WBD562 Audio Transcription

How Bitcoin Helps Mitigate Climate Change with Harald Rauter

Release date: Tuesday 4th October

Note: the following is a transcription of my interview with Harald Rauter. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

Harald Rauter is an environmentalist and Bitcoiner. In this interview, we discuss how UN climate change action is predicated on socio-economic scenarios that no longer apply (i.e. a cooperative world with improving equality), and how Bitcoin’s trustless market-based support for the energy transition could be the solution.

“Can we run the same models, but with better data? Can we get to a 1.5-degree world? And that’s the ultimate nuclear argument for how Bitcoin mining actually makes sense…where does it make sense to engage with policymakers, to actually build on their language, with their models, rerunning it but with Bitcoin mining, and Bitcoin in the various dimensions as the X factor in the equation.”

— Harald Rauter

Interview Transcription

Peter McCormack: Welcome to the show, Harald.

Harald Rauter: Thank you very much for having me.

Peter McCormack: Thank you for coming on, we're very excited to make this show.  My brother is a huge fan of yours.  I know you guys have been talking, he's been fanboying a lot.  He wanted to come down.

Harald Rauter: I know, he was very sorry he couldn't.

Peter McCormack: Well, he may come to the game tomorrow.

Harald Rauter: He had a very dodgy excuse.

Peter McCormack: What was his excuse?

Harald Rauter: He said, "The room will get too hot if he's in there", if there are too many people in here.

Peter McCormack: It's actually a fair point.  We're learning about this.  This room, because the weather's been so hot, just because of natural climate cycles, we've had a naturally very hot time recently.

Harald Rauter: Oh, yeah, totally predictable.

Peter McCormack: Totally predictable, and we've had sometimes too many people in this room and it's got super-hot.  So, that is one of the reasons.  But we're going to try and get him down to the Bedford game tomorrow, which we're bringing you to, so you may be able to see him there. 

So, climate is something we been touching on this show.  What started as a Bitcoin show now covers other subjects naturally, as Bitcoin permeates other parts of the world, and energy is one of those topics.  And we've had a range of people on the show.  I've had Alex Epstein, I've had Andrew Dessler, who I'm pretty sure you'll be aware of; I even interviewed on my other podcast, quite a while back, Katharine Hayhoe, who I also think is fantastic.  And there are a wide range of opinions with regards to how real climate change is, how serious it is, and what we can do about it. 

Making a show, such as the one I did with Dessler, will have a certain group of people who completely disagree with him; and I'll make a show with Alex Epstein and another group will completely disagree with him.  My interest is purely on what is real, what is happening and what can be done about it, so I'm always going to talk to as many people as possible.  And you, as somebody who understands climate, but also understands Bitcoin, is a super-interesting person to get on the show, so welcome.

Harald Rauter: Thank you very much for having me.

Peter McCormack: Thank you for coming on.  Harald, for people who don't know you, it's going to be very useful for you to give a background to who you are, the work you do, and that will help us establish the framework.

Harald Rauter: Well, my name is Harald, I'm Austrian by origin, I've been living in Switzerland for most of my professional career.  I'm a biochemist/geneticist by training, but I've never worked really in the academic field; did most of my professional career in consulting, engineering consulting, strategy consulting.  I was running my own company in that field for a couple of years in Germany, then 2016, returned to Switzerland to essentially start for the climate branch of The European Union, which is a body that was completely unknown to me by that time.

Essentially, it's a $100 million private investor that seeks to invest and de-risk initiatives that bring Europe onto a path of decarbonised economy.  All what happened with regards to climate laws, the Green Deal came later on, so I was fortunate enough to learn a lot about the climate, learn a lot about the actors and different theories that are going on in the space.  I was running essentially a portfolio of equity investments and grant investments for Austria, Germany and Switzerland.  And through this work actually, it was 2017, got in touch with a blockchain-based idea, blockchain/climate.  It was all within the ICO hype, so essentially nothing useful ever came out of this, but this was my first contact to the crypto space.

I came for Number Go Up, stayed for the revolution, learnt bits and bobs on how European regulation works, how Bitcoin could fit into this, and started to peel the onion for myself and started to walk, or tried to find the balance between institutional settings and legacy institutions, and what the Bitcoin revolution can bring to the space.  So I'm convinced, and I appreciate that you pick this up a lot, because I got encouraged to get in touch with you because of the interviews you did with Margot, with Troy and others, to actually consider that this is something real and it should be spread more widely, so I'm super-happy to be here.

Peter McCormack: So, with regards to climate change and the issues regarding it, it would be much more useful if we had wide and broad consensus on what the issues are, what the potential damage is, and therefore to plan mitigation.  I believe myself, people know this who listen to this, I believe that climate change is an issue.  I believe it is caused by humans and I believe there are consequences down the line.  I've also come to the point where I understand that curtailing access to energy also has very severe consequences.  And despite some people being very critical of Alex Epstein, he did make me consider that; and despite people being very critical of people like Dessler and Katharine Hayhoe, they also made me very aware of the issues with regard to climate change.

If we could get to some point of consensus, I think that would be very useful.  But I actually feel like we're getting further away from consensus and a bigger division is starting to arise here with issues with regards to climate change, and there is now a growing group of people on the opposite side of the climate scientists.  I think that's for a wide range of reasons.  I think there are lobbyists, who are successful, as we have with the tobacco industry and as we have with various other industries, in having messages that permeate and successfully change people's minds; I think that happens.  But secondly, there's also been some fails on the side of those who are trying to promote the idea that climate change is real.  I think there's been some models and claims that quite frankly haven't happened.

For you right now, your understanding of where we are with regards to climate change, how would you explain where we are, the current situation, as scientifically as possible?

Harald Rauter: Well, I'm not sure I can put it into as scientific as possible; but of course, in preparation for this podcast, I went back to essentially the roots and what you found out in this journey into the past.  And I'm really convinced that certain things you can only understand through a historical lens.

We essentially had a critical moment in 1982 where, ironically, the biggest and best prepared climate scientist came from ExxonMobil.  And so, in 1982, there is this famous 40-page report, which is an internal memo, which got released later on, which essentially puts down on paper very clearly to state climate change is real, we as humans cause it, because essentially it's an implicit statement, because it says if we burn more fossil fuel, we will cause an accelerated change of the climate.  Who is the species who is using fossil fuels to drive its civilisation?  It's us as humans, so that was an implicit acknowledgement.

Peter McCormack: They'd made the connection between an increase in carbon in the atmosphere?

Harald Rauter: Oh, yes.

Peter McCormack: I'm fully aware of this, because I interviewed Nathaniel Rich, who wrote a book about this.  I always forget the name of it.  Do you remember what it is?  The Decade We Could Have Saved --

Danny Knowles: Yeah, it's something like that.  I'll find it.

Peter McCormack: Do you know this book by Nathaniel Rich?

Harald Rauter: No, I don't.

Peter McCormack: Yeah, it's a very good book.  Actually, he's written a few good books.  He's a journalist based out in the US.

Danny Knowles: Losing Earth.

Peter McCormack: Losing Earth.  So, he wrote a book that covered that specific period with ExxonMobil.

Harald Rauter: And I think this is really critical to be understood, because if we go back into that time, it was not a conversation of, "Do we doubt whether it's real or not?"  It's essentially building a strategic argument, "How do we deal with this fact?"  So, I just imagine the ExxonMobil management sitting down and saying, "How do we deal with this now?" and I imagine they're sitting down and saying, "Okay, if we look at the lay of the land, in terms of strategic positioning, Porter's Five Forces, who are we; who are our rivals; what's the bargaining power of our suppliers; there's almost none of our customers; there's almost no bargaining power of potential substitution, that is risk so now how do we deal with this?"  The implicit assumption was, "If we exceed a certain threshold of carbon in the atmosphere, this will lead to policy changes which will be detrimental to our business".

So, I would put it down here for our conversation that there was never any doubt that climate change is real, and that we in fact have lost a decade, or two decades, discussing whether or not it's real.

Peter McCormack: This is probably why the likes of Katharine -- so, somebody like Katharine Hayhoe, if you put to her, "Hey, would you be interested in debating Alex Epstein on climate change?" she will just decline it.  Her view is that, "I'm not here to waste my time.  I'm not going to debate whether climate change is real or not.  It's happening.  I'm only interested in working on policy or actions that can change it".

Harald Rauter: Yes, understood.

Peter McCormack: Dessler did do the debate with Alex Epstein, and Alex's approach is slightly different.  He's not denying climate change; his view is that, "No, I agree it's real, but we can mitigate this.  And by preventing people having access to fossil fuels, we will do more damage than good".  I'm not defending either argument, but someone like Katharine will just hands-down not debate people because of this.

