The world is waking up to the fact the climate-policy goal of achieving "net-zero" CO2 emissions brings crippling economic pain.
Fossil-fuel prices shot up 26% across industrialized economies last year and will rise globally by another 50% this year. Politicians blame Russia's invasion of Ukraine, but the long-term trend stems mostly from governments demonizing fossil fuels while their societies remain dependent on them. Since the 2015 Paris climate agreement, global fossil-fuel investment has halved, inevitably driving up prices.
As fossil-fuel prices climb, activists believe people will shift painlessly to renewable energy sources. But they've made a major miscalculation: Renewables are far from ready to power the world.
Solar and wind can only work with massive amounts of backup power, mostly fossil fuels, to keep the world running when the wind dies down, the sky clouds over or night falls. And renewables mostly generate electricity, which is just one-fifth of our total energy use – the vast majority is non-electric like transport, industrial processes and heat.
That's why the world still gets 80% of its energy from fossil fuels, and renewables deliver just 15%. This won't change any time soon – even the Biden administration expects the world in 2050 to be dependent on fossil fuels for 70% of energy.
But most net-zero policies try to force much greater reductions in fossil fuels, driving down investment and making them extremely expensive before alternatives can take over. That leads to worldwide pain, like the northern hemisphere winter we're entering with Europe preparing for brownouts and two-thirds of the UK population predicted to enter energy poverty.
Rich countries are showcasing the policies to avoid. Germany is on track to spend more than half a trillion dollars on climate policies by 2025 yet has only managed to reduce fossil-fuel dependency from 84% percent in 2000 to 77% today.
McKinsey estimates getting to net-zero will cost Europe 5.3% of its GDP in low-emission assets every year, or more than $200 billion annually just for Germany. That's more than it spends annually on education and police, courts and prisons combined.
The United States has gone all-in on its own net-zero ambition with the most expensive climate-change policy in its history. With the Inflation Reduction Act, the Biden administration plans to spend $369 billion promoting low-carbon energy and electric vehicles. This vast expenditure will have a negligible impact on climate change, reducing the global temperature rise unmeasurably, possibly as low as 0.0009°F.
Little wonder emerging economies are balking at the expectation they emulate these terrible policies. How they tackle climate change is vital because about three-quarters of all emissions in the rest of the 21st century will come from today's developing countries – India, China and countries across Africa and Asia.
India has realized that trying to achieve net-zero carbon emissions "would entail astronomical costs" and require a "complete transformation" of its economy. In a scathing rejection, the environment ministry notes doing so "could derail our development plans."
In fact, India found this policy would be so costly that to even make a start on the process, New Delhi would need the West to pay $1 trillion. India and other developing countries have also banded together to jointly demand another $1.3 trillion in "climate financing" every year by 2030, over and above what rich countries have already promised.
Emerging economies will not sacrifice poverty eradication and economic development to follow a net-zero approach that brings so much pain for so little climate reward. Without affordable, effective fossil-fuel replacements, power bills will rise and growth will shrink.
Fortunately, there are far smarter approaches. The best long-term strategy is to dramatically increase investment in green-energy research and development. This would be much more effective and likely 10 times cheaper than the European and US approach – and thus more feasible for governments around the world to implement.
Consider how the computer went from being incredibly rare and expensive to commonplace and cheap. Governments didn't achieve this revolution by subsidizing every Western home in the 1960s or 1970s to install a massive, relatively inefficient computer in the basement.
Breakthroughs were achieved by public and private expenditure on R&D leading to multiple innovations, which led to ever-more technologies becoming commercially viable, driving even more research and production in a virtuous circle. That's the example we need to emulate when it comes to green energy.
In rich countries, energy policies designed to make fossil fuels expensive are doing exactly what they were supposed to do. Unfortunately, this means great pain and a very bleak winter ahead. Other countries are wise to pay heed to this lesson, and we should all instead take the pathway of innovation.
Bjorn Lomborg is president of the Copenhagen Consensus and visiting fellow at Stanford University's Hoover Institution. His latest book is "False Alarm: How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet."