InvestMacro

By Michael Jacobs, University of Sheffield 

Climate change policy has entered a new era. The growing row between the United States and the European Union over the impacts of the new American green subsidy regime makes that all too clear. Yet in many ways, this story is ultimately about China.

For the last 20 years, developed countries have used three main types of policy to cut their greenhouse gas emissions. Renewable energy mandates have required electricity generators to invest in solar, wind, hydro and geothermal power. Emissions trading schemes for energy and industrial businesses put a price on carbon. And energy efficiency standards have been progressively improved on a whole range of products from vehicles and white goods to homes.

Applied across Europe and North America, this policy toolkit brought notable success. Developed countries’ emissions fell sharply, even with economic growth. Green technologies – from wind and solar to electric vehicles – fell in cost and improved in performance as demand for them rose.

A virtuous circle followed: climate policy increased demand for green technologies, which reduced costs, which allowed policy to be tightened, which stimulated demand and innovation further.

The rub

There were two problems, however. First, much of the economic benefit went to China. From 2010 onwards China rapidly became the world’s primary supplier of wind and solar technology, along with underpinning minerals like lithium, cobalt and rare earths.

China’s dominance reduced everyone’s costs. But it also meant that, as industrial jobs were lost in developed countries, they were not replaced by equivalents in the new energy sectors.

Second, climate policy began to create political opposition. As emissions targets tightened, countries started to see the costs reflected in consumer prices.

The most dramatic response emerged in France in 2018, when a relatively small increase in fuel duty led the so-called gilets jaunes (yellow jacket) protestors to block roads across the country for over a year, even after President Emmanuel Macron withdrew the tax. In the US, congressional opposition stymied President Barack Obama’s plans for a climate bill – including a modest carbon pricing scheme – for the whole of his presidency.

Joe Biden has learned the lesson. His Inflation Reduction Act (IRA), passed in 2022, offers climate carrots instead of sticks – and lots of them.

The act – which despite its name is almost entirely about climate change – offers a mammoth US$369 billion (£306 billion) of tax credits and other subsidies to companies making low-carbon investments and to consumers buying green products. Critically, to take advantage of subsidies, a significant proportion of materials and equipment used must be produced in North America.

The EU position

Orthodox economists deplore the IRA. Subsidies are much less efficient than taxes (not to say more expensive), and protectionism raises costs to consumers.

Yet to any politician, Biden’s approach looks like a no-brainer. Don’t penalise businesses with carbon levies: reward them with tax credits. Don’t allow the employment benefits of climate policy to leak overseas to China: ensure they stay at home. Nearly three-quarters of Americans backed the act, including over half of Republicans.

The EU is alarmed at the likely effects. There are al ready reports of European cleantech companies planning to transfer production to the US, while others may be kept out of US markets. The European Commission has threatened the US with legal action at the World Trade Organization for breaking free trade rules, and has already secured US concessions, including extending tax credits to foreign-made electric vehicles.

Even more significantly, the commission president Ursula von der Leyen has announced a “green deal industrial plan” for the EU. The core will be a Net Zero Industry Act relaxing rules on state aid and providing subsidies for cleantech investment. Meanwhile, a Critical Raw Materials Act will build partnerships with like-minded suppliers to reduce dependence on Chinese imports, mirroring what the recent EU and US chips acts do with semiconductors.

The broader context

Both the EU and US are therefore turning climate policy into industrial and trade strategy. One might ask what took them so long. China’s twelfth five year plan in 2010 first identified seven environmental “strategic industries” on which to focus economic development. It is not a coincidence that China rapidly came to dominate the new low carbon sectors: it was literally the plan.

The EU and US moves are a desperate attempt to catch up, with Japan and South Korea not far behind. And the strategy extends beyond their own continents. The new kids on this block are multi-billion dollar just energy transition partnerships which the EU, US and other western powers have recently negotiated with South Africa, Indonesia and Vietnam.

These “JET-Ps” aim to stimulate investment, not just in the renewables transition but also in domestic industrial capacity. Loans and guarantees provided by western governments aim to leverage much larger flows of private finance. The goal is for these countries to manufacture and export their own green technologies, charting a new path for economic development.

More such partnerships will likely be announced over the coming year. This is not altruism on western countries’ part, but an attempt to offer an alternative to China’s huge investments in the developing world.

