Why net-zero needs government action

The global energy transition is failing and the private sector is to blame. It’s time for green policies, not U-turns

For decades, governments and industry have promised that markets and private investors will deliver the energy transition needed to reach net zero. This promise has not materialised. The global energy system remains highly dependent upon fossil fuels and private investment in renewables has not gathered pace at anything like the rate required.

It is time to face the facts: decarbonisation will fail without public ownership of the energy system. This is something global leaders – many of whom are this week gathered at the International Energy Agency’s (IEA) Climate and Energy Summit in Madrid – must realise.

Yet just last month the UK’s prime minister, Rishi Sunak, U-turned on several net-zero policies. Governments such as Sunak’s, and others including the IEA, claim private investors and liberalised markets are seamlessly paving the way to a clean energy future. The role of government, they say, is to protect investors and facilitate the flow of capital because, in the right market environment, the transition will take off irresistibly, rendering fossil fuels a thing of the past.

This is a story premised upon a dangerous myth – it could not be further from the truth. The market-led transition has failed, as our latest report at the Transnational Institute has found. Fossil fuels still account for 82% of energy consumption worldwide – and their use is increasing. Global coal use in late 2022 was at a record high and global oil consumption for 2023 is expected to increase by an average of 2.2 million barrels per day.

It is true that renewable investment is growing – but not at the rate being claimed. The IEA’s most recent report on the progress of clean energy cited “remarkable gains in the past year”. But if you dive deeper into the data, only three of the 50 components necessary for the energy transition are actually ‘on track’ to meet net zero by 2050.

What’s more, optimists focusing on booming renewables tend to ignore that the lion’s share of new clean energy investment is cancelled out by escalating energy demand. So while global renewable capacity did grow by a record 340 GW in 2022, the global electricity system expands at around 300 GW per year – undermining the majority of this clean energy progress. What we are witnessing, then, is more an energy expansion than an energy transition.

Where real progress is being made, it is governments – not the private sector – in the driving seat. Public funds (including households) accounted for 60% of total climate finance globally in 2019/2020. Contrary to pro-market ideology, public institutions are more likely to fund higher-risk transition sectors than private actors, with the public sector leading on technologies further away from commercialisation such as tidal energy or thermal storage.

There has never really been a free market in renewable power, nor is there ever likely to be. Instead, the renewables sector has been propped up by public subsidies. When Germany and China, governments leading the energy transition, dropped their ‘Feed-in Tariff’ renewables subsidies, the consequences were dramatic. Investments in renewables dropped by 46% in Germany in 2015, and by 38% in China between 2017 and 2018 (with investments in solar falling by 53%).

To keep the 1.5℃ target alive, we must recognise that the market model that has dominated energy transition policies is dead. We need policy alternatives. The kind of large-scale technological and economic transformation we need – and that the UN Panel on Climate Change also repeatedly calls for – is impossible without public planning and coordination.

Governments must step up and lead the way, drawing on the knowledge and needs of energy sector workers and energy users to develop strategies that are truly people-powered. As UN Secretary-General António Guterres puts it: “Renewable energy technologies, such as battery storage, must be treated as essential and freely available global public goods.”

This means public ownership of the energy sector with democratic accountability and participation. It means direct public investment in the energy transition, with a level of ambition and urgency proportionate to the scale of the crisis we face. And it means recognising energy’s role as a basic social need through a ‘global public goods’ approach, which prioritises equity, justice and energy access over private profit. Without this kind of fresh thinking, a decarbonised future will be little more than a pipe dream.

This originally appeared in opendemocracy.net