Filling in the Gaps

As DC races toward the summer recess those of you working and maybe living here might be interested in discussing your climate advocacy at a bipartisan restaurant.

With nearly $400B of Inflation Reduction Act funding to disperse the DoE was always going to receive a lot of guidance and report cards from, well, everybody. Predictably, the sheer size of the potential investment is overwhelming the team charged with disbursement as they try to spend wisely and quickly, which of course is an impossible task. Its inevitable concentration into big bets that arguably would have been made without the help of the taxpayer is the price we pay for our collective lack of vision over the last 20 years. There is way more turbulence to come as we navigate between speed, risk and quality but there is no denying the momentum, there is a lot happening everywhere, which is just as well if Hansen is right about just how loaded the climate dice are now.

For context consider the $200B profits collectively made by the supermajor oil companies last year which are largely being returned to shareholders rather than invested in their transition to cleaner energy. For climate advocates, this news falls somewhere between disappointing and alarming until we place it into context. It's just asset allocation and it's been ramping up for the last 7 yeast to an estimated total of $100B. Efficient asset allocation is the speciality of capital markets and American corporations, assuming a lighter hand of government regulation and subsidy, and the context here is the nearly $5 trillion that has been invested into the energy transition over the same period. While we should not under play the externalities of burning fossil fuels the fact that the majors are allocating their capital for the best return at the lowest risk is the the way capital allocation works, it's why $5 trillion has been invested over the last 7 years and it's the only place that the 100’s of trillions of dollars will come from to achieve this energy transition.

Jigar Shah’s DoE team is essentially allocating our capital through loans and as these smart and dedicated people do their best under the watchful eye of the House Energy and Commerce committee. I think we are all beginning to realize that we need to put down our silver bullets and moon shot solutions as success now lies in the details and the art of the possible over the perfect. The trade offs between speed, risk and quality used to be theoretical but now they are real and we are ill prepared to make them in the court of public opinion. So far, experts have allocated $5 trillion and some of them will lose money. The DoE would struggle to outperform the capital markets so we need to cut the team a break when we read about a boondoggle but also support congressional oversight as reasonable governance.

The momentum of the energy transition is real and our public investments have the potential to supercharge this inertia but how we respond to and manage the complexity and turbulence of the transition is now the limiting factor. Accepting the inevitable disruption as necessary and expected will allow our civil servants to do their job and Congress to do theirs and avoid the ideological purity tests that stop decision making. The next decade is about filling in the gaps, did I mention permitting reform….

Positive Notes

Remember the Climate Solutions Caucus? It’s back. Hard headline to read for those of us that never stopped supporting but there is some truth to it and much to celebrate resulting from the hard work of House Climate Solutions Caucus co-Chairs Andrew Garbarino (R-NY.) and Chrissy Houlahan (D-PA.) . Bottom line - 57 members at virtual parity representing the perfect launch pad for bipartisan negotiation. 

On the Slate 

Sen. Cassidy is talking about a Foreign Pollution Fee, most recently at the Senate Finance Hearing. It's worth a read, moonshots aside, as while it's not a new idea its focus on economic competitiveness may well win new friends in the Senate.

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