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Subsidies to Coal Production Boost Emissions, Impede Cleaner Fuels



While many G20 nations are showing some commitment to tackling climate change, most are also still spending heavily to subsidize the fossil fuel industry.

A new study published today finds that subsidies for thermal coal production in two key supply regions – the Powder River Basin (PRB) in the United States and Australia – are significant, distorting the market, driving up emissions, and acting as a barrier to entry for cleaner energy sources.

The paper shows that scrapping subsidies – amounting to nearly $8 per tonne ($2.9 billion/year) in the PRB and $4 per tonne ($1.3 billion/year) in Australia — would materially reduce domestic coal demand and emissions in the United States and pressure demand for Australian thermal seaborne coal exports, where the effect on emissions would be dependent on other exporting nations taking action too.

The detailed analysis, entitled Assessing Thermal Coal Production Subsidies, jointly authored by the Carbon Tracker Initiative, Energy Transition Advisors (ETA), the Institute for Energy Economics & Financial Analysis (IEEFA) and Earth Track calculated that removing production subsidies would:

– Reduce demand for US PRB thermal coal by a range of 8% to 29% to 2035 and cut emissions by 7 to 2.5 gigatonnes of carbon dioxide The range reflects how demand will respond to changes in price as subsidies are removed in the short term and over the next two decades as aging capital and expiring contracts make larger adjustments possible

– Cut demand for Australian seaborne coal by 3% to 7% in the same period. Emissions reductions would be smaller than in the US because of the substitution of coal exports by other (often subsidized) producers. Coordinated international subsidy removal would yield much greater carbon reductions

“Thermal coal production subsidies are substantial as shown in our study of the US PRB region and the Australian seaborne market.  In the context of carbon and climate targets, the impact on demand for thermal coal can be significant if subsidies are removed. In the US PRB demand can fall by 8% in the short term, to 30% or higher in the longer term as gas and renewable energy sources substitute.  This is equivalent to removing the annual emissions of between 9 and 32 coal plants,” said Mark Fulton, head of ETA and lead author of the report.

“Policy makers concerned about climate and a level playing field in energy markets should look to take coordinated action to remove the distortions to production these subsidies create,” said Luke Sussams senior researcher at Carbon Tracker Initiative, pointing out that coal is the most carbon-intensive energy resource in terms of greenhouse gas emissions generated per kilowatt hour of electricity.

The analysis questioned whether some coal reserves would continue producing at such high levels in the absence of government subsidies.  In the case of the PRB, the report noted that production has been subsidized for decades.

“Non-competitive leasing, below-market royalties, inadequate funding of site cleanup after mining operations end comprise some of the major subsidies to the private firms digging taxpayer-owned coal out of the PRB,” noted Doug Koplow, founding partner of Earth Track.

“In recent years, subsidies have neared $8 per metric tonne of coal produced in the PRB basin – even before considering the health effects of coal combustion. Eliminating coal subsidies in the PRB and throughout the world, is an obvious, no-regrets climate strategy.”

The study found that subsidy elimination across all major US coal basins would result in a substantial and positive reduction in the quantity of coal consumed and drops in carbon emissions as well. Focusing on cutting PRB subsidies alone would generate some switching to coal from other regions; however, the increasing competitiveness of gas, as well as renewables and energy efficiency, suggest carbon dioxide reductions would still be significant.

Particularly with regards to federally-owned coal in the US, even purely administrative changes could make a positive difference.  Modifications include enforcing royalties on all lease terms; ensuring competitive auctions; and requiring real funding of mine closure liabilities, with contributions held outside of the company.  An industry review by Carbon Tracker earlier this year found at least 26 US coal companies had gone bankrupt, including once major producers; proper funding of long-term liabilities should not be ignored.

“The fossil fuel industry has gamed energy market consumers with numerous subsidies evident over the long term. For coal, these include a series of tax breaks and deductions; a history of underpaying governments for the right to mine coal; collusive tendering practices for public assets; decades of government funding for carbon, capture and storage and ‘clean coal’ research; as well as capital and funding subsidies for coal rail and port infrastructure and coal-fired power plants. An on-going failure to fund mine site rehabilitation externalizes yet another cost of coal mining,” said Tim Buckley, director of energy finance studies Australasia at IEEFA.

“Any discussion of cost competitiveness of renewable energy and energy efficiency needs to take into account the decades of extensive subsidies evident for the coal industry that in many cases remain in place today,” he said.

The full report can be found here:


What Should We Make of The Clean Growth Strategy?



