Gambling on the Growth of Global Emissions, with Ken Caldeira and Ted Nordhaus

Notable Quotes

• The case for an established peak in emissions: “Most analyses had emissions peaking at some point in the middle of this coming decade, and that was all prior to the pandemic. So then, you get a big economic shock, a big drop in emissions, and the likelihood is that it's going to take a couple of years for the economy to fully bounce back. By the time [the economy] comes back, my wager is that these longer-term trends will have continued long enough that we never get back to that 2019 level [of emissions]. But obviously, there's a lot of uncertainty around all of this.” ―Ted Nordhaus (7:11)
• Why emissions could rise as the economy rebounds: “For 2019 to have been peak emissions, emissions would need to decline at a decadal scale faster than they've ever declined before. I don't want to say that something that's never happened before couldn't happen … There have been brief periods of decline, … but if you look at the emissions trajectory over the last centuries, it looks a lot like an exponential curve. The idea that it's going to flip over—it's not impossible, but it would be unprecedented.” ―Ken Caldeira (9:48)
• Even if emissions decline, decarbonization will take longer: “I’m with Ken, that I think we’re a long way from [deep decarbonization]. I think it’s going to be very hard to get there … I think we're going to end up [with a global temperature increase of] somewhere between two and three degrees. If we do a good job, we’re going to be closer to two. If we don’t, we’re going to be closer to three. But that is all about what happens after peak emissions, and how rapidly we're able to bend that curve down.” ―Ted Nordhaus (23:45)
• New technologies are essential to the clean energy transition: “The only long-term solution is the techno fix. We are not going to completely reorganize society or end capitalism or do any of the things that various folks demand to save the world from climate change. We're going to deal with it to the degree to which we deal with it—with just better technologies that allow people to go about their lives without creating carbon and putting it in the atmosphere,. fFull stop.” ―Ted Nordhaus (30:26)

Top of the Stack

• The origin of the bet on Twitter
• How to Avoid a Climate Disaster by Bill Gates
• Growth by Vaclav Smil

The Full Transcript

Daniel Raimi: Hello and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Daniel Raimi. Today, we get the details on a friendly wager between Ken Caldeira, senior scientist at the Carnegie Institution, and Ted Nordhaus, founder and executive director of The Breakthrough Institute. Ted is betting that global CO₂ emissions peaked in 2019, but Ken disagrees.

In our conversation, we'll hear from each of them laying out the arguments for and against, and exploring the underlying factors that would likely drive the outcome of the wager. We'll talk about the role of COVID-19, energy technology, human behavior, and even the extinction of the dinosaurs. Stay with us.

Okay, Ken Caldeira of the Carnegie Institution and Ted Nordhaus of the Breakthrough Institute, thank you so much for joining us today on Resources Radio.

Ted Nordhaus: Thanks for having us.

Ken Caldeira: Yes, thanks.

Daniel Raimi: We're going to talk today about a bet that the two of you have made about the future of carbon dioxide emissions. But before we do that, neither of you have been on the show before, which is somewhat surprising because you're both really prominent and great in your respective fields. So it would be fantastic if you could each tell us briefly what steered you to work on environmental issues in your life. Ken, let's start with you.

Ken Caldeira: After college, I was working in the financial district in New York, doing software development for investment banks and also doing security stuff for the New York Stock Exchange and so on. It was interesting, but I felt I was spending my life helping rich people to become richer.

I came across an article in the New York Times. Steve Schneider was at an American Association for the Advancement of Science (AAAS) Conference and spoke about the possibility of the Antarctic ice sheet melting. It just blew my mind that human activity could change climate in a way that would melt Antarctica, and this was in 1979. I saw the article and basically around 1985, I left my Wall Street job and started a PhD program at New York University. But my goal really was to learn the science and try to be politically effective at addressing the climate change problem.

Daniel Raimi: Just so our listeners know, what did you end up getting your PhD in?

Ken Caldeira: It was in atmospheric sciences.

Daniel Raimi: Great.

