Speaker 1: Hello, and welcome back to Drill. I'm Amy Westerveld are
Speaker 1: slapped and Carbon Bros. Seasons have wrapped and we'll be
Speaker 1: bringing you a new season later this month. In the meantime,
Speaker 1: we have a whole bunch of interviews to bring you,
Speaker 1: starting with this great conversation our Australia reporter Royce Kermilov's
Speaker 1: had last month with Brown University professor Mark Blythe and
Speaker 1: what he calls the strategy of carbon dominance and how
Speaker 1: we're seeing that strategy play out in an all out
Speaker 1: attack on renewable energy in the US and beyond.
Speaker 2: Hope enjoy it.
Speaker 3: Thank you so much for being here to talk to
Speaker 3: you about this. I've been very much looking forward to
Speaker 3: this conversation for some time after what your talk at
Speaker 3: the run Square of Economics about carbon dominance, where you
Speaker 3: describe the politics of climate change and you put it
Speaker 3: through the lens of both carbon and power. Would you
Speaker 3: mind walking as sorry, what is the strategy of carbon dominance?
Speaker 2: So no, essentially, carbon dominance is what I would call
Speaker 2: what's going on in the United States just now, and
Speaker 2: that requires a little bit of unparking so you can
Speaker 2: focus on the politics and obviously it's Trump. Obviously, it's Maga, Obviously,
Speaker 2: it's bright wing populism, et cetera, et cetera. But there's
Speaker 2: also something weird going on in all this. You probably knows,
Speaker 2: like yesterday when the EU basically said yes, please to
Speaker 2: a fifteen percent tax on everything they do. He then
Speaker 2: went on this really weird brant about and the one
Speaker 2: thing that I'll do, my Trump and the one thing
Speaker 2: we'll never do is is build up windmill. The EU
Speaker 2: will have no windmills in America. And he starts going
Speaker 2: this whole thing about windmills, and it's just, you know,
Speaker 2: you think it's bizarre, you've got a hatred against windmills,
Speaker 2: but it's actually far deeper than that. And the sort
Speaker 2: of the short version of the story goes like this,
Speaker 2: where does populism and Trump and all this stuff come from.
Speaker 2: Why they have an anti carbon twinge? So two things.
Speaker 2: One is basically what you might call the strategic power
Speaker 2: side of this. We'll park that for a minute, bullet's
Speaker 2: come back to it. What's the domestic politics of this?
Speaker 2: Go back to nineteen seventy five, and the three biggest
Speaker 2: employers in the United States were, if I remember correctly,
Speaker 2: General Moores, the company that became x on It, and
Speaker 2: another big manufacturer I can't remember who the hell it was.
Speaker 2: Now you go to today and what do you get you?
Speaker 2: Basically your top three are Walmart, the Home Deco, and
Speaker 2: Amazing Logistic. So they've gone from a business model for
Speaker 2: a country that makes lots of things to ones that
Speaker 2: sells lots of things, watch of which has made in
Speaker 2: other places. And this is the whole the industrialization thing,
Speaker 2: and China Shop and so on and so forth. Right,
Speaker 2: and I go back to about nineteen seventy one, just
Speaker 2: before that period, and what have you got. You've got
Speaker 2: kind of an encompassing political coalition whereby one in five
Speaker 2: jobs is in the auro sector and one and three
Speaker 2: are unbelated sectors that feed into this. So what does
Speaker 2: politics look like in this period? It looks like Tweedle,
Speaker 2: dumb and tweedl day, every political scientus in the world
Speaker 2: will be writing about how there's no difference between the
Speaker 2: Republicans and the Democrats. They agree on everything, So what
Speaker 2: are they doing. They're basically arguing over the distributions within
Speaker 2: what we would call a stable growth model. And what
Speaker 2: was that growth model? It was a carbon based growth model.
Speaker 2: What powered American growth for the nineteenth century, for the
Speaker 2: twentieth century, particularly postwar, is the East Texas basin. It's
Speaker 2: cheap shield. It's basically having cheap fuel which powered chief electricity.
Speaker 2: You can produce its scale manufacturing, so on and so forth.
Speaker 2: So you have this very sort of encompassing coalition. Everybody's
Speaker 2: basically part of the same growth model. Thirty percent of
Speaker 2: people are working in unions. Is industrial economy. Move forwards
Speaker 2: through the eighties, the nineties into the China Shop the
Speaker 2: two thousands, and what have you got. You've got a
Speaker 2: Republican coalition that looks like this. Start in Alaska. We've
Speaker 2: got a north to Kora, South Dakora, Oklahoma, Kansas, East Texas,
Speaker 2: through Texas, through the Panhandle, Mississippi, Alabama, come up to
Speaker 2: West Virginia. What have you got? You've got the core
Speaker 2: of the Republican states, the reddest states. What did they
Speaker 2: all do? They're the residual from the old growth model.
Speaker 2: They're the carbon coaliction. What they do is food, farms, fuel, fertilizer, feedstock, plastics, petrochemicals, manufacturing.
