Episode 53: Justin Guay, Sunrise Project
Today’s guest is Justin Guay, Director of Global Climate Strategy at Sunrise Project, and organization that grows social movements to drive the transition from fossil fuels to renewable energy as fast as possible.
Justin has a decade of experience in nonprofit advocacy and foundation strategy development, including managing grant making and strategy for global coal campaigns at ClimateWorks Foundation and the Packard Foundation. At the Packard foundation he oversaw a $40 million grant making portfolio across all climate and energy priorities in India, China, the US, the EU and South East Asia. He has also run the Sierra Club’s International Coal Campaign as the Associate Director for the International Climate Program. The program focused on global efforts to transition energy systems beyond coal to clean energy with a special focus on international finance.
Enjoy the show!
You can find me on Twitter @jjacobs22 (me), @mcjpod (podcast) or @mcjcollective (company). You can reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
In today's episode, we cover:
Overview of Sunrise Project
Justin’s history pre-Sunrise Project
When he started caring about climate change, and why
How his thinking has evolved on the problem from when he started to now
Goals of Sunrise project and nature of the coal problem
Where we are with getting off of coal and where we need to get to
Biggest changes that would accelerate this path
Biggest hurdles to these coming about and how to help
Role of CCS, nuclear, etc
Role of innovation, philanthropy, and policy
Justin’s advice for others looking to find their lane in the climate fight
Links discussed in this episode:
-
Jason Jacobs: Hello everyone. This is Jason Jacobs, and welcome to My Climate Journey. The show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change. And try to figure out how people like you and I can help.
Jason Jacobs: Today's guest is Justin Guay, director for global climate strategy for Sunrise Project. The Sunrise Project grows social movements to drive the transition from fossil fuels to renewable energy as quickly as possible. Justin's got a decade of experience in nonprofit advocacy and foundation strategy development, including managing grant making and strategy for global coal campaigns at ClimateWorks Foundation and Packard Foundation. At the Packard Foundation, he oversaw a $40 million grant making portfolio across all climate and energy priorities in India, China, the U.S., the EU, and Southeast Asia. He's also run the Sierra Club's international coal campaign as the associate director for the international climate program.
Jason Jacobs: Justin's perspective is an interesting one in that it's got an urgency and a directness to it that I haven't heard from many guests. His tactics are also quite different in that he's very much about using social movements and grassroots influence to do things like put pressure on big financial investors to get them to divest. This is an area that I've been hearing a lot about from different perspectives, but Justin's is different and unique. And I'm very glad to share it here on the podcast. Justin Guay, welcome to the show.
Justin Guay: Thanks for having me.
Jason Jacobs: Thank you for coming. I'm excited to talk with you. You bring a different perspective than we've had on the pod before. And although that's not always the case, I try to make sure that's the case as much as possible as we move forward so that me and all our listeners can keep enhancing our worldview on this problem as we get further into the journey.
Justin Guay: Excellent. Well I'm looking forward to the conversation.
Jason Jacobs: Cool. So maybe for starters, what is Sunrise Project?
Justin Guay: Great question. The Sunrise Project was created about a decade ago. It's an Australian based [inaudible 00:02:15] foundation. And we were largely created to help avoid the global coal exports boom that was developing with plans to develop significant amounts of new coal mines in the Galilee Basin, which would then be shipped all around the world to help fuel a proposed coal plant construction boom in countries like China and India.
Justin Guay: So that's where we started. We're still in that fight because unfortunately I think the lesson learned on those who work on coal is that while the writing is on the wall for the coal industry, it's a long slog to actually make it I think in the past. That's where we started. That's our roots really in Australian organization, focused on avoiding was a globally significant and still is a globally significant problem. We've since expanded. We are now working to transition the domestic energy fleet in Australia beyond coal by 2030 which is the deadline the IPCC has set for when the world's culturally in developed countries has to come offline. Which is as I check my watch, basically tomorrow.
Justin Guay: And then about three years ago, we developed a global finance program, which is the program I work with. Which is focused on transitioning the world's capital flows away from fossil fuels. And we are pretty laser focused on ensuring the first place we start is the coal industry. So that's sunrise. And I personally am the global climate strategy director, which means I sit at the 30,000 foot level looking around the corner for the next new interventions and opportunities. And trying to get a sense of how we're doing. Whether or not our sum is more than the parts that we are working with.
Jason Jacobs: ClimateWorks where you were before coming to Sunrise Project. I see you're still an advisor there, so how does that break down? What's your role over there, and what does ClimateWorks do as well?
Justin Guay: ClimateWorks Foundation is a regranting foundation similarly focused on addressing the global climate fight, primarily created to focus on decarbonization in the world's four biggest geographies or four biggest sources of greenhouse gas emissions. India, China, the U.S., and the EU. And ClimateWorks' unique role within the foundation and regranting world is to ensure that transnational strategies and the global picture of decarbonization is being taken care of. We have a bunch of regional foundations like Australia. We have The Sunrise Project focused on what's going on in Australia. In Europe, there's the European Climate Foundation. In the U.S. there's the energy foundation. ClimateWorks is truly the global view when it comes to de-carbonization. So I was running the clean energy, clean air projects or program at ClimateWorks. Helped set up much of the work that the Bloomberg foundation was doing around transition the world's coal fleets. Continue to be in close touch with ClimateWorks obviously essentially a general strategy advisor. And the one thing to say about ClimateWorks mission that's important for the listeners. This climate fight is enormous, as we all know. It's existential. But if you look at the amount of money coming from philanthropy to support efforts to address it, it's miserly. So of all philanthropic flows in the world, climate receives less than 2%. So one big part of ClimateWork's mission is to raise the global ambition when it comes to how much money we're putting into solving this problem.
Jason Jacobs: So it'd be great to just talk about you personally. How did this all come to be? You've been working in the space for a long time. You had multiple roles before you got to ClimateWorks, so when did this awakening occur for you and why?
