[00:00:00:24] CURT NEWTON: Today on climate conversations, we're in another episode supporting the upcoming MIT hosted Regional Policy Summit covering Northeastern North American region. I'm joined by my colleague, Dave Damm-Luhr.
[00:00:15:04] DAVE DAMM-LUHR: Hi everybody.
[00:00:15:19] CURT NEWTON: And I'm Curt Newton.
[00:00:21:27] DAVE DAMM-LUHR: We're really looking forward to talking with Deb Markowitz, who's currently a visiting professor at the University of Vermont in the School of Environment and Natural Resources and who had a number of very high level important positions in the state government of Vermont most recently secretary of the Agency for Natural Resources. And she has a lot of important observations to make about carbon pricing in particular, but regional cooperation generally.
[00:00:50:16] CURT NEWTON: Without further ado, let's get into the conversation with Deborah. Welcome, Deb.
[00:00:54:29] DEB MARKOWITZ: Hi. It's great to be here.
[00:00:56:12] CURT NEWTON: Maybe to get started, help us understand what you did during your tenure in Vermont as secretary to build greater climate action, and how this carries forward for you.
[00:01:07:09] DEB MARKOWITZ: Thanks. So yeah, I was Secretary of the Vermont's Agency of Natural Resources for six years and I feel really lucky cause I'm in Vermont where most of our population really understands that climate change is real, and it's happening, and it's impacting us right now. And the legislature was really ready for action. So over the course of the six years, we put in place an energy plan with bold goals for reducing fossil fuel use in our electric sector in particular. We worked really hard on laying the groundwork for deploying electric vehicles. We also are a participant in RGGI, the Regional Greenhouse Gas Initiative, the market-based approach that we're going to be talking about a little bit later today. And in the context of the national conversation, because Vermont is so nimble, we really can try things out, we were deeply involved with President Obama on a bunch of levels and the White House focus on reducing greenhouse gases and preparing for climate change.
[00:02:16:22] I served as the climate lead for the state of Vermont. I was the chair of our climate cabinet, which were all of the agency secretaries coming together once a quarter to talk about how climate change was impacting our agencies and how we could actually impact that public dialogue and public policy on climate change. And I worked with the White House Task Force on climate preparedness and resilience after our experience with Tropical Storm Irene devastating a significant part of the state looking at how the federal agencies could be better partners. I also represented Vermont as part of this subnational effort in the climate summits both in Paris and then follow up in Morocco. So my focus as secretary was on climate change and how it impacted every aspect of my agency, but also all of the agencies of state government.
[00:03:11:29] CURT NEWTON: That's great. The subnational thing is really front and center and a lot of people's minds. What was the experience of being at the recent UN conference where that was so present?
[00:03:22:28] DEB MARKOWITZ: Well you know, since President Trump was elected, I actually have been doing a little circuit on why we need to keep the pressure on on the state and local level and why we also don't need to panic yet. Because when you think about what the goals are in Paris and our obligations, what the United States has signed up for, we're still on track, especially as we have leaders, like California and New York, and some of the larger economies of our country committed to ambition, to greater ambition in reducing greenhouse gas emissions. And so what we saw in [? Bali, ?] what we saw in Morocco-- because actually, I was in Morocco just days after the election, and the world leaders, and the activists, and the organizations supporting climate action were really stunned.
[00:04:16:06] And I have to say, I spoke probably in five or six different sessions, and there was standing room only. And that's because I was always on panels of the US subnationals talking about what we were doing. And it was standing room only, because people wanted to know, OK, is the world going to end that because of this new president? And the answer is no. The markets have changed, energy markets have changed. Since Trump was elected, more and more coal-fired power plants are closing, or announcing closure in the next year or two, that's not because of the Clean Power Plan, which of course never came into effect. It's because natural gas is so much cheaper. Those are old plants and it's a significant investment in infrastructure if you don't upgrade them.
