American greenhouse gas emissions falling due entirely to electricity sector

Dr. Thomas Rowlands-Rees of BloombergNEF.

Rating: High school and post-secondary

Summary: Markham interviews Dr. Thomas Rowlands-Rees of BloombergNEF about US greenhouse gas emissions falling. The primary cause of lower emissions is the switch away from coal (mostly to natural gas) in the power generation sector.

Related links:

US energy-related CO2 emissions to fall in 2019: EIA

US coal plant retirements linked to plants with higher costs

US renewable energy consumption surpasses coal for the first time in over 130 years

Trump powerless to stop US coal plants from retiring

This interview has been lightly edited.

Markham Hislop: Welcome to another episode of Energi Talks, the podcast where we discuss global energy issues and trends with experts from around the world. In this episode, I’ll be talking to Dr. Tom Rowlands-Rees about American greenhouse gas emissions. There’s a very good chance we’ll be discussing the implications of a Joe Biden presidency for future emissions. Tom has a PhD in physics from Oxford university and he heads up Bloomberg any F analysis for North America. Welcome to Energi Talks, Tom.

Dr. Tom Rowlands-Rees: Thanks very much.

Markham Hislop: Now I first came across your work in a November 19th, 2020 your colleague Nat Bullard’s column, about the COVID-19 pandemic, Barack Obama’s Clean Power Plan, and the Paris Agreement. Here are some of the conclusions that Bullard came to: American greenhouse gas emissions have been trending downwards for the past 12 years. That was a bit of a surprise to me. And another one is the debate around Obama’s clean power plan that took place in 2014 and 2015 about de-carbonizing the USA power sector. It was said at that time that the market would take care of the issue. The regulations weren’t needed. And I think the critics were maybe proved right on that. So let’s start this conversation with your take on the general trend of US greenhouse gas emissions, where are we at?

Dr. Tom Rowlands-Rees: US greenhouse gas emissions are trending downwards. As my colleague, Nat highlight highlighted in his article that’s not a short-term trend. That’s been happening since around the mid-2000s. And in particular, the last financial crisis [2007 to 2009] triggered a short-term drop in emissions and it never really recovered after that. This slow down has really come from the power sector and it’s mainly, though not exclusively, from coal plants shutting down and being displaced by gas.

On some levels, this is a positive story because gas does burn more cleanly than coal. The US has a lot of cheap gas coming from fracking as a byproduct of oil production. So, interesting that the slow drop in US emissions is caused by the growth of the fossil fuel industry. But it won’t continue going down forever because once there’s no more coal to displace, then gas will be the dirtiest thing in the system.

Source: US Energy Information Administration.

Markham Hislop: I had this conversation with a Canadian colleague not long ago. And her argument was that in the Canadian context switching away from coal Canada has to be very careful because while gas seems attractive in the short term to bring down GHG emissions, you then lock in a source of emissions for the long-term because these are 30, 40, 50-year investments. It seems like that is a concern in the US as well.

Dr. Tom Rowlands-Rees: It is a concern and it is something that policymakers will need to think about the long term. I’d also say though, this idea that it’s going to lock gas in is also perhaps a little bit pessimistic for a couple of reasons.

One of the things that have defined the last decade or so is that 30% to 40% of US gas is consumed in the power sector, which is getting cheap gas from an industry that relies on high global oil prices. Now that global oil prices have dropped so much, it’s no longer economically viable in the way that it was.

We’re quite possibly facing a situation where the era of cheap gas is over, therefore the economics no longer work. Couple this with the falling cost of emissions, there’s actually a real danger that some of the gas capacity being built may end up being redundant in the future. I don’t think that gas being built now necessarily locks it in.

We think of fossil fuels as being a safe investment. If you’re investing in that area, there are real risks, both in terms of the gas price in the future and the fact that renewables are getting so much cheaper.

Source: Levelized Cost of Energy and Levelized Cost of Storage – 2020.

Markham Hislop: Let’s talk about that for a moment because according to the Lazard Levelized cost of energy estimates for 2020, we’re talking about on the low end for both wind and solar getting under 3 cents a kilowatt-hour, which makes it less expensive than any other form of power generation. Texas, for example, has long been a wind pioneer and is now incorporating a lot of solar. California is rapidly adopting renewables. I interviewed Heyme Baran from the International Energy Agency who is their renewables analyst and estimates that 90% of all power generation capacity additions going forward will be wind, wind solar and batteries. I guess maybe my colleagues’ fear of locking in gas may be overstated simply because of the economics of renewables.

