In this episode, Ramanan speaks with Gernot Wagner, a climate economist at Columbia Business School.
Wagner has written four books: Geoengineering: the Gamble, Stadt, Land, Klima, Climate Shock, and But will the planet notice? His most recent book provides a balanced take on the possible benefits and risks of geoengineering in its various forms. Prior to joining Columbia as senior lecturer, Gernot taught at NYU, Harvard, and Columbia.
He was the founding executive director of Harvard’s Solar Geoengineering Research Program, and served as economist at the Environmental Defense Fund. He has been a term member of the Council on Foreign Relations, is a Senior Fellow at the Jain Family Institute and is on the board of CarbonPlan.org.
Thanks for listening! Subscribe here for future episodes.
[00:00:13] Ramanan Raghavendran: Hello, everyone. We're here with Gernot Wagner, who is a climate economist at Columbia Business School. Prior to joining Columbia, Wagner taught at Harvard and at NYU, he worked at the Environmental Defense Fund, and was the founding executive director of Harvard's Solar Geoengineering Research Program.
He's the author of four books. His most recent book in English, which is amazing, is Geoengineering: The Gamble, which provides a balanced take on the possible benefits and risks of solar geoengineering. Wagner holds advanced degrees from Harvard and Stanford in economics and government.
Gernot, thank you for joining us.
[00:00:54] And first, could you just talk us through your life and career? How did you get interested in studying climate?
[00:00:59] Gernot Wagner: Hi, thanks for having me. Frankly, I have never done anything else in my life. So had we had this conversation 20 years ago, the first question, not too long ago, was always around, “Pick your side. You can't do both. You are a what? A climate economist?" You are either sort for the birds and bees on the one hand, or you know about interest rates, unemployment rates, and so on and so forth.
And I can tell you, that has changed quite dramatically. I'd like to think I haven't changed, the world has changed, coming around to this point of view, which is basically, look, the problem is misguided market forces. And we've known that forever, essentially, or I think we've known that forever. And the solution is very much a climate economic one. It is channeling market forces from the high-carbon, low-efficiency pathway we are still on, onto a low-carbon, high-efficiency way.
[00:02:05] Ramanan Raghavendran: And just to continue on this question a little bit, do you think the circle can be squared or the square can be circled? Whatever the expression is, that we can have market forces and planetary benefits, that they can coincide?
[00:02:20] Gernot Wagner: I mean, look, okay. Not to be too philosophical, it's basically like the wishes and hopes and dreams and opportunities we'd like to provide for our children, and so on and so forth. And in the best of all worlds, the market is simply a tool, an instrument, to channel that sort of stuff into a productive direction.
Now, just to be clear, and this, of course, gets political very, very quickly. What we have right now is anything but a free market. You can't have a free market if there are externalities, right? I mean, that's sort of ECON 101.
If what I do all day long is internalize the profits, the benefits, while socializing the costs and the risks, and, of course, with climate change that is happening in a huge way, that's not a free market. That's not market forces doing what they're supposed to be doing. This is essentially channeling stuff in the absolute wrong direction.
And what we have to do is price climate risk, biodiversity risk, and so on, all these risks properly and then compel, force, market participants to internalize those risks because otherwise, we have sort of cost socialism. We privatize the benefits and we let society pick up the bill.
[00:03:54] Ramanan Raghavendran: Got it, and we will almost certainly come back to this in our conversation. What you just said is very near and dear to our hearts. So let's start with the most recent book, with Geoengineering: The Gamble, which you showed us just now.
You make a distinction at the beginning between carbon capture technologies and solar engineering. That comes down to the so-called free-driver effect, which has important consequences for research on geoengineering. I hope we got that all right.
[00:04:20] Could you describe the free-driver effect for our listeners? Have you received any critiques of that concept and how do you address it?
[00:04:28] Gernot Wagner: So actually, to back up a little bit more, the problem we are in, the climate problem, can, in somewhat reductionist terms, but I think appropriately so, be described as a free-rider problem. What does that mean? There's 8 billion of us, and we are all free riders on this lovely planet of ours, where we are simply not paying for the full cost of our actions. Right?
[00:04:58] Ramanan Raghavendran: I really like that articulation.
[00:04:59] Gernot Wagner: That's the problem, right? This is standard, ECON 101 type stuff. And this free-driver phrase-
[00:05:08] Ramanan Raghavendran: Although I went to university 200 years ago, they did not teach us this in ECON 101.
