Today's guest is Sam Fankhauser, Director of the Grantham Research Institute on Climate Change and the Environment. GRI was established by the London School of Economics and Political Science to create a world-leading center for policy relevant research and training on climate change and the environment, bringing together international expertise on economics, finance, geography, the environment, international development, and political economy. I was excited for this discussion because Sam is not only deep in economics and climate change and the impact of climate change on the global economy, but also he comes at it from a very European perspective as he not only lives in the UK but his thought about the impacts of climate change and been involved at a high level in the UK government and so on in climate change polity and initiatives. We have a great discussion today diving deep into what motivates Sam to do the work that he does, how his views on climate change have evolved since he entered the space many years ago to today, but also big picture talk about all the different levers that we have and what needs to change and how it needs to change and what we can do to help it, and what some of the headwinds are. To be honest, it's similar topics that we cover in every episode, but given that each guest perspective is so different, we have wildly different discussions and today does not disappoint in that regard. Let's get him out here. Sam Fankhauser, welcome to the show!
Today’s guest is Professor Sam Fankhauser, Director of the Grantham Research Institute on Climate Change and Director of the ESRC-funded Centre for Climate Change Economics and Policy, both at The London School of Economics and Political Science.
He is also an Associate Director at economics consultancy Vivid Economics and a Non-Executive Director of CDC Group, the UK’s development finance institution.
Previously, Sam worked at the European Bank for Reconstruction and Development, the World Bank and the Global Environment Facility. From 2008 to 2016 he was a member of the UK Committee on Climate Change.
In today’s episode, we cover:
Links to topics discussed in this episode:
You can find me on twitter @jjacobs22 or @mcjpod and email at email@example.com, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Enjoy the show!
Jason Jacobs: Hello everyone. This Jason Jacobs and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change, and try to figure out how people like you and I can help.
Jason Jacobs: Today's guest is Sam Fankhauser, Director of the Grantham Research Institute on Climate Change and the Environment. GRI was established by the London School of Economics and Political Science to create a world-leading center for policy relevant research and training on climate change and the environment, bringing together international expertise on economics, finance, geography, the environment, international development, and political economy. I was excited for this discussion because Sam is not only deep in economics and climate change and the impact of climate change on the global economy, but also he comes at it from a very European perspective as he not only lives in the UK but his thought about the impacts of climate change and been involved at a high level in the UK government and so on in climate change polity and initiatives.
Jason Jacobs: We have a great discussion today diving deep into what motivates Sam to do the work that he does, how his views on climate change have evolved since he entered the space many years ago to today, but also big picture talk about all the different levers that we have and what needs to change and how it needs to change and what we can do to help it, and what some of the headwinds are. To be honest, it's similar topics that we cover in every episode, but given that each guest perspective is so different, we have wildly different discussions and today does not disappoint in that regard. Let's get him out here. Sam Fankhauser, welcome to the show.
Sam Fankhauser: Great to have me, thank you.
Jason Jacobs: Well I'm excited to speak with you for a number of reasons. One is that when I was prepping for this discussion, I click on the little tab that says research on your website and I have to scroll down a long, long time to get through all the research, published articles, books and such that you've written on this topic, that's one. Two is that I mean of course you think about this on a global scale but also I mean you're in the UK and you also spend quite a bit of time thinking about it from a UK perspective, which is different then we've represented so far on the pod or in my journey and I think it's a very important perspective to understand, so thank you.
Sam Fankhauser: Pleasure to be here, and it isn't just my stuff. I assumed you looked at... It's a big institute of 50 people who produce all those good things.
Jason Jacobs: I did, although I didn't have to get to all that other stuff because your stuff alone was a long, long list. It is crazy the output that the institute produces in terms of volume but also quality.
Sam Fankhauser: Thank you.
Jason Jacobs: I mean let's start there. What is the Grantham Research Institute... I guess the other thing is since I know you're involved in some other things besides the Grantham Research Institute maybe just give us an overview of how you spend your days or your work.
Sam Fankhauser: The Grantham Research Institute we're a research center at the London School of Economics, so we are based at the university, specifically we are based at the university, which is known for it's social science research so economics and divided social sciences. That's what we do. We're interested in understanding climate change from a social science perspective. A fair amount of what we do has an economics bend but we are interdisciplinary. We have lawyers, we have geographers, we have statisticians, and we have political scientists. We want to understand and inform the climate change debate from that particular angle.
