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Directions to 2050Directions to 2050A New International FrameworkA New International Framework

The scale of the challenge The scale of the challenge

Post Copenhagen ArchitecturePost Copenhagen Architecture

Sector based agreements Sector based agreements

Enabling large scale action Enabling large scale action

A global COA global CO22 market market

David HoneGroup Climate Change AdviserShell International B.V.

2

A new direction

is needed

The way we produce and use energy today is not sustainable

3

Very demanding reductions are called for

Effective action requires:

• Global emissions to fall by at least 50% relative to 1990 by 2050;

• Global average per capita emissions that will – as a matter of basic arithmetic – need to be around 2 tonnes (T) by 2050 (20 GT divided by 9 billion people): this figure is so low that there is little scope for any large group to depart significantly above or below it;

• Agreement by developed countries to take on immediate and binding national targets of 20% to 40% by 2020, and to commit to reductions of at least 80% by 2050;

Key Elements of a Global Deal

Nicholas Stern

4

The implications are clear

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20W

orld

OE

CD

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n-O

EC

D

US

A

Jap

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EU

-27

Afr

ica

Mid

dle

Ea

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Ru

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La

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me

rica

Asi

a

Ch

ina

Ind

ia

20

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"ta

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Key Levers in the Economy

CO2 emissions = people GDP energy CO2

person unit GDP unit energy

Only four factors govern the outcome, being:

• Population Number of people

• Standard of Living GDP per person

• Energy Intensity Energy per unit of GDP (efficiency of the economy)

• Carbon Intensity CO2 per unit of energy (reflects the energy source)

x x xX X

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Pathways to 2050

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50

100

150

200

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400

450

$0 $20,000 $40,000 $60,000

GDP per capita, US$ 2000 (ppp)

En

erg

y p

er

ca

pit

a,

GJ

Improving energy efficiency

2025

2050

Falling CO2 emissions per unit of energy

2008

Wealthy developedDevelopedLeading developingDeveloping

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The prospect of emission targets looms

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300

350

$0 $10,000 $20,000 $30,000 $40,000

GDP per Capita, US$ ppp (2000)

En

erg

y p

er C

ap

ita

, GJ

Finland

Romania

“Developed” countries with Kyoto Targets

“Developed” countries with Kyoto Targets

KoreaTaiwan

Singapore

China Thailand

Malaysia

Rapidly emerging economies in AsiaRapidly emerging economies in Asia

8

Two pathways to consider

No target under the Kyoto ProtocolOpportunity to respond to the

market through the Clean Development Mechanism

National action agreementsNational policies and measures

Sectoral agreementsFunding via market mechanismsUse of clean-technology funds

Direct recruitment to cadre of nations with

targets

National emission target

2013 - 2020

2013 - 2020

2018 - 20302008 - 2012

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Abatement

GtCO2e per year in 2030

B CA

Large scale abatement within the electricity sector.

Some land restoration.

Energy efficiency measures, land use practices, avoided

deforestation.

Higher cost technologies still moving down the

cost curve

The global abatement curveCost of abatement

€/tCO2e

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The anatomy of a dealCost of abatement

€/tCO2e

Abatement

GtCO2e per year in 2030

B C

Targeted systems for agriculture and deforestation D

A

Developed

Developing

Less Developed

Absolute targets

National policies and measures:SD-PAMs, NAMAs, without access to international project mechanisms.

Large scale action in the electricity (and transport) sector driven by international project mechanisms and clean tech funds.

Large scale action through cap-and-trade, transport measures (vehicle efficiency, low carbon fuels etc.) and building regulations

Support for Demonstration programmes

globally

Smaller scale clean development projects utilising the CDM

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Important for the CDM to Evolve

CDM / JI (Kyoto 2008-2012)• Small / Moderate scale• Development “dividend”• SD criteria• Additionality• Exhaustive project by project process

Cost of abatement€/tCO2e

AbatementGtCO2e per year in 2030

Clean Development Mechanism• Existing CDM rolls forward• Smaller scale than CTM• Development agenda• Focus on less developed economies

Clean Technology Mechanism• Focussed on the higher end of the

abatement curve• Principally clean electricity• Recognises CCS• Drives sector-based approach

Clean Technology Mechanism• Focussed on the higher end of the

abatement curve• Principally clean electricity• Recognises CCS• Drives sector-based approach

