A Conversation with Economist and Nobel Prize Laureate Professor Jean Tirole on Climate Change and Building a Carbon Neutral Future

The foundations for a carbon-neutral future are built on good policy, green tech and stakeholder cooperation.  

The latest Intergovernmental Panel on Climate Change (IPCC) report issued last week carried another dire warning. The report, published by the world’s leading climate experts with the help of the United Nations, reiterated that climate change is a major threat to human wellbeing and the health of the planet. The good news, however, is that it says we still have time to act and secure our future. 

The Tencent Research Institute welcomed Economist and Nobel Prize Laureate Professor Jean Tirole and Tencent Senior Vice President Davis Lin to talk about how humans – with the help of technology – can help set the planet on a greener path. Their discussion was livestreamed as part of the Tencent Dialogue series (watch the replay below), which brings together some of the brightest minds to discuss important issues.

Professor Tirole did not mince his words, describing climate change as a time bomb. “If you don’t do anything for a year, it doesn’t seem so bad. But as the years add up, we have a disaster on our hands.” 

“On the positive side,” he noted, “most people recognize the urgency of the problem and are ready to act, though there will be costs and sacrifices required to save the planet. Perceptions are important, and we must balance what works with what is acceptable.”

Carbon Pricing

Professor Tirole argued that good government policy backed by good governance is integral to any effort to combat climate change. He advocates for carbon pricing, which includes carbon taxes and emissions trading systems (ETS), sometimes called cap and trade. 

Carbon taxes set a specific tax rate on the carbon content of fossil fuels, while ETS limits how much companies can emit and allows low emitters to sell unused allowances to larger emitters, thereby creating a market price for emissions. They are necessary to create the right incentive to reduce emissions and encourage much needed green research and development, leading to significant technological breakthroughs. 

According to Professor Tirole, carbon pricing is simple, providing clarity for investors and industry, and produces efficiencies. With a clear carbon price, supporting an oil company may even make sense if it forces them to upgrade to best-in-class systems that reduce emissions. Alongside carbon pricing, governments must also end fossil fuel subsidies, which is still a common practice.

Four Emission Sources to Tackle 

Davis Lin concurs that carbon pricing is an effective way to drive new technological and behavioral change. He believes that “economic leverage is one of the most effective ways to achieve carbon neutrality,” and listed four major emissions sources to tackle with the help of tech.

  • Electricity Generation: Most of our electricity still comes from coal-based power plants.
  • Heating: Billions of people, particularly those in the northern hemisphere, require heating for most of the year. Yet most heating is still powered by fossil fuels.
  • Transportation: Although electric vehicles are popular, penetration is still relatively low. We also haven’t found real solutions to replace the current fossil-based technology for long-haul trucking and airplanes. 
  • Building and Construction: These activities require cement and steel, the production of which is a major source of greenhouse gases.

Lin sees a few key technical paths towards net zero emissions:

  • Electrification: Shifting the electricity energy structure away from fossil fuels to greener resources.
  • Hydrogen: A potential solution for energy storage, which solves the problem of intermittence that is prevalent in other green power sources such as wind and solar.
  • Carbon Capture and Storage: There will be carbon emissions that we cannot eliminate, and we need to capture it and put it back into our earth.

Where There’s a Will, There’s a Way

Lin cited the recently released Tencent Carbon Neutrality Target and Roadmap Report, which provides a roadmap for the company to achieve net zero by the end of the decade. The report contains the company’s pledge to be carbon neutral in its own operations and supply chain, and to use green power for 100 percent of all electricity consumed by 2030. It also outlines how the company will help the wider community reach that goal.

Lin said Tencent will achieve carbon neutrality by finding greener sources of energy. “Most of our emissions come from data centers and the electricity used to support them, and we are looking for more solar and wind and green new build projects to help us while electricity demand grows,” he said.

Tencent is supporting the development and scale-up of low-carbon technologies and the development of high potential, but relatively premature technologies like hydrogen or carbon capture and storage. The company is also overseeing projects in several villages in China to install rooftop solar panels. According to Lin, the panels are “a win for the villagers who get additional revenue; a win for the electricity grid, which gets additional green power; and a win for financial institutions backing the project.”

The digital transformation of industry is critical to achieving carbon neutrality. “We’re looking at projects that harness the power of computing, specifically AI, to help improve efficiency and achieve higher productivity with lower carbon emissions, including AI for power plants, water processing, and farms.” 

According to Lin, this translates to a coal-based power plant emitting less carbon while still generating the same amount of electricity, or helping independent farmers make better use of their land, whether it is reduced emissions in their crop growing process or installing green energy facilities so they can make extra money.

With more than a billion active users on Tencent’s Weixin and WeChat messaging and social apps, Lin sees consumers as another key stakeholder in the drive to carbon neutrality. “We serve many internet users, and we want to raise their awareness and promote a low-carbon lifestyle.”

Supporting Tech Start-Ups for Good

During the discussion, Lin pointed out that Tencent has a successful track record in nurturing start-ups around the world, saying, “we take a rigorous approach in looking for potential candidates that have promising technologies.”

He viewed Tencent’s support of these start-ups as part of its commitment to tech for good. “We don’t know how successful a project will be, so we look not only at the financial returns. We also factor in risk, which we are willing to take on in line with our pursuit of carbon neutrality.”

Together We Can

Lin and Professor Tirole agree the private sector is efficient at discovering new technologies, but the right incentives are needed.

They also agree that reducing carbon emissions is one of the priorities for humankind and that all parties must work together without delay. There are clear solutions at hand, though Professor Tirole added that they can only be achieved with the help of government. Meanwhile, the society at large, including workers, companies, investors, and consumers, must act in socially responsible ways. Echoing the position of the IPCC report, Lin and Professor Tirole said that the future of our planet depends on our collective effort now to cut carbon emissions.

Watch the full Tencent Dialogue between Professor Tirole and Mr Lin on YouTube.