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The more Hurricanes Helene and Milton we get, the harder it is to ignore the need.
As the southeastern U.S. recovers from hurricanes Helene and Milton, the destruction the storms have left behind serves to underline the obvious: The need for technologies that support climate change adaptation and resilience is both real and urgent. And while nearly all the money in climate finance still flows into mitigation tech, which seeks to lower emissions to alleviate tomorrow’s harm, at long last, there are signs that interest and funding for the adaptation space is picking up.
The emergence and success of climate resilience advisory and investment firms such as Tailwind Climate and The Lightsmith Group are two signs of this shift. Founded just last year, Tailwind recently published a taxonomy of activities and financing across the various sectors of adaptation and resilience solutions to help clients understand opportunity areas in the space. Next year, the firm’s co-founder Katie MacDonald told me, Tailwind will likely begin raising its first fund. It’s already invested in one company, UK-based Cryogenx, which makes a portable cooling vest to rapidly reduce the temperature of patients experiencing heatstroke.
As for Lightsmith, the firm held the final close of its $186 million growth equity fund for climate adaptation solutions in 2022, which co-founder and managing director Jay Koh told me is one of the first, if not the first fund with a climate resilience focus. As Koh sees it, the evolution of climate adaptation and resilience technologies can be broken up into three stages, the first being “reactive and incremental.” That’s largely where we’re at right now, he said — think rebuilding a dam higher after it’s been breached in a flood, or making a firebreak broader after a destructive wildfire. Where he’s seeing interesting companies emerge, though, is in the more proactive second stage, which often involves anticipating and preparing for extreme weather events. “Let’s do a lot more data and analytics ahead of time. Let’s deploy more weather satellites. Let’s look at deploying artificial intelligence and other technologies to do better forecasting,” Koh explained to me.
The third and final stage, he said, could be categorized as “systemic or transcendent adaptation,” which involves systems-level changes as opposed to incremental improvements. Source Global, one of Lightsmith’s portfolio companies which makes solar-powered hydropanels that produce affordable drinking water, is an example of this. As Koh told me, “It’s not simply improving the efficiency of desalination filters by 5% or 10%. It’s saying, listen, we’re going to pull water out of the air in a way that we have never done before.”
But while the activity and interest around adaptation tech may be growing, the money just isn’t there yet. “We’re easily $50 [billion] to $60 billion below where we need to be today,” MacDonald told me. “And you know, we’re on the order of around $150 [billion] to $160 billion below where we need to be by 2030.” Everyone else I spoke with echoed the sentiment. “The latest statistics are that less than 5% of total climate finance tracked on planet Earth is attributable to adaptation and climate resilience,” Koh said. “Of that, less than 2% is private investment.”
There’s a few reasons why early-stage investors especially may be hesitant to throw their weight behind adaptation tech despite the clear need in the market. Amy Francetic, co-founder and managing general partner at Buoyant Ventures, which focuses on early-stage digital solutions for climate risk, told me that the main customer for adaptation solutions is often a government entity. “Municipalities and other government contracts, they’re hard to win, they’re slow to win, and they don’t pay that much, either, which is the problem.” Francetic told me. “So it’s not a great customer to have.”
One of Buoyant’s portfolio companies, the now defunct StormSensor, reinforced this lesson for Francetic. The company used sensors to track water flow within storm and sewage systems to prevent flooding and was able to arrange pilot projects with plenty of water agencies — but few of them converted into paying contracts. “The municipalities were willing to spend money on an experiment, but not so many of them had a larger budget.” Francetic told me. The same dynamic, she said, is also at play in the utility industry, where you often hear about new tech succumbing to “death by pilot.”
It’s not all doom and gloom, though, when it comes to working with larger, risk-averse agencies. AiDash, another of Lightsmith’s portfolio companies that uses artificial intelligence to help utilities assess and address wildfire risk, has five utility partnerships, and earlier this year raised $58.5 million in an oversubscribed Series C round. Francetic and MacDonald both told me they’re seeing the conversation around climate adaptation evolve to include more industry stakeholders. In the past, Francetic said, discussing resilience and adaptation was almost seen as a form of climate doomerism. “They said, oh, why are you doing that? It shows that you’re giving up.” But now, MacDonald told me that her experience at this year’s climate week in New York was defined by productive conversations with representatives from the insurance industry, banking sector, and venture capital arena about injecting more capital into the space.
