“Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.”
Pathways to 1.5°C
Market-driven, transformative solutions to combat climate change
What if the real momentum in actions to address climate change in the years ahead come not from top-down central government mandates but from voluntary decisions by customers, communities, corporations, and other institutions to choose clean and affordable energy options? What if the surprisingly steep cost declines and performance improvements in renewable energy supply, electric vehicles, batteries, and other key technologies still have much, much farther to go as global manufacturing scales up and further technology advances are integrated? What if the adoption of new clean energy technology continues to gain momentum globally as a disruptive industrial revolution, following the S-curve patterns of adoption that have characterized other technology shifts in the economy?
While they may sound implausible, these what-ifs describe patterns of disruptive change that are consistent with historical periods of fundamental change in the economy. The surprising outcome is that some transitions occur much faster than almost anyone anticipates, accelerated by reinforcing feedbacks in industrial economics, social behavior, finance, and technology.
In the next few weeks, RMI will release analysis results describing five scenarios to limit global average temperature increases by the end of the century to approximately 1.5°C above preindustrial levels, a goal that most analysts see as nearly impossible to achieve. According to the United Nations Environment Programme’s recently released Emissions Gap report, even if the pledges made by nations participating in the Paris Agreement are fulfilled, global emissions will put us on a path to temperature rise of 2.9 to 3.4°C this century. Limiting temperature increases to less than 1.5°C will require more and deeper change in the years ahead than most analysts contemplate, with shifts not only in the energy sector but also in agriculture and land use. Surprisingly, our assessment indicates that such changes are still within reach, but only if global actions lead to a dramatic acceleration of the energy transition.
RMI’s analysis explores transformational changes in energy, agriculture, forestry, and land use to rapidly reduce global greenhouse gas emissions and increase carbon sequestration. Rather than assuming radical changes in energy technologies, this work assumes radical changes in the scope and scale of manufacturing and adoption of renewable energy technology, taking advantage of fundamental shifts enabled by the convergence of efficiency, electrification, renewable supply, and energy management.
Instead of assuming incremental capital turnover, we base our scenarios on market adoption curves similar to those that have characterized earlier disruptive technologies ranging from automobiles to cell phones. If the adoption of clean energy technologies follows similar market diffusion trends, and there is good reason to believe that they can, we conclude that a nearly 100 percent renewable energy system is feasible by the mid-2050s. High levels of energy efficiency and electrification of most end-uses would enable a global energy system powered largely by renewable sources. This finding builds on RMI’s detailed and rigorous national-level analyses—Reinventing Fire: China and Reinventing Fire (U.S.)—that indicate that such transitions can deliver substantial net economic benefits while simultaneously supporting overall economic growth and slashing carbon emissions.
RAPID SHIFTS ARE POSSIBLE IN INDUSTRIAL AND ECONOMIC SYSTEMS
Most conventional scenarios describing a transition to a clean energy future are constrained by assumptions about low capital turnover rates for energy-related assets. This restricts how quickly new and innovative technologies and business models can be adopted. Such models, however, may underestimate the role of innovators and disruptors in a rapidly transforming global economy. Where disruptors are able to offer a superior value proposition to existing customers or create new-market footholds by turning noncustomers into customers, they can grab increasing shares of revenues surprisingly quickly, sometimes upending traditional industry structures.
Economic history points to several such examples where big-bang innovations have led to rapid and profitable innovation in interconnected industries. Market diffusion curves or S-curves are indicative of trends of adoption of innovative, value-creating technologies. The initial years are typically characterized by ongoing technological changes and improvements while product designs are still evolving. Adoption increases rapidly as customer-friendly dominant designs are adopted in the market and the trajectory for future growth is defined. The final phase marks saturation in adoption as incremental design improvements yield marginal further improvements in value to customers. It is at this stage where new designs and technologies often jump in.
The automobile is one such example. In the early 1900s, the providers of horse and buggy equipment and services did not anticipate the quick rise of the automobile. But Henry Ford’s Model T was able to compete on both price and performance, reducing cost by over 60 percent in 13 years while providing reliable, clean, and faster modes of transportation, and inducing complementary innovations in several related industries, including finance. Car-owning households soared from 8 percent in 1918 to 60 percent by 1928, when three-fourths of all car-owning households were taking advantage of newly available car loans pioneered by GM and other companies to overcome the high initial cost of car ownership. Over time, the changes initiated by the advent of the automobile had sweeping consequences across many sectors of the economy. This is similar to what happened with the television. New tools for communication and information distribution led to radical new ways of production and advertising. In these and other examples, entirely new products and services followed in the wake of an initial “big-bang” innovation, spurring more activity and innovation farther down the line.
WHY THE ENERGY SECTOR IS RIPE FOR DISRUPTION
Bringing this perspective to the clean energy transition yields a contrarian view of what is possible. Several complementary factors suggest that the following current trends could lead to a sustained growth in renewable energy.
Strong feedbacks between adjacent and interdependent sectors
The energy transformation ahead relies on strong synergies and convergence between sectors and technologies. For example, lower cost of batteries will support increasing renewable energy penetration on the grid, greater flexibility in energy use, and higher electric vehicle deployment. These effects will be further reinforced by advances in information technology and propagation of smart technology that make other technology systems more customizable and adaptable. The compounding effects of simultaneous changes in multiple sectors of the economy are the drivers of economic and industrial revolutions.
