Our Energy Future

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Tom Stewart: Good afternoon and\r\nwelcome to The Road to Mexico, a Big Think forum sponsored by Shell Oil\r\nCompany.  I’m Tom Stewart; I’m the\r\nChief marketing and Knowledge Officer of Booz And Company, the global\r\nconsultant firm.  My job today, my\r\nrole today is to moderate a discussion about Earth’s future.  About the paths we might take toward\r\nglobal action on climate change. 

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With\r\nme in this room are three distinguished and brilliant panelists whom we’ll hear\r\nfrom in a few minutes. Marc Stuart, the Founder of EcoSecurities, Vinod Khosla of Khosla Ventures, and\r\nPeter Voser, who is the Global CEO of Shell Oil Company. 

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Before\r\nwe do that, and before we turn to them, first I’d like to welcome the audience,\r\nnot only the audience in this room in Houston, Texas, but also a more global\r\naudience several hundred thousand strong across the world wide web thanks to\r\nBig Think and Free Hurst Newspapers, The Houston Chronicle, San Francisco\r\nChronicle, and SeattleIntelligencer.com. \r\n

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We’re\r\nhere to talk about climate, energy, and the future of our planet.  We’re in Houston because in Houston,\r\nalso this week is Shell’s Eco-Marathon Americas.  Shell has been sponsoring its eco-marathon for many, many\r\nyears with events in three continents in North America and in Europe and in\r\nAsia.  The centerpiece of the Eco-Marathon is a contest in which student built, energy efficient vehicles\r\ncompete to travel the furthest using the least amount of energy.  Alongside the eco-marathon, we’ve been\r\nholding a series of discussions, this is the third, presented by Big Think and\r\nsponsored by Shell on the topic of our energy future. 

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Eco-Marathon\r\nis this really, totally cool event. \r\nI was able to go over this morning and take a look at some of the\r\nvehicles that are produced by the students; they are college students and high\r\nschool students; it sort of like a Soap Box Derby for nerds.  For young people interested in innovation,\r\nenergy and transportation, the Shell Eco-Marathon offers a rare hands on\r\nopportunity to stretch the boundaries of fuel efficiency using real life\r\nexperiences in technology and this, for the first time, is going to be an event\r\nwhere the Eco-Marathon Americas is actually held in an urban setting on city\r\nstreets with the streets going right around this venue tomorrow afternoon.  So in effect, you’ll be able to get\r\nhighway mileage from previous events and city mileage from these sort of\r\nextraordinarily interesting cars through tomorrow.  So, it’s a really neat event and will be followed by events\r\nin Germany and Malaysia later on in the year. 

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But\r\nthere is another race going on. \r\nIt’s a race involving the world’s energy needs and the world’s growing\r\nappetite for energy, and the Earth’s carbon carrying capacity.  And it’s that race that makes the Eco-Marathon important and it makes this event important. 

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Last\r\nnight, a group met here to discuss what U.S. policy might be and what changes\r\nin U.S. policy might be made to try to get U.S. policy working for a greener\r\nand more efficient energy future. \r\nWe talked a lot about the importance of putting a price on carbon, about\r\nthe need to align incentives so that large corporations, entrepreneurial\r\ncorporations, and individuals in their own behavior all find the opportunity to\r\ndirect their energy toward the future we all know that we need. 

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Today,\r\nwe’re going to look more globally. \r\nFor nearly two decades, since the Earth Day Summit in Rio De Janeiro in\r\n1992, governments, companies, academics, and non-governmental organizations\r\nhave been working to develop a framework for policy and action to prevent or\r\nmitigate climate change without inhibiting economic growth and\r\ndevelopment.  The issues aren’t\r\neasy, as all of you know.  The\r\nscience is complex; the scale of the problem is complex.  I mean, even in the midst of a very\r\nrapid technological change, the sheer size of the world’s energy infrastructure\r\nmeans that rapid change still takes a long time to develop and to diffuse.  And the politics of the problem; if the\r\neconomics and the technology of the problem are complex, the politics of the\r\nproblem, as many of you know in this room, are even more complex. 

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The\r\nworld leaders who went to Copenhagen in December hoping for a new climate\r\ntreaty came away with less than a lot of people thought they were going to get,\r\nand a lot of people hoped for.  A\r\nlot of excitement around climate change seems to have dissipated.  In Europe, the price of carbon\r\nfell.  But the issue did not go away.  Carbon is still poison to the\r\natmosphere, and while there have been questions about the accuracy of some\r\nclimate change data, the evidence for impact continues to grow. 

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The\r\nleaders who met in Copenhagen are going to be meeting again in Mexico, in\r\nCancun later on this year.  It’s\r\ncalled the 16th COP, COP 16; the 16th conference of the\r\nparties of that original Rio agreement of 1992. 

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What\r\nwe need to do and what I want to do this afternoon, is try to take a look at\r\nthe road to Mexico.  The road from\r\nhere to then, from now to then, and ask the question of our panelists and\r\ninvite you also to join in the conversation about what we can do to get\r\nmomentum going again.  Let me\r\nquickly introduce the people who are seated beside me. 

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On\r\nmy right, on your left as you are looking is Peter Voser, the Chief Executive\r\nOfficer of Shell Oil Company; it’s a post he’s held since last July.  Previously, he was the Chief Financial\r\nOfficer and the Executive Director of Royal Dutch Shell, and Peter has taken on\r\nhimself as the head of one of the world’s great energy companies to imagine\r\nwhat the energy company of the future will be and to make Shell become that\r\ncompany. 

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Next\r\nto him, Vinod Khosla is an\r\nEntrepreneur, Investor, and Tech Visionary.  He is, as he was saying earlier, a man who bets big on\r\nradical technologies.  That’s his\r\nbusiness model.  His venture firm,\r\nKhosla Ventures, is one of the leading investors in clean energy\r\ntechnologies.  He is also the\r\nFounding CEO of Sun Micro Systems. \r\nSo, in a sense he’s gone from sun to solar in his career.  And his venture capital career helped\r\nfound Juniper Networks, Excite, Serent, and many other successful\r\ncompanies. 

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Marc\r\nStuart, no relation, he spells it incorrectly, is the Co-founder of Eco\r\nSecurities, a globally leading developer of greenhouse gas reduction products\r\nand projects, carbon offsets, emission trading mechanisms, and the like.  He is an expert on markets for carbon\r\nand also is on the board of the International Emissions Trading\r\nAssociations.  Last year he was\r\nnamed one of 30 green heroes by CNBC European Business Magazine.  So, it’s a particularly terrific panel\r\nable to bring a lot of perspectives to this topic. 

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And\r\nPeter, if I may, I’d like to begin with you and to essentially ask the question\r\nthat I think many people in the audience and around the world are asking, which\r\nis; what do we do to get progress going again globally in carbon and to try to\r\nsort of get out of this sense that we have reached a pause and get forward\r\nmotion started again?  In particular,\r\nwhat can big companies like Shell do in support of that process? 

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Peter\r\nVoser:\r\nYeah, thanks for the question.  Let\r\nme go back to the way I see Copenhagen. \r\nI think Copenhagen was pushed up tremendously and the expectations were\r\nvery high as you actually described it. \r\nFor me, Copenhagen was just one milestone in a long journey and I think\r\nthat’s the way I would also take Mexico. We will have to move towards global\r\nunderstanding, hopefully global agreements on how we move forward from a public\r\npoint of view, from a corporate point of view, from another stockholder’s point\r\nof view.  So, I think we should not\r\nmake the same mistake again and actually expect too much. 

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So\r\nfor me, there is on the one side, a public debate  on how we actually take this forward, what we want out of\r\nMexico, and actually how we would like to structure  global, regional, or industry frameworks in order to allow\r\nus actually to have a long-term program price, which is really essential for us\r\nso that we actually can invest and we can go forward as a global company, like\r\nShell because at the end, we have to run an energy business which provides\r\nenergy today, tomorrow, in five years, but also in 30 years.  So we cannot just stop tomorrow\r\nproviding that and we need to combine the efforts of the scientific on the\r\ntechnology side with going forward and producing more low carbon fuels, using\r\nmore gas which is more enhanced with better NCO2 content compared to coal, for\r\nexample, etc., etc.  So, that’s the\r\none side. 

