A Roadmap for Fixing Climate Change with Entrepreneurship and Capitalism: An Optimistic View for the Future
Summary: Our climate has undergone changes that threaten the future of human and other species. Many see global warming as an irreversible impending doom, with estimates going as high as a 3.2°C temperature increase by 2100. As a technology investor, I have a more optimistic outlook: I believe we can return to pre-industrial levels of CO2 concentration in the atmosphere and have a 0°C temperature increase versus baseline. Using first principles thinking, we have determined that this can be achieved by roughly doubling our investments in emission reduction and sequestration technologies as a share of global GDP to two percent from one percent today. This means less than the world’s military spending is needed to stop and revert climate change. Our model takes into consideration significant technological progress across the emissions reduction and carbon sequestration technologies, mostly driven by disruptive innovations targeting the most polluting industries such as energy production, agriculture and transportation.
Introduction
My goal as a tech investor is to enable and accelerate the development of technologies to combat climate change through investments and company-building. It is important that these technologies become more cost-effective than our current technologies to make them viable. Philanthropic efforts alone cannot drive the change needed. Entrepreneurial efforts are needed to drive the imminent technological revolution. The best strategy to fight climate change will be to make it profitable to do so.
“Ultimately, our economy has transformed before, it can transform again. But given the sort of capitalist society we live in, it’s going to require capitalists to be part of that movement, if not leading it.” — Michael O’Leary, the Managing Director of Engine №1.
O’Leary’s core message is simple: capitalism is the fuel of change; if you want something to change, make it profitable.
I want to show you that what has been the root of the problem of climate change — capitalism — will also be the key to its solution. Instead of thinking that production and consumption should be reduced in order to stop environmental damage, they should be radically reinvented to be more sustainable through clean technologies.
The following article is a roadmap for fixing climate change with entrepreneurship and capitalism, a ‘capitalist tactic to fight climate change’. I present this tactic, outline its implementation through technological developments that will reverse the damage we’ve caused, and show with numbers how this reversal can be made possible.
This article is particularly prescient in light of Donald Trump’s recent decision to remove the US from the Paris Agreement, and other countries, like Argentina, expected to follow suit. Given government-based initiatives to combat climate change are more fragile than ever, it is time to turn our heads to the transformative power of entrepreneurship and investments when it comes to fighting global warming — which is the most efficient (and perhaps the only available) pathway.
My main thesis is that in order to return to pre-industrial levels of atmospheric carbon dioxide (that is 280ppm) to restore ecosystemic balance, we require an annual investment in the range of 2% of global GDP.
That means that the total cumulative investment, considering a slow increase of % of GDP investment in climate mitigation until plateauing at 2%, will be $157,7 trillion until 2065.
Current Outlook
As I see it, there are broadly two forecasts for the future of our planet. One is the apocalyptic prophecy, justified by historic trends and the current acceleration of natural hazards. The other is a remarkable restoration of our ecosystem’s balance, justified by the potential of technological innovations and sensible policy-making. This article does not put forward a prediction, as our destiny is dependent on our collective will and actions. It merely shines light on a possibility: we are able to reverse the damage we’ve caused, but fundamental structural changes to our behavior are of vital importance.
Apocalyptic Prophecy
There are currently an estimated 150,000 deaths around the world every year due to climate change alone. There is 50% more CO2 trapped in the air today than there was at the start of the industrial revolution, currently amounting to a staggering 420 parts per million. The WMO Secretary General Petteri Taalas reminds us that the “last time the Earth experienced a comparable concentration of carbon dioxide was three to five million years ago.” The cost associated with this soars unstoppably, with estimates going as high as $792 trillion by 2100 (Wei et al, 2020). (i.e. $10 trillion per year, >10% of global GDP), coming from storms, floods, droughts, and fires. Morgan Stanley has predicted that there will be a loss of $10 trillion to $20 trillion of total GDP if global temperatures rise above 2°C. These and more fuel popular belief in the apocalyptic prophecy.
The apocalyptic prophecy can be summarized in four alarming predictions about what will happen to our planet:
- Loss of land: with increasing sea levels, more than 10% of the world’s population will be forced to move, resulting in a mass refugee crisis.
- Loss of biodiversity: experts think we might be in the midst of a sixth mass extinction. Temperature rises, which result in severe draughts, floods and storms, make species’ habitats inhospitable. The loss of a single species alters the natural balance of ecosystems dominoing into the loss of multiple species.
- Loss of food safety: the loss of arable land related to temperature and sea level increases will put pressure on the supply of food, while the demand will keep growing.
- Unstoppable chain reactions: there are several ecosystems fundamentally determining the climate on our planet and their destruction might have irreversible consequences. One example is the arctic permafrost melting due to rising temperature, which has two consequences which contribute to global warming, leading to further melting. The first is the reduction of the Albedo effect: as there is less ice on the Earth’s surface, less heat from the sun is reflected outside the atmosphere, increasing atmospheric temperature. The second is methane release: as ice caps melt, microbes are able to consume the once-frozen organic matter trapped in the soil, a process which releases methane into the atmosphere, a potent greenhouse gas. These feedback loops are virtually impossible to manage.