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Possible Post-Copenhagen Architecture

Long term goal

Absolute targets

Policies & Measures

Mea

sura

ble R

eportable

Verifiable

Clean

Tec

h

Fun

dsSupporting

Mechanism

s

Adaptation

Funding

Carb

on M

arke

t

Infra

stru

ctur

e

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Clean

Tec

h

Fun

dsSupporting

Mechanism

s

Adaptation

Funding

Carb

on M

arke

t

Infra

stru

ctur

e

Possible Post-Copenhagen Architecture

Long term goal

Absolute targets

Policies & Measures

Mea

sura

ble R

eportable

Verifiable

Secto

r base

dag

reem

en

tsS

ect

or

base

dagre

em

en

tsShifting the balance towards

absolute targets through large scale packages of activity

Shifting the balance towards absolute targets through large

scale packages of activity

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Design of a sector based “satellite” agreement

Sector BasedAgreements

- Large scale preparatory step towards absolute targets

- Clear purpose and end-point

- Built on the foundation elements

- Negotiated separately (by a limited number of parties) as “satellites” to

the main agreement

- Typically focussed on a sector

- Technology capacity building, funding and financing

- Best practice capacity building

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Emissions Mitigation Pathways

Only four pathways forward:

• Energy efficiency

• Renewables

• Nuclear

• Fossil fuels with Carbon Capture and Storage (CCS)

All four are essential and will be needed at scale:

• To meet energy demands this century

• To limit CO2 emissions into the atmosphere

CCS is a key focus area in Shell:

• A family of technologies all in use today

• Large scale end-to-end demonstration needs to happen

• Deployment need not be a distant dream

16

Funding flow Funding flow

A “sector based” agreement that focuses on coal use in the power sector

First large scale CCS demo projects (e.g. China)

CCS Certs.CCS Certs.

CCS Standard emerges in some countries

Emissions trading adopted in many

developing country power sectors

Initial CCS roll-out in

developing countries

Initial CCS infrastructure funded directly

• EU-ETS• US-ETS

Clean technology funding framework emerges globally

CCS Project Mechanism &

certification processes

finalised

$ £ ¥ €

2009 2010-2015 2020 2025+

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Supporting CCS in the international framework

Key elements that need to be present in the near term:

• CCS recognised within the UNFCCC Clean Development Mechanism (CDM) or within a new post 2012 mechanism;

• International CCS certification, that delivers a (tradable) certificate for one tonne of CO2 stored underground and

supports the CDM;

• A funding framework for the demonstration phase of CCS,

consisting of -

• Recognition of CCS within existing and new clean technology funds (e.g. the fund recently proposed by the G8);

• Recognition of extra-national CCS demonstration projects within national and regional funding arrangements.

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Positioning CCS in the evolution of the CDM

CDM / JI (Kyoto 2008-2012)• Small / Moderate scale• Development “dividend”• SD criteria• Additionality• Exhaustive project by project process

Cost of abatement€/tCO2e

AbatementGtCO2e per year in 2030

CO2 Storage Certificate• Recognises CCS globally• Certifies tonnes sequestered• Standardised rules• Potentially tradable

CO2 Storage Certificate• Recognises CCS globally• Certifies tonnes sequestered• Standardised rules• Potentially tradable

Clean Development Mechanism• Existing CDM rolls forward• Smaller scale than CTM• Development agenda• Focus on less developed economies

Clean Technology Mechanism• Focussed on the higher end of the

abatement curve• Principally clean electricity• Recognises CCS• Drives sector-based approach

Clean Technology Mechanism• Focussed on the higher end of the

abatement curve• Principally clean electricity• Recognises CCS• Drives sector-based approach

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A Global Carbon Market must evolve

Linkages develop between all systems and more systems appear

2000 2005 2010 2015 2020 2025

Danish-ETS

UK-ETSAustralian ETS

US National or North American “cap-and-trade”

Norwegian ETS

EU-ETS

CDM

CDM evolves to include clean electricity mechanism

Pre-Kyoto Kyoto Post 2012

Expanding EU-ETS

Japan technology standards

Linkage framework

New technology mechanisms evolve (e.g. for CCS)

China adopts CCS standard

New Zealand ETS

http://blogs.shell.com/climatechange