Energy & Technology
PREPARED REMARKS BY ELLIOT DIRINGER
EXECUTIVE VICE PRESIDENT, CENTER FOR CLIMATE AND ENERGY SOLUTIONS
THE PARIS CLIMATE AGREEMENT: A TURNING POINT FOR THE OIL AND GAS INDUSTRY?
JUNE 6, 2016
Thank you, Martin, for the kind introduction. And my thanks to APPEA for inviting me to be with you here this morning.
I appreciate the opportunity to share some views on the landmark Paris Agreement, and on its implications not only for the future of natural gas, but for the future of the oil and gas industry as a whole.
I’d like to touch on five areas:
- First, the logic, and the most pertinent aspects, of the Paris Agreement;
- Second, what the agreement’s long-term goals imply for future energy use;
- Third, how the Paris Agreement is intensifying social and political pressures on the fossil fuel industry;
- Fourth, how I see the industry responding; and
- Finally, some thoughts from an interested observer on how the industry can work to ensure a more sustainable path for itself, and for the planet.
First, though, I’d like to tell you who we are. C2ES is a US-based NGO working to advance practical and effective climate policies in the United States and internationally.
We’re an independent organization, but we work closely with major companies committed to addressing climate change.
Our Business Environmental Leadership Council includes 30 companies, most in the Fortune 500. They span the major sectors of the economy, and include large energy producers and consumers, including three members of APPEA – BHP Billiton, BP and Shell.
In addition to our work with companies, C2ES undertakes in-depth policy analysis, and we facilitate dialogue among diverse stakeholders. One recent example is the role we played behind the scenes convening informal discussions among governments leading up to the Paris conference last December.
Over 15 months, we brought together senior negotiators from two dozen countries – Including Australia – for eight very candid, very in-depth sessions debating the key issues and the best options. The report we drew from these discussions and released last July laid out the essential landing zones for the agreement that was concluded five months later in Paris.
From our perspective, it’s a good agreement, one with the potential to be truly transformative. The Paris Agreement draws lessons from the past 20 years of climate diplomacy to establish a more pragmatic and more inclusive framework for global action.
It’s what we describe as a hybrid agreement; it combines bottom-up and top-down features to strike the right balance between national flexibility, to achieve broad participation, and international rigor, to ensure accountability and to promote rising ambition.
The strong, high-level political momentum that produced the Paris Agreement is continuing.
- More than 170 countries signed the agreement when it was formally opened for signature in April in New York.
- The United States and China have said they will soon go the next step and complete their domestic approval procedures.
- And there are strong signs the agreement will formally come into force as early as this year, but more likely next – much earlier than had been anticipated.
So what, specifically, does the agreement require?
- It commits all parties to make national contributions, backed up by domestic mitigation measures;
- It commits them to regularly report on their emissions and on their progress in implementing their contributions;
- And it commits them to update their contributions every five years.
These contributions are nationally determined – every country decides for itself what it will do – and they are not legally binding. But the binding procedural commitments – to regularly report, and to periodically update your contribution – will provide stronger accountability, and should work to promote rising ambition.
Rising ambition toward what? The agreement sets a number of long-term goals. It sets a temperature goal: keeping warming well below 2 degrees Celsius, and striving to limit it to 1.5. And it sets two emissions-related goals: first, to peak global greenhouse gas emissions as soon as possible; and second, to achieve net zero emissions in the second half of the century.
I’ll repeat that: net zero emissions in the second half of the century.
Of course, the agreement itself can’t ensure that these goals are met. But it establishes mechanisms that will periodically call the question; that will periodically require us to consider – both in capitals and at the global level – whether our near-term actions are in line with these long-term objectives.
So what do these long-term goals imply for the future of fossil fuels?
First, they quite clearly suggest that we need to shift as rapidly as possible to lower-carbon sources of energy – which leads me, of course, to the promise of natural gas.
In the United States, we know firsthand the important role that affordable natural gas can play in reducing emissions.
- By our calculation, more than half the cut in carbon emissions from the U.S. power sector achieved over the past decade came from the substitution of natural gas for coal.
- Natural gas has risen from 19 to 33 percent of our generation mix.
- Going forward, we anticipate bigger increases in natural gas use as the U.S. works to further reduce power sector emissions.
How representative is the U.S. experience? Is it an isolated example? Or is it replicable in other major regions of the world?
The answers depend heavily on local and regional circumstances. But one thing seems clear: the case for natural gas as a bridge fuel really only holds if its increased use is accompanied by a corresponding decline in the use of higher-carbon fuels.
