Volts podcast: Danny Cullenward on California's shaky climate plans

In this episode, policy analyst Danny Cullenward of CarbonPlan
talks about the disconnect between California’s ambitious climate
goals and its actual practical plans for achieving them.


(PDF
transcript)


(Active
transcript)


Text transcript:


David Roberts


California has long been known, nationally and internationally,
as a leader on climate policy. The sheer scale of its economy and
the stringency of its emissions targets have made it a model for
other states with climate ambitions. As a role model, its
successes (and failures) reverberate far beyond its borders.


So it matters a great deal whether California has a practical
plan to meet its aspirations. This year offers something of an
answer, and … it’s not great.


Volts is a reader-supported publication. To receive new posts and
support my work, consider becoming a free or paid subscriber.


Every five years, the California Air Resources Board (CARB)
issues a “scoping plan,” laying out how it intends to meet the
state’s targets.


The last one, in 2017, raised serious questions about whether the
state’s cap-and-trade system could do the emission-reduction work
that the state planned to require of it through 2030. This year’s
draft scoping plan (there’s still time for public comment)
answers none of those questions, and instead, looking out to
2045, raises new questions about whether carbon-dioxide removal
(CDR) can do the work the state plans to require of it.


That’s a lot of questions. To hash through them, and get a sense
of just how prepared California is to meet its climate targets, I
called up Danny Cullenward, a long-time policy analyst in the
state. (Volts fans will remember him from one of the very first
Volts posts.) He is currently policy director at the nonprofit
CarbonPlan and a research fellow at American University’s
Institute for Carbon Removal Law & Policy.


Cullenward and I discussed what policies have worked to reduce
emissions in California, whether the cap-and-trade program can do
what’s asked of it, why the current scoping plan leans so heavily
on CDR, and whether there’s still time to improve the plan before
it’s locked in for five years.


Without any further ado, Danny Cullenward. Welcome to Volts.
Thanks for coming.


Danny Cullenward


Thanks for having me on, Dave.


David Roberts


Danny, you were the first interview I ever did for Volts a couple
of years ago. And as far as I know, now you're the first return
guest.


Danny Cullenward


And the first to pivot to audio. This is fun.


David Roberts


Yeah, the first to pivot to audio. I'm sure this is the kind of
accomplishment you used to dream about as a young man.


Danny Cullenward


If I were still an academic, it would be going on my CV.


David Roberts


Alright, so the purpose of our conversation here today is to get
a handle on California and climate, sort of where it's been,
where it says it's going, and whether it is in fact prepared to
go where it says it's going. Before we get there, though, let's
do just a little sort of scene setting, a little background. I
think everybody hears about laws coming out of California all the
time. California is doing this, doing that, and it becomes a
little bit of a blur. So let's just sort of clarify what are the
targets to which California is committed by statute, and sort of
what are its other targets which are less statutory.


Danny Cullenward


I think that's the formal legal definition. That's great.


David Roberts


Semi statutory.


Danny Cullenward


Well, so there's a reason people talk about California and also
why people, I think, sometimes get confused about exactly what's
going on. And the reason that it matters is California was one of
the first states to move forward on some of the macro climate
policy issues, and many states are either copying or learning
from its experience. So what it does turns out to matter a lot to
sort of what other people start to do. I think the story begins
in earnest in climate policy with the passage of AB 32. Our
famous climate law back in 2006.


David Roberts


Under Arnold.


Danny Cullenward


Under Arnold Schwarzenegger, and a progressive Democratic
legislature came together, found common ground on this bill, did
a couple of things.


It set a target to reduce emissions back down to 1990 emissions,
by the year 2020. And it empowered the climate regulator, the
California Air Resources Board, with the authority to undertake
new regulations, including a cap-and-trade program, as well as to
coordinate with other agencies, like our clean energy regulators
that had already been pushing on renewables in the past. And that
sort of set up the meta-framework and delegated the planning
exercise to this regulator. So that's target number one. Target
number two is about a decade later. In fact, one of the same
principal legislators, then-Senator Fran Pavley, led a bill
called SB 32, which codified a target of 40% below 1990 levels by
the year 2030.


So both of those are statutory targets. They're legally binding.
The regulator is obligated to plan to and meet those targets. And
then in 2018, we had the passage of SB 100, our zero-carbon grid
bill. That was much celebrated. At the signing ceremony for that
bill, Governor Jerry Brown issued an executive order that said,
let's go carbon neutral by the year 2045 on a statewide basis as
well. And it's under the auspices of that executive order, and
some more recent executive order and direction activity from the
current governor, Gavin Newsom, that the state of California is
thinking about its long-term climate goals.


So we have statutory target for 2030, and we have non-binding
aspirational executive orders for the post-2030 period.


David Roberts


So, just to be clear, those executive orders are hotatory. Is
that the word? They're meant to inspire action, but they have no
legal force, there's no penalty.


Danny Cullenward


That's right. You can't create new policies or programs from
those executive orders that aren't separately authorized by
existing law. And it's really easy to say, "That that's dumb. It
means they're nothing." On the other hand, the statutory targets
we have followed from earlier executive orders, so there's a
history in this state, and in many other jurisdictions, you set
the aspirational goal and you codify the parts of it you can, you
sort of push ahead and you iterate in ratchet. So I don't want to
discount the importance of that. But the practical takeaway is
that nothing can be done to implement those targets other than
talking and using existing authorities.


You can't create new law with an executive order.


David Roberts


Right, so the legislature will have to follow up on that. So the
first target you mentioned was by 2020, that was returned to 1990
levels. Did California hit that?


Danny Cullenward


Not only hit it, hit it a few years early. So it's a good story.
And getting down to 1990 levels, maybe two things to say for your
listeners. 1990 is a baseline that was really common to talk
about 15, 20 years ago. We now talk about baselines like 2005,
that's just sort of an artifact of when people locked into all of
this. It doesn't sound like a particularly impressive target, in
some respects, that's true, but at the time it was set, we were
looking at emissions going ever up, and the idea that they would
flatline and come back down a little bit was actually really
ambitious at the time.


And the state met it a couple of years early, which is great.
Could talk about why. We got a little lucky. We also worked
really hard, and we got there a couple of years early.


David Roberts


Let's briefly talk about it. So I'd like to get a sense of sort
of — there's these two families of policies in California that
have been passed in pursuit of these targets. There is the
cap-and-trade system that was set up, as you say, by the Arnold
Bill. And then alongside that, there's this sort of more
sector-specific rules and regulations and investments, sort of, I
guess what you would group under "industrial policy". So you have
this sort of price-based mechanism on one hand, and then these
sort of more old-fashioned regulatory tools on the other hand.


So what has worked to put California ahead of schedule for its
2020 goal?


Danny Cullenward


Maybe the other thing to mention here is for these macro state
targets, like the 2020 target and the 2030 target, AB 32, that
original climate law asked the regulator to come up with what's
called a "Scoping Plan". So every five years, the regulator is
supposed to put together an official strategy. We're in the
middle of a process for updating that strategy. And so you can
look to those strategy documents to answer your question. And the
first such document that was put together, basically, said that
the expectation was that about 80% of the work to get to our 2020
target would be done by regulations and what today we now call
things like industrial policy.


David Roberts


That was in what year the first Scoping Plan came out?


Danny Cullenward


It should have been December of 2008, end of 2008.


David Roberts


Got it.


Danny Cullenward


And the state said 80% regs 20% cap-and-trade. And that's a
combination of policies that I think reflects the historical role
that traditional sector-specific regulations and industrial
policy have played in cutting emissions. Think renewable
portfolio standard, think CARB's leadership on mobile source
emissions, trying to set rules for cleaner cars. Those are the
kinds of efforts that have historically delivered the tons. And
the initial plan was about 80% in that traditional route and put
on top of that an economy-wide carbon price that would do some of
the lifting, but maybe not the lion's share.


David Roberts


And did that prediction, I guess, in 2008, turn out to more or
less accurately reflect what happened through 2020?


