What I'd like to do now is give you a bit of background and context on the concept of the transition to a zero carbon or net zero economy. This is a term that's very frequently used and it's very important to understand where we are now, where we need to go, and how we can get there. In 2015, nations around the world came together and signed the Paris Agreement on Climate Change. This was a commitment of almost 200 nations to avert the worst effects of climate change by holding global warming to no more than two degrees Celsius above pre-industrial levels. But the Paris Agreement contained an aspirational goal that it would be even better to pursue efforts to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels in order to avert the worst effects of climate change. Many organizations around the world have adopted models that look at the current state of the global economy where global greenhouse gas emissions are coming from and what needs to change between now and the year 2050 in order to get to net zero. Net zero by 2050 is what is needed according to the Intergovernmental Panel on Climate Change as well as the International Energy Agency to limit warming to 1.5 degrees Celsius or less. In 2021, under the terms of the Paris Agreement, the United States has pledged to reduce United States greenhouse gas emissions by between 50-52 percent as compared to a 2005 baseline by the year 2030. If all nations' commitments under the Paris Agreement are strictly adhered to, it is still likely that we would exceed the two degrees Celsius goal. However, the Paris Agreement provides for every country to continue to ratchet up its goals. But this is an all hands-on deck situation in which not only governments and regulators, but also private sector, business firms, financial organizations, and others need to work together to reach a net zero economy by the year 2050. It's really important first to understand what we're talking about when we're talking about greenhouse gas emissions. Sometimes people use the term carbon interchangeably with greenhouse gas emissions, but that's a bit of a shorthand and it's really important to understand what we're talking about. If you look at the image on the left which comes from the Environmental Protection Agency, this is a snapshot of US greenhouse gas emissions in the year 2019, the last year for which data is available. You can see that carbon dioxide is by far the largest share of greenhouse gas emissions in the United States. However, there are other components to greenhouse gases. These include methane, nitrous oxide, and fluorinated gases. Each of these different gases is a greenhouse gas, which means that it contributes to warming of the atmosphere and the trapping of heat in the atmosphere that cannot escape. Carbon dioxide, the largest source, comes from the burning of fossil fuels as well as chemical reactions, for example, the manufacturer of cement. Carbon dioxide, CO2, can live for up to thousands of years in the atmosphere and it has what is called a global warming potential of one. So one ton of CO2 in the atmosphere provides for one unit of global warming. It serves as the reference gas because it's the largest component of the greenhouse gas mixture. Methane is emitted during fossil fuel production as well as by livestock and agricultural emissions. In contrast to carbon dioxide, it has a much shorter lifespan in the atmosphere ranging from about 10-12 years. However, it is far more warming than CO2. Its global warming potential can range from about 28-36 over a 100-year period. Nitrous oxide, the third major component of greenhouse gas emissions, can come from agricultural processes, land use, industrial activities, and the combustion of fossil fuels. Its life in the atmosphere can be greater than 100 years, and its global warming potential is even higher than that of both methane and CO2, an average of 265-298 over 100 years. Finally, fluorinated gases. These are HFCs, among others. These are the gases that we use in HVAC systems, air conditioning, refrigeration, etc. The United States actually recently adopted a regulation to phase these out over time. Why was this HFCs fluorinated gases a major focus for US regulators? Well, their life in the atmosphere can range from hundreds of years to more than 50,000 years, and their global warming potential can be up to 23,000 times as powerful as that of CO2. The disaggregation of these different greenhouse gases is really important because we need to think slightly differently about how we regulate or act with respect to the different greenhouse gas emissions depending upon what industry your business firm or you might work in and there may be reasons to focus in the short-term on these very high global warming potential, but more short-lived greenhouse gases like methane. I also want to give you a little bit of a snapshot of where greenhouse gas emissions are coming from in the US economy. As you can see from the chart in front of you which comes from the Environmental Protection Agency, in 2019, the last year for which data are available, the major sources of carbon dioxide emissions in the United States were transportation and electric power generation followed by industry, residential and commercial emissions, and then other non-fossil fuel combustion. I think it's really important to note that for many years, electric power generation was the dominant source of greenhouse gas emissions in the United States. But just a few years ago, transportation overtook electric power generation. This is largely because of the transition in electric power generation from coal-fired power plants to natural gas-fired power plants which have fewer greenhouse gas emissions although still they are fossil fuel emissions. I've just given you a couple of snapshots of greenhouse gas emissions in the US economy. Now I'd like to take a step outward toward