The International Energy Agency forecasts that, under a business-as-usual scenario, natural gas will be the fastest growing fossil fuel through 2040, with global consumption increasing by 70 percent. But the IEA also forecasts that coal use will continue to rise as well.
Here’s another thing that seems clear: The climate benefits of natural gas can be realized only if we do a much better job reducing flaring and reducing methane leakage throughout the natural gas value chain.
I know that estimates of leakage vary widely. But whatever the real levels, they are too high. And there are cost-effective measures available to bring them down. What’s standing in the way?
And here’s one more thing that seems clear: Let’s say we can ensure that rising natural gas use substitutes for, rather than supplements, coal use. And let’s say we do a fabulous job reducing flaring and leaks. That’s still not enough.
Remember, the goal is net zero emissions in the second half of the century. Natural gas is a lower-carbon fuel. It’s not a no-carbon fuel.
So if we envision producing and burning growing quantities of natural gas, we need ways to keep the resulting carbon emissions from reaching the atmosphere. Which leads me to the role of carbon capture utilization and storage – CCUS.
The IEA calculates that nearly 15 percent of the emission reduction needed by 2050 to put us on a 2-degree pathway must come from CCS.
Billions have been invested in CCS and we’re making some headway. I understand that here in Australia, the Gorgon CO2 Injection Project – which is expected to be the largest CO2 storage project in the world – is projected to come on line next year. That will be a critical milestone.
We also need to be thinking about the “U” in CCUS – utilization. Just recently we’ve heard promising developments on that front.
The Ford Motor Company announced a project to capture carbon from its manufacturing emissions. They’re going to use that carbon to make the foam put in auto seats and interiors.
And last month, Exxon Mobil announced it’s expanding its partnership with FuelCell Energy. They’re working on a technology that can capture CO2 from coal and natural gas plants and use it to power fuel cells.
Breakthroughs like that are exactly what we need if we’re ever going to come close to achieving carbon neutrality.
I‘ve talked about some of the technological challenges your industry faces in navigating its way into a low-carbon future. I want to turn now to some of the social and political challenges you face coming out of Paris.
It’s no news to you that the fossil fuel industry faces growing opposition on many fronts. I understand that last month in Newcastle, 2,000 activists managed to shut down the world’s largest coal port for a day, one of 20 coordinated actions against fossil fuel installations on six different continents.
For a large and growing activist community, the Paris Agreement sounded the death knell for the fossil fuel industry.
These activists are committed to pulling every lever they can, under the agreement or elsewhere, to realize their vision of a fossil-free future. And they don’t necessarily distinguish among fossil fuels – for them, the potential carbon benefits of natural gas are outweighed by other perceived risks.
This is not a ragtag band of protestors. It’s an increasingly sophisticated movement, with significant resources, that is getting attention on Wall Street and among policymakers.
Companies are under growing pressure to disclose – indeed, in the U.S., some are under investigation for alleged failure to disclose – and investors are under growing pressure to divest.
- The governor of the Bank of England, Mark Carney, drew a fair bit of notice a few months back when he warned of rising financial risks related to climate change.
- Just a couple of weeks ago, at the Exxon and Chevron shareholder meetings, resolutions calling on the companies to conduct climate-related stress tests were only narrowly voted down.
- Later this year, we’ll hear recommendations on the disclosure of climate-related financial risks from a Financial Stability Board task force chaired by Mike Bloomberg.
A recent headline in the Huffington Post showed how the issue is being portrayed to the public. Here’s how it read: “Climate Change Poses A Big Risk To Your Retirement Savings.”
Alongside the article, I noticed a link to an online petition. The message? “Tell world governments: Keep 80 percent of fossil fuels in the ground.”
My message is that these pressures will not fade away. More likely, they will continue to grow.
So, how, so far, is the industry responding? From where I sit, it’s a mixed picture.
On the one hand, I see companies investing in alternative technologies that could help them diversify.
- I mentioned Exxon’s investment in a novel fuel cell technology.
- It’s been reported that Shell is creating a separate division focused on low-carbon power.
- Total is spending a billion dollars to acquire an advanced battery manufacturer.
- Statoil is developing a utility-scale battery system to go with its offshore wind farms.
I also see some companies – some CEOs, even – signing on to statements in support of policies such as carbon pricing. At the same time – while these are exactly the kinds of investments we need – they represent a tiny fraction of these companies’ assets.?
I hear policymakers saying that when it comes down to brass tacks, and they put specific policy proposals on the table, industry support is nowhere to be found. And I hear some companies arguing that the Paris Agreement is a lot of wishful thinking; that governments won’t follow through; and that climate change poses no real risk to their business models.
