 Hello, everyone. I see some of you familiar faces. And welcome to Sustainable Finance and Investment Seminar. This seminar series is hosted by Stanford Precourt Institute for Energy Sustainable Finance Initiative, SFI. At this seminar, we explore multiple disciplines of sustainable finance with talks by researchers associated with SFI, and also our visiting scholars. So we meet on a monthly basis during the winter and spring quarters, and this seminar turns into a weekly academic unique granting course during the fall when we start the new academic year. This seminar is open to Stanford faculty, staff, students, but when speaker concerts like today, seminar is open to the public. So let me introduce our first speaker of 2022, Jeffrey Ball. Jeff is a scholar in residence at Stanford Steyer Center for Energy Policy and Finance. And he's also a lecturer at Stanford Law School. And he's also a non-residency senior fellow at the Brookings Institution. Jeff was also a leading journalist at the Wall Street Journal, but you can still see his very interesting pieces on sustainable finance and other media platforms, even today as well. I highlight his expertise and in-depth understanding of energy transitions and climate change issues in China. And as I recently came across his new research on low carbon transition in the power sector in developing countries, so I asked him to share more details of his work at our SF seminar. So, Jeff, I really like your title of your talk. Welcome again, and please take the stage. So, Janne, thanks a lot. Thank you all for coming and spending what I imagine will be about an hour here. I'm gonna resist the temptation to have you all introduce yourselves. I'm sitting here trying to decide between the two birdies on either of my shoulders, yes or no, because I think actually this group is small enough that we could do it. I'll tell you what, yeah, here's what we're gonna do. And this means you'll have to listen to me for five fewer minutes, which would be a good thing for everyone. I wanna just go around, and I don't know, I think I'll just call on you since we're gonna do this in the order in which I see you. And just tell me, you don't have to say your name because everyone can see your name, but just tell us kind of your, in 30 seconds or less, tell us your affiliation at Stanford. And if you're not affiliated with Stanford, what you do in life as we know it. And tell us what you wanna get out of this today. And really keep it to 30 seconds or fewer. Excellent, Marshall, let's start with you. You're the first person I see. Oh dear, so my affiliation is through the Distinguished Careers Institute program. And I was a fellow in 2016 and 17, and I now co-chair the Global Advisory Council. And my interest in sustainability and corporate governance grew out of that fellowship. And I now engage in what I call thought leadership. So I do some writing and speaking, and I serve on corporate boards. And I'm very interested in seeing sustainability led development of companies, corporate boards get behind sustainability led enterprise value building. So, and I'm a- Horrific. SASB, FSA, level one certified. Cool. Two of my best friends in the world are DCI alums. So anyway, we'll have to have coffee at some point. Catherine, I know you go by Katie or Kate Caffee or Kate Caffron, but anyway, nice to see you. Hi, I'm Katie. I'm a freshman at Stanford right now. I'm from Wilson, Wyoming. I'm really interested in either econ or systems majors. And I'm really recently been interested in kind of the intersection between kind of the investment in corporate world with climate change. And I think the work that the Stryer-Taylor Center is doing is really fascinating. Excellent. I just have to tell you as we go around that if you're a student, what I get out of this talk is to have met you and try to rope you in if you're interested to the next bit of this research about which we'll talk as this goes on. Okay, Bull-McCorn, am I pronouncing your name right? Yeah, it's Bull-McCorn, but it's Pooh. I go by Pooh. Pooh, okay. I'm a Frosh, interested in maybe energy resource engineering. I'm also here to write for Stanford Daily a coverage on this. I'm trying to write more about sustainability news and the carbonization stuff. So it's very intimidating here. Oh, no, you should be journal. But yeah, hoping to learn more. Thank you so much. I just have to tell you, I majored in college, I majored in history, but what I really majored in was the school paper. I spent like 70 hours a week at the school paper. So I have huge respect for what you do and don't stop. Yeah, Ricardo, show up. I'm not affiliated at Stanford. I'm from Brazil. I am professor in Federal Investment of Bahia, not this region of Brazil in partial time. And I work in a petrochemical company and I have really interested about sustainability, about a green petrochemical product, just kidding. Excellent. And of course, I'm really interested in the finance to support this initiative, okay? Thank you for taking the time. Shivani. Okay, so hi, I'm Shivani. I'm doing my master's in law. My specialization is international economic law, business and policy. Back home in India, I was practicing trade and taxation. And I think I'm here because I'm now looking to move into climate policy, but I don't have any work experience or background, which is exactly this. So I'm just trying to kind of get as much information as I can and hopefully find that I can go after this. My office is in the law school. So we should talk at some point, okay? Great. Blas? Sure, I lead a couple of programs here at Stanford. One is focusing on innovation in energy, water and infrastructure. I also, I'm the director of the Mexico Clean Economy 2050 program at Precourt. And personally, I work on carbon markets, the carbonization, and I've just been invited to be part of the advisory board of the new Integrity Council of the Voluntary Carbon Market. Cool, thanks for coming. Johnny Beck, I don't know if I'm pronouncing your name correctly, I apologize if not. Yeah, yeah, that's perfect pronunciation. Thank you. I am just freelance economic advisor. My background is economics, economic policy, development issues. And I have been focusing in the past 15 years on sustainability issues, like renewable energy, power sector development, issues like this. So I have advised the many projects in various countries. So I visited around 50 countries, but mostly focusing on the sustainability energy sector in the related infrastructure projects. So I was just curious to participate and to get a feeling what people in Stanford are doing. Excellent. Thank you very much. Yeah, I'm glad you're here, thanks. Edward. Hi, everyone, and nice to meet you, Jeff. I'm a master's student under the CE department studying sustainable design and construction. So very interesting, definitely interesting, sustainable buildings, sustainable infrastructure and definitely general interest in how the buildings and infrastructure is gonna change the developing world in the future. Because I'm personally bridging it from China and I've been here for a couple of years. So I don't know, I just