Hello! Anca is gearing up to head to Egypt for COP27. Will you be there? Let her know: anca@ciphernews.com.
We have a Voices article on the concept of “coopetition,” which Anca mentioned toward the end of her article last week; plus, a double Data Dive to set us up for COP.
Meckling is a professor of energy and environmental policy at the University of California, Berkeley. You can reach him at meckling@berkeley.edu or on LinkedIn.
Conventional wisdom suggests that crises—such as high oil prices and economic recessions—drive governments to prioritize energy innovation.
Historically, governments have invested more in new energy technologies when oil prices were high. The price spikes of the 1970s oil crises, for example, led to the first public push for energy innovation. But oil prices alone do not explain the growth in public funding for clean energy development in recent decades.
Like high oil prices, economic crises could also be responsible for the increase. For example, the Recovery Act of 2009 poured what was then an unprecedented $90 billion into clean energy technologies in the United States in the wake of the Great Recession.
But in a recent study, my collaborators and I found the recession did not bolster public funding for the research, development and demonstration (RD&D) of new clean energy technologies in major economies in statistically significant ways. Instead, the crisis led governments to boost investment in incumbent energy technologies like fossil fuels and nuclear (despite the unprecedented cleantech funding I just mentioned).
Last week, Cipher wrote about the growing competition among nations for clean energy. This week, we’re featuring a Voices article on a relatively unknown term called “coopetition,” which combines cooperation and competition.
In our research, we conclude an interplay of global cooperation and technology competition—dubbed “coopetition”—was the driving factor propelling governments to fund RD&D of new clean energy technologies over the last decade.
Coopetition will be crucial to spurring future public investments in energy innovation to meet climate goals going forward. But keeping cooperation and competition in balance will be a challenge in the current geopolitical climate.
Mission Innovation, an international initiative created in 2015 at the United Nations Climate Change Conference in Paris, introduced a new model for global collaboration: setting goals for RD&D funding as opposed to setting goals for emissions cuts. Major economies that participated in Mission Innovation, including China, France, Germany, India, Japan, South Korea, the United Kingdom, and the United States, succeeded collectively in increasing their funding significantly.
Overall, however, members fell short of their goal to double clean energy RD&D funding by 2020. (Smaller economies did not significantly grow their funding, foreshadowing a growing energy innovation gap.)
Global competition around clean energy technologies such as solar photovoltaics, wind and electric vehicles has also been spurring new investments. In the U.S., for example, the Chinese competitive challenge mobilized bipartisan support for clean energy RD&D spending. Look no further than the Bipartisan Infrastructure Law, the CHIPS and Science Act and the Inflation Reduction Act.
Competition taken too far can undermine public RD&D spending. In the 2000s, China’s dominance in solar manufacturing and the bankruptcy of similar companies in Europe and the U.S. led to less photovoltaic production in those regions and those economies invested less in solar RD&D for several years.
Public investment in decarbonization, including energy investment, is on the rise. Public RD&D funding of new clean energy technologies rose by 84% between 2002 and 2018 in seven major economies including China. More still needs to be done.
The International Energy Agency estimates 35% of cumulative emissions reductions necessary to achieve the climate goals from the Paris Agreement depend on technologies currently at the prototype or demonstration phase. Another 40% rely on technologies that have not yet reached mass-market deployment.
Today, geopolitics is challenging global clean energy coopetition. The intensifying U.S.-China power competition has already disrupted climate cooperation—China walked away from bilateral talks with the U.S. in August.
The potential of more green trade wars and overly aggressive efforts to decouple from China’s clean energy industries are looming. Overly aggressive protectionism and techno-nationalism would disrupt the global innovation system in clean energy.
Ensuring effective cleantech coopetition going forward will require strengthening national competitive strategies while reinvesting in international cooperation.
On the competition side, governments need to tie clean energy RD&D efforts into commercialization strategies to more effectively bring new technologies to global markets. Technology—or sector-focused public-private projects such as the Offshore Wind Accelerator in the United Kingdom or the Joint Center for Energy Storage Research in the U.S.—offer models of how to bridge the lab-to-market gap.
At the same time, global cooperative efforts such as Mission Innovation need to be expanded, strengthened and complemented with enhanced coordination around international trade in clean energy technologies. A trade club for such technologies should be a priority, which could be tied to public RD&D commitments to further incentivize investment.
Editor’s note: Breakthrough Energy, which supports Cipher, is a partner of Mission Innovation.
Amy's take: Uncertainty has always been central to climate change: things can always get worse and always get better. I would have appreciated the author discussing more to what degree he has second thoughts on aspects of his 2019 best-seller laying out a future based on the most extreme outcomes.
Climate Change Is Real. Markets, Not Governments, Offer the Cure — The New York Times Amy’s take: Sharing one’s evolving perspective is important. But it shouldn’t take a trip to Greenland to convince you climate change is real, just like you don’t need a medical degree to accept a doctor’s diagnosis. These two NYT writers could use a little more intellectual humility (a phrase used here).
