Swimming upstream: addressing fossil fuel supply under the UNFCCC

Reducing fossil fuel supply is necessary to meet the Paris Agreement goal to keep warming ‘well below 2°C’, yet the Agreement is silent on the topic of fossil fuels. This article outlines reasons why it is important that Parties to the Agreement find ways to more explicitly address the phasing out of fossil fuel production under the UNFCCC. It describes how countries aiming to keep fossil fuel supply in line with Paris goals could articulate and report their actions within the current architecture of the Agreement. It also outlines specific mechanisms of the Paris Agreement through which issues related to the curtailment of fossil fuel supply can be addressed. Mapping out a transition away from fossil fuels – and facilitating this transition under the auspices of the UNFCCC process – can enhance the ambition and effectiveness of national and international climate mitigation efforts.

Key policy insights

• The international commitment to limit global average temperature increases to ‘well below 2°C’ provides a strong rationale for Parties to the Paris Agreement and the UNFCCC to pursue a phase-down in fossil fuel production, not just consumption.

• Several countries have already made commitments to address fossil fuel supply, by agreeing to phase down coal or oil exploration and production.

• Integrating these commitments into the UNFCCC process would link them to global climate goals, and ensure they form part of a broader global effort to transition away from fossil fuels.

• The Paris Agreement provides a number of new opportunities for Parties to address fossil fuel production.

     

Developing Africa’s energy mix

Africa is growing rapidly both in terms of population size and economically. It is also becoming increasingly clear that fossil fuels impose a high price on society through local environmental pollution and Africa’s particular vulnerability to climate change. At the same time, Africa has an excellent renewable energy potential and prices for renewable energy are reaching the price range of fossil fuels. Comparing results from state-of-the-art Integrated Assessment Models we find different options for achieving a sustainable energy supply in Africa. They have in common, however, that strong economic development is considered compatible with the 2°C climate target. Taking both challenges and appropriate solutions into account, some models find that a complete switch to renewable energy in electricity production is possible in the medium term. The continental analysis identifies important synergy effects, in particular the exchange of electricity between neighbouring countries. The optimal energy mix varies considerably between African countries, but there is sufficient renewable energy for each country. The intermittency and higher capital intensity of renewable energy are important challenges, but proven solutions are available for them. In addition, we analyse the political economy of a sustainable energy transition in Africa.

Key policy insights

• An almost complete shift towards renewable energy (RE) is considered feasible and affordable in Africa.

• By 2050, electricity generation could be sourced largely from solar, wind and hydro power.

• Prices for RE in Africa are now within the price range of fossil fuels, partly due to the excellent RE potential.

• The optimal energy mix varies strongly between countries, but RE is sufficiently available everywhere.

• Addressing intermittency is possible, but requires investments and cooperation on the grid.

     

The role of climate finance beyond renewables: demand-side management and carbon capture,usage and storage

Mobilizing climate finance for climate change mitigation is a crucial part of meeting the ‘well-below’ 2°C goal of the Paris Agreement. Climate finance refers to investments specifically in climate change mitigation and adaptation activities, which involve public finance and the leveraging of private finance. A large proportion of climate finance is Official Development Assistance (ODA) from OECD countries to ODA-eligible countries. The evidence shows that the largest proportion of climate finance for climate change mitigation has been channelled to the development of renewable energy, with a much smaller proportion flowing to other crucial forms of clean energy-related measures, such as demand-side management (DSM) (particularly sustainable cooling) and carbon capture, usage and storage (CCUS). This forms the rationale and aim of this synthesis paper: to review the role of climate finance to develop clean energy beyond renewables. In doing so, the paper draws on practical policy and programme experiences of some donor countries, such as the UK, and Development Finance Institutions (DFIs). This paper argues that a greater amount of climate finance from OECD countries to ODA-eligible fossil fuel-intensive emerging economies and developing countries is required for sustainable cooling and CCUS, particularly in the form of technical assistance and clean energy innovation.

Key policy insights

• Demand-side management (DSM) and carbon capture, usage and storage (CCUS) are underfunded in climate finance compared with the promotion of renewables.

