Climate Action for the World We Live In: Trump, Iran, and Navigating This Moment – Podcast #4

Basti Schwiecker: Yeah, and you’re talking about allocating money and you basically do it exclusively through your climate fund, like a donation fund. So most people probably have never heard of a donation fund. So what is a donation fund and how is it different to like a typical foundation that works on climate?

Johannes Ackva: Yeah, so, right, it’s like most foundations that you would know, I guess, were founded by a billionaire, by a very rich family. They have an endowment that they spend down every year. We are really kind of, I guess, Founders Pledge. Founders Pledge is an organization, kind of a membership organization. So we have tech entrepreneurs that are our members. They can give to different causes, and they can give to the climate fund, and the general public can give to the fund as well. So it’s a pool fund. We have thousands of people who give to the climate fund. And then in many ways, it’s kind of similar to a fund that you might invest in as an individual, right?

Basti Schwiecker: So for your retirement, for example.

Johannes Ackva: Like a pension fund. Like a pension fund, right? So I’m a fund manager. I allocate money. I guess, unlike a pension fund manager, you don’t get the money back, right? So that’s a crucial difference. But I mean, the basic idea is in many ways kind of similar, right? So like expert-led grant making and kind of being able, enabling individuals that are not rich enough to have a foundation, right, that are not billionaires to kind of still contribute and give in a way that’s actually very impactful because it’s driven by expert-led grant making and it’s kind of, it’s global, it can leverage opportunities, it’s based on research, so it’s essentially empowering individuals to give much more effectively, even though they’re not becoming experts in climate giving, the same way that if you’re investing in a pension fund, you’re kind of, I guess, trusting that the fund managers find opportunities that are higher than what you would find as an individual.

Basti Schwiecker: Also in contrast to other charity evaluators like GiveWell, you’re not recommending individual charities. You don’t have like top charities. You’re really focusing completely on your fund. Why is that and what do you think are the benefits of having a fund only strategy?

Johannes Ackva: Yeah, so why do we have a fund only strategy? So if you kind of look at GiveWell, right, so GiveWell, most of the top recommended charities there are charities like the Against Malaria Foundation. They can absorb hundreds of millions of dollars at essentially the same cost effectiveness. So the hundred millionth bed net is roughly as effective as the first. It doesn’t hold quite as well, but still. Whereas in climate, the opportunities that we focus on are, for the most part, nonprofits are doing advocacy work of some kind. They have their funding margins in the low millions. We cannot say the next 100 million to this organization would be good. So in that sense, giving recommendations that are evergreen is much harder, because there’s nothing like malaria nets in climate. So this is one reason. And then also, climate is generally a well-saturated space, certainly compared to global health. So it’s much more difficult, we think, to find really promising opportunities. So we don’t want to give recommendations or we don’t want to mislead people and say, you can give to this organization and this will always be the best opportunity. Rather we’re saying, okay, it requires active grant making. So this means not only just filling funding margins, but developing programs, developing new programs with organizations, acting globally, pooling funding in a way to kind of have the highest impact. So that’s kind of why we really believe that is the impact maximizing strategy. And I guess we’ve seen over the last couple of years a move in philanthropy towards this direction, right, towards fund-based grant making.

Basti Schwiecker: And you already compared yourself to the work of a pension fund manager, where people usually save up for retirement. But when I think about saving for retirement and investing, it makes a big difference if I’m like 25 or if I’m 65 or even 70, you know, the closer I am to retirement. the less I care about maximizing my returns, but not being broke and being sure I have enough money. So does that analogy hold up? And if so, where do you see yourself? Are you advising a 25-year-old or a 65-year-old?

Johannes Ackva: Yeah, that’s actually a really interesting question. But let me go into some detail there. So I think many people, when they think about doing good, the first intuition would be, you’re a little bit more like a 25-year-old, which means in this case here, you’re really optimizing for, in this case, saving as many emissions as possible. You’re not risk-averse, you don’t worry about being broke, you’re just saying you want to get as rich as possible. That would be true if it were as important to avoid any ton of CO2 as ever. So that would be the simple case. And that is true in many causes that we care about. So that is that we should actually not be risk averse. It should be different than how you invest your pension.

Basti Schwiecker: Like in expectation, save as many lives as possible.

