Following the U.S. federal government’s withdrawal from the Paris Agreement, individual cities and states are actively seeking to shape their own climate policies. Please join our panelists as they discuss the development of these policies on a local level, and how these initiatives contribute to the larger foreign policies of cities and states.
LEVI: Good evening. Welcome to today’s Council on Foreign Relations meeting on the “The Foreign Policy of Cities and States: Municipalities”—and states—“Take the Lead on Climate.”
I’m Michael Levi. I will be presiding over today’s discussion.
And we are very fortunate to have with us in person and virtually three excellent guests. Margaret Anadu is managing director, leads the Urban Investment Group at Goldman Sachs. Matthew Rodriquez, on the screen to my right, is secretary for environmental protection of the state of California. He’s coming to us from California. Is that right? Excellent. And—you never know. (Laughter.) Dan Zarrilli, to my far left, is senior director of climate policy and programs, and chief resilience officer of the city of New York. So we have city, state, and a source of private capital that works with all of them.
When you come to a discussion about cities, states, and climate change, and you think about cities, states, and climate change right now, you can probably frame it in one of two ways. The sort of natural, easy way of framing it right now is to say a year ago—a year and a half ago there was a big push at the national level to take action on climate change. That was being done in the context of a global agreement to address climate change. Then we had last November’s elections, a change of administration, a new administration that did not make climate change a priority. And cities and states have had to step up to do more and to take the place, in many ways, of national government. That’s one way one could frame it.
But there’s another way you could frame it. And that’s to say that well before last November’s election cities and states were playing critical roles in dealing with climate change. I know when I was briefly in Washington, when I was working in the Obama White House, we often looked to cities and states to see what they were doing, to see if we could help them, to see if we could help states that weren’t as successful learn from those that were. But mostly, we watched what they were doing and we appreciated the action that was being taken.
I suspect both of these theories do some explaining for how cities and states fit into the bigger picture on national and global climate change. And I know I’ll keep them in mind as we’re having this discussion because I think they’re both important.
I want to start with the annual climate negotiations that have just concluded. You’ll be forgiven if you didn’t notice that they’ve been just concluded. They didn’t attract the same kind of fanfare that climate negotiations have in recent years. But we recently wrapped up the annual climate talks in Bonn, Germany, and two of our three guests were there. I want to—I have a really simple question for Matt and then for Dan. Gathering of global diplomats in Germany; why did you go? (Laughter.)
RODRIQUEZ: I’m hoping you can hear me. Let me say that it’s a—
LEVI: We can all hear you well.
RODRIQUEZ: Yeah, OK. Good. It’s a—well, it’s a—it’s a pleasure to be able to speak to you. I wish I could be in New York.
Why did we go? We’ve been going to the Conference of the Parties for a number of years. My first Conference of the Parties was in 2013. And we were going because California was very, very interested in climate change issues. We had a number of climate change programs here in the state that we thought were successful in reducing greenhouse gas emissions. And, frankly, we wanted to get that story out, to talk about what we were doing here, with the hope that it could encourage nations around the world to do something serious about climate change, to have ambitious programs.
And so my first Conference of the Parties was in Warsaw. And my response here will go a little bit to the question that you posed in the beginning, what’s the role of states in the discussion. I’ll just say that in Warsaw we had a number of side events around the discussions at the U.N. level, and we had some interesting discussions with some of the nations that were in attendance. We were invited by the U.S. to do some presentations on what we were doing. But certainly, what was going on at the state and regional level was not the focus of the discussions. There was really more focus on the buildup to Paris in 2015.
I think, however, that starting in Warsaw, and certainly you saw in Lima in 2014, there was a realization that the work that was being done at the state and regional level was important to the U.N. negotiations. We could demonstrate that states and regions around the world had adopted programs that were reducing greenhouse gas emissions, and that these programs were working and were not harming the economies in these areas. So it provided information that I thought was helpful to the U.N. discussions, and I’d like to think that it was helpful in providing some momentum up to the Paris Agreement in 2015. We could demonstrate that programs were working to reduce greenhouse gas emissions, that they could be done in a way that actually seemed to be beneficial to economies around the world, and also we represented regions from all around the world.
So we wanted to make that story known in Paris. Frankly, it put us in a good position, then, when there was the Conference of the Parties in Marrakesh, the following year’s. There was a question—I think since it was right after the election—about what was going to happen in the United States; was the United States going to back out of the Paris Agreement? We were in a position, given our previous work, to talk again about what was going on at the state and regional level in the United States, to talk about our work with other states and Canadian provinces on climate change programs, and to provide some reassurance that we weren’t going to change our programs at all. And so we could continue to encourage ambition in the national discussions.
And that’s why we went to Bonn as well, to talk about what we were still doing in the United States; about, frankly, the outpouring from all sectors in the United States that were committed and continue to be committed to climate change programs in the business community and in cities, in states, in universities, in investment areas in the United States. So we were able to go to Bonn and say, look, we understand that there is some concern in Washington about these programs and there’s some question about the U.S. continuing at the federal level to engage on climate change, but we’re here to tell you that at the state and regional level in the United States we’re still working on these programs, we’re still committed to these programs, and we encourage greater ambition, frankly, in the international dialogue on climate change because we know we’ve got a lot of work to do in order to keep climate change from occurring.
