Over the past several years I have been trying to better understand the challenges of the climate crisis and how financial capital and entrepreneurship can play a role in helping. I'm particularly interested in problems that can be solved with software. When I began my journey, my biggest takeaway was that so much of the innovation required was out of my wheelhouse: hardware (e.g. lithium battery production), deep tech (e.g. atmospheric carbon sequestration), and policy coordination and government investment at a global level (e.g. the recent Inflation Reduction Act). Carbon will undoubtedly be a trillion dollar market, so one of my early idea was to create a marketplace for buying and selling carbon credits. Many entrepreneurs have this idea and while I believe the concept will work and that there is room for many players, it's still ripe with challenges (i.e. objectively assessing the quality of carbon offsets and universal acceptance for what is considered good and bad).
I continued to research ideas and grew increasingly flustered by just how vast the problem space is. I needed a framework for assembling my thoughts so I could structure the component parts of the solution set and figure out where my interests and expertise could best be focused. Recently, I read How the World Really Works by Vaclav Smil and found it to be enormously helpful in creating a simple and structural framework for myself. The book is great and much more accessible than his other work which is rather academic (but still quite good). His opening chapters are a must read for anyone interested in better understanding the challenges we face in the climate crisis where Vaclav objectively analyzes the current state of affairs while articulating real constraints we face. Most importantly it provided me a new (albeit obvious) lens for approaching the problem. Instead of asking, "How do we solve the climate crisis?" I now ask myself, "How do we wean ourselves off fossil fuels and usher in an energy transition unlike anything in human history, and how can I organize that transition into its component parts to methodically tackle the core issues?"
For me, the first step is truly understanding the importance of fossil fuels. While they have quite the bad reputation, fossil fuels have been net-good for civilization thus far (assuming we find a way to solve for avoiding climate disaster, which I am optimistic we will). They have paved the road to the modern world, literally and figuratively, and made possible human civilization’s growth from 2.5 billion people in 1950 to roughly 8 billion today. Fossil carbon has fueled the transportation industry, powered electricity for cities, enabled the mass production of food, and energized the production of the four material pillars of modern civilization: steel, ammonia, cement and plastics. Everything we touch and consume, from food, clothing, shelter, and tools, has been shaped by fossil fuels. Coupled with human ingenuity, they are the ultimate and most tangible catalyst for civilizational development, which over the course of history has trended towards tremendous progress and exponential improvement in quality of life.
The widespread utilization of fossil fuels and entrenchment in everything we do comes at a cost. They fill the atmosphere with CO2, which if left unchecked will ultimately lead to global catastrophe. Calls for net-zero emissions by 2050 require an energy transition from fossil fuels to something less harmful that is historically unprecedented in both pace and scale. To put things in context, annual global demand for fossil carbon is above 10 billion tons a year. That’s five times more than the recent annual harvest of all staple grains feeding humanity, and more than twice the total mass of water drunk annually by the world’s 8 billion inhabitants. They supply roughly 80 percent of the global primary energy demand. And the cherry on top: a majority of the world, roughly 5 billion people who live outside of affluent countries, have yet to reap the benefits of fossil carbon to the extent the developed world has.
In assessing the problem at hand, I think it’s important to understand constraints - they help to focus efforts and solutions and are a forcing function for ingenuity. Objectively, in tackling the climate crisis and accelerating an unprecedented civilizational energy transition, we need to understand the following:
At 2020 level of production, coal reserves would last for 120 years
At 2020 level of production, oil and gas reserves would last for 50 years
There is consensus that we must limit global warming to 1.5 degrees Celsius by 2050 to avoid severe global catastrophe
Simply put, at some point in the next 100 years civilization will run out of coal, and in the upcoming decades we will run out of oil and gas. Also, we need to wean ourselves off of fossil carbons in order to avert what is potentially the end of modern civilization as we know it (i.e. a climate that is uninhabitable by humans). And even if the climate crisis is not as bad as we know it will be and already is, we still need to find a new source of energy because we will run out of the fossil fuels and natural gas we currently use to power our world. In order for human civilization to survive, the transition must happen.
Today we use fossil fuels, and as a byproduct emit CO2 into the atmosphere which is the primary culprit of global warming, to power civilization: generating energy to power things (i.e. electricity, heat, transportation) accounts for nearly half of emissions; feeding the world (growing food is quite energy intensive) accounts for roughly a quarter of emissions; and making things (i.e. concrete and steel to create physical infrastructure, plastics, and ammonia for nitrogenous fertilizer) accounts for roughly 20% of carbon emissions.
