Saving The Energy Transition Starts With Honesty

Our halfhearted effort to limit climate change to 1.5° C is almost over—not because we succeeded, but because we set ourselves up to fail.

On March 20, the UN Intergovernmental Panel on Climate Change (IPCC) issued its latest report, which commentators have called our “final warning.” As the IPCC’s summary for policymakers states, “There is a rapidly closing window of opportunity to secure a livable and sustainable future for all.”

Unless we—that is, human civilization—cut carbon emissions 60% by 2035 compared to 2019 levels, it’s game over for 1.5° C. While we could pull off this energy transition in time, we seem unprepared to act. For too long, we have underfunded clean technology, weakened international collaboration and permitted elites to indulge in climate hypocrisy. We have been dishonest with ourselves about what it will take to reach net-zero emissions by 2050.

So, what must be done?

1. Invest in Long-Term Sustainability, Not Short-Term Profits

The energy transition is the biggest economic challenge in history. It will affect every human being and many vested interests. Estimates from McKinsey and BloombergNEF suggest that to reach net-zero, the world must invest an additional $3.5 to $5 trillion per year through 2050.

Today, we invest roughly $2 trillion annually in existing technologies like solar, wind and batteries, which thankfully address 50% to 60% of greenhouse gas emissions. Most specialists, however, agree they cannot meet the clean energy requirements of hard-to-abate sectors like steel, chemicals and cement. They will also struggle to keep up with the electrification of everything from automobiles to home heating. Therefore, the additional $3.5 to $5 trillion must go towards investments in alternative solutions like geothermal, fusion energy and the fuels they can generate, like hydrogen.

Consider iron and steelmaking, which account for over 7% of global emissions. Several companies aim to decarbonize steelmaking by using solar and wind to produce green hydrogen, and that green hydrogen to produce steel. But green hydrogen has supply constraints. BloombergNEF founder Michael Liebreich notes that replacing the dirty hydrogen used in fertilizers, oil refining and several chemical processes with green hydrogen would require over 143% of the world’s installed solar and wind capacity. Add green hydrogen for shipping, non-road mobile machinery, chemical feedstock, steel and long-duration energy storage, says Liebreich, and we’d need 400% of that installed capacity.

Fusion energy, ideal for generating “baseload” for electricity grids, could also create enough clean, affordable green hydrogen to decarbonize steelmaking and other hard-to-abate industries. But fusion startups won’t be able to accomplish this until they are fully commercial, which will take more capital and another six to seven years, at least. That timeline is too long for most investors who, like King Midas, want everything they touch to turn to gold immediately. Honestly?

2. Drop the Populist Charade and Start Collaborating Again

Populist politicians look for external scapegoats to deflect from internal discord. Vladimir Putin’s war in the Ukraine and Xi Xinping’s calculated aggression against Taiwan fit this pattern. So does the US’s embrace of protectionism, reshoring and friend-shoring to appease critics who claim globalization has destroyed good jobs at home. Of course, by torching relations with the scapegoats, the populist risks losing access to their goods and services. The result is economic nationalism which forces nations to invest in industries in which they have no comparative advantage. This will drive up the costs of everything, including the energy transition, and slow it down.

Take chipmaking. Taiwan produces 60% of the world’s semiconductors and 90% of the most advanced ones. Most clean technologies, including EVs, rely on chips. Attempts to replicate Taiwan’s chip capacity in North America or Europe will require staggering investments in factories, education and, consequently, protectionist policies for overpriced chips. In turn, higher chip prices would increase the cost of EVs and other clean technologies, slowing adoption and our overall progress towards net-zero.

Furthermore, economic nationalism overlooks the global nature of climate change. In 2021, China emitted more greenhouse gases than the US, EU27, India, Russia and Japan combined. And in 2022, China permitted two new coal plants per week. As energy expert Peter Bryant recently argued, “…unless we can arrest this, then everything the US/EU and UK do to reduce emissions is for naught.” The West must collaborate with China on all cleantech, fusion, geothermal and hydrogen deployment despite our geopolitical differences. Hitting net-zero in the West while global emissions rise elsewhere is honestly tantamount to doing nothing.

3. Replace Climate “Saviors” With Leaders Who Get Results

Climate change is viewed by some as a pet project of the privileged. The wealthy techies, investors and celebrities who fly private jets to climate conferences while calling for immediate decarbonization make a mockery of climate action. They style themselves as saviors but ask everyone else to sacrifice for their carbon sins. They keep the private yachts, jets and multiple homes but buy indulgences (i.e., offsets)—and have the nerve to blame climate change on conservatives who drive pickup trucks.

Sorry, paying to offset your private jet emissions doesn’t help the climate. It’s just
carbon laundering. Moreover, foisting the burden of the energy transition onto those who are least able to shoulder it serves politicians in need of scapegoats.

With inequality at all-time highs in much of the West, climate change is losing urgency in the public mind. Can you blame people for not taking up Saint Billionaire’s climate crusade when they’re working two, three or four jobs just to pay the bills?

Meanwhile, corporate executives are telling each other not to “waste” a good recession, which is a euphemism for raising prices and laying off staff under the cover of inflation and uncertainty. At the same time, central bankers are fighting inflation primarily for the benefit of asset owners, kicking the have-nots while they’re already down.

Enough. Climate leaders must practice what they preach. They must respect and recognize those who have the least to gain and most to lose from an energy transition. That includes indigenous peoples, marginalized communities and countries with limited financial means. That also includes people who rally in yellow vests, tractors and semitrucks. Honestly, wouldn’t you agree that without so-called climate skeptics on board, it’s game over for the energy transition?

The Solution? Better, Cheaper, Cleaner Products

How will we know if we’re on track to net-zero? When everyone has access to better, cheaper, cleaner products. The energy transition will happen if it is in everyone’s self-interest.

Picture the US’s average climate skeptic. Today, when the base price for a Ford F-150 is $33,695 but nearly $62,000 for an electric F-150 Lightning, why would he buy the EV?

One day soon, that electric pickup truck could cost less and perform better than its fossil-powered equivalents. At that point, the climate skeptic has nothing to lose and everything to gain by choosing the cleaner option. That’s the energy transition.

Let’s finally be honest and stop pretending that we could achieve net-zero if only the “other side” came to its senses. No, it is senseless to believe that people will put an elite crusade over their family’s financial wellbeing. If we’re serious about 2° C, we need more clean energy investment, more economic collaboration and better climate leadership (including better central bankers). That’s my final warning.

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