The energy transition
2025a). It is based on projections of population growth from the UN that have consistently failed to foresee drops in birth rates in the developing world (Burgess, 2024). The reason this is significant is because an economy with fewer people equates to less demand in the economy and subsequently lower economic growth, meaning lower demand for energy, and thus less investment from businesses and subsidies from governments are required. Therefore, basing estimates on the cost of decarbonization on wishful thinking about growth rates makes them unduly expensive. Similarly, economic modellers also poorly predict technological advances and overestimate technologies like carbon capture, underestimating falling costs of other forms like solar panels and lithium batteries (UNEP, 2024). According to Wright’s Law, every doubling of production of solar power, wind power, lithium batteries, etc., sees unit costs of production fall by a fixed percentage cost of around 20%, so as production increases, the price will subsequently fall, conveying that the technologies needed to solve the climate crisis will be even cheaper in the future (Gopal, 2022). In a hypothetical scenario where trade tensions and geopolitical strife lead countries to hold back on their efforts to reach a carbon-zero energy system, this ‘delayed transition’ could lead to 3°C of warming (Wood Mackenzie, 2024). This scenario still entails an estimate of $52 trillion of investment by 2050, but the same consultancy’s estimate for the cost of reaching 2°C of warming is estimated at $65 trillion. Therefore, the cost in terms of annual energy investment of doing very little about global warming is not that much lower than the cost of limiting global warming to the target of 2°C, so reaching the latter target seems the preferable choice. These findings are in broad agreement with the UN’s Environmental Programme (UNEP) estimation of a $7 - 12 trillion annual investment needed to reach the 2°C target, but once you take into account the investment into all energy forms that happens anyway, this figure can be reduced to $900billion - $2.1trillion as a net add-on of investment (Wang, 2024). To lighten this sum further, if we consider the expansive predictions about economic growth being overly optimistic, we can presume that renewable costs in the future will fall even further. Therefore, the energy transition as a whole may in fact be a lot cheaper than most economic models assume. Furthermore, most of these models that predict the costs of a transition to net-zero assume that society will try to complete it as cheaply as possible as this would be the rational approach. However, this would be unlikely to happen. This is because when governments make their green policies, they may not always prioritize the best ones. For example, governments may limit the use of carbon-taxes, due to this harming most businesses which rely on fossil fuels. Despite taxes being a genuinely efficient way of cutting emissions, most governments under-use them (Wang, 2024). Alternatively, governments adopt unnecessarily expensive subsidies to manufacture emission-cutting technologies to help boost their industrial base. This underlines the opportunity cost of how best to spend whatever sum of money politicians put aside for climate action, in which preparing for climate change competes with curbing it (Mundy, 2024b). This a difficult trade-off, as either the global economy spends big on decarbonization, or on adaptation to a climate-changing world, but both scenarios will have enormous costs in the tens of trillions of dollars. Therefore, given huge expenditure is inevitable, the climate- change problem should seem less daunting than traditionally assumed.
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