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A conversation with the billionaire climate investor in Dubai.
Eight years ago, at the Paris climate convention, Bill Gates committed $2 billion to fighting climate change.
You have to admire his ROI. Since then, Breakthrough Energy, the set of Gates-linked climate groups, has become ubiquitous on the topic. It invested in dozens of climate-tech startups, and Gates personally lobbied for the passage of the Inflation Reduction Act.
Gates has also come to formulate a big idea: the “green premium,” the gap between the cost of a fossil-fueled technology and the cost of a climate-friendly one. Right now, electricity generation has almost no green premium, for instance — solar power is dirt cheap — but steelmaking’s green premium is very high. Only when the world gets green premiums down to zero for every economic activity, Gates argues, will it be able to seriously solve climate change.
I had a few minutes to chat with Gates on the sidelines of COP28, the United Nations climate conference in Dubai, about green premiums and what we were doing in Dubai in the first place. Our conversation has been edited for length and clarity.
Well, there’s a lot of good things that happen at COP. Remember that there are many sectors that make up the solution. Small, innovative companies — and Breakthrough Energy has 30 [startups] here, I bet you there’s 70 others — they need big companies, they need government policies, and they have booths here. And they give people a sense: Oh, there is a new way to make steel. Well, how quickly can that be adopted? How quickly do you get the green premium down to zero? Are my steel companies and my company engaged in this? What do they think? It keeps the pressure on.
Obviously, there is no coercive mechanism here. So solving global problems — given that you don’t have world government — maybe you need meetings of 70,000 people to try and say, “Hey, come on, everybody, let's do this together.” You know, anti-climate people say, “Hey, why should the U.S. make sacrifices? Because if the U.S. alone does this, or even U.S. and Europe, the [effect on global average temperature] is very, very small and it’s not worth doing.”
Climate is so complicated. To really understand climate, you’d have to be a physicist, a biologist, an atmospheric scientist. People who are polymathic love the subject, because it allows you to say, “Oh, I’m reading a book that’s going to help you understand climate” — and almost any science book you can justify.
So getting people to understand a little bit more about climate … this is an atmosphere that the bias is toward exaggerating the impact of climate, but oh well. Maybe the signal gets muted when it gets out to the other 7 billion, and so we have to kind of, you know, overdo it here so at least it gets some resonance.
The political situation is that about 40% of voters are like, “Wow, I didn’t know my lifestyle was going to be reduced because of this. Isn’t there some rich guy or some other country or someone else who should be paying for this electric heat pump, or paying more money for their gasoline because of your carbon tax?”
Washington State has a carbon tax, which is kind of unusual in that it’s been focused on gasoline, so it’s actually raised the gasoline price. We have a referendum [to overturn the law in the works] — it’ll be interesting to watch.
Even in Europe, who you’d have to say is the most climate-committed region of the world, they have very few political parties — although maybe the one just won the Netherlands elections is one of them — who are like, “Hey, screw all this, let’s do nothing.” But even there they have to be careful because the elites‘ commitment to climate greatly exceeds the general voter’s. So when Macron puts on his diesel tax, that lasted about three months, because the rural people who are less well-off than the urban people said, “Oh, this tax is targeted at us. You’ve lost touch.” And then a whole movement gets created around that, and he pulled the diesel tax really quickly. And compared to the carbon tax that you should have on diesel, [Macron’s diesel tax] was like a tenth of the increase.
So, you know, the 70,000 here aren’t — it’s like the Republican primary, it’s not a representative set of people. For me, you know, I only have one hammer, which is innovation, whether it’s software, global health, or climate. I’ve never seen a problem that innovation can’t solve, which is a caricature, but that’s where I add value. It’s organizing the capital and the teams and the goals. It’s fantastic how much progress we’ve made in eight years.
