 Welcome, good afternoon, and welcome to today's energy seminar. First, a announcement. As Sarah sent out, we're going to have a special energy seminar in the ULIT building on Wednesday afternoon. So if you want to see yet another great talk, come there. But with that said, it's a great personal and professional pleasure for me to introduce our speaker for today, who is Leon Clark. Leon was actually a PhD student here graduating in 2002. He just told me, working with Jim Sweeney, who's right up here, and myself. And Jim can speak for himself, but looking back on his career, I'm really glad that I didn't mess him up, because he's had kind of a meteoric, highly successful career since then. Not that I'm surprised by that, but I am surprised that I didn't hold him back so much that he wasn't able to get to where he is now. So he left here, and I'll leave a few stops out. I wound up basically running the research part of the Joint Global Change Research Institute, which is a joint venture between the University of Maryland and Pacific Northwest Labs, running a group in which did many things, including the so-called GCAM, or Global Climate Assessment Model, which is one of only two large U.S. integrated assessment models that does global scenario analyses. He then left that job after about 15 years and went to the University of Maryland to be the director of research at the Global Center for Sustainability at the University of Maryland and acting director there. And more recently, just about a year ago, it's a new institution, new job for Leon. He took over as the director of decarbonization pathways. One of seven directors? It's still seven? More now. More now, okay. You can talk about that at the Bezos Earth Fund. So without further ado, I'd like to turn it over to Leon to talk about what he's been doing and what he hopes to do in the next few years. Leon, take it away. Okay, great. Thank you, John, and thanks everyone for coming. It's always a pleasure to come back here to Stanford. I have many memories that actually go back all the way into high school. Yeah, because I'm from the area. And giving talks always is a little nerve-wracking, of course, but I just want to say that this is actually particularly nerve-wracking because I actually have one of my oldest friends here from first grade, so I haven't actually given a talk in front of him before. He survived. He survived. So I think I have 30 minutes, right, and then go to questions. So I'll try and just go right to business. First, let me just say a little bit about the Earth Fund. So for people know where I now work, as John said, the director of decarbonization pathways at the Bezos Earth Fund. That's a title you would not have heard any time before, say, the last couple of years. But Jeff Bezos committed $10 billion to philanthropy, which is quite a bit in the climate space, and it's devoted to climate and nature with a focus on equity and justice. And so far we've distributed about a billion and a half of that, which means there's eight and a half billion left. And the idea is to distribute all of this, not in perpetuity, but by 2030. So it's actually looking to move on the order of a billion dollars a year. So one thing I just wanted to note about that is that 10 billion is a lot of money for philanthropy, right? But it's really a drop in the bucket when it comes to what's needed for climate change. And just as an example, there's a lot of work that's been going on recently about what the financing needs are to get on a path to reduce emissions to something like one and a half degrees. And looking at one of the most recent ones, I think we have here that emerging markets in developing countries excluding China will need to spend about 1.3 to 1.7 trillion per year by 2030 just on the energy transformation to be on track to one and a half degrees C. And that's not including adaptation, it's not including just transitions and so forth. So 10 billion is a lot, but it's not a lot in the context of the issue that we're facing. So what I'm going to do for this talk is I'm first going to talk a little bit about some of the background on where we are on mitigation, contrasting a little bit some of the good news with the bad news and how they don't quite fit together. And then I'm going to talk from there a little bit about what that means about what some important areas are that we should be working on, particularly focused on economics and the need to think about those new economic models, new economic thinking, a new economic narrative around climate mitigation. So let's start by, let's see. So first let me start a little bit first on talking about some of the conditions that surround decarbonization today. So my goal is to talk here about reducing emissions and I think people know, most people in this room I imagine are associated with sustainability, know that we're trying to reduce emissions to something like one and a half degrees, two degrees, those would be our goals at this point in time. So the question is how to get there. And I would assert that the conditions, the economic conditions, have never been better for trying to reduce emissions. So we're in, well I was going to say a high point, but it's going to get better and better. But we're in a position now where the momentum is really moving towards a low carbon future. That's where we're headed for economic reasons as much as anything. So this is a slide from the IPCC and this is showing the cost of photovoltaic cells, of wind power and batteries. And I'm sure most people have seen slides like this recently, folks that are involved in this