Falling short on climate action

Renewable energy targets are being missed and climate action policy reversals in response to the war in Ukraine could have lasting implications

By Duncan Levine


 

The past few weeks have witnessed a number of setbacks in the fight to address climate change. Just today, members of the European Parliament approved a law designating gas and nuclear as sustainable energy sources, as part of a system that was intended to influence direct investment in clean energy. Critics say the law discredits EU efforts to establish itself as a global leader on climate policy. Since nuclear energy emits no emissions (although it produces radioactive waste), there is an argument to be made that it is green and compatible with greenhouse gas reduction goals. However, it is a huge stretch to call natural gas sustainable, even though it produces lower emissions than coal.

Then, last week in the United States, the US supreme court sided with Republican-led states to rule against the Environmental Protection Agency’s power to limit pollution and carbon emissions. Analysts say the ruling will, in effect, stymie the federal government’s ability to tackle the climate crisis and deal a heavy setback to President Joe Biden’s climate action agenda.

And in late June, at this year’s summit held in Schloss Elmau, G7 leaders agreed that their countries would continue to offer finance for the exploration of fossil fuel reserves. This was contrary to expert advice from the International Energy Agency (IEA), which warned that no new fossil fuel exploration and development could take place from this year onwards if we are to limit global warming to 1.5 degrees Celsius (°C) above pre-industrial levels.

The IEA stance was in line with scientific advice and with the resolutions made at the UN Cop26 climate summit last November in Glasgow. It also echoed a warning made in a report released in April this year by the Intergovernmental Panel on Climate Change (IPCC) that emissions must peak by 2025 in order to keep global warming well below the 2°C limit set by the Paris Agreement. The IPCC report warned that the window for limiting global warming to relatively safe levels is rapidly closing. To have a 50% chance of avoiding more than 1.5°C of warming throughout the 21st century, global carbon emissions will have to reach net zero (where no more carbon is released into the atmosphere than is removed) in the early 2050s. To have a 50% chance of keeping warming below 2°C, global carbon emissions must reach net-zero by the early 2070s. In both cases, emissions of all greenhouse gases must peak by 2025.

According to the report, pursuing 1.5°C means that global use of coal must decline by 95% by 2050. Oil use must drop by 60% and gas by 45% over the same period. The decreases needed to limit warming below 2°C are not much lower. Under all these scenarios, there is no room for new fossil-fuel projects and most existing ones will have to be phased out. The IPCC report also outlines the ways in which agriculture, travel and most other industries will have to be transformed as well as how individuals might be encouraged to change their behaviour.

However, the war in Ukraine has thrown a giant spanner in the works. It has left countries like Germany with a gas supply crunch and caused international prices for both oil and gas to soar. G7 countries want to exploit fossil fuel resources in other countries, particularly the developing world, to ease that supply shortage and bring down prices. Developing countries are also welcoming the chance to earn income from new projects. But, given the length of time it takes to develop new fossil fuel projects, they will end up causing high carbon dioxide emissions for years to come, long after the consequences of the war in Ukraine have passed.

This is clearly a case of backsliding. G7 energy ministers had previously agreed to stop taxpayer-funded fossil fuel financing overseas by the end of 2022. But, at the insistence of German chancellor Olaf Scholz, this commitment was reversed.

Scholtz's calculation is no doubt driven by energy security and political considerations given Germany's heavy reliance on natural gas, the bulk of which now comes from Russia. If Russia turns off the gas taps completely, as Vladimir Putin has threatened, the consequences could be severe, especially if no contingencies are in place by the winter of 2022, when demand for gas for heating is the highest. The situation is being exacerbated by Germany's decision, made in response to Japan's Fukushima disaster, to shut down all of its nuclear power stations. As renewables have not been able to fill the gap, the country has already increased the use of coal-fired electricity in response.

While the political motivations are clear and there is no easy fix to the sudden loss of Russian gas, environmental campaigners have slammed Germany's reversal saying that investing in new gas infrastructure is not a viable strategy to reduce Russian fossil fuel imports since these projects take years to build and do not support energy security in the long run. In contrast, they stressed that renewable energy and energy efficiency solutions can be deployed faster, better serve development and energy access needs, and do not come with the stranded assets and financial stability risks of fossil fuels.

The war in Ukraine provides an additional unwanted setback to the energy transition, which was already proceeding too slowly. Case in point, in its 2022 report, the Global Wind Energy Council (GWEC) noted that the capacity build out of wind energy is already falling behind schedule. Despite two years of enormous capacity expansion (of over 90GWs per year were added in 2020 and 2021), the current rate of wind energy growth is simply not rapid enough to allow the world to reach its Paris Agreement targets or a net zero by 2050 goal.

