The US must adopt sustainable practices and a greener economy as the globe awakens to environmental issues. This protects the environment and creates jobs. Going green makes room for innovation and economic growth.
Switching to green energy sources like wind, solar, and hydropower can cut carbon emissions and significantly lessen the effects of climate change. Yet, this transition has its challenges. The energy industry must overcome infrastructural, technical, and regulatory obstacles to transition effectively. The industrial sector also faces the challenge of adapting to new technologies and processes while remaining competitive in the global market.
Drivers of the Green Transition
Market and innovation
The market demand and innovation for renewable energy products and sources have significantly increased recently. This new change impacts the economy as a whole. It affects supply and demand and other key indicators on the US economic calendar used to measure the country’s overall financial health, such as CPI, PPI, retail sales, industrial production, housing starts, the trade deficit, and consumer sentiment.
As more consumers begin to go green, there is a higher demand for green energy sources like solar and wind electricity. That’s partly the reason for the increasing demand for electric vehicles. Some buyers are beginning to look away from combustion engines and toward fully electric cars or hybrids, especially in Europe and China. No wonder every 1 in 7 car purchases worldwide is an electric vehicle.
Renewable energy costs have also dropped considerably due to technological advancements, economies of scale, and learning effects. Solar photovoltaic (PV) levelized cost of electricity (LCOE) has declined by 85% since 2010, whereas onshore wind LCOE has dropped by 13% between 2019 and 2020. The decline is a major driver in the green transition as it lowers retail and consumer costs. Renewable energy innovation has also created smart grids, energy storage, and green hydrogen.
Policy and Regulation
The US government has aggressive greenhouse gas emissions and renewable energy objectives. The Biden administration pledged to achieve net-zero emissions by 2050 and power sector decarbonization by 2035.
The government has enacted laws and incentives such as grants, tax credits, loans, and standards to promote further the growth and widespread adoption of renewable energy technology.
Social and Environmental Awareness
Over the last decade, public awareness and concern for social and environmental problems has increased. Surveys demonstrate that most Americans support the green transition and climate change action.
Businesses and investors are also aligning due to public pressure. More than 2,600 companies have signed on to the Science Based Targets initiative (SBTi) to synchronize their carbon reduction targets with the Paris Agreement.
The Barriers to the Green Transition
Policy and regulation uncertainty is a major barrier to the green transition. Policy and regulation frameworks for renewable energy are often complex, fragmented, and inconsistent across different levels of government and jurisdictions.
The policy and regulation changes can create risks and uncertainties for investors and developers of renewable energy projects. For example, the expiration or revision of tax credits or subsidies can affect the profitability and viability of renewable energy projects.
Social acceptance and equity issues are also important challenges, as the green transition can positively or negatively impact different stakeholders, such as consumers, workers, communities, and industries. It can create new jobs and opportunities for some groups but also displace or disrupt existing employment and livelihoods for others.
For example, the IEA estimates that the green transition will boost energy industry jobs, while about 5 million jobs could be lost by 2030 in the fossil fuel industry. The green transition must consider social justice and fairness and ensure a just transition.
