In our post-pandemic world, there is no more pressing issue than climate change. This fall on Disruptors, an RBC podcast, we launched a multi-part series called The Climate Conversations, which explored some of the potential solutions to a warming planet—as well as the challenges in implementing them.

Co-host John Stackhouse spoke to several leading advocates for climate action in the series—including former Bank of Canada Governor Mark Carney. Carney was the top central banker in both Canada and England before taking on the important role of UN Special Envoy on Climate Action and Finance. He’s also co-chair, along with former New York City Mayor Mike Bloomberg, of the Glasgow Financial Alliance for Net Zero: a forum for global financial institutions to accelerate the transition to a net-zero economy.

In this special extended cut of the conversation, we hear more from Carney on how the climate emergency compares to the 2008-09 Global Financial Crisis; the opportunities (and limitations) for technology to get us to Net Zero; and why the world is looking to Canada, now more than ever, for climate-change solutions.

Speaker 1 [00:00:02] Hi, it’s John here. This fall on disruptors, we’ve been exploring some of the big topics around climate change and speaking with some of the big players who are seeking climate action.

Speaker 2 [00:00:11] We called the series the climate conversations, and it’s fair to say the conversations are ongoing. As part of that effort, we’re bringing you special extended cuts of some of our most popular climate conversations. 2021 has been a pivotal year for our planet. Extreme weather put the need for climate action front and center, as did a high profile global climate conference called COP26, which happened in Glasgow. Among those who played a critical role there was Mark Carney, a former governor of the Bank of Canada, who now serves as the UN special envoy on climate action and finance. We talked with Mark about what he’s been up to, as well as his hopes for global economic transformation.

Speaker 1 [00:00:53] In this conversation from earlier this fall. Mark Carney, welcome to disruptors.

Speaker 3 [00:00:59] John Stackhouse, a pleasure to be with you.

Speaker 1 [00:01:01] I want to ask a question that came to me this morning when I woke up because this is the 20th anniversary of 911 and there’s much debate about how much it changed the world in different ways. And we’re talking about climate. And I wonder why 20 years ago, the world galvanized around a horrific event and was able to mobilize, rightly or wrongly, trillions of dollars and mobilize nations, as well as individual action to change the world. And arguably, we have not been able to mobilize the same will or resources on climate. I wonder how you think through our different collective approaches to global challenges.

Speaker 3 [00:01:44] It’s a great question. First, and if you recall the urgency of 20 years ago, and I think we all who lived through that had the same reflection and certainly the first thing I thought about this morning. Same weather here today. Very different global environment. You know, there has been a lot of progress over those 20 years, but let’s focus on what hasn’t been accomplished and how much more difficult it has become to galvanize global action, as you say. And I think there is a couple of routes of that. One was how quickly the global goodwill of the response to 911 was dissipated within a few years. The global I mean, there were strong support among the allies, but obviously the Iraq War took a toll. And you know, the retrospect the stance of the Canadian government took at the time was a principled and the right stance in retrospect, but that created a bit of a fissure as well in our relationship, and that played out more broadly across a number of a number of countries. I think the second thing, though I’d underscore, is we had the financial crisis. You and I know that, well, we are from different vantage points lived and worked through that and the response to the financial crisis. The policy response was overwhelmingly an economic policy response in the run up to twenty seven eight. There was increasing focus on climate action at the global level. You know, the elements of the consensus of which you just spoke were there and within the private sector an increase in focus and I would suggest in the financial sector as well. It didn’t absolutely stop, but it was set back dramatically. As the issues in the financial sector became survivals, the issues from a public policy perspective became recovering. From then, what was then the worst economic crisis of anyone’s lifetime and had the prospect of moving into a depression if the right policy hadn’t been followed and that set back climate efforts almost a decade? We, in my judgment, we had lost decade, and I would say as well, John, that when we got back to the level of public urgency, maybe arguably a greater public urgency around addressing climate in the run up to the start of 2020, governments starting to come together, the financial sector starting to focus on this more. And then, of course, we had the Covid health crisis and economic crisis associated with it. And I given that history thought, Wow, this is 50. You know, this could be history repeating itself and will be set back again. What’s happened? And I’m sure we’ll get into this. This has been the opposite. The experience of Covid and the economic circumstances and the right economic response. Also, social response has galvanized climate action, so we are in a different.

