Environomics: How the Green Economy is Transforming Your World

Introduction

Economics and climate change are more closely linked than you might realise – and they have a greater impact on your life too. When you order your morning coffee, for example, do you like sugar with that? Well, it will cost you.

In 2024, sugar prices rose to their highest for well over a decade, driven by droughts in some of the world’s biggest exporting countries. These droughts were one of the consequences of the extreme heat seen in 2023, the hottest year on record, where global temperatures are estimated to have been more than 1.5 per cent above pre-industrial averages. Other effects of this heat were more sobering: over 11,000 lives lost in a flood in Libya; a record area of forests devastated by fires in Europe and Canada. Such events are occurring with increasing frequency.

Industrialisation and globalisation have brought us choice, lower prices and more affordable lifestyles, and have pulled millions out of poverty. But these forces have expanded so rapidly, particularly over the second half of the twentieth century, that they have had undesirable consequences too, not least driving our seemingly unquenchable thirst for fossil fuels. The sprawling concrete megacities and belching coal power stations in China, the massive mining operations in the Democratic Republic of the Congo or Brazil, the ships built to traverse the Pacific in days to serve our growing appetites – all of these come at an environmental cost. So too do the SUVs, gadgets and meat-heavy diets we’ve come to rely on. All of these typical features of our modern twenty-first-century lives have contributed towards those increasingly worrying climate ‘events’.

With every disaster, we hear fresh cries for more to be done to curb climate change, along with howls of despair that sufficient efforts aren’t being made. In late 2023, even as world leaders met in Dubai for COP 28 (Conference of the Parties, the annual United Nations Climate Change Conference) researchers were warning that global emissions from fossil fuels had reached an unprecedented high (and that’s before considering the planes needed to jet in nearly 100,000 delegates to that conference).

There was much talk there, and everywhere else, of what action we need to take to reduce our carbon emissions, tackle the amount of waste and pollution we create, clean up the plastics in our seas and save the biodiversity of our planet, while, at the same time, agonising over when – or whether – we’ll get there.

Many countries and organisations have adopted the target of becoming carbon neutral, reducing the amount of carbon dioxide their processes add to the atmosphere to virtually zero, or somehow balancing – in effect cancelling – that amount through carbon offsetting or carbon capture (more on those later). The Paris Agreement, adopted in 2015 by 193 countries plus the EU bloc, goes further. It vowed to pursue efforts to limit global temperature rises to below 1.5ºC, to restrict all greenhouse gas emissions – not just carbon emissions – to the same amount that can be absorbed naturally (commonly known as net zero), to set country-based emission-reduction targets and to help out poorer countries. But the agreement didn’t address how to do this. That is where economics comes in.

It’s impossible to understand how this journey can progress without an economic perspective, because nearly every issue that affects the environment comes down, in some way, to what someone, somewhere, is doing to make (or save) money, to make a living. Changes to the way people do business are propelled by economic need and so are completely intertwined with the way we live our lives. There are costs to manage if benefits are to be delivered – and unintended consequences to consider if we are to nurture economies and livelihoods.

And so green issues are revolutionising our economy. In every major industry we are seeing changes driven by efforts to be greener. This is a truly global story involving vast, complex supply chains, technological innovations, commercial interests, foreign policy, corporate investment. But it doesn’t just affect businesses and governments, it impacts all of us in the simplest, most fundamental aspects of our lives. How we power our homes, how we move about, the food we eat – all of it is changing. Economics isn’t just a load of dull men (or even women) in suits talking about statistics on the radio – it’s the very fabric of our lives, the physical world that we touch, taste, smell every day.

I wanted to bring that global green revolution to life in a way that makes sense to us all, that we can all relate to. So I’ve explored, chapter by chapter, our typical daily routines, from groping for the light switch and getting dressed to the daily commute and the buildings we inhabit, and how these everyday habits and actions are affected by the economic changes taking place. And, in turn, how our actions can also affect what is happening in those industries.

As I noted in my first book,The Almighty Dollar, it’s easy for us as individuals to feel powerless and at the mercy of overwhelming economic forces, driven by global powers, governments and major corporates. The same may feel true of environmental action too – and sometimes it is true; certain decisions are out of our control. But we can all play a part in influencing outcomes. Even simple things such as the toothpaste or shampoo we choose to buy can make a difference, while other decisions we make can influence companies and governments, nudging them to do the right thing.

