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Renewable Investments vs. Recession-reduced GHG Emissions

By Tom Tanton -- March 10, 2009

In a March 4 article, writer Michael Burnham of E&E News PM (subscription required) talks about the slow down in “clean energy” investments and what this might mean for reducing the carbon peak:

Investments in new wind farms and other “clean” energy projects are slowing with the crumbling global economy, and that could make climate change’s bite harder in the decades ahead, financial analysts warned today.

With coal-fired power plants, steel mills and cement kilns producing less, greenhouse gas emissions are falling in the short term, the London-based market analytics firm New Energy Finance says in a report today. But flat investment in lower-emission alternatives in the next two or three years — presumably the time it takes for economies to rebound — could push what the analysts dub “peak carbon” back by more than a decade.

Investments in renewable energy and other “clean” technologies must reach $500 billion annually by 2020 so that the global energy system’s carbon dioxide emissions peak at 30.8 gigatons in 2019, the report says. Reaching peak carbon by such a date, followed by an emissions cut of 50 percent by 2050, should limit the global average temperature increase to between 2.4 to 2.8 degrees Celsius.

Not explained is why CO2 emissions peaking in, say, 2029 is any worse than reaching that peak in 2019,if the overall emissions’ trajectory is lower from now until then. Why, it might even let us learn even more about the climate, and more about innovative technologies. It might also allow infant technologies to mature. With lower emissions from now to either 2019 or 2029, it does seem any temperature increase would also be less if you believe climate models.

“The more you warm up, the greater the number of systems there are at deeper risk,” said Stanford University climatologist Stephen Schneider, who contributed to all four IPCC reports.

The 2007 IPCC report did not set a range of ideal dates for reaching peak carbon, said Schneider, who dismissed doing so as a nominal exercise. Even so, NEF analysts warn that reaching peak emissions before 2020 looks “highly unlikely” as the United States and other countries sink deeper into a recession.

“In the short term, the momentum of this sector’s growth has been blunted by the economic downturn,” NEF analyst Ethan Zindler explained in an interview.

“The recession’s direct impact on CO2 emissions is likely to be moderate, reducing the total by around 1 gigaton per year, and certainly not enough to avert a continued upward trend,” the report concludes.

As a point of comparison, the International Energy Agency’s 2008 world energy outlook projects cumulative investment of more than $26 trillion in all fossil and renewable energy sources between 2007 and 2030. And, it should be noted, many of those dollars are invested in technologies that reduce carbon intensity or directly reduce carbon emissions, even if some media observers don’t count them as “clean tech.” The impact on “peak carbon” may be a smaller or later (or both) achievement of that dubious milestone.

In an early 2008 report, I documented the investments made in GHG mitigation technologies in North America during the period 2000 to 2006. Investments were reported for the private sector and for the Federal government and by technology/energy category. The data were compiled from a review of over 300 company annual reports, federal budget documents, and other public sources. It should be noted that most of the investments have benefits in addition to any ability to reduce greenhouse gas emissions, and were made for multiple reasons including to increase and/or diversify energy supplies, or to improve efficiency.

Total North American investments in GHG mitigating technologies were estimated to have totaled $94.5 billion dollars between 2000 and 2006. These investments were made by the oil and gas industry, other private sector industries and the Federal government, and span a variety of areas or categories. For each sector, the figure below summarizes these investments by technology category.

Oil and gas companies invested $42.1 billion from 2000 through 2006 on GHG emission mitigation technologies in the North American market. This expenditure represents 45% of the estimated total of $94.5 billion invested by U.S. companies and the Federal government over this time period.

The largest share of oil and gas industry investments falls into the end-use technology category. The industry is estimated to have invested $27.8 billion (or 66% of the $42.1 billion sector total) for advanced end-use technologies, mostly for efficiency improvements through combined heat and power (cogeneration) and for advanced technology for vehicles. Significantly, this $28 billion investment in end-use technologies represents 46% of the estimated total amount of $61 billion invested by all U.S. companies and the federal government in this technology class as shown in figure ES-2. The second largest investment share made by the oil and gas industry, about 25% or $10.5 billion, was to develop substitute (and less carbon intensive) fuels, e.g., LNG, and to reduce methane fugitive emissions and flaring. This $10.5 billion investment in fuel substitution technology represents 76% of the estimated $13.8 billion invested in total in this technology class.

Publicly announced nonhydrocarbon investment by the oil and gas industry in the North American market is estimated at $3.4 billion over the 2000 – 2006 period, or 8% of its industry total. Significantly, this represents 19% of the total industry and Federal government investments of approximately $18 billion in this technology class. The oil and gas industry’s top investments are in wind and biomass; expenditures were also made in solar, geothermal, and landfill digester gas. The oil and gas industry also made investments in the enabling technology category principally for research into carbon capture and storage, and for the development of second generation biofuels.

In addition to the oil and gas industry, other significant technology investments were made by the motor-vehicle industry, agricultural industry, electric utilities, and the renewable-fuels industry. These other private industries are estimated to have invested $37.3 billion (or 39% of the $94.5 billion total) from 2000 to 2006. Of the $37.3 billion sector total, $25.5 billion (68%) is associated with end-use technologies, and $10.4 billion (28%) with non-hydrocarbons as seen in figure ES-1. End-use technologies include advanced technology vehicles, efficiency improvements and combined heat and power. Non-hydrocarbons include industrial gas replacements (e.g. for SF6), and renewables such as wind, and ethanol. By technology class, other private industries’ investment share was 42% of the end-use category and 58% of the nonhydrocarbon investment as seen in figure ES-2 of my 2008 report.

Likewise, the federal government is estimated to have invested $15 billion (16% of the $94.5 billion total) from 2000 to 2006 through the Climate Change Technology Program. Fifty-two percent of the federal government’s investment is estimated to be in end-use technology, including more energy efficient lighting, combined heat and power and similar efficiency improvements. Twenty-six percent of the federal government’s investment is in the nonhydrocarbon class (including ethanol and biodiesel), 13% in the fuel substitution class (such as landfill gas), and 9% fell into the enabling technology class (such as carbon capture and storage).

I’m currently updating the data base to include investments made during 2007 and 2008. Results are expected in May.

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