So that’s why we were going to Bonn, to send that message and, frankly, to talk about the fact that we’ll be having a summit in California in September of 2018 that will lead up to the next Conference of the Parties in Poland later next year. And what we want to do at that summit is talk about what’s being done at the state and regional level, talk about what’s going on in businesses in California and in the investment communities, to encourage further ambition and aggressive action at that Conference of the Parties. So a long-winded answer, but that’s the story on why we were there. (Laughter.)
LEVI: Dan, you were there for the same reason?
ZARRILLI: What he said, right. (Laughter.) No, I think—
LEVI: I’m curious, because I suspect you were there for roughly similar reasons.
ZARRILLI: Well, we absolutely were. There’s a couple things.
One is, of course, New York City’s been a leader on climate change for many years, and we’ve been working to reduce our greenhouse gas emissions and do the hard work here in the city on building retrofits and all the things that actually drive down our emissions.
LEVI: And you joined during the Bloomberg administration and have stayed over into de Blasio.
ZARRILLI: That’s right. That’s right.
And, you know, what we also saw here, of course, was the impacts of climate change. And I think when things happen in the media capital of the world, people notice in a different way. And climate change was no longer for us something happening 100 years from now to someone far away; it’s happening here and now, and we need to do something about it. And so both our greenhouse gas emission reductions, our adaptation program needed to take off, but also not in a way that just sort of compartmentalized the impacts from what is happening on climate change. And so we have been—we have pulled together an integrated team, that we’re doing both elements of our climate work together in the mayor’s office and what we’re doing in the city’s.
But what we were doing in Bonn, I think, the moment—and echoing some of what Matt said, there’s—there was a need to show the rest of the globe that the American resolve on climate change is still there, and the actions that we’re taking are actually going to make up the bulk of the greenhouse gas emissions to meet the American pledge to the Paris Agreement. And so it was a—you know, the hashtag of #WeAreStillIn and the U.S. climate action pavilion and all of the things that were sending that message became really important.
And in thinking about where we’re been over the last year and the need to even say that, it also comes back to a few silver linings, I think, that came out of the election. We probably wouldn’t hope we would have gotten here this way, but we’re actually talking more broadly about what’s happening to our cities, how vulnerable populations are, what the impacts of climate change are going to be. We’re having more of a national dialogue, I believe, when you saw with the hurricanes in Houston and in Florida and Puerto Rico in particular. We’re talking more about climate change and what it means for people’s lives. And I think that’s connecting the esoteric down to the personal level in a—in a much deeper way that helps drive action.
And it also—no one’s under the illusion anymore that, well, the federal government’s going to handle it. And so we are stepping up. We as a city have accelerated our own actions. We’ve released a plan that aligns our own city’s greenhouse gas emission reductions with the stretch target of the Paris Agreement, and we put forward a couple new programs to accelerate that greenhouse gas emissions reductions.
We wanted to bring all that to Bonn. We wanted to be part of that American message to the rest of the globe to make sure that anyone else across the globe who was thinking of, you know, pulling back—and thankfully we haven’t seen that over the past year—that the American decision to begin the withdrawal process from the Paris Agreement shouldn’t stop what we’re all doing together.
LEVI: So I want to get to the nitty-gritty for most of this conversation, because I think that’s what’s really interesting about cities and states, but I want to stay at the esoteric for just one more moment. When you go to these meetings, you have these big events and people show up, but most of the time you’re having one-on-one discussions. Are they with other city and state leaders? Are they with national delegations and people from foreign ministries? Who is it that you’re—that really wants to be meeting with you?
ZARRILLI: What I have found is that it’s—you know, the negotiators are off doing their official—you know, they were coming up with a rulebook for how to implement the Paris Agreement. They were off in their own little zone. At least—and maybe Matt had a different experience—but I found that it was very much other cities, businesses—and this is global, just not American; other cities across the globe, other regions across the globe—that wanted to get together and either work to develop partnerships, share best practices, or otherwise just deepen their relationships across the globe.
LEVI: All right. Margaret, you were not in Bonn last week.
ANADU: No, I was not.
LEVI: You were here—you were here getting things done.
ANADU: I was with my 6-month-old.
LEVI: OK. (Laughter.) Even more challenging than Bonn—
LEVI: —which was tough. Tell us a bit about what the Urban Investment Group does. Because it—what strikes me as particularly interesting about it is that it doesn’t have its roots in trying to have an impact on climate change. It has its roots in urban activity, but that ultimately and inevitably connects back to what we’re talking about.
ANADU: Yeah, actually—and I just—I love what you said about sort of starting at the city and state level, because we think of it as starting really at the most granular, block-by-block level.
So the Urban Investment Group was started about 15 years ago with a very simple thesis, that Goldman Sachs has a lot of smart people and a lot of capital, and that we had an opportunity to deploy that capital in a way that not only generated a financial return, but also generated a demonstrable social impact. And that impact has primarily been focused on what can we do to help low-income families and low-income people, and the way that we’ve done that has primarily been through the built environment.
So we are investing a billion dollars a year in emerging neighborhoods all over the country. You know, New York City is our bread and butter. It’s where we’re headquartered, where we’ve done the most work. But we are all around the country, and we’ve done that starting really with the building block of housing. So thinking about what families and communities need, and we think it very much starts with a safe and affordable place to live. And when we think about all the assets that surround that—where do you—where can you walk and buy a quart of milk, where is a quality place to send your kids to school, where are you going to work. You know, for the built environment, we’ve invested a lot in industrial facilities as we think about new manufacturing kind of coming back to the U.S.
