Renewable Energies in a Cheap Oil World.

Johan Yugar

Few things are harder to predict than the future international oil price.  Back in 2008 when the oil was having its historical peak, it was hard to imagine that we would be back in cheap oil world so soon.

The bad moment of China, the incomplete recovery of United States and Europe, the over production of oil and the refusal of the main producers to cut down the production have configured a scenario of really cheap oil. For the first time in decades we have saw an oil barrel cheaper than a bucket of fried chicken.

We can now safely say that we are in a commodity super cycle of low prices. This new cycle affects the renewable energy industry, since when the oil barrel is at $35 the renewables are no longer a priority.

And so, while cheaper crude may be good for the economy, particularly in the developed world, its consequences for the planet will be detrimental.

So, what can we do?

It is always hard to fight the basic forces of the economy, and most of the countries will welcome the low crude prices as positive for their economies, but there are a few reasons for optimism.

  • As we all know, the oil price is determined by the supply and demand. It is hard to imagine an upturn in the demand with the current trends, but the non-traditional oil, important part of the current oversupply, cannot endure such low prices for a long time.
  • Renewables now accounts for more than 20% of the global electricity generation and most of the sectorial analysis anticipates an increase in its share for the end of the decade, and this raising goes even further in the long term analysis.
  • Renewables keep improving. All the technologies have a learning curve, a period in which new technology is developed and the efficiency and costs of the process are improved. For coal and oil this learning curve is far behind, while for solar and wind energy the learning has just started, and we will see continuous improvements in these technologies in the next years.
  • Maybe the COP21 failed to deliver the wide and ambitious agreement that we expected; nonetheless the commitments reached in the COP21 will change the energy policies of many countries. In order to improve their energy sector while maintaining their environmental goals, many countries will appeal to renewable energies.

Last but not least, we should not forget that we have power. We, as citizens, can always influence in our politicians and their policies. A better informed, more committed community can be an extraordinary tool for positive change.

The climate change and the present bias

                                                                         An Spanish version of this article won the first climate change blogging contest of  the Interamerican Development Bank, and can be found here

Although they are an awesome triumph of evolution, our brains, from time to time, also shows its flaws. One of these weaknesses is that we have serious problems when it comes to making decisions involving the future. We are very bad foreseeing our future preferences, or estimating the real possibilities for us to fulfill our goals. We are also very bad estimating the future value of things or, in any case, we have a bias that leads us to favor immediate gratification.

This temporary inconsistency originates some pernicious and persistent behavior, both personally and socially. At this point we fully understand that climate change is real, that it is consequence of our activities, and that only drastic changes in our practices will allow us to avoid the worst of its effects. Still, this present bias leads us to underestimate the future effects of climate change, and defer urgent and necessary actions.

The importance of climate change as a threat to our future is very present in the public opinion. Surveys like the Eurobarometer or this study from Yale University prove that more and more people understands that climate change is the most important threat for our individual and collective future.

This increase in public awareness has not been turned in new public policies that drives to important emission reductions, neither have motivated the personal shifts that would be expected, except in a small part of the population.

The present bias is part of what makes it so difficult to combat climate change. We are asked to take action and make sacrifices for our future self, but despite how much I love that guy, I rather let him deal with his own problems (and if it is possible, also with mine). The present bias puts us on that path of inaction, in which doubt lead us to not take action, and where we see these problems as foreign and distant ones.

What can we do?

We could apply to this issue some of the tips that psychologists usually give procrastinators.

  • Set clear goals. One of the problems within the UNFCCC negotiations is that they are looking for global reduction commitments, and although this might be the most effective long-term action course, this discussion has paralyzed the countries and prevented them to adopt national or regional emission reduction goals.
  • Look on the bright side. The actions we need can be traumatic for our economies. The long term benefits are difficult to visualize. It would be good to emphasize the immediate benefits of the actions, such as reducing health costs or other economic benefits arising from plans that reduce vehicle traffic.
  • Stop making excuses. We like to justify ourselves, it helps us to live with our decisions or the lack of them. But the absence of broad consensus can no longer be seen as a valid excuse for not taking action. Bilateral agreements or even voluntary reductions increase the pressure on other countries and make it more likely to reach a global agreement. The lack of valid agreements is an increasingly less justifiable excuse for not taking action.

Both personally also socially, we can achieve small wins that allow us to overcome the bias and start a virtuous cycle that leads to the actions we need.