Show Me the Money

New reports by BloombergNEF and Vaclav Smil show the cost of "net zero by 2050" is why it won't happen.

If you have to ask how much it costs, you can’t afford it. – J.P. Morgan

The twenty-first century era of “green” everything, the “existential climate crisis”, “environmental, social and governance” (ESG) and “sustainability” gave birth to all manner of schemes promising salvation and redemption from our civilizational and planet-destroying ways.

Europe’s ignorant biodiesel policy, which directly led to the destruction of millions of acres of rain forest in Southeast Asia for palm oil plantations, is a perfect example. Fraudulent carbon credit schemes are another. In each case, the loud multitudes of advocates were wrong, the few quiet analysts who went down the quantitative rabbit hole and “brought the receipts” were right, money was wasted, and the other externalities were largely ignored.

There is, perhaps, no better example of the difference between cheerleading advocacy and disinterested analysis than the question of what would be required for the world to reach the aspirational goal of “net zero CO2 emissions by 2050”. So it was with great interest that we recently reviewed two new reports delving into this question, one from Bloomberg New Energy Finance (BNEF) and the other written by Vaclav Smil for Canada’s Fraser Institute.

Both come from experts with the requisite credentials and analytical capabilities. One has a tone of optimism and advocacy while the other the cold pragmatism of a disinterested analyst. What are the key findings from these reports? Where do they align and where do they differ? Tap your iPhone’s calculator and turn it sideways. We’re going to Show You the Money (literally, but it will take four commas).

We begin with BNEF’s definition of the two future CO2 emissions trajectory scenarios outlined in its report (*paywalled, Exec Summary publicly available), titled New Energy Outlook 2024 (emphasis added):

Our Net Zero Scenario (NZS) charts country-level and global pathways to net zero by 2050, meeting the goals of the Paris Agreement. Meanwhile, our Economic Transition Scenario (ETS) shows how the transition could unfold solely based on economic forces and technology tipping points that push the balance in favor of low-carbon technologies, without further policy action. The ETS requires no further support for clean technologies beyond existing measures, although it does hinge on a level playing field that allows these solutions to access markets and compete with incumbent technologies.

BENF’s NZS requires (emphasis added):

·       An immediate peak and decline in emissions from all sectors this year.

·       Power sector emissions must plunge 93% by 2035 (eleven years).

·       Immediate peak and reduction in all three fossil fuels this year

·       By 2050, oil demand is cut by 75%, coal 2/3rd, nat gas by half.

·       Tripling of renewable energy capacity by 2030, then a doubling of that by 2040

·       Electric Vehicles (EVs) account for 100% of new passenger vehicle sales after 2034 (11 years), and 100% of the world fleet (including commercial) by 2046.

·       3.9 Gigatons CO2 (Gt, or billion metric tons) carbon capture and sequestration (CCS) by 2030 (6 years), growing to 8.1 Gt by 2050.

Weighing each of these requirements against the present state of the world, including the time, scale, and resource needs, it is hard to see how “net zero by 2050” is even possible. And that’s before we even consider the cost.

BNEF’s path to “net zero” relies on hydrocarbon emissions assumptions and technology “pillars” that seem impossible based on empirical data and trends. Their nine technology pillars are:

1)          1.5 billion EVs, with no new ICE cars sold after 2034 (vs. ~2% or ~40 million currently)

2)          Wind and solar capacity reach 31 Terawatts (Tw) (vs. ~3.1 Tw currently)

3)          Battery storage of 4 Tw (50X current capacity)

4)          Nuclear power roughly triples to 1 Tw (incl. planned closures, from around 390 Gw today)

5)          CCS reaches 8 Gt CO2 annually (vs. a few thousands of tons currently)

6)          390 million tons of “green” hydrogen are in use (4X current global total hydrocarbon-based hydrogen demand)

7)          Sustainable aviation fuel consumption reaches 88 billion gallons annually (vs. 158 million gallons today)

8)          The global power grid reaches 111 million kilometers (~1.5X current)

9)          >500 million cumulative installed heat pumps (~10X increase vs. current)

BNEF notes (emphasis ours): “Among the nine pillars, only four are mature, commercially scalable technologies with proven business models: electric vehicles, renewable power, energy storage and power grids”.  Credit BNEF for a damn fine job of advocacy, given the track record of those four.

