SCIENCE & TECHNOLOGY
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An in-depth look at the challenges for net-zero energy transition Evan C.Y. Ng examines the broader system challenges for net-zero energy transition and the economic, financial, and market factors associated with these.
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eaching net zero emissions by 2050 is necessary to meet the Paris Agreement’s targets, so that catastrophic climate disasters can be avoided. This means that the energy system must be decarbonized deeply – fossil fuels which represent 81.2% of the current global energy need to be substituted with progressively cleaner energy vectors as much as possible, while negative emission technologies like carbon capture, utilization and storage will likely be required to offset emissions associated with remaining usage of carbon-intensive fuels. Despite the falling costs of modern renewables over the past decade, the necessary energy transition is still occurring slower than what is required to meet the Paris Agreement’s targets. One key challenge hindering the net zero transition lies in the economically illogical action of subsidizing fossil fuel consumptions in many countries, which prevents renewables from competing with carbon-intensive sources on a level playing field. To put the scale of these subsidies into perspective, post-tax fossil fuel subsidies amounted to approximately 17 times the global renewable energy investment in 2015. Persistent fossil fuel subsidies also manifest substantial economic inefficiencies and encourage excessive energy usage. An analysis comparing the subsidy and consumption of fossil fuels in 50 energyproducing economies identified an almost linear relationship between the two. Fossil fuel subsidies in these economies have created social and infrastructural lock-ins leading to persisting inefficient practices. Reforming fossil fuel subsidies is urgently necessary, as subsidies disrupt market functions of accurate price signaling to inform future technology choices, potentially risking additional carbon lock-in which negatively impacts progress towards a net zero energy system. The negative environmental and social consequences associated with fossil fuel consumption are also not sufficiently con-
sidered. Only around 16% of global annual emissions are currently covered by either carbon taxes or emissions trading schemes and most carbon prices currently in place are less than US$25/tonne: a level well below the social cost of carbon emissions. This economic inefficiency not only creates unnecessary loss of social welfare, but also prevents consumers from realizing the real costs of their consumption. Emissions must be priced appropriately to correct distorted markets, enabling economic decision-making aligned with net zero ambitions. In power sectors where energy generation infrastructures typically have a long lifespans of at least 25 to 30 years, achieving Paris’ net zero targets means that no new fossil fuel power plants should be built from now on. However, without internalizing pollution costs to provide clear price signals reflecting Paris’ commitments, a marginal investor who focuses solely on monetary cost will naturally prioritize cheaper fossil fuel incumbents, exacerbating costly stranded asset problems. For example, premature retirement of planned and constructed fossil fuel power plants to meet 2050 net zero targets will cost Latin
“Fossil fuel subsidies amounted to approximately 17 times the global renewable energy investment in 2015.” America and the Caribbean at least US$37 – 90 billion. Therefore, if the distorted market continues allowing carbon-intensive energy infrastructure to be constructed, greater costs would be required to meet Paris’ targets. However, both fossil fuel subsidy removal and carbon pricing may burden consumers
Science Snippets
Russia shot the Kosmos Russia has tested a new anti-satellite missile system by shooting one of its own satellites, an old soviet spy satellite called Kosmos 1408. There has been international outrage as the hit has produced debris that could threaten the ISS and satellites in low-Earth orbit.
New HIV treatments NICE are approving a new HIV treatment that can treat people with an injection of cabotegravir and rilpivirine every two months to keep their viral load at a safe low level. This will replace the daily oral pill, hopefully lessening the emotional toll and improving the lives of people living with HIV.
with rising fossil fuel prices, potentially leading to socioeconomic challenges that affect political stability if mishandled. For instance, research that studied the association between fuel subsidies and fuel riots worldwide and found that 41 countries had at least one riot related to fuel price increases between 2005 and 2018, which may explain why politicians are typically reluctant to remove subsidies despite understanding their inefficiencies. However, the presence of pro-climate silent majorities in many societies could manifest a potential sensitive intervention point – a few “radical” social movements towards energy sustainability can effectively trigger political mobilization, allowing a shift in the underlying socioeconomic regime that enables rapid transitions away from existing overreliance on underpriced fossil fuels. To enable a smooth transition, correcting market distortions via increasing fossil fuel prices can be coupled with price reductions of alternative energy sources, minimizing the risk of social unrest caused by sudden surges in living expenses. As such, carbon tax revenues and savings achieved from fossil fuel subsidy removals can be recycled to subsidize renewable energy deployment, bridging existing financial gaps. A case study on switching subsidies from fossil fuels to rooftop solar deployment in the European Union found that this can effectively increase emissions abatement by around 20% as uncontrolled subsidy removal would likely result in investments diverted towards natural gas instead of renewables. Earmarking carbon and subsidy reform revenues for specific purposes, like renewable energy investments, exhibits greater transparency and would generally be more socially acceptable than incorporating them into general government budgets. Nevertheless, the effectiveness of this approach is contingent on consumers’ trust towards their governments – in areas with high political distrust, a lump-sum targeted cash transfer to politically important groups, such as fossil fuel industry workers
impacted by energy transitions, would likely ensure greater success. Policymakers can then introduce parallel policies to support these targeted consumers in
“Politicians are typically reluctant to remove subsidies despite understanding their inefficiencies.” reinvesting revenues towards low-carbon technologies. Although investing in renewables is often less economical than non-renewable incumbents now, it should be noted that operating a fossil fuel power plant might not be the economically optimal option in the long-run, given that extraction costs of fossil fuels would likely increase as easyto-extract reserves are exhausted. The cost of renewables generally reduces with increasing deployment as they tend to exhibit strong learning-by-doing and learning-by-researching effects. As such, policymakers can accelerate net zero energy transitions by taking advantage of sensitive intervention points – providing subsidies to support renewables deployment can kick-start a self-reinforcing feedback loop capable of further cost reductions. This subsequently enables renewables to become cost competitive relative to incumbents in the medium-to-long term, even when renewable subsidies are absent. Economic, financial, and market challenges must be resolved to enable rapid, widespread deployments of net zero energy technologies. Read the full article online at cherwell.org.
Tech Tidbits
Tesla lost the keys The app went out last weekend and locked drivers out of their cars, 500 users reported an error. Elon Musk apologised on Twitter, as usual. The company claims the drivers have other ways to get into their cars, but may not have had them on their person.
Racist healthcare technology The MHRA has found that oximeters overestimate the oxygen levels in blood when measuring people with brown or black skin. This may mean that fewer patients from ethnic minority groups are given oxygen supplies in hospitals, which may be a reason for higher death rates among minority ethnic people.
