The Ultimate Guide to Sustainable Investing

Let’s Define – What is Human-Driven Climate Change?

Before we talk about sustainable investing and its role in solving climate change, let’s define climate change itself.

Climate change has become such a weighted term. In our minds, it can stand for burning coal, rising sea levels, wildlife diversity loss, species extinction, the Pacific garbage patch, and more. The reality is that the behavior of humans has taken a staggeringly large toll on our natural world.

And while climate change compounds these issues, we find it helpful to narrow in on the physics of the problem.

Put simply:

1. There is too much carbon dioxide and other greenhouse gases in our atmosphere.
2. The insulating effect of these molecules means less of the earth’s heat reflects into space.
3. The more heat that gets trapped, the more it changes our global systems. From directly melting ice caps to disrupting historic ocean and wind currents, boosting the intensity of storms, and the length and duration of droughts.

Thus, to solve climate change, we have to do three things:

1. Stop adding excess carbon dioxide and other greenhouse gases to the atmosphere ("Turn off the faucet").
2. Protect the remaining natural systems and start regrowing as many as we can to increase our planet’s natural carbon-carrying capacity ("Expand the tub").
3. Mop up the excess, ancient carbon dioxide until atmospheric carbon dioxide levels have returned to pre-industrial levels ("Mop up the mess").

Climate Change Explanation

The most helpful analogy for climate change is an overflowing bathtub. There’s the faucet turned on high, the tub, and the water rising up and over the sides. Unattended, the overflowing water not only creates a mess in the bathroom, but it leaks through the floor, into the vents, and down into the foundation of our civilization’s house.

The house can still dry out, but eventually, the structural integrity will suffer permanent damage. The longer the faucet is left running, the worse it gets.

In this analogy, the tub represents how much carbon our planet can hold, also known as our planet’s natural carbon cycle. When plant/animal life grows, it absorbs carbon from the atmosphere to use as building blocks in its body. When it dies, it releases that carbon back into the atmosphere.

Picture a tree. The wood of that tree has a lot of carbon molecules in it. When that tree grows, it takes carbon dioxide molecules from the air and uses the carbon part to make wood. When that tree dies and the wood breaks down, the carbon rebonds with oxygen to create atmospheric carbon dioxide again.

Then, a new tree will draw down that atmospheric carbon dioxide to make wood. It goes in cycles.

When those original plants were buried, their carbon was also buried. So instead of remaining in the tub, in the natural carbon cycle, it went down the drain and effectively left, meaning it no longer formed a part of the carbon equation. It was neither in the atmosphere nor stored in living plants/animals.

Now let’s zoom out. The natural carbon cycle is more than just trees because it encompasses all living things, particularly plants. The more life there is on earth, the higher carbon carrying capacity our planet has. The greater capacity nature has to "inhale" carbon.

The inverse is also true. Cutting down forests, expanding deserts, polluting coastal wetlands all reduce life on earth. Nature’s carrying capacity for carbon will reduce, and the bathtub becomes shallower.

A pivotal aspect of solving climate change will be to "deepen the tub". Not only have humans added ancient carbon to the atmosphere but it’s also lowered the sides of the tub by destroying natural systems through deforestation, pollution, and over-harvesting.

In other words, part of the reason for the increase of carbon dioxide in the atmosphere today is that humans reduce nature’s ability to keep it earthbound in plants and animals.

To solve climate change, we must aggressively reverse this trend.

So, that’s the tub. Now let’s turn to the faucet, which pours all this extra carbon dioxide into the tub.

History of Fossil Fuels

Let’s begin with a quick primer on fossil fuels: over our planet’s history, not all trees rotted in such a way that released 100% of their carbon back into the atmosphere. Swamps, sea-level changes, and other factors trapped trees and stopped them from fully integrating back into the natural carbon cycle.

As time passed, layers of dirt, rock, and sand piled up on top of these dead plants and animals. The increased heat and pressure compressed these layers of former life together until they lost their old forms and took on new denser, more energy-rich molecules.

What does energy-rich mean? It means heat. Or better yet, the capacity to heat.

The more "energy" a molecule has, the hotter it burns. If you have ever counted calories, you are counting the potential of your food to create heat when burned. Imagine setting one pound of lard and one pound of lettuce on fire. You’ll get a lot more heat from the lard because it is a more energy-dense food, similar to how coal is more energy-dense than fresh timber.

So, caches of these energy-dense molecules made from fossilized plants exist all over the world. Burning them gives you A LOT more heat than burning basically anything else. Humans figured out a way to harness that heat in the 1880s with the first coal-fired steam engines.

Consequently, the industrial revolution began and turned on the faucet of human-caused global climate change.

Before we decry their impact, let us first give fossil fuels their due.

From the 1880s to the present, this massive cache of energy has allowed humanity to build astounding things, from skyscrapers to the international space station. This cache has enabled humans to cure and eradicate devastating diseases and cross the world in a single day. Fossil fuels have built our world in which we live.

However, that energy cache has come at a price. Digging up and burning those fossilized plants and animals released their ancient carbon into the atmosphere.

Carbon that had been out of the equation for millions of years suddenly re-entered the atmosphere. And with the natural carbon cycle already at capacity, carbon dioxide began to "overflow" out of the tub and onto the bathroom floor (i.e., the atmosphere).

You can have too much of a good thing. At just the right level, carbon dioxide is why our planet is neither too hot nor too cold and why it can support life in the first place. The overflow of ancient carbon into our atmosphere is now doing too good of a job insulating our planet.

Some of the heat that would have bounced back into space 150 years ago is now sticking around. The longer we leave the faucet running, the more heat is trapped. The more heat that gets trapped, the more energy is in our atmosphere; more trapped energy makes our weather and global systems more chaotic.

And that’s what’s happening to our planet and our weather systems. If we cannot turn off the faucet, deepen the tub, and scale the required technologies to mop up the excess currently seeping into the foundation, the chaos of our warmed planet could lead to truly terrifying outcomes.

So, How Can We Stop & Reverse Climate Change?

The most crucial step we need to take in the next 30 years involves turning the faucet off. If we cannot successfully stop burning ancient carbon to power our civilization over this period, it will not matter how many trees we plant. The overflow of carbon will overwhelm the system.

So, how do we turn the faucet off?

We really only have two options: going backward or forwards.

Option 1: We Go Backward to Pre-Industrial Times

If industrialization is the reason we have atmospheric carbon, can’t we just return to a pre-industrial world?

While technically possible, it’s difficult to imagine many people voluntarily doing so. Would billions of people agree to give up air conditioning? Cross-country flights? Clean-burning cookstoves? No. They would not.

So, we could only return to pre-industrial times involuntarily, and the only real way to imagine that occurrence is by a collapse of global civilization. If the goal of solving climate change is to avoid an apocalypse, the "go backward" route does not seem to get us very far.

Option 2: We Progress Forwards to a Civilization Run Without Fossil Fuels

The only viable path that scientists and researchers have laid out is that we have to invest and build our way out of this mess.

Two pieces of good news on this front:

1. We have most of the technology we require, most of which is a better economic choice than the fossil fuel alternatives.
2. If we can build it, a fossil-fuel-free world will be FAR better to live in. Remember how clear the air was in the days after the Covid-19 lockdown began in March 2020? It would be like that, except all the time and more. The promised land of a fossil-fuel-free world is not just less bad than the alternative, it’s much better than today.
   
   

If we can build this world, the tub will stop filling. It will still be overflowing, but turning off the faucet will give us a shot at mopping up the bathroom in our civilization’s house by bringing atmospheric carbon back down to pre-industrial levels.

We know what we need to do to solve climate change and the first critical step involves turning off the faucet of carbon emissions. We need to transition to a fossil-fuel-free world. We have the technology we require. Most of it already makes economic sense. The question is: can we do it fast enough?

We Cannot Solve Climate Change Without Investment

To avoid catastrophic 1.5ºC warming, humanity needs to invest ~9x more into climate solutions each year. We need to research, develop, test, iterate, build, deploy, and massively scale up new technologies. And we need to deploy the existing clean technologies as fast as we can.

None of this, from early-stage R&D to building the next battery gigafactory, will happen without investment to fund it.

The good news is that much of what needs to be built to "turn off the faucet" of carbon emissions is straightforward and likely to provide a strong return on investment. Here’s a high-level overview of what that could realistically look like from now to 2050.

2020s: Get Developed Nations on a Path to 100% Zero-Carbon Electricity Generation

To turn off the faucet, we need to not only switch our electrical systems over to renewable and carbon-free sources but also to use electricity for more of our needs. From driving to heating buildings, to cooking food, by 2050, all of these activities will need to be accomplished without burning fossil fuels.

With electric cars, heat pumps, and induction stoves, we already have great electricity-powered replacements.

The first mission of this decade involves putting renewable energy generation (plus transmission and storage) in place to make adopting these electrically-powered alternatives the superior option as they scale up and reach cost parity with their fossil-fuel-powered competition.

Again, the good news here is that renewable energy is almost universally cheaper to generate than new fossil-fuel-powered plants. This will likely only become truer as its supporting infrastructure, such as battery storage, scales up over the decade. Any additional governmental support will make this transition faster.

The second mission of the 2020s is to invest heavily in research and development for the remaining "hard to decarbonize" industries. Our civilization depends on processes such as forging steel and creating concrete but does not yet have viable fossil-fuel-free alternative processes. The same goes for flying airplanes and shipping cargo across oceans.

The financial reward for solving these issues is substantial, and as such, there are numerous technologies in the works. To succeed in the 2020s, the winners of these R&D races will need to be commercially tested, viable, and ready to scale.

2030s: Broadly Switch From Fossil-Fuel-Powered to Clean Electricity-Powered

Today, we burn fossil fuels for generating electricity, transportation (cargo containers, people, and more), heating (buildings, food, and so on), and in the fuel-heavy industry (heavy materials like iron, steel, cement, amongst others).

With fossil fuels on a path to no longer being required to generate electricity, the mission of the 2030s is to electrify the infrastructure to "move and heat stuff" so we can keep heating our homes, cooking our food, and transporting goods without carbon emissions. We have most of that technology today, and it is quickly improving.

For example, according to BloombergNEF, electric cars should reach cost parity with internal combustion engine cars by 2027. Given that electric cars tend to cost significantly less to maintain than their fossil fuel counterparts, the economics seemingly point to a rapid transition.

According to the IEA, to reach the target of turning off the faucet by 2050, 50% of new car sales must be electric by 2030.

It is likely that some industries will still need to burn fuels to operate. For example, there’s still no viable method of flying a plane across an ocean without liquid, combustible fuels (although it is increasingly possible that shorter, regional flights can switch to electric power). However, airlines do not have to burn fossil fuels.

They can burn fuels derived from agricultural byproducts, called advanced biofuels. These will still have carbon emissions, but they’re coming from "the tub" and not the faucet.

2040s: Decarbonize Heavy Industry, Finish Transition Away From Fossil Fuels

Should we be on track, the goal is that by 2040, technology will have the capacity to decarbonize the remaining hard sectors, particularly heavy industry. We not only have the technology to create carbon-free steel and cement but it also makes better economic sense to do so.

All Along the Way: Develop and Scale Carbon Sequestration Technologies

While turning off the faucet of ancient carbon emissions is necessary to stopping and reversing climate change, it alone will not suffice. There remains 150 years of carbon emissions in the atmosphere over-insulating our planet. We have to clean up the mess sitting on the bathroom floor and dry out the house.

To do so, we need to capture that excess atmospheric carbon dioxide and permanently store it as a gas, liquid, or solid down here on earth. From processing it out of the air with giant vacuums and injecting it underground to sinking fast-growing kelp far down into the ocean so that it never re-enters the carbon cycle, the range of sequestration technologies is vast and exciting.

The good news here is the significant flow of investment into these technologies; this is likely just the beginning.

The less good news is that unlike decarbonization technologies, which broadly have clear paths to outcompeting their fossil fuel counterparts and, therefore, are likely strong investments, investing in carbon sequestration technology involves betting on a robust carbon-pricing marketplace.

Should it not materialize or be tepid/weak, returns-driven investment in these technologies would likely dry up.

What About Expanding the Tub? We Also Need to Invest to Protect and Expand Natural Ecosystems

Finally, to solve and reverse climate change, we must significantly expand the total mass of plants and animals living in natural systems on our planet.

Some of this expansion may come through investments that rely upon the carbon credit market. Some of this will come from government action, and some will come from charitable giving, land protection, and stewardship.

Some of it will come from technological innovation. According to the United Nations, 26% of the planet’s total landmass is used for livestock grazing. And in the United States, 41% of land is used for feeding animals, whether for direct grazing or growing animal feed, according to Bloomberg.

What would allow that land to return back to nature? If the business model of animal farming no longer made economic sense.

Plant-based meats use a fraction of the resources that animal-based meats do (for the skeptics out there, here’s the most nuanced analysis we’ve found).

They are more expensive today because of scale (animal-based meats have had 100+ years to industrialize and cut costs, whereas plant-based meats are just getting started), but they have the capability of being far cheaper. While they may never taste exactly the same as a burger, they are getting closer.

Cell-based (lab-grown) meats also have the promise of tasting just like a burger, and potentially being cheaper. However, the science is highly questionable concerning when or if that promise will become a reality (this is a seriously good analysis of the cell-based meat industry).

Conclusion: Investment’s Significant Role

We cannot solve climate change without turning off the faucet of carbon emissions. We cannot solve climate change without expanding the tub of our planet’s natural carbon-carrying capacity. And we cannot solve climate change without mopping up the historic emissions that have "sloshed" out of the tub.

And we cannot solve any of these without massive investments in researching, deploying, and scaling their respective solutions. We have no choice because of the unthinkable prospect of moving backward to pre-industrial times.

These investments can be accelerated and aided by government interventions or harmed by fossil fuel subsidies and artificially low prices. Billionaires or regular individuals like you and me can make the investments. The "how" of solving climate change can often obscure the "what" we have to do.

And the action item of "what" we have to do is invest.

We Have to Significantly Decrease Fossil Fuel Demand

Overview

The International Energy Agency  (IEA) is the group that sets the models that utilities and energy companies use to finance new projects. The IEA projects to avoid catastrophic climate change and fully "turn off the faucet" of fossil fuel emissions, our globe needs to dramatically reduce fossil fuel consumption and switch away from using fossil fuels to generate energy by 2050.

Here’s what they model that such a transition would look like:

• Oil consumption will reduce by 75% from 2020 to 2050, with the majority of production in 2050 not used to create energy but as raw ingredients for plastics and chemicals.
• Natural gas demand decreases by 55% from 2020 levels, with the majority of production in 2050 being used in conjunction with carbon capture and sequestration technology to make hydrogen.
• Coal use substantially ceases, falling 90% from 2020 levels.
  
  

Put another way, to solve climate change, we need fossil fuels to transition from taking the lead in our global energy production to becoming a role player. They’ll remain on stage, but they’ll only have a few lines.

So what would that transition look like? Is it realistic? Is this just the wishful thinking of greenies like us, or are there market forces going in favor of this transition? Let’s explore each of the three major types of fossil fuels, beginning with oil.

Oil Is Getting Outcompeted by Electric Cars

Here’s the high-level summary of the IEA’s projections:

• Oil demand falls 75% from 2020 to 2050 (~4%/year).
• The lowered demand would require no new expansions of oil fields, just continued investment to keep existing ones operating.
• By 2050, 70% of the oil produced will not be burned, but used in hard-to-replace end products like plastics and chemical feedstocks.
• Oil will be priced at $35/barrel in 2030 and $25/barrel in 2050. These low prices lead to significant stranded assets and capital loss. Only very cheap, simple production sites like those in the Middle East can continue to operate profitably by 2050.

