The world’s richest man and his wife write an open letter every year in which they ponder the opportunities for the Bill and Melinda Gates Foundation, the world’s largest philanthropic foundation. Last year, they wrote about inequity.

This year, inspired by a question from high school students—“What superpower do you wish you had?”—they wrote separate letters to students, with rather charming annotations in the letters’ margins. Melinda answered, “More time!” and wrote about recognizing, redistributing, and reducing the unpaid work that women do, especially in the poor world. Bill said, “More energy!” and wrote about the civilizational challenge of climate change and the imperative to develop what he has for some years been calling “energy miracles¹.”

By “miracles” Gates doesn’t mean unanticipated gifts that appear undeserved from nowhere but, rather, technological breakthroughs “that are the result of research and development and the human capacity to innovate,” such as the personal computer, the Internet, and the polio vaccine². He called upon students to “work extra hard in your math and sciences,” because the world needs “crazy-sounding ideas to solve our energy challenge.”

Gates is animated by an equation he claims to have come up with (although it resembles another equation, called the Kaya Identity³, well known to climate scientists) that considers total carbon dioxide emissions as the product of the factors P (population), S (services consumed per person), E (the energy used to supply those services), and C (the amount of carbon emitted per unit of energy). If total carbon emissions are to be zero, Gates reasons, and P, S, and E are either going to increase or not go down much, then C must be zero. For C to be zero, we need a miracle or many miracles. 

Gates doesn’t blame the paucity of miracle technologies on the absence of a price on carbon (which means energy companies have no incentive to develop and deploy carbon-neutral technologies), or on other bad policies. Hundreds of billions of dollars have been spent on what he calls the “demand side” of the energy challenge. Instead, he argues, the fault is underinvestment by governments and private investors in the “supply side,” which funds basic government research and resulting startups. In November, Gates decided to do something about that, announcing the Breakthrough Energy Coalition. It brings together more than 20 billionaires, including Amazon’s Jeff Bezos, Virgin’s Richard Branson, and Facebook’s Mark Zuckerberg, who have promised to invest at least $2 billion in breakthroughs.

Jason Pontin, MIT Technology Review’s editor in chief, spoke to Bill Gates about how to make C zero and simultaneously satisfy the poor world’s legitimate desire to lift billions out of poverty, and about where the coalition will invest its money.

You sometimes say that in the future the world will need more—not less—energy, in part to raise living standards in many parts of the world. That’s really the key to the challenge, no? We have to break the close connection between economic growth and carbon emissions in a time of climate change.

That’s right. If you take my equation and look at the first three factors, P is going to go up by about 1.2, S is going to go up by about a factor of 2, and E, assuming lots of breakthroughs—well, we’ll be generous and say that’s 0.6. So basically, when you summarize the equation, it suggests that C must be about zero.

When must C be zero?

If you allow poor countries and the land-use sector, including livestock, to continue to have non-zero emissions, then rich countries need to be net zero by 2050, if you really want just two degrees of warming.

If poor countries and agriculture emit significant carbon for the foreseeable future, how can the entire globe achieve net-zero emissions by the end of the century? 

Well, there are scenarios that show rich countries having negative carbon dioxide emissions⁴ in the years beyond 2050.

You’ve noted that the energy industry spends 0.23 percent of revenues on research and development, compared to 20 percent for pharma and 15 percent for IT, and you blame the long lag between invention and impact in energy on those paltry investments. Is there any way to change that?

A more than 20-year investment cycle seems an awfully long time. Therefore, does energy need a model for innovation different from those that have driven other technologies?

For a lot of energy innovations, you’ve got to give government credit. With nuclear energy, all the key research was done either by the government or by government funding. With fossil fuels, there was clearly some spillover effect from the digital revolution to analyze geological data, but it was government investing that helped to get to this incredibly precise horizontal drilling capability. So basic R&D spending has been the thing that has driven most of the breakthroughs. We do need private-sector risk-takers to go out and scale the stuff up, which is why we paired the idea that 20 leading countries must double their energy R&D over the next five years with a group of investors [the Breakthrough Energy Coalition] that will take on funding high-risk, breakthrough companies.

When we spoke about energy in 2010, you reminded me that the total U.S. government investment in energy R&D was around $5 billion, about 10 percent of the money it spends on defense-related research. That’s not changed much in the last six years. If the government did double its investment in energy R&D, where would you want that money to be spent—on more fundamental research or on supporting the scaling up of new technologies?

No, I’d spend it all on fundamental research. There’s some really exciting materials science problems which if you solved them would have benefits far beyond the energy sector, but where you could justify the increased investment just by what it would do to improve energy innovation. 

