Latest / Columbia Energy Exchange / Building a New Energy Industrial Strategy

Transcript

Building a New Energy Industrial Strategy · Columbia Energy Exchange

• 0:00
  Sarah Ladislaw: I think energy and climate and national security issues are just endlessly fascinating. I think they're some of the most important issues of our time, and I desperately want to ensure that there's no perspective I don't understand, so that we can really try to make sure that we're getting policy right. And I found that each community that I've worked in has a tendency to think a lot about what is interesting in its own community and not across each other's communities. And I think we miss a ton of opportunity, in that way.
• 0:01
  Jason Bordoff: Industrial policy, supply chain security and economic competitiveness are central to how we think about clean energy deployment. As the Trump administration pulls back federal support for the clean energy transition, there are more and more calls for pragmatism and realism. The shifting conversation around energy is visible in other ways too. During last month's climate week in New York, there was more focus on a broader set of energy policy goals that included not only decarbonization but also energy security, affordability and energy for economic development. So what does effective energy policy look like in this new era and under these new pressures, how should we balance climate ambitions with energy security and with economic competitiveness? And what does all of this mean for domestic leadership and investments in things like manufacturing and modernizing the electricity grid?
• 0:02
  This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Jason Bordoff. Today on the show, Sarah Ladislaw. Sarah's the managing director of the US program at the Rocky Mountain Institute where she leads work on federal, state and local energy policy and runs the new Energy Industrial Strategy Center. Previously, she worked in the Biden White House leading climate and energy efforts within the National Security Council. The job I had for President Obama. Before that, she was senior vice president at the Center for Strategic and International Studies.
• 0:03
  Sarah joined me for a wide-ranging discussion on everything from the roles of national security and industrial strategy in the energy transition to how the US should approach China's dominance in clean energy supply chains. We also explored her work on reforming US energy statecraft and her role in the Biden administration. I hope you enjoy our conversation.
• 0:04
  Sarah Ladislaw, welcome to Columbia Energy Exchange. It's always great to talk with you. I always learn an enormous amount and just wanted to let everyone else listen to and hear why I enjoy talking to you so much so they can learn as well. Thanks for being here.
• 0:05
  Sarah Ladislaw: It's great to be here, Jason. Thanks for having me.
• 0:06
  Jason Bordoff: I was joking before we jumped on that normally there's extensive preparation that goes into getting ready to interview people because the interviews are often topic specific, so you need to make sure you have in front of you everything you need to know about nuclear power or something else. I find that harder with you because what I enjoy about talking with you is how broad the conversations are and the breadth and sweep of your expertise. So this is not a topic specific podcast to talk about the world overall. And just for people listening, maybe you're working at RMI now you can remind people what you're doing and also the job you had in government, which I'm familiar with, but not everyone else may be familiar with. Talk a little bit about what that was, what your responsibilities were, how the government is organized to the extent it is, and then because it will inform why we're talking about what we're going to talk about.
• 0:07
  Sarah Ladislaw: Yeah, absolutely. Well, and thanks again for the chance to be here, and I similarly enjoy our far-ranging conversations. I think it probably has something to do with the fact that we both had a very similar job in government to look over the full expanse of things that touch the energy and climate and national security space, which is a pretty broad set of issues. And so you have to be able to navigate them quickly and effectively. And so I think that's why we might have some fun conversations. So just by way of background, I currently work at the Rocky Mountain Institute, which is an energy transition focused organization. My primary job is to think about how we're operating in the United States, so what are the issues that we seek to advance in terms of making a more affordable and secure and competitive energy system that also reduces emissions in the context of the US.
• 0:08
  And so I spend most of my time thinking about the state, subnational and federal policy landscape, but also what is the status of the industries in the US currently building out a huge grid, thinking about all of the new manufacturing capacity we've built, all of the strategic objectives we have in critical minerals, like those types of things. We're launching something called the New Energy Industrial Strategy Center, which is a globally focused organization designed to try to help countries use clean and advanced technology to drive competition in their most competitive energy and economic sectors. So whether it's AI or digitalization, things like defense or even the clean energy industries themselves, really thinking about how countries do that. I say all of this because it kind of relates to what I was doing at the National Security Council. So I was the senior director for climate and energy.
• 0:09
  You had a similar title. We had similar offices and similar phone numbers. And essentially that job is within the National Security Council and is designed to look across the foreign policy apparatus of the US government connected to domestic policy imperatives on energy and climate, and really think about from the full suite of national security issues, how do we think about energy and climate change? And so in the last administration, a big part of my job was to think about energy security in Ukraine as it was being ravaged by the Russians, also think about supply security in places like Europe, but then also thinking about friendshoring and our newfound sort of need to think about the competitive heights of the energy economy and where we were positioning relative to supply chain security, economic coercion, and our own comparative advantage that we were seeking to drive as part of a more holistic strategy to make sure that the US was at the cutting edge of all new and clean technologies. And so I conducted a lot of interagency meetings. We had a lot of processes and tried to make good policy with allies and other countries.
