In this episode, Ramanan speaks with Narasimha D. Rao, a professor at the Yale School of the Environment. They discuss the global energy system, demand-side solutions to climate change, what GDP leaves out, and combatting inequality and climate change together. Time stamps and the full transcript are below. This episode is also available on Apple Podcasts and Spotify.
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[0:00:15] Ramanan Raghavendran: I'm here with Dr. Narasimha D Rao, who is a professor at the Yale School of the Environment.
His research examines the relationship between energy systems, human development and climate change. He also investigates income inequality, infrastructure, and climate policy. He received amongst a long list of honors and grants, the European Research Council Starting Grant for Decent Living Energy, a project aimed at identifying energy and emissions thresholds for universally decent living standards. Dr. Rao is also a senior research scholar at the International Institute for Applied Systems Analysis and an adjunct fellow of the Ashoka Trust for Research in Ecology and the Environment in Bangalore, India. And his professional experience includes four years as a visiting faculty member at the Indian Institute of Management or IIM Center for Public Policy in Bangalore, India. And just to add to complete the profile, seven years of consulting in the electricity industry in the US.
Narasimha, thank you. One, my first question is that one of my goals in these short interviews is to humanize science. Could you walk us through your life and your career?
And I just want to alert everyone who's watching that if you are as interested as I am in Dr. Rao, you can find your way to a recent New York Times interview with him. So what led you to make the career choices that you have? If you could walk us through a little journey, that'd be great.
[00:01:41] Narasimha Rao: Sure. Thanks for having me. Yeah, I grew up in India in Mumbai in a middle class home, and I used to take the school bus across the city to go to school. And I remember as a kid, I used to witness, as one does in Mumbai, lots of poverty, all around me and beggars and squalor. And for some reason, I could just not get it out of my head. As I went through school, I always had an interest in thinking about large issues, global issues of poverty and education. And so I always wanted to get involved in those issues abroad, which I did at a pretty young age, but as all good Indians do when they excel in science and math, I wanted to do something with engineering. So I did end up studying electrical engineering, but I had two careers.
You know, I started out first as an energy consultant. So this was actually a pretty formative time. The world over, they were making major changes to the electric sectors, restructuring them in the name of improving competition, bringing in new players. And in the US they were introducing electricity markets, wholesale markets. So I was very involved as a consultant to players who were actively involved in this industry, figuring out the rules. And I also spent a few years when I went back to India working on their restructuring. In 2003, they had a new act where it was also kind of borrowing ideas from the US. So I had some pretty formative experiences in both these regions. And actually in one case, I found that in the US, I was witness to some of the events that led to the crisis of the wholesale markets in California, where there was a significant amount of market power abuse.
And I was very close to some of that data. I used to run models, dispatch models of the system at the time. And I noticed what looked a lot like market power abuse, of units being held back out of the market. And it was fascinating to me to watch how that unraveled, because leading up to it for many years, so many great minds who worked on restructuring, it was all premised on the idea that competition is going to bring prices down. And, you know, it was always an afterthought that sure, in certain circumstances you can have market power abuse, and that's what ended up happening. And also in India, in the restructuring there, found a lot of the formulations, found trying to create an escape route for certain industry, from some of the governance failures in the sector. And so all of those experiences made me feel that I want to work on the other side, in policy formulation, rather than responding to policy and particularly working in the public interest. And so that's what brought me to academia.
And in academia, I ended up moving away from technology and thinking a lot more about some of the development issues and some of the social issues that need to be studied to address these problems. And so I studied a lot more about economics, and even what I call practical ethics. So thinking about how does a country like India respond to the problem of climate change? Now, how do you develop and grow emissions at the same time, do it in a manner that's sustainable? And people hadn't really tackled this kind of question in a rigorous manner. It sort of required a lot of interdisciplinary research. And so that's what I really focused on, is trying to bring some of the technical skills to bear and thinking about much more ethical and social questions. And so that's where I ended up after my PhD, I worked for about seven years at the International Institute for Applied Systems Analysis, where we did scenarios of meeting these climate change goals and thinking about how developing countries could contribute and participate in developing scenarios of how we can get out of energy poverty, and think about sort of low carbon pathways. And that's what I've ended up working on for many years before coming to Yale.
