March 16, 2017
A Welcome Disruption
By Ragnheiður Elín Árnadóttir
More and more governments are realizing the importance of renewable and sustainable energy resources. Hydrocarbons will continue to play a role in industrial processes, but will gradually fade out as a transportation fuel. Electric engines and batteries for cars have been developing rapidly, as a result, electric cars have become an attractive and economically feasible option for the public, with an unprecedented increase in sales in the past couple of years.
A comparison can be made between the upcoming clean disruption and the Internet disruption, which transformed our lives over the past three decades. That transformation took place not because all the good, old technologies ceased to exist, but because of the superiority of the new technology, and associated business models. As Bertrand Piccard, co-pilot of the first successful around-the-world balloon flight and chairman of Solar Impulse, said while presenting to us, the European energy ministers in September 2015 in Luxembourg: “It wasn't the candlemaker who invented the light bulb.”
The question then is how to enhance and develop the clean energy disruption, and what will be its geopolitical consequences?
First, the importance of increasing the share of sustainable renewable energy in global energy consumption at an accelerated pace needs to be emphasized. This is a key issue in mitigating climate change, as well as in enhancing energy security.
Second, we need to aim for the gradual elimination of carbon-based fuel and, in the meantime, channel the enormous subsidies in the fossil fuel sector into renewable energy resources.
Third, nations around the world need to accept and realize that we are entering into a new era in the field of energy, which is based on renewables, new technologies, and decarbonization. The transition might be a bumpy ride, upsetting established political and business interests, trading patterns, and more. Exploring the implications of the clean energy agenda on global stability should be at the forefront of the international debate.
Fourth, energy technology innovation is central to meeting the common energy and climate goals set in the Paris Agreement in December of 2015. It is also of paramount importance in any economic development. Innovation can take place by developing proven, cost-effective technologies that will make the transformation of the energy system from fossil fuel to sustainable energy resources possible. Continued US leadership in Mission Innovation with the aim of doubling government spending on clean energy research and development over the next five years is of critical importance.
Lastly, energy decarbonization must be accelerated by promoting effective public-private partnerships and devising smart regulation to incentivize investment.
All this is possible, as is evident from the example of Iceland. In Iceland, around 75 percent of final energy consumption is from renewable sources, the remaining 25 percent is from fossil fuel used in transportation and the fishing fleet. Iceland has been able to achieve this status through sustainable utilization of its renewable natural resources in hydropower and geothermal energy. In the past forty years, the shares of fossil fuel in house heating in Iceland has decreased from 50 percent to 1 percent. Today, 99 percent of Icelandic households are heated from renewable sources and the entire electricity production comes from renewable sources. The social and economic benefits of this development have been substantial. The macroeconomic benefits of the geothermal district heating system alone annually amount to around 7 percent of Iceland’s GDP.
These examples show the importance of innovation and new energy technologies, and how they can unlock business opportunities. Iceland’s energy policy has proven that it is both realistic and economically sensible to pursue a clean energy agenda. However, the tools and mechanisms used to obtain such goals must support innovative and transformative changes that will lead to affordable, secure, and environmentally sustainable results.
Paris and beyond
Climate change is one of most important topics in the international arena today as humanity is regularly witness to its drastic consequences. While the causes of climate change are global, the effects are more visible and substantial in some corners of the world than others. The impact of climate change in the Arctic is particularly revealing as temperatures in the region are increasing at more than twice the average global rate. The fragile ecosystem of the region is increasingly at risk and Arctic communities are experiencing firsthand the challenge of dealing with a rapidly changing climate.
The Paris Agreement was intended to be a “make-or-break” event with respect to tangible achievements in combatting human-induced climate change; firm decisions were needed based on the best available science. To support these efforts, 195 countries signed on to the Paris Agreement. The European Union, together with Iceland and Norway, made the commitment to reduce its greenhouse gas emissions with 40 percent by 2030, relative to the 1990 levels. Former US President Barack Obama committed the United States to cutting its emissions by 26 percent to 28 percent by 2025, relative to 2005 levels. Whether US President Donald J. Trump will adhere to this commitment remains to be seen. Trump’s decision to cut climate funding in his administration’s proposed budget is not an encouraging sign. Continued US leadership on clean energy is essential to fully unlocking its business and job-creation potential at home and abroad, while managing its disruptive impacts in the decades to come.
Clean energy disruption is already here, and most of the world is committed to be part of it. Why? Because it wasn’t the candlemaker who invented the light bulb. And because it makes perfect sense.
Ragnheiður Elín Árnadóttir is a nonresident senior fellow with the Atlantic Council’s Global Energy Center. From 2013 to 2017, Árnadóttir was the minister of industry and commerce in Iceland. Her portfolio included energy. You can follow her on Twitter at @REArnadottir.