• 0:10
  Jason Bordoff: So a lot on your plate, a pretty wide-reaching and important role in the White House coordinating efforts across the government. And as you said, everything from a Biden administration that was looking to lead on climate issues internationally at international COP meetings and otherwise, and also the more traditional issues of energy security. How do you make sure Europe has the energy it needs? And that included US LNG. How do you make sure oil markets are well supplied? So particularly when there's concern about inflation, energy costs are not skyrocketing. How did you think about the ways in which those various energy security, energy affordability, energy decarbonization goals aligned and where they didn't and how policymakers should go about reconciling those tensions?
• 0:11
  Sarah Ladislaw: Yeah, it's a really great question because oftentimes in the moment and as you're experiencing these issues, they're not brought to you in broad academic terms. They're brought to you in the context of a particular bilateral multilateral moment that you're going to be in, whether a G20 or a G7 agenda or a COP agenda, which was mostly the purview of the State Department, but certainly something we got very involved in. But then also thinking about how you're trying to help the interplay between domestic energy policy and foreign energy policy, which was really quite developed and continues to be very interrelated—always has been, but more so even now as we're not just thinking about the US as a taker of technologies or a deployer of clean energy technologies, but we're really thinking about the space that you occupy within a supply chain, the kind of industrial capacity you have to produce those technologies, the energy security and economic security and in fact national security implications of all of those things.
• 0:12
  And so I think that what became very clear to me in that time and I think has only continued to accelerate is that you have to be very clear about what is the mix of goals that you have associated with any given venue or interaction and being very clear about what are the objectives that you're seeking. Is it for economic industrial competitiveness? Is it to lower costs and ensure affordability? Is it to create a new industrial capacity that you didn't have before? Is it diplomatic? Does it relate to the way that we think about climate and achieving those ambitions from a more diplomatic standpoint, and how are we setting goals and meeting them and continuing to drive faith in this idea that you can actually achieve those things? Is it about reassuring countries that are very concerned about their energy security, which can mean even beyond prices, which means will they have literally enough energy to be able to meet the needs of their people? You really have to be very clear about what is the overriding objective that you're serving in any one of those instances, and then what are some of the ones that are more subordinate? And I think that that is a tricky thing to do and has gotten more and more complicated over the last few years and I think will continue going forward.
• 0:13
  Jason Bordoff: You've mentioned a couple of times the role of policy in industrial strategy, building domestic manufacturing capability. And we've seen this in a number of respects in government including in the Biden administration. If I think about why it was—when I heard Biden officials articulate why it was important that we make EVs in the US, I heard there were national security concerns. They were digitally connected. We needed domestic auto manufacturing to be ready in case in a time of war you needed to mobilize tank vehicle manufacturing. We wanted jobs in the US. There were political considerations in a state like Michigan. Manufacturing was more carbon intensive in China than it is maybe in the US, so that was a reason to do it here. Anytime you sort of hear five different rationales for a policy, it's always kind of useful to kick the tires and be like, do we really know why we're doing this and what problem we're trying to solve?
• 0:14
  And I'm wondering, I'm teeing up as a straw man the classic sort of neoliberal economic argument that government can't always see what's coming around the corner, what industries are going to emerge. And that is kind of why a market-based economy with appropriate safeguards for winners and losers and income distribution and whatever else—but obviously across both sides of the aisle, everyone's thinking differently about that question now. And I'm wondering how you think about the role of the state in private enterprise and how much government should intentionally be saying these are industries that we want manufacturing or other capability and we're going to make sure that happens here and affirmatively go and make that happen.
• 0:15
  Sarah Ladislaw: Yeah, it's a great question. Maybe just take one step back to answer that. I think it depends on what goal you're trying to achieve. What I think one of the problems that we've had traditionally is that we're not super clear about which goal we're trying to achieve in each of these sectors. And so I think that ends up muddying the perspective here a little bit. And I think the way that I tend to think about it is there are national security objectives, there are economic security objectives, and then there are climate objectives and those are very different things. And so a national security objective is like there's a vulnerability that could be accessed or used by somebody else that would put you in an uncompromising position that you find untenable. And so Jake Sullivan spoke about this in his "small yard, high fence" speech and it was very much like, "Hey, listen, we're not being anti-neoliberal here. We're just saying there are some technologies we find it unacceptable for us not to have."
• 0:16
  Jason Bordoff: What's an example of that?
• 0:17
  Sarah Ladislaw: So semiconductors, AI chips, those things—those are just vulnerabilities that were pretty clear. Lots of dual-use defense technologies, things like that. Things that the government needs to be able to make sure that there is some domestic capacity and that there's at least some modicum of understanding of control or relative strength in those technologies. And I think in those instances, and I think this is where your connected vehicles comment came in, where the idea that there could be and is information being sent back to a foreign government about driving habits and usage of vehicles in the US or vulnerabilities we don't clearly understand in those vehicles was seen as sort of a pertinent national security concern that would warrant the type of investigation that triggered these things as national security concerns. I think that you can be much more driven in terms of the way in which government intervenes in private sector activities if and when you have an understanding of what you think the threats are and then to be able to manage those. And I think we've even seen between the Biden administration, the Trump administration, a different interpretation of the right way to manage some of those things with being stronger on some things and a little less aggressive on others in the context of the Trump administration relative to the Biden administration. But really I think it's much more broadly accepted that the government could play a more aggressive role in things that are done for national security reasons. For economic security reasons, I think it's a little bit more like—
• 0:18
  Jason Bordoff: Can I just stay on national security for one second?
