Climate change is an urgent challenge. We are nowhere on track to meet the targets of the Paris Agreement in countries around the world. Action depends not just on reducing emissions here at home, but meeting rapid economic growth around the world – China, India, Southeast Asia – while decarbonizing the global energy mix far more quickly than we are today.
In this edition of Columbia Energy Exchange, host Jason Bordoff is joined by Jonathan Pershing. Jonathan has been a key architect of the world’s landmark climate change deals, including securing the 2015 Paris Climate Agreement. He served as Special Envoy for Climate Change at the U.S. State Department, was lead U.S. negotiator to the United Nations Framework Convention on Climate Change, and was a senior advisor to the Secretary of Energy, Secretary of State, and the White House. He’s also worked at leading organizations like the World Resources Institute and the International Energy Agency.
Jonathan holds a PhD in geology and geophysics; and is now doing innovative work putting the resources of the Hewlett Foundation to work addressing our global environmental and climate challenges.
Jonathan and Jason sat down to discuss the role of government policy to send market signals, various approaches for addressing the variability of renewables, the practical impact of the U.S. withdrawal from the Paris Agreement, and much more.
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Jason Bordoff: Hello and welcome to Columbia Energy Exchange a weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Jason Bordoff. Climate change is an urgent challenge. We're nowhere on track to meet the targets of the Paris Agreement and countries around the world. Action depends not just on reducing emissions here at home, but meeting rapid economic growth around the world, China, India, Southeast Asia, at the same time that we're decarbonizing the global energy mix far more quickly than we are today. And one of the leaders for at least three decades and thinking about these challenges of the global energy system about climate change, that the entire world has been my friend Jonathan Pershing, who joins us today. Jonathan has been a key architect of the world's landmark climate change deals including securing the 2015 Paris Climate Agreement, served a special envoy for climate change with the US State Department lead US negotiator to the UNF Triple C and a senior advisor to the Secretary of Energy, Secretary of State, the White House, worked at leading organizations like WRI and the International Energy Agency, holds a PhD in geology and geophysics. And now is doing innovative work putting the resources of the Hewlett Foundation to work addressing our global environmental and climate challenges. Jonathan, thanks for joining us on Columbia energy exchange.
Jonathan Pershing: Pleasure to be here. Glad to be here.
Jason Bordoff: So let me-- there's so much I could talk to you about. And and we're going to run out of time I'm sure, but talk a little bit just to start about your agenda at Hewlett, what do you think about the resources a place like Hewlett has to address the challenges I just laid out? How do you prioritize among that? Where do you view the highest impact places to put those kind of resources?
Jonathan Pershing: So it's interesting to think about the problem first in in the larger context, and then more narrowly in terms of how Hewlett deals with it. In the larger sense, I think the world has undergone an evolution in its own thinking about the issue. I would say that for much of the last 25 or 30 years as we recognize the problem, we set ourselves up with a framework that said, let's do the least cost thing next, whatever is the cheapest next thing, let's do that. And during the time that we're working on that, technology will improve, prices will come down for additional alternatives. And we can move further. That works well--
Jason Bordoff: further along the abatement curve.
Jonathan Pershing: along the abatement curve. And that works really well, if you've got a framework that says we're not quite sure where we're going but we know we have to go down. The 2015 agreement in Paris essentially gave us a different framework, it suggests that we actually do know where we're going. It says you want to be really not more than a two degree warming, maybe as little as a one and a half degree warming. And therefore you should be planning against that, that horizon that scenario. When you think about it, that way, you're no longer and I should be the next least costing, because the next least costing may not be part of your true degree world. And let me give you an example for that. So supposing what you say is that in my least cost world, I probably can't have any emissions from coal. So in my next thing that I might do, the most efficient thing could be to make coal less emitting less polluting, make it more efficient. But and then investing limited resources today against the efficiency, which probably should be going into finding ways to capture all the carbon are getting out of coal entirely. Those are really, really different tracks to be on. And they lead you to really different outcomes. The reason I go through that kind of frame is that for me, it's also shaped the work we've done.
