Chapter 3: Climate is a 100 Trillion Dollar Problem
This is Chapter 3 from free climate book?A Plan to Save the Planet.
Tackling climate change entails transitioning from a carbon-based economy to one that does not emit CO2. This is referred to as “decarbonization,” and it entails building new infrastructure that is likely to cost the world approximately 100 trillion dollars over several decades. Approximately one-third for electrical power generation, one-third for cars, and one-third for factories.
~$30T - Solar farms, wind farms, hydroelectric dams, more grid
~$30T - 1.5 billion cars?x?$20K per car
~$40T - New factories and agriculture that do not emit CO2
How Much Energy Do We Need?
Each year the world produces 583 exajoules (EJ) of heat energy, and if this were fed into a 35% efficient turbine, 56,000 TWh/yr of electricity would be produced.
We know how much electricity is produced by large facilities like the Hoover dam in Nevada. Therefore, we can divide 56,000 TWh/yr by their annual production to calculate roughly how many facilities one would need to match global energy production.
For example, 56,000 TWh/yr corresponds to 17,200 Hoover Dams, 22,700 London Arrays, 44,200 Topaz Solar Farms, and 22-times the world's nuclear fission reactors.
What Does a $27 Trillion Dollar Solar Farm Look Like?
The Topaz solar farm produces 0.55GW of electricity, and solar farms cost $1.12-per-watt at today's prices (NREL, 2022, CAPEX). Therefore 44,200 would cost 27 trillion dollars in total ($1.12 x 0.55GW x 44,200).?
This might seem excessive, and it is. Also, it works economically, kind of. The money would be borrowed from banks and bonds. And the facility would repay the loans with the ~2 trillion dollars' worth of electricity that is produced each year (0.55GW x 44,200 x 2,180 kWh/Wh/yr x 0.001 kWh/Wh x $0.037/kWh). In other words, consumers would not pay $27 trillion and instead would pay the difference in the cost of green electricity and carbon based electricity.
Topaz's panels sit on approximately 4 square miles, therefore 44,200 facilities would consume 176K square miles (44,200 x 4). The state of Texas is 268K square miles; therefore, this would fit nicely in 65% of Texas (176K / 268K).
Solar power is intermittent; therefore, coating Texas with solar would not be a direct replacement for carbon-based sources that are available 24x7. And we are combining consumers of heat with consumers of electricity, which differ in multiple ways. Also we are not taking into consideration GDP growth. And this would need to be spread out globally, not jammed into Texas. In other words, this analysis is only an approximation. However, it does provide a rough idea of how much green energy construction is needed globally over several decades.
Easy at First and More Difficult Later
Initially, solar, wind, and hydro projects are built in the most favorable conditions. However, as one builds, conditions often become less favorable, and costs increase. Hydroelectric dams prefer sloped land with running water. Wind farms prefer windy land away from people or windy shallow water close to shore. And solar farms prefer cheap, cleared, sunny land not far from cities. In other words, decarbonization is likely to be easier at first and more difficult later.
Material Fabrication Needs to be Decarbonized Too
Thousands of solar farms, wind farms, and hydroelectric dams would consume significant amounts of metal and cement. Fabricating these materials with carbon-based fuels would cause CO2 emissions to increase. Therefore, material fabrication needs to be decarbonized too. In theory, the lowest cost way to do this is with nuclear reactors in China. More about that later.
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Infrastructure Is Paid for with Borrowed Money
Most infrastructure is paid for with money borrowed from banks and bonds. Later, these are repaid with revenue generated by the infrastructure. For example, a bank loan might initially fund solar farm construction, while later electricity revenue repays the loan over 30 years.
Economically, decarbonization is like a nation buying one new house each year, where the house represents all green infrastructure built that year. The nation ends up with one “house” after year #1, two after year #2, etc.
Also, each house has a mortgage. Therefore, the nation pays one mortgage after year #1, two mortgages after year #2, etc. These mortgage payments show up as an increase in the costs of goods and services. And one can calculate this increase in units of dollars-per-person-per-year. If one decarbonizes in lowest-cost order, each house is more expensive than the previous.
Can We Afford $100T?
Gross Domestic Product (GDP) worldwide is $96T per year. If we assume inflation and growth are zero, to simplify, GDP over 30 years would be $2,880T ($96T x 30yrs). Subsequently, $100T of infrastructure, built over 30 years, would consume 3.5% of GDP ($100T / $2,880T).
We are looking at bonds and bank loans paying for green infrastructure instead of it paying for carbon-based infrastructure. For example, we are looking at building wind farms in water, instead of building oil drilling platforms in water. Unfortunately, in many cases, green infrastructure costs more. For example, we need more windmills than oil drilling platforms.
Harm from a warmer planet is costly too. For example, damage from sea level rise, damage from storms, and damage from dryer land are all costly. Fortunately, the cost of decarbonization is less than the cost of a warmer planet. However, decarbonization costs are immediate, and many warmer planet costs are several decades away.
How Smart Are We?
In many cases, a population favors itself over its future self. Yet to what extent? As evidence of climate change increases, support for decarbonization also increases. According to a survey, 67% of Americans want to decarbonize. This suggests significant steps will be taken this decade. However, will we be smart and decarbonize at the lowest cost? In many cases, this does not occur for a variety of reasons, which we explore in later chapters.
How Do We Spend Billions of Dollars to Save Trillions?
In theory, one can reduce the cost of green infrastructure with more R&D. Nevertheless, it is unclear what and where to develop. Subsequently, we should be asking top scientists and engineers the following question:
How might we spend additional hundreds of billions of dollars on R&D, over approximately a decade, to save trillions of dollars on green infrastructure?
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