Net Zero thinking, investments and fiduciary duty

My friend Tom Gosling makes arguments for challenges that the GFANZ and other NZ (NetZero) alliances (particularly) financial ones face.

On the limits of GFANZ, @GoslingTj argues for the limitations of GFANZ and the problems of committing to a 1.5c world when the world is committing to (median scenario) of 2.7c. There is still much use in the planning tho. tom-gosling.com/blog/one-cheer…

His overall point that corporates can not attempt NZ by themselves without governments, policy and other supporting actors is well made and I think understood by those at the frontier. He makes other points about the compromises and difficulties of a world where the median policy scenario is looking at 2c to 3c heating (2.6c or so at latest assessment I’ve seen, but with error bounds etc.) but companies are being asked to support a 1.5 to 2c scenario.

Tom argues that for many investor mandates this would be incompatible with fiduciary duty. This is the legal concept - with variation between countries - that an investor has to act as “prudent person” would and this is typically interpreted to mean to maximise risk adjusted financial returns depending on the mandate.  Tom’s argument is that investing for eg. a 1.5c world would harm risk adjusted financial returns and not be “prudent” given the policy scenario.

To this particular argument, I believe the legal answer is “it depends” or as lawyer might say, it depends on “fact and degree” (not legal advice yadda yadda) . Certainly, (not investment advice yadda yadda) I could construct an equity portfolio that is plausibly in-line with a 1.5c to 2c scenario and that plausibly will make better or at least as good risk adjusted returns as the benchmark on a 7 year or longer horizon. 

And, in fact, the equity portfolios I manage are aligned with the Paris agreement, and I believe will produce better risk adjusted returns than their benchmarks. There are two observations and a caveat that I will make. First, the caveat. I am very of the “fair share” carbon budget analysis that determines temperature alignment at a company level. I judge there is limited \ no science basis for the estimates that go into fair share analysis. They are social-political judgements. This is less of an issue at a country or sector level, but a big problem at a company level. This was hit home to me listening to Prof Simon Dietz at the LSE, Climate Transition \ Grantham | TPI team. So when you see you a rating organization claim company X is aligned to eg. 3.2c this number has so many dubious assumptions behind it to be borderline fictional.  [The challenge is that you need to assign a company its “fair share” of the global carbon budget for a 2c world (at 66% probability)]

My first observation of why such portfolios are possible to manage in line with fiduciary duty is relatively simple maths. If the world is on track for 2.6c, (66% chance) then some companies and sectors are approximately heading to a 3.6c world and  some are heading to a 1.6c world (given ALL the massive uncertainties I briefly highlighted some of, above). It seems entirely plausible that you can construct high returning portfolios from those below average companies.

My second observation is you can plausibly see this from bottom up calculations. There are 1000 over companies with Science Based Target approvals (there is a large separate debate on how robust the SBT process is, but it is plausibly as good as other processes) and you have a good number of companies such as Microsoft which have produced good financial returns and are plausibly aligned with a NZ world.

Still, while NZ and fiduciary duty in my view is compatible. It certainly is possible to break it. Hence the answer, it depends. But, for instance, 30 to 35% of Americans do not believe in man made climate change, and many investor mandates will want asset managers to ignore climate in the way they ignore (at first order at least) poverty, pandemic risk, nuclear risk, pollution and many other negative systems risk. This does not address the complexity of systems thinking, universal ownership or a possible  systems view of fiduciary duty. But, it is certainly possible to break this in a mandate. A catholic mandate may be broken by investing in a prophylactic maker, a global mandate is broken by not investing globally. These may seem almost trivial except that it does show that the “customer” or end investor wishes in this case are primary.

Also, broad index funds eg representing the 2,000 largest companies in the world. Those type of funds are likely not aligned to a 1.5c - 2c world currently (they are likely to be aligned to board where the world is heading if govts make good on their commitments), and their mandates may well not be suited for a NZ commitment. 

In any event, Tom’s blog makes several noteworthy points for climate and Net Zero thinkers to ponder, even if the legal nuances of fiduciary duty, in my view (not legal advice, yadda yadda) simply depends on the actual circumstances. Subscribe now

David Wallace-Wells raises the challenge of the fact that the median science now points to a 2c to 3c world and not a 4c+ world. 

Five years ago, scientists talked about 'business as usual' warming between four and five degrees celsius. Now they talk about two to three. What does that jagged new world look like? A tour of life at 2C. (1/x)

The New World: Envisioning Life After Climate Change. Scientists increasingly agree on how much warming the planet will experience. This is what it might look like.

That this is progress, but that damage will still arise. Some activists advocate for representing a more alarmist world in order to garner more action. Others believe sticking closest to the median science is more truthful.  This is not only a challenge for climate but crosses into pandemics and other areas.

Is it better to be Straussian or “on the nose” ? (Do you even know what I mean by that?) My moderately held belief is that truthful is mostly better, but there are definite counter examples.  (It is possible that Utilitarian thinker Peter Singer is purposefully not advocating views he holds because he believes this will produce more utility, consequentialist second order thinking for those who might follow such things)

Noted libertarian leaning, conservative leaning thinker, Bret Stephens has an essay on changing his mind on climate. He now views it as definitely a problem, and one that “markets should solve.”

“A trip there changed my mind about climate change while reinforcing my belief that markets, not government, provide the cure.”

Opinion | Where My Climate Doubts Began to Melt. A trip to Greenland changed my mind about climate change but reinforced my belief that markets, not government, provide the cure.

But a careful reading of even just this opinion piece shows that these are not quite “free markets” as such, or at least as interpreted by the 1000+ comments on the article. They are markets that are created, incentivised (or not) by government and NGO actors. This is where a reading of Jacob Soll and his history of free market ideas I think is useful. See my previous blog here.

“Most of this innovation will be driven by free-market capitalism, with important incentives from government and NGOs.” (quoted in the essay).

Stephans argues:

1) Engagement with critics is vital.

2) Separate facts from predictions and predictions from policy.

3) Don’t allow climate to become a mainly left-of-center concern.

4) Be honest about the nature of the challenge.

5) Be humble about the nature of the solutions.

6) Begin solving problems our great-grandchildren will face.

7) Stop viewing economic growth as a problem.

8) Get serious about the environmental trade-offs that come with clean energy.

9) A problem for the future is, by its very nature, a moral one. A conservative movement that claims to care about what we owe the future has the twin responsibility of setting an example for its children and at the same time preparing for that future.

I would say the above sums up a possible centre-right manifesto on climate.

I think, perhaps, the simplified debates over “free markets” vs state control are unhelpful in the abstract. In the abstract, society typically at the nation-state level (but it can be at higher or lower levels at times) decides through a political process where the state should have skill\capacity (with classical liberals and conservatives cautious about the states ability to act, and (what we now view) as left leaning liberals and social democrats more optimistic about government’s ability), and then the state though policy, incentives and regulation develops markets or systems to meet society’s chosen needs usually [today] with a welfare security element (smaller for conservatives, and larger for others).

But the details really matter, most libertarians still advocate for defence, police, justice, basic science research and some other areas all to be done at the government level but they disagree even amongst themselves as to how much regulation there should be on finance or the environment. 

Re: environment, two ideas potentially compatible with classical liberals or libertarians would be a carbon tax\price (with neutral redistribution) and relaxed permitting for new energy infrastructure eg wind farms and solar panels. 

I currently view the permitting challenge as one of the main shadow battle ground taking place across most developed nations. Certainly in the UK where permitting ends up will set the medium term direction of much more than perhaps the average person realises.

Permitting for new energy infrastructure should also be a cause for leftist supply-side policy people (eg.Ezra Klein in the US). Let’s see where that develops.

The left view is - more easily understood - for more government actions possibly across all of regulations/standards, innovation direction and infrastructure and less reliance on mobilisation from the private sector.

Some thinkers here, go so far as to argue that company pronouncements on eg NetZero are a dangerous placebo that is slowing government action.

I circle back to Jacob Soll and examining the economic history work of Mark Koyama (also see previous podcast). Many solutions have been a blend of government or nonprofit actors in market formations although within this you have examples across the spectrum.

UK Charity investment law case: charities have the discretion to exclude investments

Important UK Charity investment case law (2022): “Should charities, whose principal purposes are environmental protection and improvement and the relief of poverty, be able to adopt an investment policy that excludes many potential investments because the trustees consider that they conflict with their charitable purposes? One might be forgiven for thinking that the answer should obviously be that such a policy would be entirely appropriate. But because of uncertainty over the reach of the only leading case in this area […]and the fact that this is a very important decision for them, the Claimants, who are the trustees of two such charities, seek the Court's blessing for the adoption of their new investment policies.”

The decision - in my view - of this judgment is that charities now have the discretion to exclude certain investments, even where the potential return from those investments would be greater, if the trustees reasonably believe that the investments would be in conflict with the charity’s objects.

So, for instance if a charity has an environmental objective then exclusions based on, for instance, Paris-alignment assessments would be allowed (if a proper balancing assessment was done by the trustees.)

Judge also sums:

(1)  Trustees’ powers of investment derive from the trust deeds or governing instruments (if any) and the Trustee Act 2000.

(2)  Charity trustees’ primary and overarching duty is to further the purposes of the trust. The power to invest must therefore be exercised to further the charitable purposes.

(3)  That is normally achieved by maximising the financial returns on the investments that are made; the standard investment criteria set out in s.4 of the Trustee Act 2000 requires trustees to consider the suitability of the investment and the need for diversification; applying those criteria and taking appropriate advice is so as to produce the best financial return at an appropriate level of risk for the benefit of the charity and its purposes.

(4)  Social investments or impact or programme-related investments are made using separate powers than the pure power of investment.

(5)  Where specific investments are prohibited from being made by the trustees under the trust deed or governing instrument, they cannot be made.

(6)  But where trustees are of the reasonable view that particular investments or classes of investments potentially conflict with the charitable purposes, the trustees have a discretion as to whether to exclude such investments and they should exercise that discretion by reasonably balancing all relevant factors including, in particular, the likelihood and seriousness of the potential conflict and the likelihood and seriousness of any potential financial effect from the exclusion of such investments.