Speaker 2: That's their core business model. So when Biden comes along
Speaker 2: and says we are going to do decarbonization. They regardless
Speaker 2: as an existential threat to their growth model because basically
Speaker 2: they're going to shut them down. And you can tell
Speaker 2: them all the stories about we're going to help you
Speaker 2: transit and all this sort of stuff, but they basically
Speaker 2: look at the Midwest and go, now, we don't believe
Speaker 2: you will stick with ours. This is basically an existential struggle. Now,
Speaker 2: part that for a second, and then think about how
Speaker 2: we used to think about stranded assets. Stranded assets was
Speaker 2: something that would happen to carbon assets because as the
Speaker 2: world got warmer and as governments got serious about climate change,
Speaker 2: they would tighten, if you will, regulations and it become
Speaker 2: too expensive to have these things or produce these things,
Speaker 2: and companies would rationally disinvest from them, and investors would
Speaker 2: disinvest from them, and they would become stranded assets, and
Speaker 2: therefore they'll be we want to hold them. And that's
Speaker 2: how you basically power a transition towards green ticket cetera,
Speaker 2: et cetera. But what have you flipped that on its
Speaker 2: head and you say that there's an existential struggle between
Speaker 2: green and carbon asset, and we now hold the White
Speaker 2: House and the Senate and the House. So what are
Speaker 2: we going to do. Well, basically, we're going to protect
Speaker 2: our assets. So how do you do that? You dominate
Speaker 2: the other sectors. Yeah, we're not going to ban it completely.
Speaker 2: We're going to get rid of all the subsidies, We're
Speaker 2: going to get rid of any scientific support. We're going
Speaker 2: to lean into all the stuff that doesn't really matter.
Speaker 2: For example, last week was the pitch that the American
Speaker 2: government's no longer going to recognized greenhouse gases in any
Speaker 2: way harmful, you know, being lots of other things like this.
Speaker 2: But essentially what they're doing is they've got a strategy
Speaker 2: of we're going to allow you to build that windmill
Speaker 2: in Texas because that'll help us keep the air conditioning on,
Speaker 2: But in no way do you replace the carbon that's
Speaker 2: powering the economy and moreover, that's where we get the power.
Speaker 2: Go back to the power stuff. With parts of a
Speaker 2: while ago, that has been the sort of the secret
Speaker 2: to American growth. Partly is the dollar, which I'm happy
Speaker 2: to talk about, but the dollar very much rises and
Speaker 2: falls historically with the price of oil. Because even though
Speaker 2: Saudi for a while was the biggest producer in America,
Speaker 2: is now the largest net producer. It's American oil companies,
Speaker 2: it's American LNG. It's a huge part of what America does,
Speaker 2: and it also gives them a huge advantage in growth. So,
Speaker 2: for example, the cost of energy in the United States
Speaker 2: approximately one third the cost of word is in the
Speaker 2: United Kindom. So if you have that as your advantage
Speaker 2: and you basically are part of that coalition that sees
Speaker 2: carbon is basically your strategic advantage. When the rest of
Speaker 2: the world is decarbonizing, you have two choices. You can
Speaker 2: either go for splendid hemispheric isolation from Greenland to Argentina
Speaker 2: based on carbon, which might be one option, or you
Speaker 2: can do what they're also doing, which is actively discouraged
Speaker 2: through a coergon and bribery and other methods to do
Speaker 2: with tariffs and others to get others not to make
Speaker 2: a green transition and instead to sign very long contracts
Speaker 2: for American lerg et cetera. C So, carbon dominance is
Speaker 2: basically when you turn stranding assets into a political strategy,
Speaker 2: and that is essentially what's going on right now.
Speaker 3: So I think the phrase it's essentially you're trying to
Speaker 3: frown the competitive industry that is green tech, that is
Speaker 3: you know, renewable solar wind. You're trying to drown the
Speaker 3: baby in the bata before it becomes established, before it
Speaker 3: becomes a threat.
Speaker 2: Got it.
Speaker 3: And So just looking a bit to what you said
Speaker 3: about the tariffs, I mean, the tariffs have been integral
Speaker 3: to Trump's strategy and there's trying to erect that tariff wall.
Speaker 3: In their view, it seems to rebuild American industry. How
Speaker 3: is that playing into this broader strategy, because, as the
Speaker 3: narrative goes, tariff's a profound act of self harm.
Speaker 2: Well, are they right in the sense that the problem
Speaker 2: with thinking about tariffs is always has this, you know,
Speaker 2: the economous caveat on it, which is cateris part of us.
Speaker 2: All things remain equal, but they're never equal. So if
Speaker 2: you think about the fact that corporate profits, particularly American profits,
Speaker 2: but everybody's profits have never been higher. If you throw
Speaker 2: up tariffs, do you think those companies can eat that
Speaker 2: a little bit while reducing their margins. Yes. In other words,
Speaker 2: things don't remain equal. So some of it will end
Speaker 2: up on the American consumer, some of it will end
Speaker 2: up in producers. You'll be able to effectively tax those
Speaker 2: producers and then redistribute that cash. They've already raised a
Speaker 2: couple of hundred billion with it. It's not exactly chump change.
