Inside Story

Getting from here to net zero

As Australia continues to dodge, the International Energy Agency issues a blueprint for action

Tim Colebatch 20 October 2021 3443 words

“Emissions don’t have a passport,” the International Energy Agency’s Fatih Birol reminds us. Jeff Gilbert/Alamy

We read a lot about climate change, but it’s mostly about whether our government will commit to a target it has no prospect of meeting. The Morrison government won’t be in power in 2050 to answer for any promises it makes about net zero emissions — and it has no intention of legislating policies that could actually deliver them in 2050, or at any other time.

Promising net zero emissions by 2050 is a marketing tool; no cost, some gain. It matters only because it sets up expectations that will be used to pressure future governments to introduce the emission-reducing policies this government refuses to provide. Without matching action, business won’t believe the promise, and won’t make new investments. In itself, pledging net zero emissions by 2050 is just words.

A more significant question has been played down in the media coverage. Will the government meet Boris Johnson’s challenge to lift its target for 2030 — a 26 to 28 per cent reduction on 2005 levels, the smallest cut being offered by a G20 developed country? This short-term target is something the Morrison government might conceivably have to deliver; and it claims its existing policies would get us there. But figures within the Coalition are resisting Johnson’s pressure, and the government lacks the leadership to counter them.

Suppose, though, that “net zero emissions by 2050” was not just words. Suppose our government and other governments actually meant to change their policies to put us on course to meet the target. What would they have to do?

That is the core question put by the International Energy Agency, or IEA, in its latest World Energy Outlook. A Paris-based bureaucracy whose job is to track the data on energy use and give information and advice to governments, the IEA released this year’s report early to get in ahead of next month’s COP26 summit in Glasgow.

The IEA’s summary of the world’s current position is that we are now moving in the right direction at last, but there is a long way to go — a long way. “The world has started to bend its emissions curve,” its chief modeller, Laura Cozzi, said at the report’s launch last week. But if net zero emissions by 2050 is our target, she added, we are nowhere near meeting it.

The world’s use of coal peaked in 2018. Oil use is likely to peak by around 2025. Economic growth no longer means growth in emissions. Most of the electricity generation being added worldwide is solar, wind, hydro or bioenergy. Wind and solar are now the cheapest fuels for future electricity generation, and set to remain so.

But the IEA’s executive director, Turkish energy economist Fatih Birol, warns: “The world’s hugely encouraging clean energy momentum is running up against the stubborn incumbency of fossil fuels in our energy systems. Governments need to resolve this at COP26 by giving a clear and unmistakeable signal that they are committed to rapidly scaling up the clean and resilient technologies of the future. The social and economic benefits of accelerating clean energy transformations are huge, and the costs of inaction are immense.”

On present government policies worldwide, says the IEA, emissions will still be growing in 2100 and global temperatures will have risen by 2.6 per cent.

Even if recent government pledges to reach net zero emissions, mostly by 2050, are delivered in full, the modelling says that the world will be 2.1°C degrees hotter in 2100 than in pre-industrial times — clearly overshooting the goal of holding the temperature rise to 1.5°C degrees.

Why? Because global warming requires concerted global action. Of the more than 200 countries in the world, just eighty have committed to lowering their emissions to net zero. Australia, Israel and Singapore are the only holdouts in the developed world, but others yet to commit include India, Indonesia and Russia — three of the six countries now generating most of the world’s economic growth — plus most of Southeast Asia, most of Africa, and virtually all the Middle East.

“Emissions don’t have a passport,” Dr Birol notes. This is why Australia’s failure to lift the low bar it has set itself for 2030 is sand in the wheels of other world leaders trying to make global action work. With Australia one of the world’s largest per capita emitters of greenhouse gases, its modest target tells the world we aren’t serious about ending net emissions by 2050; we are a coal exporter looking after our interests. And that strengthens resistance to action in other countries.

But suppose Australia and the other recalcitrants do end up on board, and soon enough to matter. Suppose the leaders in each country actually legislate policies that would end the world’s net emissions of carbon dioxide and other greenhouse gases by 2050. What would they have to do to end global warming?

