Technology Rich, Politically Poor: How 2025 Reshaped The Energy Transition | Ep238: Adair Turner

Lord Adair Turner (AT)

We're about to go through a revolution based on electricity, and it is the great technology. I mean, this is silent. This is capable of being zero carbon. It has no local pollution. It is inherently efficient. And I think we should be very excited. As somebody said at one of our meetings the other day, we're looking forward to an environment in 30 years time where the world can have abundant, cheap energy in electrical form at zero marginal cost and zero marginal environmental impact. 

Baroness Bryony Worthington (BW)

Hello, I'm Bryony Worthington, and this is the last episode of Cleaning Up of this year. We're delighted to report we've just passed the 1 million downloads threshold on YouTube and had over 2 million plays across all platforms. We couldn't do this without all of our wonderful guests, and of course you, our listeners and viewers, so thank you. Joining me for our traditional end of year roundup is Lord Adair Turner, Chair of the Energy Transitions Commission. Adair and I have known each other for years and he's part of the Cleaning Up architecture, so not unexpectedly we see eye to eye on many things, but in the finest tradition of Cleaning Up we have our differences. So you'll have to listen to the end to find out which topics saw us having a spirited discussion. Please join me in welcoming Lord Adair Turner to Cleaning Up. 

Adair, thank you so much for joining me here on Cleaning Up. I was just reflecting on how we had first met, which was when you were the Chair of the CCC, the Committee on Climate Change, created under the Climate Change Act, and of course we are both colleagues in the House of Lords. So I want to just kick us off… Most people will know who you are as our most regular Cleaning Up guest, but could you just say in a short snapshot who you are and what you do? 

AT 

Well, it's great to be here for what I think is the fourth in being the sort of your last guest of the year. So I'm Adair Turner. I've done many things in my life, including things to do with finance and financial regulation, but the ones which are most relevant to this discussion, that was I was the first Chair of the UK Climate Change Committee from 2008 through to 2012. 

And then 10 years ago, I became the Chair of something called the Energy Transitions Commission, which is a global coalition of companies and institutions trying to work out how we get to net zero across the whole world and all sectors. So that's what takes up my time at the moment.. 

BW 

Brilliant. And the purpose of this episode is for us to have a little bit of a reflection back on 2025. Here we are. It feels like we're really in the future, doesn't it, 2025? And it's a point in time where we're sort of 75 years on from the 1950s, which feels a long, long time ago. But we're also just 75 years away from the end of the century. And we're halfway to 2050 and all these points. So looking back on 2025, how do you feel it went? 

AT 

It's actually within three days, again, to locate this in dates, within three days of the 10th anniversary of the Paris Climate Conference of 2015. And when I reflect… and it's also about 10 years since the Energy Transition Commission started. And when I reflect about where we are in terms of dealing with this climate crisis and achieving an energy transition, the way I would sum it up is in terms of emissions and temperatures, the news is bad, right? We're not going to limit global warming to 1.5 degrees centigrade in 2050. I think that possibility has disappeared. Emissions have not yet started falling, concentrations are going up. We're already pretty much peaking above 1.5 degrees centigrade. That is all bad. So too is the politics, and I mean, I'm sure we'll come back to this, but there's no point in sort of whistling in the dark and imagining that the fact that we have a US president who thinks that climate change is a complete hoax that that isn't a disaster for the world, it is a disaster for the world. So, emissions and temperature bad, politics bad, technologies extraordinarily good, and they keep on being extraordinarily good. We are seeing amazing progress, I think most dramatically this year on battery technology, endless improvements in what batteries can do, endless reductions in cost. And so I think for everybody who exists in the energy transition and climate change space, they exist with this tension of an excitement about what the technologies are enabling us to do, but significant concerns about where we are in terms of actually reducing emissions, and even greater concerns this year about how some of the politics is developing. 

BW 

I think that's a brilliant summary. I mean, it's exactly summarized how I've been feeling all through the year. There's kind of this tension between, oh my goodness, this is terrible, we're losing. And then you look at some of the data on what's actually happening in the energy system, which is the bulk of our greenhouse gases, and the others, all sorts of causes for optimism. I mean, we've done a whole bunch of episodes around electricity this year, and electricity has always been the dominant sector for emissions, but it's so exciting now that you've got electricity emerging as a vector to decarbonize the whole system. So this electrification, electrotech, all of these phrases are now being talked about a lot more, and you can see progress on the ground, can't you? It's not just talk, it's actually happening. 

AT 

Well, look, we've always known that electrification would be a crucial driver of decarbonization, and the Energy Transition Commission has always been a little bit a step ahead of some other bodies in talking about that. I remember we produced a report about five years ago, and we said, well, electricity might account for 60 to 65% of final energy demand by 2050 or 2060. And at that time, the International Energy Agency's most aggressive scenario was sort of 50%. Well, a year later, they produced a new scenario, which was 55%. So I felt fairly good about that. They were catching up to where we were. We've continued to believe that this electrification trend will go even further and faster than we thought before. Absolutely clear that the whole of passenger road transport is going to go electric, not hydrogen. But to a surprising extent, I've shifted my point of view on heavy goods vehicles over the last five years from thinking there would be a big role for hydrogen, to thinking that will be primarily direct electric. New opportunities are emerging in the electrification of industrial heat. And indeed, we've just produced a piece of work which tries to set out what is an absolutely maximalist electrification scenario. If you can imagine us also producing iron from electrolysis, the same way that we do for aluminium, and you could go all the way up to 75%. So look, I think we're all aware that electrification, to an even greater extent than we realized, is the key to getting a zero carbon economy. You mustn't forget however the last 25%, the molecule space. And often in human endeavors, the really difficult bit is the bit where your main lever doesn't work. We are going to need hydrogen for things like making iron. We are going to need biofuels for making sustainable aviation fuel. But the absolute core is going to be electrification. And you're quite right. People are using this phrase, electrotech stack. And I think it's quite useful to realize that what we have is a set of related technologies, batteries, solar PV, power electronics, grids, they're all about the movement and the manipulation of ions and electrons in forms of solid state physics. There's an interrelationship between these technologies, which means that we can expect them to feed off each other and drive even more dramatic technological change in future. 

