This summer, Michael Liebreich wrote two essays under the title of the Pragmatic Climate Reset. The first challenged the idea that the clean energy transition has failed. And the second challenged the clean energy and climate community to a reset, exploring eight areas which he thinks the transition has gone astray.
In this special episode, Bryony Worthington sits down with Michael Liebreich, to unpack Part 2 of “The Pragmatic Climate Reset.”
Michael lays out a bold vision for cutting through the noise — replacing ideology with realism, and paralysis with progress. From net zero targets and critical minerals to global politics, energy security, and the economics of clean tech, this is a conversation about what it takes to deliver a just and workable climate transition.
Bryony asks Michael,
Michael puts forward the idea that if the transition is to succeed in the long run and keep the public on board, we must proceed as a tortoise, not a hare, building on the considerable momentum of renewables to phase fossil fuels out of our energy mix while also keeping energy affordable, and everyone’s lights on.
Listen now, or watch the full episode on YouTube.
Leadership Circle:
Cleaning Up is supported by the Leadership Circle, and its founding members: Actis, Alcazar Energy, Davidson Kempner, EcoPragma Capital, EDP of Portugal, Eurelectric, the Gilardini Foundation, KKR, National Grid, Octopus Energy, Quadrature Climate Foundation, SDCL and Wärtsilä. For more information on the Leadership Circle, please visit https://www.cleaningup.live.
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ML
What's the point? If we all need gas to keep homes warm, particularly for the poor and vulnerable, how dare we demonize the companies providing it?
BW
Because, Michael, you yourselves know they are capable of behaving like demons. Because they will present false solutions very merrily — we're going to do hydrogen homes, or we're going to do I mean, admittedly, that might have not been Shell pushing it, but it's the fossil industry.
ML
Oh, it was Shell pushing hydrogen harder than any other single fossil fuel company. No, you can demonize their behavior of promoting false solutions. You can demonize anybody who is actively promoting fossil fuel use over clean energy use. But what you can't demonize is a whole sector in all its behavior, in every department, including the bits that are not doing that. It's not the organization that is providing fossil fuel to keep old peoples’ homes warm. You can't demonize that.
BW
But then they can't give them a clean bill of health either. I think you just got to be judicious about it.
ML
Judicious, surgical. Be very clear about what we are going to demonize.
BW
Hello, I'm Bryony Worthington, and this is Cleaning Up. Anyone who follows Michael Liebreich will know that he is a prolific writer. And this summer, he penned two essays under the title of the Pragmatic Climate Reset. The first of those pieces challenged the idea that there is no energy transition underway, or that the clean energy transition is dead. And the second, which we're going to discuss today was really a challenge to the clean energy and climate community itself, and Michael walks through eight ways in which we should reset how we're approaching the clean energy transition. To discuss those ideas and more, I'm delighted to be sitting down today with Michael Liebreich to discuss the Pragmatic Climate Reset part two.
BW
Well, Michael, it's great to be here with you in London. We were in New York during climate week, and we had a really fun conversation about your part two of your pragmatic climate reset. And so here we are recording a full episode, and it's a follow on from our part one conversation that we had at the end of last season, episode 220. So I'm here to interview you about part two, but before we do that, just as a recap, maybe you just want to give us a very quick summary of part one.
ML
Let me just take a step back. Bryony, it's great to see you on the right side of the Atlantic.
BW
Yes, it feels much more relaxed here.
ML
Much better. Now the pragmatic climate reset is a two parter that I wrote for Bloomberg. Part one is really to try and address the narratives of the failure of climate action, of action against climate change, because there are obviously populist politicians — I'm not sure if we could name any, but I'm sure we can all think of a few. And there are also narratives coming out of the fossil fuel industry, they're clearly promoting very heavily a narrative that the transition was always a foolish idea. It was always naive. It was never going to work. You know, ‘we may have gone along with it,’ but they use this word, the ‘pragmatic’ approach is to admit that we're essentially wedded to fossil fuels. So part one was really to address that and say, no, sorry if you frame the transition as being this dramatic drop in fossil fuels over very few years, which is what one and a half degrees would be. Then, yes, it has failed, because we're not halving emissions in 10 years or 12 years, which is what we were told to do coming out of the Paris Agreement and so on. But if you actually take a more nuanced, or a longer term view of how a transition might actually play out, then it's going to be the steady growth of clean energy. And that's exactly what we see, and eventually that will force fossil fuels off the system. And I wanted to get that out first, because part two is then a critique. I call it a provocation of those people actually working on the transition, trying to address climate change, trying to stop climate change. And I didn't want to dive straight into a critique without first, in a sense, am I allowed to say, punching both ways. It's a very violent analogy. But I don't want what I do to be just seen as a critique of those people who want to see a transition. It's a critique of those who say there is no transition and cannot be and should not be one. That's part one. And then it's a critique of how we've actually been addressing the transition and what really needs to happen next in order to continue with what's really the considerable momentum that we commentate on and talk about all the time.
BW
So part two, then, I'm glad you explained it that way. I've read it, I agree with a lot of it, but I've got some questions for you where I slightly deviate from your suggestions. But overall…
ML
Bryony, you're allowed to completely disagree with all of it.
BW
We're quite aligned — despite our political differences — we are quite aligned on many things. But I suppose I read it and thought, okay, I can see what's happening here. But you call out green activists, and you actually say something like, we should ‘stop taking the knee to Greta Thunberg’. And I thought that's interesting, because actually, yes, she's pulling the politics one way. But what you didn't do in part one or part two was call out the real voices of populism who are saying climate change isn't real. I mean, amongst them is President Trump. Who famously, you know, last week addressed the UN and said it's all a hoax. You've got big influencers, you've got podcasters, you've got Joe Rogan, they're all pulling the politics in a particularly damaging way. And you didn't mention that. Was that conscious? Why pick out Greta?
