Bill Gates actually gets it

It seems that at every UN Conference on Climate Change, the conversation is always about reaching a global deal for emissions cuts. And while that’s all well and good, these theoretical deals are often unenforceable and rely on truthful reporting of carbon emissions (Hey, China!).
So I was thrilled that this year’s conference opened not with arguments about emissions cuts but with Bill Gates’ plan to address climate change, which has nothing to do with with making cuts and everything to do with how to empower markets to make those cuts themselves.
Gates’ announcement does two things. First, it leads a 28 person investment team to provide capital to help promising energy companies get products to market, crossing the so called investing valley of death where many great clean energy innovations die. Second, he appears to have convinced 20 governments to double their energy budgets for basic research. No mention of emissions cuts in any of these announcements.
It’s not that I don’t believe that market interventions like cap and trade and subsidies can help the process. And in terms of fairness, I’ve long argued and shown that fossil fuels have been subsidized for the last 100 years. It’s just that what Gates truly gets is that taxing carbon is not enough. 
What the world needs to address climate change is a Manhattan Project like effort to figure out clean energy solutions that are cheaper than fossil fuels. When that happens the market will expedite deployment of renewables quickly and efficiently. And the only way to get those clean energy solutions to market is to heavily invest in the basic scientific breakthroughs that will be required to cleanly meet growing energy demand.
The reality is that doubling countries’ commitments to energy R&D isn’t nearly enough. What’s actually needed is closer to a 10X increase, which isn’t that crazy when you consider the U.S. only spends $5.3 billion on energy research. Taking that up to $50 billion would put the budget where it should be–more than what we spend on health care R&D but in the same ballpark. Think of it as health care for the earth.
Gates authored a paper that he released Monday, that more or less outlines his thinking on climate change and clean energy technology and investment. It’s a concise, intelligent read and I’d point out two tables Gates presents.

The data tells the story and it’s not that complicated. The federal government is a massive underinvestor in energy research and development. The only one that’s really worse is the energy industry itself, which spends a minuscule 0.23 percent on research.
In my time as a cleantech analyst, people sometimes have asked me what I think the world needs to address climate change. And while a carbon tax would be nice or a breakthrough in energy storage would be even nicer, what always sprang to mind as I stared at the 300 plus billion market cap for Exxon Mobil was a 300 billion dollar clean energy company. In fact, I’d take 3 or 4 of them for good measure.
Commitments to emissions cuts aren’t going to give me my dreamed of competitors for Exxon Mobil and Occidental. But Gates’ plan just might.