COL­LAB­O­RAT­ING TO­WARDS A LOWER CAR­BON FU­TURE

Speak­ing at a Politico En­ergy Vi­sions event in Brus­sels, Harry Brekel­mans, Shell Projects and Tech­nol­ogy Di­rec­tor, looks at how gov­ern­ments and com­pa­nies like Shell can help the world reach the goals of the Paris Agree­ment

Oil and Gas - - EXPERT SPEAK - Source: Shell Me­dia

The Paris Agree­ment has sent a sig­nal around the world… the time to act on cli­mate change is right now. The Min­is­te­rial on Cli­mate Ac­tion that con­cluded am­pli­fies this sig­nal. The world needs to keep the global aver­age tem­per­a­ture in­crease well be­low 2 de­grees Cel­sius. But how can the peo­ple of the world do this?

Shell’s lat­est sce­nario, called Sky, con­sid­ers the mu­tu­ally-re­in­forc­ing ac­tions that so­ci­ety, mar­kets and gov­ern­ments need to take to reach the goals of the Paris Agree­ment, which Shell fully sup­ports. Sky is not a fore­cast, or a plau­si­ble route, nor is it a pol­icy pro­posal.

In fact, the Sky sce­nario, at this time, isn’t even likely, it is a tech­ni­cally pos­si­ble way to­wards meet­ing the goal of the Paris Agree­ment. It of­fers a de­scrip­tion of what ac­tions so­ci­ety might take.

These ac­tions in­volve… a tripling of en­ergy ef­fi­ciency… an end to de­for­esta­tion… and sub­stan­tial tech­no­log­i­cal ad­vances to solve chal­lenges like large-scale bat­tery stor­age.

Sky also re­lies on govern­ment-led car­bon pric­ing mech­a­nisms, like the EU Emis­sions Trad­ing Scheme and the scheme be­ing de­vel­oped in China. These point con­sumers and busi­nesses in the di­rec­tion of lower-car­bon so­lu­tions. Un­der Sky, ev­ery new pas­sen­ger car could be elec­tric by 2050…and the five-fold growth in elec­tric­ity de­mand by 2070 could be met largely by re­new­ables. But some parts of the econ­omy can­not be elec­tri­fied, or at least not eas­ily or af­ford­ably. Like heavy trans­port by air or sea and the pro­duc­tion of iron, steel, ce­ment, plas­tics and chem­i­cals. The car­bon emis­sions that in­evitably re­main from these sec­tors could be dealt with through so­lu­tions like car­bon cap­ture and stor­age and nat­u­ral off­set­ting mea­sures like new forests.

It is a lot of work to do… and that is just part of it… but the world can suc­ceed if it wants to. Pro­vided we work to­gether. And this brings me to this room. It brings me to us. We all have a role to play.

WHAT CAN GOV­ERN­MENTS DO?

Be­fore I talk about what com­pa­nies like Shell can do, let us con­sider how gov­ern­ments can help. To start,

gov­ern­ments can help by mak­ing sure that the Paris Cli­mate Agree­ment works ef­fec­tively. This means that this De­cem­ber, at the global cli­mate sum­mit in Ka­tow­ice, Poland, the par­tic­i­pat­ing coun­tries need to com­plete the Paris rule­book. The EU and China, the two most in­flu­en­tial forces in sup­port of Paris and fo­cus for this evening’s dis­cus­sion, will play a cru­cial role in mak­ing this hap­pen. This rule­book must en­able coun­tries to com­pare and ver­ify emis­sion cuts and other ef­forts to re­duce green­house gases.

And the rule­book can help to put an ef­fec­tive price on CO2 emis­sions by gov­ern­ments es­tab­lish­ing clear rules on how car­bon cred­its are granted, traded and ac­counted for.

This brings me to the sec­ond way gov­ern­ments can help to reach the goals in the Paris Agree­ment: by pro­vid­ing strong mar­ket sig­nals. There have al­ready been promis­ing de­vel­op­ments in this re­gard.

For ex­am­ple, re­cent re­forms to the EU Emis­sions Trad­ing Sys­tem – which Com­mis­sioner Arias Canete and his teams helped to in­tro­duce last year

– have made a pos­i­tive im­pact. The Euro­pean car­bon price has al­ready tre­bled since last year. It stands at around 15 eu­ros per tonne of CO2 right now. Many think this is still not high enough to stop emis­sions on a big enough scale, nor to en­cour­age the right amount of in­no­va­tion. But there is hope. An­a­lysts fore­cast that the re­forms will re­sult in an aver­age price per tonne of 25 eu­ros in the next decade.

How­ever, the ef­fect of such a govern­ment-led car­bon price can be di­min­ished by other gov­ern­men­tal poli­cies. For ex­am­ple, by sub­si­dies that coal plants re­ceive for pro­vid­ing elec­tric­ity that is used as back-up when re­new­ables can­not pro­duce enough power. Poli­cies should re­in­force and com­ple­ment each other. This is why many be­lieve the EU should im­ple­ment the Com­mis­sion’s pro­posed emis­sions per­for­mance stan­dard for the power sec­tor, rep­re­sented by the 550g CO2/kWh limit, as soon as pos­si­ble. And no later than 2025.

Re­cent re­forms to the EU Emis­sions Trad­ing Sys­tem – which Com­mis­sioner Arias Canete and his teams helped to in­tro­duce last year – have made a pos­i­tive im­pact.