What about the UK? These developments leave the British economy in a badly weakened position. The EU was the obvious partner in green industrial policy. On its own the UK is not nearly large enough to compete.

It creates a compelling case for a future UK government to do a green trade deal with the EU. In return for a financial contribution to the EU’s green innovation funds, the UK could rejoin the single market for environment goods and services.

Just a few years ago, climate change was a subset of environmental policy. Today it is a key dimension of both economic strategy and geopolitics. Given the extent of the economic transformation it demands, no-one should be surprised.

About the Author:

Michael Jacobs, Professor of Political Economy, University of Sheffield

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Jun Du, Aston University and Holger Görg, Kiel Institute for the World Economy 

The EU is preparing to abandon its longstanding restrictions on state aid to take on US and Chinese subsidies over green technologies. European Commission president Ursula von der Leyen is spearheading a new commitment from EU leaders to “act decisively to ensure its long-term competitiveness, prosperity and role on the global stage”.

She has talked about the need to counter hidden subsidies from the Chinese, both in green tech and in other sectors, though the trigger for the EU’s new approach is really President Joe Biden’s Inflation Reduction Act (IRA). This has committed the US to a record US$369 billion (£305 billion) to green its economy, including using tax breaks and subsidies.

It effectively tears up the international consensus around not using state aid, embracing what the US has railed against for years. The Economist has said that globalisation is no longer about racing, but racing and tripping others.

The EU is now proposing to introduce its own tax credits and subsidies for cleantech companies, as well as fast-tracking regulation in this area.

Meanwhile, the UK has been coming under pressure from the likes of car manufacturers to respond. So far, it has been trying to find exemptions to the US’s general approach of only offering incentives to products made in America, while also claiming the UK has no need to subsidise these kinds of areas because it is already ahead.

The economics of this drift to protectionism are worrying. Our recent research on the effects of state subsidies in China suggest that such policies could do the US and EU economies more harm than good overall.

There’s a reason why the west has long avoided state aid.
Shaun Dakin/Unsplash

What the research says

Since the dawn of the industrial revolution, states have played a significant role in developing their economies. China is the recent prime example, where the use of subsidies to develop particular industries such as electric cars or solar panels has been highly visible.

India seems to be moving in the same direction. The government is paying half of the cost of making computer chips, among a variety of incentives to encourage investment in different sectors.

Equally, in the developed world, government procurement has driven many world-changing innovations. Whole sectors such as biotech and information technology relied on government procurement to get started. America’s Silicon Valley originally grew on the back of military contracts, for instance.

Research in this area does acknowledge a case for subsidising infant industries in which a country wants to specialise. China’s state subsidies in the steel and solar panel industries would be a good example.

Yet there is a price to be paid: the money a government spends means that less will be available for helping its citizens in other ways. For example Brazil’s wheat-industry subsidies in the 1980s were estimated to have produced a net loss of 15% to welfare spending.

Around the same time, it was estimated that if the EU removed the common agricultural policy, the extra money available for government spending could increase real incomes by between 0.3% and 3.5% as a proportion of GDP. Findings like these probably explain why the World Trade Organization has discouraged state aid for decades.

Consequences

The new green subsidies will create winners and losers at different levels. Within the EU, for example, it will un-level the playing field between member states. Those that can afford to spend more on their green tech industries will potentially crowd out those with less.

Even within a country, there’s unlikely to be a win-win. Our research team has recently published a paper about China’s subsidies, using a new approach that makes it possible to estimate the direct and indirect effects on subsidised and non-subsidised firms at the same time.

This is the first time anyone has looked at subsidies in this way. Our project looked at 1998-2007, since those were the years where the necessary data was available.

We found that subsidised firms become relatively more productive, thus making them more competitive. Yet firms that are not subsidised can see their productivity growth reduced.

The determining factor is whether they operate in a geographical cluster alongside subsidised firms. When more than a quarter of firms in a cluster in China were being subsidised, the remainder suffered.

Those losing out were typically foreign-owned firms and those owned by the Chinese state, while private Chinese firms were the beneficiaries.

When we aggregated all the data, it showed that this negative indirect effect tends to dominate. In other words, subsidies produce unintended losers and make the market less competitive and more inefficient as a whole.