Jason Bordoff: Would you think about the-- one of the primary drivers of US decarbonisation over the last decade, at least in the last year or two has certainly been cheap natural gas, does that fall into the same category?
Jonathan Pershing: A little falls on the same category? It could be a dead end. And how do you think about that from a carbon perspective means that if you want to think at 2015, which is only 30 years away, how big a role is gas playing if gas is unabated, which means there's not a capture and storage program, or another way to use the gas to remove or eliminate the emissions from the cycle, gas is not part of that zero carbon future. It doesn't mean that you couldn't make it part of the future, there are some solutions moving into hiding them--
Jason Bordoff: to get the next 10 or 20% reduction.
Jonathan Pershing: Exactly right. Probably critical
Jason Bordoff: is it's how we achieved it.
Jonathan Pershing: And that is in fact, the tension that we were working with when I went to the Hewlett Foundation, I think the tension the world is engaged with as well. So what we ended up doing is we have this periodic review of our strategy, in any of the areas in which we do philanthropy. And that strategic review started off with an assessment of let's work backwards from where we want to be, we want to be more or less globally, pretty close to net zero, how soon a little bit open. If you think you're working towards a one and a half degree world, it's got to happen by 2050. If you think you have enough room to do it to a two degree world, it can be a bit after that, but probably much, much, much later than 2070. So that's a really, really near term commitment. And if you think about the long live nature of capital stock in the energy sector is within the next generation of capital stock, and in some cases, the current generation of capital stock So we started off with that vision. And we then work back. The second thing which we looked at,
Jason Bordoff: Can I just ask you about that? How do you think about the thing that's hard for people to talk about, which is, you know, we might not get there. And two and a half and three is a lot better than four or five and six,
Jonathan Pershing: completely true. And so I think what you end up doing is you look at the things that have to change. And then what you do is you think, what would it take to change those things, and it's really not entirely clear that you will be 100% successful in any of these endeavors. But if you don't shoot for 100% success, you're certainly not like an immediate. And so we started off with--
me here looking at different solutions that possibly
Jonathan Pershing: possibly, although probably not in a significant way. Because I'll come to that in just a second. But when I think about the sector is based on how we framed it in our own thinking. The second thing which we looked at is if you think about where the emissions come from, both geographically and by sector, you then articulate both a current understanding of what there, where ambitions today coming from and looking into the future what therefore has to happen. World's largest emitter by a factor of two currently is China with the US being second, there is no model therefore, in which your investment as a philanthropy or as a global set of actions can be constrained not to include either the US or China. Collectively, India is pretty much third, a year of--
Jason Bordoff: fastest growing or?
Jonathan Pershing: not-- fastest growing also though there are other smaller players are growing more quickly. But India as a big player is one of the fastest growing, growing faster than either the US or than China, Europe, collectively a little smaller than India, but kind of rounds out the top four. So we looked at this and said to ourselves, well, we should work in those places. So instead of picking places that may, in the future, be substantial, but pick the places that are today significant, you know, you have to have them really reduce their emissions. We also made a second assumption we look at the geography. The assumption was that if those four places moved, very, very little, and the rest of the world would not be affected by what they succeed in doing. If I can succeed in the US and China and India and Europe, it's impossible to imagine that Africa wouldn't pick up the technology or the practices, or that South America wouldn't, or that Southeast Asia wouldn't. So in some sense, those four also represent leading models for what is likely to be a rapidly transferred technology and set of good practices and the political weight in the world that's likely to lead to pressure on others to comply. The third thing that we did was we looked at sectors and we said, all right, so how do you think about the collective balance of greenhouse gas emissions in the world and what sectors are driving those? So at a global level, power is the one that we spent the most time on. Primarily, it's about fossil fuels, but power and electricity and the generation of electricity has really been the center of the conversation. But it turns out that's only about a quarter of global emissions. And so we've increasingly been trying to rebalance our portfolio which has started with a very very heavy emphasis on power into thinking about a much wider range of activities. Number two is transportation.
