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The likely winners and losers from the Paris climate talks

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The Paris climate change talks – the 21st annual Conference of the Parties – begins this Monday, and there is a lot at stake.

For the environmentalists, and anyone who can understand basic science, it is about protecting the world against the ravages of runaway climate change. The most in industry, it is about sending the policy and market signal that this is finally being taken seriously. For the fossil fuel industry, it is about protecting their future.

Here are some simple graphs that illustrate the challenge ahead.

wmo paris weather

Graph 1: The world is warming: The first graph is the state of the climate. The World Meteorological Organisation released its annual update this week, noting that the world is on track for its hottest year, and the hottest five years on record.

It estimates that temperatures will have already risen by more than 1C by the end of 2015 over pre-industrial averages. That is half way to the agreed “limit” that the world has  vowed to avoid. Even at 2C, there is perhaps only a 50-50 chance of avoiding runaway impacts, hence the push to tighten the target to 1.5c.

Still, climate deniers look at that graph and say, “nope, no warming here” and still hang on to their no warming since 1998 mantra.

hsbc paris pledges

Graph 2: The pledges are missing the target. So far, the pledges received by more than 170 nations amount to a small reduction from where the world was heading, but nowhere near enough to cap warming at an average 2C.

As this graph above from HSBC shows, so far the reductions amount to 4 gigatonnes of CO2 equivalent. There is another 15GT/CO2-e that needs to be reduced each year by 2030. The IEA and IRENA and others think that can be done largely through deployment of renewable energy and energy efficiency.

paris preview australia cliff

Graph 3: Australia’s pledges miss the target by a long way: This graph above, from The Climate Istitute, illustrates the challenge for Australia. The Turnbull government insists it is at the front of the pack, but if it is serious about the 2C target, it will have to take drastic action post 2030 unless its targets are increased.

The problem for the Turnbull government is that as fast as they are buying emission reductions through the Direct Action program, the rest of the economy is busily increasing them. This is particularly the case in the electricity sector where emissions have jumped sharply as more coal is burned after the repeal of the carbon price.

Australia says it will meet its 2020 targets from the Kyoto treaty, but that is largely through a generous hangover from its initial 2012 allowance, which meant that Australia could increase emissions from 1990 levels rather than reduce them.

That means Australia still has no mechanism to effect an economy wide decarbonisation program. Repeated scenario planning from the likes of the Climate Change Authority and ClimateWorks Australia have been ignored. Soon enough, Australia will no longer be able to rely on accounting tricks. It will need a real policy.

paris preview historic emissions

Graph 4: Whose fault is it anyway? One of the most intractable problems of the climate change negotiations has been the notion of responsibility. Greg Hunt likes to focus on the emission growth of developing nations such as China and India when seeking to justify Australia’s modest emissions reduction targets.

That’s an argument that might stick in Australia, but not so much on the international stage, where the question of  differentiated responsibilities is paramount.

It is true that China is by far the biggest emitter, and India is catching up quickly. But this graph above puts it in some context, with China and India having very low emissions per capita since 1850. It is largely those emissions which have taken the world to average warming of 1C since pre-industrial times.

paris preview us china

Graph 5: China and the US take centre stage. This next graph puts those figures in an added context, the historic and recent emissions from the two biggest emitters, two biggest economies, and two most powerful nations, China and the US.

China has rapidly overtaken the US in absolute emissions, although – despite a recent rise – its current emissions pre capita remain significantly below that of the US, and in terms of emissions per capita, its efforts can be seen in the third graph of the three above.

It was the inability of China and the US to agree on much that undermined the Copenhagen talks, but bilateral negotiations between Barack Obama and Xi Jinping has resulted in a significant breakthrough, although there are still some difficulties, particularly around finance and verification.

barclays carbon budget

Graph 6: It’s all about the budget. Back to the carbon budget, because it is that which will count most for business, investors and governments. The graph above, from Barclays, highlights the two budgets defined by the UNFCCC and the IPCC – the first a strict budget consistent with a 66 per cent chance of capping temperature at 2C, and the second giving a 50-50 chance.

Either way, the world is set to burn through more than half of its carbon budget within the next 15 years. If the stricter budget is observed, three quarters will be gone by 2030, precipitating a major reduction in fossil fuel burning in subsequent years.

coal hsbc share

Graph 7: Big black hole for coal: The most dramatic impact on the fossil fuel industry is felt by the coal industry. As this graph above from HSBC shows, coal is affected only slightly by the current country pledges, but if a trajectory to the 2C scenario is locked in, then the use of coal in electricity generation is virtually redundant by 2050.

barclays fossil fuel revenue

Graph 7: Fossil fuels on the slide: And coal is not the biggest loser, in absolute terms, as this graph, again from Barclays, shows an estimated reduction in fossil fuel revenues of $US34 trillion from now to 2040 under the 2C scenario.

While coal is the biggest loser in percentage terms, but in absolute loss of revenues, the oil industry would be down more than $US22 trillion.

