This is an audio transcript of The Economics Show podcast episode: ‘Martin Wolf talks to Adair Turner: Can the world decarbonise fast enough?’
Martin Wolf
When I was born in 1946, the concentration of carbon dioxide in the atmosphere was 312 parts per million. Today it is 427 ppm. That may not sound much, but it means that three-quarters of all human carbon emissions have happened during my lifetime. It means that the cooler, calmer climate of my childhood is gone forever, or at least for a very long time. And because we continue to burn fossil fuels faster than ever before, it means that we are rushing headlong into a hotter, more turbulent future faster than ever before.
For all the sound and fury coming from Donald Trump, the war in Ukraine, or China’s global ambitions, this is arguably the biggest challenge facing the world. And we barely scratched the surface of it. So what hope do we have of heading off the worst consequences of climate change? Can we decarbonise the global economy fast enough, or is our species doomed to inflict irreversible damage on the natural systems we depend on for our wellbeing?
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This is The Economics Show. I’m Martin Wolf, the FT’s chief economics commentator. Joining me in the studio is Lord Adair Turner, a man with a long and distinguished career in business and policymaking in the UK. He has been director-general of the Confederation of British Industry, chair of the Financial Services Authority and chair of the Pensions Committee. But most relevant for us today is his long involvement in climate policy as a former chair of the UK Committee on Climate Change and now as chair of the international think-tank, the Energy Transitions Commission. That’s a lot of chairs. Adair, welcome to the show.
Adair Turner
Thank you very much.
Martin Wolf
So at what point in your life did you realise the gravity of the threat of climate change?
Adair Turner
I think actually it was in the 1990s when I was a director-general of the Confederation of British Industry, and I can’t remember exactly why I became increasingly aware of it. But this was at the time of the Rio Agreements, and I simply began to read about the science. And that motivated me to believe that the Confederation of British Industry had to take this seriously and not be in the camp of simply saying, we’re business, it’s not our problem.
Martin Wolf
I have to admit, it took me a bit longer. It was in the early 2000s. At that stage, my belief was it clearly is a very big problem. We’re certainly not going to solve it because it’s far too big a problem. And we’re going to come to why that might be too pessimistic, though recent events are obviously quite concerning. We will come to that in a moment. But if you were asked now how optimistic or pessimistic on a scale of one to 10, 10 as the most pessimistic, are you that we will avoid the worst dangers of climate change? What would your number be?
Adair Turner
I guess I’m at about six or seven on that scale, where 10 is extreme pessimism. I don’t think we have any chance of limiting global warming on a sort of 10-year average basis to 1.5°C. Ten years ago, five years ago, that was still a possibility. I think that possibility has disappeared. I think with a lot of strong policy and a degree of international co-ordination, we could still limit it to say plus 1.7°C, but there is an appreciable chance that we will warm it to 2.5°C.
I think the good news is that compared with before the Paris climate agreement and before some of the things that have happened on technology over the last 10 years, there was a real chance that we might end up warming by 3°C-3.5°C. I actually have an element of technological optimism that these technologies will get us to a net zero economy at some stage, probably 20 years too late to limit it to certainly 1.7, maybe to 2. But the real extremes, I think we’ve managed to exclude by the technological advances that we’ve unleashed.
But let’s be clear: we can see from the weather at the moment what is happening at about 1.5°C of warming. For every plus point one, it’ll get worse and worse. And if we really go above two degrees to say, 2.4, and you’ve got to remember the International Energy Agency today, its estimate of where we’ll end up with on current policies is about plus 2.4 degree warming by the end of the century. I think at that level, we begin to see some really catastrophic effects on human welfare.
Martin Wolf
So let’s be more concrete. Suppose the temperature does go up in the end, couple of degrees or so — what might happen on the way? What are the tipping points here? Collapsing glaciers, melting of big parts of the ice sheet in Antarctica, really large sea level rises — what would it feel like for people around the world?
