International Energy Agency Calls for Much Higher Carbon Prices

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The International Energy Agency has determined that for greenhouse gas emissions to be reduced to the level recommended by the Intergovernmental Panel on Climate Change (and some contend that report was too conservative), carbon prices would need to be $200 a ton, more than four time the price now in effect for the EU carbon trading scheme.

From the Financial Times:

The cost of carbon dioxide emissions would need to be at least $200 per tonne – many times today’s levels – to deliver the cuts proposed by scientists to avert the threat of global warming, the International Energy Agency said on Friday.

The rich countries’ energy watchdog warned that the cost of emissions, set by trading schemes or carbon taxes, would need to be that high to make investment in technologies such as hydrogen-fuelled vehicles commercially viable….

Nobuo Tanaka, IEA executive director, said the world needed a “technology revolution” to halve greenhouse gas emissions by 2050, which would “completely transform the way we produce and use energy”.

“If we really go to the 50 per cent reduction, costs are going to be very steep,” he said.

The Intergovernmental Panel on Climate Change, an advisory body to world leaders, concluded last year that global carbon dioxide emissions would need to fall by 50 to 85 per cent by 2050 to prevent average global temperatures from rising more than 2 degrees centigrade.

Among the Group of Eight leading economies, Japan, Germany, the UK, France, Italy and Canada, but not the US or Russia, have endorsed the goal of cutting emissions by half.

The IEA report, commissioned by G8 leaders at the Gleneagles summit in 2005, put the cost at $45,000bn during the next 40 years, or 1.1 per cent of global economic output over the period.

The agency said the world needed to build 32 nuclear plants and 17,500 wind turbines every year, and outfit 35 coal-fired power stations annually with carbon capture and storage equipment; rates of investment that are far ahead of today’s levels.

It also said reducing carbon emissions by half would require commercialising technologies now deemed too experimental or expensive, saying: “Nearly 1bn electric and fuel cell vehicles need to be on the roads by 2050.”

To make those vehicles commercially viable, it said, carbon dioxide emissions would need to be priced at $200 per tonne, providing there was good technological progress. Without that progress, the price would need to be $500 per tonne…

Sixty per cent of the investment would need to be made in developing countries, the agency said. Disagreements over who should pay for such investments have been a major stumbling block to convincing China, India and other fast-growing but poor countries to sign on to emissions-cutting schemes.

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  1. Juan

    Strikes me that the IEA is pushing for a ‘save the world’ green social industrial complex, (in effect a global partnering of governments, workers and industries), while not properly considering systemic constraints.

    Subsidies/socialization of costs as the means to guarantee sufficiently high rate of return on investment while supporting expectations of this remaining above average?

    If so, the ‘partnership’ becomes very tense, fails.

    The matter of ‘who pays’ has class content.

  2. Paul

    The FT’s front page story is confused, but an inside page article is clearer. The IEA correctly points out that a carbon price of $50 per tonne CO2 would be enough to ensure that electric power is generated without carbon emissions (mainly by nuclear fission). This alone would cut CO2 emissions by nearly half.

    The problem is liquid fuel for transport. The IEA sees this as an intractable problem, requiring a carbon price of $200 to $500 per tonne to force the development and adoption of new technologies such as hydrogen fuel cells.

    A more obvious solution is to shift all long-distance ground transport to electrified rail, so that road transport is used only for short journeys (for which existing battery technology is adequate). This has other advantages – modern railways are about 3 times faster than the fastest highways. But for some reason it’s unthinkable.

  3. Anonymous

    When there is genuine proof that CO2 emmissions and global warming are linked there maybe a case for carbon trading at present there is no proof and the emmissions trading scheme is just another enron devised profiteering system. The current media and political drive for emmissions trading ignores the basic science of the periodic table that CO2 is denser than air and therefore would struggle to rise into the atmosphere that is why we have the oceans as carbon sinks. is an interesting site to get an alternative view on this subject

  4. Anonymous

    Just so we are clear. What is claimed is a link between CO2 emmissions and water vapor in the atmosphere.

    The greenhouse gas is water vapor, not CO2.

  5. Anonymous

    Your passionate cry needs to be modified to reduce water vapor in the atmosphere.

    Of course, anyone that knows anything about the quadra-trillion tonnes of water vapor in the atmosphere immediately chokes.

    But they are heretics.

  6. David Doty

    There is a new energy storage and transportation fuel solution. Researchers at Doty Energy have shown that it will be straightforward to make all the fuels and chemicals needed in the U.S. cost effectively from waste CO2, water, and renewable energy, especially wind, as it is currently the most competitive. These wind-generated fuels, called WindFuels, will include ethanol, gasoline, diesel, and jet fuel, and they will flow seamlessly into the current fuel infrastructure. We expect WindFuels to be competitive as long as oil is above $80/bbl. Hence, WindFuels can be market driven and thus able to cut global CO2 emissions in half by mid century.

    The WindFuels production system is based largely on the commercially proven technologies of wind energy, water electrolysis, and Fischer Tropsch chemistry. Wind energy is used to split water into hydrogen and oxygen. Some of the hydrogen is used in a process that converts CO2 to carbon monoxide and water. The carbon monoxide and the balance of the hydrogen are fed into a Fischer Tropsch reactor similar to that commonly used to produce fuels and chemicals from coal. The catalysts and conditions may be chosen to produce mostly ethanol, gasoline, jet fuel, or diesel. A number of major advances have been incorporated in the processes to permit 60% system efficiency, which is twice what was expected by most experts just three years ago.

    The critical technical details are available from the WindFuels website .

    Detailed system simulations have been carried out using commercially available, well validated software. The analyses and simulations have been reviewed and endorsed by distinguished scientists and engineers from the relevant disciplines.

    It is not magic. It is just sound chemistry, physics, engineering, and up-to-date economics. Check out the WindFuels website. -David Doty, PhD, physicist

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