Ok I’m going to start at the beginning, I joined Shell in 1985 as a young engineer because…. well why not and the pay was great. I have worked in the energy industry ever since and today I will not work for industries that develop new reserves of coal or oil as in my personal opinion (and by the way regarding what I do that’s Ok you know) there is already too much CO2 in our atmosphere for my grandchildren to deal with.
I have noticed that we have a new Government and in a frankly quite refreshing way they are dispensing with 150 page consultations (that arrive at their hypothesis anyway) and driving off in a new direction for energy where the focus is on the nation repaying a lot of its debt. It all started with that Levy Control Framework – sort of “yes be Green but only up to this much”. It really was like a parent controlling the hours of Call of Duty allowed.
So as we break for summer I thought I’d write a blog solving all the world’s (energy) problems in one go from a UK perspective and leave it with you to mull over.
I recently visited China for the first time and very much enjoyed it. It seems clear to me that we live in a converging world where those differences in our DNA that evolved over a few tens of thousands of years are disappearing in a few tens of years as we communicate at ever increasing speed and travel ever increasing distances and in larger numbers. Good Ok so to simplify things we can safely assume we all (Earthlings) want the same things; families, education, health, security, rights (a bit of variation here), land, enough wealth (still lots to do here).
That’s not what we have got, wealth is not evenly distributed and we have the developed and the developing countries (a developed countries concept), emerging markets, Africa and population migration from war torn and economic disaster areas. No we live in a dangerous world so we need to spend something significant in the UK on defence and security (it will only get worse). Outside of the security point the rapid advance of global economies means that we need to fight for our corner and fight hard, return to manufacturing for example.
Even at City level London is debating airports, what makes London a powerhouse in global terms? Is our city doing all it can to attract the top level of people needed to be the top dog? Is London going to remain competitive? These are the issues and quite rightly a decision on airports should not and is not being taken from a purely environmental perspective. So we need to work on cleaner more efficient and quieter planes (remember planes are already very very efficient on a CO2/100 person km basis).
Energy policy cannot ignore this competition point, the situation is simply this if you have wealth you have choices if you don’t you don’t. The UK is better off with wealth and then deploying that wealth to good use – it’s wealth first. Personally I find this an uplifting place to be as we can finally kill off the nonsense of the ‘Energy Trilemma’ where industry ‘professionals’ spout on about how jolly tricky it is dealing with three things at once (Price, Carbon, Security – if you have been locked in a cupboard for the last ten years). Sorry we have always done this and it’s called least cost energy planning, the clue is in the title (least cost = max wealth).
Good so having established that we want least cost energy why then contract with yourself to impose ‘carbon budgets’ administered by a ‘Committee on Climate Change’ no that’s madness we need international agreements to solve international problems and we don’t need another committee telling us what we already know – scrap them.
Right so we know what we are doing on energy policy now what about pollution, this is partly the responsibility of the Department of Energy and Climate Change right? No way you can’t make an organisation responsible for ‘Climate Change’ and take away the resources to do the job no lets refer to the above and rename the department er…The Department of Energy?
Pollution is a condition of the environment so the Department for the Environment needs to set the controls necessary for pollution control this is the way it was before ‘Climate Change’ took over and it worked fine. We need pollution and air quality limits set a long time in advance and not messed with on a regular basis (Office for Pollution like Bank of England outside of Gov.t). Not only do we need limits on emission of CO2 from power generation but also transport, where air is really poor (London Marylebone or Beijing) we need local limits that drive the problem away, I know for a fact engineers, companies and investors are ready to deliver the products needed.
We can set local limits in Marylebone and Beijing but we can’t set them for the world as a whole for that we need co-operation. It seems to me that in the debate around the level of CO2 in the Earth’s atmosphere we have a consensus – it’s way too high now and heading for unknown territory in the very near future (50 years). This fact is not being understood by the person on the Clapham Omnibus (A bus) and I believe two rather important points need to be made on that bus;
- Pollution as measured by CO2 in the Earth’s atmosphere is rising by 2 ppm per year every year since way before we started building windmills and despite everything we are doing we are failing in a really dramatic way to make things any better and it seems unlikely at this point to see how this situation will be reversed
- Global warming is the result and this and is not a problem for the planet. Yes let’s have a street party the planet is saved! Planet Earth will simply look more like planet Mars and as far as I’m aware the planet and its molecules are not that bothered about that, no what is in danger is the future of homo sapiens on this planet which means you or more specifically your grandchildren who we are going to receive the all-time worse hospital pass.
No we need all Earthlings to agree that as grown-ups we are not going to do this, we are going to set limits on the emissions of CO2 and we are going to do that in a sensible way. So we all travel to Paris in December 2015 with that objective and we get international agreement.
