 Hey, we're back. We're live. I'm Jay Fidel. This is Think Tech. More specifically, this is Energy in America with me and Lou Pulliorese. Lou is the president of EPRNC, which is the Energy Policy Research Organization in Washington, D.C. It's a Think Tank on Energy. And he talks to us every couple of weeks about energy. And we stay current on national and international trends and developments, news and events and energy. So welcome to the show, Lou. It's nice to see your smiling face, even in the time of crisis. Well, it is a terrible time, you know, having to do with the national economy. Yeah, it's good to be here. So let's talk about, you know, weather and view of all the, you know, deficit spending we've had over COVID. This country will be able to continue on its Green Energy initiative. I mean, whoever the president is, you still have to have the money to do it and query whether I think the question is, and I am giving a talk tomorrow in Athens, Greece. Unfortunately, I will not be there in person. I will be doing it in the virtual at the Hellenic Association of Energy Economists. And I'm talking about the what does it mean to ban fracking? Although I think the Democratic administration, I mean, the president, presidential candidate Joe Biden is not for a total ban on fracking. He is for a ban on fracking on new leases on federal lands. But one of the things I'm going to talk about is why do, you know, why do we, you know, the failure of the economics profession to kind of teach their students about, you know, cost effective ways of doing things. People come up with bans and targets and all these kind of wacky things actually that the state of Hawaii wants to do to he go why these are really a bad idea. But as part of that, I want to talk a little bit about the the issue of climate is a issue of global significance. So we're going to show you some data here, which is going to show that even if the OECD, all those, you know, the relatively rich countries take their emissions to zero, take their carbon emissions to zero, think of a magical thinking that lots of environmentalists use already for their electric cars and their windmills. So let's say this magical thinking resulted in taking all of the industrialized advanced countries to zero. We would still have emissions, which exceeded the level we had in 1995. So what I'd like to talk about how is that possible? I mean, it doesn't sound like a contradiction in terms. It's not a contradiction. If I go to zero, then I'm not admitting anything right? Yes, the OECD, but we live in a global world, which includes more than the OECD includes something called the non OECD, like China, like Burma or Myanmar, like Indonesia. How big is a non OECD world? In terms of emissions, that will be our last slide, I believe. Okay. So, so, and so there are two, two forces that are out there. One is the, the fascination, the preoccupation with reductions in carbon over mitigate over adaption, right? And this, you can see this in California. In fact, if you had Epic recently hosted a webinar called Keeping the Lights On in California. And you can see in that discussion, the issue of the fires in California comes up and we'll get to that. So the first thing I'd like to talk about is that if you're going to transition to these low carbon or zero carbon fuels, you need money to do that. It's not free. It turns out that, yes, solar and wind is very low cost, but it turns out it's not free. It takes money to transition these world economies. And one of the problems we're going to find out is that we don't have a lot of money. So let's look at what the severe budget constraints look like. And now that we have, we're going through the COVID-19 window. And so that's our first picture. So let's bring that up. So what this is, this is some data from, you know, a bunch of sources, European Commission, also the trouble asset relief program. And what I'd like to show you here, there's two aspects of this slide here. First is the fiscal response as a percent of GDP. So everyone remembers the financial crisis, right? It wasn't that long ago, where we've over invested in housing and that we had a collapse. That fiscal response for that was about 200 billion in the US, about 1.3 trillion. Well, COVID, that's chub change compared to what we've had to do for COVID. For COVID. Also, what we're not finished? We're not finished. So the estimate for the US is going to be about 4.45 trillion when we're done. Additional or inclusive? Total total. Okay. And for the European Union, about 1.3 trillion. And what that means is we're going to have a big budget deficit. And if you look at the budget deficit, how they are expected to rise by the end of 2020, you can see as the deficit, the total outstanding deficit, the budget deficit, the GDP is going to rise dramatically in the US, Eurozone, Canada, UK. And it's also rising in places like China, Korea, Mexico and Brazil. Okay. These countries are not as rich as the US, as the USA and the Euros are. But and so that's, that's no surprise. That's no surprise. But I think what what is what's fascinating to me is the discussion. Oh, isn't this wonderful? We have this COVID-19, we have all this fiscal money. We can use it to transition to the fuels of the future. And the requirements of servicing this debt, and the requirements of the just the basic things we need to do to get through COVID, it suggests to me that that's going to be a very hard sell. There's going to be a lot of demand on resources for build for recovering the economy for basic welfare support for infrastructure, infrastructure, infectious diseases, health care. We're