Speaker 1: Hey everyone, it's a busy week in the world of
Speaker 1: politics and climate. In the US. It's crunch time for
Speaker 1: the Infrastructure Bill and we should know by the weekend
Speaker 1: what of it will make it through and become law.
Speaker 1: And on Sunday of October, the COP twenty six climate
Speaker 1: negotiations in Glasgow officially kick off, where representative from nations
Speaker 1: across the world will gather to take stock of where
Speaker 1: we're at with regard to the Paris Agreement and attempt
Speaker 1: to map a path forward. Now the tide that binds well,
Speaker 1: there's a lot of clean energy and climate related legislation
Speaker 1: in the US Infrastructure Bill. Whether and what passes this
Speaker 1: week and will impact a position from which the U
Speaker 1: s can approach the global climate negotiations as a leader
Speaker 1: or well not. From BENEF We've got Ethan Zindler, head
Speaker 1: of America's and Vicky Comming, head of Global Policy, on
Speaker 1: the show to tell us about what's going on, what
Speaker 1: to watch for, and their predictions of what they think
Speaker 1: will happen. This episode is based on our ongoing coverage
Speaker 1: of US and global policy being if. Users can find
Speaker 1: this content on BENEF dot com, BENEF Mobile and of
Speaker 1: course on the terminal and for everyone listening, will also
Speaker 1: be doing a public blog these next two weeks that
Speaker 1: will follow along with the eatings and provide commentary. You
Speaker 1: can find that at bloomberg dot com Forward Slash Professional,
Speaker 1: Forward Slash Blog. As always be desprovide investment or strategy
Speaker 1: device and you guessed it. The full disclaimer at the
Speaker 1: end of the show him Mark Taylor here with Dana Perkins,
Speaker 1: and you're listening to switch on the BENF podcast. Ethan, Vicky, welcome,
Speaker 1: Thank you. Okay, so we're gonna kind of do this
Speaker 1: in two parts today talk about the US infrastructure bills,
Speaker 1: what's going on there, and then tie that into what's
Speaker 1: going on in COP twenty six. But let's start off
Speaker 1: really basic, as we always do, and just talk about
Speaker 1: the infrastructure bills. So, Ethan, you and I were talking
Speaker 1: before and I said, generally, you know the Infratructure bill,
Speaker 1: and you said, actually, it's a bit more complex than
Speaker 1: just that. I think out in the in the wide world,
Speaker 1: we call it that, but I think there's a bit
Speaker 1: more to it. Can you explain kind of the differences
Speaker 1: you're mentioning a bit ago. Yeah, So there are two
Speaker 1: major pieces of legislation before Congress right now, neither of
Speaker 1: which have gotten final passage. One is the Infrastructure bill
Speaker 1: that passed the Senate that has not passed the House.
Speaker 1: The other is a so called reconciliation bill, and that
Speaker 1: one has not passed either chamber so far. And basically,
Speaker 1: if you put the two together, you're talking about several
Speaker 1: trillion dollars potentially worth of support for US infrastructure in
Speaker 1: the most literal sense, roads and bridges and clean energy,
Speaker 1: but also a lot of social programs that are potentially
Speaker 1: in both bills, which one has the things that benf
Speaker 1: would write most about. Actually both both have a lot.
Speaker 1: The infrastructure bill that passed the Senate has some real
Speaker 1: support for electric vehicles and charging, but the Reconciliation bill,
Speaker 1: the larger and arguably good deal more controversial. One has
Speaker 1: long term extensions for tax credits for wind and solar included.
Speaker 1: It has tax credits for electric via goals included. It
Speaker 1: also has a potential something akin to a national clean
Speaker 1: Energy standard included in it. But all of that was
Speaker 1: what was in the original legislation a couple of months
Speaker 1: ago written by the House. It is being whittled down
Speaker 1: as we speak, and a slimmer version of that bill
Speaker 1: is ultimately what we'll get past if it gets past. Oh, okay,
Speaker 1: slimmer version, if it gets past, before we get into
Speaker 1: the mechanics of, you know, whether or not it will
Speaker 1: pass all that stuff. Can you just describe to us
Speaker 1: just maybe a couple of the programs that you're excited
Speaker 1: about or interested in in either of the one of these.
Speaker 1: The legislation contains a lot of things, but most importantly,
Speaker 1: I would argue for the wind and solar sector, it
Speaker 1: contains long term tenuere extensions of tax credits, and those
Speaker 1: tax credits have historically really been the most important subsidy
Speaker 1: in the United States to support growth of clean energy.
Speaker 1: So that's probably number one on the list. Number two
Speaker 1: on the list is a National Clean Energy Program that
Speaker 1: is aimed at essentially being a national renewable energy standard.
Speaker 1: That part of the bill almost certainly looks like it's
Speaker 1: not going to make the final cut at this point.