And so, as we’ll see, change is being driven by numerous players. It’s changing consumer habits that made Vinted, the web-based marketplace set up by a woman in Lithuania to clear out her wardrobe, into a billion-dollar resale platform with over a hundred million users in fifteen years. Investor pressure and concerns about obsolescence amid a fast-changing environment have nudged the oil and gas majors into investing in renewables, and manufacturers and retailers to focus on circularity. States have played a role too, stepping in where the market won’t or to chivvy things along – with his 2022 Inflation Reduction Act, President Biden boasted of the ‘largest investment in clean energy and climate action ever’.

Real progress is being made. At COP 28, negotiators from all nations agreed for the first time on the need to ‘transition away from fossil fuels in energy systems’ – a major breakthrough. Some were frustrated by the lack of an explicit target for phasing them out, and loopholes in the final text. Bad news sells: journalists are fully aware that our audiences tend to have a ‘negativity bias’ and are more likely to focus on what’s going awry rather than what’s working out, which is possibly why there was more emphasis on that aspect than the positive steps, but they were made nonetheless. Also in 2023, the Inflation Reduction Act swung into full force, prompting similar action from other governments. A treaty to protect the oceans, forty years in the making, was agreed. The rate of deforestation in the Amazon slowed, after the Brazilian government vowed to phase out the practice by 2030.

There is of course much further to go. Many say the targets on the table are not enough. If we carry on as we are, some estimates suggest that we would need the equivalent resources of three Earths by 2050 to maintain today’s living standards. It’s easy to feel disheartened when reading about climate change and the dangers to our planet, especially given some of the recent global challenges. The last decade has not been one of business as usual, but rather ‘polycrisis’: the Covid-19 pandemic followed by wars that have destabilised global energy and food supply markets, and so wreaked havoc with financial well-being. It can be difficult to fathom how action on climate change finds a place in all this. But change often begets change, and some of the various crises have also prompted positive developments.

Covid-19 may have created billions of pieces of plastic waste from all the face masks and other protective gear needed but it also normalised remote working, meaning fewer commuter journeys, and prompted companies to move their supply chains closer to the place of production. The energy crisis may have caused some to double down on fossil fuel extraction in the short term, to keep the lights on, but it also encouraged energy conservation, and a greater focus on renewables to secure future energy supply. A cost-of-living crisis may have pushed some environmental measures down the priority list for both households and politicians – the UK government, for example, has pushed back the phasing out of sales of new petrol cars – but it also inspired a thriftier, make-do-and-mend mindset.

This book doesn’t pretend to have definitive answers to our challenges, but it strives to be a guide to how things are working, what’s motivating the various players and why it should matter to you. Governments are acting. Technology is advancing. Our long-formed habits are changing. Looking at what exactly is happening can inject a little optimism, as well as identifying the areas that still need work and where the challenges are. It also reveals what we can do as individuals and where we need to rely on policy, the profit motive and corporate conscience. Getting there may not be easy – and it will depend on everyone knowing the part they must play – but we are heading in the right direction.

As I started researching this book, I realised, simply looking around the room, that my perspective on the world was shifting. Every single thing that we use, that we encounter in our daily lives, requires some kind of energy, produces some kind of waste, and involves a long, complex list of materials and processes to make. The new green imperatives are aiming to change much of that, and so even the simplest items and routines in our lives can tell a bigger story: a fast-moving global story of change – and resistance to change. This book is a guide to understanding those shifting tides.

1

Switching on the Lights

The energy revolution taking place in our homes

As the alarm goes off, you roll over and blearily switch on the light. And so begins your energy usage for the day. Early bird or late riser, for most of us the meter starts running the moment our eyes flicker open in the morning. There’s the heating clicking on, the hot water for the shower, the kettle for that much-needed cup of coffee. All those little morning rituals that get your day going depend on energy. And that energy was probably produced in a huge power station, belching out fumes, because, in most developed countries, the majority of our homes are currently powered by fossil fuels. But maybe not for much longer.

