There are numerous ways to address carbon emissions but are we choosing the right approaches? America and Europe have invested heavily in subsidizing solar and wind generation and solar panels - but critics contend that the same money spent modernizing older buildings would have done far more than funding Chinese corporations or wealthy homeowners has.
Low-carbon energy won't cost more than what is currently spent on today's fossil-dominated energy system, according to new research from the International Institute for Applied Systems Analysis (IIASA) and partners.
To limit climate change to 2 degrees Celsius, low-carbon energy options will need about US $800 billion a year globally from now until 2050, they write in Climate Change Economics. But much of that capital could come from shifting subsidies and investments away from fossil fuels and associated technologies. Worldwide, fossil subsidies currently amount to around $500 billion per year. In America it is in the form of tax credits rather than actual subsidies. States often compete for high-paying union jobs so they offer incentives to be in one state rather than another.
The analysis, part of a larger EU research project examining the implications and implementation needs of climate policies consistent with the internationally agreed 2° C target, compared the results from six separate global energy-economic models, each with regional- and country-level detail. The authors examined future scenarios for energy investment based on a variety of factors, including technology progress, efficiency potential, economics, regional socio-economic development, and climate policy.
Investments in clean energy currently total around $200 to 250 billion per year, and reference scenarios show that with climate policies currently on the books, this is likely to grow to around $400 billion. However, the amount needed to limit climate change to the 2° target amounts to around $1200 billion, the authors conclude, though it is as much guess as anything. By comparing the results from multiple models, the scientists were able to average the costs of addressing climate change.
"Nearly all countries say that they're on board with the 2° target; some have even made commitments to reduce their greenhouse gas emissions. But until now, it hasn't been very clear how to get to that point, at least from an investment point of view. It's high time we think about how much capital is needed for new power plants, biofuel refineries, efficient vehicles, and other technologies—and where those dollars need to flow—so that we get the emissions reductions we want," says IIASA researcher David McCollum, who led the study.
Co-author and IIASA Energy Program Director Keywan Riahi says, "Given that energy-supply technologies and infrastructure are characterized by long lifetimes of 30 to 60 years or more, there's a considerable amount of technological inertia in the system that could impede a rapid transformation. That's why the energy investment decisions of the next several years are so important: because they will shape the direction of the energy transition path for many years to come."
The study shows that the greatest investments will be needed in rapidly developing countries, namely in Asia, Latin America, and Sub-Saharan Africa.
"Energy investment in these countries is poised to increase substantially anyway. But if we're serious about addressing climate change, we must find ways to direct more investment to these key regions. Clever policy designs, including carbon pricing mechanisms, can help." says Massimo Tavoni, researcher at the Fondazione Eni Enrico Mattei, a climate research center in Italy, and overall coordinator of the LIMITS project, of which the new study is a part.
The researchers note that their analysis of future investment costs does not attempt to quantify the potentially major fuel savings from switching from fossil fuels to renewable sources, such as wind and solar energy.