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61. Advancing Corporate Procurement of Zero-Carbon Electricity in the United States: Moving from RE100 to ZC100

Author:
Melissa Lott and Bruce Phillips
Publication Date:
12-2021
Content Type:
Special Report
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
Corporate pledges to purchase renewable electricity have led to significant new solar and wind capacity investments and driven down the carbon intensity of the power sector in the United States. Participating companies have increasingly procured this power, many with a goal of procuring quantities that are equal or proportional to the amount of electricity that they consume at their facilities on an annual basis.[1] Corporate buyers can reap many benefits from renewables procurement, including hedging against power price fluctuations and enjoying positive brand association, helping them meet shareholder demands around climate or other environmental, social, and governance (ESG) goals. However, the reality is that commitments to buy 100 percent renewable electricity may not equate to a company actually reducing its power carbon footprint to zero. This report from Columbia University’s Center on Global Energy Policy quantifies the mismatch between companies’ contracted variable renewable electricity (VRE) and their actual use of electricity to highlight the degree to which these companies still rely on a partially fossil-fueled power grid to bridge the gap. A modeling exercise and analysis done in collaboration with The NorthBridge Group reveals a significant shortfall between electricity demand and VRE supply, leaving companies that contract for 100 percent renewables to in fact draw between 20 percent and 50 percent[2] of their annual electricity from the regional electric grid, depending on their location, demand profile, and mix of contracted renewable supplies. This disparity presents a number of challenges to corporations that wish to achieve deep decarbonization and are unable to curtail operations to match renewable energy supplies. There are several approaches to get closer to a true zero-carbon power footprint. Installing storage capacity either on-site or at the power plant to provide stored electricity when renewables are not sufficient, such as with a battery,[3] is one option. However, this only reduces the minimum shortfall by half, requiring a customer to continue to rely on electricity from the regional electric grid for 10 percent to 28 percent of its annual load.[4] Resolving the shortfall by procuring extra renewable power (e.g., to 150 percent of annual electricity demand with renewables) can drive costs up substantially without closing the gap.
Topic:
Climate Change, Energy Policy, Environment, Green Technology, Carbon Emissions, and Decarbonization
Political Geography:
North America and United States of America

62. Understanding the European Union’s regional potential in low-carbon technologies

Author:
Enrico Bergamini and Georg Zachmann
Publication Date:
11-2020
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
This research identifies existing and potential specialisation in green technologies in European Union regions, and proposes an approach to identify policies that can help to realise this potential. Using the Organisation for Economic Cooperation and Development’s REGPAT database for regionalised patent data, we estimate the potential advantage European NUTS2 regions could have in 14 green technologies. We use network proximity between technologies and between regions to understand technological/regional clusters, and build the regressors for estimating potential regional advantage in specific technologies via zero-inflated beta regressions. We construct a dataset of lagged potentials and labour market, economic and demographic variables, and perform an elastic net regularisation to understand the association with current revealed advantages. Our approach indicates an association between technological advantage in green technologies in EU regions and participation rates in labour markets, sectoral employment in science and technology, general higher education, duration of employment, percentage of GDP spent on research and development (public and private), and other expenditure on R&D. If confirmed by causality tests, the established associations could help in designing horizontal economic policies to enable specific regions to realise their specialisation potential in specific green technologies.
Topic:
Climate Change, Energy Policy, Industrial Policy, European Union, Green Technology, and Decarbonization
Political Geography:
Europe

