The global growth rate for renewable energy must double and total investment will have to hit $29 trillion by mid-century to cut energy-related carbon dioxide emissions 70% by 2050 and phase them out by 2060. But the target is achievable and its economic impact is “net positive”, according to research released in Berlin this morning by the International Renewable Energy Agency (IRENA).
The report appears just days after the International Energy Agency announced that the world’s energy-related CO2 emissions held steady last year for the third year in a row, with China and the U.S. showing reductions and European emissions holding steady. But IRENA says that’s just a start.
“The economic case for the energy transition has never been stronger,” IRENA Director-General Adnan Z. Amin said in a release. “Today around the world, new renewable power plants are being built that will generate electricity for less cost than fossil fuel power plants. And through 2050, the decarbonization can fuel sustainable economic growth and create more new jobs in renewables.”
The net result is that “we are in a good position to transform the global energy system, but success will depend on urgent action,” he said.
In its release, IRENA notes that the $29-trillion price tag for the energy transition envisions would equal 0.4% of global GDP through 2050. Combined with other pro-growth policies, the agency says the off-carbon transition will expand the global economy by 0.8% in 2050, produce more than enough jobs to offset those lost in the fossil industries, and “improve human welfare through important additional environmental and health benefits thanks to reduced air pollution.”
IRENA’s energy transition roadmap, REmap, shows “significant energy efficiency improvements” keeping global demand at about 2015 levels in 2050. “The supply mix, however, would change substantially, with the share of renewables in total primary energy supply reaching two-thirds by 2050,” the agency states.
IRENA adds that “subsidies that sustain ageing conventional energy industries should be abandoned in order to level the playing field. Modern energy access, fair competition, and sustainable development need to underpin energy policy-making.”
The global advanced energy sector—including everything from building efficiency to advanced biofuels—brought in twice as much revenue last year as civil aviation, after growing by 7% between 2015 and 2016. In the United States, however, the sector hit a plateau, growing a meagre 1%.
The data come from the fifth annual Advanced Energy Now Market Report produced by U.S. consultant Navigant Research and Advanced Energy Economy (AEE), an association of business leaders with the stated goal of “making the global energy system more secure, clean, and affordable.” The report, now in its fifth annual edition, surveys seven subsectors: building efficiency, electricity delivery and management, and what it describes as “advanced” transportation, industry, fuel production, and fuel delivery.
Together, those sectors brought in global revenue of US$1.4 trillion in 2016, $100 billion higher than the survey reported in 2016 for the previous year.
That put advanced energy at “almost twice the size of the global airline industry,” AEE observed, “and nearly equal to worldwide apparel revenue.”
Last year’s flat growth for advanced energy industries in the United States came after five years in which expansion averaged “5% annually, for a total of 28% compared to 2011,” the latest report says. The analysis put last year’s anemic growth down “primarily to the effect of low oil and corn feedstock prices on ethanol revenue. Without ethanol, U.S. advanced energy grew 5% in 2016, three times faster than U.S. GDP.”
Nonetheless, “the U.S. advanced energy industry generates $200 billion in revenue [in 2016], nearly double beer sales, equal to pharmaceutical manufacturing, and approaching wholesale consumer electronics.” American investment in building efficiency grew by US$5 billion last year, while installed energy storage expanded by 54%. Revenue from plug-in electric vehicle sales “has grown tenfold over five years, from $700 million in 2011 to $7.8 billion in 2016, and 48% [in 2016] over 2015, as all-electric alternatives to gasoline-powered vehicles caught on in the marketplace.”
The report notes that “the advanced energy industry is also a major employer, supporting more than three million U.S. jobs. That’s equal to the employment provided by retail stores, and twice the jobs in building construction.”
Fossil companies have a poor track record anticipating future energy demand and build “unlikely assumptions” into their forecasts, creating jeopardy for investors and inhibiting action on climate change, Oil Change International and Greenpeace conclude in a report released yesterday.
“Companies like ExxonMobil, Shell, and BP routinely use their in-house energy forecasts to justify investments in multi-decade, high-cost projects, from the Arctic to the tar sands.” But “while the companies present their published forecasts as objective analyses, the forecasts rather reflect the future they want us to believe in,” the two research organizations state.
The organizations’ analysis of fossil majors’ current approach to energy futures analysis shows “that the companies are highly vulnerable to disruption by clean energy technologies, and that their forecasts are playing an unhelpful role in the climate debate.”
