The UK’s woodland was depleted by the needs of industry, urbanization and agriculture and fell to little more than 6% of national land area in the early 1920s. Wood was virtually absent from many lowland areas in England. A recovery in the area given over to woodland means that about 12% of the UK is now forested but this number is only rising very slowly. Net new forestation is now well below 10,000 hectares (100 sq km) a year, much of which is in Scotland.

The UK is significantly behind other countries in Europe.

Percentage of land area under forest and woodland

Source: Combating Climate Change: A Role for UK Forests (Edinburgh: The Stationery Office, 2009), p. 1.

As trees grow, they extract CO2 from the atmosphere by photosynthesis. Young trees don’t capture much as their absolute growth is slow. Old trees have largely ceased to grow and also don’t extract much carbon dioxide. The UK’s newer woods, mostly planted thirty to fifty years ago, are now just past their peak at sequestering carbon. The 2005 figure was about 16m tonnes CO2. In 2010, the figure will fall to about 10m tonnes, and by 2020 the figure could be as low as 5m tonnes (less than 1% of national emissions).

Combating Climate Change, a report commissioned by the Forestry Commission makes a powerful case for a sharp increase in the rate of new planting.[1] It suggests that 1m new hectares, about 4% of total UK land area, should be given over to forest cover by 2050, increasing the planting to almost 25,000 hectares a year, triple today’s rate. This would, says the report, reduce UK emissions by about 15m tonnes of CO2 a year by mid-century. Parliament has legislated to cut UK emissions to about 150m tonnes of CO2 by this date. New forestry could therefore reduce the national CO2 total by about 10% below its expected level.

Is a million new woodland hectares possible? Easily. About 4m hectares are given over to rough pastureland in England alone. I haven’t got the exact figures for Wales, Scotland, and Northern Ireland, but these countries probably have another 4m hectares. So transferring a million hectares into woodland is perfectly feasible.

What about the cost? The report suggests that it strongly depends on what sort of forestry we use. ‘Energy forestry’ using, for example, coppiced hazel and willow for fuels may well have a net cost below zero per tonne of CO2 saved. (That is, the wood fuel costs less than the fossil energy it replaces.) At the other extreme, the creation of new broadleaf woodlands, managed for biodiversity, is estimated to cost about £41 per tonne of carbon dioxide. The Climate Change Committee says that any proposal costing less than £100 per tonne is potentially cost-effective. So although £41 per tonne is almost certainly greater than the cost of, for example, carbon capture at coal power stations by 2050, it is in line with other projects for reducing CO2.

The cheapest form of reforestation – giving over large plantations to single species for frequent harvesting of wood for heating and electricity generation – is broadly unpopular in the UK. Even still, it probably needs to be considered carefully. Using biomass to generate electricity is a very good way of providing ‘dispatchable’ electric power, electricity that can provided exactly when needed. The last few weeks of cold, still weather in the UK should remind us that we need huge amounts of biomass as a reliable source of renewable power as a backup for wind.


Footnote
[1] D. J. Read and others, Combating Climate Change: A Role for UK Forests: An assessment of the potential of the UK’s trees and woodland to mitigate and adapt to climate change: The Synthesis Report (Edinburgh: The Stationery Office, 2009). Available here as a free PDF from the Forestry Commission website.

Image source: Aviation Enviroment Federation.

The UK government asked the wrong question. It demanded that the Committee on Climate Change calculated how much air travel can rise without causing an increase in aviation emissions. Not unsurprisingly, the CCC answered by saying that the number of trips could rise at the same rate as efficiency improvements in air travel. The Committee said that emissions per passenger will fall by about 1% a year, and so travel could rise by about this amount. No shocks there.

By 2050, the CCC opined, the number of passengers taking trips from UK airports can rise to 370 million a year, up from 230 million today. The maximum possible number of new passengers at Heathrow from the addition of new runway and sixth terminal is about 60 million. Hoorah, said the industry, there’s space for the expansion. Unsurprisingly, the press misinterpreted the Committee’s report and said that it had ‘approved’ the government’s plans for the airport. By answering the government’s disiningenous question, the CCC has lost some of its impartiality.

***

The Department for Transport played a blinder. It could have cautiously asked the CCC whether Heathrow expansion posed a threat to the UK’s climate target of an 80% emissions reduction. Or were the costs to cut emissions more rapidly in other sectors greater than the benefits from aviation expansion? Then the Committee could have pondered and said that since Heathrow growth will add about 1.5% to the UK’s emissions, it definitely doesn’t make achieving the targets any easier.[1] But no, the DfT didn’t give the CCC this option. It simply required the CCC to do a bit of arithmetic:

Maximum air travel increase allowed = (rate of airframe / engine improvement X rate of replacement of planes) + air traffic control improvements + (rate of biofuels introduction X carbon intensity saving) + improvements in load factors.

