The dogs bark, the caravan moves on. Beyond a superficial wobble in Europe, there has been no retreat from the post-fossil fuel transition across the world.
Bloomberg NEF (BNEF) estimates that capex investment in clean energy was $1.2 trillion in 2021, $1.5 trillion in 2022, and $1.8 trillion in 2023, despite a stiff rise in interest rates and a credit crunch for green start-ups. The total is now over three times as much as upstream capex on oil and gas.
You would scarcely know it from the political noise but the pace of decarbonisation accelerated last year, and has crossed a critical threshold.
The renewable energy roll-out is running near 800 gigawatts (GW) a year, greater than the 700 GW annual increase in power consumption.
The International Energy Agency and Rystad forecast that fossil fuel use in electricity generation will decline this year in absolute terms. From there it is a one-way street.
The West has woken up to the technology threat from China, pulling slightly ahead last year with combined capex spending of $718bn on clean tech and the mineral supply chain. Clean capex rose 38pc in Europe, reaching $341bn in the EU and to $74bn in the UK – more than France ($56bn), or Italy ($30bn), which might surprise some.
“It is simply a technology battle at this point. There are three key races in clean tech and China is winning all of them,” said Kingsmill Bond from the Rocky Mountain Institute.
“The US and Europe are massively behind but last year was the year they got back into the game. There is an exponential growth story taking place across the leading regions and sectors of the world,” he said.
Global capex on EVs, fuel-cell vehicles and charging infrastructure rose 36pc last year to $634bn. Spending on energy storage has risen fivefold in two years. There is now enough investment in the pipeline for solar, batteries and mine production to meet the world’s immediate CO2 target by 2030.
All those stories foretelling a shortage of critical minerals seemed to assume that miners sit on their hands and that technology is static. The greater likelihood is a glut.
There are already as many solar panel factories as could possibly be needed this decade. Hence the drastic deflation in solar prices. Panels are today being flogged in the Global South at $120 per kWp, tantamount to free power. Try selling them a new coal plant without a bribe.
One should not read much into Labour’s retreat from its £28bn green plan. The plan remains. The party is still committed to 100pc clean electricity by 2030, easier than it once seemed given the arrival of sodium-ion batteries promising to slash grid storage costs by two thirds – to $40 kWh by 2026, if we believe China’s CATL.
The UK will still need gas with carbon capture and some green hydrogen to back up wind power during the Dunkelflaute doldrums. But it is doable.
Rishi Sunak has hurt Britain’s reputation by breaking the cross-party consensus on climate policy. He has set back the City’s ambitions to be the world’s green finance hub. Tory recourse to anti-green pub-bore tropes as a “wedge issue” has been squalid.
But nothing substantive has changed. The five-year delay in the ban on petrol and diesel sales is irrelevant. Britain’s ZEV mandate is still there, requiring that 22pc of all cars sold must be zero emission this year, ratcheting up to 80pc by 2030.
Mr Sunak has increased the heat pump subsidy to £7,500. He has ended the de facto ban on onshore wind. He is still aiming for 50 GW of offshore wind and 95pc clean power by 2030.
Both parties know that it would be suicidal for Britain to shut itself out of the greatest economic growth story since the industrial revolution. They are covering their flanks until the election is over and fuel bill fury has subsided.
I wager that Labour’s plan will exceed £28bn annually as excess savings in China again flood the world with capital and cut borrowing costs to pre-Covid levels. That would create an extra £50bn “headroom” even under Britain’s flat-earth budget framework.
Within 18 months the picture will be different. By then the long-awaited “€20,000 EV” will be flooding Europe’s mass market, just in time to fend off an existential challenge from China’s BYD. Technology will have added 100 miles to driving range, even before solid state batteries change everything again in the late 2020s.
I am keeping my old banger for a bit longer until these models arrive, and I imagine that others are doing the same. Even so, EV sales in Europe did not collapse last year. They rose by 37pc in 2023, according to the car lobby ACEA. The drop in December was due to a 48pc crash in Germany after Berlin suddenly ended its subsidy after a ruling by the German constitutional court.
Europe has made a bad mistake by relying on green coercion. The US Inflation Reduction Act (IRA) uses the carrot of tax cuts to lure investment. It is “technology-neutral” so long as it is low-carbon. It does not pick winners and losers. The result has been spectacular.
Goldman Sachs estimates that it set off $282bn worth of clean-tech projects in the first year, and will ultimately unleash $3 trillion. Every week there is a new IRA catch.
Toyota has just announced a $1.3bn investment in an SUV plant in Kentucky, on top of $14bn already committed to its North Carolina plant.
MIT Technology Review has tracked how a single nickel mine in Minnesota – intended to break China’s stranglehold on nickel supply – may unleash $26bn of tax credits through the industrial chain.
Furthermore, the IRA pays for itself. The US Treasury estimates that it will generate tax revenues over time that are roughly equivalent to the cost.
This newsletter does not normally stray into climate science, but if you have read the latest research on the Gulf Stream published by Science Advances you may be relieved to know that the world is getting on with decarbonisation quite nicely.
It warns that the Atlantic meridional overturning circulation (AMOC) is closer to a tipping point than feared due to Greenland ice melt, which dilutes seawater salinity and weakens the gyres.
The collapse could come at any time, it could be nonlinear and sudden, and it could lower average temperatures in North European cities by 5 to 15 degrees – turning Britain into southern Alaska. It would set off a global chain reaction and destabilise rainforests.
It is not a remote tail risk. It is more likely than not. Worth a read.
This article is an extract from The Telegraph’s Economic Intelligence newsletter. Sign up here to get exclusive insight from two of the UK’s leading economic commentators – Ambrose Evans-Pritchard and Jeremy Warner – delivered direct to your inbox every Tuesday.