going to have a lot of requirements. And well, let me let me ask you some economic questions here. So, so we're spending a lot more than we anticipated. We're spending a lot more on things that are a surprise COVID. And we will continue to do that till, as you said, something over $4 trillion. What does that do to our, you know, budget? What does that do to our the rest of our government? I mean, is there a bottomless pit of money out there? There is not a bottomless pit. Okay, I know there's this new monetary theory. I don't think we want to really get into that now, but it means that lots of terrible things can happen if this is not managed properly. One is that it could end up to be a big drag of the national economy and we could suffer lower economic growth. And some of that lower economic growth may turn out to come from the fact that we're going to have to pay some of this deficit. We can finance it, but we're going to have to start to pay it. And that's going to mean higher taxes, more allocation of the country's wealth into repaying these loans and not into new, not necessarily into new capital formation, right? Yeah, that's pretty serious. That's pretty serious, yeah. And then, you know, so it's not free. It's not free. We have essentially, we have essentially borrowed on resources, productivity in the future for, you know, expenditures, consumption today. And I think if you go, now the good news is the recovery is underway, right? The recovery is underway. And if you look at the next chart, I saw that chart and I really wondered about that. So we have, we have, you know, this enormous number of cases that's growing beyond expectations, beyond any boundaries, really. And ultimately, I mean, even if you say that there's some kind of recovery going on now, it's forced because we still have, we still have not dealt with the virus. And this has been the big problem this year. Yeah, that's a kind of different problem. I don't actually agree with that. I think that the death rate has come way down. It's coming down. Yeah, the case numbers are going up. If you look at the Medcram data, the Johns Hopkins data, particularly worldwide data in Europe, France and Italy. Yes, cases are going up, but these cases are concentrated in younger people and people with very fast recovery rates. So we're kind of, we're going to get a vaccine. That vaccine is likely to start to make progress sometime next year, maybe even the end of this year. So I think the other interesting I want to show about the work, if you look at the major bubbles, which are the percent of peak to the trough, you know, so how high we were to the bottom. Of course, you have the Great Depression, 26.7 percent, you know, 29, 30, 31. Then you have the World War II transformation of the military economy to the civilian economy. We had a pretty big drop there, 12 percent. It was a pretty big recession, right? And then we bump along till we get to the troubled asset recovery program. We had a 4 percent. I mean, you know, the financial crisis of 2008 looks like chump change compared to this 10.6. I mean, 10.6 percent is a big drop. And that's what we've, that's what we're probably going to experience. I think we had probably a retraction of 30 percent in the second quarter, a recovery of 30 percent in the third quarter, with the retract, with the other things happening in the first quarter, we're probably by the end of the year going to have a 10 percent loss of the COVID crisis, right? Yeah, but it's not over, Vru. It's not over, but let me just say. When I first saw the chart, I said to myself, how can you make this determination now? We're right in the middle of it. And we still have these cases. You can argue about how good or bad the numbers are. I'm just saying this. These cases, and we have not recovered the economy. I can tell you, in Hawaii, the economy is in the toilet. No, but it must be the same way in other states. So that bubble there at the end of that chart is really in process. Yeah, but I do think we can make the case that the worst of this is behind us. And so what is the nature of the recovery? Hawaii is a special case. It is largely a self-employment. I wouldn't even say the worst is behind us, Lu. I think the worst is in front of us. We're in a second wave right now. And if you could step to the future and look at that bubble from six months from now, I think that bubble would be bigger and a year from now much bigger. We're not nearly done with this. So I guess I would disagree that I think we could have the big debate going forward is do we have a V recovery or a K recovery or certain sectors of the economy going to do very well and leave other parts behind is the recovery. When will we get back to the scrimmage line? And I think there's a good chance by the end of 2021, early 2022, we'll be back to the scrimmage line. We're coming back now. Who is saying that? I mean, I Trump would like to say it's over already. But who is saying that? So I'm thinking if you look at the data from the major financial houses, the Federal Reserve, a lot of independent Department of Commerce, the Census Bureau, we have all this data and it would take a long time. I mean, we could probably spend some time going through different aspects of where the recovery is. Yes, certain sectors are lagging dramatically. The tourism business, airlines, gasoline demand is not recovering fast enough, but other parts of the economy are starting to recover. Oil prices have stabilized, they're up in the 40s now. I think the case of Hawaii, I hate to say this, I think it's largely, not totally, but it's heavily self-inflicted. It's heavily