Carbon-Reduction Push-Pull September 2021
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The world can no longer delay the rapid decarbonization of energy systems if it hopes to limit ever‑worsening climate catastrophes, according to the United Nations (New York, New York) Intergovernmental Panel on Climate Change. Awareness of the negative implications of climate crises is increasing, and regulators in the United States and elsewhere are moving to require public companies to disclose to investors new information about the environmental risks they pose. In addition, an increasing number of US cities and states are filing lawsuits that aim to hold the fossil‑fuel industry accountable for the environmental devastation that it has caused—and covered up—for decades. But strong opposition from fossil‑fuel-industry stakeholders continues to thwart some decarbonization efforts. For example, with the backing of natural‑gas and other corporate interests, Florida recently enacted a law that prevents municipal governments from banning natural‑gas hookups in new buildings. Several other states have introduced similar legislation.
Many oil companies recognize the need to speed up fossil‑fuel divestment and have curtailed their capital investments sharply; however, recent declines in investment have been so large that some analysts now project that oil producers will be unable to meet market needs. Crude‑oil demand is increasing as the world recovers from the covid‑19 pandemic, and the vast majority of vehicles still require petroleum fuels. If higher energy costs result, some people may demand political solutions to slow the transition to renewable energy, which needs to ramp up very quickly to meet future energy needs.
Market systems that put a price on carbon emissions are crucial to the creation of a strong financial incentive for decarbonization, and political commitment to maintain high carbon prices is necessary for such systems to be effective. In July 2021, China—the world's largest emitter of carbon dioxide—officially launched its national cap‑and-trade system for carbon emissions, which focuses on improving carbon efficiency (emissions per unit of energy that sees generation) rather than on reducing total carbon emissions. At present, only gas- and coal‑fired power plants fall under the rules, but China plans eventually to add other industries to the system. China is attempting to maintain the flexibility to allow for future economic development, and some experts question whether the system is nearly ambitious enough.