And so, you know, most of that work is in the built environment. And so, bringing that back to climate change, we are not going to invest a billion dollars a year and build buildings and build housing units or retrofit real estate that already exists and not do it in a way that is thoughtful and intentional about climate change. So there’s a lot of, you know, really—
LEVI: That mostly means energy use, it means—
ANADU: You know, energy use. And I would say that, you know, one of I think the most innovative and real compelling strides we’ve made in climate change and, you know, sustainability over the last few years has really been—some are boring. It’s just the building envelope. It’s just better windows, you know, more efficient boilers, replacing roofs, things like that. So, in everything that we do, we’re making sure—and actually, really, with New York City’s leadership. So you can’t really—you cannot develop a unit of affordable housing in New York City and not have it meet a pretty, pretty incredible and high standard of, you know, sustainability, et cetera. And so we’re doing all of those things that I would say in our bread and butter that we, you know, make sure everything is efficient. We make sure the energy usage of our buildings, whether they be new construction or rehab, are done at a very, very high standard.
And then, beyond that, we also—you know, Goldman Sachs is a really great platform, as we think about our role in the capital markets. And we also think that making real strides on climate change is going to take really innovative financial tools that don’t—that aren’t just kind of your standalone debt and equity and tax credits and what have you, and so we’ve also been toying around with new models. So just last year we closed the country’s first environmental impact bond, so, again, asking investors—
LEVI: And what is that?
ANADU: Sure. So we worked with the city of D.C. to structure a financing to finance green infrastructure all around the city as they responded to a real crisis they’re having with their combined sewer overflows. And so the structure of the bond is somewhat—is fairly simple. So we are financing 100 percent with our dollars the work that they’re doing around the city to build, you know, green roofs, planters, et cetera, fairly simple infrastructure that’s going to help with those combined sewer overflows. But our return at the end of the day is derived by how effective those strategies are. So, if we are able to reduce the city’s combined sewer overflows by a certain percentage, you know, we make a nominal return. If we’re able to reduce those combined sewer overflows by a significant amount, then we do even better. So what that really does is just aligns private capital with those sustainable goals.
And so we are—you know, we’re—optimistic sounds too passive. We are pretty sure that those high standards are going to be met in D.C., and we think that it’s a—you know, we think it’s a scalable tool that cities around the country can also use to not just deal with combined sewer overflows—that was kind of a niche test case—but we think there are lots of other sort of sustainable efforts and strategies that could be financed similarly.
LEVI: Interesting. I think we’ll come back to this a bit because this is a place where you can’t just have static rules in a city or in a state, but where you’re solving these problems jointly.
Matt, I want to go back to—both you and Dan made comments along the lines of you’re doing your part or more than your part to drive the United States to its Paris goals or to the—or to something consistent with a 2-degree future. To what extent do you think that cities and states can substitute for action at the federal level in this country? Can they fully substitute? Can they 90 percent substitute? Or is it—or is it, you know, they’ll do as much as they can, but ultimately you do need that federal complement to what’s happening in cities and states?
RODRIQUEZ: Well, clearly, you need federal leadership, and at some point we’re going to need federal involvement. But in the meantime, what we can do is step up and continue to show that these programs work, that there’s reason to believe in these programs and to support these programs, and to keep that momentum going. I’d like to think that in a couple of years somebody in Washington will come to their senses and realize that we need to work with the international community on climate change issues, and when they do there will be a good base because, as was mentioned, there will be a number of programs that are already being implemented around the country that are demonstrating that we can reduce greenhouse gas emissions, demonstrating how they fit—these programs fit into the economy. And so they work at a couple different levels. One will be achieving greenhouse gas reductions, and so we’ll be able to contribute to the overall goals internationally to reducing greenhouse gas emissions. But we’ll also be showing how you can develop programs that actually work and that can be applied or implemented at the national level. So it works at several different levels.
LEVIN: Dan, there’s clearly this demonstration effect, there’s the ability to scale up. Do you have a sense of how much cities can do to substitute for federal action? Is it—is it purely about sort of setting the stage, or is it considerably more material?
ZARRILLI: Well, I certainly don’t like to let anyone off the hook, right, and just say, like, don’t worry. We’ll take care it. I mean, I think, to Matt’s point on that, is we will need federal leadership on this. But in the meantime, we don’t have it. And so we’re going to step up.
We’ve done some work with an organization called C40 Cities that looked at the biggest U.S. and ultimately global cities, but particularly targeting how the actions that are being taken by the largest American cities can make up substantial portions of what the U.S. needs to commit to, to meet its Paris goals. And if we can do that, and also take the next step of helping other cities that may not be necessarily members of C40 to do those—to take some of those same steps, we do make a big difference. And, you know, I think—
LEVI: So the actual bid was, like, half?
ZARRILLI: I’m—now I’m blanking on a number. But I believe it is roughly half.
LEVI: Oh the order of half.
ZARRILLI: And, of course, the work between cities and states is very complementary here, and the fact that cities are in states. And so the work we’re doing is symbiotic, in a lot of ways. And we’re pushing towards the same ideas. Here in New York, for instance, the city has almost zero control over the power grid. But the clean energy standard that’s been advanced is a significant portion of how we will continue to make moves to reach our Paris Agreements. And at the same time, not only do we need to green the grid, but we need to drastically use a lot less energy, which is the retrofits. And so I think there’s helpful ways in which we work together in order to do this. But by no means should we say that don’t worry about it, Fed, we’ve got this entirely, because that’s setting up some bad incentives.