Jason Jacobs: In terms of the areas in climate that you focus on or the types of research that you take on, how do you go about figuring out where to apply those great resources that you've assembled?
Sam Fankhauser: Yeah, well although I just said we are based at the university, we're not ivory tower people. We do want to produce research that is academically at the frontier. We're interested in exploring new issues, developing new methodologies, collecting new data, doing all those nice academic things that you'd expect a university to do. We're also very keen to engage with decision makers in climate change policy and climate change practice. We want to understand what's going on but we also want to inform and influence what's going on. Our vision is better decisions are being made on climate change and then environment. That kind of drives what we do and where we focus on, so it has to be academically, intellectually, and analytically exciting, but it also has to have an impact on the debate.
Sam Fankhauser: For example, we work on climate change legislation, mostly here in the UK but also globally. We have a big database of 1,500 climate change laws, that's academically interesting just to document the wealth of things that are going on in climate change policy, but it's also very policy relevant because people come to us and say, "If my country is thinking of passing a climate change law what sort of stuff do we have to put in it to be successful?"
Jason Jacobs: I know that looking back early in your career and your studies and such you came from a very economics based foundation. When did the switch flip that you wanted to apply the things that you were studying in the direction of climate? Was that a gradual process or was there a specific moment where that decision was made?
Sam Fankhauser: First of all it happened a very long time ago, it happened almost 30 years ago, 28 years ago. I was, as you say, going through an education as a normal economist. I was studying for a masters in economics here at the London School of Economics. I was thinking of a PhD topic. I was excited about combining economics with environmental issues so I was keen on doing a PhD on the environment.
Jason Jacobs: Why?
Sam Fankhauser: The environment back in 1990 the key issues that excited people at the time were ozone layer depletion and acid rain. I wanted to do something that wasn't quite that well trodden.
Jason Jacobs: What was it that pushed you in that direction? You said that you were interested in doing something at that intersection. What was driving that? Where did that come from?
Sam Fankhauser: I was interested in environmental topics, there was something that was close to what I was interested in. I felt I wanted to have a job and to do work on something that has societal benefits so I didn't want to maximize my revenue, although you have to live and I'm not a [inaudible 00:07:14] environmentalist but I did want to have a job where I contribute to a societal good. The environment, in a sense, was the bit that was clear to me when I started off on my PhD. The fact that it was then climate change was a bit more coincidental. I was looking for a topic, as I said. At that time, at the end of 1990 the intergovernmental panel on climate change had just issued its first assessment report. My supervisor showed it to me and said, "Look at this, it's brand new, it's interesting. No economics in it, maybe there's something interesting in that." I never looked back.
Jason Jacobs: Maybe talk a little bit about how is your thinking on the problem and how has the problem, in your view, evolved... I don't know if evolved is the right word, but how do you think about it today versus how did you think about it when you first started working on it so many years ago?
Sam Fankhauser: Yeah, that's actually quite important how the topic has evolved over all those years. Thirty years ago it was an interesting environmental problem, it was analytically something that you could sink your teeth in, but it was a problem that was how the 50, 60 year time horizon to fix so there wasn't the sense of urgency we have today. The benchmark at the time was a doubling of CO2 concentration. Not the benchmark where you would want to stabilize emissions and want to stabilize the problem. That was 60 years away 30 years ago. What happened since is obviously 30 years have passed, we got our sense of importance and urgency wrong by about 20 years and so now all of a sudden we have 10 years to fix it rather than a generation to fix it. What it is now is a much bigger problem, it's a much more urgent problem, it's obviously also a problem where you don't have to explain what you're doing.
Sam Fankhauser: When I started my PhD I had to tell people that it wasn't ozone layer depletion and it wasn't the investment climate that I was changing. I had to explain what on earth I was doing. All that is no longer the case. People now understand what the problem is, they understand the urgency, but it's also less comfortable then it was at the beginning because it is now urgent and it's become much more scary as an issue. We understand the problem much better and most of what we've learned has made the problem more urgent and more scary then the other way around.
