Goodbye Renewable Targets: Hello Carbon Budgets

Climate action is fundamentally about reducing greenhouse gas emissions to avoid harm to our atmosphere.

Until recently renewable energy (and electricity) targets were used as a proxy for climate action, but we now see a pivot nationally and at a European policy level towards the use of carbon budgets framed around net-zero targets.  

The introduction of carbon budgets, which represent the total amount of emissions that may be emitted over a defined period, will profoundly shape the contours of the energy and electricity landscape in Ireland over the next 8 years.

Carbon budgets don’t necessarily change what policy interventions should happen, but they do impact the timing of interventions and place a greater emphasis on early action. 

Under new climate legislation, the Climate Change Advisory Council is mandated to propose carbon budgets to cover three sequential five-year periods, the third being a provisional budget.

The proposed carbon budgets provide for a reduction of 51% in greenhouse gas emissions by 2030 relative to 2018 equating to 495 Mt CO2 eq between 2021 and 2030.

Carbon budgets are the best measure of climate action because they reflect the science which tells us that it is the cumulative building up of emissions in the atmosphere that is the driver for climate change rather than emissions at some point in time.

A weakness with renewable electricity targets is that they ignore demand-side and wider system issues such as transmission constraints and emissions from non-renewable plant.

Additionally, renewable electricity targets are a function of demand and for the same given renewable electricity target (expressed as a % share of overall demand) the resulting emissions will grow as demand grows.

For example, when looking at EirGrid projections for electricity demand in 2030, the same given target for renewable electricity of 80% yields different emissions outcomes of up to 0.7 Mt in 2030.

From a policy perspective emissions from the power sector fell outside Ireland’s national obligation for emissions reduction and instead were governed under the pan European Emissions Trading Scheme.

However, the new national ambition covers all areas of the economy and this effectively moves power sector emissions from a pan EU responsibility to a national basis.

This changes the policy landscape for electricity generation in Ireland meaning that emissions reduction and delivery rather than renewable electricity targets are the key measure of success.

It is worth noting that while the electricity sector will have a carbon budget, it is also unique in that it is required to decarbonise the rest of the economy.

The decarbonisation of other areas of the economy relies heavily on the electrification of heat and transport, which will create additional pressures on growing electricity demand.

What does it mean for the Power Sector?

Using a simplified exercise, where we consider emissions over the full period rather than individual budgets and where all sectors of the economy outside electricity generation achieve a linear 51% reduction in emissions to 2030 and agriculture delivers a 33% reduction, results in a budget of 55 Mt for the power sector to 2030.

Because power sector emissions increased in 2021 to 10.1 Mt the resulting budget from 2022 to 2030 is 45 Mt. 

Figure 1: Simplified Carbon Budgets meeting 495 Mt Budget. Note for clarity some sectors are not shown (F-Gas, Waste, etc)

To stay within this budget the power sector will need to reduce emissions immediately and emit between 0 Mt and 1Mt in 2030 and if possible, become net negative.

Staying within this carbon budget for the power sector will require a massive increase in renewables such as wind and solar to reduce emissions but will also force us to look at growing demand to avoid emissions and likely consider low levels of negative emissions technologies to remove emissions thus expanding our carbon budgets.  

Note that negative emission technologies such as biomass with carbon capture is an expensive way to produce electricity but a cost-effective way to remove emissions.

It also means that interconnector flows become critical in determining overall emissions as the ability to import power at correct times can avoid thermal generation and associated emissions here.

The above analysis would change if greater reductions (i.e. above 51%) were achieved in other sectors however this is challenging given their emissions profiles and time it takes to ramp up reductions.

Overall, the changes that carbon budgets will bring go beyond the need for incremental changes and require disruptive changes in policy, thinking, and delivery in Ireland