BW 

And actually, that last point you made is so important in that people perhaps when we, you know, 25 years ago, whenever we started thinking about this problem, I don't think we appreciate how much knock on effects there'd be from sector to sector. And if you look at the story of why batteries have done so well, and you're absolutely right, this has been the big unlock, adding very cheap electrons from solar and wind to batteries has been the breakthrough, I think, in the last decade. 

And that came out of the computer and the sort of mobile phone and laptop world of just solid state batteries and working with lithium ion batteries that meant you could commercialize them then into electric vehicles. And it's just been this bleed in. And I think that's caught a lot of analysts off guard because what we tend to do is a sort of wedge analysis of this sector is going to have to do this and this sector is going to have to do that. But actually, it's a dynamic system. So every change has a kind of cascade domino effect. 

AT 

And I think the big extra bit which has now occurred was, you know, we went from computer and mobile phone uses of the lithium ion battery, that was its original process. Then it got developed on a much bigger scale in the EV space and with some big and important breakthroughs, the development of the lithium ferrous phosphate battery as an alternative to the nickel manganese cobalt batteries. But what has then happened, and I think this is the bit which has really changed over the last three years, is the sudden realization that those LFP batteries in particular are now cheap enough that they transform the electrical storage challenge. And one of the things that makes me most excited is if you look at what the cost of solar plus batteries will be to produce round the clock electricity in the parts of the world,which have lots of sunshine. That is already getting cheaper than fossil fuels, with some big implications. It actually has the intriguing implication that the cheapest source of low carbon electricity is in what we call the global sunbelt, right? And it's actually quite a challenge also for us in the sort of, well you're over there in California, but me sitting here in London, on a very gloomy wet day, we are not going to have as cheap an electricity as India or Africa has. And that means we're not going to have as cheap green hydrogen. And that means we may not be the cheapest place to produce iron.  So there are some big things changing, but the spread of batteries from being primarily focused on computers, then EVs to now becoming an economic storage mechanism is a very, very important development. 

BW 

What's been fascinating, I think, is of course, you know, we've got so far into the episode without mentioning China, but it all does track back to China in some ways, doesn't it? Because what you saw there was a country that did not have oil and gas reserves of its own, realizing that coal dependency, whilst they're still very happy burning coal, couldn't last forever. And it had lots of associated negative side effects, not least climate change, they do believe in climate change. 

So then this push into electric tech, the full stack, meaning that they've got these massive supply chains now, possibly too large a supply chain, probably hoping to sell a lot of this to the US, suddenly that's no longer looking likely. So they're diverting all of that export to the rest of the world. And for the rest of the world, it's quite nice. It's a quite nice proposition. Solar plus batteries, you can get off your expensive diesel generators, or your expensive LNG and replace it with this capital intensive… but you know, China will probably provide you with the capital too. So it's kind of having this effect out of China and to the rest of the world, isn't it, that is speeding this up? 

AT

Yes. And it has huge positives and some challenges. So you're quite right. What China did was make a set of strategic commitments, partly because they didn't have nearly as much oil and gas, also because in relation to road passenger transport, they just realized it was going to take them decades to catch up with the capabilities of say the German car manufacturers in engineering the internal combustion engine. The Volkswagen's and the Mercedes of this world have been doing internal combustion engines for over a century. And it's difficult to catch up with the sort of embedded knowledge of that. And they simply made a bet that there's going to be future in EVs, and that when they move the basis of strategic competition away from the other person's strength to a completely new area, they could be far better than the competition could because they didn't have the whole legacy system or constraints on how far they wanted to move. So they have dominated that, they've dominated solar PV, and what they've developed is this extraordinary ecosystem of supply chain. I mean, I have been to visit, for instance, solar cell manufacturers in Xi'an in China, what do you immediately become aware of for every single component that goes into a solar module or a cell? There is, in the surrounding area of the module manufacturer, there are multiple suppliers, each of whom are very, very competitive with one another, each of whom has sufficient scale to be doing forms of R&D to improve it and reduce the cost. And once you have that huge, you know, economy of scale and learning curve systems, it delivers a set of self-reinforcing processes of innovation and cost reduction, which are very difficult to replicate. 

BW

And on that point, I think there are quite a lot of misconceptions in the West about the China development model. And two things they perhaps don't understand is that, one) it's quite Darwinian, right. It's not command and control. They let a thousand companies bloom and then they winnow down to the 10 that are the most successful. It's quite brutal, actually, much more brutal than anything in the West. But so it's not this state plan, therefore, totally inefficient. It's a very dynamic system. And I think the second thing we misunderstand is it's not all based on cheap labor, you know, sweatshops, etc. They have got incredibly sophisticated understanding and they adapt very quickly. I went to visit a bus manufacturer in Nanjing this year, and it was so clear to me they weren't that bothered about building the actual buses. They made all their margin on the controllers and the software. And that's what they wanted to sell. 

AT 

No, I think that's absolutely right. There are a set of things that people say about the Chinese system. I mean, take the ‘it's all low labor cost.’ Well, just go to some of these factories. There are almost no workers there, because the level of automation is extraordinary. But to go back to what the implication of this, on the one hand, this Darwinian process that you've described can produce a lot of over capacity. But that over capacity is now producing a flow of exports into the developing world, which I think is going to be on a huge scale. And as you say, perhaps financed by the Chinese, which will enable a lot of emerging economies to decarbonize faster and cheaper than we thought was possible just five years ago. On the other hand, it's a major challenge for a place like Europe, where on the one hand, we welcome the fact that these technologies have cost reduced. On the other hand, if we're uncompetitive, we're worried about what is our role competitively in this clean technology, and what is our role in terms of employment. So I think it is important for Europe to try to think through, is there a win-win here? Are there ways that we can engage with China? And I think one of the things we have to think about a lot is the issue of inward investment and joint ventures. Because when you've ended up behind a country technologically — and to be blunt, we are — one of the ways that you catch up is to have inward investment. That is what the Chinese overtly decided to do across the whole of their economy in the 1990s. And we're going to have to do that. I don't think Europe should simply say, ‘we're going to import everything from China.’ I don't think that's an acceptable thing socially. On the other hand, we can't just turn our back on this extraordinary innovation and cost reduction machine. 

