Whither Fossil Fuels and dependent economies?

Geothermal Plant: A reliable,
cheap, and clean energy  source

Technological advances in renewable sources of energy, coupled with policy-shift in favor of cheap energy, are putting the fossil fuels sector in jeopardy.  It is not just the industry whose future is bleak, but also economies that depend on Fossils fuels. The threat is compounded by the rapidly growing investment in green energy sources. The entry of electric or hybrid vehicles in the transport sector makes a bad situation worse.

A number of reports reviewed by this publication show that Wind, Solar, and geothermal in that order, will play a significant role in electricity generation in the next 30 years.

Experts say that fossil fuels, particularly Coal, will cease being an energy generation source in the next 30 years. In fact, projections show that by 2050, renewables- Wind, geothermal, and Solar- will have increased significantly to replace fossils as sources of energy. This is because, renewable energy sources are now cheaper to install and commission, producing cheap electricity. They are also more efficient than fossil fuels.

A Hydro dam: staggered by the
weather but green and cheap

Leading the charge in this revolution is China, a leading polluter. China’s electricity demand is estimated at 1,667 GW a year. Of this, 250 GW is wind-generated, and another 356 GW is hydro generated. In effect, 36 percent of China’s electricity sources are green. Coal, the largest environmental polluter generates 38 percent or 634GW of China’s electricity. China plans to increase wind power’s share to 400GW by 2030, and to 1000GW by 2050, effectively eating into Coal’s share of the market.

The European Union’s installed wind capacity is estimated at 230GW. This, according to windEurope, forms 14-17 percent of the total electricity supply in Europe, which is estimated at 1643 GW a year.  Wind power is favored to be the future of electricity generation, replacing aging Coal and Nuclear plants that are environmental polluters. The current level of wind generation, experts say, will cut carbon emissions by 333 million tones of CO₂ per year, saving Europe €28 billion a year in fuel costs

The Third largest Polluter, the USA, is not lagging behind either. Its total green energy installed capacity is 141GW comprising of; Hydro 103 GW; wind power 35 GW; and geothermal 3.4 GW. The USA is the only Western country with a significant geothermal capacity estimated at 10GW. It is the world leader in geothermal generation at 3.4 GW.  A recent analysis by the National Renewable Energy Lab, NREL, established that wind power capacity is higher than previously estimated.  It says that with upgrades on the current hubs to heights of 80 to 100 meters, wind power potential will rise to between 10,000 and 12,000 GW.

As the leading polluters turn to climate change friendly energy sources, Science is emerging from the woods. Scientists, including Economists and epidemiologists, buoyed by the crisis caused by the COVID-19 pandemic, have become louder on climate change, warning it could be the next pandemic.

A study carried by the Environment and Energy Studies Institute, EESI, in the US found that waste from Fossil fuels is the cause of more than 2 million bronchial diseases reported in the US a year which result in 30,100 deaths.

 This high social cost amplifies other economic and financial costs of the fossil fuel sector leading to loud protests.  Among the protesters, Economists are calling for the withdrawal of subsidies to the fossil fuels sector.

The IMF estimates that Fossil Fuels subsidy globally is $5 trillion or 6.7 percent of global GDP and calls for their withdrawal.

Subsidies are meant to help nascent industries take off or keep the costs of essential goods low. However, some of the subsidies have been in place for 100 years. Further, now that oil prices are very low, there is no need for such subsidies.

Economists term such subsidies regressive, and are calling for their immediate withdrawal.

Of course, the players in the Fossil fuels industry will not go down without a fight. One way to do it is to bully governments into submission through false hypotheses developed by lobbies funded by the sector. Economists, such as Paul Krugman, call these false hypotheses, zombie ideas.

Zombie ideas are hypotheses that sound like economic theories but are not.  One such idea is the subsidies granted to the Fossil fuels sector. According to the EESI, the US subsidizes the industry to the tune of US$20 billion a year while in Europe the number is $55 billion.

Zombie ideas have given rise to populism- a tendency to reject expertise, treating counsel as an infringement of our rights- be they personal, political, and/or economic- whether real or imaginary.  Populism has spawned a fragile economic, financial, political, and social system that cannot absorb “bolts from the blue.”

The COVID-19 pandemic has laid bare the fragilities of selfish economics. The world is rudderless in the face of a global public health crisis that spreads fast and is recurring, and an economic crisis whose future is tied to the pandemic. How do we get out of this mess?  The Consensus view is; heed expertise and act on it!

This is where the theory of green economy comes in. A green economy looks at development as more than the monetary value of GDP but also factors in social welfare- the whole gamut including, public health, clean environment, wealth distribution, and redistribution.

 According to the IMF, post-COVID-19, governments must lead in investing in the green economy. “Reforestation, land restoration and building renovation to reduce carbon emissions, are job-rich activities that are also climate change friendly,” it says. Given the Economic disaster that the pandemic imposed on the world, recovery will mean creating more jobs to re-employ those furloughed by the pandemic. That is every government's headache.

Now that the future of Fossil fuels’ future is bleak, we ask, what becomes of investments into the sector in the recent past? How viable are on-going investments in the sector in Africa?

 The rapid transition into green energy puts in jeopardy economies in Africa, that depend on fossil fuels for income and employment. Demand for fossil fuels will shrink going forward. This is a warning shot that they must wean their economies of fossils and diversify. Studies show that diversified economies in Africa are better able to cope with economic shocks compared to commodity-dependent countries. That is the way to go for commodity-dependent countries.

 However, in Africa, as elsewhere in the world, the pace of transition from fossils fuels to renewables depend on politicians.  Politicians generally are easy prey for the corporate sector. This means that they could go slow on transition or even stonewall it.

  In Africa, solar is likely to be the dominant source in the energy mix of the future. This will help in the development of agro-business and small-scale industrialization away from the cities.  Solar and wind power can be scaled down to support the decentralization of power distribution from utility behemoths and create more jobs. Governments must therefore focus on green investments that improve the quality of life, such as water and sanitation, ICT infrastructure, and transport infrastructure. Such investments will also expand the


economic growth base in the continent.