carbon accounting

Corporate Net Zero Pledges: Ambitious or Empty Promises?

Otto Pilot — Fri, 21 Jan 2022 08:01:00 +0000

Corporate Net Zero Pledges: Ambitious or Empty Promises?

01/21/2022

One-fifth of the world's 2000 largest publicly traded firms have committed to net zero targets. Critics argue that such pledges are mere greenwashing, and even if pledges are fulfilled, the balance sheets usually utilize carbon offsets, which can be of questionable quality and accountability. Proponents of corporate net zero pledges say we’ll never get to net zero emissions without corporate action, and pledges represent legitimate ramping up of ambition and commitment. How can consumers, investors and policy leaders determine if these pledges are genuine attempts at hitting net zero goals? And is it possible for third party auditors to hold companies accountable?

Head of Corporations and Supply Chains for CDP North America Simon Fischweicher, CNBC Reporter Kristina Partsinevelos, and Global Lead for Environmental Sustainability at Cisco Systems Darrel Stickler discuss the actions corporations are taking and how meaningful they are.

Partsinevelos is skeptical that offsets used in the accounting, and the metrics by which they are measured, are sufficient.

“What stops a guy that owns a big forest to sell his forest five times to different companies and just say, oh, I’m gonna keep these trees going for you or else they would have been cut down,” she says.

Darrel Stickler believes the big changes required are only possible through big business adaptation:“I tell people hey listen, if you want to hug trees go work for a nonprofit. If you want to take on the challenge of figuring out how to fit sustainability profitably into business, come work for a big company.”

Companies are increasingly utilizing ESGs – environmental, social, and governance standards – to assess how well they are doing in these areas.

Simon Fischweicher tells us about the STOXX, a climate change leadership index.

“It actually uses CDP data to create several ESG-focused industries. And one in particular is the climate change leadership index that actually map CDP’s A-list and over a five-year period outperformed its global benchmark, which was a sort of global index about 1800 companies by 5.4%. Correlation, causation, can't say for sure and I do think the companies that tend to do well on CDP disclosure A-list companies tend to be well-managed businesses who are thinking about all elements of their business and managing those well. But I think it does send that good signal to the market that if you're investing in companies that are managing ESG issues at the top of their class, they are likely to be managing across the business as well.”

In 2019, 21% of Australia's forest burned in a single summer, and an estimated 3 billion animals were killed. For Mike Cannon-Brookes, co-founder and co-CEO of Atlassian, witnessing this devastation was both heartbreaking and galvanizing.

“You sort of think about these things like which fire is happening a long way away from you and it was like right up in, you know, Sydney the center of the city. And then as it spread to Mallacoota in the coastline area it sort of went through it sort of four, five different megafires that formed. If you haven’t seen the footage of the residents sort of fleeing to the beach and just the red wall behind them and they all got in boats and watched. It was just staggering to watch for anyone to watch. So, it’s very, very hard to see.”

He also discusses how the companies he’s involved with handle climate issues.

“I’d argue we are probably our hardest critics, it’s not a PR exercise to try to tell people how good we are. Trying to be as honest as possible and tell ourselves and the world where we’re actually at.”

This program is generously underwritten by the Erol Foundation.

Guests

Simon Fischweicher

Head of Corporations and Supply Chains, CDP North America

Kristina Partsinevelos

Correspondent, CNBC

Darrel Stickler

Global Lead for Environmental Sustainability, Cisco Systems

Mike Cannon-Brookes

Co-Founder and Co-CEO, Atlassian

Greg Dalton: This is Climate One. I’m Greg Dalton. Many corporations are pledging to hit net zero emissions, but critics say these pledges are often mere greenwashing.

Kristina Partsinevelos: What stops a guy that owns a big forest to sell his forest five times to different companies and just say like, oh, I’m gonna keep these trees going for you or else they would have been cut down.

Greg Dalton: Proponents say we’ll never reach the Paris climate goals without corporations taking action, and pledges represent ambition and commitment.

Mike Cannon-Brookes: I’d argue we are probably our hardest critics, it’s not a PR exercise to try to tell people how good we are. Trying to be as honest as possible and tell ourselves and the world where we’re actually at.

Greg Dalton: Corporate Net Zero Pledges: Ambitious or Empty Promises? Up next on Climate One.

Greg Dalton: This is Climate One, I’m Greg Dalton. Corporate pledges to snuff out all carbon emissions sound like a great thing, but some critics argue that even if the pledges are fulfilled, most are achieved using carbon offsets, which can often be of questionable quality and hard to track. Proponents of corporate net zero pledges say we’ll never meet the Paris climate goals without corporate action, and pledges are legitimate representations of ambition and commitment. So how can consumers, investors and policy leaders determine if these pledges are genuine attempts at hitting net zero goals? And is it possible for third party auditors to hold companies accountable? I invited three guests to discuss these questions. Simon Fischweicher [Fish-why-ker], Head of Corporations and Supply Chains for Carbon Disclosure Project North America, Kristina Partsinevelos [Part-sin-NE-ve-los], a CNBC reporter covering ESG and net zero pledges, and Darrel Stickler, global head for environmental sustainability at Cisco Systems. This episode was supported in part by our friends at the Erol Foundation. In our conversation we use a few terms that I want to quickly unpack: First, ESGs, which stands for environmental, social, governance. That refers to a set of standards that companies and investors use to assess how well a company is doing in these areas. ETFs or exchange traded funds are a type of security like mutual funds, that can be traded like a stock on an exchange. We also talk a lot about emissions, which are classified into three levels: scope 1, which come directly from the company’s activities, scope 2, emissions from the energy used to power the company, and scope 3 emissions, which are those from activities further down the supply chain. These aren’t controlled by the company directly but still part of its overall carbon footprint, like how a product is used and disposed of at the end of its life. One-fifth of the world's 2000 largest publicly traded firms have committed to net zero targets. I asked Kristina Partsinevelos [Part-sin-NE-ve-los] if that is legitimately good news - and how important such targets are for decarbonizing the global economy.

Kristina Partsinevelos: Of course, it’s good news because finally, corporations are making part of their mandates, making that priority. They’ve created chief sustainability officers. They have people in positions to try to work on reducing emissions improve their supply chain so they're not as harmful to the environment. Having said that there is the positive I guess the negative is that a lot of it out there or not a lot of it some of it out there is a form of greenwashing where corporations are making these goals but they are not providing us with the steps of as to how they're going to achieve net zero by 2050 or by 2060 or 2040. And so, there are still kinks that need to be worked out because this is still somewhat of a nascent industry when you're talking about having corporations actually commit to it. And this is the first time we’re really seeing that. And so, it’s great it can really change the way things are going in the next, 10 to 15 years for future generations but there still needs to be a lot more details worked out.

Greg Dalton: Sure. And a lot of this is voluntary, and we’ll drill into those pledges in a moment. Simon, how do you see the symbolism of giant corporations all jumping on the net zero bandwagon as Kristina mentioned something we haven't seen before?

Simon Fischweicher: Yeah, I wanna acknowledge the importance of the momentum this is creating and the conversation that is moved to talking actually about net zero emissions. I think if you think about five years ago before the Paris agreement was signed at COP 21, I think this was a dream for those of us in the environmental field to have this level of conversation. The challenge is around the standardization of what those net zero pledges are and the lack of short to medium-term steps science-based targets they’re gonna keep us on a trajectory towards cutting emissions not in 2045, but halving them in the next decade.

Greg Dalton: Darrel Stickler, as a person with climate responsibility at a company with $50 billion in sales. What do you look for when you see a corporations says they’re going net zero they’re coming on all the time? You’re an insider, how do you give them kick their tires or give them a sniff test?

Darrel Stickler: The first thing I look for is what's the scope of the commitment. And the next is I look for some evidence that they understand what net zero means this concept that I just described. If I see too many uses of the word offsets, I scratch my head and I start to dig a little deeper. What does offset mean?

Greg Dalton: Simon, companies can play around with their expenses and thanett income in order to avoid taxes all sorts of ways to do that. Money is tangible, trackable, carbon dioxide is this odorless and invisible gas. So, how much confidence should we have in companies tracking and eliminating this odorless invisible gas?

Simon Fischweicher: I think that's a great question. It leads us to some of the problems, particularly on the Scope 3 side of net zero where it is difficult to actually calculate those emissions because much of that is coming outside of a company's boundaries. However, when I think about my own organization and how we look at a company you need to have at least 70% of your scope 1 and 2, those direct operational emissions externally verified to be on our A-list. And what that means is it sort of like getting your audited financials, right, you're having a third-party come in and check your work and identify that the emissions you’re providing are actually accurate. And so, I think that's a really important signal to the marketplace that you’re providing accurate emissions to your stakeholders. When we get into Scope 3, I think that's a little bit more of the challenging area because relying on your supplier emissions or estimations perhaps if you’re thinking about an automobile manufacturer, they might be calculating emissions based on the use of their cars with people driving them. There's a lot of factors that come into getting that number exactly right. The issue right now, that number is so big what we really need is to make it go down significantly. So, maybe not getting too wrapped up in the you know the exact number at this point.

Greg Dalton: Kristina, do these kinds of things do they move stock prices or is this, you know, just kind of a niche thing that really insiders talk about? This is really, you know, drive news. Does it drive stock prices?

Kristina Partsinevelos: If you are purposely investing in ESG related ETFs and funds like that maybe there seems to be new data coming up for that particular fund, maybe. But in general, unfortunately at this point no, unless there's a huge environmental disaster. Then you would have a huge movement in the stock price. But what we've seen now is yes, we’re talking about it and it's great but it’s still not priority number one, like it's not really moving the needle that much when it comes to stock price, especially when there's so many various ESG scores. But, yeah, we’re not there yet.

Greg Dalton: And ESG is environmental, social, governance and we’ll unpack that a little bit. Simon, many companies publicly say they support climate action or a carbon tax. And there are lobbyists privately work really hard to make sure that that doesn't happen. We’ve seen that recently with companies saying these net zero pledges but they’re lobbying against the energy bills or infrastructure packages perhaps because it raises taxes to raise money for those clean energy investments. So, does Carbon Disclosure Project or CDP track corporate lobbying so that companies there are some kind of accountability for what they say publicly and what they do in the halls of Washington?

Simon Fischweicher: Yeah. Ultimately, CDP is voluntary reporting effort and disclosure system. And so, you know, we may not be directly tracking that and digging into their efforts, but we do have a component of our questionnaire that addresses public-policy engagement or companies are reporting on alignment with different industry organization positions on climate they may be a part of and meant to be discussing which public policy they may be supporting or sort of unsure of. And so, it’s a good reference point if you're looking at a company’s public CDP disclosure and looking at their policy engagement and how they’re discussing their work with resource organizations or industry groups to check that to some of the news you’re hearing and dig a little bit deeper into whether or not that's actually consistent with what their climate positions they’re saying are.

Greg Dalton: So, Kristina, how much credibility do you put in these kinds of voluntary unaudited disclosures?

Kristina Partsinevelos: Well, because my follow up question to Simon would have been right there. So, then who’s the third-party do you have one particular third-party that you’re using or firms using a bunch of different ones? And then it begs the question as to how they are what methodology are they using? I’m just like asking you the question not trying to be a pain in the butt. But, it’s usually a common problem with the rating firms the voluntary carbon offset platforms that are out there. Just there are so many different people doing it that there is no set methodology. And so, how do you guys deal with that?

Simon Fischweicher: Yeah, CDP has been around for 20 years. And our goal has been the same in that entire time. To provide a standardized comparable mechanism for tracking not only emissions from a quantitative perspective, but that full spectrum of climate management, right. And so, from a verification perspective we’re not dictating which firm or companies to work with but we’re dictating what information needs to be provided as part of the verification.

Greg Dalton: Darrel Stickler, Cisco plans to reach net zero emissions by 2040, a decade ahead of many companies. Are you going to have a third-party auditor look at those numbers and why should anyone believe Cisco when there's so much greenwashing going on and it's not clear that there’s a cop on the beat, right?

Darrel Stickler: I think we’re overstating greenwash. Greenwash is an issue for sure. But there's a lot of companies that are putting a lot of money and attention and top talent into this issue of carbon accounting. So, they get a little technical so there is a Scope 1, 2 and 3 emissions and let me just start with Scope 1 and 2. So the large financial companies, the accounting firms they do this auditing as well as specialized environmental consultancies. And they issue formal letters of, you know, their assurance and the scope and so forth, and we publish ours on our website so people can see this is what scope and this what they concluded. We’ve set a number of public goals, environment goals since 2008 and we've always had a policy that we have a public goal we’re gonna get third-party assurance because we recognized early on that us saying something well, we would hope that people would believe us but the truth is they want to have that third-party assurance.

Greg Dalton: And in the next six months corporations will have to start submitting their proposals to an organization. This gets kind of technical but it's the science-based target initiative so there’s this organization that companies will report to. Is that starting to get in the direction, Darrel, and what does that mean for companies that might be kind of, you know, inflating their numbers?

Darrel Stickler: So, SBTi is an organization that gets the goals right. And if you go to their website, you'll see there's hundreds, maybe thousands of companies whose goals are registered with SBTi. And you get registered there by submitting lots of information. It’s very painful. It took us about four months to meet all their information requirements. And they say that yes, your scope, your wording, your intent meets the requirements they published guidelines. And there's a similar thing for net zero they just came out last month. Don’t know the official title, but it's basically net zero guidelines by SBTi and you can go in there and read. If you want to say that you have a net zero goal that's SBTi approved this is what to ask and tell. So, that's what SBTi is for to make sure that these goals are properly framed.

Greg Dalton: So, things were kind of in these very early days starting to get some organizations and some early standards. Kristina, some companies say they are aiming for carbon neutral rather than net zero. As someone who carefully examines numbers and purses words issued by corporations. How do you see the emerging terminology of this conversation?

Kristina Partsinevelos: Oh, I think just like Darrel mentioned it’s gonna probably have to come from some platform that everyone is using. And if they come out with the definition then finally, we’ll get something that's concrete. You have the SEC that’s looking into it, but there's no federal mandates. I know the EU has more stringent rules. Somebody needs to come out with proper terminology. I don't know when that's gonna happen even when researching and writing a story or doing this on air, the amount of definitions that I could've used were ridiculous and instead I just went for a visual like a circle of how net zero is gonna be defined. I don't know who’s gonna go with the definitions somebody’s got to make it official and then we can all start using the same one. But right now, yes, like you mentioned there's carbon neutral and I’m sure both Simon and Darrel can speak more to the details of that or I guess the technical aspect of it. But it's not all the same, and companies know this, which is why they're taking in, not all, and I’m not greenwashing or saying that it’s all greenwashing, but the companies are sure to pick and choose how they word their marketing statements or their promises to the consumers.

Greg Dalton: A lot of these pledges are made by CEOs who will not be in office when these pledges come due. So, how are these companies held accountable and is executive pay tied to these commitments?

Simon Fischweicher: This is something that's really, you know, an important role for CDP to play where we have this voluntary disclosure where companies are reporting annually not only making that commitment getting the flashy lights with the announcements in the news; they have to report on that annually when they commit to setting a science-based target or have a net zero target. And that mechanism that most companies use is their CDP disclosure. But if you really dig into it, it’s not just hey we have this ambitious target, and we’re reporting on it annually but actually looking into governance structures and saying, is there a board level oversight of climate change at this company? Does the CEO have compensation tied to the achievement of the science-based target? And we have seen some companies I think HP Ink is one example, Canadian National Railway where in their disclosure they're saying we have a science-based target and our executive compensation is tied to achieving that science-based target. Obviously, that still runs into the problem that net zero by 2050 is none of our current CEO’s immediate problem and that's where setting that short to midterm science-based target that reduces emissions in the next 5 to 10 years in line with that trajectory towards managing 1.5° warming; we’re sort of avoiding the most dangerous aspects of climate change today, not just in 2050 is key.

Greg Dalton: Darrel Stickler, Cisco used to get dinged for not having board oversight over sustainability it now does. Is your pay and other Cisco executives tied to reaching carbon reduction goals at Cisco?

Darrel Stickler: So, the financial community has been increasing its attention to sustainability. I don’t know if people remember was it SIP sustainable investing, there is a special subset of analysts that just focused on sustainability. And that acronym I can’t remember what it is, it went away because now sustainability is mainstream. So, the financial community has just been ramping up so Cisco added social responsibility which includes ESG through our nomination and governance committee written it. And last year, our FY21 ended in July. So, now our executives the name executives have ESG as one of their it’s called individual performance factor. It’s one of the things where they multiply these factors together to come up with the cash bonus or cash compensation. And so, ESG is now part of the name executives compensation.

Kristina Partsinevelos: But then just for the social part, Don’t you find it difficult to measure that even within Cisco? Just because it’s quite qualitative versus quantitative?

Darrel Stickler: Well, I know the inclusion adversity it’s very quantitative because we publish multiple tables breaking down our employee base different ways by gender by minority at different levels of the company. But the whole trick of this whole sustainability ESG corporate responsibility is to figure out how to take it from subjective and put some numbers against it so you can set goals and measure your performance. Some people overstate it to may be dismiss it, but a lot of sustainability is finding hidden values. When you look at diversity for example, that can be taken to an extreme. But the truth is is you want to understand your customers, you want to maximize your access to different suppliers, you want to have a very diverse employee base because you have a very diverse customer base. These are all things that are good for the business. I tell people hey listen, if you want to hug trees go work for a nonprofit. If you want to take on the challenge of figuring out how to fit sustainability profitably into business come work for a big company.

Greg Dalton: You’re listening to a Climate One conversation about corporate pledges to hit net zero emissions. Our podcasts typically contain extra content beyond what’s heard on the radio. If you missed a previous episode, or want to hear more of Climate One’s empowering conversations, subscribe to our podcast wherever you get your pods. Coming up, the squishy calculations of net zero goals that rely on carbon offsets:

Simon Fischweicher: I think offsets and building a market around offsets has a really important role. If someone's net zero pledge is heavily reliant on offsets to get from today to where their net zero commitment has them in the future, to me without those standards that's very problematic.

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton. We’re talking about corporate net zero emission pledges with Simon Fischweicher, Head of Corporations and Supply Chains for Carbon Disclosure Project North America, Kristina Partsinevelos, a CNBC reporter covering ESG and net zero pledges, and Darrel Stickler, global lead for environmental sustainability at Cisco Systems. I asked Simon Fischweicher to tell us about the STOXX (that’s spelled S-T-O-X-X) climate change leadership index–another tool to help gauge a company’s carbon-cutting goals.

Simon Fischweicher: This is an index that actually uses CDP data to create several ESG focused industries. And one in particular is the climate change leadership index that actually maps CDP’s A-list in over a five-year period outperformed its global benchmark, which was a sort of global index of about 1800 companies by 5.4%. Correlation causation can't say for sure and I do think the companies that tend to do well on CDP disclosure A-list companies tend to be well-managed businesses who are thinking about all elements of their business and managing those well. But I think it does send that good signal to the market that if you're investing in companies that are managing ESG issues at the top of their class, they are likely to be managing across the business as well.

Greg Dalton: Simon, what role are institutional shareholders playing and pressing companies to cut their carbon pollution and possibly aim for zero? Because there's a lot of move now for BlackRock and others trying to press companies.

Simon Fischweicher: It's a critical role and it's one that has driven us to much of the point that we’re in now. CDP was actually founded on the idea that you could use the power of the capital markets to get companies to actually disclose on climate change, which 20 years ago was sort of an unfathomable idea and now has become something that 590 institutional investors with over 100 trillion assets are working alongside companies and their supply chains that have now activated 13,000 companies reporting on climate change around the world. So, it's really important to get that conversation started, In particular, I think you see in sort of the power shareholder advocacy and shareholder resolutions to drive major change and I think that's where large asset managers can player a really big role as they tend to be the biggest elephant in the room when it comes to making a resolution kind of go through or not. And on the science-based target and net zero side we’ve actually through CDP started a campaign that has over 200 investors now calling on companies who have yet to set a short to medium-term science-based target encouraging them to do so. So, definitely something that the investment community is interested in and pushing directly for companies to do.

Greg Dalton: Kristina, the word net in there implies the possible use of carbon offsets - planting a tree or protecting forest or doing something else, you know, in another part of the world that offsets the reductions the corporation has. What do you think about carbon offsets and their relationship to these net zero pledges

Kristina Partsinevelos: Well, it’s a market that’s growing. It's predicted to hit 1 billion in transactions this year alone so it’s the largest one. Microsoft, I think about 1.3 million carbon offsets themselves so it’s something that's not going away. Again, it goes back to the methodology used in who's going to be verifying how these carbon offsets how the carbon is gonna be removed from the air or not just, I know you just mentioned the trees, right, so that’s the most commonly like, yeah, even carbon capture a lot of other methods are available definitely more expensive. So, are these projects these financing of these projects going forward to help improve the environment and remove carbon was that something that wasn't going to happen had they not bought the carbon offsets? And so, that’s something that is still maybe a little bit murky out there.

Greg Dalton: Yeah, some companies are getting paid for forests that were not gonna be cut down anyways, yeah.

Kristina Partsinevelos: Yeah, yeah, exactly. There's a lot of scams out there. What stops a guy that owns a big forest to sell his forest five times to different companies and just say like, oh, I’m gonna keep these trees going for you or else they would have been cut down. I don’t know, there’s a lot of projects out there and there’s a lot of room for growth. It's again how do we verify it.

Greg Dalton: Simon, similar things there's no one standard sort of verifying agency that says, okay, that forest is going to be living for 100 years it won't burn, lot of forests are burning down lately, right. Your point there to Kristina on the validity of offsets which are companies relying on smoke and mirrors literally.

Simon Fischweicher: Look, I think offsets and building a market around offsets has a really important role. We need to bring all the tools out of the toolbox, but when we talk about net zero, if someone's net zero pledge is heavily reliant on offsets to get from today to where their net zero commitment has them in the future to me without those standards that's very problematic. But also, in general, what we’re looking for with net zero is for companies to abate their emissions by 90 to 95% of that net zero from their own value chain emissions, whether direct operations or supply chain. And it really should be that last mile that last five or 10% that’s neutralized by offsets. That doesn't mean that during the process of reaching net zero you can complement the efforts you're making as a company to reduce your value chain emissions and your operational emissions with offsets that help compensate for the emissions that you're already kind of producing, but those shouldn't be considered hand-in-hand with your trajectory to net zero. And I think that's because of many of the issues that Kristina is raising.

Greg Dalton: Darrel Stickler, what’s to prevent companies say that the company makes batteries and they say, oh we’ve reduced our emissions by X amount. And then the company that makes the cars or the iPhones that uses those batteries also claims those carbon reductions. What’s to prevent double counting in the supply chain? We’ve seen lots of disruptions in the global supply chain during COVID. What’s to prevent double counting?

Darrel Stickler: Well, yeah, I think net zero is gonna rationalize this because net zero is kind of a good pandemic. When our customers when Cisco customers set a net zero goal, I think the first thing I do is pick up the phone and call us because our customers can't be net zero if we’re not net zero. And then we turn around and we can't be net zero unless our suppliers are net zero because part of our footprint is what it takes to make our products and transport them and get them to the customers. So, it becomes more of a partnership and not gamesmanship.

Greg Dalton: Chevron recently announced "pathway to net zero.” Bloomberg ran a story that said that falls short of plans by its competitors like BP and Royal Dutch Shell, which have specific targets to eliminate emissions by 2050. Simon, how can a company selling oil and gas emit zero carbon pollution?

Simon Fischweicher: Well, I think that's also where we get into the conversation of offsets, right. And what are we actually talking about in terms of the boundary of emissions as well, right. Does that boundary of zero emissions just relate to operations and reducing methane emissions and moving to sort of renewable power? Or is it also talking about the use of the sole product, right. Because I think if we’re talking about use of sole product and that sort of indirect emissions though Scope 3 emissions that's where it would be impossible unless there's an actual business model transition. And so, I think Darrel or Kristina earlier maybe mentioned another issue is boundary. What are we talking about we’re talking about net zero and that's where we do need to standardization so that people can say, oh, this company is only talking about this one thing that's great, but it doesn't mean net zero because they should be talking about the full value chain.

Greg Dalton: Kristina, there is socially constructed silence around climate change; it’s often put in the category of taboo topic such as religion, sex, politics. How much do analyst investors talk about climate risk if they don't bring it up? Do you get the sense it's kind of like, oh, we’d rather not talk about that?

Kristina Partsinevelos: No, because it’s become so part of the daily lexicon, especially when you're talking about a firm and their ESG scores it’s definitely, it’s not as taboo as it once was. Maybe if you'd asked the question who's responsible for the earth warming and all that I don’t want to get into that but then that's maybe where you get some people with different opinions, but in terms of emissions and mentioning, look at the Hurricane Ida look at all the damages that we’ve seen that lasted a while. I think on average it’s cost the globe $84 billion just because of these hard-core storms that we’re seeing and they are increasing in their capacity. And so, that’s something we can’t ignore. We can't ignore the damage and what this means for corporations and humans and people and how we can fix that going forward. It’s still not topic number one unfortunately on everybody's radar. But it’s definitely being spoken about a lot more.

Greg Dalton: What about the fact that companies that have the largest profits are usually the ones that are willing to invest in environmental, social and governance at ESG?

Simon Fischweicher: There is a correlation with companies that are well-managed and their management of some of these ESG or environmental, social governance issues, right. We’re competitive in all aspects as if we’re a well-managed business and so there is, you know, if you're doing well in managing your business there is a possibility that also means that you're managing these two issues, but would love other, you know, I think they’re all from the first time might be interesting to hear from you.

Darrel Stickler: Yeah, so, I mean big companies had an advantage if they can spread the cost of a sustainability function over more revenue. So, you look at big tech company, Cisco, Apple, Microsoft, Amazon they all have really large and very competent sustainability functions. And for whatever reason maybe it's the ethos of the technology sector, but they are committed to address the problems like there's no greenwash there that I see in the tech sector. So, it really just goes back to business. I was listening and he mentioned renewables and I was talking to our facilities manager who buys our power and it's not costing us money to use low carbon electricity. He's able to do PPAs and so forth and this is the challenge of working in a for-profit company, you know that price signal pushes efficiency. And so, he says it’s good. Now, I don’t know whether it's gonna scale if everybody's going to go to 100% low carbon electricity if that's gonna pan out because maybe there's some breakpoint out there. But right now, it's not costing us money.

Kristina Partsinevelos: Aren’t we often confused or really haven’t determine yet is a company performs well with a high ESG score because they have promised to follow through these ESG goals or is it because they already were a good performer in the beginning and because they were good performer then they can provide you know transparency for ESG. Is it because people companies are making a promise to do better and they are doing better or is it because they were wealthy beforehand and now have the capabilities to do better?

Darrel Stickler: I always view those scores that you get as a combination of reporting and performance. Sometimes you score poorly because you can't get the people in the proper business functions to spend the time at the time that it's needed so that we can actually tell the outside world what we’re doing internally. So, that’s a reporting issue. And then there’s actually the performance issue where you don't score well and you look at it and you talk to the rating agency and you go, oh, we have to improve our performance.

Greg Dalton: I’d like to get Kristina’s response to a recent tweet from NASA scientist Peter Kalmus whose handle is @climatehuman. He wrote, “Politicians consider banks too big to fail but don't apply that same thinking to our earth." What does that say about how government and regulators are handling systemic risk if banks are too big to fail but the planetary system is not considered too big to fail.

Kristina Partsinevelos: Well, because we were in a situation not so long ago where banks came close or certain ones and did fail. Unfortunately, you can't have that situation with earth and so because it's something that we've never really seen. We’ve seen the damage to the earth. It's hard to apply that exact same mentality. We should but unfortunately if earth were to fail, then we wouldn't be here right now. And so, I think it's a matter of just becoming more and more proactive and with politicians thinking more long term, as opposed to just the term of their you how long they’re gonna be on Capitol Hill or wherever.

Greg Dalton: Alright, last word Simon and Darrel as we wrap up. Can capitalism reform itself and make these changes that are necessary, Darrel and then Simon

Darrel Stickler: I don't think capitalism has to reform itself. I think it's the answer. I'm a big fan of free markets and the price signal and clear and concise regulation. But I think we have what it takes.

Greg Dalton: Simon.

Simon Fischweicher: Yeah, I think that I'm also just a believer in humans and I think that we have what it takes as a species to protect ourselves really because the planet will figure itself out at a later date. And so, I'm optimistic, cautiously, and we have I think the tools in the toolbox. So, it's more about activating them into Kristina point maybe, you know, taking this a bit more seriously and acting like we've been through a too big to fail moment and still here. So, I’m hopeful and optimistic and it’s been a great part to hear one’s perspective so that call makes me even more so.

Greg Dalton: Today we’re talking about pledges by corporations to achieve net zero emissions. This is Climate One. Coming up, we hear from Mike Cannon-Brookes, the Co-Founder and Co-CEO of tech company Atlassian, on working to export renewable power from Australia.

Mike Cannon-Brookes: We have a lot of desert, we have a lot of sunshine, we're the sunniest windiest countries in the world and we only have 25 million people, but we have 3 billion consumers to the north in Asia. A huge part of our economy should be becoming a renewable energy superpower.

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton. We’re talking about corporate pledges to hit net zero emissions. Mike Cannon-Brookes is the Co-Founder and Co-CEO of Atlassian, a collaboration software company. Atlassian recently announced that it’s bumping up its own net zero pledge by 10 years - from 2050 to 2040. Cannon-Brookes is also a driving force behind Sun Cable, a company creating one of the world’s largest solar farms and battery storage facilities in northern Australia. The goal is to supply the cities of Darwin and Singapore with reliable and affordable renewable electricity, transmitted through more than 4000 kilometres of submarine cable. In 2019, 21% of Australia's forest burned in a single summer; an estimated 3 billion animals were killed. I asked Cannon-Brookes how that climate experience hit home for him.

Mike Cannon-Brookes: That was very hard to see. We were in Sydney for a part of that and then as it continues to go which we went to visit my wife’s folks in Michigan so we watch a little bit of it remotely and obviously had a lot of friends. It was incredible being in the city when we’re in Sydney and the kids like sport was canceled, they couldn’t be outside there was so much smoke around. You sort of think about these things like bushfires happening a long way away from you and it was like right up in, you know, Sydney the center of the city. And then as it started to spread to Mallacoota in the coastline area it sort of went through it sort of four, five different megafires that formed. If you haven’t seen the footage of the residents sort of fleeing to the beach and just red wall behind them and they all got in boats and watch. It was just staggering to watch for anyone to watch. So, it’s very, very hard to see. And then you had a lot of people fleeing to emergency shelters and I feel very sorry for a lot of people who lost their homes and things for obvious reasons. Any disaster is bad but of course we then sort of all stride into the pandemic. So, it’s almost like the world forgot about them a little bit which I always felt was very, very hard for them but it was brutal and obviously a huge reminder of why we’re all here.

Greg Dalton: And in 2020 California experienced its worst wildfire season ever. Which reminds me years ago I interviewed Tim Flannery, the Australian scientist and author of The Weather Makers. And he told me maybe 10 years ago what happens in Australia fires droughts is going to come to California and he certainly was right. In 2020 that happened with over four and a half-million acres burned, put that in perspective, now Australian summer 59 million acres burned. What was the reaction to that from the Australian government?

Mike Cannon-Brookes: Look, the government reaction was mixed. I think it’s probably the fairest thing to say. Certainly, the prime minister leaving for holiday to Hawaii has become a symbol of sort of abandoning one's posting in a crisis. I think it was obviously a lot of attempts at emergency relief and things like that. Depends on how far you take the government but the rural fire service and all of the fire volunteers the rural fire service here is almost entirely volunteer run. And so, you know, there was a massive community effort to help and people working 20 hour a day for weeks on end fighting fires as volunteers, so we should commend them. There was sort of almost an instant then controversy in the government about whether this was climate change or whether it was arson or this or that. And of course, we know now that next to none of it was actually arson or human started in any way, shape or form. And it’s generally accepted I would say that climate change has obviously made it worse, made the fire hotter and faster and more difficult to deal with. That doesn't mean the government has a lot about climate change from an Australian perspective, it's sort of always one of our challenges. But at least it's generally acknowledged that climate change made it worse. And obviously since then we’ve had droughts and floods and hurricanes and also something so we’ve had a fair few years of natural disasters and unfortunately, I expected to get more obviously.

Greg Dalton: Yeah, and even question whether they are natural disasters. They’re not really natural if humans are driving them. Have these disasters caused Australia to question its dependence on coal and to perhaps transition away from coal? I know that’s something you've been advocating for.

Mike Cannon-Brookes: Obviously from an economic point of view we are the third largest exporter of fossil fuels in the world after Russia and Saudi Arabia. It’s not really a club that you want to be a member of. We are the number one or number two exporter of coal and the number one or number two exporter of liquefied natural gas. So, and a bit of oil thrown in there and other things, so yes this is part of the reason why we have such a challenge in Australia. Coal is certainly from a usage point of view is slowly disappearing from our energy grid. We have long had very cheap coal so that is I think one of the inexorable slide, the question is how quickly can we do that and can we do it faster than sort of natural resistances doing it relatively slowly. I certainly believe we can do it a lost faster than we are currently doing from an export point of view. Look, I don’t hold a lot of hope that we are going to limit our exports. We are determined as a country not to count scope 3 emissions, which is our exported goods. You know generally I think the best approach there to limit those exports is number one we need to find alternative exports before our customers stop buying things. Our largest customerss in Japan and Korea or in other countries even Indonesia have clearly telegraph that they are going to stop buying our coal and they have their own internal targets for their country. So, our customers are gonna make those decisions for us. I think sometimes the narrative inside the country is that we have some sort of choice in this matter and we forget that we're selling it to customers and the customers are going to stop buying it, and we should be ready for that. And you can sort of see that in the lack of new supply opening up, which is good. There are far less new mines being opened because they’re largely noneconomic for a 40-year investment. The other thing that I think is really important there is to show other potential for export. So, from an economic point of view telling people to just shut down coal obviously creates a lot of drama around jobs and GDP loss and things like that. And so, we need to create other export industries that can replace that income. I am a big believer that we can continue to export energy from Australia in various different forms. It just won't be as a fossil fuel form which we’ve been doing since the 60s and 70s in a major way. And has certainly you know driven a lot of the growth of the Australian economy, but I don't think we can continue to export fossil fuels obviously.

Greg Dalton: Sure. Especially when governments are slow to act how important do you think it is to have corporate net zero targets for decarbonizing the global economy?

Greg Dalton: And how much credence do we put in voluntary pledges by CEOs who won't be held accountable when these dates come to be?

Mike Cannon-Brookes: Look, I think it’s really important that we work out the accountability mechanisms there. There’s a few of those. Firstly, you can still have management teams judged on making progress. You can judge the CEO on the progress they should make in the first five years or 10 years or something that they will be in there and also how the plans are going and that can be part of compensation lot of companies are doing. Secondly, the investor community has a lot to do here when you see ESG as an investing style and annual general meetings, and various shareholder requests for more information about climate plans often they’re quite obfuscated in terms of what’s actually happening or what’s actually going on with emissions. I think the investor and shareholder pressure makes a big difference and that's also from other parts of finance community. So, we see that insurance you know a cost of capital, so any sort of lenders or debt there are a lot of other financial instruments that actually make a big difference and companies are saying that it they do not have good ESG targets, you know, their cost of capital goes up, which makes them less competitive. That all makes a significant difference. I think the other one is to make sure that if they use credits, we’re gonna need some form of credits. I was sort to think that's the last 10% of the problem, we can solve 90% of the problem with technologies we have today, but we may need some sort of credit system for the last 10%. I think the more auditable and public and verifiable those credits are, we’re seeing a lot of what I would call dodgy credit usage here especially at the gas industry and some other areas where it's just not as I would say in Australia it’s just not fit in the way that they’re using those credits right they should really avoid emissions that would otherwise be put into the atmosphere or actively be compensating or removing emissions. A lot of the credits are actually not doing it yet.

Greg Dalton: And do you feel the same way about offsets? Because credits and offsets are not the same thing. Credits are like oh some renewal powers out there already I’m gonna claim part of it for my goals even though I’m not really adding to the supply. Do you feel the same way about offsets because that’s another tool that many companies turn to as a convenient way to perhaps pretend they’re solving a problem when it’s a little less clear they’re actually doing it.

Mike Cannon-Brookes: Yes. I think that whole credit and offsets right what's required is really as open and public information about what it is that you're doing. And then using all of the various standards bodies to try to make sure that those are valid ones. And I can tell you in Australia we have a few incredibly dodgy ones. Anything around sort of guaranteed land use non-change and I’m like wait, so there’s a piece of land there you’re gonna claim some goodness that you can continue to export some form of emission because you are gonna buy the land and not touch it, but it was already there kind of thing. Like there's a lot of these things where you know actually removing --

Greg Dalton: Pay me to not cut down trees I wasn’t gonna cut down anyways.

Mike Cannon-Brookes: That's right. So, we have a fair bit of that. The other one that's worrying to me when it comes to the especially the gas industry in Australia is using offsets to increase production which isn't exactly what we were meaning to do with those. That is a big problem like because of these offsets I can increase this so I'm gonna, you know, pull a lot more out and I'm gonna claim the offsets as something as, well, if you didn’t pull it out you wouldn’t even need to claim those offsets or credits in order to do that. That’s very, very concerning. The other one is the time shifting of credits which I really worry about. I’m not sure if the same thing happened with offsets I guess you could where they’re going to buy something in 2040 for something they are doing today, which you know future buying of those things. I also think is probably not gonna help the problem.

Greg Dalton: So, Atlassian as you mentioned recently announces moving forward it’s net zero goals by 10 years from 2050 to 2040. Google says it's been net zero since 2007, probably a lot of renewable energy credits in there. You have hit your goal of a hundred percent renewable power across all your operations five years ahead of your earlier target. So, what would keep Atlassian from getting to net zero sooner than 2040?

Mike Cannon-Brookes: Some of our suppliers, so we are looking through transportation is a challenge for us. We have a lot of international flights commuting and how employees get to and from work and measuring that and working out how we can make that better over time. Things like electric vehicles and things will come to help that I mean we can buy some sort of credit today but it’s not really gonna actually solve the problem we have bigger problem actually solving problem properly. And then our suppliers for some of the software that we use or hardware supplies that we use like Amazon AWS for example is one of our bigger suppliers. So, we run a lot of our software in the cloud on top of AWS. AWS has a 2040 goal so they’re kind of one of the longest poles but we've worked with them a lot they’re doing great work to green I guess you'd say all of their data centers and cloud offerings. So, some of the challenge process those supplies down the line.

Greg Dalton: Yeah, well, Amazon was late to the party on sustainability. They used to run Netflix in Amazon Web services used to run on lots of coal and they're moving on that lately. Thanks in part to internal employee pressure. So, you announced this moving forward from 2050 to 2040 around the same time as announcing a 30% increase in quarterly revenue. What’s the correlation there between growing revenue and reducing carbon emissions. Can you only do this when times are good? Are you planning to do this when times are tough as well?

Mike Cannon-Brookes: Look, we think about sustainability as a corporate part of our business. And we’re a very long-term thinking company and sustainability I don't just mean environmental sustainability, right. We’re a business that relies on customers in various communities and employees and a planet and we need all of those things to be sustainable in the long term. So, when we think about everything from diversity and inclusion to the philanthropy we have through the Atlassian foundation, through to our environmental climate things. It's all in the lens of long-term sustainability, right. We want to be a good partner to all of the groups and communities and environments that we live in as a company and we believe that is the best for our business. We don’t want to be a parasitic business in any kind of way on any of those type of areas. We have programs going on all of those to continue to be better put out a pretty honest and comprehensive sustainability report every year. I’d argue we probably our hardest critics, it’s not a PR exercise to try to tell people how good we are. It’s trying to be as honest as possible and tell ourselves and the world where we’re actually at. The stuff is hard and we try to help others learn by saying, hey, here’s where we move forward this year. Here are some areas we move backward and here’s what we learned and here’s what we’re gonna try and we really set every year. I don't think you can be just when times are good. In fact, when the business is growing 30%, you're actually working against yourself every year because you create a bigger and bigger problem. So, the earlier we can tackle that and the more systemically we can structurally tackle that I think the better off that we will be to actually get there. And again, we have an SBTI so science-based targets initiative target approved plan by them about a year and a bit to get the plan approved. So, it’s very, very comprehensive. I think a lot of you said CEOs just declare these pledges and there’s not really a plan there’s a couple of graphs and charts and stuff and that’s it whereas, you know, we have a I don’t know hundred pages like a big plan of each area the business things where you thought through and it’s like approved and they can kind of audit that every year. The SBTI does a fantastic job that I would encourage any other company to go through and they help you with your plan, right, and tell you where it’s not valid.

Greg Dalton: The Sun Cable Project, also known as the Australia-Asia Power Link aims to produce up to 20 GW of solar power in Northern Australia and export a big chunk of it to Singapore via a high voltage direct current cable. You mentioned Australia continuing to be an energy exporter, but not a fossil fuel exporter. I think you may have been talking about this; construction is scheduled to begin in 2024 in what will be the world's largest solar array nearly 10 times bigger than the current largest. How are you going to get this through, is the fossil fuel friendly Australia national government supporting this or trying to throw tacks in the road for you on this?

Mike Cannon-Brookes: To be fair the government has been really supportive of Sun Cable. So, Sun Cable is a company that's trying to build transnational and international high-voltage DC cables and power infrastructure. As you mentioned the AAPL, the Australian-Asian Power Link is our first cable project that is going from the Northern Territory of Australia it’s a 125 km² so I don’t know what that is in miles but --

Greg Dalton: A lot.

Mike Cannon-Brookes: Lot of square miles of space in the desert. And then cable up to Darwin and then 2200 miles something like that from Darwin through the Indonesian islands to Singapore. It will be about 20 to 25% of Singapore's power will come from solar energy. It’s a very power-hungry country of 5 million people that is also very first of all very sophisticated buildings mechanisms and all sort of things and has very limited space so it can’t really generate its own renewable energy. Right now, it’s entire gigatons of imported gas. It's a really strategic thing for Australia I would argue, to prove that we can do this. One of the reasons I'm so involved actively is to prove that there are other ways to export energy from Australia to the rest of the world. We have a lot of desert, we have a lot of sunshine, we're the sunniest windiest countries in the world and we only have 25 million people, but we have 3 billion consumers to the North in Asia. So, if we can connect that sun and wind to those 3 billion consumers it can be a big economic export for Australia a huge part of our economy should be becoming a renewable energy superpower. And what I said by that is exporting that power to largely to Asia, some via cable directly. I think we’ll export some as hydrogen or some sort of form of ammonia, something like that. And lastly by our high-value goods. So, we should remember that a cheap energy price in Australia largely backed by massive renewables. Our energy here is getting cheaper every single year as a renewable proportion in the grid goes up. So, we’re really proving that fact that renewables are actually reducing everybody in Australia’s price of power that means certain manufacturing aluminum smelters ore refining all sorts of other things that we can do to ship high-value goods onshore with our cheap energy means effectively a better export industry for Australia and whatever that good is. So, those are the public three main manners but yes, Sun Cable’s AAPL is an incredibly ambitious world scale project but we’re gonna get it done.

Greg Dalton: Okay. So, idea is to export sun energy rather than coal energy to that huge market to the north of you with all those thriving Asian economies.

Mike Cannon-Brookes: I have a number of different projects going on here like Sun Cable large-scale projects to demonstrate, we call them lighthouse projects in my family office. So, it’s a lighthouse project because it shows the way. We are a lot of technology investors and entrepreneurs trying to build the Sun Cable Project and the team is very entrepreneurial. If it works, I would imagine there are 5, 10, 50 cables over the next 10 to 20 years that are probably built by classical infrastructure companies who have a path lit for them if you see what I mean to show how these projects can be done, how they can be profitable and that's great that's good for climate, right. It's good to show traditional businesses how to do this. I think we need all parts of society. I think I'm a big believer that far too much of the responsibility is put on individuals and that corporations and governments and industries regions should all play a part and all need to do what they can do. Corporate net zero targets as long as they are science-based, Atlassian, the company I’m the co-CEO of. We have a science-based target that we just bought forward from 2050 to 2040 with a very thorough plan covering all the parts of the business and all the things that we’re doing. So, it should be a science-based target if you are a corporation and it should also have interim milestones that can be externally judged to. If you do all those things and I applaud your corporate net zero target. There’s far too many corporate net zero targets do not include scope 3 the customers use of their products or their suppliers upstream or downstream which I don't think is a fair or valid target. I don't think corporations can do it alone, but I think they certainly have a huge role to play here in changing as you said a lot of the demand economics and showing examples of what can happen.

Greg Dalton: Mike, thanks for sharing your insights and your leadership on Climate One today. I really appreciate people like you out there fighting on all those fronts. Thank you.

Mike Cannon-Brookes: Thanks, Greg. Thanks for having me.

Greg Dalton: Mike Cannon-Brookes is Co-Founder and Co-CEO of Atlassian, a collaboration software company. Today on Climate One we've been discussing how to vet and trust corporate net zero pledges.

This episode was supported in part by the Erol Foundation.

Climate One’s empowering conversations connect all aspects of the climate emergency. To hear more, subscribe to our podcast on Apple, Spotify or wherever you get your pods. Talking about climate can be hard-- but it’s critical to address the climate emergency. Please help us get people talking more about climate by giving us a rating or review. It really does help advance the climate conversation. Brad Marshland is our senior producer; Ariana Brocious and Austin Colón are our audio editors and producers. Our audio engineer is Arnav Gupta. Our team also includes Steve Fox, Kelli Pennington, and Tyler Reed. Our theme music was composed by George Young (and arranged by Matt Willcox). Gloria Duffy is CEO of The Commonwealth Club of California, the nonprofit and nonpartisan forum where our program originates. I’m Greg Dalton.

Play

Jay Inslee, BP and Washington’s Climate Story

Otto Pilot — Fri, 06 Aug 2021 08:00:00 +0000

Jay Inslee, BP and Washington’s Climate Story

08/06/2021

Earlier this year, Washington state passed a bill to put a price on carbon pollution across a huge swath of its economy. But it didn’t get there easily.

In 2016, shortly after the Paris climate agreement was ratified, the state voted down a measure that would have imposed a carbon tax and reduced the state sales tax. In 2018, BP and other oil companies spent $30 million against a similar measure, which also failed. But this year, BP and several more former opponents of climate policy came on board, along with environmentalists and tribes.

Washington Gov. Jay Inslee says public consciousness about the climate emergency is changing quickly.

“People are now realizing the threat to their personal hopes and dreams; that’s the fundamental change. And the reason they're realizing that it is no longer an abstraction. In 1998 or 1999 when I invited Al Gore to come give his presentations to my colleagues, it was a graph. Now it's a picture of dead coral all around the world from warming and acidification,” Inslee says. “And that's why we have to be aggressive, assertive, take no prisoners and persevere.”

Inslee says Washington learned from California's experience passing a carbon cap measure in crafting its own bill. They’ve also focused on redressing past harms, with at least 35% of the revenue from the bill going to overburdened communities and 10% going to tribal projects and programs. The bill also expands air quality monitoring in those communities.

“We’ve crafted our environmental justice ways to make sure that minority and communities of poverty that are the first and the worst hit by climate change are benefited adequately by the dollars that are invested,” Inslee says.

Some tribes criticized Inslee’s line-item veto of language in the bill dealing with tribal consultation.

“Some tribal leaders are very upset by it, others like me were more philosophical about it,” says Leonard Forsman, chairman of the Suquamish Tribe. “We were a little frustrated by it but we've got other things that we're working on that the state and governor have been supportive of, so we feel like we can work with them to try to get some language that is acceptable and achieves the goals that we have for a meaningful tribal consultation.”