Speaker 1: The bill also has support for carbon capture and storage
Speaker 1: technology in the form of tax credits, for electric vehicles
Speaker 1: in the form of tax credits. It's got a lot
Speaker 1: of different goodies for a lot of different subsectors within
Speaker 1: the clean energy world. You mentioned that it's now slimmer,
Speaker 1: and I think my question before you get into any
Speaker 1: more specifics on that, is slimmer a bad thing? Because
Speaker 1: when I hear slimmer, I hear the opposite of throwing
Speaker 1: in irrelevant things, you know, which sometimes do get thrown
Speaker 1: into bills, which maybe are just kind of making their
Speaker 1: way along as a part of the bartering process in
Speaker 1: order to get something past. But something that slimmer in
Speaker 1: theory could be a starting point, maybe not the final endgame,
Speaker 1: but a starting point for a bigger conversation. Is that
Speaker 1: the case or is a slimmer version something that really
Speaker 1: kills any hope for anything that is wider and maybe,
Speaker 1: as we've discussed COP twenty six more internationally relevant. When
Speaker 1: I say slimmer, primarily what I'm talking about is reducing
Speaker 1: some of the social program benefits that were in the
Speaker 1: original bill. But also, most importantly, as far as the
Speaker 1: clean energy sector is concerned, grapping this potential national clean
Speaker 1: Energy standard program. There's been plenty of debate, I would say,
Speaker 1: within the US clean energy policy community about whether that's
Speaker 1: a big deal. My personal view is it's not as
Speaker 1: big a deal as people are making it out to
Speaker 1: be given that the tax credits have always historically done
Speaker 1: what have boosted build of renewables, So you know, that's
Speaker 1: probably what the slimming means as far as clean energy
Speaker 1: is concerned. So it sounds like the slimming is kind
Speaker 1: of keeping the carrot getting rid of the stick. But
Speaker 1: they also sound like really familiar kind of old tunes.
Speaker 1: We've heard of the tax credit before for the wind
Speaker 1: and solar. We've heard of the carbon capture and stories
Speaker 1: tax credit as well. What is that forty Q right?
Speaker 1: We've heard of tax and centers for buying electric vehicles.
Speaker 1: Guess my interest is is there anything for say, EV
Speaker 1: charging electric vehicle charging? I saw an announcement this morning
Speaker 1: from what was it Hurts that said they're going to
Speaker 1: buy a hundred thousand testla's Like it sounds to me
Speaker 1: like an e V charging infrastructure could help things like
Speaker 1: that and others. Is there any new programs in there? Yes,
Speaker 1: there is, Actually there's a tax credit potentially for electric
Speaker 1: vehicle charging infrastructure. I actually believe that's in the Infrastructure bill,
Speaker 1: the one that passed the Senate already. There is a
Speaker 1: so called manufacturers tax credit. It would give you basically
Speaker 1: a thirty capex discount on building a new manufacturing facility.
Speaker 1: And this is explicitly and specifically aimed at trying to
Speaker 1: grow the US supply chain for strategic things like batteries
Speaker 1: and battery materials and other things like that. Sounds timely, Yeah,
Speaker 1: up and down the up and down the value chain
Speaker 1: down to consumers, but also up to manufacturing and production.
Speaker 1: There's a lot of important stuff in the bill. One
Speaker 1: other note I would just say about, you know, as
Speaker 1: you're here, I'm hearing you and me saying tax credit
Speaker 1: tax ra tax credit. Tax credits have become essentially by default,
Speaker 1: the system by which we support all kinds of things
Speaker 1: in the US, all kinds of social programs, everything, and
Speaker 1: tax credits, I mean to be clear, as a policy
Speaker 1: mechanism are terrible. They are inexact, They can be complicated
Speaker 1: to take advantage of. You don't really know how much
Speaker 1: you're going to get out of them unless you put
Speaker 1: some kind of cap on them. And the only one
Speaker 1: that's ever been capped has been around electric vehicles, at
Speaker 1: least within the clean energy sector. So they're very inexact,
Speaker 1: and it's very hard to know when they're not exactly needed,
Speaker 1: and this is why policy people really like things like
Speaker 1: clean energy standards, and they really like carbon prices and
Speaker 1: carbon markets. The reality of it is, tax credits politically
Speaker 1: have worked in the US in the past. They look
Speaker 1: like politically they might work again this time, and so
Speaker 1: that's probably what we're gonna end up with. It's gonna
Speaker 1: say tax credits sound very American, Well, yeah, I was
Speaker 1: gonna say that. I think it's one of the few
Speaker 1: places in the world where tax credits have played a
Speaker 1: big role in the clean energy deployment, and the rest
Speaker 1: of the world it's been historically more of a story
Speaker 1: of feeding tariffs and auctions, at least for renewables. Lastly,
Speaker 1: i'll say tax credits is they actually they suck as
Speaker 1: a policy mechan maybe one. They are only used in
Speaker 1: the US. They're really they're just dumb. But they are
Speaker 1: are dumb thing, and they are what we're used to
Speaker 1: over here. They have the potential, let's be clear, to
Speaker 1: potentially over subsidize things because they're not calibrated in any
Speaker 1: kind of way. But they work and they are a
Speaker 1: lot simpler, frankly than a national clean energy program, which
Speaker 1: is what's being proposed you know, to come along with this,
