A simpler, more useful way to tax carbon

Though this story ran in August 2020, we believe it’s worth reading, in part because Noah Kaufman has joined the Biden administration to work on climate economics. To see the two charts mentioned in the text, go to the URL listed at the end of this story.

A new proposal for how carbon taxes can play well with other policies.

By David Roberts, Vox, August 17, 2020

For most of the 21st century, putting a price on carbon dioxide emissions (either a carbon tax or a cap-and-trade system) has been seen as the serious person’s climate-change policy, preferred by economists, claimed to have bipartisan appeal, and backed relentlessly by tribunes of Beltway conventional wisdom like the Washington Post editorial board.

In the past few years, though, carbon pricing has fallen out of favor with activists. These days, the left has aligned around standards, investments, and justice: sector-specific emissions standards, large-scale public spending on low-carbon infrastructure, and an overarching focus on the most vulnerable and hardest-hit communities.

Nonetheless, it would be wrong to say that the bulk of climate opinion has turned against carbon pricing. Relatively few people think it’s a bad or entirely useless policy. They just see it as one tool in the policy toolbox, a complement to, not a replacement for, the many other policy tools available. Climate campaigners would prefer a carbon price with more modest aspirations, designed as part of a policy portfolio.

Academia has heard this call and, lo, it hath delivered.

The latest issue of the journal Nature Climate Change contains a study that attempts to sketch out a new approach to pricing carbon, one that does not suffer from the arrogance and overreach of previous attempts. (The authors are Noah Kaufman and Peter Marsters of Columbia University’s Center on Global Energy Policy, Wojciech Krawczyk and Haewon McJeon of the University of Maryland, and Alexander R. Barron of Smith College — I’ll just call it the Kaufman paper.)

Rather than the conventional method of determining a carbon price, which involves wildly uncertain far-future climate projections from scientists and a whole range of social value judgments from economists, they advocate for a more modest approach, with prices tied to short-term goals and arrived at through democratic deliberation. It’s a refreshingly practical approach, a way to help policymakers rather than dictating to them.

Let’s look at the details. I’ll start with the big flaw of carbon pricing to date — the problem the authors are trying to solve — and then take a look at how they propose to solve it.

Cap-and-trade systems (which cap emissions and create tradable emissions credits) have largely lost their cachet. California’s system is faltering; the Northeast’s Regional Greenhouse Gas Initiative is still running smoothly, but its effects are modest. Policymakers and economists have come to fear that the markets cap-and-trade creates are subject to manipulation and that they can’t ratchet toward zero emissions fast enough.

And so, what carbon-pricing action there is these days is around carbon taxes. (There are several carbon-tax proposals floating around Congress.)

Traditionally, the more enthusiastic carbon tax advocates have leaned on two flawed assumptions. The first is that there is an “optimal” price for carbon, which perfectly captures the balance between the costs of climate damages and the costs of decarbonizing. The second is that, once that price is determined, a tax on carbon is the “first best” and only necessary policy; other carbon-reduction policies will just distort the perfect market balance struck by the price.

The “optimal” carbon price is known in the biz as the “social cost of carbon” (SCC). The pretense of the social cost of carbon is that economists will add up all the projected damages of climate change to determine the all-in marginal cost of an additional ton of emissions. The tax on carbon will be set at that amount, which means we will purchase exactly as much climate mitigation as is “worth it.”

However, economists cooking up an optimal carbon price and presenting it to policymakers as a fait accompli fails to meet the public’s needs in three big ways.

First, determining climate damages is a wildly complex undertaking. It involves models built on a whole panoply of assumptions and inputs, many of which, the Kaufman paper says, are “inherently uncertain, such as the appropriate discount rates, risk aversion levels, issues around inequality, and attempts to assign monetary values to non-economic climate damages.”

Because of the complexity and uncertainties, the range of values produced by economists for the social cost range widely. “Meta-analyses find recent SCC estimates that range from under US$0 per ton of CO2 to over US$2,000 per ton,” the paper writes. Even if the outliers are excluded, estimates still range by hundreds of dollars. That doesn’t give policymakers much to go on.

Second, all of those uncertain variables — equity, the value of future generations, the value of other species — are buried in models, where they are effectively invisible to policymakers. Assigning value to these variables involves social and ethical decisions, but those decisions are being made by economists rather than through democratic deliberation. Policymakers have no real way of knowing what kinds of considerations produce what kinds of prices.

And third, the values for the social cost of carbon spit out by models have no connection to the policy goals they are meant to serve. They are not designed to achieve particular ends and their effects are uncertain, which, again, isn’t very helpful for policymakers.

The social cost produced by this contentious and values-laden process is meant to capture all the damage done by carbon emissions, meaning it is designed to be the principle, even only, carbon-reduction policy. But that assumes that unpriced carbon is the only market distortion that needs addressing, which flies in the face of real-world experience. The best economic and political theory now suggests that a portfolio approach to climate change, a broad package of policies, has the best chances of success.

But a carbon tax designed around the social costs is designed to be totalizing — it offers no guidance for how to craft a carbon price meant to complement other policies.

Kaufman and his co-authors propose an alternative design framework for a carbon tax: a near-term to net zero (NT2NZ) approach.

In a nutshell, rather than asking what the optimal carbon price is in some econo-metaphysical sense, the approach begins by asking: Given other policies in place and a reasonable set of assumptions, what price on carbon is required to drive emissions to net zero on schedule?

This approach has a number of advantages. It doesn’t require any complex calculations about the damages of climate change decades hence, so the biggest uncertainties are taken off the table and it can produce much more precise, actionable price estimates. It puts values-based decisions about social and ethical trade-offs in the hands of policymakers rather than economists. And it is reverse-engineered from specific policy goals, so it doesn’t require any guessing about its effects. In all these ways, it is much more tangibly useful to policymakers.

To see how these advantages play out, let’s look at the four steps the authors lay out for designing a near-term to net-zero carbon tax.