Danny Cullenward


That's a place where I think there's a little bit of nuance. So
if you look at the data in terms of how we actually got to our
target early, it turns out that there was a substantial boost
from the financial crisis, right? So, like, the world economy
collapsed, and people stopped driving. We didn't have like a boom
time, and that exogenously pushed emissions lower. When you look
at the sectors where the work has been done, it turns out that we
struggled to keep pace in the transportation sector, struggled to
keep pace in the industrial sector, but our electricity sector
decarbonized much more quickly than even the optimistic plans in
the original Scoping Plan suggested.


And that's a combination of the fact that renewables and
efficiency have performed in some respects better than we thought
and moved faster than we hoped. It's also a reflection of the
fact that at the time the plans were set, California was
importing a lot of coal power. And it's a long story, but they
eventually created a process by which the utilities in the state
stopped importing that coal power. So we shed that liability from
our books, and it's that electricity sector transition, moving
off coal and starting to move on to clean energy, which is just
beginning to really show up in the inventory.


That's where the real progress has come. The rest of the sectors
have struggled and electricity is most of the work.


David Roberts


Got it. And so you hit the 2020 target early. The 2030 target is
40% below 1990 levels by 2030. Is California on track to hit that
target?


Danny Cullenward


I don't think there's a case to be made that we're anything close
to it right now. I think it's entirely feasible and doable, but I
don't think we're on that track right now. And part of the reason
why reflects a pretty big shift in the state's official strategy
for its climate policy. So I told you that the first Scoping Plan
in 2008 said 80% regulations, 20% markets.


David Roberts


Right.


Danny Cullenward


To make a long story short, there was a crisis in the
cap-and-trade program starting in about 2016. The program was
only authorized through the end of 2020. There was a crisis about
the state of supply and demand in the program, the upcoming
expiration of its clear legal authority, and that was ultimately
resolved with a bill that passed in 2017 to extend the
cap-and-trade program to 2030. So now we have the authority for
cap-and-trade aligned to our state goal.


David Roberts


Right. I remember that fight. That was Brown, wasn't it? Who?


Danny Cullenward


That was right. And I think it's fair to say Governor Brown had a
singular role in that bill and that approach. So the bill passes
and extends the authority it requires for state constitutional
reasons. It needed a two-thirds vote, which is extraordinarily
difficult to pull off anywhere.


David Roberts


Even in California.


Danny Cullenward


Even in — anywhere.


And it led to a number of concessions to industry. So it shut
down the ability of our local air pollution regulators to
regulate CO2. It shut down the ability, at least temporarily, of
the state climate regulator to regulate CO2 emissions from the
oil and gas sector, including refining and production, other than
through existing policies and the cap-and-trade program. And it
led to a compromise in the implementation of the cap-and-trade
program that made it a not particularly strict policy. Now, if
you want to make a plan that's 80% regs and 20% cap-and-trade, a
"not particularly strict policy" can maybe deliver that right.


But that's not what the climate regulator decided to do. So they
decided in 2017, in their most recent Scoping Plan.


Like just in the wake of the program being renewed through 2030,
right?


That's right. So the cap-and-trade legislation said, "You got to
finish your Scoping Plan, and here's some of the constraints on
that planning process." And in that plan, the regulator adopted a
set of policies, or a set of strategies, that would put that
emphasis much closer to 50/50 for the year 2030. So it was a
pretty big departure. And if you ask an economist that sounds
like a good thing. If you ask a political scientist, or somebody
in the policy scene, "What's going on?" There's a lot more
questions.


David Roberts


Right. This is a classic real-world running of this sort of
experiment, this long-running sort of dispute. I'm sure listeners
are probably familiar with the basic outlines, but then you sort
of have economists who are like, "Pricing is the most efficient
way, über alles. Absolutely. The cheapest way to do this, and
most effective." And then you have sort of people from the
political realm, you might say a political scientist, who point
to, "Well, in the past, what has worked? And in the past what has
worked are these more blunt weapons, these sort of regulations
and mandates and investments," and things like that.


So it's interesting that California is really running a real-time
experiment. So now in 2017, for its Scoping Plan, it says, we're
going to put these on more or less 50/50 basis.


Danny Cullenward


Let me pause you right there. Yes. And then, here's maybe the
most interesting part of this. So the plan is settled at the end
of 2017, the rulemaking to implement the program doesn't finish
till 2018. So ask me in 2017 what I think about this. I say, "I
might have some concerns about the balance. I don't know if
that's the wisest approach, but you can absolutely design a
program to deliver in that way if that's what you want to do."


David Roberts


Right.


Danny Cullenward


And we can come back to this, to the extent this is interesting,
but the design of the program in 2018 was a pretty universal sort
of shift in a direction of not really addressing the
supply-demand balance in the program very explicitly. And I think
it's fair to say some decisions were made that led to
consequences, and these consequences were warned about. A bunch
of us in the either academic or nonprofit world raised concerns
about there being too many allowances in the program to get to
our goal. My colleague Chris Bush and Justin Gillis even had an
op-ed in the New York Times, like, for you to get an op-ed in the
New York Times about cap-and-trade minutiae.


David Roberts


Yeah. Allowance numbers.


Danny Cullenward


It's a pretty rarefied thing. Make a long story short, the
critics who raised concerns about this said, "Wow, we've modeled
the program. We think it's going to end up with too many
allowances."


David Roberts


And so just wait, just pause there. Just to spell that out a
little bit for listeners, you need an allowance to emit a ton of
carbon. And the idea is, if you get too many allowances in the
system, they just become cheap. You can start buying them up and
hoarding them. Basically, if there are too many allowances
flooding the system, it removes what incentive there is to reduce
emissions. And instead, you can just start buying and hoarding
cheap allowances to protect yourself, and because, to steal a
little bit of your thunder here, but because California allows
banking, which is buying allowances and saving them for later,
this opens the possibility that regulated entities in California
can take advantage of these super cheap, oversupplied allowances.


Buy a bunch, create a big reserve of them, and then when or if
prices ever go up, they're just going to have these giant stores
of cheap allowances. So even if the price goes up, they'll still
be sort of insulated from having to take action. That's the worry
about too many allowances.


Danny Cullenward


Yeah, and I like to analogize it. I don't want to in any way cast
aspersions on making these programs work right. Which, again, I
think is something that is a nice idea, and I work on every day,
despite writing a book about why it's unlikely to work. But think
about it as a cap-and-trade game, as a game of musical chairs.
And so the players that's the pollution, the chairs, that's the
number of allowances in the program. And players can exit the
game if regulations are successful or technology improves. And
the question is, how many chairs should you have in the game?


And if the regulator guesses wrong or gets the number wrong, for
whatever reason, you can end up with too many chairs. And the
basic rule of a cap-and-trade program is a player's got to have a
chair at the end of every period. You got to have the right
number of allowances to match your emissions. And if you don't,
you're out. You got to figure out a way to close that circle. So
it's really hard, turns out, to estimate how many emissions you
think are going to need to be covered in a cap-and-trade program.


You have to guess at the future of the economy. You have to guess
at the performance of each sector. You got to guess at
macroeconomic conditions. You got to guess how fast you think the
grid is going to decarbonize. It's hard to do right.


David Roberts


Let's pause here to make a note that the original economic
attraction of cap-and-trade, and of pricing carbon generally, is
supposed to be that you don't have to guess those things, that
the price will do the work for you, that the price will sort of
reflect our aggregated information about those things if it's
just allowed to run. But it turns out, as you point out in your
book, and as many other people have pointed out, if you've got a
big system that covers the energy sector, you're not going to
take chances. In practice, you're not going to let it do whatever
the market does to it, right?


It's energy. It's too core to the economy to leave it up to that.
So what ends up happening is regulators end up fiddling and
fiddling and messing and shaping and capping, and they end up
designing it to the point that it just becomes a sort of backdoor
command and control mechanism, which was the whole point was to
get away from that. So it's like you end up with the worst of
both worlds somehow.


Danny Cullenward


Yeah, I want to tell you a positive story about how to fix it and
all that at some point, but it is ridiculously complex. And I
think the main insight is that when you ask an economist about
this, they say, "Well, you don't have to worry about this." The
reason is they're thinking as though you had this policy in
isolation, in an idealized setting, and in the real world, you
only ever see these instruments evolve alongside strong
complementary policies. That's the label we use. We call the
things that do most of our work "complementary policies"
reflecting the sort of economist worldview on that.