Jason Jacobs: For you personally you feel more scared now then you did when you first started this work?
Sam Fankhauser: That's probably true. I don't like the word scared because it tends to switch off, the emotions take over the rational thinking. It's good that people have a sense of urgency. It's not necessarily good if people are scared because we have to go about getting a really deliberate rational careful manner, a fast and urgent manner so we don't have time to lose, but panicking doesn't necessarily help. There's perhaps too much emotions now in climate change. Part of it is good, it's nice to see in particular younger generations being really engaged on the topic and changing the dial and the nature of conversation, that's really, really good and really important, but it is also important that we go about it in a rational evidence based way.
Jason Jacobs: You mentioned that we have 10 years to solve it. As I've made the rounds and talked to different people that are extremely dedicated to solving this problem, I've noticed there's some different perspectives in terms of on the one hand there's this school of thought of let's call it a deadline. Ten years, 12 years, and we need to mobilize in that timeframe and we need to move mountains and if we don't then we know it'll be bad, we just don't know how bad and maybe there's catastrophic tipping points, and we don't have time to mess around. I think there's another school of thought that says these deadlines are artificial and we keep moving them back, and we keep moving them back, and we keep moving them back. Yes there's urgency, but it's not a World War II style mobilization, actually we just need to put one foot in front of the other and keep making progress. It isn't necessarily even a public thing, it's just a government thing, it's behind the scenes, it's deal making, it's incremental milestones. How do you think about the term deadline, and how do you think about that 10 year marker?
Sam Fankhauser: Yeah, I care less using the 10 years. I didn't mean it as a deadline, I'm not a fan of that we have 10 years, 12 years and the world comes to an end because that's not the way it is. Climate change is a problem that will be with us for the rest of the century basically and we will have to deal with our emissions and we have to deal with the consequences of climate change that we no longer are able to avoid from now on. It isn't that 10 years or 12 years, it's oh we've either succeeded or failed, it's a long-term thing.
Sam Fankhauser: Where the urgency comes in is that a lot of the decisions that we take are a 10 or 20 year time horizons are very important because we will make a lot of decisions, the world will make a lot of decisions over those decades, one or two decades that determine whether we will find it easy to live as climate change or not. We will invest in a lot of infrastructure in Asia in particular, in China, and India a huge amount of electricity generation infrastructure will be built. Once you have a power station these things last for 30, 40 years so that in that sense the next decade matters because anything we build, and we will build a lot in that decade, will lock in a particular climate regime for 30, 40 years. That is a long time.
Jason Jacobs: When you think about the role of the research that you and the team does at the Grantham Institute, and maybe it's even a broader question of just academic research in general, is it to surface information that then enables people to be more informed in decision making, or is it to actually form conclusions?
Sam Fankhauser: I would say it's both. Our social scientists we try to understand why certain things happen or don't happen, so we have an intellectual curiosity to find out what makes people pass a climate change act or what makes people object to a carbon tax or what makes people accept a carbon tax. The issues of intellectual curiosity. But we are also interested in the more normative recommendations. We want to make a contribution to solving the problem, so if it can recommend certain designs of policy instruments and say, "Look here, if you recycle the revenues of your carbon tax in a particular way you're not going to get voted out of office, it's going to be successful." Then we do want to do that as well, so it is a combination of intellectual curiosity and the drive to contribute to the solution of the problem.
Jason Jacobs: In your view how settled is the science at this point?
Sam Fankhauser: It depends on what level you look at. The bigger picture is the manmade climate change. The humans emit greenhouse gases, do those greenhouse gases radiate the forcing change to climate? That in a sense is settled. There's a few dissenters, but the bigger picture science is settled, it's very clear. At the detailed level there's a lot that we still don't understand and have to understand better what is the role of clouds, for example? When do climate feedbacks kick in? What are the tipping points? When exactly do they occur? Those are things we don't understand fully and where a lot more research is needed. The same is true on the social sciences, a lot of the technologies and the policies that we understand but there's a lot that we still have to learn.
Jason Jacobs: Do you worry at all? I think about previous generations and some crazy things that were conventional wisdom at the time that then we look back in hindsight and say, "How could they have thought that?" Do you worry that a future generation's going to look back and look at us so worried about climate change and think similarly?