Inslee defended his veto, saying the original language was too expansive and he’s organizing a summit with tribes to work out new consultation language.

Support from tribes helped get the measure through the Washington legislature, as did support from BP, who opposed a similar measure in 2018.

Tom Wolf with BP says their change of position was partly due to the 2021 legislation making the carbon price economy-wide, as well as the company’s own internal decision to become a net zero company by 2050. He says BP knows the market and world are changing.

“And if you’re not adapting to the new market, the low carbon market that the Paris Accords are working toward, everyone's working toward, your business is not gonna be successful,” Wolf says. “We are transforming from an international oil and gas company to an integrated energy company. We’re doing that because it's good for business, it's good for investors, it's good for our board, it's good for our employees and it's also good for the environment.”

Gov. Inslee says he welcomes support from all quarters to get the necessary steps in place to address the climate emergency.

“An attitude of disrupting the status quo is a necessary survival mechanism for the human species right now,” he says. “Because the status quo is deadly it’s fatal it will destroy economies and the biology that we exist on."

Guests

Jay Inslee

Governor, Washington State

Tom Wolf

Senior Manager for Government Affairs on West Coast, bp America

Leonard Forsman

Tribal Chairman, Suquamish Tribe

Greg Dalton: This is Climate One. I’m Greg Dalton. This year, Washington became the second state to place a price on carbon across most of its economy. Governor Jay Inslee says there’s no time to waste:

Jay Inslee: We are waking up every morning figuring out how can I disrupt the status quo. Because the status quo is deadly, it’s fatal, it will destroy economies and the biology that we exist on.

Greg Dalton: The cap and invest bill made it through the legislature with surprise support from oil company BP:

Tom Wolf: If we do the same thing as today 40 years from now, just make oil and natural gas products and ship them around the world, our company is not going to be successful in 20 years, 30 years, 40 years.

Greg Dalton: So how do we balance protecting the economy and the environment as climate disruption continues?

Leonard Forsman: Clean water is good for the economy too. Healthy orcas and healthy salmon and robust tribal fisheries you know helps everybody out.

Greg Dalton: Washington’s Climate Story, Up next on Climate One.

Greg Dalton: Has Washington State set a new bar for robust and just climate policy? Climate One’s empowering conversations connect all aspects of the climate emergency. I’m Greg Dalton.

Greg Dalton: Washington has set in motion a price on carbon pollution across a huge swath of its economy. But it didn’t get there easily. In 2016, shortly after the Paris climate agreement was ratified, the state voted down a measure that would have imposed a carbon tax and reduced the state sales tax. In 2018, BP and other oil companies spent $30 million against a similar measure, which also failed.

NEWSBITE: Disappointment for climate activists as initiative 1631 is trailing this morning by about 13 percentage points…

But this year, BP and other former opponents of climate policy came on board, along with environmentalists and tribes. I asked Governor Jay Inslee why this coalition of previous foes came together to support Washington’s cap and invest bill.

Jay Inslee: Well, the world is changing and thank goodness. It’s not changing -- in one sense it’s changing too fast, which is the biological collapse of the systems we depend on as humans. It’s going way too fast that way but it was also changing the momentum we have to attack the first problem. And that is changing like weekly in the United States and it’s a good thing. Now, unfortunately, it has taken massive forest fires, billions of clams and mussels being cooked in their shells. Ocean acidification sea level rise, hurricanes, tornadoes, floods in Germany and China to bring the increased public consciousness. So, the public’s consciousness is changing on this dramatically in the last several years. And organs of government and business are responding to that including BP to some degree. So, the most fundamental change that has occurred is that people are now realizing the threat to their personal hopes and dreams. That's the fundamental change. And the reason they're realizing that it is no longer an abstraction, you know, in 1998 or 1999 when I invited Al Gore to come give his presentations to my colleagues, it was a graph, right, we had a graph. Now it's a picture of dead coral all around the world from warming and acidification. And so, people are experiencing this visually in their own lives, and that is fundamentally changing this and that's why we have to be aggressive, assertive, take no prisoners and persevere. And that’s what we have brought to the table as well. Now, we were able to craft through herculean effort support for this cap and investment bill. And that took a lot of shoe-leather a lot of listening a lot of consensus building to do something new that’s workable and tangible and answers the needs of so many different corners of society. One benefit we had as we learned from the California experience, right. So, we saw some of the imperfections of their first draft if you will, and we’ve learned from that to make sure that we have our cap that does create a meaningful price signal, the floor just didn’t dropout. We’ve crafted our environmental justice ways to make sure that minority and communities of poverty that are the first and the worst hit by climate change are benefited adequately by the dollars that are invested. Now, this also, I should note this is not our first success, right. So, the previous legislative session, we created the most ambitious and best clean electrical grid requirement for totally clean electricity. So, this wasn't our first rodeo, it's our most recent. With more rodeos to come; we’re still not done yet.

Greg Dalton: And you've vetoed sections of the cap and invest in low carbon fuel standards part of this package, sparking rebukes from two fellow Democrats. Assembly Speaker Laurie Jinkins and Senate Majority Leader Andy Billig. Both said your veto was overreach of executive powers that allow Washington governor to veto a full section of a bill not a subsection. So, what do you say to those who said that you exceeded your authority in pursuing this big climate win.

Jay Inslee: Well, I am a committed Democrat and I love those two leaders. But they are human and can make mistakes on occasion and will be forgiven in the fullness of time. Listen, we have to get these climate bills in place. This is a convoluted story. I don’t know if your listeners want to hear it. But basically, the problem was is that because of a couple of recalcitrant Democrats who are not those two leaders those two leaders have been good leaders to try to address climate change legislation. But in order to get this passed they had to put a poison pill in both of our climate bills that essentially kneecapped the bill. It basically said the bills were not going to affect until these other legislators got what they want which is a five cent in gas tax, well that’s crazy. What is a gas tax, what should a looming gas tax got to do with stopping climate change legislation? So, I rightfully within my constitutional prerogative and my moral obligation vetoed this with a total sense of confidence that it is in our constitutional power because it was a section veto because that section was unique. Now I won’t bother you with the arcane legalese of that but I’m in very firm ground that this veto is legally appropriate and absolutely necessary. We could not surround all legislators twiddle their thumbs worrying about a five-cent gas tax. That's nuts -- shellfish were dying and getting boiled on our beaches. The fires are consuming north-central Washington. I can't tell the folks in Washington well sorry we got to wait for a five-cent gas tax. That’s not the Washington way.

Greg Dalton: Many people the climate situation is so urgent that it requires bending rules, breaking norms, shaking up this status quo that rests on fossil fuel, capitalism, democracy is slow, by design. And there’s a growing group of people who think incremental change within the existing establishment is not going to get the job done.

Jay Inslee: Listen, an attitude of disrupting the status quo is a necessary survival mechanism for the human species right now. We are waking up every morning figuring out how can I disrupt the status quo. Because the status quo is deadly it’s fatal it will destroy economies and the biology that we exist on. So, that attitude is an appropriate one, but we can get this done while still maintaining our democratic traditions.

Greg Dalton: And you said earlier that BP has changed a little bit. I talk later in this episode with BP executive Tom Wolf. Do you welcome having oil companies on your side and now on this climate bill it strikes me as odd that oil is on board and Republicans aren't. That's an interesting picture.

Jay Inslee: As Lincoln said, as our case is new, we must think anew. And yes, we should welcome people who agree with particular strategies going forward and BP may disagree with other ones; that should not stop us from working to pass good policies in my book. The situation is too dire not to welcome any effort to try to pass good climate legislation. We don’t have the luxury of sort of dividing the world into two camps here.

Greg Dalton: Right. It’s what things used to do is cut deals with people you don't agree with --

Jay Inslee: The good old days.

Greg Dalton: Right, yeah.

Jay Inslee: It’s called democracy.

Greg Dalton: Tip O'Neill and Ronald Reagan. You also vetoed language and the bill dealing with tribal consultation and consent. Some tribal leaders have called this, “betrayal of tribal interest.” In this episode we’re also talking with Leonard Forsman, chairman of the Suquamish Tribe who says his people are frustrated with your veto but looking forward to working with you on new consultation language. How do you respond to the range of reactions from indigenous leaders about this big climate bill in Washington state?

Jay Inslee: Well, I was just in this field among the Colville Reservation and people welcomed the climate work we were doing with a lot of attaboys yesterday. They understand that we’re doing great climate work in Washington. I certainly didn't hear those frustrations yesterday but they do exist because there was the necessary veto because of the way this was drafted. And many of the tribes I've spoken to actually to understand the reason for the veto, which is, it would have given absolute authority under virtually any circumstance for any tribe to veto any project any clean energy project anywhere in the state of Washington for essentially any reason, without any justification including and here's why quite a number of tribes agree with the veto, not all of them, not all of them but many of them, is it would have allowed one tribe to veto a clean energy project on another tribe’s property. And the tribes are not happy, you know, the tribes are pretty proud of their sovereignty they don't want anyone violating their sovereignty. The way this unfortunately was drafted would allow one tribe to invade the sovereignty of another and stop their clean energy project. Well, we want tribes to be able to advance their own visions of clean energy and not to be intruded upon on their territory by another tribe. So, it had an imperfection. But the fundamental thing I'm sure Leonard will talk to you about, I’m a super admirer of Chairman Forsman, is that we have to have as good a consultation process as possible. So, when we develop these clean energy projects, we have to have close, persistent and effective consultation for tribes, if it's on land that they consider sacred or have a particular interest in and to have a process where in a sovereign to sovereign basis there's consultation about that, particularly early in the projects not just in the last day of the project. So, that we can, if there are ways to cite things in a way to achieve the goal of the clean energy project and avoid disturbing some ground called sacred. We ought to totally investigate those things; we ought to have robust conversations. So, next month or in September we’re gonna have a summit if you will with tribal leaders to work out that consultation language and I’m confident we will get there and people will feel good about this ongoing relationship.

Greg Dalton: Over this last year of racial reckoning in our country I've learned a lot about talk to indigenous leaders and then address my shameful ignorance of it. Frankly, the education I had about indigenous people in this country that been kind of erased and there's a growing realization in some climate circles that indigenous people have knowledge and practices that can help address the broader climate emergency. Prescribed burns of forests, for example, could head off the mega-fires ravaging the American West. What have you learned in your trips to these tribes from indigenous people that has personally resonated with you and shaped your thinking and behavior?

Jay Inslee: Well, we’re very blessed having these tribes in our state because they have a long view of history and the future, number one. And then the first thing that I think is such a virtue in my state is that we have tribes that when they think of these things think of the seventh generation when they make decisions almost in every decision they make. That is a huge virtue. It is an important survival tactic and it helps lead our state to make good environmental decisions. So, that's number one. To start every discussion thinking about it in those long-term views of what it does to our ecosystem. But the second and the more, you know, tactical way, you mentioned the burns. So, yesterday I was in this field and we we’re talking with the fire suppression crews there about how we do need to do some more prescribed burns to remove the dense fuel load on the forest floor, which is now so dry, which is going back to exactly what the tribes did here in the Nisqually Prairie 5 miles from where I’m sittingright now. They historically did burns that kept that in a system that was healthy for nutrition, berries game whatever they had and they managed the forest. And we’re gonna have to go back to some of that management style if you will. And fortunately, we have reached a good consensus in our state about how to do that. How to do that in a way that doesn't, you know, endanger more endangered species, that does not cause undue air pollution. We’re in a good place about how to do that work but we have to finance it cost money to do this work, right, it’s not self-supportive yet. We have increased our state commitment by millions of dollars to this work but you can imagine how many hundred thousands of acres that need this treatment over time; it’s enormous. And the scale of the fire danger is beyond imagination. We talked to these firefighters and they said, look, I’ve been doing this for 30 years, but I've never seen anything like this. These dry conditions are, you know, one ember is a catastrophic fire now.

Greg Dalton: Right. It’s astonishing. As a candidate for president in 2020 you shape the platforms of other Democratic candidates. You were the climate candidate and shaped the platform of Joe Biden and others. Progressives and climate hawks were disappointed when the recent bipartisan infrastructure deal did not include many of his plans for decarbonizing the US economy. Is President Biden being ambitious enough on climate?

Jay Inslee: Well, I will tell you I believe President Biden is doing a super job for us in this realm. And I'm a guy who debated him on climate and I think he has shown an enormous commitment to this issue. I think he gets it deeply. I think he has proposed, you know, 90% of the agenda that we need. I think he's going to be as tactical as possible to get as much of it as possible. So, I am not disappointed in his leadership on climate in this regard. But he has run into some legislative realities. One, being the filibuster and two be in a senator two in the Democratic caucus who are not yet totally expressing total commitment to these things. So yes, all of us could be disappointed this was not in the bipartisan infrastructure which is woefully short. Let me report this, the bipartisan thing is woefully short for what we got to get done. But the President recognizes that and that's why he is supportive of the reconciliation bill with billions of dollars appropriately invested in a slug of A-Z of clean energy strategies. And I think it's a very, very robust proposal in the reconciliation. Now he's got Nancy Pelosi in there who is one of the super leaders on climate and Schumer will help out too, I’m a House member so I would start with the House, Nancy. So, we have a lot of promise right now, but we need to get the reconciliation bill obviously to have what we need. And I’m hopeful that we can achieve that. Now, you know, I kind of disagree with the President on the filibuster on this though. I was the first candidate to say that when I was running and I’m still the firmest, it is such an impediment to survival of humans. The filibuster right now is one of the most dangerous things on the planet because it enables the fossil fuel industry to block progress of the things we have to do. So, I'm hopeful that over time everybody at least those who want to save the planet come to realize that and say that that's just an artifact of a bygone era. I'm also hoping that at the end of the day a couple of our Democratic Senators feel that they’ve run their string out far enough, now it's time to get on the bus, get on the electric bus, the sooner the better it has to this is our last chance and we have to get this done.

Greg Dalton: Well, if oil got on board with carbon pricing in Washington state. Is there any reason to believe they would get on board with national pricing that Washington is a sense a model for the country? That sounds very, I’m comfortable saying that because of history, but is that kind of, you know, too rosy to think that might actually come about?

Jay Inslee: It’s not too rosy at some point; it doesn't exist today. Again, this was not monolithic. We had one company, you know, BP that helped on this, but certainly the majority of the industry did not. So, you know I think the President has concluded that he doesn't have the political momentum to pass a universal cap right now. That's the thing that we had done that I hope will lead the nation that will ultimately be a national proposal. But it'll help if a state goes forward like Washington to show the way to show we’ll continue to grow our economy to continue to show we’re protecting our energy intensive industries because we do embrace some pricing system to build in, you know, a fee if you will of imports that we would have to compete with to show that this is doable. So, I think Washington is gonna help. I think eventually we will get there nationally. Maybe it's not today but it’s important in our states moving ahead to do that but we need much more than a cap system we need direct investment too. We need direct capital investment by the national government in a whole slug of things. Let me just mention infrastructure electrical charging infrastructure. We have some really great plans to move to electrical vehicles and I'm looking forward to the administration allowing the California zero emissions vehicle standard to go in place. The moment that happens my ZEV standard goes in the place as well. So, that's gonna be really exciting. But we have to build the electrical charging infrastructure as well and that is very helpful and direct federal investment in that; that's where the reconciliation package is so important. There is a portion of that in the infrastructure bill but it’s not enough because 40, 45% of our people don't, you know, they live in apartments they don’t have a place to charge their car. So, this requires investment, not just a cap bill if you will.

Greg Dalton: You’re listening to a Climate One conversation about Washington’s cap and invest bill. We’ll continue my conversation with Gov. Inslee later in the show. If you missed a previous episode, or want to hear more of Climate One’s empowering conversations, subscribe to our podcast wherever you get your pods. Coming up, a BP executive explains his company’s pivot to a new energy future:

Tom Wolf: The market’s changing. And if you’re not adapting to the new market, the low carbon market, that the Paris accords are working toward, that everyone's working towards, your business is not going to be successful.

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton, and we’re talking about Washington’s new cap and invest bill.

Greg Dalton: In 2018, Bill Gates and Michael Bloomberg helped raise a reported $15 million in support of a ballot initiative in Washington State that would've put a price on carbon pollution. BP alone spent a reported $13 million to defeat the measure. Tom Wolf is Senior Manager of Government Affairs for the US West Coast for BP America. I asked him why BP and other oil companies worked so hard to defeat that ballot initiative three years ago, and why BP changed course to back the carbon price measure that passed earlier this year.

Tom Wolf: So, in 2016 there was an initiative on the ballot that was an economy wide price on carbon that we were neutral on because it was economy wide and affected everybody equally. In 2018, as you mentioned, there was another initiative that really was just about us and it was just pointing at not us as a company, us as an industry and our customers. And it wasn’t economy wide and it let off the hook some other companies who have carbon emissions in the state of Washington. And we didn't think that was a fair approach. So, we did fight that measure. When we made that decision in 2018, we told the governor we told all the legislators that we would be in after this if the voters voted this down to try to find that sweet spot to try to find that price on carbon. And early 2019 we did just that working with legislative leaders and the governor's office saying how can we find that price on carbon that can pass. And I'm happy to tell you that we found that, and we were helpful in finding that price on carbon and that the solution in the 2021 legislative session and we’re pumped about it.

Greg Dalton: So, that was quite a switch, you know, there were a lot of people opposed the previous efforts, environmentalists were opposed, indigenous groups, environmental justice advocates. And this one seems to have brought along some surprising bedfellows some surprising supporters some interesting switches. So, you mentioned there that this because this was economy wide it affects everybody equally doesn't isolate one industry. What else was crucial to getting that coalition the third time, or perhaps more to get this through in Washington?

Tom Wolf: For one thing, the environment changed a bit for everybody. For us in 2020, we announced our aims and ambitions about being a net zero company by 2050 or sooner. And later on, the years we had specific benchmarks by 2030. So, we were a company that was talking about a lower carbon environment, talking about carbon pricing being important. And then in 2020 we became a company that every decision we make is through that lens, and that was a change. Other companies started making their net zero goals public and how they were going to reach that goal. Environmental justice groups and equity groups learned things from previous wins and losses. And we came together seeing what can we be for, what can we work together on. And the last piece of it is legislative and executive branch leadership. The governor's office, Governor Inslee’s office and the legislative leaders and the environment committees in the House and Senate and a decade of experience on this and a decade of losing on this but they learn from all those. So, when the endgame happens at the end of session when this bill is going to that last piece they knew the bill they knew the push points and they knew what they needed to get to through the coalition support to get the votes they needed to get the yes, and they pulled it off.

Greg Dalton: How important was just a rising evidence and experience of climate events, hot weather, melting snow, disruption as well as pressure from youth. How much did that change put pressure on all these groups to kind of get a deal this time?

Tom Wolf: Well, I think that's the biggest change. I think ultimately if you look back to when Gov. Gregoire first talked about climate pricing or carbon pricing. Imagine that 10 years ago and imagine how everything’s changed in the past 10 years, both in business, both in education, both in just common discussion about this issue. It’s been a seachange in 10 years. It might not be fast enough for some people, and I appreciate that. But that whole political environment has shifted. It still has more shifting to do; there’s more room to do it. But enough of that change where, you know, people's experiences, their conversations with their neighbors and their friends, what they see in the news - all of that matters and all of that has changed, especially over the last three years.

Greg Dalton: And you’re BP Senior Manager for Government Affairs on the West Coast of the US. How is BP's experience and the shift that you’re describing in Washington State will that ripple elsewhere across the country?

Tom Wolf: I hope it has a ripple effect, that's the whole point. The whole point is to get to a national price on carbon. And there’s no surprise that in the federal side there’s not a lot of activity. There's some discussion about it, but not a lot of activity on real solutions on this yet, on a price on carbon. And if we had to push it from the regional level to get the national attention and showcase what works, then let's do it that way. This isn't a victory by itself, this is a stepping stone.

Greg Dalton: And explain why BP wants a price on carbon.

Tom Wolf: We like a price on carbon because it drives innovation, it drives change for everybody, the individual and the company. And for us as we look at, let’s say the largest refinery in Washington State. We have 2.1 million metric tons of stationary source carbon emissions from our refinery. This is the largest single source emissions in the state after the coal plants in Washington State close mid this decade. We have a challenge ahead of us: how do we get to net zero by 2050 or sooner. And we do that, probably by making less, making it more efficiently, sequestering the carbon or offsetting the carbon. How do you get there? Well, you have innovation coming from inside the company and outside and you’re rewarded for the innovation. Under our cap and invest program now, if we lower our carbon emissions quickly or more quickly, we get benefit from that. So, it’s not just as such as the stick, there are carrots involved. And then you put that economy-wide; you think of people in garages and startups and boardrooms. What do I do? How do I get this new technology out? And that price on carbon drives that innovation and makes it more palatable in the market. I'm excited and really bullish on our ability to be innovative in this space and find those solutions.

Greg Dalton: But for more than a decade oil companies have been saying we want a price on carbon and there's been sort of frankly there’s been a double game. There's been public talking points and then there's what happens in the halls of power through the American Petroleum Institute privately where everything is done as possible to slow it down. So, why should we believe you now, because there’s been a lot of talk in greenwashing, etc. and I know some of this is other companies, Exxon, in particular, you know, we’re all for a carbon price and then things are done privately to slow that down. Why should we believe it now?

Tom Wolf: Well, ultimately, I think the cynicism is expected. I think the cynicism is necessary. I think we have to be; our feet have to be held to the fire. Talk is cheap. And I think the biggest proof point is it's about the environment but it’s also about the economic environment and where it's going and what we need to be a successful company in. If we do the same thing today 40 years from now, just make oil and natural gas products and ship them around the world, our company is not gonna be successful in 20 years, 30 years, 40 years, the market is changing. And if you’re not adapting to the new market, the low carbon market that the Paris Accord are working toward that everyone's working toward, your business is not gonna be successful. So, if you don't believe us in that we think we care about the environment, I understand that. Believe us that we want to be a successful business. We are transforming from an international oil and gas company to an integrated energy company. We’re doing that because it's good for business, it's good for investors, it's good for our board, it's good for our employees and it's also good for the environment. But if we don't do it if we don't make it then our business won’t be successful.

Greg Dalton: One way that the business is changing as global automakers are moving away from gasoline and investing billions of dollars in retooling their factories to make electric cars and there’s this kind of competition among countries and companies right now to say who's going to get off gas the fastest. So, what does that end of gasoline cars mean for an oil company like BP?

Tom Wolf: So, if this was BP in 1970, we be like, this would be a huge issue. But we’re adapting to the new marketplace. We’re the number one EV charging company in Great Britain right now. Pulse is the brand. And we’re looking at coming to the US. It's not a matter of if; it's a matter of how and when. And we’re trying to figure out that market where we get engaged and a lot of other companies are as well. It’ll be a very vibrant market. We’re gonna have to meet that challenge because those Toyotas and Hondas and Fords and GMs they’re all going to be making electric cars and consumers are gonna want them. I drive a Honda Clarity a plug-in hybrid and I'm learning how I use that car, you know, plug it at home, plug it in other places. And the industry will have to figure that out the market will figure that out. That is going to be a seachange much like probably how we went from horses to cars, right, and that seachange. But we’re gonna be part of that solution. So, we might make less gasoline. That doesn't mean necessarily we’re gonna be, you know, out of the game in terms of energizing mobility.

Greg Dalton: So, I asked the same question of auto company representative recently the Auto Alliance the big automakers in the country. And I said why should we believe you now because they were, in 2016 they were the first out after the election, saying, hey, let's ease off on these regulations for pollution standards. And he said, basically follow the money, you know, words are easy, but they’re investing billions of dollars into these new electric cars. It would be difficult to change if, say, a Republican president comes in ’24. I’d like to ask the same of you: follow the money, you know, CapEx, capital expenditures. What percentage of BP’s capital expenditures today are going to clean versus brown because ultimately words are one thing but you know billions of dollars in capital investment that shows a company's commitment.

Tom Wolf: Absolutely. So, before the 2020 announcement that we were going to net zero by 2050 or sooner. It was $500 million a year like 500 million with an M. A large amount of money, but I don't know what our CapEx but it wasn’t a large part of our CapEx.

Greg Dalton: Yeah, it’s like pocket coins in the couch for, you know.

Tom Wolf: Well, again, still a lot of money. I mean just to be clear. But since we did announce our new aims and ambitions, we have some specific benchmarks that we put out there. So, by 2030 that number will grow tenfold to $5 billion a year which is a 33% of our CapEx. So, to be clear to your listeners. We’re still going to be doing hydrocarbons we still believe we’re going to be doing hydrocarbons in 2030, some of them, and that we’ll need some capital expenditure to keep that moving; we’re gonna meet the market needs that the market were still gonna have for some of those hydrocarbons. But a third of our investments is gonna be in low carbon initiatives. And for a company like us that is a huge sea change. And I think the number by 2025 is $3 billion a year - and that's a floor, not a ceiling. And as I like to think that as the market changes and changes rapidly, that is a floor that will be doing more as more opportunities come up.

Greg Dalton: Tom Wolf is Senior Manager of Government Affairs for the US West Coast for BP America. Tom, since Pope Francis came to the United States in 2015 there's been rumblings about Republicans pivoting on climate. That has failed to materialize in a meaningful way aside from one energy innovation law championed by Lisa Murkowski and that was a significant piece of legislation. Last month, dozens of conservative legislators formed the new conservative climate caucus including Representative Cliff Bentz of Oregon and Dan Newhouse and Cathy McMorris Rodgers of Washington State where you are. Politicol reported recently that they then went silent as a devastating heat wave hit the Pacific Northwest. So, there's a new climate caucus and then it goes dark when there's a big climate event. You talk with Republicans privately, how do you see their public and private positions on energy and climate? And is this long rumored coming out ever going to happen?

Tom Wolf: I do talk to Republicans a lot. It is not difficult conversation. It’s a varied conversational and actually had that conversations with people of all political spectrums. There are people on the far left who think that oil refineries should shut down tomorrow. And I’m like what you use our products everyday. Again, there are some people on the right who are like, you guys should be doing what you do now you shouldn't change anything and that's not right either. But there is a growing group in the middle that is understanding that, the middle-right included, that is understanding where things are going. But I would argue to your listeners is you get the government that we deserve. It's the people who move politicians. I think the Republicans are talking more about climate change because their constituents are talking more about climate change. The constituents are going to give the Republicans an opportunity to get in this game and get in the way they haven't been before. That's how it happens. And on the left side, if I may say, it can’t be just pressures from people saying just shut down the fossil fuel industry or screw BP every chance you get. It gotta be how do we have these companies get greener, be part of the solution.

Greg Dalton: Right. But there's also an imbalance. I mean there’s a lot of fossil fuel funding that goes into Congress and there’s a few issues where, you know, frankly the votes are out of sync with public sentiment. The public wants background checks on guns; that doesn't happen, right. So, there are places where you know the politicians don't reflect public opinion. In Washington State, Republican state legislators oppose Washington's cap and trade bill that BP supported, you know, are there long-held political alliances that are shifting here?

Tom Wolf: I think in the state, there are. I think federally if I could solve the federal issue in Congress I’d be in a different podcast, Greg. But locally I just see those conversations changing. I do see the conversations with Republicans; they did not support the cap and invest program nor the low carbon fuel standard. That does not mean they don't see the problem, they're not sure of the solution. And I think over time this --

Greg Dalton: But what’s the opposition to the solution if an oil company saying, hey, this affects us we’re for it, when industry supports and environmentalists support it, indigenous people, icons of the Seattle Washington economy, Amazon and Microsoft support it and Republicans oppose it. I don't get it.

Tom Wolf: So, if I can channel them a little bit. The role of agriculture very iffy on this, you know, because they see pricing of fuel that they use all the time and they’re concerned about this. The constituents in the eastern part of Washington, which is much more conservative, they see those gas prices and they’re kind of focused on that. I just think over time, you know, I'm bullish, I’m a glass is half-full kind of guy, is that people will see this in a different light in the years ahead and will bring more Republican voices into this. But I’m not sure who is gonna lead whom. Will it be the people that says oh my God cut the crap we have to get this accomplished or will it be leaders telling their constituents, we have to get past this we had to go to this transition. But any time in our country transition is always been hard. It’s been a leap to get to where we have to get to but the people can get there. I think one of the reasons we got there as a company is because our employees and our investors and our market is telling us you gotta change. And I think that's one of the reasons we’re changing and that isn't any different for politicians.

Greg Dalton: Yeah, I think it's an interesting place where we are, where the global automakers and oil companies are out front moving more than the Republican Party because of investor and customer pressure. If Republicans don't come out and support the bills that BP wants them to support for something as important as climate change does that mean you change your political giving?

Tom Wolf: The short answer is yes. Yes, I'll be looking at that and I'll be making changes based on that.

Greg Dalton: What do you think of Pres. Biden's jobs and infrastructure plans. And is BP supporting, pushing that forward?

Tom Wolf: And we are, you know, we've been supportive of the Paris Accord obviously Pres. Biden put us back in the Paris Accord. President Biden is talking about net zero by mid-century; we’re talking about that. He’s talking about methane regulations we’re talking about methane regulations. There's a lot of synergies there. And, we’re not just focused on this in the US but globally working with governments to find that price on carbon or other regulations that incentivize the action toward a lower carbon society incentivize those actions to get to the Paris Accord goals. And for the infrastructure piece, whether it's mass transit or other pieces of it, anything that helps lower the carbon footprint that makes total sense to us. We’re looking at EV charging station incentives, we’re gonna be an EV charging world. We may or may not be successful in that world.

Greg Dalton: BP of course has been down this road before when it shifted from British Petroleum to Beyond Petroleum in 15 years or so ago under --

Tom Wolf: 20.

Greg Dalton: 20 years ago, under John Browne. During that time BP helped popularize the personal carbon footprint. You know, had a calculator on its website, and that makes some people think they’re like the oil companies trying to put the burden back on individuals. How do you think about the individual responsibility versus, kind of the systemic and industry responsibility for carbon footprints?

Tom Wolf: This is why I like the price on carbon so much; it puts the responsibility on everybody. And I'm hoping that through innovation the consumer has a smooth transition. The consumer goes from the flip phone to the smart phone and doesn't even realize that switch lowers carbon. But ultimately, we’re all responsible, we all have a place to do in this. As a company, we’re an international oil and gas company switching to an integrated energy company. We have a huge footprint and it’s our responsibility to find a way to get to net zero and lower by 2050 or sooner. But the consumer has to be looking for products and rewarding the manufacturers of those products that also have a lower carbon footprint. So, I'm not sure if it’s equal or greater or less than, but we all have to have skin in this game and I think through innovation we’re gonna find ways whether it's, you know, in our homes with electricity used by more efficient appliances, whatever that is. I think it'll be easier for consumers because the innovation will push it that way: consumers will buy good products that have a better carbon footprint. I think EVs are perfect example, Greg. Ultimately, I look at the issues we have both locally in Washington State and on the West Coast and nationally and our company and globally and saying how do we make sure we have a quality of life economic environment with a much lower carbon footprint. And it ain’t gonna be easy; if it was easy, we’d be doing it already we as a society. And I would argue that it can't be just individual companies and a couple consumers saying we’ll go to net zero by 2050. We need governments, national government setting that price and setting those expectations putting the carrots and sticks out. So, we all have that equal innovation to get to net zero by 2050 or sooner. It's gotta be a public-private work but without the public work, it ain’t gonna happen. We’re not gonna reach the Paris goals. That’s why BP is advocating globally for a price on carbon.

Greg Dalton: Tom Wolf, Senior Manager of Government Affairs, for the West Coast of America for BP America. Thanks for coming on Climate One.

Tom Wolf: It was my pleasure to be here. It's a great podcast and thanks for having this conversation.

Greg Dalton: The legislative success of Washington state’s new cap and invest bill also depended on support from tribes. Leonard Forsman is chairman of the Suquamish [SU-quamish] Tribe in Washington and also serves as president of the Affiliated Tribes of Northwest Indians. He spoke with Climate One’s Ariana Brocious about his view on the legislation that finally passed.

Leonard Forsman: I think it's a good first step towards addressing you know the impacts of climate change and carbon footprint management I guess you’d call it, reducing carbon footprint. So there was that and I think there's a lot of recognition of the tribal needs fiscally in there, in the set aside for tribal projects. And then of course there's concerns about the consultation issues and the fact that part of that was vetoed and of course there are concerns about that but we're trying to work through those best we can at this point in time.

Ariana Brocious: Am I right in thinking that you and some other tribes opposed previous versions of this kind of a bill in past years?

Leonard Forsman: Some tribes have had concerns about the aggressiveness of the bills regarding addressing the number of challenges in Indian country for one and then also in other communities of you know lower economic status or minority status. Trying to get those those issues redressed through a more what they make all more progressive approach. So there was a you know a lot of discussion about the fee or tax on emitters and then also the cap and trade. There's also the concern that's brought up is that we need to do something to reduce carbon emissions. There has to be a reduction and that sometimes the criticism of just taxing and creating revenue by taxing or putting fees on the emitters, on the polluters and then creating money that pays for resilience. And that's one of the reasons I supported like the initiative process was that we have a long list of projects that can help improve habitat that's been damaged here and so that helps us in resilience and cleaner water or less toxics, you know improving habitat functions that support salmon, clams, other wildlife so you know kind of weighing those against each other there's always been a challenge for me as a tribal leader.

Ariana Brocious: Yeah so just to make sure I kind of capture what you're saying or understand, so past efforts in the views of some tribes weren't aggressive enough in actually addressing the root causes, basically just like limiting carbon emissions and didn't do a good enough job addressing concerns of tribes in terms of restoration or these other projects that that need funding and need help?

Leonard Forsman: Right there's a number of you know there's relocation is one cost for some of the tribes on the coast, relocation not just the coast but other places they're from wildfires for example and also just addressing you know the fact that there's sea level rise and more storms and all those things so you just have those those types of projects and then there's also just the backlog of habitat restoration that needs to happen; it's becoming more important to do that because of the fact that we have to make our ecological systems more resilient. So not only were, they were damaged and need to be restored you now with the climate impact environments even more important so as far as the argument about carbon reduction everybody wants that right but some feel that generating income to take care of these other restorative projects is less important than actually getting at the carbon reduction issues.

Ariana Brocious: In this episode we're really exploring some of the questions of why this year this effort succeeded and what came together to make that happen and the support of tribes was part of that and I'm wondering in your mind how critical you think that was.

Leonard Forsman: Obviously the tribes have a lot of impact in Olympia because of our presence and also our you know we do contribute to a lot of political causes and we're very engaged with the state as we should be. And we were informed that this bill has some some good tribal provisions and we need to get it moved over to the house so some calls were made to some of the senators that we needed. And some of them you know were not fully behind it but our influence was able to we're able to get enough of a push to get it through and then over to the house and so then that's when they were really a lot of discussions were being had; the tribes have a presence but also within I think within this more within this session there was a lot of need for emphasis on restoring and repairing relationships based upon the racial history of the state and the federal government. So even more so I think it amplified our presence there in a little bit more than it maybe it has been in the past.

Ariana Brocious: Right, and speaking to that environment that you just mentioned, there have been statements from a couple of tribal leaders that the governor's line item veto of language related to consultation with tribes was in in one “a betrayal of tribal interests.” What's your position on that?

Leonard Forsman: Some tribal leaders are very upset by it, others like me were more philosophical about it. We've been supportive of Jay Inslee every time he's ran. We all know that we're not always going to agree. We were a little frustrated by it but we've got other things that we're working on with the state and governor have been supportive of so we feel like we can work with him to try to get some language that is acceptable and achieves the goals that we have for a meaningful tribal consultation.

Ariana Brocious: In general how do you rate Governor Insley's handling of concerns of indigenous people when it comes to these climate policies?

Leonard Forsman: One thing that I think has been a frustration for me is the balance between jobs, the economy, large corporations, polluters and tribal interests regarding protection of the environment. He's tried to balance that to a certain extent but oftentimes there's always this like conversation that happens. It's like well you know they employ a lot of people whether it's Boeing or another you know larger polluter or you know maybe a paper mill or whatever right. And the balance between those two things has always been a challenge for him and for us is trying to understand that you know we we have you know economic engines within our tribes and we try to balance that with our need to protect the environment and you know, the state needs to do the same thing. And I think that sometimes the pendulum or the weight always goes towards the jobs and protection of the economy over protection of our waters and our air and our ecosystems. so that's just that’s just containing it goes on and goes on every day and it's a challenge for all policymakers out there. So I just feel like clean water is good for the economy too, and healthy orcas and healthy salmon and robust tribal fisheries you know helps everybody out.

Greg Dalton: Leonard Forsman is chairman of the Suquamish [SU-quamish] Tribe in Washington.You're listening to a conversation about Washington’s new carbon cap measure. This is Climate One. Coming up, Washington Governor Jay Inslee on how he hopes his state’s policies will inspire others:

Jay Inslee: My state needs to do more and that's why we passed the best laws in the last two years and they're just starting to kick in, right. You don't solve the problem 12 hours after you pass the bill. I'm proud we have the best in the United States and I encourage everybody to catch us, right. Go ahead, try to catch us.

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton. Let’s return to my conversation with Washington Governor Jay Inslee. In a recent Climate One episode on public transportation we talked a lot about the push for parity of funding between cars and transit in infrastructure or other federal bills, as opposed to the 80 percent that now goes to cars and highways now. I asked Inslee if he supports that idea.

Jay Inslee: Well, I’m not sure I pick a numerical number of what constitutes parity, but I'll just give you some principles I think we should follow. Number one, you cannot build freeway lanes out of this problem. It's certainly endangered climate, and trying to pave, you know, a couple more tens of square miles is not a solution to my state's transportation woes. That is a physical reality. And when you think about parity, I guess we need parity each should use whatever mechanism we have to have good transportation options by eliminating carbon pollution, whichever works. The reality from a physical standpoint, is it every corridor of our transportation network has to carry more passengers per mile. And I'm confident over time that we will. Now, I don’t think that we should come to a zero roadbuilding. In our viewpoint in part, is we’re gonna be having electric cars which are fantastic. So, I do believe that historical split if you will change because the physical requirements and the new technology that’s coming on. I don't want to forget a whole bunch of new things, scooters. Scooters are not a toy, they are a transportation system right now, right. You combine light rail with a scooter and an electric skateboard and a bicycle you got a great system. And that’s happening in Washington state right now it's happening in real time.

Greg Dalton: On electric cars electrification mobility is great, they’re sexy their cost is coming down they’re going mainstream. I think the Ford F150 maybe a cultural game changer there, but there's a problem that people like me and you who drive electric cars. We don't pay gas tax to fund the roads. So, you dismissed earlier that kind of gas tax issue, but how are we gonna pay for roads with electric vehicles?

Jay Inslee: Well, first off, at the moment it is my belief that we should be incentivizing electric vehicles. We should be incentivizing the way for middle class and lower income people to afford electric vehicles. This is not the moment to dump charges on electric vehicles. They are still an emerging technology and I believe we should have incentives as we did in the solar industry, as we did in the wind industry. We should in the electric transportation system to incentivize rather than to punish people getting electric cars. So, at the moment I don't think that that's a route to go. But over time yes, we’ll have to figure out some way that everyone participates in our transportation revenue structure. It could be the vehicles per mile it could be somewhat, you know, a fee when you get your license. We don't know yet. There will over time need to be some system like that. But right now, when we’re trying to get this baby off the ground, I do believe we should be going the other direction, which is incentivizing this new technology making it easier for lower-income people to afford this technology. I think from an equity standpoint, that's very important.

Greg Dalton: Companies are setting goals of net zero emissions; that sounds good, but those pledges are often fuzzy and rely on offsets and other controversial tools. Many of them in your home state, Amazon, Microsoft and others. How much credence do you put in companies saying we’re going net zero? Should we really trust that?

Jay Inslee: Well, I think we should applaud any effort, even if it is not totally hundred percent angelic. I just think, yes, you can always make a criticism no matter what a person does and, you know, until Amazon delivers packages by mule you know you’re gonna have carbon emissions to some degree right now. So, I guess what I'm thinking is we should applaud efforts, and we should inspire further efforts, is the way I’m looking at it. So, and we should be reality based. If you make a pledge that means you know you're not using a particular product, but the sub product that goes into the product has enormous carbon footprint you got to pay attention to that, right. If you're driving an electric car but you’re using coal-fired electricity, you’re getting a small gain, but maybe not that much. So, yes, we have to be alert to all these things, but I applaud people who are, in part because it’s good for public sentiment to say that this is becoming an expectation of the community that everybody's gonna pull on the rope. But yes, everybody’s gonna need to be more ambitious over time.

Greg Dalton: I wanna re-circle back to something that we touched on. Washington's climate policies are modeled after California's which have been criticized for turning a blind eye to people of color that often live on fence line communities near refineries and other sources of local air pollution. What has Washington done to address those climate justice concerns. You mentioned that but I want to be sure we really nail that.

Jay Inslee: Yeah, we thought that was a fundamental pillar of our planet policies with equity. And so, we have been very intentional about this and built the strongest environmental justice provisions in the country. Just mentioned a couple of them. So, 40% of all the investment they would go through the cap and invest has to go to these communities of poverty where frequently and frequently BIPOC communities obviously where they’re getting the first and the worst of the pollution coming off these factories and our roads by the way, the roads are as dangerous as toxic pollution centers. I remember meeting a young woman, all her friends had asthma. She lives next to the freeway, right. So, for a fully 40% needs to be invested directly and we have a very equitable open decision-making system on how that is allocated. So, that's a significant improvement. 10% of all the dollars of the clean energy investment needs to go to tribal community lands. They represent less than 1% of the population. So, that was an important commitment as well. On the wage side we have the strongest incentive program to have people have good wages family wage jobs and through that union representation. So, in our previous bill we passed we have the strongest provisions that when you bid on a project to get a grant that will be awarded, you get extra points every time you do something to have more prevailing wages, to have safe standards to have representation. So, it’s a very strong incentive program. We want these new jobs to be family wage jobs. And frankly, this is a challenge for us because they're replacing older industries and newer industries kind of, you know, frequently start on the lower end of the economic curve. So, it is important for us to build into these policies a way to incentivize real family wage jobs as we go through this economic transition. I think if people look at our bill, they’ll be encouraged on a way to do that, that’s an important thing. Now, another important thing is to have the training, infrastructure to train people for these jobs as well. And it has to be not just in the urban core. I was in the other day in the tribal the Colville industry, that’s one of the things they were talking to us about. We need more training for wind turbine technicians and electric car technicians and the like. So, that's gonna be part of our effort.

Greg Dalton: Yeah, whole lot of new jobs being created there. We mentioned the climate summit in Glasgow coming up in November. You believe that states and regions could drive national governments to be more ambitious going into Glasgow - high-stakes there to move forward the Paris agreement. But a recent report from the Environmental Defense Fund analyzed carbon emission trajectories of states and found that Washington and many other states are not on track. So, how can states push countries if they’re not meeting their own goals?

Jay Inslee: Well first off, we can push ourselves and we can push each other. In my state, we actually are doing well on a per capita per dollar GDP. We are doing relatively well compared to other states. But you’re always a victim of your own success. My states’ been named the best place to live two years in a row. No governor in American history can claim that, where their state’s been named the best place to live for two years in a row and obviously part of that is our best economy. When that happens, people move into your state, and they are economically active, and when that happens, your carbon emissions are associated. So, we’re attracting people from all over the world and they're coming here. So, on a gross basis we have not been able to drive down as fast as we would like, but we are in a per-unit GDP and per capita. We’ve been considerably successful. But what I would say to everybody: my state needs to do more and that's why we passed the best laws in the last two years and they're just starting to kick in, right. You don't solve the problem 12 hours after you pass the bill. So, these bills need to take effect for us to achieve our goals. I'm proud we have the best in the United States and I encourage everybody to catch us, right. Go ahead, try to catch us and that's a good challenge to be in. By the way Glasgow what we’re doing besides just pushing our national governments. We want to have coalitions and agreements between ourselves that we will commit to ourselves county to county state to state to commit ourselves to higher ambitions. They may be more aggressive in our nation states and that's appropriate because Washington state can do something, I can do something that Pres. Biden can't do, you know, I'm not negotiating with senators from West Virginia. So, I can move my state faster than he can move the nation. And so, we have to make our states laboratories of democracy and clean energy. We need to be ahead of our nation states on these policies as we intend to do in Glasgow.

Greg Dalton: On this Climate One... We’ve been talking with Governor Jay Inslee, Tom Wolf of BP and Leonard Forsman of the Suquamish Tribe about Washington’s new cap and invest bill.

Greg Dalton: To hear more Climate One conversations, subscribe to our podcast on Apple, Spotify or wherever you get your pods. Talking about climate can be difficult and sometimes depressing, but solutions begin with discussions like these. Please help us get people talking more about climate by giving us a rating or review. It really does help advance the climate conversation.

Greg Dalton: Brad Marshland is our senior producer; Ariana Brocious is our producer and audio editor. Our audio engineer is Arnav Gupta. Our team also includes Steve Fox, Kelli Pennington, and Tyler Reed. Gloria Duffy is CEO of The Commonwealth Club of California, the nonprofit and nonpartisan forum where our program originates. I’m Greg Dalton.

Play

Mark Carney, Fatih Birol and the Narrow Path to Net Zero

Otto Pilot — Fri, 09 Jul 2021 08:00:00 +0000

Mark Carney, Fatih Birol and the Narrow Path to Net Zero

07/09/2021

Visionary Guests

Five years ago, most of the world’s nations entered into an agreement to dramatically ratchet down their carbon dioxide emissions with the goal of keeping planetary warming to 1.5 or 2 degrees Celsius above pre-industrial levels by midcentury. Reaching that goal, it is hoped, will avert the worst consequences of climate disruption.

Currently the world is burning fossil fuels at rates that will push carbon pollution far higher than the goals set by the Paris Climate Agreement. So is achieving net zero by 2050 still possible?

Mark Carney is an economist and banker currently serving as the UN Special Envoy on Climate Action and Finance. He says part of the challenge of addressing climate change is “the tragedy of the horizon;” we may set ambitious targets, but human nature’s tendency toward procrastination gets in our way.

“Once the physical manifestations of climate change are so enormous and immediate, it’s too late,” Carney says. “So, we need to act now. And the challenge is to pull the future to the present and motivate people in the present to make the types of investments and changes that are necessary.”

In his new book Value(s): Building a Better World for All, Carney explores the ideas of “what is growth, what is value, and the extent to which we as a society value sustainability, value solutions that move our country, our planet towards net zero.”

Carney believes firmly that one of the tools necessary is harnessing the power, innovation, and dynamism of the market, paired with a realistic carbon budget.

“It's that element of the equation that far too many for too long have set aside,” he says.

The International Energy Agency recently laid out a roadmap to make it to the net zero goal, and made headlines by reporting that meeting that target will not require any further investment in new fossil fuel projects.

IEA Executive Director Fatih Birol says the energy sector is responsible for more than 80% of emissions. His agency’s report translated government emissions targets into discrete steps required to meet the 2050 goal.

“We have looked at the entire energy sector – all these power plants, all the cars, trucks, industry facilities one by one. And we came up with over 400 measures that the governments need to put in place in order to reduce those emissions,” he says. Those include finding alternative aviation fuels and ensuring 60% of all car sales are electric by 2030. Currently, less than 5% of car sales are electric.

Birol says solar power offers huge opportunities, especially in developing countries in Africa, and believes that even China, who currently consumes half the world’s coal, will move away from that carbon-intensive energy source. We will need to marshal the current technologies and develop new ones to transition all parts of our economy and industries, he says.

“The pathway to reach the net zero 2050 is a very, very narrow pathway but still achievable if we move quickly and if we have international collaboration with governments around the world,” Birol says.

