An overheating planet requires extreme climate solutions

(Bloomberg) –First came the hottest June in recorded history. Now it’s the hottest-ever July. This year is already highly likely to replace 2016 atop the heat ranking. Scientists suspect the last several years have been warmer than any point in more than 125,000 years.

This acceleration of heat is the result of burning enough fossil fuel to raise global average temperatures about 1.2C since the Industrial Revolution. And we’re not yet halfway to Peak Heat.

According to the current projections from researchers at Climate Action Tracker, all the existing emissions-cutting policies by governments around the world would result in the global average temperature increasing about 2.7C by 2100. A separate team at the United Nations compiled an end-of-century estimate of 2.8C.

The problem is clear: Existing weather is visibly outrunning our combined efforts to stem global warming. Humans are losing the race against heat.

“Climate policy is not keeping pace with the acceleration of climate change,” says Ann Mettler, vice president for Europe at Breakthrough Energy, a consortium of nonprofits and venture capital funds backed by Bill Gates that invests in green technologies. Shifting to clean energy, she says, “whatever that cost, would pale in comparison to what these extreme weather events cost.”

Projecting a future of temperatures is inherently imprecise because modern humans have never experienced such extremes. The expected outcomes of a 2.7C and 2.8C world can be hard to distinguish from one at 3C, a level of warming that scientists have spent decades studying. But what’s clear is that running faster only gets harder and more expensive as the impacts of further heating mount.

As many as 50 million people could regularly see temperatures that human bodies aren’t equipped to survive if the world warms by 3C, according to a 2018 study in Lancet Planetary Health. New York City might experience three once-in-a-century flooding events every year. Up to 52 times more people would face dangerous heat in African cities such as Algiers, where temperatures topped 119F (46C) this week. The wildfire area burned globally would double as the Amazon rainforest transforms into grassland.

Research also shows that the distribution of misery would be extremely unequal. The UN Intergovernmental Panel on Climate Change estimates that 40% of people in rich countries will be inoculated against impacts happening at 3C of warming that people in poorer countries will be experiencing after an increase of just 1.5C. Rising causes of death would include not just heat itself but exposure to ground-level ozone, malaria, dengue, and West Nile virus.

For the researchers involved in tracking today’s heat milestones, this summer has been strange. “Shocking but not really surprising,” is how Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies, describes the experience of observing Phoenix pass 110F (43C) for at least 27 days straight this month.

It’s the same with “breaking records in China or Rome,” he says of 126F (52C) in Xinjiang and 107F (42C) in the Italian capital. “Even the things that are unprecedented are not surprising.” Climate models like those run by NASA saw it coming.

Of course, humans exert control over planet-warming pollution and can change these models’ trajectories. Bloomberg Green spoke to scientists, researchers and analysts who are pushing the outer limits of our ability to eliminate emissions. Here’s what they believe can be done to accelerate the most powerful solutions to better match the new speed of heat.

A Quick Change to Future Temperatures

It’s not possible to cool the planet in the space of a summertime, but it’s entirely possible to dramatically reduce future warming in less than a generation. We’ve done it before.

Countries have avoided generating about 8 billion metric tons of planet-warming carbon dioxide since reaching the landmark Paris Agreement in 2015. That’s equivalent to about 22% of last year’s emissions, which themselves came in lower than anticipated.

How did we pull this off? By building 1 trillion watts of solar, deploying millions of electric cars, enacting more than 2,000 climate laws in every country on the planet, and surpassing $1 trillion in annual spending on the energy transition.

All those efforts “helped us put the world onto a different trajectory,” says Laura Cozzi, the chief energy modeler at the International Energy Agency. To put things in perspective, in 2009 the same researchers at Climate Action Tracker saw the world warming 3.5C.

Going even faster means that renewable energy deployed globally needs to triple by the end of the decade while energy efficiency doubles and the oil-and-gas sector cuts methane emissions by 75%, according to the IEA’s models. “We need to do more,” Cozzi says.

Building Batteries to Store Cheap Green Energy

The biggest success of the energy transition has come about because of a simple rule: Make a lot of anything, and it gets easier to make even more at cheaper prices.

Until the last few years, clean-energy alternatives were too expensive to compete with fossil fuels. Today solar power costs just 11% of what it did in 2009. Offshore wind and battery prices fell 74% and 84%, respectively, from 2012 to 2022, BloombergNEF data shows.