The Economic Factors in Favor of the Transition Away From Oil

Numerous economic forces work in favor of this transition.

1. Currently, 55% of oil is used to make gasoline and diesel. The majority of oil produced today is used to move people and things around, primarily in cars and trucks. Electricity-powered cars are faster, safer, have more features, and require significantly less maintenance because they have fewer moving parts.
2. The oil industry is consolidated, coordinated, and sensitive to demand. Decreasing demand for gasoline and diesel likely means that OPEC (the global oil cartel) will begin to restrict supply to keep oil prices elevated. It would be unlikely that they would expand oil production with investments into new fields as this would create oversupply and an even greater downward pressure on oil prices.
3. Other promising technologies may soon replace the need for oil where liquid, combustible fuels are still needed. It’s unlikely that trans-oceanic planes and container ships could pack enough energy onto a battery to make the voyage by 2050. They’ll need some kind of liquid energy to combust. Luckily, biofuels and low-carbon hydrogen technologies have made significant strides in this direction. With more carbon taxes coming online, the economics of these alternatives could further drive down the demand for oil for transportation.

The Biggest Blockers to the Transition Away From Oil

With the rise of electric vehicles and their superiority to gas/diesel-powered vehicles, at least this part of oil’s demand should decrease. Oil companies have told their shareholders that the future of oil is in plastics. Thus, we can expect reduced oil demand between now and 2050, but how much? These factors that could hinder the transition:

1. Oil companies are extremely good at lobbying and navigating the system to reach their goals in governments with greater checks/balances like the US, let alone those with higher concentrations of power (dictatorships, for instance). They could continue extracting government support for oil and oil-powered vehicles that artificially slows down the adoption of electric vehicles.
2. Lower oil prices could slow investments in low-carbon liquid fuels. While it would make more sense that OPEC would reduce supply as oil demand drops, it could also flood the market with cheap oil and take the short-term loss to quash investment in oil-alternative fuels. If investors see OPEC’s willingness to take years of losses to protect its business, they could be skittish to invest in alternatives that can only deliver a return if cheaper than oil.
3. Low-carbon alternatives could face a cultural pushback. We have seen people on both sides of the political aisle prioritizing values and identity over economics in personal decisions. Tesla vehicles cost more than their gas-powered counterparts, as do Impossible burgers. The left is more prone to buy these alternatives because they reinforce their identity. The risk here is that despite an electric Ford-F150 being a better truck, it receives no backing in the marketplace from truck owners as a statement of political allegiance.
   
   

While there is hope surrounding the transition away from oil, such a change may encounter obstacles. Governmental intervention, like a carbon tax, would dramatically reduce the effectiveness of these blockers.

Coal Is Getting Outcompeted by Wind, Solar, and Batteries

The fate of coal is a bit simpler to map out than oil. According to the IEA:

• Coal supplies will drop by 90% from 2020 to 2050.
• No new coal mines are needed to fulfill demand during this time.
• Most of the coal used in 2050 is as a raw ingredient in steel production, rather than burned to generate electricity.
• Most of what generates electricity captures the carbon for sequestration.

The Economic Factors in Favor of the Transition Away From Coal

• It now costs less to build new solar arrays than continue operating existing coal plants in most areas of the globe. There are many growing solar energy companies.
• Campaigns to shut down coal plants and brand coal as negative for the climate and health have succeeded (like this one from the Sierra Club).
• Even coal-reliant countries like India have explored halting any new production of coal facilities due to their inferior economic situations.
• Coal’s significant air pollution can lead to civil unrest, particularly in economies with growing middle classes, like China and India.
• Investors have shown a lack of confidence in the long-term potential of coal, with the Dow Jones US Coal Index hitting all-time lows in the summer of 2020 before Dow Jones discontinued it.

The Biggest Blockers to the Transition Away From Coal

• With their lower upfront capital costs, coal is still considered a way for developing countries to fast track electricity production, even if they cost more to operate.
• China’s geopolitical ambitions to expand influence could lead it to finance and subsidize coal for developing countries.
• Strong-handed governments like China may continue to focus on short-term economic growth over long-term economic and societal benefits.
• The anti-nuclear campaigns of Europe, and lack of green alternatives, have led to a rise in coal use.
• Coal is a vital ingredient in steel production. While companies have recently produced steel without coal, it remains unclear if the economics of this coal-free technology can scale around the globe.
  
  

Like oil, numerous economic forces favor the transition away from coal. Coal consumption is likely to decline from now until 2050. Regardless, the crucial question is by how much and how quickly.

Natural Gas Sticks Around, Relying on Carbon Capture, Usage and Storage

Of the three fossil fuels, the IEA projects natural gas to decline the least from now until 2050. Natural gas primarily generates electricity with a secondary use of producing heat for buildings and cooking. Here are the IEA’s projections for natural gas:

• Natural gas production will decline by 55% from 2020 to 2050.
• Natural gas power plants will be equipped with carbon capture and sequestration technologies.
• 50% of natural gas produced in 2050 will be used to generate hydrogen (with the excess carbon dioxide being captured and sequestered).
  
  

Before diving into the economic factors for and against the transition away from combusting natural gas, let us first define a key term: Carbon Capture, Usage, and Storage (CCUS). This technology represents the lynchpin in the IEA’s projections for the future of natural gas. Without it, there will be no reasonable end markets for natural gas in a zero-emission world.

What is Carbon Capture, Usage, and Storage (CCUS)?

Technology exists today that can separate out carbon dioxide from other gases. Once separated, this carbon dioxide can be used (for example, to carbonate beverages) or sealed somewhere like an abandoned oil well to never emerge again (this is what sequestered means).

Here’s the good news for CCUS: we’re getting pretty good at capturing carbon dioxide. Multiple technologies exist, and they have fairly clear paths to capturing it economically at scale.

Here’s the bad news: no sequestration technology has thus far emerged at scale. Sealing it in rock formations often makes the most sense, but this approach has two problems: 1) it’s still unclear if these might leak, and 2) site location is crucial. It only makes sense if the rock formation is right below where the carbon is captured.

The fossil fuel industry really wants us to believe that CCUS will work because they can then operate as usual and capture the greenhouse gases. Thus far, their investments in CCUS have only resulted in headlines like "shocking failure" with over 80% of CCUS projects globally failing to be utilized as advertised.

The Economic Factors in Favor of the Transition Away From Natural Gas

• Fracking operations have failed to make consistent profits. Approximately 67% of natural gas in the US comes from fracking. Fracking wells have consistently underperformed supply expectations, leading fracking companies to push profits into further drilling rather than continuing to work existing wells. Fracking also produces oil, and, given its higher operating costs than traditional oil well drilling, fracking’s business model only makes sense when global oil prices are high.

• Solar is comparable in cost to natural gas. Moreover, it is only likely to continue getting cheaper.
• Electric heat pumps cost less to operate than gas furnaces. Even though heat pumps remain more expensive upfront than gas furnaces, we can expect that price to go down as they scale up production, making them an even better investment and further reducing the demand for natural gas.
  
  

The Biggest Blockers to the Transition Away From Natural Gas

• Will CCUS work? For natural gas to operate as a "transitional" electrical power technology, the carbon dioxide emitted must be captured and stored. Similarly, for natural gas to play any meaningful role in the hydrogen industry, the technology to capture and store the excess carbon must be mature and deployed at a mass scale.

• Given the failures thus far in space, we’ll believe it when we see it. Until then, the promise of CCUS may simply enable the fossil fuel industry to build natural gas plants based on the modeled promise of captured emissions without them ever being realized.

• Natural gas has momentum. At the time of writing, in February 2022, the EU labeled natural gas a "Sustainable Fuel". There is a lot of money riding behind natural gas’s perception as a climate solution, and barring that, the regretful adoption of a necessary transitional fuel.

• A significant amount of natural gas infrastructure has been developed recently, such as the installation of natural gas pipelines. Ports are being modified to accept and process LNG (liquified natural gas) container ships.

• Fossil fuel propaganda. For decades, the fossil fuel industry has attempted to convince us that gas is better for cooking than electric/induction. According to some great Mother Jones reporting, we know they have resorted to impersonating concerned neighbors on NextDoor to get angry about natural gas bans for new construction. Wow.
  
  

There is a world where the natural gas industry declines more sharply than by 55% over this period. If CCUS technology cannot be scaled and solar, wind, and batteries continue to drop in price to outcompete gas electricity production, the market for natural gas could constrict further, as natural gas would have no role in the hydrogen market.

However, natural gas could also decline by much less than 55%. If the perception of natural gas remains positive and aging nuclear power plants are replaced by gas instead of renewables, the demand for natural gas could remain constant or even increase.

Conclusion: Fossil Fuels Will Almost Certainly Decline Over the Next 30 Years. But by How Much?

To solve climate change, we have to turn off the faucet of carbon emissions from burning fossil fuels.

The good news is that from oil to coal to natural gas, numerous economic forces aid a successful transition. Even without significant governmental intervention, these forces alone could significantly reduce the demand for fossil fuels. With governmental interventions, these forces could become unstoppable.

The unfortunate news is that the transition is far from guaranteed. Fossil fuel companies have a long and successful history of bending governments to their will. Key technologies like CCUS may never commercialize successfully. Crucial zero-emission technologies like electric cars may become political symbols.

However, we have agency. Many of the paths that lead to the failure to transition away from fossil fuels in time stem from willful obfuscation by fossil fuel companies. Knowledge is power. We know what we have to do to solve climate change. We just have to do it.

We Need to Dramatically Increase Investments in Climate Solutions

The major plans for how to solve climate change center around increased investing in climate solutions. In order to be on a path to remaining under the catastrophic 1.5ºC warming:

• Project Drawdown and the Climate Policy Institute believe we need to boost the yearly global climate solution investment from $600 billion in 2019 to over $5,200 billion ($5.2 trillion).
• The International Energy Agency estimates that, by 2030, annual investments in renewable energy investment must rise to $1.2 trillion, in clean energy infrastructure (grid upgrades, EV charging stations, and so on) they must rise to $880 billion, and in zero emission alternatives (electric cars, efficient electric appliances, building retrofits), they must rise from $530 billion to $1.7 trillion.
• Investments in low-emission fuels must increase 30x by 2050, reaching $135 billion annually.
• McKinsey estimates that investments in physical infrastructure would need to top $9.2 trillion a year.
  
  

In any of these projections, the numbers are staggeringly large. Here’s how McKinsey put them in perspective:

"This incremental spending would be worth about 2.8 percent of global GDP between 2020 and 2050. The increase is approximately equivalent, in 2020, to half of global corporate profits, one-quarter of total tax revenue,15 percent of gross fixed capital formation, and seven percent of household spending."

However, investment in climate solutions is not charity. Most of the solutions discussed to "turn off the faucet" of historic carbon emissions have clear advantages in the market. The solutions would likely be strong investments without the looming threat of climate change.

Even some of the investments directly related to climate change, like efficient carbon sequestration, could have a massive payoff should strong global voluntary and involuntary carbon markets emerge.

Therefore, let us take out our crystal balls and peer into the future. In order to stop and reverse climate change and remain under 1.5ºC, what type of growth would we need to see in the various markets (solar, EVs, and so forth)? Which technologies are ready to scale and which still are in their infancy?

The good news, over 50% of the technology in place has a clear, competitive role in the marketplaces.

The bad news, though, is that approximately 50% of the technologies we need to turn off the faucet of emissions remain in the prototype and demonstration stage.

How Do Climate-Friendly Solutions Compare Against Existing Solutions?

Solar, Wind, and Electric Cars: The Climate Solutions Ready for Prime Time

Green = Technology has a clear place in the market
Yellow = Technology has been successfully demonstrated but still needs to scale to reach economically efficient market adoption
Red = Technology remains in its infancy and is far from being deployable at scale

This is very good news. Why? It gives us time, and it helps us prioritize. While there are certainly still some "moonshot" aspects of solving climate change, more than half of what we need to do to turn off the faucet is known and ready to scale. It is simply a question of whether we can do it fast enough.

Here is the type of growth required from the market-ready technologies from now until 2050 according to the IEA’s 2050 Net Zero Report.

Solar Panels

Solar is a well-proven technology. It has a strong supply chain, a healthy R&D budget, and a track record of delivering solid returns for investors. For us to remain under 1.5ºC, solar PV additions would need to increase yearly from 134 GW in 2020 to over 630 GW in 2030 (a 16.74% CAGR) and maintain that annual deployment rate through 2050.

A crucial part of that will be the expansion of residential rooftop solar. The 25 million households with rooftop solar globally would need to expand 4x to 100 million by 2030 (14.78% CAGR) and then 10x to 250 million by 2050.

Wind

Similar to solar, wind is now a proven technology with a robust marketplace surrounding it.

There are two types of wind power: onshore and offshore. Onshore is easier to build because the wind turbines are constructed on land. Such an approach has led the way in deployments compared to offshore.

To remain on the 1.5ºC of warming path, our global deployment of onshore wind will need to scale from 109 GW deployed in 2020 to 310 annually deployed by 2030 (11.02% CAGR).

Offshore wind has significant potential for growth and expansion. There are numerous real estate opportunities in oceans and lakes (and they tend to be pretty windy). Global offshore wind deployment will need to scale dramatically in the 2020s, going from 5 GW deployed in 2020 to 80 GWs deployed annually by 2030 (31.95% CAGR). Wind energy is critical to electrifying our energy sources.

Electric Cars

The third major category of ready technology is electric cars. Electric cars are already better cars than fossil-fuel-powered ones. They are safer, faster, more powerful, and cheaper to maintain.

With the economies of scale coming with broader adoption, they are on track to cost the same or less upfront as gas-powered cars by 2027, according to Bloomberg’s analysis.

This is all good news because electric car sales will need to ramp up dramatically in the 2020s, scaling from 4.6% of all new cars sold globally in 2020 to 60% of all new cars sold globally by 2030 (29.28% CAGR).

Batteries

A fourth category is missing from the IEA analysis, but we want to include it here. Batteries are an increasingly mature industry, and they are a crucial part of solving climate change. The sun only shines during the day, and the wind blows when it blows, but we need electricity 24/7.

The solution here is to store the electricity from that additional sunshine and extra wind in batteries.

The good news is that thanks to the rise of electric vehicles, the battery industry has quickly expanded. According to a McKinsey analysis, global battery cell production went from 64 GW in 2016 to 613 GW in 2020 (a whopping 77% CAGR). They project that by 2030, production will be at 2912 GW (a still impressive 16.52% CAGR).

With battery technology continuing to scale, we should see virtuous feedback cycles. With batteries becoming cheaper, it makes economic sense to deploy them in more areas of the economy, particularly in energy storage and powering electric vehicles.

There are many growing battery stocks and companies. It is not a question of whether the battery industry will continue to grow but whether it will grow fast enough. 

Carbon Capture, Hydrogen, and Bioenergy: Significant R&D Still Needed

The massive deployment of solar, wind, electric cars, and batteries is possible. Each has its clear economic benefits. They are proven technologies with positive market forces behind them.

However, they alone will not address climate change. In our energy system, plenty of innovation is required to mitigate approximately half of the remaining emissions; and these are all trickier parts of the economy. Explore the list of biofuel stocks and how we decide which ones to invest in.

Carbon Capture, Usage, and Storage (CCUS)

A crucial part of the IEA 2050’s plan is validating carbon capture and sequestration technologies. This area is the part of their analysis that we struggle with the most. As outlined in "We have to Significantly Decrease Fossil Fuel Demand," carbon sequestration technology remains in its infancy.

