In this episode, Sonia Aggarwal, co-founder of think tank Energy Innovation, shares about her time in the Biden administration as special assistant to the president for climate policy, innovation, and deployment.
Before I get to today’s pod, a quick note-slash-apology. Last week, in my crossover episode with the Catalyst pod, I was bantering with Shayle Kann and made a clumsy attempt at a joke, referring to our audiences as “handsome and virile.”
Both those adjectives are typically associated with men, which might have made it seem like I think of Volts’ audience as primarily male, so I just want to say, emphatically, for the record, that I do not think that. Most of my favorite feedback and correspondence has come from non-dudes and most of my favorite pods have featured them. I know and deeply value the fact that there are energy nerds of all genders out there listening. I’m sorry if my verbal ineptitude left any other impression.
Anyway, on to today’s episode!
As I previewed for Volts subscribers a few weeks ago, I attended the third annual Yale Clean Energy Conference last week. It was a blast! It’s always energizing (pardon the pun) to be surrounded by so many young people doing so much cool stuff. It gives this crusty old blogger some hope.
While I was there, I recorded a podcast — live on stage! — with Sonia Aggarwal.
Sonia is well-known in Energy World. She co-founded (with previous Volts guest Hal Harvey) the energy policy think tank Energy Innovation, where she worked for years before heading into the Biden administration as the (deep breath) special assistant to the president for climate policy, innovation, and deployment.
She recently reemerged from the belly of that beast and is now back running Energy Innovation. I chatted with her about her experiences in the administration, what policymaking looks like close up, what she’s proud of getting into law, and what gaps remain in US energy policy. It was super-fun.
Thanks to Sonia, thanks to the kind folks at Yale, and thanks to all of y’all for listening. Enjoy.
Robert J. Klee
Good afternoon, everyone. It's so nice to see you all again. For those who don't know me or didn't see me when we kicked off this conference, I'm Rob Klee. I'm our director of Clean Energy Programming at the Center for Business and Environment at Yale. You last saw me when I was up here giving part of that opening sort of panel. So I think it's fitting, and it is actually my great pleasure and privilege to introduce the final event of our Yale Clean Energy Conference. And you're all in for a real treat, a live broadcast of David Roberts' Volts podcast with his special guest, Sonia Aggarwal, CEO of Energy Innovation and former special assistant for the president on climate policy innovation deployment, which helped develop the Bipartisan Infrastructure Law in IRA.
So David's going to tell you all about Sonia. It's really his show, but I wanted to take a moment to geek out a little about the fact that I'm sharing the stage for even just a minute with David Roberts. He's been my go-to source for the latest thoughtful, in-depth info on clean energy technology, on policy, on climate change, on politics, and all the other stuff that I actually try to teach here at Yale. He's been reading, writing, talking, and thinking about this for over 15 years at places like Vox, at Grist, and now his own Volts podcast and newsletter.
And he has just a way of making this complicated, crazy, technical, clean energy world make sense — in a way that's actually kind of freewheeling, kind of fun, kind of funny. And he does it through these conversations with amazing people where the hour does seem to just fly right by. Now, I know I'm not alone in the Dave Roberts fan club. There are a lot of you in that fan club, and I see some of you, like raising hands here. But did you know that Nick Offerman is also a fan? Parks and Recs fame as well, which is, as a former parks and rec commissioner, I truly enjoy the fact that Nick Offerman —
No, I wasn't like Nick or his character. So as a big fan, I'm so excited to introduce David Roberts and Sonia Aggarwal, if everyone can welcome them with a round of applause.
Hello, everyone. Thanks for coming. Thanks to Yale for having us. It's been a fascinating conference. I've had some fascinating conversations last couple of days. Hi to the audience at home of the Volts listeners who will be hearing this in a little while. You'll just have to trust that this is live and a bunch of people are here. These are not pre-recorded audience noises. I'm so excited to be here with Sonia, Sonia Aggarwal. She has been working for years at an energy policy think tank called Energy Innovation, which is spectacular, does great work, started by the great Hal Harvey, who has been on the pod before, does a lot of great work and research, and then has spent the last couple of years, two years in the Biden administration as the senior special advisor for something and something and something and something.
Some sort of senior advisor on energy stuff. So she's got a great inside and outside view. And so I thought we would just kind of talk a little bit about what the policymaking process was like these last couple of years in the Biden administration, what they got accomplished, what they didn't get accomplished, what's left to accomplish, all these types of things. So I'm excited. And then at the end, we'll take some questions, hopefully have some Q&A. I'll try to be brief against my nature and leave some time. So, Sonia, first I'd just like to hear about your experience this last three or four years.
Tell us, sort of like, how did you get a phone call from, who called you and what did they offer you and what were you doing exactly? Senior advisor on something, something but nuts and bolts: What were you in there working on?
Yeah. Well, thank you so much, Dave, and thank you to everyone here at Yale for having us and hosting such an interesting collection of human beings doing very cool work on the physical stuff that we need to get out into the economy to make this whole transition happen. I'm so grateful for all that work and for you all organizing this. So in the beginning, we set out to try to understand which policies could be used to drive the kind of deep decarbonization we need to meet the climate moment. So how do we get to the scale of deploying all this clean stuff everywhere that would actually bend down our greenhouse gas emissions?
And we did that by building an analytical model that looked at all these options for policies and how they could come together to reduce not just greenhouse gas pollution, but also pollution of all kinds and thereby improve people's health, and how much was it going to cost and what were the job implications and all of these things? So, I sort of feel like for the prior decade, before the phone call did arrive, to come join the team at the White House, I had been preparing for that very moment with an incredible group of people at Energy Innovation and beyond as well. When I decided to join, I found it really exciting because it was the first time ever that any president was going to have a national climate advisor as one of the four main policy advisors inside the White House. So before, there's a national security advisor who's advising on security stuff, a national economic director who is looking over all the various complexities of our giant economy, and then a domestic policy council, which is looking at how do we actually make sure that our schools and hospitals and all of those types of things are how they need to be.
