The Environmental and Energy Study Institute (EESI) held a briefing showcasing two new reports on how to transition the United States toward a low carbon economy. The reports, From Risk to Return: Investing in a Clean Energy Economy and the United States Mid-Century Strategy for Deep Decarbonization, present a range of pathways that can achieve deep reductions in greenhouse gas emissions between now and 2050. These pathways involve mixtures of: energy efficiency, renewable energy, nuclear power, carbon capture and storage, increased carbon sequestration in U.S. lands, and reductions in non-CO2 emissions. These pathways rely on commercial or near-commercial technologies that American companies are adopting and developing. The briefing explored how deeper investment in clean energy can yield long-term dividends for the American economy.
In a low carbon economy, total electricity generation could double between now and 2050, presenting a prime opportunity to reap the benefits of investing in clean energy. An average of $320 billion a year in additional private sector investment would be needed between now and mid-century to reduce total energy sector CO2 emissions by 80 percent by 2050. This bold step forward could in turn yield an average of over $360 billion in annual savings from reduced spending on fossil fuels.
Dr. Karl Hausker, Senior Fellow, World Resources Institute
- This latest Risky Business report, From Risk to Return: Investing in a Clean Energy Economy, is a detailed report on the impact of climate change from a business perspective. It focuses on what investments are required to reduce carbon emissions by 80 percent by 2050 (the November White House report discussed below considers all greenhouse gas emissions). The WRI report was commissioned by Risky Business, an initiative to "assess and publicize the economic risks to the U.S. associated with climate change." Risky Business was founded by former New York City Mayor Michael Bloomberg, former U.S. Secretary of the Treasury Hank Paulson, and businessman Tom Steyer.
- The world needs to reduce global greenhouse gas emissions by 80 percent from 1990 levels to make a meaningful impact on climate change. From Risk to Return finds that such a transition is technically and economically possible using existing technology (commercial or near-commercial).
- The report explores four potential pathways to get to an 80 percent reduction of carbon emissions within the United States by 2050:
- High Carbon Capture and Sequestration
- High Nuclear
- High Renewable
- Mixed Resources
- Each pathway addresses three pillars of action:
- End use fuel switching to electric sources (e.g., switching to electric cars).
- Decarbonization of electricity (generating electricity with lower carbon sources).
- Energy efficiency
- The four pathways all shrink oil and coal use dramatically (though less so in the high carbon capture and sequestration pathway); slightly reduce natural gas use; increase renewables, biofuels, and nuclear; and reduce our overall energy consumption.
- All pathways will require a high capital investment. But the investments lead to even higher savings in the long run, since fewer fossil fuels are consumed. Clean energy investments would result in a positive cash flow starting in the 2040s-2050s. In the 2020s, necessary investments would average about $215 billion a year, with savings in the $65 billion a year range. In the 2030s, that would increase to $400 billion a year vs. $370 billion a year in savings. The payoff would really come in the 2040s, when annual investments, beginning in 2041, would be about $360 billion a year whereas savings would be $700 billion a year (because by then the clean energy technologies will be mature).
- The annual increase in energy investments from 2020-2050 would average about $320 billion a year, which is roughly equal to the average annual IT spending in the United States over the past decade ($350 billion a year).
- Historically the United States invests about 15-20 percent of total GDP every year (currently, $3 trillion in investment represents 16.7 percent of the total GDP of $18 trillion). The four pathways would only increase that by about 1 percent (from about 17 percent to about 18 percent).
- Investments to reduce carbon emissions would create 1 million net jobs by 2050, even taking into account job losses in fossil fuel industries, and such investments would generate greater economic growth because more money would be kept in the domestic economy instead of being used to import fossil fuels.
- There would nevertheless be challenges to overcome in order to carry out investments of this magnitude. The pace of building power plants would need to increase 2-4 times the current rate, and the rate of upgrading transmission infrastructure would also need to increase.
- The report does not include many policy prescriptions, but it does recommend putting in place a price on carbon, and eliminating subsidies for fossil fuels.
Dr. Noah Kaufman, Climate Economist, World Resources Institute
- The Paris Climate Agreement invited countries to develop long-term (mid-century) carbon cutting strategies. This resulted in the United States Mid-Century Strategy for Deep Decarbonization, released by the U.S. Government in November 2016.
- The U.S. strategy received input from the Environmental Protection Agency (EPA), the Department of Energy (DOE), the Department of Agriculture (USDA), and the network of National Labs, and accounts for deep decarbonization while supporting a growing economy.
- The United States needs to cut its greenhouse gas emissions by 80 percent to fulfill its commitment under the Paris Climate Agreement.
- Dr. Kaufman focused on five takeaways:
- Our current trajectory is insufficient. We need to show greater ambition before 2030.
- Economy-wide planning is needed. It is necessary to address all three pillars (increased electrification, lower carbon electricity generation, energy efficiency) to reduce greenhouse gas emissions by 80 percent in a cost-effective manner.
- The near-term (2025) to long-term (2050) pathways are very different. To achieve our 2025 goals, not much needs to change (although "business as usual" is not an option, as it results in rising emissions). But to achieve its 2050 goals, the United States will need to take much more significant action. It would be more cost-effective to take stronger action earlier (and exceed our 2025 goals), rather than waiting until 2025.
- Electricity generation increases in all pathways. Electricity generation could be mostly carbon-free thanks to a high diversity of renewables, though the continued use of some natural gas is likely. Putting a price on carbon and supporting new technologies would help avoid locking the economy into a technology.
- The more we act on climate, the more we drive down costs on new solutions. It is a virtuous cycle.
Question & Answer Session
“Did you do a high energy efficiency scenario?”
- Hausker: No, we mostly worked on looking at a mix of energy fuel scenarios.
- Kaufman: We did a smart growth scenario, in which economic development becomes more energy efficient. The United States could achieve an additional 10 percent reduction in energy use by 2050.
“Did you explore a non-nuclear solution?”
- Hausker: We did not explore reducing nuclear. It would be a more daunting challenge to switch to low-carbon generation if nuclear were cut, since it runs at 90-95 percent capacity (compared to about 30 percent for most renewables). Cutting nuclear would require much larger (and more expensive) investments in renewables.
- Kaufman: Cutting off nuclear would indeed be a more costly option to take.
“Whom should we look to for clean investment since the new Administration seems it may not be a strong proponent of clean energy?”
- Kaufman: Both government and private industry have a role to play.
- Hausker: There will be growing momentum in the private sector to invest more in clean energies as they become cheaper, and state and local governments are looking to continue their pro-clean energy policies (e.g., state Renewable Portfolio Standards and goals to reduce greenhouse gas emissions).
“Are there examples of policies we could put in place at the local and state government levels?”
- Kaufman: California has put in place policies for a long term vision. States and cities are moving forward with solar, wind, and energy efficiency, and that push forward is very important.
- Hausker: Localities have a tremendous impact on the transportation network and can do a lot to promote public transportation, shared rides, walking, and biking. They can also do a lot to support distributed energy, such as solar rooftop. No matter the energy source, there will be opposition to building and development. Making permitting easier is an important role policymakers can play.
Karl Hausker has worked for 30 years in the fields of climate change, energy, and environment in a career that has spanned the federal government, research institutions, NGOs, and consulting. Much of his work has focused on the energy and transportation sectors and on low carbon, resilient development strategies.
At WRI's U.S. Climate Initiative, Noah Kaufman focuses on carbon pricing and other market-based climate solutions. He has previously served as Deputy Associate Director of Energy & Climate Change at the White House Council on Environmental Quality and as a Senior Consultant at NERA Economic Consulting.