Speaker 1: Pushkin from Pushkin Industries. This is deep background. I'm Noah Feldman.
Speaker 1: Last month, we all saw the devastating images from Texas.
Speaker 1: Plunging temperatures and two severe winter storms in quick succession
Speaker 1: led to a breakdown of the state's energy grid. More
Speaker 1: than four and a half million homes and businesses were
Speaker 1: left without power. Not only that, water service was disrupted
Speaker 1: for more than twelve million people because of pipes freezing
Speaker 1: and bursting. It was an unprecedented failure of the state's infrastructure.
Speaker 1: This disaster in Texas was a wake up call for
Speaker 1: places all across the country. Our infrastructure is consistently and
Speaker 1: concerningly outdated. It often was not built to withstand extreme
Speaker 1: climate conditions of the kind we're seeing more of era
Speaker 1: of climate change. We don't seem to be prepared for
Speaker 1: more frequent and severe storms. Without a serious overhaul in
Speaker 1: the coming years, our electric grid, our water, and our
Speaker 1: sewage systems have the capacity to fail again, and to
Speaker 1: fail massively. Here to help us get behind the story
Speaker 1: of what really happened in Texas and what we can
Speaker 1: do about it going forward is Alice Hill. Alice is
Speaker 1: one of the country's leading experts on climate resilient infrastructure.
Speaker 1: She's now a Senior Fellow for Energy in the Environment
Speaker 1: at the Council on Foreign Relations, but before that, she
Speaker 1: was Special Assistant to President Obama and Senior Director for
Speaker 1: Resilience in the White House. She led the national policy
Speaker 1: regarding preparing for the impact of climate change. In that role, Alice,
Speaker 1: I'm very grateful to you for joining us. Welcome to
Speaker 1: deep background, Alice. I wonder if we could start with
Speaker 1: you walking us through what you see as the true
Speaker 1: root causes of the disaster that we saw in Texas,
Speaker 1: because there, you know, there are many opinions out there
Speaker 1: about quote unquote what really went wrong, So maybe just
Speaker 1: start with the temperature anomaly and what its immediate consequences were. Well,
Speaker 1: I'll have to start with the statement of temperature anomaly.
Speaker 1: I guess it depends on how far back you want
Speaker 1: to go, but certainly these temperatures were not an unprecedented
Speaker 1: event for Texas. Forty years ago, they had a similar
Speaker 1: event of at least as long duration and as least
Speaker 1: as cold temperatures. So if you want to drill down
Speaker 1: on what's an issue here, it's a choice not to
Speaker 1: invest in preparedness. You choose not to prepare your grid
Speaker 1: or extreme events, You're going to line that those extreme
Speaker 1: events can do heavy damage, and once your electric grid fails,
Speaker 1: it just cascades through all the other infrastructure sectors, causing
Speaker 1: widespread damage. And with climate change, we have an added
Speaker 1: twist the extremes that we will experience in the future
Speaker 1: that are fueled by warmer temperatures global average warmer temperatures
Speaker 1: will exceed the extremes in the past. So if Texas
Speaker 1: had done its job, it would have been if the
Speaker 1: utilities had done their job, they would have been prepared
Speaker 1: for a cold snap like what they just saw. But
Speaker 1: going forward, they also need to prepare for what will
Speaker 1: be unfamiliar events, events that have never occurred in recorded
Speaker 1: human history, and that will take perseverance and additionally money.
Speaker 1: We'll dive into that, but I think what you said
Speaker 1: is already really fascinating. If something was just a one
Speaker 1: in forty year probability, would you already have thought that
Speaker 1: If something is a one in forty year probability, let's
Speaker 1: say that an expenditure should be made to prevent that
Speaker 1: from having disastrous side consequences. What metric would you have
Speaker 1: used of costs and benefits. If someone had said, yeah,
Speaker 1: well it gets this cold in Texas every forty years,
Speaker 1: Well you need to do a cost benefit analysis of
Speaker 1: what are the costs of reinforcing your grid, and then
Speaker 1: what are the potential costs that you will suffer when
Speaker 1: that grid fails. We're hearing that it could be upwards
Speaker 1: of ninety billion dollars worth of damage, thirty lives lost,
Speaker 1: and there may be other consequences that are never included
Speaker 1: in that tallly. So, in terms of looking ahead, if
Speaker 1: you just take the basic cost benefit analysis that the
Speaker 1: federal government has provided across the board, if we spend
Speaker 1: one dollar now in for example, hardening our grid to
Speaker 1: extreme weather, we save six dollars in recovery costs. Now,
Speaker 1: there's a reason why electric grids don't want to invest
Speaker 1: in that, because it costs more money and that will
Speaker 1: increase rates and then you might have your rate payers upset. However,
Speaker 1: who ultimately bears the cost when the whole system collapses,
Speaker 1: And in this case, there'll be many people bearing the cost,
Speaker 1: but ultimately it could also be the federal taxpayers who
Speaker 1: have had nothing to do with the calamity that befell Texas.
