How to Avoid a Climate Disaster

by Bill Gates

  By the same token, we need governments to commit to funding mega-scale projects (in the range of hundreds of millions or billions of dollars) that can advance the science of clean energy—especially in the areas I listed above. And they need to commit to funding them for the long haul so that researchers know they’ll have a steady flow of support for years to come.

  Match R&D with our greatest needs. There’s a practical distinction between blue-sky research into novel scientific concepts (also called basic research) and efforts to take scientific discoveries and make them useful (what’s known as applied or translational research). Although they’re different things, it’s a mistake to think—as some purists do—that basic science shouldn’t be tainted by considering how it might lead to a useful commercial product. Some of the best inventions have emerged when scientists start their research with an end use in mind; Louis Pasteur’s work on microbiology, for example, led to vaccines and pasteurization. We need more government programs that integrate basic and applied research in the areas where we most need breakthroughs.

  The U.S. Department of Energy’s SunShot Initiative is a good example of how this can work. In 2011, the program’s leaders set a goal of driving down the cost of solar energy to $0.06 per kilowatt-hour within the decade. They focused on early-stage R&D, but they also encouraged private companies, universities, and national laboratories to concentrate on efforts like lowering the cost of solar-power systems, removing bureaucratic barriers, and making it cheaper to finance a solar-power system. Thanks to this integrated approach, SunShot met its goal in 2017, three years ahead of schedule.

  Work with industry from the beginning. Another artificial distinction I’ve run into is the idea that early-stage innovation is for governments and later-stage innovation is for industries. This just isn’t how it works in reality—especially when it comes to the kinds of tough technical challenges we have in energy, where the most important measure of success for any idea is the ability to reach national or even global scale. Partnerships at an early stage will bring in the people who know how to do that. Governments and industry will need to work together to overcome barriers and speed up the innovation cycle. Businesses can help prototype new technologies, provide insight into the marketplace, and co-invest in projects. And, of course, they’re the ones who will commercialize technology, so it makes sense to bring them in early.

  Accelerating the Demand for Innovation

  The demand side is a little more complicated than the supply piece. It actually involves two steps: the proof phase, and the scale-up phase.

  After an approach has been tested in the lab, it needs to be proven in the market. In the tech world, this proof phase is quick and cheap; it doesn’t take long to demonstrate whether a new smartphone model works and will appeal to customers. But in energy, it’s much harder and more expensive.

  You have to find out whether the idea that worked in the laboratory still works under real-world conditions. (Maybe the agricultural waste you want to turn into a biofuel is much wetter than the stuff you used in the lab and therefore doesn’t produce as much energy as you expected.) You also have to drive down the cost and risks of early adoption, develop supply chains, test your business model, and help consumers get comfortable with the new technology. Ideas currently in the proof phase include low-carbon cement, next-generation nuclear fission, carbon capture and sequestration, offshore wind, cellulosic ethanol (a type of advanced biofuel), and meat alternatives.

  The proof phase is a valley of death, a place where good ideas go to die. Often, the risks that come with testing new products and introducing them in the market are simply too great. Investors get scared off. This is particularly true for low-carbon technologies, which can require a lot of capital to get going and may require consumers to change their behavior pretty substantially.

  Governments (as well as big companies) can help energy start-ups make it out of the valley alive because they’re massive consumers. If they prioritize buying green, they’ll help bring more products to market by creating certainty and reducing costs.

  Use procurement power. Governments at all levels—national, state, and local—buy enormous amounts of fuel, cement, and steel. They build and operate planes and trucks and cars, and they consume gigawatts’ worth of electricity. This puts them in the perfect position to drive emerging technologies into the market at relatively low cost—especially if you factor in the social benefits of bringing these technologies to scale. Defense departments can commit to buying some low-carbon liquid fuels for planes and ships. State governments can use low-emissions cement and steel in construction projects. Utilities can invest in long-duration storage.

  Every bureaucrat who makes purchasing decisions should have an incentive to look for green products, understanding how to figure in the cost of the externalities we talked about in chapter 10.

  By the way, this isn’t a particularly new idea. It’s how the internet took off in the early days: There was public R&D funding, of course, but also a committed buyer—the U.S. government—waiting on the other end.

  Create incentives that lower costs and reduce risk. In addition to buying things themselves, governments can give the private sector various incentives to go green. Tax credits, loan guarantees, and other tools can help reduce the Green Premiums and drive demand for new technologies. Because many of these products will be expensive for some time to come, prospective buyers will need access to long-term financing, as well as the confidence that comes from consistent and predictable government policies.

