Cutting carbon emissions on the scale needed to tackle climate change can best be tackled by a two-tier sectoral approach, according to a newly released report from the International Energy Agency (IEA).
According to the Paris-based intergovernmental agency, decarbonising the power sector and reducing the CO2 intensity of key sectors such as iron and steel, cement, paper, chemicals, petrochemicals and aluminium will be critical if the world is to tackle climate change.
"The task is huge and requires nothing short of a low-carbon industrial revolution," said IEA executive director Nobuo Tanaka. In the medium term, he went on, the problem could be tackled through a two-tiered sectoral approach, with a strong signal to investors in power generation to promote less carbon-intensive technology, and ambitious new policies to push for a more efficient use of electricity.
The new report, Sectoral Approaches in Electricity – Building Bridges to a Safe Climate, attempts to show how the international climate policy framework could effectively support a transition towards low-CO2 electricity systems in developing countries by addressing sectors that require urgent actions, without waiting for countries to take nationwide commitments.
Decarbonising the power sector is a critical step towards realising the necessary CO2 reductions from industry, as most electricity is still generated from fossil fuels. This, the agency argues, applies to an even greater extent in countries outside the OECD, where power demand growth is particularly high leading to the danger of so-called "carbon lock-in": investment in CO2-intensive generation capacity that is "practically irreversible" because of its long operating life.
Under sectoral market mechanisms, credits for emission reductions would be issued once a country's performance exceeded an agreed sectoral emission baseline. Baselines could differ across countries, reflecting the different generation mixes, resources and access to technology in different regions. Sectoral crediting, says the report, would allow investors to seek credit revenues at the individual project level. This, argues the agency, would be more effective than existing clean development mechanism (CDM) objectives in which credits from CDM projects are used to offset emissions in countries exceeding their emission targets – a situation the IEA describes as a "zero-sum game."
However, the electric sector must be seen as a priority, Tanaka warned, calling for climate negotiators to set up mechanisms to support effective efforts in developing countries. Tanaka also called for low-CO2 generation technologies encouraged under such a system to include nuclear as well as carbon capture and storage. "These technologies are currently not allowed to contribute to carbon market projects in developing countries," said Tanaka.