Speaker 2: In terms of the broader strategy. You know, will have
Speaker 2: fifteen percent tariffs lead to American reindustrillization. No, WITHUD have
Speaker 2: fifty percent tariff, Well, yeah, because you'd stop trading and
Speaker 2: therefore you would literally have to make this stuff yourself.
Speaker 2: So on its own as a reindustrialization vehicle, absence any
Speaker 2: sense of investment policy or industrial policy, which you had
Speaker 2: with Biden, then it's probably not going to work. But nonetheless,
Speaker 2: does it sort of like work in terms of a
Speaker 2: political stratage. Yes, If you think about the nineteenth century,
Speaker 2: what would the Republican policy towards the working class to
Speaker 2: protect them the tariff, keep out foreign competition, have ruthless
Speaker 2: domestic competition, keep your markets really flexible, keep your energy
Speaker 2: costs really really low. In fact, use carbon to make
Speaker 2: them the lowest in the world. Never mind all this
Speaker 2: stuff about the level ased cost of electricity being cheaper
Speaker 2: with green stuff. If we really pumping off carbon, we
Speaker 2: can be competitive, and we can do that in such
Speaker 2: a way that we can ignore and basically obviate this
Speaker 2: green transition.
Speaker 3: Why I'm with NATA kind of the picture be on
Speaker 3: the u US for a moment. But there was something
Speaker 3: you mentioned in your talk to Ansul of Economics which
Speaker 3: was a lot of this stuff that works around the
Speaker 3: idea of I think you used the praise minimum viable coalitions.
Speaker 2: Yeah, minimal winning coalitions.
Speaker 3: Yeah, yes, So what is that? Just to be clear
Speaker 3: about what that is.
Speaker 2: So the basic if you think about politics under that
Speaker 2: old Regima talked about when Democrats are tuedo dominic, Republicans
Speaker 2: of tweedle d how did you win elections? That's when
Speaker 2: political sciences in love with the thing called median voter theorem.
Speaker 2: So that's some dude who's in the middle, and they
Speaker 2: really have middle preferences, And because votes are very large
Speaker 2: number of things, ultimately you have a kind of quasi
Speaker 2: normal distribution of preferences, which is to say, there are
Speaker 2: very few communists and very few fascists, and most people
Speaker 2: are just uncle nice in the middle. So you need
Speaker 2: to move your polity free towards captain as many Uncle
Speaker 2: nice as possible, and the Republicans will by saying, hey,
Speaker 2: taxis are good for Uncle Nice. And then the Democrats
Speaker 2: will say, no, actually, redistribution is really good for Uncle Nice,
Speaker 2: and that's what we should do. But essentially Tweedle Dumb
Speaker 2: and Twio default over this median voter. The median voter
Speaker 2: has largely disappeared. What you've basically got are the action
Speaker 2: is no longer in a sort of normal distribution. What
Speaker 2: you've got are very hetrogeneous preferences. And what you try
Speaker 2: and do is build a minimum winning coalition rather than
Speaker 2: an encompassing coalition. You basically go to your base and
Speaker 2: work out from the tale to as far into the
Speaker 2: middle as you need to go, basically working with your activists,
Speaker 2: working with gerrymandering districts, working with keeping them agitated and
Speaker 2: angry all the time. And in that way, the Republicans
Speaker 2: have been much more successful than the Democrats. And it's
Speaker 2: that ability to build up minimum winning coalition and keep
Speaker 2: that going means that you don't have to compromise anything
Speaker 2: with the other side.
Speaker 3: So taking those ideas, something I was picking up on
Speaker 3: my reporting in isolation was that there have been attempts
Speaker 3: elsewhere to replicate this strategy. I mean, we see this
Speaker 3: kind of in New Zealand, where the government's coupled together.
Speaker 3: We see this in Australia with different Australian states that
Speaker 3: Queensland now is currently doing something similar and also it
Speaker 3: looks like the UK might be going down that path. Yeah,
Speaker 3: and so my question is how does it say, how
Speaker 3: do we see this kind of bawling out from the
Speaker 3: US to other places right now?
Speaker 2: Well, there's a way in which it doesn't work, which is,
Speaker 2: if you really want to destroy a right wing political movement,
Speaker 2: just get endorsed by Trump. So you know, that's what
Speaker 2: Albanize showed us, That's what Canada showed us, right, I
Speaker 2: mean that was basically like you cut, Trump comes out
Speaker 2: for the other guy and it's a kiss of death.
Speaker 2: On the other hand, there are deep, sort of endogenous
Speaker 2: reasons for these countries to embrace this type of politics.
Speaker 2: So what is this type of politics? The type of
Speaker 2: politics basically says three things. There's a self serving elite
Speaker 2: called the top ten to twenty percent. They've run off
Speaker 2: with all the cash. We've got nothing and screw them.
Speaker 2: They hate us, and that's up. Basically, there's one is
Speaker 2: basically that. Then there's a sort of nationalist ethno nationalist
Speaker 2: version of that. That's the anti immigration thing is basically
Speaker 2: all these foreigners coming in and living off welfare, and
Speaker 2: when the one paying taxes, so on and so forth.