BW

Exactly.  And that touches on another topic, which I think has been in quite a sharp focus this year, which is affordability. Because as much as we're very excited about this technology transfer and this transition, the politics, as you said at the start, is not great. And there's this tension between knowing that this is going to be in the future cheaper. But right now, people are not feeling that their energy bills are cheaper. They've been told that this new system is going to be better for them, but the prices are high. Now, we know that's down to commodity markets and gas prices and global insecurity. But it feels as if, and it's very easy to weaponize this and say, ‘it's all this green crap,’ excuse my French, ‘that's pushing up your bills.’ So it's really important that we think about that affordability question. And I find it incredibly frustrating that actually these technologies are the cheaper options, but they're being blamed for the price rises. I mean, how do we get out of that bind? 

AT

The answer is you have to, and we have to be better at anticipating this and managing it. So you're quite right that the predominant reason why there was an energy price crunch after Russia's invasion of Ukraine was nothing to do with the cost of renewables. It was due to the cost of gas. But what we have is a challenge that when the cost of gas goes up, the cost of gas generated electricity goes up. And we have a system where the price of electricity in the wholesale market is set by the single most expensive unit, which tends to be the gas generation. And the price goes up. And actually, and a lot of them wouldn't like to admit this, in that environment, a set of renewable providers make a large amount of money because they've got low costs, but they're getting high prices. And I don't think we have moved fast enough to think about, do we need to change the whole of our power market structures so that we can enable the ordinary consumer to look through to the cost of renewables rather than paying this marginal price? We need to get clever about that. We also need to be much more clever about time of day pricing. It is inherent that when you move to a renewable system where you have points of time when the sun doesn't shine and the wind doesn't blow, it doesn't get switched on at the same time of demand, you will have greater volatility of prices across the day and the year. Now, that should be an opportunity with smart tariffs and smart bits of machinery for people to say, ‘well, I'm going to run my washing machine or I'm going to charge my car in the middle of the night when electricity is free.’ But it actually takes quite a lot to make sure that people understand that possibility. And unless you have good businesses and we do have some great businesses developing those products and getting the message through, there are people sitting there facing a higher electricity price because they're using electricity at the worst time of the day. The final thing to say is we do need to make sure we don't over tell the story about how cheap it is because it wasn't cheap to start with. And to get it going, we did have to get some subsidies in the UK. These were things called the ROCs, the renewable obligation certificates. This was a higher price for renewable electricity to start with. And that cost is still in the system. That is on bills as well. So the government is now planning to take some of that cost away off the bills. But partly there's a set of reasons why people are not seeing the inherent benefit of the lower cost of renewables. And I don't think we've been smart enough at anticipating the circumstances in which that could be the case. 

BW

As you were talking there, I was just thinking about Octopus, who were our founding Cleaning Up Leadership Circle company. We're delighted that Greg Jackson came on.

AT 

I’m sure you’ve had Greg on. 

BW

Yes, we have had Greg on. And, and you know, they made an incredible announcement this year where they were offering people… they teamed up with BYD, they've brought an affordable EV to market in the UK. So the UK, unlike Europe and the US, is welcoming of Chinese cars. They're not giving them grants, but they're still letting them come in without tariffs. And so Octopus were able to construct a product where if you signed up to their lease deal with the car and their agile tariff, you're essentially getting free motoring. Because they can see that with their database management, their customer relations management, they can arbitrage the cars as part of their demand response offering into the market. So this whole package then looks fantastically attractive to the person who signs up to it. That kind of thinking is leagues ahead of actually, I think how the market and how the regulators are governing the market. 

AT

And we have to accept that systems are inert, systems only move slowly, consumers only move slowly. Only a small number of consumers, despite Octopus’s significant advertising and community, will be aware of that offer. So it's almost inevitable that there are transition costs and we just need to get smarter. One other thing which is just beginning to worry me a bit in the UK at the moment is the balance between electrification and decarbonization. As you know, the UK has made a commitment to clean power by 2030. I think rather intelligently, it has redefined that as nearly clean power by the early 2030s — 95% decarbonization by some time in the year 2030. And the reason why that's important is that when you try to decarbonize to take the carbon out of an electricity system, the most difficult bit is the last mile, right? The UK has gone from, in 2010, our electricity produced 500 grams per kilowatt hour of electricity. And by last year, we'd already got to 125 grams per kilowatt hour. And almost whatever we do, we'll get to 75 or so by 2030. Now, once you get to around 75 or 50 grams per kilowatt hour, it's actually far more important to electrify the economy and to use as many of those almost clean electrons as possible, rather than to drive to make a fetish out of ‘it's got to be zero.’ Because if you try too hard to make it zero, you will add some costs to the cost of electricity, which will make it more difficult for you to electrify. 

BW

I was smiling as you were talking there, because I couldn't agree more that this target that seemed to appear came out as a manifesto commitment, I think, that we were going to get our electricity cleaned by 2030. To me, why I was worried about that is it just sounded like something that they'd polled in a focus group somewhere, and the public had gone, ‘woohoo, yeah, it sounds great.’ But they don't know how close we are to already being clean. And they certainly don't know the costs implied with doing that last 10 to 15%. And they don't even know what electrification means. And so you had this, what I fear happens a lot in politics is you've got this kind of desire to be populist. It's just populist on the left of this is what the public understands, so we'll go with that and it will give us a North Star that will be popular. And I can see that. But actually, the energy system requires us to do something different, which is, as you say, take those green electrons and make sure we're using them to take fossil fuels out of the rest of the economy, where you get an inherent efficiency saving. And I think you and the ETC have done a great job, and I know Michael's done a great job of pointing out just how much more efficient electrons are. The molecules for certain things like driving a car. It's probably a third of the energy needed. 