Harald Rauter: No, I think it would be a very interesting conversation, because this is exactly what we actually need to do.  Now, there is no point in having a conversation of what happened in the past if we want to go forward, if we want to find a way of how we can go forward.  I think the climate community is not doing itself a favour by saying, "We should shut down fossil fuels by tomorrow", because obviously that will lead to detrimental short-term consequences, as we're seeing in Europe right now.  So, this is not a fruitful conversation to be had.

What we need to do instead is, like any normal company would do, it would say, "We have a business model.  Now we need to find a substitution strategy, how we can get into a new business model".  How do you think Apple sat down in 2004, when it just saw that MP3 players were getting smaller and smaller and getting integrated into your mobile device, which is called a telephone?  They didn't choose to go into the telephone business because they were so keen on having a telephone; but they were keen on maintaining their share of MP3 players, which was a massive part of their business and their revenue, to be continued in a new reality, which is called the mobile age.

I think that's the same conversation we need to have with regards to energy.  Even if we look at the International Energy Agency and a different scenario.  None of these scenarios predict a world in 2100 below 30% fossil fuel energy in the supply mix.  I think we can do better than that, I think we need to do better than that, if we are serious about 1.5°.  So, my tether, my North Star in all these conversations is essentially this emerging reality that 1.5° global warming, compared to the pre-industrial age, is a key figure that we need to work towards, and we need to be very creative on how we can make that work.  But we cannot compromise on 1.5°.

Peter McCormack: Because…?

Harald Rauter: Because the damages and the consequences if we only reach 2° are too detrimental for the human civilisation to accept, meaning at 2°, for instance, you have 2.5 billion people that will run out of water in Sub-Saharan Africa, which will lead to huge climate migrations.  This is not a dystopian argument.  I mean, if you look into France right now, you see these processes accelerating and what it means if even western civilisations are running out of water.

Peter McCormack: But to challenge you there, because it's right to challenge you, there have been grand claims made in the past, lots of very grand claims.  There were specific claims with regards to the ozone layer and acid rain; there were claims that we'd all be under water by a certain time.  So, what I want to know is that if someone is claiming that 2.5 billion people in Sub-Saharan Africa will not have access to water, how do we know this?

Harald Rauter: Well, we don't really know it.  It's of course part of a scenario-planning exercise.  But I think the question, to me, is a different one.  If we have the possibility to contain global warming to 1.5°, why would we not try to do it?

Peter McCormack: Well, I think the best argument for that would be, what is the trade-off?  What is the trade-off between 1.5° and 2°?  What do we have to do to get to get to 1.5°, and what are the costs to humans and civilisation, and what is the impact of going to 2°?  To me, this is the argument.  By the way, I'm with you --

Harald Rauter: No, I understand all that.  But the question remains the same, even if we work with a 2° scenario.  Currently, we're 2.7° to 3.5°.  So, if you want to discuss whether this is going to be detrimental or not, we can have the conversation, but then it's not me with whom you want to have that conversation.

Peter McCormack: Yeah, I know, yeah.

Harald Rauter: So, even if we talk about a 2° global warming threshold, the question still remains the same, "If we are able to do it, why wouldn't we do it?"  And the question that I'm interested in is asking myself, "What is the policy side doing at the moment to make this work?  What are the assumptions this policy side is building its policies on?  What are the climate models trying to predict, and how robust are they on the base; or, how concrete are they at the base when it really comes to concrete climate action?"  So, this is the onion that I try to peel.

Peter McCormack: Yeah.  And I think part of the fear that comes from those who are either sceptical or against the conversations, whatever the range of views are, I think comes from a place of massive distrust at the moment for centralised entities, institutions, governments --

Harald Rauter: Oh, yes.

Peter McCormack: -- fear that this is used, weaponised, for tax policy, that their friends in government, or close to government will benefit, that Nancy Pelosi will know exactly which companies should be financed on the green side and will successfully invest in them, all the bullshit that we've seen during COVID, which by the way I personally fell for a whole bunch of this shit; I think that is where the fear comes from, is how do you establish policy which is overall net good for people and isn't just a tool or a weapon of these failed centralised institutions?

Harald Rauter: I 100% agree with them.  I'm sitting here in a Bitcoin podcast, because I'm massively distrustful towards the institutions.  I think that we need to be a bit more surgical when it comes to understanding how these institutions operate.  Some of the arguments are just too simple for me, due to my experience, or according to my experience.  These are not bad people, they're not ill-intended; they do their best, but based on a very compromised understanding of the world.  So, I'm sitting here because I think a lot of these narratives, also within the IPCC reports are problematic, and I'm happy to dig into that, because I think this is a quintessential point to be understood before we can have a conversation around how does Bitcoin fit in all of this.

Peter McCormack: Okay, talk to me about that.  Explain to me who the IPCC are.

Harald Rauter: So, the IPCC is the Intergovernmental Panel for Climate Change.  It is essentially a body that has been created in 1988 as, you would call it, a joint venture out of the World Meteorological Organisation and the UNFCCC, which is the UN entity which deals with the climate change issue.  This is the panel which is the scientific body that gathers all the information that is available on the climate, and then publishes reports describing the state of play at a certain given point in time, and they do this through regular reports.  These are the important reports when it comes to -- or, these reports cater to governments, all governments around the world, to inform the policymaking on climate-related decisions.

Peter McCormack: Are they a respected and trusted body?

Harald Rauter: Well, on the whole, yes, absolutely.  I know this is also a point of controversy.  I recommend everybody who doubts academic publishing or scientific publishing to go and read those reports.  In terms of scientific craftmanship, that's best in class, and they are really well vetted.  So, we're bitcoiners and if you don't trust it, then fucking verify it, because all is publicly available.  The reports are available, the supplementary material is available, all the models are available, all the assumptions within the models are available; everything is open source, and I think that's a really good thing. 

But it's a massive body of work to dig deep into this, and I was fortunate enough to have this as a profession to learn how good they actually are.  I don't want to qualify on how good they are; I think there are very interesting aspects in them, but there are also flaws in them, and I'd love to discuss what I think what are the interesting positives and negatives.

Peter McCormack: We've done some research on this in the past as well, because one of the criticisms of climate scientists is the models; people use models to actually attack them.  But in our research, Danny, they were pretty accurate, weren't they?  There have been failed models certainly, but that's the exception, not the norm.  Actually, the models have been, in the more recent ones, even more accurate.

Harald Rauter: Which makes sense, right.  The more data sets you get in, the more data you can incorporate, the better the models are.

Peter McCormack: Right, okay.  So, from that point, you talked about, and I know you were discussing this in preparation with Neil, you talked about some of the flaws within the overall climate change conversations.  I mean, I'm starting to recognise them, but where would you say is we're having a lot of difficulty?  All I want is to make progress.  If somebody is sat across the table from me, who is a sceptic, I want to know, how do we get to a point where we're in agreement, where we both have a set of facts, we're like, "Okay, that is truth, that is fact", and we can agree and make progress.

I'm not here to push a single agenda.  If I'm wrong, I want to know if I'm wrong; and if they're wrong, I want to help them know if they're wrong.  How do we get do that point?  If this is science, it should be pretty obvious, it should be like, "Here are the facts, this is where we're heading, these are the consequences, this is what we need to work with".  And by the way, I think the most complicated part of all of this is actually, climate change is a global issue, which has got local and regional interest.  I think there are certain companies who have a massive interest in helping people believe this isn't an issue, because their entire business model, which is worth billions of profit every year, completely crashes.

Just as a complete side point, I think people should look to Saudi.  I see what's happening there.  That is a country whose entire business model is based on the extraction of hydrocarbons, but they are changing their business model at the moment, and they are investing heavily in sports, and they've bought into Newcastle, they've started a golf tournament, and they've just announced this new mega-walled city.  That is a country that recognises that its business model needs to change.

Harald Rauter: Oh yeah, absolutely.  Well, a couple of things here.  I wouldn't call it flaws, because I think what humans do naturally is we have a very complex reality, which we try to extract in a certain way to make our lives just easier.  And I think, on a policy level, you do the same thing.  But you need to read the primary data in order to be able to identify where we might have taken a wrong turn. 

So, let's focus for a second on the special report which came out, which is just called, The Global Warming of 1.5°, in 2019.  It's a massive document, it's 260 pages.  Of course, there are executive summaries and everything.  But what is really interesting is the fact that it represents a synthesis of all the different models that have been used in the past to model climate change, but also to describe mitigation pathways.  So, let's put that to the side for a second; I think it's really important that we talk about those when it comes to Bitcoin.

On a higher aggregation level, it's super-fascinating, because it was the first time that this report asked the question, "In what world are those mitigation pathways actually embedded in?"  Now, that makes total sense, because if you look at a world which is highly cooperative, a certain action can look very different, or feasible, than to a world where the world is highly competitive.  So, what it did is they incorporated the so-called Shared Socioeconomic Pathways, which essentially is a description of the state of play when it comes to, "How does the world look like in terms of geopolitical condition?"