The bottom line is, subsidies are not without problems, even for China. In the last decade we have seen what “losers” can do to an economy, or a society – think of movements towards populism and autocracy in many places.

Therefore, there needs to be a more thorough debate about the benefits and costs of subsidies before states apply them, and some carefully designed policies to prepare for the potential losers.

About the Authors:

Jun Du, Professor of Economics, Centre Director of Centre for Business Prosperity (CBP), Aston University and Holger Görg, Acting President, Kiel Institute for the World Economy

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Amy Myers Jaffe, New York University 

Through a year of war in Ukraine, the U.S. and most European nations have worked to help counter Russia, in supporting Ukraine both with armaments and in world energy markets. Russia was Europe’s main energy supplier when it invaded Ukraine, and President Vladimir Putin threatened to leave Europeans to freeze “like a wolf’s tail” – a reference to a famous Russian fairy tale – if they imposed sanctions on his country.

But thanks to a combination of preparation and luck, Europe has avoided blackouts and power cutoffs. Instead, less wealthy nations like Pakistan and India have contended with electricity outages on the back of unaffordably high global natural gas prices. As a global energy policy analyst, I see this as the latest evidence that less wealthy nations often suffer the most from globalized oil and gas crises.

I believe more volatility is possible. Russia has said that it will cut its crude oil production starting on March 1, 2023, by 500,000 barrels per day in response to Western energy sanctions. This amount is about 5% of its current crude oil production, or 0.5% of world oil supply. Many analysts expected the move, but it raises concerns about whether more reductions could come in the future.

How Europe has kept the lights on

As Russia’s intent toward Ukraine became clear in late 2021 and early 2022, many governments and energy experts feared one result would be an energy crisis in Europe. But one factor that Putin couldn’t control was the weather. Mild temperatures in Europe in recent months, along with proactive conservation policies, have reduced natural gas consumption in key European markets such as Germany, the Netherlands and Belgium by 25%.

With less need for electricity and natural gas, European governments were able to delay drawing on natural gas inventories that they built up over the summer and autumn of 2022. At this point, a continental energy crisis is much less likely than many forecasts predicted.

European natural gas stockpiles are around 67% full, and they will probably still be 50% full at the end of this winter. This will help the continent position itself for next winter as well.

The situation is similar for coal. European utilities stockpiled coal and reactivated 26 coal-fired power plants in 2022, anticipating a possible winter energy crisis. But so far, the continent’s coal use has risen only 7%, and the reactivated coal plants are averaging just 18% of their operating capacity

The U.S. role

Record-high U.S. energy exports in the summer and fall of 2022 also buoyed European energy security. The U.S. exported close to 10 million cubic meters per month of liquefied natural gas in 2022, up 137% from 2021, providing roughly half of all of Europe’s imported LNG.

Although domestic U.S. natural gas production surged to record levels, some producers had the opportunity to export into high-priced global markets. As a result, surpluses of summer natural gas didn’t emerge inside the U.S. market, as might otherwise have happened. Combined with unusually hot summer temperatures, which drove up energy demand for cooling, the export surge socked U.S. consumers with the highest natural gas prices they had experienced since 2008.

Prices also soared at U.S. gas pumps, reaching or exceeding US$5 per gallon in the early summer of 2022 – the highest average ever recorded by the American Automobile Association. The U.S. exported close to 1 million barrels per day of gasoline, mainly to Mexico and Central America, plus some to France, and consolidated its position as a net oil exporter – that is, it exports more oil than it imports.

Much like Europeans, U.S. consumers had to pay high prices to outbid other global consumers for oil and natural gas amid global supply disruptions and competition for available cargoes. High gasoline prices were a political headache for the Biden administration through the spring and summer of 2022.

However, these high prices belied the fact that U.S. domestic gasoline use has stopped growing. Forecasts suggest that it will decline further in 2023 and beyond as the fuel economy of U.S. cars continues to improve and the number of electric vehicles on the road expands.

While energy prices were a burden, especially to lower-income households, European and American consumers have been able to ride out price surges driven by the war in Ukraine and have so far avoided actual outages and the worst recessionary fears. And their governments are offering big economic incentives to switch to clean energy technologies intended to reduce their nations’ need for fossil fuels.