Adair Turner
The issue of tipping points is a very important one that scientists look at, and I think we’ve got to think about two sets of tipping points. One is the consequences of any level of global warming, of which one of the biggest would be a change in the Gulf Stream, the north Atlantic overturning circle, where you just have to observe from other places at the same latitude of the UK, that we’re a bit odd. At this latitude, you would expect to be much colder if it wasn’t for this very big flow of water, which comes up from the Caribbean. And that is a complicated piece of physics driven by the relationship between freshwater and saltwater. And essentially, if you get a lot of melting of the Greenland ice sheet, that can be offset and at some stage it could turn off, and that would mean that the UK would get much, much colder. That is a real tipping point. It’s debated by scientists of how big it is, but there are some papers out recently saying no, no, this really is a possibility within the second half of the century.
Equally worrying is another category of tipping point, which is where the very fact that we have warmed the climate warms the climate further. One of those is the melting of the Arctic floating ice. That floating ice at the moment reflects sunshine back into the atmosphere. If it melts, the sunshine hits a dark sea and you get much more warming. And also there is another potential tipping point — which is there is a large amount of methane trapped in permafrost in the tundra of northern Canada, northern Russia — beyond a certain level of temperature, that permafrost melts and we release that methane, huge impact and it accelerates it. So these are very, very important effects. That is why Paris was the commitment to well below 2°C, because there’s a feeling that we significantly reduce the possibility of hitting either of those tipping points. Once you start saying we’re going to increase the temperature by 2.4°C, you may find that it unleashes something, which means that you can’t stop it going to 3 or 3.5.
Martin Wolf
And sea level rises?
Adair Turner
Well, the sea level rises I think will be more gradual. That really is a multi-century thing rather than a multi-decade. I would be more worried about something very significantly happening to the Gulf Stream.
Martin Wolf
And as I understand it, the scientists are actually surprised by how quickly it has been warming in recent years. So they, actually, turn out not to be too pessimistic as so often they’re criticised of being — but actually, if anything, their models have been too optimistic.
Adair Turner
Yes, I think you’re right. You mentioned the concentration levels earlier. Now getting to about, you know, 425, 427. At that level, I think many scientists did not expect to see a year like last year, which was clearly over 1.5°C above the pre-industrial level. The first half of the year, people were saying, well, this is a very, very strong what’s called El Niño effect, one of these natural oscillations over a sort of five-year period. But scientists have been really shocked by the January figures for this year. By now, they expected to see the impact of the waning El Niño. So I think, if anything, you are right. The level of warming that we have seen is at the top end of what the scientists had expected, given the concentration increase that we’ve seen so far.
Martin Wolf
And that obviously means we should be acting faster than we planned. But in fact, it’s pretty clear, with Donald Trump’s return to power in the US, which is still the world’s second-largest emitter, about a quarter, if I remember correctly. And he’s really in ferocious opposition to anything that admits there is such a thing as global warming. How big a threat is that going to be to continued progress that you say is, to some degree, economically and technologically inevitable?
Adair Turner
Well, I think it is a threat, and it’s really intriguing. It isn’t that he’s just saying, here’s a problem, but I don’t think the American people should pay to deal with it. It’s almost deliberately doing things which are likely to make the problem worse. Including completely arbitrary settings like I want a ban on offshore wind. Why does he want it? Well, because he didn’t like the sight of turbines near his golf courses in Scotland. It’s like the sort of the king has a right to just stop people doing things on his personal whim. This is very deep. I would say over the last three months, I’ve increased by maybe 0.2°C, 0.3°C, my subjective judgment on what warming will have. The US will not give any money to help the developing world achieve decarbonisation. The US will not achieve the 48 to 52 per cent emissions reductions which it had previously promised within the Paris process. There will be an encouragement to develop fossil fuels, and there will be a diminution of American business development of the technologies that can deal with climate change. And that’s very serious, because at the moment we are very dependent on the Chinese motor in terms of the development of the key clean technologies. It would be good if we had the power of American business also creating another motor of that technological development. But that would be a setback. And globally, it makes international agreement very difficult to drive forward. I think we’ll see some countries actually pull out of the Paris process. I do expect to see Argentina do that. But in a sense, this creates the challenge the rest of the world and UK, Europe, India, Brazil, China become the biggest players here. We are going to have to find a way to achieve momentum and drive it forward with America as a drag anchor.
