No time to waste

But we can still win the race for decarbonisation

Time is a limited resource, and we are running out of it. 

COP28 is weeks away and there’s a lot at stake. The world is burning its ‘carbon budget’ fast. It is projected to take just 7 years to use it up. On this basis, it is gone by 2030. The carbon budget measures how much more greenhouse gas can be emitted than the Earth can absorb before the resulting temperature rises breach limits beyond which humans may have little or any influence or control over the future climate. 

While most large countries, cities and companies have ‘net zero’ targets aimed at reducing emissions, few I talk to believe that their 2030 targets are actually achievable, and most of them are aiming at dates between 2050 and 2070, which may be too late. In the meantime, the resources consumed to generate these emissions entail massive cost and, in securing them, competition and conflict.

The transition to lower carbon energy is, in many ways, happening faster than most dared to think, but it is a far bigger task from a lower base and will take much more time than most understand or communicate. After US$6 trillion invested in low carbon and renewable energy over the last 20 years, and another $3 trillion on the grid, renewables have not yet substantially displaced fossil fuels or reduced annual emissions, and electricity is still only 20% of energy.

Greening electricity will require a tripling or quadrupling of existing generation capacity, and that is before electricity starts to increase its share of the rest of the 80% of the energy system in sectors like industrial heat and transport where it has barely broken through. This great energy transition is underway, and exciting, but it will take many years, indeed decades, and huge quantities of materials to make it happen.

So, the race is on.

There is a race for resources. The journey towards decarbonisation starts from where we are today, with over 80% of energy from fossil fuels to a destination involving lower emission and renewable energy solutions, such as solar, wind and supporting grid infrastructure. The pathway is made of transition-critical materials, such as copper, lithium, nickel, cobalt, and rare earth elements. A new mine can take 16 years. It will take time, effort, and competition, to secure the materials we need.

In the meantime, there is a race to the bottom. The fossil fuel reserves that lie under the ice in the Arctic, the ground in Ukraine, the Mediterranean, the Arabian desert, in North America, Latin America and the South China Sea, together with other metals, minerals, food and water resources, will continue to define the global energy market and the geopolitical landscape. They are setting the scene for new arms races and even inspiring new space races.

There are also races for life itself. Climate change and environmental degradation are making lives increasingly difficult and shortening them. The global population is growing, urbanising, and consuming more. Demographic change and income inequality are social challenges that can make effects worse. Environmental challenges include severe weather patterns, such as fire weather, drought, and extreme precipitation, as well as rising sea levels and water scarcity. Water and air pollution is claiming lives, and more in cities than from war, terrorism and murder put together. Land is being degraded and forests destroyed. Many of these factors are auto catalytic, feeding back in loops, and cost more to mitigate or adapt to over time.

The longer it takes to address many of these problems, the more expensive it can be to solve them. Inflation can also make this problem worse. Measures of core inflation exclude the energy and food sectors (which are of course interlinked as energy represents a large part of the cost of food). Together with the demand for, and cost of materials, there are significant upwards pressures and risks on the cost making anything, particularly out of scarce resources. Geopolitical risk and de-globalisation could make it harder. Hopes for an easing of inflation, which increases costs of capital, have been growing, but these factors may represent an enduring challenge.

So now the race must now also be on to stop waste. Put simply, most energy, over 70% in many countries, is wasted in the journey of a molecule, for instance in the losses associated with extracting and converting (10%), generating (50%), and transporting and distributing (10%) it. A large proportion of these losses takes the form of waste heat, often because energy is generated far from the point of use, using technologies (using conventional fuels like gas and even ‘low carbon’ fuels like nuclear) that generate as much heat as electricity, but that can’t or don’t use it. Yet more energy is wasted at the point of use. 70% of energy is used in buildings, industry, and transport. Buildings can waste a third of the energy they use just because of the wrong mechanical and electrical infrastructure, like lighting, air conditioning and controls. Industry uses less electricity than commercial or residential buildings but can make step changes in the way in the way that it consumes heat. Transport remains substantially a job for oil, despite modest electrification to date, and the “well to wheel” losses can be 75% plus. As time goes on, the cost of these losses mounts up, representing time and money that we won’t get back.

Stemming these losses is the fastest, largest, cheapest, and cleanest source of greenhouse gas emission and energy cost reductions, as well as improvements in energy security. The problem of energy waste can be addressed at speed and scale by focussing on efficient and decentralised generation of energy, or what I refer to as “EDGE”, solutions. Bringing energy generation closer to the point of use, capturing, recycling, and using heat and reducing transmission and distribution losses, is a big part of the solution. Thankfully, we can now increasingly generate energy where we need it cheaply and reliably, using on site solutions such as solar and ground and air sourced heat, accompanied by electrical and thermal storage.

It is also becoming possible to create more efficient fertilisers, cost effectively, from renewable sources applied locally, for instance from ‘green’ hydrogen, rather than from natural gas. The journey of a molecule used in the food system is even worse than the energy story, involving losses of 90% plus between the production of ammonia, evaporation and run off of fertiliser on the ground, and packaging and shipping using fossil fuels. Food is then wasted in distribution and end use.

My book, ‘The Edge’, investigates these problems and what to do about them. The funds managed by my firm, Sustainable Development Capital LLP, invest in solutions.

Resource efficiency, most often overlooked, is key to sustainable development, to economic productivity, to competitiveness, and to having any serious chance of moving fast enough in the race to decarbonisation in a timeframe that will make enough difference. The focus of government and business has been to produce more. Now it must shift urgently to using the same or less to do more.

Using less to do the same or more costs less, improves profitability and is a foundation for sustainable growth. Energy waste is the largest source of greenhouse gas emissions, wastes money and creates energy security risks. Addressing it is the fastest and cheapest solution at this stage of the energy transition. It buys us the crucial time that we need to improve the way that we supply energy, food, and water and, by addressing the problem at the source, it avoids the time and money wasted in pouring more good energy and money into a leaky system.

Time and money are scarce resources.

Time is not renewable. We can’t afford to waste it.