Developing nations priced out

The same can’t be said for consumers in developing nations like Pakistan, Bangladesh and India, who have experienced the energy cutoffs that were feared but didn’t occur in Europe. Notably, Europe’s intensive energy stockpiling in the summer of 2022 caused a huge jump in global prices for liquefied natural gas. In response, many utilities in less developed nations cut their natural gas purchases, creating price-related electricity outages in some regions.

Faced with continuing high global energy prices, countries in the global south – Africa, Asia and Latin America – have had to reevaluate their dependence on foreign imports. Increased use of coal has made headlines, but renewable energy is starting to offer greater advantages, both because it is more affordable and because governments can frame it as more secure and a source of domestic jobs.

India, for example, is doubling down on renewable energy, unveiling plans to produce hydrogen fuel for heavy industry using renewable energy and moving away from imported LNG. Several African countries, such as Ethiopia, are fast-tracking development of hydropower.

Energy prices and climate justice

The energy challenge that the Russia-Ukraine crisis has bred in developing countries has intensified global discussions about climate justice. One less examined impact of giant clean tech stimulus plans enacted in wealthy nations, such as the United States’ Inflation Reduction Act, is that they keep much of the available funding for climate finance at home. As a result, some developing country leaders worry that a clean energy technology knowledge gap will widen, not shrink, as the energy transition gains momentum.

Worsening the problem, members of the G-7 forum of wealthy nations have tightened their monetary policies to control war-driven inflation. This drives up the cost of debt and makes it harder for developing countries to borrow money to invest in clean energy.

The U.S. is supporting a new approach called Just Energy Transition Partnerships, in which wealthy nations provide funding to help developing countries shift away from coal-fired power plants, retain workers and recruit private-sector investors to help finance decarbonization projects. But these solutions are negotiated bilaterally between individual countries, and the pace is slow.

When nations gather in the United Arab Emirates in late 2023 for the next round of global climate talks, wealthy nations – including Middle East oil producers – will face demands for new ways of financing energy security improvements in less wealthy countries. The world’s rich nations pledged in 2009 to direct $100 billion yearly to less wealthy nations by 2020 to help them adapt to climate change and decarbonize their economies, but are far behind on fulfilling this promise.

U.N. Secretary-General Antonio Guterres has called on developed nations to tax fossil fuel companies, which reported record profits in 2022, and use the money to fund climate adaptation in low-income countries. New solutions are needed, because without some kind of major progress, wealthy nations will continue outbidding developing nations for the energy resources that the world’s most vulnerable people desperately need.

About the Author:

Amy Myers Jaffe, Director, Energy, Climate Justice, and Sustainability Lab, and Research Professor, New York University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Christian Downie, Australian National University and Robert Brulle, Brown University 

Leer en español.

You’ve probably seen ads promoting gas and oil companies as the solutions to climate change. They’re meant to be inspiring and hopeful, with scenes of a green, clean future.

But shiny ads are not all these companies do to protect their commercial interests in the face of a rapidly heating world. Most also provide financial support to industry groups that are spending hundreds of millions of dollars on political activities, often to thwart polices designed to slow climate change.

For example, The New York Times recently reported on the Propane Education and Research Council’s attempts to derail efforts to electrify homes and buildings in New York, in part by committing nearly US$900,000 to the New York Propane Gas Association, which flooded social media with misleading information about energy-efficient heat pumps.

The American Fuel and Petrochemical Manufacturers, which represents oil refiners and petrochemical firms, has spent millions on public relations campaigns, such as promoting a rollback of federal fuel efficiency standards.

These practices have been going on for decades, and evidence shows that industry groups have played key roles in blocking state and federal climate policies. This matters not just because of the enormous sums the groups are spending, but also because they often act as a command center for political campaigns to kill pro-climate policies.

We study the political activities of industry groups. In a recent research paper, we dug through U.S. tax filings to follow the money trail of trade associations engaged on climate change issues and track the billions they have spent to shape federal policy.

What we found

After NASA scientist James Hansen sounded the alarm on climate change in 1988, three trade associations – the National Association of Manufacturers, the Edison Electric Institute and the American Petroleum Institute – banded together with a couple of electrical utilities to form the Global Climate Coalition, or GCC.

The GCC systematically opposed any international regulation of climate-warming emissions, and successfully prevented the U.S. from ratifying the Kyoto Protocol, a 1997 international agreement to reduce greenhouse gas emissions.