It’s going super well. They’ve got [former White House chief of staff] John Podesta [leading the effort], who’s here helping to try and make sure it goes faster than normal. We fund groups that are helping with IRA implementation. There’s various philanthropic things we’ve done in support of getting the IRA to move quickly — so that, like Obamacare, maybe it’s more popular four years after it passes in red states than it was the day that it went through on a purely partisan vote.
Some people have estimated the cost of these tax credits at way beyond what they were scored. I think they’re wrong, because their EV number was insane — that Goldman Sachs, $1.2 trillion thing. But the Congress is there if a tax credit over-succeeds. They can — at year four, five, six — cut it back or eliminate it.
Right now, companies are responding to the IRA incentives. But you know, if you get Trump elected, and he really gets rid of it, there’s a lot of business plans that will [make people] feel foolish. And then for the future, it’s going to be very tough. Because even if the Democrats come in and put something new in, people say, “Well, you’re asking me to make a 30-year investment. And half the time, I’m stupid.” So that could be quite damaging that it’s so unpredictable.
I’ve said very clearly that, unless you get green premiums to zero, you’ll never get adoption in the middle-income countries. The low-income countries are small numbers, and you can subsidize them — maybe, in some cases, you should. But [you can’t] in the middle-income countries — that’s India, China, Brazil, Vietnam. You know, humanity lives in middle-income countries, and thank God, it’s the opposite of what it was in the 1960s, when there were almost no middle-income countries and there was this rich, Europe-U.S. piece.
So yes, we have to make solar, fission, fusion, storage, cement, steel, beef — we’ve got to make them at, ideally, negative green premiums, but at least at zero green premiums. Otherwise, you never get adoption.
Now, technology can go through a period where it has a green premium. And then you’re asking rich countries, rich companies, rich people to create the demand signal to get on the learning curve, like was done with solar. Breakthrough [Energy] only works on technologies that, once they’re down the learning curve, have zero or negative green premiums. At the Paris talks, there was almost no focus on the hard to abate areas. Even though it won’t achieve 1.5 [degrees Celsius of warming] and probably won’t achieve 2 [degrees Celsius], the fact that we kicked that off, and there are more companies than I would have expected with cool ideas — many of which will fail, you know — that’s more than I thought we’d have eight years ago.
Rhodium is not assuming there’s a cheap fission reactor. Once you get to 2060, predicting the costs of things… I mean, even fusion. We will probably have extremely economic fusion by then.
Editor’s note: This article was updated after publication.
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On conditional loans, China’s emissions, and primary care clinics
Current conditions: Storm Conall brought more heavy rain and flooding to sodden England • Flash floods killed at least 20 people on Indonesia’s Sumatra island • The northern Plains will be hit with an “arctic outbreak” on Thanksgiving day.
The Department of Energy yesterday agreed to loan Rivian $6.6 billion to resume construction on its factory in Georgia, where the company will produce the upcoming R2 and R3 electric pickups. The loan is conditional, meaning it hasn’t been finalized just yet. “If finalized, the loan will support construction of a 9 million square foot facility to manufacture up to 400,000 mass-market electric sport utility vehicles and crossover vehicles,” the DOE said in a statement. “At full capacity, the EVs manufactured at the facility are expected to yield an annual fuel consumption savings of approximately 146 million gallons of petroleum.” Whether the loan will be completed before the incoming Trump administration takes over – or whether Trump would try to axe the loan – remains to be seen. The Biden administration set a goal for zero-emission vehicles to make up half of new U.S. car sales by 2030.
China’s CO2 emissions will rise slightly this year due to a surge in energy demand, according to new research published today from the Centre for Research on Energy and Clean Air. “The growth in energy consumption and electricity consumption is faster than in the transition pathways,” the report said. Even as China rapidly rolls out renewables and EVs, emissions will rise by 0.4% in 2024. Less than half – 44% – of the experts polled by CREA said China’s emissions have already peaked, or will peak next year. Two years ago, just 15% of experts believed that to be the case. And 36% of experts said China’s coal consumption has peaked, up from 20% who said that last year. China is the world’s biggest emitter of greenhouse gases, and coal is its main source of emissions.