Speaker 1: I do want to talk about bearing the costs, because
Speaker 1: I think it's vastly important. Is the one dollar spent
Speaker 1: save six dollars later a national statistic or is it
Speaker 1: one that could have been applied concretely in Texas? I mean,
Speaker 1: I guess what I'm wondering is how much would it
Speaker 1: have cost Texas to harden its infrastructure grid against cold
Speaker 1: Whether they're by saving the ninety billion dollars, Is it
Speaker 1: one sixth of that or is it a larger percentage.
Speaker 1: I think it's a lower percentage. The figure that I
Speaker 1: read is sixteen billion. We will get a lot greater
Speaker 1: granularity going forward on this. The vulnerabilities the electric grid
Speaker 1: in the face of climate change are huge. The costs
Speaker 1: are significant to harden the grid against those costs. But
Speaker 1: because our electric grid is central to human existence at
Speaker 1: this point in a developed nation like the United States,
Speaker 1: if we lose our grid in an extreme event, we
Speaker 1: will have enormous costs. It's not as if this hasn't
Speaker 1: happened before. It happened with Hurricane Sandy, and in that
Speaker 1: instance it was a very strong storm, but it was
Speaker 1: the fact that New York had neglected to include in
Speaker 1: its planning that lower Manhattan had suffered about a foot
Speaker 1: of sea level rise, and because they failed to include
Speaker 1: that in their planning, when the storm search came in
Speaker 1: the water, the storm surge at wall of water that
Speaker 1: comes in front of a storm quickly overcame the flood
Speaker 1: berriers that Manhattan had built. Those were built to assuming
Speaker 1: a maximum of twelve feet, came in close to fourteen feet.
Speaker 1: The water immediately poured in, a substation exploded, and the
Speaker 1: city that Never sleeps plunged into darkness. Eight million people
Speaker 1: along the Northeast corrid or lost power, and huge downstream
Speaker 1: failures of transportation, healthcare, communications, And that was a sixty
Speaker 1: billion dollar event as well. Now, in response, con Edison,
Speaker 1: after some pressure, has really emerged as a leader in
Speaker 1: hardening its grid to future events. Also, I'm really fascinated
Speaker 1: by the Sandy comparison for the following reason. Part of
Speaker 1: the narrative about what went wrong in Texas is about
Speaker 1: out a deregulatory environment in a state that believes in deregulation, right,
Speaker 1: a state that like Texas, self consciously separated its grid
Speaker 1: from the grids of other states in part, at least,
Speaker 1: as I've read, to avoid being subject to certain kinds
Speaker 1: of federal regulation, and so we sort of think to ourselves, Oh,
Speaker 1: Texans don't want to be regulated. But you're describing that
Speaker 1: events of comparable consequence and of comparable error were made
Speaker 1: in New York, which is not characterized by that kind
Speaker 1: of deregulatory impulse. So I'm wondering were the motives in
Speaker 1: the Sandy case for the failure to harden the grid
Speaker 1: similar to identical to the motives in Texas, namely that,
Speaker 1: as you said, nobody wants to spend money right now
Speaker 1: to save money sometime in the future unless they're obligated
Speaker 1: to do so. I think that's the largest challenge, is
Speaker 1: that everyone's trying to run a lean machine at low costs.
Speaker 1: But I would just point out it's not just Texas
Speaker 1: or New York. Look at California. We have utilities that
Speaker 1: have underinvested in preparation for the wildfires. The wildfires have
Speaker 1: been worsened by climate change. Going forward, you have to
Speaker 1: ask how does the world's strongest economy function when it's
Speaker 1: grid is not up to even historical risks, much less
Speaker 1: the future risks that climate change will bring or is
Speaker 1: already bringing these new extremes that have never been experienced.
Speaker 1: There was just a study issued today by one of
Speaker 1: the major consultancies, ICF estimating that there's at least five
Speaker 1: hundred billion dollars worth of work that needs to be
Speaker 1: done on the electric grid to harden it to the
Speaker 1: kinds of extremes that we will be experiencing to get
Speaker 1: ourselves prepared for climate change. I'm genuinely fascinated by this,
Speaker 1: by what you're saying, and I'm also really surprised by it.
Speaker 1: So right away, there's a takeaway here that I didn't anticipate.
Speaker 1: And if I can say it and tell me if
Speaker 1: I'm getting it right. You know, the social psychologists and
Speaker 1: the behavioral economists have taught us that we as humans
Speaker 1: are really bad at calculating improbable but very bad future events.