area. But the point here is that if you look at PV costs, solar cell costs, they're now competitive or producing electricity from solar cells is as cheap or cheaper than producing it from fossil power in many circumstances, in many regions. Now of course that depends on the sun and so forth, but it's cheap. Same things happening with wind, same things happening with batteries, they're all coming down rapidly. The economic conditions have changed dramatically from, I mean from even, I mean obviously from 10 years ago as you can see on the chart, but it's a very different world that we live in now. So technology, the technology options for reducing emissions are much better than they've been at any time in the past obviously, but they're actually really quite competitive now. And it's changing the entire dynamic about how we think about decarbonization. And along with that of course comes pretty big increases in their deployment. These charts are always really cool. This is showing the increase in deployment of PV onshore wind batteries. But of course if I were to take the PV chart, which looks like it's doing great and show it as a percentage of total electricity, it would actually be quite small. But nonetheless the point is that these green technologies are now extremely competitive. So that's just the technology piece of it. But the market's changing as well. So what you're seeing is around all throughout the developed world in particular, you're seeing companies, financial firms looking to try and buy green and invest green. So the demand is there now for investment on green or the supply. So on one side we have what's called a quote from what's called the Global Financial Alliance from, excuse me, the Glasgow Financial Alliance for Net Zero. And that's a set of the largest financial firms that have come together to say that they want to try and invest on a trajectory towards one and a half degrees. Now there's actually been some issues with that. And we won't go into that, but the point is their goal is in fact to try and make their investments consistent with one and a half degrees. And as you can see, if you can read the quote, but their assets under management are $130 trillion. So that's a lot of leverage. On the other side is Science-Based Targets Initiative, a whole bunch of companies that have signed up to the Science-Based Targets Initiative. And so they put together Net Zero plans for their companies. Those are reviewed by some sort of scientific consortium. And that's trying to push them or they're trying to push on the way to Net Zero. The point of these slides is not to talk about G-Fans or SBTI, but just to point out that businesses are now looking to try and invest as much as they can in low-carbon trajectories. So this is also driving us in that direction. And of course I don't think they'd be doing it if technology was not where it is. The same time we're seeing also governments investing in the same ways or making the same sorts of governments are also taking a number of actions. And I'll talk about the IRA and the U.S. in a moment. But just here on trade, the European Union is now going to be putting tariffs on goods coming into the European Union based on their carbon content. So carbon border adjustment mechanism or CBAN, as we like to say. And they're doing it in many ways to protect their domestic industries because in Europe they have carbon pricing and they used to actually just hand out the permits, but now they're auctioning and so they have to protect their domestic industry. But that's actually now putting a premium on green production for everyone who's exporting to the European Union. If you're exporting to the European Union, you now have to start thinking, oh my gosh, I need to be actually investing in green production. The U.S. signed an agreement with the EU on aluminum and steel to do something very comparable. And you can look at it in the U.S. context. Of course, our industries, our across industry in manufacturing were highly competitive on carbon. I think I was looking at it recently. There's some work from the Climate Leadership Council and I think only the U.S. has lower carbon content out of manufacturing in general than the U.S. So of course, is a climate, is a competitiveness, you tell me. But the point is that that's actually putting a lot of pressure on foreign governments. I do a lot of work internationally and I can just tell you countries around the world are definitely taking notice of this and thinking about what they can do and it's putting a lot of pressure on them to think about how to move forward. And this is before even mentioning Ukraine and the implications of the Ukraine War on energy security and the implications that has for whether we think Petro-States are a good thing or not and whether we should actually be getting off of fossil fuels because almost all the literature indicates that the energy security implications of being on clean energy on renewables are much lower. There are supply chain issues, no doubt, absolutely. And that's a battle that'll be sort of fought out over the next coming decades. But the point is really that fossil, that the current sort of reliance on fossil has higher energy security issues than a renewable future. So there's all these pressures. These are all pressures. If you're a country or India, Indonesia, you're thinking, well, gosh, you know, this is, I can see that the demand is there. If I can just put in, you know, India has tremendous renewable resources, solar. I need to be moving into solar. I can do my green production. It's cheap. This is where I should