Season 2 Episode 7 – Yariv Cohen Edited Transcript
Conversations on Climate Season 2 Episode 7: Yariv Cohen Edited transcript
Section one: becoming a climate internationalist
Chris: Yariv, thank you so much for taking the time to speak to us today.
Yariv: A pleasure. Thank you for inviting me.
Chris: You’ve had an absolutely remarkable career and you’ve lived all over the world: Tel Aviv, as a TV commentator in China, you’ve lived in Africa, the Middle East, the UK. Is that international element a part of your DNA?
Yariv: Like everything in life, it is a bit of design and a bit of chance. I was always curious about other cultures from an early age. For me the business world is a way to explore those cultures, to reach those places. I like to learn about other people, and through business – and especially climate business which has no borders – I got a chance to know a lot of those places. Some of them I just came to, liked, stayed a bit longer and then a bit longer and lived there. In some places I thought beforehand: this is a place I want to explore, I want to go and be in.
Chris: As well as this global focus, one of the overarching themes of your career has been an interest in climate and climate tech. Where did that originate?
Yariv: I think once you get exposed to the problem and what could happen, how broken things are and how easy it is to fix them, you just get into it. You start, you develop a project. When I started, no government really mentioned it. There was the Kyoto Agreement and some people signed up, but no leader mentioned it in conversation. And today it is everywhere; I just came back from Los Angeles from the Summit, and climate is one of the key topics that they talked about. In the deep capitalist conversation, that’s part of it. And I think that’s a journey for everybody: once you see it, you get into it.
Chris: A similar enough journey to my own, where I was in investment banking for a number of years, and then decided: no, there must be more to life than this. Climates bit, and once it bites it gets a hold of you and you end up being very happy dedicating your time and energy to it.
Section two: what drives distributed solar in Africa?
Chris: Let’s talk about your current business. It’s a remarkable distributed solar business based in sub-Saharan Africa, primarily called Ignite Power. Before we move into the technologies or the more mundane parts of it, could you give us a little description of the business from the viewpoint of a customer?
Yariv: Today there are close to a billion people without access to power. Imagine a hut – I wouldn’t even call it a house – three walls, two rooms in the middle of Africa, which is always dark. There’s no floor and there’s no light. And during the day, sometimes you get a little bit of light from the small windows, and during the night you burn kerosene to walk around, not to fall.
And then we come and we offer them light. We offer them a solar panel, a battery, three lights, a mobile charger and a radio. And suddenly that house becomes a home. The kids come in, so they’re not outside all the time. They can work longer. The woman is safer in the house to play. And then there’s the phone charging. When we started it was about giving them light, and when we did surveys they cared about the light. That was very important. They didn’t have to go and get kerosene; it was safer; no fumes. But now the main usage is to charge the phone. So they all have a phone and they charge the phone. and the interesting thing is when they have a consistent power supply, the kids start using the phone.
They didn’t use it before because it was very precious. But when the kid used the phone, we did further analysis and their English improves. So when we started, it was let’s give them light. And now we found out that we’re impacting the education level of the kids just with something very simple like light.
Chris: It seems to be that the main motivation for yourself and for your customers is the improvements in quality of life. Is climate change in any way a part of the considerations for your customers, rather than yourself?
Yariv: So it’s definitely a consideration of mine, of our investors and our partners. Most of our clients however just want to live. They want to have the light, that’s the most efficient resource that they have. They’re interested that the kids can suddenly do schoolwork at night, which they couldn’t do before. They’re interested that it’s safe, they’re interested that they can work longer hours. If it comes from the sun, or from a different means, that is less relevant at this stage. Afterwards they become a proponent, but a lot of them don’t speak English and are not necessarily aware of climate change. They are aware of what it does to their field, what it does to the temperature, but not necessarily the whole concept.
Chris: Digging into your own personal story, you’ve been very successful as serial entrepreneur over time. Take me back to 2014 when you started Ignite: what drove you to start again with a blank piece of paper, with this particular business model?
Yariv: So I think there are probably two angles, like a lot of things. Prior to Ignite, I was leading a carbon development company. We built projects that do carbon abatement all over the world. That led me to China – we had 140 projects there – Russia, Vietnam, America, and a little bit in Africa.
It was a global business with a big carbon impact on the world. I retired from that business in 2012. We had a small business back then in Africa. Not many projects, but I managed it and fell in love with the place and started traveling there more and more. And then in some setting I met [Rwandan] President Kagame for lunch in London. We started having conversation about energy access, energy efficiency, energy generation. And at that time it wasn’t that clear that solar energy or wind energy or hydro energy was better than others. And we started a debate on what form of energy is optimal. Following that lunch, I had a meeting with my friends at Bloomberg and we published a paper.
We researched Rwanda as a country and we said that actually, Rwanda can become 100% renewable, and it’s faster and it’s cleaner and it’s cheaper than going down the regular route. So I published this paper as a white paper hoping somebody will pick it up. And then they [the Rwandan Government] asked me, can you help us make it happen?
So from a theoretical debate to a little bit of investing my time, to a small donation for making a project, it became a business. And that business now connects two and a half million people. We employ about 3,500 agents in multiple countries and we’re growing. But I didn’t plan to start another business, it just organically happened. I was quite aware of the economics because I used to do those projects with carbon financing. Back then, to connect the home to power was something like $1,000. And when I looked at Ignite in 2014, It suddenly went from $1,000 to $200. So I said: okay, that’s an interesting curve that’s happening here. And now we’re talking below $100. That enabled this whole business model of selling to the bottom of the pyramid profitably and quickly.
Section three: solar without subsidies
Chris: If we look at distributed solar as a business model: we [in the UK] have an obsession with subsidies, with the idea that you cannot work sustainably without having big elements of government support. But where you were developing in Rwanda there was very little subsidy support. How can you explain that difference? We [in the UK] believe it can’t work unless you have subsidies, but in a relatively lower income part of the world it’s a great success.
Yariv: I think the first part is physics, the number of sun hours that you get during the day. The efficiency of a panel in on the equator is much better than a panel in the UK, so you get a lot more power. The second thing is, what are you comparing it to? If there’s nothing there, building up a new grid is quite expensive. That cannot happen. So that’s the second dimension. The third dimension is, what are you doing with the power? If you want to power a fridge, an industrial fridge in somebody’s house, where they eat two meals a day with no kids, It makes no sense to use power in the first place, or to use solar power if you are using LED lighting, if you use efficient cooling. If you use efficient pumps, then suddenly less power can bring you a lot more yield, a lot more output, and all of it comes into the pricing at the end of the day. And then how many hours a day do you want? Is it a full day, because solar doesn’t work at night. We need to put in battery storage.
So the optimization works really well, first of all, in places with no power. That’s the one we’re going into easily. Then, to start finding cost savings between peak tariffs and low tariffs, and so on. And the cost of solar, the cost of lithium is continuously going down, so we’re seeing more and more domains where it has become economically competitive without subsidies as the costs are changing. Especially when we used to have cheap gas from Russia, it’s difficult to compete for any other form of energy. Suddenly that gas is no longer that cheap; so we see a flood of distributed solar installation in Germany, which we didn’t see three years ago.
Chris: How does pricing work? It’s a price per kilowatts, does it vary during the day, is it fixed price?
Yariv: It depends. The smaller systems are fixed price. The marginal cost is zero, so you basically need to cover the system plus the profit to make it work. With bigger systems, you can start doing more advanced modelling, mostly about consumption. Not about the timing of usage – yet.
Chris: You mentioned the energy crisis in Europe. In this part of the world we’ve been going through an existential crisis about what our energy systems should look like, how we are going to design it, how we can get off our addiction to Russian oil and gas. Some of the answers have been pretty unsatisfactory, like firing up old coal plants. But net-net, we’ve been leaning more into renewables and hopefully it’ll be a net-positive for the energy transition in Europe.
You have suggested that a similar thought process is happening in sub-Saharan Africa, where energy prices have been making people look more seriously at renewables. Is that right?
Yariv: I would say it’s even started before [the crisis]. Africa is a bit shielded from the other shocks. Energy is expensive regardless of the Russian gas price. However, they’ve been going through a process of understanding. When I first started, the prevailing view was that everybody should be connected to the grid. Why? Because that’s how it happened everywhere else.
Then there came an understanding, which took quite a few years, that it is quite expensive. Some of those places could never afford it. You connect a house that uses three lights to a grid, and it’ll never cover the cost of the cable getting there. So now you extrapolate it forward – why not use a mini grid? Why not use household solar? Now the leadership of those countries is starting to understand, together with the World Bank and others, that it has to be an energy mix. Some will be connected to the grid – my view is only the big consumers like steel, cement and so on. Some will be connected to micro grids in a region. Some, or actually most, will just need enough power to connect to a household solar system that will light them up.
Then the mix is something that is constant changing, constantly analysed. How quickly can you deploy? How good are the systems? What is the cost of the time, and how much money do the governments actually have to spend on that?
Section four: infrastructure, innovation and the leapfrog effect
Chris: One of the really interesting parts about Ignite is how you’re not just focusing on energy as a singular problem. You have all these other considerations, and you mentioned some of them earlier. One is education. Another is cooking; you have kerosene oil and all the fumes that then comes into people’s lungs. Where do you see the inter intersection between clean technology and other development and justice issues?
Yariv: We see ourself as a distributed infrastructure. Everything that has a cable today, we want to remove it. What is connected to your house today? First of all, power. Then you need the gas for cooking – we know how to we replace that. Water – we know how to do solar pumps. Internet access – we know how to use a satellite.
Essentially, we can provide the same modern access (that elsewhere would need lots of cables, pipes and fibre) to your home without those cables, and it just makes a lot more sense. Now, some of them are already very developed like energy; some are developing like water; and some are in the near future, where you can provide reliable internet access anywhere you want without the need for even a cell tower.
Chris: If we’re look at the similarities and differences between development here and there: I know from my own experience being a developer of renewable energy assets, my problem isn’t technology. My problem isn’t even finance problem. It’s regulation, and it’s the infrastructure in and around that. It’s the legislation that’s written, it’s the interest groups, it’s the neighbours. It’s all of that stuff that takes up the vast majority of time, rather than technical issues or financing issues. Is it the same in your experience?
Yariv: We have all of those issues, but also we have a big one around getting it done. When you sign a contract in the UK and develop a project, you go to the contractor, he gets the equipment, he gets the project done. We operate in villages far away. Getting there is hard. There are issues of customs, water, rain, floods, the workforce, and so on. Interestingly enough, that’s where the technology comes in; technology around management of that big workforce. Making sure there’s constant delivery in a lot of houses at a large scale that ramps up without product being lost.
So we are a technology company, but the technology is not on the solar panel. It’s about execution in places that are difficult. Once we crack it in a country, then you can ramp up.
Chris: So it seems like you need to be very innovative in your distribution systems and your logistic systems, as well as your physical infrastructure that you’re putting in place. Could you tell us about your views on innovation, and particularly how it feeds into your very innovative business models?
Yariv: The first development was that we had a PayGo lock. Every one of the systems locks until they pay us, and we use mobile money to get paid. But then Covid happened – how do you manage a remote workforce from far away, working from home? We had to very quickly develop all the tools: distributed call centres, distributed service optimization routes for where you go on the motorcycle, because suddenly you can only put one person on the motorcycle, not two.
Some of our staff are suddenly not allowed to go. So our ability to map a country, to be able to optimize where people go, to be able to verify and to take pictures of all the locations and what happened…GPS tagging, or predicting where problems would be, understanding why customers are not paying from the data. All of those are tools we had to develop, which became a very strong enabler post-Covid. Covid forced us to be digital, which is now bearing fruit.
Chris: That makes my life seem very straightforward and very easy! Before talking to you, the idea of a distributed solar infrastructure project seemed pretty nuts and bolts. It seemed like something that shouldn’t be that technically difficult. But now understanding a little bit more about the issues on the ground, you get a much stronger feel for that challenge. But you also seem to be suggesting that there are roles for advanced technologies within that, modelling both your energy flows, but also of your people flows. Do you have an artificial intelligence or big data analysis side of your business?
Yariv: We have it and it’s continuously improving. The new tools that come out, we utilize them to enable a lot more interaction and faster analysis. In the end it’s about efficiency To connect one home to power is easy. To connect 500 homes, we can get it done. To connect 100,00 homes in a very short period of time without losing a lot of the system, and providing constant level of service? That becomes a big data play. Also from the geospatial level of understanding the ground and the data. If people are not paying we need to know why, and quickly. If they are paying then great – what did we do right? Is the pricing correct?
If there is a problem, for example we just saw there’s a flood. Is the flood really impacting us or not? Do we need to send the team? Sending a team is expensive. If we can figure it out before that saves us a lot of time.
Chris: A common theme here seems to be that you’re going into areas where there’s no existing grid infrastructure. It allows you to leapfrog that step. Is that fair – and if so, do you see any other potential for similar leapfrogging in the energy sector where you’re operating?
Yariv: Yes, so it’s easier because we don’t have incumbents; and it’s hard because there is nothing there, we need to educate them. But that is complete leapfrogging, It’s the same in water infrastructure. If your water infrastructure comes from a solar pump that we just put there, you just leapfrogged the pipe. Cooking is the same, and the internet actually, they’re all leapfrogging and those things will come back to our side of the world much quicker than people think, like what happened with distributed energy.
Chris: Do you want to talk about the work you do with water, providing access and purifying?
Yariv: We do solar pumps that are super-efficient. We call it pay as you harvest, so the customer pays us when they harvest and they can increase their yield three times, even if they have a diesel pump. Getting the diesel and moving it around is not easy, and it’s polluting the field, and it’s complicated. We provide solar pumps and they’re going well.
Section five: impact investing in the Global South
Chris: As well as being an entrepreneur, you’re also an impact investor Where I’m sitting, impact investments does seem to be quite niche. People talk about it, but don’t treat it with the seriousness that I feel it should be treated. People will criticize it for being a luxury, that you’re not focusing on shareholder value, you’re focusing on impact and non-fiduciary duties.
How did you start as an impact investor in developing countries?
Yariv: So I’ll start first of all with the status of impact investing. I’m a mathematician, so I look at trends and now it’s much bigger. There is much more interest, and much more capital in impact investing than there was last week, and the week before, and the week before that.
We are on a trend, and that trend is exponential. When we’re talking about the younger generation, they say: I don’t want to make more money for the 1%. That’s when they come and work for us. You can make money and you can have an impact. And we don’t have a shortage of good people wanting to work for us because it’s like climate – once you made an impact, you feel so good. You want to continue doing it in the future.
I think impact investing is a personal journey. Is understanding what is the impact you want to create in the world? Soul searching – what do you really care about? Okay, say I care about development in countries: what can I do with my time? What can I do with my job? And what can I do with my money to advance that at every stage along the way? And then measure if what I wanted to do is actually happening on the ground.
Putting money into something and then saying: we had impact on that without thinking about it in advance…that for me is not impact investing, it’s post-rationalization for why the investment did or didn’t go well.
When you say: I want impact; I want to connect people to power because it saves lives; I’m going to invest my capital on top of the return; I’m going to connect X number of people – that’s a good investment. We see a lot more sophistication, especially today when everything is digital and you can suddenly get a pass through for your investment, understanding exactly what happened and verify it.