Perhaps the CCC resented the limited brief. It actually made some quite conservative assumptions about each of the elements in this equation, pushing the government’s figures down as far as it could. Nevertheless, if you simply want to hold the UK’s emissions from aviation bunker fuel down to the current level of 37.5m tonnes, a new runway at Heathrow is clearly possible.

Rate of airframe / engine improvement
The CCC considered that annual improvements in fleet efficiency would be about 0.7% a year. This is slightly lower than the industry projects. The next generation of airplanes will be perhaps 25% more efficient per passenger kilometre than the average plane retiring from the UK fleet. At the current rate of aviation growth and the typical length of life of passenger airplanes, this may mean about a 1% yearly improvement in fleet efficiency.

Over the 40 years to 2050, this apparently small difference compounds into a big gap. 0.7% means a 32% improvement over the 40 years to 2050. 1% means a 49% increase.

The chief scientist of the CCC’s sponsoring government department, Energy and Climate Change, said in his book, ‘No redesign of a plane is going to radically improve its efficiency. A 10% improvement? Yes, possible. A doubling of efficiency? I’d eat my complimentary socks.’[2] The CCC agrees with his physics-based view even as the aviation industry pressure groups pretend that much larger improvements are possible.

Air traffic control and other operational improvements
The industry says that Heathrow congestion causes emissions by forcing planes to stack over south-east London waiting to land. This is undoubtedly true but curing this will be far from simple. The CCC has taken a cautious view of what is possible. Sensibly enough, it has concluded that adding 60% to the traffic by 2050 is likely to act as a brake on any major improvements in air traffic routing. It has projected improvement of about 0.1% a year.

Biofuels
The airline industry airily talks of making flying carbon neutral (‘net zero’ in North American language) by using biofuels. The CCC took a much more conservative view, saying that the limited amount of agricultural land around the world could not be devoted to producing jatropha oil for aviation. It said that only 10% of the fuel would come from biofuels by 2050 and this kerosene would have a net carbon cost of 50% of fossil fuels.

The net effect of these changes and load factor improvements is to increase ‘efficiency’ (passenger distances per litre of fuel burnt) by about 60% by 2050. Hence Heathrow expansion is possible without breaching the artificial cap set by the government of not exceeding today’s emissions levels.

The implications for aviation’s share of emissions
Implicitly the government is suggesting that other sectors need to decarbonise faster as a result of aviation’s emissions remaining constant. Perhaps this is the right analysis – it probably is more difficult to decarbonise aviation than other sectors of the economy. But the implication of the UK decision is that other fossil fuel uses will have to cut their emissions even more rapidly than expected.

At the moment, the CO2 from aviation’s share of emissions is somewhat over 5%. The UK intends to reduce its emissions by about a factor of five over the next 50 years. So if air travel emissions are unchanged they will rise to over 25% of total emissions by 2050. (The CCC points out that restraining air travel growth to a 60% increase will require a) a £200 per tonne carbon tax; b) a shift to some videoconferencing and greater use of rail; and c) capacity constraints at many airports and even still 60% is a tight target.) This means that the rest of the economy will have to cut emissions even faster than otherwise. The space for non-aviation emissions will decline by about 85%.

It is even worse if we consider the non-CO2 effects of aviation. These include contrails and other global warming effects not related to carbon dioxide. The CCC suggests, in line with current scientific opinion, that current evidence suggests that these impacts approximately double the effect of jet aircraft. Include these effects, therefore, and aviation uses up 50% of the whole UK carbon budget in 2050. The CCC very deliberately refers to this problem but the uncertainty over the exact impact means that it doesn’t include these effects in its assessment. If the UK government decides at some stage to load aviation with a multiplier of 2 for non-CO2 effects – as is increasingly likely – the percentage rate of annual reduction in other sectors will have to be even faster than if the CCC had decided to do so today. And yet the CCC has repeatedly said that to achieve the required cut in other sectors is already hugely demanding. Giving aviation an easy ride has just made it worse.