The other danger is that authorities in other countries will view G7 actions as justification for reneging on their own fossil fuel reduction commitments. If the largest economy in the EU, the world's foremost advocate and implementer of climate action, can backtrack on its promises, why shouldn't they? The unfortunate repercussion is that the EU's Fit for 55 package, all of its energy and climate action directives, initiatives and calls for the world to take action to address climate change start to look hypocritical when its three largest member states (France and Italy are also members of the G7 club), are deviating from their agreed-upon plans.

Here in Taiwan, while the government has committed to reach net zero by 2050, it is already behind its own implementation schedule. The government set a goal in mid-2016 of phasing out nuclear power and reaching an electricity mix of 50% natural gas, 30% coal and 20% renewables by 2025, from about 14% nuclear, 45% coal, 31% natural gas, 4.5% oil-fired and 5% renewables in 2015. In 2021, however, the Ministry of Economic Affairs (MOEA) lowered the target for renewables to 15%, and the MOEA minister said recently that the 20% goal would likely not be achieved until 2027. Meanwhile, the expansion of natural gas capacity, which is cleaner than coal, is proceeding slower than planned, partly due to delays in building the required storage capacity.

The National Development Council (NDC) published Taiwan's Path to Net Zero Emissions in 2050 on 30 March 2022 and the cabinet has drafted the Climate Change Response Act. The review process of the act has already begun but, regardless of legal obligations once the relevant legislation has been enacted, reaching net zero will be especially challenging given Taiwan's current dependence on imported fossil fuels, the slow pace of adding renewable energy capacity and energy storage, as well as decarbonising manufacturing, transportation, and the building sector.

Based on the roadmap's targets, 60-70% of Taiwan's electricity needs in 2050 should be met by renewables, with another 9-12% from hydrogen and 20-27% from fossil fuels with carbon capture, utilisation and storage (CCUS) capabilities. (The capacity figures listed in the plan are between 40GW and 80GW of solar and 40-55GW of wind capacity by 2050, but this far exceeds interim targets previously announced, indicating that the bulk of renewable capacity is anticipated to be added after 2035, leaving the difficult capacity expansion work for the future.) The NDC has suggested that Taiwan could actually get close to 80% of its electricity from renewables by 2050 through solar, wind and other power generating methods, but settled on a 60-70% target because of Taiwan's geographical limitations and current pace of deployment of renewables.

The roadmap also comes with a financial commitment to spend NT$900 billion over the next eight years to set a foundation to reach the 2050 goal. Of that, NT$210.7 billion will go to renewables and hydrogen energy, NT$207.8 billion will be put into the electricity grid and energy storage, and another NT$168.3 billion will go to the promotion of electric transportation. In addition, NT$128 billion would be spent on incentives to reduce power consumption and replace old equipment, including inefficient factory and office air conditioning systems, outdated transformers and motors. According to the NDC, state-run enterprises would contribute NT$440 billion of this and the undertaking might induce an additional NT$4 trillion of private investment.

While this is clearly a step in the right direction, Greenpeace Taiwan has criticized the spending as being only about a third of the roughly NT$300 billion a year South Korea is investing in its energy transition and has said the government was seriously underestimating the costs of pursuing carbon neutral goals. It also noted that about half of Taiwan's pledged investment will come from Taiwan's state-run enterprises, including utility Taiwan Power Company (Taipower) and oil refiner CPC Corporation, both of which have faced financial difficulties in recent years, leading to questions as to where their funds would come from. On account of higher international oil, gas and coal prices, Taipower has posted accumulated net losses of over NT$100 billion, including NT$67.2 billion in the first five months of 2022 alone while CPC Corporation has racked up accumulated losses of NT$84.3 billion over the past two years. Starting from 1 July, Taipower raised the price of electricity for heavy users by an average of 15%. However, it is estimated that this will only apply to around 22,000 companies while most other users will pay the same rates as before. Given the fact that coal prices are up over 170% year-to-date, while oil and gas prices have both risen more than 40%, the best such a modest rate hike can hope to achieve is to help to reduce the level of future losses at Taipower.

Taiwan's approach to electricity prices is based on economic considerations, unlike countries like Germany, where high prices are justified and used to help fund the transition to clean energy. Only a minority of businesses, such as those who have signed up to RE100, care about where their power comes from, while the majority of businesses and household consumers in Taiwan are concerned primarily about the price and are either not aware or choose to disregard the link between energy use and climate change.

On the question of the projected NT$4 trillion in investment from the private sector, this is not inconceivable based on the substantial investments already made, especially by European investors in Taiwan's burgeoning offshore wind energy sector. However, it is questionable if the levels of foreign investments will be sustainable if authorities do not improve the investment environment, especially with regards to Taiwan's local content requirements and permitting process. With huge interest and growth in wind energy across the world, Taiwan is facing growing competition for foreign investment in the sector and will need to take action on these issues or risk missing out as investors seek better returns elsewhere, including in the Asian region.