It assumes fairly that that might be a world where the world is highly cooperative, it recognises collectively that we need to do something about climate change, and is willing to act in a cooperative manner towards that path.  It's called the SSP1 Pathway, the green growth.  Then, on the other extreme, there is a world which is almost a bit dystopian, because it describes a world -- I need to read this up --

Peter McCormack: That's fine.

Harald Rauter: -- because it's just so accurate.

Peter McCormack: Harald has receipts!

Harald Rauter: I have.

Peter McCormack: Do you have something so we can pull it up there?

Harald Rauter: No, I don't.

Peter McCormack: Where does that come from; is it off the internet?

Harald Rauter: Yeah, of course!

Peter McCormack: We have the internet here in Bedford!

Danny Knowles: Well, it's pretty bad!

Harald Rauter: All right, so look up the Five Shared Socioeconomic Pathways.

Peter McCormack: Hi, Jerome.

Harald Rauter: Where is Peter, by the way?

Peter McCormack: We've retired Peter Schiff.

Harald Rauter: Okay.

Peter McCormack: Yeah, he's done, we've had enough Peter Schiff.  We've moved on to Jerome Powell.  I'm not feeling Jerome.

Harald Rauter: Oh, please put up Lagarde, that would be so much more appropriate.

Peter McCormack: Yeah, Lagarde's interesting.  Do you know what, I feel like I want --

Harald Rauter: In terms of lossless level?

Danny Knowles: But he's telling you which way inflation's going in the UK.

Peter McCormack: Yeah, I'm just not feeling Jerome like I used to feel Peter Schiff.

Danny Knowles: What?!

Peter McCormack: Stop it!  Can you find it?

Danny Knowles: Yeah, I can find it, but the internet's not loading anything.

Peter McCormack: Oh, for fuck's sake.

Harald Rauter: So, you don't have --

Danny Knowles: You told him we had the internet!

Harald Rauter: So, you don't have internet!

Peter McCormack: We do, it's just in the village I live in, it's pretty shit.

Harald Rauter: It's easy to explain.  So essentially, this is called --

Peter McCormack: Here we go.  Is this it?

Harald Rauter: -- A Regional Rivalry Scenario.  Leave all of that out, etc, there needs to be some kind of a map.

Danny Knowles: Here you go.

Harald Rauter: Oh, yeah, this is cool.

Peter McCormack: Okay, so…?

Harald Rauter: So, it's called The Rocky Road.  So, it assumes a world with high population, low economic growth per capita, low human development, low technological process, resource-intensive lifestyle, resource-constrained energy and food demand per capita, focus on regional food and energy security, regionalisation and lack of global corporation.

Peter McCormack: Yeah, it sounds pretty fucked!

Harald Rauter: That sounds somehow familiar.

Peter McCormack: Is that the current state of play?

Harald Rauter: No, wait, I think this is why it gets super-interesting.  And then we have the Inequality Scenario, which essentially assumes a lot of tensions between different populations, so city versus rural, working class with elite, and so on and so forth.  And then there is a fossil fuel development, which is actually a really interesting one, which assumes we're not changing much, we just use a shit load of energy that we can produce out of fossil fuels to mitigation climate change.  It sounds absurd, but of course you need energy to also do a lot of carbon capture and storage, and so on and so forth.  They're all essentially assumptions.

Then you have the SSP2 pathway, which essentially is called The Middle Of The Road, so it's a compromised, we're not so much in rivalry, we're not so much in cooperation; we're somewhere right down the middle.  And the funny thing is, what the IPCC scientists then did, they ran the 22 integrated assessment models, which are all open source, you can check them, you can verify them, and ran them under the different socioeconomic pathways and said, "Okay, can we find a way of how we can reach 1.5° or 2° global warming until 2100 under those societal boundary conditions?"

Here is where I think something very, very problematic happened, because the IPCC said, rightfully as scientists, "SSP1, clearly we can do it; SSP2, we can do it.  There's even a 2° pathway in SSP5, but there is no 1.5° scenario in SSP3 and in SSP4".

Peter McCormack: Right, and so let's read SSP3, "A resurgent nationalism, concerns over the competitiveness and security and regional conflicts push boundaries to increase focus on domestic or, at most, regional issues", basically it feels like where we are right now.

Harald Rauter: Well, I think it's even worse.  I think if SSP3 and SSP4 would have an ugly child, this is where we are in.

Peter McCormack: "Inequality: highly unequal investments in human capital, combined with increases and disparities in economic opportunity and political power, lead to increasing inequalities and stratification both across and within countries".  Yes, I mean it feels like we are that ugly child.

Harald Rauter: Yes.

Peter McCormack: But it feels like we have become that ugly child over the last five to ten years.

Harald Rauter: Oh, yes, absolutely.

Peter McCormack: This is a recent issue which you can see with a conflict in Ukraine and Russia and the culture wars.

Harald Rauter: Absolutely, I'm 100% with you on that.  And I think this is where you need to understand the flaws of political institutions, because then the IPCC made something which is, from a policy perspective, relatively straightforward and understandable.  But they said, "We do not have a 1.5° or 2° pathway for SSP3 and SSP4, so we reject them, we just don't look at them, we ignore them.  We just focus on an illusionary world where we are all cooperative, because we have the Paris Agreement, and we build all the policies based on that".

Peter McCormack: And we hope…

Harald Rauter: And we hope, and we go into SSP1 or SSP2, build our policies around that, and then we just see what happens.

Peter McCormack: Because if you don't, if you're SSP3 or SSP4, you might as well not do anything.

Harald Rauter: Or you need to look at completely different options and completely different interventions that would make sense in an SSP3 or an SSP4 world.

Peter McCormack: The problem in those worlds or with those different interventions is they're probably likely the scenarios that we've seen during COVID that haven't worked anyway, and probably accelerated us towards SSP3 and SSP4.

Harald Rauter: That might very well be, I don't know, but I think what is interesting for us in this conversation, with regards to Bitcoin and I'm coming back to this later on, is Bitcoin is made for exactly that world, because it aligns the incentives in a non-cooperative environment, it eliminates the trust that is required for cooperative action.  We can qualify that later on.  I think it has different intervention points where this could make sense and will make sense.

Now, the second piece that I want to touch upon is, if we look at the models themselves, and that's super-interesting and I'm not a modelling expert, but I guess most people know how modelling works, so essentially what you do is you have multi-variables as inputs that you qualify, so you give them certain values, and then you run a so-called regression analysis which then looks at possible outputs and then asks the question, "Is this output that I need within the realm of the independent variables that I've used as inputs".  So, this is essentially how modelling works.

Peter McCormack: I don't think most people do know how modelling works!

Harald Rauter: Okay, do most people understand how modelling works now; is that a bit better now?!

Peter McCormack: I do now.  If we were making a show on modelling, I would have further questions, but you go ahead!

Harald Rauter: Then don't invite me!  And so, the models are still black boxes for me, because I'm not a modelling expert; there are people who are much better at this than I am.  But what is interesting, what is published, is the input variables that are considered for the models themselves, and I think here is where it gets really interesting.

So, the categories for the models, or the inputs for the models are the same for all the models, so they essentially assume, "What if we can make buildings way more efficient by X% at scale?  What if we can decarbonise traffic by X%?  What if we can mitigate landfill gas by X%?  What if we can use regenerative agriculture to produce our food?"  So, these are very high-level assumptions that then go into these models, are then cooked, and then give you certain outputs, whether under these assumptions the 1.5° or 2° targets can be reached or not.

Now we have two very interesting aspects where we essentially see flaws within the state of play within the climate community right now, because we're building all our climate actions on a false assumption that we are living in a cooperative world, and I'm here to put my hands down and say the Paris Agreement is dead, it will not be revived, we will not make it work, so we need to find better ways of how we can actually get to 2° or 1.5° global warming without being in a cooperative environment.

Peter McCormack: Okay, just on that, you're saying it's dead; it isn't publicly dead.  Remind me, did Trump pull America out of the Paris Agreement?

Harald Rauter: Yes.

Peter McCormack: He did, okay.

Harald Rauter: But it was a political stunt, nobody cared about it anyway.

Peter McCormack: No, of course, that was about Trump, I'm fully aware of that.

Harald Rauter: But just to be 100% clear, he pulled the US out of the Paris Agreement, but there is a four-year delay period before you actually pull out.  So, the US has been there all along.

Peter McCormack: Was there any validity to his arguments?  Danny, can you look up what Trump said?

Harald Rauter: Can we just please not go there, because the argument was, "I'm the President of America and not of Paris"?

Peter McCormack: Well, you say that, but actually there are times in the past I've been critical of Trump, and actually some of the things have been pretty good.

