The Economy, Land & Climate Podcast

Is Drax UK's single biggest CO2 emitter? Think-tank Ember give us the answer

November 02, 2021 Economy Land & Climate Insight Team
The Economy, Land & Climate Podcast
Is Drax UK's single biggest CO2 emitter? Think-tank Ember give us the answer
Show Notes Transcript

Alasdair from ELCI talks to Phil MacDonald, Chief Operating Officer of think-tank Ember, about the the energy think-tank's latest analysis which places Drax as the UK's single biggest emitter of carbon dioxide in the UK and among the top 5 emitters in Europe.  
Phil provides a startling explanation of how a huge amount of carbon emissions are being missed, and how incentives exist for governments to use biomass for power because of an apparent accounting loophole around its use.


Alasdair:

Hello, and welcome to the Economy, Land and Climate podcast. My name is Alasdair MacEwen, and in this episode, I spoke to Phil MacDonald, Chief Operating Officer of the energy think tank Ember about their new analysis, which shows that wood burning power company, Drax, is the single largest emitter of carbon in the UK, and in the top five carbon emitters in Europe. This comes at a time when Drax are in the midst of a wide ranging campaign for further government support, and in which the power company presents itself as a key player for helping to achieve net zero by 2050.

Phil:

That's why we see other countries around the world, they're looking at how the UK is doing this, and they're realising that this is cleaning up the carbon accounts. This is you know, there's some emissions that just don't have to be counted. So why wouldn't you switch to switch to biomass?

Alasdair:

I began by asking Phil to explain Ember's new findings.

Phil:

What we did here is we're looking at the official figures of what's coming out of the chimneys. So instead of looking at what's listed on the UK's carbon accounts, we're trying to understand what's actually coming out the out of the chimneys, which, surprisingly, is an unusual way of looking at emissions in the UK. So, when you look at that, and this is not disputed by Drax, the emissions that are coming out of their chimneys put them as the as the largest emitter in the UK. What is disputed is whether those biomass emissions should be counted at all. And under UK law, biomass is treated as carbon neutral. And so those emissions are ignored. They're completely not counted within the UK. And so that's where we get into this dispute with Drax and the biomass industry. But I think if we - we can go into that, a little bit later on, but I think the that's the interesting thing to focus on is that the, because of the decline of coal in the UK, the coal phaseout is almost complete, there's just a couple of coal plants left. So coal emissions have fallen precipitously. And we still have quite a lot of gas. But that's also being the generation of gases being eaten into by, particularly by offshore wind as we keep building so much more offshore wind every year, so that fossil emissions are falling in the UK power sector. And at the same time, we've seen a climbing level of biomass emissions as we switch from old coal plants into biomass power stations. And that's happened at Drax and at Lynemouth. And there's one more power station set to launch in the next few months. But we shall see whether it does. So I guess just the other thing to say is that it's kind of amazing that it puts it so high in the in the top five in Europe, all these enormous coal power stations that are recognised as being the dirtiest, the worst emitters in Europe, and Drax when you look at what's coming out of the chimney sits alongside them, which is quite shocking.

Alasdair:

Could it be said that there maybe wasn't that much point in Drax switching to, to biomass from coal?

Phil:

Yeah, there is the debate. If you take it as what the UK, what UK law says, as I said none of this, none of these emissions are counted. And the argument is that they are counted, but just not in the UK. They're counted in the places where this wood is coming from. So as the wood is harvested in the US, in Russia all over the world, that Drax has this global supply chain, the assumption is that these emissions will be counted in the land use sector. And so we don't have to count them when they when we burn the wood in the UK. That assumption is a very dangerous one, in my eyes. It's very difficult to track where all this wood is coming from, what's actually happening to, back even to the forests in the US, but it certainly becomes much more difficult in countries, as I say, when we're looking at Siberia, can we really be sure that this wood is actually sustainably sourced and it's coming from somewhere where it's definitely going to be low emissions and that the emissions are going to be accounted in, for instance, in Russia's carbon accounting? We just we just can't make that assumption. And so that's why the whole thing is so dangerous, and so why we've tried to look at it from this different point of view, which you're trying to look at just what is coming out of the chimneys like that's surely the facts of the matter is where we should start with which is those emissions coming out of the chimneys, and then work back from there to be like, what level, what's the safe level to assume that that wood is actually stored back in the, in the past during its growth, growth of new trees, all these sorts of things. And that's part of the debate about whether this switch from burning coal to burning wood was a good thing or a bad thing.

Alasdair:

Does that then mean that the UK doesn't count these emissions either? So these emissions don't get actually counted in the UK's climate accounts. Emissions accounts?

Phil:

Yeah, indeed. So none of these biomass emissions are counted in the UK. So that could make a little bit more sense, if you were sourcing from the UK. So say, if you were looking at energy crops within the UK, that's counted, the UK's land use sector is quite well understood. And we know we have some of the best tracking of the land use sector in the world. So you could say, Okay, we're taking some wood from here, or we're taking some energy crops from here, and then we're burning them in the power station down the road. That calculation is an easy one to make. But when we're looking at this global supply chain, it becomes a lot more messy, and there's a lot more risks along the supply chains, about where the emissions might be going missing. And I think the - I'm not the real expert to talk about this, I would say Duncan Brack from Chatham House is the man who really understands the risks in this land use accounting of biomass, but at a basic level, you can already see that there's plenty of gaps in the global supply chain where you could have emissions that aren't being counted.

