Speaker 1: Welcome to zero. I am Akshatarati. This week climate Action
Speaker 1: under Trump. It's week two at COP twenty nine in Baku.
Speaker 1: The negotiations are heating up. Much of the fight is
Speaker 1: about money, but countries like Saudi Arabia are also opening
Speaker 1: up old fights about fossil fuels. How does this all
Speaker 1: go down? We'll bring you more about whether there's a
Speaker 1: deal on climate finance or not next week. Till then,
Speaker 1: I thought I'll share two conversations I had about climate
Speaker 1: action over the next four years as Donald Trump retakes
Speaker 1: the White House. The first one is with Ali Zaidi,
Speaker 1: who is currently the climates are under President Joe Biden.
Speaker 1: I talked to Ali on stage at the Bloomberg Green
Speaker 1: event here in Baku about what exactly endures inside the
Speaker 1: US on climate action and can anyone pick up the
Speaker 1: slack that's left behind when the federal government stops acting.
Speaker 1: The second one is with Jonathan Pushing, who's the head
Speaker 1: of the Environment program at the Hewlett Foundation and a
Speaker 1: veteran US diplomat on all things climate. He says that
Speaker 1: the world is a lot more prepared for a Trump
Speaker 1: presidency this time, and there's also a lot more momentum
Speaker 1: on climate action. That means both Ali and Jonathan agree
Speaker 1: that things are likely to slow down rather than reverse
Speaker 1: under Donald Trump. That's not to say it's good news,
Speaker 1: but it does create opportunities for other countries to step
Speaker 1: into the void and take on a leadership role. Welcome
Speaker 1: to Bloombergreen, and welcome back to the Zero podcast.
Speaker 2: Fantastic view with you.
Speaker 1: Now. Last time we talked about two years ago, India
Speaker 1: and Pakistan were going at it at the World Cup
Speaker 1: and you were celebrating the US having passed the largest
Speaker 1: climate legislation ever passed. Now there's good news and bad news.
Speaker 1: The good news is India has actually won a World
Speaker 1: Cup since.
Speaker 2: Then, but who's keeping score right?
Speaker 1: And Pakistan well has had a few climate impacts. And
Speaker 1: the other bad news is well Trump is coming to
Speaker 1: power and we don't know whether the largest climate bill
Speaker 1: that the bide An administration was able to pass will
Speaker 1: be able to get all the money, all the incentives
Speaker 1: that it has out the door. How worried are you?
Speaker 2: I am less worried than you might think I am
Speaker 2: because in the architecture of our climate strategy, we anticipated
Speaker 2: a handoff to the private sector to carry us the distance.
Speaker 2: I think of the Inflation Reduction Act, the Bipersion Infrastructure
Speaker 2: Law as the booster packs on a rocket, but the
Speaker 2: rocket is the private sector. And I think what we
Speaker 2: will see next year and the years after is that
Speaker 2: during this period of time we were able to achieve
Speaker 2: escape velocity in the United States on critical areas decarbonization.
Speaker 2: I am worried about parts of the inflection point, which
Speaker 2: to me feel very fragile. One of them is our
Speaker 2: ability to sustain the manufacturing renaissance that's taken off in
Speaker 2: the United States. We know that federal policy is so
Speaker 2: critical to incubating that industrial capacity build out in a
Speaker 2: couple of key areas. I think we might fall back
Speaker 2: if policy is reversed course.
Speaker 1: So the Trump administration is promising to cut taxes, and
Speaker 1: that means it's going to have to try and find
Speaker 1: money from places. I know that there is a lot
Speaker 1: of money from the Inflation Reduction Act that's going to
Speaker 1: go to Republican states that might stick around. But there
Speaker 1: are certain types of incentives that might actually be cut
Speaker 1: immediately or maybe phase down sooner than planned. A couple
Speaker 1: of them that come to mind, electric vehicle tax credits,
Speaker 1: might go altogether. The clean Electricity tax credit might be
Speaker 1: phased down early. Do you think those two sectors have
Speaker 1: met this rocket escapablocity that you hope?
Speaker 2: Well, Look, I think that the American people are very
Speaker 2: focused and rightfully so, on pocketbook issues, including the cost
Speaker 2: of energy. Those electricity tax credits are tax cuts that
Speaker 2: flow through to utility pairs who now see lower energy bills.
