The Battle Against Global Warming Is the New Cold War

The Cold War inspired the creation of several key publicly funded organizations, many of them military, that have reconfigured the nation’s economy, and the world’s, through a series of transformative technology booms. The Defense Advanced Research Projects Agency (Darpa), which was founded by President Eisenhower in 1958 as a response to Sputnik, has been credited with laying the groundwork for the internet, Wi-Fi, supercomputing, desktop computing, GPS, robotics, artificial intelligence, drones, and voice recognition. Through the ’50s and ’60s, the Department of Defense learned how to best use its position as a primary customer to spur industries to create better and more innovative technologies—a process that has brought to market three of the most important energy technologies of the past century: nuclear power, sophisticated and efficient turbines, and solar photovoltaic tech. (The depth of the military’s influence on the US economy is so profound that, to understand its role, I found myself reading an economics book titled Is War Necessary for Economic Growth? The answer was, with some qualifications, yes.)

As Arati Prabhakar, who led Darpa from 2012 to 2017, explained to me, “We are very good at innovating in this country for the things that we set out to innovate for in 1945: national security, which led to changes in information technology, and health, which became biomedicine. And I don’t think it’s an accident that that’s what we’re good at now—because those were precisely the things that we focused on.”

The military has been successful at creating tech for a few reasons: As Prabhakar suggested, it sets priorities for problems it wishes to solve and then pursues multiple technological pathways. What’s more, it perseveres without caring excessively about costs.

Take Darpa itself. According to MIT’s Bill Bonvillian, who has studied the agency’s role in innovation for more than two decades, Darpa’s greatest advantage is its uniquely nimble, collaborative, mission-driven culture, where managers move back and forth between research and application, creating communities among researchers and industry. “In most R&D agencies, the critical decision is awarding the grant,” he says. “In Darpa, the managers award the grants and then move into the researcher’s home.”

In addition to providing what economists call the “technology push” by funding foundational science through Darpa, the military also excels at creating a “demand pull” by partnering with industry to develop the products, mounting large-scale demonstration projects, and being an early-adopting customer with deep pockets. Many of these innovations have made their way into civilian life.

Every time you board a 737, for example, you are experiencing the result of the Army’s demand pull in the world economy. In the early ’60s, Army and NASA engineers set out on a program of basic and applied research to radically change the way they understood jet engines, in a bid to make them much more energy-efficient. As researcher John Alic has documented, they went deep into the physics of the machines, studying the way air flowed over the blades and how metals behave at high temperatures. They funded basic research on rare earth magnets at university labs and developed ceramic coatings that are now standard for high-temperature uses. With the Army spending billions of dollars on research and then purchasing expensive products that spun out of it—like Apache helicopter blades—not only did jet engines become more efficient and reliable, the private sector adopted and built off of the new technologies to create civilian products—like that passenger aircraft, the turbines in gas-fired power plants, and even the magnets that run the electric windows in your car.

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The US has wallowed in the politics of climate despair since the late 1990s, so it may be hard to accept what I’m going to say next: We could fairly quickly adapt our existing federal technology innovation system to work on the tech we need to decarbonize energy at a scale that would have real impact. (What’s more, by shifting innovation from military applications to civilian ones, we’d be building a country where war is no longer necessary for economic growth. But that’s a different conversation.)

Here's why we can't let the coronavirus undermine transitions to cleaner energy

  • The COVID-19 pandemic is slowing down economic activity.
  • Governments should take the opportunity to launch sustainable stimulus packages focused on clean energy technologies, writes Fatih Birol, Executive Director at the International Energy Agency.

The impact of the coronavirus around the world and the resulting turmoil in global markets are dominating global attention. As governments respond to these interlinked crises, they must not lose sight of a major challenge of our time: clean energy transitions.

The coronavirus is turning into an unprecedented international crisis, with serious repercussions for people’s health and economic activity. Although they may be severe, the effects are likely to be temporary. Meanwhile, the threat posed by climate change, which requires us to reduce global emissions significantly this decade, will remain. We should not allow today’s crisis to compromise our efforts to tackle the world’s inescapable challenge.

Governments are drawing up stimulus plans in an effort to counter the economic damage from the coronavirus. These stimulus packages offer an excellent opportunity to ensure that the essential task of building a secure and sustainable energy future doesn’t get lost amid the flurry of immediate priorities.

Large-scale investment to boost the development, deployment and integration of clean energy technologies – such as solar, wind, hydrogen, batteries and carbon capture (CCUS) – should be a central part of governments’ plans because it will bring the twin benefits of stimulating economies and accelerating clean energy transitions. The progress this will achieve in transforming countries’ energy infrastructure won’t be temporary – it can make a lasting difference to our future.

