Switching to renewable energy could save trillions

offshore wind farm

The cost of green energy such as wind and sun has been falling for decades

Switching from fossil fuels to renewable energy could save the world up to US$12 trillion (£10.2 trillion) by 2050, according to a new study by Oxford University researchers.

The report says projections that the rapid switch to cleaner energy sources will be expensive are wrong and overly pessimistic.

Even without the currently very high gas prices, the researchers say it makes economic sense to go green due to the falling costs of renewables.

“Even if you are a climate denier, you should be on board with what we advocate,” Professor Doyne Farmer, of the Institute for New Economic Thinking at Oxford Martin School, told BBC News.

“Our key takeaway is that we should go full throttle on the green energy transition because it will save us money,” he said.

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The report’s findings are based on looking at historical price data for renewable and fossil fuels and then modeling their likely future evolution.

Fossil fuel data goes back more than 100 years as of 2020 and shows that the price has not changed significantly after accounting for inflation and market volatility.

Renewable energy has only been around for a few decades, so there is less data. But in that time, continuous improvements in technology have meant that the cost of solar and wind power has fallen rapidly, at a rate of nearly 10% per year.

The report’s expectation that renewable energy prices will continue to fall is based on “probabilistic” models that use data on how massive investment and economies of scale have made other similar technologies cheaper.

“Our latest research shows that scaling key green technologies will continue to reduce their costs, and the faster we move, the more we will save,” says Dr. Rupert Way, the lead author of the report from the Smith School of Enterprise and the Environment.

Wind and solar are already the cheapest options for new energy projects, but questions remain about how best to store electricity and balance the grid when weather changes cause renewable output to decline.

Net zero cost

Back in 2019, Philip Hammond, then Chancellor of the Exchequer, wrote to the Prime Minister to say that the cost of achieving net-zero greenhouse gas emissions in the UK by 2050 would be more than £1 trillion. This report states that the likely costs have been overestimated and discouraged investment.

It also said that predictions by the Intergovernmental Panel on Climate Change (IPCC) that the cost of keeping global temperature rise below 2 degrees would equate to a fall in GDP by 2050 are overly pessimistic. Switching to renewables is likely to turn out to be a “net economic gain”.

The research was published in Joule journal and is a collaboration between the Institute for New Economic Thinking at Oxford Martin School, the Oxford Martin Program on the Post-Carbon Transition, the Smith School of Enterprise & Environment at the University of Oxford, and SoDa Labs at Monash University.

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