The report charges that oil companies are “selectively skeptical about technology”, showing “systematic bias” in their renewable energy forecasts, expressing greater pessimism for electric vehicle uptake than the auto industry, and presenting “implausible forecasts of technology costs”. It states that the fossils’ incorrect forecasts “give false confidence while masking underlying trends”, ignoring political drivers of a changing energy system and encouraging investors to do the same.
“The companies have repeatedly underestimated growth in renewable energy,” the organizations note. “For example, ExxonMobil’s Outlook in 2005 projected that wind and solar would account for 1% of total world energy production by 2030. Wind and solar achieved this share in 2012, after seven years rather than 25. In 2010, as this underestimate had become clear, ExxonMobil predicted that wind and solar would then reach 1.5% in about 2022, a level that was in fact reached in 2016.”
But ever so strangely, the fossil analyses “are not skeptical of technologies that would boost their business, such as fracking, petrol/diesel engine efficiency, or CCS [carbon capture and storage],” the authors note. “The continued growth of oil and gas faces structural challenges, but these are glossed over or (more often) ignored, in contrast to the challenges for clean energy technologies.”
These gaps in fossils’ analysis add up to significant risk for investors, Oil Change and Greenpeace warn. “The history of technological change is littered with companies who confidently but mistakenly believed there would be ever-growing demand for their product. Think of Kodak, or Blockbuster,” they write. Oil companies are still investing their shareholders’ money in projects expected to break even in 15, 20, or 25 years. But “even a relatively small decrease in demand could translate into falling prices during that period, and delay breakeven or reduce returns.”
Moreover, by creating “a fatalism that fossil fuels will necessarily dominate the energy mix for decades to come,” the industry forecasts produce a lose-lose for investors. “Climate change creates the greater risk to investment portfolios,” the organizations write. So “if the forecasts are wrong, investors stand to lose on their oil investments. But if they are right, long-term investors stand to lose on the rest of their portfolio. This is why it is vital that investors engage with companies on their energy forecasts.”
Governments reveal their true priorities by their spending decisions, and that means next week’s federal budget will be an important test of the Pan-Canadian Framework on Clean Growth and Climate Change, Environmental Defence climate specialist Dale Marshall wrote last week in a Hill Times op ed [subs req’d].
“While the government continues with consultations and policy development of the framework, the upcoming federal budget must be used to take another big step forward on climate action in Canada,” Marshall noted. “Equally important as the amount of money the budget allocates is that the funding be systematically applied in the right places and the right ways to edge the country towards the clean economy we need. Investing in high-carbon projects and other activities that will systematically increase carbon emissions will make it all but impossible to achieve Canada’s climate targets.”
Marshall suggested several ways the budget can “reinforce and amplify” the framework adopted by the federal government and 11 provinces and territories last December. Dollars are needed for renewable energy deployment, smart grid development, off-diesel programs for Indigenous and other remote communities, and a national building retrofit program. Regulatory support for a clean fuel standard, a zero-emission vehicle strategy, and a zero net-energy building code will need funding, too.
And “the federal government needs to ensure that public money is spent only on infrastructure projects that put Canada on track to phase out the use of fossil fuels by mid-century,” Marshall writes. “Environmental Defence and business, academic, and environmental advocates have been urging the federal government to undertake a full life-cycle analysis of all proposed projects to determine their expected greenhouse gas emissions. The project proposal that can best meet the goal of the infrastructure while minimizing carbon emissions should be privileged over others that would lead to higher emissions.”
Just as important as the investments the federal budget makes will be the ones it leaves out. “With one hand, governments take revenue from polluters based on how much carbon they emit, and with the other they give money back to those same polluters in the form of subsidies,” he writes—$3.3-billion per year, by recent estimates. “Federal subsidies at least need to be eliminated by 2020,” he writes, “and this budget can begin that process.”
Late last month, in a post on Policy Options, Équiterre Government Relations Director Annie Bérubé pointed to Canada’s “tailpipe problem”—the 24 million cars and trucks that produced 23% of the country’s greenhouse gas emissions in 2014, and have accounted for three-quarters of the growth in energy-related emissions since 1990.
“If we’re going to achieve our climate goals and do our fair share to ensure the planet continues to be a safe place to live, we need to turn this trend around,” Bérubé wrote. “Around the world, a mobility revolution is gathering momentum. And Canada is wisely getting in on the action, with policies and investments that open the door wider for zero-carbon transportation.
“But if we are not ambitious in our plans, and deliberate about their implementation, we will miss out on opportunities to be industrial and environmental leaders.”