Jason Bordoff: And that's something I don't think as well understood. I think it's-- I think people-- electricity is visible to them and how they consume energy. We see what solar panels and windmills are, which can substitute cost effectively in many cases. Industry I mean, transportation they see as well, but--
Jonathan Pershing: yes, but over political pressure has been about- can I get renewable energy into my system and as if that by itself would solve the problem, and it certainly contributes to the solution. I'm not arguing it doesn't, but it's not the problem in its entirety. It's a piece of the problem. So we look at transport, which is the number two emitter in places like California which was the--
Jason Bordoff: and even there I think when the big-- when people say, you know, transportation is visible to people, but kind of in cars, and we think a lot about electrifying cars. We probably need to think more if you agree on trucks, trains exactly
Jonathan Pershing: absolutely. And again, that framework depends by which country you're in. So if you are in United States, a very substantial share of total emissions from the transport sector are in fact in light duty vehicles, cars. If you're in China, it's overwhelmingly trucks. If you're in other parts of the world, you know, how do you think about emissions that come from aviation, which are trans boundary, those are a different set of growing rapidly growing really rapidly. So for us, that framework is really helpful I'm thinking about it. We also know that almost a quarter of emissions come from the industrial sector. And those are not just from the direct combustion of fossil fuels, you know, from burning things to get heat. It's also from process emissions. We've got a combination of things like perfluorocarbons and the production of alumina, and you've got conversations that deal with HFC's and coolants and a whole series of other gases, as well as the emissions from the energy side of the development of heat and process structures. How do you deal with that? Again, that's the better part of a quarter emissions. And it's the largest share of emissions in a place like China. And we don't we're not really invested--
Jonathan Pershing: what's the answer? How do we deal with that? Do you have thoughts on the--
[Crosstalk] [00:09:55 to 00:09:57]
Jonathan Pershing: I think there's all kinds of sources for each one of these cases. The last one for me is land use sector. And that's another quarter of total emissions. There was a report that came out today that looks from the governmental Panel on Climate Change at the issues in land use sector. And in some ways, I think it's going to have a significant effect. Because in my mind, people going to start paying attention. When you talk about shocks to the food system, and the unavailable supply and distribution networks and basic crop capacity and people starving, people start paying attention. So I think that's going to really generate a lot of new interest in a sector that really is under invested in from the community. We've looked at all of those as a way to try to think through where we invest, but we're small. And so for us, the other question is, where is there a partnership? Where can you bring people to the table, and we're not big enough to make the technology purchases on our own. We are able to influence and support the development of policy, which has a multiplier effect that makes it
Jason Bordoff: Can you talk about some of those other technologies we've seen a shift in some cases, as we get deeper decarbonisation targets from renewable standards to clean energy standards. Many people are talking candidates included now about NET zero targets. NET implies there may be a role for negative emissions. But there's still a debate, I think about what role people think advanced nuclear should play, carbon capture should play, direct air capture should play. We're talking again about hydrogen, which was the conversation 10-15 years ago. Your thoughts on those broad suite of technologies
Jonathan Pershing: So we come out essentially, in our examination, looking at the kinds of scenarios that have been developed for how do you get to essentially NET zero. And in some ways, it's a very easy metric. It's politically salient, it's easy to think about, and if you're plus or minus 10 years, it'll make a difference on temperature. But essentially, you're trying to get to NET zero, and I use the word NET advisedly, I think it's going to include negative emmissions, and I use--
Jason Bordoff: technological and land based?
Jonathan Pershing: both sides. And so for me that structure is quite important because it shapes the scale that you have to have But it also, as a consequence implies that everything is counted. And and I look at these kinds of things that I worry about the combination of urgency and speed, can I do it in the next 25 to 50 years? Or it's at a lot longer a strategic plan? How much is it going to cost me? What kind of disruption might occur in terms of communities that are currently living on today's world of energy and industry and transport? How will they have to look like in the future? And do I have any examples of transitions that might work in those places, in any place in the countries that we're working in, or in other countries that might be brought to bear as examples to play up. All the scenarios that seem credible to us include nuclear, include carbon capture and storage, include direct air capture, include massive gains and efficiency, include substitution in the materials that we use, both for the fuels and for the outputs and products in our communities, and they require a pretty substantial change in how we do business, which means a regulatory shift, it means the governments have to pay more attention to these kinds of questions because it implicates their work in the finance field, as well as in community development and practice. So you've got this very broad array, which both means there's a lot you can do, but also means that all these things are interconnected. And you can't pull on one thread without seeing the entire fabric change.