Lastly, gov­ern­ments can be of huge help by en­cour­ag­ing in­no­va­tion and in­cen­tivis­ing com­pa­nies to scale-up their cleaner en­ergy prod­ucts and ser­vices. That is what the Chi­nese govern­ment has done, and now: 40% of all wind tur­bines in the world are pro­duced in China… one in ev­ery two elec­tric cars in the world is in China…China pro­duces 55% of global lithium-ion bat­ter­ies.

The EU has plans for an EU In­no­va­tion Fund to demon­strate in­no­va­tive low car­bon tech­nolo­gies. This in­cludes car­bon cap­ture and stor­age – or CCS. If in­tro­duced ef­fec­tively, and at to­day’s prices, this EU scheme could be worth some €6 bil­lion in the 2020s.

This could mean a big boost for Europe’s abil­ity to de­liver CCS. Ac­cord­ing to the In­ter­na­tional En­ergy Agency, CCS is a vi­tal tech­nol­ogy if the world is to meet the Paris cli­mate goals.

WHAT CAN COM­PA­NIES DO?

So, gov­ern­ments are of cru­cial im­por­tance to reach the goals in the Paris Cli­mate Agree­ment. But gov­ern­ments can­not do it alone. That brings me to com­pa­nies like Shell.

HOW CAN WE HELP IN THE TRAN­SI­TION TO A LOWERCARBON FU­TURE?

Shell is al­ready ac­tive, and we are plan­ning to do a whole lot more. Shell will aim to bring down the net car­bon foot­print of our en­ergy prod­ucts by around half by 2050. In other words, about 50% fewer green­house gases per unit of en­ergy when used by our cus­tomers, and around 20% less by 2035. This cov­ers not just emis­sions from our own plants and sites but also those pro­duced by our cus­tomers when they use the en­ergy prod­ucts we sell. No other com­pany in our sec­tor has pledged to do this.

We will achieve this in a num­ber of ways. By con­tin­u­ing to grow the role of nat­u­ral gas as a part­ner to re­new­ables. Be­cause nat­u­ral gas emits be­tween

45% and 55% lower green­house gas emis­sions than coal when used to gen­er­ate elec­tric­ity… and less than one­tenth of the air pol­lu­tants.

Our New En­er­gies busi­ness is also im­por­tant to lower emis­sions of the en­ergy prod­ucts we sell. It fo­cuses on new fu­els and the power mar­ket. That in­cludes pro­duc­ing so­lar and wind power, and trad­ing and sell­ing elec­tric­ity to busi­ness and homes. We ex­pect our in­vest­ment in New En­er­gies to be be­tween $1 and $2 bil­lion on aver­age a year un­til the end of the decade. Take hy­dro­gen, for ex­am­ple. As a trans­port fuel it pro­duces no emis­sions, other than wa­ter va­por. In Ger­many, we are one of the part­ners in a joint ven­ture aim­ing to set up a net­work of 400 hy­dro­gen fill­ing sta­tions by 2023. Shell is also co-founder of the Hy­dro­gen Coun­cil. This is a group of en­ergy and car com­pa­nies that wants to in­vest 10 bil­lion eu­ros in hy­dro­gen over the next five years.

And, even out­side New En­er­gies,

Shell is seek­ing to de­velop other new tech­nolo­gies. In Aus­tria, for ex­am­ple, it is par­tic­i­pat­ing in a project with the Tech­ni­cal Univer­sity of Vi­enna and oth­ers to im­ple­ment a low-cost car­bon­cap­ture process at a biomass power plant. And look­ing fur­ther into the fu­ture, Shell is sup­port­ing sci­en­tific re­search into new modes of chem­i­cal pro­duc­tion with aca­demic in­sti­tutes in China and the Nether­lands. The start­ing point for this re­search is the view that CO2 is not a waste prod­uct at the end of a chem­i­cal process, but a nec­es­sary in­put at the be­gin­ning. It could take years, per­haps decades, be­fore these chem­i­cal­pro­duc­tion tech­niques are per­fected…but they of­fer tan­ta­lis­ing op­por­tu­ni­ties.

The last way com­pa­nies like Shell can help in the tran­si­tion to a lower-car­bon fu­ture, is by con­tin­u­ing to pro­mote ef­fec­tive cli­mate poli­cies. Like our sup­port here in the Euro­pean Union for a well-func­tion­ing Emis­sions Trad­ing Sys­tem… in­no­va­tion sup­port for low car­bon tech­nolo­gies…and sus­tain­able and re­new­able trans­port so­lu­tions.

To con­clude… As the Sky sce­nario shows, the world can meet the goals of the Paris cli­mate agree­ment, but an aw­ful lot still needs to be ac­com­plished. It is en­cour­ag­ing that China and the EU have al­ready shown lead­er­ship to meet these goals. The time to build on those ef­forts, with ne­go­ti­a­tions on the Paris rule­book just around the cor­ner, is right now.

We…all of us… Shell in­cluded… have to work to­gether. And if gov­ern­ments can work to­gether… to cre­ate the land­scape the world needs to suc­ceed… a clear, de­fined, well-sign­posted land­scape which both con­sumers and busi­nesses find easy to read and nav­i­gate…then we have a chance of get­ting to where we all want to be.

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