Harald Rauter: Oh, man, I mean look at the UN speech in 2016 with regards to Germany; it was spot on.

Peter McCormack: Yeah, he absolutely nailed it.

Harald Rauter: He was absolutely spot on.

Peter McCormack: Yeah, he nailed it, he said they were too reliant on Russian energy, and here we are and Germany is facing blackouts.  I just want to know exactly what it is he said; can we just do it?

Harald Rauter: Of course, it's your show!

Peter McCormack: You're the guest though, you can say, "No, fuck you, Pete, I'm leaving"!

Danny Knowles: I mean, I've got his statement here, it's a lot.

Peter McCormack: All right, let's go to the top.  Right, "Thank you very much [applause] thank you.  I would like to begin by addressing…" I don't need that, "I've just returned from a trip overseas with nearly…" I don't care about that.

Danny Knowles: He said this.

Peter McCormack: Right, "One by one, we are keeping the promises I made to the American people during my campaign for President, whether it's cutting job-killing regulations, appointing and confirming a tremendous Supreme Court…" etc.  "On these issues and many more, we're following through on our commitments, and I don't want anything to get in our way.  I am fighting every day for the great people of this country…" okay, I get the point, "… my duty to protect America and its citizens, the United States will withdraw from the Paris Climate Accord [applause] thank you, thank you, but begin negotiations to re-enter either the Paris Accord or an entirely new transaction on terms that are fair to the United States, its businesses, its workers, its people, its taxpayers.  So, we're getting out, but we will start to negotiate…" etc.

"As President, I can put no other consideration before the… taxpayers to absorb the cost of lost jobs, wages… draconian financial and economic burdens the Agreement imposes on our country.  Compliance with the terms of the Paris Accord are onerous and energy restrictions it has places on the United States and would cost America as much as 2.7 million lost jobs by 2025 according to the National Economic Research Associates.  This includes 440,000 fewer manufacturing jobs, not what we need…"  I mean, what I'd want to know, where are those jobs lost, but are new jobs gained by people moving into other areas?  Okay, I mean look --

Harald Rauter: I went cross-eyed already.  It's all fair game, you know, it was a political stunt.  This move makes sense under America First policy.

Peter McCormack: But isn't America the biggest pollutant?

Danny Knowles: I imagine it's China.

Harald Rauter: No, it's still the US.

Peter McCormack: It's still the US?  Can we have a look at that.  I wonder if, because of that, the requirements under the Paris Accord therefore hit them the most.  I'm not saying whether it's right or wrong, because that's one of these challenges, like who bears the biggest burden?

Harald Rauter: I mean, this is a big and important conversation.

Peter McCormack: China now is double the United States of top 10 polluters.

Harald Rauter: Oh, okay.

Peter McCormack: India's half of the US, Russia -- UK isn't even top 10.  Go UK!

Danny Knowles: Need to try harder!

Peter McCormack: All right, go on.

Harald Rauter: This plays into the argument, we cannot save the world.

Peter McCormack: Yeah.

Harald Rauter: The truth is, the Paris Agreement made very clear, through something that is called The National Determined Commitments, which have been signed by the countries, that this is the quota that you need to fulfil.  So, it was never meant as, "You need to save the world", but it was meant as, "This is the problem, and this is how we cut it down into national determined commitments, and this is your show that you need to burden".

Peter McCormack: Yeah, I think the reason I wanted it up there is to make the point that one of the biggest problems is the political cycle and the career objectives of a president to be re-elected versus the needs of the planet; that is something that exists.  The political cycle, the four-year, five-year political cycle, depending on the terms of your country, is often something which causes short-term decision-making, which negatively impacts countries.

Typically with the money, in borrowing and debt that countries build up, it tends to be built up because current administrations are always focused on being re-elected in four years.  So, they print the shit out of money and they pass the problem onto generations further down the road.  The political cycle, to me, is one of the most damaging things we have in society.

Harald Rauter: But it's a reality.

Peter McCormack: Yeah, of course.

Harald Rauter: Just to add one more point to the point, "We cannot save the world", there is one element which builds deliberate asymmetry into sharing the burden into the Paris Agreement, which is the so-called conversation around loss and damage, which means rich, western countries have, over decades, fucked the poorer countries.

Peter McCormack: Of course.

Harald Rauter: So, the Paris Agreement wants to get that straight and say, "Look, because you have profited over-proportionately from the extraction of goods and commodities, whatever, and have over-proportionately affected the poorer countries through the ramifications of climate change already, you need to build up a fund, a loss and damage fund, to finance the adaptation measures in the poorer countries".  Now, guess what happens?

Peter McCormack: People say no?

Harald Rauter: No, they signed that and they pledged, but what do you think happened then?

Peter McCormack: I have no idea, tell me.  Don't make me make a shit guess!

Harald Rauter: The fund never materialised, because of course nobody wants to pay the bill.

Peter McCormack: Right, okay.  But I also find that strange, because I do know how much aid large countries send to other smaller countries.  And I know that's politicised itself, but it does happen.

Harald Rauter: Yeah, I cannot comment on that, I don't have any opinion, but I'm just saying I'm looking at what we have installed, what are the mechanics of the process and where does it get stalled, for what reason.  So, of course the political cycle is a problem, of course the sellability -- is that even a word -- to your constituents is a problem, yes.  But there are also very urgent needs that usually overrule and trump the long-term ambition of any country.

So, let's be clear, these reports were written 2018, so they were multi-annual bodies of work.  So, essentially what we're looking at is a rear-view mirror into the happy-camper age of 2015, when the Paris Agreement was signed and everybody was happy.  2022, fast-forward, we're facing a very different world.

Peter McCormack: Okay, Paris is dead, what now?

Harald Rauter: Well, that's what we're here discussing.  So, I think it would help the conversation to start it from a very different place and say SSP1 is dead; Paris Agreement is dead; we're fucked.  And I actually also say that in my company, so I am the one that is known to be the one that says, "We're fucked".  And don't get me wrong, I'm not saying this lightly.  I went through very, very hard phases.  I worked for the European Union in this climate action field for seven years, I've seen it through the bone how these organisations operate.  Again, I'm not blaming it, I'm doing a real surgical analysis out of my experience and drawing my own conclusions how I as an individual can contribute to an effort to make this a better world.

Peter McCormack: No, but I agree, I also think we're fucked!  And I know the issue's there.  Have I drastically changed even my life at an individual level?  No, I haven't, I'm a fucking hypocrite.

Harald Rauter: But we all are.

Peter McCormack: Yeah.  But at the same time, I'm looking at countries and their energy production as only going in one direction, and we need it to go, certainly in terms of renewables, in a drastically different direction.  We are in a world in conflict, and I just don't see -- every time I read something like you've put together or something else, I'm like, "This is just not going to happen".  In my head, there's part of me that's already thinking, "What is the mitigation I've put in place to protect my children when we head to a very different world, because things haven't happened?"

Harald Rauter: But you know the answer, you have an answer to that, I have an answer to that.

Peter McCormack: Build a bunker, lots of Bitcoin and gold, produce my own food, get some guns and some tinned pineapple!

Harald Rauter: Yeah.  I mean, two parts of that I agree.  But I think it offers us a different level of conversation to look at where does it make sense to interact, or rely on governments, and where do we need to take a bottom-up, or where to do need to build a bottom-up movement that can allow us to regain agency in the process that got completely disenfranchised.

Peter McCormack: Hold on, so are you saying that we should no longer rely on centralised institutions to solve this; you think this can come --

Harald Rauter: I think it needs to come from us.  I personally think that we are seeing the end of the traditional institutions as we know it.

Peter McCormack: Yeah, they're breaking apart.

Harald Rauter: Yeah, and I think it totally makes sense.  If you look again into history, and how people always seek to find some level of coordination and cooperation, and these proof-of-stake-resembling third parties that we can rely on and trust to do things for us that we would not be able to otherwise do ourselves in an uncoordinated manner, they have been proven very useful until a certain point.

I think what we need to be prepared for is that those institutions do understand that they are in decline.  I'm a big European, I consider myself a European citizen.  I love this continent for all its diversity, its differences, its cultural differences.  I've not been much to the US, so I don't want to praise that too much, but --

Peter McCormack: Can I ask you a question on that?

Harald Rauter: Yes.

Peter McCormack: Are you also pro-EU?

Harald Rauter: Not pro-EU in the current form.  I think the nail in the coffin of the European Union, as it is right now, went in at the latest in 2004.  Now, I can explain to you if you're interested what that means.

Peter McCormack: There's a reason I ask you, because I'm very, very pro-Europe.  As someone who travels to America a lot and also loves a huge amount about America, I love the diversity in America, but I also think that a lot of Europeans could benefit from understanding America more, and vice versa.  The thing I love about Europe, my favourite things about Europe, I can travel anywhere in Europe, feel very safe and meet people with a different language and different culture, but a very similar outlook on life, and quite a similar sense of humour.  I think Europeans have a very good ability to work together, to cooperate, even though we are essentially different countries.