• 0:19
  Sarah Ladislaw: Sure.
• 0:20
  Jason Bordoff: I'll just stay with the electric vehicle as one example. And I'm not an automotive expert, although my dad did run an auto repair shop and knows a lot about all of this stuff—I can ask him—but my sense is that internal combustion engine cars are pretty sophisticated computers now and digitally connected too. And I'm wondering to what extent does the national security label get sort of co-opted to do the things people want to do for other reasons? We want more EVs because it's important from a climate agenda and maybe it's really the case that electric vehicles are 10 times more risky than the internal combustion engine for digital connectedness. I'm not sure, but you get the tension. Are we just embracing, are we taking the phrase "national security" to kind of mean everything now as a justification for lots of things that people want to do for other potentially quite important reasons like climate change?
• 0:21
  Sarah Ladislaw: I think that there's definitely the danger that happens. I will say, and this is probably—we should have a call-in show with deep automotive experts calling in and correcting us if we're wrong or your dad, let's just bring your dad over. There is some argument to be made that electric cars are closer to autonomous vehicles and the other sort of more advanced versions of electrification that could cause even greater national security concerns with autonomous control. But we'll leave that there for a second. And I think it is also true that most people know about and recognize that the tip of the spear on the tools that were used to make the US market cordoned off from external Chinese vehicles or vehicles coming into the US was the core part of that policy when in fact there were lots of other provisions that were really designed to deal with all vehicles and ensure that we had some modicum of understanding of what the actual threats were and how they were being managed, not just for ICE vehicles and regular EVs, but quite frankly for vehicles that have a fair degree of software from other countries as well that may not be as secure as we need it to be for hacking and other types of nefarious offenses.
• 0:22
  So I think I definitely take your point, but I think that there's a lot of nuance there that can cut in both directions. I think what you are pointing to is when I say let's be careful about the terms we're using, a lot of what I think people will say is, "Oh, I think there's a national security concern in our reliance on other countries for solar PV or batteries writ large or electric vehicles or decarbonized fuels." I think in some of those cases what they mean is we are not comfortable with the level of concentration of industrial capacity in other countries for things that we want to buy or we eventually want to sell. And this is where I think we as the climate community, we as the national security community haven't done as good of a job of just saying, "Hey, we just don't want that level of concentration and we do want to be able to participate in these markets."
• 0:23
  And the level of control and expertise and vertical integration that has particularly been achieved by China but in other countries is something that's problematic from an economic competitiveness standpoint and therefore we want to create capacity to participate in those markets here. I think that's important because it hearkens back to the nascent industry argument and industrial strategy in the way that we've always understood it, which is there is some level, particularly the closer you go to early stage innovation, that you can protect a market while you grow it for a while. That's a relatively understood trade practice, but there's more of that now, particularly as the world is moving towards more different clean energy technologies, that investments are going in that direction, that countries are kind of saying, "Hey, we don't want to just buy these technologies. We think we want to actually produce these technologies and in order to do that, we're going to have to protect our market for a little bit because the advantages and the competitiveness that countries like China in particular are showing just mean we can't do that and we don't find that acceptable from an economic position."
• 0:24
  I would just say I think that that is a totally valid way to feel and also a good analytical lens for saying, "Okay, what does that cost?" There's a cost to that, right? Because you have to develop a capacity. You're acknowledging the fact that you're not necessarily the most economically competitive producer, but you've decided to do that. And maybe it's not for immediate national security reasons, but it is for economic security reasons. It's in this area where I think—this is most like oil supply security issues that you and I are very familiar with. You could of course continue to buy oil and energy resources as we did in much of the 2000s before US shale came online from other countries and just sort of be okay with that level of dependence. That's never a very comfortable spot for us to be in. And I think as a country we feel much better because we have the optionality and in fact are one of the largest producers of oil and gas in the world. So I think that to a certain extent the economic security arguments driving industrial strategy in the clean energy space are very like that. Even if the case is that you're talking about equipment not day-to-day flows of oil and gas, which is a material difference, but I think is still better suited to the realm of economic security than national security per se.
• 0:25
  Jason Bordoff: Yeah, I mean I think what we're getting at is you mentioned Jake Sullivan's speech before, "a small yard and a high fence," and the question is if you're not so good at defining how small the yard is, it gets pretty big pretty quickly for a lot of different reasons. And there are tensions there. If we believe climate is a crisis and you want to deploy clean energy 10 times faster than we are today, it's pretty important that it be as cheap as possible. Part of the reason it is so cheap is because of what China has done to dominate that sector and you're identifying a concern with that dominance. And if you want to push back on that dominance and build more domestic manufacturing capacity and diversify supply chains that slows things down and makes things more expensive potentially—you can tell me if that's wrong—but there's a real tension there I think.
• 0:26
  Sarah Ladislaw: Yeah, and I think this is where you get into that third lens, which is climate. And on the climate side, there's definitely an imperative to try to reduce emissions out of the energy system as quickly as possible and as cost effectively as possible. And so folks who are really just thinking about deploying clean energy technologies in a way that make that possible would argue that the national security and economic security lenses I was just talking about are not particularly useful to that end. I think that's probably true. And by the way, just to talk about yards and fences again, I always thought that we could have done a much better job defining what was the medium yard with the lower fence, right? I think there was a medium yard with a lower fence. We had 301 tariffs and a whole bunch of other things and huge amounts of domestic subsidy that was clearly signaling and was being articulated through lots of bilateral and multilateral conversations with lots of allies who had similar objectives that we wanted to be able to develop these industries and that we weren't going to be protectionist and punitive towards one another and that we wanted to try to develop these capacities together.
