As a proponent of the power of technology to tackle climate change, Bill Gates has put his considerable resources and energy behind investments that could reduce the greenhouse gas emissions from producing everything from energy, transport and aviation to cement, steel and food.
Breakthrough Energy, set up by the billionaire philanthropist and Microsoft co-founder in 2015, takes stakes in start-ups with nascent technologies that need funds to develop at scale. To be considered, a start-up must prove it can reduce emissions by at least 0.5bn tonnes, in a world that produced almost 37bn tonnes of energy related emissions last year.
Gates spoke to the FT’s climate correspondent Attracta Mooney about the latest $1bn fundraising target for the Breakthrough Energy Ventures investment arm, and the need for governments to deliver more research and development, carbon taxes, and tax credits, to help limit global warming.
Attracta Mooney: Breakthrough Energy [Ventures] has had funds for a couple of years. Is there any particular area of focus now?
Bill Gates: Well, Breakthrough Energy is my work on mitigation, and the Gates Foundation is where the adaptation work is done. And at this point, we have 100 companies in the portfolio.
The goal is reasonably straightforward: that is, to create technologies such that the green premium [the additional cost of choosing clean technology over one that emits more greenhouse gases] for every source of emissions is driven to zero.
We are just in the process of raising fund three and that’s going very well. We have a little more than $1bn in funds one and two, and fund three will be about the same size. And we will do some other funds that are more for follow-on-type things.
We have Breakthrough Energy Fellows for things that are early stage — not yet fundable. We have ventures for things that are venture fundable, and we only fund climate [initiatives]. We have a very large technical staff: we have a fusion team, storage team, agriculture team.
And, then, we have [a platform, called] Catalyst, which is about taking technologies at the lab level and getting them scaled up [to the stage when] normal infrastructure investors would come in [but can’t] because of the remaining uncertainties.
We [also] have a policy group and we do a lot of science [initiatives], like open-source grid models. So we’re making incredible progress. At the lab level, there are amazing technologies. Now, getting them out [to market] . . . there’s still a big challenge.
AM: [Those] 100 portfolio companies — is that the number you wanted to stay at?
BG: No, fund three will get us up to probably 140, and then some will go away, so you can subtract from that. We’ve had an unnaturally low failure rate. But we have multiple cement, multiple carbon capture [companies]. There are different strategies that work in different geographies, depending on the geology. You can have multiple succeed, but you’ll have some that are just superior to others or that just don’t work at all.
AM: You said an “unnaturally low failure rate” — how low is it?
BG: I think we closed 15 per cent of the things we’ve invested in. A lot of these are companies we’ve founded. We put together the Stanford and MIT groups, our geological hydrogen group Koloma . . . we have theories [for which] there are no companies and we’ve created a bunch of companies. We created Redwood [Materials], which is the number two guy at Tesla doing battery recycling. We see gaps in the emissions space and [assign] fellows to work on it, and then we create fundable companies and we hire people.
AM: You mentioned carbon capture, which seems to be a big focus for the COP28 agenda as well. There is a big debate about phasing out fossil fuels and phasing out “unabated” fossil fuels [those burnt without emissions captured]. The COP team and [president-designate of COP28] Sultan al-Jaber talk quite a lot about the role of carbon capture and storage (CCS). What role do you think CCS and direct air capture will play?
BG: Well, so far, it plays essentially no role. Climeworks [a Swiss direct air capture company] is in the market. [Microsoft is] their biggest individual customer. But that’s, you know, like $600 a tonne [for the cost of carbon removal]. So it’s not economic for the world at even $200 a tonne to use that brute-force approach.
For everything you can, you want to solve it by never generating the carbon dioxide. So for passenger cars, you want electric vehicles . . . when you get there, you’ve eliminated the primary demand for crude oil, because it always sells at an energy premium because of its transportability.
So electric cars should be the way to solve crude oil [emissions, which] should have at some point a negative green premium.
You wouldn’t want to use carbon capture for large areas like that. You would want to use that for, [for example] poor countries who you really don’t want to impose economic costs on because they’re poor and their historic emissions have been near zero.
The primary role most people see for the capture piece is, at least direct air capture, to take the final 10 per cent [of emissions that cannot easily be removed through other means]. Now, some people say, ‘let’s have years of negative emissions to catch up for the past’. You’d have to get a very low per tonne price — the numbers are just gigantic compared to, say, development aid budgets, or anything you want compare it to.
[Oil company Occidental Petroleum] just bought a company called Carbon Engineering for $1.1bn, so there’s activity in the space. Actually, there’s two of the Breakthrough Energy companies here in the UK: Mission Zero [Technologies] and 44.01 are actually carbon capture companies.