Speaker 2: You can literally go to utilities around the country where
Speaker 2: they will tell you how much the price of electricity
Speaker 2: came down and how much families are benefiting because of
Speaker 2: investments from the Inflation Reduction Act. So I think it
Speaker 2: would be problematic not from just a climate perspective, but
Speaker 2: from a retail economics perspective if there were to be
Speaker 2: a reversal on that. On your point about is it
Speaker 2: easy to undo this, Look, nine out of every ten
Speaker 2: dollars from the grant side of our investment agenda is
Speaker 2: in some form or fashion already into the economy. Most
Speaker 2: of the tax credits twenty one out of twenty four
Speaker 2: have some guidance associated with them and are moving forward.
Speaker 2: And you know, I believe and I think this is
Speaker 2: manifest in the politics in Washington that we have grown
Speaker 2: the political consensus around the Inflation Reduction Act through its execution,
Speaker 2: which evidence point one is the letter from House Republicans
Speaker 2: to their own leader saying, hey, let's stop trying to
Speaker 2: repeal something that would unplug a bunch of jobs and
Speaker 2: economic opportunity in our districts.
Speaker 1: Well, ideology has never been more powerful in American politics
Speaker 1: than it is, perhaps now, or at least in recent history.
Speaker 1: Perhaps it is now. We are studying to see some
Speaker 1: of the Trump administration's appointees, and what we are noticing
Speaker 1: is that there are a lot of loyalists being put
Speaker 1: and so there are wild cards that could be coming
Speaker 1: your way. Aren't you worried about those?
Speaker 2: Look, if you work on climate change, you're always counting
Speaker 2: on there being wild cards. But I think there's a
Speaker 2: real robustness in the system. The first part we talked
Speaker 2: about already, and that's the private sector and the role
Speaker 2: it's going to play in. I think continuing to pull
Speaker 2: the policy a certainty along. They have made a trillion
Speaker 2: dollars worth of investment bets predicated on a policy regime.
Speaker 2: They're not going to want to see the rug pulled
Speaker 2: out from.
Speaker 1: All we had the egg on mobile CEO yesterday telling
Speaker 1: us that the US should not pull out of the
Speaker 1: Paris Agreement.
Speaker 2: Yeah, and that's not your most obvious ally in this fight,
Speaker 2: but not only calling for staying in Paris but also
Speaker 2: calling to keep intact the incentives that have been put
Speaker 2: in place. So I think there's that piece of it.
Speaker 2: I think the robustness also comes from state policy. You've
Speaker 2: got more than half of the states that have democratic
Speaker 2: leadership and very much engaged in advancing clean energy. But
Speaker 2: that actually ignores the fact that you have a bunch
Speaker 2: more Republican governors whose entire economic theory rests on investments
Speaker 2: from the Inflation Reduction Act. You go to a place
Speaker 2: like Oklahoma, Governor sit an amazing leader in attracting private
Speaker 2: investment to a state. Most of that private investment is
Speaker 2: clean energy. Governor Kemp in Georgia, most of that investment
Speaker 2: clean energy. Go to South Carolina Governor McMaster, most of
Speaker 2: that new investment clean energy. So if you want to
Speaker 2: see the politics of this, you look at the house
Speaker 2: where they've written to their leader. You look at the
Speaker 2: private sector where they put the bet on clean energy future.
Speaker 2: You look at the states where they're running towards clean energy.
Speaker 2: This is actually a much more robust system with a
Speaker 2: lot more momentum behind it than we had in twenty seventeen.
Speaker 2: So I hear you on the risk factors, but I'm
Speaker 2: focused on the incredible momentum and I think that's where
Speaker 2: I put my stock.
Speaker 1: Now, let's look at the international front. We are here
Speaker 1: at COP twenty nine. Negotiators are going to have to
Speaker 1: battle out something that is perhaps going to be the
Speaker 1: hardest thing that many experts are saying since the Paras Agreement,
Speaker 1: because it's all about money, and especially rich countries, especially
Speaker 1: the US does not like to talk about money as
Speaker 1: much when it comes to hundreds of billions of dollars
Speaker 1: that need to be given to developing countries. Before we
Speaker 1: get into the details, the first thing that's going to
Speaker 1: happen is that Donald Trump says he's going to pull
Speaker 1: the US out of the Paris Agreement. Again, let's see
Speaker 1: if he listens to the exit mobile CEO. But if
Speaker 1: he doesn't, that means the US is not party to
Speaker 1: negotiations within one year of him making that decision, and
Speaker 1: that creates a credibility gap right now in these really
Speaker 1: difficult negotiations are the other negotiators taking you and your
Speaker 1: colleagues seriously.