LEVI: And part of what you’re saying here is for New York to hit the goals you’re talking about there are city-level policies, but if you didn’t also have a state-level policy pushing power generation—
ZARRILLI: It would make it harder, yeah.
LEVI: Couldn’t do it.
ANADU: And also, just from a financing perspective, I mean, a lot of the tools that we use to finance—whether that be, you know, solar or some of the more direct built-environment work—you know, depend on federal dollars. And so you can certainly do some that work without them, but you really can’t get all of it.
LEVI: So in a lot of cases what you’re doing is helping people convert tax credits into cash that they can actually invest.
LEVI: I was going to ask you—you know, we have someone from the state of California, from New York City, both known as places that are strictly middle of the road when it comes to politics. (Laughter.) They are—I asked you earlier when we were waiting to start where you mostly operate. You operate in blue states, in red states. You have a lot of operations in a state that almost voted for Evan McMullin. Is that sort of heightened partisanship and incredible divide we see at the federal level—do you see that as prevalent when you’re working with these individual states and municipalities?
ANADU: You know, it’s a great question. I think we don’t as much. So a lot of the—a lot of the work that we’re doing—and it’s funny. In every city and state where we’re active, it’s all about sort of, like, finding the level where we can—where we can get some attachment. And sometimes that is, you know, literally the one passionate, human being in a city agency who has a passion project that is amazing and, you know, depends on no actual program or funding. It just depends on that person’s sort of effort and time. And that’s—you know, that’s kind of one example.
And then there are, you know, broad city agencies that have the right sort of pro-development, pro-impact, pro-inclusive work we’re doing. Sometimes that’s the state. Sometimes it’s none of those levels and we’re using only federal tools. So I think—I think it makes us have to be more innovative and flexible with how we do our work. But certainly, there’s no—there’s no political environment or context that is going to make us shy away from doing this work. Because there’s always some way to attach and some way to find a way to get things done.
LEVI: Do you ever find yourself telling a policymaker in once place about a success in another place. Say, well, you know, we were able to invest in the following project here. If you tweak your rules this way, we could do it.
ANADU: Absolutely. Absolutely. And there’s some—there’s some—there’s some municipalities that welcome that. So, New York City, again, is a highly sophisticated place to do—to do business, whether that be development, some of the more social enterprise corporate work that we’re doing. And so we find ourselves exporting some of those lessons learned all the time. And I think one of the things that’s really great about New York City is not necessarily the level or amount of tools—that’s certainly one of them—but just the way that the entities tend to work together.
So sometimes we’ll go into a new city or state, really just introducing people. Like, hey, you have this tool over here in this agency and have you thought about how you could pair these things together, especially just in a—in an environment where public dollars are shrinking, you have to really stitch things together. And so we find that there are no—no one—no one is sort of prideful and doesn’t want to do better. I think it takes time. Sometimes it takes legislation. But we’ve found people, you know, pretty open to new ideas and new strategies.
LEVI: We have a couple minutes left before we open to questions. So get your questions ready. But I have my own last questions for Dan and for Matt. Dan, your title includes not just climate change but resilience. And obviously there’s been a big impetus from events five years ago to resilience in New York City. Tell us about where you’ve succeeded and where the challenges remain, quickly.
ZARRILLI: Well, there’s probably two things. One is that our work on resilience really, in many ways, grew out of the Hurricane Sandy experience and the need to be able to absorb the shocks that are coming our way, particularly from climate change. And the real innovation of what we did is to not just work to then start preparing for the next Sandy, but to think about heat, which kills more New Yorkers than any other natural hazard, or rain, or other natural hazards that are coming our way.
But then we began an exercise and a partnership with 100 Resilient Cities to think broader about—
LEVI: Offshoot of the Rockefeller Foundation?
ZARRILLI: That’s right. And that is—that culminated in a plan that we call our OneNYC program, that looked at what are the major challenges or threats to New York City. And aging infrastructure, and growing inequality, and the fact that we’re a growing city and what that means for housing and transportation and the workforce, and then you put climate change on top of that and it becomes a bit of a threat multiplier on all of those. And so we pulled together an integrated plan to think about how we’re building the resilience of the city. And, you know, just in the last five years, we are certainly a much—we are much better off than we were when Hurricane Sandy hit. We have a lot more to do. You know, our infrastructure’s been upgraded. We’ve had a number of investments that we can point to that the impacts would be different. They wouldn’t be eliminated—
LEVI: Would we have the same kind of power outages that—
ZARRILLI: So the power grid has seen a billion dollars of investment in submersible equipment and in better protected substations. You know, and the work that the MTA is really important. We’ve been investing in the city’s infrastructure and the public hospitals and our NYCHA housing. There’s been a bunch of things that are both happen and underway as part of $20 billion of spending that we’re doing—some of it federal, some of it city dollars—in order to make sure that we’re better prepared for what’s coming.
LEVI: Great. Matt, you’re gathering city and state leaders from around the world next year, before the annual climate talks. Will you be—we’ve seen this almost transition from these global meetings being purely national leaders, to including cities and states, to cities and states being more prominent, like you described. Will you be inviting national leaders and international representatives to your gathering of cities and states?
RODRIGUEZ: Well, certainly it’s intended to be an international conference. I should mention the Under2 Coalition. You alluded to it. The Under2 Coalition is now over 200 states, regions, cities, and some national governments from around the world that are committed to keeping climate change to a less than—substantially less than 2 degrees Celsius. This was an initiative started by Governor Brown and the German state of Baden-Wurttemberg in May 2015. There were originally, I think, 12 signatories. Now, as I said, we’re up over 200. And the summit will be bringing together that group, as well as other groups from around the world, to discuss what we’ve been doing and the progress that’s been made in our programs to date.