Jason Bordoff: and how much do-- so where do you think the state of those technologies--
Jonathan Pershing: they're all different, they're all quite different. So it's kind of interesting to break out the individual pieces. The one that's been best examined in my mind is the power sector. And if you currently look at the capacity for an immediate purchase, as dictated by what the market seems to be buying in many, many parts of the world, the least cost solution to generate electricity these days seems to be a combination of various variety of renewables. Gas is about the same price. Gas has a significant advantage of being reliable, and I can get it where I can get the distribution to work and I've got pipelines or LNG capacity and terminals that good 24x7. The majority of renewables have some variability. They have various levels depend on where they are and what kind of regimes they're in, and whether they're balanced by a larger grid? So there are ways that people are thinking about managing that variability. Technology developments and batteries are bringing down some of the short term variability costs. But we have very few answers in terms of dealing with long term secular change. If I've got a monsoon season, and that runs for months, and the wind regime changes and the solar regime changes, I can add four hours. Can I manage a month? No, I actually can't do that. So I'm going to have to still do a lot of thinking about how the system works. And while their ideas, many of them include these kinds of transitions with at least things like gas as part of the mix, and if I have gas as part of a mix, I have to capture the carbon. And if I have captured the carbon, it then takes a whole new set of technologies like carbon capture and storage that have to be elevated and amplified at a substantial scale. So I put that--
Jason Bordoff: and you see that as viable
Jonathan Pershing: At the moment it's increasingly looking like it's viable, it's not free. It has cost. There's some really interesting new work--
Jason Bordoff: climate changes has costs too?
Jonathan Pershing: Climate change has huge costs and I think you got to balance those too. There's some new work coming out, some new corporate thinking that's being done, some new technology developments that suggests that it might be possible to capture the carbon from natural gas and at only marginally different prices than combusting it to begin with. We'll have to see if that is a commercially viable opportunity. But we're hearing from companies that they're working on that task. I'm relatively optimistic about it. I think it's chemically and physically possible to do that. I think the commercial questions and the cost questions remains to be seen. But I think we have to accept that. I think we have to have policies and programs from the governments that really push that agenda. The market has to be given signals to drive that forward. But I think it's only one of the solutions. I think you then get into these other sectors and think about what else you could do. I think there's open questions even in the power sector, about how much I do interconnections. So if I have a large enough area I can manage much much more variability in any given locality. I can move power around, it looks pretty consistently--like I've got consistent wind regimes in the entirety of the mid country of United States. I don't really worry about that. It doesn't vary all that much even seasonally. There's some variability but not that much. If I can move that power around the country, I can offset some of the seasonality across the eastern West Coast. Exactly right. I can move hydro down from Canada, a very clear opportunity for United States, I can move solar power up from Mexico, or in the case of Europe, from North Africa. We're already exploring those kinds of options. But then you get into the really significant question of how do you manage and regulate cross border trade in things like electricity, as a very narrow example. Look at the conversation that England is going through, the UK is going through in the context of Brexit? What kind of arrangements would have to have with continental Europe for its existing infrastructure, much less for a very different new infrastructure that might emerge
Jason Bordoff: Plus a range of energy security concerns if we think importing oil, you know needs to be addressed with strategic stocks. The risk of importing electricity.
Jonathan Pershing: in some places it looks much more daunting than others. The US happens to have, well we pissed them off sometimes happens to have pretty reasonable neighbors.
[00:17:18] Jason Bordoff: Well, we do. We have a lot of cross border electricity trade now,
Jonathan Pershing: essentially US and Canada are intertwined. And there's a little bit of interconnection with US and Mexico, our gas trade is is really intertwined, but our electricity is not. And so managing that would be part of the solution going forward.