So does the Paris agreement represent a turning point for the oil and gas industry? For the moment, at least, it seems to depend who you ask.
My organization is about building common ground, because we believe that’s the only way to make real progress. We worry when we see signs that the demonizing tactics of one side lead the other side to simply dig in. No one’s going to win that way.
We know there’s no solution to climate change without business. But we believe real and lasting solutions are possible only if business shows leadership, rather than fobbing the responsibility off entirely on governments. Governments, on the whole, are showing greater resolve than ever on climate change. But who are we kidding? They can’t possibly do it on their own.
There’s probably no convincing the zealots that the oil and gas industry has a legitimate role in a carbon-constrained future.
But it seems to me you need to do a better job convincing the many others who are not zealots, but who are increasingly, and quite reasonably, concerned about the genuine risks posed by climate change.
I’m not a business analyst. I can’t advise companies on how to best serve the interests of their shareholders. But in the interest of achieving consensus solutions, and avoiding prolonged gridlock, I would offer three suggestions:
First, I would urge the industry to rapidly scale up investment in low-carbon energy; in carbon capture, utilization and storage; and in other viable means of sequestering carbon.
Second, I would urge the industry to chart, and to clearly articulate, a long-term vision for itself that is compatible with climate protection.
And third, I would urge companies to come to the table, roll up their sleeves, and work with policymakers and other stakeholders to enact and implement the policies we need to facilitate a smooth low-carbon transition.
To sum up, the Paris Agreement marks a critical turn in the global climate effort. It sets ambitious goals, and it guarantees a succession of highly visible political moments when our efforts will continually be held up against those goals.
And this puts the oil and gas industry at a crossroads.
Yes, natural gas can be part of the solution. But the broader question is whether the industry will cling as long as possible to its established business model; or whether it will choose to reinvent itself – to work with others to deliver the policies, the technologies, and the investment needed to ensure a more sustainable path for itself, and for the planet.
To me, at least, the choice is clear.
Again, I appreciate the opportunity to share these views. And I thank you for listening.
What if you held a sale and customers bought hardly any of your product? You might conclude that your product wasn’t very popular. If your product happened to be carbon allowances, essentially permission slips to emit carbon pollution, that lack of popularity sounds like a good thing for the climate.
This is essentially what happened last week when California and Quebec, who have joined their carbon markets, announced the results of their most recent auction of allowances. Companies who must buy allowances decided they didn’t need the full amount being offered, presumably because their emissions are declining.
California and Québec began their carbon markets in 2013, and the partners have held joint auctions of allowances every three months since November 2014. Each jurisdiction sets a limit on nearly all fossil fuel combustion at an amount that declines each year (the cap). Businesses responsible for that fossil fuel combustion have to buy allowances at auction to cover their emissions.
Historically, businesses have bought more than 90 percent of the allowances offered. But at the most recent auction, only about 10 percent of the allowances were sold.
This is great news. It means that carbon emissions are going down, and at a faster rate than the policy requires. If emissions were going up, prices at auction would be high. If emissions were going down at the same rate as the cap, then prices might be low but the auction would still sell out.
Market forces, like declining costs of renewable power, are part of the reason why emissions are declining. Businesses can use cost-effective alternatives to fossil fuels in their operations.
Also factoring into the results are the numerous other policies California and Québec have in place to drive down emissions, including ones aimed at increasing energy efficiency. That means businesses use less energy overall.
Is there any reason this might be considered bad news? Well, if you were counting on the money from the sale, it’s a problem.
California has anticipated generating billions in revenue through 2020 from the allowance auctions. But with few allowances sold, that state revenue source drops dramatically. California’s auction revenue is directed to various clean energy programs across the state, which means those programs could be in jeopardy if auction sales remain low.
So, is this an example of cap-and-trade working or not working? I would argue this is how cap-and-trade is supposed to work. The government sets a cap based upon its climate goals, the cap creates a price in the market, and companies incorporate the carbon price into their business decisions. If emissions are low (more accurately, if they are lower than the cap), then businesses don’t buy carbon allowances, pure and simple. Both California and Québec agreed upon rules for handling unsold allowances before their programs started, so businesses know what to expect.
A larger and more difficult question is whether this is an example of carbon pricing working. In both jurisdictions, the cap-and-trade program is only one of many policies aimed at reducing emissions. It’s unclear at the moment to what extent the carbon price is driving down emissions (and allowance demand) versus other policies. A sophisticated statistical analysis is required to answer that question, and as the cap-and-trade program continues there will be observations to enable just such an analysis.
