Fossil fuels and sustainability: Global challenge – local response

1. Fossil fuels and sustainability:Global challenge – local response Mark Jaccard REM 200 School of Resource and Environmental Management Simon Fraser University February, 2014

2. Requirements of sustainability The human economy, like the human body, is an energy and materials transformation system – resource inputs and waste outputs. These two flows determine environmental sustainability. Resource endurance – energy and material inputs must be able to sustain services they provide to humans by enduring indefinitely or by substitution to alternatives at comparable cost. Non-toxicity of wastes – energy and material outputs must be benign to the receiving environment, or recycled within the human economy, or captured and safely stored.

3. Environment Resources: energy & materials Economy: energy & material transformation Wastes: energy & materials Sustainability threats: resource scarcity & environmental harm Oil depletion concern

4. Peak oil (aka Hubbert’s peak) Discovery and exploitation of a finite resource to follow a bell-shaped curve over time – applies to all finite resources, such as oil Peak oil Quantity Time

5. Peak oil and its presumed consequences • The theory: • As we pass the global peak in the production of oil, energy prices will rise and stay high. • The consequences: • rapid decline of suburbia, • rapid decline of long-distance trade and travel, • reduction of economic output • conflicts over scarce resources

6. But does peak oil accurately depict the dynamics of oil production and price? Oil is finite – but its exact quantity is unknown. Rising prices motivate exploration and innovation, increasing oil reserves. More important, the definition of “oil’ keeps changing to include previously excluded resources: • deeper offshore oil, • enhanced oil recovery, • tight oil, • oil sands, • heavy oil, • shale oil. All these “oil’ resources can produce gasoline, diesel, etc. So too can the other fossil fuels – natural gas and coal. So too renewables.

7. What are the production costs of fossil fuel substitutes for conventional oil? Potential increasing and cost falling with innovations Potential increasing with shale gas Peak oil focus Source: Farrell and Brandt, Berkeley, 2008

8. The observed dynamics: peak oil curve can and does shift Ignores feedback between price, exploration, technology and the discovery-development of “oil” supplies – long predicted by economists. Rising price shifts curve to right and peak upward Quantity Time

9. Is the supply cost info for oil and its substitutes reliable? Why is the current oil price so far up its curve at $80-$90? Bottlenecks, market power, speculation, expectations. Could the oil price spike up for several years? Yes – war, rapid demand increase, weather, etc. Will the price of fossil fuel supply shift upward over time? Maybe – but just as likely downward with innovation.

10. Toxicity of wastes concern: global impacts Environment Resources Local wastes Economy Global wastes

11. The 2 C carbon budget Remaining carbon budget Unburnable carbon

12. Current world energy path Next 50 years? CO2-free =15% CO2 emitting = 85%

13. Diverting from a hotter, unstable world Must start declining this decade 60 Current path to soon lock-in to 4C, then 6C, etc 40 Emissions path for 50/50 chance of not exceeding 2° C Annual Global Emissions (Gigatonnes CO2 equivalent) 20 2015 2000 2050 2100 50 – 75% decline by 2050

14. Necessary actions and policies Loss of forests and some agricultural practices increase GHGs Especially important to reduce CO2 emissions from fossil fuels: - energy efficiency, - fuel switching to renewables, perhaps nuclear, and - carbon capture and storage when using fossil fuels These actions only happen with policies that price emissions or regulate the technologies and fuels that cause emissions. Policies Actions

15. Energy system under 2 C constraint Energy efficiency is not enough. Must be rapidly switching to CO2-free forms of energy (renewables, nuclear, FF with CCS) Electricity generation must be close to CO2-free by 2050 (wind, biomass, solar, hydro, geothermal, fossil fuels with carbon capture and storage, nuclear). Buildings must be close to CO2-free by 2050 (heat pumps, passive solar, biofuels, photovoltaics, solar hot water) Vehicles must be close to CO2-free by 2050 (electric, ethanol, biodiesel, hydrogen) All these technologies and fuels available today at slightly higher cost.

16. 2 C constraint and the oil scarcity risk As climate policy tightens globally, what happens to the price of gasoline in every country? What happens to the demand for oil globally? What happens to the price of oil globally? What happens to the oil scarcity concern?

17. Climate action and oil scarcity risk Environment Resources Economy Wastes

18. But can we act on the climate risk? Ironically, our global worry is not running out of fossil fuels. It’s not running out fast enough (at least if we burn them openly). But acting on climate risk is hugely difficult. We need global action, but global governance is weak. Two challenges stand out. • Poorer countries have the fastest rising emissions and don’t want to bear the costs of shifting to a low carbon path. • Even in rich countries, those who can make money by increasing carbon pollution try to delude us. • Climate scientists are wrong. • Our fossil fuel project somehow does not increase pollution. • Ignore climate risk and just look at the jobs and tax revenues.

19. Rapidly rising global CO2 emissions Start of major power commitments for immediate reductions Annual Global Emissions (Gigatonnes CO2) Accelerating

20. Rich and poor: CO2 responsiblities

21. Rich and poor: Who pays and how? Challenge? Visions of equity are self-interest biased. Ability to pay? (previous rich countries? future rich countries?) Polluter pay? (current polluters? past polluters? Individuals?) Solution? Aid to developing countries must be combined with trade measures such as tariffs that reflect carbon pollution policies and emissions.