1) Pick a date to hit net zero

The climate situation is simple: either the world reaches net-zero carbon emissions or global temperatures keep rising forever. Every nation must reach net zero; the only choice is how fast. Different countries will move at different speeds depending on their individual circumstances, level of economic development, and risk valuations. These decisions should be made by policymakers, out in the open.

2) Craft an emissions pathway to the net-zero target

As the Kaufman paper notes, “an infinite number of pathways are conceivable between current emissions levels and a future net-zero target.” Some pathways emphasize near-term reductions. Others emphasize R&D aimed at larger reductions later. Some rely on electrification, some include biofuels, some include nuclear power, some include negative emissions. Some are “straight line” reductions, others show a peak and then a decline.

Again, decisions about the appropriate pathway should be made by policymakers, based on national circumstances and values.

3) Determine the carbon price consistent with the emissions pathway in the near term

Energy-economic models can be used to estimate a carbon price that will help meet the desired target. Unlike the models that estimate SCC, energy-economic models can integrate the effects of multiple policies, so they can show a carbon tax how to be a team player.

The models and their projections are built on assumptions about the future trajectory of energy technologies, consumer behavior, and policy. Those things are more difficult to predict the farther out in the future, so these kinds of models are generally most useful when planning for the short term, the next decade or so. Beyond that, the assumptions become educated guesses.

So Kaufman et. al recommend that the models be used to determine near-term carbon prices rather than to guess what prices might need to be in 2050. “Focusing on the near term,” they say, “means that CO2 price estimates should not be unduly influenced by assumptions about the highly uncertain long-term evolution of technologies and behavior.”

In short, they urge that plans be made based on what we can see immediately ahead of us, not hopes for technological miracles decades out.

4) Periodically repeat steps 1-3

Knowledge in the fields of climate, energy, and technology evolves rapidly; policymakers should periodically set new goals and craft new pathways based on the latest science and democratic opinion.

There are a variety of ways to do this kind of “adaptive management.” Carbon prices could be adjusted automatically based on predetermined metrics — boosted if interim emission targets are not being met, or lowered if energy prices rise too high. Or prices could be adjusted every five years through an inclusive stakeholder process.

“Pairing a long-term emissions target with a set of iterative near-term policies is not novel,” the paper says. “The United Kingdom, for example, has adopted a national target of net-zero GHG emissions by 2050 and sets five-year carbon budgets to act as stepping-stones.” This approach fits well with the Paris climate agreement, which requires countries to submit new nationally determined contributions (NDCs, or commitments to reduce greenhouse gases) every five years.

To illustrate, Kaufman et. al determine near-term to net-zero carbon prices for the US that would yield straight-line emission reductions to a series of net-zero targets.

The chart below tells the tale. On the left, you can see the emission pathways to net-zero in 2040, 2050, and 2060 respectively. On the right, you can see the carbon prices necessary to reach those targets: $32, $52, and $93 per metric ton in 2025, with prices almost double that in 2030.

The black bar lines on the right-hand chart represent the range of carbon tax proposals currently before Congress, revealing that the near-term to net-zero prices are roughly within the range of what lawmakers are discussing.

As the colored bars on the right show, each estimate is actually a fairly wide range. That has to do with the sensitivity of models to a variety of assumptions, from the cost of various energy sources to the rate of innovation to the success of complementary policies. If any of those variables unfold differently than Kaufman et al. have projected, then the carbon price estimates would change accordingly.

The chart below shows how much changes in these variables affect the final price estimates. As you can see, a great deal depends on the price of oil and the success of other policies, both of which are extremely difficult to predict.

Setting near-term to net-zero carbon prices is not easy. It still requires tons of judgment calls about future developments. But at least this approach puts those judgment calls on the table where policymakers can see them.

The near-term to net-zero model has a great deal to recommend it over the conventional social cost of carbon method. It is a more modest approach to carbon pricing, more iterative, cooperative, transparent, and democratic. It is much more concretely helpful to policymakers than the endless cosmic quest to determine a precise social cost.

In a sense, however, its strengths are also its vulnerabilities. All those value-laden decisions previously made by economists in spreadsheets would be open to public dispute and manipulation. Every time policymakers revisited the tax, it would be a chance for vested interests to make mischief and complicate it with exemptions and conditions.

Basically, the near-term to net-zero approach exposes carbon pricing directly to democracy. Whether you think that’s a good idea or not depends on your assessment of the health of the world’s big democracies. There is certainly a school of thought that says complex decisions like this should be made by experts — something like California’s model, where the state legislature sets broad targets and direction and the Air Resources Board carries them out.

But if the world is truly to reach net zero, all the world’s polities will eventually have to buy into the effort. It can’t be done successfully if driven purely from the top down. When polities and policymakers are ready, they will find a carbon price a helpful tool, and the modest approach is a helpful way of crafting one.

https://www.vox.com/energy-and-environment/2020/8/17/21370732/carbon-tax-simple-useful-nt2nz

Senators float a price on methane to curb U.S. oil, gas emissions

By Valerie Volcovici, Reuters, March 9, 2021

WASHINGTON - Three Democratic U.S. senators on Tuesday floated a bill that would take a new approach to curbing emissions from methane from oil and gas production - putting a price on it.

Senators Sheldon Whitehouse, Cory Booker and Brian Schatz introduced the Methane Emissions Reduction Act, which directs the Department of Treasury to assess a fee on the potent greenhouse gas beginning in 2023 - a move they say could end those emissions, help achieve climate change targets and improve air quality in communities near oil and gas facilities.

The bill also calls on Treasury to work with the Environmental Protection Agency and the National Oceanic and Atmospheric Administration to develop a program to monitor and measure methane emissions from each major oil producing basin.

“This bill will hold oil and gas companies financially responsible for their methane pollution and make methane emissions from fossil fuel production cost prohibitive, steps that will go a long way in the fight against climate change and to protect air quality in local communities,” Booker said.