[00:05:03:14] Wind now is cheaper than coal by a third, a whole third in the Great Plains area of the country. There's tremendous wind farms that are very cost effective. So renewables are competitive, their cost effective. We have a market transformation that's happening. And then we've got these economies, these large states who are driving policy that also then has an effective driving market change.
[00:05:29:00] DAVE DAMM-LUHR: So what's the opportunity now for states and subnational folks?
[00:05:35:02] DEB MARKOWITZ: Well, states have to continue to lead. Leadership matters. I believe that leadership really matters when it comes to climate action, and it matters because there's really interesting social science and how people get convinced of things. And beliefs about climate change is all a lot about identity. And leadership messages help move people's feelings of identity. I'm a person who is an activist. I'm a person who believes in social justice from. Or, I'm a person who's moral or who's patriotic. And how we label ourselves matter. And those labels linking to particular actions make a difference.
[00:06:14:11] And so if we have a president now, and his cabinet are casting doubt on climate change and the need for action, we need to have countervailing leadership. So, that's a very high level answer to your question. In practical ways, though, there's also an answer is that we have-- because of federalism, states have an awful lot of authority independent of federal government to enact policies. And so state ambition needs to move ahead. States need to continue along the path of reducing their greenhouse gas emissions and putting in place policies that create the right kinds of incentives for business and for communities.
[00:06:57:20] DAVE DAMM-LUHR: Well at the summit, there's going to be a lot of conversation about cross-border, cross-state opportunities too. What's your take on that? What's the opportunity before us right now?
[00:07:08:04] DEB MARKOWITZ: The more we work together, the more we have power to really make enduring change is my view. And that is what we discovered through RGGI that having this market based, this linked-market approach really created success in the transportation sector. The fact that California has the ability to adopt different rules than the federal rules and that there's a certain number of states, a dozen or so, who can join in, including Vermont. We can benefit from those more stringent auto emission standards that are driving the electric transformation in car innovation and auto innovation. That's really important. It's going to continue to be important.
[00:07:49:29] There's a lot of questions. And when I was in Paris and then in Morocco, there were a lot of questions about, well, are we ever going to be able to link all our markets? And that's a complicated question, because each of the markets are designed pretty differently, and so linking is not as easy as you would hope. The question is, whether or not it's necessary, at least at this point.
[00:08:13:10] CURT NEWTON: So from that broader perspective, maybe we can talk or more specifically about carbon pricing since that's the order of the day here. How do you see carbon pricing playing out when you have state-level initiatives, and then regional-level initiatives, and really some substantial differences from domain to domain? How do you see that playing out from a policy perspective?
[00:08:36:07] DEB MARKOWITZ: Well, I think it's going to be two waves that will converge. We have got the Western climate initiative with now the Canadian partners that are experimenting right. There is some history for California that they're rolling out the market-based approach when it comes to their sectors outside of the electric sector, so transportation fuels in particular. We will see how that works over time. It's just in its infancy. Meanwhile, I would expect with the changes in governorship, there's going to be some interest in New Jersey, perhaps Virginia, joining RGGI. And that will open up a whole host of questions about how you do that, because this is a financial arrangement between states, and so that's never easy.
[00:09:26:21] The other challenge, just so folks understand it who we're listening to this, when we're talking about a market-based approach and RGGI, we'll use RGGI as the example, there is a provision in the United States Constitution that requires states to get approval from Congress if they're going to enter into an interstate compact. Now, with a Republican Congress, it's unlikely that they would be willing to OK a multi-state agreement that would create a market for carbon. And so as a consequence, RGGI has been designed as an interlocking set of independent states.
