The world’s premier climate assessment body, the United Nations Intergovernmental Panel on Climate Change (IPCC), issued its latest comprehensive report yesterday, and the news was not good. A vast undertaking — the report distills some 14,000 papers by thousands of researchers — the panel’s work provides the scientific and factual underpinning for the upcoming global climate summit in Glasgow.
Among the frightening findings:
Atmospheric carbon dioxide levels are at a two-million year peak. Repeat: levels of carbon dioxide haven’t been this high since dinosaurs were roaming around.
This means global warming of at least 2.7 degrees Fahrenheit (1.5 degrees Celsius) is already pretty much baked into our future — a daunting prospect given the disruptions this will cause, indeed is already causing. And while the temperature increase, though still gaining steam, can eventually be halted and then reversed with enough cuts in greenhouse gas emissions, the impacts we do experience won’t be so easily undone. Once melted, glaciers won’t quickly refreeze. We’ll be stuck with whereever sea levels settle — which could be multiple feet higher or more — for many generations. But even that won’t matter if we don’t arrest the temperature increase before it threatens life as we know it.
Yet there’s good news of a sort. For the first time the panel concluded with zero wiggle room that these changes are being caused by human influence (the panel called this conclusion “unequivocal” for the first time). Well, what humans have caused humans can repair, if we dramatically pick up the pace of current efforts to decarbonize the world’s energy system.
With that in mind, I’m including in this substack some columns I’ve been writing with colleague Milo McBride for Climate and Capital Media, a lively hub of pro-climate advocacy journalism. These columns look at how the global energy system is changing at a quickening pace as one of the most profound energy system transformations in human history gains momentum. When I covered energy at The Wall Street Journal I used to say there’s more going on now in energy than at any time since the discovery of fire. Perhaps the industrial revolution was on a scale of what we face, though I’d argue the speed and breadth with which our revolution has to happen exceeds even this. I’ll add these columns to the substack every couple of weeks, interspersed with my usual posts. Here’s the first one (which I’ve tweaked slightly to keep up to date from when it was initially published)….
The world continues to struggle with Covid-19, now spreading in its most contagious and deadly incarnation yet, the Delta variant. That has many yearning all the more for an eventual return to “normal.”
But what will a post-pandemic “normal” look like for the global energy industry?
Energy markets have been roiled by the pandemic, particularly the collapse of business and leisure travel and a prolonged suspension of the daily commute for many. Oil prices briefly, astonishingly, crashed below zero at one point. An icon of the industry, Exxon Mobil Corp., exited the Dow Jones Industrial Average and reportedly even discussed merging with another, Chevron Corp.
French energy titan TotalEnergies, which recently took on the second half of that name, withdrew from big oil’s flagship U.S. lobbying group, the American Petroleum Institute, over the group’s approach to the energy transition.
Meanwhile, solar power, the scrappy upstart of the energy system, navigated the pandemic downturn with aplomb. It racked up 14% growth in capacity in 2020, a year in which total global energy demand fell by an estimated 5%, according to the International Energy Agency. In the U.S., wind and solar claimed two-thirds of newly installed generation and in the EU surpassed their fossil counterparts for installed generation for the first time.
Solar’s standout performance during the crisis prompted the head of the IEA to crown it “the new king of the global electricity markets.”
The COVID-induced collapse in energy demand cut global carbon emissions, as well, a notable 7% last year.
And yet, despite all these surprises, how much has really changed?
Well, some, certainly. But not nearly enough to get the world on course to keep the global temperature increase below the two degree Celsius goal set by the 2015 Paris Agreement. The most encouraging development — coinciding with, and perhaps connected to the pandemic — wasn’t the travails of fossil fuels or the persistence of solar but rather in the public posture of governments and some of the world’s biggest energy companies.
Whether shocked by a uniquely global COVID crisis or spurred by accumulating evidence of climate catastrophe unfolding in the here-and-now, presidents, prime ministers and CEOs alike have committed to taking action to achieve net zero emissions by specific dates. They include China’s net-zero-by-2050 aspirations and BlackRock Inc. uber-investment manager Larry Fink’s vow to push the corporate world toward the same goal. Oil and gas majors in Europe are showing signs of leaning into the energy transition, especially considering the impressive progress Nordic players such as Equinor and Østed have made in the past decade.
All of those plans include vague and squishy terms and reflect some mixed motivations. Corporate leaders and climate activists have sparred over how aggressively fund managers and public companies can cut support for fossil fuels and still meet obligations to their investors.
The broad thrust of economic support provided by governments so far — with some notable exceptions in places such as Germany — and central banks has done more to shore up the fossil fuel industry than speed its demise. Yet they represent hope for what’s needed: aggressive action.
The Biden administration’s climate envoy John Kerry called the current moment the world’s “last best chance” to ramp up the ambition.
Despite the reversal of renewable and fossil fuel fortunes during the pandemic, the plausible trajectories for reducing global carbon emissions over the coming decades continue to range from disastrous to apocalyptic, according to a recently released United Nations Environment Programme study.
