What’s Next for Cleantech After the US Earth Day Summit?

Technology Policy Science & Innovation

What’s Next for Cleantech After the US Earth Day Summit?

Commentary
Posted on: 17th May 2021
Olamide Oguntoye
Policy Lead, Science & Innovation Unit

    John Kerry’s optimistic comment about gaps in climate technology has stoked fresh debates about whether climate targets set by world leaders are achievable. At the Earth Day summit, of which Kerry was front and centre, leaders from more than 40 nations (which account for 80 per cent of global emissions) met to highlight the urgency of climate change and to pledge decisive action. Since the summit, however, it is yet to be seen how cleantech will evolve to square up with these pledges.

    On the one hand, several studies including those by the University of Maryland's Center for Global Sustainability and the Environmental Defense Fund have shown that the US and indeed the rest of the world can meet new ambitious climate targets with a suite of policy actions. On the other hand, a different camp including The Economist, have argued that the climate targets are unachievable unless a plethora of innovations all happen simultaneously in a sustained manner.

    The world still gets over 80 per cent of its energy from fossil fuels. In the US, dependence on legacy fossil technologies including natural gas power generation is a roadblock to full decarbonisation. In China, coal continues to dominate the economy as the country grows its coal fleet much faster than the rest of the world combined. Among emerging economies such as India, fossils continue to play a pivotal role in driving economic growth. With only a decade to halve emissions – as promised by the collective pledges made by the US and other countries – the question is how the Earth Day summit will change the course of cleantech in the near term.

    More public support emerging

    More public support emerging

    The April summit will likely spur a new wave of cleantech support programmes. Having put climate change high on its agenda, the US government’s proposal to spend $2.25 trillion on revamping infrastructure and developing clean energy will make an impact. Similar programmes from around the world are also promising. The UK has launched its COP26 Energy Transition Council, which will invest around $70 million in the new Clean Energy Innovation Facility (CEIF) to support access to clean energy technologies for developing countries.

    Earth Day discussions also touched on reviving international cleantech collaborations like the Mission Innovation (MI) – an international partnership between 24 countries and the European Union, which accounts for 80 per cent of global R&D spending on clean energy innovation. MI’s mission is to accelerate global clean energy innovation and to make it more widely accessible. Shortly after it launched in 2015, MI suffered a major political blow from the unsupportive Trump Administration. However, in a signal of his new approach, in his remarks at the summit, President Biden made it clear that this is one of the key programmes the US will revitalise.

    Figure 1: Clean energy RD&D public expenditures in the MI member countries for 2015–2018

    MI member countries RD&D spend on clean energy for 2015–2018

    Source: Nature Energy

    To make this effective, the US needs to ramp up its public RD&D investment in clean energy. When MI was announced in 2015, its goal was to double public the RD&D investment of member states in clean energy over the subsequent five years. By 2018, its progress was clearly off the mark (Figure 1) while at the end of its fourth year, it had only reached 60 per cent of its target. Being the biggest contributor to public clean energy RD&D, the US was largely responsible for MI’s failure to meet its earlier objective. As member countries now reboot their commitment to the mission, the US must double down on its clean energy investment.

    In addition to public research spend, the US and other countries need to forge stronger partnerships with the private sector when it comes to deploying more cleantech projects and improving impact. Between 2013 and 2019, venture capital (VC) investment in clean technologies increased by a factor of ten. Corporate investment also soared within the same period showing significant interest from the private sector. The next step would be to build stronger private sector participation into cleantech programmes to achieve better synergies.

    Green recovery at the centre

    Green recovery at the centre

    Since the Earth Day summit, leaders around the world continue to promote the idea of a green recovery. Compared to the 2008 financial crisis, Covid-19 led to a six-times drop in global emissions. This fall is an excellent starting point for a reboot in how we grow the global economy while keeping emissions low. Estimates suggest a green recovery can cut the level of 2030 emissions to 25 per cent lower than projections based on pre-Covid commitments and put the world close to a 2°C pathway.

    A green recovery can also create job security. The pandemic led to widespread panic about job losses and economic decline, and created one of the greatest shortfalls since the Great Depression. Job losses in 2020, as measured in working hours, were approximately four times greater than those of the global financial crisis of 2008-2009. In the energy sector where investments are expected to drop by a fifth according to IEA estimates, millions of jobs in the sector are at risk (Figure 2). However, as another estimate suggests: by investing $1 trillion in green recovery over the next three years, the world can sustain and create up to nine million jobs in the process – a number that offsets the six million set to be at risk from the pandemic.

