Climate Action

How 5 pivots in 2 industries can trigger net-zero pathways in 2021

A red and yellow e-bus, the first used in Washington as passenger transport.

Creative solutions such as exploring the use of idle e-buses as battery storage units is one possible route to achieving climate targets. Image: Unsplash

Jonathan Eckart
Project Lead, Global Battery Alliance, Global Leadership Fellow, World Economic Forum
Mathy Stanislaus
Director, Public Policy, Global Battery Alliance
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SDG 07: Affordable and Clean Energy

This article is part of: The Davos Agenda
  • Following big climate target announcements last year by major greenhouse gas-emitting countries, significant headway must be made in 2021.
  • Transport and power sectors can decarbonise more quickly than others.
  • Solutions such as the smart usage of electric vehicles and idle e-bus fleets as battery storage systems should be explored as a priority.

Important announcements for climate action were made in 2020. Major economies including China, Japan, Korea, the US (based on President-elect Biden’s election campaign) and the EU committed to net-zero economies by about mid-century (in the case of China, by 2060). Combined, they accounted for more than half of global greenhouse gas (GHG) emissions in 2018.

But major headway will need to be made this year to make these announcements real. The transport and power sectors will be “trailblazers” and reduce emissions faster than others, as Figure 1 shows for the example of the EU’s 2050 net-zero goal, and other analysis confirms for China’s 2060 net-zero pledge.

What are the biggest drivers to bend emissions in those two trailblazing industries and what are priorities for 2021?

The challenge

To begin with, let’s look at the breakdown of emissions and why transport and power can decarbonize relatively fast – albeit, according to current projections, not fast enough.

In 2017 approximately 50 gigatons of carbon dioxide were emitted across the globe. By about 2050, emissions will have to be reduced to net-zero to stay within the 1.5° goal, as the IPCC reported. There are five major drivers of these emissions: electricity generation (~25%); agriculture (~24%); manufacturing (~21%); transportation (~14%); buildings (~6%). In addition, there a bundle of other sources of greenhouse gas emissions (~10%).

Graph showing the decarbonization pathway for the EU
Figure 1. Decarbonization pathway for the EU. Image: McKinsey and company.

If the transport and energy sectors can move faster than others, here are five pivots to give them extra tailwinds in 2021 across three dimensions, proposed by the Energy Transitions Commission: 1. Using less energy by increasing efficiency, 2. Generating more clean energy for more people, 3. Substituting fossil fuel-generated with clean energy.

Five priorities for 2021 across three dimensions to get to net-zero economies.

1. Scale up electric vehicle deployments for road transport by investing in EV infrastructure and battery cell manufacturing

Electric vehicles are three-to-five times more efficient than internal combustion engines. EVs are also associated with a lower lifecycle carbon footprint. Key bottlenecks to a faster electric vehicle uptake for light-duty transport include the ramp-up of circular battery supply chains, including means of high battery utilization in first and second-life applications, and the deployment of large e-bus and EV fleets, along with the associated charging infrastructure.

A 35% increase in the production of batteries would be required by 2030 versus base case projections to meet only the 2°C goal of the Paris Agreement. This is where investments should be directed immediately in 2021. Besides institutional finance, public funding is critical. Committed funds need to be complemented and put to use quickly. They include the EU’s €3.2 billion investment into cell manufacturing over multiple years, the more than $2 billion commitment from the government of India, and the $2 trillion injection by President-elect Biden for a clean energy economy during the coming four years.

2. Accelerate wind and PV for green electricity

The major catalysts towards clean electricity generation are faster deployment of additional wind and solar PV, nuclear power (where socially accepted) and energy storage systems ideally on gigawatt scale or other grid flexibility options to address the intermittent nature of renewables.

The Bloomberg New Energy Outlook estimates that “expanding and decarbonizing the power system to stay on track for warming of 1.75C would require around $35.1 trillion of investment in power generation assets and batteries in the next three decades”. Adding required investments into power grids and for hydrogen generation raises this figure to a staggering $78-$130 trillion by 2050.

In the 2020s, the roll-out of wind and PV for green electricity generation are a top priority, coupled with battery and other flexibility options. Renewables and batteries face an economic limit between 70% and 80% penetration in most markets so the coming decade should be about approaching that limit as fast as possible.

3. Expand storage to make the most of renewables

Renewables are intermittent and need to be complemented by storage systems. The storage market – driven by lithium-ion battery installations – declined in 2019 for the first time in almost a decade, showing how dependent the market still is on policy support. Storage systems on a gigawatt scale (e.g. via pumped storage) are not easily expandable and can currently not be provided by batteries.

However, in 2021 the smart usage of electric vehicle and idle electric bus fleets as storage systems should be explored as a priority. Coupling the transport and energy sectors in vehicle-to-grid solutions could meet 65% of storage demand in 2030 and become a major grid flexibility solution. It could also allow vehicle owners to offset their cost of vehicle ownership by buying electricity when prices are low but selling – by reverse-charging their car and feeding electricity back into the grid – when prices are high.

To realize this, regulatory reform and standard setting to regulate bi-directional charging should be prioritized, along with further experimentation to validate business cases and test consumer behaviour. Private sector investments in pooled EVs as a service should be advanced.

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4. Advance carbon pricing to incentivize the use of clean energy everywhere

Momentum and business support for expanded carbon pricing schemes are gaining traction and now that the EU, the US and China have set net-zero commitments, such schemes may be easier to negotiate (e.g. in “climate clubs”). Collective action across geographies can significantly reduce transition costs. A case in point is the expected proposal in mid-2021 of a carbon border tax in the EU, a “local” policy that could have far-reaching impacts on global trade and emissions along value chains. This is certainly a controversial effort and expected to invoke push-back from EU trading partners. It may also lead to alternative approaches, such as linking emissions trading schemes. In any case, it could play a catalytic role in supporting the greening of value chains and additional renewable deployment.

5. Establish collective abatement efforts across value chains and industries

Collective action is paramount to establishing accepted standards, baselines, targets and funding levers to abate emissions. The Battery Passport initiative of the Global Battery Alliance is one such effort to measure, track and improve the environmental, social and governance footprint of batteries, including the greenhouse gas footprint across the entire battery value chain over time. Another is the work of the Mission Possible Platform. Similarly, abatement pathways must be implemented in collective action across other value chains and industries.

So when leaders meet in Glasgow in November for COP26, the world should have moved on significantly in climate action. This year could see breakthroughs that get us closer to a net-zero compliant pathway across major markets.

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