An outlook on the green transition after COP26
in cooperation with CESI - by Matteo Codazzi
The recent COP26, which ended on November 13th in Glasgow, has generated conflicting judgments on its outcomes, with some analysts celebrating the reached achievements and others claiming its failure. It is likely reasonable to affirm that COP26 represented a further step, but not a leap, on the long road towards decarbonization.
Firstly, an accomplishment that has not had sufficient public resonance is the declaration to invert the deforestation trend by 2030. Signed by 137 countries representing more than 90% of global forests, it may represent the measure leading to the most rapid effect against global warming, able to reduce the temperature increase by 0.2°C compared to the current path.
Another important result is the Global Methane Pledge, proposed by the US and EU and signed by 105 countries, committing to reduce methane emissions by 30% by 2030 with respect to the 2020 level. The relevance of this deal is highlighted by the fact that 30% of global warming is due to methane emissions, which has a greenhouse effect that 80 times more than CO2 (though with a faster degradation). However, the Methane Pledge can only be considered as a partial success since the agreement was not signed by Australia, China, Russia, India or Iran. Then, on November 13th, the Glasgow Climate Pact was signed by 197 countries – the first pledge ever to limit the use of unabated coal. Its critics remark the fact that the term “phase out” contained in the initial drafts was, at the last minute, substituted by the term “phase down” under the pressure of China and India.
It is important to underline that the deal calls for the signing countries to strengthen their “Nationally Determined Contributions” (NDC) (which are the emission reduction plans of each country) by 2022, rather than every five years as previously required. In total, more than 140 countries, responsible for 85% of greenhouse gas emissions, committed to reach net zero – though at varying dates. For instance, India promises to cover 50% of its energy demand with renewables by 2030 and to reach net zero by 2070.
According to the IEA, before COP26 the announced pledges would have led to a +2.1°C global warming increase above the Paris Agreement target. After COP26, the NDCs should limit the rise in global temperatures to 1.8°C compared to pre-industrial levels, marking the first time that countries’ aim to keep global warming under 2°C. An unexpected bilateral agreement between the US and China was also announced in the conference’s last days, with the two countries committing to work together towards more ambitious initiatives within the current decade, in order to comply with the 2015 Paris Agreement. Despite the hazy formulations in the agreement, the open commitment of China to fight climate change represents an encouraging political signal; albeit only shared and agreed efforts by all the countries will effectively impact climate change in the coming years.
But commitments and pledges represent just a starting point and will be ineffective without a proper implementation of the measures targeting emissions abatement. Indeed, investments and partnerships combining the public and private sectors are essential to reach the objectives. In this regard, some of the initiatives launched at the COP26 event (for example, the Glasgow Financial Alliance for Net Zero, a coalition of more than 450 leading financial institutions with assets of over $130 trillion committed to accelerate the energy transition) give hope for an effective implementation of the announced pledges, with a special focus on developing countries.
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As a matter of fact, advanced economies account for just one third of global CO2 emissions according to the IEA, which stresses that most efforts are needed for emerging markets and developing countries. Looking to individual countries, in 2020 the two countries with the most CO2 emissions were China with 31% and the United States with 14% of the total, whereas the EU and India account each for 7% of the global emissions.
The reduction of CO2 emissions will be strictly related to the change of the energy mix. In this framework, electricity will cover a pivotal role in the abatement of emissions thanks to their higher efficiency compared to other energy carriers and to the increasing deployment of renewable plants. Indeed, both the IEA and IRENA (the International Renewable Energy Agency) estimate that, in order to reach carbon neutrality, 50% of the final energy consumption in 2050 needs to be delivered by electricity, compared to the current 20%. In addition, according to IEA’s net zero scenario, in 2030 renewables will jump from a 30% to a 60% share of the global generation. This growth would require the installation of more than 7 TW of renewable power plants (mainly solar photovoltaics and wind) in the next ten years, while unabated fossil fuel generation capacity should gradually decrease. On the other side, the end-use sectors will be completely transformed by electrification, with a growing increase of electricity for industry, e-mobility and commercial or residential buildings.
Electricity will also be used to produce green hydrogen (H2), which would be mainly applied to the hard-to-abate sectors, firstly substituting the current use of fossil fuel-based hydrogen and then creating new types of demand (gas-to-power or hydrogen fueled mobility). Different possible configurations for the production, transport and consumption of green hydrogen could be envisaged and recently at CESI we have released a public study comparing different H2 scenarios and evaluating their impact on the power system. Our analysis concludes that either installing renewable energy source power plants near hydrogen production sites or generating renewable energy source power in the most favorable locations, and then conveying power to electrolyzers through the electricity transmission grid, both represent the most cost-effective solutions, when compared to the alternative of transporting hydrogen (at least in the first phase of the hydrogen supply chain development).
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In the Italian case, translating the 2030 targets of the EU Green Deal on a national level means adding 70 GW of renewable plants to the existing 57 GW, with a rate of 8 GW/year compared to the average of 1 GW/year recorded in the last three years, according to the estimates of Elettricità Futura, the Italian association of electric companies. Achieving this result would increase the share of renewable energy sources in the electricity mix from the current 40% to almost 70% in 2030. Elettricità Futura expects that the Green Deal will activate 100 billion euros in private investments from 2022 to 2030, 50% of which will be channeled into renewable energy source generation, 25% into storage and 25% into networks and digitalization.
Looking beyond the electricity sector, total investments (considering also transportation and heating) would amount to €1,100 billion until 2030, generating 250,000 net new jobs: a unique opportunity to address decarbonization and environmental sustainability while fostering economic recovery.
The green transition and energy security after COP26 – in cooperation with CESI