The shifting posture in global leadership signals the prospect the world at least understands it can do much, much better. Just how much better will be the focus of the upcoming U.N. climate summit this November in Glasgow, Scotland — by far the most important climate gathering since Paris. The report urgently states that countries must dramatically ramp up their Nationally Determined Contributions (NDCs) in order to avoid worst-case scenarios of warming.
And that has begun to rapidly reshape the outlook for the future of the energy industry.
The European Union stepped up last year with an outline of the most overtly aggressive path toward net zero by 2050. The plan envisions a goal of zero emissions by 2050 and has included talk of “trade walls” against countries whose carbon-reduction plans don’t stack up to EU standards. It also includes nearer-term targets of reducing emissions by 55% by 2030 — a number the EU parliament has been pushing to increase. More discreetly, the EU is positioning itself geopolitically as a major producer — and not merely consumer — of renewable energy like wind and green hydrogen.
But even more important is the about-face happening in Washington. The question now is whether the Biden team, with the slimmest control of the Senate and a bevy of other challenges, will produce sufficient global carbon reduction efforts to help eventually bend not only the U.S. but also the global emissions curve well below even the snowballing ambitions foreseen in Paris.
That sort of stepped-up ambition has yet to emerge. But the administration is clearly aiming for more than a mere reversal of Trumpian policy. Whether the world seizes the opportunity may depend more than anything else on what the U.S. brings to the table this year in the run-up to Glasgow.
As with global energy markets’ reactions to COVID, what we’ve seen so far is encouraging but hardly sufficient. The Biden team took the high-profile step of nixing the Keystone Pipeline, banned “fracking” for oil and gas on federal lands, and ended some federal fossil fuel subsidies. Furthermore, they have vowed to take climate goals into account across the whole expanse of government decision-making.
On the renewable side, the new administration has pledged to convert more 600,000 federal vehicles to be electric alongside encouraging the necessary procurement of EV infrastructure like charging stations. As the U.S. lags severely behind nations like the U.K. and Germany in off-shore wind installation, an executive order has been signed with hopes of doubling generation by 2030 by expediting the permitting and regulatory process.
Biden is now pushing for a national clean energy standard that would mandate and incentivize individual states to align their energy grids with the U.S.’s commitments to Paris. But like most of the administration’s climate initiatives, it will have to wait for Biden’s bipartisan infrastructure plan to make it through Congress (assuming it can). Then the Democrats’ push for a far larger additional plan can try to run the gauntlet of a partisan push using “reconciliation” rules that allow Republicans to be ignored as long as every Democrat in the Senate can agree (no small undertaking).
But even what Biden has done so far — not least the immediate reversal of hundreds of Trump administration policies and initiatives — will ripple through global energy markets from oil to electrical power. Witness the about-face at General Motors, whose CEO Mary Barra went from embracing Trump’s rollback of auto emissions standards a few years back to last month announcing a company “aspiration” to produce only electric vehicles by 2035.
The use of coal, the dirtiest of fossil fuels, is widely acknowledged to be on an inexorable slide to oblivion — though by when globally remains very much up for debate. Debate has also raged over whether oil is nearing peak demand after the biggest consumption drop in the past 70 years. Demand in China, the first major economy to turn around after the pandemic hit, rebounded smartly in the second half of last year, and carbon emissions there in 2021 are outpacing those in 2019 before the pandemic.
“If the governments will not take measures — political measures in terms of the oil consumption — transportation sector, petrochemical sector, and others — once the economy rebounds, so will the global oil demands,” Fatih Birol, executive director of the International Energy Agency, recently told the Atlantic Council’s Global Energy Forum.
The UN Environment Programme’s report underscored that the pandemic downturn itself is merely a blip on the long path to reducing carbon emissions sufficiently to get in line with the goals set out in Paris.
What inspires optimism in the current moment is this: Stepped-up ambition by governments will likely be dramatically magnified by a private sector incentivized by what incentivizes it the most, profits. Solar power is already the cheapest form of electricity in critical markets like India and will cross that threshold in many other places in the next few years. Battery advances offer new ways for renewables to compete with conventional power. Green hydrogen, an important pillar of the EU energy transition plan, holds the potential to eventually decarbonize some of the most challenging industries, from shipping to airlines.
With proactive policies from governments, the aspirations expressed by the likes of BlackRock can dovetail with real investments on a scale that propel progress.
The past year has seen a dramatic divergence in investors’ views of sustainable energy sources versus oil and gas. India, which has already attracted a formidable array of the world’s biggest institutional investors, could require another $500 billion in renewable electricity infrastructure alone over the next few decades to reach its ambitious goal of 450 MW of renewable energy by 2030, according to an analysis by IEEFA.
Way more than talk will be needed; more even than what once would have been cheered as ambitious action. This will be the measure of November’s so-called COP26 gathering, the Conference of Parties under the 1992 United Nations Framework Convention on Climate Change.
That makes the months leading up to the Glasgow conference essential to understanding what is politically, financially and technologically possible.