National Climate Adviser Gina McCarthy said the Biden administration is working to propose new regulations here to curb methane emissions on federal and private land by September, replacing and strengthening regulations that the Trump administration had revoked.

Special Climate Envoy John Kerry has said the U.S. will work to align methane regulation with other countries here, such as Canada.

The fee the bill envisions would be assessed on a basin-by-basin basis and cover all companies that produce, gather, process, or transmit oil or natural gas, the senators said, and would be based on a formula factoring in the company’s gas production and methane rate.

Companies that already voluntarily reduce methane will be able to opt out of the fee by demonstrating their emissions intensity is below the average of the operating basin.

Funds raised from the fee go into the National Coastal Resilience Fund, a program administered by the National Fish and Wildlife Foundation and NOAA to prepare communities for climate change.

https://www.reuters.com/article/us-usa-climate-methane-idUSKBN2B12O4?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosgenerate&stream=top

Making the Concrete and Steel We Need Doesn’t Have to Bake the Planet

There are cleaner ways to produce the building blocks of the nation.

Op-ed by Rebecca Dell, The New York Times, March 4, 2021

You’ve probably spent a lot of time over the past year looking out the window while staying clear of the pandemic. If you’re a city dweller like me, no doubt you see mostly concrete, steel and maybe sky.

Roads and sidewalks, apartments and office buildings, overpasses and embankments, cars and buses, streetlights and even statues — they’re all made of concrete and steel. And there’s even more of it out of sight, in sewer mains, electricity transmission lines, foundations, ducts and girders.

It’s the stuff of modern life, and we use it in astonishing quantities. Last year, around the world, nearly two billion tons of steel was produced — more than 500 pounds for every person on earth. And at least 30 billion tons of concrete, or nearly 9,000 pounds for each of us. The scale can be hard to believe, until you look at a runway or a suspension bridge and contemplate what was required to build it.

But all the comfort, security and convenience provided by things made of steel and concrete comes at a cost. Making steel and cement — the main ingredient in concrete — generates about 15 percent of all global emissions of carbon dioxide, the gas most responsible for the climate crisis. In the United States, industrial sources like steel mills and cement kilns are also the leading source of some of the most damaging types of air pollution. We can’t solve climate or pollution problems if we don’t clean up these industries.

This is particularly urgent. In the coming years and decades, the United States will need a lot more steel and concrete. Roads are crumbling, mass transit is unavailable, many communities still don’t have access to high-speed internet, drinking water is contaminated, and a nasty winter storm left millions of Texans without power. Climate change is only going to increase the need for infrastructure, from wind turbines to flood control systems.

Last month, in an Oval Office meeting to discuss infrastructure and workers’ rights with the leaders of major unions, President Biden noted that the United States ranks “like 38th in the world in terms of infrastructure, everything from canals to highways to airports.” On Wednesday, the American Society of Civil Engineers gave American infrastructure a grade of C-, warning of “significant deficiencies.”

Both political parties want to turn that around.

But a single major infrastructure investment from Congress could increase U.S. carbon dioxide emissions by 200 million tons, or almost 4 percent of national annual emissions. For comparison, in the decade before 2019, the United States managed to decrease annual emissions by only some 220 million tons. We can’t afford to build in a way that emits huge amounts of climate-changing gases, adding to the climate problem at the same time we’re trying to fix it.

Fortunately, we don’t have to. Most infrastructure is paid for with tax dollars, so the public can insist that we build it in a cleaner way. This is the idea behind the Buy Clean campaign, an effort by a growing number of governments and corporations to change the way products are made by demanding low-carbon production and supply chains for what they purchase. This will hardly affect the cost to taxpayers, because steel and cement are a very small portion of the total cost of projects. For example, the eastern span of the bridge between San Francisco and Oakland, Calif., that was finished in 2013 cost California taxpayers more than $6 billion, but less than $25 million of that — less than one half of 1 percent of the cost — was spent on cement.

States are starting to experiment with this approach. California has a policy that sets a maximum level of greenhouse gas emissions per unit of material for some building materials. Lawmakers in New York and New Jersey are considering a plan that would award a credit to contractors for public construction projects that use cement and concrete produced with low greenhouse gas emissions.

There are things we can do to reduce emissions immediately. Concrete mixes are available that are just as strong but have less of the ingredients that emit the most carbon dioxide. Multiple studies have found that this could reduce carbon dioxide emissions by 20 percent or more. These recipes are already in wide use in Europe and elsewhere. We could use electricity from renewable sources to make recycled steel, like a steel mill in Colorado, to reduce emissions from steel production by a similar amount.

Those 20 percent reductions are very valuable and we should get moving on them right away, but they’re not going to get us to the long-term climate goal of net-zero greenhouse gas emissions. That’s why the country needs to make serious investments in the many new ideas for making steel and concrete with zero emissions, to create incentives to buy them and to invest in the workers and communities that produce them.

Meeting the nation’s climate goals doesn’t have to be a burden on American manufacturing — it can make our products and technology more competitive around the world. Smart climate standards can create new manufacturing and construction jobs and with them new ladders to the middle class.

Infrastructure investment is one of the few things both political parties agree on. But how we build affects how we breathe and what kind of climate we have to live in. Most people don’t notice the steel and concrete around them, and they don’t see how it’s changing the climate. We need to recognize the problem and then recognize our power to fix it.

Dr. Dell is the director the industry program at the ClimateWorks Foundation, which works with philanthropies to slow climate change. She worked at the Department of Energy in the Obama administration.

https://www.nytimes.com/2021/03/04/opinion/climate-change-infrastructure.html?referringSource=articleShare

Oil Trade Group Considers Endorsing Carbon Pricing

Day by day, the business community is coming around. The Business Roundtable, the Chamber of Commerce, and now even API recognize that climate action is inevitable and pricing is the most efficient approach.