Now, I don’t have a pure mapping of how much you spend on R&D to how quickly you get the breakthrough. As with cancer research, there’s a lot of uncertainty as to what scientific possibilities are out there. We don’t have a good equation. You know, it’s possible there’s some guy in a laboratory today who’s inventing something miraculous, but because of climate change and the value of having cheaper energy, we shouldn’t just sit around and hope for his miracle; we should tilt the odds in our favor by doubling the R&D budget.

It’s striking that all of your examples have to do with chemistry and materials science. That’s not a coincidence, is it?

No. Take TerraPower⁹, the nuclear fission company that I’m very involved with [along with former Microsoft chief technology officer Nathan Myhrvold]: all our biggest challenges have been in materials science. We have very high neutron bombardment of our steel plating, and the toughest engineering problem to solve has been proving that over long periods of time we don’t have degradation. But the ability to model materials comes up in almost all energy breakthroughs.

How do you respond to the argument that commercializing inventions like solar paint¹⁰ would take far too long to meet the time line of net-zero carbon emissions by 2050? How do you answer the thesis that to avert the worst impacts of climate change, we must deploy the clean technologies we have, while simultaneously investing in more fundamental breakthroughs as well?

For countries that are quite wealthy, like Europe and the United States, we could bear to have energy costs go up even a factor of two in deploying what we have today. It would be a huge political trade-off, and I don’t know if countries would choose to do it, but you wouldn’t be impoverishing anybody.

But look at a country like India, which is paradigmatic and numerically very significant in terms of its expected additions to hydrocarbon use over the next 30 years. If you give Indians the dilemma of electrifying their country using coal or meeting a greenhouse-gas constraint that would dramatically reduce how much electrification gets done, you give them a very tough trade-off. They will ask, “Shouldn’t we save millions of lives? Shouldn’t we give women electric stoves instead of burning wood? Shouldn’t we avoid the environmental degradation all that wood gathering involves, and all the time it demands?” I can’t predict, but I imagine they’ll lean toward electrifying the country, which will mean a global-scale experiment with high carbon dioxide.

So if it wasn’t for technological innovation, I wouldn’t be very optimistic about reducing greenhouse-gas emissions. But if we have the innovations, then we can say to India, “You can achieve two goals: you can be a great global citizen by not emitting into the atmosphere as much carbon dioxide per person as the rich nations emitted to fuel their growth, and you can electrify your country.”

Won’t progress also require smart policies, including some kind of price on carbon? Wouldn’t we need a carbon tax to help create a business rationale for investing more in clean technologies?

The innovations will need to be encouraged on the supply side and demand side. The supply side is about funding basic government research, and then creating startup companies with that research.

On the demand side, there are arguments to be had about how much we ought to do and what the structure should look like, but if you look at the rich countries as a whole, they have done a lot. [In the United States] there have been things like the PTC [renewable-energy Production Tax Credit], the ITC [Investment Tax Credit], or the renewable portfolio standards¹¹. Now, the policies may have been too specific to particular technologies, and maybe they should be done with a more general mechanism, but overall, if you look at the relative investment in the demand side for innovation versus how much these countries have put into the supply side, it’s a stunning picture. On the demand side, rich nations have invested literally hundreds of billions, but on the supply side, if you put aside China, nobody’s really substantially increased their energy R&D¹² budget over these last 15 years.

The answer to your question is: yes, we need lots of work on the demand side. But when you click on the supply side and see what we’ve done you’d be very disappointed, even though, in terms of billions of dollars needed, it’s not nearly as much. It’s surprising how little’s been done.

I understand you prefer to discuss the supply side. But do you have policy preferences about how to impose a price on carbon? Do you favor a clean, transparent tax? Or would you like some kind of cap and trade? Perhaps, most plausibly, a mixture of smart policies? Or do you not care?

Some countries will do a pure carbon tax¹³, and there’s a certain beauty to doing it that way, but the consensus that I think people will reach here in the U.S. will be to focus more on supply side.

Then let’s talk about the supply side! What is the Breakthrough Energy Coalition, and how will you decide where to invest?

Last November, 26 wealthy individuals and myself [as well as institutions, such as the University of California] committed to invest in breakthrough energy companies. There are two ways that the coalition will make those investments. First, we’ll create a special fund called Breakthrough Energy Partners that the individuals in that group will invest in, although sometimes these individuals will invest directly in companies. Second, we’ll get another set of institutional investors, including university endowments, foundation endowments, and corporation funds, and try to get about an equal amount of money as we’re getting from individuals for a fund for institutions, about two billion dollars.

By this summer, we’ll have some of the key people and will have pulled together the investment documents, and then we’ll be able to go to not only individuals who are willing to commit based on knowing me and trusting this thing would be structured well, but also the institutions.