Speaker 1: and if you had to pick one or the other,
Speaker 1: I think most people in the industry would say, we
Speaker 1: will take a long term extension of the tax credits
Speaker 1: over a new bureaucracy that mandates certain amounts of clean
Speaker 1: energy consumption. Yeah, I mean, Vicky, what's your opinion on
Speaker 1: the flip side of that. So Ethan is not a
Speaker 1: big fan of tax credits, is it working that much
Speaker 1: better in the rest of the world, Well, ensure, I
Speaker 1: would say yes, Okay, I would certainly say that renewables
Speaker 1: auctions have proved particularly successful at deploying large volumes of
Speaker 1: would say wind and solar at costs that kind of
Speaker 1: more accurately reflect the underlying technology costs. So we've seen
Speaker 1: auction tariffs have tended to go down with but they
Speaker 1: don't always. For example, if there's like an delay on
Speaker 1: permitting or some kind of really heavy a local content requirements,
Speaker 1: then they might not necessarily go down, but certainly they
Speaker 1: do help the government also kind of keeper a tighter
Speaker 1: rein on their outlay in terms of expenditure as well,
Speaker 1: certainly compared with beaming tariffs. I was just going to
Speaker 1: say that the text credits are an ugly beast, but
Speaker 1: they are our beast, and they're the beasts that everybody knows,
Speaker 1: and that's why ultimately they seem to be politically possible.
Speaker 1: And the last thing, without getting too much into the politics,
Speaker 1: is that the reason why I think, and we'll see
Speaker 1: how this plays out, but I think that they'll get
Speaker 1: through is because the most important person in all these discussion,
Speaker 1: Senator Joe Mansion, who represents the state of West Virginia,
Speaker 1: seems to be open to policies that support renewable energy
Speaker 1: that's tax credits, but opposed to policies that presumably would
Speaker 1: you know, explicitly limit the role that coal and fossil
Speaker 1: fuels play, never mind the sort of inconsistent thinking around
Speaker 1: that logic. But policies that appear to be, you know,
Speaker 1: specifically hurting fossils he doesn't like. But policies that go
Speaker 1: to support renewable specifically he's been open to. And I
Speaker 1: think that's why this will probably make it through. Can
Speaker 1: you explain to everybody listening, who is not a U
Speaker 1: S policy buff, why Joe Mansion is significant and what
Speaker 1: he represents in this discussion. So people have jokingly referred
Speaker 1: to him as Prime Minister Mansion or co President Mansion.
Speaker 1: The issue is that the Democrats have fifty elected members
Speaker 1: of the United States Senate and the only reason effectively
Speaker 1: they have a so called majority is because they can
Speaker 1: cast the fifty first vote with the sitting Vice President
Speaker 1: Kamala Harris. That means that every single Democrat must vote
Speaker 1: for any piece of legislation to get through the Senate.
Speaker 1: And Joe Manchin is pretty much the most conservative member
Speaker 1: of the Democratic Caucus, along with one other Senator, Kirsten
Speaker 1: Cinema from Arizona, but he's probably a slightly more hope
Speaker 1: high profile. But the bottom line is you actually need
Speaker 1: to get all fifty senators on board. It's just that
Speaker 1: he's been the most challenging because a big chunk of
Speaker 1: the rest of the caucus is considerably to the left
Speaker 1: of him. Can I ask this might be a dumb question,
Speaker 1: but apart from not wanting any democratic legislation through, what
Speaker 1: do Republicans oppose in these bills? Is there anything policy
Speaker 1: oriented that they actual the opposed or is it strictly
Speaker 1: political Because you have Joe Manson, you have Cinema, but
Speaker 1: you have fifty other people that could vote for this.
Speaker 1: It's a great question. I mean, the first thing to
Speaker 1: note is in fairness to Republicans, the infrastructure bill, which
Speaker 1: is the first bill passed I think with six votes
Speaker 1: through the Senate, like a lot of Republicans got on
Speaker 1: board to support that, it had bipartisan support. That bill
Speaker 1: is pretty narrowly focused on Rhodes bridges. It has some
Speaker 1: e V support, but it's kind of a pretty conventional
Speaker 1: infrastructure bill. Republicans make the argument that the other bill
Speaker 1: goes way beyond the bounds of what the definition of
Speaker 1: infrastructure should be to focus on social policy. They also
Speaker 1: seem to have found religion on the question of caring
Speaker 1: about the deficit and debt. And again, uh yeah, I
Speaker 1: say that ironically or sarcastically, because it does seem like
Speaker 1: whichever party controls the reins is usually typically willing to
Speaker 1: spend a lot of money and and deficits have run
Speaker 1: up a big time under Republican presidents and Republican congresses
Speaker 1: in the past. So I think, you know, now suddenly
Speaker 1: they're finding a certain amount trying to find some fiscal discipline,
Speaker 1: and that's the argument that's being made to oppose this
Speaker 1: bill as well. Can you discuss the longevity of these bills,
Speaker 1: because I think as we get into this conversation around
Speaker 1: copy and we're looking ahead, not just to that magical
Speaker 1: year that we're all kind of very much looking forward
Speaker 1: to when we're making policy decisions. A lot of discussion
Speaker 1: around the US over the last few years has been
Speaker 1: around executive orders and how easy they are to rip out.