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The\r\nother side for me as a CEO is, let’s move on.  Let’s actually do what we can do today.  Let’s not wait until we have good\r\nregulations and frameworks which actually allow us to invest.  There’s a lot we can do in energy\r\nefficiency within our own operations. \r\nThere’s a lot we can do and eco-marathon is a brilliant example of how\r\nto move on the transport side to a lower carbon fuel world.  Biofuels come to mind and other things\r\ncome to mind.  We are pushing gas\r\nand we are pushing gas and we are advocating that, not just in the United\r\nStates, I was just in China over the weekend and we had a huge and long debate\r\nand discussion about gas in China. \r\nHow can that help actually to help their climate change goals, etc? 

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And\r\nthen the other one which we are pushing as well, is carbon capture storage and\r\ntransportation, and how we can actually move that forward.  We need to have it as a mitigation in\r\ntechnology to actually give the industry and all the stakeholders a push\r\nthere.  So I think that’s all the\r\nelements we are working on in Shell apart from actually pushing our advocacy\r\ninto the Copenhagen/Mexico process in order to actually get the world to move\r\non to some global frameworks.

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Tom Stewart: Let me push you a\r\nlittle bit on what you were saying on the second comment, that it’s time to –\r\nwhile we continue talking and building framework, it is also time to stop\r\ntalking and start doing stuff. \r\nWhat are some of the things that can be done with major energy companies\r\nto sort of put stretch targets on that good intention?  To sort of say, all right, don’t just –\r\nhow ambitious can you be in just starting to do stuff while awaiting for the\r\npolicies and how can we increase this and sort of raise the heat on it? 

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Peter Voser: I think you can be quite\r\naggressive in this, but if you have stretch targets which we, from\r\ntime-to-time, get from the political side, which are not just achievable, I\r\nthink you are actually missing the boat here.  You are missing the point.  I think you need to give incentives in order to achieve bit\r\nand significant steps forward rather than actually putting a target in place\r\nwhich cannot be achieved. 

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I’ll\r\ngive you an example.  A few years\r\nago we got biofuels regulations in Europe, which is not possible to be\r\nachieved.  Now, they have to change\r\nafter two years.  I think we need\r\ncommunication between the corporates, the technical side, the science side, and\r\nthe regulators to governments in order to come up with the right target.  I think industry, when challenged,\r\nnormally delivers.  We have good\r\nexamples here on how you can drive technology and innovation.  Shell has always been first in terms of\r\ntechnology and innovation.  We\r\ndon’t need to stretch target into goals, we will move.  But you cannot expect that you have a\r\nlight switch, light switch from this energy source to this one, overnight.  It will just not happen.

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Tom Stewart: Vinod, let me ask you,\r\nyou’re in the business, among other things, of radical disruption.  You’ve been quoted as saying, last week\r\nI think, that coal could actually become the cleaner fuel than solar.  And you said earlier today that the\r\nbiggest thing that you think we need to do is to have economic gravity.  Economic gravity always prevails and\r\nhow can we start to get that gravitational pull to strengthen.  So, how can we get that gravitational\r\npull to strengthen so the people start moving? 

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Vinod Khosla: Thanks Peter.  I’m a big believer that in the end,\r\neconomic gravity always rules.  And\r\nthat environmentalists, by at large, trying to convert the rest of the world\r\ninto environmentalists are going the wrong way.  We need to take environmentalists and turn them into what I\r\ncall “pragmentalists”.  That\r\nunderstand the role of economics, economic gravity in large social adoption of\r\nnew energy sources, technologies, everything else. 

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Having\r\nsaid that, I actually believe all the people, all the gurus, the experts, and\r\nwe can talk about expert forecasts, they are probably almost always wrong and\r\nrandom.  We can come back to that;\r\nthere is statistical data to support it.

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Peter Voser: I don’t need them, I\r\nbelieve you.

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Vinod Khosla: But those of you who are\r\ninterested read a book called, “Expert\r\nPolitical Judgment, by Professor Tetlock, a 20-year study\r\nof 80,000 forecasts; a very rigorous study.  But we start believing these 20, 30, and 50 year forecasts\r\nfrom experts.  We need to abandon\r\nthem and instead of exporting the past into these future forecasts, we need to\r\ninvent that future.  We will along\r\nwith that future, I am on record saying, I can’t imagine oil being more than\r\n$30 a barrel by 2030.  And the\r\nreason is very simple, it will have to compete it’s way down to compete with biofuels\r\nand cost of production of biofuels is the marginal cost of rent on land, and if\r\nyou look at fundamental economics, that’s the number it will drive to in real\r\nterms, real dollars.  There is no\r\nquestion in my mind that we will have technologies that meet unsubsidized\r\nmarket comparativeness against fossil fuels that are 100 percent renewable.  Maybe better than 100 percent,\r\nwhich is where my comment where coal can in fact be cleaner than solar.  That’s based on the technology we feel\r\nis waiting for commercialization that reduces the lifecycle of carbon\r\nproduction of power generation from coal to more than 100 percent.  So, solar can only do 100 percent reduction in\r\ncarbon emissions, this technology, by displacing products that could otherwise\r\nproduce carbon can get up to 200 percent reduction. 

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I’ll\r\nbe happy to go into it in more detail, but the main point is this.  We have to bet on innovation and\r\ntechnology.  And technology that’s\r\nradical and different and get our best talent working on this technology.  And I would submit that five years ago,\r\nthere wasn’t a PhD student at MIT or Cal Tech, or Stanford, at least that I\r\nknew of, that was interested in working on energy recent.  All the best minds went to\r\nbiotechnology, nanotechnology, computer science, semi-conductor devices, not in\r\nenergy research.  And that has\r\nchanged, and that’s why the future will be different and why innovation will\r\nreach this point of unsubsidized market competitiveness.  Because of that, I use my favorite\r\nphrase, these technologies will meet Chindia price; the price at which India\r\nand China will adapt them without regulation.  I believe we are far closer to that point than anybody\r\nrealizes.

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Question: Bureaucratic\r\nsurvival.  Never put a date in the\r\nsame sentence.  So, you’re not a\r\nbureaucrat, so I’m going to ask you to break that rule.  You said these technologies will meet\r\nthe Chindia price, when? 

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Vinod Khosla: So, I believe carbon\r\nsequestration today for many carbon point emitters, many coal plants.  I’m not saying most, I’m not saying\r\nall.  Many coal sources can be\r\ncarbon negative, or carbon zero, in the next year or two without a price on\r\ncarbon because they turn carbon dioxide in this case into useful building\r\nproducts that can be sold.  And so\r\ncarbon become, not a problem, but a feed stock.  In the case of oil, I would say the same thing.  I believe in the next year or so,\r\nrenewable oil sources can compete unsubsidized with crude oil.  I also believe –  

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Tom Stewart: The biofuels and things\r\nlike that –

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Vinod Khosla: Biofuels, right.  I also believe on the consumption side\r\nof this, unlike and I wrote a blog that got me in a lot of trouble where I\r\nwrote a blog about two years ago, which said, “Prius is more green wash than\r\ngreen.”  And it is more green wash\r\nthan green.  It is a completely\r\nuneconomic technology and in the McKenzie study came out, hybridization of\r\ncause came out as the single most expensive way to reduce carbon in dollars of\r\ncosts per ton of carbon reduced.  I\r\nbelieve it was about $100 per ton. \r\nAnd so we are picking technologies because the environmentalists love\r\nthem, that is pleasing to the political appetite and certain political\r\ncommunities, and that’s the wrong way to go. 

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On\r\nthe efficiency side. We’re working on engines that can have 50% more efficiency\r\nwithout an increase in costs of internal combustion engines.  And I believe those are near commercial\r\ntoday.  It’s pretty easy to do a\r\nlight bulb.  LED light bulb, and we\r\nwill be introducing that within the next year, that’s cheap enough, that means\r\nbelow $10, where it pays for itself within the first 12 months.