Sam Fankhauser: Yeah, there will be degrees of worry. I hope that future generations will forgive us for the Industrial Revolution, which was a push in human and economic development and it's brought a lot of good in poverty reduction, quality of life, human welfare. That was a good thing where you wonder if future generations will probably look back and say, "What took you so long to find out that some of these things are dangerous? Did you really eat meat?"
Jason Jacobs: That's more of your worry? You don't worry about my question then? You're pretty convicted that this is a big problem?
Sam Fankhauser: It is a big problem. Look, I'll be in a sense be happy if somebody tells me tomorrow, "Sorry Sam, you wasted your career. You spent 30 years on a problem that doesn't exist." In a sense that will be a great outcome if the problem goes away, but the scientific evidence is now so clear that the problem does not go away and we do have to do something about it. Obviously we still have a lot to learn about the climate system and we might get nice surprises, we might find out that maybe the system isn't quite this reactive to greenhouse gases as we thought, or maybe the tipping points are a bit further in the future then we thought, that's all possible. On balance ever since I started doing these things most of the learning, pretty much all of the learning on the climate science side has been of the type the problem is actually a lot worse then we thought.
Sam Fankhauser: There have been very few positive surprises. There have been positive surprises, I would say, on the technology side, on the solutions side. The speed at which renewable energy has become cheaper, the enthusiasm in which the car industry... I don't know whether it's enthusiasm but they do it with determination move to it's electric cars, money that goes into batteries, the speed at which those technologies are coming into force. Those are positive surprises. We probably thought this would be taking longer. On the climate, on the science side most of the learning has to be in the direction of making the thing worse.
Jason Jacobs: That's how it feels to me, I mean as a non-expert who's relatively new to thinking about this problem at least in a professional capacity. It's like getting beaten over the head with big bad news, big bad news, big bad news, and then there's this little shred of good news. Then it's hey let's bring out the streamers and the balloons and pat each other on the back. It's like if there's a tidal wave and you're sitting with a little bucket and it's we just got 10 buckets of water out of the boat, but that's a tidal wave.
Sam Fankhauser: I think of it as a race. The news comes in about technology solution or news comes in about societal trends and we feel like consensus is growing so that's good news, so the solution moves ahead in the race. Then you open the latest version of nature or science and you figure out the problem has moved on as well in the race. It's a question of who moves faster. On disputing a bit, the metaphor that we're here with our bucket fighting the tidal wave because I think we have actually quite the good set of solutions available. There's lots of reports now from people, mostly technology people but also economist which have looked very carefully about net zero solutions and sector by sector emission source by emission source looked at what we have to do to take carbon out of our lives and our economies. Most sectors we pretty much know what we have to do. We know how one designs a carbon free electricity sector, we have the technologies and renewables, and we know how to make those systems function and be stable.
Sam Fankhauser: Increasingly we have the technologies actually on carbon free surface transport. They're a bit expensive at the moment, but we know what we have to do. The same is true for most industrial sectors. The same is true for heating, so emission source by emission source the blueprint exists. What we're struggling with, in a sense, is to make those changes societally acceptable and to have them adopted in a meaningful timeframe. One of the eminent people have looked at these things, Dale Turner here in the UK. He says, "If you make me the dictator of the world I will solve the problem for you." And he would, it's just that we don't solve problems by making people dictators. It's the political economy of the problem that in a sense we have to solve in the first instance.
Jason Jacobs: People actually ask me now that I'm 10 months into looking at this full time whether I'm more optimistic or less optimistic then I was before I got in. My answer has been that I'm actually a lot more optimistic that what you said, that we know what to do and there's things that are in our control if we just do them, but I'm actually less optimistic that we can get them done. I guess given that we know what to do, what are your thoughts in terms of what we could do given that we can't just put a global dictator in place to facilitate moving faster, which we sounds like certainly need to do?
