Pathways to meeting climate goals with clean and affordable energy

ABSTRACT

Successfully managing climate change will require a broad policy focus that encourages the adoption and implementation of all viable net-zero pathways. Solutions that focus on the elimination of hydrocarbon fuels, rather than on managing green-house gas emissions, could have enormous unintended economic, security, and social justice consequences. The Net-Zero Producers Forum, with Canada as a founding member, is intended to provide a platform to advance a set of pragmatic and effective solutions to global climate challenges by fostering international cooperation among major hydrocarbon producers. The aim is to help achieve the necessary reduction in emissions in a sustainable manner. The objectives of the forum include support for development of net-zero strategies, promoting and implementing best practices, advancing carbon management technologies, and fostering cooperation on abatement of methane and fossil fuel combustion emissions. Transparent measurement and benchmarking tools will play an important role in carbon management and are critical to ensuing that technology and policy solutions are working as intended.

RÉSUMÉ

Gérer le changement climatique avec succès nécessitera de mettre l'accent sur une large politique générale encourageant l'adoption et la mise en oeuvre de toutes les solutions viables de réduction à zéro. Les solutions qui se concentrent sur l'élimination des hydrocarbures, plutôt que sur la gestion des émissions de gaz à effet de serre, pourraient avoir d'énormes conséquences involontaires sur l'économie, la sécurité et la justice sociale. Le forum des producteurs net-zéro, dont le Canada est l'un des membres fondateurs, a pour but d'offrir une plateforme pour faire progresser un ensemble de solutions pragmatiques et efficaces face aux défis climatiques mondiaux en favorisant la coopération internationale parmi les principaux producteurs d'hydrocarbures. Le but est de contribuer à la réduction nécessaire des émissions d'une manière durable. Les objectifs du forum comprennent le soutien à l'élaboration de stratégies net-zéro, la promotion et la mise en oeuvre des meilleures pratiques, la progression des technologies de gestion du carbone et la promotion de la coopération en matière de réduction des émissions de méthane et de combustion de combustibles fossiles. Des outils transparents de mesure et d'évaluation comparative joueront un rôle important dans la gestion du carbone et sont essentiels pour garantir que les solutions technologiques et politiques fonctionnent comme prévu.

KEYWORDS:

• Climate change
• net-zero producers forum
• methane abatement
• circular carbon economy
• technology deployment
• CCE guide
• CCE index

Climate change has become a key area of focus globally as rising temperatures and daily headlines about fires, floods, and other worrisome events signal climate stresses. The scientific community broadly agrees that aggressive greenhouse gas (GHG) emission reductions must be taken. Global leaders met in Paris in 2015 and pledged to limit the global temperature rise this century well below 2°C above pre-industrial levels, but progress on implementation has been challenging.

Many countries are responding to climate concerns by mandating renewable energy sources. There are also global movements gaining traction to completely ban hydrocarbons as a source of energy. A shift away from traditional fuels could lead to significant drop in oil demand in the long term, negatively affecting the economies of hydrocarbon-rich countries, and potentially creating energy security and market stability problems among both producing and consuming economies.

A narrow focus on only reducing fossil fuels could also result in several unintended consequences: (1) no practical solutions for hard to abate sectors like aviation, shipping, steel, and cement; (2) costly and inefficient utilization of existing infrastructure; and (3) reduced energy access and reliability. Many credible forecasts suggest that the primary energy mix that the world will need in 2050 to meet energy demand will still include significant amounts of hydrocarbons (bp, 2022; IEA, 2021; US EIA, 2021). The resulting carbon emissions from this energy mix must be managed.

Sustainability as a concept is an important component of climate management. Awareness of the natural environment as a finite resource is reflected in three main sustainable development pillars, including economic growth, environmental protection, and social equality.

In 2015, the United Nations outlined a collection of 17 interlinked global goals designed to be a “blueprint to achieve a better and more sustainable future for all” commonly known as the Sustainable Development Goals (SDGs). The SDGs include calls to eliminate poverty and hunger, support for urgent action to combat climate change, and, notably, SDG 7 that aims to “ensure access to affordable, reliable, sustainable, and modern energy for all” (UN, n.d.).

The challenge of achieving the climate goals set forth in the Paris Agreement (UNFCCC, 2015) is best met by pursuing all options to manage GHG emissions. It is imperative that we widen the focus to include all available technologies that reduce carbon dioxide (CO₂) and other GHG emissions. Social and economic consequences of climate policies must be managed along with the carbon.

Net-Zero Producers Forum

The governments of Canada, Norway, Qatar, Saudi Arabia, and the United States, collectively representing nearly half of global oil and gas production, announced in April 2021 that they intended to establish a new international forum for producers dedicated to developing long-term strategies to reach global net-zero GHG emissions. The Net-Zero Producers Forum (NPF) is a voluntary coalition dedicated to galvanizing cooperation to respond effectively and pragmatically to global climate challenges and help accelerate pathways to global net-zero emissions, while supporting a sustainable and secure energy future.