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Tom Stewart: You’re saying it’s\r\nacross three of the four technologies you actually said within the next year or\r\n18 months, we reach a tipping point, and the fourth you didn’t –

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Vinod Khosla: I would say all four will\r\nbe commercial next year at retail, and I’ll add a fifth which is a major energy\r\nconsumer, I think air conditioning that is cheaper than today’s air\r\nconditioning and 75 percent less energy consumption.  That’s most of the consumption, lighting, HVAC, transportation\r\nfuels.

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Tom Stewart: One of the things that\r\nhappened in Kyoto was, some people felt that this 18 year string that started\r\nwith Rio, with the Earth Day Summit in Rio, that we sort of played out the\r\nstring.  And what came out of Kyoto\r\nwas what was called a basic agreement, which was with the United States, India,\r\nChina, Brazil, and South Africa, right. \r\nAnd those five sort of separated themselves and said, “Let’s us\r\ntalk.  Let’s take this offline and\r\nwe’ll talk.”  And Marc, the\r\nquestion I wanted to ask you, and then I want to get to the market mechanisms\r\nthat seem to be somewhere between the future and actually achieving it, but the\r\nquestion I want to ask you is; does the UN framework still have life in\r\nit?  Should we actually just say,\r\nthat was then, this is now, has it outlived its usefulness, or do we need to\r\nkeep it going, or should it be jettisoned and revitalized, I guess that’s the –

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Marc Stuart: The process that began in\r\nRio and ended in Copenhagen is over. \r\nOkay, the top down UN-driven, caps on countries I do not think is going\r\nto be revived.  I think what you\r\nare going to see, and I think what the basic agreement points us in the\r\ndirection to, is a much more heterogeneous policy environment the countries are\r\ngoing to take on with different types of caps, wit intensity caps, with\r\nagreements on land use, with efficiency targets, with some with hard caps, etc.\r\nand with more types of collaboration there will be more bilaterally and\r\nmultilateral.  You can obviously\r\nsee the U.S. and Mexico, for example coming in with some type of deal to merge\r\ntheir carbon commitment going forward. \r\nOr, the U.S. and Chile, for example, is one that has been mooted, or the\r\nEurope and Brazil, and obviously the big one is the U.S. and China.  And that is something that embeds many\r\nmore things than just simply climate and environmental concerns. 

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I\r\nthink that what Copenhagen showed is that impart, the climate issue has\r\nactually outgrown the U.N.  This is\r\nnow the big boys playing.  This is\r\naround big issues; this is national leaders, the executive branch talking to\r\neach other on this.  That never\r\nhappened before and that is a very substantial move.  And as such, the U.N. frankly, does not rate above those\r\npeople and that is something you need. Where does the U.N. go from here?  Clearly, Copenhagen was a\r\ndisaster.  It was a disaster both\r\nin terms of its overall – okay, well disaster is slightly strong.  It was a disaster in terms of its\r\noverall outputs of what was expected and what came out, and it was not helped\r\nby the fact that it was basically a logistical nightmare.  And that put a lot of pressure onto people\r\nand there was no real possibility to actually get people to work on these\r\nthings.  And that was ultimately\r\nthe problem. 

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Where\r\ndo we go from here?  The U.N. has\r\nto reestablish its credibility as a neutral arbiter, as a more of a technical\r\nagency between countries rather than just simply, as I say a top down, we shall\r\ndo these things collectively.  It\r\nneeds to look at – if we’re going to have different types of commitments, how\r\nare we going to adjust those against each other.  How is one commitment going to look against another?  How do you create some form of common\r\ncurrency, some sort of comparativeness to understand how things are working\r\nbetween each other?  Ultimately, we\r\ndo need markets.  Okay?  Markets have to be part of the\r\nsolution.  I disagree a little bit,\r\nI think that policy by definition shapes markets and puts them in place, and\r\nyou have to have that for this transitional phase.  We have an enormous amount of capital stock out there that\r\nwill require change over.  Not\r\nevery single power plant is going to be able to put a something on the back end\r\nof it that will enable it to produce viable materials for the building\r\nstock.  We do need ways of keeping\r\nwhat Kyoto showed us that markets and innovation sprout up everywhere as part\r\nof this process. 

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Tom Stewart: So, what we need, and\r\nwhat I think I hear you saying, and Peter I want to ask you to comment on this,\r\nis that we may be coming up with a heterogeneous patchwork of agreements among\r\nnations, a patchwork of policies, and that unless we have some sort of very\r\nclear price signal that is so you have apples to apples to apples despite this\r\npatchwork.  I mean, the problem\r\nwith the patchwork is that you could get a race to the bottom, right?  I can find, oh here’s a loophole\r\nthrough which I can dive.  And what\r\nwe’re trying to create is a race to the top.  We’re trying to create the incentive so that you get a race\r\nto the top.  And Peter, as you look\r\nat this future, first of all, do you think that is right?  That we’re going to have this collection\r\nof bilateral, multilateral agreements? \r\nAnd will that give corporations like Shell and you know, other large\r\ncorporations the consistent global view that allows the race to the top, or do\r\nwe run the risk of a race to the bottom? 

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Peter Voser: First of all, at Shell we\r\nhave always said we want market solutions because that’s in the longer term\r\nwhat we will think will give us the incentives to actually invest at the lowest\r\ncost possible in order to actually bring Co2 down to acceptable levels.  We have also said we cannot be a purist\r\non this one that everything works tomorrow; it will just not happen that.  We are having 45,000 people in\r\nCopenhagen trying to sort something out; it will never work this way.  So, I think I’m a more pragmatic and say we may start off with bilateral, multilateral, etc. in order to get\r\nactually going.  And I think we can\r\nhandle that, but I think in the longer term, if the market really will function\r\nand it needs to function, I think you will go towards a more globalized market\r\nenvironment.  Now, you can ask me\r\nthe same questions, is it one year is it five years or 10 years?  Do I care?  Most probably I’m in the camp of I don’t care that much at\r\nthis stage, I want to get started to move.

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So\r\nI think, this – what we have said, I’m not entirely sure that everything works\r\nin one year, but we can come back to this a little bit later.  So therefore, market-based overall I\r\nthink you will have different countries doing it and regions doing it\r\ndifferently at the beginning.  I\r\nalso think we need, apart from the U.N. paralysis; we need also the industries\r\nto start to work together.  You\r\nneed, actually, the coal industry to come together.  How do you measure actually, on a worldwide basis, what is\r\nbest practice?  How do you want to\r\ndrive that?  And I’ve got head of\r\nrefineries here; we need the refinery industry to come up with stuff.  We have benchmarks.  I think we need to actually – and\r\nthat’s what I meant, we cannot wait until we have a global framework, we need\r\nto take the initiatives.  And\r\nindustries have always do work best if they have, as an industry to have a\r\nchallenge.  And we are normally\r\nquite good at getting to the lowest cost solution.  So I’m still convinced that we’ll go on the race to the top,\r\nbut I think it will be a kind of volatile bumpy road.

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Tom Stewart: And one of the\r\nquestions I have, and this is actually one of the things that happens in the\r\neco-marathon is that there is a certain minimum speed that – if I could go in\r\nthese wonderful vehicles – If I could go at zero speed, at the slowest possible\r\nambling rate, my miles per hour could be very good with a lot of technology, so\r\nI think there’s a minimum average speed of I think 15 mph, or something like\r\nthis, so that there is something that puts a little pressure on the student\r\nengineers of these cars.  But I’d\r\nlike to take the issues here that Peter raised and add something that Marvin\r\nOdum, who is the President of Shell Oil company said, which is that in his data\r\nshow that in the energy field where you have these large interconnected\r\nsystems, it takes almost a quarter of a century for a new energy technology to\r\ndevelop to the point where it can take one percent of the market.  And I think that we would all agree\r\nthat that’s too slow.  And first of\r\nall, you could challenge him on the data, I’m not sure he’s here to engage the\r\nbattle, but first of all I don’t know if the data are right, but let’s assume\r\nthat; how do we speed that up?  How\r\ndo was get that clock speed a lot faster? 