But good economists have been thinking about this for a while. I
mean, there's many to reference, but Severin Borenstein at UC
Berkeley and his colleagues wrote a really great paper looking at
the California program and saying, "Wow, I mean, there's so many
policies that directly affect emissions subject to the program."
There's only a small piece of the puzzle that is responsive to
these prices, and you end up trading, as we say in the book, you
end up trading the residual, and there's more volatility the more
work these other policies are doing. There's also more political
stability the more you rely on these other policies.


So everything kind of points into a direction where the program
looks bigger than it is and is also really complicated to manage
empirically and effectively. So I'm trying to be sympathetic
here. Like, it's hard to do it right. I'm not saying, "Oh,
everybody screws it up if they just listen to the smart people."
It's actually really hard to do.


David Roberts


Yeah. Because you have all these other complementary policies
that are reducing emissions, but every little bit that they
reduce emissions has an implicit effect on the pricing in the
cap-and-trade system. So you sort of have these two symbiotic
things, one of which you're directly controlling and one of which
you're sort of obliquely controlling. Yeah. And you end up having
to — it just seems like, and you're right, we're perhaps being
too negative too early here, but it just seems like ...


Danny Cullenward


Save it, Dave.


David Roberts


... A giant Rube Goldberg mechanism created just so you can say
you did something market-like. The final product bears virtually
no resemblance to any market or market mechanisms. But it's just
like the symbolic value of saying, "We did a market thing," has
prompted all this work and complexity just to make this thing
appear to be playing a big role.


Danny Cullenward


Okay, I got to push back on you. That is both too cynical and not
cynical enough. Here's the optimistic case for this. You actually
want markets to work, if you want to deliver some cost-effective
reductions. There's value in having markets discover
cost-effective reductions. And in the real world, if you manage
this carefully, given all of these constraints and all these
concerns, there's actually value in that secondary supporting
role. So you sort of articulated case, "Oh, this is all smoke and
mirrors." It actually could be important to do this right,
admittedly at a lesser scale than the textbook econ solution
suggests more.


David Roberts


Explicitly as a "sopping up the remainder" policy rather than a
sort of "main workhorse" policy.


Danny Cullenward


Yeah. And if politics improve over time, if industry wants to
come to the table to talk about cost-effective ways to get things
done, it becomes a venue where you could have that conversation
and have that conversation potentially be real. The more cynical
take, and this is something I expect we'll come back to, is that
the presence of a market-based program that can be described as
an idealized outcome also becomes a shield against reform.


David Roberts


Yes.


Danny Cullenward


And people will point to it, and they say, "You already have this
economically efficient program that's designed to do all the
work, so you don't need that next industrial policy. You don't
need that higher ambition. Why would you remove allowances from
the market and raise consumer prices when it's already designed
perfectly?" It becomes a very dangerous thing when the idealized
case is made, and that's typically made by industry and by
regulators when they're sympathetic to either the concerns of
industry or the challenges of reform that I think are practical
and real.


David Roberts


Right. So if you have in place this system that you are claiming
is an economically efficient way of mopping up emissions, and
then you propose some further sector-specific industrial policy,
it's very easy for industry to come along and say, "No, you don't
need that. We already have — look, you already said you have this
perfectly economically efficient plan in place. Why would you
need to do anything else if you truly have this plan in place?"


Danny Cullenward


And just for a second, if they're right, if that program was
designed perfectly and you're not worried about long-term
dynamics, you just assume a relatively simple econ framework
here, they might have a point. And the problem is the programs
are rarely designed that sufficiently, and you also have all
sorts of other market failures that sector-specific policies
might want to address. But they do make a point which, again, is
really compelling to lots of people and is worth paying attention
to. If you did this right, it would take away some of the
rationale for some of the sector-specific work.


And I think it's a mistake to say, "Oh, that's not a legitimate
argument." From a certain point of view, it can make sense. The
tell is that we've rarely designed programs that are strict
enough to deliver on that outcome.


David Roberts


Yes, this is the key. I think you can imagineer a program that
does all these things they say it does, but it doesn't seem like
a coincidence that no one's been able to implement a program like
that in the real world. In the real world, these programs are
always compromised and oversupplied with allowances with all
these blind spots. This is the whole sort of political economy
point, right?


Danny Cullenward


Yeah. And just again, not to put too fine a point on it, but
that's okay if you work with it and you understand it and you put
it in the right size box and you say, this is the classic
example, is, "would you rather California have a $30 price on
carbon or a zero dollar price on carbon?" And I will take the 30,
please. But I don't want to pretend that 30 gets me to net zero,
and I want to hold both of those ideas in my head at the same
time.


David Roberts


Right, okay. So this brings us to the present. California is, in
2017, sort of shifted its emphasis to a sort of half-and-half
industrial policy and cap-and-trade program road to the 2030
target. It is not currently on track to that target because of
some of the large and still unaddressed problems in the
cap-and-trade side of things. That's where we stand now. So then
into this situation enters the current Scoping Plan, which was
just released. I guess they do it every five years. They did
2017. So the 2022 Scoping Plan was just released.


Danny Cullenward


Just to clarify, it's the draft that's been released, so this is
the only opportunity for public comment. It's not locked in, but
we'll talk about what's going on.


David Roberts


Right. That's important later. The draft Scoping Plan for 2022
has been released. Now, you might think, given what we've
discussed so far, that the 2022 Scoping Plan would be singularly
obsessed with whether the cap-and-trade program can in fact, do
50% of the work, can in fact, do what they want it to do. Given
that a. there's a lot of long-standing, very loud, persistent
critiques of that program. And two, that it doesn't seem to be
working currently because they're not on track, you would think
that the Scoping Plan would be preoccupied with "how can we
tighten up cabin trade, so that it really, does this work we say
it's going to do?"


That turns out not to be what the Scoping Plan does at all. In
fact, the Scoping Plan, as you pointed out in a piece you just
wrote last week, devotes all of six pages to the 2030 goal, which
is currently not on track to be met. And as far as I can tell,
does nothing to revise the basic shape of the cap-and-trade
program and doesn't really, as far as I can tell, address any of
the long-standing critiques of the cap-and-trade program.


In other words, this Scoping Plan tells us very little about how
California is going to go from "not on track" to meeting 2030 to
"on track". Is that fair?


Danny Cullenward


Yes, that's fair. So this is over 200-page planning document.
There are six pages that address cap-and-trade and the 2030
target.


David Roberts


That's wild. That's wild. It's only eight years away, Danny.


Danny Cullenward


Yeah, I know. They don't even discuss, you reference the concerns
and criticisms. Let me just give you just a couple of statistics.
So if you look at the official greenhouse gas inventory by which
we measure progress towards our various targets, the most recent
pace of reductions is about 4.5 million tons per year we're
reducing. And that's good, it's something to celebrate, but we
need to increase that by almost a fourfold rate to get on track
for 2030, to get to our existing statutory target.


David Roberts


So what, like 16? What's the target number?


Danny Cullenward


The target number, we're in the low 400s, 400 million tons CO2
equivalent per year. And we need to get down to about 259 million
per year by 2030. We need to be falling at a rate, like, if you
take our 2021 provisional estimate, we need to be falling at
about 16.7 million tons per year, and we're falling sort of four
to 5 million tons per year. So there's a gap there. That is
absolutely in the technical world, that's an achievable. We can
do that. We know how to do that if we really want to do that.


But there's a gap. Second thing I want to introduce is we
actually have a lot of evidence. We talked about back when the
cap-and-trade regulations were finalized in 2018, there was a big
debate, and there was some criticism. So the people who wrote
their numbers down in public documents who said, "Here's how many
extra allowances we expect to see at the end of the third
compliance period." We just got data six months ago on that. And
based on those allowances, those extra allowances, we have
concerns that the program maybe can't get us to 2030 on track
with our goals.


So the people who did that, it turns out they got pretty much
exactly right, and we saw the surplus allowances at those levels.
So I'm the vice chair of the Advisory and Oversight Committee for
this program, and speaking just in my personal capacity today
with you, we in our annual report for the advisory report, looked
at the number of extra allowances, and there are about 321
million that came into the post-2020 market. In the 2017 Scoping
Plan, which did this first analysis of how to get to 2030 and how
big the cap-and-trade needed to be to get there, they estimated
around 236 million tons of reductions would need to come from
cap-and-trade.