But there had never been climate in the room at that level of decision making. And that's really profound, because at this point in the decisive decade on climate, all policy has to be climate policy. And so as we think about the dimensions of policy in any of those categories we need to be considering, how does that actually impact our capability to meet our climate goals? So Gina McCarthy was the first ever national climate advisor, and I joined her team to work on all kinds of the details of how we would get the policies across the finish line.
Did you have a particular remit or part of the economy you were looking at, or were you just looking over the whole thing? It's a big —
The whole thing? Yeah, so I was pretty much the tons guy. So I was like, the tons guy. Like, the tons of greenhouse gas emissions. So, where are the tons? Find all the tons. Get rid of as many tons as possible of greenhouse gas emissions. That was a lot of my job, so helping to figure out what our target for economy-wide greenhouse gas emission reduction should be in 2030, for example, which is something the president set on Earth Day his first year, 50% to 52% reduction below 2005 levels in 2030. So that's a pretty profound acceleration in the pace of decarbonization that we set our sights on.
And then, as we were kind of developing the policies in Build Back Better, which turned into the Bipartisan Infrastructure Law and the Inflation Reduction Act, I was helping to ensure that all those policies were adding up to what we need to get done. How do we prioritize the various policies in those pieces of legislation so that we could actually make the greenhouse gas impact that we needed to. And then I also focused a lot on innovation and manufacturing as part of the remit. So that was also all around: How do we prioritize the technologies that we need to commercialize right now in order to make them available at scale in time to really help us solve this very pressing issue?
I'm curious how free of a hand your team had to come up with policies? Or were there, like, do this or don't do this? Were there parameters set? Like, I assume if you guys had come out and said, what we need is a giant carbon tax, you would have gotten shut down. So how free were your hands?
I would say that they were very free in the context of the fact that the president is elected by the American public and is there to represent the best interests of what people want. Right. So there were a lot of political issues happening right when the president took office. There was a pandemic. There was inflation. There was all kinds of really challenging problems. So within those constraints, we certainly had a lot of room to figure out what was the suite of climate policies that could also deliver benefits in all those other political dimensions that we needed to fulfill.
And also, I will say there's been decades of devoted people who have been thinking about what policies can help us bend down the emissions curve. So it's not like we walked in and had this blank sheet of paper and came up with stuff. We were standing on the shoulders of so many people who've been doing this research and work for so long. And so we had a good menu, but we got to pick from it.
I have a question, not totally sure how to ask it, but even for those of us who follow this stuff pretty closely and are policy obsessed, the actual making of the policy in the room is a little bit of a black box to everybody who's not inside the room. So I think on the one hand, you have sort of people who have a cynical view who are just like, "this is what big corporations said they wanted", or this is like, "you have to do this to get this senator's vote." It's just all this horse trading and kind of vaguely corrupt stuff. But I also heard a couple of things in the process — a couple of things that stuck in my head.
One was in talking with Jesse Jenkins, who's a professor at Princeton who does modeling, who does the energy modeling with his team. One of the points he made was like, this is the first time that climate policymakers have had models there to test in real time, sort of as things are going to sort of test their assumptions against. And then also when I was talking to Saul Griffith, another sort of energy nerd who's also been on the pod, he said something that stuck in my head. He's like, this is the first climate policy where the engineers got the first run at it before the lawyers and the economists, where the engineers actually came up with the policy.
So both those things made me think like, maybe this is actually like a rational, evidence-based thing going on inside there. Wouldn't that be nice? So between those two poles of the sort of cynicism of horse trading and the actual technocratic using models and empirical data, where were we in between those there? If people could have seen it, would they be heartened or would they be depressed?
It's a big question, Dave.
I know. It's also very big.
I think the answer is that people would be really heartened because it is in many ways, as Jesse and Saul have described. So, okay, let me answer this in two ways. Because there was Build Back Better that kind of split into these laws, the Bipartisan Infrastructure Law, to some degree, the CHIPS Act and then the Inflation Reduction Act. And I would say, especially in the context of the Inflation Reduction Act, that was a bill that was passed with only Democrats. No Republicans voted for that bill. The other two were bipartisan bills. In the final bill, the Inflation Reduction Act, which is really what is the engine of climate progress and a lot of the ways that we are going to cut energy costs for families and businesses.
That one was incredibly analytically informed. It was from the beginning we had an overall greenhouse gas emission reduction goal. We were trying to find programs, analyzing them line by line with the amount of money that would be spent on each of those programs to understand how those could actually add up to the greenhouse gas emission reductions that were required. At the same time, keeping the Democratic coalition together was a big challenge. And Senator Schumer was incredible at that, and he, I think, should get a lot of credit for that. I mean, that was really amazing what he and his incredible team of people were able to get done on that front.
That meant that throughout the process, certain things were painfully cut from the list of things that we wanted to see get across the finish line. At the same time, at every juncture, when something big was cut, tons were in the room, right? So the analysis was in the room, and we were able to then quickly say, "look, what can we add back in other ways that might help us get to a similar level of impact than before we lost whatever the thing was?" So there was a lot of that kind of real-time policy development and prioritization that really enabled us to preserve the greenhouse gas impact of the law, even though we lost quite a lot of the individual line items along the way.
Of those things that got cut along the way. Is there any one in particular that you lose sleep about that you were sorry to see go?
