The World After Paris: Energizing Economics in a Post-Carbon Era

It’s no accident that history’s greatest inventions have eventually ended up in energy applications, powering everything from the world’s greatest cities to the iPhone in your pocket. Harnessing the power of fire for nearly limitless applications was once the ultimate achievement in human history. And yet even that has now been eclipsed, from the computer chip to the solar panel, by the silicon revolution. As we begin to leave fossil fuels in the rear-view mirror, it’s worth asking: how will humanity fare in the post-carbon era?

What to Make of Paris?

At this year’s Conference of the Parties, commonly referred to as COP21, the international community will united for a collaborative convening rivaled in history only by the United Nations and the Olympic Games. This is a fitting venue, given the subject: devising a legally-binding, global framework for the world’s citizens to fully commit to low-carbon energy systems. The primary motive is no secret — cutting carbon has been a vocal goal of environmental activists for many years now. But for the first time, governments at all levels seem to finally be jointly committing to make low-carbon policies a reality.

While many remain skeptical that such a grandiose international deal could ever be accomplished, much less actually carried out, the informed observer might beg to differ. When all of the Paris press conferences and photo ops are over, the legitimate and ongoing transition to clean energy will continue — regardless of what deals are struck and who is elected in 2016. There is a demonstrable appetite for progress in the energy sector, and most notably, this appetite has little to do with activists or political agendas. Rather, the transition to low-carbon economies has everything to do with the progress of human history and the innovation that has already brought mankind into the digital age.

The well-known professor and writer, Noah Smith, recently wrote in Bloomberg View: “It has been a source of enormous pleasure for me during the past five years to see the solar power skeptics proven wrong.” His post, titled “Capitalism Can Survive Cutting Carbon,” hints at a view of the World After Paris, an era of economic opportunity driven by an energy revolution that doesn’t conform to the North–South divide of international development.

Let’s Get Technical for Just a Moment

Speaking to the viability of a decarbonized economy in the Global North, Smith’s conclusion, informed by a new JP Morgan study, is fairly straightforward: the availably of low-cost renewables mean a “…deep decarbonization of our economy wouldn’t force us to return to a pre-industrial civilization.” He acknowledges that there would be initial rise in costs to ditch fossil fuels in favor of clean energy resources, but that the rise would amount to a few “affordable” percentage points for wealthy nations. Additionally, the costs of to decarbonization would almost certainly be rapidly paid back by avoided costs from climate impacts, such as sea level rise ($3.1 trillion avoided costs) and energy costs ($10B — $34B in savings), according to a 2015 EPA study.

Image courtesy of Bloomberg New Energy Finance

Regarding a shift to clean power in the Global South, data from Bloomberg New Energy Finance and elsewhere suggests that in the South, distributed power in particular offers a paradigm shift for energizing local economies, both in terms of mitigating energy scarcity and in terms of undercutting cheap coal and other fossil fuels on price.

It’s a relatively well known and broadly accepted fact that energy access is a massive problem worldwide, with approximately 1.2 billion people who are without access to electricity. And around 95% of those people are living in sub-Saharan Africa and developing Asia. The good news is that renewables are already contributing. The UN Development Programme notes, “…renewable energy solutions can yield important social, economic and environmental benefits, such as removing pressure on important ecosystems and allowing countries’ electrical grids to be stable and reliable engines of economic growth.”

By removing technological barriers to energy access — such as the need for centralized power plants or the production or importing of fossil fuels — renewables are a critical multiple for economic growth in developing nations.

Image courtesy of Lazard

These conclusions are echoed in a sweeping report from Citi and the University of Oxford on the costs of action vs. inaction on climate in which the authors write:

The incremental costs of following a low carbon path are in context limited and seem affordable, the ‘return’ on that investment is acceptable and moreover the likely avoided liabilities are enormous. Given that all things being equal cleaner air has to be preferable to pollution, a very strong “Why would you not?” argument begins to develop.

“Why not” indeed. If this convergence of data and COP-driven political will is to be believed, the post-carbon landscape is looking less like an activist’s fantasy and more like the next steps in global innovation for quality of life.

Will We Thrive, or Merely Survive?

Now that we can see the path to a post-carbon era, will humanity in fact fare well? Can we truly shed the technologies that enabled the greatest creation of wealth in all of history?

Short answer: yes.

Just as the first industrial revolution spurred global growth, renewable energy-powered economies of the future are looking increasingly likely to be both inevitable and a net positive for global citizens everywhere. Take, for example, the flexibility of renewable assets. No longer is power production tied to centralized power plants with unhealthy or dangerous externalities. And I’m not just talking about distributed solar, as powerful as that particular technology will prove to be.

No, today we have the ability with modern wind technology, micro-hydro, distributed, small commercial and utility scale PV, concentrated solar power, and even some forms of biomass and waste-to-energy technologies, to generate low to zero carbon power in almost any environment imaginable. And with more promising technologies like wave and tidal power, energy storage, and electric vehicles exiting the R&D stage as we speak, the future of flexible, low-cost and low-carbon energy is only just getting started.

A post-Paris, post-carbon era will also be one of increased consumer choice, as you will not only have more control over your personal energy resources, but also over how that power is used — peak demand vs. low demand; demand-side management and digital energy products will all combine to create a powerful toolkit for energy consumers.

And as alluded to earlier, energy access will vastly improve. This is tremendous news for the worldwide economy, as millions, even billions of people will see a dramatic improvement in quality of life as they join the global middle class.

See You at the Finish Line

Paris undoubted marks a marvelous opportunity to put pen to paper and unite the nations in an accord to tackle climate change head on while simultaneously ushering in a new era of global prosperity spurred by new energy. And while most of us hope the COP will meet the high bar set for it this year, we should all recognize that an energy revolution is occurring despite international agreements, not because of them.

At Paris, we’re walking through the gates of the post-carbon era and there won’t be any turning back.