A Sustainable Transition or Just an Energy Transition

Introduction

The passage of the Inflation Reduction Act (IRA), which allocated nearly $400 billion to shift the United States toward cleaner energy sources, has significantly impacted the renewable energy industry (Badlam et al., 2023). Since the enactment of the IRA, the number of new renewable energy projects in the United States has increased by 55 percent in 2023 alone (Bird & Womble, 2023). However, despite this remarkable progress, the world is still far from generating enough clean energy to combat the climate crisis effectively. The International Energy Agency estimates that renewable energy projects must be tripled by 2030 to prevent the most severe climate disasters (Cozzi et al., 2023). Yet, climate finance growth is not “sufficient nor consistent across sectors and regions,” while carbon emissions are rising, underscoring the urgent need for action (Buchner et al., 2023).

The goal of tripling renewable energy production by 2030 aligns with a policy convergence that almost solely relies on new renewable power plant development and technological breakthroughs to solve the climate crisis. Policymakers and industry stakeholders are betting that sufficient technological developments and advancements will be made to reduce emissions to the level required to slow global warming within our narrow time frame.

However, the current focus on new technologies to address the climate crisis is flawed on two fronts. The available evidence suggests that the world is not on track to meet its carbon emission reduction targets by 2030. Also, the solution to the climate crisis requires a comprehensive approach that takes all aspects of sustainability seriously. Neglecting other sustainability areas is counterproductive for climate-tech enthusiasts, as it is the fundamental economic reforms required by other aspects of sustainability that could ensure climate technology investments are prioritized. The current policy approach treats renewable energy as an end in itself rather than a means to achieve a sustainable transition.

Change the Focus, Change the Outcome

January 2024 was the warmest January on record, marking the eighth consecutive month of record-breaking temperatures. The long-ignored statistics of a warming climate come with significant economic costs (National Oceanic and Atmospheric Administration, 2024). The National Oceanic and Atmospheric Administration (NOAA) reports that the year 2023 marked the fourth consecutive year in which 18 or more billion-dollar disasters have struck the United States alone (Smith, 2024). The annual average from 1980 is 8.5; there were 28 incidents in 2023 (Smith, 2024). The increasing frequency of natural disasters is unraveling the insurance markets, a cornerstone of the American economy. Rising risks attributed to natural disasters are making it increasingly difficult for insurance companies to offer low premiums, underscoring the urgent need for action to mitigate the economic impact of climate change (Cho, 2022).

The exponential growth of costly climate disasters and resulting consequences require a more enthusiastic goal than avoiding the worst catastrophes. Policies focused on avoiding the worst catastrophes can be costly because they set a benchmark at the minimum, which deceptively implies that meeting such goals is just enough.

Due to the avoidance of necessary economic changes, renewable energy is used to supplement our growing energy consumption rather than replace our current use of fossil fuels.

Renewables Fueling Growth

Much of the growth in renewable energy is attributed to China, which installed more solar panels than the rest of the world combined in 2023 (Yu et al., 2023). While China accounts for 27 percent of the world’s carbon emissions, its isolated renewable energy growth is insufficient to reduce global emissions (World Bank, 2022). The motivation behind China’s focus on renewable energy is due to a need to explore new growth opportunities for its production-dependent economy, which is not necessarily a benevolent sustainability goal (Hilton, 2024). China is, at the same time, building new coal plants than any other country in the world (Lempriere, 2023).

The Biden administration has adopted protectionist policies to reduce China’s climate technology and supply chain dominance (Goodman, 2023). American companies such as Tesla are finding it incredibly challenging to compete with Chinese companies offering high-quality products at lower prices. Citing security concerns and the protection of American workers, the Biden administration has adopted policies that make imports from China more expensive (Goodman, 2023). The Tax Policy Center at the Brookings Institute reports that Biden’s China policy will likely raise the prices of “fossil fuel-saving goods and discourage buyers from making climate-friendly choices, with little benefit to US workers” (Gleckman, 2023). In geopolitics, the energy transition is merely a tool in the great power competition of economic growth.

However, it is not only governments failing at their climate promises. Corporations are increasingly making commitments to achieve net-zero goals. However, only 4 percent of them have met the United Nations Race to Zero campaign requirements (Net Zero Tracker, 2023). The campaign requires setting emission targets and covering all the emissions organizations are responsible for. Some organizations have used net zero as an opportunity to greenwash and reap the benefits of being perceived as green organizations. Accenture, in 2022, reported that nearly 93 percent of the 34 percent of the world’s leading companies with net-zero goals will not meet their targets by 2030 (Accenture, 2022). Net zero is another policy convergence that may allow organizations to continue business as usual without fundamentally changing their operations. However, it is only possible to reach net zero with a meaningful commitment to sustainability if the underlying economic incentives unaligned with solving the climate crises are reformed.

Conclusion

Renewables technological development is essential for addressing the climate crisis. However, the primary motivation behind the growing investments in renewable energy is often not a commitment to sustainability but the pursuit of new economic opportunities. Regardless of one’s stance on economic policies prioritizing development, these motivations steer climate investments toward varying outcomes. Technological optimism must not cloud a rigorous evaluation of the challenges in resolving the climate crisis. Our existing economic system is ill-equipped to tackle existential global issues such as climate change. Simply adhering to policies that appease the median stakeholder will likely fall short. Bold and innovative approaches to sustainable policies and practices are urgently needed.