The Top 5: You Can Have Low Carbon & Economic Growth

02.02.17 | Blog | By:

Happy Thursday friends! Here’s my weekly take on the five most interesting developments in future fuels and vehicles trends over the last week.

  1. Economic Growth in a Low Carbon World: According to the Energy Transitions Commission, you can have both. But the major finding in the study conducted by Vivid Economics is that decarbonization of all sectors is important, but just as important is increasing energy productivity and efficiency.
  2. A GOP Regulatory Game Changer: A little meeting last week and chronicled in the Wall Street Journal about the reach of the Congressional Review Act could have serious implications for all kinds of regulations promulgated during the Obama era, including, maybe, the 2022-2025 fuel economy standards.
  3. EU Energy State of the Union: The European Union as a whole has continued to make good progress on delivering the Energy Union objectives, in particular on the 2020 energy and climate targets. However, National Renewable Energy Action Plan (NREAP) trajectories for transport have not been met.
  4. Introducing SuperButol: A low-cost, high-octane gasoline blend component developed by Saudi Aramco called SuperButol is the focus of an upcoming FUEL journal article. Look out ethanol, MTBE, MMT and the like?
  5. ITF/OECD Transport Outlook 2017: If no additional measures are taken, CO2 emissions from global freight alone could increase by 160% by 2050, underscoring the recent IEA, BP and ExxonMobil outlooks which all predicted the rise in freight transport and the additional diesel fuel demand that would create.

1. Energy Transitions Commission (ETC): Economic Growth in a Low Carbon World

An analysis carried out by Vivid Economics for the ETC and released this week showed how simultaneous radical improvements in energy productivity across the transport, industry and buildings sectors could reduce global energy demand by 60% compared with business as usual by 2050. According to ETC, these improvements are driven by increased energy efficiency of a wide range of equipment and appliances, combined with structural shifts in urban design and economic activities.

Regardless of carbon emissions pathway, economic growth is assumed to continue, with average GDP per capita growth rates of 1.2% and 2.3% in OECD and non-OECD economies respectively to 2050. As a result, on average across scenarios: OECD economies increase GDP per capita from $38k in 2015 by 25% to 2030 and 60% to 2050 and non-OECD economies increase GDP per capita from $10k in 2015 by 50% to 2030 and 150% by 2050.

According to ETC, providing goods and services to an estimated 9.6 billion global people by 2050 while limiting the rise of global temperatures to less than 2°C will require not only to decarbonize our energy supply, but also to limit the foreseeable rise in energy demand at world level. Improving energy productivity is as important as decarbonizing the energy supply, as the figure below shows.

A structural break in energy productivity improvements is needed, ETC says, to accelerate energy productivity improvement from 1.7% per annum today to 2.5 to 3% per annum. Energy productivity improvements account for 45% of gross carbon emissions reductions, on average, in low carbon scenarios.

The research carried out by Vivid Economics demonstrates that achieving this pace of improvement is technically possible, if significant progresses are made simultaneously across the transport, industry and buildings sectors by leveraging two key drivers of energy productivity:

  • Providing a greater level of services with a given quantity of energy (e.g. less energy consumed per kilometer travelled), through technological improvements and shifts to more efficient practices.
  • Enabling more economic activity to be generated with a given level of energy-based services (e.g. more GDP created with less kilometer travelled), through structural shifts such as more adequate urban design, the shift to a service-based economy and the development of circular and sharing economy models.

With respect to transport, Vivid Economics estimates that energy demand could be reduced by 70% compared to a business as usual scenario, through a combination of reduced travel needs, modal shifting and improved vehicle efficiency, alongside a large-scale fuel shift to electricity for passenger travel and alternative fuels for freight transport.  Here are some examples of what that could look like:

As has been identified in the recent IEA, BP and ExxonMobil energy outlooks, energy demand in transport is expected to increase. In this analysis, the increase is pegged at 75% and almost entirely attributed to non-OECD countries. The figure below shows how (and what) targeted policies can be employed to drive improvements in transport.

Other highlights include the following:

  • Vivid expects the large proportion of energy efficiency improvements to come from electrification.
  • Radical innovation is required for heavy-duty vehicles as electrification is not a practical solution for now. Vivid highlights the role of hydrogen and biofuels in filling this gap.
  • Within-mode efficiency improvements (such as ride sharing) can halve transport energy demand.

2. Wall Street Journal: A GOP Regulatory Game Changer

So there I was last Friday morning, enjoying my daily morning sojourn into the Wall Street Journal over coffee when I became a little thunderstruck reading this column. We know that the Republican Congress has been chomping at the bit to roll back Obama-era regulations, starting with Obamacare (properly, the Affordable Care Act). In fact, there’s even a bit of overwhelm about the sheer volume of regulations to be rolled back and which legislative tools can and should be used to do so.

