To tackle climate change, we need more than incremental changes
Image: Tessaria Mihangel, courtesy of James AG Kahn
“You are an inner Bayesian,” my professor of sustainable finance once told me when I questioned the conventional wisdom that natural gas can effectively help our carbon-intensive economy transition to lower emission levels.
At that moment, I forgot Bayes’ contribution to statistics and had to check it. In short, Bayes’ theorem involves modifying existing predictions or theories with new evidence and information. This allows us to update our assumptions as more data becomes available.
Yes, this is what I am now.
We should all apply Bayes’ theorem to our lives and extend it to society as a whole—especially in terms of how we can inspire new ideas and technologies that can help us deal with the climate crisis.
Our current incentive structure still favors incremental repair to a large extent. In contrast, in order to produce the major world-changing innovations needed to solve the climate crisis, we need more support from the public sector and large companies—including funding and deployment—as well as fundamental changes in the indicators we use to measure Reassess the impact of new ideas on society.
For more than 40 years, we have been aware of climate change caused by human activities. We know that the greenhouse effect has a history of more than 100 years.We already know how Capture carbon, Build renewable energy infrastructure, and improve energy efficiency within decades. However, the amount of carbon dioxide in the atmosphere continues to rise.
Based on my experience as a fledgling entrepreneur in the field of carbon removal and someone who pays close attention to when the behavior I am engaged in does not produce the results I want, I know that the approach we are taking will not work. Several of my colleagues also expressed this view.
In society, we must do what we should also do regularly as individuals: look inward, analyze our behavior, and make changes so that we can embark on the path of realization. However, with climate change, we continue to act in accordance with rules that no longer apply.
There seems to be a belief—especially in Silicon Valley and venture capital bubbles—that traditional free markets will save us. It doesn’t matter, we don’t have a real free market in this country; this way of thinking assumes that we can effectively deal with climate change and create a more prosperous future without any systemic changes.
Unfortunately, the way we currently fund new ideas reflects this technological utopian way of thinking. When what we need is a systematic reform of our economy, the indicators that we determine what makes an idea “success” often only allow for gradual change.
First, the public sector must once again become a funder of big ideas. Government funding has provided us with some of the most transformative new technologies that laid the foundation for other ideas to take off: GPS, the Internet, and space travel are some examples.
There is a dichotomy between ensuring a livable future (which requires long-term planning) and the underlying profit motives that are indispensable to capitalism, which has paid more attention to the results of the next quarter in recent decades than ever.
I believe that a large part of the venture capital world has been spoiled for the past two decades. As simple applications become multi-billion-dollar behemoths, quick exits and huge returns become the norm. It doesn’t take much to make it bigger. Small teams write lines of code, the number of users grows, and advertising funds flood in. That’s it. There are no new manufacturing plants, few long-term strategies, and of course not too many systemic changes.
Climate change is essentially a hardware problem-which means we need large infrastructure projects that will fundamentally change the way our economy operates. But our incentive structure has been destroyed by shiny new software that has grown exponentially overnight, rewarding ideas that use our existing systems to provide convenience.
Even our most promising technologies—for example in carbon capture—are constrained by current market incentives. Unlike software, hard technology requires long-term support and investment. In addition, they do not always have working prototypes, which puts them at a disadvantage in front of potential private sector investors. It is these hard technologies that enable us to build a true recycling system and make the concept of waste obsolete.
At an investor promotion meeting I attended in Lower Manhattan, I saw a magnificent view of the Midtown skyline, and I witnessed software adjustments that solve small problems—such as gradual improvements in energy efficiency—that are longer than large-scale ones. Repairs are urgently needed for more attention.
How can we get rid of this destructive incentive structure?
This is not easy. There is no magic fix, it will depend to a large extent on changing our way of thinking. We must turn to the future after the next fiscal quarter. Even the five-year exit period is too short. We need regulations and incentives designed to remind the financial and business communities that the greater the power, the greater the responsibility.
Change will be costly. We will have to face the reality that profit margins may be lower. We must adapt to a longer time frame. We will have to make more risky bets.
But with this, we will give ourselves a chance to build a more prosperous future for more people.
It is time to realize that we must either learn to adapt to the increase in risks and the reduction in potential returns that we can control, or learn to adapt and thrive, or climate change will impose them on us. And it deteriorates exponentially over time.
Rear Admiral Grace Hopper said: “The most dangerous sentence in this language is,’We always do this.'” She was right. Previous success is not always the best indicator of future demand. As a common theme of climate change, we must adapt to the challenges of the future.
James AG Kahn is a student at Columbia Climate School Climate and society Master’s courses.
