IEA Urges Policy Action on Global Warming, Worries U.S. Shift to Natural Gas May Slow

By Rick Mitchell

PARIS--Without new environmental or other regulations to tighten carbon dioxide emissions standards for existing coal-fired power plants, the recent U.S. shift to cleaner running gas-fired plants could begin to fizzle out because of rising gas prices, according to an International Energy Agency report released June 10.

The World Energy Outlook Special Report, Redrawing the Climate-Energy Map offers the U.S. case as an example of areas in which it says urgent, but feasible, policy actions are needed to get the world off its current path toward global warming that is highly likely to produce a big increase in catastrophic climate events.

The report recommends four energy policies it says countries could implement immediately using existing technology, without harming economic growth and without waiting for a global climate agreement to take effect in 2020.

It said the recent coal-to-gas transformation in the U.S. power sector, spurred by the shale gas revolution and key economic factors, has contributed to one of the few “bright spots” in an otherwise alarming picture for global energy-related emissions.

While global energy-related carbon dioxide emissions in 2012 rose 1.4 percent to reach a record 31.6 gigatons, mostly due to growing energy use in emerging economies, in the United States the coal-to-gas shift in power generation helped slash U.S. emissions by some 200 million tons for the year, “back to the level of the mid-1990s,” the agency said.

However, rising gas prices are calling that shift into question, it said.

Uncharted Territory

Launching the report in London, Maria van der Hoeven, IEA's executive director, noted that U.S. researchers in Hawaii recently measured atmospheric C02 concentration at over 400 parts per million.

“This is uncharted territory in the history of humans,” van der Hoeven told reporters, adding that “while it does not represent a tipping point per se, that milestone is symbolic of failure to respond adequately, and to fulfill our own national and international pledges to limit average global temperature increase to 2 degrees Celsius over the long term.”

The IEA has said global atmospheric carbon dioxide must be held to about 450 ppm in this century, to have a chance to hold global warming to 2 degrees Celsius in that time frame, compared with pre-industrial levels. Scientists say that is the warming threshold beyond which catastrophic climate change becomes exponentially more likely.

But van der Hoeven said that, as budget shortfalls brought on by the economic crisis have caused countries to put climate change efforts on hold, the world is headed for a 5.3 degrees Celsius temperature rise, “with potentially disastrous implications in terms of extreme weather events, rising sea levels, and huge [related] economic and social costs.”

In weeks of meetings that ended Dec. 8 in Doha, Qatar, U.N. climate negotiators in the 18th Conference of the Parties (COP) to the 1992 U.N. Framework Convention on Climate Change adopted agreements that set out a path for a global accord that by 2020 would require all countries to accept commitments to address climate change.

Four More Gigatons of Carbon Dioxide

The energy sector accounts for about two-thirds of global greenhouse gas emissions, with developing countries accounting for 60 percent of total emissions, the report said.

Van der Hoeven said the world cannot afford to wait for a global climate agreement to take effect in 2020, because by then annual energy-related emissions will be nearly 4 gigatons higher than the level that would put the world on track to keep global warming under 2 degree Celsius.

She urged governments to take key national and international policy action to slash energy-related greenhouse emissions before 2020.

China, which was the globe's biggest carbon dioxide polluter in 2012 and also had its biggest increase in emissions, still posted one of its lowest increases in a decade, thanks to efforts on renewables deployment and efficiency gains, the agency said.

EU emissions fell partly due to its contracting economies, but also to increasing renewables use, but Japan's emissions rose after it cut nuclear power use in the wake of the Fukushima Daiichi Reactor disaster of 2011, the IEA said.

Four Measures for Two Degree Rise

The report's author, Fatih Birol, said it proposes four measures that would allow the world to stay on a path for holding global warming to 2 degrees Celsius.

The “4 for 2 degree” scenario would cut annual emissions to 3.1 gigatons of carbon dioxide equivalent by 2020, 8 percent lower than expected under the current policy trajectory, said Birol. Binding international measures would take affect in 2020, he said.

The report proposes:

•targeted energy efficiency measures in buildings, industry and transport that would account for nearly half the emissions reduction to 2020;

•limiting construction and use of least-efficient coal-fired power plants, for 20 percent of the emissions reduction and raising the share of power generation from renewables from today's 20 percent, to 27 percent in 2020; Natural gas generation would also increase;

•actions to reduce methane releases from upstream oil and gas industry, which would cut emissions by 18 percent; and

•a partial phaseout of fossil-fuel consumption subsidies that would slash carbon dioxide emissions by 12 percent and also boost energy efficiency efforts.

The report said implementing the proposals will cost $1.5 trillion to 2020, but if the world waits until 2020 to take action, the cost will have risen to $5 trillion.

U.S. Coal-fired Generation Up 14%

Combined-cycle gas-fired plants emit roughly half as much CO2 per kilowatt hour as conventional coal-fired plants, the IEA said.

The so-called U.S. shale gas revolution has produced much lower natural gas prices in the United States, boosting the U.S. economy, and increasing the competitiveness of natural gas versus coal in the U.S. power sector.

From 2008-2012, when total U.S. power demand was relatively flat, coal's share in U.S. electricity output fell from 49 percent to 37 percent, while gas increased from 21 percent to 30 percent, and renewables rose from 9 percent to 12 percent, the report said.

In 2011, when the share of gas had already increased significantly, the utilization rate of combined-cycle gas turbines was still under 50 percent.

But whether the U.S. trend in emissions reduction from coal-to-gas switching in power generation will continue depends on relative coal and gas prices, the IEA said.

It cites data indicating that, as U.S. natural gas prices have already begun to rise, coal consumption for power generation rose 14 percent in the first quarter of 2013, compared with the same quarter in the previous year.

If gas prices continue to rise as expected, more electricity producers may find it more appealing to keep running their existing, higher carbon dioxide-emitting, conventional coal-fired plants, the agency said.

“In the absence of environmental or other regulations posing additional restrictions on carbon dioxide emissions standards on existing power plants, existing coal plants could again become economical relative to gas,” the report said.

IEA advises 28 of the 34 member countries of the Organization for Economic Cooperation and Development, which include the world's largest market economies, but not China, Brazil, India, Indonesia, Russia, or South Africa. Mexico and Chile are OECD members but not IEA members.

The agency plans to release its full annual WEO report on Nov. 12.