Part 4 of the blog series: What does COP21 mean for Engineering and Technology? Read previous parts here.
Did you know, 80% of our known fossil fuel reserves will have to be left in the ground, and listed companies have already claimed as assets 25% more fossil fuels than we can afford to burn.
That is, if we are to stay within the 2 degrees Celsius warming limit agreed to at the COP21 climate agreement signed in early December. See the first blog in this series for more details.
One of the firm commitments coming out of the accord was that every country will now have to report their CO2 emissions, and review emission reduction targets every 5 years. This mandatory reporting of emissions is important, as if emissions have nowhere to hide it will make it easier to monitor and control what happens to our fossil fuels. It will also hopefully lead to an end to “off-shoring” of emissions, and to huge $500bn given by governments worldwide to subsidise fossil-fuels.
Keeping fossil fuels in the ground
Mandatory reporting of emissions will make it easier to tackle the big question of what to do with all the fossil fuels we can’t burn.
According to research by the Potsdam Institute, if we want to stay within the 2 degrees of warming limit promised by COP21, then we can only afford to release another of 565 GtCO2 into the atmosphere between now and 2050.
So we are going to have to leave 80% of these fossil fuels in the ground or find a way to burn them without releasing emissions.
In 2002 it came to light that Shell had overestimated its fossil fuel reserves by 23%, and this resulted in £3bn being wiped off the share value of the company. So the impact of a world-wide “write-off” of more than a quarter of listed fossil fuel reserves would cause financial chaos.
Clearly, someone somewhere is going to want to burn these fossil fuels for profit. The COP21 agreement will hopefully ensure proper transparency at a global level so that they are burned in a responsible way. Technologies which remove carbon dioxide from fossil fuel emissions will become increasingly important – and engineering companies with an expertise in areas such as Carbon Capture and Storage will benefit.
Cut-backs to fossil fuel subsidies?
According to the IMF governments worldwide spend more than $500 Bn a year on fossil fuel subsidies (in the UK the total is $39Bn). The IEA estimates that cutting these subsidies could reduce global emissions by 10% and if governments are forced to report nationwide emissions then they will surely come under pressure to start cutting back support for fossil fuels. The impact of this on engineering and technology services linked to the oil and gas and coal industries for instance could be huge. Combined with the plunge in oil prices from $110 a barrel in 2014 to less than $40 now, such cuts could put many companies out of business.
Reduced “offshoring” of emissions
Cheap energy costs and low regulation over emissions are part of what has made developing countries such as China appealing as places to produce things cheaply. In 2011 69% of China’s total energy supply came from coal power(cheap but dirty), and a study in 2009 suggested that as much as 46% of the rise in CO2 emissions in China is related to the production of goods for foreign markets.
Now that all countries are obliged to monitor and report their emissions, the practice of “off-shoring” emissions will now be likely to stop as more countries start to introduce regulation over emissions. Product prices should adjust to incorporate the costs of using less dirty sources of energy coupled with efficient and low emissions manufacture. This will stimulate more business for engineering companies with expertise in energy efficient production processes.
The fact that emissions will no longer have anywhere to hide means there will be increased interest and funding of technologies that allow us to burn fossil fuels and manufacture products with fewer emissions. It could also put increased pressure on the fossil fuel industries by pressuring governments to reduce subsidies.