How to sell climate change action to bean counters

The three most pervasive myths about tackling climate change claim that the transition to renewable energy will drive up household bills, require massive government subsidies, and create mass unemployment. These concerns are all (fortunately) false.

Along with other academics, I have examined cases over the past 30 years where governments have been able to use public investment and regulation to rapidly expand the deployment of renewable energy technologies such as solar panels and wind turbines.

We have found that the traditional approach to energy policy-making — conducting cost-benefit analyses, aka bean counting — tends to hinder renewable energy adoption because it has misperceived the economy as something static that always performs optimally. This perspective assumes that politics can do little to disrupt the structure of existing markets. The meteoric rise of entirely new sectors over the last decade, such as the global electric vehicle market and offshore wind energy, shows that policy can indeed bring about radical change.

It’s time to debunk the myths holding back the transition away from fossil fuels.

Myth one: Decarbonization will make electricity expensive

Subsidizing low-carbon technologies is an investment, not a cost. A recent study suggests this is an opportunity for the global economy with a potential $12 trillion return.

Government policies, such as offering research and development grants to companies experimenting with larger-capacity batteries or loan guarantees to companies developing riskier technologies like concentrated solar power, create an incentive for private companies to also invest in new ventures.

Investment eventually creates a tipping point in the market when the natural choice for investors or consumers shifts from a dominant technology like fossil fuels to an emerging technology like renewable energy because the latter is suddenly cheaper or more profitable than the former. Once this happens, there can be exponential growth in the use of these new technologies. This is already happening: the falling cost of producing electricity from solar and wind power has meant that installation rates of rooftop solar panels have skyrocketed across Europe, along with investment in large offshore wind farms.

As more and more of these technologies are deployed around the world, manufacturers can afford to build larger factories to meet the growing demand. Coupled with new supply chains, ways to go to market, and the insights gained from manufacturing batches of a given product, manufacturing costs are falling dramatically. Manufacturing a solar panel or wind turbine becomes significantly cheaper over time, which in turn makes producing a unit of electricity cheaper. These cost curves exist for most new technologies, but not for mature ones (like coal-fired power plants) that have been around for decades.

Not doing anything about climate change is also associated with high costs. Recent estimates show a potential global economic loss of $7 trillion associated with the continued pursuit of fossil fuel growth.

Myth two: Renewable energies need massive subsidies

Renewable energies have already benefited from government subsidies such as feed-in tariffs over the past three decades. These give energy companies an additional payment for the electricity they generate from wind, solar and other renewable sources.

Renewable energy now rivals and even surpasses the cost of generating electricity from fossil fuels. Offshore wind, for example, produces electricity at around a quarter of the current price consumers are charged in the UK – a price set by the wholesale cost of gas. The construction of new wind turbines is no longer dependent on subsidies.

Meanwhile, the fossil fuel industry benefits hugely from subsidies, receiving nearly $700 billion in 2021 alone. These include governments that set the price of gasoline or cooking oil for consumers and then subsidize it, provide tax incentives to companies that import or export fossil fuels, and guarantee a minimum level of domestic purchases. These so-called brown subsidies lock countries into increasingly expensive sources of energy as fossil fuels are depleted, requiring ever more expensive methods such as deep-sea drilling or fracking to extract them, which would require ever-growing subsidies.

Myth three: Jobs will disappear

The transition from fossil fuels to energy systems will eliminate nearly 3 million jobs in mining, power generation and other sectors. However, more than 12 million new ones are expected to emerge by 2030 in the fields of transport, renewable energy generation and energy efficiency.

Research also suggests that unchecked climate change alone will lead to massive job losses, particularly in agriculture and construction, where extreme weather conditions are likely to wreak havoc. Climate change is already expected to cost businesses $1 trillion in losses over the next five years.

However, many green jobs are not inevitable. Governments must offer skills and employment support to help workers move from oil and gas drilling to offshore wind farms, for example. Such investments could support green jobs that earn 7% more than the average fossil fuel sector job.

The current approach to climate policy is hampered by the propagation of these myths. The truth is that investing in a green transition will lower electricity prices, free up funding from entrenched fossil fuel subsidies, and create new jobs around the world.

If we continue to fret about the cost of action, there won’t be many beans to count by 2050.

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This article was republished by The Conversation under a Creative Commons license. Read the original article.