[00:05:28] Ramanan Raghavendran: Got it. Thank you. And you know, I'm going now dig into your research a little bit.
[00:05:33] Narasimha Rao: Sure.
[00:05:34] Ramanan Raghavendran: So when considering scenarios around limiting global warming, many projections about energy usage involve a world in which technology is doing all kinds of amazing things, and demand for power just keeps on rising and rising.
[00:05:48] And you've suggested another perspective, where changes in behavior, which is the Amasia theme song as you know, and changes in energy services because they have to go together, creates a low energy demand scenario, despite population and income increasing. Can you square that circle or circle that square for us?
And talk to us about how we downsize global energy and supply-side solutions on negative emissions, on emissions-generating technologies.
[00:06:19] Narasimha Rao: Yeah, the motivation for the study is that most of the climate models that we're trying to project how we can achieve these ambitious targets of limiting temperature increase from pre-industrial times to within two degrees Celsius, but focusing on supply-side solutions. So they kind of took growth for granted across the world, and figured out what portfolio of technologies could bring us down to zero emissions by mid-century. But these portfolio of technologies increasingly relied on carbon capture and storage, unproven technologies for doing so. And, and the size of it-
[00:06:55] Ramanan Raghavendran: If I may interject one of my favorite topics, which is the carbon capture stuff is not just unproven, it's arguably somewhat frightening.
[00:07:04] Narasimha Rao: Yeah. I mean, it is. And at the time it was the time it was thought of, it was literally a place holder for, for what we can't achieve. You know, let's figure out a way where we can just fictionally extract out carbon dioxide from the atmosphere. And so, you know, now there are, there's a lot more thinking into that direction, but nevertheless, it remains unproven. And for it to diffuse across the entire world in a manner that's cost-effective seems really unrealistic. So at least we wanted to do a thought experiment. What if we focus on how we use energy, transform how we actually use energy? How far can we get with that? That was the idea. And I need to explain a couple of principles about this in order to understand the scenario. One of them is if you look at the entire energy system all the way up from the extraction of resources, all the way down to our energy services, and you find the maximum amount of energy waste that's been neglected is on the demand side, in how we use energy. If you think our buildings are like leaky buckets, you think about our vehicles.
You know, we are approaching now, almost soon going to be at 50% of global automobile sales being SUVs and this is in parts of the world where you're in congested cities, it's not so much about function anymore. So you have so much wastage on the end use side. When we think about behavioral change and transforming how we use sort of what we call the passive systems within which we consume energy, we can have a dramatic effect in reducing energy use. And that has a kind of a knock-on effect on the supply. That is, there's so many losses that if you reduce one unit of energy demand, you reduce the need to build five units of energy supply because of avoiding all those losses. So that's kind of the leverage you have, and it significantly could potentially reduce the costs of de-carbonization, because if we've grown the energy system a lot less, than you just have a lot less to decarbonize.
And so it's kind of a useful transition strategy to get us to these ambitious targets, and potentially in a manner that could enhance wellbeing, as I'll talk about later. So how do we get there, and what do we need to do to transform the energy system and how we use it? Well, there are a couple of pillars of this vision. One of them was that we need to think about a different set of values in terms of how we use materials. So one of them is let's think not about ownership, but let's think about utilization and usage of capital. Yeah. So for example, we care about mobility getting from A to B, not necessarily owning the car that gets us from A to B. So the alliance on shared resources has a very dramatic effect on our use of, for example, transport. So we found that you can reduce the vehicle fleet by more than half, and grow travel demand into 2050 significantly so that we meet our travel needs, but we utilize information technology to be able to collectively share a limited number of vehicles.