Dr. Tom Rowlands-Rees: I’m inclined to agree with that conclusion.

Renewables have zero operating costs. Once the capital investment has been paid, once they’re built, nothing’s going to displace them unless it has somehow got negative costs. Whereas gas is much more about the fuel costs.

There’s perhaps more of a role is for gas peaker plants. Once they’ll be running at low capacity factors to make up where the other technologies have a shortfall, but not optimized towards running for long hours at higher efficiencies like combined cycle technologies.

Markham Hislop: Lets talk about another sector for a moment. And that would be transportation, which makes up, I think, around a quarter of US greenhouse gas emissions. And it seems to me that the electrification of transportation may be ready to do the same thing in the transport sector that gas did in the power sector, which is starting to bend that curve downwards. We’re probably about two or three years away from sticker price parity between electric vehicles and gas-powered vehicles. And if Elon Musk has his way, we’ll see very, very cheap batteries by the end of the decade and America, especially States like California are really pushing hard on faster adoption of zero-emission vehicles with mandates. What’s your take on that?

Dr. Tom Rowlands-Rees: I mean, I think it’s great to see so much activity on this. And I think that you know, it’s an exciting time to be involved in electric vehicles and that the transport sector generally, I think the thing that gives me sort of hesitation to get too optimistic, and I think there’s a real challenge for all of this is you can make dramatic change in the short term in terms of what’s happening with new vehicles and new infrastructure. And we’re still some way from that. But even with that, there’s a lag in terms of the turnover of the overall fleet of vehicles that are on the road. So, you know, to start materially affecting emissions from transport, say 10 years from now, it’s not sneaky to start having activity now and quite, quite drastic activity, which is, it’s a very difficult problem to solve. I don’t think that I necessarily have the answers, but I think that it’s, going back to what we were saying just before we started recording I think it’s another reason why that needs to be more focused on transport to try and figure out this part of the puzzle.

Markham Hislop: I was doing an interview with an economist, not that long ago. And they were speculating that perhaps what Biden might do is bringing in a program that will turn over that auto fleet more quickly than the average, you know, 13 years and especially concentrating on the older, I mean, they’ve had cash for clunkers for a long time but accelerate that and, you know, go after those vehicles that were produced, say from 2000 to 2010, which are less fuel-efficient, and maybe a little bit more polluting, get them out of the auto fleet and get that average age of an auto, maybe down below, below 10 years. What do you think the odds are of Biden doing that?

Dr. Tom Rowlands-Rees: It’s an interesting question. And I should add that I am, I’m still getting to grips with the ins and outs of US politics. I think that for this to succeed, it, it has to have strong buy-in from the automakers who will see this as an opportunity potentially. And if that then can translate into opportunities around jobs. And so there’s a sort of a domestic manufacturing angle that would need to accompany such an aggressive phase out of the vehicle fleet for it to be,upolitically palatable. I mean, one, I think that everyone would want to avoid is sort of a situation like happened with solar in Germany where the government subsidized, the uptake of a technology that drove the development of an industry in a different country, which in, in that particular case was China. So I think there needs to be a coordinated plan, not just around phasing out the existing fleet, but for this to be politically palatable, there would also be, needs to be an examination of the supply chain and the opportunities to create jobs in the U S. I can’t see it happening any other way.

Markham Hislop: Let me give you an explanation for why I’m a little optimistic on this front, an under reported and under commented on part of the clean energy plan that Biden put out. And obviously it wasn’t the president elect who wrote the platform, but whoever did really, I think, understood this, you know, where the clean energy industry is going globally, because Biden says that he’s committed to making the United States, the number one, clean energy power in the world. And so he understands that there’s a clean energy, looks like an arms race between North America, Europe, and Asia. And he’s determined that the U S is going to get back on top of that arms race. And that would argue for some of these more aggressive programs and in particular, when it comes to manufacturing of electric vehicles and the supply chains that are critical to those, because that’s how you get back on top of, you know, the battery industry, EV industry, and other related industries. What do you make of that?