(7)  In considering the financial effect of making or excluding certain investments, the trustees can take into account the risk of losing support from donors and damage to the reputation of the charity generally and in particular among its beneficiaries.

(8)  However, trustees need to be careful in relation to making decisions as to investments on purely moral grounds, recognising that among the charity’s supporters and beneficiaries there may be differing legitimate moral views on certain issues.

(9)  Essentially, trustees are required to act honestly, reasonably (with all due care and skill) and responsibly in formulating an appropriate investment policy for the charity that is in the best interests of the charity and its purposes. Where there are difficult decisions to be made involving potential conflicts or reputational damage, the trustees need to exercise good judgment by balancing all relevant factors in particular the extent of the potential conflict against the risk of financial detriment.

(10) If that balancing exercise is properly done and a reasonable and proportionate investment policy is thereby adopted, the trustees have complied with their legal duties in such respect and cannot be criticised, even if the court or other trustees might have come to a different conclusion.
I would echo the judge who wrote:

“I think it was important, not only for these charities, but also for charities generally, that there should be clarity as to the law on investment powers of charity trustees. That is why I gave permission for these proceedings to be brought. I hope that such clarity has been provided.”

The judge decided:

“…The Claimants have decided, reasonably in my view, that there needs to be a dramatic shift in investment policies in order to have any appreciable effect on greenhouse gas emissions and for there to be any chance of ensuring that there is no more than a 1.5°C rise in pre-industrial temperature. The only question is whether they have sufficiently balanced that objective with any financial detriment that may be suffered as a result. In my view they have and the performance of the portfolio will be tested regularly against recognised benchmarks and will seek to provide the financial return specified in the Proposed Investment Policy.

Accordingly I consider that the Claimants have exercised their powers of investment properly and lawfully, having taken account of all relevant factors and not taken into account irrelevant factors. I believe that the decision to adopt the Proposed Investment Policy is sufficiently “momentous” to justify the court giving its blessing to that decision and I therefore make the declaration that is sought in the adjusted wording of declaration 9 in the draft Order. That is in the following terms, with my amendments:

“The trustees of the Charities are (a) permitted to adopt [the Proposed Investment Policy] and (b) that doing so will discharge their duties in respect of the proper exercise of their powers of investment.”

Read the full judgment : https://www.bailii.org/ew/cases/EWHC/Ch/2022/974.html

Or Pdf here.

Why consider supporting SEC climate disclosures

  • The SEC is a pseudo-meta regulator of the world 

  • SEC is proposing climate disclosures 

  • If you believe climate disclosures are good you should be writing to the SEC to tell them so

The US SEC (company and financial regulator, securities exchange commission) is proposing to require companies to include climate-related disclosures in annual and regular reports. The SEC commissioners (and politicians) are not unanimous in supporting these proposals. There is a reasonable argument that the SEC is a global meta-regulator. There is an argument that these disclosures will allow easier innovation and assessment of carbon impacts. Thus this is an important step in assisting climate solutions. If you believe this, you should send supporting statements to the SEC while comments are open to 22 May (or contra) as a low cost way of helping potentially a high impact policy. The idea is tractable and impactful. While not very under-researched, most people outside finance seem unaware of this proposal nor of the meta-regulator role of the SEC. This makes the SEC have a uniquely global role.  

Background

On 21 March 2022 - “The Securities and Exchange Commission today proposed rule changes that would require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements. The required information about climate-related risks also would include disclosure of a registrant’s greenhouse gas emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks.”….

“The proposed rules also would require a registrant to disclose information about its direct greenhouse gas (GHG) emissions (Scope 1) and indirect emissions from purchased electricity or other forms of energy (Scope 2). In addition, a registrant would be required to disclose GHG emissions from upstream and downstream activities in its value chain (Scope 3), if material or if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions. These proposals for GHG emissions disclosures would provide investors with decision-useful information to assess a registrant’s exposure to, and management of, climate-related risks, and in particular transition risks. The proposed rules would provide a safe harbor for liability from Scope 3 emissions disclosure and an exemption from the Scope 3 emissions disclosure requirement for smaller reporting companies. The proposed disclosures are similar to those that many companies already provide based on broadly accepted disclosure frameworks, such as the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol.”

In brief detail:

Board and management oversight and governance of climate-related risks

How any climate-related risks have had or are likely to have a material impact on its business and financial statements over the short-, medium-, or long-term

How any identified climate-related risks have affected or are likely to affect strategy, business model, and outlook

Processes for identifying, assessing, and managing climate-related risks and whether such processes are integrated into the overall risk management system or processes

The impact of climate-related events

Scopes 1 and 2 GHG emissions metrics, separately disclosed, expressed both by disaggregated constituent greenhouse gases and in the aggregate, and in absolute and intensity terms

Scope 3 GHG emissions and intensity, if material, or there is a GHG emissions reduction target or goal that includes its Scope 3 emissions; and

Any climate-related targets or goals, or transition plan…

Why is the SEC a meta-regulator?

This ideas has been discussed in financial and policy circles, but in a public popular way by Bloomberg writer, Matt Levine.

The idea (which he has floated from time to time over the years ) is that the SEC is a form of global “meta-regulator” because US business touches the whole world (and so many “stakeholders”, customers, employees, supplies etc.) in so many ways then the way you regulate US business will regulate the world.

In that sense by demanding climate data, the SEC is suggesting climate is relevant for US business and thus the world.

Levine writes:

“I sometimes say that, in the U.S., the SEC is the all-purpose meta-regulator, and here you can see why. Public companies exist in society, so everything that matters to society is probably material to public companies, and what public companies do about any issue probably matters to society. And regulating what public companies have to say about that issue will affect how they act on it. The title of Commissioner Peirce’s dissenting statement is: “We are Not the Securities and Environment Commission - At Least Not Yet.” But they are! They’re the Securities and Everything Commission.”


What is the theory of change mechanism? 

The idea is that is it hard to manage what you do not measure and therefore measurement and disclosure are the first steps in solving a problem.

Market advocates argue that once sufficient transparency is produced that investors / market forces will then (most efficiently or more efficiently than central planning) produce the desired outcome under acceptable trade offs.  

The strong-form argues for limited policy intervention.  The weak-form argues that market forces work alongside policy will be most effective. 

There is evidence that transparency can lower the cost of capital and that it’s helpful at IPO and in overall making stock/debt markets more efficient. 

Mechanisms could be (drawing on Levine): 

The disclosure regime effectively deputizes public companies to be climate enforcers: If their suppliers don’t start measuring and reducing their emissions, the companies won’t be able to do the required disclosure.


If your disclosure under this item says “Our board is not informed about climate-related risks in any systematic way, and never really considers them,” that will look bad. Investors will complain, the SEC will look at you with suspicion, it will be unpleasant. To check this box, you will have to start providing the board with regular reports about climate risk, and devoting time to it in board meetings. (This is true even if you are, like, a software company with a modest environmental footprint.) Perhaps this will all be surly and pro forma and your behavior won’t change, but the (reasonable) theory seems to be that if you force boards to talk about climate change they will end up doing something about it too.

Large Funds as Universal Owners

Matt Levine also highlights a somewhat new piece of thinking on the idea of “Universal Ownership” and how this is different (recall certain passive investors may own 3 - 5 % of all American companies in their tracking mandates).

Several large institutional investors and financial institutions, which collectively have trillions of dollars in assets under management, have formed initiatives and made commitments to achieve a net-zero economy by 2050, with interim targets set for 2030. These initiatives further support the notion that investors currently need and use GHG emissions data to make informed investment decisions. These investors and financial institutions are working to reduce the GHG emissions of companies in their portfolios or of their counterparties and need GHG emissions data to evaluate the progress made regarding their net-zero commitments and to assess any associated potential asset devaluation or loan default risks. [SEC]

Then Matt:

Notice that this is weird. This is not “investors need this information to understand the company providing the information,” but rather “look, investors these days are diversified, and many of them care about the systemic risks to their portfolios, not about how any one company runs its business.” If it’s material to an institutional investor that its portfolio be carbon-neutral, then it needs to know the carbon emissions of each portfolio company, even if those emissions are not actually material to that company.

This strikes me as very new! And basically correct, I mean: Investors are often diversified and systemic these days, so the SEC’s rules might as well reflect how investing actually works. Still it is a novel and surprising concession, asking a company to disclose stuff because it is useful to its shareholders as universal shareholders, not (just) because it is relevant to the company’s own business.

What is the cost? Risk?

There will be increased reporting and staffing costs for companies.  This may cause lower allocation of capital to more impactful items. Second order costs harder to know but might make more intense companies suffer from a higher investment cost of capital.  (Which advocates would argue is a feature not a bug). Major risks seem limited but see counter arguments below.

What is the benefit?

The first order benefit is that it allows investors (and the public) to know and therefore assess the carbon footprints of large corporates and their climate strategies. This information is difficult to ascertain outside the company. 

It allows more accurate allocation of capital for those investors interested and allows easier comparison of strategies between companies. 

It allows market forces to act better. 

It may allow more efficient litigation if required on if companies follow relevant laws as regards risks (eg carbon risks). 

Why is this a long term benefit ?

If you believe carbon impact is a significant risk then this regulation has plausible probability (I estimate 72%) that it will allow better innovation and risk management. 

In particular, if you give some weight (say 40%) to the SEC as meta-regulator idea then this has a plausible chance  of positive  global systemic benefit. 

The cost of the regulations seem acceptable and the risks of unintended consequences low and of acceptable outcome. 

What are the counter arguments?

These are best articulated by one of the SEC commissioners Hester Pearce.  She argues the regulations are unnecessary and costly. And by extension creep the SECs mission into environmental regulation.  (see link end)

John Cochrane has adjacent arguments although these apple more to the Fed and climate, but worth considering. For the Fed it is overstepping remit and also the wrong area of government to be tackling the challenge as he views limited risk to financial stability.  (see link end)


Is this tractable? Under researched ? impactful ? Should people support it ?