Draft American Petroleum Institute statement says carbon pricing would help meet Paris accord

By Ted Mann & Timothy Puko, The Wall Street Journal, March 1, 2021

WASHINGTON—The oil industry’s top lobbying group is preparing to endorse setting a price on carbon emissions in what would be the strongest signal yet that oil and gas producers are ready to accept government efforts to confront climate change.

The American Petroleum Institute, one of the most powerful trade associations in Washington, is poised to embrace putting a price on carbon emissions as a policy that would “lead to the most economic paths to achieve the ambitions of the Paris Agreement,” according to a draft statement reviewed by The Wall Street Journal.

“API supports economy-wide carbon pricing as the primary government climate policy instrument to reduce CO2 emissions while helping keep energy affordable, instead of mandates or prescriptive regulatory action,” the draft statement says.

API’s executive committee was slated to discuss the proposed statement this week. In a statement to the Journal, API’s senior vice president of communications, Megan Bloomgren, said the group’s efforts “are focused on supporting a new U.S. contribution to the global Paris agreement.”

Carbon pricing aims to discourage the production of harmful greenhouse gases by setting a price on emissions. The API draft statement would endorse the concept in principle, without backing a specific pricing scheme such as a carbon tax.

An endorsement of carbon pricing by the oil industry’s most important trade group would underscore the changing politics of climate change, as major business groups acknowledge the dangers posed by greenhouse gases and adjust to a new reality in Washington. Another major business group, the Business Roundtable, endorsed carbon pricing last year.

President Biden campaigned on treating climate change as a crisis, and since he ascended to power with Democrats controlling Congress, too, several major trade groups have announced support for new climate initiatives.

API was one of the fiercest opponents just more than a decade ago when Congress last considered major legislation on the issue, a plan to have emitters pay and trade for their contributions to climate change. Now it is just the latest of several to support similar plans to put a price on or tax emissions, following an announcement from the U.S. Chamber of Commerce in January.

The institute’s draft statement stops short of explicitly endorsing a tax on carbon dioxide emissions or other specific pricing framework, and stops short of the language of environmental activists who argue the world must transition away from fossil fuel power sources altogether.

But it does continue a reversal that has accelerated since Mr. Biden’s victory. In recent weeks, API has backtracked on past opposition to direct federal regulation of the oil-and-gas industry’s emissions. And it is emphasizing that the industry can play a role in helping the world address climate change. That has included laying groundwork publicly to support some form of price on carbon emissions.

In its annual State of American Energy report from January, it listed “market based government policies” to reduce emissions across the economy as a policy that would support progress. The Washington Examiner reported it was the first time this report included such language.

“The risks of climate change are real,” API’s annual report said. “Market-based policies can foster meaningful emissions reductions across the economy at the lowest societal cost. An example can be carbon pricing—balancing reducing GHGs with flexibility and pacing to keep energy affordable.”

Internally, many API members staunchly oppose endorsing a carbon tax or imposing standards for the use of renewable energy, according to one person familiar with the internal discussions who described them as “heated.” The organization had similar internal conflicts over its position on methane-emissions regulations, which the Trump administration had moved to undo at the request of independent producers.

These fights over climate change have increased the pressure on API from within. While many of the smaller and U.S. based companies in its membership want it to press for traditional values -- lower government regulation and more access to federal lands -- some of the majors, especially those based in Europe, have been pushing the organization to accept an ongoing transition to cleaner fuels, one often fed by government intervention.

Just two days after the annual report was released, Total SA announced it was leaving the organization, saying API wasn’t fully aligned with it on climate change. The French oil giant has been pushing to transform its company into producing and selling renewable power and pointed directly to API’s past opposition to carbon pricing and U.S. regulation on methane emissions in its decision.

“The (company) acknowledges the API’s considerable contribution, for over a century, to the development of our industry,” the chief executive Patrick Pouyanné said in a statement at the time. “Nevertheless, as part of our Climate Ambition…we are committed to ensuring, in a transparent manner, that the industry associations of which we are a member adopt positions and messages that are aligned with those of the (company) in the fight against climate change.”

https://www.wsj.com/articles/oil-trade-group-considers-endorsing-carbon-pricing-11614640681?mod=searchresults_pos1&page=1

The Prius of airplanes

By Joann Muller, Axios, Feb. 19, 2021

Hybrid-electric aircraft will soon kick off a new era of cleaner air travel, just as the pioneering Toyota Prius heralded the start of the electric car movement 20 years ago.

Why it matters: Replacing small regional planes that run on fossil fuels with hybrid or electric aircraft would help reduce climate-damaging CO2 emissions. It could also make air travel easier and cheaper for people living in smaller cities not served by major airlines.

The big picture: CO2 emissions from aviation have risen rapidly over the past two decades, reaching about 2.8% of global CO2 emissions from fossil fuel combustion, according to the International Energy Agency.

• And with passenger air travel growing at about 5% a year — except during the pandemic — airlines have been scrambling to lower their carbon footprint.

State of play: Fully electric planes, while promising, are limited by available battery technology.

• Batteries cost less and pack more energy into a smaller package than they did a decade ago, but they're still too heavy to allow planes to fly long distances or carry heavy loads.

• They do work, however, in low-flying air taxis for short runs across a city or to the airport.

• These new electric vertical takeoff and landing (eVTOL) aircraft are getting a lot of attention on Wall Street, but they won't be widely available until around 2035, according to a Deloitte analysis.

Yes, but: For medium distances of 50 to 500 miles — the city-hopping routes ignored by hub-and-spoke airlines — hybrids offer a practical solution that can be ready in just a few years.

• UBS, the Swiss investment bank, forecasts a $178 billion market for hybrid-electric aircraft.

Driving the news: Surf Air Mobility, a regional air travel service, said this week it would acquire Ampaire, a developer of hybrid electric powertrains for aviation.

• Surf Air co-founder and CEO Sudhin Shahani called Ampaire's technology a step toward "the next great shift in air travel: sustainable aviation that's accessible to everyone."