There is large societal pressure to stop climate change and push our planet towards a 1.5°C global warming trajectory, as outlined in The Paris Climate Agreement. However, a 2020 UN report found that current pledges will lead to a temperature rise of 3.2°C. The report notes that the richest 1%, who emit more than double that of the poorest half of the population, will have to reduce their footprint by a factor of 30 to stay in line with the targets of the Paris Agreement.
By November 2024, only 16% of global companies (G2000 companies) were on track to fulfill their 2050 net-zero goals, which is a slight dip from the 18% which were on track in 2023. Companies are not moving fast enough to decarbonize their operations. 17 out of 20 G20 countries, which account for 80% of emissions, have made net zero targets. However, this is not even closely enough to halt warming of temperatures. Faced with this situation, activists have demanded the imposition of sanctions, and many economists believe the only way forward is putting a price on carbon emissions.
A study published by the Royal Society showed that people at large favored sanctions when it came to avoiding greenhouse gas emissions, rather than the interests of their own nation. They argued from these results that sanctions would be effective methods to fight climate change at a global scale.
However, there are reasons to doubt the conclusion drawn is sound. Firstly, this was more a theoretical exercise, not observing the actual actions of the study’s respondents. Secondly, political leaders and business owners, whose decisions maneuver the future of climate change, are different from your everyday layperson. Therefore, it is quite possible political leaders would hesitate to implement sanctions, and business owners would be reluctant to accept them if monetary losses were at stake.
Fighting big money is a losing strategy. The solution, instead, is to use big money as the pivot to reverse climate change: make the reversal profitable, creating the biggest gold rush since the industrial revolution. In the following section, I will present the ‘capitalist strategy to fight climate change’. Later, I will show existing and potential applications of this strategy.
Restorative Prophecy
The restorative prophecy is justified by the belief that entrepreneurship can drive the technological innovations and disruptions necessary to drive CO2 emissions reduction and sequestration. It is my hypothesis using first principles thinking that by 2065 the level of CO2 in the atmosphere could return to pre-industrial levels.
Rather than abandon personal interests for the sake of communal interests, or future generation interests (as the sanctions tactic demands), the ‘capitalist strategy to fight climate change’ harnesses individual personal interests to fulfill the interests of society as a whole, the mechanism of the invisible hand.
Innovative tech solutions to cut carbon emissions as well as carbon removal techniques that get cheaper at scale are starting to emerge. The broad adoption of these technologies will be driven on one hand, by societal and institutional pressure to cut carbon, and on the other hand, by their economic superiority to how things have been done conventionally. The landscape for the future of cleantech is a wellspring of hundreds of new multi-billion dollar companies.
At Utopia Capital, we are very excited to partner with entrepreneurs driving the decarbonisation of the economy at scale:
- We have backed Agrarius, which with its organic fertilizer helps farmers to increase the food production of their land by 10–50% (producing more food with the same level of emissions) and cutting their use of fertilizer (which is typically produced through energy-intensive processes).
- We have backed CarbonCrusher, building roads faster, cheaper and carbon-negative (i.e., sequestering carbon from the atmosphere).
- We are co-founding NewCo, which is focused on sequestering millions of tons of carbon at scale using nature-based solutions.
- We are backing 1010 Solutions, which with its patented technology has the potential to add an annual carbon absorption capacity larger than the Amazon rainforest to our planet.
Even though Utopia Capital has already proactively invested in several clean-tech projects, this article is an attempt to push a collaborative approach in our commitment to fighting climate change, welcoming new partnerships.
From 2018 to 2022, climate tech venture funding grew at a compound annual growth rate (CAGR) of 52%, reflecting a significant increase in investments. Over the past decade, the combined enterprise value of global climate tech startups has increased 45-fold, reaching $2.5 trillion in 2023. Long-term trends suggest climate tech is growing consistently.
However, throughout 2024, a decline in climate tech investing has played out. Climate tech financing dropped 29%, from US$79 billion between Q4 2022 and Q3 2023, to US$56 billion in the ensuing four quarters. Against this backdrop, climate tech funding contracted from 9.9% of VC and PE investment to 8.3%. The dip from 2021 is slightly worrisome. It’s time to reignite the interest in investing and developing climate technologies. It does seem, however, like AI-powered climate tech solutions have gained appeal. Time will tell whether the AI surge pays off.
The European Union, in Bill Gates’ opinion, needs to invest 800 billion euros ($834 billion) in four key green technologies this decade if it wants to end dependence on Russian energy. Moreover the report commissioned by Gates’ Breakthrough Energy from Boston Consulting Group looks for another 800bn in grid infrastructure for renewables, long-duration storage, clean hydrogen and sustainable aviation fuel. Those “enabling technologies” would allow it to cut energy dependency by around 1.4 million gigawatts — about 10% of its projected primary consumption in 2030.