There is a risk that it never scales. Although we have pretty good technology for separating carbon dioxide from the air, we are still no nearer to knowing what to do with it afterward.

If a technology/company can break through this technological barrier, the financial rewards could be massive.

Hydrogen-Based Fuels

Fuel cells are "engines" that create power with hydrogen as a fuel source, with the only output being water. Pretty clean, right? Fuel cells are not new technology. The Apollo spacecraft had fuel cells. If we can scale the use of fuel cells, we can add a whole new emission-free source of power for the world to use.

So why aren’t we living in a fuel-cell-powered world today?

The problem is getting the hydrogen. At a high level, hydrogen can be sourced in two ways, one dirty, one clean. The dirty way, also known as "blue hydrogen", involves splitting it off from natural gas. Methane (CH4), the primary molecule in natural gas, has four hydrogen atoms. In 2020, 90.6% of hydrogen came from this process.

Economically, this poses a problem for scaling hydrogen production. If it is meant to replace fossil fuels like natural gas but the main ingredient in making it is natural gas, it will always cost more than natural gas.

Fossil fuel companies see hydrogen as a major way to stay relevant in a decarbonizing world.

This ONLY makes sense if two things happen: 1) CCUS technology shows its viability (otherwise the switch to hydrogen would not result in a decrease in emissions), and 2) if carbon pricing made it more advantageous to turn natural gas into hydrogen and capture the carbon rather than just sell the natural gas directly in the first place.

[A side note: it is for this reason that we do not include companies like Fuel Cell Energy in the Climate Index because they make much of their revenue from helping the fossil fuel industry turn natural gas into hydrogen without adequate sequestration of the ensuing carbon emissions.]

The second way of sourcing hydrogen is cleaner, more elegant, and known in the industry as "green hydrogen". Hydrogen can be extracted from water (H2O). Running an electrolyzer through water splits off the hydrogen atoms. If the source of that electricity is 100% renewable, then green hydrogen becomes an emissions-free fuel source.

The promise of green hydrogen is its capacity to act as a battery of sorts. Renewable energy systems have to curtail (translation: waste) electricity if it is too sunny or windy. The electrical grid needs to remain balanced, meaning 100% of supply has to always find 100% demand.

Especially as we bring more wind and solar energy online, there will be more excess electricity on certain days. Instead of getting wasted, that excess could run hydrogen electrolyzers on demand, thus capturing that energy in a different, far more stable form: hydrogen.

The good news is that green hydrogen is beginning to scale. Shell opened a large green hydrogen plant in China to provide emission-free hydrogen for the 2022 Winter Olympics. Bloomberg’s analysis now believes that green hydrogen could be the cheapest form of hydrogen by the end of the decade, with a staggering CAGR of 54.7% from 2021-2028.

If Bloomberg’s projections come to pass, we could be on a clear path to a far more hydrogen-powered world, regardless of the efficacy of CCUS and/or carbon pricing.

Bioenergy

Broadly speaking, bioenergy involves the creation of electricity/power from burning plants. But wait, doesn’t that produce emissions? Yes, it does. The difference between bioenergy and fossil fuel energy is that bioenergy’s emissions are much more a part of the current carbon cycle (they are in the bathtub).

If we suddenly turned off the faucet of fossil fuel emissions and magically mopped up the historic carbon emissions, bioenergy theoretically would not contribute to climate change. Our planet’s carbon cycle would be in balance, and bioenergy’s carbon emissions would get reabsorbed by plants to be used again.

The problem with bioenergy today is that we do not live in that world. The faucet of ancient carbon emissions is still turned up high, and the excess is sloshing over the tub and on the bathroom floor at an alarming rate. Deliberately burning more stuff, whether it’s fossilized plants or recently harvested plants, just makes climate change worse.

Bioenergy has promise, however. The IEA’s graphic above ties the fate of bioenergy to CCUS. If successful, bioenergy could be another area to deploy CCUS and use waste streams like sawmill sawdust to generate electricity.

To us, of more interest is bioenergy’s potential in providing low-carbon alternative fuels for hard-to-decarbonize sectors like airplanes and ocean shipping.

Agriculture: Where the Most Innovation May Be Needed

There is one major source of carbon emissions that we have not yet discussed: agriculture. According to the EPA, agriculture is responsible for 10% of the USA’s greenhouse gas emissions. The United Nations puts global agricultural greenhouse gas emissions at 17%.

Even if we wean our civilization off of fossil fuels, we will likely also have to address and bring down these emissions from agriculture.

There are a number of practices aimed at reducing agriculture's impact. Lumped under the term "Regenerative Agriculture," the science is pretty clear that these practices are broadly better for our world than standard industrial agriculture. They involve far fewer chemicals, fertilizers, and pesticides while building up the soil microbiome.

Practices like managed grazing, where cows are "herded" and rotated around a pasture rather than left to roam free, build back degraded soils.

All of these practices are better for our natural world. They tend to make farms more resilient and farmers more money than standard practices. The problem is the science is pretty skeptical on whether any renewable agriculture practices actually result in reducing emissions from agriculture.

A meta-study completed by scientists at the World Resource Institute has landed in a place of high skepticism around the carbon sequestration potential of regenerative agriculture. They found that:

• While no-till agriculture does seem to increase soil organic carbon, it also increases the release of nitrous oxide, a 300x more potent greenhouse gas than carbon dioxide. The increase in nitrous oxide may outweigh the increase in sequestered carbon.
• The latest estimates show some carbon sequestration potential for managed grazing, but it is more reduced than originally thought, with half of the reduction potential requiring the incorporation of planting beans on the grazing land.
• The use of cover crops does seem to increase soil-based carbon, but it may also increase the release of nitrous oxide.
• Converting farming land to grazing land does rebuild soil back on that piece of land, but it increases the demand for food production elsewhere.
  
  

There is one clear path to reducing emissions from the agriculture sector: reducing the number of cows. In the US, 35% of all agriculture emissions come from the beef and dairy industry.

This number only accounts for the emissions from "enteric fermentation" (aka cow burps) and manure. It does not account for the significant cropland used to grow food for cows. According to Bloomberg, 41% of land in the US is used for feeding animals, whether for direct grazing or for growing animal feed.

We thus need to replace cows, and we have two promising technologies, one mature, one still very much in its infancy.

Plant-Based Meats

Plant-based meats use a fraction of the resources that animal-based meats do (for the skeptics out there, here’s the most nuanced analysis we’ve found).

They are more expensive today because of scale (animal-based meats have had 100+ years to industrialize and cut costs. Plant-based meats are just getting started), but they have the capability of being far cheaper. While they may never taste exactly the same, we should expect to see plant-based meat continue to increase its market share.

But plant-based meats probably have some kind of adoption ceiling. Ultimately, they are not meat, and only so many people will regularly order Impossible Whoppers. This brings the second technology to center stage: cell-based, or lab-grown meat. Cell-based meats have the promise of tasting just like a burger.

Cell-based meat production processes require fewer inputs and have a theoretical path to costing far less than animal-based meat production. These two promises have led to an investment boom into cell-based meat.

Cell-Based Meats

Unlike plant-based, the science on cell-based meat is far from conclusive. In fact, the experts with the most experience in a similar industry (vaccine production) are incredibly skeptical that cell-based meat will ever reach anything close to cost parity with farm-raised protein. Yeah, it’s a bummer.

So, for now, that leaves agriculture without a clear emissions reduction plan. Regenerative agriculture practices, while holistically preferable, may not have any meaningful climate impact.

The mature technology in the space – plant-based food – will continue to keep growing, but it will likely only reduce the demand for beef. The immature technology in the space has the potential to render using cows as a food source obsolete, but it may have unsolvable flaws in its business model.

Clearly, more innovation will be needed to reduce and/or offset agriculture’s emissions.

Conclusion: The Path to Solving Climate Change is Clear. Can We Get There Fast Enough?

This is the question of our time. We know what we have to do to solve climate change. We have to rapidly deploy the market-ready zero-emission technologies: solar, wind, electric cars, heat pumps, and batteries.

While we do that, we need to finish R&D and commercialize the next class of decarbonization technologies: hydrogen, carbon sequestration, and bioenergy, so they can be rapidly scaled next. We need to find even better ways to eat fewer cows, and it’d be great if we find scientifically verified strategies for reducing agricultural emissions.

While achieving all of the above does depend on our collective will, it thankfully does not depend on that will stemming from altruism. It can stem from greed. Practically all of these solutions can deliver solid-to-outstanding returns to their investors.

The question is whether we can galvanize that collective will to invest in climate solutions fast enough.

If We Succeed Our Day-to-Day Lives Will be Substantially Better

Too often, solving climate change is equated with sacrifice – we will have to give up things we love today in order to improve our children’s lives.

But that’s simply incorrect. A world where we solve climate change is a far better world than the one we experience today. Our air, water, and land will be much, much cleaner because we won’t be burning millions of barrels of stuff a day to power our civilization. We won’t be pumping chemicals into the ground to extract more stuff to burn.

This cleaner world will be much healthier for all living things. Asthma rates will plummet. Places like Cancer Alley in Louisiana will be a distant memory.

And this cleaner, healthier world will be much safer. There will be far less highly flammable natural gas piped around our neighborhoods. We won’t need carbon monoxide alarms in our homes. And the days when our governments cozied up to oil-rich dictators will be long behind us.

Even if it weren’t for the looming threat of catastrophic climate change, that cleaner, healthier, safer world is worth fighting for.

Imagining a Much Cleaner World

Remember at the beginning of the Covid-19 lockdowns how cities reported clear skies for the first time in decades? Mountains that the shadow of pollution had hidden were exposed. Hazy vistas became clear. That is what the world where we solve climate change will be like, all the time.

That idling car that used to emit a steady stream of exhaust at the drive-through is now electric, emitting nothing, with the only sound being the music from its speakers. That smokestack that used to send a steady stream of gray fog into the air now sits idle as white clouds drift on blue sky. The beach where thick, black globs of oil washed up for days that one summer the spill happened is now pristine.

When you burn something, you unavoidably create air pollution. From the burner on your stove to the coal power plant powering your dishwasher, we humans burn a lot of stuff to fuel our way of life.

In the world where we solve climate change, we simply won’t have to. Our electricity will come from the sun, wind, movement of water, and subatomic reactions. We’ll use it to fuel our cars, heat our homes, and cook our food. Burning will be limited to logs in the fireplace.

And a world without ash, soot, and smog will be much cleaner.

Imagining a Much Healthier World

The smog that makes our city skylines look sick has the same impact on our lungs. Fresh air is really good for us. A constant diet of smoke, pollution-filled air is not.

The humans that live in the world where we solve climate change are far healthier. Today, the poorer you are, the more polluted your air. From dirty coal power plants to heavy industry to oil refineries, the things that create air pollution tend to concentrate in poorer neighborhoods. The poor have less time, money, and resources to fight it.

This pollution results in tragic levels of unavoidable disease today. From significantly higher rates of asthma to places like Cancer Alley in Louisiana, where air pollutants from the many oil refineries sicken their workers and their families at far higher rates than average, fossil fuels are inevitably making some of us very ill.

In a world where we solve climate change, these neighborhoods don’t have to face higher asthma and cancer rates. Their children will grow up knowing nothing but fresh air they can breathe easily and deeply.

Imagining a Much Safer World

When you press your foot down in your car and accelerate, you literally pump highly combustible fuel into a controlled explosion.

When the gas burner on your stove fails to ignite, you get a small rush of fear knowing there’s an unknown quantity of highly combustible gas floating around your house. When you hear your gas furnace make a weird noise, you ask yourself when was the last time you replaced the batteries on your carbon monoxide detector?

Fossil fuels are dangerous. They literally explode! Their fumes can silently put us to sleep and kill us. Accidents involving fossil fuels can be accompanied by fireballs.

The world where we solve climate change is a safer one at home. There’s no longer anything we keep in our homes that can explode. Carbon monoxide poisoning is no longer an issue. Deaths from car accidents drop too.

Our electric cars don’t have blocky engines in the front, but instead multiple feet of storage area designed to crumple and protect us. They’re also practically impossible to roll over because the layer of batteries on the bottom lowers the center of gravity.

And the world where we solve climate change is also safer abroad. The countries who sacrifice their humanitarian ideals to remain on the good side of fossil-fuel-rich dictators simply won’t have to anymore.

The Putins, OPECs, and Maduros of the world lose their foothold not only on their neighboring countries but also their populaces. No more Putins flexing their muscles because they know Europe needs their gas supply. Fossil fuels and corruption are often found together. Imagine if we needed them far, far less than today.

Imagining a World With Abundant Energy

Let’s end here. This one is exciting, and also a bit out there. In the world where we solve climate change, we likely have more energy than we know what to do with. On sunny summer days, electricity will literally be free. We can only imagine what human creativity will come up with to use it.

We don’t always think about it, but we have a relationship of scarcity with energy today. Wars are fought over access to oil. Politicians go to great lengths to keep heating oil prices from spiking in the winter. Sudden changes in gas prices make national headlines.

In the world where we solve climate change, we will size our wind and solar farms not to meet 100% of our electricity needs on the best, sunniest, windiest days but on the worst, darkest ones. We’ll make sure that all days are covered, and that will mean that some days end up producing far more electricity than required.

What could be done with it? We can only guess. Will grocery stores lure you by offering free charging for your car? Will utilities use it to split water into green, emission-free hydrogen? Will we use it to run carbon capture and sequestration machines all around the world?

We don’t know. But we can be fairly certain that a world of energy abundance tomorrow will be far better than the scarcity-plagued one we have today.

Conclusion

Shared belief changes the world. The world where we solve climate change will only happen if enough of us believe in it. Goals are so much more powerful when they have a prize waiting.

It’s crucial to refute the antiquated idea that the only path to solving climate change is through sacrifice. The opposite could not be more true. To solve climate change is to live in a more abundant, free, and rich world. 

The world where we solve climate change and wean our civilization off fossil fuels is simply a better place to live in than the one we have today. It is far cleaner. It is much healthier, and that health is spread far more equitably. It is safer at home and around the world. And it has the potential of unlocking abundant, virtually free energy unlike the world has ever seen.

Climate change is so often framed in terms of risk. But solving it has rewards. And they must be focused on.

If We Fail to Solve Climate Change, Our Lives Will be Immeasurably Worse

The world where we fail to solve climate change is terrifying. And we are already seeing it happen on small scales that affect us globally.

The endless droughts in Afghanistan that have given way to the Taliban. The superstorms that battered New York to New Orleans. The wildfires in Colorado during the snow season and the recent February fires that led a California fire chief to proclaim "Fire Year" instead of fire season. Ice shelves calving early.

And here is the terrifying part: according to some scientists, if we do not change course but continue burning fossil fuels in a "business as usual" fashion, we’ll be at 4.3ºC of warming by the end of this century. These problems will accelerate.

This is a deeply uncomfortable reality, but the only way we avoid it is to face it. Fully. In our previous piece, we explored how the world where we solve climate change is a better world than today. This positive side of addressing climate change is crucial to hold onto and not discussed nearly enough.

But we also must equally hold the reality of inaction on climate. Just as humans get spurred to action by the prospect of rewards, we also do a lot to avoid pain. And inaction on climate change will bring an unprecedented level of pain to all of us. It will be the worst for the poorest people on our planet, but it will scar all of us.

So, while there are many reasons to be hopeful (as we lay out in the rest of this series), the reality is that our global civilization is still a ways away from avoiding climate disasters. We’re still headed for the terrifying world of climate inaction.

The only way to avoid the actual pain of catastrophic climate change is to imagine it. Feel how scary it is. And take action before it is too late.

