We stand on the threshold of a once-in-a-century change in a market sector worth $10tn annually, or more than 10 percent of global gross domestic product. And as the French street protests of recent weeks have shown, this shift will impact everyone and shape the economy, the environment, international security, and 21st-century geopolitics. We are, of course, talking about energy. The icons of modernity — from high-speed mobility via planes, trains, and automobiles, lighting and air conditioning, modern medical devices and smartphones — all are fuelled by access to affordable and reliable power.
Three paradigm shifts are already shaking up the global energy landscape: the expansion of the natural gas supply due to fracking of shale formations; the electrification of transportation via lithium-ion batteries; and carbon-free electricity generation from wind and solar. All three are economically competitive today because they have benefited from decades of research and development. With room for further cost reductions, they are also becoming disruptive, undermining the value of trillions of dollars invested in traditional assets, such as coal and even clean nuclear plants.
And, if used judiciously, all three could significantly reduce greenhouse gas emissions. Despite the progress, fossil fuels still comprise 80 percent of global energy use. The science is clear that this is causing global warming. Since the beginning of the industrial revolution, the global average temperature rise is slightly more than 1C. But averages are misleading. The true impact on human lives is manifested in the moments and places where the impact has been extreme: heatwaves, droughts and excessive rainfall. It is not a question of if, but when this will reach our neighborhoods, causing flooding, forest fires and air pollution that threaten our wellbeing. If 1C has done so much, imagine the impact of a rise double that size.
To stay below 2C, we can emit only about 800bn more tonnes of carbon dioxide. The global annual emission rate is roughly 40bn, leaving us just 20 years. Thereafter, emissions must total zero. What can be done? First, we need research and development to create cost-effective low-carbon solutions. These could include electricity storage that is much cheaper than present-day batteries; small modular nuclear reactors that are competitive because they cost half as much as today’s reactors; refrigeration and air conditioning that do not cause global warning; zero net energy buildings that are no more expensive than ordinary construction; cutting the carbon impact of both agriculture and the production of steel, concrete and chemicals.