“Things not seen” in 2020

You all know the reasons to be depressed about the climate. The Davos élite listen respectfully to Greta’s hellfire sermon, but don’t sign up to the 12-step programme. Carbon emissions continue to rise (+ 1.3% in 2019), as does the CO2 concentration at Mauna Loa (415 ppm two days ago). China and India keep opening new coal power stations. 95% of new cars sold have polluting combustion engines. Australia is on fire. The Murdoch press and the Kochs keep spreading their poisonous disinformation. We are all doomed!

Maybe, and maybe not. You need to get into the weeds for signs of hope. But they are there if you look. My hope list falls into two groups: economics and technology, and politics and culture. For each factor, I add a completely subjective confidence factor for a significant impact in 2020. YMMV.

1: Ever better economics and technology

As Jacobson, Blakers, Breyer etc (and yours truly) keep saying, we already have the technology we need for almost all the energy transition. The key three technologies are affordable already. The LCOE of wind and solar is at or below US 2c/kwh in prime locations, half the price of coal and gas, and competitive with them in a widening range of countries. Battery cars and buses are widely competitive with ICE rivals on a TCO basis, especially in countries that correctly tax fossil fuels heavily. They keep getting cheaper. As you would expect from Econ 101, they are growing fast.

The sources here (in the spreadsheet) are reputable except for batteries, where the numbers should not be taken literally. I leave them in for lack of better data because the order of magnitude is credible: EV cars have decupled in number, so has their range, and cars are joined by 420,000 buses in China, each with the batteries for ten cars.

As long as the growth rates of renewables and EVs are greater than those of primary energy demand and fossil-fueled cars respectively, the energy transition  is a sure thing - not necessarily fast enough, but certain. I see no reason to doubt this. What daemonium ex machina could force a reversal of these strong trends?

There is for instance no sign of a ceiling in either technical progress or economies of scale in the key triad. Wind is the most mature, but even there improvement is steady. Offshore turbines have reached 12 MW. Floating platforms have opened up new provinces like the US and Japanese Pacific coasts, and the Western Approaches off NW Europe. Solar panels are now routinely 20% efficient, at $2.2 per watt wholesale in Asia. Steady increases in battery energy density are beginning to lever open the challenging aviation market, though full adoption waits on the success of one of the many new battery chemistries currently being investigated with goldrush backing.

Outside China, we see much less movement in two key complementary technologies, long-distance HVDC transmission and pumped hydro storage. This is only from lack of demand, since both are perfectly mature, have known costs, and when needed can be deployed anywhere and half the planet respectively. The long shots suffer from the brutal competition: American CSP companies have largely ceased operation. Wave energy is a dead duck. P2G – catalysing water into hydrogen using cheap off-peak renewable electricity, with the option of upgrading it into methane, butane or ammonia – continues to attract serious R&D funding in Europe. So does V2G (using vehicle batteries for grid storage), hydrogen reduction of iron ore (DRI) and low-carbon cement. The main weakness in the global R&D portfolio is the skimpy support for carbon sequestration, which we are now certain to need on a large scale.

James’ confidence factor: high

2: The Asian slowdown

Global fossil fuel carbon emissions rose in 2017 (+1.1%) and 2018 (+2.2% %), but decelerated in 2019 (+0.6% central estimate; +1.3% counting forest fires, land use and natural sources).

This reflects a wider slowdown in both China and India. In the latter, electricity demand is almost static (+1.9% YOY). This has not yet been seen in China (chart, set date range to 10 years). However, the Chinese growth engine is definitely slowing too. Both countries will surely follow the path of OECD members to static electricity consumption, from both tertiarisation and greater efficiency through for instance widespread adoption of IOT controls, variable-speed motors, and LED lighting. It is quite likely that we are seeing this shift already.

In both countries, coal is in trouble. Because renewables have negligible marginal costs and grid priority allows them to exploit these, they cannibalise the high-revenue sales of coal plants and drive down their capacity factors. In a slowdown, coal is the swing producer and takes all the hit. In India, coal has taken a major cut in 2019 from good hydro production. .The country had 37 GW of coal plants nominally under construction as of last July but many of these are in fact suspended. Only 3.5 GW of net new coal capacity opened in the 2018-2019 financial year. The industry is begging the government for a bailout: but the political class will always choose farmers, who vote their pockets, over now friendless ex-cronies. Chinese coal enjoys greater political support both centrally and in the provinces, but the massive bad investment is under growing strain, with serial bankruptcies.