Dr. Tom Rowlands-Rees: It makes sense. I think that you know, we have to think about the fronts that the U S you know, in terms of this stated ambition of the U S becoming the set of the powerhouse on clean energy, obviously clean energy, isn’t a single entity, lots of different sectors. And I think that to some extent, the ship has sailed on technologies like wind and solar, solar manufacturing is just so consolidated in China. It would be very painful for the U S to try and compete there. On wind energy. There’s, you know, European manufacturers have, really got a strong position, and we’re even seeing in the development of offshore wind in the U S it’s European companies that are, sort of getting into those opportunities early around the development of those projects, perhaps electric vehicles, given that the US has a track record in automotive. And you have some degree of a battery supply chain in the U S perhaps provide is an opportunity, but there’s a big competition between US and China. Those are the two horses that are in that particular race and parts. That is the race that I would say the US is still in contention.

Markham Hislop: Let’s talk about another big contributor to GHG emissions. And this, again, I don’t think gets the attention that it deserves and that’s forest fires, and we’ve seen them, particularly in California, that’s been a huge issue, but as climate change, worsens and conditions become dryer, I would expect that we’ll see that forest fires become an issue in other States. How big is the problem.

Dr. Tom Rowlands-Rees: So just bringing up the numbers now to make sure I get it right. We estimate that forest fires in 2020 in the U S we’re close to 200 million tons of CO2 higher than they were in 2019. Take into account 2019 was a particularly low year, but it’s still a massive uptick. Now I got this data from a group of collaboration of academics at various different universities that work with NASA and analyzed satellite data to try and make a rough estimate of this. And, you know, it’s really their area of expertise not mine, but my correspondence with them, you know, one of the things they wanted to emphasize is that this stuff, you know, sometimes you have a anomalous years and, you know, you shouldn’t try and read too much into one year. So for sure, 2020 was a really bad year for us.

Dr. Tom Rowlands-Rees: Forest fires, it might just be a blip. The thing that gives me a little bit more cause for concern is when we think about it in terms of fires in temperate regions, which would include the U S is, and it would include Australia as well. So if we take 2019, where there were a lot of fires in Australia and then 2020 there was a large number in the U S represents a significant uptick in this type of forest fire globally. So it remains to be seen in the next few years if this is a new trend, and indeed this a feedback effect from global warming or whether this is just a part of the natural way, these things work. Sometimes you have years with, with more fires than others.

And, you know, so I think we have to watch this space, but certainly if it does turn out to be a trend, I think it’s, I don’t necessarily think that it’s fair to include that in, you know, the U S’s Paris targets or because, you know, you’re a country with a lot of forests that doesn’t mean you should be punished or penalized for that, but it’s certainly an opportunity maybe reversing this trend, if it is a trend and managing those forests. Well, there’s an opportunity to avoid a lot of emissions, but I think, you know, it’s something that should be thought about.

Markham Hislop: Well, speaking of Paris climate targets I was surprised to read in NATS column that the US is now just barely, but nevertheless if the current trajectory holds is actually on pace to meet its climate targets, and that was a little surprising. What do you make of that?

Dr. Tom Rowlands-Rees: Sure. Well, I mean, yeah, so I mean, I have to take responsibility for this one because this something that resulted from a little bit of analysis I did. And so let me give it in its full context, we took, you know, 2016 when that target was agreed. And then we looked at 2025 and we drew a straight line on the chart of, you know, U S economy wide emissions and said, you know, if you’re sitting in 2016 and you’re thinking about hitting this target, this straight line represents the trajectory you need to be on. And then obviously Trump took the U S out of the Paris agreement and the emissions have been nowhere near that line 2020, the destruction we’ve seen, brings the U S back to where it was supposed to be on that line.

But obviously we know that’s because of the pandemic, because people haven’t been traveling. As soon as you take all of that away, you would expect emissions to bounce back up. So when we say that it’s back on track, what we really mean is on the chart, it’s where its supposed to be, but for all the wrong reasons and in a way that is not necessarily binding. So, you know, it’s not going to be baked in if the U S recovers back to where it was, then it’ll be way off track again. So we say, it’s back on track. And this is just really to emphasize that there’s still an opportunity when the U S enters into the Paris agreement or reenters into the Paris agreement for it to meet its original commitments. Whereas if none of this had happened, you’d say there’s no chance at all. Now there is a chance, but it’s still reliant on a huge amount of work being done and for the economy to grow back greener, so to speak.