feel like this seminar check all the boxes, so I'm definitely gonna check it out. So very interesting. I hope you feel that way at the end. Thank you for coming. Yeah, excellent. Louise. Hi, great to meet you, Jeff. I am a first year MBA student at the GSB. I'm very interested in the intersection of policy and business, particularly when it comes to driving investment and financing to different clean energy spaces and have a particular interest, but don't know much about the emerging market world. So I wanted to learn more about it. Terrific. Thanks for being here. Shuan. Hi, everyone. My name is Shuan. I'm a first year graduate student, major in atmosphere and energy. And for my undergraduate studies, I did environmental engineering in China. So I have always been interested in the combination of finance and energy. So I guess I would like to learn more about the financial mechanisms to decarbonize the global economy today. Yeah. Terrific. I'm glad you're here. Thanks. Trishala. Again, I hope I'm not mispronouncing your name. I apologize. That's perfect. That's perfect. Great meeting you, Jeff, and nice seeing all of you. So I am in the law program, same as Shivani. I'm in the LLM program at the law school and specializing in international economic law business and policy. And back in India, I worked as a transactional lawyer in financing PEM&E. And then I worked with the state government back in India in impact finance for economic development projects. So I mean, back in Stanford, my interest has been towards climate finance. And yes, so hence I'm here. I would want to know more about it and then hopefully have further my career in it. So yeah. Perfect. Thanks. Dante. Thank you. I'm a PhD candidate in energy resources engineering. And after graduation, I want to work in energy transition space. So I want to learn as much about the financial side of it. Hello. I am here. It's great to see you. Good to see you. Good to see you. Some familiar faces. I am a second year in the master's international policy program. So nice to see so young one of our alums here as well. I'm specializing in energy and climate policy. And I've worked with Jeff previously through the policy lab, had an amazing experience. So I'm excited to hear some more thoughts and get to know some other people interested in this area. So some of the ground work that resulted in the work that I'll talk through today, Kali, participated in. OK, well, let's zoom through the rest. So let's see. Indra Neal. Hi, sorry. I'm not able to turn on my video. No, no, that's fine. Not at all. I'm a postdoc studying disaster risk in the Bay Area and in some other regions. And I have a general interest in climate finance. That's why I'm here. So look, I really appreciate you all doing that. We've burned through a quarter of our time, but I actually think that's really worth it. Because I'm suspecting that, well, look, I'll just tell you, from my benefit, a big part of the benefit of, from my vantage point, a big part of the benefit of an hour like this is seeing other people of common interest. And I really hope that you all take a screenshot and reach out to each other, as well as feeling free to reach out to me as time goes on. I mean, you probably don't need me to tell you this, but I feel compelled to tell you this, having spent 10 years at Stanford and the last two of them spending way too much time on screens like this. And I think it's, I mean, one of the tragedies of the many tragedies of this pandemic in a really kind of sort of self-centered microscopic way is that we have way too many of these interactions like this. And one of the extraordinary things about Stanford is the depth and the breadth of the community of people who are interested in probably lots of things, but certainly climate change and energy. And so I hope that you all get a chance to get out and have coffee with each other, because it's really, it's an extraordinary community. Okay, enough lined up. I'm gonna, I'm looking at my watch. I'm gonna, I'm intent on leaving at least 15 minutes for your questions. So I am gonna burn through stuff quickly and I'm gonna do that intentionally. And I'm gonna, we're gonna have an agreement on a few things. The first is I'm gonna refer, I'm gonna actually, I'm not gonna have any slides. I can't stand PowerPoint presentations. I'm proud to tell you I have never in my life put together a PowerPoint presentation before I came to Stanford. So if you're on the screen and you're 23 years old, I wanna tell you that you actually can put food on the table for a lot of years, never putting together a PowerPoint presentation. I think they're way overused and I'm just gonna ask you to like, listen. And you can take notes if you want. I'm gonna try to speak in a, something of an outline form, so it's coherent. But I will at a certain point, pull up a screen and show you little snippets of a paper because I want you to see a couple of graphics. So I just want you to know that you can, this paper is available for you to call up and download. It was in the invitation. I'm gonna circle back to this at the end, but I'm gonna really invite those of you who are students. I'm gonna invite any of you who wanna talk more to just ping me at jeffball.stanford.edu, jeffball.stanford.edu and we can have coffee. But if you're students and you're interested in this, please reach out because there are opportunities for you to get involved in a very substantive way. And what I'd ask you to do is if you're interested at the end of this, don't reach out to me before you've read the paper because I want you to take the time to read the paper and decide whether you're really interested in it and then you can come back to me. So that's what we'll do. I'm gonna start broad with the kind of what, why we're here and what world view birthed the work that I'm gonna talk about. And some of this is gonna sound familiar to many of you because you're all focused on climate change, but I want at least to ground us. And then I'm gonna talk about the actual work. I'm gonna talk about how we put it together because I actually think a little bit of getting into the weeds about how we put it together is helpful in understanding at least what I would argue is new about this work. And it also hopefully helps you, those of you who haven't done kind of deep research like this before think about the process of doing this kind of research. And then I'll do probably what you expect me to do which is I'll tell you what we found that I think is new, some recommendations that we've come up with and then I'm gonna stop and you can all jump in. Okay, so let's just start really broad. We're all here at a time of a huge, I think, dichotomy. On the one hand, things in the world seem greener than ever. The trajectory of the development of clean energy technology has advanced faster and farther. I think then many people would have dared expect 10 years ago. Many forms of renewable energy in many parts of the world are cheaper than certain kinds of fossil fuel energy. The extent of growth in solar and wind around the world is incredible, far beyond the wildest expectations of a lot of