Porsche this week joined a growing list of car manufacturers that are pumping the brakes on the shift to EVs. Instead of rolling out new EV models to accompany the luxury Taycan and Macan, Porsche now plans to produce new gas and hybrid models instead as it feels the effects of a slowdown in EV sales. “We are currently looking at the possibility of the originally planned all-electric vehicles having a hybrid drive or a combustion engine,” the company’s CFO said. “What is clear is that we are sticking with the combustion engine for much longer.” Earlier this year Porsche watered down its goal for 80% of sales to be electric by 2030.
Maine is suing oil giants Exxon, Shell, BP, Chevron, Sunoco, and the American Petroleum Institute, accusing them of knowingly deceiving the public about the role of fossil fuels in the climate crisis. It becomes the ninth state to do so. The new lawsuit claims the oil companies have long known that fossil fuels cause climate change, and that the resulting rising sea levels are especially harmful in Maine because so many of the state’s communities and industries are located near the coastline. The state wants unspecified damages from the companies as well as funds for adaptation and mitigation.
A recent study published in the journal BMC Primary Care examines how climate change is affecting primary care clinics serving “low-income and socially disadvantaged communities.” Surveys were sent to more than 400 staff members at clinics across 43 states. Nearly 85% of the staffers who responded reported that climate change – and especially extreme heat – is affecting their patients’ health. Many said extreme weather events were harming their clinic’s ability to provide care due to effects like power outages and staff shortages. About 16% of respondents said extreme weather contributed to loss or spoilage of vaccines. But just one-third of respondents said they’d spoken to patients about the increasing health risks associated with climate change, saying they had more important topics to discuss in the limited amount of time available during consultations. And 61% cited their own lack of knowledge about the connection between climate change and health. Interestingly, just 34% said politics or polarization were stopping them from bringing up climate change when discussing health risks.
BMC Primary Care
Renewables accounted for 24% of electricity generation in the first three quarters of 2024, up from 22.8% in the same period last year.
Rob talks Ford and GM with BloombergNEF’s Corey Cantor. Plus, Rob and Jesse dig into the Trump transition.
It’s been a news-filled few weeks — so it’s time for a roundup. On this week’s episode of Shift Key, Rob and Jesse talk about what Trump’s cabinet selections might mean for his climate policy and whether permitting reform could still happen. Then Rob chats with Corey Cantor, senior EV analyst at BloombergNEF, about promising Q3 sales for U.S. automakers, General Motors’ turnaround, and how much the Trump administration might dent America’s EV uptake.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Robinson Meyer: How are you thinking about Ford and GM right now? Because they have basically totally reversed their position since the first time we started talking.
Corey Cantor: I hope I’m not too corny today, but I was thinking Missy Elliott — another New Jerseyan — “flip it and reverse it,” in terms of how people feel about Ford and GM. I think GM’s approach … don’t forget this is their second platform at the rodeo here, meaning GM had the Bolt and the Chevy Volt before it, and a good amount of experience with EVs. And really, what they were trying to do with Ultium was to build a battery and EV platform that could work with a variety of different vehicles.
And so the struggle, as we’ve outlined before, and many publications have outlined was they just couldn’t get the battery production working. They had issues with automation. They had issues with ensuring that they were setting up the necessary suppliers. And I’d say, about maybe nine months ago or so, a favorite EV journalist of mine, John Voelcker wrote in, I believe, InsideEVs, around this idea that GM had finally cracked Ultium and were finally kind of … He had got the head of Ultium at the time on record saying that they had resolved a lot of the issues, and really, you’ve seen it in the sales volume, as well as the fact that EVs like the Cadillac Lyric continue to sell pretty consistently.
Then GM ran into a software issue with the Blazer, and fixed that software issue, and that had slowed things down. And then since, really, June of this year has been off to the races. And so we’ll see how the fourth quarter goes, right? I think you don’t want to get too high on any kind of automaker, but GM is clearly in a better spot because they’re approaching making a profit on each of the EVs sold.
