TIME energy

To Beat Climate Change, Digitalize the Electrical World

Joe Kaeser, chief executive officer of Siemens AG, pauses during a news conference to announce a joint bid with Mitsubishi Heavy Industries Ltd. for Alstom SA, in Paris on June 17, 2014.
Arnaud Fevrier—Bloomberg/Getty Images Joe Kaeser, chief executive officer of Siemens AG

Kaeser is the CEO of Siemens

Electrifying the world’s infrastructure is the critical next step to de-carbonization. We must consider tactics to speed progress toward this goal

On April 12, 1870, a message from England clicked through on a telegraph machine almost seven thousand miles away in India—the first dispatch sent via a monumental telegraph line that Siemens helped to build from London, through Tehran, and all the way to Calcutta. This moment was among the first to mark a new, unprecedented era of intercontinental communication, trade, and cultural exchange that would come to be known as globalization. During the 146 years since that historic transmission, as the world has grown increasingly interconnected, so has Siemens, which now operates in nearly 200 countries.

Our footprint and longevity give our company a unique perspective on the challenges facing humanity in the 21st century. We therefore have a unique opportunity and platform to address the world’s single most urgent priority: climate change. We have proudly committed to cutting our global carbon footprint in half by 2020, and to becoming carbon neutral by 2030. This plan requires a substantial investment, but it will pay off quickly. In fact, we expect our $110 million investment to pay for itself in just five years and generate $20 million in annual savings thereafter. So, we have now set our sights on an even bolder quest: securing a carbon-free future while dramatically expanding access to electricity.

In the developed world, we are surrounded by electronics—from the computers on our desks, to the smart phones in our pockets, to the thermostats in our homes, to our data in the virtual cloud. For this reason, you might imagine that our critical infrastructure is digital, too. But in reality, much of the machinery of modern life is powered by combustion engines and old, analog systems that are carbon-intensive and inefficient. In fact, 40 percent of global carbon emissions result from the transportation sector, industrial processes, and the operation of buildings. Yes, we must replace the combustion engines in cars, trucks, buses, ships and airplanes with electric models. But electrifying the world’s commercial and industrial infrastructure is the critical next step to de-carbonization, and we must consider several tactics to speed progress toward this goal.

First and foremost, energy efficiency is a major lever for reducing CO2 emissions along all parts of the energy chain—from the production of resources all the way to final consumption. Fortunately, industry-led efforts to improve energy efficiency through the adoption of modern technology are well underway. We must double down on them.

Second, increased investment in renewable energy will provide abundant, clean, and increasingly cheaper electricity, which will further encourage electrification. Here, too, the world is making progress: In 2015, for the first time ever, more renewable capacity was built than conventional fossil generation.

Digitalization offers many new possibilities for optimizing the existing energy system and will also further catalyze electrification. Today, new efficiencies are being realized through the collection and analysis of big data and smart data, remote service platforms, low loss power transmission, decentralized energy systems, and intelligent energy distribution and storage technology. When scaled, these efforts will accelerate the efficient electrification of our existing infrastructure and bring down the cost of operation—potentially by orders of magnitude.

Finally, pricing of carbon emissions is one of the most important conditions for restructuring the energy system. In particular, carbon pricing derived by market forces, emissions standards, and intensified energy sector research and development would be a highly effective catalyst to achieve full electrification as quickly as possible.

With nearly 1.1 billion people living without electricity across the globe, the combined economic, social and environmental impact of this comprehensive approach would be profoundly positive. In the near term, fossil fuels will be required. But, over time, the share of renewable energy sources and storage will increase and their cost will be driven down even further. Along the way, access to electricity will increase, and countless jobs will be created worldwide, improving the lives of billions. Best of all, the expense of electrification will be more than covered, over time, by future energy cost savings.

While the transition from a combustion-powered society to electrification is already underway due to market forces alone, this transition will take generations without support. But we have every incentive—environmental, economic, and yes, moral—to speed the evolution. We also have the means. An increased push for energy efficiency, renewable energy technology, electric mobility along with the growing digitalization movement and a universal carbon pricing structure, would speed up the carbon-free future and the rise of a global middle class we desperately need. We can and must all do our part.

Read more articles from the TIME/Fortune Global Forum at the Vatican on the role of business in solving the world’s greatest problems.

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