people even though renewables still remain a small slice of the overall energy pie. So technology has advanced and in addition to that, any of you who have been reading or listening over the last year or so know that basically every government on the planet and every multinational corporation has promised to achieve net zero emissions by sometime in the middle of the century. Now I'm being a little hyperbolic here, obviously not every government has said it, but lots of them. It's becoming, I think in kind of the corporate world the price of admission to the debate about the price of admission to operating in the global economy. And so there are huge questions about what those net zero promises mean, but the fact number one that renewable energy and clean energy technologies of many sorts have increased in volume and reduced in prices are in cost. And the fact that there are so many big promises about net zero emissions is a huge change from where we were a few years ago, let alone 10 years ago. And yet, what is not happening? Carbon emissions, which is sort of the whole point of this are not only not slowing down in their, are not intensifying in their decline, they are actually still rising. The flow of money, which is something we're gonna talk about a lot is still going in the main into high carbon things. And a particular point about that money is that a lot of the promises that you've heard in Glasgow, you know my reference to Glasgow, the climate change conference that just took place, a lot of those promises to spend more money on clean things were promises having to do with public money, government finance. And essentially everyone who looks at this question of how to deal with climate change concludes that public finance is not the most important part. Private money is the most important part because at the end of the day, the amount of money that comes from, the amount of money that comes from private sources will vastly must vastly outweigh the amount that comes from public sources. Public sources, government spending is really important because it can be catalytic. It essentially greases the wheels of the global economy. But if the private money doesn't follow, then the public money isn't gonna have done much. And so there are huge questions to ask about why that private money is not following and this is something we're gonna get into. Okay, so in one sense, green progress, in another sense, green stagnation. That's kind of where we are. So the big question that motivates the research I'm gonna tell you about is how do we change those flows of money, the flows of global finance from high carbon to low carbon things? Because at the end of the day, dealing with climate change is about shifting money, full stop and none of you who have tuned into a sustainable finance initiative program probably need to be told that. Okay, so let's do a little bit of the finding of our terms. What flows are we talking about? So there are three screens that I'm gonna apply to kind of what matters in dealing with climate finance. And I'm gonna go from broad to narrow. So the first screen is that not to put too fine a point on it, climate change is gonna be one or lost in emerging and developing economies. It's not gonna be one or lost in the United States. It's certainly not gonna be one or lost in Palo Alto. It's gonna be one or lost in the places in the world where energy demand and carbon emissions are increasing the fastest. Number two, what matters in those economies? What's relevant to climate change? What's most relevant to climate change is infrastructure. That is the big stuff, power plants, roads, bridges, airports, the big stuff that is energy intense to build, but much more importantly, energy intensive to operate. That to the extent that one locks in, that one builds high carbon infrastructure, one is locking in significant emission patterns for decades. So we've gotta get infrastructure right or almost nothing else that we do that will matter. So developing world infrastructure. And then number three is the flow of money that is financing that infrastructure. The premise of this work is if you wanna change the carbon profile of infrastructure in the developing world, you have to understand, you have to follow the money behind that infrastructure. You have to understand who is financing it, how they're financing it in order to change that, okay. So let me just go through the questions that attempting to change the flow of finance toward a lower carbon profile involves. And let's start sort of, well, let's start at the most basic and then we'll move up. So the foundational question is what are the current flows financing? What kind of infrastructure is the money that is going into infrastructure in the developing world producing? What is that money building? Number two, who is behind that money? Who's financing what in terms of carbon intensity? What does the carbon footprint of the financing profile of different financiers look like? Who's clean and who's not as a war? Number three, what financial structures are they using? That's really important. That sounds quite in the weeds, perhaps not if you're at the GSB, but the structures that the financiers are using is really important because where a financier sits in what's known as the stack of finance has a lot of implications for the importance of that financier and bringing on other financiers. So what are the flows? Who's financing what? What financial structures are they using? Obviously, I think, where in the world are they deploying the money? And so that's essentially who, what, where, when? And those things together get us to what I think is the second most interesting question, which is why? Why are they financing what they're financing, the way they're financing? Why are they financing clean stuff or dirty stuff? And that is the question I will just give you a kind of sneak preview. The why question, which to my mind is incredibly interesting is what we're about to start doing here at the Starter Taylor Center over the next many months. And answering that why is important to being able to answer the how. The how is how do you change it? Okay, so we're gonna dig into the research now, but what I want you to understand is what we've done so far over about the past year or year and a half is who, what, where, when. What we're about to do, and we've built, we've built a data tool that I will tell you about. And we're gonna now mine that and hopefully be able to get on airplanes and go places if that's possible to actually answer the why, why are actors acting with the way they are? And all of that's gonna help us answer, how do you change it? Okay. Now, I'm gonna talk about we, the we who did this work. I just wanna tell you who that is. In addition to me, it involves, it involves Callie who's on the call somewhere, I was on the call. And it involves a bunch of other, there you are. And it involves a bunch of other students, two of whom, three of whom forgive me, are co-authors of mine on this paper I'll show you. One of those is an undergraduate. So you can be an undergraduate at Stanford and be a co-author on a