Those plummeting costs have pushed global power prices down so much that dirty fuels no longer make economic sense, and their use has likely peaked in the sector, the Rocky Mountain Institute and Bezos Earth Fund said in a report. All but one of the US’s remaining coal plants are more expensive to run than it would be to replace them with new solar, wind or energy storage, according to the research group Energy Innovation.

Plummeting battery costs have also helped put 27 million electric cars on the road at the start of the year — and the most recent forecast from BloombergNEF sees the global EV fleet reaching 100 million in 2026.

But we need more ways to contain all that clean energy so it can be used cheaply around-the-clock, from mega-batteries to pumped hydro. “There needs to be a concerted effort to look also at storage solutions,” says Madhura Joshi, a senior associate at climate think tank E3G based in India. “The pace of development on that is nowhere near as fast as where we would like it to be.”

Adding Subsidies for More Speed

The earlier governments support cleaner alternatives, the sooner costs will come down and demand will go up — globally.

Consider the US Inflation Reduction Act. Each ton of carbon dioxide cut as a result of the massive climate-spending measure will bring between 2.4 and 2.9 tons of CO2 reductions elsewhere in the world, according to the research firm Rhodium Group. The spillover effect from the US law will eventually make clean technologies cheaper for everyone.

The IRA is also helping to spur a clean-technology arms race as others fear being left behind. Within seven months of the bill’s passing, the EU put forward its own Net Zero Industry Act — a package of measures designed to boost domestic production of key technologies, including batteries and heat pumps. China’s subsidies are already twice that of the EU’s on a GDP-adjusted basis.

Countries will increasingly have to intervene to spur nascent technologies to remain competitive. It took 40 years for solar panels to reach mass-market scale. That same process needs to be applied — much faster — to solutions such as green hydrogen, small modular nuclear reactors and carbon capture, according to Lee Beck, Brussels-based senior director for Clean Air Task Force, a climate nonprofit.

“The more solutions options we commercialize as fast as possible, the easier it will be to pivot should any single solution fail,” she says. “It will also lead to faster deployment in other places.”

Snipping the Red-Tape Delays

Even with much-cheaper green solutions, bureaucratic hurdles can cause years-long delays that slow down deployment.

The green-energy economy has grown faster than the ability of electrical grids to connect all those clean electrons. It currently takes about four years to join solar generators to the US grid, and more than eight years to plant an underground power transmission line. A large part of that time is spent on securing the right permits to start manufacturing or construction.

Russia’s invasion of Ukraine and the pressure it brought to wean Europe off gas helped galvanize policymakers to streamline the permitting process, something the renewables industry has repeatedly called its biggest bottleneck. The bloc designated wind and solar farms as an “overriding public interest,” bringing the time needed to authorize a project to as little as nine months. Stacks of paperwork will be replaced by a simple online procedure.

The US needs its transmission system to grow by 1.8% a year through 2035 to keep up with the volume of solar and wind power being built in the aftermath of the IRA, and an even higher 2.4% annual growth rate to meet its net-zero goal. But the actual growth rate has been about 1.2%, according to Jesse Jenkins, an assistant professor of mechanical and aerospace engineering at Princeton University. And the stakes are enormous, he says, because about 40% of potential US emissions cuts won’t materialize without a bigger grid.

Part of the problem is the absence of national authority to site power lines in the way the US does highways and pipelines. “It means that there’s literally no one in the entire process, who’s looking out for the national interest,” Jenkins says. “All you have are local jurisdictions and private-sector interests.”

It’s not about simply ignoring often legitimate debates over how land should be used, says Beck from CATF. Rather countries need to look ahead and grapple with those tradeoffs now. “We aren’t planning really for what the future infrastructure will look like,” she says.

Rapidly Closing the Finance Gap

Doing more means spending more. The race against heat is measured in finance.

The sums needed to virtually eliminate global emissions by mid-century, which would give the world a chance of staying within 1.5C of warming, are head-spinning: $196 trillion in total spending, according to BloombergNEF, or almost double the size of the global economy in 2022.

Last year was the first time ever that industrial and consumer investment in the energy transition equaled fossil-fuel investment, according to BloombergNEF. Reaching net zero by 2050 would mean that ratio needs to be 4-to-1 by this year, BloombergNEF’s modeling shows, before rising to 6-to-1 in the next decade and 10-to-1 in the 2040s.

Achieving that acceleration will require every financial trick available. And there are lots of approaches being tested. A prime example is ” blended finance,” or the bundling of investments by different kinds of institutions to support hard-to-finance projects. Governments, development banks and philanthropies can take on some of the risk so private investors are more willing to get involved. There might be debt issued at friendlier-than-market rates. Or else a mix of grants, loan guarantees and equity-ownership arrangements.