The policy is possible but faces opposition. On principle right leaning politicians dislike the costs and unintended consequences of regulation. The policy could be very impactful. The debate is not well known outside finance circles. Given this if you are minded, it’s a policy worth giving supporting comment to. Do feel free to comment your support (or not) here: https://www.sec.gov/rules/submitcomments.htm

Press release with links to full report here. 


Further thinking and reading:

On climate policy overall, Chris Stark CEO of Climate Change Commitee (UK statutory body), podcast: https://www.thendobetter.com/investing/2022/2/7/chris-stark-ceo-climate-change-committee-netzero-policy-adaptation-cop-fairness-behaviour-change-podcast

On climate science: Zeke Hausfather on the state of the science

https://www.thendobetter.com/investing/2021/11/22/zeke-hausfather-state-of-climate-science-energy-systems-post-cop26-tipping-points-tail-risks-podcast


On a simple but comprehensive mental model on solving climate, from the head of Stripe, Climate, Nan Ransohoff https://nanransohoff.com/A-mental-model-for-combating-climate-change-846be1769d374fa1b5b855407c93da66

Counter arguments:
Peirce (SEC): https://www.sec.gov/news/statement/peirce-climate-disclosure-20220321

Cochrane: https://johnhcochrane.blogspot.com/2021/07/climate-risk-to-financial-system.html

Chris Stark: CEO climate change committee, NetZero policy, adaptation, COP, fairness, behaviour change | Podcast

Chris Stark is the Chief Executive of the UK’s Climate Change Committee. The committee is an independent statutory body which advises the UK and developed governments on emissions targets and preparing for and adapting to the impacts of climate change. I think he is one of the most important and thoughtful thinkers on climate change policy today.

We discuss what is most misunderstood about climate policy, the likely co-benefits and the scale of investments needed especially in the UK in replacing “old inefficient stock”.

What positives/negatives came out of COP26 (recent international climate conference) and what to hope for in COP27 and beyond. Why COP26 might have been considered a corporate COP as a criticism but why that might not be bad. 

Why sector specific strategies might be a better plan than a focus on carbon tax.

Why adaptation or resilience has been a bit of a “Cinderella” in climate discussions. What the science suggests is already baked into 2050 scenarios and so what we should be thinking about adaptation as well as mitigation. 

The complexities and challenges around “behaviour change” and why it’s not a great term. Why we might not need a complete culture change (in the sense of changing lifestyles) but the intersection of behaviour and technology. (For instance, still driving cars but electric cars on a decarbonised grid.)

Why a sense of fairness is one the most important climate policy (political economy) considerations and what we should think about in terms of climate impacts falling unequally across countries and peoples. 

What role finance has to play and Chris references the work of Nick Robins at  looking at this, link here. Also see his work for Grantham Institute links here. 

We discuss:

  • Climate assemblies (and why Chris changed his view on them)

  • Divest/engagement strategies 

  • Carbon offsets 

  • Carbon taxes 

  • The role of nuclear 

  • Land use

  • Road charging 

And we end with advice Chris has for people. 

Various links to the CCC work can be found here.

Transcipt below, you can listen below or where you get podcasts. Video above or link here.

PODCAST INFO

Transcript with Chris Stark (only lightly edited, so expect typos etc.)

Ben Yeoh (0:00): Hello, and welcome to Ben Yeoh Chats. If you're curious about the world, this show is for you. What should we be doing about climate policy? On this episode, I speak to Chris Stark. Chris is the CEO of the UK's Climate Change Committee, and a leading thinker on climate policy. We speak on the transition to net zero, the investment needed, and what is most misunderstood. If you enjoy this show, please like and subscribe as it helps others find the podcast. Thank you, be well.

Ben Yeoh (00:31): Hey everyone! I'm super glad to be having Chris Stark with me. Chris is the chief executive of the UK's Climate Change Committee. The committee is an independent statutory body, which advises the UK and developing governments on missions, targets and preparing for and adapting to the impacts of climate change. And I think he is one of the most important and thoughtful thinkers on climate change policy today. Chris, welcome.

Chris Stark (0:57):  Hi Ben, it's very good to be here.  


Ben Yeoh (0:59): So, what do you think is perhaps the most misunderstood about climate policy and thinking today? For me, at least from a UK perspective, I was quite moved by your committee's work that suggested, although we need a large amount of capital investment, particularly turning over capital stock around the order of say 50 billion or 60 billion a year. In terms of percentage GDP, this was maybe 1% of GDP, and that this investment generates a lot of positive economic returns, not just in terms of climate, but a lot of natural capital, but a lot of many other co benefits. And I guess you can see this on an individual basis. So, if you upgrade your fridge, obviously, that costs you say 1000 pounds, a lot of capital expense, but you get lower operating costs and your fridges cooler, and it's got all the latest kind of things. And I kind of feel when I talk to people, people don't really understand that actually on a net basis, it may not cost that much. What is it for you? Is it along the lines of that which you can elaborate on? Or is it a couple of other things? What do you think is misunderstood?


Chris Stark (2:04): Well, I think there are misunderstandings all over the place. I mean, it's the top misunderstanding is that climate change is something that's you know, a bit further down the road, you know, that we will get to climate change, but we don't need to worry about it right now. I think that's the number one fallacy with us now.  I mean, we are speaking today in January, and it's really warm, it's very unusually warm. And you can see that it's precisely now affecting the growing season. So, you know, there are clues everywhere. And although that sounds quite nice, that's actually very problematic. You know, there's all sorts of reasons why that's a problem if the pollinators aren't there for the flowers when they come out then you've got a new problem with biodiversity and, you know, the whole kind of system of food, for example, that we have as well. So, the climate thing is, I think number one is this idea that it is something that can wait. And we still get that even though of course, it's much more popular in the discussion today. But I think the other one is the one that you raised, and you completely nailed it in the way that you described it. This idea that somehow tackling the issues of, you know, the underlying cause of climate change is going to be ruinously expensive. It just isn't and I honestly really liked the way you described it there. 


Chris Stark (03:23): Challenges that we have, lots of things, technologies that we use in everyday life, right across the economy, in every corner of modern life, we use fossil fuel technologies. We've kind of got to the point where we don't even notice it, because it's so pervasive in the West, certainly. And we got to change that. And it is a huge shift change that has a massive inertia in the system, all the infrastructure that's been there to establish those fossil fueled paradigms, and every sector of the economy, there needs to change. That is predominantly about investing. So, we need to invest to change the assets that we are using. So, you mentioned it, you know, the fridge is one of those fossil fuel assets at the moment because it uses electricity, but you can get a better fridge. A more obvious example is a car that you may drive which at the moment; most persons drive a petrol diesel car, in the future, that could be an electric car. That requires investment to change over these capital assets. And it takes time to do that, unless you're willing to do something pretty radical, and strand those assets to stop using them before they get to the end of their useful life. But that's investment and it does cost, there's no doubt there's a big investment cost to it. But the key thing and the thing that most people don't understand is that in the use of those assets that you replace those fossil fuel assets with. So, the electric car, or even that fridge that you talked about or something called a heat pump, an alternative way of heating your home.


Chris Stark (04:52):  They are much more efficient in the way they use energy. They're typically electrical. So, if you can decarbonize the electricity to those devices, then you've got, you know, cheap, your readily available decarbonized source of energy, and they're cheap to run. And if you net those two things off that big capital cost, and the cost of using it, the cheaper cost of using it, then you get to this very low cost all across the economy. It is close to 0%. And actually, in these moments of high fossil fuel prices, it actually gets slightly cheaper to decarbonize, because, of course, you know, this is the alternative to that if the relative cost falls. So, there are lots of things that people assume out there in climate land when they're commentating on it, but actually, most of it, you can kind of puncture with a bit of analysis, which is largely what we're here to do.


Ben Yeoh (5:43): And do you think that holds for the UK? Do you think that holds globally as well?  It seems to be based on some other analysis I've seen, but I don't think I've seen it as in depth as what you guys have done for the UK. But it would seem to hold that logic. Obviously emerging markets will be slightly different on the curve. And they could, in fact, leapfrog to some degree. And maybe we're seeing that in places like China in some aspects already, because one of the push backs I get when I talk to people who are sort of open minded, but a bit skeptical, they say, oh, what about China or what about the world? So, the UK can do it. Now there's a kind of historical, maybe moral and ethical imperative for why the UK should be one of the first in any event and socially-developed nations. But even putting that to one side, you think that broadly holds globally?


Chris Stark (6:33): Yeah, it really does. I mean, actually, the UK is one of the hardest places in the world to decarbonize, you could say it's the hardest actually, when we were 30 years ago, and were really starting on that journey. It probably was the hardest place because we had been most invested, more invested rather than any other country in the world in fossil fuels. Because we started it off really, since the Industrial Revolution. There are parts of the world that haven't made that journey quite as extensively as western economies like the UK. And actually, they should be even cheaper to decarbonize. And this is the exciting thing for me. Now, it's convenient to use fossil fuels. So, I think this is the challenge that you can take a lump of coal out of the ground today, I can hold it in my hands, and you know, I can put it on my desk for 1000 years, it will still retain the energy that you know, you might want eventually, within it. It's a convenience to have that coal. If you fall down the trap of going for that convenience, building out the kind of infrastructure that older western economies have built out based on fossil fuels, then you will face big challenges in the future to compare back to something zero carbon in the future. 


Chris Stark (07:46): The challenge for those economies, China might be one of the developing economies, as they are sometimes known, most notable, probably India, is to not go down the route of building out that fossil fuel infrastructure in the first place. Really interesting questions about whether a country like India needs a national grid in the way that we have in the UK for example. Might be much cheaper for them not to do that, to have solar, for example, and wind and hydro as the core basis of their energy system, but in a kind of a set of islands across the whole country. That is probably a cheaper energy system. So yeah, that story does hold in other countries. In fact, it's probably more compelling in other parts of the world.


Ben Yeoh (08:26):  So, coming out of COP 26, we had some progress and some continued areas of improvement. And we're going to go into COP 27, 28, 29 and further on. It's the kind of ongoing progress rather than a sort of point in time. But what would you point to as maybe successes on the global community basis? And what would you like to see? Maybe areas where we could improve?


