The Problem of Capital Turnover for 100% Clean Energy Goals

Scientists say we must reach zero emissions by 2050 to avoid locking in dangerous levels of climate change, but while global emissions have fallen due to decarbonisation of the electricity sector, emissions stubbornly hard to cut transport and buildings continue to grow.

Even with aggressive mandates for electric vehicles and building electrification, these two sectors are difficult to decarbonize due to slow capital turnover – the process by which old equipment, such as vehicles and appliances, are replaced with new equipment.

Capital turnover makes net zero emissions harder to achieve with each year we wait to start electrifying our vehicles and buildings. Electric vehicle adoption is accelerating, and new all-electric homes are cheaper than mixed homes, but Americans won’t replace our many hundreds of millions of existing gas-powered vehicles and fossil-fuel appliances for decades.

This creates a significant lag between setting all-electric sales targets and achieving the goal of all-electric fleets. And that leaves only a few opportunities to convert every vehicle or building, potentially locking in emissions above the 2050 net zero goal.

While the goals of a 100% clean energy economy are important, policymakers must align their policy agendas and benchmarks with the stubborn reality of capital stock turnover.

Only one or two replacement options

More than 60 countries, including Germany and the United Kingdom, have set net zero goals by 2050. States and cities, as well as businesses and utilities across the United States, have also committed to net zero emissions by 2050, and members of Congress are designing national climate legislation along the same net zero path.

Decarbonizing the Electricity Sector Lays the Foundation to Support Economy-Wide Net-Zero Emissions Goals Through Transportation and Building Electrification, and the U.S. Grid is Getting Cleaner Every Day: Data from the Energy Information Administration show that U.S. electricity was nearly 40% carbon-free in 2018. This trend must continue to ensure electrification is a viable path to reducing emissions from transportation and buildings.

These net zero commitments are imperative. But the slow turnover of capital stock means that meeting these 30-year goals requires immediately accelerating the market share of all-electric vehicles and construction components, as well as finding ways to speed up the turnover process. himself. Capital turnover and the average lifespan of vehicles and buildings (as well as building components) mean that we have one or two clean replacement opportunities by 2050.

Zero-emission transport by 2050

Transportation recently overtook electricity generation as the leading source of greenhouse gases in the United States, responsible for 29% of total emissions. So how do you achieve net zero transport emissions?

Decarbonizing road transport through electrification (and to a much lesser extent using hydrogen or other carbon-free fuels) is essential for light vehicles, buses and freight vehicles. Every vehicle should be replaced with a zero-emission version as it approaches its end of life since we only have one or two replacement opportunities by 2050.

There is a lag between sales targets of 100% and full fleet turnover, which is approximately equal to the average lifespan of the equipment (23 years in the case of buses), which means that Electric vehicle sales must accelerate rapidly to meet mid-century climate goals.

This same fundamental relationship between vehicle fleet composition exists for passenger, light freight, and medium and heavy freight vehicles.

Existing policies are already helping fleets convert from fossil fuels. California’s zero-emission vehicle mandate, now adopted in a dozen other states, requires that a certain percentage of each automaker’s sales be electric vehicle sales. As a result, EV sales in California represent approximately half of all EV sales in the United States, and all ZEV states combined represent approximately 60% of total EV sales in the United States.

But even this policy is not strict enough to meet the 2050 net-zero goals given the rate of capital turnover.

For example, by 2025 the ZEV mandate will likely require around 8% of vehicle sales to be electric. In addition, its “banking” provision weakens the policy by allowing manufacturers to count electric vehicle sales in future years if they have been too compliant or by allowing manufacturers to trade these additional credits with other manufacturers. . Likewise, its “pooling” provision allows ZEV states to exceed their goal of transferring additional credits to underperforming ZEV states (except California).

By comparison, California’s Innovative Clean Transit regulations align with social capital turnover considerations by requiring a full transition to zero-emission buses by 2040 – an especially important approach for other jurisdictions to take because we don’t only have a median one chance of replacing buses by 2050.

California is currently considering an Advanced Clean Trucks policy similar to the ZEV mandate but geared toward light, medium, and heavy-duty trucks. Unfortunately, the proposed sales targets are not aggressive enough given the relationship between sales and the fleet: 11% of sales from 2024 to 2030, with a peak of 22% in 2030 of sales in all truck categories.

Governments can lead by example and accelerate transport decarbonization by committing to converting their fleets as soon as possible to support mandates. Fortunately, some private fleets like Amazon’s are converting even without mandates, but policy requirements will be needed to successfully electrify the transportation industry.

Zero-emission buildings by 2050

Direct fuel use in buildings is responsible for 12% of total emissions in the United States. Achieving net zero emissions in buildings by 2050 requires new buildings to be zero emissions as soon as possible, but around two-thirds of the building area that exists today will still exist in 2050. emphasis on the decarbonization of existing buildings. replacing fossil fuel appliances with electric ones.

Capital stock turnover for building components offers only one or two replacement opportunities by 2050, so governments must incentivize or require customers to replace all fossil-fuel appliances with electric or zero-emission models from the next decade.

An average gas furnace lasts 18 years and will likely only be replaced once by 2050 if installed in a new building today. As such, it must be replaced (or originally installed) by a heat pump by 2030 at the latest. Most of the energy used in buildings is to power space and water heating. Reducing total energy consumption in buildings therefore helps achieve climate goals by freeing up grid capacity for electrification while reducing customer bills.

As with transportation, governments can lead by example by converting their buildings as soon as possible. Cities are already banning gas in new buildings, favoring or requiring electrification over mixed-use construction, creating “rebate taxes” to fund electrification projects, and taxing fuel oil.

States can accelerate the electrification of buildings through decarbonization goals containing intermediate goals, such as all-electric new construction by 2022. States must also update building codes to require new construction and high-efficiency, all-electric retrofits, similar to city-level policies. State regulators should take a skeptical stance on new natural gas infrastructure that is inconsistent with the goal of zero-carbon buildings by 2050, and examine targeted electrification pathways that begin to phase out infrastructure of gas without imposing undue stranded costs on customers.

Infrastructure inertia cannot prevent opportunities to decarbonize transport and buildings. As governments, utilities and corporations continue to make flagship climate commitments, considering capital turnover can help ensure the success of these commitments.

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Amanda Myers is a policy analyst at Energy Innovation, a policy research and consulting firm.

Sallie R. Loera