Moving towards a Low-Carbon Economy

The term “low-carbon economy” refers to an economy and a society that produce lower levels of CO2 emissions than those required for the long-term stabilisation of atmospheric carbon concentration.

The EU has made itself the world leader in efforts to “decarbonise” the economy, and was part of the “high ambition coalition” at the recent COP21, setting the goal of reducing 2030 CO2 emissions by 40% compared to 1990 levels. No similar pattern can be observed, for example, in the United States, China or India, the countries responsible for half of world CO2. Without their contribution, the laudable efforts of Europe (whose emissions account for 10% of the world’s total), will have little direct impact.

The early consequences of policies for a low-carbon economy are already in effect, even if we are not aware of it. Directives for the implementation of these policies affect all orders of economic activity. We are seeing significant R&D resources assigned to this area, with heavy investment and the creation of new business opportunities, some of which are successful and others which end in abject failure.

This situation has led sceptics to believe that there is no relation between CO2 emission reductions and climate change mitigation, that it’s just business. Time will tell who was right.

Already on the road

The recent COP 21 Agreement has set out an imprecise path towards an economy that emits fewer greenhouse gases (GHGs), of which CO2 represents approximately 75%. The objective, set out explicitly in the EU framework strategy if not in the Paris Agreement, is to move “away from an economy driven by fossil fuels” by boosting renewables. Today, fossil fuels account for 73% of primary energy use in the European Union, showing the scale of the challenge involved in pursuing this transformation.

With the technology available now and in the near future, it will be difficult to effectively replace coal, natural gas and particularly oil in the refining, chemicals and petrochemicals, metals and cement production industries. In addition to this, new gas and oil resources made available by “new” exploitation techniques and current low prices mean cheap oil will still be available for 40 years. This represents competition to renewables, not just in this sector but also in others.

The “decarbonisation” of electricity is making clear progress in the EU. In mainland Spain, renewable energy (not without CO2 emissions) accounted for 43% of electricity in 2014. But behind this figure are others that include extra costs, premiums readjusted after the fact and higher electricity prices than in other countries. There are also surplus capacities, ruinous investments in combined cycles and decisions to invest massively in new-generation renewables at early stages of the learning curve. The electricity production and distribution model may be reconfigured, with actors running large and medium generation facilities also managing the contribution of producers with the capacity for distributed generation or to store electricity locally or in electric vehicles. If we add to this the electrification of demand with improved energy efficiency, particularly for domestic and service use, the “electric” contribution to emissions reduction can be very significant.

For air and heavy road transport, first-generation biofuels do not provide a net emissions reduction to the extent required, and the more advanced fuels will not be available for some time. For cars, European regulations are reducing emissions effectively with decreased consumption. Electric will be slow to penetrate in this sector until storage technology enables greater autonomy and faster charging. But the associated improvements in efficiency can be significant.

To summarise, the EU’s leadership translates into major changes in our daily lives, which are not always visible and which give rise to the appearance of new business opportunities (of which some are profitable and others are truly catastrophic) and the disappearance of others. All kinds of economic activity are affected, on many occasions including European industry becoming less competitive.

Is that the price we have to pay for being the first?

PROF. VICENTE J. CORTÉS, INERCO PRESIDENT

(Source: ‘Cinco Días’ newspaper)