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Peter Voser: So, I just want to clarify\r\na few things quickly.  Mark, I\r\ndidn’t say that policy and politics are not important, in fact, they may be the\r\nmost important thing that enables or disables it and though I believe the\r\ntechnologies will be here and proven technologies next year or so, deploying\r\nthem will take 25 years, broadly. \r\nSo, there’s a big difference in enabling technology that is proven that\r\nyou can get an engineering report that says this works, to deploying it\r\nbroadly.  And there’s a deployment\r\ncycle.  In fact, the deployment cycle\r\nvery much depends on politics and policy. And so we should be clear about\r\nthat. 

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This\r\nissue of change and how fast it happens I think is a complete red herring\r\nbecause it’s tied to this issue of economic gravity.  If people can make money at it, and I hear these forecasts;\r\nit takes tens of billions, or hundreds of billions of dollars to change the\r\nrefinery infrastructure and you see these extrapolations.  Let me give you a concrete example.  In 1996 I had a similar conversation, I\r\nwas known as a telecom investor with the CEO.  Every major telecom company in the United States, and I was\r\ntold nothing had changed in 50 years. \r\nAnd nothing had changed. \r\nAnd I was on the board of one of these and in fact, you couldn’t even\r\nintroduce a new piece of equipment into the network without going through the\r\nunions because there were union rules of how many pieces of equipment a\r\ntechnician could support.  So,\r\nabout as regulated, and if you think the oil industry sensed it, if you changed\r\nthe long distance call rate by a penny, the Governor is going to call you,\r\nright?  Every politician got\r\ninvolved with a 2% change in your phone rates.  This was 1996. \r\nNot only that, I talked to the largest suppliers of equipment, people\r\nlike Cisco and Lucent, and they said to me, based on the input that their\r\ncustomers were giving them, not one of them was ever going to internet\r\ntechnologies for the core of the telecommunications network.  Not one was ever going to go.  In fact, the Cisco CTO Chief Technology\r\nOfficer told me they never would go above what’s called a technical term, OC12,\r\na certain data rate.  Very low data\r\nrate, with internet technologies. \r\nEverything else would match the telecom infrastructure.  And it was the worst infrastructure\r\nthan energy because you had to be compatible with the foreign exchange\r\ninstalled in Iowa 50 years ago. \r\nAnd those were still operational. 

\r\n\r\n

Within\r\nthree to five years, Wall Street, because of new economics, was pouring\r\nhundreds of billions of dollars, no federal money, voluntary commitment to this\r\nnew industry, laying fiber, hard construction problem, it’s a horrendous rights\r\nof way problem when you’re going across everybody’s property to lay a cable,\r\nlegal nightmares.  Hundreds of\r\nbillions invested and five years after that conversation I had, not one carrier\r\nwould say they weren’t completely switching to internet protocols.  That same kind of black swan phenomena\r\nwill happen in the energy business when the technology is proved economics.  And the people who don’t adopt them\r\nwill go out of business.

\r\n\r\n

Tom Stewart: It’s like arm\r\nwrestling.  You know, we can be at\r\na stasis for a long time and then when you win, suddenly –

\r\n\r\n

Peter Voser: Suddenly you go the way –\r\nLet me give you a stunning example. \r\nAll right.  AT&T was a\r\ntop ten company in the world in 1996, five to seven years later, they for sold\r\nfor a song to Cingular.  People\r\nforgot the small cellular start up that didn’t exist 10 years before.  Bought AT&T and uses that\r\nbank.  AT&T disappeared.  So, radical change can happen, it\r\nhappens regularly.  In fact, I\r\ncould give you 20 examples of such large change.  And there’s some great graphs from analysts from Morgan\r\nStanley to your specific question of how fast the rate of change is\r\nhappening.  There’s a chart that\r\nshows that 50 years ago, it would take 50 years to get to one percent of\r\nsociety to adapting a new technology like radio.  And then television, it was 30 years.  Today, for a new technology, like Google,\r\nit’s three to five years to get 50% of the population to adopt it.  There’s some stunning data on it.  I think we are in this accelerated\r\nphase.

\r\n\r\n

Tom Stewart: And you think we’re\r\ngoing to be in that phase with the energy technologies as we were with the\r\ncommunications? 

\r\n\r\n

Peter Voser: If it is economically\r\ndriven.

\r\n\r\n

Tom Stewart: And that’s where I\r\nwant to come to Mark for a second. \r\nBefore that, I actually want to tell the story years ago when I was at\r\nFortune I did a story about some of the early internet entrepreneurs.  And a woman named Stacy Horn, who\r\nstarted an online service back when it was dial up in New York.  And she was using up all of the phone\r\nlines to get to run her banks of modems in her third floor Greenwich Village\r\napartment.  And so what was then\r\nBell Atlantic needed to run new lines from the intersection, where the trunk\r\nline was and that meant, New York being New York that the Bell Atlantic\r\ntechnologists had to go from one basement to another because that’s where the\r\nlines run through a bunch of brownstones. \r\nAnd they were going crazy because they couldn’t identify the owners of\r\nthe buildings because the owners of the buildings were corporations within\r\ncorporations, within corporations in the Cayman Islands and da, da, da, da,\r\nda.  And so no landlord would come\r\nforth to admit that they could actually let the Verizon guy in until Stacy,\r\nwith an entrepreneurial spirit said to the Bell Atlantic guy, well in that case\r\nthey’re not going to complain if you come, will they.  And the guy shrugged and said, you know, you’re right.  And so they just went right through and\r\nthe heck with the regulations drove the lines, and of course, modems are a\r\nthing of the past, but that’s the kind of change in attitude that can\r\nhappen. 

\r\n\r\n

But\r\nMarc, this doesn’t happen without market mechanisms that give that strong\r\nsignal that drive the investment from Wall Street, or wherever it was, and the\r\ncurrent market mechanisms for carbon trading, the Kyoto mechanisms, are going\r\nto expire in 2012, which you know, is two years from now.  So, what happens?  What happens to give the kind of market\r\nthat we need to have economic gravity start playing this role? 

\r\n\r\n

Marc Stuart: It’s a really good\r\nquestion, Tom.  First of all, I’d\r\njust like to make a little comment on the new technology versus old technology\r\nparadigm that we were just discussing. \r\nMy point would be that, yes, we’ve seen tremendous acceleration in\r\nintroducing new technologies, but they’ve all generally been into open\r\nspace.  Into things that were not\r\nalready there, already providing the services.  My electricity works perfectly well in my house.  My light bulbs work well.  My car works well.  And displacing an existing service\r\nmechanism with a new one, I would tend to think needs that policy driver to\r\nmake it a little more cost efficient because there’s inertia in the system, as\r\nwe heard from Shell.  And that is\r\nmy only point.  I agree with\r\nyou.  And one of the problems with\r\nthe current carbon trading system under Kyoto is that it lasted only five\r\nyears.  We only got five years of\r\nvalue out of the CDM and we were only able to start doing things, really in\r\nabout 2004, 2005 when we realized there was going to be a market. 

\r\n\r\n

I\r\nwould argue that there was perhaps one technology development that was driven\r\nby the CDM, one.  Which was the\r\nincineration of HFC’s, which was not necessarily –

\r\n\r\n

Tom Stewart: Hydrocarbon –

\r\n\r\n

Marc Stuart: HFC of refrigerants.  [00:37:59.09]

\r\n\r\n

Tom Stewart: Refrigerants, right\r\nright.  The ozone, the ozone - 

\r\n\r\n

Marc Stuart: That would be the only\r\ntechnology I think was driven by the credit based market based system of the\r\nCDM.  If you give me a 20 or 30\r\nyear value stream for the environmental values that are created by beating a\r\nbenchmark, and Peter was talking about benchmarks before, I am a fervent\r\nbeliever that we should be benchmarking every technology in the current, what\r\nthey call additionally system within the CDM must be tossed away forever.  Benchmarks and long-term capability to\r\nearn would make an enormous difference to accelerating in that capital stock\r\nchangeover.  Instead of it taking\r\n25 years, maybe we can get that down to 15 years, or instead of one area taking\r\n40 years, taking 20 years.  This is\r\nthe kind of thing – we don’t have that right now.  And right now, as I say, we’ve developed a global\r\ninfrastructure that is in place to seek out emission reductions throughout the\r\nglobal economy.  It has been halting;\r\nit has been imperfect, okay.  But\r\nit has developed, as I say, an entire culture that is out there looking for\r\nthese ways for reducing, and as I say you have the thousands of PhD’s doing the\r\nbig science, I have the folks on the ground that are looking for ways of\r\nputting things on the ground.  And\r\nPeter obviously has the same sorts of folks that are looking for things.  You need both sides of it.  Without having a market that gives you\r\nthat kind of long-term stability, and Kyoto desperately failed in that, you’re\r\nnot going to see the kind of interface between technology development to\r\nexecution platforms throughout the world that is necessary.

