James Lawler: [00:00:00] Welcome to Climate News Weekly. I’m here with Darren Hau and Julio Friedmann. Hi guys.
Darren Hau: Hey.
Julio Friedmann: Awesome to be here.
James Lawler: So I want to start out with a big piece of news that there’s been a lot of chatter about. Tesla, in a second round of layoffs, the first laid off about 10 percent of their workforce, now they’ve laid off the entire supercharger team, as well as a number of other key executives from a variety of departments across the organization. Darren, I’m so glad that you’re here today to comment on this story. I mean, I own a Tesla and I have to say, you know, one of the, one of the things I love the most about it is the supercharging capability and the ability to, you know, charge it at this wonderful network of superchargers that I know you were part of the team that put that all together. What, what are your thoughts on what’s going on with, with Tesla these days?
Darren Hau: Yeah, absolutely. Let’s talk a little bit about why this is a bit of a surprise and a shocker. First of all, as you so well put James, the Tesla charging network has been one of the best parts of owning a Tesla and that has been a major competitive [00:01:00] advantage for the company. It’s been such a better network than the other charging networks that all the automakers have moved from the CCS standard to the North American Charging Standard or NACS that Tesla had pioneered. That’s a topic we’ve covered in past episodes.
James Lawler: Yeah, and I believe the woman who was in charge of spearheading that whole effort across the industry, Rebecca Tinucci, was laid off.
Darren Hau: Yeah, it sounds like she and her entire team was just let go wholesale. Now, there’s a lot of commentary on why that might be. We’re not going to speculate on that here, but lots of reasons on kind of personal dynamics and things like that happening within Tesla that probably won’t be surprising for anyone who follows Elon. But yes, Rebecca and her whole team, including, you know, William Jameson, a friend of mine who was also leading the charge on that, were all let go. There are a few reasons why this is really surprising, right? One, the Tesla supercharger network is kind of the gold standard in the charging space, at least in North America.
Two, all these automakers have committed to [00:02:00] NACS at this point. And the fact that Tesla has just kind of ripped the cord on this has left a lot of them surprised, flummoxed, a little bit in limbo because they were kind of banking on Tesla really pushing the network even further and enabling it for their drivers. Now that’s, that’s still ongoing, but what we’ve heard is a lot of these folks that other automakers now lost their contact, right? Who are they, who are they going to speak with about integration? This is going to be a big challenge.
The last reason why this is surprising is because as far as I’m aware, the supercharger network is actually profitable, at least the sites that are already built. Now, Tesla has been investing a lot in growth, so maybe on like a business unit level, it’s not profitable, but my understanding is existing supercharger sites are profitable. So this is also a large potential profit center for Tesla in the future and, and something that they could have grown.
Now, there are a lot of reasons why this decision may have been made. One, it is expensive to put copper and conduit and chargers in the ground, [00:03:00] and maybe Elon decided there was a better use of capital. Number two, there, this may be kind of a burn your ships moment where Tesla says, “Hey, all these automakers are now on board. I expect the rest of the industry to stand up and put this investment in, we’ve already done so much”. So, there are reasons why this decision may have been made. Personally, I believe it’s a strange decision. Tesla’s giving up on a long term advantage of its, but, yeah.
Julio Friedmann: I’ve said this over and over again, like, we need infrastructure. If we don’t have infrastructure, we’re not going very far. Yeah. And this is a shock to the system because one of the few pieces of infrastructure that was on track and going well is suddenly up in the air. And it again reinforces the idea that nothing in this space is cheap, easy, or inevitable.
James Lawler: Right.
Darren Hau: Let’s talk about silver linings, actually.
Julio Friedmann: Please.
Darren Hau: I think, yes, it’s a huge shock to the system, but one silver lining is Tesla has great people in there that have a lot of experience doing this and have innovative, you know, forward-thinking methods for doing it. The fact that [00:04:00] they are now going to propagate out into the rest of the industry and probably be gobbled up by people eager to tap that experience is probably a good thing long term, but certainly this is very disruptive.
James Lawler: Yeah, that’s a really good point Darren, didn’t think about that. We will continue to track this and thankfully we have Darren here who can give us the educated perspective on, on all things EV-charging going forward.