[00:10:12:07] So every state has its own regulation. They pass their own laws, they have their own procedure, and following their own state rules to join in RGGI. And so it is not an interstate compact. And so that means that it's simply a cooperative arrangement. We're all going to have rules that meet certain standards, and if we do, we're in. And that means that as the RGGI states negotiate changes, like the entry of a new state or changing how much the cap is going to be, where we're put the cap for carbon, every state has to agree it's a consensus-based arrangement, which is tough. And we saw that in the last program review, which really was just completed and because every state has its unique concerns and interests based on its geography, and where it is in the grid, and who its neighbors are, et cetera.
[00:11:05:27] CURT NEWTON: I was maybe we could roll it back to some fundamentals for a bit. Some of our listeners may not be super familiar with RGGI, if they even know what it stands for, the Regional Greenhouse Gas Initiative. How would you explain carbon pricing to a five year old?
[00:11:18:15] DEB MARKOWITZ: All right. Well, so the way carbon pricing works is within RGGI, fossil fuel power plants, the big ones, 25 megawatts and larger, have to provide one carbon allowance, CO2 allowance, to account for each ton of carbon it produces. So to a five year old, I would say its like when you're playing store. You've got a certain amount of things that you're going to trade on the market, but you're going to sell it to the highest bidder. You're going to auction off those allowances.
[00:11:51:02] So in this case, the larger power plants have to purchase at auction and allowance for each ton of CO2 they're producing. And so the system overall controls the amount of carbon emission among the states by capping those allowances saying we want to tamp down the amount of pollution coming from our region. And so we're only going to auction off the allowances that we've agreed upon, that ratchets down emissions. So it's worked. Its ratcheted down emissions by about 40% to date. And then what happens is the proceeds from that auction, the money, they're selling it, the money is used. And it creates sort of a virtual cycle, because what happens is states use that money to invest in other energy conservation and green energy alternatives. So it creates additional reductions, so greenhouse gas emissions from the region, and the power companies are incentivized, they're giving this incentive, to also reduce their emissions because their emissions are capped.
[00:12:59:20] And what happens though with the allowances is really interesting, because power companies buy the allowances, but also the allowances or are bought by investment companies because they'll hold them. And for example, if you're a power company, you buy the allowances you think you're going to need for the year. You've meanwhile been sort of greening your portfolio, so you'll need less and less because that's sort of what's contemplated under RGGI. And then let's say you have a real cold winter or really hot summer, so you need to run your fossil fuel plants more than expected. All of a sudden you don't have enough allowances, so you've got to buy them on the market in theory for a higher price right.
[00:13:43:11] So, that's part of the complexity of this. You're creating an auction system, a financial instrument, and there's lots of rules and regulations about doing that in a way that is fair and transparent. I don't know if that's good enough for a five year old.
[00:13:59:14] CURT NEWTON: If they are their patient.
[00:14:01:00] DEB MARKOWITZ: Is there an M&Ms, a way to talk about it with M&Ms, but I wasn't quite that.
[00:14:06:29] CURT NEWTON: There's a perception in some quarters that some form of carbon pricing is like a silver bullet. It's the first best thing that we can do to take on climate change, to build some sort of bipartisan consensus. Do you think that's a valid view?
[00:14:23:02] DEB MARKOWITZ: Well, that view comes from the fact that carbon pricing was a Republican idea initially. And in Congress, and when RGGI first formed, it was in anticipation of a federal bill. And since that time, the Republicans have walked away from anything related to climate and greenhouse gas reductions. That being said, what I like about a market-based approach, as opposed to a tax, is that you can actually get results right away, because you're capping the amount of carbon. And then you're creating a revenue stream that could be used to invest in other carbon reduction measures, and that's been successful for RGGI.
[00:15:05:27] In contrast for a carbon tax to work, it has to be so high that it changes behavior. It's about-- it also will raise revenue, although what we've seen actually is that in most cases when a carbon tax is being introduced, it is framed as being revenue neutral. So it's not raising extra money to reinvest in efficiency. So what I like about the RGGI system is it's transparent, it's effective. It's putting a price on carbon, but in a way that doesn't shock the system.