So we've banked more allowances, that is to say, private parties
bought and are holding on to more allowances than the entire
cumulative reductions expected from this program in the last
plan. So when I tell you that only six pages sort of hint at this
stuff, and they don't even reference the advisory reports, the
data, the documents, the public peer-reviewed papers, that should
really strike you.


David Roberts


So just to put a fine point on that, regulated entities could get
all the way through 2030 using nothing but already banked
allowances, not making any further reductions at all. Is that
fair?


Danny Cullenward


That's a possible outcome. I don't want to say that's the most
likely outcome. It depends on sort of your view about both the
number of players in the game. We know the number of chairs and
the regulations if we're thinking about this as the musical
chairs game, and that is possible. And so my colleague Dallas
Burtraw, who's the chair of the advisory committee, was quoted
several times in the press saying, "That's a possibility." It's
wickedly complicated to try and model it all, but basically,
we're talking about a surplus of 321 million when you're looking
at creating kind of a deficit of 236 million.


So it's the wrong direction for sure.


David Roberts


And even if they only do half the emission reductions needed,
that's still super bad. I mean, ideally, you'd have few to none
excess allowances floating around in your system, right?


Danny Cullenward


If you wanted emissions to fall roughly in line with program
caps, you wouldn't expect to see very large banks emerge or at
least you'd want to have some long-term continuity in the
program. I want to flag the cap-and-trade program is only
authorized through the end of 2030.


David Roberts


Right.


Danny Cullenward


We'll get to this like what's going on in Washington. Washington
has authority to do both climate and cap-and-trade way out
farther into the distance. And so there's some really interesting
issues that come up. You might look at our market and say, "If
we're just trying to solve for 2030, we have way too many
allowances."


David Roberts


Right.


Danny Cullenward


You could also look at our market and say, "Well, if we were
trying to solve for also 2045 or 2050, maybe it's appropriate to
be in the kinds of conditions we're in." The problem with that
statement is that we don't have the legal authority to do that,
and we can talk about this, but it proved impossible to get a
simple majority vote on just a climate target last year, and you
need a two-thirds vote to make the cap-and-trade program also
follow.


David Roberts


Yes. And given the sort of harrowing concessions Brown had to
make to get that first two-thirds vote, one can only imagine what
would be required to get it past 2030.


Danny Cullenward


Yeah, and it's tough because again, if you're a proponent of
these systems — and again, I want to support, like using them
well and right, that's a good thing. But you're probably also
pretty challenged by what's increasingly sounding like double
speak about this from the regulators. Because think of it this
way, if this conversation gets deferred a couple of years, and
we're having a conversation about what a two-thirds vote looks
like in 2024 or 2025, that's going to be an even harder
conversation. If there's a big bank of allowances and relatively
low prices, and you say, "Well, what if we extended the program
and massively increased prices?"


It's not like that challenge gets easier by putting it off.


David Roberts


Yeah, I mean, this is sort of another aspect of the political
economy of these programs, is they need to be able to get more
expensive. That needs to at least be an open option. They're not
working correctly unless they occasionally get more expensive.
But no politician wants to go out and propose a reform explicitly
to raise prices on people.


Danny Cullenward


And that is also why when people declare victory on the backs of
the idealized perception of these programs, it becomes even
harder to advance climate progress. Because now you're not only
stuck trying to convince a reformer to make that argument, but
you have often the government, and usually major industries
saying, "Actually, it's fine the way it is."


David Roberts


Right.


Danny Cullenward


So the number of people who are sort of against the climate
reform trajectory increases, including political stakeholders who
are just trying to think about staying in office or managing
competitiveness, it's tough.


David Roberts


And so tell us also ... you found a discrepancy about how the
sort of baseline emissions scenario is calculated, that also
looks like it's padding the results slightly. Can you explain
that real quick?


Danny Cullenward


Yeah, so if you want to model the role of the cap-and-trade
program, and I told you that it was expected to require almost
half of the work from cap-and-trade in the previous 2017 Scoping
Plan, you need to model what you think business as usual
emissions are going to be, given all of the other
non-cap-and-trade policies. So what's the clean electricity
policy, the vehicles policy? When you add that all up before you
think about the effect of cap-and-trade, what does that all look
like?


David Roberts


Right. So in other words, what is the remainder that
cap-and-trade has to wipe up?


Danny Cullenward


If you just pretended we didn't have cap-and-trade, and you had a
good model that could give you a crystal ball outlook for the
emissions trajectory without cap-and-trade, these Scoping Plans,
they say, "cap-and-trade will close the gap." You basically want
to model what you've got without cap-and-trade, and whatever else
you need to do, that's the role that's implicitly assigned to
cap-and-trade. So if you model that, we can have a conversation
about how big this needs to be. And so in the six pages, there's
some discussion about, well, we've got a new scenario, a new
version of that line for emissions, and it's lower, so we're not
going to need as much from cap-and-trade.


David Roberts


So that's saying we're going to get more out of these
conventional industrial policy policies than we thought.


Danny Cullenward


Yes. And to be clear, it's not like there's a bunch of new
policies. There's a couple of things that have come online in the
last few years, but it's not like they're proposing a bunch of
new policies. They're sort of saying, "Since the last time we
checked in, we have a few more policies, and the outlook looks
pretty good." So that sounds like good news. And if it's true, it
is. Vis-à-vis reducing the reliance on cap-and-trade. I want to
flag, that does not fix the problem of having a lot of allowances
when you want the program to cut emissions.


David Roberts


But the less work you're asking it to do ...


Danny Cullenward


The more manageable the problem becomes.


David Roberts


Right.


Danny Cullenward


So that sounds great. And so I decided, I download the
spreadsheets because that's the kind of person I am. And I
started looking at the spreadsheets, and I was like, "Something's
not right here." And I pulled the inventory data, again, from the
climate regulator. They say, "What's the pollution look like in
our state from the climate side?" And the scenario that is being
offered as evidence for we're doing better, our emissions are
going to be lower, and so we're going to rely less on
cap-and-trade. Don't worry.


That scenario is like 12, 15 all the way up to potentially 27
million tons per year lower than the actual inventory data where
we have it. So the story is completely inconsistent with the
regulator's own data, and it's worse. I dug into the
sector-specific totals because you could imagine that the outlook
for transportation is different post-pandemic. I work from home
now, I didn't use it. No, the difference is in the building
sector, which does not change, and the industrial sector.


David Roberts


Which is the one that's hardest to get at and slowest to change
and has least policy aimed at it.


Danny Cullenward


So all the modeling in this plan is done with a proprietary
analysis through consultants. There's not a lot of documentation,
and on this scenario in particular, there's really nothing to
clue us into what happened. So all I can do is sort of hold up a
mirror and say that "the numbers are off." And the delta between
the story and the inventory numbers is bigger than the purported
improvement in 2030 that should make us comfortable that we don't
have to worry about the cap-and-trade program anymore.


David Roberts


Right. The upshot of which is just that California is proposing
to rely on cap-and-trade even more than it says it is, by a big
chunk.


Danny Cullenward


I would summarize it slightly differently. We don't really know
what's going on. Nothing has really changed in terms of the
policy portfolio, and no one's proposing to make any changes now.
The regulator, to their credit, they've said, "Hey, we're willing
to have a conversation about the cap-and-trade program, we just
like to have it next year." And so there's nothing here, and
nobody's affirmatively changing. And it's not like the role is
bigger, or something like that. It might be smaller, but we're
still not having a conversation about "how do we more than triple
our emission reductions, given a plan that relied about half on
this program, and evidence that this program is not designed to
perform in that way right now."


And again, for proponents, if you're somebody who wants to see
this program play a bigger role and do a bigger job, you also
know you got to think about a two-thirds vote in the legislature
to extend it past 2030, which would fundamentally change the way
you would answer those questions, right? If you're planning for
2030 versus for 2045 or 2050.


