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CERAWeek: Bill Gates on addressing the climate change crisis

01 March 2021 Kevin Adler

CERAWeek by IHS Markit kicked off on 1 March with a discussion between IHS Markit Vice Chairman and Pulitzer Prize-winning author Daniel Yergin and Bill Gates, founder of Microsoft, global philanthropist, and author of a new book about the climate change challenge, How to Avoid a Climate Disaster.

In a wide-ranging discussion, Yergin and Gates looked at the urgency of addressing carbon emissions globally, the impact of emission-reductions measures so far, promising technologies, and Gates' efforts to translate the ideas of climate experts to messages that will inspire the general public to demand action.

For more than a decade, Gates has been sounding the alarm about climate change, most famously in a TED Talk in 2010.

In his new book and the discussion at CERAWeek, Gates said transformative solutions must be implemented on a huge scale, and promptly. Gates expressed some optimism, noting, "… only in the last few years, with the adoption of 2050 net-zero goals and involvement by activists, we [may get] governments to execute on a plan."

Today, however, Gates said that the relatively easy reductions have been launched or achieved, at least in wealthier nations, such as reducing emissions from power generation and the introduction of a mass market for electric vehicles. But the scale of the needed solutions seems not to have penetrated the public consciousness yet.

"This will be harder than any other domain I've ever worked in," he said, referring to his tech industry work and more than 20 years of the Gates Foundation funding solutions to combatting the world's infectious diseases.

Part of the solution is getting the message out clearly. "Being succinct on this topic is very hard. The article writers in a magazine will put in a sentence that this [emissions source] is equivalent to 10,000 cars on the road. But they never give you enough information on what percentage of the problem it is," he said. "And they tend to romanticize that solar panels are cheap and that will solve the problem. Or if we just travel less miles or eat less meat, or we make green investment — as if any one of these will solve this problem."

Instead, Gates said, a combination of innovations, breakthroughs, and changes in activity will have to be in place, and they will have to be sustained. "In the history of the industrial economy, things have never changed as we're asking them to change. It is so radical," he said. "Only if an entire generation is committed to making it a political priority - at least all the rich countries for the next 30 years - do we have a chance."

Green premium

In his book, Gates references what he calls the "green premium," which he defined as: "the additional cost of choosing a clean technology over one that emits a greater amount of greenhouse gases."

The green premium varies hugely. For electric cars, Gates estimates that a Chevrolet Bolt costs about $0.10/mile more than driving a Chevy Malibu, including purchase price, fuel, repairs; that's a premium of less than 10%. "We can see over the next 10-15 years that this green premium will probably get to zero. That means the government can say no more gasoline cars, and people won't complain," he said, adding that it Is why General Motors CEO Mary Barra was confident in saying earlier this year that GM will stop making gasoline and diesel cars by 2035.

The situation is entirely different in cement production, where Gates said that reaching net-zero approximately doubles the cost. That's where the problem lies, as it would be hard to convince many cement buyers, particularly those in poorer countries, to pay that green premium.

Innovators around the world first have to step up and reduce the cost of carbon reduction, carbon storage, and carbon removal. Then, political leaders in wealthy countries must commit to filling the gap for paying the rest of the premium, he said.

Currently, the total, global green premium is so high that it's simply not politically tenable to advocate for closing it, Gates admitted. Gates himself purchases offsets for the carbon he generates at $600/metric ton (mt) from a company that stores the carbon deep underground. The world emits about 51 billion metric tons/annum of carbon, so that's about $30 trillion per year for the green premium.

In his book, he presumes that the green premium will reach $100/mt within about a decade. That brings the annual cost to about $5 trillion per year, which he said is still impossible to imagine wealthy countries transferring to poor countries. But if on top of pricing for carbon removal, technology is developed to reduce and capture 95% of the carbon, then the remaining volume would cost about $250 billion per year, which he said is a "manageable" figure.

"Unless you can order this [cost] and look at those magnitudes, in a sense you are not being guided by what the priorities are," he added.

Solutions

In terms of solutions - whether incentivized by the green premium, or not - Gates and Yergin agreed that increased electrification of economic activity is at the top of the list.

With that, Gates observed, the transmission grid in a mature economy such as the US probably has to triple in size. "It has to stay reliable, and people don't want the price to go up. So … what we have done so far is only a small subset of what we are asking … to do in this 30-year period," Gates said. (Notably, the interview was taped before the power outages in Texas brought reliability closer to the forefront of US consciousness.)

Again, he cited innovation as the key — a not surprising conclusion from a person who helped to change the world with software to run on personal computers. "The innovation pipeline starts with basic R&D, then you want entrepreneurs to develop their ideas, and then you need venture money … and then you need somebody to buy these green products even if they cost a little more," he said.

