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Don't Buy The Hype, Renewables Have A Long Way To Go.
We have a long way to go.
To save this beautiful planet from our climate crimes, we must revolutionise how we use energy, recourses and land. This massive transformation is well underway. For example, renewables had record-breaking growth in 2022, with 295 GWs of new capacity. As such, there is an air of optimism and feeling that we are progressing. But the reality is far from that. It turns out we have an awful long way to go. Let me explain.
It takes a staggering amount of money to shift away from fossil fuels. This price is worth paying though; these energy sources are more independent, safer, don’t have associated environmental damage that will damage the economy, and have the potential to create local jobs.
2022’s energy transition’s gargantuan leap took a monstrous amount of investment. In total, 2022’s annual energy transition investment totalled $1.3 trillion. That figure includes renewables investment, as well as investment in low carbon non-renewables like nuclear, and investments in increasing energy efficiency. To give you a sense of scale, $1.3 trillion is the equivalent value of the entire of Indonesia’s economy.
But this still isn’t enough to save the planet. IRENA’s (International Renewable Energy Agency) recent report found that for us to hit a climate target of limiting climate change to 1.5 degrees Celsius, annual energy transition investment needs to quadruple to $5.2 trillion!
Just a reminder here, 1.5 degrees Celsius of global warming is still enough to destabilise weather patterns and create deadly extreme weather that will stress nature, our health, society and our economy.
So, the question has to be asked, why do we need so much investment? Well, low-carbon energy sources constitute a tiny portion of the global energy mix. In 2022, oil, coal and gas power comprised an astonishing 84.1% of the planet’s total energy production. Low-carbon sources only accounted for 11.4% of total energy production. Of that, wind and solar only accounted for 1.1% and 2.2% of global energy production, respectively.
So, despite the massive push for renewables and low-carbon energy sources over the past decade, they have bearly made inroads into the total carbon emissions of the worldwide energy industry.
So, the next question has to be asked, where can we find an extra $3.9 trillion? Again, just to give you a sense of scale here, the total US military annual budget was five times less at only $766 billion in 2022.
Now, you might think that it is impossible to raise these funds. It seems like an utterly enormous amount of money. But in reality, it’s relatively easy, at least in theory.
Take the fossil fuel industry; it has to constantly search for new untapped oil and gas fields, also known as unabated fossil fuels, to ensure they can meet future demand. In 2023, the annual investment in finding and utilising unabated fossil fuels is set to reach a record peak of $950 billion! That is despite the fact that the IEA has stated that investment in new fossil fuels must stop immediately if we are going to hit our climate targets.
Fossil fuels also receive an enormous amount of subsidies! These are designed to incentivise investment to keep the fossil fuel supply steady and ensure affordable energy and fuels for a government’s citizens. In 2021, the fossil fuel industry received an astonishing $5.9 trillion worth of subsidies.
Redirecting both of these funds to stop new fossil fuels and power our energy transition isn’t a stupid or impossible idea. As more renewables are built, the demand for fossil fuels will dramatically drop, making the lack of newly tapped reserves not a problem. What’s more, these renewables will be cheaper per kWh than fossil fuels, lowering the overall cost of energy. Gasoline and diesel fuel prices will increase, but not by much, as oil companies currently receive only $1 per gallon sold, meaning it should only go up by around 20%.
But we don’t need the whole $6.85 trillion per year the fossil fuel industry gets from subsidies and spends on expansion. We only need to redirect 56% of these funds, and we have saved the world.
Now, you still might think that this is unrealistic, and that’s fair enough. So let me share with you another shocking find from IRENA.
41% of global energy investment planned from now until 2050 is for fossil fuels. That is despite the fact that it will only account for 5% of our energy needs by 2050. This means there is a complete mismatch between investment and future usage, which means that trillions of dollars worth of fossil fuel investment will go up in smoke over the next few decades.
What’s more, IRENA actually has a far more conservative view on how much funds need to be redirected towards energy transition technologies to meet our climate targets. They think that if we can redirect $1 trillion of investment from the oil industry towards our energy transition each year from now until 2030, we will be on course to hit our energy targets. That is less than 15% of the investment and subsidies (which really are a type of governmental investment) the fossil fuel industry receives each year.
The fact of the matter is that renewables, nuclear and other planet-saving technology need significantly more money to expand and save the world and our societies from the ravages of climate change. Yet, the fat cats of the fossil fuel world are still acting like they will be doing business as usual by 2050, despite the fact that global oil reserves will run out in 47 years and that our climate pledges make this an impossibility.
We have the technology and the money available to stop climate change in its tracks. We just need to wrangle it out of the tight, greedy fist of the oil world.
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