Imagining a World Where Weather Extremes Are Normal

Let’s focus on a world of 3ºC of warming. There is broad consensus by the scientific community that under a "business as usual" approach with no meaningful climate action, we can expect at least this level of warming by the end of the century.

Some within that community (like those Wallace-Wells relies upon) believe this is too conservative, but let’s stay conservative. What does "just" a 3ºC world look like?

Firstly, we would see the end of "normal" weather. Goodbye to the predictability of farmers' almanacs. Hello "A New Record Was Set Today…" headlines. Extreme weather events, those that historically happened once every 10, 50, or 100 years, will occur far more often (but still randomly).

Droughts will be longer, dryer, and hotter. Heat waves that would have happened every one in ten years will happen every one to two years. Extreme heat will become far more normal not just for places like Arizona, but across the world:

Earlier this century, Arizona experienced roughly 116 days of such high temperatures, Texas experienced about 43 days, Georgia about 11 days, Montana approximately six days, and Massachusetts just one day, according to modeling by the Climate Impact Lab.

Were global temperatures to rise by an average of three degrees Celsius by 2100, those numbers would spike to an estimated range of 179 to 229 days of at least 95 degrees Fahrenheit days in Arizona, 135 to 186 days in Texas, 85 to 143 days in Georgia, 46 to 78 days in Montana, and 26 to 66 days in Massachusetts, per the same analysis. (Source)

Rain patterns will shift. When rain does come, it will often come in downpours. New daily records will be set for precipitation. River basins that a few months before had recorded record lows from heat and drought will suddenly sport new record high watermarks as an unprecedented amount of rain sluices through them.

Floods will occur in places that have never flooded in living memory. Hurricanes will become more regular and even more intense. Regions that depended on snow will average far less, with much of that precipitation falling as rain instead.

All of this extreme weather will significantly impact natural ecosystems. In dryer regions, wildfires and smoky skies will become a seasonal norm. Regions that rely on snowpack for water will see their reservoirs trending downwards. Farming regions that depend on regional rainfall to replenish reservoirs will face increasing water shortages.

Imagining a World Inundated With Rising Waters

It will be even worse for coastal regions. Places like New Orleans, New York City, and Florida will see stronger, more frequent hurricanes and will also have to cope with the weight of the ocean looking to inundate its streets.

A LOT more sea ice has melted at 3ºC of warming. The arctic is regularly ice-free during the summer. Shipping lanes open up from northern Russia to northern Canada. Antarctica has shrunk considerably. Entire island nations like the Maldives and Kiribati will be underwater, their people and cultures forced to migrate as climate refugees.

The melting ice has pushed global sea levels two feet higher on average than their current levels. High tides come far higher, particularly during storms. Significant parts of the world are unrecognizable.

Parts of Venice are simply underwater. The concrete in the condos on Miami Beach has been undermined by saltwater to such a degree that the state has barred anyone from even walking around it. The risk of building collapse is too high. Large parts of Bangkok, a city with over five million people, are permanently underwater.

Freeways and bridges get shut down during storms and high tides regularly. Cities face the impossible choice of massive infrastructure repair projects to fix pipes, sewers, and streets not built to regularly interact with saltwater or simply abandoning those areas to retreat to higher ground.

Famous beaches from Hawaii to Brazil now only emerge during low-tide. It’s unclear how long such a situation will last as each new storm carries more sand back out to sea. Tourism is forever changed. Oh, and all of the coral reefs will have died.

The edges of our land will be forever changed, and we globally will have a new appreciation for the destructive power of the sea.

Imagining a World Trying to Cope With All of It

Now imagine our global civilization trying to cope with that level of unprecedented chaos.

What will happen to our global food supply chains with us barely able to predict the weather? What will happen when the water runs out in drought-stricken regions months before the expected rains return?

How will the Western world cope with the 100 million climate refugees that extreme weather and rising sea levels are projected to create? Britain literally left the EU in response to the continent attempting to resettle just a million Syrian refugees.

How will individual countries, let alone the globe, figure out which climate damages to fix and how to pay for them?

How many trillions of dollars of coastal real estate will become worthless? How many insurance claims will be paid back?

What kind of leaders will arise in such chaos? Those focused on democratically doing the greatest good, by the greatest number? Or those looking to dictatorially entrench racial, social, and economic power?

Can we realistically hope that somehow we manage to find a way to avoid our entire world becoming one big "tragedy of the commons"? Or do we collectively fall into a scarcity mindset making it impossible to stop those with power hoarding an ever-shrinking pie of resources?

These are the questions that make climate change the crisis of our time. How much chaos can our human systems (governments, economies, national borders) take before they collapse?

Imagining a World Where It All Keeps Getting Worse in Escalating Climate Feedback Loops

And it gets worse. A 3ºC world likely means we’ve set off some, if not all, of the potential climate change feedback loops. A 3ºC world would likely change our geopolitical landscape forever, but humanity would survive. Our daily lives, world, and sense of security would be completely different, but most of us would survive.

But most of us would not survive catastrophic, exponential warming. The kind that would come from, say, an 8ºC world. The fear of a 3ºC world is that it would unalterably trigger our decline into an 8ºC one.

There are four main types of feedback loops, and they all get more powerful the hotter our planet gets:

1. Less ice = less heat reflected. The scientific term for this is albedo. Ice is white, the ocean is dark blue. Like a white t-shirt versus a black t-shirt on a sunny day, ice reflects far more heat back out of the atmosphere than the open ocean. The less ice that covers the earth’s surface, the less white space there is to reflect the sun’s heat, and the more heat stays back on earth. Thus the downward spiral begins. If that wasn’t bad enough, scientists are finding the ash from forest fires is settling on ice, further reducing the ice’s albedo.
2. Less northern permafrost = more emissions from the land. The far frozen north of our planet has as many greenhouse gases frozen and stored underneath its surface as the total amount of carbon dioxide in the atmosphere today. The hotter our planet gets, particularly the arctic, the more permafrost melts, the more these gases are released.
3. Climate change kills forests. Forests today are critical for absorbing and sequestering atmospheric carbon. Extreme heat, weather, and temperature irregularities put forests under extreme stress. From bark beetle infestations in the Western US to extreme heat in the tropics, swathes of the forest are dying. And when forests die, they not only stop acting as a carbon sink, they start emitting the carbon they had been storing back into the atmosphere.
4. Melting ice messes with the gulfstream. The Gulfstream is a powerful ocean current that regulates global temperatures. It keeps the arctic cold, the tropics hot, and in between temperate. Freshwater throws off its circulation mechanisms. When the Gulfstream circulates differently, it leads the jetstream, the pattern of air movement around the world, to circulate differently. This disruption of the jetstream is why in the US we’re seeing developments like the extreme heat dome over the Pacific Northwest in 2021 or the series of Polar Vortexes over the past decade where cold air that traditionally circulates in the arctic has redirected south. These events are not "normal." As more freshwater leaks into the Gulfstream, they’ll only increase.
   
   

Conclusion: It Is Unthinkable to Not Solve Climate Change

The price of inaction is simply far, far too high. According to David Wallace-Wells in An Uninhabitable Earth, a 4.3ºC warmer planet would result in more than $600 trillion in climate-related damage.

How big of a number is that really? The total value of the world’s stock market in 2021 was $73 trillion. The total amount of global currency in circulation in 2021 amounted to $90 trillion. Yes, it’s a civilization-crushingly large sum.

The systems we have come to depend upon, from international commerce to the global food chain to the rule of law, will be regularly pushed to a breaking point. Storm after storm. Drought after drought. Deadly heat wave after deadly heat wave.

But climate change is a solvable problem. We know what we have to do. We still have time. This decade involves investing in scaling technologies with a proven track record of making investors money. Assuming we continue investing in R&D, we’ll probably be in a good position to start scaling the next series of necessary technologies in the 2030s.

We have a clear path to turning off the tap of carbon emissions. We have some really promising ways to mop up the historical carbon dioxide we’ve already emitted in the works. And we have a growing movement of global citizens and politicians who understand we can’t do it all without also protecting and rewilding large parts of our globe.

The doomsday scenario laid out above all leads to a global tragedy of the commons. Where countries, neighborhoods, families, and individuals feel such a sense of insecurity that they ignore the greater good and do whatever it takes to hold onto their piece of a shrinking pie.

It is far too easy for us humans to "otherize" each other and imagine any sense of collective altruism we have built completely disappearing in such a world.

But we are not helpless actors in this. Some of the most powerful forces in human nature are also on the side of solving climate change.

Greed - there is a lot of money to be made in the transition to a zero-emission world. Self-preservation - those with something to hold onto, whether it be something smaller (a house, a business, a farm) or something large (an endowment, a senate seat, a company executive position) are increasingly aware of the threat posed by climate change.

These alone will not solve climate change, but they leave an opening. One that does not rely upon unrealistically altruistic assumptions of voluntary global sacrifice but of individual actors operating in their own best interest. They just need to learn and remember where their best interest truly lies.

That’s where people like you come in. To remind the world that we can solve climate change. That it’s better business to solve climate change. And that if we don’t, we will very likely lose everything we hold dear.

Solving Climate Change Starts With Individual Actions

"Why should I do anything when major corporations and governments caused climate change. They should solve it."

"I’m just one person. What possible impact could I have on a global economic system?"

"I have $10k in my retirement fund. The global stock market has $73 trillion in it. How could changing my investments matter?"

***

These are paraphrased versions of questions and comments we’ve received about sustainable investing. And these commenters are not alone. Some pretty smart people have followed this same logic to a similar conclusion.

For example, Stephen Dubner argued in Freakonomics that the only utility of voting was to allow you to say you voted, as one vote does not change elections.

It can be comforting to hold opinions like this. They relieve responsibility to take any actions. You were born into a world run by fossil fuels. You couldn’t control that. Why should you feel responsible for changing it?

We’ve spent a lot of time thinking about this, and in return, we ask "How do we know the status quo can change"? Because the only thing that is constant is change. There are far more electric cars than before. You can now buy a plant-based Impossible burger at Burger King. So how does that happen?

We’ve only seen it happen when enough people decide to make an individual change. That first domino can then often make it easier for others to follow. More cyclists can lead to more bike lanes, which can result in more cyclists. More vegans lead to better meat substitutes, which enables more vegans.

So as we wrap up this chapter on why your investments matter for climate change, let’s zoom out and explore the biggest question of all: should individuals feel responsible for making changes to solve climate change?

Yes – it’s the only way change happens.

Our Mental Models for Individual Impact Are Wrong

The logic laid out by Dubner is correct, but it’s missing a piece. The likelihood of your vote in an election being the single swing vote is incredibly low. The missing piece is the potential impact of whether the low-likelihood event actually comes to pass.

Change doesn’t happen linearly. It happens in step functions. Let’s use another example. Let’s say you choose not to fly and instead will drive your (electric) car to visit your family.

What is the likelihood that your decision to not fly will result in lower emissions? It’s small. That plane is likely headed to your parent’s city regardless of whether you are on it.

But there is some tipping point at which the airline throws in the towel and says, "Ok, there aren’t enough passengers. Let’s discontinue this route." Airlines cancel routes all the time. Somebody was the last straw, and that person’s decision not to fly was extremely impactful.

When we think about individual impact, we have to multiply the likelihood of the event happening by its possible impact.

This second part is the missing piece. William MacAskill argues this in Doing Good Better (this excerpt laying out the logical argument for vegetarianism is worth reading). He argues that the impact of ethical personal actions is a step function, not a linear one. Mostly, your ethical actions will not have an impact. But when it does, the impact can be significant.

Here’s an example he uses: most of the time when you choose not to buy meat at the grocery store, it will not impact the amount of meat the store manager orders.

But if the manager orders meat in units of 1,000 and your decision not to buy meat that week meant the store sold 4,999 chicken breasts rather than 5,000, your single action reduced the subsequent order by 1,000. That’s a huge swing for one action and can make up for all of the times it failed to have an impact.

The hard part about individual actions is that there is a level of faith. We don’t get to see their immediate results, at least not on the system as a whole. But we can see it in those around us.

Your Actions Influence Your Peers, Who Influence Their Peers, Who Influence Their Peers

When we’re trying to make a decision or a change in our lives, we often look at what our peers do. Why do you read product reviews when shopping online? Why do you ask your friends what show you should watch next? Why are there more electric cars here in the Bay Area than in most other places?

When you align your daily life with your climate values, whether it involves biking over driving, cooking a vegan meal, or changing who you bank with, you set an example for your community. And that example ripples out.

Researchers studied this influence in relation to one of the most impactful climate actions you can take: getting solar panels. In 2014, the Journal of Economic Geography published an article about whether or not getting solar panels is contagious.

They looked at home solar installations in Connecticut in 2014 and found the answer is a clear yes. They found that if you install a solar system on your house, you increase the likelihood of other solar system installations in your area.

This was true after they factored out other potential demographic explanations, such as income or political views. Here’s a line from their conclusion:

"Our results indicate that there are important spatial neighbor effects: adding one more adoption in the previous six months increases the number of PV system adoptions in a block group per year-quarter within 0.5 miles of the system by 0.44 systems on average."

So, based upon their findings, you could expect an installed solar system in the green circle (below) to lead to an additional 0.44 systems in that circle. Then you have a new center of the circle. That solar system would result in another 0.44 systems, and so on. Our choices ripple out from us in ways that we see and in ways we do not.

Your Actions Are What Change Corporations

Your decisions about what to buy and what not to buy send signals into the supply chain. And the only way to change the status quo is to have enough people willing to go against it. This phenomenon has been thoroughly studied. It starts with those who are willing to go against the status quo.

These are the people that Everett Rogers, in his theory of Diffusion of Innovation, dubbed the "Innovators." The 2.5% of the market willing to take a chance on something promising. If they have a positive experience, it enables the more risk-averse early adopters to jump on board.

By Rogers Everett - Based on Rogers, E. (1962) Diffusion of innovations. Free Press, London, NY, USA., Public Domain, https://commons.wikimedia.org/w/index.php?curid=18525407

As more people join, it will make more sense for companies and governments to invest in improvements and infrastructure. Electric cars get more charging stations. Solar panels become cheaper.

And it's more than what a company builds. Your actions change how they build it. The demand for sustainable products has created openings for new companies to rise. From fashion to homewares to bulk materials, these companies only exist because individuals like you went against the status quo to find better alternatives.

And the success of sustainably focused companies changed their industry. Tesla is the best example here, having shown the auto-industry that electric cars are better than their gasoline counterparts. Now the rest are investing heavily in catching up.

Crucial decisions get made in boardrooms, but the inputs to those decisions come from our actions. Are we buying? Are we selling? Are we reviewing? Are we ignoring?

Your Actions Are What Change Governments

The same is true for our governments. The government won’t solve climate change unless enough of us ask it to solve climate. We have to force it with who we elect. We have to pressure elected officials to follow through on their promises. We have to force it with threats of political consequences and disruption of the status quo if they don’t.

How else can we expect the government to change?

Your Investments Are a Critical Piece of Your Individual Climate Responsibility

Individual actions matter for climate change. They are the catalyst that changes our corporations and our governments. We cannot solve climate change without them.

And where you invest is a crucial piece of individual climate action. Your shares have voting power. Your shares can help climate solution companies grow faster. And your shares can challenge the narrative of the status quo around the potential rewards of sustainable investing.

While you are unlikely to see the direct results of your action, trust that they build towards something. The step function will come, and that narrative will shift.

There is a version of a Jewish proverb that holds relevance here: "if not me, who?"

A simple way of looking at climate change is that if enough people say "yes, me!" we’ll solve it and avoid catastrophic warming. If they say "not me, try the next guy," we won’t.

