Tag: business

COP21 daily report: The need for innovation (but do not call it innovation)

Posted on by janet.crompton
Cabot Institute Director Professor Rich Pancost will be attending COP21 in Paris as part of the Bristol city-wide team, including the Mayor of Bristol, representatives from Bristol City Council and the Bristol Green Capital Partnership. He and other Cabot Institute members will be writing blogs during COP21, reflecting on what is happening in Paris, especially in the Paris and Bristol co-hosted Cities and Regions Pavilion, and also on the conclusion to Bristol’s year as the European Green Capital.  Follow #UoBGreen and #COP21 for live updates from the University of Bristol.  All blogs in the series are linked to at the bottom of this blog.

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For the past two days, a delegation of us have been representing Bristol City Council and a group of Bristol businesses at the Sustainable Innovation Forum (SIF) at Paris.  Our group included Bristol Mayor George Ferguson, who spoke on Tuesday; Amy Robinson, of Low Carbon Southwest and the driver behind the Go Green business initiative; Bristol City Council representatives Stephen Hillton and Mhairi Ambler; and Ben Wielgus of KPMG and Chris Hayes of Skanska, both Bristol Green Capital sponsors.

This was the COP21 ‘Business event’ and aspects of this have been rather sharply targeted by Paris activists. There is a legitimate question of whether corporate sponsors are engaging in greenwashing, but this was not my perception from inside Le Stade de France.  There were some major fossil fuel dependent or environmentally impactful companies in attendance, but they seemed genuinely committed to reducing their environmental impact.  Their actions must be transparent and assessed, and like all of us, they must be challenged to go further. This is why it was fantastic that Mindy Lubber, President of Ceres, was speaking. Ceres is a true agent of change, bringing a huge variety of businesses into the conversation and working with them to continually raise ambitions.

The majority of these businesses, just like those that attended Bristol’s Business Summit in October, are clearly and objectively devoted to developing new technologies to address the world’s challenges,. Whether it be new solar tech that will underpin the PVC of 2050 or innovative new ways to deploy wind turbines cheaply and effectively in small African villages, it is no longer ‘business’ that is holding back climate action and in many cases they are leading it.

And we need them to do so.  We need them to develop new products and we need them to be supported by government and Universities.  We need them because we need new innovation, new technology and new infrastructure to meet our environmental challenges.

One of the major themes of the past two days has been leadership in innovation, an ambition to which the University of Bristol and the City of Bristol aspires – like any world-class university and city.  We have profound collective ambitions to be a Collaboratory for Change. These are exemplified by Bristol is Open, the Bristol Brain and the Bristol Billion, all endeavours of cooperation between the University of Bristol and Bristol City Council and all celebrated by George Ferguson in his speech to the SIF attendees yesterday.

This need for at least some fundamentally new technology is why the Cabot Institute has launched VENTURE. It is why the University has invested so much in the award-winning incubator at the Engine Shed. It is why we have devoted so much resource to building world-leading expertise in materials and composites, especially in partnership with others in the region.

We do not need these innovations for deployment now – deployment of already existing technology will yield major reductions in our carbon emissions – but we need to start developing them now, so that we can achieve more difficult emissions reductions in 20 years.  Our future leaders must have an electrical grid that can support a renewable energy network. Our homes must have been prepared for the end of gas.

And we will need new technology to fully decarbonise.

We effectively have no way to make steel without burning coal to melt iron – we either need new tech in recycling steel, need to move to a post-steel world, need to completely redesign steel plants, or some combination of all three.

We will need new forms of low-energy shipping. Localising manufacturing and recycling could create energy savings in the global supply chain.  But we will always have a global supply chain and eventually it must be decarbonised.

Similarly, we will need to decarbonise our farm equipment.  At heart, I am still an Ohio farm boy, and so I was distracted from my cities-focus to discuss this with Carlo Lambro, Brand President of New Holland.  Their company has made some impressive efficiency gains in farm equipment, especially with respect to NOx emissions, but he conceded that a carbon neutral tractor is still far away – they require too much power, operating at near 100% capacity (cars are more like 20-30%).  He described their new methane-powered tractor, which could be joined up to biogas emissions from farm waste, but also explained that it can only operate for 1.5 hours.  There have been improvements… but there is still a long way to go. I appreciated his engagement and his candor about the challenges we face (but that did not keep me from encouraging him to go faster and further!).

