Net Zero by 2050

Ok then

In May this year, the IEA published “Net Zero by 2050: A Roadmap for the Global Energy Sector”. It is arguably the most comprehensive take on measures to embark upon in order achieve net zero emissions three decades from now. If you don’t know what net zero means, a simple way to explain it is that the greenhouse gases going into the atmosphere will be balanced by what’s removed from the atmosphere. Unless you have been residing under a rock with no means of communicating with the outside world, or you have other more urgent every-day priorities similar to those of the millions of people living below the poverty line, you would be well aware of its importance considering the need to combat climate change, particularly limiting the rate at which the world is heating up.

If you haven’t read the publication yet, I think you should. Or at least read the Summary for Policymakers. Particularly the part where it says the “global pathway to net‐zero emissions by 2050 detailed in this report requires all governments to significantly strengthen and then successfully implement their energy and climate policies”. You are unlikely to find me agreeing with what I consider to be the type of theatre that has surrounded Greta Thunberg. However, when she delivered her latest rendition with repeated use of the expression “blah blah blah”, I was for once inclined to consider agreeing with the theatre. Is this harsh? I appreciate that in this brave new world of ours, climate change discussions can seemingly only be held in one direction and everything that questions how we want to go about tackling it risks being bunched up under climate change denial. However, there is a big “how” question that appears to have been left to the ether here, particularly for developing countries. Let’s go over that statement again, this time with deliberate highlights. “The global pathway to net-zero emissions by 2050 … requires all governments to significantly strengthen and then successfully implement their energy and climate policies.” All 196 of them (or, at least, all 193 member states of the United Nations). Simultaneously, or at least at different levels of mutually agreed determination.

This report was greeted as a bombshell, with many suggesting that the IEA was finally “starting to get it” (e.g. here). The assessment was that if an organisation perceived as either conservative or batting for conventional energy could be this damning about fossil fuels, then perhaps a very serious corner had been turned. Others greeted the report with some measure of incredulity, particularly on the basis of what seemed, to them, a distance from reality and practicality. I was initially one of them. On reflection, I have adjusted my views on the report. I think all the IEA did was to objectively present the reality of what it means to make the kinds of commitments that would no doubt emerge from the forthcoming 26th UN Climate Change Conference of the Parties (COP26) in Glasgow. I am perhaps reading too much into this particular interpretation, but I imagine its current Executive Director, Fatih Birol, has a say in the direction of official expression in the organisation. This type of what-it-means take is not new to him. I vaguely remember sitting at a presentation he gave in 2007. He was their Chief Economist then. In trying to explain the potential for increasing oil demand growth coming from India, he urged the audience to consider what an upward change in GDP would do to the sudden abilities of people to afford the 1 lakh car, and what that would in turn do for gasoline demand. The audience immediately grasped the scale of what he was talking about. I instinctively wondered why it would be considered fair by anybody to deny people the joy of achieving their dream of escaping poverty and acquiring better mobility through a 1 lakh car, for example. That is what I think has happened here, just with over 400 of such milestones happening across a variety of sectors globally, simultaneously or in some sort of managed sequence.

How is this going to happen? Seriously, how? Using oil as an example, and data from BP’s World Energy Outlook, we are talking about a four-fold reduction in global consumption. For gas, we are talking about reducing consumption by over one-and-a-half times by 2050. The expectation is that solar, wind, biofuels, and nuclear will do the bulk of the replacement along with increases in energy efficiency, and tackling methane emissions in fossil fuel production. The majority of these adjustments is expected to come from the United States, Europe, and China (they, according to BP’s estimates, are expected to reduce their oil consumption five-and-a-half times current levels by 2050, and one-and-a-half times for gas consumption over the same period). Africa is expected to halve its current oil consumption in the same timeframe. This is not practical for, nor fair on, a continent that contributes 4% of global CO2 emissions.

Think about what would be going on in the United States and Europe, using one example, with switching cars from internal combustion engines (ICEs) to electric vehicles (EVs – road transportation is a huge part of oil consumption; some 40%). I will take my diesel Kia Sorento to the car dealership and trade it in for a Tesla Model X (a really cool car by the way). That Kia Sorento will end up in one of the many developing countries where right hand drive is the norm. If that developing country experiences – and it likely will – economic growth that brings lower classes up into the middle class and lower middle classes to the upper middle class, many of its citizens in this transition will be faced with a choice of demonstrating their newly acquired status with this Kia Sorento or a more expensive hybrid or EV. Think about what choice they will make. Imagine if millions of people like me do this trade, and millions of these ICEs go to these countries (because it will be naïve, I argue, to think that they will be destroyed for conversion of their parts to other uses as opposed to being sold on). Imagine the millions of choices to be made by these new winners in a small upward economic transition. What would your bet be?