\r\n\r\n

Tom Stewart: What are the\r\ndifferences between carbon and energy technologies and internet technologies is\r\nspeed.  Right?   I mean, you can get three guys in\r\na garage and give them 50 bucks and - 

\r\n\r\n

Vinod Khosla: I’m sorry; I have to\r\ndisagree that telecommunications infrastructure –

\r\n\r\n

Tom Stewart: That’s different, I\r\nagree. 

\r\n\r\n

Vinod Khosla: That changed in five\r\nyears.  Do you know the minimum if\r\nyou designed a new piece of equipment that was two years of testing in the Bell\r\ncore network, before you can even introduce a piece of gear into the telecommunications\r\nnetwork, it was so mission critical I would submit, more mission critical than\r\nmost of energy that the rigor around changing it was stupendous until companies\r\nstarted going out of business because they didn’t have economics.  And then suddenly all that\r\nchanged.  So, I just have to sort\r\nof disagree with that and disagree with sort of this notion that carbon pricing\r\nis as critical as people make it out to be.

\r\n\r\n

Tom Stewart: Peter, you were sort\r\nof nodding in agreement with Mark as he was talking.  As you think of the importance, I guess of long-term market\r\nsignals, to the decision you are making every day at Shell, what do you need in\r\na pricing mechanism or in a policy mechanism that gives you the ability to make\r\nthose decisions in the right way?  And\r\nhow do we get there from a – well I’ll follow up with how do we get there from\r\nwhere we are now? 

\r\n\r\n

Peter Voser: Look, I don’t think you\r\nwill every get certainty.  In any\r\nbusiness which invests for 30-40 years, we have got a lot of uncertainty,\r\nyou’re starting with price uncertainties, technology uncertainties, government\r\nuncertainties because we have been nationalized and denationalized a few times\r\nin many places.  So, I think what\r\nI’m looking for is at a framework going forward and the mechanism in which I\r\ncan build trust over time.  And\r\nthat, I think a not far away.  The\r\ntwo gentlemen are not to far away either. \r\nI think we are all going off the market mechanisms at the end, you call\r\nit economical gravity, etc.  What\r\nwe are looking for is actually an incentive to invest in order to – well that’s\r\nwhat we are looking for.  And I\r\nthink that will have boundaries in the longer term and these boundaries are\r\nfirmer at a certain stage than they are at some other stages.  So, I think we can achieve that and I\r\nthink we are not that far apart.  I\r\nthink what I still struggle with some of the discussion actually, is I hear\r\ntelecom and I hear other things, but I think the vast amount of investments, we\r\nneed to cover the energy gross across the board mainly in emerging markets will\r\nnot be delivered by the breakthrough technology in the next five years because\r\nthey are not scalable in this time. \r\nSo, I think we need also, an investment environment to actually invest\r\nin those areas, and I’m fully optimistic when I see China and India how they’re\r\npushing the renewables part, they will make big steps.  They will not need 25 years, I do\r\nagree, but the rest of the world may actually need those 25 years. But it’s\r\nalso, how are we going to invest and finance between now and 2030 and\r\n2040?  So, we will have on the one\r\nside a job to do quite clearly, and we will have to keep the gross on the\r\ncontrol because energy, and I use this sentence quite a bit; energy powers your\r\nlife, and it sustains your life. \r\nAnd we cannot afford to tell those who don’t have the energy intensity\r\nas we have it today in the U.S. or in Europe to tell them you have to wait 30\r\nyears.  So, let’s just also bring\r\nsome realism in here.  We need both\r\nand we need vast amounts of money.

\r\n\r\n

Tom Stewart: And this sort of cuts\r\nin two directions.  In the next 30\r\nyears, I think, a third of a billion people in India and a third of a billion\r\npeople in China, and if I can do this math, that’s two-thirds of a billion\r\npeople will be moving into cities. \r\nAnd city life tends to be more energy intensive than rural life and\r\ncertain rural village life, which is what many of them are coming from.  So they are going to be moving into\r\nurban environments and consuming more energy than they used to.  We’ve also done some data, just the\r\nweek that General Motors declared bankruptcy, we published a white paper called\r\n“The Best Years of the Automobile Industry are Ahead of it,” because we were\r\nactually taking a global perspective and looking at the fact that as you look\r\nat the development of India, China, Turkey, Mexico and a great many, Brazil, a\r\ngreat many other countries, a lot of them are passing that moment of GDP per\r\ncapita, when suddenly they buy cars. \r\nAnd that’s happening in China right now with, you know, 25% growth in\r\nthe automobile market every year and I think that compounds at a – that means\r\nin three years, you double it. 

\r\n\r\n

So,\r\nyou have this extraordinary growth in opportunity for people, but also this\r\nextraordinary growth in demand for energy.  And this is, I think one of the reasons that Copenhagen\r\nfoundered, this sort of battle between the energy have’s, or the economic\r\nhave’s and the economic have not’s saying, hey we can’t.  How can we get that conversation to\r\nchange from a stand off, which it really is right now, it is sort of two bulls\r\nin gates like this and nobody’s moving? \r\nHow can we get that conversation to start moving to find a, hopefully, a\r\nwin-win in there?  Vinod, do you\r\nwant to take a stab, I mean I’m up here; I don’t know why I’m up here. 

\r\n\r\n

Vinod Khosla: Sure, I’ll pick up from\r\nwhere Peter left because Peter made a very important point that I think is\r\noften misunderstood.  People need\r\nenergy to power their lives.  And I\r\nlike to say, there are 500 million people on this planet that enjoy an energy\r\nrich life.  We will lead five\r\nbillion, maybe nine billion people by 2050 to have an energy rich life.  We won’t get there to energy savings or\r\nefficiency.  So, the fact is, the\r\nworld will need, two to 10 times more energy here in the foreseeable\r\nfuture.  The carbon cap and trade\r\nKyoto protocol was deeply flawed in one very important way.  It said, here’s a cap on carbon, and it\r\ndidn’t differentiate between economies like India and China that wanted to grow\r\n10% per year, and economies like Japan were growing less than 1% a year.  You can’t have a cap independent of the\r\neconomic growth rate.  You can’t\r\nhave a cap independent of whether the per capita income is $1,000 a year, or\r\n$35,000, what you can have, and I wrote a paper on this, it’s on my website, www.Khoslaventures.com\r\ncalled, The Terms of Discussion Around Carbon Cap are Deeply Flawed.  There should be discussions about\r\nthe carbon efficiency of GDP, rates of growth for every economy in the\r\nworld.  And that is the only basis\r\nthat can be morally described as fair. \r\nGrow at any rate, but subscribe to a global standard of carbon\r\nefficiency per dollar of GDP.  That\r\nis a fundamental flaw in Kyoto and I was very glad to see that the Indian Prime\r\nMinister at this discussion and I tried to influence him quite a bit last year.  He took that position at Copenhagen and\r\nI’m very glad he did because it changed the discussion.  It was the only substantial new\r\nposition that was taken which was carbon efficiency matters and they discussed\r\nit with their Chinese counterparts and China was in a similar –

\r\n\r\n

So,\r\nhaving said that, I want to also make another point.  This is not as pessimistic an environment as people\r\nthink.  Copenhagen to me succeeded\r\nin a very big way that people don’t realize.  There was no treaty, there was no cap, but there isn’t a\r\nCEO, yourself included, who would make an investment today in infrastructure\r\nwithout considering carbon as a risk. \r\nSo, I was just talking to this young man who runs a $75 billion\r\ninvestment fund.  You don’t deploy\r\n$75 billion without deploying it in infrastructure.  And he said to me, “I can’t find any infrastructure investments\r\nthat are low carbon risk.”  Think\r\nabout it.  If you’re trying to\r\ninvest, you can protect it against terrorism, you can protect again nuclear\r\nattacks, you can protect against floods, but you can’t protect against carbon\r\nrisk.  And so they don’t make\r\ninvestments, they’re frozen.  In\r\nfact, that’s exactly why 150 coal plants, previously approved have been\r\ncancelled in this country. \r\nWhy?  Because it’s a carbon\r\nrisk.  So, I actually believe\r\nthings like Copenhagen and Kyoto have brought that risk to such a big level of\r\nvisibility that it is a part of all corporate decision-making and 80 percent of\r\nthe benefit of carbon pricing is already done.  In fact, I’m certain it actually adds to the risk and has\r\npeople consider carbon. 