AT

I mean, broadly speaking, when you drive a car, which is an internal combustion engine, 75% of the energy does not end up as kinetic energy in the wheels, it ends up as wasted heat, which is bad at any time of year. But in the middle of summer in a city is a disaster because not only are you wasting energy, but you're heating up the streets just when you don't want them to be heated up. When you do it with an electric vehicle, only about 10% turns into heat. And by the way, we can reduce that over time. Electric motors can get more and more efficient over time. So only 10% goes into heat and the 90% is in the kinetic motion. We've just done a study on the potential for energy efficiency. And it points out that over the next 25 years, it is absolutely possible for the world to increase what you might call energy related services, which is how many kilometers people travel by air or car, how many kilowatt hours of heat they have in their home. We can increase that by 70% while decreasing the amount of what's called final energy demand by about 25%. And the absolute core of why that is possible, this is a new unique period for the next 25 years is electrification, electrification takes the heat losses out of end use applications and removing from a coal and gas electricity generation to renewables takes the heat losses out of coal and gas. I don't think most people realize that any system which is based on fossil fuels is inherently ineffective. It's ineffective for some things which are rooted in the laws of thermodynamics. It's just inherently difficult or inherently inefficient to turn heat into what engineers and physicists call work from forms of motion. And the future electric system gets us away from that inherent inefficiency. 

BW

Yeah, absolutely. And I think that's why this year for me has been the year of this electrification narrative emerging out and people really grasping that this is not just cleaner. It's going to be cheaper and it's going to be way more efficient. And if we signed up to all these targets in Paris about increasing energy efficiency by X times, it's not going to be done through fabric of building loft lagging or light bulbs. It's going to be done through electrification because you're basically moving to a much more efficient system. So I hope we have now got, all around the world, people understanding that you need an electrification strategy. And that's the primary focus now because that's how consumers get to the point where they're benefiting. 

AT 

Realizing that the future is electric. I mean, we've had electricity being significantly used for 130 or so years. First emerged in very early factories, street lighting, etc. But we're about to go through a revolution based on electricity and it is the great technology. I mean, this is silent. This is capable of being zero carbon. It has no local pollution. It is inherently efficient. And I think we should be very excited. As somebody said at one of our meetings the other day, we're looking forward to an environment in 30 years time where the world can have abundant, cheap energy in electrical form at zero marginal cost and zero marginal environmental impact. And that's a very, very exciting possibility which opens up huge potential. Now, we've got to go from A to B and we mustn't overstate how easy it is to go from A to B. There's significant investment required on the route. And that's where the cost comes in. I mean, let's take residential heat. Once people have heat pumps, they will enjoy cheaper ways of heating their house. But it's a non-trivial investment, particularly for people of low income. So we mustn't just sort of say, ‘oh, it's dead easy.’ We have to think through and plan how to make these investments. But the prize at the end should be a very attractive one for societies across the world. 

Michael Liebreich (ML)

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BW 

We are very excited about all this, but we started off with the cup half empty bit as well. We should probably think about that because even as we've, as we've said, China having a big effect, we've got another massive country having an effect. And that is the US and the Trump effect, particularly the Trump effect in the White House. I mean, what is going on? 

AT

Even before we go to that, just to very quickly, as you say we might come back to it, China is fantastic for its clean technology, but let's be clear, it's the biggest emitter in the world and its emissions per capita are now higher than Europe's in the UK. So just at the time, and I certainly do this at the time of lauding them and saying, how much should we respect them for these clean tech agreements? We've got to start saying to them, you have got to reduce your emissions from, for instance, your steel and cement industry, which is pouring concrete into a completely over the top property sector. So we mustn't iconize China even while we respect them. 

BW

We've both been there a couple of times this year, probably you more than me. But I did go to Beijing recently and looking at the data, they are making incredible strides to get to a cleaner electricity system, but they're coming up against the problems that we're all coming up against, which is high penetration renewables, it requires a lot of system investment. And as we were saying earlier, we can't oversell wind and solar plus batteries because there are real system challenges. 

AT 

It's a challenge, but we need to we need to challenge them to get on with it because the way I sometimes put it, whether we limit global warming to well below two degrees centigrade is going to be determined in Beijing and Delhi, not in Brussels and London, because that's where the numbers are. That doesn't mean we should not do it. We should drive our own emissions down, but that's the big numbers. Because they're 20 times bigger than us in population, they’re bound to be. The other thing I would focus on in particular, we often focus on the power sector, and you're absolutely right, they're they're well aware of challenges that they have to drive, and they technologically know how to deal with them. We just need to encourage them to go faster. I'd also concentrate on the steel and cement, which are about a third of their total emissions, and actually have been swollen by this completely over the top property construction boom that they have, with an enormous waste of resources. Now, the good news is that the Chinese economy is rebalancing away from that property construction, and that China is also developing technologies which can produce steel and cement in a zero carbon fashion. I was, just a month ago, in Shandong Province looking at a pilot plant of hydrogen-direct reduction of iron. I don't think I've got it immediately to hand, but if I had, I could show you little lumps of iron ore that went into this plant and little lumps of pure iron that came out, and they are really beginning to focus on these industrial technologies as well as the electrification technologies. The challenge is that even with their capacity to reduce cost, it will still be more expensive to produce a ton of iron using hydrogen rather than using coking coal. We're not going to get the progress on iron making or on the other hard to evade sectors — chemicals, cement, aviation, and shipping — unless we have carbon taxes or something like that. One of the things that I spend a lot of time doing when I'm in China is trying to convince them not to object to the European CBAM or carbon border adjustment mechanism, but themselves to embrace carbon pricing. Because if they did that, I think we would see them unleashing in their heavy industry sectors the same innovation and cost reduction which we have seen in the electricity sector. One has to think through all sectors of the economy and engage with them on each of those. 

BW

Perhaps where there is a bit of difference between us is my increasing cynicism that carbon pricing is the answer, having worked on it for many, many decades now. The reason I am slightly cynical is because China does have its own national carbon market, but it sees it as a financial product. It wants to trade. It's not driving inward investment or the investment strategy. 