AM: You mentioned Occidental. The Occidental CEO has said direct air capture will allow the fossil fuels industry to keep producing [oil and gas] for decades to come.
BG: If it’s economic and truly net zero, you know . . . but the likelihood is that electric cars will outcompete. And that’s a big area of emissions, so the scale of capture you would have to have would be pretty unbelievable. But if it can really be made truly and honestly zero, and truly and honestly cheaper than electric cars and some part of the car range, then it’s part of the solution. But the likelihood is, we really should push for electric cars to be the total substitute there.
AM: So that kind of push that we’re seeing from countries, including, for example, Saudi Arabia, which really wants CCS to be included alongside rolling out renewable energy or something like that . . .
BG: But they’re not doing any CCS, they’re not funding the companies that work on CCS.
AM: Do you think it’s a negotiation ploy, then, in that sense?
BG: Who knows? I can’t speak for them. Amongst the areas that Breakthrough Energy is creating technical possibilities in is coming up with the lowest-cost direct air capture.
So if that’s part of the solution sack . . . it is a thing that by definition always has a positive green premium because its whole purpose is the carbon reduction — it’s not in and of itself a service.
There is a potential that if CO₂ gets cheap enough and hydrogen gets cheap enough, that you can do what’s called “complete the fuel cycle”, and you can do the math on how cheap the hydrogen would have to be and how cheap the carbon capture would have to be in order for you to use something called electrofuels or synthetic fuels as a meaningful part of the solution.
Economics are, in human endeavour, a very key way that we measure these things. And innovation creates more economical options for us to get to zero emissions.
AM: But is it fair to say that your view is that there’s a role for direct air capture, for CCS, but that is after you decarbonise as much as you can?
BG: It’s kind of a brute-force solution and it never has a zero green premium. It always costs money. And so the ideal is that you find ways of making steel and cement [with lower or no emissions]. So is that for the last 10 per cent — what do you reserve that for, who’s financing that piece, what’s the cost per tonne?
You eventually want to get to the point where you’re willing to tax any emission activity at the marginal cost of capture and then actually spend it on capture. That’s the way you get to zero [emissions]. But, for most cases, you should use an alternative technique, rather than emitting and then paying for capturing.
AM: Will you be at COP28?
BG: Oh yeah.
AM: What would a good COP28 look like to you? What’s an ideal outcome?
BG: Well, these meetings have a lot that’s going on. I’ll be there wearing both my Gates Foundation hat and my Breakthrough Energy hat. A lot of our innovative companies will be there in the innovation pavilion, [which we worked on with the United Arab Emirates] to make sure was a very big deal, because those companies need big company partners, government partners, to get their stuff scaled up as fast as possible.
So I hope that the connection between the innovative companies and private sectors and government, that we have a lot, and it’s probably the most hopeful thing in the whole climate area. I mean, after all, we are missing our near-term goals [on cutting greenhouse gases by almost half by 2030 to limit global warming to 1.5C since pre-industrial times].
Those middle-income countries . . . unless you get small green premiums or massive subsidisation coming from rich countries — which has no chance of happening, because it will exceed all aid budgets by multiples — the way you square the circle on this in terms of people’s willingness to pay more, even in rich countries . . . innovation is how you square the circle.
That’s why, in 2015, I committed to create Breakthrough Energy, to create options across all emission areas to vary economically, ie over time with negative green premiums, [to] provide the same goods and services.
AM: Will you do any deals with the UAE while you are at COP28?
BG: We have a health day; [the UAE will] announce new money for health things, as will we. There’s an agricultural day; we’ll announce commitments to various projects that are in the adaptation bucket.
AM: What about on the mitigation side?
BG: We have a few projects that, assuming the next [few] weeks go well, we’ll announce some products.
AM: And is that working with the UAE to do that, or separately?
BG: Well, on the adaptation side, I hope they’ll be involved in every one of our adaptation announcements.
AM: There is a huge gap with adaptation finance, and actually even mitigation financing in the middle-income or developing world. The IMF said the other day that we need 80-90 per cent of climate finance for emerging and developing economies to come from the private sector. But that’s not where the money is going. How do you think you solve that problem?
BG: When it gets a negative green premium, then normal capitalistic economics kick in. So you always have to distinguish between grant money — which climate adaptation is about — versus money that’s trying to bootstrap climate solutions, which are mostly coming from rich countries, rich companies or rich individuals, or things that are now commercial, and the risk profile has gotten to the point where they deserve to compete for just normal private sector dollars.
Because those numbers are so big, mixing together these different types of climate finance just confuses everyone, because what’s necessary to trigger the money and make it flow in the right way are utterly different between grant-type [initiatives] versus, you know, financing a solar field that has a strong economic case.
