Highlighting Global Trends in Carbon Emissions

It is rather easy to get swept up in the 'holier than thou' mindset when it comes to lower carbon emissions in the US. Granted, the US is making progress on this front: 2012 levels were about 13% below those seen in 2005.

But it would be remiss to ignore the impact of the crippling recession kicked off in 2008, which significantly aided in crimping productivity, and hence pollution. And secondly, it would be misleading to claim that the changing dynamics in domestic energy consumption were an altruistic decision: they were not.

For the precipitous fall in natural gas prices has only served to pique the interest of the most lax of capitalists to the benefit of the fuel. This boon has only since been compounded by the shift in government policy to reduce emissions, which is essentially code for 'moving away from coal'.

Not only is the shift out of coal to natural gas significant because natural gas-fired power generation creates much lower levels of emissions, but also because power generation is the LARGEST sector for creating carbon emissions in the US:

Across the other side of the pond, we see a very different conundrum faced by our European friends. For not only are lower coal prices spurring on demand for coal-fired generation in Europe, but an imbalanced carbon emissions market means that there is no incentive to burn a cleaner fuel. Due to an oversupplied market, carbon permit prices are exceedingly low, while given the inextricable ties to oil-indexed pricing, natural gas prices are so high.

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This means that burning coal is the cheapest option by far, regardless of how many carbon permits are needed to offset the pollution created. In fact, a recent report stated coal prices essentially need to double from today's level to make cleaner-burning natural gas competitive. Further madness is manifesting itself in Europe as recently-built natural gas-fired power plants are being closed, while an increasing number of coal plants are being planned.

The below chart highlights the trend of rising global emissions. It is not unexpected to see China's emissions soaring given the images of pollution we are seeing from the country, combined with the fact that they consume nearly as much coal as the rest of the world combined.

But we also see significant emissions from the 'other' category. There should be no small emphasis placed on the Middle East, as countries such as Saudi Arabia, UAE, and Qatar have some of the largest environmental footprints in the world:

Some countries are taking steps to limit their emissions out of a necessity to increase energy independence as much as to reduce pollution. China is a good example of this, surpassing the US to become the biggest spender in terms of renewable energy investment.

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In defense of the US, the growth in renewable energy should also be held accountable for the drop in emissions in recent years along with the increasing relevance of natural gas. Meanwhile, Germany is also taking large strides to develop renewable energy sources as it attempts to distance itself from recent reliance on coal and nuclear energy.

All of which brings us to the final chart below. Not only is the transportation sector a leading contributor to global emissions, but it also holds the most potential to reduce pollution on an incremental basis. Research from Exxon Mobil predicts that vehicle usage will increase globally from 800 million currently to 1.8 billion by 2040. Given improving fuel standards and technological development, the emissions produced per vehicle could be drastically reduced:

So that was a whistle-stop tour through some key trends in the world of carbon emissions. There are plenty of positives to be taken from these paths, although inevitably ulterior motives such as costs are more of a key driver than altruism; hopefully these two can be more closely intertwined going forward.

By. Matt Smith