Can the #EnergyTransition be cost neutral?

Stating that the transition away from fossil fuels can be “cost neutral” and leave the Western way of life unaltered is what politicians and voters want to hear, but it’s probably wishful thinking.

The Guardian has a story about a new study by Australian researchers that says that dangerous global warming will happen sooner than thought. Their forecast, based on new modelling using long-term average projections on economic growth, population growth and energy use per person, points to a 2C warming by 2030.

Apparently these researchers figured out that:

  • “the more the economy grows, the more energy you use”;
  • “massive increases in energy consumption would be necessary to alleviate poverty for the nearly 50% of the world’s population who live on less than $2.50 a day”;
  • temperature rises would go through the roof very quickly if we would burn fossil fuels in order to get the energy to provide people with a living to get them off $2.50 a day;
  • improvements in energy efficiency are insufficient to offset the surge in energy consumption;
  • fast-tracking the transition from fossil fuels to renewables is therefore urgent.

So far, so good.

However, they suggest that this urgent energy transition is “more a political issue rather than an economic issue” and that it could be achieved in a “cost neutral” way by switching $500bn in subsidies for fossil fuels worldwide to renewables. They say that this would trigger a move of “creative destruction” by pulling the rug from out under the fossil fuels industry, and that “we could have rapid improvement and deployment of renewables to cover our shift from fossil fuels”.

Well, stating that the transition away from fossil fuels can be “cost neutral” and leave the Western way of life unaltered is certainly what politicians and voters want to hear, but that’s probably wishful thinking. Switching to renewables will cost a lot. It will indeed require huge investments over a long period of time not only to scale up renewables production capacity, but also to adapt or retrofit large swaths of our industrial civilization’s infrastructure that have been designed to run on fossil fuels. More importantly, it will significantly impact the way energy gets ‘metabolised’ by society and hence the productive capacity of the economy – including the capacity to generate surplus value to finance the investments required to successfully carry out the energy transition. Switching $500bn in subsidies from fossil fuels to renewables is certainly urgent, but it’s only just the beginning.

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