David Roberts


In retrospect, just making it ten years at a time was not great,
was not smart, which Washington learned from. Before we move on
to the other parts of the Scoping Plane, let's briefly talk about
Washington, because Volts listeners will know that Washington has
recently passed a whole raft of great clean energy and climate
policies, a bunch of sector-specific stuff. But alongside that,
Washington is proposing to create a cap-and-trade system more or
less mirroring California's and to connect it to California's, to
become part of California's market, which some folks might
remember way back in the day when California was first setting up
its market. This was always kind of the thought that it was going
to be a big West Coast thing, that there were going to be all
these players attached to California's market, but they sort of
like dropped off one at a time, leaving California and Quebec
now?


Danny Cullenward


That's right. Ontario later joined for a brief period


David Roberts


Very random, but then Ontario bailed too.


Danny Cullenward


But they're not there anymore. Yeah.


Right. So now it's California and Quebec, but Washington is
proposing to join. So from my hometown point of view, the
dysfunctions of California's cap-and-trade system very much
matter for Washington. So spell that out a little bit. Like, what
is the danger that Washington faces here?


There's a couple of things. So one thing to say is, again, there
are a few sources of climate policy and climate institutional
leadership at the subnational level in the United States. And
California is one of the really big players in that space. And so
even when people set out to do their own things, they often
borrow or learn from and adapt various things we've done. So it's
always important to think about what we're up to, not because
we're the center of the universe, but because a lot of what's
happening is either following or learning from things we're
doing.


David Roberts


One of the reasons that smaller jurisdictions that come along and
want to do something good on climate will copy California's work
is that California, sort of legendarily, has a robust
administrative capacity. One of our favorite subjects here at
Volts, and specifically CARB is sort of unique. So maybe just say
a quick word about why California ... ? What is it about
California's system that enables it to put together these things
out of scratch, such that other people sort of come along behind
and want to copy it?


Danny Cullenward


I think that's exactly it. So we have large and reasonably
well-sophisticated regulatory bodies in a number of spheres. And
in fact, one of our problems is we have so many that coordination
can be an important challenge. We'll come back to this actually
because part of the flavor here is California — there was a
debate when AB 32 was being set up in 2006. "Should we give one
agency the quarterbacking role, the lead in all of this, or
should we distribute it across agencies?" California went with
the sort of quarterbacking model, where the Air Resources Board
is primarily in charge of this, although, as we mentioned, a lot
of the progress has been made in electricity. And you should be
looking at our utilities regulator for that.


David Roberts


Yes, but it is worth saying that CARB is huge and powerful
relative to virtually anything you find in almost any other
state.


Danny Cullenward


Almost anywhere else. Right, exactly. And so there's scientists,
there's engineers, there's lawyers, there's a big administrative
capacity.


David Roberts


Which, like, Washington does not have, just doesn't have the size
and money to replicate that.


Danny Cullenward


And that's exactly right. And so what's so interesting right now
about subnational American politics is I think we're seeing much
higher climate ambitions become popular at different times, and
so you're seeing sort of higher watermarks for the level of
policy goals and integrity. But many of the states, like
Washington, where I would describe frankly, your current goals as
better than California's, but you all don't have a regulator that
has the same capacity. And so it's not just that people are
looking for inspiration. Let me contrast this really quickly.
California says, "Let's have a zero carbon electricity grid, a
renewable portfolio standard with a technology-neutral back end.
Let's amp that stuff up on steroids."


Many states have utility regulators that are capable and
sophisticated enough to emulate those policies if they want so
that policy can diffuse without worrying too much about
institutional capacity.


David Roberts


Right.


Danny Cullenward


Not so with a cap-and-trade program, which is phenomenally
complex. And I mean no disrespect to the regulators in Washington
state, but there's just far fewer per capita in total. So the
significance of this is that you literally need essentially
hegemonic, regulatory actors to govern these systems. And this is
the opposite — you and I've talked a little bit about the East
Coast states and their cap-and-trade program called RGGi, where
they're fairly egalitarian, and everybody sort of cooperates on
an equal basis. This is really a centralized infrastructure that
California is the biggest market by far.


The size of your emissions footprint is less than a 6th of our
market. So you are a smaller player in economic terms. And that
means both the capacity difference between the two states and the
relative economic importance of our decisions and situation have
enormous influence over whatever you all decide you want to do.


David Roberts


Right. Washington doesn't have the administrative capacity to
cook up a system like this from scratch. But does it have the
administrative capacity even to manage a mirror of California's?


Danny Cullenward


I don't want to comment directly on that because I don't think
there's any reason to doubt it. And I also personally couldn't
run one of these by myself, so I don't want to sort of stick
myself in their shoes. Look, copying the DNA of the structure of
the market should be feasible. The system is called the Western
Climate Initiative, and there's actually a private corporation
called WCI Inc that runs a lot of the things, like the auction
platform, the various mechanics and pieces of this. Those are
services that can be contracted for reasonable costs.


So I think there's a case to be made that a lot of this can be
done. The question is, do people want to design around a common
program? Do they want to design around similar programs that are
managed separately? And there's a lot of politics that go into
that. I don't think that administrative capacity is necessarily
the biggest problem. I would not say it would be fair to say out
of whole cloth, with no example to learn from, could the
relatively small Washington Department of Ecology stand up a
program completely on their own? In a vacuum, that would be a
much bigger lift. But the question of what might they design,
given the example, experience, text and operating experience of
all of the different players, including California, that have
worked with these systems, I think is very different.


David Roberts


Right. So then let's get back to the substance, which is if
California's program is flooded, is oversupplied with allowances
such that it has this incredible slack in it, what is the danger
for Washington if it hooks up with that program?


Danny Cullenward


So the danger is that there are potentially too many allowances
here, such that — if Washington were to design a strict
standalone cap-and-trade program, it would be a more robust
program. It would almost certainly have higher prices. And so if
you're a regulated industry in Washington, you're probably pretty
pro-market link because that means you can hook into our market
and try and buy some of those surplus allowances which will tend
to raise our prices, but will tend to depress the prices up in
Washington, so it'd have the political benefit of reducing
prices. It would have the environmental consequence of
potentially our excess allowances, rendering your program unable
to meet your own goals, depending on how carefully those issues
are balanced.


And that's why this link issue, which I want to be very careful
not to prejudge, it's so complicated because the design questions
all interact with the decision around, "do you link to
California, and does California either reform or extend its
program or not?"


David Roberts


Right. And is the size of Washington's market enough to
materially impact that level of oversupply, or are we kind of a
drop in the bucket there?


Danny Cullenward


It's a great question. I've seen some initial efforts to start to
model the program, but I haven't seen anybody directly grapple
with that question. So given several hundred million surplus
allowances and statewide emissions on the neighborhood of 60
million tons per year up there, what kinds of deltas and credit
flows would lead to consistent outcomes or inconsistent outcomes?
I get the sense people are studying that privately, but I haven't
seen a lot of good public-facing analysis on that.


David Roberts


Right. So the danger here is just Washington replicates
California's system, and then thereby inadvertently replicates
California's inability to hit its target because of the weak
cap-and-trade system.


Danny Cullenward


Yes. So that's the climate nightmare. And then the super cynical,
scary version of this is, "Isn't this better than nothing?" And I
think the answer to that question is still, "Yes." So where in
that spectrum of better than nothing and actually on track with
what we're all trying to do, can we land this thing?


David Roberts


That's where the whole climate space lives, isn't it? That delta
between what we ought to do and what we can do.


Danny Cullenward


Yeah.


David Roberts


What's better than nothing versus what's needed?


Danny Cullenward


And I think what's so complicated about this is, like, we've
probably lost two-thirds of your listeners just talking about
cap-and-trade. And here you actually have to get this far. We're
almost to the point you're going to have a conversation about
what your opinion should be about this.


David Roberts


Right.


Danny Cullenward


And that's really different than, like, I would like 100% clean
electricity or zero-emission vehicles. Where putting aside the
fact we've had a lot of problems trying to actually do that well
and robustly and in a big tent fashion, it's a lot easier to tell
a regular person who's motivated to fix climate what direction
they should be pushing in here.


David Roberts


Right. Or just more EVs?


Danny Cullenward


Like EV good, clean energy, good.


David Roberts


Yeah, exactly. These sectoral policies are very sellable or
explicable in a way that cap-and-trade is not.