Not only governmental institutions but also big private sector players are invoking an increasing commitment.
Bill Gates has raised more than $2billion in funding for his clean energy non-profit Breakthrough Energy, thanks to investments from seven major U.S. corporations. This aims to work towards a transition to clean energy and to achieve net-zero carbon emissions by 2050.
He also stated in reference to Breakthrough Energy Catalyst, a novel platform that funds and invests in project companies utilizing emerging climate technologies that reduce emissions: “Half the technology needed to get to zero emissions either doesn’t exist yet or is too expensive for much of the world to afford. Catalyst is designed to change that and provide an effective way to invest in our clean technology future.”
Warren Buffett said in his letter that Berkshire Hathaway Energy is in the middle of an $18 billion project, begun in 2006 and continuing until 2030, to rework and expand the electricity grid in the West. He writes: “Historically, the coal-based generation of electricity that long prevailed was located close to huge centers of population… The best sites for the new world of wind and solar generation, however, are often in remote areas.” Berkshire Hathaway Energy, or BHE, is building transmission lines to carry electricity from remote areas to population centers. Such projects are not straightforward, and ‘billions of dollars are needed to be invested before meaningful revenue would flow.’
From Linear to Disruptive Clean Technologies
A requirement of the Restorative Prophecy is the shift from linear to disruptive clean technologies. A disruption occurs when a new product or service creates a new market due to its sheer superiority and either replaces or diminishes the existing industry. It’s worth pointing out the two types of upcoming clean-tech.
1. Emission Reduction technologies: these consist of green technology and infrastructure aimed at reducing future emissions of CO2 into the atmosphere. Within this category the evolution of technologies can be thought of as
a. Linear: an improvement of current technologies into more efficient CO2 emission reduction.
Or, alternatively, as
b. Disruptive: building entirely new technologies which cut emissions of CO2 in ways which are as of yet inconceivable.
2. Emission Sequestering technologies: these are dedicated to removing. past emissions of CO2 from the atmosphere.
Again, the evolution of sequestering tech can be either
a. Linear: improving current approaches like reforestation.
Or
b. Disruptive: developing entirely novel technologies to drive carbon sequestering.
A core reason why I believe the restorative prophecy is possible is that consensus opinion underestimates the impact of disruptive technologies on emissions reduction and sequestration. Roadmaps to a global net zero are using a linear worldview based on technologies mostly available today. This leads to the broad consensus that the world will not manage to stay within the 1.5 degree global warming target set out in the Paris Agreement.
However, exponential technological development implies that we cannot assess future outcomes with our current understanding of technologies. Instead, we must take into account the difference disruptive technologies will make. At Utopia Capital, we realize the potential effect of exponential, disruptive technologies, and want to actualize their possibility. We believe that with the usage of technologies that are still in their infancy or non-existing and a mix of carbon sequestering technologies that get cheaper at scale, it’s possible to stay under the 1.5°C buffer and then reverse all man-made climate change by 2065.
Current trends will not continue towards the future, as history is seldom linear. The trends of climate change characterize our past mistakes, but they don’t need to determine our future.
An example shows the effect of past disruption in our technological developments: “The horse and carriage era did not end because we ran out of horses. It ended because horse transportation was disrupted by superior technology, the internal combustion engine, and a new, disruptive 20th century business model. Horses didn’t just disappear. They became obsolete for the purposes of mass transportation.” (Tony Seba: Clean Disruption — Energy & Transportation).
Investors concerned about climate change have focused on the energy sector (which is responsible for 41.7% of greenhouse gas emissions). A huge stream of investments is dedicated to utility scale green energy power plants (e.g., solar, wind), to developing new energy sources (e.g. fusion, hydrogen), and to decrease CO2 emissions in general industrial processes. But this alone will not be enough. How these technologies are distributed will be crucial to generating disruptive progress, resulting in a substantial impact in CO2 emissions reductions.
We have to create exponential scale disruptions tackling the sectors that pollute the most. The approach should follow the 80–20 rule (concentrate on a few sectors which have a massive effect). There are currently three sectors that are responsible for 76.3% of global greenhouse gas emissions: Energy for industrial and household usage, Agriculture, and Transportation. If disruption focused on these, then the total scaled effects would amount to a large-scale emission reduction. These sectors present fertile territory for forward-looking entrepreneurs looking for billion dollar opportunities.
If this is you, read closely. In what follows I will present cutting-edge projects that hold immense investment and engineering potential.
Disruptive Emission Reduction Clean-Tech
As the graph shows, energy for industry and buildings, transportation, and agriculture, constitute the three highest emitting sectors, contributing 41.7%, 16.2% and 18.4%, respectively. They also represent the sectors in which disruptive technologies hold the highest potential to reduce emissions.
Disruption of Energy — Transition to Off-Grid, Decentralized Energy Production
Solar and wind powered energy sources are on the rise. Are these technologies disruptive? I will explain how they have the potential to be so, with scaling green energy through decentralization.