Speaker 1: So now we're at a place where there are things
Speaker 1: going through the Senate, going through the House. How long
Speaker 1: will these bills in theory be applicable. That's a really
Speaker 1: good question. So there's the term of the bills, you know,
Speaker 1: in terms of the length of the legislation that have
Speaker 1: different programs. Many of the key programs are looking at
Speaker 1: a tenure horizon in terms of how long they would
Speaker 1: be on the books. So that's what the legislation says.
Speaker 1: But as you rightly point out, there's the politics here.
Speaker 1: So the reality of it is that if the Democrats
Speaker 1: lose one or both chambers of Congress in two bye,
Speaker 1: a Republican Congress could try to undo this through other
Speaker 1: legislative action. The good news, I guess for those who
Speaker 1: support this bill is that Biden will still be president
Speaker 1: through the end of four into the very start, So
Speaker 1: basically you would not be able to undo anything that
Speaker 1: this Congress passes any earlier then, and even in that circumstance,
Speaker 1: you would have to have basically a Republican president and
Speaker 1: probably Republican control of the House and the Senate. But
Speaker 1: all this speaks to why Democrats are so anxious to
Speaker 1: get getting something done now, because this really may be
Speaker 1: the last chance to try and pass something like this.
Speaker 1: The elections next year do not look good for Democrats
Speaker 1: at the moment, You've got a full moon now, basically
Speaker 1: a Democratic president, two chambers of Congress controlled by Democrats,
Speaker 1: and they feel like this is the moment that they've
Speaker 1: got to move And I would agree with that because
Speaker 1: I think you don't know what's going to happen in
Speaker 1: the future, and especially as we think about climate there
Speaker 1: really is no time to waste when it comes to
Speaker 1: dealing with these issues. Okay, so let's let's talk about
Speaker 1: what we think is going to happen. Here. There's a
Speaker 1: deadline on all this, right, it's it's coming up. Yeah,
Speaker 1: the end of the month October thirty one has been
Speaker 1: said as the informal deadline by the Speaker of the
Speaker 1: House Nancy Pelosi when she says that she will bring
Speaker 1: both bills up for a vote on the floor of
Speaker 1: the House. That also, not coincidentally, happens to be really
Speaker 1: the eve of when the cop climate talks kick off
Speaker 1: in Glasgow. I maybe off by a day, I think
Speaker 1: you can correct me, but that's basically exactly that moment. Yeah,
Speaker 1: the official opening ceremony, Yes, the thirty first of October.
Speaker 1: I mean, with the time difference, it might even be
Speaker 1: pretty like you're within minutes. So it's not coincidental. And
Speaker 1: you know, the administration, I think that by an administration
Speaker 1: is keenly aware of that. Privately last week, Biden said
Speaker 1: to a bunch of members of Congress basically said, look,
Speaker 1: if you don't pass this bill, I'm showing up to Glasgow,
Speaker 1: you know, pretty empty handed. That's what he said privately.
Speaker 1: Then publicly the White House was like, no, no, no, no,
Speaker 1: We've actually all got all this other great stuff that
Speaker 1: we've done. We've written these regulations or whatever. But like
Speaker 1: that is uh. As I've said to Vicky in the past,
Speaker 1: that's like put lipstick on a pig. They've done some
Speaker 1: great stuff. There's no question about that. And writing regulations.
Speaker 1: But you cannot show up a cop and honestly say
Speaker 1: that the US has on its books any kind of
Speaker 1: long term commitment to really address these issues unless Congress
Speaker 1: passes something. So the pressure is really there. Now. Will
Speaker 1: they do something by the end of this week? I
Speaker 1: think so, But gosh, it's really really hard to predict.
Speaker 1: Over the weekend. Nancy Pelosi said basically, oh yeah, well,
Speaker 1: we've almost got a deal, and then this morning it
Speaker 1: doesn't look so great to me. The person that I
Speaker 1: think is that is most perplexing and worrisome to everybody
Speaker 1: is Senator Christian Cinema from Arizona, who, while Mansion has
Speaker 1: been out there and I think we kind of know
Speaker 1: what it is he wants and doesn't like, she's totally
Speaker 1: enigma to most people at this point. She seems to
Speaker 1: like clean energy tax credits, that's what the reporting has been,
Speaker 1: but she also really seems to like to be a gadfly,
Speaker 1: and I have this fear that she's going to blow
Speaker 1: the whole thing up at the end of the day.
