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Decarbonize by adapting the economy. Joan Vila, March 2023

The debate on the decarbonisation of the economy has focused almost exclusively on technological change, especially renewable generation to replace fossil energy. It is true that this change alone solves part of the equation. But it’s an uphill road. You always have to start by saying that the best energy is the one you don’t need, negaenergy. Here you have to start, first by reducing consumption and then generating with renewable resources.

In this debate, a parameter greater in scope than fossil energy itself is often forgotten. The world extracts 106 billion tons of raw materials, whether fuel, vegetables, water, or minerals. Of this amount, only 23.7 billion tons are permanently fixed in the form of goods, some 67.4 billion tons are dispersed in the air, water and landfills, and only 9.3 billion tons are recycled. There you see the scope of the problem: humanity has become a horrific machine for dispersing resources.

We know that disruptive technology is going to help decarbonize. For example, electricity generation with coal or nuclear energy have an efficiency of 33%, generation with gas in combined cycle of 55% and hydro, wind and photovoltaic energy are considered with yields of 100% based on the fuel that does not exist. Only the change of electricity generation is a step of great magnitude. But technology has much more in store for us. For example, the electric car, with an energy efficiency of 75% compared to the combustion car, with an efficiency of 26%, or the heat pump that allows the change of a gas condensing boiler with an efficiency of 100% for a machine with an efficiency of 300 or 400%. Then we must think about artificial intelligence, which will automate many activities and achieve knowledge that will allow less energy use (although the computers behind are large consumers). Finally, we have the replacement of animal protein by vegetable protein and precision fermentation protein. This will free up agricultural land and water consumption.

The implementation of these technologies will theoretically allow consumption savings if the Jevons paradox is not reproduced again. William Stanley Jevons was an English economist who, in 1865, noticed that, as the steam engine improved its efficiency, more coal was consumed. This was because the cost of running the machine was getting lower, so it was used for longer hours and more machines were built. We have seen this paradox until today with the improvement of the performance of cars, airplanes and all machines. Improves performance and increases consumption. Therefore, the introduction of disruptive technologies must be accompanied by fiscal measures that curb the Jevons paradox.

What measures does Jevons need? To a greater extent they must be fiscal measures, which penalize the consumption of raw materials, for example the carbon tax, but the change must be deeper and reach all raw materials. Changing taxation by penalizing the extraction of raw materials has the effect of favoring their efficiency and recycling. In order not to punish the economy with excessive tax pressure, the revenues of this new taxation must be returned to the system, although another solution is the elimination of other taxes, such as VAT. There is no point in a tax levied on what the human mind is capable of creating, such as music, literature, cinema, organizational services, efficiency programs, engineering calculation… This change has begun to be seen timidly during the inflationary peak of energy in 2022, but it has been carried out in an improvised way, without an in-depth debate of the need for change. The price of CO₂ in the ETS market is a good approximation to the debate, although its evolution is too slow for the needs of the decarbonization project.

But where the debate is not taking place is in the field of behavioral changes. The economy has been developing to achieve a continuous increase in production, without seeing that, often, this was at the cost of decreasing the quality of products, obtaining a shorter useful life, forcing to buy and produce more. This has been compensated invisibly by the tertiarization of certain products that are sold by service. For example, a sheet is billed to hotels per night of service, a fact that drives the manufacturer to a higher quality to extend life. This sheet is washed in industrial washing machines that charge their service for washing, so that the manufacturer of the machine wants it to have the least number of breakdowns and maximum life. And the same scenario is done with detergent, which is charged for each wash, developing powder detergents, with lower logistics cost and with good automation in their use. This mechanism of changing sales from product to service, leads to an increase in quality and a decrease in resources.

The same example we are going to see with the autonomous fleet electric car. A car today has a use of about an hour a day, or much less. An autonomous fleet car can work up to ten hours a day or more, so the reduction of material needed is of an impressive magnitude, ceasing to own the car to use it as a service.

Behavioral changes, negaenergy, is going to be the biggest revolution that is going to make the transition. A new lifestyle appears that I call frugal, the end of the economy of ostentation, by which one wants to appear to have more than another, inducing that everyone wants to make the same path, until differentiation is no longer useful and a new phase must be made to distinguish oneself. It’s like the effect of a bleachers on a football field when a spectator gets up and forces those in the back to get up.

But the fact is that decarbonization will lead to a loss of production, therefore of work and will force us to rethink how work and income are distributed, how the minimum requirements to live are resolved (access to housing), how leisure is filled, how a person who changes work is trained again, how public budgets are reprogrammed, and how the three pillars of the welfare society are maintained: health, education and care for the elderly and the disadvantaged.

A revolution that is approaching slowly, with occasional noises, but silently.

Joan Vila

CEO of LC Paper

LC Paper is a Member of the Private Business and Climate Foundation.