It’s time to hit the accelerator on the energy transition

The terrifying floods in Pakistan in recent weeks that have killed 1,400 people and displaced more than 30 million others have been called the “climate catastrophe of the decade”.

The fear is that such disasters will only become more frequent and more deadly as our planet warms. But some environmental experts are convinced the problem is fixable. We have the technological knowhow to combat the threat. So how do we galvanise collective action at the necessary speed and scale?

That problem was highlighted at a wide-ranging conference on climate change and biodiversity hosted by the Science Museum and the Natural History Museum in London this week, involving policymakers, environmental researchers, financiers and technologists. One scientist there asked: “Is climate and nature a cost or an income generator?”

In April, the Intergovernmental Panel on Climate Change warned that greenhouse gas emissions had reached their highest level in human history over the previous decade

If viewed as a cost, it will always be tough to persuade politicians to act. If viewed as a means of generating jobs, greater prosperity and improved wellbeing, it will be an easier sell.

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In April, the Intergovernmental Panel on Climate Change (IPCC) warned that greenhouse gas emissions had reached their highest level in human history over the previous decade. Without immediate and deep reductions in emissions, the possibility of limiting rising sea levels and preventing irreversible environmental damage would be beyond reach.

Three main challenges on collective action emerged at the conference – call them opportunities, if you are more optimistic. They are the three Cs of collaboration, competition and communication. Governments need to pursue systemic reforms that create incentives for businesses and consumers to make different choices. Companies need to innovate to provide cleaner, cheaper and better products. And scientists and activists need to sustain the political momentum with expertise and campaigning.

The complexity of the first challenge was driven home by the differing views of two policymakers. While one argued the only solution was to “rewrite the rules of the market”, the other warned that elected politicians would always focus on “one-off shiny things”. Politicians hailed the success of the Paris climate change agreement in 2015, vowing to cut harmful emissions. Since then, however, the world’s 60 biggest banks are estimated to have poured $4.6 trillion into financing the fossil fuel industry.

But there are many encouraging examples of collaboration between public and private sectors to accelerate green investment. The UK offshore wind industry, which now covers the energy needs of one-third of British homes, is one, according to Rhian-Mari Thomas, chief executive of the UK Green Finance Institute.

Impressive growth

Through its price guarantee and auction mechanism, early public funding and regulatory flexibility, the British government helped to de-risk private sector investment, sparking impressive growth. By 2021, the UK accounted for 22 per cent of the world’s offshore wind installations, second only to China’s 47 per cent.

Competition between renewable energy providers has already lowered the costs and increased the efficiency of wind, solar and battery technologies to a startling degree

Thomas told me it was a blueprint, “or greenprint”, for more ambitious public-private partnerships. Similar collaboration could entice more investors into other industries, such as green aviation fuels, steel, cement and hydrogen energy, she said.

Competition between renewable energy providers has already lowered the costs and increased the efficiency of wind, solar and battery technologies to a startling degree. Clean energy resources generated 38 per cent of the world’s electricity in 2021, compared with 36 per cent from coal, according to the Ember think-tank.

To have a chance of keeping global warming below the target ceiling, Ember predicted that the wind and solar industries would need to sustain compound growth rates of 20 per cent every year until 2030. These figures sound wildly ambitious, but they were achieved during the previous decade.

The third big challenge is communication, especially when it comes to biodiversity. Scientists embraced the opportunity to debate their research at the COP26 meeting in Glasgow last year. But they need to sharpen their message and learn the language of economics, too. Last year’s Dasgupta Review on the economics of biodiversity was a milestone because it attached a value to the planet’s “natural capital”. Nature must be viewed as a precious asset, not just an economic good.

With surging energy prices triggered by the war in Ukraine, it is tempting for politicians to revert to dependence on fossil fuels. A far better response would be to accelerate the green energy transition and ensure that fossil fuel emissions are cut. The tragedy of Pakistan only highlights the costs of making the wrong call. — Copyright The Financial Times Limited 2022