Episode 224: Rebecca Dell, ClimateWorks Foundation

Aug 29

Today's guest is Rebecca Dell, Senior Program Director, Industry at ClimateWorks Foundation.

ClimateWorks is on a mission to end the climate crisis by amplifying the power of philanthropy. Since 2008, ClimateWorks has granted over $1.3 billion to more than 600 grantees in over 50 countries. Now, Rebecca leads the industry program, which is dedicated to reducing and eliminating the one-third of greenhouse gas emissions that come from the material economy. Previously, she worked at the U.S. Department of Energy in the Obama Administration, where she coordinated implementation of President Obama's Climate Action Plan and was a lead analyst and author of the U.S. Quadrennial Energy Review. Before her federal service, Rebecca was a scientist at the Scripps Institution of Oceanography, studying the interaction between the ocean and land-based ice sheets like those in Greenland and Antarctica.

Industries are a huge source of emissions and many people say that they are notoriously "hard to decarbonize," but this conversation with Rebecca sheds light on additional context for why that may be the case (or not). What aspects make them hard to decarbonize? How can we accelerate decarbonization and philosophically, what should we do in the meantime? This is a great discussion and we hope you enjoy it!

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Episode recorded on August 5, 2022.

In today's episode, we cover:

[3:57] An overview of ClimateWorks Foundation
[6:02] Rebecca's unusual entry into climate from physics
[11:37] Gap in resources and funding for solutions in the industrial sector
[13:53] Why the industrial sector is considered "hard to decarbonize"
[16:21] Activities that are mainly responsible for GHG emissions, including steel, cement and chemicals
[21:56] Costs associated with green production and who covers it
[28:56] Examples of how Rebecca creates demand for low GHG commodities
[32:34] ClimateWorks' model for looking at potential grantees
[37:15] Biggest levers for decarbonizing industrials faster
[39:28] Voestalpine steel company example of the infrastructure planning, local politics, and social issues tied to decarbonizing certain industrials
[44:44] Types of capital needed
[48:36] Why a carbon tax is unappealing
[52:52] Carbon capture and the cement industry
[58:41] How people can make an impact in climate working in the industry sector

Jason Jacobs (00:00:00):
Hey everyone, Jason here. I am the My Climate Journey show host. Before we get going, I wanted to take a minute and tell you about the My Climate Journey, or MCJ, as we call it membership option. Membership came to be because there were a bunch of people that were listening to the show that weren't just looking for education, but they were longing for a peer group as well. So we set up a Slack community for those people that's now mushroomed into more than 1,300 members. There is an application to become a member. It's not an exclusive thing. There's four criteria we screen for; determination to tackle the problem of climate change, ambition to work on the most impactful solution areas, optimism that we can make a dent and we're not wasting our time for trying, and a collaborative spirit. Beyond that, the more diversity, the better. There's a bunch of great things that have come out of that community, a number of founding teams that have met in there, a number of nonprofits that have been established, a bunch of hiring that's been done, a bunch of companies that have raised capital in there, a bunch of funds that have gotten limited partners or investors for their funds in there, as well as a bunch of events and programming by members and for members and some open source projects that are getting actively worked on that hatched in there as well. At any rate, if you want to learn more, you can go to MyClimateJourney.co, the website, and click the Become a Member tab at the top. Enjoy the show.
Jason Jacobs (00:01:34):
Hello everyone. This is Jason Jacobs and welcome to My Climate Journey. This 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. Today's guest is Rebecca Dell, Program Director for Industry at ClimateWorks. ClimateWorks is a team on a mission to end the climate crisis by amplifying the power of philanthropy. Since 2008, ClimateWorks has granted over 1.3 billion to more than 600 grantees in over 50 countries. Now, Rebecca directs the industry program. Previously, she worked at the US Department of Energy in the Obama Administration where she coordinated implementation of President Obama's Climate Action Plan and was a lead analyst and author of the US Quadrennial Energy Review. I was excited for this one because industries are a huge source of emissions, and so many people say that they are "hard to decarbonize," so I wanted to talk to Rebecca to find out why they're so hard to decarbonize. What aspects make them hard to decarbonize? How to make them less hard to decarbonize, or said another way, how to accelerate the decarbonization? Philosophically, what should we do in the meantime? How should we think about offsets, if at all and what else can we do to get to where we need to go faster? Great discussion and I hope you enjoy it. Rebecca, welcome to the show.
Rebecca Dell (00:03:13):
Thanks so much for having me.
Jason Jacobs (00:03:15):
Thanks for coming. We were chit chatting a little bit before the show, but I think I had tweeted about, I think it was something about mining and lithium and constraints and electrification, and someone had suggested that I speak with you. I looked at your background and that's a little bit adjacent to what you do, but industrials is so important and you've got such a cool background that here we are. I really appreciate you making the time to come on the show.
Rebecca Dell (00:03:41):
My pleasure. Let's do this.
Jason Jacobs (00:03:44):
Well for starters, I also wasn't familiar with ClimateWorks, but I read up on it prior to the discussion and it looks like you do really interesting work, so maybe just start with a bit on ClimateWorks and what the organization does.
Rebecca Dell (00:03:57):
I'd be happy to. Yeah. I run the industry program at the ClimateWorks Foundation. The ClimateWorks Foundation is pretty much what the name would suggest. We're a grant making organization, we're based in the US and we focus on climate change. In addition to, we have about a dozen kinds of subject specific grant making programs. As I mentioned, I work in the industry one, we've got transportation, food, finance, all different things.
Rebecca Dell (00:04:24):
Then, ClimateWorks also does a lot to help the philanthropic community more broadly deploy its funding and its resources to address climate change in the most effective way. We do a lot of research, and analysis, and intelligence to support the climate philanthropy community, broadly considered. A lot of peer learning to help all of the organizations that want to give away their money to solve climate change, help them do that in a thoughtful and strategic way.