Speaker 1: But all things being even, I think they will get
Speaker 1: something done by the end of this weekend. One last factor,
Speaker 1: which people don't talk about is Halloween is on October
Speaker 1: thirty one, and I'm telling you that is like a
Speaker 1: sacred holiday here in the United States. That's when every
Speaker 1: kid goes out and goes trick or treating. Washington Bureau
Speaker 1: of Bloomberg by like three thirty PM is usually pretty quiet.
Speaker 1: All the parents have run home to like get the
Speaker 1: kids set up. No parent in Congress is gonna want
Speaker 1: to be fiddling with this on October thirty one. I
Speaker 1: think that that is the sort of that's the sleeper
Speaker 1: pressure here to get this done. That it's also Sunday
Speaker 1: ethan y, so even more you know incentive. So full moon, Halloween, Yeah,
Speaker 1: coming call, coming together, cop, It's all coming together. Wait,
Speaker 1: so hang on. The infrastructure bill has already passed the
Speaker 1: Senate and the House, right, and it has not passed
Speaker 1: the House. Okay, so so we're likely to get at
Speaker 1: least one of two. Is that right? No? I mean,
Speaker 1: that's the issue here is that basically the votes are
Speaker 1: there to pass the infrastructure bill basically more or less
Speaker 1: on its own. But liberals in the House are saying, hey,
Speaker 1: wait a second, We're not voting for this bill unless
Speaker 1: we get to also vote on this reconciliation bill and
Speaker 1: we also get to actually pass it. They're saying we're
Speaker 1: not We're not in on your infrastructure bill unless you're
Speaker 1: in on this reconciliation bill. And they make the argument
Speaker 1: that if you don't do both at once, that you'll
Speaker 1: never come back on the issues that are raised in
Speaker 1: the reconciliation bill. And I think they raise a fair
Speaker 1: point because I think Joe Manchin doesn't necessarily really want
Speaker 1: to come back on any of that stuff. He's pushing
Speaker 1: to just pass the infrastructure bill on its own and
Speaker 1: be done with it. But Liberals are saying, we're not
Speaker 1: coming along unless you give us something in return, which
Speaker 1: is the reckon Cliation Bill. Ethan a quick walk down
Speaker 1: memory lane before we segue over to cop. One of
Speaker 1: my earliest memories in any f when when we were
Speaker 1: a startup, before we were part of Bloomberg, was sitting
Speaker 1: in our office where Ethan nat Buller and I shared
Speaker 1: shared in office and we shared a YouTube video in
Speaker 1: two thousand nine of Joe Manson shooting the Cap and
Speaker 1: Trade bill with a gun signifying his u his stance
Speaker 1: on the whole issue. Remember that I do remember he
Speaker 1: ran for re election by making an advertisement in which
Speaker 1: he took the waxman marquee Bill, pinned it to a
Speaker 1: tree and shot it with a rifle. Yeah, and it worked.
Speaker 1: He got re elected. Mansion knows his constituency. I mean,
Speaker 1: it's a conservative part of the country, and the history
Speaker 1: and heritage of West Virginia is coal mining, and it's
Speaker 1: one of the poorer states in the country. And coal
Speaker 1: mining has been hit badly in the US. But you know,
Speaker 1: I still don't think that necessarily justifies his position. But
Speaker 1: let's remember these members of Congress represent individual parts of
Speaker 1: the United States, and this is why he is who
Speaker 1: he is in terms of his position sometimes. Okay, So
Speaker 1: this weekend, it all, it all kind of comes down
Speaker 1: to it. We're gonna take a quick break and when
Speaker 1: we come back, we're going to talk about the impacts
Speaker 1: of the US giving the A or NAY and what
Speaker 1: it means for the climate talks in Glasgow. Stay with us, Okay,
Speaker 1: welcome back. We're going to change gears just a little
Speaker 1: bit and talk about the global stage upcoming starting on
Speaker 1: oct one and running to what November is the COP
Speaker 1: twenty six negotiations in Glasgow, Scotland. So for the uninitiated.
Speaker 1: I'm sure you've heard about it on the news, but Vicky,
Speaker 1: can you start us off and just tell us what
Speaker 1: this is? What are these negotiations? COPPS sounds for Conference
Speaker 1: of the Party to the UN Framework Convention on Climate Change.
Speaker 1: So all of the governments that signed up to the
Speaker 1: U n F Triple C will come to Glasgow to
Speaker 1: discuss how best to reduce greenhouse gas emissions and adapt
Speaker 1: to climate change. And it's usually an annual phone but
Speaker 1: this is actually we had a gap because of COVID
Speaker 1: nineteen last year, so it's actually been two years since
Speaker 1: the last one and this year it's hosted by the UK.