Speaker 1 [00:04:44] place, different this time. Why are? Why is it not? Why is climate not relegated by yet another global crisis?

Speaker 3 [00:04:51] Well, yeah, I think there’s several factors. One of them is I’ll start with the negative, which is that it’s 10 years later and it’s that much later. It’s that much more obvious. The climate impacts. It’s much more urgent. That’s the first. The second is that technology has moved on quite substantially. So many more of the opportunities are economic today. It’s a question of will and getting capital to work and investment in the ground. I’m not saying that we’ve got all the solutions at an economic level to fully decarbonize, but there is a path for at least the next decade for a substantial progress that makes a big difference. I think thirdly, a number of governments and informally I’ve been involved in these discussions with a number of governments. They took a lesson from, you know, a few countries had a climate focused response to 2008 South Korea, elements of China, elements of the German fiscal response. And lo and behold, those countries established quite competitive positions, very competitive positions in key industries. Solar, wind as well, so the economic congruence, if I can say it that way, the alignment is much better now and it’s much better understood. And I think the last thing which is a softer point, if you will, or a values point in many respects, that’s a harder point. A stronger point is what lessons do you take from the health crisis? We undervalued resilience. We didn’t prepare for something that wasn’t just a possibility. It was a certainty. And there were ample warnings. So we undervalued resilience. We didn’t listen enough to science. We didn’t think about sustainability. And by and large, and you know, there are exceptions to this. But by and large, people’s response to Covid was one of solidarity. They did what they needed to do, not just for themselves and their families, but for others. And of course, all of those elements resilience, sustainability, solidarity, those values are what’s necessary to properly address climate. And if I go back, if you allow me to go back to my first point, which is the economic shifting, well, actually, you can marry them with jobs growth, dynamism of the economy if if you if you bring it together. So we’re in a different situation now, fortunately. And I think our individual and collective responsibility is to harness that as much as possible.

Speaker 1 [00:07:17] Let’s talk about values. Of course, the title of your book, which I read with great interest, it’s an excellent book for those who haven’t read it in a very serious book. And I mean that in a complimentary way. I read it concurrently with the Bill Gates book and wrestled with similarities and differences. I think you agree on many, many things, but stepping back, I found Gates. And this shouldn’t be surprising, perhaps for a math guy like him. A very technological approach. That’s what we would expect from Bill Gates, who was almost Cartesian, that this is a problem that can be solved and you take a more bit more of a moralistic point. If I can put it that way, it kind of Hobbesian. And as I compare and contrast the two works, I thought, and this is oversimplifying it, but there’s a real tension between man and machine, both in the cause of the climate crisis, but also in the solutions. And there are some, and one can question gates on those who believe this is a technological problem that can be solved. And there are others who say, No, this is a human challenge. This is a behavioral issue. And I wonder how you. Of course it’s both. But how you balance those two, because a lot of people would like technology to solve this. We don’t like technology to solve it. As with Covid, as with everything, it’s just easier if we have a machine or a device that can take care of a problem, we are harder to solve. We humans. But I wonder how you, you know in the balance, are weighing technology and human behavior as we get deeper into trying to solve this crisis.