Guests

Mark Carney

U.N. Special Envoy for Climate Action and Finance

Fatih Birol

Executive Director, International Energy Agency

Greg Dalton: Is there still time to get the world on a path to net zero emissions by 2050? Climate One’s empowering conversations connect all aspects of the climate emergency. I’m Greg Dalton. Five years ago, most of the world’s nations entered into an agreement to dramatically reduce their emissions, with the goal of keeping planetary warming to 1.5 or 2 degrees celsius by midcentury. But burning fossil fuels at our current rates will push carbon pollution far higher than the Paris Agreement goals. Mark Carney is an economist and banker currently serving as the UN special envoy on climate action and finance. He’s also author of the new book Value(s): Building a Better World for All. He tackles the question of how we can get to net zero. In 2019, he sat in the UN General Assembly, and heard these words.

[Start Playback]

Greta Thunberg: This is all wrong. I shouldn't be up here. I should be back in school on the other side of the ocean. Yet you all come to us young people for hope. How dare you! You have stolen my dreams and my childhood with your empty words. And yet I'm one of the lucky ones. People are suffering. People are dying. Entire ecosystems are collapsing. We are in the beginning of a mass extinction, and all you can talk about is money and fairy tales of eternal economic growth. How dare you!

[End Playback]

Greg Dalton: That’s Greta Thunberg at the UN. I’ve heard those words many times. It gives me chills and tears every time I hear them. You write that these words cut through the assembled presidents, prime ministers, business leaders and other dignitaries. How did they cut through you?

Mark Carney: Just as you described actually, Greg, absolutely powerful to the core. The inadequacy of the response made thus far that point and I would include still now two years on. You go to a meeting like that, you're assembled, if you’re someone like me because you're trying to do something about it. So, you to some extent go into a meeting like that feeling pretty good about yourself. And as I said a moment ago the inadequacy is exposed and, you know, that’s part of her power has been to reinforce the relentless logic of climate physics in the size of a carbon budget. And many, many contributions that Greta Thunberg has made but one of them has been to just force that math in front of a number of decision-makers.

Greg Dalton: And particularly powerful for me is the fairytales of eternal economic growth and the systems the world we live in is built on perpetual compounded quarterly growth. And we’re approaching, you know, 50 years from when The Club of Rome said, this doesn't pencil out.

Mark Carney: Yes, um, well, this is where I have a departure from her because the question and this is part of what I try to get across in the book, the point of what is growth what is value and the extent to which a value of sustainability to the extent which we as a society, value sustainability value solutions that move our country our planet towards net zero and to net zero then that will have value. And then that will compound as part of that growth. Now, it’ll be a very different type of growth than the trajectory we've been on. But the nature of growth and the nature of what we value has changed over centuries and it's relatively rare just to be clear, it's relatively rare that you move out from a trade-off of short and longer-term or people and planet or profit and planet rather. But I think there is a prospect of that happening. And the other thing I feel very strongly about is that the scale of the investment, the scale of change that's required is that we won't get there without harnessing the power the innovation, the dynamism of the market. But it has to be oriented to that end, it has to be oriented to the same end that Greta Thunberg underscores which is net zero consistent with a realistic carbon budget. In other words, an understanding of just how limited it is. And you know it's that element of the equation that, you know, far too many for too long have set aside.

Greg Dalton: And many governments and companies are making those net zero pledges. As a former governor of the UK Central Bank you're playing a key role in the upcoming climate summit in Glasgow later this year. Climate leaders, Mary Robinson and Christiana Figueres have questioned the UK's leadership of the conference of the parties or COP26 and express concern that it isn't raising ambition for governments and companies. Are they right to be worried?

Mark Carney: Well, I think everyone is right to have the highest ambitions and to challenge the efforts of people or making myself challenge my efforts as well. The ambition of the COP26, this meeting in Glasgow in November is to keep 1 1/2° within reach. Paris set the sub 2° goal that one and a half stretch goal that the NDCs the country plans at Paris at that moment were equivalent to 2.6° so they are weren’t equivalent to the objective even at the time, and then most countries didn't execute against those plans. And so, the world when the UK took up the presidency was headed well above 3° in different estimates but certainly well above 3°. So, to pull ambition back into towards that 1 1/2° is absolutely necessary and it is a high ambition. There's no mission accomplished banner though that will, you know, even if that is accomplished, banner that should be flown in Glasgow because plans are not execution. And 1 1/2° within reach is not 1 1/2° achieved.

Greg Dalton: Right. And just to reflect on that, so the world is currently on path to double the Paris stated goals. So, we’re nowhere near achieving the promise of Paris. Much of the conversation of the conferences the UN international process is based on how we value or discount the future. You write that climate change is a tragedy of the horizon. What do you mean by that and what do we do about the tragedy of the horizon?

Mark Carney: Well, I spoke in those terms because we often think of it as first and foremost a tragedy the commons, which is this problem of not having the externality price of climate change free rider problem in effect. But it's also goes to the human nature which is that we put off till tomorrow what we should be doing today and we’re irrationally impatient. And for climate change as you well know, once it becomes the clear and present danger once the physical manifestations of climate change are so enormous and immediate, it’s too late. The stock of carbon, the stock of greenhouse gases in such in the atmosphere that absent some technological fairytale to use that term, we won't be able to reverse it. So, we need to act now and the challenge is to is to pull the future to the present and motivate people in the present to make the types of investments and changes that are necessary. And part of what we’re doing on the financial side is to accomplish that. But we can only really accomplish that if in parallel social pressure consumer pressure and government policy is consistent with addressing the tragedy of the horizon and that’s the core work.

Greg Dalton: Right. And so, when you mentioned that I think of lots of examples to kind of bring that down. I think of Miami it’s built on porous sandstone so building the seawall around the city won't work. They have sunny day flooding. You used to work at Goldman Sachs many people on Wall Street are relocating to Miami. The city needs to spend $4 billion in coming decades to retreat from some places and armor the rest. The property market is booming, condos are going up banks are issuing 30-year mortgages. Is that an example of a horizon where everyone's just banking on well, I can get out before it collapses it's all about time horizons.

Mark Carney: That's right that is an example. And one of the things, so maybe I'll give a counterexample to expand on what I was saying a moment ago, which is in the UK in Canada one of these financial reforms related to climate is to conduct so-called climate stress tests. And that’s to ask banks to look at where they’re lending and think about how those whether it’s a company or in this case, real estate, how that's going to look 10, 20, 30 years out from now. And look at those assets in two ways. One is what happens if it's business as usual and we head well through that 3° then and as a consequence we have more and more extreme weather events. The sea levels rise by another 10 inches and the consequence exactly what you're saying the $4 billion isn't enough. And what is that do to the real estate that you’ve lent 30-year money against. Are you comfortable with those risks have you really thought it through. And in order to properly ask that question as opposed to just conceptually put the challenge, we banded together a group of central banks and climate experts, climate scientists, macroeconomic modelers and created scenarios, coherent scenarios which are take the catastrophe risk modeling of climate. And I can tell you as somebody who used to oversee Lloyd's of London which one of its jobs was to ensure against these types of risks. So, it's pretty sophisticated modeling, to take the economic impact and the asset level impact the Miami real estate impact in your example and challenge the banks and say, well, did you know that this is the risk you're running if you keep the mortgage to the end. What is your strategy? Is your strategy what you just said, Greg, which is well, get out before others realize this and yes it will be sold on and that’s possible. Another strategy or view could be well, we actually we don't think it's going to happen because we think that through the power of Greta Thunberg and governments and others, we won't end up in that 3° plus world. But what we need to have is our financial institutions fully or as fully informed and have the perspective that they need in order to be clear what risks they're running. There are also risks and this may sound a bit paradoxical, but there are risks with success.

Greg Dalton: Transition risks.

Mark Carney: Yeah, exactly transition risks. So, what if I'm lending, and obvious example is I'm lending to a big oil company that is in investing in the energies of the future, but it has oil reserves the last 30 years and gas reserves that last 50 years, etc. And I'm assuming that the value of those assets will be realized but because we’re successful in addressing climate change, much less oil and gas is used and these assets are stranded and there's losses there and therefore I have losses, either because I’ve invested directly in them or I'd lent against those assets. And the order of magnitude of those so-called stranded assets is enormous. 50% plus for gas and coal reserves of the known reserves that exist cannot be burned, and we still meet the Paris objectives that’s what stranded assets mean. And so, there's also that challenge put to the financial institutions now.

Greg Dalton: And you write that it’s not just oil and gas companies and banks you write that the European auto industry has about $280 billion in assets of risk at risk of being stranded because of three disruptions. Electrification of cars, autonomous vehicles and ride sharing. So, for people, listeners who have a 401(k) program that's invested in the S&P 500 or some European index, are the stock markets discounting the value of European auto stocks because some of their factories may become outdated because they’re building fossil fuel engines when the world's going electric.

Mark Carney: Well, that adjustment has started to happen we see it in the extreme evaluations for Tesla, you know, electric vehicle manufacturers and major auto makers. And of course, number of people step back and they said, well, how is that possible the number of cars that are produced by Toyota, Volkswagen, BMW, Ford, etc. all together. It just dwarfs the amount by Tesla. The answer is yes, but one has a clear future and the others have, let’s be polite, you know, have murky futures. Now, what's interesting is what has changed in Europe in the last 12 months, in Germany for example and this is most relevant. They have announced that there are no new internal combustion engine sales of vehicles after 2030. And here's an example of how you address the tragedy that’s rising you have a clear government policy like that. It tells the German auto industry where the future is and where it isn't. It's far enough off in the distance that there's time to repurpose some of those factories to invest in electric vehicles and to adjust build their charging infrastructure and so that's happening. But there are assets that are no longer worth much because they were geared to the emission’s heavy old modes of transport. But these are the types of policies that can then be amplified by a financial sector that has the right information and is thinking far enough ahead to where the future is going to be in. That's part of what's coming together. I don't want to oversell it I don’t wanna say it's all lined up but it's part of what's coming together as we speak.

Greg Dalton: You’re listening to a Climate One conversation about getting to net zero emissions with economist and author Mark Carney. If you missed a previous episode, or want to hear more of Climate One’s empowering conversations, subscribe to our podcast wherever you get your pods. Coming up, the role of insurance companies in assessing and mitigating climate risk.

Mark Carney: For the insurance covered in London, the extreme weather events have gone up three times in the course of the last 25 years. And the costs have gone up eight times.

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton, and we’re talking about the need for urgent and immediate action on climate with Mark Carney, the former central banker for both Canada and the UK now serving as the UN special envoy on climate action and finance. Three insurgent directors were recently elected to the board of ExxonMobil. They want to change the company’s direction to protect shareholders from losing money in the global shift away from fossil fuels. I asked Mark Carney about the impact of that election.

Mark Carney: Well, one of the things I thought is there is a return to shareholder value. If you Google engine number one Exxon presentations. So, this is the activist investor who started this process to get those directors elected. There is an 80+ page presentation which goes through basically, the outlook for value creation which goes back to our earlier conversation about growth and value and the core thesis of it and backed up with some series of analysis of numbers, is that the company Exxon had not been investing enough in the fuels of the future or the energies of the future. And that plus the prospect of stranding of assets meant that it was destroying value and that it needed the strategic change and of course that's part of the job I mean as a board member, members of boards your job is overseeing strategy and selecting the right people to run it and that's fundamental to your job. And so, the judgment obviously of the majority of the shareholders decided that this is right and voted the shares accordingly. So, it's an interesting alignment I mean very important situation, but it's an alignment of value and the future value more consistent. I don’t want to oversell it, more consistent with sustainability as opposed to value in the past which was the existing strategy the company was pursuing.

Greg Dalton: Right. So, it’s about money rather than future. I’d like to play -- we go to Jim Cramer, Arnav. So, I’d like to play a clip from CNBC's Jim Cramer and get your action on the other side.

[Start Playback]

Jim Cramer: I’m done with fossil fuels. I mean big pension funds saying this will not gonna work anymore. It doesn’t matter how good they are --

Female Speaker: Do you think that’s the biggest thing holding these guys back and not necessarily just oil production part here in the United States?

Jim Cramer: Absolutely. Look at BP, it’s a solid yield, very good. Look at Chevron buying back $5 billion of the stock. Nobody cares. And this has to do with new kinds of money managers who frankly just want to appease younger people who believe that you can't ever make a fossil fuel company sustainable. We’re in a deathknell phase.

[End Playback]

Greg Dalton: That's quite a statement from a leading figure on Wall Street CNBC to say, and he sounds bitter about this change and he points to millennial money managers and investors in the deathknell phase. Your reaction.

Mark Carney: Well, seriously I hadn’t heard it. He often sounds bitter. I wouldn’t overstate the obvious. But, no, it is quite instructive. I would parse out a couple of things. One is that I wouldn't put this down to use the term woke capitalism. I put it down to you know an assessment of where the world is going or where the world needs to go. And a more extreme section of the economy that isn’t moving fast enough. Now, one of the challenges, I think we have is that within the energy sector there are companies that are transitioning there are companies that are trying to take now finally a significant proportion of their cash flows and do what engine number one wants Exxon to do in these new directors who want Exxon to do to reinvest in a renewable energy and transition from the fuels of today to those of tomorrow. So, now, identifying those true examples as opposed to the niche you know kind of trophy investments that are intended to appease this issue --

Greg Dalton: Greenwashing.

Mark Carney: -- yeah, as opposed to really truly transform. That’s what investors have to make a judgment about. So, I wouldn't have the blanket I’m done with the entire sector any more than I would in the steel sector, which of course is hugely polluting and emitting. But it will be a period of time will run there are certain companies that are investing huge amounts in greening steel. And we need a system we need objective judgments about who's actually doing it, but we need a system that gets capital to those companies so that they can actually make those investments and takes capital away or changes the pricing at least of the companies that aren’t doing anything or aren’t moving fast enough.

Greg Dalton: So, you’re saying that some companies are greenwashing some companies are legitimate in transforming and the markets need to sort that out. I want to come back to banks and their lending. You’re obviously been central banker of two countries. The International Energy Agency recently stated that investment in new fossil fuel infrastructures inconsistent with the Paris climate goals. IEA chief, Fatih Birol is on this episode of Climate One. My question to you as Canada's former central banker is why are Canadian banks lending to line three and development of the Canadian tar sands? Is that consistent with Canada’s pledge to meet net zero by 2050 and is that consistent with the economics we’ve been talking about?

Mark Carney: New development of fossil fuels as opposed to is my interpretation of that as opposed to --

Greg Dalton: What’s already in the pipeline?

Mark Carney: Yeah, what’s in the pipeline, what's maintaining. But I think the, if I can make the basic point which is being asked of an investor or a bank which is that how does this energy asset fit into the energy transition that needs to happen if we’re going to achieve our climate goals. And what is happening, you know, when the UK took over the presidency, we had 30% of global emissions where in some country that had some form of net zero commitment. Today it’s 70% and climbing of global emissions in countries that have a form of net zero commitment. The consequence of that is it’s cascading down to the level of the company and the financial institution. And the question is do you have a net zero objective what’s your plan to achieve it and then the judgment increasing will become well which of these is credible is real, including, is it real in terms of the company has the management capability to actually execute against the planet. Might be the best intentions, but them not able to pull it off. And so, what I'm saying is true of any asset, but it's certainly absolutely true of energy assets which is well how does this fit in with this transition. What market share you’re implying you’re going to have 10 years, 20 years out if you’re maintaining production for example, in fossil fuels or even increase in production and is that credible. Or you effectively saying we’re not going to do we collectively are not gonna accomplish what we’ve signed up for.

Greg Dalton: Insurance companies another big part of the financial market. They were some of the earliest corporations to sound the alarm on climate risk they know the numbers and some see them as constructive actors. Others say insurance companies will exploit climate to raise prices and fatten profit margins. I talked with one insurance CEO who shrugged and said, you know, we reprice our policies every year. The risk goes up, we can raise our prices, right? So, how do you see insurance and reinsurance company’s role in driving decarbonization of the global economy?

Mark Carney: Well, there are few things and let me reinforce that point you just made which is that's exactly what happens as their former regulator what would happen, these are the most sophisticated managers of climate risk. If you want a discussion about how bad, how much things have deteriorated in terms of physical climate implications and where it could go, talk to a property and casualty insurer or a reinsurance company because that's what they do all the time. And what they do is they change the pricing because it's riskier or they stop covering certain areas, you know, some of that Florida real estate not gonna get insurance on it down the road if we’re on this trajectory. So, that's the first. And second is that insurance companies on the asset side of their balance sheet. So, they write these risks they take these risks but they invest over on the other side so they have money to pay off and make a profit hopefully for them and their shareholders. On the asset side they been some of the earliest movers on divesting of assets or managing down their climate exposure and they’re some of the most sophisticated in terms of assessing the contribution of their portfolio. Some of the big European insurers actually publish the warming contribution of their portfolio to the planet. So, it tends to be I mean for some of the big ones right now it's about 3°. Let’s say the world is warming three and a quarter they’re at 3° but then they’re explicitly looking to manage that down. So, to sell assets that are bigger contributors because they’re not moving fast enough and by companies that that are reducing. So, what we’re also seeing and one of the things we want to have in place for this big meeting in Glasgow on the insurance side is underwriting. So, giving insurance consistent with companies that are transitioning to the net zero. So, it's a question of how you get insurance cover if you're operating the sector, but you're ignoring the transition. So, insurance is, I view it as a leading indicator of what, well, a faithful reporter what's happening on the ground what they won’t insure a leading indicator of how bad things could get because that's their job to think about that. And then the question is are they responsible steward of their funds both on where they invest and what they're willing to underwrite. Just to give you the straight number I mentioned in the book, but for the insurance covered in London, the extreme weather events have gone up three times in the course of the last 25 years. And the costs have gone up eight times so the insured cost and that's adjusted for inflation, a good central banker adjust for inflation. So, that gives you sense and then of course that which is uninsured, why I shouldn’t say of course but just to point it out has gone up an even greater amount because they're pulling back.

Greg Dalton: Yeah, and that’s leaving people either uninsured or putting that risk onto the balance sheets of states and governments and taxpayers. Economists are stereotypically rational to the point of being emotionally closed off. Although the field has gone toward behavioral economics lately whether or not you know, the purely rational people. I'm just curious personally for you we try to bridge the personal and systemic here. We’re talking about all of these numbers that are just so grave and I wonder how you handle working with the magnitude of these risks and deal with these doomsday scenarios. How you deal with that on personal emotional level?

Mark Carney: Well, I'm trying to focus on what we can do about it in a rational way and how to organize the system so that the incentives are there to address it. And to be clear, I'm very conscious that there's no financial sector or answer to this alone. I mean we need government policy we need people making choices and of course we need, in the end we’re gonna need more innovation. We’ve had tremendous innovation and low carbon technologies, and we can go a long way with those but we can’t get all the way to the end without further innovation. So, first is I deal with it by trying to be part of the solution and knowing something accumulated over the years about how markets work and how they can be a force for good is setting that up. I would say this, Greg, that there's been a lot of progress in recent years on this. It is mainstream, very rapidly, so that makes me more optimistic. But then when I sit down and look at the scale of the other side of the numbers to scale the challenge the size of the carbon budget, I find it very difficult. And the thing that keeps coming back to me virtually every day is, you know, you run out of time. We’ll have this great conversation, but we will run out of time. And it just always comes back to me it’s like everything with climate change is not enough time.

Greg Dalton: So, bottom line here as we wrap up. Climate is the biggest market failure of all time because we get individuals and companies use the sky as an unpriced sewer. And you're involved with lots of groups that are trying to change the rules of the game while it's being played capitalism to reform from within. Can markets self-correct to address this big failure of climate change?

Mark Carney: I think they can. I do think they can. I mean just to be clear that there’s a very large proportion of people in markets who view this as first and foremost a major commercial opportunity, a chance to make a very large amount of money. Because societies have decided to address this issue and that's gonna show up in what people you know what kind of car they drive what they eat, you know, where they go on vacation. But it's also gonna show up in government rules and regulations and laws and carbon prices and other things. Now, if that second element isn't followed through by the political process and we all know how difficult the political processes is. People won’t make as much money we won't make as much progress. So, finance certainly won't do it on its own, but we have the collective we have the attention of the financial industry now that this is a major strategic issue. And I’ll add one other thing, just to give a sense is it is increase, I hear this all the time that getting to sustainability is like the Internet. In other words, it’s something that affects absolutely everything which is true. And therefore, you have to be knowledgeable and you can make a lot of money or you can lose a lot of money for not thinking about it in those terms. And of course, like the Internet if we remember, when I say the Internet, I mean going back to the mid-90s. The information superhighway it’s used to be called. But it is something that has seeped into all of our lives and we don't, you know, we don’t even know but there are these waves of euphoria and then a bit of despair and then, you know, kind of bounces back up. And that’s what we’re gonna need in order to get there.

Greg Dalton: Right. Well, Mark Carney is an economist and banker currently serving as the UN special envoy on climate action and finance. He’s also author of the new book Value(s): Building a Better World for All. Mark Carney, thanks for sharing your insights on Climate One. And I hope that Glasgow is a big success that raises ambition because we certainly, there’s a lot riding on it and we need it.

Mark Carney: Thank you very much, Greg. It’s a true pleasure to be on.

Greg Dalton: You're listening to a conversation about the challenges of getting the world to net zero emissions by 2050. This is Climate One. Coming up, the head of the International Energy Agency on what steps will be needed to get us there:

Fatih Birol: One ton of C02 going into the atmosphere from Jakarta or from Los Angeles or from Paris, it has the same effect on everybody. The emissions don’t have a passport. So, therefore we have to find a global solution here. (:14)

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton. The International Energy Agency recently made headlines by creating a roadmap to get the world to net zero emissions by 2050. The report determined that we don’t need to invest in new fossil fuel supply projects to meet projected demand. Fatih Birol, Executive Director of the International Energy Agency, unpacked this latest report and its findings.

Fatih Birol: What is happening today that more and more countries around the world. United States, Canada, all European countries, Japan, Korea, New Zealand and China, they made commitments to bring their emissions to net zero by 2050. Why? Because the scientists tell us it is the only way that we can keep our planet, more or less, as it is now. Now we look at the realities of life, energy sector is responsible for more than 80% of the emissions. So, if the world all these countries their economies need to go to from high levels to zero by 2050 huge changes need to happen in the energy sector. So, what we’ve done, we have translated those government targets, targets imposed by the scientists to energy sector. What needs to happen in the energy sector so that the emissions decline and go to net zero by 2050. We have look at the entire energy sector all these powerplants, all the cars, trucks, industry facilities one by one. And we came up over 400 measures that the governments need to put in place in order to reduce those emissions. Let me give you one example. In 2030, 60% of all car sales should be electric cars. Today, it is less than 5%. To be in line with those targets it should go 60%. So, if we make these steps, more electric cars, alternative fuels to oil in the aviation, we will not need oil as much and oil demand will decline so that we reach our targets. If this happens, we won’t need to invest in new oil exploration. We don’t need to discover new oil fields. The ones we have today is enough to meet declining oil demands. So, I see that the pathway to reach the net zero 2050 is a very, very narrow pathway but still achievable if we move quickly and if we have international collaboration among the governments around the world.

Greg Dalton: Right. And there’s different pathways. The low collaboration pathway takes us out to like 2090 before we get to net zero. The high international collaboration pathway gets us I think 2050. The auto industry already seems to be sort of pointed in that direction. Maybe there are questions about the speed and durability of that commitment. But that raises questions for the destruction of oil demand. I recently interviewed Frank Macchiarola, Senior Vice President with the American Petroleum Institute and he said your agency got it wrong on new supply. He said that growing global population and growing global demand for energy in emerging economies mean that new fossil fuel supplies are necessary. How has the oil industry responded to this report?

Fatih Birol: So, first of all I should say the colleague you interviewed in your program is half right, half wrong. Growing population, growing economy needs more fossil fuels, I wouldn’t say fossil fuels, they would need energy. Fossil fuel is not equal to energy. Energy is … for example in Africa today, I am seeing Africa will make a big move in the direction of solar energy. Solar energy is becoming so cheap that last year more than 90% of all powerplants built in the world were solar.

Greg Dalton: But isn’t there also been an uptake recently that solar prices, that narrative or declining solar prices --

Fatih Birol: Yes, solar prices went up recently but I think this is a temporary optic because of the technical issues if it continues to be under low side and we will see each of global power markets for many years to come. Especially I am keen about Africa because in Africa we still have two out of three people in Subsaharan Africa having no electricity, no access to electricity. And can you believe it in Africa the continent which gets the brightest sun, most sun and the amount of powerplants from solar in Africa is only one third of in the United Kingdom. So, this is a heartbreaking data for me but I believe Africa will make a big push in terms of solar energy and bring tens of millions of people electricity through solar. Of course, some countries will still use natural gas, oil and others but if the electric cars, become the first choice of the customers, the population around the world, with the declining cost that will be a big shift from the current car models. Now, have the oil industry reacted, mixed reactions some European and some North American now are taking our report as a basis to develop investment strategies. But some others, for example one Middle East oil minister thought we are too optimistic, this is a beautiful dream. He called it, nicknamed it La La Land.

Greg Dalton: La La Land.

Fatih Birol: Yeah. Another minister from a big Eastern European oil and gas producer said, it is far too optimistic that such a technological change happens. I respect all of these views but what I don’t respect is that we cannot discuss, dispute the need for action to address climate change. This is, in my view out of question.

Greg Dalton: So, the net zero scenario and visions of 90% reduction in coal by 2050. Today, coal is declining around the world, but it is growing in China. So, some people would say that a lot of great things can happen but coal in China could outweigh other positive changes. So, what do you see regarding any indication that China will change its path on coal?

Fatih Birol: You’re completely right. And what China will do what China will decide in general on climate change and energy will decide whether or not the world can reach its climate goals, first off. And especially in terms of coal, today half of the coal in the world is consumed in China, the other half everybody put together. So, this is just to put the point stronger. Now, I see that even in China there is a weakening of the commitment in coal, this is number one. Number two, the declining cost of solar energy together with wind, onshore wind and offshore wind will make even existing coal plants not profitable. Number three, in China, but also in India, there is another driver which will lead to reduced coal use which is air pollution. And you will see that the Chinese, the citizens in the big cities are not very happy for the air pollution coming from the coal plants. And there are maybe hiccups here and there some zigzags but I would expect that China will also move in a direction that we will see a terminal decline of coal.

Greg Dalton: How much of an impact has COVID had on fuel switching and the carbon curve. You said that oil took the biggest hit. Have we hit peak oil demand as many have suggested because of structural decline in oil demand caused by COVID?

Fatih Birol: Last year, one year ago, we wrote it down and I said, the oil will not peak unless governments take right policies and provide the incentives for the alternatives. People are thinking that we will not drive as much as before because there is the teleworking and the people have now better understanding of the environmental challenges they are much more environmentally aligned. I don’t buy it. I don’t buy it. There should be strong either regulatory or fiscal incentives for the drivers for the people to move them in the right direction. And I said, if the governments do not take the necessary measures, we will go back where we were before the peak. And our numbers show that as of next year, if no changes happen, we will be there where we were before the COVID.

Greg Dalton: There's also an ongoing debate about technology and innovation. One camp says technology exists that needs to be deployed which will drive down cost. The other camps say, no, existing technology is not enough. We need big new innovation to decarbonize the global economy. Where are you on that?

Fatih Birol: Since I am in Paris, in France I would say in French answer yes and no, so in between. So, why yes, why no? Yes, because there are some technologies such as the solar wind efficiency electric cars which are definitely it can have a massive expansion of tools because they are already in the market and which is a very good news. But -- they alone will not bring us to our climate cause. They would be very important measured drivers but we need huge decarbonization of iron and steel industry huge driver, cement, all the trucks to convert electric cars but trucks are very important or the buses or aviation. We cannot run the jets by solar energy at least for now. So, we need new technologies in addition to what we have now, different technologies. The existing ones and without them being part of the solution especially those sectors which we call hard to evade sectors it will be difficult to decarbonize them. So, we need both of them.

Greg Dalton: So, the pathway your scenario for net zero by 2050, which matches some of these countries’ commitments, China is out to 2060, is now less than 30 years away. When I look back 30 years, 1991 doesn’t seem that long ago to me. I don’t think humans are very good about looking that far into the future. So, how do you convince people that 2050 is actually really soon, especially when it comes to energy and are facts and charts and figures the best way to really reach people and drive home that urgency?

Fatih Birol: I completely agree with you. It is the reason what we have done between now and 2050 we have milestones every year what we have to achieve what we have to do. And as of this year, we are going to look what countries promised against how they perform. So, are they on track or off track? And we are normally an energy organization, our normal counterparts are energy ministries, energy companies. But since one month I am talking with all the big investors, financial institutions because of the very reason that our report in my view gave an unmistakable signal to the investors. You have the risk of putting your money in the old technologies which in turn means that you will make big losses. And there may well be an opportunity in new clean technologies where there may have lucrative profits for you. We gave this unmistakable message with the numbers, facts and figures and it is the reason we are seeing a huge interest from the institutional investors and the pension funds, private institutions, etc. So, the investments that will be made in the next few years will show which direction the world will go including the ones in the United States.

Greg Dalton: Yeah, we’re seeing that the increasing investor interest, increasing investor importance, pressuring Exxon Mobil, shareholder resolutions, all those sorts of things. COP26 is coming up in Glasgow in November that’s the International Climate Summit. And we talked elsewhere in this episode with Mark Carney who’s playing a leading role advising British Prime Minister Boris Johnson on that who’s the Chair of that conference yet most countries have not updated their pledges made when the Paris climate agreement was reached six years ago. The numbers are not encouraging. How concerned are you about the announced national plans and is there any indication of rising ambition going into Glasgow?

Fatih Birol: The issue is, Greg, one ton of C02 going into the atmosphere from Jakarta or from Los Angeles or from Paris or from Oslo, it has the same effect on everybody. The emissions don’t have a passport. So, therefore we have to find a global solution here. Now, when it comes to COP26, I am really hopeful. Hopeful for two reasons. One, there is a strong political momentum. The recent G7, seven largest economies of western countries came up with a very strong statement, they have endorsed the report that we reported that we are talking now. What do I expect? I expect that this positive momentum turns into A) providing a clear signal to the world population. We are going to fix this problem all together. And second, for the emerging world, there is a need to make give some support in order to mobilize investment in clean energy technologies. Because in the next 30 years more than 90% of the emissions come from emerging world and only a small proportion of the clean energy investments go there. So, how we can unlock this because we have enough money, capital in the world but money doesn’t go to Indonesia, doesn’t go to India. What kind of mechanisms we will create to make those investments lucrative for the investors. So, this is the second expectation I have from COP26 and we are working very closely with the UK government to make sure that we will come up with some clear outcome from COP26. It is very important this one, this COP26. It is like Elvis Presley; it is now or never. So, if it doesn’t work now, it will be very difficult to again turn back to have such political momentum to get it again especially when the United States is back to fight against climate change.

Greg Dalton: So, to sum up a little bit here what you're saying is we have most but not all of the technology we have enough money, but it's not going to the right places. So, direct technology and the money we already have, and a large part of that can be, if we direct the money in technology we have, a lot of this can be solved. So, the opening line of an IEA report says, “The last 12 months of seeing enormous upheavals in energy markets around the world. Yet the challenges of transforming the global energy system remain urgent and daunting.” You know where I'm quoting from? It’s the first line of an IEA report world energy outlook from 2009, 12 years ago. And it's almost the same language used today. So, what makes you think that the next 12 years will be different although just kind of be saying the same thing about upheaval and daunting challenges.

Fatih Birol: First of all, it shows that we are consistent with ourselves which is a big news. And the second thing is that the world energy system is a bit like a huge tanker in the sea. The direction changes very slowly. It is not like the IT sector which is like a bicycle you can make your maneuver very, very quick. But now, what I am seeing is technological development are progressing so quickly the cost of clean energy are dropping down so quickly that I expect a huge change happening. And this may that in fact that the all major economies around the world seemed that they are determined to adjust climate change. Political momentum is there, determination is there the technologies are getting cheaper. And I think as I said before, there is no lack of capital and we have a roadmap of the world. I am really hopeful that in the next 10 or 12 years the situation will change significantly compared to today. Whether or not we will be able to reach this 1.5° target, I don’t know. We do our best even if we don’t reach 1.5° but if we reach 1.6°, 1.7° temperature increase it is much better than the 3° temperature increase where we are now.

Greg Dalton: Right. I think we’ve had about 1° of warming so far. So, 3° triple what we've had so far that's a scary world. Fatih Birol is Executive Director of the International Energy Agency based in Paris looks at the global energy system and created scenarios for getting to net zero emissions by 2050. Dr. Birol thanks for coming on Climate One and sharing your insights.

Fatih Birol: Thank you very much. Great to talk to you.

Greg Dalton: On this Climate One... We’ve been talking about the narrow path to net zero emissions with Fatih Birol and Mark Carney. To hear more Climate One conversations, subscribe to our podcast on Apple, Spotify or wherever you get your pods. Please help us get people talking more about climate by giving us a rating or review. It really does help advance the climate conversation.

Brad Marshland is our senior producer; Ariana Brocious is our producer and audio editor. Our audio engineer is Arnav Gupta. Our team also includes Steve Fox, Kelli Pennington, and Tyler Reed. Gloria Duffy is CEO of The Commonwealth Club of California, the nonprofit and nonpartisan forum where our program originates. I’m Greg Dalton.

Play

Clearing the Air on Carbon Offsets

Otto Pilot — Fri, 02 Jul 2021 08:00:00 +0000

Clearing the Air on Carbon Offsets

07/02/2021

For more than two decades, carbon offset programs have promised individuals and businesses that they can reduce their overall carbon footprint by paying someone else - somewhere else - to reduce their emissions. But in practice this often doesn’t accomplish the intended climate benefit.

In a series of stories earlier this year, ProPublica reporter Lisa Song detailed how one carbon offset program in California failed to deliver on its climate goals, and actually resulted in more carbon emissions being released into the atmosphere.

“Basically, it comes down to the rules as they were written,” says Song. Her reporting covered a study by the nonprofit group CarbonPlan that showed that the forest carbon offset program designed by the California Air Resources Board allowed people to take advantage of how the carbon storage potential was measured for different forest types.

“They found a pattern where people are choosing to place offset projects in forests with very carbon-rich trees where the types of trees in their forest don’t resemble the types of trees that went into calculating the regional average,” Song says, which had the effect of generating tens of millions of “ghost” credits that don’t achieve real climate benefits. This matters because people around the country and world look to California as a model when it comes to cap and trade and carbon offset programs, she says.

“And therefore if people are just following these rules without really scrutinizing them then you run the risk of exporting these flaws to other states and countries,” Song says.

Barbara Haya, director of the Berkeley Carbon Trading Project at University of California Berkeley, says such flaws are common among many of the carbon offset programs that have come about in the last two decades.

“The problems are really built into the structure of the market,” she says. “We really know how to measure emissions. It's much harder to measure emissions reductions.”

“Offsets are presented as verified quantified tons of emissions reductions and they aren't that, because of the uncertainty,” Haya says. Instead, she says, we should first work to reduce our own emissions and then view offsets as a way to support climate projects that accomplish some degree of emissions reductions. “And in that context, we can really think about offsets, the way they truly are today, as a charitable contribution.”

Michael Greenstone, an economist at the University of Chicago, has a different view: “If there were a reliable offset that was inexpensive, I don't think people should be embarrassed to live whatever life they want to live and then just offset it. But the critical thing is that it be done in a reliable and transparent way,” he says.

He’s launched a new nonprofit called Climate Vault that aims to accomplish that by buying emissions permits from regulated markets and locking them away so other polluters can’t buy and use them, a process he terms pressing “the easy button,” because it relies on enforcement though existing government-mandated carbon markets.

“If you're looking for bang for the buck, that is, as much carbon reduction as possible for every dollar you spend, that’s the exact purpose of those markets,” Greenstone says.

Once they acquire a sufficient number, Climate Vault says it will use those carbon permits to launch the “world’s first large-scale ecosystem for carbon removal,” he says, trading the permits ton for ton for proven carbon dioxide removal from the atmosphere.

Guests

Lisa Song

Reporter, ProPublica

Michael Greenstone

Milton Friedman Distinguished Service Professor in Economics, U. Chicago

Barbara Haya

Director, Berkeley Carbon Trading Project, Goldman School of Public Policy, UC Berkeley

Greg Dalton: Is there a better way to regulate and use carbon offsets? Climate One’s empowering conversations connect all aspects of the climate emergency. I’m Greg Dalton. For more than two decades, carbon offset programs have promised individuals and businesses that they can reduce their overall carbon footprint by paying someone else - somewhere else - to reduce their emissions. But in practice this often doesn’t accomplish the intended climate benefit.

Lisa Song is a reporter for ProPublica who covers the environment, energy and climate change. In a series of stories earlier this year, she detailed how one specific forest carbon offset program in California failed to deliver on its climate goals, and actually resulted in MORE carbon emissions being released into the atmosphere. Later in the show, we’ll explore some possible ways to improve the system. First, though, Climate One Producer Ariana Brocious speaks with Lisa Song about her reporting.

Ariana Brocious: Can we start with some basics here for people who maybe don't understand the nitty-gritty of carbon offsets. How do carbon offsets work at the most basic level?

Lisa Song: Basically, carbon offsets are about paying somebody else somewhere in the world to reduce their carbon emissions and then claiming those reduced emissions as your own. One of the things about climate change is that no matter where the carbon emissions come from they all end up in the same atmosphere and all help fuel climate change. So, if you are a company somewhere that perhaps would need to spend a lot of money to reduce your own emissions, if the government allows it you could spend less money and pay someone somewhere else to reduce their emissions.

Ariana Brocious: And so, do those work the same if say I take a flight and I want to offset the carbon footprint of my trip, is that the same as a company who wants to pollute more, or maybe is limited in how much they can pollute or burn fossil fuels in this case and buys an offset for that purpose.

Lisa Song: They are similar in the sense that it's all about paying someone else to reduce emissions but if you are someone who is flying and wants to offset your own emissions you are likely buying carbon offsets from what's called the voluntary marketplace. That means you're buying emissions reductions that help you feel better but they are not being accounted for in some sort of government mandated climate program. Whereas what's happening in places like California is they have a government mandated climate goal and they are counting every ton of CO2 that goes into the air and those carbon offsets in California are part of this mandatory emissions reductions program. So, in the compliance market if you are a major polluter the government has regulations that force you to reduce your emissions by a certain amount.

Ariana Brocious: And so, in either case, I'm kind of curious why so many of the carbon offset programs that are available take the form of protecting land like forest that already exists as opposed to things like planting new forest or other kinds of carbon absorbing tools that we may have.

Lisa Song: Yeah, that's a good question. I think part of the answer has to do with that there is a huge push for good reason for conservation and for biodiversity. And there is no doubt that we need to preserve the existing forest we have, particularly a lot of tropical forests and rainforests in order to help meet our climate goals. Protecting forests is definitely good for the environment and for climate change, and I think in some ways by emphasizing these forest protection-based carbon offsets you are allowing people to fulfill two goals at once. The first one is reducing emissions in the atmosphere and the second one is forest conservation. The problem of course is that we are documenting cases where these programs aren’t working as advertised.

Ariana Brocious: Right. And I want to get into that in just a second. Part of the rationale for using existing forest also might be just that they’re already a big carbon sink, right, and the loss of them would sort of further exacerbate the situation we’re in.

Lisa Song: Right. So, forests and particular the forests that have a lot of carbon rich tree species bigger trees that can store a lot of carbon they've been pulling down CO2 from the atmosphere for decades if not centuries. And if you were to cut down those forests because you need lumber or because you need to clear the forest to graze cattle or something, then you are releasing into the atmosphere, a huge amount of stored carbon that's been stored for decades. And so, the idea with these offsets is you pay people to preserve their forests and keep the trees standing instead of cutting them down and then you give them credit for preventing those emissions.

Ariana Brocious: And how do those programs, the carbon offsets fit in with larger cap and trade programs like California's cap and trade program?

Lisa Song: There are different ways that you can fit a carbon offset program into cap and trade. But in California the way it works is that companies have to reduce their emissions by a certain amount every year. And one way they can do that is through cap and trade where they can buy excess permits for emissions from other companies that don't need them or they can buy them from the state at auction. Some companies also receive those emissions permits for free and of course there's the trade part where if you have excess permits you can sell it to another polluter. But the state also gives them an option where they can reduce a certain amount of their emissions by buying carbon offsets instead. And so, the state of California through the Air Resources Board has set up this carbon offset program where they are encouraging every day landowners in the country to enroll their forests in carbon offsets and then those offsets generated can be purchased by the polluters that are regulated under the cap and trade program.

Ariana Brocious: And your reporting for ProPublica has revealed that that program California's carbon offset forest program has actually allowed a lot more carbon to be released into the atmosphere, right. Why is that?

Lisa Song: Basically, it comes down to the rules as they were written. Our story was reporting on a study that came out of a nonprofit and basically, the study showed that when the Air Resources Board wrote up the rules for the carbon offset program the way they set up the rules sort of opened up these loopholes that allowed the system to be gamed. So, what the study shows is not that anybody is breaking the rules, but actually that there are systemic flaws built into the rules themselves.

The technical flaws are pretty complicated but basically once you've picked the forest that will be enrolled in the offsets program you would do a survey of the trees in that forest to figure out how much carbon is stored per acre in your forest. Then what you do is you compare that number to the amount of carbon stored in a typical forest of a similar type as your forest. And these typical forest numbers are called regional averages and they're all calculated and established by the Air Resources Board. The problem is that these regional averages have been calculated using course data that doesn't take into account a lot of the nuances between different types of trees and different types of tree species. And what the Carbon Plan scientists discovered was they found a pattern where people are choosing to place offset projects i n forests with very carbon rich trees where the types of trees in their forest don’t resemble the types of trees that went into calculating the regional average. And it's this skewing of the types of forests and the skewing of the difference that ends up inflating the carbon savings you're generating.

Ariana Brocious: So, just to kind of recapture what you said. How did that then result in there being more carbon emissions being released when the actual goal is to reduce them or limit them?

Lisa Song: Right. Because every time a company buys carbon offsets, you know, let's say a company, a polluter in California needs to reduce their emissions by 5 million tons that year, and they buy 5 million carbon credits that then gives them the right to emit 5 million tons of CO2. So, the polluters emissions of CO2 are real. All those 5 million tons, even if the 5 million carbon credits they purchased are not all real. So, you end up you know if the system works perfectly then every carbon credit cancels out a real ton of CO2 that is emitted. And when the system doesn't work perfectly every carbon offset that is not real you are not balancing out the real emissions and so you end up with a net increase in CO2 emissions.

Ariana Brocious: Right. Okay. So, I think there's some proponents of carbon offsets who would say that it’s an inexact science right and that there's going to be some loss or it's not gonna be precise in every case. But there are cases where those landowners may not have even been planning to log their forest, right?

Lisa Song: Yes. And that’s a separate issue. On the carbon accounting regional averages issue which was the focus of the carbon plan study, they found that overall, those flaws created up to 39 million carbon credits that aren’t achieving real carbon savings. Separately, the study also pointed to the fact that one of the biggest questions we always have with carbon offsets is a carbon offset is only real if you're saving trees that would otherwise have been cut down because if the landowner was never going to log the trees then they were never in danger and those emissions never would've been emitted anyway. And it's a very difficult thing to prove what somebody would have done if the carbon offsets didn't exist. So, this is a perpetual problem in assessing offset programs. And in California what we were able to find was that there are certain cases, such as with the Massachusetts Audubon Society where it's what the society said in their paperwork was that they would have or they could have cut down a ton of their trees to a level that wasn't very realistic for a conservation group. And so, that showed this other weakness in the program is that it's unclear how many of the carbon offsets are not real because the landowner would not have realistically cut down those trees.

The reason why the California program is so important is that a lot of people not just in the US but around the world look at California's cap and trade program as an example of something that really works and as one of the best carbon reduction systems in the world. And therefore if people are just following these rules without really scrutinizing them then you run the risk of exporting these flaws to other states and countries.

Ariana Brocious: I'm speaking with Lisa Song, a reporter at ProPublica covering the environment, energy and climate change. And we should note that the California Air Resources Board, who, as you said, designed this program objects to some of your findings. What is their critique and how did you respond?

Lisa Song: Their critique is that their program is legit and they don't agree with the flaws that the study authors pointed out. I will say that we did give them a full chance to respond weeks before we publish the story we sent them the complete study and its detailed methodology. They didn't really comment on the specifics of the study itself or its methods. We also took pains to try and really talk to them and offered to talk on the phone starting months before we published and they refuse to give us a single phone interview.

Ariana Brocious: So, based on your reporting what would be ways to improve this program or this kind of a program and avoid some of that over crediting that's been occurring?

Lisa Song: Really the key way to solve this is to recalculate those regional averages that are so important to figuring out carbon credits. And the carbon plan scientists in their paper offer one way of recalculating those regional averages. What they basically did was for every project in the program they calculated what they believe is a more accurate version of the regional average by using data from tree species that more closely resemble the actual mix of trees in the project itself.

Ariana Brocious: So, there's a roadmap if the California Air Resources Board wanted to look into that.

Lisa Song: Yes, yes, there is. And, you know, the carbon plan folks have offered their very exact version of the calculations and explained how they did it. There are undoubtedly other methods that you could recalculate the regional averages and those would be very detailed scientific decisions and methods to discuss and it is in the power of the Air Resources Board to figure that out and see if they want to do some version of that.

Ariana Brocious: So, another aspect of your reporting I found interesting is that tribes have kind of a mixed experience with this program. Can you explain some of the tribes that have participated and what those mixed experiences have been?

Lisa Song: Sure. So, one of the tribes is the Yurok Tribe in California and they have participated in at least two different carbon offset projects on their land. They have gained a lot of money from these programs and they have use some of that money to help buy back some of their ancestral lands and some of that money, you know, has gone to various cultural programs as well. I interviewed someone from a different tribe the Hoopa Valley Tribe where at least so far, the tribe is not inclined to participate in carbon offsets. They don't like the idea of giving somebody else the right to emit more CO2. So, there's obviously mixed feelings and mixed opinions among different tribes on whether they want to participate. And another thing we want to be clear on is that you can have great conservation benefits and cultural and economic benefits from the programs even if the CO2 savings are less than what was promised. And one of the key questions is are we willing to accept these flaws in the carbon math if it means we are getting these benefits in conservation. But can we even make that decision if we don't know for sure what percentage of the offsets are real.

Ariana Brocious: Lisa Song, thanks for joining us here on Climate One.

Lisa Song: Thanks for having me.

Greg Dalton: You’re listening to a Climate One conversation about reexamining carbon offsets. If you missed a previous episode, or want to hear more of Climate One’s empowering conversations, subscribe to our podcast wherever you get your pods. Coming up, we dig into why many current carbon offsets don’t work:

Barbara Haya: Measuring emissions reductions from offsets is inherently uncertain and that uncertainty means that there's wiggle room in interpreting quality. So, when that uncertainty meets this industry that’s stacked against quality it’s very hard to pull it back and get high-quality results. That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton, and we’re talking about rethinking carbon offsets. Barbara Haya is director of the Carbon Trading Project at the University of California Berkeley. Michael Greenstone is Milton Friedman Distinguished Service Professor of Economics at the University of Chicago and founder of the new nonprofit, Climate Vault, which aims to fix some of the problems with carbon offsets we heard about earlier with Lisa Song.

Voluntary carbon offsets are widely available - for example, for individuals buying airplane tickets and for businesses eager to look “green.” In some places, customers filling up their gas tanks see a notice saying the entire emissions of that fuel are offset by funding forest programs far away. The driver pays a small additional price to feel good about negating their climate impact. I asked Michael Greenstone if offsets like that work as advertised.