Sam Fankhauser: Yeah, that's in a sense the big question isn't it? There's many various things that one can do. I mean one big driver obviously is public opinion, so if you can mobilize public opinion. Whenever I give a talk there's usually a question at the end what can I do personally to contribute to the solution of the problem? Then you go through the various personal emission sources you can do something about, you fly less, or you insulate your homes, and all those sorts of things. The thing that really drives it that I usually say is engage, be noisy, tell your elected officials that you want them to solve the problem. We need that noise, that campaign, that contribution, and that's now happening certainly on this side of the Atlantic with extinction rebellion and school strikes where there's much more of a public drive to force politicians to do something about it. Now at the moment that's in Europe, it hasn't reached North America, it probably hasn't reached Asia, so we have more to do there. But getting that public buy-in is one big driver that we should work on.
Sam Fankhauser: The other source of optimism I feel is, ironically for some people I guess, is industry and business. Increasingly business starts seeing the opportunity in the whole de-carbonization exercise. They figure out that money can be made in electric cars and in renewable energy and the people who solve the clean aviation conundrum will be incredibly economically or commercially successful. That's an important driver certainly in capitalist market based system that we live in because all of a sudden the political will to impose policies will become less and less important because the market will push certain solutions through. I'm not saying that's the totality of the solution, far from it, but it will help to remove some of the barriers that we face if all of a sudden politicians and the decision makers at government levels feel like industry government and the population is moving ahead of them they will start acting. The question is whether all those processes are quick enough relative to the critical timeframe that we talked about before.
Jason Jacobs: I actually have questions on both of those areas, the public outcry as well as the industry. Maybe we can tackle those separately. On the public outcry, why is it that in Europe you have mobilized so much more and quicker and better and more impassioned then in America or Asia or other places? I mean was it something that you guys did or is it a cultural thing? What can we learn here in the US? If it's going to help us to do so how do we make it happen?
Sam Fankhauser: That's one of the big research questions that from a pure academic curiosity point of view would be great to understand it, but obviously it would also be a hugely, hugely important for a solution of the problem. I think we understand some bit and we genuinely puzzled by others. When it comes to developing countries it's an understandable sense that the development and poverty alleviation takes precedence over something that is perceived to be slightly longer term. There's also the justice issue that says you guys caused the problem, you want us to solve it? I can see where psychology comes in there. That's changing partly because those countries understand now, as vulnerable if not more vulnerable then the rest of us and they also understand the business opportunities and economic opportunities that are involved in that. The reluctance from the developing countries is going away.
Sam Fankhauser: Why is the US so different from Europe? That really is an interesting question. It seems to be an Anglo-Saxon problem. The US is of the most obvious manifestation of right wing climate skepticism and it does tend to be right wing, usually males of a certain age, climate skepticism. We've seen elements of that in Australia and in Canada as well, for example.
Jason Jacobs: Older white men?
Sam Fankhauser: Old white man, yeah I mean that's probably a generalization and I'm sure you find different age groups and different genders and different ethnicities but that's roughly true. In the UK that hasn't happened interestingly. We have our fair share of climate skeptics but they're much more contained then they are say in the US. Hard to say what reinforces what, but there was a consensus about 10, 12 years ago that climate change was an important problem until we passed a really good law, the Climate Change Act of 2008, which was passed by consensus. We had the left wing government at the time but the conservative right wing opposition was very much in favor. If anything they asked for tightening the draft legislation rather than watering it down. In a sense once that phase was passed there was buy in from both sides. The government changed and we now have a right of centered government but the commitment is there and the Climate Change Act, that consensus that was forged in jointly passing that law and feeling ownership over it is still there.
Sam Fankhauser: There were instances over those 10 years since the law was passed where more skeptical ministers were in charge, but the law was then capable of keeping them in check. There was one instance where we had a climate skeptic environment minister who was in charge of preparing the UK's national adaptation strategy and he really hated it, but his officials could say, "Look, it's the law you have to do it or you're in breach of the law." That in a sense constrained, it creates a freedom of one individual to derail a process.
Jason Jacobs: The UK, not only did they pass a law but you guys setup a government body that's responsible for holding organizations and people accountable to the law, correct? Is it the CCC?
