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1. Build Carbon Removal Reserve to Secure Future of EU Emissions Trading

Author:
Wilfried Rickels, Mathias Fridahl, Roland Rothenstein, and Felix Schenuit
Publication Date:
05-2024
Content Type:
Policy Brief
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
• A carbon central bank (CCB) that translates carbon removals into allowances would transform the European Union Emissions Trading System (EU ETS) from a fiat allowance to a gold standard system, ensuring unchanged net emissions on the path to net-zero greenhouse gas (GHG) targets. • Meeting such expectations would require a CCB with a clear commitment to a net-zero GHG target, but also with the capacity to manage the market on the path to that target. • This requires a strong institutional framework, which could be achieved by integrating the CCB into the European Central Bank (ECB), building on its reputation and capacity. • Given the long lead time to set up such an institution, the European Commission should already take the first steps to fulfil the other requirement, namely building up a large carbon removal certificate (CRC) reserve, which would provide the CCB with the credibility to stabilize the market in the future. • To fill the CRC reserve, the EU should emulate the US approach by immediately initiating resultbased carbon removal procurement as a first key step of a sequential approach to integrated carbon removal into climate policy. • This could be achieved by developing a centralized procurement program, supporting existing procurement programs, such as Sweden’s or Denmark’s, and incentivizing additional EU member states to initiate procurement. • An important prerequisite for this is the ability to bank CRCs that are not yet eligible for compliance with near-term EU climate targets and use them in later crediting periods.
Topic:
Climate Change, European Union, Carbon Emissions, Net Zero, and Carbon Central Bank
Political Geography:
Europe and Global Focus

2. Triggering Investment in First-of-a-Kind and Early Near-Zero Emissions Industrial Facilities

Author:
Chris Bataille, Seton Stiebert, and Jonas Algers
Publication Date:
08-2024
Content Type:
Special Report
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
Among the most significant challenges to achieving the Paris Agreement goal of global net-zero CO2 emissions by 2055–2075 is addressing the so-called “hard-to-abate” heavy industrial sectors such as iron and steel, cement and concrete, ammonia, methanol, and high value feedstock chemicals like olefins. These sectors accounted for 7.5 Gt CO2 or 20.4 percent of global emissions in 2021, and global demand for their products will only rise until broad development goals are met everywhere. Moreover, nearly all heavy industrial plants being planned or in construction today are fossil based, with the exception being a handful of small-scale pilot facilities. Given that plants tend to operate for at least 20 years before their first deep renovation, and 40–80+ years overall, these new ones will likely still be in operation by the time global CO2 emissions must be net-zero (~2050–2060), after which heavy industry players that are still emitting will likely need to pay for CO2 removal (CDR) from the atmosphere. The cumulative CO2 emissions between now and then and the likely very high cost of CDR are driving society, governments, and firms to make near-zero emissions the default minimum standard for all new and retrofit facilities by the end of the 2020s. However, fulfilling that standard is no easy task. The main bottleneck is less technological in nature than financial and market based. At the current state of the art, near-zero emissions plants simply cost more than fossil-based plants, and meanwhile, no demand pull or market exists for lower-emission industrial products. Given the urgency of the task at hand amid the global climate crisis and the current lack of a business case to undertake it, strong policy signals can be used to incentivize early investment in near-zero-carbon heavy industry. This report, part of the Carbon Management Research Initiative at the Center on Global Energy Policy at Columbia University SIPA, explores financial policy instruments that can make first-of-a-kind (FOAK) near-zero emission industrial facilities viable. The report finds that such FOAKs can then be used as low-risk, replicable models for rapidly transforming the “hard-to-abate” sectors and ultimately facilitating a transition to full net-zero emissions for industry as a whole.
Topic:
Climate Change, Investment, Industry, Carbon Emissions, Net Zero, and Abatement
Political Geography:
Global Focus

3. Scaling Investment in Renewable Energy Generation to Achieve Sustainable Development Goals 7 (Affordable and Clean Energy) and 13 (Climate Action) and the Paris Agreement: Roadblocks and Drivers

Author:
Mithatcan Aydos, Perrine Toledano, Martin Dietrich Brauch, Ladan Mehranvar, and Theodoros Iliopolous
Publication Date:
12-2023
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
The zero-carbon energy transition is the solution to the 2022 energy crisis and a fundamental part of the solution to the global climate crisis. Yet, there are relatively low levels of investment in renewable energy in developing countries, hindering their achievement of the Sustainable Development Goals (SDGs) and contribution to the Paris Agreement goals. In 2021, the Asia–Pacific region (excluding China) accounted for less than 8% of investments in energy transition technologies, Latin America and the Caribbean for less than 4%, and Africa and the Middle East for less than 2%. Annual investment in zero-carbon energy in developing economies other than China has stagnated since the Paris Agreement was signed in 2015. To put the world on track to reach net-zero emissions by 2050, annual capital spending on zero-carbon energy in developing countries must increase by more than seven times, to more than USD 1 trillion, by the end of the 2020s. There is therefore an urgent need to address the drivers of public and private finance for investment in renewable electricity generation, network infrastructure, and enduse sectors to meet the Paris Agreement and two complementary SDGs: ensuring access to affordable, reliable, sustainable, and modern energy for all (SDG 7); and taking urgent action to combat climate change and its impacts (SDG 13). This report sheds light on roadblocks to scaling up investments in renewables while distilling solutions from international experience and brings clarity to where international and national efforts should urgently be focused to address the deterrents of investment in renewables and enable zero-carbon energy security and prosperity.
Topic:
Climate Change, Investment, Renewable Energy, Carbon Emissions, Paris Agreement, Energy Transition, and Net Zero
Political Geography:
Global Focus