Speaker 3 [00:08:56] Yeah, the way I look at it, as you say, John, it’s both. And I’d argue it’s there’s it’s a triangle. And I think we’ve talked about this a bit in the past and its benefits in the book, which is that we need three technologies. In order to solve this, we need the engineering technologies. And I referenced a moment ago that some of them are fully economic, profitable today when solar increasingly on the storage side, prospectively on hydrogen, they’re economic today. But we need those and I’ll use Bill Gates’s term breakthrough technologies, elements of green hydrogen, sustainable aviation fuels, direct air capture and even large scale carbon capture. You know, which is a big issue for Canada. We need those to become economic. So we need the engineers. We need the technological solutions. My argument or my perspective would be the scale of what’s required for those means that they won’t just happen, and they certainly won’t just happen in a timely fashion to address the issue, given the limited carbon budget. So we also need political technology, and that’s an odd phrase. But just to keep the structure, we need that consensus, which people have developed by and large. You see voting patterns, polling patterns, not just in Canada, but elsewhere. You know, that consensus is coming together in different political parties or political groups in different countries have different ways of mapping that to addressing the climate crisis in terms of what policies would be. But you need that consensus. And what I argue in the book and what I really believe about, of course, I believe it, but is that when you get a consensus around something like sustainability and you move out of a trade off the planet and profit, you know, sustainability today versus tomorrow and people say, no, we want the climate crisis addressed. We expect our businesses. Governments or financial institutions to be addressing this. This changes the value equation, it means that it is valuable to do things that reduce our carbon footprint that move us towards net zero and it becomes not just risky but actively harmful to the viability of a business. If you’re still part of the problem, if you’re not moving and that gets to the third leg of the triangle, which is financial technology, and that’s a lot of what the work I’ve been doing for the UN and run up to the Glasgow cop, which is and you’ve been helping with this as an institution is to put in place the plumbing of the system so that there’s proper disclosure about who’s part of the solution and who’s still part of the problem. That there’s new markets that help to invest in not just the breakthrough technologies, but carbon offsets and other things that are necessary to optimize the carbon budget to have bigger capital flows into emerging economies, creating those, but also to have the commitments of the financial institutions. And with that, the transparency about what they’re doing to solve the problem. And I’ve talked to, you know, Bill Gates about this a few times, and I think there’s a recognition that, you know, this is comparative advantage, right? Not surprisingly, you wouldn’t want me focused on the technologies of the future. I’m much better focused on trying to help the financial system get into place. And Bill and others absolutely invest in identifying the technological needs and investing in those. And if I can make one last point, just to put this in context, you know, direct air capture, which is a technology where, you know, we’ve got a great company, a Canadian company, carbon engineering, one of the leaders. It’s still a very expensive technology relative to a tonne of carbon taken out of the air. That said, very little money has been put into that area. And by thinking all the way through the decarbonization chain, if I can put it that way from solar and wind, that’s economic today to direct air capture, which arguably has to be part of the solution. Tomorrow, we’re shining a light on where money needs to go. And if you’re a venture capitalist, growth equity and entrepreneur and to some extent, a government for a primary research, well, you should be focused on those technologies of the next decade. The private sector can take care of the technologies of this decade at scale.

Speaker 1 [00:13:26] One of the questions you get into in the book is around capitalism and whether capitalism is fit for this crisis. And of course, there’s many models and executions of capitalism is not a monolith. But I wonder how your thinking is evolving coming out of this crisis, where we have mobilized trillions of dollars and it wasn’t capitalism, it was the state that mobilized that largely to avert an even greater crisis. I wonder what that tells us about the limitations of capitalism to solve these epic challenges and the tragedies on the horizon as you call them in the book, but also what the strengths are of capitalism there was that we need to hang on to or even invest more in