James’ 2020 confidence factor: medium

3: Blackrock and the winds of change in finance

The CEO of mammoth investment house Blackrock, with $7 trillion under management, made waves a fortnight ago with a circular announcing a shift away from coal and warnings about the climate risk of fossil fuels. We need to calibrate our cynicism carefully here. Fink’s language was a lot more dramatic than the operational change in investment policies. The change of heart was triggered by the decision of the Japanese National Pension System (US$1.6tn) to strip a US$50bn mandate off Blackrock last month, and then award it to the Paris-aligned Legal & General Investment Management (H/t IEEFA and CoalWire). However, the company has been a leader in normalising renewables as low-risk portfolio investments. This is not greenwashing.

Both aspects matter. The loss of the social licence of fossil fuels has so far been a slow process, but it is self-reinforcing. The divestment movement will keep growing. The oil companies have been cutting their exploration budgets and returning funds to shareholders: they will keep shrinking. A smaller and contracting business is a less influential one. Mark Carney’s well-focused campaign is winning – but too slowly.

James’ 2020 confidence factor: low

4: The EU finds a mission

The last decade has been a bad one for the EU. Through the euro, it at last acquired real influence in macroeconomic policy – and used it to support destructive German austerity in its poorest members (they had no leverage over the richer ones). This did not work out well for the eurozone economies, or for the EU’s approval ratings. Things are now more or less back to normal, and the ECB and acolytes have far less leverage all round.

The EU has got religion on climate, and the Green Deal is the centrepiece of von der Leyen’s Commission. This is rightly far more popular (Eurobarometer pdf report, pages 2,3). It also fits nicely within the legacy EU competences for market regulation. The Green Deal requires lots of money – the German coal phaseout alone calls for €40 bn over 25 years -, but not a long struggle to change the institutional map. The key Franco-German axis supports it. The holdout Poland is being isolated and ground into cooperation; even neofascist Hungary just held a large solar auction.

The EU will therefore carry on with the Green Deal, and its targets will only change in the direction of greater ambition. It’s just as well for the planet, as the USA has gone over to the dark side and the Chinese leadership dithers, over coal as well as solar. Modi and Bolsonaro offer contrasting styles of green neofascism. Still, it’s much better to have one solid leader than none. Those annoying reminders to OK cookies on your computer come from EU lawmaking. The drawback with the EU is that its policymaking is S-L-O-W.

James’ 2020 confidence factor: medium

5: The Greta show

Fast rewind back to 1429, when a provincial teenage girl has just showed up at the Dauphin’s little court at Chinon, directed by unverifiable visions. This longest of long shots paid off because the Dauphin was desperate. When Jeanne reached Orleans, she had a harder time getting respect from the hard-bitten French commanders, but won over an odd band of supporters including the infamous serial killer Gilles de Rais and the future military genius Jean de Dunois, the Bastard of Orleans. Jeanne’s career is Exhibit A in the Great Man, or Great Woman, theory of history against the “big impersonal forces” crowd.

Greta Thunberg is even younger than Jeanne and has enjoyed a similarly improbable success. There was a lot of luck in both cases, but they needed to show up first; and to use their luck wisely. Greta is thankfully more sensible, and has showed remarkable restraint in handling fame and provocations, and sticking to a simple and incontrovertible message with a Churchillian steeliness (and understandable grumpiness). Her luck is ours too.

Again, we have to be judicious in our assessment. Mass street protests can shift public opinion and the Overton window of élite discourse, but they don’t create revolutions outside very unusual circumstances (as in the Baltic states in 1987). What Greta has done is add a large new group of young people to a pre-existing coalition of weary climate scientists, old-school environmental activists, repentant financiers, conceited entrepreneurs and random bloggers. The great thing about young enthusiasts is that they they don’t know what’s impossible. They correctly think little of the carbon tax pushed for decades in vain by the economic establishment, while all the progress has come from kludgy tax breaks, direct subsidies, regulatory mandates, and socialist guarantees like FITs. More of the same will do the job, sweetened – as in the AOC Green New Deal - with compensation for politically important groups of losers like miners.