Jason Bordoff: So can I ask you about the policy drivers, we need those at the national level, and I want to ask you about where we are in the US. But you would may-- one of the things that makes climate such a difficult problem is that it is ultimately a collective action problem and it doesn't matter for where the ton of emissions come from. So we all have to act together and know a few people have been at the center of that the way you have, including helping to put the 2015 Paris Agreement together so then, Trump famously withdrew from the agreement. number. Nonetheless US negotiators are continuing to participate in meetings under the UNF Triple C. So what's been the practical impact of our withdrawal from this? And what would happen, say in 2021? I think the technical date in which we withdraw is the day after the presidential election, if there was a change in administration, two things go back quickly to the way they were.
Jonathan Pershing: I think the way to look at it is to think about the near term consequences. And then those that're slightly longer term. In the near term, there's been very little change. The US is technically still part of the agreement, still has a seat at the table, still whenever it raises its, you know, hand to speak up is recognized as in the normal course of events as part of the process. And the technical people in the US team are very competent. There are a couple of things that also have translated across administrations and this one has not been very different. The idea that one of the things we're going to be wanting to have in any future regime is transparency. How are other countries behaving because if they're behaving badly, and not doing what they said that we do that actually has a consequence for the world and has a consequence for the perception and often the reality that there's inequities in the trade and lower costs being taken, countries taking advantage of not acting, and passing off the cost on somebody else. It may cost you more money to have a low emissions car or power plant or industrial facility. And if you don't have to bear that cost, then all of a sudden your products are cheaper. That dynamic is one that all administrations in the entire history that negotiations have approved. So you end up with the first Bush administration starts off with establishing the structure. The current administration maintains and amplifies that, the second Bush administration, Bush two ends up yet further focusing on transparency. And Obama further amplifies that should actually got a whole history, and that one is relatively easy. There's consistent and constant agreement, both in Congress and the executive branch has not objected to that agenda. That's the near term thing that we're working on. Because a lot of the work now has been in furthering the rules of transparency. The second thing, which is slightly longer term is we also set for ourselves a commitment to have a certain level of emissions reductions by the year 2025. In many countries, which was for 2030, the US chose a 2025 goal. We're not on track for that. That's beyond the current term of this administration. It's implausible--
Are we not on track because of policy changes of this administration? Or if the election had gone differently would we be on track?
Jason Bordoff: even though we're going to exceed the targets of the Clean Power Plan.
Jonathan Pershing: It looks like it would have been much, much closer. It's unclear who would have been yet adequate. Clearly, the things that were done in the Obama administration had us on our trajectory, but the expectation were that a new administration would have to do yet a bit more to close a relatively small gap. Many of the policies have been walked back. And we have seen consequences of walking those policies--
Jonathan Pershing: Yes, but they've also walked back efficiency standards. They've walked back the commitments on vehicles. They've walked back the structure for land use and solar preservation. They've walked back some of the National Parks set asides that had carbon sequestration attached to them. All of those have been removed. And the pressure applied that was inherent in the carbon plan was actually leading to both resource transfers and state programs in all states, not just in a few they're leading in terms of further reductions. So I think we always would have exceeded the Clean Power Plan. We would've exceeded it by more, and there would have been a ratcheting and you would have had a mechanism to move that forward. And that's gone.
Jason Bordoff: And even if we were on track, the whole idea behind Paris was that we take stock and I think it was 2020. And we clearly collectively need to see expanded and accelerated ambition through the national spotlight.
[Crosstalk] [00:21:43 to 00:21:44]
Jonathan Pershing: 2023, so it'd be in the next president's term. And that would be the place where you're starting to hitting, what am I doing next. Now you're supposed to iterate on a five year cycle, that's what the convention that's what the Paris Agreement set for us. The five year cycle for us, in theory should start five years before our expiry date, which is 2025, which means it should start in 2020. That's the long term or medium term when that I think will not go anywhere. I don't believe this administration has any plans to iterate or to update, and certainly not to augment the stringency of its current program.