Chris Stark (08:50): Yes, COP 26 was really interesting for all loads of reasons. And I find it personally very interesting, because it was my home city. So, I mean, the topic that I cover in my professional life is climate change. And it was in my home city of Glasgow. A great place to host it actually, because it's set up quite nicely to deal with a conference of that kind of scale. And I think it did a reasonably good job of it. [] the really interesting thing about this COP was that it was criticized by some of the corporate COP. And it was a corporate COP and I don't think there's any shame in that actually. I think the really interesting thing at COP 26 was it was the first time I felt at least that at a COP corporate turned up. I mean, you could tell that it was the Triple A, CEOs, you know, top financiers, they were there. They weren't just there because they wanted to be part of the show.


Chris Stark (09:51):  They were there because I think they could see the opportunity and all of this for the first time. And you get this really interesting thing happening where the economics of the transition to decarbonize the global economy get better and better each year. The cost of solar falls each year, the cost of wind falls each year, constructing technologies that can use those energy sources. And that gets better each year and that eventually becomes very compelling. And I think that's what we saw. So, although that story has been brewing for a while, this was the COP where it became clear that those like Triple A, Blue chip corporates and financiers were interested. And then you have the thing that you always get at a COP, which was that civil society was there making its voice heard. Now interesting, I think when you get pressure from both of those things together, as world leaders start to get squeezed, and start to raise the ambition. We saw a bit of that at Glasgow at COP 26, but we didn't see enough. But the really interesting thing, for me at least is that in Glasgow, what we saw was an almost universal view that net zero is the site concept of getting to the point where you are emitting as much as you take out of the atmosphere to get to this kind of balanced position. Net Zero, carbon dioxide is now a kind of universal aim for every country in the world. 90% of the world's economy is now under some sort of net zero target by midcentury. That's amazing. You know, that is a real step forward. 


Chris Stark (11:20): So, we've not had that at the COP before. And we didn't even have that, you know four or five years ago, this is a huge, huge step forward. I think the UK can lay some claim to helping that process, actually, by being willing to make that the target [Inaudible: 00:11:33] in the UK, because it looks at not just carbon dioxide, but all greenhouse gasses, tougher basis. But that was a big part of the story in Glasgow. But what was absent was the near-term ambition to drive the transition. And the change in the climate is ruthless; it only cares about the cumulative CO2 that's put into the atmosphere. So, it's great to have those midcentury goals. But unless they're accompanied by short term action to suppress emissions, carbon dioxide comes from burning fossil fuels mainly, then unless we have that, then we keep pumping carbon dioxide into the atmosphere and the temperature inexorably on the planet keeps rising. 


Chris Stark (12:15): So, you know, we haven't got the ambition rate for 2030. And I think for me that's the disappointment in COP is that we didn't get that kind of, you know, Triple A, I mentioned that already when it came to corporates. We didn't get the same ambition from some world leaders, especially for 2030. Some countries have all agreed that they should have done better: Russia, China could have done more, Australia could have done more, Indonesia could have done more, you know, there's Brazil that could have done more. So, I think there is still a gap. And it can be closed. But it's a hell of a job now over the next nine years now to get to kind of make sure that we try and tackle that 2030 goal in the way that we need to otherwise… [a goal] for COP 26, which was keeping alive, the temperature outcome of 1.5 degrees centigrade, but I'm afraid that will fade away quickly, indeed, if we keep going on the same trajectory for Carbon Dioxide emissions. So, I suppose for me this was the COP that had some really good bits in it, and stuff to hang your hat on. We've finally tackled the issue of fossil fuels in a text from the UN. But there’s a lot still to worry about. So, COP 27 is where we go next.


Ben Yeoh (13:32): I can chime in with a lot of that. So, I've been an investor and I was speaking to a large healthcare company CEO, probably about a year ago. And saying that a lot of his end asset owners’ investors wanted him to think about net zero for the company. And he was open minded. He says, yes, this is definitely a problem. And then said, well, you know, health care, we're not the most intense company. It's probably not within our top five risks when we do our analysis, but we should think about it and maybe we'll do something and what's kind of, like sort of mildly positively committed, but nothing that I thought would get done anytime soon. And then fast forward to the second half of the year, there was a real step change in the rhetoric, committed to midcentury Net Zero, but more than that was going to go negative by 2030. And had put the short-term action plan in place. And that was really in the space of, say six to nine months and pressures, obviously from both employees, outside stakeholders, probably investors, and that and coming to the right thing to do.


Ben Yeoh (14:39): So, I do think there is a shift in corporate land, although again, not across everyone and everything, but you know, this is a company with billions of dollars in revenues, hundreds of thousands of employees. So, I think that was quite interesting. And then the second order effect of the fact that what we forget is that CEOs speak to politicians and governments all the time. So, they are uniquely influential as well as civil society and everything else, because they're saying, well, we've done it, and we're just doing it regardless. So that's in one sense. 


Chris Stark (15:11): Yeah. I think it's interesting you raise that though Ben. I mean, I think for me, there's a really interesting story behind that about how change happens. So, there is still a bit, we talk a lot about policy in my job. So, people refer to policy and policymakers. And there is a sort of notion sometimes about how policy is made by governments. And the thing, I still hear it occasionally, and the thing that is often said, is that, you know, leaders in governments respond to what voters' demand. And in democracies, like the UK, you get a manifesto or an election, the party of government is elected on the strength of that manifesto, and then they implement these policies, as though it's a sort of transaction between voters and politicians. Now, there are other systems of government, of course, but I'm thinking particularly of democracies, like the UK here. It doesn't really work like that, in my experience. And actually, the process of change, basically, as far as policy is concerned, is a bit more organic and interesting actually. And a lot of it is to do with corporations, and their willingness to change. And actually, governments and world leaders hear that; I think more directly than we do, sometimes the voters.


Chris Stark (16:31):  It's almost as if the voters have a veto, actually, I often think, but one of the interesting things in my world, at least one of the interesting transitions that's ahead for us is in vehicles and fossil fuel vehicles, to electric vehicles in the future. Now, that is a fascinating transition. And most consumers haven't been asking for that kind of transition to take place. It has been actually a more of an interesting discussion between governments cognizant of some of the environmental impacts of cars, but also some of the industrial impacts of car making and those automotive manufacturers. And you get the policy discussion happening a lot in that space, actually. So, creating the incentives that countries around the world have put in place for electric cars, as a means to grow the production of those cars, and the economic benefit of that for those countries that do so. 


Chris Stark (17:28): That actually took discussion between government and corporate. And we the consumer, then buy the thing that comes out of that via policy. And I think, actually a lot of this, there's all sorts of those kinds of transitions still to come. And I think we should think more deeply about how the policy process works. Because if you do so you can actually accelerate it. And that's exactly what's happened with electric vehicles. Actually, it's been the process of creative policy making, particularly in places like California that has dramatically shifted, you know, the pace with which we think we can make that transition. And just one final point on that particular transition is I think it's really interesting that the conventional view on how you decarbonize the transport system, say 20 years ago, maybe 15 years ago, maybe even as late as 10 years ago, was that you had to tax the fuel for those cars, you had to put a carbon tax on the petrol, or the diesel, the gas for the car, and eventually the consumer will flip to something else. But I see that story of how we've subsidized and supported and encouraged and regulated for electric vehicles hasn't really involved doing that kind of taxation at all. And that tends to be a better way to get things done quickly. And it's also a politically more acceptable way of doing it because consumers don't like paying higher taxes. So, I think that some of this stuff actually really matters for some of the other things, some of the other technological shifts that need to happen across the economy. So, I actually think we should think more about how that policy process works.


Ben Yeoh (18:58): That's really fascinating to me, because that ties in quite a few relatively complex observations that I've had, although contested. But to me that's putting together this idea that maybe we have Median Voter theory, where the median voter is, and this idea of the Overton window where you might get a window of policy ideas done. But if you look at it, if you want to really reflect that in democracies, politicians have to kind of reflect that median voter to some degree. The median voter really is signaling to us, they don't like carbon taxes or prices. And that's been pretty consistent wherever there's been a little bit of flex, but overall, you're not passing that through a median voter type of thing. But otherwise, if you think about what you're saying about call it the kind of industrial strategy or industrial policy, you can get corporate and say transport [ ] or maybe even buildings are where we do it; where corporates in buildings might agree like okay, we can do efficiency and do carbonization there, we don't necessarily need a carbon price, we can do a mixture of raising standards and some other incentives. And do it by a set of sector-by-sector policies which actually get there without having to worry. 


Ben Yeoh (20:13): You're within the Overton window because you're not necessarily doing a carbon tax or something like that. But you're getting to a place where you can affect policy more quickly. And maybe as effectively sort of the jury's still out on carbon within that. And I'm hearing one more thing to articulate this sort of view that actually we could do this, maybe in areas where we need. So, in this country, like say, transport buildings, maybe Agriculture and Land Use, and you don't have to use so much political capital on something like a carbon tax or price. There's an underlying background that always helps to have a price on something. But you might be able to get there with just a well thought out sector strategy, which if it has corporate buy-in, if you've got corporate buy-in policy support, and the consumer is not giving you a veto, then you can kind of go ahead and do it. Does that kind of make sense as a kind of policy framework as a theory of change?


Chris Stark (21:03): Very much so, I've been in this job for four years, four or five years now. And the whole time I've been doing this job that is the kind of advice that we've been pushing out to the government, this idea that you actually need sector specific strategies for decarbonizing. And the reason that's important is because the conditions are different in every sector. Now, you definitely do need a background carbon pricing; something that gives a strong signal to markets to move away from the thing that is causing the environmental damage. But the old […], I say old actually, but you still hear this extensively particularly from those in the oil and gas sector interestingly enough; that you still hear this idea that we can do it all with carbon pricing. But we know that's politically unsuccessful. And I'm not making... I run an organization that gives technical advice; I'm not making a political point here.


