Markets Vs. Mandates: Promoting Environmental Quality And Economic Prosperity

- Well, I have the pleasure of kicking this off, which is always a little difficult. And how can you speak without PowerPoint slides? So I have some, this is the one for the, the conference generally. And then as I thought about what I would say about markets versus mandates, I was asked by Charles Lindsay here at Hoover, if I would write a, a piece for the Hoover Substack freedom frequency. So I thought, oh, that's a great, I, yeah, I'd love to do that. I hadn't really kind of put it all together in that way. And so, so I did that and, and I thought, well, since, since it's on the web, we don't need to hand you paper copies. So I made up a, a link to the substack and they said, A link, no, you need a QR code. What is a QR code? I, i, I can never get it to work on my phone. Well, there's the QR code for the primer, if you will, on markets versus mandates. And this is the first time I've ever, I think, spoken and had, bear with me one slide. I usually say, you should give this to somebody in the audience because, you know, they have 27 slides, all of which are in 12 font. And, but these, I have one single slide. And this single slide was motivated by one of my heroes. The, I say hero of the short and sweet Tom has written some great books that are longer, but always he has these just pithy ways of putting things out there. And I hooked up with Tom a few years back and actually got to go to lunch with him and, and he's a bit reclusive. So when I came back to my office here and said I had lunch with Tom Soul people, you really, you, you got to be with him. And I, so I've always been pretty proud of that. And every time I've gotten together with him, I've learned something. I came here, then a few, couple months back when we here at Hoover, had a celebration of Tom's work and his 90th birthday. And, and I forgot the darn thing the second time, I like to wear a button, but I have a picture of it that really summarizes what markets versus mandates is about. And this is, they gave out buttons at Tom's celebration, and this was my favorite of all of his quotes that were fit, fit right on a button. I've done a lot of work on the notion of markets and the environment. I have a book in the three printings actually called Free Market Environmentalism. And I've always introduced that concept by saying it depends on property rights. But Tom really with this quote, changed the way I think about markets in the environment because when he said, there are no solutions, I thought, how do we approach all environmental problems? Well, suppose you have a leaky faucet, what do you do? You say, what's the solution? Fix it, and what's the fix? A new washer? And maybe if you're talented enough, you get out a screwdriver and a set of wrenches or pliers, and you, if you were better than I, you probably would turn the water off first. But you fix it. And, and that's the, the solution to the problem. And what Tom's quote made me think of is, well, before you fix it, you ask, what are the trade-offs? Should I do it with my horrible skills at plumbing or should I call someone who's really good? That's a trade-off in Tom's way of thinking. And the more I thought about it, the more I thought we approach environmental problems as if there is a solution, stop emitting carbon, that's a solution. Well, but there's some trade offs. And that, that notion that I got from Tom's little saying is, this button really, I think sets the stage for what markets versus mandates is about. It's about how those trade offs are made and who makes them. How do we know whether we should call the plumber or fix it ourselves? There are lots of things that go into my decision as to how to solve that problem, but it, it's in, in the case of the environment, the question is who gets to make the trade-offs? Who gets to decide whether A is better than B? Who gets to, to make those decisions? And won't come as any surprise to anyone who's ever walked through the doors of the Hoover Institution to know that I have a slight leaning towards markets and markets. Then back to the other point I made, depend on property rights. And with property rights owners, buyers and sellers make that trade off decision. Do you want to keep your land for whatever you're using it for or sell it to someone who wants to do something else? And it's that willing, buyer, willing seller gains from trade that really drive the market side. And that requires property rights. And our mission at Hoover is to, to explore how property rights come about to then, as Condi put it, unleash that human ingenuity. How, how do property rights work to stimulate people to make these trade-offs in a way that captures, is it really a good idea to do it this way or is there another way? And is that one better? So I, if you leave with nothing else from the day, and, and as I said, there you have it, you don't need the clicker. 'cause I'm finished with my slides. I think if you leave with Tom's admonition in this button that there are no solutions, but there are lots of trade-offs. And every time you think of an environmental problem, whether it's at the top of the food chain with climate change or something, as if you will, trivial as to whether you fix the faucet to save water. If you leave with that, you will understand how to think about the difference between markets and mandates. Do private individuals with property rights make those trade-offs or do people in politics, politicians and bureaucrats make those trade-offs? For us, I think the environmental movement in this country is set us off on a task of recognizing that the environment is a problem. It quickly morphed into a mandates approach. Look at the alphabet soup of, of almost everything EPA and all the other agencies with acronyms. The that approach has dominated environmental policy in the United States, but as you'll see, as the day goes on, it need not dominate. And there