63. Financing the European Union: New Context, New Responses

Author:
Clemens Fuest and Jean Pisani-Ferry
Publication Date:
09-2020
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Roughly two thirds of the European Union’s budget is financed out of member states’ national tax revenues. These resources, based on gross national incomes, are transparent, fair and in line with the principle of subsidiarity but they lead to political debates that emphasise the cost of EU spending rather than the benefits, and add to the perception of the EU budget in terms of net balances, rather than value added. The financing of the EU budget must be reassessed in the light of the July 2020 decision to launch the Next Generation EU programme. Budget resources could include a plastics charge, a carbon border adjustment mechanism, a digital tax, revenues from emissions trading and a financial transactions tax. We evaluate these options against four criteria: whether the origin of the revenue can be assigned to a particular member state; whether the revenue can be raised in isolation or requires pan-European tax coordination; whether the new resource can help reduce tax distortions in the EU; and whether the resource is related to EU policies. Revenues from emissions allowances fit these criteria best. Carbon emissions do not primarily cause damage only where they occur. Taking the EU cap on emissions as a given, additional emissions in a particular member state should be regarded as a negative externality on other member states. Emission reduction objectives are set at EU level. Whoever auctions off an allowance, wherever the corresponding emission occurs in the EU, and wherever the resulting good or service is consumed, the impact on common policy outcomes is the same. In this regard, proceeds from the sale of emissions trading system allowances are not that different from customs duties. Compared to the ETS, the other candidates for EU own resources are less convincing. Carbon border adjustments are intended to limit international competitive distortions rather than to generate revenue. Digital taxes and minimum corporate taxes are best left to the process underway in the Organisation for Economic Co-operation and Development. On a financial transactions tax there is no agreement within the EU. Total ETS revenues up to 2050 would approach €800 billion in a realistic scenario and possibly even €1.5 trillion assuming the scope of the ETS and the share of auctioned permits are increased. ETS revenues therefore would be largely sufficient to repay the Next Generation EU debt. However they would generate distributional effects, and so part of the revenues should finance grandfathered rights that would accrue to the member states. The EU can tackle the distributional issues involved in the reform of own resources.
Topic:
Budget, European Union, Finance, Tax Systems, COVID-19, Decarbonization, and Digitalization
Political Geography:
Europe

64. U.S. and China Climate Goals: Scenarios for 2030 and Mid-Century

Author:
Asia Society Policy Institute and Climate Analytics
Publication Date:
11-2020
Content Type:
Special Report
Institution:
Asia Society
Abstract:
In September 2020, President Xi Jinping announced new goals for China to reach carbon neutrality before 2060, as well as to strengthen its existing 2030 commitments under the Paris Agreement. With these announcements, China has signaled a move to join the European Union—as well as the United States under a Biden administration—in leading long-term climate action among the big emitters. Our analysis demonstrates that if China’s new long-term goal covers all greenhouse gas (GHG) emissions, and not just carbon dioxide (CO₂), this could bring the country within reach of the emissions reductions required by mid-century for its actions to be in line with the Paris Agreement’s long-term goal of limiting average global temperature increases to 1.5°C. However, if President Xi’s announcement is only meant to cover CO₂, then China would need to achieve carbon neutrality around 2050 for this to be compatible with the Paris Agreement.1 Either way, China’s short-term actions will also need to be quickly brought into line with its new long-term trajectory. This includes doing more than simply peaking CO₂ emissions before 2030 as President Xi foreshadowed. Instead, our analysis demonstrates that China would need to peak its emissions by 2025 and rapidly reduce these thereafter to be compatible with the Paris Agreement. This also implies a need for significant adjustments to the other quantifiable targets identified in China’s existing Nationally Determined Contribution (NDC) under the Paris Agreement and the ramping up of action to achieve these. Reducing coal-fired power generation quickly and phasing it out entirely by 2040 would be an important step toward achieving this early peak and rapid reductions. Under the Trump administration, the United States has reneged on past climate action promises and rolled back existing policies resulting in an increase in emissions compared with the Obama administration. As a result, this report highlights that even under a Biden administration, the United States is likely to miss its previous 2025 target under the Paris Agreement. However, a Biden administration means that the United States now has the potential to reverse the Trump administration’s rollbacks and make a significant contribution to closing the Paris Agreement’s ambition gap in a new 2030 NDC. Indeed, by taking the initiative to reboot U.S. action in line with the Energy and Climate Package touted by President-elect Biden during his campaign, including its goal to reach net-zero emissions by 2050, U.S. emissions could be reduced substantially by 2030.2 For example, our analysis indicates that if the Biden campaign’s policies were to be fully implemented with the support of Congress (see below), and continue to be supported by strong subnational action, they could bridge more than half of the U.S. share of the global ambition gap by 2030 through reducing emissions by up to 38%–54% below 2005 levels (GHGs, including land use, land-use change and forestry)3. This would also reduce estimates for average global temperature increases in 2100 by 0.1°C, on top of the 0.2°C–0.3°C reduction achieved by China’s recent announcement. As this report shows, President-elect Biden’s plan to decarbonize the U.S. electricity system by 2035 would represent by far the biggest contribution to this effort and is in line with the Paris Agreement temperature goal. It would result in savings of ~1,350 MtCO₂ out of a total abatement potential of ~1,810 MtCO₂e [1,630–2,100] in 2030 across his Energy and Climate Package. However, this report also estimates that potentially only half of this potential could still be achieved through Executive Authority in the event of Congress not supporting action, although this estimate carries a large degree of uncertainty. We also outline how additional emissions reductions could come from action in other areas, including freight transport and industry—with the electrification of end-use sectors and green hydrogen important opportunities to achieve this. If the United States and China fully implement these ambitious goals and are able to achieve net-zero GHG emissions around mid-century, it would be a monumental step forward toward bringing the Paris Agreement goals within reach. It would also mean that for the first time more than 60% of the world’s emissions are in countries with a clear pathway to decarbonize their economies. However, achieving the goals will require bold action in all sectors of the economy, with an early coal phaseout being paramount for both countries.
Topic:
Climate Change, Carbon Emissions, Paris Agreement, and Decarbonization
Political Geography:
China, Asia, North America, and United States of America