The IEA modelled energy and emission outcomes on several scenarios: business as usual (continuing existing policies in each country); adding the pledges made by China, the United States and seventy-eight other countries to reach net zero emissions; and its own estimates of the cheapest and fastest path for the world to reach net zero by 2050.

Of course the IEA’s path is not the only way to get there, but any alternative way is likely to be more expensive and just as disruptive. This is modelling, so it’s not gospel, but it does suggest the orders of magnitude we are facing, and which pieces of the puzzle are the most important. These are a few key takes.

The critical battles in this war will be fought not in Australia and the West, but in today’s developing countries: above all China, but also India and its neighbours, Southeast Asia and, not least, Africa.

Developing countries are already the driving force of the global economy. The International Monetary Fund projects that they will provide 70 per cent of the world’s real economic growth in the next five years. On that reckoning, China and India alone will generate 40 per cent of global growth, while all the advanced economies combined — the United States, Europe, Japan and the others — will supply just 30 per cent.

But the choices the developing countries make will be greatly influenced by how rapidly the developed world — and advanced developing countries like China — phase out the old technology to bring in the new.

The faster the West dumps fossil fuels and invests to bring on new technology and lower its price — by developing green hydrogen and ammonia as energy sources, for instance, and making it viable to capture, utilise and store carbon emissions — the cheaper it will become for developing and developed countries to invest in them rather than coal and gas. We have an important part to play.

Coal-fired power must go, and as soon as possible.

The IEA’s findings are not strictly policy recommendations. But in effect it is saying, “If net zero emissions by 2050 is your goal, this is the best way to get there.” And in the power sector, the message is very clear: coal has to go, ASAP.

The IEA’s pathway to net zero specifies no new coal-fired power stations, anywhere in the world. Those already under way (mostly in China) should be abandoned where possible. And — in sharp contrast to the Australian government’s policy — the world should open no new coalmines or extensions thereof.

On the IEA’s path to net zero, half the world’s coal-fired generators would shut down by 2030 and the electricity generated from coal would shrink by two-thirds. The plants that remain would be newer ones that could operate flexibly as a back-up to solar and wind power — or one able to be converted to capture their CO2 emissions and utilise or bury them.

By 2050, in its scenario, coal-fired stations would supply only 1 per cent of the world’s electricity demand, and they would all be capturing their carbon dioxide emissions for industrial use or storage. Coal would survive only by becoming emissions-free.

Coal (and gas) would retain a bigger role in large industrial plants designed to capture their emissions. But the IEA projects that even in 2050, a world producing net zero emissions will use only a tenth of the coal we now produce each year. That would have quite an impact on Australia.

“Accelerating the decarbonisation of the electricity sector is the single most important way to close the 2030 gap,” it says, “and could cut emissions by around 5 gigatonnes,” or about 15 per cent of global emissions. “We estimate that up to 60 per cent of the gap [between existing policies and the path to net zero] in the electricity sector can be closed through cost‐effective expansion of wind, solar photovoltaics, hydro and nuclear power.”

The IEA’s modelling implies that coal is already in inevitable decline; the net zero target would simply accelerate that. Even on existing policies, it sees coal’s share of global electricity demand shrinking from 40 per cent in 2010 to 26 per cent by 2030, and 13 per cent by 2050.

In advanced economies, even Australia’s, coal has been shrinking in importance for years, and now faster than ever. Renewables have replaced it as the cheapest source of power, so when solar or wind are going full pelt, coal stations have to reduce their output, and be ready to increase it again when needed. They work much better when they can burn coal steadily, flat out. But that world has now gone.

New South Wales and Victoria have not built a new coal-fired power station since last century. Their remaining coal generators are like a collection of old Holden Kingswoods, being driven past their use-by date. They frequently break down and are becoming uneconomic to run in a system in which renewables are the cheapest source of power. Last year coal supplied just 54 per cent of Australia’s electricity — not the 60+ per cent claimed by many analysts — and could already have sunk below 50 per cent.

Yet as coal fades away, total power generation worldwide is set to almost treble by 2050. Most of it would come from new solar and wind plants, but with significant portions also from hydro, bioenergy and the new kids on the block, hydrogen and ammonia.