• Climate finance for sustainable cooling, in particular, represents just 0.04% of total ODA, despite cooling projected to represent 13% of global emissions by 2030.

• Public investment in CCUS is limited at US $28 billion since 2007, despite the costs of meeting the Paris Agreement estimated to be 40-128% more expensive without CCUS.

• Additional climate finance for these sectors should not come at the expense of funding for renewables but should be complementary to it.

     

The influence of social movements on policies that constrain fossil fuel supply

Mounting evidence suggests that a large portion of the world's fossil fuel reserves will have to remain in the ground to prevent dangerous climate change. Yet, the fossil fuel industry continues to invest in new infrastructure to expand fuel supply. There appears to be a prevailing logic that extraction is inevitable, in spite of growing climate change concerns. Few political leaders seem to be willing to challenge this logic. The absence of adequate political action on climate change has sparked a burgeoning social movement focused on constraining fossil fuel supply. This article describes this movement, and explores the role that social mobilization may play in enabling policies that limit fossil fuel extraction. Drawing from literature on social mobilization and political change, this work: (1) discusses some of the social and political barriers to mobilization focused on restricting fossil fuel supply; (2) describes the pathways through which mobilization efforts may influence climate policy; and (3) highlights insights from studies of successful social movements that have relevance for the issue of fossil fuel extraction. The article concludes with directions for future research on social mobilization focused on supply-side climate policy.

Key policy insights

• Enacting policies to limit fossil fuel supply has proven challenging in many contexts.

• There is renewed interest in the role social movements may play in shifting the political landscape, to make it more likely that policies to restrict fossil fuel extraction may succeed.

• Effective social mobilization requires a combination factors aligning at the right time to influence policy outcomes, such as windows of political opportunity opening, and compelling framing that calls citizens to action.

• Critical examination of the factors that lead to movement success is necessary to understand the circumstances where social mobilization may influence supply-side climate policies.

     

The roles of network embeddedness,market incentives,and slack resources in the adoption of clean technologies by firms in developing countries

Worldwide carbon dioxide emissions continue to increase driven by fossil fuel consumption and industrial discharges. Progress on carbon emission reduction requires firms to adopt clean technologies which minimize material and energy consumption. Technological change is particularly required in developing countries, where industrial emissions often lead to chronic urban pollution problems. In this study, we explore the antecedents of clean technology strategy by firms in developing countries. We combine the contingent natural resource-based view with the relational view to examine how network embeddedness, market incentives and slack resources influence adoption of clean technology. The empirical support for our hypotheses comes from data obtained from 342 firms that operated in the carbon-offset market during the years 2007 to 2009. We find that a firm’s relational network structure influences adoption of clean technologies, particularly when market incentives are low. Contrary to one of the hypotheses, the results of our paper suggest a negative relationship between a firm’s slack resources and its clean technology strategy. Our study highlights the benefits of networks in fostering adoption of clean technology in developing countries. Furthermore, we find that high market incentives (carbon price) decrease the probability of clean technology adoption, so adding to the view that firms respond to carbon-offset rules to realize high carbon revenues at the lowest cost.

Key policy insights

• High market incentives (carbon price) decrease the probability that firms in developing countries will adopt clean technology.

• This adds to concerns about the capability of the Clean Development Mechanism to deliver sustainable development.

• Even where market incentives are low, firms in developing countries are more likely to adopt clean technologies when they are embedded in a closed network of connected partners.

• To stimulate adoption of clean technology in developing countries, policy makers should focus on initiatives to facilitate partnerships between organizations operating in the carbon market and create opportunities for knowledge sharing and learning.

• By changing the policy focus to networks of organizations, the carbon market can bring about positive change in terms of shifting the firm behaviour.