AM: Even to get a solar field that has a strong economic case in, for example, some African countries, it’s hard to get financing for it. How do you get past that?
BG: [Many] African countries are not significant emitters, so it doesn’t matter. In middle-income countries, yes, you should change the electricity systems, but it’s just a rounding error to focus on unstable places, where the risks of the capital [are] very appropriately gigantic.
AM: President [William] Ruto of Kenya talks about the struggles to get financing for projects, and South Africa the same thing — the president says he can’t get financing for the clean energy projects.
BG: The way that electricity bills are paid in South Africa — and the way the electricity production system is run — makes it difficult for private finance to go in there without, you know, pretty high risk rates. So I don’t think the financial world is behaving irrationally.
AM: I definitely take your point. For private finance, it’s just seen as a way riskier bet, to invest in low or middle-income countries . . .
BG: It depends on the country. I mean, it’s a project-by-project thing.
AM: Do you think you can do anything to reduce those risks of investing in those countries?
BG: You always have a hard time bootstrapping the electricity markets. You look at the history of the Indian electricity companies and the bailouts, and things like that. It’s a tricky bootstrap.
AM: On adaptation, we talked about grant money there. Can we get enough grant money to adapt all of these countries?
BG: The biggest effect of climate [change] is in tropical countries, and the effect runs through the damage to agricultural output — that you have, in general, lower output [and you have] more years of zero output.
We saw in the 1960s and 1970s, when the world was forecasting massive famine in south Asia, that impact — because yields went up despite the population growth; the calories per person went up more during that period than any period. And there was not, thank goodness, mass starvation.
African agricultural productivity is a quarter of, say, the US or Europe. Africa has the cheapest land, Africa has the cheapest labour. So, even in the face of climate population growth, we ought to be able to make — with the right [research and development] investments, which is grant money — we ought to be able to raise agricultural productivity per person, even with population growth and climate change.
We’re raising the frontier of agricultural productivity and they’re not even close to that frontier.
AM: You’ve talked about the 1.5C target of the Paris agreement and it not being achievable. Can you talk to me a little bit more about that? And what that means if we go to 2C, which I think is what you suggest.
BG: Take steel — draw what you think the reduction is over the next 30 years — cement, [or] beef . . . The majority of emissions, we haven’t really started to reduce those emissions. And so you actually have to get the technologies at the lab level, then you’ve got the pilot projects, then you’ve got to scale up the pilot projects, you’ve got to get the costs down. And then you have to convince middle-income countries to make those changes.
Zero is kind of this demanding number that says they can’t skip any country or any source of emissions. And I’d love to meet the person who can explain that to me. I’m not trying to be the realist in the room. I’m just struck by the numbers somewhat. In areas like health and climate, being honest about the numbers is helpful, [so] that we pursue realistic goals.
AM: I did an event here earlier this year at Chatham House about 1.5C. And [an argument put forward] was that by saying we can’t achieve 1.5C, it kind of gives polluters leeway to keep going.
BG: That’s their opinion . . .
AM: But you think that it’s better to have the real numbers?
BG: If you want to be part of a solution, yes. If you want to be an activist, it’s OK. But what do you do the day you don’t meet 1.5C? I mean, you’re kind of breeding cynicism not to educate people on the realities of what’s going on in the world.
If people want to be engaged in the fact that we have very little money — and whether it’s for buying vaccines . . . or getting innovation projects accelerated — we really do have to acknowledge that this is a world of finite resources. And the one thing that’s magic in this world is the innovation.
AM: How do you get Russia and China and big polluters on board?
BG: It’s a collective action problem. The rich countries need to lead. So far, China’s done a lot of things well. In fact, who’s brought climate technologies down in price better than any other country? I mean, to the degree that it creates incredible trade tension that their solar panels, their batteries, are the most economical at this point. And so countries have to make a trade-off there in terms of climate versus other considerations.
AM: You mentioned rich countries have to lead. The UK has rolled back some of its net zero policies. What do you think about that?
BG: Well, the UK’s overall track record on climate relative to others is pretty good. We do have to be careful about [how], when you say, “10 years from now, do something”, it’s easier. Then when it gets to be seven years or five years [from now, and] the car manufacturers want to know, “should I shut my plant down?” Is the low end of the UK car market going to be forced to be all electric cars, which still has a high green premium?
So if you look at the at these green premiums, it’s easier, particularly in a democracy, to say, OK, in 10 years we’ll end this or that. Climate is a huge problem. I believe that more R&D money, more carbon taxes, more tax credits for climate [are needed] . . . but it all has to fit in with the multiple priorities that voters bring to the allocation of their tax resources.
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