Q&A with Climate Scientist David Victor, Part 1: Where Things Stand

With energy prices at the top of many minds, we check in with David Victor, a member of Dimensional’s network of ESG researchers and academics, to get his views on the current state of climate change, AI and data centers, and the future of energy.¹ Victor is a professor of innovation and public policy at UC San Diego, director of the campus-wide Deep Decarbonization Initiative, and an adjunct professor of climate, atmospheric science, and physical oceanography at the Scripps Institution of Oceanography. He’s also part of the Washington, DC-based think tank the Brookings Institution.

In Part 1 of this three-part series, Victor shares his views on the right way to measure progress toward slowing global warming, realistic climate goals, and the current energy crisis.

Dimensional: Let’s start with the current state of climate change. Over the last few decades, many countries have focused on trying to limit warming to 1.5–2°C above preindustrial levels. Where do we stand today in terms of warming and growth of greenhouse gas emissions?

Victor: About 15–20 years ago, the world was on track for 4–5°C of warming above preindustrial levels. Right now we’re on track for maybe 2.5–3° of warming. I see this as good news: 2.5–3° is not 5°, and that’s the right way to measure progress. We’re not on track for the 1.5–2° that everyone had been talking about, but in my view that was never achievable—it was much too ambitious given how long it takes for the energy system to switch directions toward lower emission futures. These goals, which many policymakers still talk about a lot, are good examples of climate policy goals disconnected from reality.

In terms of global emissions, we haven’t seen a peak in total emissions, but the good news is that global emissions growth has started to slow down. At the individual country level, China is, by far, the world’s largest emitter, and its emissions growth has started to level off a bit. Most of that is because of the slowdown of China’s economy and the rationalization of the Chinese energy system toward more renewables and more efficient coal-fired power plants. They’re still building coal plants, but a lot of the new coal plants are replacing older plants that were not very efficient; total coal consumption in China has probably peaked. There has also been an incredible build-out of electric vehicles, which has reduced Chinese oil consumption, plausibly by more than a million barrels a day.

What’s also interesting is that we’re seeing a shallow decarbonization in the US and Europe. In the US, we’ve seen inexpensive natural gas and renewables replace a lot of coal, which has reduced emissions. Overall, the global picture of slowing emissions growth is encouraging. Not enough to stop climate change, but a completely different picture from the early 2000s when emissions were soaring.

Dimensional: Can you tell us what you’re seeing in terms of emissions intensity?

Victor: Emissions intensity is a way to measure greenhouse gas emissions released per unit of economic output, and it has plummeted because we’re basically decoupling economic growth, which is what most people in society rightly care about, from the externality, namely pollution. And when you decompose those data, to me what’s interesting is most of that decoupling is because of efficiency: The economy is much better at producing economic output per unit of energy input than in the past.

It’s also the case that the carbon intensity of the energy system in most economies has improved. Among fossil fuels, coal is the most carbon intensive energy source, and natural gas is the lightest. Renewables, nuclear, and geothermal have zero carbon intensity, essentially. The replacement of coal with natural gas in the US is a great example of a significant reduction in carbon intensity.

Dimensional: You mentioned earlier that in your view, the 1.5–2° targets were never achievable. Can you unpack that a bit?

Victor: For the last three decades, most of the discussion around climate goals has been driven by: What do climate scientists tell us the climate needs? Those scientists have focused on the climate but not as much on cost or feasibility. Then a lot of the conversation focused on what should be done if we want to stop climate change at 1.5–2°C above preindustrial levels. That’s where the world is today—a lot of discussion about goals that were never workable. Still, many governments and companies set goals like “net zero by 2030” or “net zero by 2050,” which were based on reaching those 1.5–2°C targets.

Now nearly everyone is finding out how hard it is to meet those goals. Companies have been worried about the repercussions if they admit they can’t meet their goals, but we’ve started to see some firms “blink.” Air New Zealand, for example, walked away from its goals and adopted new ones. I think this is a very good thing. At the end of December, I wrote an opinion piece for The New York Times explaining why it’s good when policymakers and investors pursue what is feasible rather than promising the impossible.² I think we’re at the beginning of a much more pragmatic theory of change. When companies walk away from aspirational goals and set ones that are more realistic—and they explain why they are making changes—it highlights that what an individual company is able to achieve depends, frankly, on the larger technological and policy ecosystem.

Dimensional: What are your views on the larger policy ecosystem and potential for change?

Victor: What’s interesting is that only about a dozen countries account for 80% of global emissions, and the vast majority of them—except Russia, Iran, and Saudi Arabia, which are in the carbon exporting business—are broadly sympathetic to the energy transition. So that tells us who needs to be in the room in terms of international cooperation on climate change. You could get a lot of cooperation if you choose the right club of countries to work together.³

Dimensional: Are there policies that you think could help incentivize decarbonization?

Victor: Robust market pricing mechanisms for carbon emissions could help. But they won’t on their own create the disruptive technological changes needed for big cuts in emissions—like 80% or even 100% cuts.

The European example is very encouraging. Europeans run an emissions trading scheme. It’s a cap-and-trade system—there’s a cap on the total amount of emissions that covered entities can emit, and entities also have the flexibility to buy and sell emission units, and the price depends on supply and demand of the emission units. That system is working pretty well, because it has created very powerful incentives to decarbonize. It has also created very powerful incentives for Europe to make carbon border adjustments, so that the European firms aren’t bearing these costs and competing with firms that don’t pay these costs. All of that is directionally correct.

I favor carbon taxes over emissions trading because it is easier, technically, to design a tax system that sends a reliable signal to firms about the cost of compliance. Politically that is hard as well, which is why carbon pricing isn’t just a market signal but also a credibility signal—a sign that government is serious. In addition to pricing, we will also need smart systems for industrial policy to help guide key new technologies into use and help them compete. Many governments are doing that now.

Dimensional: What is your take on the current energy crisis?

Victor: The current crisis is like one of those Rorschach inkblot tests. Everyone is seeing in the inkblot what they want to see.

The current US federal administration seems to see high oil prices as an argument for doubling down on oil production. Meanwhile, others, like China, Europe, and Japan, seem to view the crisis as an argument for doubling down on reducing dependence on conventional fossil fuels.

In March, the president of the European Commission called Europe’s turn away from nuclear power a huge mistake, and now they’re focusing on more natural gas, more renewable power, more efficiency, a little bit more carbon capture and storage. All that together would mean a cleaner economy, and one that’s less dependent on imported energy, in particular from Russia, but also from the Middle East. That’s good news.

The current crisis is also enabling the Japanese to accelerate the restart of some of the nuclear reactors that had been shut down after Fukushima. This restart was already in progress and has been turbocharged by the country’s fear of ongoing dependence on imported oil and gas for power generation.

And the Chinese have doubled down on efficiency, electric vehicles, renewables, and nuclear. So it’s really interesting to see the effect that the current energy crisis is having in different places around the world. It is a window into political priorities.

Stay tuned for Part 2, where we will explore how the growth in energy usage by AI data centers is impacting energy demand and emissions.