It is worth analyzing the technology cost curves. Over the past decade, the cost of solar power has dropped ~90%, becoming the cheapest source of energy in history (wind right behind it), even without subsidies. The use of solar power is growing. Several industrial companies, like the steel producer Nucor, are switching to solar energy. Lightsource informed that whereas previously all solar energy used to be directed for utilities, now it’s 50% utilities and 50% corporate.
The cost curves show that solar and wind will likely become 70% cheaper over the next decade. So, the greener sources of energy will become cheaper, making their widespread adoption inevitable.
Strategies optimizing the usage of energy would bring down the costs of solar and wind energy even further. Currently, the production of solar and wind energy depends on fluctuating weather conditions. We can rely on solar during the day when the sun is up and strong, but not during night time. When renewable sources can no longer be relied on, non-renewable sources are demanded. To solve this, the development of batteries to store excess green energy is crucial. Other alternatives involve using excess solar to power hydrothermal energy which can later be used when demand peaks. Optimizing photovoltaic cells and windmill tech for harnessing energy is also key. Currently, solar panels turn only 20–30% of the sun’s energy into electricity.
Note that what will drive the transition to renewable sources are economic reasons, with the upshot that it is environmentally beneficial. This supports the claim that capitalism will bring about disruption.
An important change to speed up the transition will be to stop subsidies to non-renewable sources of energy. Subsidizing coal and oil energy sources is harmful to the environment, as it helps non-renewable sources to have an unfair competitive advantage. It also slows down the wide-spread adoption of green energy sources. Why should taxpayers’ money be spent on something which is damaging the environment, rather than resources that could save it? A better solution could be to impose a tax on non-renewable sources of energy, and use the money raised to make the use of renewable sources more accessible.
In fact, a green subsidy race seems to be unleashing between nations to fuel the energy transition. The US signed a law in August 2022 that entails tax breaks and subsidies worth $369 billion for green tech firms. The EU, which introduced carbon taxes in 2005, needs to respond to the US’ initiative to keep its leadership in clean energy. The Net Zero Industry Act (NZIA) is a green subsidy strategy by the EU announced in Davos in January 2023, and officially adopted and entered into force at the end of June 2024. Its primary objective is to speed up net zero industrial transformation by expanding the EU’s manufacturing and installation of clean technologies.
I believe the truly disruptive strategy will be implementing decentralized energy systems.These are systems through which energy is produced off the main electricity grid, and closer to where it will be used. This is enabled by storage-as-a-service, and onsite units of production.
Batteries are used to store solar energy onsite to use whenever demand is high and supply is limited by climate conditions. New companies are providing storage-as-a-service to other electricity providers with the goal of reducing demand charges (i.e., reducing how much you as a homeowner would eventually pay in utility bills). Essentially, these battery storages are placed in the location where they’ll be used, storing energy when it is cheap and making it available when it’s expensive, while avoiding transmission losses.
Tony Seba, in his book Clean Disruption of Energy and Transportation, estimates that the cost of generating electricity from solar power combined with battery storage will drop to $0.02 per kWh by 2030, and continue to decline to $0.01 per kWh by 2040. This is a significant drop from the average retail price of electricity in the US, which was $0.13 per kWh in 2020, according to the US Energy Information Administration. .
Developing decentralized energy systems off the main grid by installing solar panels/wind turbines by the buildings that will use that electricity can significantly reduce transmission costs, cutting utility bills. Combining on-site solar panels with storage units, and implementing this over the range of a whole community, city, or even country, would lead to significant cost reductions. Coupled with the already decreasing trends in the price of clean energy sources due to their improved technology, these systems maximize disruptive effects. Crucially, production costs will get cheaper than transmission costs with enough exponential improvement of underlying solar technology.
Other advantages of decentralized energy include an increase in the security of supply, a reduction of energy lost during transmission, and an increased resilience over time as they have greater network connectivity which better supports grid gaps.
Note that currently, while moving electricity around, the US grid loses enough to power all seven Central American countries four times over. Moreover, decentralized energy enables a peer-to-peer model, as individual households can sell surplus energy to the grid. Thus, one can simultaneously be an energy producer and consumer.
The usage of energy could be optimized through a Smart Grid Architecture Model (SGAM), a system which connects and manages the interactions between energy producers, distributors, and end consumers. The system measures, models, and anticipates fluctuations of energy usage and demands, enabling a response that reduces the stress on network assets by delivering electricity and heat exactly where they need to be.
The upshot? Centralized utilities will be at a competitive disadvantage, as they will inevitably charge more because of distribution and transmission costs. They will be unsustainable both in the environmental and the economic sense.
In Australia, rooftop solar power is about to become #1 in the country in terms of power generation capacity, and more than 3.3 million households (out of a total of ~11 million) have rooftop solar PV. The Island of Ta’u is currently running on a 100% solar + storage microgrid. The combination between solar energy reduction costs, and the reduction costs that storage-as-a-service provides, is leading several Islands to a 100% adoption of clean sources.. The future of energy is mostly decentralized. Importantly, the disruption will not only be clean but also economically profitable.