Coronavirus Covid-19 virus infection China Hubei Wuhan contagion spread

Image: C2ES

The costs of key renewable technologies, such as solar and wind, are far lower than during previous periods when governments launched stimulus packages. And the technology for both solar and wind is in a much better shape than in the past. Meanwhile, hydrogen and carbon capture are in need of major investment to scale them up and bring down costs. This could be helped by current interest rate levels, which were already low and are declining further, making the financing of big projects more affordable. Governments can make clean energy even more attractive to private investors by providing guarantees and contracts to reduce financial risks.

Taking these steps is extremely important because the combination of the coronavirus and volatile market conditions will distract the attention of policy makers, business leaders and investors away from clean energy transitions. This situation is a test of governments and companies’ commitment. Observers will quickly notice if their emphasis on clean energy transitions fades when market conditions become more challenging.

The sharp decline in the oil market may well undermine clean energy transitions by reducing the impetus for energy efficiency policies. Without measures by governments, cheaper energy always leads consumers to use it less efficiently. It reduces the appeal of buying more efficient cars or retrofitting homes and offices to save energy. This would be very bad news, since improvements in energy efficiency, a vital element for reaching international climate goals, have already been weakening in recent years.

Governments can address this by pursuing policies that have already proved successful previously, such as measures to improve the energy efficiency of buildings, which create jobs, reduce energy bills and help the environment.

The recent steep drop in oil prices is also a great opportunity for countries to lower or remove subsidies for fossil fuel consumption. There are around USD 400 billion of these subsidies worldwide today, and more than 40% of them are to make oil products cheaper.

There can be good reasons for governments to make energy more affordable, particularly for the poorest and most vulnerable groups. But many subsidies are inefficiently targeted, disproportionally benefiting wealthier segments of the population that use much more of the subsidised fuel. In practice, the effect of most subsidies is to encourage consumers to waste energy, adding needlessly to emissions and straining government budgets that could otherwise be prioritising education or health care.

The coronavirus brings other dangers for clean energy transitions. China, the country most heavily affected by the virus initially, is the main global production source of many clean energy technologies, such as solar panels, wind turbines and batteries for electric cars. The Chinese economy was severely disrupted during the government’s efforts to contain the virus, especially in February, causing potential supply chain bottlenecks for some technologies and components.

This is why governments need to make sure they keep clean energy transitions front of mind as they respond to this fast-evolving crisis. IEA analysis shows that governments directly or indirectly drive more than 70% of global energy investments. They have a historic opportunity today to steer those investments onto a more sustainable path.

As the IEA announced last month, global energy-related CO2 emissions stopped growing last year even as the world economy expanded by nearly 3%. We need to make sure 2019 is remembered as the definitive peak in global emissions, and that means taking action now to put them into sustained decline this decade.

We may well see CO2 emissions fall this year as a result of the impact of the coronavirus on economic activity, particularly transport. But it is very important to understand that this would not be the result of governments and companies adopting new policies and strategies. It would most likely be a short-term blip that could well be followed by a rebound in emissions growth as economic activity ramps back up.

Real, sustained reductions in emissions will happen only if governments and companies fulfil the commitments that they have already announced – or that they will hopefully announce very soon.

Governments can use the current situation to step up their climate ambitions and launch sustainable stimulus packages focused on clean energy technologies. The coronavirus crisis is already doing significant damage around the world. Rather than compounding the tragedy by allowing it to hinder clean energy transitions, we need to seize the opportunity to help accelerate them.

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Why Clean Energy Stocks Popped Double Digits Tuesday | The Motley Fool

What happened 

Shares of clean energy stocks made a strong recovery Tuesday as the market and oil prices both moved higher. Ballard Power Systems Inc (NASDAQ:BLDP) jumped 17% by the close, FuelCell Energy Inc (NASDAQ:FCEL) finished higher by 12%, and Clean Energy Fuels Corp (NASDAQ:CLNE) closed up 13% on the day.

So what

The two macro trends early in trading were the market overall rising as investors bought back into a market that’s plunged over the last few weeks. The other big factor affecting clean energy was a big jump in oil prices Tuesday.

Hydrogen symbol made of leaves floating over field

Image source: Getty Images.

Oil is indirectly a competitor for Ballard, FuelCell Energy, and Clean Energy Fuels, so when oil prices were plunging that was bad news for their businesses. Now that oil is rising a bit, it’s an incremental tailwind. 

Clean Energy Fuels is most likely to be affected because it’s trying to get trucks and bus fleets to switch from diesel to natural gas fuels. The biggest pitch the company makes is that long-term there are cost savings from natural gas, which has remained cheap even when oil prices rose over the past decade. But if oil, and therefore diesel, prices go down, it won’t make as much sense to make the switch to natural gas. 

Ballard is making hydrogen products that can be powered by oil, so cheap oil is a hindrance but still doesn’t change the cleaner energy hydrogen can provide. And FuelCell Energy, while cleaner than oil power plants, is primarily selling to facilities as an auxiliary or backup power source, and it’s often consuming natural gas that’s common in the power plant business. 

