Lowering cost of clean technologies helps combat climate change

Washington, DC—Technologies that emit greenhouse gases into the atmosphere often cost less than non-carbon-polluting alternatives. This is a long-standing challenge for worldwide efforts to fight climate change and keep warming in check.

New work published in Environmental Research Letters by Carnegie’s Ken Caldeira and Lei Duan with the University of Waterloo’s Juan Moreno-Cruz demonstrates the value of investing in climate-change-mitigating innovation—even after net-zero emissions have been achieved.

“Scientific and engineering innovation can lower costs of sustainable energy alternatives, decreasing the so-called ‘Green Premium’, and making them easier to implement at large scale,” explained Caldeira, who is also affiliated with Breakthrough Energy. “For example, wind and solar power technologies have become a lot cheaper over the last decade. The result has been more wind and solar deployment, helping to decrease greenhouse gas emissions. The same thing can happen with other technologies if we invest in making them cheaper.”

A major challenge in this sector is that ordinary market forces do not sufficiently drive investment in emissions-reducing technology, according to the authors. Research and development in this space is often unattractive to investors compared to other opportunities, due to uncertainty, the time it takes to see profitability, and the regulatory environment. As a result, most early-stage investments in new clean energy technology have been publicly funded.

“However, our work demonstrates that there is ample opportunity for clean energy innovation to help address climate challenges,” Duan explained. “But governments and private industry will need to work together to make this happen.”

Caldeira, Duan, and Moreno-Cruz set out to develop a framework by which experts can attribute a value to the cost-savings created by innovations that reduce carbon emissions. To accomplish this goal, they created a new model, called Climate Optimized Investment or COIN.

In their model, optimal strategies always involve investing in what is called a learning subsidy to help drive down the cost of technologies that are costly today. This is based on the concept that the cost of a technology decreases as it is deployed, and its uses are refined and better understood.

“Think about the first time you acquire a new skill,” Duan explained. “It takes time to do each step and ensure you are undertaking it correctly. Then, as you get comfortable with the task, you can accomplish it quickly and efficiently. The same is true for the roll-out of new technology.”

They found that the more stringent the targets for cutting carbon emissions, the more value was produced by investments in reducing the costs of sustainable energy technology. Even in a zero-emissions scenario, learning-curve investments can drive down costs of maintaining this carbon-free state.  

“A lot of people think that we need to get to a net-zero energy system so fast, we don’t have time to innovate new technologies,” Caldeira said. “We need to do what we can do with what we have, but net-zero could be costly unless we work now to develop better and cheaper technologies. Targeted research and development, and learning subsidies, can play a critical role in driving progress on this front.”