Conclusion: We Need Individual Action Aimed at the Systemic Solution of Closing the Climate Investment Gap

When asked the question of whether or not individual actions matter, climate scientist, "How to Save a Planet" host, and policy writer Dr. Ayana Johnson summarized that we need individual actions that add up to systemic solutions.

The good news is that we have frameworks for solving the problem. We need to reduce emissions by 50% by 2030 and achieve net zero by 2050. We have the solutions. And we know that we have a climate investment gap of $5 trillion.

Investing in those solutions will take many individual votes, congressional calls, lifestyle choices that shift markets, and, of course, investment decisions.

Investing at its core is about a belief in the future, and we need to make sure we invest in the future we actually want to live in, retire in, and leave to our children.

Climate Change Explanation Using the Bathtub Analogy

The most helpful analogy for climate change is an overflowing bathtub. There’s the faucet turned on high, the tub, and the water rising up and over the sides. Unattended, the overflowing water not only creates a mess in the bathroom, but it leaks through the floor, into the vents, and down into the foundation of our civilization’s house.

The house can still dry out, but eventually, the structural integrity will suffer permanent damage. The longer the faucet is left running, the worse it gets.

In this analogy, the tub represents how much carbon our planet can hold, also known as our planet’s natural carbon cycle. When plant/animal life grows, it absorbs carbon from the atmosphere to use as building blocks in its body. When it dies, it releases that carbon back into the atmosphere.

Picture a tree. The wood of that tree has a lot of carbon molecules in it. When that tree grows, it takes carbon dioxide molecules from the air and uses the carbon part to make wood. When that tree dies and the wood breaks down, the carbon rebonds with oxygen to create atmospheric carbon dioxide again.

Then, a new tree will draw down that atmospheric carbon dioxide to make wood. It goes in cycles.

When those original plants were buried, their carbon was also buried. So instead of remaining in the tub, in the natural carbon cycle, it went down the drain and effectively left, meaning it no longer formed a part of the carbon equation. It was neither in the atmosphere nor stored in living plants/animals.

Now let’s zoom out. The natural carbon cycle is more than just trees because it encompasses all living things, particularly plants. The more life there is on earth, the higher carbon carrying capacity our planet has. The greater capacity nature has to "inhale" carbon.

The inverse is also true. Cutting down forests, expanding deserts, polluting coastal wetlands all reduce life on earth. Nature’s carrying capacity for carbon will reduce, and the bathtub becomes shallower.

A pivotal aspect of solving climate change will be to "deepen the tub". Not only have humans added ancient carbon to the atmosphere but it’s also lowered the sides of the tub by destroying natural systems through deforestation, pollution, and over-harvesting.

In other words, part of the reason for the increase of carbon dioxide in the atmosphere today is that humans reduce nature’s ability to keep it earthbound in plants and animals.

To solve climate change, we must aggressively reverse this trend.

So, that’s the tub. Now let’s turn to the faucet, which pours all this extra carbon dioxide into the tub.

History of Fossil Fuels

Let’s begin with a quick primer on fossil fuels: over our planet’s history, not all trees rotted in such a way that released 100% of their carbon back into the atmosphere. Swamps, sea-level changes, and other factors trapped trees and stopped them from fully integrating back into the natural carbon cycle.

As time passed, layers of dirt, rock, and sand piled up on top of these dead plants and animals. The increased heat and pressure compressed these layers of former life together until they lost their old forms and took on new denser, more energy-rich molecules.

What does energy-rich mean? It means heat. Or better yet, the capacity to heat.

The more "energy" a molecule has, the hotter it burns. If you have ever counted calories, you are counting the potential of your food to create heat when burned. Imagine setting one pound of lard and one pound of lettuce on fire. You’ll get a lot more heat from the lard because it is a more energy-dense food, similar to how coal is more energy-dense than fresh timber.

So, caches of these energy-dense molecules made from fossilized plants exist all over the world. Burning them gives you A LOT more heat than burning basically anything else. Humans figured out a way to harness that heat in the 1880s with the first coal-fired steam engines.

Consequently, the industrial revolution began and turned on the faucet of human-caused global climate change.

Before we decry their impact, let us first give fossil fuels their due.

From the 1880s to the present, this massive cache of energy has allowed humanity to build astounding things, from skyscrapers to the international space station. This cache has enabled humans to cure and eradicate devastating diseases and cross the world in a single day. Fossil fuels have built our world in which we live.

However, that energy cache has come at a price. Digging up and burning those fossilized plants and animals released their ancient carbon into the atmosphere.

Carbon that had been out of the equation for millions of years suddenly re-entered the atmosphere. And with the natural carbon cycle already at capacity, carbon dioxide began to "overflow" out of the tub and onto the bathroom floor (i.e., the atmosphere).

You can have too much of a good thing. At just the right level, carbon dioxide is why our planet is neither too hot nor too cold and why it can support life in the first place. The overflow of ancient carbon into our atmosphere is now doing too good of a job insulating our planet.

Some of the heat that would have bounced back into space 150 years ago is now sticking around. The longer we leave the faucet running, the more heat is trapped. The more heat that gets trapped, the more energy is in our atmosphere; more trapped energy makes our weather and global systems more chaotic.

And that’s what’s happening to our planet and our weather systems. If we cannot turn off the faucet, deepen the tub, and scale the required technologies to mop up the excess currently seeping into the foundation, the chaos of our warmed planet could lead to truly terrifying outcomes.

So, How Can We Stop & Reverse Climate Change?

The most crucial step we need to take in the next 30 years involves turning the faucet off. If we cannot successfully stop burning ancient carbon to power our civilization over this period, it will not matter how many trees we plant. The overflow of carbon will overwhelm the system.

So, how do we turn the faucet off?

We really only have two options: going backward or forwards.

Option 1: We Go Backward to Pre-Industrial Times

If industrialization is the reason we have atmospheric carbon, can’t we just return to a pre-industrial world?

While technically possible, it’s difficult to imagine many people voluntarily doing so. Would billions of people agree to give up air conditioning? Cross-country flights? Clean-burning cookstoves? No. They would not.

So, we could only return to pre-industrial times involuntarily, and the only real way to imagine that occurrence is by a collapse of global civilization. If the goal of solving climate change is to avoid an apocalypse, the "go backward" route does not seem to get us very far.

Option 2: We Progress Forwards to a Civilization Run Without Fossil Fuels

The only viable path that scientists and researchers have laid out is that we have to invest and build our way out of this mess.

Two pieces of good news on this front:

1. We have most of the technology we require, most of which is a better economic choice than the fossil fuel alternatives.
2. If we can build it, a fossil-fuel-free world will be FAR better to live in. Remember how clear the air was in the days after the Covid-19 lockdown began in March 2020? It would be like that, except all the time and more. The promised land of a fossil-fuel-free world is not just less bad than the alternative, it’s much better than today.
   
   

If we can build this world, the tub will stop filling. It will still be overflowing, but turning off the faucet will give us a shot at mopping up the bathroom in our civilization’s house by bringing atmospheric carbon back down to pre-industrial levels.

We know what we need to do to solve climate change and the first critical step involves turning off the faucet of carbon emissions. We need to transition to a fossil-fuel-free world. We have the technology we require. Most of it already makes economic sense. The question is: can we do it fast enough?

We Cannot Solve Climate Change Without Investment

To avoid catastrophic 1.5ºC warming, humanity needs to invest ~9x more into climate solutions each year. We need to research, develop, test, iterate, build, deploy, and massively scale up new technologies. And we need to deploy the existing clean technologies as fast as we can.

None of this, from early-stage R&D to building the next battery gigafactory, will happen without investment to fund it.

The good news is that much of what needs to be built to "turn off the faucet" of carbon emissions is straightforward and likely to provide a strong return on investment. Here’s a high-level overview of what that could realistically look like from now to 2050.

2020s: Get Developed Nations on a Path to 100% Zero-Carbon Electricity Generation

To turn off the faucet, we need to not only switch our electrical systems over to renewable and carbon-free sources but also to use electricity for more of our needs. From driving to heating buildings, to cooking food, by 2050, all of these activities will need to be accomplished without burning fossil fuels.

With electric cars, heat pumps, and induction stoves, we already have great electricity-powered replacements.

The first mission of this decade involves putting renewable energy generation (plus transmission and storage) in place to make adopting these electrically-powered alternatives the superior option as they scale up and reach cost parity with their fossil-fuel-powered competition.

Again, the good news here is that renewable energy is almost universally cheaper to generate than new fossil-fuel-powered plants. This will likely only become truer as its supporting infrastructure, such as battery storage, scales up over the decade. Any additional governmental support will make this transition faster.

The second mission of the 2020s is to invest heavily in research and development for the remaining "hard to decarbonize" industries. Our civilization depends on processes such as forging steel and creating concrete but does not yet have viable fossil-fuel-free alternative processes. The same goes for flying airplanes and shipping cargo across oceans.

The financial reward for solving these issues is substantial, and as such, there are numerous technologies in the works. To succeed in the 2020s, the winners of these R&D races will need to be commercially tested, viable, and ready to scale.

2030s: Broadly Switch From Fossil-Fuel-Powered to Clean Electricity-Powered

Today, we burn fossil fuels for generating electricity, transportation (cargo containers, people, and more), heating (buildings, food, and so on), and in the fuel-heavy industry (heavy materials like iron, steel, cement, amongst others).

With fossil fuels on a path to no longer being required to generate electricity, the mission of the 2030s is to electrify the infrastructure to "move and heat stuff" so we can keep heating our homes, cooking our food, and transporting goods without carbon emissions. We have most of that technology today, and it is quickly improving.

For example, according to BloombergNEF, electric cars should reach cost parity with internal combustion engine cars by 2027. Given that electric cars tend to cost significantly less to maintain than their fossil fuel counterparts, the economics seemingly point to a rapid transition.

According to the IEA, to reach the target of turning off the faucet by 2050, 50% of new car sales must be electric by 2030.

It is likely that some industries will still need to burn fuels to operate. For example, there’s still no viable method of flying a plane across an ocean without liquid, combustible fuels (although it is increasingly possible that shorter, regional flights can switch to electric power). However, airlines do not have to burn fossil fuels.

They can burn fuels derived from agricultural byproducts, called advanced biofuels. These will still have carbon emissions, but they’re coming from "the tub" and not the faucet.

2040s: Decarbonize Heavy Industry, Finish Transition Away From Fossil Fuels

Should we be on track, the goal is that by 2040, technology will have the capacity to decarbonize the remaining hard sectors, particularly heavy industry. We not only have the technology to create carbon-free steel and cement but it also makes better economic sense to do so.

All Along the Way: Develop and Scale Carbon Sequestration Technologies

While turning off the faucet of ancient carbon emissions is necessary to stopping and reversing climate change, it alone will not suffice. There remains 150 years of carbon emissions in the atmosphere over-insulating our planet. We have to clean up the mess sitting on the bathroom floor and dry out the house.

To do so, we need to capture that excess atmospheric carbon dioxide and permanently store it as a gas, liquid, or solid down here on earth. From processing it out of the air with giant vacuums and injecting it underground to sinking fast-growing kelp far down into the ocean so that it never re-enters the carbon cycle, the range of sequestration technologies is vast and exciting.

The good news here is the significant flow of investment into these technologies; this is likely just the beginning.

The less good news is that unlike decarbonization technologies, which broadly have clear paths to outcompeting their fossil fuel counterparts and, therefore, are likely strong investments, investing in carbon sequestration technology involves betting on a robust carbon-pricing marketplace.

Should it not materialize or be tepid/weak, returns-driven investment in these technologies would likely dry up.

What About Expanding the Tub? We Also Need to Invest to Protect and Expand Natural Ecosystems

Finally, to solve and reverse climate change, we must significantly expand the total mass of plants and animals living in natural systems on our planet.

Some of this expansion may come through investments that rely upon the carbon credit market. Some of this will come from government action, and some will come from charitable giving, land protection, and stewardship.

Some of it will come from technological innovation. According to the United Nations, 26% of the planet’s total landmass is used for livestock grazing. And in the United States, 41% of land is used for feeding animals, whether for direct grazing or growing animal feed, according to Bloomberg.

What would allow that land to return back to nature? If the business model of animal farming no longer made economic sense.

Plant-based meats use a fraction of the resources that animal-based meats do (for the skeptics out there, here’s the most nuanced analysis we’ve found).

They are more expensive today because of scale (animal-based meats have had 100+ years to industrialize and cut costs, whereas plant-based meats are just getting started), but they have the capability of being far cheaper. While they may never taste exactly the same as a burger, they are getting closer.

Cell-based (lab-grown) meats also have the promise of tasting just like a burger, and potentially being cheaper. However, the science is highly questionable concerning when or if that promise will become a reality (this is a seriously good analysis of the cell-based meat industry).

Conclusion: Investment’s Significant Role

We cannot solve climate change without turning off the faucet of carbon emissions. We cannot solve climate change without expanding the tub of our planet’s natural carbon-carrying capacity. And we cannot solve climate change without mopping up the historic emissions that have "sloshed" out of the tub.

And we cannot solve any of these without massive investments in researching, deploying, and scaling their respective solutions. We have no choice because of the unthinkable prospect of moving backward to pre-industrial times.

These investments can be accelerated and aided by government interventions or harmed by fossil fuel subsidies and artificially low prices. Billionaires or regular individuals like you and me can make the investments. The "how" of solving climate change can often obscure the "what" we have to do.

And the action item of "what" we have to do is invest.

We Have to Significantly Decrease Fossil Fuel Demand

Overview

The International Energy Agency  (IEA) is the group that sets the models that utilities and energy companies use to finance new projects. The IEA projects to avoid catastrophic climate change and fully "turn off the faucet" of fossil fuel emissions, our globe needs to dramatically reduce fossil fuel consumption and switch away from using fossil fuels to generate energy by 2050.

Here’s what they model that such a transition would look like:

• Oil consumption will reduce by 75% from 2020 to 2050, with the majority of production in 2050 not used to create energy but as raw ingredients for plastics and chemicals.
• Natural gas demand decreases by 55% from 2020 levels, with the majority of production in 2050 being used in conjunction with carbon capture and sequestration technology to make hydrogen.
• Coal use substantially ceases, falling 90% from 2020 levels.
  
  

Put another way, to solve climate change, we need fossil fuels to transition from taking the lead in our global energy production to becoming a role player. They’ll remain on stage, but they’ll only have a few lines.

So what would that transition look like? Is it realistic? Is this just the wishful thinking of greenies like us, or are there market forces going in favor of this transition? Let’s explore each of the three major types of fossil fuels, beginning with oil.

Oil Is Getting Outcompeted by Electric Cars

Here’s the high-level summary of the IEA’s projections:

• Oil demand falls 75% from 2020 to 2050 (~4%/year).
• The lowered demand would require no new expansions of oil fields, just continued investment to keep existing ones operating.
• By 2050, 70% of the oil produced will not be burned, but used in hard-to-replace end products like plastics and chemical feedstocks.
• Oil will be priced at $35/barrel in 2030 and $25/barrel in 2050. These low prices lead to significant stranded assets and capital loss. Only very cheap, simple production sites like those in the Middle East can continue to operate profitably by 2050.
  
  

The Economic Factors in Favor of the Transition Away From Oil

Numerous economic forces work in favor of this transition.