are ways that actually are a better way to fix that faucet. If you leave with that, you will know what this conference is all about, what this project is all about, and how we at Hoover think about markets versus mandates. And with that, my colleague, I'm his boss, no, I'm really not. Nobody is Nick's boss appropriately. Nick is a brilliant scholar and, and has the energy to carry on projects in ways that I never could. And with that, let me turn it over to Dominic Parker. Well, well thank you. So Terry had the task of following condi and speaking, and that is not a task to envy, nor is the task of following Terry. So we're just, we're going down the list here, I think. And then on top of that, when he takes my clicker, he's, He's handicap man, you want me to do it for you? So I do encourage you to read Terry's piece and Substack, and he gives really great examples of trade-offs over natural resource use in that article. One is about water, water which is valued for irrigation, for municipality uses, but also for habitat, for fish, for environmental services. And so how do you make those trade-offs? And if you have property rights and markets, you think about different things than when those trade-offs are assessed by, by bureaucrats from afar. So Terry and I think very similarly about markets for man verse mandates, but one difference between the two of us is that he's retired from teaching economics. And I'm currently a professor of economics at the University of Wisconsin, which means I have trouble explaining things without the aid of graphs. And so I am going to show you a graph to illustrate a point I wanna make Terry's graduated. Beyond that, he doesn't need such aids. So with that as an aid, my goal over the next few minutes is to offer a complimentary way to think about markets versus mandates. And to tie that thinking into the themes of the conference for today. Oops. Oh no. So there it is. So I wanna think about at least what is a short run trade off that doesn't have a solution. So in the words of of sold, there's only trade offs, not a solution, at least ostensibly, here's one without a solution. And then, and then I'll talk about what we get when we think about this trade off. So on the vertical side of this graph is environmental quality. And I'm gonna broadly define that to represent things like clean air, clean water, stable climate, biodiversity. And on the horizontal side is economic freedom. And so I'm gonna broadly define that as options that consumers have, producers and households. And so in a free society, we can drive whatever we want. We can drink from plastic straws or paper straws if we want. We can use gas or electric stoves. We can spray chemicals in our lawns. We can hunt and fish where we want. We can use the shower heads that we choose. So, you know, broadly speaking on the, the far left is a command and control kind of economy with little freedom. And on the far right is a laissez-faire kind of economy. And so Patrick McLaughlin, who's a scholar here at the Hoover Institution who studies regulation, both at the federal and the state level, has shown that the federal, the number and intensity of federal regulations, particularly about the environment, has grown over time. So we're probably moving away from economic freedom because all those regulations detail constraints on what firms can do, what households can do, and what consumers can do. So I wanna say people most, most people value environmental quality and freedom. I've had a few neighbors that seem to take pleasure out of restricting freedom with no return from it just to kind of regulate your behavior. But most people think of regulating behavior as in the, in the environmental world is, is helping improve environmental quality. So if there really is a trade off, and I think there is in the short run, but not the long run, then societies can't have everything. And the line connecting the vertical and the horizontal AEs represents a, a constraint. It represents trade-offs. And, and so I think importantly, the allocations along the constraint can't really be ranked because there's not really a one size fits all. So let's talk about the letters W and X. So they're on this, they're on this constraint, and the median resident in California, likely per prefers a point like w to a point like X. So you have maybe more environmental quality and less economic freedom. And in fact, in Patrick's database, California is the most regulated state, which probably doesn't surprise you. So that would correspond with it having less economic freedom. But a state like Idaho, which ranks either at the bottom or the top, depending on your perspective, it is the least regulated state according to his database. So that's like a point like x where you, you think, well, there's more economic freedom, perhaps there's less environmental quality as a result. And so I don't think the markets first mandates program is so concerned with fighting over whether W is better than X. Although, you know, we have preferences and we can sort, and, and I have, you know, we have lots of ideas about comparing W versus X, but I think the main point is understanding how we can avoid policies and institutions that put us at a point like y and why is really a, a bad place to be, right? Because, you know, if you're at y you could have more economic freedom and not give up any environmental quality. Similarly, you could have more environmental quality without giving up economic freedom. And so I think of this program as largely about how we don't end up in a place like y and, and, and, and how we can move to, you know, somewhere, anywhere between W and X is better than Y for everybody, you know, whatever your stripes are. So, you know, I mean, I think another way of saying that is if we're at a point where, like why we have environmental regulations that aren't really working, they're not delivering environmental quality. Okay, let me, let me give you three