Speaker 2: And then there's the anti green one. Right, it's all
Speaker 2: a hoax and we don't need to do this. And
Speaker 2: those different factions coalesce because all of those are basically
Speaker 2: whether the legitimate gradiances are not a leave up to
Speaker 2: whoever's listening to this, but they work together as a set,
Speaker 2: and they're all real things in each of these countries.
Speaker 2: Is it the case that basically, in the eyes of many,
Speaker 2: a self serving political coal that cares more about decarbonization
Speaker 2: than the fact of your kid's schools falling down? Yes,
Speaker 2: what about wage stagnation, Well, it hasn't hammed for the
Speaker 2: top twenty percent, it's hard for everyone else. They don't
Speaker 2: seem to give a damn about us. Yes, right, So
Speaker 2: those conditions are there, and what Trump has done is
Speaker 2: to provide a model of how to do this, of
Speaker 2: what this is and what these agents should be thinking about,
Speaker 2: et cetera. And they'll have different national cadences and different
Speaker 2: national flavors, but the formula is essentially the same. So
Speaker 2: we have this world in which those grievances have real valance,
Speaker 2: if you will, for people. They mobilize around them to
Speaker 2: a certain extent. The United States provides a ten plate
Speaker 2: for it, but you have to then dial it back
Speaker 2: in terms of particularities of your local economy, et cetera.
Speaker 2: They can't just take these ideas off the shelf and
Speaker 2: dump them down and do the playbook. They have to
Speaker 2: be played with in certain ways. And then does the
Speaker 2: figure of Trump himself, who is immensely unpopular side of
Speaker 2: the United States and actually inside the United States. So
Speaker 2: that kind of cuts the other way. But you know,
Speaker 2: that's sort of the broadway in which I think about it.
Speaker 3: So when we think about this as kind of international conservatives,
Speaker 3: we might find parallels between places like Hungary, the US,
Speaker 3: and other places around, but ultimately these are American ideas
Speaker 3: and they don't necessarily transplant as easily to other countries.
Speaker 3: Other communities are the places.
Speaker 2: Yeah, I mean, if you think about Hungary, right, I
Speaker 2: mean Orban's big thing, along with a lot of the
Speaker 2: sort of nationalists right in Eastern Europe. It began with
Speaker 2: central banks. It began basically a central banks as agents
Speaker 2: of the money lenders and all of the antisemitic tropes
Speaker 2: that went with that. They're sort of the anti Surus thing,
Speaker 2: et cetera. Then it became sort of, you know, along
Speaker 2: with putting the much more nationalist version of this. Hungary
Speaker 2: then became very critical of the EU and then the
Speaker 2: ethno nationalism et cetera, et cetera. So there's a playbook
Speaker 2: which has developed very much uniquely in those places and
Speaker 2: it predates Trump. But what Trump did was basically take
Speaker 2: this kind of latent call it of basically angry working
Speaker 2: class people and low and middle class people who had
Speaker 2: been hit by a combination of financial crisis, austerity, wage stagnation,
Speaker 2: and a seeming favoritism towards foreigners rather than the domestic population.
Speaker 2: And he was able to weaponize that. And that's been
Speaker 2: layered on top of those politics and other places. So
Speaker 2: again to think of, you know, the La Pen, La
Speaker 2: Pen's very different, The National Front's very different to this.
Speaker 2: They've talked very much towards the center to be left
Speaker 2: economically but right on immigration, et cetera. It's quite different
Speaker 2: from the Maga approach box in Spain, very much more
Speaker 2: like the Maga approach reform. It's really kind of a
Speaker 2: vehicle for forage rather than anything else. So there's a
Speaker 2: trumpy aspect of this, but the politics aren't particularly maga
Speaker 2: in that respect. So again it's a very mixed bag.
Speaker 2: What's interesting is at this moment you see this everywhere
Speaker 2: in different versions, and it behooves us to go world. Why.
Speaker 3: One of the questions I had was, I mean, so
Speaker 3: we have this kind of international conservatives and building, we
Speaker 3: have this template being set up by Trump and his friends.
Speaker 3: We also have this strategy of carbon dominance that we've outlined.
Speaker 3: But opposed to that, we have the example apparently being
Speaker 3: said by China, where China is moving very fast to
Speaker 3: mean I think in May, and the sort of Sweden's
Speaker 3: worth of solo it's the people is expected in China
Speaker 3: by twenty twenty seven. I could have that wrong, but
Speaker 3: and yeah, and we're starting to see you know, kind
Speaker 3: of incredible statistics coming out about you know, the right
Speaker 3: baby production battle.
Speaker 2: Of like eleven fifteen sectors all the rest.
Speaker 3: But absolutely, and then we had the US Secretary of
Speaker 3: General just the other day of at least that report
Speaker 3: basically saying, hey, solar is still the cheapest thing ever
Speaker 3: and batteries are coming down and everything's changing now. So
Speaker 3: when we view what's going on in the US in
Speaker 3: opposition to China, what are we looking at?
