Climate Change and Renewable Energy: An Economic Perspective

The world we live in changes drastically year upon year. From the development of technology such as AI and its astonishing range of applications, to the incredible progression seen in areas like quantum computing, every year we take great steps forward in our understanding of the limitless possibilities available to us. AI and quantum computing are just two examples of the current research topics that have influenced, or have the potential to influence, every aspect of our lives. However, despite these advancements, one looming threat remains constant: climate change.

With its impacts being felt across ecosystems and communities worldwide, climate change poses an existential threat to our planet. From increasingly severe weather events to a sharp loss of biodiversity, the signs of its existence are plentiful and undeniable. However, despite widespread awareness of the immense gravity of the situation, few can detail how we, as a collective, are going to resolve it. In this article, I will attempt to explore the complexities behind why addressing climate change has proven so challenging. By delving into the economic factors influencing climate change mitigation efforts and the development of renewable energy resources, we can gain useful insight into the pathways towards a more sustainable future.

In 1965, a U.S. President’s Advisory Committee panel warned that the greenhouse effect was a matter of real concern. Fifty-nine years later in 2024, after a series of conferences and emission targets being set, we are, admittedly, getting closer to halting and eventually reversing climate change. However, when it comes to a phenomenon as serious as climate change, closer isn’t enough. To understand why this 'closer' is all we have been able to do, we need to first understand how the situation arose.

In the early 1900s, world trade was shifting from being primarily hand-production based to most products being automated. New markets and industries burst into existence, the population grew exponentially, and the economy skyrocketed. All of this occurred on the back of the use of coal and oil to power automation via steam engines. As a fuel, coal and other fossil fuels were cheap, plentiful, and efficient compared to completing tasks by hand, so their use increased over the years until countries became dependent on their huge power output. This dependence is the crux of the issue; most renewable alternatives to fossil fuels are unable to match their power output. The most common reason for this is that renewable energy sources tend to be unreliable. This encompasses power sources like wind turbines and solar panels, whose output depends on the weather. Others, like tidal power, are constant, but still do not provide enough power to supply an entire country at peak times.

In recent years, developments in energy storage and smart grid technology have somewhat mitigated these disadvantages. However, until the alternatives can fully meet the energy demand, some amount of fossil fuel energy will continue to be needed.

At first glance, this inability to meet demand seems like a simple problem with a simple solution. If the energy produced by a certain number of solar panels, wind turbines, or wave turbines is insufficient, surely building more of them would suffice?

However, this is where economic considerations come into play. From the perspective of the government and large energy corporations, there is a limit to how much money should be invested in these less reliable forms of energy production. This is because if the same amount of money is invested into renewable and fossil fuel sources, the fossil fuels will produce more energy and thus are more profitable.

Combining this with their short-term stability and the fact that the UK currently imports 37% of its energy from foreign sources explains clearly why the transition to renewable energy sources is so slow. Reducing reliance on foreign countries and reducing energy costs to the population requires a cheaper, more readily available source. The issue with this logic is that the more money invested in renewable energy, the cheaper and more readily available the energy becomes. The best course of action would arguably therefore be to prioritise renewable energy sources.

In the face of this and the fact that the cost of implementing renewable energy has decreased significantly over recent years, we can conclude that the reluctance to make the switch to renewable energy arises from elsewhere: the cost of updating infrastructure built around fossil fuels and power plants. Reworking the power grid to be able to handle decentralised energy sources, for instance, takes a lot of time and resources.

Although the barriers to the transition to renewable energy are slowly being overcome as climate change worsens, and the necessity of renewable energy becomes harder to ignore, it is still the case that the majority of the UK’s energy comes from fossil fuels. The issue with this slow conversion is that the UK is off track for reducing its greenhouse gas emissions to net zero by 2050, its pledge, according to the government’s Climate Change Committee. This outcome was, however, arguably inevitable considering the existing plan did not provide enough detail for how the pledge would be met. To get back on track, major changes to the way we are tackling the challenge need to be made. The supposed 'economic infeasibility' of prioritising switching to renewable energy becomes less of an excuse as time passes; the more that is invested now, the lower the costs will be in the future, as both fuel expenses and labour costs will decrease.

In essence, the climate crisis remains a more-than pressing issue. Tackling it will require countries to look beyond immediate profits and commit to reducing emissions through sustainable practices and investments in renewable energy. By improving our policies on the matter and embracing innovation, we can pave the way for a sustainable future and make significant strides in the 'war' upon climate change.

Maxwell James