Carbon markets and the theory of change, plus the calamity of Hamlet’s indecision

Mark Lewis is a world-leading expert on energy and environmental markets, and was one of the world’s first carbon market analysts. What’s less known about Mark is his love of Shakespeare, and how he connects that with his work on climate change. We talked about his theory of change for finance and climate, how the 2008 Great Financial Crisis catalysed a Shakespeare reading marathon which has inspired and supported his work on climate change ever since, and why the world must at all costs avoid the calamity of Hamlet’s indecision.


Mark Lewis is Head of Climate Change Investment Research at BNP Paribas Asset Management. Previously, he was Head of Research and Managing Director at Carbon Tracker, a non-profit company based in London which publishes research on the financial aspects of climate risk. Prior to Carbon Tracker, Mark was Managing Director and Head of European Utilities Research at Barclays (2015-18), Chief Energy Economist at Kepler Cheuvreux (2014-15), and Managing Director and Global Head of Energy Research at Deutsche Bank, where he worked for 14 years until 2013. In addition to his experience as a sell-side financial analyst, Mark spent one year as Deputy Head of investor relations at E.ON at the beginning of the Energiewende, and two years as a credit analyst covering the European utility sector at Standard & Poor’s. In total, Mark has over 20 years’ experience as a financial analyst covering global energy and environmental markets.


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Mark: There’s a reason people still read Shakespeare 400 years later, and that’s because he has articulated every aspect of the human condition probably more fully and more expressively than any other writer, certainly than any other writer in the English language, anyway.

Denise: That was Mark Lewis. He’s head of global sustainability research at BNP Paribas Asset Management, and he’s one of the pioneers in green finance. In 2008, as the financial crisis was unfolding, Mark took a decision to spend his daily commute reading the plays of Shakespeare. And he found an unexpected companion that’s inspired and supported him in his work on climate change ever since.

Now, if you’ve been thinking about taking on a big reading challenge during your lockdown, this episode is for you. I really enjoyed our conversation, which took place in early April when roughly a third of the world’s population was in lockdown.

Mark: I like reading, you know, literature. If you work in investment banking, it’s a full on job. It’s a 24 hour day a day job in the sense that at that time I was working across the globe. So I would obviously be working in the European time zone. And then in the evening I would be getting emails from colleagues in the Americas and I would wake up in the morning to a load of emails from Asia and Asia Pacific and Australasia.

And there came a point particularly after the global financial crisis where I thought all I do is read work related material. And so I took a conscious decision to start reading great books on my daily commute. I live on the Western outskirts of Paris. It takes me about 40 minutes to commute into work.

So 40 minutes a day on the way in, 40 minutes a day on the way out, you can actually read, get through quite a lot. I thought, well, I’ve never read Hamlet. I’ve never read Macbeth. I should really take the time to do that. And I did. And found them absolutely overwhelmingly powerful and decided I would read the complete works of Shakespeare on my daily commute.

Of course, it ends up being not only on your daily commute. It’s when you’re traveling, when you’re on planes, when you’re on holiday. There’s a reason people still read Shakespeare 400 years later, and that’s because he has articulated every aspect of the human condition probably more fully and more expressively than any other writer, certainly than any other writer in the English language anyway.

Denise: When did you first become aware of climate change as a problem, and when did you start becoming interested in it? 

Mark: I suppose I first became aware of it in the early 2000s, chatting with my brother, who is an environmental engineer by training, on a family holiday. He had been closely involved with his company’s dealings around the Kyoto protocol in 1997.

And that’s what really got me interested in the topic. Bear in mind, this is 2002, 2003. Saying that coal fired power generation would have to leave the power generation mix over time because that’s what was required for the climate. 

As a utility analyst at the time, this intrigued me. Europe was in the process of legislating at that point for a carbon market, which then got going in 2005 and I thought this was something I ought to get on top of to be prepared for the impact on the profitability of the power generation sector, which was the sector I was following very closely at the time in my day job. So it was good timing and the market got going and it did have a big impact.