Chris Stark (22:00):  It's really important to say that we know it doesn't work, because consumers don't like paying higher taxes, a fairly obvious thing to see. So, I think if we can look around that, and increasingly use regulations and standards to try and drive the transition, and with that in mind, the idea that doing so actually will cut the cost to the consumer, if those technologies can achieve scale. That's really important in this transition. And that's the kind of advice that we've been offering. And it matters particularly because what's anchoring the whole strategy in the UK, and increasingly in other countries is this concept of getting to net zero or a goal by a certain date. Now, if you do that, it helps to work back from that date to work out at what point you need these technology transitions to take place. Because what you want to do, ideally is to achieve the technology transition, without stranding assets excessively. And that basically, if you want to get to net zero by 2050, kind of interesting stat for you is that, if you buy a fossil fueled asset technology, today, it will probably be in use for between 15 and 20 years. 


Chris Stark (23:13): So, if you want to get to net zero by 2050, you really got to stop selling those assets by around 2030, you know, slightly earlier in some sectors, slightly later and others, but that kind of date really matters. Because then you can achieve a kind of a smoother transition, you can replace assets as they reach the end of their life. Otherwise, you know, something much more disruptive is required. Now, that's really helpful if you're trying to anchor some of these technology transitions. So, you can set as we have done in this country, a goal for the ending of sales of fossil fuel vehicles, for cars and vans in this country by a date that's compatible with that 2050 transition. I think we could do more of that. And really interestingly, that that didn't involve doing carbon pricing, you could argue there's a sort of shadow carbon price in there. But what it really does is send an incredibly strong signal to the two really important participants in the market, the consumer and the producer. They both know what to do then. And they see that coming. And you get this kind of innovation cycle happening that drives down the cost. And that's exactly what we're seeing in electric vehicles. Now, we can do that in other areas. If you know, as much as I am often accused of being overly optimistic about how this transition can be achieved at low cost. I actually think we've been conservative about that, because we're not actually trying to draw in too much of that cost reduction story in the analysis that we've done. If we did, I think we could really, really bring the cost down in our assessment even further. So, I'm pretty sure that's the way it'll go.


Ben Yeoh (24:46): Excellent. I was speaking to Zeke Hausfather the other day on a recent podcast. He's a climate scientist. And he was making the point that so called 'doomsday' scenarios of say above four degrees or for in instance where life on Earth ceases to exist is kind of very unlikely that's very pessimistic. On the other hand, the challenge was really serious and that, in his view, one and a half degrees, given whatever what's baked in is very unlikely to happen. So, you're probably on a trajectory where even two degrees is possible, but optimistic. Four degrees would also be possible, but quite pessimistic. And then taking all of that of what's baked in, there's a lot of adaptation, which is going to have to happen, because there's a lot of baked in to what we already see what's going to happen in 2050. And your recent letter that you put out in January pushes forward, the idea that we probably do need to do more on adaptation. And perhaps our policy thinking on here is less well developed, given what's already baked in 2050. So, what do you think of that adaptation call? And were you hoping to see more policy perhaps from a UK perspective in 2022, and thinking about adaptation, and what's already baked in?


Chris Stark (25:57): So, adaptation is, I've described it as the Cinderella, it's the Cinderella of climate, discussion of climate policy is a slightly forgotten thing and it really shouldn't be. I don't think it is helped by the name. I don't like the name adaptation; I think it sort of tends to put people off. But I haven't found a better term; resilience is sometimes thought of as a kind of […] it's not quite the same thing. But I do think we need to start talking about it. And this idea, I think that occasionally takes hold in the minds of some of the commentators that we mustn't talk about adapting to the changing climate, because it will somehow take the pressure off, mitigating the climate changes in the first place. I think that's for the birds, you're going to have to bring these two things together. And the reason I say that is because I'm afraid with quite a high degree of certainty, most of the change over the next 30 years, let's say in the climate is now baked in; reminder, we've warmed the planet by about 1.1 degrees centigrade. Now, that doesn't sound like very much, but that's an average. And that's an average land temperature. There are differences across the world. The differences depend on whether you're on land or in water and depending whether you're in the upper atmosphere or down below. But 1.1 actually may not sound a lot, but it's a huge shift in planetary terms. And there's a lot more still to come. And I'm afraid that is driven almost entirely. 


Chris Stark (27:30): I mean, we might as well say it entirely by the change in the concentration of greenhouse gasses in the atmosphere. And what's driving that is us. And it is mainly a story of our use of fossil fuels. And we will, I'm afraid, reach those 1.5 degrees centigrade thresholds. I think with a pretty high degree of certainty. And that's what the UN's Scientific Clean House said as well. I'm afraid that's just an inevitability. The question is whether we hold there, or keep rocketing through into higher temperatures. And we really should try and avoid that. Because the damage to the, you know, the global economy, the damage to the welfare of people living in the global economy, the damage to systems that we rely on throughout the world, is dramatic, and every fraction of a degree of warming, we should try and avoid it if we possibly can. And I don't think it is very much the dog that has not yet barked. I don't think people have clocked how important this is, and how quickly the changes are happening and it is upon us. The 10 warmest years here in the UK have all been since 2002. We are now kind of consistently getting warmer temperatures; with that comes more extreme weather. And I'm afraid we're going to have to reach net zero in that warming climate. So that kind of brings in this question of whether you do adaptation or mitigation. And actually, that's for me, that's just a false dichotomy; you got to do both together. 


Chris Stark (29:05): I'm really keen on making this point because actually, even if you take very simple things like that kind of transition in the energy sector that we have been advising for net zero, we also have to think about having a resilient energy system in a warming climate that achieves net zero. And you need to think about those two things now actually. So that is one good example of where we need adaptation, actually. So, we know we're going to have a more renewables-based energy system in the future in this country. We know that our energy system will generally be more reliant on electricity. That means we have greater risks. When we have an interruption to the electricity supply. Greater risks of extreme weather mean we can't generate electricity from renewables. So, we should be thinking about these things now. And I think actually, when you do that, you get into a more optimistic framing perhaps of what can be done here and we can talk about a well-adapted economy that is also achieving net zero. And actually, I think that is a positive discussion. Got to get out of this negative feeling of it all. I'm afraid that's what's causing us not to act on it. But that's a big challenge; that's something that I think my institution is going to have to pick up.


Ben Yeoh (30:03): I agree, I always liken it to the fact that there is no reason we can't walk and chew gum at the same time, given what we have to do on this. And actually, when you think about let's call it resilience work, they often spark ideas, because some resilience is going to need innovation and technology change. And some of it can also be used for mitigation, but also just that thinking about having to invest for essentially a better future or neither arm sparks that thinking whereas ignoring it, you know, putting your head in the sand around it is just as bad on that as if it were to sort of say, okay, we're not going to do anything on the mitigation side, you know, where we're going to have to do both. So, I think that's interesting. And some of the resistance is....


Chris Stark (31:01): It's really tough, though. I was looking at this... I did a presentation a few weeks back. And one of the things I was looking at, to pull out some stats on the change that we've seen in the UK climate. We've done quite a lot of that in the last 12 months. And you and I were chatting before this podcast began. You were born in 1978; so was I, I hope you don't mind me telling your listeners that. But 1978, that's more or less the point from which we start manning, from one of the points from which we start measuring the change in temperature in this UK so that we look at the 1981 era, and 1991 to 2000. And point six degrees centigrade from 1981 of warming has occurred. So basically, what that means is reframing myself, since you and I were born, half of the global temperature increase that we are now suffering from climate change has happened. So, it's in your lifetime, that half of that has happened. 


Chris Stark (31:55): So, it is really accelerating. And sadly, it's not a surprise, because scientists have been warning about this for decades now. So sometimes it's presented as a surprise that we're seeing this accelerated warming or something that is worse than was expected. It's not; it's exactly what was expected. Models have been pretty accurate at predicting it. Halting that is really tough. And I think the other thing is, it's just holding it, there is a question about whether we can reverse it. But the first thing we've got to grab is the challenge of actually halting it. And that only happens when you get to net zero globally. So, this thing about doing the two things together, it's very hard to explain it. But it's really, really important that we do it. And you know, governments around the world are going to have to grab this. I hope the UK will be one of the places that get ahead of it. But then it involves spending money sadly and involves putting policies in place that are a longer term that tend not to be the kind of policies that governments that want to be elected in a four- or five-year cycle, want to implement. So don't dismiss how challenging this is.


Ben Yeoh (33:02): I agree, we definitely have to do both. There was an insightful report into climate change and behaviour change, which was only available for a short while on the government website, before it was removed. Because this government in particular seems currently intent or not raising possible behaviour changes such as going vegetarian, or once a week or something or flying less. And on the one hand, it seems completely fair to me that elected representatives influence the course of policy and you can see that and you know, they have to reflect that and the government has choices about where they want to put policy. On the other hand, I can see that cultural change often happens for good or for bad actually, despite or without government policy, and in fact, can go the other way. And I think of big social change movements, like really big ones, so the ending of slavery or women's votes or minority rights, which kind of came ground up and had a cultural change element. And then the government changed because society had already changed first. And I think to some degree, maybe it's correct that when you get a government, which is too on the nose about behaviour change, the population often reacts the other way. Because we don't like or a lot of societies don't like being told what to do. But wherever it comes, ground up, because this is what we want to do, it obviously becomes an easier thing. 


Ben Yeoh (34:30): So, I was interested because actually, in one of the analyses I saw from the CCC behaviour change could add an element to that, although you could take it from other places. I'd be interested in your views on where you sit on behaviour change ideas, or maybe even cultural change ideas. I'm quite keen on cultural changes. I don't exactly know where it happens. But I'm a little bit maybe more skeptical and where government mandated farmers, but it's definitely a mechanism and lever that we could push and some of it might even just be on innovation, right? We are going to need people to want to replace their fridges and their cars, be amenable to spending some of this money, future generations. And maybe if they wanted to, you know, eat less beef once a week then that would also be fine. So, I'm interested in where you sit and where there are pros and cons on it?


