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The Future Is Low Carbon

Moving from a high-carbon to a low-carbon economy entails replacing the global energy and industrial high-carbon infrastructure over the next decades. UN’s recent Economic and Social Survey 2011 – The Great Green Technological Transformation estimates replacement costs at $15-$20 trillion, or between one quarter and one third of global income.

This is a herculean task. One that has been interpreted more as an insuperable obstacle than as a great opportunity. The cost and magnitude of the shift seems, at first glance, to be a formidable barrier. It takes diverting a large chunk of global savings and investment towards this task. If we do it as fast as science has been asking us to to, we’ll leave unexploited a wealth of high-carbon, relatively low cost resources. But look again. Using these resources represents an unaffordable climatic and environmental cost. The huge mobilization of monetary values to invest in new activities, new materials, new energy sources, new technologies could feed a long boom cycle of economic activity over several decades. Income and profit gains will more than compensate for the cost of replacement. We could start a long cycle of global growth that would add up to one of history’s longer-lasting periods of increasing prosperity.

Because climate change is a global phenomenon, the shift towards a low-carbon economy has to be a global one. It creates distributive risks and advantages. Leaders of several developing and underdeveloped nations argue that it represents a burden they cannot afford. They also say that since they’re not responsible for the GHG emissions that caused the problem, they have no obligation to act. This reasoning corresponds to the “insurmountable obstacle syndrome”. Seeing change as a hindrance impossible to overcome is self-defeating, especially when there is no viable alternative. Besides there is no opting out for anyone.

Obstacles should be viewed as motivations, not deterrents. Rich countries have the opportunity to create an investment dynamic that will by itself be a source of strong job and income creation. Developing and underdeveloped countries have what I call, after Alexander Gerschenkron, the advantages of backwardness. As the UN survey puts it, “developing countries may be able to leapfrog directly to renewable energy sources”. Instead of trying to catch up developed countries through the high-carbon path, they can shortcut to the low-carbon advanced economy.

Some of this transformation is already under way in both developed and emerging countries. The steps taken are still modest, but they have started showing the pay offs. The Brookings Institution has just released a study on the U.S. clean economy showing it has a significant job creating potential. The UN survey reports that Portugal has been able to increase the share of renewables in total energy supply from 17% to 45% in five years, between 2005 and 2010. China has invested $48.9 billion in renewable energy in 2010, up 28% from 2009 says a report from UNEP and Bloomberg Energy. Global investment in renewable energy has totaled near $850 billion in six years, from 2004 to 2010. According with the survey, Chinese new investment has totaled $140 billion; India invested $24 billion; Brazil, $40 billion; Africa almost $6.5 billion.

The technology needed to begin this infrastructure replacement is already available. The UN survey states that:

“Many of the technologies needed for a green economy are already available, as evidenced, for example, by the range of options for generating renewable energy (wind, solar power and biofuels, among others), technologies for carbon capture and more efficient energy use, techniques to replace non-biodegradable resources, and sustainable farming and forestry techniques, as well as technologies to render coastlines and infrastructure less prone to natural disasters.”

Major challenges now “lie in how to further improve these techniques, adapt them to specific local and sectoral needs, scale up the applications so as to bring down significantly their costs, and provide incentives and mechanisms that will facilitate their diffusion and knowledge-sharing.”

New investments in clean energy will eventually reach a tipping point. They have been growing at more than 30% a year, on average, for half a decade. It is an important fact that growth was unabated by the global financial crisis. Although it stalled in 2008, it got new momentum in 2009 and 2010, and keeps growing strongly this year. We are no longer at a standstill, although we have not started to navigate the immense sea of opportunities, most of it still uncharted. We’re still on coastal waters, but the time will soon arrive that we will have to point our economic vessels to deep sea and start exploring the full range of possible routes.

The high-carbon economy has no future. Most of its core is made of sunset industries. Old technologies, successively improved at the margin, but yielding basically the same products they have produced since their establishment. This economy’s job-creating power has been dwindling at least since the 1990’s. Its environmental and climatic costs  increase exponentially. It has no feasible long-term technological horizon.

We are already surfing the first waves of a scientific and technological revolution more far-reaching than the passage from the Middle Ages to the Renaissance. It suffices to look at how new digital technologies appear at dizzying speeds, or at the advancements in nanotechnology, neuroscience, robotics, genomics, cellular therapy, biotechnology just to name a few, to have a glimpse of the grand transformation on the way. It will radically affect our everyday life, our patterns of production and consumption, our use of materials and resources, our personal and professional lives. Most of this revolution is already geared to a low-carbon future.

The UN survey indicates, however, “ that the pace of progress of technological change is nowhere near that needed to reach the goal of full decarbonization of the global energy system by 2050”. It is clearly accelerating, though,  and it seems to have already gained momentum.

Most of what is needed for a full transition is ahead of us. Market forces’ progress towards the new economy is slower than warranted by the open scientific and technological frontier. But they are moving faster than government policies. One of the urgent tasks at hand is to synchronize actions in the technical, economic, social, and political realms. This infant economic model needs government support, business innovativeness and leadership, a sizable volume of public and private investment, and demand from consumers.

We’ve done that before. If we look at the timeframe of previous historical shifts, their pace was nowhere near the speed we will need to move. But the velocity of change over the last 20 years has been unprecedented. And we can accelerate further.

The low-carbon economy is the only possible future of prosperity we have. The high-carbon economy is near the end of its lifetime. We have no choice but to replace it. The choices we have are about the mix of solutions each country will adopt, and the pace of adoption. These are not cost-free choices. The speed at which we choose to change will determine the climatic and environmental costs associated to the length of the transition to the new economy.