Climate change and EU policy -

why has so little been achieved?why has so little been achieved?

Bruegel Energy and Climate Exchange

October 4th 2012

Professor Dieter Helm

Author of The Carbon Crunch: How we are getting climate change wrong and how to fix it. Yale University Press, 2012

The Questions

• What are the causes of global warming?

– Facing up to some inconvenient facts

Why has so little been achieved?• Why has so little been achieved?

– Recognising current failures

• How do we make progress?

– Delivering effective climate mitigation

Professor Dieter Helm4th October 2012 2

370

380

390

400

An ever-upward path

Atmospheric CO2 (ppm)

330

340

350

360

370

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: US Department of Commerce National Oceanic & Atmospheric Administration (NOAA)Professor Dieter Helm4th October 2012 3

What causes global warming?

• The role of coal

• China

• Population growth

• Carbon consumption, not production• Carbon consumption, not production

What is likely to happen before 2020?

Professor Dieter Helm4th October 2012 4

Historical coal burn vs atmospheric CO2 (mt

& ppm)

380

390

400

4000

5000

6000

Atm

osp

he

ric

CO

2 (

pp

m)

Co

al

con

sum

pti

on

(m

illi

on

to

nn

es

of

coa

l e

qu

iva

len

t)

Professor Dieter Helm

330

340

350

360

370

0

1000

2000

3000

Atm

osp

he

ric

CO

2 (

pp

m)

Co

al

con

sum

pti

on

(m

illi

on

to

nn

es

of

coa

l e

qu

iva

len

t)

Coal consumption Atmospheric CO2

Source: US Department of Commerce National Oceanic

& Atmospheric Administration (NOAA), BP statistical

review of world energy 20114th October 2012 5

World coal demand scenarios to 2035 (mt)

6000

7000

8000

9000

Mil

lio

n t

on

ne

s

Professor Dieter Helm

0

1000

2000

3000

4000

5000

1980 2009 2020 2035

Mil

lio

n t

on

ne

s

New policies

Current policies

450 scenario

Source: OECD/IEA World Energy Outlook 20114th October 2012 6

Population growth – the projections

Professor Dieter Helm

Source: United

Nations 4th October 2012 7

What is likely to happen before 2020?

By 2020:

• China X 2 GDP

• India X 2 GDP

• 400 – 600 GWs new coal (if 12th 5 year plan

implemented in China)

• No further action following Durban

Professor Dieter Helm4th October 2012 8

Why has so little been achieved?

• Kyoto is production-based

• Europe has been de-industrialising

• Current renewables are expensive and • Current renewables are expensive and

contribute little

• Nuclear is reducing across Europe

(especially in UK and Germany) + being

replaced by coal in Germany

Professor Dieter Helm4th October 2012 9

EU Climate Change Package

• 2020 – 20 – 20 It all adds up to 20!!!!

• World leadership – offering 30% at

Copenhagen

And then….And then….

• Nuclear exit

• More coal

• 2050 Roadmap and 2030 targets

Professor Dieter Helm4th October 2012 10

Europe: an unviable position

Competitiveness

Consumption

of carbonCosts

• Current renewables cannot make much difference to global climate change–

land & shallow sea areas just not big enough

• Energy efficiency – good idea but does not necessarily reduce energy demand

Professor Dieter Helm4th October 2012 11

How do we make progress?

• Carbon pricing

• Carbon consumption and border

adjustments

• Coal � gas substitution• Coal � gas substitution

And then….

• Enormous scope for new technologies –

future renewables

Professor Dieter Helm4th October 2012 12

Carbon taxes v. EU ETS

20

25

30

35

Carb

on price

EU

R

A carbon tax

alternative

0

5

10

15

Carb

on price

EU

R

Source: Bloomberg

EU ETS futures prices

Professor Dieter Helm4th October 2012 13

Coal � gas for the transition

Fossil fuel emissions

800

1000

0

200

400

600

Coal (average) Fuel oil Natural gas

Approximate CO2 emissions: grammes of CO2 per KwH of electricity generated

Source: International Energy Agency "CO2 emissions from fuel combustion highlights 2011"

Professor Dieter Helm4th October 2012 14

The new technologies – future

renewables, active grids and more…

• Next generation solar

• Smart Meters

• Storage and batteries• Storage and batteries

• Electrification of transport

• Biotechnologies

• Nuclear: PRISM, Fast-breeders

Professor Dieter Helm4th October 2012 15

Conclusions

• European leadership has failed

• 2020 – 20 – 20 has probably made matters worse

• Durban will probably lead to 450ppm ++• Durban will probably lead to 450ppm ++

EITHER:

• Change tack now

• Admit defeat

Professor Dieter Helm4th October 2012 16

Professor Dieter Helm4th October 2012 17

www.dieterhelm.co.uk

• European Energy Policy, in: The Oxford Handbook of the European Union

Edited by E Jones, A Menon, and S Weatherill, OUP, August 2012.

• The UK’s new dash for gas, Prospect, 20th September 2012.

• Trade, climate change and the political game theory of border carbon

adjustments, with Cameron Hepburn and Giovanni Ruta, May 2012,

Grantham Research Institute on Climate Change and the Environment, Grantham Research Institute on Climate Change and the Environment,

Working Paper No. 80.

• Surprise – the oil price isn’t higher, Prospect, April 2012.

• The sustainable borders of the state, Oxford Review of Economic Policy,

Volume 27 no 4, winter 2012.

• What next for EU energy policy?, in Green, safe, cheap: Where next for EU

energy policy? edited by Katinka Barysch, Centre for European Reform, 2011.

• The Economics and Politics of Climate Change, Helm, D. R. and Hepburn, C.

(eds), (new edition 2011), Oxford University Press.

Professor Dieter Helm4th October 2012 18