Danny Cullenward


Yeah, and again, I think if we were orienting this conversation
around, trying to have a more honest conversation about what are
the options and the consequences, it might be easier to do some
of that. And part of what we're dealing with right now is just
the complete inability to just speak plainly about what's going
on, which only makes it harder to have the sort of pro-climate
conversation.


David Roberts


Right. So now that we've lost two-thirds of listeners, let's
leave behind cap-and-trade momentarily and talk about the rest of
this Scoping Plan. Returning to the Scoping Plan, so there's 200
pages of it. Six of those pages deal with the looming 2030
deadline, for which the state is not on track. So then there's
all the rest of it. So a lot of the rest of the Scoping Plan
turns to this aspirational 2045 target of carbon neutrality. And
it proposes to get to carbon neutrality not exclusively, but a
big chunk of getting to carbon neutrality in 2045 it proposes to
do via carbon dioxide removal, CDR.


So tell us a little bit about the scale of CDR that is being sort
of proposed here in this Scoping Plan.


Danny Cullenward


So carbon dioxide removal is a very scary monster that is coming
to take your children away, and you should — I'm joking because
it's this ... I've been working on carbon dioxide removal pretty
hard for the last couple of years and people say, "why are you
wasting your time on that? We need to cut emissions and deploy
solar and wind and efficiency and storage and EVs and build the
national grid." Those things are all true. But one of the reasons
I focus on it is because it's like this perfect prism for
refracting all of climate politics into its factional squabbles.


And I want to again say two things that are almost the polar
opposite of one another and both true. There's almost nothing
that exists today that's real, that's permanent, that's
delivering carbon storage that is even remotely comparable to the
atmospheric and oceanic consequences of burning fossil fuels.


David Roberts


Yes.


Danny Cullenward


And we're also going to need way more than, I think, easily a
gigaton per year globally by mid-century. We can spend too much
time fighting about those numbers. But it needs to get very big
very quickly from approximately zero, which applies a very big
scaling. And so you can look at any long-term net zero plan and
say, "There's none of this, it can't possibly be real to rely on
any of these carbon removal technologies," which I think is a
huge overreach. And you can also look at these kinds of plans and
say, "Wow, you're relying so heavily on an idea."


David Roberts


Yeah, theoretical future technology.


Why are you not making equally heroic assumptions about cutting
emissions and doing other things right?


Or about the falling prices of solar or the falling prices of
batteries? Like, if you want to get your heroic assumptions in
there, why not make heroic assumptions about the stuff that's
actually reducing emissions?


Danny Cullenward


So if I told you that somebody and a big important player had put
out a plan that relies, pretty substantially, for almost a
quarter of its net zero goal, on a sort of speculative set of
technologies with no detail on what they are, how to deploy them,
and was taking no near=term action and deferring this
conversation on the basis of some incomplete modeling, you'd say,
"that sounds like an oil company." And it also sounds like, I
want to be really clear, I want this to be better, but it's also
a perfectly fair description of the draft Scoping Plan. So we
have here, these are numbers that I think are meaningless to
people who aren't in net zero land, but we've got some pretty
massive reliance on carbon removal, maybe up to 100 million tons
per year assumed by 2045.


That equates to something on the order of a 75%/25% split. We're
about 75% reductions in emissions and about 25% carbon removal to
get us to net zero. Just to compare this, when people talk about
net zero, the state of New York has codified a 2050 climate goal
that says at least 85% reduction, so higher than our 75%.


David Roberts


Is it also proposing to mop-up the remainder with CDR? Like, is
there a little bit of CDR mop up in all these state ambitions?


Danny Cullenward


Yeah. And this is part of I mean, again, if you think about this
from a physical climate science perspective, we don't know how to
get everything to zero.


David Roberts


Yeah, right.


Danny Cullenward


And even just N2O emissions from the agricultural sector, that
alone is reason enough to think about carbon removal. So yes,
there's always going to be some, and we need to rip that band-aid
off and stop being scared of it. We also need to be able to say
that and say when is way too much.


David Roberts


Right? You want a goldilocks amount of CDR in your long-term
plan? Not none, but not too much. So New York has very little,
it's going 85% reductions at least in 15% remainder by 2050.


Danny Cullenward


The California legislation that tried to codify our 2045 net-zero
goal would have said at least 90%, 9-0. And your state,
Washington, has a codification of at least 95%. So compare that
to the approximately 75%, 76% that's in the preferred scenario.
And that should give you some sense. Like this is not aiming for
the moon. In fact, this is airing pretty heavily on not cleaning
up the mess first.


David Roberts


Right. So ironically, Washington and New York have more ambitious
emission reduction goals, long term-emission reduction goals than
California. California's is commensurately lower emission
reductions and commensurately much higher reliance on CDR.


Danny Cullenward


At least in this draft plan. Yes.


David Roberts


I guess I just want to know why. Because if Washington's setting
this goal and New York setting this goal and all these states are
coming along setting these goals, I mean, they feel confident
that the technology will be there for those things, or at least
see a pathway to those technologies. Why is California ending up
the most cautious in its long-term plan? Just like, what explains
that?


Danny Cullenward


So I don't want to over-index on the outcome because I think,
first of all, it's hard. And I think anybody who's closer to
putting pen to paper, and where the rubber meets the road, is
going to run into challenges that these bills, which are just
sort of codifying targets, haven't had to fully address. So I
want to, on the one hand, defend the challenge here, and on the
other hand, the reason that the number comes out so much
different in California is that the California regulator
literally did not include a scenario that resembles any of those
others. So they didn't even look at, like, "Well, what if we
tried to get to where Washington wants to go or New York wants to
go?" And they could say, "Oh, we looked at it, and here's why
it's not so good."


And we could have a conversation there. But just sort of like
reforming the cap-and-trade program, they didn't talk about about
it.


David Roberts


So there's no sort of numerical or analytical explanation for why
they didn't do this. There's no modeling of an alternative
scenario where there are higher emission reductions.


Danny Cullenward


There are four scenarios that are studied, alternatives one
through four. The first two alternatives look at a 2035 net zero
target, which is we can get into this if you want, but is so
aggressive. It's, I think, not a realistic conversation. And I
worry.


David Roberts


That's a little weird. That they like why they do that.


Danny Cullenward


Well, I worry that this is kind of the cynical versions of your
Goldilocks story because they picked a scenario that's right in
the middle, by choosing a couple of scenarios that realistically
nobody was going to implement.


David Roberts


You choose your ends and you can determine what your middle looks
like, right.


Danny Cullenward


And Alternative 4, the one, they didn't pick, they picked
Alternative 3 in the draft. Alternative 4 has even more carbon
dioxide removal and even fewer emission reductions at the end. So
they didn't study a 2045 target that resembles the New York, the
Washington, or even the proposed legislative California version.
So they just literally didn't look. And that's an area where,
again, I should mention that the posture of this document this is
drafted by staff after a series of public engagement
opportunities. It will go before the board of the Air Resources
Board, which is the politically appointed decision makers who
oversee the staff.


And it's one of the things the board could say is "Hey, why don't
you include a new alternative or modify one of your alternatives,
so that it looks like one of the other climate leaders that's out
there?"


David Roberts


So California has released a Scoping Plan that says very little
about the 2030 target, despite the fact that there are extremely
well-documented concerns, about whether that 2030 target is in
reach or whether current policy can get there. Says virtually
nothing about that. Then says about the 2045 target kind of this
other magic asterisk, like, we'll get 75% of the way there, and
then CDR will do the rest. When we talked earlier, you sort of
made this point that, in a sense, CDR is playing the same role
for the 2045 target that the cap-and-trade program is playing for
the 2030 target, i.e. it's just sort of like hand waving away the
remainder without a very close look at how it's supposed to
happen.


So it seems like this is not a solid basis upon which California
can launch its extremely ambitious coming years, crucial coming
years. It seems like this needs revising. It seems like what
you'd want is a beefed-up consideration of 2030, and at least an
effort to model greater emission reductions, through 2045, rather
than so much CDR. So let's just talk a little bit then about the
sort of mechanics here. This is a draft Scoping Plan. There's
going to be a public review comment process, and then what
happens?


