On Earth Day, a look at environmental targets and what needs to happen next

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Earth Day concept

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Today is Earth Day, whatever that means for you. For once, though, the politicians are not adding to greenhouse gas emissions by flying around the world first class or, worse, in private jets to talk shop.

Rather, they are gathering virtually.

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Earth Day news

According to The New York Times, they will hear President Joe Biden commit the United States to cutting CO2 emissions nearly in half by the end of the decade.

It’s a target that would require Americans to transform the way they drive, heat their homes and manufacture goods, the post reports.

Although the time frame is longer, the new goal nearly doubles the pledge that the Obama administration made to cut emissions by 26-28% below 2005 levels by 2025. It also builds on the UK’s ambitious plans announced earlier this week.

Nathan Hultman, director of the Center for Global Sustainability at the University of Maryland, described the 50% goal as attainable. However, it will require “pretty significant action across all sectors of the American economy.”

Autos and energy generation are tipped as two of the major industries to feel the impact of the new target, if supported by new legislation.

Declining emissions

Emissions have been coming down.

Before the pandemic energy-related CO2 emissions in the USA had fallen 14% since 2007. Most of that reduction came from the replacement of coal by gas for power generation, according to Reuters.

A substantial drop in coal use has led to a drop of over 1 billion tons of CO2 emissions. Savings have been partially offset by a rise from natural gas that replaced those coal plants. In addition, prior to the pandemic, an increase jet fuel further offset savings.

Carrots and sticks

So, as Reuters points out, net zero by the longer-term goal of 2050 implies some combination of: carbon capture and storage; a more limited share for gas in future power generation; and broad electrification of sectors of the economy that still burn oil and gas directly.

Nothing remotely like this has happened yet.

Changes to date are all occurring within the power sector’s generation mix, rather than across the boundary between the power sector and the rest of the energy system.

For the metals industry, to contribute significantly to a 50% reduction by 2035 is going to need a mix of carrot and stick. Such an incentive could have profound implications.

The carrots could come in the form of government support for research and in tax breaks for appropriate investment (such as carbon capture).

Sticks could be a carbon tax, or a border carbon adjustment mechanism to penalize imports of product with a high carbon footprint – such as from China.

Consumer fears

But the fear many consumers will have concerns power costs. Will CO2 emissions considerations drive investment, or will it be simply cost per KWhr?

Encouragingly, the cost of wind and solar have dropped so much that new tenders are being won without subsidy in direct competition with traditional power generation like natural gas and substantially under where new nuclear would be.

But whether renewables can deliver the long-term, low-cost power rates needed by, for example, aluminum smelters or electric arc furnace (EAF) steel producers remains to be seen. As for major emitters, like steel producers using blast furnace technology, the double whammy of increased emissions penalties and increased power costs could have profound implications for such sectors of the industry, possibly hastening the migration to EAF technologies.

Some European producers are investing in alternative fuels, like hydrogen. However, it is too early to say if cost will come down enough to make such fuels viable for power- and heat-intensive industries like steel.

Even for transport and energy storage applications, such fuels are far from an economically viable without considerable government carrot or stick incentives. The worry is such incentives distort the market. In turn, that could produce unexpected adverse consequences, such as dumping increased costs elsewhere in the economy.

So, such arbitrary targets as a 50% reduction will be welcomed by environmental lobbyists. Indeed, we should all welcome it.

But they would be much more encouraging if they came with a clear plan, with costs, on how to achieve them.

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