Climate Wars, Episode Two: Europe's Sacrifice

The Paris climate agreement is a fact. Now that the jubilant cheers over its signing have died down, it's time to take a sober look at what actually happened, who promised what, and what the consequences will be.

Global industrial carbon dioxide emissions, from fossil fuel combustion and cement production, are dominated by six countries – China, the US, the EU, India, Russia and Japan – which together emit 70% of them. Their INDCs, or Intended Nationally Determined Contributions, matter.

What did the world promise?

The outcome of the “fight against climate change” really depends on China (30% of global emissions). In the period 2000-2013, China’s emissions grew in parallel with GDP and no one expected this growth to stop soon. However, in 2014 and 2015, they did not move up despite the annual GDP growth of 7%. The consumption of all major raw materials, including cement, steel and coal, is steadily declining and there is no prospect of changing this trend. The peak has clearly already been reached – the Chinese economy has experienced its rapid industrialization and is moving into a services phase. However, this does not prevent China from committing to the “ambitious” goal of reaching a peak by 2030.

The USA (15%) emits 16.5 t. _CO2 per person per year, that is, 2.5 times the European level. While the EU complied with the Kyoto Protocol, the USA simply did not ratify it and increased its emissions in the period 1990-2005 by 18%. With the fracking boom, the structure of electricity production there changed sharply from coal 50% + gas 18% (2005) to coal 38% + gas 30% (2014) with a clear tendency of substitution in the future. Accordingly, carbon emissions fell by 10% without any protocols and without this significantly affecting the price of electricity. In the last two years, RES have been sprouting like mushrooms in the USA, so reducing emissions by another 16% by 2025 seems quite real. How difficult is it to maintain this trend with low prices and growing natural gas reserves and ideal conditions and falling prices for renewables? And even if that doesn't happen, who actually believes the US will ratify Paris?

India (6.6%) is in the same position as China a decade ago – rapid annual growth in emissions from a very low level. It has committed to reducing its carbon intensity ( _CO2 per unit of GDP) by 33% between 2005 and 2030 without setting a cap on emissions. Given the pace of nuclear and renewable energy construction, this can be achieved without much effort. China’s emissions boom lasted only 13 years, meaning that a natural peak in India can be expected before 2025.

Russia (5%) is “committed” to increasing its emissions by only 38% by 2030. This goal is too high for it – such growth requires a functioning economy, not just launching missiles. Now seriously – against the backdrop of today’s appalling inefficiency, Russia could theoretically become a rich country without increasing its energy consumption by even a single kilowatt-hour.

Japan (3.6%) actually proposes to reduce its domestic industrial emissions by 16-20% between 2013 and 2030. It did not meet its Kyoto target – on the contrary, it increased its emissions by 9% between 1990 and 2014. Given that its per capita emissions are 1.5 times higher than the EU, it is rapidly returning to nuclear power, and its population and economy are steadily shrinking, Japan should have no difficulty at all in achieving its new target. And even if it does not meet it, what does it matter? Does anyone ask about Kyoto?

The EU's self-sacrifice

The only entity that takes the Paris Agreement seriously is the European Union (9.6%). The old continent invented, signed and over-implemented the Kyoto Protocol – a 21% reduction in emissions from 1990 to 2014. A little-known fact is that _CO2 emissions from the EU28 countries peaked in 1980, when coal produced 46% of electricity. In 25 years, until 2005, emissions decreased by only 10% (despite a 50-60% drop in the Eastern European member states), as the share of coal in electricity production fell to 30%.

In Paris, Europe committed to reducing its industrial carbon emissions by 43% over the 25 years from 2005 to 2030. By 2014, there had already been a 19% drop, but this came at the expense of catastrophic de-industrialization and an increase in the average price of electricity by over 40%, and today it is twice as high as in the US. In the flagship countries of the so-called energy transition, Denmark and Germany, the difference reached 3 times. And since the words “fracking” and “nuclear” are politically incorrect in Europe, we need to replace practically all coal (and quite a few nuclear power plants) in the energy mix with renewables to achieve the 2030 target. How does this relate to the EC’s slogans for reviving industry?

Where is Bulgaria?

A few words about Bulgaria. From 2005 to 2014, there was almost no change in our industrial emissions. We still don't know exactly what Bulgaria will commit to within the EU. If we assume that we have to achieve a 30% reduction by 2030 (well below the EU average), the options are not many. In addition to the Kovachki power plants, we will have to close at least one of the three large TPPs in the Maritsa basin and we return to the romance of the electricity regime. And if by chance some large investor with energy-intensive production knocks on the door, we tell him to try his luck in Turkey. Since it is an independent and developing country, although already with a higher GDP per capita than us, it has "committed" to slightly increasing its emissions - up to 110% from 2012 to 2030. It won't chase investments, will it?

The conclusion is clear – only the EU is committed to a significant reduction in emissions. Not surprisingly, it has always played the role of Don Quixote in its climate “leadership”. This is immediately reflected in the markets. The reaction of the rating agencies after the Paris Agreement is completely logical – energy companies around the world remain unaffected, with the exception of European ones, whose credit rating drops. That is, Europe, as after Kyoto, is once again paying the full bill.

No, what was signed in Paris is not a global agreement to save the world from climate change. It is a unilateral commitment to economic suicide, and one undertaken by the least developed political entity in the world in the 21st century – the European Union, which is no coincidence on the verge of collapse. And the price will be paid primarily by its poorest countries, which, squeezed by their energy dependence on Russia and the desire for rapid economic growth, are in dire need of their own cheap energy sources. We will pay by remaining poor.

And who will foot the $100 billion in annual aid to developing countries to "fight the consequences of climate change"? Bet at least half of that bill will also come to Europe! But there will be no one to pay it, because the European economy is already on systems that its climate-obsessed leaders are about to shut down.

The good news is that it's all just promises - all the fuss in Paris has zero legal value and can be safely forgotten if political leaders with heads and balls are found on the Old Continent.

Main data sources:

EDGAR: http://edgar.jrc.ec.europa.eu/overview.php?v=CO2ts1990-2014

Climate Action Tracker: http://climateactiontracker.org/countries.html

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