     

The impacts of economic structure on China’s carbon dioxide emissions: an analysis with reference to other East Asian economies

A change in economic structure influences the total energy consumption as well as CO₂ emissions of a country, given the inherent difference in levels of energy intensity and energy fuel mix of different economic sectors. Its significance has been recognized in recent literature on China’s emission mitigation which could arguably raise China’s mitigation potential and thus the possibility of keeping the 2-degree trajectory on track. This article utilizes the past trend of economic structural change of five East Asian developed economies to project the energy consumption and CO₂ emissions of China in the coming decades. A special delineation of the economic sector is made, putting private consumption together with the three typical economic production sectors, to resolve the mismatch between the statistical data of energy consumption and economic production, in that residential energy consumption is typically merged into the tertiary sector, although it does not directly correspond to gross domestic product (GDP) output. Results suggest that the level of CO₂ emissions would be lower if China followed a development pathway emphasizing the development of the tertiary sector and continuously shrinking her secondary sector, making it possible for China to contribute more to global carbon mitigation. The impact from the rise of private consumption would be relatively insignificant compared to deindustrialization. In addition to continuous improvement in technology, economic structural change, which reduces carbon emission intensity, would be essential for China to be able to achieve the carbon emission level pledged in the Paris Agreement.

Key policy insights

• For China, significant economic structural reform, particularly deindustrialization, is necessary to achieve the goal of ‘peak emission by 2030’.

• Any additional contribution from China to the global effort to maintain a 2-degree trajectory would be limited – from a ‘fair-contribution’ perspective based on share of population or GDP – because the implied mitigation targets would be almost impossible to achieve.

• If developing countries follow the pathway of developed economies, particularly in developing energy-intensive industries, energy consumption and CO₂ emissions would significantly increase, reducing the possibility of keeping global temperature rise within the 2-degree Celsius benchmark.

     

South East Europe electricity roadmap – modelling energy transition in the electricity sectors

One of the most important challenges for the South East Europe region will be replacing more than 30% of its presently installed fossil fuel generation capacity by the end of 2030, and more than 95% by 2050 if its age structure is considered. This requires a strong policy framework to incentivise new investments in a region currently lacking investors, but also presents an opportunity to shape the electricity sector over the long term according to the broader energy transition strategy of the EU and the Energy Community. The aim of this paper is to assess what type of long-term pathways exist for electricity sector development in the region if they follow the energy transition process of the EU. In this model-based scenario assessment, long term electricity sector futures are explored using a set of interlinked electricity models evaluating the level of renewable energy investment required in the region to reach a deep decarbonization target, assuming emission reduction above 94% by 2050 compared to 1990 in line with the long term market integration and climate policy goals of the EU. It also explores what are the most important system wide impacts of the high deployment of renewable energy concerning generation adequacy and security of supply.

Key policy insights

• Energy policies in the South East Europe (SEE) region, both at the national and regional level, should focus on enabling renewable energy integration, as this will be a key component of the future energy mix.

• EU and Energy Community policies should be incorporated into national energy planning to ensure that SEE countries embark on the energy transition process at an early stage.

• Stranded costs should be carefully considered in decision-making on new fossil-fuel generation and gas network investment in order to avoid lock-in to carbon intensive technologies.

• If consistent decarbonization policy prevails, with a significant and persistent CO2 price signal, the role of natural gas remains transitory in the region.

• The SEE region offers relatively cheap decarbonization options: the power sector can reduce GHG emissions above 94% by 2050 in the modelled scenarios.

     

Prospects for steam coal exporters in the era of climate policies: a case study of Colombia

Continued global action on climate change has major consequences for fossil fuel markets, especially for coal as the most carbon-intensive fuel. This article summarizes current market developments in the most important coal-producing and coal-consuming countries, resulting in a critical qualitative assessment of prospects for future coal exports. Colombia, as the world’s fourth largest exporter, is strongly affected by these global trends, with more than 90% of its production being exported. Market analysis finds Colombia in a strong competitive position, owing to its low production costs and high coal quality. Nevertheless, market trends and enhanced climate policies suggest a gloomy outlook for future exports. Increasing competition on the Atlantic as well as Pacific market will keep coal prices low and continue pressure on mining companies. Increasing numbers of filed bankruptcies and lay-offs might be just the beginning of a carbon bubble devaluing fossil fuel investments and leaving them stranded. Colombia largely supplies European and Mediterranean consumers but also delivers some quantities to the US Gulf Coast, and to Central and South America. Future coal demand in most of these countries will continue to decline in the next decades. Newly constructed power plants in emerging economies (India, China) are unlikely to compensate for this downturn owing to increasing domestic supply and decreasing demand. Therefore, maintaining or even increasing mining volumes in Colombia should be re-evaluated, taking into account new economic realities as well as local externalities. Ignoring these risks could lead to additional stranded investments, aggravating the local resource curse and hampering sustainable economic development.