• For now, the company's plan is to upgrade existing turboprop aircraft with Ampaire's hybrid technology on short, regional routes while the industry works toward fully electric aviation for all trips.

How it works: Upgrading today’s aircraft for electric power is a relatively low-cost, low-risk path to aircraft certification, says Ampaire CEO Kevin Noertker.

• Its "Electric EEL," for example, is a retrofitted Cessna plane, with an electric motor in the nose and a traditional combustion engine in the rear.

• Both systems provide thrust, but in the air, the engine is mostly used to recharge the 50 kWh battery stored under the fuselage.

• In October, the EEL completed a 341-mile test flight between Los Angeles and San Francisco.

• Ampaire also partnered with Hawaii-based Mokulele Airlines on a series of test runs between the islands’ small airports with mock payloads.

What they're saying: "It is a very long time — well over a decade, maybe two — before your large trans-continental planes are electric," says veteran aviation executive Fred Reid, now president of Surf Air Mobility.

• "The beauty of a hybrid is that they're already flying. You can save 25 to 30 percent on operating costs and it makes a dent on the environmental problem."

• "We could upgrade 20-30,000 planes, and give them a shelf life for another 20 years."

https://www.axios.com/airplanes-hybrid-electric-future-5a8cd60e-e65e-4eac-b33a-6e667173a855.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosgenerate&stream=top

Bill Gates Has A Master Plan for Battling Climate Change

The co-founder of Microsoft became obsessed with developing clean tech through his philanthropic work. With a new book, ‘How to Avoid a Climate Disaster,’ and a cadre of billionaire partners, he now has an action plan for ending the world’s carbon dependency.

By Christina Binkley, Wall Street Journal Magazine, Feb. 15, 2021

Note from Partnership for Responsible Growth: These technologies become feasible when a growing price on carbon makes them competitive.

A day before the inauguration, as Lady Gaga rehearsed “The Star-Spangled Banner” in Washington, D.C., wildfires burned in Sonoma, Santa Cruz and Ventura counties in California, shocking climatologists who had never witnessed the state’s fire season extend into January. NASA had just announced that 2020 tied with 2016 for the warmest year on record. As the Covid-19 pandemic drove city dwellers to search for places that felt surer, safer—Vermont, Kansas, Idaho—the FBI began arresting Americans who had rioted in the U.S. Capitol. Online sales of “prepper” gear (gas masks, food preservation kits) were brisk.

Bill Gates was at his lakeside compound in Seattle, gearing up for his next effort to save the planet from mass extinction. For 20 years, Gates has been studying the twin global afflictions of disease and poverty. These efforts led him to consider climate change and its vexing impact on civilization. This month, Knopf will publish his latest book, How to Avoid a Climate Disaster. Remarkably, given the state of the world, it is an optimistic, can-do sort of book, chock-full of solutions for a problem President Jimmy Carter began warning about in 1977.

Last month’s inauguration of President Joe Biden had a big influence on Gates’s outlook. An earlier draft of the book included measures for a second Donald Trump term. In November, after the election, he edited these parts out, including provisions for how U.S. state and foreign governments could account for an absence of federal support. Another Trump win, Gates says, would have left us “holding our breath for four years and trying not to turn blue.”

“I hope Joe Biden stays healthy,” he had told me during our first virtual interview in December, while seated in a glass-walled conference room at Gates Ventures known as the fishbowl, where he has been taking meetings and relying on the Microsoft Teams platform during the pandemic.

Seattle’s Lake Washington glints over his shoulder, where far below a distant motorboat leaves a wake as Gates slips into his preferred posture, slouched with an ankle across a knee in an ergonomic conference-room chair. Gates, who is 65, has already confronted intractable problems, from trying to eradicate polio to epic rivalries with Steve Jobs and Google. The co-founder of Microsoft also sounded the alarm early about the need to prepare for a global pandemic. Climate change is yet another challenge Gates has served onto his own plate.

Although he has confidence in our collective ability to avoid the earth’s descent into a landscape of scorched rainforests and liquefying glaciers, his prescription is daunting: The planet must reduce the amount of greenhouse emissions being pumped into the atmosphere, currently about 51 billion tons per year, to zero by 2050. Nothing less, he says, will prevent a catastrophe, and he is calling for a full-scale technological revolution to make it happen.

“This is, you know, a harder problem than even ending the pandemic or getting rid of malaria,” Gates says. But the good thing, he adds, is that we have “all these idealistic people who are really pushing the cause forward, so 10 years from now they can see concrete metrics of the right progress, which is not just the low-hanging fruit.”

The crux of his argument is that, as helpful as innovations like electric cars, solar panels, lithium-ion batteries and plant-based burgers are to the effort, they don’t go far enough. There isn’t enough land on earth to plant enough trees to offset our carbon dependency. “The key point in my book is that a serious climate plan—which we don’t have yet—involves counting in your head all the different sources of emissions,” Gates says. This reckoning has to go beyond agriculture and electricity to encompass all carbon-spewing processes (transportation; concrete and steel production) so that we can develop green alternatives. So, for example, Gates believes we must invent green steel.

During an interview from the fishbowl a few days after the Capitol riot on January 6—a day he spent glued to the television even as the congressional vote counting continued well into the night—Gates says we are already on the cusp of a revolution. Climate change, he notes, went nearly unmentioned in the 2016 presidential debates. By the 2020 primaries, after Greta Thunberg had chastised Boomers for fiddling as frog and bee populations collapsed, Democrats were fighting over who would spend the most to fix the problem. “We got innovation on the climate agenda,” Gates says. The next United Nations Climate Change Conference is coming this November in Scotland. “In Glasgow, we’ll do even better.”