have. So then you can see on the other side, okay, well, where are we? We've got all this pressure to reduce emissions. Where are we? So just to remind everybody, I think everybody knows this, emissions continue to arise. So these are CO2 emissions. There was a little blip from COVID, but CO2 emissions around the world continue to go up. Okay. Okay, that's fine. Now, how much space do we have if we want to get down to one and a half degrees? So I'm going to show a slide that is way too complicated, but I'm still going to show it. This is a slide from the IPCC and it's showing emissions historically, which is, if I can get my cursor, maybe it shows, it probably doesn't show. The black line to the left is historical emissions and I just want you to focus on the sort of purple and the blue going down. So the purple are emissions trajectories consistent with limiting warming to two degrees centigrade and the blue are emissions trajectories consistent with limiting temperature to one and a half degrees. And you can see that it's kind of a change in trend. I imagine most everyone can see that that's a change in trend. And if you look down at the bottom, there's these gray bars and the very bottom bar says CO2 comparison and is around 2050. That's when CO2 emissions need to be at zero to limit warming to one and a half degrees. So the general consensus is CO2 emissions need to be get to zero around 2050 for one and a half degrees. They need to get down to zero by about 2070, 2080 for two degrees. And I will just note to remember, people often say, oh, we got to get down to one, we're going to get down to one and a half degrees if we can get our emissions down by 2050, which is already daunting. But if we were to do that, you're not actually certain of being at one and a half degrees. That's a 50-50 chance, right? So a couple of things. First, that's a 50-50 chance. That's in centigrade. Actually, we probably have a lot of scientists here, but it's not Fahrenheit, which, of course, would be closer to three degrees, 2.7 degrees. So it's actually really quite a daunting challenge. And then I'll also note that, I haven't done this recently, but in the past I spent a lot of time on this. That's 50%. The tails can be pretty nasty for what it's worth. The tails can be like 12 degrees Fahrenheit or something like that. Nobody really knows. We're not even close to on course to limit warming to one and a half degrees. I mean, not even close, right? So one other way to look at that. Here's the remaining carbon budgets. I think everyone's seen these sort of issues. There's one and a half degrees. We spent 2.4 billion gigatons, and we've got about 380 left. About 10 years at current emissions levels, and we're at the 50-50 level. Okay. So we've got these two... I'm not going to do that. We've got these two sort of juxtaposed issues in place. So on the one hand, the conditions have never been better. They really never have been better. And I really think you can say that we are moving towards a new energy transition like others we've seen in the past. On the other hand, well, that's true. We're not moving even close to rapidly enough to be able to limit warming to anything like what we would like to be doing. So we have to ask questions. So what can we do about that? Oh, actually, first I should say, why is that? Why are we not moving more rapidly? So the bottom line is it's just really, really hard. And let me just give some examples for folks. So here's... And I'm going to give examples that have to do with economics because that's kind of the... One of the things we're focused on thinking through and that's what I'm going to talk about. So 18% of India's tax revenues come from fossil fuels. What are they going to do to transition and make up that loss of revenue for their government? So that's a real fiscal policy issue they're going to have to deal with. That's a big issue. In addition, the Indian Railways, which is I think the largest railway in the world, Indian Railways, IR, Indian Railways, 45% of its revenue comes from transporting coal. They already have solvency issues. What are they going to do going forward to deal with the loss of revenue from transporting coal? Indonesia has tremendous resources actually for a green economy. It's got mineral resources for nickel, which would be great for battery. And in fact, I think there's always conversations with the Chinese and with Tesla about battery production in Indonesia. It's got proximity to regional supply chains. It's got really good geothermal resources. But I will also note that Indonesia is the largest exporter of coal, the seventh largest exporter of natural gas, the largest exporter of palm oil. Its palm oil represented 13% of its total exports. It also has a tremendous coal overcapacity of electricity. And I don't know what the numbers are now. You may know if you answer that. But the numbers now are something like, I don't know what the number of watts are in track, right? So it's true that they've got this tremendous potential. They've got geothermal, they've got nickel resources. They're in a really good spot to be part of these regional supply chains. But at the same time, they've got a tremendous overcapacity of coal. And their economy is built on fossil fuels and palm oil. And palm oil is the production of palm oil is quite destructive, of course, in the context of forest and deforestation. I'm going to give two more examples, and then we'll talk a little bit more. I was in a talk, I would give a talk at the last conference of parties at the COP with the head of SCOM, which is the national utility in