Decarbonisation: Thoughts on helping Earth by renovating the global economy

Systems map showing how interconnected industrial hydrogen, carbon capture, better buildings, and electrification systems can become an integrated decarbonisation system.
Integrated decarbonisation system:
Each of the shapes represents a distinct functional operating unit in a broader system.
Each needs to be developed and implemented and faces its own challenges.
Together, they represent the end-state system we need to create to meet the moment.

Decarbonisation by system substitution: summary

Human civilization must decarbonise urgently, and doing so will require elimination of carbon from a myriad of economic systems. Many systems today are declining or terminal, unable to generate long-term returns on capital. Our economy needs to transition to a set of end-state systems, enabled by technology, that provide for their participants and respect the environment.

First, we must rethink our societal approach to economic systems. We must rethink the function of systems with negative social and environmental externalities, and seek to eliminate the negative ones. Without this approach, decarbonisation is impossible; this is also a once-in-a-civilization opportunity to end the injustices our current economic systems create in their process of concentrating and privatising profit.

Second, we must assess extant economic systems with fresh eyes, answering questions that trace and explore their embedded negative externalities. We have technology and science that allow us to understand the solutions to these problems. But only once we meaningfully lay out what they all are, and what eliminating them will take, will we be able to fix them.

Third, we must design systems to substitute in for extant ones. Generally we can approach a series of related problems with a series of related, integrated solutions. This allows us to invest in companies that are going to decarbonise whole systems by integrating different technologies and generating different profits.

Fourth, we must implement these end-state systems. By borrowing the tech industry’s start-small-and-scale-fast mindset, we can establish flywheels that decarbonise systems efficiently, displacing the current system by winning on quality and/or cost. This strategy can be applied in a technology-agnostic way, keeping investors honest and elevating only ideas that have practical applications. 

Only by working at the level of economic systems can we achieve decarbonisation that is lasting, profitable, and beneficial to society. We already have much of the technology needed to slam the brakes on the climate crisis, and humanity’s failure of imagination has put us in the awful position we find ourselves in. But we will never reach the scale we need if we don’t look across the economy and bet on big, risky solutions to trillion-dollar problems. That is how we win—and how we score points for the whole planet.

To illustrate the interlocking nature of these societal end-state systems, a high-level diagram laying out a Green Recovery/Green New Deal-style re-envisioning of the economic system is included. Refer to the diagram as an example of what this approach can promise at its end: a just, integrated, zero-emissions economy.

Diagnosing the problem

In a world of interlocking systems, the climate crisis is a systemic problem, and can thus only be addressed systematically. Humanity’s daunting task is merely to replace the meta-structure of society. To date, we have collectively failed—handicapped by an economy that has empowered extractive industry, ignoring the growing scale of environmental and human catastrophe. We have engineered a society that provides for the few at the expense of the many, relying on economic systems of three types:

  1. Declining: imbalanced systems that concentrate and privatise positive externalities, socialise negative externalities, and generate mid-term (<10 year) returns on invested capital
  2. Terminal: imbalanced systems that concentrate and privatise positive externalities, socialise negative externalities, and generate near-term (<5 year) returns on invested capital
  3. End-state: well-balanced systems that socialise positive externalities, eliminate negative externalities, and generate long-term (10+ year) returns on invested capital

The nightmare we must face is that the systems we have in place are almost all either declining or terminal. Take the fossil fuel industry, and its role in the economic system we build around energy, as an example. While it continues to be propped up by allied governments and wealthy elites, the inability of players to generate even mid-term returns suggests that it is indeed terminal. Cutbacks and bankruptcies abound across the value chain, but rentiers continue to harvest whatever profits they can make before humanity comes to its senses and ends fossil hegemony. 

While we still subscribe to multi-century colonialist narratives of endless growth, reality has already begun to tear at the fabric of what’s left. We are in the waning months of economic semi-normalcy before a prolonged, international depression wrought by COVID. Humanity’s response is exposing the brokenness of our systems.

Yet the greatest opportunity in human history stands before us. Our new imperative is to transition our economic systems to their end-state versions. This is the only chance we have to get a zero-emission economy right, and logically, a zero-emission, climate-friendly, technologically-advanced economy must be the end-state of capitalism. We must also end the social injustices—classed, racial, and colonial—that are reified by our economic systems. This is our chance to fix what’s broken (or fall into oblivion). 

This system-substitution scheme can be robust if it begins with a full accounting of a system’s negative and positive externalities, and works to design solutions that retain the benefits while eliminating the negatives. Because its mission is to build something for the long future—an end-state for infrastructure, technology, and the economy—it must account for social, racial, and economic equality alongside its zero-emissions imperative. By then repurposing the tech industry’s scale-to-win mindset, it can support sustainable businesses with long-term returns while improving the world we live in (and the lives of all who are and will be impacted by the broken old systems).