[00:05:12] Gernot Wagner: Interesting. Okay. So actually, okay, there we go. Right? Yet another example of in some sense how the world has changed in the sense of, look, if you don't teach that stuff in the first day of the first ECON class, then you are not doing an appropriate job as the teacher. Essentially saying, "Look, there are market forces to be channeled in the right direction. In order to do that, we actually have to internalize those externalities." Full stop. Right?
Okay, what is free driver? And credit where credit is due, so the late, great Martin Weitzman, my co-author on a book called Climate Shock, the two of us coined that term, if you will, in a Foreign Policy essay, like a decade or so ago. And he ran with it in a very formal economic model, in a peer-reviewed publication. And then I took it and ran with it in this book, Geoengineering: The Gamble.
Okay, what's a free driver? It's basically the exact opposite. For climate, the name of the game is, for climate policy traditionally, how do you motivate more people to do more? How do you motivate more people to mitigate more CO2 emissions? For solar geoengineering, the question, in many ways, is how do you stop people from doing too much too soon, stupidly?
So now, this distinction between solar geoengineering and carbon removal. Carbon removal, sucking CO2 out of thin air, is basically expensive medication. We have to cut CO2 emissions and we need to suck CO2 out of thin air. And that sounds expensive, energetically and monetarily. So the question is, how do you scale that up? How do you climb the learning curve, slide down the cost curve, scale up the technology, make it less expensive?
For solar geoengineering, in many ways, what we know, what we think we know about the topic, the technology, stratospheric aerosols, these sorts of things, is that it is so powerful, so potentially powerful, so cheap, relatively speaking, that in the extreme it's the free-driver effect, sort of.
It's so cheap that it might as well be free. The direct costs of doing it, potentially, basically don't matter. The risks, the uncertainties, they matter a lot. But it's different from the direct cost to those attempting to solar geoengineer the planet.
[00:07:55] Ramanan Raghavendran: Very interesting. And every time you say something, I have nine other questions, but I'm going to try and keep us moving along.
[00:08:02] Gernot Wagner: How much time do we have?
[00:08:04] Ramanan Raghavendran: Well, it sounds like we can do one of these every month. So you have written, and you wrote it in the book, that geoengineering research should be done by independent scientists and deployment should be initiated by elected leaders.
[00:08:16] What's your view of the role the private sector has to play in the geoengineering portion of a climate action strategy?
And here also, I think it would be interesting to contrast that role between solar geoengineering and carbon capture.
[00:08:31] Gernot Wagner: And that is the crucial distinction. So on the carbon capture front, the private sector has a huge role to play. And ought to play a much larger role. Why? Because the name of the game is to scale up the technology. To paraphrase a fairly well-known VC in this area, "It's about speed and scale." Actually, I'm not paraphrasing, I'm directly quoting here. We got to speed this thing up and we got to scale it.
We've got to do a lot more. And to do a lot more, you need money, you need investment. You basically need money meeting technology. And the more we do, the cheaper each unit is going to get, right? This is sort of the standard story. The private sector has an enormous role to play.
Now, the public sector has an enormous role to play in terms of subsidies and so on. And by the way, the public sector has an enormous role to play to avoid having carbon removal, carbon capture, be basically a distraction from cutting CO2 emissions in the first place, right? That's key too. We can't basically say, twiddle our thumbs, "Oh, la, la, la-"
[00:09:55] Ramanan Raghavendran: "We're going to capture that."
[00:09:55] Gernot Wagner: "... Don't have to put up a solar panel because we are going to be able to suck it out eventually anyways." Right? That's a problem. That's a real problem. Or it will be a problem.
For solar geoengineering, I guess the harsh way of putting it is there is basically no role for the private sector. And at some point, maybe, of course. But this is not a technology that, back to this free-driver effect, is in any way, shape, or form costly enough to warrant us worrying about driving down the costs.
I mean, there might be many problems with solar geoengineering, but they are not related to the thing itself being too costly. There are things like risks to worry about. There are lots and lots of other factors at play that make it very much a public policy problem, a public policy issue, and one where scientists have a real role to play. But basically, as researchers publishing peer-reviewed publications, open, transparent, and so on and so forth, publicly funded research, that is very different from basically saying, "We've got to scale up this technology and there is a role for investors to play in the private sector."
[00:11:15] Ramanan Raghavendran: That's very helpful. Actually, that's the best explanation I've heard yet. So thank you for that.
[00:11:28] So we've talked about geoengineering, but you've also written quite eloquently about the need for individual behavior change in publications, and you've walked the walk.