The NPF was launched through an inaugural ministerial meeting held in Houston on 9 March 2022. During the meeting, Ministers endorsed the initiative’s Terms of Reference, which codifies the objectives and framework of the NPF (US DOE, 2022, March). The United Arab Emirates (UAE) was welcomed as the sixth member on 13 May 2022 (US DOE, 2022, May).

As originally conceived, the NPF intends to focus on three key aspects of GHG management: (1) implementing methane abatement strategies; (2) advancing the circular carbon economy (CCE) framework that was endorsed at the G20 Leaders’ Summit in 2020 (G20, 2020, p. 9); and (3) developing and deploying clean-energy and carbon capture and storage (CCS) technologies.

Ministers agreed that the NPF should highlight the role of industry and climate stakeholders in identifying and acting on solutions to phase out unabated fossil fuel emissions, while reducing emissions to the maximum extent possible in the interim. To reinforce this commitment, NPF members formally launched a working group on Deployable Emissions Reducing Technologies, which will provide a platform for key industry stakeholders to engage in critical dialogue regarding their respective best practices and lessons learned regarding methane reduction technologies (US DOE, 2022, March).

Methane Abatement Strategies: Methane (CH₄) is the second most abundant GHG after CO₂. Although methane does not persist in the atmosphere for as long as CO₂, it is more effective in trapping infrared radiation, creating a more amplified greenhouse effect. Over a 100-year time frame, methane has about 28 times the global warming potential of CO₂, as noted in Shabaneh (2022, p. 3), among others. Scientists believe that methane concentrations could return to pre-industrial levels within 50 years if methane emissions were halted (Collins et al., 2013, p. 1106). A reduction in methane emissions could have an immediate impact on reducing the risks of climate change.

One of the significant outcomes from the 26th Conference of the Parties (COP26) to the United Nations Framework Convention on Climate Change, held in Glasgow late in 2021, was the announcement of the Global Methane Pledge which commits signatories to take voluntary actions to contribute to a collective effort to reduce global methane emissions at least 30% from 2020 levels by 2030. The European Commission estimates that fulfilling the 30% reduction in methane emissions under the methane pledge would reduce warming by 0.2°C by 2050 (European Commission, 2021).

Circular Carbon Economy (CCE): The CCE framework builds on the well-accepted principles of circular economy and applies these to managing carbon emissions: to Reduce the carbon that must be managed in the first place, to Reuse and Recycle carbon into valuable products or through natural carbon cycles. The CCE embraces these principles and adds a fourth R: to Remove excess carbon and use it or store it (Williams, 2019, p. 5).

The CCE is an integrated approach toward more comprehensive, resilient, sustainable energy systems that support and enable development. CCE encourages countries to take advantage of all technologies, forms of energy, and mitigation opportunities according to resource availability, economics, and national circumstances to promote sustainable development.

To bring a broad perspective on climate mitigation options into focus, the King Abdullah Petroleum Studies and Research Center (KAPSARC) partnered with leading international organizations to develop the Guide to the Circular Carbon Economy (CCE Guide; KAPSARC, 2020). KAPSARC as coordinator, the International Energy Agency (IEA), the International Renewable Energy Agency (IRENA), the Nuclear Energy Agency (NEA), the Organization for Economic Co-operation and Development (OECD), and the Global CCS Institute (GCCSI) authored reports on key elements of carbon management.¹

The reports that form the CCE Guide provide insights into the relative opportunities of each of the elements of the Circular Carbon Economy and are intended to help leaders appreciate the degree to which each element may be able to contribute to our climate goals while also improving the quality of life globally.

People do not want abstract energy; they typically want houses that are well-lit, warm in the winter and cool in the summer – and everybody seems to like automobiles and jet travel. The corollary in the CCE is that people do not want bioenergy or carbon utilization or renewables or any other abstract mitigation strategy; they want products and services that come with a clean climate and an improved quality of life. The CCE welcomes all carbon mitigation options that can help achieve climate goals.

As the world evolves in a way that meets the Paris Agreement’s climate stabilization goals, all the 4R elements will play a role. How much each of the four Rs – reduce, reuse, recycle, and remove – contributes depends on many factors, such as the costs and performance of technologies, resource availability, which will be dependent on geography and geology, public acceptance, national circumstances, and enabling policies. The NPF will explore how CCE concepts can be applied internationally.

Developing and deploying clean-energy and carbon capture and storage technologies: The third key focus of the NPF is on new technology. Prioritizing solutions based on abatement potential, cost, and maturity and advancing CCE technologies with sustained research and development (R&D) efforts and pilot projects will be critical to carbon management.

An exclusive focus on non-hydrocarbon classes of clean energy investments comes at the expense of more affordable but just as effective projects. By proceeding that way, we may be inadvertently slowing the momentum required to generate emissions reductions at the speed required. Despite lower costs, the absence of a clear and credible strategy to increase clean energy deployment is a big barrier for investments in many countries. This was one of the key findings of the OECD in one of its contributions to KAPSARC’s CCE Guide (OECD, 2020).

