The Trillion Dollar Paradox
Global warming is very expensive: extreme weather, rising sea levels, crop failures and industry disruptions all cost money. This figure tends to range at around $38 trillion annually. That begs the question. Is the estimated trillion-dollar price tag that comes with transitioning the world to clean energy worth the cost of investment?
Well, fossil fuels aren't free, and so are the many costs for maintaining and updating our extensive fossil fuel infrastructure. However, wind, water and sunlight are all free and in unlimited supply. There’s just the upfront cost of building infrastructure to harness them. To fully transition to a green economy, we'd also need to invest in electrifying entire industries, building new renewable energy plants, and more.
In the early 2000s, most economic models predicted those costs to be impractical and prohibitively expensive. But a slow revolution has been happening over the past two decades. Countries like Germany, China and some tech companies decided to invest huge sums of money in solar infrastructure. This led to more research and development, which brought the costs down far below what even the most optimistic model had predicted. Today, solar is 84% cheaper than that early model projected. It would be making it cheaper than power from coal in much of the world. This change is so dramatic that some economists now think switching to renewable energy quickly could save trillions of dollars in the next three decades.
However, the only way this will happen is if the government does not legislate fossil fuels (don’t make them illegal, just exorbitantly costly). Then offer grants to the biggest polluters to incentivize their shift to renewables in such a way that is economically explainable to the shareholders that expect short-term profit and growth to be priorities. This is difficult, as it is nearly impossible to defeat the fossil fuel lobby. If legislation is passed, it would politically be unpopular amongst constituents to then gift grants and other incentives to big corporate polluters.
The problem with these economic analyses is that they never address the issue of energy storage. The technical feasibility, resource availability and economic costs of creating grid scale energy storage are currently showstoppers. The intermittent nature of solar (which includes wind) means you must be able to store vast quantities of energy economically. We haven’t figured out how to do that yet. Batteries are costly, there is not sufficient lithium, and they degrade with use. Using solar to create green hydrogen may work if prices can be lowered. Once we solve the storage issue, we can proceed at full speed with the transition.
While some countries look desperately for alternatives to fossil fuels, the largest economy is pushing for more drilling and drilling... At some point mankind as a group will have to make the conscious decision of supporting companies that reduce emissions and stop buying from those who contaminate the environment.
But for now, the case for a green transition was framed as a sacrifice today for the benefit of tomorrow. That reasoning relied on outdated models that underestimated the costs of global warming and overestimated the expense of renewables. The evidence is now clear. Investing in clean energy is not only environmentally responsible but also economically rational. Transitioning quickly protects future generations and saves money in our lives.
Daya Sangha
Sources:
The trillion dollar paradox - George Zaidan
https://www.weforum.org/stories/2023/11/climate-crisis-cost-global-economies/