peer-reviewed paper. And one of those people is still a student both at the law school and the GSB, David Lio. And one of those students, Angela Artega-Pastore is just graduated from the master's in international policy program, which is Callie's program. Many, many MIP students have been involved in this work. But I would say that, I would say at least a couple of dozen students over the past few years have been involved in the work that culminated in this. We, the form that this took is something called Policy Lab which is a law school platform. It's effectively a research seminar. It's not a lecture class. It's where we all roll up our sleeves and actually do work. Everyone is assigned a research stream and we have kind of collaborative meetings. The next tranche of this research, which is the why tranche will ramp up probably a little bit in the spring and more intensively in the fall. And reach out if it's interesting. Okay, so let's talk about what we did. And you can read more about this in this paper, which I'd encourage you to do if this structure is interesting. But let me start defining a little more about defining the question. There are a lot of very smart people around the United States, across the United States and around the world who are asking the question, what, in what way is infrastructure in the developing world contributing to climate change? And trying to slice and dice this stuff many ways. My sense was that a lot of people are asking this question in a fairly narrow way. For instance, is China one of the biggest financiers of infrastructure in the developing world? Clean or dirty? Is, question one, question two, who in the world is financing coal-fired power? Coal-fired power is important because coal is the dirtiest fossil fuel. Questions like that, really important questions but fairly narrow questions. So the premise of this work is we're going to ask the broadest possible question. Who's financing what, full stop? We're not going to limit it by country of origin for financiers. We're not going to limit it by technology of finance. We're going to see where the chips fall. So a sort of first principles exercise. How did we do this? So a little bit into methodology. We started with two databases from the World Bank. One of the data, I won't name them, it's in the paper but one of the databases is publicly available. One of the databases is not yet publicly available but was made available to us through cooperation, a research kind of cooperation that we had with quite smart people at the World Bank. We took those two databases. We did a lot of refining and bolstering of holes in that data. And we created effectively a data tool, a merged data tool, essentially a machine that we can turn on or off and we can pull different levers on this data machine to ask it different questions owing to analyzing these flows. And importantly, as new data comes out in the future, updated information, the idea is that the machine is built such that we can feed that data into the machine without having to rebuild the machine. So we're building something hopefully that lives on in analytical ability. So this World Bank data includes lots of information on the financing of individual infrastructure projects. Who's investing? How are they investing? When did they invest? How much did they invest? That sort of stuff. Nothing about carbon. The World Bank contends that this database covers 80%, 80% of infrastructure projects in the developing world. That's pretty good. That's pretty comprehensive. So we, there were lots of holes in this data. As I said that we had to go fill but we'll leave that aside. So we have this database which is financial information about projects. We did kind of two important first screen things. Number one, we imputed methodologies that already exist for assessing future carbon emission profiles from a project. So we sort of bolted those methodologies onto our machine which now allow our machine theoretically to tell us who's invested in this project? What's the carbon emission profile over years of this project? And I'll talk in a moment about the different scenarios of carbon emission. And when you meld those two together what does that allow you to do in theory? It allows you to figure out which financiers are responsible for how much emissions. That's the name of the game, right? So that's the idea. Now, because this database is so voluminous we felt that we had to narrow it down for the first exercise. So we narrowed down all the infrastructure projects in the developing world to all the power plants in the developing world. I hope it's fairly self-evident to you why power plant would be relevant in climate change. It's obviously not the only kind of piece of infrastructure that's relevant in climate change. You could argue airports are, you could argue trains, you could argue highways but we wanted to sort of build this methodology based on something that was quite important with the theory that we could then propagate this methodology to other kinds of infrastructure which is what we plan to do. So I'm gonna be talking to you just about power plants. So I've just told you how we built this machine. I've told you that there are holes in the data which I will not go into because I'm gonna run out of time but that's really important for any of you who are thinking about doing deep data work. Those, if the holes are big enough then nothing that you do really matters. And so we built this data machine, we bolt on the methodology for carbon assessment and we turn the crank on the machine and here's what we find, okay? I'm gonna tell you about three findings. I'm gonna stop talking in 10 minutes and leave you time for questions but I'm gonna tell you about three findings. Most of these findings are the source of additional work that we're gonna be doing in the coming months. I'm gonna show you a few graphics and I'm gonna do it really quickly but you can all go look at these things more deeply if you find them interesting. Okay, finding number one, the new infrastructure being, the new power plant infrastructure being built in the developing world is too carbon intensive. Probably not a huge surprise to most of you here, right? But what we found is that, oh, I forgot to tell you one thing. In addition to looking only at power plants we're looking only at three years through 2018, 19 and 20. There are reasons for that. We would have loved to have been able to look at more years but when we melded these two World Bank databases together the only common years were those three years. Now, a power plant is included among these three years if it was financed in those three years. If it achieved financing by the World Bank's definition in those three years. So some of these power plants may not actually have been built yet or even if they had been built they may not have been turned on yet but the notion is they are relevant to the profile of global energy production because they presumably will be. Okay, and while there's another reason actually I think 2018, 19 and 20 is really interesting which is that they're the three years that precede this stampede of net zero announcements. So if you company X are telling me that you're gonna go net zero and you've suddenly gotten religion on climate change fine, I wanna know what you've actually been spending your money on for the last three years, right? So is your net zero announcement does that embody essentially in about face or is that consistent with what you've actually been putting your money to? So this is the sort of thing we can begin to truth test with this data. Okay, all right, so finding one, it's too dirty. 