Justin Guay: So I'm from Utah, spent a lot of time outdoors in the mountains, grew up skiing and snowboarding. And for a short period of time was convinced I would become a professional, which sadly did not materialize. But it was during those years that you started to learn a bit more about climate change and you could just see it. Snow falling at only higher and higher elevations and get rain in the mountains in the middle of the winter. Things that you just hadn't really ever seen before. A lot of that is obviously anecdotal stuff when you look at broader trends, but it hits you personally pretty strong. And I can attest to the fact that you see the climate changing pretty rapidly in front of your eyes in these kinds of places. The overnight lows aren't as low, the resorts can't make snow. It just becomes something that makes it real for you.
Justin Guay: After my undergraduate at the University of Utah, I spent a few years doing my best to escape real life and real work snowboarding and otherwise. And I ended up deciding to go back and get a graduate degree in international development. So I ended up at University of Denver, and it was there that I really took that personal interest in climate change and turned it into a professional path. So I wrote a thesis on climate change adaptation in developing countries. And from there I landed in D.C. right when the Waxman-Markey Bill dropped and there was the huge push to get a deal in Copenhagen. The world looks very different now than it did then and a lot of ways. But I was pretty naive to how change actually occurs in the world. So I thought the top down push focus on policy, a big global agreement was obviously bound to pass. So I dove head first into that world and low and behold the whole thing fell apart in shambles. And after Copenhagen, I really felt like much of the climate movement, like a deep sense of despair. And I didn't really know what to do because my world view had been top-down policy, rational thought and argument were going to win today. And it turns out the real world's a lot messier than that.
Justin Guay: So I was working for the Sierra Club, and they had an international program and they were doing some work with some local groups in India. And I begged them to let me go to India because I felt like I needed to get closer to something actually tangible because the global negotiations and the policy making in D.C. felt like it was hopelessly abstract and not going to happen.
Justin Guay: So I spent about a year living in India in Bombay, or Mumbai for the locals. And it was there that I was working with a bunch of distributed clean energy startups that were focused on how to get clean energy access to the poorest parts of India. And that was a really interesting viewpoint into this challenge, which broke my mental mold because it was no longer just about reducing carbon emissions. It was also, how do we do that while also taking care of poor people? Which is still a fundamental challenge we have.
Justin Guay: But when I was there, I had some local activists find us and drag us on a journey down the Southern coast of Maharashtra and show us coal plant after coal plant where big infrastructure projects were being built. Power was being generated to power the country's development. But literally the power lines were going over the local villager's huts. So it was all being built in the name of the poor, built in the name of development, but they weren't seeing any of that. And even worse, they were actually being kicked off their land in order to enable it. So it really was pretty eyeopening in terms of what actually is happening at the ground level compared to the conversations that are had at the UNFCCC or in the halls of Congress.
Justin Guay: So that sent me down a long path of trying my best to transition energy development away from coal, which I still see as one of the most destructive forms of power towards clean energy. So I landed back in DC, did a bunch of lobbying on international financial flows from multi-laterals like the World Bank, U.S. export import bank, several others. And then moved out to California because the D.C. gravity can really deflate you in a lot of ways. And got really caught up in the clean tech scene, entrepreneurial scene. And it was really pretty amazing going from DC, which is a can't do place. It's where dreams go to die. And then you land out in Silicon Valley, which has maybe the opposite problem, but at least it's a can do place. Really about how we solve problems. So that was deeply refreshing given where climate change policy, climate action was at the time.
Justin Guay: From there I went to Packard Foundation, worked to manage their climate energy portfolio. Then ClimateWorks, and now here at Sunrise. So throughout that whole time, the politics of climate has shifted pretty dramatically for better and for worse. And for me at least personally, the common thread has been how do we get off of coal and how do we transition financial flows accordingly?
Jason Jacobs: So thematically, it sounds like you've hit it a bunch of different angles. But getting off of coal has been a rallying cry at least for the last many years for you personally, is that a fair statement?
Justin Guay: Yeah, definitely worked on a bunch of different angles of the climate problem. But coal has been the biggest challenge I have been uniquely focused on over the years.
Jason Jacobs: Why is that piece of the climate fight? How did you make that decision and what convinced you that that is the angle that would enable you to be the most impactful?
Justin Guay: Coal is where the carbon is. It's the single largest source of carbon emissions from the energy sector. One of the biggest sources globally. And it's where if you look at all the other sectors, it's the source of carbon we can get rid of and it's not going to be difficult. There's a lot of very challenging parts of the climate problem. Coal is not one of them. This is something we can absolutely do. We can do it on the timescales that are required. We are now just in a political, frankly shit fight to make it happen on time. I have no doubt that the coal industry will go the way of the Dodo. What I'm worried about is whether it will happen fast enough.
Jason Jacobs: And when you say on time, what measurement of time and where does that reference come from?
Justin Guay:: The IPCC's 1.5 degree report, which was released not too long ago, gave some pretty concrete deadlines for when the coal fleet must be retired. Totally offline. In the OECD, the developed world, which is by 2030. And then the rest of the world, so India, China, and the developing world by 2040 or no later than 2050. So we don't have much time at all. The developed world must go first and fastest. And the good news is it's already happening. We're seeing be seeing coal plant retirement rates, especially in the U.S. and the EU. But to get the entire fleet all the way offline in a decade is still quite a large challenge that I think a lot of people are really only beginning to wake up to now.
Jason Jacobs: Maybe talk a little bit about the existing state of the state in terms of getting off of coal. And then you mentioned shit fight, you mentioned that the world doesn't work in rational ways. There's a few different nuggets there, but what are maybe some of the headwinds or obstacles that are standing in the way of us moving faster?
Justin Guay: So if you look at the numbers from Global Energy Monitor, which is the foremost expert on the state of the global coal plant pipeline, we have over 500 gigawatts of coal plants that are under consideration for construction. But that in perspective, it's about twice the size of the U.S. fleet, and it's about a quarter of all installed capacity. So that's just the expansion of the coal industry. And keep in mind that we can't expand it at all. The UN secretary general has called for an immediate freeze on coal plant construction in 2020, so literally next year. But we still have this overhang of 500 gigawatts of plants that are potentially going to be built.