Speaker 2: So this is where you move out to the other
Speaker 2: side of Trump's circle, away from the national conservatives, the
Speaker 2: ban and wing, the marginally tailors, and you move away
Speaker 2: from the finance people who are interested in stable coins
Speaker 2: and sort of reworking the role of the dollar, and
Speaker 2: you get back to those folks used to be mainstream Republicans,
Speaker 2: the ones that are like Marco Rubio. And you said, well,
Speaker 2: what are they worry about? What they worry about is China,
Speaker 2: And they worry about China in the following sense they
Speaker 2: are if you will. And my friend and colleague Dan
Speaker 2: Brisco must get a shout out for this because he's
Speaker 2: writing an offhead on this and I just read it,
Speaker 2: so it's in my head. But essentially I think Dan's
Speaker 2: right on this, that that group of people are what
Speaker 2: you might call really hardcore form policy of realists, and
Speaker 2: they're a very materialistic bunch of realists in the sense
Speaker 2: that they've got no time for America. Is the shining
Speaker 2: light on the hill or any of that sort of stuff.
Speaker 2: This is naked self interest and what is naked self
Speaker 2: interest dictate The history is written by the people who
Speaker 2: control the source of energy. The nineteenth century, it was
Speaker 2: coal that was the United Kingdom with a technological lead.
Speaker 2: Once it moved to oil and gas, it became the
Speaker 2: United States. Russia was able to maintain itself in large
Speaker 2: part of the coal war because it was completely self
Speaker 2: sufficient and oil and gas. And if you control that stuff,
Speaker 2: then then you know you control the future. But if
Speaker 2: you've got a world in which greenhouse gases and other
Speaker 2: warming agents are seriously threatening everything from biowebs to human survival,
Speaker 2: then you have to be carbonized. Now, whoever gets there first,
Speaker 2: whoever locks that in, whoever creates the tech, they're the
Speaker 2: ones that are going to be the next hedge and one.
Speaker 2: They're the ones that are going to be selling the
Speaker 2: stuff you need to survive to everybody else. And Biden's
Speaker 2: crew recognized this and wanted had they won the election,
Speaker 2: their idea would have been IRA two, IRA three, build
Speaker 2: on this, build more and more, actually get ahead of
Speaker 2: the technological curve, try and sort of anticipate before China
Speaker 2: gets their way to go. And instead what we did
Speaker 2: was we voted in Trump and we basically said to
Speaker 2: the tech lords, why don't you just do ai instead,
Speaker 2: because I'm sure it'll end up being something someday. So
Speaker 2: that's kind of where it's ended up. And we've seeded
Speaker 2: that to China. Now have you seed that to China?
Speaker 2: And you're a foreign policy realist, what do you do?
Speaker 2: You have to stop them. This is why they're serious
Speaker 2: about Taiwan, is why they're not spoiling for a fight,
Speaker 2: quite willing to have one. Now, the interesting thing about
Speaker 2: the Crump coalition is these people are quite vocal and
Speaker 2: quite a large prominent part of it, but so far
Speaker 2: they seem to be completely sidelined because neither the tech
Speaker 2: laws nor the National Conservatives really want to get to
Speaker 2: a shooting More of the China they're quite fine to
Speaker 2: have the Communist Party is the ideological enemy and so
Speaker 2: on and so forth, and they're pushing green tech around
Speaker 2: the world, and it's all just bullshitting. We shouldn't be
Speaker 2: doing it. Why don't you love our coal industry? Et cetera,
Speaker 2: et cetera. But they don't really want to get into
Speaker 2: a shooting match that could be the final shooting match.
Speaker 2: So there's real tensions in this coalition. But the basic
Speaker 2: idea is whoever controls the energy infrastructure in the twenty
Speaker 2: first century runs the world. And the Americans are very
Speaker 2: scared it's not going to be oil and gas, and
Speaker 2: they're doing everything they can to make sure that it
Speaker 2: is well.
Speaker 3: On that in terms of material reality that this is
Speaker 3: describing here, I mean, one of the things that is
Speaker 3: very interesting to me is you have China. I think
Speaker 3: there was a report out yesterday the day before that
Speaker 3: China is now basically planning to a limit it's oil imports.
Speaker 3: At the same time, you have Japan basically buying more
Speaker 3: gas than what it needs and now that it's Nucleus
Speaker 3: timing back on and reselling Australian gas wiolets on the water.
Speaker 3: You have Pakistan doing the same thing, and Pakistan Pakistan
Speaker 3: Southwest Asian economy, considered to be one that was going
Speaker 3: to be growth, is now leap progging over kind of
Speaker 3: carbon acids just to solve it. You have China supplying
Speaker 3: evs to Africa, so you have the potential for a
Speaker 3: laite throg effect there. You know, So in combination with
Speaker 3: kind of the US tariffs that may drive up prices
Speaker 3: on steel and steel labor and the anti immigration policies
Speaker 3: that compromise your ability to do skills, and the reality
Speaker 3: that there are going to be a lot less people
Speaker 3: buying this stuff down the track. Where does that leave
Speaker 3: the US in terms of the material reality?
Speaker 2: This is where the story falls apart, because at the
Speaker 2: end of the day, the problem is we have too
Speaker 2: much carbon. We have too many carbon assets. If you
Speaker 2: start to think about the basil salt fields that you've
Speaker 2: got off of Argentina, off of Brazil, Indonesia, Guyana, as
Speaker 2: well as the LNG that you're talking about, Qatar, all
Speaker 2: these other places, there's too much of this stuff. Now.