Britain’s climate leadership unravels under Rishi Sunak — POLITICO Anca’s take: A glimpse at the challenge facing the new British prime minister and, more importantly, a reflection of the wider challenges leaders will face at the upcoming COP27 in Egypt over climate finance.
Brazil gives flagging climate fight a timely boost — Reuters Anca’s take: Lots of positive coverage is following the election of Luiz Inácio Lula da Silva as Brazil’s new president, with many seeing this as good news for the climate following the leadership of far-right President Jair Bolsonaro.
Chris Sacca on climate investing right now: The opportunity ‘almost seems unfair’ — TechCrunch Amy’s take: It’s interesting how dismissive Sacca is of the role of government. Almost everyone I interview—including legendary venture capitalists Vinod Khosla and John Doerr at the recent Breakthrough Energy Summit—say government policy is essential.
“Valuations are out of control”: Chris Sacca shuns hydrogen — Axios Amy’s take: This is what happens when addressing climate change isn’t a core focus for a firm. Making money on climate technologies and fighting climate change are not necessarily the same thing, but they must coincide if we are to succeed.
A Power Balance Shifts as Europe, Facing a Gas Crisis, Turns to Africa for Help — The New York Times Anca’s take: This is a trend we have spotted and reported on as well. African countries’ frustration is understandable—expect the issue to pop at COP27, too.
Carbon-Capture Projects Are Taking Off. Here’s How They Stash the Greenhouse Gas. — The Wall Street Journal (paywall) Amy’s take: Every time I see the phrase “turn to stone,” I think of the Sanderson sisters in Hocus Pocus, who turn to stone at the end of the (first) movie. Happy (belated) Halloween!
G7 offered Vietnam and Indonesia $15B to drop coal. They said ‘maybe’ — POLITICO Anca’s take: U.S. climate envoy John Kerry referred to these ongoing talks during the Breakthrough Energy Summit last month as an opportunity “to bring [developing countries] on board” with the green energy transition. Whether these talks have been successful will be clear at COP27.
More of what we're reading:
White House announces $13.5 bln funding to help households with energy bills — Reuters
Energy crisis chips away at Europe's industrial might — Reuters
Meet the leader in charge of doling out DOE’s $25B for novel cleantech — Canary Media
Global clean energy investments need to triple between now and the end of the decade if the energy sector is to achieve net-zero emissions by 2050.
That’s according to the 2022 World Energy Outlook released by the International Energy Agency (IEA) last week.
Clean energy investments are set to rise by more than 50% by 2030, jumping from $1.4 trillion in 2022 to over $2 trillion by the end of the decade based on the IEA’s Stated Policy Scenario, which analyzes existing policies, as well as policy ambitions and targets.
The current energy crisis triggered by Russia’s invasion of Ukraine has led to long-term policy responses in the United States, the European Union, Japan and South Korea, as well as ambitious clean energy targets in India and China. These plans are spurring the investment boost.
“Clean energy becomes a huge opportunity for growth and jobs, and a major arena for international economic competition,” the report stated.
For the first time, the agency predicted demand for fossil fuels will peak in the near future.
Yet clean energy investments would need to jump to over $4 trillion by 2030 to be aligned with the IEA’s 2050 Net Zero Emissions Scenario, which sets out a pathway for the global energy sector to achieve net-zero CO2 emissions by mid-century.
Source:International Energy Agency, World Energy Outlook 2022 • The NZE scenario, the most ambitious in the outlook, sets out a pathway for the global energy sector to achieve net-zero CO2 emissions by 2050. AE = Advanced Economies; EMDE = Emerging Market and Developing Economies.
Today, for every dollar spent on fossil fuels, $1.50 is spent on clean energy, Tim Gould, the IEA’s chief economist, said in a briefing. For the world to reach $4 trillion in clean energy investments by 2030, that ratio will have to be more like one to nine, he said.
While many companies and financial organizations have set targets to scale down fossil fuel investments, “much more emphasis is needed on goals and plans for scaling up investment in clean energy transitions, and on what governments can do to incentivize this,” the report stated.
Failure to sufficiently increase investments in clean energy technologies would mean more investments in fossil fuel infrastructure to accommodate growing energy demand in coming years—a move that jeopardizes the world’s goal to keep global warming below 1.5 degrees Celsius, said Fatih Birol, IEA executive director.
AND FINALLY...
Wind from above
Cipher reader Jay Snyder shares this photo he snapped while on a recent flight from London Heathrow airport. “The collection of white objects on the ground were wind turbines,” Snyder writes. “It was neat to see them from the sky, and to see them looking so small in contrast to how large they look when you're on ground level with them!”
Each week, we feature a photo that is somehow related to energy, the thing we all need but don’t notice until it’s expensive or gone. Email your ideas and photos to news@ciphernews.com.
Editor’s note: In addition to supporting Cipher, Breakthrough Energy also supports and partners with a range of entities working to tackle climate change, including nonprofits, corporations, startups and research firms. For more information on Cipher’s editorial policy, click here.
