Last month, 16-year old Swedish climate change activist, Greta Thunberg, made headlines again with her speech at the Climate Action Summit in New York. At a young age, Greta is demonstrating impressive leadership in holding world leaders responsible for the lack of sufficient action to combat climate change. She felt that they left her and her generation no choice but to quit being kids and take ownership of their future, which is being destroyed by the greed of adults.
Greta was deeply concerned that world leaders were not ready yet to present real solutions or plans to meet the 1.5 degree by 2030 goal, because they were not “mature” enough. She cited an Intergovernmental Panel on Climate Change report setting a “total carbon budget” of 420 gigatons of CO2 in the beginning of 2018. And it’s one we have already missed. This got me thinking…
While brave and admirable, will Greta’s activism be supported by the kind of multi-generational leadership the world needs to meet its climate change goals? Are the rest of us fully informed as to what effective leadership in this space looks like and what compliance actually requires?
As widely understood, the failure to meet carbon emission goals is largely driven by the reliance on fossil fuels to satiate our ever growing hunger for energy. This makes it easy to point at government inaction and the greed of fossil fuel producers and large consumers for limiting our access to an assortment of zero- or low-carbon technologies. Regardless of the extent to which governments and oil, gas, coal and related industries are responsible, environmental activism and related studies seem to be largely focused on one side of the energy equation: supply. The concern has largely been about our energy sources and the insufficient investment in zero or low carbon technologies. Understanding the demand side of our energy equation is obviously trickier. But if climate change activism and leadership across relevant industry sectors and economies are serious about meeting their carbon emission goals, they would benefit from addressing a couple of questions.
How feasible is it for investments in zero or low carbon alternative technology over this coming decade to grow at a pace that would support energy demand growth and displace fossil fuel sources?
Over the last decade global renewable capacity has more than doubled from above 1,100 GW in 2008 to above 2,300 in 2018 GW according to the International Renewable Energy Agency (IRENA). Still, renewable energy supplied about 15% of global energy demand in 2018 according to the EIA. Even if global consumption for energy were to grow by no more than 1%, we will see energy demand growth of 20% in the next 20 years as predicted by the Shell Energy Sky Scenario of 2019. This means that investments need to more than double current levels of renewable capacity only to support demand growth, i.e. limit further increases in rather than reduce CO2 emissions. To effectively displace carbon-emitting fossil fuel sources and reduce our emissions, the world needs to more than triple or quadruple its renewable capacity. The technical, geographic, and financial feasibility of the required fast-paced wholesale transition in the energy supply mix could definitely use some more analysis. To what extent is multi-generational leadership of climate change initiatives ready to drive this analysis?
And a more burning question is do we really believe that our global demand for energy will grow at a drastically slower pace in the next 20 years compared to the last 20 years?
The more we use energy for transportation, industrial activity, electricity, heating, cooking, etc the more CO2 we send to the atmosphere. And it could be that our growing consumption of energy is making it near impossible to meet climate change goals. Climate change science and activism is mostly originating in the developed OECD world and more specifically in the Western Hemisphere. This is where energy demand growth is beginning to slow down in many areas and is expected to remain flat or even decline in the future. In non-OECD, energy demand has grown by over 3% per year on average over the last 20 years. Most of the recent energy consumption outlooks expect energy demand in the developing world to adhere to a growth rate of no more than 1-2% per year over the next 20 years. The need to triple or even quadruple global renewable energy resources in the next 20 years is based on these low to moderate energy demand growth expectations. But is it realistic to expect the developing world in Africa and Asia Pacific for example to curb its appetite for energy to this extent, given all the socio-economic and political change?
Have traditional methods for understanding and forecasting energy demand become obsolete?
Global energy demand is an extremely complicated story that requires hard core data analytics and modeling. Energy demand forecasting models have typically been based on the extrapolation of past behaviors. The relevance of past trends is declining due to major socio-economic and technological transformations, not to mention climate change itself. Any serious demand forecasting exercise will need to address multiple dimensions around these transformations and they affect our appetite for energy, for example:
- Home to more than one third of global urban population, the developing world is still primarily rural. The rate and nature of economic growth could drive urbanization much faster than historic rates in several of these economies.
- The anticipated growth in economic activity and urbanization in the developing world simply means the need for automotive mobility will only grow. This will happen in places where economic pressures make it nearly impossible to see any form of meaningful adoption of newer fuel-efficient vehicles, let alone EVs.
- About 14% of the world’s population (about 1 billion people) is still without access to electricity. Universal access is planned by 2030 in most countries according to the UN. Many uncertainties surround the timing and nature of this access.
- Complicated decision making processes among individual energy consumers, consumer groups, or policy makers will drive investments in distributed generation, micro-grids, or electric vehicles. Understanding the impact of these decisions on the operation of energy systems and eventual energy demand growth can be even more challenging.
- An ongoing technological transformation at a pace that is catching us by surprise every second. Digital technology adoption across different sectors can make energy demand growth easily exceed moderate expectations not only in the developing world, but also in the developed world. In the financial sector, a recent analysis by the University of Cambridge estimated that bitcoin-related activity alone consumes more energy than the entire nation of Switzerland!
The real challenge for energy transition leadership: combat climate change but cooperate with others around the table
Clearly, it’s much simpler to understand the investment and operational decisions of hundreds of regulatory bodies or thousands of businesses than it is to understand what these transformations mean for the energy consumption of 7.7 billion individuals. This is why understanding the responsibility of policymakers and energy producing and consuming industries in the success or failure of energy transitions is more straightforward. But the bad news is that if demand does not assume an active role in meeting decarbonization goals, we could see consumption growth at a rate that supply cannot keep up with.
The good news though is that one of the key demand challenges, the digital transformation, can be an enabler. We have the technology that will allow us to better access and understand behavioral, socio-economic, and energy demand dynamics and predict future dynamics. To support Greta and her generation protect their future, responsible multi-generational leadership of global energy transition takes two things:
- Accepting the analytical challenge of projecting how energy demand will or won’t grow and its implications on carbon emissions; and
- Setting clear objectives for energy demand growth and consumption profiles that support climate change goals and developing innovative strategies to meet them.
If the world needs to go through a low-carbon diet then having an exciting assortment of zero- and low-carbon technologies in its pantry alone isn’t sufficient. Like any diet, an intentional understanding and management of our energy consumption behavior is a necessity.