Speaker 2: From the one hand, you could imagine on an argument
Speaker 2: that would say, well, that's fine, because ultimately we are
Speaker 2: the swing producer. Saudi will still have the lowest possible price,
Speaker 2: highest possible quality, but they can't do everything. There's going
Speaker 2: to be a bunch of stuff we can't decarbonize in
Speaker 2: any conceivable time frames, such as air travel and so
Speaker 2: on and so forth. Cements a bit of a tough one.
Speaker 2: So we're still going to be able to do that,
Speaker 2: and if price is fall that's great because that gives
Speaker 2: us a way of staying in the game vias ave
Speaker 2: via these alternative green technologies, But ultimately, if it becomes
Speaker 2: so cheap that you can't really make a profit out
Speaker 2: of it, right, ultimately the capex is bigger than the opics,
Speaker 2: then you've got a bit of a problem. And ultimately
Speaker 2: that thing that usually kills green transitions or experimental technology
Speaker 2: is the valley of death between basically piloting and then
Speaker 2: getting it to scale and then making some money off
Speaker 2: of it. You get a weird version of that, whereby
Speaker 2: what's the point in opening up another fracking field in
Speaker 2: Oklahoma if at the end of the day the world
Speaker 2: price is twenty bucks because everything's so saturated. So in
Speaker 2: a sense, it's sort of double edged. You want the cheapness.
Speaker 2: It keeps you in the game, but if it gets
Speaker 2: too cheap, you knock out your own producers. And also,
Speaker 2: at the end of the day, if it is the case,
Speaker 2: the barer technology gets better, et cetera, et cetera. And
Speaker 2: China strategically just doesn't want to deal with the vulnerabilities
Speaker 2: that come with oil, and India also falls very much
Speaker 2: into this category. India's neuralgia has always been oil imports
Speaker 2: and the ability to pay for them. So if you
Speaker 2: get India, Pakistan, China, the rest of Southeast Asia, particularly Malaysia,
Speaker 2: Indonesia making a green transition, the Americans, unfortunately, they are
Speaker 2: going to be the last people hanging around driving F
Speaker 2: one fifties that cost two hundred thousand dollars.
Speaker 3: One kind of question is something I want to ask
Speaker 3: because I feel that it's always left Holiday's analysis. What
Speaker 3: do you see as the role of you know, what
Speaker 3: is called greenflation, you know, the price of stuff rising
Speaker 3: as climate impactums change and things become more variable when
Speaker 3: you've got disasters. It is something that seems to be
Speaker 3: universally recognized that climate change will drive up the cost
Speaker 3: of stuff over time. But it and we also know,
Speaker 3: you know, you can look at the Biden administration where
Speaker 3: inflation spikes kind of become the mandate of heaven, where
Speaker 3: if it's spikes, you loose government pretty quickly. And as
Speaker 3: you say, I think you've got a very good phrase
Speaker 3: of this nature always batch last. And so if we're
Speaker 3: seeing as an inevitability, how does that figure into this
Speaker 3: politics as a factor.
Speaker 2: So if you had Biden administration two point or that
Speaker 2: was continuing down this path, you would take a leaf
Speaker 2: out of a Deblavator's book. You would build up buffer stocks.
Speaker 2: You would try and think about things that you need
Speaker 2: to have strategic supplies of so you could release them
Speaker 2: if there were shocks, et cetera. But the problem with
Speaker 2: that is that you didn't win the election. And the
Speaker 2: second thing is buffer stocks are really expensive. You could
Speaker 2: be doing something else with the money, and that might
Speaker 2: not be the thing that you run out of. So
Speaker 2: what is there to do? Well? Ultimately, what you try
Speaker 2: and do with these things is to have options. In
Speaker 2: the sense of optionality. You want to cover your downside
Speaker 2: as much as you can and then position yourself in
Speaker 2: such a way that you might get the upside on
Speaker 2: it if it comes to pass. What might that look like? Well,
Speaker 2: in terms of let's say agriculture in the United States,
Speaker 2: absolutely the case that some places have become too hot
Speaker 2: for particular strands of wheat. Okay, so what do you do?
Speaker 2: You move the wheat production elsewhere, and you start to
Speaker 2: do something else in the place. You plan ahead, You
Speaker 2: try and get ahead of the curve. Is that a
Speaker 2: full proof solution to this? Absolutely not. We already have
Speaker 2: estimates from the prop the Potsdam Institute for climate research
Speaker 2: on greenflation, you think it's already significant. So a recent
Speaker 2: European report that essentially said it's showing up already. It
Speaker 2: takes about sixty days from a weather shock to basically
Speaker 2: show up in food prices. So as these patterns continue,
Speaker 2: the problem is the nonlinear in them. You don't know
Speaker 2: what's going to happen and when it's going to happen,
Speaker 2: in which part of the BioWeb is going to be impact.