I’ll get to a point that you asked about, which is red and blue states. And this divide, seemingly, in the United States. I’ll mention that there are a number of cities and counties from red states that are involved in the Under2 Coalition. And I also say that as a representative of California, I represent California at a group called the Environmental Council of States. And it doesn’t matter whether you’re from a red or a blue state, there’s an interest in discussing energy efficiency, which is one of the ways you deal with climate change, reduce the amount of energy you need to use. There’s an interest in renewable energy and the progress that’s being made in renewable energy. There’s an interest in how we can have cleaner transportation.
Issues like this sort of transcend the political divide. They’re of interest all around the country. And we want to have a discussion of that at the summit. So we want to talk about the programs that we’ve been pursuing that address climate change, but have also been beneficial to our states and regions in a number of ways. And, yes, I would anticipate that there will be a national government representation and involvement as well. The co-chairs of the summit involve Mayor Bloomberg, also Patricia Espinosa from the—from the UNFCCC, as well as Anand Mahindra, the industrial representative from India. So we see it as being an international event to, as I said, build momentum to the Conference of the Parties that will occur later that year in Poland.
LEVI: OK, very interesting.
I want to now invite members to join the conversation with their questions. Please remember this meeting is on the record. Put your hand up, obviously. Wait for the microphone and speak directly into it. Please stand, state your name and affiliation, and please limit yourself to one question. And keep it concise, so that as many members as possible can ask questions. Over here on the right.
Q: Thank you. Bhakti Mirchandani. I work for a hedge fund. Fascinating presentation.
My question is for Margaret. I’m very curious about the 25 million (dollar) environmental impact bond for D.C. water. Who buys that type of bond? How does risk-sharing work? I know with the Riker’s Island Goldman Sachs bond the recidivism didn’t perform, so Bloomberg Philanthropy had a guarantee. So how did this particular bond work? And if there’s a potential for investor losses, if the municipality doesn’t perform, how does the investor buy it with fiduciary duty, or is it only high net worth?
ANADU: Sure. So, and I think this goes to the way that we think about some of these—some of these tools that we innovate before we think they are, you know, capital-markets ready. So the D.C. water environment impact bond, similar to the recidivism bond with Riker’s, we are the sole holder of the bond. So we did not sell those. So those are—that is all risk that’s on Goldman’s balance sheet. So that’s the first part of your question. Then, in terms of, so, who’s bearing that risk, it’s up. So we, you know, manage the portfolio very thoughtfully as we think about risk.
We are—the Urban Investment Group does not have philanthropic capital or concessionary capital. So everything we’re doing we—you know, are risk-adjusted returns. And so we did a significant amount of diligence. I would say probably, you know, seven or eight, you know, months on the ground with the engineers in D.C., understanding all of the infrastructure work they were doing, the exact metrics they were trying to hit in order to meet the—meet the levels required under their consent decrees. So we think, while it’s a new tool, it’s a new way to structure that financing, you know, we believe we’re going to—we’re going to get our underwritten return.
Now, of course, there’s risk. And we could lose funds. But that would be a risk that Goldman Sachs would bear in its entirety.
LEVI: Why did you hold on to that, rather than selling at least some part of it?
ANADU: Well, one, I mean, we like the risk and the return. So our—and that’s consistent with everything the Urban Investment Group does. So we are not—we are not a market-maker. We are not, you know, structuring deals for other folks to buy, which is a, you know, practice, certainly in other parts of the firm. So our fund, if you will, is for the firm’s balance sheet. So we hold pretty much everything that we invest in. So a billion dollars a year? We keep it on the balance sheet.
LEVI: In the back, Mr. Hellman.
Q: Steve Hellman, Energy Impact Partners.
I’m noting, with regret, that this meeting is on the record. (Laughter.) I do have a question for Matt and Dan. How are you guys regarded at these meetings? Are you guys gadflies because you’re not really the U.S. representatives? Or do people, on the contrary, gravitate to you? How are the actual U.S. representatives regarded at these meetings? Are they taken seriously? (Laughter.) And then, just sort of like separately, noting how much energy in this country is the domain of the states and ISOs and so forth on the electricity side, and so forth, and how little really the federal government plays a role in these marketplaces, do you really think—obviously, what’s going on with the federal government is a—not exactly tailwinds for, you know, climate change issues. How much real impact do you think the federal government will have on these issues over the next four years, versus what you guys are able to do?
LEVI: OK. We’re going to divide those between the two of you. Who wants the are you gadflies or rock stars question? (Laughter.)
ZARRILLI: I guess maybe—
RODRIGUEZ: Let me—let me—
ZARRILLI: Yeah, please.
RODRIGUEZ: Let me take a crack at that. And I’ll just mention that, as I said, in 2013 when we were in Warsaw, I won’t say that say we were gadflies, but we were definitely on the periphery of the discussions. By the time we got to Paris, certainly Governor Brown was there. And Governor Brown was a featured speaker at a number of events that were directly related to the U.N. negotiations. And in the most recent Conference of the Parties, Governor Brown was featured at a large number of large events, where he was a speaker, as well as Governor Inslee from Washington and Governor Kate Brown from Oregon. And so—and I, myself, spoke at about 10 or 11 different panel presentations at the Conference of the Parties.
And then, in addition to that, you do have the individual meetings with government representatives from around the world. And through those communications and meetings in the past, we’ve entered into memoranda of understanding with China, for example, to talk to them about emissions trading programs, energy efficiency, renewable energy. We’ve got an agreement, again, to trade information and talk about various programs with the German government. We’ve worked collaboratively with the government of the Netherlands. And the Conference of the Parties provides us with the ability to sit down directly with representatives from around the world to have discussion on programs and how we can work collaboratively to trade ideas on how to make these programs more efficient.
So I’d like to think that we’re far from gadflies and, in fact, we provided some substance, I think, to the discussions, and have addressed some of the issues that have come up in the past, particularly some of the economic issues. You know, if you have Germany, and California, and China all gathering together to say, look, we’re going to pursue these climate change programs, and we don’t think they’re going to damage our economies, in fact, we think that they’re beneficial, that helps in the dialogue, I think. So I think we play a significant role.
LEVI: And for those of you who might have trouble picturing all this, these climate conferences—it’s kind of like a really big state fair with all sorts of events all over the place, kind of disconnected across a huge venue. And then there’s a negotiation going on in a few different rooms. I remember the 2009 summit in Copenhagen, you have everyone wandering about. The only time I can remember everyone stopping and watching the screens was actually when Governor Schwarzenegger showed up and gave a speech. And everyone stopped and listened, no matter what they were doing. So maybe that’s close to rock star.
Dan, let me frame Steve’s question this way: I don’t think cities and states are expecting an enormous amount of help from the federal government in the next few years, beyond maybe programs that already exist. Is there any concern about active resistance or throwing, you know, a wrench in the gears of efforts that cities—or, do you sort of think of the federal government as kind of passive in the next few years?
ZARRILLI: I think we’ve seen a couple instances of actually being obstructive. And maybe the biggest one is the clean power plan, and the fact that that’s been now rescinded, even before it came into effect. And so that could have had a big impact, and that was really what the U.S. contribution to the Paris Agreement was largely based on, was the clear power plan. So now we’re seeing that that’s going to be pulled back. There’s going to be one single public hearing in West Virginia on this. And, you know, I’m sure—it’ll be interesting to hear what they see. But we’ll end up getting our points of view in on that.
But there are other things as well. And you can look at what the federal government has been doing on the flood risk management standard, which is—
LEVI: I assume everyone here is deeply familiar with the flood risk standard. (Laughter.)
ZARRILLI: I’m sure you’ve been following this closely. Every—you know, it was a late rule in the Obama administration to attach smart planning guidelines to federal disaster recovery, to make sure that we’re building to higher and better standard. And it’s smart for taxpayers, it allows you to start begin planning for climate change in your recovery. We were able to use a form of that in the—with the post-Sandy experience here in New York City. And it was incredibly valuable to be able to build back better and stronger, instead of just replacing what was there. And that was just, with 28 words in an executive order, just completely gutted. And I think only the National Homebuilders Association actually was, you know, supportive of that. I think it had pretty much bipartisan support. And yet, it’s gone.
And so I think there’s plenty that can go wrong. And we need to make sure that our voices get heard and we speak up when we see those things coming. And that’s, you know, what we’ve been doing, what my boss has been doing, in lots of ways, making sure that we are working to protect New Yorkers everywhere we can from the intrusions from the federal government. And, at the same time, we have to focus on what we’re doing and do it even—do more and do it faster.
LEVI: In the middle row near the back.
Q: Thank you. Catherine Powell. I’m a senior adjunct fellow here at CFR and a law professor at Fordham.
I’m just wondering, how did the issue become so hyper-partisan? You know, given that you have Republicans, like Michael Bloomberg, who’s been a leader on this. I believe William Ruckelshaus was the first administrator of EPA. I grew up in a Republican household. So I just—it’s just curious to me how it became so hyper-partisan. And then what’s the way forward to sort of rebuild bipartisan consensus around climate change?
ZARRILLI: I think fossil fuel money is a big part of that answer. You know, how do we rebuild a consensus? I would think that we need to probably stop talking about GHG emissions and esoteric things in the atmosphere that you can’t see and feel and touch, and instead talk about public health impacts and talk about what happens when your neighborhood floods once a month, and talk about, you know, the pocketbook issues that, you know, when—that when the economy is going down, because we’re not taking climate seriously, you’re going to lose your job and you’re going to lose your livelihood.
And then framing those in positive ways where—like Matt was saying, when we take action on climate, you know, our—the city’s greenhouse gas emissions have gone down as our economy has expanded. And I think we see that lesson from cities all across the world, and then probably states and regions all across the world as well. And so there’s a—there’s a compelling case to be made that the investment in clean energy will create better futures, better air quality, all the things that you can actually see and feel and touch in your life. I don’t know if that will overcome the resistance and fossil fuel money that’s still in the system, but I think that’s part of the way forward.
LEVI: I see hands. So I’m going to be a little unconventional here, Ed. The question, but before you get to ask your question can you give a 30-second take on this previous question?
Q: (Laughs.) Well, Ed Cox, chairman of the New York League of Conservation Voters Education Fund.
ZARRILLI: Hi, Ed. How are you?
Q: Yes. I’m doing well.