Speaker 2: I think the US has built up quite a bit
Speaker 2: of credibility over the last four years, including an announcement
Speaker 2: I made today about three billion dollar target that the
Speaker 2: President had set in twenty twenty one to mobilize adaptation
Speaker 2: finance into the developing world, the Prepare initiative. We actually
Speaker 2: met that goal a year early, and we'll meet it
Speaker 2: again next year. But you know, I would be sugarcoating
Speaker 2: it if I suggested that US leadership going into next
Speaker 2: year from the federal government has a bright and positive
Speaker 2: halo around it. In global climate conversations, I think people
Speaker 2: hear what has been said, they read what has been written,
Speaker 2: and they largely believe it. And as a result, that
Speaker 2: I think diminishes the US federal position as the rules
Speaker 2: are being written on the clean energy economy of the future.
Speaker 2: That comes to the detriment of US businesses and US workers.
Speaker 2: So I think that's a problem if we don't sort
Speaker 2: of see this through in terms of the conversation that's
Speaker 2: happening right now. It's all about bringing more countries in
Speaker 2: around an ambitious target for twenty thirty five. It's quite
Speaker 2: a way a way, I think the bigger that coalition
Speaker 2: is and the boulder that ambition is, the more likely,
Speaker 2: If that might be counterintuitive, but the more likely we
Speaker 2: are to pull through on the other side and deliver
Speaker 2: the resources that are necessary to lift up the entire
Speaker 2: world in adapting to these challenges.
Speaker 1: Why is that? Why do you think a bigger target
Speaker 1: will make it easier given the US is likely to leave.
Speaker 2: I think if it is a target that is fit
Speaker 2: to purpose, that actually meets the moment, there will be
Speaker 2: more of a pull to get it done. If it's,
Speaker 2: you know, an anemic target, I think that makes it
Speaker 2: less exciting for people to really put their weight behind it.
Speaker 2: And I think the broader the coalition, the more likely
Speaker 2: it is that, you know, when one country falls back,
Speaker 2: the others pick up the slack, and so on so
Speaker 2: forth we pull each other through in the end.
Speaker 1: One reason why the Inflation Reduction Act has some more
Speaker 1: teeth than would have been otherwise is because there was
Speaker 1: a recognition from the Republican side that China is eating
Speaker 1: the US lunch when it comes to green technologies. This
Speaker 1: next four years are likely going to grow that gap.
Speaker 1: Even with the Inflation Reduction Act staying as it is,
Speaker 1: as you would hope it stays. What happens when you
Speaker 1: come back, say in twenty twenty eight, Democratic president back
Speaker 1: in power, and the gap between the US and China
Speaker 1: is bigger when it comes to green technologies. How do
Speaker 1: you catch.
Speaker 2: Up if four years from now we have fallen further
Speaker 2: behind China. I think that's economic malpractice at the federal
Speaker 2: policy level. I think the science is not unsettled on
Speaker 2: climate change, and yet folks articulate it as a matter
Speaker 2: of belief. But even if you set that aside, the
Speaker 2: economics are clear. These are technologies invented in the United States.
Speaker 2: When we invest in their manufacturing capability and deploy them domestically,
Speaker 2: there is unambiguous economic upside and energy security upside. It
Speaker 2: would be economic malpractice to put us back in the
Speaker 2: position we were four years ago, where we're in a
Speaker 2: massive deficit in the leadership of these technologies. So I
Speaker 2: understand your question, which is what happens if that deficit exists?
Speaker 2: So if we come out of the ditch. So I'm
Speaker 2: actually rooting for how root for anybody who puts America's
Speaker 2: economic interests first? And I'm going to root for the
Speaker 2: next Congress, the next administration, finding a way, whether it's
Speaker 2: motivated by climate or not, to invest in our industrial
Speaker 2: strength and invest in our energy security, and invest in
Speaker 2: our ability to make the technologies that we pioneered in
Speaker 2: the United States, make them cheaper, make them better, and
Speaker 2: help them translate into jobs and economic opportunity.
Speaker 1: So far, what the Trump administration has said is there's
Speaker 1: going to be an Energi czar in the White House,
Speaker 1: not a climates are So what happens after January taking
Speaker 1: part and becoming part of the resistance which was created
Speaker 1: after the system administration.