Human civilization is quite large so it’s no surprise that the surface area that has enabled its growth over the past century is quite extensive. This presents myriad problems that need solving in the upcoming decades, which depending on your point of view can either feel extraordinarily daunting or exciting. To further add complexity, most of the solutions will need to interoperate with one another in order to realize the results we need (e.g. if we believe vertical farming will help drive down carbon emissions because it provides better land utilization and lowers transportation costs as food can be grown in or close to densely populated cities, those vertical farms will require energy and infrastructure that will need to be provided by renewables or low-emission technologies). There are many dependencies in the equation, not to mention widespread government coordination, subsidies and mobilization which feels impossible in today’s political climate. And lastly, a majority of the global population lives in developing nations which have not benefitted from or deployed fossil fuels the same way affluent countries like the US, Europe, or China have. It’s unreasonable to expect them to not pursue a higher quality of life the way developed nations have achieved by prohibiting them from using fossil carbons, so investment in solutions need to be globally accessible such that reductions in emissions by affluent nations aren’t usurped by increases in emissions from developing ones.
There are many problem areas I think are fascinating and need to be solved in parallel with one another. My first pass at a framework organizes these into several different easy to understand categories:
Generating energy to power things
Feeding the world
Making physical things
Getting carbon out of the atmosphere
Adapting to a less hospitable climate
Developing effective state policies and coordination
Influencing the world with a new mindset
I'm still very early in breaking down these categories - surface level at best, and that may even be generous - and I do not address carbon removal and policy in this post. The thing I'm paying most attention to is where I think my skills are best focused - that is to ask the question, where can software and financial capital play a role in helping to solve the problems?
Generating Energy to Power Things
I think about powering things in two ways: 1) there is the energy required to electrify cities and homes and provide heating and cooling, and 2) energy required to transport things. Regarding the former, the most obvious solution to reducing fossil fuel consumption here is investing in renewables - wind, water and solar - and deepening investment in nuclear fission which is a highly viable and effective alternative to fossil carbon (and of course, continuing to explore the Holy Grail of nuclear fusion). However, a complete transition requires two things that do not exist today: 1) mass-scale, long-term electricity storage, and 2) extensive grids to transmit electricity across time zones. These are technical developments that require large scale coordination and state-level investment (especially for long-distance transmission). They need to happen in order for cities and their inhabitants to transition to clean energy. Places that don’t receive ample sun, wind, or are not located in close proximity to water for hydropower rely on renewable energy generated from elsewhere. That energy needs to be transferred in order to create and support a viable grid. And even for cities and geographies that have these natural power sources in abundance, they still need ways to store that energy (i.e. batteries) in instances of downtime (of which there are plenty, like a cloudy and windless day). One can imagine a future state where all this infrastructure is developed, but we still need fossil carbon reserves in case of emergency.
While massive batteries and grid infrastructure is not my forte, I am particularly interested in energy markets and how we can most effectively route and distribute energy. Software companies like David Energy can help us better understand and manage energy usage, leading to actionable insights and cost savings through more efficient markets.
As for using energy to power transportation, electric vehicles are our logical (near-term) end state and the investment and transition is well underway. There are still limitations though: battery storage and lithium production and ubiquitous and efficient charging being the two primary ones. Another evolution of transportation is investing in and electrifying municipal micro-mobility in congested cities (i.e. bikes, small cars, scooters, etc.). This is a movement I find quite exciting and I've been learning more about it following Horace Dediu on Twitter. I am very intrigued by opportunities to better manage and utilize networks of electric vehicles and charging stations and have always thought there could be a neat crypto application powering a Helium-like network for EV charging stations. As an aside, one important and thematic caveat to all of this is that all of the materials required to make this transition to electrifying personal transportation require burning fossil fuels for production. We take for granted just how pervasive their use is.
Transportation encapsulates so much more than moving us individually from one place to another. Long-distance movement and shipping are totally different beasts than hopping in a Tesla and driving across town. Today, it’s nearly impossible to rely on electricity and batteries to power long-haul trucks, massive cargo ships, and airplanes. All of these modes of long-distance transportation rely on fossil fuel to work, and that will likely be the case until the groundswell movement of electrifying personal transportation scales and evolves to power heavier machinery. My general and uneducated instinct is that we focus on renewables including nuclear for powering cities and homes, electrify personal transportation, then solve for long-haul transport by applying whatever we learn from the former two to the latter.
