“Climate action does not require economic sacrifice,” wrote Rachel Kyte, then CEO of the Sustainable Energy for All Initiative (SEforAll) in September 2015.
Many studies and cases show that climate action does indeed yield economic benefits (see the case of China). Going even a step further: if climate change proceeds unchecked, its negative impacts will effect the world’s economies at large. So in reality, without climate action there won’t be much of any long-term economic activity anymore. To stay below the 1.5°C threshold agreed in the Paris Agreement means we need to drastically cut emissions. The recovery packages stipulated in the course of overcoming the impacts of the corona crisis can be an opportunity to channel needed investments into sustainable, green sectors and build back better.
Survive and Thrive!
The voices calling for a swift recovery and build back better from COVID are vast and from across the political spectrum. Yet, they often remain surprisingly vague on what “building back better” – or its variants stronger or greener – include.
On the supply side, we need to significantly scale up renewable energy deployment. In recent years, governments, local authorities and businesses have taken up 100% RE targets. Their commitment emphasizes that a 100% RE future is not just possible, but also economically feasible. In fact, green energy has been more resilient against COVID-19 impacts than fossil fuels. They have experienced less supply chain disruptions than fossil fuels. Further, the wind and solar industries can create more jobs than their fossil counterparts. While the 100% RE vision has somewhat become mainstream in the renewable energy bubble, the importance of reducing demand for energy is still often overlooked.
A clean energy system with improved energy efficiency is easier to realize than one with low energy intensity, because the energy gap is easier to fill with only renewables. Yet, our track record of improving energy efficiency is as poor as our track record on climate action. Since 2015, energy efficiency improvements have slowed down, only flattening very recently, according to the International Energy Agency (IEA). Rising energy efficiency in 2020 was a mere consequence of the coronavirus pandemic and the subsequent economic shutdowns, rather than a conscious effort on our part.
Investments into energy efficiency are predicted to fall by 9%, as financial savings are reduced because of COVID-19, according to IEA.
Lessons from the 2008 financial crisis
Let us take a look back into the year 2008: The financial crisis has just unraveled, and governments invest billions to protect banks and kick-start economic activity. Back then, crucial green elements to revitalize struggling economies post-crises were incentivizing and scale up of emerging technologies such as solar PV and wind, as well as energy efficiency improvements. Both areas triggered unemployment reduction and stimulated further investments, ultimately reducing costs and increasing demand. Chances are that investments into energy efficiency would pay off similarly this time.
Energy efficiency to build back better
Initial analyses of European and Asian recovery packages might suggest that energy efficiency is a prominent measure in most packages. The EU’s Green Deal “renovation wave” will invest around 70 billion Euro into enhancing energy efficiency of buildings and industry. This will likely have positive impacts on air quality, job creation and reduction of energy poverty. Similarly, some German states such as Lower Saxony and Hamburg have opted to prioritize energy efficiency investments for buildings.
Energy efficiency is not only a matter of developed countries though. Bangladesh’s Green Transformation Fund is unlocking investments for energy and resource efficiency. The Philippines seek financial savings from increasing efficient use of power sources. Further, India seeks to increase energy efficiency by investing heavily into battery and storage capacities.
In sum, energy efficiency is a cornerstone of our economies and able to revitalize our crises-stricken societies. Investing into energy efficiency can trigger further investments and bring down costs of energy technologies, as we have learned from the 2008 crisis. Overall, more people could be able to afford certain technologies, improving living standards.
The rebound effect
By no means however, should we see this as a free ticket to continue economizing as we have. We need to drastically rethink our economic structures. The effect described above is also known as the “rebound effect.” Enhancements in energy intensity are to some extent offset through more demand or more energy consuming changes in said technologies. This can lead to an increase in overall electricity demand. Maja Göpel, a German economist and transformational researcher analyzed this effect and the paradox it causes in her book “Rethinking our world – an invitation.” She emphasizes the need to rethink our economic system which is based on monetary profit maximization, rather than environmental concerns.
To have it all, to build back better, thrive economically and survive the worst impacts of the climate emergency, governments and businesses need to prioritize energy efficiency. Coupling those with long-term energy and resource planning will be a key task for governments. With trillions being channeled into economies, the time for governments to act and build back better is now.