Fossil fuels – coal, oil, gas – account for about 80 per cent of the world’s energy use, from electricity generation and home heating to transportation and the manufacture of steel and plastic. They are carbon-rich non-renewable resources: essentially a stored form of solar energy, created through pressure and temperature over many millions of years. Carbon is one of the key drivers of climate change and one of the main pollutants clogging up our atmosphere.

How much of it is down to the energy use of the average person in the street? A government survey in the UK in 2022 found that one in three people thought that the actions of large polluters should be tackled before individuals, and a similar proportion reckoned that changing their own behaviour would make little difference.

And yet, the same study found that households are responsible for over a quarter of greenhouse gas emissions. Energy usage is calculated in kilowatt hours (kWh): one kilowatt hour is equivalent to powering a 100W light bulb for ten hours. The average household in Britain is estimated to use around 15,000 kWh of energy a year on powering their home, most of which is accounted for by heating and hot water. This isn’t to let major corporations and governments off the hook, but that figure suggests that as individuals we can still make a difference.

It’s tricky, though, to see exactly where we can make changes; our modern lifestyle is energy hungry, so while as individuals we can be mindful of turning off lights and unplugging appliances, ultimately we do still need to heat our homes, see where we’re going, wash our clothes. We don’t have all that much say in where our power comes from. That’s down to energy companies and government policy. And, for now, both are heavily reliant on the use of fossil fuels.

The story of fossil fuels actually isn’t as straightforward as it looks. Although at first sight they might seem to be the supervillains in the climate change drama, for many years they have enabled us to live richer, longer and better lives. We’ve become addicted to them because they have been the drivers of our prosperity – superheroes without which the modern world could not exist. Over the last 200 years, global GDP has tracked energy use, and the more energy we’ve used, the wealthier and healthier we’ve become. Even after the crisis in global energy prices in 2022, weaning ourselves off them can feel like an impossible dream; none of us is prepared to switch off the lights, give up our televisions and go back to washing all our clothes by hand.

Yet energy transitions have happened before. Our relationship with fossil fuels has been relatively brief, given the span of human history. As our needs have increased over time, we’ve seen several shifts in fuels and energy sources, usually driven by scarcity, price and availability. And we’re in the midst of another change right now.

Prior to the Industrial Revolution, which began in the mid-eighteenth century, lumber, animals, wind and water provided most of the energy people needed for heat and transport. As populations grew, lumber became scarce, wind and water insufficient, and living closely with so many animals created a huge amount of waste and they became a source of pollution and disease.

These problems were solved by coal. Coal mining really took off in the Elizabethan Age in the UK but it took a few hundred years more for coal to become the linchpin of industrial progress and transportation. It came into its own with the rise of the steam engine, which could run on wood or coal. However, being three times as energy intensive as wood, weight for weight, and cheaper to boot, coal had the upper hand. By 1900, it was the main industrial fuel. The Industrial Revolution lifted millions out of poverty and set them on the road to rising living standards. Coal had a valuable role in the transformation of our lives.

But it is also the filthiest member of the fossil fuel family. Coal mining causes toxic run-off into waterways. The sulphur and nitrogen emitted when it is burned causes acid rain.* Coal power stations also account for a fifth of global greenhouse gas emissions. That makes coal twenty times as toxic across its life cycle as solar energy and about seventy times as toxic as wind power.

But even before concerns about its environmental impact went mainstream, another even more transformative source of power was emerging. Despite being millions of years in the making, crude oil has been part of our lives on a mass scale for less than 200 years. The first commercial well resulted from Edwin Drake’s Pennsylvania explorations in 1859. A plentiful supply allowed for rapid industrialisation and the rise of the USA as a global economic powerhouse. By the early 1900s, the second major energy transition was under way, driven literally by the popularity of the passenger car (see Chapters 4 and 5). By the 1960s oil had superseded coal as the world’s leading energy source, being twice as energy intensive as its rival. The expansion of the oil industry also led to an increased supply of natural gas, which is often found and extracted alongside oil, and has become a mainstay of many a nation’s energy source.

Concurrently, a domestic revolution was starting from the smallest but most illuminating of household objects – the electric light bulb. From the 1870s onwards, that drove households into the light, and sealed the popularity of electricity, which was typically generated from . . . fossil fuels.