When it comes to CO2 emissions the concept of sovereignty is changed, it is replaced by the concept of good neighbours. CO2 emissions travel around the globe at will mixed by the winds and storms of our weather systems. This is an international problem and can only be addressed with an international agreement.
We have done this before it was called the Montreal Protocol and we got rid of the hole in the Ozone layer, the reasons for this were twofold;
- Not solving the Ozone problem killed you not your grandchildren
- It was actually technically quite easy to do so
Removing CO2 is a much harder technical nut to crack and that needs to be understood. The investment levels needed are significant and at a time when global financial markets are already stretched (the 2008 crisis was not solved it was averted). So we need a deal, a big deal, a deal cast in stone not quick sand a deal where failure to comply is not an option, a deal where we all recognise the issues and the consequences of failure to agree. Maybe Paris 2015 doesn’t quite get there but I believe at some point such an agreement will be made, simply because in scientific terms it has to.
The lack of a firm international deal on CO2 emissions is the single most important market failure in the energy industry and is preventing energy companies from delivering the products and services that consumers have enjoyed for decades now. All energy companies should collaborate to drive progress on international agreement, that is the same for all energy ‘chapters’ coal, oil, gas, shale, nuclear, renewables and energy efficiency, we would all benefit form a firm international deal. Ok some shareholders might take a hit depending on their investments but that’s a wealth distribution issue and anyone holding fossil stocks today is surely aware of that risk. However, my former employer Shell for example might well benefit from a firm climate deal as they have the cash, manpower and large project management experience to deliver the scale infrastructure energy system changes needed to reverse the upward CO2 trend. Taxing the pollution at source does not prevent it from being used, it does increase the price and so depending on substitution the higher priced product would no doubt have a market for a long time still.
So at the meeting of the IPCC in Paris 2015 there are three outcomes;
- A firm binding international deal
- A middle ground muddle
- No change
What should the UK response be to this, what should we do?
A firm binding international deal should be index linked to the actual CO2 ppm recorded so that should the figure rise on say a five yearly cycle then the deal targets automatically tighten such that the mechanism delivers the result. What we don’t want is a deal that has a spreadsheet of pledges that when added up should reduce the atmospheric CO2 but the actual ppm concentration continues to rise, that would just prove that we are not very good accountants for carbon. This outcome would be cause for a street party the UK would embark on a firm least cost plan to meet the targets set.
For the other two the UK response should be the same, we should position ourselves to be delivering one molecule more CO2 reduction than anyone else, in other words to be at the front of the pack but not on a separate lap. In working out how and where we are in this regard we need an accounting system for CO2 emissions.
An accounting system for CO2 emissions
CO2 emissions largely come from the burning of fossil fuels and biomass. These are the areas where a firm deal needs to be struck, we can deal with other emissions as well but CO2 emissions are the ones we need to control right now as they are the largest by far. Each country would report its fossil fuel production and imports and exports which would be monitored by an international body set up for the job. It would account for the use of the fossil fuels by the burning efficiency of a list of power pants and engine types etc. and report a stock change as a result. A tax is then applied for all Carbon consumed on the assumption it all is converted to CO2 emissions, any CO2 capture can be reclaimed. The price of the carbon tax is linked to the actual recorded CO2 concentration in the Earth’s atmosphere. All revenues collected from this tax are to be used to invest in non-fossil fuel and energy efficiency projects by the taxed government in their own country. Any excess funds would be used in an internationally operated fund that invested in infrastructure in less developed countries.
This moves us all away from subsidies to pollution control which is obviously a better place to be if you want to develop energy infrastructure and innovative energy technology companies. For me it would be one energy industry meeting the needs of consumers not the polarised factious industry we currently have.
Our destiny is the UK is largely dependent on an international deal, we achieve nothing by running out of gas some two laps ahead of the competition; they will simple run past us as the race is never ending. The UK needs to be Chris Froome – in the lead pushing the top guys along doing that little bit more than the rest. If such a lot resides on the politicians it is interesting to note that as the UK we cannot get a seat at the negotiating table, we are represented in Paris 2015 as a part of the European Delegation, remember that (at least as one consideration) when you vote on that future of the UK in the European Union.
We as an industry (all chapters) need to come together to be clear in our moral and ethical responsibilities to explain this problem truthfully, accept that we are all failing, show the pathway to a solution and urge consensus in international negotiations.
Or failing that to be ready for the consequences which look increasingly unpleasant – Calais and Tunisia are recent examples.
 A “Hospital pass” is a term used in several football codes to describe a pass that subjects the recipient to heavy contact, usually unavoidable, from an opposing player