So, we want to move to another story. One of the reasons we do need chargers to be successful, along with everything else in this energy transition, is the compounding effects of normal weather patterns and climate change. So we’re seeing historic heat and flooding across the Asian region as a result of climate change compounding with the El Nino weather pattern in that region. So a WMO report has found that in many parts of Asia, seas are warming three times faster than globally average sea surface temperature, which is just extraordinary. More than a hundred thousand people have been evacuated from Guangdong province in China in recent [00:05:00] days due to heavy rainfall. Pakistan has also experienced heavy rainfall. Temperatures in India are up to 45 degrees [Celsius], which is 113 degrees Fahrenheit, in addition to high humidity, which produces incredibly dangerous conditions. So this is serious stuff and it’s happening at significant scale.
Julio Friedmann: Yeah. So first of all, I’m glad that it’s being reported because we often don’t see reports about what’s happening in the rest of the world in terms of climate impacts, but it is real and it’s very dangerous. The wet bulb temperature issue, the humidity and heat together, is extremely dangerous and we’re seeing that. The wet bulb temperature is the point at which the combined heat and humidity mean that as you sweat, as you perspire, you no longer cool yourself. So your body has lost the ability to cool itself.
There are floods, there’s property damage, it’s really bad. Even more to the point, we’re seeing these manifested at a time when we simply don’t know what’s [00:06:00] going on in the climate and it’s happening much faster and much bigger than we predicted and that ain’t good.
James Lawler: So moving to another story. Eleven rich nations have pledged $11 billion to the World Bank to tackle global challenges, including climate change and pandemics. So one of the interesting features of this pledge is that this money will be will be leveraged by the issuance of debt by the bank to the tune of roughly six or seven to one. So this represents probably something around $70 billion of resources that are now available to help poor countries deal with the effects of global warming. The countries that have stepped up to make this pledge include the United States, Japan, France, Germany and the UK.
Julio Friedmann: So I’ve seen coverage on this story from two different angles, one of which was Hosanna, this is a record amount of money. The other was holy cats, it’s nowhere near enough money. Which is true in both [00:07:00] cases. At COP28 the Loss and Damaged Fund received less than a billion dollars and people were horrified because there’s so much more loss and damage than that, it is pennies. But, it is also the case that it was the first time that money was ever put in this fund. I look at the World Bank story in that context.
A.J. Banga, the new World Bank president, has only been on the job for like a year. And he’s brought in this enormous pile of money to do important work, in particular in developing countries, which need more support. A lot of stories have been written about needs to recapitalize and restructure itself so that it can provide these kinds of climate services, whether it’s investment or infrastructure or relief or whatever, and we’re starting to see that, so this is the right trajectory. It’s also the opening ante. We’re just going to need to see many more commitments of this kind made over time.
Darren Hau: Hey, Julio, if you, if you’re like someone who’s relatively new to like the financial space, you might listen to all these commitments and be like, it seems like we keep [00:08:00] throwing money at climate, it’s so much money. Can you give some perspective on how much this compares to other things we invest in? And, how can we think of this in terms of investing it for the long term and like infrastructure and productive assets as opposed to just like “throwing money away?”
Julio Friedmann: Right. So there’s lots of different ways to think about this space. I like to use the framing put forward by Avinash Persaud. Avinash with a v. Avinash is a scholar and an economist originally came up with the Bridgetown Initiative from Barbados in partnership with Mia Motley, their prime minister. And he basically says there’s three kinds of work you need done. We need to do mitigation work. That is investment into stuff that makes money. That’s a trillion dollars a year more than we are using today. So right now it’s like $1.8 trillion. We need to get to $2.8 trillion. Actually, we really need to get to $4.8 trillion, but let’s start with an extra trillion. We need trillions of more money going in, [00:09:00] but those things get a return on the investment. That’s the project you want.
Second set of stuff is investments that reduce loss. These are things like adaptation projects, whether it is seawalls or water projects or whatever. These are things where you’re avoiding a loss. And here he says we need to put in hundreds of billions every year, not trillions, but, but many, many multiples of where we’re at today. And then there is smallest amounts of money, which are truly philanthropic, loss and damage. How do you help people who have suffered the consequences already of climate change? What investments do you need to make there?
For scale, globally, we put about $3 trillion a year into the energy business. It is now the case that about two thirds of that is clean energy, which is good. But it is nowhere near enough. We need to get up to $5 trillion, really. So we need an extra couple of trillion coming in. Is that a lot of money? Yes. Is that a ludicrous amount of money? No. Microsoft’s valuation [00:10:00] as a company is $2.5 trillion, like we have trillion-dollar companies out there. The global economy is a $100 trillion or so like, so we have enough money on earth to do the job and it’s close to what we already do. So it’s hard, but it’s not ridiculous. One of the ways that you can help in this is the first rule of holes. First rule of holes is you stop digging. Right?