Rather, to put it differently, you have biked the bike. We understand that you moved from Boston to New York by bicycle—
[00:11:45] Gernot Wagner: I did. Okay. I mean, yes, but actually, that might be a great example of all of this, which is, did I do this for climate reasons? No, come on. Right? Of course not. Okay, here's me. I'm actually literally sitting in my apartment here right now. Welcome to our 750 square feet in lower Manhattan, third-floor walk-up. And no, I don't have a driver's license, right? And I've never driven. So these stories are, they sound a lot better after the fact, once you make them more logical.
So frankly, the real reason why I didn't get a driver's license back then was that I left Austria for college in the States when I was 18, right after high school. And in Austria, you can get a driver's license once you turn 18. While in the States, you get your license at, I don't know, 16, 17 years old or so. So I was too young to do it in Austria. I was too old to do it in the States. And then college, grad school, and the rest, and then life happens.
And I've only ever lived in cities. Don't ask me about the year at Stanford. That was a bit of a pain in the butt. But otherwise, yeah. I've just never driven. And look, this sort of encapsulates one of the, I would say, bigger questions in all of this, which is climate tech, and/or systemic, lifestyle, broader changes.
So maybe to put it more concretely, look, cities cut carbon, right? The average city dweller, again, welcome to my 750 square feet. We have a smaller footprint, by definition. It doesn't matter how rich you are. If you live in a city, all else equal, you will have fewer square feet at your disposal than the same wealth, same investment outside a city, right? So some of this, of course, is by choice.
As so often, of course, these individual questions are most directly or only really apply to those who have the choice in the first place. Just to be clear, this is not a question for, frankly, lots of people who sadly don't have the choice. Where, in some sense, it is society, it is policy that guides, or, for that matter, locks us into inferior choices.
We, as society, ought to do better and allow people to live closer to work and so on and so forth. But then, sort of the personal example, for somebody rich enough, relatively rich enough, to have the choice where basically the choice is, "Okay, do I live in a smaller place in the city or do I live in a three bedroom, two and a half bathroom, detached colonial out somewhere in New Jersey.
Not to make fun of Jerseyites. That will be my Twitter feed.
[00:14:53] Ramanan Raghavendran: Why not? Why not?
[00:14:54] Gernot Wagner: Well, actually, why not? Exactly. So welcome to my Twitter feed. Let's make fun of suburbanites all day long because it is a pathetic lifestyle. Just to be clear.
[00:15:01] Ramanan Raghavendran: I could not agree any more.
[00:15:03] Gernot Wagner: You basically maximize your square feet, basically at the exclusion of everything else in your life. Quite literally, you sacrificed breakfast and dinner with your kids in order to give your 14-year old her own bedroom and her own bathroom, who, by the way, hates you because she can't visit her friends without you driving her around. And it sort of—
[00:15:28] Ramanan Raghavendran: How do you know my life so well?
[00:15:31] Gernot Wagner: No, but basically, so again, this is the slightly over-the-top description here. On the other hand, this is a question now of, we are, as a society, and have been in the US for decades, essentially, we are even getting the language wrong. Every home under 1,400 square feet is called a starter home. It's the sort of thing that the real estate agent sells you, or encourages you, to buy and basically is gleeful about you buying the small house because she knows you will be back in five years because you need a bigger home. And that's sort of what you do. That's just the life. That's the norm.
And it's sort of unimaginable that you like your kids enough to want to live in a small enough space to actually have them around to cook at night, every day. It's this sort of stuff where society writ large is pushing us in a direction. I'm an economist, so go talk to a sociologist about why this is the case. Talk to psychologists and so on. Economists would basically say, because we are not pricing things properly, in a sense. So we are subsidizing suburbanites left and right by providing cheap or free parking in cities, by basically subsidizing the 'burbs. Right? Subsidizing suburbanization and have been doing it for way too long.
And of course, a big part of this is we are not pricing climate risk, climate damages, properly. Because if we did, more square feet would cost a lot more and we would be encouraged to live more efficiently. I mean, efficiency isn't bad per se, but of course, it creates these sorts of tensions.
And now, we are back to market forces where essentially, at what point is more, the channeling or the desire to have more, in fact, inappropriately much? Basically, at what point does maximizing your square feet, or wanting more square feet, actually butt heads against all these other priorities where we are no longer optimizing our lives, but we are simply maximizing square feet because society tells us that's what you should be doing?
[00:18:04] Ramanan Raghavendran: This is one of my all time favorite topics and I'm resisting spending—
[00:18:09] Gernot Wagner: Making fun of 'burbanites?