Gates gave a TED Talk about climate change in 2010. It hasn’t received as much attention as his pandemic-warning talk, but it marks the point when he grasped that greenhouse gases were hampering the philanthropic goals of the Bill & Melinda Gates Foundation. In the early naughts, he was traveling frequently to sub-Saharan Africa and South Asia to study child mortality, HIV and other problems. Traveling in Lagos, Nigeria, one night, he recounts in his book, he wondered at the city’s relative darkness and many unlit homes. Gates recognized a form of impoverishment that he hadn’t considered—energy poverty.

Globally, per-capita income rises with national energy use, meaning that cheap energy is critical to reducing poverty. “It’s hard to be productive if you don’t have lights to read by,” Gates writes in How to Avoid a Climate Disaster. He cites the influence of Canadian scientist Vaclav Smil, who helped him understand how energy shapes civilizations. Gates has written that he looks forward to Smil’s books, which are dense with statistics, with the same gleeful anticipation fans have for a new Star Wars movie.

By 2006, the year An Inconvenient Truth, Al Gore’s groundbreaking documentary about global warming, came out, Gates had invested in energy development. So-called clean tech had become trendy, with more than $25 billion pouring into solar power, battery companies and other new technologies from 2006 to 2011. Gates went all in, even investing in nuclear energy, which, unlike solar and wind, provides a constant, not intermittent, power source.

Clean-tech venture markets crashed in 2011. Fracking had cut the cost of natural gas, depressing demand for green alternatives. One heavily hyped solar-panel startup, Solyndra, illustrates the complexity of funding energy innovation. Solyndra’s thin-film solar cells, a promising technology subsidized with $535 million in federal loan guarantees, proved too expensive to compete with government-subsidized imports from China. The company went bankrupt in 2011, leaving taxpayers ultimately on the hook for the loan.

An analysis by the Massachusetts Institute of Technology estimates that venture investors lost more than half of their money on Cleantech 1.0. Gates is unfazed by such losses. He says he has personally invested $2 billion in climate change innovation so far and expects to invest another $2 billion over the next five years. “I’m only going to lose money on this stuff,” he says, shrugging. “But that’s not in short supply.”

Gates’s current thinking about climate innovation galvanized in June 2015. While attending meetings in London, he was probed by an editor at the Financial Times about the lack of pioneering research into clean-energy solutions. The exchange bugged him. During a meeting the next afternoon in a suite at the Four Seasons Hotel on Park Lane, he began pacing and mumbling, according to two people who were with him at the time, Larry Cohen, head of Gates’s private office, Gates Ventures, and Jonah Goldman, who runs Gates’s policy and advocacy, including climate efforts. “It’s just not enough of a focus, and the wrong people are organizing this,” Gates muttered.

As his group left the hotel and climbed into a black Mercedes van to head to another meeting, Gates and his team concocted a plan to vastly increase the amount of public and private money going toward energy innovation. By the time he emerged on the other side of London, Gates had decided to create a venture capital fund and to organize government leaders to invest billions of dollars in climate technology. “We could call it Breakthrough Energy,” Gates later posited.

“That was not what we expected when we landed in London,” says Goldman.

The speed of what followed reflects the magnitude of Gates’s reach. He pitched then–French president François Hollande the next day in Paris at the Élysée Palace. In September, he crashed a United Nations meeting between Hollande and India’s prime minister, Narendra Modi, to pitch the leader of one of the world’s biggest carbon producers. Modi, enthusiastic about the idea, proposed his own name for the coalition, Mission Innovation, which Gates accepted.

In Seattle, Gates’s team began to structure the $1 billion venture fund. When Gates laid out the plan to Rodi Guidero, managing director for strategic investments at Gates Ventures (who now oversees Breakthrough Energy Ventures), Guidero blurted, “That’s a terrible f—ing idea.” He argued the fund would lose money and embarrass Gates.

“Why do you think I care about that?” Gates replied.

(In retelling the story, Guidero now says, “I can’t believe I said a thing like that to Bill Gates.” Gates says he doesn’t remember the exchange.)

Gates’s team established unusual criteria for the fund. Any venture must feasibly eliminate a minimum of 500 million tons of greenhouse gases annually, with an investment horizon of at least 20 years, rather than the standard 10. That meant older participants might not live to see a payout.

“In another 20 years, you’re not going to be wondering if you got a return,” says Larry Cohen. “You’re wondering if there’s going to be a planet left for your great-grandchildren.”

Breakthrough Energy Ventures spurned institutional investors. “It’s easier to make these decisions when you don’t have to justify your lower investment returns to your boss,” says John Arnold, a Houston-based billionaire and former energy trader who invested in the fund and joined as co-chair.

In the fall of 2015, Gates emailed a global cadre of billionaires who could afford to lose tens of millions investing in Breakthrough Energy Ventures. They included Jack Ma, Jeff Bezos, Vinod Khosla and Prince al-Waleed bin Talal.

It turned out to be an appealing club to join, and a model of global billionaire diversity (although female members are scarce). Other investors include Michael Bloomberg, LinkedIn co-founder Reid Hoffman, SoftBank founder Masayoshi Son, South African mining businessman Patrice Motsepe, Mukesh Ambani (India’s wealthiest person), Richard Branson, Bridgewater hedge-fund founder Ray Dalio and Beijing real-estate developers Zhang Xin and Pan Shiyi.

John Doerr, the legendary venture capitalist at Kleiner Perkins who made early bets on Netscape, Amazon and Google, says the $50 million he put into the venture was his biggest-ever personal investment at the time. “The idea that we would gather entrepreneurs and business leaders from around the globe...I found exciting,” Doerr says. “I think it’s one of the most remarkable pieces of fundraising I’ve ever witnessed.”

Doerr is a believer. He says the climate crisis is the next big investment opportunity. “This is the mother of all markets,” he says.

“It was stunning to me how easy it was to raise the money,” Gates says.

In November 2015, just five months after the London van ride, Gates stood sandwiched between U.S. President Barack Obama and Canadian Prime Minister Justin Trudeau, the only private citizen onstage at the launch event for Mission Innovation at the Paris climate summit.