Key policy insights

• The climate policies of most of Colombia’s traditional trade partners target steam coal as the more emission-intensive fossil fuel, with many countries implementing or considering a coal phase-out.

• Coal exporters should re-evaluate their operations and new investments taking into account this new policy environment.

• To prevent a race to the bottom among coal producers that would favour weak regulation, climate policy makers should also consider the local social and external costs of coal mining, including on health and the local environment.

     

National climate change mitigation legislation,strategy and targets: a global update

Global climate change governance has changed substantially in the last decade, with a shift in focus from negotiating globally agreed greenhouse gas (GHG) reduction targets to nationally determined contributions, as enshrined in the 2015 Paris Agreement. This paper analyses trends in adoption of national climate legislation and strategies, GHG targets, and renewable and energy efficiency targets in almost all UNFCCC Parties, focusing on the period from 2007 to 2017. The uniqueness and added value of this paper reside in its broad sweep of countries, the more than decade-long coverage and the use of objective metrics rather than normative judgements. Key results show that national climate legislation and strategies witnessed a strong increase in the first half of the assessed decade, likely due to the political lead up to the Copenhagen Climate Conference in 2009, but have somewhat stagnated in recent years, currently covering 70% of global GHG emissions (almost 50% of countries). In comparison, the coverage of GHG targets increased considerably in the run up to adoption of the Paris Agreement and 89% of global GHG emissions are currently covered by such targets. Renewable energy targets saw a steady spread, with 79% of the global GHG emissions covered in 2017 compared to 45% in 2007, with a steep increase in developing countries.

Key policy insights

• The number of countries that have national legislation and strategies in place increased strongly up to 2012, but the increase has levelled off in recent years, now covering 70% of global emissions by 2017 (48% of countries and 76% of global population).

• Economy-wide GHG reduction targets witnessed a strong increase in the build up to 2015 and are adopted by countries covering 89% of global GHG emissions (76% not counting USA) and 90% of global population (86% not counting USA) in 2017.

• Renewable energy targets saw a steady increase throughout the last decade with coverage of countries in 2017 comparable to that of GHG targets.

• Key shifts in national measures coincide with landmark international events – an increase in legislation and strategy in the build-up to the Copenhagen Climate Conference and an increase in targets around the Paris Agreement – emphasizing the importance of the international process to maintaining national momentum.

     

Reducing global GHG emissions by replicating successful sector examples: the ‘good practice policies’ scenario

This article shows the potential impact on global GHG emissions in 2030, if all countries were to implement sectoral climate policies similar to successful examples already implemented elsewhere. This assessment was represented in the IMAGE and GLOBIOM/G4M models by replicating the impact of successful national policies at the sector level in all world regions. The first step was to select successful policies in nine policy areas. In the second step, the impact on the energy and land-use systems or GHG emissions was identified and translated into model parameters, assuming that it would be possible to translate the impacts of the policies to other countries. As a result, projected annual GHG emission levels would be about 50 GtCO₂e by 2030 (2% above 2010 levels), compared to the 60 GtCO₂e in the ‘current policies’ scenario. Most reductions are achieved in the electricity sector through expanding renewable energy, followed by the reduction of fluorinated gases, reducing venting and flaring in oil and gas production, and improving industry efficiency. Materializing the calculated mitigation potential might not be as straightforward given different country priorities, policy preferences and circumstances.

Key policy insights

• Considerable emissions reductions globally would be possible, if a selection of successful policies were replicated and implemented in all countries worldwide.

• This would significantly reduce, but not close, the emissions gap with a 2°C pathway.

• From the selection of successful policies evaluated in this study, those implemented in the sector ‘electricity supply’ have the highest impact on global emissions compared to the ‘current policies’ scenario.

• Replicating the impact of these policies worldwide could lead to emission and energy trends in the renewable electricity, passenger transport, industry (including fluorinated gases) and buildings sector, that are close to those in a 2°C scenario.