Jason Jacobs (00:05:00):
Got it. If I just parrot that back to make sure that I understand, it sounds like, as an organization, you have different sectors that you focus on at the intersection of those sectors and climate change, and you're making grants within those sectors. In order to make those grants effectively, you do a bunch of research and analysis, and then you share that research and analysis more broadly with other grant making organizations, so that it can be re-utilized so that more money can be deployed into addressing climate and be done thoughtfully and in ways that can bring the highest return.
Rebecca Dell (00:05:30):
Absolutely. I mean, if you think about it, there's a lot of people who would give grants, they care about climate change, but they're just a person. They don't have any particular expertise on the subject. They don't have a staff to support them. If they want to be able to do that work thoughtfully, deploy those resources well, we are delighted to support them in that journey.
Jason Jacobs (00:05:54):
Awesome. How did you get into doing the work that you do? And separate from that, how did you come to care about the problem of climate change? At what point did those intersect?
Rebecca Dell (00:06:02):
Those are big questions. On the climate change front, I think I had a little bit of an unusual entry into the field. People often assume that because you work on climate change, it must be because you loved animals as a child or something. That was not my story. As a young person, I just really loved physics a lot more than animals. I studied physics and I got really interested in fluid dynamics. I really wanted to solve differential equations. It looked like, "Oh, well, there's a lot of interesting and complicated fluid dynamics that are happening in the ocean in the atmosphere. That sounds like a fun thing to do for the rest of my life."
Rebecca Dell (00:06:51):
I went to graduate school to get a PhD in climate science so that I could do that. As you might imagine, becoming a climate scientist in our current moment in history can be a radicalizing experience. I, over the course of many years, first in getting my PhD and then as a young scientist, I really started to feel I had the apocalypse for my day job. That I would wake up every morning and I would go to the office and I would just stare into the apocalypse all day. I didn't really know how to make the situation better. It was pretty clear that the bottleneck for climate action, the reason that we were not taking aggressive action as a society was not because the science wasn't good enough.
Rebecca Dell (00:07:46):
If I spent the rest of my life writing really good papers on climate science, that was unlikely to move the needle by itself. That's not to say that climate science isn't a great way to spend your life. Most of my friends from grad school are still scientists and that's wonderful and we need that. But for me, I started looking for whether there was an opportunity for more short term influence. I was lucky enough to be able to get a job with the Obama Administration working at the US Department of Energy. I left academia behind. I started wearing charcoal suits and sitting in ugly windowless offices and conference rooms. It was fantastic.
Rebecca Dell (00:08:32):
Working for the government, working in public policy, it wasn't always super fun, but I found it incredibly satisfying, because I felt for the first time, a real connection between what I was working on. I guess I felt when I was a scientist, that the levers of power that I could pull on, they just weren't attached to anything. I could pull as hard as I wanted and nothing would ever happen, because the lever just wasn't attached to anything. When I went to work for the government, it wasn't so much that the levers weren't attached to anything, it was that the levers wouldn't move. But a lever that doesn't move, that still holds out the possibility that if you can get enough other people to pull on the lever with you, then you could move the lever. The reason that it's not moving is that it's attached to something really, really important.
Jason Jacobs (00:09:27):
It's a terrible analogy, but I'm picturing the Dumb and Dumber scene where he says like, "So you're saying there's a chance."
Rebecca Dell (00:09:35):
Well, on today of all days. I don't know when this podcast is going to be broadcast, but just this morning, Senator Sinema of Arizona announced that she was open to supporting the Inflation Reduction Act, which is like, that's a lever moving. That's a big lever moving. The theory of change is, so there's a chance, there is a chance. I worked for the government for a few years and then I was, in DC euphemism, I was thanked for my service in January of 2017. Since then, I've been working in philanthropy and non-profit organizations still on climate change.
Jason Jacobs (00:10:15):
Talk to me about that decision. You talked about where you were when you were on the science side, and then you talked about the alure of going into government. What about the decision to work in philanthropy?
Rebecca Dell (00:10:26):
That was a little bit opportunistic. I left the government. I spent a couple months being funemployed. I'm originally from the San Francisco Bay Area. I thought, "This feels like the right time to go home." I moved back to California and there was a foundation in this space that was in the process of doing a major strategy review.
Rebecca Dell (00:10:52):
They were looking to hire a strategic planner to kind of help them take a very comprehensive reassessment of their climate portfolio. That sounded like a fun thing to do. That was my first job after DOE, and then one of the major, for me, certainly, the most important finding of that process of really trying to look comprehensively across all of the drivers of climate change and all of the potential solutions. One of our most important findings was that the industrial sector was just grossly under-resourced.
Rebecca Dell (00:11:37):
This was a driver of the industrial sectors, depending on how you count it, the source of either a quarter or a third of all greenhouse gas emissions. There was hardly any money going into the space. There was hardly anybody working on it. Most organizations that worked on climate change had no activities in this space whatsoever. This was just the most important gap in the sort of non-governmental, but also actually governmental, this was the most important gap in climate solutions by a lot of metrics. I've been working on it ever since.
Jason Jacobs (00:12:17):
Coming in, I mean, obviously, industrials is a huge source of emissions. I don't know if you call it conventional wisdom, but certainly there's a big segment of the climate world that would call it "hard to decarbonize." They would also, it seems like, and maybe it's not the same segment, I don't know, but there's some segment that would also hold up industrials specifically as one of the sectors that justifies things like offsets, because we're just "not going to be able to decarbonize in any reasonable timeframe." I guess when you look at the sector and you look at how big a source of emissions it is and you look at where it needs to get to, how do you think about that transition in terms of difficulty and how do you think about that transition in terms of time horizon?