Now what

The stock market moves this week shouldn’t be taken too seriously by investors, especially in the clean energy space. Oil prices go up and down, and long-term the price of oil shouldn’t matter if clean energy technologies are going to win. 

I would pay more attention to the long-term performance of these companies as indicators of where these renewable energy stocks are going. And that’s where my bigger concern comes in. All three are losing money, and until those losses become profits they don’t have sustainable businesses. That’s where I would like to see progress in 2020. 

Sound investments to decarbonize the world’s industries

As cutting-edge technology vaults the global economy into the Fourth Industrial Revolution, the processes we use to turn raw materials into everyday products are still astoundingly reliant on the same dirty-burning fossil fuels that our grandparents used a century ago.

Manufacturing still relies on extracting millions of tons of raw material from the ground every day and refining it into cement, steel, polymer and countless other finished products by burning carbon fuel to super-high temperatures and emitting tons of planet-warming greenhouse gases (GHG). According to a recent IEA Tracking Industry report, direct industrial GHG emissions rose to 24 percent of global emissions, and unless something is done to decarbonize, there will be no chance of addressing the climate change challenge.

So, what can financial institutions do? IFC, for one, is sensitive to the critical role that manufacturers play in improving living standards, providing jobs and bolstering economic growth around the world and has developed a comprehensive strategy that addresses every link of the value chain, encouraging countries to produce a greater diversity of products using more sustainable processes.

The strategy emphasizes low-carbon growth through the selection of the best available technology and the use of cleaner fuels and renewable power. It encourages manufacturers to reduce their use of natural resources by applying circular economy principles, as well as by conducting a systematic greening of their supply chains and selectively substituting imports to reduce transport-related emissions.

The World Bank Group, including IFC, has established a major new set of climate targets (PDF) for 2021-2025, doubling its current five-year investments to around $200 billion in support for countries to take ambitious climate action.

Innovative solutions

To further encourage such investments, IFC set an internal price on carbon at $40–80/metric ton of carbon dioxide equivalent in 2020, rising to $50–100 in 2030 and continuing in a similar trajectory beyond. Making extensive use of financial and advisory support services to help investee companies recognize the reputational value of sustainability and good global citizenship, IFC also uses innovative tools such as green bonds, green loans and blended finance to marshal decarbonization investments.

These efforts are already influencing IFC’s investments. In Nigeria, where a high percentage of natural gas is flared in the country’s oil fields, for example, IFC is helping to monetize the wasted gas by investing in fertilizer plants that use the flared gas to produce nitrogen fertilizers. The production of fertilizers results in a significant amount of carbon dioxide emissions, but by using gas that otherwise would be flared, the overall GHG emissions are significantly reduced.

Guided by a set of best practices in the cement sector, IFC has invested in various waste heat recovery projects in middle-income countries such as Turkey and India. IFC also has financed several projects that use alternate fuels and raw materials (PDF) to manufacture cement.

In the steel sector, IFC is promoting investments in projects that will procure locally collected scrap for the operation of energy-efficient greenfield induction furnace or Electric Arc Furnace-based mini-mill scrap-based steel plants. Recent investments in the glass industry emphasize the use of cullet or recycled glass and the production of energy-efficient glass products for use in cars and buildings.

The $2.5 trillion fashion industry is responsible for around 10 percent of global GHG emissions. Several global fashion brands are moving toward sustainable practices. Levi Strauss & Co has been at the forefront of this trend. Levi Strauss and IFC are working with 42 designated Levi Strauss suppliers and mills to reduce GHG emissions by helping suppliers identify and implement appropriate renewable energy and water-saving interventions across 10 countries.

While these initiatives are noteworthy, much more needs to be done. There are two major challenges to reducing GHG emissions in industry: high-temperature heat requirements currently can be met only by using fossil fuels; and the reduction of non-fuel or process-related GHG emissions from ammonia, cement, ethylene and steel sectors that comprise almost 45 percent of overall emissions. These non-fuel emissions can be reduced only through major changes to raw materials and processes.

Meeting these challenges will require accelerated effort towards circular economy innovations to refashion products and processes, changes in human behavior, deeper energy efficiency improvements, electrification using renewable energy, use of hydrogen and biomass as feedstock or fuel, and carbon capture.

According to OECD estimates (PDF), a low emission pathway will require an additional 10 percent in overall infrastructure investment needs over the next 15 years. The good news is that the additional costs could be offset over time with fuel savings.

We are entering a period of unprecedented climate change disruptions that will redefine our comfort zones, challenge our perceptions and change the way we consume and produce. The very health of the planet hangs in the balance and increasing decarbonization of industry guided by sound investments is a critical part of the solution.