• Using successful policies and translating these to policy impact per sector is a more reality-based alternative to most mitigation pathways, which need to make theoretical assumptions on policy cost-effectiveness.

     

CO2 abatement goals for international shipping

The Paris Agreement, which entered into force in 2016, sets the ambitious climate change mitigation goal of limiting the global temperature increase to below 2°C and ideally 1.5°C. This puts a severe constraint on the remaining global GHG emissions budget. While international shipping is also a contributor to anthropogenic GHG emissions, and CO₂ in particular, it is not included in the Paris Agreement. This article discusses how a share of a global CO₂ budget over the twenty-first century could be apportioned to international shipping, and, using a range of future trade scenarios, explores the requisite cuts to the CO₂ intensity of shipping. The results demonstrate that, under a wide range of assumptions, existing short-term levers of efficiency must be urgently exploited to achieve mitigation commensurate with that required from the rest of the economy, with virtually full decarbonization of international shipping required as early as before mid-century.

Key policy insights

• Regulatory action is key to ensuring the international shipping sector’s long-term sustainability.

• For the shipping industry to deliver mitigation in line with the Paris Agreement, virtually full decarbonization needs to be achieved.

• In the near term, immediate and rapid exploitation of available mitigation measures is of critical importance.

• Any delay in the transition will increase the risk of stranded assets, or diminish the chances of meeting the Paris Agreement's temperature commitments.

     

Implications of Japan’s long term climate mitigation target and the relevance of uncertain nuclear policy

Achieving long-term climate mitigation goals in Japan faces several challenges, starting with the uncertain nuclear power policy after the 2011 earthquake, the uncertain availability and progress of energy technologies, as well as energy security concerns in light of a high dependency on fuel imports. The combined weight of these challenges needs to be clarified in terms of the energy system and macroeconomic impacts. We applied a general equilibrium energy economic model to assess these impacts on an 80% emission reduction target by 2050 considering several alternative scenarios for nuclear power deployment, technology availability, end use energy efficiency, and the price of fossil fuels. We found that achieving the mitigation target was feasible for all scenarios, with considerable reductions in total energy consumption (39%–50%), higher shares of low-carbon sources (43%–72% compared to 15%), and larger shares of electricity in the final energy supply (51%–58% compared to 42%). The economic impacts of limiting nuclear power by 2050 (3.5% GDP loss) were small compared to the lack of carbon capture and storage (CCS) (6.4% GDP loss). Mitigation scenarios led to an improvement in energy security indicators (trade dependency and diversity of primary energy sources) even in the absence of nuclear power. Moreover, preliminary analysis indicates that expanding the range of renewable energy resources can lower the macroeconomic impacts of the long term target considerably, and thus further in depth analysis is needed on this aspect.

Key policy insights

• For Japan, an emissions reduction target of 80% by 2050 is feasible without nuclear power or CCS.

• The macroeconomic impact of such a 2050 target was largest without CCS, and smallest without nuclear power.

• Energy security indicators improved in mitigation scenarios compared to the baseline.

     

Challenges for hydropower-based nationally determined contributions: a case study for Ecuador

Hydropower is the dominant renewable energy source to date, providing over two-thirds of all renewable electricity globally. For countries with significant hydropower potential, the technology is expected to play a major role in the energy transition needed to meet nationally determined contributions (NDCs) for greenhouse gas (GHG) emission reductions as laid out in the Paris Agreement. For the Republic of Ecuador, large hydropower is currently considered as the main means for attaining energy security, reducing electricity prices and mitigating GHG emissions in the long-term. However, uncertainty around the impacts of climate change, investment cost overruns and restrictions to untapped resources may challenge the future deployment of hydropower and consequently impact decarbonization efforts for Ecuador’s power sector. To address these questions, a partial equilibrium energy system optimization model for Ecuador (TIMES-EC) is used to simulate alternative electricity capacity expansion scenarios up to 2050. Results show that the share of total electricity supplied by hydropower in Ecuador might vary significantly between 53% to 81% by 2050. Restricting large hydropower due to social-environmental constraints can cause a fourfold increase in cumulative emissions compared to NDC implied levels, while a 25% reduction of hydropower availability due to climate change would cause cumulative emissions to double. In comparison, a more diversified power system (although more expensive) which limits the share of large hydropower and natural gas in favour of other renewables could achieve the expected NDC emission levels. These insights underscore the critical importance of undertaking detailed whole energy system analyses to assess the long-term challenges for hydropower deployment and the trade-offs among power system configuration, system costs and expected GHG emissions in hydropower-dependent countries, states and territories.