Rebecca Dell (00:13:09):
That is a very common narrative. I understand why people feel that way. When I first started looking at this space, my initial reaction was similar. I just thought, "What are we going to do about cement? We got nothing here." But my experience has been that the more I learn, the more tractable the problem seems. In fact, there are a number of ways in which this space might be easier than a lot of other sectors to make progress. I think what the narrative around hard to decarbonize really reflects is not that it's somehow inherently harder, but that we're at a much earlier stage of our work.
Rebecca Dell (00:13:53):
I think that if you go back 20 or 25 years, and you had talked to people who were working on the power sector and you asked them about getting to net zero, or not net zero, just getting to zero, getting to zero emissions in the power sector, 100% clean electricity globally, they probably would tell you like, "Oh yeah, that's going to be really hard." But fast forward to today, we've got 20 or 25 years of progress. The technology is much more mature. The systems are in place. We're making faster progress than most people expected. It no longer feels that hard. Not to say there won't be challenges, but it doesn't make sense to call it hard to decarbonize.
Rebecca Dell (00:14:39):
I think the same thing is true in the industrial sector. I think that people assume, because we haven't made progress, that we can't. We're sort of at a similar stage in the industrial sector in terms of our climate journey to where the power sector was maybe in 2,000 and where the transportation sector was five or 10 years after that. We're going to have to move faster, because we are all kind of working towards similar deadlines. All the sectors are working towards similar deadlines, but there's nothing inherently hard about it. It's just that we haven't done the work yet.
Jason Jacobs (00:15:18):
I know that industrials encompass several different categories. I mean, there's cement, there's steel. There's several others. When you look at the playbook in each of these categories, is it similar from category to category, or is it custom for each category? Also, when you look at the stage we are relative to where we need to be or relative to power, for example, as you just mentioned, are they in vastly different stages or are they in similar stages on the journey?
Rebecca Dell (00:15:51):
I think the answer to that question has more to do with you than with the sector. Are you a lumper or a splitter? The first thing to say is for members of your audience who might be new to this space when we talk about the industrial sector in climate conversations, what we're talking about is kind of the material economy broadly considered. It includes mining, manufacturing, construction, waste, processing, all of those things.
Rebecca Dell (00:16:21):
But what happens is very shortly after you define that scope, you end up focusing on a very small number of industries within that, because there's an astonishingly short list of industrial activities that are responsible for the overwhelming majority of the greenhouse gas emissions. We talk a lot about steel, cement and chemicals, because just those three commodity industries are responsible for two thirds of the emissions from the sectors, from the whole industrial sector. Why waste your time with other types of manufacturing when you could focus on these.
Rebecca Dell (00:17:01):
Now of these three, they each have their own distinct challenges and opportunities, but they also have a lot in common. Broadly considered, these are very energy intensive industries. Some of the big challenges are around how do we get a large enough quantity of clean energy available in the places that we want to do this industrial activity. Most of these industries require some kind of high temperature processing. Either you need a new process that can do that kind of high temperature, chemical reactions using clean energy, or you need to substitute a lower temperature process for your high temperature process.
Rebecca Dell (00:17:47):
Both of those are good options. Then, another area where the industrial sector is a little bit different than most other sectors is that a lot of the emissions are what we call process emissions, which is to say that it's greenhouse gasses that come from chemical reactions that are not combustion reactions. Only about 60% of the greenhouse gas emissions from the sector come from using energy at all. The rest of them are from other types of chemical reactions. For example, when you make cement, you start out with a common kind of rock, called limestone, and there are carbon atoms bound right into the rocks.
Rebecca Dell (00:18:29):
Limestone has carbon in the rocks, and in the process of making cement, you force that carbon out of the rocks and it comes out as carbon dioxide. For cement, more than half of your greenhouse gas emissions are coming directly out of the raw material there. It's coming right out of the rocks. There's a set of problems that you have to solve around these process emissions. That's the big picture, lump it all together. Of course, if you want to, any one of these industries has an infinite number of nuances you can dig into.
Jason Jacobs (00:19:02):
When you look at the existing products, I guess, I'll ask this for any of these categories or overall, if it's consistent across, but these are commodity industries largely, it seems that as long as it's over the quality bar, that it's going to come down to price, I would think. So how do you motivate and mobilize the producers to use greener or cleaner, or produce greener or cleaner offerings? What are some of the barriers that are preventing that from happening in the timeframes that we need to?
Rebecca Dell (00:19:48):
Yeah, that's a great question, because from the perspective of the commodity producer, certainly the transition costs to clean production and potentially also just the production costs, those will be additional costs compared to conventional dirty climate damaging production. In a commodity industry, you can't expect the commodity producer to be able to bear those costs, but there's a good news-bad news situation here. The bad news, I already told you.
Rebecca Dell (00:20:25):
The good news is that while these materials are incredibly valuable from a human flourishing perspective, think about how much harder our life would be without steel to hold up buildings, to make vehicles out of, to use in manufacturing processes, steel is incredibly valuable. But from a strictly kind of financial and economic perspective, these industries are very low value added. What that means is that the cost of the material is a very small portion of the cost of the finished goods that are made out of them. It's often literally a rounding error, which is to say less than 1%.
Rebecca Dell (00:21:10):
While it may not be tractable for the producer to take on the full cost and risk of the transition to low greenhouse gas production, it's totally affordable for the purchasers of the finished goods and the consumers of the finished goods to do it. In the United States, the cost of cement is, on average, less than half a percent of the cost of construction projects. If green cement is twice as expensive, well, you just added half a percent to the cost of your construction project. I don't know very many people who wouldn't be delighted if their construction project had only a half a percent cost overrun.
Jason Jacobs (00:21:56):
But relative to not having a half percent cost overrun, having a half percent cost overrun is worse, so why would anyone rationally choose that, unless they're a bleeding heart that's going to sacrifice their self-interest for the collective good, the abstract collective good?