Speaker 1: Also in probably very good future events, we hyperbolically discount,
Speaker 1: and we do it very badly. And if I'm hearing
Speaker 1: you right, the failure to invest sufficiently in hardening infrastructure
Speaker 1: against climate extremes seems to be more caused by that
Speaker 1: human tendency that's universal. Doesn't matter what your politics are,
Speaker 1: doesn't matter where you stand on regulation, because as you
Speaker 1: say it, exists in New York. It existed in New York,
Speaker 1: although it's better now. It exists in California still, and
Speaker 1: it exists in Texas. And so from that perspective of
Speaker 1: the version of the story that's been circulating in I
Speaker 1: guess it would be fair to say liberal elite circles
Speaker 1: that tends to blame Texas distinctively is kind of misplaced.
Speaker 1: You know, I mean, Texas got it wrong, and that's
Speaker 1: not good. But California also got it wrong, and in
Speaker 1: the past, New York got it wrong. And that's because
Speaker 1: we're all humans, not because some of us have one
Speaker 1: view of regulation and some of us have a different
Speaker 1: view of regulation. Well, I would say that what's difficult
Speaker 1: with climate change is that because we are risk is humans,
Speaker 1: based on our own experience, the availability bias, we tend
Speaker 1: to think that the last extreme is the very worst
Speaker 1: thing that could happen. When someone says, you know, I've
Speaker 1: lived here for fifty years and this has never happened before,
Speaker 1: it's just unprecedented. That's understandable, but it's not really particularly
Speaker 1: newsworthy because with climate change, we are going to be
Speaker 1: seeing successively worse events, and so the challenge is what
Speaker 1: level of preparation do you need. In Texas' case, they
Speaker 1: didn't invest in preparing for past extremes. In California's and
Speaker 1: in New York's it was future extremes that had then materialized,
Speaker 1: so it was planning from based on historical path. In Texas' case,
Speaker 1: they actually had had this experience. In California case, they've
Speaker 1: had a lot more development in these areas wildland urban
Speaker 1: interface that put more people in places where fire occurs,
Speaker 1: and then there's more ignitions and can be more flammable
Speaker 1: materials accumulating, and a lot of other complex factors. But
Speaker 1: in Texas, there was a choice not to prepare for
Speaker 1: an event that had occurred forty years ago and an
Speaker 1: event they had a cold snap in twenty eleven that
Speaker 1: they didn't choose to change how they did business after that.
Speaker 1: With regulation, you might see improvement on that, and that's
Speaker 1: what we've seen with con Edison. Regulation or agreement by
Speaker 1: the company in the course of being regulated has led
Speaker 1: to improvement. Am I right in interpreting what I've read
Speaker 1: to suggest that Texas wasn't subject to federal regulation here
Speaker 1: by virtue of the way that it chose to keep
Speaker 1: its grid separate from adjoining grids. Yes, it consciously said
Speaker 1: we don't want to have to deal with the fits,
Speaker 1: so we're going to keep all our generation within our state, essentially,
Speaker 1: and had increased its vulnerability because when you're having trouble
Speaker 1: in one area, of classic solution is to ask somebody
Speaker 1: else nearby to lend a helping hand, and that could
Speaker 1: be in the utility in another state that could send
Speaker 1: transmit some power to you. But Texas had basically made
Speaker 1: a decision that it wanted to be an island and
Speaker 1: to itself, which increased its vulnerability. Would you think that
Speaker 1: a good solution for this is that federal law should
Speaker 1: be changed so that states can, assuming it's possible, which
Speaker 1: maybe it isn't, so that states can't really opt out.
Speaker 1: I mean, under the constitution, Congress would certainly have the
Speaker 1: power to regulate state power grids even if they were
Speaker 1: separate from other states, because the power grade in a
Speaker 1: state like Texas affects the interstate economy, even if they're
Speaker 1: not literally physically connected to the grids from other states.
Speaker 1: So that's just a policy choice by Congress to run
Speaker 1: the regulatory system this way. I mean ought that to
Speaker 1: be different, so that all states, no matter where they are,
Speaker 1: no matter what choices they make, are subject to federal regulation. Well,
Speaker 1: you've raised essential point when it comes to climate change,
Speaker 1: because under our current system, the federal government largely differs
Speaker 1: on these decisions to state and local authorities, and that
Speaker 1: includes regulation of land use, regulation of building codes. And
Speaker 1: what we get is a patchwork across the United States,
Speaker 1: and in the area of building codes, all of our
Speaker 1: building codes at this point only look to historic past.