52% of the new electricity generation that got financial backing in these three years is too carbon intensive to comport with the goal of keeping the earth's average temperature from surpassing a degree and a half above pre-industrial levels a degree and a half Celsius above pre-industrial levels. There are, we ran these numbers in lots of ways. We ran it according to two degrees according to one and a half degrees according to different probabilities but that's the bottom line. Slightly more than half is misaligned. There were 55 emerging and developing countries in which power plants were financed that were misaligned, 55 emerging and developing countries. Vietnam, Mexico, Pakistan, South Africa were just a few of them. I wanna just emphasize here that China and India are not the only relevant developing countries to climate change. And you start to see this when you actually look at these numbers of a sort of maybe one might say second tranche or third tranche of extraordinarily climate-relevant developing countries. Okay, so it's too carbon intensive. Finding number two, a big reason that it's too carbon intensive is natural gas. Now, I think this is actually a really important finding because it will not come as news to most of you that in the discussion around the world about how to deal with climate change particularly regarding energy, the big bogeyman is coal. Lots and lots of people are working to stop the construction of new coal-fired power plants in the developing world and to shut down existing coal-fired power plants. I'm here to tell you that even if every coal-fired power plant on the table were not built and if every coal-fired power plant that we're operating that operates today was shut down, we'd still lose the climate game. And the extent to which we'd still lose the climate game is evident in this finding about natural gas. So a lot of these developing countries and a lot of the financing institutions and I'll talk a little bit more about who they are but these are multilateral development banks like the World Bank and the Asian Development Bank. These are national banks. These are private financial institutions. They've made promises to stop financing coal in the developing world but they're still financing natural gas in the developing world which is a lot cleaner than coal but still still emits plenty of carbon dioxide particularly when as much natural gas-fired power as many natural gas-fired power plants are being built as indeed are being built. So I'm going to now share my screen and this is gonna tell you so I'm gonna just deconstruct this a little bit. Look at the amount of capacity of generation that is the percent of new generation that is natural gas in the middle here is 34.5% of the total new generation so much more than coal, right? And if you look, so just let's stop on that. There is much more gas being built than there will be much more generation from gas in the developing world as a result of what's been financed in 2018, 19, 20 than coal and then let's look at the carbon impact on the right, estimated annual emissions. And so you see that effectively 80% natural gas is going to contribute 80% as much emissions as coal, new coal will over these years, 44% of the total as opposed to 55% of the total. So the point to remember is killing coal won't cut it and there needs to be a much deeper discussion about the importance of natural gas and I want to be very clear I'm not suggesting that construction of natural gas ought to end or will end but there is a very important discussion to have of how this natural gas infrastructure is used in a way that minimizes its impact on the client. Okay, so that was finding number two. So first of all, in total, what's being built is too carbon intensive in the developing world. Number two, coal is not the only issue, gas is incredibly important. Number, I'll give you two more. Number three, certain international players are particularly important in financing high carbon infrastructure. And let's go here and if you want to see names and again, I would encourage you to dig into this more deeply but I'll just give you a sense of names. So here are the top financiers of misaligned, climate misaligned generating capacity in emerging economies in these three years. Now, foreign financiers, I'm going to come back to this in a moment, this is to say of the misaligned, the climate misaligned power plants, the stuff that's too carbon intensive that was financed in the developing world of that amount that was financed by financiers outside the country in which the power plant was being built. Who are the top financiers of the misaligned stuff? And if we had more time and I were in a classroom with you and I would ask you to tell me what trends you see, but I think what you see is just look at this. So look at the country. So, so young is sitting in South Korea right now. South Korea is pretty near the top of the high carbon financiers. Japan is very near the top, essentially Japan, China, South Korea. So if we wanna talk about whose activities we need to change, this is a pretty good place to start. Okay, now finding number four. And I think this is really, really important in terms of defining kind of our next step or research. This shifts from the kind of who, what, when, where to the why. There is a, and I'll keep this on, I'll keep this view here because it's relevant. There is I think a general sense among people who ask this question of how to decarbonize developing infrastructure that this infrastructure is high carbon, largely because of dirty outside financiers. Big institutions in places like Japan, South Korea, China, the United States are pouring money in to benefit their own domestic financing institutions and their domestic construction institutions, dirtying the developing world, dirtying developing countries and that they are the ones who are putting this dirty infrastructure in place. What we found is actually there's strong evidence that financiers in these countries themselves, in Vietnam, in Mexico, in Malaysia, in Indonesia are a significant source of financing, building power infrastructure in these places. And in fact, what we found is that 44% of the generation capacity built in these countries in these three years came from domestic financing, not from foreign financing, nearly half. And domestic financiers bankrolled as much coal and gas as foreign financiers did. So just as I told you a moment ago that stopping everything about coal won't solve climate change, what I'm telling you here is that stopping the high carbon investments of international financiers, that is to say money coming