Bill Clerico, the founder and managing partner of the venture firm Convective Capital, is also deeply familiar with the tricky dynamics of climate adaptation funding. Convective, founded in 2022, is solely dedicated to wildfire tech solutions. The firm’s portfolio companies span a range of technologies that address suppression, early identification, prevention, and insurance against damages, and are mainly looking to work with utilities, governments, and insurance companies. When I talked to Clerico back in August, he (understatedly) categorized these establishments as “not necessarily the most fast-moving or innovative.” But the bleak silver lining, he told me, is that extreme weather is forcing them to up their tempo. “There is so much destruction happening so frequently that it’s forcing a lot of these institutions to think about it totally differently and to embrace newer, more novel solutions — and to do it quickly.”
People, it seems, are starting to get real. But investors and startups alike are also just beginning to define exactly what adaptation tech encompasses and what metrics for success look like when they’re less measurable than, say, the tons of carbon sucked out of the atmosphere via direct air capture, or the amount of energy produced by a fusion reactor.
“Nobody wakes up in the morning and buys a loaf of adaptation. You don’t drive around in an adaptation or live in an adaptation,” Koh noted. “What you want is food, transport, shelter, water that is resilient and adapted to the effects of climate change.” What Koh and the team at Lightsmith have found is that many of the companies working on these solutions are hiding in plain sight. “They call themselves business continuity or water efficiency or agricultural precision technologies or supply chain management in the face of weather volatility,” Koh explained.
In this way, the scope of adaptation technology balloons far beyond what is traditionally climate-coded. Lightsmith recently invested in a Brazil-based digital health company called Beep Saude, which enables patients to get rapid, in-home diagnostics, vaccination services, and infusion therapies. It falls under the umbrella of climate adaptation tech, Koh told me, because rising temperatures, increased rainfall, and deforestation in the country have led to a rapid increase in mosquitoes spreading diseases such as dengue fever and the Zika virus.
Naturally, measuring the efficacy of solutions that span such a vast problem space means a lot of customization. “Your metric might be, how many people have asked for water in a drought-prone area?” MacDonald told me. “And with health, it might be, how many children are safe from wildfire smoke during fire season? And for ecosystems, it might be, how many hectares of ecosystem have been saved as a means to reduce storm surge?” Insurance also brings up a host of additional metrics. As Francetic told me, “we measure things like lives and livelihoods covered or addressed. We measure things like losses covered or underwriting dollars spent on this.”
No matter how you categorize it or measure it, the need for these technologies is not going away. “The drivers of adaptation and climate resilience demand are physics and time,” Koh told me. “Whoever develops climate resilience and adaptation technology will have a competitive advantage over any other company, any other society, and the faster that we can scale it up, and the smarter and more equitable we are about deploying it, the better off we will all be.”
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On long-range forecasts, Google’s nuclear deal, and carbon sinks
Current conditions: Severe flooding in Sri Lanka has closed schools and forced thousands from their homes • The U.K. could be warmer than Spain this week • It will be 95 degrees Fahrenheit today in Phoenix, which just marked 20 consecutive days of record heat.
It’s looking like this winter will be another mild one. AccuWeather long-range experts are forecasting that most of the United States will see above-normal temperatures between December and February. The exception is the Northeast, which could be cooler and see more snow this year than last. Last winter, you may recall, was the warmest on record. In some southern states, temperatures this winter could run more than 3 degrees Fahrenheit above the historical average. “This will result in a noticeable reduction in heating demand, which could translate to lower heating bills for families and businesses,” AccuWeather said.
AccuWeater
Google has signed an agreement with Kairos Power to build and operate a fleet of advanced nuclear reactor plants that will generate 500 megawatts of clean power by 2035. Kairos will sell that electricity to Google to power its data centers. While other tech giants are also investing in nuclear to address their surging electricity needs (Amazon bought Talen Energy’s Cumulus data center campus; Microsoft is backing the revival of the Three Mile Island nuclear plant), Google is the first to commission new nuclear power plants for this purpose. The plan is to have the first reactor online by 2030. The Financial Timesnoted that the U.S. has only brought three reactors online in the last 20 years.
Bill Gates’ climate venture firm Breakthrough Energy is out today with its 2024 State of the Transition report. The firm has invested $3.5 billion into more than 110 climate tech companies over the last nine years, and the report mostly discusses those projects’ progress, along with climate-tech investment strategies. Perhaps the most interesting part of the report is the letter from Gates himself, in which he says 2024 saw climate tech enter its “deployment era.” He wrote:
“At Breakthrough Energy, we noticed a subtle, but important, perspective shift from both the investors and corporations we engage with. Major global investors … are finally getting off the sidelines and engaging in climate tech opportunities in meaningful ways. Meanwhile, corporate leaders increasingly understand that cleantech is not just about shrinking their carbon footprint. It’s also about strengthening their businesses and deploying their capital more efficiently.”