Herein lies the problem. The UK government wanted the CCC to ‘approve’ its plans to expand Heathrow. Its remit allowed the CCC no discretion to say no to the advantages given to aviation even though the cost this expansion imposes on other sectors is high. Nowhere in the CCC’s report is any assessment of the higher cost to decarbonise other sectors resulting from the freedom given to aviation by the government’s prescriptions. We do not, for example, know the financial impact of the tighter targets for other activities such as transport, home heating or power generation. It may be that the economic and social benefit of allowing aviation to expand is very great and therefore the favouritism shown to the flying is justified. But the Committee has not been allowed to make this calculation. It has been obliged to fulfil the role of the arithmetician to the government and not its policy adviser. One has to say that this is a waste of some of the best brains in Britain.

Footnotes
[1] More detail on this assumption is provided at here in an earlier Carbon Commentary article on “Heathrow expansion” (Monday 26 November 2007), but I’m using the implied CCC figures here.
[2] David J. C. MacKay, Sustainable Energy – Without the Hot Air.

Until this week, we thought that Sizewell B was likely to be the most expensive nuclear power station built in the UK. Image source: World Nuclear Association.

The Guardian newspaper of Monday 19 October broke the story that the UK government is preparing to guarantee a minimum price for carbon dioxide emissions to encourage the development of nuclear power stations. Putting a high cost on greenhouse gas emissions from power stations will force up the wholesale price of electricity, ensuring a better financial return for nuclear power stations (and for renewables such as wind). The decision to create a floor price for carbon demonstrates that the full costs of nuclear technology are probably well above today’s wholesale electricity prices. We may well need nuclear power but we are going to pay heavily for it. The government’s optimistic noises from 2006 to the middle of this year about the commercial viability of nuclear power have turned out to be wrong.

***

More generally, this note argues that the failure to incentivise nuclear construction in the current liberalised electricity regime may oblige the UK to introduce high guaranteed ‘feed-in’ payments for all low-carbon generators, including the very largest power stations. Guaranteed tariffs may be a more effective instrument for incentivising low carbon generation than the carbon dioxide price.

2006 government views on the costs of nuclear
In September 2006, David Kennedy, then a senior civil servant in the UK Department of Trade and Industry (now BIS) and currently the chief executive of the Climate Change Committee, submitted a paper to an academic journal on the economics of nuclear power.[1] The paper was published the following year. In the paper Dr Kennedy looked at the likely costs of building new nuclear plants in the UK. He then used these estimates to say what the wholesale price of power would need to be to encourage the building of new nuclear power stations.

Table 3 of his robust and cautious paper contained 10 estimates from independent external sources of what is called the ‘levelised’ cost of electricity from new nuclear. ‘Levelised’ figures spread the costs of a power station over its expected lifetime generation of electricity and account for matters such as the deconstruction of the power station at the end of its life. An interest rate is applied so that money spent now is given a higher weight than the money expended in sixty years’ time.

The ten estimates quoted by Kennedy were as follows:

The average was £30 per megawatt hour (mWh). This is equivalent to 3p per kilowatt hour. For comparison, current UK retail prices for electricity are about 13p a kilowatt hour.

Dr Kennedy’s paper went on to provide a more conservative figure that UK policymakers might use. He assumed a cost of £37.50 per kilowatt hour. The analysis also suggested a figure of £43.70 as an ‘extreme’ high case.[2] The wholesale price of electricity, at least as shown in medium-term contracts to buy and sell power, varies between about £50 per mWh and about £60.[3] Ofgem’s recent energy market scenario report also suggests a figure of about £60 for late in the coming decade when the first new nuclear plants might be starting to generate. So readers of Dr Kennedy’s paper would have assumed that nuclear power is profitable at current market prices and at projected future levels. Indeed, government policy-making from 2006 to 2009 has explicitly assumed that nuclear is ‘cost-competitive’ with other forms of generation such as gas and coal.

The views of the Committee on Climate Change, December 2008
By late 2008, the Committee on Climate Change (CCC) had a very slightly different view:

Current estimates of the likely cost of generating electricity from new nuclear are in the range 4-5p/kWh (£40-50 per mWh). These cost estimates are higher than typically produced two to three years ago, as a result of the significant increases in steel and other component prices, and of significant supply bottlenecks which have emerged as demand for new nuclear power station construction has come up against a limited capacity supply industry.

But fossil fuel price increases over that period have produced an even greater increase in the cost of fossil fuel based electricity, and the relative cost position of nuclear has therefore improved.

Less than a year ago, the CCC was saying that nuclear was the lowest cost generating plant for power generation even though its estimates were higher than Kennedy’s figure of two years earlier. ‘4-5p’ per kilowatt hour for nuclear compared favourably to more than 6p for gas generation and more than 7p for coal. Its view was unambiguous:

Nuclear power is competitive with both coal and gas-fired generation in the central fossil fuel price scenario even without a carbon price.