65. The Future of Carbon Offset Markets

Author:
Henry Lee and Abigail Mayer
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
Corporations, organizations, and even governments are purchasing offsets to reduce their carbon footprint. This policy brief provides an overview of the offset process – who buys them, who produces them, and who certifies them; describes the emerging challenges facing this market; and makes recommendations for the future.
Topic:
Climate Change, Energy Policy, Carbon Emissions, and Decarbonization
Political Geography:
Global Focus

66. Net-Zero and Geospheric Return: Actions Today for 2030 and Beyond

Author:
Julio Friedmann, Alex Zapantis, Brad Page, Chris Consoli, Zhiyuan Fan, Ian Havercroft, Harry Liu, Emeka Richard Ochu, Nabeela Raji, Dominic Rassool, Hadia Sheerazi, and Alex Townsend
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
The case for rapid and profound decarbonization has never been more obvious or more urgent, and immediate action must match growing global ambition and need. An important new component of this discussion is the necessity of achieving net-zero global greenhouse gas emissions for any climate stabilization target. Until net-zero emissions are achieved, greenhouse gas will accumulate in the atmosphere and oceans, and concentrations will grow, even with deep and profound emissions reduction, mitigation, and adaptation measures. This places a severe constraint on human enterprise: any carbon removed from the earth must be returned to the earth.
Topic:
Climate Change, Environment, Green Technology, Carbon Emissions, and Decarbonization
Political Geography:
Global Focus

