Solar Power to the Rescue?

By Daniel K. Benjamin

If these advances continue,
solar energy will displace
fossil fuels to a growing extent
over the next fifty years.

Consider the irony: Many people believe that solar energy, trapped by human-generated greenhouse gases, is responsible for what could be catastrophic future increases in global temperatures. Yet according to recent research, it may be solar energy, harnessed by human-generated photovoltaic technology, which eradicates the problem before it becomes one.

In a just-published paper, economists Ujjayant Chakravorty, James Roumasset, and Kinping Tse suggest that solar energy could drastically curtail future use of fossil fuels, eliminating most of the potential for future global climate change.1 Solar energy has two features that may affect global climate change. First, human use of solar energy, e.g., by producing electricity via photovoltaic technology, generates no greenhouse gases and so will not elevate global temperatures. Second, ongoing technological change in solar energy technology has pushed prices down.

If these advances in solar technology--and the resulting price declines--continue in the future, solar energy will displace fossil fuels to a growing extent over the next fifty years. As it does so, the production of greenhouse gases will decline much more rapidly than current models predict. The result, according to these economists, is global temperatures that will peak lower and sooner and will be declining within 30-50 years, instead of rising for the next 300 years.

Most prior assessments of the likely future of the planet's temperature have not assumed technological improvements in energy technology. Such studies, including some that influenced the recent Kyoto Conference on Climate Change, have forecasted the eventual utilization of all of the world's coal deposits. Because coal is rich in carbon, these scenarios project atmospheric carbon loads rising from today's 7.5 billion tons to as much as 40 billion tons by the end of the next century. These numbers have been used to predict global temperatures a century from now that are 3 to 6 degrees centigrade higher than in 1860 (a commonly-used benchmark year).2

But as the authors of the Journal of Political Economy article note, technological progress has been driving down the cost of producing electricity from solar energy, enhancing its attractiveness relative to oil--and more importantly, relative to coal. If this progress continues at the same rate, the cost of electricity generated from solar power will decline from current levels of about 25 cents per kWh to a highly-competitive 4-6 cents per kWh within 30 years.

Even under a "pessimistic" scenario for technological progress, the authors forecast that solar energy costs will be competitive with fossil fuels by about the middle of the 21st century. Under either time path, instead of a world that converts from oil to coal, as so many fear, our children will witness one that converts almost directly from petroleum to solar power.

If these economists are correct, more than 90 percent of the world's coal reserves will never be used--and thus most of the hypothesized future global warming will never take place. Carbon loads will peak at 12-15 billion tons around the middle of the century, and global temperatures likely will go no higher than 1.5 to 2.3 degrees centigrade above baseline before beginning to decline after mid-century.

Taken at face value, the authors' predictions imply that global warming is strictly a short-run potential problem. It is of significance for the next hundred years, at most, and perhaps will be waning within fifty years. As they put it, "Our analysis shows a drastic decline in emissions around the middle of the next century under any reasonable estimate of technological development." Just as significantly, the much smaller temperature changes they predict suggest that any government policy intervention should be both modest and carefully considered, given the likely minor impacts of such modest warming.

Clearly, any research claiming to peer decades into the future must be viewed with caution, particularly because solar energy has been chasing fossil fuels for more than 25 years. Yet Chakravorty, Roumasset, and Tse offer a key insight that is missing from existing work on this issue: People respond to incentives. In this case, there are incentives to find alternatives to fossil fuels and to use those alternatives if the price is right. The implications of this insight will almost surely provoke a serious debate among scholars studying global climate change. If the conclusions of that debate look anything like these forecasts, younger readers of this column likely will be enjoying solar cooling in their sunset years.

NOTES
1. See Ujjayant Chakravorty, James Roumasset, and Kinping Tse, "Endogenous Substitution among Energy Resources and Global Warming," Journal of Political Economy, December 1997, pp. 1201-34.

2. Current temperatures are about 0.7 degrees centigrade above 1860 levels.


Daniel K. Benjamin is a PERC senior associate and professor of economics at Clemson University. His regular column, "Tangents-Where Research and Policy Meet," investigates policy implications of recent academic research. He can be reached at: wahoo@clemson.edu

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The effect of government policy changes on the private sector has been the unifying theme that ties together Daniel K. Benjamin's broad-scale research. He not only examines the outcomes of policy changes, but also the reasons behind the modifications.Taxes, unemployment, risk assessment, and drugs have been the focus of much of Benjamin's...
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