ML
So the phrase that I used, the only time I mentioned Greta, was I said that we should stop taking the knee to Greta Thunberg and start worrying about utility bills. So it's not just an attack on Greta Thunberg, it's actually trying to refocus. It's a sort of shorthand for what I'm doing in part two, which is refocus on the concerns of the average person. And so I may have used a florid turn of phrase to try to emphasize that, but you're right. What I didn't do in part one was address the populist politicians, the Reform here in the UK, or President Trump in the US, or, by the way, you know, an increasingly long list of politicians in other countries as well. In a sense, it's because I kind of take it as read. I think everybody knows that there are those figures out there saying those things. I'm fundamentally an energy analyst. I think I'm more useful as an energy analyst than a political analyst. Even in part two, when I do call out the sort of reverence with which we hold the one and a half degree target and Greta Thunberg, you know, Fridays for Future and so on, that's not the main payload of what I'm saying. What I'm saying is that we should have different targets, different priorities within the energy system, that we should reset things like hydrogen and the way we go about diplomacy. It's kind of a technocratic approach in both Part One and Part Two, and it's also to do with who we're likely to persuade. Because there's nothing I can do that will persuade Donald Trump to embrace wind turbines as he embraced the American flag in the Oval Office in his first term. He's just not going to. And in fact, in social media, neither of us are going to persuade a single person who's set against clean energy of any sort, nuclear, your favorite nuclear, or renewables, my favorite. Or energy efficiency or batteries or electrification of heating or transportation. Those people who are set against those things are unpersuaded by anything that we do. All we can do is deny them an audience. All we can do is to explain to those people who might be susceptible to the rhetoric that in fact, it is misguided. It is wrong in the physics, wrong in the economics, wrong in the environmental science, wrong in the politics. And if we do that, well, then we'll win. And so railing against the bad guys. I just don't think it's persuasive. It doesn't deny that followership. In a way it would drive me to an extreme. And then anybody who's an independent, who kind of comes in with an open mind would be like, ‘well, damned if you do, damned if you don't.’ I don't like the populists, but I don't like the anti-populists either. I could be much more use as an analyst, so that's what I try and do.
BW
And perhaps another aspect of this that you could have perhaps been more explicit about was the fact that there is a sort of anti-progress, anti-humanity element to the green movement, which does turn people off right? People are not going to stop driving their cars and jump on bicycles. Some will, but the majority are not going to. And so there's this very anti-progress narrative. But instead of doing that, you focus more on what I think might be adding a bit of fuel to the flames of the right wing populist backlash, which is seeming to imply that we're treating the public like a cash machine. That was your florid phrase about, you know, we've got to stop ‘treating people like they are hostages at a cash machine.’ And actually, that's where I think perhaps it feels like you're punching in the wrong direction a little, because you're seeming to be saying that policies towards decarbonisation are necessarily going to be expensive, and you're not really saying that. Are you?
ML
No, absolutely not. I think the meta to what you've just said is that I need to write a book, because I do let the populists off the hook, as we've just said, but I also let the degrowthers off the hook. I don't go through the reasons why I think it's completely absurd to expect, particularly, of course, you know the people who are emerging from poverty in the global south and so on. The idea of degrowth for them… But you know, not just them, actually degrowth in the G7countries. A point that I do make is that the G7 counties are full of people who are actually suffering quite severe economic strain. And then the idea of de growth is a non starter. Do I go into that in great detail? No. Could I? Yes. Would it make entertaining reading or listening for audience of the show? Yeah, it probably would. I have done it in the past.
BW
There’s a part 3 here maybe?
ML
Or a book, but what I would say is, I don't think I give the impression that all action on climate is expensive. In fact, the opposite. When I say, ‘stop treating people like hostages at a cash machine expected to withdraw their savings to fund priorities they don't share.’ I'm not saying that all climate action falls into that category. I mean, obviously not. Because then the next section is about the energy priorities, which says, focus on the stuff which is affordable, the first 90% which is affordable, which is not taking people to the cash machine and forcing them to withdraw their savings. But unfortunately, too many of the approaches that we're following, I say we as sort of the climate community, have driven up the costs excessively.
BW
Let's talk about what you are saying, because that's true, and when you read it, it's clear that you're saying, let's not sweat the last 10% of decarbonisation now, because necessarily you're at the bleeding edge of technology, it's going to be higher cost. You're not sure about whether the cost curves are going to come down or not, and you can be kind of bamboozled into very expensive pet projects that vested interests are going to put in front of ministers and say, ‘this is essential.’ And if you can just avoid some of that, keep the costs manageable and focus on the 80% which can be got at through clean electricity and electrons replacing fuels, that seems to be essential.
ML
Probably the best example of that, the simplest example is here in this country, Clean Power 2030 which is to get to 95% zero carbon electricity — so nuclear and renewables — by 2030. The problem is you start to go up the very expensive bit of the cost curve. And meanwhile, we don't really have a coherent strategy for the electrification of transport. We don't have a coherent strategy, and that's kind of an understatement, for the electrification of heating. And we don't have a coherent strategy for the electrification of large chunks of industry, and a big piece of those three EVs, heating and industry could be electrified, probably at no extra cost. There may be behavior change, but no extra cost. So that would be much cheaper than driving for purity on electricity. And of course, because our electricity in the UK is already 60% clean, you would be going from something that is 100% fossil. If every heating system that's 100% fossil, if you just went to electricity, even if it's resistive heating, it's going to be cleaner. But of course, if it's a heat pump, it's enormously better. And the same with transportation. So our priorities are driving up the costs more than they need to.
BW
Yeah, absolutely. And so if anyone in the government's listening, which I hope they are, the UK government here, really, what we want is an electrification strategy. Because that would, firstly, it would signal that Kwasi Kwarteng’s hydrogen strategy, which is probably still out there somewhere, is now consigned to the dustbin where it belongs. And we're focusing on the, as you say, the near term technologies that have come down the cost curve that are now available to us, where real people can experience benefits. The costs can come down, and the efficiency of the whole economy gets improved by these technologies.
ML
So I suspect that there are, or will be, people closely associated with the UK Government, that will listen. And the chances of the, turning around and saying, you know, ‘I heard this really good podcast from Bryony and Michael, and you know what, we're just going to rename it, we'll call it CP40, and actually we'll push back the AR7, the auction round seven, for more renewable capacity. We don't need to do it this year. We can push that back by five years. That's not going to happen.’ That's not going to happen.