  Governments can play a huge role by adopting zero-carbon policies and shaping the way markets attract money for these projects. A few principles: Government policies should be technology neutral (benefiting any solutions that reduce emissions, rather than a few favored ones), predictable (as opposed to regularly expiring and then getting extended, as happens frequently now), and flexible (so that many different companies and investors can take advantage of them, not just those with large federal tax bills).

  Build the infrastructure that will get new technologies to market. Even cost-competitive low-carbon technologies won’t be able to gain market share if the infrastructure isn’t in place to get them to market in the first place. Governments at all levels need to help get that infrastructure built. This includes transmission lines for wind and solar, charging stations for electric vehicles, and pipelines for captured carbon dioxide and hydrogen.

  Change the rules so new technologies can compete. Once the infrastructure is built, we’ll need new market rules that allow the new technologies to be competitive. Electricity markets that were designed around 20th-century technologies often put 21st-century technologies at a disadvantage. For example, in most markets, utilities that invest in long-duration storage aren’t appropriately compensated for the value they’re providing to the grid. Regulations make it hard to use more advanced biofuels in cars and trucks. And, as I mentioned in chapter 10, some new forms of low-carbon concrete can’t compete because of outdated government rules.

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  So far in this chapter, I’ve been covering the development phase—policies that can spark the creation and adoption of energy breakthroughs. Now let’s turn to the scale-up phase—rapid, large-scale deployment. You can only reach this stage once the cost is low enough, your supply chains and business models are well developed, and consumers have shown that they’ll buy what you’re selling. Onshore wind, solar power, and electric vehicles are all in the scale-up phase.

  But scaling them up won’t be easy. We need to more than triple the amount of power in just a few decades, with the majority of the new electrons coming from wind, solar, and other forms of clean energy. We need to be adopting electric vehicles as fast as we bought clothes dryers and color TVs when those became available. We need to transform the way we make and grow
things while continuing to deliver the roads, bridges, and food we all rely on.

  Luckily, as I mentioned in chapter 10, we’re no strangers to scaling up energy technologies. We drove rural electrification and expanded the domestic production of fossil fuels by tying policy and innovation together. You might consider some of those policies—like various tax advantages for oil companies—subsidies for fossil fuels, but they’re really just a tool for deploying a technology we thought was valuable. Remember that until the late 1970s—when the concept of climate change first entered the national debate—it was widely accepted that the best way to raise the quality of life and spread economic development was to expand the use of fossil fuels. Now we can take the lessons we learned from the purposeful growth of fossil fuels and apply them to clean energy.

  What does that mean in practice?

  Put a price on carbon. Whether it’s a carbon tax or a cap-and-trade system where companies can buy and sell the right to emit carbon, putting a price on emissions is one of the most important things we can do to eliminate Green Premiums.

  In the near term, the value of a carbon price is that by raising the cost of fossil fuels, it tells the market that there will be extra costs associated with products that emit greenhouse gas emissions. Where the revenue from this carbon price goes is not as important as the market signal sent by the price itself. Many economists argue that the money can be returned to consumers or businesses to cover the resulting increase in energy prices, though there’s also a strong argument that it should go to R&D and other incentives to help solve climate change.

  In the longer term, as we get closer to net-zero emissions, the carbon price could be set at the cost of direct air capture, and the revenues could be used to pay for pulling carbon out of the air.

  Although it would be a fundamental shift in the way we think about pricing goods, the concept of a carbon price has broad acceptance among economists from many schools of thought and across the political spectrum. Getting it right is going to be technically and politically hard, in the United States and around the world. Will people be willing to pay that much more for their gasoline and every other product in their lives that involves greenhouse gas emissions, which is pretty much all of them? I’m not going to prescribe what the solution should look like, but the core objective is to make sure everyone pays the true cost of their emissions.

  Clean electricity standards. Twenty-nine U.S. states and the European Union have adopted a type of performance standard called a renewable portfolio standard. The idea here is to require electrical utilities to get a certain percentage of their electricity from renewable sources. These are flexible, market-based mechanisms; for example, utilities with access to more renewable resources can sell credits to those with fewer. But there’s a problem with the way this approach is carried out today: It limits utilities to using only certain approved low-carbon technologies (wind, solar, geothermal, sometimes hydro), and it excludes options like nuclear power and carbon capture. That effectively raises the overall cost of lowering emissions.

  Clean electricity standards, which a growing number of states are now looking to adopt, are a better way to go. Rather than emphasizing renewable sources in particular, they allow any clean energy technology—including nuclear and carbon capture—to count toward meeting the standard. It’s a flexible, cost-effective approach.