Reframing externalities

As we have all had to learn, our individual actions have consequences, both intentional and unintentional. When individual actors participate in a collective process of transactions, they create an economic system. Economics sees the cumulative consequences of actions in these systems as externalities (positive, neutral, or negative).

A positive externality might be the accumulation of wealth by a small few from the concentrated profits in an economic system, even though those profits could be shared equitably among the system’s participants. (Conveniently, that wealth enhances the economic and political power of the few who receive it.) This is not to say that profits are inherently a bad thing; their unequal, uneven distribution is still enough to support the livelihoods of billions of workers worldwide, with follow-on effects that result in the consumer-powered economy we share. But the implications for power-sharing should make the distribution of profits in a system subject to greater scrutiny.

Negative externalities are almost invariably social or environmental, burdens assigned to those with the least agency in such systems. Poverty is a negative social externality, as is racial injustice; people with power capture the wealth that should rightly go to the people without power. But the most severely negative externalities in our global economic systems are environmental. The myriad forms of pollution those in power deem acceptable present existential threats to all life on earth. Contamination leads to shortened lifespans; habitat destruction leads to biodiversity loss; and, of course, greenhouse gas emissions lead to a worsening climate crisis. Mechanically, the climate and ecological crisis is a result of the socialisation of negative externalities, as positive externalities—profits—are privatised to benefit the already-wealthy-and-powerful.

It is time to rethink this callow framing. We have lived for long enough in a world littered with the economy’s negative externalities. What if, instead, we sought to design and establish economic systems that only had positive externalities? If human civilization is going to shift to its technological end-state, we first need to identify the negative externalities of the systems we are trapped inside of, so we can focus our work on their elimination. We must wear the mantle of change, not just in service of the climate crisis; we must be the ones who spread the benefits of wealth to marginalized communities while eliminating the environmental destruction that threatens us all.

Assessing existing declining and terminal systems

To understand how to approach substitution of existing declining and terminal economic systems, I propose three key system-level assessment questions, focused on negative externalities: 

  1. What negative externalities are present, and from what sources?
  2. What changes will eliminate these negative externalities?
  3. How do we address the impacts of past negative externalities?

These questions should each have one clear answer for any system under scrutiny. Technology and science have advanced our understanding of economic systems to the point that this is generally possible—and we have the methods of inquiry to answer these questions for systems we don’t understand. A harm-reduction mindset is crucial here; in order to prioritize the systems to substitute, we must begin with the biggest, most economically critical, and most polluting ones. Thinking big, tackling hard problems, is the only way.

Fossil fuels, critical to today’s global energy and transportation systems, are the type case for negative externalities on an immense, catastrophic scale. Let’s ignore the immense social injustices perpetrated by the industry’s exploitation of poor countries and enrichment of bad actors, and focus on its environmental destruction. With each gallon burned, greenhouse gas emissions become immediately socialized negative externalities, threatening all life on Earth. Let’s apply this set of questions to it:

  1. What negative externalities are present, and from what sources?
    Greenhouse gases are released into the atmosphere as fossil fuels are burned; environments are contaminated by fossil fuels, their products, and the processes required to transform them.
  2. What changes will eliminate these negative externalities?
    Battery electrification and green hydrogen substitution, powered by cheap, scalable, emissions-free wind and solar.
  3. How do we address the impacts of past negative externalities?
    We have to counter each tonne of emissions: directly, by capture-sequestration; indirectly, by offsets or geoengineering. Likewise, we must clean up associated environmental contamination wherever we feasibly can. Tipping points may be one-way and irreversible.

This set of questions can be applied to any economic system, and the answers can be quantified in minute detail. I see them as a guide to the problems we face. If we can correctly diagnose the negative externalities, understand what changes are necessary, and figure out how to repair damage done, we know what it will take to design a robust substitute end-state system.

Designing end-state systems

We are all floating in an economic whitespace—trillions of dollars of opportunity, on a scale so immense that it is difficult to truly conceive. Let’s take EV manufacturers as an example here. The narrative that they are replacing the fossil fuel industry (both for energy, via renewables generation and storage, and for transportation), decarbonising the world in the process, is critical to the billions of dollars the markets have poured into them in the past several years. 

First, let’s think about the assessment questions laid out above for the fossil fuel industry. EV manufacturers argue that the lack of tailpipe emissions from their vehicles means significant improvements over fossil-powered cars. Indeed, they are helping to reach the system’s end-state by leveraging battery electrification, often in combination with renewable energy generation. But this framing ignores the often-coal-powered manufacturing processes for battery cells that make up the bulk of EVs’ carbon footprints. In addition, EV manufacturers are doing nothing to address the legacy of negative externalities the fossil fuel industry continues to pump into the atmosphere. As an example of the misstatements common in this space, Tesla’s environmental reporting cites the solar power its installations generate as vastly outweighing the energy consumed by their operations, implying this is somehow a 1:1 relationship. Generating new solar energy is certainly a good thing. But it’s not enough. Tesla-caused tonnes of emissions from, say, coal power plants that power those pesky battery cell (or solar panel) factories—those continue to pump into the atmosphere. 

