How can we shift the incentives so that even the most self-interested people make choices that help stabilize our planet and prevent human catastrophe? What does climate capitalism look like?

The way I see it, we’ll need four things: better tech, better ideas, better rules, and better metrics.

Let’s start with tech.

For a long time, a lot of people in the climate movement felt that the key to succeeding in the marketplace was to get people to pay a so-called “green premium.” There were two related versions of this idea. The first was that people would pay extra for products that are good for the planet because they want to demonstrate their commitment to the planet, the same way someone might pay extra for cage-free eggs because they care about animal welfare. The second was that because burning fossil fuels comes with enormous long-term costs—including what economists call “externalities” such as disaster relief or damage to public health—we should be willing to pay higher upfront prices for clean energy and green products because they come at a lower cost to society over the long run.

I fundamentally disagree with the premise behind both these versions of a green premium, for two reasons. First, in a competitive world, selling more expensive stuff doesn’t work. Some people might have the interest, and the disposable income, to pay extra for products because they care about the planet and want to demonstrate that commitment through their purchases. But that’s another version of kindness, and as admirable as it may be, it won’t scale. Getting to net zero will require transitioning the entire world away from fossil fuels, and that means making clean energy and cleantech the least expensive option. Along the same lines, externalities are real—economists should continue to measure them, and policymakers should take them into account. But if we want a real shot at stabilizing at our planet, we have to compete on sticker price.

My second problem with the idea of the green premium is that it implies that such competition isn’t possible, that cleaner automatically means more expensive. That’s not true—and it’s becoming less true every day. Just look at the American coal industry. While policy has at times had an impact, and advocacy, particularly the Sierra Club’s “Beyond Coal” campaign, has accelerated existing trends, the real reason we haven’t built a new coal-fired power plant in years and that the number of coal miners has shrunk from over 215,000 in the 1980s to fewer than 40,000 today is pretty simple. Coal got too expensive. Cleaner energy won in the marketplace.

Unfortunately, that cleaner energy was still pretty dirty—for the most part, we transitioned from coal to natural gas, which (due to methane) is nearly as bad, and sometimes even worse, than coal. But what natural gas did to coal, renewable energy can do to oil and gas. In fact, in many places, the cheapest form of electricity is now solar or wind. Many of the cheapest, best vehicles are electric, too. And that’s not even taking into account the massive taxpayer subsidies that the oil and gas industry receives.

Back in the 1800s, Ralph Waldo Emerson wrote that if you can build a better mousetrap than your neighbors, the world will beat a path to your door. The same idea applies when it comes to energy, and things that use energy. If we can build better, cheaper stuff, people will buy it. And if that stuff happens to protect the planet, improve the quality of life for everyone, and prevent hundreds of millions of needless deaths, we can harness the power of capitalism for good.

That thinking is what led me to Stanford University. For decades, Stanford has been on the cutting edge of tech, not just funding groundbreaking research, but turning that research into technology and products that succeed in the marketplace. Google, Yahoo, and Snapchat are just a few companies that began there. The IT revolution scaled because of market capitalism, but the seeds were planted at Stanford University.

My partner, Kat Taylor, and I asked the president of Stanford, John Hennessy, “Why can’t we do for cleantech what Stanford did for IT?” We then gave Stanford a $40 million grant to create a program to fund innovative ideas. Because it was a grant, not an investment, we knew we would never see a dime from any companies that emerged from the research of the grad students and professors we supported. But today, that $40 million grant has led to businesses with over $6 billion in value. Here’s just one example:

Today, in the United States alone, there are about three million tractor trailers that run on diesel, not to mention millions more small-and medium-duty trucks. Diesel fuel consumption accounts for about 25% of the overall carbon pollution from the transportation sector. But electrifying trucks is difficult, because the batteries required to power them would have to be really big (at the moment, anyway).

In 2016, fellow doctoral students BJ Johnson and Julie Blumreiter came up with a solution. Instead of trying to replace diesel engines entirely, their company, ClearFlame Engine Technologies, modifies existing diesel engines so that they can use renewable fuels like ethanol and methanol. A ClearFlame engine keeps 80% to 90% of the components from the original engine, and trucks that use their engines can cut their carbon emissions almost in half. It’s a win for truck owners and drivers, too, because ethanol is cheaper than diesel.