This was the first example of trade associations working together to stall government action on climate change. Similar efforts continue today.

So, how much do trade associations spend on political activities, such as public relations? As not-for-profit organizations under the Internal Revenue Code, trade associations have to report their revenue and spending.

We found that trade associations historically opposed to climate policies spent $2 billion in the decade from 2008 to 2018 on political activities, such as advertising, lobbying and political contributions. Together, they outspent climate-supporting industry groups 27 to 1.

The oil and gas sector was the largest, spending $1.3 billion. Across the 89 trade associations we examined in nine different sectors of the U.S. economy between 2008 and 2018, no other group of trade associations came close.

No. 1 expense: Advertising and promotion

What came as more of a surprise as we were tallying up the data was how much trade associations are spending on advertising and promotion. This can include everything from mainstream media ads promoting the industry to hiring public relations firms to target particular issues before Congress.

For example, until they parted ways last year, Edelman, the world’s largest public relations firm, received close to $30 million from American Fuel and Petrochemical Manufacturers to promote fossil fuels, reporters at the online news site Heated found.

Our study found that trade associations engaged on climate change issues spent a total of $2.2 billion on advertising and promotion between 2008 and 2018, compared with $729 million on lobbying. As 2022 lobbying data shows, their spending continues. While not all of this spending is directly targeting climate policy, climate change is one of the top political issues for many industries in the energy sector.

Media buys are expensive, but these numbers also reflect the specific role trade associations play in protecting the reputation of the firms they represent.

One reason that groups like the American Petroleum Institute have historically taken the lead running negative public relations campaigns is so that their members, such as BP and Shell, are not tarred with the same brush, as our interviews with industry insiders confirmed.

However, many firms are now coming under pressure to leave trade associations that oppose climate policies. In one example, the oil giant Total quit API in 2021, citing disagreements over climate positions.

Spending on social media in the weeks ahead of the U.S. midterm elections and during the U.N. Climate Conference in November 2022 offers another window into these groups’ operations.

A review by the advocacy group Climate Action Against Disinformation found that 87 fossil-fuel-linked groups spent roughly $3 million to $4 million on more than 3,700 ads through Facebook’s parent company alone in the 12 weeks before and during the conference.

The largest share came from a public relations group representing the American Petroleum Institute and focused heavily on advocating for natural gas and oil and discussing energy security. America’s Plastic Makers spent about $1.1 million on climate-related advertising during the two weeks of the U.N. conference.

Funneling money to think tanks and local groups

Trade associations also spent $394 million on grants to other organizations during the decade we reviewed. For example, they gave money to think tanks, universities, charitable foundations and political organizations like associations of mayors and governors.

While some of these grants may be philanthropic in nature, among the trade associations we spoke to, most have a political purpose in mind. Grants channeled to local community groups, as one example, can help boost an industry’s reputation among key constituent groups, and as a result their social license to operate.

What this means for climate policy

Fossil fuel companies, which reported record profits in 2022, still spend more on political activities than their trade associations do.

But industry groups historically opposed to climate policies are also big spenders, as our research shows. They outspent those that support actions to slow climate change, such as the solar and wind industries, by a whopping $2 billion to $74.5 million over the 10 years we reviewed.

This likely helps to explain why it took Congress almost 35 years after Hansen first warned representatives about the dangers of climate change to pass a major climate bill, the 2022 Inflation Reduction Act.

About the Author:

Christian Downie, Associate Professor, Australian National University and Robert Brulle, Professor of Sociology, Brown University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Candelaria Bergero, University of California, Irvine and Steve Davis, University of California, Irvine 

Several major airlines have pledged to reach net-zero carbon emissions by midcentury to fight climate change. It’s an ambitious goal that will require an enormous ramp-up in sustainable aviation fuels, but that alone won’t be enough, our latest research shows.

The idea of jetliners running solely on fuel made from used cooking oil from restaurants or corn stalks might seem futuristic, but it’s not that far away.

Several airlines are already experimenting with sustainable aviation fuels. These include biofuels made from agriculture residues, trees, corn and used cooking oil. Other fuels are synthetic, made by combining captured carbon from the air and green hydrogen, made with renewable energy. Often, they can go straight into existing aircraft fuel tanks that normally hold fossil jet fuel.

