COP26 is the real thing and not a drill

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The latest report from the Intergovernmental Panel on Climate Change confirms that human activities are having a profound effect on the climate. But, more happily, the International Energy Agency’s World Energy Outlook 2021 shows that we know what to do about it, in substantial detail and at an affordable cost. Yet we are not doing what we should do and so emissions continue to rise. Will that change at COP26 in Glasgow? I doubt it.

It is no longer necessary to debate the science of anthropogenic climate change. What is essential, instead, is to focus on what needs to be done now. On this, the WEO 2021 is perfectly clear.

It distinguishes four scenarios: “stated policies” (STEPS), which consists of the actual policies of governments; “announced pledges” (APS), which assumes all of their pledges will be met in full and on time; “sustainable development” (SDS), which are the UN’s sustainable development targets; and, lastly, “net zero emissions by 2050” (NZE), which is just what it says it is.

STEPS merely stabilises emissions, guaranteeing ever-rising temperatures. Even APS would lower emissions only to 20 gigatonnes of CO2 per annum by 2050. Under both of these scenarios, temperatures would continue to rise. NZE would deliver net zero emissions by 2050 and a median temperature increase of 1.5°C above pre-industrial levels but it would also need to cut global emissions by at least 40 per cent by 2030. (See charts.)

We are in a novel predicament: revolutionising the energy system has become a necessity. Yet, insists the IEA, the revolution is actually technically feasible and affordable. All it takes is will. In one generation we need to shift to a new energy economy whose outlines are clear and much of which is already technically feasible. The core of the new system would be electricity generated by renewables. While electrification is key, there would need to be other energy sources, especially hydrogen and bioenergy, for some industrial and transport uses. Many would insist that there will need to be a role for nuclear electricity, too.

Chart showing a wide range of uncertainty over the impact on temperature of the scenarios

The world will require a huge acceleration in the supply of clean electricity in the next decade. But there will also need to be vast improvements in energy efficiency, in reducing leaks of methane, a potent greenhouse gas, and in innovation, especially in the hard-to-abate sectors. Crucially, the transformation has to be global. The battle will ultimately be won or lost in emerging and developing countries, which have the fastest growth in population and in demand for energy. Today, for example, almost 770m people live without electricity.

Chart showing explosive growth expected in clean energy technologies

Innovation will play a crucial role. We need, above all, to learn how to manage the complex new electricity systems. This will demand digital technologies, which must, in turn, be made secure against cyber attacks. Also important will be innovation in industrial processes. The new technologies needed will include advanced batteries, hydrogen electrolysers, advanced biofuels and innovations for the capture and use of CO2. That will require big investments in research and development.

Chart showing the needed transformations of the capital stock

All this will require huge investments by both public and private sectors, with the latter guided by the right incentives and regulations. The pattern of investment in energy will be transformed, from fossil fuels towards batteries. According to the WEO 2021, investment related to the transition to zero emissions will need to reach $4tn annually by 2030 from around $1tn now. This high investment will be partly compensated by lower operating expenditures: average household energy bills should, argues the IEA, actually be lower under NZE in 2030 and 2050 than under the do-nothing STEPS.

Chart showing investment in clean energy still well below necessary levels

The biggest challenge will be financing the needed investment, especially in emerging and developing countries (other than China). Multilateral development banks will have to play a leading role. But much of that will need to be in catalysing private investment. Also crucial will be providing the necessary knowhow for developing countries to leapfrog into the new energy economy. Yet, in many emerging and developing countries, coal is the dominant fuel for electricity generation. Phasing it out will be a tough challenge.

Chart showing the scale of required investment and finance

While there seems to be a clear path towards a zero-emissions energy economy, it is a really difficult one. It is hard technically and even harder politically. On the former, the report lays out the complexity of bringing in a radically new system, some of whose operating details are still unclear, while ensuring that households and businesses continue to have the energy they not only need, but will insist upon. On the latter, the most pressing concern of governments must be exactly this: lighting, heating, cooling and transportation are not “nice to have”. If people who are used to these find them unavailable or unaffordable, they will react with incandescent fury. Our current predicament of high energy prices is a sobering warning. If this energy revolution is to happen, it must be planned and executed with an understanding of both the many complexities and the risks of a political backlash should it go wrong.

As the IEA report stresses, governments must play a central role in dealing with this huge global externality. Only by acting co-operatively can they create the policy framework for such a big shift in private behaviour. COP26 may be the last chance to put humanity on the path to net zero by 2050. If governments do not take that chance now, the shift will probably not happen with the needed scale and speed. It is an immense responsibility, and no less immense task. Governments have no decent choice but to rise to the occasion.

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