Chris: There are a lot of issues in the world now slowing down the development of renewables. High interest rates across, high inflation, scarcity of supply, the slowing down of supply chains, de-globalization. All of these negative impacts on the growth of renewables. Have you seen that impact having an impression upon what you’re trying to achieve?
Yariv: So on one side, there’s all that impact. On the other side, if you look overall investment, the only area of investment that hasn’t shrunk, and is actually increasing, is climate investment. That’s the only part of the investment world that is still holding on, because the need is so high.
Chris: But that also increases competition for scarce resources; solar panels are a scarce resource. The wait list get a new panel shipped can be long. How are you dealing with that type of issue, because you’re operating in a part of the world where you can be at bid. A lot of money has gone into, for example, the United States because of the Inflation Reduction Act, so prices have tended to be bid up globally around that. How do you deal with that kind of competitive market?
Yariv: We order earlier, we wait a bit longer, but that’s a small part of our complexity. This is a small impact compared to higher food prices, pressure on governments and their ability to borrow. That is more concerning to me, and it’s very important. So adjusting pricing, both us and governments, and just putting a high priority to get it done is key.
Chris: When you say adjusting pricing, that’s pricing for the end consumer? Is that regulated by the government, so you have a conversation with the government about charging?
Yariv: We always have a conversation. Sometimes it’s regulated, but it’s also linked to what tariffs are being paid, what taxes are being paid, and that’s an ongoing conversation. If we remove tariffsand customs, then the pricing would change. So some countries, some locations, it’s set [pricing]. Some others, it’s open. We have every permutation somewhere in Africa.
Section six: can Africa’s entrepreneurs save the world?
Chris: Yes, Africa’s in enormous continent. But I had an interesting conversation with an LBS professor by the name of Rajesh Chandy who’s Chair of the Wheeler Institute. His specialty is entrepreneurship in developing markets. His take on the world was that that we over here are not entrepreneurs. There’s such a tiny fraction of us that are entrepreneurs, but if you go around Africa, a majority of people are entrepreneurs by definition. We all aspire to be working for big firms and being small parts of big machines. But in Africa, the norm is to be self-employed. So the whole idea of entrepreneurship in Africa is quite different to entrepreneurship in the global north.
What’s your take of the difference between entrepreneurship, from you and I as business school graduates, versus entrepreneurship in Africa and the places that you’re operating?
Yariv: In Israel, an entrepreneur’s goal is to make an exit. The goal in the UK is to create a business. In Africa, sometimes it is just to get a job, get by. The key skill of all entrepreneurs at the end of the day is problem solving. And that’s great for us, because we have a team of problem solvers. We allow each one of our countries to operate almost, I wouldn’t say independently, but to set goals by themselves with support from the centre. So in a way, each one of those is a different business led by an entrepreneur. So the talent on those teams, the problem solving, the ability to persist in finding a new market is much stronger, much deeper in Africa than it is in other countries.
Chris: Interesting. That’s leads on to another point that that the Professor Chandy made, that his main source of comfort and optimism for tomorrow, in the climate change world, doesn’t come from the west or the geographic north. It comes from Africa and from emerging markets where he sees guys and girls on the ground who are working away. These are the people who will be solving those problems, because they’re the people who are living with it, who are on the edge of the problem.
They’re dealing with first and they have that type of problem-solving mentality towards life. They are going to be providing solutions to these problems, as opposed to waiting on Silicon Valley to spit something out.
Yariv: I think it’s a combination of the two. It’s the guys on the ground with a niche being picked up or supported by techies from all over the world, who help them devise both the technology and the business model/operating model to make it happen on the ground. But I do see from India and from Africa, solutions that are coming that are taking the world by storm.
Chris: Last year we had a dip in overall investment. Africa got $3 billion in tech startup funding, which was counter to the trend in the rest of the world, which is fantastic. Could you tell us a little bit about the entrepreneurial culture of Kenya or Rwanda, and how it’s shaped by their the unique culture and history?