BW
But an electrification strategy could emerge.
ML
We absolutely need, whether it's one electrification strategy or an electrification of heat and a transportation strategy and an industrial electrification strategy, we absolutely need those. And they need to be very much grounded in the stuff that will be cheaper. And they need to be very clear. And it needs to be clear that they are not just some climate indulgence, it needs to be clear that this is going to save people and companies money and that it will generate export opportunities. And so it's part of an industrial strategy as well. I think it can be done, but I'm not sure that it's on the horizon.
BW
But, I guess if you look around now, transport, certainly, it's passenger cars that make up the bulk of the demand for oil. And it does make a lot of sense now to allow the UK to do an experiment in cheaper vehicles. So we're not applying tariffs to Chinese vehicles, we're slightly disadvantaging them with the grants that have come in, that the Chinese companies don't qualify for. But we're doing this experiment in kind of a globalized way of seeing, can we do this transition at a cost that's affordable and that will be then deflationary? Because we're getting ourselves off the oil price, which is so vulnerable to shocks.
ML
So the biggest problem, the biggest barrier to doing what I suggest, which is what you suggest — a big electrification plan — is that electricity is so damn expensive in the UK. It’s the highest cost electricity in the G20. And it's hard to see why that would come down. So I could suggest a lowering electricity prices plan as well, which would have been zonal pricing to break the link with natural gas quickly. There was this myth that it would take five years to introduce zonal pricing. It hasn't taken that anywhere else in the world. We’re on the wrong side of history on that. But also electrification, in and of itself, would drive down electricity prices, because so much of the bill is the fixed cost. The more electricity demand there is, the more you push down that middle piece, the fixed costs. And then, of course, you've got to get some of the green tariffs or the social charges and the taxes. And I mean, I'm sorry, if Rachel Reeves, if the chancellor is listening to this, put them into general taxation. Just get them off electricity, because that will drive electricity demand, and we'll push down the prices, and then we can electrify. So in a way, just mapping it back to the pragmatic climate reset, we've sort of skimmed through, we've done the first section on politics, where I say, you know, stop talking down to people and treating them like hostages at a cash point and so.
BW
I'm a bit dubious that’s what’s happening, but anyway.
ML
Well, that's an interesting conversation about people certainly feel like that. And then you can have a debate about whether it is due to the rhetoric around climate. You know, to what extent is the political pushback the populist politicians anti climate? Is that just, a sort of endogenous outburst of their own making, or is that because they've been annoyed by sort of sanctimonious climate warriors and so on. But the other piece is, then, to do with the targets. Part two, the second section, there's these eight sections. The second one is the climate targets, and the third, which is really the energy system, which is about focusing on the 90%. So we sort of skimmed through, I think, of a few pieces.
BW
I think actually, net zero has a lot more flexibility in it than people realize. And it isn't Ed Miliband telling you when you can make a cup of tea, which is how it's being portrayed by some right wing commentators, it's just become a totemic fight. And I think for me, the populists have just jumped on this because they think they can put a wedge into the argument. And actually, not a lot of people even know what net zero is. I'm not sure it doesn’t play that well out there, but what they will say is, ‘if you're cold in the winter or you can't get everything,’ it can be blamed on this simplistic argument that it's because we signed up to net zero. But that's what they're very good at. They're very good at finding plausible enough sounding solutions which are actually not really real.
ML
What I tried to do in the piece was, well, in that section two on the targets, was really focus on the 1.5°C, which just mathematically means you've kind of got to be off fossil fuels by 2050. So 2050 net zero globally is what's required for 1.5°C. And what I did in the piece was, which was fascinating, was to go back to the time of the Paris Agreement, 2015, and try to remember where it came from. And honestly, when you do that, it's just extraordinary how little reflection there was of how much it would cost. You know, 2018, the IPCC writes this report saying 1.5°C is much less risky. It's much better to get to 1.5°C than 2°C, which I totally agree with. But it says that you have to be 50% off fossil fuels by 2030. And that means essentially destroying 50% of our energy infrastructure. And it's not in any of the IPCC modeling what the cost of that would be, the impact of having to replace it. And the marginal carbon price, the idea that you would have then have a marginal carbon price of the things that you do of $6,050 versus $200 if you're going for 2°C. None of the politicians who jumped on the bandwagon of ‘keep 1.5°C alive’, etc, none of them examined that. So I come out saying we've really got to reset that absolutely. But I was then having to do a little bit of, I will be honest, sort of tap dancing and empretzelment, because even if you want to then get to 2°C, even if you say, ‘Look, we should do this in a more rational way,’ we should stick with what Paris agreement actually says, which is 2°C, the developed countries, the rich countries, still have to get to net zero at 2050 or thereabouts. I call it net zero-ish, as opposed to absolute net zero. But they need to get to net zero-ish by 2050. Because if the whole world is to get there by 2070, let's say, which is 2°C compatible, then the rich countries have to get there first.
BW
Since you mentioned Paris and the international side of things, let's just touch on one of your favorite subjects, which is the science. Because one of the legs of the reset is resetting science. And I think this is one of the most persuasive parts of the essay, it calls out the fact that science has been taking a shortcut for presenting worst case scenarios. And the shortcut they took was to amp up how much coal we were going to burn. And it turns out, they amped it up so much that there was not enough coal to burn in the second half of the century. So this RCP 8.5, which you rightly called out. In the essay you've talked about the consequences of this, you know, this kind of trick they pulled, and it has had really serious political consequences, hasn't it? Because other people have been able to pick it apart, and it's just undermined credibility, which is such a shame.
ML
So I'm going to remind you of the first time you and I spoke about RCP 8.5
BW
When was this, Michael?
ML
We were speaking at a conference in East London, I believe. And I think it was a charging company that had a kind of a retreat for its staff, and you were adamant. I was saying, ‘there's this thing called a RCP 8.5 which you know that the scenarios are all exaggerated.’ And you were adamant that that couldn't possibly be the case.