\r\n\r\n

Tom Stewart: But in order then to\r\ntake that risk, or not take that risk, you have to be able roughly to quantify\r\nit and that’s where we have a problem, Peter.  At this point, the band of variability around that risk is\r\nsimply, I think it needs to get a little narrower.  

\r\n\r\n

Peter\r\nVoser:\r\nYeah, I know.  I think we can deal the pricing because that’s the same as oil and gas, you need\r\nto have your views.  Well, what we\r\nneed to know are actually – it’s more the rules.  It’s the legislations around it.  Now, if that is, as you talked earlier, the country,\r\nregional, or global based, I think it will evolve.

\r\n\r\n

Tom Stewart: So, the risk is less\r\neconomic than it is political, but the game might change in a dramatic way and\r\n– 

\r\n\r\n

Peter Voser: But for us, we are good\r\nat quantifying.  I mean, you bring\r\na very important point, but Shell has now, for more than a decade already, we\r\nhave our carbon price assumption. \r\nAnd when we look at projects, we look at the carbon intensity, we price,\r\nwe look – we build that into our economics.  So, this is not new for us and that’s why I called my\r\nCopenhagen, it’s a milestone in a journey but a very important one because we\r\nare talking about it now.

\r\n\r\n

Tom Stewart: Marc, I think that\r\nthere is one question about – factual question about Copenhagen that I’d like;\r\nI mean about Kyoto, that I’d like you to address.  As I understand it, and I may be wrong here, so you can\r\ncorrect me here.  The Kyoto accord\r\nactually exempted the emerging markets from caps, but the fundamental idea was\r\nthat when we come back to; we’ll bring you back into that same framework, is\r\nthat the way we square the circle of disagreement? 

\r\n\r\n

Marc Stuart: Exactly.   

\r\n\r\n

Vinod Khosla: There are Tier One\r\ncountries and Tier Two countries.

\r\n\r\n

Marc Stuart: Exactly.  And then nobody in Copenhagen thought\r\nthat China, which had one-third the emissions of the United States in Kyoto\r\nwould be more than the U.S. afterwards. \r\nAnd I completely agree with Vinod. \r\nI think we need to move to an intensity basis, at that point even to a\r\ncapita basis after that, but the idea that benchmarking industries across that\r\nis extraordinarily synergistic with that. \r\nAnd I think that all of these pieces do eventually come together, but\r\nit’s a very complex negotiating to get to that point. 

\r\n\r\n

Tom Stewart: Quickly, what do you mean\r\nbenchmarking across industries? \r\nSo, we have a carbon intensity metric that we share across economies, do\r\nwe also do the same thing sectorally, so we have a carbon intensity comparison\r\nbetween Shell, BP, Exxon-Mobile, or between Coal, gas – so we have a whole\r\nhorizontal and vertical layers in climate –

\r\n\r\n

Peter Voser: Let’s take refineries, if\r\nyou do refineries on a worldwide basis, you automatically come and you look at\r\nthe carbons behind, etc. etc. \r\nThat’s how we can –  

\r\n\r\n

Tom Stewart: How much transparency\r\nare you prepared to give?

\r\n\r\n

Peter Voser: That’s why I used the\r\nrefineries because you have actually a system already in place where the\r\ntransparency is there.  And I think\r\nyou can drive this without having too much of a commercial sensitivity around\r\nit.  Some others you can’t, but I’m\r\npretty sure you can do a lot.  I’m\r\nnot an expert, but you can do a lot on the upstream side as well when you have\r\noil production, etc., etc.

\r\n\r\n

Tom Stewart: I think in general,\r\nbusinesses tend to have a knee-jerk reflexive reaction against transparency\r\nthinking that things will be competitive that turn out not to be, or turn out\r\nto be less competitive than they thought, so we could probably have more\r\ntransparency than a lot of people might instinctively realize. 

\r\n\r\n

I’m\r\ngoing to at this point, invite people in the audience, if you will, to ask\r\nquestions.  And we have microphones\r\nhere.  And if you will please get\r\nin line behind the microphones and we’ll take our questions.  I’m going to ask you to do two things,\r\nplease.  Number one is to identify\r\nyour – three things.  Number one is\r\nto identify yourself, number two is if you have to ask a question of a specific\r\nperson, ask a question of the specific person or the panel generally, and\r\nthree, I’m going to exercise moderator’s privileges and I’m going to cut off\r\nall speeches.  Short questions,\r\nshort, to the point, and let’s try to keep the dialogue constructive and going\r\nforward because that’s what we’ve been having so far.  And please, I also want – the other thing I want to do that\r\nwe have, at this moment in line we do not have any women and I want to see\r\nwomen in line.  And I want to make\r\nsure that we are getting a diversity of points of view here. 

\r\n\r\n

So,\r\nsir, why don’t we start with you. 

\r\n\r\n

Laverne\r\nWilliams: Yes.  I’m Laverne\r\nWilliams, I’m the Founder and CEO of Environment Associates Architects\r\nConsultants, we’ve been doing green architecture now for 35 years and we are\r\nbased right here in Houston.  My\r\nquestion is directed mostly to Mr. Khosla, but anybody else who wants to answer;\r\nI’d like to hear your thoughts too. \r\nFor the technologies that you are elating to, okay, will there be enough\r\nbasic resources available on the planet to eventually, for everyone to benefit\r\neventually?  You know, we’re up to\r\nnine billion people on this planet. \r\nAlso, what about the costs of implementing these technologies, are the\r\nPrinciples of Cradle-to-Cradle and the Precautionary Principles going to be\r\nemployed in their implementation?

\r\n\r\n

Vinod Khosla: Yes and no.  It’s hard to give a blanket answer, so\r\nI will give you an example.  For\r\nevery kind of coal mine produces roughly 2 ½ tons of carbon dioxide, which the\r\nprocess I was talking about earlier turns into five tons of building materials\r\ncarbonates; calcium carbonate, magnesium carbonate, things like that.  Not only that, to produce that five\r\ntons of building materials would have taken seven tons of limestone mining for\r\naggregate for production, things like that.  So, one ton of coal eliminates seven tons of mining.  Okay?  So, you multiply your resource.  You’ve taken your waste, carbon dioxide, and embedded it\r\ninto something that produces five tons of building materials.  By the way, the other piece we need\r\nfrom that to make this happen, to combine with carbon dioxide is all the\r\ngeologic brines Peter keeps digging up. \r\nEvery time you draw a barrel of oil, you’re pulling up five to seven\r\nbarrels, 15 barrels in some cases of brines.  Those brines have the calcium hardness and some alkalinity\r\nthat we need to drive our process. \r\nSo, I can remediate his brines with the power plant’s carbon emissions,\r\nor the refineries carbon emissions, produce a building material that reduces\r\nmining by 80 percent or more.  Not\r\nonly that, because I’ve remediated his brines, and I don’t have any of the hard\r\nstuff in it, no calcium in it, I can desalinate that at a fraction of the\r\nenergy cost it would have taken to desalinate that and fresh water is my\r\nbyproduct.  That’s a creative\r\nsolution of this one example. 

\r\n\r\n

Now,\r\nI can give you other examples that don’t give the Cradle-to-Cradle, but in fact\r\nthis is actually a stunningly attractive example where all of it works at zero\r\nprice of carbon.