Jason Jacobs: Are people racing to tuck it in before the 2020 freeze?
Justin Guay: So there has been a long effort to reign in that expansion dating all the way back at least to 2011, maybe even 2010 when people started to really get their arms around just how many plants were being proposed. It's that gap between what we talk about when it comes to climate change in the abstract and carbon emissions reductions, and then what we're actually doing in our day to day investment decisions and policy decisions.
Justin Guay: So that pipeline has actually been shrinking quite a bit. We've essentially avoided doubling the size of the coal fleet, thanks to the efforts of grassroots activists, policy makers, investors around the world who are increasingly saying, "We've got to get off all fossil fuels. But coal is the first thing that's got to go." So that pipeline has shrunk dramatically, and the amount of installed capacity has only marginally increased.
Justin Guay: The problem is we can't have any increase at all. So will we meet that 2020 deadline now? There are at least 20 to 30 gigawatts that are literally under active construction right now a little on preapproval that will likely get built one way or the other. So what we're facing though, and the good news is that we are likely to hit peak coal plants on a net basis, sometime between 2022 and 2024. And that's really important because once an industry doesn't have a future growth story, they can no longer attract investment. They no longer have the same amount of political power and respect that they once did.
Justin Guay: And that creates a self reinforcing cycle of downward pressure that really eliminates or accelerates the ultimate demise of an industry. So that's I think the real power of the expansion story. To the extent that we see the expansion and actually hit terminal decline, hit a peak and go down, that suddenly becomes a really powerful thing for us. But what looms on the other side of that peak is how fast we can retire the slope of that line. And it turns out it's got to be really, really fast. And that is the thing I think a lot of people are not really grappling with today because most of the world's coal plants will have to come offline before their useful life, before investors have been paid back. It's going to because enormous job losses. It's going to because enormous dislocation socially and politically. And that means for us to really be able to do it, we're going to need managed decline and government intervention. Which is something most in the climate conversation are not really comfortable with. And especially in the coal fight, a lot of people feel like there is a markets as destiny crowd, which is the economics are in our favor. Coal can't compete. It's going to go offline no matter what. All of which is, I would say generally true. But not fast enough and not without tremendous amounts of political backlash which it will engender.
Jason Jacobs: When you talk about the shit fight, what does that look like? How does it manifest?
Justin Guay: Well, I think it's easy to see it here in the U.S. So as the coal industry faces greater levels of retirement, worsening economics, and a loss of their market share, they're basically cultivating political patrons to pull together bailout packages. Either from the federal government or from state governments to help prop up their fairly poor economics today so that they can continue to survive in the future. So those are just nakedly political decisions. They have nothing to do with economic rationality, let alone climate rationality. And it sets up this what is exacerbated by what is already a highly partisan and politicized fight over whether we do anything about climate change. So you see that in the United States, but you also see it in other parts of the world. So in Australia, the new government has come in and said not only do they not want to let coal plants retire, they want to prop them up, bail them out, and even try to subsidize new construction. Despite the fact that you couldn't find a single market participant who thinks it makes economic sense to build a new coal plant.
Justin Guay: So I think the shit fight is really about the power of incumbencies to buy politicians in order to secure subsidies to help them survive. Whereas we have cheaper, cleaner, more nimble and dynamic industries sprouting up capable of replacing these guys. That's the fight and really the problem is that we just don't have time for that fight to play out. It has to be won by 2030 in the developed world.
Jason Jacobs: Are there specific policies that go across plants, or is it more bailouts on a specific plant basis? Any examples that you can point me and the listeners to, just to be illustrative of the dynamics that you're describing?
Justin Guay: Sadly, there's a lot. But probably the most emblematic would be capacity mechanisms, which are literally just bulk payments to generators who have theoretical capacity that could be available in case they needed it. So we've seen capacity payments in Europe, we've seen them definitely in the United States. They've been proposed in Australia. The only reason we don't have more capacity payments in the U.S. is because the Trump administration has proven pretty inept at actually getting these policies in place. But absent federal leadership in the wrong direction, you're starting to see regional markets, regional grid operators put these kinds of payments in place. So the New England grid operator actually just put in place a capacity, essentially a bailout for coal plant operators who maintain a certain amount of fuel supply on site for cold winter months. Which most rational [inaudible 00:18:49] would say is not necessary and is quite clearly an attempt to support and prop up some of these aging, uneconomic, not competitive resources.
Jason Jacobs: And maybe say a bit more about how these capacity payments work. Just because I want to make sure I understand it.
Justin Guay: They're essentially bulk payments that are based on how much capacity a generator has. So if you're a gigawatt plant or 500 megawatts plant, it would alter the amount of money you get. But they're not, I think the crucial point to make is they're not based on actual generation. You get the payment no matter what simply for existing. So they are described as a part of a functioning market, but really all they are is a check for existing. Renewable energy doesn't get it because they are not quote unquote 'always on.' Renewable energy operators who have storage potentially could be capable of getting those kinds of payments. But it becomes a reliability argument that the incumbents used to try to dis-incentivize or pull the rug out from under clean energy competitors.
Jason Jacobs: Does nuclear get it?
Justin Guay: Yeah, there's a huge bailout recently in Ohio. And this goes to some of the political fault lines that are problematic. So there's been a long simmering debate from pro-nuclear activists and then traditional environmentalists around whether or not nuclear gets to be considered a part of the clean energy crowd. I would say that those dynamics are shifting pretty quickly.
Jason Jacobs: From what to what?