The OECD report highlighted that enabling policies are needed across the different dimensions of CCE – including a wide array of different technology options and approaches. A supportive policy environment is essential to achieve a rapid transition to a more circular carbon economy, including through better valuation of emissions and through innovation (ibid., section 3).

The OECD (2020, section 4) also recommended financing and investment policies for CCE, focusing on carbon capture, use, and storage (CCUS), and emphasizing longer-term benefits and economies of scale and incorporating Environmental, Social and Governance (ESG) factors into investment decisions. ESG practices should include CCE-related technologies, such as CCUS to balance the risks of reliance on any single approach.

Finally, the OECD suggested accelerating CCE technology and business model innovation, with governments encouraging both “push” and “pull” policies (ibid., section 5). Public funding of R&D remains a core “push” role for governments to drive innovation, through the design of R&D support. On the “pull” side, public procurement can be an effective tool to create markets for low-carbon materials with a knock-on effect on innovation, including potentially for CCUS. The intent of government policies should be making carbon a value-added product, not an economic burden on consumers.

CCE index

A key policy objective of GHG management should be the development of robust measurements, reporting, and verification systems. KAPSARC’s Circular Carbon Economy Index project seeks to expand and add rigor to the conceptual basis of the concept of CCE (KAPSARC, n.d.). The CCE Index is a composite indicator that enables measuring country performance and progress toward CCE in diverse contexts (Luomi, Yilmaz, Alshehri, & Howarth, 2021).

The CCE Index highlights how different regions and countries at different stages of economic development are performing on the CCE today, and how much potential they have to accelerate their transitions towards carbon circularity. It also examines how the world’s major oil-producing countries are managing carbon and preparing their oil and gas sectors for the energy transition. The 2021 CCE Index compares 30 major economies on two temporal dimensions: current CCE performance and CCE potential (Luomi, Yilmaz, & Alshehri, 2021).

The following high-level messages stand out:

1. No country has yet achieved a CCE, in which atmospheric CO₂ and other GHG emissions are minimized and recirculated, where possible, to generate value. There are significant differences between the top performers, which are high-income industrialized countries, and the lowest performers, which tend to be middle-income countries with high levels of economic reliance on oil exports.

2. The top countries in the 2021 CCE Index (Norway, the United Kingdom, Germany, France, and Canada) display the highest level of engagement with a broad variety of CCE activities, such as renewable energy deployment or CCS or hydrogen projects, and they are the best positioned to keep making further progress toward carbon circularity.

3. A significant contribution to countries’ scores, on average, comes from energy efficiency, renewables, and electrification. Most countries are making progress in switching away from high-carbon intensity fuels in the power sector, however, outcomes are less even in areas requiring either access to technology (nuclear energy) or capacity to invest in new technologies (hydrogen and CCS).

4. Technology, knowledge, and innovation gaps and lack of access to CCE finance are the biggest obstacles faced by countries to accelerating their progress toward CCE. While many developed economies have been advancing on clean technology deployment, progress in emerging and developing countries in creating, diffusing, and absorbing the required knowledge has been more limited. Similarly, many countries are facing challenges in leveraging sustainable finance, partly because of the low institutionalization of the necessary regulatory frameworks.

5. Gauging how the world’s largest oil producers manage their oil sectors and related industries is also crucial, given the extent of the circularity transition ahead of them. Some countries in this group rise in rank compared to their peers when carbon management in the sector is considered. Countries’ potential to make progress toward a CCE appears to improve as their reliance on oil export revenues decreases.

In general, successful carbon management will require the adoption of transparent measurement and performance standards, as well as advancement of technologies and methodologies for implementing those standards. The KAPSARC CCE Index represents an early effort in this regard to provide a benchmarking analysis to guide policymakers and encourage innovation.

Conclusion

Climate challenges are real and urgent. But recent events in Europe and elsewhere around the world suggest that GHG management ambitions must be balanced with attention to security and sustainability. Enhancing the cooperation of energy suppliers on these efforts is critical. Forming alliances on multiple fronts and incorporating all viable pathways to emissions reduction is the only practical course of action to achieve the climate results envisioned in the Paris Agreement at an affordable cost.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Adam Sieminski

Adam Sieminski is Senior Advisor to the Board of Trustees of KAPSARC, an energy and sustainability think tank located in Riyadh, Saudi Arabia. He served as President of KAPSARC from April 2018 to August 2021. In 2017, he held the James R. Schlesinger Chair for Energy & Geopolitics at the Center for Strategic and International Studies. From 2012 to 2016, he served as Administrator of the Energy Information Administration at the US Department of Energy. Before his government service, he had a long career as a financial analyst working in New York, London, and Washington, DC.

Notes

1 Access to the overview of the CCE guide and the eight supporting documents is available through KAPSARC (2020).