concrete examples of, of what I'm talking about and then I'll transition to link all of this to the themes of the conference. So first, many jurisdictions, including some in California, have implemented bans on plastic carryout bags. So that Trader Joe's on Sunday, and you, you know, you have to use a paper bag, not a plastic carryout bag. And so what research has shown consistently across the world, not just in California, is these bands don't really reduce plastic waste. They have a small impact at best. And what you find is people substitute away from carryout plastic bags, they buy more plastic grocery bags. And so you have a mandate that takes away freedom and does not yield much environmental quality improvements, if any at all. And so that is like a movement from say, X to Y, which is a bad move. And I think when we, when we talk about environmental federalism, you know, we'll talk about one of the great examples of environmental fed federalism is not just that people can sort and find a mix that better matches their preferences for freedom and environmental quality. That's a huge benefit of federalism, but so too is experimentation. So we can try different things in different places and learn what works and what doesn't. And I often think of positive examples. So one jurisdiction finds a way to improve environmental quality and freedom, and other jurisdictions can learn from that. But bad examples are equally informative, right? So I'm actually, especially given I don't live in New York City, I'm excited about the regime change with the new mayor there because I think it's gonna teach us a lot about, you know, if you change policies pretty drastically, you know what happened? So great experiments for economists to learn from A second example would be a positive example, which I think is more like a move from Y to W. And this is in recent years now, 20, 30, 40 years ago, so not so recent, the initiation of something called the conservation easement at different state levels that authorized partial interest in land for conservation to be utilized by conservation groups in a way that's at least voluntary for landowners in the short run. So they're not, you know, they're not conservation easements are not perfect, but they're a substitute for top command and control land use regulations. And you know, I'm very familiar with conservation easements. I've researched them for a while. I've looked at a lot of the data and they work pretty well in a lot of cases they work better than, than top-down regulations. And so here's a case where we've found a way to allow a little bit more economic freedom and got more environmental quality as a result. Okay? The most complicated thing was with the arrows. And I had this set up with animation, so I was not gonna, not gonna burden you with the complicated graph just to begin with. But the thing with the aerials is, is my way of depicting the evolution of the Federal Clean Air Act in a sim. And what I think is kind of a simple schematic, and, and I think this illustrates how you can get regulations that allow more freedom and can improve more environmental quality within those, within those schemes. So when the Clean Air Act was passed in 1970, I'm talking about the Federal Clean Air Act it in, then shortly after, in 1975, CATA at converters were required in cars and there was other command and control mandates in the Federal Clean Air Act required scrubbers be installed in smoke stacks. And so I think these policies pretty effectively at least, and, and pretty quickly improved air quality. You know, they reduced SO two carbon monoxide and, and some other local air pollutants. But they did, they did so in a really costly way, both economically in terms of the freedoms that were, that were taken away from it. So I think of that as like a big move from X to Z. So yeah, you got more environmental quality, but there was a lot of, of freedoms that were restricted in the process over time, especially with the 1990 amendments to the Clean Air Act, there was a lot more flexibility, market incentives, sulfur dioxide trading programs between power plants were introduced. And so what that did is it, it allowed more flexibility and more freedom, and you got improvements both in the dimension of freedom, which, you know, people deeply value and environmental quality, which people deeply value. So you kind of hit a wall with where you could go with mandates and to get further with the Clean Air Act, it was necessary to introduce market incentives and, and they were, they were quite effective. So with that, with that graph, the last thing I wanna do here is just comment on how I think this framing links to the themes of the conference. So the first session we'll hear about environmental federalism and, and as I've already mentioned, federalism gives people a way to sort and to experiment with different environmental policies. So, so I think that's clearly important. It's clearly part of the American tradition as Condi pointed out is, is to have state and local action happen before we resort to federal action. And I think you'll hear from the panel that there's a lot of environmental improvements at the state level far, you know, long before the federal government acted. In fact, I have a substack on the freedom frequency where I discuss in memory of Earth Day. Earth Day was in 1970, initiated a bunch of federal regulations like the Clean Air Act, clean Water Act. But if you look at data from even the fifties and sixties, you see environmental improvements were predating federal regulations in the case of water for a while. So, so that's federalism. The next theme is trade and international trade trades. What are the environmental implications of international trade? I want to give a shout out to Cal, who we saw at an environmental program last year, and it was after some new tariffs were passed and Cal said, you know, we really should explore in your conference this issue of