The ideas of economists

As world leaders assemble in Glasgow for COP26, John Maynard Keynes’ famous quote on the power of ideas in shaping policy and action comes to mind to describe why we made two recent grants in connection to the climate conference. Both were time-sensitive opportunities that came through our networks and that needed rapid decisions and deployment of money, so we believe they vividly illustrate the value of the Climate Change Fund.

And both are targeted at changing ideas and discourse to change action. This is because we continue to believe that the central lever to achieve more climate progress through philanthropy is by improving how the vast societal attention climate change receives is better allocated. Both grants are focused on amplifying important ideas in this special moment, so we also include links to how they have been received in the media (though we believe a lot of the impact, especially for Grant #2, might come from impacting decision-makers directly, not via mass media).

Grant I: Changing how we think about the effects of policy choices to make better climate policy decisions

It is a common problem in climate discussions that those policies that have arguably been the most successful in driving decarbonization – technology-specific innovation and support policies that have driven the success of solar, wind, and electric cars – have a bad reputation as costly, inefficient, and highly uncertain. While the evidence base for their effectiveness becomes increasingly clear, there is still hesitancy to repeat the same approach for other critically needed technologies – such as carbon removal, low-carbon steel, carbon capture and storage, and advanced nuclear, to name a few.

We believe changing this is critical, as innovation policy is the most plausible strategy to deal with the central conundrum of the climate challenge – that future emissions are, by and large, not where the willingness and ability to pay for climate action right now are concentrated.

If that sounds abstract, consider that Germany spent hundreds of billions on making solar cheap. Not being a particularly sunny country, it won’t save a lot of emissions here, but these investments have plausibly driven many gigatons of carbon reductions in sunnier countries.

So, we were excited to be approached to comment on a report prepared by leading international academics that would make those points in a much more rigorous fashion and translate them for policy makers in key economies, including key emerging economies of China, India, and Brazil. Asked whether we could do anything more to support it, it became clear that more could be done to amplify the report’s message via a targeted PR effort which is what this grant is about. The New Economics of Innovation and Transition is the flagship report of the EEIST project. It was launched at the World Leaders Summit on Innovation at COP26. A VIP influencer evening reception was held on 4 November in the UK Pavilion at COP, to promote the findings more widely. This can be watched here, you can learn a bit more about the EEIST project at the end of this post.

Why we made this grant and why we believe it is additional

As neither the UK government nor UK universities are particularly funding-constrained you might wonder “Surely, it is great this report is promoted, but wouldn’t this have happened anyway?”. This was our first line of questioning and we think the answer is “no” for two reasons: (1) With the research funded out of a budget for International Climate Finance, PR amplification through a UK PR agency would have been out of scope. (2) While we believe there are probably other philanthropists who would have made the grant on a longer timeline, the urgency and the business of project staff makes it unlikely (50%) to us that this actually would have happened.

What we expect and how we will track impact

Given the relatively small sum and extreme urgency, we did not conduct a very detailed investigation, but rather argued based on key considerations.

If there was only a small probability (say, 1%) that this funding would affect the thinking of an important decision maker, it would be well worth the money.

More concretely, we think there is a 50% chance that the report will be featured in a major publication that it otherwise would not have been featured in, and we estimate a 50% probability that without this grant this would not have happened (i.e. no one else would have stepped in).

We will primarily track impact through media-uptake.

What it achieved

As of this writing, an article making the core arguments of the report in a digestible manner syndicated via the Press Association has been published in over 150 newspapers around the world, including the Daily Mail and the Independent. The report was also featured in an original article in the Guardian, BBC Radio 4, Brazilian media Estado and Brasil Energia (no links) and China Daily, and there are likely other pieces forthcoming (we will update the post). According to analytics, the media amplification of the report has reached an estimated 3.5M coverage views.

Grant II: Changing how we think and act about the challenge of committed emissions

Another important problem in climate discussions is an over-reliance on renewables and a “premature triumphalism” about the ease of accomplishing the low-carbon transition as if it were only about the dropping module costs of solar panels rather than a technically and polit-economically challenging transition.

While the political economy of phasing out fossil fuels is hard in OECD economies, as recently observable in the Build Back Better Plan hinging on support from a Senator in a coal-state (Manchin, of West Virginia), this transition is all the more challenging in places where most of the fossil fuel infrastructure is very new, just at the beginning of their lifetime. Consider this figure from Tong et al 2018 in Nature:

As one can clearly see, a lot of coal capacity is very new – with most coal plants in Asia less than 15 years old, i.e. at least 25 years away from the typical lifetime of a coal plant.

To reach ambitious emissions targets, most of this coal capacity would need to be retired prematurely.

Especially in those futures where most climate risk is concentrated, where climate action is hard, this will not happen. And these are exactly the futures we should pay the most attention to.

If one does not believe that it is guaranteed that we will quickly shut down these coal plants, Plan Bs are very valuable as otherwise currently operating coal plants alone risk emitting more than 300 Gigatons of emissions, enough to single-handedly jeopardize the goal of the Paris Agreement.

