May-2024

Decoding the complexities of decarbonisation

Decarbonisation is a complex process influenced by various interrelated factors that underscore the multifaceted approach needed to achieve net zero goals.

Bamrung Sungnoen, Wiwut Tanthapanichakoon and Khavinet Lourvanij. SCG Chemicals
Pongsatorn Anukulnaree, Thai Polyester Company
Apinan Soottitantawat, Chulalongkorn University

Article Summary

Decarbonisation, the process of reducing the amount of carbon dioxide and other greenhouse gases emitted into the atmosphere from all sectors of society, particularly the energy-intensive sectors, is a crucial step towards mitigating climate change. However, it is a complex issue comprising economic, political, technological, social, and infrastructural challenges. Understanding these complexities enables us to forge a realistic roadmap toward our aspirations, providing a foundation for strategic planning and decision-making to navigate these roadblocks. The goal is to turn our aspirations into reality.

Economic factors
Economies heavily dependent on fossil fuels must diversify to renewable energy sources like wind and solar. Although renewables are becoming more cost-effective, they often require significant upfront investments. Examples of decarbonisation requiring a massive shift in capital allocation towards low-emissions technologies (Krishnan, et al., 2022) and infrastructure are as follows:
• About $275 trillion in cumulative spending on physical assets is needed between 2021 and 2050 to achieve net zero emissions, including renewable energy, electric vehicles, energy efficiency improvements, and carbon capture, utilisation and storage (CCUS) technologies. More specifically, the estimated costs of decarbonising four key industrial sectors (cement, steel, ammonia, and olefins) are about $21 trillion (Krishnan, et al., 2022).
• Similarly, the US Department of Energy estimates that decarbonising eight US industrial sectors (chemicals, refining, iron and steel, food and beverage processing, pulp and paper, cement, aluminum, and glass) could require up to $1.1 trillion in capital expenditures (Walton, 2023).
• Carbon pricing, such as greenhouse gas (GHG) taxes, may have near-term macroeconomic impacts, leading to higher costs of fossil fuels and adverse supply shocks like ‘oil shocks’. Annually this can lower global growth by 0.15-0.25% and increase inflation by 0.1-0.4% (IMF, 2022).

Undoubtedly, economic factors are central to global decarbonisation efforts, influencing investment decisions, industry dynamics, and macroeconomic outcomes. Governments, businesses, and international organisations must work together to navigate these economic challenges and ensure the widespread sharing of decarbonisation benefits while effectively managing cost burdens.

Political factors
Policies and regulations play an indispensable role in promoting or hindering decarbonisation. Political leaders play a key role in championing and adopting climate policies that smoothly drive the transition to a low-carbon economy. Political systems often focus on short-term gains instead of long-term policies due to electoral cycles. Political stability and a focus on long-term planning are necessary to sustain decarbonisation efforts.

Climate change policies, particularly those that affect consumers, such as carbon pricing, can face opposition from the public and relevant industries. Strategies to minimise political costs include protecting vulnerable households and ensuring income inequality is addressed.

Global decarbonisation efforts require international co-operation and agreements like the Paris Agreement. Political leadership and diplomacy are essential for negotiating agreements and ensuring countries commit to ambitious emission reduction targets. Political factors also play a role in how countries collaborate on technology transfer and financial support for developing nations.

Political leaders must manage energy transitions to minimise economic disruptions by supporting affected workers and communities, which includes economic diversification, job creation in new industries, and retraining programmes.

In short, political factors are integral to global decarbonisation efforts. Political leadership, public support, policy design, international co-operation, and the management of economic transitions are essential for advancing low-carbon and climate-resilient economic growth.

Inequitable global development
Historically, developed countries have contributed the most to global GHG emissions due to their prolific industrial activities over the past centuries. In contrast, developing countries have contributed far less to the current levels of atmospheric GHGs but are facing the most severe impacts of climate change. This historical context underscores the need for developed countries to lead decarbonisation efforts and support developing countries in low-carbon economic transition.

Developing countries often lack the financial resources, technology, and infrastructure to rapidly transition to renewable energy and implement effective climate change mitigation and adaptation strategies. Pushing these countries to reach zero carbon emissions too rapidly without adequate support can hinder their economic development and exacerbate poverty. Therefore, global decarbonisation efforts must be sensitive to the different capacities and developmental needs of developing countries.

Intermittency and inadequacy of renewable energy
Renewable energy sources are intermittent. For example, hydroelectric power can be impacted by changes in rainfall patterns, and solar power can be affected by increased cloud cover or dust from desertification. Some solutions to address intermittency are:
• Energy storage, such as battery energy storage systems (BESS), can store excess energy, thus smoothing out supply fluctuations. Nevertheless, batteries are expensive, and concerns exist about the environmental impacts of mining materials (such as cobalt and lithium) and forced labour issues.