Martin Wolf
Could one be a little optimistic on what’s going to happen in the US before I discuss the rest of the world? Because after all, American businesses are profit seeking and profit responding. The US has lots of renewable resources. I read that in Texas there’s an awful lot of solar energy going in. That would suggest that market forces and technological development are still on your side. Of course, ideology is so passionate here. It seems to me that they hate the idea of accepting climate change on the American right, because they hate the idea that these wussy environmentalists could possibly be right about anything. This is about owning the libs, as they say. But is it possible to be optimistic that actually the market might still help, even in the US?
Adair Turner
Oh, no, no, it will still help in the US. I mean, I’ve made the pessimistic case, but let me now switch round. You have to remember that under Trump’s first time in the presidency, the pace of the fall of the American coal industry was the fastest it’s ever been, because coal simply doesn’t make sense economically relative to wind and solar. You are quite right that there are many states of America, including Republican states, which have developed a lot of wind and solar, in particular Texas, but many others as well. And I was very interested to see the other day the head of battery technology at General Motors saying, no, the future is still electric and they will still pursue it, and they think it will be economic even if Trump pulls back many of the subsidies for electric vehicles. So there will be many American businesses still pursuing the development of clean technologies. It’s just that the pace of it has received a significant setback.
Martin Wolf
So let us consider the response of the rest of the world. Apart from continuing with their own programs, one of the questions they face is, well, should they penalise the US for ignoring the global public good? And the EU has this carbon border adjustment mechanism. And since we’re talking about a protectionist world, well, they would have a very powerful justification for putting tariffs on imports of US goods because they’re going to be produced in the most climate-unfriendly possible ways. Do you think we should all collectively double down on this?
Adair Turner
Well, I think there is an argument for that. I heard Joe Stiglitz proposing precisely this. Europe has a carbon price. It is committed to removing what is called the free allowances from the heavy industries like steel and cement. I think that is the right thing to do, but only if you put in place a carbon border adjustment mechanism, or CBAM as it’s known, against imports from people who don’t yet have a carbon price. And I think one of the few benefits of Trump getting in and his protectionism is that it creates an environment where the European Union can and should say, look, we are going to tighten our CBAM in order to make it really, really effective protection against polluting competition. And I think the European Union should sit down, and India and China, and say this is non-negotiable. We’re doing it. Those four words I used with quite senior Chinese policymakers in a visit just before Christmas, because it’s the right thing to do. But we want you to join us in having a carbon price on your steel and cement industries, because we don’t want the complication of having to charge you a border carbon adjustment. And if we do that, the logical implication of that is that they would then put a CBAM against imports from any other country, which was not going down that path. Obviously, this would drive Donald Trump crazy, but one of the things we’re going to have to decide in the world is whether we’re sometimes going to be robust enough to do the right thing, even if it does really annoy the current American administration.
Martin Wolf
When you said this to the Chinese, how did they respond?
Adair Turner
Well, it’s interesting you sometimes get a sort of formal level of we are a developing country, which you have to challenge. You know, we are still poor. There is a common but differentiated responsibilities. But when you make the argument, you do get people within policy circles saying, yeah, that’s right, we should take this argument seriously.
Martin Wolf
When you have far away the world’s largest emitter, and you also have developed most of the technologies to deal with it, it seems rather strange to argue that sort of you’re a developing country and we don’t be really engaged in this.