tariffs and, and trade and the implications. Cal, that's a great idea. And so we have a session today about trade. I think of trade as an expression of economic freedom. Trade itself is, as I tell my students when I teach, you know, where does economic prosperity come from? All the root of all economic prosperity is trade. There's like, I don't think there's anything else. Trade between individuals, trade between groups, trade between countries is, is really fundamentally the root of all environmental or all economic improvement. So trade has the, the, the potential just to expand this frontier to give us more of everything. But of course, trade has complex effects on environmental quality. You get more possibilities. Many are good and, and many and and some might be bad. So we'll hear about that later today. Another theme, so the conference themes are trade technology and entrepreneurship. So technology gives us better ways to monitor and measure environmental outcomes. So like emissions, for example, methane leaks for example. There's newer technologies to do that, better ways to measure fishing activity in the high seas than we used to have. And so with those technologies, we have more opportunities to use markets, they work better. A prerequisite, as Terry was mentioning for markets is, is some basis for contracting voluntary interactions. And in order to have a contract, you have to be able to measure what's happening and evaluate it. Well, technology has just blossomed in a way that allows us to do that. The launch talk with Niraj will highlight how the Nature Conservancy is using technology to improve voluntary conservation. But technology, I think clearly, you know, expands this frontier. It gives us an opportunity to, to have more of the things we love, more freedom and more environmental quality. And then finally, I would be remiss if I didn't mention entrepreneurship in our environ. So many of them are here today with us both from last year's Hoover cohort and this year's cohort of en infopreneurs. And they are really the force that nudges outcomes from points like why to something better. You know, this, this doesn't happen magically even, you know, we've had enviro entrepreneurship in the private sector, we've had it in the nonprofit sector and we've had it in government. And, you know, environ to the extent they're successful are taking economic freedoms as a given and trying to find ways to, to leverage that for environmental improvements. And so with that, I, I just want to give us time for a break before we launch the session, but I also wanna give a plug for Terry's freedom frequency piece. It's a great piece to think about trade-offs and if you have time, I have a piece that's probably next to it on the freedom frequency, a web on the, the homepage, which gives my view of the great advances we made since Earth Day in 1970. And the contribution of markets to those advances, which I think has been stunning, phenomenal, and gives me hope that if we allow the kinds of freedoms that facilitate markets, we're gonna continue to improve. So thank you very much. Really appreciate you being here and look forward to a stimulating day.

- Well, I've been asked to just launch our next session here. Session title here is Back to the Past State versus Federal Governance and Environmental Federalism. We have, I think, really two of the great experts on environmental federalism in in the United States. Here with us on stage. Let me introduce them and then I'll turn it over to each of them for some remarks. We'll do some moderated discussion and then open it up for discussion on the floor. So directly to my left, your right is Jonathan Adler of William and Mary College. He is the Taswell Taylor professor of law and William h Cabell research professor since 2025. Prior to joining the faculty at William and Mary, he was a chaired professor of law and the founding director of the Coleman p Burke Center for Environmental Law at Case Western Reserve University School of Law. He's the author or editor of SE seven books, including Climate Liberalism, perspectives on Liberty Property and Pollution 2023. Then over farther on my left is Todd Myers, Washington Policy Center, vice President for Research at the Washington Policy Center. He's the author of the, of the book, time to Think Small, how Nimble Environmental Technologies Can Solve the Planet's Biggest Problems. His writing has appeared in major media outlets, including the Wall Street Journal, national Review, Seattle Times, and USA today. He has served as vice president of the Northwest Association of Biomedical Research and received their distinguished service award in 2018 for his support of bioscience. So it's a, it's great to have you both here. Welcome to the Hoover Institution, and let's just start it off with Jonathan Adler. Well, it's a, it's a pleasure to be here and to talk about one of my favorite topics. After a couple economists, though I'll warn you now, you're gonna hear from a lawyer and I am gonna try and talk about some legal questions in how we think about environmental federalism. And what I wanna do just in the next 10 minutes, relatively briefly, is say a little bit about how we think about our constitutional structure. The fact that we have a federal government and we have state governments, they both have a set of responsibilities. When we wanna deal with environmental problems, we should try to think somewhat rationally about how to divide up that responsibility to think about what some of the trade offs are between assigning certain obligations to the federal government and the state governments. And if I leave you with anything in my brief remarks, it's that we've done a terrible job at that. That the way our constitution is structured might suggest a way of dividing responsibility between the federal government and state governments when it comes to environmental policy economically. We can certainly think about notions of