BW
So it's interesting. And I hadn't appreciated the trick they'd pulled, because these are worst case scenarios, right? And I think you and I are on the same page on this, that sensitivities of climate are so unknown that yes, there could be a worst case scenario. And not least because now we're discovering that we've got a termination shock of all the sulfur dioxide that we've taken out of our coal burn and our oil burn, which means that we're not reflecting as much sunlight. And the concentration of greenhouse gasses is still going up, and the double effect of that means that climate sensitivities could be much worse than they are. But rather than create an RCP that talks about that, they just amped up the coal use. And I was sort of incredulous when you told me this. I thought, how could they be so silly? And actually, it turns out, they did it then, and they haven't really acknowledged it. And they seem to be pursuing this sort of energy system focus, when actually we need a whole earth system focus. That would give you a worst case scenario if you wanted one, right? And that might be useful. But to just try and pretend the energy system is going to be on a worst case scenario seems to me, as you say, politically difficult. Because, as you say, people have been able to pick it apart, and then they discredit the whole thing.
ML
Yeah, so it gets very technical very quickly, because what you're referring to there are the sensitivities. You've essentially got the amount of CO2 that we put into the atmosphere, which is largely to do with the energy system, also a bit of deforestation, agriculture and some other gasses. We mustn't forget, you've done some great episodes on methane and some of the kind of funkier gasses. But there's the emissions, and then there's, what does the Earth do about it? How does the Earth respond? And then, of course, these are different reports within the IPCC assessment reports. And I'm very worried about the sensitivity, because for a relatively small amount of emissions, it might be that we have really bad outcomes. But as a scientist, I want them to model that by saying, ‘well, these are the emissions, or the different scenarios of emissions, and then these are the scenarios for what might happen,’ and to separate those and to examine those and to put resources into getting better and better at understanding sensitivities. And on the energy system side, the emissions outputs. To pretend that we will be at RCP 8.5, you need to be at something like 1200 parts per million by 2100. Well, you can't get there. You can't get there with coal because there isn't enough of it on the planet that's recoverable. And you can't get there through tipping points, because the tipping points don't impact fast enough to get you there. But what we might have is worse temperature outcomes, and then worse planetary system outcomes, so melting of ice caps and so on. But that's where we should put our resources to understanding the real you know, get as good a model as possible. And one of the areas as a scientist, forget the politics, just for a second. As a scientist, it really matters when it comes to tipping points. The scenario that they use to do most of the research into tipping points is RCP 8.5 or its modern analogs. And that's a bit like saying, I want to make myself a cup of cocoa, and I'm going to put a pan of milk on the stove, and I want to know whether it's going to boil over. And so I'm going to put it on RCP 8.5 right? Gas mark 10, or electricity mark 10. And of course, it boils over, makes a horrible mess. The problem is that doesn't tell you what it would have done had you put it onto gas mark or electricity mark five. Maybe it would never have boiled over because of the way that heat and convection and bubbles and so on work. So the fact that you put a huge signal through the system and bad things happen is sort of obvious, but of course, it generates fantastic headlines. You know, ‘cocoa disaster,’ or ‘the penguins have died,’ and so on. But it doesn't tell you anything. And so we're operating essentially, I'm afraid, when it comes to tipping points, we're operating essentially blind, because we're not examining the precursors to tipping at realistic emission scenarios, and it's just very, very dangerous.
BW
But to be fair, what I'd rather see them do is not just take emissions in isolation. So look at the whole earth system and the feedbacks that are happening and the loss of reflectivity that we're now expecting to get. Reflectivity seems to be weakening, and it could get worse. And that would still give you a pretty scary scenario, and there are many cascading risks that are social, that mean that as the impacts grow, as governments are distracted by the impacts, will they have as much appetite for mitigation? Weather based systems, you know, hydro is going to be disrupted, there's all sorts of knock ons.
ML
There are lots of feedbacks, by the way, that are not in any of the IPCC modeling. So, for instance, that business with coal and RCP 8.5. It postulated this huge pulse of emissions, which led to a huge pulse of heating, which would lead to a huge pulse of sea level rise, which would have overwhelmed lots of the coal fired power stations that were supposed to be driving it. So in many ways, it's not realistic. But I think, and I agree with you, we should be absolutely trying to get the best modeling, full system modeling that we can. And above all, then coming to the politics, not hitting it with assumptions that are so palpably wrong that you can immediately dismiss the whole thing, if you want to.
BW
Which is, in fact, what's happening.
ML
Cleaning Up is supported by its Leadership Circle. The members are Actis, Alcazar Energy, Arup, Cygnum Capital, Davidson Kempner, EcoPragma Capital, EDP of Portugal, Eurelectric, the Gilardini Foundation, KKR, National Grid, Octopus Energy, Quadrature Climate Foundation, SDCL and Wärtsilä. For more information on the Leadership Circle, please visit cleaningup.live. If you've enjoyed this episode, please hit like, leave a comment, and also recommend it to friends, family, colleagues and absolutely everyone. To browse the archive of over 200 past episodes, and also to subscribe to our free newsletter, visit cleaningup.live.
BW
Let's move on to your diplomacy reset, which is aligned to this. So you have some very practical, very specific suggestions of what we should do with our international climate talks. I know you've got a favorite among them. I've got a couple too. But tell us a bit about, what are the views of COP at the moment, or Conference of Parties, as they're called?
