Less for a change.

Photographer: Carla Gottgens/Bloomberg

We've Hit 'Peak Carbon'

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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It seems like every day we read a new story with dire news about climate change. Experts now warn that it will be impossible to hold global warming below 2 degrees Celsius, even with the carbon-emissions limits required by the recent Paris round of climate talks. Some environmentalists warn darkly that we must choose between saving the planet or capitalism. 

But I have some very good news to report. In 2015, global carbon emissions actually fell.

The Cost of Carbon

This isn't an occasion for complacency. The fall might be a temporary blip. Even if it’s not, emissions represent the amount of additional carbon that is added to the atmosphere every year -- that carbon builds up, so to really halt climate change we will need to decrease emissions drastically, not just halt their growth. 

But I feel that some climate writers are being too quick to dismiss the decline in emissions. Brad Plumer, one of the best in the business, writes that we should regard the drop as a temporary pause rather than a true peak. He notes that much of the emissions pause came from slowing economic growth in China, which reduced coal use. Since China is now the planet’s biggest carbon emitter by far, that made a huge difference. But China’s growth will probably rebound, and many other developing countries such as India and Indonesia are waiting to take up the baton of rapid industrialization. When they do, they probably will fuel their development the same way all other countries have -- by burning coal. 

So we’re not out of the woods yet. But there are reasons to think that Plumer is being too pessimistic. There are three major factors that will conspire to hold down carbon emissions in the decades ahead. One is technological, one is economic and one is political. 

The technological force is, of course, the rapid progress in solar energy and battery storage technologies. Both appear to be decreasing in cost along smooth exponential paths. This suggests that there’s some kind of self-replicating process going on. In the case of solar and batteries, that process is probably a learning curve -- making more solar panels and batteries helps manufacturers discover how to make them ever more efficiently. 

That process has already made solar a cost-effective option in many areas, even without government subsidies. And if current trends continue, it will be cheaper than building new fossil-fuel plants in most regions of the world. Batteries, meanwhile, will help solar replace fossil fuels at night as well as when the sun isn’t shining. They will eventually also allow electric cars to replace gasoline-burning ones, further cutting into carbon emissions. 

The second force is an economic one -- peak coal. Although the world isn't in danger of running out of coal any time soon, much of the highest quality and most accessible coal has already been mined in countries such as China. As the remaining coal becomes lower quality and harder to reach, the costs of getting it from the ground to power plants and factories soars. This is probably a big reason why Chinese coal production has already plateaued, and why the country now imports a substantial amount of coal despite being endowed with ample domestic reserves. 

Even when cheap coal is still available, it takes huge amounts of infrastructure investment to extract, transport and process it. India, for example, has large domestic coal reserves -- the world’s fourth largest -- but it isn't very efficient at building infrastructure to extract that coal. Already, this is causing supply bottlenecks, which will raise the price of coal and slow the growth in carbon emissions. Meanwhile, many developing countries lack large domestic coal reserves, and will be forced to import the fuel. Importing is very costly as well, and this expense will also put a damper on emissions. 

The final force is political. The increasing alarm over climate change has caused even growth-obsessed China to be worried. The country implemented a unilateral cap-and-trade program this year. Meanwhile, the Paris climate agreement imposes more stringent emissions requirements than any earlier deal, showing that the potential for global coordination is real. Meanwhile, emissions in the U.S. have kept falling even as the country has resumed a fairly normal rate of economic growth. 

So climate writers and activists shouldn't dismiss the possibility that we are really turning a corner. But they are right to caution against excess optimism. We shouldn't see the 2015 emissions drop as a sign that our problems are solved and that we can stop putting our energy into the struggle against carbon. On the contrary, it is precisely our continued efforts on the technological and political fronts that give us hope that the tide may finally be turning.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net