Gates looked sheepish in group photos, having been stranded for about an hour in an awkward situation for an introvert. “Our press conference was delayed because [Modi] and Obama were talking one-on-one,” Gates recalls. “And so I’m standing there with all these other leaders of all these other countries waiting for Obama and Modi to come.”

At last Gates arrived at center stage, wearing a dark suit and a too-short blue tie, to announce his initiative: Twenty-eight billionaires had opted in, and 20 countries had committed to double clean-energy R&D spending in an effort to curb climate change.

Last year’s global average temperature was 1.84 degrees Fahrenheit warmer than the baseline 1951 to 1980 mean, according to NASA. Melting permafrost has spit out human cadavers and a woolly mammoth that had been locked in the frozen earth for more than 40,000 years. Residents of Tuvalu, an island nation in the South Pacific, are jockeying for space as their archipelago is swallowed by rising seas.

How much will it cost to halt this trajectory? Gates employs simple formulas. Removing carbon from the atmosphere, for example, currently costs at least $200 a ton, and he thinks it’s possible to quickly get that down to $100 per ton. To remove 51 billion tons of emissions per year at $100 per ton would require spending $5.1 trillion per year, or 6 percent of the world’s GDP. Which is much cheaper, Gates points out, than shutting down whole sectors of economies, as has happened during the pandemic.

What’s more, there is a precedent for this sort of radical innovation on the part of the government. In 1973, the U.S. Defense Advanced Research Projects Agency, also known as DARPA, began a program to network computers called the Internetting project. By 1986, the National Science Foundation had launched the backbone of what would become the Internet, a system capable of carrying large volumes of information across its networks. NASA and the Department of Energy contributed. Europe joined, and eventually so did commercial and private network providers, followed by several generations of Silicon Valley entrepreneurs, many of them the same people now putting their Internet-derived riches into climate innovation. Gates suggests the same approach can work for climate change research and development. But, he argues, we no longer have decades to make it happen.

Gates proposed in December that the U.S. create a National Institutes of Energy Innovation, and fund it along the lines of the existing National Institutes of Health, which is the largest biomedical research agency in the world, with an annual budget of more than $40 billion. The NIEI should focus on research fields such as low-carbon fuels, energy storage and renewables, he says.

How to Avoid a Climate Disaster presents ideas with the methodical approach of a college textbook. In addressing how current solutions fall short, Gates puts forward some tree-planting arithmetic on page 129:

“[T]he math suggests you’d need somewhere around 50 acres worth of trees, planted in tropical areas, to absorb the emissions produced by an average American in her lifetime. Multiply that by the population of the United States and you get more than 16 billion acres, or 25 million square miles, roughly half the landmass of the world.” An intervention of this scale would be enough to cover only the United States. (Gates nonetheless buys carbon offsets for his own footprint, paying, he says, $400 per ton—more than 40 times the price of typical offsets.)

Gates is a believer in free markets, and one of the key concepts in How to Avoid a Climate Disaster is based on Keynesian economics. He proposes using a measure that he calls the “green premium” to understand how a zero-carbon technology can replace its carbon-spewing analog. The green premium specifies how much more that new technology costs. For instance, in his book Gates writes that green aviation biofuel is sold at an average cost of $5.35 per gallon. This amounts to a green premium of more than 140 percent over standard jet fuel, at an average of $2.22 per gallon.

Gates wants the world to jump-start zero-carbon technologies, which face far greater hurdles than developing new software. “You bootstrap those markets to get the scale, to get the green premium...down enough so that by 2050...you can say to [India] with a straight face: Buy clean steel,” Gates says.

In practice, this means governments stepping up with tax credits, loan guarantees and other supports. But Gates believes investors must play their role. He recently raised a second $1 billion Breakthrough Energy Ventures fund, largely with the same group as the first round. Investments will be guided by Breakthrough Energy’s in-house team of scientists and entrepreneurs, with two investment heads— Carmichael Roberts, a chemist and entrepreneur, and Eric Toone, also a chemist—deciding where to place bets and then acting as cheerleaders and mentors. “Everybody inside BEV is a company builder,” says Roberts.

Ramya Swaminathan is chief executive of the BEV-backed Malta, a battery company that emerged from X, Alphabet’s “moonshot factory.” After a setback involving another potential investor, she called Roberts. “Carmichael said something I’ve never heard from an investor before,” Swaminathan says. “ ‘Here’s how we failed.’ It seems subtle, the inclusion: we.”

A Breakthrough investment, an electric-car battery company called QuantumScape, already appears promising. Also backed by Volkswagen, it went public last fall. Its stock yo-yoed from $23.50 to more than $130 a share before leveling off around $50 in January.

Gates is particularly fond of TerraPower, a Bellevue, Washington–based developer of safer nuclear energy that Gates co-founded in 2008, with an investment that reports estimated at the time as more than $500 million. Gates, who declined to confirm the size of his initial investment, does not share most of the world’s terror of nuclear technology.

“Nobody’s gone back and done a complete redesign of a nuclear energy plant since those early days of the ’50s,” Gates says. “So the question is, in the digital age, can you build a nuclear reactor whose economics, safety potential and waste output are utterly different than the current generation of nuclear? You really have to start from scratch.”

TerraPower’s approach, designed after Gates paid for supercomputer modeling, stores heat in tanks of molten salt. Without high pressure, the technology will eventually be able to run on spent fuel rods, so that existing stockpiles of nuclear waste are reduced as they are recycled.

“Can nuclear be super safe?” Gates asks. “I say yes.”

After 10 years of developing a prototype, TerraPower was on the verge of building a demonstration plant in China in 2018, when the Trump administration pulled the plug amid rising tensions with the country. Chris Levesque, TerraPower’s chief executive, recalls taking the call from the U.S. Department of Energy in his office, his general counsel at his side. “It was October 11, 2018,” he says, the date fixed in his memory. “It was devastating…. It [was] really almost like the grieving process—first it’s disbelief, then it’s acceptance.”