1. Currently, 55% of oil is used to make gasoline and diesel. The majority of oil produced today is used to move people and things around, primarily in cars and trucks. Electricity-powered cars are faster, safer, have more features, and require significantly less maintenance because they have fewer moving parts.
2. The oil industry is consolidated, coordinated, and sensitive to demand. Decreasing demand for gasoline and diesel likely means that OPEC (the global oil cartel) will begin to restrict supply to keep oil prices elevated. It would be unlikely that they would expand oil production with investments into new fields as this would create oversupply and an even greater downward pressure on oil prices.
3. Other promising technologies may soon replace the need for oil where liquid, combustible fuels are still needed. It’s unlikely that trans-oceanic planes and container ships could pack enough energy onto a battery to make the voyage by 2050. They’ll need some kind of liquid energy to combust. Luckily, biofuels and low-carbon hydrogen technologies have made significant strides in this direction. With more carbon taxes coming online, the economics of these alternatives could further drive down the demand for oil for transportation.
   
   

The Biggest Blockers to the Transition Away From Oil

With the rise of electric vehicles and their superiority to gas/diesel-powered vehicles, at least this part of oil’s demand should decrease. Oil companies have told their shareholders that the future of oil is in plastics. Thus, we can expect reduced oil demand between now and 2050, but how much? These factors that could hinder the transition:

1. Oil companies are extremely good at lobbying and navigating the system to reach their goals in governments with greater checks/balances like the US, let alone those with higher concentrations of power (dictatorships, for instance). They could continue extracting government support for oil and oil-powered vehicles that artificially slows down the adoption of electric vehicles.
2. Lower oil prices could slow investments in low-carbon liquid fuels. While it would make more sense that OPEC would reduce supply as oil demand drops, it could also flood the market with cheap oil and take the short-term loss to quash investment in oil-alternative fuels. If investors see OPEC’s willingness to take years of losses to protect its business, they could be skittish to invest in alternatives that can only deliver a return if cheaper than oil.
3. Low-carbon alternatives could face a cultural pushback. We have seen people on both sides of the political aisle prioritizing values and identity over economics in personal decisions. Tesla vehicles cost more than their gas-powered counterparts, as do Impossible burgers. The left is more prone to buy these alternatives because they reinforce their identity. The risk here is that despite an electric Ford-F150 being a better truck, it receives no backing in the marketplace from truck owners as a statement of political allegiance.
   
   

While there is hope surrounding the transition away from oil, such a change may encounter obstacles. Governmental intervention, like a carbon tax, would dramatically reduce the effectiveness of these blockers.

Coal Is Getting Outcompeted by Wind, Solar, and Batteries

The fate of coal is a bit simpler to map out than oil. According to the IEA:

• Coal supplies will drop by 90% from 2020 to 2050.
• No new coal mines are needed to fulfill demand during this time.
• Most of the coal used in 2050 is as a raw ingredient in steel production, rather than burned to generate electricity.
• Most of what generates electricity captures the carbon for sequestration.
  
  

The Economic Factors in Favor of the Transition Away From Coal

• It now costs less to build new solar arrays than continue operating existing coal plants in most areas of the globe.
• Campaigns to shut down coal plants and brand coal as negative for the climate and health have succeeded (like this one from the Sierra Club).
• Even coal-reliant countries like India have explored halting any new production of coal facilities due to their inferior economic situations.
• Coal’s significant air pollution can lead to civil unrest, particularly in economies with growing middle classes, like China and India.
• Investors have shown a lack of confidence in the long-term potential of coal, with the Dow Jones US Coal Index hitting all-time lows in the summer of 2020 before Dow Jones discontinued it.

The Biggest Blockers to the Transition Away From Coal

• With their lower upfront capital costs, coal is still considered a way for developing countries to fast track electricity production, even if they cost more to operate.
• China’s geopolitical ambitions to expand influence could lead it to finance and subsidize coal for developing countries.
• Strong-handed governments like China may continue to focus on short-term economic growth over long-term economic and societal benefits.
• The anti-nuclear campaigns of Europe, and lack of green alternatives, have led to a rise in coal use.
• Coal is a vital ingredient in steel production. While companies have recently produced steel without coal, it remains unclear if the economics of this coal-free technology can scale around the globe.
  
  

Like oil, numerous economic forces favor the transition away from coal. Coal consumption is likely to decline from now until 2050. Regardless, the crucial question is by how much and how quickly.

Natural Gas Sticks Around, Relying on Carbon Capture, Usage and Storage

Of the three fossil fuels, the IEA projects natural gas to decline the least from now until 2050. Natural gas primarily generates electricity with a secondary use of producing heat for buildings and cooking. Here are the IEA’s projections for natural gas:

• Natural gas production will decline by 55% from 2020 to 2050.
• Natural gas power plants will be equipped with carbon capture and sequestration technologies.
• 50% of natural gas produced in 2050 will be used to generate hydrogen (with the excess carbon dioxide being captured and sequestered).
  
  

Before diving into the economic factors for and against the transition away from combusting natural gas, let us first define a key term: Carbon Capture, Usage, and Storage (CCUS). This technology represents the lynchpin in the IEA’s projections for the future of natural gas. Without it, there will be no reasonable end markets for natural gas in a zero-emission world.

What is Carbon Capture, Usage, and Storage (CCUS)?

Technology exists today that can separate out carbon dioxide from other gases. Once separated, this carbon dioxide can be used (for example, to carbonate beverages) or sealed somewhere like an abandoned oil well to never emerge again (this is what sequestered means).

Here’s the good news for CCUS: we’re getting pretty good at capturing carbon dioxide. Multiple technologies exist, and they have fairly clear paths to capturing it economically at scale.

Here’s the bad news: no sequestration technology has thus far emerged at scale. Sealing it in rock formations often makes the most sense, but this approach has two problems: 1) it’s still unclear if these might leak, and 2) site location is crucial. It only makes sense if the rock formation is right below where the carbon is captured.

The fossil fuel industry really wants us to believe that CCUS will work because they can then operate as usual and capture the greenhouse gases. Thus far, their investments in CCUS have only resulted in headlines like "shocking failure" with over 80% of CCUS projects globally failing to be utilized as advertised.

The Economic Factors in Favor of the Transition Away From Natural Gas

• Fracking operations have failed to make consistent profits. Approximately 67% of natural gas in the US comes from fracking. Fracking wells have consistently underperformed supply expectations, leading fracking companies to push profits into further drilling rather than continuing to work existing wells. Fracking also produces oil, and, given its higher operating costs than traditional oil well drilling, fracking’s business model only makes sense when global oil prices are high.

• Solar is comparable in cost to natural gas. Moreover, it is only likely to continue getting cheaper.
• Electric heat pumps cost less to operate than gas furnaces. Even though heat pumps remain more expensive upfront than gas furnaces, we can expect that price to go down as they scale up production, making them an even better investment and further reducing the demand for natural gas.
  
  

The Biggest Blockers to the Transition Away From Natural Gas

• Will CCUS work? For natural gas to operate as a "transitional" electrical power technology, the carbon dioxide emitted must be captured and stored. Similarly, for natural gas to play any meaningful role in the hydrogen industry, the technology to capture and store the excess carbon must be mature and deployed at a mass scale.

• Given the failures thus far in space, we’ll believe it when we see it. Until then, the promise of CCUS may simply enable the fossil fuel industry to build natural gas plants based on the modeled promise of captured emissions without them ever being realized.

• Natural gas has momentum. At the time of writing, in February 2022, the EU labeled natural gas a "Sustainable Fuel". There is a lot of money riding behind natural gas’s perception as a climate solution, and barring that, the regretful adoption of a necessary transitional fuel.

• A significant amount of natural gas infrastructure has been developed recently, such as the installation of natural gas pipelines. Ports are being modified to accept and process LNG (liquified natural gas) container ships.

• Fossil fuel propaganda. For decades, the fossil fuel industry has attempted to convince us that gas is better for cooking than electric/induction. According to some great Mother Jones reporting, we know they have resorted to impersonating concerned neighbors on NextDoor to get angry about natural gas bans for new construction. Wow.
  
  

There is a world where the natural gas industry declines more sharply than by 55% over this period. If CCUS technology cannot be scaled and solar, wind, and batteries continue to drop in price to outcompete gas electricity production, the market for natural gas could constrict further, as natural gas would have no role in the hydrogen market.

However, natural gas could also decline by much less than 55%. If the perception of natural gas remains positive and aging nuclear power plants are replaced by gas instead of renewables, the demand for natural gas could remain constant or even increase.

Conclusion: Fossil Fuels Will Almost Certainly Decline Over the Next 30 Years. But by How Much?

To solve climate change, we have to turn off the faucet of carbon emissions from burning fossil fuels.

The good news is that from oil to coal to natural gas, numerous economic forces aid a successful transition. Even without significant governmental intervention, these forces alone could significantly reduce the demand for fossil fuels. With governmental interventions, these forces could become unstoppable.

The unfortunate news is that the transition is far from guaranteed. Fossil fuel companies have a long and successful history of bending governments to their will. Key technologies like CCUS may never commercialize successfully. Crucial zero-emission technologies like electric cars may become political symbols.

However, we have agency. Many of the paths that lead to the failure to transition away from fossil fuels in time stem from willful obfuscation by fossil fuel companies. Knowledge is power. We know what we have to do to solve climate change. We just have to do it.

We Need to Dramatically Increase Investments in Climate Solutions

Overview

The major plans for how to solve climate change center around increased investing in climate solutions. In order to be on a path to remaining under the catastrophic 1.5ºC warming:

• Project Drawdown and the Climate Policy Institute believe we need to boost the yearly global climate solution investment from $600 billion in 2019 to over $5,200 billion ($5.2 trillion).
• The International Energy Agency estimates that, by 2030, annual investments in renewable energy investment must rise to $1.2 trillion, in clean energy infrastructure (grid upgrades, EV charging stations, and so on) they must rise to $880 billion, and in zero emission alternatives (electric cars, efficient electric appliances, building retrofits), they must rise from $530 billion to $1.7 trillion.
• Investments in low-emission fuels must increase 30x by 2050, reaching $135 billion annually.
• McKinsey estimates that investments in physical infrastructure would need to top $9.2 trillion a year.
  
  

In any of these projections, the numbers are staggeringly large. Here’s how McKinsey put them in perspective:

"This incremental spending would be worth about 2.8 percent of global GDP between 2020 and 2050. The increase is approximately equivalent, in 2020, to half of global corporate profits, one-quarter of total tax revenue, 15 percent of gross fixed capital formation, and seven percent of household spending."

However, investment in climate solutions is not charity. Most of the solutions discussed to "turn off the faucet" of historic carbon emissions have clear advantages in the market. The solutions would likely be strong investments without the looming threat of climate change.

Even some of the investments directly related to climate change, like efficient carbon sequestration, could have a massive payoff should strong global voluntary and involuntary carbon markets emerge.

Therefore, let us take out our crystal balls and peer into the future. In order to stop and reverse climate change and remain under 1.5ºC, what type of growth would we need to see in the various markets (solar, EVs, and so forth)? Which technologies are ready to scale and which still are in their infancy?

The good news, over 50% of the technology in place has a clear, competitive role in the marketplaces.

The bad news, though, is that approximately 50% of the technologies we need to turn off the faucet of emissions remain in the prototype and demonstration stage.

How Do Climate-Friendly Solutions Compare Against Existing Solutions?

Solar, Wind, and Electric Cars: The Climate Solutions Ready for Prime Time

Green = Technology has a clear place in the market

Yellow = Technology has been successfully demonstrated but still needs to scale to reach economically efficient market adoption

Red = Technology remains in its infancy and is far from being deployable at scale

This is very good news. Why? It gives us time, and it helps us prioritize. While there are certainly still some "moonshot" aspects of solving climate change, more than half of what we need to do to turn off the faucet is known and ready to scale. It is simply a question of whether we can do it fast enough.

Here is the type of growth required from the market-ready technologies from now until 2050 according to the IEA’s 2050 Net Zero Report.

Solar Panels

Solar is a well-proven technology. It has a strong supply chain, a healthy R&D budget, and a track record of delivering solid returns for investors. For us to remain under 1.5ºC, solar PV additions would need to increase yearly from 134 GW in 2020 to over 630 GW in 2030 (a 16.74% CAGR) and maintain that annual deployment rate through 2050.

A crucial part of that will be the expansion of residential rooftop solar. The 25 million households with rooftop solar globally would need to expand 4x to 100 million by 2030 (14.78% CAGR) and then 10x to 250 million by 2050.

Wind

Similar to solar, wind is now a proven technology with a robust marketplace surrounding it.

There are two types of wind power: onshore and offshore. Onshore is easier to build because the wind turbines are constructed on land. Such an approach has led the way in deployments compared to offshore.

To remain on the 1.5ºC of warming path, our global deployment of onshore wind will need to scale from 109 GW deployed in 2020 to 310 annually deployed by 2030 (11.02% CAGR).

Offshore wind has significant potential for growth and expansion. There are numerous real estate opportunities in oceans and lakes (and they tend to be pretty windy). Global offshore wind deployment will need to scale dramatically in the 2020s, going from 5 GW deployed in 2020 to 80 GWs deployed annually by 2030 (31.95% CAGR).

Electric Cars

The third major category of ready technology is electric cars. Electric cars are already better cars than fossil-fuel-powered ones. They are safer, faster, more powerful, and cheaper to maintain.

With the economies of scale coming with broader adoption, they are on track to cost the same or less upfront as gas-powered cars by 2027, according to Bloomberg’s analysis.

This is all good news because electric car sales will need to ramp up dramatically in the 2020s, scaling from 4.6% of all new cars sold globally in 2020 to 60% of all new cars sold globally by 2030 (29.28% CAGR).

Batteries

A fourth category is missing from the IEA analysis, but we want to include it here. Batteries are an increasingly mature industry, and they are a crucial part of solving climate change. The sun only shines during the day, and the wind blows when it blows, but we need electricity 24/7.

The solution here is to store the electricity from that additional sunshine and extra wind in batteries.

The good news is that thanks to the rise of electric vehicles, the battery industry has quickly expanded. According to a McKinsey analysis, global battery cell production went from 64 GW in 2016 to 613 GW in 2020 (a whopping 77% CAGR). They project that by 2030, production will be at 2912 GW (a still impressive 16.52% CAGR).

With battery technology continuing to scale, we should see virtuous feedback cycles. With batteries becoming cheaper, it makes economic sense to deploy them in more areas of the economy, particularly in energy storage and powering electric vehicles.

It is not a question of whether the battery industry will continue to grow but whether it will grow fast enough.

Carbon Capture, Hydrogen, and Bioenergy: Significant R&D Still Needed

The massive deployment of solar, wind, electric cars, and batteries is possible. Each has its clear economic benefits. They are proven technologies with positive market forces behind them.

However, they alone will not address climate change. In our energy system, plenty of innovation is required to mitigate approximately half of the remaining emissions; and these are all trickier parts of the economy.

Carbon Capture, Usage, and Storage (CCUS)

A crucial part of the IEA 2050’s plan is validating carbon capture and sequestration technologies. This area is the part of their analysis that we struggle with the most. As outlined in "We have to Significantly Decrease Fossil Fuel Demand," carbon sequestration technology remains in its infancy.

There is a risk that it never scales. Although we have pretty good technology for separating carbon dioxide from the air, we are still no nearer to knowing what to do with it afterward.

If a technology/company can break through this technological barrier, the financial rewards could be massive.

Hydrogen-Based Fuels

Fuel cells are "engines" that create power with hydrogen as a fuel source, with the only output being water. Pretty clean, right? Fuel cells are not new technology. The Apollo spacecraft had fuel cells. If we can scale the use of fuel cells, we can add a whole new emission-free source of power for the world to use.

So why aren’t we living in a fuel-cell-powered world today?

The problem is getting the hydrogen. At a high level, hydrogen can be sourced in two ways, one dirty, one clean. The dirty way, also known as "blue hydrogen", involves splitting it off from natural gas. Methane (CH4), the primary molecule in natural gas, has four hydrogen atoms. In 2020, 90.6% of hydrogen came from this process.

