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Social Benefits of Carbon, Part 2: Projections and the COP21 Paris Agreement Future Impacts

Energy-and-Policy-Developments-rect

In ‘The Social Benefits of Carbon (SBC) – Part 1’, the history of Civilizations’ growth and major developments, supported largely by evolving fossil fuels technologies and energy supplies, were covered over the past two Centuries. In this SBC Part 2 article we will cover recent World energy supplied projections and International agreements intended to substantially reduce total World greenhouse gas emissions towards mid-21st Century. Analysis of possible COP21 Paris Agreement impacts on most Countries economies and the probability of reasonably achieving the COP21 carbon reduction goal will also be analyzed.

International Climate Change and Carbon Reduction Policies – Since the mid-20th Century, Developed and Developing Countries overall have made fair progress in directionally ‘stabilizing’ their total average per capita fossil fuels consumption and associated carbon emissions. Refer to Figure 4b in SBC Part 1. Unfortunately, (referring to Figure 4a, SBC Part 1) total World carbon emissions from fossil fuels consumption have increased by an average of 7.5% per year since 1950. Fossil fuels consumption increases have continued despite the past (1992 Kyoto Protocol; COP3) and subsequent (2015 Paris Agreement; COP21) International climate change policy agreements. Most Developed and some Developing Countries have made promises to substantially reduce their future carbon equivalent greenhouse gas (GHG) emissions as needed to possibly limit future global warming to about a maximum increase of 2 degrees Celsius, 1880-2050. The IPCC projects that achieving this 2 degrees C goal will require reducing total World annual GHG emissions by 40%-70% 2010-2050. Since about 75% of total current GHG emissions come directly from consuming fossil fuels, total 2010 fossil fuels carbon emission levels need to be reduced by up to about 50% mid-21st Century.

Reducing World total fossil fuels consumption and associated carbon emissions by 50% 2010-2050 will likely be very expensive, particularly for Developing Countries. To help Developing Countries build the needed green energy technologies, the Paris Agreement proposes developing a US$100+ Billion fund; allocated to poorer Countries and funded by richer Countries.

Economic & Population Growth, and Associated Energy Consumption Projections – A number of qualified organizations have routinely developed projections of future World and individual Countries’ economies’ outputs, populations and energy production-consumption. These include the EIA, and the IEA. Based on these and other credible studies I have developed data to analyze and illustrate past-and-future projected International economic, populations and energy consumption changes.

To illustrate the difference in past and future projected performances of ‘Developed’ and ‘Developing’ Countries, total World data is separated into (Organization for Economic Co-operation and Development) OECD Countries (which primarily includes major Developed Countries: Canada, Germany, Japan, US, UK, etc.) and Non-OECD Countries (which includes all other Developing Countries: Brazil, China, India, Russia, etc.). To begin this analysis let’s first review the economic development data, both historic (1990-2015) and future projections (2016-2040); Figure 5a.

Fig 5a

Primary Data Sources – EIA IEO’s 2011-16; Reference Case ‘projected’.

Total OECD Countries’ ‘gross domestic product’ (GDP) experienced economic (output) growth significantly greater than total Non-OECD Countries since 1990. Currently (2015) OECD GDP makes up about 64% of total World GDP. Non-OECD Countries’ GDP is projected to grow at significantly greater rates the future. For a variety of factors (greater regulatory burdens, lower population growth rates, etc.) OECD GDP is projected to grow at somewhat slower rates (2.4%/yr. vs. non-OECD 6.7%/yr. growth rates) in the future.

In addition to higher future annual economic growth rates, Non-OECD Countries’ populations are projected to grow at substantially greater rates than OECD Countries; refer to Figure 5b.

Fig 5b

Primary Data Source – EIA IEO reports.

Total Non-OECD populations makeup 6.0 Billion or almost 83% of the total World population currently (2015), and are projected to increase up to 7.6 Billion; of total World 9.0 Billion, 2040. OECD populations are projected to grow by only 0.1 Billion 2015-2040.