One of those potential tools is the Congressional Review Act (CRA) enacted in 1996. The CRA gives Congress the ability, with simple majorities, to overrule regulations from the executive branch. The column notes that the “accepted wisdom in Washington is that the CRA can be used only against new regulations, those finalized in the past 60 legislative days. That gets Republicans back to June, teeing up 180 rules or so for override.”  However, the column notes a meeting that took place last Wednesday with one of the CRA’s original architects, Todd Gaziano. The outcome of the meeting is that the CRA grants Congress far greater powers than has been realized or utilized until now.

“But what Mr. Gaziano told Republicans on Wednesday was that the CRA grants them far greater powers, including the extraordinary ability to overrule regulations even back to the start of the Obama administration. The CRA also would allow the GOP to dismantle these regulations quickly, and to ensure those rules can’t come back, even under a future Democratic president. No kidding.

 

Here’s how it works: It turns out that the first line of the CRA requires any federal agency promulgating a rule to submit a ‘report’ on it to the House and Senate. The 60-day clock starts either when the rule is published or when Congress receives the report—whichever comes later… Bottom line: There are rules for which there are no reports. And if the Trump administration were now to submit those reports—for rules implemented long ago—Congress would be free to vote the regulations down…. There’s more. It turns out the CRA has a expansive definition of what counts as a ‘rule’—and it isn’t limited to those published in the Federal Register. The CRA also applies to ‘guidance’ that agencies issue.”

Naturally, I wondered what the impact could be to transport-related regulations. The General Accountability Office tracks these reports and they are publicly available. For example, there is a report submitted as of Dec. 22, 2016 for the 2017 RFS volumes. Theoretically, Congress has until Feb. 22, 2016 to overturn the regulation ― unlikely, but not impossible. I also searched for a report on the 2022-2025 fuel economy standards and could not find one. That doesn’t mean EPA didn’t submit one and the regulation was only finalized about two weeks ago. However, the column does intimate that the failure to submit these kinds of reports was a pattern and practice in the Obama Administration. A review of other EPA regulations show that reports were indeed submitted (for example for the Tier 3 regulation). Nevertheless, is this the avenue for scrapping the standards? We’ll see.

3. European Commission: EU State of the Energy Union

The European Commission released yesterday its second State of the Energy Union report reviewing progress in the EU since the first report was released in 2015. Read more about it here.

4. GreenCar Congress: Saudi Aramco R&D proposes SuperButol as new low-cost high-octane blend component

GreenCar Congress reported this week on a paper published in the journal FUEL on a novel, low-cost, high-octane gasoline blend component developed by Saudi Aramco called SuperButol. It’s made from low-value mixed butenes using a new process the team has named Butenes to Butanol (BTB); it has slightly lower blending RON compared to MTBE but has lower blending vapor pressure and higher energy content compared to ethanol.

It also has an insignificant effect on key gasoline specifications, according to the paper, including potential and actual gum; oxidation stability; intake valve deposits; port fuel injector fouling; haze formation; and water extractability performance. The team suggests that SuperButol is a viable and affordable gasoline component, which can help to meet future demands for high-octane gasoline. In addition, the process helps to optimize refinery operations by valorizing low-value products.

The research team noted in the paper:

“… In this paper, we introduce a new high octane gasoline blending component, SuperButol, which is mainly a mixture of different isomers of butanol with small amounts of di-isobutylenes (DIB) and is made from mixed butenes which have low economic value in the refinery and low octane rating for the engine. This blending component could be used on its own or with other octane boosters such as MTBE. In fact, recent studies have demonstrated the potential of using alternative octane boosters, such as SuperButol in less processed fuels in order to reach the same anti-knock properties as a commercial high-octane fuel…

 

SuperButol can also increase the refinery revenues by enabling the blending of low value pentanes into the gasoline pool at an acceptable vapor pressure. Its oxidation stability, gum and deposit formation tendencies are similar to those of MTBE. In terms of haze formation and water extractability performance, it is better than ethanol and butanol and should pose no handling problems provided suitable precautions are taken. As a result, SuperButol could provide another practical and affordable option to produce higher octane gasolines in the future…”

Game changer? Threat to MTBE and/or ethanol market share (and MMT for that matter)? That remains to be seen. What is clear is that the pressure to improve the quality of gasoline, and in particular, octane around the world is going to continue. And the race to grab that market share globally continues with key markets in Asia, Africa and Latin America. The driver behind the need to improve gasoline quality is tightening emission and fuel economy standards in response to growing air pollution and climate concerns.

5. OECD/International Transport Forum (ITF): ITF Transport Outlook 2017

This week the OECD and ITF released its annual Transport Outlook, reviewing recent trends and presenting long-term projections for transport demand to 2050 for freight (maritime, air, surface) and passenger transport and including CO2 emissions. It looks at how the main policy, economic and technological changes since 2015, along with other international developments are shaping the future of mobility. Read more about it here.