[00:15:42:21] DAVE DAMM-LUHR: So carbon pricing has been focused pretty much on the power sector, that's what we've been talking about here. How about extending it to transportation, or methane leaks, or land use practices, or something else?
[00:15:54:03] DEB MARKOWITZ: Well that's a great question, and the Western Climate Initiative, that's California, now parts of Canada, is experimenting with taking this market-based approach and applying it in the transportation sector. It is much harder-- we've spent a lot of time in the Northeast looking at options for how we would manage a market in the transportation sector. And the complexity is really would be the point of regulation. Like, who would you require to manage the system and pay in, at what point? And so we could have a whole podcast just on the complexity of how fuel is sold, and mixed, and sent. And we also spent a lot of time looking at carbon intensity of fuels and how you might create an incentive for the lower carbon intensive fuels by having some sort of surcharge. But again, by the time the fuel gets to our pumps, it's all mixed and so it's very hard to untangle it. And that would get to the issues of the methane flaring in some of the oil production, so it is complex.
[00:17:07:09] The reason why RGGI has been successful and was able to roll out so smoothly, remarkably smoothly for something that's so complex, is that the entities that were being regulated under RGGI were already regulated. We have a highly regulated approach to how we provide energy. And in part, it's because reliability is so important. We need to make sure that every time we turn the switch on, the lights actually go on. There was already in place a structure for measuring what people were using, the companies what they were using, and how to create that accountability that's necessary as part of it.
[00:17:48:00] CURT NEWTON: Yeah. I think it might be worth unpacking just a little bit of complexity about the transportation sector, because I think it might be illuminated.
[00:17:54:17] DEB MARKOWITZ: Yeah, so if you think about it, you have to start at the beginning. First, you're pulling the oil and gas out of the ground, then that's taken to a refinery. At the refinery, the oil is made into different products that end up going to what's called the rack, which is where it's stored. And then it goes from the rack through the distribution channels to other storage, finally into the pumps. So there are lots of different pieces to it, and not many states have refineries. So if that's the point of regulation, that is complex. Not many states have racks more than refineries that don't have the racks. Distributors haven't really been regulated, and there's lots of them. So where do you do it? And how would you set up a new regulatory system? It is complicated.
[00:18:48:01] One of the things we've been in conversation in Vermont about, is there a way we can innovate on this? And one of the suggestions that is being floated is to look at the benefits side of RGGI, which is getting money into the system, so that you could invest in energy efficiency and renewables. Is there a way to have a fossil fuel carbon surcharge at the pump, because we're already regulating at the pump at least in states that have a gas tax, which many states do to pay for roads. Can you add in a surcharge that will bring money into the system to reinvest into, for example, electric charging infrastructure so we can get ready for electric vehicles or subsidies for lower and moderate income people to purchase and benefit from the electric transformation? Or in Vermont, we've got a really old housing stock, so our concern always has weatherization and that economic justice issue, where it's mostly the lower income people who are suffering with uncomfortable homes that are costly to heat. So that's a less pure idea, but I'm a politician, so practical also matters.
[00:20:04:14] DAVE DAMM-LUHR: So the issue of the Policy Summit is really integration across states at the subnational level, in this case, New York, New England, and eastern Canada. What's on your mind for that?
[00:20:17:11] DEB MARKOWITZ: I think it's going to be great to hear what everybody is doing it, because there has been a lot of added ambition and leadership in this area. It really is an experiment what California has been doing with its Western climate initiative bringing in provinces of Canada. Trudeau, the premier in Canada, is very active on climate issues, so it'll be exciting to see what they're thinking coming up next. And for RGGI with these new governorships, there's an opportunity for expanding RGGI and wouldn't that be great, because that'll serve as a framework for linking later on.
[00:20:55:24] CURT NEWTON: How are the conversations in Canada different? Or how do they compare to the conversations we have within states in the United States?