Speaker 1: We don't yet even have model that really look to
Speaker 1: the future. But even with our history model codes that
Speaker 1: look to protect us from extremes of the past, more
Speaker 1: than fifty percent of the states don't even bother to
Speaker 1: adopt those codes, including states that are in the path
Speaker 1: of frequent extreme events. So that is just a decision
Speaker 1: that we've said constitutionally, we're going to let the state
Speaker 1: and locals make this decision. But this collides with the
Speaker 1: expectation that has now grown among Americans that when things
Speaker 1: go wrong, the federal government's going to bail us out.
Speaker 1: So you saw Texas said, oh, look this is terrible,
Speaker 1: we need help federal government, And we see that all
Speaker 1: the time. And we've also seen a paradigm that shifted
Speaker 1: from Eisenhower's time, when basically before Eisenhower, local communities were told, yeah,
Speaker 1: you get to make your choices locally about what you do,
Speaker 1: but you also are going to take care of the disaster.
Speaker 1: We're just we'll send you help with the Red Cross.
Speaker 1: At the federal government, we're not in the disaster recovering business.
Speaker 1: But that changed with Dwight Eisenhower. And from a very
Speaker 1: modest like I think it was about five hundred thousand
Speaker 1: dollars or something under Dwight Eisenhower, it's now the federal
Speaker 1: government typically pays seventy percent, sometimes ninety percent, and often
Speaker 1: one hundred percent of disaster recovery in these big events.
Speaker 1: So you've got state and locals making choices about how
Speaker 1: they want to live, and those choices often involve significant risk.
Speaker 1: Living in floodplains, living in areas prone to fire, and
Speaker 1: building codes that are not floodproof or fireproof. Bad things happen,
Speaker 1: huge losses, and then Congress says, oh, yes, we need
Speaker 1: a bailout. Saint Paulson who called these climate bailouts, and
Speaker 1: he astutely observed that it will be very hard to
Speaker 1: turn off the spick it on climate bailouts. And that's
Speaker 1: why it's so important to encourage local communities and states
Speaker 1: to invest in risk production so we get take advantage
Speaker 1: of this one to six ratio. You're really describing a
Speaker 1: tremendous moral hazard problem. I mean, it's polite of you
Speaker 1: to say that we should encourage the states, but the
Speaker 1: truth is, if the states can spend less and then
Speaker 1: be bailed out by the whole country, by the taxpayers
Speaker 1: of the whole country, their incentive is precisely to underinvest.
Speaker 1: I mean, that's you know, it sounds like you're making
Speaker 1: a case for requiring the states to invest in hardening infrastructure,
Speaker 1: not a case for encouraging it. I mean, you're being polite,
Speaker 1: but it sounds like, given the incentives you're describing, if
Speaker 1: you and I and the tax payers everywhere else in
Speaker 1: the country are going to be paying for it, we
Speaker 1: should be upfront demanding that and requiring as a matter
Speaker 1: of law that individual states invest enough that they don't
Speaker 1: have to be bailed out. Well, I agree with that policy,
Speaker 1: but it turns out it's very difficult to gain the
Speaker 1: political will to implement such policy. In the Obama administration,
Speaker 1: there was an idea of a disaster deductible. So essentially,
Speaker 1: if states would invest more in pre disaster reduction of risk,
Speaker 1: better building codes, better land use practices, better investments in
Speaker 1: their electric grid, when the disaster hit, the federal government
Speaker 1: would pay more a higher percentage to that state of
Speaker 1: their losses in recognition that they'd already spent money in
Speaker 1: risk production. And those who chose like Texas, which has
Speaker 1: not historically had strong building codes or land use practices
Speaker 1: or electric grid requirements, you would say under that scenario, well,
Speaker 1: you chose not to because you wanted to keep your
Speaker 1: tax base a high and you wanted to attract all
Speaker 1: this investment, but you didn't want to have the higher
Speaker 1: prices of the homes in the land develop use issues.
