Energy transition: the quest for emissions-free energy
How we produce and use energy in a more sustainable way that is less destructive for the world around us is a pertinent topic today. The usual emphasis here is on switching sources of energy production to sources that do not involve CO2 emissions. But, as we argue, this energy transition will also involve changing the ways in which we distribute, store and consume energy. We identify greater electrification as one central theme for the consumption of energy, while emissions-free energy sources will remain center stage for energy production.
The future of the energy transition
The energy transition will continue to have multiple policy dimensions. Changing energy sources and consumption will continue to be encouraged by the “carrot” of policy subsidies as well as technological change reducing costs. But markets can also be used to provide a “stick” for reform, in conjunction with policy. Carbon pricing, carbon taxes and the development of voluntary carbon markets provide an obvious example of markets in action and where they can fall short.
The energy transition will require some compromises. Greater electrification, for example, will have many benefits but will also create new demands on our natural capital – for example, through a higher demand for mineral resources build electronic devices.
But it will also create many opportunities for improvement. For example, the decentralised nature of renewable power may add resilience to overall power systems and benefit local economics. Changing energy systems may also provide an opportunity to rebalance the global energy system, giving greater opportunities to the so-called Global South. The energy transition is not just a matter for the developed economies: the needs of emerging economies need urgently to be addressed too.
- The world needs to meet an expected increase in energy demand in the least destructive way possible. The bulk of greenhouse gas emissions come from energy.
- Increased electricity output from renewables, extending electrification into new sectors, and improved electricity distribution and storage systems are top priorities.
- Annual global investments in low-carbon power and sustainable transition strategies are expected to rise exponentially over the next decade.
- Public and commercial sector priorities will probably increasingly converge, helped by technological change. Change could help boost energy system resilience and give a stronger voice to the Global South
This is an adapted extract from a Deutsche Bank report. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
About the authors
Markus Müller is Chief Investment Officer ESG and Global Head of Investment Office Private Bank, Deutsche Bank AG. Markus is a member of Deutsche Bank's Group Sustainability Council.
Daniel Sacco works in the Chief Investment Office at Deutsche Bank, focusing on financial markets research and analysis and ESG/sustainability topics.
Sebastian Janker is Head of the Chief Investment Office Europe for Deutsche Bank Private Bank and is based in Frankfurt. In this role, he helps develop and present Deutsche Bank Private Bank’s house view on all asset classes and strategies. Additionally, he is in charge of communication around capital markets.