175. Does Trump Spell The End Of Net Zero?

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1:27Und wie sich ein Betrieb stabilisiert oder geordnet abgewickelt wird. Im Podcast-Kanal Gute Geschäfte von Kreditreform. Überall, wo es Podcasts gibt.

1:54joined to give him his full title, Professor Lord Nicholas Stern, a friend of yours, Robert Nick Stern, you know him as, but he's one of the leading voices on economic impact of climate change. You know, he wrote this really powerful review back in 2006, the Stern Review, which is a kind of pivotal report into the economic impact of climate change. He's been a former chief economist, isn't he, at the World Bank, chief economics advisor to the UK government. So he's someone who knows what he's talking about when it comes to the impact of climate change? He does. And among the people that I've talked to over decades about climate change, I've always found him the most compelling.

2:36And one shouldn't actually underestimate how important that review, the Stern Review, commissioned by Gordon Brown, published in 2006, really was. It was the first government review to take the economics of climate change seriously. It remains a powerful document. And his analysis remains absolutely central to not just the dangers of climate change, but also the opportunities there will be for us from re-engineering our economies to make them cleaner. Because he's not a great pessimist. He also makes the point very strongly that we can have a more prosperous UK from investing in climate friendly technologies.

3:27Yes. So here's our interview with Nick Stern. Nick, we've been talking, you and I, for almost 20 years now, pretty much since you published your very influential report for the British government about the risks of climate change. Weirdly, we are in a climate now where our leaders seem to be almost downplaying these risks. But you believe it's all a lot worse than it was in 2006. It does worry me. But I think we should be clear that not all politicians have lost focus on this. In many ways, the most important economy in the world, just in terms of emissions, is China. It's the biggest economy in the world if you measure output in a sensible way.

4:12through what we call purchasing power parity. It has been the biggest economy in the world for 15 years or so on that measure. And they take this very seriously. And they take it very seriously for very good reason, because they have their population concentrated in coastal areas. They depend in large measure, as does India, Pakistan, Bangladesh and so on, for the waters off the Himalayas. And if you lose those snow and the ice there, you're in deep trouble. Some politicians have stepped back, but other politicians have kept the focus. But it does worry me that in Europe, we seem to be not exactly stepping back, but not stepping forward with the pace that one would hope for.

4:59But just on China, you know, they are building new nuclear very rapidly. They are obviously the world's leading manufacturer of solar panels and other technologies that should help for the whole world to reduce emissions if rolled out at the requisite pace. But they are still commissioning coal-fired power stations and their emissions are still rising. So when you say they're taking it seriously, surely they're not taking it seriously enough. Well, nobody's taking it seriously enough. But just look at the facts of what's happening in China. Their emissions will probably stabilise about now because they are adding some coal-fired power stations.

5:40They're decommissioning other coal-fired power stations. And they're adding renewable capacity and nuclear capacity at a quite phenomenal rate. they've been adding renewable capacity at a rate of around 300 gigawatts a year. The total in the UK, everything, accumulated over time, looking across everything, is about 80. So what is your 80? The 80 gigawatts in the UK, roughly, is all the electricity generating capacity. Both renewable and non-renewable. And you're saying that in China, the increase in renewable capacity per annum is, you know, essentially four times. Yes, yes. They will probably peak in the next year or so around now.

6:26They've committed to peaking by 2030 and they will do it early. So one of the things I have been struck by is how unbelievably rapidly they are, as you say, commissioning, for example, nuclear. Right. We are still years away from commissioning even Hinkley, which has just been going on forever in terms of the build. And the costs are now absolutely through the roof. I think more than 40 billion pounds is the estimated cost of just that one plant. The UK has decided for security reasons, we can't have the Chinese building our nuclear power stations. Is that the right decision for the UK? Because it turns out the French, who we are relying on, don't seem to be as fast as we would like.

7:11I think it's very important that we talk about the speed in terms of what we have to do from the point of view of the climate. The next 10 or 15 years are absolutely crucial. We really do need to get to net zero across the world by 2050 to have any chance now of holding to well below 2 degrees because we're already seeing with what we've got very severe effects and we're very close to tipping points and that's going to get worse. So it's very important to focus on what we do as a world in the next 10 or 15 years. And that's why nuclear is not, as it were, the first thing to discuss because the first thing to discuss is how we can build our non-fossil fuel, our zero carbon capacity quickly.

7:55And there it's quite clearly renewables. You're talking wind and solar essentially? Yeah, wind and solar. With solar and battery storage? With battery storage and with better grids. The better the grid, the less storage you need. But you're going to need quite a lot of storage. But it's very important to get that time dimension clear. But this problem is sufficiently severe that we should be looking at everything. And we should be looking at nuclear. It should be part of the story. But in the UK, that's not coming quickly. There will be small modular reactors, I think, that will be more important than the big things like Hinkley Point.