self-inflicted. It's tourism. You know, we have a mono economy. We still have a mono economy and it's hard to get tourism started again. The airlines the airlines are essentially firing many tens of thousands of people like this week. You know, all kinds of sectors are collapsing. If we can get some stimulus money in there, I think they can maybe bridge through. I do think the airline business, look, the question is will real estate come back? Lots of these things. You know, we have some history of these things. Things will come back. It's really the timing that comes back. So, I mean, I'm happy for us to do a session on the economic recovery and we can maybe do that next time when we have more data. But the question I'm trying to raise tonight is a different question, which is that you're likely to have Biden as the new president. A whole bunch of new people are going to come to Washington and they're going to be very entranced with the idea of transforming not just the U.S., but the world to the new green deal. Maybe not the new green deal. Maybe it's called the Biden green deal. But that we're going to do that, right? And that my... You know, but one thing, let me just offer this. I mean, when they come to Washington and they get involved in implementing whatever initiatives they feel are appropriate, the first thing they're going to have to do is patch things up. They're going to have to attend to the virus. It hasn't been handled. They're going to have to attend to the economy. That hasn't been handled. They're going to have to try to fix the things that are broken. And frankly, and you may agree with me on this, frankly, the new green deal is not the immediate problem. It is not the top of the priority. I can tell you, on the first the first year of the Biden administration, environmental issues. For example, if you listen, I mean, I couldn't watch the debate. It was too horrible for words for me. But I looked at some of the transcripts today and I would say that yeah, Biden is likely to do some stuff on fracking it, but I think it's going to be very limited. I don't think he's going to blow up the jobs in the oil and gas industry. I don't think he's going to... I actually don't even think he's going to take the tax rates the first year because the economy is going to be still pretty flat. It's recovering, but you don't put taxes in a year where the economy is down. That's going to be postponed. So as we've spoken before, my guess with Biden is he will spend a lot of time reaching out to American allies to taking down the tone of a lot of the rhetoric. That's going to be his big thing. I totally agree. And in this country, too. And try to settle things down and bring the constituencies together in this country. But I can tell you the notion that we should go through a further lockdown, that's over. That's not going to happen. Nobody's going to do that. It's over with. The costs of that are too high of another lockdown. People are going to have to learn to deal with the risk of COVID-19 within the framework of sending people back to work and back to school. Well, you know, I don't think it's a black and white binary thing. It's absolutely not. And so you can have you can have a lockdown on one side. That's binary. You can have a completely open on the other side. That's binary. But the answer is somewhere in the middle. The answer is you tune it carefully, delicately. You tune it sensitive, you know, in great sensitivity to what is going on on both sides. And I mean both sides of the economy and the non-economy. And I think that probably we have learned, hopefully we have learned something. And the next president, hopefully Biden, will be able to say, look, let's get together on this. Let's develop some really refined policy in Washington. And all you guys can follow it. We'll have national systems. And that will be a much more refined approach. Right. But we live in a constitutional democracy which with the with the Republic, a Republican democracy. So I wouldn't argue that. A federal government generally can take care of things by doling out money and issuing guidelines. It will not have the power to override governors. Okay. We just not have that power. Even Trump has learned that the hard way. So my point tonight is something else. I believe that you're going to have to rethink how you approach climate. If we go and let's go to the last picture or the next picture. And this picture shows you that there's not going to be substantial transformation in carbon emissions without the non OECD world. I think we all knew this. We just didn't want to talk about it. And so we just finished up the annual produce LNG producer consumer conference. I chaired a panel. This was all in the virtual world on decarbonization. And we had Jeffrey Long from the University of California talk about new technologies to rapidly absorb carbon at much higher rates. The certification of net zero LNG. Lots of ideas. But these ideas are largely costly or at least more expensive than the current energy mix. And they are almost entirely taking place in the developed world. But if you look at this chart here the red is the non OECD emissions which now surpass emissions and emissions in the OECD. And we talked to these we talked to people from these countries power systems in places like Vietnam, Indonesia, Philippines. And what they're saying is we don't have any money for decarbonization. We don't have any money for massive research program to drive out the coal. Yeah. The China made a big commitment. India said some things. This is the problem. The real legacy scale and technology is not coming in there nearly fast