Ken Caldeira: But with my actual PhD, I was trying to understand the consequences of increasing atmospheric CO₂ content. Because of that, I thought, “Well, I need to understand why CO₂ was at the level it was 200 years ago.” That got me into trying to understand the geologic carbon cycle. My PhD dissertation ended up being about what happened to the carbon cycle when the meteorite hit the earth that wiped out the dinosaurs, because that also wiped out a lot of marine life. Really, that research led directly to my work in ocean acidification. I have this long-term geologic background. For me, a century seems like a short amount of time. So I'm used to thinking in terms of hundreds of years as being relatively short.

Daniel Raimi: Super interesting. Well, we'll see if that comes up in our conversation over the next 25, 30 minutes.

Ted, how about you? How did you get interested in working on environmental issues?

Ted Nordhaus: Well, I unintentionally ended up in the family business, as it turns out. My dad was basically the first environmental lawyer in Washington. Really started the first climate change practice back in mid-'90s, and had a long history well before that on foundational environmental regulatory law. My uncle is Bill Nordhaus, who won the Nobel Memorial Prize a couple of years ago and was really the first environmental economist.

But I actually didn't think I was getting into that business. I thought I was doing real grassroots political work. I spent the first half of my career running real grassroots environmental campaigns on the ground. Then over time, I ended up —through a series of path dependencies, let's just say, or perhaps bad decisions—running a think tank.

I think growing up around those two guys, I absorbed a lot and learned a lot from both of them. I like to think that even though my dad passed away a couple of years ago, and he and Bill and I all have somewhat different views on a bunch of these different issues, we all sit in a broader, pragmatic tradition with regard to dealing with environmental challenges.

Daniel Raimi: Absolutely. That makes sense. Well, let's get into the meat of our conversation today. I want to give our listeners just a little bit of background before I turn it back over to you all.

As pretty much everyone listening will know, global CO₂ emissions declined dramatically in 2020 because of coronavirus. As the economy hopefully recovers over the next year,or hopefully sooner than that over the next few months, we would expect to see some type of rebound in greenhouse gas emissions. But there's a question of whether emissions will return to their pre-pandemic levels, or whether 2019 was actually the peak year of emissions globally.

Many people have offered opinions on this question. Ken and Ted also have their opinions. What makes them distinct is that they decided to put some money on the line to try to answer this question. Ted is wagering that emissions peaked in 2019, and Ken is taking the other side of the bet. It's important to note that we all hope that Ted is right, but we're not sure, and there are points pointing in either direction.

Ken and Ted and myself and all of our listeners, you will certainly know that there's a lot of uncertainty around this question, and no one's trying to be Nostradamus here. I think the idea is that Ken and Ted are making a friendly bet, recognizing they could each be wrong, as a way to explore the issue.

So we're going to explore the issue today and talk about whether emissions peaked in 2019 or not. Let's start with Ted. Ted, what's the best argument that you can think of for why emissions peaked in 2019?

Ted Nordhaus: Well, I mean, the best argument for, and the basis of my argument, is that emissions have been trending towards a peak for about a decade now. Really since the last big financial shock during the financial crisis. Most analyses had emissions peaking at some point in the middle of this coming decade, and that was all prior to the pandemic.

So you get a big economic shock, a big drop in emissions, and the likelihood that it's going to take a couple of years for the economy to fully bounce back. By the time it comes back, my wager, at least, is that these longer term trends will have continued long enough that we never get back to that 2019 level. Obviously, there's a lot of uncertainty around all of this. So that's why you make a bet and you lay out the terms.

What's great about long bets where we made the bet is that you have to be real, very specific about the terms of the bet, and you have to put your money up front. There's a long history of people losing these bets, claiming retroactively that they didn't really lose them, and not paying. So I will happily pay. I know Ken will as well, and we won't have a choice. I think in terms of being analysts and pundits or whatever you want to call us in this role we're playing right now, I think having some accountability around our claims is a really healthy thing.

Daniel Raimi: Absolutely. Just so listeners are aware of one detail of the bet, and correct me if I'm wrong, but the detail is that the bet essentially runs through 2030. So there's an implicit assumption that emissions will not peak after 2030. Is that right?

Ken Caldeira: We did not explicitly say anything about after 2030, but that's an interesting question. But maybe we should talk about the next decade first, and then we'll talk about longer time prospects. But this is a really interesting question.