Speaker 2: Well, the good news is I won't get shown up
Speaker 2: by the next climates are No. I look, I'm I
Speaker 2: am eager to be part of civil society and to
Speaker 2: root for the success of a country I love, and
Speaker 2: to find a way to plug into the imperative of
Speaker 2: our times, which is that we rise to meet the
Speaker 2: moment on climate change. Whether or not Joe Biden is
Speaker 2: his office or Donald Trump is in office, or whomever
Speaker 2: we are in the decisive decade for climate action. Climate
Speaker 2: action is not on pause over the next four years.
Speaker 2: It's on all of us to figure out how we
Speaker 2: accelerate progress at home and abroad on that.
Speaker 1: Thank you, Elie, thank you. After the break, I talked
Speaker 1: to a veteran American climate diplomat, Jonathan Pushing, about how
Speaker 1: global diplomacy changes once Trump becomes US president. Again. By
Speaker 1: the way, if you've been enjoying this episode, please take
Speaker 1: a moment to rate and review the show on Apple
Speaker 1: Podcasts and Spotify. It helps other listeners find the show. Jonathan,
Speaker 1: Welcome to the show.
Speaker 3: Thank you so much. Glad to be here. Now.
Speaker 1: These are not idle circumstances for you to be talking
Speaker 1: about the US. We expect Donald Trump to pull out
Speaker 1: of the PRAUS Agreement. We don't know, of course, there
Speaker 1: are things that are unpredictable in a Trump residency, but
Speaker 1: assume that happens, how do you think the world reacts,
Speaker 1: and what have we learned from the first time this
Speaker 1: happened that could be applied today.
Speaker 3: So thanks very much. I think that there are a
Speaker 3: number of pieces in the way we should look at
Speaker 3: the questions you're asking, and I think they're the right
Speaker 3: questions to ask. The first one is I do assume,
Speaker 3: as you have suggested, that he intends to withdraw from Paris.
Speaker 3: I think the open question is whether he also withdraws
Speaker 3: from the convention, and we don't really know. He didn't
Speaker 3: do it the first time. There's some indication that he
Speaker 3: intends to do it now, but we don't know. Let's
Speaker 3: assume for the moment that he doesn't. In that sense,
Speaker 3: the US continues to be part of the conversation. They
Speaker 3: have an observer's seat in the back of the room
Speaker 3: because they're not a party to Paris any longer, but
Speaker 3: because they're in the convention, they still have a role.
Speaker 3: They have a perhaps small, but a delegation that continues
Speaker 3: to come. That would be consistent with some of the
Speaker 3: requests to the administration from some of industry, which believes
Speaker 3: that the global rules are ones the US should be
Speaker 3: involved in negotiating, and those standards will matter to them
Speaker 3: as they do global business. A second possibility he actually
Speaker 3: withdraws from the entire process. I think the thing that
Speaker 3: countries have learned is two from the Morocco experience. Marrakesh
Speaker 3: was the last time he was elected. He then withdrew
Speaker 3: and we had that four year period. The first thing
Speaker 3: that they've learned is that the US being out slows
Speaker 3: things down, but it doesn't stop them, and the US
Speaker 3: is a smaller share of the globe total today than
Speaker 3: it was in twenty sixteen, give or take some it's
Speaker 3: just over ten or eleven percent of the world total.
Speaker 3: That's a much smaller share, and the world can move
Speaker 3: on with the ninety percent of the global community that
Speaker 3: is still engaged. The second thing which they learned is
Speaker 3: that notwithstanding in the administration the executive branch withdrawal, the
Speaker 3: US continued to act in many ways. Inertia is a
Speaker 3: remarkable thing, and policies are hard to overturn once they've
Speaker 3: been set. So policies, for example, like the Inflation Reduction
Speaker 3: Act or the Infrastructure Law or the Energy Bill, those
Speaker 3: are likely to go for some period of time, and
Speaker 3: the incentives that they set are likely to continue. There's
Speaker 3: also some indication that the states and localities will continue
Speaker 3: to do the work that they have done. So while
Speaker 3: there may be a slowing in the US frame, there
Speaker 3: is continuity in the sense of more action, but it
Speaker 3: will not be as aggressive as required to solve the
Speaker 3: climate crisis, and the kind of ambition which the last
Speaker 3: four years of the Biden team has brought will be missing,
Speaker 3: and some of the pressure that the US can bring
Speaker 3: to bear in the global community will be absent, and
Speaker 3: it is not clear today that there is another country,
Speaker 3: or even necessarily a group of countries that can pick
Speaker 3: that up.