Speaker 1: And there seems to be a lot of pressure on
Speaker 1: this one. Is it that because of the two year
Speaker 1: hiatus or is there something special about this one? Certainly
Speaker 1: kind of it's been heightened the expectations, I think because
Speaker 1: we've had this two year break. But it's also important
Speaker 1: because it's the first occasion where the first official occasion
Speaker 1: when countries can discuss their climate plans out to twenty thirties,
Speaker 1: so those are called nationally determined contributions or n d
Speaker 1: c s, and it marks the start of this process
Speaker 1: whereby first of all, governments say what they're willing to
Speaker 1: do and how they plan to adapt climate change. Then
Speaker 1: in three years time we have what's called the global
Speaker 1: stock take. So it's essentially an assessment where you take
Speaker 1: all of those plans together and see what impact would
Speaker 1: be in terms of mitigating climate change. Within the view
Speaker 1: is that the next step is the governments don't go
Speaker 1: away and revise their plans and in theory increase the
Speaker 1: ambition of their targets and pledge. I mean, I think
Speaker 1: it's safe to say that among these cup meetings which
Speaker 1: now we're on the one, certain ones really stand out.
Speaker 1: So this is a continuation of Paris, And if you
Speaker 1: rewind the clock really far, Kyoto is another one that
Speaker 1: really stands out as a meeting where there was a
Speaker 1: reasonable amount of crystallization, let's say, of thought. There are
Speaker 1: others that Alsko us to know for other reasons, is
Speaker 1: not doing that. So Copenhagen, I think, is the one
Speaker 1: that many of us think of already say well, that
Speaker 1: meeting maybe didn't quite do what we set out to do.
Speaker 1: Now making one of the things you've done is a
Speaker 1: preparation for this meeting is to have a think as
Speaker 1: to whether or not you think this will be one
Speaker 1: of those meetings where we continue to say Glasgow for
Speaker 1: years to come in a positive light or maybe sortly
Speaker 1: lackluster light. So there are some probabilities that you associated
Speaker 1: with this outcome. Now, should we lead with the headline,
Speaker 1: Should we lead with what you think the overall probability is,
Speaker 1: or do you want to break down the different areas
Speaker 1: that perhaps you looked at when trying to decide if
Speaker 1: this is going to be a success or relative failure. Well,
Speaker 1: maybe we'll take the pyramid principle and start with so
Speaker 1: the flagship like our overall expectation, and then we'll explain
Speaker 1: what we actually I mean by that is that there's
Speaker 1: a saycent chance that will be a success. And by
Speaker 1: success in this case, because there's lots of different definitions,
Speaker 1: that means that it makes meaningful progress towards actually achieving
Speaker 1: the goals of the Paris Agreement. So I'm sure you're
Speaker 1: called the Paris Agreement agreed to limit global warming to
Speaker 1: two degrees and to try to make that limit to
Speaker 1: one point five degrees. And the way that we've came
Speaker 1: to this fourth empersent is that we broke it down
Speaker 1: into Okay, so where do we actually expect countries to
Speaker 1: make progress? What are the sort of fifty metrics? For example,
Speaker 1: do we expect all of these NDC targets, of these
Speaker 1: twenty thirty emission targets to collectively put the planet on
Speaker 1: the path to the one point five degrees? Do we
Speaker 1: expect parties to make some kind of pledge about coal power?
Speaker 1: Do we expect developed countries to meet the target pledge
Speaker 1: a hundred billion dollars per year in climate finance? And
Speaker 1: we looked at what we thought the probabilities for each
Speaker 1: of those fifty metrics and then totted them all up,
Speaker 1: and that's how we came to our overall estimate. I
Speaker 1: got a definitional question for you. And as we get
Speaker 1: into the discussion around what they're actually going to discuss
Speaker 1: at the event, there's a lot of conversation around carbon emissions,
Speaker 1: and then also discussions around methane, which I think hasn't
Speaker 1: gotten quite the same amount of play. But let's start
Speaker 1: on the carbon emissions side of things. Can you explain
Speaker 1: what net zero means? Because it's important to differentiate that
Speaker 1: net zero is different than absolute zero, and as countries
Speaker 1: are creating commitments or at least talking about potentially maybe
Speaker 1: Sunday making commitments towards net zero. Can you give us
Speaker 1: a definition there? So, and maybe first of all, just
Speaker 1: to explain where that net zero number comes from. So
Speaker 1: that inter Governmental Panel on Climate Change produced a special
Speaker 1: report in looked at where emissions need to be in
Speaker 1: order to achieve these one point five or two degrees targets,
Speaker 1: and they said that in order to get to ensure
Speaker 1: that global warming doesn't exceed one point five degrees by
Speaker 1: the end of the century, by the middle of the century,
Speaker 1: then the world needs to be at net zero emissions.