In other words, if Californians of goodwill want this to be
revised and improved, what should they do, and what is the hope,
and who has the power to cause it to be revised? How would it all
work?


Danny Cullenward


I think I'm supposed to say vote in November. Isn't that the
standard answer to all?


David Roberts


Get out and vote!


Danny Cullenward


Get out and vote.


David Roberts


Oh my God.


Danny Cullenward


Well, I mean, if you're concerned about these issues, there is a
public comment period open. You can quickly Google the California
Air Resources Board 2022 Scoping Plan. You should find
information about that pretty quickly. But the process here is
that for the next several weeks into sometime in mid, late June,
the comment period will be open. And then at that point the board
will hear the program, they'll hear from the staff about what's
in the proposal, they'll start to review feedback, and a number
of things could happen. So the staff have indicated that they
want to see a vote on this program by the end of the year, to
clear this up and move on to the next priorities.


In theory, the board could say, "Hey, we've heard some concerns
here. We think some of these concerns are well founded. We'd like
you to go back," and, for example, include a scenario that talks
about deeper emission reductions by 2045, or include more than
six pages on 2030. Or align your planning, say, of the
electricity sector to some really great work that's ongoing joint
between CARB and the Public Utilities Commissioner and the Energy
Commission, where they're trying to grapple, I think, in much
more technical detail, with how to actually develop a clean grid
that builds out the energy needs we need as we electrify
everything.


So maybe instead of assuming we should expand our gas capacity,
which is what the draft plan proposes, maybe we should think
about the more careful modeling to figure out what likely gas
prices are going to be in a world that has a war with Ukraine.
And does it make sense to build that out right now or not? So the
board could provide direction to the staff to revisit.


David Roberts


So the board has the power to say to CARB staff, "Go take another
whack at this with these specific things in mind." It has the
authority to do that.


Danny Cullenward


Yes, they have the authority to do that, that's for sure. And the
plan doesn't become final until the board votes on it. And so I
think the board's reaction to what happens in the next several
weeks, month or two, is going to be really important as to
whether this thing gets kind of rubber stamped or there's a
chance to align it.


David Roberts


And if you were God King of the CARB board, are those the two
specific things you would tell them? a. tell me something about
2030. Please reassure me about 2030. And then second, model more
emission reductions through 2040. Are those the two big things,
or are there other things you would instruct them to do?


Danny Cullenward


I think those are two of the really important things. The third,
I might add, is the one I mentioned about let's really plug into
the detailed modeling work that's trying to ask what that zero
carbon grid should look like, because that may be more robust
than what we're doing. That may be a way to help us get to the
lower emission scenario. But I think those are two or three
concrete actions that, they don't require you to invent a new
plan out of whole cloth, but I think they'd be really
constructive. I'll be honest, the 2030 question is so hard
because we spent five years not talking about it.


And that was frankly, one of the lowest moments for me as a
professional is realizing when that deal was done, we were going
to lose five years because the technical people could see the
consequences, and it would take a long time before they manifest,
and now the problem has gotten harder, not easier. So I don't
know how to solve that.


David Roberts


And if you complain back then, you're supposed to let it play
out. And like you said earlier, industry can just come in and
say, "No we settled this." Right? Like if you're going in and
pushing for reforms during those five years, industry just comes
in and says, "no we settled this. We got the cap-and-trade thing
in place, we don't need any more of this stuff." So it not only
sort of you not only go quiet about cap-and-trade, you end up
suppressing discussion of other stuff too.


Danny Cullenward


And this is why it's really important for other people to pay
attention because — I'm glad we still have a cap-and-trade
program. I'm going to try and upset everybody here, like, it's
good we have one, it's better than nothing. We can make it
stronger. It can play an important role. I don't think it can
ever play the idealized role that some academics think it should
and industry proponents cynically use to manipulate to their
political advantage. But I also think the sort of emerging
Leftist critique that all markets are bad and everything is evil
is not particularly helpful on this either.


Although I also want to recognize, like when I talk to my friends
in the environmental justice community, they are the ones who
bear the brunt of people saying, "cap-and-trade solve this
problem."


David Roberts


Right.


Danny Cullenward


And that's real.


David Roberts


Because those refineries that the local air pollution authorities
are now no longer allowed to regulate because of cap-and-trade
are located in those communities.


Danny Cullenward


Yeah, when it comes to CO2, they can no longer regulate them.
That's right. So we've shifted so much attention away from air
quality to climate, which is good for climate and if we could use
climate policy to solve both problems it'd be a win for
everybody. But the practical reality on the ground is when we say
cap-and-trade will do more than it's capable of doing
politically, we sacrifice both the climate impacts and the
political priorities of disempowered communities, who basically
don't get the airtime and nobody's talking about the local
pollution permitting.


David Roberts


California has a large and robust environmental justice movement.
Are they losing their minds in response to the Scoping Plan?
Because it really seems like their nightmare for CDR to be given
this giant role and for cap-and-trade to be utterly unreformed.
It just seems like, are they on the war-path about this?


Danny Cullenward


So I want to let the environmental justice community speak for
itself on this. But I think talking to them I learned something a
long time ago. You might remember the first time we worked
together was when you were covering some of my research on how
these electricity imports, letting our coal imports out of the
cap-and-trade program, sort of shedding liability. It was called
resource shuffling. And it was kind of an inside deal to make it
easier to meet our targets and potentially lose some outcomes.
And I went from being somebody who was fairly welcome on the
inside of these policy conversations to being told to take a
hike.


And I looked around and I realized it was me and the EJ folks.
And I stopped for a minute and I listened. And I don't mean that
I'm like some woke, White climate guy who gets all this, but I
mean, I actually listened to what are they saying. And it has
been striking for all of the criticism that EJ groups get about
being technically unsophisticated about issues X, Y, or Z.
There's no question if you compare a community group against the
world's leading chemical engineer, that the chemical engineer
will have more particular things to say about carbon removal.


But time and time again, they're noticing process flaws that are
designed to shunt the conversation to particular political
outcomes. And they were the first people in the early part of the
Scoping Plan process to say, "We can't get anybody to disclose
the modeling assumptions. We don't have the capacity to review
them or the time. They've given us three weeks to respond to
basically the draft technical analysis, and we can't discourage
the assumptions."


David Roberts


Well, if there's any community in the US that has good reason to
be alert to procedural shenanigans, retrofitted to achieve
particular political ends, it's them.


Danny Cullenward


But I think we've ignored that in this broader conversation. And
I'm doing my part to listen, including when they say things that
are totally counterintuitive because sometimes it turns out they
figured it all out. And I'm just really struck by that. I mean, I
worked — very recently, there was a story that came out yesterday
on the role of dairy digesters and the low-carbon fuel standard
that Jessica Foo wrote for Grist. And it was this phenomenally
complex piece of reporting. She brought me all these moving
parts, and I read u,p and I was trying to follow her at every
twist and turn.


And it turns out, the EJ groups had fully documented it in
comment letters weeks before I had come to it. And the number of
times that happens, and it's not, like, visible in the elite,
technocratic circles, is really striking. And I think, I think
that's something to reflect on, and also to let the EJ groups
speak for themselves. They have an advisory committee that has
public positions they're developing on this, and we should take a
listen.


David Roberts


Yeah, it'll be interesting when they come out with something. I
can only imagine. So what do we know about the, in terms of what
you can say maybe publicly, but what do we know about the CARB
board and its political sort of orientation? Is there appetite
for reform of the kinds you're talking about on the board?


Danny Cullenward


I'm hopeful. You know, that's ultimately a question for for the
board members to decide for themselves. But but I think what's
been kind of interesting is that you know that the previous chair
of the Air Resources Board, Mary Nichols, is is a singular figure
in climate policy history. And I think it's fair to say, during
her second tour of duty as board chair under Governor
Schwarzenegger and Brown, she had a fairly clear sense of what
she wanted to do. And the agency moved ... there was a very clear
sense of cohesion around that. And in some respects, the staff
are many of the same individuals from that era.


But there's a different board, there's a different board chair,
and a number of the newer board members have a strong either
progressive climate or environmental justice orientation. So they
need to decide what it is they want to do and why. And it's not
for me to speak for them, but I do think there are different
board members now than there were five or ten years ago, and that
tension is there.