Chris Stark (35:16): … let's just kind of go from the top, you asked about behaviour change. And actually, it's not a term I like very much. I think behaviour change implies bad behaviour. [That’s not a useful framing]. We're talking at a societal level. The challenge of changing it, though, is a real one, right? So, we want to, in all the work we do, we see a really important role for change in behaviours and lifestyles, in, you know, assisting this transition to net zero that I've been talking about today. Really interesting, one of the last pieces of work that we did before we published, the advice that led to the UK's Net Zero target back in 2019. It was a very last-minute thing. So, we thought we were just kind of stepping back. We'd sort of built this pathway out to net zero and a loose pathway for the UK economy, could be carbonized to net zero, to justify the analysis of the recommendation that we've done. And one of the things we were able to do for the first time was just step back from it and see, right, to what degree is this transition due to technology shifts, and to what degree does rest on some change in behaviour in society. And it was really striking that the kind of pure technology changes that have driven emissions down today in the UK. And by that, I mean, things like causing a coal fired power station and replacing it with a wind farm. 


Chris Stark (36:47): That's the kind of pure technology change in the sense that I, as a consumer, when I boil my kettle don't know that the electron was generated from a wind farm. You know, it's something that happened somewhere else, there's a lot of that still to come. So, these sort of technology shifts, there's about two fifths of the total emissions reductions over the next 15-20 years, two fifths of it comes from that kind of technology shift. The rest of it involves some change in behaviour. It's really interesting when we sort of sat back and looked at that, and we repeated the exercise last year, about a year ago, we did our most recent advice on the path for UK emissions with five separate scenarios, for getting to the net zero. One of them actually focused on changing behaviour. But in all of those scenarios, behaviour change is important. And then the rest of it; more than half involves some element of changing behaviours, some of that is what you might call a kind of pure behaviour change. So, changing a diet, I suppose, is the best example of that. But actually, most of it, over 40% of the emissions reductions that we are predicting would be necessary by 2035 is a mixture of technology change and behaviour change. And that's the stuff that I find most interesting. So that's us moving to using heat pumps, which is a shift in behaviour, because you don't use a heat pump the way you use a gas boiler. So as using electric vehicles, rather than petrol cars, because you got to plug them in differently, that's a behaviour change. There is a need for some changes over and above that. And I think the most obvious of those is diet, the other one that people talk a lot about, including us is flying, doing less of the flying stuff. But actually, that wedge in the pie chart that we produce was less than a fifth. So actually, a lot of behaviour change is important. It is mainly about how we use these new technologies that will help us to get to net zero. And I think we should be more willing, therefore to talk about changing behaviour because you raise another question. Another term in your question to me about culture. And actually, I don't think that we need a change in culture, to get to net zero. By and large, the kind of culture and lifestyle that we have as the UK today is what I think we will have in 2050. We'll still be you know, traveling on roads in cars, which will be electric cars and we'll still be warm in our homes.


Chris Stark (39:13):  So, I think this idea that you need some dramatic shift in, you know, the kind of fundamentals of the, you know, the whole economy is worth probing a bit. But definitely we think it's important to change behaviours, it definitely makes the whole thing easier. And for me, this is the last point on this for this particular point. That's where I think the government has failed actually, is that because they haven't grasped the behaviour challenge. They are making it harder for themselves to achieve net zero in their own strategy, because they're missing out on this huge opportunity, I think, to make the whole task of decarbonizing the UK easier. And I think we need to find perhaps different ways of framing these different narratives because behaviour change does sound very confronting to people. [Inaudible: 00:39:57]. 


Ben Yeoh (39:59): Yeah, I guess they're all reframing. So, I guess this is partly the Bill Gates and others idea of having, if you've got an alternative technology, which is equal in price or maybe a very small green premium, you simply switch, you don't have to call that a behaviour changes because people switch to it. But actually, if you look at it, it is a behavioural change, we now use mobile phones rather than what the Germans now call Stock phones. And in fact, talking about the leap, I was speaking to someone from South Korea the other day, and their equivalent of social housing, doesn't have any landline phone infrastructure, they skipped it all, and went straight to mobile, which is a good example. So, if you build that into your social housing and the fabric of your building, then actually it's cheaper and better and cost you less, and you don't need any landline infrastructure to do that. And that essentially, is a kind of behaviour change as well. But like you said, is to do a technology thing. 


Chris Stark (40:54): I really agree. 


Ben Yeoh (40:54): And techno optimists might even say, for instance, short haul aircraft. If you invest enough money, electric engines might get you there. Long haul, maybe not. But there is sort of other ways, that even the things that you think [are hard], if you maybe do a little bit less long haul, and your short haul goes electric, and you have no issues with that, then there are actually other ways of getting there. I'm not entirely convinced by the techno optimist position, but they do have some points about actually, maybe if you're not going to want to do that, then you just throw more money on the innovation side to get around that.


Chris Stark (41:32): Yeah. And that's the key kind of challenge. I mean, I mentioned this work that we did a year ago, which looked at different scenarios for net zero, and we deliberately had an innovation scenario and a behaviour change scenario. We wanted to have archetype scenarios, we wanted to kind of stress you know, each of those elements of the transition, what was interesting was they look quite similar, actually, although in the innovation, while we were trying to stress some of these newer technologies, things like direct air capture, where you're going to take carbon from the air, from the atmosphere, and without using a plant to do so. You know, those kinds of technologies, they're great, you know, if you might well have an optimistic view on the thing you talked about aviation travel, I do, actually, I think we will have those.


Chris Stark (42:17):  I think we'll see progress there. But the reason that this scenario looks similar, is even if you believe all that, you've got to still do some pretty straightforward stuff over the next 20-30 years, to get to net zero. And my big concern with the kind of techno optimist, I think I am a techno optimist, but the big innovation proponents, particularly in the US, is that they sort of duck the idea that you've got to do anything difficult, that eventually, it'll all be fixed, but it isn't. It doesn't stand up to any kind of scrutiny, when you think about it in those terms. If you look at how long a plane, for example, will be in operation at the moment, it may be 30-40 years. So, you know that, unless you're going to actually physically take them out of the sky and put them out of commission to replace, or be replaced with something else, you know that you'll still be burning jet fuel in 2050. So actually, that leads you to I think, a more... and that's definitely you get from the CCC in our work, just a more straightforward outlook and all of this, where we completely support those newer technologies. But we also think that you've got to do the basics. And I would love more people to think that way about him.


Ben Yeoh (43:24): Now, I agree, I call that position, kind of a techno realist or techno pragmatism. So, you're not quite as extreme as Elon Musk but you have to be part of the solution. I think that's where you get actually both center right and center left thinkers in that space. I think on the center left, Ezra Klein and Adam Tooze have sort of talked about that position in terms of political economy thinking, but even more market-lead people also get there on the innovation front, actually, that leads me to remember, I was once jokingly punched by Lord Deben, who I think is still your Chair because I called him an old white man in jest. And this was unfair, because actually, he is one of the most progressive environmentalist politicians on the right side of the aisle and has been for many years. But it was really around this idea. And I guess that on the left, a lot of climate thinking is intertwined with other forms of inequality or poverty thinking, coming under this term, I guess, of climate justice. And those on the right, probably think about that a little bit less and think about growth and innovation in terms of helping the poor, and trying not to entangle that with more straightforward climate policy and their thinking, although a lot of it is intertwined. 


Ben Yeoh (44:42): And I was wondering, is there a way through these set of ideas about how you need to or not think about climate justice or things about that, in terms of the fact that in some ways, like you say, the planet doesn't care, just the more carbon you put in the air, it will slowly warm. And, you know, human beings decay out, you know, the dinosaurs came and gone off the planet Earth kind of way. You'll probably still be around in a million years. Humans may not be. So, I was kind of intrigued. Do you see any way through these set of ideas, climate justice, left, right and that entangled with things of inequality, poverty, growth and healthcare, there's all things. Some of that doesn't entangle with climate, some of it doesn't. But I guess a lot of progressive thinkers push on all of those, and makes it a little bit less clear for those maybe on the center right who want other policies on, say, poverty and growth, which don't want that entangled with climate.


Chris Stark (45:34): Yeah. For me, this is the critical issue. When it comes to that. I mean, we could talk for hours, I mean, many, many hours about the technology transition that will drive net zero. And I would love to do that. But you know, I deeply love to talk about the economics of that transition. But what that all tells us is that there is a sort of momentum in the technology space towards these decarbonized technologies, which is great. And the underlying economics, again, in any scenario was profound […], this transition taking place, what it needs, of course, is policy to make that work. But it's the policy question that then keeps coming. The policy question for me that really jumps out at you is not really about which technology to support. It's what you might call the fairness question. And I think this is now the critical issue and probably always was the critical issue, but now it's very obvious. So, I have to say, don't have that much time but not because I don't believe it but I don't think it's that compelling for many people, the kind of standard equity argument for acting on climate change is that we, in the rich Western economies caused this problem. And therefore, we should make reparations and make it happen quickly, and then fix it and go faster than other countries in the world to fix it. Whilst that is true, it's just not a compelling political narrative for a political leader. And we do need political leaders in this space. So, for me the more compelling story, when it comes to fairness, is about the distribution of the costs and the benefits. And that for me is the fairness discussion that we need to have. You can have your own view on the equity arguments on climate change. And believe me, I absolutely hold the same view on that, you know, that we do have a historical legacy here is, those countries in the world that are suffering most from climate change, have done the least to cause it. So, there's a very obvious equity problem there. The other equity problem instantly is the future generation problem. And this is the kind of reverse of COVID politics, funnily enough. The future generation, the younger generation, has suffered most during COVID because they have suffered the kind of economic insecurity that comes with the measures that we've had to take globally. And yet, weirdly, conversely, has had the least risk from COVID. 


Chris Stark (47:56): So, you know, climate politics is the flip of that. We need the older generations to make right what they caused for the benefit of the future generations. Now, we may see that kind of clash coming out of this COVID pandemic. But all of that stuff, I just kind of set that aside, I don't think you need to believe any one thing on that to act on climate change. But what you definitely do need is a policy on spreading costs and benefits fairly in this transition to net zero. So, for me what the one I want to focus on, because although I think the overall cost of the transition, in aggregate is low, no one experiences an aggregate cost. So, there will be real costs for real people, depending where they live, what their job is, you know, what kind of lifestyle they have, and their income level. And although the overall cost of this is low, policy will need to try and spread those costs across the economy. And it will also have to try and spread the benefits as well. And I think the benefits spreading are even harder in many ways than the spreading of the costs.  It usually leads you to thinking about fiscal tools, tax policies, but actually it is much more fundamental than that. I think it's about where you put investments, for example, for some of the industries that you might need for Net zero. Do you put them in places that have been damaged by previous transactions? That seems to be the logic of what the present government is trying to do. You know, these kinds of thoughtful things need to be brought out into the open, I think. But fairness for me now is the issue, when it comes to net zero. The equity stuff is really at the margins of that, from my perspective.