Speaker 1: So you will pay more in post disaster. You're going
Speaker 1: to pick up more of the tab that it got
Speaker 1: all the way to comment under Obama in the rags,
Speaker 1: it was very quiet. Under Trump, I think it will
Speaker 1: be difficult. The politics of it are so difficult. We
Speaker 1: do have one example where we have successfully done this
Speaker 1: as a nation, at least one and that is on
Speaker 1: our barrier islands. We have passed the Coastal Barrier Act
Speaker 1: in the sixties that essentially said, in those areas, we're
Speaker 1: not going to give any more federal money to development
Speaker 1: in those areas, and if a disaster occurs, you're on
Speaker 1: your own. So we essentially said the federal government's interest,
Speaker 1: it's just those areas are too vulnerable. The local communities
Speaker 1: can go ahead and do it, but we're not going
Speaker 1: to be supporting it, and that has held. We'll be
Speaker 1: right back. Let's talk a little more about where the
Speaker 1: costs of this disaster have already fallen. One of the
Speaker 1: issues that's gotten the most attention is that some individuals
Speaker 1: and also some energy businesses basically had versions of contracts
Speaker 1: where they would get a lower price of service for
Speaker 1: the ordinary days in exchange for the idea that when
Speaker 1: costs went up, they would pay some proportion of the
Speaker 1: wholesale costs of energy, which is, in principle, was supposed
Speaker 1: to be a fair contract. Right, I get a lower
Speaker 1: price when the price is low, and then I pay
Speaker 1: a higher price when the price is high. Then, for
Speaker 1: a brief time, some number of days during the disaster,
Speaker 1: when electricity went offline, the price of power skyrocket to
Speaker 1: an enormous set of prices enough that it could bankrupt
Speaker 1: ordinary people with some enormous power bills. Are contracts like
Speaker 1: that just flat out irrational? Should we not be allowing
Speaker 1: those kind of contracts at all because of the fact
Speaker 1: that at the extreme they have these effects, or are
Speaker 1: those contracts that actually would be morally justifiable provided that
Speaker 1: they're actually carried through, you know, provided that you save
Speaker 1: money when you save it, and then when you when
Speaker 1: it costs a lot of money, you have to pay
Speaker 1: the money. Well, I think this is a point where
Speaker 1: the market collides with people's expectations. And yes, the Harvard
Speaker 1: professor who helped construct the Texas system said the system
Speaker 1: was working as it was supposed to when when their
Speaker 1: resources scarce, the price is supposed to go go up.
Speaker 1: But we're talking about ordinary humans at the other end
Speaker 1: of this, and sometimes it's the utilities, but sometimes it's
Speaker 1: going to be the individuals who were just shopping around
Speaker 1: for a cheap break. And we're not investigating what would
Speaker 1: happen if there's a forty year event that shuts down
Speaker 1: the entire group in Texas and they have trouble generating
Speaker 1: power that's just beyond the average consumer. And I think
Speaker 1: it's naive for us to expect the average consumer would
Speaker 1: in fact investigate that. So that's why it's shocking when
Speaker 1: we hear these numbers. No one contemplated it when they
Speaker 1: were entering it, certainly as an ordinary investor and probably
Speaker 1: even sophisticated investors. Because of the availability bias and our
Speaker 1: optimism bias, we think these bad things won't happen. We
Speaker 1: never really pencil it out how bad it could be
Speaker 1: and that it could drive us into bankruptcy. But when
Speaker 1: we're dealing with extreme events, I think regulation is appropriate
Speaker 1: because they're not ordinary events. There are events that are
Speaker 1: not in the ordinary course of business. So just as
Speaker 1: we need insurance for in case we have a terrible
Speaker 1: car accident, we want insurance on our best and most
Speaker 1: important assets, our home. We need to find ways to
Speaker 1: provide insurance but also regulate this market. For me, it's
Speaker 1: a bit of an analogy of these building codes. Building
Speaker 1: codes have been around for thousands of years. People have
Speaker 1: recognized for a long time that it's too hard for
Speaker 1: the purchaser to figure out whether their house is sound
Speaker 1: or not. We need building codes to help us make
Speaker 1: those judgments, and that's where regulation can help drive better outcomes.
Speaker 1: I think regulation of the electricity grid, for in terms
Speaker 1: of hardening and in terms of limits on the extremes
Speaker 1: of the prices, is just sound business. What we'll see
Speaker 1: now is a lot of finger pointing saying you left
Speaker 1: those prices too high. I saw that article this morning.
Speaker 1: For too long and we will see a lot of
Speaker 1: people trying to get out of these agreements. As a
Speaker 1: former lawyer and judge, and I'm sure you appreciate the
Speaker 1: lawyers are going to have a field day with this
Speaker 1: for a long time. This will be in the courts,
Speaker 1: the insurers, those who drafted the contracts. Lawyers will have
Speaker 1: a lot to work with. So why not design a
Speaker 1: system that can deal with these extremes and put those aside,
Speaker 1: versus leaving ourselves so vulnerable and then spending a lot
Speaker 1: on the cleanup. Since you are a lawyer and a
Speaker 1: former judge, what are your intuitions. I'm not asking you
Speaker 1: to decide on the legal issues, which obviously will be
Speaker 1: very complexibill depend on the individual contracts. But do you
Speaker 1: have a view about the question of what we should
Speaker 1: do here. I mean, I'm very sympathetic to your view
Speaker 1: that we should have regulation that doesn't allow contracts that
Speaker 1: have the effect of bankrupting people for events that they
Speaker 1: should have rationally as a pure economic rational actors calculated,
Speaker 1: but in fact being mere humans that they didn't. I'm
Speaker 1: a little less sympathetic. When it's a sophisticated economic actor
Speaker 1: like a power company on its own, then I'm a
Speaker 1: little more were inclined to say that they should be
Speaker 1: they should have to say that they should have a
Speaker 1: chance to sign a contract like this, dumb as it
Speaker 1: may be, and be that they should be held to
Speaker 1: account when they did sign such a contract. But do
Speaker 1: you have a view, broadly speaking about whether either individuals
Speaker 1: or businesses that are getting these enormous bills should actually
Speaker 1: now have to pay them. Quite apart from the question
Speaker 1: of whether we should allow people to enter contracts like
Speaker 1: this in the first place, I would need to think
Speaker 1: deeply about how much we can let people get out
Speaker 1: of their contractual commitments. You know, they'll be that this
Speaker 1: is an act of God forcemdu. I think going forward,
Speaker 1: we need to say we don't want this to happen again,
Speaker 1: and so what are the parameters we're going to put
Speaker 1: on a system through regulation that keep this from happening?