Michael Greenstone: Well, it's a terrific idea. And I think it's starting point is frustration that people have, that government policy is not addressing the climate crisis in the way that is merited. And in the absence of like robust government policy, people want to do something about their climate footprint. And being able to offset your emissions at the fuel pump is a terrific idea. It allows people to participate. The challenge has been that these products or offsets have been available for about a quarter of a century. And, you know, every year there's a “new scandal” indicating that the offsets are failing to deliver the carbon reduction. And at some point you begin to ask yourself is it actually a “new scandal.”

Greg Dalton: Is it structurally built into these things that are inherently flawed. So, what do you think is this, you know, do you trust carbon markets?

Michael Greenstone: Well so, I think we should be specific. I trust compliance markets which are markets and upper governments to restrict CO2 emissions. I think these voluntary offset markets have a really checkered past and you know the story line is kind of a mañana line, tomorrow we’re gonna get this right. And I think after 25 years it’s time to find a way for people to be able to express their desire and organizations for that matter to reduce their carbon footprint. And I think we should stop, you know, it’s only insane if you keep doing the same thing when it doesn't work over and over and we should look for a new approach.

Greg Dalton: So, there's two more because there’s the compliance markets which are required companies, power plants, etc. required to reduce measure and reduce their carbon emissions. And then there’s the voluntary markets, which is you and me wanna offset a flight or our driving and that's the market Michael you're saying is problematic. Barbara, when governments and companies started designing ways to cut carbon pollution, they naturally wanted to do that at the lowest cost. They could do that directly by cleaning up smokestacks and tailpipes or indirectly by building clean energy or preserving forest somewhere else. Is that misguided is that the right way to go about it?

Barbara Haya: So, I mean I agree very much with Michael that it's a compelling idea that isn't working and hasn't worked and hasn't worked for 20, 25 years. And I’ve thought a lot about why it hasn't worked for over two decades and I think the problems are really built into the structure of the market. So basically what I see is that we really know how to measure emissions. It's much harder to measure emissions reductions. There’s a lot more uncertainty in measuring emissions reductions because you have to measure them against what would likely have happened without the carbon finance without the offset income.

Greg Dalton: That’s called additionality or additive, right, that’s the key thing, right.

Barbara Haya: Yeah. So, one of the key issues is when offset, you know, when a forest land owner participates and claims that they would have clear-cut their forest where if not for the offset income would they really have done with that the wind power developer did they really need that offset income to go forward. And there’ve been real problems with the offset industry allowing in a wide range of projects, many of which would've happened anyway. That's one problem. The other problem is when you're measuring emissions against what would likely have happened anyway there’s also the question of, even if the project really is “additional” if it really did need the offset income what is that scenario, what would likely have happened otherwise. That's also a key uncertainty.

Michael Greenstone: Can I just jump in here for a second, Greg? I agree with everything Barbara is saying. And let me just add one more thing as, you know, maybe the cynical economist here. Nobody really has incentives to get it right, who's at the table. The parties at the table are basically Greg Dalton who wants to offset his emissions when he is filling up his gas tank. He wants to feel good about that.

Greg Dalton: Well, I drive electric cars. I don't have a gas tank. But someone else, yes.

Michael Greenstone: Okay, someone else. The forestry project, the guy who runs the forestry project he’s at the table too. He sure would like some money and as Barbara just described he can basically say anything about what he was going to do in some alternate world. And then sometimes and often then there’s like a middleman in between. Think of them as like a consultant. That consultant is probably getting paid by both sides at least and their job at some level to kind of produce projects. And so, everyone is kind of in on the deal on the transaction like Greg Dalton who had a gas car maybe in some point in the past. The consultant is in on the deal and the forestry persons are on the deal. Now, who’s missing who’s not at the table? The entity who’s not at the table is the planet. And what is the planet care about they only care about the emissions CO2. They don’t care that Greg feels good about also his emissions. They don’t care that the forestry guy got a little extra money for saying that he would have cut down these trees. And they don’t care that the consultant got some money. Like the planet only cares about emissions and yet they’re not at the table. And so, given that confluence of incentives I think it's not terribly surprising when combined with Barbara's good point about how difficult it is to measure avoided emissions. It’s not very surprising that we’re getting the results for 25 years that we’ve been getting.

Greg Dalton: There’s another person missing. The last time Barbara and I talked couple years ago the episode included Pauline Kalunda, Executive Director of ECOTRUST Uganda. She said, the way people in developing countries approach carbon offsets is actually from the adaptation perspective. We live at the frontline and are affected by climate change. So, from a developed country it comes as your offsetting your footprint. In the developing countries it comes as I'm building my resilience. So, there’s another piece there’s another person at that table, which is some of the developing countries who receives capital money from rich countries to help them fight climate change is that a bad thing, Barbara?

Barbara Haya: No, it isn’t. Okay, so first thing can I just follow up really quickly in what Michael said. I totally agree with everything that you just said and just to pull it all together. Measuring emissions reductions from offsets is inherently uncertain and that uncertainty means that there's wiggle room in interpreting quality. So, when that uncertainty meets this industry that stacked against quality it’s very hard to pull it back and get high-quality results.

Greg Dalton: So, it’s imperfect information in the marketplace.

Michael Greenstone: But Greg, you’ve raised another really important issue. Hey wait, oftentimes there are some other goal that might be to build climate resiliency in sub-Saharan Africa. It might be, any of a myriad of other goals and often those goals are very laudable and hard to be against in fact easy to before. I think the challenge is, though we are at a incredibly urgent moment with the climate crisis. And my view is that we have to be like a laser on tons, tons, tons that is tons of CO2. And once you start admitting that there are projects that have multiple goals. Again, the planet is not at the table. The planet really just wants fewer tons of CO2. And I think when you have multiple goals and flexibility in measurements, like it should not be surprising that we’re getting the result we’re getting.

Greg Dalton: Right. Well, I’m actually interested, you know, I read a report recently that came out from your institute, Michael, and it’s the US Energy & Climate Roadmap. And I frankly was surprised to see in the second paragraph reference to Jim Crow and persistent racial and income disparities in our country. I honestly did not expect that so prominently from University of Chicago report notice of bastion of conservatism. But that gets to, you know --

Michael Greenstone: Wait, hold on, Greg. Hold on let me object to that like bastion of conservatism is not the same thing as racism.

Greg Dalton: Okay.

Michael Greenstone: I would say that they’re like a thousand miles apart.

Greg Dalton: Okay. Some people might question that. But would that have happened before America’s unfolding racial reckoning and what I’m getting out here is that, you know, that report said there’s another --

Michael Greenstone: We’re getting a little further here like the bastion of conservatism is belief in the use of markets to help solve social problems and grow incomes and things like that. That doesn't mean taking, you know, that is not the same thing it’s very decidedly not the same thing as discrimination it’s decidedly not the same thing as subjugation of people based on their race or a variety of other you know morally repugnant things that you phrased.

Greg Dalton: Right. I guess some people would say that American capitalism was initially founded on slave labor so that sort of, you know, racism is deeply rooted.

Michael Greenstone: That’s fine but that’s like a very different thing than talking about like economic advice. You would not find a single economist at the University of Chicago who is advocating for forced labor or slavery or anything like that. That's a conflation that --

Greg Dalton: Okay, fair enough. So, we’re talking about offsets and offsets there are some dimension of offsets which is directing money toward people who’ve been disadvantage. Whether it's in poor countries or in poor neighborhoods. And one of the criticisms of offsets is that it, you know, so there’s a generation of capital and money flow here that some people want to address either current harms or past harms. And I think your report gets at that and is that a useful part of offsets if it helps generates money. In California there’s a carbon market 35% of the money is supposed to go toward disadvantaged communities. And one of the criticisms of offsets is that it allows people to clean up another country, but they don't clean up their backyard.

Michael Greenstone: Yeah, so there’s a mix of issues there, I think. There are a series of laudable environmental justice goals out there and I think the question I am focused on is can we achieve those that’s critically important too, but is it necessary to compromise the goals for confronting the climate crisis. And that it boils down to reducing tons of CO2 and that’s what offsets are supposed to offer. And what I've been trying to say is it for the last quarter-century they have had a very checkered record on that. And if you want to achieve multiple goals, that’s fine there’s nothing wrong with that. But then you should acknowledge from the start this is not really about reducing tons of CO2, this is not undoing, you know, the person who wants to undo filling up their gas tank of the car. It’s maybe achieving other goals, those goals could be critical and urgent social goals but in terms of what the planet cares about tons, tons, tons, they are not hitting the mark.

Greg Dalton: Barbara, how do you see that environmental justice and race factor in the whole system of carbon offsets?

Barbara Haya: So, two thoughts there. One is that when you’re talking about a cap and trade program a set of climate policies it’s really important to take many issues into account, not just carbon. We need to recraft our economy to drive this transition towards -- we need to recraft our economy to try this transition toward zero emissions really as quickly as we can and that will involve many changes and interact with many other policies. And it’s really clear that in order for that to be effective, it needs to take many issues into account to be politically supported. But if we’re talking about the voluntary offset market a few thoughts there is that, one, right now the offset market is broken. So, it's really hard for buyers of offsets to filter out what are the real credits what are the false credits. In that context I think we need to rethink what offsets essentially are. Offsets are presented as verified quantified tons of emissions reductions and they aren't that because of the uncertainty offsets are as a way for individuals and companies and others to support climate projects climate programs that result in some very hard to estimate from those project types emissions reductions. And in that context, we can really think about offsets the way they truly are today, as a charitable contribution. And if what you're doing is taking on a very deep target like a company taking on a carbon neutrality goal. I think there is real reason for them to look closely at what their values are and think carefully about how can they have the greatest impact on climate change mitigation with the funds that they’re spending and also how does that match their other values.

Greg Dalton: So, in 2019 Google said it had eliminated its entire legacy of carbon emissions through high-quality offsets. How much confidence do you have that that is really happening, you know, who’s auditing that claim?

Barbara Haya: I mean the devil is in the details, right, and how much Google is really betting the projects that they support is offsets. My understanding just reading the news is that they are doing the type of vetting that's really needed and that they are forward-looking in the offset market by developing some of their own projects and really focusing on renewable energy and reducing their own emissions. And if they are indeed doing all of those things that's what needs to be done.

Greg Dalton: So, it comes down to trust and brand.

Michael Greenstone: You know, my sense is that Google and Microsoft and maybe just a handful of other places really are doing the kind of vetting that Barbara has in mind. But that does not describe the vast majority of offsets. In fact, I can tell you there is a very high-profile technology company who I had a conversation with who was probably talking about a forestry project in a conversation I was having with them. And I said, oh, and, you know, they said, how much they’d spend on it and they said, you know, how many tons of CO2 did you get for that? And there’s kind of solid and they said, well, you know, we never thought to ask that question.

Greg Dalton: Whoa, isn’t that the main point? So, we’re talking about sort of the systems level. Let’s get to the individual level, you know, if I'm a person who wants to offset it. You know, should I do this or Barbara, you mention this is kind of a charitable contribution that it might make you feel good. It might do some good. Not as much as you think or they say, is that where you come down on personal individual carbon offsets?

Barbara Haya: Yeah, I mean I think the first thing you should always do is to reduce your own emissions. And then if you want to do more to cover your ongoing emissions, I think it's really helpful to think of offsets like a charitable contribution and support a project during an organization that you know and trust.

Michael Greenstone: You know, I have a different view than Barbara, actually. I think as Barbara is articulating a very popular viewpoint, which is the first thing we should do is we should reduce our own emissions. Take fewer flights, drive less, all kinds of things like that. Look, I think that’s fine if people want to do that but I wanna come back to the dream here. The dream is that there is such a thing as a reliable offset that’s inexpensive. And if there were a reliable offset that were inexpensive, I don't think people should be embarrassed to live whatever life they want to live and then just offset it. But the critical thing is it be done in a reliable and transparent way and that is why I started Climate Vault.

Greg Dalton: You're listening to a conversation about rethinking the carbon offset market. This is Climate One. Coming up, Michael Greenstone explains the idea behind his new nonprofit, Climate Vault:

Michael Greenstone: We are purchasing these permits, taking them out of the market and putting them in the vault as it were. And what we're going to do with them is use them to launch the world's first large-scale ecosystem for carbon removal.

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton. We’re talking about carbon offsets with Barbara Haya, director of the Carbon Trading Project at the University of California Berkeley, and Michael Greenstone, Milton Friedman Distinguished Service Professor of Economics at the University of Chicago. Michael Greenstone says his new nonprofit Climate Vault was born out of the frustration of the historical failure of offsets. University of Chicago economist Michael Greenstone says his new nonprofit Climate Vault was born out of frustration over the historical failure of offsets.

Michael Greenstone: And the core idea of Climate Vault is let’s not write these super complicated contracts between people filling up their gas tank and some person running the forest farm in Brazil or Maine or wherever it is. Let’s just press the easy button. Governments around the world have set up what are called cap and trade markets for CO2. And in those cap and trade markets they set a maximum allowable among the CO2 emissions and then everyone who pollutes has to hold a permit and they only print as many permits that adds up to the total they’ve allowed. And why not just go into those markets and outbid polluters for the permits. And each permit you take out is effectively reducing the gap. And there’s two great advantages of that. One, you don't have to hire a third-party consultant you don’t have to have doubt about whether or not there was a reduction in CO2 emissions. The governments, you’re free-riding on the government's enforcement capabilities they do enforce the rules. And the second, if you're looking for bang for the buck that is as much carbon reduction as possible for every dollar you spent that’s the exact purpose of those markets. Those markets are returning to you telling you where you can get the cheapest reduction in CO2. So, you don't have to become an expert on tree farms in Maine or Brazil or the Ukraine or wherever it is the markets are totally giving you that information for free.

Greg Dalton: So, that’s the kind of merging of the voluntary individual carbon markets and the compliance market so I can buy, you know, take away some pollution that's happening in my home state California. Barbara, is that a good thing?

Barbara Haya: Let me ask you a question, Michael. So, yeah, theoretically each allowance equals the permit to emit. And if you take allowances out of the market that leads to, each credit leads to a ton of reduction somewhere in California and the ten-year cap and trade program period. But in practice, isn’t the market a bit more malleable than that for two reasons. One, there’s currently a large oversupply of allowance credits on the market and estimates of that oversupply are that they equal about the total expected effect of the cap and trade program on emissions from 2021 to 2030 this next period. And what that is expected to do is to keep prices close to the floor. So, if you take credits out of that market, you are reducing the oversupply you’re increasing prices just a little bit, but the actual effective increasing those prices is uncertain. And then the second thing is doesn't California constantly calibrate its suite of climate policies to make sure that it meets its 2030 target and to keep cap and trade allowance prices at politically palatable levels. So, isn’t there always that sort of regulatory response to changes in allowance prices.

Michael Greenstone: Yeah, so, I think what Barbara has brought up two important and subtle points. The first is, is the cap really a cap? I think that would maybe be the first one. And she is correct there are what are called floor prices and ceiling prices and you know the short version is as long as the prevailing price in those markets is between the floor and the ceiling then the cap is the cap. And that is true in the California market it's true in the RGGI market which is another cap and trade market and that’s something that we monitor very closely. And if we see the prices getting near before the cap then we would just switch purchases to a different market that didn't have this risk. So, in answer to Barbara's question, yes, that is a concern but it's something we monitor very closely. And given the current price and the projected price, you know, five, six, seven years out, I don’t see a reason to be concerned about that. But let me come to the second part of what Climate Vault does which I think is really kind of a decisive reply to Barbara's important point. And the second part of what Climate Vault does is on behalf of individuals and organizations who want to reduce their carbon footprint we are purchasing these permits, taking them out of the market and putting them in the vault as it were. We're collecting them, we have more than 200,000 I think by the time these areas were likely to have more than half a million of those permits. And what we're going to do with them is use them to launch the world's first large-scale ecosystem for carbon removal. And in practice, what we’re gonna do is make a public announcement and say, any carbon removal firm that can come forward and carbon removal technologies pull CO2 out of the atmosphere it’s much easier to monitor than forcing projects. And anyone who can come and do that we will trade you a permit if you do at least a ton we’ll give you a permit. And what that means is we are then liberated from any of the concerns that Barbara rightly raises about cap and trade markets and whatever goes on inside the cap and trade markets we will be getting reductions in CO2 from these carbon removal technologies. I’m curious to hear Barbara's reaction.

Greg Dalton: So, Barbara your reaction to that.

Barbara Haya: So, creating this revenue stream and a system that supports carbon removal at scale and drive some prices couldn't be more important. And I so hope that you're successful, it’s important.

Michael Greenstone: Look, people and institutions are really desperate in a way that was not true five years ago to do something about their climate footprint, alright. That is just a fact. I think Barbara and I have there's almost no daylight between us on this. The historical options have failed, period. So, that demand for voluntarily reducing one's carbon footprint is not going away. And so, the reason I started Climate Vault was it felt like the supply side needed to be disrupted like let's get some new ideas out there. And, you know, I've been pretty clear the reasons I think this is a good new idea, but let's have a better idea someone has a better idea than Climate Vault like I’ll hold a parade for them.

Greg Dalton: Well, I’ll share a personal story. I also had personal experience directly with carbon offsets a couple years ago I paid $800 to The Nature Conservancy to offset my family's carbon footprint family of four. And a year later I got a letter from The Nature Conservancy please renew your donation. I was like, wait, what? No, this was not a donation to your general operating fund. This was a donation for specific purpose for a specific outcome and I felt cheated by that. So, I went to the Gold Standard, which is in Geneva, I thought okay they’re the Gold Standard I'd heard of them. Went on their website and bought some offsets for here and there this price in that country and never received anything from them. And I said, wait a minute, what did I just buy? And contacted them and said, oh sorry, we can’t print out another certification from our system. Okay, that makes sense, so I asked for my money back. So, looking at what Climate Vault is doing I'm intrigued and like, you know, the idea of putting personal funds into an imperfect but functioning cap and trade market in California and in the Northeast that’s something that I think I would check out. Will it achieve the reductions that promise I think part of that is, you know, trust in Michael and what they're doing, but maybe is not 100% but it's better than doing nothing. But before we get to the end, Michael, I was looking at that recent report and which touched on the social cost of carbon, which is a similar related concept during Pres. Obama's time it was about $58 a ton. The next administration set the social cost of carbon at $1 to $8 a ton. What is the importance of this concept and what is the Biden administration doing to infuse it into how the US confronts the cost that burning fossil fuels inflicts on all Americans?

Michael Greenstone: Yeah, so in full disclosure, I worked for the Obama administration and it was my idea following the President’s direction that the United States, I did this jointly with my colleague, Cass Sunstein, should have a uniform social cost of carbon. And what is a social cost of carbon? The social cost of carbon is the reduction in climate damages in dollar terms that you would get from reducing emissions by ton of CO2. So, it tells you the benefits of reducing CO2 emissions as people try to do with offset programs. And it is like the key jenga piece in climate policy because climate policy, regulatory climate policy in the US, requires cost-benefit analysis. And you have to compare the costs of policies against the benefits. The reason one needs the social cost of carbon is the costs are measured in dollars and the benefits are measured, were measured in tons of CO2 like that's an unfair fight we know who’s gonna win that one every single time the dollars are gonna win. And so, this is a way of converting the benefits of reduction to CO2 in the dollars. And it allows regulations to reduce CO2 to go forward through the cost-benefit process and become rules that then we all have to comply with. Bringing this back to Climate Vault, the Biden administration set an interim figure of about $51 per ton. My own view is, and they’re gonna update it, my own view is that there's a very strong case for it being at least $125 a ton based on the old methods. And since it costs through Climate Vault about $12.50 per ton abated that's like saying you can create 10 times the benefits. So, every $12.50 of cost for every ton, you would be providing the world people in the United States, people in Bangladesh, people in India, the whole world about $125 benefits. Ten to one ratio is pretty good, hard to get.

Greg Dalton: Right.

Barbara Haya: So, let me respond to that by saying, you know, for Climate Vault, if you’re successful in catalyzing the carbon removal industry, and bringing prices down and making that happen, you know, that would be tremendous and tremendously important to support. I still have questions about whether a ton is a ton, meaning we know very well how to estimate our own emissions. Measuring emissions reductions is much more difficult. Cap and trade programs are complex there is that regulatory response. And I worry about giving companies and individuals a cheap out to doing the hard work of reducing their own emissions given the uncertainty in the offset industry and remaining uncertainty and whether an allowance credit truly equals one ton reduced. I think reducing your own emissions and buying a credit whatever that credit is these are not equivalent. I believe strongly that we’re always responsible for our emissions and our first responsibility is to reduce our own emissions.

Michael Greenstone: Can I talk about that for a second? Because I think again, this is a place where Barbara and I have slightly different viewpoints. Let me concoct an example. Suppose it's very expensive and I think it is for most people to reduce their own emissions. Maybe they live far away from where they work or they need to travel they have a sick parent who they have to go travel and visit. And that kind of bleeds into morality about emissions. And my view is like maybe that would be very, very expensive for me to reduce my emissions but I still want to make a contribution to account for my emissions. And I don't think there's anything immoral or anything wrong with using reliable offsets as Climate Vault is offering to undo my emissions. I don't think it's necessary for me to fly less if I have a reliable way to reduce my emissions. And that's what Climate Vault is offering and I think it really strikes at part I think a challenge with the climate crisis is that there is this moral element to it. But, you know, the planet doesn’t care about like if I reduce my emissions or if I got them done reliably some other way. The planet just cares about the tons of emissions it doesn't give any preference to the emissions I took out by not flying. And I think it's important to shift the focus away from these moral questions and into questions of what does the planet actually care about.

Greg Dalton: That’s very appealing. President Bush famously said the American lifestyle is not negotiable at the Rio Summit. And that certainly appealing to people in some part of America who think that, you know, addressing climate means you’re gonna take away my hamburgers and my air flights. If we can have both that would be certainly appealing. Michael Greenstone is Milton Friedman Distinguished Service Professor in Economics at the University of Chicago and founder of Climate Vault. Barbara Haya is Director of the Berkeley Carbon Trading Project at the University of California Berkeley. Thank you both for explaining and taking us into a complicated and very important part of the climate conversation.

Michael Greenstone: Thank you for the opportunity.

Barbara Haya: Yeah, thank you, Greg.

Greg Dalton: On this Climate One... We’ve been talking about rethinking carbon offsets with Barbara Haya, Michael Greenstone and Lisa Song. To hear more Climate One conversations, subscribe to our podcast on Apple, Spotify or wherever you get your pods. Talking about climate is awkward and complicated. Please help us get people talking more about climate by giving us a rating or review. It really does help advance the climate conversation.

Play

Letters to The Boss: Help Fix Our Climate

Otto Pilot — Fri, 22 Nov 2019 08:02:54 +0000

Letters to The Boss: Help Fix Our Climate

11/22/2019

When more than a thousand Amazon employees walked off the job last September, it wasn’t higher wages or better benefits they were demanding.

“It was a really, really powerful moment to see such support for something as radical, I guess as climate change,” remembers Sarah Read, an Amazon User Experience Researcher.

“That was a moment when I realized that we as employees could change what the company was doing,” agrees software designer Jacob Adamson. “Just the mere act of signing a letter could move the largest company, move the richest man in the world, to do something.”

Read and Adamson are both members of Amazon Employees for Climate Justice (AECJ), the group that organized the walkout. Workers in Amazon offices from Seattle to New York to Dublin participated, joined by students, youth groups and tech workers from other companies. It was the culmination of a long-waged employee campaign urging CEO Jeff Bezos and other upper level management to reduce the company’s carbon footprint. (Amazon scored a “C” on the Greenpeace Click Clean Report; tech companies Facebook, Google and Youtube each scored an “A.” Bezos has since pledged to make the company carbon neutral, in line with the Paris Climate Agreement.)

Climate change is becoming a major risk factor for corporations - today, not far in the future. With groups like the Carbon Disclosure Project grading companies on environmental action, employees, consumers and investors are taking note -- and woe to those CEOs who are slow to pick up the ball.

“We’re gonna start to see some efforts where silence is complacency and it’s no longer acceptable,” says Joel Makower of Greenbiz. “You’re gonna have to get off the sidelines, to use the football metaphor, and get into the game one way or the other. And companies that aren’t, I think, are gonna find themselves facing some new pressures.”

Guests

Jacob Adamson

Software Developer, Amazon

Sara Law

Vice President, Head of Global Initiatives, CDP North America

Joel Makower

Chairman and Executive Editor, GreenBiz Group Inc

Sarah Read

User Experience Researcher, Amazon

Swami Venkataraman

Senior Vice President, Moody's Investors Service

Andrew Winston

Author, Green to Gold

Greg Dalton: This is Climate One, changing the conversation about energy, the economy, and the environment.

CLIP [Amazon Walkout]

Greg Dalton: When Amazon employees walked off the job last September, it wasn’t higher wages or better benefits they were demanding.

Sarah Read: It was a really, really powerful moment to see such support for something as radical I guess as climate change.

Greg Dalton: Climate change is becoming a major risk factor for corporations - today, not far in the future. With groups like the Carbon Disclosure Project grading companies on environmental action, employees, consumers and investors are taking note -- and woe to those CEOs who are slow to pick up the ball.

Joel Makower: We’re gonna start to see some efforts where silence is complacency and it’s no longer acceptable.

Greg Dalton: Letters to the boss - help fix our climate. Up next on Climate One.

---

Greg Dalton: When it comes to corporate climate action, is the customer always right? Climate One conversations feature oil companies and environmentalists, Republicans and Democrats, the exciting and the scary aspects of the climate challenge. I’m Greg Dalton.

CLIP [Amazon Walkout]

Greg Dalton: Last September 20th, more than a thousand Amazon employees walked out of corporate headquarters in Seattle and offices from Los Angeles to Dublin. It was the culmination of a long-waged employee campaign urging CEO Jeff Bezos and other upper level management to reduce the company’s carbon footprint.

Jacob Adamson: That was a moment when I realized that we as employees could change what the company was doing. Just the mere act of signing a letter could move the largest company, move the richest man in the world to do something.

Greg Dalton: Workers at a growing number of companies are pressuring their own CEOs to take a stand on climate change. And the message isn’t just coming from within - many corporations are feeling the heat as consumers and investors hold their feet to the fire, demanding both action and transparency on everything from supply chain to waste disposal.

But does incorporating climate risk into corporate decisions help or hurt business? On today’s program, we’ll hear from experts who are keeping score on how the big players are doing, what they could be doing better, and what it means for their bottom line.

CLIP [Amazon Walkout]

But first, we’ll talk with Amazon employees Sarah Read and Jacob Adamson. Read is a user experience researcher and Adamson is a software developer. They’re both members of Amazon Employees for Climate Justice, or AECJ, the group that organized the September walkout.

In Greenpeace’s 2017 scorecard called Click Clean, Facebook, Google and Youtube all scored an A. Amazon got a passing grade of C - not good enough, say many employees. At their annual shareholder meeting this past May, Amazon user experience designer Emily Cunningham stood up and challenged Jeff Bezos to come out on stage so she could address him directly. Sarah Read was in the room where it happened.

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Sarah Read: Oh wow, that was a really powerful moment. And when Emily stood up to introduce the resolution, she asked us to stand with her. And so the moment of seeing those employees stand up and support her and her speech was so powerful I mean, I know several of us including myself, cried when she spoke about the next generation and the future of the youth globally. And so, yeah, it was a really, really powerful moment to see such support for something as radical I guess as climate change.

Greg Dalton: Jacob, you were outside the building. What was your take, your experience on that day when the company said it will release its carbon footprint later in 2019. How important was that for you personally, and as a moment for the company?

Jacob Adamson: I think that that was a moment when I realized that we as employees could change what the company was doing. Just the mere act of signing a letter could move the largest company, move the richest man in the world to do something. So that for me was a moment where I felt really empowered. And it was a moment when I realized there’s something going on here.

Greg Dalton: And how about you both personally before you signed the petition or joined Amazon Employees for Climate Justice, did you have a lump in your stomach? How about that moment when you push the button. Tell me about that.

Jacob Adamson: I think that one feeling that I had really strongly the first time I ever did anything related to climate justice at Amazon was nervousness. I was like asked if I could talk to my coworkers about the shareholder letter and about the resolution. And I had never done anything like that, you know, I knew my coworkers but I knew them as people through work. And we talked about what we had done last weekend what are we gonna do next weekend and what we were having for lunch that day. Issues like climate change were not discussed, but I knew that what I was doing was important and that it was the right thing to do. So I pushed through that nervousness. And I also knew that if I couldn’t do it, you know, someone with tremendous privilege and I'm not on a visa I can lose my job and ultimately be okay. And if I can't do that how can I expect other people to do that.

Greg Dalton: So the day before the big walkout there’s a global climate strike September 20th, Greta Thunberg is encouraging students around the world to not go to school, there is the Amazon walkout. What was the mood in the office that day?

Sarah Read: Well, the day before the walkout was the day of the climate pledge that Amazon announced. So while there was excitement from the walkout the questions that I was getting from all of my teammates is, “What do you think about the climate pledge and are we still walking out?” And I said, “The climate pledge is a great first start. And heck yeah, we’re still walking out tomorrow.” So it was an exciting energy.

Greg Dalton: And that's the pledge where Jeff Bezos said, “We’re done being in the middle of the herd on this issue. Decided to use our size and scale to make a difference and pledge to be net zero by 2040, 10 years ahead of the Paris agreement.” So he kind of was clearly moved by the employees. So what was it like on the day of the actual walkout? Here it is, okay this big day and employees are in headquarters and around the country around the world really are walking out. Take us to that day.

Sarah Read: Yeah. That day was so exciting. I went downstairs into the lobby, and I had told of all the people that I had spoken with and emailed with in my building about the walkout. And I'm standing down there in the lobby with my team waiting.

And a few minutes go by, and I'm like oh my gosh no one is coming it’s not gonna happen. I've been doing all this work and then slowly people come out of the elevators two here, two here, another one there. I had a package of stickers and so I’m just handing out stickers to everyone. “Do you want a sticker? Do you want a button? What's your name? Thank you for joining us.” And we all waited until we had a kind of a critical mass of 20, 30 people and we walked out and there's people everywhere and signs and media and pizza. It was so exciting, it was like the most exciting thing that I've ever been a part of to see. And as we stood there and chatted with people and there are more and more buildings joining us at the spheres coming in just like these droves of people it was unlike nothing else.

Greg Dalton: Wow, what a feeling. How about you Jacob, what was the experience like?

Jacob Adamson: I think a lot of it was similar. I was pretty nervous. I was waiting in the lobby also, and, you know, I just got around to everyone's desk that I had talked to already and say, okay are you coming? And they’re like, yes, let me finish like this one last thing. In the lobby I have like maybe four or five people and I’m like oh my God like months of work and this is all I got. But then more people came down, and more people came down. And we had to move out of the lobby into the patio outside because there so many of us. And, turning the corner to see the crowd of people around the spheres was something I’ll never forget. It wasn't just something we’ve been working for, for so long it was here and it was finally happening.

Greg Dalton: Was there ever any retaliation or pressure to not do this or to participate or not participate?

Sarah Read: No. Actually, a lot of employees took time off for the walkout. Just to have the air cover and I think an Amazon official was quoted in one article saying that employees can do whatever they want with their time off. So, you know, we haven't experienced any retaliation, not to say that it will never happen. But, at this moment it has not. And I think part of that is really because we are not being anti-Amazon. We are simply asking Amazon to take ownership over this issue to take ownership over its impacts. And to really live up to the high standards that we’re held to every day on the job.

Greg Dalton: What are the big levers you know, the big sources of emissions is it the trucks you know, a lot of people don't realize how big Amazon Web Services is. Netflix and a lot of the websites in America run on Amazon Web Services, is it the packaging. What are the big levers?

Jacob Adamson: Well, it’s the things you just mentioned. The data centers are big sources of, you know, carbon emissions. So is the massive logistics network all the trucks the vans and everything combined is a carbon footprint the size of a small European country.

Greg Dalton: Sure. Massive. So what do you think about you said that Jeff Bezos plan, the pledge, was a good first step. What else should the company do?

Jacob Adamson: So there's still things that Amazon needs to do to be a leader in the climate movement. Firstly, that Amazon is committed to carbon neutrality. That doesn't mean we’ve actually committed to emissions reduction. We can get our way to carbon neutrality through offsets. And in addition to that we need to stop donating to politicians that don't believe in climate change. Last year alone we donated to 60 such politicians that are now in Congress.

We also shouldn’t be making technology that helps fossil fuel companies get oil and gas out of the ground. It needs to stay on the ground.

Greg Dalton: So you think that Amazon should actually actively not pursue oil and gas which are very sophisticated users of technology. They want to use the cloud and powerful computing to find more oil and gas and get it out of the ground. And you're saying Amazon shouldn't pursue that business.

Sarah Read: No. Amazon should not. A few weeks after they made the climate pledge, Amazon was at a conference actually for oil and gas helping I guess market AWS products to help those customers. The science is clear; we cannot extract any more fossil fuels out of the ground; they have to stay in the ground. And Jeff in his climate pledge said he wants to be a leader in this area but you can't be a leader if we're helping extract fossil fuels that seem so obvious, right? So we think that that's gonna be a really important part of being a leader in this area is stopping soliciting that business from oil and gas.

Greg Dalton: There’s also a pledge for 100,000 Rivian electric delivery vans after Amazon invested in the company. A lot of tech people look to innovation, you know, solutions. What innovative things that or others is the company doing to solve some of the problem?

Jacob Adamson: So one thing that the company has pledged to do is called shipment zero. They're planning on having 50% of packages be delivered in a carbon neutral way. And that is through electric vehicles and sustainable packaging. So that's something that they originally announced in response to the shareholder letter that was sent out months ago. And so that was a direct result of Amazon employees organizing and making their voices heard.

Sarah Read: When it comes to some of the stuff that the climate pledge has introduced and especially those electric vans and electric vehicles. One of the things that we've been talking about that we haven't seen addressed is piloting those electric vehicles and the new solutions for fulfillment centers in communities that are most affected by our pollution.

If you’re aware of the Inland Empire in California which is San Bernardino and Riverside that's a huge warehouse hub. Amazon has warehouses there, people in those communities which are largely communities of color have increased respiratory disease and asthma as a result of all of the pollution around the logistics industry. And so for us it's really important that Amazon actually looks at who is most affected by our carbon emissions and actually start to address those areas first. If they do a lot of stuff for the privileged people it’s not the place to start. We really want to start with the people who are most impacted by our pollution.

Jacob Adamson: Yeah. I would say that those people, you know, working in the warehouses living in the warehouses and drivers. They're not just other random people, these are our coworkers, they are in our internal directory. And their families are getting hurt by the pollution that our company is emitting.

Greg Dalton: So there's no white-collar, blue-collar split in this movement inside the company?

Jacob Adamson: I would say that we’re all on the same planet and we’re all in this together. If we're going to solve climate change if we’re gonna effectively enact climate justice we have to understand that.

Greg Dalton: How has this experience changed each of you as a person? You came into the company, Jacob, was a little more environmental, Sarah, not so much. It’s been a couple of years. How are you as a professional and as a person changed by this experience?

Jacob Adamson: I think that the experience of working for something that matters is a transformative one. When I first had a conversation with my coworkers about climate change I was really nervous. But as I kept having these conversations they got easier and easier and more powerful every time. And in addition to seeing those transformations within myself I've seen them in my other coworkers we can talk about issues that matter, not just carbon emissions but issues of human rights and other and racial justice. The coworker who I spoke to that wouldn’t sign on to the shareholder letter that wouldn't vote yes on the resolution, they joined the walkout.

Greg Dalton: How about you Sarah?

Sarah Read: It's really changed me very quickly. I mean, I've been involved for six, seven months now. I remember a year ago I definitely felt like there were not people at Amazon that cared as deeply about social justice and racial justice as I did and I felt very alone and kind of isolated. And to see this group of people who think like I do and see the world as I do and care about the issues that I care about and to be able to join them and rally around the notion of environmental justice and actually get things done has really made me feel confident in tech workers in Amazon workers in myself. I just feel like a whole new person.

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Greg Dalton: That was Sarah Read and Jacob Adamson of Amazon Employees for Climate Justice. You’re listening to a Climate One conversation about climate change and corporate culture. Coming up, winning hearts and minds in the boardroom.

Andrew Winston: For almost every CEO I talked to there was a personal reason. Like their kids talked to them, or they went to the rainforest or they went to the Arctic and it took one of these trips; they needed to make it personal. They needed a story.

Greg Dalton: That’s up next, when Climate One continues.

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Greg Dalton: This is Climate One. I’m Greg Dalton, and we’re talking about corporate responsibility and climate change. My next guests are two experts long on the vanguard of infusing environmental values into corporate America. Joel Makower is Chairman and Executive Editor of Greenbiz, a media group focusing on the intersection of business, technology and sustainability. Andrew Winston is a veteran consultant and author of “Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build a Competitive Advantage.”

We’ve been hearing a lot lately about the climate “ambition gap” - the space between what’s needed to cut carbon pollution to safe levels and the action that companies and governments are taking. Joel Makower has some insights.

Joel Makower: Well, first of all I see an inflection point in the conversation about business and climate, which is I think fundamental to what we’re going to talk about for the next few minutes. And it's kind of flipping the script from the traditional conversation about what is business doing to the climate to what is the climate doing to business? And, in a world of you know, fires and floods, and heat waves, and hurricanes and all of that. There is a lot of risk involved; supply chain risk, business continuity risk, right to operate risk, if you're a big water user in a water stressed area. And, so the conversation is really a lot more risk focused than it used to be. And, in some ways the gap, yes, there is an ambition gap and we’ll get to that. But, the gap is between the risk people inside companies and the sustainability people. They don't talk to each other, many don’t even know each other. And when they do talk to each other they often realize that they don't speak the same language, they don't even talk about risk in the same way.

So, I mean fundamental to this ambition gap is sort of this, this new understanding of the relationship between business and climate. And, yes I mean you see I've been doing involved with the aviation industry a lot lately, and if you look at where pretty much every major sector is going based around the Paris Accord, and a lot of other science-based target initiatives. It's getting to net zero carbon by midcentury by 2050. The aviation industry they want to cut their climate emissions in half by 2050. So, that's not gonna work, that's an ambition gap right there, within a sector never mind the actual company operations.

Greg Dalton: One thing on aviation, I've heard from people that flight shaming which is taking off in Europe and kind of coming to the United States is getting the aviation industry interested in a way that it's getting their attention. Because if their product is shameful that's different that's new for them.

Joel Makower: Yeah. It's more than that though, Greg. It's also, yeah, that that's true and particularly in Europe and in Europe it's not just the flight shaming even the German Finance Minister back in September said that it was going to raise the taxes on intra-German flights, and lower the taxes on intra-German train rides in order to -- that’s a existential hit at least within the domestic market.

But, it's also if you talk to for example, corporate sustainability folks, which I do all the time and they’ll say you know we've done so much, the proverbial low hanging fruit. We've done our facilities, and our products, and we’ve work with our supply chains, and we've got you know, we switch to renewables. And we've done a whole range of energy-related and other things within their area of influence. But, flying is been the biggest piece of it that they haven't figured out how to do that. And obviously the best answer is don't fly. And for some reason companies haven't figured out that that's I mean they haven’t found good viable options. Telepresence was going to change all that and it hasn't really, you can do some things with telepresence, but not a lot people still want to press the flesh. So, I think there's a lot of risk in the corporates more so than individual travelers saying we have to cut back our flying and that becomes a big, big, risk for the aviation sector.

Greg Dalton: Andrew Winston, sustainability's often been kind of in a green box sort of as Joel mentions sort of the sustainability people are not the kind of the heavy hitters. It’s not always the CFOs, the people who are working on risk or capital allocation, is that changing? You recently wrote about a survey of a thousand CEOs at Accenture that the UN Global Compact did what do that study find?

Andrew Winston: Yeah, it’s interesting. I want to build on a couple things Joel said if that's okay? You know, so I think this risk cycle is really interesting, because you know, we started maybe 40 years ago where risk from a company perspective was just regulation, right. I have this kind of narrow definition, and then over years we move to, oh, we can reduce cost we can innovate and create new products, we can you know, create value in other ways. And I agree that we’re kind of back to this risk discussion, but it's much more both tactical and in addition, what Joel said there's this, you know, discussion of systemic risk, right, the risk to society, the risk of climate change and you know, making a city uninhabitable.

And so you see the banks and institutional investors starting to come to the table now, because they have this long-term view on that.

But, you know, I think this gap that we’re seeing, there is a fundamental challenge now in you know, all of sustainability which is I think on some level the debate about it being in the corporate sector is over. And part of this Accenture UN Global Compact study of a thousand CEOs, you get that you get the percentages, you know, 99% say it's on their agenda basically, so it is like we won, right. We won the battle of getting it on the agenda every large company has a sustainability report, every large company now has quantitative goals, it’s great. But, at the same time, because of the science and what's happening in real time it all feels kind of woefully inadequate versus what needs to happen on the science.

And, I think you get some of that sense that, you know, from these studies asking CEOs how important is this to them, that it's a weird set of results because you get these very high percentages saying it's important. That sustainability is important to the success of their business you know, and again, like 99%, but then some specific questions you know, of these thousand CEOs, you know, how many are deploying low carbon and renewable energy, you know, 59%. How many see a net zero future for their company, you know, 44%. On some level those are really low versus what needs to happen, right.

Greg Dalton: Tying compensation to sustainability goals.

Andrew Winston: Well, that's the funny part in that survey is just 62% of the CEOs said they would link their pay to sustainability after 99% said it's important to the future success of their business. So, they don't really want to put, you know, a good third or 40% don't want to put their money where their mouth is. So there's clearly a gap in the pay side.

Greg Dalton: And Andrew, you've written recently about invoking companies to use their political power. We've heard for a long time Sheldon Whitehouse will say, look companies talk a great game, and when they come to Washington DC, it's about taxes, immigration and climate does not cross their lips. And Andrew you said that and we’ve seen some recently there was a letter from what 11, heads of 11 environmental organizations took out this full-page in the New York Times, those that sort of work with Companies Environmental Defense, Conservation International. So, but we're in an era of great deregulation. So why are companies gonna go to Washington. It's like asking a teenager to lobby their parents you know, to cut their allowance, right who’s going to do that.

Andrew Winston: Well, it's a really interesting question, because I think and again, it's like a cycle back, right. These big environmental groups 40 years ago started with we got to use policy. And then realized, you know, policy might not be enough and went and targeted companies and citizen behavior. And we’re back to policy in a way, because again we’re so far along the path on climate change that we now need such big systemic changes that we need big policy. And that's part of the logic which is if businesses believe that it's important to their future where they can't thrive without a thriving planet then they need policy to back that up. But, it is going against this maybe fifty-year culture of kind of the neoliberal order of, you know, business is fighting to be released from all the shackles of government, where government relations people their job is to cut regulation.

And you see this battle real-time going on in the auto industry right now where you got a split between some of the majors saying okay we want to go along with California's higher CAFE standards fuel efficiency standards, and others saying there we want to slow down and kind of doing the typical fighting of more pro-climate legislation. So, there are still very few companies that really show up as Senator Whitehouse says, because it's so against their culture even if it's in their interest to fight for a price on carbon say.

Greg Dalton: Right. And again the lobbying people often, Joel Makower, don't talk to the sustainability people. There's a bunch of lawyers and then there’s a bunch of greenies.

Joel Makower: Yeah, the government relations hasn't communed well with sustainability but this is starting to change. And I think we’re going to see this over the next year or two, or three. Some of these things take a while a lot slower than we would all want to happen. And there’s three sort of entry points for this. One, is elevating CEOs that are out there speaking about the need for climate policy that are actively engaging it's a fairly small number now. But, there are some efforts coalescing to hold them up and give them backstop them, if you will from a reputational perspective and elevate and celebrate those CEOs. Two, is that there's really never been sort of rankings of what companies are doing on the policy side with climate. What tends to happen is if you think of the bell curve with those two small ends at either side and the big fat middle, at the ends are like companies that are proactively engaged, the Patagonias and relatively small handful of others. And of course the other ender mostly fossil fuel and ones that want to stymie any further progress.

But in the big fat middle or most companies to Andrew's point are just staying quiet. We’re gonna start to see some efforts where silence is complacency and it’s no longer acceptable. You gonna have to get off the sidelines to use the football metaphor, and get into the game one way or the other. And companies that aren’t I think are gonna find themselves facing some new pressures, and that gets to the third leg of the stool which is employees. You know, they're starting to be some efforts to organize employees to basically take a page from the LGBT effort that when there were these bathroom bills in North Carolina and Georgia and some other places that employees said, you know, we don't want to do business there, we don't want to go to conferences there, we’re gonna pull our meetings from there. I think there was an NCAA game in Charlotte that may have been canceled or moved.

So the question is how do you leverage employees to say we want you our company to get in the game again. And, that, you know, in a competitive job market where everyone is looking for talent, particularly at the middle and higher levels of skill sets that becomes a pain point if you're not seen as proactive and engaged. And you’re starting to see the next generation or even the current generation of mid career job changers not wanting to work for those companies. So, I'm hopeful that we’re going to see that dynamic changing.

Greg Dalton: Right. And earlier in this podcast we talk with some Amazon employees who were part of that pressure. You mentioned CEO leadership, Paul Polman has retired from Unilever. David Crane got fired from NRG for going too far. Who are the real leaders now that are really pushing the envelope? Andrew or Joel.

Andrew Winston: I don't think there's many who have stepped in quite yet to fill a lot of what Polman was doing. He was really unusual for this last decade. I think arguably, you know, Faber [ph] at Nestlé has kind of -- excuse me at Denone has you know, really stepped up and is incredibly fluent in this. And there's the smaller company CEOs like there always has been, I mean you can always go to Yvon Chouinard at Patagonia for some good coverage on the problem with capitalism. And there’s lot of companies doing great things, but it comes back to this political question the CEOs in my experience have been its not totally understandable I mean really why you’ve seen companies come forward as Joel said on bathroom bills on LGBT rights, on immigration on guns, right, like Dick's Sporting Goods saying we’re not gonna sell. Doug McMillon at Walmart, you know, cutting certain ammunition. But much less comfortable talking about climate which is really odd. I’m not sure I would've predicted that that they would talk about trans rights comfortably before climate. It shows you that they made climate so political and by they, I mean kind of a concerted effort and there's lots of research backing this up from the Koch Brothers from Exxon, from others for 40 years, right, making it a political issue. Making something that's a science issue with political ramifications into purely political. And, so you've gotten CEOs uncomfortable about getting a mad tweet from the president, or getting on the wrong side of a particular party. And it's really it's very hard to get past that culturally right now.

Joel Makower: Yeah. But, Andrew, I mean I agree but I also think it’s important to point out that LGBTQ issues are very personal and political. And I think that's been as political probably as climate in a lot of ways, but it's personal.

Greg Dalton: Andrew, you've written about how, you know, motivations for CEOs that really they all think about legacy, because the business case only goes so far. That leaders need to think about taking it really to a moral plan that this is my legacy, maybe Polman did that. You know, is that gonna work to get some leaders to really think about take some risk can lean in and think about their legacy?

Andrew Winston: Yeah, I think you know, we need leadership so badly, right. Companies can only go so far without CEOs behind it. And I've probably I wouldn’t say done a 180 maybe a 90° turn over the years on this question of how do you reach people personally. I mean my first book was Green to Gold it was very you know, clear-cut that green makes money, right. And that was maybe needed for that time. But, you know, I’ve done some research with CEOs and asked a bunch that are leaders in sustainability, and that talk about it a lot, you know why did they come to this. And the business case stuff that Joel and I have been working on for far too long, each of us, it's there and it's good that the case has been made and they kind of say yeah I know that. But, it was like the third or fourth reason; for almost every CEO I talked to there was a personal reason. Like their kids talk to them, or they went to the rainforest or they went to the Arctic and it took one of these trips they needed as Joel said to make it personal. They needed a story. And so I've, you know, come around that we have to hit people as business beings, but, also kind of moral beings, I think at different times. I think if the day before the quarterly meeting with your investors talking to your CFO and CEO about the morals of climate change may not work. But, over a drink at the annual retreat maybe you talk about their legacy and their kids and what they're doing with their lives. And I find that, that there is some part of that that grabs people you need I guess both you know, both the head and the heart.