Feeding the World
We need food to survive. Over the past 70 years, the world population has grown from 2.5 billion people to over 8 billion. That growth required a lot of ingenuity when it came to producing enough of it, particularly when a majority of the global population consolidated in megacities that are far removed from where food is produced. Our sustenance is often created hundreds or thousands of miles away from major metropolises, and then transported to cities. Agriculture is a fossil carbon intensive business with many different attributes: industrial food processing requires land deforestation, managing farms (machinery, soil, etc.), manufacturing fertilizers, and then transporting the final products to consumers. These innovations have supported both the growth in global population and our transition to a city-based civilization.
There are several things that stand out to me with regards to limiting fossil-fuel consumption when it comes to feeding the world. The first one is the shameful fact that in a world where a meaningful percentage of the population is malnourished, we waste an unfathomable amount of food. We produce well more than we actually need. In affluent populations the world loses almost half of all root crops, fruits, and vegetables, a third of all fish, 30% of cereals, and 20% of meat and dairy products. Roughly one-third of the overall food supply goes to waste, and by some studies, 70% of that wasted food is perfectly edible. This is pure insanity. Solutions to this don’t require technological innovation, they require behavior changes amongst consumers, and businesses that can find ways to turn this disaster into opportunity like Misfits Market which started by selling produce that most groceries won't stock (because they look funny and would otherwise be discarded) directly to consumers at a discount. This is an area that is ripe for new models to incentivize desired behaviors.
The second area of investment here should be in vertical farming. In order to minimize agricultural fossil fuel consumption, moving produce production closer to the end-consumer will drive down emissions from transportation. Instead of NYC residents eating tomatoes grown in Spain, what if they were grown in a vertical farm in Newark? There are a lot of companies innovating here like Bowery Farming, many of which are also solving the second-order problem of deforestation and the emissions that come from manufacturing and powering heavy agricultural machinery.
Another place we can help to reduce emissions attributed to food production is by minimizing crops’ reliance on nitrogen heavy fertilizers. Producing ammonia for fertilizer is a major source of carbon emissions. Plants require it in fertilizer to grow healthily and reliably, and it also enables fields to harvest multiple crops throughout multiple seasonal cycles. Without it, it would be impossible to feed close to half of the world's population! An interesting solution here is genetically modifying plants to improve their efficiency of nitrogen uptake. This is an area where CRISPR may come in handy. There are already plenty of studies underway to do this, as well as others to genetically modify plants to increase their capacity for atmospheric carbon removal.
Making Physical Things
We are surrounded by stuff. Electronics, household appliances, buildings, roads, plumbing, etc. Stuff is everywhere. And almost all of it relies on fossil fuels in order to exist. There are four key ingredients to make this stuff: cement, steel, plastics, and ammonia. Together, these indispensable materials are responsible for 25% of all CO2 emissions, and there are currently no commercially available and readily deployable mass-scale alternatives to replace them.
Plastics, cement and steel are materials we interact with every day. They are also the materials that power our transition to renewable energy. Wind turbines, solar cells, dams, and electric vehicles are made of them. It’s a virtuous cycle. We need to find a way to eliminate the use of fossil fuels from the production of ammonia, plastics, cement, and steel, but we will need to produce a lot of these materials in order to develop the infrastructure to support renewable energy. On top of that, the modernizing world will need access to these materials in the upcoming decades in massive quantities in order to improve their quality of life.
The primary thing I’m interested in here is finding ways to make sure these things don’t go to waste. That means recycling these materials so they can continuously be reused instead of having to constantly produce them anew. Fortunately, this is already happening, just not at the scale we need it to. Primary steelmaking produces twice as much as recycled steelmaking every year, but we haven’t made much of a dent with concrete. Concrete also suffers from wear and tear, and only has a multi-decade lifespan which is not good. We need to improve our ability to recycle and reuse it, while exploring other materials for physical structures. Making sure things don’t go to waste also means producing only what we need and ensuring excess production is utilized. This is an area where enterprise-focused marketplaces and networks can emerge ensuring abundance is distributed amongst consumers, businesses, and nation states alike.
Adapting
The surface area of fossil fuel usage is vast. My suspicion is that a net-zero world will not happen by 2050. Things will go wrong between now and then. The world is a volatile place, and this type of energy transition is unprecedented, especially because so many things need to go right: international state-level coordination, government subsidies, technological innovation from incumbent companies who are willing to temporarily cannibalize their own businesses, funding for and innovation by startups worldwide, changes in consumer and enterprise behavior and large-scale incentives to drive that behavior change that go well beyond a moral call to action.
