Energy transition, reloaded

Wildfires in New Mexico and the war in Ukraine may not appear to have much to do with each other. Scratch under the surface a bit, and they are closely connected as the latest in the long line of the ballooning environmental and societal costs of over-reliance on fossil fuels. Together, these mounting costs are hastening the transition to renewables: Last week, the EU put into high gear calls to accelerate its phaseout of Russian energy imports.

Energy transitions shaped our civilization. Domestication of animals allowed the creation of the first states, while the transition from wood to coal ushered in industrialization and capitalism. Oil revolutionized transport, kick-starting globalization. Nuclear power promised limitless energy — for both productive and destructive uses, creating modern superpowers and the Cold War. These transitions were driven either by the creation of entirely new markets — e.g., oil-powered cars and airplanes in the early 1900s — or by offering a cheaper way to power the existing ones. This “primacy of price” sounds like a capitalist ideal, in which the markets decide the winners and losers.

The trouble with the price of fossil fuels is that it does not include all their objective costs. These unincluded costs are called “economic externalities.” Think of a gasoline-powered car: its owner enjoys convenient, relatively cheap transportation, while car manufacturers and oil companies enjoy the profits from selling their products. However, the cost of car-related pollution — in e.g., lost productivity because of respiratory illnesses — is externalized and shared by the entire society. Because externalized costs are paid by everyone, fossil fuels and the products that they power are artificially cheaper and therefore effectively subsidized. The key part of the energy transition is the internalization of these externalities, which will make fossil fuels more expensive than their renewable counterparts.

As in every transition, there will be losers and winners. Winds blow and the sun shines across the world, and this democratic distribution of renewables may lead many developing countries to faster energy independence. It is tempting to think that oil-rich regions and the fossil fuel giants of this world will be the losers, but these roles are far from preordained. Adaptability will determine who sinks or swims. Four decades ago, both IBM and Olivetti were making world-class typewriters. Today, IBM makes no hardware of any kind and is thriving; Olivetti effectively disappeared in the 1990s. Global oil companies have spent decades amassing capital and an international, educated workforce. Drilling for oil has similarities with drilling for geothermal energy or underground energy storage. Dealing with liquid petroleum derivatives is very similar to bioethanol and biodiesel. The post-oil economy skills are here already; oil giants’ greatest challenge will be their size and bureaucratization, which breed “too big to fail” or “always done it this way” attitudes. Smaller, nimbler outfits may have an easier time adapting, as they did in the fracking transition of the 2010s.

Countries also have choices. Some of today’s petrostates are using their fossil-fuel wealth to invest in education, inclusion and diversification of their economies, some to fund European soccer leagues, some to fight culture wars and some to fight actual wars. These choices are bizarrely analogous to those of the European monarchs of the 1700s, which scarred their economies all the way until the 1990s when the EU started equalizing them. Similarly, Texas, Norway and Saudi Arabia will vastly differ in wealth in the early 2100s if they continue their current trajectories.

Previous energy transitions offer some lessons. First, the “old” fuels rarely disappear in favor of the “new” ones — they mostly fall behind as new markets open in which they can’t compete. Second, new technologies play a role in transitions but rarely drive them. Electric cars and solar panels have been around for decades but grew in significance only with the political will to subsidize them. Third, transitions require either traumatic events like wars or decades-long committed government focus unswayed by polling numbers. Bad news for the U.S., as its polarized, soundbite-dominated politics makes thoughtful global leadership unlikely. Not the end of the world: the U.S. will continue creating innovative climate solutions, but probably not lead in implementing them. That responsibility is moving east, as the EU finally coalesces around a gutsy energy transition strategy and China leads the world in growing renewable energy capacity.

Ognjen Miljanić is a professor of chemistry at the University of Houston, where he teaches on energy and sustainability. He is the author of  “Introduction to Energy and Sustainability,” published by Wiley. Follow him on Twitter: @MiljanicGroup