ValueWalk’s interview with renowned economist Graciela Chichilnisky, author of the forthcoming book, “Reversing Climate Change” (World Scientific Publishing, December 2019). In this interview, Graciela discusses her background, how Global Thermostat’s direct air capture technology works, issues with reversing climate change , and why climate change demands a global response, making a swift transition to renewable energy.
Can you give us a brief background on your expertise?
I’m a Professor of Economics and Mathematical Statistics at Columbia University, Director of the Columbia Consortium for Risk Management, and the author, most recently, of REVERSING CLIMATE CHANGE. I’m also co-founder and CEO of Global Thermostat, and co-creator of a carbon removal technology that can reverse climate change. The technology was chosen by MIT Technology Review as one of the Ten Breakthrough Technologies of 2019, curated by Bill Gates. Global Thermostat was also named one of the top ten most innovative companies in energy by Fast Company and I was selected by International Alternative Investment Review as the 2015 CEO of the Year in Sustainability.
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In addition, I worked extensively on the Kyoto Protocol, creating and designing the carbon market that became international law in 2005. In 2017, I was selected by the Carnegie Foundation for their prestigious Great Immigrant, Great American award and in 2018, I was awarded the Albert Nelson Marquis Lifetime Achievement Award.
I hold Ph.D. degrees in mathematics and economics from MIT and the University of California, Berkeley, and I am the author of more than 300 scientific articles and 13 books, including Saving Kyoto which won the American Library Association’s 2010 Outstanding Academic Title of the Year and the American Geographical Society’s Book of the Month Award in October 2009. I also acted as the lead author on the Intergovernmental Panel on Climate Change which received the 2007 Nobel Prize for its work in deciding world policy with respect to climate change.
Can you talk about your company, Global Thermostat, “direct air capture" technology, how it works and its current status – is it being used and where?
Ten years ago, Peter Eisenberger and I set out to remove carbon dioxide from the atmosphere and use it as the basis for renewable low-carbon fuels. We developed a direct air capture technology, which enables the removal of carbon dioxide from ambient air. This is different from other carbon removal technologies that draw carbon from concentrated sources like the flue of a power plant smokestack. At this point, Global Thermostat has built two pilot facilities, each with the capacity to remove 3,000 to 4,000 metric tons of carbon dioxide per year. This past summer, ExxonMobil agreed to work with us to help scale up our technology, with an eye towards large industrial applications.
Why does the climate crisis demand a global response?
There are many environmental issues that capture international attention but do not require an international agreement to solve them. The destruction of the Amazon rainforest is a case in point. All nations have a strong interest in preserving the Amazon rainforest because of its unparalleled diversity of plant and animal species and its ability to produce oxygen, the lungs of the world. But only the countries that contain the Amazon rainforest within their borders have any real power to prevent its destruction. If Brazil adopts measures that encourage deforestation, or turns a blind-eye to or is unable to stop illegal logging, there is little the international community can do.
Climate change is different. In this case, all nations are implicated since all nations produce carbon emissions. And carbon emissions transcend borders. Global warming is the result of cumulative global emissions. The atmosphere does not distinguish between emissions from the U.S. or China; the atmospheric concentration of carbon is the same all over the world. Carbon emissions have the same impact on the global climate no matter where they are produced. It also does not matter where we reduce carbon emissions. A ton of carbon reduced in the U.K. is as valuable for preventing climate change as a ton of carbon reduced in India.
No country alone produces enough emissions to cause global warming. But perhaps two countries could help prevent further damage. If China and the U.S., the world’s largest greenhouse gas polluters, eliminated all of their emissions, global emissions would decrease by about 45%. This would be a huge step in the right direction. Yet emissions reductions by other countries would still be needed.
This is why a global agreement to reduce carbon emissions is so critical. No country has an incentive to reduce emissions, since doing so will not prevent climate change unless other countries do the same. To make it worthwhile for a country to combat climate change, its actions need to be part of a larger, coordinated global effort that has the potential to stop global warming.
An international climate treaty gives countries the assurance that their climate combat efforts will not be in vain. An international climate treaty gives countries more “bang for their buck.”
Describe your vision of carbon revolution and how that can realistically unfold.
The key is Direct Air Capture. Up until this point, the challenge has been that developed nations and developing nations have had a vast discrepancy in the amount of carbon they are releasing into the air. Developing nations have balked at having their carbon emissions limited, as it has been via these carbon-intensive technologies that developed nations have built their economies.
However, with carbon negative technologies, also called carbon removals, both the rich and the poor nations can and will accept conditional mandatory emissions limits, from which mandatory limits will naturally evolve. With mandatory emissions, the carbon market can function and make funding available to implement carbon removals. To make all this possible, the world needs carbon negative technologies that can inexpensively remove carbon dioxide from air and transform it into goods and services that trap it on the planet itself.
