Takeaways from Bill Gates’ How to Avoid a Climate Disaster
In How To Avoid A Climate Disaster, Gates provides the right amount of climate-alarm for us to sit up and take notice but more importantly, follows it up with a clear-eyed and concrete plan for how we can innovate our way out of this gigantic problem.
Instead of naively pitching capitalism against climate, or calling for difficult personal sacrifices, Gates’ optimistic message is that through bold technological innovation and supportive government policy, we can harness the powerful forces of capitalism to rewire civilization as know it and achieve our climate goals.
Below are my key takeaways from the book:
The true breadth and scale of the overall problem is mind-boggling:
In the book, Gates provides a neat breakdown of the sectors and their contribution to greenhouse gas emissions:
- Making things (Cement, Steel, Plastic) — 31%
- Plugging In (electricity) — 27%
- Growing things (plants, animals) — 19%
- Getting around (planes, trucks, cargo ships) — 16%
- Keeping warm and cool (heating, cooling, refrigeration) — 7%
As you can see, emissions pervade almost every single aspect of our civilization and we need to get all of these emissions to (net) zero by 2050, according to the IPCC to avoid catastrophe. The size of this challenge is impossible to overstate. It involves reconfiguring almost every single aspect of our civilization built over several centuries in a matter of a few decades.
The challenge is further amplified by the fact that many countries in the developing world are (rightfully) continuing to build new carbon-based infrastructure to give their citizens a chance at a decent quality of living. So, this really is the equivalent of changing every component of a jumbo jet while it’s in flight.
Popular narrative does not focus nearly enough on the hard problems:
The progress humanity has made with solar, wind, and electric vehicles has been incredible and certainly worthy of celebration. However, these important victories might be disproportionately hogging the popular narrative at the cost of more challenging problems with the climate transition.
The sector that’s probably the most underrepresented in climate conversations is manufacturing, particularly of steel, cement, and plastics. These materials are the foundations of modern civilization pervading almost everything around us. However, they are also hugely carbon intensive, particularly in the case of steel and cement. In fact, manufacturing as a sector represents the single biggest source of greenhouse gas emissions. What is unfortunate is that for many of these materials, we do not yet have a decarbonized alternative proven at scale.
The implications of intermittency of renewables are under-appreciated:
Gates lays particular emphasis on the repercussions of daily, seasonal, and multi-day weather-related intermittency of renewable energy sources. To provide reliable electricity despite these intermittencies will involve significant storage and/or excess generation capacity both of which will greatly increase the average cost of power.
As a concrete example, assuming that the cost of solar power during the day costs 5 cents per kWh, and the cost of storing 1kWh for one cycle is about 10 cents. Then the cost of using the solar generated power at night will be 15 cents/kWh or about three times the day time cost if we add the storage costs.
Even more dramatic is the situation where extreme weather related events such as hurricanes leading to wind and solar shutting down production for a few days. To guarantee reliable power during such events would require an enormous amount of storage capacity. As a hypothetical illustration, Gates shares estimates that just for Tokyo which does undergo such weather related disruptions annually, the total cost of batteries in today’s prices could be about $400 billion with an annual cost of $27 billion without considering installation and maintenance!
It can be argued that if battery costs go the route that solar took over the last few decades, these extra costs will come down drastically. However, Gates does not believe that battery technology will undergo order of magnitude level improvements.
Using the Green Premium to determine role of innovation, policy, and business:
Perhaps the single most important conceptual contributions of the book, in my opinion, is the use of Green Premiums to determine where innovation is needed. The Green Premium is the difference in cost of a climate-friendly alternative to a particular good. For goods which don’t have any viable green alternative, the Green Premium is calculated using the cost of capturing the greenhouse gases emitted by it.
The good news is that currently the Green Premium for some goods such as electric heat pumps to replace gas-powered furnaces is actually negative. In other words, the greener alternative is actually cheaper. In other cases, such as electric buses and electric cars, its on the way to becoming zero.
However, for the vast majority of relevant goods, the Green Premium is still positive, and in cases like cement (through carbon capture), as high as 140%. What this means is that it is still expensive in most cases to do right by climate.
Crucially, Green Premiums provide a tool to clearly determine what kind of effort is required to transition different goods to their decarbonized alternatives. For goods where Premiums are low or zero, market forces aided by encouraging policy can help scale their deployment globally. However, for goods whose Premiums are still high, policy or market forces alone may not be sufficient. What we really need in these cases is R&D to bring down the costs which brings us to our next takeaway.
The crucial role of Governments in R & D:
In the initial stages, R & D projects can be uncertain. The level of risk in these cases could sometimes be unacceptably high for conventional sources of funding such as banks or venture capitalists. Furthermore, in climate tech, the research could take several years if not decades to become a viable product. This once again can inhibit traditional sources of funding.
In these circumstances, it is vital that governments step in to fund such risky research. Once the viability of the research is proven, the private sector can then take over and commercialize it. Notably, many crucial products and services that we currently enjoy today such as internet and GPS took a similar trajectory to global deployment.
Trade-offs between economic development and climate change in the global south:
Another point that Gates takes pains to hammer home is that it is impractical and grossly unfair to ask poor countries to accept expensive green premiums today to transition to greener technologies. Getting their citizens out of poverty is rightfully the top priority of these countries, and often times, carbon-based infrastructure is the only choice available to these countries today to do so. Note that while solar and in some cases wind are cost competitive to fossil-fuel based electricity generation, economic development requires reliable, uninterrupted power which as we discussed earlier, these sources still cannot provide cheaply.
Gates stresses that rich countries should invest in R&D to lower the Green Premiums to make green technology accessible to the developing world, and not just for moral reasons. Reconfiguring the global economy with clean technology is a gigantic economic opportunity which the developed world can stand to benefit greatly from.
In summary, how to avoid a climate disaster:
The key point to remember is that we need urgent and significant technological innovation across a huge number of sectors to make net zero possible.
With that said, the high-level plan which is predominantly targeted at Governments (and to a lesser extent, large corporations) has the following elements:
- Dramatically increase the supply of innovation by supporting a large number of targeted R & D efforts. It is important to ensure that risky ideas tackling hard problems are supported along with the low-hanging fruit.
- On the demand side, nurture the technologies that successfully come out of the lab through the difficult early stages of deployment through patient early adoption, and through financial and infrastructural support.
- Finally, once proven, accelerate their installation at scale through policy measures which force retiring legacy carbon-based infrastructure and push adoption through reducing the Green Premium via a carbon tax and/or through standards which legally require their usage at a certain minimum level.
I would love to hear folks’ thoughts on the book and climate solutions in general. Please leave your comments below.
