robert hahn is a distinguished senior fellow at the Technology Policy Institute, an adjunct professor at Carnegie Mellon and an honorary associate at Oxford’s Smith School of Enterprise and the Environment. He was the chief economist on the White House team that designed the pathbreaking cap-and-trade system for limiting smokestack sulfur emissions.>
Published November 22, 2022
These days, it’s hard to miss headlines about generous philanthropists who are using their money to speed the fix for climate change. We have Bill Gates, who is deep into tech startups aimed at facilitating net-zero emissions, Jeff Bezos, who pledged $10 billion for the cause and committed Amazon to electrifying its delivery fleet — and, most recently, Patagonia founder Yvon Chouinard, who gave away his $3 billion company for the cause. But spending large amounts of money to address this issue effectively is harder than it looks. Here, I offer a few thoughts on how you, the budding climate philanthropist, can avoid the pitfalls.
Do Your Homework
You probably have dozens of experts at your beck and call. But if you’re going to give away vast sums, you owe it to yourself to understand the basics about what’s actually happening and what could be done to slow it. (Don’t take too long to study, though. The window for avoiding a climate catastrophe could be closing soon.)
And happily, that’s gotten easier in recent years because there are a bunch of great books on the subject. If you’re willing to put up with some economics, try Robert Pindyck’s Climate Future, which reminds us there is a lot we know about climate change and a lot we don’t. The MIT economist, who has thought long and hard about how to manage future events we don’t understand but could prove very, very bad, goes back to basics: Society should buy insurance by investing in both greenhouse gas emissions reduction and adaptation.
Or, if you prefer to get the scoop from a peer, try Bill Gates’s How to Avoid a Climate Disaster. Gates’ clear-eyed exposition emphasizes the need to get to net zero in a hurry, and is optimistic that new technology can help make up for the foot-dragging from fossil-fuel producers that has undermined calls for action.
Focus, Focus, Focus
There is no magic bullet that will save us from climate change — it will take a whole lot of magic bullets. You need to figure out how your money will help address a part of the problem you care most about. One necessary choice is whether to invest in the people, organizations and companies that will help reduce greenhouse gas emissions, or to invest in means to reduce the impact of what is coming our way.
The first approach is to hasten the hard work of reducing carbon dioxide and methane emissions across the economy. You may be tempted to support the nonprofits and non-governmental organizations (NGOs) — pressure groups, if you will — that push governments to accelerate the transition. But buyer beware. You may want to check whether the NGOs are pressing for costly changes that lack sufficient payoff. Take, electric vehicles, for example. Will the huge subsidies now aimed at reducing the sticker price of electric vehicles change their speed of adoption?
I am skeptical of subsidies, especially when there may well remain lower-hanging fruit to pick. And the World Bank agrees: it found that governments get more bang for their buck elsewhere.
Plan B is to invest in reducing the impact of increasingly extreme weather, rising sea levels and the like. This could include building sea walls around coastal cities, developing technologies that remove carbon dioxide from the atmosphere and store it, or geoengineering that reduces the amount of energy that pierces the atmosphere. But approach carefully. Infrastructure change is a money pit, and geoengineering could end up doing more harm than good.
Billionaires could make a big contribution by standing above the interest group fray and providing the seed capital for technology that may make all the difference.
Decide How You Value the Payoff
MBAs usually measure success in terms of the financial return on investment. But the impact of most investments that you make in slowing climate change is not going to be so easily measured — especially because initiatives that benefit, say, Canada may make life harder in Central America. Where possible, it would be good to try before you buy, for example, spending a bit to see whether a proposed intervention, such as a solar panel subsidy, really delivers sufficient bang for a buck.
At the very least, though, you need to be rigorous in tracing how your money will get you from here to there. For example, suppose you are deciding whether to finance lobbying for a carbon tax in the U.S. You need to assess the likely impact of the lobbying, the likely impact of the tax on fossil fuel consumption, and the likely impact on carbon emissions in other countries. The chain of reasoning can be extended to impacts of these hoped-for emissions reductions on people and ecosystems. But you get the point.
To take another example, you may be interested in holding governments accountable for the pledges that they make. The UK, for example, said that it has a goal of net zero emissions by 2050. Assuming progress can be measured in straightforward metrics, one could set up a prediction market in which participants (some presumably quite knowledgeable about climate change) assess the likelihood that the UK will meet that goal, or that pays off based on the actual emissions in the UK in a particular year. Such prediction markets may be both more accurate than governments or businesses with an incentive to deep-six bad results, and could also be useful in holding legislators and the private sector accountable for the targets they set.
NGOs Aren’t the Only Game in Town
The private sector — in particular, startups trying for break-out technological solutions — will almost certainly play a critical role in climate change. These startups are addressing a range of challenges including producing low-carbon energy, storing carbon dioxide and making platforms available for trading carbon credits and assuring credit quality.
Universities are also worth a hard look. Academics have been in the vanguard in both climate research and in the economics of climate change mitigation. For example, Nobel Prize-winning economist Bill Nordhaus of Yale came up with one of the first models that helps evaluate the benefits and costs of initiatives to curb greenhouse gas emissions. Oxford University played an important role in arguing for the need for net-zero emissions to address this issue. And a number of economists, from MIT and Carnegie Mellon among others, have highlighted the important role that the management of uncertainty will play in crafting intelligent solutions to this challenge. Finally, you should also consider think tanks, a handful of which have fended off the disinformation that slowed America’s willingness to act on the critical issues.
Let Science Trump Ideology
There is a tendency to exclude some potential solutions on the basis of ideology, as opposed to science or economics. For example, without carefully assessing the relative risks and benefits of energy technologies, some environmentalists argue that nuclear power should not be on the table. The only acceptable solution, from this perspective, is true renewables like wind and solar — as well as energy conservation.
Countries have adopted different positions on nuclear, with Germany agreeing to a phase out (after Chancellor Merkel needed the Green Party in her governing coalition and before Russia squeezed Europe’s energy supplies) and the French doubling down on their commitment to nuclear to supply electricity. In my opinion, nuclear power — in particular, the inherently safer and probably cheaper nukes on the horizon — represents a very attractive, and arguably essential, part of any feasible plan for slowing climate change. Whether you agree or not, the takeaway here is that letting ideology substitute for science could result in very expensive solutions that don’t buy very much.
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Yes, it does take a village — billionaires alone aren’t going to stop global warming. But they could make a big contribution by standing above the interest group fray and providing the seed capital for technology that may make all the difference.
Questions? Fire away.