Speaker 1: All right, There are two things that are different this
Speaker 1: time around in a Trump presidency than last time. Last
Speaker 1: time there was a delay baked in. The US left
Speaker 1: out a very long time, and by that time Joe
Speaker 1: Biden was elected, and so the US came back, but
Speaker 1: no other country as a result of the US exit
Speaker 1: followed through. This time, there's already noises being made. Papua
Speaker 1: New Guinea did not send diplomats to COP twenty nine.
Speaker 1: Argentina took their diplomats back, and we understand Mila is
Speaker 1: thinking about taking Argentina out of Paris. Do you think
Speaker 1: this time around the risk of other countries leaving is
Speaker 1: higher or lower?
Speaker 3: And why? I think it's probably about the same. I
Speaker 3: think that we're not likely to see many countries withdraw
Speaker 3: The agreement is not, in some sense a particularly onerous one.
Speaker 3: It leaves to each country the choice of what it
Speaker 3: will do, and in some ways that flexibility means that
Speaker 3: a country could decide to take up modest level of
Speaker 3: reductions commitments and still be eligible for the financial aid
Speaker 3: that comes with it, still be eligible to be part
Speaker 3: of a dialogue on technology, part of a dialogue on trade.
Speaker 3: So there's actually a lot of incentive to be in
Speaker 3: and only marginal incentive to be out. I think the
Speaker 3: second question, though, is what's different this time? He's going
Speaker 3: to be pushing an oil and gas vision of the world.
Speaker 3: He has said so in his campaign. He's not particularly
Speaker 3: supportive of renewable transition. But this time, unlike the last time,
Speaker 3: the prices for those alternatives are fundamentally competitive, and that
Speaker 3: to me is a fundamentally different outcome. So a country
Speaker 3: like China is very happy to engage in the global
Speaker 3: dialogue and say, well, the US isn't available for funding
Speaker 3: these new transitions, but we are. We're in, we have
Speaker 3: a ready checkbook, we have an experience of a transition
Speaker 3: at home. We are prepared to engage with you as
Speaker 3: you make the transition. So now the question becomes what
Speaker 3: will the Donald Trump administration offer as an alternative. Will
Speaker 3: it offer low cost gas? Yes? But will that low
Speaker 3: cost gas come with a dependency on the United States? Yes?
Speaker 3: And how reliable will that be over a longer term
Speaker 3: when you build out gas infrastructure. One of the advantages
Speaker 3: of renewable energy is that once you've built it, this supply,
Speaker 3: the energy itself is domestic. It doesn't come from a
Speaker 3: tradable permit, it doesn't come from some kind of a commodity.
Speaker 3: It comes because you have wind or sun or geothermal capacity.
Speaker 3: So in that sense, there's an enormous value in the
Speaker 3: security of your energy resource not to be reliant on
Speaker 3: a global gas market or on one player like the
Speaker 3: United States. I think where we were four or eight
Speaker 3: years ago was much higher prices and therefore a very
Speaker 3: different competitive market.
Speaker 1: The other thing that the US is likely to do
Speaker 1: before a formal exit happens under Trump, if it happens,
Speaker 1: is to submit what is known as the Nationally Determined Contribution,
Speaker 1: a target that the US will be setting for twenty
Speaker 1: thirty five. Because the US is still party to the
Speaker 1: agreement and all other countries are set to submit this
Speaker 1: before February of twenty twenty five, how much do other
Speaker 1: negotiators other countries take those goals and the US credibility
Speaker 1: behind it. Given Trump might leave and as you talked about,
Speaker 1: may slow down progress that is somewhat baked in, but
Speaker 1: because it won't be as fast as we need it.
Speaker 1: Those goals are likely to be much further out than
Speaker 1: what is reality.
Speaker 3: I think that's an accurate characterization. I think this submission
Speaker 3: of a US NDC or a US commitment has a
Speaker 3: couple of particular attributes. They'll do it before the end
Speaker 3: of this term, which means to me that they're very
Speaker 3: likely to be able to say, if we were staying
Speaker 3: in this is the kind of trajectory we'd be on.
Speaker 3: And by extension, this is a credible pathway for others.
Speaker 3: This is a pathway that we think we could meet
Speaker 3: with policy, with technology development, with engagement globally, with supply chains,
Speaker 3: and that represents almost a baseline that the rest of
Speaker 3: the world can look at to assess their own progress.
Speaker 3: That's the upside of doing it. That means that there's
Speaker 3: some vision of what you might want to try for.
