Putting gas in your car is between $4 and $5 a gallon. Cooling your home is also budget-busting. But the cost of green energy is coming down. The United States government and other nations should therefore focus on clean fuels to cut costs and combat climate change — something corporate America wants.
A new study issued by the International Renewable Energy Agency (IREN
REN
A) says that the price of wind and solar has fallen by two digits since 2020: the cost of electricity from onshore wind fell by 15% while offshore wind dropped by 13%. Meantime, rooftop solar PV has fallen by 13%. That’s why about 80% of the installed electric generation capacity has come from renewables in the last four years. But is this transition ocurring fast enough to meet the goals set by the Paris climate agreement?
“The energy transition is already in place,” says Francesco La Camera, the director-general of Abu Dhabi-based IRENA. “We are moving to a new energy system largely based on renewables and complemented by green hydrogen and sustainable biomass. It is unstoppable. But this trend is not happening at the speed and scale required to limit temperature increases to no more than 1.5 degrees.”
La Camera, who spoke with this writer after meetings at the United Nations in New York, added that renewable energy is saving money: about $55 billion worldwide compared to the current price of fossil fuels. He said that globally we need to triple the investments in renewables — from the existing installed base of 260 gigawatts to more than 800 gigawatts by 2030. That will require an investment of $5.7 trillion.
But according to IRENA’s research, this would increase the gross domestic product worldwide by 2.4%. The 85 million new positions linked to the green energy economy would dwarf the 16 million lost jobs tied to the old economy. The transition makes sense economically and environmentally. Congress could pass a scaled-down version of the Build Back Better bill to include tax credits to fight climate change.
Consider the White House Office of Management and Budget’s recent study that found climate change could reduce the economic output in this country by 10%. As such, revenues to the U.S. treasury would fall by 7.1% or $2 trillion a year. For context, the proposed 2023 U.S. budget is $5.8 trillion. Beyond that estimate, the report says the U.S. government could spend $25 billion to $128 billion each year on disaster relief.
Lagging Legislation
That analysis comports with one released this week by Dartmouth College, saying that the United States, China, Russia, Brazil, and India have collectively caused $6 trillion in income losses from warming since 1990. The study, published in the journal Climate Change, says that losses occur in poorer countries — the ones most susceptible to rising tides and eroding coastal regions. That includes rainforest nations in South America, the southwestern Pacific, and Africa.
“Yet the distribution of warming impacts from emitters is highly unequal: high-income, high-emitting countries have benefited while harming low-income, low-emitting countries, emphasizing the inequities embedded in the causes and consequences of historical warming,” the study says.
Despite the research illustrating the economic impact of global warming and the complementary analyses showing the financial benefits of renewables, the United States is not moving quickly enough. The U.S. Supreme Court ruled this month that the U.S. Environmental Protection Agency did not have the legal authority to mandate CO2 reductions from power plants across all states.
Correspondingly, the court ruled that such rights reside with congress. Traditionally, judges have deferred to the federal agencies to interpret laws — mainly because they employ the experts, not the courts. President Biden has set a goal of reducing CO2 emissions by 52% by 2030, compared to 2005.
To that end, the president and much of the Democratic congress want to include climate provisions in an updated budget reconciliation bill. But the U.S. Senator Joe Manchin, D-W.V., remains opposed, voicing the same concerns he had last year when the pricier Build Back Better legislation failed. Without Manchin, the bill can’t pass because of partisan differences. He says that the country is already trending green and that it does not need any more financial incentives to hasten the pace.
But a letter signed last December by 437 companies, investors, trade groups, and employers has called on the U.S. Senate to pass climate measures that the U.S. House had previously approved. That was followed by one in April from 50 companies with $200 million in annual revenues. They include IKEA, Hewlett Packard, Levi Strauss & Co
LEVI
., Logitech, PSEG, Salesforce, and Unilever.
“At eBay, we are committed to reducing our carbon footprint as we grow our business. Strong federal policy support will allow companies across the U.S. to power their businesses on affordable, secure, domestic clean energy and build a more sustainable and competitive economy,” says Renée Morin, Chief Sustainability Officer, eBay.
‘Less Inequality’
Here’s the dilemma: IRENA’s Director-General La Camera says that the transition is well underway and is unstoppable. And Senator Manchin generally agrees. However, the two thought leaders part ways over the speed of the change, with La Camera emphasizing the urgency — the need to avoid a climate breakdown. That follows the findings of 99% of all climate scientists.
It’s not a theoretical debate. The Intergovernmental Panel on Climate Change says that human-induced CO2 leads to heatwaves, wildfires, and droughts. Indeed, the world will endure several warming hazards if it doesn’t limit its use of fossil fuels and prevent temperatures from increasing more than 1.5° Celsius or 2.7° Fahrenheit by mid century, compared to pre-industrial levels.
Temperatures hit 115 degrees in Siberia last summer, and there’s been a 400% increase in the number of natural disasters since 1980. Europe’s biggest insurers — Allianz, Generali, and Zurich Insurance Group — have restricted coverage for coal concerns. Reinsurance giants Swiss Re, Munich Re, and SC
SC
OR also have underwriting restrictions on heavy emitters. Industry losses are in the hundreds of billions.
Meantime, Bank of America
BAC
Corp., Citigroup
C
Inc., Goldman Sachs Group
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, Morgan Stanley
MS
, and Wells Fargo
WFC
have altered their lending practices. Most of those also disclose their climate risks — something the U.S. Securities & Exchange Commission has proposed. Already, Blackrock, which manages $6 trillion for pension and investment funds, looks closely at companies’ potential climate risks before its funds would invest in them.
“We must understand the playing field: the Intergovernmental Panel on Climate Change report,” says IRENA’s La Camera. “The reason to decrease the emissions is not that we wake up in the morning and think these thoughts. It is because of the cost — the potential hit to the global economy and gross domestic product. “We need to be carbon neutral by 2050 — not because it is a nice thing to say but because it is the way to avoid the impact on humanity.
“We are not suggesting unplugging the old system. We are suggesting a pathway — to have an energy system that conforms to the Paris agreement,” he adds. “Naturally, the rainforests are a strong component for absorbing CO2 emissions. When we talk about net zero in 2050, we consider the rainforests’ role. In the end, we all want a cleaner energy system that is fairer with less inequality.”
Corporate America has taken the lead. Congress will eventually follow — hopefully, before it’s too late.