  Clean fuel standards. This idea of flexible performance standard can be applied to other sectors too, to reduce the emissions from cars and buildings as well as power plants. For example, a clean fuel standard applied to the transportation sector would accelerate deployment of electric vehicles, advanced biofuels, electrofuels, and other low-carbon solutions. As with a clean electricity standard, it would be technology neutral, and regulated entities could be allowed to trade credits, both of which lower the cost to consumers. California has created a model for this with its Low Carbon Fuel Standard. At the national level, the United States has the basis for such a policy with the Renewable Fuel Standard, which can be reformed to address the limitations I mentioned in chapter 10 and expanded to cover other low-carbon solutions (including electricity and electrofuels). This would make it a powerful tool in addressing climate change. The EU’s Renewable Energy Directive provides a similar opportunity in Europe.

  Clean product standards. Performance standards can also help accelerate the deployment of low-emissions cement, steel, plastics, and other carbon-intensive products. Governments can start the process by setting standards in their procurement programs and by creating labeling programs that give all buyers information about how “clean” different suppliers are. Then we can expand these to standards covering all carbon-intensive goods sold in a market, not just whatever’s being bought by governments. Imported goods would have to qualify too, which would address countries’ concerns that lowering emissions from their manufacturing sectors will make their products more expensive and put them at a competitive disadvantage.

  Out with the old. In addition to rolling out new technology as fast as possible, governments will need to retire inefficient, fossil-fueled equipment—whether power plants or automobiles—faster than they might otherwise. It costs a lot to build power plants, and the energy they produce is only cheap if you can spread the cost of construction over their useful life span. As a result, utility companies and their regulatory agencies are loath to shut down a perfectly good operating plant that may have decades of useful life ahead of it. Policy-based incentives, through either the tax code or utility regulation, can accelerate this process.

  Who’s on First?

  No single government body could fully implement a plan like the one I’ve outlined; the decision-making authority is simply too dispersed. We’ll need action at all levels of government, from local transportation planners to national legislatures and environmental regulators.

  The exact mix will vary from one country to another, but I’ll touch on a few common themes that are true in most places today.

  Local governments play an important role in determining how buildings are constructed and what kinds of energy they use, whether buses and police cars run on electricity, whether there’s a charging infrastructure for electric vehicles, and how waste gets managed.

  Most state or provincial governments have a central role in regulating electricity, planning infrastructure like roads and bridges, and selecting the materials that go into these projects.

  National governments generally have authority over activities that cross state or international borders, so they write the rules that shape electricity markets, adopt pollution regulations, and create standards for vehicles and fuels. They also have enormous procurement power, are the primary source of fiscal incentives, and usually fund more public R&D than any other level of government.

  In short, every national government needs to do three things.

  First, make it a goal to get to zero—by 2050 for rich countries, and as soon after 2050 as possible for middle-income countries.

  Second, develop specific plans for meeting those goals. To get to zero by 2050, we’ll need to have the policy and market structures in place by 2030.

  And third, any country that’s in a position to fund research needs to make sure it’s on track to make clean energy so cheap—to reduce the Green Premiums so much—that middle-income countries will be able to get to zero.

  To show you how it can all work together, here’s what a whole-of-government approach to accelerating innovation could look like in the United States.

  Federal Government

  The U.S. government does more to drive the supply of energy innovation than anyone else. It’s the biggest funder and performer of energy research and development, with 12 different federal agencies involved in research (the Department of Energy has by far the largest share). It has all sorts of tools for managing the direction and pace of energy R&D: research grants, loan progra
ms, tax incentives, laboratory facilities, pilot programs, public-private partnerships, and more.

  The federal government also plays a central role in driving the demand for green products and policies. It helps fund roads and bridges built by state and local governments, regulates cross-state infrastructure like transmission lines, pipelines, and highways, and helps set the rules for multistate electricity and fuel markets. And it collects most tax revenue, which means that federal financial incentives will be the most effective at driving change.

  When it comes to scaling up new technologies, the federal government plays the largest role of anyone. It regulates interstate commerce and has primary authority over international trade and investment policy, meaning we’ll need federal policies to reduce any sources of emissions that cross state lines or international borders. (According to The Economist—one of my favorite magazines—U.S. emissions would be about 8 percent higher if you included all the products that Americans consume but are made elsewhere. Britain’s would be about 40 percent higher.) Although carbon pricing, clean electricity standards, clean fuel standards, and clean product standards should all be adopted at a state level, they’ll be more effective if they’re implemented across the country.

  In practice, that means Congress needs to provide funding for R&D, government procurement, and developing infrastructure, and it needs to create, modify, or extend financial incentives for green policies and products.

  Meanwhile, in the executive branch, the Department of Energy does in-house research and funds other work as well; it would play a central role in implementing a federal clean electricity standard. The Environmental Protection Agency would be charged with designing and implementing an expanded clean fuel standard. The Federal Energy Regulatory Commission, which oversees wholesale electricity markets and interstate transmission and pipeline projects, would need to regulate the infrastructure and market elements of a plan.