I think post-World War II, I think what's happened in Europe is incredible.  I struggle with the EU, but that's the bureaucrats fucking it up.

Harald Rauter: We are on the same page, and I think this is why it pains me so much, because I think that there is -- the price that we paid for free movement and not to convert to another currency, what we see now, is too high for what we pay on the other side of the equation.

Peter McCormack: Yeah, but you can blame the problems in that on essentially the same people you can blame with the problems in the US; it's all the centralised institutions.

Harald Rauter: Yeah, and how they have been built.  I mean, I think the -- so let's not go too much into the details of how the EU does its legislation and how it builds its institutions, but I think one piece is really, really important.  The post-war stability came essentially from the two big nations within the European Union, which is Germany and France. 

Peter McCormack: The two big…?

Harald Rauter: Yes, I'm sorry, but essentially these were the two war parties that had to reconcile and find peace with each other.  This is essentially the big axis in the European Union.  I know you're looking at me very disgusted!

Peter McCormack: Well, you know, it was Churchill who stood his ground against Hitler, I think he played a very important role.  But, come on.

Harald Rauter: I don't want to idealise it, but this is a section --

Peter McCormack: I'm fucking with you!

Harald Rauter: Yeah, I know.  And I think a lot of this institutionalism that followed was very much built on, "It's going to be fine, we're going to work this out, because we trust each other", and we know where blind trust leads us.  And I think where this problem really surfaced was when we introduced monetary union, around 2000, without actually having a plan for a fiscal union.

Peter McCormack: Well, there was no fiscal union.

Harald Rauter: Well, it was in plan, but it got voted down by the French and the Dutch in 2005.  So essentially, suddenly we're stuck in a monetary union without actually knowing how you're going to balance that on the other hand of the equation.  This is I think where the asymmetry started to really show, and where the destabilisation process really started.  And now you have an EU that, by the way, is really efficient.  It's using very little money for its administrative processes, but it does not have a lot of geopolitical power, institutions, to get anything done.

Peter McCormack: Do you know about the whole moving of the European Parliament to Strasbourg for three days every month?

Harald Rauter: I don't know about that.

Peter McCormack: This is insane.  This is my favourite thing about the European Parliament.  Danny, look this up.  Search up the European Parliament and Strasbourg.  So, as far as I'm aware, when the original agreements and discussions about forming the European Parliament were created, France were suspicious of it being entirely based in Belgium.

Harald Rauter: Oh, yeah.

Peter McCormack: Right, we're just loading this up, "Why does the European Parliament move between Brussels and Strasbourg?"  Because, they were looking at ways to save money, and they realised €103 million was spent annually -- here we go, "The EU's national governments decided in 1992 to lay down in the EU Treaty where the EU institutions are officially seated.  This decision had important consequences for the working arrangements for the Parliament, its official seat and venue… A 2013 study by the European Parliament shows that €103 million could be saved per year should all European Parliament operations be transferred from Strasbourg to Brussels", no, that's not what it is.

But for three days, the lorries go to Brussels, they collect everything, they move it all to Strasbourg and they operate there for three days a month, and then they move it all back.

Harald Rauter: Because it's all based on quotas, every country needs to have a certain EU institution, every country needs a commission, etc.

Peter McCormack: Yeah, but come on, somebody at some point must have said, "Hold on.  So, what you're saying is we're going to move the whole parliament for three days?  This is fucking idiotic", but they did it!

Harald Rauter: Yeah.  But let's not get hung up on that.

Peter McCormack: I know, I just think it's funny.

Harald Rauter: It is funny and it's also ridiculous.

Peter McCormack: But this is the people we're relying on.

Harald Rauter: You should not be surprised that people are losing their trust in those types of institutions, if the only legislation you get done is what type of vegetables you're allowed to sell in your store.  It's ridiculous.  I read this yesterday, I don't know who posted it, but it was really interesting; our relationship to the national government, or to a superior government, like the EU -- there is still a relationship, it's not either or; it's both -- relies on the fact that I give up my freedoms and liberty to a certain extent, I comply with the laws, in exchange for security, which means you provide energy sufficiency, you provide food sufficiency, you provide me with a stable currency, you provide me with defence, and you can do none of that.

Peter McCormack: Benjamin Franklin will be shaking his head.  Was it Benjamin Franklin who said that, "Whoever gives up security --"

Harald Rauter: But I think this is really important to understand that there is something deeply European, and I think also something deeply healthy in this ability and this wanting to trust each other, but this can go badly wrong.

Peter McCormack: Was it Benjamin Franklin?

Danny Knowles: Yeah.  He said, "Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety".

Peter McCormack: Right, which sounds very cool.

Harald Rauter: I wouldn't go that far.

Peter McCormack: Well, Europe is built on cooperation.

Harald Rauter: Yes, and I think this is why, if you do a surgical analysis of -- we've moved now from Paris Agreement to political institutions.  Now you can ask yourself, "If I want to do something, what is my best shot that I have to gain agency in both the climate challenge, as well as as a citizen in the European Union, or in this continent?" and I think that Bitcoin has a role to play in both.  Well, let's make it very concrete.  I think I want to bring in another piece that could be interesting to discuss, which is how now this, what we agree is a rather dysfunctional body, approaches crypto and Bitcoin, because there's a big, big regulation coming out.

Peter McCormack: Well, I do have another question before we get to that.  What is the actual solution, because we're about to get into the method of solving this and how we get there; but what is the solution?

Harald Rauter: Thanks for asking the simple questions!

Peter McCormack: By the way, this chart is incredible.  Anyone who's listening to the show, we're about to walk through a chart which talks about energy use, energy generation and it's brilliant.

Harald Rauter: I think it's one of the most resourceful sites that anyone can dig into who's interested in data, not only regarding climate change, but also economic activity.  I recommend it a lot.  So, what we can see here is that --

Peter McCormack: Yeah, try to explain how this chart looks to somebody who's listening.  We will put it in the show notes.

Harald Rauter: So, it's essentially a pie chart that describes in detail, per industry, what the industry's contribution, the sector's contribution, to greenhouse gas emissions is.  And it pies it out in a way that in the highest aggregation form, we only have a couple of big industries left which contribute to essentially 100% of GHG emissions.  What we can see is that the energy sector, directly or indirectly, contributes about 75%, give or take, to the CO2 emissions.  And I think that's important.  If you ask me what is the solution, we need to understand energy, we need to understand energy generation, energy distribution, energy consumption and where the majority of the energy is actually consumed.

Peter McCormack: Sorry, just a quick question, I'm going to explain to the people listening.  So, the pie chart essentially says energy is 73.2%, agriculture, forestry and land use is 18.4%, waste is 3.2% and industry is 5.2%.  Then, in each one of those, when you go and check out the chart, it breaks it down further.  But where we have industry as, cement and chemicals as 3% and 2.2% separately, but within energy use, we have iron and steel at 7.5%, why is cement and chemicals not -- is that a by-product of the manufacture?

Harald Rauter: I cannot answer that question.  I think that there are some conscious choices around how this gets displayed, because you're absolutely right.

Peter McCormack: Well, it could be that the production of cement leads to CO­2 emissions, whereas iron and steel, it's the use of the energy.

Harald Rauter: It's indirect, yes.

Peter McCormack: Yeah, it's direct and indirect.  So, it could be that; I'd like to know that.  Okay.  Then, so when I see iron and steel is 7.2% total, that is the energy that that industry uses?

Harald Rauter: Correct.

Peter McCormack: So, if you electrify that part, if the energy generation came from renewables for all of that, that could be zero?

Harald Rauter: Yeah.

Peter McCormack: Okay, interesting.

Harald Rauter: Directly zero, but indirectly of course it would have an effect, yes.

Peter McCormack: And I would look at something like aviation at 1.9% and say, "Well, we can't do anything about that, because Boeing are not going to produce --"

Harald Rauter: We cannot do it, yes, we cannot do anything structural about it, because people want to move and people will want to move, and there's no way that in the short term, we can substitute the synthetic fuels in a way that would help the climate cause.  But I think it's actually an interesting item you're pointing towards, because we get a lot hung up on these really nice examples of shaming airlines.

Peter McCormack: Yeah, we shame airlines, and it's 2%; and we shame Bitcoin mining, I wonder where Bitcoin would be on this chart?

Harald Rauter: Well, I think this is exactly the conversation we need to have.

Peter McCormack: Sorry, one more question before we start breaking it down.  So, when I see deforestation is 2.2%, that isn't the carbon going into the atmosphere, that's actually --

Harald Rauter: It's opportunity cost.