Rebecca Dell (00:22:13):
It's a fair question. I think there's a lot of answers that the answer's a little bit different in different contexts. I think in the short term, there is a set of consumers who are interested in the environmental attributes of the products they purchase and are willing to pay extra for that. That's a great place to get started. Obviously, that's not going to solve the problem. There's not enough of those people or organizations to sort of get to the whole industry, but you can get started with voluntary efforts.
Rebecca Dell (00:22:46):
Then a very large portion of these materials are directly purchased by governments with tax dollars. Here in the United States, something like 45% of all cement is purchased with tax dollars. We can, as a society, say, "Hey, if you're going to use our tax dollars to buy this stuff, you should buy the stuff that is not going to bake our climate." Then, I think in the very long term, the final long game of all of this is a regulatory approach.
Rebecca Dell (00:23:18):
That's the thing that we do all the time. We have regulations about buildings that govern their safety and their energy efficiency. We have regulations about cars that say you have to have a catalytic converter to reduce your tailpipe pollution. Eventually, we'll get to a place where, why do you buy clean materials, because you're not allowed to buy the dirty ones.
Jason Jacobs (00:23:41):
When you look at the landscape from a climate work standpoint, and where you spend your time and have your expertise, you mentioned that steel and cement and chemicals are the three big ones. Do you look at all those, or is there a subset that you spend more time in than others?
Rebecca Dell (00:23:57):
Yeah, we work on all of those and we work on them in somewhat different ways. What we see as our highest potential strategies are not the same, but we work on all of them. We'll very occasionally work on other things outside of that, if we think that there's a particularly interesting opportunity. There's a lot of people who are interested in aluminum these days, but aluminum is a very distant fourth in its greenhouse gas emissions, and so I tend to spend less time thinking about it.
Jason Jacobs (00:24:26):
Maybe we should double click on each of those then quickly, just in terms of the state of the state there and what some of the potential green alternatives are that are either most highest potential, or furthest along, or I guess maybe the magic is the one that best addresses each of those that lives at the intersection of both of those, quicker and good enough?
Rebecca Dell (00:24:51):
I think if you look across the sectors, there's only a few categories of solutions. All the solutions fit into one of, I would say, probably five categories. Your basic set of solutions is, first, material efficiency. You can just use less of this material to deliver the services, make the products that you want to make. There's a huge opportunity there and we should do that.
Rebecca Dell (00:25:20):
The second is carbon capture and storage. In each of these industries, you have the option of basically doing pretty much what you're doing today, but then trying to capture all the CO2 as it comes out, sticking it underground. I'm not advocating for or against any of these, I'm just listing. Option number three-
Jason Jacobs (00:25:39):
The advocating for and against comes later in the discussion, or...
Rebecca Dell (00:25:46):
I would be happy. Yeah, that comes later.
Jason Jacobs (00:25:46):
Okay.
Rebecca Dell (00:25:46):
Hey, I will give you my straight opinion. For the moment, I'm just giving you a landscape. Third, electrification, pretty straightforward.
Jason Jacobs (00:25:55):
In terms of the sources of energy required, just finding cleaner ways to do it that are also in the right locations or able to be transferred to the right locations in a way that's viable and cost effective?
Rebecca Dell (00:26:08):
Yeah. I mean, it's not easy to do, but it's conceptually straightforward. Four is hydrogen and five is bioenergy. In each of these industries, you sort of have a combination. You say like, "What is the combination of those five things that we might want to do? What is more or less appropriate?" But basically, all of your solutions fit in one of those five buckets.
Jason Jacobs (00:26:32):
That's consistent across steel, cement and chemicals?
Rebecca Dell (00:26:36):
Yeah.
Jason Jacobs (00:26:38):
As an organization, when you're looking across steel, cement, chemicals, and you're also looking across these five categories, how do you determine where to focus and allocate your resources and mind share?
Rebecca Dell (00:26:51):
Well, so one of the things that we spend a lot of time doing is trying to create markets for low greenhouse gas commodities, so create demand, create lucrative opportunities to sell these things, because you can often do that in a way that allows producers to decide for themselves what they think is the best solution, because it's really, it's not going to be the same everywhere. Some places have good access to clean electricity in very large quantities that is not available in other places.
Rebecca Dell (00:27:25):
Some places have a particular industrial economy in a particular location that the most important thing is to preserve an existing workforce and an existing set of tools. Other places have other resources. I don't expect that the solution is going to be the same for everybody everywhere. For example, in the steel industry, there is a lot of excitement about hydrogen and using hydrogen for steel making, particularly in Europe, there's tons of pilot projects and exploration of hydrogen. That's great. That's definitely going to be part of the solution.
Rebecca Dell (00:28:06):
It is the really genuinely clean alternative that is closest to being commercially available by a significant margin. But on the flip side, if you can get a directly electrified steel making process to work at scale, that's actually going to be much more energy efficient than a hydrogen process. In places where you're more constrained by the price and availability of electricity, the sort of technology risk of direct electrification versus the relative energy inefficiency of hydrogen, you're going to weigh those two things differently.
Jason Jacobs (00:28:47):
When you talk about creating demand, what are some examples of how demand is created and what are some examples of what you are doing to help facilitate that?
Rebecca Dell (00:28:56):
Yeah, there's a ton of different approaches available here. One of the things that we do a lot of work on is a set of strategies and policies that we call buy clean, which I've already mentioned. This is the idea that the public sector, when they buy these commodities, the government, when they buy these commodities using your tax dollars, they should preferentially purchase low greenhouse gas versions of that. There's a number of US states that have buy clean laws, of one kind or another, in place.