There is often a heated debate around implementing new policies, and it is not unusual to hear predictions that regulating carbon emissions will cause economic doom. But time and again, experience has shown that businesses adapt quickly to new conditions and keep doing what they’re good at – giving us the products and services we want to buy. That they’re doing this while keeping their carbon emissions below a set level is something to celebrate.
Innovation is an essential component to meet the challenges of climate change. Better ways to produce, store, conserve, and transmit energy will help the U.S. and other nations meet the ambitious goals set at the United Nations climate change conference held in Paris in December 2015.
Join the Director of the U.S. Patent and Trademark Office, Michelle K. Lee, and a panel of technology, energy, and climate experts for a discussion on how present and future innovation can change the course of our planet’s future. Questions to explore will include:
- What do we need do more, do differently, do faster, to change course and evolve our energy system to be clean, efficient, accessible, dependable and low-carbon?
- Where do we need breakthroughs in technology to really make a difference?
- What policies would help drive the innovation we need? What business model innovation is needed?
June 29, 2016
1:00 - 3:00 p.m.
Carnegie Institution for Science Auditorium
1530 P St. NW Washington , DC 20005
Hon. Michelle K. Lee
Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office
Dr. B. Jayant Baliga
Director, Power Semiconductor Research Center, North Carolina State University
National Inventors Hall of Fame Inductee, 2016, Insulated Gate Bipolar Transistor
Chief Sustainability & Social Impact Officer, HP
Dr. Kristina Johnson
Chief Executive Officer, Cube Hydro Partners National Inventors Hall of Fame Inductee, 2015, Polarization Control Technology
President, Center for Climate and Energy Solutions
Moderator: Amy Harder
Energy Reporter, The Wall Street Journal
See full bios of speakers
After witnessing the historic signing of the Paris Agreement by 175 nations, we now need to turn our attention to fulfilling its promise.
As its nationally determined contribution to the agreement, the United States set a goal of reducing net greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025. In a new paper, C2ES outlines how expected and in-place policies could get us close to the goal line -- reducing emissions by as much as 22 percent. Getting the rest of the way can likely be achieved through a mix of additional policies, city and business action, and technological innovation.
First, let’s look at how we can get to a 22 percent reduction.
U.S. net emissions are already down more than 9 percent from 2005 levels due to market- and policy-related factors, including a shift in electricity generation from coal to natural gas, growth in renewable energy, level electricity demand, and improved vehicle efficiency.
The C2ES business-as-usual forecast, drawn from a number of analyses, projects an additional 5.6 percent reduction in net emissions through such policies as greenhouse gas standards for vehicles and the Clean Power Plan.
The rest of the anticipated emissions reductions is expected to come from new, higher estimates of future carbon sequestration and additional measures under development, including steps to strengthen fuel economy standards for medium- and heavy-duty trucks, reduce methane emissions in the oil and gas sector, and reduce hydrofluorocarbons (HFCs).
Now, how will we address the remaining gap of at least 270 million metric tons carbon dioxide equivalent?
Additional federal policies would help. For example, greenhouse gas standards could be set for major industrial sectors under section 111(d) of the Clean Air Act, the same section that underlies the Clean Power Plan.
Technological advances that lower the cost of emissions reduction will also undoubtedly play an important role. Over the next five to 10 years, battery storage technologies are expected to improve by a factor of 10, which would support the integration of more renewable generation. A promising design for a natural gas power plant with nearly 100 percent carbon capture will enter the demonstration phase next year and could be commercialized soon after. And agricultural advances are leading to more sustainable crops able to sequester more carbon dioxide in their root systems.
Stronger efforts by cities will also be critical to filling the gap. A growing number of cities are working to improve the energy efficiency of residential and commercial buildings, which account for for 41 percent of total U.S. energy consumption. Greater adoption of Property Assessed Clean Energy (PACE) programs, which help finance energy efficiency and renewable energy projects, could significantly reduce city energy demand. Similarly, city programs to build out infrastructure to increase the adoption rate of electric vehicles will, in-time, appreciably lower transportation-related emissions.
Companies, too, will play a key role. Twelve leading companies signed the C2ES statement calling on governments to quickly join the Paris climate pact and pledging to work with countries toward the domestic measures needed to achieve their national emissions-cutting contributions. More than 150 U.S. companies with a combined market capitalization in excess of $7 trillion joined the American Business Act on Climate Pledge – committing to reduce emissions, increase renewable power, or finance climate efforts. And the White House is calling on more companies to join the initiative.