Speaker 1: And that means that for greenhouse gas emissions, so not
Speaker 1: just carbon, not just media. And it means it takes
Speaker 1: into account it doesn't mean that all countries that need
Speaker 1: to have no emissions. It takes into account what we
Speaker 1: call carbon sinks. So these are things like forests or
Speaker 1: land that are able to absorb or sequester and then
Speaker 1: store carbon or emissions. Does that explain Yes, I think
Speaker 1: it does. So there's a emissions out versus emissions that
Speaker 1: are able to be absorbed, at least on the carbon
Speaker 1: side of things. And just to talk a little bit
Speaker 1: about that, I p those IPCC scenarios. Of the five
Speaker 1: scenarios they've come up with, only one of them actually
Speaker 1: results with US meeting at one point five degree scenario.
Speaker 1: All of the other four are above, So this is
Speaker 1: definitely something that we need to be critically thinking about
Speaker 1: regarding tipping points. Now, does this apply regarding this concept
Speaker 1: of net zero to this applied a methane or is
Speaker 1: there a different dialogue around methane emissions. Methane emissions are
Speaker 1: the topic of that has really kind of suddenly emerged,
Speaker 1: i'd say, in the last few months. Where previously everybody
Speaker 1: was focusing on greenhouse gas emissions on carbon they then
Speaker 1: have been looking at what they can do to tackle
Speaker 1: methane emissions, and most recently there's the European Union and
Speaker 1: the US and various other countries have made this what
Speaker 1: they've called a Global Methane Pledge, which is to cut
Speaker 1: global methane emissions by at least thirty from levels by
Speaker 1: twenty and at the moment, by our analysis, about a
Speaker 1: quarter of the world's methane emissions are covered by that pledge.
Speaker 1: So if they really want to achieve that target, they
Speaker 1: will need a big methane emitter like China and Russia
Speaker 1: and India to really sign on. Well. I mean, I
Speaker 1: think the main thing I'm nothing to point doubt or
Speaker 1: methane as the case maybe, is that it stays in
Speaker 1: the atmosphere for only ten years, whereas CEO two stays
Speaker 1: in years. But it's eighty times more potent. So that's
Speaker 1: why it's become a bigger conversation recent intern years. It's
Speaker 1: also become a bigger conversation because the US has chosen
Speaker 1: it as a topic and it's one where they can
Speaker 1: make progress, so it makes them look better. I would
Speaker 1: also argue it's one where progress can probably be achieved
Speaker 1: more easily than on CEO two. I mean, you can
Speaker 1: plug wells does financially make more sense for companies not
Speaker 1: to be flaring and wasting extra gas up into the atmosphere.
Speaker 1: This is a problem that is arguably much more solvable
Speaker 1: than the CEO two problem. But it's also much smaller problem. True,
Speaker 1: But as you know, this is all going to be
Speaker 1: about making some headlines, right, So nothing or mething however
Speaker 1: you want to say. It feels like it's one that
Speaker 1: I suspect we'll we'll probably see some positive news out
Speaker 1: of a fair amount of sort of victory lapping on
Speaker 1: out of COP. But you know better than I do.
Speaker 1: Speaking of headlines, though, let le's pivot slightly towards what
Speaker 1: to watch for. So VI you mentioned Dame, you mentioned
Speaker 1: the probabilities of success in each of the key areas.
Speaker 1: But if I'm you know, listening on the radio, I
Speaker 1: mean I even heard the cup mentioned on the BBC
Speaker 1: this morning. If I'm listening on the radio and they
Speaker 1: mentioned something coming out of Glasgow or not, what should
Speaker 1: I be listening for. Is a pledge on methane good enough?
Speaker 1: Or is there something else that I should listen for
Speaker 1: to know if this thing has been a success. I
Speaker 1: think in some respects it's the very fact that they're
Speaker 1: having a COP is important to note. So one of
Speaker 1: the main benefits of this process is that it brings
Speaker 1: governments together, whether virtually or in person, where they can
Speaker 1: kind of eye each other up to see what what
Speaker 1: have you committed to and what have you actually achieved.
Speaker 1: So the Paris Agreement it doesn't impose binding a mission
Speaker 1: targets or any targets on the signatories. It's really this
Speaker 1: kind of system of pay a pressure of who wants
Speaker 1: to be the climate leader and who wants to keep
Speaker 1: up with their peers, and that's that's really important. I
Speaker 1: think we would be looking for concrete commitments in terms
Speaker 1: of finance. So I mentioned earlier the hundred billion dollars
Speaker 1: a year target. It's very very small fry in terms
Speaker 1: of the actual amounts of finance, but it was committed
Speaker 1: to by developed countries to provide this financing by twenty
Speaker 1: for developing countries. So it's really important to the kind
Speaker 1: of political process, the diplomatic process, and building trust between
Speaker 1: the developed and developing countries, and to persuade developing countries
Speaker 1: to take on much more ambitious and climate targets, which
Speaker 1: is will be necessary if we want to achieve the
Speaker 1: goals of the Paris Agreement. I would just add that
Speaker 1: a hundred billion in the grand scheme of things. The
Speaker 1: other way to look at it is it's a really
Speaker 1: small price to pay to get developing countries to feel
Speaker 1: that there is a fall through taking place. And to
Speaker 1: be clear, some number of their pledges are directly contingent
Speaker 1: on getting support from wealthier countries. They literally say we're
Speaker 1: not following through unless we get this help. So symbolically
Speaker 1: it's really important. But literally it's really important, and it's
Speaker 1: in the grand scheme of things. As Vicki points out,
Speaker 1: it's really not that much money given the size of
Speaker 1: the of the amount of money that needs to go
Speaker 1: into the sector to solve the problems. Are their countries
Speaker 1: not showing up that are part of these contingencies? It
Speaker 1: depends if we if we mean they're physically showing up.