A fun microcosm is the U.S. nationwide electric vehicle (EV) supercharger rollout. The Inflation Reduction Act (IRA) funded $5 billion for a network of chargers along major highways (the National Electric Vehicle Infrastructure). Let’s check in with Transportation Secretary Pete Buttigieg on the program’s “progress” of ~8 chargers installed nationwide to date (we hardly blame interviewer Margaret Brennan for laughing in his face…..live link in source note):

Hope is my only strategy | Amuse on X

Incredibly, somehow nuclear fission – a “clean” power generation technology with a 70+ year safety record – is not included among BNEF’s “mature, commercially scalable technologies with proven business models”. Among its nine pillars, the tripling of nuclear power generation would require >700 gigawatts (GW) of new plant construction. BNEF anticipates nearly 2/3^rd of the growth in new nuclear power generation is expected to come in the Asia Pacific region. This would be a monumental political failure for the West, and U.S. and European leaders, regulators, “environmentalists” and NGOs should be held to account to make sure that does not happen. Especially after the (former governor and attorney cosplaying as) U.S. Energy Secretary Jennifer Granholm said at a recent ceremony celebrating Southern Company’s Unit 4 at Plant Vogtle coming online, “two down, 198 to go”!

Hope I can develop a strategy!

BNEF estimates the cost to consumers, governments, businesses, and financial institutions by 2050 ranges from $181 trillion for its “economic transition” scenario to $215 for its “net zero” scenario. Realistically, costs that high doom both, relegating them to cocktail party chatter, “environmentalist” and NGO demands, Charlatician™ campaign promises, and media hype. As they should.

BNEF notes that the net zero scenario costs “only 19% more” than its economics-driven transition. (The upgraded model with leather and larger touch screen is only $34 trillion more!).

For perspective, in an earlier report this year, BNEF concluded that $1.8 trillion was invested in low-carbon energy technologies in 2023. In New Energy Outlook 2024, BNEF’s NZS calculates that figure needs to rise to $5.4 trillion per year from now to 2030 (3X the current level). With global GDP around $103 trillion dollars, BNEF’s calculation works out to about 5% of global GDP – annually. As we note below, in reality the actual cost and, importantly, the portion that would need to be shouldered by the world’s wealthy nations, is likely far higher.

BNEF’s report concludes with a section about the land use implications of its NZS. Limited suitability of solar and wind turbine sites in countries like South Korea, Japan and Vietnam and land availability for biofuels seem to garner greater concern than the impact on food for humans. Noting the enormous amounts of land required to accommodate the wind, solar, biofuels and mining required by 2050, the report forecasts (emphasis added):

“…onshore wind and solar projects require 2.9 million square kilometers of land by 2050. That is almost 15 times more than was being used by the two technologies in 2023. At the peak of biofuel demand in 2044, some 4.8 million km2 of land is needed to cultivate feedstock, comparable to the area covered by the European Union. Meanwhile, mines supplying the critical minerals needed for the net-zero pathway span 180,000 km2 by 2041, more than the area of Uruguay.”

In the report’s Executive Summary, BNEF states that it “sees carbon neutrality by mid-century as a tough but achievable stretch.”  One legendary analyst in the field sees this as wishful thinking.

Vaclav Smil is a Czech-Canadian scientist, polymath and one of the world’s most prolific researchers on matters of energy, the environment, population, and resources, with nearly almost 50 books and over 500 papers to his credit. His ruthless manner of dissecting bullshit claims emanating from all sides of the environmental and energy debate is legendary, and his new report for Canada’s Fraser Institute, Halfway Between Kyoto and 2050 Zero Carbon is a Highly Unlikely Outcome, is no exception.

