CERAWEEK: Lack of policy certainty muddles path to net-zero emissions

Arguments over the fuel mix of the future and assertions that one fuel type is better than another must end and give way to meaningful discussions about getting every sector of the energy industry on a path to net-zero emissions, an energy security and climate change expert said March 1 at the CERAWeek by IHS Markit conference, held virtually.

Those discussions must also ensure that the cost-benefit analysis of the road to net-zero is also positive for consumers, workers, and everyone involved in the transition, said Sarah Ladislaw, senior vice president and director of the Center for Strategic and International Studies' energy security and climate change program.

"Everyone has a problem to solve for in this equation, and it requires us to get on the same page on the policies we're going to put in place to make it happen," she said.

Pointing to oil and gas companies, for instance, Ladislaw said that the sector's problem will be finding a net-zero pathway that maintains the jobs the sector provides.

"There's a huge amount of opportunity to do that," she said." If you look at what carbon capture, utilization, and sequestration at scale, plus direct air capture, plus a hydrogen future would look like in terms of an employment program, it's a very promising pathway."

Turning to the renewables sector, Ladislaw said, "if you think that just putting a few temporary incentives and manufacturing tax credits in place is going to grow a green energy economy, [you] are sorely mistaken."

Expectations for ESG

Climate policy in the US has lacked the certainty at the federal level needed to drive massive investment decisions, scale-up domestic deployment of newer, cleaner technologies, and expand exports of those technologies abroad, she said.

Ladislaw applauded the accelerating focus on environmental, social, and governance performance measures as more value throughout the economy has been put on sustainability.

Yet, "ESG is basically able to tell you what is unquestionably good to do from an environmental standpoint, or unquestionably sort of bad to do from an environmental standpoint," she said. "It's not really good at making a lot of gradations in the middle, and that's where I think additional sort of clarification and standardization would be helpful."

Further, ESG "cannot replace policy," Ladislaw said, adding she was worried about the level of expectations people may be putting on ESG to guide investors. Signals from policymakers, she said, would be necessary to really answer questions on what the low-carbon transition will look like and what will be the risks inherent to that transition.

Concrete actions

Ladislaw suggested that 2021 may be the year answers to those questions start to firm up, not just in the US, but globally.

"For the last several years, it was a really big and important statement for a lot of countries to pledge some sort of net-zero target by 2050," as it became clear that, at the current trajectory, the world "is not on pace to meet the globally agreed-upon target of [a]1.5-degree temperature rise," she said.

"And so I think what you'll see this year is ... the world is no longer about just making net-zero-by-2050 targets, it's about actually showing that you have a credible near-term path with concrete actions that you might take as a government or as a company to be able to meet those targets," she said.

She reasoned that with the United Nations Climate Change Conference of the Parties (COP26) summit, coming up in November to accelerate action on the Paris Agreement, countries coming out of the coronavirus pandemic and the change in US administration, "countries are pretty determined to make hay while the sun shines and get as much accomplished in the course of this year, in the context of global recovery."

'Texas is a wakeup call'

Andrew Light, acting assistant secretary for international affairs at the Department of Energy, who was on the same panel as Ladislaw at CERAWeek, said that "we have the aspiration, we have the targets, and we're seeing a growing chorus of leaders around the world embrace net-zero as the reality that we have to hit."

He acknowledged that it would be tough and the US has much work to do to scale up technology and ensure affordability. "But the downside of the kind of climate change we're going to see and the sorts of impacts we're going to see if we don't do this are going to really hurt all business sectors across the economy. ... And what just happened in Texas is a wake-up call to the kind of world that, unfortunately, we are in the process of creating right now."