tech funds.
Large scale action through cap-and-trade, transport measures (vehicle efficiency, low carbon fuels etc.) and building regulations
Support for Demonstration programmes
globally
Smaller scale clean development projects utilising the CDM
11
Important for the CDM to Evolve
CDM / JI (Kyoto 2008-2012)• Small / Moderate scale• Development “dividend”• SD criteria• Additionality• Exhaustive project by project process
Cost of abatement€/tCO2e
AbatementGtCO2e per year in 2030
Clean Development Mechanism• Existing CDM rolls forward• Smaller scale than CTM• Development agenda• Focus on less developed economies
Clean Technology Mechanism• Focussed on the higher end of the
abatement curve• Principally clean electricity• Recognises CCS• Drives sector-based approach
Clean Technology Mechanism• Focussed on the higher end of the
abatement curve• Principally clean electricity• Recognises CCS• Drives sector-based approach
12
Possible Post-Copenhagen Architecture
Long term goal
Absolute targets
Policies & Measures
Mea
sura
ble R
eportable
Verifiable
Clean
Tec
h
Fun
dsSupporting
Mechanism
s
Adaptation
Funding
Carb
on M
arke
t
Infra
stru
ctur
e
13
Clean
Tec
h
Fun
dsSupporting
Mechanism
s
Adaptation
Funding
Carb
on M
arke
t
Infra
stru
ctur
e
Possible Post-Copenhagen Architecture
Long term goal
Absolute targets
Policies & Measures
Mea
sura
ble R
eportable
Verifiable
Secto
r base
dag
reem
en
tsS
ect
or
base
dagre
em
en
tsShifting the balance towards
absolute targets through large scale packages of activity
Shifting the balance towards absolute targets through large
scale packages of activity
14
Design of a sector based “satellite” agreement
Sector BasedAgreements
- Large scale preparatory step towards absolute targets
- Clear purpose and end-point
- Built on the foundation elements
- Negotiated separately (by a limited number of parties) as “satellites” to
the main agreement
- Typically focussed on a sector
- Technology capacity building, funding and financing
- Best practice capacity building
15
Emissions Mitigation Pathways
Only four pathways forward:
• Energy efficiency
• Renewables
• Nuclear
• Fossil fuels with Carbon Capture and Storage (CCS)
All four are essential and will be needed at scale:
• To meet energy demands this century
• To limit CO2 emissions into the atmosphere
CCS is a key focus area in Shell:
• A family of technologies all in use today
• Large scale end-to-end demonstration needs to happen
• Deployment need not be a distant dream
16
Funding flow Funding flow
A “sector based” agreement that focuses on coal use in the power sector
First large scale CCS demo projects (e.g. China)
CCS Certs.CCS Certs.
CCS Standard emerges in some countries
Emissions trading adopted in many
developing country power sectors
Initial CCS roll-out in
developing countries
Initial CCS infrastructure funded directly
• EU-ETS• US-ETS
Clean technology funding framework emerges globally
CCS Project Mechanism &
certification processes
finalised
$ £ ¥ €
2009 2010-2015 2020 2025+
17
Supporting CCS in the international framework
Key elements that need to be present in the near term:
• CCS recognised within the UNFCCC Clean Development Mechanism (CDM) or within a new post 2012 mechanism;
• International CCS certification, that delivers a (tradable) certificate for one tonne of CO2 stored underground and
supports the CDM;
• A funding framework for the demonstration phase of CCS,
consisting of -
• Recognition of CCS within existing and new clean technology funds (e.g. the fund recently proposed by the G8);
• Recognition of extra-national CCS demonstration projects within national and regional funding arrangements.
18
Positioning CCS in the evolution of the CDM
CDM / JI (Kyoto 2008-2012)• Small / Moderate scale• Development “dividend”• SD criteria• Additionality• Exhaustive project by project process
Cost of abatement€/tCO2e
AbatementGtCO2e per year in 2030
CO2 Storage Certificate• Recognises CCS globally• Certifies tonnes sequestered• Standardised rules• Potentially tradable
CO2 Storage Certificate• Recognises CCS globally• Certifies tonnes sequestered• Standardised rules• Potentially tradable
Clean Development Mechanism• Existing CDM rolls forward• Smaller scale than CTM• Development agenda• Focus on less developed economies
Clean Technology Mechanism• Focussed on the higher end of the
abatement curve• Principally clean electricity• Recognises CCS• Drives sector-based approach
Clean Technology Mechanism• Focussed on the higher end of the
abatement curve• Principally clean electricity• Recognises CCS• Drives sector-based approach
19
A Global Carbon Market must evolve
Linkages develop between all systems and more systems appear
2000 2005 2010 2015 2020 2025
Danish-ETS
UK-ETSAustralian ETS
US National or North American “cap-and-trade”
Norwegian ETS
EU-ETS
CDM
CDM evolves to include clean electricity mechanism
Pre-Kyoto Kyoto Post 2012
Expanding EU-ETS
Japan technology standards
Linkage framework
New technology mechanisms evolve (e.g. for CCS)
China adopts CCS standard
New Zealand ETS
http://blogs.shell.com/climatechange