Levesque faced what venture capitalists call the second valley of death—a low point when startups are likely to fail. While his nuclear-industry colleagues and employees wondered if TerraPower was done for, Gates stepped in. He turned to Capitol Hill. Six weeks after the China deal was rescinded, TerraPower pivoted to a plan to construct a prototype reactor on U.S. soil, with Gates later promising to contribute at least half the cost. The plant was funded by Congress last October and is one of two new nuclear reactors approved, each awarded $80 million in funding. Gates has committed to invest another $500 million in TerraPower, which Levesque expects will start generating energy in seven years. “We’ll push forward,” Gates says. “It takes kind of a long-term thinker.”

As a teenage prodigy in the 1970s, Gates wrote computer code to schedule classes for the student body of his Seattle high school (and later admitted that he hacked the system so that he could place himself in all-girls’ classes). After dropping out of Harvard to co-found Microsoft, he conceded in a 2016 interview he could be a nightmarish boss, memorizing employee license plates to keep tabs on who was working late or on weekends and employing a self-made management theory that no one should report to a manager with a lower IQ than their own.

These days, a half-dozen friends and associates describe Gates as a polymath who relentlessly tries to decipher puzzles. To keep him at peak productivity, his senior team at the Gates Foundation and Gates Ventures (he left Microsoft’s board in 2020) hold an annual meeting to determine how best to allocate his time over the coming year, says Cohen, who left Microsoft with Gates in order to establish what is now Gates Ventures.

It isn’t helpful to interrupt Bill Gates. He speaks in circles, wending his way around ideas and unleashing a cascade of details that can be difficult to follow until its conclusion. “I’m not a natural like Steve Jobs, who could really get people riled up,” he says.

When I asked what makes him good at solving complex problems, Gates spoke without hesitation for six minutes and 45 seconds, touching on his approach to eradicating malaria, building strong teams, his understanding of concrete and cement, Americans’ generally more positive outlook about nuclear energy than the Europeans’, and much more. He concluded, “This is fun work.”

He paces, according to colleagues, and his voice gets squeaky when he’s excited, but he often fails to emote when faced with tragedy. “It’s actually hard to convey what it’s like to be there watching a kid who’s dying of malaria. I could get better at that,” he says. In a social setting, small talk is not his thing. Gates is the guy in the corner talking to another brainiac.

“Tony Fauci and I were quite obscure and would go to cocktail parties and nobody would talk to us,” says Gates of the director of the National Institute of Allergy and Infectious Diseases, who has taken a star turn during Covid-19. “Now Tony’s like the rock star and Saturday Night Live has women throwing bras at him.”

Gates sees his role in climate change falling squarely on the side of science. “I won’t be the biggest advocacy person. I will be on the innovation piece,” he says. “I do hope to mostly use logic as opposed to lobbying dollars.”

In February, as his book was about to arrive in stores, Gates was preparing to launch two new facets of Breakthrough Energy, the umbrella organization under which BEV sits, including a series of philanthropic fellowships in green industries for post-graduate technologists and business leaders. Another program, Breakthrough Energy Catalyst, will sell real carbon-offsets (not tree-planting credits) to help fund market-ready technologies such as aviation biofuel refineries while enabling high-net-worth individuals, companies and institutions to meet climate pledges. “You can’t buy your way out of your climate impact,” says Jonah Goldman. “You have to buy your way into the solution.”

Melinda Gates, whom Gates married in 1994, is often seen as a humanizing influence on her husband, a scenario neither of them appears to relish. (Through spokespeople she declined to be interviewed for this piece.) The couple has three children, Jennifer, a 24-year-old medical student; Rory, 21, and Phoebe, 18, both college students.

Melinda does offer social guidance, Gates acknowledges. She counseled against making too many references to cow farts, he writes in How to Avoid a Climate Disaster, attempting to limit his mentions of the methane produced by ruminant livestock.

Yet he thinks the popular view of Melinda as his alter ego is shortsighted. “Melinda and I are more alike than people think,” Gates says. “Yes, you can see her empathy more easily than mine—though I cry more easily than she does. Melinda’s very analytical—like top-1-percent analytical, though yes, I’m weirdly even more analytical.”

If the Gates approach works, a handful of billionaires could become vastly richer from taxpayer-backed technologies, which poses a question of equity. “These people are the winners of the system that is producing [these] problems,” says David Callahan, founder and editor of Inside Philanthropy, which tracks trends in charitable giving.

Chuck Collins, director of the Program on Inequality and the Common Good at the Institute for Policy Studies, a progressive Washington, D.C., think tank, who also worked with Gates’s late father, Bill Gates Sr., would like to see the effort—and the rewards—spread around more. “I would rather have fewer billionaires and more broadly controlled venture funds funded by taxpayers, funded by pools of donors, but not by five or 10 mega-billionaires or centi-billionaires,” Collins says. “That’s where it becomes corrosive—concentrations of power.”

Gates says he understands those concerns, and today’s general societal distrust of billionaires, but this is really no time to quibble.

“I think you should attack billionaires who try and avoid the estate tax or billionaires who try and avoid paying capital gains taxes,” he says. “There’s a lot of things to go after billionaires for, besides their willingness to put money into a fund that’s super high-risk, and in the best case, they won’t get their money back for over a decade. And they’re doing it because they believe in climate.”

Gates is a little worried that people will get sick of hearing from him this year as he flies around trying to save the planet. There’s climate change, there’s the pandemic (not to mention Alzheimer’s research, another of his passion projects). “ ‘Boy, this guy sure is telling us what to do in two different areas. Who does he think he is?’ They’re going to get full of me,” Gates says.

He slouches and ducks his chin as he makes a joke. “I’m just trying to avoid kryptonite as much as I can.”

https://www.wsj.com/articles/bill-gates-interview-climate-change-book-11613173337