The coalition launched with a remarkable group of rich individuals. But I didn’t see many names from the energy industry. Don’t you need the expertise of the energy industry, as well as its financial resources?

We haven’t been out soliciting. But yes, if we can get people who are in today’s energy market, either equipment or utilities, it would be great to have them as well. Our basic goal is that if we can raise a couple billion, we can back a lot of great companies and back them much further than a typical venture fund would choose to do.

You’ve said you were willing to invest up to one billion dollars of your own money over the next five years. Why not invest more?

I wish just writing a bigger check was the solution. I’ll be fascinated as we get this fund together how quickly we’ll be able to invest. If we can effectively invest the first couple of billion dollars, then absolutely—not only will I put more money in, but I’ll call up the institutions and individuals and say, “Hallelujah, they found enough companies that now we are financially limited; we want more money.”

Clean tech so far is somewhat out of favor [for investment] because people were unrealistic about how quickly some of these advances could be created. The difficulty of new adoption, of reliability, of scaling things up—all those things—is very, very daunting. So we need to get people excited about these types of investments again, but also really have them understand that the IT world created a model in terms of time frame, patience, and even the amount of capital required that doesn’t exist in the energy sector in most cases.

Have you funded carbon capture?

I’m an investor in David Keith’s company, called Carbon Engineering¹⁴, a free-air capture technology. They’re building a plant. It will have costs on the order of a hundred dollars or more per ton of carbon dioxide that’s pulled out with free-air capture, but having built the first plant, they’ll see opportunities to bring that down.

How is TerraPower progressing? When will there be a commercial reactor, and why was China the only possibility for a test facility?

They’re not the only possibility. There are countries like India, Korea, Japan, France, and the U.S. that have done advanced nuclear stuff, but today about half of all the nuclear plants being built in the world are being built in China, and China’s ability to do engineering is very impressive. It’s likely China is where TerraPower’s pilot plant will be built¹⁵. In the best case, if that plant gets done by 2024, then sometime in the 2030s you’d have a design that you’d hope all new nuclear builds would adopt, because the economics, safety, waste, and all the key parameters are dramatically improved.

Have you made any mistakes in your energy investments that you’d care to talk about?

I’m in five battery companies, and five out of five are having a tough time. For instance, Don Sadoway’s company, Ambri¹⁶, is great, but they’re having a real challenge in terms of getting the seals of their sodium batteries to work, and getting the economics of their batteries so that storage people would find them attractive. I don’t regret having invested, but all the battery things I’m in are finding both the size of the market and proving the technology more difficult than they expected. They’re still in business, but it’s proving to be quite daunting. When people think about energy solutions, you can’t assume there will be a storage miracle. It’s still possible there will be, but we need to invest in lots of paths that don’t demand storage.

If there’s no storage technology that scales, how will solar and wind ever meaningfully contribute to electricity generation?

If you said to me, “There will be no storage miracle”—nothing like solar chemical or anything like that—then I think the likely system for a rich country looks like a gigantic high-­voltage DC grid with solar and wind, and natural-gas peakers with some very high degree of carbon capture and sequestration [CCS].

If you had a supergrid that covered all of North America, and you looked at weather models and understood wind and sun patterns, and rationally used all of your solar and wind to maximize diversity, then with a magic, continent-wide grid, with huge capacity that is doable with the right government approvals, you’d end up probably being able to cover about 80 percent of energy needs. For the remaining 20 percent, you could, in the worst case, use natural-gas peakers and CCS. It’s a little bit easier to do CCS in a natural-gas plant than it is in a coal plant, and it’s easier to do it for 20 percent of the energy than it is for all of the energy.

The grid’s there, and it’s the most likely solution that’s straightforward. Doing a big high-voltage DC grid is quite economic. It’s only magic in the sense that the sovereign has to clear the right-of-ways and create the right economic incentives. It’s not a technology miracle; it’s a policy miracle.

Can the U.S., which committed to reducing its emissions by more than 25 percent by 2025, and other countries meet their obligations under the Paris agreement?

Even though the Paris thing was a big step forward, there is so much work to be done in each country. I think people can be skeptical about how many countries will meet their commitments and, even if those commitments are met, how they will be met. Take, for example, the U.S. commitment: a lot of the way the U.S. is meeting its commitments is by shifting the relative energy mix toward natural gas.

If we didn’t have innovation, if you said “Hey, science is frozen, we just have today’s technology,” I would be quite pessimistic about the world [avoiding] even ... a three-degree scenario. The reason I’m optimistic about climate change is because of the potential for innovations where C equals zero.