Climate Change – Interesting Twists

There are calls for reducing carbon emissions which means reducing consumption of fossil fuels, and on the other hand, there is concern that the world simply cannot just stop using fossil fuels. Or can it?

By Anil Madan

The question of what approach is the best way to address the climate change issue is confounding. On the one hand, there are calls for reducing carbon emissions which means reducing consumption of fossil fuels, and on the other hand, there is concern that the world simply cannot just stop using fossil fuels. Or can it?

No matter where you stand when it comes to this debate, there are three significant developments that deserve more than passing mention.

Firstearlier this month, the International Energy Agency (IEA) issued a Special Report titled Net Zero By 2050 declaring that if all of the pledges to date by governments around the world to reduce energy-related carbon dioxide (CO2) emissions are achieved, they will still fall well short of what is required to bring such emissions to net zero by 2050 which the IEA accepts as necessary to give the world an even chance of limiting the global temperature rise to 1.5ºC.

The IEA offers a pathway to transition to a net zero energy system by 2050. It does so without advocating reliance on new technologies but rather, focuses on greater proliferation of solar and wind solutions with a doff of the hat to bioenergy, geothermal and hydro power. There is no mention of nuclear power. The IEA claims that its approach is a cost-effective and economically productive pathway, resulting in a clean, dynamic and resilient energy economy dominated by renewables (solar and wind) instead of fossil fuels.

Whether the IEA’s “solution” is realistic or viable is not clear but, at least facially, the IEA does not seem to be projecting naïveté. It describes the pathway to building a net zero energy sector in the next three decades as “viable” but “narrow and extremely challenging” and one that “requires an unprecedented transformation of how energy is produced, transported and used globally.”

The IEA recognizes that net zero means a huge decline in the use of fossil fuels. Built into the IEA’s analysis is the assumption that global energy use will shrink by 8% over the next three decades even with two billion more people on earth, representing an increase of more than 25% in the world’s population. The IEA also expects that the global economy will be twice as big.

It is tempting to dismiss the IEA’s report as pie-in-the-sky and almost nonsensical.  Indeed, for an agency that has no policy-making authority, its “pathway” does bring back that question about naïveté. Does the IEA expect that countries and fossil fuel giants will suddenly drop their business models and give up exploration and development?

Air pollution. Pic –

Indeed, the IEA states that beyond projects already committed as of 2021, its pathway has no room for any more new oil and gas fields, nor for new coal mines or mine extensions. But note that there is no room in the IEA’s assumptions, and none of this is binding on any government. 

Some aspects of the IEA’s pathway may well come to fruition. For example, its plan is that no internal combustion engine cars would be sold after 2035. Many countries and some U.S. states are already moving in this direction. The IEA states that the global electricity production sector would achieve net zero emissions by 2040 as wind, solar, bioenergy, geothermal and hydro generation modalities provide about 90% of electricity generation by 2050 and two-thirds of total energy supply. 

The IEA projects a drop in oil demand of 75% and a drop of 55% for natural gas by 2050. 

These projections seem unrealistic. Take just the case of China where President Xi Jinping has vowed to reach carbon neutrality by 2060 and where the country’s leadership has reiterated its Paris Climate Accords pledge of a 2030 emissions peak.

What is not clear is how high that peak will be or, as Yale Environment 360, published by the Yale School of Environment notes, how strong China’s climate ambitions really are and how quickly China can wean itself from its main source of energy — coal.

Already, in the second half of last year, 2020, steel, cement and heavy manufacturing, predominantly fed by coal power, boosted China’s CO2 emissions by 4 percent compared with the pre-pandemic days of 2019 

The Yale review notes that coal remains at the heart of China’s flourishing economy. In 2019, 58% of China’s total energy consumption came from coal. This helps to explain why China accounts for 28% of all global CO2 emissions. A sobering note is that in 2020, the year of the pandemic, China brought 384 gigawatts of new coal-fired power into operation, and this is more than three times what was brought on line everywhere else in the world.

The future looks bleak for those looking to cut coal usage.  A total of 247 gigawatts of coal power is now in planning or development, nearly six times Germany’s entire coal-fired capacity. China has also proposed additional new coal plants that, if built, would generate 73.5 gigawatts of power, more than five times the 13.9 gigawatts proposed in the rest of the world combined. Last year, Chinese provinces granted construction approval to 47 gigawatts of coal power projects, more than three times the capacity permitted in 2019.

China has pledged that its emissions will peak around 2030, but that high-water mark would still mean that the country is generating huge quantities of CO2 — 12.9 billion to 14.7 billion tons of carbon dioxide annually for the next decade, or as much as 15 percent per year above 2015 levels.

The Chinese Communist Party is obviously caught in a difficult position. Whereas reducing its carbon footprint is a de rigeur stated policy, the country still has to deal with fostering economic growth for its immense population.

The Yale publication notes that China can only flatten its carbon emissions if it can achieve heavy reliance on renewable energy augmented by nuclear power, as well as major technological advances in carbon capture and battery/storage technology. 

But, make no mistake, China’s coal dependence is at odds with any notion of a long-term decarbonization project and with the goal of the Paris Climate accords to limit global temperature increases to 1.5ºC. 

Second, a judge in Holland ruled that Shell’s current climate strategy is “not concrete enough and full of caveats,” adding that the oil major has a legal obligation to reduce its emissions in line with international climate goals. So, the judge ordered Shell (Royal Dutch Shell) to cut its emissions 45% by 2030 compared to 2019 levels.

This is an extraordinary ruling. It exalts the Paris Climate Accords to the level of an almost constitutional obligation. It has a court dictating what corporate policy should be. 

Greenpeace and six other environmental groups sued Shell on behalf of 17,000 citizens of Holland. Their contention was that Shell must conform to international climate obligations and that its investments in oil and gas exploration threaten the lives of Dutch citizens. 

Needless to say, Shell has promised to appeal the decision. It is reasonable to expect that an appellate court will rule that the Paris Climate Accords are not binding on business corporations and, in any event, the courts are not the arbiters of what corporate investment policies should be. On the other hand, if a corporation commits a transgression and injures a person, a court of law is the appropriate forum for an award of damages. Might not a more expansive view of the law include the notion that ensuring compliance with the law or directing that conduct not run afoul of the law is a proper function of the courts?

Third, less than a week ago, ExxonMobil announced after its annual shareholders meeting that at least two of its twelve directors had been replaced by others who are seen as better suited to fight climate change, bolster the company’s finances and guide it through a transition to cleaner energy. Final results may show that more than two seats were affected.

The significance here is that the dissident directors were backed by many of America’s major institutional investors. As might be expected, the California Public Employees’ Retirement System, popularly referred to as CalPERS was among the supporters of the replacement directors.

These developments tell us that there is increasing pressure on Western governments and Western corporations to deal more aggressively with climate change and to find actual solutions. No similar pressure is applied in China or India, two of the largest emitters of CO2. 

History tells us that when the U.S. and other Western countries focus on a problem intensely, they usually produce technological breakthroughs to solve it. Both China and India have tremendous talent to offer the world and their role in solving challenges of, and related to, climate change may make all the difference.


* Published in print edition on 1 June 2021

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