Finally, if we really intend to limit warming to below 2C, then we will likely need to capture and store (CCS) some of the carbon dioxide we are adding to the atmosphere. Moreover, some of the national negotiators are pushing for a laudable 1.5C limit, and this would certainly require CCS. In fact, the need for the widespread implementation of such technology by the middle of this century is explicitly embedded in the emissions scenarios of IPCC Working Group 3. That is why some of our best Earth Scientists are working on the latest CCS technology.

Unfortunately, CCS illustrates how challenging innovation can be – or more precisely, as articulated by Californian entrepreneur Tom Steyer, how challenging it can be to develop existing technology into useful products. The CCS technology exists but it is still nascent and economically unviable.  It must be developed.  Given this, the recent cancellation of UK CCS projects is disappointing and could prove devastating for the UK’s intellectual leadership in this area.  The consequences of this decision were discussed by Nicola Sturgeon in a panel on energy futures and she renewed Scotland’s firm commitment to it.

This issue exemplifies a wider topic of conversation at the SIF: social and technological innovation and development requires financing, but securing that financing requires safety.  Skittish investors do not seek innovation; they seek safe, secure and boring investment. And SIF wrapped up by talking about how to make that happen.

First, we must invest in the research that yields innovations. We must then invest in the development of those innovations to build public and investor confidence.  Crucial to both of those is public sector support. This includes Universities, although Universities will have to operate in somewhat new ways if we wish to contribute more to the development process. We are learning, however, which is why George Ferguson singled out the Engine Shed as the world’s leading higher education based incubator.

Second, and more directly relevant to the COP21 ambitions, businesses and their investors need their governments to provide confidence that they are committed to a new energy future.  It has been clear all week that businesses will no longer accept the blame for their governments’ climate inaction.

Instead, most businesses see the opportunity and are eager to seize it. As for the few businesses that cling to the past? Like all things that fail to evolve, the past is where they shall remain.  The new generation of entrepreneurs will see to that. Whether it be the new businesses with new ideas or the old businesses that are adapting, the new economy is not coming; it is already here.

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This blog is by Prof Rich Pancost, Director of the Cabot Institute at the University of Bristol.  For more information about the University of Bristol at COP21, please visit bristol.ac.uk/green-capital
Prof Rich Pancost

 

This blog is part of a COP21 daily report series. View other blogs in the series below:

Tradable Energy Quotas: The future of energy use?

Posted on by janet.crompton
The idea of Tradable Energy Quotas or TEQs has been floating around political circles since it was proposed by Dr. David Fleming in 1996. It’s been called the most influential scheme of its type, and has attracted cautious interest from both Labour and the Conservatives within the UK, as well as from EU bodies concerned with climate change.

TEQs are, in effect, a rationing scheme designed to curb the use of carbon-intensive energy sources. Each TEQ certificate would be a licence to emit a certain quantity of CO2, and would have to be surrendered by energy generators to the TEQ registrar at the end of each year. The TEQ certificates would begin in the hands of the end consumers of energy, and would travel up the production chain as TEQs would be used alongside cash as a parallel payment system for energy.

At the heart of the TEQ system is the idea that a country should be held to an annual ‘carbon budget’, and that each adult citizen should be entitled to an equal proportion of the domestic part of that budget. Businesses and industry would have to purchase rights to the remainder of that budget in order to power offices and machinery. TEQs would replace the more traditional method of emissions limitation, the carbon tax. The schematic below was reproduced from a report on TEQs by the All Party Parliamentary Group on Peak Oil.

In the TEQ scheme, 40% of the annual carbon budget would be distributed free to citizens, perhaps through an online account. The remaining 60% would be available to purchase from the TEQ registrar, and is mainly aimed at businesses. However, domestic users who exceed their free allowance of TEQs can also ‘top up’ by purchasing TEQs from this pool.