I lost a lot of sleep along the way, so now I'm just catching up on that. But besides the sleep part, honestly, the most painful for me was we had a clean electricity performance program, which dropped out early-ish in the process. And that was the closest thing that we were going to get to a federal clean energy standard or just some sort of real goal of where we were going over time in terms of the percent of our electricity that comes from zero-emitting sources. But to the earlier point, that was really tough when that fell out.
But we were actually able to add some other programs in after that fell out. That then did get us back a number of the greenhouse gas emission tons that we lost.
And so, just for the audience's sake, the clean — I can never remember the friggin — Clean Energy ...
Performance Program. The name changed. It changed many, many times.
Yeah, you could call it whatever you —
It was basically a national clean energy standard that would have required utilities to hit certain targets with their clean energy, except not require, because you can't do requirements in a reconciliation bill. So it basically would have bribed them to hit those targets.
That's not the word I would use, but it included both incentives and penalties. And that was one of the only places in the Inflation Reduction Act that actually included penalties, aside from a relatively small methane emissions fee. But, yes, that's exactly right.
And was there a particular baby you had that made it through the thing that you're particularly proud of that was like, your thing that you were cheerleading for?
Yes, I feel like I was cheerleading the whole thing. I really was so very much passionately trying to help this get over the finish line. But if I were to pick one thing, I think the rural clean energy programs were something that I focused a lot of time on, because rural co-ops are nonprofits that serve more than 90% of the persistent poverty counties in America. And this, at the end of the day, what we were able to get across the finish line in terms of investments for these nonprofit rural cooperative electricity providers is the largest investment ever in rural electricity, including being bigger than the original 1930s Rural Electrification Act that first brought reliable power to rural areas in the United States.
So this is really a transformational investment in those critical communities that need lower energy costs. And clean energy can provide it. But because they've kind of been locked into these old, expensive coal contracts for a very long time, and they don't have the capital to make that transition and actually access energy that is today cheaper and cleaner, it's very exciting that that could be right on the cusp for us.
And part of that, or in addition to that, similar to that, nonprofit and co-op utilities get the rebates or — what am I trying to say? What I'm trying to say.
I think you were trying to say that we have these tax credits for clean energy. And before the tax credits for clean energy that did exist before, but were extended in the Inflation Reduction Act, before you had to have a tax liability in order to get the tax credit right. And so if you were a nonprofit, then you weren't really having a tax liability. And so therefore, these nonprofit rural co-ops couldn't really access all of the incentives for clean energy that private developers or other private utilities could. So this change to the way that the tax credits are administered now enables nonprofits to benefit from those clean energy incentives also.
Yeah, and that's these munis, these co-op utilities, and also nonprofits, churches. It's really an under-celebrated part of the bill, I think. I mean, one pleasant surprise was, as you like, some things got taken out. We keep using the passive voice: Joe Manchin kept taking things out. But I was really shocked when we all woke up to find out that he was going to pass it after all that in the end, he didn't really mess with — he took some things out, but he didn't mess a lot with the things that were on paper. Like what ended up passing in the end is remarkably similar to that analytically produced early product, which is just not something you see very often.
My question is, I think it's now in energy world, in my world, I think people understand that national decarbonization is — that clean electrification is the backbone of decarbonization, that decarbonization is primarily about clean electrification. And to me, I was very pleasantly surprised to find that the bill, this is another thing Saul pounds the table about and wants to make sure everybody knows that the bill was mostly about electrification. Like the bulk of the money, the bulk of the provisions were about electrification. But so I guess my question is, do you find that the people in the administration outside energy world get that?
Is that story popularly understood? Like, if I asked Joe Biden, would he get that? Would Kamala Harris get that? Is the primacy of clean electrification — has that gone beyond our world and is popularly understood now in policy circles, do you think?
Well, I think policy circles is a different question than general population. I would say the answer to general population is not really, but people just, if they ever think about energy, they're thinking about how much it costs and what the bill is at the end of the day and whether their lights come on when they flip the switch? And so, therefore, in other parts of the policy circles, because we do live in a democracy where people are truly trying to represent what people who voted them into office want. Those are very big deals. How much is the energy going to cost and whether it's going to be reliable.
And I think that to a large degree, the electrification story is pretty well understood amongst high-level policymakers. I would say the president is very focused on this, actually, and he was constantly asking about electric vehicles and trying to understand what does that mean for transmission. He really was in those levels of detail. So that's really, I think, quite heartening that the story is really grasped well at the highest levels but at the same time, I don't know where my organs are, for example, but somebody does and I trust that somebody does and they're not going to be the people in the climate policy office, although I guess that's kind of basic human information that most people should know.
So I might be the outlier. But the point is just that I think there's a fair amount of just understanding that there are analyses and experts who are keeping tabs on this, how we solve this challenge. And in one sense it's most important that people understand that there are solutions and we can deploy them right now and we should be deploying them faster and they actually are better and people actually want them. Those are the things that I think we need to break out of our little circle. And sometimes even those basic things happen.
Yeah. And people can save money. I mean that's to me, what's exciting about this chapter of the story is that climate policy has gone from something very big and abstract and far away from people to switch out the stuff in your life, the stuff you have your hands on, your car, your boiler, your stove, and you will be better off for it. You'll have better health, be cheaper. Another big aspect of IRA, which I don't know that I — if you had asked me like two or three years ago "what will a national climate bill look like?" — I don't know that I would have predicted, but there's a huge, and I don't even know that this is well, popularly understood, but there's a huge element of attempts to onshore or friendshore supply chains.