Key policy insights

• Ecuador’s hydropower-based NDC is highly vulnerable to the occurrence of a dry climate scenario and restrictions to deployment of large hydropower in the Amazon region.

• Given Ecuador’s seasonal runoff pattern, fossil-fuel or renewable thermoelectric backup will always be required, whatever the amount of hydropower installed.

• Ecuador’s NDC target for the power sector is achievable without the deployment of large hydropower infrastructure, through a more diversified portfolio with non-hydro renewables.

     

Is India pulling its weight? India’s nationally determined contribution and future energy plans in global climate policy

Ahead of the Conference of Parties (COP) 24 where countries will first take stock of climate action post Paris, this paper assesses India’s progress on its nationally determined contribution (NDC) targets and future energy plans. We find that, although India is well on track to meet its NDC pledges, these targets were extremely modest given previous context. Furthermore, there is considerable uncertainty around India’s energy policy post 2030 and if current plans for energy futures materialise, the Paris Agreement’s 2 degrees goal will be almost certainly unachievable. India’s role in international climate politics has shifted from obstructionism to leadership particularly following the announcement of withdrawal by the United States from the Paris Agreement, but analysis reveals that India’s ‘hard’ actions on the domestic front are inconsistent with its ‘soft’ actions in the international climate policy arena. Going forward, India is likely to face increasing calls for stronger mitigation action and we suggest that this gap can be bridged by strengthening the links between India’s foreign policy ambitions, international climate commitments, and domestic energy realities.

Key policy insights

• India’s NDC pledges on carbon intensity and share of non-fossil fuel capacity are relatively modest given domestic context and offer plenty of room to increase ambition of action.

• India’s ‘soft’ leadership in global climate policy can be matched by ‘hard’ commitments by bringing NDC pledges in line with domestic policy realities.

• There is significant uncertainty around future plans for coal power in India which have the potential to exceed the remaining global carbon budget for 2 degrees.

     

Challenges to addressing non-CO2 greenhouse gases in China’s long-term climate strategy

Under the Paris Agreement, countries are encouraged to submit long-term low greenhouse gas emissions development strategies. Such strategies will merge emissions goals with socio-economic objectives and enable countries to increase their ambition over time, thus offering an opportunity to close the gap between the current emissions trajectory and the Agreement’s ‘well below 2°C’ target. China is in the process of preparing its own long-term strategy. We argue in this article that non-CO₂ greenhouse gases (NCGGs) should be an essential component of China’s long-term low-emissions strategy. To incorporate NCGGs into China’s long-term low-emissions development strategy, key scientific and institutional challenges should be addressed, such as uncertainty about the accuracy of NCGG emissions inventories; uncertainty about future projections of NCGG emissions; and institutional coordination deficits and imbalanced policy approaches. Overcoming these barriers will have significant implications for climate change mitigation and can open a path for the development of concrete follow-up actions.

Key policy insights

• Non-CO₂ greenhouse gases (NCGGs) make up around 17% of China’s GHG emissions, but China has no quantified target to limit or reduce these gases.

• NCGG emissions mitigation should be an essential component of China's long-term low-emissions strategy, which is currently under development.

• Considerable uncertainty exists over both historical NCGG emissions data and forecasts. This poses challenges to developing a comprehensive multi-gas strategy.

• Institutional challenges must also be addressed, such as fragmentation of responsibility for NCGGs.

     

Which policy instruments attract foreign direct investments in renewable energy?

