Net Zero: 2025 Perspective

 

Net Zero: 2025 Perspective – Trends and challenges in the global energy transition

Today the flow of startling “breaking news” stories seems unrelenting. But the long-term health (and viability) of the planet remains an equally serious matter of concern. For an authoritative analysis of the current environmental state of affairs, Eden McCallum invited Lord (Adair) Turner, chairman of the UK’s Energy Transitions Commission, to give his 6th annual talk on the progress towards a global net zero economy.

What follows is a summary of his talk. A video of the complete talk can be viewed here, the supporting slides can be found here and the text of Lord Turner’s Keele World Affairs lecture entitled “Avoiding catastrophic climate change: technologic possibilities and political barriers” is here.

Lord Turner’s talk started with showing that the evidence of significant planetary warming is clear and troubling. The hopeful news is that technological innovation is developing faster than many could have imagined. However, both political will and effective action from business are needed to avoid the worst climate outcomes. 

Climate change 

The concentration of CO2 in the atmosphere has leaped in the past 100 years, leading to higher temperature levels. 2024 was the first year in which temperatures were over 1.5°C above pre-industrial levels. 

“It seems that the temperature increases may be occurring faster than the climate models suggest,” Lord Turner said. This has already led to some extreme weather events, such as the recent wildfires in California and floods in Pakistan, China, and Valencia in southeastern Spain. 

CO2 and methane emissions have not come down far or fast enough. As a result, Lord Turner said, we have run out of time to limit global warming to 1.5° Celsius. The task now is to limit that rise in temperature, as every point of a degree above 1.5 will bring more and more harmful climate change effects. 

The good news 

There is a technological route to reducing CO2 emissions. The cost of solar photovoltaic (PV) electricity has fallen dramatically. The cost of a panel (in terms of the dollars per peak Watt of power) has come down by 99.9% over the last 50 years. “It is one thousandth of what the cost was in 1970,” Lord Turner said. “I’m absolutely certain that from the $0.09 a Watt which we had reached in October 2024, we will be down at seven or six cents a Watt by 2030.” 

Wind energy has also got cheaper, albeit not in quite such a spectacular way. The cost of wind turbines fell by about 45% between 2010 and 2023, thanks largely to Chinese manufacturing. “What the Chinese are illustrating is that it is possible to achieve very significant reductions in the cost both of manufacturing wind turbines and deploying them,” Lord Turner said. 

Batteries 

Back in 2010, the US Department of Energy set a stretch target to achieve an 80% reduction in the cost of lithium ion batteries per kWh storable by 2020. The actual reduction achieved was more like 85% or 90%. Nickel, cobalt, and lithium prices rose between 2020 and 2022. But they fell back again – there is now in fact a glut of nickel in the world. But there has also been “an extraordinary wave of innovation”, Lord Turner said. 

These new batteries, which require no nickel or cobalt, are called lithium ferrous phosphate batteries. They now account for more than 50% of all the batteries going into electric vehicles (EVs). “The closer you are to these technologies, the more one gets excited by the extraordinary capacity of human beings to innovate,” Lord Turner said. 

Battery EVs will end up being cheaper to buy than internal combustion engine vehicles (ICEs), as well as being cheaper to run. In China this has already been achieved. The BYD Seagull has a range of 190 to 250 miles. It is a four-door, full size car and it is selling in China for $9800. The International Energy Agency (IEA) used to expect a 15% market share for EVs by 2030. They now believe it will be 44%. 

Storage 

The cost of battery energy storage systems (BESS) has been falling sharply over the past two years. “Many people have not yet realised how transformational this is going to be,” Lord Turner said. 

Most of the global population lives in low latitude countries – the Sun Belt – where we are on the verge of a revolution in the ability to electrify the economy and to do it primarily with solar,” Lord Turner said. “In these parts of the world, solar plus batteries is going to be a pretty much complete solution to the provision of electricity.” The start of what The Economist magazine has called The Solar Age.  

In higher latitudes, while batteries can store electricity on less sunny days, when the wind does not blow, you have to use a range of alternatives, Lord Turner argued: some batteries, some hydrogen, some gas turbines, but running either with hydrogen or with carbon capture and storage (CCS). There is also a role for nuclear energy – both large fission and probably small modular nuclear. 

What is astounding is that the UK has already decarbonised its electricity system by 75% in 12 years – a great achievement. There is now a commitment to get that to near zero by 2030. That will be more difficult, he said. 

Progress 

EVs are about three or four times more efficient than an ICE vehicle. Similarly with heat pumps – which are essentially just an air conditioner in reverse – they are three or four times more efficient than gas boilers, Lord Turner said. “The answer to how we get to a zero carbon economy is simple. It’s electrify, electrify, electrify, and decarbonise the electricity generation systems of the world. And both of those are possible, and the technologies are available to do that at low cost.” 

Even in the “hard to abate” sectors there are available paths to get to net zero: use hydrogen instead of coking coal to produce steel, put CCS on the back of cement plants, use methanol or ammonia in ships, and produce sustainable aviation fuel from bio sources. 

But, Lord Turner conceded, at the business-to-business level there is a significant cost involved in making these changes. This means that these sectors of the economy will not decarbonise without carbon pricing and the protection of a carbon border adjustment mechanism (CBAM). 

Politics and the (business) people 

The costs to achieve a net zero world are significant but manageable, Lord Turner said: $1.7tn a year, perhaps 1.5% – 2% of global GDP. The social media environment, and the return of President Trump, make this a harder sell. But with firm political will it can be done – including explaining to China that carbon pricing and a CBAM are non-negotiable. 

In conclusion, Lord Turner had five priorities for action: 

• Win the argument that climate change is a huge threat to human welfare and that we should accept some cost to mitigate it 

• Anticipate and manage distributional effects (in other words – recognise that, for example, not everyone can afford to install a heat pump or have off-street parking and therefore cheaper electricity to charge an EV)  

• Seize the opportunity to decarbonise the not so “hard to abate” sectors 

• Mobilise reasonable cost of capital finance flows to developing countries (they need an incentive to avoid cheaper-to-build but more polluting old technology) 

• Develop a collaborative, constructive and robust relationship with China (the essential player in all this. China is simultaneously the world’s biggest emitter of CO2 but also the dominant developer of all the low-cost technology). 

In the Q&A that followed the presentation the issue of security was raised. “Relying on somebody to produce your solar PV panels is much less concerning than relying on them to deliver you gas,” Lord Turner said. 

He also urged business to get on the front foot. “What cement companies should be doing is saying: we know the technologies to get to net zero, but we can only do this if you impose a high enough carbon price and then protect us against unfair competition by a high enough CBAM. [Business] has to be urging government to do what government needs to do.” 

In other words, the opportunity to avoid catastrophic climate change is in our hands if we all collectively demonstrate the will to take the necessary action.