Smil is not a techno-optimist, Cornucopian, or endless growther who “denies” climate change. Or a neo-Malthusian EcoStatist posing as an altruist. He believes climate change is a problem and that endless growth is not possible on a finite planet. He’s a realist who believes the possibility of achieving “net zero CO2 emissions by 2050” is Slim and None. And Slim caught the 7:00 a.m. Greyhound to Phoenix.

Hope is not a strategy! | Vaclav Smil (Source: University of Manitoba)

With brutal efficiency and bringing the receipts, Smil documents the enormity that replacing coal and natural gas fired electricity generation, internal combustion engines in personal and commercial vehicles and farm equipment, all forms of industrial and residential heating, maritime and air transport “net zero by 2050” must overcome. The cost, time, scale, resource requirements, empirical trends, and energy system inertia render it pragmatically impossible.

Smil begins his analysis by noting that since the Kyoto Protocol (1997), government expenditures in the trillions, regulation, and technological advances, and despite the Paris Agreement (2015), global fossil fuel consumption still increased ~55% from Kyoto to today. Over this period, the portion of the hydrocarbons in global energy consumption only decreased from ~86% to ~82%.

Several Substack posts would be needed to give Smil’s report the coverage it deserves. Here we provide a few examples to give readers a sense of the enormity of the task. For example, within 26 years, the “energy transition” would have to:

“..replace more than 4 terawatts (TW) of electricity-generating capacity now installed in large coal- and gas-fired stations by converting to non-carbon sources; to substitute nearly 1.5 billion combustion (gasoline and diesel) engines in road and off-road vehicles; to convert all agricultural and crop processing machinery (including about 50 million tractors and more than 100 million irrigation pumps) to electric drive or to non-fossil fuels; to find new sources of heat, hot air, and hot water used in a wide variety of industrial processes (from iron smelting and cement and glass making to chemical syntheses and food preservation) that now consume close to 30 percent of all final uses of fossil fuels; to replace more than half a billion natural gas furnaces now heating houses and industrial, institutional, and commercial places with heat pumps or other sources of heat; and to find new ways to power nearly 120,000 merchant fleet vessels (bulk carriers of ores, cement, fertilizers, wood and grain, and container ships, the largest one with capacities of some 24,000 units, now running mostly on heavy fuel oil and diesel fuel) and nearly 25,000 active jetliners that form the foundation of global long-distance transportation (fueled by kerosene).”

To meet the Paris Agreement’s interim goal of 45% cuts from 2010 levels by 2030, Smil puts the necessary rapid reductions into context across economies and industry sectors. To wit (emphasis added):

Another revealing way of viewing the daunting magnitude of this challenge is to look at the cuts that would have to be made by G20 economies to meet the interim 2030 goals: for nearly all major economies, it would generally mean halving the 2020 emissions, with cuts of 45 percent for Canada and 46 percent for Saudi Arabia, to 55 percent for the EU, 56 percent for the US, and 63 percent for China (McKinsey, 2023). Only an unprecedented economic collapse could bring such cuts during the next seven years.

Smil is known for referring to four materials – cement, primary iron (for steel), ammonia (for fertilizer), and plastics (from crude) – as the modern pillars of civilization, the production of which all presently depend on fossil fuels. His paper leaves no doubt as to the difference between the vacuous advocacy of the prevailing paradigm and the cold analysis for which he has become known.

“Green” hydrogen (via electrolysis from water, using zero carbon sources) for making steel and ammonia “would need an annual production capacity of some 135 million tons” by 2050 (vs. present global production of ~90 million tons for all uses annually, nearly all via hydrocarbons). Here, Smil’s estimated figure of 91 million tons green hydrogen annually by 2050 just for steel making checks nicely against BNEF’s estimate (99 million tons).

Adding in the demand for hydrogen for transportation, heating, power generation and other industries, Smil sees global demand could easily reach 500 million tons by 2050, a figure which – alone - would require “about 25 PWh of green electricity, the total equal to about 86 percent of the 2022 global electricity use”. Good luck without nuclear power.