At best, then, EV manufacturers address a handful of the problems the fossil fuel industry creates, while creating new problems, without undoing the damage done. So how do we fix what they’re not fixing? 

This is where ingenuity, creativity, and holistic thinking come into play. Once we have answered the aforementioned assessment questions on a given system in need of substitution, we have to answer one final trillion-dollar question:

How do we build a scalable, profitable, balanced end-state system to eliminate future negative externalities and address past ones?

As we ponder this question—which, unlike the assessment questions, has theoretically infinite answers—we have to look across the current system and find its gaps. We have to think about adjacent systems, including those that purport to replace or resolve the problems of the old system, and find their gaps. We have to translate negative externalities into sources of profit, and to identify ways for a new system to distribute positive externalities equitably and broadly. We have to plan for balance, justice, function, and integration. We have to design both micro- and macro-substitutions.

Let’s extend the EV manufacturer example. Okay, we know they’re getting us part of the way to our end-state in the energy and transportation systems. They’re eliminating tailpipe emissions with battery technology, and generating new solar in the process. But they’re releasing incremental manufacturing emissions as they source battery cells, and ignoring atmospheric carbon already floating everywhere around us. 

Say we wanted to fund a handful of startups to close these gaps. We know what they would do, thanks to our work answering the assessment questions. The key here is to understand them, and figure out how to click them together, like little Lego businesses. Why, for instance, is there no company designed to strategically decarbonise the battery production value chain? Signing power purchase agreements with battery cell factories, deploying solar-and-battery microgrid systems to pull them off the coal-powered local grid. Why are there no integrated carbon-capture systems that run off industrial waste heat from cell production, with sequestration that produces saleable commodities like cement or animal feed? 

Why isn’t there a company out there that does both these things? That’s what we should be asking ourselves of our work as we advance this mission. If we can’t come up with a good reason, and it will work to decarbonise, we should try and implement our newly designed substitute system—and make it the end-state system it should be.

Realizing end-state systems

So, great, we’ve assessed a system, and designed a substitute version. Now we have to implement this end-state system. How do we put these ideas into practice?

The core is to figure out a meaningful value-add that can be done profitably, and scale efficiently from a set of starter customers. 

Let’s keep the substitute system we designed above in mind. Renewable energy conversion saves money compared to legacy energy systems; boom, profit. Carbon capture and sequestration is potentially self-funding if the outputs can be efficiently monetized; boom, profit. Battery cell manufacturers face pressure to decarbonize from their customers, and can save money in the process; boom, starter customers. 

Once you build that flywheel, you can extend it to other parallel parts of the same economic system, scaling as you penetrate the fractal elements of the sprawling transportation and energy systems. 

Take the mindset of tech, apply it to real problems, and boom.

Chamath’s essential hypothesis in soliciting these visions is that the core operating principles of the tech industry can be applied for beneficial ends, and not solely to serve a privileged elite building ivory towers as their lessers scrape for scraps. I was compelled to write in because I share that belief, and that only by adapting the system we currently have will we find effective tools to combat the climate crisis. 

The corporate economy has the potential to address the problems that it creates, provided well-intentioned, well-informed, well-rounded teams seek to drive true value, that respects life and the environment, and doesn’t just generate shareholder returns. Decarbonisation should be informed by young climate strikers, who have broadly adopted the motto “Systems Change, Not Climate Change!” Companies that seek to stop the climate crisis will succeed most if they build integrated societal supports.

I have made a deliberate choice not to frame this strategy around a specific set of technologies, because I think we still don’t know what technologies we need to solve all the problems before us. EV manufacturers are a useful reference case, but what about the future hydrogen-metallurgy manufacturers, space-waste-handling companies, intergalactic-quantum-teleportation carriers? We don’t know what’s out there, and it’s arrogant to try and pick horses. So we should think big. We should stay close to the freshest cleantech businesses, root out the pump-and-dump scandals-in-waiting, and let the technology lead us—like a non-evil version of the pharma industry, with an ecosystem of promising, unproven talent solving the world’s hardest problems.

Instead of succeeding by luck or bandwagon, we can succeed by staying current, creative, nimble, and scientific. We can bring our executive, financial, and strategic talents to bear with the companies we partner with, incubate, or start ourselves. We can define companies that make up systems, and make them real by applying the same scaling logic building throughout the tech industry. 

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