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					                        ENV-2A33 Fossil Fuels
                                   2008 - 2009

            Carbon Trading
   A way towards Carbon Reduction?
          This presentation and related links will be available at
    www2.env.uea.ac.uk/gmmc/energy/env-2a33/fossil_fuels.htm



                   Keith Tovey(Н.К.Тови 杜伟贤) M.A, PhD, CEng, MICE, CEnv
  CRed                HSBC Director of Low Carbon Innovation:
carbon reduction      School of Environmental Sciences, University of East Anglia   1
                   Carbon Trading
  • Energy Intensity
  • Carbon Intensity
  • Kyoto Protocol
  • Issues affecting Electricity Supply Industry
    in UK - sector most affected by
  • European Union Emission Trading
    System
                     EU-ETS
  • Personal Carbon Trading (DTQs) - a discussion
    if time permits
  CRed
carbon reduction                                2
                          ENERGY INTENSITY

                                                 GDP changes in UK




   Total Energy Demand in UK

  CRed             Wealth of Country has increased faster than Energy Growth
carbon reduction                                                               3
                   ENERGY INTENSITY
                                 Wealth of UK
                                 increased uniformly
                                 with energy in 1950s
                                 and 1960s
                                 Major infra-structure
                                 projects in late 1960s -
                                 early 1970s
                                 1979 - 1992
                                 restructuring followed
                                 by increase efficiency
                                 1992 - increased
                                 conservation

  CRed
carbon reduction                                          4
                    ENERGY INTENSITY
   UK has become more
   efficient in using
   energy to generate
   wealth over past 50
   years.

   Generate the same
   wealth with 45% of
   energy as in 1950.

   Improvement ~ 1.45%
   per annum


  CRed
carbon reduction                       5
                                     ENERGY INTENSITY
                         40000                    USA

                         35000
                                                 Japan                                 Qatar
GDP per head (US$ (95)

                         30000
                                                                            Canada
                         25000       UK
                                                          France
                                                                                     Other EU Countries
                         20000                           Germany
                                                                                     Mediterranean EU
                                                          Poland
                         15000                                                       Nordic EU
                                                                                     New EU
                                                                   Russia
                         10000
                                                         China
                         5000
                                                        India
                            0
                                 0           5           10           15        20             25     30

                                                                 kW per Head

                                          Energy - GDP Relationships                                       6
                                                        Carbon Intensity
                                       Carbon Dioxide Emissions per unit of Energy
                                                    Carbon Emissions per unit of Primary Energy
                            50

                            45                                                              Qatar

                            40
 CO2 Emissions per Capita




                            35
                               Developing                             USA
                            30 Countries
                                                     Australia
                            25         Russia
                            20                                                                      Other EU
                                     Germany
                            15                                                                      EU nordic
                                     UK                            Canada
                            10                                                                      EU med
                                                                 Japan
                             5                                                                      EU new
                                                       France
                             0
                                 0              5                10         15         20             25        30
                                                             Primary Energy per Capita (kW)


Mix of Electricity Generating Capacity has a significant impact                                                      7
                    What is the magnitude of the CO2 problem?
                 How does UK compare with other countries?
                 Why do some countries emit more CO2 than others?
                   50
                   45      Developing

                   40      EU
                           Other OECD
                   35
 tonnes/capita




                           Transition
                   30
                           Oil Producing              UK
                   25
                   20             China
                   15
                   10
                    5
                    0




                                  UK
                             Norway




                               Japan
                             Sweden




                                 Italy
                              France




                                UAE
                              Mexico
                               Brazil




                               Libya
                            Pakistan




                           Lithuania

                         Switzerland




                                   US
                            Namibia

                              Turkey




                              Greece

                           Denmark



                              Russia




                               Qatar
                             Ukraine




                         Netherlands
                                India




                               China




                        South_Africa




                           Germany
        CRed                                                        8
carbon reduction
                            Per capita Carbon Emissions             8
                                                                    8
                                                     gms CO2 / kWH




                                           0
                                                     400
                                                           600
                                                                 800