There are two primary Plan Bs, carbon capture and storage which we support through CATF, and – as an emerging opportunity championed by TerraPraxis – by re-powering a coal plant’s heat source with another power-source, such as an advanced nuclear reactor. This has several attractive properties, such as (a) the ability to use much of the coal plant’s asset to the end of their useful life, (b) to use the related infrastructure, such as transmission, (c) to have the low-carbon power where power supply was expected and, (d) last, but certainly not least, to provide for a just transition that maintains jobs and wealth in communities that otherwise expect economic benefits from coal plants and would strongly oppose premature closures.

Yet, prior to this COP, it’s an idea that has been almost entirely absent from mainstream climate discourse.

This is why we were excited to fund a high-level event at the Climate Action Solution Center (CASC) at COP26 where TerraPraxis had the opportunity to shape the Energy Day’s program around the challenges of “De-risking the Terrawatt Transition”, dealing with the challenge of committed emissions described above. You can learn more about the event here, including watching the entire event, and see the agenda here.

Why we made this grant and why we believe it is additional

While we believe this event would have been funded in our absence, through pro-nuclear industry and government stakeholders, we believe funding it fully philanthropically and without any real or perceived connection to self-interest makes this event considerably more impactful. We think it is important that the event is framed entirely with the mission to maximize expected emissions reductions, which is the only guidance we imposed.

For example, if you believe, very conservatively, that

1. There is a 1 in 10,000 chance that
2. 1 in 10,000 of current coal emissions will be avoided additionally through re-powering five years earlier through the effects of this event,
3. and that funding this fully philanthropically makes a 1% difference

this would mean you believe that the cost per avoided ton of CO2 would be USD 1.10/tCO2e. We believe these assumptions are extremely conservative, given the high-profile of the event (a, we believe a 1 in 1000 chance as best guess), (b) the change it could bring (1 in 1000), (c) and the higher integrity from philanthropic funding (5%), putting our best guess at USD 0.02/tCO2e.

What we expect and how we will track impact

We expect this event to be very valuable, but with a lot of the value delayed in time, hard to measure, and related to changing participants’ minds about the potential of advanced nuclear for re-powering. Given the high-level and in-person-focused nature of the event, we do not expect major media reception.

We will primarily track impact through presence at the event, as well as conversations with TerraPraxis staff to track impact after the fact.

What it achieved

Lively discussions at the event, photo courtesy of Julie Broadfoot

The event brought together about fifty political leaders, advisors, key global stakeholders from the private sector, advocacy groups, and think tanks from Africa, Europe, Asia-Pacific and the United States. The evening panels from the event, i.a. featuring world-renowned climate scientist Dr. James Hansen, were broadcasted live by the Atlantic Council (watch here). The topic was also featured in the New York Times, citing event speaker and former President of the Maldives, Mohamed Nasheed, that “G20 countries need to look at decommissioning coal plants at home and re-powering their coal fleet infrastructure with clean energy”. This combination of speakers from some of the countries most vulnerable to climate change as well as countries from the Global South facing real trade-offs between overcoming energy poverty and avoiding emissions increases made the event particularly important We are still in the process of collecting further data on impact which we will publish, where possible, as it becomes available.

Conclusion

Overall, while we are still waiting for more impact data to come in, we are extremely pleased with the results of these grants.

In a time where attention to climate is surging, we believe it is critical that this attention is well-spent and this will often mean challenging conventional wisdom, be it the “ideas of economists” that policies that look expensive in the short-term cannot be extraordinarily cost-effective in the long run (Grant 1) or that the premature decommissioning of coal plants will be easy and we need not seriously invest in alternatives (Grant 2). While these grants will save no carbon tomorrow, we believe they exemplify what the Climate Fund stands for, making bets with the potential to have dramatic impact by contributing to changing the climate conversation for the better and enabling a more balanced, open, and evidence-driven discourse on climate solutions that will lead to better action.

Background

The Economics of Energy Innovation and System Transition (EEIST) project develops cutting-edge energy innovation analysis to support government decision making around low-carbon innovation and technological change. By engaging with policymakers and stakeholders in Brazil, China, India, the UK and the EU, the project aims to contribute to the economic development of emerging nations and support sustainable development globally.

Led by the University of Exeter, EEIST brings together an international team of world-leading research institutions across Brazil, China, India. the UK and the EU. The consortium of institutions are UK: University of Oxford, University of Cambridge, University College London, Anglia Ruskin University, Cambridge Econometrics, Climate Strategies, India: The Energy and Resources Institute, World Resources Institute, China: Tsinghua University, Energy Research Institute, Brazil: Federal University of Rio de Janeiro, University of Brasilia, Universidade Estadual de Campinas (UNICAMP) EU: Scuola Superiore di Studi Universitari e di Perfezionamento Sant’Anna.

EEIST is jointly funded through UK Aid by the UK Government Department for Business, Energy and Industrial Strategy (BEIS), and the Children’s Investment Fund Foundation (CIFF).

Contributing authors are drawn from a wide range of institutions. For full institutional affiliations see www.eeist.co.uk

The contents of this report represent the views of the authors, and should not be taken to represent the views of the UK Government, CIFF or the organizations to which the authors are affiliated.

TerraPraxis is one of our top recommendations focused on accelerating innovation in neglected technologies, such as advanced nuclear, to help tackle climate change and energy poverty. You can learn more about them here.