The Guardian’s news story
In October 2009, if the Guardian reports are accurate, the government is admitting that nuclear is not able to compete with fossil fuels except with protection from a high carbon price. The newspaper mentions a figure of €30 a tonne, compared to today’s price of CO2 emissions permits in Europe of about €13 a tonne. This levy will be added to the cost of using coal as a fuel for the power station and the effect will be to increase wholesale prices.[4] A €30 price for a tonne of CO2 will add about £20 to the cost of producing a mWh of coal-generated electricity.

During the course of 2009 the implied cost of nuclear power has risen from being no worse than competitive with gas and coal (at a zero carbon price) to being €30 (£27) per mWh more expensive.

Put at its simplest, the progression in nuclear cost estimates is therefore as follows:

* £20 for the carbon permits to produce a mWh of coal-fired electricity added to the current wholesale price of £50 or future prices of £60 per mWh. Assumes that that the €30 a tonne figure suggested by the Guardian is the level required to cover the ‘levelised’ costs of nuclear power per mWh.

For reference purposes, it may be helpful to know that the last nuclear power station built in Britain, Sizewell B, has levelised costs in today’s money of about £60 a mWh, or somewhat less than the apparent current projections of nuclear costs but higher than any of the government figures from the 2006-8 period.

Why is this important?
Nuclear power has gone up in price, probably by a factor of between two and three above what was expected even a few years ago. This is no surprise and even this blog predicted such figures early this year (see here and here). The continued problems at the new Finnish nuclear power station raise the strong suspicion that cost estimates will rise further in the future.

More generally, the Guardian report buttresses the case of those who say that the UK needs a guaranteed floor on the carbon price urgently. Today’s gas prices are very low by recent standards and depressed world economic growth may cause this to continue. The rational investor is therefore looking to build new combined cycle gas turbine power stations to profit from these low fuel prices. This runs the risk of either locking the UK into carbon-emitting power generation and/or shortages of power if the current glut of gas reverses unpredictably or if emissions targets oblige the generators to curtail production. But, as it stands today, the generators are queuing up to build unabated gas power stations. At today’s gas and carbon prices not only nuclear power but coal with carbon capture is looking very expensive.

The EU’s decision last week to back Powerfuel’s Hatfield coal gasification (IGCC) plant is welcome, but the project may only make financial sense with carbon prices at least as high as needed for nuclear power. Powerfuel’s proposed technology is still largely unproven at the scale envisaged and it may well turn out to be far more expensive than expected. There are many sceptics out there around the world saying that IGCC with capture will be even more expensive than nuclear. And offshore wind, today buttressed by a temporary increase in renewable subsidies in the UK, will need similar long-term incentives.

Are there any solutions?
My strong sense is that the woefully slow progress in developing new UK sources of low-carbon electricity might possibly be remedied by agreement between the main UK political parties on a high and semi-permanent carbon tax, probably of at least £40 a tonne. This may imply an increase in electricity costs of about 3 pence per kilowatt hour, a painful jump on already historically high levels.

Or – and this runs completely against the spirit of electricity market liberalization over the last twenty years – it may be simpler to copy the micro-generation feed-in tariffs scheme and offer a stable and guaranteed price for low-carbon electricity sources constructed in the next fifteen years, perhaps with higher prices for the first 10, 20, and 30 gigawatts of capacity constructed. The early rate might be £80 per mWh for nuclear, £90 for coal with capture, £70 for onshore wind, and £100 for offshore. The effect of this measure will be to unwind the working of the free(ish) markets in electricity generation and retailing. Few people may yet be willing to contemplate such a massive change, but even enthusiasts for liberalised energy markets must surely admit that the inability to incentivise the construction of nuclear, coal with CCS or even wind under the current system is indicative of a market failure of dangerous and unprecedented proportions.


Footnotes
[1] David Kennedy, ‘New nuclear power generation in the UK: Cost benefit analysis’, Energy Policy, 35.7 (2007), 3701-16.
[2] Kennedy 2007: 3709.
[3] Drax power station, by far the biggest in the UK, records in its latest financial statement of August 2009 that the average price it has sold electricity in the forward market for 2011 is £60.30 per mWh.
[4] This requires the assumption that coal power stations are pressed into service last: after gas and renewable (i.e. in economist’s language, coal stations are the ‘marginal’ producers).