People who don’t use their full allowance of TEQs could sell their surplus on a market that is overseen by the registrar. This encourages domestic energy users to be frugal in their energy use in order to profit from the sale of TEQs. Businesses too would need to curb their energy use in order to avoid having to buy too many TEQs. Finally, the generators and importers of energy would have to gather all the TEQ certificates gained from sale of energy and return them to the registrar at the end of each year. If they are unable to provide enough TEQ certificates to cover the energy they have produced, they would face financial penalties.

The TEQ scheme is designed to produce a profit for the government through the sale of 60% of the TEQ certificates. This income would replace that of a more traditional carbon tax, and could hopefully be ploughed back into creating more low-carbon energy.

Now I’m going to put my cards on the table. I like this scheme. My instinct tells me that TEQs, or rationing of some form, is a sensible response to the problem of climate change. But as it stands, I don’t think this scheme would work.

Let’s start with the most pressing problem: Who is the registrar? In the proposed TEQ system, an astonishing amount of power and control is given to the ‘registrar’, without any firm idea of who or what the registrar is.

Perhaps it’s a public-sector organisation? With 60% of the TEQs initially allocated to the registrar for tender, the power it has over the price of each TEQ is practically insurmountable, allowing them to increase or decrease prices almost at will. With this kind of control, they will come under intense pressure from the treasury to raise TEQ prices to generate more revenue. At the same time they would be lambasted by the populace, who would demand an ever lower TEQ price. To offer control over the registrar to a government department would be akin to offering someone a grenade without the pin- it’s political suicide. To put it mildly, I suspect the creators of the TEQ scheme would have trouble finding someone to do the job.

So how about letting a private sector company have control of the registrar? Well, I’m certain you would have companies lining up for the job, but trusting any of them would be a fatal mistake. With such a remarkable monopolistic power, a private sector company would inevitably succumb to the temptation to appropriate a larger and larger proportion of the revenues. It wouldn’t be anything illegal of course, merely a creeping expansion in administration costs and a slow rise in wages- especially of the top executives. And how long would it be before the first accusations of insider trading surface? It wouldn’t be hard for a company in charge of the registrar to conceal its preference for certain other firms, offering them cheaper or earlier deals on TEQs. Handing control of the energy industry to a private firm also has energy security implications; how can we be certain that the company will work in the best interests of our country? In the worst case, it might even be persuaded to work in the interests of a foreign power. The final problem with private-sector control is transparency. Once the government loses control of the registrar, it will lose sight of the intricacies of running the TEQ scheme. At this point, it becomes very difficult to verify if the registrar is doing a good job, and even harder to justify reprimanding them.

Centralising power over the market and allocation of TEQs also has one other major problem. What happens if the registrar’s servers crash? It would paralyse the country’s energy network, ensuring nobody could buy or sell energy. We wouldn’t have to worry about energy security anymore; we could have all the fuel in the world stacked in warehouses around the UK, but if the TEQ exchange goes down it would all be effectively useless. My conclusion: having a single TEQ market overseen by a single registrar would make us incredibly vulnerable to hackers or hostile governments.

So is there a remedy for all these problems? I think there is.

Decentralise.

First, split the job of regulating TEQ markets away from the task of allocating and collecting TEQs. There is no strong reason why both jobs have to be done by the same organisation, and it’s far safer for it to be done by two separate ones. Second, open up the job of administering TEQ markets to private sector brokers, but make them liable for the exchanges they handle. This means that hackers would have to target several exchanges to bring down the country’s energy network, rather than just the one.

Finally, eliminate the job of administering the TEQ accounts of every citizen completely. Users could store their TEQs in digital wallets that reside on their own computers and mobile devices, and the value of their TEQs could be cryptographically protected using something akin to a blockchain.

Decentralisation might not solve every problem that TEQs currently pose, but it could go a long way towards making it a more secure and accountable system. Will TEQs be introduced anytime soon? I doubt it, but it’s possible that a smaller scheme may be trialled somewhere in the world over the next few years, as governments struggle with the problem of emissions reduction.

This blog is written by Cabot Institute member Neeraj Oak, the Chief Analyst and Energy Practice Lead at Shift Thought.

 
Neeraj Oak
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