Speaker 3 [00:14:11] a moment ago you, you referenced Taubes and rightly so. So, you know, one of the points he made, obviously, is the fundamental role of the state is to his protection. And in his day and age, it was protection from war and violence within societies. So the state has a monopoly on violence that, if you will, as well. That’s his terminology. So it runs the police force, runs the army, et cetera. And that’s the implicit social contract with individuals. And if the state doesn’t do its job, you, you replace those who are running the state. Now, the idea of protection has extended over the centuries. It extends to financial stability, interestingly enough. So again, our world, if I can help you into mine where we do expect the Bank of Canada, we do expect the regulators to be thinking about the big risk. Obviously, we expect major financial institutions as well. But you know, the core bits of the state have an overarching responsibility. Think about those and act on them appropriately, organize ourselves so that if the US blows up as it did Canada, I mean, we can’t avoid some aftershocks, but our system doesn’t go down, which it did not. The same thing applies to pandemic preparedness, where the state has fallen down, and now the effort is OK, how do we organize ourselves in order to be prepared for the next health crisis, have adequate capacity, have action, work on a global level as well as the local level? And so there’s some lessons there that is not going to be provided by the market. That’s that those are roles of the state and within climate. What what’s the analog well, part of what the state has to do, and we’re moving in this direction in Canada to, you know, to the credit, is have a clear objective first point. Net zero by 2050, have a medium term objective, you know how to run a business. You know, it’s great to have a long term objective. What about a medium term objective and marking progress? So we have a 2030 objective 40 to 45 percent, or at least that’s as we’re speaking today. That’s Canada’s objective measure progress annually, but also put in place the policies in order to get there and have a degree of credibility and predictability about those policies. And so the classic example in Canada, and I think I use this example globally is the carbon price. We have a legislated carbon price that runs to one hundred seventy dollars by 2030, and that gives predictability for businesses and investors and individuals to start adjusting today. You know, no internal combustion engine vehicles, new ones by 2035. Again, our auto sector, you see it responding today is going to mean we’re more competitive in auto manufacturing as a consequence. So the state plays an important role. But you start to see and hopefully in my answer, where the state’s actions fulfilling its fundamental role in this case on climate starts to provide a path or some certainty. So then the market and capitalism, as you were terming it, can step in and really provide the solutions. And of course, the best elements of state intervention provide flexibility for the market to find a better way of, you know, in a world with one hundred and seventy two all their carbon price will what’s the what’s the right answer to deliver energy or to heat a building? Well, let’s have the market figure it out within that context and not overly dictate it, because the one thing I think we know is that the scale the problem is such that we need many, many solutions, and there’s probably some of them that seems somewhat unlikely at this stage, but smarter people and more energetic people can make them happen.

Speaker 2 [00:18:11] Coming up after the break, more of my conversation with Mark Carney. So stay right there.

Speaker 4 [00:18:21] You’re listening to Disruptors, an RBC podcast, I’m Trinh Theresa Do. Earlier this fall, RBC Economics and Thought Leadership released a report called, “The two trillion dollars transition: Canada’s Road to Net Zero”. It explores the costs and benefits of Canada’s shift to a carbon neutral economy and how it can fuel a new generation of Canadian innovation, from carbon capture technology to sustainable agriculture to the full potential of super charging electric vehicles. We look at all the ways for Canada to take a leading role in the fight for climate action and the economic opportunities they create. To learn more. Check out the link in the show notes of this episode and visit zero and follow disruptors wherever you get your podcasts.

Speaker 2 [00:19:12] Welcome back in the second half of my conversation with Mark Carney. We talk about some of the daunting timelines facing the world as we try to stem decades worth of damage wrought by climate change. And we also talk about the important role Canada can and should play in the fight for climate action.

Speaker 1 [00:19:30] Timelines, as you’ve put quite eloquently, are critical to this. We don’t have centuries, certainly, but there’s an important tension underway in the world. I would argue around timelines. When I talk to my environmentalist friends, I often divide them into two camps the 20 30 camp and the 2050 camp and the 20 30 camp are people who say we can’t really think too much about net zero by 2050. The crisis has to be solved by 2030, by getting emissions down by 40 or 50 percent in that range. And then the 2050 camp are those and I’ve heard Bill Gates speak to those who say, let’s, let’s not undermine the 30 year journey by trying to do too much in the 10 year. And now it’s a year journey to 2030, so maybe we’ll fall a bit short of 2030. But the real need is to get on the right path to 2050. And hey, it’d be great to have both, but just don’t let one undermine the other. Are you a 2050 or 2030 or are you going to be Canadian and say, you’re 20 40?