Johannes Ackva: Save as many lives as possible. Not like be OK with the fact that you might save zero lives if you can also save 100 lives. In principle, if you’re doing good, you should not behave like if you behave with your pension. But then there’s something interesting in climate specifically, which is the fact that climate damage is highly non-linear, which means that if you’re in a worse future, saving a ton of carbon is much more important because there’s more damage per each additional ton of carbon. The way to think about this, I mean, here this analogizes very well to the pension fund example. If you’re already 65, you don’t want to invest everything in stocks. Because if the stock’s going really well and you’re already a millionaire, adding an additional dollar is not that important. But it’s really important that you’re protected against a stock market crash. So you want to hedge your bets. And this kind of transfers in climate. You do want to make sure that in those worlds that are going relatively poorly from the climate perspective, like where climate damage is high. In those worlds, it’s much more important to save additional tons of CO2, the equivalent of not going broke.

Basti Schwiecker: So that means the difference between a warming of 2 degrees compared to 2.1 degrees is much smaller or there’s much less damage in this scenario than going from 3 degrees to 3.1. Do I get that right?

Johannes Ackva: Yeah. So that’s exactly right. Right. And like, I mean, so like if you so OK, you can’t hear this, but you can see it. Right. So like it’s like it’s a curve that kind of goes up. Right. And I think that’s kind of one of the most important facts about climate science. Right. The most really important fact that this is true.

Basti Schwiecker: So the damage kind of exponentially grows with rising temperature.

Johannes Ackva: Yeah. Yeah. I mean, to give the intuition, it’s just the further you go away from temperature that you’re used to or that biological systems are used to, the more unpredictable it becomes and the more it becomes likely that just the ability to adapt is kind of not there anymore. So right now we’re essentially at one degree of warming right now already. Clearly, there’s incremental changes. We can observe changes. But the further we go away from the world that we know, or that biological systems have adapted to, the worse expected impacts are, the more likely it is that societies become overwhelmed, et cetera. So that is why I think there’s strong reasons to believe in this nonlinear shape, and that is why optimal climate strategy is not about maximizing emission reduction, but minimizing expected damage, right? So taking into account this uncertainty about how the world might develop and kind of taking actions that will be disproportionately good when it kind of matters more.

Basti Schwiecker: Okay.

Johannes Ackva: Sorry, just to kind of close this, to say this a little bit more informally, doing things that work when shit hits the fan.

Basti Schwiecker: All right. I think I got it. But it sounds a little bit academic to me. How would I actually spend my money differently? How would I donate differently if I want to focus on worst case scenarios or a world where the shit hits the fan?

Johannes Ackva: Yeah. No, this is a great thing, right? Because if you first hear this idea, it sounds like something very abstract, very academic. It’s a nice idea that a philosopher would like to think about, but how does this actually matter for someone who wants to do good? So there’s two key reasons why this matters a lot and how you can see this. And one, the first key reason is really that we know something about the worlds where climate damage is higher. So we know that you cannot imagine a world of five degrees of warming where renewables have succeeded beyond all expectations, storage has gotten cheap, transmission has been easy, et cetera. This combination of facts does not exist. I would even argue you cannot imagine a world of four degrees of warming. So you know that if you’re in a scenario where something has gone wrong, some of the bets that we’ve been making as a society at large must have failed or must have been, relatively speaking, disappointing. And we know something about the structure of the bets that we’re taking right now, right? So we know that solutions that are, for example, alternatives to renewables or that are kind of complementary to renewables that kind of have different risk profiles, that they will be differentially more valuable in those worlds, right? So if you’re in a world where say transmission remains hard, or seasonal storage remains hard, solutions that kind of complement variable renewables, so wind and solar, like say, something like advanced geothermal, right, or advanced nuclear, anything that’s kind of a dispatchable resource becomes, relatively speaking, more valuable. And also, relatively speaking, we can expect them to be built more. And this is really the key idea here, that we know something about what will be particularly important in those worlds. So this is kind of the requirement, how this can actually lead to practical strategy changes. And then there’s kind of the second fact, which is that most of the climate community completely ignores this, and in fact, is kind of betting on the best case, right? So, if you follow the climate discourse, the thing that you will kind of always find is like, let’s string all of our optimistic assumptions together and demonstrate that the solution that we like will work and solve the problem entirely if everything goes right. So if costs keep reducing, if transmission becomes easy, if everything goes well, if there’s no climate backlash, if everything goes well, then we don’t need all of these other things. This is such a typical way to argue in the climate space. It’s exactly the opposite how you would argue if you’re actually risk managing. So you would say, here’s the risk structure. You try to hedge your risk. So in that sense, it’s very driven by pet projects, by things that people like, and arguing optimistically. So this is the reason why we, as a grantmaker and a funder, who’s trying to improve the bets that society is taking at large, strongly focus on those solutions that will be useful in those cases. Because so much of climate discourse will say, oh, well, we don’t need new geothermal because we have wind and solar. This or that solution because yeah, whatever, we’re not gonna end up in a high warming world or like Or like, yeah, OK, we have these solutions and if we have a strong international agreement, we can cheaply save the rainforest. Yeah, well, if we have a strong international agreement, there’s not going to be a lot of climate damage to begin with. Right. And I guess I mean, I’ve been in this climate philanthropy game now for six or seven years and we’ve been starting to write about the risk or kind of thinking about this, since 2021, in 2021, we put out a report. So this was at the height of the Biden era. Okay, climate philanthropy should really prepare for worse geopolitical conditions or worse political conditions. So at a time when, yeah, and I guess, two months later, the Ukraine invasion happened, right? And then many other things happened, right? And we’re in a very, very different moment right now. Yeah. Than we’ve been there, right? And much of the plans that were made in that time, were kind of assuming that the height of climate attention that was there in the early 2020s, what persists would be a permanent state. And what we’re seeing now is like, okay, it was kind of a blip and now we need to make the best of what we have right now.