Greg Dalton: You're listening to a Climate One conversation about closing the corporate ambition gap on climate change. We’ve just heard from Andrew Winston, author of Green to Gold, and Joel Makower, Executive Editor of Greenbiz. Coming up, investor relations. How are markets already pricing in the costs of climate disruption?

Swami Venkataraman: To put it very simply, what is going to happen in the next 10 to 20 years has already been determined by the emissions that have happened in the past 20 years.

Greg Dalton: That’s up next, when Climate One continues.

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Greg Dalton: This is Climate One. I’m Greg Dalton. We’re talking about how corporations are responding to the climate crisis, and what their action - or inaction - says to their employees, customers and investors.

Swami Venkataraman is a Senior Vice President in the Environmental, Social and Governance group at Moody’s Investor’s Services. And Sara Law is Head of Global Initiatives at the Carbon Disclosure Project. CDP gives nearly 140 companies an A rating on their carbon disclosure. Some of the names I was surprised to see on the A-list were Bayer, new owner of Monsanto, global mining giant BHP, and Nestlé. How did these companies with bad environmental reputations end up with such a high score?

Sara Law: It’s a good question to put forward. How do you square the circle when you have some companies who are demonstrably in the news for reasons that might suggest they’re not performing well on climate. But, the work that we do here at CDP is to try to ask a most holistic set of questions as possible. We think that the bedrock of trying to make assessments about this type of thing is to first of all have good information. And so one aspect is that, you know, is the full submissive the disclosure, you know, that information that company share. But equally, we recognize that transition to a low carbon economy is a journey. And so where we see demonstration of progress and signs of best practice we take a relative measure at that benchmark of one company against the other. And that leads us to position some companies as A and all the way ranking down to like a D minus. I do want to remind you that there are some companies that get an F, which recognizes that they don't disclose at all.

Greg Dalton: Swami, let's get you on disclosure is increasing transparency, but are companies disclosing the right things and do investors have good information now to make investment decisions based on the climate risk that companies are disclosing?

Swami Venkataraman: Short answer is no. Very often, they are not disclosing what's really important. And also there is a lot of inconsistency in what companies are disclosing, and so it becomes hard to really compare one company with another. So what we're doing is just like CDP is doing a lot of great work in getting companies to disclose. We have some limitations in what we can require companies to do given our sort of role in the markets. We generally _____ why telling companies what to do on any aspect of things. However, that's not to preclude our participation even more higher policy making level. So our chief credit officer is a member of the task force on Climate Related Financial Disclosure, called the TCFD. And, what we do there is they will have to come up with a very comprehensive set of guidelines on what and how companies should be disclosing about their climate risk. And we are part of the TCFD, and we are part of making those recommendations and we certainly would push for companies to disclose. We support the TCFD’s recommendations. I think that will go a long way in solving both of those puzzles. One, is not being consistent. Second, very often not being relevant. The third thing we find is even where companies do disclose, it is often partial and they don't go to the most important thing the bottom line if you will, which is how does it actually affect your cash flows and your assets and how is it financially material to you. That is something very few companies do today.

Greg Dalton: CalPERS, the big California Pension Plan said that the biggest hundred emitters should be required to report because they pose wide risk to the economy systemic risk. Swami, do you think that some companies should be required to fully disclose, because they pose such a systemic risk to the global economy?

Swami Venkataraman: See I think even if you look at it from a more fundamental point of view, right. You have FASB that sets accounting standards, right -- Financial Accounting Standards Board. Companies are required to disclose a whole lot of things, including things like pension costs and other things that they’re not going to be paying anytime in the near future. But, which are relevant to the assessment of the financial well-being, and the future prospects of corporations. So this idea of requiring companies to disclose relevant and material things is actually not very new and it's actually being done.

Greg Dalton: Sara, how do you know that company, that investors actually, you put the information out there but, how do you know that mutual funds and other companies that make investment decisions, individual investors, do they use the information that's out there. Because a lot of people get these complicated disclosures, proxy statements they don’t pay attention.

Sara Law: Sure. Well, Greg I wanna answer that question, but I just want to say, in building off Swami’s response, that whilst requirement to disclosure is a matter for regulations to address the fact that we lack consistent disclosure across all companies not just those that are systemically important make it incredibly difficult to compare like for like and to come up with the true benchmark. So I feel for my friend across the table, Swami here and I can tell you that it's a challenge for CDP as well. It’s let us have to do some work around modeling of emissions for instance for us to be able to provide a true snapshot of any economy, or a sector to be able to give helpful insights. But to come back to your question and it actually links up. We do this because it’s actually being direct demand from our investor signatory base, for them to have a clear set of information. So that when they come to making capital allocation decisions, it's not a patchwork where they can't locate company A, compare to company B. And your question to me is specifically, how do we know how do I know that investors are truly using this information.

The work that you pointed to before for instance the Climate Action 100+ that is actually, an invested driven initiative based of CDP data that has helped to identify those 100 systemically important companies. And, that has then been the foundation for an investor driven engagement campaign with super specific tasks as to what companies need to do. And a whole program of work that that collection of investors can now follow to help change the markets that they can influence. Much more specifically, you’ve got investors such as the New York State Common Retirement Fund, who’s used CDP data to build up a special climate index, that started at 2 billion has been up to 4 billion. And it’s showing returns and investment that benchmark as well as the regular indices in terms of investment return. That's quite concrete.

Greg Dalton: Lot of investors look at the economy and they divide it into sectors. Pharmaceuticals, industrials, transportation, tech. What are the sectors that have the biggest vulnerabilities to where climate risk is lurking and investors may not see it. I think everyone knows that oil and gas, has big climate risk, but what other sectors have climate risks that people may not be aware about because it’s not being disclosed or reported?

Sara Law: I’m really glad you asked that question, because there’s the objective reality of which sectors are exposed to high risk. And then there’s self-recognition, whether those companies are actually disclosing it themselves. So we released the report around the summer time based on the 2018 data set that showed that in industry like the power industry, surprisingly disclose many more opportunities arising from a low tab in transition than the risks we would expect to see. Now that's one objectively speaking, you would expect to see a greater degree of risk whether it's related to an increase in the cost of capital now and into the future for them, unless the demand for their existing products and services. But, interestingly where we saw high disclosure of risk was actually coming from the financial services sector, and we believe that that relates to a growing awareness that not just the risks inherent in the direct operations. But they are the funders and the bankers of the rest of the economy. And where those assets start to look shaky, that might mean earlier retirement or even write off that exposes greater risk for the financial sector.

Greg Dalton: Swami, let's get your take on that. Where do you see the biggest lurking risks that are not being disclosed in the economy?

Swami Venkataraman: So there are a couple of points to be made there. One is, Moody's has something called the environmental risks heat map. And think of the heat map as sort of like a traffic light system, for the kind of environmental risks faced by different sectors. So we have red, orange, yellow, and we have a blue as well for no risk.

The environmental heat map goes beyond just climate change or carbon transition, rather, that really beyond the focus on just carbon emissions. It also looks at just the direct physical risks from climate change, you know, rising sea levels, and temperature, and hurricanes, and so on. It also focus on water it focuses on pollution and waste disposal issues and so on. But, we do have a big focus on carbon transition as well. So, the heat map gives a color for every sector, for each of these environmental area. So, for carbon in particular, if that's the issue on carbon emissions, we identified 16 sectors which have either, very high or high exposure to carbon transition risk from a financial materiality perspective. So, those sectors include from our perspective, it includes utilities, includes oil and gas, automobile manufacturers, surface transportation, cement, steel, airlines, shipping, and so on. So not exactly a surprising list, but, it serves to put these sectors on notice for financial materiality, right. In our view, for example, to your question on banks, we don't have them in the high risk category from a financial materiality perspective. Meaning, the most banks while they do fund sectors including oil and gas and so on. They very rarely take on long-term exposure they are not enlisting in the bonds of these companies for example right they are simply a lot of the time providing working capital other forms of thing.

Some banks do provide project financings, especially outside of the U.S. where there is some little more longer term exposure. But by and large, the role of banks is important from the perspective of let us try to turn companies’ investments around; let’s use banks as a lever to influence what companies do. But we didn't see banks themselves as having very high or high exposure.

Greg Dalton: We've been talking about corporations. I want to talk about cities, they play an important role the municipal bond market is close to $4 trillion relied on for retirees, for steady relatively safe income. Cities rely on that to build schools, bridges, hospitals, etc. Is there climate risk in cities, Sara Law, and is it being fully disclosed to investors with all the people buying municipal bonds?

Sara Law: Is it being fully disclosed? The answer has to be no. I think disclosure in cities is maturing as a notion. And I just wanna put it this way that there is no same compulsive feedback loop so to speak. In the corporate world the success that we've had in pushing for disclosure is because investors are asking for it. The cities program on disclosure in CDP which is nearly 10 years old now, has come purely through voluntary action. So we’re seeing it grow very steadily, but there's a lot still to be learned. So I don't think all risks have been disclosed yet.

Greg Dalton: Swami, your thought on whether there is a ticking time bomb in the municipal bond market where there's climate risk that cities who are working very hard, some of them, to address climate, but they're not fully disclosing or fully coming to grips with their own climate risk of the bonds they are issuing.

Swami Venkataraman: It is true. But there’s a difference between corporations and cities. And the difference is that, by and large the corporations that are the focus of disclosure requirements and regulations are corporations that emit carbon dioxide and cause climate change. And so from their perspective its carbon transition risk, it's the risk that as the world transitions to a low carbon world that their businesses and cash flows will be affected.

This is by and large true for corporations there are some corporations that have physical risk as well. But, by and large, if you look at cities, and counties, and states, and countries the risk is mainly physical risk. It’s the actual risk from rising temperatures, change in rainfall patterns, and sea level rise, and hurricanes, and so on so forth. There may be some of them that also have transition risk notably, you know, if you think of oil exporting countries or oil producing regions which benefit from those royalties and revenues, they will lose that if oil consumption falls. So there are some exceptions in the stateside. But, by and large, if you’re talking with the municipal market really talking about carbon transition risk.

Okay, and how are these two different? In the case of carbon transition risk, you're really talking about how regulations could affect the companies in the next few years, because they have to begin the transition right away, right. In the case of cities what they are talking about is, when is temperature and rainfall patterns going to change, how much of the sea level rise going to be. There is a lot of uncertainty in terms of how the climate is going to respond. We know there's going to be a response, we don't know what that is. What we do know is that what we do in the next 10 to 15 years in terms of actual emissions ironically enough, doesn't really matter over the next 10 to 20 years for the cities and for countries. Because this is somewhat complicated climate science but to put it very simply, what is going to happen in the next 10 to 20 years has already been determined by the emissions that have happened in the past 20 years. There is a latency --

Greg Dalton: There’s a lag in the system.

Swami Venkataraman: There’s a lag in the system, exactly. So, what we don't know is what’s the uncertainty and how climate is going to respond. But you're right, cities it's not an excuse not to grapple with that, not to disclose that but the nature of the risks being faced by these two types of entities are very different.

Greg Dalton: We’ve been talking about climate change and corporate risk. That was Swami Venkataraman, Senior Vice President of Moody’s Environmental, Social and Governance group, and Sara Law Head of Global Initiatives of the Carbon Disclosure Project.

My other guests on Climate One today were Sarah Read and Jacob Adamson of Amazon Employees for Climate Justice, Joel Makower of Greenbiz Group, and Andrew Winston, author of Green to Gold.

Greg Dalton: To hear more Climate One conversations, subscribe to our podcast at our website: climateone.org, where you’ll also find photos, video clips and more. Please help us get people to talk more about climate by giving us a review wherever you get your podcasts.

Greg Dalton: Kelli Pennington directs our audience engagement. Tyler Reed is our producer. Sara-Katherine Coxon is the strategy and content manager. The audio engineers are Mark Kirchner, Justin Norton, and Arnav Gupta. Anny Celsi edited the program. Thanks to Julia Drachman for field reporting. Dr. Gloria Duffy is CEO of The Commonwealth Club of California, where our program originates. I’m Greg Dalton.

Play

Carbon Offsets: Privileged Pollution?

Otto Pilot — Fri, 30 Aug 2019 09:02:57 +0000

Carbon Offsets: Privileged Pollution?

08/30/2019

A carbon offset is a credit – a way to offset a unit of pollution created in one place by, say, planting a tree, or otherwise sequestering carbon, somewhere else. But in the race to bring carbon emissions to zero, are offsets a legitimate tool, or a delusion that allows heavy emitters a way out of taking real action?

“I just need to recruit everybody to make sure the forests remain forests and the farmlands have as many trees as possible,” says Pauline Kalunda, Executive Director of Ecotrust Uganda, a non-governmental conservation organization in Uganda. She uses money from carbon offsets purchased in wealthy countries to help build environmental resilience at the community level. Buying offsets can help fund carbon-reduction projects in developing economies with limited funding – but they don’t help reduce dirty air back home.

“We ultimately need to get to a point where it is really, really expensive to pollute so that people pollute a lot less,” maintains Kahlil Baker, Executive Director of Taking Root, a Canada-based group which also works with the offset market to promote economic development among smallholder farmers in Nicaragua. Voluntary offsets are great for eco-conscious consumers who want to ease their climate guilt. Do they run the risk of letting individuals think they’re off the hook for their carbon sins?

“I’m a lot less worried about offsets from individuals than I am about Chevron offsetting,” says Zoe Cina-Sklar, a climate justice campaigner with the advocacy group Amazon Watch. She worries about corporations and other large polluters using offsets to avoid accountability under state climate policies.

Barbara Haya, a research fellow at UC Berkeley’s Center for Environmental Public Policy, who studies California’s offsets program, echoes this worry. “We’re allowing businesses in California like Chevron and Phillips and other large emitters to continue to emit,” she claims, “because they're buying these credits that many of which don't actually represent real emissions reductions.”

But Rajinder Sahota, who leads the Cap and Trade program for the California Air Resources Board, disagrees with the takeaways of Haya’s research. “The offsets don't play a specific line item in reducing emissions towards our target,” she counters, “they are a compliance currency under the cap and trade program.”

Ultimately, carbon offsets work best, as Derik Broekhoff from the Stockholm Environmental Institute puts it, as the icing on the cake and not the cake itself. “The advice for voluntary offset has always been reduce your own emissions first,” he suggests, “and then turn to offsets as a kind of additional even charitable contribution that you can make towards both helping the climate and making the world a better place.”

Guests

Kahlil Baker

Executive Director, Taking Root

Derik Broekhoff

Senior Scientist, Stockholm Environmental Institute

Zoe Cina-Sklar

Climate Justice Campaigner, Amazon Watch

Barbara Haya

Director, Berkeley Carbon Trading Project, Goldman School of Public Policy, UC Berkeley

Pauline Kalunda

Executive Director, Ecotrust Uganda

Pennie Opal Plant

Co-Founder, Idle No More SF Bay

Rajinder Sahota

Deputy Executive Officer, California Air Resources Board

Greg Dalton: This is Climate One, changing the conversation about energy, the economy, and the environment.

Greg Dalton: In an ideal world, everyone would have a smaller carbon footprint. In the real world, some people try to be less bad by buying carbon offsets.

Pauline Kalunda: People sit down and try all means to reduce their footprint. But whatever else are they cannot do without, they offset.

Greg Dalton: But is creating a market for pollution part of the solution or part of the problem?

Zoe Cina-Sklar: We've seen a lot of markets and a lot of incremental change at best.

Greg Dalton: Are carbon offsets just a(nother) way for consumers in industrialized countries to ease their climate guilt?

Kahlil Baker: Financing activities that help remove carbon from the atmosphere isn’t going to fix climate change in its own right. But I think it's really important first step.

Greg Dalton: Carbon Offsets and the Privilege to Pollute. Up next on Climate One.

Greg Dalton: Are carbon offsets a delusion, a flawed tool, or something else? Climate One conversations feature oil companies and environmentalists, Republicans and Democrats, the exciting and the scary aspects of the climate challenge. I’m Greg Dalton.

Greg Dalton: A carbon offset is a credit – a way to offset a unit of pollution created in one place by, say, planting a tree, or otherwise sequestering carbon, somewhere else.

Pauline Kalunda: I just need to recruit everybody to make sure the forests remain forests and the farmlands have as many trees as possible.

Greg Dalton: Pauline Kalunda is Executive Director of Ecotrust, a non-governmental conservation organization in Uganda. She uses money from carbon offsets purchased in wealthy countries to help build environmental resilience at the community level. Buying offsets can help fund carbon-reduction projects in developing economies with limited funding – but they don’t help reduce dirty air back home.

Kahlil Baker: We ultimately need to get to a point where it is really, really expensive to pollute so that people pollute a lot less.

Greg Dalton: Kahlil Baker is Executive Director of Taking Root, a Canada-based group which also works with the offset market to promote economic development among smallholder farmers in Nicaragua. Voluntary offsets are great for eco-conscious consumers who want to ease their climate guilt. Do they run the risk of letting individuals think they’re off the hook for their carbon sins?

Zoe Cina-Sklar: I’m a lot less worried about offsets from individuals than I am about Chevron offsetting.

Greg Dalton: Zoe Cina-Sklar is a climate justice campaigner with Amazon Watch, an advocacy group. She worries about corporations and other large polluters using offsets to avoid accountability under state climate policies.

Pennie Opal-Plant: I mean, I’m astounded at the decades that elected officials have known about the climate crisis and have done nothing.

Greg Dalton: Pennie Opal Plant is co-founder of Idle No More Bay Area, a grassroots climate organization led by Native American women. She is critical of California’s offset and cap and trade programs,which we’ll explore further later in the hour with a state official. First Pennie and the others others joined me at for a roundtable discussion of international and domestic carbon offsets. I began our conversation by asking Pauline Kalunda how individuals buying offsets in developed countries actually affects people in emerging economies.

Pauline Kalunda: The way people in the developing countries approach carbon offsets is actually from the adaptation perspective. Because we live at the front-line we are affected by climate change, so we look at it from the perspective of building our resilience. So from the developed country it comes as you’re offsetting a footprint from the developing country it comes as I'm building my resilience.

Greg Dalton: And is there an element of justice in that because the developing countries didn't really create this problem the rich countries did. Most of the carbon up in the air is red white and blue, which means it's American, French, Russian, etc. Is there an element of justice embedded in a carbon offset?

Pauline Kalunda: Yes it has an element of justice because normally to create a carbon -- to pollute, you have the ability to withstand it, to withstand the impacts of pollution. Whereas we stand in the perspective of our contribution is so small but then we suffer the consequences. So we are not a very litigious community so we don't normally look at things from the perspective of punishing and justice. But we look at it from the perspective of cooperation and partnership.

Greg Dalton: And so if someone buys an offset that comes to Ecotrust what happens what do you do with that? Is it planting trees, you said building resilience, what does that mean?

Pauline Kalunda: Yes. We work with the communities that are dependent on rain fed agriculture. Mainly these are communities that depend on forest for fuel, wood, water for all their basic needs. So what we do is that we develop a community vision in which we would like to build the resilience of the landscapes both the productive and the natural landscapes. And we highlight areas where the planting of trees will have significant environmental benefits, reducing water flow siltation and so on and so forth. So when you come as an organization as experts we quantify the carbon stocks that will result from that land use plan. So when you come to Ecotrust you’re buying just the carbon stocks but the package has so many other things in it.

Greg Dalton: Kahlil Baker, what happens with Taking Root in Nicaragua. Something similar in terms of, you know, enhancing forest with money that would not otherwise be there and helping those communities?

Kahlil Baker: Yes, like Pauline was saying it starts from having a community achieve some of the ambitions that were in place and bring a financing mechanism that allows them to make some long-term investments within resilience and to agriculture systems and land use activities. They’ll gonna help both reduce carbon in the atmosphere but at the same time allow the community to make long-term investments they otherwise couldn't have made.

Greg Dalton: Right. Pennie Opal Plant, you have a different view on carbon offsets which are a key part of California's cap and trade system, which is one of the biggest things key part of California's climate action you live near some refineries. Tell us your view on carbon offsets used by big energy suppliers.

Pennie Opal Plant: I just want to start out by saying to Pauline and Kahlil that that does sound like a wonderful mechanism for your communities. So I’m looking at a longer vision of safety for all the babies in the world. That's my focus is ensuring that they have a safe and sustainable future. And I'm right up against the belly of the refineries in the San Francisco Bay there's five refineries and the rates of respiratory issues, asthma, cancer is dramatically increased from anywhere else in the county. And as an indigenous woman I also have a little bit of a different perspective because women that I love and I'm close to are at the extraction sites and the tar sands and the Bakken oilfields in North Dakota and in Ecuador and Peru and like all over. And so I am very familiar with what the fossil fuel industry has done to indigenous people and others around the world. And here we are at the end of the world as we know it because the world as we know it's not going to be the same for my grandchildren and my you know all of our the babies that we love. And so how do we look at shifting the system the entire system so that your communities can get the resources that they need to do the good work that you're doing, but where we’re not allowing the fossil fuel industry to continue to harm all of us.

Greg Dalton: And so a key part of that California cap and trade program allows offsets where the rationale is that let them go with the lowest cost and that allows companies to pollute in California the United States and offset that in the developing world where those companies say it's cheaper. That's good for customers because it keeps the energy prices low in California elsewhere and so what Pennie, you’re seem to be saying that allows pollution in your neighborhood and people get to sort of those companies the state is allowing them to clean up another part of the world in which may be good for that part of the world, but are they pitting certain people against each other?

Pennie Opal Plant: Absolutely. It’s the latest form of colonization and we’re seeing that in places where these contracts maybe not in your community but definitely up in the Yurok Tribe in Northern California where the decision-makers to sign the contract there with the state of California did not conduct prior informed consent with all the tribal members. And when we went up there to talk to the women we were invited to go up and talk to the women about the indigenous women of the Americas defending Mother Earth treaty. We talked to them about what signing that contract does to our indigenous sisters. And they were appalled because they were sold that contract and it’s I believe it's 100-year contract. They were sold that contract by the people signing the contract, telling them that they are climate heroes from signing that contract. Where we all know that the fossil fuel industry needs to be reined in. I mean that has to happen otherwise we’re not gonna make it. I mean scientists are talking about extinction. So I don't think just about my communities, I really do think what part of that sacred system of life is being destroyed because of human’s impact on this system. Like how do we look at the system that created these problems from a more elevated perspective and say what caused these problems. The system of economics that we have now caused these problems.

Greg Dalton: Pauline Kalunda, can you see carbon offsets as a new form of colonialism where the developed countries are kind of using money to exert some control. They’re now mainstream and there's lots of even large environmental organizations that are supporting them. So people see opportunity powerful interest can come in and get hold of them.

Pauline Kalunda: Exactly. Because when these things were being designed because the offset market has been around. The voluntary market has been around for a very long time before the IPCC came about before the Kyoto Protocol came about, in what they call the voluntary market. People were offsetting, companies were offsetting, organizations were offsetting. And they used to have what is called the mitigation hierarchy whereby you start with a planning where you agree on the critical issues that cannot be offset because they cannot be tampered with. And you to start with avoidance and then followed by restoration and whatever cannot be avoided and cannot be restored is what you offset. There are some terminologies like, for like, but then when it comes to whoever you referred to as a colonialist comes in to take advantage. Then they take only the end that meets their objective that fits into their narrative, so to speak.

Greg Dalton: Kahlil Baker, do you use personal carbon offsets when you fly around do you buy offsets to your plane ride here from Nicaragua?

Kahlil Baker: Yeah, I mean I do, but maybe I can take a step back for a second and focus on why we created this system, right. Ultimately, te have to bring carbon out of the air because carbon isn’t inherently immoral or bad we all exhale carbon dioxide. And so because it’s not inherently immoral, we can’t say it is illegal to emit CO2 because we exhale it, right. If we can’t say it is illegal then we ultimately have to discourage people from polluting so much. And the idea is we got to put a price on it, right, we have to internalize that externality. So the price of pollution is factored in when people make decisions. And so the first part is putting a cost on pollution. And so at carbon offset is hey we’re acknowledging there’s a price. Ideally, this will be done at the global level and the price would be really, really high that really polluting activities like fossil fuels isn't something that could be done. And so we want to discourage that behavior as a first step, right. And once that is done with and what do we do with that money? We could invest it in education or a whole bunch of other social goods but we could also invest it in activities that help fund the removal of carbon from the air. So I really see it from that perspective.

Greg Dalton: So if people want to buy a carbon offset how should they think about them and be helpful because it's a very confusing world to try to buy offsets.

Kahlil Baker: The way I think about it is if you are gonna buy organic food, right or free range eggs. How do you know that the food that you’re buying is really organic or do those chickens really were free range. And so ultimately it’s gonna come down to trust, right. And so you can develop trust in many different ways. Ideally, know your farmer or know the activity that you’re helping to support the carbon offsetting to that you’re supporting. I mean if you don’t have that opportunity then we rely on things like standards or the reputation of the people doing it the people behind the project. So in the carbon industry like in the organic industry there’s certified organic there are different carbon certifications and like all certifications they’re imperfect, right. So an exotic timber plantation of an invasive species where people are displaced might be a really effective pump at sequestering carbon, you might be able to get that certified saying look we are really effective at removing carbon but that misses the point.

Greg Dalton: Right. I'd like to ask Zoe Cina-Sklar. Carbon offsets, I don't think you use them when you go home to Oregon you take the train, you know, should people avoid carbon offsets or should they be try to be smart when they buy them. What’s your view on them?

Zoe Cina-Sklar: So often and we talk about climate change we make it about the individual. We make it about the choices of whether each of us is going to drive a car or fly or buy organic. And there certainly is a broad problem with consumption in the world. And if you look at the drivers of climate change, if you look at the people and there are people whose names and addresses who are allowing this crisis to continue its fossil fuel CEOs it's cattle event, it’s huge cattle trading commodity traders in the Brazilian Amazon going deep into the rain forest. And those actors really need to be held accountable and so often the way offsets work is the transferring of costs and so it's meaning that people still can't breathe clean air it's meaning that we’re having climate disasters where people are losing their homes and losing their livelihoods. And it's meaning that indigenous communities who've been the best stewards of the land for millennia are sometimes getting displaced. And I totally trust that my fellow panelists here have really good programs that are working to avoid those tensions. But there is a history of indigenous people being told sign this contract receive money and they're already protecting their lands. Indigenous peoples are less than 5% of the world’s population but they are stewards for 80% of the world’s biodiversity. They’re incredible protectors and in their cosmovisions it's not necessarily about money. And I do think there is a need to be, I know there's a need to be transferring resources from the global north from those of us who are responsible to the global south. And I think that that needs to be happening in a more systemic way, not about you or me buying an offset and certainly not about a big oil company that's making it hard for people to breathe in Richmond, California buying an offset in Amazon.

Greg Dalton: You’re listening to a Climate One conversation about carbon offsets. Later we’ll hear more about California’s offsets from an official with the state’s air board. First, more from our roundtable about the challenges of paying for the privilege to pollute.

Pauline Kalunda: What do I need to do to incentivize these people to leave the forest as a forest, to make the integration of trees on a farm a profitable venture.

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton, and we’re talking about the carbon offsets market with Pauline Kalunda, Executive Director of Ecotrust in Uganda. Kahlil Baker, is Executive Director of Taking Root in Nicaragua. Pennie Opal Plant, cofounder of Idle No More Bay Area. And Zoe Cina-Sklar, a climate justice campaigner with Amazon Watch. Let’s pick up our roundtable conversation with a larger question to Zoe about markets – are they part of the solution or part of the problem when it comes to the climate crisis.

Zoe Cina-Sklar: I think they are a big part of the problem. When we look at how we've dealt with climate change that's far I would say dealt in big air quotation marks. We've seen a lot of markets and a lot of incremental change at best. We’re still seeing rising greenhouse gas emissions and we’re seeing a rise of climate catastrophe every year. And people are looking to the market and grasping for these market solutions in that moment. And I would say that that's we've tried that and it has not been working. And we have this really, really short window to take real action and often when you see policies that could step up to the crisis like the Green New Deal people say but it's gonna cost too much we can’t afford it. And I would say that the cost of inaction or delaying action is so much greater. And to Pennie’s point, redistribution must be part of that when we have billionaires who have those resources and people who don't have enough to meet their basic needs. There's a need for that money to move and if we don't see that movement and redistribution of money, I don't think we will be able to face the enormity of this crisis.

Greg Dalton: There are some billionaires coming forward, Ray Dalio and others saying tax us more, right. Some of them, not all of them but some people are coming forward saying, yeah, I should be. Kahlil Baker, your organization feeds into carbon markets, markets are faster, powerful. Can they be part of the solution?

Kahlil Baker: Yeah, I mean, I’m just hesitant when we use big terms like that. Like markets to me ultimately means we’re trading between people and people have done that for since beginning of when there’s been people. But within every exchange markets are made by rules and society makes those rules. And so we can direct, we’re not gonna get rid of exchange between people, right, that’s as fundamental as since humans have been creating civilization. So we need people we need politics we need pricing those we need democracies to shape markets to get them to where we want them to go.

Greg Dalton: Changing the rules of markets. There’s some really wonky things going on.

Kahlil Baker: Taxation and billionaires being taxed more we’re talking about redistribution, right. And the importance of distribution and inequality creates so many problems, it doesn’t inherently mean that we shouldn’t be financing activities that remove carbon from the atmosphere. And it doesn't mean that we shouldn’t put a price on pollution so that we can get to these aims.

Greg Dalton: Pennie Opal Plant.

Pennie Opal Plant: You know that’s the second time you brought that up Kahlil about how the carbon market reduces carbon. But I mean Pauline brought up that they had been, this has been happening for decades as we know, and carbon has increased. So can you talk about that little bit more like I'm curious how do you reconcile those two facts.

Kahlil Baker: Yeah, I mean I didn't explicitly say that this is fixing the problem or the problem has been fixed. We ultimately need to get to a point where it is really, really expensive to pollute so that people pollute a lot less. And there is evidence of where I live now in British Columbia where they put a tax on carbon. And academics have study this and they think that it has reduced the amount of emissions that would've happened otherwise. Emissions have still gone up, which is a horrible thing and so I think that price needs to be a lot higher. But what if it's not for pricing pollution for pricing the emission of carbon dioxide, what other mechanism do we think is going to be really, really effective doing that.

Pauline Kalunda: I also, I’m a bit should I say confused. I'm thinking that there is no silver bullet. There are things that are completely unacceptable with our own notes there is an opportunity to offset the things that are just completely unacceptable. Just like we have the judicial system whereby if you’re mad at someone, I mean you’d be thrown into the corridors or something like that. So you can’t say that because there is a way to punish evildoers then evil is on the rise. There’s got to be everything but also the offsetting system that we work in for example is purely voluntary. Where people sit down and determine their footprint and try all means to be able to reduce the footprint but whatever else are they cannot do without they offset. So you can’t say that simply because other people are taking that as an opportunity to whitewash themselves therefore the opportunity for others to have zero impact should also be taken away. So I'm thinking that there is a place for a market, but it is not the silver bullet. There are very many other things that need to be done in combination with the market.

Greg Dalton: Sure. I think a lot of people would acknowledge that they’re imperfect there needs to be a price on carbon. There needs to be lots of other things, reductions, etc. I'm wondering if, Zoe, offsets create a moral hazard sort of the illusion that oh okay I can throw some money and, you know, because I interview a lot of climate evangelists who dedicate their lives to climate and they fly all over the place and that's their number one carbon sin and they acknowledge it and they somehow justify it as well. I'm doing more good, my net balance is positive but they’re on airplanes all over the place which we all know is the most harmful thing we can do it harms the environment at a vulnerable elevation. So does this ultimately have to come down to a moral issue?

Zoe Cina-Sklar: I think there's a lot of pieces of the climate crisis that are a deeply moral issue. And I’d go back to what I said at the opening about the role of the individual versus the role of the system. So I’m a lot less worried about offsets from individuals than I am about Chevron offsetting. So to give a piece of how it's connected to my work a lot of oil from the Amazon about half of all the oil exports from the Amazon are refined here in California. And that's making it hard for people, for Pennie’s neighbors to bre athe and is causing climate crisis. And in one of the provinces where there's a lot of oil drilling in Ecuador in Pastaza the governor wants to join California's offset program. So we’re looking at a situation where Chevron could be paying the governor of Pastaza to keep polluting communities here in California while at the same time continuing oil drilling in his province. So we’re seeing that being a true moral hazard where there's these big corporate polluters getting let off the hook. And so I think this piece of the individual and the voluntary market is one piece and this piece of offsets as part of climate policies of states like California is another. And at the broader level with these offsets there's also just huge issues around efficacy and leakage. So the drivers of climate change are fossil fuel extraction and deforestation and those drivers are continuing and expanding. And unless we’re looking at those drivers we’re gonna see that offsets aren't even decreasing emissions at a global level. There’s a really interesting forthcoming study from, UC Berkeley researcher Barbara Haya looking at offsets in the California context. And she found that 82% of these offsets which are domestic offsets not international, that 82% of those offsets are not actually having an impact because of leakage. So one timber company is cutting down fewer trees and another timber company is turning around and cutting down more trees. So I think we have to be looking at those drivers and again looking at the broader system and who is buying these offsets. The International Aviation Association is really excited about offsets and the climate impact of that sector is a lot bigger than even the most frequent fire among us.

Greg Dalton: If you’re just joining us at Climate One we’re talking about carbon offsets with Zoe Cina-Sklar, a climate justice campaigner with Amazon Watch. Pennie Opal Plant, cofounder of Idle No More Bay Area. Kahlil Baker is Executive Director of Taking Root in Nicaragua and Pauline Kalunda, is Executive Director of Ecotrust in Uganda. It’s easy to say and I interview lots of people who other people should change. Republican should do this, China should do that company should do that, the state. And a lot of the great moral leaders of social movements have said change begins with the individual and then emanates outward. And then it’s easy to blame a company, you know, a Chevron or a Shell but we smoke their crack. Now most people don't have choices. So we are complicit and that's where it gets really and this is a sincere, I'm very conflicted and looking to Pennie for how you sort that out.

Pennie Opal Plant: It’s hand-in-hand. The solutions have to come from every sector from individual. I recently made the decision I wasn’t going to fly anymore. So my family is going to Hawaii without me this summer.

Greg Dalton: You’re the moral leader I’ve been looking for.

Pennie Opal Plant: You know, I think that’s an individual choice. I have no judgment on anyone else's, you know, how they are living their life. But for me, I realized that the way that I think and the way that I feel has to be in alignment and for me that alignment included not flying anymore. And I just want to say that I'm really disappointed in Amtrak because I have a conference to go to in fossil fuel frontline fossil and fuel and oil, sorry, I’m still a little sick, conference in Oklahoma. And I was gonna take Amtrak and it was gonna take 49 hours to get there. So I have a hybrid I couldn't get there on an electric vehicle to Oklahoma but I can drive my hybrid there which dramatically reduce my carbon. But I think that, you know, when we look at how do as individuals but how do we do this well it include like how do we make Amtrak better. How are we gonna move people around this continent in a way that isn't carbon, creating more carbon. What do we do as individuals but also how do we shift the entire system so that these polluting corporations whose shareholders, not all of them support them, you know, there are shareholders that are not in alignment with what these corporations are doing. And so how do we shift this whole system again it’s such a critical time and we might not make it. So how do we work together to figure this out to move forward in the best way. It’s now. Our future generation is not going to be able to make those decisions, it's on us.

Greg Dalton: And you made that decision about not flying, not because of the impact because a lot of people would say, Pennie, you’re not flying you’re not gonna accomplish anything but it's because so you can live with yourself.

Pennie Opal Plant: Absolutely. And we all have to do that.

Zoe Cina-Sklar: And just to add to that a little bit. I imagine many of our listeners are here in the United States and as someone in the United States who has the privilege to be making some of those choices. I think there is a huge power in making those individual choices. I don't want to discount that so I think saying I’m going to make the choices I can make because I have the means to do so is a great thing to do. And the amount of consumption in the U.S. is disgusting and it's just about tying that to the broader crisis into the actors who hold the fundamental responsibility more than the individuals.

Greg Dalton: Pauline, should I feel guilty for my lifestyle?

Pauline Kalunda: I don’t know your lifestyle.

[Laughter]

What I know is that where I come from I feel like I just need to recruit everybody to make sure the forests remain forests and the farmlands have as many trees as possible. So whereas where you're coming from the kind of decision that you kind of take is from the consumers perspective where it come from it’s from the producer's perspective. So yes there are many, many pieces to these but yes where I come from is what do I need to do to incentivize these people to leave the forest as a forest. What do I need to do to incentivize these people to make the integration of trees on a farm a profitable venture. And if selling its service because while they go about increasing trees on their land they provide these services the carbon sequestration service the climate service. So if commoditizing that service adds on that income stream that makes an agroforestry system, a profitable venture that makes it to break even then that's what I do. That's the contribution I make.

Greg Dalton: So as we wrap up here I want to get to bridging the individual and the systemic. Because we know individual action isn't enough and yet we have a hard time acting at a systemic level if we’re not in a position of power. So how can, you know, Pennie, how can an individual affect the system, because systems are big and they don't have simple buttons we can just press?

Pennie Opal Plant: And they haven't been successful at keeping us safe. I mean I’m astounded at the decades that elected officials have known about the climate crisis and have done nothing including the United Nations. So, it hurts, it’s painful. And because we know that they are locked into a system that isn't working, I encourage and invite every human being in the entire world to rise up with others who are rising up. Because I think it's going to take about a billion of us rising up together at the same time around the world continuously on specific days to force policymakers to make the difficult decisions that need to be made right now. If there are millions of us in the streets, stopping commerce, stopping travel, stopping the wealthiest people’s rivers of income, then things will change.

Greg Dalton: You're listening to a conversation about carbon offsets. This is Climate One. Coming up, we’ll hear different perspectives on the offset credit program in California, which is a growing part of the state’s efforts to reduce carbon emissions.

Rajinder Sahota: We learned from the mistakes in the international programs and decided that we didn't want to replicate many of those features into our own program.

Barbara Haya: We’re allowing businesses in California like Chevron and Phillips and other large emitters to continue to emit because they're buying these credits that many of which don't actually represent real emissions reductions.

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton. Barbara Haya is a Research Fellow at the UC Berkeley Center for Environmental Public Policy. She studies California’s carbon offset program, and is critical of its results.

Barbara Haya: It's not performing as advertised. It's generating many fewer reductions than credits it generates.

Greg Dalton: Rajinder Sahota, who leads the Cap and Trade program for the California Air Resources Board, disagrees.

Rajinder Sahota: We don't have a deduction line for offsets. They are a compliance currency under the cap and trade program.

Greg Dalton: We’ll hear more from Rajinder in just a bit. First, Barbara Haya explains what her research has shown about the role of offsets in California’s carbon reduction plans.

Barbara Haya: The majority of our reductions are coming from direct regulatory measures. So far the cap and trade program has had very little effect. Our cap and trade program is expected to include something like 40% of our reductions.

Greg Dalton: In the future.

Barbara Haya: In the future.

Greg Dalton: Direct regulation now you're talking about mandates on companies so a hundred percent renewable energy and you got to be cleaner. Those sorts of direct mandates are the thrust of California's program right now. Cap and trade, which has gotten a lot of the attention of California’s program isn't doing much now, but it will be up to 40% in the future.

Barbara Haya: Right. And going forward offsets can be used to meet half of those reductions. So the quality of our offset program really strongly affects the quality and the effectiveness of our cap and trade program.

Greg Dalton: And what grade would you give California's offsets?

Barbara Haya: So California structured its offset program to remedy the impacts of the UN's offset program. It has not fully done that. So a report that I came out two months ago looked at the Forest Offset Protocol which is generating 80% of California's offset credits, huge number of credits. And I found that four in five of those credits don't represent real emissions reductions because of lenient methods used to estimate emissions reductions from these projects.

Greg Dalton: And let's just explain forest offset credits. This is where a landowner who own some forest land can say keep the trees standing and get paid for doing something or not doing something that would release carbon into the atmosphere, basically get paid for managing their forest in a different way that has carbon benefits?

Barbara Haya: Yes. So what that means is that forest landowners who are already managing their lands in a sustainable way are now allowed to earn offset credits for the current management practice. And we don't know how much the Forest Protocol is really influencing landowner management decisions and how much we are just paying for business as usual land management.

Greg Dalton: This whole question of additionality, are people changing their behavior because of these offset payments it's really hard to measure, right.

Barbara Haya: It’s really hard to measure. But there's a second problem with our forest offset protocol. And this is the study that I released two months ago and that's this issue of leakage. That is if you conserve forest by reducing the amount of timber you harvest, but you don’t change the demand for timber products, that timber production is just gonna come from somewhere else. So you preserve forest carbon in one place and then you deplete it --

Greg Dalton: You just pushed it somewhere else, yeah.

Barbara Haya: You just deplete it somewhere else. The protocol includes very weak methods for accounting for this leakage.

Greg Dalton: People talk about squeezing a balloon, right, the air just goes somewhere else. So California, overall the headline here is the California's offset program and the cap and trade program is not performing as advertised?

Barbara Haya: It's not performing as advertised. It's generating many fewer reductions than credits it generates. And it's important to remember that for every credit generated an emitter in California is allowed to emit more because they purchase this credit. So we’re trading we’re allowing businesses in California like Chevron and Phillips and other large emitters to continue to emit because they're buying these credits that many of which don't actually represent real emissions reductions.

Greg Dalton: Would you say that California's overstating its climate leadership?

Barbara Haya: I would say that California is doing a tremendous amount to rein in our greenhouse gas emissions to our regulatory measures. California's cap and trade program is not working. We structured it to keep prices too low to really drive emissions reductions and offsets is one piece of that. What worries me so much about California's cap and trade program is that we’re designing it as a model for other jurisdictions. Oregon is considering a cap and trade and offset program much like ours.

Greg Dalton: Linking with Canada.

Barbara Haya: Yeah. And what really worries me is that we’re exporting a policy that reduces more emissions on paper many more emissions on paper than it does in practice. So one thing our offset program is doing is keeping prices low without actually reducing emissions.

Greg Dalton: Which for an elected politician and for consumers, keeping the price of compliance low is a good thing. No one wants the price of gasoline or electric bills to go up to fight climate. So keeping the cost low is an agreed goal, right, for anyone who's in elected office responsible to citizens who don't want to pay more at the pump or the meter.

Barbara Haya: But when we keep prices low iIt doesn't drive change and there's one thing to set a cap and not meet it. There’s another thing to set a cap, not meet it, but to say, you did and that's really dangerous.

Greg Dalton: Do you think California's cap and trade program should be fixed or ditched?

Barbara Haya: I think it is possible to have an offset program that make sense. And what we would need to do is to have a much smaller offset program, recognizing the challenges the uncertainty in what we’re actually achieving and the risks that we’re not achieving what we say we are. We can have a program that has much tighter rules that more conservatively estimates the emissions reduced and more carefully chooses the project types that are allowed to participate. I think most important is understanding what offsets are and what offsets are not. What offsets are is a way for emitters to pay into a program that reduces some hard to measure amount of emissions reductions in lieu of reducing their own emissions. So I think if we acknowledge that it creates an opening for us to ask, well, what is worth that trade, what project types, what activities do we see as worthwhile of allowing the emissions above the cap here in California. And I think if we acknowledge what offsets are and what offsets aren’t we can have a more honest discussion about what types of flexibility do we want to provide to businesses that will weaken or could weaken the effectiveness of a global warming law it might be worthwhile to create that flexibility on the edge.

Greg Dalton: Yeah. I think a lot of people are well-intentioned, even across this whether it's in the personal level or the systems level people want to believe they’re doing good and aren’t doing as much good as they think they are.

Barbara Haya: Right. I mean here's one I think really a fruitful use for offsets. So in the voluntary market for example, University of California has a carbon neutrality initiative where you see it’s committed to being carbon neutral by 2025. Offsets allowed UC to take this very, very aggressive climate target and try to meet it even though it's near impossible for us to actually meet with all on-site reductions. So offsets created the ability for us to take this very deep target try to meet it and then procure these offsets as we continue to reduce our emissions over time towards real zero.

Greg Dalton: So offsets can fuel climate ambition, even if they’re not a hundred percent foolproof today.

Barbara Haya: Very well put. And I think that there's also a very, there's a difference between California taking a climate target and Oregon, Oregon taking a climate target that's in line with what those jurisdictions should be doing to reduce their own emissions and carbon neutrality initiative goal which is very ambitious and voluntary. So I think offsets can really play a role as you said in allowing for these targets to be taken and then providing the flexibility to meet them.

Greg Dalton: Barbara Haya, a Research Fellow at the UC Berkeley Center for Environmental Public Policy, on California’s carbon offsets program. You’re listening to Climate One. Rajinder Sahota heads up the Cap and Trade program for the California Air Resources Board. I asked her to respond to critics like Barbara Haya who claim that the offset program is not working as advertised.

Rajinder Sahota: So the original offsets were part of the international community under the Kyoto Protocol and they were under the clean development mechanism. And yes, there were issues that played out in the 90s and early 2000. In California we didn’t actually start to design our cap and trade program until 2009. And by that time enough stories had come out about the international offsets to where we realized that we wanted a different model which actually is more robust, has a more objective way to quantify and identify offsets and includes a rigorous, third-party verification component. Now, that hasn't stopped people from trying to equate some of the bad stories that came out with the international offsets with ours, but the design of our program is very, very different and it's much more robust than what was in the international community. In fact, our program has actually been litigated because it was signaled by some environmental groups early on that our offsets were just as flawed as the international offsets. But in the litigation and the lawsuit, ARB the state of California was able to demonstrate that our program was sufficiently different sufficiently robust that we met the requirements of AB 32 the statute that calls for the climate program and sets the climate targets. And that implementing the program in the way that we had designed the program would meet the objectives of having real, quantifiable, verifiable and permanent offsets in our system.

Greg Dalton: A lot of the California offsets are focused on forests. As I understand it, to be eligible for an offset, forest owner has to have a forest that sequesters more than the average amount of carbon. So by definition, you know, half of the forests hold more than the average amount of carbon. So that raises the question whether people, forest owners can get paid for doing nothing or doing what they are already doing. Are there safeguards to ensure the forest owners can’t just get paid for doing nothing?

Rajinder Sahota: No. And if I am understanding your question correctly, you may be picking up on some of the speaking points where a research fellow at Berkeley has actually taken aim at our offset program and especially the forest program. And what we do is we look at the growth in a forest that is owned by an individual. We try to understand if that growth is more than what should be available in that forest under existing regulations and under existing natural growth patterns. So it's not an average it's better than what is there in the absence of offset program and we only credit above that amount. And each year that forest grows and each year you get an incremental more amount of credits in the system. I think the concern that she is raising is, is that she doesn't believe that any growth that exists on day one in a forest should be creditable. But people have been taking action to do better than what is required by regulation and what would be the natural growth cycle in the region. And they should be rewarded for that and AB 32 explicitly calls for us to reward early action and doing better than laws and regulations, and business as usual is defined as being additional and has been litigated in the lawsuit.

Greg Dalton: That's Barbara Haya who we spoke to earlier in this podcast and radio show. Good headlines this week. California ahead of its goal to reduce carbon emissions by 2020 to the levels of 1990. So California is ahead of its overall ambition to reduce carbon emissions. Is it true that in the next decade that cap and trade and carbon offsets will play a bigger role than they have so far? Because a lot of the gain so far been because of clean electricity from renewable sources California moving ahead very strongly there. Will offsets and forests be more important in the next decade than they were in the last decade?

