Statue of Adam Smith in Edinburgh. Image: Shutterstock
Marco Magrini considers the limits of market forces to tackle climate change
Homo economicus, as we were dubbed by Adam Smith, the father of economics, can be an amazing species. As the canny Scottish Enlightenment thinker predicted, it seems that people can, en masse, adopt new, radical technologies when they’re sufficiently mature, whenever it benefits them. It happened in a snap with the internet, not to mention the smartphone. It may be happening again with clean-energy technologies.
In the first half of 2023, ‘investment in renewable energy skyrocketed to US$358 billion’, according to BloombergNEF’s latest report. The International Energy Agency (IEA) forecasts that, in 2023, global renewable capacity will grow by more than 440 gigawatts, the biggest increase ever, mostly thanks to solar investments (and to China). As incredible as it may sound, next year, the manufacturing capacity for photovoltaics production is expected to more than double to one terawatt (1,000 gigawatts).
The recent swift adoption of electric vehicles has also been astounding. Less than five per cent of all new cars sold were electric in 2020, rising to around nine per cent in 2021 and 14 per cent in 2022. This year, EVs are projected to reach a 19 per cent market share. In the first half of 2023, the Tesla Model Y was the top-selling car worldwide, thus beating every petrol-fuelled vehicle. ‘The global automotive market is firm in the Electric Disruption Zone,’ reads the CleanTechnica website with some fanfare.
Is H. economicus’s innate rationality going to steer our society towards the safe haven of decarbonisation? Unfortunately, the answer is no – its rationality is, by definition, marred by selfishness. As Smith put it in The Wealth of Nations: ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.’
Solar photovoltaics, electric vehicles and lighting (more than half of residential lights are now low-consumption LEDs) are the only innovations, among the more than 50 monitored by the IEA, that are considered ‘on track’ towards the global goal of net-zero CO2 emissions by 2050. All of the remaining ones are not.
The majority of the IEA’s indicators are listed in the ‘more efforts needed’ category, including energy efficiency, electrification level and renewables adoption in general, but also hydrogen, wind and nuclear, heating and cooling, energy storage and smart grids. The IEA also laments an insufficient pace of innovation.
The several items ‘not on track’ comprise coal usage, methane abatement from oil and gas operations, and gas flaring. Aviation and shipping are still far from their emissions goals, as are all heavy-emitting industries (aluminum, cement, chemicals, steel and paper). The still unproven carbon capture technology, long promoted by the fossil fuel industry as a dramatic solution, is probably off track entirely.
As a matter of fact, French consultancy Capgemini has outright excluded carbon capture from its own list of ‘technology quests’ that are needed to reach the fabled net-zero target. The list is a very detailed inventory of breakthroughs required to decarbonise Europe’s economy, including (unlike the IEA’s tracker) agriculture and land use (together responsible for more than 18 per cent of global emissions). From building a trans-Mediterranean electric grid powered by concentrating solar energy to retrofitting existing shipping vessels with ammonia-fuel-cell propulsion engines, Capgemini’s 55 quests give a clear idea of the magnitude of the tasks ahead.
Homo economicus, as we were dubbed by Adam Smith, the father of economics, can be an amazing species. As the canny Scottish Enlightenment thinker predicted, it seems that people can, en masse, adopt new, radical technologies when they’re sufficiently mature, whenever it benefits them. It happened in a snap with the internet, not to mention the smartphone. It may be happening again with clean-energy technologies.
In the first half of 2023, ‘investment in renewable energy skyrocketed to US$358 billion’, according to BloombergNEF’s latest report. The International Energy Agency (IEA) forecasts that, in 2023, global renewable capacity will grow by more than 440 gigawatts, the biggest increase ever, mostly thanks to solar investments (and to China). As incredible as it may sound, next year, the manufacturing capacity for photovoltaics production is expected to more than double to one terawatt (1,000 gigawatts).
The recent swift adoption of electric vehicles has also been astounding. Less than five per cent of all new cars sold were electric in 2020, rising to around nine per cent in 2021 and 14 per cent in 2022. This year, EVs are projected to reach a 19 per cent market share. In the first half of 2023, the Tesla Model Y was the top-selling car worldwide, thus beating every petrol-fuelled vehicle. ‘The global automotive market is firm in the Electric Disruption Zone,’ reads the CleanTechnica website with some fanfare.
Is H. economicus’s innate rationality going to steer our society towards the safe haven of decarbonisation? Unfortunately, the answer is no – its rationality is, by definition, marred by selfishness. As Smith put it in The Wealth of Nations: ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.’
Solar photovoltaics, electric vehicles and lighting (more than half of residential lights are now low-consumption LEDs) are the only innovations, among the more than 50 monitored by the IEA, that are considered ‘on track’ towards the global goal of net-zero CO2 emissions by 2050. All of the remaining ones are not.
The majority of the IEA’s indicators are listed in the ‘more efforts needed’ category, including energy efficiency, electrification level and renewables adoption in general, but also hydrogen, wind and nuclear, heating and cooling, energy storage and smart grids. The IEA also laments an insufficient pace of innovation.
The several items ‘not on track’ comprise coal usage, methane abatement from oil and gas operations, and gas flaring. Aviation and shipping are still far from their emissions goals, as are all heavy-emitting industries (aluminum, cement, chemicals, steel and paper). The still unproven carbon capture technology, long promoted by the fossil fuel industry as a dramatic solution, is probably off track entirely.
As a matter of fact, French consultancy Capgemini has outright excluded carbon capture from its own list of ‘technology quests’ that are needed to reach the fabled net-zero target. The list is a very detailed inventory of breakthroughs required to decarbonise Europe’s economy, including (unlike the IEA’s tracker) agriculture and land use (together responsible for more than 18 per cent of global emissions). From building a trans-Mediterranean electric grid powered by concentrating solar energy to retrofitting existing shipping vessels with ammonia-fuel-cell propulsion engines, Capgemini’s 55 quests give a clear idea of the magnitude of the tasks ahead.
Yet ‘progress is occurring faster in those parts of the energy system for which clean technologies are already available and costs are falling quickly’, the IEA reckons in its tracking report. In other words, H. economicus’s instincts aren’t sufficient to avert the climate and environmental crisis; the old idea that market forces could do it has proven to be a fallacy. Maybe a global tax on carbon emissions could have succeeded, but it was irrationally ruled out by many states.
Among the ‘not on track’ flags, the IEA also lists ‘behavioural changes’. In this case, the agency talks about energy usage, but it’s more than likely to be a general rule: nobody is keen on changing their status quo – neither people, nor nations.
We should also remember that Smith was no blind free-market zealot. He realised that his H. economicus needed interventionist government to guarantee the wealth of our nations
Among the ‘not on track’ flags, the IEA also lists ‘behavioural changes’. In this case, the agency talks about energy usage, but it’s more than likely to be a general rule: nobody is keen on changing their status quo – neither people, nor nations.
We should also remember that Smith was no blind free-market zealot. He realised that his H. economicus needed interventionist government to guarantee the wealth of our nations
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