Speaker 3: On the other hand, there will clearly be a walking back.
Speaker 3: There will be a sense wele the US wanted to
Speaker 3: do that, but it won't. The Trump administration won't. So
Speaker 3: should we in our country follow a good and desirable
Speaker 3: path or one that might be easier with less burden,
Speaker 3: less potential upfront cost and how to think about that.
Speaker 3: I think it'll be in the middle. I think the
Speaker 3: existence of a credible pathway will have an impact. I
Speaker 3: think the absence of the US to push that will
Speaker 3: also have an impact.
Speaker 1: The reason cops exist and work is because we have
Speaker 1: a global problem that requires all countries to come together
Speaker 1: and discuss how do we address it. But I think
Speaker 1: there has been philosophically a thought that given climate change
Speaker 1: in climate science has been now well understood and impacts
Speaker 1: are being felt, the desire for countries to work together
Speaker 1: will actually grow because this catastrophe is here today, but
Speaker 1: it doesn't feel like that's happening. Are we actually moving
Speaker 1: away from a cooperative world trying to address climate change
Speaker 1: to a competitive world trying to address climate change? A
Speaker 1: competitive world that has existed in every other fora for
Speaker 1: as long as two hundred countries have existed on this planet.
Speaker 1: And is that a good thing or a bad thing?
Speaker 3: I think we should be clear about the role which
Speaker 3: the convention and the process plays well and the role
Speaker 3: which it could never really deliver. It is very good
Speaker 3: at goal setting. It has set a goal for us
Speaker 3: for all countries to act domestically. It is set a
Speaker 3: goal for us for those domestic actions to be enshrined
Speaker 3: in regulation or in law. It is set a goal
Speaker 3: for temperature increase well below two and striving for one
Speaker 3: point five. It has set a goal for collective efforts
Speaker 3: on finance. But it is not, nor I don't think
Speaker 3: was it ever expected to be an implementing body. This
Speaker 3: is not where you go to write the rules of
Speaker 3: a public utility commission that's working in the state of Iowa.
Speaker 3: This is where you go to say, is that aligned
Speaker 3: with a collective effort? And it is also very good
Speaker 3: at reviewing the actions of the countries and seeing if
Speaker 3: they align or not. So to me, the question is
Speaker 3: not so much will that continued need for both setting
Speaker 3: goals and for reviewing progress. Will that continue? Yes, with
Speaker 3: or without the United States. On the other hand, do
Speaker 3: we need other institutions and mechanisms to facilitate implementation. Absolutely,
Speaker 3: and those are going to be taken up by sector.
Speaker 3: So in some cases, for example, will the steal producers
Speaker 3: of the world figure out how to do a better
Speaker 3: job at low carbon steel and will that information move around? Yes?
Speaker 3: Will they compete with each other, of course they will.
Speaker 3: Will they compete against a low carbon future. Yes, because
Speaker 3: global demand is going to drive that forward. Do you
Speaker 3: need a singular agreement where all countries agree on exactly
Speaker 3: how they would do that. No, that's where the market
Speaker 3: can play, I think its most effective role, where competition
Speaker 3: around price and the delivery of these attributes of zero
Speaker 3: carbon become significant. So I think the agreement and the
Speaker 3: next steps around the agreement play out both collectively in
Speaker 3: the effort of setting the goal and evaluating progress, and
Speaker 3: individually and in the competition that each country and within
Speaker 3: each country companies have to find solutions that work.
Speaker 1: So I'm going to ask you a finance question now,
Speaker 1: because this is the cop at which a big finance
Speaker 1: goal has to be agreed on. Now, whatever the goal
Speaker 1: might be, and whether we get a deal or not,
Speaker 1: we can look back at the funds that do exist
Speaker 1: and recognize maybe the partial success or really a failure
Speaker 1: of those funds. There's the Green Climate Fund, There's the
Speaker 1: Global Environment Facility, there is now the Global Shield that
Speaker 1: has been created. Just the sheer number of funds and
Speaker 1: the number of steps you need to take to get
Speaker 1: the money out of them makes it really difficult for
Speaker 1: that money to actually do the work that needs to
Speaker 1: be done even if the money exists. Why is the
Speaker 1: finance problem so complicated and why does the structure require
Speaker 1: all these international funds and multiple of them that are
Speaker 1: being I think.