Adair Turner
Well, China has for a long time been able in the Paris process to pretend that it is a developing country. And one of the things I do and I’m a China (inaudible) sometime in the next 24 years, you will have to drop this idea that you’re a developing country, because your leader, Xi Jinping, has said publicly that by 2049, you will be a fully developed, rich economy. So we’re just arguing about the date at which you accept that you’re no longer a developing country. Again, if you put that argument, you get wry smiles. The way I see China, sort of two stories told about China: biggest emitter in the world. Bigger per capita emissions than Europe. Has targets, but they’re not tight enough to be compatible with 1.5 or even 1.7°C. On the other hand, the provider of a great deal of the low-cost technology and solar EVs, electrolysers, that we’ll need. What we have to understand is both those stories are right, and our engagement with China has got to start with saying, we hugely welcome and admire your development of the clean technologies, but we’ve got to combine that with being robust and saying as long as you stick to your existing targets, the world is going to warm to a completely unacceptable level even if we in Europe cut our emissions close to zero.
Martin Wolf
And they are obviously going to have to play a central role in helping the decarbonisation of the whole developing world.
Adair Turner
Well, here’s a very interesting point on the decarbonisation of the developing world. Most of the developing world is what I call the Sun Belt of the world. The biggest breakthroughs in the costs of cleantech over the last 10 to 15 years are solar and batteries, and what is happening over the last five years in battery energy storage costs is quite extraordinary. They’ve come down 70 or 80 per cent just in the last five years. Once you put solar plus batteries together, there is a real possibility in a way that you couldn’t have said five or 10 years ago that the whole of Africa can develop a very, very large electricity system without having fossil fuels at all, because they don’t have a complicated balancing problem like we have of how we deal with windless days in winter. The balance problem is, broadly speaking, simply day to night, how to keep the air conditioners running in the evening, the office . . .
Martin Wolf
They’re close to the equator.
Adair Turner
They’re close to the equator. However, what they need to do that is capital, because the crucial thing is the cost of capital in Africa and other bits of the developing world is so high that at the moment, it still offsets that. If the cost of capital in Africa was 4 per cent real, let’s say, which it might be for a development in Europe, I don’t think you’d ever build any fossil fuel power plants at all. You’d build wind and solar plus batteries. If it’s 10 per cent, you build gas turbines. And if it’s 25 per cent, you buy diesel gensets. Which keeps your capital costs low but commits you to buying dirty fuel out into the future, unleashing low-cost capital flows into the developing world, and in particular Africa, is a huge opportunity. And one where I think Europe and the UK should be working with China to drive that as fast as possible.
Martin Wolf
And this is an area where US opposition might be an issue, particularly if we were depending on institutions like the World Bank, the other multilateral development banks, to play a big role. So how do we get round that problem?
Adair Turner
Well, the US are a shareholder in several of these major development banks, but they are not a controlling shareholder. And frankly, we’ve got to be tough with them because it would be completely immoral to deny African countries the ability to build clean power systems using the incredibly cheap solar panels and batteries which China will sell them.
Martin Wolf
If you look at the politics of this in the developed world, there are pretty clear signs of some of the same phenomena that we’re seeing in America. If we look at the vote for the AfD in Germany, for example, what is being said here by Reform and parts of the Conservative party. We are seeing some of the same sort of green fatigue, aren’t we? How do we respond to that?
Adair Turner
Well, you are right. And it concerns me that the Conservative party under Kemi Badenoch is going along with that. And I think it’s quite bizarre because they could be telling a very good story about what they’ve achieved. Between 2010 and 2024, under 14 years of Tory government, the carbon intensity of UK electricity went down from 500 g/kWh of electricity that we use to 124 g/kWh. We reduced it by 75 per cent. I think there’s a bit of a tragedy that the Conservative party isn’t saying, look what we achieved in that period of time.
