Climate Change: Equity, Economics & Indemnity

While the world is immersed in the rhetoric of exchange between nations, the stock of emissions is being checked by the rising equity of renewable energy and the economics of this is simple.

Nations have more to gain, almost every nation, but more importantly every constituency; there is no need to protect one constituency against the other.

Cutting the flab of rhetoric, some numbers show that solar energy cost per unit has dramatically moved south in the last three years, so much so that the last auction in India dubiously projected a least cost scenario. But whatever the nuances of benefits and subsidies, the cost is moving down for several reasons. Going by economics, the renewable energy will cost (including equity and remediation) far less in the future than the non-renewable and therefore the latter has no chance in the long run or the short.

The most potent reason why renewable, both solar and wind, actually scores over the non-renewable is the simple fact that the cost of land and the associated social cost of displacement could be minimal; intertwined with the possibility of equity the shared benefits rise much beyond what we can possibly envisage. The total cost of ownership, including the community around, is least for the renewable.

Think of any large manufacturing unit, a large warehouse, a store, a building, or even a large agricultural tract of land needing energy for irrigation, a solar or wind energy utility could be created with almost no additional incremental land. The alternate for this would cost millions of hectares of land and the displacement cost would be several times borne by generations to come.

This allows an equity participation between the customer and the supplier, where land is provided as an equity. This model allows the overall cost of generation to be shared in an equitable manner.

When the world is reeling under the burdens of debt of all kinds, where current generation is virtually drawing from the future, this is no small indemnity.

The social cost of non-renewable energy has never been ascertained and leaves the whole branch of economics of remediation on a free ride.

When wells dry up, so does the community around it; when nations dry up with current reserves, the populace have no other alternative but to migrate.

Migrations, history has shown, whether small or big, has been driven by economics of scarcity and have left generations suffering.

Yes, current populations are tied to opportunities of employment that come from mines, wells and other deposits that are not renewable and it makes economic sense for now to exploit such opportunities to the full.

But every right minded entrepreneur will make a judgment call to invest in an equity for the future that must be tied to the renewable that becomes a source of wealth creation in the future and of employment.

It is not surprising therefore that the biggest Oil companies are the biggest supporters of renewable energy actions and have ratified the COP21 accord (although the countries where they originate from have still a debate raging against).

The Oil companies see a hope in the renewable energy equity that they partner to create, whether in energy efficiency, new technology in plastics, in electric batteries and so on and so forth.

It is time for every energy guzzling industry to participate in the building of this equity by pledging part of their land in exchange; most of solar and wind could be self-financed if such participation models are facilitated by regulation or its absence.

Negation of climate change is actually not a rhetoric, it is a careful attempt of denial, which neither helps the cause of the non-renewable or the constituencies who are currently attached to it.

But this remains a world where choice is free for one and all while economics will silently act to direct choice in the direction that makes economic sense rise to the challenge of optimality.

So be it.