US gasoline demand rose last year in another reminder that the US really no longer has a set of climate plans that will result in falling national emissions. Here in 2024, the US is not unlike a large school system that’s long had the goal to raise grades, test scores, and college admissions. First efforts do result in stabilizing these academic measures, and the school begins to slowly climb upward in a positive direction. The next round of gains however require a renewed, and in many ways, a more challenging effort. And, that’s the problem the US now faces: the early gains were easier to harvest, and the next round of gains would require trudging through the politically risky badlands of the country’s transportation sector, and automobile fleet.
Despite the poor performance of wind and solar last year, the promising growth of these two increasingly cheap technologies gives the impression the US is on course to the next round of emissions reductions. It isn’t. The big gains so far in the national emissions portfolio have of course come from a rapid and very impressive collapse of coal. This is the big win that clearly promotes a sense of hope and optimism, but it shouldn’t. Another analogy: investors deepen their commitment to companies that are able to sustainably grow earnings. But growing earnings year after year, decade after decade, eventually gets hard—even, if not especially, for the best run companies. The gains made so far in US emissions reductions are just like that. You can’t just produce a miracle once. You’ve got to generate successive miracles to keep the momentum going, and now the US has entirely lost that momentum. We ate into coal. All good. Now we need to eat into oil, and natural gas. But oil consumption is not falling, and natural gas consumption continues to grow. By alot.
If you want to make the argument that the US has set in motion an array of good initiatives that could produce a good round of reductions, you really need to specify that those are longer term; outcomes that will land next decade. Presently, there is nothing to generate any meaningful declines from here to 2030. We can retire more coal. But natural gas continues to grow. We can adopt more EV, but EV adoption while restraining road fuel growth is not able, by itself, to actually create reductions until much later in the fleet turnover process. Again, next decade.
• coda: At the most recent Academy Awards show, host Jimmy Kimmel gave a shout out to director Greta Gerwig, referencing the widespread criticism that she had been unfairly snubbed in the Best Director category. When the audience applauded loudly, Kimmel then said, “Whoa, whoa, whoa! You are all the voting members of the Academy, you are the ones who made this happen!” And this is precisely where America is right now, as it faces the next round of efforts to reduce emissions. The gap between a voiced agreement that the US should fight climate change, and the willingness of individuals to actually do something about it, is about as wide as it can be.
Europe is very much winning the emissions fight. Last year, EU emissions fell to 60 year lows as power sector emissions fell hard, and transportation emissions fell also on the back of a long arc of EV adoption, and fuel efficiency. Although oil consumption is down roughly 13% since the highs of 2005/2006, it’s still the case that Europe too finds it hard to get off oil. The difference between the US and the EU, however, is that while also killing coal, the EU actually does something about petroleum emissions, and has more recently started to fight natural gas. Power sector emissions fell by a whopping 19%, and you can see that pretty easily in the chart below, as both coal and natural gas were crushed.
The West likes China’s leadership in building wind and solar, but then doesn’t like it so much when China floods the world with cheap PV. According to a big write-up at the Financial Times, China’s solar production capacity is now so enormous, that it dwarfs current global output:
China, the dominant solar equipment supplier, doubled production capacity last year to more than 1tn watts and now produces nearly three times more panels than global demand, according to the International Energy Agency and Wood Mackenzie. Global prices for panels have fallen 50 per cent in the past year to as low as 10 cents a watt.
What’s not to like? The commodification of solar is an outcome that should be embraced by everyone. If that means solar PV manufacturing doesn’t get off the ground (much) in the OECD, who cares? The value-add to electrification and clean generation all comes through batteries, software, interoperability, time-shifting solutions, and great economics. There is a huge volume of value-add up for grabs in energy transition and much of it will result from creative applications, not raw materials.
As Cold Eye Earth has pointed out for years, comparative advantage (Ricardo) is generally in alignment with environmental goals. For example, even if Chinese solar panels are made using electricity from a grid that relies heavily on coal power, the cost advantage that China can offer spurs global PV adoption, wiping out and rendering moot the composition of China’ power supply. Indeed, the greater the volume of solar China produces, the bigger the pressure on its own fleet of coal-fired generation.
The West of course has social goals and political constraints. We are currently in a kind of Christmas-tree phase where every public project or investment gets saddled with a bunch of aspirational targets that often seem aimed to remediate past instances of unfairness. As a concept, that’s totally fine. But if we agree that climate change poses an existential threat, one that is itself potentially very inflationary and very threatening to how the world works, we might want to narrow the number of sectors we’re trying to protect as work of energy transition rolls onward. Protecting incumbent auto industries is probably unavoidable. But trying to stave off a commodity product like solar PV is self-defeating.
Battery storage represents an existential threat to fossil fuels, similar to wind and solar. At a large enough scale, battery storage starts to look more like generation. And while we’ve not yet hit that level just yet, it’s clear the mighty S curve is about to make itself more visible. So it’s probably time Cold Eye Earth did a primer on battery storage. Let’s go.
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