into these countries will not solve climate change. And that leads to a conclusion that I think is really important, which is the importance essentially of self-determination by these countries, by these developing countries. And that is to say many of the decisions about what's being built are decisions being made within these countries. And there's a fancy term called political economy that refers to the kind of web of decisions about how money is spent. And what I'm gonna suggest to you is that the political economy of a particular developing country is hugely important in determining why money is going into high carbon infrastructure as opposed to low carbon infrastructure. And if you wanna start dealing with climate change and if you consider the world to be say a chessboard with each square, a country, you have to dig into each of those squares and understand what's going on within each of those squares. Who's calling the shots? Who's investing the money? Who's scratching who's back? Such that you can start to understand a realistic way, not a kind of idealistic pie in the sky theory that sounds good in Palo Alto, California, but a politically realistic, economically realistic way to change the way money is moving, to change the incentive structure such that institutions in those countries, in that country that now feel that it behooves them to invest in high carbon stuff, start to feel that it behooves them to invest in low carbon stuff. And to the extent that you can do that, then you start to remember I talked at the start of this talk about the importance of private finance as opposed to public finance. To the extent that you can reorient the incentives, and let me stop sharing my screen here. To the extent that you can reorient those incentives such that there is greater advantage assigned to investing in clean stuff in each of these countries, then you can start bringing in the real money, the big private money, which sees actually more money to be made in a clean way than in a dirty way. So that's the game. So let me just take very quickly, and I'll be done in less than two minutes. So the recommendations that we made flow from these findings. Number one, if you wanna deal with climate change, you have to roll up your sleeves and get your hands dirty and focus on the political economies of these countries. You cannot just sit in Glasgow and sort of decree that the United Nations or a club of wealthy developed nations will write a check for $100 billion and just sort of drop it around the world and that'll solve the problem. You have to get into these economies and start to change signals. So the political economy, if the focus not just on coal but gas, and again, I wanna be clear, I'm not suggesting that the secret here is to stop burning gas for power. There are many people who believe that's the case. There are many people who believe that that's unrealistic, but there are ways to change the way that the gas infrastructure, that gas fire power plants are used so that they enable rather than hurt the use of renewables. And that's an important shift to make. Number three, net zero at this point is basically just a slogan. Company A means something different when it talks about net zero from what company B means. And it is really important if these net zero promises individually and this whole net zero push collectively are gonna have a material effect on the global climate to bore into each of these promises in these countries and force the people, the institutions that are making those promises to explain what they mean by those promises. And that leads to the last recommendation, which has to do with disclosure on finance. It is impossible. We kept banging our heads against the proverbial wall in doing this research because of the holes that I talked about before. There were two kinds of holes. Number one, certain projects just weren't in the database, which I think is sort of just, that just happens. But number two, there were certain institutions that were much less likely to have their investments in this database than others. And there are patterns that start to emerge. And the bottom line is the institutions that are relevant to promulgating global finance need to be pushed to disclose where they're spending their money. Because if they're not disclosing where they're spending their money, then their protestations about net zero don't mean much. It's just sort of happy talk. And so it's really important to get those disclosures. And I'll bring this back to the exercise that I've just been talking about because if we're gonna monitor the flows of finance in an effort to understand the motivations behind those flows, in an effort to change those flows, we have to know with real specificity what those flows are, who's spending what. And we have a, I think that as a result of this work, I would humbly suggest to you that we have a much better understanding of those flows than we did before, but there are still too many holes. And if we can't answer that question, then we can't deal with climate change. Just one clarification, Christian. So when you're measuring the level of alignment or misalignment, can you specify the criteria? So basically it's money that be deployed for like a financing, those fossil fuel, like a popland versus the entire, like what was that? No, no, yeah, that's a good, I think I talked about it, but I think I went pretty quickly. So it's not, it's a very important question. So I mean, it is, I wanna be clear. It is not, if you invest in fossil fuels, you're misaligned, and if you invest in renewables, you're aligned. That's way too crude. So let's just do this in steps. Many of you will have heard of a global, the notion of a global carbon budget. Just raise your real hand if you've heard of that. Okay, so some of you haven't. So the notion of a global carbon budget is the following, really oversimplified. The world has a certain number of tons of carbon dioxide left to emit before really bad stuff happens, before reaching certain thresholds. And if the world exceeds that amount of future emissions, yeah, really bad things will happen. So basically what we did is we didn't invent those numbers. We took those numbers from accepted sources, and then you figure out of that total how much can be ascribed to power, to electricity generation. And then we actually do some modeling to figure out which portion of that power plant, that electricity generation portion of the global carbon budget is relevant to each power plant. Now, we do, this involves not just whether it's a coal plant or a power plant, but what country it's in. The wonks among you will have heard the term capacity factor. That's essentially how often the power plant is running. It has to do with the nature of coal. So it gets very, very specific, but we put all that stuff in as best we can, and there are some limitations to what we're able to do. And then we say, does the power plant, is this project, after having done all of that, is there a 67% chance that this will be aligned with two degrees, a 50% chance, or a 33% chance? And is there a 67%, 50% or 33% chance it'll be aligned