Many of the world’s emerging economies are ramping up renewable energy deployment faster than more advanced economies, according to new analysis from think tank RMI. These countries, scattered across the Global South (and excluding China, Eurasia, and the Middle East), are all showing clear trends, such as a surge in clean tech investment, exponential renewables growth, and solar and battery storage cost parity with fossil fuels. Much of this is driven by a lack of fossil fuel reserves, and a need for alternatives. In a third of developing countries, demand for fossil fuels has peaked. With enough investment, these trends could be supercharged, and the developing world could catch up with advanced economies’ energy transitions within five years. Climate coalition Mission 2025 used the report as an opportunity to reiterate its call for governments in rich countries to massively scale finance for low-income countries to reach the goal of tripling renewables by 2030.
RMI
New preliminary findings from an international group of climate researchers found that, in 2023, the Earth’s land regions showed an “unprecedented weakening” in their ability to absorb carbon. Soil, grasslands, forests, and wetlands are some of the world’s greatest carbon sinks, helping to balance the climate. But last year, the hottest year on record, it looks as though they absorbed almost no carbon at all. The researchers say that if warming rates continue as they are, urgent action is needed “to enhance carbon sequestration and reduce greenhouse gasses emissions to net zero before reaching a dangerous level of warming at which natural CO2 sinks may no longer provide to humanity the mitigation service they have offered so far by absorbing half of human induced CO2 emissions.”
Tesla’s Optimus humanoid robots, which were on full display at the company’s recent Cybercab event, reportedly were mostly controlled by humans.
A counter-proposal for the country’s energy future.
American electricity consumption is growing for the first time in generations. And though low-carbon technologies such as solar and wind have scaled impressively over the past decade, many observers are concerned that all this new demand will provide “a lifeline for more fossil fuel production,” as Senator Martin Heinrich put it.
In response, a few policy entrepreneurs have proposed novel regulations known as “additionality” requirements to handle new sources of electric load. First suggested for electrolytic hydrogen, additionality standards would require that subsidized hydrogen producers source their electricity directly from newly built low-carbon power plants; in a Heatmap piece from September, Brian Deese and Lisa Hansmann proposed similar requirements for new artificial intelligence. And while AI data centers were their focus, the two argued that additionality “is a model that can be extended to address other sectors facing growing energy demand.”
There is some merit to additionality standards, particularly for commercial customers seeking to reduce their emissions profile. But we should be skeptical of writing these requirements into policy. Strict federal additionality regulations will dampen investment in new industries and electrification, reduce the efficiency of the electrical grid through the balkanization of supply and demand, and could become weapons as rotating government officials impose their views on which sources of demand or supply are eligible for the standards. The grid and the nation need a regulatory framework for energy abundance, not burdensome additionality rules.
After decades of end-use efficiency improvements, offshoring of manufacturing, and shifts toward less material-intensive economies, a confluence of emerging factors are pushing electricity demand back up again. For one, the nation is electrifying personal vehicles, home heating, and may do the same for industrial processes like steel production in the not-too-distant future, sparked by a combination of policy and commercial investment. Hydrogen, which has long been a marginal fuel, is attractingsubstantial interest. And technological innovation is leading to whole new sources of electric load — compute-hungry artificial intelligence beingthe most immediate example, but also large-scale critical minerals refining, indoor agriculture like alternative protein cultivation and aquaculture, and so on.
In recent years, clean energy has seemed to be on an unstoppable path toward dominating the power sector. Coal-fired generation has been in terminal decline in the United States as natural gas power plants and solar and wind farms have become more competitive. Flexible gas generation, likewise, is increasingly crowded out by renewables when the wind is blowing and the sun shining. These trends persisted in the context of stable electricity load. But even as deployment accelerates, low-carbon electricity supply may not be able to keep up with the surprisingly robust growth in demand. The most obvious — though not the exclusive — way for utilities and large corporates to meet that demand is often with new or existing natural gas capacity. Even a few coal plants have delayed retirement, reportedly in response to rising demand and reliability concerns.
