Confronting The Economic Naivete of Net Zero by 2050

Experts debate the costs and benefits of decarbonation at the MIT Free Speech Alliance's next Great Debate

The MIT Free Speech Alliance (MFSA) hosts another “Great Debate” on Nov. 14 when all-star teams of experts square off in Cambridge to debate whether decarbonization will be worth the cost. Heterodox Academy President John Tomasi will moderate. It's going to be another full house, so register now! MFSA Executive Committee member Steve Carhart shares his thoughts on the topic as a way to whet our appetites before the main course.

The idea of achieving net zero carbon emissions (reducing fossil fuel use and attendant carbon emissions to a level that can be offset by other means) by 2050 has captured the public imagination.  Following the 2015 Paris Agreement, which endeavored to reduce global temperature increases to 2.0 degrees C (and hopefully 1.5), the subsequent goal of achieving this through reaching net zero by 2050 became a political consensus among diplomats at the 2021 UN Glasgow conference.

Energy markets (with minor exceptions such as utility regulation) are among the most efficient in the world.  Changing energy use patterns -- particularly the composition of long-lived capital stocks such as power plants, refineries, furnaces, and vehicles —are not something presidents or legislatures, let alone diplomats, could simply vote into being.  They are the result of long trends of relative cost competition between technologies. Unfortunately for the politicians, renewable electric technologies are economically marginal, as are the companion consumer capital items such as electric cars and heat pumps. Rapid technology turnover cannot take place without some form of major socio-economic coercion.

This was confirmed in 2017 by the MIT IGSM* model, which calculated that reaching the 1.5 degree C objective by 2050 would require the imposition of cost of carbon emissions set initially at $130/ton (2023 $), increasing at 4 percent per year in real terms to provide sufficient economic incentives to accelerate the capital stock turnover.  This level of carbon fee would roughly double the retail prices of fossil fuels in real terms by mid-century. No political leadership has been willing to impose that degree of penalty on carbon emissions.

Massachusetts: A Case Study in Economic Naivete

Nonetheless, in 2021 Massachusetts passed a law requiring that the state reach net zero by 2050 and produced a plan to reach these goals. Massachusetts is as favorable a test case as one can imagine; our state’s energy use consists almost entirely of buildings and vehicles, and we have offshore wind.  Hard-to-decarbonize sectors such as agriculture, heavy industry, and long-haul transportation are minor contributors compared to other states.  Add that to a supportive population, and it should be easy; if we can’t get to net zero by 2050 in Massachusetts, we can’t get there anywhere.  Unfortunately, the actual policies consist primarily of subsidization of favored technologies, a very weak policy mix.

Broadly speaking, the plan was to electrify all buildings with heat pumps, of which residences are the biggest part; electrify all transportation, of which autos are the biggest part; and decarbonize all electric generation, with offshore wind playing the largest role.  Three years into this legal commitment, implementation is stalled on all fronts.  Electric vehicle sales have lagged due to high costs and lack of charging facilities; heat pump installations needed to electrify buildings are at a third of the required rate; and the single existing offshore wind project is inoperable due to faulty blades and developers withdrew from future planned projects due to high costs.   (These plans have since been rebid, but the new costs will not be revealed until after the election.)  I estimate consumption of fossil fuels to be growing between half and a full percent per year (ironically, the state does not track and report these data).  This compares with the eight percent per year reduction required to meet net zero by 2050.

Everyone is in favor of net zero if it is easy, cheap, and fun.  Unfortunately, reaching it by midcentury is hard, expensive, and inconvenient. 

The British found this out last fall when their Prime Minister scrapped large portions of their net zero plan which were about the require the middle class to prematurely replace boilers with electric heat, at their cost, among other things. Sizable portions of German industry, located in a country where net zero has been aggressively pursued, have recently closed or moved due to high energy costs for renewables, exacerbated by the loss of Russian natural gas. 

Closer to home, experts including prominent members of the MIT faculty will debate the topic: “Resolved: The total cost of global net-zero carbonization by the latter half of this century is well worth the projected global benefits” on November 14.  This discussion is long overdue!

*The Integrated Global Systems Model (IGSM) is MIT’s flagship human/earth system model developed continuously and peer-reviewed since the 1990’s.

Carhart is an MIT graduate whose professional career includes energy policy and investment management. He is a donor and alumnus participant at the MIT Center for Sustainability Science and Strategy, the center of MIT's economic/geophysical modeling. He serves on the MIT Free Speech Alliance Executive Committee and the Alumni Free Speech Alliance board.