Justin Guay: From a point, let's say back in the '70's or '80's where environmentalists were solidly anti-nuclear, we're pushing for nuclear phase outs, did not want to see any nuclear online at all. To a point where I would say there's at least a measured quiet around what is going on with nuclear. Meaning that environmentalists are not necessarily actively opposing nuclear or trying to shut it down, at least the majority. But they're not necessarily pro-nuclear either. But that's a big difference. But the problem is that in that set of politics in Ohio, the nuclear industry and the coal industry teamed up to get a bail out, which is the worst of all. Because the nuclear energy industry should not be in bed with the coal guys, and climate activists and environmental activists across the board should not want to see coal bailed out under any circumstances. So getting those political alignments set up such that anything that's low carbon or no carbon is on the same team. And anything that's high carbon like coal is excluded and not supported in any way is really important. And frankly, we're not there on politics in the U.S. at least.
Jason Jacobs: Do you identify as an environmentalist?
Justin Guay: I would say yes, but you know there's a lot of things about environmentalism that I don't agree with. Frankly I see nothing wrong with keeping existing nuclear plants online. I'm not anti-nuclear, not necessarily pro-nuclear. I don't think it makes a ton of sense to go build a bunch of nuclear plants. But I think there are some tribal ideologies that I wouldn't sign up for that persist that are a challenge. I think the bigger fault line for me is not am I environment or am I not environment? It's actually whether or not I'm team climate or I'm team Democrat. So in the United States, that I think is a big problem for the climate movement.
Justin Guay: So I can personally attest from my time in D.C. what happens a lot of times is that climate activists become Democratic activists. And they allow a climate message to be watered down or clinic policy to be watered down based on the political viability a Democratic operative might see, because they don't see any daylight from Republicans. So they view that as their team. But the reality is where team climate. And whoever carries that water good. And we need to be able to criticize Democrats if they are not pushing for the policies that will actually solve the crisis, which is essentially the case today. Most really are not deeply understanding what's going to be required, and most of the commentary at the political level is very shallow. It's an exciting time. We're finally talking about climate change for the first time in the 10 years I've worked on this. At a very serious, very real politically salient level. But because we stopped talking about it for the last decade or so, the depth of understanding of the candidates is actually pretty surprisingly low.
Jason Jacobs: You talked about moving away from coal and getting beyond coal. Those are two different phrases that I've heard. You have strong views on to what, so we go beyond coal. So to where?
Justin Guay: I mean it's an active debate still, but I think it's quite clear that we have to move beyond all fossil fuels across the board. It's not as though like 10 years ago when I started, natural gas was viewed as a bridge fuel. I think there were a lot of people who are very skeptical of that then. And I think the science has emerged and our timeframe has collapsed in such a short period that it's clear that that can't be the case either. But, there's still a lot of people who firmly believe that gas has a role. Things like CCS will that will enable fossil fuels to sit at the climate table so to speak and be a part of the solution. My experience has been that CCS is not a technology that's ready for prime time. And that suggesting or justifying new fossil fuel expansion under the guise that one day CCS will be ready to solve that problem is irresponsible.
Jason Jacobs: Where is CCS lacking? Because I've had some guests on that have talked about CCS specifically and they have obviously no surprise a much more optimistic view. So what is inhibiting it from being ready from primetime today?
Justin Guay: The biggest thing is cost. These projects are incredibly expensive. Most of them have been boondoggles, billions of dollars overspent compared to what the project proponents had suggested they would cost. Real world capture rates are not what the proponents have suggested they would be. So most CCS projects have said that they plan to capture about 90% of emissions. Which is good, but there's still 10% that we still have to account for. But real world capture rates have been much lower for a variety of reasons.
Justin Guay: But ultimately, unlike wind and solar, CCS has been around for a long time and has not scaled. Costs have not dropped. And you have not seen it actually make its way into the marketplace. So I don't not believe that CCS works. I mean the technology works, there's no problem with it. But again, in the real world it can't compete. So absent a huge amount of dedicated policy support and money that we need to throw at it. I don't see it happening. So I think CCS advocates have to grapple with that fact. They've been bullish on it for a long time. And for a long time it hasn't really materialized. So for me, it's not so much a tribal ideological beliefs about should we or shouldn't we have CCS and fossils in the mix. It's more pragmatic reality they haven't shown up yet and our time is so short, we can't keep waiting on them.
Jason Jacobs: So when they point proudly to what's happening with net power for example, is that mostly hype, is it overblown, or is it potentially a breakthrough?
Justin Guay: That's great, but it's one project. And we need an entire industry. We need hundreds, thousands of these projects. We've got a terawatt of coal plants in China that would need to be retrofitted with CCS or retired. So I think the strategic question or the strategic calculus we have is which do we think will happen first? That we can shut these things down entirely and replace them with clean energy? Or that we can see CCS be cost competitive enough to be able to retrofit those plants? Either way it would work. But do we think the CCS will come fast enough? I'm fairly skeptical.
Jason Jacobs: I'm no expert on the math, but what I see is that we need to get there a whole lot faster than we are. I think the challenge though is that it's going to take time no matter what. And then you start getting into a world of trade-offs where every path is a suboptimal path. And you can use some CCS, you can use some natural gas, you can push on renewables, but then you're going to hit intermittency issues and then you can push on the long duration storage innovation. And interconnections with the grid, and transmission, and wind use, and nuclear, and costs, and a pricing externality, and advanced nuclear and fusion. And on and on and on and on. Probably a bunch of things that I didn't even mention. But you had said for example, it doesn't make sense to build new nuclear. And I guess anything I just mentioned, whether it's wind, or it's solar, or CCS, you can rip it apart. Right? And so to me it seems like there's no one thing that's going to carry the day. But we need a portfolio and we just need more and we just need faster. But I just worry that if we're opposing CCS for example, or we're opposing new nuclear for example, then we're just taking options off the table in a world where we should be putting more options on the table. So how do you react to that?
Justin Guay: I think that my position would be actually pretty similar to that, which is I don't oppose either CCS or nukes. New nukes. It's a matter of letting them compete in the marketplace with the subsidies they already have. So yeah, I would not say we should be passing policies that ban those technologies. I think that would be silly. I'm just expressing deep skepticism that they come to save the day. And I think that's the problem right now with a lot of climate advocates is that we have continued to hold on to these technologies that we've been talking about for over 20 years, that are supposed to come and help save us, come to the rescue. And they're basically where they were 20 years ago. I mean yes, there have been improvements. Yes, we have some pilot projects. That's great. I just think we need to be very honest with ourselves about state of those technologies. They are really not in good shape now. I would be more than happy to see a bunch of R&D money and support go to those kinds of technologies. I just think we all need to be recognizing what's actually working in the real world and what we're still waiting on.
Justin Guay: But yes, in terms of a total setup portfolio, I mean we are definitely in a world of bad choices. And we're just trying to make less bad choices now. I think a perfect example that would be direct air capture. There's a lot of environmentalists that are firmly opposed to that technology. I don't see how you can be opposed to it today. We're at 420 parts per million. How do we get back to 350? We have to clean up the Superfund site in the sky. There have to be technologies that we don't necessarily like that are deployed because there's no possible way that we get back to any kind of safe limit unless we start making some tough decisions.
Jason Jacobs: We did the soundbite for Sunrise Project and then we've been talking about general market conditions and such. But one piece of context that I think is important that we haven't yet covered is just what is Sunrise Project slice? So you want to get beyond coal, I get that and that's what you're working on. But what's your lane? What area of that transition are you focused on? And then what's the actual work that you're doing each and every day?
Justin Guay: So we are the most focused on how political and social change come about. So there are a lot of very smart analysts and [inaudible 00:29:54] who think a lot, very deeply about the climate problem. We listen to them, we trust them. That is not our lane. We are not the ones putting out the deeply researched deep de-carbonization scenarios. We spend our days in the political trenches working to actually make change happen in the real world. Largely by supporting social movements, by supporting smart strategy, and by supporting an ecosystem of actors that are trying to push and change political conditions to enable this change to happen. So on the global side as I said up front, we're really interested and focused on how we get capital out of coal plant expansion and the existing fleet and into clean energy. But really first and foremost, how do we get out of the bad stuff?
Justin Guay: So a lot of our work has been focused on shifting systematically important actors in the financial system away from coal. So that means enacting a coal exclusion policy, divesting from coal, actively pushing the companies they own in the case of investors to transition away from coal plants and associated infrastructure. So what we've seen in terms of progress, which has been pretty dramatic over the last few years. Is that there are now over 116 globally significant financial institutions, which we define as greater than $10 billion in assets under management. That have some form of a coal exclusion policy.
Jason Jacobs: Is that a coal company exclusion policy?
Justin Guay: So it depends on how you define coal company. So we would not limit the term coal company to [inaudible 00:31:24] Peabody. But also to diversify utilities and conglomerates that are developing.
Jason Jacobs: So anyone that still has coal as part of their portfolio is coal?
Justin Guay: Yes. And right now, the thresholds that are defined in most of those policies are around 30% coal revenue. So of a total corporate balance sheet. If 30% or more comes from coal in some way, shape, or form, you would be considered a coal company that either must be divested from some of these financial institutions, or pushed to transition. So we would define a coal company as achieving or securing greater than 30% of their revenues from coal in some way, shape, or form. Whether that's power, mining, or transport. And those thresholds, the 30% threshold is likely to decline over time. We're already seeing it from many of the financial institutions that have adopted these financial inclusion policies. There are other elements we would include. So greater than 10 gigawatts of existing coal capacity, plans to develop more than two gigawatts of new coal plants, or miners that mine more than 20 million tons of coal. All of those things would basically land a company on an exclusion list or a transition list where an investor would be pushing them to limit those exposures and transition to cleaner options.
Justin Guay: So about a 116 have some foreign policy, not all with those exact standards and thresholds. And that has grown from about one every month starting in 2013 when the World Bank announced the very first coal exclusion policy. To one a week this year. And most importantly has gone from primarily Western institutions. So multilateral development banks and private banks to primarily Eastern institutions. Including the first Chinese state owned enterprise, all three big Singaporean banks, and the world's fourth largest bank in Japan Mizuho, or sorry MUFG.
Justin Guay: So it's essentially a financial Exodus from the coal industry have pretty powerful signal. And I think the most interesting real world impact that it has created is that the cost of capital has skyrocketed. So the University of Oxford, their oil and gas group, not their clean energy group has been surveying European and U.S. institutional investors around their hurdle rates, how much money they would put on the table in order to invest in a new coal plant. Or any energy project type. And what they found is that those hurdle rates for coal are as high as 40% now. And just two years ago they were as low as 18 to 20%. So in effect, they'd doubled. Meanwhile, clean energy hurdle rates have stayed fairly low. And I think that's a very clear signal that markets are pricing in the risk of new coal plant development in a way that is pretty nonlinear in change.
Jason Jacobs: And you guys are a nonprofit?
Justin Guay: We are, yeah. We're a nonprofit.
Jason Jacobs: And how are you funded? What does the portfolio of donors look like?
Justin Guay: We like any, not any but like most profits. We get grants from large foundations who are interested in solving climate change. And that's the primary source of our support. Unlike some of the big green groups like say Sierra Club or Greenpeace, we do not have individual members. So we don't get contributions from, monthly contributions from individual members as well. We're entirely supported by foundations. And then to a smaller extent, [inaudible 00:34:45] networks.
Jason Jacobs: And the foundations, I mean are there common elements to the types of foundations that would find this type of approach compelling?
Justin Guay: I think the common element is that there's not that many of them. So as I mentioned up front with in relation to ClimateWorks, only 2% of all philanthropic giving goes to climate. And even that is fairly concentrated in say 10 to 20 of the largest foundations. So there's not an enormous pool. I will say though, that that's starting to change pretty quickly. There's a lot of people coming to grips with how big of a problem we have and how little progress we've made so far. So I do think that there's going to be an increasing amount of support for work like this. Not just ours anywhere. One piece of a much bigger puzzle. And not all work needs to be about creating political pressure and shifting political reality. I mean there's a lot of important work to be done on technical research, broad-based communications. It takes all forms. But if you look at the giving pledge and all of the foundations that are stepping up, I do think that there's going to be more, not less focused on this problem in the future.