So that model of shared resources is extremely important in this vision. Another one is the idea of de-materialization. So if we think about why we have cement and steel, for example, we want them to provide some kind of structural integrity, safety against the elements, physical durability. Are there ways to do it with less cement and steel? So we can reconstruct homes that don't use steel rebar as a framing, and there are in fact ways that you can redesign how you structure buildings using timber potentially, for framing that requires steel. And so we can think about automobiles that use aluminum instead of steel, which is lighter, but still as strong. And that also provides you with significant reduction in energy use to manufacture vehicles, using public transit, using shared mobility. These are all ways that we can significantly reduce energy use.
And then of course, another important foundation of this vision is using information technology. And this is extremely important, because we need that to be able to coordinate the complex uses of these devices across all of us. We also see the potential for a lot of convergence and consumer products, just the same way, smart phones could potentially be replacing up to 30 different products, it's been estimated. And if you have that kind of convergence, the utilization of appliances in the home, using smart technology, and coordination between suppliers and consumers, using smart grids, we can significantly reduce the amount of new capital we need. We extend product life. We make fewer things. We wear our clothes for much longer periods of time. Those kinds of changes are all going towards reducing the energy system size by reducing demand.
[00:12:04] Ramanan Raghavendran: I mean, underlying everything you just said is the concept of significant behavior change. And one of the things I want to touch on briefly before we're done is how might that actually happen? But before we get into some of that for a second, things like green growth and green consumerism, is it your view that demand sides... I'm asking you a question I know the answer to, and I know the answer I want, but I'll ask it anyway.
[00:12:31] I mean, your research suggests that these demand-side solutions, whether it's reuse or shared mobility or a variety of other things that we can discuss, that these are significantly better than incrementalist approaches like green growth and green consumerism. Why is that? Why do you say that?
[00:12:48] Narasimha Rao: So there's many issues with the paradigm of green growth. I think fundamentally it's incrementalist and we need dramatic transformational change. Yeah. And there's two aspects of that. I think the first thing we need to think about is what is the purpose of growth in the first place? And so we need to think about the fact that growth is a means towards an end, and that end is improving our wellbeing and improving our collective wellbeing. And what we find when we look at growth today is that it tends to be benefiting a minority at the expense of our majority in many ways. And so when we start to think directly about how can we measure wellbeing directly, and how do our energy services support wellbeing, it opens up a whole slate of new opportunities and ways to try utilize resources to achieve that end.
So the assumption behind green growth is that technology will bail us out, and if we allow growth to increase unfettered, and we think about how entrenched the fossil fuels are in our model of growth, we start to see how it's really fictional. It is. I mean, think about fertilizer production, simply that one example. It's basically based on synthetic fertilizer, which comes from fossil fuels today. If you think about cement and steel, which require extremely high amounts of heat to transform those products, transforming those, especially in developing countries where most growth is coming from, just by greening, it's not going to get you very far. I'll give you a small example on the demand side. So if you take refrigerators, right? So it's kind of a poster child in some ways of energy efficiency. We've had in the US, refrigerators have reduced their energy consumption to a third of what they used to consume in the seventies, even by increasing their size a little bit on average.
And that's mainly because of efficiency in the technology of refrigeration. What people don't mention is that in that same time period, the number of homes in the US that own a second refrigerator has doubled, that's now 30%. And so that brought a significant offset to those reductions, and so the electricity consumption in the US for appliances is not decreasing, despite very significant improvements in energy efficiency. And in my research, I found that if you look globally at energy use, you've identified products and services that can constitute the most basic standard of living, basic well-being. And we found that the amount of energy that we need to serve that basic well-being is about a 10th of the energy demand in the US, and that's across the world. And that's also including countries that have big gaps in living standards.