Peter McCormack: Yeah, it's the opportunity cost by having a reduced absorption of --

Harald Rauter: Yes, reduced absorption of carbons --

Peter McCormack: Yes, okay.  This chart's fucking brilliant.  Honestly, if you're listening, whatever your beliefs are, go and check this chart out; it's fascinating.

Harald Rauter: Yeah, and I think once you see it from that aggregated level, you also understand that if you ask me now, "Where are the different intervention points where Bitcoin could make sense?" it becomes pretty clear.  So, we need to distinguish two things here.  There's energy that gets produced and generated, which never sees a grid.  So for instance, these large steel mills, they usually have direct purchasing agreements, long-term direct purchasing agreements for their base line with a reliable energy supplier.  But they also purchase energy from the grid.

Peter McCormack: Well, my question's very simple.  If we want to reduce the amount of increase in carbon in the atmosphere, what are the quick wins here?  So, you look at something like transport, 16.2%; if we move to an electrified fleet of vehicles globally, that means that is a number we can erode.

Harald Rauter: Yes, if you are sure that the electrification or the energy actually comes from a renewable source, which is not that easy, and I think this is exactly where we have to have a more nuanced conversation.  Because what we now know is, where this conversation starts from, we know that the majority of the grid is still considered fossil, so carbon intensive.  There's a growing minority of the grid that is renewable.

The problem here is that this is a complex interaction between the energy generators, the grid operators and the consumers.  So, it's not that easy to just say -- and you've covered that, we don't have to go into this in detail.  I mean, Shaun Connell talked about it very eloquently.  There is a lever here where we say, "How can we start to decarbonise the energy sector by slowly, emphasis on slowly, substituting fossil-fuel-related energy sources with renewable energy sources?  Why does this make economic sense?"  Because, the price curve for the renewables is massively decreasing, while obviously the marginal cost for fossil fuel is going up, because it gets harder and harder to produce it.

We are in a very special circumstance at the moment, which is not reflective of neither the past, nor hopefully the long-term future.

Peter McCormack: Just a quick question, what's the role of nuclear in this for you?

Harald Rauter: Personally, I think nuclear needs to be a part of the equation.

Peter McCormack: Agreed.

Harald Rauter: If you look at how efficiently we use energy, we've moved from a little bit of dried grass to coal to uranium.

Peter McCormack: To fission.

Harald Rauter: Maybe to fission in the future.

Peter McCormack: Well, fingers crossed.

Harald Rauter: But I think when we talk about baseload and short, reliable baseload supply, nuclear needs to be part of the equation.  From a climate perspective, it's clean, clean-ish.  You have a long-term problem of storage.

Peter McCormack: We found out the other day that the big tanks of green goo are a myth.  I was kind of disappointed.

Harald Rauter: What is green goo?

Peter McCormack: You know in The Simpsons, at the nuclear plant, they have the big tanks of green goo that leaks into the river and creates a three-eyed fish?  There's no green goo.

Harald Rauter: Okay, I'm super-relieved to hear that!

Peter McCormack: I might sound like a moron, and I hope I get backed up here, but I imagined that there was some kind of goo; did you?

Danny Knowles: I mean, I didn't expect it to be like The Simpsons, but I didn't know what it looked like.

Peter McCormack: Did you expect it to be a goo though?

Danny Knowles: I don't think so, is the truth!  I expected like rods.

Peter McCormack: Shut up!  You're just saying that to make me look stupid.  You see, that's why he's the natural successor.  Fuck you, Danny!

Harald Rauter: I think once we start to understand it's not that simple to stabilise grids through simple scaling of renewable energies, I think we start to have a better conversation about what it really takes to accomplish that.  For instance, we know that there are a massive amount of projects that have been developed, specifically in the UK by the way, by government subsidies, for solar and wind.

Peter McCormack: And to anyone who says, "Yes, but it's government subsidies", let's be real: the fossil fuel is highly subsidised.

Harald Rauter: $6 trillion, yeah.  So, this is not a free market, it's a highly, highly corrupted market, for various reasons.  And so what happens now is, if you have these projects which essentially could generate a lot of energy, we're talking gigawatts here and gigawatt-hours here, this cannot be dispatched to the grid.  Why is that?  Because the grid operators say, "With this additional supply, we cannot balance our grid proportionately or appropriately, because we do not know how we can dispatch it to a demand".  So they say, "What we need to do now is to widen our bandwidth, so we need more bandwidth on the grid.  The question is, who is going to pay for that?" 

The grid operator says, "I'm not going to pay for that", but the regulator says, "You have to do that".  Then the grid operator says, "If I have to do it, then I will cascade the cost down to the end consumer".  So, we see these are very, very complex relationships and a political game of who is carrying the water in the very end.  On top of that, someone needs to have these projects in the hundreds of millions on their books.  These are very costly projects that still have a maintenance cost, but don't return you anything.

Peter McCormack: But if we look at where it has happened, parts of Scandinavia have been very successful moving to renewables.

Harald Rauter: Very.

Peter McCormack: Even Germany was fairly successful in transitioning to some renewables, fairly --

Harald Rauter: Germany was the pioneer of all of this.

Peter McCormack: Yes, but they decommissioned their nuclear plants and became reliant on Russian natural gas, which is a separate issue.  But also, isn't Texas 70% reliant --

Danny Knowles: I think it's had days over 70%.

Peter McCormack: Yeah, but Texas is oil and gas country over there, boy!  And they've successfully been transitioning over time to renewables.

Harald Rauter: Yes, because the business case makes sense.  Now, you asked me, "What are the solutions?"  Okay, what is the natural price of energy if you produce it or generate it?  Nothing, it's zero, so you need a customer to pay something for it.  Now, what you're looking for is buyers of first resort.  Who is willing to buy that energy under all circumstances?

Peter McCormack: The government.

Harald Rauter: No, there are not many.

Peter McCormack: The government isn't?

Harald Rauter: Well, what do you do with this energy.  You need to understand about energy, you cannot just discard it; energy cannot be destroyed.  So, once you produce the energy, it needs to be actively managed out if nobody uses it.  Do you want to hear a cool example of that?

Peter McCormack: Tell me.

Harald Rauter: So, in Austria, the main energy supplier has a framework agreement with the Austrian railways, so that if they have too much supply running on the grid, the Austrian railways are running their locomotives empty just to kill the energy, just to destroy the energy.

Peter McCormack: Oh, yeah, this is like running the toasters, right?

Harald Rauter: Like running the toasters, but running a locomotive takes a bit more energy, so this is really good.  Once you understand that, they can ask, "Who is the buyer; who pays here?"  The energy provider pays, so it's negatively priced energy.

Peter McCormack: So, they might as well spend that on some ASICs…

Harald Rauter: If you only will have a solution that would buy this energy either for free, or for a symbolic 1 cent.  You already would be in a better situation than if you were just always troubled by how to curtail and how to kill this energy.

Peter McCormack: Okay, so listen, we've covered this on the show a lot.  Bitcoin miners will buy that.  They will buy that and if it's a low enough price, they will take that and they will turn that into money and we will grow the Bitcoin Network, we will increase security, we'll improve the money, we'll improve the world; we've covered this. 

So, my question for you is, everybody listening knows that, they buy that, great.  Two things.  Firstly, if every single grid was to attach Bitcoin miners to its network, firstly are there enough ASICs available now; is the network big enough to support all of them?  I'm not sure it is, so Bitcoin itself needs to grow, Bitcoin needs to be a bigger network and the market cap needs to be higher, so that's something.  But that's fine, because we know this is a transitional period and it will take time.

But how will that lead to more, or an increase in the development of renewables; why does Bitcoin incentivise that?  All Bitcoin does is incentivise the buying of energy, but they could buy that off a coal plant, they could buy that off a nuclear plant; they could buy the excess energy from anyone --

Harald Rauter: And they will.

Peter McCormack: -- and they will.  So, what is the connection here to renewables?

Harald Rauter: Because, if you take the whole subsidy game out of play --

Peter McCormack: Okay, free market, full free market.

Harald Rauter: Free market.  Then, if you look at the marginal cost of a kilowatt-hour produced by fossil fuel, it's going to be way higher.

Peter McCormack: The marginal cost?

Harald Rauter: The marginal cost.

Peter McCormack: Yes, because it's close to zero on wind and solar.

Harald Rauter: Yeah, and you need to dig deeper to get the oil actually out of the earth, so you need to get if first out, you need to transport it, you need to refine it, you need to transport that again.  That all builds cost into the kilowatt-hour to all the energy that you can get out of it.  So, there is a natural incentive, by simple economics, to switch to renewables.

Now, yes, it's true we have the problem of intermittence on the renewables side, but this is not something that we cannot solve for; it's just an additional problem which can be solved.

Peter McCormack: Well, it is being solved.

Harald Rauter: Well, not really, let's be realistic.

