This month’s Manila Asia Pacific Economic Cooperation (APEC) meeting will discuss climate-proofing infrastructure.
Next month’s COP21 meeting will discuss encouraging global investment in energy efficiency and new generation technologies.
The two are linked. Carbon pricing will tie them together.
Expanding carbon pricing and elimiinating fossil fuel subsidies are the quickest, most efficient, means to reducing destructive climate change.
Coupling the roughly US$5.3 trillion saved from eliminating annual fossil fuel subsidies, coupled with the roughly $1.2 trillion that can be raised from $30 carbon prices (applied universally) will yield $7.5 trillion a year.
That’s equal to nearly 10% of the global economy. This money can reinvested in cleaner energy. Stated differently, long-term climate change has been caused by the economic distortions above of dirty energy subsidies and lack of carbon pricing.
These investments won’t represent deadweight losses. They’ll represent efficiency gains. This will come from eliminating the economic drag of distorted carbon price signals that’s created climate change over the last 150 year. The result will be a more efficient, richer global economy.
Prime candidates for some of this $7.5 trillion a year of new investment will be large scale sun and wind as well as large-scale transmission infrastructure to carry these and other energy sources from producers to consumers.
The future revenue streams generated from such investment can contribute to paying the health and retirement costs of an aging global population — a looming future problem that’s been just as badly managed as climate change has in the past.
Applying expansive thinking, therefore, can solve several problems at once.
In coming weeks, APEC and COP21 must make a start in sketching out this future. Done right, properly implemented economic reforms to distorted energy markets can create path to prosperity for the 21st Century.
Eliminating destructive fossil fuel subsidies, expanding carbon pricing, recycling the trillions into low-emission energy production and building the common-carrier, cross-border energy transport infrastructure to bring it to market solves several problems at once.
The core of the system can be high-capacity, long-dstance, cross-border High Voltage Direct Current (HVDC) power lines of the kind already on display in places like China and Brazil to bring distant hydropower to coastal cities. These same kinds of power lines can in the future deliver sun, wind and other low emission energy sources.
Deeper interconnection can allow asynchronous intermittencies to large cancel each other out. The problem of residual intermittency can be solved by laying properly-constructed gas pipelines alongside the HVDC power lines to provide supplemental backup supplies of natural gas and, more importantly, hydrogen.
Properly constructed pipelines can carry both simultaneously. This helps future-proof the pipeline system against the end of the natural gas transition age when hundreds of billions of dollars of bad investment Liquid Natural Gas infrastructure must be written off.
With a combined pipeline/HVDC system, natural gas can serve as a transition fuel to hydrogen to ‘load balance’ intermittent renewables delivered through HVDC. The beauty of such a parallel system is that natural gas/hydrogen supplies located anywhere along the network can be used to maintain high-capacity utilization of the HVDC power lines. Conversely, surplus electricity transmitted by HVDC can be transformed into hydrogen along the network for storage and later use as needed.
A combined pipeline/HVDC system achieves standardization, storage and future proofing — three desperately-needed economic reforms in the energy industry.
The big loser, of course, would be Liquid Natural Gas — an inflexible, dirty, single-generation technology. The LNG industry owes its existence to distorted energy pricing caused by unpriced carbon emissions and the lack of multi-fuel energy interconnections between national markets.
Eliminating fossil fuel subsidies and applying carbon prices will lead to LNG being replaced with something better and longer-term: efficient, multi-fuel networks.
All this is relevant to APEC and COP21. It speaks to the looming challenges of creating a 21st Century energy economy to replace the economically wasteful and environmentally destructive energy economy of the carbon age.
By 2050, the global economy will be unrecognizable.
Visionaries now see this.
The biggest one may be Liu Zhenya, chairman of Chinese electricity infrastructure state champion State Grid Corp of China. By 2050 Zhenya believes a series of regionally interconnected electricity grids will have created — in effect — a global Internet of energy at a cost of about $100 trillion.
Built out over 35 years, that’s $3 trillion a year. That’s just half the amount per year that eliminating fossil fuel subsidies and applying carbon pricing will yield. That, in turn, allows the other half of the $7.5 trillion saved per from eliminating fossil fuel subsides and implementing carbon pricing to be invested developing and build out new energy generation technologies.
The result is a virtuous circle. The first order calculations above, for instance, leave out second-order benefts like greater energy market efficiency, incraesed supply security, quickened innovation and better price signals.
Bottom line: climate change needs to be viewed as a positive sum economic reform problem in which everyone benefits. The upcoming APEC and COP21 meetings can start the world on this path.