Countering Climate Change: No Big Bang ??

Somil Goyal , Bhupin Gupta and Maria King discuss the Net Zero timeline.

As the world re-opens after Covid-19, we see one of the largest energy demand shocks ever. At the same time, geopolitical factors have increased supply risk, especially in Europe. This perfect storm leads to a huge increase in energy prices. What it also shows is that short-term and long-term goals on Net Zero can be well-aligned. By being more careful with our energy consumption and giving priority to local & renewable sources, we can: a) Save money here-and-now, and b) Move faster to reduce Green House Gas (GHG) emissions, thus hitting Net Zero goals faster.

So when can we expect business and consumer behaviours to shift decisively - in energy, in transportation, in food and other consumption sectors? Well, one point is clear: we need not wait for a Big Bang?in 2030. Instead we expect a continuous series of small steps - starting today and going through to 2030 and beyond. In this article, we focus first and foremost on energy transition, but also cover key points in other sectors.

Multiple technologies can and will be used to achieve Net Zero. Many are not available today, certainly not at scale. But a set of measures with near-term benefits are available for use now. And we can expand this solution set as solutions expand over time.?Those who wait too long will end up with stranded assets and increased pain of transition. Those who move too quickly will make false bets. With a commercial Net Zero strategy, both risks are avoidable.

Granular clarity on the timing and roadmap of GHG reduction towards Net Zero is crucial for individuals and businesses.

The Short Term (1-3 years)

Over this period, we expect energy transition to move in small steps. We do not expect consumers and businesses to count solely on renewables. The focus in the short term will be as much on renewables scaling as on mitigation and replacement of the most polluting sources, such as coal and heavy oils. That means comparatively lower carbon sources, even fossil fuels, have a future. For example use of natural gas in power production, coupled with methane emission reduction, will be crucial for short-term benefits. Substantial funding pools do go towards making this shift.

At an individual level, the best efforts will be to flatten the peaks in electricity usage. For instance, by encouraging smart building management or by timing high power gadgets (e,g, dishwashers, washer-dryers and electric vehicle charging). These measures will reduce peak fossil fuel demand and drive greater renewables share in the energy mix. This also saves us money. Structurally this will drive demand for smart city and building automation solutions.

Other GHG-saving adaptations will also become more popular, e.g. substituting travel (esp. jet and internal combustion engines) and animal protein consumption. No surprise then that there is huge investor interest in alternate proteins, telepresence devices and remote productivity. EV is already a revolution with Tesla also being almost as valuable as all leading fossil fuel automakers combined.

Another possible measure for individuals or businesses is to calculate and offset their carbon footprint by voluntarily paying for green initiatives, e.g. in reforestation or energy efficiency. Voluntary carbon offsetting is somewhat controversial, even among the authors of this article. Building credibility can be challenging without governmental backing. Also if market players use it to avoid measures to genuinely reduce global emissions, then it may be counter-productive. Nonetheless, carbon offsetting brings convenience and signaling benefits, and is growing exponentially. Private sector initiatives, like the Taskforce (TSVCM) are working to scale an effective and efficient voluntary carbon credit market. At the very least, such products do encourage greater accountability and transparency.

The Mid Term (4-6 years)

Over the medium term, we expect improved energy storage technologies and smarter power systems. These will facilitate the use of ever more renewable energy in the overall energy mix. Individual efforts to choose green energy, even at marginally higher prices, could help reach this stage faster.

We expect increased use of Carbon Capture, Utilization, and Storage (CCUS) in energy and downstream industries. We also see hydrogen becoming a prominent energy vector, e.g. blended with natural gas, in fuel cell electric vehicles, as a potential source of heat, and in hard-to-abate industries like steel and cement.

Both CCUS and hydrogen are currently funded by university research, development grants or long-term corporate R&D. These are capital-intensive areas, and so there is a role for governments (financial support and regulatory certainty) before substantial leverage from commercial financing can be obtained.

Outside energy, we expect sustainable solutions in construction and agritech (e.g container farming) to be available at scale in this timeframe.

The Long Term (7-10+ years)

Finally, for the longer term, more R&D investment will continue in better battery storage, cheaper & smaller scale CCUS, efficient power system management and advanced fission reactors.?Newer elements that we expect include: the development of an international hydrogen value chain (shipping, storage etc.), commercial transport on green hydrogen, and possible advent of nuclear fusion.?

Such investments need to be underpinned by innovation investment from governments, a support structure from commercial financial institutions, and a mindset among consumers to champion the common Net Zero goal.

Achieving Net Zero is not a solo effort from citizens, industry or government, but a holistic mix of all three.

To share your opinions and to create your own personal or business roadmap, do please get in touch.