    Figure 2: Number of energy sector jobs at risk due to Covid-19

    Energy sector jobs at risk due to covid-19

    Source: CarbonBrief

    Creating large swathes of jobs with a green recovery will involve cleantech deployment programmes including large-scale building retrofits and renewables installation. Such large-scale deployment will in turn contribute to lowering the cost of cleantech and enabling further adoption. However, focusing on large-scale deployment alone also comes with the risk that governments will de-prioritise the development of new and less commercially mature technologies. The US and other countries need to ensure adequate funding remains available to support such promising technologies and help them cross the proverbial, so-called valley of death.

    The US Department of Energy's Loan Programmes Office (LPO) is an excellent point in case. The LPO paved the way for Tesla's breakthrough back in 2010. It kickstarted solar at scale and gave companies such as Ford the funding to finance some of their most ambitious upgrade projects. Under the new US administration, the LPO is making a comeback with $40 billion worth of loans. As observed in the case of the 2008 financial crisis, green recovery programmes tend to be successful when they concentrate on deploying mature technologies such as modular home solar power systems and efficiency retrofits. So instead of focusing entirely on existing, mature technologies, the LPO should diversify its portfolio in a way that supports promising options like clean hydrogen or advanced geothermal.

    Competition with China

    Competition with China

    The tech-tension between the US and China reverberates through cleantech. While the US has historically led on investment in clean energy R&D, China has gained a clear leadership when it comes to manufacturing and deployment of these technologies. In 2018, over a third of the world’s wind turbines were made by Chinese companies. In 2019, China built over 70 per cent of the world’s photovoltaic solar panels. China currently has almost three-quarters of the world’s lithium-ion battery manufacturing capacity while wielding significant control over the battery supply chain.

    After the Earth Day summit, the dynamics of engagement between the two countries might be entering a new phase as both announced their interest in forging a cooperative path forward. Although the ambitions and motives between both countries may vary, their Earth Day announcement signals that there could be potential changes in how they compete and collaborate on cleantech.

    To turn words into action, both China and the US must be willing to meet in the middle. They need to renegotiate their differences over technologies that are mutually beneficial but challenging to tackle independently. History between both countries already presents a range of examples showing how cooperation is possible; take GE partnering with Chinese State Grid Corp to create smart grid standards or authorities in California partnering with state actors from China on initiatives to scale up clean technologies across both countries. Lessons from these past engagements need to be applied more vigorously between the countries.

    Jointly developing technologies like carbon capture and storage (CCS), promoting coordinated standards for the interoperability of cleantech products, funding joint R&D initiatives especially regarding the supply chains from which both countries benefit, and revising trade policies that inhibit the development of a global chain are some of the areas in which both the US and China should collaborate. CCS is a case in point for promising technologies with huge potential in both countries. The success of this technology requires scale of which the US and China are key drivers. Working together on these valuable areas will help pool costs and knowledge and drive adoption.

    Areas of competition between the US and China must also evolve. The time to compete over solar panels, batteries, electric vehicles and other consumer products is over, and there are no disputes about who the winner is. So, the US should now focus on next-generation technologies such as green hydrogen or advanced geothermal, which hold huge promise but are yet to be dominated by a clear winner. Joanna Lewis, environmental economist at Georgetown University, who studies US-China trade summed it up when she said: “rather than competing with China on tech that was invented decades ago, it’s wise to be forward-thinking about the tech we’ll need down the road.”

    Rare metals, of which China provides more than 85 per cent, and scarce metals, which the country controls through two-thirds of global supply, are another important area with huge Chinese dominance. The US must step up its competitiveness and exploit new ways to end its reliance on China, for example, by accelerating battery recycling and exploring alternative battery chemistries.

    Another area the US and China should compete is in providing the most sustainable and affordable cleantech solutions to developing countries. China is already leading with a portfolio of strong partnerships across Africa, Asia and Latin America. China’s partnerships not only secure its supply of the much-needed rare earth metals, but also guarantee a market for its cleantech products. China in return provides solid development capital to finance key projects with its partner countries. The US can compete by supporting developing countries in regulating energy projects, and in ensuring exploitative international players are put in check. It can equally compete by offering low-cost loans for clean energy projects in a way that removes the financial bottlenecks while allowing technologies to scale and become more affordable.

    The journey to COP26

    The journey to COP26

    The Earth Day summit's role in shaping the dialogue on how we achieve climate targets remains important. As Kerry and other climate leaders prepare to meet in Glasgow later this year at COP26, it is crucial to remember that while making ambitious announcements are important, the actions taken before and after are of equal significance. Ahead of the Glasgow conference, leaders should prioritise finalising outstanding negotiations around finance to accelerate the delivery of cleantech programmes. They should raise their ambitions on how states support private markets to deploy clean technologies at scale and hash out the modalities for advancing the green recovery. Only with positive action will cleantech deployment and emission curves begin bending in the right directions.

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