AT 

Look, I agree with that. I have been sitting in Shanghai and people saying, ‘well, this is a great trading opportunity. How are we going to create a futures market as well as a spot in carbon pricing?’ I've gently said, ‘this is irrelevant.’ A carbon pricing is about how to create incentives to decarbonize their hard to evade sectors. But I am more optimistic than you, because I would say that the Chinese carbon pricing system is pretty much exactly where Europe's was in 2005. It has a whole load of free allowances for the heavy industrial sectors. The emissions cap, they don't even have a really serious emissions cap. It's based on an intensity basis, and is sufficiently lacking that it generates a carbon price of $15 a ton, which is not sufficient to overcome the green cost premium. But all my conversations in China suggest that the policy makers know that they will need a serious carbon price at a much higher level. They know in the economy where the most effective policy levers are not carbon pricing, they're forms of targeted subsidy or regulation. But it just so happens that if you're talking about heavy industry, shipping and aviation, energy insensitive sectors with professional decision makers, it is in those that carbon pricing is most likely to be the really efficient instrument. And without it, you won't get decarbonisation, because I think you've got to draw a distinction. EVs are going to be cheaper than ICEs to buy up front because they're a better technology. A tonne of iron is not going to be cheaper when it's made in a green fashion rather than a dirty fashion. We face a green cost premium and we somehow have to work out how to deal with it. 

BW

I do mostly agree with that, except to say that I think what will actually unlock this is not the existence of the carbon pricing, but the return of the revenues back into contracts that allow them to experiment with new ways of doing things. Because if you look at the way contracts for difference have unlocked massive investment in the UK into the offshore wind industry and into nuclear, it's those contracts. And actually, when you smear the cost of these first of a kind or early, quite expensive projects out across the whole economy, it's almost negligible. 

AT

We may have an agreement here. I do think, in these hard to abate sectors of the economy, carbon pricing is the way to go. 

BW

No, but carbon pricing is the way in which you collect the revenues. But the important bit is how do you de-risk? 

AT

Well, you may not need it. I mean, if we could get in India and China as well as in Europe, the expectation that there was going to be a carbon price of $100 a tonne applying to the whole of their iron and steel industries, I think you broadly could leave it to the market in highly competent iron and steel companies to say, ‘okay, I'm going to face that price in 2040. I better start having a plan to get rid of my blast furnaces before I get there.’ So I am more confident that there are some sectors of the economy where pricing is a very powerful lever. 

BW

I don't think we're disagreeing on that. But my sense is that we're not where we are in the industrial sectors as we are in the other parts of the economy. We know the pathway to decarbonising power. It's clean electricity, right? It's nuclear plus renewables, plus batteries. We know what to do in transport. We've got a good sense of what we can do for sort of small scale heat. It's the large scale heat sources and the molecule transition where there's still quite a bit of uncertainty. 

AT

Well, there is an uncertainty. But by the way, that again is one of my arguments for pricing. Because I think when you know that there is a new technology, you know what it is, and it is definitively better, electric vehicles like versus internal combustion engines. You can use technologically specific policy instruments such as there's a date beyond which I'm going to ban internal combustion engines or I'm going to subsidise EVs. 

I think it's inherent that in iron and steel and even more in chemicals, you'll never be able to put your hand and say, ‘this is the technology which is going to win.’ You will have a whole series of technologies available. Is it going to be carbon capture and storage? Is it going to be hydrogen direct reduction? Are you going to use gas as an intermediate fuel and then move to hydrogen over time? And where you have a whole series of different choices, I think that's where you need instruments which are somewhat technology neutral, which set the incentives in some way or another to move away from the old carbon intensive fashion and then leave it to the competence of the market and decision makers to decide which of those different options. So I don't think in those sectors we should wait till we're certain, ‘this is the technology,’ because I think we should allow a competition. Take shipping for instance, we could go down an ammonia route. We could go down a methanol route as an alternative to marine fuel oil in shipping. I don't think we need to decide. I think however, if we were able, and this may take us back to America's politics, if we were able to get a global shipping carbon price, I would then be very happy to leave it to the very competent people who run the container and bulk shipping companies of the world to decide which particular technological route they're going to go down. 

BW

Well, we did an episode actually on that whole IMO thing, and it does definitely link back to the politics of the US. The IMO, it kind of just got massively stalled by a very aggressive intervention at the last minute by the US who from the White House would just kill all of this, saying ‘It's all ideologically nonsense. Climate change doesn't exist. We don't want anything that's going to interfere in this market.’ And they killed it really, didn't they? 

AT 

Yeah, well look, let's go back to Trump in general. We have in the US an administration that doesn't believe in climate change, and therefore the moment he was elected, I mentally increased my estimate of subjective feel for what the temperature of the world will be in say 2050 by 0.1°C. But I think I'm now increasing it by 0.2°C or 0.3°C, because what has happened is worse than I thought. I thought what we would have is America saying, ‘we don't believe in climate change. You guys out there believe in climate change. We think you're silly. Do whatever you want, and it'll just harm your competitiveness.’ What has surprised me and is really worrying is that there seems to be an overt aim by the US administration to, as it were, try and undermine everybody else's efforts to deal with climate change. Also, to undermine the flow of information about climate change, the cuts of funding for climate science, which can tell us what's going on. I think it's almost a sign that, in their hearts, they know their argument is wrong, and therefore to them, it is dangerous that other people still believe it, and so they have to try to sort of undermine all efforts, but it is very startling what is going on. It's a deliberate attempt, and some of it's failing. I think the Americans were probably disappointed by what happened at COP30 in Belem, because I think they thought ‘we'll pull out of the process and we'll be able to persuade lots of other countries to pull out of the process.’ They haven't done that so far. The vast majority have stayed in, but they have clearly set out to undermine specific initiatives, of which the one that you mentioned is a very important one. The International Maritime Organization had agreed in April to head towards, I think, a fairly well-designed carbon pricing regime, gradually increased over time, which would create the incentives for the global shipping industry at a measured pace to move towards zero carbon. Now, that would entail a cost, but it's very important to realize that the cost for consumers is absolutely trivial. Even if you double shipping freight rates, what that does to the cost of a pair of jeans made in Bangladesh and bought in London is so trivial that the consumer doesn't notice it. That's because global shipping is an unbelievably efficient industry, particularly container ships. I mean, it's often not quite enough that the invention of the container shipping process is one of the great inventions in the last 50 years. It's enabled us to move material around the world at stunningly low cost. It's so stunningly low that even if you increase it significantly, it doesn't make any difference. It was a very well-designed policy. It's a policy against which there are really no good economic arguments at all. It would not slow global growth. It would not be to anybody's disadvantage. The Americans decided to try to kill it, essentially because the fact that the rest of the world wants to agree to a carbon price is an intellectual threat to their belief system. They clearly did set out not to kill it, but to force a delay. They did it by linking their lobbying to lots of other things. Phone calls telling other countries that they wouldn't get this from the US if they didn't change their vote at the IMO. A really brutal interference with the sovereignty of other nations. Now, that's fact and we're going to have to live with that fact. What that may mean is we just have to accept that America for now doesn't want to take any action on climate change. The rest of us are going to have to have the guts to agree things between the rest of us and apply them between the rest of us, even if America is out. I think that is one of the big political challenges for the world. In summary, America has surprised me by the scale of this. Not just, I'm not going to do something, but I'm going to step out and stop you doing things as well. It's surprising and alarming. 