There's a huge element. I mean, I think when people ask me like I was overseas talking about IRA and Australia recently and they asked me how it got over the finish line and people were asking me, has the US Senate finally absorbed the problem of climate change? And I was like, "hmm, you know", but they have absorbed that they're scared of China and they're scared of the fact that China utterly dominates the supply chain of all these technologies that we're all spending — we're about to spend billions of dollars pursuing. So there's huge elements in the bill, of really ambitious efforts in the bill to bring that stuff here.
And it's really like an audacious, like starting from almost nothing, like these parts of the country sort of legendarily have been hollowed out by globalization. The manufacturing base has been hollowed out. And now at long last, here comes a Democratic president trying to do something about that. So where did that focus and push come from? Because it's not really something that feels like emerged out of climate world or out of energy world, that feels like something that sort of like other people pushed into the process. What's the story there?
Yeah, it's a great question. I think the president campaigned on what I think is a really optimistic and beautiful picture of what America could be and a real vision of building things here, of having good jobs in places where really they have not had very good jobs for quite some time, and that manufacturing and paths into unions were really good ways to provide that kind of livelihood for people who really have seen a lot of that, again, kind of go overseas over the years. And so there was a strong agenda. And of course, this is probably the most labor-friendly president in a very long time, if not ever.
And so he is very focused on how do we actually use the tools of the federal government to provide those types of opportunities to as many Americans as possible. So I think that was a very big part of it. Of course, the global competitiveness angle is always a factor, but I actually don't think that that was the main driver of at least this push on investment in domestic manufacturing, of the clean equipment that we will demand here in crazy quantities, that the whole globe is going to be demanding in head-spinning quantities. I think it really was from that core focus on the American worker and trying to make those people's lives better and have more opportunities.
Was there any tension? Because you can sort of imagine if you just wanted to decarbonize as fast as possible and speed was your only guide, you'd just buy all the cheap Chinese stuff as fast as possible. So, in a sense, some of this stuff, like take the EV tax credits, they only apply to cars with a certain amount of domestic content, or they're manufactured locally, which just means, and we're seeing this right now, that just means that at least for the next few years, it really narrows the number of EVs that are eligible for the credit. So on a big picture level, it seems like there's some tension between speed and this onshoring, this desire to do it domestically.
Did that feel like a tension? Was there any tension between sort of like the decarb people and the onshoring people?
It's a great question, and one that much time was spent on analytics attempting to understand this question better during the last few years. So it is very much something that I think people take seriously and have thought a lot about. Now, I don't think anyone has the perfect answers to those questions, but I will say this: I think for us to succeed on our climate goals, we also need to succeed on security, right. And the security of supply of the clean equipment, in addition to all kinds of other energy security issues, right. So if we are overly dependent on one or two countries for most of the equipment that we are going to need to actually solve our energy needs over time, to actually reduce costs for people over time, that's a real challenge.
And that could hinder, even if it is not right now hindering, our speed on meeting our climate goals. And so I think there's a real recognition that we need a diversity of sources around the world for these really critical and increasingly critical energy equipment. Again, it's not like the next year, fastest choice, but it is, as we are thinking about being robust toward this in the medium term, it really does make a big difference.
Let me ask a somewhat political question. It was striking to me during this sort of crucial year of Build Back Better being put together and then slowly hacked down, that the left, broadly speaking, from the center left all the way over to the sort of hardcore climate campaigners, were unusually unified, were unusually not at one another's throat. All voices were singing in the chorus, "yes, pass this. Yes, get this over the finish line." It was a real moment of unity. And even I think the couple of years running up to the administration, there was a real coming together of a lot of the diverse factions of the left around a sort of common policy agenda, which I think more or less is reflected in the final bill.
All of which is an unusual story for someone like me, who's been following, or you who's been around this for ten or 15 years. Unity has not been the rule. But now it passed. And the remaining issues — what's left over: Stuff like permitting, stuff like building really quickly over NIMBY objections. Stuff like the protectionism, union questions around EV manufacture, lots of potential sources of tension. Supply, oil leases and liquid natural gas, export hubs. You can see already, I think, fissures reemerging and fights restarting. Are you worried that we're just going to descend back into recriminations against one another?
Do you think that the unity, that we can hold on to that at all?
I think that those moments of unity across all of the people who kind of hold different priorities in their mind, this is maybe not quite true all the time, but it is more important than normal when we are trying to get a big piece of federal legislation across the finish line. And that is probably not going to be where we are again over the next year, at least. So I think that it's actually healthy for our democracy to have people who are fighting for their priority issue to be taken really seriously by policymakers as is kind of the norm across most years.
Right. And so these are issues that still do need to get solved, and a lot of them may not be solved at the federal level. We have a very balkanized decision-making process for a lot of our energy infrastructure, as you know better than most people in this country. So I think it makes a lot of sense for communities that are most impacted by these different types of energy extraction to be vocal about what they want and what they need, for people who care about making sure that jobs are as high quality as possible, to be vocal about what they want and what they need.
And it's the job of local and state and often federal, also decision makers to try to balance across all of those objectives. But it is very rare that everyone's priorities align and really get something done. I think that we probably have another opportunity, and we must have another opportunity for this at the federal level in the next few years because I have a little counter on my computer about how many weeks we have until 2030, and it's now 327 weeks until 2030. And we are not done with what we need to get done policy-wise and certainly not technology and building things wise before 2030.
So we do not have infinite time to wait for that next moment of unity. And I think we need to find common ground now around the next bite at federal ambition, even as we continue to advocate for our priorities at every level.
When do you envision Democrats having a trifecta again and that next bite happening? I have trouble envisioning that ever. So are you more optimistic?
What I try to do is always plan for the various scenarios. Like if we didn't plan for the next bite at real federal climate ambition, say we did have the opportunity to do that in 14 months, we better have an idea of what we are trying to get done by that point. Right. And we better have some degree of unity around what those priorities are. At the same time, we better plan in case we're going to be in a big defense mode for a lot of the policies that we have managed to move forward over the last several years.
And I do think that this next election is probably the biggest and most important climate election of our lifetimes just because we do not have time. It's a time problem more than anything else. And so that's what I'll —
What is that next big piece? Obviously, the difficulty of talking about IRA with people, as I'm sure you're well aware, is it is in a lot of ways just a giant bucket filled with like dozens and dozens and dozens of individual policies. So I'm sure the next big bite will in some sense be a bucket full of policies, too. But if you had to sort of summarize, what are the gaps left over by Uncle IRA, Uncle CHIP and Uncle Bill? Uncle Bill, thank you. By the three big bills that got passed, what are the big gaps where you would focus if you did have a trifecta and you were writing the next big piece?
We only started to scratch the surface on decarbonization of heavy industry. There are some really good programs in the Inflation Reduction Act for this, including a program that supports large scale demonstrations of very low emissions industrial processes. So when I say this, I'm talking about things like steel making, chemicals, cement, fertilizer, all these types of things that are often somewhat in the background. And therefore, we are quite far behind on reducing pollution from making those things. So I think we also have a tax credit in the Inflation Reduction Act, which is all about trying to reduce greenhouse gas emissions from industrial processes, but it's capped, so it will be very oversubscribed.
I think that there will be lots of people who want to do these projects, that — the money will run out before they can all do the projects they want to do. So I think lifting the cap on that tax credit would be one thing that's pretty surgical. Another idea that we have been kicking around at Energy Innovation that I quite like is a production tax credit for clean heat in the industrial sector, because there's a structural problem where it costs more, given industrial electricity rates, to produce low and medium temperature heat in industry using electricity, than it costs to burn fossil fuels to make that heat right now. And that's a rate design issue.
So could we find some way to make it more possible for us to deploy the already commercially available technologies that can electrify a lot of the heating needs in our industrial sector, things like that. I think there's huge opportunities for us to make a lot more wide scale progress on the kind of down payment we put in the industrial sector from the last set of bills.
What about states? Because a lot of, I mean, I think one of the sort of maybe untold stories about IRA is the extent to which it borrowed from state, sort of adventurous and cutting edge state policy, quite a bit of it in my own home state of Washington, if I may brag a little bit. Washington has done a bunch of stuff in Jay Inslee's crew. That whole thing came out of Washington, and a lot of the stuff that they sort of pioneered ended up in IRA. So what now that states, I mean, obviously states have their hands full implementing IRA, figuring out all the sources of funding and how to direct them and everything else.
But like states that are out ahead and that are sort of blazing a path, what should they do? Like the Washington's and the Colorado's and now Michigan. Welcome, Michigan, to the club. What should they be doing?
So first of all, I would say that Governor Inslee's leadership on the climate agenda from when he first joined the presidential race as our climate president and really released a lot of very detailed plans of what he would do to address the climate crisis, you are absolutely right. Much of that same stuff ended up in the final bills, and the organization that was started by his former team, Evergreen, is still at it and making a lot of really good recommendations on progress. So I'm grateful to your governor for that. I think as far as what states that want to be ahead now can be doing, there's plenty of things.
Right, so, the Inflation Reduction Act and the Bipartisan Infrastructure Law fundamentally change the opportunities that states have to deliver very low-cost energy to their citizens. That also improves people's health. And that is not really factored into a lot of state energy planning yet. So that's one thing that just honestly rerun in the numbers to say, look, actually this stuff turns out to be really pretty affordable now. It's cheaper than continuing to rely on polluting energy sources and then thinking hard about what kind of electrical grid expansion would be required to accommodate that very low-cost clean energy.
And that's both at the transmission scale, so large long-distance lines, but also very much at the distribution scale. So the small lines that go from the substation to your house, we also need to be thinking about how we optimize for all of the low-cost energy sources and modern kind of building equipment at that level as well. Adopting clean energy standards: You mentioned Michigan. There have been a slew of states that have increased the ambition or altogether adopted new clean energy standards over the last couple of years. Minnesota started off this year. Michigan is ending this year.
As far as two new states that have joined in with ambitious clean energy standards, there's just a huge amount of opportunity presented by the federal incentives in the electricity space. Also, state and city economic development offices could be really working hard to look at what are the incentives and programs offered from these new federal bills that could bring low emissions manufacturing to their region — look at how you're stacking up against the other states and cities and how attractive are you making it for businesses to locate those low pollution, zero pollution factories in your area and all that local tax revenue and jobs that come along with doing that. I think that's a huge thing that not enough people are paying attention to. There's also some building sector programs that were established in the laws that the states have a lot of control over designing and implementing.
So making sure that those are really effective, that they are actually reaching families that are low and moderate income with technologies and equipment for their buildings that will help them reduce their energy bills. That's really the name of the game for that. And there's a lot of runroom for states to do a lot on that, too.
And I'm going to take host's prerogative and add one more to your list there. There is a housing crisis which is not unrelated to the climate crisis, and a lot of that goes down at the state level, discouraging sprawl, encouraging infill, encouraging middle housing, et cetera, et cetera. Also something my state has been doing great stuff on, and Colorado as well. I think that's an overlooked piece of the climate fight and an overlooked set of allies, too. What about Biden? What should he be doing without Congress up until the election? And then let's say he's reelected and doesn't have Congress and so he's restricted to executive actions.
I mean, this was sort of like the very familiar, remember when the Clean Power Plan, Obama's clean power plan got crushed and everybody was like, all right, "what can you do with regulations?" or "what can you do with executive actions?" you know, we're back there again. So what can Biden do with the power of the federal government through executive action that can fill in some of the gaps in the legislation?
The most important priority for the year up until the end of this first term is to finalize rules that will reduce pollution via the Environmental Protection Agency. He has quite a few rules that are not yet finalized that are very important. And so kind of the way to think about it is that the bills that crossed the finish line over the first couple of years, that the administration provided a lot of incentives for companies to transition to cleaner products, whatever industry they may be in. And so we need to come in and shore up on the back end of that the rules that will ensure that they actually are held accountable for pollution that continues to harm people's health.
So we have a rule that will limit methane emissions from the oil and gas sector, a rule that will limit pollution and improve efficiency of vehicles, both light cars and heavy-duty vehicles.
Didn't he propose something on that? But it's not finalized —
Exactly, it's finalizing them at the level of ambition that really we need to see. And then, of course, the power plant rules are back 111 trying to update those rules to make sure that we are taking account of the best available technology right now and all of the legal constraints that surround that section of the Clean Air Act. All of those things are just incredibly important for us to finish sooner rather than later in this last year before the election. And then you asked about the next term: I think one underexplored area is just we are not doing what we can to limit public health impacts of pollution from factories.
There's a lot of evidence of local impacts on communities from dirty operations. And those rules also need to be modernized to understand now what kind of technologies do we have to control some of that? And how do we get the companies to really be thinking about installing those?
I want to take some questions. I got one more to throw at you, and it's unanswerable, so we'll forgive you if you don't have an answer. But one of the thorny problems that everyone's facing right now is a set of sort of contradictory needs. On the one hand, we need to build a bunch of stuff really, really, really quickly. I don't know if people have their head wrapped around it like we need to, like two, three, X the pace of building everything, everything, solar, wind, nuclear, geothermal power lines. We need to hit the targets. We need to be building a lot of it really fast.
But we have these built up set of institutions and rules and practices that make it slow to do things in the US, slow and expensive to build infrastructure. There's tons and tons of environmental regulations that are now being used to block the building of power lines and solar panels. There's a lot of NIMBYism about power lines, about hydrogen hubs, about CO2 pipelines, wind and solar. And then also on top of that, there is, I think, a wide recognition in our world of the need to have this transition not be as, let's say, crude and unjust as previous transitions, and a need to take vulnerable communities, their wishes, their feedback, more into account.
So all of those are kind of intention. You want a lot of speed and you have a lot of stuff that's slowing us down, some of which is justified, some of which isn't. So how do you wrap your head around that whole naughty set of issues. How do we think about going fast and also being careful and also being just, and also being environmentally sensitive, et cetera?
Yeah, you said this, but there is a reason why it's tough to build things, and it's because industries of the past have a history of railroading over communities and really not taking people's views into account. So I think that that's really important for us to keep front of mind. At the same time, I think one thing that gets lost in these conversations often is that the scale of extraction and the amount of pollution associated with continuing with a fossil fuel centered energy system is multiple orders of magnitude larger than any impacts from a cleaner energy system. And I've seen different estimates of this, but it's something like 1/537th the amount of extraction associated with hitting all the way to net zero.
But not necessarily the same people affected.
New people who are seeing this stuff this time around.
Yes, and that's exactly right. And that's why I think it's really important for us to have a community by community approach that is tough. But I think that there are some best practices that we can look to. And one that I particularly like is something that we identified, actually, in a project we did at Energy Innovation about ten years ago called America's Power Plan. And it was all about, what's the suite of policies that we need to get in place in order to transform our electricity system? And one of the things was about siting and how we kind of get this infrastructure built.
And the core recommendation of that section, which was led by people from these more rural areas that we're seeing, that siting in their areas, was that there are business models now where actually some of the profit can be shared with the communities. So it's not just about the tax revenue that's supporting the schools and hospitals in a local area, but it's also about creating some headroom in that actual investment strategy for providing some compensation to the communities that are hosting these large infrastructure projects. So that's one thing that does tend, I think, to reach people, but there's plenty of other things, and it is unfortunately going to be very much a community by community conversation about what actually do people want there. And that's inherently not going to be the fastest thing, but that's probably what's required.
Yeah, I mean, I think the hope is, insofar as people have hope on this set of issues, is that there's some level of early community engagement and early benefit sharing that avoids trouble later. And thus makes the whole process faster. Right. There's some magic perfect sweet spot that is enough community engagement to satisfy a community and then less fighting later. But I don't know that anybody's got the formula for that just yet. We can talk forever, but I'd love to take some questions in the time we have left. We have mics around, I think. Oh, and I should say we don't have much time and we're recording, so if you have more of a comment than a question, I encourage you to not do that and instead just have a question.
Audience member 1
Sonia and David, amazing conversation. Thank you very much, Sonia. Actually, David and Sonia, curious putting you on the spot. If you have a knee jerk thought on what area or sector in the, call it the electron value chain, supply chain, whether it's finance, transmission, battery storage, what area has more or better technology ready to deploy or almost ready to deploy, that could make as much difference as possible the fastest, because obviously we are very low on time. Thanks.
I have an idea. Go ahead.
Though I am currently obsessed with thermal storage, this is my dark horse candidate for something that's going to make a big difference and is ready to go, mainly because it's extremely low tech. I mean, in some sense it's a box of rocks. So the idea is you have these industrial heating needs. You need industrial heat. Right now, the cheapest way to do that is burning fossil fuels. Direct electrification is difficult for some of that to produce the sort of intense ongoing heat that some processes need. But you build a bunch of renewables, dump the power into a heat battery, into a box of rocks, because the renewable energy is variable.