United Airlines, which has been using a blend of used oil or waste fat and fossil fuels on some flights from Los Angeles and Amsterdam, announced in February 2023 that it had formed a partnership with biofuel companies to power 50,000 flights a year between its Chicago and Denver hubs using ethanol-based sustainable aviation fuels by 2028.

In a new study, we examined different options for aviation to reach net-zero emissions and assessed how air travel could continue without contributing to climate change.

The bottom line: Each pathway has important trade-offs and hurdles. Replacing fossil jet fuel with sustainable aviation fuels will be crucial, but the industry will still need to invest in direct-air carbon capture and storage to offset emissions that can’t be cut.

Scenarios for the future

Before the pandemic, in 2019, aviation accounted for about 3.1% of total global CO₂ emissions from fossil fuel combustion, and the number of passenger miles traveled each year was rising. If aviation emissions were a country, that would make it the sixth-largest emitter, closely following Japan.

In addition to releasing carbon emissions, burning jet fuel produces soot and water vapor, known as contrails, that contribute to warming, and these are not avoided by switching to sustainable aviation fuels.

Aviation is also one of the hardest-to-decarbonize sectors of the economy. Small electric and hydrogen-powered planes are being developed, but long-haul flights with lots of passengers are likely decades away.

We developed and analyzed nine scenarios spanning a range of projected passenger and freight demand, energy intensity and carbon intensity of aviation to explore how the industry might get to net-zero emissions by 2050.

We found that as much as 19.8 exajoules of sustainable aviation fuels could be needed for the entire sector to reach net-zero CO₂ emissions. With other efficiency improvements, that could be reduced to as little as 3 exajoules. To put that into context, 3 exajoules is almost equivalent to all biofuels produced in 2019 and far surpasses the 0.005 exajoules of bio-based jet fuel produced in 2019. An exajoule is a measure of energy.

Flying less and improving airplanes’ energy efficiency, such as using more efficient “glide” landings that allow airlines to approach the airport with engines at near idle, can help reduce the amount of fuel needed. But even in our rosiest scenarios – where demand grows at 1% per year, compared to the historical average of 4% per year, and energy efficiency improves by 4% per year rather than 1% – aviation would still need about 3 exajoules of sustainable aviation fuels.

Why offsets are still necessary

A rapid expansion in biofuel sustainable aviation fuels is easier said than done. It could require as much as 1.2 million square miles (300 million hectares) of dedicated land to grow crops to turn into fuel – roughly 19% of global cropland today.

Another challenge is cost. The global average price of fossil jet fuel is about about US$3 per gallon ($0.80 per liter), while the cost to produce bio-based jet fuels is often twice as much. The cheapest, HEFA, which uses fats, oils and greases, ranges in cost from $2.95 to $8.67 per gallon ($0.78 to $2.29 per liter), but it depends on the availability of waste oil.

Fischer-Tropsch biofuels, produced by a chemical reaction that converts carbon monoxide and hydrogen into liquid hydrocarbons, range from $3.79 to $8.71 per gallon ($1 to $2.30 per liter). And synthetic fuels are from $4.92 to $17.79 per gallon ($1.30 to $4.70 per liter).

Realistically, reaching net-zero emissions will likely also rely on carbon dioxide removal.

In a future with similar airline use as today, as much as 3.4 gigatons of carbon dioxide would have to be captured from the air and locked away – pumped underground, for example – for aviation to reach net-zero. That could cost trillions of dollars.

For these offsets to be effective, the carbon removal would also have to follow a robust eligibility criteria and be effectively permanent. This is not happening today in airline offsetting programs, where airlines are mostly buying cheap, nonpermanent offsets, such as those involving forest conservation and management projects.

Some caveats apply to our findings, which could increase the need for offsets even more.

Our assessment assumes sustainable aviation fuels to be net-zero carbon emissions. However, the feedstocks for these fuels currently have life-cycle emissions, including from fertilizer, farming and transportation. The American Society for Testing Materials also currently has a maximum blend limit: up to 50% sustainable fuels can be blended into conventional jet fuel for aviation in the U.S., though airlines have been testing 100% blends in Europe.

How to overcome the final hurdles

To meet the climate goals the world has set, emissions in all sectors must decrease – including aviation.

While reductions in demand would help reduce reliance on sustainable aviation fuels, it’s more likely that more and more people will fly in the future, as more people become wealthier. Efficiency improvements will help decrease the amount of energy needed to power aviation, but it won’t eliminate it.