In the world of net zero emissions, the IEA projects that 88 per cent of a vastly expanded global energy demand will be met by renewables. Solar and wind would each generate roughly a third of that — each generating almost as much electricity in 2050 as the world now generates from all sources including coal, gas, hydro and nuclear.

But the IEA believes we will also need nuclear power and carbon capture to make net zero work.

Its proposal to ban coal might warm green hearts, but the IEA is convinced that the world in 2050 will also rely for its electricity on expanded nuclear power — and some gas and coal, mostly from power stations that capture their carbon and use or bury it.

The critical issue is the one Australia has been grappling with for years without success: how to generate electricity when the sun is not shining and the wind is not blowing. The IEA points out that there are many ways of doing so, but they are expensive, and some are cumbersome, so all possible options will be needed.

It would be expensive to have your power system relying solely on batteries and pumped-storage hydro to provide energy when solar and wind are having bad days. Witness the latest revelations that Snowy Hydro 2.0 and its transmission links could cost more than $10 billion, rather than the $2 billion first promised. The scale of new battery storages is growing rapidly, but they are still niche products, there to help in emergencies rather than power us night after night at low cost.

That’s why the IEA’s modelling envisages nuclear power generation roughly doubling worldwide by 2050, mostly in China and the developing world. It accepts that nuclear is now politically unacceptable in the West, but expects it to regain its place, even in Japan and Europe. In its view, nuclear is a mature, safe and relatively cheap technology that produces no emissions — and can supply the crucial backup flexibility required by a renewables-based system.

By 2050 it sees nuclear supplying 8 per cent of the world’s power needs, with emissions-free gas and coal producing just 2 per cent between them but playing a backup role to the dominant renewables. Gas would hold its ground longer than coal, because it emits only half as much carbon dioxide and gas plants can operate more flexibly than coal stations. But by 2040 most of the world’s gas-fired power stations would also have shut down.

The IEA has not abandoned hope that carbon capture and storage will become a significant contributor to meeting the net zero emissions goal. But it argues that the lack of investment by business and governments to pave the way for carbon storage — and hydrogen and ammonia as sources of fuel — is limiting the potential role they can play.

“Without innovation and learning‐by‐doing to drive down their costs over the next decade,” says the IEA, “it would be much more difficult for these technologies to ramp up after 2030 to contribute to achieving net zero energy emissions by 2050.”

There is another problem with the carbon capture option that the IEA carefully does not mention. We’ll come to that shortly.

Emissions could be significantly reduced if we focused more on raising energy efficiency.

In the old world, growth in the economy and growth in energy use went hand in hand. But in the last decade they have diverged sharply: global GDP has surged, mostly in developing countries, while growth in energy use has slowed.

Energy intensity — the dollar of GDP created per unit of energy consumed — is now growing by nearly 2 per cent a year. Double this annual growth to 4 per cent, the IEA says, and in a decade we could prevent energy use that otherwise would have raised global emissions by a third.

There are thousands of opportunities: from behavioural changes like turning down the heating and airconditioning in homes and offices (the IEA recommends 19 to 20 degrees for heaters, 24 to 25 for air conditioners) to replacing inefficient old technologies with energy-efficient new ones. Industry in particular could make big savings, the IEA argues, especially in reducing its use of materials, but the opportunities are across the board, and include videoconferencing, working from home, retrofitting buildings and increased recycling.

The big one now is electric vehicles. Two years ago the IEA’s Outlook highlighted the energy inefficiency of SUVs. On average, it said, they need 25 per cent more fuel to drive a kilometre than a car does — and with 200 million of them on global roads, they had become the second-biggest source of growth in rising global emissions. Alas, no one took any notice.

But this time the IEA has a positive story to sell: switching to electric vehicles powered by renewable energy could save billions of tonnes of future emissions. As part of the path to net zero, the IEA says, with government support EVs could overtake petrol- and diesel-fuelled cars to win 60 per cent of the global vehicle market by 2030 — up from less than 5 per cent in 2020.

The mining industry must immediately implement a crash program to sharply reduce methane emissions from mining gas and other fossil fuels.