So essentially the growth in our energy system is supporting the affluence in luxury consumption, often minority, while the basic living standards of a lot of people have persistently been subpar for a long, long time. And so when we think about demand-side solutions, the idea first of all, is that we choose a different metric for what we define as our ultimate goal, and that's wellbeing. And we want to try and link our energy services, both direct and indirect, to wellbeing. So if we think about... I'll give you a few examples. If you talk about food, housing, and transport. Okay, so if we think about food today, about three quarters of agricultural land use, and about half food-related emissions come from livestock production. But livestock production only provides less than 20% of calories to people globally. And if you think about the 2 billion people still who are to be born, and where they're being born in countries where meat consumption is increasing significantly, it's hard to think of where we're going to find the space for that kind of productivity, without relying on synthetic fertilizer and other kinds of industrial commodities used to feed animals.
In some research, it's well-known today that reducing meat consumption is good for health and can significantly reduce greenhouse gases, but we've also found diet changes, even in vegetarian diets, can have an interesting impact. So for example, we've done work in India where white rice is widely eaten right? In South Asia and East Asia, as we know. Well, white rice also has a lot of methane-related emissions, aside from the fact that it's very fertilizer-intensive and water-intensive. And we've done a study in India showing that if you shift to cost grains, grains like millets and sorghum, we can shift land use by up to 20% in India, towards these grains, without reducing total production, by increasing micronutrients and basic nutrition. So it is providing more iron to people, providing more vitamins, reducing water use, reducing energy use, and reducing greenhouse gas emissions.
[00:17:45] Ramanan Raghavendran: Well, it's very interesting, you know, diet, as we talk about behavior change, a lot of our thinking around our investment business is this notion of reshaping the norms. And I want to pick on white rice briefly before I move on to the next question. But as someone of Indian origin, I grew up eating rice with everything and I'm South Indian, so really everything. Turns out, that really that's just a norm. It's just how you associate the smorgasbord of Indian food. When you eat lunch or dinner, you associate a pile of rice in the middle. Well, that's really just a norm. So I would like you to know that I have not eaten white rice in half a decade.
[00:18:25] Narasimha Rao: Really? That's impressive.
[00:18:29] Ramanan Raghavendran: And I eat Indian food 85% of the time. So it was just a norm that you have to associate eating your dal and your veggies and your paneer and whatnot. And it's just norm that you eat it with white rice or you eat it with Indian bread, a paratha or roti. That's a norm. So I've been eating the Indian equivalent of stew without rice, without bread for five years now. And honestly, I've never been healthier.
But anyway, enough about my dietary habits, let us move to question four, which relates to your answer to this question. So you'll be able to build on it in some ways, because I don't think we got fully done. So the discourse around standard of living, but this goes beyond standard of living, but it equates wellbeing and GDP, right? If you're a nation, you think about your GDP. Your research has found that GDP and similar aggregate measures disregard inequalities, and that we should consider a population specific context for standard of living.
[00:19:27] What do you think is most overlooked in these aggregate approaches to wellbeing that you've argued, and I agree, are erroneous? What's being overlooked?
[00:19:38] Narasimha Rao: Yeah, there's a lot of environmental impacts of GDP that we know are not accounted for. And a lot of people have done research to show that we are significantly underestimating the impacts of fossil industries by not looking at some of these environmental impacts on well-being. So that's one thing, but more than that, our current growth in GDP really is about material consumption and material transformation. And when we think about how much does the material consumption really contribute to our wellbeing, it's only a small portion of it. And so there's plenty of research showing that what matters to us is not measured by GDP. And there's actually increasing science on wellbeing that's actually asking people life satisfaction, that state of mind, as well as objective views of wellbeing. What are the tools that you need to flourish in life?
And so when you look at those, we are finding increasingly those are less material and sensitive than overall growth. So I've tried to parse out what is the material basis for wellbeing? Can we carve out from our total material consumption that which is really necessary or required? And that's what I call these decent living standards, where we look at what physical wellbeing and social wellbeing. And it's not subsistence, it's not talking about abject poverty. It's actually a pretty expansive view of a good life in modern society, where you have a refrigerator, you have access to the internet and access to motorized transport so you can get to work, maybe in an SUV, maybe in public transit. And so we found that those basic constitutes of a decent life are a small fraction of the amount of energy that we're using in the world today.