Based on these economic and population growth projections, per capita GDP and associated average standards-of-living are projected to increase very significantly 2015-2040; refer to Figure 5c.

Fig 5c

Primary Data Sources – Figures 5a & 5b.

Non-OECD per capita GDP is projected to more than double 2015-2040. OECD Countries per capita GDP is projected to grow at much greater rates than non-OECD Countries. This per capita GDP growth and difference of associated living standards improvements is due to the continued projected more-healthy future economic output in total OECD GDP vs. Non-OECD Countries. And, due to the huge increases of Non-OECD populations compared to OECD Countries; 1.6 vs. 0.1 Billion; 2015-2040.

The very large growth in Non-OECD and OECD economies must be powered by numerous existing and developing technologies and required energy supplies. The growth in ‘primary’ energy consumption is projected to increase very significantly in the future; refer to Figure 6a.

Fig 6a

Primary Data Source – EIA IEO’s 2016; Reference Case. Primary Energy consumption includes all renewables, nuclear and fossil fuels.

Non-OECD Countries’ primary energy consumption is projected to increase at substantially greater rates than OECD Countries in the future (2.4%/yr. vs. 0.6%/yr.; 2015-2040). This larger Non-OECD primary energy consumption increase is due to greater 2015-2040 total economic GDP growth, and other factors such as fewer regulatory influences on improving technologies’ energy efficiencies. OECD Countries are able to grow their economies’ GDP’s with significantly lower energy intensities due to existing higher efficiency energy technologies, and, regulatory and economic mandates & incentives that facilitate further future improvements. Another factor could be due to increasing OECD net-imports from Non-OECD Countries.

Primary Energy Consumption Mixes and Carbon Emission Projections – Due to a combination of established & developing energy technologies-supplies, regulatory & economic incentives, growth in Non-OECD & OECD Countries’ economies, and other related factors, the mix of primary energy sources are projected to change significantly in the future; refer to Figure 6b.

Fig 6b

Primary Data Source – EIA IEO’s 2016; Reference Case. ‘FF’ = Fossil Fuels (petroleum, coal plus natural gas) and ‘Non-FF’ = Non-Fossil Fuels (nuclear, hydro, biofuels, wind & solar plus geothermal).

Non-OECD Countries’ total fossil fuels consumption is projected to increase by almost 50% 2015-2040. In 2040 Non-OECD fossil fuels consumption could make up about 66% of the total World fossil fuels consumption. OECD Countries’ fossil fuels consumption is projected to increase by only10% 2015-2040. This relatively small OECD fossil fuels consumption increase is due to continuous energy efficiency increases, developing GHG emissions regulations, slower population growth, and possibly increased net-imports from non-OECD Countries.

The EIA also projects continuous increased ‘non-fossil fuels’, which will directionally help reduce some future fossil fuels consumption. Non-OECD Countries’ ‘non-fossil fuels’ production-consumption could soon exceed OECD Countries and increase further in the future. While this Non-OECD non-fossil fuels projection appears promising, the important question is: ‘What will be the impact on total future World carbon emissions?’. Refer to Figure 7a.

Fig 7a

Primary Data Source – EIA IEO’s 2016; Reference Case.

Despite the efforts of most OECD and many non-OECD Countries in supporting past and recent UNFCCC agreements (COP3 Kyoto Protocol, through the recent COP21 Paris Agreement) total World fossil fuels consumption and carbon emissions are projected to continue increasing 2015-2040. Total World carbon emissions from fossil fuels have increased by over 12,000 million metric tons per year (MMT/yr.) 1990-2015, and are projected to further increase by about an additional 9,700 MMT/yr. 2015-2040; for a total 43,200 MMT/yr. by 2040. Non-OECD Countries are projected to account for 68% of total World carbon emissions in 2040. Some of these increased carbon emissions could be due to ‘carbon leakage’ from further increased OECD net-imports from non-OECD Countries.