Basti Schwiecker: Yeah. So if I get it right, you at Founders Pledge CEO, or your climate team CEO, value add, like hedging against the bets that society made. Like you said, a lot of the climate movement and a lot of success has been made in renewables, like solar got much cheaper, batteries got much cheaper, but we don’t know how long that will continue. And in cases that the price reduction will not continue in that way and that long-term storage, transmission will be harder than we hoped for. In this case, having additional bets on advanced geothermal, on advanced nuclear might be extremely valuable. Although, if everything goes as everyone hopes for, which is also a possibility, those things would be kind of unnecessary, right? So you’re hedging bets with the risk that it would be very valuable in a scenario where climate damage could be extreme, but might be less valuable in an ideal world.

Johannes Ackva: Yeah. I think this is roughly right. I want to add two or three clarifications. I think that the basic idea here is correct. We’re not only focusing on the worst cases. It’s more like we’re saying, in general, a couple of things are true about societal climate response at large. I think one thing is that society at large spends a lot of money on climate, right? And philanthropy spends a lot of money on climate. So there’s something like between $10 to $50 billion in climate philanthropy, which is much, much more than most other causes that people concerned with effective giving care about, right? So our theory of the case is, so get to high-impact grantmaking in climate, you have to kind of focus on things that leverage existing resources that are already being spent on climate and that improve the societal response to climate. Adding another dollar to a popular strategy in climate, I think it’s very difficult to think about this as high impact giving. I think it wouldn’t qualify. One qualification, I think the way that you were describing it, it sounds as though we’re only focusing on remote worst cases. We’re generally kind of trying to essentially make bets that improve the overall kind of societal response to the problem, kind of taking into account different risks, but those are not always remote risks, right? And it’s like, they don’t depend on things that are unlikely to happen by default. So for example, I fully believe that renewables will continue to get cheap. The reason to bet on other energy sources is not that renewables don’t get cheap. The reason would be transmission is hard or stuff like that, other infrastructure constraints. Long-term storage, for example. Long-term storage, yeah. And then the kind of things that we’re betting on. In 2023, we started betting on right-of-center climate and clean energy, civil society, and the US. And the probability of a Republican president was 50% in 2023. So this was not a remote outcome. But it was an outcome that, frankly, climate philanthropy did not prepare for well and hasn’t prepared for well and I mean most of climate philanthropy was surprised and unprepared and kind of called up their conservative friends the day after the election. I mean, calling your conservative friends the day after your election is better than not calling them at all. But ideally, you’d call them a year before.

Basti Schwiecker: Yeah, sure. Yeah, that’s a good example, you know, because the jury’s still out there if we will solve transmission, long-term storage, and other challenges. But we already know that we failed in having a climate-friendly government in basically all places. So in Europe, and especially in the US, there has been a lot of backlash.

Johannes Ackva: In Europe, there’s been a lot of backlash too. And in Europe, there’s a lot more backlash still to come probably, right?