Methane gases in the atmosphere are shorter-lived than carbon dioxide but far more potent as a cause of global warming. We’ve all seen photos of flames soaring from the smokestacks of Middle East oil and gas wells as excess gas is burnt off. In Australia, soaring methane emissions from gas fields drove much of the rise in greenhouse gas emissions from 2014 to 2019.

The IEA says these emissions could be cut by more than 80 per cent by 2030 if mining companies carried out “the elimination of all technically avoidable methane emissions.” It’s all doable, and…

Many of these reforms could in fact save money.

A prime example: stopping the leaks from oil, gas and coal mining would cost the industry US$13 billion (A$17.5 billion), the IEA says, but the market value of the gas they would save is more than that. It’s an example of the inertia caused by that “stubborn incumbency” of established practices.

People in many countries are paying more for power from dirty coal-fired stations than they would if the old plants were replaced by new solar and wind generation. Even now, the IEA estimates, solar and wind plants are easily the cheapest to operate, and the cheapest even including construction costs, arguably except for gas in the United States. By 2030 they will be the cheapest everywhere, by a mile.

To get there, though, we need to double energy investment.

The world now spends about 1 per cent of its GDP investing in new energy plants, transmission lines, pipelines and so on. The IEA says that share needs to rise to 2.2 per cent to finance the rollout of solar and wind power, EV charging stations, transmission lines and other works needed to make net zero emissions feasible. And moreover:

Most of that investment must be in developing countries.

That’s the real problem. Borrowing money is cheap in countries like Australia, but in developing countries it can cost seven times as much. Their governments and companies are financially weak — half the electricity companies in Africa are in financial difficulty — and rich countries like Australia have not delivered the aid they promised in Paris in 2015 to help developing countries to carry out their part of the green revolution.

The IEA urges the International Monetary Fund, the World Bank and governments to get together to come up with new financial avenues to make this aspiration a reality. It points out that developing countries are going to need a lot of iron, steel, cement, chemicals and other energy-intensive products. And the chances of the world halting global warming anytime soon will depend on what choices they make, and how much energy-efficient technology they can afford to buy.

The World Energy Outlook 2021 is also full of the positive messages about the economic and social benefits of this green revolution that we now hear from its former opponents like the Business Council and the Murdoch press. (Welcome aboard, what took you so long?) But two of its most important messages are left unstated. They are crucial, so let’s end with them.

No country is more important in achieving net zero emissions than China.

The IEA is too diplomatic to say it, but China is the key to success. It now burns 56 per cent of the coal we consume. Xi Jinping has promised to stop financing new coal-fired stations in the rest of the world, but his government is still building and planning them in China. On its current policies, the IEA numbers show, China would still account for half the world’s use of coal in 2050. We will only get to net zero if the Chinese government stops building coal-fired stations in China.

My regular reminder: China is already the biggest economy in the world, and by a growing margin. The IMF projects that by 2025, its real output will be 30 per cent greater than that of the United States. Of course, China could be exaggerating its numbers, and right now — with its building giant Evergrande on the verge of collapse — the unsustainability of its economic path is more obvious than ever.

But it will still be by far the most important country we need to have onside.

The IEA’s path to net zero emissions assumes a carbon price.

You could get some of the way without a carbon price, but nowhere near zero. Regrettably, “technology, not taxes” is just another of the Coalition’s empty three-word slogans. The reason for a carbon price or tax is to drive the adoption of new technology when business as usual doesn’t provide sufficient reason for it.

I mentioned earlier the IEA’s continued faith in carbon capture, utilisation and storage. Its own numbers make it clear that CCUS has no future on current policy settings. Without a carbon price, it is simply unviable. Hydrogen and ammonia, too, need a carbon price to be viable. It is just Economics 101: if production involves “externalities” that damage third parties, governments should put an appropriate price on them. Make the polluter pay, and good solutions will be found.

It’s not hard for people to recognise that fact: Europe’s emissions trading scheme is now widely accepted. But to build the case for that, a country needs to have real leaders. Australia unfortunately has none, at least at federal level, and there is no sign of any emerging. •