Speaker 3: The underlying issue is broken down into those countries that
Speaker 3: have access to commercial capital, those countries that have access
Speaker 3: but at high rates, and those countries that really don't
Speaker 3: have access. And in fact, if we look at the funds,
Speaker 3: the majority of the actual resources are going to the
Speaker 3: upper middle income countries. They're not going to the bottom
Speaker 3: of the pyramid. And so in some sense, that community,
Speaker 3: which is more than one hundred countries, come back to
Speaker 3: the process every time and saying it's not working. But
Speaker 3: supposing you think about it a slightly different way, and
Speaker 3: the question now is is their reform in the various
Speaker 3: financial institutions that are trying to change the way they
Speaker 3: provide for risk and to offset the risk in the market.
Speaker 3: Now I have some real indications of progress. Some of
Speaker 3: the adjustments being made in the World Bank, for example,
Speaker 3: are increasingly not looking at project finance which goes to
Speaker 3: an upper middle income country, but looking at why is
Speaker 3: there so much risk? And can I reduce the risk
Speaker 3: so now that country could borrow from the market and
Speaker 3: the rates would be more competitive. This, of course is
Speaker 3: why you have other connected problems. The debt burden of
Speaker 3: countries makes this more difficult, and the questions of the
Speaker 3: number of different demands on resources are also more difficult.
Speaker 3: But I would submit that at the end of the day,
Speaker 3: the problem here is not will there be government to
Speaker 3: government transfers of funds, but there will be a de
Speaker 3: risking of private capital, and the combination of the reduction
Speaker 3: in price of what we are trying to do, plus
Speaker 3: some risk adjustment and risk management will fundamentally alter the
Speaker 3: investment trajectory. And we're already starting to see that, and
Speaker 3: it's moving down the development chain, which is to suggest
Speaker 3: that over time, the money that will have to provide
Speaker 3: from one government or from a group of governments to
Speaker 3: other governments will pay for a smaller share of the total,
Speaker 3: and the market investment will increasingly pay for the large
Speaker 3: share of the transition.
Speaker 1: This idea is usually referred to as blended finance, and
Speaker 1: blended finance itself is not new, but working at sort
Speaker 1: of billion dollar scale is quite new. It's only really
Speaker 1: in the last ten years that that's worked. If you
Speaker 1: were to look at success stories. What comes to mind
Speaker 1: as things that people should look at and may not
Speaker 1: be a perfect analogy, but ways in which blended finance
Speaker 1: can really unlock capital at scale.
Speaker 3: So I think it's really helpful to think about some
Speaker 3: of the things that various development agencies are doing, including
Speaker 3: the World Bank. But let's take a couple of examples.
Speaker 3: For a long time, development finance was project finance. The
Speaker 3: idea behind it was there's a new power plant, or
Speaker 3: there's a road, or there's a factory, and I will
Speaker 3: put in capital to enable that to be developed. But
Speaker 3: many of the developed country development agencies have shifted and
Speaker 3: they've said, what are the barriers to private markets working
Speaker 3: to investment working? Well, there are a barrier to policy.
Speaker 3: Those policies don't allow the repatriation of profits, or the
Speaker 3: policies have high surchcharges in tariffs, or the policies make
Speaker 3: it difficult to get access to the grid. If you
Speaker 3: are to adjust those policies, you'd actually start changing the
Speaker 3: risk of the investment. And we're seeing development agencies increasingly
Speaker 3: focus their attention on those kinds of policy adjustments. So
Speaker 3: you look at some places like Ghana or like Kenya
Speaker 3: in Africa, both of which have seen some really interesting
Speaker 3: evolution in the way they treat farign capital and the
Speaker 3: kinds of ways that that capital is now welcomed because
Speaker 3: it's easier to deploy it and to bring it to
Speaker 3: project programs, and that now enables private markets and banks
Speaker 3: around the world to come in because the risk has
Speaker 3: been reduced. I think we'll see more of that. It's
Speaker 3: much more evident in some of the upper middle income countries.
Speaker 3: You see it in a very different way in Mexico
Speaker 3: than you do in Mali. Mali is still having a
Speaker 3: great deal of difficulty civil unrest. They're much much harder
Speaker 3: to work. Mexico is seeing much much more capacity in
Speaker 3: terms of market investment.
Speaker 1: Now, I want to ask you a big picture question
Speaker 1: looking at twenty twenty five, ten years of Paris, and
Speaker 1: I say ten years of Paris, but I want to
Speaker 1: ask a picture much bigger than Paris, which is when
Speaker 1: the Paris Agreement got agreed. It was sort of the
Speaker 1: moment where not just the fact that finally a climate
Speaker 1: cop led to an agreement, but also a recognition that
Speaker 1: governments around the world were starting to prioritize climate in
Speaker 1: a way that they had never done so and we
Speaker 1: can split what happened after Paris in maybe two hours.