Economically, this poses a problem for scaling hydrogen production. If it is meant to replace fossil fuels like natural gas but the main ingredient in making it is natural gas, it will always cost more than natural gas.

Fossil fuel companies see hydrogen as a major way to stay relevant in a decarbonizing world.

This ONLY makes sense if two things happen: 1) CCUS technology shows its viability (otherwise the switch to hydrogen would not result in a decrease in emissions), and 2) if carbon pricing made it more advantageous to turn natural gas into hydrogen and capture the carbon rather than just sell the natural gas directly in the first place.

[A side note: it is for this reason that we do not include companies like Fuel Cell Energy in the Climate Index because they make much of their revenue from helping the fossil fuel industry turn natural gas into hydrogen without adequate sequestration of the ensuing carbon emissions.]

The second way of sourcing hydrogen is cleaner, more elegant, and known in the industry as "green hydrogen". Hydrogen can be extracted from water (H2O). Running an electrolyzer through water splits off the hydrogen atoms. If the source of that electricity is 100% renewable, then green hydrogen becomes an emissions-free fuel source.

The promise of green hydrogen is its capacity to act as a battery of sorts. Renewable energy systems have to curtail (translation: waste) electricity if it is too sunny or windy. The electrical grid needs to remain balanced, meaning 100% of supply has to always find 100% demand.

Especially as we bring more wind and solar energy online, there will be more excess electricity on certain days. Instead of getting wasted, that excess could run hydrogen electrolyzers on demand, thus capturing that energy in a different, far more stable form: hydrogen.

The good news is that green hydrogen is beginning to scale. Shell opened a large green hydrogen plant in China to provide emission-free hydrogen for the 2022 Winter Olympics. Bloomberg’s analysis now believes that green hydrogen could be the cheapest form of hydrogen by the end of the decade, with a staggering CAGR of 54.7% from 2021-2028.

If Bloomberg’s projections come to pass, we could be on a clear path to a far more hydrogen-powered world, regardless of the efficacy of CCUS and/or carbon pricing.

Bioenergy

Broadly speaking, bioenergy involves the creation of electricity/power from burning plants. But wait, doesn’t that produce emissions? Yes, it does. The difference between bioenergy and fossil fuel energy is that bioenergy’s emissions are much more a part of the current carbon cycle (they are in the bathtub).

If we suddenly turned off the faucet of fossil fuel emissions and magically mopped up the historic carbon emissions, bioenergy theoretically would not contribute to climate change. Our planet’s carbon cycle would be in balance, and bioenergy’s carbon emissions would get reabsorbed by plants to be used again.

The problem with bioenergy today is that we do not live in that world. The faucet of ancient carbon emissions is still turned up high, and the excess is sloshing over the tub and on the bathroom floor at an alarming rate. Deliberately burning more stuff, whether it’s fossilized plants or recently harvested plants, just makes climate change worse.

Bioenergy has promise, however. The IEA’s graphic above ties the fate of bioenergy to CCUS. If successful, bioenergy could be another area to deploy CCUS and use waste streams like sawmill sawdust to generate electricity.

To us, of more interest is bioenergy’s potential in providing low-carbon alternative fuels for hard-to-decarbonize sectors like airplanes and ocean shipping.

Agriculture: Where the Most Innovation May Be Needed

There is one major source of carbon emissions that we have not yet discussed: agriculture. According to the EPA, agriculture is responsible for 10% of the USA’s greenhouse gas emissions. The United Nations puts global agricultural greenhouse gas emissions at 17%.

Even if we wean our civilization off of fossil fuels, we will likely also have to address and bring down these emissions from agriculture.

There are a number of practices aimed at reducing agriculture's impact. Lumped under the term "Regenerative Agriculture," the science is pretty clear that these practices are broadly better for our world than standard industrial agriculture. They involve far fewer chemicals, fertilizers, and pesticides while building up the soil microbiome.

Practices like managed grazing, where cows are "herded" and rotated around a pasture rather than left to roam free, build back degraded soils.

All of these practices are better for our natural world. They tend to make farms more resilient and farmers more money than standard practices. The problem is the science is pretty skeptical on whether any renewable agriculture practices actually result in reducing emissions from agriculture.

A meta-study completed by scientists at the World Resource Institute has landed in a place of high skepticism around the carbon sequestration potential of regenerative agriculture. They found that:

• While no-till agriculture does seem to increase soil organic carbon, it also increases the release of nitrous oxide, a 300x more potent greenhouse gas than carbon dioxide. The increase in nitrous oxide may outweigh the increase in sequestered carbon.
• The latest estimates show some carbon sequestration potential for managed grazing, but it is more reduced than originally thought, with half of the reduction potential requiring the incorporation of planting beans on the grazing land.
• The use of cover crops does seem to increase soil-based carbon, but it may also increase the release of nitrous oxide.
• Converting farming land to grazing land does rebuild soil back on that piece of land, but it increases the demand for food production elsewhere.
  
  

There is one clear path to reducing emissions from the agriculture sector: reducing the number of cows. In the US, 35% of all agriculture emissions come from the beef and dairy industry.

This number only accounts for the emissions from "enteric fermentation" (aka cow burps) and manure. It does not account for the significant cropland used to grow food for cows. According to Bloomberg, 41% of land in the US is used for feeding animals, whether for direct grazing or for growing animal feed.

We thus need to replace cows, and we have two promising technologies, one mature, one still very much in its infancy.

Plant-Based Meats

Plant-based meats use a fraction of the resources that animal-based meats do (for the skeptics out there, here’s the most nuanced analysis we’ve found).

They are more expensive today because of scale (animal-based meats have had 100+ years to industrialize and cut costs. Plant-based meats are just getting started), but they have the capability of being far cheaper. While they may never taste exactly the same, we should expect to see plant-based meat continue to increase its market share.

But plant-based meats probably have some kind of adoption ceiling. Ultimately, they are not meat, and only so many people will regularly order Impossible Whoppers. This brings the second technology to center stage: cell-based, or lab-grown meat. Cell-based meats have the promise of tasting just like a burger.

Cell-based meat production processes require fewer inputs and have a theoretical path to costing far less than animal-based meat production. These two promises have led to an investment boom into cell-based meat.

Cell-Based Meats

Unlike plant-based, the science on cell-based meat is far from conclusive. In fact, the experts with the most experience in a similar industry (vaccine production) are incredibly skeptical that cell-based meat will ever reach anything close to cost parity with farm-raised protein. Yeah, it’s a bummer.

So, for now, that leaves agriculture without a clear emissions reduction plan. Regenerative agriculture practices, while holistically preferable, may not have any meaningful climate impact.

The mature technology in the space – plant-based food – will continue to keep growing, but it will likely only reduce the demand for beef. The immature technology in the space has the potential to render using cows as a food source obsolete, but it may have unsolvable flaws in its business model.

Clearly, more innovation will be needed to reduce and/or offset agriculture’s emissions.

Conclusion: The Path to Solving Climate Change is Clear. Can We Get There Fast Enough?

This is the question of our time. We know what we have to do to solve climate change. We have to rapidly deploy the market-ready zero-emission technologies: solar, wind, electric cars, heat pumps, and batteries.

While we do that, we need to finish R&D and commercialize the next class of decarbonization technologies: hydrogen, carbon sequestration, and bioenergy, so they can be rapidly scaled next. We need to find even better ways to eat fewer cows, and it’d be great if we find scientifically verified strategies for reducing agricultural emissions.

While achieving all of the above does depend on our collective will, it thankfully does not depend on that will stemming from altruism. It can stem from greed. Practically all of these solutions can deliver solid-to-outstanding returns to their investors.

The question is whether we can galvanize that collective will to invest in climate solutions fast enough.

If We Succeed Our Day-to-Day Lives Will be Substantially Better

Overview

Too often, solving climate change is equated with sacrifice – we will have to give up things we love today in order to improve our children’s lives.

But that’s simply incorrect. A world where we solve climate change is a far better world than the one we experience today. Our air, water, and land will be much, much cleaner because we won’t be burning millions of barrels of stuff a day to power our civilization. We won’t be pumping chemicals into the ground to extract more stuff to burn.

This cleaner world will be much healthier for all living things. Asthma rates will plummet. Places like Cancer Alley in Louisiana will be a distant memory.

And this cleaner, healthier world will be much safer. There will be far less highly flammable natural gas piped around our neighborhoods. We won’t need carbon monoxide alarms in our homes. And the days when our governments cozied up to oil-rich dictators will be long behind us.

Even if it weren’t for the looming threat of catastrophic climate change, that cleaner, healthier, safer world is worth fighting for.

Imagining a Much Cleaner World

Remember at the beginning of the Covid-19 lockdowns how cities reported clear skies for the first time in decades? Mountains that the shadow of pollution had hidden were exposed. Hazy vistas became clear. That is what the world where we solve climate change will be like, all the time.

That idling car that used to emit a steady stream of exhaust at the drive-through is now electric, emitting nothing, with the only sound being the music from its speakers. That smokestack that used to send a steady stream of gray fog into the air now sits idle as white clouds drift on blue sky. The beach where thick, black globs of oil washed up for days that one summer the spill happened is now pristine.

When you burn something, you unavoidably create air pollution. From the burner on your stove to the coal power plant powering your dishwasher, we humans burn a lot of stuff to fuel our way of life.

In the world where we solve climate change, we simply won’t have to. Our electricity will come from the sun, wind, movement of water, and subatomic reactions. We’ll use it to fuel our cars, heat our homes, and cook our food. Burning will be limited to logs in the fireplace.

And a world without ash, soot, and smog will be much cleaner.

Imagining a Much Healthier World

The smog that makes our city skylines look sick has the same impact on our lungs. Fresh air is really good for us. A constant diet of smoke, pollution-filled air is not.

The humans that live in the world where we solve climate change are far healthier. Today, the poorer you are, the more polluted your air. From dirty coal power plants to heavy industry to oil refineries, the things that create air pollution tend to concentrate in poorer neighborhoods. The poor have less time, money, and resources to fight it.

This pollution results in tragic levels of unavoidable disease today. From significantly higher rates of asthma to places like Cancer Alley in Louisiana, where air pollutants from the many oil refineries sicken their workers and their families at far higher rates than average, fossil fuels are inevitably making some of us very ill.

In a world where we solve climate change, these neighborhoods don’t have to face higher asthma and cancer rates. Their children will grow up knowing nothing but fresh air they can breathe easily and deeply.

Imagining a Much Safer World

When you press your foot down in your car and accelerate, you literally pump highly combustible fuel into a controlled explosion.

When the gas burner on your stove fails to ignite, you get a small rush of fear knowing there’s an unknown quantity of highly combustible gas floating around your house. When you hear your gas furnace make a weird noise, you ask yourself when was the last time you replaced the batteries on your carbon monoxide detector?

Fossil fuels are dangerous. They literally explode! Their fumes can silently put us to sleep and kill us. Accidents involving fossil fuels can be accompanied by fireballs.

The world where we solve climate change is a safer one at home. There’s no longer anything we keep in our homes that can explode. Carbon monoxide poisoning is no longer an issue. Deaths from car accidents drop too.

Our electric cars don’t have blocky engines in the front, but instead multiple feet of storage area designed to crumple and protect us. They’re also practically impossible to roll over because the layer of batteries on the bottom lowers the center of gravity.

And the world where we solve climate change is also safer abroad. The countries who sacrifice their humanitarian ideals to remain on the good side of fossil-fuel-rich dictators simply won’t have to anymore.

The Putins, OPECs, and Maduros of the world lose their foothold not only on their neighboring countries but also their populaces. No more Putins flexing their muscles because they know Europe needs their gas supply. Fossil fuels and corruption are often found together. Imagine if we needed them far, far less than today.

Imagining a World With Abundant Energy

Let’s end here. This one is exciting, and also a bit out there. In the world where we solve climate change, we likely have more energy than we know what to do with. On sunny summer days, electricity will literally be free. We can only imagine what human creativity will come up with to use it.

We don’t always think about it, but we have a relationship of scarcity with energy today. Wars are fought over access to oil. Politicians go to great lengths to keep heating oil prices from spiking in the winter. Sudden changes in gas prices make national headlines.

In the world where we solve climate change, we will size our wind and solar farms not to meet 100% of our electricity needs on the best, sunniest, windiest days but on the worst, darkest ones. We’ll make sure that all days are covered, and that will mean that some days end up producing far more electricity than required.

What could be done with it? We can only guess. Will grocery stores lure you by offering free charging for your car? Will utilities use it to split water into green, emission-free hydrogen? Will we use it to run carbon capture and sequestration machines all around the world?

We don’t know. But we can be fairly certain that a world of energy abundance tomorrow will be far better than the scarcity-plagued one we have today.

Conclusion

Shared belief changes the world. The world where we solve climate change will only happen if enough of us believe in it. Goals are so much more powerful when they have a prize waiting.

It’s crucial to refute the antiquated idea that the only path to solving climate change is through sacrifice. The opposite could not be more true. To solve climate change is to live in a more abundant, free, and rich world. 

The world where we solve climate change and wean our civilization off fossil fuels is simply a better place to live in than the one we have today. It is far cleaner. It is much healthier, and that health is spread far more equitably. It is safer at home and around the world. And it has the potential of unlocking abundant, virtually free energy unlike the world has ever seen.

Climate change is so often framed in terms of risk. But solving it has rewards. And they must be focused on.

If We Fail to Solve Climate Change, Our Lives Will be Immeasurably Worse

The world where we fail to solve climate change is terrifying. And we are already seeing it happen on small scales that affect us globally.

The endless droughts in Afghanistan that have given way to the Taliban. The superstorms that battered New York to New Orleans. The wildfires in Colorado during the snow season and the recent February fires that led a California fire chief to proclaim "Fire Year" instead of fire season. Ice shelves calving early.

And here is the terrifying part: according to some scientists, if we do not change course but continue burning fossil fuels in a "business as usual" fashion, we’ll be at 4.3ºC of warming by the end of this century. These problems will accelerate.

This is a deeply uncomfortable reality, but the only way we avoid it is to face it. Fully. In our previous piece, we explored how the world where we solve climate change is a better world than today. This positive side of addressing climate change is crucial to hold onto and not discussed nearly enough.

But we also must equally hold the reality of inaction on climate. Just as humans get spurred to action by the prospect of rewards, we also do a lot to avoid pain. And inaction on climate change will bring an unprecedented level of pain to all of us. It will be the worst for the poorest people on our planet, but it will scar all of us.

So, while there are many reasons to be hopeful (as we lay out in the rest of this series), the reality is that our global civilization is still a ways away from avoiding climate disasters. We’re still headed for the terrifying world of climate inaction.

The only way to avoid the actual pain of catastrophic climate change is to imagine it. Feel how scary it is. And take action before it is too late.

Imagining a World Where Weather Extremes Are Normal

Let’s focus on a world of 3ºC of warming. There is broad consensus by the scientific community that under a "business as usual" approach with no meaningful climate action, we can expect at least this level of warming by the end of the century.

Some within that community (like those Wallace-Wells relies upon) believe this is too conservative, but let’s stay conservative. What does "just" a 3ºC world look like?

Firstly, we would see the end of "normal" weather. Goodbye to the predictability of farmers' almanacs. Hello "A New Record Was Set Today…" headlines. Extreme weather events, those that historically happened once every 10, 50, or 100 years, will occur far more often (but still randomly).

Droughts will be longer, dryer, and hotter. Heat waves that would have happened every one in ten years will happen every one to two years. Extreme heat will become far more normal not just for places like Arizona, but across the world:

Earlier this century, Arizona experienced roughly 116 days of such high temperatures, Texas experienced about 43 days, Georgia about 11 days, Montana approximately six days, and Massachusetts just one day, according to modeling by the Climate Impact Lab.