James Lawler: Yeah.
Julio Friedmann: That’s fine. And the G7 has made a commitment to this extent.
James Lawler: Indeed, they have. So the G7, and again, the countries in the G7 are Canada, France, Germany, Italy, Japan, the UK, the U.S., and the EU have joined together in a pact to stop using coal by 2035. So this is against a backdrop, as we’ve discussed before, of an expansion of the global coal fleet. It grew in 2023 and retirements, so the shutting down of plants, was the slowest, the amount of capacity that was shut down was less than at any year in recent history, other than [00:11:00] 2014. And it’s the first time that an actual date has been set or deadline has been set for doing this.
Julio Friedmann: The fact that a number of really big nations have come along and said, “We care about this and we’re doing something about it, that’s going to lead to more commitments by other nations”. That’s going to lead to structural changes in the coal markets, et cetera. And so these are in fact very big deals. U.S. is number one economy still, Japan is number three economy, so the number one and number three economy have said they’re going to do this.
James Lawler: What, if any, indications are there that China may change course when it comes to coal additions? Because, because if again, the amount of coal that is added every year by China is just, just, you know, 4x what’s added outside of China.
Julio Friedmann: Well, first of all, this is part of the reason I spend so much time doing carbon capture work.
James Lawler: So not much.
Julio Friedmann: What this will really lead to, though, is if people know that we are simply [00:12:00] not going to be burning coal in the future in a large number of countries, that’s going to really shut down a lot of investment in the sector.
James Lawler: Right. Makes sense. So I want to shift in our, in our last few minutes here to some policy decisions that have been made recently and announcements that have been made recently. There are several of them. Let’s talk maybe first about permit reform. White House Council on Environmental Quality, so that’s CEQ, finalized a rule to reform, simplify, and modernize the federal environmental review process under NEPA. So that is part of the president’s commitment to expedite permitting under his Permitting Action Plan. So, you know, the ability to do this, the outcomes that are forecast in the IRA, you know, the, the job creation potential of the energy transition, like all of these wonderful benefits really hinge on, on the ability of projects to get their permits and put shovels in the ground.
Julio Friedmann: Right. So I’m, I am thrilled to see these measures. [00:13:00] And let me say that there are a lot of these new statutes that are coming out now, and they represent a desire to not only codify some of the wins of the Biden administration before the election, but also specifically to avoid the charge of the Congressional Review Act. If these statutes are codified and enacted more than 60 days before the end of the fiscal year, then they are not subject to Congressional Review Act challenges, so that’s a good thing. Permitting reform is the biggest of these challenges. There are thousands of projects, tens of thousands of projects that are facing challenges and slowdowns and permitting issues. And a big piece of that is NEPA…
James Lawler: That’s the National Environmental Policy Act.
Julio Friedmann: …and if you can streamline the NEPA process, that is hugely valuable. If you can help people feel good about the fact that their costs will be modest in this space, that’s huge. Every year that you add [00:14:00] to a project adds 20% to the capital costs and project costs. So if you can streamline this process, you’re actually saving everybody money. You’re saving the project money, you’re saving the ratepayer money, you’re saving the taxpayer money. So it’s good. I’m pleased to see this among the other sorts of things the administration is rolling forward on.
James Lawler: The last story we want to touch on today is, uh, $7 billion of awards under the Solar for All program. The U.S. EPA, Environmental Protection Agency, announced 60 selectees that will receive $7 billion in grant awards through this Solar for All grant competition to deliver residential solar projects to over 900,000 households nationwide. This is funded by the Biden administration’s Investing in America agenda through the IRA, which created the EPA’s $27 billion Greenhouse Gas Reduction Fund. These selections under that program will provide funding to states, territories, tribal governments, municipalities, and nonprofits to develop “long [00:15:00] lasting solar programs that enable low income and disadvantaged communities to deploy and benefit from residential solar.”
That’s all that we have time for today on Climate News Weekly. Julio Friedman and Darren Hau, thank you guys so much for joining us today. It was a very busy couple of weeks, but we got, we got through it and we’ll, we’ll be back in two weeks with another news update.