Speaker 1: And the thing that most people don't realize is that
Speaker 1: this is the tip of an iceberg. It's going to
Speaker 1: be repeated, not necessarily the deregulation of Texas, but the
Speaker 1: failure of electric grids are going to be repeated across
Speaker 1: the nation. And we need to talk now about what
Speaker 1: we are going to require of the providers of critical
Speaker 1: infrastructure and critical services to do to understand their future
Speaker 1: risk from climate change and what they're going to do
Speaker 1: about it. And I do believe that that will require
Speaker 1: a major overhaul of how we do business. You're seeing
Speaker 1: this emerge very starkly in the financial markets. You've seen
Speaker 1: the Bank of Villian England impose a stress testing. New
Speaker 1: Zealand has said it's going to require financial disclosure of
Speaker 1: climate risk across its market. Switzerland has also indicated it's
Speaker 1: looking at the same Canada tide. It's stimulus to disclosure
Speaker 1: for large corporations, and France has already been doing this
Speaker 1: since twenty sixteen for its thanks. We need to be
Speaker 1: thinking about a similar system to require our executives to
Speaker 1: begin to think about these risks that tend to be
Speaker 1: viewed as black swans or things that won't happen, but now,
Speaker 1: particularly with climate change, these are high consequence risks and
Speaker 1: they're no longer low probability, they're now high probability. But
Speaker 1: we have not changed our thinking to reflect that yet.
Speaker 1: And I'll just leave you this just a stunning study
Speaker 1: to me. MU Business School Stern Business School did a
Speaker 1: study in twenty nineteen of the directors for the Fortune
Speaker 1: one hundred companies looking at there did a survey of
Speaker 1: their biographical information. It looked at it for ESG, environmental, sustainability,
Speaker 1: and governance. When it got to the environment category, they
Speaker 1: were out of eleven eighty eight directors and these are
Speaker 1: running our top corporations, only five people, not five percent,
Speaker 1: five people cited any climate change background. Meanwhile, we have
Speaker 1: these huge events just coming along quickly and growing in intensity,
Speaker 1: but we are ill prepared. So you've seen the financial
Speaker 1: markets already saying we get it, we're probably going to
Speaker 1: get regulated, so we're going to try to get ahead
Speaker 1: of this. And in the utilities we're going to need
Speaker 1: to do the same so that they're prepared. But it's
Speaker 1: not just utilities. It's your wastewater treatment plants, it's your dams,
Speaker 1: it's your bridges, every piece of infrastructure communications is vulnerable
Speaker 1: to climate change impacts going forward. Alice, you have something
Speaker 1: like a patent on the term resilience. In the Obama
Speaker 1: White House, you were senior director for resilience. You've written
Speaker 1: a book about how he can be resilient. Tell me
Speaker 1: what resilience means to you, not only in the infrastructure context,
Speaker 1: but more broadly. I mean it. It's one of those
Speaker 1: sort of master terms of our era. Say say more
Speaker 1: about it for me, Sure you know resilience. For me,
Speaker 1: it means essentially the ability to prepare, for, withstand, and
Speaker 1: respond to extreme events, and so that means that it
Speaker 1: would include future extremes. But it's useful, and it's particularly
Speaker 1: useful with a politically charged topic like climate change. Some
Speaker 1: politicians want to talk about resilience when they don't want
Speaker 1: to talk about adaptation because adaptation reads climate change, resilience
Speaker 1: reads I don't have to have an opinion on climate change. Alice,
Speaker 1: you lay out seven principles of resilience in your book.