The bottom line is, we can capture carbon dioxide in the atmosphere and transform it into profitable goods and services, while cleaning the atmosphere. The global carbon dioxide markets are or will soon be large enough to absorb all the carbon dioxide that humans emit into the atmosphere today, which is over 32 gigatons per year. New technology enables carbon removals, helps the economy, creates jobs and improves exports. We can even create carbon negative power plants that turn the energy sector into a carbon sink, cleaning the atmosphere of carbon dioxide and keeping temperature increases below 2°C.
The circle closes. Carbon removals enable economic growth and economic growth enables carbon removals. That is how carbon removals can help achieve the goals of the Paris Agreement and resolve climate change.
Make no mistake: this is an economic revolution. It is now possible to ensure that the more energy we use, the more we clean the atmosphere and avert climate change.
In terms of global policy, to implement this in a time-scale that matters, we must activate the EU ETS carbon market, based on mandatory emissions and already trading $175 billion per year in 2011. The funding from the carbon market would suffice to quickly scale up carbon removals around the world, as the IPCC now requires.
So, what’s stopping us from reversing climate change now?
The short answer is: finance. We need a source of investment to build a sufficient number of DAC commercial carbon removal plants, and we need it fast enough to reverse climate change. Accomplishing this will require trillions of dollars’ worth of finance, about the size of the global mortgages market. Nonetheless – I know that it’s possible to achieve this financing. Moreover, I know this plan will make money.
The clue is in the way investment is typically obtained to build traditional power plants today. To build an electricity plant, the builders sell “offtakes” or Power Purchase Agreements (PPA) to cities or other customers. PPAs are contracts that promise to buy a certain amount of electricity per year (e.g. 400 megawatts) at an agreed upon price (e,g, 8 cents per kilowatt hour) over a certain period of time (at least 10 years).
So, if New York City wants a new power plant they produce such an offtake/PPA. These PPAs are negotiable instruments. The builder takes them to the bank and converts them into a cash loan, and then uses the money to build the power plants. The builder pays back the loan from the sale of electricity that is guaranteed by the offtake. Easy. All, or nearly all power plants in the world -- and there are about 55 trillion dollars worth of power plants in the world — are built like that.
We need the same strategy to build DAC plants that clean the atmosphere -- except that instead of PPAs, the financial instruments can be called “carbon purchase agreements” – CPAs.
Is it possible to make a swift transition to renewable energy?
Yes, it is. In fact, it has already been done, although it requires more input at present to continue and complete this process. In 1997, the Carbon Market of the United Nations Kyoto Protocol (KP) was voted and approved by 160 nations. The U.S. signed the KP but it did not ratify it. Nonetheless, the carbon market helped change the value of all goods and services in the world economy because it changes the cost of energy: it makes clean energy more profitable and desirable and dirty energy unprofitable.
This changes the prices of all products and services in the world, since everything is made with energy, and drives the economy to use cleaner rather than dirty energy sources. Now, over twenty-five percent of humanity uses carbon markets, including the European Union Emissions Trading Scheme, China, and several U.S. states, including California. Carbon market trading now exceeds $178 billion per year.
The carbon market cuts the Gordian knot and makes change possible. It does so because it makes clean energy more profitable and fossil energy less profitable, and therefore encourages economic growth without environmental destruction: it fosters green development. The carbon market itself costs nothing to run, and requires no subsidies except for minimal logistical costs. In net terms, the world economy is exactly in the same position before and after the carbon market: there are no additional costs from running the carbon market, nor are there from its extremely important global services.
The Kyoto Protocol Carbon Market is a shining example of a green market. Another successful example of a green market is the Sulphur Dioxide Market at Chicago Board of Trade that was created about 20 years ago. This market is quite different from the carbon market because sulphur dioxide concentration is not a “global commons,” since it varies city by city while carbon dioxide is the same uniformly all over the planet.
This changes fundamentally the structure and functioning of the market. There are other green markets in the works. The U.N. is exploring market mechanisms for biodiversity and for water- sheds. As in the case of the KP carbon market, these are markets that would trade rights to use the global commons — the world’s atmosphere, its bodies of water, its biodiversity — and therefore have a deep built-in link between efficiency and equity.
In closing, tell us about your book, REVERSING CLIMATE CHANGE and how listeners can find it?
REVERSING CLIMATE CHANGE is a comprehensive look at global climate change – how we got here – which is both a technological and an economic question, and how we can reverse climate change, if we act now. My co-author, Peter Bal, and I discuss the science of climate change, the complex international negotiations needed to reach a compromise between developing and developed nations, the need for clean energy, the benefits of the carbon market, and the urgency of finding a way to extract carbon dioxide from the atmosphere and utilize it profitably.
The book predicts the advent of the carbon revolution, a new economic era in which carbon dioxide is removed from the air will not only reverse climate change, but will become the main feedstock of economic growth, replacing petroleum. Is also includes my personal view of the negotiations that led to the Kyoto Protocol and later the Paris Accords, key international agreements to avert catastrophic climate change, as well as a detailed description of direct air capture technology. The book is available in bookstores and online.