Daniel Raimi: Okay, great. So we will save that. Let me now ask you, Ken, to give us just a really succinct version of the argument for why emissions have not yet peaked, whether this decade or further out in the future.

Ken Caldeira: My argument is embarrassingly simple and diluvian in some respects, in that, if you're trying to figure out where a car is going, one thing you can do is ask the driver and look at plans and what people are thinking of doing. The other thing you can do is well, look at how that car has been hurdling and what it's been doing in the past.

For 2019 to have been peak emissions, emissions would need to decline at a decadal scale faster than they've ever declined before. I don't want to say that something that's never happened before couldn't happen. After the 1970s oil shock, global emissions actually declined in the early 1980s around 1980. So it's not unprecedented. Then also emissions declined again after 1990, and then with 2008 and '09. So there've been brief periods of decline. But on the decadal scale, there's always been substantial increases in emissions.

I said I tend to look at things in century scales. If you look at the emissions trajectory over the last centuries, it looks a lot like an exponential curve. The idea that it's going to flip over—it's not impossible, but it would be unprecedented.

I felt it was relatively safe to argue that something that's never happened before has a lower than 50 percent probability of happening in the future. I know that's not a very strong argument, but it's not just mathematicians who can think of what's the value of some function like CO₂ emissions, so then you can talk about the rate of change. Then you can talk about the curvature, or what mathematicians call the second derivative. So how fast have emissions changed on the decadal scale?

The curvature in the emissions curve at that decadal scale has never been so rapid, what we would need to see decline in emissions going into the future. It would need to be more or less twice the rate; the curving over of the emissions trend would need to be twice as sharp as, say, what happened after the oil shock around 1980. So it's not impossible, but the rate at which things would need to change would have to be double whatever has happened before.

Now, I have to say that in my extrapolating method of thinking about this, COVID is not really brought into the case. Looking at the amount of time it took to recover, both around 1980, 1990, and 2008, that it's really COVID that gives me a little bit of pause, just seeing how it's completely out of control and that it might have economic consequences that might last longer. Basically my argument is as simple as saying that a continuation of past trends would indicate that CO₂ emissions are going to keep going up.

There's another part of this, and that has to do with motivated reasoning. I don't want emissions to go up, but most of the emissions this century are projected to come from developing countries. I don't want to see CO₂ emissions, but I want to see these countries get richer and have healthier living conditions rapidly. So I'm hoping that the developing world is going to develop really rapidly. I think that will result in more CO₂ emissions, but I have to say that that might be just motivated thinking, hoping that we're going to see an increase in economic activity in the global south.

Daniel Raimi: Right. I mean, motivated reasoning definitely shapes how all of us think about everything, but I'm glad you brought it up and recognize it.

Let's turn back to Ted and ask you, Ted, if you can maybe build on some of the points that Ken made, and argue against yourself. So can you highlight one or two other factors that might lead you to lose the bet?

Ted Nordhaus: Sure. I easily lose the bet. I mean, It’s amazing how long it took us to get together, mostly my fault, to actually make the bet. Because when we first discussed it, it was an interaction on Twitter back in May. At that time, there was really no vaccine on the horizon. It was a time where there were a lot of what I would call happy talk about V-shaped recoveries and things like that, which I was very skeptical about. In part because I certainly didn't anticipate that we'd have working vaccines by the end of this year. So to some degree, I was betting that we were looking at several years of, at best, a very slow economic growth.

I think I’ve gone back and forth, especially over these last months, somewhat being just thrilled that it looked like we had these vaccines and they were going to be available very quickly, and then somewhat disappointed at some of the difficulties and logistics of actually getting people vaccinated at rates that would very quickly get us out of the situation we're in today. I think a very rapid V-shaped recovery makes my prospects for winning this bet a lot less likely.

On the other hand, to build a bit on Ken's point, really whether or not emissions peaked in 2019 or this coming decade is really a question of whether the carbon intensity of the global economy falls faster than economic growth expands. So although there’s lots of complexity within it, it's a very simple mathematical question.

