The Energy Transition

Question [00:00:03]

“How do you see the energy transition in a broader economic context? Do we have the market design system in place to achieve net zero goals?”

Prof. Michael Pollitt [00:00:09]

The energy transition is about pricing the carbon externality, and that's about raising the price of carbon in the global economy in order to reduce the externality. So that is, you know, the fundamental economic problem that we need to deal with.

Question [00:00:27]

“Where do you see Europe, the US, Africa and Asia on the energy transition runway? What are some interdependencies?”

Prof. Michael Pollitt [00:00:34]

I think that Europe is clearly ahead in terms of making progress with the energy transition, both in terms of the setting of targets and getting those into legislation, but also in terms of policies being put in place that would actually deliver net zero.

Then I think other places are at various stages. I think the US is beginning to do things at the federal level, in addition to the things it's already been doing at the state level in some states, where essentially California and New York, New England have got European style energy and climate targets, and then other places, you know, can be brought along as part of the energy supply chain.

I think China remains a very hopeful location for the world, both in terms of delivering low carbon energy equipment, but also eventually implementing low carbon policies. 

Question [00:01:31]

“Do you think there are any key uncertainties that remain in the energy transition agenda and the move to net zero?”

Prof. Michael Pollitt [00:01:36]

We're getting to the point where energy transition is going to be expensive.

We've been doing the easy things so far, which are the decarbonisation of the power sector with wind and solar. Once we begin to move on to heating and transport, things get significantly more difficult.

I think transport, there are good signs in terms of battery technology in the emergence of electric vehicles, but you know, still that's posing problems in terms of supply chains and the delivery of the quantity of vehicles that we might need.

And in heating, we're only just beginning to grapple with the political costs of a heat transition, which are gonna create very different costs for individual households depending on which heating technology they've got the possibility to adopt.