ML
So I'll give you the caveat first, which is, in 2011 I got so frustrated with the COP process. We were by then, I think it was COP17 in Durban or Cancun or somewhere, one of those. And I wrote a piece for Bloomberg saying Ya Basta, which is the great rallying cry of the anti-globalization movement in Italy. So Ya Basta, can we stop doing COPs? Can we just do clean energy and stop with this? And four years later, the Paris Agreement was a magnificent triumph of diplomacy. And it was. Although it introduced this kind of virus of 1.5°C into the discourse, the 2°C hard target and the approaches with the nationally determined contributions modeled, I believe, on the Climate Change Act or vice versa, these five year reviews and so on. Paris was really useful. So I was wrong. The caveat is, don't listen to me, because when I said we should stop doing them, I was wrong. Now I don't say we should stop doing the COP meetings. We shouldn't disband or resolve from the UNFCCC, but we've got to rein it in. So one suggestion is to hold COP meetings on islands where there are no more than 5,000 beds. So reduce the size. Make the decisions non-binding and based on majority, rather than this consensus, which requires everybody to be on board. So have majority decisions, admit that they're non-binding, make the whole thing a lot smaller, reduce it to one week, and also focus it on sectoral agreements. Because, this idea of world government by climate targets, it's failed. Not everybody bought into it ever. It has completely failed. Clearly, the US has explicitly said that it's absolutely out of not just the climate targets, but the whole SDGs. But there is a need for a forum where we talk about the steel industry, the shipping industry, the aviation industry, whether there's enough copper for all the electrification that you and I have spoken about. And so doing sectoral deals or brokering sectoral deals, is a role that I think the UNFCCC could play.
BW
Yeah, I'm just smiling here, because when I finished doing the Climate Change Act and was still a civil servant, I went from the domestic bit of government into the international bit of government on climate. And my proposal was to have sectoral agreements rather than whole economy diktats about pathways. And we spent a fair bit of time thinking about that. It went nowhere. And unfortunately, I think the only sector that the UNFCCC process is actually looked at in detail is the agricultural sector, where there is an ongoing discussion about it. But for whatever reason, environment ministers gathering into this process every year can't crack the whip on agriculture. They can't crack the whip on steel. They're the wrong people, aren't they?
ML
Yes, so I've got another few suggestions on that. First of all, forget environment ministers, agriculture ministers. Forget climate change ministers and environmental ministers, because they can't pull the skin off a milk pudding domestically. You need to get finance ministers, trade ministers, ministers of industry, and energy is usually associated with either industry or one of those. But you need to get ministers who are around the table when the big spending decisions are made. And even agriculture, those ministers can be very powerful, obviously in agricultural nations, but the whole area of land use should be just taken out of the UNFCCC. Just forget it, because land use is so bound up with social policy. And even in a country like the UK, where we have essentially — rounded to the nearest 5% — 0% farmers, it's still enormously emotive. But of course, these are incredibly important industries, emotionally, culturally, historically, resilience wise, politically and so we're never going to affect them by saying, ‘Oh, I'm sorry, you can only emit this many tons of carbon,’ and therefore you have to change the entire rice growing culture of Japan. It's not going to happen.
BW
You can't do that without your different bits of the government talking. There is another one I wanted to talk about, which we didn't talk about in New York, ironically, which was when we met in person, which is the finance reset. So talk us through what it is that's kind of got under your skin on the finance side of things.
ML
So a couple of things, I think that, broadly speaking, what has happened in I'm going to say, I would say, since Paris, I feel very long in the tooth, because I've been working on sustainable finance and finance into climate solutions, pretty much for 20 years. I can't tell you how many conferences and panels I've sat on saying, how do you get more money flowing into climate solutions, going back more than 10 years. So I wrote a piece in, I'm going to say 2013, I think it was accusing the financial system of being institutionally fossilist. So this is riffing on institutional racism, of a system in which no individual person, you can't put the finger on an individual as a racist, and yet the system is producing racist outcomes. And the financial system just had lots of different aspects to it that was advantaging fossil fuels, and it was things like the banking rules at the time. It was Basel II rules, it was fiduciary duty, whereby pension fiduciaries were not allowed to encourage the pension fund managers to do clean rather than fossil. It created a bit of a stir. I wrote it, and a version of it was published by the World Economic Forum, and I think it did quite a lot to spur discussions.
BW
But you weren't alone. There were lots of people trying to find a large lever you could pull within the financial sector.
ML
There were a few. There was Nick Robbins, there was Simon Zadek. There was the green bonds initiative, but that was a bit later. That tended to come from 2015, onwards. Ma Jun, we had an episode with him as the sort of the father and the grandfather of green finance in China, I would say. Climate bonds.
BW
Sean Kidney.
ML
Exactly, the climate bonds initiative, very early on. And Rachel Kyte, whom I'm very much hoping to do a second episode of Cleaning Up with very shortly. And these are people who were working on it. I was not alone. But let me get back to the issue of why we need a reset. Because the pendulum swung completely the other way, from institutionally fossilist to these attempts to use the financial system to tilt the playing field in favor of climate and sustainable solutions. And the thesis was that if you could somehow demonize the dirty stuff, you could then choke off finance to fossil fuels, which would, you know, enable a flowering of clean solutions. And first of all, it's impossible to choke off the finance to these things, because all it means is that the returns to them go up. If there's less capital available, then their cost of capital might go up a bit. So then all that will happen is you make them more attractive to somebody who, frankly, doesn't give a damn. And so it's extremely difficult to choke off all the finance to any individual business. You could argue, well, maybe most of the finance to coal was choked off. Coal's cost of capital really did go up because of the climate issue. And by the way, is staying up. There's nobody building coal fired power stations in the US, despite what's going on in the administration. But that model of central bank intervention to tilt the playing field and the use of financial regulation, and then the whole edifice. So the first thing was, was on climate, we kind of tilted the playing field. Instead of just saying, let's get rid of fossilism, let's just have a flat playing field, they attempted to actually tilt it towards clean. But then the whole edifice of ESG, which was, I would say, to use a big word, epistemologically unsuccessful. The idea that if you could collect enough data, that you could truly see the climate or sustainability impact of an entire company out into the future is kind of ridiculous.
BW
I mean, there was this period where people forgot that what drives capital is the spreadsheet and what the returns are. And the inputs to that are specific policies. They're sectoral policies that changed the equation of real economic policies. And there was this idea that you could just wave a magic wand and certainthings would happen within the financial system, and you could do away with these sectoral policies, or at least they were second order. And I think hopefully people realizing that's just completely wrong.
ML
Well there's a meta pot shot that I'm taking at politicians in that section. Because if I'm saying that, you know, ESG and climate finance are not going to solve the problem, I'm also saying if you're too craven to regulate in the real economy, and if you want buildings to be low-carbon buildings, if you want power stations to be low carbon power stations, if you want cars to be low carbon cars, then you've got to regulate in the real economy. If you want your industry, your ceramics industry, to use clean electricity rather than gas, don't expect some poor banker working in New York to do your hard work for you. You've got to regulate in the real economy and do the hard yards.
