Date posted: 20/09/2019 5 min read

Breaking the link between economic growth and pollution

NZ is tracking well on its shift to a low-carbon economy, says the World Economic Forum, but globally the push has slowed.

In Brief

  • The World Economic Forum Energy Transition Index (ETI) measures countries on the performance of their energy systems and their readiness to transition to a low-carbon system.
  • Sweden, Switzerland and Norway topped the 2019 ETI rankings of 115 nations, with New Zealand at 14 and Australia at 43.
  • In a worrying sign, coal consumption globally increased in 2018, after declining for three years, and investment in fossil fuels (as a proportion of total energy investment) was also up.

By Christopher Niesche

When economies grow, they consume more energy. It’s a longstanding and well-established link, but one that must be broken to enable the transition to a low-carbon energy system, warns the World Economic Forum (WEF).

The WEF’s Energy Transition Index ranks countries on the performance of their energy systems and their readiness to transition to a low-carbon system that fosters inclusive economic growth and an affordable, secure energy supply. But its 2019 report, Fostering Effective Energy Transition, reveals that the shift towards low-carbon energy has slowed.

“Globally, energy transition has slowed. The year-on-year increase of the global average score on the Energy Transition Index was the lowest of the last five years,” states the report. “Three years after the global milestone of political commitment through the Paris Agreement, this lack of progress provides a reality check on the adequacy of ongoing efforts and the scale of the challenge.”

“Three years after the global milestone of political commitment through the Paris Agreement, this lack of progress provides a reality check...”

On the positive side, energy security and access continues to show greater improvement, particularly in emerging and developing Asia. On average, 135 million people gained access to electricity each year between 2014 and 2016.

Why the push to low-carbon economies is urgent

Sweden, Switzerland and Norway top the WEF’s Energy Transition Index (ETI) rankings, with other nations from northern and western Europe rounding out the top 10 spots.

In our own region, New Zealand is well positioned to start producing more low-carbon energy, but Australia is lagging behind many other advanced economies. New Zealand ranks 14th out of the 115 nations examined, while Australia comes in at 43. Australia, Canada and South Korea were the only large economies with ETI scores outside the top quartile.

The rankings coincide with an increased sense of urgency about the transition to low- or no-carbon economies. Last year’s special report by the Intergovernmental Panel on Climate Change set out the challenge: emissions related to human activity will need to drop to net zero by 2050 to limit the global temperature increase to less than 1.5°C above the pre-industrial level.

The energy system contributes two‑thirds of global emissions and lies at the heart of this challenge. “Although unprecedented in its scale and impact, the energy transition also offers an opportunity to shape the future of the energy system and ensure its sustainability, security, affordability and inclusiveness in the long term,” states the report.

Accelerating the energy transition will require coordinated action across economic, technological, social and political systems, says the WEF.

How do you decarbonise an economy?

Economic growth in modern economies is closely associated with increasing energy consumption, and this link will have to broken. “Decoupling energy consumption from economic growth will require economic diversification to less energy-intensive industry sectors, energy efficiency in production processes and increased cooperation between developed and developing countries for technology transfer and capacity building,” states the report.

In terms of technology, a wider toolkit of low-carbon technologies needs to be developed for widespread commercialisation.

There is also an important social element to energy transition. How will the cost of energy transition be borne? What happens to those communities that depend on coal mining or oil extraction for work?

Worryingly, global performance is worsening in some areas. Coal consumption increased in 2018, after declining for three years, and the report notes that with the average age of Asian coal plants at 11 years, it will be decades before they are retired.

Investment in fossil fuels, as a share of total energy supply investment, grew in 2017 for the first time since 2014. The share of fossil fuels in total primary energy supply has remained stable at 81% for the past three decades. This is important because electrification – the conversion of a machine or system to the use of electrical power – is critical for decarbonisation and makes up only 19% of the total final consumption of energy.

SNAPSHOT: Australia’s energy policy

Australia has committed to cutting emissions by 26% by 2030 – a target that Australia’s prime minister, Scott Morrison, has said will be met “in a canter”, despite climbing carbon emissions. The federal government’s central emissions reduction policy is the A$3.5 billion Climate Solutions Package to be spent over 15 years.

About A$2 billion is to be spent on the Climate Solutions Fund, which will pay farmers and other groups who reduce emissions or prevent carbon dioxide released into the atmosphere by, for example, retaining native vegetation or making their businesses more energy efficient.

The package also includes A$1.38 billion towards the Snowy Hydro expansion in NSW. The project would pump water uphill into dams when power is cheap, then release it to drive turbines at times of high electricity demand, acting as a giant battery and backing up intermittent energy produced by wind and solar.

However, successive Australian governments have failed to reach an agreement on energy policies even within their own parties, let alone across the aisle.

SNAPSHOT: New Zealand’s energy policy

New Zealand is aiming to reduce carbon emissions to zero by 2050, as outlined in the Zero Carbon Bill introduced to parliament in May. The ambitious target is to be achieved in part through the reduction of animal methane emissions in the agriculture sector, particularly from dairy cows, but it also has a renewable energy element.

Hydroelectricity already generates the majority of New Zealand’s power, with significant contributions made by gas and geothermal power.

The government remains committed to its target of 90% of electricity generation from renewable sources by 2025 (in an average hydrological year) providing this does not affect security of supply.

In its Energy Policies of IEA Countries: New Zealand 2017 review, the International Energy Agency wrote: “This performance is a world-class success story among IEA member countries.” New Zealand also has an emissions trading scheme.

Read more:

Read the 2019 Fostering Effective Energy Transition report by the World Economic Forum.

The energy system is undergoing a pivotal transformation

Read more