This isn’t to be despondent. I do think civilization will rise to the challenge, but we need to be prepared for disaster to strike because it already is. Global heat waves, prolonged droughts, and increased flooding and storms are just the tip of the proverbial melting iceberg. We need to invest in technologies and programs that help humanity adapt to the changes caused by the climate crisis. This runs the gamut from software based solutions to infrastructure development to state and global policy. If we think the refugee crisis is daunting today, it will only exacerbate as large-swaths of geography currently inhabited by billions of the most in-need populations become uninhabitable.
These problems are massive and need to be tackled in parallel with our efforts to reduce emissions and usher in the next energy transition. It’s hard to do many things exceptionally well simultaneously, but we don’t have a choice in this scenario. I’m particularly interested in solutions that help people adapt to the changing environment. Most of the population in Europe does not have air conditioning and suffered through devastating heatwaves this month. How do we solve this? How do people living in areas prone to flooding and wildfire survive? How do we think about water preservation and distribution during prolonged droughts? While we solve for eliminating emissions, we need to survive long enough to do so successfully.
If we accept that we need a Plan B (and Plan C) in the instance we aren't able to realize a global emissionless energy transition in the next three decades, another part of adapting is removing CO2 from the atmosphere. Fortunately, we know there is a market for these services. Companies are willing to pay real sums of money to initiatives that offset their emissions. There are a wide variety of initiatives under way to sequester carbon, ranging from genetically modifying plants to enhance carbon consumption to loading beaches up with carbon-removing sand and using machines to capture carbon from the air and bury it deep underground in rocks.
Mindset
Fear is not a good motivator when we look at risk on a long-scale time horizon. And for human beings multiple years is a relatively long time scale. People still smoke even though they know that it causes cancer and will kill them over time. People drink knowing it will destroy their livers and lives over an extended period of time. And people will do things that send CO2 into the atmosphere even if they know it will cause the collapse of human civilization over an extended period of time. Things that happen many years in the future seem less scary to imminent threats that impact us right now. And we live in a world where there is no scarcity of things, real or conjured by the media, that scare us today. Fear does not work as a motivational force to usher in the required energy transition.
Moral imperative also does not work. In Kim Stanley Robinson's book Ministry for the Future, one of my all-time favorites, an international organization is set up to legally represent the interests of species, humans and others, that will be born into the future (hence Ministry for the Future). It's a fascinating concept, but likely not one that would garner much traction today because human beings don't really care all that much about unborn generations and their respective qualities of life, even if it is the right thing to do. People care much more about their own current quality of life, being able to support and shelter a family, or even understand where their next meal will come from. We are selfish and we will always be our top priority in our hierarchy of needs. Collectively speaking, doing the right thing for the long-term will never take precedence over looking out for ourselves today.
People want a better quality of life for themselves, their families, and their communities. And generally speaking, they want it somewhere between less than they currently pay for it and free. And that is the mindset we need to embrace when embarking on this energy transition. This is not about self-sacrifice in the name of the common good. It's not about uprooting our lives for a better tomorrow. It's about being able to do a lot more of what we like and need to do, powered by a lot less. It's about energy abundance to power a better tomorrow, in a way that will ultimately save people money and improve their quality of life. There's a lot of great literature about this concept. This Cleo Abram's video inspired by Matthew Yglesia's writing, Derek Thompson's Abundance Agenda, Ezra Klein's Supply-Side Progressivism, and Noah Smith's synthesis of these ideas are highly recommended for inspiration.
Our collective mindset needs to be inspiring, not dire. We are creating a future where everyone's life is better. Boundless renewable energy will unlock human civilization's potential to accomplish unfathomably awesome things. Now this all sounds like subjective hyperbole, but here are some practical examples: Would you rather pay more or less to power your car or mode of transportation? Do you want to pay more or less for nutritious food? Do you want your place of residence to have heat and air-conditioning and cheap electricity? Do you want to be able to do more with every dollar you spend? The answers to these questions should be obvious and easy for any rational actor, and this is what more energy to power our lives will accomplish.
The energy transition is something that clearly excites me. It will be one of if not the most important things that happens within my lifetime, and I hope to play a small role in it by continuing to invest in and support entrepreneurs that are building solutions in the space, backing politicians who take action seriously and think rationally and practically about the matter, and perhaps even building something one day. The more I dig in, the broader the surface area grows and the deeper it seems to sink, too. I'll continue to sharpen my thinking on the matter while looking for areas where I think I can be a little bit helpful: mainly investing in companies that are helping to solve for the key thematic areas I've outlined and will continue to refine, and supporting organizations and political actors that help drive policies to create the subsidies and incentives to motivate large-scale infrastructure investment, development, and innovation.