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‘Decarbonisation is too expensive’ – how to sell climate change action to bean counters ThePipaNews

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The three most common myths about dealing with climate change claim that the transition to renewable energy will increase household bills, require huge amounts of government support and create mass unemployment. These fears are all (thankfully) false.

Together with other academics, I studied examples from the past 30 years of governments successfully using public investment and regulation to rapidly scale up the use of renewable energy technologies such as solar panels and wind turbines.

We found that the traditional approach to energy policymaking—conducting cost-benefit analyses, also known as bean counting—tended to hinder the expansion of renewable energy because it misconceived economics as something static that always works in an optimal way. This perspective assumes that policy cannot do much to disrupt the structure of existing markets. The rapid growth of entirely new sectors over the past decade, such as the global electric vehicle market and offshore wind, shows that policy can indeed drive radical change.

It’s time to debunk the myths holding back the transition away from fossil fuels.

Myth one: decarbonisation will make electricity expensive

Subsidizing low-carbon technology is an investment, not a cost. A recent study suggested that it is an opportunity for the global economy with a potential return of US$12 trillion.

Government policies, such as offering research and development grants to companies experimenting with more capacious batteries or loan guarantees to companies developing riskier technologies such as concentrated solar power, create an incentive for private companies to also invest in new ventures.

Investments eventually create a tipping point in the market when the natural choice for investors or consumers shifts from a dominant technology such as fossil fuel to a newcomer, such as renewable energy, because the latter is suddenly cheaper or more profitable than the former. When this happens, there can be exponential growth in the deployment of these new technologies. This has already happened: the falling cost of generating electricity from solar and wind has seen the rate of rooftop solar installation skyrocket across Europe alongside investment in large offshore wind farms.

An offshore wind turbine that is mounted by a crane on a ship.
Wind turbines are growing in size and electricity production capacity.
DJ Mattaar/Shutterstock

As more of these technologies are used worldwide, manufacturers can afford to build larger factories to meet growing demand. Along with new supply chains, routes to market, and the insight gained from making lots of a particular product, manufacturing costs drop dramatically. Manufacturing a solar panel or a wind turbine becomes much cheaper over time, which in turn makes the production of a unit of electricity cheaper. These cost curves exist with most new technologies, but not mature ones (such as coal-fired power plants) that have been around for decades.

It is also a real cost to do nothing about climate change. Recent estimates show a potential global economic loss of US$7 trillion linked to the continued pursuit of fossil fuel-fueled growth.

Myth two: renewable energy needs massive subsidies

Renewable energy sources in the last three decades have already benefited from government subsidies such as feed-in tariffs. These provide an extra payment to power companies for the electricity they generate from wind, solar and other renewable sources.

Renewable energy now competes with and even beats the cost of generating power from fossil fuels. Offshore wind, for example, produces electricity at around a quarter of the current price charged to UK consumers – a price set by the wholesale cost of gas. Building new wind turbines is no longer dependent on subsidies.

Meanwhile, the fossil fuel industry benefits enormously from subsidies, receiving nearly $700 billion in 2021 alone. These include governments setting and then subsidizing the price of gasoline or cooking oil for consumers, providing tax incentives to companies that import or export fossil fuels, and guaranteeing a minimum level of domestic purchases. These so-called brown subsidies lock countries into increasingly expensive sources of energy, as fossil fuels are depleted and require increasingly expensive methods such as deep-sea drilling or fracking to extract, which would require subsidies that grow forever.

A lone fracking rig in an empty brown field.
New fossil fuel reserves are becoming increasingly expensive to exploit.
Lonny Garris/Shutterstock

Myth three: jobs will disappear

The shift away from fossil fuels in energy systems will eliminate nearly 3 million jobs in mining, power plant construction and other sectors. But it is expected to create more than 12 million new jobs in transportation, renewable power generation and energy efficiency by 2030.

Research also suggests that unabated climate change will cause massive job losses on its own, particularly in agriculture and construction where extreme weather is likely to wreak havoc. Climate change is already expected to cause $1 trillion in losses to businesses over the next five years.

However, many green jobs are not inevitable. Governments must offer skills and employment support to help workers switch from drilling for oil and gas to installing offshore wind turbines, for example. Such investments could support green jobs that pay 7% more than the fossil fuel sector average.

The current approach to making climate policy is hampered by the existence of these myths. The truth is that an investment in a green transition will lower electricity prices, free funding from entrenched fossil fuel subsidies and create new jobs worldwide.

If we keep bickering about the costs of action, there won’t be very many beans left to count by 2050.


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