Economic inflation is clearly on the decline, but we’re about to witness a massive outbreak of rhetorical inflation in Dubai. That’s where the world’s leading politicians, public figures, climate change activists and celebrities are gathering for COP 28, where we’ll hear the usual array of big promises and bold declarations. They’ll tell us it’s our last chance to avoid disaster and our best opportunity to save the future of our planet. I’m here to tell you that now, more than ever, none of this matters.
This isn’t reflexive cynicism or reactionary pessimism, both of which I regard as lazy forms of punditry. Instead, it’s optimism about the energy transition already underway and the inability of even the most obstructionist governments and large corporations to meaningfully slow its progress. We are, without question, on a path that will see us exceed the 1.5 C target in the Paris Accord. But we are also on a path that will get us much closer to it than many people realize.
My optimism begins in China, of all places, where a new report from Bloomberg New Energy Finance (BNEF) documents the breathtaking scale and scope of that country’s renewable energy buildout. Back in 2021, Chinese President Xi Jinping announced the creation of so-called “renewables bases” in the country’s massive western and northern deserts. These bases would contain massive solar and wind installations along with energy storage technology to help capture and integrate their power into the national grid. Now, with some new data becoming available on what these look like and how quickly they can be built, everyone is going to need to update their assumptions and their spreadsheets.
“The speed at which projects are being deployed has already led several forecasters to upgrade their estimates for renewables adoption this year,” says Bloomberg Green. “China will install more than 300 gigawatts of solar and wind capacity in 2023, almost double the volume a year earlier, according to BNEF forecasts. The entire global total in 2022 was 338 gigawatts. As Cosimo Ries, a Shanghai-based energy analyst with Trivium China told Bloomberg Green, “There’s nothing in history you can benchmark this against.”
If China’s renewable industry and provincial governments can hit their targets here, they’ll add 455 gigawatts of wind and solar energy — roughly equivalent to the size of India’s entire power network — to a grid that already has more clean power than any other nation on Earth. And because it’s being built on deserts, where the land has effectively no value, it will be some of the cheapest power on Earth, too.
China isn’t doing this out of the goodness of its heart or because it cares about the well-being of all mankind. It’s doing it because it understands that relying on imports of oil, natural gas and other fossil fuels makes it dangerously dependent on other countries. It also understands that by effectively cornering the market on the construction of wind turbines, solar panels and other renewable energy technologies, it can grab a huge slice of the biggest growth industry of the 21st century. In other words: It’s the economy, stupid.
The developments in other parts of the world aren’t quite as breathtaking, but they’re still important markers of an energy transition that continues apace. As Goldman Sachs noted in a new report, the cost of electric vehicle batteries is falling much faster than recent projections predicted. Its research department now sees battery prices falling to $99 per kilowatt hour by 2025, a 40 per cent drop from 2022 levels. So much for all that talk about “greenflation.”
This means that so-called “cost parity” between gasoline-powered vehicles and electric ones could arrive even sooner than expected. As a result, the ongoing adoption of those electric vehicles (EVs) will be powered far more by their underlying economic advantages than any government subsidies. “Our analysts see the EV market transitioning to a new phase that is more heavily influenced by consumer adoption than government largesse as battery prices drop,” the Goldman Sachs report notes.
Yes, investors should continue to press companies to lower their upstream emissions, and climate activists should keep pressuring elected officials to implement good, thoughtful policy. But focusing on the oil and gas industry and its unwillingness to co-operate with efforts to prevent catastrophic climate change is a bit like pressing McDonald’s and Burger King to help fight the obesity crisis in America. It is abundantly clear by now that the oil and gas industry, regardless of where it’s located, will never voluntarily wind itself down. The aborted attempts at a pivot to lower-carbon solutions by companies like Shell, BP and even Suncor show when the going gets even a little tough, these companies fold like a $5 tent.
The latest United Nations climate conference will almost certainly fail to meet its stated goals. But as a flurry of recent news shows, the energy transition is already well past the point of no return — and picking up speed every day.
In the end, though, that’s not as big of a deal as it might seem. As the International Energy Agency noted in a recent report of its own, “Many producers say they will be the ones to keep producing throughout transitions and beyond. They cannot all be right.” Indeed, many of them are already quietly coming to this realization and scaling back ambitious plans to increase production in favour of increasing profits and dividend payments to their shareholders.
This isn’t the sort of clean, satisfying victory many climate activists want to see, whether it’s at COP 28 or some other international conference. But right now, it’s the only one they’re going to get. Rather than being disappointed about the inevitably disappointing outcome of COP 28, they can take heart in the fact that climate progress no longer depends on things like that.