67. Carbon Pricing and the Elasticity of CO2 Emissions

Author:
Ryan Rafaty, Geoffroy Dolphin, and Felix Pretis
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
We study the impact of carbon pricing on CO2 emissions across five sectors for a panel of 39 countries over 1990-2016. Using newly constructed sector-level carbon price data, we implement a novel approach to estimate the changes in CO2 emissions associated with (i) the introduction of carbon pricing regardless of the price level; (ii) the implementation effect as a function of the price level; and (iii) post-implementation marginal changes in the CO2 price. We find that the introduction of carbon pricing has reduced growth in CO2 emissions by 1% to 2.5% on average relative to counterfactual emissions, with most abatement occurring in the electricity and heat sector. Exploiting variation in carbon pricing to explain heterogeneity in treatment effects, we find an imprecisely estimated semi-elasticity of a 0.05% reduction in emissions growth per average $1/metric ton (hereafter abbreviated as: ton) of CO2. After the carbon price has been implemented, each marginal price increase of $1/tCO2 has temporarily lowered the growth rate of CO2 emissions by around 0.01%. These are disappointingly small effects. Simulating potential future emissions reductions in response to carbon price paths, we conclude that – in the absence of complementary non-pricing policy interventions – carbon pricing alone, even if implemented globally, is unlikely to be sufficient to achieve emission reductions consistent with the Paris climate agreement.
Topic:
Climate Change, Carbon Tax, Carbon Emissions, and Decarbonization
Political Geography:
Global Focus

68. The Future of the Automotive Industry: Dangerous Challenges or New Life for a Saturated Market?

Author:
Annamaria Simonazzi, Jorge Carreto Sanginés, and Margherita Russo
Publication Date:
11-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The automotive industry is undergoing a radical transformation. New social, technological, environmental and geopolitical challenges are redefining the characteristics of a saturated market, opening new scenarios while offering opportunities for the entry of new players. These challenges are bound to trigger reorganization of the global value chain between old and new suppliers and car makers and their suppliers, affecting the distribution of employment, the regionalization of production and the dynamic evolution of the comparative advantage of nations. In this paper we address the issue of the reorganization of global value chains in the face of these challenges. The analysis will compare the relative position of core and peripheries in the North-American and European macro-regions, focusing on Mexico, which represents a significant case study for analysis of the impact of the digital transformation on the domestic value chain in an “integrated periphery”, and of trade agreements on the location policies of big multinationals. The dependency of the Mexican automotive industry on the strategic decisions of global players is considered a factor of great vulnerability, especially in a context of rapid change in the patterns of consumption, technologies and international trade agreements. For Mexico, as for European producers in the integrated and semi-peripheries, the main challenge in the near future will be posed by the radical transformation the industry is going through in electrical and autonomous-driving vehicles, which sees regions and players outside the traditional automotive clusters in the lead. The transformations taking place are bound to change the global structure of automotive production. The rise of new competitors from the emerging economies and would-be entrants from other sectors, competing in mastering the new digital and software technologies, threatens the established structure of the industry. The pandemic has led to a spectacular acceleration in the process of change, while heightening uncertainty about future developments. This is why the governments of leading countries are joining in the race, wielding carrots and sticks in support of their industries and in the endeavor to encourage risk-taking and investment in research and innovation, step up e-vehicle production while providing for the necessary infrastructures, and guarantee their companies a place in the new industry.
Topic:
Markets, Networks, Integration, Decarbonization, Digitalization, Production, and Automotive Industry
Political Geography:
Europe, North America, and Mexico

69. Maritime Challenges: Decarbonization and Geopolitical Tensions

Author:
Clarissa Lins and Guilherme Ferreira
Publication Date:
11-2020
Content Type:
Special Report
Institution:
Brazilian Center for International Relations (CEBRI)
Abstract:
The maritime sector is key to the international economy and trade, accounting for almost ¾ of total freight activity. Shipping is also the most energy-efficient way to transport cargo. “In the coming years, structural changes are expected in the global economy and maritime scenario”, pointed out the speakers during the event “Maritime challenges: decarbonization and geopolitical tensions” held in partnership between CEBRI and the Norwegian Consulate General in Rio de Janeiro.
Topic:
Geopolitics, Economy, Maritime, Trade, Shipping, and Decarbonization
Political Geography:
Brazil and Global Focus

