Is This the Only Chance for Wind and Solar to Tackle Climate Change?

Investments in renewable energy could get a big boost if the world put the brakes on fossil fuel subsidies; but it's not a realistic option. Here's why.

Aug 24, 2014 at 8:44AM


Maybe all we need to combat climate change is a simple funding fix. Source: NextEra Energy. 

Renewable energy development used to be decried as an expensive burden on the global economy; but companies such as General Electric Company (NYSE:GE), SunPower Corporation (NASDAQ:SPWR), and NextEra Energy (NYSE:NEE) have proven that renewable energy can be quite profitable. While the world currently invests $200 billion in low-carbon energy each year, it is woefully short of the capital required to stave off a 2 degree Celsius rise in global temperatures that world governments have agreed to as the ceiling for manageable climate-change impacts. After that, planet Earth will become a little uncomfortable in economic and standard-of-living terms. 

If $200 billion in annual investments isn't enough, how much will it cost? David McCollum of the International Institute for Applied Systems Analysis recently plugged away at the numbers to find out. The bad news is that the world will need to invest roughly $1 trillion to $1.2 trillion each year on low-carbon energy, or about the same as total annual energy investments, to fill the gap. Yikes.

The good news is that shuffling the bulk of fossil fuel subsidies, totaling $544 billion in 2012, to renewable energy projects could potentially get us a heck of a lot closer to the target. Growing energy demand and increased commitments by world governments could do the rest. Is this the only chance wind and solar have to tackle climate change? Turns out, it may not be that realistic. 

Why it could work
The important thing to stress is that costs to develop renewable energy are really investments -- they have a return. Reminding governments of this fact could translate into substantial increases in renewable energy investments on the national level. For instance, General Electric has invested heavily and strategically in wind turbine technology for years. Today, it boasts the most widely deployed wind turbine in the 1MW-2 MW category, with more than 16,500 installed globally. Meanwhile, the company's 2MW-3 MW wind turbines have been chosen for two of the largest wind farms in the world.

Similarly, SunPower is among the companies that have invested heavily in solar energy, catalyzing declining cost profiles for both residential and utility-scale projects in the process. As Motley Fool solar specialist Travis Hoium recently explained, SunPower -- and solar energy at large -- is just beginning to realize its true potential. Arguments that renewable energy isn't profitable for utilities are also quickly dismissed by NextEra Energy, which brought in $15.1 million in revenue in 2013 while sporting a generation portfolio that generated 40.3% of its energy from wind assets, and another 32.1% from nuclear assets. The company has also walloped the S&P 500 in the past decade.

NEE Chart

NEE data by YCharts.

Unfortunately, that's the fairy-tale version of the global energy investment story. Reality is not as favorable. 

Why it will never work
The International Energy Agency estimates that fossil fuel subsidies totaled $544 billion in 2012, while more than half of that total consisted of oil subsidies. Tax breaks to Big Oil have gained some attention in the United States, but domestic subsidies only amount to about $2.4 billion per year, or 0.015% of American GDP. The majority of global oil subsidies come from oil producing nations in the Middle East. For instance, Saudi Arabia propped up oil companies with roughly $45 billion in 2011, or 8% of GDP. Iran wasn't far behind with $42 billion, also 8% of its GDP. Why would countries that depend so heavily on oil slash subsidies for it, especially considering many keep fuel prices low for citizens? 

A more realistic option
I think it's quite obvious that renewable energy alone won't save the world from climate change. That doesn't mean low-carbon technologies shouldn't be pursued, although it does create an opportunity for an olive branch of sorts. It's impossible to expect companies and countries to abandon fossil fuel energy infrastructure overnight, but we can invest in technologies, such as carbon dioxide manufacturing, which turn carbon emissions from a giant problem into a massive opportunity. It would also substantially lower the $1.2 trillion estimate for required low-carbon energy investments, and create substantial GDP growth across the globe. If the relatively overnight upstarts of wind and solar businesses at General Electric Company, SunPower, and NextEra Energy are any indication, then carbon dioxide manufacturing could become the new standard for chemical manufacturing -- and result in an emissions peak and eventual decline -- with a concerted and global effort. 

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolioCAPS pageprevious writing for The Motley Fool, or his work for SynBioBeta to keep up with developments in the synthetic biology industry.

The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers