← Energy Gang
Loading summary
Transcript109 lines
- [00:02]
A
Looking to understand the geopolitical and global forces at play shaping our energy future. Then check out a new podcast series, the Future of Energy from Gzero Media and Imbridge, co hosted by JJ Ramberg and Greg Ebel. They dig into the biggest energy challenges and opportunities like AI policy and innovation with experts like Pulitzer winner Daniel Jurgin and Canadian Member of Parliament Lisa Raitt. Listen on Apple, Spotify or wherever you get your podcasts or or visit gzeromedia.com energygang hello and welcome to the Energy Gang, a discussion show from Wood mackenzie about the fast changing world of energy. I'm Ed Crookes and this is the latest in our series of special episodes from the COP 29 climate talks in Baku, Azerbaijan. In a moment, I'm going to be talking about a very important and under discussed topic, energy efficiency, with John Kreutz of rmi. But first, although President elect Donald Trump has not sent any representatives to the conference, he's been looming large over proceedings here. The US Is the world's largest economy and in recent years has been one of the most dynamic in investment and innovation in low carbon energy. Every other country here wants to know how energy in the US Will evolve under the coming administration. So to discuss what the next four years hold for energy in the US I'm joined by Zach Friedman, who's the Senior Director of Federal Policy at ceres, which is a group. Well, how do you describe what you do? You work with investors and businesses on sustainability, right?
- [01:36]
B
Yes.
- [01:36]
C
We have two sides that work on what we call operational leadership. So helping companies on their sustainability journeys. And we take those leaders on sustainability to advocate for smart federal and state policy that drives private investment in technologies and solutions that reduce costs and emissions and strengthen our economy.
- [01:54]
A
Fantastic. Well, welcome to the Energy Gang. Great to have you on here. And it's also a pleasure to welcome back Vijay Vaithi Sawaran, who is the global energy and climate innovation editor at the Economist. Hi, Vijay, how are you?
- [02:04]
B
Fantastic. Great to be back on the show.
- [02:06]
A
Yeah, well, it's great to have you. I'm very pleased that I kind of caught you with a coffee, but I spotted you across the road.
- [02:11]
B
Ah, there's no escape.
- [02:12]
A
There's no escape. Exactly. You can run, but you can't hide. The Energy Gang will catch you in the end. So, look, I'm particularly glad you're here because I was hoping to get you to talk a little bit about the article you've just had published in the Economist on essentially what to expect for energy under the second Trump Administration, Very good piece. I would free plug here and advise everyone to go out and take a look at it. Some very interesting thoughts in it. And the way I read it, and feel free to correct me if this is not your intent, but you're basically saying some of the discussion about energy, everything's gonna be different, is overdone and you think there's gonna be a lot more continuity perhaps, than people think, relative to what we've seen under the Biden administration.
- [02:57]
B
Yeah. So of course, art is always in the eye of the beholder, Ed. So if that's how you saw it, of course that's what my opus meant. No, seriously, Trump coming into the White House almost certainly will lead to some negative consequences for the climate movement. We're at a climate conference, COP 29 here. So of course, for this crowd that's concerned about global cooperation, certainly bad news. Almost certainly he will pull the US out of the Paris Agreement on day one for show or certainly soon thereafter, like he did last time. Maybe they might even try to pull the US out of the UN Framework Convention, which is a much more serious thing. But that's fiddly and complicated and he probably won't focus on it. And it probably won't mean much if the US Is a refusenik to begin with. That has to be said up front. So no good news for international climate cooperation or US Funding for overseas climate efforts on climate.
- [03:46]
C
But.
- [03:46]
B
But if you say, what's the question for energy under Trump? And the answer is probably more of all of the above, which is kind of what we saw under Biden.
- [03:53]
C
Right.
- [03:54]
B
So we have to start with the baseline under Biden, despite having a lot of climate credentials with the Inflation Reduction act and so on, we saw the greatest rise in oil and gas and including exports of LNG under his administration. That's going to continue. And in terms of clean energy as well, where we're going to see in places like Texas, market driven reasons why those are going to continue. And so broadly speaking, I think there'll be a slowdown in decarbonization, but the direction of travel won't change very much.
- [04:21]
A
Right. As you say, that's one of the great ironies. During the election campaign, there was a lot of rhetoric from the Republicans about how the oil and gas industry had been shackled during the Biden administration. And yet oil production at new record highs, natural gas production at new record highs, the US Emerging as the world's largest LNG exporter for the first time. I mean, I think one of the lessons I take from that is just that the power of any federal government to influence what happens in the energy industry is limited. I mean, it does have some power, right? It's not totally powerless. But you can't just wave a magic wand and transform the energy industry.
- [04:56]
B
I mean, OPEC and Chinese demand are far more influential on the oil price and on investment decisions in oil markets. Shareholder discipline is probably what's holding back or thrusting forward investors and drillers in shale, much more so than federal policy. Now, that's not to minimize the impact of methane regulation, for example, which is extremely important when we talk about upstream regulation of the industry. And so there are areas where there can be specific impacts. But if you talk about the broad energy supply and the energy mix, the White House has a lot less power than a lot of people think.
- [05:28]
A
That methane regulation you mentioned is that, you said extremely important. Is it really extremely important? I mean, my sense of it is that a lot of companies, certainly all the larger companies, already have pretty demanding targets for reducing methane emissions. The impact of the regulation on them not going to be very much at all.
- [05:46]
B
Well, it's interesting because you put your finger on it on an issue that I think is actually reveals something that's not widely understood about the support that oil and gas gives to Donald Trump. The methane fee, which is a particular provision within the ira, almost the only stick within a big bag of carrots, basically money for everyone, subsidies, tax breaks for everyone. But there was this fee which is almost perhaps the first time the US introducing an externalities pricing scheme related to climate at the federal level. So it's a big deal in a way. And that precedent is not liked by generally the oil and gas industry broadly. So it's probably going to go away. I think it was not that it was such a powerful effect as a regulation, but it was a signaling effect. And the big companies like Exxon, like Chevron, like Conoco, are actually taking actions already. They're committed to net zero. I've actually been out in the Permian where they've made rejigging of their methane capture and so on in order to monetize it and comply with some OGCI or other industry standards on this. But there's a lot of independence. And those are the guys who actually were the big Trump guys, the Indies, the shale drillers, the guys who are not at the top tier but who represent the long tail of production. They're often the dirtiest as well. They're the ones that have been the scofflaws. If they go bankrupt, they just leave the drilled areas uncapped. And so the lion's share of emissions will come increasingly from the smaller guys. And those are the ones who are big supporters of Donald Trump. We saw the chairman of Exxon here walking around Baku actually saying the US should stay inside the Paris agreement, the US should support the ira. Donald Trump specifically should not reverse the ira. So you're seeing the bigger oil companies have a divergence of interest, I would put to you. And picking up on your point, they actually already committed to doing this sort of methane action.
- [07:31]
A
Yeah. So that's a great point. When you look at a lot of American businesses, including even ExxonMobil, the largest U.S. oil company, they have the CEO saying, keep the U.S. in Paris, don't unwind all the measures in the inflation Reduction Act. Do you think that's going to have any effect? I mean, Zach, what do you think? What do you expect under the second Trump term?
- [07:50]
C
And before I go there, maybe one point on the methane fee or waste emissions charge that was preceded by hundreds of million dollars of investments to oil and gas companies to fix their leaks. And obviously we all know that methane leakage is wasted product that companies could sell to the market. So oil and gas companies want to sell more product and not waste anything. So that's very important. I continuity there. On the question of Paris, I think from our high level perspective, businesses and investors need certainty. They've had certainty. And we've just seen hundreds of billions of dollars in private sector investment invested reshoring American manufacturing, strengthening U.S. competitiveness, reducing our reliance on our foreign adversaries, and reducing costs for American families and businesses thanks to these investments. And so really, I think, to be honest, it's not really about Paris, but it's about America. And it's about Pittsburgh and Cleveland and Detroit, places like Dalton, Georgia and Casa Grande, Arizona, where we want to continue. And even, you know, energy hubs like Houston and Baton Rouge. We want to continue American leadership of producing the heavy industrial goods, the advanced finished goods and advanced technologies that we all need. And again, certainty for businesses and investors is what they need. And the world is going to keep on moving without the US and we don't want to see these, you know, economic opportunities of these, you know, really crucial industries of today and tomorrow to foreign countries and including our adversaries. You know, we want to make the vehicles, the technology, the steel, the agricultural goods in communities across America.
- [09:17]
A
So what you've just said seems very reasonable and rational. I still wonder whether it's actually going to carry the day, though. I Mean, what indications do you get when you talk to people in business, when you talk to people in Congress, what's going to be a new generation of a Republican controlled House of Representatives and Senate? When you see the kind of people that are going to be going into the administration in the White House, do you think that argument as you've sketched it out about American economic interest is actually going to carry the day? Or is it possible that partly, just as a sort of instinctive, reflexive reaction to not wanting to be like the Democrats, we'd actually see more change?
- [09:54]
C
To be honest, you know, I think we've brought our businesses to Capitol Hill and meet with Republicans for the past year plus and that resulted in a letter from 18 House Republicans this past summer telling Speaker Johnson to continue the incentives from the ira.
- [10:07]
A
Oh, was that something you were involved in? That letter does seem very significant, particularly given that the Republican majority 1, 2.
- [10:13]
C
3, 4 seat majority in 18 is quite a lot. And there are more where that came from, you know, beyond that 18. But obviously, you know, I think over the coming year with the Trump tax cuts expiring and you know, there's going to be a lot of competing pressures on these folks. But again, I think they and more see just again the real tangible benefits of these incentives that are driving investment in their communities. Again, Dalton, Georgia, Morgan, Utah, Casa Grande, Arizona, and then, you know, cities and communities across the country just to bring.
- [10:42]
B
A specific kind of number to it, or a couple of them. Multiple analyses have been done on where the investment from the infrastructure law, particularly the ira, but also the bipartisan infrastructure law, the companion law, and 70 to 80% of the money has been going to rent districts to Republican districts. And rmi, the environmental think tank, counted up just the projects in the Gulf states, Texas and Louisiana, worth a billion dollars or more on decarbonization, industrial decarbonization, big heavy projects in very conservative districts. More than 80 projects they've counted. That was a year ago. It's probably more by now. And these are all ones with people working on these projects that are counting on these tax credits. And so I think the power of self interest and lobbying will ensure that hydrogen CCUs and a number of other tax credits that are part of the IRA and the infrastructure law will have constituencies. Now that's not true for everything. I think the EV credits are on the line. They were unpopular to begin with, with the number of even Democratic congressmen, probably poorly designed. So they're going to be cherry picking off of the ira. But there will be a Lot of defenders looking out for their own self interest, who will fight for big parts of them.
- [11:49]
C
And it's beyond, I would say, carbon capture and hydrogen, you know, in the Deep south and again, in communities that have been hard hit by deindustrialization for decades, we're seeing billions of dollars of private sector investment creating jobs, you know, bringing back opportunity to these communities. And it's not just, again, you know, there's obviously the folks who work in those factories, but then there's, you know, the restaurants who can hire more folks, you know, the real estate builders in those communities that need extra housing, et cetera, et cetera. So there's just a real renaissance of American manufacturing and economic development that we really need to continue in this country. And we're making this, you know, building bipartisan support for that.
- [12:24]
B
I think that's the, you know, the, the broad canvas, but the specifics of the next few months, I think, however, we are going to see a Trump shock, and we're already seeing it in some renewable energy stocks. Right. They're getting punished. A lot of the 130 to 160 billion dollars of investment that's been brought in, including a number of foreign investment projects that have been announced in America by these triple whammy of laws. If you really want to go back to the CHIPS act, infrastructure law and the IRA going this direction, they have not gone to FID to final investment decision. Right. And so it's possible, if there is a very aggressive action by the Trump administration with radical attempts to undermine, if the GOP somehow galvanizes around eviscerating these laws to look for monies to pay for a tax rollover or other projects, then I think some of them may not materialize. I think there's a bit of a wait and see among some of these projects, but the broad trend I think is right, and I think Zach and I agree on this.
- [13:19]
A
Right. So you mentioned a tax rollover. You have all of these tax cuts in the 2017 tax cuts and Jobs act, which are coming to an end. They expire at the end of next year or many of them. Sorry, but. Yeah. Well, Gordon, then you probably know better than me what the details are. So my understanding of it is that, as you say, a lot of them expire end of 2025. If you renew all those tax credits, there's a very big bill for that that's kind of four plus trillion dollars over 10 years to renew those. And under those circumstances, then you are going to get, as Vijay says, you're Gonna get kind of a lot of pressure to make savings wherever you can. And does that not then end up putting some of these Inflation Reduction act tax credits in the line of fire, making them potentially vulnerable, because there's gonna be so much desperation basically to save money wherever they can. They're gonna look for targets to do that. And these tax credits are an obvious potential victim.
- [14:13]
C
That's the fight. And yes, I mean, obviously there's been a lot of rhetoric, but I think since Republicans retook the House till now, we've seen the kind of ambition cutting the IRA quite a bit. Right. So I think we've gone from a scalpel, not a sledgehammer. And I think again, businesses need this certainty and not have a tilling effect. We all want to reduce our reliance on China, but they are ahead of us. And we can't just overnight bring back supply chains. That takes time. But we need that certainty and the long term investment here to make that happen. And the investment, we were already seeing this and we'll see more. The investment will come back to America. And these are so smart and strategic and economically almost existential for a lot of these communities. And we don't want those to go.
- [14:56]
A
So question we've been talking a lot about then, potential downside risks for clean energy under the Trump administration. Are there potential upside opportunities as well? I wonder, when you think about some of the priorities that the new administration is going to have, certainly sort of manufacturing, strengthening the US Manufacturing base is going to be one of them. National security is going to be another. In particular, national security as that's reflected in the sort of the AI race. If you think AI as being like rocketry in the 1950s, you know, we had a space race with the Soviet Union. We've now got an AI race with China. It's very clearly a technology that has huge military implications as well as civilian implications. And AI means data centers, and data centers mean power. And therefore there was that quote from President Elect Trump wasn't there when he was on the campaign trip, he said, see, you know, I'm going to give you so much electricity, you'll be saying, no, no, please, it's too much, too much electricity. Stop it. We can't take so much, as I say. So I mean, what do you think is this actually there are things going to end up being positive.
- [15:58]
C
I think there's two or three. First is we need to keep the tax credits and the incentives in place because, you know, we have both AI and just the overall desire to reduce costs for Folks, right? And we have load growth. So that's why electricity prices are raising. And we need as much electricity on the grid as possible. And the way to do that is having tax incentives for their investment in affordable, reliable, abundant American clean energy. That's first of all, second of all, manufacturing, national security and trade and you know, tariffs with China, I think we can integrate environmental performance into those with the carbon tariff. And Republicans have led on that in Congress. And this is, you know, a triple or, you know, multiple win for American manufacturing and leadership and security against our competitors. And then I'd say third, you know, we're delayed in passing a farm bill and, you know, that's an opportunity to, you know, continue to uplift America's farmers in rural communities as leaders in conservation and stewardship and ensure that we have growing, thriving rural communities and stable food prices and production.
- [17:05]
A
And sorry, how could that relate to energy and climate policy then? What's the connection?
- [17:10]
C
There's incentives in the farm bill for conservation and those need to stay and.
- [17:15]
A
Be expanded for conservation of energy or land.
- [17:18]
C
Yes. On agriculture as a climate policy.
- [17:21]
A
Okay, right, interesting. Yeah.
- [17:23]
B
So let me differ with my learned friend on at least one thing here. I think that the Trump likely policies that we're going to see will have some positive effects for clean energy, but one negative strongly is going to be trade. I think there are negative consequences from the tariffs. He calls himself tariff man and he's created this crazy war with our allies as well as with China in his first term. Biden continued the Trump tariffs and even increased some of them further. I think this is not good for the battle against climate change, for acceleration of ambition. I think having gummed up supply chains where most of the the supply chains needed for solar, for batteries, for a number of the clean energy technologies do come from China. I think increasing those tariffs even further, which you may well do, is going to slow down the fight. I think it's going to be a trade off. Let's be honest. In real life, there's no free lunch. It will take some time to develop American solar industries. I'm not against that, or American clean energy and clean battery chains. But in the meanwhile, we have to acknowledge that there will be costs of larding all of these policies with local labor, local environmental justice. You go through the list of things that the Biden administration policies had as requirements to get additional sweeteners. I think that would and did slow down investment in these areas. And saying every small widget that's involved in the solar supply chain is a National security risk if it comes from China, well that's ridiculous. And we've shown we cannot make batteries at scale yet. We saw what's happened with Northvolt in Europe trying to do that. It's a disaster. A big battery company that was a national champion or European champion. And so there's a great risk that we end up in a dead end or lose a decade. And Detroit, the big car companies take the opportunity to slow down their investments. We're already seeing signs that they want to move towards plug ins rather than pure or full EVs and they're going to take that opportunity to in a sense have a friendly policy regime in Washington. And therefore we again lose a decade or at least four years in that race. But it's a decade in terms of investment cycles, Capex cycles. That is the danger on the negative side. On the positive side, yes, I think that lobbying will keep a lot of these credits going, something we haven't mentioned. On the innovation side, Trump won, was actually pretty good on innovation related to energy. Energy R and D went up. Nuclear policy was positive. That's an area of bipartisan support. And a third area, building stuff. I think we'll get permitting reform done and that's something we could probably find a bipartisan consensus and it may even happen quite soon. So in those areas, if we can build, we can actually accelerate the clean energy revolution.
- [19:51]
C
I would just going back to the trade issue, I would argue, and I would repeat now Vice President Elect Vance's point during the vice presidential debate that America is a clean manufacturing leader. And so solar panels in the United States, the production of that emits less carbon than importing a solar panel made in China. And then you have the shipping emissions as well. I also think from a geopolitical perspective, we have to both drive investment in American advanced manufacturing and protect that investments with, you know, a carbon tariff at the border. You know, again, well designed, phased in over time to allow for, you know, the reshoring of these supply chains. But I think from from a geopolitical and from an environmental perspective and economic perspective, we have to do that.
- [20:37]
A
Do you think we might actually get that carbon tariff for the US in the next four years? I mean, it feels like quite a strench. I mean, apart from anything else, if you were to introduce that, it would mean buying into the idea that climate change is a real problem and it really needs to be addressed, which I feel like the administration's not going to be there.
- [20:56]
C
We have broad Republican support. I mean, Kevin Kramer from North Dakota, Bill Cassidy from Louisiana, John Curtis from Utah, and Bob Lighthizer, Ambassador Lighthizer, who's likely to come back to the administration. You know, all supporters, whether you know, you care about climate or not. Again, this is a geopolitical issue, it's an economic issue, and it benefits the climate as well.
- [21:15]
B
I'll make a prediction. I think within the next two years we'll get a CBAM in America, but it will not be a carbon border adjustment measure, as the Europeans call it. It'll be the China Bashing Action measure, rebranded as sort of anti China, anti carbon dumping. There won't be an explicit domestic carbon price attached. Don't mention the word tax or price. But what it'll be is it'll be a camel's nose under the tent for what will ultimately be the most sensible policy of all, which is carbon pricing at the federal level. That's what we need. Even ExxonMobil, the chairman who's walking around here at COP, supports that, at least so he claims. And this will be the test. Does he really? But once we get there, we get to a world where we have Europe with a meaningful carbon price. China has a carbon price low, but rising. About 27% of world GDP is covered by a carbon price now, according to the World Bank. And if the US joins that party, I think we suddenly get to a world that's much more reasonable, much more practical to find. Rather than having subsidies for everything which are not sustainable in the long term, we have a carbon price that helps deal with the externalities of carbon pollution.
- [22:16]
C
Two additional things in favor of a China Bashing Action measure. Measure one is the revenue point. We need a pay force. I mean, there's not going to be a ton of revenue, but that's one place to get revenue. And it may start on a limited set of commodities, we'll see. But again, it's an opportunity to raise revenue. And then in a little more than a year, we do have the EUC BAM coming online. We need to be at that table and make sure that America's manufacturers are at an advantage, have a level playing field.
- [22:45]
A
And to the extent that the U.S. government is going to care about what the WTO thinks, other international institutions think, it does seem like it's going to be more generally acceptable to introduce some kind of carbon tariff rather than just a kind of a random blanket tariff. And certainly people I've been talking to, we were talking to someone literally just before this conversation started, who was saying that if you think about the way China, for instance, views the cbam, there is kind of grumbling and there's complaining and so on, but it's sort of broadly see where it makes sense.
- [23:15]
B
From my conversations with developing countries, the European Sea bem has been grumblingly accepted. There are steel makers and other industrialists in India who are already making arrangements for contracts for renewable energy for the portion of their exports that will need to go to Europe. It's a fait accompli. And their mindset is beginning to affect investment decisions. I was just in South Africa recently for the Economist, and there too, one of the important parts of the conversation where they're thinking about their transition off of coal and their just energy transition partnership. One specific thing that even leaders in government are saying we have to export to Europe and we need to invest much more in clean energy to decarbonize our economy for that reason. So I think the effect has already, in a sense, they've had a signaling effect even before the law comes into force.
- [23:57]
A
Yeah, as you say, I think that's absolutely right. I think that's definitely what we're seeing as well. And that's a very crucial difference then between that kind of carbon tariff and just a tariff on everything, which clearly is a much more aggressive act and does then push towards some kind of trade war. And I think there's an interesting question there about where the interests of the U.S. energy industry writ large lie, including the U.S. oil and gas industry, because clearly one of the places where countries could retaliate against the US for increased tariffs is on exports, and the US Is a big exporter of refined products, as I was saying earlier, the world's largest exporter of lng, and those are potential vulnerabilities then if a trade war escalates. So it'll be interesting, I think, to keep an eye on that, to see whether that's something again, basically giving the broad US Energy industry an interest in the Trump administration not going too far.
- [24:53]
B
Although on that very specific point, what we were discussing before with methane emissions, one of the reasons the bigger companies in the Permian Basin are very interested in, in seeing some agreement between the US And Europe on this topic, because Europe has rules on flaring and venting and upstream methane emissions, very important rules, because if you do it badly, the idea that natural gas is much cleaner than coal is no longer true. And so we need to make sure. And the bigger companies have committed to technologies and investments, and so they want to gain that market advantage, otherwise they'll be blocked out of Europe. Right. And so I think we see there is a window here for profit, you know, self interest, driving that kind of change here as well.
- [25:33]
A
Yeah, no, absolutely, that's a great point. That if you are going to be exporting gas to Europe, you want to make sure that emissions are low right through the value chain, right from the well at the top through the pipeline.
- [25:43]
B
And I predict the European rules, the European, they call it their observatory for international imported LNG will be cut and pasted by the Japanese and the Koreans. And between those three, you get really the lion's share of the world's LNG market.
- [25:54]
A
That makes a huge difference. I do agree. So look, I wanted to go back to something Vijay, you were just talking about, interested in getting your view, Zach, this question of making it easier to build things, as you say, that's something else where there's quite a lot of bipartisan consensus on this that it's just too hard to invest in infrastructure in the U.S. it's possible to mount too many legal challenges. You have to jump through too many hoops in terms of environmental approvals. Things can be reviewed over and over and over again and projects can be delayed for many, many years. And that's a problem for all kinds of infrastructure. It's very specifically, clearly a problem for low carbon energy infrastructure. It's been a problem for carbon dioxide pipelines, probably for hydrogen pipelines. It will be. It's a problem for power lines connecting wind and solar generation to customers, all of that. So it seems very clear that there is potential there to help the US Low carbon energy industry by doing some kind of deal to reform permitting. That thought has been rumbling around Congress now for many years without ever actually getting anywhere. We've had another bill, the mentioned Barrasso bill proposed this year doesn't seem to be making a massive amount of progress. Doesn't look like it's going to be passed into law now in the dying months of the Biden administration and the lame duck Congress. But what's your expectation, do you think? I mean, is there still a chance we'll see something this year or is there a chance we'll get something in the next Congress and under the next administration in terms of permitting reform?
- [27:26]
C
I think with the election results, the chances of Manchin Brasso have drastically decreased. Unfortunately, I think the companies that are driving load growth and driving economic growth need clean energy and energy as quickly and cheaply as possible. So we do need to build both projects and transmission to get affordable, reliable, clean energy to where it needs to go. I think the Republicans are looking at permitting reform actually in reconciliation, I think a pretty new idea because usually that's a procedural change.
- [27:58]
A
Now, sorry, you're going to have to explain the significance of that. So how does that work? What does that mean?
- [28:02]
C
Reconciliation is the process where you just need a simple majority in Congress where you can pass spending bills. So spending and tax and bills like the inflation Reduction act, like the Affordable Care act, like the Trump tax cuts. And so there has to be a spending element to it where permitting reform is largely thought of as a procedural changes. Right. And legal changes, regulatory changes. So this will be very interesting to see if that passes muster with the parliamentarian who has to review these reconciliation bills. So it's going to be really interesting. But I think it's definitely been talked about and it's a challenge to get consensus around what's necessary. But I think there can be reasonable timelines for projects and that encourage incentivize early upfront engagement with communities because I think that's how investors and folks building stuff can reduce the back end litigation risk engaging communities, getting support early on and then being able to build quicker.
- [28:59]
B
So I asked John Podesta, the White House climate czar when he was here in town a couple days ago, this question about permitting reform because there are some dreams or fantasies that it might happen during the slack period, the lame duck session. There is historical precedent for things getting done in the lame duck session if it suits the parties. Right. If there's a self interest. And so he pointed out the Senate is taking this up. He was less confident about the House. But talking to conservatives in addition on this, the calculation really is since there's going to be GOP control of the Congress, although not perfect control in the House given the rebel, the GOP members, why do a deal that gives anything at all to the Democratic side, to the environmentalists, as it were. Why not wait till we control everything and just have our own bill versus we can't get anything done in the House because this is a fractious topic and so might as well have an imperfect bill now rather than have another two years go by with nothing getting done. That's the conversation in the GOP at the moment. And so I think don't write off the prospect it's slim of something getting done now with GOP support because they have less confidence that they can get their own people along to get this complicated thing done at a time when they need to do the tax package next.
- [30:06]
C
Yes, I think that's the reason why it would happen now and Obviously, you know, Senator Manchin is retiring. I would never underestimate him. You know, he's a force of nature. So we'll see. And to the point of giving environmentalists something, I would say that, you know, the bill doesn't actually, you know, say anything about clean energy or environment, anything. It's about faster, more rapidly deploying projects and building projects, and, you know, that benefits everybody. And obviously, you know, we all want, again, affordable, reliable, clean, abundant energy.
- [30:36]
A
So, Zach, I wanted to ask you about CERES tactics and your kind of plans for the way you're going to operate over the coming four years. When you work with investors, companies, everyone in your network, and you're trying to advance these sustainability goals, what is going to be the right way for you to work with the administration, against the administration, with state governments, with the international community, everybody else? I mean, how do you kind of conceptualize what your position is going to be during the second Trump administration?
- [31:09]
C
I think it doesn't change that much, actually. You know, we bring the business case and the business voice to these discussions, whether those are privately or publicly, in the most strategic, impactful way. So we will continue to mobilize our folks to make the economic case to policymakers in Congress and the administration. Obviously, some of that messengers and messengers change. But we want and have a very large tent of everyone from software and it's technology, food and beverage, heavy manufacturing technology, apparel. So we have a huge tent in energy companies and utilities, the investors. So we just have a huge tent of voices across the economy saying, this makes sense, this is good for the bottom line and the climate, and we'll be continuing to mobilize those folks.
- [31:57]
A
Vijay, what do you expect in terms of relations between American businesses in general and the administration for the next four years?
- [32:05]
B
I think most of the business community, and certainly Wall street, is going to try to stay on the right side of Donald Trump. I think that's as a political matter. He showed last time he was in power that if he didn't like a particular company's behavior, he would call it out, he would tweet, we would see a popular reaction, share price would come down, you would harass the CEO. You don't want to get on his wrong side. So I think they'll do their best to stay on his side of the. His good side. But beyond that, I think, broadly speaking, although they have their doubts about his erratic behavior, they're going to be very happy to get corporate tax cuts. They're going to be quite happy. Right. We saw a business community actually lined up with Donald Trump to a significant amount, although there was some trepidation in certain quarters. Big Tech uncertain about Donald Trump and their interest in clean energy again goes a false foul of where Donald Trump may go. So I think you're going to see some interesting sort of divisions there, but I don't think you're going to see too many business leaders speak out in the way that the chairman of Exxon. It's just stunning that of all places, Big oil would be the first major kind of industry, at least one CEO from big oil, to speak out against the incoming president. I don't think you're going to see a whole lot of that.
- [33:13]
A
So we ought to just about wrap it up now because I know both of you have got places to go and people to see. Just to bring it back to the cop, though, in terms of your expectations about what could come out of here and what impact that could have on the debate of the US and the progress of the energy transition in general, what are you looking for? I mean, maybe Zach, start with you on this in terms of what you, as syriz, would like to see as an outcome from COP 29, obviously the finance cop, the question of climate finance capital flows to finance the transition, is central to what's being discussed here. What would count as a good outcome for you?
- [33:56]
C
I think strong US Engagement in a strong global engaged and committed agreement where investors and businesses see certainty and ambition to continue to drive investment in the US and in countries around the world that is strengthening our economies, our supply chains and reducing costs and emissions.
- [34:15]
A
And what's your expectation, Vijay? Are we going to get that?
- [34:19]
B
Well, let's remember this is a small cop, right? There are big cops and small cops. Next year in Brazil will be a big cop. Glasgow in Scotland was a big cop and this is a smaller cop. But it was one that could not fall apart as some have. The Hague, when the Kyoto Treaty fell apart. There are examples of cops that utterly go wrong and set things back many years. So they're off to a good start. From base of low expectations, there was a deal agreed on carbon trading rules. After years, there was a breakthrough on what's called Article 6.4.
- [34:49]
D
Right.
- [34:49]
B
So there's been progress already.
- [34:51]
A
Just as a footnote, how substantive is that deal really? It wasn't clear to me that it actually got the carbon market to where it needs to be.
- [34:59]
B
No, it hasn't done that. But having a deal at all in this incredibly fraught area is a big step forward. Now the devil's in the details, what's in, what's not, what are the rules, who can participate, the role of biological credits versus not. I mean, there's the devil's in the details, but before we didn't even have a devil to deal with. Right. So, I mean, it's actually progress. And I think that it's a stepping stone. And if that actually is able to be fleshed out in a decent way, it will unleash enormous amounts of capital. I think far more than anything that will come from donors, coffers or the Multilateral Development Acts. There isn't enough official money to deal with the kind of challenge that the energy transition poses. It has to come from the private sector. And this is one of the keys to unlock that capital.
- [35:46]
A
So a clear statement on that, then, by the time the COP concludes that would be positive for you.
- [35:51]
B
I think that could be a good step forward for a smaller COP as a stepping stone to a bigger one coming up, which again will focus very much on the similar topics, given that Brazil has the Amazon and the credits are an important part of what could unlock and help preserve the Amazon.
- [36:05]
A
Well, I know that we'll all of us be following the rest of the negotiations very closely to see whether we do get that outcome. But for now, Vijay Zak, thank you both very much indeed. Great talking to you.
- [36:15]
C
Thank you.
- [36:16]
B
Great to be here.
- [36:18]
A
If you're curious about how the global energy transition will shape our future, check out the Future of Energy. It's a new podcast series from Gzero Media and Enbridge, co hosted by JJ Ramberg and Enbridge's CEO Greg. They dive into critical global conversations around energy innovation, climate change and geopolitics. With expert guests like Pulitzer Prize winner Daniel Jurgin, former Canadian Member of Parliament Lisa Raitt, former Congressman Tim Ryan, and Microsoft's Ulrich Homan, you'll get insights from people at the forefront of energy evolution, topics like economics, the impact of AI and how indigenous communities are shaping energy. Tune in on your favorite podcast platform or by visiting gzeromedia.com that's gzeromedia.com energygang I'm joined now by John Kreitz, who's the chief executive of rmi, which may be familiar to some of our listeners in your old incarnation as Rocky Mountain Institute. Just before we get into substance of what I want to talk about today, if you could just explain a little bit to listeners what RMI is and what you do, you're kind of partly a think tank, but not really. I mean, you're much more than A think tank, right?
- [37:25]
D
Yeah, we call ourselves a think do and scale tank, Ed.
- [37:28]
B
Right.
- [37:28]
D
And we've been around about 40, 43 years now. Founded during the first energy crisis. And we're an independent, nonprofit, nonpartisan organization that really tries to bring forward not just the facts, but also the solutions that we need to engage on to drive markets to scale here in clean energy. And we believe that a well directed market is the fastest way to drive change.
- [37:53]
A
And you work with businesses and governments to do that?
- [37:55]
D
We work with businesses, governments, communities of all shapes and sizes all around the world. We're actually about 725 people working in 60 countries today, so very global in our overall approach.
- [38:07]
A
Right. And what you're talking about here in particular at cop 29 I think is a really interesting and important subject that is very often neglected, which is energy efficiency. And I think it's a fascinating subject. It's something, as I say, is hugely important to the whole issue of the energy transition and tackling climate change. Often not talked about enough, I think, and I have some personal views on that, which I'm probably going to get into in a moment, which I'm very interested to hear your thoughts on. But before I get into what I think, do you want to talk a little bit about what you're saying here and what your message is to cop 29?
- [38:47]
D
Yeah, I mean, cop 28 really did set some high aspirations for us. It set the tripling of renewables target, but it also set the doubling of energy efficiency target. And we at RMI were very encouraged by that. And folks like the IEA have done the analysis that recognize that those are about equal in size when we think about the reduction in carbon emissions globally, we're here at this copy recognizing that while there's been concerted effort to figure out some of the supply side solutions out there on that tripling target, and that's by no means to suggest that we're fully on track there, but we're thinking about it and there are all sorts of engaged industry players and policies on it. On the energy efficiency side, we're not right. And this is a mistake. It's a mistake for us globally for a whole host of reasons.
- [39:37]
B
But.
- [39:38]
D
But perhaps the most challenging portion of it is that energy efficiency itself, that doubling target is actually required for us to reach the tripling at an economic way and an affordable way.
- [39:52]
B
Right.
- [39:52]
D
And there are so many other benefits that we can talk about in order to justify it, but it is absolutely essential for us.
- [39:59]
A
Yeah, that's a great point. Actually. I Hadn't thought about that. But I'm sure you're right that the doubling energy efficiency goal is, is essential to make the tripling renewable energy goal achievable because you can only bring that much more renewable energy, particularly variable renewables, onto a grid if you also have improved efficiency.
- [40:16]
D
That's exactly right. That's exactly right.
- [40:18]
A
And certainly then also stepping back, if you look at the bigger picture about getting the world on a pathway to net zero emissions, certainly in our modeling at Wood mackenzie, I'm sure a lot of other people's modeling as well, the numbers can really only be made to add up only if you have a very significant improvement in energy efficiency as well. Right. It's not an optional extra, it's something that's essential for getting to net zero.
- [40:40]
D
It's essential. And I also would say that you get three times the carbon kick for every kilowatt hour of energy efficiency you save versus the amount of renewables you put online. Because our existing fossil fuel system is so inefficient.
- [40:55]
B
Right.
- [40:55]
D
We lose about two thirds of the energy that we put into the system today. And that's just literally paying a tax on thermodynamics. But when you add up the numbers on that, that's like four and a half trillion dollars a year that we as a global economy waste every year in the process of perpetuating the fossil fuel system that we have. And we can rectify that through energy efficiency. We actually have a secure form of energy. And I was talking with one of the Ghanaise ministers yesterday and he was talking about invisible windmills that they're trying to harvest in Ghana that was all about their energy efficiency program. So there's this notion that it should be our first fuel. It's the most economic form, it's the most energy secure form. It allows us to get more out of the capital we've already put in ground. And so whether you're talking about more data centers or you're talking about needing more electricity to electrify industry, or you're talking about the need just to provide basic energy access, you get a lot more when you focus on energy efficiency.
- [42:02]
A
So I hear you saying all that and I find the case super compelling. But just before we get onto my objection, just as a kind of factual footnote, what exactly was the commitment of COP28? When you talk about doubling of energy efficiency, that doesn't mean doubling as we're every unit of GDP per unit of.
- [42:21]
D
Energy used that was to double the rate of energy efficiency capture here. So that we get up to 4% a year and hold that through 2030 essentially.
- [42:30]
A
Right, got it, thanks.
- [42:31]
D
And I will note as well that in the one year since COP28, we've actually dropped from 2% to 1% as a planet. Right. So the IEA's data is showing us that we're moving in the exact wrong direction against this potential resource and this what I would say essential elements of any strategy to combat climate, but also any strategy that you have to manage your national security, to manage kind of your affordability, because we can't simply expect to put lots more assets on the grid and be able to afford that for a host of reasons.
- [43:08]
A
Right. And to your point, as you say, about where is real progress being made and where isn't it, as you say, in renewable energy, battery storage, Absolutely going great guns. Those industries are fantastically successful globally right now. That's clearly a success story. Energy efficiency, as you say, is not getting there at the moment.
- [43:27]
D
It's not getting there. But the fun thing is we do have solutions out there, right? We have five fold more efficient air conditioners that have been shown piloted and are actually being now produced by a couple of the major manufacturers here globally. We have ways to make industrial processes more efficient, we have ways to make motors consume half of electricity out there, we have ways to make them more efficient. And yet it takes a concerted push in order to pull all these solutions in and help everybody mobilize against them.
- [44:00]
A
Right? And so that's where my big concern about the whole energy efficiency discourse really comes in. As you say, the case seems very compelling. This idea of it being the first fuel, the way that you can get that double dividend, you're both saving emissions and saving money if you improve energy efficiency. It seems to me though that the fact that you can save money by making energy efficiency improvements points to some pretty fundamental problems in the sense that if businesses and individuals could save money by making these improvements, they would have made them anyway. If you assume that on balance, overall, people are rational actors in the world, if they see technology that's available to save them money, they will spend money on it. And it's not happening, or it's not happening to the degree that it needs to. And as you say, particularly over the past year, despite international commitments, it's not been happening. And what that says to me is there are some really pretty fundamental structural barriers that hold people back from making those investments in energy efficiency. And whether they are maybe technological sometimes, but maybe political or regulatory or legal or sometimes cultural or even psychological. There are issues out there that mean we do not realize the full potential of energy efficiency. And all those things are really hard to shift. And that inclines me instinctively to be quite pessimistic, actually about the potential for delivering these kind of big improvements in energy efficiency that you're talking about.
- [45:38]
D
There are many barriers to energy efficiency and that is one of the challenges that we have to face here. Whether you're talking about split incentives between who owns the building versus who pays the energy bills, or whether you're talking about the size of the savings that you get relative to the amount of effort that you have to put into it, or whether you talk about just the opportunity cost of going after cost savings versus going after growing markets. Right. There are many, many different barriers that exist there. But we have seen that when leadership exists, and especially in energy intensive industries where there's a focus around how exactly do you capture this at scale and drive the economic incentives? And there are famous case examples of Dow and others that have done an incredibly successful energy efficiency as a strategic lever for them. There are ways to capture it at scale. And I think while there's a need for capital, while there's a need for information in order to make better decisions, there's ultimately a need for leadership. And that's one of the things that we're trying to emphasize here at cop. It's of tremendous strategic value, but it takes visionary leadership to say I see that better, I see the benefit for everyone, and I'm willing to commit to it, I'm willing to make it a priority from a national perspective. I'm willing to integrate it into my NDCs, which very few have right now. It's not being systematically included as one of the primary NDC elements.
- [47:08]
A
And can that leadership really, do you think, make a difference at a global scale? Again, more of my kind of evidence for pessimism on this front is if you look back at history over decades, energy efficiency globally increases at a pretty steady pace, about, as you were saying earlier, I think about 2% a year every year on average. And sometimes it's a bit faster, sometimes a bit slow. It's never really broken out of that range over a very long period. Which again sort of says to me that there is something structural in the nature of the world economy that means that's what it's going to do. And that's something that it's really hard for governments to shift.
- [47:45]
D
Yeah. So a few thoughts on that front. One, the nature of energy efficiency is changing and in particular as we electrify, we naturally get rid of some of the waste in the system that I talked about earlier here. And when we do the math on that, you can get about a full percentage point bump in the overall progress on energy efficiency just through electrifying, which is good news, right? If we use more renewables and we link them into a system that's electrifying, we get an additional bump on top of that. And then there is a bit that we have to capture through innovation and new policies and new practices and new technologies. But we're at a moment where digitalization, the ability to re engineer and rethink things like motors and create them so that they're actually much more controllable and manageable and there's much less wastage in the system. The ability to use kind of large scale technologies to balance the grid and get electricity across the grid more efficiently. These all exist today. And if we use this as a spur to actually do things better, we improve the capital productivity of the whole system and everybody benefits rather than us seeing an endless stream of additional costs.
- [49:07]
A
Do you think it can actually result in less energy being used, though? I think about rebound effects. There's a big scientific literature looking at the way that when energy efficiency rises, people actually use more energy, sometimes called the Jevons Paradox. If you get more efficient in your use of energy, then that means that there's more you can do with that energy, so people do more of those things. I mean, there is quite a lot of evidence that that is a real thing, right? I mean, that is a real thing.
- [49:30]
D
But that also suggests that we're going to use all of that surplus to go into purely energy intensive things, which is frankly not the case. And the evidence also shows that you get substantially more benefit overall in savings and reductions in usage and the willingness to deploy that extra savings into other things that we want that aren't energy intensive, so that it's a net benefit for sure. And I just want to make sure that everybody understands that there is some rebound effect, but the net benefit is huge.
- [50:02]
A
So you were saying earlier, RMI is not just a think tank, it's a do tank and a scale tank as well. What are you doing in terms of working on energy efficiency?
- [50:10]
D
So we work on energy efficiency across each of the sectors we work in, and those are the major energy consuming and producing sectors. So you can think about the grid, you can think about built environment, you can think about transportation and industry in different parts of the world. We're doing many different things, but maybe Calling out one in the United States. We've been working up in Massachusetts to help pioneer a retrofit modularization for public housing, right, where you actually can take an old brick building and use panels to put super insulation on the outside, embed within those panels, super efficient heat pumps that provide both air conditioning and heating in them, and ultimately electrify and connect in this process to solar cells up on the roof to reduce the overall energy burden for the tenants by 85%. Right now, that's being done in Salem, Massachusetts, at the Fairweather apartment complex. And this whole idea of being able to modularize retrofits is an innovation in and of itself that allows you essentially to go from a leaky old building to a fully modernized one with a simple connection process that never moves grandma or single parents out of the complex in the process.
- [51:35]
A
Because it certainly has been the case in the past, doesn't it, that some of these programs aiming to weatherize homes, improve insulation and so on have had very little success. I know that there's all kinds of anecdotes about programs that have gone wrong, haven't achieved the results that were hoped for. They had a very bad experience in the uk. I don't know if you know about that story, but that was a whole program that turned out to be completely ineffective. And it does seem that's quite a good example of some of the challenges in energy efficiency, which is getting down to that kind of granular level of home by home and dealing with the different challenges that each individual home presents and so on. It's tricky to do and can be very expensive.
- [52:15]
D
And that's exactly what this response is. And we see energy efficiency as well as an opportunity for innovation because the idea that you can create the solution off site, that you can do all the scanning of the facade and build everything to spec, and then in a short few moments, right click on these panels and snap them in place and immediately transform the energy bills of those buildings is something that does make a huge difference relative to having 20 different contractors parade through a building and try and figure out one by one and move everyone out, et cetera. We're trying to take what could be a complex and overwhelming process and make it a snap.
- [52:57]
A
Right? So energy efficiency is important. You can get real gains out of it. The world has set goals for accelerating progress here. What can COP 29 deliver then, in terms of turning that vision into a reality? What would you like to see the negotiators here come out with that would make you think they're taking this seriously. They've realized there is a problem in terms of lack of progress towards that 2030 goal. Now they're doing something about it.
- [53:27]
D
So at this particular cop, we're not going to see substantial changes relative to where we were last year. So we need to be planning for the next cop, you know, and everyone's thinking about this as a three COP series or a troika right now. And I think the big challenge that I'd like to put forward to the world's leaders is energy efficiency is this essential resource. So let's make sure we're ready to operationalize it and commit to it next year as part of your nationally determined contributions, and that it receives the attention over the coming year that's required through policy development, through education, through capital provision, through corporate engagement that ultimately sets a strategy that makes sense for each individual country and aggregates up to a dramatically different outcome for the world.
- [54:17]
A
Certainly it's going to be very interesting and very important to see whether they do actually manage to do that. And we'll be following that on the energy gang for the rest of this cop and in the run up to cop 30, as you say, in Brazil in a year. But for now, John Kreitz, thank you very much indeed. Great talking to you.
- [54:31]
D
Thank you, Ed. Pleasure to be here.
- [54:34]
A
And that's all from us for today. Thanks also to Vijay Vaitiswaran and Zach Friedman. Thanks to our producers Dan Cottrell, Harry Weston Cottrell and Matt Walters. And above all, many thanks to all of you for listening. We really value your feedback, so please do keep it coming. And we'll be back very soon with all the latest from COP 29. Until.