Rebecca Dell (00:29:30):
Most of them have been passed in the last year, so we're still in that stage of moving from enacting a policy to implementing a policy. They're going to take a few different approaches. The Biden Administration also put out an executive order in December of last year saying that the federal government was also going to do buy clean. They are, again, in that phase between enactment and implementation. There's still some experimenting happening on exactly how these policies will be implemented, but that's a great example. I think another interesting example is that there are some European countries that are looking at a policy called carbon contracts for differences.
Rebecca Dell (00:30:12):
This is basically the government saying, "Look, we will step in and say for every ton of carbon emissions below a certain benchmark, that you can make this product for, we will add a subsidy at the point of sale. We'll agree in advance that we'll give you some amount of this many euros per ton, of every ton of carbon that you save below our benchmark. Then, when you sell your steel, or when you sell your cement, or when you sell your fertilizer, you get that subsidy." That's basically the government saying, "We'll just pay the price difference between green production and conventional production." Those are just a couple of examples of how you might approach this.
Jason Jacobs (00:30:55):
What are some examples of what ClimateWorks might do or has done to facilitate those types of initiatives?
Rebecca Dell (00:31:03):
We do a lot. As a grant making organization, mostly what we do is we give grants. We have grants in the buy clean space for researchers, for technical experts, for environmental advocacy groups, all over the United States and in other countries that are working to advance these policies and to make them as effective as possible. When we do that, we support environmental organizations, organizations that you and your listeners likely will have heard of, things like the Sierra Club, but we also support researchers at universities, like the University of California, or the University of Washington, who are focused on this space.
Rebecca Dell (00:31:45):
We also organize coalitions. We kind of create venues where you can bring together environmentalists, labor unions, firms, policy makers, into a coherent coalition and organize their policy advocacy to move this ahead. That's the kind of thing that we do on all of these issues.
Jason Jacobs (00:32:10):
When it comes to grantees, I know if you talk to a venture capital firm, for example, they might say, "Here's the criteria that we look for when we back a company." It might differ from firm to firm, or even partner to partner within a firm, but there tends to be kind of a mental model for how to look at new opportunities. What is the organization's mental model and/or what is your mental model when you're looking at potential grantees?
Rebecca Dell (00:32:34):
I'm looking for organizations that are smart, that are strategic thinkers, that are committed to the issue, that have good networks and connections, both with other groups and with policy makers and experts. I also often think about this at least as much from the kind of overall ecosystem perspective as from the perspective of an individual grant. I might say, I guess, what an investor might call a portfolio level.
Rebecca Dell (00:33:09):
One organization has been working on this issue for many years and they have a ton of capacity already, and that's great. We will support their continued and expanded work. But let's say that group is a very traditional environmental group, and so there's a certain set of policy makers who find their voice very credible and are very interested in talking to them, and another set of stakeholders, I said, policymakers, but it might also be firms or others, who might not be that interested in talking to people they perceive as greenie weenies.
Rebecca Dell (00:33:45):
Then we say, "Okay, what are some complimentary organizations, some organizations that are committed to this issue, but committed from a more manufacturer first approach, and so they have great relationships with firms? Or who come from particular states or regions that we think are important?" We really want to be able to target the policy makers who are from those states and regions and things like that. I'm always trying to build an ecosystem and a coalition that's kind of well balanced and allows us to make the case through a lot of different channels.
Jason Jacobs (00:34:25):
How do you know if you're doing a good job? That could be on a weekly basis, on a quarterly basis, or on a yearly basis. How do you measure yourselves? That could be quantitative or qualitative.
Rebecca Dell (00:34:35):
That is a great question. It's something that I think about a lot, because the one metric that I really care about is, in some important ways, is not available to me.
Jason Jacobs (00:34:47):
What's that?
Rebecca Dell (00:34:48):
The one-
Jason Jacobs (00:34:48):
You're about to tell me.
Rebecca Dell (00:34:51):
... metric I care about... Yeah, yeah, yeah. The one metric I really care about is are greenhouse gas emissions going down? That's the only one that matters, in the end, but I am realistic that particularly the work in the industrial sector is given what an early stage it's at, it's going to take many years of work before we really are able to see clearly the effect of our work on actual greenhouse gas emissions. We need to get policies passed. We need to get technologies deployed. We need to get systems and specifications changed.
Rebecca Dell (00:35:24):
We need to do all of those things before you actually are going to see it in the numbers and the greenhouse gas emission numbers. We need to also be thinking about what our kind of interim markers or indicators of our progress between here and there. Those are things like, are we getting policies passed? Are they good policies? Are we seeing companies actually make firm public commitments to either decarbonize their own operations or purchase products from lower GHG suppliers? Are we seeing investors saying firmly and publicly, asking the companies in their portfolios, "Hey, what are you guys doing to reduce greenhouse gas emissions? In order for us to feel good about this investment, we have to know that you guys are mitigating your climate risk."
Rebecca Dell (00:36:23):
Then another thing that I keep a really close eye on is that because the industrial sector is one that was so overlooked for so many years, there just aren't that many people who work on it, there aren't that many experts, there aren't that many committed advocates, there aren't that many companies, there aren't that many research centers. So one thing I keep a close eye on is the growth of the community, which often takes the form of a literal nose counting. How many people are working on this? Are we seeing that grow over time?
Jason Jacobs (00:36:54):
I mean, I'm sensing from you that you're passionate about addressing the problem, and also that you're ambitious and impatient. So when you go to sleep at night and you're feeling super impatient about the pace that things are happening and you just wish things would happen faster, what are the things that you wish would happen faster? What are the biggest levers?
Rebecca Dell (00:37:15):
Oh, my word. I feel that so much. One of the things that I think is really pernicious about this hard to decarbonize language is that it gives people permission to abandon their urgency. Just earlier this summer, I was talking to a European cement company, and they were presenting with seeming pride, they're like, "Look at our extremely ambitious plans to install carbon capture and storage on our big plant. We're so committed to climate action and we are charging ahead."