Scaling up sustainable aviation fuel production could decrease its costs. Quotas, such as those introduced in the European Union’s “Fit for 55” plan, subsidies and tax credits, like those in the U.S. Inflation Reduction Act signed in 2022, and a carbon tax or other price on carbon, can all help achieve this.

Additionally, given the role that capturing carbon from the atmosphere will play in achieving net-zero emissions, a more robust accounting system is needed internationally to ensure that the offsets are compensating for aviation’s non-CO₂ impacts. If these hurdles are overcome, the aviation sector could achieve net-zero emissions by 2050.

About the Author:

Candelaria Bergero, Ph.D. Student in Earth System Science, University of California, Irvine and Steve Davis, Professor of Earth System Science, University of California, Irvine

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Daniel Sperling, University of California, Davis 

California is embarking on an audacious new climate plan that aims to eliminate the state’s greenhouse gas footprint by 2045, and in the process, slash emissions far beyond its borders. The blueprint calls for massive transformations in industry, energy and transportation, as well as changes in institutions and human behaviors.

These transformations won’t be easy. Two years of developing the plan have exposed myriad challenges and tensions, including environmental justice, affordability and local rule.

For example, the San Francisco Fire Commission had prohibited batteries with more than 20 kilowatt-hours of power storage in homes, severely limiting the ability to store solar electricity from rooftop solar panels for all those times when the sun isn’t shining. More broadly, local opposition to new transmission lines, large-scale solar and wind facilities, substations for truck charging, and oil refinery conversions to produce renewable diesel will slow the transition.

I had a front row seat while the plan was prepared and vetted as a longtime board member of the California Air Resources Board, the state agency that oversees air pollution and climate control. And my chief contributor to this article, Rajinder Sahota, is deputy executive officer of the board, responsible for preparing the plan and navigating political land mines.

We believe California has a chance of succeeding, and in the process, showing the way for the rest of the world. In fact, most of the needed policies are already in place.

What happens in California has global reach

What California does matters far beyond state lines.

California is close to being the world’s fourth-largest economy and has a history of adopting environmental requirements that are imitated across the United States and the world. California has the most ambitious zero-emission requirements in the world for cars, trucks and buses; the most ambitious low-carbon fuel requirements; one of the largest carbon cap-and-trade programs; and the most aggressive requirements for renewable electricity.

In the U.S., through peculiarities in national air pollution law, other states have replicated many of California’s regulations and programs so they can race ahead of national policies. States can either follow federal vehicle emissions standards or California’s stricter rules. There is no third option. An increasing number of states now follow California.

So, even though California contributes less than 1% of global greenhouse gas emissions, if it sets a high bar, its many technical, institutional and behavioral innovations will likely spread and be transformative.

What’s in the California blueprint

The new Scoping Plan lays out in considerable detail how California intends to reduce greenhouse gas emissions 48% below 1990 levels by 2030 and then achieve carbon neutrality by 2045.

It calls for a 94% reduction in petroleum use between 2022 and 2045 and an 86% reduction in total fossil fuel use. Overall, it would cut greenhouse gas emissions by 85% by 2045 relative to 1990 levels. The remaining 15% reduction would come from capturing carbon from the air and fossil fuel plants, and sequestering it below ground or in forests, vegetation and soils.

To achieve these goals, the plan calls for a 37-fold increase in on-road zero-emission vehicles, a sixfold increase in electrical appliances in residences, a fourfold increase in installed wind and solar generation capacity, and doubling total electricity generation to run it all. It also calls for ramping up hydrogen power and altering agriculture and forest management to reduce wildfires, sequester carbon dioxide and reduce fertilizer demand.

This is a massive undertaking, and it implies a massive transformation of many industries and activities.

Transportation: California’s No. 1 emitter

Transportation accounts for about half of the state’s greenhouse gas emissions, including upstream oil refinery emissions. This is where the path forward is perhaps most settled.

The state has already adopted regulations requiring almost all new cars, trucks and buses to have zero emissions – new transit buses by 2029 and most truck sales and light-duty vehicle sales by 2035.

In addition, California’s Low Carbon Fuel Standard requires oil companies to steadily reduce the carbon intensity of transportation fuels. This regulation aims to ensure that the liquid fuels needed for legacy cars and trucks still on the road after 2045 will be low-carbon biofuels.