Basti Schwiecker: Yeah, I mean, yeah, I’m not too excited with regards to the next couple of elections in Europe. But let’s hope for the best. Also, let’s talk a little bit more about what happened in the U.S. As we all know, Trump became president, and as you mentioned, the climate movement wasn’t prepared. You’re one of the few exceptions who started to talk to your conservative friends before the election.

Johannes Ackva: Made conservative friends, rather, yeah.

Basti Schwiecker: Made new friends on the conservative side. And the picture looks pretty bleak for most people. And there’s a lot of rollback on climate policies Biden initiated, the big beautiful bill in the US put a stop to a lot of stuff the Biden administration championed. Would you agree or do you see it as bleak or as some kind of silver lining or as something to still be hopeful even under President Trump?

Johannes Ackva: Yeah, I mean, there’s a lot of nuance here. Right. So I think if you kind of look at President Trump and if you kind of look at, I guess, the policy situation right now in the United States more generally, if you look at it from the perspective of short-term U.S. decarbonization, the picture has become significantly worse in the sense that you mentioned the big beautiful bill. So the big beautiful bill essentially repealed or shortened a lot of the tax credits that were in the Inflation Reduction Act that was Biden’s signature achievement. And that had tax credits for essentially all energy, clean energy technologies, or generally kind of climate-friendly technologies. And it kind of reduced, the big beautiful bill kind of reduced the tax credits for solar and wind, for electric cars, et cetera. Solar, wind, electric cars, those are those technologies that are where the tax credits kind of lead to the most additional emission reductions in the U.S. in the short term. So the picture has gotten worse there. And Trump has also repealed a lot of other regulations, like vehicle standards, pollution standards, stuff like that. And this is what takes up most of the atmosphere in terms of the political atmosphere or the climate, the attention. If you read the New York Times on the Trump climate policy, this is the most of the stuff that you will read about. And I think that’s the optimistic take here. If you think about what the US is going to do for global decarbonization, the US is something like 5% to 10% of future global emissions. But it’s kind of, I don’t know, somewhere between 20% and 40% in terms of clean energy innovation capacity. So you really want to evaluate the US by its ability to kind of drive global technological change. And you want to evaluate climate policies or energy-relevant policies by this. And in this perspective, situation is better. Crucially, things that survived in the one big beautiful bill, the tax credits for other energy sources that are not wind and solar, and a lot of the innovation policy infrastructure also got damaged, but it’s at the status of being rebuilt. There’s a lot of excitement, partially. For example, Fervo Energy, it’s a new innovation in geothermal company, had its IPO earlier this year. There’s a lot of movement around nuclear. So you kind of can end up in a situation where, actually, you’re going to end up with significant breakthroughs in the Trump administration. Those will not be motivated by climate, right? President Trump will not hail them as climate achievements in the same way that he’s not proud of what he achieved with the COVID vaccine, right? But that doesn’t mean that those things aren’t real and that they’re not changing the world. And I think, frankly speaking, these are the most important things to expect from the U.S. right now, right? Whether or not the U.S. kind of adopts electric cars as fast as other countries, it kind of doesn’t really matter for the global emissions picture. So in that sense, I think the story is certainly more hopeful than you’d kind of get if you would just kind of read the news and kind of say like here’s the number of policies that got repealed because there’s, in a way, a lot of the important stuff has survived. And also, with the AI infrastructure build out, how it is shaping the American conversation, and how the AI competition with China is essentially the most bipartisan thing in the US political discourse at all. There’s a lot of pressure to actually get more serious about getting a lot of energy. Some of the energy will be dirty in the short term. The coal plants will run a bit longer. There’s going to be more gas demand. By and large, most of the pressure is going to lead to more clean energy and being more serious about clean energy innovation, doing the steps that are necessary. All of these are reasons to say the situation is not as bleak as you imagine it to be, they’re not saying the situation is better than it would have been if Harris won the election, right? That’s a completely different conversation, right? I’m not making any claims of that sort. I’m saying, if you’re kind of just saying, if you’re saying like everything is bad and there’s no reason to work in the U.S. anymore, you’re not reading the situation right. That is more or less what I’m saying.

Basti Schwiecker: Yeah. And one central point of your argument is that one should focus much more on the long-term and global effects of a policy than on the short-term and local effects. Can you stress this one more time?