POSITIVE FEEDBACKS THAT COULD ACCELERATE THE ENERGY TRANSITION
Process and product innovations will continue to drive down costs of solar, wind, and battery systems, leading to higher adoption of renewable energy resources. The improvements ahead are likely to come from steady improvements in materials science and design, and from rapidly scaling production. Wind generation is now so cheap that it is forcing the economic shutdown of older coal, gas, and nuclear plants. Solar power already costs less than traditional fossil fuel powered plants in many locations, and both rooftop and utility-scale solar prices are expected to drop nearly 30 percent by 2020. There is no evidence yet that the industry has reached the furthest extent of its learning curve.
Adoption is diffuse and broad
Multiple actors in many different markets spur the current renewable energy movement. Much of the growth in renewable energy globally is led by private companies and customers, who find compelling economic reasons to make the switch. This is in contrast to a traditional utility responsible for the planning and operation of a grid that supplies power from centrally owned power plants. Instead of large, capital-intensive projects, centralized decision making, and high-risk business-to-business transactions, much of the new energy revolution is diffuse, smaller scale, decentralized, and based on business-to-customer transactions.
Growth is global
Previous waves of energy supply—oil, natural gas, hydropower, and nuclear—were significantly constrained by geography and the challenge of moving energy supply from source to point of use. Renewable resources, on the other hand, are abundantly available worldwide, often in reasonable proximity to demand. The paradigm for scaled deployment is fundamentally different and stands to benefit from rapid scaling of manufacturing and widespread distribution.
Techno-economic paradigm shifts, including the current one led by renewable energy, are led by early adopters and fast followers who pave the way for the rest of the economy. The renewable revolution is currently led by countries including Germany and Denmark and, closer to home, the states of California and Hawaii. This continues to spread to other parts of the world including China and India, where year-on-year growth rates for solar photovoltaics (PV) in 2015 were approximately 300 percent and 137 percent, respectively. This transformation has been enabled by strong political and business leadership, coupled with a public recognition that action against climate change must be a societal imperative.
TRANSFORMING THE ENERGY SECTOR
Based on these core assumptions, our analysis develops estimates for adoption of demand- and supply-side measures such as energy efficiency, electric vehicles, solar PV, and wind generation that will be critical to reduce emissions from the energy sector.
An underlying tenet for our scenarios is that, over time, much of global energy demand can be electrified, enabling greater efficiency of energy use together with higher renewable energy penetration overall. The ground transportation and buildings sectors can readily be electrified, while air transportation and high-temperature industrial uses may need to rely on other alternatives such as biofuels. The shift toward electrification of transportation is already beginning, with electric vehicle stocks doubling nearly twice over the past few years. In addition, Tesla and other manufacturers are planning to introduce light- and heavy-duty electric trucks to expand the market even further.
On the supply side, we develop scenarios for a rapid transition to renewable energy supply based on assumptions that renewable energy will follow market diffusion trends exhibited by other disruptive technologies in the recent past. In these scenarios, energy demand is largely met by renewable energy by the mid-2050s.
Much of the new energy infrastructure in the decades ahead will be built in developing countries, where millions do not have access to electricity or other modern forms of energy supply, and where per-capita energy consumption is much lower than in the developed world. Addressing growing emissions in these countries will be critical for our climate future. Leapfrogging to renewable energy supply and taking advantage of hybrid distributed and centralized grid architectures can enable cost-effective sustainable development pathways while contributing to rapid change in the global energy system. While this may seem ambitious, 47 countries—members of the Climate Vulnerable Forum, developing nations that are most at risk from devastating climate impacts—have already pledged to transition to 100 percent renewable energy between 2030 and 2050.
ADDRESSING GROWING EMISSIONS IN THE AGRICULTURAL, FORESTRY, AND LAND-USE SECTORS
Even with a radically transformed energy system, we must address emissions in the agricultural, forestry, and land-use (AFOLU) sectors to contain climate change. These sectors contribute high amounts of potent greenhouse gases, including methane and nitrous oxide, which have much higher warming potential than carbon dioxide. Large shares of these emissions come from deforestation, enteric fermentation (i.e., digestive processes) in livestock, and decomposition of agricultural waste products.
Our analysis concludes that five high-impact measures—afforestation, beef consumption reduction, grazing management, conservation agriculture, and biomass pyrolysis—can alone yield significant carbon benefits. These measures could turn the AFOLU sectors into net sinks for carbon dioxide by the middle of this century.
In addition, we will need to contain other sources of emissions, including fluorinated gases, which are mostly emitted from industrial processes; methane emissions from oil and gas supply chains; and carbon dioxide emissions from cement manufacturing.
CALL TO ACTION
In the aftermath of the U.S. election, uncertainty prevails about the future of U.S. climate policy and the impact on global commitments and actions. Nonetheless, RMI’s analysis describes a possible fast track path to a global clean energy future that is led by synergistic and compounding changes in key industries. Rapid scaling of low-cost manufacturing for solar PV, wind, batteries, electric vehicles, and other key technologies is at the heart of this transition. From this perspective, near-term actions in the world’s largest and most rapidly developing economies, including India and China, could be the most important leverage points for driving the global energy economy beyond the key tipping points for next-generation technology.
To be clear, the scale of the commitment and transformation required to achieve a 1.5°C target will require concerted and determined action by policy makers, business leaders, and civil society. It will require fundamental changes in our energy economy and in our own behavior and consumption. Surely, it is daunting, but it is not beyond our reach.
Image courtesy of iStock.