Jason Jacobs: Why is climate giving coming from such a small percentage of foundations? Historically, at least.
Justin Guay: Part of it is that if you look at just philanthropy and its history, it's mostly been focused on giving to religious causes, education, or buildings. Getting people's names on universities or hospitals, or whatever it might be. So there is a bit of a historical bent towards how philanthropy has been spent. And that's I think what accounts for a big part of that skew. I don't know how to answer why more foundations haven't decided to create climate programs and invest in it. I mean, I think one potential answer in the U.S. is that it's become so partisan in a way that's frankly mystifying because it's no different from being concerned with the effects of any other universal law. I mean, it's just science. It's just fact. But because there's been such concerted right-wing, misinformation, fossil fuels and misinformation for so long, we have political conditions in this country that make it controversial. Those are changing rapidly. But I think that's part of why you haven't seen as much focus on climate in the past.
Jason Jacobs: So when you look at the big picture, what is the role of philanthropy? What is the role of innovation? What is the role of policy? How do you think about that portfolio? What are the most impactful things that we could do as a society to have the biggest impact?
Justin Guay: The philanthropy has a pretty uniquely powerful role because its form of money is very unique in the ecosystem. I mean, they have theoretically the highest risk tolerance. They have a source of money that is a guaranteed negative 100% return each and every year. And it magically replenishes each and every year. Investors would love to be able to play with that kind of money. But I think that philanthropy needs to scale the amount that it's giving. It needs to provide a baseline foundation for the NGO is working on this problem. Because so many NGOs working on climate change outside of the big ones are actually working on a shoestring budget. So there's just a need for more basic infrastructure investment across the board.
Justin Guay:: I also think that foundations need to be able to be comfortable with funding things that push political boundaries. And I don't mean that in any kind of direct intervention in political campaigns or anything like that. But for the longest time, we have all in the climate community run away from our issue. I mean, I remember sitting in climate NGO gatherings where messaging gurus would tell us we shouldn't talk about climate change, we should talk about air pollution because it's such a polarized topic and nobody wants to hear about climate change. Well, the reality is you don't talk about your own issue, nobody else will and you're not going to get anywhere. So I think that whole mindset, it's not a foundation mindset, it's a climate movement mindset has to shift. But it means that those who support the movement need to be more comfortable with pushing the boundaries and leaning into the problem and not running away from it.
Jason Jacobs: If you could wave your magic wand and change one thing to accelerate our progress against this problem, what would it be?
Justin Guay: I think that I would want to see the parameters of the debate at the elite level shift from a set of parameters that were defined 20 odd years ago. Primarily as a way to appease moderates and Republicans that we theoretically thought would join us in this fight. Towards the reality of the problem we're facing now so that we could talk openly about what will sound quite radical, but is actually science based and factually based in terms of what must happen. I feel like that gap between where the conversation is and where it needs to be, if we have any shot in hell at solving this problem. Is so enormous that it frightens me. I do think that it's closing. If you look at the climate conversation, even in the political debates we've had on the Democratic side so far. There is an active and growing conversation on climate that is becoming far more radicalized than it has been in the past. And I don't mean that in a political way, I just mean in terms of aligning what must be done with where our conversation is. So I think it has to start with just being honest about what's going to need to happen. I just don't think we're honest with ourselves right now.
Jason Jacobs: Where does it need to be that you don't think it is?
Justin Guay: The most concrete example I see is that even for Democratic candidates that will talk openly about climate and have a climate plan and talk about it on the debate stage, most of them talk about carbon neutrality by mid century. And the elite level conversation, the mainstream of the climate community applauds that and loves it because that is where we need to go. But what we leave out of that target is saying the hard part out loud, which means we must retire the coal fleet by 2030. Can't allow expansion of the oil and gas industry anymore.
Justin Guay: And that we are highly likely to face stranded assets that will need to be retired. That will most likely require some form of government intervention to allow for a transition and manage decline. That's the hard part that's not said out loud, and most of these candidates are going to be in office for four to eight years at most. So a policy that gets us somewhere in 2050 is essentially meaningless if you're not willing to do the hard stuff in the near term to enable it. So I think that's where our debate needs to shift. We need to go from speaking about platitudes and 2050 timelines to what we're going to do day one to actually reign in and retire the fossil fuel industry. Which has tremendous amounts of political power in this country. And for the most part, we are still not really being honest about what that's going to look like.
Jason Jacobs: Do you distinguish between the companies that are producing fossil fuel and the fossil fuel fleet? So when you talk about divesting from coal, does that also mean ... when you look forward in your ideal world, what's the role of the big oil and gas companies in this next chapter of the world?
Justin Guay: My feeling is that only dinosaurs die, and not all fossil fuel companies need to be dinosaurs. So I don't necessarily come at it in any ideological way to say these are all fossil fuel companies, blanket statement they must go. Frankly, I could care less if they are a part of the clean energy transition. Excellent, we're going to need them. But I think the reality has been that they are not honest actors and that they are not actively a part of the transition yet. So I would say that pure play mining companies, companies like Peabody, those that don't have any other direction of travel for their corporate activities, they don't have any other sources of income or revenue. Those are dinosaurs. Those guys are not going to be a part of the transition. They're headed towards a dead end.
Justin Guay: I think there's an open question on the oil companies. They obviously have invested fairly trivial amounts in the grand scheme of things, but they have invested in clean energy at various points in their lifecycle and increasingly so today. But it's also hard to look at the amounts and look at what they're doing on the oil and gas extraction side and say yes, they have fully internalized a transition and that's where they're headed. That doesn't pass the laugh test. Where I think the most interesting push is around diversifying companies. So utilities or even auto manufacturers. These are guys that don't need fossil fuels, but are some of the biggest consumers and purchasers of them. And we have seen utilities shift pretty dramatically. So I don't necessarily think that a company like Duke or Southern has to be the bad guy. Those companies can be a part of the transition, but they are not putting their shoulder to the wheel yet.