Projected Future Fossil Fuels Consumption Benefits and Costs –The EIA currently forecasts that total World GDP will effectively double over the next 25 years and total populations will increase from 7.3 to 9.0 Billion. About 61% of the increased economic growth is expected to occur within non-OECD Developing Countries; including net-exports. This is good news for many Developing Countries and their populations’ future increased average standards-of-living. OECD Developed Countries economies and populations’ average living standards are also projected to continue increasing at healthy rates in the future.

Unfortunately, most of the World’s future economic growth is projected to be powered primarily by increased fossil fuels (heating, electricity generation and transportation fuels). Even though total non-fossil fuels energy sources are projected to increase by about 84% 2015-2040, total fossil fuels consumption is projected to increase by 33%; or double non-fossil fuels production-consumption (equivalent Btu’s) increases, 2015-2040. This will unfortunately result in up to 29% increase in total World carbon emissions over the next 25 years; or effectively 41% greater than the 2010 level.

The ‘social benefits of carbon’ (SBC) based on total projected World 2015-2040 economic growth is projected to increase very significantly. Future total fossil fuels primary energy percentages are projected to decline from 83% down to 78% (2015-2040); the balance supplied by non-fossil fuels). These energy supplies are required to not only support existing and growing populations & their living standards, but are also required to support total World economic output; GDP. About 80% of current and future GDP’s outputs require large energy consumptions, both directly and indirectly. The 20% balance of total GDP output is fairly independent to significant direct/indirect required energy consumption. The 80% of total GDP requires numerous energy consuming activities & operations, including durable and nondurable ‘goods’ raw materials supplies-production, fabrication & manufacturing, harvesting, etc. ‘directly’. This 80% of total economic output energy demand also includes other ‘indirect’ activities & operations such as goods & services transportation & distribution, storage & physical management, R&D, etc. The 20% balance of total world GDP output that requires little or insignificant energy consumption directly or indirectly includes primarily financial & investment and Internet based economic activities.

Based on these GDP energy consumption and different economic activities-factors, the SBC of current-future fossil fuels energy valued-added contributions are estimated and projected increase from roughly US$1,500/MT up to US$2,100/MT, 2015-2040. This GDP per MT estimated SBC is far larger than many ‘social costs of carbon’ (SCC) estimates that are estimated to be in the range of US$50-$200/MT.

Planned Carbon Emission Mitigation Action Plans – Most Developed and many Developing Countries have signed up for the latest Paris Climate agreement; COP21. The COP21 agreement proposes creating a minimum and future increasing US$100 Billion/yr. fund to be allocated to poorer Developing Countries and funded by richer Countries. While this COP21 fund could definitely help Developing Countries make their growing economies more energy efficient and lower their reliance on fossil fuels, the funding level may not be very adequate towards achieving overall COP21 goals. For example: the EIA IEO 2016 projects non-OECD fossil fuels carbon emissions will increase up to 29,400 MMT/yr., 2040. This non-OECD carbon emission level is 20,500 MMT/yr. above the UNFCCC’s goal of reducing their 2010 carbon emission level by 50%; 2050. Based on the proposed US$100 Billion COP21 fund, this level of largely OECD-to-non-OECD financial support or foreign aid is equivalent to ($100Billion/20.5BillionMT =) US$4.90 per MT carbon. A value, coincidentally, somewhat less than current EU carbon market prices.

Currently the total (fully amortized) costs to build, operate and displace most existing high carbon intensity energy supplies-technologies (electricity, heating and transportation fuels) with low-zero carbon technologies and energy supplies have estimated costs between US$25/MT-US$100/MT. Based on the proposed new US$100 Billion COP21 fund, non-OECD Developing Countries will only be able to reduce their future (2040) fossil fuels carbon emissions by possibly 1,000-4,000 MMT/yr. This is 80%-95% short of the COP21 2010-2050 50% reduction goal. To achieve the non-OECD 50% reduction goal could require increasing the foreign aid-COP21 funding to at least US$500 Billion/yr. up-to-possibly $2.1 Trillion/yr. in future decades. This level of foreign aid-COP21 funding support primarily from Developed Countries’ would be equivalent to 0.6%-2.7% of total annual projected OECD Countries GDP’s; by 2040. Based on the projected EIA IEO 2016 OECD GDP (2015-2040) average growth rates of 2.4%/yr., the likelihood of most Developed Countries increasing their funding-foreign aid to Developing Countries at levels greater than their future domestic GDP annual growth rates is highly questionable. This very large transfer of future OECD economic (wealth) output-to-foreign aid/COP21 funding, risks creating future ‘very-great’ recessions in many Countries around the World.