Alasdair:

Okay. And in terms of - I mean, could it actually be argued that, in terms of how the UK looks at its total emissions, that you know, that it's perhaps unlikely that the UK would want to do this, but it could be to the UK's advantage, therefore, if it's trying to present itself as heading towards net zero, and a kind of a clean, green economy, that not counting these biomass emissions actually benefits their how their accounts look?

Phil:

Totally. And that's why that's why we see other countries around the world who are looking at what the UK is doing with Indonesia, Japan, two examples that spring to mind. They're looking at how the UK is doing this, and they're realising that this is cleaning up the carbon accounts. This is, you know, there's some emissions that just don't have to be counted. So why wouldn't you switch to biomass? Yeah, and so there's, there's an obvious incentive, there's an incentive at the government level to do this, because it just helps with the UK's carbon accounts. And there's an incentive in the private sector, because then you can obviously go from this switch, Drax used to be the UK's largest coal power station, big emitter, you know, widely demonised, and then can switch to biomass and avoid some of that opprobrium.

Alasdair:

right, and also, the EU, for example, saying I mean, I think is it roughly about 60% of renewable energy classed as biomass if you actually think that biomass is a renewable energy, and therefore, their new targets for renewable energy are actually also in a sense benefited by by having biomass in them.

Phil:

Yeah, it does make it easier for them to meet, I think it's important to kind of make a distinction on very local biomass from energy crops or from you know, wood waste, like just down the road, on a small scale in a combined heat and power station. That kind of biomass is going to be getting much closer to being carbon neutral, although it needs a lot of regulation to check that that is definitely happening and nothing is slipping into the supply chain. That's just a completely different kind of biomass to what we're talking about here, which is talking about millions of tonnes. So 8 million tonnes of wood last year is coming in from all over the world, not from the UK, coming into our ports on huge tankers, and that's the kind of scale and those kinds of global supply chains is where these risks come in about biomass.

Alasdair:

It's been reported that Standard and Poor's, or the S&P, have dropped Drax from their global clean energy index. What do you think is happening there? Do you think there's any connection actually, between your recent analysis of Drax and what's going on with the S&P index?

Phil:

It would be too strong to say our recent analysis is the thing that has shifted S&P and other investors. Because really, there's been this mounting evidence in the scientific community. And you know, the weight of evidence is just building up behind these risks, that biomass isn't carbon neutral. And I think that's where the real push has come for, for some of these investors to look at it again, and to properly try and understand what's happening in the science of biomass, I think it's very interesting that the S&P have dropped Drax from the clean engine index. It's also interesting that at a similar time, we have Jefferies, the investment bank, who did a reassessment of biomass in the UK, and they're really quite emphatic about it not being good for the climate, and there being these huge risks around emissions. The interesting thing is that Jefferies still regards Drax as a good investment, because they're backed by the government. So when you're getting, you know, more than 2 million in subsidy a day from the government, the company looks like a good investment still. And so we have this amazing paper from Jefferies where they say, yep, biomass probably isn't good for the climate. But we think it's a good investment. You're going to make money from it, if you put money into it, because it's backed by all these subsidies, where I think that they kind of need to keep looking at it is when you're entirely reliant on government policy, as Drax is, there is always a risk that the wind changes, and that policy gets removed. So we already know that Drax's subsidies for biomass are going to run out in 2027. And they're entirely reliant on a new wave of subsidies coming in for their BECCS plant, for their biomass, energy and carbon capture and storage plant. And at the minute, we saw in the net zero strategy, the government's very interested in this and interested in BECCS in a general sense. And so maybe they can rely on those on those subsidies. But I would say it's maybe more of a risk that some of the investors are thinking that if government doesn't come through with a subsidy, then suddenly the company looks very different from an investment point of view. I think.

Alasdair:

So do you think this is a tipping point for the ESG sector in terms of how they look at biomass, and particularly woody biomass?

Phil:

So I think, with all these things, it's kind of weighing up of risk. So you have the option here to - where are you putting your investments? Also, what kind of benefit is going to do for your corporate social responsibility and for your, for your image as a company investing in these things? And I think we have at the minute, we have biomass, which is looking increasingly risky, as you say, particularly woody biomass as a climate solution. And with a lot of opposition from scientists and from NGOs. And then on the other side, we have wind and solar, which is just continuing these incredible learning curves where it's just getting cheaper and cheaper year on year, we're going to see the new government contracts for offshore wind and onshore wind coming at the end of this year. And we're expecting to see a bigger, bigger wave of building and even cheaper than ever, and so when we're weighing up, when an investor is weighing up, what to invest in, there's this low risk, very cheap, guaranteed, low carbon electricity source or there's this very expensive high risk biomass. And so I think we could begin to see that kind of tipping point. And I think all these companies are going to be watching what's happening in other companies because no one wants to be the last, you know, the last investor left still touting biomass as a as a major climate solution.

Alasdair:

I wanted to come back to you on what Drax's response to your analysis of their emissions was. They say that the figures that you provided are completely at odds with what the world's leading climate scientists at the UN IPCC say about sustainable biomass being crucial to delivering global climate targets. What do you make of their response?

Phil:

I don't think that is how the what the IPCC says as a clear point about biomass.

Alasdair:

And the UK government also said that they didn't recognise the figures that you provided. What did you make of that comment?

Phil:

Yeah, they should recognise them because they are official figures. So in actual fact, the UK Government will have seen them before because Drax supplies them. Yeah, so they should wreck.

Alasdair:

My thanks to Phil MacDonald of Ember in putting this podcast together. If you enjoyed the podcast, please do subscribe or follow us. And we'll hope to have more interesting interviews on climate topics in the very near future. Thanks for listening.