comparative advantage and the like, and use that as a guide for how we might divide responsibility between the federal government and state governments. But then we will look at what we actually have. We haven't done any of that. We haven't followed our constitutional and it's intuitions. We have not followed what economic theory and modeling might suggest, rather it's been somewhat haphazard and that the reasons we have a lot of federal regulation are not the reasons that we tell ourselves and they don't align with the theoretical justifications that actually work. And that if we wanna do a better job at thinking about how we, or we wanna do a better job at addressing environmental problems, one of the things we need to do is think more carefully about how we allocate responsibility between the, the federal and state governments. So I spent 25 years in Cleveland, so I, it's hard to talk about the subject without talking at least one beat about this. This is a picture that Time Magazine published in 1970, in 1969 of the Cuyahoga River burst into flames. Some of you may remember the Randy Newman song. Based on this, those of you that are a bit younger may prefer the reference in in the REM song to the Bernie of the Cuyahoga. This picture has been incredibly important in the way we talk and think about environmental problems, and in particular, the burst of federal regulation and federal involvement that be began in 1969 and continued through the 1970s. The the problem, and, and this is something that we continue to cite all the time, whoops, there we go. So for example, you know, the EPA likes to publish this picture to talk about the various progress. It, it turns out there is a children's book the Day the River Caught Fire that tells this story. But of course, the problem, and some of you know, this, is that picture I showed you a minute ago is not a picture of the 1969 fire on the Cuyahoga River. It is the picture that Time magazine published. It is the picture that the EPA has used repeatedly over the last several decades. But it's in fact not a picture of the 1969 fire. It's, this is the closest thing we have to a picture of the 1969 fire. It's a lot less dramatic. It's the fire was, was perhaps somewhat fierce, but it only lasted about 20 minutes. It was really something of a non-issue. It was something of a non-issue because river fires in on the Cuyahoga had once been common in the late 19th and early 20th century. In fact, they had been common throughout the United States in all sorts of, of of places where rivers had been industrialized. They were a relatively frequent late 19th and early 20th century environmental problem. A problem that by 1969 we had largely forgotten about until the Time Magazine dug up this picture and published it. The picture that that that they published is actually from this fire in 1952, a real intense inferno. Something that would have, would almost certainly caused loss of human life had it not occurred on a weekend caused substantial damage, but not nearly as dramatic or was far more dramatic than what actually occurred in 1969. And if I had time, I could regale you with stories of, of fires, again, from going back to the 19 teens going back to the late 19th century. They, they had been quite common. But again, don't, don't align with the story. We generally like to tell ourselves the story of the Kaga Ohga River. And I have a long article, or, or sleep aid if you prefer, that goes into this story in some detail, is what happened with the Cuyahoga fire in some respects and bodies, a fable that we tell ourselves about federal environmental regulation. And that fable is that federal environmental regulation was a necessary response to the failure of state's, localities, and private organizations to address environmental concerns. Well, that wasn't true about the 1969 fire, right? This, this is a problem that had been common throughout the United States, in industrialized places, had been common on the Cuyahoga. It is a problem that had been solved for the most part prior to 1969. And so we had kind of forgotten about it. But more broadly, this is the case with environmental problems. In fact, most of the major environmental problems that we were concerned about in 19 69, 19 70 were in fact moving in the right direction. The federal government did not intervene 'cause state and local governments had failed to act. It intervened because there was demand for environmental protection and for a variety of reasons that demand resulted in federal action as in addition to state and local action, because of other things going on in politics. Not because state and local governments had been asleep at the switch or had not been responsive to public demand. So Nick mentioned this before, you know, here's some of the data on water pollution. I can show you data on, on air pollution. I can show you data on efforts to conserve wetlands. I can show you data on all sorts of things where those environmental problems that we were most concerned about, the time things were moving in the right direction before federal statutes were adopted. In some cases, the, the, the, the trends of progress were greater prior to the adoption of federal statutes, then after, likely due to diminishing marginal returns. But it was not the case that the federal government was the savior that had to act because things had been getting worse and worse and worse until Congress paid attention. And in terms of we think about the causes of why we got federal regulation, when we did, again, I'm gonna go through this relatively quickly, happy to in in the q and a to to elaborate any of these things. There was increased environmental awareness and understanding. So there was demand for more environmental action generally at all levels of government. Our politics at the time in the 1960s were becoming far more nationalized, right? So in 1969, time Magazine could publish a picture that goes to the nation of a a rare fire