The consultancy SystemIQ, working with University of Exeter, Simon Sharpe and the Bezos Earth Fund, has produced a report that looks at the positive tipping points that could accelerate the transition to a post-carbon future. The report is called The Breakthrough Effect: How to trigger a cascade of tipping points to accelerate the net zero transition.
It’s possible to see this as a piece of work that builds on SystemIQ’s earlier 2020 report, The Paris Effect, that looked at the rate at which post-carbon business models were becoming competitive in different sectors, which I wrote about in Just Two Things a couple of years ago.
Time’s moved on then since then, and the pathway to a manageable future keeps getting narrower. So now we need to think about systems characteristics such as tipping points and reinforcing loops as well, to accelerate the process.
Here’s their description of tipping points and reinforcing feedback loops:
After a tipping point is crossed, reinforcing feedback loops that drive self-accelerating progress are strengthened, and balancing feedback loops that resist change are weakened. Greater deployment of the solution brings improvements, prompting even more deployment. Learning by doing improves performance, economies of scale reduce costs, and the spread of new social norms increase acceptability. Producers, consumers, and investors move decisively towards the new solution.
As they argue, this isn’t special pleading. There are many examples where rapid technological transitions have transformed the economics of a market in 20-30 years—the transition from coal to gas, for example. The difference is that—given the crisis we currently face—we need to be a bit more deliberate about it.
As it happens, we’re already watching a couple of such tipping points in practice, in both the renewables sector and the electric vehicles markets.
The clear cost competitiveness of renewables has led to a large ramp up in deployment, with solar and wind accounting for (more than) 75% of total new capacity additions globally last year. Similarly, electric vehicle sales are scaling up rapidly in leading markets, even while still 2-4 years ahead of sticker price parity with internal combustion vehicles.
If you look back at forecasts of both price and new market share for these technologies, it’s fairly clear that analysts missed the ‘reinforcing loop’ part of the process. Typically their forecasts under-estimated share and over-estimated price, and of course, these two errors are connected to each other.
However, existing interests can delay these transformations to protect their market share or their margin, and we have seen plenty of that in the energy market. Even without this kind of interference, it can also take time to build out the infrastructure and systems and business models needed to make the new system work.
(I)n the power sector the transition can be slowed by obstacles in planning and permitting for renewable power and electricity network build-out, continued opposition from vested interests, legitimate concerns about the socio-economic consequences of the transition, and temporary constraints in the supply chains of critical minerals or components. These can be thought of as dampeners that can reduce the slope of the S-curve.
To students of Three Horizons, some of these will be familiar as examples of “H1 minus”, where incumbents use market power or regulatory influence to defend the revenues and margins for as long as possible.
In the report, they focus on three cascades, and I’ll focus on these here.
The biggest impact of such tipping points is where you can identify a high emitting sector which also has the prospect of early change. Sometimes there is one action that includes the majority of the potential for reducing emissions:
while reducing emissions in the shipping sector requires a range of actions, including efficiency improvements and battery-electric short-haul fleets, zero-carbon fuels – such as green ammonia – are expected to account for (around) 80% of the sector’s final energy demand in a fully decarbonised system.
Of course, the secret here is a systems secret. Tipping points have the biggest impact when they are connected into reinforcing loops which keep on amplifying positive feedback in the redesigned system. In particular, actions that have a repeated impact on reducing costs tend to be particularly effective as a market signal.
The three “tipping cascades” or “super-leverage points” they focus on are as follows:
- Mandating zero emissions vehicles
- Mandating green ammonia use in fertiliser production
- Redirecting public procurement to promote the uptake of alternative proteins
They argue that the effect of these three spills out across ten sectors that account for 70% of emissions. Specifically, a “super-leverage point” is defined here as
- “Being the highest-leverage action within their own sector, based on combining low cost or difficulty with large effect on the development or deployment of zero emission solutions;
- “Having an influence on at least one other major emitting sector that is: a) positive in direction, i.e. it supports the transition; b) high in impact; and c) reasonably high in probability.”
On zero emissions vehicles, by mandating the transition to zero emissions vehicles, governments aren’t spending their own money—instead they are sending a signal to the auto sector to shift investment even faster than they have started to.
This would also have the effect of accelerating battery development, which would have cascading effects into both the power sector (where batteries are critical) and also the heavy road transport sector, one of the transition’s problem children:
Cheaper and better performing batteries achieved through the scale-up of electric cars would increase the competitiveness of battery-electric trucks, bringing forward the point where they outcompete petrol or diesel trucks. There are also likely to be advances in electric drivetrain technology that are transferable from cars to trucks.
On green ammonia, meaning ammonia produced from green hydrogen, is on the list because it has a relatively low green premium, is easy to ship (again with only a small green premium) and fertiliser plants already consume ammonia, so there’s no end-user conversion costs:
The shift of fertiliser manufacturing to green ammonia may therefore be achievable with policies that are relatively low cost and low difficulty.
In policy terms this has to be done carefully, since overall fertiliser costs represent anything from 15-40% of food costs (this is US data) and food prices are already high.
But the transition win here is that
Progress in green ammonia use for fertilisers could scale up the supply chains of green hydrogen production and bring down the cost of green hydrogen for use in several other sectors. For example, implementing a 25% green ammonia blending mandate in fertiliser manufacturing could create demand for almost 100 GW of hydrogen electrolysers, which would reduce capital costs by (around) 70% given current learning rates. This could (help) to close the gap to cost parity or increase the economic viability of zero emission solutions in other sectors including steel production and shipping.
The report’s authors propose public procurement to promote the uptake of alternative proteins because it increases demand rapidly through the strategic use of the public sector, thereby creating economies of scale and reducing costs rapidly. There are some numbers here—generally this is a well-researched report—that suggest that public procurement accounts for 5-6% of the overall food market, which is enough to change the dynamics of the system:
By introducing large numbers of consumers to these products, public procurement can also enhance accessibility and help to shift social norms around meat consumption.
Again, as with the auto sector, this is a redirection of existing spend rather than an increase. The underlying technologies for alternative technologies are well-developed and well-understood.
The ‘cascade’ effects here reach into the agriculture sector, notably the high-emitting livestock sector, and also change the economics of land use towards protecting land and away from converting it.
Of course, in my recent reading I have an article from leading scientists that says transition is going to be tough to achieve because of the critical resource bottlenecks involved. Although I am generally sceptical of technology as a magic bullet for these things, scaling these markets is more likely to create different solutions to these resource issues, as we’re already seeing in battery research.
Looking at the report’s detailed analysis of where these zero carbon solutions become competitive, it’s also striking how much a carbon price of $100 a tonne changes the picture. For me, that’s the point that I’ll believe that policy-makers—and all that Davos crowd—are serious about dealing with climate change.
Thanks to Ian Christie for the tip. A version of this article was also published on my Just Two Things Newsletter.