Ben Yeoh (49:35): How do you think we might get a better read on that?  I reflect on two things, sort of an imaginary coal miner, you know, or stories that I hear from them. They don't mind so much losing their own livelihoods if their sons and daughters have really great opportunities in something else. But that's quite a hard transition to do. You know, that's both generational and different jobs. I'm intrigued by the climate assembly process, which I know you were partly involved in. I was slightly disappointed that I didn't feel I got as much out of that or widespread acknowledgement. I do feel that's one sort of deliberative democratic process which might get as further along as it did for instance with abortion in Ireland. It doesn't seem to have triggered in the UK here as much but maybe it's early days. So, I don't know if you've thought of any other ways of where we're going to get to on this…..


Chris Stark (50:28): Well, it is still early, but we're going to run out of time, if we don't put in place some strategic policies to support all of this. I think it is a policy discussion that sort of molded over my mind. When I would use that word; but I think it's the right word. And I had a pretty amazing experience on that climate assembly that you talked about; actually, I've been involved in a couple of them as well, in Scotland as well. I had a slightly reduced rule in the UK, one I was very central to. And a story I tell quite frequently now is that I went into that process, pretty dubious about it actually looking back and sniffy about the benefit of these processes. Because for me, as the guy who leads the institution that does the numbers, I was worried about undermining that technical analysis with this stuff about thoughts and feelings, you know, and I was totally wrong with that.


Chris Stark (51:21): I don't mind admitting it. Because it turns out, if you get a group of people in a room, if you explain the issue to them in straightforward terms, then of course, there are people at the margins who think that they still don't want to do anything about it. Most of them feel quite compelled to actually, get into the issues at that point. If you then present them with solutions to some of the problems that we talked about, and the climate assembly in the UK was about how you get to net zero, then they're up for it. Funnily enough, the great British public is actually pretty sensible at that moment. They understand the kind of nature of the challenge quite easily. And they equally understand the solutions. And the challenge wasn't to get them to support the solutions. The challenge was to hold them back actually, from wanting to be involved in the process after it finished. I think that's fascinating, definitely [Inaudible: 00:52:10], but I definitely agree with you that it didn't have the traction process as good as that I feel it should have had. Now we used a lot of the insights from that process in our technical modeling, which is, I think, the way that we'll continue to work. 


Chris Stark (52:15): So, the work that comes out of that climate assembly has fed into the technical modeling that we've done since then we have a good handle on some of the key things like behaviour change, we've talked about already. But we needed a bit more than that. The other outlook on this, which I think is slightly more productive in the current political climate, is that we know this is an investment, heavy transition. It does involve investing in capital technologies. And we know we need to do that throughout the country. This is not a game changing inclusion. But I think it's become more obvious that this is a larger than investment story. And in the world, where you're making investments of the order of, we say 50 billion, the government says 60 billion extra capital expenditure across the economy each year, from about 2030 onwards. In that world, you can direct a lot of that investment; you can put it in places where there hasn't been that kind of investment. And if you know, you're going to have to do it, you have to believe that the legal targets we have in this country will be delivered, and I do believe that. But if you know that, therefore they will be delivered, then you also know that that investment has to be made. And I think that is a pretty interesting set of circumstances because it means you can free up some of the policies that we have never had in previous transitions, coal being the obvious, most recent one in the 70s. Moving away from coal, we didn't have a good sense of what was coming next. We didn't plan for it in that we are not talking here about the planned economy. But I am saying that there are so many aspects of this transition that lend themselves quite well to planning that investment, which will mostly be private investment, shaping it to go to certain territories of the country. And I'm quite excited about that. Because I think that is a route into talking about some of the fairness things in a more productive way, regardless of your political view and all. So, for me, that's another interesting angle on it, even if you don't want to do climate assemblies.


Ben Yeoh (54:19): Yeah, I kind of think that if we had more climate assembly type thing, I'm very fond of this participatory form I've held on conferences myself just getting people involved, because a lot of this is to use a great British English term common sense in some ways. And like you say, again, something I believe, and I think is true is in general, we're not end masse. That's stupid, right? We can grapple with that. Just a lot of the information isn't told to us in plain English, you know, there are acronyms and jargons and politicians don't say anything of substance anymore. But when presented with that, a vast majority of people agree on a set of things and reasonable people disagree at the margins, where there's difficult things to agree upon. So, I kind of think more of that would actually get people thinking more pragmatically given that actually as you say, it's happening. So, it will have to come sooner or later and the later you do it, the more it will cost and the more disruptive it will be.


Chris Stark (55:14): …very briefly on that, because I think there are certain aspects of this transition that will lend themselves better to that style of work than others. And the one I would keep coming back to is the challenge of how you decarbonize buildings, because communities across the country, we live in those communities, they are different anywhere you go. And that's what's interesting with traveling around the country; you find that villages, towns, cities look different, depending where you are, they have different types of buildings, different historical legacy, different employment patterns, as well. All the other stuff that goes with that. Actually, bringing groups of people together to talk about how you invest in those communities. And as a byproduct, almost making them decarbonized is really important, because people feel that they have some handle on it, then some insight in it, and they want to do it. And that's basically what the climate assembly told us. So, I'm a big advocate for doing more [of this]. 


Ben Yeoh (56:08):…[you] can intertwine health and some other things, which I think you've said it yourself, it's likely to be localized plans, because different local regions have different needs, may be settling and trying to put all of the necessary thing together before moving a little bit on to finances. So, my read of the CCC analysis has four buckets of meeting net zero demand reduction and efficiency, low carbon solutions like electrification, low carbon energy, and then offsets. And you've done a call out for voluntary offsets. So, we'll collect evidence this year, and it has to happen across the whole economy, agriculture, land use, transport, buildings industry. And on this, is there anywhere would you like to highlight where we might be doing better, or where we need more lacking or more innovation? It seems from this conversation and what I've heard before, kind of buildings and industry, and maybe transport to some extents are those two or three clusters. Because there has to be a conversation on buildings. And we're perhaps a little bit behind the curve and an industry the observation that you made. And I think we've said that; is that if you go five years ago and come to today, we made a lot more progress than perhaps we would have thought we might have been there for five years ago. So maybe this building's industrial transport. But is there anything you'd like to sum up on net zero where we may want to concentrate more on or where you kind of want to highlight there's been some good work on?


Chris Stark (57:29): Well, listen, it'd be very good if I could sit here. And I think when I look back on it in previous discussions, maybe a couple years ago, I would have given this answer, actually, it'd be very good to be able to say, look, we're doing well on the power sector, you know, and we need to now focus on transport or heat. But the truth is, actually, although we have done quite well, in the power sector, there's a hell of a lot more to do even in that sector. So, I'm afraid the slightly glib answer is that we're not doing enough in any area. And the challenge of scaling up to the degree that we need to scale up over the course of this decade to get to net zero team is a pretty, pretty impressive challenge. So, we'll need to do a lot more in all areas. The areas where I think we see the biggest gap now, though, are definitely in that building's challenge. The government does have a view now on how to decarbonize buildings in a way that they didn't even a year ago. But if I can characterize it, it's quite a kind of atomized market laid out look on how you fix that challenge. So, you almost need to set the incentives in the right place, and people just magically switch from gas boilers to heat pumps. We know that that's not quite how it will work. So, I think there's a lot more to do in the building's front, not least to design and plan a bit better the communal solutions that we'll need. If you go to the countries on the continent, lately, Scandinavia, you'll find that they use district heating networks and not gas networks. I see that kind of stuff really matters. So, a bit of work there would really open that up, I think transport is heading in the right way. But that's mainly because of electric vehicles. And we also need to stop using vehicles quite as much as we do at the moment. 


Chris Stark (59:00): There are still challenges there. But the big gap I'm afraid is in the natural world and in agriculture. We know what broadly we need to do but it's a messy old business decarbonizing land and farming. And we don't quite know what to do, nor do we know what policies will work. And I think for me, that's one of the most interesting areas. … With our work on adaptation, but also looking at issues like biodiversity and food production food systems, trying to build a more integrated view of what needs to happen. I think that's the challenge for us over the next few years. And the last sector, which I haven't mentioned, but I will briefly give a very important mention to is industry. And I think we know what to do now with decarbonizing the manufacturing construction sectors but it's a big policy ask. We've pretty dramatically changed our outlook on how you decarbonize those industries. And mainly, we've done so by building a better sense of how you invest in those sectors to decarbonize them, and catch the investment cycles early. If we don't do that, then those industries are going to be really hard to decarbonize at the pace that we need to decarbonize them and that brings in, I suppose some of the big policy questions of the age, like carbon border adjustments, emissions trading schemes, carbon taxes, you know, that kind of stuff is really frontline, I think, but there's the stuff to do across the piece. That's why my job is so interesting.


Ben Yeoh (01:00:15): Great. So maybe turning to the sort of second order element for our last few minutes, which is on finance. So, financing all of this in the real economy. And I've had some questions from listeners on the finance and economics of climate change, and I put them in three buckets, and we'll come around to them, but I'll put them all together. The first bucket really is, "what do you think are the options or even the best options for financing this as it seems, the longer we wait, the more we have to pay, but there is sort of the difficulties in pausing those options?"  The second is that "there's a lot going on in terms of changing or nudging financial regulation, and even thinking about what obligations investors or companies might have. And in that thinking, is there anything you think we should be embedding within financial regulation or financial nudging of markets that could be useful?" And the third bucket, I guess, "is the economics around climate change on the models, are they too far off to be kind of that useful? And what is the thinking on that side? So, there's been a lot of pushbacks in terms of like, oh, it's a few percent GDP hearing that, but if you put a lot of those imports, if you think about natural capital, they just seem way off. They sort of tail risk and some of the local and regional risks about this. There has to be a wholesale change of our economic model thinking of incorporating, I guess, more human capital or natural capital, or does what we have is sufficient to where we need to drive. So, I guess coming back to the first question on options for financing that and if you want to roll into financial regulation, we can do that.


