Who created the miracle of renewable energies? – 08/17/2021 – Paul Krugman

As terrible as things are in the world, climate change is unique in that it poses a threat to the existence of civilization. And it is appalling that so many political figures oppose head-on any serious action to deal with this threat.

Despite this, there is still a chance that we will do well enough to avert disaster, not because we have become wiser, but because we have been lucky. We thought it would be difficult and costly to achieve significant reductions in greenhouse gas emissions, but it has never been as costly as the enemies of the environmental cause claimed. Over the past 12 years, however, we have experienced a technological miracle. As Max Roser well documented in an article, the costs of solar and wind power, once considered silly hippie fantasies, have plummeted to the point where modest incentives are enough to result in rapid reductions in fossil fuel use.

But did it happen by chance? This miracle – two miracles in fact, because producing electricity from the sun and the wind involves completely different technologies – did it happen exactly when we needed it? Or was it the result of good public policy decisions?

The answer is that there are good arguments for claiming that the right policies – the Obama administration’s investments in green energy and European subsidies, especially for the development of offshore wind facilities – have played a central role.

What is the rationale for this conclusion? Let’s start with the fact that neither solar power nor wind power was a fundamentally new technology. Windmills have been in use since at least the 11th century. Solar PV was first developed in the 1950s. And, to my knowledge, there has not been a major scientific advance behind the recent dramatic drop in the costs of these two forms of energy.

What we are seeing instead appears to be a situation where the increasing use of renewables results in cost reductions. In the case of solar and wind power, we’ve seen a series of incremental improvements as energy companies gain experience, from steep reductions in component prices as things like turbine vanes. start to be mass-produced, etc. Renewable energy, as Roser points out, appears to be subject to learning curves, under which costs fall in proportion to the cumulative advance of production.

And that’s the point: When an industry has a tough learning curve, government support can have huge positive effects. Just subsidize an industry for a few years and the costs start to drop, with experience, and eventually the situation will reach a point where growth will become self-sustaining and subsidies will no longer be needed.

It may have happened, or is about to happen, with respect to renewables.

The American Recovery and Reinvestment Act of 2009 – the economic stimulus package adopted when Barack Obama took over the presidency – was primarily intended to combat the collapse in demand that followed the 2008 financial crisis because it was not not strong enough to produce a rapid recovery. (And no, I’m not talking in retrospect. It was a problem I spouted at the time.) But it also included significant funding for green energy: tax breaks, grants, government loans, and loan guarantees. .

Some of the projects the government had bet on went awry, and Republicans took political advantage of the losses. But venture capitalists predict that some of the companies they bet on will fail; if that never happens, they don’t take enough risk. Likewise, a government program to advance technology is sure to end in failure; if that doesn’t happen, the project won’t push the boundaries.

And, in retrospect, it feels like Obama’s initiatives have indeed pushed the boundaries, especially in the case of solar power, which from expensive technology and limited adoption has become a technology. sometimes cheaper than traditional energy sources.

Obama’s policies have also helped wind power, but in this I suspect a lot of the credit goes to European governments, which heavily subsidized offshore wind power projects at the start of the last decade.

In short, there is a good case for the claim that government support for renewables has created a cost miracle that might not have happened otherwise – and this cost miracle may be the key to save us from climate catastrophe. .

Translation of Paulo Migliacci

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