Now, I’ll caveat that with, we don’t know if the EV tax credit itself, you know, at the federal level, plays a role in the fact that they’ll be gross margin profitable, but that is a pretty big turning point. Because at that point, you’re no longer losing money on those EVs, and so you are kind of geared to go more high-volume. Where if you look at Ford, Ford has been losing thousands of dollars on every electric vehicle, really had not been building a platform for the current sales of the Mach-E and the F-150 Lightning, hoping to kind of just price them where they’d be losing little enough on each that they can make their bridge to that next platform.
And then earlier this fall, Ford basically announced pushing back those EV models to 2027, along with the new platform. So Ford kind of runs into the issue that we discussed on the previous conversation with Tesla, in that they’re going to have only really two EVs in the U.S. market for the next couple of years. So GM will have the Bolt back next year and some other Cadillacs. There’s a lot of exciting things on the way for GM.
This episode of Shift Key is sponsored by …
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Music for Shift Key is by Adam Kromelow.
And for his energy czar, Doug Burgum.
When Trump enters the Oval Office again in January, there are some climate change-related programs he could roll back or revise immediately, some that could take years to dismantle, and some that may well be beyond his reach. And then there’s carbon capture and storage.
For all the new regulations and funding the Biden administration issued to reduce emissions and advance the clean energy economy over the past four years, it did little to update the regulatory environment for carbon capture and storage. The Treasury Department never clarified how the changes to the 45Q tax credit for carbon capture under the Inflation Reduction Act affect eligibility. The Department of Transportation has not published its proposal for new safety rules for pipelines that transport carbon dioxide. And the Environmental Protection Agency has yet to determine whether it will give Texas permission to regulate its own carbon dioxide storage wells, a scenario that some of the state’s own representatives advise against.
That means, as the BloombergNEF policy associate Derrick Flakoll put it in an analysis published prior to the election, “the next administration and Congress will encounter a blank canvas of carbon capture infrastructure rules they can shape freely.”
Carbon capture is unique among climate technologies because it is, in most cases, a pure cost with no monetizable benefit. That means the policy environment — that great big blank canvas — is essential to determining which projects actually get built and whether the ones that do are actually useful for fighting climate change.
The next administration may or may not decide to take an interest in carbon capture, of course, but there’s reason to expect it will. Doug Burgum, Trump’s pick for the Department of the Interior who will also head up a new National Energy Council, has been a vocal supporter of carbon capture projects in his home state of North Dakota. Although Trump’s team will be looking for subsidies to cut in order to offset the tax breaks he has promised, his deep-pocketed supporters in the oil and gas industry who have made major investments in carbon capture based, in part, on the 45Q tax credit, will not want to see it on the chopping block. And carbon capture typically enjoys bipartisan support in Congress.
Congress first created the carbon capture tax credit in 2008, under the auspices of cleaning up the image of coal plants. Lawmakers updated the credit in 2018, and then again in 2022 with the Inflation Reduction Act, each iteration increasing the credit amount and expanding the types of projects that are eligible. Companies can now get up to $85 for every ton of CO2 captured from an industrial plant and sequestered underground, and $180 for every ton captured directly from the air. Combined with grants and loans in the 2021 Bipartisan Infrastructure Law, the changes have driven a surge in carbon capture and storage projects in the United States. More than 150 projects have been announced since the start of 2022, according to a database maintained by the International Energy Agency, compared to fewer than 100 over the four years prior.
Many of these projects are notably different from what has been proposed and tried in the past. Historically in the U.S., carbon capture has been used on coal-fired power plants, ethanol refineries, and at natural gas processing facilities, and almost all of the captured gas has been pumped into aging oil fields to help push more fuel out of the ground. But the new policy environment spurred at least some proposals in industries with few other options to decarbonize, including cement, hydrogen, and steel production. It also catalyzed projects that suck carbon directly from the air, versus capturing emissions at the source. Most developers now say they plan to sequester captured carbon underground rather than use it to drill for oil.
