How we can curb climate change by spending two percent more on everything | Jens Burchardt

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June 15, 2021

Watch at: 00:00 / 00:00:20Transcriber: This is a lump of coal.It was mined a while ago in the Ruhr region in Germany,about 50 miles from where I grew up.Watch at: 00:20 / 00:40As coal goes, it's actually quite high-end.It's very dry, it has a high share of carbon in it.Both those things mean you can't only burn itto produce power and heat,but you can use it to make steel.Now why am I telling you this?By the end of this talk,I want to have convinced you that we can make a huge step forwardin the great fight against climate changeWatch at: 00:40 / 01:00by just spending one to two percent more on things that we buy.And the path of this coal is going to help me with it.But ...back to steel.What you have to know about steelmaking is that it's a humblingly brutal process.These huge furnaces that tear apart and recombine elements and materialsWatch at: 01:00 / 01:20that have literally been around for millions of years,at temperatures of up to more than 2,000 degrees Celsius.It's a triumph of industrialization,but it's terrible for the climate.More than five percent of all man-made emissionscurrently come from making steel.And of all the many challenges we face to save the climate,Watch at: 01:20 / 01:40this one's particularly hard to solve.Now, why is that?The first reason is technical.There are technologies to produce low-carbon steel.We can, for example, capture the CO2and pump it back under the earth --that's called carbon capture and storage.Or we can move to entirely new processesthat, for example, run on low-carbon hydrogen instead of coal.Watch at: 01:40 / 02:00But all of these are currently only at a piloting stage.The second reason is economical.This is likely going to be expensive.And to illustrate that,let's compare the steel challenge to that of companies in other sectors.If you're in, say, manufacturing,most of your emissions come from the power you consumefor things like conveyor belts, robots, drives and so on.Watch at: 02:00 / 02:20You can eliminate them by switching to renewables,which isn't that expensive anymore.In most cases, this won’t cost you more than 10 euros per ton of CO2,probably a lot less.Other companies have more energy-intensive processesthat require a lot of heat to operate.They generate more emissions by burning fossil fuels directly,Watch at: 02:20 / 02:40and that's more expensive to get rid of.Now let's assume, across all of their processes,it costs them, on average, five times as much,somewhere between 40 and 50 euros per ton of CO2.Now if a steel company wants to move to zero emissions,it either needs to invest significantly in upgrading all of its current plantsWatch at: 02:40 / 03:00and into infrastructure that transports CO2from its plants to a storage site,or it needs to close all its plants and build entirely new onesthat, for example, run on low-carbon hydrogen.According to industry studies, this can cost them 10 times as much,in the ballpark of 100 euros per ton of CO2,Watch at: 03:00 / 03:20and the costs for a ton of steel could increase by as much as 50 percent.Now, to make matters even worse,our steel company operates in the commodity business;it almost exclusively competes on price.And it has shitty margins already:that means saving CO2 is expensive,but its profit per ton of CO2 is very low,and this puts it in the uncomfortable companyWatch at: 03:20 / 03:40of only a few other sectors,the so-called hard-to-abate sectors club,all the industries like cement and chemicals,that have equally messy industrial processesand require very high temperatures to operate,or aviation and shipping,that need to invest a lot of energyto move very large and heavy objects over longer distances.And hard-to-abate sectors are one of the larger dilemmasWatch at: 03:40 / 04:00of international climate action,because discussions around decarbonization usually go roughly like this:Well, the activist says,"Your emissions are harming the planet and threatening humanity.You need to change immediately."And the company answers,"I know. But if I invest in low-carbon technologies,Watch at: 04:00 / 04:20and the next guy doesn't,we'll be more expensive and go out of business.It won't help the climate.So first, I need a level playing field."Both understandable positions,but bringing down emissions is kind of urgent,and a global level playing field,in which, say,all countries agree on one mutual price for carbon emissions,probably won't materialize anymore in my lifetime.Watch at: 04:20 / 04:40So this is where the discussions usually reach a stalemate,and where my talk would therefore end.But would it end here, I wouldn’t have been invited to hold it,and I already promised youthat saving the planet does not have to break the bank.So let's maybe follow the path of our lump of coaljust a little further.Watch at: 04:40 / 05:00The last time we left it, it had helped make steel,which, climate impact notwithstanding,is one of the key building blocks of our economies.It's in many, many things,from huge structures to everyday household itemslike