Johannes Ackva: Yeah, sure. I mean, we’re in Germany, which is kind of illustrating this point, I think, better than essentially any other country, right? So if you kind of look at Germany’s most important contribution to climate mitigation, started in the early 2000s, the renewable energy law, which kind of led to the really high subsidies or feed-in tariffs for wind and solar, which at this point were extremely expensive technologies. Also, it was not a climate policy. It was primarily motivated by expanding renewables and phasing out nuclear. That’s a different story, but I can go there. This was a policy that really accelerated the technological development of wind and solar. First in Germany, but then also helped the Chinese betting seriously on this and making solar cheap. It was a terrible policy from the perspective of reducing emissions cost-effectively in Germany. The cost-effective strategy in Germany in the early 2000s would have been to replace German coal with Russian gas. That would have been the cost-effective decarbonization strategy, because gas is half the emissions of coal. That would have clearly been a stupid strategy. It would not have led to technological change, etc., but that’s what cost-effective decarbonization would have looked like. But obviously, Germany is not a sunny country. We all know that. Today it is, but in general. So it was not a good strategy from the perspective of short-term German emissions and even long-term German emissions. It’s not necessarily a great strategy, but it has fully transformed the global picture. There are a lot of places where solar is really good. The cost reductions in solar, in particular, and wind also have fundamentally changed the global emissions outlook. So the fact that right now you should be much more optimistic about climate than you should have been 10 years ago is to a large degree related to the cost reductions in renewables, particularly solar. And those are very directly linked to German policy. So I think this is a great example. Evaluate something by its long run global effects. And it’s not accidental, right? So everything that can reduce emissions cost effectively in the short term needs to be a mature technology. Building more of a mature technology cannot have large innovation consequences, right? So there’s something very systematic about this relationship. And there’s something very systematic about this. And this is really important. It’s really difficult. And a lot of the climate conversation, a lot of the activist discourse is about the emissions in our country by 2030. And this kind of is really negative, because it really kind of leads policymakers to optimize for the wrong thing, right? And in Switzerland, I mean, the marginal ask of the, the ask litmus test for the climate communities, like making our homes more energy efficient, etc, right? this is not something that has global relevance, right? I mean, but that those are kind of the asks. And so that’s the way in which also the climate community has a positive effect in kind of asking for more ambitious climate policy, but has a negative effect in asking for local short-term targets that is kind of actually counterproductive for global decarbonization.

Basti Schwiecker: So I want to finish the episode with a recent event, the war in Iran.

Johannes Ackva: Yeah, it’s the most important climate policy of the 2020s.

Basti Schwiecker: Yeah, that’s what I was going for. So it seems the war has ended by now. And there are a lot of reasons to see it very, very critical. But might it have been a good thing for the climate?

Johannes Ackva: It has almost certainly been a very good thing for the climate. Obviously, it’s not a climate policy. So when I said it’s the most important climate policy of the 2020s, it’s a joke. But it’s also there’s something serious here, which is that the most important events for climate and energy are usually not climate policies. They’re usually energy shocks. This energy shock, even if it were over now, which I guess I wouldn’t bet on, but even if that were true, I mean, the 1973 oil crisis didn’t last much longer than the crisis that we observe now and had deeply profound aspects. So in the 1970s, the consequences there were massive. After the 1973 oil crisis, France essentially decarbonized, did the fastest power sector decarbonization ever, going 80% nuclear over the course of 15 years. No other country has done something similar. But this was not the only thing. It’s not all about nuclear. The Department of Energy in the US was founded as a result of that. The early investments in renewables are related to this. And many other policies. So this was a profound shock to the energy system that kind of strongly pushed towards local energy solutions, but also non-fossil energy solutions. We see this right now again. People are going to burn more coal if coal is a domestic resource. But the most important effect of this crisis is going to be people are going to buy more renewables. And countries are going to be more interested in building domestic energy resources. Because the dependence, even if the war is over now, if you follow the memorandum of understanding, the situation has fundamentally changed and that now we’re saying the Strait of Hormuz is controlled by two countries, Iran and Oman, and it’s not international waters anymore. And Iran has demonstrated they can close the strait at any moment. And the US has demonstrated that they will not act forcefully to prevent that. So if you’re a policymaker concerned about energy security, I think the lesson is very clear. And most of the consequences of that are going to be good for global decarbonization, because most domestic energy that is cost effective will be low carbon.

Basti Schwiecker: Yeah, let’s hope that at least one good thing comes out of this disaster. Well, it has been a pleasure as always. Hope to see you again and thank you, Johannes.

Johannes Ackva: Yeah, thank you so much, Basti.