• 0:27
  But it's a pretty complex kind of domestic and international policymaking and coordination that you have to do to do that, and I think that's work that still quite necessarily needs to be done. All of that is aside from what is this third category, which is like there are places where you probably don't need to develop a clean energy industry capacity. It should be totally fine for countries to decide, "I do not necessarily need to have solar PV manufacturing capacity,” just by way of example, “in any real big way here in the United States. Therefore we'll just go ahead and deploy these technologies." I think that you could probably make that argument in general. You probably have to think about particular applications and where you're putting the kind of cell and wafer technologies that we're talking about. But in general, this is one of those things you could say, "Well, maybe we are not going to be the most cost competitive in those technologies."
• 0:28
  Maybe we're still uncomfortable with the level of control or the level of dominance that another country might have across that technology vertical. But one has to ask a question, maybe another country would be better at producing that. So maybe again back to the oil supply security analogy, if it's diversity in a sector or a technology vertical that we want on a global basis, it doesn't have to be your country that is necessarily the one that fills that gap. It could just be that there's a general global goal that we need to be able to create more diversity in supply chains, in clean technology verticals. That's totally fine. Again, it's another way of thinking about both the economic security aspects of this, but then the trade-offs relative to the rate and pace of deployment of what are some of the cheapest clean energy technologies that we've ever experienced.
• 0:29
  Jason Bordoff: And I think you agree because you've talked about it—there is a difference—I mean we tend to think in an energy sense about the traditional essence of energy security and then particularly when it comes to the clean energy economy, we're layering those onto supply chain issues which are different than the flow of energy. We're not importing electricity from China. We're importing a manufactured product that is installed and then makes electricity for quite a long time. It's not to say there are no risks, but they are different in kind and not unique to clean energy. I mean a lot of these are true for so many parts of our modern economy and technologies that we're heavily dependent on China for—the iPhone in my pocket, the computer we're talking on or anything else.
• 0:30
  Sarah Ladislaw: Yeah, it's definitely true and I think that what I observe now in the last year and a half or so is what you've seen in general has been an expansion of this notion of industrial strategy even beyond the clean energy space to the defense industrial base and the technology space, the building space. And it's really about does the US have industrial capacity and what kind of industrial capacity do we need as a country to build stuff, to be able to build stuff? And I think that you can apply that general type of need – this is a broader economic question – but you can apply that basic sense of needing to be able to have industrial capacity as a country to lots of different things. I'm happy to have us apply it to the energy sector so long as we're doing it in ways that we can genuinely be competitive and we're smart about how we're trying to drive that competitiveness. But I do think that there's a bigger issue here, which is does the US have appropriate amounts of industrial capacity for what makes us feel like we can be a functioning and competitive economy going forward? And I think that's a larger meta conversation that does drive a lot of what we're seeing in clean energy industrial policy as well.
• 0:31
  Jason Bordoff: You spend a lot of time thinking about these issues at a major think tank, and then doing the job in government and now doing work on these issues at an organization with a lot of expertise. But also I think you'd agree with an advocacy agenda. It is an NGO different from a university or a think tank. And first I'm wondering, the kind of work you do today or maybe if you were back at CSIS, how would it be different now after you served in government and saw what policymakers need and what the policy world is like? How did that change the way you think about what is useful to do for organizations like the one I'm sitting at and what do we need more of now? I guess we need all of these things, but you chose to go to an NGO I think for a reason and how you think about those very different seats you've had and what sort of work is most important for all of us to be doing now who care about these issues?
• 0:32
  Sarah Ladislaw: Yeah, absolutely. I mean, it's an interesting question I've always thought, and one of the reasons why, as you know Jason, I do what I do is I think energy and climate national security issues are just endlessly fascinating. I think they're some of the most important issues of our time and I desperately want to ensure that there's no perspective I don't understand so that we can really try to make sure that we're getting policy right. And I've found that each community that I've worked in has a tendency to think a lot about what is interesting in its own community and not across each other's communities. And I think we miss a ton of opportunity in that way. And so I have intentionally tried to switch my perspectives in my career starting out working in government at DOE 20 some odd years ago and then moving to a national security oriented think tank to really think about oil and gas supply security issues and then moving to working in government again and then working in an advocacy organization.
• 0:33
  I would say that to me the thing that's really important is that all of these kind of different perspectives are coming at the same challenges and grappling with the same complexity. They just do it in sort of different ways. The place you start from is oftentimes the way that you tend to think about an issue. And at CSIS, one of the things we spent a lot of time at security oriented think tanks was thinking about the geopolitics and the market as it existed. And I think that what's happened—it was a really amazing time to work on that stuff because the US had the biggest oil and gas supply surge in the history of the world and completely changed the geopolitics of this issue. And yet at the exact same time, China decided it was having energy security issues as well and created the biggest surge in the creation and cost reduction of clean energy technologies probably also in the history of the world.
• 0:34
  I haven't validated that point, but pretty significant. And both of those things were kind of happening at the same time and I think that's really, really fascinating. And so I think that all of these kind of organizations and places do the same types of things and are dealing with the same types of issues. They're just sort of dealing with them from a different perspective. And I have found in the last few years a lot of coming together of those communities. I think that the complexity of the challenges that we're dealing with right now are melding all of these national security, economic security, climate security realities so that we're kind of all part of the same community. And what I find really interesting about that, even though each type of organization deals with it a little bit differently, is that so much has changed that I think we're all kind of inventing a new way of doing this right now.
• 0:35
  And so this is part of why we're doing this new initiative, which is really designed to say the new energy system that we're all creating right now is going to power new industries that will reshape much of the world either from a geopolitical perspective, how we regard each other in trade dynamics, what we can do technologically, how we relate to each other socially. All of this is going to be empowered by energy systems that need to be more secure and more competitive and more cost effective and just much better at achieving all of these end states that we want. And they've got to ultimately be good for the environment. They not only have to hopefully reduce emissions, but they've got to be able to withstand the kind of climate impacts we're about to see too. So we have a huge amount of work to do as a community of actors, and I think what I see now is that they all relate to each other much more than they have in the past.
• 0:36
  Jason Bordoff: So obviously we share that in common and part of the reason we've for so long enjoyed talking about these issues—the kind of need to think simultaneously about energy as a national security issue, an economic issue, an economic development issue in the global south, an environmental issue. It's so hard to only deal with one of those dimensions if you're not simultaneously thinking about them all. And I agree with you, I think not enough organizations and people have done that historically. But we're in a moment now—we just came off climate week and you heard as much about energy security and affordability as sustainability at climate week. Maybe that's an opportunity, maybe it's a risk, I don't know. But tell me what you think about this kind of moment we're in now of pragmatism, realism, whatever those words mean, reset. Is it an opportunity, a risk, both? Where do we go from here?
• 0:37
  Sarah Ladislaw: Yeah, it's a little bit of both. I mean I think maybe two things. When I was first starting to do this in the early 2000s, I thought to myself about writing a piece called "The Opportunity Tipping Point." And to me, everyone was talking about tipping points in climate and all the implications of moving to a world that had much greater climate impacts. And I thought to myself actually from a geostrategic standpoint, the most important tipping point in this evolution towards the new energy system would be when new energy technologies were cost competitive with the existing system and we're there. So lots and lots of the technologies that we want to see in the system are way closer to being, on the face of it, solar, wind, batteries, even some versions of more advanced technologies on the heat pump side. And certainly the way that we can think about the interoperability of the grid—
• 0:38
  Jason Bordoff: You see that on a total system cost, not kind of LCOE, but a total system cost. Obviously there's a bunch of dimensions to that.
• 0:39
  Sarah Ladislaw: And I take your implication of that point. So let me just say this, which is in the ways we're going to need to build out the system, the things that you're going to want to do with transmission and distribution, both to get more efficiency out of existing systems and to build them out both in terms of their capacity and their capability to have two-way or multi-way communication inside an electric power system. Yes, those are system costs that do not count in an LCOE sort of framework for things like solar or wind or intermittent renewables that are being added to the grid, somewhat alleviated by the batteries that you could attach to them if you wanted. I think in the energy system that we're driving to, you are going to need and want those investments anyway. And so I think that ultimately for me, if we think about the way that we're going to need to build out, especially advanced energy systems in developed economies to do the kind of industrial buildout, AI, data center buildout, not everywhere but in certain locations, the way that we're going to manage cost and affordability and reliability and those competitiveness issues is by being able to have a much more sophisticated and expansive grid architecture that can underpin a variety of technologies that are leading the direction of a more electrified future.
• 0:40
  And I'm not saying electrification purely for green energy reasons, but I'm saying because a lot of the advanced technologies that we are developing and creating are part and parcel of electrically powered systems. I don't think that this means fossil energy goes away. I don't think that that's actually quite frankly the point from a "are we building a better energy system" dynamic. But I actually feel like relative to 10 or 15 years ago, the investments that are being made in energy systems are much more along the lines of the type of transition we would need to see for a more heavily mitigated lower emission system in the long run. I just don't fundamentally believe that that's going to be the only driver for why people do them. And I don't think that you can just be a purist about it. I do think that there are places around the world where they're going to need firm power capacity because they're not going to build out their transmission systems to be able to have the distributed energy resources integrated in a way that drives industrial production and the other things that they really want to be able to have in their system.
• 0:41
  But in general, I would say I think that the real economy and the direction of travel for much of what we're doing in the energy system is leading to a lot of technologies that we would characterize as generally being good for the energy transition, whether it's also cleaner gas or nuclear or geothermal as well. Technologies that—I don't know about you, but I went to about 8 million conferences last week and every single one of them had something to say about nuclear and geothermal. So I do think that in a general sense, I think that that is very positive. I would say the negative part is I don't think we've reinvented what is our due north on climate. So we had the Paris Agreement, we've had all of these nationally determined contributions, we understand that folks are trying to be as ambitious as possible about trying to reduce emissions and prepare their economies for their adaptation needs.
• 0:42
  And this is not just about the US election. I think it's broadly recognized that many of those goals are not being achieved through the current structure and the current system and therefore we need to think about what comes next. And I don't know what the answer to that is yet, but I do think that no one here is talking about climate change because we think it's a really cool thing to talk about. We're talking about it because we think it's an actual need that we need to address as a human society. And so I think that that is going to get renegotiated over the next few years to figure out what is it that it means to be both a competitive economy and an energy secure economy, but also feel like we are dealing with the challenges of climate change and all their manifestations. And I think that that is a bit in flux.
• 0:43
  Jason Bordoff: If I heard you, you were sort of saying the direction of travel is toward a clean energy economy, even absent the driver of climate change. And is that because you view all that as all cheaper? That's just a cheaper way to power the global economy or for national security reasons. Certain parts of the world, Europe, for example, don't want to import oil. So kind of like China did 20 years ago, they're going to electrify a lot instead and then want that electricity to be produced domestically. And a lot of that might be renewables, geothermal, something. Am I hearing you? And it sounds part like what you're suggesting, and I don't want to put words in your mouth, but just to be provocative, is even if the task force that the Energy Department put together and then disbanded turns out to be right, that climate is not such a big problem to worry about, the world's decarbonizing anyway. I mean is that overstating where you think we are right now? Because that's a pretty optimistic take and I'm not sure I would share that view I think, but I'm curious if you—do you think that even absent that, that's where we're headed?
• 0:44
  Sarah Ladislaw: Yeah, there's a couple words that I just want to be really careful of because I think they imbue a lot of meaning without being intentional, which is one is "inevitable," right? I'm not sure I believe anything's inevitable. And so I think we've got to be very careful about being like, "Yeah, this is just a movement that's on its way" and that's not how I think. So I think that the reality is that if you take Jason Bordoff 15 years ago and say, "Hey, the whole world is going to buy more power generation from solar, wind and batteries than it does from gas or nuclear or coal going forward on a year-over-year basis, and that's going to be a thing people do and that's going to be the most cost effective option that they can have in the near term." That wouldn't have been true and you would've been like, "That's hard," and now it just is.
• 0:45
  And so that to me is movement. It is movement in the market and I think the fact that there's an entire energy system that people could choose to have if they wanted to pay a cost, which I think the more you decarbonize heavy fuels and there are things that are very heavy—trucking and all kinds of things that are much more expensive to choose an electrified option or a low carbon option for—I think all of that still remains very true. We are way closer to that being a viable option than we were 15 years ago. And I think that's pretty interesting and evident. And so you see them being investment options that corporations and companies are making for I think a combination of energy security and climate reasons. If they were so far out of the money that they were investing in unicorns, they wouldn't be called an energy security option. They can be called that today because they can materially contribute to the energy supply of a country. Now there's the other wiggle where decarbonization, if you mean 100%, that is still very expensive and extremely hard to achieve so that we're on a pathway to decarbonization of 100% of a country's energy supply. I think we still have to recognize that that is desperately hard to do. But if you are talking about on a pathway to being able to progress the amount of clean energy in your system and increase the efficiency and the sophistication of that system over time, probably through electrification, maybe lowering the carbon content of your electricity after you electrify, that could be an alternative pathway to the "only electrify with clean" kind of mantra that I think is more part and parcel of environmental communities. I think that those are the type of things that we've got to be very careful about the nuance we prescribe to that level of development because I'm not sure that I would say decarbonization in its entirety is inevitable, but I do feel much more comfortable that we have driven a lot of new clean energy and quite frankly, advanced energy solutions into the system that didn't exist before. And we have more work to do there, obviously.
• 0:46
  Jason Bordoff: If I hear you, I mean there's a way that people, maybe particularly economists, have thought about the problem of climate change for a long time. There is a cost to decarbonizing, there's a larger cost to not doing it, and you need to build policy instruments that somehow internalize that cost. You can subsidize it, you can do the carbon tax, you can make a cap and trade system, but it imposes cost. You're talking about a changing world now of geo-economic fragmentation, competition for future industries with China, national security issues being front of the agenda in a way that was different in the world of copacetic geopolitics, of entering the WTO and all the rest. What I want to ask you is where does that take you in terms of how to think about, assuming the world doesn't just decarbonize on its own at this point, you still need government policy to address the challenge of climate change, but maybe in a different context. Where does it take you in terms of the policy playbook, the policy toolkit, what sorts of policy interventions are needed now in that new reality you described?
• 0:47
  Sarah Ladislaw: Yeah, I think that what is both tricky and exciting about this particular moment, and I say exciting—I find this stuff fascinating, but it sort of depends on where you are. So all advanced economies and many developing economies have climate goals. They have goals that are associated with how much emissions they want to reduce. They have goals associated with how they want to adapt to protect their economies. I would say over the last few years they've added a few components to that. One is what do you want your industrial makeup to be relative to those challenges? Is there something green industrial policy-wise that you want to have as objectives for you in your economy, both because it contributes to your economic or national security in your own definition or you just really want to have a strong economy and having a strong economy is in of itself really important to being able to withstand impact from climate change and just be kind of a strong competitive economy.