[00:21:03:10] DEB MARKOWITZ: Well, that is interesting. It's not so different than the United States in so far as there's areas of Canada that benefit from the fossil fuel industry more than others. Quebec has been on the leading edge of pushing for climate ambition, which is not surprising since they've got Hydro-Quebec. They've got tremendous renewable energy resources. And so for them, it's an economic driver. The more other provinces in the United States want to buy their power, the better off they are. It's a little bit more complicated when you get to the areas that are the tense tar sand areas and the areas that are generating fossil fuel. And so not surprisingly, you've seen in their leadership some inconsistency, and in their federal leadership, some inconsistent messages on reducing fossil fuels.
[00:21:55:06] There's a cultural difference, though, between the US and Canada where in the United States our politics are often driven by values of individualism. And in Canada, it's more collectivism. There's a very strong value of a communitarian that we think about the community first. One of the challenges with climate change is in order for us to do what we need to do to protect the planet, we're going to have to change how we live. We're going to have to change our communities are designed. We're going to have to think about how we travel and our consumption, we'll have to think about. And in Canada, there's already a set of values that support those kinds of changes and considerations. In the United States, not so much.
[00:22:47:28] CURT NEWTON: One of the running themes we've had in our podcast has to do with justice and in our interaction with climate change. I wonder if you see justice considerations playing out differently in Canada given its communitarian focus.
[00:23:00:27] DEB MARKOWITZ: Well, yes and no. Like if you ask some of the leaders of the Canadians indigenous population, they'll say, hey, they've been left behind. When Hydro-Quebec was built, they flooded millions and millions of acres of native land, so yes and no. What's interesting in thinking about the justice aspects around climate change is we know that the more vulnerable populations are going to suffer a greater impact. In the United States, we have FEMA who comes in when there's a natural disaster to respond. And so we're going to see an evolution with FEMA about how are they going to manage these multiple storms and disasters and with the democratization of communication and of the ability to create narrative around climate change, because of social media. It's no longer hidden what's happening in poor areas of the country.
[00:24:01:05] Now anybody with their smartphone can show us exactly what's happening in parts of Houston or in places in Puerto Rico that have been damaged because of climate-related storm. And that's going to be important when we think about justice around climate change in this country. FEMA has a lot of work ahead of it. The system is not up to snuff. There's not enough money in the system to respond to every natural disaster. But I think for the first time, because of this democratization of information, we're going to know when their communities that are left behind and we'll be able to do something about it.
[00:24:40:29] CURT NEWTON: I like that. Yeah.
[00:24:42:13] DAVE DAMM-LUHR: So I have a question. The panel that you're going to be moderating is Carbon Pricing Design Integration of National and Subnational Programs. You're a visiting professor at University of Vermont Environmental Policy and Leadership in the Rubenstein's School of Environment and Natural Resources. So what are your thoughts in terms of the key research questions and policy needs in terms of carbon pricing? Where should academia be putting their emphasis?
[00:25:10:28] DEB MARKOWITZ: Well, so we need to continue to do economic analysis. One of the questions that I get often about RGGI is, hey, it wasn't RGGI that was working, it was the fact that everyone was converting to natural gas. So are the reductions in the RGGI states really from RGGI, or was it just a luck of the draw that the economy slowed, natural gas is cheaper? And so there has been economic analyses done independently of RGGI that show that about 50% of the benefit came from this policy, the RGGI auctions, which is terrific, but we need to do more research on that. We need to look at what are the drivers, we need to do more research on where are the best places are for reinvesting those proceeds.
[00:25:58:01] And then there's a lot of technical work that needs to be done to look at what it would take to link programs. Already the Georgetown Climate Center is a big player in this where they're looking at some of the legal complexities. And I think ultimately, the California system is very different. It's an all-fuels approach. And so linking an all-fuels approach to electric only sector, is that even possible? What would it take? And so there's a lot of opportunity for research, looking at the legal frameworks and the policy frameworks for linking.