Speaker 2: It becomes very difficult to cover that with any type
Speaker 2: of options. So there's no great solution to it, and
Speaker 2: it's baked into the cake. What does this do to politics?
Speaker 2: I think it's already there in the sense that for
Speaker 2: a couple of years, five years ago, six years ago,
Speaker 2: you couldn't respectably stand up and say, unless you just
Speaker 2: want to be a crack, that windmills were evil. And
Speaker 2: when there was a period whereby you had people like
Speaker 2: the head of the EFD railing against windmills and somehow
Speaker 2: this was okay. It was like green fatigue or something
Speaker 2: like this. I think now in Europe, when every summer
Speaker 2: is hotter than the prior one, when there are wildfires
Speaker 2: in Scotland which never ever happens right when people's actual
Speaker 2: experience is finally, oh, it's getting really hot in here,
Speaker 2: isn't it? And none of us are their conditioning. I
Speaker 2: think that tempers down the absurd claims of anti climate
Speaker 2: action and basically allows us to refocus. So I think
Speaker 2: that sort of you know, at the end of the day,
Speaker 2: what's the phrase, nothing gets your attention better than pain?
Speaker 2: Right that you know there is something to that, and
Speaker 2: it has a way of filtering out the politics. Quite
Speaker 2: how Trump deals with this, we don't know. I mean,
Speaker 2: you don't know if he's going to be done by
Speaker 2: the midterms. You don't know if he's going to be
Speaker 2: two terms, if this lasts, if the Democrats are the
Speaker 2: shambles that they are just now and continue to be.
Speaker 2: So the problem being that as the party of the
Speaker 2: state is CO who kind of likes things the way
Speaker 2: they are, it's very hard for him to argue for
Speaker 2: anything else that that just hands it in a sense
Speaker 2: of the Republicans. And if we get two terms of
Speaker 2: these guys, then that's when you get the full carbon
Speaker 2: dominance strategy. And by that point you have seen such
Speaker 2: a big break with China, the rest, with East Asia,
Speaker 2: with South Asia and the world will be very much
Speaker 2: two different places. One that's still holding onto carbon trying
Speaker 2: to promote its use, and one that's basically postcarbon.
Speaker 3: So essentially that moral luck.
Speaker 2: Yes, yeah, it's part of the pen If the Democrats
Speaker 2: came back in on a landslide and we're able to
Speaker 2: get two back to back victories and we're able to
Speaker 2: do a whole restoration of green industrial policy. The damage
Speaker 2: that these people have done in the meantime is so large.
Speaker 2: Think about it from the point of view basic R
Speaker 2: and D. You're threatening top universities with funding, You're threatening
Speaker 2: with one growing students. You're banning f one visas for
Speaker 2: your top researchers. You're basically saying we don't care about
Speaker 2: this stuff. So if you're one of those researchers, one
Speaker 2: of those scientists, why would you want to be here,
Speaker 2: particularly if all the options somewhere else. There's a way
Speaker 2: in which they're embedding policies which even if you get
Speaker 2: a change of administration, it's very hard to undo. The
Speaker 2: trust has gone.
Speaker 3: It's funny you say that. I'm and not to get
Speaker 3: too perertial, but a lot of the stuff that's happening
Speaker 3: with Trump makes me sometimes think, and this is unscientific,
Speaker 3: but about what's happening in the US is the Australianization
Speaker 3: of US politics, because we went through a similar pace
Speaker 3: with this in twenty thirteen with the election of Tony
Speaker 3: Abbott and the Raiser Gain that came through and just
Speaker 3: happed the budget and just cut everything to pieces, and
Speaker 3: the decisions that were made done have profound changes and
Speaker 3: as you describe, locked in a series of policies. But
Speaker 3: you know that continued to exist for the decade of
Speaker 3: a three different coalition administrations. And what it seems to
Speaker 3: be the response from the center left, which is Labor
Speaker 3: Party here soorts to essentially weight them out, and that
Speaker 3: the approach seemed to have been We're going to present
Speaker 3: the reasonable, the sensible response to this. When all this
Speaker 3: fizzles out, will be able to step into the breach
Speaker 3: promise to rebuild. And the first term of the Albernesi
Speaker 3: administration was very much just about repairing, was about putting
Speaker 3: back things, and which has left a lot of people
Speaker 3: very jaded and frustrated in many ways about kind of
Speaker 3: where things are going. And I wonder whether the Democrats
Speaker 3: are essentially playing the same strategy weight this out.
Speaker 2: I think some of them would like to wait it out.
Speaker 2: But the problem is if you have someone that's in power,
Speaker 2: like you know, before the Razor gam you had Howard
Speaker 2: as well, who you know, was not exactly a shining
Speaker 2: example of public investment. When you've had that degree of damage,
Speaker 2: you do have to spend a lot of time doing repair,
Speaker 2: and it's a bit where it's kind of obvious to
Speaker 2: everyone that this is wrong and it's okay to go
Speaker 2: and do that stuff. Britain finds itself in a really
Speaker 2: weird position because that's exactly where they are with the
Speaker 2: thirteen years of the Conservative But the government is so
Speaker 2: afraid of its own fiscal shadow and so timid that
Speaker 2: they literally are hamstrung not by anything except their own
Speaker 2: fear of the bond market. The bond market itself is
Speaker 2: not the problem, but just afraid of it, so they
Speaker 2: are unable to do it, and that really gets people
Speaker 2: pissed off and shaded. I suspect what's happening in Australia
Speaker 2: is where the Democrats would like to find themselves. That
Speaker 2: is to say, we would be back in power, we
Speaker 2: would be credible, people would recognize the damage. I don't
Speaker 2: think America is there yet. I think a lot of
Speaker 2: people don't think at all of it this is damage.