Rajinder Sahota: So when we adopted the 2017 scoping plan what we’re looking at is a reduction of about 40% from 2020 to 2030. The rate of decline doubles in terms of how many reductions we have to get the next decade compared to this decade. So it is a much steeper decline to that target. The cap and trade program is one of the policies that we identified along with the renewable electricity standards the low carbon fuel standard advance clean cars and several other standards here at the state of California to help achieve that 2030 target. The cap and trade program is required to deliver about 35% of the reductions necessary over the next decade. The program itself includes offsets, but that offsets are not in any way counted towards our target in 2030. And I can explain that a little bit more. When we put out the inventory that you saw this week what you saw was the actual emissions from the tailpipes the actual emissions from the smokestacks in the state of California and the emissions associated with imported power that was consumed in California. We don't have a deduction line for offsets. The offsets don't play a specific line item in reducing emissions towards our target. They are in compliance currency under the cap and trade program. And so I’ve always been a little confused or a little frustrated that again I know Ms. Haya is one of the people that believes this or states this is that offsets will somehow count towards our inventory and tracking progress towards the AB 32 and SB 32 targets. That's factually incorrect. Anyone can look at the inventory on our page and see that we never count offsets as any kind of deduction. We always count the actual emissions into the atmosphere that are occurring in California and associated with the imported power.

Greg Dalton: One of the critiques of cap and trade, which is associated with offsets is that the price is too low to drive change. What do you say to critics of cap and trade who say the price is too low?

Rajinder Sahota: I think what you see is when you have an economy wide program like cap and trade we already know that companies are factoring into their long-term investments for updating their facilities and making business decisions to count for the price of carbon. And so it's never been clear to me what evidence has been put forth out there that the prices are too low to actually get people that are regulated to consider carbon on their books when they're thinking about long-term financial assets and liabilities on their books because that's not what we’re hearing and that's not what we're seeing. So I would disagree that the prices are too low. I would also note that the prices reflect that we have complementary policy. So we have the low carbon fuel standard we have renewable portfolio standard we have other measures that are picking up some of that cost in them and all of the burden is not falling to cap and trade. I mean often you hear that you need something upwards of $100 to get reductions from an emissions trading system like cap and trade. But when you start to add in other measures and other policies, the price naturally comes down because now they are also forcing specific action on a specific scale that the cap and trade program doesn’t have to itself provide.

Greg Dalton: So for example, I interviewed several oil companies who they say they have a shadow price of $70-$80 much higher than California's. And you would say that's okay because California has other tools that price is just one of the tools driving emissions.

Rajinder Sahota: That’s correct. I mean when they said they have a shadow price of $70-$80. The question is was that shadow price what they think their carbon liability is because of cap and trade or does it also include the low carbon fuel standard which requires that if they are not meeting the benchmark in that in any given year they're paying upwards of $200 and another program at ARB to reduce their carbon intensity.

Greg Dalton: A defense of California’s carbon offsets program from Rajinder Sahota, who heads up the Cap and Trade program for the California Air Resources Board. Derek Broekhoff is a Senior Scientist at the Stockholm Environmental Institute, a nonprofit research and policy organization. He offers us a final thought on why buying offsets isn’t – and perhaps shouldn’t be – as simple as buying a toothbrush.

Derik Broekhoff: Number one, carbon offsets are not a simple commodity. And so anyone approaching them or contemplating offset purchases should do so with their eyes wide open. It's not the same kind of thing as going to purchase a toothbrush. I'd say you have to do your homework. And number two, I would say there's been a bit of a paradigm shift in the last few years. The advice for voluntary offset has always been reduce your own emissions first. But I would go even further to say carbon offset should always only be the icing on the cake not the cake itself. And the attitude used to be okay I can get carbon offsets for $5 or $10 a ton so I'm going to reduce my own emissions up to where the cost for me is maybe $5 or $10 a ton and then I’ll just offset the rest. And I think we've reached a point where that kind of approach, although it sounds cost-effective in the short run is not workable in the long run. You look at kind of the big picture and where we need to be n terms of global emissions in 10, 20, 30 years. We, as a society all sectors of the economy need to start making really significant investments in reducing emissions. And the costs of doing so is gonna be well above what carbon offsets are going for right now. So general recommendation is reduce as much as you can, you know, as you can feasibly do and then turn to offsets as a kind of additional even charitable contribution that you can make towards both helping the climate and making the world a better place.

Greg Dalton: Derek Broekhoff, Senior Scientist at the Stockholm Environmental Institute, helping us thread the needle on the upsides and downsides of carbon offsets. To hear more Climate One conversations, subscribe to our podcast at our website: climateone.org, where you’ll also find photos, video clips and more. Please help us get people to talk more about climate by giving us a review wherever you get your podcasts.

Greg Dalton: Kelli Pennington directs our audience engagement. Tyler Reed is our producer. Sara-Katherine Coxon is the strategy and content manager. The audio engineers are Mark Kirchner, Justin Norton, and Arnav Gupta. Devon Strolovitch edited the program. Dr. Gloria Duffy is CEO of The Commonwealth Club of California, where our program originates. [pause] I’m Greg Dalton.

Play

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Otto Pilot — Thu, 14 Feb 2019 17:00:49 +0000

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Just ten years ago, an entire state running on 100% renewable electricity seemed fanciful. But this dreamy vision became reality when, with the backing of big utilities, California committed to 100% use of zero-carbon electricity by 2045. A statewide pledge to go carbon-neutral by 2045 raised the stakes even higher. So what will it take for California to achieve such a feat? Will Governor Gavin Newsom embrace climate initiatives started by former Governor Jerry Brown? What's next in California’s surprise gambit to take the world’s fifth largest economy to net zero?

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John Hofmeister

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Mary Nichols

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Otto Pilot — Fri, 16 Mar 2018 00:01:00 +0000

Is Silicon Valley as Green as it Claims?

03/07/2018

Tech companies are cleaning up their data centers and building shiny new buildings that sip water and energy. But are they really as green as they claim? Many companies issued statements in support of the Paris climate agreement, but their actions will be more important than their statements. According to guest Aron Cramer from BSR, the way we measure how green companies are needs an update. “Companies should be judged not only on what they do, which is more traditional,” Cramer says, “but also what they enable through their partnerships and what kinds of policy frameworks they seek to create.”

Lynelle Cameron, Vice President of Sustainability at Autodesk
Aron Cramer, President and CEO, Business for Social Responsibility
Patrick Flynn, Senior Director of Sustainability, Salesforce

This program was recorded live at The Commonwealth Club in San Francisco on March 6, 2018.

Guests

Lynelle Cameron

President, CEO, Autodesk Foundation; VP of Sustainability, Autodesk

Aron Cramer

President and CEO, BSR

Patrick Flynn

Senior Director of Sustainability, Salesforce

Announcer: This is Climate One, changing the conversation about energy, economy and the environment.

Patrick Flynn: We know that sustainable business is better business, that sustainable businesses do more with less – less energy, less water, less waste, less materials.

Announcer: Tech companies are cleaning up their data centers and moving into shiny new buildings with small carbon footprints. But is Silicon Valley really as green it claims?

Aaron Cramer: Companies should be judged not only on what they do, but also what they enable through their partnerships and what kinds of policy frameworks they seek to create.

Announcer: After all, those same tech companies are masters of marketing hype and manipulating human behavior.

Lynelle Cameron: We have an incredible opportunity but also responsibility to put the right tools on the market for people to be able to understand the energy or the materials impact of everything.

Announcer: Green capitalism in Silicon Valley. Up next on Climate One.

Announcer: Is Silicon Valley really as green as it claims? Welcome to Climate One; I’m Devon Strolovitch. On today’s show, host Greg Dalton asks how Silicon Valley tech companies are changing to reduce their carbon footprints.

When President Trump announced in 2017 that the U.S. would eventually exit the Paris climate accord, the CEOs of Apple, Google, Facebook and Microsoft quickly criticized the move. They were responding to pressures from competitors, customers and their employees. Many tech companies have strong and long-standing commitments to cleaner power. Yet those same companies are masters of marketing hype and manipulating human behavior. Are they really as green as they claim?

To explore Silicon Valley's role in cleaning up the global economy, Greg welcomes three guests. Aron Cramer is CEO of Business for Social Responsibility, a consulting firm. Patrick Flynn is Senior Director of Sustainability at Salesforce, a cloud computing company. And Lynelle Cameron is Vice President of Sustainability at Autodesk, which produces software used in design and building.

Here’s our conversation about the carbon footprint of the tech economy.

Greg Dalton: Lynelle, let’s begin with you. What's the business case for caring about climate and energy. Why does tech companies care, what’s the business reason?

Lynelle Cameron: Well at Autodesk and maybe let me just first say we’re in the business of. So Autodesk makes design in engineering software that's used by people to build quite literally anything on the planet. So if you think about the phone in your pocket. Think about the car that you came here on or public transit, the building that we’re in, even the movies that entertain you. These are all things that Autodesk customers design and make. And so when we think about energy and climate and the future, we have an incredible opportunity but also responsibility to put the right tools on the market for people to be able to understand the energy or the materials impact of everything. Whether it's a manufacturing process or building an entire city and that's what we’re in the business of is actually helping people design and make more things but make them better and make them with less negative impact.

Greg Dalton: And one of the earliest industries on board in the whole sustainability thing was architecture. Because that’s -- and a lot there using Autodesk software because they clearly saw early the return on the investment. The reason like greener buildings make business sense.

Lynelle Cameron: Absolutely. And that’s probably the most tangible thing and probably the earliest area that we’ve seen dramatic change here is in green buildings. And for Autodesk, when we started this journey 10 years ago we didn’t actually have any LEED certified buildings. So that was the first step was learning by example and really thinking about our own building footprints. And the journey has been great along the way. We actually see Autodesk as a living laboratory. So we need to test out things that our customers are going to be faced with. And our most recent facility is up in Toronto. We moved into this building a year ago and it's the first building anywhere that's been designed using a technology called generative design which you probably heard about in a manufacturing context, but, you know, you optimize for energy and materials and daylighting and travel path. But we actually surveyed all the inhabitants, the employees, to ask them how often do you like to go get coffee? How does sound impact your work? Who do you need to meet with? We plug all that in to the computer and it generates and explores thousands, millions of options in the computing environment and then gives us the optimal designs for what we were designing for. So if anyone has a chance to go to Toronto, it’s an incredible space. Now we’re testing another one of our tools on seeing how the building performs. Building operations, which is another new frontier for us that we’re learning by doing.

Greg Dalton: And hopefully no one runs into glass walls when they are on the way to get coffee. Patrick Flynn, there was an all hands meeting at one point that’s kind of the origin of the sustainability story at Salesforce. Tell us about that story.

Patrick Flynn: Yeah, you know Salesforce is a company that really thinks about trust and transparency as its number one value. So it’s very typical to have an all hands meeting where everybody is invited where anybody can stand up and ask a question to the CEO. And a woman name Sue Amar stood up and asked the CEO “Why don't we have a program for environmental sustainability” and he said “We do now and you're gonna run it.” And from there, was born our sustainability program at Salesforce.

Greg Dalton: And tell us briefly, you have a new tower in San Francisco. The tallest tower in the Western United States something like that. And one of the things that it has we’ll get right to this, you know, it has blackwater recycling, which is unheard of or very rare. So tell us.

Patrick Flynn: Yeah, we’re incredibly proud of the Salesforce tower. So, it’s the tallest office building west of the Mississippi. And it's the most sustainable building in our portfolio. I’ll get to blackwater but first a few things. The base building itself is LEED Platinum certified it's got a fantastically efficient HVAC system that uses outdoor air to properly ventilate the largest underfloor air distribution system which is much more efficient than overhead ductwork. What Salesforce chose to do is fit out that office space with LEED Platinum commercial interiors. And we expect that LEED Platinum commercial interiors project will be the highest rated LEED v4 project for commercial interiors when it's complete. And then, yeah, about a month ago we announced that we would be installing a blackwater system. So blackwater is a water recycling system. It's the same sort of technology that happens in nature that allows rainwater to permeate through and be broken down by the sediment and bacteria and enter the river clean but it's housed within the basement of a building. Now, the impact is dramatic because what it does is it reduces the water footprint of Salesforce tower by an estimated 78%. 7.8 million gallons of water avoided and what that is equivalent to 16,000 California residents’ annual water consumption. So we felt like, you know, a good sustainability strategy is flexible to adapt to the circumstances, whether that's the circumstances of the business or in this case geographic. We know severe drought will return to this region and we felt like it was a great way to respond to the water needs of this area and even more important a great way to demonstrate that blackwater is a fantastic technology that should be deployed and it ends up being the largest commercial blackwater system in the United States in a high-rise building.

Greg Dalton: Must cost a lot of money. You’re doing that partly to hedge against future risk and future costs increase, as well as some PR value, is that fair?

Patrick Flynn: Well, you know, the system eventually pays for itself. The primary reason we do it is because it's the right thing to do. One interesting nuance is we’ve done, Salesforce isn't the sole occupant of the Salesforce Tower. But what we've done is put that in place in the building for the benefit of all tower occupants. So we've gone above and beyond to provide that to others.

Greg Dalton: So everybody in the tower can drink toilet to tap from Salesforce, yeah.

Patrick Flynn: Well, distinction. So going an extra level of detail here is the water that gets treated ends up going to nonpotable destination.

Greg Dalton: Okay.

Patrick Flynn: So toilet flushing, plant irrigation, cooling tower makes up things like that.

Greg Dalton: Greenpeace publishes an annual click and clean report that evaluates and grades major tech companies and their energy footprint. Here’s Gary Cook, who leads that campaign.

[Start Clip]

Gary Cook: So what we focused on at click and clean is extent the major IT companies are using renewable energy and are otherwise trying to reduce their climate footprint. When we started this campaign in 2010 we're initially focusing on companies like Facebook and Apple who are building their data centers and places that were basically increasing demand for coal. And so the challenge at the time was like you guys are going really quickly, you’re going the wrong places, you have options to grow with renewables. You should commit as a company to grow but make smarter decisions about how you grow, where you build your data centers and start traveling on that path. And now we have over 20 IT companies who have made a long-term commitment to be 100% renewable. Salesforce has been, they’re one of the first companies who weren’t building their own data centers to make a long-term commitment to be renewably powered. They’re making progress. They still have a ways to go. They were important trailblazer in the sense that they were customer and showed that the customers can have a big impact on, they have agency to change what’s powering their operations. And so you saw as a result, other companies like Autodesk, like Box and others also begin to follow suit. They made commitments, signaling to market that hey, renewable powers were important to us. We believe in climate change and we want to be having our operations powered with more renewable energy and not increasing demand for more coal.

[End Clip]

Greg Dalton: That’s Gary Cook of Greenpeace. So Aron Cramer, let’s have you respond to that. It’s like, progress they could do more is that, you know, generally your view that they could go faster, doing good things, but they could go faster?

Aron Cramer: So, I think all of us can. And I would say less they and more we because we’re going through a fundamental transition in our energy system. It's not going fast enough there's been amazing progress. Some of the examples that we’re hearing about tonight I'm sure we'll talk about. And we know that we’re not on a trajectory to keep warming at or below 2°C. So more needs to be done by all of us and I think there are a lot of ways that's happening. Some of it is for business reasons that are market signals are very, very powerful, they’re beginning to move. Clean energy is becoming much more affordable. Some of it could be about consumer demand. We’ve got two B2B companies primarily here we should talk about the role of consumers who are enabled through tools developed here in Silicon Valley that sometimes create more consumption. That means more energy consumption. That's an issue we need to think about. And some of it comes from pressure and some of it comes from public policy. So I think it's clear that if you go back 10 years. There are things that are happening now that were on the fringes of the debate 10 years ago. We’ve got companies up here committed to 100% renewable energy there are companies that are committed to 100% electric vehicles over the next several years. Those ideas would have been considered fanciful 10 years ago, they’re now very much in the mainstream and the momentum is really strong. So our biggest enemy here is time. Are we moving fast enough? So far, the answer is no we’re not.

Greg Dalton: Let’s look at some specific companies from Greenpeace who gets an A, Silicon Valley, Apple, Google, Facebook. B, Adobe and Salesforce, who gets a C for their energy consumption, Amazon, HP and IBM. Who gets a D, Oracle and HBO. Who gets an F, Hulu, Pandora and this one hurts NPR. So Aron Cramer, you know, some of those are consumer facing, you deal with lots of companies I don’t expect you to address specifically this report that you aren’t part of but what makes, you know, used to go inside, what makes the difference between an A and F, is it leadership, is it consumer pressure, is it legacy?

Aron Cramer: So I’m gonna consider that score in the next pledge drive I hear on the radio. So here's my take on it. And I haven't analyzed the Greenpeace scores. But the way at BSR we think about this and we think about what a company can do actions that fall into three categories. Act, enable and influence. So first of all what are you doing, you know, with the tools you're creating with the buildings you're producing the things that you generate with your products and services that you have a lot more control over. There's an opportunity for leadership and very often there's a payback. Second is enabling because we all live within ecosystems. So, you know, what the Salesforce Tower is demonstrating here in the city of San Francisco is fantastic. How can that be extended to other new builders, a lot of building going on in the city. So how can that happen? How are you helping your customers become more sustainable? So enabling so much happens through value chains. We have to think about that. And the final bit is influence. And that's actually good news story because over the last several years a lot of companies, including those up here on the stage have been very vocal saying, we need public policies that promote the right kind of energy system. And we saw the business sector step up at Paris in 2015. We saw the business sector step up last year through the We Are Still in campaign saying that the United States should not withdraw from the Paris agreement. And that's a little bit new as well. So I think companies should be judged not only on what they do, which is more traditional, but also what they enable through their partnerships and what kinds of policy frameworks they seek to create.

Announcer: You’re listening to a Climate One conversation about the carbon footprint and the tech economy. Coming up, Greg Dalton asks how Silicon Valley is getting more climate-conscious by moving downtown.

Patrick Flynn: Rather than go out into the suburbs and build a campus, we've chosen to build our offices in city centers. So you get the benefit of mass transit. You get the benefit of the efficiencies of city life, and you've got the opportunity to support local businesses with your lunch decision.

Announcer: That’s up next, when Climate One continues.

Announcer: We continue now with Climate One. Greg Dalton is talking about Silicon Valley’s carbon footprint with Lynelle Cameron, Vice President of Sustainability at Autodesk; Aron Cramer, CEO of Business for Social Responsibility; and Patrick Flynn, Senior Director of Sustainability at Salesforce.

Here’s your host, Greg Dalton.

Greg Dalton: Lynelle Cameron, one of the critiques from U.S. senators who’ve been on this program is that Silicon Valley does lots of great things in their operations and branding, but when it comes to policy engagement, their lobbyists never bring up climate. They talk about immigration. They talk about visas other things, taxes and visas, but they don't want to touch climate because it’s controversial. Should Silicon Valley go to bat more for climate change in Washington?

Lynelle Cameron: So I would actually disagree with the premise. And I think when we see, look at the Paris agreement several years ago we saw private-sector coming together like never before to help actually negotiate that agreement which I think was really, really optimistic. We also saw then with the withdrawal from Paris. This incredible rise of a collective voice from the private sector thanks to BSR and series and many of these other groups and I think companies increasingly want to put their voices together on climate and advocate as a group. But I will also say Greg one of the other thoughts is the language matters. And for some reason the word climate is a lightning rod for many people, especially this company but not only, and I think back to 10 years ago, we were kind of in the same place on sustainability, right. There is a lot more comfort talking about citizenship, corporate social responsibility, but this idea of sustainability and a competitive advantage from a topline perspective, people weren’t comfortable. I know my previous role I wasn't allowed to use the word sustainability initially. I named my group Environmental Strategy and Solutions, two s’s and I’d flip one of them as soon as the company get comfortable with this idea of sustainability. And I think we’re starting to see that with climate as well. We know what we need to do. In the private sector we’re seeing that more and more leading with climate and using the word climate. Even Al Gore is talking about climate without talking --

Greg Dalton: About climate. Sure. I’ve interviewed U.S. senators, Democratic senators who said their Republican colleagues say I can support you, just don't put that climate word on the bill. I can't vote for it if there are climate words in the bill. Patrick Flynn, Salesforce has been quite outspoken on certain social issues in Indiana when there were some marriage equality things that really, you know, punch back pretty hard. But those issues, immigration, you know, marriage equality, those are more personal to people, climate is abstract. And it's not personal, it’s not deemed to be personal. Your thoughts on where climate change fits in terms of Salesforce’s political priorities.

Patrick Flynn: I think everybody has a personal connection to climate and to the environment when you ask them. I think the best thing going for Salesforce is cultural in this journey. And you spoke about our, speaking up in regards to discriminatory legislature. The company was founded with philanthropy integrated from day one, 1% of product, 1% of profit, 1% of employee time. To me that was instrumental in creating a culture that really wants to do well and do good. And one thing we think about is listening to all stakeholders, so customers, employees, communities and the environment as a key stakeholder. And when one of those is in need of our help in need of our voice, we respond. And so I think we do think about climate as an important place for the company can speak up. Just last week I was on the steps of City Hall at a rally in support of the clean power plan. So we do think there are places where we can use our company voice for the environment as one of our critical stakeholders.

Greg Dalton: Aron Cramer, a lot of corporations fossil fuel companies and others and pretty much every economist on the planet says there ought to be some kind of price on carbon pollution. And Rob Walton, chairman of Walmart, elders of the Republican Party, George Shultz, Hank Paulson have all supported this. We just went through a once in a generation tax reform. Nobody spoke up for a price on carbon. Is that true, was there any company who’s saying hey, this is a chance to put a price on carbon we’re doing this huge once in a generation deal. Did any company stand up for something that many corporate leaders profess they support?

Aron Cramer: There may have been some but it was very much at the margins. And I would agree with you, I think is a massive lost opportunity because while climate may seem abstract to people, there are actually elements of it that aren't. So Governor Jay Inslee of Washington had a great quote the other day saying “Climate used to be a graph or a chart. Now it's the flood in my backyard.” And that is something that people understand and we’re seeing. We saw it in Boston last week and not to mention Harvey, et cetera, et cetera. There are a lot of examples unfortunately. So I think there was an opportunity here that was lost. And I would agree with the premise of your question and I think unfortunately I think the business community has stood up over the last well, last several years, last 16 months, in particular in a whole range of issues, But I think the opportunity to reduce corporate taxes and to reduce regulation was too much to be avoided and most companies decided to focus on the shorter term than these other questions. You know there are all sorts of models out there like the so-called feebate system where you've got a carbon tax and monies returned to people. I think it could be sold because I think you can construct something that says, you’re gonna pay a little more at the gas pump, but you’re gonna get a check every month or you’re gonna have your income taxes reduced. And so there's a way to do it and I think we missed a massive opportunity.

Greg Dalton: Lynelle Cameron.

Lynelle Cameron: Well I was just gonna add, and I think you're right, you’re both right. And companies are talking about price on carbon. Certainly setting prices themselves. We have a price, you probably have a price as well.

Greg Dalton: An internal price which means if you wanna go fly somewhere you gotta pay the carbon pollution price of that plane ticket, right.

Lynelle Cameron: Yeah. We have an internal price on carbon that helps us figure out how to use a market system internally if you will for carbon. But I do, you know, I know our team in the DC area is definitely having conversations about price on carbon and that conversation is still young, but it's happening, which is encouraging.

Greg Dalton: Aron Cramer mentioned adaptation, responding to -- Lynelle Cameron, your company helps people design this future. We’re talking about a future where the water line, the coast where most people live on the coasts that waterline is going to change in people's lifetime. So one person said here recently it's gonna be permanently temporary. That is we’re gonna have to build buildings that maybe have to move up an inch or a foot or roll them back. So how are you thinking about adaptation and the future that we’re gonna build with this volatile climate?

Lynelle Cameron: Yeah. I would say most of our customers are thinking about both mitigation. So reducing further climate impacts as well as adapting and preparing for a warmer climate, not just sea level rise I mean it's too much water and too little water in different parts of the world. And so we are working with customers on city design, in fact, here in San Francisco, Resilient By Design is a big effort that came out of New York. They had a competition Rockefeller supported this around rebuild by design after Sandy, now we’re doing that here in the Bay Area about around resilience. How do we preempt and prepare for what's coming. And you know we've got customers certainly through the Autodesk foundation that are working in Myanmar and Rwanda and all different places around irrigation and solar. And this is really about adaptation because climate is impacting people around the world in very, very different ways.

Greg Dalton: Yeah, and there’s some really exciting stuff to kind of rebuild this future and I see climate as an opportunity not just a threat or a downer. Patrick Flynn, Silicon Valley companies are known to have these lavish buffets for their employees and actually at some companies it's a problem because, you know, people gain weight. But Salesforce doesn't have a cafeteria is it because you're too cheap? Why is that?

Patrick Flynn: You know, we’ve got I think a really great real estate and office strategy which has a bunch of benefits, many of them environmental. So rather than go out into the suburbs and build a campus, we've chosen to build our offices in city centers. So you get the benefit of mass transit. You get the benefit of the efficiencies of city life, you happen to be where the employees want to live and work and you've got the opportunity to support local businesses with your lunch decision. And what we do is whether it's New York or Indianapolis or New York, London. We try to find locations in sustainable buildings that are also in the city centers that allow us to have all these environmental benefits.

Greg Dalton: Aron Cramer, one of the things that people don't like to talk about in this conversation is that all of the stock valuations and if you have a retirement plan is premised upon compounded quarterly earnings growth. And all these talks about kind of around the edges, but the central driver and I’ve had people from Patagonia and elsewhere say that's the problem, compounded forever exponential growth. That's scary to talk about because then you’re starting to question capitalism. Do you go there?

Aron Cramer: Well, I don't question capitalism, but I question the way capitalism is currently practiced in some circumstances. We’re a business network we believe in the market. It’s very interesting, I attend The World Economic Forum in Davos this year and the G word was no longer taboo and --

Greg Dalton: To question growth.

Aron Cramer: Growth, exactly. There were spontaneous calls from CEOs saying exactly what you're saying. And many of them are, you know, I said before they’re lavishly paid prisoners of a system that they inhabit, you know, don’t shed a lot of tears they’re well taken care of, but the system is punishing and they know that it skews decision-making. So it is a big issue, but, you know, we’re seeing some change. So we’re seeing in 10-K's more and more there is reference --

Greg Dalton: Annual reports.

Aron Cramer: Sorry, yeah, in the annual reports. There’s an effort called task force for climate related financial disclosures. I've been saying it for two years. I have to do it slowly every time. Which is calling for companies to talk about the scenarios they see for the future because if you look to the future beyond the next quarter. You start to make different decisions. So things are starting to move, they’re starting to change. But it hasn't yet taken hold. I would bet and I'll come back in 20 years. I would bet in 20 years some of the rules in the marketplace will be different because there is recognition that companies publicly traded companies in particular end up making short-sighted decisions because that's what investment analysts are looking for. And there's increasing recognition that that doesn't really serve anyone's interest.

Greg Dalton: And there’s some talk about some companies prefer to stay private or go private, Aron Cramer, are private companies, do they have a little more room to make longer decisions, you know, five-year paybacks rather than two-year paybacks on things. Do they have a little more room to be green?

Aron Cramer: Yes. Not all of them practice it, but there's no doubt that there is more room for privately held companies. And that's one of the reasons why you see actually the number of public companies as a share of the market, I don’t know the statistics, but it is shrinking. It's not collapsing but it is shrinking because of these and other constraints on publicly held companies.

Greg Dalton: And we’re all complicit because we like to see our retirement plans, 401(k)s go up and it’s because of that G word. We’re talking about capitalism and Silicon Valley and beyond with Aron Cramer, CEO of Business for Social Responsibility, also Lynelle Cameron with Autodesk and Patrick Flynn from Salesforce. I'm Greg Dalton. We’re gonna go to our lightning round at Climate One. Time for a quick question and quick answer. The first section here for our guests is true or false. Aron Cramer, most Wall Street analysts don't care about sustainability metrics?

Aron Cramer: True.

Greg Dalton: Lynelle Cameron. Preppers can use Autodesk software to design survival pods for climate doomsday?

Lynelle Cameron: True.

Greg Dalton: Patrick Flynn. Salesforce employees privately share jokes about the phallic nature of the company’s newest tower that dominates the San Francisco sykline?

Patrick Flynn: False. It’s public.

[Laughter]

Greg Dalton: Lynelle Cameron. True or false, most corporate philanthropy is really tax-deductible marketing?

Lynelle Cameron: False.

Greg Dalton: This is a short answer question. Lynelle Cameron. A company that comes to mind quickly you think should get more credit for its sustainability efforts?

Lynelle Cameron: Oh gosh. Someone said Salesforce.

[Laughter]

Greg Dalton: Alright, we’ll let that one fly. Patrick Flynn. The company -- you can return the favor. A company that gets too much credit for its sustainability effort?

Patrick Flynn: NPR we learned earlier.

Greg Dalton: Ouch. Okay, Lynelle Cameron.

Lynelle Cameron: Wait – too much credit.

Greg Dalton: Too much.

Lynelle Cameron: Oh yeah, maybe.

Patrick Flynn: We got an F, didn't we learn that?

Greg Dalton: Yeah. Turn it back, that’s fair.

Lynelle Cameron: I would say Apple.

Greg Dalton: Gets too much credit.

Lynelle Cameron: Um-hum. Recently.

Greg Dalton: Okay.

Lynelle Cameron: They’re making a lot of progress of late and that's great to see. But there's still a lot more that they could do.

Greg Dalton: And they make products different than a lot of companies up here because they’re actually manufacturing company. For a long time they were not very green because Steve Jobs was not a sustainability leader at all. Interesting. Okay.

Lynelle Cameron: Yes. And I was at HP for years so.

Greg Dalton: Little rival there, okay. Aron Cramer. One company you really wish would hire you to help clean up their act?

Aron Cramer: I’ll call Elon Musk. I’ll say Tesla for 200.

Greg Dalton: You think they need it?

Aron Cramer: Yes.

Greg Dalton: Really?

Aron Cramer: Yeah.

Greg Dalton: How so?

Aron Cramer: There are health and safety issues in their manufacturing process --

Greg Dalton: Trying to make cars too fast.

Aron Cramer: -- that should be addressed. Yeah. And I think there are questions about the materials that are going in, not only to their electric vehicles, but more generally. So I think the car is wonderful. The cars are wonderful, but that doesn't mean that there are no issues there.

Lynelle Cameron: And then there’s SpaceX.

[Laughter]

Greg Dalton: Yes. Sending stuff into outer space. Okay. Patrick Flynn. Your personal carbon sin?

Patrick Flynn: Air travel, right.

Greg Dalton: Lynelle Cameron. The carbon sin of your boss? Besides air travel.

Lynelle Cameron: A car. Yeah, I just heard about the car that she has been driving.

Greg Dalton: Big one, gas powered.

Lynelle Cameron: I don’t have firsthand data. But I would say that’s many people’s sin probably.

Greg Dalton: Mine’s probably hopping in taxis in San Francisco. Last one, Aron Cramer. The carbon sin of someone in your family.

Aron Cramer: Oh my 15-year-old son devours meat like it's going to go away tomorrow.

Greg Dalton: One of the biggest things people can do to reduce their carbon footprint, get off that red meat. Let’s give them a round of applause for getting through the gauntlet here.

[Applause]

Announcer: You're listening to a conversation about the carbon footprint of Silicon Valley. This is Climate One. Coming up, Greg Dalton asks how tech companies are even betting on green in Las Vegas.

Lynell Cameron: We sat down with the sustainability officers at MGM, Mandalay Bay, Sands and had a conversation with them about everything from electricity to recycling to meat and food waste.

Announcer: That’s up next, when Climate One continues.

Announcer: You’re listening to Climate One. Greg Dalton is talking about how green Silicon Valley really is with Lynelle Cameron, Vice President of Sustainability at Autodesk; Aron Cramer, CEO of Business for Social Responsibility; and Patrick Flynn, Senior Director of Sustainability at Salesforce.

Here’s Greg.

Greg Dalton: Patrick Flynn, global electricity is about 20% renewable. Now there's a lot of progress on electricity and people talk about energy they sometimes break it down as electricity and there’s energy, which is to heat your home or move your car. Electricity, lots of good things are happening solar and wind, data centers, et cetera. Oil not so much. Oil’s still kind of got a grip on global transportation. And I can hear how data centers are getting at solar and wind, but what are companies like Salesforce doing to get at the oil monopoly?

Patrick Flynn: Well, when we look at our strategy we start first with what is the nature of our operations. As a service business as a cloud pioneer, we need to think about the cloud think about data centers. Most of our energy is in the form of electricity. So you touched on it, but our 100% renewable energy, commitment, we were one of the first to sign on back in 2013. You saw that in the Greenpeace video. We really think about that as primary in terms of our strategy decarbonizing the electric grid. And when we think about that, it’s a three-pronged strategy. Avoid, reduce, mitigate. So avoid is, where do you site your data centers. Is it on a clean or a dirty grid? Can you find capacity in your existing infrastructure that precludes the need to build the next data center in the first place? Then there's reduction and how do we take operational efficiencies and better software design better hardware architecture to wring out energy waste within the data centers. Last is mitigate, within mitigate first is renewable energy and when we think about that the most important thing is additional local job creating hopefully market moving strategies in the locations where we have our operation. So we take a zoomed in approach on local impact and that can take time. And so while we develop that strategy wait for the regulatory and policy changes to take effect in different states or in different countries. We also know that climate change is incredibly urgent. And so we think about carbon offsets and this past year, we announced that we'd reached net zero greenhouse gas emissions and now deliver a carbon neutral cloud to all of our customers every single day. Now for that, geography was less important. We didn't go local carbon projects because it's one atmosphere, one carbon balance. And so we scoured the globe for those projects that had the greatest certainly environmental credibility, but really were there other co-benefits to them and in particular equality benefits. Equality is a strong value that we cherish at Salesforce. We know speaking of resilience earlier we know that climate change disproportionately impacts our most disadvantaged communities. So investing in projects that yield carbon credits that also change people's lives today clean cook stove, solar hot water heaters. And so some of those get to additional fuels and changing out how water is heated in India reducing the amount of deforestation that happens in Honduras. So through that carbon strategy we have the opportunity to really think about fuels other than electricity.

Greg Dalton: Aron Cramer, let's get you in here because a lot of, less companies are in manufacturing they’re not directly using oil but their employees use oil to get to work every day. Maybe they walk if they work at Salesforce or Autodesk but a lot of them burn fossil fuels to get to work. Is that a lever that companies can use to get at oil that's not part of their core operation.

Aron Cramer: Absolutely and a lot of companies actually just like some have signed up for 100% renewable energy. More companies are committing to 100% electric vehicles and --

Greg Dalton: Really.

Aron Cramer: The debate here again, there's a lot of signs of progress. There are a lot of people who believe that in the middle of the next decade we’re gonna see the hockey stick approach, a rapid increase in the uptake of electric vehicles. And this is something that, you know, and is outgoing call with analysts last year, the outgoing CFO of Shell, said he felt that that was going to be around the year 2025 that we would see a tipping point. Now it was his last call with analysts when his departure was known so that was quite interesting. But I think it's recognize that this change is coming, and there's an important piece here because people are going to find that this is not a hard transition to something that's more difficult, but a good transition to a product that's better. That actually operates more cheaply, runs more cleanly. And so I think there's a big story there that relates not only to electric vehicles but to other similar transitions that are also taking place.

Greg Dalton: One of those big transitions, Lynelle Cameron, is to automated connected electric vehicles robotic cars, right which you probably involved in designing, helping envision that future. And there are a couple of visions one is that, oh, these automated very efficient electric cars are humming around, the other is in complete gridlock. I don't know if you have a thought on how Autodesk is gonna position itself for these robotic cars bringing people to your office.

Lynelle Cameron: So automated vehicles self driving cars is not necessarily gonna save the world. Mass transit is the way that you move people quickly through cities and we need to focus on that. Obviously, there are lots of benefits of having self driving cars so that people don't have to own cars and you can use cars when you need them. But it goes way beyond that being the solution for this. And just to build on your point as well, you know, we think about our commute footprint, we think about travel, we think about these big events that we have in Vegas and the air travel to get there. And those are all incorporated into the strategy that we use and certainly having offices in cities on public transport we talked about so people don't have to drive cars. Yet we also have benefits for employees to buy EVs with discounts with some of our customers who are in that business. So there is work that’s happening and even in terms of events having more online participation so that people don’t have to travel to events and that's the obvious way to reduce the oil and fossil fuel.

Greg Dalton: But people like business trips they get to expense account they get to go drink in Vegas. You really think that event in Vegas is clean and green?

Lynelle Cameron: Oh, actually the story is a little bit surprising so people think about having an event in Vegas would be the least sustainable place to have an event. And we’ve actually found the opposite. So about five years ago we sat down with the sustainability officers at the vendors that we've worked with and we’re considering working with. So MGM, Mandalay Bay, Sands and had a conversation with them about how do you reduce the footprints of these events in Vegas. Everything from electricity to recycling to meat and food waste which people don't think of as a climate issue but food waste is really significant. And you would be surprised how quickly they were able to turn knowing that their customers care about, will care about these in the future. And so when we compared an event in Vegas to an event here in San Francisco, the economies of scale the transportation the logistics that are in Vegas actually panned out. And there's actually if you Google sustainability at AU, you can hear from these vendors about what's happening in Vegas as a result of that meeting five years ago.

Greg Dalton: We’re gonna go to our audience questions. Welcome to Climate One.

Female Participant: Hi, I’m Lisa Danz with Citizens’ Climate Lobby. My question, Lynelle Cameron, you mentioned that you have an internal price on carbon at Autodesk. I’m wondering what’s your price and does it change over time and do you know the same question about other companies?

Lynelle Cameron: We don't communicate our price externally. So we did set it more than a year ago and we use it ourselves internally but we don't actually communicated externally that might be the same with Salesforce.

Patrick Flynn: Yup, the same for us at Salesforce. We’ve got an internal price that we use that it creates the financial incentives to encourage low carbon behavior, whether it's citing a data center like I touched on, or investing in energy efficiency.

Greg Dalton: So that does as you’re preparing for some day when there's a real price on carbon you'll be ready is that right?

Lynelle Cameron: Yeah, building the muscles.

Greg Dalton: Okay. Let’s go to our next question. Welcome.

Male Participant: Hi, Warner Chabot. San Francisco Estuary Institute. First, thank you for the leadership that you and your organizations provide. My question is this. The Bay Area is the global headquarters for most of the tech companies that have transformed have two thirds of the world communicates, accesses knowledge, works and entertains itself. With that amazing capacity the Bay Area should become the international model of how local communities tackle climate change and adaptation. Above and beyond the good work that you're doing with Autodesk with the Resilient By Design project. Can you talk about what you are encouraging your employees to do to be more engaged in community planning efforts to improve the quality of life for your employees and those communities to make the Bay Area a model for climate adaptation and local planning.

Greg Dalton: Lynelle Cameron.

Lynelle Cameron: Well I can say one of the interesting projects that we worked on a couple years ago was with a company called Owlized and if you can picture those eyes that you look at the Grand Canyon and you look through. And we worked with them to model different scenarios in San Francisco in the Bay Area of what it would look like with, you know, a one-foot storm surge versus three-foot versus higher. And the whole point of that was to engage the public in a conversation about climate and what if. And so, you know, there's a lot of different efforts and that's what we can really bring is that modeling software to think about what would it look like under these different scenarios and then engage the public in that conversation.

Greg Dalton: Patrick Flynn, there is a map that shows the Bay Area with the headquarters of Facebook and Google. A lot of them right by the water and with just a little bit of sea level rise. They are inundated and yet those companies Oracle, your fierce rival, they don't like to talk about it very much. You know some people joke oh my office is on the second floor or they think they'll have money to move up the hill. But those companies, what is it, time horizons or something, why don't they like to talk about something that's a real direct long-term risk to their campus and employment?

Patrick Flynn: Yeah, probably indirect long-term it's really tough to get real about something that’s so abstract and impersonal. I think it harkens back to your comment about how do you make climate change real to a skeptic and things of that nature. To the question about employee engagement and resilience, we’ve got one out of five members of the Salesforce workforces members of Earth Force our green team and it's how we do the many small things throughout the world that add up to big change when you combine them together. And that's one of the best mechanisms that we have for adapting our environmental strategy to the local needs of the particular office where that Earth Force member sits. So we have campaigns that focus on sea level rise or clean energy or waste diversion, to allow the teams themselves throughout the globe to figure out what the local issue is that they can attack.

Greg Dalton: Let’s go to our next question. Welcome to Climate One.

Female Participant: Hi, I’m Charlotte Blommestijn with the B Team. Aron, would you mind talking a little bit about how the Task Force on Climate-related Financial Disclosures, the TFCD recommendations has really led to a greater push and expectations of companies to assess them, and maybe Patrick and Lynelle you can talk about how the TFCD recommendations are impacting you. And if you're thinking about supporting and or adopting these recommendations and how that's helping you shift your business strategy and maybe your capital allocation decisions.

Greg Dalton: Aron Cramer.

Aron Cramer: Thank you. And the B Team has been a great partner for us working on climate.

Greg Dalton: Might say what it is briefly.

Aron Cramer: B team is a collection of 30 plus leaders of businesses including Marc Benioff of Salesforce and civil society organizations that are looking to shift the economy in a more just and same sustainable direction. So the task force has come up with recommendations that I think affect three communities quite a lot. So the first is investors because this basically ratifies the notion that investors are getting imperfect information about the risks that companies face and without getting too much into the weeds on securities law and I’m not a securities lawyer. Companies, there are a lot of reasons why companies don't predict the future in their filings with the Securities and Exchange Commission because of risks of providing speculative inaccurate information. This may change that and give better quality information to investors that's number one. Number two, I’m talking about institutional investors. Number two is all of us because there are a lot of companies that may not be facing up to climate risks, whether it's on infrastructure or core product. So all of us may be invested in companies that have so-called stranded assets, assets that they believe they can monetize in the coming years but in fact they may not be able to. The third is for the companies themselves, because without this information, they can't make good decisions. So my hope is that these recommendations will be taken up. So European companies are far ahead of American companies in embracing the guidance from this task force, my hope is that it will grow. And I think it will, but it's going to take some time.

Greg Dalton: Patrick Flynn.

Patrick Flynn: And Salesforce signed on to the support letter for the task force for climate related financial disclosures TCFD for short. And I think it's one of the most inspiring movements out there generally. We’ve touched on how we all collectively need to do more faster. And to do more, to do things faster we need to fire up, I’m a mechanical engineer, fire up some really powerful engines here. And you've got the technology engine represented by companies here. You've got the political will and behavioral engines and you've got the finance engine and the capital markets. And we’re starting to see that engine get revved up. The TCFD is calling for greater disclosure through formal financial documents, 10-Ks and whatnot. And I think of that in the same breath as SASB, the Sustainability Accounting Standards Board which is calling for and defining what investor grade information will be by industry. And so as we get greater transparency and greater disclosure more comparable data, more auditable data, then the markets can have something to respond to. And we know that sustainable business is better business. That sustainable businesses outcompete, right and there's the classic cost reduction/margin expansion do more with less, less energy, less water, less waste, less materials. There's the customer connection. So this is actually something that customers are calling for whether that's a B2B relationship or behind every B2B is a customer on the far end of that chain. So at the end of the B2B relationship is an individual customer calling for it. TCFD in particular focuses on risk and climate related risk. We know that sustainable businesses are thinking about risk in really adept ways and that makes them more resilient. And then the last area of business impact I think in sustainability is brand impact. And we can demonstrate that we are listening to stakeholders, listening to where individuals want to work, where companies want to do business. And so all of those things combined to make sustainable businesses outcompete and when we get to show that clearly to the marketplace then I think that engine is really operating.

Greg Dalton: And then just got to get all those smart companies to come up with a better name for TCFD -- brand for name something that -- let’s go to our last question.

Male Participant: Andrew, Commonwealth member. Do you see the possibility for informed and coordinated consumer base to compel sustainability with market forces?

Greg Dalton: Let’s talk about that enviro and outside pressure. Clearly that was part of the Greenpeace campaign that’s been mentioned but a lot of times actually in business to consumer companies they, inside green people like the pressure from outside. Who’d like to tackle that?

Patrick Flynn: I think we will see a great movement here. And we’re already seeing it. The way a consumer thinks about a product or service is changing. And it's no longer an arms length transaction for something that's just black and white. It's a demonstration of your values which company you choose to listen to streaming music with or to store your file with you. You can think about the Greenpeace Click and Clean Report and your decision reflects your values.

Lynelle Cameron: And I would say we’re only increasingly seen that with the next generation of people and employees who are absolutely demanding something very different than our generation.

Announcer: Greg Dalton has been talking about how green Silicon Valley really is with Lynelle Cameron, Vice President of Sustainability at Autodesk; Aron Cramer, CEO of Business for Social Responsibility; and Patrick Flynn, Senior Director of Sustainability at Salesforce.

To hear all our Climate One conversations, subscribe to our podcast at our website: climateone.org, where you’ll also find photos, video clips and more. If you like the program, please let us know by writing a review on iTunes, or wherever you get your podcasts. And join us next time for another conversation about energy, economy, and environment.

[Applause]

Greg Dalton: Climate One is a special project of The Commonwealth Club of California. Kelli Pennington directs our audience engagement. Carlos Manuel and Tyler Reed are the producers. The audio engineer is Mark Kirschner. Anny Celsi and Devon Strolovitch edit the show The Commonwealth Club CEO is Dr. Gloria Duffy.

Climate One is presented in association with KQED Public Radio.

Play

California's Climate Crusade

Otto Pilot — Fri, 06 Oct 2017 00:01:00 +0000

California's Climate Crusade

08/30/2017

Some environmentalists said the law extending California’s cap and trade system to 2030 is a sellout to the oil industry and it shortchanges disadvantaged communities that breathe the dirtiest air. How do California’s climate moves play into national politics and policy? Will climate and energy play a meaningful role in the upcoming midterm elections? Will companies make energy policy more of a priority? We look back at how Gov. Schwarzenegger set the tone and how his past leadership continues to influence California’s policies today.

Guests

David R. Baker

Energy Reporter, San Francisco Chronicle

Mike Mielke

Sr. Vice President, Environment & Energy, Silicon Valley Leadership Group

Parin Shah

Senior Strategist, Asian Pacific Environmental Network

Greg Dalton: Welcome everyone. Thanks for joining us. We’re delighted to see you here. Climate One is growing, we have increasingly national radio audience. So we’re gonna talk about California in a national context today and how it's leading and how it affects other states in our country.

From the Commonwealth Club of California this is Climate One, changing the conversation about America's energy, economy and environment. I'm Greg Dalton. In 2007, I went to the Arctic on a global warming expedition with scientists and journalists aboard a Russian icebreaker. Experiencing climate change at the top of the world changed my life and when I returned I created Climate One as a project of the Commonwealth Club. For the last 10 years I’ve been interviewing leaders about how burning fossil fuels disrupts all the systems around us our food system, our water system, our energy system, our ecosystems, our lifestyle and our economy. Climate changes everything, and affordable solutions are all around us now. As the Trump administration doubles down on fossil fuels, states around the country are pushing ahead on clean energy. Wind power is big in Iowa with bipartisan support. Solar electricity is expanding in Nevada with support from Republicans and casinos. Minnesota is quietly and gradually cutting its carbon emissions. Massachusetts, New York and other states are considering going to 50 or even 100% renewable power. In California, Democrats and Republicans join with environmentalists and oil companies to agree on expanding the state’s climate action plan. On the show today we’ll discuss how that could affect the car you drive and the proof of pollution that rises when you surf the web or send an email. We have three guests on stage along with our live audience today. David Baker is reporter with the San Francisco Chronicle. Mike Mielke is Senior Vice President with the Silicon Valley Leadership Group, association of large tech companies and Parin Shah, Senior Strategist with the Asian Pacific Environmental Network which opposes the extension of California's main climate law. Please welcome them to Climate One.