I liked the way the young activists hijacked the story about COP 25. It was never supposed to be about raising ambition – that’s for COP 26 in Glasgow next year – but the activists made it seem as if it was, and so constructed a shameful failure. They also helped kill attempts by the axis of denial (USA, Australia, Brazil) to rig the new carbon trading scheme required by the Paris Agreement. The result was another failure to agree – but a good one, as the axis now faces a choice between a sound trading scheme and none.

James’ 2020 confidence factor: low

6: Death of Rats

It’s not just the good young girls who make a difference to history but also the bad old men: Trump, Murdoch, Koch. Old is helpful here: Charles Koch is 84, Rupert Murdoch 88. Donald Trump is only my age, 73, but has an exceptionally unhealthy and stressful lifestyle. Terry Pratchett’s Death of Rats is slowly sharpening his tiny scythe for all three. The odds are still that each will see the end of the year. On UK life tables, the 1-year death chances of the three are roughly 3%, 10% and 20%. The risk of incapacity to show up at the Dr. Evil desk probably doubles that. The risks to the three lives are independent, so the total chance of at least one of them leaving the stage is a respectable 66%. If Trump doesn’t hear SQUEAK, American voters are (on all polls) very likely to give him the boot in November. We should not therefore count on the last-act-of-Hamlet scenario, but an early bad end is a real possibility for each of them.

James’ 2020 confidence factor: medium

7: Black and white swans

Climate and economic models, and in general predictions based on extrapolation of past trends, necessarily exclude black swan events. These are least likely in the technology side. They are likely in two areas: the climate itself, as we have seen with the exceptionally bad Australian bushfires; and society, culture and politics, where non-linear change is the rule rather than the exception. It seems pretty safe to expect that the swans will be black in climate and white in society. Blackrock and Greta are white swans.

Another example is the death of American coal.

The underlying shifts in relative prices have been much slower than the vertiginous fall. The most decrepit and inefficient coal power stations have all gone, and the ones being closed now are relatively modern and efficient. But there is no slowdown. Positive feedbacks are at work as well as economic trends: utility managers are severing their longstanding business links to coal miners, and herd loyalty gives them moral cover; the rundown drives the coalminers faster to bankruptcy, with fire sales of mines to short-term grifters outside the normal capitalist web of relationships; bankrupt companies lose political support. Similar processes are surely at work in both India and China. Their much larger coal mining sectors will presumably get bailed out (as Tata and Adani already have been), but supplicants are far less popular with rulers than donors.

The next step will be cracks in the power of oil and gas. The November flotation of a tiny part of Saudi Aramco (the $1.7 trillion pig in a poke) was not a flop, but it did not go quite as well as hoped, even before Donald Trump and the ayatollahs underlined and heightened the political risks to all Middle East oil.

James’ 2020 confidence factor: low. Swans, right?

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There are then grounds for hope. They are overall rather thin pickings, and fall well short of what is imperatively needed: pedal-to-the-metal investment in renewables; social, political and financial exclusion of denialists and defeatists. The odds are not yet in our favour.

The canonical virtue of hope is not the same as optimism, whether blind or informed. It is just possible for humans to live and die under William the Silent’s bleak maxim “It is not necessary to hope in order to act”, but very few of us are capable of the despairing heroism of the Warsaw Ghetto uprising in 1943. Before risking our lives and fortunes we need what is aptly known as a fighting chance. For some, this is well short of evens. Such hope may be dashed, as in the wider 1944 uprising in the same city. Sometimes it pays off, as with Britain in 1940. We admire both types of courage, but can only in practice follow the second.

So don’t give up. Clio does not take sides, but Athena does. She backed the Greeks at Troy. Remember who won.

FWIW, my predictions for 2020:

• Fossil fuel emissions will fall slightly
• Gas will hit its first serious trouble in the USA
• Denialist politicians will do badly in elections.