enough. And as we get to this post COVID world they're going to worry about how they keep the lights off. They're not going to have time to think longer term. So out of that comes a conclusion is we do need to keep pushing the research and the technology transfer so that the systems that are available to the world that are decarbonizing moving to hydrogen are very, very low cost. They are going to have to be competitive with today's current fuels. So I just want to put that out there as a big, big problem. And I want to respond with this. It really is too bad that not only has Trump stopped the climate change effort in his time but he has slowed it down everywhere because the President of the United States is kind of world leader no matter how good or bad he is. And so that's one thing. The other thing is David Attenborough the Sir David was on 60 minutes with Anderson Cooper on Sunday and he made a very important point. And that is the world has had tremendous damage to it. The planet has had tremendous damage. That damage is increasing every day. And at some point in the future not very far away we are all going to suffer. People will die for climate change. Already the storms in the Northwest already and in the Southeast. And this will affect Hawaii will affect everywhere. And the problem is you can say well we got to wait on this we got to wait on that. A COVID or no COVID this says we got to save the planet or the planet will eat us. And I'm very concerned about that. David Attenborough very concerned. The natural world is collapsing around us. I think that's a much too apocalyptic. Okay and I understand among particularly among the left in the United States. But when do you solve it Lou? Okay here's my question. I have a very very interesting. Some point is going to be a judgment day and it's probably very soon. Right but here's the problem. All the effort has gone into we've talked about this before and this came up in our discussion with the California officials right. Well you say the climate's changing. You say it's been changing for years. Then why did you have a program in California that put all your effort into jamming you know solar and wind and batteries and you didn't do anything to protect the grid. You did nothing for adaption. You put everything into mitigation and you said the climate was changing. You said it was changing. And you know that California cannot alter the climate. Maybe you could have a 1% effect. Then why did policymakers not put any money into adaption? They could have cleared the vegetation. They were wrong. I'm not wrong. The expenditures on those policymakers were wrong. Yes they were wrong. They were wrong. Absolutely. Now it turns out some of the utility systems like San Diego gas electric did a pretty good job in building out the grid taking out the underbrush. But once again some of this is attributable to the environmental community which says oh we can't have you cut the trees. We can't you have you clear out the vegetation. We like the vegetation. You can't be a mean person and do that. Now I think if you look what's happening now people are getting the you know they're getting the message. Even the architects are starting to say oh this net zero house is kind of crazy. Let's build it with stronger catchments. Let's change the way we build the houses so they're more durable. Yes we have to work on decarbonization but we abandon adaption at our own you know at our peril. We have to put more money into adaption but adaption is not sexy stuff. No one's giving you a Nobel Prize for figuring a better way to build a house so it's more adaptable. They want some technology. They want some fancy way to reduce carbon emissions. But I'm saying is that the history of mankind is all about adaption. By the way the climate has changed before without carbon. It's changed many times. And so this is the argument you and I have had over months as to whether it is of a concern and it is of a concern. It's a concern but guess what? And we can't really kick the can down the road. We have to deal with it one way or the other. So we can bicker about you know exactly whether this plan is a good plan or that plan is a good plan. Those are political issues as far as I'm concerned. At the end of the day we have to come together on recognizing that it's a big problem and it's going to damage everyone in the world and we have to do something. If I went out to the American people today and I said I think we're underspending in climate and overspending on infectious diseases what do you think they would say? I think our response on COVID-19 is a tremendous intellectual failure. You can blame it on Trump but it goes beyond Trump. It's our academic institutions. It's our governments. It's everybody who thought oh we don't have to if we worry about climate and nothing else we'll just be fine. You know the climate is to be all and end all of all things society should worry about and we put all our intellectual resources into climate. We have starved the other sciences. I certainly agree we can't do that. We have priorities and we have to be smart about the priorities. Climate you can't be at the top of the chart right now because we don't have the money but it can't be at the bottom of the chart either. It doesn't need to be at the bottom. It has to be part of everything we do whether we spend the money you know in this year or next year we have to make plans and move down the road with it. If we ignore it which we have been doing you know we are going to pay a horrible price. First I will send you. It's not me it's kids. It's the next generation. Yeah but let me just say