Yariv: First of all, a lot of technology is to improve what’s happening. I’ll go to the most mundane story. You have a garbage truck which does three houses a day. Suddenly, if you have a payment system, it can do 10 houses a day because they can ‘play and pay’ and order them. You add an optimization component and suddenly it can do 20 houses a day.
So there is a lot of scope for improvement for current businesses in Africa or in India; technology can improve them massively, more than it would in other places where they’re coming from a more efficient baseline. We’ve seen that cycle of improvement happen in multiple geographies over time. If you look at India five years ago, that was the hottest place to be. Now, a lot of those gains have been achieved, so now it’s different type of startups. And now it’s happening in Africa. Each one is a bit different, though they’re becoming a bit closer to each other. In Nigeria, it’s a lot more fintech; in Rwanda there’s climate tech; there’s agritech in Kenya, plus some media tech. Each one is starting to create an ecosystem around it, because every successful company creates a lot of know-how and a lot of motivation to do something similar in that domain.
Chris: What have you seen that’s unique that’s coming from these infrastructures, that might be coming from the specific historical cultural differences in these countries?
Yariv: The first thing that came is mobile money. So when we were still using the credit card, everybody was paying me cents and dollars in mobile money. Now it’s everywhere, and that ability around mobile money gives them a new type of identity. I have a different means of showing where my identity is, I have a different type of delivery system. I don’t know deliver to my house, I deliver to where I am because my phone is with me. So I can say, ‘I’m around here,’ and that Amazon delivery will come to me, and so on.
The infrastructure you have determines the solutions that could happen. And having mobile money, having movable houses suddenly changes the applications that will come about. We’re seeing a massive electrification of the motorcycle sector in Africa, like we’ve seen in Beijing. Within three years, the whole of Beijing changed from polluting cycles, to everything being electric. We’re seeing the same in Africa happening as we speak.
Chris: You are a serial entrepreneur in markets where people would typically find it quite difficult. Could you give us a little insight into the secret of making good seed-level investments in the developing world?
Yariv: The first and most important is traction. Seeing that there is a market fit. In the developing work you can reach quite far with very little capital. You can have a client, you can start selling. I remember I was a judge at a tech competition, and all of them had fantastic presentations that they’d rehearsed, but not necessarily the traction we see in others. So don’t work on the presentation, just get sales. You sold to five pharmacies? Now I believe that you can sell to 50 or 500 or 5,000. We see a lot more entrepreneurs now that are starting this way – I want to start selling. I want to start building. I have the basic minimum viable product, let’s go find a client. Now I know there is a market for this, how much we can argue about how long it will take you, how much will you make out of it. But we know there’s a market.
Chris: How many properties did you say that you have put distributed solar on?
Yariv: To date, we’ve connected about two and a half million people. We are present in 12,000 villages.
Chris: Are each of those villages treated as special projects in themselves? Or do you treat a region, a country equally?
Yariv: We usually have an agreement with the government to go in. Then we map the country based on economic information, based on difficulty to reach, based on density, based on a lot of factors. We prioritize specific districts and then specific sectors and then specific villages, and optimize. The operations plan for that place is optimized to one, or a few of those parameters.
Chris: Do you do project finance or is it government support? Is there IMF support? This is obviously an enormously positive impact you’re making on the world. You’d hope that there would be some international organizations who’d be supporting you in this?
Yariv: It’s all of the above. Every three-letter acronym name in the development world, from the IFC, World Bank, DFID, USAID, Has given us some support somewhere or other. I think all European countries, including Switzerland and Sweden or Norway, has supported us one way or another. And the capital structure is designed for a specific place, depending on their interest. Sometimes we get results-based financing, we get paid for the installation. Sometimes we get grants, sometimes we get concessionary loans. Sometimes we get quasi-equity.
All of them have supported us. Some of them supported us in really hard times, where we really needed them, from the governments to the different institutions. And some of them are supporting us to scale. So this is a team effort, by more people than I could mention in this in the podcast.
Section seven: the future of carbon markets – global or local?