David Roberts


If there were a time to sort of try to insert into the process
and change the course CARB is on, the sort of Nichols
path-dependent course it's on, it would be now, right? I mean,
this would be the time to do it.


Danny Cullenward


I don't want to make it into it like a personality issue. I think
the main point I was trying to suggest is that for an outside
observer to talk about CARB as a fairly singular entity. That was
a sensible description of seven years ago. And I do think that
there are important voices that are emerging on the board that
may be different sometimes than what staff want and potentially
more aligned with other stakeholder groups on the outside. I
think that's a good thing as it relates to the possibility to
improve the outcome here and not simply set up ...


My big worry is we'll have a non-binding plan for net zero, that
will sort of socialize a very heavy reliance on carbon removal,
that will socialize not cutting as many emission reductions as we
want, and declares, sort of in passing, that 2030 is solved. And
now, does it matter if there's a non-binding plan to that effect?
You could say, "Oh, it's just a non=binding plan." Well, what
happens when somebody brings that to the utility regulator and
says, "Why are you guys pushing this hard? Here's this plan to do
even more than you're doing? Says we're fine."


And I just worry that people underestimate the impact for those
sorts of things, and I worry it will underestimate our
credibility for doing real actions. And I just want to highlight
maybe a couple of things that are going on in the state since
we've been really critical.


David Roberts


But let me just jump in here. Yes, this is my final wrap-up
question, and you've touched on it in a number of ways running up
to now, but sort of as you said at the very beginning, as we both
said, California is kind of the 800-pound gorilla in the state
climate game. And anyone who's paying attention to national
politics knows that, once again, here we are saying, "Oh, we're
going to go to the States. The federal government is going to be
lost to us. There's going to be no progress at the federal level.
We're going to have to do this at the States."


Just real deja vu of this conversation. So if that's true,
California is the big state actor, the one with sort of
historically the most ambitions, with the most administrative
capacity to make plans and form policies. So just talk a little
bit about the implications here of California's success or
failure on this larger kind of go-back-to-the-states strategy.


Danny Cullenward


So obviously we need to push at all levels. So I don't want to
say, "Oh, the states are going to take care of it," because it's
not enough, and nothing's ever enough. But we've got the best of
times and the worst of times. I think you can point to some
things that are really not working, and I do that a lot because
when they get copied, it screws up other things as well. We're
also doing a bunch of things that are working, and I think it's
important to think about those. I think the potential to go deep
on individual sector policies. CARB continues to be, that the Air
Resources Board continues to be one of the most important vehicle
regulators in the world, and we need to be really thoughtful
about that as an important focus.


David Roberts


Enormously influential, right? I mean, whatever, a dozen states
follow along?


Danny Cullenward


More than that, I think, yeah, it's the only state that can set
stricter emission standards for mobile sources than the federal
government. And, of course, the Right-wing legal machine will
attack that, and we will have to defend that. But that continues
to be an important area. We really did launch the first
large-scale, 100% clean electricity policy, our SB 100 bill, that
many states have now copied, and that's been profoundly
beneficial. And we have many sector-specific policies, whether
it's trying to organize offshore wind, trying to think about the
buildout of clean electricity and accelerate the pace of grid
deployment and clean energy deployment.


There's a lot of efforts to push that further in the legislature
and in the administrative branches. And we have right now a
massive budget surplus, a good chunk of which the governor is
very intentionally directing, and explicitly directing around
climate priorities, many of which are great. So you can see
everything when you look at us. And the thing that worries me is
we have sold the story that we figured it all out, rather than
we're one of the places that is doing the most to figure it out.
And we will have some wins and some losses, and people who copy
us uncritically will miss that.


NGOs, who promote simplistic tales of what we've done, will sell
the wrong story to other people and will also miss the
opportunities to move forward in this state. So I'm actually
pretty hopeful that there's a lot of great things going on. But
as always, fixing the cap-and-trade program is one of the hardest
ones, and I still continue to try and do it.


David Roberts


Yeah. And the flip side of cap-and-trade maybe being weaker or
more flawed, than is understood outside the state, or even
understood within the state. The flip side of that is just the
extraordinary success and power of these sectoral policies. And
this is sort of conventional wisdom, maybe more so a couple of
decades ago, but the sort of conventional wisdom in US policy
circles is that, "oh, we're trying to move away from command and
control," overly intrusive this and that to market-based policies
that are less smaller government hand. All this very conventional
wisdom. I just feel like it's so important for people who are
following the actual unfolding of policy and the unfolding of
emission reductions in the US to just say aloud, again and again,
it is these old-fashioned sectoral policies that are the
workhorses, that are working, that have proven track records at
this point.


Danny Cullenward


Yeah. I mean, if you're an industry that's, that's trying to get
started, like, we, many of us want to start the offshore wind
industry in California, that's a very good thing. You need
typically legislation, you need regulatory coordination. You see
that the interest in geothermal development and lithium mining
down in the Salton Sea area. It's not a surprise that you see new
industries that are trying to create themselves, and create the
infrastructure around themselves, working directly with the
government to figure that out. And of course it's going to take a
lot of private capital and a private sector interest to do that.


But it is not a surprise that there's a coordinating role for the
government in that work.


David Roberts


Right. And there's more to it than just turning up the carbon
price dial and hoping for the best.


Danny Cullenward


Yeah. And again, I'm not here to say don't do any of that stuff.
It's better to have one than to not have one. And the key thing
is to realize that it's really hard to turn that dial, and
there's reasons not to, especially around affordability, rely on
it too much. So tell me where you want that price to be and
design a program to get you there. It could be a tax, it could be
a cap-and-trade program that's well designed to get you to a
particular set of outcomes, and then rely on it for that boost,
for the revenue it brings in, for the little kick it gives to all
the sectors it covers.


If you rely on it to be this magical thing that will deliver at
low cost whatever you need, no matter when you need it, you won't
get it. Just like if you assume carbon removal will mop up all of
your problems, it will fail.


David Roberts


Right.


Danny Cullenward


You need to build it to be the thing that you want it to be and
not rely on it as a crutch. So, again, I'm not here to say, "get
rid of it, or Washington shouldn't have a cap-and-trade program."
What I'm saying is Washington is proposing to adopt California's
forest offset protocols into its cap-and-trade program. So all of
the widely documented problems in our protocols are planning to
be replicated. Why?


David Roberts


Right. So just a more discerning eye in terms of picking apart
what's working and what's not working. Okay, well, this is super
educational.


Danny Cullenward


Eat your veggies.


David Roberts


Yeah. Eat your veggies. And I think it's helpful, I think, to get
it out there, because things tend to descend into sloganeering.
So I think it's good to get it out there that California is both
kicking ass and falling short, like, both doing a lot and really
not prepared to accomplish all it says it want to accomplish. We
can hold both those thoughts in our heads.


Danny Cullenward


Yes. And let's not forget, it's really hard to do any of this,
and you need experts to do it. And we got to remember, some
institutions are really good at some things, and some things are
challenging to some institutions, and we can't lose sight of that
administrative capacity issue.


David Roberts


Yes.


Danny Cullenward


It's at the heart of all of this. You can't just say, "oh,
industrial policy, but I don't actually have a public sector,"
that doesn't work. Right. You can't say, "cap-and-trade, and I
have a monstrous team that's ready to — oh, I don't have a
monstrous team. I have a very small team that's going to need to
be a taker on a lot of the details." Those are very different
strategic considerations.


David Roberts


Right. Alright, well, thank you so much for this. This is really
clarifying, and maybe we'll do it again in five years when the
2027 Scoping Plan comes out.


Danny Cullenward


And we talk about — yeah, yeah. That'd be fun. Thanks for having
me back on. I really appreciate it.


David Roberts


Awesome. Thanks, Danny.


Danny Cullenward


Cheers.


David Roberts


Thank you for listening to the Volts podcast. It is ad-free,
powered entirely by listeners like you. If you value
conversations like this, please consider becoming a paid Volts
subscriber at volts.wtf. Yes, that's volts.wtf, so that I can
continue doing this work. Thank you so much, and I'll see you
next time.


This is a public episode. If you'd like to discuss this with other
subscribers or get access to bonus episodes, visit
www.volts.wtf/subscribe