Speaker 2: You think this is what we need to do. There
Speaker 2: is a certain logic to it. If you basically are
Speaker 2: a kind of realists in the international relation sense, and
Speaker 2: you think the most important thing isn't how the global
Speaker 2: welfare optimum is generated. You think it's how America does.
Speaker 2: In America should be running things, then a strategy of
Speaker 2: carbon dominance and at least hemispheric dominance would make sense
Speaker 2: to you. And allowing China to run off with everything
Speaker 2: is not what you want. So it depends what you
Speaker 2: value at the end of the day.
Speaker 3: And Mark, before I let you go, We've talked to
Speaker 3: them many things today. But is there anything else you're
Speaker 3: think we've missed all you want to highlight or bring
Speaker 3: out in this conversation.
Speaker 2: I think it's a really interesting one is to think
Speaker 2: about the fact that while China continues to basically dominate
Speaker 2: sector after sector to invest in battery technology, etc. They've
Speaker 2: got an approach to AI, but they're not betting the
Speaker 2: farm on it, and the United States is betting the
Speaker 2: farm on it. And this is very different from what
Speaker 2: you usually do. Usually, what the United States does is
Speaker 2: run a kind of hidden developmental state through universities, through
Speaker 2: agencies like DARPA, Defense Advanced Research Projects, and then you know,
Speaker 2: we make these things and then they spill out into
Speaker 2: the private sector. And the great example is Mariana Masakoto
Speaker 2: did the cigner booking the competition state. All the key
Speaker 2: technologies in the iPhone were basically made it in public
Speaker 2: and private universities with federal money, and they had defense applications.
Speaker 2: And then Steve comes along, put it in a shiny
Speaker 2: box and changes the world. Right, And this is very different.
Speaker 2: This is now a part where we've got these massive
Speaker 2: companies whose investment budgets are orders of magnitude bigger than
Speaker 2: anything that the universities could muster or even the public
Speaker 2: sector would put out. And they're run by man children
Speaker 2: with massive egos. So if you think about meta, I mean,
Speaker 2: Meta has squandered almost a trillion dollars on the metaverse.
Speaker 3: I mean it's just.
Speaker 4: Bollocks, right, the Cambridge's legs no, exactly and exactly, and
Speaker 4: you've got you know, so you have this sort of
Speaker 4: incredible arms race for this thing called generative AI which
Speaker 4: is never going to happen.
Speaker 2: It's a complete camera. You don't get count. You know,
Speaker 2: it's it's almost a very Soviet way of thinking. It's like,
Speaker 2: if we have enough of a quantum of transformation, you
Speaker 2: get a quality of transformation. Like, no, that's not how
Speaker 2: it happens. But nonetheless, we'll spend all this money on
Speaker 2: this sort of stuff and it's insane arngeries and that
Speaker 2: the people at the top still can't tell you what
Speaker 2: the final use case is. Meanwhile, China is just going
Speaker 2: sector after sector, Let's do batteries, let's do this, let's
Speaker 2: do this. It really is the strange moment where we
Speaker 2: the cult of the entrepreneur in the United States has
Speaker 2: blinded the country to what actually we need to do
Speaker 2: in long term investment, and we've bet the househol in
Speaker 2: this one critical technology, which, as far as I've concerned,
Speaker 2: all it seems to be able to do is to
Speaker 2: bugger up higher education and people's ability to write things. So,
Speaker 2: you know, that would be my side worry on top
Speaker 2: of all this stuff.
Speaker 3: But there's a there's an aspect to that where the
Speaker 3: use of AI appears. If if we look at this
Speaker 3: in terms of power I've written about this actually for
Speaker 3: Droid where there was an extension to which II the
Speaker 3: next link in the evolutionary trend from the way economic
Speaker 3: modeling was used to argue against doing anything about climate change,
Speaker 3: which was another Australian pioneering invention. By the way, you
Speaker 3: can see how you know, the hype and the focus
Speaker 3: and artificial intelligence as a climate solution and as it
Speaker 3: will fix everything, it will create new materials is very
Speaker 3: much a distraction in a very convenient way, to turn
Speaker 3: people away from investing in and focusing on to just
Speaker 3: going all in on. You know, wind solar batteries.
Speaker 2: Got out sodium batteries, you get rid of the need
Speaker 2: for thermal protection. The cost of EV's dropped by thirty percent.
Speaker 2: It's very simple. It's not nearly as sexy as we
Speaker 2: are making god box.
Speaker 3: And with that that might be a good point to
Speaker 3: end on. Mark, thank you so much for take making
Speaker 3: a box.
Speaker 2: P