But if you put it into a heat battery, then you can get steady 24/7 output out of the heat battery. And so instead of a natural gas pipeline and a natural gas boiler or a coal truck and a coal kiln, you have a transmission line and a heat battery, and then voila, you solve the industrial heat problem. Heat batteries are, I mean, there's a lot of cool, I shouldn't say it's low tech, there's a lot of cool innovation happening. But basically, like you're heating up rocks, they retain heat really well. Like you can get 95% to 98% of the heat back out.
So it's incredibly efficient. So the one other thing I'd say about that is the main thing holding back renewable energy development right now is trying to get connected to grids. It's the interconnection queue. It's just waiting for your slot. But if you just build your renewables and dump the energy directly into a heat battery, which is attached to an industrial facility, then that's a whole new area for renewable energy developers. They don't have to wait for the grid. They can just build next to industrial uses with a heat battery in between. And that's like half the final energy we use is heat.
So that's like a huge new opportunity for renewable energy developers to get around the grid connection issue.
I love it. We love heat batteries at Energy Innovation, and we have several pieces of work on that, too, and love it. So. Totally agree with you, Dave. The other one, I would add, is another thing that is not really like a complicated technology, but it's just very exciting to me because of its potential. And that's just advanced conductors. So that's basically. They sound advanced, but they're actually not that advanced. It's being able to use new transmission lines that carry quite a lot more energy on the existing pathways of the lines that we have now. So we just haven't updated our transmission lines in a lot of years in most of the country.
Texas has done a little, and we built some transmission here and there. So it's a little bit newer, but a lot of our transmission lines are just pretty old. And there's a new analysis which just came out from UC Berkeley looking at the potential for advanced conductors in the United States. And I wish I could remember the headline, but it's at least two times the transfer capacity of our existing transmission system that we could get if we replaced all those old lines with just newer ones that have been used in other countries and even used a little bit here in the US.
And that's a huge boost to getting the kind of transfer of electricity across our country that we need if we're going to be transitioning to a lot more clean energy.
There's a whole suite of technologies that get more out of the existing built transmission line. It's very hard to build new ones, but you can get a lot more throughput through existing ones with existing technologies. That's mostly just a regulatory financial issue.
Audience member 2
Hi, my name is Yetang. Thank you so much for this wonderful conversation. I think part of the beauty of IRA is that it's not only a game changer for climate solution deployment here in the US, but also potentially a way to inspire a wave of similar climate measures in the world. Do you have any advice for other governments when they're thinking about how do we roll out something similar to IRA? Thank you.
Oh, my goodness. Do I go first on that one? Because this is very much on my mind. I went to Australia a few months ago at the behest of the big electrical union there, precisely because they've just elected a Labor government after years and years of conservative government, and it's very much a live issue in the Labor Party. What do we do on climate? In a sense, they've been burned by the carbon tax. They've been burned by their whole history with climate policy. But one thing I heard over and over again, I heard the Australian Energy minister say more than once, so I know it wasn't just a one-off line.
He said that the IRA is the most significant policy development for climate ever, including the Paris Agreement. So I really don't think you can overstate the extent to which policymakers in other countries have been galvanized by this. They don't know about the ugly sausage making. They don't necessarily know about the gaps. All they've heard is like, the US is in the game now and we've got to get in the game or get left behind. And I think every country has its own sort of strengths, its own place in the future, clean energy economy. So for, like, Australia, Australia is in the top five producers of, I think in the top two producers of the five most important critical minerals that everybody's talking about needing.
And they have a very dig up rocks based economy. And I was like, "look, just dig up different rocks." There's a huge global market specifically looking for these minerals from friendly sources like, be that and every country's got their own thing, but I think every country has got to get active is the thing and maximize their own individual advantages and just take advantage of, like, there's just going to be a ton of money flowing around the world for this stuff. So just like, stick your finger in it. Get some of that money, you know.
What Dave said.
Audience member 3
Sonia, do you ever dream of a carbon tax? And if so, what are you dreaming about when you are? And then, David, do you have any comments on Washington State's experiment with a carbon tax over the past year?
Do you dream of carbon taxes?
Yeah, I guess it depends on the night.
What you had to eat.
Gosh. Yeah. So I think when carbon taxes were first proposed 50 plus years ago, I think that would have been a great time to adopt a carbon price and that a carbon price that grew over time, starting back then to reflect the actual cost of the damage that carbon pollution is doing to people and to our capability to have a livable civilization. I dream of that having happened. I think we are at a different point in the urgency of the climate crisis than we were back then. And I encourage any kind of internalization of the costs of that pollution in whatever way now.
And some of that just looks different than it might have if we had gotten that project started when we probably should have.
I actually think Washington state's history with this is a great illustration of the political economy of carbon taxes, because economists love them, because on a spreadsheet, it is the cheapest and most efficient way to get to a particular target. But as I have tried to point out to many economists over the years, the world is not a spreadsheet. And in fact, a policy that penalizes everyone in a visible way and benefits no one in particular is the opposite of good politics. A policy that hurts everyone and helps no one strands you. And the only people you have at your back are economists.
And what brigades do they command, or whatever the phrase is. And Washington tried it via direct democracy, via ballot measure, several times. And a lot of people poured themselves into trying to get it over the finish line, and it didn't work. And so then Washington resorted to what people like me were saying all along: Do policies that benefit people, do active — spend money where it's visible in such a way that it creates visible jobs. And these things are not perfect on a spreadsheet. But a policy in the real world is better than any theoretical policy. Any policy in the real world is better than anything in your head.
So for years, I was sort of like the carbon tax, "throw cold water on it" guy. It was kind of my shtick for a while, but now I actually think now that kind of things are going and money's flowing and things are getting subsidized, I think there will be ways of pricing carbon around the margins or in specific industries or in specific contexts. Not the headline policy, not the top line policy, but sort of a supplemental backstop type of policy, like the methane fee in the IRA is a kind of carbon tax, a narrowly focused carbon tax. So I think things like that, like in an individual state or in an individual industry, or maybe, and other people have higher hopes about this than I do, but maybe in federal budget negotiations, they badly need revenue.