The market’s gone through many different iterations, and my career has taken lots of twists and turns tracking the vagaries of climate change as a public policy priority, and carbon markets as a financial markets priority. 

The competitiveness of renewable energy has increased many, many times over, uh, since those early days when you needed very significant subsidies to get people to invest in renewables. So we’re in a completely different world and you know, it’s been an incredible experience to follow this space as closely as I’ve been fortunate to be able to do over the last 15, 16 years. 

Denise: Did you have a sense of being a bit of an outsider in those early days? 

Mark: Well, yes and no. I mean, yes, in the sense that, um, climate change is a concept, didn’t have anything like the front page news, power and screen power that it has nowadays.

But the virtue of getting into this topic via the carbon market was that the existence of a financial market in carbon allowances that, you know, cap and trade scheme is a very simple construct. It says, here’s the cap on carbon emissions that you’re allowed, and that cap will decline over time, and companies have to reduce their emissions in line with the declining cap.

It takes a lot of the emotion and feeling around climate change, which was, you know, a controversial subject at the time. But once you put a price on something like carbon emissions, it just becomes another financial market. So in a sense that neutralized all of the politics around it and it just became a pure numbers game in the same way that trying to predict the, uh, price of oil, uh, of copper, of gold is, is a numbers game. There’s a supply and demand and you analyze it. 

So I became one of the very first full time carbon analysts in the market. And at that time we had not only the European carbon market, but. the Kyoto mechanisms – the Clean Development Mechanism, and the Joint Implementation Mechanism – which were generating credits from outside the European union, but which could be used for compliance purposes within the European union.

On the one hand, of course, it’s a market like no other in the sense that it’s a political construct designed to achieve a public policy purpose, which is to reduce carbon emissions over time. So inevitably, to be passionate about that, you have to have an intrinsic interest in the subject itself. And climate change and climate change as a problem with something I became very interested in and very passionate about.

Denise: Could we talk about your theory of change for the financial sector on climate change? On the one hand, the IPCC Special Report on 1.5, which came out in 2018, has a chapter in which it talks about the factors like finance, governance, and behavior having a greater potential for change than suggested by many of the models.

Yet, if we listen to some of these discussions at green finance fora, you get the sense that many finance people won’t embrace change without the appropriate policy signals. Like, sort of, “You go first.” 

Mark: Having observed the changes that have taken place in the energy space, and remember anthropogenic greenhouse gas emissions, 70% of them come from the combustion of fossil fuels. So the energy sector is by far the largest contributor to manmade climate change. 

Having observed very closely the debate in Europe and in Germany, I think there are a number of lessons which have informed my own theory of change. You need a combination of factors. I’d say first and foremost, in the early days, this was the prerequisite to everything else. Public policy incentives to attract capital into industries that at that time would not have been able to attract capital. So renewable energies in the early two thousands were not at all competitive and needed subsidies to attract investment. 

Now, this is where the change starts to happen, because once you have a subsidy in place that attracts the capital, you start to see economies of scale in the new technologies. Because being attracted by the incentive, people put money in. As the money comes in and the scale increases, you get reduced costs. And as the cost starts to fall, it becomes that little bit easier for governments to set more ambitious targets and the cycle begins again.

So you get the start of what I call a virtuous feedback loop between policy and technology. And over time, that inner feedback loop has been complemented by an outer loop or extra, let’s say, pedals on a wheel that are making it go faster, which is on the one hand, societal consciousness around climate change. This is something in particular over the last couple of years with the school children’s strike for climate led by Greta Thunberg. This puts a lot more pressure on to policymakers to set more ambitious targets so that part of the wheel is turning. 

And now on the other side of the equation investors start putting more pressure on companies to do more around their own action on climate change. So you put all of that together. What you have in effect is an accelerating feedback loop between policy, technology, social consciousness of the need to take action on climate change and pressure on companies from their shareholders to do the right thing by the climate, effectively.

And that’s what we’ve seen with renewable energy. We’ve gone from a situation 12 years ago where renewable energy, solar energy, if you take solar, is the best example of this. Solar energy 12 years ago would have cost more than $400 per megawatt hour. I’m giving you global averages here as stated by the International Energy Agency to today around $50 or $60 per megawatt hour on a global average basis.

