What effects will the roll-out and uptake of 5G among consumers and businesses have on the environment?
5G can enable significant environmental advances in the form of more intelligent, energy-efficient devices and machinery, as well as through reducing the need for business travel. But other impact is varied and depends to some extent on the choices made by governments, businesses and consumers, with a clear role for investors in engaging with companies to encourage environmentally sustainable practices.
Increased efficiency versus expanded use
The discussion around the environmental impact of 5G is more complex than many people think. At a high level, efficiency gains from the technology would benefit the environment. However, increased use of smart technology that 5G enables, 5G infrastructure, and the changing behaviour of workers and consumers also have effects.
A recent Nokia study showed that 5G is an impressive 90% more efficient in terms of megabits per second (mbps) than 4G. While other 5G equipment and network providers will have varying rates of efficiency, this is a strong indication that the higher data capacity of 5G will be positive for the environment.
However, the impact on the environment is not clear-cut, given the additional base stations that 5G requires — as it has a lower signal range than 4G — and the expected increase in data consumption by 5G users. In aggregate, 5G could lead to a significant overall increase in energy use.
Minimising the environmental impact of higher 5G energy demand
There are two broad categories of solutions to offset the potentially higher energy demands of 5G: more use of renewable energy and optimising network loads.
Energy consumption can account for 20% to 40% of network operating costs for 5G providers. Given the falling costs of renewable energy, rising costs of carbon-based energy, and increasing awareness around corporate sustainability, greater use of renewables is something that network operators are likely to be giving serious thought to.
Network load optimisation practices used to improve network performance involve greater use of smart construction and energy-efficient materials, virtualising core networks, and enhancing radio access network efficiency through modernising legacy equipment. With many legacy tele-communication networks experiencing stagnant revenue growth, opportunities to cut costs should be considered, particularl if there is an environmental benefit.
Changing lifestyles can lead to environmental gains
Outside of efficiency gains and energy use by 5G networks, there are second-order effects on the environment.
We have seen a revolution in communication over the past year, with video conferencing and working from home becoming mainstream. 5G can enhance remote working, particularly in areas that currently have patchy Internet coverage. 5G can also combine with edge computing to dramatically improve the quality of home working and collaboration with people across locations. This can be done by bringing data processing and delivery capabilities closer to data sources to reduce latency and bandwidth.
Additionally, 5G-enabled mini devices could connect with bigger screens, reducing the need for bulky laptops and increasing the range of sites where work can be done. With more people working from home, there will be less energy use in transport.
Combining 5G and smart technology
Entwined with the Internet of Things (IoT), 5G can mean less wastage when using appliances and devices. Smarter technology in devices, machinery and buildings will be more responsive to environmental cues, such as precipitation, temperature and light. Smart electricity meters installed in the Empire State Building, for example, have helped cut energy costs by 38%.
Saving energy means cutting greenhouse gas emissions. Ericsson predicts that information and communications technology (ICT) solutions like IoT — used across transportation, travel, buildings, electricity grids, services, manufacturing, agriculture and land use — can help cut global carbon emissions by up to 15% by 2030. The Ericsson USA 5G Smart Factory in Texas, which makes equipment for 5G networks, is a prime example of how 5G can enable Industry 4.0. The factory is 24% more energy-efficient than baseline and has a gold rating from the US Green Building Council.
5G and IoT will also enable electricity microgrids to be brought online when main grids fail or are unavailable. This will make it possible to better integrate intermittent renewable energy sources, such as wind and solar, into the grid.
More smartphone recycling
Investors need to be proactive and engage with companies in making the case for more environmentally sustainable 5G networks.
One way is through greater use of smartphone recycling. The UN estimated that 49.8 million tonnes of e-waste were generated globally in 2018, with smartphones contributing a significant proportion as consumers upgrade their mobile phones every two years on average. However, 80% of a smartphone is recyclable, and the concentration of minerals within it including copper, silver, gold and palladium cannot be found naturally, making it valuable for extraction.
Original equipment manufacturers (OEMs) should recycle as many 4G smartphone components as possible. However, some components can be potentially toxic. Over time, the use of biodegradable sensors can help lessen the impact of e-waste from phones and other electronic items. Greater use of network sharing — although this may not be financially desirable for all operators — can reduce the physical footprint from towers and base stations.
Second-order effects of 5G are key
While it is still an open debate whether and to what extent the greater use of data overwhelms the efficiency improvements of 5G communication, investors must consider second derivative effects. There is robust evidence suggesting that the changes 5G enables around our working habits and enterprise/industrial activity will be positive for the environment.
Investors have a clear role to play in terms of encouraging companies across the 5G value chain to pursue environmentally sustainable options, and in factoring firms’ environmental policies into their stock selection processes.
Jon Guinness is portfolio manager at Fidelity International
