Bill Gates’ Fund For Climate Research ‘Will Take Decades To Pay Off’

CREDIT: Ian Langsdon, Pool photo via AP

PARIS, FRANCE — Here at the Paris climate talks, all of the major sticking points towards a global climate deal are really about money, especially financing for clean energy projects. This is a problem the world’s billionaires could fix, if they weren’t being led down the wrong path by Bill Gates.

Back in 2009 the rich countries pledged to mobilize $100 billion a year by 2020 to help poorer countries adapt to climate change and slash CO2 emissions. But even the arguments between those who want to keep warming below 1.5°C (2.7°F) rather than a 2°C (3.6°F) target boil down to just how much money the rich (countries) will make available right now to developing countries for carbon-free energy projects.

I put “countries” in parentheses because 20 of the world’s richest billionaires led by Bill Gates said last week they were creating a “Breakthrough Energy Coalition,” focused narrowly on cleantech research and development (R&D).

As I wrote at the time, the problem with such a narrow focus is that “Key developing countries like India are making decisions about building coal vs. carbon-free power right now that could lock in carbon pollution for decades.”

Indeed in the last few days, senior Indian negotiator Ajay Mathur made that very point explicitly, saying India would scale back coal use “if sufficient cash for renewables emerges from a Paris deal.” In Paris, a number of leading experts on India and cleantech have told me that this may well be the central issue that determines the fate of the climate.

So while longer term R&D spending is always helpful, billionaires who actually want to make a game-changing impact should push the Gates effort to fund the whole technology life-cycle — research and development and demonstration and deployment (RDD&D).

A New York Times story Wednesday on the Gates effort picked up on my critique:

“The partnership has already drawn criticism. With the new clean-energy fund, detractors say Mr. Gates and other members of the coalition are overly focused on energy moonshots that will take decades to pay off — if they ever do,” the Times writes.

“I’m perfectly willing to stipulate that countries underinvest in R.&D., but it doesn’t change the fact of the time frames involved,” as the Times quoted me. Indeed, as the story notes, “detractors” say team Gates is “overly focused on energy moonshots that will take decades to pay off — if they ever do.”

Gates offers no serious defense for this mistake: “Mr. Gates said the coalition was focused on early-stage investments but any breakthrough start-ups could raise more capital to finance deployment of their technologies.”

Who exactly is going to provide that massive amount of financing, especially for new, risky, breakthrough technologies? That’s a particularly crucial question because, again, to actually matter to humanity, some breakthrough in the year 2030 would need to be deployed rapidly at the trillion-dollar scale.

Memo to team Gates: We need to raise capital NOW to finance deployment of carbon-free projects now (and in the coming years).

Significantly, governments are notoriously slow to act in the area of project financing. Our current conservative-led Congress in particular has vowed to oppose U.S. legislation aimed at contributing our fair share (as the world’s largest cumulative carbon polluter) to the $100-billion-a-year global fund. They’ve even blocked efforts by President Obama to provide loan guarantees for U.S. clean-tech projects, projects which benefit Americans and American companies directly.

Yet, with just a fraction of their wealth, the billionaires could quickly leverage vast funds — hundreds of billions if not trillions for loan guarantees, which would slash the risk of cleantech deployment in India and the rest of the developing world — and that, in turn, would lower the interest rate these projects have to pay, sharply lowering their cost.

Remember, carbon-free power sources like solar photovoltaics and wind power have a high upfront capital cost, but pay for themselves over time since they don’t have an annual fuel bill the way coal plants do. Projects with high upfront capital cost become more viable the lower the interest rate they pay to finance that cost.

The billionaires could put together a $100-billion revolving fund that could support over a trillion dollars in clean energy projects, which would make a vast difference in how much renewables India and other developing countries could deploy in the next 15 years. And that could be the difference between whether we avoid catastrophic global warming or not.