Disruption of Agriculture — transition to lab-grown products
Agriculture is responsible for almost 20% of total greenhouse gas emissions. This sector is not only increasing methane emissions, but it is also reducing the capacity of the environment to absorb CO2 through deforestation. CO2 is absorbed by plants during photosynthesis, which is turned into oxygen in the process. Land clearing for crop or pasture interferes with the natural balance photosynthesis provides to atmospheric gas distribution. The global food system accounts for more than 70% of freshwater withdrawals, occupies over 50% of habitable land, is responsible for 80% of deforestation, and 36% of crop calories are used for animal feed.
According to a study by Oxford University, lab-grown meat could reduce greenhouse gas emissions by 96%, and cut water consumption somewhere between 82% and 96%. Meat can be grown in a lab by extracting animal stem cells and growing them in vitro or in a petri dish, feeding them nutrients, growing them in bioreactors, and processing them into something that looks and tastes like animal meat. Increasing investment efforts in this technique would drive technological advancements that facilitate the process and power scalability. As a result, the price of lab-grown meat would decrease exponentially in the future. Given how resource intensive animal farming is (using land, water, and energy required to grow, feed, and transport animals), it is not hard to imagine that lab-grown meat will reach and surpass cost parity to farm-grown meat.
There is evidence to suggest the cost of lab-grown meat will decrease exponentially. From a first principles perspective, it should be cheaper to grow meat in a lab because it’s closer to being 100% efficient from input to output (i.e., all raw materials are utilized for the production of the final product without any waste or energy loss), whereas conventional meat products require lots of unused inputs (i.e., every part of an animal that’s not consumed and energy used by the cattle during their lifetime). Rather than raise entire animals, we would only grow the parts we eat.
Moreover, the bioreactors needed to make meat at scale are receiving increasing amounts of investments to increase their size and capacity ($2 billion globally as of 2023). Due to improvements in the scale of production and cheaper materials, the price of a lab-grown burger has already fallen from $330,000 to $9.80 from 2013 to 2019, with the launch of Mosa Meat’s burger, and this will probably continue to drop. Once lab-grown meat becomes cheaper than animal meat, people will switch for economic reasons. Some restaurants are already serving lab-grown meat this year. The California-based company UPSIDE is selling lab-grown chicken that has been approved by the FDA.
Another example is milk. Milk is composed of 3.3% solid proteins (the rest being water 87.7%, sugar 4.9%, and fats 3.4%). In the same way that we can produce insulin from yeast in the lab, we can produce any protein from combining carbohydrates and nitrogen with a programmed micro-organism. This process is called precision fermentation. Therefore, milk can also be produced in vitro. Crucially, the cost of precision fermentation is improving about 100x per decade! This means that by 2030 the costs of these synthetic proteins will be about 80% lower than animal proteins.
It is estimated that 30% of the Earth’s surface is used for livestock farming, despite meat-production being extremely resource-intensive, and the demand for livestock products rapidly increasing (some predictions estimate demand will at least double by 2050). This situation is unsustainable.
I believe that the cost-efficiency and concerns about the exploitation that the farming industry demands will encourage the transition to lab-grown products, disrupting agriculture. However, it is the drop in costs that lab-grown products would cause that will be the central driver of the transition. As underlying technology improves, people’s resistance to lab-grown products decrease, and financial efforts are channeled to scaling them, a wide-spread switch will follow. Thus, disruption will be simultaneously cost-effective and beneficial for the environment.
Financial efforts will come from investors looking for attractive investment opportunities, founders looking to build businesses consisting of billion dollar opportunities, and governments reducing subsidies for animal products to make lab-grown alternatives more competitive.
As switching to lab-grown meat becomes indispensable for the environment and cheaper, disrupting agriculture, animal farmers may end up providing a small and premium niche of the overall food market, much like horse-driven carriages are used as tourist attractions but not as serious transport methods.
Disruption of Transportation — shared, autonomous electric vehicles
The disruption of transportation will be driven by two reconfigurations of the transportation landscape: (1) electric vehicles (EVs) will replace internal combustion engine vehicles (ICEs) as they will be cheaper, charging during peak hours free of cost, (2) shared autonomous vehicles will replace car ownership.
The cost of electric vehicles has been dropping since their mass market introduction by Tesla in 2008 (variations of EVs have actually been around since the 1800s). Whereas the Tesla S was $80,000 in 2014, the Geely Geometry EX3 SUV, which has around 200 miles of range, costs ~$9,200 in 2023. A consequence is that the production and sales of EVs are increasing exponentially.