22. Rich country delusions: Canada’s oil sands Plan? Increase production from 2 million barrels per day to 9 million. Requires expanded production, new pipelines, ocean tankers. Delusion strategy? Critique climate science. Ignore it and talk of jobs and tax revenues. Ignore or deny evidence that increase oil sands must not happen in world in which we stay at or below 2 C. Independent analysis? Oil sands expansion inconsistent with staying below 2 C.

23. Fossil fuels under 2 C constraint Unconventional oil Declining use of fossil fuels unless rapid growth of CCS Con. gas Unconventional gas Con. oil CO2 Coal 1980 2000 2020 2040 2060

24. Global energy system under 2 C constraint 50% reduction from growing system requires 80% CO2-free globally Only possible if virtually all long-lived energy investment is CO2-free from today 15% in 2010 50% in 2030 80% in 2050 CO2-free energy share = renewables + nuclear + fossil fuels with carbon capture & storage

25. MIT focus on Canada’s oil sands “The niche for the oil sands industry is fairly narrow and mostly involves hoping that climate policy will fail.” - Chan et al., 2010 “The main reason for the demise of the oil sands industry with global CO2 policy is that the demand for oil worldwide drops substantially. … it can be met with conventional oil resources that entail less CO2 emissions in the production process.”

26. Oil sands under the IEA 2 C scenario X Source: Archer

27. G7, Rio (1988)(1992) Kyoto (1997) World Conference on Changing Atmosphere (1988) Canada’s emissions targets & policies Climate Change Plan for Canada Project Green EcoENERGY 900 Action Plan 2000 e) National Action Program 2 800 Green Plan 700 600 500 Canadian GHG Emissions (Mt CO 400 300 200 100 0 1990 1995 2000 2005 2010 27 27

28. US vs Canada emissions to 2020

29. Policy effectiveness climate policy • Any of these can be effective compulsory non-compulsory • information • labels • subsidies standards emissions pricing • These alone cannot cap-and-trade carbon tax

30. Latest emission forecast: sectors

31. Latest emission forecast: provinces

32. Canadian policy:Alberta 2005-2007 • Fossil fuel rich region of Canada – oil and gas industry, coal-fired power. • Developed emission intensity standard for industry in 2005-2007 to pre-empt pending federal regulations. • Required initial 12% intensity reduction (emissions per unit output) then intensity reduction of 2% per year. • Fee of $15 / tCO2 for emissions in excess of standard. • Revenues collected from fee are accumulated in a technology fund for distribution to industry based on competing bids. • Optics • Alberta claims it was first in North America to price emissions. • Sometimes refers to emissions charge of $15 / tCO2. • But fee only applied to excess emissions, so actual average cost for emissions from a typical facility likely less than $5 / tCO2.

33. Canadian policy: British Columbia 2006-2010 • Sets aggressive target for emission reduction and then implements substantial compulsory policies. • Clean electricity standard requires 93% new electricity to be zero emissions (like an RPS, but allows fossil fuels with CCS). • Led to cancellation of two coal plants and one natural gas plant. • Rapid development of run-of-river, some wind and some biomass. • Carbon tax on all fossil fuel combustion emissions. • revenue neutral with all revenue returned via corporate income tax and personal income tax cuts (tax credits for low income) • tax of $10/tCO2 in 2008, rising by $5 every year to $30 by 2012. • Other policies • Implementing low carbon fuel standard and carbon neutral gov’t. • Initially joined California-led Western Climate Initiative and passed legislation to enable future link to California cap-and-trade.

34. Canadian policy: Ontario 2003-2013 • In 2003 commits to phase out all coal-fired power (coal provided electricity almost 1/3 of generation). • Rapid development of natural gas plants. • Policies to foster renewables via feed-in tariffs, differentiated by type of renewable (higher FIT for PV). • Coal fired plants now producing little, sometimes nothing • Other policies • Host of non-compulsory policies. • Originally joined California-led Western Climate Initiative

35. Canadian policy: Quebec 2007-2013 • 2007 implements North America’s first carbon tax of $3 / tCO2. • - Over $200 million annual revenues allocated to energy efficiency, public transit, electrification (hydropower dominant) etc. • Joins Western Climate Initiative in 2007, creates cap-and-trade framework in 2009 for implementation in 2013 • - To reduce emissions 20% by 2020 from 1990 • - California-Quebec agree to allow permit trades in 2015, delegates some management to WCI Inc. which runs California system • - Free allocation of permits based on gov’t target for many, declining 1-2% per year depending on unit • - Also auctions for permits (4 per year?) with floor price ($10?) • - Phase I - 2013-2014 applies to industry and electricity (free allocation of permits to about 80 facilities), greater 25,000 tonnes • - Phase II 2015 -> extend to embodied carbon in fuels • First Quebec auction happened Dec 3 - results Dec 6!

36. Questions explored in REM 350 • Can current or even substantially higher human-related flows of energy and materials be sustainable? • Can non-renewable resource use be in a sustainable energy and material system? • How do we define behavioral changes for sustainability and what is this potential? • How do we evaluate alternative policies for sustainability? • What institutions and policies are needed for rapidly scaling-up renewables? • How can we achieve the necessary global effort against the climate risk? • What mechanisms within and between nations can rapidly provide energy access to 2 billion people? • What is economic growth and can it be sustained indefinitely? • Can international trade be sustainable? • Is foreign investment good or bad for developing countries? • How can research into human ways of thinking help with policy design?