BW 

It's definitely squarely put them in the petrostate camp. There's a group of countries for whom fossil fuel trade is existential to their economy, Saudi being the main one, but Russia and Qatar and some of the other smaller Middle East countries. The US has now aligned itself with that group in saying, ‘no, no, we're a provider of fossil fuels to the world. It's now generating income, helping rebalance our balance of trade. Therefore, anything that slows this down is going to be stopped by us.’ That's possibly always been true, but never really been explicit. 

AT 

Well, it is. On the other hand, I think they are still making a huge mistake. Saudi Arabia argues against lots of actions, but you can see why they do, because they are essentially a natural resource rent economy. By the way, they are repositioning. They are investing heavily in renewables. The more that they do that, the more that we might hope that at some future stage, Saudi's negotiating position is more balanced. I think we probably will see that as they get more and more renewable electricity and as they electrify transport, etc. I think that is the direction we hope to see. America will never be a natural resource rent economy at the level of the total economy. Therefore, there is a big strategic mistake that they are making on turning their back on this electrical technology of the future. I think they are going to regret it in terms of the technological edge that they will see China developing in all aspects of this electro tech. Interestingly, even including in a vital element of artificial intelligence, the US thinks it's ahead in artificial intelligence. It's ahead in one thing, which is large language models, the production of the actual intellectual process of thinking. If you did go to everything to do with what's called physical AI or embedded AI, humanoid robots, robotization in general, automation, where you don't just need the large language model, you need the sensors, the actuators, the miniature batteries, the miniature motors, China is moving rapidly ahead of that. The very fact that it has made a bet on electrification for its energy system is going to give it a set of benefits in everything to do with embedded or physical AI. Again, this is weird. America has done major cuts in its federal government-funded science budget. I mean, it's just bizarre. American hegemony, American superpower status, was crucially dependent on the extraordinary funding by the space program, by the Defense Department of basic science back in the 50s and 60s. The fact that America is now saying, ‘we cut out basic federal government science,’ again, is a very, very odd thing to do. The climate change bit is the manifestation of a set of other things, which are bizarre strategic choices. 

BW

There's so many paradoxes in all of this, in that if you were thinking about how, if you're starting to use LNG, which they are, as an export lever, not just for balance of trade, but also as a form of diplomacy in the world, it actually wasn't long ago before America understood that we don't want too much LNG leaving the country because we have a massive domestic market that we need to keep served. Saudi Arabia doesn't have that problem, but America does. Every barrel or firm of gas that gets shipped out is going to have a price effect on the US's own consumption of gas. That will mean unhappy consumers. The endless battle line about cost of living, energy affordability, is already looming large. I think what they're hoping, actually, is that they can roll back to coal and that somehow that'll give them some headroom to have cheap prices at home and exporting all this gas. 

AT 

You may be right. You may be right. That's also quite short-term, and coal is not necessarily cheap. Now, these old aging plants require a lot of maintenance, switching back to them. Whilst the coal might be there, it's not going to be cheap relative to something like some of the other options that have been deployed in places like Texas, in California, in all parts of some of the red states now, realizing that if you want fast electrons, it’s batteries plus solar. I do think it's incredibly curious, well curious and alarming what's happening here. It is curious and alarming. Turning their back, I mean, electric vehicles are the future. I don't know anybody who's bought an electric vehicle who can imagine going back to that sort of noisy and smelly thing called an internal combustion engine. 

BW

But I tell you what is real here, though, is the distances that people travel are just extraordinary. 

AT 

It is much bigger. In some areas, less so than others. But what is happening is that the ranges that EVs can travel are roaring forwards. The charging speed is roaring forward. Look, let's be clear. Different markets are different logical early adopters of the electric vehicle. So the logical earlier adopters are where the vast majority of people's travel distances are less than 100 kilometers a day, indeed far less. I mean, most British people, they get in a car, they maybe use it 20-25 kilometers a day. And that's what they do 95% of all days in the year. And it's only a very small number of days that they need a longer range. But it is true that people need a lot of assurance about that. People overestimate in their mind how many days a year they need those long distances. But I think we will see in most markets this issue of range anxiety. By the way, I love this fact about EVs. I've got into debates with people in Britain who say, the point is EVs will never work in countries that have long distances and cold weather. They just won't work. I point out that the highest penetration of EVs in Europe is Norway, which last time I checked had long distances and cold weather. 

BW

Exactly. And I think the US and places like the US, Canada, Australia, where these vast distances get traveled, and there's very little in the way of public infrastructure and public transport because the economy can't be economic. 

AT 

You have to remember in Australia, the vast majority of people live in cities where their travel behavior is very similar to Europe. Once a year, a minority of them do the big outback journey. Well, I'm happy for them to keep using their ISEs, but it really is a minority of the total. 

BW 

Interestingly, just from a personal perspective, we had a Tesla, like everyone else in the Bay Area, but we just decided to lease a Rivian for lots of family reasons, sports related mainly. But the Rivian is an example of a car that's designed for a US market. It's got 400 mile range, it's an SUV, and it's a beautifully engineered car, probably far too over-engineered in some cases. But they're going to bring out a cheaper version, with Volkswagen teaming up. And there's going to be, as you say, diversification and range extenders as well. I can see that, not hybrid cars, but backup generators. 

AT

Yeah, I think that the hybrid debate is interesting because I think you've got to draw a distinction between a hybrid, which only does 30 kilometers electric and is mainly ... 