South Africa. And he was pointing out that with carbon pricing, like carbon border adjustments and so forth, 46% of South Africa's exports will be at risk because of their carbon contents. They're incredibly carbon intensive. So what's South Africa supposed to do? Well, how are they supposed to transition? Now, they do have very abundant renewable resources. They also have a lot of expertise in car manufacturing. They have expertise in what's called fissure-troth processes, which is being able to transform coal and other substances into natural gas or into liquids. So they have all that. They could think, oh, maybe we can do a green economy. We'll produce green fuels or green hydrogen. But that's actually quite hard to make that. How are they going to make that transition? This is a country that has something like 30% unemployment is having trouble just managing that. Now they're going to transition the entire economy away from their fossil and emissions-intensive production. Last example, in Puma Longa province, which is in South Africa, is home to 80% of their coal production. And you can imagine this is everywhere. So the US has had this. In Canada, you have Alberta. There's really huge political issues in play. And because of Alberta's and kiner economy is dependent on fossil fuels. But how are they, and they have very good solar resources there. So you could imagine they might be able to transform into producing energy from PV. They already have electricity infrastructure and so forth. But that's probably not enough. You probably can't just transform the entire economy into PV. They actually have to be thinking about a much broader set of industries that they're going to use. So the first issue is that it's just really hard to make these transitions. And John and I were just talking in many countries that are very poor. The costs of PV I showed you are sort of these market costs you might think about in the richer countries. But not only are the costs higher in many countries, let's say many African countries, but as John was pointing out when we were talking earlier, the cost of capital is dramatically higher. So this is just a very hard, hard issue to take on. And so in philanthropy, we're trying to always think about this. I can say that in philanthropy, now that I've been doing it for 11 months, this is what we think about. So we're thinking about what to do about that. And one of the areas that we think is really important is really to think about the economics of this. So every issue that I just mentioned to you is an issue around economics. It's a subtle point, but it's an important point because a lot of us in this business have done some economics in this space, but it's been environmental economics. These are not just environmental issues. These are development issues. These are economic development issues. I'll come back to that in a moment. Where environmental economics, where development economics need to go. But I'm going to point out five areas where I think, where we're looking at it, where we're thinking that economics can do more. So the first is on narrative. So there's sort of a, let's say if you took an environmental economics class, the first thing you would learn, or one of the first things you would learn, actually would look like this. So there's a marginal cost of emissions, or emissions reductions. The more you reduce emissions, the more it costs. But of course you get an environmental benefit from that. But if you look at it today, with the reduced cost of these energy technologies with this demand for clean production, can you really make the argument that it is inherently more expensive as you're planning your long term development to be investing in fossil fuels. You're risking tremendous stranded assets. I mean the fact of the matter is we're moving to an economy, or a global economy where it's going to be cheap to produce electricity, to produce energy from green sources. And frankly capital, especially when these financial firms, companies want to buy green, they're going to move their capital to where you can produce it cheap. So that is coming. So we're in a spot though where the narrative is just basically a priori before even moving into it that reducing emissions is costly. And of course there's many reasons for that and in some sense it's not totally untrue. On the other hand there's a lot of vested interest that would push that narrative going forward. And I think what we haven't seen is the economics community really diving into this deeply. I think what we've seen is that folks, I mean I've been in this business for a while, not as long as some of my colleagues, but making the argument that a low carbon future or low emissions future might actually be better off economically is something that would be sort of, something only heretics would have said a decade ago. And you would be considered an incredible technology optimist. I don't think that's the case anymore. And I think nowadays we really need to be doing more work on saying well what are the stranded asset risks, what's the trade regime going to look like in the future, what's production going to look like in the future and what are the risks to countries like Indonesia, to India investing in fossil. Let me give you an example here. So in northeast Brazil they have something like 700 gigawatts, that's a lot of renewables resource. So the size of the resource is 700 gigawatts, that's a lot. That's way, way more. It's like five times larger I think, larger than their actual electricity production today. But they're actually investing right now, and it's