[00:26:32:11] There's always been some interest in linking overseas. When I would talk at the climate summit, folks were really interested in it whether or not there's a way to link what we're doing here with what the EU is working on, other places in the world. It's not ready for prime time. I mean, think about the complexity of currencies and how we deal with currencies, so there's a lot of room for economists to be thinking forward.
[00:26:56:05] CURT NEWTON: Is there any particular outcome you're hoping for from your panel or the summit in general?
[00:27:01:21] DEB MARKOWITZ: Well, I hope that it stimulates thought and provides an opportunity for folks who are already involved in their own market or involved in organizing in a state around pricing of carbon to really understand how the markets are working and what the potential might be in the future for intersection.
[00:27:23:09] CURT NEWTON: If you imagine five years out in the future, what would you like to see if you had control?
[00:27:27:06] DEB MARKOWITZ: Well, I would like to see us recommitting as a nation to the Paris Accord. And I'm a person who really believes in technological innovation. And what we're seeing right now is a rapid transformation in markets and innovation, technological innovation, that's driving change. And I expect in five years, we're going to be benefiting from that. We're going to see more-- we're going to have more choices when it comes to electric vehicles. There's going to be battery technology that allows us to deploy and depend on renewables in a different way. And I'm really excited about the electric vehicles. I've been driving a Leaf, and that's in part because that was the only one. There was Fords and Nissans, and we didn't have much choice and it's a wonderful car, but I'm looking forward to the next battery that'll get me further. And I think I'm feeling optimistic. It's coming.
[00:28:24:01] CURT NEWTON: Yeah, I imagine it'd be nice to be able to drive a couple hundred miles on a charge--
[00:28:27:20] DEB MARKOWITZ: Yeah, exactly, exactly, which means that it's only 100 miles in the winter, because of the cold. But there's been a lot of work on the technology that are going to help us reach our goals.
[00:28:39:05] CURT NEWTON: Great.
[00:28:40:10] DAVE DAMM-LUHR: So, it's the day after the Summit, what's the best possible outcome that you wish for?
[00:28:46:26] DEB MARKOWITZ: Well, I hope that people leave the Summit feeling energized and ready to go back in and act. Because of what's happening on the federal level, the states, the provinces, they have to be the ones at the forefront of climate action and innovation. And one of the things we've discovered here in Vermont is when we invest in renewables, when we invest in efficiency, we're actually stimulating our economy. And the more we can get those stories out, the better.
[00:29:17:28] There's going to be some great people at this conference, really that the leading thinkers in many of these areas. And so my hope is that people leave feeling connected to the larger community and with some good ideas to take home.
[00:29:33:25] CURT NEWTON: Thank you, Deb. This has been a really interesting conversation. We've covered a lot of important ground and really looking forward to seeing this proceed at the Climate Summit next week and beyond.
[00:29:43:14] DEB MARKOWITZ: Well, I look forward to meeting you in person.
[00:29:46:04] CURT NEWTON: Thank you. Bye.
[00:29:47:11] DEB MARKOWITZ: Take care.
[00:29:48:00] DAVE DAMM-LUHR: Bye. That was a really fabulous conversation that we had with Deb Markowitz and had a lot of really astute observations to make about state level and multi-state action climate.
[00:30:04:10] CURT NEWTON: Yeah, I found her enthusiasm, her optimism for the future, really infectious and we need more of that. So we're looking forward to carrying that good energy into the climate summit.
[00:30:16:25] DAVE DAMM-LUHR: And beyond.
[00:30:17:23] CURT NEWTON: Yeah, so I'm Curt Newton. Thank you for joining us. If you have any comments, please do reach out to us at email@example.com or through our social media channels on Facebook and Twitter.
[00:30:29:29] DAVE DAMM-LUHR: Hope to hear from you real soon. Bye-bye.
[00:30:32:15] CURT NEWTON: Bye-bye.