The Geely Geometry EX3 SUV is manufactured in China. It exemplifies the country’s ability to produce affordable and practical electric vehicles at scale. Over the past two years, China has aggressively reduced the costs of EV production. Between 2023 and 2024, battery prices — the most expensive component of EVs — continued to decline due to advancements in lithium-iron-phosphate (LFP) technology. According to BloombergNEF and ICC Battery data, China’s LFP battery cell prices have reached a new low of approximately $60/kWh for 2024 year-to-date (YTD). This is significantly lower than the 2023 global average of $115/kWh, marking a substantial reduction of nearly 48%. As a result, EVs have reached price parity in China, leading to mass adoption, a trend that is expected to follow in other markets where they are still more expensive than comparable combustion cars.
In terms of maintenance, Hertz says that EV maintenance costs are 50–60% lower than those for gas powered cars. Moreover, EVs last longer than internal combustion engine (ICE) vehicles (about 3–7x more). For example, the Tesla S P 85 lasts 1 million miles! This makes driving EVs exponentially cheaper in the long run. Nevertheless, this potential seems somewhat excessive for the average driver. No one drives that much.
But it isn’t excessive if these vehicles function as fleets.
Fleets refers to a cluster of vehicles that operate under the same ownership. Over 5 years, a fleet car (e.g., uber, or amazon car) drives about 500,000 miles. This means that over 5 years they would need one EV or three ICE. This suggests fleets would have to go electric to optimize costs (the upshot of this capitalistic driven transition again is significant positive impact on the environment).
But how could EV fleets reach further scalability so as to fully replace current transportation habits?
The answer is through autonomous vehicles. When these become approved by regulators and legislation, further disruption will flood the transportation industry. Autonomous electric vehicles will function as fleets: they will drive around a city transporting people door-to-door on demand. This is referred to as Transportation-as-a-Service (TaaS).
TaaS will be cheaper, cleaner, and more abundant than, for example, Uber or Lyft because it takes out the human labor costs, and because cars would be utilized non-stop so there will be fewer vehicles on the road. According to ARK Invest, the cost of autonomous ride-hailing could drop to 0.25 per mile. Imagine Uber but without long waiting times, without human drivers, and a lot cheaper (10x cheaper vs. taxis by 2030, a ride from JFK to Manhattan for $3.75). This is the future of transportation.
This transformation of transportation will decrease the need for parking space, which could be used for green spaces. In crowded areas where car ownership is expensive and inconvenient, TaaS will majorly upgrade transportation in terms of accessibility and traveling times, as well as positively impact urban planning. New opportunities will emerge for sub-urban cleaning, maintenance and charging of fleet vehicles in off-peak times.
What is more is worth noting that Tesla’s autopilot system is 9x safer than human drivers, and these systems are gradually improving over time. If this technology became widespread, around 900,000 lives would be saved yearly across the globe. This strongly suggests that the disruption is inevitable.
Ultimately, the driving reasons for the disruption of transportation by TaaS will be its economical profitability and enhancement of safety, but in the meantime it will have an astounding effect on the environment, significantly cutting greenhouse gas emissions.
Summary
To debrief, there are many developments in the energy, agriculture, and transportation industries which hold the potential to disrupt the current model. These changes will be driven by their economic profitability.
Think of the car and the horse again. In the beginning purchasing a car was much more expensive, so people stuck to the common ways. As technology improved and scalability was enabled, widespread adoption of the car followed.
I envision a similar future for our current technologies. Currently, non-renewables are the easy alternative, but sooner rather than later, they will be wiped away by the novel, more efficient, cheaper technologies.
The technological disruption will be primarily driven by financial reasons, as the transitions benefit people’s economic self-interest. The truly beneficial byproduct will be its positive impact on the environment (and on the safety of consumers).
The three disruptions explained above will be responsible for the vast part of the emission reductions, as they make up most of current emissions. These changes will do most of the work to slow down climate change. Thereafter, emission sequestering clean tech would stop and reverse climate change. I present and explain this technology in an upcoming article: The Utopia View: Landscape Of The Most Promising Emission Sequestering Technologies.
Utopia Model For Reversing Climate Change
Climate change can be reversed. This is not an overly optimistic guess, but a conclusion reached through analysis using first principles thinking.
We have developed a mathematical model that shows the reversal of climate change (i.e., returning to pre-industrial levels of CO2, 280 ppm, by 2065) is possible. This is the Utopia Model for Reversing Climate Change. It shows that with less money than conventionally thought (especially benchmarked to world military spending) the emissions put out so far could be recaptured. It is meant to provide an idea of how much investments are needed to stop and reverse climate change.
It is our conclusion that investments in green technologies in the range of 2% of Global GDP could reduce emissions and speed up carbon sequestration to reverse carbon excess by 2065 to pre-industrial levels.
There are some crucial points which brings our model apart from more traditional projections: 1) We believe that investments in carbon capture can and will scale faster, which will lead to 2) reaching net zero sooner and 3) and after reaching net zero, they will drive back atmospheric carbon for climate restoration.
According to experts, it is expected that the global temperature will stabilize when carbon dioxide emissions reach net zero. In our model, net zero, which is expected to coincide with the moment when levels of carbon dioxide in the atmosphere are highest, will be reached earlier than other models, by 2036–2037, given the exponential increase in CO2 sequestration technologies. This contrasts with the conventional expectation that net zero will be reached in the 2050s or even 2070s.