in the long-term plan, they're investing in LNG facilities, liquefied natural gas facilities to bring in imported liquefied natural gas and use that for electricity production there. Have they really done all the calculations to think through whether that's the best investment going forward? I don't know. I'll also note getting back to the economic development issues that it's extremely challenging area. It's one of the poorest areas in Brazil. So you could imagine that in fact you could be thinking about green steel, green hydrogen, or green anything frankly using renewable energy in that region, but they're actually investing at the same, they are investing in renewables, don't get me wrong, but they're also still investing in LNG. Have they done that assessment? So that's number one is the narrative. I think there's a real change that has to come in the narrative, and I just want to be clear. I'm not arguing that it's all roses, that it's very easy to just transition to this new economy. What I am arguing is that we're not actually having, as an open discussion about this in economics, as we should be, and the a priori assumption still is simply that it's more costly to go to a low carbon economy. The second issue and where we think that it would be useful to be putting in more effort is to really be thinking about a broader suite of policy solutions. So just all the examples I gave you before were examples that were about economics. When you take environmental economics, what you learn about first is, you know, pricing. Carbon pricing, carbon taxes, tradeable permits, market-based instruments. You might learn a little bit about what I spent my PhD on, which is spurring technological advance in environmental technologies. Now we're moving a little bit now more to incentives than we did in the past. But if you really look at the issues that we're talking about now, they're really issues of economic development. And it's a much, it's trade, it's tax policy, it's fiscal policy, it's about supply change. Those are the issues that matter. So a lot of us in this room are thinking about, are thinking about climate or thinking about the environment. Most people aren't thinking about that. They don't care. They're thinking about jobs. They're thinking about food on the table. They're thinking about roads. That's what they care about. And they're not going to go along with emissions reductions unless it satisfies those needs. That's what it has to satisfy. And so we're not actually talking about emissions reductions. We're talking about building new economies that are prosperous and that also reduce emissions or have zero emissions. So I'll just give you another example, something I've been spending time on. In the Brazilian Amazon, I think, let me just tell you a little bit about the Brazilian Amazon. More than 60% of the Amazon basin is in Brazil. And from 2019 to 2022, under Bolsonaro's presidency, Brazil lost 45.5,000 square kilometers of the Amazon. That's an area larger than Denmark. They're not going to halt deforestation because there's a carbon price or they've got some EV mandates. They actually have to think of an entirely new economic model for those cities around the Amazon. And there's a lot of options. So of course there's the bioeconomy, which is producing, say, Brazil nuts and açaí and so forth from the standing forest and making that economically viable, but that's not sufficient. You also have to be thinking about more efficient cattle and agriculture, but that's probably not sufficient either. They actually just need to think about what are they going to do? It's going to be service industries. What industrial structure are they going to have that would be satisfactory to the people in the region to move away for the structure that they have today? Now we could go into the details of what's actually going on, a lot of it's illegal land grabbing and so forth, and we don't need to go into that today, but the point being that it's very hard to say, hey, we're going to stop deforestation in an economy that's built around it or a social structure and not have an alternative. There has to be an alternative. And that's economic development. That's not environmental policy. And so we really need to be thinking about, as we're thinking about the policy solutions, we have to really broaden the aperture of what we're thinking about and be thinking about economic development style policies, whether it's, well, not just economic development, but go back to India, going to make up the fiscal revenues. How are you going to do that? How are you going to deal with tax policy, trade policy, as I talked about earlier, with CBAM? These are all the issues now around climate. So that's the second of the three. The third is capacity. So in the U.S., we just had the Inflation Reduction Act, which, fascinatingly, even though it does not mention climate, is the single biggest climate bill in our history. And as you can imagine, or maybe you can't imagine, but let's say you're on the hill or you're in the White House and you're thinking, oh, should we put a higher incentive here? Should we put more tax incentives there? Should we encourage production? Well, how do you know what that's going to do to all the political economy that you're working with? Well, you're going to think tanks, universities, you're asking to run analyses. What's going to happen to Kentucky? What's going to happen to union workers? They're doing all of this analysis. They want to know, oh, is this going to affect inflation, which they want to know. And in fact, actually, for what it's worth, there's