\r\n\r\n

Question: So, by\r\nCradle-to-Cradle to clarify, that simply means that we are looking at the whole\r\ncycle of that carbon molecule from beginning to end.  We’re not sort of throwing some of it out back –

\r\n\r\n

Vinod Khosla: And the base products\r\nfrom oil extraction and –

Question: It sounds like a case\r\nof two wrongs making a right actually when you put those two things\r\ntogether. 

\r\n\r\n

Vinod Khosla: It does.  It’s quite true, that’s what people\r\ntell me.

\r\n\r\n

Question: Thank you very\r\nmuch.  Yes. 

\r\n\r\n

Rob\r\nStavins: Good afternoon, I’m Rob Stavins, Professor of Business and Government\r\nat Harvard University.  Thank you\r\nfor a wonderful discussion.  I\r\nagree with much of what’s said, although a few of the things that were said, I\r\nfound to be, I want to say this nicely, inconsistent with the facts, as I know\r\nof them.  Having said that.  And I believe something upon which you\r\nagree is that eventually anything that will happen with climate change will\r\nhappen through markets.  And I\r\nthink there was also some agreement, not complete agreement, I guess, that that\r\nwill require price signals being implemented essentially, additional price\r\nsignals, through governments.  And\r\nI think you would also agree that individual governments really won’t find\r\ninteraction in their interests and take action on climate change because it is\r\na problem, the benefits to an individual jurisdiction are inevitably going to\r\nbe less than the cost and therefore international cooperation is required.  So, I have two questions.  On that as the premise, since you seem\r\nto agree that the United Nations process is probably not the key process going\r\nforward, Question number one: \r\nwould you agree that the more promising process going forward would be\r\neither the G20, the Finance Ministers of the world, often of course, the heads\r\nof state participate in those meetings, after all the G20 represents\r\napproximately 86 percent of global emissions; or for that matter, the major\r\neconomies forum which is almost the same set of countries which accounts for\r\nabout 90 percent of the emissions? \r\nThe first question. 

\r\n\r\n

The\r\nsecond question related to that is; would you agree with me the two key\r\ncountries in the world this year who are exceptionally important for progress\r\nin terms of international cooperation, and I’m not referring to China and the\r\nUnited States, the two major emitters, are rather Korea and Mexico?  And the reason I say that is, Korea\r\nthis year has the Presidency and is hosting in November, as you know, in Seoul,\r\nthe G20, and they set the agenda, and of course, Mexico is going to be hosting\r\nin Cancun in December, team of the U.N. framer on convention on climate\r\nchange.  So those are my two\r\nquestions, if you’re forgive me, I’m going to sit down, I have a very bad back\r\nand I’ve been standing too long right now.

\r\n\r\n

Tom Stewart: Those are two very\r\ninteresting – Marc, you want to, we’ll take these apart and we’ll spend a\r\nlittle time with them, Marc. 

\r\n\r\n

Marc Stuart: Yeah, first of all, I\r\nwould very much agree with the assessment that the G20 or the MEF’s process is\r\nvery likely to be a major pusher in this whole process.  Completely agree with that.  As I say, you can get five signatures\r\nand get about 60 percent of the world’s emissions, get another 10 to 12 and\r\nyou’re up to 85 percent range. \r\nAbsolutely.  It’s far more\r\nefficient and those countries have far more intertwinings of their economies\r\nalready. 

\r\n\r\n

In\r\nregards to Korea and Mexico; yes, Mexico absolutely.  Mexico has a huge responsibility, we’ll here a little bit\r\nmore about that later, to basically pick up the ball and sort of show that we\r\ncan as a community of nations take this forward.  Korea, 100 percent agree.  I’m really glad that you said that.  I’ve been spending a lot of time in\r\nKorea the last couple of years. \r\nThey have been very deeply engaged in trying to figure out how they are\r\ngoing to be engaged in the carbon world. \r\nTheir emissions profile versus the 1990 cap would be insane for them to\r\ntake on just as it would be for China or India or anybody like that.  And they’re very, very – trying to come\r\nup with some innovative solutions on how they can engage and part of this as\r\nclearly an industrial country right now, but without the modalities of the old\r\nKyoto system.  And obviously being\r\nhead of the OACD is a big part of that, but I think it goes well beyond that\r\nand it’s been really active for the last two years.  I think what comes out of there is what’s going to be a\r\nvery, very important precedent.

\r\n\r\n

Tom Stewart: So, what we’re saying\r\nis in effect, if I may paraphrase Rob’s statements is of the second question\r\nhere that agenda management and agenda setting is an absolutely key element of\r\nthis process and perhaps often overlooked.  That it’s the people who set the agenda and set the table\r\nwho can drive a lot of progress just by that.  Peter, do you want to comment on that?  And then we’ll turn to you Vinod. 

\r\n\r\n

Peter Voser: Yeah, just a sort\r\ncomment.  I fully agree with that,\r\nbut I think we also have to be careful that we are not going at only the\r\nG20.  I think it should not be a\r\nmagic number.  I think it will be\r\nmore than the G20.  I think it will\r\nbe a larger group over time.  I\r\nthink we have done all the damage with G2, in my opinion, so G7, G8, G6, or G5\r\nwhatever we had and now we have G20. \r\nbut I think we should focus on the right countries, whatever they are\r\ncalled, but I think we should not limit it because I think today’s countries\r\nwhich are important may not be entirely those who are important in 20 or 30\r\nyears time because the growth of energy will not be the same across the\r\nworld.  So, that’s a more general\r\npoint.

\r\n\r\n

Tom Stewart: And also, if I may\r\nsay, if we think about biofuels, the coming online of biofuels may show up in\r\nunusual places because there maybe this perfect biofuel somewhere that you\r\nhaven’t imagined that could suddenly make somebody a major player in biofuels\r\nand who is just off the radar screen. \r\nYes ma’am. 

\r\n\r\n

Terri\r\nHinton: Thank you, my name is Terri Hinton and I actually represent Big Think\r\nand some of the other more cutting edge media companies, you know, carrying on\r\nthis conversation, trying to elevate culture through that process.  And my question is, let’s kind of step\r\nback and pardon me if it’s a little over simplistic, but the sense that I have\r\nin terms of what it takes for true leadership to actually emerge is a level of\r\nabsolutely responsibility.  And I’m\r\nwondering if, in any of your minds, if there is a sense of a leader or\r\nleadership, whether it’s an organization, a company, an individual, or a\r\ncombination of individuals that, you know, has anybody grappled or understood\r\nthat and wants to take absolute responsibility for this change that we’re\r\ntalking about.  And has that\r\nleader, is that leader insight, has it emerged as either an organization or –

\r\n\r\n

Tom Stewart: Sort of the Arch Bishop\r\nTutu of climate change, if you will. \r\n

\r\n\r\n

Terri\r\nHinton: That’s right, that’s right. \r\nYou know in an absolutely kind of – the best leaders emerge through that\r\nkind of absolute responsibility, so I’m just wondering if there’s any comments\r\non that?

\r\n\r\n

Tom Stewart: Any thoughts on\r\nthat? 

\r\n\r\n

Vinod Khosla: Well, I’ll give it a\r\ntry.  I think I have to disappoint\r\nyou on this one.  I don’t think you\r\nwill have one leader.  I think this\r\nhas to be shared because sovereignty will play a big role here and interference\r\nin sovereignty will play a big role, so I think, what I tried to say before, I\r\nthink you will need a group of countries, 20 or 25 counties, 15 maybe, who\r\nreally drives this.  And thus allow\r\nactually a real discussion to actually happen, but as soon as you get into\r\nthemes like monitoring of achieving targets, setting targets, etc. you are\r\ngoing to get really into the country by country issues and I cannot see that\r\nsomeone can actually lead that discussion through.  Leadership is possible to bring a group of 15-20 together\r\nand drive that, but I think I wouldn’t see any country, and that’s why I\r\nmention the G2 in my opinion doesn’t actually help in this whole discussion\r\ntaking the absolute lead in this one. \r\nSo, I would rather – 

\r\n\r\n

Tom Stewart: Let me ask you this\r\nbecause in the information technology industry that you know so well and helped\r\nto shape, there were rock stars, you know Bill Gates and Steve Jobs and I\r\nactually remember when I was at Fortune Magazine we had a cover once that had\r\nScott McNeely in a Superman costume, right in a super hero costume.  So, there were super hero rock stars in\r\nIT.  Will there be super hero rock\r\nstars in clean tech? 

