GREEN MANIFESTO
BILL GATES SAYS HIS PLAN TO FIGHT CLIMATE CHANGE WILL REQUIRE NEW WAYS OF DOING BUSINESS,
AVOIDING A CLIMATE DISASTER REQUIRES A DIFFERENT WAY OF DOING BUSINESS, THE COURAGE TO TAKE ON RISKS THAT MANY CEOS ARE NOT USED TO TAKING — AND THAT INVESTORS ARE NOT USED TO REWARDING.
— BILL GATES
In the conversations I have about climate change, one question comes up more than any other: “How can I help?” Sometimes it’s an individual who simply wants to know whether to stop buying plastic straws. (Answer: it doesn’t do much for climate change, but it does help the environment in other ways.) Just as often, though, the question comes from someone working on a larger scale — for example, a chief executive who wants to know: “What can my company do that will really make a difference?”
Unfortunately, even the most dedicated climate change advocates have struggled to find satisfying answers to that question. But there are in fact things businesses can do to make a measurable difference for the climate. They will not come easily, though. Avoiding a climate disaster requires a different way of doing business, the courage to take on risks that many CEOS are not used to taking — and that investors are not used to rewarding.
It took me years to come to this point of view. I became interested in climate change not as an environmentalist, but as an advocate for global health and development.
Since the early 2000s, my wife, Melinda, and I have been funding efforts to improve health and fight poverty in lower- and middle-income countries. A few times a year, I would travel abroad for the chance to see the work in action. Often, I’d fly into a country at night and be struck by the immensity of the darkness. A billion people, I learned, did not have access to reliable electricity. Around half of them lived in sub-saharan Africa. (Today the global number is about 860-million people.)
It became obvious that it would be virtually impossible to make real inroads on disease and poverty when more than one in 10 people on Earth did not have reliable access to all the benefits of energy — lights for schools and health clinics, transportation between work and home, fertilizer for crops, even air-conditioning to withstand rising temperatures.
But achieving a modern lifestyle depends on fossil fuels. And the problem is simple: we can’t afford to release more greenhouse gases. In fact, we need to stop releasing them altogether, and do it by 2050. Think of the climate like a bathtub that’s slowly filling up with water. Even if we slow the flow of water to a trickle, the tub will eventually fill up and water will spill all over the floor. To stop temperatures rising and avoid a disaster, we have to turn off the tap entirely — we have to get to zero greenhouse gas emissions.
I wrote my new book to propose a practical plan for eliminating emissions and developing and deploying the tools we need to so. While I’m optimistic that we can do that, it’s going to take a lot of effort from the only groups capable of operating at a global level — governments, non-profits and businesses.
How hard will it be? In the course of writing How to Avoid a Climate Disaster, I developed a way to answer that question. I call it Green Premiums — the differences in cost between a fossil-fuel-based way of doing something and the clean, non-emitting way of doing the same thing. The Green Premiums tell us how much it will cost to zero-out emissions in all the sectors of the economy where fossil fuels are involved — including producing electricity, manufacturing, agriculture, transportation, and heating and cooling. Armed with these Green Premiums, we can see which zero-carbon tools are practical now, and which ones we still need to improve or invent.
In my research, I found some pleasant surprises. For example, in the U.S., switching to a clean electricity grid using current technology (wind, solar, hydropower and nuclear) would raise electricity prices by about 15 per cent over current retail rates. That’s a relatively small hike for many people — roughly $18 a month — though we’d need to make sure that lower-income families wouldn’t be burdened by it. Europe, with its abundant sources of renewables, is in a similar position.
Unfortunately, many countries don’t have as much wind and sunlight as the U.S. and Europe do. In those places, the Green Premiums on electricity will be quite a bit higher, and they’ll need innovation to close the gap.
In fact, the relatively low Green Premiums for electricity in the U.S. and Europe are the exception, not the rule. For the large majority of activities that cause emissions — everything from making cement and steel to flying jetliners — we don’t have clean options that are remotely as cheap as their conventional counterparts.
For example, cargo ships run on a fuel that costs about US$1.29 per gallon in the US. The clean versions of this fuel cost between US$5.50 and US$9.05 per gallon, depending on how they’re made — an increase of between 300 and 600 per cent. No shipping line is going to voluntarily increase its fuel costs by such a huge margin.
Why are most of the Green Premiums so high? Because green products face stiff competition from their polluting counterparts. Fossil fuels are readily available, and we have spent decades building the infrastructure to extract, process and move them around the world. In addition, their prices don’t reflect the damage they do to people or the environment. And they do their job very effectively — a single litre of petrol, for example, contains as much energy as 34 sticks of dynamite. Virtually all the clean alternatives are less powerful.