BW
And I think that's specifically true in the West. I question China, because as you referenced, we had this amazing episode with Professor Ma Jun who, in China, was able to line up macroeconomic policy, the cost of capital, making capital available, tilt the whole thing towards what they considered to be sustainable investments, right? And they had a definition of that, which was, we're moving out of a fossil only system into a clean system. And they seemed to pull it off and look at them now, right?
ML
Careful, careful. Because, first of all, I think what he was talking about was what I think we would call joined-up policy.
BW
But it has a macro element.
ML
It had a macro element, but it was also transport policy, energy system policy, agriculture and so on. And when you say they had a macro element, notice that it didn't choke off at all the investment flow to coal fired power.
BW
It was an incentive. It was a carrot, for sure, as in reducing the cost of capital, weighting the capital towards clean, they definitely did that.
ML
Anybody listening who's looking for a PhD thesis topic, it would be fascinating to investigate whether it was the sectoral policies or the macro, slight changes to the cost of capital and so on, the creation of green products. Take as a starting point the episode with Ma Jun, and then you can interview everybody and do your analysis.
BW
And how relatable is that everywhere else, right? China has quite a unique situation with the access to the capital levers that it has, and the huge investment banks they've got.
ML
And an enormous misallocation of capital with no ill consequences, et cetera, et cetera, et cetera.
BW
So let's move on to the last section, which was policy, which is probably the largest one.
ML
Actually, let me just on finance. Let me, just before we move on, what I do argue for is a level playing field, but a lot of transparency. And in a sense, because we still need, for instance, good HR policy, because ESG was not just about climate, we do need good HR policies. And we do need good transparency on the data, on emissions and so on. But it's the demonization of politically unfavored sectors, or parts of the energy system that you don't like, but are actually keeping the lights on. I want to deconflict, I think that's what I'm really saying. And a lot of the reset is, you know, don't demonize people that you need. And I explored that with Ben van Beurden, the former CEO of Shell. What's the point, if we all need gas to keep homes warm, particularly for the poor and vulnerable? How dare we demonize the companies providing it?
BW
Because, Michael, you yourselves know they are capable of behaving like demons. Because they will present false solutions very merrily — we're going to do hydrogen homes, or we're going to do I mean, admittedly, that might have not been Shell pushing it, but it's the fossil industry.
ML
Oh, it was Shell pushing hydrogen harder than any other single fossil fuel company. No, you can demonize their behavior of promoting false solutions. You can demonize anybody who is actively promoting fossil fuel use over clean energy use. But what you can't demonize is a whole sector in all its behavior, in every department, including the bits that are not doing that. It's not the organization that is providing fossil fuel to keep old peoples’ homes warm. You can't demonize that.
BW
But then they can't give them a clean bill of health either. I think you just got to be judicious about it.
ML
Judicious, surgical. Be very clear about what we are going to demonize.
BW
So one reading of what you've written could be that you've gone a little soft on the fossil fuel industry, I think. And one of the phrases in particular, I thought this is quite curious phrasing is that you say, if you care about climate justice, you should just let the fossil industry keep prices low. Now, in a world where really it's gas prices and the pricing of gas that's driven a lot of people into fuel poverty, how can you really justify that sentence?
ML
So I can't remember the exact phraseology of the sentence. I doubt that it was exactly that. I think what I say is that climate justice has to also include energy affordability. I don't think I say fossil fuel affordability.
BW
You say, let the fossil keep prices low.
ML
If it says that, then out of context, it sounds pretty bad, I will confess. But here's, here's the thing, what I'm really saying, and this goes back to the little four line model that I built of the energy system in part one, which is just grow clean energy as fast as possible, and let the clean energy push the fossil off the system. Inevitably, that might mean that our energy prices drop, but you know what the decline rates of fossil resources, the decline rates of gas and oil, and particularly non conventional, if you frack for gas and oil, the decline rate is 10% a year. So if the prices do drop, it won't be for long. And what I think I'm trying to do with that sentence, which I need to go and see whether I really wrote, is that when people talk about climate justice, they talk about the differential impact on different communities. We've got to look at disadvantaged communities where they might be breathing more polluted air, or they might be about to lose their jobs in poor communities because the mine is going to be shut, or whatever they might be in the extreme example, child labor and so on.
BW
And also the people who caused the problem suffering the worst impacts, right? You didn't cause the problem right.
ML
Yes exactly. Countries with incredibly small carbon footprints should not be expected to make any sacrifices at all. All agreed, all correct, 100%. But you've also got: if the model of the transition is, let's put a price on carbon, and that will drive up the cost of fossil fuels, but it's great because it provides the signal for the development of wind and solar and batteries and clean energy and energy efficiency, and so eventually it'll come back down. The problem with that is, in that arc, people will suffer terribly. The poor and the vulnerable, not the climate campaigners and the NGOs and the frankly mainly middle class, very vocal activist community. They're not going to suffer if energy prices go up during that arc. And so part of climate justice is allowing people to have access to affordable energy at all points in the transition, even if it means pulling back a little bit from the urgency of action. We cannot have a transition which starves people of energy services, that's not what Justice looks like.
BW
No, of course. But there are ways in which you can price carbon and then pay the money back. Like we have social services, social policy. We have tax and rebates.
ML
But look what happened in Canada. We talked about this, right? The first thing that Mark Carney did was signal that he was on the side of the average person. I call it the sensible center. Turns out, by the way, that that's a phrase made up by Tony Abbott, that well known climate campaigner whom I've had on the show. But the sensible center was not interested, even if it was a carbon fee and rebate system in Canada. There's still a bit of it that remains at the retail level.
BW
There are other solves though. In theory, you could put in a step tariff, where the first tranche of energy consumption is very discounted and then it steps up.
