1. The Low Carbon Society –
Challenges and Opportunities
Andrew Sentance
Professor of Sustainable Business
Warwick Business School
Making Science Work Conference
Exeter, 3rd December 2009

2. Outline
• The challenge of the “Low Carbon Society”
• Implications for economy and key sectors
• Policy instruments and measures
• Key steps and business opportunities

3. Carbon emissions per head
CO2 per capita, 2005 values
25
20
15
10
2050 target
5 2-2.5 T
0
il
y
S
K
na
a
lia
n
a
a
ce
a
az
an
pa
ad
re
di
si
U
U
ra
hi
an
us
In
Br
Ko
m
Ja
an
st
C
Fr
R
er
Au
C
G
Source: OECD

4. Sustainable global emissions scenarios
Annual greenhouse gas emissions (GtCO2e)
70
60
50
40
30
2016:4% 20
10
Increased early grow th
0
2000 2010 2020 2030 2040 2050
Year
2016:4 trajectory with global emissions peaking in 2016 with subsequent reduction in total emissions of 4%
subsequent
Source: Climate Change Commission

5. World GDP growth and CO2 emissions
from energy
Average annual growth rates, percent
GDP 5
Carbon Dioxide
Emissions 4
3
2
1
0
70s 80s 90s 2000-08
Note: Carbon dioxide is measured in millions of tonnes
Source: World Bank and BP Statistical Review

6. Greenhouse gas emissions, by source
Global GHG emissions in 2000 = 42GT CO2 equivalent
5%
3%
25% Power
14%
Industry
Transport
Buildings
Land use*
Agriculture*
Waste*
18% 14%
Other
8% 13%
Source: Stern Review (2006) * Non-energy emissions

7. Key steps
• “Decarbonisation” of power sector and
transport
• Big shift in energy efficiency of industry,
buildings & appliances
• Cutting non-energy emissions from
agriculture, changes in land use & waste

8. Decarbonisation of power sector
• Hydro, wind, wave/tide & solar
• Bio-fuels and bio-mass
• Carbon capture and storage
• Energy storage schemes
• Nuclear power

9. CO2 emissions from global transport
Total CO2 emissions in 2000 = 5.6 GT
2%
12%
Cars and vans
10% Freight trucks
2-3 wheelers
45%
Buses
6% Water
Aviation
2%
Rail
23% Source: Stern Review (2006)

10. Transport carbon emissions
Excluding international aviation and shipping
CO2 emissions CO2 per capita Transport as % of total
(million tonnes) (tonnes/head) CO2 emissions
United States 1813 6.1 31%
Canada 160 5.0 29%
Australia 80 3.9 21%
France 135 2.2 35%
United Kingdom 129 2.2 24%
Italy 119 2.0 26%
Japan 268 2.0 21%
Germany 159 1.9 19%
Russia 206 1.4 13%
Brazil 138 0.7 41%
China 332 0.3 7%
India 96 0.1 8%
Source: OECD

11. Transport – cutting emissions
• Reduce travel
• How we travel – time shift, mode shift
and behavioural change
• Carbon efficiency of individual modes

12. UK carbon “taxes”
£/T of CO2, 2009 values
300
250
200
150
100
50
0
Domestic Climate EU ETS Stern carbon Air Motor fuels
-50 gas change levy permits price passenger
duty

13. CO2 emissions by UK transport mode
Grams per passenger km
Current 2050 potential
180
160
140
120
100
80
60
40
20
0
Car Rail - Rail - Bus Air - Air - Air -
electric diesel longhaul shorthaul domestic
Sources: Committee on Climate Change, 2008; CfIT (2007); and author’s estimates.
Note that 2050 figures are illustrative – based on 90% decarbonised electricity

14. Contribution of energy efficiency
• Potentially massive increase in requirement for very
low carbon energy
• Significant shift in energy efficiency will reduce the
“load” on the future low-carbon energy system
• Key areas: energy distribution; transport; buildings;
appliances & industry
• Potential “rebound” effect
• Regulatory and pricing interventions needed to
drive investment and behaviour change

15. Building the “low carbon society”
Economic
Instruments
Behavioural
Low Carbon
Technology & Structural
Society Change
Political
Frameworks

16. “It is not from the benevolence of
the butcher, the brewer, or the
baker, that we expect our dinner,
but from their regard to their own
interest.”
Adam Smith, Wealth of Nations, 1776

17. Technology – potential drivers
• Consumer demand
• Strategic vision
• Carbon pricing
• Regulation and standards
• Government policy and financial support

18. Technology – barriers
• Consumer confusion
• Conflicting business strategies
• Inadequate long-term price signals
• Uncertain regulation
• Unclear or inconsistent policy
approaches

19. Economic instruments
• Emissions trading
• Carbon taxes
• Energy taxes
• Incentives for developing and
embodying low carbon technologies
• Energy efficiency incentives

20. Potential size of carbon markets
20000
18000
Million tonnes CO2 emissions, 2002 Total emissions from fossil fuels
16000 Emissions from power and industrial sectors (estimated)
14000
12000
10000
8000
6000
4000
2000
0
European Union United States of China, India, G7 EU25, Jap, Aus, OECD Top 20 Global
(25) America Mexico, Brazil, Can, USA emitters
South Africa
(+5)
Extending EU ETS to power and industrial sectors in Top 20 countries
would create a market of US$90-350 bn

21. Emissions trading – key conditions
• Comprehensive geographically
• Wide sectoral coverage
• Long-term framework of caps/targets to
drive investment
• Robust monitoring and reporting
• Strong institutions to underpin credibility
and protect against political interference

22. Emissions trading in practice
• EU ETS is best established scheme, but targets
and framework relatively short-term
• Sector coverage limited – transport, agriculture
and domestic energy use largely excluded
• Prices have been volatile and emissions
reductions have been modest
• Political pressures and influences on allocation
process
• Copenhagen – a major opportunity to move
ahead with global emissions trading?

23. Key steps to Low Carbon Society
• Twin track approach: major shift in energy efficiency, while
decarbonising energy & transport
• Massive expansion of low/zero carbon electricity supply,
using a wide range of technologies
• Electrification of road transport, alongside increasing use
of bio-fuels
• Heavy investment in low carbon technologies will be
required – especially in energy sector and transport
• Wide range of economic & regulatory instruments to be
developed, providing consistent & long-term price signals

24. Business opportunities
Strategic driver: There is No Alternative (TINA) to the LCS
1) Key energy and transport sector challenges – technology,
infrastructure, systems and support
2) Helping households and firms identify and deliver energy
efficiency improvements
3) Developing market infrastructure for carbon trading, pricing
and decision-making
4) Supporting policy-makers in developing and delivering new
and innovative tools and frameworks
5) Educating, informing and advising the public and the
business community on LCS change agenda