Peter McCormack: No, on a 100% grid, no.  But the energy sector -- what was it, Nima we had in yesterday, we were talking about this with him.  The energy network originally, say the UK network, a few decades ago would have been ten coal powerplants powering the entire country.  Now what we have is a highly decentralised complex network, where energy can come from coal, it can come from me with solar panels on my roof.  It's a stronger network in some ways, because it's become decentralised.

Harald Rauter: Decentralised, absolutely.

Peter McCormack: But in that, we still have a network which is flexible, we do still have that.  So, as we've become more decentralised, as we've had more renewables, the network has adapted to become more flexible to deal with the intermittency.  So, it is being solved, partially.  Are you telling me, or are you disagreeing with me, or are you saying it's not solved to the point where we could have a 100% renewable network?

Harald Rauter: No, it's not solved to a point where we can provide, through renewable sources, the energy requirement that is needed to substitute fossil fuels.  I don't know what the precise percentage is.

Peter McCormack: We can produce enough energy from the sources; the intermittency is the big issue?

Harald Rauter: Yes, but this is exactly why you need so much more flexible supply, in order to have a grid that is stabilised with the bandwidth --

Peter McCormack: So you need to overproduce.

Harald Rauter: Exactly, of course, massively.

Peter McCormack: And is overproduction enough, or will you still have intermittency?  It sounds to me like what we need is a balance of nuclear and renewables.

Harald Rauter: Yes.

Peter McCormack: And some batteries.

Harald Rauter: I think this is something -- you mention Germany.  I think Germany is a really interesting case, because they've coined this term of "power-to-X".  So, the idea of temporarily storing power or excess power in other forms is not new; you can do a lot of things.  Power-to-X could be power to mining, it could be power to gas, it could be power to oil, because essentially if you have aggregated molecules, you can synthesise them as much as you can break them down; it's just chemically stored energy.  Is it efficient?  Not really, but it's a way of how you can actually store energy that doesn't find demand, which can be dispatched later when you need it.

This is why batteries at scale are so important.  But batteries at industrial scale are not there yet.

Peter McCormack: No, and it feels like one of those hard problems to solve that I don't see being solved soon.  But that said, Nima said batteries are still being used.

Harald Rauter: Oh, yeah.  I mean, the whole idea of the German energy transition focusing also on electrical vehicles was that you essentially had a mobile fleet of batteries that, in aggregate, is big enough to provide that balancing factor.  It's quite interesting, because what you do there is, we are used to very linear energy flows.  There's a generation, there's a transmission, there's a consumption.  But the bidirectional loading capabilities, this is something very new.

So essentially you could say, "Hey, dear Tesla driver, here is excess of energy.  Would you mind stopping for 30 minutes to take that off for me?  You get a super-good price, and at a later point you could also get the reminder to say, 'Look, I could really use your energy; do you want to provide that back, and this is the price I pay you?'"

Peter McCormack: I actually personally think one of the ideas would be to have the batteries also within the home.  The idea of the Tesla battery on the wall, I mentioned to Nima, I've looked into having solar panels here.  The idea was that over time, my energy I think it pays back over eight years, and eventually my energy gets cheaper coming from solar.  But I said to the guy, "The scenario I'm actually interested in is a scenario where we have a blackout and I actually still have power".  He said, "Well, that's a different solution.  You actually need to have a battery here, but you also have to have a generator in case there's completely failure, so it's a different scenario".

But if there's an overproduction of energy and we are charging the batteries in a home, then the homes can be using those batteries at the time and the solar could be going straight to the grid.

Harald Rauter: It's a very interesting conversation to be had, because there are so many people who are interested in -- or, we can do this actually live.  What was your first question that you asked yourself when you were considering the solar panels on your roof?

Peter McCormack: How many years would it pay back, because it's an expensive cost.  It was like £30,000.

Harald Rauter: Yes.  Do you want to ask yourself the question, "How much energy's needed?  What's sufficient for me to run what I need to run?"

Peter McCormack: No.

Harald Rauter: Oh, you didn't do that.

Peter McCormack: No, because I live a life where I turn on the lights and at the end of the month, I pay a bill.  It's only recently I've looked, because the bills have gone up a lot.  But my first question was, "What is the payback for the investment?" because £30,000 is a lot of money, right?  And if I'm saving a few thousand pounds a year on my bills, or whatever it was; whatever the cost was, it's like, "How many years until it pays back?"  Maybe it wasn't eight years, maybe it was longer, but that was my first question.  And my second question was, "Is this a solution if there's a blackout; will I still have energy in a blackout?"  Maybe that was the £30,000 to have the additional things for that.  They were the two things I cared about.

Harald Rauter: Most people care about the dimensioning.  They say, "Well, how much energy do I need, and how much can this thing provide to me?"

Peter McCormack: But for me, that was him to solve that, he is the consultant.  He looks at my energy bill and he tells me what I need on the roof.  My care is about how long to repay and am I protected in a blackout.

Harald Rauter: Yeah, and what is true for the home is true for the grid.  Essentially, this is how we've built energy systems.  We say we really know how big demand is at any given time, and these simulations are just very, very robust and very good, in most cases.  And we generate only as much as we need, plus a legally required buffer, an insurance scheme on top, so that it can fluctuate left and right.  But in the future, energy systems I think are going to look very differently.  We say, "Well, we just provide as much demand as we possibly can so that we're not limited in the supply we actually generate". 

That is true for your home, because you can now over-dimension this for you use, for your utility use, so you will have an oversupply.  You can either put that back into the grid, or you can charge your electric car and store it in there, and use the energy in case of a blackout.  Is that dimensioning enough?

Peter McCormack: Yeah, it is. 

Harald Rauter: Or, you can run a Bitcoin miner and repay a little bit from there.

Peter McCormack: That as well.  A battery with a miner?  Sounds like a very good business.

Harald Rauter: And I think that's a very robust case, because know there is also this FUD around, "Old miners will be discarded".  This is not a very efficient business, it's not going to be a high, intense, mining operation, but you just want to use the surplus energy in a way that it makes sense for you.  So, you will always go for a cheap, second-hand S9 that you get basically for free to reduce your CapEx, have zero OpEx, so essentially whatever you mine is yours.

Peter McCormack: Yeah, I mean at zero cost energy, every miner, even an S7, is beneficial.

Harald Rauter: Yes.

Peter McCormack: Okay, so look, what is the pathway, how does this happen?  At the moment, we're in a world where, well, Paris is done, we're fucked, 1.5° might be missed if we don't get this right.  We know, if we electrify the grid globally, we have a chance of hitting that, because we're putting less carbon in the atmosphere.  We know that if you overproduce and you attach Bitcoin miners, that solves part of the grid.  But how does this all happen; how do we go from a point of view of you and I just discussing this; how do we see meaningful action?

Harald Rauter: I think this is where it then becomes interesting to educate people, also policymakers.  If I read, for instance, regulations in Europe that regulate crypto assets, I'm reading it only from the lens, not what this enables us to do, but how does it actually potentially jeopardise the things that I think or you think or we think are necessary so that this can happen at scale.  For instance, if I read the MiCA Bill, the regulation of crypto assets which the EU has been putting forward, I was very, very concerned when they tried to attack Bitcoin mining specifically in the first draft of the bill.  So, this would have been something hugely concerning for me.  I'm super-happy to see that this has been voted out, so it's done.

Peter McCormack: We say, "Laters, see you later; see you later, motherfucker!"

Harald Rauter: I think this is exactly how we need to approach it.  Now the question is, "So, what?"  At the same time, there are taskforces that deal with grid reliances, that write huge reports on how important demand response is going to be for the future of the smart grids, but nobody's connecting the dots.  This is hugely problematic for me.  I don't care about shitcoin regulations, I don't care about NFTs, I don't care about any of that, it's all regulated.  By the way, the good thing is that stablecoins get very, very clearly regulated, so I think this is also a net positive for the community as a whole.  But Bitcoin is not mentioned there at all, so it's only attacked through proxy wars, environmental issues, KYC AML issues, etc.

Peter McCormack: Yeah, I know, old-school FUD.

Harald Rauter: Exactly.  But I think the power of the future institutions that we're trying to build is not coming from top-down centralised, but we need to build this.  I think this is where we need to make a clean analysis on the problems, make a pragmatic assessment of the situation.  I don't care, 2°, 1.5°, I don't care; we have a solution that could help us to decarbonise our economies.

Peter McCormack: Well, Danny and I were talking about this the other day.  One of the things we're missing here in the UK and Europe, we are missing a Coin Center, or a Bitcoin Policy Institute.

Harald Rauter: But this is exactly the point, I'm 100% with you on this.  The problem is that institutions that run only on faces need counterparties who only run on faces.  So, the EU, none of these people understand Bitcoin, only the slightest.  So, it's like telling them, "Have a negotiation with air"!

