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    The work that remains to reach net zero

    This article is an on-site version of Martin Sandbu’s free lunch newsletter.sign up here Send newsletter directly to your inbox every Thursday

    It was a week of many IMF reports. For the pre-released analysis chapter, Previous free lunch, And my colleague Martin Wolf is devoted His column this week To the updated number released by the fund.

    But more important than all of this may be another publication that has been slightly drowned by the surge in reports.The International Energy Agency has promoted the publication of its flagship World energy outlook I am planning to go out before the COP26 Climate Change Conference next month. This is a great and comprehensive guide to thinking about where we are in the carbon transition and what to do (see FT news article). here).

    Earlier this year, the IEA set cats among pigeons (at least oil-producing pigeons) by presenting them. Energy market forecast Consistent with global net zero carbon emissions by 2050, it showed no room for investment in new oil and gas exploration. Existing reserves are sufficient to meet all decarbonization-compatible demands by that deadline.

    This week’s report focuses on our thinking by comparing the Net Zero scenario with two other scenarios on how energy use and production evolve. One is the “announced pledge” scenario, where countries do what they need to do to fulfill their decarbonization commitments to date. The other is the “stated policy” scenario, which looks at what each country is doing, not what it is saying.

    The contrast between these two and Net Zero tells an impressive story. The country is currently not acting to achieve what it has promised. The road to carbon emission pathways in the Net Zero scenario. In short, a huge amount of political and policy change still has to happen, many of which will happen next month.

    The IEA has identified four priorities: clean electrification, energy efficiency, methane reduction and innovation. The first two are not surprising. The last two are probably less obvious, but the IEA brings numbers that influence their importance. When it comes to innovation, agencies say many of the decarbonization technologies they need are already available, but more investment is needed now for technologies that will make a big difference in the coming decades.

    “Government needs to strengthen support in key technology areas such as advanced batteries, low-carbon fuels, hydrogen electrolyzers, and direct air recovery. It also reduces costs and facilitates the introduction of new technologies to the market. In order to do so, we need to cooperate internationally. [net zero scenario]New technologies, which have important future roles, make important early advances. Hydrogen-based fuels and fossil fuels by CCUS [carbon capture, utilisation and storage] It accounts for less than 1.5% of final consumption by 2030, which is almost non-existent today. These relatively small intrusions into the market lay the groundwork for these technologies to increase after 2030 and make a greater contribution to net zero energy emissions by 2050. “

    These are six points from the report that I think are particularly important from the perspective of carbon transition economics and political economy.

    1. The main findings of the report have a major impact on the politics of today’s electricity price crisis. The IEA implicitly identifies policy makers looking for ways to reduce electricity prices by identifying clean electrification and increased demand-side efficiency as the top two factors to reach net zero. I will challenge.Because, as I argued Recent column, Increasing gas prices, and associated electricity price increases are the best possible incentives for both of these two goals. Policies such as price caps and storm taxes that reduce the amount of money that renewable energy generators receive would otherwise benefit from the high prices of competing gas and expect developers to benefit from the expansion of renewable energy. Decrease future profits. And lowering the price consumers pay for the limit of electricity reduces the incentive to save on electricity usage.

    2. There is a free lunch! The IEA estimates that 60% of faster electricity decarbonization will be provided to consumers at no additional cost, as renewable energy is often already cheaper than alternative energy. We believe that 80% of the additional efficiency gains on the energy demand side can also be paid for by smart regulations (such as appliance standards and material use). Also, 45% of oil and gas methane emissions can be avoided at no net cost “if the cost of implementing reduction measures is lower than the value of the recovered gas”.

    3. We need to increase the energy consumption of the poor. This number has increased due to a pandemic after a steadily declining population, with 770 million people worldwide still unavailable for electricity. Global energy use will increase in many of the poorest countries, even if it falls under the net zero scenario.

    4. Conversely, energy intensity (the energy required for a particular economic outcome) needs to accelerate. In the policy scenario stated, the IEA estimates that the amount of energy required per unit of GDP will improve by 2.8 percent per year. But that’s not enough. For NetZero, this improvement rate should reach at least 4% per year, “more than double the average rate over the last 10 years.”Recent reports from Bruegel’s think tank Good analysis Of this question.
      (However, it should be noted how impressive the constant improvement in energy intensity of 2% per year, especially in combination with the improvement in carbon efficiency of energy. Not enough, but lasting economic growth is the planet. It shows the reason why it is incompatible with the boundary of.)

    5. The necessary changes require a huge investment. Within 10 years, the amount invested in clean energy will need to be about quadrupled from current levels to about $ 4 trillion to reach a net zero pass. The announced pledge scenario simply (simply!) Doubles it.

    6. Oil demand should peak in 2025 and then decline just to meet the announced commitments. It should give oil-producing countries a pause. If they do not reduce production, they will soon fight to supply a shrinking market. Resistance to the phasing out of oil production by producing countries may soon become unsustainable. (It was a big problem in the Norwegian elections last month. The new government, which took office today, categorically refuses to demand that the oil industry take time.)

    There are still more. Please read the report itself in detail. It could be one of the best ways to stay up to date before the world discusses Glasgow’s climate next month.

    Other reading material

    • America is Unofficial general strikeAsk Robert Reich.Explain why Sarah O’Connor quits your job Good for the economy..

    • When Germany introduced the minimum wage a few years ago, many feared that it would hurt low-wage workers by killing their jobs. actually, New economic research It documents that their wages have risen significantly and employment has remained the same or even increased. The way this happened was due to the closure of small, low-productivity companies and the absorption of workers by large, high-productivity companies.of My column this week, I should not be convinced by the new rhetoric that labor shortages are the way to high wages, as the UK government has not evaluated the exact way higher wages can increase productivity. Insist.

    • David Allen Green captures brilliantly Disappointing absurdity Regarding Brexit’s Sir David Frost’s rhetorical crusade against the EU, he said: Losing. “Sign up for our newsletter to catch up with the latest Northern Ireland standoff twists and turns Britain after Brexit, Formerly known as Brexit Briefing.

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