Were global temperatures to rise by an average of three degrees Celsius by 2100, those numbers would spike to an estimated range of 179 to 229 days of at least 95 degrees Fahrenheit days in Arizona, 135 to 186 days in Texas, 85 to 143 days in Georgia, 46 to 78 days in Montana, and 26 to 66 days in Massachusetts, per the same analysis. (Source)

Rain patterns will shift. When rain does come, it will often come in downpours. New daily records will be set for precipitation. River basins that a few months before had recorded record lows from heat and drought will suddenly sport new record high watermarks as an unprecedented amount of rain sluices through them.

Floods will occur in places that have never flooded in living memory. Hurricanes will become more regular and even more intense. Regions that depended on snow will average far less, with much of that precipitation falling as rain instead.

All of this extreme weather will significantly impact natural ecosystems. In dryer regions, wildfires and smoky skies will become a seasonal norm. Regions that rely on snowpack for water will see their reservoirs trending downwards. Farming regions that depend on regional rainfall to replenish reservoirs will face increasing water shortages.

Imagining a World Inundated With Rising Waters

It will be even worse for coastal regions. Places like New Orleans, New York City, and Florida will see stronger, more frequent hurricanes and will also have to cope with the weight of the ocean looking to inundate its streets.

A LOT more sea ice has melted at 3ºC of warming. The arctic is regularly ice-free during the summer. Shipping lanes open up from northern Russia to northern Canada. Antarctica has shrunk considerably. Entire island nations like the Maldives and Kiribati will be underwater, their people and cultures forced to migrate as climate refugees.

The melting ice has pushed global sea levels two feet higher on average than their current levels. High tides come far higher, particularly during storms. Significant parts of the world are unrecognizable.

Parts of Venice are simply underwater. The concrete in the condos on Miami Beach has been undermined by saltwater to such a degree that the state has barred anyone from even walking around it. The risk of building collapse is too high. Large parts of Bangkok, a city with over five million people, are permanently underwater.

Freeways and bridges get shut down during storms and high tides regularly. Cities face the impossible choice of massive infrastructure repair projects to fix pipes, sewers, and streets not built to regularly interact with saltwater or simply abandoning those areas to retreat to higher ground.

Famous beaches from Hawaii to Brazil now only emerge during low-tide. It’s unclear how long such a situation will last as each new storm carries more sand back out to sea. Tourism is forever changed. Oh, and all of the coral reefs will have died.

The edges of our land will be forever changed, and we globally will have a new appreciation for the destructive power of the sea.

Imagining a World Trying to Cope With All of It

Now imagine our global civilization trying to cope with that level of unprecedented chaos.

What will happen to our global food supply chains with us barely able to predict the weather? What will happen when the water runs out in drought-stricken regions months before the expected rains return?

How will the Western world cope with the 100 million climate refugees that extreme weather and rising sea levels are projected to create? Britain literally left the EU in response to the continent attempting to resettle just a million Syrian refugees.

How will individual countries, let alone the globe, figure out which climate damages to fix and how to pay for them?

How many trillions of dollars of coastal real estate will become worthless? How many insurance claims will be paid back?

What kind of leaders will arise in such chaos? Those focused on democratically doing the greatest good, by the greatest number? Or those looking to dictatorially entrench racial, social, and economic power?

Can we realistically hope that somehow we manage to find a way to avoid our entire world becoming one big "tragedy of the commons"? Or do we collectively fall into a scarcity mindset making it impossible to stop those with power hoarding an ever-shrinking pie of resources?

These are the questions that make climate change the crisis of our time. How much chaos can our human systems (governments, economies, national borders) take before they collapse?

Imagining a World Where It All Keeps Getting Worse in Escalating Climate Feedback Loops

And it gets worse. A 3ºC world likely means we’ve set off some, if not all, of the potential climate change feedback loops. A 3ºC world would likely change our geopolitical landscape forever, but humanity would survive. Our daily lives, world, and sense of security would be completely different, but most of us would survive.

But most of us would not survive catastrophic, exponential warming. The kind that would come from, say, an 8ºC world. The fear of a 3ºC world is that it would unalterably trigger our decline into an 8ºC one.

There are four main types of feedback loops, and they all get more powerful the hotter our planet gets:

1. Less ice = less heat reflected. The scientific term for this is albedo. Ice is white, the ocean is dark blue. Like a white t-shirt versus a black t-shirt on a sunny day, ice reflects far more heat back out of the atmosphere than the open ocean. The less ice that covers the earth’s surface, the less white space there is to reflect the sun’s heat, and the more heat stays back on earth. Thus the downward spiral begins. If that wasn’t bad enough, scientists are finding the ash from forest fires is settling on ice, further reducing the ice’s albedo.
2. Less northern permafrost = more emissions from the land. The far frozen north of our planet has as many greenhouse gases frozen and stored underneath its surface as the total amount of carbon dioxide in the atmosphere today. The hotter our planet gets, particularly the arctic, the more permafrost melts, the more these gases are released.
3. Climate change kills forests. Forests today are critical for absorbing and sequestering atmospheric carbon. Extreme heat, weather, and temperature irregularities put forests under extreme stress. From bark beetle infestations in the Western US to extreme heat in the tropics, swathes of the forest are dying. And when forests die, they not only stop acting as a carbon sink, they start emitting the carbon they had been storing back into the atmosphere.
4. Melting ice messes with the gulfstream. The Gulfstream is a powerful ocean current that regulates global temperatures. It keeps the arctic cold, the tropics hot, and in between temperate. Freshwater throws off its circulation mechanisms. When the Gulfstream circulates differently, it leads the jetstream, the pattern of air movement around the world, to circulate differently. This disruption of the jetstream is why in the US we’re seeing developments like the extreme heat dome over the Pacific Northwest in 2021 or the series of Polar Vortexes over the past decade where cold air that traditionally circulates in the arctic has redirected south. These events are not "normal." As more freshwater leaks into the Gulfstream, they’ll only increase.
   
   

Conclusion: It Is Unthinkable to Not Solve Climate Change

The price of inaction is simply far, far too high. According to David Wallace-Wells in An Uninhabitable Earth, a 4.3ºC warmer planet would result in more than $600 trillion in climate-related damage.

How big of a number is that really? The total value of the world’s stock market in 2021 was $73 trillion. The total amount of global currency in circulation in 2021 amounted to $90 trillion. Yes, it’s a civilization-crushingly large sum.

The systems we have come to depend upon, from international commerce to the global food chain to the rule of law, will be regularly pushed to a breaking point. Storm after storm. Drought after drought. Deadly heat wave after deadly heat wave.

But climate change is a solvable problem. We know what we have to do. We still have time. This decade involves investing in scaling technologies with a proven track record of making investors money. Assuming we continue investing in R&D, we’ll probably be in a good position to start scaling the next series of necessary technologies in the 2030s.

We have a clear path to turning off the tap of carbon emissions. We have some really promising ways to mop up the historical carbon dioxide we’ve already emitted in the works. And we have a growing movement of global citizens and politicians who understand we can’t do it all without also protecting and rewilding large parts of our globe.

The doomsday scenario laid out above all leads to a global tragedy of the commons. Where countries, neighborhoods, families, and individuals feel such a sense of insecurity that they ignore the greater good and do whatever it takes to hold onto their piece of a shrinking pie.

It is far too easy for us humans to "otherize" each other and imagine any sense of collective altruism we have built completely disappearing in such a world.

But we are not helpless actors in this. Some of the most powerful forces in human nature are also on the side of solving climate change.

Greed - there is a lot of money to be made in the transition to a zero-emission world. Self-preservation - those with something to hold onto, whether it be something smaller (a house, a business, a farm) or something large (an endowment, a senate seat, a company executive position) are increasingly aware of the threat posed by climate change.

These alone will not solve climate change, but they leave an opening. One that does not rely upon unrealistically altruistic assumptions of voluntary global sacrifice but of individual actors operating in their own best interest. They just need to learn and remember where their best interest truly lies.

That’s where people like you come in. To remind the world that we can solve climate change. That it’s better business to solve climate change. And that if we don’t, we will very likely lose everything we hold dear.

Solving Climate Change Starts With Individual Actions

"Why should I do anything when major corporations and governments caused climate change. They should solve it."

"I’m just one person. What possible impact could I have on a global economic system?"

"I have $10k in my retirement fund. The global stock market has $73 trillion in it. How could changing my investments matter?"

***

These are paraphrased versions of questions and comments we’ve received about sustainable investing. And these commenters are not alone. Some pretty smart people have followed this same logic to a similar conclusion.

For example, Stephen Dubner argued in Freakonomics that the only utility of voting was to allow you to say you voted, as one vote does not change elections.

It can be comforting to hold opinions like this. They relieve responsibility to take any actions. You were born into a world run by fossil fuels. You couldn’t control that. Why should you feel responsible for changing it?

We’ve spent a lot of time thinking about this, and in return, we ask "How do we know the status quo can change"? Because the only thing that is constant is change. There are far more electric cars than before. You can now buy a plant-based Impossible burger at Burger King. So how does that happen?

We’ve only seen it happen when enough people decide to make an individual change. That first domino can then often make it easier for others to follow. More cyclists can lead to more bike lanes, which can result in more cyclists. More vegans lead to better meat substitutes, which enables more vegans.

So as we wrap up this chapter on why your investments matter for climate change, let’s zoom out and explore the biggest question of all: should individuals feel responsible for making changes to solve climate change?

Yes – it’s the only way change happens.

Our Mental Models for Individual Impact Are Wrong

The logic laid out by Dubner is correct, but it’s missing a piece. The likelihood of your vote in an election being the single swing vote is incredibly low. The missing piece is the potential impact of whether the low-likelihood event actually comes to pass.

Change doesn’t happen linearly. It happens in step functions. Let’s use another example. Let’s say you choose not to fly and instead will drive your (electric) car to visit your family.

What is the likelihood that your decision to not fly will result in lower emissions? It’s small. That plane is likely headed to your parent’s city regardless of whether you are on it.

But there is some tipping point at which the airline throws in the towel and says, "Ok, there aren’t enough passengers. Let’s discontinue this route." Airlines cancel routes all the time. Somebody was the last straw, and that person’s decision not to fly was extremely impactful.

When we think about individual impact, we have to multiply the likelihood of the event happening by its possible impact.

This second part is the missing piece. William MacAskill argues this in Doing Good Better (this excerpt laying out the logical argument for vegetarianism is worth reading). He argues that the impact of ethical personal actions is a step function, not a linear one. Mostly, your ethical actions will not have an impact. But when it does, the impact can be significant.

Here’s an example he uses: most of the time when you choose not to buy meat at the grocery store, it will not impact the amount of meat the store manager orders.

But if the manager orders meat in units of 1,000 and your decision not to buy meat that week meant the store sold 4,999 chicken breasts rather than 5,000, your single action reduced the subsequent order by 1,000. That’s a huge swing for one action and can make up for all of the times it failed to have an impact.

The hard part about individual actions is that there is a level of faith. We don’t get to see their immediate results, at least not on the system as a whole. But we can see it in those around us.

Your Actions Influence Your Peers, Who Influence Their Peers, Who Influence Their Peers

When we’re trying to make a decision or a change in our lives, we often look at what our peers do. Why do you read product reviews when shopping online? Why do you ask your friends what show you should watch next? Why are there more electric cars here in the Bay Area than in most other places?

When you align your daily life with your climate values, whether it involves biking over driving, cooking a vegan meal, or changing who you bank with, you set an example for your community. And that example ripples out.

Researchers studied this influence in relation to one of the most impactful climate actions you can take: getting solar panels. In 2014, the Journal of Economic Geography published an article about whether or not getting solar panels is contagious.

They looked at home solar installations in Connecticut in 2014 and found the answer is a clear yes. They found that if you install a solar system on your house, you increase the likelihood of other solar system installations in your area.

This was true after they factored out other potential demographic explanations, such as income or political views. Here’s a line from their conclusion:

"Our results indicate that there are important spatial neighbor effects: adding one more adoption in the previous six months increases the number of PV system adoptions in a block group per year-quarter within 0.5 miles of the system by 0.44 systems on average."

So, based upon their findings, you could expect an installed solar system in the green circle (below) to lead to an additional 0.44 systems in that circle. Then you have a new center of the circle. That solar system would result in another 0.44 systems, and so on. Our choices ripple out from us in ways that we see and in ways we do not.

Your Actions Are What Change Corporations

Your decisions about what to buy and what not to buy send signals into the supply chain. And the only way to change the status quo is to have enough people willing to go against it. This phenomenon has been thoroughly studied. It starts with those who are willing to go against the status quo.

These are the people that Everett Rogers, in his theory of Diffusion of Innovation, dubbed the "Innovators." The 2.5% of the market willing to take a chance on something promising. If they have a positive experience, it enables the more risk-averse early adopters to jump on board.

By Rogers Everett - Based on Rogers, E. (1962) Diffusion of innovations. Free Press, London, NY, USA., Public Domain, https://commons.wikimedia.org/w/index.php?curid=18525407

As more people join, it will make more sense for companies and governments to invest in improvements and infrastructure. Electric cars get more charging stations. Solar panels become cheaper.

And it's more than what a company builds. Your actions change how they build it. The demand for sustainable products has created openings for new companies to rise. From fashion to homewares to bulk materials, these companies only exist because individuals like you went against the status quo to find better alternatives.

And the success of sustainably focused companies changed their industry. Tesla is the best example here, having shown the auto-industry that electric cars are better than their gasoline counterparts. Now the rest are investing heavily in catching up.

Crucial decisions get made in boardrooms, but the inputs to those decisions come from our actions. Are we buying? Are we selling? Are we reviewing? Are we ignoring?

Your Actions Are What Change Governments

The same is true for our governments. The government won’t solve climate change unless enough of us ask it to solve climate. We have to force it with who we elect. We have to pressure elected officials to follow through on their promises. We have to force it with threats of political consequences and disruption of the status quo if they don’t.

How else can we expect the government to change?

Your Investments Are a Critical Piece of Your Individual Climate Responsibility

Individual actions matter for climate change. They are the catalyst that changes our corporations and our governments. We cannot solve climate change without them.

And where you invest is a crucial piece of individual climate action. Your shares have voting power. Your shares can help climate solution companies grow faster. And your shares can challenge the narrative of the status quo around the potential rewards of sustainable investing.

While you are unlikely to see the direct results of your action, trust that they build towards something. The step function will come, and that narrative will shift.

There is a version of a Jewish proverb that holds relevance here: "if not me, who?"

A simple way of looking at climate change is that if enough people say "yes, me!" we’ll solve it and avoid catastrophic warming. If they say "not me, try the next guy," we won’t.

Conclusion: We Need Individual Action Aimed at the Systemic Solution of Closing the Climate Investment Gap

When asked the question of whether or not individual actions matter, climate scientist, "How to Save a Planet" host, and policy writer Dr. Ayana Johnson summarized that we need individual actions that add up to systemic solutions.

The good news is that we have frameworks for solving the problem. We need to reduce emissions by 50% by 2030 and achieve net zero by 2050. We have the solutions. And we know that we have a climate investment gap of $5 trillion.

Investing in those solutions will take many individual votes, congressional calls, lifestyle choices that shift markets, and, of course, investment decisions.

Investing at its core is about a belief in the future, and we need to make sure we invest in the future we actually want to live in, retire in, and leave to our children.

Continue Reading →
Chapter 2: Why Your Retirement Fund Matters for Solving Climate Change