While the underlying trend to non-fossil looks inevitable, what policy-makers and investors do today, at this point of stress, is nonetheless critical to pace – and thus the maximised economic outcomes for the most that will be enabled by climate success.
Research shows that when capital is directed to incremental fossil production to lower price, it impairs green innovation. A recent paper, using empirical evidence from the US shale boom, demonstrated that while cheap gas can substitute out coal and reduce short-term emissions, it induces firms, and academia, to divert resources away from pioneering alternatives.
So significant might this effect be given the nascency of “green”, that not only might long term emissions be higher, but the switch from fossil may actually be “infinitely delayed”. The authors suggest that avoiding this tragic trade-off requires policy intervention in the form of research subsidies and carbon prices. Redirecting gains, over time, from fossil to green. There is a message there for governments now considering the direction of windfall profits for energy firms and cries for cuts to gasoline taxes. And it seems that some are taking heed.
Which links to the second thing. Energy efficiency – aka the “nega-watt”. Increasing investment in fossil fuel assets now, can only really produce extra volumes a year out or more. Releasing current market pressure requires less demand. And in an energy system riddled with losses to heat and noise, cutting the 67% we waste doesn’t mean dropping our standard of living, it means doing the same with less: a concept which in many other industries would just be known as improved efficiency and something to be sought, almost above all else.
Despite massive gains in computing, data, digitisation and automation the how, and when, we consume energy has remained pretty unreformed for decades. The reasons lie in a mix of fossil under-pricing (it’s obviously not carrying its real environmental cost), utility regulation biased to the installation of physical capacity rather than demand flexibility, and the often-higher upfront capital cost of better equipment that delivers lower lifetime running costs. With so many demand-side solutions now ready to go, this is the moment for governments to promote the hell out of efficiency tech. The volumes could come quicker than new fossil, and with truly enduring benefits.