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In terms of the effects of climate change legislation, energy production is one of the more sensitive sectors in the economy. Contrasted
with areas like buildings or light industries, where cheap or even
negative-cost savings are immediately available as “low hanging"
abatement options, even the latest generation of fossil fuel plant is
pushing hard against physical limitations in thermal efficiency. And
with energy and electricity generation responsible for more than half
of current net anthropogenic GHG emissions, it seems certain that
energy producers will face a steep abatement curve under expected
treaties and legislation.
The relevant question, then, is how robust will the
post-Kyoto emissions reduction regime turn out to be? While there
is serious doubt as to whether the cuts and targets agreed upon at Cancun will
support the goal of limiting anthropogenic temperature rise to 2 degrees or
less, an analysis reveals much steeper cuts below a 2020
baseline than Kyoto is expected to achieve relative to its baseline:
| |
1990 Emissons |
2007 Emissions in Kyoto Signatories(BAU) |
Kyoto Reductions from BAU |
BAU Projections 2020 |
Emissions Reductions vs BAU (high/low) |
| |
MtCO2e |
| Copenhagen Target Countries |
16,190 |
7,107 |
902 |
20,229 |
6,826/5,969 |
Copenhagen NAMA Countries
|
8,726 |
0 |
0 |
21,676 |
11,620/2,000 |
Other Countries
|
11,161 |
0 |
0 |
12,530 |
40/40 |
| Worldwide Totals |
36,077 |
7,107 |
902 |
54,434 |
18,485/8,008 |
Reductions in Countries with Cancun Targets and Nationally Appropriate Mitigation Actions (NAMAs) - Copenhagen vs. Kyoto
While future climate policies will dictate that the the energy and power industries will
need to adjust to tighter and tighter li mitations, so far there has
been little clarity in determining a strategy to make these adjustments
while maintaining an adequate future supply of energy with a generation
fleet which is fit for purpose. New build, including nuclear; new
technologies, including Carbon Capture and Storage (CCS); and market
mechanisms, such as renewables obligations and feed-in tariffs, can
play a role, but the planner or investor needs to understand the
"how"s, the "why"s, and most importantly, the "when"s, in order to
maximize returns and minimize risks.
Energy
Edge, with its broad network of energy sector experience and view
and understanding of changes likely to occur in the carbon markets, can
help you navigate the uncertainties ahead. If you have questions,
why not contact Energy Edge partner Karl Schultz today?
For more on the implications of the Cancun Agreement, please read our Policy Briefing here
For more on how your business might need to plan for climate change, read here
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