So our rising living standards and all the comforts and convenience that the twentieth century brought to developed countries were entirely thanks to the plentiful supply of coal, oil and gas. Our dependence on these superheroes was such that governments around the world have subsidised extraction and development as a way of boosting their economies. Affordable coal, oil and gas enabled economic development and a more prosperous way of life.

But even as life got better for many, there was a heavy price to pay. By the start of the twentieth century, the side effects of rapid industrialisation were hard to ignore: acrid clouds of smoke hovered menacingly over cities, and bronchitis was a major source of fatalities in the UK. Across the USA, women who were yet to get the vote formed various smoke-abatement associations, in protest at the blighted air.

Muttered about in scientific circles for as long as a century before, the darker side of fossil fuels went prime time in 1988, when climate scientist James Hansen warned US Congress that global warming was primarily due to greenhouse gases built up in the atmosphere due to the burning of those sources of energy.

You’d think that might have spurred widespread change – but public awareness grew very slowly. In the early twentieth century, the discovery, exploration and distribution of oil and gas in the Middle East gave rise to the Seven Sisters: mega companies that controlled the market and the industry. They were the forebears of America’s Exxon and Chevron, Europe’s BP and Royal Dutch Shell. Today, the power has shifted to largely state-owned enterprises that represent the biggest oil producers: Saudi Aramco, Gazprom of Russia, Brazil’s Petrobras, for example. As the evidence on climate change has mounted, many of the biggest energy firms have adopted a business-as-usual strategy: keep on churning for as long as the wheels keep on turning.

And their efforts have gone further than that, initially denying their role in climate change and later lobbying heavily for continued government support on the basis that they are crucial to sustaining Western economies, world economic growth and jobs. In 2018, the big five – Shell, BP, Exxon, Chevron and ConocoPhillips – stood accused by activists of spending close to $200 million trying to influence or block climate change legislation, or just change the narrative. Some of those companies, including Exxon, contested the claim, saying that there were different ways of dealing with the risks of climate change, and that there was also a danger of equating policy debate and disagreement with climate disinformation. Behind the scenes, energy bosses have been known to argue that without the replacement infrastructure – the electric vehicles, the replacement of boilers with heat pumps – realistically customers will be reliant on fossil fuels for some time. And they, of course, are perfectly placed to serve that need. Moreover, some of their shareholders are likely to be unforgiving if companies miss a chance to beef up profits.

As our economies thunder on and our global population grows, appetite for energy is not diminishing, and some of the companies that supply it may be inclined to resist change. But while fossil fuels are still the primary source of our energy, thanks to the usual factors of price and availability – and thirst for profit – that’s no longer the only driving force for change. Increasingly there’s a growing desire to do better by the planet and its people. Which means that those natural market forces might need a helping hand.

While each country has a different ‘energy mix’ – Japan, for example, has been heavily reliant on fossil fuels, while France’s main power source is nuclear – the push towards renewables has been visible across the globe. Taking the UK as an example, in 1960, 90 per cent of the nation’s power was generated by coal. By 1990 it had fallen to 67 per cent. Renewables didn’t really get a look in until this point but then things started to change drastically. By 2022 coal accounted for just 1.5 per cent of the UK’s energy mix, while renewables had risen to 40 per cent.

That change was driven by price competition and the growing availability of alternatives, but also by the government helping the transition to less filthy alternatives. Of course, we didn’t jump straight from coal to renewables. What first allowed the country to move away from its coal dependence was gas, and that’s a common transition story around the world.

As far back as the mid-twentieth century, coal was being targeted in the UK by Clean Air Acts of 1956 and 1968 after smog became as much of a feature of London as the iconic doubledecker red bus. After the Second World War, a new variety of pipelines had made the delivery of natural gas to cities more viable – and therefore an accessible source for domestic heating.

While the UK is a gas producer, about half of its gas comes from abroad, in part due to a lack of storage and refining capacity. The key source of imports is from Norway, via pipeline, with some of the rest coming in a liquid form, for example from Qatar. One of the downsides of gas, though, is that supply is vulnerable and the price can skyrocket, as happened following the invasion of Ukraine, with Russia threatening