[00:18:11] Ramanan Raghavendran: Just this idea that we perform wealth by acquiring square feet. And it's just a norm. It's a norm, right? It's an old norm.
[00:18:22] Gernot Wagner: Yeah, of course. Yeah.
[00:18:23] Ramanan Raghavendran: But it's a norm and it kind of has to change. But let me push us along.
So both behavior change and geoengineering can sometimes be controversial in public discourse and sometimes can be viewed as either/or solutions, right? You either do the, "We all change," or, "We intervene in a fairly dramatic way."
[00:18:43] So the question is actually related to climate communication, and the question is, can we be doing a better job of how we communicate climate action and solutions to the public? And if so, what does that better job entail?
[00:18:59] Gernot Wagner: Yes, and I wish I knew.
So often, the key thing here is finding your own balance between climate tech, on the one hand, the fancy new gadget, the heat pump, the induction stove, the electric vehicle, that on the one hand, and personal change, behavioral change, and so on. And to be clear, the lifestyle change type stuff is hard. It just is.
When I speak to my little Twitter bubble and basically make fun of suburbanites all day long, I realize I'm not picking up the suburbanites where they are. I'm making fun of them. I'm picking up the urbanites where I think they are. That's a choice, of course, on my part.
And just to be clear, you could also say, "Look, this is just me making myself feel good about my measly life." So I'm stuck here in my 750 square feet. I'm making fun of the people with six bedrooms.
[00:19:55] Ramanan Raghavendran: This is my digression. My digression is, I find myself in many settings where I'm talking to pretty affluent people. And I have a gathering this evening. It's a group of affluent people in a very large house. And it is a gathering about climate. We have a pretty well known academic speaking at that gathering about climate. I'm introducing him, and so I have kind of an MC role. I can't shame my host. And so I am yet to figure out my own lexicon. And I can point to changes I've made in my own life and lifestyle, but this is really hard.
[00:20:35] Gernot Wagner: It is, right? In part it is, we do associate more square feet with wealth. Actually, the way I like to think about it is, we try to optimize so much. Basically economics is all about optimizing your lot in life given constraints. And in some sense, that sort of model works pretty well in general. This is how we spend our time. How do you divvy up your 24 hours? It's about optimization. Meanwhile, we have basically, enabled by fossil fuels, enabled by basically the last few decades of increasing wealth and so on, we have left that framework for real estate, where it's basically about maximizing, not optimizing.
[00:21:32] Ramanan Raghavendran: Okay, Gernot, final question. In one of your columns of Bloomberg, you write, “It's hard to point to the adage that any crisis equals opportunity. We're still very much in the crisis part, in more ways than one.”
[00:21:44] How do we get to the opportunity phase, and what is it going to look like once we're there?
[00:21:48] Gernot Wagner: Let me give you the most optimistic answer I can muster, which is-
[00:21:50] Ramanan Raghavendran: Please, we need some.
[00:21:50] Gernot Wagner: I wrote these lines in the pre-Inflation Reduction Act world. We just passed the most ambitious climate law ever. Is that it? No, we didn't solve it, right? But this act could very easily be called the Inflation and Carbon Reduction Act of 2022, because it is clearly the US joining this global clean energy race and in some sense doing what frankly we ought to do, which is have this race to the top where the Europeans have been talking about European Union, about their 700 billion Euro Green New Deal, essentially forever, I mean, for a couple of years by now. And it hasn't passed yet.
It passed in the European Council and it's being debated in European Parliament and so on at the moment. Now the US passed its law. Well, Europe's going to get its 700 billion investment, right?
And then it's going to be the US, and there's China and India and Brazil, and so on and so forth, right? And that's the very hopeful version.
Frankly, the pithy five-word answer is: it's too late for pessimism.
[00:23:09] Ramanan Raghavendran: Ooh, I like that. I like that a lot.
[00:23:14] Gernot Wagner: It says it. I mean, it says in five words, what usually takes me five paragraphs to explain, which is, it is getting worse. It is, right?
[00:23:22] Ramanan Raghavendran: Right, right.
[00:23:23] Gernot Wagner: We are still losing the race against unmitigated climate change. But yeah, this is now, frankly, the race between positive socio-economic tipping points on the one hand, versus negative climatic tipping points. And yeah, too late for pessimism.
[00:23:43] Ramanan Raghavendran: I love it. We don't always end these interviews on a joyous note: that is a very joyous note to end, and we're going to stop here. I want to thank you, Gernot, for being so wise and so forthcoming, and thank you for your time.
[00:23:59] Gernot Wagner: Thank you.