8:28But even that technology is not yet proven in the UK. Well, they use it for submarines and so on. I mean, not proven is probably too strong. But to be able to produce those on scale and at reasonable cost. See, renewables are much cheaper than the rest of it. But I do think nuclear should be part of the story. And I think in the UK, it will be small modular reactors. That will be probably the future of nuclear in the UK. But it's very important to focus on the next 10 or 15 years. And that takes you inexorably to renewables. Yeah. Part of the problem, though, is that for lots of people, climate change feels like something esoteric, something long term, something that isn't impacting them now.

9:10You know, they're dealing with economic crises themselves now, with concerns about living standards and everything else. How do you incentivise and convince people that this is worth doing now and not something that they can just park like saving for a pension? One is an understanding of the dangers. And part of what's changed in the last 10 years or so is that people are experiencing these things much more directly. So people do recognise a living climate change. They see wildfires. They see the intensity of those increasing. They see the extreme heat. Is it enough to stop them in their tracks just yet?

9:54I think the answer to that empirically is no, it's not yet. But it's very important to have that discussion and keep that discussion in the public eye. The second thing is that this is a much more attractive way of growing, that this is the growth story of the 21st century. Why? Because the clean is already cheaper than the dirty across electricity and much of surface transport. And that fraction will grow. It's where the exciting innovations are going to come. It's where AI is going to be so powerful. It's where you've got increasing returns to scale. Cities where you can move and breathe are much more productive than cities where you can't.

10:34We kill in the UK about 35 ,000 a year from air pollution. That's 20 times more than road accidents. We kill in the world 5 or 10 million people a year from air pollution. The number of people who die per year in the world would be a little over 50. This is huge. and all this is about better and stronger growth. And of course we do have to invest a lot and this is of critical importance. We do have to invest a lot to get to that new attractive growth story. I suppose the thing that I find striking and many people would say it's a bit depressing is if you go back say five years, right, we had huge numbers of young people in particular on our streets protesting against fossil fuel emissions, calling for this environmental and economic transition.

11:27That was rational because it was their futures that were being mortgaged. It was their futures that, on the scenarios that you have described, would be devastated if global warming is not curtailed. It's striking to me, actually, that the heat, as it were, seems to have got out of those protests. I don't know whether it's a weariness. I don't know whether it's a despondency. I don't know whether it's just that there are now other so many egregious problems in the world, whether it's emotions that are generated by what they see in Gaza or the emotions that are generated by other things that the new American president is doing.

12:12But it is quite interesting to me that whereas many people would say the biggest priority for the world is reversing climate change, nonetheless, you don't see that in the kind of protests that we did see, let's say, five years ago. I think on the streets, that's right. But if you look at the surveys of what worries people, that still comes, particularly for young people, very high. But do you think there is a fatalism now that somehow, because it seems to me slightly, the challenge I would give to you is you have been saying these things consistently for 20 years, right? And I just slightly worry that we are in a, and a few years ago, I think there was a sense, particularly among young people, that we can change the world for the better.

13:00And I worry that we have entered a world of fatalism, that what will be will be and there's nothing we can do about it. And I'm really asking you whether you've got ideas about how you break that mindset and give people hope that this future is in their hands. And in particular, whether that is remotely possible while Donald Trump is in the White House, the most powerful man in the world, climate change denier, essentially saying he's going to exploit as much of the fossil fuels that America has as is possible. Broadly, I would argue around the world, there's a sort of view that says nothing is possible until his four year term is over.

13:43The understanding of the problem is, I think, increasing on the whole with education, with exposure. That's empirical. The people on the streets and the intensity of the street process is not what it was a few years ago. But I think it's very important to distinguish between the understanding and the intensity of the political pressure. But politicians don't have to respond if they're not feeling under pressure. They don't. And that's why it's so important to keep the argument going. It's why I'm here today, Robert and Steph. This is a story that we have to constantly discuss, constantly bring to attention, marshal the evidence.

14:22But we have to bring the positive story. And increasingly, the positive story is visible. I mean, 20 years ago, the cost of renewable electricity was probably 20 times what it is now. This isn't a marginal change. This is a colossal change. If you look across the countryside and see solar panels in a not very sunny country, that has multiplied enormously in the UK. Electric vehicles now are cheaper in much of the world and will be cheaper here too before long than their counterparts. And of course, you don't have to put petrol in them. People are seeing now evidence of what is happening to the climate and they're seeing the opportunities.