Markham Hislop: We’ll close on this note, Tom, I did an interview for energy talks yesterday with Dr. Seth Klein. It was Canadian climate activists, and he argues that we are so far behind in terms of meeting our Paris climate targets, that only putting an economy on a war footing and basically having the government direct much of production and so on will get us there. And, and he justifies that argument. The climate change is such a crisis. It is kind of like a world war in its severity and this conversation. And the other reporting I do though, gives me some hope that a combination of escalating policy over time, better technology, changes in consumer habits. We can get there. We can achieve those climate targets, at least in North America and perhaps parts of Europe. What would be your take on that?

Dr. Tom Rowlands-Rees: I sort of half share your optimism. I think that, you know, where I’m very optimistic is on the power sector. The technologies have reached that maturity, they’re crossing the tipping points. We’re seeing the transition that we’d hoped for. There’s still a huge amount of work to be done, where the real pain is going to be is on how we move away from oil and transport. And obviously electric vehicles offer us some hope there, but it does require more drastic action to meet those to start hitting targets, particularly because, I mean, to give an example, I’m also looking at emissions in Canada and we haven’t finished the analysis there, but in Canada, the majority of the power sector is from hydro. So actually overall very low emissions, which means that in terms of the overall emissions target, the sort of things that other economies having, you know, coal getting shut down renewables, coming in, can mask some of the failings in other sectors.

And the reason that the, the emissions targets debate in Canada is so pointed is that they don’t have that to disguise some of the failings in other areas. And I think we’re now reaching the point in the U S where the power sector is getting cleaner and cleaner and, and there’s less and less of that to give in terms of emissions reductions. And so now the other sectors and in particular transport are being exposed as not having made enough progress. So I think that there is some optimism in some sectors that, you know, this doesn’t, this can be sort of maybe direct, you know, directing economic forces effectively can do it. I think that maybe a more warlike mentality, I can sympathize with that argument more when it comes to some of the other sectors, perhaps if I’m standing in the shoes of a climate activists, I would say that’s where that warlike, energy is probably best directed. Now whether that’s politically palatable or not, it’s not for me to say, but kind of half agree with the optimism, half agree with your guests from yesterday.

Markham Hislop: Just to wrap up, I’ll have a few observations about the Canadian situation. Canada is particularly going to be difficult to meet its targets on, in two areas. One is industry because a lot of that is dominated by oil and gas production which makes up 26% of national emissions. The oil sands alone make up 11% of national emissions and decarbonizing the oil sands while there is technology to do it is a very, very difficult task, both technically and politically. So that watch for that, that’s going to be a big issue. And the other is transportation because for a variety of reasons you know, Canada is a very much a cold climate country and Canadians are used to driving bigger vehicles like trucks and SUV’s. And I think we’re going to see that transportation also will be a very difficult sector to decarbonize and electrify. So Canada is, has got a lot of challenges. And, in fact, we may see that the U S does a better job of meeting
its Paris targets than Canada does.

Dr. Tom Rowlands-Rees: I would agree with that. Just one final thought though is in a certain sense for everyone else looking at what Canada does, it’s kind of interesting because for the reasons we discuss Canada is facing the kind of conversations now that other countries will be facing in five years time because they don’t have any easy options; or, Canada doesn’t have any easy options that some other countries have some easy options that they can win on right now and, you know, kick the difficult conversations down the curve.

So I think it’s really interesting to see what Canada does and how it handles that situation and how the conversation plays out. Because I think everyone can learn from that.

Markham Hislop: Prime minister, Justin Trudeau’s Liberal government has brought in a very comprehensive suite of climate policies, everything from a national carbon price to a larger emitter carbon tax and a whole variety of other regulatory and incentive subsidies to adopt cleaner technology. The problem is going to be the decentralized nature of the Federation, because a lot of this implementation will take place at the provincial level because of the constitutional authority. For the prime minister, it’s kind of like pushing a string. That’s going to make it very, very difficult.

Tom I’ll interview you five or 10 years down the road and we’ll see if that’s correct, but I think what we’ll see is at the federal level, the government slowly tightening the screws of all of those policy initiatives, and if a particular province or provinces doesn’t come along, then they will override the authority of the province and impose the federal policy or program on the province. And they’ll just keep tightening and tightening it every year in the hopes that that will get them to where they want to go.

We’ll watch that with considerable interest, comparing it to the US where we have a very different situation and a different policy mix.

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