Green Premium is metric that says you are on to success in 2050: Bill Gates

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CERAWeek by IHS Markit 2021 commenced today. At the plenary session, Bill Gates, Co-Chair of the Bill & Melinda Gates Foundation and founder of Breakthrough Energy, discussed his new book “How to Avoid a Climate Disaster.” It is a plan for eliminating greenhouse gas emissions.

Drawing on his decades of work in science, technology, and humanitarian aid, Gates offered insights into the breakthrough technologies and pipelines of innovation to address the climate challenge, in a chat with Dr. Daniel Yergin, Author ‘The New Map’, and Vice Chairman, IHS Markit, who was the moderator.

Dr. Daniel Yergin (L) and Bill Gates (R). Courtesy: CERAWeek by IHS Markit 2021.

He commented on the work of the Gates Foundation. The number of crop failures were a lot larger. There was no movement that was strong enough for a political will. Only in the last few years, the activists did force the governments on some plan. There were new metrics like the Green Premium. Africa has population growth and limited governance. Things have since gone very well.

About his book, he had been in many conversations since 2005. He shared his journey, about things he had very little knowledge about. Some of the goals for 2030 are somewhat unrealistic, but may be achievable by 2050. In the history of the industrial economy, things have never changed as fast as we wanted them to. The innovation pipeline generally starts from basic R&D. We have looked at super-hard categories like cement, steel, etc. Government money comes in for basic R&D. Now, we are going to catalysts, such as solar panels. Someone can say, they can make cement at 50 percent price premium. The demand side for green innovation is needed. It will go to governments, companies, and ultimately, users.

Carbon capture and nuclear
What is the difference in cost between a product that involves emitting carbon and an alternative that doesn’t? This difference in cost is what Gates calls the Green Premium, and understanding it is key to making progress on climate change.

You need to capture carbon at the source. There are some steel processes. There are some carbon engineering processes, as well. Carbon engineering on paper looks great. We need to try out everything. Direct air capture is one process.

In terms of breakthroughs, if we look at all the sources, there is the vaccine that will bring the pandemic to an end. You can get super cheap green hydrogen for lot of industrial processes. The hydrogen has to be mind-blowing cheap. It is exciting, but might not emerge. It is frustrating that nuclear does not generate that interest. US Congress created the advanced reactor demonstration program (ARDP). Nuclear is too expensive in the US. We have to go back and start all over. On biofuels, we are the biggest customer of aviation biofuels. There are some hybrid projects going on. We need to scale that up.

Green Premium
As a rule, there are three levers we can pull to reduce Green Premiums:

Governments can use policies to either make the carbon-based version of something more expensive, or make the clean version cheaper—or, ideally, some of both. This could include requiring a certain amount of electricity or fuel to be generated in zero-carbon ways.

Companies and investors can commit to buying and using cleaner alternatives, investing in research and development, supporting clean-energy entrepreneurs and startups, and advocating for helpful government policies.

Individuals can help create markets for better, cleaner alternatives. When you buy an electric vehicle or a plant-based burger even though it costs more than the alternative, you’re saying to the companies that make these products: “There’s demand for these items. Make more, and we’ll buy them.” That will drive investment in research, which helps decrease the price and ultimately, makes the clean products more affordable and available for everyone.

Green Premium is the extra cost you pay for something that has no emission! Green Premium is simply the difference in cost between doing something in a way that produces greenhouse gases, and doing the same thing without the emissions. You need to give up some range. We can see volumes, with incentives. Green Premium can get to zero, even as there are no more gas-powered cars. We owe more to the world, and we have to innovate for them. Green Premium is the metric that says you are on to success in 2050.

There should be some cost to make green cement, for instance. Some carbon capture can improve over time, as you are using different approaches. The $5 trillion goal is the ultimate. We need to draw a lot of people looking at the same model. If transportation moves to electricity, it can make things more easy. We need to pursue more of miracle storage and nuclear.

Power demand for the US has been going flat. Electricity is coming up as the ultimate solution. We need a lot more transmission. Electricity will be more central to everything running.

Climate agenda is also different for different countries. Will people rely on energy generated by other resources? There are parts of Africa where the adaptation agenda is acute, because of the temperature. The very poor countries need to get subsidized energy.

About Covid-19, what were the lessons learned? Gates Foundation has been working on respiratory diseases. Countries like Australia, New Zealand, South Korea, etc., handled the first 60 days very well. The next pandemic will see diagnostics equipment that is at least 10 times better. Pandemic is a lesson for the governments to think more about the future. We have also funded the high-volume vaccine manufacturers in India. We need to get the economies back on track.

He added the Biden administration is channeling a lot of money. The general interest levels are also high on many topics. The road ahead should be a lot of innovation. There should be hundreds of great companies who are pursuing to improve the great metrics. A lot of it is in the political realm. We hope to see more surprises from the innovators.

Breakthrough Energy, which started with a venture fund to invest in promising clean energy companies, has expanded to a network of philanthropic programs, investment funds, and advocacy efforts to accelerate energy innovation at every step.

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