[Applause]

David Baker, let's begin. In 2006, George Bush is in the White House. Arnold Schwarzenegger is governor of California. The economy is booming, Al Gore's Inconvenient Truth is just about is out and the IPCC U.N. group of scientists are about to come up with their report and California signs what some people would say is the first and most important piece of climate legislation. Pick up the story there.

David Baker: Sure. I’d actually go back here before that’s 2005. We think back to that decade, there was growing public concern internationally about climate change and what to do about it. And Schwarzenegger, who was always very conscious that he was a Republican governor in a democratic state, in 2005, came out and said science is settled we know it's happening. We have a good idea what we need to do about it. So I'm gonna put on an executive order and we are going to cut our emissions back to 1990 levels by the year 2020. It was just an executive order and that means any governor comes into office afterwards can use it or toss it, trashy without a single problem. So Fran Pavley, legislator here in California from the L.A. suburbs decided that was not going to be good enough. And she put forward a bill with Schwarzenegger to enshrine that goal into law and that's what we had in 2006. For Schwarzenegger it was a really good shrewd move. He was still eyeing whether he’s gonna go nationally and if he had another job pass governorship of California and he was up for reelection. He needed some big bold issue that he could appeal to Democrats and independents with and he made this his cause. He got it through the legislature with only one Republican vote in favor of it.

And yet he was reading the polls pretty astutely because if you go back and look at public opinion polls in California at the time that law actually had almost identical support among Republicans, Democrats and independents. The parties weren't quite aligned that way, but among the voters in California they all pretty strongly backed that law. And so you have from the very beginning California primary climate law always had that kind of bipartisan and compromising origin story to it. It was always something that was put together by Republicans and Democrats, even though in the legislature it didn't quite pan out that way. But that form the basis for pretty much everything that came next.

Greg Dalton: In 2008, there was a recession then there was some concern. Well we can afford to fight climate. There's a recession, people concerned about the jobs. What came out of that?

David Baker: Well, a couple of contradictory things came out of that. California by that point had become the headquarters of the cleantech industry in the United States companies focusing on solar, wind, electric cars, that kind of thing. And we were starting to get some jobs out of that so there was a bit of momentum in that direction. At the same time you had industries that were never happy about the original climate change law and were really unhappy about this idea of cap-and-trade that was coming out of it who thought okay, this recession is our opportunity. And so in 2010, they put together a ballot initiative to try to hit the pause button on this law and suspend it until the economy improved. And it turned into a fairly expensive political fight, but that proposition went down in flames it was pretty handily rejected by voters who basically viewed it as sort of an attack on the California law primarily by the oil industry. And ever since then there was I would say the beginning of the process of the industry adapting to this law once they lost that ballot initiative.

Greg Dalton: Yeah, it was validated at the ballot box. And then 2010, Jerry Brown comes in office and he's initially quite suspicious of cap-and-trade. Because remember, after the great recession there is a lot of suspicion about Wall Street cap-and-trade people worrying that it could be gained and scanned that this was and we might get into this later that people could gain this trading of a gas that you can't see, smell, touch or taste that sounds like a Wall Street dream.

David Baker: There were a lot of people who are thinking that way in 2010, including the people who are putting together the cap-and-trade system. We’ll get into this a bit more later but there are different ways that you can use market mechanisms to try to control greenhouse gases. The two that you hear most often are just putting attacks on them or cap-and-trade, which is a pretty complicated market. And the people at the states, the California Air Resources Board who are in charge of putting together this cap-and-trade system were terrified by the ghost of the electricity crisis that all live through it. And they spent a lot of time consulting with people here in Berkeley, Stanford, some people who are coming out of the industry. Looking for all kinds of ways that people could game the system and then trying to build the end rules that would protect against it. The result is the system's been up and running for several years now. And it appears to be moving pretty smoothly and nobody is ever caught anyone trying to manipulate it in a particular way. The downside is this thing is frigging complicated it’s really difficult to learn all of the rules understand how every last mechanism works, so that was the trade-off.

Greg Dalton: So Mike Mielke, we have this law signed by Republican Governor, been through a recession validated at the ballot box. George Shultz, Republican statesman rode to its rescue in 2010 when it was challenged by oil companies comes to extend it. Why did Silicon Valley companies get behind supporting this climate law?

Mike Mielke: Well, thanks for having me here today really appreciate the opportunity to talk with folks about this in California's leadership on climate. We supported the Silicon Valley Leadership Group are 375 members and high-tech. We supported what was then some of them are Pavley’s bill AB 32, the California Global Warming Solutions Act. Because we saw it as an opportunity to, one, address an issue, a problem a real problem with Valley scientists and engineers. So we not only respect science, believe in science, but we also see this entrepreneur’s opportunity where a lot of other folks don’t. And we also supported cap-and-trade which was part of what came out of the 2006 package because we believe it is the most efficient and cost-effective way to reduce greenhouse gas emissions. Yes it's complicated. And yes, the folks at the Air Resources Board here in California are up to the task of making sure that the cap-and-trade system works. And we thought it was also a good opportunity to speed the transition to the clean energy economy. I mean right now in California we have over half a million people in the advanced energy economy. So that’s more three times that we have in movies, television and radio more than we have in agriculture it's fast coming up on construction and the gains in that sector have been in double digits. So there's been a real opportunity in terms of the jobs in the future and we saw that as an opportunity back then.

Greg Dalton: Parin Shah, the head of your organization, when this deal was passed she said that this deal was California Governor Jerry Brown playing Santa Claus, the tooth fairy, the Easter Bunny all in one for big oil. So pretty colorful quote. Explain why you opposed, your group opposed this climate deal. (0:14:10)

Parin Shah: Sure, me as well as those words. And thank you for having me here as well. You know, I wanna actually step back from the sort of support oppose for just a moment and talk about how California and most places actually end up reducing carbon emission. And that's through rules, sustain California meets our obligation from the climate law from 2006 from the Pavley law, 80% of it is met through the rules that the state of California's promulgated, 80%. Cap-and-trade is a bit of a circus sideshow. You know, it catches a lot of attention it’s kind of interesting it’s where the money is. But really the hard work of addressing climate change and improving our air quality happens through the rules that ARB passes, I’m sorry, the Air Resources Board for the state of California and local air districts passed. So I mean some of that is the advancement of renewable energy, we got a 50% goal we’re working at getting to a 100%, you know, environmental justice groups are very supportive of that. We don't need the fossil fuel power plants, you know, Pavley clean cars which is really sort of been a national innovator in terms of getting clean cars on the market. You know that is carrying so much of the reductions. Our initiatives around electric vehicles that, you know, benefit all of us, and certainly, you know, to improve air quality benefit environmental justice communities. Those are the things that are getting our reductions. Now with regard to cap-and-trade we oppose this particular deal that the governor and legislature passed recently. Because it really doesn't get to the environmental, it doesn't get us to where we need to go in terms of the environmental integrity.

There are as David said, there are definitely some complicated components to it. There are allowances in terms of who gets how many sort of trading chips, right. So you’re sort of a casino in Vegas there’s these number of chips that you get for free versus what you have to have to pay for. There’s gonna be a great deal more of those free allowances that are handed off to the oil industry. And we just didn't think that that kind of a giveaway was worthwhile. There were some good components to it as well. There's a companion bill which really update California's clean-air laws which hasn't been updated in decades. So we think that the environmental integrity of the bill as it was written and it is being promulgated may not actually allow us to reach our reductions for the part that little tiny part that 20% the cap-and-trade does. And for the optics nationally, it’s an important thing. This deal in Oklahoma let’s crack open the champagne it’s a good deal in Oklahoma. But in a place like California where we innovate the way that we do we lead the nation by 10, 20 years. This is not something to be incredibly proud of and continues to leave environmental justice communities that APEN members come from in the Bay Area, my organization behind because it's allowing refineries and power plants to continue to pollute and not just emit atmospheric pollution, but emit local pollution that enters into bodies and causes respiratory as well as other sort of public health issues.

Greg Dalton: Do you think the people who've been left behind and suffered the pollution of the brown economy are going to be left behind in the green economy, is that a concern?

Parin Shah: Well that divide us real, right. I mean we have, you know, the electric vehicle standard objective that California's passed, you know, definitely is getting electric vehicles out there.

But, you know, there's a needed push to be able to get those vehicles whether they’re sort of first-generation or in the used car market into the hands and homes of low income folks. That isn't happening, there’s a potential for a green divide in the state and we don't need to do that. We can do better when we uplift all Californians middle income, low income, we uplift everybody. And someone who can afford a Tesla for six digits probably doesn't need that subsidy. But someone who pays two times as much as I do for my energy bill, they need support they need an uplift, they need a hand up to become a part of this green economy.

Greg Dalton: David Baker, a lot of the national environmental regulations car pollution tailpipe start in California. Tell us why people around the country should care about what's happening in California on this climate law and in general California's climate plan. We’re the most populous state, biggest economy, so what?

David Baker: Well, a couple of reasons. One, yes we are a very big economy and a very big state in terms of population. But two, we have now set ourselves up or at least the state government has under Governor Brown as being sort of the champions of climate action at the government level under the Trump administration. With Trump you have essentially the federal government backpedaling as much as they can, or just trying to put things into a deep freeze in terms of taking further national action on climate. Jerry Brown loves this role, he cherishes this role of being able to get up in front of a microphone take a few punches at Trump and say we're still going push ahead and anybody who wants to follow please do.

Greg Dalton: And trots off to China and he’s like the president of climate.

Parin Shah: He’s essentially turned himself into the ambassador of climate even though there are plenty of environmental folks here in the state who had issues with some of his policies. But the point being, he is actually sort of assume this mantle of leadership of saying we've got a model in California maybe it’s not the best but we've got it, it’s up and running, all you can come and join us, please do. And so he’s constantly trying to get other people to adapt our policies and join in our programs with the cap-and-trade market that we’ve been talking about the province of Québec in Canada has been participating in our market for over a year. The province of Ontario just started its own cap-and-trade system and currently plans to join with ours. Their prices are almost exactly the same. So he seems to be having a bit of an effect and at the moment, he's sort of a main game in town nationwide. I don't see anybody else who's done quite as much to basically say no, we're not going backwards.

Greg Dalton: So all the Californians who leave and go to Canada they’ll be familiar with their cap-and-trade scheme, all the people who still be familiar with the price of electricity up there. We spoke with Catherine Reheis-Boyd who is President of the Western States Petroleum Association and she says it's going take more than California to combat climate disruption.

[Start Clip]

Catherine Reheis-Boyd: It really depends on the approach. And as long as we look at these types of policies in a cost-effective way, that’s gonna be the highest chance of success. Because eventhough California is taking this leadership role, it really does matter if others follow because California is only less than one percent of climate change emissions in the world. So, if we did everything, it would not impact the reduction of greenhouse gas emissions. It has to be a collective, unified approach.

Greg Dalton: What do you think of those concerns about the environmental justice criticisms this deal that Governor Brown, California Governor Jerry Brown advance recently?

Catherine Reheis-Boyd: Well, first I would say that both of the issues are meritorious. The reduction of greenhouse gas emissions in a global sense but also how do we deal with local community concerns that are located around facilities, ours or any other manufacturing facility. Both of those are our meritorious concerns. What we have said is that you should not try to handle both of those in the same policy because they’re very, very different. You wouldn’t handle a global pollutant like CO2, which is what we breathe in and out the same way you would handle a local concern I say smog or ozone or particulate matter. One is health-based and one is, you know, has effects on climate temperature which then impacts other things. So that’s why I think it was a very good package that came together.

[End Clip]

Greg Dalton: That’s Catherine Reheis-Boyd, President of the Western States Petroleum Association. David Baker, the industry's been trying nationally has been trying to slow down climate progress for some time. Is there a difference between the Western oil companies, oil companies in the West and the national posture?

David Baker: Well, they have to live here. They have operations here. They've refineries here. They have oilfields here. That's a big thing I mean they simply have to be able to find some way to make their operations work with the state regulations. American oil companies in general are still trying to draw out international action on climate change very much contrary to the way the European oil companies have decided to approach it. The European oil companies a couple years ago came together and issued a joint statement saying, this is a serious problem we are going to help address it.

We need a global price on carbon. Need the same price to apply around we don't care how it comes about. We don't care if it's tax, we don’t care if it’s cap-and-trade. We need that price we need to be pretty much as widespread as possible. We will then base our investment decisions on it and you'll see some progress. And the American oil companies wanted nothing to do with that, including Chevron over in San Ramon. They basically said nope, this will lead to higher prices for our customers. We want no part of it. So there is a divide within the industry if you’re talking about American versus international right now.

Greg Dalton: Mike Mielke, Silicon Valley companies support lots of green efforts doing lots of green things and we’ll talk about in a minute, but when they go to Washington they don't lobby on climate. The rep against Silicon Valley and a lot of companies is they do lots of things to say we’re green, our employees and our products, but when it comes down to the political trenches the inside game where they spend money in Washington, climate doesn't register, why?

Mike Mielke: Well, I think there are a couple things here. So one is when you have groups like BICEP which was started by Ceres, which is an investor network. That made clear statements about a price on carbon and the need for that in federal action and supporting the clean power plan and supporting staying in Paris.

Greg Dalton: This is Nike and Levi's and brand companies saying --

Mike Mielke: But it’s eBay, it's Facebook, it's tech companies too. And so they’ve been very clear about that, right. But yes, I think there is a real criticism there in terms of the backroom discussions the hard trench warfare. And I think a lot of that’s because it is a incredibly hot political potato in Washington DC, I mean, you have outright denial from folks. I mean one of the hallmarks of what just happened here in California was we had eight Republicans as opposed what happened in 2006 when there was just one that came and voted for the package to get to the two thirds threshold that was needed.

Greg Dalton: One of those Republicans later lost his job is perhaps because of his vote so.

Mike Mielke: Well, he’s still in the assembly but he’s no longer the leader of this.

Greg Dalton: So there was, yeah, some political price. So when it gets into Washington lobbying is because climate is not a core concern for tech companies. They were more worried about visas for workers, and tax policy and Apple wants to hide their hundred billion dollars in Ireland, that sort of thing more important than --

Mike Mielke: Yeah, I’m not supposed to laugh at that one.

[Laughter]

Greg Dalton: Good poker face.

Mike Mielke: Yeah. So I think the issue is yes, there's a whole bunch of concerns they have before congress, right. And we talk about the top list of issues, it’s not there. And I think one of the reasons is because a lot of these tech companies are doing stuff in terms of their operations. Going to hundred percent renewable for their data centers I mean Apple and Facebook and others. But also they don't face the pressure in terms of their supply chain. They're not a Nestle or, you know, someone big in ag that has an incredible vulnerability from climate disruption, right that affects all the sorts of products that we rely on as consumers, right. So I think that's a real issue for them as well. They don’t face that pressure that other companies do.

Greg Dalton: Well, tell us what cleantech companies are doing in terms of their data centers because they don't have a supply chain, but a lot of electricity goes in the data centers. And every time we, you know, click like on Facebook or send an email there is some coal burned somewhere. What have they done to clean that up?

Mike Mielke: Yeah, so the data centers is just for everybody. These are the engines of the cloud, well let’s talk about the cloud and how everything now is on mobile, right. You can order whatever you want on Amazon on your phone if you’d like.

You can do access Facebook and do all these things. And that’s all powered by these data centers which are the engines of the cloud and of mobile applications. And they take a lot of energy and they require a lot of cooling so that they can function effectively and that requires a lot of electricity. And so what these companies have done a lot of these large tech companies have said we’re gonna go ahead and we’re gonna advance our own, you know, in terms dealing with their own operations, green electricity. So they've made huge investments in clean electricity so Apple and as I said, Facebook, Google and others and more than that they've also banded together as part of this effort called the Renewable Energy Buyers Association. So they've gone and they fought at the local level in states across the country for getting renewable power on the grid, right. And that was led by a lot of tech companies. And so they’ve worked to get more wind more solar on the grid around the country in order for their operations elsewhere to be more green.

Greg Dalton: Yeah, in some red states, Utah and others, eBay went into Utah and got the law changed. If you’re just joining us we’re talking about clean energy in California and around the country with Climate One. I'm Greg Dalton. Our guests are David Baker, reporter for the San Francisco Chronicle, Parin Shah, with the Asian Pacific Environmental Network and Mike Mielke with the Silicon Valley Leadership Group. We’re gonna to our lightning round and ask some brisk questions to our guests. True or false. Starting with Mike Mielke, true or false. Some Silicon Valley companies are skilled at greenwashing?

Mike Mielke: True. That happens anywhere.

Greg Dalton: Parin Shah. True or false, people who work in fossil fuel companies will rot in hell?

[Laughter]

Parin Shah: False.

Greg Dalton: Also for Parin Shah. True or false, you can have empathy for rank-and-file workers at oil companies earning good salaries and providing fuel we need for our daily lives?

Parin Shah: I certainly can. And they need to help us transition to the renewable.

Greg Dalton: True or false, David Baker. Tesla's stock is wildly overvalued?

David Baker: Oh good Lord.

[Laughter]

I think I’ll be committing journalistic malpractice if I actually opined on that.

Greg Dalton: To say that their stock is worth about half a million for every car they sell for $400,000. Okay, how about this one David Baker, true or false. Elon Musk and Donald Trump have a fair amount in common?

David Baker: False. Im sorry. False.

Greg Dalton: Mike Mielke, true or false. Tech companies and oil companies had never been on the same side of the battle until the recent extension of the states climate law?

Mike Mielke: Yeah, when Catherine just said what she said I found myself agreeing with a lot of it, and that is a rare thing, yes.

Greg Dalton: Did that leave you feeling dirty or clean?

[Laughter]

Mike Mielke: Unchanged.

Greg Dalton: True or false, Parin Shah. Cap-and-trade is sexy?

Parin Shah: Clean air is sexy.

Greg Dalton: Okay, we’re gonna go to association. I’m gonna mention something and you’re just gonna tell me unfiltered what first comes to your mind. David Baker, hydrogen powered cars.

David Baker: Eh-err.

Greg Dalton: Mike Mielke, Greenpeace.

Mike Mielke: Good.

Greg Dalton: They’ve been pressuring a lot of cleantech companies to clean up the cloud. Parin Shah, President Obama.

Parin Shah: Windsurfing.

Greg Dalton: I thought you --

Parin Shah: You said first thing.

Greg Dalton: Yeah, first thing. It’s what he’s doing now. Mike Mielke, steak.

Mike Mielke: Lots of GHGs.

Greg Dalton: Parin Shah, Tesla.

Parin Shah: Great idea, overpriced.

Greg Dalton: This is multiple-choice for David Baker. What has a larger water or carbon footprint, a gin or orange juice?

David Baker: Oh, that’s brutal, man.

[Laughter]

Greg Dalton: I read on your Twitter feed that you’re a gin snob.

David Baker: It may very well be gin and I don’t care.

[Laughter]

Greg Dalton: Okay. So just for you, your beverage information, the water and footprint contents of beverages goes from good to bad. Gin, coffee, wine, OJ and milk. So milk and OJ really high. Now this came from Diageo, the makers of Tanqueray by the way. So maybe there’s, take that with a grain of salt.

[Laughter]

According to the gin-makers gin is better than OJ.

David Baker: Are they sponsoring this show?

Greg Dalton: No, they’re not sponsoring. Let’s give this round to them for getting through that lightning round.

[Applause]

Mike Mielke, some Republican elders recently went to Washington. James Baker, George Shultz, Hank Paulson, these are some of the elders of the kind of old guard statesman. And they said, we need to have a revenue neutral carbon tax. What does Silicon Valley think of that? What are the prospects for that?

Mike Mielke: I’ll take those in reverse order. What are the prospects for that? Currently still dim. I will say thanks to the efforts of folks like Citizens’ Climate Lobby.

There is a climate solutions caucus and that is growing and that's the way that works is one Democrat and one Republican step into that caucus together.

Greg Dalton: It’s called Noah's Ark caucus.

Mike Mielke: Yeah, exactly. There’s safety in numbers and in doing it together, right, jumping off the together, Butch and Sundance. So yeah, and what does Silicon Valley think about that, I mean in general we support, you know, putting a price on carbon, right. It’s the right thing to do for all sorts of reasons, right. It creates all sorts of opportunities and we need to reduce our greenhouse gas emissions.

Greg Dalton: Earlier, Parin Shah said that most of the reductions that are happening are because of regulation Silicon Valley is notoriously famously libertarian doesn't like government intervention. So what do you see, do you prefer the market solution because carbon tax is still kind of that regulatory mandate kind of approach to things.

Mike Mielke: Yeah, so I mean he's right and everything up until now. But once we get out into the out years, once the low hanging fruit has already been picked it’s gonna be harder and harder to get those emission reductions and that's where cap-and-trade really get to come in to affect more fully. So yes, currently it's all these complimentary measures that are doing the heavy lifting. But in the future it’s gonna change. So, you know, as I said, we support cap-and-trade because it’s the most effective and efficient way to get there. That doesn’t mean that we would not consider something else in the future.

Greg Dalton: So Parin Shah, trying to like cap-and-trade has taken root, seems like it’s here to say. A lot of environmentalists don't like it, don’t trust it because they think it's, you know, it’s just an extension of Wall Street. They’re trying to overthrow it or they’re trying to tame it. What’s with the approach?

Parin Shah: Well, carbon pricing generally has a role in the toolbox. As Mike said, and there’s definitely a place for it. I think it has a very limited role in its value.

And in this last year, EJ organizations really do try to work with leadership in Sacramento here in California to try to shape a cap-and-trade program that we could all get behind. This iteration like I said doesn’t get there.

I think in terms of going forward, there is a role for carbon pricing. We think it's better to have it be a straight tax, it’s cleaner, have less folks. And one problem with it I will say with the tax is a lot of people at ARB will lose their jobs and that's not a good thing. But maybe they can transition to working on clean air, right.

Greg Dalton: Bureaucratic in momentum and inertia to continue the status quo in government. We’re talking about clean energy around the country at Climate One. Parin Shah is with the Asian Pacific Environmental Network, Mike Mielke, with the Silicon Valley Leadership Group and David Baker with the San Francisco Chronicle. I'm Greg Dalton. We spoke with Loren Kaye who works with a group affiliated with the California Chamber of Commerce and he says that fighting climate has a big cost.

[Start Clip]

Loren Kaye: We have always been supportive of cap-and-trade. There's no doubt about it that climate change regulation in California is going to be expensive. But the cap-and-trade program will make it less expensive than it might have been otherwise just a command-and-control approach. Every sector of the economy is gonna be affected. But obviously the energy industry is going to have the most direct effects, the tourism industry will be affected in California the agricultural industry will be affected. There's nobody who was out of reach of the climate change regulations in California. We need to be monitoring the progress of this law over the next 10 years because it’s going to be very expensive. It's going to add cost to energy and it’s gonna add cost to goods and services in California.

It’s gonna make us slightly less competitive than we would otherwise be. The great hope of course for this and the most important test of success is whether other states and countries also adopt cap-and-trade measures.

[End Clip]

Greg Dalton: That was Loren Kaye with the California Foundation for Commerce and Education. So two things there, cost and expansion. First, Parin Shah, he’s saying that cap-and-trade is going to have smaller increases for electricity bills that’s gonna affect people that you care about, is that fair?

Parin Shah: It’s a fair statement but that's part of the answer. So while cap-and-trade will have a smaller impact because its price will be lower right now, a ton of carbon let’s say the California selling for $14.75, $15 a ton. The true cost of carbon on the economy or the social costs of carbon is anywhere from $35-$50 a ton. So what we do need to be doing and what EJ organizations like ours are concerned about is bringing us up and not subsidizing the polluters with that sort of $35 delta between 15 and 50 and in bringing that cost up. Now you can do different things with that revenue. In California we've advanced that we and the notion that we make investments into frontline communities and communities that have been impacted by fossil fuel use. So those are living next to refineries or power plants, you know, another piece of it is having a dividend. And a dividend that is means tested so one that allows for low income folks to be able to have access and to address that sort of change in price as we transition from what might be a cheaper or might be considered a cheaper fuel into something else.

I will tell you though that wind and solar and I can probably speak to some of the folks that he's working with our parity with natural gas and certainly with coal in terms of generation. So these notions of sort of apocalypse in terms of the price is the chamber doing what they do best I mean trying to sort of keep the status quo as opposed to innovate. We’ve had a century of oil a century of oil where we can go to now and do it equitably is a century of renewable energy for all. That can be designed public policy is not something that just sort of happens public policy is born of our intellect, it’s born of our collective wisdom. And I think we can design something if we so chose. That was equitable that kept the business going and was good for the planet. Triple bottomline, that’s pretty good deal.

Greg Dalton: Mike Mielke, a lot of concern about the really tremendous concentration of wealth in Silicon Valley across our society. We just heard Parin Shah talk about some people being left behind. How much is the equity piece of this, the people who are frontline fence line communities’ part of the conversations you have in Silicon Valley?

Mike Mielke: More and more. It's a big part of it. And I think it's due to the hard work of Parin and others. And a lot of folks in the legislature now are taking up this issue with real force. I mean it’s part of the package as Parin had mentioned that was just passed. I mean there are three bills, right? So we're talking about the cap-and-trade extension, but there was also a constitutional amendment put forward by the Republicans to look at cap-and-trade expenditures in the future. And then there was this local air quality bill. And that’s where Catherine and I agree, right. Let's not use a mechanism cap-and-trade that's meant to deal with the global pollutant to deal with local pollutants.

Let's use existing loss, let’s enforce them better. Let's make sure that we're putting real teeth into that. And that was part of the package so that was certainly not something that the oil companies were wild about to say the least. And yes, I mean there is this question now I think a lot of folks in Silicon Valley are wrestling with which is equity with large and what do we do about folks as either they’re left behind or as the transition takes time to sort of take root and for people to go from, you know, one sector of the economy to the other and learn new skills. It is not easy. It takes time and we have to think really hard about how to make that happen in a way that doesn't leave people behind.

Greg Dalton: Mike Mielke, also this could be an issue in the 2018 midterm elections. Climate has not been a salient issue in a lot of elections around the country barely plays in presidential elections maybe after, you know, Hurricane Harvey I don't know, a bubble up. Is climate gonna be an issue in the midterms?

Mike Mielke: So I’ll first put a plug in for another effort that I have laid and that is climatepolitics.info or climatepolitics.org where you can go and you can learn where every legislator stands on climate change. That's another effort that we've been leading here. We’ve got that for Congress and we've done that here in California with the bill package that just passed. So is it gonna amount too much in 2018? No. And I think there are a couple of reasons for that. One is because I think amongst the list of concerns that folks have climate change for a lot of people doesn't rise very high. Folks are not making sure their representatives are held accountable for how they act on climate which is why we watch climate politics. And another thing that I learned is that folks who think that the environment is an important issue are some of the worst voters, right. So I mean one of the main things that we can do if we care about climate is vote.

I mean number one and not just vote but go to town halls as folks did with regards to the Affordable Care Act and say this is important to me. I mean I'm feeling these effects. If you live in Houston, Texas or you live in wherever, if you live, you know, parts of the country that are Miami which is literally spending hundreds of million of dollars to arm itself to raise itself out of the sea, which is rising around it. You have to let folks know that this is an important issue and hold them accountable.

Greg Dalton: Parin Shah.

Parin Shah: I was gonna say that I mean will it play a factor. I think it plays a factor if we start to look at it holistically. And Mike just said it, and there’s a daily occurrence in Miami is that waters come up out of the sewer, over --

Greg Dalton: Sunny day flooding.

Parin Shah: Right. And so I mean that isn't about a polar bear which is telegenic megafauna is great but humans are pretty telegenic too, right. And if we start to talk about this issue from the place of how it impacts each one of us individually, then it does become and we all can. Like it does become something that becomes a factor in the 2018 election as it needs to be, right. Because when we're looking at the impacts, you’re looking at the impacts of the hurricane the recent hurricane or, you know, even of Sandy or Katrina in the past. I mean folks are being displaced, it’s only gonna get worse, right. As we start to see through sealevel rise as we start to see these big storms coming through where we’re gonna start to have huge chunks of the population not just in the United States but around the world, the coastal communities all over the world that are gonna need to move from where they are. And we start to look at it, not just from the place of, oh, the natural system, but that we look at it from the system that is the human system maybe we can actually start to have the impact. Healthcare hits us because it’s our health. Climate hits us because it’s actually our livelihood as a species.

Greg Dalton: So Parin Shah, what can an individual do that will affect something so mega, mambo, mega-scale, right. Just even powerful people feel like they don't have enough power for something that’s so big. How can an average citizen listener do something meaningful other, you know, okay, yeah, your electric car, your Prius, no meat, vote. What can we do?

Parin Shah: It’s all of those things, right. I mean just do what your conscience says. I mean there is no I mean, sure, change your lightbulb, plant a tree, you know, if you can afford it, you know, get an electric vehicle. Now if your utility allows it purchase renewable energy and do those little things. This is not something that is as the years, here’s the magic, here’s the magic solution, you know, it is a series of small actions that are required by all of us a big piece of it. I personally think the biggest piece of it and this is my nonprofit at the side, is vote. And hold those individuals that do not stand for healthy communities and a healthy planet accountable. Vote them out of office.

Greg Dalton: Mike Mielke, other than voting, what can people do. I've heard people talk about roles you have as a parent, as a consumer, as an employee. What can people do as an employee to okay do all those things to move their company to do more?

Mike Mielke: Yeah, I think the first thing is talk about it. I mean one of the reasons I moved out from Washington DC almost a decade ago to come out here was because I was tired of not having anything get done in Washington DC on these and other important issues. I wanted to come to a place where you can get things done.

And so it's easier in many ways. The quality of conversation here in California because of this broad awareness and this broad public support for doing something about this year is higher than it is in lots of other places in the country, right. And so the first and most important thing is to speak about it is to make it real for people. Is to talk about for example, as you and I we’re in the green room just before Harvey and the fact that climate scientists now are increasingly saying that climate change is supercharging these kinds of storms, right. And what does that mean and tie things like droughts or other kinds of things and talk about that with your peers, and then come up with a plan of action. You know, look at what you're doing in terms of your operations at your company. What can you do better and what has the biggest bang for the buck in terms of greenhouse gas emissions if that's what you're shooting for.

Greg Dalton: We’re gonna go to your audience questions and invite you to join us at the microphone back there. One, one-part question or comments keep it brief. I'm here to help you if you need some help with that. And we have 18 minutes left and we’ll get through as many questions as we can. And welcome you to just briefly identify yourself, state your question and we’ll get to it. Let’s go to audience questions. Welcome to Climate One.

Male Participant: Thanks for the opportunity to take question. I’m a 33-year EPA employee so I’m having my fun right now. So California is really ag, oil and tech industry. And the tech industry is not in this because there are a lot of groundwater issues related to them. But those three groups coming together are responsible for a lot of the problems that we’re addressing. What’s the status of those three groups working as a unit to address some of the issues you brought up tonight?

Greg Dalton: Who’d like to tackle that? Mike, that seems to be your area of intersector cooperation.

Mike Mielke: Yeah, I mean I think those folks and others came together to support the bill package that we was just passed, right. I mean we have a Big Ten here in California we really good. I mean this really came to an effect back in 2010 when we had that ballot proposition, right which pitted Texas oil companies versus California.

And, you know, folks came together and we've got, you know, environmental justice environmental equity. We've got folks in labor. We got folks in health, loan associations and others we got a lot of business come together and working on this. And so I think it's easier to get things done here in California because you have a history, we have a history. I mean part of the narrative here I understand tonight is to sort of pit industry versus EJ against each other, but Parin and I have worked on many more things and have agreed on many more things than we disagreed on. And that's the virtue I think in the sense of being here in California.

Greg Dalton: Let’s go to our next question. Welcome to Climate One.

Male Participant: There is a new wind power device that is vertical rather than horizontal. It’s smaller, you can put 10 of them around one of the big ones and the mechanics for it are at ground level, which makes it cheaper to operate. The only place I can find anything about this is Duke Energy. Do you know any other place worth being developed?

David Baker: I’d have to take that offline but that format that style of wind turbine people have been using that small scale for about 10 years. It is not as cost-effective as the other forms but there are companies out there that do offer it to you. I can’t name them off the top of my head, but they’re there, yeah.

Greg Dalton: Let’s go to our next question. Welcome to Climate One.

Female Participant: Hi, thanks. I’m Lisa Diantwitz [ph] Citizens’ Climate Lobby. And my question is for Parin Shah. I understand that APEN supported SB-775 as an alternative to AB-298. And I’m curious to know your perspective on why the fight went the way it did and why, you know, AB-398 jumped in and sort of beat out SB-775 and how we can improve in the future and, you know, get these coalition endorsed bills passed.

Greg Dalton: A little bit of unpacking. There’s a lot of numbers in there that we didn’t follow. But the question was about some of the laws passed.

Parin Shah: Yeah. So there are really sort of three now four bills that were in play in this particular legislative session. And ultimately, the one that was signed was the one that was supported as Mr. Eduardo Garcia from the assembly his bill along with the governor's office. Those sort of the one that came in that came in and was signed. There's an alternative on the Senate side that was sponsored by Senator Wieckowski that really did take a look at really transforming the cap-and-trade system and having a little bit more certainty around it. I honestly think that it might've been a little bit too much too fast, right. So, you know, ag, oil and tech as the previous question was about our important players, the most important players the populist in the state of California, right. We are the voters we are the ones who can work with industry, we can work with our legislature and we can make our voices known, you know, in the media. And I don't think enough folks really were ready and knew about what could happen if that alternative bill were passed to get it to go. So it’s sort of my called action. Keep it up.

Greg Dalton: We’re talking about clean energy at Climate One. Yes, welcome.

Male Participant: Hi, my name is Steve Hams [ph] also from Citizens’ Climate Lobby. My question relates to the issue that was raised about why businesses don't make climate a priority in their lobbying efforts. And I wanted to mention that with the Climate Leadership Council that was brought up before that 11 major corporations became founding members endorsing that carbon dividends plan that they put out, including four oil companies. So my question I think to either Mike or David, do you feel that that is a watershed moment for companies speaking out on specific climate policy?

Mike Mielke: You haven’t spoken for awhile I mean I’m happy to talk to it, yeah.

Greg Dalton: David Baker.

David Baker: Sure, I’ll give you my take on it. I wouldn’t say a watershed moment. And I would hesitate on that simply because I think we've seen some up and down cycles in terms of industry's willingness to go to battle on climate issues. There is a big push probably would have been ’05 or ’06 somewhere in that ballpark by a number of major U.S. corporations, including PG&E here in town. Where they very much came out in public and started demanding some kind of action on this. That went on for a few years, faded out into the background.

Greg Dalton: That was Caterpillar, John Deere some real heartland companies say we got to solve this.

David Baker: So we’ve already gone through a couple of up and down cycles so I'm very hesitant to say that anything recently is a watershed.

Greg Dalton: Mike Mielke.

Mike Mielke: Yeah, I think I agree. It’s important, it’s a step forward and we’ve been taking lots of steps back at the national level so, I’ll put it that way.

Greg Dalton: Let’s go to our next question. Welcome.

Male Participant: My name is Rob Williams I'm with the original Environmental Tax Policy Institute. My question goes something like this. I would say the question is for Mike and Parin. Isn’t one of the principal things that people in the first world can do to fight climate change is simply not procreate?

Greg Dalton: Population is often the, yeah, the elephant in the room. Who’d like to tackle that?

[Laughter]

Parin Shah: So the footprint one, you know, the procreation thing, you know, the parts associated with that quite, you know, I don’t know we’re gonna stop that.

Greg Dalton: We need some fun along the way.

Parin Shah: Got to have a little bit of fun. But, you know, the carbon footprint, right sort of the ecological impact of folks in the United States is pretty tremendous. And I don’t know if they are really sort of taking a look and saying, hey you should have children or you should not have children as maybe the right answer. But it’s really taking a look at the daily actions, you know, you can do the sort of reduce that particular footprint. You know the daily actions that you can take to sort of try to move the companies that you purchased your products from. You know, whether they be food or car or whatever, you know. Buying from those that have a smaller footprint that are using renewable energy, you know, that are supporting adjusted transition away from fossil fuels towards a renewable energy economy. That might be the sort of the better way to get at it for my opinion.

Greg Dalton: Let me follow up on that because the average carbon footprint of an American is 10 times what it is for an Indian for sure. So, you know, Western people living our lifestyle have a much bigger impact. And yet population growth a lot of it's happening in the emerging economies, you know, it stabilized in China, India's gonna surpassed China, you work with Asian communities, you know, are you saying that family planning is off the table, you’re not gonna go there in terms of addressing climate or it’s too difficult culturally insensitive?

Parin Shah: Well I think it’s a little bit blind to go there. I mean we should acknowledge the century of consumption that is existing on this continent and in Europe before we start, you know, sort of telling others whether they should have children or not have children. I mean that is antithetical to sort of free choice and to the for the EJ, you know, say antithetical to sort of an individual's, you know, right of self-determination.

And we got to take a look at our individual choices in this moment and not superimpose our wrongdoing as a society, our consumption over the last century and say oh because we did that you've got to kinda, you know, take it back a notch. And that's a form of colonialism.

Greg Dalton: And that's been at the heart of lot of the U.N. negotiations that those countries shouldn't pay for the sins of our grandfathers. Let’s go to our next question. Welcome.

Female Participant: Hi, my name is Karen Hoffman. I'm a professor of sociology at the University of Puerto Rico. My question is for Mike Mielke. You mentioned that you believe that cap-and-trade is the most effective way to get to where we need to be in terms of carbon reduction. And I’m supposing that you mean as opposed to the tax as opposed to regulation. And I wonder if you could talk a little bit about how and why you came to that belief that cap-and-trade is most effective.

Mike Mielke: Yeah, well, certainly you put two other alternatives forward. So one is direct regulation and that's where we differ with our friends in the environmental justice community, the EJ community. I think an important part of all of this is, A, maintaining public support and B, building public support. And let's face it, we've tackle a lot of low hanging fruit here in California and we made lots of great progress. But in the future as I noted, it's gonna get harder and harder and it’s gonna be incumbent upon us to figure out and have this conversation as a society. What's the best way to do this. In the least disruptive way as quickly as we need to do to make sure that we’re not bidding down a path in the future that we want none of our children no matter where we live to face.

And so compared to direct regulation it was no contest. Tax, I think the issues there are manifold I mean one of them with the bill that was mentioned previously that the alternative bill in the Senate was that it would institute a border adjustment tax and there's all sorts of that's a big bureaucracy there's all sorts of fraud legal questions with that. You know, how do you institute that here in California. How do you put that forward and that was a big concern of ours frankly. Another one was the market disruption. We’ve had this system up and running now for five years. It is widely recognized as the best in the world and that includes the EU, right. And so we didn’t want to put in jeopardy what we were already doing with something as Parin himself noted that was too much, too fast to insert.

Greg Dalton: Welcome to Climate One.

Male Participant: Thank you. My name is Gary Deeter [ph] and I have a general question about the comparability of the cost to generate electricity. You do read quite often and I think Parin even mentioned in some of his comments that the cost of renewable energy is comparable to fossil fuel energy. You do read that a lot, like I said. When you consider the intermittent nature of renewables, you know, how do you really make that comparable and is the cost really on par because it takes a little more maybe than just an intermittent generation source. I have solar panels on my house so I know it doesn't go work at night. Thank you.

Mike Mielke: Do you have storage at your house too?

Male Participant: No, I do not.

Mike Mielke: Okay.

Male Participant: But that cost that’s kind of --

Mike Mielke: No, I understand. So you’re saying don’t just focus on the renewables, focus also on either the energy efficiency. Because I mean it’s all part of the pie, right. So one is we wanna reduce the size of the pie, right to make it easier to get to more, you know, renewable energy and so that’s energy efficiency.

And that has a great payback and it’s sort of a no-brainer in terms of investment. Then there are other renewables that we’re talking about. When we refer to that, we’re talking about new generations. So yes, I think almost universally, no matter what country you look at right now, renewables are beating fossil fuels, right in terms of new power generation, new facilities. But storage is a big and important thing, right because we do have to figure out what to do when the sun isn't shining and the wind isn't blowing, right. And so it's a very real issue that we have going forward and it's part of the equation. I mean right now there's another bill in the legislature which we’re working with the author on SB-100 to get the state 100% renewable electricity. It’s a big issue and there are all sorts of things that are associated with that. But yes, it's all part of a much larger, much larger puzzle. So I think if you actually look at the energy efficiency piece of it and sort of the cost decreases there. I think you can still make that claim that's it's on par if look at it holistically.

Greg Dalton: Parin Shah.

Parin Shah: I’ll just add two things. One, a little over 100 years ago we gave and we continue to give from the federal government subsidies to fossil fuel companies. They’re on in the perpetuity we've not stop those giveaways, those subsidies for that industry to exist. One, first, in the beginning to sort of come up and mature but now they're just getting that. Every 10 years or so renewable industry has to go and sort of bag and borrow to try to get the tax credits.

Mike Mielke: That’s more often than that, unfortunately.

Parin Shah: Well right. So every 10 years we’re kind of like trying to piece this thing together, you know, while the fossil fuel industries sort of gotten us out of subsidies into perpetuity. Like that is impacting our ability to sort of advanced newer technology. We got to really get at that head on.

Greg Dalton: Thank you. Welcome to Climate One. Let’s have our next question.

Female Participant: Hi, my name is Julia Barbara and I’m a sustainability consultant at Quantis International. I was hoping to talk a little bit about the way that we talk about climate change because it’s incredibly inaccessible to most people. So I was wondering if you guys could share some of the best ways that you have heard that has made the climate challenge real because we do know that people care about their jobs, their family and their health. And there's plenty to unpack there in this issue. So I’d love to hear from all of you on what you would recommend and when do you think the industry that we’re in might transition to make this more accessible to others.

Greg Dalton: I'll take a first crack of that. There’s a fabulous book called, “Don't Even Think About It” by George Marshall, whose a British author. He cites some other research in there that says it needs to be PAIN, there’s an acronym PAIN things need to be personal they need to be abrupt, they need to be a moral and they need to be now. So if you think about climate, it’s not personal, it’s not abrupt, it’s slow moving. You can get to the morality issue that we've touched on here and it's not now. So things have to be personal abrupt, and moral, and now, you know, that can reach people, you know, one of the concerns is climate doesn't have a human face. Think about how much we react to one act of terrorism and a handful of deaths terrible and yet climate change looks what’s happening we don't have the same reaction. Who else would like to tackle that? David Baker.

David Baker: This is just sort of my personal opinion from watching this over the years. I've no idea what my paper’s position this would be, but I would say that the only thing that might work better than what has happened up until now is if someone were truly able to make it a crusade. The problem is there are whole number of reasons why it's difficult to get everybody on board with that particular crusade.

Obama was in many ways hamstrung in talking about this in public because he had a very coherent energy policy but every bit of it pissed off someone. And if he said it all at the same time he would lose some people. So he was very much in favor of renewable energy. He also liked having much more natural gas coming from fracking. He didn't even like to say the word fracking in public because he knew that a big chunk of his base hated it, but that was actually a key part of his policy. So how do you communicate it, how do you do a better job of getting people on board. I think it will take some kind of leadership role. I don't know if it's a government leader or somebody else to actually make it some kind of crusade that people feel they can personally buy into, but it is exceedingly difficult to do that.

Greg Dalton: Any other, there’s another thing also, which is more facts don't change people's minds, you know, the emotion so much of the climate conversation has been abstract it's big and it's small. What's a gigaton I don’t know what a kilowatt hour is. I’ve been doing energy for 10 years I can't tell you what a kilowatt hours or megawatt or it's really small parts per million, microns, 1.5, you know, particular matter. The numbers are so big they’re so small we can't get our head around them. If there are personal, emotional stories and stories more than facts, that's what I've learned reaches people after 10 years of talking to people about this. There’s some great podcasts in climateone.org that get into the whole psychology, linguistics, cognitive, or even brain science about processing threats and rewards and villainization versus coming together in empathy. Let’s go to our next question.

Male Participant: Hi, my name is Nore [ph] I have a question for Parin Shah. Would you trade California's current climate policy for a high carbon price like 50 or more, even dollars a ton, but give up all the regulations and give increase local air pollution standards and give some of the revenue to help EJ communities? (01:08:14)

Greg Dalton: You got a magic wand there for a damn bargain.

Parin Shah: No, I mean, like I said the regulations are broad and the rules have brought us where we need to go. And it's not necessarily regulating those that are innovating. I mean there are industries that are growing that are nascent. It's really getting down to the industries that have brought us that have brought this destruction upon our planet and our bodies and our society. I mean it’s about really targeting the stuff the folks that are bringing the pollution, the fossil fuel industry. I mean that is really clearly what we've got to be looking at trying to sort of transition out of.

Greg Dalton: Welcome to Climate One.

Male Participant: My name is Dave Luebkeman. I work with an organization called Plant With Purpose. And we work with rural farmers all around the world teaching them to plant trees to improve their environment. So it works overseas, it could work in California in terms of basically reforesting California. Are any of you guys involved in any event, or are you organization _____

Mike Mielke: I've certainly heard of organizations that are doing that. And I'm not certainly not an expert in this space but I worry when I think about how many trees we just lost because of the drought here in California as an example, right. And that means in a sense more greenhouse gas emissions, right because those trees sequester carbon dioxide. So I think it's a great idea in theory I worry about the practice. And again that’s not knowing enough about it.

Greg Dalton: Picking up on the communications question. There's another piece to this, which is we’re all culpable. And I think that our complicity in this makes it difficult for us to hold and to know what to do with it because unlike you could look at slavery and say I didn't own a slave or I wasn't part of that system or I wasn’t part of apartheid.

I could have posed apartheid. I didn't stop women from voting we’re all culpable in this fossil fuel economy. I think that causes some degree of conflict to guilt, et cetera. I’m gonna close with how you each of you wrestle with that and what gives you hope. So Mike Mielke, do you every feel guilty for your lifestyle?

Mike Mielke: I feel, yeah, I do. I wrestle with guilt and I feel currently fortunate and back when I was in Washington DC I did a lot of international development work. So I worked in places like Afghanistan, Thailand, Indonesia and Grenada after Hurricane Ivan doing relief work. And the main reason I want to do that, I’ve been always been focused on the environment, was to understand the concerns of others who are less fortunate than I am. So it's always at top my mind. Do I feel guilty for taking cross-country trips for example, I mean that's a huge part of my carbon footprint as it is for everyone who does travel. Yes, it's something that I wrestle with. What gives me hope? My son, I talked to him about a lot. He has ingrained it. He understands climate change, as well as I think any seven-year-old could. He's already starting to talk to his peers about this. And I think when, you know, it comes to the point with the PAIN acronym when our backs are against the wall we can get big things done. It’s gonna take getting to pain threshold though I think, unfortunately.

Greg Dalton: David Baker guilt and hope.

David Baker: I tend to think that guilt and particularly in situations like this is a bad route and a bad thing to let yourself fall into. I mean there are plenty of actions that all of us can take little tiny actions, day-to-day that can help take those take all the ones that you can incorporate it into your lives. But many of the things that need to get done will only get done at the societal level. So push for that vote for people who will push for that. Talk about it as we've been discussing here talk about with other people try to get people lined up. That I think is a much better thing than wallowing in guilt. And, you know, we're talking about how to communicate with people conveying a message that you should feel guilty about what you're doing, shame on you. That is very rarely a good way to get people to change their behavior at least. I think--

Greg Dalton: Not long-term, sure, yeah. Like to have short-term, but shame and blame doesn't work long-term.

