An economic model of “decisive transition” away from fossil fuels and toward a clean energy economy shows that rapid decarbonization not only wouldn’t break the bank -- it would save the world a whopping $26 trillion in energy costs over the coming decades, in addition to allowing the global community to meet the climate targets set by the Paris agreement and saving untold numbers of lives from deaths related to air pollution resulting from combusting fossil fuels. This model contrasts greatly with the common thinking that decarbonizing the global economy will be hugely expensive thanks to the number of infrastructure inversions and hefty subsidies that will be necessary to facilitate such a massive shift. In fact, Nobel economist William Nordhaus -- no slouch when it comes to crunching the numbers -- posited that the world should tackle the clean energy transition slowly so as to “stretch out the costs and minimize the pain of transition.”
But a new op-ed from three professors from the University of Oxford, published by Bloomberg, argues that Nordhaus was mistaken, as he failed to account for some key economic principles including Moore’s law and Wright’s Law. Moore’s Law outlines that as technology improves, costs lower exponentially over time. This certainly has been the case for wind and solar, which are already outgrowing their government subsidies and becoming competitive with fossil fuels. Wright’s Law applies to a sort of manufacturing learning curve. The more we produce renewable energy, the better we get at it, and the more efficient and inexpensive it becomes.
And let’s face it -- fossil fuels aren’t that cheap anyway. While prices are volatile, on a long enough timeline there isn’t a curve -- fossil fuels have failed to follow the curves of Moore’s law and Wright’s Law. Furthermore, oil, gas, and coal are still heavily subsidized around the world, to the tune of $447 billion worldwide for fossil fuels, as compared to just $128 billion for renewables.
It makes good economic sense to lean into the clean energy transition and try to decarbonize as rapidly as possible. It’s also imperative for the future of humanity. Just last month the Intergovernmental Panel on Climate Change (IPCC), together with the United Nations (UN) released a landmark report detailing the current state of global warming, and the prognosis is grim. The 6th Assessment Report sounds a “code red for humanity” and lays out the extremely tight timeline that remains for the world to curb greenhouse gas emissions in order to avoid the worst impacts of climate change.
The United States has been slow, compared to other developed countries, to accept this reality and lean into climate change adaptation and mitigation, but the Biden administration has made catching up a central component of its platform. The massive infrastructure bill currently working its way through Congress contains many provisions to this end, including massive support for electric vehicles -- although critics are quick to point out that these provisions pale in comparison to campaign promises and climate imperatives, and largely favor the U.S. oil industry’s priorities.
Now, just this month, Biden has unveiled a new plan focused on boosting solar to new heights in the United States. This bold initiative aims to bring solar’s share of the nation’s energy mix from 4% to a whopping 45% by 2050. The Bloomberg op-ed is bullish on this plan to say the least: “New policies are required to drive the deployment of zero-carbon technologies, expand markets, accelerate progress down the Wright’s Law curves, and build the smart-grid and electric-vehicle charging infrastructure that such a transition requires. It's imperative that Congress acts on Biden's plan — doing so will save U.S. consumers trillions in energy costs, create millions of new jobs, reduce harm from climate change and ensure the U.S. leads in the energy technologies of the future.”
As the second-biggest greenhouse gas emitter in the world (China ranks #1), it is imperative for the wellbeing of the entire planet that the United States get serious about decarbonization. The good news is that it’s not only possible, it’s economically viable and even beneficial. Of course, getting bipartisan support is no easy task, but money talks and renewables may stand to save a whole lot of it.
By Haley Zaremba for Oilprice.com
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