Speaker 1: Would you give us some highlights from the Big seven? Well,
Speaker 1: there are seven key principles that we're developed through a
Speaker 1: group co chaired focusing on what do we do to
Speaker 1: have better outcomes for infrastructure in the phase of extreme
Speaker 1: weather from climate change. A few of those are particularly
Speaker 1: apt for the situation we're facing now in Texas. The
Speaker 1: first thing is we need to no longer think of
Speaker 1: infrastructure is separate components, that if we just protect one component,
Speaker 1: we will be protecting everything else. The world is so
Speaker 1: interconnected now. These systems are so interconnected and all of
Speaker 1: them are connected to the grid that if we have
Speaker 1: one system go down, it's a bit like dominoes, just
Speaker 1: everything else collapses along the way. We also need to
Speaker 1: think in terms of multi hazards, so we tend to
Speaker 1: think just a flood problem, for example. But we have
Speaker 1: had one of the most painful examples of what we
Speaker 1: can and should plan for with the pandemic. So in
Speaker 1: the midst of this pandemic, we've had thirty named storms
Speaker 1: in the Atlantic, so many named storms that we had
Speaker 1: to use the Greek alphabet. We've seen the hottest temperatures
Speaker 1: that we've seen, we believe, ever recorded on the earth
Speaker 1: in the aptly named Death Valley in California. We've seen
Speaker 1: unprecedented cyclones and wildfires that have driven people out of
Speaker 1: their home seeking shelter and putting them at higher risk
Speaker 1: for infection from COVID nineteen. Our firefighters, our emergency managers
Speaker 1: have all been put at greater risk during these events.
Speaker 1: So we need to plan and think through that. We
Speaker 1: are in a world now where we are going to
Speaker 1: have compounding events, close in time events, simultaneous consecutive events.
Speaker 1: We're just going to get hit a lot, and that
Speaker 1: requires us to rethink instead of just preparing for one
Speaker 1: particular hazard. And then I think the last end for
Speaker 1: Texans right now, as they plan going forward, we should
Speaker 1: always be anticipating that. Of course we are going to
Speaker 1: suffer bad events, but how can we plan now to
Speaker 1: build back better in the future. Where can we identify
Speaker 1: to make improvements if something gets destroyed or something is damaged.
Speaker 1: How can we come back bigger, stronger, better in the
Speaker 1: face of disaster, And that usually requires planning and thinking
Speaker 1: through where we can spend our precious dollars most effectively.
Speaker 1: Lots we can do here. There is reason for optimism,
Speaker 1: and there's hope for all of us to be engaged
Speaker 1: in ensuring that we have a bright future ahead. As
Speaker 1: I wonder if I could close on a personal note,
Speaker 1: I'm amazed by your career path You ran the white
Speaker 1: collar crime unit in the US Attorney's Office in Los Angeles,
Speaker 1: which is a very high powered job to have had
Speaker 1: in criminal law. You were a judge on the Superior
Speaker 1: Court in Los Angeles, and then you ended up as
Speaker 1: the true maven of preparing for responding to extreme climate
Speaker 1: events within this resilience framework, what was the pathway that
Speaker 1: shifted you from the very distinguished career in criminal justice
Speaker 1: to the very distinguished career that you've had in the
Speaker 1: totally unrelated I would think area of preparing our country
Speaker 1: for climate change. Well, here's the essential piece of career
Speaker 1: advice I can share. Be nice to those who sit
Speaker 1: next to In law school, I sat next to Janet Napolitano,
Speaker 1: and in two thousand and nine, she knew that I
Speaker 1: was getting a little tired of being a judge being
Speaker 1: dispute resolution. I deeply admire our judges. They shoulder a
Speaker 1: great deal of responsibility and it can often be heartbreaking
Speaker 1: the choices that they have to make. After over a
Speaker 1: dozen years as a judge, I knew that I didn't
Speaker 1: want to spend the rest of my career in dispute resolution.
Speaker 1: I'm in a different form of dispute resolution when you're
Speaker 1: in policymaking, but not head on, where there's a winner
Speaker 1: and a loser every day with every case in courtrooms
Speaker 1: across the country. So she knew that I was interested
Speaker 1: in a career change, and she asked me. She called
Speaker 1: me up and said, hey, what do you think about
Speaker 1: coming to Washington? And after thinking about it for a
Speaker 1: little while, I'm figuring out how to make that be
Speaker 1: a success for my family, I chose to go. And
Speaker 1: one of the very first assignments I got was this
Speaker 1: issue of climate change. And the reason I got it
Speaker 1: is because I was sitting around a large conference room
Speaker 1: with a bunch of senior leaders from the Department the
Speaker 1: Homeland Security, which, as you know, is the third largest
Speaker 1: agency in the federal government, over two hundred thousand employees,
Speaker 1: responsible for immigration, emergency management, our coastal waterways. And President
Speaker 1: Obama just signed an executive order requiring agencies to engage
Speaker 1: in adaptation planning in two thousand and nine, and to
Speaker 1: some extent still now, climate change was not mute as
Speaker 1: a career enhancer. It as a something that would probably
Speaker 1: hurt you in your career. In fact, I was advised
Speaker 1: that when I started working on the issue. But sitting
Speaker 1: around this conference table, everyone's got their arms crossed against
Speaker 1: their chests, They're leaning back in their chairs, and as
Speaker 1: I remember it, somebody said, Oh, give it to her.