Sam Fankhauser: Yeah, that's right it's the CCC, the Committee on Climate Change and that for me is one of the key innovations that happened in the UK that we, as a research institute, tried to understand and came to the conclusion that that was a really key part of what keeps the UK drive towards de-carbonization together. The intuition is climate change is a problem, a long-term problem, you need really long-term commitment that go through changes of government to different business cycles. You have to really keep that long-term view and politicians normally do not have that long-term view, so how about putting some of those responsibilities in the hands of technocrats, technical experts that are more likely to see the long-term picture? The parallel, in a sense, is to monitor a policy where interest rates are not set by the government, by the Ministry of Finance, but they're set by independent central banks.
Sam Fankhauser: Independent central banks are less prone to reduce interest rates ahead of an election to win votes. They're more likely to have inflation targets in mind, and that technocratic long-term thinking, which seems to work in monetary policy in a sense was transferred to climate policy. Obviously the CCC, the Committee on Climate Change does not have the powers of the fed. The fed sets interest rates and is truly independent. The Committee on Climate Change recommends climate targets. They are then adopted by parliament, but the whole system makes it quite difficult or at least embarrassing for parliament to ignore the advice of the Committee on Climate Change.
Jason Jacobs: I love that, it's really interesting to think about it. What the implications would be if we did something similar in the US. It's almost like take all the money we're putting towards ICE and put it towards the CC equivalent instead.
Sam Fankhauser: The model has been tried out in other jurisdictions. Sweden has an independent committee, and various Scandinavian countries actually do. Ireland I believe has one. There were experiments that didn't work so well in Australia. The equivalent to the Climate Change Committee wasn't quite as long lived and it didn't have the power I think, the system was too young. It didn't have the power to stem the tide when the government changed and reigned them in in the way the UK committee has. The UK committee is really, really very powerful now. Everybody yields to the analytical advice that comes out of the CCC. We did some research on that, I talked to people in high carbon industries whom you would expect to be skeptical of the whole thing but they used the Climate Change Committee advice both in their own lobbying of government but also internally when they talk to their own boardrooms. The same is true for environmental activist, they use the same advice. It's a really very powerful institutions that the UK has created here.
Jason Jacobs: I guess on to the second part, which was the role of industry that you discussed. I mean this is a fascinating one for me because you're an economist and if I think about the playing field, there's the role of industry and there's the whole free market crowd that says, "Don't pick winners and let the market duke it out." Then there's the crowd that says, "Well let the market duke it out but you have to price the externality and I mean it's not a level playing field unless you count the tax on the harm that you're doing on the planet or at least on the planet's ability to house human life comfortably."
Jason Jacobs: Then there's things like clean portfolio standards and other things you can do that can take certain ones that maybe seem more promising and you can help them along. There's probably a million other instruments and tools and stuff that I'm not even thinking about. Of course there's more heavy handed government regulation mandates, things like that back here, your dictator analogy. I mean you have a master key globally, you can do whatever you want, you're that dictator. Given that landscape or maybe other things that I didn't even mention, what do you do?
Sam Fankhauser: The first thing to say is I think we need the private sector to help solve the problem, but it isn't unfettered free markets that will solve the problem, it's actually a carefully regulated private sector in a value described to make sure that any externalities are taken care of and that private sector has to write incentives. In order of magnitude terms to investments we need, private investment is 10 hundred plus times bigger then public investments, and so the idea that through public investment you could solve the problem while leaving private investment untouched, that just doesn't work in terms of these carriers of how much there is of private and public. You do need to harness the private sector and the private investment that is going on. How do you do that?
Sam Fankhauser: Obviously as an economist I would say you have to put the price on carbon. You can do that through a tax or you can have trading schemes as you have in California and we have in the European Union. That's a big part. Certainly in the EU, which is a bit I understand better, the EU emissions trading scheme has changed the attitude of industry to its emissions. They're now monitored, they're now measured, they're now managed, and that is because there is a price on it and that has got the attention of boardrooms and senior management to take care and pay attention to carbon. That's a huge big important thing.
Sam Fankhauser: It's not the only thing you need. There are free market economists who say put the price in carbon and the rest takes care of itself. That's probably true if that carbon price is unbelievably high, high at the level that probably politically you don't get away with. If you want a level that you do get away with politically you have to complement that carbon price with other regulations, you have to have rules in the financial sector about disclosure of climate risks. You watch notch technologies that make energy efficiency, behavior change easier. You need to put for clean technology and innovation just because there are other externalities involved in that. Just to give you an example, some of my colleagues here at Grantham have looked at the car industry and asked, "What does it take to change R&D research and development in the automotive sector from the internal combustion engine to electric cars?"
