The Road to Net Zero
By Mathew Hampshire-Waugh
Humans are changing CO2 concentrations in the atmosphere faster than any other planetary event in at least 66 million years. Temperatures are already over 1⁰C higher than in pre-industrial times. Make no change to our existing systems and most likely we will warm the planet by at least 3⁰C by the end of this century and by 4.5⁰C by the middle of the next. We are already experiencing three times the number of climate related (and not so) natural catastrophes compared to 40 years ago. The last 20 years have recorded 19 of the hottest in the last two millennia, and with half of the strongest hurricanes on record.
If we don’t change the way we fuel the economy, or successfully adapt to a warming climate, then over the next 80 years, more than one third of the world could be impacted by water shortages and malnutrition. A further one billion lives may be cut short due to air pollution from the combustion of fossil fuels, and the destruction of capital assets coupled with lower labour productivity could wipe out in excess of 5% of global GDP.
Compare the death, suffering, and economic toll of climate change & air pollution to other global issues and they already rank in the top three of major world problems. Continue burning fossil fuels, and the enhanced risk of breaching dangerous tipping points pushes climate change up to the top spot, before spilling over into nearly every other human problem.
The Earth’s systems are currently playing catch up with the rapid increase to the concentration of CO2 and that means nearly 1.5⁰C warming is already locked in. Further change is inevitable but should prove manageable. Adaptation will be necessary, but other tactics must be deployed if we are to avoid higher temperatures and unmanageable tipping points. At first glance, a technical fix like climate engineering seems the easy, cheap option. But as with most quick fixes it only solves part of the problem. Mitigation of carbon dioxide and the transition to a net zero carbon economy offers the only complete and low risk path.
If we don’t change the way we fuel the economy, or successfully adapt to a warming climate, then over the next 80 years, more than one third of the world could be impacted by water shortages and malnutrition.
Fundamental Change
A net zero transition requires fundamental changes to both our energy supply and our energy demand. Wind & solar electricity coupled with pumped hydro and battery storage can form the backbone of a net zero economy – providing cost competitive, safe, reliable, distributed energy, with no carbon emissions or air pollution. We must electrify everything where possible and where not, switch to hydrogen, biofuels, or carbon capture. Electrification will replace oil-powered transport, gas-powered heating, and coal-powered industry. Global agriculture will need to be modernised to lower carbon intensity and eating habits must cut back on meat to free up enough agricultural land to regrow forests and offset stubborn residual emissions.
Change will be all-encompassing, but requires no compromise on quality of life: simply the breaking of old habits. Done well, the transition will barely register for the top 10% of the global population already accustomed to the highest quality of life in developed countries. The remainder of the world will quickly be enabled to raise living standards towards those in the top bracket. The poorest 10% will for the first time connect to the modern world with electricity access, clean cooking, and basic amenities. A just and equitable transition for all.
Electricity prices will decline, but as electricity must replace cheap coal and gas heating, so the overall blended price of energy may rise by one third. However, electrification brings large efficiency gains – heat pumps use four times less energy than gas boilers; electric cars three times less energy than combustion engines, and electrified industrial manufacturing brings significant efficiency gains. A net zero economy will demand less than half the energy of the equivalent fossil fuel system with no compromise on travel, goods, food, or amenities. The levellised cost of the whole system will end up 25% cheaper than the fossil fuel alternative.
Wind, solar, and battery costs are already shrinking by 10-35% every time the number of installations doubles. Hydrogen and biofuels will soon join this commercial experience curve. It’s not the passing of time that lowers costs, but the scale of production. Sitting on our hands and waiting for a breakthrough is not the way forward. We have already commercialised 80% of the technology we need, so the faster we push, the cheaper it gets.
Optimise the Speed of Transition
Net zero is inevitable. But that doesn’t mean the speed of the transition can’t be optimised. Continuing to run a fossil fuel economy is inefficient and, just like any other market inefficiency, it can be corrected to drive greater prosperity. In my book, net zero, I estimate that a twenty-year transition provides the best balance, with enough time for governments, businesses, and individuals to adjust whilst bringing the system cost savings forward and more than offsetting any losses from fossil fuel assets left stranded or from crowding out other investments.
The world will need to find $3.5 trillion of annual investment. The $1.75 trillion spent on mostly fossil fuel energy, plus the $0.5 trillion wasted on fossil fuel subsidies, must be redirected into net zero projects. This leaves just $1.25 trillion (1.5% of GDP) of additional annual deployment which will yield a competitive market rate of return for investors plus a ten-year payback for society as the energy system becomes cheaper.
As I write this, we are nearly one year into the COVID-19 global pandemic. Central banks around the world have cut interest rates to zero and pledged to print over $5 trillion of new money. Governments are embarking on once-in-a-generation stimulus plans with a total of $12 trillion pledged so far, but only $0.5 trillion earmarked for net zero.
Net zero is inevitable. But that doesn’t mean the speed of the transition can’t be optimised.
Targeted Stimulus
The key to successful stimulus will be to target opportunities where access to money or upfront investment present a bottleneck, but the solutions are not technically demanding, they have existing legal frameworks, and are socially accepted.
For me, the three key pillars are:
- Supply side stimulus for rapidly deployable modular technology. Post 2009 solar, onshore wind, and smart grid were the success stories with existing subsidy systems and technology ready to slide down the experience curve. This time round, offshore wind, lithium ion, and hydrogen can be added to the list.
- Lowering demand side hurdles so individuals can electrify once the economy improves. Quick, easy, and scalable projects such as home insulation, EV charge points, and smart metering lower the hurdles to the adoption of heat pumps, electric cars, and demand side response once the economy and consumer spending improves.
- Selective investments into longer term, more complex engineering projects. Embarking on big, bespoke engineering projects is higher risk and slow. Investments should be carefully selected to focus on long term R&D goals and infrastructure: carbon capture in cement & fertilisers, third generation biofuels, and grid connectivity.
The required upfront investment for a net zero transition creates jobs and stimulates economic activity, can be financed using historically low interest rates, and will pay back through a cheaper energy system, greater economic output, and more tax revenues in the future.
Net zero will be cheaper, cleaner, safer, more reliable, more sustainable, and will create more employment than if we remain bound to fossil fuels. By understanding and acting on this statement we can redefine the argument and create a better future for all on Planet Earth.
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More details on Mathew’s upcoming book – Climate Change and the Road to Net Zero – can be found at www.net-zero.blog