From carbon to clean: The global energy transition
There is little disagreement about the necessity to reduce or ultimately eliminate the use of carbon-based fuels to address the existential crisis of climate change and reduce concentrations of carbon dioxide that negatively impact air quality. Transitioning to a more ideal energy environment, however, is incredibly complex with myriad issues that require serious study by governments, scientists, and other experts. Amidst geopolitical tension, precarious supply chains, and the imperative need to reduce global emissions, the energy transition has reached a critical tipping point. In a period plagued with uncertainty, the chasm between expectation and reality is growing. As a result, governments, the private sector, scientists, and other stakeholders need to join forces to create solutions in the face of known challenges.
The current state of energy transition
The 20th century experienced rapid growth of geopolitical and economic interdependencies. This globalisation quickly manifested in every sector of the economy. As a result, the world, especially developed countries, experienced a systematic increase in energy demand. Non-renewable and natural energy sources were overexploited and destroyed. According to the Center for Climate and Energy Solutions, renewable energy sources remain firmly at the centre of the current energy transition and represent the fastest-growing energy source in the United States, up 90% from 2000 to 2020 and increasing 42 percent between 2010 and 2020. While there is growth in the use of renewable energy, fossil fuel usage is also expanding to meet growing demand. According to IEA’s 2021 Global Energy Review, energy demand grew by 14% from 2011 to 2021 worldwide, primarily fuelled by emissions-intensive sources. As a result, worldwide energy-related emissions have increased by approximately five percent, or 1.7 giga tonnes (Gt) of CO2, over the last decade.
Energy transition process and strategy
While the modern stages leading to an efficient energy transition vary by country based on economic status, creating an “ideal” energy environment heavily relies on decarbonisation through enforceable climate policies and regulations with a stronger focus on producing electric-based solutions for transportation, home living, etc. According to a 2021 report from the U.S. Energy Information Administration (EIA), motor gasoline and diesel fuel consumption in the transportation sector alone equaled 30% of America’s total carbon emissions. This is only one of the contributing factors to the energy transition dilemma.
Regulating the usage of carbon energy means establishing and enforcing strict government policies regarding emission levels to lower the carbon emission rate. The EIA forecasts that by 2023, carbon emissions will total 4,971 million metric tons (mmt). While this is lower than the peak usage that occurred in 2019, it is still a staggering amount. Unfortunately, the technology responsible for lowering carbon levels remains far too costly for practical use. A potential solution to offset the technological financial expenses and lower costs is to implement a US$75 carbon tax, as suggested by the International Monetary Fund (IMF), on carbon emissions generated from producing goods and services.
Although there is much work to be done, there is an overarching sense of hope in today’s innovative landscape with growth and research primarily driven by solar photovoltaic (PV) and wind technologies. According to the IEA, the world is set to add as much renewable power in the next five years as it did in the past 20 years. The World Economic Forum reports that renewables are predicted to grow by almost 2,400 gigawatts (GW) from 2022-2027. Not only will further electrifying multiple economic sectors reduce harmful climate and environmental factors, but it will also lead to cleaner air and lower emission rates ensuring a fully sustainable energy system.
At the core of the effort is the need for technology and funding—issues that will have to be resolved by industrialised nations. Breakthrough technologies are required to lower the cost of carbon storage and transform energy consumers into energy producers. Governments alone cannot solve this challenge. Private capital will be needed to fund innovation and advancement.
The future of energy transition: What needs to be done?
Climate action requires mitigating 59 Gt of emissions across key sectors including power generation, transport, agriculture, and industry. The Rockefeller Foundation states that only 16% of climate finance needs are currently being met, creating a significant gap between the current state and what is needed for the future. The chasm is especially evident between developed and developing economies. At the 2022 United Nations Climate Change Conference of the Parties (COP), ground-breaking agreements were reached to fund loss and damage and stimulate technological assistance for developing countries. While other objectives remained unfulfilled—including progress on emissions mitigation—governments, corporations, and other stakeholders are united in their efforts to address climate change comprehensively on a global level.
The need for a comprehensive energy transition exists on a global scale and the transformation will contribute to fundamental changes in almost every sector of the economy, as well as the communities of developed and developing countries. While there is still progress to be made, technological advances, increased attention, funding, and a global commitment will redefine the discourse and confront the most critical issue facing our world.
About the Author:
Nishant Tiwary is a global energy transition and climate finance expert. A research scholar at IIT Delhi, he is a John F. Kennedy Fellow at Harvard Kennedy School and a Jack McDonald Fellow in investments and finance at the Graduate School of Business Stanford. As an officer on special duty to the Union Cabinet Minister of Power and Renewable Energy of India, he led the national investment strategy and programs on hydrogen, EV, storage, energy efficiency, solar, and wind, impacting 1.4 billion citizens. Nishant is an advisory council member at Harvard Business Review (HBR) and serves on the United Nations Global Task Force on Digitisation of Electricity in Europe. Contact him at [email protected].