BW 

It's an ICE vehicle carrying some batteries around. Yeah. 

AT 

… and the ones which the Chinese are increasingly producing, which is 200 kilometers or higher on electric, but has a small generator. It doesn't have an internal combustion engine, has a small generator, which the vast majority of people will probably not use except one or two times a year when they need that longer range. So I don't think we should exclude that as part of this. 

BW 

No, no, that... And in fact, I think the UK's definition of a ZEV or a zero emission vehicle allows for range extension, partly because the London taxi cabs have them. I did want to just touch on the coming from that conversation we just had about the US and the effect. Let's just talk about what's happening with multilateralism generally, because we just had what was essentially been classed as a kind of failed COP in Belém in Brazil, mainly because they didn't reach an agreement on some core text. But the whole of the negotiations have kind of stopped really anyway. 

AT

Well, here's an interesting… deliberately provocative question. Why do we bother with negotiations any longer? I mean, we've got the Paris Agreement. We've now got Article 6, which gives us a framework for trading carbon removals, etc. We've got the COP28 declarative commitments. We know we want to triple the size of renewables and then triple them again. We know we want to double the pace of energy efficiency improvement. We know that we broadly will have to transition beyond fossil fuels. It's not clear to me that there's a value in then saying, ‘okay, well, let's try and fine tune the wording on transition, our transition from beyond fossil fuels.’ You'll just create an argument. So there is an argument that says either COP should be scaled down or we should believe that the biggest value in COP is what takes place outside the negotiating rooms. It is the getting together of entrepreneurs and businesses who are talking about the ideas they've got, plus some of the coalitions of the willing. And I think we are at that stage where there is a tendency for a negotiating machinery to find something to negotiate about and to get very disappointed when it doesn't reach agreements. But to say, ‘well, hang on, but why did we need that?’I think the thing that is missing in the COP process is a really quantitative focus on where we are now and what we have to do to get back on track. So if you look at, for instance, the IEA's estimate of where we're heading to with stated policies, it's about 2.5°C. If you look at BNEF, (Bloomberg New Energy Finance’s) estimate of where we'll be on what they call the economic transition scenario, what will happen if people just do what is the lowest cost in any case, again, about 2.5°C. Now, one could do a piece of analysis. Indeed, this is what the ETC is going to do over the next six months. It says, okay, to go from 2.5°C to where we've said we want to be well below 2°C degrees centigrade, what do you have to do? How much could you get by turbocharging clean electrification and just driving it faster and faster? How much can you get from having a reasonable pace of decarbonizing the hard to abate sectors? How much would you have to get if you want to get well below 2°C from really getting serious about methane and nitrous oxide emissions? And what do we have to do to make sure that land use change goes from an emission source to a sink? Now, if you have that analysis, part of the problem of the COP process is a negotiation between people who never look at those figures or debate those figures and therefore are left with the free rider that they can make an assertion about what the objective is without actually owning or even understanding what the measures are. 

BW 

Well, okay, I partially agree with you, except that I think we've got overly focused on one part of the equation of climate risk, which is the mitigation bit, which is the thing you just described. What are the pathways, what are the scenarios. How do we get man-made emissions onto a declining pathway, which we've not yet managed to do, by the way, in 30 years of doing this. 

So that's still been the majority of our focus. But when you mention temperature targets, they are not solely decided by man-made energy-related emissions. We know that there are now feedback mechanisms kicking in, which are changing the watts per meter squared that the Earth receives. So that's what… The actual risk of climate change is not just what we do with man-made emissions. Because two things, one is that when we're not understanding these knock-on changes in albedo, the reflectivity of the planet, and nature itself has been mopping up over half of our emissions, and nature may stop playing ball at some point, and we're not tracking that. The ocean is absorbing half of our man-made emissions at the moment. Will it be able to do that is the question? And our biosphere, our forests, and our peatlands, and everything else, there are knock-on effects there, which are changing their profile of emissions. 

AT

But the COP process can’t change those physical things that you've talked about. We need the scientists to inform us as best as possible. But once we've got as best as possible information from the scientists as to how powerful those levers are, what we can do about it is reduce emissions, which I think, therefore, you do have to come back to: how are we going to do that? Now, it may be that those are so powerful that our starting point of stated policies is not 2.5°C, it's 2.8. We need to understand that. It may be that if you understood that, the best you can do is not going to be well below 2°C. We need to adapt. We need to have ways of planning to adapt to it. But that doesn't in any way undermine the value of saying, let's get clearer about what it is we need to do to reduce our emissions. Distinguishing between those which, if we turbocharge the technology trends in place already, will turn out to be costless, which is broadly speaking, the electrification story. And those which, if we want to have them, are going to cost us some but not much, which is broadly speaking, the heavy industry and shipping and aviation. Now, I think we should do both of them and here I have a little bit of disagreement with your stated partner in crime, Mr Michael Liebreich, who I think is saying we should only do the bits which are cost efficient. 

BW

Well, I'm slightly in his camp, maybe not unsurprisingly, partly because I care less about the 2% of these hard to abate sectors. I care more about the bigger picture, which we skip over, which is that in the global context, the risk that we're managing against is always best case scenarios.

AT 

But I don’t understand that Bryony. Why, if the risk is higher than we thought, do you want to exclude one of the things which is required to bring the risk down? 

BW 

Because it's at the margin. 

AT 

I don't agree it’s at the margin. I don't agree. But again, I'm still not understanding. You're basically saying we need to understand that the risks are higher, but we can't change those physical processes. What we can change is our emissions. 

BW 

Well, firstly, actually, there's now increasingly a lot of work being looked into in terms of other forms of Adaptation-plus. Firstly, adaptation gets squeezed out by a mitigation only focus. 

AT 

No, I don't think it does. 

BW

It has been

AT

There is a danger that it does. 

BW

People will tell you we can't talk about adaptation because it will distract from mitigation. I've heard that countless times. 