Rebecca Dell (00:37:54):
I was like, "So when are you going to make the final investment decision on this carbon capture and storage investment?" They said, "Oh, we expect that we'll make our final investment decision in 2028." I was like, "So you're just going to think about it for six years. Your timeline is spend six years thinking." They were like, "Yeah." They very clearly believed that they deserved credit for their ambition.
Rebecca Dell (00:38:22):
I think we can all agree, whatever that is, it's not ambitious. There are things that we can do right away. In the cement industry, for example, there are alternative ways of blending cement and concrete that we could start doing tomorrow that would cut 30 or 40% of our current greenhouse gas emissions in the sector, if universally adopted. Totally mature, technologically well established, we could do it tomorrow, it wouldn't be that expensive. In many instances it would save money. We're just not.
Jason Jacobs (00:38:54):
It sounds like there's some different vectors for being hard to decarbonize too, because there's the actual technical challenges or the regulatory hurdles, but there's also socioeconomic challenges. I had posted on Twitter asking if there were any topics people wanted us to cover. Matt Baker, who it sounds you may know, told me to ask you about the Linz Mill in Austria and the associated socioeconomic challenges with that.
Rebecca Dell (00:39:20):
Yeah, that sounds like Matt. Matt's an old friend of mine.
Jason Jacobs (00:39:25):
I figured.
Rebecca Dell (00:39:28):
This is true. I think we have a lot of technology options and they all could be moving faster than they are, but the socioeconomic challenges and the sociopolitical challenges are real and it doesn't do anyone any good to pretend they don't exist. The Linz Mill in Austria is a fascinating facility. It's owned by a steel company called Voestalpine. This is a very widely respected steel company. If you look at where they sell their steel, they sell most of it into automotive and aerospace, very high end, high value added segments.
Rebecca Dell (00:40:10):
They're considered to be a very high tech company that's extremely technologically sophisticated, invests a lot in R&D. I think there's probably a lot of other steel companies around the world that look at Voestalpine and are like, "Yeah, we should be more like that. They're doing great." But their main facility, which is in Linz, which is the third largest city in Austria, was built right on the Danube. Basically, the way this facility operates is that iron ore and metallurgical coal is brought by barge on the river to this facility. They use it to produce six or seven million tons of steel per year and employ something like 12,000 people.
Rebecca Dell (00:40:55):
If you wanted to fully electrify this facility, that would probably require something like 10 gigawatts of electricity. For any of your listeners who would have a better sense of what that means, a typical nuclear power station is one gigawatt of electricity. What we're talking about is that this facility would require I don't six or 10 nuclear power stations to power one steel mill. Austria is a net electricity importer already. A few years back, before the pandemic, I actually visited this plant and I spent several hours talking to their head of sustainability and he made the point.
Rebecca Dell (00:41:39):
We were walking around the facility together and he was like, "Look around, do you see any transmission lines that could carry 10 gigawatts of power? I don't. If we were going to electrify this plant, literally, where would the energy come from?" That's a very serious question. It's one that many heavy industrial facilities will have to confront, because honestly, like this plant, a lot of them, the reason that they were built, where they were built was because they had good access to cheap fossil energy. One of the things that is particularly dramatic about this plant is if you look at its history, this plant was founded in 1937 and its name at the time of its founding was the Reichswerke Hermann Göring. There's this well known history, I'm not letting any dirty secrets out.
Rebecca Dell (00:42:30):
One of the things that we have seen everywhere around the world is that deindustrialization, so closure of big centralized industrial economies, has been closely associated in many places with the rise of reactionary, right-wing politics. People are very angry and sad about the loss of their local economic drivers, the way that it undermines communities, the way that it makes them feel abandoned. That often gets expressed in reactionary right-wing politics. This plant has a very unhappy historical association with that, that it has worked to overcome in the intervening years. But I already mentioned, this plant employs 12,000 people. The city of Linz only has about a quarter of a million people in it.
Rebecca Dell (00:43:21):
If this plant were to close, because they could not get that 10 gigawatts of power, that would be a body blow to the entire city and the entire region. There's some pretty scary potential political consequences of allowing things to happen. I think why Matt suggested that you ask me about it is because I find this plant really interesting because it kind of brings, you can see in very stark detail, or very stark contrast, how some of the challenges that are associated with this transition are less about specific technologies and more about infrastructure planning, local politics, and these kind of social issues.
Jason Jacobs (00:44:04):
Well, there's a couple different directions I'd love to go from here. Well, I'll tell you them both, and then we can figure it out. One is just as these new technologies come to market, it's not like building software, or a digital marketplace, or something like that. I mean, there's a whole bunch of capital that's needed.
Jason Jacobs (00:44:22):
I mean, this is moving atoms, and building plants, and pilot facilities, and demonstrations, and first of a kind, and it involves different types of risk, and also in some cases, different types of capital. I want to talk about that. Secondly, don't think we're going to escape here without talking about offsets. Those are a couple things that we haven't addressed yet that I feel we should.
Rebecca Dell (00:44:44):
Those are both great questions. Let's just take them one at a time. In terms of the type of capital, this is going to be expensive. A new cement kiln is many hundreds of millions of dollars. A new steel mill is anywhere between a billion dollars and 20 billion, depending on what you're building. It's very easy to spend a billion dollars. In fact, I would say similarly, chemical plants cost a similar amount usually to steel mills depending on their size. We're talking about numbers with at least nine zeros in them.
Rebecca Dell (00:45:18):
I would say there's two issues that should be separated. One is, can we attract this kind of capital for investing in a known technology and a going concern. Another is the technology risk associated with new types of facilities. I think that we're going to need significant public investment on the technology risk side. Part of these industries being commodity focused and low value added is that they don't have a lot of history or experience in big R&D risky technology investments. I told you that this Austrian steel company has a reputation for being very R&D forward.
