Last month, Elon Musk announced his vision for Tesla and a sustainable future, but was vague on specifics. On Wednesday, the company laid out in detail the math behind his so-called Master Plan 3 including what the economy at large might look like in a greener future and how much it would cost compared to the alternative.
Tesla’s report finds that an economy built on sustainable energy is not only feasible, it is economically preferable. The switch would require “less investment and less material extraction than continuing today’s unsustainable energy economy,” Tesla found. The investment needed to develop a sustainable economy—based on an electrical grid and manufacturing industry powered by renewable energy and electrified transportation—would be $10 trillion, but sticking to oil, coal, and natural gas would end up costing $14 trillion globally over the next two decades, according to the paper, a difference in price roughly equivalent to the annual GDP of Germany.
Elements of the sustainable economy that would require investment include factories for wind turbines, solar panels, and electric vehicles, recycling facilities for batteries, and mining and refining infrastructure for raw materials such as lithium and nickel.
The higher costs of a fossil fuel-dependent economy would stem from dwindling hydrocarbon supplies in the future that would make remaining reserves more expensive and lost efficiency. Tesla’s report pointed out how current technologies, such as gas furnaces and combustion car engines, can be highly inefficient, and only 36% of energy produced with current sources leads to useful work or heat in today’s economy. Meanwhile, moving to a sustainable economy, while expensive, presents “zero insurmountable resource challenges,” although the report noted that increasing mining, refining, and manufacturing infrastructure will require trillions in new investment.
Switching to a clean and sustainable economy would of course benefit Tesla as it would increase the availability of lithium—a key mineral in car batteries. A lithium shortage has been top of mind for Elon Musk for years, so much so that Tesla is building its own lithium refinery in Texas to have more control of the valuable metal’s supply chain. Tesla’s report finds that the required spending on mining and refining would make up almost $1.2 trillion of the sustainable economy’s $10 trillion price tag.
The shift to clean energy would also be in Tesla’s favor, as Musk has long promised that the company’s nationwide Supercharger network will soon be powered 100% by renewable energy, largely through solar panels and battery storage. Tesla’s report calls for $424 billion to be invested in solar panel factories, and around $2.2 trillion in electrochemical battery factories over the next 20 years, forming the cornerstone of the clean energy economy. Overall, this would lead to 30,000 gigawatts of renewable energy capacity, up from 3,372 GW today according to IRENA, an intergovernmental organization that promotes renewable energy adoption.
An efficient transition
Tesla’s report is not the only one warning about the cost of committing to fossil fuels long-term. An Oxford University study last year found that switching from fossil fuels to renewable energy by 2050 could save the global economy around $12 trillion, while warning that the narrative of the energy transition being too expensive to pursue was misleading.
“There is a pervasive misconception that switching to clean, green energy will be painful, costly and mean sacrifices for us all—but that’s just wrong,” Doyne Farmer, an economist and lead author on the Oxford study, said in a statement. “Completely replacing fossil fuels with clean energy by 2050 will save us trillions.”
Tesla’s report did not examine the potential future costs of climate change impacts or the expenses of adapting to climate change, but failure to mitigate climate change is also likely to be costly. In the U.S. alone, taxpayers could have to pay an extra $2 trillion by the end of this century to make up for a shrinking federal budget due to climate change, a White House report revealed last year.
Fossil fuels have long been considered reliable for generating energy, but other recent studies have found that its efficiency has declined along with the Earth’s available supply of hydrocarbons. A 2019 study published in Nature found that the true return on investment for fossil fuels is around 6:1, far lower than previous estimates of 30:1 returns and that puts fossil fuels’ cost-efficiency ratio roughly on par with renewables. The study also found that fossil fuels’ efficiency is set to decline further in the coming years as the cost of tapping scarcer supplies increases.
Other studies have put a higher price tag on an energy transition, although even then the benefits outweigh the costs of inaction. A Stanford University study published last year found that transitioning the entire global energy system to renewables by 2050 would cost $62 trillion, but even that eye-watering expense might be a bargain, as the researchers found that the benefits of the transition would amount to $11 trillion annually, meaning it would take only six years to repay the investment.
Other recent reports have worked to price in fossil fuels’ hidden costs to nature. Biodiversity and ecological functions, ranging from freshwater filtration to stable food systems, are worth as much as $150 trillion according to a 2021 BCG report, or around twice the value of annual global GDP. But man-made pressures and ecological decay are already costing the global economy $5 trillion a year, the report found.
While ecological functions are highly valuable to the global economy, markets have yet to fully account for them. Partha Dasgupta, the Cambridge University economist who recently received an elevated knighthood for his seminal 2021 economic review of biodiversity’s value, has argued that markets have so far failed to price in how ecological decay damages economic growth, and conservatively estimates that global nature-damaging subsidies amount to as much as $6 trillion a year.
This story was originally featured on Fortune.com
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