Reducing GHG emissions and mitigating climate change would require significant investments in renewable energy technologies. Foreign direct investments (FDI) in renewable energy (RE) have increased over the last years, contributing to the diffusion of RE globally. In the field of climate policy, there are multiple policy instruments aimed at attracting investments in renewable energy. This article aims to map the FDI flows globally including source and destination countries. Furthermore, the article investigates which policy instruments attract more FDI in RE sectors such as solar, wind and biomass, based on an econometric analysis of 137 Organisation for Economic Co-operation and Development (OECD) and non-OECD countries. The results show that Feed in Tariffs (FIT) followed by Fiscal Measures (FM), such as tax incentives and Renewable Portfolio Standards (RPS), are the most significant policy instrument that attract FDI in the RE sector globally. Regarding carbon pricing instruments, based on our analysis, carbon tax proved to be correlated with high attraction of FDI in OECD countries, whereas Emissions Trading Schemes (ETS) proved to be correlated with high attraction of FDI mainly in non-OECD countries.

Key policy insights

• Feed in Tariffs is the most significant policy instrument that attracts FDI in the Renewable Energy sector globally.

• Fiscal Measures (FM), such as tax incentives, show a significant and positive impact on renewable energy projects by foreign investors, and particularly on solar energy.

• Carbon pricing instruments, such as carbon taxation and emissions trading, proved to attract FDI in OECD and non-OECD countries respectively.

• Public investments, such as government funds for renewable energy projects, proved not as attractive to foreign private investors, perhaps because public funds are not perceived as stable in the long run.

     

Governance of bioenergy with carbon capture and storage (BECCS): accounting,rewarding, and the Paris agreement

Studies show that the ‘well below 2°C’ target from the Paris Agreement will be hard to meet without large negative emissions from mid-century onwards, which means removing CO₂ from the atmosphere and storing the carbon dioxide in biomass, soil, suitable geological formations, deep ocean sediments, or chemically bound to certain minerals. Biomass energy combined with Carbon Capture and Storage (BECCS) is the negative emission technology (NET) given most attention in a number of integrated assessment model studies and in the latest IPCC reports. However, less attention has been given to governance aspects of NETs. This study aims to identify pragmatic ways forward for BECCS, through synthesizing the literature relevant to accounting and rewarding BECCS, and its relation to the Paris Agreement. BECCS is divided into its two elements: biomass and CCS. Calculating net negative emissions requires accounting for sustainability and resource use related to biomass energy production, processing and use, and interactions with the global carbon cycle. Accounting for the CCS element of BECCS foremost relates to the carbon dioxide capture rate and safe underground storage. Rewarding BECCS as a NET depends on the efficiency of biomass production, transport and processing for energy use, global carbon cycle feedbacks, and safe storage of carbon dioxide, which together determine net carbon dioxide removal from the atmosphere. Sustainable biomass production is essential, especially with regard to trade-offs with competing land use. Negative emissions have an added value compared to avoided emissions, which should be reflected in the price of negative emission ‘credits’, but must be discounted due to global carbon cycle feedbacks. BECCS development will depend on linkages to carbon trading mechanisms and biomass trading.

Key policy insights

• A standardized framework for sustainable biomass should be adopted.

• Countries should agree on a standardized framework for accounting and rewarding BECCS and other negative emission technologies.

• Early government support is indispensable to enable BECCS development, scale-up and business engagement.

• BECCS projects should be designed to maximize learning across various applications and across other NETs.

• BECCS development should be aligned with modalities of the Paris Agreement and market mechanisms.

     

The impact of the Tokyo Metropolitan Emissions Trading Scheme on reducing greenhouse gas emissions: findings from a facility-based study

This paper provides a detailed analysis of the Tokyo Metropolitan Emissions Trading Scheme (Tokyo ETS), Japan’s first emissions trading scheme with mandatory cap initiated by the government of Tokyo. Unlike trading schemes in other countries, the Tokyo ETS covers indirect emissions from the commercial sector. It is well known that a variety of market barriers impede full realization of energy efficiency opportunities, especially in the commercial sector. Experiences with the Tokyo ETS should therefore provide important lessons for the design of climate change mitigation policies, especially when targeting the commercial sector. The emissions from covered entities have been drastically reduced from those at the scheme’s outset, with an average 14% reduction as of the end of the first commitment period of five years (2010–2014) compared with 2009 levels. This paper shows that the Tokyo ETS alone did not cause these reductions; there were other drivers. Among them, the energy savings triggered by the Great East Japan Earthquake in 2011 were crucial. The contribution of credit trading, in contrast, was limited since most of the covered entities reduced emissions by themselves. Through an investigation of official reports, an assessment of the emissions data from the covered entities compared to those of uncovered entities and in-depth interviews with firms covered by the scheme, this paper confirms that the main drivers of emissions reductions by covered entities were separate from the ETS. In fact, the advisory aspect of the scheme seems to be much more important in encouraging energy-saving actions.