Sam Fankhauser: Obviously the industry is going through that now, but there's certain path dependence and inertia if you're an engineer who's studied the internal combustion engine for the last 30 years, you will find it very hard to get enthusiastic about electric cars. You have to overcome that friction through additional regulation and through additional policy. You need a carbon price, as an economist I would say that, but I would be complementing that with a lot of other interventions and a lot of other policies.
Jason Jacobs: When you say that we need industry support, are you talking about industry overall, are you talking about the big oil makers? What is the role of industry in helping with this transition?
Sam Fankhauser: Actually as you broaden it from industry and say business because it does involve everybody, it does involve all economic activity. There's measures around that say what is the size of the green economy today, and the green economy is then defined as well defined ring fenced activities like energy efficiency and water efficiency and renewables. A sense for me that is wrong because the green economy or the zero carbon economy that we are going to build involves everybody, it's every sector, every activity has to become green. A lot of what we do in modern economy is services, so you will need green services, banks will have to get used to the idea that they're lending money to wind farms rather than coal fired powered stations. Mortgages will be against buildings that are zero carbon, so that makes the finance sector become part of the green economy. Architects will have to build zero carbon homes, engineers will have to climb through the infrastructure they build, so that makes those sectors becoming part of the green economy.
Sam Fankhauser: You go sector by sector, activity by activity, and you figure out everybody has to become green either through the products they produce or through the production processes they have. We don't have a parallel green economy that you put alongside the existing economy. It's really changing the current economy from within.
Jason Jacobs: I mean given that by definition your purview is big picture, I mean it's economics. It makes sense that we're talking about all these different moving pieces that need to change. I think for me, I mean I'm early stage startup person by career, historically it seems completely overwhelming. It's like oh man, everything needs to change, so if given that everything needs to change how do we do anything to make progress?
Sam Fankhauser: Well but that in a sense is the beauty of markets. You don't have to worry too much of the central planet we put in charge. Earlier on in the interview would have to worry about hell of a lot of things, but if you leave it to markets each single decision maker, each single company will come up with their own solutions. Some of them will succeed, some of them will fail. The idea that the de-carbonization revolution is a bit like the Industrial Revolution, it's a makeover creative destruction as economist Joseph Schumpeter called it where new ideas come in and they encourage incumbents into markets and to slightly state incumbents are leaving the market in favor of new, more nimble, more creative market entrance. You see that in the electric car industry. Tesla is a disruptive market entrance. Some of the IT companies who get into that technology they're disruptive market entrants. That doesn't mean they will be successful. It can still be that the incumbents fight back, it may still be that people who invest in the new technology lose a lot of money.
Sam Fankhauser: One of my colleagues here at the Grantham Research Institute is an economic historian and he looks at deep structural transformations in the past, and he looks at, for example, the arrival of railways and the steam engine and his observation is technologically railways were a brilliant idea, it was a big step forward. Steam ships were a big step forward, we still use them today, that was brilliant technological innovation, but people lost a hell of a lot of money in the railway boom investing and speculating in railway lines that didn't pay off. It's capitalism will get it wrong as it were in some instances. The whole creative push of innovation can actually make a difference.
Jason Jacobs: Another thing I would love to get your take on is on the one hand there's an argument that says that if you take social justice, equality, and making sure that everybody has an adequate standard of living at a minimum and things like that that globalism has picked winners and loser essentially, and that in a world of increasing scarcity, that divide will even get further. Therefore, if we want to solve climate change we need to put, just transition or social justice or basically making sure that things are more evenly distributed front and center. There's another school of thought that says these are two separate issues and they're both important, but one is a distraction from the other and if you want to solve either one you need to decouple them. How do you think about it?
