Opinion: An energy revolution is possible - but only if leaders get imaginative about how to fund it

Michael Grubb

Michael Grubb

A well designed policy could have huge benefits for both the climate and the country involved, says Professor Michael Grubb (UCL Bartlett School of Environment, Energy & Resources).

Limiting climate change will require an unprecedented global movement to make  low-carbon technologies  the norm.  COP26 - the UN climate conference held last November in Glasgow - showed that unfortunately, the world is far from ready for such a movement. Many leaders still  assume  that reducing emissions and growing their countries’ economies aren’t compatible goals.

Yet in many places, transitions to clean energy technologies have succeeded far beyond expectations. Since 2010, wind power has grown from providing under 1% to providing  10% of electricity  in Brazil, and provided 15% of the EU’s  electricity demand  in 2019. Solar power - described as "the most expensive way to reduce carbon emissions" as recently as  2014 - now costs 85% less than it did a decade ago, increasingly making it the  cheapest electricity  in history.

And in India, affordable energy access programmes drove sales of high-efficiency  LED bulbs  from just 3 million in 2012 to 670 million in 2018, with prices also falling by 85%. These three technologies now offer some of the cheapest ways to produce electricity or light across much of the world.

What’s crucial is that these transitions all involved significant government action. Plus, most went ahead despite the fact that in many cases, early economic calculations suggested that developing renewables would be an especially expensive way to cut emissions.

Rather than relying on  research and development  to bring down costs through coming up with new inventions - or leaving the market to do so on its own through  competition - governments used subsidies and  public procurement  programmes (government commitments to buy a certain volume of a new product) to keep costs down and boost uptake.

These impressive outcomes show that traditional models of economic appraisal - calculating costs and benefits as if they were fairly predictable - are inadequate for making truly  transformative  change in sectors like energy, industry, transport and buildings.

A global  low-carbon transition  will involve multiple, unpredictable changes to the way these sectors are run. And few of a transition’s most important benefits, like cleaner technologies and  supply chains ,  new jobs , and  fresher air , can be easily quantified in advance.

The costs of wind power, solar power and LEDs were initially  much higher  than established technologies (like  coal-  and gas-powered electricity) that had benefited from more than a century of development. But as seen in major emerging economies, as well as in Europe, these new technologies are now actually cutting energy costs.

Our analysis  shows that, when deciding how to make low-carbon transitions, leaders need to look beyond traditional  cost-benefit  economic approaches - and must embrace uncertainty around the  risks and opportunities  countries might face as a result.

Leaders and researchers also need to identify how to create " tipping points " that can trigger cascading changes towards low-carbon economies. For example, continued improvements in  battery technology  are making electric vehicles (EVs) increasingly competitive with gasoline cars.

Policies to build better  charging infrastructure  and reduce EVs’ price could tip us more rapidly towards an electric transport future. The benefits of that future include cleaner cities, reduced oil dependence and even the ability to  store  excess electricity in EV batteries to support the national grid when needed.

Historically, it’s been widely assumed that reducing emissions would mean  damaging  countries’ economies. And low-carbon transitions do, of course, involve social and economic  challenges.

But well-designed policies - such as those used to drive the revolutions in wind, solar and LEDs - have the potential to create huge benefits for participating countries, not just for our climate. If we want to solve climate change, we first need to transform our economic thinking.

This article first appeared in The Conversation on 19th January 2022.


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