As bad as many other problems in the world are, climate change is unique in that it poses an existential challenge to civilization. And, shockingly, so many politicians are adamantly opposed to taking any significant steps to confront the issue.
Despite this, there’s still a possibility that we will be able to avert disaster — not because we’ve become smarter, but because we have been fortunate. We used to think that attaining significant reductions in emissions of greenhouse gas would be challenging and costly, but not as expensive as anti-environmentalists claimed. However, in the last dozen years or so, we have witnessed a technological miracle. Solar and wind power costs, previously regarded as stupid hippy illusions, have fallen to the point that even modest subsidies could result in a rapid decrease in fossil fuel use, as well documented in an essay by Max Roser.
Was it, however, pure luck? Is it a coincidence that this miracle — certainly two miracles, because generating power from the wind and the sun need completely different technology — arrived just as we needed it? Or was it the result of wise policy decisions?
The explanation is that policy — specifically, the Obama administration’s investments in renewable energy and the European subsidies, particularly for offshore wind – played a significant effect.
What evidence supports that conclusion? Let’s start with the reality that neither solar nor wind power were revolutionary technologies. Windmills have been around since at least the eleventh century. Solar photovoltaic power was invented in the 1950s. And, as far as we can tell, there haven’t been any substantial scientific advances to account for the recent dramatic decrease in the costs of both technologies.
Instead, we appear to be witnessing a situation where the increased usage of renewable power is driving cost reductions. We have seen a set of incremental advances in solar and wind as energy businesses acquire experience, large price reductions in component prices as things such as turbine blades go into a mass production, and many more. Renewables seem to be responsive to learning curves, wherein costs decrease as cumulative production increases.
And here’s the kicker: When a sector faces a high learning curve, government assistance might be quite beneficial. Subsidize such a sector for several years, and its expenses will decline as it gains experience. It will eventually reach a turning point where its development will be self-sustaining, and the subsidies will be unnecessary. That is arguably what has occurred, or is about to occur, in the case of renewable energy.
The American Recovery and Reinvestment Act of 2009, sometimes known as the Obama stimulus, was primarily designed to counteract the drop in demand that resulted from the financial crisis of 2008. It was quite helpful, but it earned a negative reputation because it was not powered well and hence unable to produce speedy recovery. However, it contained substantial investment for green energy in the form of tax incentives, government loans, subsidies, and loan guarantees.