Speaker 1: She's new, she'll do it. And I was handed this
Speaker 1: assignment which gave me an extraordinary opportunity to learn from
Speaker 1: some of the very best scientists across the federal government,
Speaker 1: experts who had been thinking deeply about this, and it's
Speaker 1: me on this journey and made me appreciate this is
Speaker 1: one of the biggest threats and one of the most
Speaker 1: unfamiliar threats humanity has ever faced in its long history. Alice,
Speaker 1: thank you for just extremely clear analysis and thinking, and
Speaker 1: for a very sobering message about what we can do better,
Speaker 1: and for your ongoing terrific work on this subject. Thank
Speaker 1: you so much. Thank you, what a pleasure to join you.
Speaker 1: I so appreciate the opportunity. In the course of this
Speaker 1: fascinating conversation with Alice, several key takeaways emerged in my mind.
Speaker 1: The first is that what happened in Texas was predictable,
Speaker 1: far from being a freak event. Texas had experienced. Alice
Speaker 1: points out cold temperatures comparable to these as recently as
Speaker 1: forty years ago, so it should have been possible for
Speaker 1: Texas to realize that it did need to harden its
Speaker 1: infrastructure against potential low temperatures. Second, and to my mind,
Speaker 1: the most surprising of these takeaways, Alice points out that
Speaker 1: it was not in particular Texas's distinctive deregulatory political culture
Speaker 1: that led to the problems here, because New York and California,
Speaker 1: places with more progressive governments and more regulation of various kinds,
Speaker 1: made similar mistakes in failing to invest in infrastructure to
Speaker 1: overcome potential serious climate challenges in the past, with Hurricane
Speaker 1: Sandy as a prominent example. In other words, according to Alice,
Speaker 1: our failure to invest more in our infrastructure isn't really
Speaker 1: a product of any political commitment. It's rather the product
Speaker 1: of the human impulse to fail to make sufficient investments
Speaker 1: in events that seem low probability to us, but are
Speaker 1: in fact extremely high cost. Yet another takeaway is that
Speaker 1: as a nation, we face a genuine moral hazard when
Speaker 1: it comes to how we ensure ourselves against extreme climate events.
Speaker 1: Individual states spend the money on preparation, but the whole
Speaker 1: federal government, which means all of us is taxpayers put
Speaker 1: up the money to bail out those areas where things
Speaker 1: go awry. Whenever the people who pay for the accident
Speaker 1: are not the same people who are buying the insurance
Speaker 1: in the first place. You have a moral hazard problem
Speaker 1: and you get under investment in prevention, and that seems
Speaker 1: to be the case with respect to climate right now. Last,
Speaker 1: but not least, I walked away from my conversation with
Speaker 1: Alice more convinced than ever of the need for us
Speaker 1: to improve the regulatory schemes that enable states to get
Speaker 1: away with not investing what they should. The federal government
Speaker 1: isn't a solution to every problem that we have in
Speaker 1: the world, but climate is as borders. Infrastructure is acrossed borders,
Speaker 1: electric power grids are across borders, and for that matter, health,
Speaker 1: as we've learned in the context of a pandemic, is
Speaker 1: very much also across borders. In all of these contexts,
Speaker 1: we need more, not less, centralized, rationalized planning regulation in
Speaker 1: order to avoid extreme events actually having the impact that
Speaker 1: the Texas cold snap did have on so many human beings.
Speaker 1: Until the next time I speak to you, be careful,
Speaker 1: be safe, and be well. Deep Background is brought to
Speaker 1: you by Pushkin Industries. Our producer is Mo laboord our
Speaker 1: engineer is Martin Gonzales, and our shorerunner is Sophie Crane mckibbon.
Speaker 1: Editorial support from noahm Osband. Theme music by Luis Guerra
Speaker 1: at Pushkin. Thanks to Mia Lobell, Julia Barton, Lydia Jean Cott,
Speaker 1: Heather Fain, Carli Bigliori, Maggie Tay, Eric Sandler, and Jacob Weisberg.
Speaker 1: You can find me on Twitter at Noah R. Feldman.
Speaker 1: I also write a column for Bloomberg Opinion, which you
Speaker 1: can find at Bloomberg dot com slash Feldman. To discover
Speaker 1: Bloomberg's original slate of podcasts, go to Bloomberg dot com
Speaker 1: slash Podcasts and if you liked what you heard today,
Speaker 1: please write a review or tell a friend. This is
Speaker 1: Deep Background.