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Playing carbon catch-up
Giles Parkinson
Published 6:30 AM, 6 Jul 2010 Last update 10:15 AM, 6 Jul 2010
The revolution in energy technology isn’t just on its way, it’s already here, and is likely to presage a fundamental shift towards low carbon technologies.
At least that’s the assessment of the International Energy Agency, the Paris-based intergovernmental advisory group first established in the 1970s following the oil crisis, in an effort to devise policies to deal with future emergencies.
The IEA has now charged itself with the task of advising governments how to navigate through the policy challenges of responding to climate change and energy security issues, and administer a transformation to clean energy.
In its latest technology assessment report, the IEA notes that its 2008 call to action on a move to low-carbon technologies is starting to take shape.
“For the first time, we see early indications that such a revolution is under way,” says IEA executive director Nobuo Tanaka.
He cites the more than $US112 billion that was invested in wind, solar and other renewables in 2008, and which remained constant in 2009 despite the global financial crisis.
In particular, he notes the rapid expansion of hybrid and electric vehicles production facilities and predicts that up to five million such vehicles could be on the road by 2020 (Chinese car manufacturers predict a far greater number).
He also notes that in OECD countries, the rate of energy efficiency improvement has increased to almost 2 per cent per year – more than double the rate seen in the 1990s (Australian government please take note) – and funding for low-carbon energy RD&D has increased by one-third, between 2005 and 2008, and will likely double by 2015.
But while all this is well and good, the IEA warns that the rate of progress remains fragile and fragmented and well below what is needed.
“What we need is rapid, large-scale deployment of a portfolio of low-carbon technologies; we need a massive decarbonisation of the energy system, breaking the historical link between CO2 emissions and economic output, and leading to a new age of electrification,” Tanaka says.
The sort of investment that the IEA is talking about is breathtaking. Tanaka estimates that $US46 trillion in additional investments will be needed by 2050 to fund the sort of investments needed in renewables, smart grids, next generation biofuels, nuclear and carbon capture and storage to bring carbon emissions down by 50 per cent.
It sees energy efficiency playing the most prominent role, cutting growing energy demand to 32 per cent from 84 per cent under the business-as-usual scenario, meaning that fuel cost savings could amount to $US112 trillion over the same period.
Subtracting these fuel savings from the additional investment costs yields net savings of $US66 trillion. Even if both the investments and fuel savings over the period to 2050 are discounted back to their present values using a 10 per cent discount rate, the net savings amount to $US8 trillion.
But to get there, it will take some aggressive public policy making. A carbon price is the first stop, to avoid locking in inefficient, carbon-intensive technologies. And this should be augmented by a suite of energy technology policies and RD&D programs far beyond what is being envisaged in Australia and many other countries.
Among the policy tools it recommends are stable, long-term incentives such as feed-in tariffs, loan guarantees and tax credits – a constant refrain of the clean technology industry in this country – along with technology-neutral market mechanisms, such as emissions trading schemes and green certificates.
The report also highlights what is concentrating the minds of policymakers in the US – the rapid emergence of developing countries, particularly China, as major developers, manufacturers and exporters of clean and low-carbon technology.
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5 Comments
Contribute to the Conversation
Tony Hansen wrote:
You write: 'A carbon price is the first stop, to avoid locking in inefficient, carbon-intensive technologies'.
(See Playing carbon catch-up, July 6)
Should we not also be wary of locking in inefficient, non-carbon-intensive technologies?
6 Jul 2010 10:16 AM
Bernard Walsh wrote:
Tony, that's a good point (see "An inefficient alternative", Conversation contribution, July 6). Which is why a blanket carbon price is a good way to reduce emissions. It means that a lot of attention will be paid by the market to improve efficiency of non-carbon-intensive technologies, or selecting the most efficient ones available at any given time.
Limiting non-carbon investment to narrow areas selected by government bureaucrats is, as you suggest, not a good idea, as it requires them to pick a runner in what will be an interesting race over the next few decades.
6 Jul 2010 12:01 PM
Bill Koutalianos wrote:
"...leading to a new age of electrification." (See Playing carbon catch-up, July 6).
With such optimism in such poorly advanced infant renewable technologies, it sounds more like we're headed for an age of de-electrification.
If the electricity price rises we are currently having is termed 'catch up', I wouldn't like to see what catching up actually entails.
6 Jul 2010 12:29 PM
Richard Brown wrote:
Whatever we do, we should avoid the expensive ETS implemented in NZ. (See Playing carbon catch-up, July 6).
The scheme does not help the environment one iota, but will make traders and polluters wealthy.
There is no incentive to do anything positive for the environment.
The NZ ETS is considered by all to be an "Emperor's New Clothes Tax'.
6 Jul 2010 1:32 PM
Roger Clifton wrote:
Bill Koutalianos implies that an expansion of electrification is not possible if we rely on renewable technologies. (De-electrification, Conversation contribution, July 6).
Quite so! However the report does also recommend nuclear, which would certainly fill the gap.
To that end, we need to vote for pollies with enough courage to suggest nuclear.
Instead of locking in artificially high feed-in tariffs, we need a stiff carbon tax, so that non-carbon technologies can out-compete carbon, then compete with each other, to unsubsidised efficiency.
Among the new technologies we need to see emerge, is the synthesis of transport fuels/energy, which will become an increasing concern to remote Australia as diesel gets priced out of reach.
6 Jul 2010 2:24 PM
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