How To Avoid A Climate Disaster by Bill Gates (2021)

The starting message is that we need to cut the emission of CO2 and other greenhouse gases (GHG) to essentially zero by about 2050 to avoid major catastrophes on our planet (e.g. bigger hurricanes, flooding, extreme heat, droughts and so on). Currently, the world produces 51bn tonnes of GHG, and this has to drop essentially to zero. It is possible to produce some as long as it is captured, stored or absorbed (by trees, for example) - this is called net zero emissions.

Gates shows a very strong correlation between rising CO2 emissions and global temperature: from 1850, CO2 emissions from industrial processes and burning down fossil fuel increased from zero to 37bn tonnes, and this has been accompanied by the rise of global temperature by about 1.2C, on average. Even if we do not increase the amount of CO2 emissions and keep them flat, taking into account already accumulated gases in the atmosphere, by 2050, the amount of gases in the atmosphere would be critical. According to Gates, if we do nothing, then the world's temperature would be almost 4C degrees higher, if we slow down emissions - by 1.5C and only if we cut them to zero can we expect stable temperature. It also takes some time for the Earth to cool down - so the positive impact may not be felt for 10-20 years after we cut emissions.

The author decides on a separate chapter to discuss how to cut emissions within each category, what technologies already exist and which solutions we still need to find. He also discusses regulation (mostly in the US, though) and how it needs to change to incentivise the transition. One particular important technological solution is Batteries which are needed to balance the electricity market and allow for wider use of renewables. I found this section of the book quite useful for my analysis of potential investment opportunities in this space. Currently, existing batteries for use in large scale power grids are extremely expensive and hard to use on an industrial scale.

One important point on regulation is the need for long-term thinking - in particular, 2030 targets should be the only milestone to achieving net zero emissions by 2050. If we instead focus on simply cutting emissions somewhat by 2030 and then cut more afterwards, we may end up switching power from coal to gas which would help reduce emissions by 2030 but not much further. Instead, going all out on electrification now, even if it means still burning fossil fuel to generate electric power, would help us to achieve the ultimate goal by 2050. Essentially, this idea implies possibly more demand for metals and somewhat less for gas, although gas demand will still rise (in my view).

Another important point (although with less practical solutions) is how to share the burden between countries. 40% of the world's emissions are produced by the richest 16% of the population (and potentially more because this does not include emissions from products that are made someplace else but consumed in rich countries). Gates asks a very reasonable question: "What will happen as more people live like the richest 16%?". Based on trends in population growth (10bn people by the end of the century, economic growth and urbanisation trends), Gates estimates that by 2060 the world's building stock - a measure that factors in the number of buildings and their size - will double. That's like putting up another New York City every month for 40 years.

China now emits more GHG than the US, and Europe combined, although per capita, China is at par with Europe but almost half compared to the US. However, China can argue that a lot of its emissions are linked to the production of goods consumed in the US and Europe. There has to be the solution for the wide use of green energy at an affordable price so that this issue of climate change does not slow down the economic growth of poorer countries. Green premiums for new sources of energy should be low enough to be affordable in developing countries.

Gates also discusses the inertia in adopting new energy sources and the reasons behind it (not least the size of the energy industry, its long and complex value chain, high upfront costs, long life of operations, regulation and strong impact on human life - like installing wind turbines and connecting them to energy-consuming centres). Oil was discovered in 1859, but 50 years later, it represented just 10% of the world's energy supply. It took 30 years more to reach 25%. It took natural gas 70 years to reach 20% of the global energy supply.

Energy efficiency is also a slow process and does not follow Moore's Law which predicted that microprocessors would double in power every 2 years. Consider that Ford's Model T could cover 21 miles with one gallon of petrol in 1908, while the top hybrid today gets 58 miles (more than a century later). Another example of slow improvement is solar panels - the first models introduced in the 1970s converted 15% of the sunlight into electricity, now (50 years later) the best models convert only 25%.

Gates brings examples of regulations, some parts of which are so outdated (for example, fuel-efficiency standards do not even take into account EVs) as another reason for slow changes in the energy industry.

Lastly, I have this interesting point from my scribbles which I don't want to forget - it does not really fit into any specific points above - more just to illustrate the magnitude of changes and size of current demand relative to 30-50 years ago (supports my view of much higher demand for commodities than we currently expect). The point is that China has produced more cement in the XXI century than the US did during the whole XX century.