Given the durable competitiveness of coal and especially natural gas, some form of additionality requirement might make sense for hydrogen production in particular, since hydrogen is not just a nascent form of electric load but a novel fuel in its own right. Simply installing an electrolyzer at an existing coal or natural gas plant could produce hydrogen that, from a lifecycle perspective, would result in higher carbon emissions, even if it displaces fossil fuels like gas or oil in final consumption. Even so, many experts caution that overly strict additionality standards for hydrogen at this stage are overkill, and may smother the industry in its crib.
Likewise, large corporate entities and electricity customers adopting additionality requirements for their own operations can bolster investment in so-called “clean firm” generation like nuclear, geothermal, and fossil fuels with carbon capture. In just the past month, Google announced plans to back the construction of new small nuclear reactors, and Microsoft announced plans to purchase electricity for new data centers from the shuttered Three Mile Island power plant, the plant made famous by the 1979 meltdown but which only closed down in 2019. Three Mile Island’s $100-per-megawatt-hour price tag would have been unthinkable just a few years ago but is newly attractive.
Notice the problem Microsoft is trying to solve here: a lack of abundant, reliable electricity generation. Outdated technology licensing, onerous environmental permitting processes, and other regulatory barriers are obstructing the deployment of renewables, advanced nuclear energy, new enhanced geothermal technologies, and low-carbon sources. Additionality fixes none of these issues. Of course, Deese and Hansmann propose “a dedicated fast-track approval process” for verifiably additional low-carbon generation supplying new sources of AI load. Yet this should be the central effort, not the after-the-fact add-on. The back and forth over additionality rules for the clean hydrogen tax credit is a case in point. The rules for the tax credit will (likely) be finalized by January, but lawsuits already loom over them. Expanding this contentious additionality requirement to apply to broad use cases will be even more contentious without solving the actual shortage data center companies care about. Conversations about additionality are a distraction and misplace the energies of policymakers and staff.
Substituting one regulatory thicket for another is a recipe for stasis. Instead of adding more red tape, we should be working to cut through it, fast-tracking the energy transition and fostering abundance.
With such broad requirements, what’s to stop future administrations from expanding them to cover electric vehicle charging, electric arc furnace steelmaking, alternative protein production, or any politically disfavored source of new demand? Could a second Trump Administration use additionality to punish political enemies in the tech industry? Could a Harris Administration do the same? What if a future administration maintained additionality standards for new sources of load, but required that the electricity come from fossil fuels instead of low-carbon sources?
Zero-sum regulatory contracts between sources of electricity supply and demand are not simply at risk of becoming a tool for handing out favors on a partisan basis — they already are one. Two pieces of model legislation proposed at the July meeting of the American Legislative Exchange Council, an organization of conservative state legislators that collaborate to write off-the-shelf legislative measures, would require public utility commissions to prioritize dispatchable generation and formally discourage intermittent renewable sources like solar and wind. One of the proposals suggests leaning on state attorneys general to extend the lifespans of coal plants threatened with retirement.
These proposals did not move forward this year, but it is unlikely that the motivating force behind them is exhausted. And whatever one thinks of the relative merits of intermittent versus firm generation, ALEC’s proposals demonstrate just how easily gamed regulations like additionality could be and the risks of relying on administrative discretion instead of universal, pragmatic rules.
This is not how the electric grid is supposed to work. The grid is, if not an according-to-Hoyle public good, a shared public resource, providing essential services to customers large and small. Homeowners don’t have to sign additionality contracts with suppliers when they buy an electric car or replace their gas furnace with an electric heat pump. Everyone understands that such requirements would slow the pace of electrification and investment in new industries. The same holds for corporate customers and novel sources of load.
The real problem facing the AI, hydrogen, nuclear, geothermal, and renewables industries is an inability to build. There are more than enough clean generators queueing to enter the system — 2.6 terawatts at last count, according to the Lawrence Berkeley National Laboratory. The unfortunate reality, however, is that just one in five of these projects will make it through — and those represent just 14% of the capacity waiting to connect. Still, this totals about 360 gigawatts of new energy generation over the next few years, much more than the predicted demand from AI data centers. Obstacles to technology licensing, permitting, interconnection, and transmission are the key bottlenecks here.
Would foregoing additionality requirements and loosening regulatory strictures on technology licensing and permitting increase the commercial viability of new or existing fossil fuel capacity, as Deese and Hansmann warn? Perhaps, on some margin. But for the foreseeable future, the energy projects and infrastructure most burdened by regulatory requirements will be low-carbon ones. Batteries, solar, and wind projects make up more than 80% of the queue added in 2023. Meanwhile, oil and gas benefit from categorical exclusions under the National Environmental Policy Act, while low-carbon technologies are subject to stricter standards (although three permitting bills recently passed the House, including one that waives these requirements for new geothermal projects).