and it becomes a national thing. Whereas fires in the 1950s, 1940s, 1930s, 1910s were generally local events and things that did not get, get national attention. There was for a lot of obvi obvious reasons, having very little to do with environmental policy, profound distrust in the ability of state and local governments, state governments in particular, to safeguard their populations. And, and, and we need to understand that that's one of the reasons why environmental policy was nationalized. If, if states, if many states could not be trusted to protect their own citizens from violence based on the color of their skin, why would we trust those state governments to be particularly progressive or forward-looking when it came to environmental protection? And there was also a, a certain amount of rent seeking. There were certainly a lot of firms that benefited from the move from state regulation to national regulation as a way of achieving market share, imposing costs on competitors or standardizing markets. Understanding that that's part of why we got federal regulation. It wasn't because state and local governments were incapable and willing to act. It is worth asking a little bit about what should the federal rule be like, if we're going to have federal involvement, what are the reasons we should want to have it? We should start, I think, from an understanding of that there are lots of benefits from decentralization. I think Todd's gonna talk a little bit about this. I won't spend a lot of time going through them, but, and Nick and, and Terry already hinted at some of them, one, there's a lot of local knowledge in, in, in local communities. We foster innovation by not doing the same thing the same way we can satisfy preferences better when we decentralize. Right? Idaho and California do not have the same environmental preferences. We can ensure, often ensure greater accountability. That is the lines of accountability locally are often closer than they are when you're dealing with folks far away. And we might think there are benefits from ecologies of scale. The fact that environmental problems are quite different from place to place the way we want to address certain sorts of problems can vary quite dramatically. So I, I would argue this is a reason why we want to often default to things at the state and local level. But there certainly might be reasons why we want federal regulation. There are a bunch of reasons really quickly, if we think about these reasons though, when we look at what we have, we find a real problem. Interstate spillovers. The fact that when I lived in Ohio, I used electricity often generated by coal power plants that would emit air pollution, that would affect Vermont. That there's a reason for federal involvement there, right? Ohio's not gonna clean up those emissions just for the benefit of Vermont, because we're nice people in Ohio and we were generally nice in Ohio, but we weren't that nice, right? And so that's a good justification for federal intervention. The problem is when you look at the US code and you look at the page and page and page after of environmental re of environmental statutes and environmental regulations, you find very little that's focused on interstate spillovers. It is a tiny fraction of the federal environmental regulation that we actually have. We can talk about national public goods, but regulation's not typically the way we provide for national public, for public goods. If we have national public goods, we would think about subsidizing them. We would not think about achieving them through regulation. There's a lot of technical expertise and there may it that may benefit from fe federal resources or we may not want to duplicate that expertise. But that's not really a justification for regulation. It's again, justification for perhaps subsidizing research, collecting data and the like. There may be economies of scale. We may benefit from the fact that an automobile that you know is produced in, used to be Detroit or wherever they're produced now can be sold in it throughout the United States. And maybe that that is a benefit from standardization, but relatively little of environmental or environmental regulation can be justified on that basis. Race to the bottom, it talked about a lot. It's in the theory all the time. The problem is, as an empirical matter in the United States, we don't have evidence of it. We in fact have evidence in some cases of the exact opposite of states, in fact, learning from each other to satisfy environmental preferences better than they had before. We do not in fact find states failing to regulate as a consequence of these competitive pressures and the sort of dynamic that race to the bottom would predict. So the basis for federal regulation that could justify federal regulation that are put forward don't really do a good job of justifying what we have. So I've argued that we have the problem of jurisdictional mismatch. We excessively centralize a lot of things that should not be centralized. And at the same time, we abdicate things where the federal government should be more involved. Interstate spillovers being the primary example of that. We spend too much time telling local communities what quality of air water they should have locally too little time preventing jurisdictions from externalizing the costs of their activities on their neighbors. And then we have a cooperative federalism model that is not particularly cooperative. So this is just a, a, a plea of saying we should think about what the federal rule is. We should think about the trade-offs. And if we think seriously about it, we may disagree about precisely what sort of environmental regulations we want, but what I think we can't do is be very satisfied with the system we have. And then lastly, here's I guess my version of Terry's Thomas soul trade. There is no going back to the Garden of Eden. We are not talking about what allocation of authority will perfect