She pointed to local transit investments, vehicle fuel efficiency regulations, encouragement for electric vehicles and biking, and the growing trend toward shared mobility as “a path to a healthier planet, cleaner air in our cities, and economies that work efficiently.”
Last week’s visit to Ottawa by European Climate Commissioner Miguel Arias Cañete was part of a wider diplomatic push to bolster the Paris agreement, echoing the EU diplomatic surge the preceded the 2015 conference that concluded that landmark global climate deal.
As several reports described a Trump White House fiercely divided over whether to withdraw from the Paris accord, EU foreign ministers say they will step up their support for the 2015 agreement. The EU joins an increasingly crowded field of candidates for the mantle of global climate leadership the United States appears ready to cast off.
“European foreign ministers agreed to raise climate risk awareness among partners and aid developing countries in gaining access to sustainable energy,” Reuters reports via CNBC. The European ministers nodded—diplomatically—to “the latest developments and changing geopolitical landscape” that had prompted them to “reinvigorate EU climate diplomacy.”
“We are positioning our diplomats in the EU delegations and embassies to do an aggressive outreach so that the Paris agreement be implemented and saved,” the agency quoted an EU official as saying.
The assertive statement follows EU climate commissioner Miguel Arias Cañete’s visit to Canada last week. While here, he urged this country to help Europe fill “a vacuum of leadership in climate change policy.” The EU commissioner will also take his message to Iran, India, and China.
China, in particular, is well positioned to seize the opportunity provided by America’s political distraction with the competence and legitimacy of its own president. China was swift to assert its global climate leadership after Trump gained his narrow Electoral College win. Second-term President Xi Jinping is believed to see climate action as part of his political legacy. And the country’s world-leading investments in renewable infrastructure back up the perception.
Few things have Ontario voters more enraged at Premier Kathleen Wynne than the persistent hikes in their electricity bills. After previously cancelling the provincial portion of its harmonized sales tax (HST) levied on power bills, she and her Liberal cabinet are now weighing more far-reaching moves to bring down charges, CBC News reports.
“Wynne and her cabinet are considering two key changes that could see hydro bills drop in the range of 8% or more,” the national broadcaster reports, citing “multiple sources.” The most prominent change would reduce what’s known as a “global adjustment” charge that has appeared on Ontarians’ electric bills since 2005. Another would reform how the province delivers rate relief to low-income residents.
The global adjustment was intended to “recoup the expected $50-billion cost of refurbishing power plants, building new ones, and financing new wind and solar projects,” CBC reports, “but it has risen dramatically since its introduction.” Although hidden in per-kilowatt-hour power prices, the adjustment “accounted for 85% of the cost of electricity” in the province last year, adding $12 billion to bills.
The reason appears to be the way the payment plan was structured. According to a senior official cited by CBC, the public financing model “really front-end loaded” public payments for the sector refurbishment in an effort to reduce overall interest costs. But in doing so, the official conceded, “we created a bit of a monster.”
The answer may be, in effect, to restructure the “debt” power customers are paying down to be amortized over a longer horizon.
Reducing current payments to lower the adjustment charge could reduce consumers’ bills in the short term, said Paul Sommerville, executive director for energy at the Mowat Centre, an Ontario think tank. “It’s one of the things that’s really been driving rates higher in Ontario.”
But like any delayed debt, interest charges could mount. “It’s like taking a longer mortgage on your house,” explained Mark Winfield, who co-chairs York University’s Sustainable Energy Initiative. “You pay a lot more in interest, potentially a big problem if interest rates go up.”
Winfield urged the government instead to “target” its relief at “the constituencies that are really in distress: low-income folks, people in the north and rural areas.”
Ontario already does that to a degree in the second program area under review. The Ontario Electricity Support Program (OESP) provides rebates of up to $50 per month for low-income hydro customers, although the plan “has been criticized for failing to reach all the households that need it.” The OESP is funded by another levy on power bills, but critics say that since it is a social benefit, it should be paid from the province’s general tax revenues instead.
The province has already backed away from some planned green power purchases and suspended collection of its share of the HST on power bills, in a so far unsuccessful effort to soothe simmering ratepayer action. And Energy Minister Glenn Thibeault did not deny that more changes may be coming. “I recognize that reducing hydro rates is a key issue for Ontarians,” Thibeault told CBC. “We’re working hard to find a solution that will be equitable for residential, commercial, and industrial ratepayers, and all options are on the table, within reason.”