G-7 target on fossil fuels raises many questions

By Frank-Jürgen Richter

Business Times, June 19, 2015

Summarising a recent Group of Seven meeting in Bavaria, German Chancellor Angela Merkel said that the leaders had committed themselves to “decarbonise the global economy in the course of this century†. They also agreed to limit the rise in average global temperatures to a maximum of 2 degrees Celsius over pre-industrial levels.

Effectively, the leaders agreed to back the recommendations of the Intergovernmental Panel on Climate Change (IPCC), the United Nations’ climate change panel, to reduce global greenhouse gas emissions at the upper end of a range of 40 per cent to 70 per cent by 2050, using 2010 as the baseline, and to phase out the use of all fossil fuels by 2100.

That the G-7 agreed on reductions was not much of a surprise as the US and China had agreed to cut their emissions by 2025 when presidents Barack Obama and Xi Jinping met in Beijing last November; their nations jointly account for over one third of global emissions. Mr Obama agreed to reduce US emissions to 27 per cent below the 2005 levels by 2025, and China would set its peak emission to be 2030 when at least 20 per cent of all energy should come from non-fossil sources.

For environmentalists and green parties, this is good news. But have the G-7 leaders thought this action through?

The International Energy Agency (IEA) regularly assesses our global use of energy. According to IEA, the global consumption levels of fossil fuels in 2013 were – 13.8 gigatonne of coal, used mainly for power generation (some 9.4 Gt); oil (11.1 Gt) used mainly for transport (6.6 Gt); and gas (6.3 Gt) used for both power generation (2.6 Gt) and for space heating (1.4 Gt). These hydrocarbons are all used to create chemicals as feedstocks for many other products including plastics, fertilisers and pesticides.

Roughly half the global demand for oil is for petrol for cars and a quarter for truck diesel, with the rest used by aviation, marine and rail transport.

Most nations agreed to reduce their pollution following the 1997 Kyoto Protocol, yet the world has since seen an increase in energy consumption though with a relative decrease in pollution. Some reduction is due to substitution (oil or gas for coal), by technological advances (more efficient engines or processes across all sectors) and the emergent renewable energy sources (hydro, wind and solar substituting for hydrocarbons).

But, and this is important, there has been no significant reduction in the use of oil for transport. Oil in its several forms – from heavy bunker fuel used by oceanic shipping to lighter distillates for road, rail or aviation – continues to be the best present-day transport fuel. It is easily created, distributed, carried and used and it has a high energy potential per kilogramme. It is also cheap though prices rise and fall according to market sentiment. Oil majors who prospect as well as produce oil work according to the ratio ERoEI.

That is, they compute their expected returns over their expected investment. At the present time, with a glut of oil and gas from the shales of North America, many producers have held back from their costly plans to explore the Arctic and deep offshore seas. They will be expensive to explore and to exploit and at today’s prices are not seen as viable. Ultimately this ratio, for the rational manager, will determine when to stop exploitation even if there is still untapped resource.

So when should we panic? My query acknowledges the very long lead time to get an innovation to the marketplace. There are many novel ideas, some nearly commercial, that can be plugged into the electricity grid to create clean electricity. Many nations, for instance, are investing in concentrated solar power – using mirrors to focus sunlight to heat a liquid that will turn turbines to generate electricity. Others look to photo-voltaic panels to roof new buildings so as to use the power inside, with the excess sold on the grid.

No one has yet found a cheap way to convert all the road and sea vehicles away from oil. Some have suggested fitting sails to cargo vessels – at best these reduce oil consumption by 25 per cent, at worst create dangerously unstable vessels as of old when sailing ships often floundered in gales. The massive modern ports of China, Dubai or Holland could not tolerate such a mess. And how will farmers receive fertilisers and pesticides made from hydrocarbons if there is no transport, and what of all the fuel needed for their agricultural machinery, to say nothing of the distribution chain after the harvest. We live in an oil-fuelled world at present.

If we do not engage in research and discussion about our globalised transport flows that use fossil fuels then 2100 will arrive with no solution. We saw the trade discussions of the GATT leading to the WTO and its Doha Round failure over many years. The years of meetings of the climate change bodies culminating in annual meetings of the IPCC have not halted our polluting emissions.

I wonder if a global agreement will be reached in Paris in December 2015 when the IPCC hopes to create a Kyoto follow-on – ultimately to stop our use of fossil fuels by 2100. If such a Protocol does emerge, by when will they convene a sensible discussion of the reality? And when will all nations ratify the new Protocol? Politicians are wont to make big calls, but it is the permanent officials who have the hard task of operationalising lofty promises. I remain pessimistic.

The writer is founder and chairman of Horasis, a Global Visions Community