                                               200
                                                                                       1000
                                                                                                           1200




                   CRed
carbon reduction
                                Norway
                             Switzerland
                                 Sweden
                                 France
                                 Austria
                                                                                              Developing




                                Belgium
                                                                       Oil Exporting




                            Luxembourg
                                  Qatar
                                   UAE
                                  Spain
                                                                                              EU




                                  Japan
                             Netherlands
                                    UK
                                                                       Other OECD




                               Germany
                                Portugal
                               Denmark
                                   USA
                          Czech Republic
                                   Italy
                                                                                                                  Carbon Emission Factor in Electricity Generation




                                  China
                                  Libya
                                                                                                                                                                     Carbon Emissions and Electricity




                               Australia
                                   India
                                 Poland
 9
 9
                      Carbon Trading
     Kyoto Protocol
     • Requires carbon dioxide emission reductions from
       Annexe 1 countries through burden sharing.
     • Non Annexe 1 countries are not included in reduction
       requirements.
     • Participation of Non Annexe 1 Countries through the
       Clean Development Mechanism (CDM) and Certified
       Emission Reduction Certificates (CERs)
     • Introduces a carbon trading system
     • Annexe 1 countries invest in developing countries and
       claim offset reduction for their actions.

                      Problem of additionality
  CRed
carbon reduction                                               10
                       Carbon Trading
   Opportunities under Kyoto
   • JI (Joint Initiatives) between Annexe 1 Countries
   • CDM (Clean Development Mechanism)
      – Annexe 1 Countries or organisations/ businesses investing
        in Non Annexe 1 countries in low carbon technology
        projects.
      – Funded via the World Bank: a form of trading
      – Annexe 1 countries can offset some of their carbon
        emissions by such investment and purchase CERs.
      – Problem:
               • Often absolute changes/reductions in carbon emissions
                 are confused with reductions in carbon intensity not
                 with reductions in emissions.
               • An issue of importance for EU-ETS Phase 2
         – Controlled by “Competent Authorities” in relevant
            countries
         –
   CRedOnly around 20 successful schemes in China so far out of
            around 100 suggested.
carbon reduction                                                      11
                     Carbon Trading
    Problem of Additionality
    • Aims to combat double counting, NOT CLEAR how
      successful this is.
    • Schemes must show ADDITIONAL savings over
      business as usual.
    • Reference standard must be documented standard even
      if it is not yet implemented.
    • Scheme has been used almost exclusively for renewable
      energy projects
    • CRed with partners in Eco-Energy Cities (China) were
      trying to use CDM via CERs for funding energy efficient
      buildings in China following success of Elizabeth Fry
      and ZICER, but has been confronted by many barriers.

  CRed
carbon reduction                                                12
               Carbon Intensity of Energy Use
       Using Electricity (including losses in transmission)
       •   Coal Generation     ~ 1000 g per kWh
       •   Oil Generation      ~ 900 g per kWh
       •   Gas Generation       ~ 400 g per kWh
       •   Nuclear Generation ~ 5 g per kWh
                       (including fuel fabrication and reprocessing
       Overall (UK) ~ 520 g per kWh and rising significantly
       Gas Supply
       • Gas         ~ 186 g per kWh
       Example
                   • heat a home electrically: Electricity is 100% efficient
                           emissions will be 520 g per kWh
                   • heat a home with normal gas boiler: boiler is 70% efficient
                     emissions will be 186 / 0.7 = 266 g per kWh a saving of
           49%
  CRed             • A condensing boiler is 90% efficient
carbon reduction                                                               13
         Issues affecting UK Carbon Emissions

     • Changes in Electricity Supply Industry
     • Increase in Renewable Generation is not
       keeping pace even with increase in demand.
     • Modelling assumes Government Targets for
       renewables are reached and exceeded.
     • Currently we are well short of targets
     • Electricity Supply Industry in UK will receive
       the brunt of the cuts in carbon allowances
       under EU-ETS