environmental policy or, or produce a lack of trade-offs. It's a question of what will do a better job for us of managing the trade-offs in environmental policy that we have. And I apologize for going over and I will stop there. Okay, thank you Jonathan. Todd, over to you. Well, thank you. It's, it's really nice to have the opportunity to talk to you about this. I have worked in environmental policy at the state level for more than a quarter century, previously served at the Washington State Department of Natural Resources at the end of the spotted Owl era, then served on the Puget Sound Salmon Recovery Council, and then on the, at the Hanford Advisory Board overseeing the cleanup. And so a lot of my work has been very practical as opposed to sort of philosophical or thinking more deeply about these. I've just been trying to deal with what was in front of me. So I really appreciate the opportunity to be on the panel with Professor Adler, who is a real thought leader in this and has thought a lot about environmental federalism. And I always learn something. So I, what I think is, you're probably gonna get a panel that's like this, where he is the guy who's gonna give you the deep thoughts. And I'm just gonna tell you sort of the grubby politics on the ground. So in talking about environmental federalism, I think there's a few reasons that we've already heard for why you would take power away from the federal and, and try to locate, locate it at the local level. The first is sort of a laboratory of democracy. We talked, we heard earlier about examples, good examples or bad examples is the case I think we have in Washington state or elsewhere. I like this poster. You know, it says, it could be that the purpose of your life is only to serve as a warning to others. I feel that that's basically been my career in Washington state. But there are lessons to be learned from that, for better, for worse. Another argument is this sorting, right? If you wanna live in Washington state where we very, where we prioritize environmental stewardship, you can live in Washington state or you can go just east to Idaho, where the regulations are much less, where they have a very different approach to being a steward of the environment. And then also accountability. I think this is one of the key things that I wanna talk about today, which is the reason that you get that trade-offs are distorted and decisions are distorted is because there is a lack of accountability. There's a lack of property rights, which means that you are making decisions but not feeling the consequences. And so by taking something out of the federal government and locating it closer to the people who feel those consequences, you are more likely to get accountability. And so these, I think are the three sort of big things that people talk about, about why environmental federalism makes more sense in promoting good sustainable stewardship of the environment. And in fact, we see that this can succeed. The first example I'm gonna give is actually not a state based sort of federalist approach, but a local based, which is a sort of tribal, so Secretary Rice talked about bringing in indigenous students. Actually it I, in looking at the management and the stewardship of natural resources, some of the best examples that I want states to take a lesson from is how they manage natural resources on tribal reservations. And I'll give you a perfect example. So in Washington state we have the Quinalt tribe, which is on the coast. They have these beautiful cedar forests and the Bureau of in Indian Affairs managed those forests for on behalf of the members of the tribe to generate revenue. And so for a long time, what their mandate was to generate revenue. And so they would go and they would harvest and they would cut down a lot of trees. And then they said, well, look, if we replant, that just takes money. It's money that we can't provide to the tribal members. You know, trees grow back naturally, we're gonna let them grow back. What they found though was is that cedar trees in particular do not decay. They have a chemical that doesn't, that causes them not to decay like other conifer forests. And so what you got were these massive areas where there was just stumps and there were so much slash that there was no regrowth. So the tribal members were like, look, well look, this is not sustainable. You're not growing back. We're not gonna have forests for the future. This is ugly. Please do something about this. And the Bureau of Indian Affairs said, not our job. Our job is to generate revenue. And if there is a place in the united, at least in the lower 48 that is farther from Washington DC than the Quinalt tribe, right? It's, it probably doesn't exist. So the accountability was completely detached from what the management was on the ground. After a while, the tribe started to make an argument about, look, let us manage these forests. We can do it. If you give us the authority, we can manage better for our own members and other tribal members who live on the reservation. And so it, they finally got control and, and the Bureau of Indian Affairs wasn't even doing environmental assessments before they did the harvest. They had a general plan for the whole area, but they weren't doing environmental assessments. And just to show you how absurd it was, when the tribe finally took over management of the forests, the Bureau of Indian Affairs said, oh, by the way, we still have authority on this. So we have to over, we have to, you know, sign off, you have to do environmental assessments. And the tribal members said, wait, wait, wait, wait. We, we have to do environmental assessments, but you didn't. And they said, yes, that's correct. So that I think gives you a sense of how detached the man, the stewardship was with the Bureau of Indian Indian Affairs. Once the Kalt tribe started managing it, they started doing replanting, regrowing those while still harvesting for revenue. I talked