ML
But you could also just build more clean energy and let it force the fossil fuel off the system. And certainly, at the moment, in the current political environment, you should not focus on the sort of banning and making things more expensive and using price signals to the negative. In other words, I think if you want to make clean energy cheaper then, and if you do that, that's just going to be politically much, much more palatable. And I think that there's an element of vindictiveness in a climate campaigner community, or the climate community, which is, you know, these people have had it good for too long. They must now be made to pay. The fossil fuel company, as though the company, by the way, the company is really just a setup. It's either its staff or its shareholders. The company is not a thing, despite Citizens United in the US, the company is not a thing. If you penalize a company, you penalize its shareholders. The shareholders of Shell and BP is basically every pensioner. It's us. It's not different from the taxpayer or the energy consumer. So this kind of desire to demonize is something that’s ugly and it shouldn't, it shouldn't be the motivator.
BW
The natural extension of what you're saying really is we should probably stop pricing carbon and just do what we've been doing, which is issuing contracts — contracts for difference — where the cost of that differential against the normal price in the market is smeared into the bills. And that alone, that kind of carrot may be sufficient. We don't need this shadow carbon price on everything. Is that what you're saying?
ML
Well, not quite no. I think what I'm saying in the piece, and I think I say it much more clearly in the piece than when you and I talk, when I take a sort of more extreme position than my considered position, which is actually in the piece. But I think it's, you know, CO2 emissions are getting a free ride, and so a social price is appropriate. The social cost of carbon exists, and pricing it is a good thing. It is. It is not just good economic theory. What I argue strongly against is excessive pricing. So there's all sorts of policies that put prices of $500 per ton. If you can put a modest cost, fine, then do that. And CFD is an interesting choice that you jump to CFDs, where they've actually been so successful that they have spawned their own problem in terms of curtailment. So once you get a lot of renewables on a system, then the grid starts to suffer, and then a plain vanilla CFD is is actually causing, I don't want to say, more problems than it solves, but pretty darn close.
BW
I've spoken to the Low Carbon contracts company about this, because they are the unsung heroes of that whole build out of offshore wind. And those contracts were really good at de-risking capital, correct? And when they're curtailed, they don't pay. We are paying for curtailment but the contract— anyway, this is bit getting into the weeds.
ML
So a modified system… So two points about the CFD, which is not the core argument of my piece. But I think a modified contract for difference that essentially has the generator bear the risk of curtailment, so let them bid higher for the CFD. So it would drive up the cost of the CFD. But that would be a lot lower of a cost overall because they would then have an incentive to dump electricity locally, find a source, maybe build in a different place, maybe put batteries in and so on. So doing that would be a lower cost than essentially just socializing the cost across society as it currently happens, and not providing an incentive to eliminate curtailment. But the other issue with CFDs is they are really a response to poorly structured power markets. If our power markets had liquidity in the sort of 15 year term, or a whole bunch of instruments, which sounds fanciful, but of course, all it is just the derivatives market.
BW
Yeah of course, of course. But very hard to project out over 15 years.
ML
I have elsewhere argued that the existence of CFDs sucks that liquidity from properly constructed markets into a sort of government-dominated market where the only type of contract is a CFD. There's no innovation from private players,
BW
But that's because private players are still slightly fossil focused, let's say.
ML
What’s the exit route from CFDs? An interesting topic. Another PhD thesis for somebody.
BW
Exactly. There's another aspect of what you mentioned, which is the cost curve, right? Because what I was going to challenge you on was we were paying an awful lot for offshore wind in the CFD world, and there was a cost curve that came down arguably too far, and then inflation hit and etc, etc. But in your piece, you say all policies have to be able to show you can come down to under $250 a ton. And there should be sunset clause on all clean energy policies, which I think would just push up the cost of capital, personally. I think an automatic sunset clause will inevitably fall foul of politics and bankers will price it in.
ML
So we're on to Section eight, which has a few suggestions. They're almost meta suggestions, right? Because they are how policies across a lot of sectors could be perhaps better constructed. And I think what I'm trying to do in at least some of them, is to insulate politicians from lobbying. To say, look, if you did it like this, there would be sufficient transparency and processes in place that essentially nobody would get away with lobbying for their favorite CCS approach or direct air capture. And it's spurred by the need to differentiate between technologies that are going to types of clean energy that will get cheaper just with volume — volume and time will do the job — and ones where really you're not within spitting distance. We've fallen in a sense, a victim of our own success. Maybe similar to CFDs working very well. Cost reductions in wind, but especially solar and batteries, made people think that all we need to do is muscle our way through the tough years, and everything will get cheap, and clean will always beat dirty in every sector, in every business model, every technology. And that just is not the case. So where it is the case, you can then use a policy mechanism for scale up, because you can say, well, if we do get big enough and electric vehicles, if you just get big enough in your rollout of electric vehicles, then they will come down. And we see this… BYD, you know, the low cost. And it’s not just low cost, they're better vehicles. BYD is now a better car than, I'm not going to name, you know, a certain brand beginning with the word Tesla. But that's the reality. So in that case, the costs went down the experience curve. But in another case, you could say hydrogen, but you can also say CCS, or you can use direct air capture. So the mechanism that just demands a greater and greater volume over time will not get you there. The sunset clause that I want to see would still respect… It wouldn't remove, it wouldn't back trade and remove subsidies or support or purchase agreements from what's already in place. It would simply say, we're going to stop doing that because electric ferries didn't become cheap enough, or whatever it is, and therefore we're going to stop doing those until such time as there's been a breakthrough or an improvement or some reason to believe peer reviewed that it will indeed get cheap enough.
BW
Well, we can debate the whys and wherefores of sunset clauses. And personally, I think, I think it's…
ML
Flip it around. What would you do with a policy that is manifestly failing and costing a lot of money, like the EU's Red III or RFNBO. Would you reset that?