  CRed
carbon reduction                                        14
 Options for Electricity Generation in 2020- Non-Renewable Methods
                                      14000
            Installed Capacity (MW)   12000      New Build ?
                                                 Projected
                                      10000      Actual
                                      8000
                                      6000
                                      4000
                                      2000
                                          0
                                          1955 1965 1975 1985 1995 2005 2015 2025 2035
        Nuclear New Build assumes one new station is completed each year after 2017.
                                       ~20% of electricity is generated by nuclear or around 70 TWh
                                                By 2020 this will be down to around 15 TWh
  CRed                                   If replaced by coal CO2 emissions will rise by 54 Mtonnes
carbon reduction                                Replacement by gas rise will be 22 Mtonnes            15
                                        UK Gas Production and Demand
                              140

                              120
       billion cubic metres




                              100

                              80
                                                                     Import
                              60                                      Gap

                              40
                                           UK Production
                              20
                                           UK Demand
                                0
                                 2004   2006   2008    2010   2012   2014   2016   2018   2020

  CRed                                                                                           16
carbon reduction                                                                                 16
       Electricity Generation i n selected Countries   coal

       USA          Japan
                                   r                   oil
                                   UK
                                                       gas

                                                       nuclear

                                                       hydro

                                                       other
  Germany          France        Sweden       Norway   renewables




    Poland          India       China         Russia




  CRed                                                              17
carbon reduction                                                    17
              Our Choices: They are difficult: Energy Security      There is a
                                                                     looming
      60000                                                          capacity
                                                                     shortfall
      50000                                                       Even with a full
                                                   New Coal ???   deployment of
      40000                                                        renewables.
                Opted Out                             New              A 10%
 MW




      30000       Coal                              Nuclear?       reduction in
                                                                   demand per
      20000     Actual Coal                        Renewables     house will see
                 with FGD                                         a rise of 7% in
      10000                                                       total demand
               Actual Projected
                                                                  - Increased
               Nuclear Nuclear
          0                                                        population
           2000  2005     2010    2015     2020     2025    2030   decreased
                                                                 household size
  • Opted Out Coal: Stations can only run for 20 000 hours more and must close
   CRed                              by 2015
   • New Nuclear assumes completing 1 new nuclear station each year beyond 18
carbon reduction
                                                                              18
                                             Historic and Future Demand for Electricity
                                       500
       Electricity Consumption (TWh)                                          Business
                                       450
                                                                              as usual
                                       400
                                                                                     Energy
                                       350                                           Efficient
                                       300                                           Future ?
                                       250

                                       200

                                       150

                                       100

                                        50

                                         0

                                        1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025


                                             Number of households will rise by 17.5% by 2025 and consumption
                                               per household must fall by this amount just to remain static
  CRed
carbon reduction                                                                                               19
                                          Electricity Options for the Future
                         Carbon Dioxide Emissions
                                                                                                      Energy Efficiency – consumption
                250
                                                                                                      capped at 420 TWh by 2010
                200
                                                                                                      But 68% growth in gas demand
 MTonnes CO 2




                150                                                                                       (compared to 2002)
                100
                                 Actual                                                               Business as Usual
                                 Business as Usual
                 50
                                 Energy Efficiency
                                                                                                      257% increase in gas consumption
                  0                                                                                      ( compared to 2002)
                  1990    1995     2000   2005   2010   2015   2020   2025


                           The Gas Scenario                                                                 Gas Consumption
                                                                                                100
Assumes all new non-renewable                                                                    90
                                                                                                           Actual
generation is from gas.                                                  billion cubic metres    80
                                                                                                 70        Business as Usual

Replacements for ageing plant                                                                    60        Energy Efficiency
                                                                                                 50
Additions to deal with demand changes                                                            40
                                                                                                 30
Assumes 10.4% renewables by 2010                                                                 20
                                                                                                 10
                          25% renewables by 2025                                                  0
                                                                                                  1990   1995   2000   2005    2010   2015   2020   2025
                                                                                                                                                       20
                           Alternative Electricity Options for the Future
                          Carbon Dioxide Emissions
                 250