We recognize this is ambitious — but we trust that it is possible. Standard projections of atmospheric CO2 underestimate the exponential impact of scaling carbon drawdown solutions. The primary focus of our model (and this article) is to foreground that emission-reduction, or decarbonizing our current economy, is just one aspect of the problem; the deeply transformative change will come from carbon sequestration.
The graph below, which is derived from our mathematical predictions, shows how CO2 in the atmosphere would begin to decrease after emission reduction technologies lead to net zero and then net-negative emissions, eventually reaching the desired target of pre-industrial levels (280 ppm ≃ 2,185 Gigatons of CO2).
Graph 1
In order to achieve these results, substantial investment in emission reduction and sequestration technologies is required. This would allow the development of technological innovations that would exponentially decrease the cost to sequester 1 ton of CO2. Following our mathematical calculations, we expect the investment trends and the cost to sequester 1 ton of CO2 to follow the path outlined below.
Graph 2
It can be noticed from the graph that we expect there will be a slight drop in climate mitigation investments as % of GDP until 2032, as carbon sequestration technologies will simply not be ready at scale, before total investments rising to 2% of Global GDP in 2040. Although total investments will increase each year, initially the global GDP will increase faster, until the increase in investments in climate mitigation accelerates to catch up and surpass the rate of growth of global GDP, until it stabilizes at 2%.
As a result, the cost to sequester 1 ton of CO2 will decrease year-on-year. Climate drawdown will become a burgeoning industry, attracting investment and job opportunities, while making sure that CO2 (and other greenhouse gases) remains stored in the earth long-term. This will restore the Earth’s atmosphere to a livable state for humans and other species.
The key assumptions of our model are as such:
(i) We estimate a long-term GDP growth of 3% annually and a direct, linear correlation of CO2 emissions with global GDP. Today, 1% of global GDP ($1.1 trillion) is invested annually in emissions reduction and sequestration. In our model, we require a growth to 2% of global GDP to reverse climate change.
(ii) Furthermore, we estimate that it costs $400 in capital expenditures to permanently replace a capital good emitting 1 ton of carbon dioxide per year (which we derived by calculating the lifetime savings of carbon emissions of replacing a coal-fired power plant with solar). This figure remains stable over the forecasting period, balancing technological advancements vs. the capturing of low-hanging fruits first, and assuming that the marginal gains of investors exceed marginal costs at that figure. Furthermore, we assume that it costs $100 to remove one ton of carbon emissions from the atmosphere (here, we assume an improvement of cost over time due to new technologies).
(iii) Finally, we assume that only 80% of our emissions can be cut (as some processes simply emit carbon without alternative technologies available) and we also consider the carbon absorption potential of the ocean, with a potential release of CO2 from this carbon sink as the concentration of atmospheric carbon would decrease.
The table below shows a summary of our 40-year long vision of the future predicting the varying amounts of CO2 in the air, new CO2 emissions, CO2 released by oceans as atmospheric CO2 levels decrease, CO2 sequestered, costs for reducing CO2 emissions by a ton annually on a permanent basis, costs of removing 1 ton of CO2, money invested in emission reduction tech, money invested in emission sequestering tech, and total money invested as a percentage of total GDP.
Keep in mind that CO2 levels increased from 280 ppm in 1750 to 427 ppm today, a change of 147 ppm. The amount of CO2 in the atmosphere today is around 3,340 Gigatons. The amount before the industrial revolution was equal to 2,185 Gigatons. We need to subtract at least 1,155 Gigatons of CO2 from the atmosphere. We will also need to recapture the excess CO2 which would be released by the ocean in the future.
The key sensitivities in the model are as follows: The model considers it would cost, on average, $400 to mitigate 1 ton of CO2 emissions per year permanently across developed and developing countries, a figure derived by comparing the costs of a coal fired power plant which is replaced with a utility-scale solar plant. We assume this cost will remain constant as there are plenty of carbon emitting industries which will require replacement with costly green tech alternatives. We estimate that it currently costs $100 to sequester 1 ton of CO2 from the air using a blended approach of nature-based and technological solutions and we assume that the price of sequestration will decrease exponentially as technology improves. In our model, we assume that $1.1 trillion will be invested in emission reduction technology in 2025 and $5 billion will be invested in emission reduction technology in 2025, and we assume that investments will increase over the next 40 years. These assumptions are modest, as investments of the amount stipulated have already been reached in previous years. These considerations and assumptions show that the target of returning to 2,185 Gigatons of CO2 in the atmosphere (returning to 280 ppm) is possible, even plausible.
As a further assumption, we have determined a target spending amount of money to be invested in climate technologies at 2% of global GDP. This means, economic efforts will have to be redirected from other sectors to tackle CO2 excess, but not to an unrealistic or excessive amount. As a benchmark, 2.2% of total GDP in 2021 was military spending. Currently, c. 1% of global GDP is spent on energy transition and climate efforts, so the efforts need to be doubled. In the long-run, investing 2% of global GDP in mitigation is a sound investment, as it provides at least 5x return on capital considering the harms of climate change and its impact on future GDP as outlined in the introduction.