Then the question is, “Where does that growth in terms of emissions start from?” So emissions are down pretty significantly in 2020. If we get a really robust recovery in 2021, I think the chances are decent that I lose this bet in 2021, 2022, just because things come back really, really fast and you get huge investments in stimulus and things like that in China, the United States, and lots of other places. The growth outstrips the trend in falling carbon intensity of the global economy.

I feel like if I lose this bet, I'm going to lose it in the next couple of years. I feel like if we get out to 2024, 2025, I feel pretty confident I'm going to win it.

Daniel Raimi: That makes sense. Ken, can you chime in, either building on what Ted said, or also elaborate on why other factors might lead you to lose the bet?

Ken Caldeira: I think Ted put his finger right on the central issue. To me, this question of how fast the economy recovers from this COVID disaster, it's important, but to people interested in century-scale energy transitions, it's not so critical.

This other point that Ted raised, if we have a rate of economic growth—so how fast does, say, global GDP increase—and then we have what are the CO₂ emissions per dollar of GDP generated, and the question really is, “Is the economy improving its carbon intensity such that the amount of emissions per unit GDP is falling more rapidly than GDP is rising?”

So what do we all want? Some could say “no growth” for the rich countries. But most people in the world, their welfare would be improved if their standard of living went up. Most people would like to see GDP increase as rapidly as possible. But we'd like to see the environmental consequences of that GDP fall as rapidly as possible, and so we'd like to see carbon intensity fall more rapidly than GDP growth, but both of those to be as high as possible.

The interesting kind of bet, but maybe a less publicly salient one, is which growth rate will be higher, the GDP growth rate or the rate of decarbonization. In my day job, I'm doing everything I can do to make that rate of decarbonization be as rapid as possible. Nobody wants to lose because of bad GDP growth. I want to lose because I underestimated the rate of decarbonization.

Partly why I'm perhaps underestimating the rate of decarbonization is I know that solar and wind have come down greatly in cost. In many places for bulk power, wind or solar can be the cheapest source. A lot of my work and my day job has been looking at very deep decarbonization scenarios where you don't have some natural gas leftover to provide flexibility. It's very difficult for these intermittent renewables to supply the power in those scenarios.

I think some of the difficulties in looking at how wind and solar work in deep decarbonization scenarios may have colored some of my perception of the utility of wind and solar in shallower decarbonization scenarios where you do have a lot of grid flexibility. Natural gas or other things that could come in or out when the wind's blowing or the sun's not shining. I do think that there's a possibility that some of my focus on deep decarbonization scenarios have colored my perception of how much could be done in shallower decarbonization with these kinds of technologies.

Daniel Raimi: Right. That makes sense. I know you're well aware of this, but the points you touched on are mostly relevant to the power sector. There’s a whole other set of issues to think about when we think about industrial emissions, and transportation emissions, and buildings, and all that stuff. I know you recognize that.

Ken Caldeira: No, it's true. This is very good that you brought that up. The power sector is a minority of our CO₂ emissions. Things like heating and things like making steel and cement and so on are substantial contributors to emissions and are very difficult to decarbonize.

Ted Nordhaus: Ken, can I build on your point a little bit?

Ken Caldeira: Sure.

Ted Nordhaus: I want to really agree with Ken on a couple things here. The first is we've made a bet about peak emissions. Peak emissions is just a far, far cry from deep decarbonization or stabilizing atmospheric concentrations of CO₂ or temperature stabilization. It's none of those things. It's a way station. You've got to get past the peak before you can get to any of those things. But it's a long, long way.

It's really interesting since we made this bet and Twitter is not, in most regards, a reflection of anything in the world, but I think in a bunch of the responses, it is. Because almost everyone thinks I'm going to be wrong, at least if you follow my Twitter feed. If you look at the popular imagination on Twitter, it's that emissions are just going to keep increasing rapidly as far as the eye can see. We may or may not be at a peak, but when you look at all of the trends, we’re past peak coal. We’re past peak oil.

I think that most folks who have looked at this carefully would say, “Well, whether we’re past the peak or not, we're probably close to basically a long plateau in emissions.” Now, that is wildly insufficient if you're trying to stabilize atmospheric concentrations. If you're going to stabilize atmospheric concentrations, you don't necessarily need to get them exactly to zero, but you need to get them pretty darn close to zero. Those are huge, huge cuts. That's deep decarbonization, and that's much, much harder than peak emissions. I think that even though people somewhere in their head know these are different things, I think people get them almost emotionally all mixed up, and they're not the same thing.