an article that it indicated that Senator Manchin was convinced to go along with it only after some work. I think it was from folks at Penn. Penn, maybe I can't remember, had done work that showed that it wouldn't increase inflation for what it's worth. But anyways, point being, they're going to all of these think tanks and universities in this incredible infrastructure. Okay. Now, that's not the case everywhere. So if we think about where emissions are headed in the future, this is showing emissions in various countries. The key thing to note here is that India, China, these are the countries where the emissions are going to be coming from. You know, this is the future. It's not the U.S. It's not Europe. It's these developing economies, emerging economies. That's where emissions are coming from. Many of them just simply do not have the capacity to do this. So what do they do? They have to go to international consulting firms, international NGOs, but they don't have that trusted domestic capacity that actually understands what's going on on the ground and will be there in a durable fashion. And, you know, frankly, we don't want, I mean, nothing against the French. We don't want the French being the ones who are deciding our policy. We want Americans in the U.S. Every country feels that way. So the capacity is very much under-resourced. And I'll also note that philanthropy, even when they're funding into a lot of these countries, is often funding big NGOs from the outside of those countries rather than funding domestic capacity. So I think one of the core areas that we need to be focusing on is actually building up that capacity that we can in these countries. I won't go into why there's a lot of difficulties with that point being that it's very important. And many countries actually have really good capacity, but just hasn't been kind of brought together. Brazil has tremendous capacity for a lot of work on agriculture and land use. It's actually really quite good. Two more. So economics, the profession in general. So through 2019, the Quarterly Journal of Economics, which is one of the most prestigious journals in economics, had never published an article on climate change. Now, I've just made the argument that what we're talking about here is not just environmental economics. It's about development. It's about economics broadly. It's kind of astonishing in retrospect that the field has not actually kind of embraced climate change as one of its major focus areas. It's this ostensibly an existential issue for us. And it's actually in many ways been kind of relegated to this sort of corner of environmental economics, but it's something much, much broader. And so at the same time, I think what's happened then, because economics has not really put its full weight into climate change, that a lot of the work that we have, a lot of what we have is really fallen behind. So a lot of the tools are behind. I've spent a lot of time on the tools. Many of them are behind. Often when we're doing analyses, we're not actually including all the different benefits, air pollution, energy security, and so forth. A lot of the modeling, the model tools that we use are not actually built for the big transformations that we're thinking about. We could argue about this back and forth, but so there's a real sense that economics needs to put more of its weight behind this. And then finally, I'll just make the point that, you know, something that I kind of have, I guess I've sort of made this point all through this talk, but if you look at where funding has gone, whether it's international, whether it's NGOs, it's governments, it's foundations, they've really kind of gone into two things. There's a whole bunch of funding that goes into development, and then there's funding that goes into environmental issues and climate. But those actually really have to be the same thing. We need to be funding not just development and not just climate, but low carbon economic development. And I think there's a real need for the community to be thinking about it that way, moving it that way, and actually trying to do those at exactly the same time. So I guess I'll end here shortly. So it's clear that we really need to be thinking differently about this than we've thought in the past. Now, you know, this is a community of people who do research and are students, and there's always the question of how much our analysis is actually affecting everything, but it does affect it. And I think there's a real opportunity for us to be pushing on this issue of really low carbon economic development and what that means, accepting that the world really is changing. We are on a trajectory to a different energy future. It just needs to be faster. Oh, I forgot a good quote I wanted to give everybody. So we're on this trajectory, but Bill McKibbin has a great quote, which is on climate, winning slowly is the same as losing. And that's the case. So this is not about whether this transition is going to happen by 2070. It's got to happen fast. And what we're trying to do is think about how to do that. So anyways, the question I have is what would philanthropy be doing to take on these challenges? How should we be investing? How do we do this to accelerate emissions reductions? So it's great to be here. Thank you for the chance to give a talk, to see so many old friends, and I'm happy to take any questions or any advice about how we should actually be moving to move this forward more quickly. Except for instead of all the money. Yeah, yeah, yeah. Of course. Thank you so much for a great talk. Obviously, it's too many.