This is why we need energy innovation. Clean tech has to be so cheap that everyone adopts it.
It is hard to overstate the magnitude of this challenge. Energy is a Us$5-trillion-ayear business, and it is not accustomed to rapid change. It will take time to achieve the scale of change we need, so we should get to work now on creating the policies, technologies and market structures that will make it possible.
The good news is that there is a growing interest among the groups best suited to drive this change — corporations and governments. The bad news is that right now we don’t have the economic structures to allow them to have an impact, and so they often do things that may look good on paper but don’t actually help solve the problem.
Planting trees, for instance. It sounds like a simple fix and it has obvious appeal for all of us who love trees, but its impact on climate change is overblown. Although trees absorb some carbon, they can never take in enough to offset the damage from our modern lifestyle. To absorb the lifetime emissions that will be produced by every American alive today — just 4 per cent of the global population — you’d need to plant and permanently maintain trees on more than 16 billion acres, roughly half the land mass of the world.
Yet if you’re a business leader looking to do something about climate change, planting trees looks like an attractive option. That’s not a failure on your part — it just means the world hasn’t given you a way to do something that has more impact.
So what can you do that will have impact? There are four areas where companies can make a practical difference. Not all of them will apply to every business, but there is something on this list for most of them.
The first area involves mobilizing capital to reduce the Green Premiums. For some products — like wind, solar and electric passenger cars — the Green Premiums are already low but will go down even further if more companies buy them. In other cases, such as low-carbon steel and fuels for shipping and aviation, the Green Premiums are prohibitively high. These are the sectors where we need to invest the most money and effort.
In practice, this means companies need to be willing to finance innovative low-carbon solutions where the Green Premiums are highest. Investors, for instance, can lower the cost of capital for these technologies and make financing easier for them as they get to large-scale demonstration projects.
In some cases, investors may need to accept lower returns too. This is inherently risky — I’ve already lost more money on battery companies than I ever thought I would. But pooling resources and investing together instead of individually will lower the risk for any single investor. By providing low-cost capital and other financial concessions along multiple stages of a technology’s development, you can help promising innovators navigate all the obstacles that keep them from getting their ideas out of the lab and into the market. You can also mentor clean energy entrepreneurs, sponsor pilot projects and put money into innovative funds that prioritize climate impact.
The second way your company can have an impact is through the products it buys. If your company runs a fleet of vans, for example, you can commit to buying electric vehicles. You’ll not only meaningfully reduce your company’s emissions, you’ll also send a signal to auto manufacturers that there’s a growing market for electric vehicles, which will in turn drive competition and push prices down. Procurement is a powerful tool to start building markets for other products too, such as hydrogen fuels and greener alternatives to steel and cement.
Another example of using procurement to drive down Green Premiums involves the airline industry. Your company can offset the emissions from employees’ travel by buying sustainable aviation fuel for the miles they fly. That creates demand for clean fuels, attracting more innovation in that area, and it makes travel-related emissions a factor in your company’s business decisions.
There are many other examples of companies making a measurable difference by paying for early-stage technologies that reduce or offset emissions. Some, including Stripe, are supporting carbon capture, a promising technology that needs investment to scale up. Through the Hybrit project, some steel companies are integrating clean hydrogen into their production methods. And utility companies are buying long-duration storage solutions for clean electricity, as Great River Energy recently did with Form Energy.
The third area is expanding research and development. Consider Impossible Foods, one of the leading producers of plant-based meat, in which I was an early investor. (Cattle are a major producer of methane, a greenhouse gas.) In 2020, Impossible announced plans to double the size of its R&D team with a goal of reducing the price of its burgers and expanding market share. Last March, its products were available in 150 grocery stores. Today they’re available in more than 15,000.
The final way you can help drive down the Green Premiums is to help shape public policies. You can make it clear that governments need to invest in public R&D for clean energy, and call on officials to give the private sector incentives to innovate in this area and to help clean energy compete by putting a price on carbon or setting minimum requirements for the use of clean energy.
Working in these four areas will not always be comfortable. If your bank loans money to a company that goes under, your bottom line will take a hit. If you assign your best researchers to a clean-energy project, they might end up going down a dead end. Time spent talking to a politician about climate policy is time you could spend discussing your core business instead.
But these are the shortterm costs required of every business leader who wants to do more than pay lip service to climate change. It takes courage for CEOS to bear these costs, and patience for board members and investors to reward them for it. Yet, in the long run, these risky steps will be good for business. The Green Premiums will come down, and consumers will remember which companies were serious about helping avoid a climate disaster.