Speaker 3 [00:20:36] Yeah, exactly. I’m more of a 20 30 year. I think that I mean, experience in managing things the extent I have and I have some is that you need objectives that are within your timeline of responsibility. Let’s put it that way that you’re going to live to live with the consequences. Now that’s first reason. The second, just given how tight the carbon budget is, it is. It is essential. I think the third point I’ll make, which is tangential to this, but I just want to make it, which is some in the 20 30 camp, maybe not those you’ve talked to. But take the view. OK, well, we just need to radically change and shut down a variety of things. I think the lesson of the last 18 months is we’re not going to shrink our way to net zero. You know, we shut down a quarter of the global economy effectively, maybe more and only just met that seven percent annual reduction. We’re not going to shut down another quarter of our economy and then another and another. I mean, so we need to invest at scale to grow. The caveat I’d put to the 2050 camp and the Gates camp is that when you have S-curve adoptions, you don’t necessarily have to be a third of the way to where you need to be from a technology roll out because of the fact that compounding effective as new technology spreads. So the fact that getting into the teens percentage of vehicles that are electric vehicles in the latter part of this decade that is consistent with and that reinforced by government policy and the reworking of the capital stock in the in the auto industry that will be consistent with getting to where we need to, which is, you know, zero emission fleet. But we need to we need to deliver this. All of us play separate know related roles in it in a way that’s growing the economy. We absolutely need to grow the economy to do that and build the confidence I think we can. I think, particularly in Canada, I think it’s been underplayed to be candid, just the scale of investment that will come with a clean grid by 2035. The reworking of our auto sector, the effort so you know, my home province to move to net zero emissions for scope one CO2 emissions for the oil sands. I mean, that’s a $50 billion investment program, at least, if not more, with big knock on effects for jobs, positive knock on effects for jobs. So I know we need to deliver on that in our own ways. But as the confidence builds that this is part of our economic future as well as our environmental future, we will hold the coalition behind.

Speaker 1 [00:23:23] Well, let’s talk about some of the systems, the adjustments or changes that can, can, can get us there. You’ve talked about the opportunity. We have a piece of research from RBC Economics looking at the net zero pathways for Canada and estimating it to be a $2 billion project over 30 years for the country. In other words, it’s going to require $2 billion of investment, public and private. This is not all due to be spent by by government. And that’s a big number. But it actually breaks down in a fairly manageable way. Since two to three percent of GDP, we allocate two to three percent of GDP to to a number of things that are of great value to society. And there’s lots of ways we can do that even more effectively by mobilizing private capital to be a significant chunk of that of that $2 trillion. And of course, the two trillion dollars is going to lead to a lot of new companies new jobs, new even new sectors. If. Canada gets things, get things right. What do we need to get right in terms of the systems? And that includes the money flows. How do we get that two trillion dollars in the most efficient, effective way to the folks who can invest it optimally for themselves, but also for society,

Speaker 3 [00:24:50] normally for capital expenditure above 60 percent or so, a little more is internally funded by companies. You know they’re making a profit, they’re making cash flows and they reinvest that in their business. And the question will be for a variety of our businesses, our big energy companies or big automakers, as two examples are tech companies as well. How much of their money are they reinvesting in decarbonizing and becoming more carbon competitive? It will be a very important signal because of course, the less they’re investing in that, the more they’re running off their business, because in the end they’re going to need to be net zero to, you know, consistent with the rest of the country. So a reasonable proportion of this, not all businesses will work for this will make sense, but a reasonable proportion of this will come from business themselves as other capital expenditure does. The second thing is that clearly the bulk of it will need to come from private finance. I can make a case for and there is a case absolutely for government spending in newer technologies and kick starting things and knitting grid inner ties together. For example, in the electricity sector, there’ll be other examples. But the bulk of it has to come from the private sector, and there will be an expectation that those returns are market returns that they’re consistent with, you know, on a on a risk adjusted basis. They are consistent with returns that have been seen in the past. That is feasible. I’ll put it this way let me let me answer on a global basis and then come back. Well, I’m going to make a global point in a macro point just gratuitously, which is that orders of magnitude internationally take the whole world. The numbers are similar to your numbers, if not slightly bigger, probably two, two and a half percentage points of additional annual investment per year. If that were to happen, that would take up the so-called savings glut that has built up over the course of the last 20 years. One of the as you note, well, John, one of the things that’s developed is that people have been saving more investment as a whole. Hard investment has been lower than in the past. And that’s one of the reasons why global interest rates are so low. And that’s a whole other set of topics. But this is actually something that is manageable globally, but actually has a knock on effect. All things being equal of raising global interest rates to rates that you know, listeners would be most would be more familiar with historically, maybe not all the way there, but half of the way there and giving some returns to individuals on risk and risk free investments on their savings accounts on their own, their government bonds. Now governments, by the way, have to prepare for that. They can take the current situation for granted. So the short answer is too late for a short answer. But the short answer to your question is a chunk will come from the companies themselves. That’s what happens in the past, and particularly if they see it as an imperative for their competitiveness and their viability, their businesses. But the bulk will need to come from the private financial sector. The banks, the big insurance companies are ourselves through, you know, our RSP investments and others. And that will make sense in a world that values sustainability in a policy environment that’s consistent with moving towards net zero, that will be that will be profitable for those individuals.