Speaker 1: The first five years was really recognizing what it means
Speaker 1: to try and meet these goals. You had the one
Speaker 1: point five c report that came out that sort of
Speaker 1: created the net zero by twenty fifty framework that has
Speaker 1: been adopted by countries and companies. You had investors thinking
Speaker 1: about investing in ESG because interest rates were low and
Speaker 1: they thought they could get more return on something that
Speaker 1: is fundamentally the right thing to do, and there might
Speaker 1: actually be longer term returns to be gained. And then
Speaker 1: you can look at the following five years, and then
Speaker 1: things started to hit reality. If you're to imagine the
Speaker 1: next ten years now that we've sort of come to
Speaker 1: a point of more realism on climate, which is carbon
Speaker 1: cannot be the top priority for any country, but it
Speaker 1: will be among the top priorities, maybe the top five,
Speaker 1: maybe the top ten priorities. How do we tackle a
Speaker 1: global problem over the next ten years as the urgency
Speaker 1: to act becomes faster, but the reality is going to
Speaker 1: pull it down.
Speaker 3: So I think there's two realities. There is the reality
Speaker 3: that is essentially about the climate change itself, and over
Speaker 3: the last ten years, we've seen the increasing level of impact.
Speaker 3: I think that that impact starts to show up in
Speaker 3: local will to change. It shows up in a combination
Speaker 3: of need for resilience. But it also shows that some
Speaker 3: of the things things that we are looking to as
Speaker 3: part of the solutions set, will need to accommodate that resilience.
Speaker 3: And if they provide both services, both a service for
Speaker 3: reducing emissions and a service for resilience, they'll be more attractive.
Speaker 3: Let's give an you example that there have been some
Speaker 3: massive storms in the United States. It goes back to
Speaker 3: Superstorm Sandy. We've had Heleen this past year. Interestingly, the
Speaker 3: communities that were most resilient to those storms were able
Speaker 3: to put their solar grids onto the market. Those that
Speaker 3: relied on conventional centralized power, primarily of natural gas, had blackouts.
Speaker 3: That's a very interesting conclusion. The same thing has happened
Speaker 3: in Hawaii for typhoons. The same thing has happened in
Speaker 3: India after the floods. Those local communities that actually had
Speaker 3: access to domestic, local renewable energy were much more quick
Speaker 3: to recover. There's a second question here, and that's the
Speaker 3: price question. Prices have come down for the alternatives, and
Speaker 3: the prices have come down for a variety of alternatives
Speaker 3: that are central to the question. One, the price of
Speaker 3: renewables has come down. It's now much cheaper and in
Speaker 3: most of the world competitive with fossil fuel. Not everywhere,
Speaker 3: but much of the world. Two, the price of an
Speaker 3: electric vehicle has come down. And for some it's been
Speaker 3: the Chinese market, which is extraordinarily rapidly growing, but it's
Speaker 3: also been a two and a three wheeler market which
Speaker 3: is coming out of India, and that's penetrating into Africa
Speaker 3: with those vehicles, not just with a four wheel light
Speaker 3: duty car. We're seeing the price of alternative industry coming down,
Speaker 3: not yet to the point of competition, but to the
Speaker 3: point where some supplemental price from carbon makes it an
Speaker 3: equivalent cost. And that looks like it's going to continue
Speaker 3: to drop at the same rate. If all those things continue,
Speaker 3: the next ten years is likely to see an acceleration
Speaker 3: of action. I think it will be less quick in
Speaker 3: the absence of policy stimulus, but it will occur. And
Speaker 3: I think really the agenda for this negotiation and for
Speaker 3: the global endeavor is can you further accelerate the transition,
Speaker 3: not will it stop or will it continue? But can
Speaker 3: it go faster?
Speaker 1: Thank you gentathmen.
Speaker 3: Thanks, it's been a pleasure to talk to you.
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Speaker 1: Zero's producer is Mighty Leraum. Bloomberg's head of podcast is
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Speaker 1: The music is composed by Wonderly Special thanks to jend
Speaker 1: De Luis, Sharon Chen, Shuwan Wagner, Ethan Steinberg, Blake Maples,
Speaker 1: and Jessica Becker. I am Akshatrati Back soon.