Investment in green R&D takes sting out of transition

Extinction Rebellion climate activists in London this week. Picture: Peter Nicholls/Getty Images

As climate policy increasingly drives up living costs with next to no results, voters are becoming wearier of expansive green promises. We can only hope this backlash can lead to better, cheaper and more effective measures.

Voters are inevitably viewing climate policies with more scepticism after dealing with climate activists blocking roads and gluing themselves to runways, celebrities who take private jets while lecturing us about taking the bus, and policies that cost the world but deliver little.

The transformation has been reflected in rightward shifts in various European countries in the EU elections and a broad perception of a “green backlash”.

Germany’s energy policy famously was promised to cost the public the equivalent of one scoop of ice cream each month. Now, as costs have far surpassed €500bn ($825.7bn), the per-person price tag seems more comparable to an entire ice cream truck. Similarly, in Britain, Germany and the US, the crippling costs to families of policies such as replacing gas stoves or boilers have become evident, leading to repeated political reversals.

In general, what we’re seeing exemplifies what climate economists have long warned: policies pushing a transition to greener energy are inherently costly.

McKinsey estimates that the cost of a transition from fossil fuels to green energy would exceed $US5 trillion ($7.6 trillion) annually, and recent economic estimates show the resulting slowing economic growth could make the real economic impact five times higher. For the average person in wealthier nations, this translates into unaffordable costs of about $US11,500 a year.

At the same time, climate policies are delivering much less than promised. The Biden Inflation Reduction Act was hailed for its potential to dramatically lower emissions rapidly this decade for $US369bn. It turns out the price could run into the trillions and the temperature impact is much smaller. In Germany, landmark legislation to switch to green energy has achieved next to nothing: in 2010, 79.6 per cent of German energy was powered by fossil fuel while 12 years later it had declined by just 0.3 percentage points to 79.3 per cent.

The shrillness of climate doom also wears down voters. While climate change is a real and man-made problem, end-of-the-world proclamations from media and campaigners greatly overstate the situation.

While climate economics shows the overall impact of global warming is negative, its likely total impact is equivalent to one or two recessions across the rest of the century – a problem but nowhere near end of world.

And, of course, voters face many other problems: inflation, healthcare, education and security. Polling data illustrates a shift in sentiment. For instance, ahead of the EU elections, German voters revealed a significant drop in climate concern. In the US, climate change remains a lesser issue, ranking 12th of 14 priorities.

There is a real need for smarter, more practical climate policies. What we need most is innovation. Throughout history, humanity has tackled major challenges not by imposing restrictions but by developing transformative technologies. We didn’t address air pollution by banning cars; we created the catalytic converter, which significantly reduced emissions. Similarly, we didn’t combat hunger by urging people to eat less; the Green Revolution allowed farmers to produce far more food.

However, for the past 30 years, innovation in green energy has been sorely neglected. Back in 1980, developed countries allocated more than US8c of every $US100 of GDP to research into low-carbon technologies. But as climate policies shifted towards making fossil fuels more expensive, spending on green innovation fell by half, down to less than US4c per $US100. Investment in green-energy research has been shown to yield significant benefits. Studies indicate that every dollar invested in green R&D could prevent $US11 in long-term climate damages, making it arguably the most effective global climate policy available.

When R&D eventually drives the cost of green energy below fossil fuels, everyone will switch – not just rich countries but, crucially, also China, India and Africa.

Patience with today’s hugely expensive but ineffective climate policies is wearing thin. Fortunately, this could be the push we need to change track and focus on much cheaper innovation that could actually fix climate change.

Bjorn Lomborg is president of the Copenhagen Consensus, visiting fellow at Stanford University’s Hoover Institution and author of False Alarm and Best Things First.