But regulations can be modified and even rescinded if opposition swells. If battery costs do not resume their downward slide, if electric utilities and others lag in providing charging infrastructure, and if local opposition blocks new charging sites and grid upgrades, the state could be forced to slow its zero-emission vehicle requirements.

The plan also relies on changes in human behavior. For example, it calls for a 25% reduction in vehicle miles traveled in 2030 compared with 2019, which has far dimmer prospects. The only strategies likely to significantly reduce vehicle use are steep charges for road use and parking, a move few politicians or voters in the U.S. would support, and a massive increase in shared-ride automated vehicles, which are not likely to scale up for at least another 10 years. Additional charges for driving and parking raise concerns about affordability for low-income commuters.

Electricity and electrifying buildings

The key to cutting emissions in almost every sector is electricity powered by renewable energy.

Electrifying most everything means not just replacing most of the state’s natural gas power plants, but also expanding total electricity production – in this case doubling total generation and quadrupling renewable generation, in just 22 years.

That amount of expansion and investment is mind-boggling – and it is the single most important change for reaching net zero, since electric vehicles and appliances depend on the availability of renewable electricity to count as zero emissions.

Electrification of buildings is in the early stages in California, with requirements in place for new homes to have rooftop solar, and incentives and regulations adopted to replace natural gas use with heat pumps and electric appliances.

The biggest and most important challenge is accelerating renewable electricity generation – mostly wind and utility-scale solar. The state has laws in place requiring electricity to be 100% zero emissions by 2045 – up from 52% in 2021.

The plan to get there includes offshore wind power, which will require new technology – floating wind turbines. The federal government in December 2022 leased the first Pacific sites for offshore wind farms, with plans to power over 1.5 million homes. However, years of technical and regulatory work are still ahead.

For solar power, the plan focuses on large solar farms, which can scale up faster and at less cost than rooftop solar. The same week the new scoping plan was announced, California’s Public Utility Commission voted to significantly scale back how much homeowners are reimbursed for solar power they send to the grid, a policy known as net metering. The Public Utility Commission argues that because of how electricity rates are set, generous rooftop solar reimbursements have primarily benefited wealthier households while imposing higher electricity bills on others. It believes this new policy will be more equitable and create a more sustainable model.

Industry and the carbon capture challenge

Industry plays a smaller role, and the policies and strategies here are less refined.

The state’s carbon cap-and-trade program, designed to ratchet down total emissions while allowing individual companies some flexibility, will tighten its emissions limits.

But while cap-and-trade has been effective to date, in part by generating billions of dollars for programs and incentives to reduce emissions, its role may change as energy efficiency improves and additional rules and regulations are put in place to replace fossil fuels.

One of the greatest controversies throughout the Scoping Plan process is its reliance on carbon capture and sequestration, or CCS. The controversy is rooted in concern that CCS allows fossil fuel facilities to continue releasing pollution while only capturing the carbon dioxide emissions. These facilities are often in or near disadvantaged communities.

California’s chances of success

Will California make it? The state has a track record of exceeding its goals, but getting to net zero by 2045 requires a sharper downward trajectory than even California has seen before, and there are still many hurdles.

Environmental justice concerns about carbon capture and new industrial facilities, coupled with NIMBYism, could block many needed investments. And the possibility of sluggish economic growth could led to spending cuts and might exacerbate concerns about economic disruption and affordability.

There are also questions about prices and geopolitics. Will the upturn in battery costs in 2022 – due to geopolitical flare-ups, a lag in expanding the supply of critical materials, and the war in Ukraine – turn out to be a hiccup or a trend? Will electric utilities move fast enough in building the infrastructure and grid capacity needed to accommodate the projected growth in zero-emission cars and trucks?

It is encouraging that the state has already created just about all the needed policy infrastructure. Additional tightening of emissions limits and targets will be needed, but the framework and policy mechanisms are largely in place.

Rajinder Sahota, deputy executive officer of the California Air Resources Board, contributed to this article.

About the Author:

Daniel Sperling, Distinguished Blue Planet Prize Professor of Civil and Environmental Engineering and Founding Director, Institute of Transportation Studies, University of California, Davis

This article is republished from The Conversation under a Creative Commons license. Read the original article.