But you’re quite right. And I think we have to start getting more thoughtful about some of the distributional effects of driving towards net zero. When you talk about decarbonising steel and cement and plastics production, the good news is that the cost is spread in a very, very thin slice, broadly proportional to income, because in a set of indirect ways, richer people consume more stuff. But when you get to where are you going to put in a heat pump instead of your gas boiler, the economics are very, very different for a richer person who has £10,000 sitting in the bank. And so if they spend it, they’re giving up the 3.5 per cent to whatever they were getting on deposit and a lower income person whose cost of capital is borrowing on credit card. I think we’ve got to anticipate the distributional challenges, the fact that this transition does affect different people in different ways.
We’ve also, by the way, got to win the argument that there is a very major problem of climate change, because I think there has been a somewhat overstated attempt to say, oh, well, it’s all green growth. It’ll be good for growth in any case. And there are some very, very positive things about heading towards this zero carbon economy. But you mustn’t overstate the argument because there will be costs. So we’ve got to go back to say, yeah, there are some costs. They’ve got to be shared fairly, because if we don’t deal with it, we are going to face a catastrophe and our children and our grandchildren are going to face a catastrophe.
Martin Wolf
It’s pretty clear in Britain and Europe more generally that there’s a lot of resistance to the investments. People don’t want windmills. They don’t want huge solar arrays. To my astonishment, in Europe, they haven’t been able to agree even on grid integration across countries, which is absurd. So there seems to be an amazing amount of political resistance in places which are pretty committed to this. How do we get things just happening?
Adair Turner
Well, that is absolutely right. And again, one needs a bit more of a strategic vision of how to do it in a way which will produce least resistance. Let me give you an example. We have tended to develop offshore wind platforms in the North Sea one by one. And then each of them has a cable coming back to the shore. It may need a substation at the shore, and then it may need a pylon to connect to the core of the grid. National Grid proposed 10 years ago to essentially put undersea, out of sight, a grid round the North Sea, which offshore wind could then plug into. And then you’d only need to bring that back to the shore in sort of two main places, limiting the total number of places where you might then have an argument about a new pile online. And I think, frankly, there has been a tendency, first of all, believe that markets can solve everything. That markets are incredibly powerful on things like electric vehicles and batteries. There are some, you know, complicated, interconnected utilities where you need some sort of strategic vision. The interconnection argument around Europe is very important as well. The fundamental rule of developing a renewable-based electricity system is interconnect, interconnect, interconnect. The more you interconnect, the more even if the sun isn’t shining and the wind different blowing in your part of Europe, it will be doing it somewhere else and therefore you’ll reduce the need for batteries or hydrogen storage or all the other ways that we balance the system. And so again, we do need to drive that as strongly as possible, including, I think, looking at some of these really interesting options for interconnectors come all the way from north Africa, amazing wind and solar resource there, which could support Europe.
Martin Wolf
Now we’re going to have a break. And after that, we’re going to talk about the role of China and dependence on China in the new green economy and also the possibility, very controversial, of geoengineering.
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And we’re back from the break. So one of the questions that I’ve been thinking about quite a bit is everybody’s terrified that China is going to dominate the entire supply chain and destroy our motor vehicle industry, as it’s already destroyed the solar panel industry, in which Germany was once a leader. And that itself is going to be a sufficient reason for a lot of protection. And you can see that in Europe now, they’re terrified of what it’s going to happen to their motor vehicle industry. How concerned are you about this terror?
Adair Turner
Well, you’re quite right. Across all the most important technologies — solar PV or wind turbines, electrolysers, batteries, EVs — the Chinese are dominant because they have developed scale, they’ve developed learning curve effects, they have piled money into the R&D, and they are just at the forefront of manufacturing cost and innovation. Now, I think it’s completely understandable that we say, well, we don’t want forever to buy 70 per cent of our stuff from China. We want to develop our own supply chains, but we’ve got to be intelligent about how to do that. If you simply put in, you know, 100 per cent tariffs, all you will do is make your domestic industry fat and happy behind that protection. And I think we should also be thinking about inward investment. You’ve just seen in Spain that Stellantis and CATL doing a big joint venture to have a gigafactory for EVs in Spain. And when you use inward investment, you effectively get a form of technology transfer, because your own workers and managers work in an environment where you are seeing how to run factories.