Justin Guay: And on the auto manufacturers, ironically it took diesel gate to have our first big OEM that's all in on the electric revolution, which is a VW. Again, I think diversifies are the most interesting place to look. That's where I think we win or lose this game. And we have to drive a wedge between them and the pure plays who have nowhere to go because the only thing they do is either extract fossil fuels or burn them. So I think it's a bit of a mixed picture. I have a lot of hope that these oil and gas guys will be a part of the transition. But I also don't want to be naïve. And thus far, they have not given me a whole lot of confidence that they will be big drivers of the transition.
Jason Jacobs: Do you talk to them?
Justin Guay: In various points in my career I have, yeah. We don't have an active dialogue with them right now and mean. As I said, we're focused mostly on coal, not on oil and gas. But I do think you get a lot of interesting insights from a lot of these guys in private conversations. That's why I try my best not have any tribal when I come into any of this work. It's one thing to say a lot of things privately and it's another thing for the companies to continue to do what they do. So yeah, I mean I've definitely had many conversations with coal, oil, and gas companies, utilities in my current day job. Not as much.
Jason Jacobs: Some of the counterarguments I've heard to divesting are that by divesting, they're still going to be around and do whatever it is that they do. But the green minded actors that [inaudible 00:44:59] chairs today, if they divest, then they'll just be locked out of the discussions versus at least having some influence when it comes to shareholder meetings and things like that. And another is just that nobody understands carbon like they do and that we actually need their help. What do you think about those arguments or what would you say to someone that makes them?
Justin Guay: For pure play companies, I don't see any point in engaging if they've got nowhere to go. It doesn't make any sense to me. And I think the analogy, it's a bit like saying shouldn't we have the tobacco industry help us write the laws for reducing tobacco use? Nobody would say that with a straight face. We've had decades of progress in the tobacco fight, and that would never pass muster. And yet we say it all the time with fossil fuel companies. And I think that's primarily because people are afraid of their power when it comes down to it.
Justin Guay: But I do think there are a set of actors that can and should transition. It's the diversified companies, utilities, OEMs, and others. And there I think that divestment is your last course of action, not your first. But it has to be on the table because we have had engagement and conversations with these companies for decades, and it hasn't changed them. So unless you keep that stick, that last course of action very open and visible, why do they have any reason to believe or why do they have any pressure to act beyond just some rational conversations? And I think it would be foolish to take that off the table. And I think if you look at the trends in the investment community, that's not activists saying that anymore. You have [inaudible 00:46:29] saying that openly. You have BNP saying that openly. You have Church of England saying that openly. These are investors that have been really focused on stewardship and engagement for decades and got frustrated and fed up because these companies have talked forever. And their actions don't align with that talk.
Justin Guay: And I think that the last company that we didn't get to, but we'd be remiss not to talk about it, would be BlackRock for that exact same reason. I think what you see over and again from companies like BlackRock and people like Larry Fink is that they have the best of all worlds. Because as long as they talk about climate change and talk progressively and put up a good front, people don't tend to push them too hard on what they're actually doing. And they get a huge amount of space and political leniency to continue to be just as bad as anybody else. And as I said up front, there's 116 globally significant financial institutions with the coal policy. BlackRock is not one of them. They're the world's largest investor in coal, and they talk a good game about climate and transition risks. But they're not aligning their words with their actions. So I think the only thing you have at the end of the day, the only stick you have is divestment, and it needs to stay on the table.
Jason Jacobs: And where does energy poverty fit into all of this?
Justin Guay: So going all the way back to my journey in my time in India, where I have landed on energy access is that it's not so much coal, versus solar, versus wind that is the technology that will bring energy to the world's poor. It's more about how political governance works to ensure that the grid is actually extended to these populations. And that they can afford the juice that flows to those credits. So there's over a billion people who don't have any energy access at all today. There's a billion people who live with, who actually have connection to the grid, but the juice is so infrequent that they live with constant blackouts. And for all intents and purposes, they don't really have power. That has nothing to do with whether or not you build a coal plant, or a solar plant, or a wind farm. It has everything to do with whether or not those people aren't politically marginalized and have access to the grid, and can hold their leaders accountable to delivering them power. So I think it's a huge red herring that the coal guys use to justify their place at the climate table. But there's no reason that coal is particularly suited to that task versus any other energy generation sources. It's not about the energy of generation source, it's about the grid that's the power to people.
Jason Jacobs: So last topic that I wanted to dig into is just we have an election coming up. And there's different schools of thought when you think about that election from a climate standpoint. Because on the one hand we have essentially an active denier in the office who's anti-science and at least in rhetoric, who knows what he really believes. And actively unwind a lot of the climate progress that we've made to date. At least that's the message I hear from the meaningful portion of the climate community. But then there's another portion that says who's ever in that seat, the hard work is going to be scrapping and climbing for the incremental wins behind the scenes quietly in a bipartisan way. And that it's this fork in the road, right? Because you've got the Green New Deal crowd that's calling for a revolution. And then you've got people saying that will be the best way to ensure another four years with Trump. How do you think about that with your climate hat on?
Justin Guay: I think if anything, 2016 proved that nobody who pronounces to know what will happen in the world of politics knows anything. I think that's just where we need to start from. But I do think that this is where my point about being teamed Democrat versus team climate really matters. I think for those who care deeply about this issue and think that it's existential, you have to remain true to what is the best way to solve climate change. Not what is the best way to keep the Democratic Party in power. Because that does actually change how you might approach for instance, Democratic primary. The arguments I hear for the middle of the road candidates, candidates that theoretically can beat Trump more handily and in general who are going to by default have weaker climate policies than those further to the left who will have stronger climate policies. They don't to me seem as though they've internalized the fact that the 2016 election happened. They feel to me like a set of people who want to turn back the clock, pretend 2016 never happened, and that we can really just get back to the way things were. And I think we all need to recognize that the world has fundamentally changed. And that whatever political rules we thought we were abiding by have been totally rewritten.
