Even though oil prices are at about $50 a barrel— the lowest they have been since 2009— this will not deter humanity’s transition to cleaner energy. For starters, oil and renewables do not really compete with each other, despite what many people think. Renewables are for electricity, while oil is for cars— oil is simply too expensive to power the grid. But even when solar is compared to coal and natural gas, solar wins the battle: solar is predicted to be the world’s largest single source of electricity by 2050, according to the International Energy Agency (IEA). If this occurs, more than 6 billion tons of CO2 emissions would be avoided per year by 2050 – that is more than all current energy-related CO2 emissions from the United States or almost all of the direct emissions from the transport sector worldwide today. The reason solar currently makes up less than 1 percent of the electricity market is due to panel availability and high upfront capital costs. However, because solar is a technology and not a fuel, these costs are expected to keep dropping as time passes and efficiency increases. The following graph illustrates this point:
Moreover, the history of oil prices shows that oil will not stay at its current low for more than a year or two. While it may never return to $100 per barrel, it will not remain below $70 per barrel because almost $1 trillion in investments in future oil projects would not be profitable if that were so. Therefore, supply will eventually shrink and prices will rise again. On the other hand, as shown by the previous graph, solar will keep getting cheaper and cheaper. The question is no longer if the world will transition to cleaner energy, but how long it will take.
IEA. (2014, September 29). How solar energy could be the largest source of electricity by mid-century. IEA Press Releases. Retrieved from http://www.iea.org/newsroomandevents/pressreleases/2014/september/how-solar-energy-could-be-the-largest-source-of-electricity-by-mid-century.html
Randall, T. (2015, January 30). Seven Reasons Cheap Oil Can’t Stop Renewables Now. Bloomberg Business. Retrieved from http://www.bloomberg.com/news/articles/2015-01-30/seven-reasons-cheap-oil-can-t-stop-renewables-now
Man-made greenhouse gas emissions which originate from all forms of industrial production processes are the major cause for climate change. In order to mitigate climate change, the European Union developed the European Emissions Trading Scheme – in short ETS. This was the response to the obligations the Kyoto protocol established for the industrialized state parties to reduce the emissions from their industry. The ETS is basically a marketplace where the biggest emitters can trade emission permits, depending on how much they emit. One permit allows the owner to emit one ton of CO2. Initially, the permits where distributed to the companies according to their history of emissions; since 2012, however, a large amount of the permits is auctioned. Once a firm own a permit, it can trade it with other firms. In this way, it is sought to set incentives to reduce emissions and earn additional income instead.
The problem with this well-intended plan is that it is very difficult to establish the ideal amount of permits to be put on the market. Indeed, this is a very complicated calculation, based on the analysis of prospective economic growth, output and energy consumption in the next trading period (usually 5 years). When the economic crisis struck, the emissions trading scheme began to fail, as the price of the permit fell to almost zero, as the economy slowed own and produced less. Therefore, one could again pollute the atmosphere for free, as it was the case before the Kyoto protocol went into force. The problem lies within the core of the system: the thresholds are set by the government, which have understandably a strong incentive to promote economic growth. Lobbyism of the big polluters further increases the amount of initially allocated permits on the market.
To summarize: the ETS has failed. One ton of CO2 costs just above 4,50 Euros on average, which is definitely now strong incentive for firms to cut emissions. By the end of 2013, the surplus permits rose to over 2 billion tons of carbon dioxide.
What is done:
As a response to the failing of the ETS, the British NGO Sandbag developed and realized a plan to change the system from within. The emissions trading takes place according to a free market approach. Therefore, everybody can basically take place in the trading of emissions.
However, in order to be able to trade on the emissions market, one needs to obtain a special license from the exchange place.
Sandbag did exactly this. And now, the organization is collection money in a form of crowd-funding and then buys emission permits at the official marketplace. However, instead of using or trading the permits, Sandbag destroys them. In this way, the organization attempts at reducing the overall amount of permits on the markets and as a result increase the price per permit. That means that everybody can reduce the amount of carbon dioxide released into the atmosphere by a couple of tons with just a few Euros.
Now imagine, what disturbance a Europe-wide action could cause on the emissions trading market!
Many companies have actually benefited from the ETS, as the initial allocation of was wrongly calculated. These “carbon fat-cats” where given too many permits in the first place and could therefore emit millions of tons of carbon dioxide for free. Now it’s time to challenge the system with its own weapons.
Picture with courtesy of Aniroudh Koul
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