Abolishing fossil fuel subsidies and taxing carbon emissions can fund construction of a world-spanning energy internet by 2050.
In assessing the potential, consider just two numbers.
The first: fossil fuels subsidies amount to $5.3 trillion, according to the International Monetary Fund.
The second, all the needed technologies to solve climate change (apart from carbon capture and storage) can be implemented for carbon prices of $40 per tonne or lower, according to global management consultancy McKinsey.
Applying $40 carbon prices to all the world’s 40 billion tonnes of carbon emissions would generate $1.6 trillion a year.
Eliminating fossil fuel subsidies and applying $40 carbon pricing, therefore, will raise $6.9 trillion a year for reinvestment. That’s more than 8% of the global economy.
Building a global energy grid by 2050 would cost about $100 trillion, or about $3 trillion per year. This, according to State Grid Corp of China Chairman Liu Zhenya in his book entitled “Global Energy Interconnection.”
Economic savings from eliminating fossil fuel subsidies can be redeployed to investment in new globe spanning energy infrastructure across which zero emission energy can flow.
All of this amounts to the biggest ‘virtuous circle’ the world has ever seen.
Fixing climate change is no longer a technology problem. It’s an economic and financial reform problem. Perverse economics (unpriced or subsidized carbon) caused climate change. Reformed economics can fix it.
The benefits extend beyond climate change.
The global proportion of the aged is growing. Pensions and social security programs are underfunded.
Large-scale investment funding in decarbonization paid for by carbon market reform can generate the needed cash flows for low emission infrastructure investment. This investment will then generate the income streams needed to pay the costs of an aging population.
By 2050, the can be connected by a series of hub-and-spoke power line and pipeline networks across which electricity and hydrogen — each fungible into the other — will flow.
This process will occur in three stages.
The first is deepening, broadening and upgrading national electricity grids to enable more long distance inter-regional trade in energy. China’s Three Gorges Dam is an example of that.
The second phase will be deeper cross border interconnection of national grids to bring on more renewable energy. Europe’s North Sea Offshore Grid Initiative is an example of this. The third and last phase will be interconnection of regions to allow regional interchange of surplus capacity.
The now world-spanning grid of fiber optics cables is an example of this, much of which has only been built out in the last few decades. The comparison is between fiber optics, power lines and gas pipelines is apt.
The reason is that units of energy — like packets of energy — are fungible. Given multi-destination conduits, markets will do the rest.
A global infrastructure ‘Marshall Plan’ aimed at solving climatate change — particularly one that pays for itself through already-needed economic reforms — may well be the key to 21st Century prosperity.