Justin Guay: And we don't actually know anymore what the boundaries are, what's politically feasible, what's not politically feasible. And I worry the most that the Democratic Party and the democratic establishment will look in 2020 like the Republican establishment looked in 2016. Which was totally out of whack, totally tenured to what was happening with its base, let alone with the independent voters that needed to secure. And I do think you've got to come out with an actual vision that excites people to get them up off their asses, to go vote and knock on doors.
Justin Guay: And I just find it hard to believe that with all of the things we face that we can excite people enough on this problem by saying if we just go middle of the road, small incremental changes to this existential problem. We got this. I do kind of think we need a man on the moon moment. And I think the politics have shifted so much that it's possible. It doesn't mean that it is guaranteed. It doesn't mean that we might not alienate Rustbelt voters. But I think we've got to stop trying to avoid losing and start trying to win. Because we've been for decades trying that incrementalist hope and a prayer on bipartisanship approach. And frankly it has not worked. So the only thing I know is that doing the same thing over and over again and getting the same results does not suggest we should keep doing the same thing over and over again. I think it's about time we at least try. We just don't have the time anymore to keep doing the same stuff, expecting a different result.
Jason Jacobs: So for the people that would say that it's better to have a watered down climate policy that moves the ball forward than a denier in the office of the president, you would say that you don't believe that that's the best way to ensure that a democratic candidate wins?
Justin Guay: Well, I think the painful reality is that both of those scenarios lead to the same outcome. Which is we don't solve climate change. Yes, it's better than a denier, but it still doesn't get us where we need to be. And that's why we need to really be laser focused on what has to happen. Whether it's politically feasible or not. And then we have to make that politically feasible. That's the challenge going forward. And that's just where we just aren't quite yet.
Justin Guay: And I guess the last thing I'd say on voting is that just to be clear, in the 2016 primary, I was firmly a Clinton voter. Not a Bernie Sanders supporter at all. I was firmly a bipartisan first incrementalist, and I felt like it was the smartest, best path forward. And it's been actually pretty instinct for me personally to realize that in 2020, I'm the opposite. I'm not quite sure what's happened. The world has changed around me. I hope, and I haven't changed that much. But it's really hard for me to continue believing that we can keep selling this bill of goods. That if we just do small incremental changes, it will add up to the massive chain that's required. Maybe if we had 100 years, but we don't have 100 years. So I just think it's time we started to throw a cold bucket of water over our heads and just accept that even if it's really hard, it's the Kennedy quote, we don't do it because it's easy. We do it because it's hard.
Jason Jacobs: If someone said, "Here's $100 billion, but the only way you get it is you have to allocate it towards the thing that can move the needle the most in the climate fight." Where would you put it? How would you allocate it?
Justin Guay: I would take a small fraction of it. I would endow a national green bank. And I would mandate it with buying up the remaining coal plants in the United States and retiring them before 2030. I don't think you need all $100 billion dollars. I do not believe that there's that much value left in the fleet. And I also believe investors will need to take some form of a haircut. So I think you take a chunk of that money. You buy up the coal fleet, you ensure it's retired by 2030.
Justin Guay: And my rule is always coal first. So buy off the coal fleet, retire it, make sure it's offline by 2030. That's not all that money. I would then take my second rule of climate politics, which is that we are way too focused on electricity only. And we have not broken trail on the really hard to decarbonize stuff. Industry, ag, deforestation. These spaces get no love. And for all intents and purposes, we are not anywhere near close to on track in a way that we are with electricity. So the stuff I think is exciting are the ideas for an ARPA-I, ARPA for industry. I think it would be interesting to do something similar for ag and ARPA ag. Really focus on innovation, but really not just early stage R&D deployment. The stuff we know works, we need money to get it out into the real world.
Justin Guay: And then last but not least, and this one is still controversial for environmentalists at least, but I find it completely uncontroversial. I think we need a moonshot program for direct air capture, because we are already over 350 by a mile. We're going to blow past 450. Until we figure out how to clean up the Superfund site in the sky. We do not have a chance at avoiding civilizational collapse. We may win on electricity, we may win on transportation, we may even get there on the heart to decarbonize stuff industry, etc. But we're going to have a giant overhang of carbon emissions, and it needs to be sucked out of the air and sequestered. So I think we are, for all intents and purposes with direct air capture where we were with solar in the '70's. We have teeny little bits of ideas of which technologies will work. We don't have any real deployment whatsoever and we need just a massive amount of money into R&D and deployment to make it work. That's what I do.
Jason Jacobs: A lot of our listeners care about this problem and are trying to find their lane. So let me speak to them for a moment. For people listening that are concerned and want to figure out how to help, what advice do you have for them?
Justin Guay: My advice will be the exact opposite of what the environmental movement has been telling people for the last 50 years. Don't believe people when they tell you that one little step will solve this problem. That just changing out your light bulbs is doing your part. Those things are all important, so please do them. But frankly I think that at the end of the day, this is about political change. We're going to need policy, and we're going to need people who are willing to implement that policy. So I would just beg people to vote, and vote because of climate and let people know you're voting because of climate. I'm not saying vote for Democrats, I'm not saying vote for Republicans. Let both parties know that you're a real constituency and that your vote will hinge entirely on what they will do on climate and whether it's credible. Because once we develop a block of people, that will shift politics greatly and you will see candidates respond. So to the extent that people can make that clear, make that known, show up to the extent they can at political events. But I'm not asking people to become political organizers. Really just vote and let people know you voted because of climate, not in spite of it.
Jason Jacobs: Awesome. I think that's a great point to end on. So Justin, you've been a great guest. I really enjoyed this discussion. Thank you for coming on the show.
Justin Guay: Yeah, thanks for having me Jason. It's great.
Jason Jacobs: Hey everyone. Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. Note that is .co not .com. Someday we'll get the.com, but right now .co.
Jason Jacobs:: You can also find me on Twitter @jjacobs22 where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