Rebecca Dell (00:46:04):
That's because they spent about 1.5% of their revenue on R&D, which is much more than most steel companies. That kind of, the transition technology risk, we're going to need some public money there. Then I think, again, we talked about how we're creating and structuring markets to make low greenhouse gas production profitable. I think that if low greenhouse gas alternatives more profitable under current market conditions, these industries are full of well established, well capitalized companies.
Rebecca Dell (00:46:38):
If ArcelorMittal, or Dow Chemicals, or any of these companies had an idea to say, "Well, we want to build a new plant and we can make a strong case for why it's going to make money." They wouldn't have any trouble going to the bank and getting a loan. The problem is not, can these companies get access? It's not a financing problem. It's a revenue problem. It's a profitability problem. I think if we can find ways to structure markets so that they can be reasonably confident that they can make money with low carbon alternatives, I feel very sanguine about the capital markets being able to supply the investment that they need.
Jason Jacobs (00:47:17):
Does it require carbon to be priced?
Rebecca Dell (00:47:19):
I mean, it requires an incentive to do low carbon things versus high carbon things. One of the ways to do that is to price carbon. It is by no means the only way or even the most effective way.
Jason Jacobs (00:47:32):
What would be the most effective way in your view?
Rebecca Dell (00:47:35):
Well, I think that, for example, some of the policies that I think have been genuinely very effective at driving this kind of transitional investment are renewable portfolio standards and the zero emissions vehicle mandate in California, both of which are not explicitly pricing carbon in any way. What they're doing is they're setting quotas. They basically say, "At least this much of your production has to be clean and you can figure out however you want to do that."
Rebecca Dell (00:48:06):
In many instances, you can trade compliance credits. If you think that somebody else can over comply with their quota, you can pay them, so that you get to under comply with your quota. There's sort of indirect pricing aspects. But what gives investors real certainty is a hard quota, that says, "You must do this. If you don't, the consequences will cost this much."
Jason Jacobs (00:48:30):
What is it about a carbon tax that is not as appealing in your view?
Rebecca Dell (00:48:36):
The thing that is very dramatic to me is that we have had priced carbon for these industries for an entire continent for 15 years now under the European emissions trading system. Has that motivated any large scale change in European industry? No, it has not. European firms use precisely the same fossil based manufacturing processes in the steel, cement, and chemicals industries that are used everywhere in the world. It's not because pricing isn't a good idea in theory, it's because the way that it gets applied in practice serves inevitably, it would seem, to mitigate the actual bite of the incentive.
Jason Jacobs (00:49:17):
Almost like if you put a big tax on cigarettes, it would have to be a pretty big tax to get people to stop buying cigarettes because they'll just eat it so they can keep smoking their cigarettes.
Rebecca Dell (00:49:27):
It's actually worse than that because under the emissions trading system, which is actually the same way that the California cabin trade system and many other carbon pricing systems work, what they do is they say you get all of your allowances for free, and then you can trade on the margin. It's like if you had a cigarette tax where you could smoke two packs a day without paying any tax, you only had to start paying the tax for cigarette number 41.
Jason Jacobs (00:49:57):
What about offsets? I mean, as we talked about, it's early in the market and it's going to take some time. Are offsets helpful or harmful?
Rebecca Dell (00:50:03):
I think that the correct target for the industrial sector is zero greenhouse gas emissions within the industrial sector. I think getting to zero is going to be hard. I think that there are actually visible technology pathways to get to 95% reductions. Given that I'm not super interested in offsets, I don't know why we would entertain them meaningfully until maybe we get to 95%, and then we want to have a conversation about, well, what are we going to do about the last 5%? Offsets could be fine for the last 5%. They have no business being involved in the first 50%.
Jason Jacobs (00:50:46):
I mean, I know the carbon markets are a mess, but let's say that there was more transparency, and permanence, and durability, and additionality, and that the fraud was stamped out, and stuff like that, which are big ifs, but let's just say for a purpose of argument that we lived in that world, and we're around that corner, given how many years or even decades it's going to take to facilitate this transition in that scenario, which is not the scenario we're in today, I understand, would it be more helpful to do them along the way, or just to steer clear altogether?
Rebecca Dell (00:51:17):
I don't see the point. I think if you're a steel company and you have a certain amount of money that you could spend on offsets, why is that helpful? What do you know about forestry? Spend that money on reducing your emissions, spend that money on emissions reductions at a steel plant, specifically at your steel plant.
Jason Jacobs (00:51:38):
What do you think of the term net zero and all these big, bold net zero commitments that are getting thrown around by these big companies?
Rebecca Dell (00:51:45):
I think that different people use the term net zero in different ways. Like I said, there might be some cleanup at the end that has to be done with carbon negative approaches. I think that to the extent that we have to do those, they should be done within the sector that is doing the emissions so you don't get to outsource it. I'm comfortable with net zero within the industrial sector, but I don't see any point in talking about creating an incentive for industrial firms to be investing in land use solutions or things like that. Those things are super important, I'm all for them. That's not the useful thing that a steel, cement, or chemical company can do.
Jason Jacobs (00:52:33):
You mentioned carbon capture in one of the buckets of decarbonizing the industrials. What do you think about carbon capture? And an adjacent question, what do you think about carbon removal or things like direct air capture more generically? I guess both within industrials and of course otherwise, since it isn't industrial specific?
Rebecca Dell (00:52:52):
I think that even if we decide that we don't want to use carbon capture in any other part of our economy, the place that we are most likely to want to rely on carbon capture is in the cement industry. That's because, as I was talking about earlier, in the cement industry, more than half of the greenhouse gasses are just coming straight out of the rocks and we don't have a lot of good options. We certainly don't have technologically mature options for how to deal with that other than carbon capture. However, I think that it is absolutely not the case that all carbon capture is good carbon capture and we should just incentivize it in a blanket way.