The table shows outcomes based on possible future investment assumptions. I am not claiming that this will happen, I’m proposing a model to analyze what would happen if varying amounts of investments were directed to reducing CO2 in the atmosphere. I believe that the investments in doing this will be highly profitable, which is why I believe it can happen.
There are four variables that can be altered. These are 1) costs to mitigate 1 ton of CO2 emissions, 2) cost to remove 1 ton of CO2, 3) money invested in sequestering technology, 4) money invested in emission reduction technology. You will note that altering these will have an effect on the year by which we will reach pre-industrial levels of CO2 in the atmosphere (280 ppm). I invite you to take a look at the equations used to make the predictions, alter this open-source model and see how these variations would affect our future.
Note that sequestering tech plays a key role in our Utopia Model. This is because if we want to reverse climate change, a substantial amount of investments are going to be required for this type of tech to really take off. I will introduce a closer look at these from a financial point of view. If you want to learn about what the different sequestration strategies are, I suggest you follow me and check out our future articles.
Sequestering Technologies: The Path to Reversing Climate Change
Sequestering technologies have the potential to reverse climate change. They would do so by capturing the excess CO2 we have released into the atmosphere and which the oceans have been saturated with. In our Utopia Model For Reversing Climate Change, we show that investments at a level of 2% of global GDP for a sustained time over several decades would be sufficient to reverse most of the damage done and drive the green revolution.
The graphs below feature the positive effects of investments over time in sequestration capacity, and the positive effects of sequestration technology on CO2 levels in the atmosphere.
Graph 3 shows that with an exponential increase in investments in sequestration technology, new innovations coming out and other technology reaching maturity, the price of removing 1 ton of CO2 from the atmosphere would decrease over time.
Graph 3
Scaling sequestering technologies is the missing step to generate truly significant progress for reversing climate change. If the investment efforts outlined in Graph 3 would be carried out, then the future of CO2 in the atmosphere would follow the path shown in Graph 1 above.
Overall, it shows the potential impact on our global climate driven by sequestration technologies. Hopefully, this inspires entrepreneurs to launch the businesses that will drive the changes our planet urgently needs.
Our highly skilled and experienced team at Utopia Capital has a history of partnering with founders to build the companies of the future. If you are interested in leading the next disruption, we can help you. Don’t hesitate to reach out to us: https://www.utopiacapital.com/.
Conclusion
Atmospheric levels of CO2 have reached a breaking point — we either backtrack on our emissions and invest in green technologies, or we continue fueling the (soon irreparable) damage by continuing the path we are on.
As I see it, there are two prophecies about what could happen with our planet in coming years. The first is apocalyptic, and it holds that we will not cut back on emissions, that climate change will continue to wreak havoc across every continent, and that we are likely to destroy the planet over the next 100 years. The second is restorative: we will manage to restore our ecosystem’s balance. This is the one I advocate for, justified by detailed analysis of the current technological and financial landscape.
I have shown why I think it’s possible to fix climate change. The industries responsible for almost 80% of emissions are just 3: energy production, agriculture, and transportation. They all have the potential to undergo disruption. Energy production by shifting towards decentralized, renewable production. Agriculture by transitioning towards lab-grown products, which are close to being 100% efficient input-to-output. Transportation is already experiencing a shift towards autonomous, electric vehicles. In the future, autonomous EVs operating as fleets would significantly disrupt the industry.
These disruptions would bring down carbon dioxide emissions significantly. Thereafter, investing in emission sequestering technology could help not only halt, but reverse, climate change. If we manage to remove the excess CO2 we have released into the atmosphere since the industrial revolution through sequestering technologies, we are likely to witness the biggest ecological restoration in history.
To make this a palpable possibility, we have developed the Utopia Model for Fixing Climate Change. The math shown in it is clear: we can reverse climate change by investing ~2% of the global GDP in green technologies over the next 40 years. You can think this is optimistic, but as a technology investor, I have seen the power innovative technologies have to disrupt industries, and the same is likely to happen with innovation in clean tech. This is because these technologies are not just sustainable but financially attractive, luring in investors who can really tip the balance.
At 10x Value Partners and Utopia Capital, we believe that the transition to clean tech will become the better alternative, environmentally and financially speaking, thus incentivising businesses to save our planet by acting on their own economic self-interest. The transition to clean tech will be a capitalism driven one. If the economics of green tech will be more convenient than CO2-driven industry, not for subsidies or additional tax but for innovation-driven, disruptive efficiency, then the transition will be simultaneously green and profitable.
I hope to have shown that there’s sufficient proof for believing the restorative prophecy is possible, and, more importantly, suggesting routes for its immediate enactment.
“The best way to predict the future is to create it.” (Abraham Lincoln)
