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The path to decarbonization

Summary:
Over the fold, another draft section of the climate chapter of Economic Consequences of the Pandemic. As always, comments, compliments and criticism appreciated The response to the pandemic, in the US and many other countries, has been less than successful. But even leaving aside the disastrous impact of the Trump Administration, it must be conceded that the pandemic posed an incredibly difficult challenge. When it broke out, we had no cure, no vaccine and a very limited understanding of the virus and the way it was transmitted. Now that vaccines are entering production, and given competent government, we can hope for much better outcomes in the future.The contrast with the climate crisis is striking. We have had decades of warning and devoted millions of hours to researching

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Over the fold, another draft section of the climate chapter of Economic Consequences of the Pandemic. As always, comments, compliments and criticism appreciated

The response to the pandemic, in the US and many other countries, has been less than successful. But even leaving aside the disastrous impact of the Trump Administration, it must be conceded that the pandemic posed an incredibly difficult challenge. When it broke out, we had no cure, no vaccine and a very limited understanding of the virus and the way it was transmitted. Now that vaccines are entering production, and given competent government, we can hope for much better outcomes in the future.The contrast with the climate crisis is striking. We have had decades of warning and devoted millions of hours to researching every aspect of the problem. Yet, emissions are still increasing. This failure has come despite the fact that we have have nearly all the technology to decarbonize the economy, at relatively modest cost, and with little disruption to our daily lives.

To stabilize the global climate with less than 2 degrees of warming will be a massive task. It will require not only the elimination of nearly all greenhouse gas emissions in developed countries by 2050 but active measures to remove greenhouse gases from the atmosphere. To see what needs to be done, it’s useful to start with the big picture. At present, around 85 per cent of all primary energy is generated by burning oil, gas and coal. Of the remaining 15 per cent, hydroelectricity and nuclear power (which are unlikely to grow substantially) account for 10 per cent. Solar PV and wind account for only 5 per cent.

The process of decarbonizing energy supply is already underway, but the pace of change is far too slow. Technological progress over the last twenty years has drastically reduced the cost of two carbon-free energy sources, solar photovoltaics (PV) and wind power [fn. I will use the standard term ‘renewables’, although it reflects an obsolete perception of the energy problem, dating back to concerns about the possible exhaustion of ‘fossil fuels’ like oil and coal. When dealing with climate change, the sooner low-cost carbon-based resources become scarce, the better]. Other potentially promising options including geothermal energy, tidal power and biofuels, didn’t work out and have been quietly forgotten (I’ll discuss nuclear power a little later). More recently, improvements in battery technology have effectively eliminated the variability problems associated with solar PV and wind, and have also undermined the case for gas-fired power as a ‘bridge’ to carbon neutrality.

Improvements in battery technology are crucial to the next major step in the process, electrifying transport. Electric cars, buses and trucks are already on the market, and have a lifetime cost of operation only a little higher than that of comparable petrol and diesel vehicles. A modest expansion of existing subsidies would be sufficient to make electric vehicles cheaper. However, the shift to electric vehicles can yield a substantial reduction in emissions only if electricity generation is already largely decarbonized.

The last important piece of the puzzle is hydrogen. In principle, hydrogen produced by electrolysis (splitting water into hydrogen and oxygen) can replace carbon-based fuels in most industrial uses. Examples include the replacement of blast furnaces for steel with DRI and the production of ammonia, the main feedstock for a variety of chemicals, which is currently made using hydrocarbons. Large-scale investment in the production and use of ‘green hydrogen’ (as opposed to current production methods based on lignite) is just beginning, but could be accelerated rapidly given the political will to introduce the necessary supporting policies.

The moderately good news is that the supply of energy from solar PV and wind is growing at around 10 per cent per year, which implies a doubling every seven years. If this trend were were consistently until 2050, and total energy demand was unchanged, the carbon-free share of energy demand would by above 60 per cent.

The positive trend was driven almost entirely by the electricity sector. Coal-fired electricity generation is in sharp decline in most developed countries. This process was already underway before the pandemic,

BP Statistical Review states that in 2019

Renewables provided the largest increment to power generation ( 3 4 0 TWh), followed by natural gas (220 TWh). These gains came partially at the expense of coal generation which fell sharply (-270 TWh), causing the share of coal in power generation to fall by 1.5 percentage points to 36.4% – the lowest in our dataset (which goes back to 1985).

Another way to look at the aggregate numbers is to ask what changes would be need to begin a sustained reduction in energy-related emissions

The BP Statistical Review notes that, in 2019, clean energy accounted for 40 per cent of the growth in primary energy. One way to think about this is that if the rate of additions of renewables were doubled, and the rate of growth of primary energy demand were reduced by 20 per cent, all growth in primary energy would be delivered by clean energy. Given that gas would expand at the expense of coal, this would imply the end of growth in energy-related emissions.

The shift away from coal has accelerated during the pandemic, particularly in less developed countries. Coal-intensive energy strategies have been abandoned or sharply modified in several countries, including Bangladesh, India, the Phillipines and Vietnam. At the same time, China, South Korea and Japan have committed themselves to a zero net emissions target (2060 for China, 2050 for the other two).

Commitments to decarbonization have not, as yet, been matched by concrete policy measures. But the goal of zero net emissions by 2050 is entirely feasible and would, if achieved, stave off most of the worst consequences of climate change.

John Quiggin
He is an Australian economist, a Professor and an Australian Research Council Laureate Fellow at the University of Queensland, and a former member of the Board of the Climate Change Authority of the Australian Government.

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