with one and a half degrees? And we, what we ultimate, so we have all that data in the methodology, but ultimately what we choose as the definition of the distinction between aligned and misaligned is 33% chance of alignment with one and a half degrees. Anyway, feel free to read more, but that's the notion. Louise, I see you're, I see a couple of hands. Louise, you're first. Yes, thank you so much for this. This is incredibly interesting. I think, I guess, one overarching question I have is, you know, as you talked about the need to kind of get down and dirty, and they like actually get into the weeds and help figure out how to change the money flows within each country. Curious if you could just speak a little bit more about how you could see that playing out and how, like how could that actually happen? Is it the role of institutions like the World Bank or the UN to like help play some of that role and starting to shift flows? Or will it be at a much more, you know, local level kind of individually within countries? Just curious how you, how you're thinking about. Yeah, I mean, I think the answer is yes and yes. So let's take, let's just think of any country and I'm thinking of developing countries again other than China and India, largely because I think China and India are far more known commodities in terms of their relevance here than other countries, but there are six or eight other countries that we identify in this paper and other people have identified as extraordinarily important to defining the global climate in terms of how much they're emitting now and how much more they're likely to emit based on their trajectory. So let's just take any of these countries. So what would you do? Yes, you wanna certainly know what the multi-national development banks like the World Bank or the Asian Development Bank or the European Bank for reconstruction and development outside development banks, what they're doing. But there's a kind of philosophical debate that you'll quickly encounter where these MDBs will say, look, at some point we're doing what the governments want us to do, the host governments want us to do. And the governments will say, no, no, the big guys come in from the outside and they're sort of pushing their way around. What I'm suggesting in the exercise is you have to really unpack that. So first of all, when the MDBs come in and spend money, who's deciding what they will spend their money on infrastructurally within a country? Which ministries in that country's government make those decisions? The environment ministry, the energy ministry, what utility companies in that country are relevant? What outside hedge funds from London or New York or Hanoi are relevant? What construction companies that stand to make money on building power plants are relevant? And on and on and on. It's like, it's peeling this onion. It's getting, that's what I mean by getting dirty into this. And I'm suggesting that the proposition of kind of our next tranche of research is that if we do that exercise in a couple of places that we think we have established are not only interesting in and of themselves, but are representative as templates of other emerging and developing economies. If we do a few of them, we actually, we like to think, we may actually do a real service to the world in kind of helping answer that why question, which then enables a much more intelligent attempt at an answer of the how, how to change it all. Does that answer your question? Yes, thank you. Okay, great. Poo, you had a question. Yeah, I think it's very interesting that you've heard a talk. And I was wondering, like given sort of these research that you've conducted or peer review, I was wondering how in from like developing nations perspective, how much do you think this is going to be simply a game of non-tariff trade barriers for developing nations? I'm asking this from the fact that I'm Thai and the Southeast Asian space asking, feels like sometimes it's being sort of pushed around by the West and China sort of the East power. And then it seems like the decarbonization would just be another trend where capital was just being transected but not really disposed on the country. Do me a favor, explain your term to people who might not be familiar with your, explain what you mean by non-tariff trade barriers. So I guess my fear is it seems learning more about this over the last quarter is that over time, simply because the country isn't unable to decarbonize or through its infrastructure, perhaps it's the country relatively just invested in also few based infrastructure. And then suddenly there's a lot of pledges where oh, we're only accepting products that are fully decarbonized. And so products are no longer able to sell or agriculture is no longer able to adapt and over time, because of these red tape surrounding the urbanization, which are I think a good thing, but the speed that it's going and the lack of support that is coming along with it may make developing nations struggle to adapt with these better, higher urbanization standards. Yeah, so it's a great question. It's way too important a question to deal with the way I'm going to deal with it in 30 seconds, but it's the source of huge geopolitical disagreement. And if you ever doubted that climate change is an issue of fundamental political and economic importance, all you need to do is think about the question that was just asked. So the question is basically what is the if the world decides that in order to deal with climate change it wants to erect fences around countries that it believes are not pulling their weight in terms of dealing with climate change. So if country A puts a carbon tax on its producers and country B does not, how does the world push country B to do something so that country B's producers are not and fairly advantaged over the other producers around the world? And what's the effect if country B is a poor country? That's essentially the question. And I guess I would say that the answer depends on the specifics of each country, but I suspect that the, I guess I'm a little, I think it's unlikely that there will be the political will globally to impose these kinds of barriers that are punishing to certain countries if those countries are deemed of economic importance around the world. Despite all of the supposed protestations about interest in climate change and I'll give you a piece of evidence about why I say this. You've all heard of the notion of a carbon price, a carbon tax cap and trade systems. And there are lots of people who think that that is the ultimate solution. It's an elegant market solution. I actually, I wrote a piece in foreign affairs a few years, a couple of years ago, arguing that carbon prices are a wonderful idea, but not very relevant in practice because no one's doing them at levels that are relevant. And I think the answer is there's not a lot of political will to do it. And so similarly, why do I say this? Because I think there's probably not a lot of political will or at least so far, there's not a lot of evidence that there's a lot of political will to conduct trade policy, to predicate trade policy on