So when we start talking about deep decarbonization, I'm with Ken. I think we're a long way from it. I think it's going to be very hard to get there. I'm on the record in multiple ways saying that not only do I not think that 1.5 degree stabilization is realistic, but I think two degrees is going to be pretty darn unlikely as well. I think that these crazy four or five degrees of warming in the century is completely unrealistic. I think we're going to end up somewhere between two and three degrees. If we do a good job, we're going to be closer to two. If we don't, we're going to be closer to three. But all of that is just to say that that is all about really what happens after the peak, and how rapidly we're able to bend that curve down. That is not actually on the table in terms of this bet at all.

Ken Caldeira: Right. While I still think I'm more likely to win than Ted, I think my reasoning is somewhat faulty, and that I do think the challenges of deep decarbonization have filtered into my thinking about that challenge of doing anything. Over the last five years, at least in the electric power sector, I think the view has really changed, where there was this MacDonald et al. study that Chris Clack was involved in, and then another study, the National Renewable Energy Laboratory (NREL) deep decarbonization study.

It's increasingly looking like maybe up to 80 percent of the power sector might not be that hard to decarbonize if you have substantial natural gas or other means of grid flexibility. Wind and solar have come down in costs, and so that often the cheapest way to add electricity to a system, or that already exists and therefore has some flexibility, is just to add wind and solar.

So if I'm wrong, it's because I probably misjudged how much the electric power sector would adopt these carbon neutral technologies. But I guess I'm still skeptical about the rest of the heating and so on... Basically the mantra is that you want to electrify as much as you can, and then decarbonize the electricity system. So you'd like to have heat pumps and you'd like to have electric cars and things like that. But the infrastructure takes time.

So it's one thing if you're expanding an economy and you're adding new stuff, and then you can have carbon neutral stuff. But if you really need to start reducing emissions, you need to start replacing CO₂ emitting infrastructure with infrastructure that's not CO₂ emitting, and that takes a lot longer.

Daniel Raimi: Absolutely.

Ken Caldeira: There's one thing I wanted to say, which I didn't say so far, in that in the early 2000s, the temperatures weren't going up so rapidly and everybody was talking about a hiatus and whether we were seeing some end of global warming. As climate scientists, we're trained not to look at single decades and think that's an indicator of a long-term trend. Then typically climate scientists think of, “Well, something needs to persist for around 30 years for it to be reliably thought of as a long-term trend.”

So while the events of the last years have been, COVID aside and Trump aside, quite promising in many respects, the question of, "Well, will this trend of the last several years continue into the future?” When we saw people invent fracking and natural gas got cheap, people thought maybe coal mining would get much cheaper or something else. Who knows?

Daniel Raimi: Good points. Just as you've emphasized a couple times, it’s really worth thinking about the long run, even as we keep an eye on the short term trends.

So as we close out today, this has been a fascinating conversation, I do want to ask you just if you could briefly comment on a big picture question, zooming out from our emissions trend lines and technologies. There’ve been a lot of comparisons that folks have made between COVID-19 and climate change in terms of the problem and how the government may or may not address the problem. We're not going to try to litigate all those. But I'm curious, from each of your perspectives, is there one particular thing that you take away from COVID-19 and humanity's response to it that informs us about how humanity may or may not be able to tackle climate change successfully? You can take this at a domestic level or a global level, or however you want. Ted, why don't you chime in first on that?

Ted Nordhaus: I think it's a pretty strong case for the techno fix. If you look at just how hard it has been to limit behaviors to really limit the spread of this virus, and the fallout in terms of both the economy, in terms of people's quality of life, in terms of all sorts of other things that we care about. It won't, but it should put an end to people suggesting that de-growth is the answer to climate change. It should put an end to people who are like, “This is all about behavior change and social engineering.”

Even as contested as things like mask wearing and those kinds of behaviors have been, all those people are going to line up for a vaccine. Florida, Texas, all these places where there's ostensibly all of this science denial around whether COVID is a flu or a plague, and whether masks work or not. Boy, people will be lining up around the blocks to get those shots.