If you’d said to anybody, and I mean pretty much anybody back in the mid two thousands that we would be producing solar energy at utility scale in Germany. Nobody would have believed you. So that’s the power of this feedback loop that I’m talking about, and we now need to translate that feedback or put that feedback loop in place in other areas of the energy industry.

We need a big breakthrough in energy storage. Bring the cost of storage down so that we can complement the intermittency of solar and wind more effectively than we can at the moment. 

Denise: You mentioned that Shakespeare is really the ultimate commentator on the human condition. What would Shakespeare offer on climate change?

Mark: You can find passages in Shakespeare that are very applicable to climate change. Needless to say, in an author that predates the Industrial Revolution, nature is uncontrolled. You know, before the industrial revolution, which gave humanity a claim, I suppose, a claim that today is being unravelled by all the ways in which nature is showing that that nature is still in charge actually.

You think, for example, of the scene of King Lear on the heath and it’s man against the elements, a very disturbing scene. And that’s what, and that’s often how nature is depicted in Shakespeare as this uncontrollable violent force over which we have little or no power, and we’re at the mercy of those elements.

Hamlet in particular is probably the one that I come back to most. The reason it’s particularly interesting and chimes particularly well in our era of climate change is that it shows the calamity of indecision. I mean, the tragedy of Hamlet is really all about Hamlet’s inability to act. You know, he discovers early in the play that his father was murdered by his uncle so that his uncle could marry his mother.

And it’s been interpreted in many ways over many, many years, of course. But the central point of the play is that we end with terrible tragedy at the end with practically everybody who’s left on stage in the final scene of the play, dying, and dying quite violently. And that all comes back to Hamlet’s lack of decisiveness and we really must avoid indecision and dithering in dealing with climate change. It really is time to act.

There is in fact a wonderful quote in Hamlet, in the second act, and he’s suffering from this sense of overwhelming depression. He’s talking about the sky above, and how poets have described the most, uh, glowing terms.

He says: ‘It goes so heavily with my disposition that this goodly frame, the earth seems to me a sterile promontory. This most excellent canopy, the air, this brave, overhanging firmament, this majestical roof fretted with golden fire. Why it appeareth nothing to me, but a foul and pestilent congregation of vapors.”

And of course, you know, if you fast forward 350 years to the first assessment reports of the Intergovernmental Panel on Climate Change, uh, what we’re talking about here is the concentration of greenhouse gases in the atmosphere. That is to say a foul and pestilent congregation of vapors. As described by Hamlet.

Freud interpreted Hamlet as a tragedy, mainly because he thought that Hamlet had an Oedipus complex about his mother. But that passage there could lead you to believe that Hamlet was 350 years ahead of the Intergovernmental Panel on Climate Change in pointing to the concentration of greenhouse gases in the atmosphere, this foul and pestilent congregation of vapors.

Denise: Do you consider yourself an activist? And has Shakespeare helped you to become a better activist? 

Mark: Of course I have passions the same way every human being has passions and I feel very strongly about the need to take action on climate change. But I like to think anyway, that those passions are rooted in a cold and rigorous analysis.

My job really is to look at the economics of it. That’s what I’ve been trained to do. So if that’s being an activist. Um, you can call me an activist. I’m an analyst first and foremost, and Shakespeare gives me that extra bit of passion. But I, you know, what I’m paid to do is to look at the numbers and the numbers give us a very clear message that we have to take action and avoid the indecision of Hamlet.

Denise: Thank you very much, Mark. Thank you for coming on the show. 

Mark: My pleasure, Denise.

Denise: That’s it for this episode. Thanks for listening to New Climate Capitalism. If you enjoyed this episode. Please think about sharing it or telling a friend. Many thanks to Sarah Elzas and Victoria Yates for their help making this episode. If you want to hear more from Mark, find him on Twitter @MCL1965 You can find the shownotes and otherr esources at the websiteclimatenarratives.co or on Twitter @NewClimateCap.

The theme song is by Lucas Laufen.

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