Sam Fankhauser: I think that all those things hang together. The way I would put it is climate change is a hugely unfair problem. It's unfair in the sense that those who suffer most, those who have contributed least to it, so there's a bit unfairness in the way the benefits and the costs of using fossil fuels are distributed. That's in a sense a core issue in the negotiations of how we solve the problem and who we have to support in that de-carbonization efforts more than others. There's also just the practical observation that we are talking about deep structural transformation as I described at every part of the economy has to reinvent itself, and that's hugely disruptive in terms of the skills that are required and we shouldn't kid ourselves if you do hugely disruptive things there will be pockets of people who's skills are no longer in demand and we have to help them to acquire new skills and become successful in the new economy.
Sam Fankhauser: That's both the right thing to do from an ethical fairness point of view. If you're more Machiavellian about it, it's also the right thing to do to remove the resistance that otherwise comes from those groups because there's a lot of climate skepticism both comes from people who are scared of the change and perhaps rightly scared of the change. If you're a coal miner you do have to face the prospects of losing your job. If you can help perceive the real losers of the low carbon transition it will make the whole exercise much more easy to carry through, but it also makes it more just and more fair.
Jason Jacobs: If someone offered you $100 billion but in order to get it you have to allocate it towards the climate fight in a way that will maximize its impact on accelerating this transition, where would you put it and how would you allocate it?
Sam Fankhauser: Probably ask for more money, but assuming I start at that level there's a couple of technology gaps that we still have. As we talked about before, a lot of the solutions are data and we know what we have to do in sectors like transport and a lot of industry, electricity, but there's a couple of gaps that we do still have and probably start allocating money towards closing those gaps. One of them is negative emission technology, for example, which we do need. I don't like to think of negative emission technology as an excuse to stop trying to reduce emissions. I'm thinking of it in terms of the problem is so big and the degree of change that we need is so vast there will be residual emissions somewhere in the system and we need to deal with them. Looking at negative emission technology is a big area where one can allocate funding.
Sam Fankhauser: What do I mean by negative emission technology? A lot of it is nature based, so combining biomass energy with carbon capture and storage, for example, which gives you negative emissions because the trees suck up the carbon. You then burn that biomass and you capture the carbon and you don't release it back into the atmosphere. There are also directly captured technologies that are... The exist in the lab as it were, which we should try out in the field. Those are some of the technology solutions where one would allocate money into. We talked before about the need for some behavior change in politically economy changes. I would ask allocate the second hundred billion probably into that campaign. Make sure that we can overcome those politically economy constrains and get people to change their behavior.
Jason Jacobs: I guess my last question is there's a number of listeners, maybe all of them, myself included that are concerned about this problem and trying to figure out how to help. Talk to them, talk to us for a moment. What advice do you have?
Sam Fankhauser: Yeah, we touched about that before. Quickly, the most important thing for me is to be outspoken about it and to make clear to whatever decision makers you're in contact with that this is a problem you care about and therefore they should care about too. That is their elected democratic representative, so should go to Congress and legislate these things. You're not just a voter, you're also a worker, make sure to your employer that you prefer to work in an environmentally enlightened company. People care about the welfare of their workforce, either intrinsically or because happier people are more productive. You're the worker, you're also a consumer and so you can send the right signal through your consumption choices. You can tell business that you have a preference for environmentally sustainable goods by making those choices when you buy a car or when you go shopping in the supermarket or where you go on holiday.
Sam Fankhauser: Genetically that's the signal you want to send, then you have specific things obviously you can do in your own behavior, travel behavior, in your own consumption behavior, the way you heat your house, how much you heat your house, how often you put the air conditioning on, how often you fly, what type of food you eat. Can make subtle changes there to your behavior and point again is you can make those without reducing your welfare or your happiness. This isn't about hair short and living in caves, this is about changing behavior in a positive way that makes you healthier and happier and makes it easier for you to move and breath clean air and leave a good world for your children. This is a positive change in behavior, not a constraint.
Jason Jacobs: I think that's a really great point to end on, but Sam I can't thank you enough for coming on the show. We covered a lot of ground and had a lot of great insights to share. I really appreciate it. I know our listeners will as well.
Sam Fankhauser: My pleasure, it was really nice talking to you and discussing these things with you.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey you can visit us at myclimatejourney.co. Note that is dot co, not dot com. Someday we'll get the dot com, but right now dot co. You can also find me on Twitter @jjacobs22 where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. Before I let you go, if you enjoyed the show please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.