15:10Are they seeing them strongly enough yet to make the kind of protest and pressure that will be necessary? No. But it's very important not to deny the very strong movement in the understanding of what's going on, the experience of what's going on and the opportunities, because that's what we have to build on to get to the pressure that we need. There's lots of structural things that need to change though, aren't there? In terms of like, you've mentioned about renewable energy being cheaper, but the way it works in the energy market here is the unit of energy is based on the highest price of the tax, which is often gas.

15:45So it ends up going to a higher cost because of that. And also things like, you know, we've talked a lot about zonal pricing on this programme and it seems to be really hard to get that through. So people are paying, you know, if you live near a wind farm, you'll pay less for your energy. And all of these things which would help consumers to be more economic and more environmental is out of their power. I think it's extremely important in the UK that we get energy prices to fall before the next election because the clean is cheaper than the dirty. But the way we do our pricing structure at the moment does not reveal that.

16:24People don't understand that the reason we're paying so much for energy is because we're too reliant on gas. And I mean, it's sort of mad that we have a political debate at the moment where both of the right wing parties, you know, the Tories and reform are both saying we've got to pull back from our net zero targets. and for reasons that are slightly beyond me, they are getting quite a lot of traction because people seem to think that it is, you know, essentially the transitional costs that are making energy so expensive rather than the fact that it is our over-dependence on gas that is the big driver of our prices.

17:02It's the legacy costs that make it so expensive. So it's very important that we get those arguments across that the clean is cheaper than the dirty and that the reason our prices are so high is because of the basis on fossil fuel. And the reason we're so insecure is because of the dependence on fossil fuels. But I think we can make that argument and we should and we will and we are. What would be the one reform or the one or two reforms you would like to see them do that would get those prices down? I think I would get away from the marginal cost pricing in the very narrow short run sense of the term.

17:35You do need standby, you do need backup, but you should be able to make contracts where the people who are going to provide it on the margin have a long-term contract to stand by and do that. I think you could load more of the transition costs onto gas rather than electricity. Why not just put it through the general taxation system? And you can do that as well. But I don't want to lose the Trump point, Robert. Is anything possible until he leaves the White House? The answer is unambiguous. Yes, there is. The good folk of Texas will be investing, as they did during the last Trump presidency, strongly in solar and wind.

18:15There'll be cities and states in the United States that will continue as they did during the last Trump presidency. And in many ways, they're better equipped to do that because prices have fallen so much, costs have fallen so much in eight years that have elapsed since then. So first thing is that stuff will continue in the United States as it did last time and because the costs have fallen so much. We have to turn to China because they're the biggest emitters. Roughly half their car sales were electric cars last year. As I said, their zero carbon capacity is already bigger than the fossil fuel capacity and electricity generation.

18:59They have lots to do on their grids so that they use their renewables better and storage. And they're doing that. So you're seeing movement in the biggest economy in the world and the biggest emitter in the world, which is China. I think Europe will continue. The energy security arguments, of course, in Europe are so important and solar and wind give you the security. You're going to see stronger and stronger link-ups with North Africa. North Africa is going to be a major source of electricity for Europe. This is solar in North Africa that then gets pipes to Europe. Is that right? Yes, cabled.

19:36Cabled, yeah. When I say pipes, I mean cables. You send the molecules down the pipe, you send the electrons down the cable. Exactly right. Exactly right. I'm using a metaphor. You'd want a little bit of pedantry on your podcast. We have no shortage for me. Thank you, Nick. We do need more of it. Thanks. So what I wanted to point to is that A, United States in many areas will continue and B, other parts of the world will keep moving. And I think it's very important to recognise that Trump has stepped back in trade. He's stepped back in aid. He's stepped back in health. He's stepped back in finance.

20:15He's stepped back in security. In all those areas, he's stepped back on the world stage. Somebody steps back, other people will step forward. And that is exactly what is happening. China has been thinking about this strategically for a long time, and of course, acceleratingly so, in these last months. I think Europe is stepping forward on security, as it should. And I think Europe should step forward on China as well. So the way in which we step forward in international finance will be through the multilateral financial institutions. They should be trebling in this next five years what they lend.

20:57And let me remind you that whilst the World Bank has a heavy United States shareholding, here are five multilateral development banks with zero United States shareholding. the Asia Infrastructure Investment Bank, the European Investment Bank, the New Development Bank, the so-called BRICS Bank, the Islamic Development Bank, CAF in Latin America, and there more. And they should be lending to projects in places like Africa that are clean power projects. That's what you're saying. That is a particularly important example, Robert. The total electricity capacity in Africa is probably 250, 300 gigawatts total.