Chris Stark (01:02:02): Well, the first thing to do and I always forget to do this, when I speak on podcasts or events is to plug a piece of work that we have already done on this. And if any of your listeners are interested, we have an absolutely brilliant forum chaired by Nick Robins at the LSE. Looking at this question of what it means to have a net zero aligned financial system alongside the more conventional questions about how you finance net zero. It's a brilliant [paper]. I can't possibly do it justice in a very short answer. But having a look at that is a good place to start. If anyone is interested, it's on our website, you'll find it; just have a look under finance. But the main point coming out of that, that work, he chaired this advisory group of stellar names, and we more or less swallowed his recommendations in our final recommendations to government. What he was saying is that the UK's commitment to net zero will not be a problem to finance. You know, there is no problem with the availability of capital. But what there isn't, I suppose I'm massively simplifying Nick's work here is the translation mechanism to make sure that, that wall of capital is something to discuss by people like Mark Carney gets to the places that need to get. And that's policy. It's mainly about making sure that policy permits that. Again,[without] going into too much detail about this. One of the really important reasons why that is important is back to the old story of energy, and how we decarbonize our energy system, which is still one of the central planks of the challenge overall.


Chris Stark (01:03:43): We are moving from a world where at the moment, the model for conventional energy production and use is that the consumer pays mostly for the thing that is being burned. We think the most obvious [model] about electricity generation, the consumer is paying for fossil fuel to be burned, in return for which they get their electricity. And the future energy system that we'll have is fundamentally different. The fuel in our renewable system or even a nuclear system is essentially free. But you need the consumer to pay for the capital cost of the thing that generates the electricity and I'm sticking with electricity because it makes this really simpler. You therefore need policies that permit consumers to repay investors for that capital kit. And, you know, that's difficult. I think there's one [area] the UK has done really well actually is to put policies in place to allow large scale renewables to be financed in that way that I've just described. And I suppose extending it; the challenge is to do that in other areas. So that is for me, one of the key challenges that we haven't yet tackled is to make sure that the policy is in place to allow capital to flow to those other technologies or other challenges. And then the other thing that's in place is the kind of regulation around finance, as you've highlighted in your question, and it's hugely important to have that. The financial disclosure rules there are immensely important. They are not the answer to this, but they do raise the issue, hopefully to the level of the boardroom, if you're a large corporate having to now comply with that, and they certainly do if you're a financial institution having to look at what risks you're exposed to, when it comes to climate. 


Chris Stark (01:05:27): I rather like the way Mark Carney [has articulated it] though slightly over simplistic, but I think that's why I like it, that he talks about the two main risks here being the kind of transition risk, and the risk of climate change itself. And you need to be alive to both of those when you're thinking about disclosing it, because climate is driving, you know, a pretty fundamental shift in asset values more than anything else. Now, when you bring all that together and there's a much richer story that we could spend longer talking on, if we have the time. I think this all looks quite appealing. And for me, that's what's exciting is I think we have moved from thinking of finances as sort of background condition, you know, within which you will achieve your aims on climate to thinking actually, no, finances are a lever. It's an enabler of progress. And I'm really excited about that kind of outlook on it. And it also takes us into a thing that we haven't really talked enough about yet. But here we are planning some work here in the CCC on how you finance adaptation, as well as net zero and mitigation. And I know that's a harder challenge. But I think we can do that for that kind of potent mix of policy and disclosure requirements and regulation. So, I think there's a lot more to do here, but it's something you can expect that we're going to do more work on.


Ben Yeoh (01:06:40): Excellent. And I'll provide the link to Nick's work, which is really good. In the comments below. So now in our last five minutes, I thought we'd do a quick-fire section. Maybe I call it overrated, underrated, but you can just do a sort of neutral or a comment on it. And then we'll end with a final question. So, I'll sort of push out an idea and you can say whether you think it's overrated or underrated, or some quick comment on it. So, let's start with divestment as a strategy, overrated or underrated?


Chris Stark (01:07:11): Massively overrated. So, we do need, I think, fossil fuel industries to make the transition. I think if they had the balance to do it, that transition will happen more quickly if they do. I think it also is the case however, if they're not willing to do so, then they should be viewed as pariahs. And divestment becomes a more legitimate strategy […], but we're not going to get to net zero globally without the support of those energy corporates, mainly.


Ben Yeoh (01:07:38): Excellent. Carbon offsets. 


Chris Stark (01:07:43): I can't answer that. But I'll say that I think this is such an interesting topic, so much so that we've just done a call for evidence on it. And anyone listening to this should go to our website and submit some answers to the questions that you've asked. There is a role for offsets. Very important to say that. And even more important to say that roles change over time. So, the role of offsets today is going to be very different from the role of offsets by 2050. And I see that it's really hard to communicate. So, I'll probably underrate it actually, given that all I've said there is a tool.


Ben Yeoh (01:08:17): Yeah, it's not stationary over time, I think that's a really important thing that we're going to need to develop and change with the time, interesting. Nuclear power, or maybe more precisely, mini nukes, but any thoughts on nuclear in general.


Chris Stark (01:08:30): So, nukes have a really important role. I mean, I don't know the extent to which it will play a role in the UK energy system, except to say that without it, we're going to really struggle to get to net zero. In our modeling, it makes up about 20% of total generation. And it plays a particularly important role because of the quality of the service that is provided from nuclear. But you can get it from something else. So, it's important to say that you could do something with carbon capture and it delivered the same kind of service. But I tend to think nuclear is something we want. But the real big challenge is, we don't want it to crowd out the cheap stuff. So, if you got too much nuclear, then you crowd out you know, the cheap renewables, that we every year have discovered become cheaper. So that is a difficult balance to strike, given how long it takes to build a nuclear plant. And that brings us to these mini nukes, and I'm indifferent too. I think that they potentially have a really important system value. I'm dubious about them being able to be built quickly. And back to something I said much earlier in this discussion that matters, because in this transition to net zero, we need things that we can actually plan confidently, and I don't think that many of these new technologies will be present until maybe the 2040s or later. So, again, it's one of those things I think we should support but let's see how it goes. But let's not rely on it.


Ben Yeoh (01:09:57): Green New Deal or the idea that we could create a lot of jobs in a greener nation.


Chris Stark (01:10:03): Yeah, whether it's overstated or understated, very important. I don't much like the term [Green New Deal], something quite different with it. And I do think it's been captured by a particular part of the political spectrum. But I think in the UK, people like Ben Houchen [Tees Valley mayor, a Conservative mayor in a Labour area] have really got the secret sauce for how he maintains public support for net zero and climate change, because they are tying it so explicitly to jobs. And it's not all about jobs. But we know that's a good strategy to maintain public support. So, I do think there are lots and lots and lots of jobs in this transition. And I have no problem with people who want to make that association


Ben Yeoh (01:10:42): And Road charging as a new tool.


Chris Stark (01:10:47): This is the piece of work I want to do. But I haven't done it yet. And it's a sort of economist [dream on] road charging? 


Ben Yeoh (01:10:55): Yeah. 


Chris Stark (01:10:56): But I don't know what's the right policy, because politics is too tricky. But I definitely see the value of it. And we are right up against it when it comes to replacing fuel duties in this country, because just briefly on that we've got raises about 20 billion a year at the moment. So that's the duties that we all pay on the fuels that we use for transport, that will dwindle very quickly, if we make the switch to electric vehicles as quickly as I think we are about to. And the replacement for that is something that requires a lot of thought and a lot of planning and a lot of careful design. Now, if you work that through in the political cycle that we have in the UK, we have probably got that it will be the next parliament where we need to see the implementation of these big tax reforms for transport policy. And that means potentially that election will happen next year or the year after it means that we need to be doing the thinking now, for what replaces fuel duty. So, this is really upon us, I think, and we hope to do some work on this. Others will do so too. But it's not strictly speaking about the climate issue. It's a sort of impact of Boris Johnson's own policy, which is the sale of petrol and diesel cars.


Ben Yeoh (01:12:08): Yeah, all of the economists tell me road charging is better. But then they told me it's the same with carbon tax though. Who knows? But I would also say that initially congestion charge was also much more controversial. And now London pretty much accepts it. And I think the mayor has said that he's going to start some work on road charging, because they will need the revenue. Okay, so then last question on that. Now this is really interesting, which is, do you have any general advice or thoughts for the listener? So one could be, do you have any left field advice, you know, or moonshot, you might only put 1% of your resources into it but you kind of think you know what, this is an option, if it really hits or pays off, we could do it, we could do something really big, even though there's a small chance that it might happen or maybe to the general listener who wants to involve themselves in more policy, or work or innovation in this, any two or three areas, you kind of think oh, you know, like maybe mention buildings, or transport or policies like, go into that we just need more bright, clever people working on those problems.


Chris Stark (01:13:10): Right, so you've hit me with a curveball, because I've not prepared an answer to this [we didn’t prepare any of this conversation], but I'm going to give you a slightly divergent answer to it if I can.


Ben Yeoh (01:13:16): Sure.


Chris Stark (01:13:17): Short and punchy. To anyone who's interested in this my kind of take on it, the answer to your question, believes that this is going to happen. It is really important. So having a general belief that all the things that you and I talked about today are legitimate and probable, because that really opens up the possibility. So that's my kind of first thing. And then the second thing, there are only two, and the second thing is going back to a point I made earlier, and don't rely too much on unicorn technologies and things that haven't yet been invented. As appealing as they are, they are firstly not necessary. And secondly, almost certainly a delaying tactic, if you follow that in that kind of line of argument. So, believing that we can do something on this, that it will be cost effective to do so. But also sticking to the boring stuff that we know we need to do. And you will find the investable propositions I think through that lens, and that's pretty much the outlook that we have in the CCC.


Ben Yeoh (01:14:20): Great. So that seems to be excellent advice. So once again, Chris Stark, thank you very much. 


Chris Stark (01:14:27): Thanks, Ben.


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