Our approach to climate change and curbing carbon emissions is broken. Let’s face it: Governments and international organizations have so far failed to alter the trajectory of our warming planet.
This isn’t for lack of trying, but the sad reality is that governments and international organizations haven’t been able to curb the global market’s appetite for fossil fuels. Yet there is an obvious and potentially lucrative way out of this mess.
The key to altering this imbalance is through the market itself. The technology underpinning clean and renewable energy is accelerating exponentially, with costs plunging through the floor.
As a result of these developments, clean energy will soon be cheaper across every metric than traditional fossil fuels. Since these trends are happening by the forces of the market alone, the best thing that governments can do is meaningfully invest in climate technology infrastructure and companies.
Saudi Arabia’s decision to curb carbon emissions to net-zero by 2060 is welcome news. Still, the real opportunity of the kingdom’s pledge remains unrealized.
As one of the world’s leading producers of hydrocarbons, Saudi Arabia wields huge influence over global carbon emissions through its ability to curtail oil production. A dramatic shift in oil production isn’t realistic because the world is still dependent on fossil fuels. The market won’t allow it at this stage, but things are changing fast.
When it’s cheaper and easier to get electricity from solar energy and drive an electric car, there won’t be much room left for fossil fuels. Along with other leading countries in the Persian Gulf region, Saudi Arabia has an opportunity to invest in this future of energy while transforming the regional knowledge economy by following these historic announcements with substantial investments into climate technology.
The path forward is not about simply cutting emissions or planting trees but committed investment in climate technology.
Larry Fink, the chief executive of hedge fund Blackrock, recently said that the next 1,000 unicorn startups worth at least US$1 billion would be involved in climate technology. Moreover, international organizations need to ensure that capital is invested in climate technology in developing nations.
Not only is the market exploding, but there is significant room for governments to help direct the energy to emerging and developing nations. Given the Arab Gulf region’s strong connections with emerging markets in Africa, the subcontinent and elsewhere in Asia, it is perfectly positioned to be an exporter of climate technology.
Clean energy will be universal at some point in the near future, and that’s one reason for Fink’s optimism. Current market and technology trends suggest that it could take shape much sooner than we realize.
Consider the price of solar energy as an example of how fast the market is changing. Over the past decade, the price of electricity from utility-scale solar projects has dropped by a factor of five. That equates to an 80% price decline. This remarkable drop means that building a new solar plant is cost-competitive with new coal or gas power plants.
What’s even more impressive is that costs are falling so fast that they are outpacing forecasts. Solar electricity in 2020 is roughly a quarter the price the International Energy Agency projected in 2010.
The market will render fossil fuels obsolete. The question is how long this shift will take and whether we have the time to wait. The forces are already taking shape as the market is course-correcting through deeper adoption of renewable energy.
Just look at the skyrocketing share price of Tesla and the explosion in global electric-vehicle sales. There are examples of the shift everywhere. Governments can accelerate this transition with intelligent policy investment in climate technology and (it is hoped) stave off dire climate-change forecasts.
This is where the Gulf region could potentially step in. Leading Gulf countries like Saudi Arabia and the United Arab Emirates have already laid out ambitious green-energy goals. Saudi Arabia plans to build the world’s largest green hydrogen plant powered by wind and solar energy in the city of Neom. Long-term projects are good targets, but smaller-scale investments in startups now can be the catalyst for real change.
With the capital to invest and the ideal conditions for research and development, Gulf states are positioned to support the next generation of climate-technology startups. These aren’t limited to renewable-energy projects but can focus on agricultural technology, smart-city development, and green hydrogen energy.
Not only are such investments valuable for the global fight against climate change, but they are critical for building the strength of the region’s knowledge economy. Moreover, the Gulf can export such technology to emerging-market countries around the world.
When Cape Town, South Africa, nearly ran out of water in 2018, the UAE was close to exporting desalination technology to ease the crisis. That’s a specific example of how the Gulf could spread its climate-related industry across the world.
Government pledges to curb carbon emissions are significant, but they aren’t enough. The industrial revolution and the triumph of resource-hungry capitalism are a big reason we are facing climate challenges.
Instead of reinventing the wheel, we need to embrace the mechanism of capitalism to foster real change in the hydrocarbon industry and the transition to renewables.
This article was provided by Syndication Bureau, which holds copyright.