Chris: Lets shift track and go back to your earlier experiences and talk about carbon markets. We’ve seen recently that carbon pricing has gone to unprecedented levels, over a hundred euros per ton in the EU. What is your assessment of the carbon markets today?
Yariv: I think it’s a lot more complicated than it was. It’s a lot more regional. I wrote a paper in 2012 that said carbon markets will not be global, they will be regional and local, because the problem is local. If I want to support a business, I want to support it in my area.
We’re seeing a lot of that fragmentation, for example the Zimbabwean announcement that some of their projects will be allowed out [of the country] and the others will not. Or the Indian government wanting to keep more. The leaders are taking ownership of the problem and want to keep those projects in the local market and develop them as they go.
That’s why we’re seeing different prices for different projects. There’s a huge difference in quality in projects and we’re seeing different pricing for them. It’s a great opportunity. It’s a great opportunity for startups, for developers, for entrepreneurs as it’s becoming more and more complex and more and more targeted.
I still believe, as I believed in 2008, that carbon markets are the most efficient way to create carbon reductions. Why? Because capital goes to the most cost-effective source of emissions reduction at that time. And now, add the fact that you can decide if you want it local, if you want it nature-based, if you want energy efficiency, or if you want carbon storage with chemical ways to capture carbon, which now is around $400 a ton. Each one of them is getting different pricing and it’s becoming more and more sophisticated, and I think it’s a good thing.
Chris: So currently you believe that markets aren’t fit for purpose, but we’re moving in the right direction. What do we need to do to make them run efficiently, to be part of the solution?
Yariv: We’re having lots and lots of small markets because that’s what the payer wants, that’s what the consumer wants. So a UAE company wants to buy credit from a UAE project, because he wants to see the impact, he wants to tell the story. They’re becoming more involved.
On the marketplaces, the exchanges are becoming more sophisticated and more fit for purpose. We’re still in a stage where it is all forming, but the way the direction it’s going is with a greater focus on quality, on verification technology and locality.
Chris: Wouldn’t that be slightly inefficient? For example, if we’re talking about Africa as a continent, instead of having a whole series of individual carbon markets…now I admittedly this is absolutely a double-edged sword, where you have people in say the United States buying carbon credits from a country in Africa, who will have all the natural infrastructure there. It makes sense for money from the United States to be preserving forests, planting new forests, whatever it might be because natural infrastructure is there.
Now the other side of that sword is you may then be permitting people in the US to avoid changing their lifestyles. They continue to live an unsustainable lifestyle at the cost of people in Africa, who aren’t using that ton of carbon that has been taken up, to develop their own infrastructure and their own economies.
So there is an enormous opportunity in positive flows of cash, but there’s enormous risks attached to it too. How do you see that balance? Because you need a global market for that.
Yariv: So first of all, the fact that we’re having this conversation is a good step. People are more aware of both those sides and the balance between them. If Google is willing to pay $400 a carbon a ton for sequestration of carbon in granite, great. That’s a great way to create it. The customer, Google or Amazon or you yourself, are becoming a lot more sophisticated in what they want and what the impact is. And also the seller, the government in Africa wants to guarantee that they keep the right number, get the right value for it. So it’s not being sold for $1.50, but for $15.
When we were doing a project in the past, the Chinese government decided for those projects the minimum price that an international buyer would pay, and so on. Then they’ve created their own companies that are buying, maturing and are able to use that carbon in other countries.
If every country has a cap or a commitment, They need to start the thinking process. How much so I want to keep, how much do I want to sell? That becomes a resource that we price. If we price the resource, we price the externalities, and we price it in a dialogue, eventually it’ll land on an equilibrium.
Chris: To get a efficiently functioning market, you need to have common standards, so you know that a ton of carbon bought in country A is equivalent to a ton of carbon in country B. Now we’re quite far away from having equivalency of standards; if you’re talking about more and more individual countries doing their own markets, aren’t we going to be creating all sorts of inefficiencies?