Speaker 1: There's certainly been headlines recently about the China g and
Speaker 1: Russia's putin are reportedly not coming. But I don't think
Speaker 1: they should be taken those kind of an unsms. Should
Speaker 1: we take where the pinch the saw. Really it's not
Speaker 1: immediately linked between whether the political leader is present in Glasgow.
Speaker 1: We've how much the country is willing to commit to.
Speaker 1: So actually she hasn't left China since the start of
Speaker 1: the COVID nineteen pandemic. They take a really conservative approach
Speaker 1: to travel, and yet we've still seen since then that
Speaker 1: absolutely China's committed to combon neutrality and is making progress
Speaker 1: on some of the more concrete policies. Even though it's
Speaker 1: true it's like headline emissions target is really not that ambitious.
Speaker 1: I would just completely editorializes here and say that it
Speaker 1: does seem like she likes to upstage Biden whenever he
Speaker 1: gets the chance. And also I suspect they'll be a
Speaker 1: quote quote surprise out of China. Who knows what will be.
Speaker 1: Maybe it's that he shows up. Maybe they make some
Speaker 1: announcement on domestic coal, which to my mind is one
Speaker 1: of the biggest outstanding issues. China has a huge call fleet.
Speaker 1: They made a pledge to stop financing overseas coal and
Speaker 1: that was very well received, I think generally, but it
Speaker 1: did not address the fact that they have this massive
Speaker 1: call fleet and they, by the way, have another couple
Speaker 1: hundred gigawats of coal fired power plants that they have
Speaker 1: under development there over the next you know, five ten years.
Speaker 1: So some announcement around that I think would make headlines
Speaker 1: and justifiably so if and if they did it, Yeah,
Speaker 1: that would be absolutely enormous because China accounts for a
Speaker 1: huge chunk of actually what's planned for COPRA, and it
Speaker 1: would also put pressure on India and in Indonesia and
Speaker 1: other countries in the region to follow suit. It would
Speaker 1: effectively spell the very end of any further coal project
Speaker 1: development in the world. If they did that. We're almost
Speaker 1: there outside of China and India basically because nobody's funding
Speaker 1: coal other places, including China, but inside their borders is
Speaker 1: a different story right now. So this all sounds to
Speaker 1: me like we're going to need to do a post game.
Speaker 1: How about we have you guys back to get into
Speaker 1: what happened in the US and in COP in a
Speaker 1: couple of weeks and we'll take into some of the
Speaker 1: details as well. We didn't get to a lot of things,
Speaker 1: whether there's going to be a global carbon price, what
Speaker 1: the chances are there we can talk about what happened,
Speaker 1: So free to come back in a couple of weeks. Yeah,
Speaker 1: but hey, can I before we go, can I plug
Speaker 1: some some other cool stuff? First of all, Vicki's note
Speaker 1: is fantastic, which were just about it's Monday, this will
Speaker 1: be app which will be out by the time this podcast,
Speaker 1: so so definitely be enough clients check that out. And
Speaker 1: then the second thing is that we're going to attempt
Speaker 1: to blog through the entire cop and write something hopefully
Speaker 1: every day but probably at least every other day, and
Speaker 1: please keep an eye out for that because Vicky's got
Speaker 1: a lot of great more stuff to say, and we'll
Speaker 1: get input from our colleagues in the Asia Pacific region
Speaker 1: where so much of the important potential commitments could come
Speaker 1: from out of cop So where should people go to
Speaker 1: find this blog? Blo dot com. Okay, Ethan Vicky, thanks
Speaker 1: for coming. Thank you. Today's episode of Switched On was
Speaker 1: edited by Rex Warner with Gray Stoak Media. Bloomberghinia is
Speaker 1: a service provided by Bloomberg Finance LP and its affiliates.
Speaker 1: This recording does not constitute, nor should it be construed,
Speaker 1: as investment advice, investment recommendations, or a recommendation as to
Speaker 1: an investment or other strategy. Bloomberguinia should not be considered
Speaker 1: as information sufficient upon which to base an investment decision.
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