In Conclusion – Realistically all Countries, OECD and non-OECD, need to address feasibly reducing their future carbon emissions from fossil fuels, while sustaining reasonably healthy economic growth. These environmental and economic activities also need to reasonably and sustainably address future possible global warming. To reduce total World carbon emissions towards 50% of 2010 levels, the EIA IEO 2016 projects that total carbons emissions must be reduced up to 28,000 MMT/yr. by 2040. Based $25-$100/MT costs to reduce future carbon emissions will require total annual funding levels of US$0.7 Trillion/yr.-US$2.8 Trillion/yr. in near-future decades. This maximum required funding level is almost equivalent to the average projected total World annual increased GDP growth rates 2015-2040. Such an added expenditure could put most the World into significant risk to chronic-global economic stagnation and potential major, near future recessions.

If OECD Countries decide to not provide the $100+ Billion of COP21 funding-aid for non-OECD Countries and instead only address their own National fossil fuels consumptions, such an action will still have limited progress towards the COP21 total 2010 50% reduction goal. Magically eliminating 100% of all OECD Countries fossil fuels consumptions by 2040 will still result in non-OECD 2040 total carbon emissions being just 4% less than total World 2010 levels.

The high costs of displacing most World fossil fuels consumptions and associated carbon emissions, in addition to the fact that the latest COP21 Paris agreement is not a legally bidding treaty, makes achieving the 50% 2010-2050 future carbon emission reduction goal fairly improbable. Not being able to feasibly reduce total World 2010 level carbon emissions up to about 50% means that global temperature increases are likely to exceed the COP21 Paris agreement goal of a +2 degrees C by mid-21st Century. This means that most Developed and many Developing Countries need to develop more realistic strategies to addressing both carbon equivalent GHG emissions reductions in the future and dealing with likely increasing climate change impacts.

A more feasible and practical alternative to many current and likely future less-than-affordable clean-green energy policies could be developing ‘more balanced solutions and approaches’. A more balanced International approach should include both cost effectively reducing future fossil fuels consumption-carbon emissions, and increasingly mitigating future climate change impact risks. This means continuing to develop and support truly affordable-sustainable and effective lower carbon technologies and energy sources growth-development, and, begin developing and implementing more effective ‘Adaptation’ strategies.

‘Adaptation’ strategies should include more aggressively modifying current Countries’ Residential, Commercial, Industrial and Transportation Sectors’ buildings-facilities and infrastructures as needed to reasonably address climate change annual-seasonal and local weather patterns deteriorations. These include more effectively managing the most at-risk major cities and communities, including transportation & utilities’ infrastructures, and agriculture/food/water resources. Improved Country Assets & Residents’ living conditions strategies possibly need to address developing-pending increased average weather seasonal temperatures, rising ocean levels, increasing storms severities, expanding floodplains, and growing local-regional droughts. These individual Countries’ upgrades need to be truly and reasonably ‘affordable’ and ‘sustainable’ based on available technologies and limited available domestic funding from each Countries’ real GDP outputs; i.e. not endless national debt growth.

Many Individuals and Politicians will likely continue to propose regulatory carbon restrictions such as cap-and-trade, carbon taxes, feebates, etc. Assuming these free-market and added Government tax revenues are actually invested in cost effective green energy solutions that significantly reduce future fossil fuels consumption, and, making community upgrades to mitigate developing global warming impacts, what other issues should also be critically analyzed and possibly addressed in the near future? Carbon leakage? Establishing ‘legally bidding’ future COP treaties? International trade controls? Other?

Your thoughts and ideas?

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