Gates has his fingers in each of those pies, including about $2 billion in investments in companies with promising technologies. His most high-profile recent development has been with TerraPower, which is developing a nuclear power reactor that Gates said would provide carbon-free power without the safety concerns that arise with traditional plants. In October, the US Department of Energy awarded a contract for up to $4 billion to TerraPower and a second company to each build next-generation nuclear plants within the next seven years, and Gates said he has personally committed $2 billion to the venture.

Carbon capture is another technology in which Gates has invested. He's backing work on direct air capture, which seeks to pull carbon out of ambient air, rather than from a source of high carbon, such as a power plant or steel plant. While describing some of the proposed technologies as "wild ideas," Gates said they are necessary, as reducing carbon from existing processes is insufficient to solve the global problem.

In the aviation space, Gates noted that he is the largest buyer of aviation biofuels in the US, about 7 million gallons per year. "Assuming hydrogen doesn't work in a plane, it will be electrified fuels or biofuels," he said. "Right now, I'm buying [that it will be] biofuels."

The question, as it is in so many other areas, is cost. Right now, aviation biofuels are two-three times as costly as fossil fuel-based aviation fuels.

Gates also has investments in battery storage companies through the Breakthrough Energies Fund, including Quidnet Energy, which is working on using excess renewable energy to pump water down into the earth, where it becomes pressurized, and then releasing it when needed. "It's like hydro-storage, but it works in many locations, not just where you need a reservoir," Gates said. "They're out there drilling holes and seeing if that can work."

Taking the big-picture perspective, Gates said: "If you look at all the sources [of carbon], you need something like a dozen breakthroughs. It's not one magic tool that does the job. If you can get super-cheap green hydrogen, and that is used for a lot of industrial processes, fertilizer, and steel, that is a huge deal…. [but to reach] breakeven for steelmaking, green hydrogen would have to be mind-blowingly cheap. It's exciting, but it might not emerge."

Per his investment in TerraPower, Gates believes that nuclear energy is a major part of the equation, saying that up to 25% of the world's clean power in the future could be nuclear. But he acknowledged the public's fears about nuclear power have slowed its development, chiefly by resulting in regulators insisting on more and more protection from potential accidents. This has raised the cost of new facilities, in the US at least, to punitive levels.

TerraPower believes that its design will solve the problem, and Gates said that a site will be selected this year.

Lessons learned

To conclude the discussion, Yergin asked Gates about lessons learned from both his work on climate change and his efforts to eradicate diseases through vaccinations. Gates gave a TED talk in 2015 about the world's lack of preparedness for a pandemic similar to the Spanish Flu.

First, Gates said that he learned that warnings are not heeded and that the severity of a problem tends to be unappreciated. As an example, he said, "people oversimplify … maintaining the reliability of electricity" when they talk about the merits of electrification to reduce emissions from transportation, heating, and manufacturing. "You can have a cold front over the Midwest and shut down wind and solar. Electricity is only really valuable when it's totally reliable," he said.

Second, Gates is concerned about political and public willpower to make the necessary investments and sacrifices. "I'm definitely afraid that the large capital investment and plans required constantly through the 30 years" won't exist, he said. "Unless we get this to a bipartisan issue …"

Reaching bipartisanship starts by getting people to at least discuss from the same framework. Gates cited his Breakthrough Energy Science initiative, which has published an open source climate emissions model, as an effort to cut through the posturing of people with different agendas. Anyone can use the model to look at the factors involved in carbon emissions and test their ideas on matters such as transmission, energy storage, or the use of nuclear power. "We have to draw in lots of people using the same models so that they cannot exaggerate the benefits of using one thing or other," he said.

Finally, Gates said that huge opportunities exist in solving the climate challenge. In particular, he cited the power industry as an example. "They should be very excited…. power demand could be three times bigger," he said.

For the oil and gas industry, while fossil fuels may be on the way out, Gates said that the needs created by carbon capture and removal "are skill sets that those oil and gas companies can bring. Can they help us with biofuels? Can they help with electric fuels?"

And he ended with a warning, relating climate change back to the COVID-19 pandemic. Minimization of and preparation for climate change are essential. "[It] will kill five times as many people per year" as COVID-19, he said. "But sadly, it creeps up on you…. Hopefully, [we] get more people to join in — fewer deniers, fewer people who think it's easy to solve…. A lot of it is in the political realm, which is unpredictable. But the science is amazing. I love talking to the innovators."

Posted 01 March 2021 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit

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