4. The future of clean energy
We are still nowhere near the scale and pace of emission reductions required.
Although any period of change will bring elements of the unknown, to a large extent the clean energy transition presents less uncertainty than other changes in history. This is because the world already has a plan in The Paris Agreement, and targets including net zero by 2050. The greatest uncertainty concerns whether the world will achieve these and by when.
“We have a big advantage. This is a transition where we know exactly where we want to go. It's very well defined. I remember when the Soviet Union collapsed, everybody said it's a transition. But nobody knew exactly what the other side would look like. Now we know what we want.”
Christof Rühl, Columbia University
According to the UN, the world is not on track to deal with climate change and governments need to do more. Citing a report published by the UN in advance of COP27, Simon Stiell, Executive Secretary of UN Climate Change said: “We are still nowhere near the scale and pace of emission reductions required to put us on track toward a 1.5 degrees Celsius world. To keep this goal alive, national governments need to strengthen their climate action plans now and implement them in the next eight years.” As governments accelerate plans new risks and opportunities are likely to emerge. In addition to replacing fossil-fuelled power generation with clean energy, the climate action plans will see greater use of carbon capture technologies and the further development of markets such as carbon offsetting. The latter, in particular, will need a global commitment to cross-border regulation in order to work successfully.
The future of clean energy
On a highway to climate hell with our foot on the accelerator?
On a highway to climate hell
The majority of the world’s nations met in Egypt for the United Nations November 2022 climate talks, COP27. The UN secretary general, António Guterres, opened the summit with a strong warning. He said: “We are on a highway to climate hell with our foot on the accelerator.” He called on governments throughout the world to make sure that plans and actions directed towards reducing current levels of global warming remain at the forefront of national agendas. In 2015, most of the world’s nations signed the Paris Agreement pledging to reduce global warming to no more than 1.5 °C, articulating their ambitions in five-year action plans called Nationally Determined Contributions (often referred to as NDCs). However, most of the world is lagging. Since COP26 in Glasgow, only 29 out of 194 countries have submitted tightened or renewed NDCs to the UN. There is no question, urgent action needs to be taken to cut carbon emissions. In the Clean Energy Transition debate Christof Rühl acknowledged this but also warned of possible risks as more businesses transition. He said: “There will be cost constraints because the more companies participate, the more industries and sectors participate, the less the government can afford to subsidise the whole exercise, even without the cost of the war in Ukraine.” Cost incentives should not be underestimated. If clean energy sources cost more, there is lower incentive for businesses to transition. As Christof Rühl said: “There will be an emphasis on a competitiveness of the new with the old fuels.” He added: “That would mean that there will be some mechanism to make the fossil fuels more expensive, like a carbon tax.” Such taxes already exist in part of Europe and California, but it is likely that such schemes will be expanded, including to other locations.
“We can sign a climate solidarity pact, or a collective suicide pact.”
António Guterres, UN
“This is promising to be a giant market, a global market. And so far, it is a completely unregulated market.”
Christof Rühl, Columbia University
Is carbon offsetting a great scheme or a great scam?
As new climate change technologies and directives are developed, this gives the opportunity for new markets to be developed. However, this can also bring problems, especially in the area of global regulation. One example is the market for carbon offsets, a market that has exploded in recent years. This is where carbon producing businesses and organisations pay to have their carbon emissions ‘offset’ through actions such as the planting of a tree. According to climate campaigners including Greenpeace and Friends of the Earth, carbon offsetting doesn’t work. Greenpeace points out that a newly-planted tree can take as many as 20 years to capture the amount of CO2 that a scheme may promise and even then it could be destroyed by drought, deforestation, wildfire or disease before it delivers on this promise. Friends of the Earth argues that carbon offsetting schemes can distract businesses from taking steps to lower their carbon emissions and they may risk investing in schemes that are a sham. For example, a scheme may promise to protect an area of forest from logging, but this may just end up diverting loggers to another area of forest. The forest still gets cut and the company buying the offset hasn’t taken any steps to reduce emissions at source. What’s more, if you pay for a tree to be planted, how do you know that this will actually happen and that the tree will be nurtured and protected for long enough to make the difference needed? Christof Rühl echoed this point when he said that carbon offsetting is a completely unregulated market. Although he acknowledged the EU’s ETS Framework which allows for ‘carbon trading’, he pointed out that in order to work properly on a global level, carbon offsetting needs to be policed by a global regulatory body. He also noted: “It is very important to create genuine carbon sinks, to create forests, to create swamps, to create this kind of natural diversity which helps us to deal with the carbon which has already been emitted… The world will have to find a way of coming together across borders to get this done. This is not something which can be done for individual countries alone.”
No transition without investment in new technologies
As we look forward to the future of clean energy, we must also look at new technologies. Energy transition simply cannot happen without further development. A key issue is energy storage. In the case of renewables, what do we do when the sun doesn’t shine or the wind doesn’t blow? As businesses and consumers become more reliant on these energy sources it is vital that new technologies are developed and improved, including better storage for battery technologies, high voltage transmission lines that can cope with the increased demand as communities move from oil and gas to electricity, robust backup systems to minimise the risk of black outs and allows for patterns for wind generation. Gido van Graas noted that ING bank encourages client investors to focus on energy storage, as well as carbon capture, hydrogen and renewable energy. Christof Rühl agreed the storage of energy is a key issue and pointed out how the war in Ukraine has highlighted for many nations the importance of secure energy storage. In the past, a direct gas pipeline may have been enough. Moving forward, governments will need to ensure there is enough reliable storage to contain hydrogen reserves and electricity generated by renewable sources. He also noted that until enough reliable storage is in place, it is likely that governments will need to ensure that ‘dirty’ back-up systems are in place to keep the lights on and economies running. He said: “One new dirty coal fired power plant could increase the share of wind energy in a given regional system, because it provides backup generation for wind… It’s not just a simple substitution, but we need to find ways for the old and the new to work together.”
“We need to find ways for the old and the new to work together.”
Christof Rühl, Columbia University