Barclays notes that COP-21 in itself is “clearly not going to put the world on a 2°C track”. But that does not mean that fossil-fuel companies can simply carry on with business as usual and ignore the implications of the IEA’s 450-ppm pathway. A strong agreement in Paris will still send a clear signal for future investment patterns.

 

  

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  • MaxG

    This problem will sort itself out; when food production goes down the tubes due to warming, and people start dying in droves…

    • Mike Dill

      Sad but probably a realistic possibility. Unfortunately hungry people often start wars (see french revolution).

      • Phuc Dat Bich

        … and as Joe Hockey says “Poor people don’t drive cars!”.

        Another argument that doesn’t add up any more than Prince Charles’ stupid comment that the Syrian conflict was caused by climate change.

        The biggest wars of the past century and this were started by the Germans and the Americans. So I don’t get the connection with hungry people.

        • Colin Nicholson

          Nope the biggest series of wars was started by the Russian revolution in 1917. It almost lost WW1, certainly aided and abetted WW2, fueled the cold war, and the list goes on. Something about the starving people in 1917 comes to mind.
          As for your mindless thinking on Syria, try gaming the scenario without the 6 year drought

    • Phuc Dat Bich

      The jury is out on this one. How do you argue with the science that shows that seasonal higher CO2 emission levels results in higher crop yields. For example also in the Netherlands, CO2 separated out from north sea gas is pumped into greenhouses resulting in improved tomato crop yields. While I am not arguing with the need to cut emissions, which even for ocean acidification needs is essential, your particular argument in this case in my opinion does not stack up.

      • Motorshack

        You might have a point about higher CO2 being good for plants, but high temperatures definitely are not. Once temperatures get above about 90F (32C) most plants stop growing and shut down metabolically in order to minimize water loss.

        Nor is “the jury still out on this one”. Anyone who has ever worked on a farm can tell you from direct experience what a prolonged heat wave does to crop yields.

        So, a permanent heat wave caused by excess CO2 is quite likely to devastate global crop yields – even if rainfall patterns stay normal, which they probably won’t. Here in the U.S. agriculture in California is already in a state of serious collapse, and the Great Plains will likely follow in a decade or two.

        Finally, as a former soldier, who once spent more than a year in a war zone, I don’t expect the sorting out process to be the least bit pleasant.

        In short, good luck to one and all. I expect that you’ll need it.

      • Colin Nicholson

        And the nutritional value of the food produced in CO2 greenhouses is ????

      • Coley

        You ever eaten Dutch tomatoes?

        • Colin Nicholson

          they’re not as bad as the icelandic ones … oh and the icelandic corn …….

  • Wickliffe

    The solution cannot arise within the context which creates the problem. Industry must burn fuel to produce wealth. Growing a food garden and building soil intentionally in the process can feed people and sequester CO2 (half-life 300 years) by direct use of solar energy. We each need to begin this sequestration while we can. The time to gain expertise is now, not while dying from consequences of economic collapse.

  • it’s all hot air…several hundred new coal plants permitted in India and China this year will not be shut down in the next 10 years, and the record number of SUVs bought in the US this year will not be parked & abandoned over that time frame either…

    • Mike Dill

      The newer coal plants are cleaner than the old ones that they are shutting down. The big problem for them is that solar and wind will drop the wholesale raters, take most of their profits, and they will not be running very often as solar and wind are cheaper to operate.

      My guess is all the FF plants that are not subsidized by the governments will be unprofitable in a very small number of years as the costs of new wind, solar, and storage keep dropping.

      • the new plants may be cleaner but they’re not carbon capture, so the CO2 releases will be the same as for the plants that they replace…China and India accounted for 98% of the increase in world coal trade from 2008 to 2013, and the new plants they’re building today will not be shut down anytime soon; India’s lofty goal is to have renewables account for 35% of their power by 2050:
        http://cleantechnica.com/2014/07/16/india-targets-35-renewable-energy-share-installed-capacity-mix-2050/

        • Colin Nicholson

          So cars that are produced today have the same emissions profile as those of 35 years ago? Nice try on the 98% of a delta, and cherry picking to 2013, but we are more savvy on this website

          • i wasn’t cherry picking 2013, i was directly quoting a US EIA article from earlier this week: http://www.eia.gov/todayinenergy/detail.cfm?id=23852

          • Colin Nicholson

            Yep you failed to mention the 2014 figures and the 2015 projections also detailed in that report, so I’d say that is cherry picking up to 2013.

    • Sean Sweetser

      So we should just do nothing? … I dont concur with that strategy. We do as much as we can and ask China and India to do the same

      • no, i’m saying we wont do anything, or not much, as a result of this conference…politicians from across the globe jetting to Paris will produce more emissions buring jet fuel than their pledges will reduce…i’ve watched this a long time; discussed the risks of greenhouse gases with my congressman in the 70s, 40 years ago…nothing changes…