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YES! topic 2018

Climate protection – with coal, oil and gas?

by Franziska Holz, a researcher at DIW German Institute for Economic Research

Selected by Berlin International School Team I

The challenge deals with the role of coal, oil and gas in the era of climate change. The combustion of fossil resources – carbohydrates – is responsible for a significant share of climate-warming greenhouse gas emissions because it emits carbon dioxide (CO2) into the atmosphere. Our modern economies use fossil resources in a multitude of sectors and processes, in particular in the energy sector and in transportation.

It is hard for most of us to imagine life without fossil energy because that would potentially require a substantial change of our lifestyle: where would electric power come from, how would our cars and aeroplanes be fueled, how would we heat our homes? Therefore, one can identify two central propositions for slowing down climate change:

a) the complete and possibly fast stop of the use of fossil resources. Renewable energies (wind, sun) can be an alternative to generate electricity; cars can be fueled with bio-diesel. However, our infrastructure is currently made to accommodate fossil fuels (power plants, gas stations ) and reorganising the infrastructure takes time. From an economic perspective, it is essential to take into account that there are owners of fossil resources and infrastructure that expect to earn revenues. If resources and infrastructure are not (allowed to be) used any more, their owners cannot earn the revenues which they are likely to oppose. Hence, we need to find incentives for society to transform the energy system and for resource owners and infrastructure owners to cooperate

b) a change in the way that we use fossil energy carriers, making their use more climate-friendly. In the extreme case, this would be a complete avoidance of greenhouse gas emissions by using processes such as Carbon Capture and Storage (CCS). It is also conceivable to increase the efficiency of the combustion processes and to switch fuels from coal to natural gas. It also needs political resp. Economic incentives to achieve such a change in the fossil fuel consuming behaviour.

To start and get a better understanding of the situation, I would suggest thinking about the following questions:

– Which fossil resources exist? What is the climate impact of each of them (carbon content resp. CO2 emissions)?

– How much is the so-called carbon budget of the atmosphere? So, for a warming target of 2°C, how much CO2 can still be emitted? How much for the 1,5°C target (Paris Agreement)? So, how much fossil resources can still be combusted to reach these targets? You will note that these climate targets will not be met when only implementing the current climate pledges of each country (the so-called NDCs)!

To think further, consider the following questions:

– In which countries are the reserves of the fossil resources located?

Are these reserves produced (mined/lifted) by state-owned or private multi-national firms? In other words: Who will lose future revenues when climate protection does not allow the sales and use of fossil resources anymore?

– In which areas do we use fossil resources? Can these applications be replaced by climate-friendly processes? Who decides about these applications and how much would a conversion to climate-friendly processes cost?

– Which political and economic instruments (incentives) could convince resource owners to keep their reserves in the ground? Which instruments could make users of fossil resources change their behaviour?

Many excellent researchers currently investigate how to deal with fossil resources in the climate change era. On the websites of the following research institutes you can find outstanding publication, though some of them may be very technical:

– PIK Potsdam and MCC Berlin, e.g. from Nico Bauer, Jérôme Hilaire, Jan Steckel

– IIASA (in Austria), e.g. from my former PhD student Daniel Huppmann and the group that he now works in,

moreover, of course at my institute DIW Berlin!

Moreover, many associations, think tanks and NGOs publish kinda good reports and databases. You may start with checking out the website of Carbon Tracker.

Keep in mind that you will find references to many more relevant sources in the publications!

Franziska Holz

Since 2004, Franziska Holz has been doing research at DIW Berlin. Since the beginning, she has worked on the global markets for fossil resources (gas, oil, coal) and their related challenges. One of her foci is the development and use of computer-based mathematical models to analyse these markets.

Institution: DIW – German Institute for Economic Research

YES! Participations: 2018