David Baker: Exactly. In terms of hope, I have quite a lot of hope. I am quite worried, quite scared by all of this. But I have quite a lot of hope just because we have made an enormous amount of progress just in the last 10 years, and just in this state not even looking at the rest of the world. We've actually made a lot of progress here, in terms of getting solutions out there that are gonna help and more importantly, getting the prices of those solutions to drop. And that is really what's gonna make long-term change in things. We’re certainly not the only people here California is not doing this by itself. But we've done this, other places have done this know it is nowhere near enough, but there has been progress made. It is not a hopeless situation. So yeah, I do have a lot of hope.

Greg Dalton: Parin Shah, let me just twist this a little bit. You deal with people who have, are vulnerable don't have the resources to deal with this. Is there resentment toward people who have higher carbon footprints and privilege, and also what gives you hope?

Parin Shah: So is there resentment. No, you know, the members that we have at our organization live next to a refinery here in Richmond, California for 25 years they've been working on the solutions and there is not, I have not met a member _____ ocean immigrants have not met a member that, you know, certainly doesn’t get upset but always will be ready to sort of talk with others about the impact that fossil fuels have on their life and work with folks whether be legislature or somebody on the street, legislature or someone on the street to sort of look at what kind of solution we can find together.

So that is actually my hope story is that, you know, folks that have been so directly impact in the front lines of the stuff are still out there sort of advocating decades later saying we can find a solution together if we act collectively. And that collective power is powerful, I mean recently some of the, this is off-topic but some of the, you know, sort of white supremacist sort of activism that was going on and how quickly we were when we came together as a collective society and said hey, morally that doesn’t work. How quickly that guy quieted down, right. That’s our power, that’s our hope and that’s what I sort of look to going forward.

Greg Dalton: And it circles back to that human face. We have people don't get more motivated by white supremacist than they do a climate driven thing that doesn't have that human face. We are out of time. I’d like to thank the Climate One crew in the room here. Let’s give them a round of applause for the work they’ve done --

[Applause]

-- and Patrick and Kelli and Jane Ann and I’m gonna mess this up, Will and Bryan and John. We’ve been talking about states and companies pushing toward a cleaner economy. Our guests were David Baker from the San Francisco Chronicle, Mike Mielke with the Silicon Valley Leadership Group, an association of tech companies, and Parin Shah from the Asian Pacific Environmental Network. Podcast of this and other Climate One shows recorded with a live audience, are available wherever you podcast. When you download one or visit our Facebook page, please leave a comment and give us a rating. We wanna know what you think of our conversations on electric cars, clean energy, water, technology, and more. Thanks for joining us. We'll see you next time everybody.

[Applause]

[END]

Music courtesy:

Words by Jason Shaw

Play

Taking the Temperature of California’s Climate Law

Otto Pilot — Mon, 17 Oct 2016 00:00:00 +0000

Taking the Temperature of California’s Climate Law

09/21/2016

It’s been ten years since California enacted a landmark law that put it at the forefront of the global war on climate change. Has AB 32 been a boon or a bust?

Fran Pavley, Senator, California State Senate
Catherine Reheis-Boyd, President, Western States Petroleum Association
Dan Sperling, Member, California Air Resources Board

This program was recorded in front of a live audience at the Commonwealth Club of California on September 20, 2016.

Guests

Fran Pavley

Senator, California State Senate

Catherine Reheis-Boyd

President, Western States Petroleum Association

Dan Sperling

Member, California Air Resources Board

Greg Dalton: From the Commonwealth Club of California this is Climate One, leading the conversation about America's energy, economy and environment. I'm Greg Dalton.

It's been 10 years since California Governor Arnold Schwarzenegger launched California's attack on climate change by signing a law to reduce carbon pollution across the state’s economy. That pioneering law known as Assembly Bill 32 or AB 32 is arguably the most important piece of climate legislation in the country. Today, that law puts a price on greenhouse gases and is generating billions of dollars in revenues. It also has put California at the forefront of the global move to protect the climate that supports our economy and lifestyles.

On the show today, we’ll explore the impact of AB 32, and other climate laws are having on the price of gasoline, electricity, jobs, innovation, and our way of life. We also will discuss the prospect of self-driving cars and California's role in the Paris climate agreement, a flexible plan endorsed by nearly every country in the world to move away from fossil fuels.

We’re joined by three people who are playing leading roles in the debate over how California will run its economy and how we all get around. State Senator Fran Pavley co-authored AB 32, and other laws regulating fracking and tailpipe emissions. She recently led the successful effort to extend much of California's main climate law for another 10 years. Now Senator Pavley is in the final weeks of her 16-year career as a state legislator.

Cathy Reheis-Boyd is president of the Western States Petroleum Association, which represents the oil industry in Arizona, California, Nevada, Oregon and Washington. And Dan Sperling is a member of the California Air Resources Board, the main state agency for regulating air quality and carbon pollution. He’s a transportation expert and founding director of the Institute for Transportation Studies at UC Davis. Please welcome them to Climate One.

[Applause]

Welcome you all. I want to go back to 10 years ago this month on Treasure Island and where Governor Schwarzenegger signed AB 32, this California's main climate law. Let's hear what he had to say then.

[Clip]

Arnold Schwarzenegger: It’s great to see all of you here today. And it is wonderful to see so many people be part of this historic occasion. In a few minutes we will be signing Assembly Bill 32. When we sign this we will begin a bold, new era of environmental protection here in California that would change the course of history. In fact, we will create a whole new industry that will pump up our economy.

[Clip End]

Greg Dalton: So Governor Schwarzenegger, Cathy Reheis-Boyd, a new law pump up the economy 10 years later, what’s been the impact?

Catherine Reheis-Boyd: So I mean, the way you’ve actually framed this conversation and I'm really happy to be here Greg with Senator Pavley and Dr. Sperling. We've been actually doing this since 2006 together. So it has been a while of working together on this very important issue. And the way you pose the question is, you know, has it been helpful or hurtful. And frankly I think it's been both.

And I hope we’ll get into that a little bit. But I think on the helpful side I think it really has set a conversation for California that's a very important one, not only in the context of what we can do, but, you know, how that relates to things like the Paris agreement and things that the international community is looking at.

But also as we look at the positive side of it, we also have to find a way to minimize as much as we can the cost of the program. Such that businesses and consumers can still, you know, have the quality of life that they have as we’re trying to move forward. So I sort of have yes on both sides of that question.

Greg Dalton: Done some good, done some bad. Senator Pavley, this is your baby, AB 32. Ten years in, what's the scorecard?

Fran Pavley: Well, as a former teacher, I suppose I would give it an A-. That with a lot more work to be done obviously because this is going to take decades to get this right. Sometimes I look back and I think about what Governor Schwarzenegger said in his, often times in his speeches, he would say, well we don't have to choose between a clean environment and a strong economy. We can have both. And we can look at the math what's happened since AB 32 passed back in 2006. Our economy has gotten bigger and emissions have gone down and we’re on track to meet our 2020 targets. And some of the very popular programs that I know the public's been increasingly aware of and very supportive of our issues such as energy efficiency in buildings and appliances where you save money on utility bill plus reduce greenhouse gas emissions.

We've done tremendous good work on cars, Dan will talk about that. But we're seeing greater fuel efficiency in cars in fact, everyone's benefiting from greater fuel efficiency of cars. And it's now a national policy; it started as a state policy so we’re not going it alone on all these policies. Where by 2026, we’ll average 54.6 miles per gallon, saving people money at the pump and reducing greenhouse gas emissions. So my involvement in all this is making sure to the maximum extent possible we have a win-win-win reducing climate pollution, cleaning up the air because of the contributing factor and health impacts and also creating in-state jobs. And so it's going to take a lot of work by a lot of good people, lot of innovation. So I welcome this conversation as well.

Greg Dalton: Thank you Senator Pavley. Dan Sperling, she gives it an A- has it really helped or hurt the economy or is it a mixed bag as Cathy Reheis-Boyd said?

Dan Sperling: Well, I think there's no, it's so new. So there’s some pieces of it that have been here a little longer like the vehicle standards. But most of it, cap and trade, low carbon fuel standard, they’re just barely getting started. And perhaps the one that's, other one that's had an effect is the renewable portfolio standard requiring renewable energy for the electric utilities. But for the most part, we’re just getting started. And I think the bigger question is we have to do a lot. We have to do something. The science is overwhelming that, you know, climate change is a huge risk to the earth, to California. And the question is, how do we move forward aggressively?

And as Cathy said, we want to do it smart. And as Fran said, there's lots of things low hanging fruit, I mean efficiency like vehicle efficiency. We should have been doing that even if there was no climate change problem, no oil problem. We get somewhat, it cost about to get that 50 miles per gallon. It'll cost us a little over a thousand dollars extra, but we get each consumer, will get back at least $3000 or $4000 extra for themselves. So forget about climate, air pollution everything else. Just on pure economics for the individual it's something really good. And that's the challenge here is to start going down that curve, you know, where are the really good no regrets, high payoff things and figuring out how do we get further.

And I’ll say one more thing, because I have Cathy next to me here. Is that the challenge is that we don't really know exactly what this future is going to be. And some things are going to cost more; we don't know how fast innovation is going to happen. And so we need to be making investments and innovating but we do need some flexibility there. Because none of us are smart enough to know exactly how do we get from here to there.

Greg Dalton: Cathy Reheis-Boyd, let’s talk about there. There is growing in corporate America, growing recognition about climate change. Dan Sperling just mentioned the energy efficiency for automobiles that reduces the demand for gasoline. Is that a good thing, is that something that Western states oil companies support or is that something that you resist?

Catherine Reheis-Boyd: Well, I mean we've always supported energy efficiency and all of its forms. So and we’ve also always supported diversification. I mean it's never good to have all of your eggs in one basket. I mean none of us do that even in our stock portfolios, right. So I do think that it is a time where we have to look at all sources of energy as we go down this path together.

And the one thing that I just get a little concerned about is that, you know, in California the leadership position that it has taken is a very important one. But we have to remember we’re still only less than 1% of the, you know, of the greenhouse gas emissions in the world. So what we do matters from a leadership standpoint, but we have to make sure that we don't take such economic burden on ourselves that all we do is put our state at a competitive disadvantage unless other people are going to follow us.

So it gets really important that whatever signals we’re sending to the rest of the world and whether it, I hope to get into the issue of cap and trade, is because that's really important for the signal to the rest of the world. And we can lead but if, we have to have people follow us because this is a global pollutant, right it does matter where emissions come from and how we address it collectively in the globe. It’s planet issue, it's not in your backyard direct health issue.

Greg Dalton: Sure. California can’t solve the problem. Talk about cap and trade; transportation fuels were included in the program last year. And there was quite a debate about how much that would increase the cost of gasoline. Some large numbers, I think the ultimate credible number is about $.10 a gallon. That gasoline fluctuates by a lot more than that all the time. So is that an acceptable burden or do you think that was too much because some of the numbers that were, the oil industry suggested were a lot larger than that $.10 a gallon.

Catherine Reheis-Boyd: Yeah, and like Dan said, we’re in the infancy of the program, right. So, you know, how much cost will actually be borne by this as the program ramps up, we’ll be, you know, we’ll all be watching, that’s the market, right. Nobody knows what that will be. But when you have not only, first you’ve got the highest taxes on gasoline and diesel, you know, in the U.S. I mean I think we’re the third-highest taxes. Plus now we've got the $.10 for fuels under the cap and trade program.

And you also have another complementary policy as it's called in the state of California the low carbon fuel standard, which also puts another four to five cents on the gallon of gas according to the Energy Commission. So we’re at low crude oil prices so gasoline and diesel are at low cost and so we’re not really feeling that burden. But those are pretty significant cost to the consumers of California and we’re in the infancy of these programs. So I just think cost containment and design factors in the program are really super important so that we control cost while we try to make our climate change objectives. I mean, that’s a balance that has to happen as the program ramps up.

Greg Dalton: Senator Pavley, when this was first envisioned 10 years ago, there were a number of Western states that were going to join California and kind of the ideas that California can’t price itself out otherwise businesses will go to Nevada or Oregon, Utah, lower cost states. A lot of those states rolled off after elections, are no longer standing with California. Isn't it real that there is a risk to California can put itself at an economic disadvantage by pricing energy too high?

Fran Pavley: Well, we always have to be careful and we always look at any kind of leakage that means in simple terms, there's no point in having a carbon polluting industry just move across state lines for whatever reason, because it still affects the planet. But what's really been happening here sort of behind-the-scenes even though what you said was correct, is states are working together. For example, Oregon and Washington and British Columbia joined us with putting in EV infrastructure for electric cars throughout our state.

I just got back a few days ago from Mexico City. Amazing, the National Senate down there just unanimously passed the Paris accord agreement. The president of Mexico, who I met with for an hour, over an hour at the National Palace. He and the president of United States and the Prime Minister of Canada all agreed to adopt California's now the national standard of lower, more fuel-efficient cars. Those will all be used across all three countries. Governor Brown has been very involved; in other states we call them subnational states, provinces, others all adopting similar policies. There's an amazing amount of things going on.

I believe over 40 states now of renewable portfolio standards. We’re waiting on Congress to move forward and in the meantime, the most expensive thing I think we can do as a government is nothing. This is a huge challenge and we’re showing that this can be done cost-effectively and is technologically feasible. And there’s amazing amount of good news stories as well as new technologies that are right on the cusp of moving forward.

Greg Dalton: Blackrock is a large research firm, investment management firm, one of the largest in the world. Catherine Reheis-Boyd, they came out with a report recently that said driverless cars could “trigger a slide in demand for traditional cars and gasoline much quicker than markets expect.” Do you think that EV's and driverless cars; already there’s soft, basically flat demand for gasoline in the United States because of efficiency? What is the potential that the industry's misreading demand and it could fall faster than the market expects enough? And that’s Blackrock talking.

Catherine Reheis-Boyd: Well, I mean, look at California, right? We have, what, 38 million people soon to be 48 million people that drive 26, 27 million cars, 185 billion miles a year. That’s a lot. We’re the third largest gasoline consuming entity in the world as a state and only the two in front of us are China and United States of America. So we travel a lot, we drive a lot, and we use a lot of gasoline and diesel let alone jet fuel and marine fuel.

And then you've got the DOE's, Department of Energy’s energy information administration who looks forward out to say 2040 and they’re still estimating all the energy in the world in 2040, 80% comes from coal, gas and oil. So I think it's just in the context of the conversation we have to sort of have the reality of the facts of what it's going to take and over what time period that we can do these types of transitions. And so, you know, that's a long time and I know we have SB 32 which we’ll talk about now and AB 197 at some point in this conversation which takes us out to other targets on 2030.

But still by 2040 which is 10 years past that, we’re still 80% coal, gas and oil. So it's a transition, right?

Greg Dalton: Dan Sperling, is that true? A lot of environmentalists cheer electric cars, there’s now half a million cars with a plug in the United States, small fraction was a 1% or 2% of new car sales. It's going to take a long time. Is Catherine Reheis-Boyd right that mainly we’re going to be running the economy on fossil fuels in 25 years?

Dan Sperling: Well, that's probably true but I wouldn't agree that as much as, you know, Cathy was quoting some stellar organizations. But I think that there's a lot of rethinking of those numbers and those forecasts. So I do interact a lot with a lot of the big oil companies and DOE and international energy agency and there's a lot of question about whether those forecasts of large continuing amounts of fossil fuel and oil are going to be correct because if you take, you know, vehicle efficiency is actually what's going to make the biggest difference in the next 20 years.

And just look at us we’re going from 27 miles per gallon to 50-some miles per gallon. Our cars are going to be using half as much energy in 2025 as they were in 2010. Now there are more cars that's US. Japan is doing the same thing, Europe is doing the same thing, China, Korea and I guess now Mexico. So this focus on efficiency is happening worldwide. And the question is, are we going to continue on that trajectory. Every new year, the new vehicle is about 4% better than the previous year and you keep doing the 4% and it starts becoming significant.

So U.S., Europe, Japan, everyone agrees we’re going to be using less fuel. The question is, what’s going to happen in China, India, Latin America and whether they're going to and whether we’re going to -- the story I was telling was cars and then we got trucks and planes. So that's kind of the forecast for a lot of fossil energy and a lot of oil, let's say. It’s partly because we’re going to use it for petrochemicals, aviation, probably, you know, although there was an announcement yesterday that JetBlue is going to now use biodiesel for their planes.

So I think it can change -- here's an anecdote in a story, Norway has gone in just a few years from almost 0% electric cars to 35% of their new car sales being electric. Now, ok they subsidize it a lot and there are some explanations but they’ve flipped, you know, they are now in a region where electric cars are normal and gasoline cars are the kind of those dirty, polluting things.

Greg Dalton: Cathy Boyd, Steve Coll wrote a book Private Empire about ExxonMobil. He said the one thing that really could disrupt that business model was a breakthrough in battery technology. Is that true? If there's a big breakthrough in battery technology could that disrupt the oil industry? Do you even worry about electric cars or there are just going to be such a small niche that it’s not going to displace oil?

Catherine Reheis-Boyd: Yeah, I mean, we’re a trade association so we represent all of the companies actually in the five states. And each of them have their own business plan, their own view of the future, and each of them are investing as much as the federal government in research and development on all these alternative and renewable fuels. And each of them have a different look, you know, ExxonMobil may look at lithium batteries while somebody else may buy an ethanol plant to see if they can, you know, make cellulosic, something that can work in the future.

So, I think they're all interested in looking out in their own business plans and figuring out what that means for them as a company. And I can tell you as being a trade association, none of them think alike. They all have different views on the future and it could be solar, it could be wind, it could be battery technology, and Dan knows this probably from talking to my members better than I do. There's a wide range of options they’re looking at as they themselves look at the future and what that means for them as a company.

Greg Dalton: Senator Pavley, Governor Brown recently signed a bill on super pollutants. We’re talking a lot here about carbon pollution which is greenhouse gases. There’s another category of pollutants that are kind of -- a lot of them come out at both ends of the cow. How important is this, this new law to get at dairy and other part methane, other parts of the climate challenge?

Fran Pavley: Well, it fits in really well with segueing into SB 32 because if we’re going to reach the targets they talk about in 2030, the 40% reduction below 1990 levels, all of the above have to be in play, more fuel-efficient cars, electrification of the grid, battery storage technology for cars as well as replacing natural gas for homes or utility power plants. There's actually a new battery storage place that’s opened in the Los Angeles area.

We have an alternative fuel company that was so excited about SB 32 passing, because of the market signal that's being sent that they are investing in new people and they’ve taken over an old oil refinery. They have a long-term contract with United Airlines on biofuels. There's a lot of excitement and moving forward on all these technologies. I know we can do this.

Greg Dalton: Dan Sperling, biofuels were all the rage a few years ago and they haven't really -- they’ve been kind of disappointing actually. Having come through some the companies that started making alternative fuels are now making make up because they can make more money at lower volumes. So, you know, tell us about the prospect for cellulosic biofuels that can go in existing pumps, existing tanks. They’ve been kind of a disappointment.

Dan Sperling: You know, before I answer that let me back up just a second because I want to talk about what California is doing, California's leadership. You know, Fran mentioned that California is not an island and the climate problem is a global problem, but what we're doing in California, so what we do in terms of actual emission reductions in California has a small effect.

But what we do in terms of policy innovation, what we do in terms of creating the industries and the innovation really is global. And we are creating the platform in California for economic growth and leadership by nurturing those technologies, encouraging of it, you know, solar technologies, the batteries, the vehicles, the Teslas. And so, we are positioning ourselves for the future which, you know, is going to be very different and we’re going to be ready for it more than a lot of places.

Now, the biofuel is a big challenge and there are a lot of things that have happened faster than we expected including the battery has improved much faster than any of the experts thought, any of the companies thought. The biofuels has been just the opposite, is that we thought the cellulosic biofuels, the biofuels made out of wood and grasses; we thought we'd have it by now.

The federal government adopted a requirement for, you know, 17, 15 billion gallons of it by 2022. It’s not going to happen. And I think mistakes were made, not enough was invested in developing the right plants that would be used in terms of processing it. There was a lot of hubris that we knew more than we knew and we had some venture capitalists and some others that were overselling it and hyping it.

And so now, I think we’re in a little retrenchment and I think we’re looking at it differently now. Now, we’re looking at, okay we got this big corn ethanol industry and you can think what you want of it but they are bringing some innovation into it. They are getting more efficient, they’re pulling the corn oil out of it to use as a diesel fuel, they’re starting to take some of the corncobs which is cellulose and processing it. So they're making -- it's kind of an incremental path. But I think what we really need now is the oil industry to get engaged.

The oil industry is the only one with the resources, the capabilities to really scale it up to make the investments that are needed because otherwise it's not going to happen fast. It's going to happen slow. And so, I'm just trying to figure out how do we get those oil companies. And some of them are, some of the oil companies that are investing a fair amount as, you know, we’re talking about, you know, Cathy was saying there are some investing in different types of biofuels and advanced biofuels, but it's not very much, and we come back to policy. I don’t know if you want to talk about policy. And that’s what Cathy and I believe.

Greg Dalton: Let’s get Catherine Reheis-Boyd on that. Why aren’t they investing more? They have this sort of this pattern of oil companies, they dip their toe in, they invest, they divest, they don't stay with it very long. Maybe that's because their primary product has higher profit margins than this experiment--

Catherine Reheis-Boyd: No, I mean, frankly if you really look at the data which, you know, the data actually matters, you know, facts actually do matter in these conversations. And if you look at the data the investments that our companies make are equal to the federal government.

And the only next investments by the auto companies are quite far less than the ones we've made. So we are making huge investments to try to figure this out. And it's easier on the diesel side than it is on the gasoline side. On the diesel side, the biodiesel side is progressing pretty well. The difficult stuff on the gasoline side is in California and as you know you can only blend so much ethanol in gasoline before you hit what's called the blend wall.

In California, it doesn't let you blend more than 10% for very good reasons because it begins to have impacts on the engine. So you have 10% to work with that you can blend in gasoline to make it less carbon intensive to lower its carbon. And the only thing we have is either corn-based ethanol or something like sugarcane-based ethanol.

And they’re making progress, but the carbon intensity isn’t where it needs to be to really advance that. And it's just not commercially scalable getting the energy conversion on ethanol side from the biomass to the energy side it's been tough. And not just for our industry, there's been many who’ve tried to, you know, crack that nut. But one other thing I think that's important and Dan began to get into it and I hope we have time here Greg, to touch on it because I am very concerned about where we find ourselves right now relative to the passage of SB 32 and AB 197 which are connected.

And I want to make sure we have that conversation because we have obviously, you know, Senator Pavley here who was very instrumental in having that passed. And my worry is, this program in California from AB 32 has been, cap and trade has been its cornerstone. And why and for the audience who doesn't understand cap and trade, a cap is the environmental side, where is my friend Alex from NRDC, right? It’s a declining cap. It's the environment side of cap and trade. The trade is the business side. It makes it more cost effective to meet that cap, why we like market mechanisms like cap and trade programs or carbon tax that are market-driven.

And now we have cap and trade being the cornerstone of the California program, yet we don't have a program that goes past 2020 on cap and trade. And it seems like when you read AB 197 which is connected to it, that we’re transitioning away from cap and trade and we seem to be moving more back to command-and-control. And I may be reading it wrong, I haven't dug into it entirely yet but I get concerned and I see the report just released by the California Environmental Justice Alliance which basically says cap and trade should go away. And so I find myself sitting here wondering how are we going to reconcile that with our leadership position in Paris and the rest of the international community going to cap and trade and us sort of figuring out where we are going.

Greg Dalton: So let me just clarify it. You're saying cap and trade should stay and you’re supporting it and yet there is a California Chamber of Commerce lawsuit that’s trying to challenge cap and trade.

Catherine Reheis-Boyd: So let's be clear on that because again, facts matter. And so if you look at the Attorney General's brief on the Chamber of Commerce's litigation, it actually says on page 2 that it is not in any way an attack on climate change. The only thing the Chamber’s lawsuit says is that did AB 32 authorize the auctioning of revenues to generate billions of dollars and is that a tax or a fee, and if it was a tax it should've been a two-thirds vote. That’s it.

Greg Dalton: Senator Pavley, the future of California's climate program we’re hearing that from Catherine Reheis-Boyd from the oil industry that she has some challenges. What is your response to that?

Fran Pavley: My response is the cornerstone for AB 32 was the cap, the cap on emissions.

Greg Dalton: The environmental benefits to fight climate change.

Fran Pavley: Right. Now historically, whether it's combating smog, right, and cars, it was the command-and-control and reduction of the emissions. Business community wanted some flexible compliance mechanisms in reducing emissions. (0:36:07)

They can either make direct reductions so their refineries or whatever carbon they were emitting could be continued to go on but reduce their emissions to comply or they could purchase allowances that would allow them to pollute; we always say, they would have to pay to pollute. So the discussion we’re having and it gets to be hanging on very much insider’s game, I guess, is do you want to in future years pass cap and trade post 2020?

There’s some legal debate on whether you needed two-thirds vote or not. I would say to you, most of the business communities now that SB 32 is passed and there’s a cap on emissions going to 2040, they will want the flexible compliance mechanisms and that it may require a two-thirds vote. So part of the discussions in cap and trade is where the money is being expended and most of the benefits would probably go to a lot of the disadvantaged communities who bear a disproportionate share to the impacts in climate change; that gets a lot of people in the room as well. So I would say that'll be one of the discussions in the next two years for Governor Brown in the next legislature.

Greg Dalton: We’re talking about California's climate action plan at Climate One. That’s State Senator Fran Pavley. We also have Cathy Reheis-Boyd, from the Western States Petroleum Association and Dan Sperling, a member of the California Air Board. I’m Greg Dalton.

We’re going to go to our lightning round and ask a series of yes or no, quick association questions of our guests. So yes or no, Dan Sperling, electric vehicles will save the bacon of electric utilities otherwise caught in a death spiral?

Dan Sperling: No. They will be successful, but they would not for the --

Greg Dalton: They won’t save the utilities. Cathy Reheis-Boyd, you are happy Senator Pavley is termed out of office?

[Laughter]

Catherine Reheis-Boyd: No. No.

Fran Pavley: I have to say I always offered the oil companies an option; they could have bought out my contract, I’ll live in Hawaii --

[Laughter]

No. So SB 32, see what happens.

Dan Sperling: You can say anything you want now.

Fran Pavley: Isn’t that nice? I’m just kidding.

Catherine Reheis-Boyd: Yeah, of course.

Fran Pavley: I’ve actually enjoyed the relationship but, you know, as former senator Sheila Kuehl always told me, you can always be gracious when you win.

[Laughter]

Greg Dalton: Fran Pavley, oil companies extract fuel from the age of dinosaurs and if they don't adapt quickly some of them may become dinosaurs themselves?

Fran Pavley: True.

Greg Dalton: Cathy Reheis-Boyd, Tesla’s gigafactory for car batteries gives you heartburn?

Catherine Reheis-Boyd: No.

Greg Dalton: Cathy Reheis-Boyd, yes or no, white people in California breathe cleaner air near their homes than people of color?

Catherine Reheis-Boyd: Could be true.

Greg Dalton: Dan Sperling, when it comes to fighting public interest in cleaner fuels, Chevron is the new Exxon?

Dan Sperling: Well that implies a lot of things. They have not, Chevron has not been supportive of biofuels.

Greg Dalton: We are going to change this a little bit and just I want to mention a word or phrase and you tell me what first pops into your mind. No filtering.

Catherine Reheis-Boyd: This is kind of fun.

[Laughter]

Greg Dalton: Cathy Reheis-Boyd, the new Chevy Bolt the BEV with a 200-mile range and a $35,000 price tag.

Catherine Reheis-Boyd: What am I supposed to say, what pops in my mind?

Greg Dalton: Yeah, what do you think about the Chevy Bolt?

Catherine Reheis-Boyd: Interesting.

Greg Dalton: Fran Pavley, hamburgers.

Fran Pavley: Less beef.

Greg Dalton: Dan Sperling, high-speed rail.

Dan Sperling: Hopeful solution.

Greg Dalton: Cathy Reheis-Boyd, Volkswagen diesels.

Catherine Reheis-Boyd: Like them.

Greg Dalton: Governor Jerry Brown, for Cathy Reheis-Boyd.

Catherine Reheis-Boyd: Pragmatic

Greg Dalton: Also last one for Cathy, not last one, another one for Cathy. Cathy, California's new law regulating cow burps and other certain super pollutants.

Catherine Reheis-Boyd: Tough.

Greg Dalton: Dan Sperling, the American Petroleum Institute.

Dan Sperling: Slowing things down.

Greg Dalton: Also for Dan Sperling. Fran Pavley’s legislative legacy.

Dan Sperling: Brilliant and long-lasting.

Greg Dalton: Fran Pavley, fracking.

Fran Pavley: You got it I think.

Greg Dalton: You wrote the law regulating, it’s on --

Fran Pavley: I know, I had to work with the oil companies. And we did it but it’s regulated. We know where they’re fracking, what water they’re using. They better not be contaminating aquifers and eventually it'll be phased out.

Greg Dalton: Also Fran Pavley, retirement.

Fran Pavley: Looking forward.

[Laughter]

Greg Dalton: And the last one for Cathy Reheis-Boyd. The Republican Party.

Catherine Reheis-Boyd: In transition.

[Laughter]

Greg Dalton: Alright, that’s the end. How they do? Let’s give them a round for getting through that.

[Applause]

[CLIMATE ONE MINUTE]

Announcer: A big part of meeting our state’s emission reduction goals is getting Californians to give up the gas-hoggers. In 2011, Anthony Eggert of the California Energy Commission envisioned us having a million EV’s on the road by 2020. So, how are we doing on that? Eileen Tutt of the California Electric Transportation Commission joined us recently with an update – and some good reasons to make the switch.

Eileen Tutt: We have about 160,000 vehicles and so we have four more years to do 840,000 vehicles. I believe we can make it to a million, but I think the challenge right now is all about gas prices. The fact that you can get gas at two dollars a gallon is really, really hurting this market. And I don't see that changing anytime soon but I guess I'm still hopeful that we’ll get close to a million. I think it's great to have that good target. And I want to point out that I think what we’re doing in California, the zero emission vehicle requirement from the Air Resources Board is very important, but we also have incentive programs.

The federal government offers very generous incentives. There's something called the low carbon fuel standard where your utility will give you money on your utility bill if you tell them you have an electric vehicle and you plug it in at home. There are HOV lanes in California. So in this state the mandate or the requirement on automakers is one component but I think part of the reason we’re succeeding this time where we didn't succeed last time, is because the state government in all, you know, at the Public Utilities Commission, at the California Energy Commission, at the Air Resources Board and now the Federal Government. Everybody's pulling together to try to encourage consumers to make, you know, the greenest choice out there which is a plug-in electric vehicle.

Announcer: That’s Eileen Tutt of the California Electric Transportation Commission, speaking to Climate One in 2016. Now, back to Greg Dalton and his guests at the Commonwealth Club.

[END CLIMATE ONE MINUTE]

Greg Dalton: We are talking about climate change at Climate One with our guests Cathy Reheis-Boyd from the Western States Petroleum Association. State Senator Fran Pavley and Dan Sperling a transportation expert.

Dan Sperling, tell us about Paris, you said earlier that California's leadership was significant. So Paris is this big deal, all the countries are on board for doing it. How does California matter there as Cathy Reheis-Boyd said earlier we’re only 1% of the problem?

Catherine Reheis-Boyd: Less than.

Dan Sperling: I was hoping you were doing part of the previous. I was going to say great wine, cheese.

[Laughter]

Greg Dalton: Oh, Paris. Yeah, yeah.

Dan Sperling: More serious so. Well, I think California has played a huge role in one as a leader and influencing and watching what happens in Washington, never mind elsewhere. You know, like I personally, I worked with China on their development of a zero emission vehicle mandate for China.

So we from California are having a lot of influence around the world and we give, I mean, for a long time United States was kind of a laggard in addressing climate change, and I think now, you know, thanks in large part to California's role it's no longer seen that way. In California, you know, when Governor Schwarzenegger and Governor Brown they go around the world and they speak and they encourage the sub nationals and they’re having a big influence.

And Paris represents the nations of the world joining together and saying we've got a big problem. We've got to do something about it. And we used to hear all these stories about well, we’ll be disadvantaged relative to China, but everyone's on board. China, you know, is investing more in renewable energy and is investing more in electric vehicles than we are. So, I mean, I don't buy the argument anymore that, you know, worrying about being disadvantaged. There are so many parts of the world that are moving forward aggressively, more aggressively than we are.

Greg Dalton: And one area that is pushing that is this increasing well, concern about the carbon budget, there’s a certain amount of carbon that we can burn to stay below with a redline the world community has drawn. We are already more than halfway there I think. At current rates we burn through that whole budget in about 10 years. Early last year we had Angus Gillespie, vice president for CO2 at Shell Oil here at Climate One for a discussion on the future of oil. He had a very interesting point to make on what has been described as a carbon bubble. Let's listen to Angus Gillespie from Shell Oil.

[Clip]

Angus Gillespie: So you’ve heard a lot of talk recently about things like unburnable carbon, the carbon bubble and other things. This is the market the investors are starting to realize how significant a risk climate change can be to their investment stalk. Now, this is a type of thing that starts to get real action because once senior executives see the impact on the stock price then you know real activity, long-term activity really starts to take traction.

[Clip End]

Greg Dalton: That’s Angus Gillespie from Shell Oil. Catherine Reheis-Boyd, that's an oil executive saying that they’re concerned about this 30-year investments they’re making that they may not get their money back; they have to write down those investments if there is a price on carbon or -- the economics are changing.

Catherine Reheis-Boyd: And I think one of the things that I'm very interested in hearing about from Senator Pavley and Dr. Sperling is this issue of how do you price carbon. I’m in an interesting position with my companies that I represent that have different views on market mechanisms and as you know we have two. We have a cap and trade program which is a market mechanism and we have a carbon tax which is a market mechanism. And for the audience the only difference is, is in cap and trade you certainly know the emission reductions you’re going to make but you are not as certain about the price.

On carbon tax, you know the price but you’re not as certain on the reductions you make, but they're both driven by the market. And I'm very curious where the conversation is going to go on cap and trade versus a carbon tax because you’re looking up in Washington State. I mean, we have an initiative of 7-32 on the ballot right now that is a carbon tax. So you’ve got all these different things sort of swirling around on what is the right answer. I know the Air Resources Board certainly looked at a carbon tax early on. So I’m just sort of curious if I could just get their views on that versus cap and trade. I’m just fascinated by trying to figure it out.

Greg Dalton: Senator Pavley, California has chosen cap and trade. Secretary Shultz and some Republicans support a carbon tax. There are some rumors that a carbon fee may be introduced to the new Congress next year 2017 by Republicans. Your take on how that would affect California.

Fran Pavley: It's been a fascinating discussion and I think we all agree you have to put a price on carbon and that's what we’re doing whether it's cap and trade. Here's where I have an issue with the carbon tax. It really is not a very progressive tax; it really disadvantages, you know, lower income people. It does send a price signal. But let's look at this.

Right now, if oil companies are polluting, they’re buying allowances and we’re using it to reduce greenhouse gas emissions that we can quantify those reductions. A carbon tax, they're not paying a thing. You're paying it at the pump when you refill your car. It's the public that's paying it. So when we had this discussion a few years ago, Darrell Steinberg had authored a bill that was supported by the oil companies, they want to shift it over there.

So it does have a price signal. Some people prefer that. I think national policy we should all get behind whichever direction that they so choose. But you need a combination of incentives and investments in order to reduce carbon emissions. I'm not sure carbon tax by itself is going to get the job done because of the cost shifting it's going to go to. It's not going to the polluter per se unless there’s a way to do that. It's going to the end-user.

Greg Dalton: Dan Sperling, it’s pretty messy. There are different states tackling this differently. We don't have national action. You know, how can this be effective?

Dan Sperling: Okay. I need to speak as a professor here. I did my diplomatic answers already. I mean, okay, one big issue here is how do you use the money because with the carbon tax you generate lots of money too. I mean, you generate essentially the same amount of money depending on how you do it whether it's cap and trade and carbon tax. And one question is how do you use that money.

And, you know, I think to get it accepted on a national level it's going to have to mostly go back through income taxes or rebates. And you can structure it so that lower income people get more of it. And that probably should happen; you should probably take a certain percentage of it, and dedicate it to those that are most disadvantaged. You should probably take some of it to companies that are disadvantaged in some way. You probably should put a little in R&D, but probably I mean most economists now would say you should give it back in some way, that's the most efficient thing to do.

So the problem, so the thing with carbon tax, so one, I used to be a much stronger advocate for cap and trade relative to carbon tax but one of the things I’ve come to understand is with a carbon tax something Cathy said, I think is right is that it sets a specific certain price on carbon. And I always thought, yeah, okay, but company after company comes to me, biofuel companies all kinds of low-carbon efficiency, innovation, efficiency companies say I need to know what the price will be so I can go to the bank, you know, low carbon fuel standard is another one.

I need it when I go to the bank I got to be able say, I’m going to get that much, you know, bonus from having a price on carbon. It's one of the weaknesses of the cap and trade. On the other hand, cap and trade really provides a structure with a certain amount of certainty, it makes it easier to connect with other geographic regions, you know, at the end of the day there’s no good answer on this I think.

Greg Dalton: We’re going to go to audience questions. We’re talking about climate change at Climate One. Welcome.

Female Participant: Hi, my name is Sarah Golden. I run an online social media campaign called Stop Fooling California. My question is for Catherine Reheis-Boyd. I'm wondering if in some ways when you look at the past and what’s happened in energy and climate policies. If you in some ways, have blind spots of what's going to happen in the future and how much you're, the way that you represent different industry interests may shape the way that you may not be forward-looking.

Catherine Reheis-Boyd: Well, thank you for that question. And obviously I know your organization well. I hope not. I mean, I really hope I don't. And I hope our industry doesn't. And I think we have evidence of that. I mean we've been engaged in these conversations since 2006. I mean we were supportive of the bill in 2015, which was to actually extend cap and trade past 2020. That was our organization. That was the Atkins Bill AB 1288. Now we certainly had things we wanted to make sure happened if that was the case.

And again we didn't as an industry, you know, we don't even have a position on whether we prefer cap and trade or carbon tax of both market mechanisms. And I have companies who like one versus the other all over the place. So we do support having a market mechanism but not necessarily which one of those the state may choose. As Dan said it kind of makes the same approach.

And so the only things we were concerned about if California picked a cap and trade program, which we did, was to make sure that the businesses and consumers are as protected as possible because the costs are high and we still have a state that’s very diverse. We have still a high poverty rate. We still have people that are very much unemployed and above the national average.

So we have to look at these choices going forward as I think we have, both from the environmental side and the economic side. And I am a firm believer that the two go hand in glove and that you can have both. But the design factors are really, really important on what we do here not only in the past, but certainly now going forward.

Greg Dalton: Economist Nick Stern who was sitting up here a couple months ago would also say there's a cost to doing nothing. That climate change can shave 10% to 20% off of global GDP. So would you recognize Cathy that there is a cost of inaction also?

Catherine Reheis-Boyd: Absolutely. In fact there is three really there, I mentioned two. I mean it’s really social, environmental and economic, right. It's all three of those that are very, very important. And how we deal with communities is extremely important. And in the space of climate change I'm hoping that we can understand that at least for communities dealing with pollutants that are impacting people's health is through a program that's designed in the criteria pollutants side.

It's with particulate matter and sulfur dioxide and nitrogen dioxide that is a direct impact to health. That is not a climate change problem. That's a criteria pollutant problem. When we’re in climate change, we’re talking about a global pollutant that we cannot just be the only state that incurs huge cost because energy costs are high, electricity is high. I mean, and we have a very diverse population. So it's not an easy answer, right. We've got to come together on all three of those social, economic and environmental policies.

Greg Dalton: Let’s go to our next question. Welcome to Climate One.

Male Participant: Yes, Jeff Ricker. Fran and Dan, has anyone quantified the benefits of these laws here in terms of how much lower the world's temperature is from all this?

Greg Dalton: Dan Sperling, how can you measure California's leadership quantified?

Dan Sperling: Well, we haven't gotten much reduction as I said in the beginning we’re really just getting started. So the amount of reduction, I mean, you know, you could twist that question into all kinds of things. But I think at the end of the day, you can't think today, tomorrow, one year. This is the future of the planet the future of the human race, the future of species.

So we know we need major reductions. I think a much better way of thinking about it is, you know, what do we do that's most cost-effective as soon as possible, but also there are some things we have to position ourselves for the long term as well. It might cost a little bit more in, you know, in the near-term. So it's really certainly we need to be using cost as a metric and analyzing what we do, but there's a lot of uncertainty and both on the cost side in terms of forecasting costs, you know, that's my profession.

And I hang out with people that were forecasting what's the rate of innovation, what’s going to happen the cost of batteries, what's going to happen to all these new technologies that we’re talking about. But then there's uncertainty there, there's even more uncertainty on the impact side to know how bad are we destroying the world, fires and rising waters. So yes, I could give you a quantitative number but it wouldn't be very meaningful because we need to, you have to think about it as a supply curve of options.

And let's start doing the cheapest things and preparing for long-term and then we'll figure out the price of carbon. I mean people say it should be valued at $50. We are not pricing. So most people say we should price at $50 a ton. Our cap and trade program is $12 a ton. So clearly we’re not doing a good enough job in California and elsewhere in terms of pricing carbon in a way that leads us to the best, most cost-effective reduction in carbon. (01:00:01)

Catherine Reheis-Boyd: Greg, can I add to that?

Greg Dalton: Sure, Cathy, go ahead.

Catherine Reheis-Boyd: Oh sorry. Want to go first senator?

Fran Pavley: Well I just, we've had sort of those kinds of questions thrown at us before sort of that gotcha kind of thing. So I wanted to talk about is really sort of success story. And I was in the legislature back in 2002 or ‘03. The most controversial bill back then was to come up with renewable portfolio standard. All the utilities opposed, Chamber of Commerce opposed and this was for 20%, it was the Senator S bill, 20% of all our energy make sure come from clean renewable sources. We just come through a horrible deregulation where economy had really tanked, brownouts everywhere if you remember. We’re in such a better place today. We have diversified our energy supply.

So fast-forward, several years after the 20% showing that we could do that and the utility companies got behind it because they realized it was really a smart investment in renewable energy for them to diversify their portfolio. Then it came to 33% we’ve getting bipartisan support in the legislature because wind and solar companies are in everyone's district. And now the utility companies at the plate ended up supporting 50% of all the energy mix in the state of California will come from clean renewable sources; in state jobs no more Enron gaming the system here that's been a tremendous benefit to the state of California and its economy and the concern at the beginning was the price of photovoltaic cells.

It's cost effective, we have financing plans like the SolarCity no upfront costs and the list goes on and on. So these embedded policies in what is called AB 32 or SB 32 are the real success stories where they’ve saved people money and also help the environment, but creating jobs at the same time. And so those are the kinds of cost effective, technologically feasible conditions with those market signals for investment in our state that have become really beneficial.

Greg Dalton: Let’s have Cathy quickly and then we’ll go to our next question.

Catherine Reheis-Boyd: Yeah, the one thing that the gentleman brought up that just spurred a thought and that is with SB 32 and AB 32 you really are talking about problem with like 55% reduction or I think it’s about 15% into AB 32, another 40% projected under the new bill. That's 55% reduction in emissions from a state that's less than 1% of the problem. And so I just, I don't say that in a negative way.

I just say it in a way that we should condition our leadership such that we challenge other people to join in the fight on climate change, because if we don't and that’s why you hear economists talk about conditioning California's policy like we’ll do it if you do. To challenge them to join because if not, the cost of 55% reductions in this short of a time period when it’s less than 1% of the climate’s problem, that’s a hefty price tag. And so it just reminded me that --

Greg Dalton: I've gone to several of the UN climate conferences. The one in Mexico particularly was after the collapse in Copenhagen. And people look to California leadership, without California leadership the U.S. is not as credible. They look to California for leadership on culture and innovation, lots of things. So that leadership matters it makes the U.S. more credible in those international arenas. Let’s go to our next question.

Greg Dalton: Next question. Welcome to Climate One. We’re talking about climate change.

Male Participant: Hi, Ryan Shoehart with Calstart. Senator Fran Pavley, thank you for your many years of brilliant leadership. I have a question for anyone who’ll take it. One year ago we got SB 350, which directed CPUC to direct utilities to accelerate widespread transportation electrification. Last week the CPUC did so and utilities are now working on that. What does widespread transportation electrification look like? What will we see when it's here?

Greg Dalton: Who’d like to tackle that? Dan Sperling, car guy.

Dan Sperling: My favorite topic.

Catherine Reheis-Boyd: He’s writing a book.

Dan Sperling: Yeah, I’ve written many books about that. So electrification is -- for light duty vehicles, it’s going to be almost total electrification. It's really just a question of how soon and exactly the nature of it. So I drive a hydrogen car which is an electric car. And I get hydrogen, but it's an electric car. So we’re going to have some mix of battery electrics, plug-in hybrids and fuel-cell electrics, light duty. The heavy-duty, the trucks is a lot more problematic. It's more challenging.

It's going to be some mix of electric battery electrics for shorter vehicles making short trips and biofuels and hydrogen. But I think it's pretty clear that we’re going to light duty, we are definitely electric. You can talk to any car company, not a single one of the major car companies would argue with that anymore. It's a done deal and it's really just a question of how fast do we do that. And so that means, you know, more chargers, you know, fast chargers, hydrogen stations out there.

Catherine Reheis-Boyd: The gap is pretty large. Obviously the time period here matters because it’s about 3% of the market right now in California. We have about 200,000 electric vehicles and 26 million other kinds of engines. So that's a pretty big gap between the two. So I think the timing issue that Dan brings up is a really important one. And let's not forget natural gas, I mean it has been probably the single most, you know, biggest thing we've done in the United States to deal with climate change is our ability to produce natural gas.

Greg Dalton: Let’s end it there. Our thanks to State Senator Fran Pavley, Cathy Reheis-Boyd with the Western States Petroleum Association and Dan Sperling. I’m Greg Dalton. Thank you all for coming and listening.

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Fatih Birol

2021: This Year in Climate

How Activism Can Win Bigger and Faster with Kumi Naidoo

This Year in Climate: 2023

Green Energy / Red States

Ukraine and the Middle East: Climate Action in Conflict Zones

Solar Flare-ups

Daniel Yergin: Energy, Markets and the Clash of Nations

A Paris Progress Report

Clearing the Air on Carbon Offsets

Clearing the Air on Carbon Offsets

Guests

Lisa Song

Michael Greenstone

Barbara Haya

Carbon Offsets: Privileged Pollution?

Corporate Net Zero Pledges: Ambitious or Empty Promises?

Jay Inslee, BP and Washington’s Climate Story

Mark Carney, Fatih Birol and the Narrow Path to Net Zero

Letters to The Boss: Help Fix Our Climate

Can California Go Carbon Neutral?

Is Silicon Valley as Green as it Claims?

California's Climate Crusade

Letters to The Boss: Help Fix Our Climate

Letters to The Boss: Help Fix Our Climate

Guests

Jacob Adamson

Sara Law

Joel Makower

Sarah Read

Swami Venkataraman

Andrew Winston

This Year in Climate: 2023

Corporate Net Zero Pledges: Ambitious or Empty Promises?

Climbing, Conservation and Capitalism

Is Silicon Valley as Green as it Claims?

Jane Goodall and Yvon Chouinard

Aligning Profits with the Planet

Yvon Chouinard: Founding Patagonia & Living Simply

Tomorrowland

Carbon Offsets: Privileged Pollution?

Carbon Offsets: Privileged Pollution?

Guests

Kahlil Baker

Derik Broekhoff

Zoe Cina-Sklar