you asked them to make this policy they're under informed. Yeah but I'm going to send you the agenda of our recent event in which different individuals companies research presented papers and research. It's a mistake to say we've ignored it. Even the Trump administration is spending a great deal of money on decarbonization. You might find that's quite shocking but I will send you and in the power sector in cooperative programs with Japan on hydrogen we have a very big program on hydrogen. It's just that these problems if you get back to this last chart you're going to have to make this stuff a lot cheaper. You can't just put on a hair shirt and say I've done a good job. I've controlled the climate. I didn't need any mungbeats today or something. It's not going to work right. You're going to have real need real breakthroughs in new technologies because the developing world is not going to pay for it. And if you don't get the developing world you might as well just put all your money into adaption. Well okay but I come out at the end saying that I don't think the world is putting enough effort and thought into this. It's not collaborating in this. There are silly disagreements between this group and that group. A lot of people reject climate change in this country. Thank you for Dr. Trump and many others. And the problem I have with it is we are not together on the issue. We have not worked out the priorities. We have not made a plan. We have not collaborated on a global scale. And we are sitting pretty for enormous disasters and loss of life. And the next generation is going to be too late. So I agree with you. There are certain things that are more higher priority. But we cannot forget this for one minute. We have to build it into everything we do. Every policy we make. So if you want to see the nature of the challenge let's look at the last picture here. Can we have one more picture here? Yes. Oh yeah two things. First the next picture. We'll skip that the global primary. Let's just go because we're running out of time here. I just thought you might yeah just go let's take a look at the upcoming election. I know that's up. And I thought this is from the predicted market. You see and this is the betting market. And I thought it was very interesting that you see the top light blue line. It's slightly above the dark blue line. So right now the betting markets are saying that we're most likely going to have a Biden presidency but a divided Congress. But it's very close to the outcome of a Biden presidency and a Democratic Congress. So that's where the betting markets are right today. And so we are it looks like we're heading for change. Let's see what happens here. From your lips to God's ears. I would sure like to see that. I'm not all that. I make no comments on political outcomes are bad for business for me to take sides. That's a very interesting chart but I'm not sure I understand. Maybe you can take one moment Lou and tell us what the betting market is. The betting market is that there are markets in the U.S. and even abroad in Ireland where people can bet money on the outcomes. They can actually buy like a perimutable ticket or most like a horse race. And the thinking has been among economists that betting markets are more accurate than polling or what pundits tell you because in betting markets people are betting real money. And they don't care about they don't care about the candidates. They just want to make money. It would be great to have so who's going to win. Well we have that. This is the betting market is showing you who's going to win. It could be wrong. You know some bets don't come in like you predict. So that doesn't mean it just says the these are the implied odds. That's right. And they change. They probably change. They change day to day and you can see the shift moving around. You can see it. That's very interesting. Well I hope it works out something like that. You know where at least we pay attention. One way or the other it becomes political because it involves money. And we haven't solved the money. We haven't solved the political. Yeah just let me have the climate change. You know and everything in life involves risk. Okay and in my view the way the state of Hawaii. I mean I'm not I don't you know I'm not an expert on this. But my view is the weighing of the risks assume that the costs of the lockdown were more than acceptable to the cost of increased number of cases and deaths from COVID-19. Yet we don't make those calculations when we build roads or we let people drive. We don't do that but we did it for this. And the risk of this. Now we didn't know a lot in the beginning but we do know something now. We have good international data. We know that it is not that lethal. It's bad. It's bad. But my but I think further lockdown. And here's my prediction I'll make. If Biden becomes president. We will have no lockdowns. That's my prediction. There will be no lockdowns under a Biden presidency. You can take that. I would refine that to say. It's more likely if Biden becomes president. We'll be smarter about lockdown. We might be smarter but you know in the end. You where I don't think he's going to do it. I think the it's going to become so apparent. That the economic losses from the lockdown are just too devastating to bear. We're going to see. I hope we're going to see. Yeah. Well thank you. Thank you that we're out of time. And I really enjoyed this very stimulating conversation. And I look forward to our next discussion. All right. I look forward to seeing you Jay. Take care. Who put your easy. The president of E-princk in Washington. Thanks so much. Aloha.