Yariv: Actually we have a robust and finite number of methodologies that can determine how much carbon was saved under the UNFCC, under Gold Standard under Verra (VCS). Those are fairly developed. You can make changes, but the changes are now more, how do you verify that happened? Do I go and count trees? Do I hug them to see how wide they are to figure it out? Or can I do it from space?
But that’s on the verification side. What we don’t have is the pricing. So in each one of those projects, a ton of carbon is worth a different amount. Why? Because they have other features. If I’m connecting African women to power and saving the lives of kids, my ton of carbon is maybe more valuable than for a reforestation project in Peru.
So we don’t have the common price, but I don’t think we’ll ever have one because each is different. We do have robust and evolving ways to determine how much carbon is theoretically there, and more and more technologies that are able to tell us what has happened, verify it and check it independently of the seller. Because if somebody tells me that I planted 500 trees, I want to independently verify it. It may or may not be accurate. Whatever the person tells me, it costs a lot of money and I have to have the risk that he’s not telling the truth. If now I can do a satellite pass and I can immediately understand that, then I can pay more for the carbon. So the development is in the verification side and in the pricing mechanisms.
Chris: One of the most interesting developments in this space recently has been the EU’s cross-border carbon tax. Now clearly that is a good thing in driving down carbon emissions within the European Union. But the problem with any sort of tariff is that it can lead to barriers to trade with the developing world. Overall, Is the EU border tariff a good thing?
Yariv: I think it’s a good thing. They are talking about…there are compensation mechanisms for countries where you want to do more trade with, or trade is disadvantaged. There are different schemes for what can be allowed and not allowed.
Like everything else, when it starts it’s not perfect. Then it’s adapted and improves. It’s a complicated problem. Global emissions is a complicated problem, the physics behind it is complicated. We need to have complicated solutions that adapt over time to the situation, but we are making strides on each and every part of that.
Chris: I agree. It’s a very important part of the whole piece. We are going to overshoot 1.5 degrees. Hopefully we won’t overshoot two, but we need to do a lot of work not to do that. And if we overshoot 1.5, we need to find ways of trying to pull that back a bit, and also trying to decarbonize the really hard to decarbonize parts of the economy. So having some way of extracting carbon, near-inevitable carbon, from the atmosphere is essential. We’re a long way away from it. As we stand a lot of technology needs to be created.
Section eight: how to find your climate career
Chris: As we wrap up, I think this been a really interesting conversation looking at all sorts of areas that we haven’t really considered before. At the start of this season we interviewed the Dean of London Business School, and we talked about the role that business schools play in the world.
What advice would you give to Dean Francois, on what business schools can do to open more doors to working in developing economies?
Yariv: LBS is unique. It’s very international. You started this conversation asking about my internationalism; it probably was a desire, but LBS gave me the tools and the understanding and the confidence to go to strange places in the world and start interacting with people with some knowledge of how to do it.
I think we are seeing more of it in other schools, and I think that trend is happening. Just make sure that the interactions are there, the opportunities are presented, the curriculum supports it in the right way. That it is not strengthening stereotypes but actually removing them.
Chris: As a final question, we ask for a little piece of advice to viewers or listeners. If there’s somebody out there who’s really interested in what you’ve had to say and would like to get involved, as an investor or as someone who wants to do a startup in developing markets, what encouragement could you give them, and where would you suggest would be a good place to start?
Yariv: Whatever it is which leads you there. This is a new industry and you can pick up a lot of knowledge very quickly. You can become a world expert in specific parts of the climate tech revolution much quicker just by being exposed to it. So first, be exposed. There are hundreds of events in every city in the world. Choose where you want to make an impact – on advocacy, on technology, on operations, on finance. All of it needs talent and there is no shortage of jobs.
Chris: Brilliant. That’s been a really interesting conversation, Thank you.
Yariv: Thank you for the invitation. It’s been great!
To watch the full conversation with Yariv Cohen go to our podcast page
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