Speaker 1 [00:28:21] You get to see Canada both as a Canadian on Canadian soil, but also from a from a global perch. How does the world in 2021 see Canada?

Speaker 3 [00:28:31] The world sees Canada in different ways, and it’s it’s a little hard as an insider, as a Canadian to add this up and balance it. But there’s a couple of lenses through which we’re seeing. We are seen as relatively from a climate perspective. We’re seen as a very carbon intensive economy and a need to like everybody, but maybe even as more than others to make a concerted effort to get that down first. First thing that’s that’s a perspective. The second thing is that we are seen as having a number of the solutions. So I mentioned the carbon price that’s seen as world leading. In terms of the approach, we’re seen as having a number of the technological solutions and expertize and innovation and drive, and that goes from a, you know, carbon. You’re in cement, carbon engineering and direct air capture to a very, very long legacy of innovation in our core energy industry. Oil and gas sector and others. And you know, there’s an imperative for that to be continued at scale and at pace. But we are seen to have that build up. We’re also seen as one of the more constructive international players, if I can put it that way. You know, we’re helping to build the system and recognize that the world needs to move forward together in order to solve this. So I, you know, I’m biased because I’m Canadian, so I’m going to say that the balance sheet is pretty positive. The judgment of us, and by the way, our financial sector is seen as very sophisticated and particularly our pension funds, that our institutions are seen as very welcome partners internationally and being part of the part of the solution here. So to, you know, to bring it together, I’m biased. So I see that on net were viewed positively, but everybody is going to be judged by results. And you know, the exam time is over the course of this decade. And so everything that we’re all doing in the end, this is an issue that there’s no style points on climate change right in the end. You’re either getting emissions down or you’re not. And if you’re getting them down or you’re doing it in a way that’s growing your economy is others. And we’ve, you know, look, we’ve got challenges. I think we all know that, you know, let’s get them out in the open, which I think we’re increasingly doing must get our best people on it and get moving.

Speaker 1 [00:31:07] What are the two or three most important things the country can do in the next 24 months?

Speaker 3 [00:31:13] I’d say the following one I’d lock down those 20, 30, 20, 30, five hard. And so the on the auto side, on the electricity side, I think that’s an imperative. I think the initiative in the in the oil sands to net zero oil sands, the private initiatives making that fully tangible, credible and moving it forward and appropriately scaled. I think having the whole of the financial sector organized for net zero and being transparent about being organized to net zero as a necessary facilitator of that. And you know, look, we can’t we can’t be moving backwards on anything as well. I think that that’s another point. As soon as you establish a reputation for stop, start on climate policy, people will focus elsewhere. If you establish a reputation that climate policies is headed in the right direction and the market can anticipate the future entrepreneurs, innovators, you know, investors, banks, others, they’ll put money behind the future and we’ll get there faster.

Speaker 1 [00:32:18] This was outstanding. Mark, thank you.

Speaker 3 [00:32:19] My pleasure. There is great pleasure.

Speaker 2 [00:32:23] That was Mark Carney, former Bank of Canada governor and the U.N. special envoy on climate action and finance. Stay with us in the weeks ahead. For more extended cuts of our most popular interviews from the Climate Conversations, a special multi-part series on disrupters. To hear the complete series, go to RBC dot com slash disruptors. Until next time, I’m John Stackhouse. Thanks for listening.

Speaker 4 [00:32:51] Disruptors, an RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by Jar Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit slash disruptors.

Jennifer Marron produces "Disruptors, an RBC podcast". Prior to joining RBC, Jennifer spent five years as Community Manager at MaRS Discovery District and cultivated a large network of industry leaders, entrepreneurs and partners to support the Canadian startup ecosystem. Her writing has appeared in The National Post, Financial Post, Techvibes, IT Business, CWTA Magazine and Procter & Gamble’s magazine, Rouge. Follow her on Twitter @J_Marron.

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