They badly need revenue, and that's a good source of revenue. So it's not completely out of the realm of possibility that something like that could fall out of federal budget negotiations. But it just won't be the main thing. It's going to be a backstop wherever it pops up.
Audience member 4
Hey, guys, thank you for this. This is pretty awesome. A couple of things. Just first on the IRA in different countries. I live in Canada and believe me, we just don't have this thing called a shiny credit card that it seems to have like no limit. We do have a tax base that limits us to what we can and cannot do. But my question is actually on supply chain. So basically I develop renewable natural gas projects. And the IRA came out and said, "okay, if you buy things that are built in America, we're going to give you X extra," right?
And then we go and you double click on it. And I start buying a compressor here in the US. And then I go, I'm like, perfect, I qualify, right? But the instruction from the IRS just doubles down on it. So every single component inside that compressor needs to be made in America. There's probably like 20 countries, even though it's assembled here, that make up that compressor. So in what way — okay, near shoring is great and we love it. Inshoring is better. In what ways are we going to expand? I mean, do you guys see, like, before we bring everything home, that's going to take time. Do you guys see an extension, perhaps with friendly countries to comply with some of this, an evolution of that? Because that's not going to happen tomorrow. I'm building projects today and I cannot meet that requirement. Nobody can. How do you see this happening? Because right now it sounds great on paper, La La Land, but in reality it doesn't work.
Sure. So, I think to your last point, some of the domestic requirements are actually Canada, US, and Mexico. So, for EV assembling and stuff like that, I do think the other piece you raised was about the cost of this. And if you look at the Inflation Reduction Act, it is actually more than paid for through all kinds of other non-climate-related, non-carbon-tax, but revenue-generating activities, including shoring up our tax sheets. But I think as far as moving forward, this is a bill that was made by a lot of hands, and there was a lot of provisions in there that had to do with where different components were manufactured.
And this will be a learning opportunity for the federal government to understand how much we are actually restricting the capability to deploy technologies with these requirements and how much we are actually making an impact on global supply chains. And it's actually wild. I mean, the battery supply chain requirements were something that we got lots of phone calls about when that first came out in the Inflation Reduction Act. This is going to be impossible to meet. Nothing will ever qualify. You're going to tank the industry. And within what it's been 15 months, we've seen an incredible number of investments in domestic battery manufacturing.
And that's creating all kinds of new industries, new jobs. And it's actually pretty amazing to see how quickly the global supply chain for those headline components at least, is getting rewired in such a short period of time. So, I think there's learning amongst all of us, right? Like maybe some of the requirements are too stringent and they just won't be met. In other cases, they might have sounded stringent, but they actually are having the impact that the law was intending. So, it's a mix, I think.
There's sort of like a loophole in the EV tax credits where you can get the tax credit if you lease it, even if it's not domestic content. And then the IRS sort of like wrote it so that leasing is super easy. And then Manchin got his butt up on his shoulders and now wants to reverse his own bill. But yeah, I think that Sonia is exactly right. One, there's been on the order of like $250,000,000,000 of new investment in manufacturing, domestic manufacturing in the US in the year since IRA passed, which is just mind-blowing.
So, one, I think you're right that the supply chains will reconfigure quickly. Two, I think this will give other countries incentive to be friendly, to get on the friendly list and maybe even give them incentive to clean up their labor practices and pass some laws about mining or whatever and get friendlier so they can get their piece of this pie. And then I think probably you're also right that some of this will be tweaked by federal agencies if it turns out to be too restrictive in the future. Like I think it's going to settle itself. It'll work itself out.
There will be a lot of chaos in the interim, but I think it'll work itself out.
Audience member 5
You talked about agenda setting at a future point of unity. And I think that so much of the legislation that was just discussed is understandably focused on the US's transition. But it's also a global transition, and the US especially has a role in contributing to that transition outside its borders. I'm interested if you could choose in that future point of unity, perhaps that would be a time to sort of solidify what the US can do abroad. And perhaps an example of that would be climate finance with a legislative backstop. If something could be done at a national legislation level in the future, what would be something you might try to slip in?
The first thing I'll say is that the single best thing the US can do to accelerate decarbonization in other countries is to drive down the cost of decarbonization technologies, and that is what the IRA is designed to do. So every bit that these technologies get cheaper, it makes it easier and faster for developing nations to opt for them. So that's, you know, kind of a convenient answer. But I really think it's true. I really think that's our primary role, and that's going to be America's primary role in this. I am, I guess, skeptical about the political viability of large-scale funding, of the loss and damage stuff and the climate fund stuff.
I mean, it's all great. I would love to see it, but that would take a lot of unity among Democrats because you're never going to get any Republican votes for sending money abroad like that. But I do think there's tons and tons of lower-level opportunities for knowledge sharing and for technology development sharing and for more cooperation. Right now, speaking of the anti-China stuff, Republicans are upset because — what is it, this car factory, is it Toyota? I forget the factory, but they brought in a Chinese team to sort of help them learn how to do this stuff with batteries.
And now Marco Rubio is all like, "Oh, you're letting the Chinese into your factory." I'm just like, "Jesus. We should be learning from one another." And I think we could formalize a lot more of that. Just bring over scientists and send scientists abroad to do technology sharing. Like, ultimately, I think making technology cheap for the rest of the world is the most direct route from A to B in terms of helping other countries. But maybe you have other things to say about that.
I think what you said is fantastic.
Thanks so much, Yale, for all your hospitality.
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