Jason Bordoff: Is it even with a different administration in the US? Is it plausible to foresee significant acceleration and expansion of NDC targets around the world right now?
Jonathan Pershing: I don't think it's likely that the US could make a huge enough dent, given the current trajectory in 2025 to bring us back into compliance. I think more likely is that when I have to think about what we do next, and the next will be 2030. And what are the things you put into place for 2030 horizon? I think if we do that, we can actually get the rest of the world to come along with us and be more aggressive. And we should be clear, we're not the only ones who have to do more, the whole world has to do more. And that was part of the Paris design. It suddenly you-- iterate on a five year cycle, but the expectation is that you-- as you learn how to do these things, and as you learn from other countries, you can be more aggressive, you can take more action. So for me, the constraint is that if the US is not doing that, if it's not moving forward, the rest of the world looks and says the world's most wealthy economy has chosen not to play. Why should we? Now there are some offsetting factors there. Interesting enough, China's still on track. China had a target that at the time it was set we thought was pretty ambitious. They--
Jason Bordoff: how do you respond to people who say it was an ambitious, it was a declining carbon intensity, you still have rising emissions. There's some debate about how far it was from business as usual.
Jonathan Pershing: I think that there are three parts of their target. There was an intensity part, which was I think, more than business as usual, but not as much as one might have liked to have seen. There was a second target, which I think was more substantial, quite a lot more substantial, which called for a share of non fossil based supply in the power sector. Over the course of the next 15 years. That was a huge stretch at the time. At the time nobody thought China could come close to meeting that. So the fact that prices have come down in the power sector for things like renewables, isn't part of function of how much energy and time and resources China put into making that policy work. And it's played out globally, we're now getting competitive options on renewables, because China made this massive investment in changing the outcome. So we can look back and say, what would have happened anyway? I actually don't think so. I don't think it was on track to happen. I think China identified this as an area that if it worked hard, it could in fact, be a major player in a new global market. And it did, and it is, and to me that has to be given credit somehow. The last one is to try to make a major commitment on land. It basically said it was not going to do deforestation, it was going to protect its forests. And unlike this administration, which was chosen to remove protections from a lot of our land, China has been fully successful and complying with its land commitments. Now it's not without cost because China is the world's largest producer and consumer of pulp and paper and a lot of things passed through China. So deforestation avoided in China may mean increased deforestation in the Congo Basin, or in Indonesia or in Brazil. So it's not without some global consequence, but China actually is doing pretty well.
Jonathan Pershing: And their policy toward coal?
Jonathan Pershing: policy towards coal has been fraught, at best. The numbers were going down for a while, they closed down a lot of small scale facilities, did a really good job about removing coal from local houses, a lot of coal was being used for cooking and for heating, that's pretty much been eliminated. A lot has been replaced with natural gas. On the other hand, we're seeing still continued new builds in China on the coal side. It's about keeping pace. If you think about the overall scale, the share of renewables is growing, but the share-- and the share of coal is therefore slightly down. But actual quantities, we're still seeing new builds. Now about five or six years ago, China was building a new facility almost weekly. It's now down to virtually a standstill. There is still some new build there, but very, very little. The analysis that we've seen suggests that China probably has an oversupply and overcapacity in the market. And therefore the question partly is how to think about the rank ordering. It may have coal, but it may never burn it, it may not be using it. They're also looking at imports. Increasingly, China's getting imports from South Africa. Imports actually would like to buy from United States, importing from other parts of the world like coal site from Indonesia. And that actually is not something that China likes very much, it likes to be much more self sufficient in its energy supply. And this provides the additional impetus. And finally, coal is one of the big culprits in China for its air quality problem. And that has driven an enormous pressure within the country to both clean up the existing supply, and in many cases to find substitutes
Jason Bordoff: now and those are-- but from a climate same, but those could be very different things. I mean, in the US, we cleaned up acid rain and sulphor dioxide emissions and scrubbers but you're still getting the carbon.
