Achieving CO2 emission reduction: A perspective

Lucy O’Shea is a Senior Lecturer in the Department of Economics at the University of Bath.

It has been stated many times over the past few weeks that commitments and actions that follow COP26 are too important to fail. This calls to mind a similar situation in 2008 when during the credit crisis we were told that banks were too big to fail. That time governments stepped in to support the banks to protect the economy. This time we need equal, if not more, determination of governments to step in and protect the environment.

However, the determination to address the problem should account for the notion of fairness. The target is to stay within 1.5 – 2^oC of global surface temperature increase above pre-industrial level. The estimated carbon budget that will allow us to keep within that target lies between 420 GtCO₂ and 1270 GtCO_2.

If we subscribe to the idea that the global atmosphere is a common property resource where each individual has equal rights to it as a sink for emissions, the allocation of rights is such that for every tonne emitted by developing countries, 0.2 tonnes should be emitted by developed countries (Tavoni et al. (2012)). If carbon budgets are adjusted to take account of historical responsibility, the authors show that this implies negative emissions for developed countries, i.e., they have to absorb more than they emit or alternatively, they should pay developing countries for the right to emit. The purpose of this introduction is to set out clearly the scale of challenge, and how tinkering with marginal changes in how we organise the economy or how we behave as producers and consumers will not work.

The construction sector is the largest global consumer of materials, and buildings are the sector with the largest single energy use worldwide (Krausmann et al., 2009). Overall, buildings are responsible for 19% of global greenhouse gases (IPPC, 2014). Direct and indirect emissions from electricity and commercial heat used in buildings rose to 10 GtCO₂ in 2019, the highest level ever recorded.

Increased demand for space heating/cooling, connected devices, and appliances, outpaced energy efficiency and decarbonisation, which has resulted in a net resurgence in energy related emissions from buildings. According to UN estimates, there are 7.6 billion individuals on the planet with roughly 50% living in urban areas. It projects that by 2050 there will be 9.8 billion people with 66% living in urban areas. This has huge implications for the rates of construction and the use of raw materials, as much of this new construction will occur in developing countries.

As the initial design and materials used at the construction stage has a dis-proportionate effect on both embodied carbon (CO₂ emissions associated with extraction, manufacturing, transporting, installing, maintaining and disposal of materials and products) and CO₂ emissions derived from building-use, it is vital that resources and know-how are transferred to less developed economies. Within the portfolio of options of consumer-related behaviour, those that interface with buildings (along with transport) tend to dominate contributions towards CO₂ emission reductions (Moran et al., 2020).

Thus, the construction sector provides a nice example of the need for an effective mix of actions by government, producers and consumers. The government needs to regulate producers through mandatory targets while, at the same time, providing them with flexibility to meet these targets. Current regulations relating to best practice regarding building structures and insulation should be replicated across countries with support to achieve these regulations where required.

According to the IEA, adherence to global building energy codes are not keeping pace with the expansion of floor area in emerging economies. The annual drop in energy intensity per m² should be at least 2.5% to achieve the IEA Sustainable Development Scenario (SDS), which includes remaining ‘well below 2^oC’ goal of the Paris Agreement, together with universal access to affordable, reliable, sustainable and modern energy services and improved air quality. In 2018, the energy intensity reduction was less than half the required rate to achieve SDS.

To reach the target of 2.5%, consumers need to be supported to adopt energy efficient appliances to ensure that adoption is sufficiently widespread, for example tripling the adoption of heat pump technology. The faster the take-up, the quicker economies of scale set in and the faster the reduction in costs, whereby the government can withdraw and let the market achieve further adoption. Thus, while technologies may already exist on the market, without sufficient consumer take-up, they will not achieve the necessary CO₂ emissions reduction.

There are two elements that determine take-up: affordability and willingness of consumers to adopt alternative new technologies, both of which increase as a technology diffuses through the market. The key role for government is to support initial take-up and hasten the spread of the technology through fiscal incentives and education. The government should ensure that consumers do not divert income saved from energy efficiency gains towards increasing their overall energy demand.

In terms of driving change by altering incentives, regulatory effort should focus on producers rather than consumers as it is producers who innovate, produce and control the supply of goods and services with consumers by and large responding to what is available on the market. It is true that consumers may be able to influence to some extent the mix of products through their choices but given the scale of the changes required and past experience, relying on the consumer to drive the transition to a low carbon economy provides a bit of a cop out for producers.

References

• Giesekam, J., Barrett, J., Taylor, P., & Owen, A. (2014). The greenhouse gas emissions and mitigation options for materials used in UK construction. Energy and Buildings, 78, 202–214.
• Krausmann, F., Gingrich, S., Eisenmenger, N., Erb, K.-H., Haberl, H., & Fischer-Kowalski, M. (2009). Growth in global materials use, GDP and population during the 20th century. Ecological Economics, 68(10), 2696–2705.
• Moran, D., Wood, R., Hertwich, E., Mattson, K., Rodriguez, J.F.D., Schanes, K., Barrett, J. (2020). Quantifying the potential for consumer oriented policy to reduce European and foreign carbon emissions. Climate Policy, S28-S38.
• Tavoni, M., Chakravarty, S., Socolow, R. (2012). Safe vs. Fair: A formidable trade-off in tackling climate change. Sustainability, 210-226.

All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath. Read more of our blogs on COP26.