David Keith – Numbers Guy?

David Keith is one of the sharpest minds to tackle the carbon/climate problem; refreshingly hard-headed about the scope of the problem and associated scale of relevant solutions. His recent talk at the SDTC Investor Forum in Calgary, Alberta hit the mainstream cleantech sector just as hard as it die the fossil fuel sector. His pragmatism is refreshing. There are differences in our respective approaches. And for a numbers guy, his numbers can be … off. But bottom line is they are quibbles in the larger context of basic agreement: massive, tera-watt scale solutions need to be deployed, and fast.

Keith sees carbon sequestration as the way to unlock low carbon transportation fuels using existing infrastructure. His startup – Carbon Engineering – develops technology to capture atmospheric CO2 and inject it into older oil fields (enhanced oil recovery). The CO2 stays in the ground, offsetting the natural gas needed to capture it and the oil that later gets burned. End result is an oil that is up to 60% less carbon intensive. It requires two pieces of legislation to be effective: a price on carbon ($100), and a low-carbon fuel standard. The final product is still a $20 premium to oil.

Um – can’t we just burn the nat gas in our tanks and be just as well off carbon wise? But he’s right on target when it comes to scale; it’s got massive potential. And it allows existing players to stay in the game. And it’s the last bit that motivates him, I think.

I prefer a softer relationship between fuels and carbon sequestration: use huge amounts of marginal land to grow specialty plants that sequester carbon in the soil through their roots when they’re cut at the right time – the roots die when the plant is cut, permanently sequestering the carbon (see Tim Flannery’s latest book for details). As for the liquid fuel? Next-generation cellulosic refineries can turn those plants (and agricultural waste, and wood chips….) into drop-in fuels like diesel or ethanol. And it’s cheap to produce: a buck a gallon. No subsidies, just a lot of land. And possibly carbon neutral. But it does mean existing players who don’t change direction are cut out. And there are strict limits to production – perhaps a third of oil can be replaced this way. So we need mandated tough fuel-efficiency standards to reduce demand.

But here’s a subtlety: Keith argues (correctly) that existing companies and industries have “no business solving this problem” – literally. He’s a bit too sympathetic to their pain, in my view. But he’s right that they’re (largely) constrained to continue to do what they do – that’s what Boards and shareholders force on a CEO. Corporate Social Responsibility is window-dressing, core business remains core business. Even Suncor’s 20 MW wind project is just a scrap tossed on the field for effect. A coal company will stay a coal company – because that’s what they know best. So don’t expect them to do anything less than fight real carbon pricing to the death because it’s an existential threat. Same with the oil companies.

And that’s why Keith’s fuel solution has merit, even with the crappy economics and questionable carbon numbers. It invites fossil fuel companies to the party. Instead of fighting the required legislation, they endorse it and bring along their capital, expertise and infrastructure.

Keith is one of the world’s geo-engineering experts, and accepts the inevitability of putting a lid on our quickly-heating pot of water. I’ve argued before this game will likely end in tears, but I accept the depressing inevitability of the need to buy time. Keith’s preferred solution appears to be sulphur in jet fuel, which when burned in the upper atmosphere reflects the suns’ heat. Again, I favour a softer intervention: massive engineering of marginal and prime agricultural land to sequester carbon using specialty plants. His geo-engineering is a kind of karate – hard and muscular. Mine feels more like tai chi – use existing biological forces to bend nature our way. But he’s right. We’ll need both temperature mitigation and carbon-suction ….

Keith and I agree on nuclear: like it or not, the hard reality is we’re not going to de-carbon without it. And we need innovation, like next-generation breeder reactors that burn existing nuclear waste for fuel. Keith argues it will never come from government, the existing nuclear giants (Ariva, Westinghouse, etc), or the venture community. Only a single-minded, committed and deep-pocketed ‘super-angel’ can pull this off. Like Bill Gates’ Terrapower project.

Role of government? I’ve accepted less-than-perfect solutions like Ontario’s Feed-in-Tarriff given the lack of anything else at the table. But it’s inefficient, and as Keith argues – it can lock in existing technologies (don’t forget bankers only back the old stuff). I’m not as hard on these half-measures as he – a strong and growing price on carbon is the only effective tool to unlock the market’s might – because it gets something started. I don’t care it’s a bit inefficient. Keith does, and seems more hostile to active government in general. But that’s a minor left-right quibble.

Finally, Keith muses that Calgary just might get bulldozed if they don’t keep their eye on the carbon ball (literally – it’s a resource town, and when the resource goes …). If North America and Europe agree on a low-carbon fuel standard and lots more oil gets unlocked using fracking – goodbye Tar Sands. Keith sees a low-carbon standard as a good bet. I think there will still be a buyer – this makes clear why Harper is so set on the nutty Northern Gateway pipeline: China might just be the only buyer.
My feeling is Keith is as much motivated by defending the freedom of the market and a general distrust of government as he is by the numbers on carbon. But that’s a quibble. The guy is smart, motivated and is tackling the hardest problem of all: how to engage the existing players. Without them on board, the carbon fight never ends.

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