• 0:48
  And so I think we actually have right now, and you've seen this over the last several COP processes, you've seen this in the evolution of US energy policy and climate policy in the Inflation Reduction Act and the Bipartisan Infrastructure Law. You've seen this in Europe in the green industrial strategy. You've seen this in Japan in the GX strategy. Essentially it is like melding together these ideas into new plans that don't necessarily speak only to the emissions reduction component of what your job or your goals are for climate, but try to speak to the broader objectives that you might also have for energy and climate policy and economic policy at large. And so I think this has actually made things much more complicated. It's not just sort of a simple, "This is the ultimate objective and this is the thing that we're shooting for."
• 0:49
  And so I think initially, and this is a big part of the work that we're trying to do, is to really think hard about how you sequence those objectives, right? Because it isn't just going to be, "You can have a climate policy and a climate plan and climate objectives. You can have economic development policy, economic development objectives." You've got to figure out what those two things have to do with one another, not just in your domestic policy, but also in how you deal with other countries around the world. And I think this is where, so for example, if you were to say, "Well, my climate objectives are the same thing as my industrial policy objectives," you might think it's necessary to be able to manufacture all the clean energy technologies you want to deploy in your country. That's probably not a great idea. You probably don't have aptitude or capacity in all of those things, money to finance all of those things, and certainly not state time and attention and capacity to make that possible.
• 0:50
  So you should probably pick which ones are the really important ones and then for the rest of them, just figure out ways to deploy those technologies in a way that meets your energy security or climate goals. And I think this is the conversation we're seeing play out over and over again in different countries because right now we've got countries that are because of other kind of national security or competitiveness goals, whether it's building out more defense industrial capacity or building out AI and semiconductor capacity, things that are very energy intensive, national security objectives. They're building out a lot of demand on their system in an electric power system that doesn't make a ton of sense and does not lead to least cost delivery of electricity to consumers, both residential and commercial. This is getting ironed out right now because these are the—or it needs to be ironed out right now because these are the tensions that we're feeling in the sort of confluence of all of these objectives in general.
• 0:51
  I think that's a fantastic thing because if you—I mean take the electric power sector in Europe or in the United States, they're tremendously convoluted markets with things that we brought up that would make economists kind of go nuts because they don't make a ton of sense about how we actually manage these markets in these systems. I think it's a tremendous opportunity for us to fix some of that. And it's luckily being driven by four or five different societal imperatives, not just one. And to me, that's hugely promising, right? You can care about climate change or not. You could care about national security or not. You probably do care about affordability. All of these things lead you to a very robust energy reform agenda that at the end of the day, if you do well is going to be good for all of those objectives.
• 0:52
  Jason Bordoff: Is that true everywhere or does it look pretty different in different places? Meaning if you're in Europe and you're pretty dependent on oil and gas imports and Russia's just cut off your supply, you might want to move a lot faster toward energy efficiency and electrification, although Europe hasn't made nearly as much progress on that as it probably should have. If you're in Indonesia or South Africa and you have abundant coal supplies, maybe it looks different or take the US. If you're focused on jobs and economic activity and security of supply and security of supply chains, and to be provocative, you're the largest oil and gas producer in the world, why are you doing all this clean energy stuff? Absent the concern about climate change, which we shouldn't leave aside, but let's leave aside for the moment, why does it take you to the place you're talking about where it becomes an accelerant for the clean energy agenda?
• 0:53
  Sarah Ladislaw: I think a couple of reasons. I mean, listen, I do think to answer your first question, it is different in different places and I think this is one of the things that's hardest about engaging in broad-based discussions about the energy system right now. It really depends on where you are, and I think that being very hyper-focused on local context is really important for people playing in the policy space right now because it definitely does matter whether you are in a country that has a built out energy system that is aging and needs to be refurbished but has all sorts of entrenched interest versus one that is newer and is thinking about it has a lot more infrastructure to build out at present. I think these are very different things. I think it's very different in the context that you mentioned between Europe and the United States.
• 0:54
  However, I think that there are efficiencies that are available to all of these economies by thinking through particularly an electric power system, just ensuring that you get as much out of the system that you have as possible about really trying to think about interoperability between distributed energy resources and your centralized grid, between how you deal with markets that are physically interconnected but don't necessarily send each other the right signals so that they operate together. I think Mario Draghi, this was one of his main points in criticizing or giving recommendations to Europe was like, "You need your gas market to work better and you need your gas market and your electric power market to be able to speak together better." So I think those things are all really important in many jurisdictions. I just don't think that there's an either/or here.
• 0:55
  So when I look at the US, I'm like, "Yeah, we've got tons of oil and gas." We're also going to export a very large amount of LNG upcoming here soon, and we're adding huge amounts of increments there too. There's value to that. I mean there's value to that for our European partners and others around the world. There are leads and lags in this system. You can have as much supply as you want, but if you do not have the infrastructure to move it and use it, it is not going to be an answer for you today. And so the near-termness and the availability of clean energy technologies like solar and wind and batteries are very valuable in the sort of nearer term context for building out the electric power system. I think the low hanging fruit is all of the existing transmission that we have that we don't utilize to its greatest capacity. And so if we want to speak about efficiency and using a system that we already have, I think that's one of the things that we can be doing more of. And I think that it's broadly good for us to have diversity of supply. We've always believed that as a country in our energy policy. We've really wanted to make sure that we have more control over our energy supply, but then also diversification of both sources and suppliers. I don't see why that's not true now. I think that that's always been true and I think it will continue to be true.