global greenhouse gas emissions by sector and use, and the gas released. I think that this is a complex but important way to understand global greenhouse gas emissions. In the United States as I pointed out, transportation is the largest source of greenhouse gas emissions. But globally, you can see that electricity and heat generation as a sector is larger as a source of greenhouse gas emissions than the transportation sector. But here you can see that electricity and heat generates largely CO2, but also some methane and others. It's important to see that the picture in the United States is similar to but slightly different than the picture of greenhouse gas emission sources globally. Since this is a global problem that requires global solutions in addition to solutions within the United States, I think it's really important to understand this global snapshot as well. Once we have a picture of greenhouse gas emissions both in the United States and in the global economy, we need to move from a static focus to a dynamic one. This chart which is created by the International Energy Agency demonstrates how the major energy sources need to shift between now and the year 2050 in order to get to a net-zero economy. You can see the two major components of energy supply on the bottom in red are oil and coal, with the light purple band of natural gas. Those all need to shrink dramatically by the year 2050, but the process needs to begin now. In contrast, you can see that we need growth in the renewable energy space: solar, wind, and other renewables primarily. The International Energy Agency administration's net-zero by 2050 model requires the global economy to reach certain milestones by certain years. One of the most controversial which achieved a lot of news in the press was the idea that even this year that there should be no new unabated coal plants approved for development. By 2025, there should be no new sales of fossil fuel boilers. By 2030, we need to have achieved certain important interim milestones on the path to net zero by 2050. All new buildings need to be zero-carbon ready, global car sales need to be 60 percent electric, and we need to have universal energy access largely to renewable sources of power. You can see how things are going to need to shift dramatically and they're going to need to shift immediately. Just to put a spotlight for a moment on the notion of clean energy technologies. In this chart, you can see that we need to add major capacity in solar and wind energy generation by 2030 as compared to 2020. It needs to increase by a factor of four times. Electric vehicle sales need to increase by a factor of 18 between now and 2030, and the energy intensity required for per unit of GDP needs to decrease by four percent annually. What are the implications of this? This means that we're going to be in a massive transition in the economy both globally and in the United States. This has really significant implications for individuals, households, business firms, and other organizations. There are, as you might be beginning to think, some substantially large-scale opportunities for innovation and growth in everything from advanced batteries to store the power when the sun isn't shining and the wind isn't blowing, hydrogen electrolyzers to create new sources of renewable fuel, the idea that we can directly capture CO2 emissions from the atmosphere to reduce those emissions from existing fossil fuel energy generation sources and then finally we're going to need critical minerals to produce the batteries for electric vehicles and other storage of renewable energy among other uses. Not only does this present a risk, but this also presents significant business opportunities. What are the implications of the transition to a net-zero economy for employment? As you can see here, the IEA predicts that by 2030, there'll be 14 million new jobs in clean energy and 15 million fewer jobs in fossil fuels. Overall, we can expect growth as a result of the transition to a net-zero economy, but there will be displacement as well and that's something that needs to be taken into consideration. The transition to a net-zero economy is likewise going to have significant implications for households and consumers beyond simply employment issues. It is likely that these changes to the economy are going to affect multiple aspects of people's lives. Transportation is going to change, the way we heat our homes and cook our food is going to change, urban planning and our jobs may change as well. The IEA estimates that about 55 percent of the cumulative emissions reductions in their net-zero model pathway are linked to consumer choices. Those choices include things like what car to purchase, whether to retrofit a home with energy-efficient insulation or other technologies, replacing our existing sources of heat, for example, a natural gas boiler with a heat pump. These are all choices that individuals, households, and consumers are going to make that likewise have significant implications for business. How much is this all going to cost and who's going to pay for it? We anticipate that the costs are likely to be significant and that there's going to have to be a combination of funding from the public sector and the private sector to ensure a smooth transition to a net-zero economy by 2050. The IEA, for example, estimates that annual clean energy investment worldwide is going to need to more than triple by 2030 to around four trillion dollars annually. This financial support is going to go to stimulating investment in new technologies, ramping up existing technologies, the possibility of transition payments for those who are displaced as the economy changes, as well as building climate resilience; meaning our ability as a global community as well as national local communities to respond to those effects of climate change that we are unable to prevent.
