“Trying to predict the future is a mug’s game,” writes science fiction author Douglas Adams. Indeed, it is. Few would have predicted at the end of 2019 that greenhouse gas emissions would register a record fall in 2020 because of a global pandemic. Adams continues: “But increasingly it is a game we all have to play because the world is changing so fast and we need to have some sort of idea of what the future’s actually going to be like because we are going to have to live there, probably next week.”
In terms of the energy transition, 2050 is next week. 2021 can, and must, be the year climate action becomes much more commensurate with climate science. COP26 in November is the perfect incentive to make this happen. With Joe Biden nearly in the White House, China seemingly committed to a 2060 net-zero goal and the necessary technologies largely out there, there is hope the year can advance towards ensuring “next week” doesn’t become a grim prospect for the climate, people and the economy.
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In 2020, net-zero pledges fell thick and fast from policymakers and businesses alike. In 2021, those ambitious words need to be turned into concrete actions.
Biden is likely to hit the ground running, having started creating an impressive energy transition team with former two-term Michigan Governor Jennifer Granholm as energy secretary and Gina McCarthy, ex-administrator of the Environmental Protection Agency, as his domestic climate policy advisor.
Granholm sits on the board of electric bus-maker Proterra and will be a strong advocate for zero-emission vehicles, while McCarthy, a former Cabinet official, will know which levers to pull to advance climate action and environmental protection. A third key move, appointing presidential candidate Pete Buttigieg as transportation secretary, shows Biden wants to make climate a focus of that department too. Buttigieg launched his own US climate plan in September 2020.
Across the Atlantic, the EU, long seen as a clean energy leader, plans to update many of its climate and energy laws in 2021 to implement its Green Deal and meet a new 55% by 2030 emissions reduction target. The EU Emission Trading System regulation, Renewable Energy Directive, Energy Efficiency Directive, Energy Tax Directive, CO2 emission standards for cars, gas market rules and the the EU’s Sustainable Products Policy are all up for change.
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By GlobalDataThe UK, which will finally have left the EU, will have to show how it intends to deliver on bold climate and energy targets for 2030, and whether it can successfully turn the post-Brexit City into a global green finance capital.
Financing clean energy and climate action will be at the centre of discussions and decisions around the world in 2021: both how to fund the energy transition and the impacts of net-zero commitments on investors. Divestment is likely to be an important theme with pension funds in particular massively moving away from fossil fuels.
Attention will also be focused on how the EU spends its mammoth €750bn recovery fund, which kicks in on 1 January. The European Commission has promised that, as part of an effort to “build back better”, all spending in this fund will be compatible with the EU Green Deal. But what ‘compatible’ means remains a subject of heated debate. Natural gas and whether it is eligible for EU funding as a “transition fuel” is particularly controversial. There is also the EU’s long-term budget of €1.8trn for 2021–27 with 30% of it ring-fenced for climate investment to watch.
Pandemic implications
The EU’s climate policies vis-à-vis the rest of the world will be closely monitored, as it seeks to repair its badly damaged relationship with the US and forge a new post-Brexit relationship with the UK. A promised EU carbon border tax will be a delicate proposition in this regard. Eyes in the EU and the US will also be riveted on China’s next Five-Year Plan, which will be unveiled in March 2021. How and whether this fits with its stated goal of being a net-zero economy by 2060 will be decisive for the global clean energy transition.
Hovering over all of this are the economic impacts of the Covid-19 pandemic. This will be particularly pertinent for low-income communities in developing countries. For the first time in decades, the number of people living in extreme poverty has started rising again with a loss of income triggering a crisis in energy access. 2030 is not only the deadline for many climate targets, but also for the UN’s Sustainable Development Goals. 2021 should see more people get access to (clean) energy; without targeted investment, notably from western governments and companies, however, this goal is in jeopardy.
Technology-wise, offshore wind will be a big one to watch everywhere. Annual offshore wind capacity is supposed to increase around ten-fold by 2050, compared with 2018, to reach clean energy goals. Serious investments will need to start in 2021 if this is to be achieved.
The amount of offshore wind that can be brought online is also likely to be a key decider of the availability and cost of green hydrogen in the years to come. Expect the hype around hydrogen to grow in 2021. This agenda will also refocus attention on carbon capture and storage, and its potential role in producing blue hydrogen from natural gas.
Transport will be high on the agenda as speculation about hydrogen-derived e-fuels heightens, notably for long-distance transport, and electric vehicles continue to fall in price, the choice of such cars increases and charging stations become much more widespread. The fall in battery prices is also likely to continue, and batteries – and storage more generally – will remain in the headlines.
Less sexy, but equally important, is the bog basic energy infrastructure of grids and pipelines. In most developed countries these are old and ill-equipped to deal with the dynamic, decentralised energy system of the 21st century. In many developing countries, they need building from scratch. Networks will require serious attention everywhere in 2021 as the energy transition continues to deepen and widen, and the integration of renewables becomes ever more paramount.
The flip side to more interconnected, digital energy systems coming online globally is that privacy concerns and cybersecurity are also likely to gain in stature.
This article is part of a series on climate and energy in 2021.
