[Choi Ji-woong's Energy War] How Carbon Reduction Will Dominate Future Industries

The Key to Energy Saving is Minimizing the Use of Resources

Exchanging Content in the Digital World Without Consuming Physical Resources
No Need for Cars and Machines to Consume Energy

Climate Change Becomes a Growing Issue Over Time
Carbon Reduction Technologies and Cultures Emerge One After Another

Asia Economy Newspaper publishes a monthly Thursday column titled 'Choi Ji-woong's Energy War,' diagnosing the energy industry undergoing a great transformation and examining the related changes in the international order. The author is an expert in the energy field who joined Korea National Oil Corporation in 2008, worked in the Europe and Africa Business Division and the Stockpile Business Division, and completed an MBA program in Oil and Gas at Coventry University in London in 2015. He authored the bestseller "How Oil Rules the World," which covers the modern history of oil. Last year, he gained readers' attention by serializing the column in this newspaper.

The oldest concern in economics is that human desires are infinite while resources are finite. Until the modern era, this problem could be somewhat resolved by increasing production. The consumption of oil and coal has increased annually over the past century without constraints from climate change. The first and second industrial revolutions established mass production systems through high-density energy sources such as coal and oil. It is undeniable that this drove out poverty and improved all aspects of life, including lifespan, health, happiness, and human rights, contributing to historical progress. However, going forward, the same utility must be created with scarce resources and limited energy. Even if resources remain, carbon issues will not allow mass production as in the past.

To solve the carbon problem, expanding low-carbon energy is necessary, but another pillar must be reducing energy consumption itself. In May, the International Energy Agency (IEA) presented a roadmap to achieve carbon neutrality by 2050 in a report titled ‘Net zero by 2050,’ advocating a sharp expansion of renewable energy as expected.

It also emphasized one more thing: reducing energy consumption. The total global energy consumption currently stands at 435 EJ (exajoules), which must be reduced by about 22% to 340 EJ by 2050. Europe’s largest energy company BP explained in its energy outlook report released in September 2020 that to achieve carbon neutrality by 2050, the global energy consumption growth rate must remain at ‘zero’ from 2030 onward. The Japanese government announced a draft long-term energy strategy in July 2021, stating it would increase the share of non-fossil energy while reducing electricity consumption by about 8%. In short, carbon reduction without energy consumption reduction is impossible.

What does it mean to reduce energy consumption? It is easy to understand it as reducing the use of passenger cars, turning off lights, watching less TV, and using washing machines and refrigerators less. Of course, these are energy-saving actions. However, these are relatively less important parts. Individuals directly consume energy in forms such as electricity, gasoline, and batteries. But indirect energy consumption through consuming products produced by various companies is much greater.

In Korea, household electricity accounted for only about 14.5% of total electricity consumption in 2020. In contrast, industrial electricity used in manufacturing and service industries accounted for about 77.2%. Industrial electricity is ultimately consumed to provide goods and services to consumers. Therefore, to save energy, it is more important not to frequently replace cars, TVs, and washing machines than to simply use them less. This is true not only from the perspective of saving energy but also in terms of conserving resources that make up numerous goods.

All products consume or transform energy before being provided to consumers. Therefore, the core of energy saving is minimizing the use of goods. In other words, the core of energy saving is pursuing dematerialization. At the center of this is digital technology and the recently spotlighted metaverse industry. Companies in this industry replace physical materials with virtual reality to minimize the use of real-world resources while aiming to provide utility beyond the physical.

▲Choi Ji-woong, Researcher at Korea National Oil Corporation Smart Data Center

Nowadays, people no longer use LPs or CDs to listen to music. They stream or download music files. Instead of paper books and newspapers, they use e-books and the internet. Smartphones have eliminated or reduced many tools such as alarm clocks, cameras, MP3 players, and electronic organizers. Basic human desires like attention and empathy are also fulfilled on social media. As the metaverse industry grows, exchanging content and emotions in the digital world without consuming physical resources will become commonplace. In that world, heavy cars and massive machines will not need to consume energy to operate.

Current currency, dominated by card payments and digital pay, has characteristics of virtual currency. Still, current currency can be materialized as banknotes or coins, so it has not completely abandoned the form of physical money. However, virtual currencies like Bitcoin have no physical form from the start and can only be owned as numbers in virtual wallets. While the future of virtual currencies cannot be predicted, their current form reflects the trend of dematerialization where physical forms disappear.

The leading U.S. companies today (Apple, Tesla, Alphabet, Facebook, Amazon, Netflix) are all industries creating new cultural ecosystems through a combination of imagination and advanced technology. They focus more on design, content creation, and advanced technology rather than manufacturing. Strategically, the U.S. will not lose its lead in telecommunications, artificial intelligence, and content sectors and will impose sanctions on challenges to these areas. Behind this is the change in energy and carbon.

Climate change will increasingly emerge as a major issue over time. As this happens, technologies and cultures that reduce energy use and carbon emissions will emerge one after another. On the other hand, it is important to consider that Korea has an industrial structure centered on manufacturing with high energy consumption. Therefore, the impact of energy and environmental changes on the industrial sector will inevitably be greater. Efforts are needed to prevent climate change and carbon reduction issues from becoming shocks to the industry.

Countries like Korea, which rely almost entirely on energy imports, need to pay more attention to energy security during this transition period. While industrial changes occur over a long period, energy issues can cause significant shocks in a short time.