BW
I've got a good answer for you for this. Because when we were writing the Climate Change Act way back in, what was it 2004 or 2005, we thought, what's the point of setting all these targets if we don't have policies. And the policies in the Climate Change Act that we enabled were market based. Technology neutral prices that could — not prices, sorry, they were obligations. So if you emit something, we enabled the government to pass secondary legislation to bring in an incentive to open that market up to a new entrant, right? So it would be a market. A bit like the zero emission vehicle standards that we've got today. They were brought in under the Climate Change Act. They're market based, and they are just to drive a wedge into an incumbent market. All of that is enabled in the Climate Change Act. And the reason we chose that instrument was because we felt it would be the least cost way of doing it. And it would be through regulation rather than primary legislation. And the benefit of regulation is that it's more easily adapted, so you can take an adaptive path forward and change it as you go. So I think the authors of the Climate Change Act well understood some of these principles that this could get expensive very quickly, especially if you become very obsessive about targets for their own sake, or you take a very particular line on a technology. Not to call anyone out, but Friends of the Earth of old would always say, ‘it has to be renewable energy, and it has to be by this percentage by this date, and that's the policy.’ And we said, ‘no, actually picking something out now that you don't really understand whether it's going to have the cost curve you hope, isn't the right way.’ So flexibility, adaptability, and trying to allow the market to decide, not civil servants.
ML
And I think we're sort of, in a way, saying the same thing, because you said, ‘do it through regulation.’ And clearly, if you do a stupid regulation, it's also easier to undo it than if it's primary legislation.
BW
Yes, I think I was just triggered by that specific thing, yes,
ML
But you know, I called the piece a provocation, yeah, because I think it's really important to have that conversation. Does it have to be a formal sunset, as in it just evaporates if it doesn't get renewed actively? You could imagine a process which says that it at least comes up for debate in Parliament if the costs are out of the range, and those sorts of things. But, you know, let me give you an example of a bad approach. The IMO, the International Maritime Organization. It's got this framework, which might be ratified in October, and it says that your fuel must have this carbon intensity. So what happens if you can improve or lower your emissions by a non-fuel approach. So for instance, you might sail more slowly, or you might use wind power, or you might use one of your favorites, a nuclear ship, which doesn't use a fuel at all.
BW
Maybe in a couple of decades time.
ML
But it doesn't allow that. It's supposed to cover many decades, and all it says is, the fuel you use must be low carbon. And therefore it is essentially pushing them to use probably first LNG rather than diesel, and then it will be renewable natural gas or bio, I don't know what you call it, bio-LNG? And then, of course, the things they love: bio-fuels, which is to push people to methanol and to push people to ammonia, which could be incredibly expensive, right? But it's written that way, and it's going to be very difficult to unwrite it, because you need a lot of countries to agree. So it's just bad. It's just poorly thought through, and it's likely to impose costs on small island nations that are dependent on shipping and will simply have to live with this thing. If it goes through.
BW
We’re running out of time, Michael, we could go on and on, because there's so much depth and breadth to your piece. And I thank you for writing it. It was a pleasure to read it, a pleasure to be provoked by it. And I'm sure many people, lots of people I've heard have said, ‘thank goodness someone wrote it all down, because a lot of people have been feeling some of these things.’ So thank you.
ML
Can I say that I am actually disappointed with it because I called the second piece a provocation, and far too many people have said, ‘well, I fundamentally agree with all or most of it.’ There are some people who've pushed back and said, ‘we shouldn't be conceding that a reset is needed,’ or Michael doesn't understand how serious the situation is. With the first one, ‘we shouldn't concede a reset as a political point,’ I'm not the expert in and it is a good discussion. The one that says Michael doesn't understand how serious the problem with that is that it's a restatement of the need for urgency. But that is disconnected from… You know what, I'm not saying go slower. I'm saying speed up. But the way to speed up is to strip off the barnacles. And so I think that there is a good discussion going on, but it has landed rather too easily. It’s not been provoking enough.
BW
Okay? Well that's an invitation for everyone to read it and send in their provocations and their responses. And their responses to us here at Cleaning Up. One question to finish. You're very candid about when you've been wrong, like saying Ya Basta to the COP process. What do you think you might have got wrong in this reset?
ML
So I think that point about the political response, there's a very good response written by somebody called Pedro Fresco, who runs an association of renewable and clean energy companies in Valencia and Spain, written in Spanish. I read it in the original, I’m very proud, but Google Translate works as well. And he's written a very, very cogent response to the political point that says, ‘As soon as you admit that we need something called a reset, you've essentially conceded the field to the opponents.’ And that's a… I don't say I got it wrong, but I do accept that it's a very valid criticism. I think the other thing that, maybe it's an omission, again, coming back to the need to write a book. I probably didn't think through enough, or certainly didn't address, how do leaders reset their rhetoric for their stakeholders, their organizations? Because it's very easy to say we should just get rid of Red III and RFNBO regulations. Or your bank, which espoused a 1.5°C target should now forget about that and maybe move to a 2°C target. How? How does that actually work? How do you do that without a loss of face, without a loss of followership amongst the people you need to agree? So I think that it's a weakness. I wasn't wrong, it was just an omission.
BW
I think maybe another way of saying that, though, for me, what I'd rather see is less obsession about targets and percentages and temperature targets, and more focus on the physics of the electro-tech revolution that we're about to go into, right? That this is just more efficient. It's a lighter system, therefore it's less energy intensive, and that will bring benefits.
ML
To be fair, don't forget that I wrote the five horsemen of the climate apocalypse, but I also wrote the five superheroes. So if you like that stuff, then there is always that. And I don't disagree, I haven't resolved from the five superheroes, and that stuff will win, because it is basically better. It's better economics, it's better thermodynamics, it's better for air pollution, it's better for the climate, it's just better. So that stuff will win. The electro-tech stack does win.
BW
Yeah, great. That would be how I would do it as a politician: focus on the good stuff. Anyway, such a pleasure. Thank you so much for writing that, for getting us all thinking. And I look forward to our next episode together, which I'm sure will be soon, thank you.
ML
Always a pleasure. Thanks. Bryony,
BW
So that was Michael Liebreich discussing part two of his pragmatic climate reset. As usual, we'll put links in the show notes to the episodes we mentioned and to the articles themselves. My thanks to Oscar Boyd, our producer, to Jamie Oliver, our video editor, to the rest of the Cleaning Up team, and to the Leadership Circle members who make this podcast possible. Please join us at the same time next week for another episode of Cleaning Up.
ML
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