AT 

Well, but I don't think it's the other way around that adaptation is squeezing out mitigation. Look, we have a set of technologies that can reduce emissions. Some of them, in particular the electricity ones, are close to costless. We have others which have a low cost but are still material. And those are the hard to abate sectors, which by the way, I think are in some sense easier to abate than residential heat, because I think they have less complicated implications because I think these things are upstream technical and have a low cost to consumers. That's why I think we could do those as well. And I can't see why any piece of analysis that says, ‘well, because of these physical reinforcements, the problem is worse than we thought.’ I can't see why that's pertinent to the cost benefit decision as to whether we take this on decarbonizing the hard to abate sectors. 

BW 

So my point is what are we doing with multilateralism and how are we structuring our global conversation about climate change in a way that makes us clear sighted about the challenges and is not overly fixating on some aspects to the expense of others. And I would argue that the risk approach to climate change has not been... It's in the UNFCCC total agreement, but in Paris it's absent because Paris is all about NDCs and all about this bean counting of carbon. But actually, we're missing this risk approach, which I think is needed. 

And if I was going to reinvent the COP process and restart negotiations, it would be to talk about two things. One, how do we properly get a handle on the risks and the science that needs to be done to understand that, because there's gaps. And the IPCC is a summary of a bottom-up process. There's no global overview. That needs overhauling. And then if there is a process of negotiation, let's have some smaller negotiations that are sectorally focused in the right sequence. 

AT 

Well, look, I agree with that. I mean, I think we should take the hard to abate sectors and we should agree on approaches which will drive them down. What I'm not getting logically, Bryony, is why an increasing focus on the inherent uncertainty, and it is uncertain, about some of these physical processes multipliers, has any implications for which of the mitigation actions you choose to make and whether you take any of the actions which cost you. 

BW 

But I suppose if I'm thinking about it now, why I'm animated by this particular topic is because of the politics of this narrative framing at the moment. But not for anyone's fault, it's been weaponized, a lot of disinformation, a lot of vested interests shaping this saying that it’s all very difficult, very costly, and it seems like it's being pursued in a kind of very purist fashion. A bit like we were saying with 100% clean electricity, you don't need to do that. We could be more pragmatic about it. And we are not going to get the public on board unless they're fully aware of the risks. 

AT 

So we may need to get them on board, but I think we need to help people understand that decarbonizing the hard to abate sectors has a trivial cost implication for consumers. And by the way, the populists understand that. There is no AfD or Rassemblement National; campaign against EU ETS-1 and carbon pricing on steel and chemicals. 

BW

But that's only because they have no idea what it is.

AT

No it’s because they intuitively understand the cost to the consumer. Whereas there is a focus on ‘don't take my gas boiler away from me,’ because gas boilers are much more tricky. Gas boilers to heat pumps is a difficult transition. Shipping, if we get it right, is not. Because it has almost no implications whatsoever for the life of ordinary people. 

BW 

Yeah. I think it's easy to over extrapolate from what people like AfD say. As Trump himself has said, you can say a load of things on the campaign trail, but once you've got the levers of power, that's when you do the things you know that work. And I bet you, if AfD or any of those far right groups got anywhere close to power, they'd scrap the ETS as their first point, because they know that that is a thing that affects everything. So in any way, I... 

AT 

Well, neither of us wants to see... 

BW 

No, we don't want to see that… 

AT

… that our disagreement, our bet on this, having a crystallization. So we'll leave that. But look, I mean, there is this crucial argument which Michael has put on the table as to what you should do. I'm very clearly of the belief that giving up on the emissions reduction which could come from the hard to abate sectors, would be a remarkably silly thing to do because I think the cost to consumers of that is very low and that the transition for consumers on moving to zero carbon shipping will impact them much less than the transition of getting rid of their gas boiler and moving to heat pumps, which I think they should do, but I think needs careful thought and management of subsidy. Whereas I don't think shipping does. 

BW 

I would like to see more attention on cracking, as we talked about at the start, how do we get people to instinctively understand that electrification is good for them, even if the high upfront capital cost might seem as if it's not available to everyone. We've got to make sure it is available to everyone because that's when they get the benefits. I'm just going to end by saying, ‘okay, so here we are, end of 2025, tipping into 2026. What are you looking forward to or what are you anticipating in the year ahead? 

AT 

Even cheaper electric vehicles with even longer range. News of battery technology breakthroughs, which I think will continue to surprise us. Oh, and by the way, other things we haven't talked about, we've just done a piece of work in India with our partner in India on AgriPV. AgriPV is putting solar panels above agricultural land and realizing that in some parts of the world, this can reduce the demand for water by 50% because you're trapping the water. And it can in many cases increase agricultural yield because there are parts of the world where the solar radiation is too strong for the process of photosynthesis to be optimally balanced against the water loss. And what I love about that is it's not a technological breakthrough, it's an application breakthrough. So the thing that always cheers me up is coming across these ways in which people are taking all the technologies we've got and then finding all sorts of minor wrinkles of how we apply them. This, by the way, is not a minor wrinkle. In India, this could involve installing enough solar panels above working agricultural land to produce probably 15 or 20% of India's electricity. 

BW

I love that. And I love the fact that now solar panels are essentially cheaper than building materials really in many cases. So you could do the same. Germans are hanging them off their balconies and also increasingly, you can use them over water to prevent evaporation. 

AT 

So that's fantastic. Well, that's what keeps me positive. 

BW 

Thank you again. I really enjoyed catching up over the year and look forward to seeing you next year. 

AT

Take care. Bye. 

BW

So that was Lord Adair Turner, Chair of the Energy Transitions Commission and regular contributor to Cleaning Up. As ever, we'll put links in the show notes to the previous episodes and reports we referenced. My thanks to Oscar Boyd, our producer, to Jamie Oliver, our video editor, and to the rest of the Cleaning Up team and wonderful leadership circle members who make this podcast possible. And thanks to you for listening. This was the last episode of this year. But if you can't live without your weekly Cleaning Up fix, don't worry, we'll be publishing some classic episodes over the break. And then we'll be back on Wednesday, January the 7th at our usual time slot of 6pm GMT for the next season. Wishing you a very happy holidays in the meantime from all of us here at Cleaning Up. 

ML 

Cleaning Up is supported by its Leadership Circle. The members are Actis, Alcazar Energy, Arup, Cygnum Capital, Davidson Kempner, EcoPragma Capital, EDP, 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're enjoying 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.