Jonathan Pershing: I think it's one thing if you've got a capacity it's already built, and if you're still building capacity, because then you actually look at an economics that are somewhat different. And it also makes a difference if in your economic analysis you do or you don't assume you'll ultimately have to deal with carbon. We dealt with a clean air act problem before carbon was a real issue. It wasn't part of the deal. We were looking at a very, very different question of criteria pollutants. And so we looked at scrubbers as a solution. Now when we look at that combination, and this was one of the powerful things in the amendments of the Clean Air Act and the Clean Power Plan, one of the things that you end up looking at is when you add them together, coal's no longer very good option even with scrubbers. Even with new scrubbers, it's just not that efficient. gas is a much better deal. And if the price on carbon explicit or implicit were to rise, even gas may not be that good a deal.
Jason Bordoff: And in addition to its domestic use of coal, China through its One Belt, One Road initiative is building infrastructure around the world and in many cases is pretty carbon intensive,
Jonathan Pershing: quite carbon.
Jason Bordoff: If you were back at the State Department, what would you be trying to do about that? What would be the approach for US policy?
Jason Bordoff: we don't have a great relationship with China right now,
Jonathan Pershing: Yes, I think this is one that we have not done a good job on. I don't think this administration has paid a lot of attention to some of those other implications. My own view about this is that there are a handful of things that we should do. The first one is that I think there is pressure to be brought on China. I think that the US is one of the few countries that can do that. I think that the related, the other issues in the--
Jonathan Pershing: not right now. But ours was-- it's always been tense. They are a major player, they are a rising power, we have both a combination of fear and need. And that combination, I think, plays in both of our cases, two ways that you can find areas of common thinking and common work. China's willing to work on climate change. It wants to work on energy, it is interested in engagement. What I have seen from outside the government is that there are a lot of research universities, a lot of think tanks, a lot of corporations still actively involved and China both appreciates the exchange and actually now brings more and more to the table. I think we need to grow that. I think the second thing is we have to work with allies. I think in many cases, Chinese export models are essentially predicated on the fact that there's no one offering an alternative. China comes in, and you're a country saying I need power and power, let's be very clear is development, and how do you think about growing your economy and your welfare of your community, unless you can develop and have economic access to electricity. So if that's the case, and China comes in and says, I've got a deal for you, I'll build you a coal fired power plant. And I've got all these idle engineers standing by because I've really slowed down my building at home, and I'll make it really cheap for you, and I'll get you cheap money. And the rest of the world looks at it and says, well, we can't really afford to do that. We're just having not to invest in foreign assistance. We're not making programs available for loan guarantees for countries. None of us are, Europe isn't, Japan isn't really, the US isn't. So there's no one to come back with a counter offer for the Chinese coal facility. But if we did, very few countries either want to be beholden to China or want the coal facility instead of something that's greener. So we provided a counter offer that actually had weight. And if we organized ourselves collectively to provide that, we would have a different outcome. And we could compete for a green scenario, which China would compete on. I don't want to mis-understand this, that it's coal or nothing for China, China's the biggest producer of all the renewable alternatives also, that could be what it exports, and we could be competing on cost there. And some of the things that we do well in the OECD community is things like the interconnect and the grid structure and local access. That's an area that we would do quite well on and could also be part of the solution. And you could have a very green outcome instead of what's currently a pretty cold intensive outcome.
Jason Bordoff: The climate summit that the UN Secretary General is having in about a month in New York, what first, what do you hope can be achieved at that just quickly?
Jonathan Pershing: I think it'll do two things. It'll raise the profile, which is essential. I think that too many people have said, well, you know, stuff is happening, the US isn't playing China is doing a little bit. It's slipped a bit on the radar, I think this will be a chance to elevate its political salience to governments. I think that's very important. I think the second thing that will happen is there'll be a series of explicit commitments made by everyone from governments, to the private sector, to groups of NGOs, and advocacy organizations. And those will begin to lay out concrete next steps that people intend to take. The combination hopefully will give a bit more momentum and energy.
