Building a lower-carbon, higher-energy future

MANILA, Philippines - Cutting greenhouse gas emissions while keeping the lights on for a growing global population is a huge but critical challenge. We have to believe it is a challenge we can meet.

At this year’s United Nations Climate Summit in New York, delegates gathered to “catalyze climate action” and “raise political ambition.”

The summit’s rhetoric may be high-minded but its agenda is suitably pragmatic. One clear sign of that pragmatism is its interest in carbon pricing.

At first sight, carbon pricing — imposing a cost on carbon to encourage polluters to cut their greenhouse gas emissions — can look like a fiddly response to the challenge of climate change; an accountant’s solution to a scientist’s problem. But, in reality, it is one of the best tools we have. Thanks to mechanisms like California’s emissions trading scheme and the Regional Greenhouse Gas Initiative, it is also something that states in America are proving to be genuinely innovative at.

Well-implemented carbon pricing systems, including the kind of market-based mechanisms favored by Shell that allow organizations to buy and trade carbon permits, have the potential to promote low-carbon technologies and encourage energy efficiency. Typically, they are also flexible, fair and relatively cheap to run. In fact, done properly, carbon pricing tackles emissions at the lowest possible cost to consumers and with the lowest impact on economies.

Carbon pricing offers a means to some urgently needed ends. We face a real and growing threat from climate change. As things stand, it will take a major, coordinated effort to limit global warming to close to two degrees Celsius. That’s the point beyond which we expect to feel the more serious impacts of global warming.

Just as important, however, is the need to meet rising demand for energy. Energy powers economies. Without energy, our lives would be almost unrecognizable.

The increasing global population, a rising appetite for goods and services in emerging economies, and rapid urbanization are putting increasing pressure on energy supplies. These are the main reasons the International Energy Agency (IEA) believes demand for energy could double by 2050 compared to 2010.

Renewables are clearly going to play an increasingly significant role in the global energy mix, but we are still a long way from being able to rely on them. The US Energy Information Administration estimates that 11 percent of today’s global supply comes from renewable energy sources like hydropower, biofuels, wind, geothermal and solar. However, it also estimates that, even by 2040, that share may have increased to only 15 percent. The Shell Scenarios study, for its part, projects a figure as high as 25 percent by 2050. That would still leave traditional sources like oil and gas (plus nuclear) meeting around 75 percent of energy demand.

As such, carbon pricing is essential if the world is to reduce greenhouse gas emissions. Effective carbon pricing would encourage the greater use of cleaner-burning natural gas as a fuel for power generation. According to the US Environmental Protection Agency figures, a partial shift from coal to natural gas between 2005 and 2012 helped reduce the US power sector’s greenhouse gas emissions by 15 percent.

Carbon pricing, together with appropriate government support, could also accelerate carbon capture and storage (CCS) — the technology that can capture carbon emissions at power stations and other large plants and store them safely deep underground; a technology Shell is helping to pioneer at cutting-edge projects in Canada and Scotland. CCS could be a real game-changer, with the potential to remove up to 90 percent of carbon dioxide emissions from power generation.

There’s much to do if we are to build a lower-carbon, higher-energy future. For Shell’s part, we wholeheartedly support the World Bank’s statement in time for the UN Climate Summit, calling for a carbon price to be applied throughout the global economy.

Carbon pricing is one vital step, but there’s a long road ahead. To build the energy future we need, government, business and civil society must work together. With the right approach, one characterized by pragmatism, it can be within our reach. And, as CEO, I am determined that through our production of natural gas and our efforts to advance CCS, for example, Shell will continue to play our part.

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For the text of author Ben van Beurden’s recent keynote speech at Columbia University titled “Working Together to Build a Lower Carbon, Higher Energy Future,” go to www.shell.com/speeches.