70. Perspectives on a Hydrogen Strategy for the European Union

Author:
Cédric Philibert
Publication Date:
04-2020
Content Type:
Special Report
Institution:
Institut français des relations internationales (IFRI)
Abstract:
There is now a wide understanding that larger use of clean hydrogen in future can be an important mean to achieve decarbonisation of the European economy. A robust, cost-effective European hydrogen strategy could become a pillar of an EU economic recovery plan which should, in line with the Green Deal, accelerate the decarbonization of European economies. The challenge for the upcoming EU strategy is to identify the most important future uses of cost-effective clean hydrogen, ensure sound scale-up through efficient public support schemes and system approaches driving significant cost reductions. Opportunities to maximise the economic benefits for the European economy in terms of jobs, value creation and competitiveness will also matter. And, of course, effective decarbonisation. The European hydrogen industry is now largely ripe for a progressive scale up that needs to be planned for the coming 20 years. While clean hydrogen will be indispensable, it comes with technical and economic challenges. There is an undisputed potential for decrease, but costs and availability of energy inputs, as well as transport and distribution systems, and an enabling policy environment, matter as much or more than simple scale-up. The EU will have to take stock of strategies developed by other countries. Japan and South Korea have robust industrial strategies that push carbon intensive hydrogen in the automotive, residential and power sectors with strong public support. Decarbonization is not always the primary objective. The current demand for hydrogen in fuel refineries and to produce ammonia and methanol for agriculture, mining and industry purposes figures at the top of the possible demand for clean hydrogen. Moreover, steel making in the industrial sub-sector is most likely to create considerable demand for clean hydrogen in complement to scrap recycling. In the transport sector, clean hydrogen could be primarily used for long-haul trucking and coaches. European products exist and deployment is already underway. Long-haul trucks and coaches may demand significant amounts of clean hydrogen, with some complements from other terrestrial transport means although the European carmakers prioritise battery electric cars and light duty vehicles. For hydrogen fuel cell vehicles and supporting infrastructures the challenge is of cost reduction through upscaling and mass production. Deep sea shipping is a sub-sector in which ammonia as a fuel is most likely to generate considerable additional demand for hydrogen. Aviation is a sub-sector that may call for large amounts of clean hydrogen in various forms unless offsetting emissions with verifiable carbon storage is available at scale and more competitive. Clean hydrogen may be used to achieve full decarbonisation of the power sector as an inter-seasonal option, via sector coupling with the gas infrastructure – but this will probably not be needed before 2035. Clean hydrogen can mainly be produced from electrolysis of water with low carbon electricity generation, from natural gas steam reforming with carbon capture and storage, and from natural gas pyrolysis. The clean hydrogen production comes with costs/challenges: hence why future demand must be carefully identified and prioritised. A sound hydrogen strategy for the EU should initially: Assess all available reference studies and international developments in terms of system benefits and costs, certainties and uncertainties, primary and secondary priorities, timelines as well as strengths and weaknesses of the European industry; Deploy progressively and cost-efficiently clean hydrogen for the applications where it has a potential proven advantage over competing solutions for decarbonisation to evaluate merit in terms of EUR/CO2 of each application under different assumptions; Support hydrogen clusters at city or territorial/ regional levels were production, demand and distribution can be effectively organized into systems that allow scale up, job creations, cost reductions and decarbonisation; Organize the scale up of demand and competition over supplies via regulation, IPCEIs in providing clarity over future needs/timelines; Develop roadmaps and demonstration projects for clean hydrogen-based solutions where the possibility of hydrogen proving a superior solution for decarbonisation is high enough; Protect EU hydrogen industry stakeholders at all levels and seizes from external takeovers; Ensure a level playing field for clean-hydrogen and hydrogen-rich fuels and feedstocks both within the EU and externally when there is a global market and competition, via regulatory tools and/or via a carbon border adjustment mechanism.
Topic:
Climate Change, European Union, Decarbonization, Hydrogen, Green Deal, and Energy
Political Geography:
Europe