Jason Bordoff: Let me ask about one piece of the private sector. So I think around the same time, they'll be another meeting of the oil and gas climate initiative. There are different views as you know about what role there is in this transition for the oil and gas industry and is it an industry with political power that needs to be marginalized, or with capex budgets and with engineering capabilities and with a role to play because we're going to be using these things for a while. That has to be part of the solution. And I'm just wondering how you think about that.
Jonathan Pershing: I'm struck by the various kinds of ways the majors have approached the problem. There's an exercise that was led by the, the head of the Bank of England, a guy named Mark Carney, in which he set up a set of task force together to look at climate impacts in the corporate world, and to think about corporate risk to climate impacts. And he thought about climate in two ways. One is if climate change itself happens, physical risks come to companies. And the second was if countries decide to really take policies to mitigate climate change is actually a policy risk to companies. With that in mind, he asked companies prepare reports about what their risk was, and the number of the majors have done so. And I'm really intrigued by three of the reports that have been done and what the companies themselves say about their future in this world. The first one is Exelon. Major player well known not particularly focused in its public statements and worrying about climate change historically, frankly, one of the laggards and making any kind of political statements here. The Exelon report, which was very comprehensive, because Exelon is quite talented, enormous technical depth. The Exelon report says that Exelon will continue to be a low cost provider. And because we will use oil and gas a long way into the future, they will be as low cost provider very fine, no worries, company is going to be whole, really good investors don't have to worry about them. They're in good shape, not much risk. The second analysis was done by by BP, again, a big player very serious in the world. Their analysis essentially says, we think this is going to be a real issue. We think as a company, the solution for us is no longer to be in gasoline. It's going to be in chemical products. We're going to be a big plastics player. We see that as a growing market. We see huge opportunity there. Very different emissions character because a lot of what you're doing is locking up emissions in the physical thing instead of combusting it, and releasing it to the atmosphere. And we see that as a shift in where we're going to be where we're going to go and how we're going to operate. We might be a little bit smaller because the operations may be different, but we are just as profitable risk, not very high in that world. Of course, it does assume a fourfold increase in global plastic, which may be a problem. The third one--
Jason Bordoff: Some NOC is taking that approach too Saudi Aramco making same idea…
Jonathan Pershing: Same idea, exactly right. The third model was Shell. Shell basically says, we think this is a real problem. We think it's going to be really an issue. We are going to diversify. We don't see ourselves as an oil and gas company, we see ourselves as an energy company, because what people really want isn't oil or gas, they want mobility, they want heat, they want light, they want a set of things that are provided by the energy that we produce, we're going to diversify. We're going to buy renewables like crazy and they are, we're going to be in the plastic space because that's part of what we can deliver. We're going to be in the heat space, we are going to find other ways to generate the things that the community is going to need, will probably be bigger, but will be different. And they've already begun to make those investments. So here's three fundamentally different approaches. I'm not sure that any of them is necessarily going to be right. But they're all interesting. I don't believe the X1’s is actually fear. I think it's going to be a much much harder sell for Exlon to operate in a very aggressive carbon constrained world. But I used to work for the oil and gas sector. I was an employee of the Arco and it was-- before I got bought out and Exlon was always light years ahead. Exlon has unbelievable talent. So I wouldn't put it past them because it is long term survival here. But I think as a global energy sector, you also have to worry about the other players. I think a lot of those players are much less progressive. It's not just an Ecuinor and a Shell and a BP, it's small wildcatters who see no interest in any change at all, who have enormous influence in local politics, who block any kind of carbon policy. That's also part of the deal.
[00:35:58] Jason Bordoff: Unfortunately, we're out of time. I wish we had a lot more time to talk about many more things, but hopefully we'll have you back at Columbia very soon. Jonathan Pershing, thanks for making time to be with us today.
[00:36:07] Jonathan Pershing: It was a pleasure to be here.
[00:36:08] Jason Bordoff: Thanks to all of you for listening. Until next time, I'm Jason Bordoff. Please check us out online at energypolicy.columbia.edu and follow us on social media at ColumbiaUEnergy. We will see you next week.