For me, not surprisingly, given my position on the climate issue and my priors and the institute I run, the only long-term solution is the techno fix. We are not going to completely reorganize society or end capitalism or do any of the things that various folks demand to save the world from climate change. We're going to deal with it to the degree to which we deal with it. With just better technologies that allow people to go about their lives without creating carbon and putting it in the atmosphere, just full stop.

Daniel Raimi: Ken, how about you? What's a takeaway that you think you'll come away from this year with?

Ken Caldeira: First of all, I like Ted's point that sometimes it's easier to find a technological solution than change people's behavior. But the main thing I draw from this COVID crisis is the importance of having a shared set of facts based on good science. People and politicians can disagree about what the appropriate policy response is to that factual situation, but that if people don't recognize the facts on the ground, the policy response is not going to be successful. So I think that the response to COVID shows that it's okay for us to disagree about how to respond to threats, but we should agree on what those threats are.

Daniel Raimi: That's very well said. I've been thinking about that one a lot myself.

Daniel Raimi: Well, before we close it out, guys, this has been really fascinating, but I want to ask you each again the question that we ask all of our guests, which is to recommend something to our listeners that you've read or watched or heard recently that you think is really interesting and that you'd like to share with a broader audience. So Ken, why don't you go first? What's at the top of your literal or metaphorical reading stack?

Ken Caldeira: Well, I've been an advisor recently up at Gates Ventures, and Bill has written a new book, which I've been privileged to help be a fact checker for and that should be coming out in February. The book title is How to Avoid a Climate Disaster by Bill Gates. It's basically about trying to reduce what he's coined “the green premium,” which means the additional cost of carbon neutral technologies.

Daniel Raimi: Interesting. Ted, how about you? What would you like to recommend?

Ted Nordhaus: I think the most interesting book I read in the last year was Vaclav Smil's book called Growth. I actually reviewed it for New Atlantis this last winter. I think it's quite apropos to the conversation we're having today, which is as much as anything, trying to project trends into the future is really, really hard because these are all almost always some version of an S curve. The problem is that the fog of the present means that it's very difficult to figure out in many cases where exactly you are on that S curve. Are you at the bottom? Are you at the top? Are you in the middle of it?

There were a bunch of things in that book I thought were fabulous, and I love Vaclav. There were things I disagreed with, but I think the thing that I took away from that book is just that it's easy to see these things in hindsight, and very, very difficult to figure out what's going on when you're right in the middle of it.

Daniel Raimi: Absolutely.

Ken Caldeira: Let me just say at the end here that I usually, in my professional work, try to avoid making predictions of the future, because that's a sure way to be wrong is to predict the future frequently. So part of this bet context is that look, it is a bet. If something was a fact that I am certain of, I could put it in one of my scientific or technical papers. This is kind of speculation and fun.

Daniel Raimi: Yes, absolutely. I think hopefully our listeners take that away and they understand that this is a friendly bet about something everyone recognizes involves enormous uncertainty. We'll watch over the next few years and maybe over the next 10 years how it plays out. And maybe if and when we have a resolution to the bet, we'll have you guys both back on the show and we'll talk about what happened.

Ken Caldeira: Sounds great.

Daniel Raimi: Great. Well, once again, Ted Nordhaus of the Breakthrough Institute and Ken Caldeira of the Carnegie Institution, thank you so much for joining us today on Resources Radio.

Ted Nordhaus: Thanks for having us.

Ken Caldeira: Thank you. Bye.

Daniel Raimi: You've been listening to Resources Radio. Learn how to support Resources for the Future at rff.org/support. If you have a minute, we'd really appreciate you leaving us a rating or a comment on your podcast platform of choice. Also, feel free to send us your suggestions for future episodes.

Daniel Raimi: Resources Radio is a podcast from Resources for the Future. RFF is an independent nonprofit research institution in Washington, DC. Our mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. The views expressed on this podcast are solely those of the podcast guests, and may differ from those of RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals. Resources Radio is produced by Elizabeth Wason, with music by me, Daniel Raimi. Join us next week for another episode.