\r\n\r\n

Peter Voser: I think in a certain\r\nway.  Let me be clear.  Many of you, I probably sound like a\r\nnut ball with all my forecasts.  If\r\nI sat here two years ago and said to you that Citibank could go under, or\r\nGoldman Sachs could be in danger, you would have said I’m a nut ball.  What happened?  It was getting just a little bit\r\ntechnical; it was the tail of the probability distribution of what Nassim Taleb\r\ncalls it, Black Swan phenomena.  I\r\nbring that up for the following reason, I have pieces on energy transformation\r\nthat is almost entirely based on black swan’s affinity and I’ve given a number\r\nof talks that I call “The Black Swan Affinity.”  The answer is, there will be heroes, but if you look at\r\nNassim Taleb’s explanation of a black swan, it’s highly improbable, large\r\nimpact, and retrospective but not prospective predictability, okay?  So, you can’t sit here and say, he’s\r\ngoing to be the black swan of the Bill Gates of energy.  You can’t.  But 10 years from now, you will be talking in those terms\r\nalmost all large transformation happens through the tail of probably\r\ndistribution, if I can get rigorous statically, it never happens out of\r\nextrapolations of the past which is almost all Professor Stavens, almost every\r\nother forecast is based on taking the past and looking at incremental\r\nimprovements and disruptive change – he is disagreeing with me. A lot of expert\r\nforecasts are based on past incremental changes – but the model of change will\r\nbe different.

\r\n\r\n

Tom Stewart: Let me keep the\r\nconversation going, but I do want to point out that we can’t predict there is\r\ngoing to be a Bill Gates or a Steve Jobs of energy technology, of clean\r\ntechnology.  We’ll know his name,\r\nor her name, in 10 years, and we can’t predict it now, but in 10 years we will\r\nall say that we knew him then. \r\nRight? 

\r\n\r\n

Marc Stuart: I think you’re looking at\r\nhim.

\r\n\r\n

Vinod Khosla: Can I make another\r\npoint?   

\r\n\r\n

Tom Stewart: Yeah.  I want to – we have just a few more\r\nminutes and I want to make sure – are there any other questions here.  We have one more minute.  All right, so, a quick point, and then\r\nsir if you have a quick question, we’re going.  

\r\n\r\n

Vinod Khosla: You see thousands of\r\nexamples of things you should do to be greener.  Ninety-nine percent of them are complete nonsense and irrelevant.  There’s only two or three things that\r\nmatter, and 80 percent of the carbon impact will be because of less than five\r\ntechnologies 10 years from now.

\r\n\r\n

Tom Stewart: Right.  And that will be –

\r\n\r\n

Peter Voser: I think you will have\r\ntechnology heroes because they have the right technology and they are the\r\nfathers of those, or the mothers. \r\nBut I think in energy and as I said beforehand, it just drives our lives\r\nso much, you will not get away from very clear sovereign issues and you can’t\r\nhave those – absolutely great heroes, but it will always be driven –

\r\n\r\n

Tom Stewart: The great heroes in an\r\nenvironment a lot of negotiation and some are very technical questions.  One – a chance for one quick question\r\nand then a quick response and then we’re going to have to move on.  Yes sir. 

\r\n\r\n

Tom\r\nValone: My name, Tom Valone, Integrity Research Institute, Washington D.C.  I wanted to address the Climatologist’s\r\nposition here which may or may not have been represented successfully in the panel,\r\nand specifically Jim Hanson, who is a colleague of mine, has a voice and should\r\nbe heard, specifically about his demand for 80 percent reduction by 2030 in\r\ncarbon emissions.  This seems like\r\nan impossible task, but the fact is, he’s tackling the coal industry which is\r\nonly 20% of our energy consumption. \r\nForty percent is petroleum. \r\nMy question to Shell is; can Shell make such a commitment of 80 percent\r\nreduction by 2030?  There are\r\ntechnologies across the street, bio-gasoline and so forth, but the other\r\nincentive, market incentive I believe, from our institute’s future\r\nperspectives, and we’ve had three conferences on future energy, by the way, is\r\nthat there are technologies that now allow and will allow in just the next\r\ncouple of years people to drive cars without gasoline.  Not only electric rechargers, but\r\ntotally new types of technologies. \r\nWill the Shell of the future be able to adapt when their product become\r\nobsolete?

\r\n\r\n

Tom Stewart: That’s a great\r\nquestion, can the fossil fuel company become the renewable company, and in this\r\nenvironment, where as many people say, we have to actually think of an absolute\r\nserious reduction of carbon overall. \r\nI’ll leave this with you Peter, and then I’m going to wrap it up.  Thank you. 

\r\n\r\n

Peter\r\nVoser: I\r\nthink, as any energy company in the world we’ll have to deliver the energies of\r\nthe future and this will be a mixture of fossil driven energy, it will be\r\nrenewable energy driven, and whatever you can come up with, but these are most\r\nprobably the two.  I think by,\r\nthat’s our calculations by the mid of this century, you will still be\r\npredominately fossil resource driven – hold on, hold on.  These are our calculations.  What is our objective is very clear, to\r\nprovide the world with energy, but we also are absolutely clear that we have to\r\nmeet the increased demands with a much lower cost to the environment and that\r\ndrives our innovation, it drives our technology, and it drives our target\r\nsetting for the longer term.  So,\r\nwe are not committing to 80 percent, 50 percent or whatever, these are for the\r\nstates to governments to do so and we will do our piece actually to drive it.

\r\n\r\n

Tom Stewart: This is a great, this\r\nis actually a great way to end it, and a great point because I think what we’ve\r\nheard and continue to hear and its part of what has made these negotiations and\r\nthese development so complicated, and so difficult over the years is how many\r\nforces are engaged.  We have the\r\nforce of the development of emerging markets and development of demand and of a\r\nhigher quality of life for people who have had a very low quality of life and\r\nthat’s – there’s no way to resist that. \r\nWe have the question of how much Earth can take and is there a cap?  Is there some number where we have to\r\nsay, sorry it’s not BTU’s per unit of GDP, there’s got to be some absolute\r\nnumber, we’ve just got to suck it up and bite that bullet.  We have the emergence of new\r\ntechnologies, some of which may be so revolutionary that, as you said, they are\r\nunpredictable now – we have to watch our time.  I have to do this. \r\nI’m sorry – I hate to cut anybody off because it’s been too good a\r\ndiscussion.  But we have the\r\nemergence of new technologies that could complete change the paradigm\r\nhere.  And we have the complicating\r\nquestions of continuing to live in the house we have while we are building a new\r\nhouse, and this very complicated policy environment in which we want to create\r\nthe circumstances across complex jurisdictions so that what you rightly called\r\nthe economic gravity can start having it’s full and eventually internet arm\r\nwrestling metaphor is eventually very dramatic, affect it’s tipping point\r\neffect, which may eventually get to that resolution of that need to reduce –\r\nthat opportunity to reduce Co2 by 80%. 

\r\n\r\n

I\r\nwould like to ask everybody – the panel discussion now has ended, but we’re not\r\nquite done yet.  But I would like\r\neverybody here to and on the web, to join me in thanking Marc Stuart, Vinod Khosla, and Peter Voser for what\r\nI think was a really terrific discussion. 

Recorded on March 26, 2010

\r\n\r\n\r\n\r\n\r\n

After the Copenhagen Climate Council was considered a failure, how should we prepare for COP-16 in Mexico? Big Think's live roundtable on March 26, 2010 in Houston was moderated by Tom Stewart, Chief Marketing and Knowledge Officer at Booz & Co. On the panel: Peter Voser, CEO of Royal Dutch Shell; Vinod Khosla, founding CEO of Sun Microsystems; and Marc Stuart, Co-Founder of EcoSecurities.

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