In 2021, Katie Hall and I cofounded Galvanize Climate Solutions. Through this enterprise, we have also invested in plenty of companies that didn’t have their origins in Stanford research. One of them, Alcemy, aims to revolutionize the way we make concrete. Concrete is a huge—and often overlooked—source of carbon pollution. This is a particularly challenging issue because countries that are lifting their people out of poverty tend to build a lot of buildings very rapidly, and thus use a lot of concrete. It had long seemed that we would have to choose between prioritizing a livable planet or prioritizing livable buildings in developing countries. Alcemy wants to change that. The founders, Leopold Spenner and Dr. Robert Meyer, use machine learning and control technology to make predictions about cement mixtures and their ingredients. Its software allows concrete producers to lower their carbon content while maintaining, and in some cases improving, the quality of the finished material.

But when Donnel joined the Obama administration to help run a multi-billion-dollar effort to retrofit old structures, he concluded that the program, while well-intentioned, didn’t work. The problem was that every building was different. It took a lot of time and money to figure out what changes were needed, and even with federal subsidies, landlords balked at the cost. So he started a company, BlocPower, which uses custom-built software to inexpensively create a digital model of nearly any building and come up with a customized solution. With a focus on buildings in low-income and underserved neighborhoods like the one Donnel grew up in, the company installs all-electric heat pumps to replace the ones that burn oil and gas. Best of all, BlocPower pays for the entire upfront cost of the investment. Building owners pay back Donnel’s company over time, but because their utility bills are so much lower with the new heating systems, they still save money each month.

That’s what winning in the marketplace looks like. Not just cleaner. Cheaper and better, too. If you own a truck fleet, a concrete mixer, or a residential building in New York City, it doesn’t matter if you care about climate change or not. Upgrading to cleantech is just business common sense. To put it another way, if you want to stick with fossil fuels, it will cost you more than switching to something cleaner.

That’s one reason the green premium idea is misleading. More and more often, companies and consumers can cut emissions without paying extra. In fact, in a growing number of cases, they’ll have to pay a polluters’ premium to stick with fossil fuels.

The fossil fuel industry knows that the tables are turning. Increasingly, products that are helping us stabilize the planet aren’t just better for the public at large than their oil-and-gas-powered counterparts—they’re cheaper and better for individual customers, too.

Which is exactly why fossil fuel companies and their allies are trying to mislead the public now—before the adoption of clean-energy-powered products becomes widespread enough that everyone discovers they like them.

In 2023, for example, the National Review published a big story called “The War on Things That Work.” The author, Noah Rothman, warned that scary environmentalists want to take away all your household appliances, from your gas stove to your air conditioner to your lawn mower, and replace them with electric junk that will break. “Armed with unchecked self-confidence and possessed of an abiding faith in the idea that you must be coerced into altruism,” he wrote, “the activists seem to be coming for almost everything you own.” This is total nonsense, but when people associated with the climate movement spend all their time talking about how much more expensive saving the planet is than burning fossil fuels, it makes the war-on-things-that-work argument seem much more convincing than it should be.

In fairness to Mr. Rothman and the National Review, not so long ago the environmental movement was mostly asking people to make sacrifices: drive less; fly less; install expensive solar panels. For some people, knowing that their travel or hot water or electricity wasn’t harming the planet was worth the extra cost. But for most people, it wasn’t. People wanted to buy things that were cheaper, better, and ideally both. For many, that meant buying oil and gas—or products that needed oil and gas to work.

But the National Review’s spin ignores what is, for them, an inconvenient truth. “Green” technology and products are no longer pie-in-the-sky ideas. People aren’t buying them because they’re liberals. People are buying them because they like getting more bang for their buck. Or to put it in the National Review’s terms, even without the massive, nonstop bailout the oil industry receives when taxpayers pay to clean up its mess, the “things that work” happen to be the things that work for the planet.

Excerpted from Cheaper, Faster, Better. © 2024 by Tom Steyer. Published with permission of Spiegel & Grau.