Clean Growth Strategy for green energy
Shutterstock Licensed Photo - By sdecoret |

It was hardly surprising the Clean Growth Strategy (CGS) was much anticipated by industry and environmentalists. After all, its publication was pushed back a couple of times. But with the document now in the public domain, and the Government having run a consultation on its content, what ultimately should we make of what’s perhaps one of the most important publications to come out of the Department for Business, Energy and the Industrial Strategy (BEIS) in the past 12 months?

The starting point, inevitably, is to decide what the document is and isn’t. It is, certainly, a lengthy and considered direction-setter – not just for the Government, but for business and industry, and indeed for consumers. While much of the content was favourably received in terms of highlighting ways to ensure clean growth, critics – not unjustifiably – suggested it was long on pages but short on detailed and finite policy commitments, accompanied by clear timeframes for action.

A Strategy, Instead of a Plan

But should we really be surprised? The answer, in all honesty, is probably not really. BEIS ministers had made no secret of the fact they would be publishing a ‘strategy’ as opposed to a ‘plan,’ and that gave every indication the CGS would set a direction of travel and be largely aspirational. The Government had consulted on its content, and will likely respond to the consultation during the course of 2018. And that’s when we might see more defined policy commitments and timeframes from action.

The second criticism one might level at the CGS is that indicated the use of ‘flexibilities’ to achieve targets set in the carbon budgets – essentially using past results to offset more recent failings to keep pace with emissions targets. Claire Perry has since appeared in front of the BEIS Select Committee and insisted she would be personally disappointed if the UK used flexibilities to fill the shortfall in meeting the fourth and fifth carbon budgets, but this is difficult ground for the Government. The Committee on Climate Change was critical of the proposed use of efficiencies, which would somewhat undermine ministers’ good intentions and commitment to clean growth – particularly set against November’s Budget, in which the Chancellor maintained the current carbon price floor (potentially giving a reprieve to coal) and introduced tax changes favourable to North Sea oil producers.

A 12 Month Green Energy Initiative with Real Teeth

But, there is much to appreciate and commend about the CGS. It fits into a 12-month narrative for BEIS ministers, in which they have clearly shown a commitment to clean growth, improving energy efficiency and cutting carbon emissions. Those 12 months have seen the launch of the Industrial Strategy – firstly in Green Paper form, which led to the launch of the Faraday Challenge, and then a White Paper in which clean growth was considered a ‘grand challenge’ for government. Throughout these publications – and indeed again with the CGS – the Government has shown itself to be an advocate of smart systems and demand response, including the development of battery technology.

Electrical Storage Development at Center of Broader Green Energy Push

While the Faraday Challenge is primarily focused on the development of batteries to support the proliferation of electric vehicles (which will support cuts to carbon emissions), it will also drive down technology costs, supporting the deployment of small and utility-scale storage that will fully harness the capability of renewables. Solar and wind made record contributions to UK electricity generation in 2017, and the development of storage capacity will help both reduce consumer costs and support decarbonisation.

The other thing the CGS showed us it that the Government is happy to be a disrupter in the energy market. The headline from the publication was the plans for legislation to empower Ofgem to cap the costs of Standard Variable Tariffs. This had been an aspiration of ministers for months, and there’s little doubt that driving down costs for consumers will be a trend within BEIS policy throughout 2018.

But the Government also seems happy to support disruption in the renewables market, as evidenced by the commitment (in the CGS) to more than half a billion pounds of investment in Pot 2 of Contracts for Difference (CfDs) – where the focus will be on emerging rather than established technologies.

This inevitably prompted ire from some within the industry, particularly proponents of solar, which is making an increasing contribution to the UK’s energy mix. But, again, we shouldn’t really be surprised. Since the subsidy cuts of 2015, ministers have given no indication or cause to think there will be public money afforded to solar development. Including solar within the CfD auction would have been a seismic shift in policy. And while ministers’ insistence in subsidy-free solar as the way forward has been shown to be based on a single project, we should expect that as costs continue to be driven down and solar makes record contributions to electricity generation, investment will follow – and there will ultimately be more subsidy-free solar farms, albeit perhaps not in 2018.

Meanwhile, by promoting emerging technologies like remote island wind, the Government appears to be favouring diversification and that it has a range of resources available to meet consumer demand. Perhaps more prescient than the decision to exclude established renewables from the CfD auction is the subsequent confirmation in the budget that Pot 2 of CfDs will be the last commitment of public money to renewable energy before 2025.