You could argue that car manufacturers, dealers, shippers, and all involved in the handling of ICEs in Europe and the United States will be required to destroy them (I know, but let’s test it for argument). It is going to come at a cost. Who will bear this cost? We all will. If it isn’t from our taxes which will manifest through such mechanisms as government subventions to these aforementioned actors, it will be in the price we pay for the new life such as directly in what we pay for the new EV, or from a combination of both. It is also not going to come cheap for developing countries either, and more importantly. If African countries are expected to reduce their fossil fuel consumption, significantly large-scale investments in renewable energy alternatives would need to be made. This is very expensive. Developed countries will have to make good on their promise to raise at least US$100 billion every year in climate finance for developing countries, for example. Nigeria’s infrastructure deficit alone has been argued by its current Central Bank Governor, Godwin Emefiele, to be this same amount and frequency. Now, do Pakistan. Or Bangladesh. Or Uganda. Or Tanzania. Or South Sudan. Or just pick a random developing country from the World Bank Development Indicators database.

Think about how slowly developing countries would need to grow economically in order to fit the assumptions modelled into a net zero future where – for example and sticking with BP data because it is easier to play with in Excel – Africa's combined share of global primary energy consumption is expected to move from about 3% now to about 6%. You have to assume that either the population growth rates for African countries will slow down, or that if they don’t slow down, they wouldn’t have that much GDP growth-related increases in energy use or perhaps even access to warrant any energy demand concerns. Or a combination of all of them. As a young man in my final undergraduate year, I remember excitedly reeling off some statistics to my father about some world data I had just come upon. His response shaped how I look at a lot of things till this day. He asked, “son, which world?”. I have since adapted the question to “whose world?”. This world does not appear to have given much consideration to the multitude of growth scenarios that could play out in the developing world. To be fair, and sticking with Africa, the historical numbers have not given much to work with.

Think about how much further government expansion would have to happen in order to achieve net zero. Think about how much liberty would be traded for such expansion. The argument currently put forward is for a main role of governments to be one of helping achieve a just and equitable transition. What would a just and equitable transition look like? Who will decide, in each of these countries, what is just and equitable and for whom? I will do a separate piece on economic freedoms. For now, my instinctive interpretation of the role of governments in achieving net zero by 2050 is more regulation. Regulations to limit, or restrict altogether, issuing licenses to explore for oil and gas, for example. Regulations to encourage companies to invest in projects whose investment metrics are not objectively positive. Regulations to increase the amount of taxpayer funded spending on projects whose economic viability has been determined either by politicians or by bureaucrats or by both, so you can expect a lot of winner-picking. And so on. Think about the behavioural responses that need to be engineered, not necessarily by the market, but by governments. Think about Adam Smith’s man of systems.

Think of the geopolitical implications. One example is the Democratic Republic of Congo (DRC). DRC holds over 60% of the world’s cobalt reserves. Cobalt is particularly useful for lithium-ion batteries which are in turn a particularly important storage ingredient for making renewable energy projects work (EVs or solar photovoltaic or PV power storage). Unless there is a rapid and economically sustainable shift away from technological dependence on lithium-ion batteries, we are going to have to deal with countries like DRC more frequently in order to achieve the scale of expansion in EVs and solar PVs in particular. Think about how previous relationships between developed and natural resource-rich countries have been historically. Think about the current political instability in countries like DRC. Think about what this kind of dynamic has done to commodity prices historically.

Think about how well countries have done so far in meeting their Nationally Determined Contributions (NDCs) as committed to in the Paris Agreement. The IEA report notes that the performance of countries in this regard has so far not been stellar. Oftentimes, it has not been due to deliberate fault on the part of the countries making these commitments. Take Lebanon, for example. Their NDCs can be argued as reasonably ambitious and achievable. But it can equally be argued that a wicked combination of economic turmoil, political problems, a tragic accident, and now a serious fuel shortage, would naturally shift the attention of its citizenry to other pressing day-to-day matters. This is the reality for many developing countries whose governments, as requested by the IEA report, must significantly strengthen and then successfully implement their energy and climate policies. US$100 billion per annum ain’t gonna cut it.

These are some of the hundreds of questions that ought to accompany the hundreds of milestones expected of the net zero target. These are the kinds of questions I would like brought to the table in Glasgow, for awkward but serious debate. What would I have put in the summary for policy makers, particularly of developing countries? I would say you cannot sacrifice your priorities. That should, always, be your loyalty. Have you gotten access to electricity sorted at scale and at prices you are not unsustainably subsidising? Can you even afford to subsidise? Have you finished building basic infrastructure? Are you not going to produce anything? All of this needs power. Large scale power. Not cute, one solar PV panel over a hut, power. Grid equivalent scale stuff. Cheap power. You could say the IEA report fired the starting gun for these questions to be asked. Are we going to ask them?