4. The Potential Role of Biohydrogen in Creating a Net-Zero World

Author:
Yushan Lou, Zhiyuan Fan, and Julio Friedmann
Publication Date:
01-2023
Content Type:
Special Report
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
As the window of opportunity to avert the worst effects of climate change closes, rapid decarbonization efforts have been turning to novel low-carbon hydrogen applications in the fields of heat, energy storage, and fuel cell technology as a potential solution for traditionally hard-to-abate sectors. Green hydrogen, in particular, defined as hydrogen produced from water electrolysis using renewable or low-carbon electricity, has received the lion’s share of attention. By comparison, little attention has been paid to biohydrogen (Bio-H2), a type of hydrogen produced from organic waste streams (e.g., agricultural waste) that can potentially yield a carbon-removing (or climate-positive) fuel when coupled with efficient CO2 absorption and subsequent storage. Indicatively, few hydrogen supply-and-demand forecasts or high-level hydrogen strategies mention it. However, Bio-H2 presents opportunities not only to establish a cyclical hydrogen system with waste converted into energy but also to address emissions that remain after all technically and economically feasible efforts have been made to eliminate them. This report, part of the Carbon Management Initiative at the Center on Global Energy Policy, explores the current state of play for Bio-H2 and its potential contribution to decarbonization efforts. The report begins with an analysis of the varying definitions and categorization of Bio-H2 in the literature, which may relate to its classification as both a hydrogen and a bioenergy with a diverse selection of sources and manufacturing pathways. Next, it assesses the crucial question of Bio-H2’s carbon intensity, which has additional specifications to those of blue hydrogen (defined as hydrogen manufactured from natural gas with carbon capture and storage [CCS]) and green hydrogen production, including land use, land use change, use of dedicated fuel crops (and associated land use issues), status and footprint of wastes (agricultural, forestry, and municipal), and avoided or reduced methane emissions. The report shows that if the biomass feedstock is not carefully selected and the energy consumed during its processing is not closely monitored and controlled, Bio-H2’s carbon footprint can potentially exceed that of fossil-based hydrogen today. Therefore, to avoid any potential negative climate impacts from utilizing Bio-H2, the assessment and governance of biomass feedstock for Bio-H2 manufacturing is critical. This report also shows that the potential carbon-removing value of Bio-H2, particularly the carbon-negative hydrogen derived from biomass wastes and CCS, far outweighs its energy value and that Bio-H2 can be manufactured using technologies that are relatively mature and near commercial stage. Nonetheless, because the carbon-negative value of Bio-H2 is contingent on the use of biomass wastes, which is a constrained resource, Bio-H2 should only be employed when the capacity of other decarbonization methods is limited. Key opportunities for its application present in hard-to-abate sectors with potential for manufacturing zero carbon or even carbon-negative steel or chemicals. In regions where waste biomass is abundant and underutilized (e.g., East or Southeast Asia), Bio-H2 can also enable a circular carbon economy and offer flexible carbon management solutions. For example, local food scraps and agricultural waste (e.g., rice husk) can be converted into fertilizers (created from hydrogen-derived ammonia), which can cut carbon emissions from food production.
Topic:
Methane, Carbon Emissions, Energy, Net Zero, and Biohydrogen
Political Geography:
Global Focus

5. Thematic Bonds: Financing Net-Zero Transition in Emerging Market and Developing Economies

Author:
Gautam Jain
Publication Date:
12-2022
Content Type:
Special Report
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
A significant gap exists globally between the financing needed and the current level of spending to meet net-zero goals. The problem is particularly acute for emerging market and developing economies (EMDE), as they face higher spending on the energy transition as a percentage of gross domestic product (GDP) and are likely to be affected more severely by climate change than advanced economies. Thematic bonds that target specific investment themes, including climate change mitigation, can help narrow the financing gap, but EMDE’s share of the global thematic bond market remains small. This report explains the urgency of raising financing for EMDE to address climate change and discusses the evolution of thematic bonds. It finds that the asset class has the potential to achieve significant further growth. As part of Columbia University’s Financing the Energy Transition initiative, it offers policy recommendations to governments and development banks interested in increasing thematic bond issuances from these countries. Options to consider include addressing local currency risk using structured finance, adapting institutional frameworks such as Green Bond Principles (GBP) to national contexts, addressing accessibility issues in domestic markets, and providing tax incentives.
Topic:
Development, Emerging Markets, Climate Finance, Bonds, Green Transition, and Net Zero
Political Geography:
Global Focus