In short, we should view the CGS as a step in the right direction, albeit one the Government should be elaborating on in its consultation response. Its publication, coupled with the advancement this year of the Industrial Strategy indicates ministers are committed to the clean growth agenda. The question is now how the aspirations set out in the CGS – including the development of demand response capacity for the grid, and improving the energy efficiency of commercial and residential premises – will be realised.

It’s a step in the right direction. But, inevitably, there’s much more work to do.

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How Much Energy Does Bitcoin Use, Really?



how much energy bitcoin requires
Shutterstock Licensed Photo - By Chinnapong |

Many headlines have capitalized on the rapid rise of Bitcoin’s value. However, there’s a darker side of things that may entirely escape people’s awareness — the vast energy usage associated with Bitcoin mining. The practice involves adding information about transactions to a publicly accessible record called the blockchain.

Bitcoin miners increase the amounts of the cryptocurrency they own by being involved in mining. That means there is a built-in incentive to start mining and keep doing it. The energy consumption associated with mining may not be as visible as it is in traditional types of mining because everything happens in the digital realm — however, it’s exceptionally high, which is a cause of concern to many individuals in the know.

The Rise in Value Brings About Higher Energy Consumption

It’s not hard to find impressive headlines and news stories about how the value of Bitcoin has soared over the last few months. Many people even suspect they’ll soon witness the inevitable burst of a “Bitcoin bubble.” Miners are taking advantage of the current boom, though, which involves depending on power-sapping computers and related equipment.

In the early days of Bitcoin, it was possible to mine on basic home computer setups. Now, the most dedicated miners invest in the best computers around. In some cases, that means the machines they use are quite energy efficient, which is a good thing. However, the purchase of equipment that uses electricity well isn’t enough to make a significant dent in the overall Bitcoin energy usage.

The Approximate Energy Usage Statistics Vary

When you start doing in-depth research about just how much energy consumption Bitcoin demands, be prepared to come across many different figures. Although people are doing diligent research, they still can’t reach an agreement. For example, according to statistics from the Bitcoin Energy Consumption Index, the annual energy usage is just under 32 terawatt hours.

That’s the estimate for per-year energy use of Serbia and more than 150 other countries. However, analysts find it impossible to reach a unified conclusion about the per-transaction energy consumption for Bitcoins.

Figures from Digiconomist estimate one Bitcoin transaction takes 255 kilowatt-hours of power — or enough to power an American household for more than eight days. Marc Bevand, another analyst, disagrees with that figure, though his remarks on the matter are not as specific. He discusses how many of the highly publicized statistics fail to account for the technological innovations that occur as equipment improves.

He gives the example of an S9, which is a standard piece of Bitcoin equipment, claiming 16% of the S9’s revenues went towards electricity costs. If that figure is more accurate, it would mean each Bitcoin transaction uses enough power to keep an American residence going for just under four days.

Bitcoin Miners May Be Able to Branch Out From Cryptocurrency

Some Bitcoin miners are attracted to their trade for more reasons than just the lucrative and ballooning prices of the coins. People from a wide variety of industries, from banking to insurance, are looking at uses for blockchain technology. In the insurance sector, fraud costs $40 billion per year, but the verification method that miners understand and work with dramatically reduces fraud and makes blockchain appealing to insurance professionals.

Also, banks are increasingly researching Blockchain as a supplement to their current methods. As the prominence in the market goes up, the allure of being a Bitcoin miner does, too.

Also, going back to Bitcoin specifically, as the value of each coin goes up, people become more motivated than ever to invest in better technologies that help them remain profitable for as long as possible. When all these factors combine, it’s not hard to understand why energy consumption rises.

Do Banks Use More Energy Than Bitcoins?

Some analysts argue that even if the energy demanded by Bitcoins is exceptionally high, it’s still not at the level of energy used by banks. To keep things in perspective, it’s important to realize that the banking industry keeps its total energy usage figures under wraps, leaving people to do lots of speculating.

One analyst determined there are approximately 30,000 banks in the world, and each one has ATM networks, offices and other components that require electricity. When adding all the relevant factors together, the final figure this individual came up with is that banks use about 100 terawatts of power per year, less than the earlier-cited figure related to Bitcoins.

However, people have given opinions that the amount is too conservative. It does not include the energy used by bank employees, such as when employees drive to their offices or fly to meet clients. It bears mentioning, though, that the Bitcoin figures mentioned in this piece probably don’t either.

There are countless statistics about Bitcoin energy usage, and most of them are not promising. But instead of reading a few of them and immediately feeling shocked, it’s important for people to take a broad look at the findings and reach their own intelligent conclusions based on the collective research.

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