Another problem for many green projects, especially in the developing world, is that they are too small to interest deep-pocketed investors. One attempt to remedy that was launched at the 2021 UN climate talks in Glasgow. Called the One Planet initiative, the group assembles a portfolio of smaller clean-energy and sustainability projects, which increases their scale enough to attract large institutions with bigger potential profits.

The key, says Cozzi from the IEA, is lowering what’s known as the weighted average cost of capital — which raises expected returns for investors. There also has to be serious reform at multilateral lenders such as the International Monetary Fund to unlock more money from companies and investors. “Without the private sector, you don’t do the clean energy transition,” she says.

Markets Made to Support Speed

Greening the global economy will require creating new markets and reshaping existing ones.

Companies developing cutting-edge climate solutions need to raise money, but investors can be wary of technologies they’ve never heard of. One way to allay that fear is to show there’s demand for their products. That’s why John Kerry, the US climate envoy, launched a pact for big companies such as shipping behemoth A.P. Moller – Maersk A/S and building materials giant Holcim Ltd. to buy tons of green fuel and low-emission cement before a drop is produced. Breakthrough Energy leads a similar effort.

The global carbon offsets market — where companies currently spend billions on credits they use to cancel out their emissions — will also need to be reformed and better regulated to channel money into a greater swathe of CO2-saving initiatives, says Breakthrough’s Mettler. While projects focused on planting trees and protecting forests are vital, those funds could also be used to support emerging technologies such as carbon capture, she says. Countries could also explore other market solutions, such as a system being trialed in Germany which rewards companies for emitting less using more expensive solutions.

“Right now those that invest in clean technologies have all the risk, and that’s not working,” says Mettler. “There are policy levers that we can pull that would reduce the cost of the energy transition.”

Carbon markets backed by government mandates will also play a key role. By making it increasingly expensive to emit CO2, companies are incentivized to drive investments into low-emissions alternatives. While around 40% of global emissions are covered by carbon markets, according to the OECD, the price varies from close to €100 ($111) per ton in Europe to less than $9 in China.

Speeding up the Transition for Those Left Out

The price drops in clean energy have not led to rapid adoption everywhere, even places where there’s plenty of sunshine and wind.

Green energy is mostly growing in three places: North America, China and Europe. Yet 60% of the world’s potential solar energy shines on the continent of Africa, which has the same installed capacity today as the tiny country of Belgium.

“This is about designing good climate policy so the richer pay more and you protect the most vulnerable in society,” says Simone Tagliapietra, analyst at the Bruegel think tank in Brussels. “They are the ones hit most by this climate impact.”

More than 40 world leaders met in Paris last month to hash out potential options to reform the global financial system to help. The summit closed with a movement toward more nimble emergency funding from the IMF, early-warning systems for disasters, catastrophe insurance triggered automatically by extreme conditions and pauses on debt repayments.

Michai Robertson, a senior advisor on finance for the Alliance of Small Island States, wants to go beyond these reforms to find additional sources of finance. He’s pushing for possible levies on fossil fuel companies or on the price of an airline ticket. It’s one way to fill funds that wealthy donor countries — who do the bulk of the flying and oil burning, on a per-capita basis — are unable or unwilling to.

“It is grossly unjust to be subsidizing fossil fuels on the supply side,” Robertson says. “It’s time to revisit and rethink what it means to give back in the context of climate.”

This month alone has brought a string of alarming new research that shows how rapidly the Earth is changing — at times surprising even scientists who have studied the climate for years. 

Antarctic sea-ice growth has stalled out in ways unseen in modern history. A current which circulates water within the Atlantic could collapse this century, and waters off the coast of Florida may have reached record-high temperatures. The extreme heat scorching the US and southern Europe would have been virtually impossible without global warming, while the rise in global temperatures made China’s heat wave 50 times more likely.

Still, emissions continue to climb, oil and gas companies plan to increase production and politicians are under pressure to ease up on climate commitments as the cost of living rises. A study in June showed that the amount of carbon that can be released before the world hits the amount that leads to 1.5C of warming will be exhausted before 2030.

“We know that 1.5C isn’t realistic in the short term,” says John Christensen, director of the UN Environment Programme and one of the authors of the Emissions Gap Report. “But it can come back down. There’s no alternative.” 

–With assistance from Zahra Hirji and Kyle Kim.

To contact the authors of this story:
Eric Roston in New York at eroston@bloomberg.net
John Ainger in Brussels at jainger@bloomberg.net