Peter McCormack: Well, this is why I wanted to talk, I want to have an open discussion, I say this lightly like it's just reality, but I want to have a discussion with somebody in the cabinet and say to them, "You have a green policy agenda.  We can help, Bitcoin mining can help this.  We can incentivise the growth in renewables and we have a buyer of last resort who will take that excess energy from you, so we can help you get your green goals.  By the way, at the same time, you can become an innovation centre for Bitcoin development within Europe".

Harald Rauter: I would go even a step further for me.

Peter McCormack: Well also, "We can protect ourselves from the policy decisions of your own government's incompetence in the central bank".  That one might not go down so well!  Maybe not mention that one, but there are so many benefits to you having a pro-Bitcoin agenda.  Anyway.

Harald Rauter: My dream scenario is the following, because we also need to understand that there is a language bridge that we need to build.  Bitcoin Fixes This didn't help us, because it's abstract, it's patronising, it's not nice, nobody wants to be treated that way.  There's a language piece that needs to feed into this, and I think the SSP language, the Shared Socioeconomic Pathways thing, really helps us there, because there's nothing wrong with saying, "Look, behind closed door, or open doors, we agree the Paris Agreement is not going to fly.  But we need to acknowledge a world where we are in SSP3 world.  Your models, which I would really like to see open, do not find a pathway forward for a 1.5° world".

Now, what would happen if we took all of these inputs on the different stages at what we know about Bitcoin right now, and how would the models look different?  I'm talking for instance about all the methane work that's going on on the various fields, it's so exciting.  When we understand that only using the flared gas could provide four times the energy input that is required to power the Bitcoin Network, I agree, the problem is that the network is too small to actually be a critical player in this game.  But this is hopefully only a transitional stage.

Now, when we incorporate the whole work that is done on methane and landfills and flared gas, concretely as a mechanism into these models, if we use the whole energy conversation that we just had, very concretely, greening energy is just one of the inputs.  If you can make that concrete with very clear parameters, what's the size that we need, what's the volume that we need, what would that cost, how many ASICs would that actually be?  If you make these models very concrete and you run the models again, would we come to a 1.5° world; yes or no?  I think the data's partially there.

I got this idea when reading the work of Daniel Batten.  Once we understand, I would be interested to hear how he ran the model that he gets to a reduction of 0.1°, or 0.15° I think even, which is a lot if you think about 1.1° already being priced in, so we have a margin of 0.4°.  He can provide, with his calculations, 0.1° already.  That's massive, that's not reflected in any of the model work of the IPCC.

Peter McCormack: Is he the guy in Australia?

Danny Knowles: He's in New Zealand, yeah.

Peter McCormack: For fuck's sake, why's he so far away?

Harald Rauter: Could we now pool all this work together that is done in the energy field, that is done in the property field, building stocks, that's the thing, in the land fill and methane burning and flared gas work; can we pull this all together?  Can we run the same models, but with better data?  Can we get to a 1.5° world?  That's the ultimate nuclear argument for how Bitcoin mining actually makes sense, because it provides already the elements of where, from this work onwards, where do we need to engage, or where does it make sense to engage with policymakers to actually build on their language with their models, rerunning it but with Bitcoin mining and Bitcoin in the various dimensions as the X-factor in the equation?  That would provide a really, really cool civilisation pathway, if you want, because we would essentially work in a --

Peter McCormack: Everybody wins.

Harald Rauter: Exactly.  We start in an SSP3 world, we have Bitcoin as the X-factor in the middle.  Whether you appreciate it or not, it's good to be at 1.5°; let's just accept that as common sense.  And economically, we would reinstall what we would call an SSP1 world.  Because, what is this all about?  It's all about low time preference, free markets.  We're all in for that, and cooperative worlds.  That's exactly what Bitcoin provides.  Bitcoin is the SSP1 world.

We're living now in a world which is essentially a need creation economy, while what we actually need is a need coverage economy.  So, we're having so much economic output that bitcoiners will agree we don't need.  We're all against frivolous spending, stupid purchases.  Your Bitcoin is valuable, so you only want to exchange it for the best goods possible.  So, bitcoiners, whether they agree or not, share a lot with the left that thinks insufficiency economics, for instance, or degrowth economics.  Bitcoin is the path, it caters to both, I will even call it religions, at that point.

So, there's a very pragmatic way forward, which builds on realities where we are right now, engages with policymakers and legacy institutions, where necessary and appropriate, builds a pathway forward where we say, "This is now the legitimacy of why we really want to use that energy and how we want to use it", to actually end up in a better world, because what we want is a Bitcoin standard.

Peter McCormack: Brilliant, okay.  So, anyone listening, what would you encourage them to do?  I would focus on those who are interested in supporting this or being part of this; what is the action now?

Harald Rauter: I think there are two groups.  My plea would be, let's not get hung up on who's right.  This is a net negative for all of us.

Peter McCormack: Agreed.

Harald Rauter: We want a cooperative world.  Humans are inherently cooperative.  We do better when we collaborate and when we cooperate.  This is the first one.  Life gets easier if you start to understand the other side a little better.  I've spent my professional life usually always between camps, so before 2017, 2018, when Greta Thunberg essentially started this climate movement, which changed everything, by the way, apolitical but which changed everything, in terms of how the world related to the climate issue.  I had to explain what I was doing, so I was sort of a misfit in the rest of the world.  Then I became a bitcoiner, so anyway, we're weirdos.  Now, you become a bitcoiner in the climate space; this is as weird as it gets.

Peter McCormack: You fucking freak!

Harald Rauter: I'm used to that, I hear that often!

Peter McCormack: I love it, man, honestly.

Harald Rauter: So, for those who are interested, reach out to me.  I would love to bundle that energy.  I think Bitcoin, and I'm conscious that many will disagree, Bitcoin needs a voice also in Europe and it doesn't, and that is inherently the case.  That would make it fucking brilliant.  It doesn't have a leader, it doesn't have a face, and that makes it very strong.

But like the Bitcoin Policy Institute in the US, there are moments when it's good to provide an opinion and a voice and a position to a conversation, and I'm not in the camp of saying, "Well, Bitcoin doesn't care".  Yes, Bitcoin doesn't care, but we can still catalyse a couple of things, if we just bring this together.  I mean, just take the whole methane conversation; this is so fucking brilliant.  How many brains have now started to work on this?  Engineers, philosophers, VCs, modellers.  I mean, these are such brilliant brains, and it would be shame if all of them would act in isolation and not bundle this, like the Death Star, in a positive way, and bring this to a positive explosion.

Peter McCormack: This is so on my mind, Danny's mind, we're talking about this a lot.  We need the equivalent of a Bitcoin Policy Institute in Europe, let's say.  People who are focused on education and lobbying and having those conversations with policymakers to not inhibit what we're trying to do, but also be more proactive.  I know some people are like, "Don't work with regulators".  Sometimes I think you have to, like the enemy of my enemy, whatever.  But I think we do, to the point where I'm even thinking of having that conversation with The Policy Institute and saying, "Look, we will pay for somebody, but can they work under you in Europe; can they work within your structure, but can they be doing the work in Europe?"  I think it's desperately needed.  Danny's been poking me a lot on this.

Danny Knowles: I think Neil needs to head it up.

Peter McCormack: Really?

Danny Knowles: I think he'd be really good at it.

Peter McCormack: That's a fucking bold statement.

Danny Knowles: I think he'd be very, very good at it.

Peter McCormack: I think you're right.  His time's already paid.

Danny Knowles: Exactly.

Peter McCormack: And, if he had to spend more time on that, we would cope without him on this.  I'm going to think about that, but I think that's fucking brilliant, well done.  But I think we need that.  Okay, thank you, really appreciate having you on, Harald.  How do people find you, find your work, get in contact?

Harald Rauter: Well, I'm more a reader on Twitter, but I'll try to get some of these ideas out more regularly.  I think it's important I learn from them, and I think I learn from people sharing with me, so I think it's also time to give back.  So, I'm trying to do better.  You'll find me @HaraldRauter, it's my full name.

Danny Knowles: I think you might increase your follower count a little bit.  Guess the numbers!

Harald Rauter: But you can also write me an email, that's probably the easiest at the point, and that is harald@bitcoinfirst.work.

Peter McCormack: Okay, so we will put that all in the show notes.  We should do a follow-up to this next we do a European sprint.  I definitely want to cover the Fourth Turning from a thermodynamic cybernetic perspective!  You know who we should try and bring in for that?

Danny Knowles: Mark?

Peter McCormack: No.

Danny Knowles: Brandon?

Peter McCormack: Yes.  Try and bring Brandon in, get the two of you round the table, go and watch a football match.  I'm going to take you to dinner tonight and then we're going to go and watch football tomorrow.  Appreciate you, man, this was brilliant.  Anything we can do to help, stay in touch.

Harald Rauter: Thank you very much.