                 200
                                                                                        25% Renewables by 2025
  MTonnes CO 2




                 150                                                                    • 20000 MW Wind
                                                                                        • 16000 MW Other Renewables inc.
                 100
                             Actual
                                                                                        Tidal, hydro, biomass etc.
                             Gas
                  50         Nuclear
                             Coal
                             40:20:40 Mix
                   0
                   1990   1995   2000   2005   2010   2015   2020   2025


        Energy Efficiency Scenario                                                         Carbon Dioxide Emissions
                                                                                  350
                Other Options
                                                                                  300
Some New Nuclear needed by 2025 if CO2
                                                                                  250
levels are to fall significantly and excessive
                                                                    Mtonnes CO2



        gas demand is to be avoided                                               200

                                                                                  150
                                                                                              Actual
                                                                                              Gas
                       Business as Usual Scenario                                 100
                                                                                              Nuclear
                                                                                   50         Coal
                                                                                              40:20:40 Mix
  New Nuclear is required even to reduce                                            0
                                                                                    1990   1995   2000   2005   2010   2015   2020   2025
           back to 1990 levels                                                                                                          21
                         Carbon Trading
   • Carbon Trading has potential to reduce carbon
     emissions at cheapest cost.
   • Companies are given a free allowance which may be
     reduction on historic trends, an increase on historic trends,
     or at a constant level.
   • Carbon Trading takes place between companies.
   • If a company exceeds it allowance it can reduce its carbon
     emissions, or it can purchase allowances from someone
     who has a surplus.
   • However, there is an ultimate buy out penalty if there are
     too few allowances.
   • During Phase 1 (2005 – 2007 this penalty was €40 a tonne
   • In Phase 2 2008 – 2012, the penalty is currently €100 a
     tonne. in EU-ETS.
    However, Carbon Trading as a means to reduce carbon only works if:
                • Sensible allocations of permits are issued
                • The price of carbon is realistic
  CRed
carbon reduction                                                         22
                  Carbon Trading: How it works -1
 • Example with no trading.
 • Requirement for a 10% cut in emissions
All Examples use Euros (€ )as the currency
              Company A                          Company B
                                                              60 tonnes reduction

                    50 tonnes reduction




                                            600 tonnes
 500 tonnes




                                                             Cost for reduction is
                    Cost for reduction is
                                                               say € 20/tonne
                      say € 10/tonne
                                                             Total cost to company
                   Total cost to company
                                                                    € 1200
                           € 500




Cost to achieve 10% reduction: 110 tonnes = € 1700 or € 15.45 per tonne
                                                                                 23
       Carbon Trading – Company A: How it works -2
      • Opportunities for Energy or Carbon Reduction
      • Trends are same, but factors vary depending on carbon intensity
                 30

                 20
Cost per tonne




                 19
                                   Tradable Value of Allowances

                 13
                 12
                 11
                 10

                         A     B C       D        E           F       G
                      50 tonnes 10 20    30      30           60       30

                               Cumulative Carbon Savings
     Target Reduction is 50 tonnes – can be achieved with an investment of € 500
Tradable value of allowance high: company makes profit by investing in other schemes
                                                                                  24
                 Carbon Trading – Company B: How it works -3
      • Opportunities for Energy or Carbon Reduction
      • Trends are same, but factors vary depending on carbon intensity
                   30
                   26
                   24
                   20
Cost per tonne




                                         Tradable Value of Allowances


                               A         C B                        G


                          60 tonnes      20 10                     200



                                      Cumulative Carbon Savings
                 Target Reduction is 60 tonnes – can be achieved with an investment of € 1200
                         Tradable value of allowance low: company buys allowances
                                                                                                25
26
27
28
29
30
31
32
33
34
35
36
37
38
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Carbon Trading: Web Links




                            40
41
 What prices does EU-ETS need to be to stimulate low
                carbon technologies?




Solar Collectors installed 27th
        January 2004


            Annual Solar Gain 910 kWh
                                                       42
43
44

				
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