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Can Wright's Law Save The World?

Updated: Oct 29, 2021

Oxford predicts a $26 trillion gain from net zero, saying we should eliminate the word "cost" from the net zero lexicon. The relevant concept is how much we gain. This turns the 'too expensive' or 'too difficult' argument on its head and shows how both people and planet will benefit.

Mathematicians at Oxford University have carried out the world’s most comprehensive study of the economic windfall to be had from a turbo-charged decarbonisation based on unstoppable leaps and bounds in known technology. It concluded that the net gain is $26 trillion (£19 trillion), or $14 trillion under cautious assumptions. The faster it happens, the bigger the benefit. It can be achieved in 25 years, beating the global target of 2050.

With the right rules and policy signals – and seed money to bring the newest technologies to scale – free enterprise will take care of the problem, guided by Adam Smith’s Hidden Hand, they claim.

Crucially, renewables will prevail because fossil fuels cannot compete. They will slide rapidly into obsolescence so long as the market is not obstructed, or so long as the governments stop "standing on the hose."

Cathie Wood from the technology fund Ark Invest likens it to the fate of the whale oil industry in the 1860s, once the fifth-largest sector of the US economy and chief source of lighting fuel. Within a decade whaling had mostly vanished because something better came along: kerosene. Only this time, it's renewables smashing up the old order.

The Oxford report, by the Institute for New Economic Thinking, said global solar costs have been falling by 15pc a year since the mid-1990s in a textbook case of Wright’s Law, the so-called learning curve of innovation. Pioneered by Theodore Wright in 1936, Wright’s Law provides a reliable framework for forecasting cost declines as a function of cumulative production. Specifically, it states that for every cumulative doubling of units produced, costs will fall by a constant percentage. For solar, that's 15pc each year.

The models long used by governments and agencies to predict solar performance assumed on average that costs would fall by just 2.6pc a year. In fact, prices have fallen between 5 and 6 times faster. Similar miscalculations have occurred with batteries and wind turbines.

In more good news, unsubsidised new wind and solar have now reached parity with fossil fuels across most of the world, cheaper for most of mankind, according to Bloomberg New Energy Finance. Wright’s Law of technology still holds, so they will become even cheaper, subject to the supply of critical minerals, reports The Telegraph.

Once the cost curves cross, the game is up. The collapse becomes unstoppable, or to borrow the Hemingway dictum, you go bankrupt two ways: "gradually, then suddenly".

The financial markets can see this. They are shutting fossil energy out of the capital markets, albeit some quicker than others. The International Energy Agency and the International Fund can see it too. They no longer deem net zero to be a cost but rather a growth accelerant and the answer to fuel poverty, resulting in a whopping reduction in global energy costs from 4pc to 2pc of GDP.

Recently, in parallel to this, the International Investors Group on Climate Change - a coalition of investors with more than $60 trillion in assets under management - are putting the squeeze on electric utility companies globally (which account for about 40pc of emissions worldwide; more than any other sector) to move up their timeline to hit net zero by 15 years, to 2035, and is demanding a detailed strategy on how each one will get there. This is the opposite of "standing on the hose" and $60 trillion is a lot of firepower.

The denialist industries and their highly paid lobbyists no longer waste effort arguing over climate science. That old argument no longer has traction. Their new line of defence is to deter action by playing up the enormity of the task. The Oxford mathematicians, if correct, are basically saying that's rubbish.

So, eliminate the word "cost" from the argument - which has long been the reason for such a slow pace of change, with our world leaders giving us just "blah, blah, blah" as Greta Thunberg put it - and present it as a bonanza for those quick to seize it, and the debate turns on its head.

The task then becomes a matter of steering vast pools of idle global capital to poorer countries, to finance projects with a profitable return. The market can do it beautifully, with a tweak here or there, and with help from the established mechanisms of export finance diplomacy. None of this is beyond the wit of man or expensive in any meaningful economic sense.

Thankfully, there's a is a force out there more powerful than the political class. It's Wright’s Law of technology.


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