Bill Gates: US carbon trading system would not decarbonize cement, steel sectors

Introducing a national US carbon emissions trading system (ETS) would do little to decarbonize high-emission sectors like the steel and cement industries, Microsoft founder and philanthropist Bill Gates said this week at a virtual event hosted by Harvard Book Store to promote his new book on tackling climate change.

Gates was asked by OPIS during the 22 February event's question and answer session if the US should follow the lead of the European Union and most recently China in creating an emissions trading system and a US carbon price to try to drive emissions lower.

"A national carbon price is a tool and it alone doesn't solve the problem, because we have things like cement and steel where the green premium is way above your dollars per ton in your carbon market," said Gates, whose green premium concept refers to the cost difference between a product that involves emitting carbon and a zero-carbon alternative.

Gates will be discussing his book as well as his latest venture, Breakthrough Energy, on 1 March with IHS Markit Vice Chairman Daniel Yergin at the upcoming annual CERAWeek event, which this year is being held virtually.

Carbon prices in emissions "don't work on those hard things at all," said Gates. "They just take the low-hanging fruit which has the lowest per ton emissions and use markets to make sure that you work on the easy easy stuff."

"That won't get us there," said Gates with respect to decarbonization.

Gates expressed skepticism that a more international-based system of carbon pricing could be easily developed.

"Now it is a tool, it will create demand and for [sectors with] green premiums that are low, it will help push things along," said Gates about carbon pricing.

"It has been done on a national basis, it's very hard to get that right on an international basis, although it has been talked about. A carbon tax, carbon permits are simply tactics. At the end of the day, you need a substitute for steel where the green premium is very small," he said.

Research and development and purchasing clean-energy alternatives are required alongside such "market-type ideas" to reduce green premiums, Gates added.

Gates also said during the event that he is spending several million dollars a year to offset his own carbon emissions through measures such as purchasing green aviation fuel made from plants in addition to direct air capture at a cost of $600 per metric ton of carbon dioxide captured.

The US pioneered some of the earliest large-scale cap-and-trade systems that reduced pollutants like sulfur dioxide in the 1990s, helping to spur the creation of similar carbon emissions trading systems like the EU Emissions Trading Scheme.

However, representatives from both ends of the US political spectrum have appeared leery about advocating for a carbon cap-and-trade system and the creation of a single carbon price across the country.

"It is unlikely that [the Biden administration] will be using a carbon pricing policy," said Tim Profeta, director of Duke University's Nicholas Institute for Environmental Policy Solutions, when he spoke at a European Roundtable on Climate Change and Sustainable Transition event last month.

"The political situation in the US Congress is not one that would be embracing of a carbon tax... It does not have support. In terms of cap and trade, there really has been on the progressive wing, a resistance to carbon markets as well," said Profeta, who has pushed for carbon pricing at a federal level.

— Original reporting by Anthony Lane.