Only a handful of projects are actually under construction, however, and the prospects for others reaching that point are far from guaranteed. Inflation has eroded the value of the 45Q tax credit, Madelyn Morrison, the government affairs director for the Carbon Capture Coalition, told me. “Coupled with that, project deployment costs have really skyrocketed over the past several years. Some folks have said that equipment costs have gone up upwards of 50%,” she said.
Others aren’t sure whether they’ll even qualify, Flakoll told me. “There is a sort of shadow struggle going on over how permissive the credit is going to be in practice,” he said. For example, the IRA says that power plants have to capture 75% of their baseline emissions to be eligible, but it doesn’t specify how to calculate those baseline emissions. The Treasury solicited input on these questions and others shortly after the IRA passed. Comments raised concerns about how projects that share pipeline infrastructure should track and report their carbon sequestration claims. Environmental groups sought updates to the reporting and verification requirements to prevent taxpayer money from funding false or inflated claims. A 2020 investigation by the inspector general for tax administration found that during the first decade of the program, nearly $900 billion in tax credits were claimed for projects that did not comply with EPA reporting requirements. But the Treasury never followed up its request for comment with a proposed rule.
Permitting for carbon sequestration sites has also lagged. The Environmental Protection Agency has issued final permits for just one carbon sequestration project over the past four years, with a total of two wells. Fifty-five applications are currently under review.
Carbon dioxide pipeline projects have also faced opposition from local governments and landowners. In California, where lawmakers have generally supported the use of carbon capture for achieving state climate goals, and where more than a dozen projects have been announced, the legislature placed a moratorium on CO2 pipeline development until the federal government updates its safety regulations.
The incoming Congress and presidential administration could clear away some of these hurdles. Congress is already expected to get rid of or rewrite many of the IRA’s tax credit programs when it opens the tax code to address other provisions that expire next year. The Carbon Capture Coalition and other proponents are advocating for another increase to the value of the 45Q tax credit to adjust it for inflation. Trump’s Treasury department will have free rein to issue rules that make the credit as cheap and easy as possible to claim. The EPA, under new leadership, could also speed up carbon storage permitting or, perhaps more likely, grant primacy over permitting to the states.
But other Trump administration priorities could end up hurting carbon capture development. The projects with the surest path forward are the ones with the lowest cost of capture and multiple pathways for revenue generation, Rohan Dighe, a research analyst at Wood Mackenzie told me. For example, ethanol plants emit a relatively pure stream of CO2 that’s easy to capture, and doing so enables producers to access low-carbon fuel markets in California and Washington. Carbon capture at a steel plant or power plant is much more difficult, by contrast, as the flue gas contains a mix of pollutants.
On those facilities, the 45Q tax credit is too low to justify the cost, Dighe said, and other sources of revenue such as price premiums for green products are uncertain. “The Trump administration's been pretty clear in terms of wanting to deregulate, broadly speaking,” Dighe said, pointing to plans to axe the EPA’s power plant rules and the Securities and Exchange Commission’s climate disclosure requirements. “So those sorts of drivers for some of these projects moving forward are going to be removed.”
That means projects will depend more on voluntary corporate sustainability initiatives to justify investment. Does Amazon want to build a data center in West Texas? Is it willing to pay a premium for clean electricity from a natural gas plant that captures and stores its carbon?
But the regulatory environment still matters. Flakoll will be watching to see whether lax monitoring and reporting rules for carbon capture, if enacted, will hurt trust and acceptance of carbon capture projects to the point that companies find it difficult to find buyers for their products or insurance companies to underwrite them.
“There will be a more of a policy push for [CCS] to enter the market,” Flakoll said. “But it takes two to tango, and there's a question of how much the private sector will respond to that.”