Accelerating towards green transition tipping points

Climate change “tipping points” identify thresholds that, once crossed, will create a disastrous feedback loop—think a collapse of the West Antarctic ice sheet.

An extremely interesting piece of research published earlier this year, however, highlights the role of different, “positive” tipping points—in our social, scientific, policy and economic race to generate solutions for the green economic transition. ??

The study , published by environmental services company Systemiq Ltd. in partnership with the University of Exeter and climate expert Simon Sharpe , emphasises the role of learning by doing in driving superior performance, reducing costs thanks to economies of scale and even helping transform social norms.

In other words, it is an application of Wright’s Law to the green economic transition. As Azeem Azhar describes in his excellent book The Exponential Age , Wright’s Law emphasises “the relationship between demand and skill. As demand for a product grows, the people producing it have to make more of it. And that means more opportunity to learn by doing. As they put what they have learned into practice, costs get driven down further and further”.

Systemiq’s study points out that we have already crossed one such tipping point, in the case of electricity, as renewables are now cheaper than fossil fuels in much of the world:

• In its central scenario published in December last year, the International Energy Agency sees global renewable capacity increasing by almost 2,400 GW (75%) between 2022 and 2027—that is the same as the entire installed capacity of China.
• In fact, global power sector emissions may have already peaked, according to analysis London-based think tank Ember published last month.

In the case of electric vehicles (EVs), according to Systemiq, the tipping point hasn’t been reached yet – but is likely close.

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Where support is needed

Unfortunately, in certain areas or sectors, the presence of positive feedback loops, with their potential to establish the dominance of clean alternatives in the market, is less certain.

One such example is that of heat pumps used for heating buildings. While heat pumps have the potential to provide heat at a lower operating cost compared to gas, their upfront cost may remain higher than that of a gas boiler, even with cost reductions resulting from economies of scale. As a result, achieving a situation where heat pumps are widely adopted may depend on bridging this cost gap, possibly through government subsidies.

Even when tipping points have been reached, the pace of the transition cannot always be assumed to be smooth. The electricity sector, for instance, faces obstacles such as lengthy permit processes for constructing renewable power networks, opposition from vested interests, legitimate concerns regarding the socio-economic impact of the energy transition, and temporary shortages of essential minerals or components.

These challenges underscore the necessity of implementing policies that support the transition of sectors towards achieving net-zero emissions. For instance, providing retraining opportunities and creating new job prospects for workers displaced from polluting industries may be required even after the tipping point has been surpassed.

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Tipping cascades

While analyses of individual sectors are clearly important for the green transition, the study’s most promising conclusion is that "tipping cascades" may emerge as a result of interconnections between different areas.

The degree of certainty about the likelihood of these cascades emerging varies substantially across sectors, but the authors highlight different areas where they have the potential to occur.

For example, a growth in EV adoption to 60% of global vehicle sales would lead to a surge in battery production volumes. This would result in a significant drop in the cost of energy storage solutions more widely, making renewables more dependable (even when “the sun doesn’t shine and the wind doesn’t blow”)—and hence further encouraging investment in them.

Similar situations could unfold with more financing of research and the introduction of policy mechanisms to drive the adoption of green ammonia in fertiliser production, which could lead to its adoption in areas such as shipping and steel production.

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Policy tips

The bottom line is that national net-zero plans should seek to accelerate processes that allow sectors to reach positive tipping points, and especially to generate tipping cascade situations. Businesses must be ready to not just contribute to these efforts, but also to identify the opportunities they create and act swiftly to make the most of them.