Martin Wolf
It is what China did.
Adair Turner
It is what China did. China in the 1990s and 2000s said we are technologically behind, the best way to catch up is inward investment. Now you can, if you want, combine inward investment with a requirement for a joint venture. The Chinese did that. You can combine it with some local content requirements so that they don’t end up as just assembly plants. So I hope in Europe there will be an intelligent debate, not about how we achieve total autarky, but about how we intelligently develop supply chains where it’s possible.
Now, I think it’s also important to distinguish between different sectors. Europe now has almost nobody employed in solar panel manufacturer. Solar panels are a plug-and-play technology. You make them in a factory, you put them in a container ship, you take them out. Maybe that is one where the world will tend to have a small number of dominant providers, and you just accept that that’s the case. I think EVs and batteries are different. There is a tendency for automotive companies to want to be somewhat close to the end customer, and there’s a very strong tendency for battery factories to be logically located close to …
Martin Wolf
They’re very heavy items.
Adair Turner .
… because they’re very heavy items. So with intelligent policy, we should be able to have a vibrant battery and EV business in Europe, even if part of it is directly or in joint venture owned by some of the Chinese companies which have developed this technology.
Martin Wolf
Final question. Now, assuming we are going to get there, but shoot slowly, there is a strongly held view by some that we’re going to have to do some emergency work at some point to catch up, even if we are going to end up in a decent steady state, but too late, 20 years, 25 years too late. And that will mean geoengineering, some form of it. What do you think of that argument? And if we did it, what would we do and how?
Adair Turner
Well, there are a variety of technologies where we could drive negative emissions. Some of them are not geoengineering. There is direct air capture. Yeah. Literally using energy to suck CO₂ out of the atmosphere.
Martin Wolf
Carbon capture.
Adair Turner
Carbon capture, but this is carbon capture not at the back end of, say, a steel plant or a cement plant.
Martin Wolf
From the air, from the atmosphere.
Adair Turner
The reason why this is an expensive thing to do is that the CO₂, as you pointed out earlier, is 427 ppm and it’s very energy-intensive to suck that out. It is doable. There are technological developments where we may get that cost down, and I think we may do quite a lot of that. There are then much more fancy geoengineering things, blocking out bits of sunlight. You know, there’s a whole range of them. I think the challenge mounted on this is if we believe that we’re going to find it very, very difficult to get international agreement to take the actions now to bring our emissions down fast enough, it’s a bit optimistic to then assume that in 25 years’ time, we’ll be able to get the international co-operation, which is required to do any geoengineering, because any of the really dramatic geoengineering — playing around with the absorption capacity of the oceans or blocking out bits of the sun — cannot happen unilaterally. They would need a significant degree of co-operation.
Martin Wolf
The way I think about it is that my geoengineering is your act of war.
Adair Turner
No, absolutely …
Martin Wolf
Yeah, if you stop monkeying about with the climate, you could make something very, very miserable.
Adair Turner
No. All these geoengineering things will have one climate effect in one place and one climate effect or another, and the losers will resist.
Martin Wolf
You can step forward, imagining an agreement between Donald Trump, Xi Jinping, Vladimir Putin and Narendra Modi on this, it’s very hard to imagine at that.
Adair Turner, thank you very, very much for this fascinating conversation.
Adair Turner
Thank you.
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Martin Wolf
That’s all for this week. You have been listening to The Economics Show from the FT. This episode was produced by Laurence Knight, with original music and sound engineering by Breen Turner. Our executive producer is Manuela Saragosa. The broadcast engineers are Andrew Georgiadis and Rod Fitzgerald. Cheryl Brumley is the FT’s global head of audio. I’m Martin Wolf. Thanks for listening.