Consider that 40% of projects supported by the Inflation Reduction Act are caught up in delays. That is $84 billion of economic activity just waiting for the paperwork to be figured out, according to the Financial Times. Additionality requirements are additional boxes to check that almost necessarily imply additional delays. Permitting reform makes them redundant and unnecessary for a cleaner future.
This underscores perhaps the most essential conflict between strict additionality requirements and clean energy abundance. Ensuring that every new policy and every new source of demand allows for absolutely zero additional fossil fuel consumption or emissions will prove counterproductive to global decarbonization in the long run. Natural gas is still reducing emissions on the margin in the United States. Over the past decade, in years with higher natural gas prices, coal generation has ticked up, indicating that the so-called “natural gas bridge” has not yet reached its terminus. Even aggressive decarbonization scenarios now expect a substantial role for natural gas over the coming decades. And in the long term, natural gas plants may prove wholly compatible with abundant, low-carbon electricity systems if next-generation carbon capture technologies prove scalable.
The United States is the world’s energy technology R&D and demonstration laboratory. If policies to prune marginal fossil fuel consumption here stall domestic investment and scaling of low-carbon technologies — as current permitting regulations already do, and proposed additionality requirements would do — then we will not only slow U.S. decarbonization, but also inhibit our ability to export affordable and scalable low-carbon technologies abroad.
Environmental progress’s surest path is in speeding up. For that to happen, we need processes that allow for rapid deployment of clean energy solutions. Expediting technology licensing, fast-tracking federal infrastructure permitting, and finding opportunities for quicker and more rational interconnections should be first and foremost.
The real solution lies in building a regulatory environment where energy abundance can flourish. Clearing the path for clean energy development, we can achieve a future where energy is affordable, reliable, and abundant—a future where the United States leads in both decarbonization and economic growth. It’s time to stop adding barriers and start speeding up progress.
Daron Acemoglu and William Nordhaus have some disagreements.
This year’s Economics Nobel is not a climate prize — that happened in 2018, when Yale economist William Nordhaus won the prize for his work on modeling the effects of climate change and economic growth together, providing the intellectual basis for carbon taxation and more generally for regulating greenhouse gas emissions because of the “social cost” they impose on everyone.
Instead, this year’s prize, awarded to MIT’s Daron Acemoglu and Simon Johnson and University of Chicago’s James Robinson is for their work demonstrating “the importance of societal institutions for a country’s prosperity,” i.e. why some countries are rich and others are poor. To do so, the trio looked at the history of those countries’ institutions — laws, modes of government, relationship between the state and individuals — and drew out which are conducive to wealth and which lead to poverty.
Long story short, “extractive” institutions set up to reward a narrow elite tend to hurt economic development over time, as in much of Africa, which was colonized by Europeans who didn’t actually live there. “Inclusive” institutions, by contrast, arose in the United States and Canada, where there was significantly more European migration, thus incentivizing the ruling elite to set up institutions that benefitted a broader range of (again, European) residents.
While this research rests heavily on the climate (the reason Europeans avoided African colonies was because of the high rate of disease in tropical climates), it does not touch on climate change specifically. But Acemoglu especially is an incredibly wide-ranging scholar and has devoted some time to the specific questions of climate change — and in so doing has been a direct critic of Nordhaus, Stockholm’s preferred climate economist.
“Existing approaches in economics still do not provide the right framework for managing the problems that will confront us over the next several decades,” Acemoglu wrote in a 2021 essay titled “What Climate Change Requires of Economics,” referring directly to Nordhaus’s Nobel-winning work. “Although the economics discipline has evolved over time to acknowledge environmental risks and costs, it has yet to rise to the challenge of climate change. A problem as massive as this one will require a fundamental reconsideration of some of the field's most deeply held assumptions.”
His criticisms included that Nordhaus’s more gradualistic approach — the latest version of his model spits out that a 1.5 degree Celsius warming target is “infeasible,” and the “cost vs. benefit optimal” amount of warming as 2.6 degrees Celsius over pre-industrial levels with a carbon price that rises to $115 per ton by 2050 — ignores both the best way to reduce emissions and the risk of not doing so fast enough.