Key policy insights

• Most of the observed emission reductions were not caused by the Tokyo ETS alone.

• An advisory instrument was crucial to the effectiveness of the Tokyo ETS.

• The experience of the Tokyo ETS suggests that making full use of the advantages of emissions trading is difficult in the case of the commercial sector.

• Price signals have not provided a stimulus to climate change mitigation actions, which implies that establishing a cap to yield effective carbon prices poses a challenge.

     

Energy-intensive manufacturing sectors in China: policy priorities for achieving climate mitigation and energy conservation targets

In this study, a long-range energy alternative planning (LEAP) model was built to evaluate the relative priority of three kinds of policies expected to be implemented for the energy-intensive manufacturing sectors (EIMS) in China to achieve CO₂ mitigation and energy conservation targets. These policies encourage (1) the use of more electricity instead of coal; (2) the continuous improvement of energy efficiency; and (3) a shift to other less energy-demanding sectors. The results indicate that the policy of shifting economic activity from the EIMS to other sectors is most helpful for China to achieve its targets of mitigating CO₂ emissions and conserving energy. Encouraging the EIMS to use more electricity can help China to achieve a higher proportion of non-fossil-fuel based energy in its overall primary energy consumption. No single policy will allow China to achieve all the targets, emphasizing the need for an integrated policy design that combines all types of policies.

Key policy insights

• The policy of encouraging a shift to less energy intensive industries should receive the highest priority in aiming to peak China's energy-related CO₂ emissions as early as possible, and lower overall CO₂ emissions, coal consumption and primary energy consumption in the long run.

• Encouraging a shift to electricity should go hand-in-hand with greater energy efficiency, otherwise such a policy cannot help China significantly reduce energy-related CO₂ emissions.

• Encouraging the EIMS to use more electricity should receive the highest priority in helping China achieve a higher proportion of non-fossil-fuel based energy in its overall primary energy consumption.

     

The effectiveness of climate clubs under Donald Trump

On 1 June 2017, President Trump announced that the US intends to leave the Paris Agreement if no alternative terms acceptable to his administration can be agreed upon. In this article, an agent-based model of bottom-up climate mitigation clubs is used to derive the impact that lack of US participation may have on the membership of such clubs and their emissions coverage. We systematically analyse the prospects for climate mitigation clubs, depending on which of three conceivable roles the US takes on: as a leader (for benchmarking), as a follower (i.e. willing to join climate mitigation clubs initiated by others if this is in its best interest) or as an outsider (i.e. staying outside of any climate mitigation club no matter what). We investigate these prospects for three types of incentives for becoming a member: club goods, conditional commitments and side-payments. Our results show that lack of US leadership significantly constrains climate clubs’ potential. Lack of US willingness to follow others’ lead is an additional, but smaller constraint. Only in a few cases will US withdrawal entail widespread departures by other countries. We conclude that climate mitigation clubs can function without the participation of an important GHG emitter, given that other major emitters show leadership, although these clubs will rarely cover more than 50% of global emissions.

Key policy insights

• The US switching from being a leader to being a follower substantially reduces the emissions coverage of climate mitigation clubs.

• The US switching from being a follower to being an outsider sometimes reduces coverage further, but has a smaller impact than the switch from leader to follower.

• The switch from follower to outsider only occasionally results in widespread departures by other countries; in a few instances it even entices others to join.

• Climate mitigation clubs can function even without the participation of the US, provided that other major emitters show leadership; however, such clubs will typically be unable to cover more than 50% of global emissions.

• Climate mitigation clubs may complement the Paris Agreement and can also serve as an alternative in case Paris fails.