• 0:56
  Jason Bordoff: And when you look at everything we've talked about, if you were back in your old job for an administration that was putting climate front and center on its priority list, is what we've talked about—the kind of international climate agenda or when you look at multilateral climate institutions, the green finance agenda, the annual COP meetings—are they no longer fit for purpose? And is everything we've just talked about where we need to focus or if you were writing the transition memo, what would you advise for how to think about climate from an international standpoint these days?
• 0:57
  Sarah Ladislaw: I think the history of the period of time that I've been dealing with both energy security and climate change issues is that what they do over time is adjust. They adjust to the world that they're in. So early 2000s, when China first started consuming a bunch of oil and gas and we got really worried about their onslaught of consumption and what it was going to do to energy security, we had a very sort of neoliberal view of the world. We were doing bigger markets and free trade and all of these things. That's how we talked about things. And with every successive financial crisis and pandemic and all these things that happen in the world, we sort of change the way that we think about things. And why am I doing a very long preamble here is because I think it's the fault of the international climate community that it is going to probably need to change the way that we think about the climate challenge writ large. And how do we motivate change?
• 0:58
  As you know very well, the administration you worked in, the Paris Climate Agreement came out of that time, and that was really thought to be an answer to the criticisms of a Kyoto Protocol, more top-down driven sort of system of dividing the emissions up in the world and deciding who had responsibility for reducing what. The Paris Agreement was supposed to be this more bottom-up system that allowed everybody to do what they thought that they could do and that we would ratchet up ambition over time. That's probably been pretty successful in the ways that it's going to be successful. We've now shifted into a period of time where people care about their position in lots of different industries. And so what you've seen is countries thinking in more industrial policy terms about being able to both benefit from and be in control of the creation of new industries and the contributions of energy to those industries.
• 0:59
  And so that was not something that was necessarily like the front of a UNFCCC agenda over the last few years, but it was definitely what many developed and large emerging economies were doing, and that was where they were putting both their investments and their policy attention. And I think that continues to be the case now. I think the difference is it's not necessarily just for climate reasons, it's because they want to be able to be positioned to have a robust energy system that positions them well, both in terms of their emissions goals, but also in terms of having a competitive economy. I think the climate community will adjust to that, but it also doesn't answer forestry issues. It doesn't answer all sorts of biodiversity issues, and there's a broader sort of agenda or there's a broader set of issues that the environmental community is very interested in that are still very relevant in other settings. I would just say this, in terms of where we think where trillions of dollars have been spent over the last 15 years and are likely to be spent going forward, I would just—my thought is that it's going to be much more anchored to places where countries believe they want to develop a comparative advantage.
• 1:00
  Jason Bordoff: Can you close us out by sharing—we heard a lot of concern in Climate Week about the pullback in the US role, US leadership on these issues, the president in the UN calling it a con job. What gives you the most optimism about America's ability in the long term to lead internationally on climate and energy security issues?
• 1:01
  Sarah Ladislaw: I don't know if it gives me the most optimism, but I have a tendency, as you know, Jason, as someone who watches policy often, you just sometimes try not to pay too much attention to the politics around them. Instead, look at what the market is doing. And I look at where people are investing, and I think there's a huge amount of investment interest in building out the kinds of industries that I'm talking about in the US and that require us to have a functioning electric power system to be able to provide affordable energy to residents and to be able to provide the energy that industrial consumers are going to need. And what I find really interesting is wherever I go, people want to talk about that topic or they want to talk about permitting reform, which I know is the most sexy and exciting topic that anyone can think of. But again—
• 1:02
  Jason Bordoff: It's all about abundance these days.
• 1:03
  Sarah Ladislaw: It is about trying to ensure that we can build things and we can do it in a way that doesn't make it prohibitively expensive for us to do anything. And to me, that's a conversation we are way, way overdue in having in earnest, and I hope that we take the opportunity to do that. I'm just excited about how much work we have to do because there's a lot of it and I think it's all mostly pretty beneficial.
• 1:04
  Jason Bordoff: Great. Sarah, it's a complicated time too. I just spend a lot of my time trying to understand it better and just want to thank you for being a good friend and thought partner and helping me think about how to do that. I've learned an enormous amount, not just in the last hour, but in our conversations. So thanks for that. Thanks for the work you're doing. Thanks for your service in government and really appreciate your time today.
• 1:05
  Sarah Ladislaw: Well, thank you. It's been a pleasure and I want to similarly thank you and all your colleagues for all of the really important discussions you put out there. It helps me think through things as well, so I appreciate that.
• 1:06
  Jason Bordoff: Thanks again, Sarah Ladislaw, and thanks to all of you for listening to this week's episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University. The show is hosted by me, Jason Bordoff and by Bill Loveless. Mary Catherine O'Connor, Caroline Pitman and Kyu Lee produced the show. Gregory Vilfranc engineered the show. For more information about the podcast or the Center on Global Energy Policy, please visit us online at energypolicy.columbia.edu or follow us on social media @ColumbiaUEnergy. And please, if you feel inclined, give us a rating on Apple Podcasts, it really helps us out. Thanks again for listening. We'll see you next week.