And so we've been able to differentiate these and also look at in our main sectors where we consume energy. Like I was saying in housing and transport, how much of it really is contributing to our basic wellbeing? So if you look at housing, like the US, the average size of a new house is something like 2,500 square feet. And the average home in Scandinavia, where the quality of life is very high, is about a thousand to 1,200 square feet or in that range. And so if you think about what drives housing size, what drives the size of vehicles, it's not necessarily what provides us the most wellbeing.
We know that some of that is just we do it because we can, right? I mean, you don't count the externality costs of it. And so moving in the direction of thinking about what really contributes to wellbeing leads us in the direction of finding very modest material use. And so that's where the demand side view comes in for significantly shrinking the size of this climate challenge. So I think there's a lot of neglected benefits of a low carbon economy, because we're not thinking about the types of benefits that GDP does not capture.
[00:22:32] Ramanan Raghavendran: I mean, I would just add to that earlier this year, I interviewed Kevin Ummel, who is living this path. Without spending too much time on his personal life, he is living a low consumption path. And as far as I could tell, he looked and sounded pretty damn happy to me. So, I just thought—
[00:22:52] Narasimha Rao: It's true. There's research showing that ultimately people in old age, what do they care about? They care about their relationships, ultimately and a lot of what people value is not really reflected in their material use.
[00:23:06] Ramanan Raghavendran: Agreed. I'm going to wrap us up with the final question. And this has to do with inequality. You know, climate change disproportionately affects those in poverty. And we know this, we've known it for a long time, but uplifting people out of poverty, and pushing along equality becomes emissions intensive, or at least that's the popular wisdom. Your work with the Decent Living Project aims to resolve this confusion.
[00:23:32] How do we eradicate poverty while still controlling environmental impact?
Can you talk a little bit about that? You know, the question is what is the best approach, but I suspect a more nuanced way to ask it is what is a better approach?
[00:23:45] Narasimha Rao: Yeah. So I think it's well known that climate change is really a poverty multiplier. It's going to exacerbate existing inequalities. So that direction is well known, but what people are not as sure about, which I'm trying to address in my work is that, will reducing inequality, reducing social inequality, actually reduce our emissions? So is equitable growth favorable to solving the climate crisis? And I think that is the case. And my research is showing that to some extent, and there's many channels by which this is the case. So when I talked about understanding now through this Decent Living work, the different services that constitute basic wellbeing and their impact on energy use the most important services we get such as health care, basic health, education, providing water and sanitation to everybody, is very cheap in terms of energy compared to larger houses and car dependent economies.
So you get a lot of development, human development, from very low amounts of energy, if you're channeling your development resources towards those services. So that's one way to think about equitable growth. You're focusing on the most basic needs of people. You will grow energy slower, but you will improve wellbeing. And that's what we have. We finally have evidence to show that in terms of energy use.
But there are other channels as well, so more equitable growth. If you think globally, if you have poorer countries growing income faster and adopting new technology faster, there's a lot more low-hanging fruit for energy efficiency and reducing energy use in poor countries with higher income growth. Then you have in more advanced economies that have already climbed up that learning curve of technology. So if you look overall, the fast diffusion due to income growth in poorer countries of efficient technologies will actually have a much bigger effect on reducing the extent of emissions growth, then if you had a more unequal development with more income growing in richer areas in richer countries. That's another view.
And a third view, which I don't tackle in my own research, is political. It's that you have a lot of support for environmental policies and in a more equitable economy. And that I think has not been studied enough, is that our social institutions are also shaped by how equitable our growth is, because it provides essentially power to different interest groups in society. And that's a channel that's also worth exploring.
[00:26:16] Ramanan Raghavendran: Sadly for you, Narasimha, we are pretty much guaranteed, based on this discussion to need another one, but I will leave you alone for maybe a couple of months, because this was amazing. We could have gone on, on each one of these topics for our full session. And so I think we're going to end up coming back and digging even deeper. Thank you very much for your time and best wishes for the rest of the year.
[00:26:41] Narasimha Rao: Thanks very much. I really enjoyed it.