The United States has significantly reduced its greenhouse gas emissions over the past decade. Cutting emissions 26 to 28 percent below 2005 levels by 2025 is a challenging goal. But many options remain untapped, and concerted efforts across multiple fronts can get us across the goal line.
CCUS Technology is Essential to the Success of the Paris Agreement
Pacific Gas and Electric Company’s
Based in San Francisco, Pacific Gas and Electric Company (PG&E) provides natural gas and electric service to nearly 16 million people throughout Northern and Central California. PG&E’s service area includes diverse communities from the coast to oil-producing regions around Bakersfield and rural agricultural communities across the Central Valley. As part of its broader climate change commitment, the company is working in a variety of ways to address the need to adapt to changing climate conditions.
|Josh Wiener of MetLife, Kevin Rabinovich of Mars Inc., Rusty Hodapp of Dallas-Fort-Worth International Airport and Rob Bernard of Microsoft share the strategies that helped them win Climate Leadership Awards with David Rosenheim of The Climate Registry at the fifth annual Climate Laedership Conference, March 10 in Seattle.|
Climate action can start with an idea, but it takes a goal and a plan to get there to make that idea a reality.
When the folks at Microsoft began their current sustainability journey in 2007, “There was well-intentioned chaos,” according to Rob Bernard, the company’s chief environmental strategist. When the Clinton Foundation asked the software maker for a tool to monitor carbon in cities, “That made us think that, internally, we needed to have a strategy on sustainability,” Bernard said in his remarks at the fifth annual Climate Leadership Conference (CLC) in Seattle earlier this month.
That strategy led Microsoft to set and achieve its first public greenhouse gas goal, a 30 percent reduction within five years. Once that was met, the company then set -- and met -- an even more ambitious goal: carbon neutrality.
Microsoft was one of 13 organizations, three partnerships, and one individual honored with 2016 Climate Leadership Awards for accomplishments in reducing greenhouse gas emissions and driving climate action. The were given by the U.S. Environmental Protection Agency’s (EPA), in collaboration with C2ES and The Climate Registry.
Approaches to Structuring a High Ambient Temperature Exemption
By Steve Seidel, Jennifer Huang, and Stephen O. Andersen
As parties to the Montreal Protocol consider an amendment to phase down hydrofluorocarbons (HFCs), one critical concern is whether suitable alternatives for air-conditioning applications are available and adequately demonstrated for cooling capacity and energy efficiency under conditions of high ambient temperatures. Given the critical importance of these applications, one option being considered by parties is to provide a time-limited exemption for those uses in countries that could be adversely impacted by high ambient temperatures. This paper looks at a number of options for how such an exemption might be structured.
The following was published in March 2016 on the EcoWomen blog. View the original post here.
I let out a cheer when Leonardo DiCaprio mentioned climate change during his Oscars acceptance speech. But concern about climate extends far beyond the red carpet.
Religious leaders, military officials, mayors, governors, business executives, and leaders of the world’s nations are all speaking about the need to address the greenhouse gas emissions that threaten our environment and economies.
Last December, world leaders reached a landmark climate agreement at the UN Climate Change Conference (COP 21) that commits all countries to contribute their best efforts and establishes a system to hold them accountable. COP 21’s Paris Agreement also sent a signal to the world to ramp up investment in a clean energy and clean transportation future.
The U.S. committed to reduce its greenhouse gas emissions 26-28 percent below 2005 level by 2025. The U.S. Environmental Protection Agency (EPA)’s Clean Power Plan was touted as a key policy tool to help reach that goal. However, with the recent surprise stay of the rule by U.S. Supreme Court, can the U.S. still meet its climate pledge? Simply put, yes.
|Source: International Energy Agency|
For the second year in a row, the global economy grew and global carbon dioxide emissions did not.
Preliminary data from the International Energy Agency (IEA) indicate that energy-related carbon dioxide (CO2) emissions (from burning fossil fuels for electricity, transportation, industry, space heating and so on) remained unchanged from the previous two years at around 32.1 billion metric tons. Meanwhile, economic growth increased by more than 3 percent for the second consecutive year.
A couple years of data doesn’t necessarily translate into a trend. And continued ambition in the decades ahead - like we saw with the landmark Paris Agreement in December 2015 - will be required before we can announce that we have truly turned the corner on reducing CO2 emissions.
But the IEA noted that 90 percent of new electric generation in 2015 came from renewables. Yes, 90 percent. And this apparent decoupling – after decades of energy-related CO2 emissions moving in lockstep with economic growth -- is a positive sign that low-carbon policies may finally be gaining traction in many parts of the world.
The change is due to policies and market forces affecting two factors – energy intensity and fuel mix – both in China and in the developed economies.