21:36Nothing. So that's less than China's annual increase. And that's exactly the point. China's capacity in solar to produce per year is over a thousand. This is a fantastic opportunity to really get electricity across Africa. How do you do it? Well, you work the multilateral development banks in China, which would be stepping forward where the United States has stepped back and doing something enormous important. You can't digitise without electricity. I mean, so much depends on it. At this Lord's Moor, we want to still talk to you about Nick, but sit tight for a couple of minutes.

22:17We've talked a lot about substituting dirty power with clean power. Another big and contentious issue at the moment is the extent to which we need to see behavioural change. So one of the things that is striking about this government is, one, it has said it wants to see airport expansion, including Heathrow. Two, it has delayed the phasing out of petrol hybrid cars. And three, one of the technologies that it is investing an enormous amount in is carbon capture, which would actually maintain dependence on oil and gas. So I'm just wondering, are these policies genuinely consistent with their ambition to hit our net zero targets?

23:17I think that part of the story is mixed in answer to your question. Carbon capture and storage will matter. Cement, for example, is going to be difficult to decarbonise without carbon capture and storage. So you think there is some kind of a role for carbon capture? I mean, cement is a very important example. Sure. And so, yes, there is. Because I'm slightly worried, particularly because that is definitely not a proven technology yet. Oh, well, again, that's not quite right. There are quite a lot of carbon capture and storage actually going on. I mean, for example, in the United States, enhanced oil recovery, where you capture the carbon dioxide and stick it back down the oil fields and get more out.

24:00But that is not the same as what is proposed in the UK at the moment. Well, it's still pumping the CO2 underground. So let's put the carbon capture to one side because we are going to need some of it. And we're going to need direct air capture at some point too because we'll quite shortly overshoot the 1.5 degrees, so we're going to have to take stuff out. We need to do a lot of research on bringing down the cost of direct air capture. Well, as I say, that is definitely not commercially proven.

24:29It's a proven technology, but it's jolly expensive. So you're right, you said commercially proven, that's correct. If you look at the future of air transport, the future of air transport lies in essentially zero carbon, sustainable aviation fuel. That's quite a way away. There's lots of stuff that's close, like green steel, but the sustainable air fuel is probably quite a long way away. So should we be expanding our airport capacity? We should be doing a number of things. We should be getting more people to travel by train. Oh man, you're joking, aren't you? I spend my life on trains because I am someone who has to come down from the northeast of England to London.

25:12And more often than not, the flying is cheaper and more reliable. And that's part of the problem, isn't it? That's exactly what I'm saying. We have to invest more. Yeah, we do, yeah. But we also have to recognise that flying will increase. And it's very important, two things. One, people should pay for the damage that they do. So we're not paying enough? No, we're not paying enough for the... Don't we need to be faster on sorting out the fuel? Because the issue is not the flying. As you say, it's the fuel that's used to fly. Well, it's both. You want people to fly less, but recognising that that's not going to go away, so that you have to push very hard on sustainable air fuel.

25:52And that is something which I think the UK could work with other countries in the world. But I suppose, look, here is what you might call the Nigel Farage question, which is if airfares go up to reflect their climate damage, a lot of people on middle to low incomes won't be able to fly. it'll become the preserve of the rich and that doesn't look fair to most people. The people wouldn't understand they might not be happy about paying the real costs of what they do and that's an argument which we have to put. It won't be just a preserve of the rich. Airfares should go up but they won't go up so far as to prevent people altogether It's a matter of doing less.

26:42And we should be doing less flying motivated by paying properly for what's done, investing hugely in working to find sustainable air fuels and investing very strongly in the alternatives, which is rail and zero carbon road transport. So there's not a simple one line answer because you're talking about the whole transport system, Robert, and we can describe what investment is necessary for that. And we're brilliant, actually, in this country at taking an integrated long-term approach to transport, aren't we? Wouldn't it be nice if we got better? So if you're thinking about what do we have to do, you've got a slight fatalist tendency in the line of questions, Robert, there.

27:24No, no, I'm just challenging you in a way that is that. Which probably isn't the real you. And what I'm talking about here is the investments that we have to make. And it's very important to keep focusing on the investment. We have to invest another two or three percentage points of GDP. Boris Johnson, back in the Carbis Bay G7 summit, asked myself and my group to write a strategy paper on investing for this new form of growth, which actually Boris Johnson understood quite well. Did it happen? And almost none of it's happened. So what I'm saying is that making and staying with that investment case and showing what investments we have to make, showing how much they are, we should be investing another two or three percentage points of GDP.