Smil’s analysis sheds devastating light on the mineral requirements necessary to support net zero by 2050, something we have noted in earlier posts. Accounting only for EVs: copper (100% EVs by 2050 would require seven years of current global copper production), lithium (>40 times current global production), graphite, cobalt, and nickel (~25 times current global production).

These highlights are merely a drop in the bucket and a disservice to the depth of analysis in Smil’s report for the Fraser Institute. We highly encourage those interested in the (gory) details to read the full report (which, unlike the BNEF report, is not behind a paywall).

Smil astutely points out that humanity has not yet completed the first energy transition from biomass to hydrocarbons. Billions of people still rely on biomass (wood, dung, crop waste) to provide energy for heating and cooking, a point we have emphasized over our 18 months publishing on Substack.

We conclude our review of Smil’s tour de force noting his estimates of the economic cost, as well as his philosophical question about the hype surrounding, the “energy transition” and “net zero by 2050”. Noting that no one can offer a reliable estimate of the cost, Smil uses a recent estimate from the McKinsey Global Institute of $275 trillion from 2021 to 2050. Like the 2050 demand for green hydrogen for steel making, the McKinsey figures align closely with those calculated by BNEF ($215 trillion). However, Smil notes that the world’s most comprehensive study (16,000 projects in 16 countries across 23 project types) of mega infrastructure projects of over $1 billion, shows 91.5% of these large projects suffered cost overruns, with the average overrun being 62%.

Burdening the McKinsey estimates by 60% for anticipated overruns, Smil calculates a cost of nearly $440 trillion, or >$15 trillion per year for almost three decades. (Before you scoff at that nosebleed figure, consider the effects of a doubling or tripling of interest rates on debt-funded capital-intensive wind, solar and other renewable projects since ~2019.)

It is obvious that the wealthy nations would have to shoulder most of the burden. The developing nations simply do not have the money.

Consider the G20. Practically speaking, we do not see China, Mexico, Indonesia, Brazil, Argentina, Turkey, South Africa, Russia, and India going along with spending $10 trillion - $15 trillion annually (13 – 19% of the bloc’s present GDP of $78.6 trillion) to reach “net zero by 2050”.

This effectively leaves the G7 nations. Left to shoulder the burden as “wealthy” nations, at $10 trillion - $15 trillion annually, they would have to incur annual costs ranging from 22% to 34% of their GDP to even attempt to achieve the absurd goal.

It is very simple. “Net zero by 2050” will not happen because governments, consumers, businesses, and financial institutions of the G7 nations (or any other western nation) do not have the money to spend 22 – 34% of their GDP annually for this cause for the next 25 years. Especially not governments like the U.S. and Europe, with chronic budget deficits and serious sovereign debt problems. If you disagree, Show Us the Money – from where will it come?

As brilliant as Smil’s quantitative analysis is, it is perhaps surpassed by his pragmatic advice to those who will listen. After mocking endless hype suggesting the world can rely solely on wind and solar photovoltaic by 2030, and claims that all energy needs can be met with cheap green hydrogen or affordable nuclear fusion, he states:

“What does this all accomplish besides filling print and screens with unrealizable claims? Instead, we should devote our efforts to charting realistic futures that consider our technical capabilities, our material supplies, our economic possibilities, and our social necessities—and then devise practical ways to achieve them. We can always strive to surpass them—a far better goal than setting ourselves up for repeated failures by clinging to unrealistic targets and impractical visions.”

The BNEF report has a tone of advocacy. Smil’s report is wide-eyed and pragmatic.

We close with a familiar question to readers of environMENTAL, but this time with a prospective framing vs. the usual retrospective one: “what good could be done for the lot of humanity, environmentally (clean water, basic sanitation, enough food, conservation of wildlife and biodiversity), in terms of basic healthcare and education, and lifting 4-5 billion closer to our living standards, with $215 - $440 TRILLION over the next 25 years?  (For twelve ideas we’ve referenced before, with a cost <one half of one percent of that total, see this report from the Copenhagen Consensus).

“Net zero” CO2 emissions by 2050 will not happen. And the eight billion people on earth will be better off for it.

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