Rebecca Dell (00:53:37):
I think that you have to get to very high capture rates before it passes muster as a solution. That means in many cases, you have to redesign your plant around the project of concentrating the most CO2 into single flue gas streams so you can capture it in a cost effective way. I think there's going to be very few instances in which we're able to retrofit existing facilities to get sufficiently high capture rates of CO2 that it actually passes muster as a climate solution.
Rebecca Dell (00:54:21):
Mostly, what we're talking about with carbon capture is you still have to build a new plant or rebuild most of the plant that you have. That's not to say that we aren't going to want to do it. It's just to say that we should be realistic and also we should be very demanding that 50% capture is not a solution. 90% capture is maybe a solution. That's plantwide, not process level.
Jason Jacobs (00:54:44):
When we laid out the buckets before, I mean, the sense I got from you was that you don't necessarily know which bucket's going to be most impactful and there isn't necessarily a silver bullet. From your and from a ClimateWorks perspective, you're just trying to get more shots on goal across all of those buckets. Did I hear that right? Or are there specific buckets or pathways that you're most excited about?
Rebecca Dell (00:55:05):
I mean, so first of all, these are big complicated industries. If you look at the industry today, all of them have a mixture of different process technologies that they use. In the steel industry, most steel is made in a blast furnace, but we also have shaft furnaces, we also have ren furnaces, we also have electric arc forces depending on what resources that you have access to wherever you're making steel.
Rebecca Dell (00:55:32):
I think that's going to be true in the future. There isn't one solution that's going to be the right solution for everybody. Also, even the solutions that we're pretty sure are going to work like hydrogen reduction of steel, pretty sure it's going to work is not it's working. There's still a lot of risk built into pretty sure it's going to work.
Rebecca Dell (00:55:54):
I think that we are at a stage where we want to be maintaining a portfolio of technologies. We do the same thing in the power sector. We didn't decide that solar was the answer and that all power will be solar power. We decided that the mix of different generation technologies that we want to use in the future will be different from the mix we want to use in the past, but we still want to have a mix.
Jason Jacobs (00:56:17):
When it comes to technological innovation, are companies that are doing this work are potential grantees for ClimateWorks?
Rebecca Dell (00:56:25):
We generally don't do direct sort of technology supporting grants. What we do a lot more of is supporting joining with companies and other stakeholders to advocate for governments to make bigger investments. The reason for that is pretty simple, we don't have enough money to directly support the technologies ourselves. To give you a sense, we were just talking about hydrogen steel reduction, the most advanced project in this space is the hybrid project in Sweden. They have spent something like 200 million euros on this project to date.
Rebecca Dell (00:57:06):
They have built a furnace that works and is capable of producing one ton of steel per hour that is 0.05 or 0.02% of the size of a typical blast furnace. That is a test scale facility, that is not a commercial scale project. They are now getting ready to build their first commercial scale plant, which will be capable of producing not 10,000 tons of steel per hour or per year, but a million tons of steel per year. They expect that the first plant is going to cost a billion and a half euros. That's an amount of money that private philanthropy, we do not have access to. That's an amount of money that really can only be provided by firms and governments.
Jason Jacobs (00:57:59):
Magic wand question. If you had a magic wand and you could change one thing that would most accelerate the progress of decarbonizing the industrial sector, what would you change and how would you change it?
Rebecca Dell (00:58:08):
I would just make everybody who works on climate everywhere around the world, I would give them a vivid understanding of the importance of industrial decarbonization, because I think that the most important barrier here is that this sector and this work is overlooked. There's a lot of things we need to do and a lot of things we could do pretty straightforwardly if the people in positions to make those choices understood that those choices were available to them.
Jason Jacobs (00:58:36):
Rebecca, anything I didn't ask that I should have or any parting words for listeners?
Rebecca Dell (00:58:41):
Come on in, the water's fine.
Jason Jacobs (00:58:44):
I can speak to that too. It's been four years. It's important work and it's fulfilling, but it's also just super fun and intellectually stimulating as well. There's great people doing it since people were just mercenaries chasing dollars. I don't think they would head in this direction. Therefore, you get a pretty mission driven group.
Rebecca Dell (00:59:00):
Yeah, a better class of people.
Jason Jacobs (00:59:00):
Yeah. Like just deeply purposeful in their work, which is cool to be around.
Rebecca Dell (00:59:04):
Yeah, no. I would say specifically in the industrial sector, if you are listening to this podcast because you're thinking that you would have a bigger impact on climate change, well, this is an area where there are enormous emissions and very few people doing the work. If you're looking for a place where you can have a high impact, where you can dedicate yourself and build yourself into a leader and an expert in a relatively short amount of time, it's a lot easier to do that in industry than it is in some of the more mature spaces. You should consider it.
Jason Jacobs (00:59:43):
By the way, how can we be helpful to you? Or how can listeners be helpful? Is there anyone that you want to hear from? If so, who? What kinds of people?
Rebecca Dell (00:59:50):
I'm always interested in hearing from people who work for companies in these sectors to learn more about what they are doing and kind of how they understand what's possible. I would welcome any kind of outreach of that nature. You can always tweet at me, @rebeccawdell. I happily accept all industrial decarbonization related tweets.
Jason Jacobs (01:00:17):
Nice. Well, thanks so much, Rebecca, for coming on the show and I really appreciate the discussion and the work that you do.
Rebecca Dell (01:00:23):
Thanks for giving me the opportunity. This was a fun conversation. This is a great show that you've put together.
Jason Jacobs (01:00:29):
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. 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. 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.