refrigerators or washing machines.We use it to build wind turbines,which we need to save emissions in the power sector,Watch at: 05:00 / 05:20and we use it to build our cars,which is the part of the journey I'd like us to follow next.Now, in today's typical car,steel can be found in many, many different parts.You can assume that an average European midsized sedanwith a 30,000 euro price tagcontains about one ton of it.To produce one ton of steel, in Europe,Watch at: 05:20 / 05:40generates a bit less than two tons of carbon emissions.In other countries, like China, it's a bit more, so let's round to two.Now we've learned earlierthat moving to low-carbon steel can increase its costsby as much as 50 percent.If history tells us anything,then these costs will likely decrease over the long run,Watch at: 05:40 / 06:00if humans truly put their mind, their muscle, their money behind it.But, for the sake of this argument, let's stick to these costs,plus 50 percent.In the case of our European midsize sedan, this translates into ...wait for it ...200 euros.Watch at: 06:00 / 06:20Wait, that can't be right.That's not even a percent of the final sales value.Well, let's do the math.If you spend 30,000 euros for a car, what are you actually paying for?Well, first of all, the car company needs to make money.So the first 20 percent are for its margin, for marketing,the whole sales organization, overhead and so on.Watch at: 06:20 / 06:40The car needs to be assembled --another 20 percent goes to production.First, the parts of the car have to be assembled --40 percent go to suppliers.In this whole process,many things need to be moved from A to B and back,so more goes to transportation.Now only 15 percent of the price of the caris actually for the materials in it.Things like the battery, aluminum, plastics, glass,Watch at: 06:40 / 07:00and two percent for the steel.This means that materialsthat make up 90 percent of a car's emission footprintby the time that I can buy it in the dealershipmake up only 15 percent of its costs.And it means that even [though] the car company has to pay 50 percent moreWatch at: 07:00 / 07:20for the steel in the car,this only translates into a very small markupon my final sales price.Now you would rightly argue that steel isn't the only thingcreating emissions in the car.And that's, of course, correct.So we did the math for other commodities and processes as well.And it turns out building a 30,000 euro carWatch at: 07:20 / 07:40out of exclusively carbon-neutral materialswould only increase its price to 30,500 euros,only 500 euros extra.It's less than two percent more.Buying that same car in sunset red instead of blackwould cost me 700 euros extra.Fancier rims -- 1,000 euros extra.Watch at: 07:40 / 08:00Leather seats -- 2,000 euros extra.You get the picture.So let's imagine:that same discussion we had earlier, but with a car producer in the middle,where the activist says,"Your emissions are harming the planet and threatening humanity.You need to change immediately."And now a car producer answers,"I know.Watch at: 08:00 / 08:20But if I invest in low-carbon materials, and the next guy doesn't,my car will be two percent more expensive.Wait ...My customers might actually pay that.And I can market all my cars as carbon-neutral.Steel producer,your steel is creating too many emissions in my car.You have to change immediately.""I can make low-carbon steel for you,Watch at: 08:20 / 08:40but it will be more expensive.""How much more expensive?"And now, we at least have a dialog.Almost everything about the way we currently livecurrently contributes to global warming.Most of the things we buy come with a heavy emissions backpackthat few of us are really aware of.What I want you to understandis that we can eliminate a lot of these emissionsWatch at: 08:40 / 09:00by just spending one to two percent more on things that we buy.We've learned what it would cost to produce a carbon-neutral car.So how about a carbon-neutral smartphone?Three euros extra.That's 13 cents a month on a two-year plan.A carbon-neutral pair of jeans? 60 to 70 cents extra.Watch at: 09:00 / 09:20Even building a house out of carbon-neutral materialswould only increase its costs by two to three percent,and even less in good locations.There are six supply chainsthat are responsible for almost half of all global emissionsthat we can impact directly through our purchasing decisions.Those are things like food, construction, fashion,Watch at: 09:20 / 09:40consumer goods, electronics and, of course, automotive.And just like in the car example,materials make up only a fraction of the final sales price in most of them.Addressing these emissions could be a huge step forwardfor international climate action.It would enable customer-facing companiesWatch at: 09:40 / 10:00that can benefit from marketing carbon-neutral productsto address a multiple of their direct emissions footprints.And many of these emissions are in sectors like steel,that can shoulder the costs on their own.Some are in countries that don’t yet regulate emissions aggressively enough.Take the Chucks I’m wearing now.Me being willing to spend two percent more on themWatch at: 10:00 / 10:20