Climate change issues

Heat wave. The United Nations and the Red Cross said in a statement that by 2100, extreme heat events will make parts of Asia and Africa uninhabitable for up to 600 million people. Projected death rates from heatwaves are 'surprisingly high,' comparable to all cancers or all infectious diseases, according to a report released by the UN Office for the Coordination of Humanitarian Affairs and the International Federation of Red Cross and Red Crescent Societies ahead of next month's UN Climate Change Conference in Egypt.

The report adds to the growing number of studies showing that climate change is exacerbating the magnitude and frequency of extreme weather events. Heat waves in the western United States broke hundreds of records after days of triple-digit temperatures and weeks of dry weather. According to the report referring to the 2019 study; By the end of this century, a third of the global population may be living in regions with average temperatures above 84 degrees Celsius, and this has hitherto been limited to 0.8% of the world's land surface, particularly in the Sahara region of Africa.

If global temperatures rise 2 to 2.5 degrees Celsius above pre-industrial levels, extreme heat waves will also make parts of the United States, including Georgia, Alabama, Louisiana and California, less suitable for human habitation by 2070, the report said. said to bring.

More frequent and more severe heat events will kill more animals and destroy environments, exacerbating the fallout from such weather, according to the report. The food supply will be disrupted by extreme temperature events, potentially contributing to price volatility for staple crops such as wheat.

Transformation of energy. Energy transformation is the process of changing energy from one form to another. In physics, energy is a quantity that provides the capacity to do work or move (for example, to lift an object) or to provide heat.

Many forms of energy can be used in natural processes or to do mechanical work, such as heating, cooling, lighting, to provide some services to society or to run machinery. For example, to heat a house, the furnace burns fuel, whose chemical potential energy is converted into thermal energy and then transferred to the air of the house to raise its temperature.

-Europe's dilemma: fossil or nuclear

To compensate for scarce and expensive imported resources, many European countries are turning to coal for electricity generation. As a result, multiple governments now face the dilemma of generating alternative energy, but at the expense of increased pollution. Complicating the issue further is the phasing out of a number of nuclear power plants due to safety concerns and limited funding. 'This means that in some countries not enough electricity is produced to meet demand,' says Jones, an investment analyst at PiggyBank, a Canadian personal investment advisory firm.

Steve Hall, partner and chairman of technology research and consulting firm ISG, says Germany-based IT organizations will likely be the first to be hit, given their reliance on energy from Russia. “France will likely be less affected as the country is dependent on nuclear power for a significant percentage of its energy needs,” he notes. Based on overall market volatility in the oil sector, Hall predicts that the UK and Scandinavian countries will both see significant price increases, but likely not experience significant supply issues.

The European Union has already taken several steps to mitigate the impact of the crisis by urging member states to reduce their gas and electricity consumption. 'France, for example, has encouraged citizens to use less electricity during peak hours by using appliances such as dishwashers and washing machines where electricity demand is low,' says PiggyBank's Jones.

Jones believes that to meet long-term needs, Europe should diversify its energy sources by investing in renewable technology and nuclear power: 'This will help them become less dependent on imports of natural gas or any other fossil fuel for that matter.'

Going forward, Hall thinks data centers should try to embrace clean energy sources with workloads running in the public cloud. “This will take several years to achieve, so we will see higher costs pass to consumers as the costs of producing goods and services continue to rise,” he says.

But Hall is generally optimistic: 'It's likely to be a long winter, but assuming that energy issues will be resolved by mid-spring 2023, it shouldn't be massively disruptive to the overall IT industry.'

-Green energy incentives and the US Inflation Reduction Act

On August 16, 2022, President Biden passed the landmark 'Inflation Reduction Act' (IRA), which includes several renewable energy tax breaks to help companies and US consumers transition to clean energy. The legislation includes several incentives for traditional forms of renewable energy, such as wind and solar, as well as stronger incentives and tax credits for producers, developers and investors looking to build new carbon capture, use and storage (CCUS) facilities.

The IRA includes approximately $369 billion in incentives for climate-related program spending, including clean energy and carbon capture projects. Specifically, the IRA:

-Significantly increases the availability of existing federal income tax credits for local CCUS projects (commonly referred to as “45Q credits”), from $50/tonne (/ton) CO2 produced by industrial activity to $85/tonne (/ton).

-45Q incentives increased from $35/tonne to $60/tonne for use from industrial and power generation carbon capture.

-45Q incentives for storage in saline geological formations from direct air capture (DAC) increase from $50/tonne to $180/ton.

-45Q incentives for use from DAC increase from $50/ton to $130/ton.

-The 45Q loan is available for 12 years after carbon capture equipment is in service and will be adjusted for inflation from 2027 and indexed to the base year 2025.

-The 45Q's 'construction start' window has been extended for seven years, until January 1, 2033. This means projects must begin physical work by then in order to qualify for credit.

Another major change to the IRA is the inclusion of a direct payment option to get the loan; this will allow owners of carbon capture equipment to take their credits as if they had overpaid. This is important because under previous legislation, credit could only be taken to the extent that it offset current taxes; this limitation will often require the creation of complex “tax equality” financial structures to monetize loans.

Additionally, the IRA expands the definition of “qualified facilities”; that is, facilities that are eligible to claim credit:

-The capture threshold for power generation facilities eligible for credit will decrease from 500,000 tons of CO2 emissions per year to 18,750 tons.

-It will decrease from 100,000 tons of CO2 emissions per year to 12,500 tons for industrial facilities.

-For DAC plants, it will reduce the amount of CO2 capture requirements from 100,000 tons per year to 1,000 tons per year.

-Power generation facilities wishing to qualify for the loan must meet a capture design capacity requirement of not less than 75% of the CO2 from an electricity generating unit that will install capture equipment.

Taken together, these changes are expected to significantly increase the number of carbon capture projects that will enter service in the coming years.

The IRA is expected to help the US reduce total emissions by about 40% below 2005 levels by 2030, compared to the 24-40% cuts we track today. However, estimates of the role that carbon capture will play in achieving this goal vary depending on the application. A large-scale analysis by the IRA in consultation with the Rhodium Group concluded that carbon capture could provide 4% to 6% of this progress and more in the coming years. A separate analysis by Princeton University's REPEAT Project found that the IRA could result in about 1 billion metric tons of CO2 sequestration by 2030.

Installed carbon capture capacity (million metric tons per year capture capacity) including IRA Source: Rhodium Group, IRA

 Another example of a green incentive would be France, which offers a bonus to every French citizen who buys an electric or hybrid vehicle. The aim is to replace every thermal vehicle with electric ones. Today, the bonus goes up to €7000, and if it's under €47000, it's usually 27% of the car's price. Between 47k and 60k, the bonus drops to 2000€.

Conclusion? Recent meteorological events combined with geopolitical events are catastrophic for the continuity of humanity. Fortunately, it has pushed key organizations to act together at their internal scales to mitigate the negative effects of such events.

Continuing in this direction could lead to serious demographic decline, as many studies have shown. To combat this, governments of the largest economies have created incentives to reduce carbon emissions and have turned to the development and use of renewable, green energy.

The tax credits included in the IRA are an important step forward in popularizing carbon capture and separation technologies as a way to reduce CO2 emissions. Previous tax credit levels were sufficient to spur only a handful of domestic carbon capture projects, but the new credit amounts and the reduction in qualified plant size should open up a few new, economically viable plants.

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