Acemoglu is far more optimistic about how policy can direct technological development and less sanguine about additional warming over and above the Paris Agreement limits. He argues that the possibility of theoretical “tipping points,” where exceeding certain climate thresholds by even a small amount may cause dramatic damages, make the risk of such overshoot far too great.
He also took issue with the discount rate applied to spending later vs. spending now in Nordhaus’s models. The basic idea is that a dollar spent today to mitigate the effects of climate change is more valuable than one spent in 2050. But the rates Nordhaus uses — which he derives from real-world investment returns — implies that in order for spending now to be worth it later, the benefits in 2050 or 2100 must be very, very large.
“There is a plausible economic (and philosophical) case to be made for why future essential public goods should be valued differently than private goods or other types of public consumption,” Acemoglu wrote in 2021, arguing that discount rates derived from investment returns, like the ones Nordhaus uses, might not be the best guide to public policy.
So what does the latest Nobel laureate want instead? Well, something like what the United States has been doing the past few years.
Accounting for the economic benefits of domestic or “endogenous” technological development, Acemoglu’s research finds that "the transition to cleaner energy is much more important than simply reducing energy consumption, and that technological interventions need to be redirected far more aggressively than they have been.” He explored how this process could work in papers he wrote over more than a decade, developing a model for this kind of directed technological change and applying it to the United States, starting as far back as 2012.
Across all his work on climate change, Acemoglu argues that a focus on pricing the “externalities” of carbon emissions — the harm emissions impose on everyone that isn’t reflected in the prices of fossil fuels — is myopic. Instead, the challenge is both restricting emissions and fostering clean technologies that can take the place of dirty ones, which have had a remarkable head start in investment.
In “The Environment and Directed Technical Change,” published in 2012 and co-written with Philippe Aghion, Leonardo Bursztyn, and David Hemous, Acemoglu argues that a mixture of carbon taxes and research subsides could “redirect technical change and avoid an environmental disaster” by imposing a cost on dirty technology and boosting clean technology.
Such an approach would probably rest heavily on positive subsidies and encouraging clean technology and less on a carbon tax, the four write (although a carbon tax would still help to “discourage research” into polluting technologies). It would also need to happen soon.
“Directed technical change also calls for immediate and decisive action in contrast to the implications of several exogenous technology models used in previous economic analyses.”
This framework does not precisely match United States policy — we have no carbon tax — but it does somewhat approximate it. The Biden administration’s approach to climate policy centers on large-scale investments in clean technologies, whether they’re tax credits for non-carbon-emitting electricity production or financing for clean energy projects from the Loan Programs Office, combined with a suite of Environmental Protection Agency rules that are intended to reduce pollution from fossil fuel power plants (along with an actual direct fee on methane emissions).
This approach is embedded within an overall industrial policy that’s supposed to make the economy more productive — a counter-argument to the idea that climate spending is an economic drag that trades off with environmental harms in the future. Acemoglu, too, questions the idea that there’s a tradeoff between economic growth and spending to combat climate change. Not only could renewables be cheaper than fossil fuels, “an energy transition can improve productive capacity and thus lead to an expansion of output, because transition to cleaner technologies can boost investment and the rate of technological progress,” he and his co-authors write.
Acemoglu has also weighed in on one the more controversial questions in climate policy and economics: the shale gas boom. In a 2023 paper written, again with Aghion, Hemous, and Lint Barrage, he weighed the effects of dramatic increase of domestically extracted natural gas, focusing on the importance of technological development. The Environmental Protection Agency attributes the decline in US greenhouse gas emissions since 2010 in part to “the growing use of natural gas and renewables to generate electricity in place of more carbon-intensive fuels,” due to natural gas replacing coal electricity generation. While this logic has come under fire from some activists and researchers who say the government’s models underestimate methane leakage from natural gas operations, Acemoglu took a different tack.
Yes, natural gas substituting for coal reduces short-run emissions, he and his co-authors concluded, but also, “the natural gas boom discourages innovation directed at clean energy, which delays and can even permanently prevent the energy transition to zero carbon.” They backed up this assertion by pointing to a decline in the total share of patents rewarded to renewable energy innovation between 2009 and 2016.
The way out is that same mix of carbon prices and technology subsidies Acemoglu has been recommending in some form since Kelly Clarkson was last on top of the charts, which “enables emission reductions in the short run, while optimal policy would ensure that the long-run green transition is not disrupted.”
If the Biden Administration’s climate policy works out, it will look something like that, and the prize will be far greater than anything given out in Stockholm.