There’s a new Common Sense podcast episode out (#298), and the main subject (apart from an interlude to talk about the Paris terrorist attacks), was focused on the Atlantic’s interview with Bill Gates: “We Need A Climate Change Miracle“.
It is worth your time.
Unfortunately, as Dan points out, the reason this interview is getting attention is not because of Climate Change, but because of two separate side-bar comments.
First, Bill Gates was asked why the Free Market won’t deal with Climate Change:
Well, there’s no fortune to be made. Even if you have a new energy source that costs the same as today’s and emits no CO2, it will be uncertain compared with what’s tried-and-true and already operating at unbelievable scale and has gotten through all the regulatory problems, like “Okay, what do you do with coal ash?” and “How do you guarantee something is safe?” Without a substantial carbon tax, there’s no incentive for innovators or plant buyers to switch.
And for energy as a whole, the incentive to invest is quite limited, because unlike digital products—where you get very rapid adoption and so, within the period that your trade secret stays secret or your patent gives you a 20-year exclusive, you can reap incredible returns—almost everything that’s been invented in energy was invented more than 20 years before it got scaled usage. So if you go back to various energy innovators, actually, they didn’t do that well financially. The rewards to society of these energy advances—not much of that is captured by the individual innovator, because it’s a very conservative market.
And then when asked whether the government will be inefficient:
Yes, the government will be somewhat inept—but the private sector is in general inept. How many companies do venture capitalists invest in that go poorly? By far most of them. And it’s just that every once in a while a Google or a Microsoft comes out, and some medium-scale successes too, and so the overall return is there, and so people keep giving them money.
Oh my. Calling the private sector “in general inept”? Blasphemy!
Observations though:
- I’m not sure why everyone is getting so hung up on the side-commentary. This isn’t an ideological discussion about socialism versus free market economics. It’s just acknowledging that in the current circumstances, pragmatically speaking, the free market does not have enough incentive to get too involved in the search for Big Energy.
- Yes, that may be because the energy sector is “too” regulated – but we are not going to change that any time soon, so there’s no point in arguing that deregulation is the first step in addressing climate change. It’s like trying to decide whether the first step in putting out the fire is to try and re-build the house out of non-flammable materials #toolateforthat
- The pragmatic response is to find the best and quickest solution. Given the current sway of things, that’s going to include government funding. And why not just throw everything at the problem?
Anyway, here’s the more important part:
The heating levels have not tracked the climate models exactly, and the skeptics have had a heyday with that. It’s all within the error-bar range. To me, it’s pretty clear that there’s nothing that relieves this as a big problem. But when people act like we have this great certainty, they somewhat undermine the credibility. There’s a lot of uncertainty in this, but on both the good and the bad side.
By overclaiming, or even trying to ascribe current things more to climate change than to other effects, environmentalists lend weight to the skeptics. Like, in the near term, the Pacific oscillation, this El Niño thing, has a much bigger impact on current weather than climate change has had so far. Now, climate change keeps climbing all the time—it just keeps summing, summing, summing, and adding up. So, as you get up to 2050, 2080, 2100, its effect overwhelms the Pacific oscillation.
So we have to have dramatic change here. It’s unprecedented to move this quickly, to change an infrastructure of this scale—it’s really unprecedented. And, when you turn to India and say, “Please cut your carbon emissions, and do it with energy that’s really expensive, subsidized energy,” that’s really putting them in a tough position, because energy for them means a kid can read at night, or having an air conditioner or a refrigerator, or being able to eat fresh foods, or get to your job, or buy fertilizer.
That’s why we really need to solve that dilemma, we need innovation that gives us energy that’s cheaper than today’s hydrocarbon energy, that has zero CO2 emissions, and that’s as reliable as today’s overall energy system. And when you put all those requirements together, we need an energy miracle. That may make it seem too daunting to people, but in science, miracles are happening all the time.
Rolling Alpha posts about finance, economics, and sometimes stuff that is only quite loosely related. Follow me on Twitter @RollingAlpha, or like my page on Facebook at www.facebook.com/rollingalpha. Or both.