I think we’re—there’s a—I’m not sure it can be handled in 30 seconds. (Laughter.) OK, so—but I do think that there are private-sectors solutions as well as governmental solutions. And since Republicans are more oriented on the private sector side, as opposed to the public side, I think they can fit together. I think one has to remember, Ruckelshaus was the first, the President Nixon put into the EPA, by executive order he established it, in a way that works, where the federal established standards but they’re enforced locally. It’s a system that works. And he signed the Clean Air and Clean Water—first Clean Air and Clean Water Acts. So I think that’s a good start. And people remind people of that. I think that sort of can bring people together.
But my question goes to, there has actually been a reduction in our carbon output in this country over the last 10 years. And what are the primary drivers of that? What are the role—what was the role of cities and states in that? And will that role be greater or less going forward?
ZARRILLI: I think a huge driver of that emissions reductions was the transition—at least, I could speak for what I know in New York City’s energy mix—there was a transition away from coal-powered to more natural gas. And so the expansion of fracking played a big role in that. But that’s not something that we can rely on forever if we’re actually going to meet the targets of the Paris Agreement. We need to get past the fossil fuels and continue to expand into renewables. But I think that’s a—that is, in some circles, an untold story, that it was really a—it was just a fuel switching in the power grid.
LEVI: Matt, I want to ask you a bit about that, because there’s obviously been tension and confrontation in California around this. As I understand it, Governor Brown was protested in Bonn by anti-fracking activists. Do I have my story right?
RODRIGUEZ: You do. Let me deal with a couple of issues. It’s a little difficult to join in the conversation here from California. Let me just say, on the preceding question, on the politicization of climate issues, there’s a really wonderful book, “The Prize,” which talks about the oil industry and oil developments in the world. And it talked about the oil shortages and gas shortages in the late ’70s. And it said, you know, the Japanese response to that was for the Japanese government to sit down with Japanese businesses and reach a consensus. In France, they had a very, very top-down direction from the government: Here is how we’re going to handle this particular issue.
And then it made the point that in the United States whenever an issue like this arises it becomes politicized. And so that just seems to be the way that we deal with these issues, at least initially. And then we see how it sort of plays out over time. And I think that people will see over time that, you know, energy efficiency is a good thing, that moving to renewable energy is a good thing. It reduces our dependence on foreign sources of energy. Transportation’s going to change to cleaner forms of transportation. If people can see that is the wave of the future, then they’ll be interested in moving in that direction and it will become less politicized over time. So I think that’s the direction that we’re going.
With regard to fracking, and the whole question, I will just say that under a business as usual scenario California would have, by 2020, been at about—we figured, about 506 million metric tons of CO2 equivalent emissions. Our goal is to get down to 430, which is about 1990 levels, by 2020. The last year for which we have information shows that we were about 440. And actually, the information from 2016 shows that we’ve made significant reductions since then. As was mentioned, most of those changes are in the energy sector. California has a goal of having 33 percent of its energy from renewable sources by 2020. And we’re going to meet that, so that—we upped it.
And our goal is to have 50 percent of our energy from renewables by 2030. We think we’re going to hit that early, frankly, at the rate we’re going. So it’s been a combination of things. The change in energy, which is easier for California to make than other portions of the country—I will freely admit that—because we were not significantly coal-based to begin with. But our move to renewables has been responsible for a lot of the reduction. But it’s combination of other things. It’s energy efficiency. It’s this suite of other programs that we have here in California. But, you know, there are a variety of ways to get there. I think changing our major energy sources is the best way to reduce the emissions problems.
LEVI: And that last piece is also critical. Every year we use less energy to product the same GDP. And whether it’s transportation, planning, or building standards, cities play a huge role in shaping that evolution.
Q: Stephen Kass, Brooklyn Law School.
One of the themes you’ve talked about is the role of cities as models for the rest of the world. I wonder whether Dan or Margaret could talk about what they have learned, beyond exporting their own ideas, from the problems of other cities. Are there things that should be built, that we could be learning from cities abroad? And are there—what are the lessons about financing challenges abroad that Goldman Sachs could learn and share?
ANADU: Yeah, I mean, I was trying to think of, like, a—so, one of—one of the most, I would say, interest finance things we’ve done in the world of climate change has been a financing we did in the city of Newark, you know, obviously right across the river in New Jersey, where we basically did an energy retrofit across all of their public housing units. And it was everything from, again, the more basic things I talked about—building envelope windows, et cetera. But also, you know, solar installations, co-generation plants, et cetera.
And one of the things that we learned from that is that sometimes, you know, scale can work against you. And so being able to do that with Newark’s, basically, entire public housing system, you couldn’t do that as easily in New York. Like, it just—it couldn’t move as fast because the—you know, the New York City Housing Authority is much larger, much more complex. The, you know, financing required was much more significant. And so sometimes I think it’s easier to pilot things on a smaller scale in less complex environment and sort of get it really all bundled up together, and then export it to maybe a larger context. That’s one example.
And then—and then, you know, the D.C. environmental impact bond is another example where, you know, D.C. is a—D.C. water, their actual, you know—that entity has a strong credit, very sophisticated, largely a lot of the engineering around the green infrastructure were not even consultants. Those were folks they had in house. So I think now that we’ve done it, now that we have the structure, now that we have the experts, now we can export it other places. But I do think that with some of these things you have to start in place where there is the real human will. I really think a lot of this just boils down to the individuals that you’re across the table from and what their efforts are and what their passion is to get things done. And then kind of move it around to either just larger settings or more complex settings.
LEVI: Dan, you go to these C40 discussions, mostly non-U.S. Give us one thing that you’ve heard from another city at a C40 meeting that you wish you could do here.
