If the figures presented by researchers from Radboud University, the University of Cambridge/C-EENRG, Cambridge Econometrics, The Open University, and the University of Macau, published in the journal Nature Climate Change this week are correct, the global transition to renewable energy and the abandonment of fossil fuels is unstoppable.
And, the researchers point out this transition will continue on its current trajectory irrespective of whether or not new climate policies are adopted by all the world’s countries.
The research paper points out that with current global investments and economic advantages in a low-carbon transition, there will be a drop in demand for fossil fuels before 2035. Readers may remember that in May, Ernst & Young’s (EY) latest Renewable energy country attractiveness index (RECAI) was published.
RECAI chief editor Ben Warren summed up the report, commenting: “While the current economic climate has driven a relentless focus on costs, that focus is paying dividends with the global cost of electricity from renewable sources falling year-on-year. Combined with the plunging cost of battery technology, we anticipate further rapid growth of the evolving renewable energy sector in the coming years.”
Consequences to fossil fuels with the transition
In the wake of the transition, trillions of dollars in assets will be left stranded because of the existence of the “carbon bubble – assets in fossil fuels that are currently overvalued. There will come a point in time and in the not-so-distant future when the bubble will collapse, simply because the transition is ongoing and gaining speed.
When the bubble does collapse, it could lead to global economic instability similar to what the world experienced in 2007, according to Clean Technica.
The study, published on Monday, June 4, shows that a sharp slump in the value of fossil fuels would cause this bubble to burst, and suggests that such a slump is likely before 2035 based on current patterns of energy use.
The researchers used advanced computer modeling to arrive at their conclusions, and have already been under fire from fossil fuel advocates who say the research is skewered to fit the study’s preconceived notions. The trouble with that argument is simply that it isn’t true.
“If countries keep investing in equipment to search for, extract, process and transport fossil fuels, even though their demand declines, they will end up losing money on these investments on top of their losses due to limited exports,” explains lead author J F Mercure of Radboud University and C-EENRG.
How will the U.S. fare under current conditions?
To be clear, there will be winners and losers when the bubble bursts, and the two biggest losers will be Russia and the United States. Based on President Trump’s determination to pull out of the Paris Agreement, the scientists also modeled what would happen if the USA did indeed continue to invest in fossil-fuel assets.
Basically, the modeling showed that without diversifying by investing in renewables, the country’s GDP would be reduced even further. Dr. Mercure clarifies this point:
“With a declining global fossil-fuel demand, fossil-fuel production in the USA is becoming uncompetitive, and may shut down. If the USA remains in the Paris Agreement, it will promote new low-carbon technologies and reduce its consumption of fossil fuels, creating jobs and mitigating its loss of income, despite losing its fossil-fuel industry. If it pulls out, it will nevertheless lose its fossil-fuel industry, but by not promoting low-carbon technologies, will miss out on job creation opportunities, while increasing its fossil-fuel imports by not reducing its domestic fossil-fuel consumption. The outcome is, therefore, worse if the USA pulls out.”
Professor Jorge Viñuales, the co-author, said: “Contrary to investor expectations, the stranding of fossil fuel assets may happen even without new climate policies. Individual nations cannot avoid the situation by ignoring the Paris agreement or burying their heads in coal and tar sands.”
It is interesting to note that the research also supports the views of some policy and investment experts that economics and technology are now driving action on climate change, whereas before, it was all driven by policymakers.
Former UN climate chief Christiana Figueres told the Guardian, a year after Donald Trump announced the withdrawal of the US from the Paris agreement: “There is a big difference between the economics of climate change and the politics of climate change. Is Trump going to stop that advance [by businesses towards low-carbon technologies]? I don’t think so.”
And as Digital Journal pointed out on June 1, ” dozens of Fortune 500 companies, from tech giants like Apple and Google to Walmart and General Motors, have become a major driver of the renewable energy movement in the U.S., investing billions of dollars in new wind and solar projects that power their operations or offset their conventional energy use.”