climate change, on carbon barriers. And so I think it's unlikely that anytime soon and that happens in a way that has a real effect on trade. Katie, you had a question. Yeah, thank you. I was just wondering kind of if you could expand upon your point when you said that like we should be pursuing ways to change gas infrastructure to enable the use of renewables. I'm kind of like what you meant specifically by that. Yeah, yeah, thank you. It's a good question. Okay, I'll do this really quickly. I guess there are two parts to this. The whole reason one asked this question is rooted in the difference between the way a gas-fired power plant works and the way a coal-fired power plant works. So to go really basic here, right? All of you know that how does fossil fuel produce electricity? You have some stuff. You flick a switch and you burn the stuff. The heat from the burning stuff heats water. The water boils. The boiling water produces steam. The steam turns what's called a turbine. The turbine turns a generator and the generator produces electricity. So that's electricity 101 for the last century. And those of you who actually know about engineering are cringing at what I've just said. I'm a history major who's just explained to you electricity 101. But anyway, that's basically how it works. And so when you burn coal, it's hard to dial back a coal-fired power plant, right? You flick the switch on and it runs. When you with a gas-fired power plant, it's much more flexible. If you think of it in car terms in driving a six-shift car, you can shift up or down, speed up, slow down much more easily. And so it's much more flexible is the term that people use. And so therefore you can think of using gas and in fact, gas is increasingly around the world used this way to back up what's called firm up renewable energy. So you all know that the sun doesn't shine all the time. You all know that the wind doesn't blow all the time. And there are maybe three ways, among others, to increase the prevalence of renewable energy. One is you have a bunch of batteries and there's a lot of work going on in batteries, right? So that when the sun's not shining and the wind's not blowing, you have a battery that's disseminating energy that has been stored from when the sun is shining and the wind's blowing. Number two is you have a kind of ballet of different kinds of renewables. So the sun may not be shining in one place but it may be shining in somewhere else. And so you can string wires between those two places or the sun may not be shining in one place but the wind may be blowing in that place. So you can balance them out that way. And that's kind of the dream of 100% renewables is getting doing as much of that elegant stuff as possible. But there's a third way and this is the way that has been largely done so far because batteries have been particularly expensive. And that is you have a gas-fired power plant and when the sun's not shining and the wind's not blowing, you just turn on the gas plant. And then as the sun comes up and the wind starts blowing, you dial down the gas plant, right? And so to the extent that you operate gas plants in a way that they are there largely as backup to renewables and not as the primary source of energy that crowds out the development of renewables, then you can use the theory goes, gas to enable the energy transition. Now, there's a huge debate over about every word I've just uttered on this question of gas. I really encourage any of you who find it interesting to do some reading about it. I'm happy to talk to you more about it. And I think there's very interesting work that we're interested in doing this area. But that's the answer. And I guess I would just submit to you that all that gas I talked about having been built in the past few years is not gonna be torn down. It ain't gonna happen because there's too much money tied up in those gas-fired power plants. So it is a very important for the climate question how those gas plants are operated and operating them in this way that helps renewables is not just about sitting and flicking the right switch at the gas plant. It's very much about redesigning the electricity markets, the energy markets in these countries to incentivize certain behavior of operators of different kinds of electricity. It's very complicated very quickly, but that's right. Yeah, yeah, Jeff, that was great. I mean, you raised all the key important issues. I mean, from my experience, I just pointed out you mentioned about private sector participation in all these investments because this is critical. And when I visited many countries, I mean, developing countries, the investments mostly coming from the government guaranteed loans, which you already pointed out like Asian Development Bank or World Bank African Development Bank, et cetera. And then the key issue here, if you can see that is tariff, tariff is not cost recovery. In most of the developing countries that I visited, not cost recovery, and that's creating the key problem here. So private sector is not interested if the tariff is not cost recovery. Tariff meaning the amount of money that a private producer can charge. Yeah, right. Exactly, exactly. So if the cost is not recovered by the tariff and the government keeps subsidizing, so it is not interested for the private sector. So that's why developing countries are not getting the sufficient investment. Only those multilateral or international financial institutions are coming with the money. And they're financing 80%, as you say. And even they cannot finance 20% because 20% is financed through not charging taxes and their custom duties. And of course, I mean, the land permits, et cetera, things like this that government can do. So with that issue, so the private sector is not interested and the government keeps subsidizing the tariff. And I spent a lot of time in the countries where due to the tariff, when government tried to increase the tariff, the social unrest has happened, even revolutions. So just make sure that you consider this points why this countries are not getting enough investment, even to maintain the existing system. Yeah, I appreciate that. It's a really interesting point and it goes straight to this question of political economy and what is realistic politically and economically and what is not realistic in the countries that are key. So thank you very much for that. Yeah, and I also don't want to keep you all the guys, you have already run out of time, but of course, I mean, also there are other critical issues that if you talk about political economy. Joe, can I make your suggestion? Can you send me a note? And I'd be happy to talk more if you'd like to. I just want to respect everyone's time and my email is in the chat. Just so everyone has it, it's Jeff Ball, J-E-F-F-B-A-L-L at Stanford.edu. I apologize, I just want to- I will, Jeff, yeah, yeah, I got your email. Thank you. Great, thank you. Okay, thank you for everyone. And then also stay tuned for our next month meeting. It's gonna be posted on SFI website as well. And then I also shared Jeff's links for his profile. So please check out and see you everyone next month.