ZARRILLI: Oh, I wish we had the district energy system that the Scandinavians had, and is something, I think, to look forward to. You know, we go into these—
LEVI: So what—very quickly, what is that?
ZARRILLI: You know, it’s a—it’s a way—they have a much more efficient way to heat and cool their buildings than we have currently in place. And they’ve been able to leverage that and do some really great things.
You know, we do. We go into these networks. And a lot of times we do put a lot into the networks, that others learn from. But there have been some, I think, good, shining examples that we’ve taken out it. And the work that San Francisco did on their zero-waste program to eliminate what goes to landfills was helpful to us as we were ultimately making a similar zero-waste commitment. We have an ongoing partnership with Copenhagen on cloudburst or really intense rainstorms and how we—how we handle that water. We’re currently piloting some of those investments in southeast Queens right now. So there is—there are definitely really good things that come out of those engagements, that I think we all do learn from each other to different degrees.
LEVI: Amy. Microphone.
Q: Amy Jaffe, Council on Foreign Relations.
So I know this is going to be one of the last questions, but when we look forward to new technologies—like springs to mind the problem of autonomous vehicles—could be incredibly constructive to sustainability or take us totally in the opposite direction. Any thoughts about the roles, especially in cities but also in the state, to get the regulations in a place so that these new vehicles are actually cutting carbon fuel use, instead of increasing it?
LEVI: So I’m going to go to Matt first because, on the one hand, California has been very active in this space of regulating, shaping the development of highly autonomous vehicles. But I know at the federal level, the environmental community has not been particularly involved. Has that been different in California?
RODRIGUEZ: We see changes in the transportation sector as being a real key to addressing greenhouse gas emissions. And certainly autonomous vehicles are a big part of that. So we’ve got a suite of programs that deal with changes in the transportation sector. If autonomous vehicles are a part of that and they can lead to greater efficiencies, then I think that’s something we need to take a look at. I know that we’ve been working on regulations for autonomous vehicles that would be applied here in California. We’ll see if the federal government comes around to having regulations on autonomous vehicles and takes some of the pressure off of us.
But if we need to, I know we’ve been working on the regulations. And we are fully committed to changing to zero emission vehicles just generally. That’s a big part of the solution to transform your transportation sector. And so our goal is to have 1 ½ million zero-emission vehicles on the road by 2025. I think we’re looking at whether that is ambitious enough. And certainly, autonomous vehicles sort of fit into that picture. We’re just going to have to see how the technology changes. And it’s changing very rapidly. But we’re going to have to see how that technology fits into our plans as we look ahead.
LEVI: Dan, will you get congestion pricing before you get autonomous vehicles? (Laughter.)
ZARRILLI: We’re on the record? (Laughter.) Now, look, I mean, there’s—all of our work on transportation, which accounts for about 30 percent of our greenhouse gas emissions here in the city, most of it comes from private vehicles. So where we have private vehicles, we’d rather more of them be electric. And we’ve been—we’ve made a commitment that’ we’re expanding charging infrastructure across the city. Car share is ultimately going to play a piece in that as well. And I think as the—you know, the expansion on AVs and the regulatory structures and the legal structures come into place, I don’t know if we have an answer on what that’s going to look like.
There will ultimately be a pilot here in New York City. And that’s going to move forward, I believe. And so I think there’s a lot of open questions on what that means in such a dense street grid here in New York City. But, you know, what we need to do to ultimately continue to upgrade the transit system and finance those upgrades—a millionaire’s tax is what the mayor’s put on the table for that. And I suffered through the 6 train coming up here, and it was pretty awful. So we all live that experience daily. We need to find the right ways to reduce the congestion, but also make sure our mass transit is funded. And that’s going to really important to us as well.
LEVI: One short, last question from Jeff in the front row.
Q: Thank you, Michael. Jeff Laurenti.
I was somewhat perplexed by Secretary Rodriguez’s suggestion that well this big about blue or red is much exaggerated, that if you strip away the label of climate and call it energy efficiency or renewable energy everything’s hunky-dory, we’re all on the same track. And I wonder whether we, across the river in New Jersey, were wasting our time in trying to get a governor to replace one that had taken us out of the Northeast, Middle-Atlantic state’s coalition with one—a Goldman Sachs alumnus—who pledges to take us back in.
What is it that states are sacrificing, at least in the short term, when they do take action for climate change measures? Because there are costs with energy efficiency. That’s why you have lobbies that oppose it. There are costs with renewable energy, and that’s why you have lobbies that oppose investing in that. What are the costs that we’re sustaining when we do that? And when the rest of the country, the right now under benighted denialist control—the majority of states—when they’re forced to catch up, what will they be paying as a price for being late?
LEVI: I would normally go to answers on that, but I actually think that you lay out an important piece of this, that kind of speaks for itself. Cities and states can play important roles, and there are a host of different steps that can be taken that aren’t particularly politically controversial. But others are. And there’s a reason why we’re talking about cities and states and not as much right now about the federal level. And there are reasons why this is such a contested area. And I think you’ve laid some of those out nicely.
We are out of time. (Laughter.) I worked here for 10 years. I only learned—I learned more than one thing, but the one thing I learned most is never end late. I hope you have all learned something about cities and states and climate change. I hope you’ve learned that some of the real rock stars in this space are dealing with things like building efficiency and bond financing and going to these meetings and meeting with anyone who will talk to them to share their lessons, because it is how a lot of what needs to happen on climate change will happen.
Please join me in thanking our guests. (Applause.)