Is the cost of cutting carbon too steep?

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On May 6, 2007, long after the decade-to-decade-and-a-half run of dominance the show bearing his namesake experienced, Homer J.Simpson uttered modern philosophy’s greatest question:

I’ve got three kids and no money. Why can’t I have no kids and three money?

The point of the quote? Responsibility is expensive. the greater your responsibility, the more likely it is to cost you a pretty penny. Well, while the sentiment may not be shared by all of our citizens, we in the United States have a responsibility to do our part to save the planet that we have worked so diligently to destroy, especially so in the last 150 or so years.

Now, we have a price tag for that responsibility, as Wood Mackenzie has released a report titled Deep decarbonization requires deep pockets which outlines the $4.5 trillion cost to fully decarbonize the U.S. power grid by 2030.

 

Rolling out the renewables

Under this model, Wood Mackenzie’s Dan Shreve found that, to reach this ambitious goal, the United States would require “more capacity [of renewables] to be built every single year over the next 11 years than what has been installed collectively over the past two decades.”

To replace all fossil fuel generation in the United States, Wood Mackenzie estimates that the country would need to install 1,600 GW of new wind + solar capacity and supplement that generation with 900 GW of storage. Looking at those numbers you may be thinking “Wow, that’s a lot, but, you know, we’re installing more and more renewables by the day.” To add some context, the entirety of the US power grid has about 1,060 GW of capacity, of which roughly 130 GW are wind and solar. For storage, THE ENTIRE WORLD has 5.5 GW of battery storage capacity in operation or under construction.

So, in short, the United States would have to get on line 1.7 times more renewable energy than all of the non-renewable generation we have installed to date and supplement that with 163.6 times more storage than the entire planet has installed or is constructing to date, all in the next 11 years.

If this seems wild to anybody else, you aren’t alone. Wood Mackenzie, later in the report, recommends extending that timeline horizon to either 2040 or 2050. Not only does that timeline target allow for new technologies, ones that don’t even exist yet to reach commercial scale, but the report notes:

Two places with extensive experience of integrating renewables into electricity, California and Germany, do not have RE100 targets before 2045. Their respective 2030 targets are only 60% to 65%.

In short, Wood Mackenzie argues the best way to achieve these ambitious dreams is to give ourselves time. You’ve got a better chance of hearing Beethoven’s 5th at a Jay-Z concert than the United States does to decarbonize entirely in the next 11 years, and maybe that’s okay. It’s a fairly radical dream, after all.

 

Cost vs. avoided cost

As relayed earlier, Wood Mackenzie estimated this 11-year decarbonization cost to be $4.5 trillion. That kind of spending over a decade is unfathomable, unless you look at annual military spending, there’s no way it could be worth the cost, right?

Well, that’s something Amir Jina of the Energy Policy Institute at the University of Chicago addresses in an article for Forbes: Will Global Warming Shrink U.S. GDP 10%?

The article was written in response the collective freakout over a graph in the last chapter of the most recent National Climate Assessment. The graph predicts that if the United States were to do absolutely nothing about climate change by the end of the century (assuming we’d live to see it), and have a warming of 15°F above pre-industrial levels, that could “knock as much as 10 percent off the size of America’s economy by century’s end.”

Jina relays that the outcome is overall unlikely, though not impossible. It’s more of a worst case scenario. However, the way the numbers work out make it interesting. U.S. Gross Domestic Product (GDP) today is about $22 trillion. If we were to imagine the 10% GDP loss kicking in today, rather than 2100, that loss would be $2.2 trillion a year. If you’re already connecting the dots, that means that two years of GDP loss – money that would serve literally zero purpose, just disappear – would nearly entirely pay off the most radical energy revolution ever. Furthermore, investing that over 10 years (2020-2030), rather than two, would bring that cost from 10% of GDP annually to roughly 2%. That’s $450 billion annually. For comparison, the aforementioned 2018 defense budget clocked in at $700 billion.

So now we have at least a tentative price tag for both the worst-case scenario of climate change, and the most expensive version of national decarbonization. Hopefully as the future comes and technology evolves we get to a point soon where these prices become a conversation, rather than theory.