with the manager of their program and I said, you know, sort of tell me what your philosophy is. And he says, we manage like Weyerhaeuser, right? We, we go, we harvest trees, we generate revenue, we hand it out to our members. So I think it's a really good example of how locating the decisions on the ground not only yields those economic benefits, but also better environmental benefits. This is another favorite example of mine in Washington state. You probably all heard about the murder hornet. I'm a beekeeper. I was particularly interested in the murder hornet in Washington state because they go after hives. I was president of my beekeeping association at the time, department of Agriculture came in and brought a, you know, example of one of these hornets encased in plastic. I deal with lots of stinging insects all the time. And that thing encased in plastic dead scared me. It's their giant. So we had this invasion or feared invasion. And so they enlisted beekeepers and found, and finally were able to trap one. And then the university of, there was a student at the University of Washington who created this cool tracker that they put on. It went back to the hive, they found the hive, this really cool looking person with this outfit. You can't, there's, they have to, they can sting through a normal bee suit. So they had to do like this vulcanized rubber thing. This person is from the Department of Natural Resources. When I saw this, I said, if the Department of Natural Resources doesn't use this to recruit, then that, I dunno what the hell they're doing because that is really cool. And they found this and they were able to destroy the hive. And we haven't had any since then. It is a perfect example of engaging local communities, state government, taking the lead, working with those folks, tracking down an invasive species and eradicating it. And I'm really glad, because I don't wanna see any of them in my state. We know that this is true. Also, studies show that these sort of local efforts actually work better around the world. The study, which you cannot read on the slide because the type is too small, looked at hundreds of conservation projects around the world. And what they found is, is that those projects that were run out of the centralized government ha were successful in achieving their stewardship goals less than 20% of their time. But projects run at the local community or by local tribes about 50% of the time. Not perfect, but far better because those lines of accountability, knowledge, other things like that, made it more likely to be successful. The, the case of the Quin tribe, I think is a perfect example of, of what they found in this study. But of course I think that what you see is, is that there are more failures than successes. Now, coming from Washington state, maybe I'm biased because that's what I see, but many of the challenges that we have at the federal level, we see at the state level. So the Flint water crisis is a perfect example. The city of Flint, Michigan switched its water. It caused problems. They had, you know, lead and other things in the water. And there the quotes during this period of time are just remarkable. The Michigan Department of Environmental Quality said Anyone concerned about lead and drinking water can relax. Right? That turned out not to be true. Once the EPA, the regional EPA finally sort of figured out what was going on, they were saying, well maybe we could use this source of funding. It's not for filters, it's not to address this sort of thing, but maybe we can use it for this. And there's an email internal to EPA where it said, yeah, we could probably justify it. And then it said, but I'm not sure Flint is the kind of community we want to go out on a limb for. So that gives you a sense of how the distance between the federal government and the federal agencies and then even the state agencies. And then once they started cleaning it up, they had a really cool tool, tool developed by University of Michigan AI to identify where the lead pipes in the community were. 'cause they'd been built up over a century. They didn't even know what pipes needed to be replaced. The AI tool was working fantastically. And what it showed was is that not surprisingly it was the low income communities where the lead pipes had been and the wealthier communities had newer pipes. But the wealthier communities said, Hey, why aren't you digging up our pipes and checking? You need to check ours. You're, you're using our kids as an experiment. We don't trust your AI tool. Guess what that put pressure on the city. And ultimately the city stopped using the AI tool and started digging up pipes in the wealthy communities. And guess what they found? There was no lead pipes there and they wasted time and money. And so that sort of political pressure can distort at the local level as well as at the federal level. This is one of my favorite examples in Washington state, we like solar panels and we like EVs. So why not combine the two of them except that a solar powered EV charger costs about a hundred thousand dollars, whereas a standard EV charger costs about $15,000. So the city of Bellingham installed some, and so I asked them, why are, like, why are you doing this? This is so expensive, right? They're limited, they have, they can only do what the battery can hold. I don't know if you've been to Washington State, it's not the sunniest place in the United States. And the answer I got was, well the city council thought it'd be nice if some of the power came from the sun. So we're gonna spend a hundred thousand dollars instead of $15,000 for EV chargers for that. Again, even at the local level, those priorities, those incentives can be distorted. So federalism offers suffers from some of the same problems, right? The primary benefit of politicians tend to be identitarian and emotional rather than, you know, the benefits of actual true environmental stewardship. The incentives to change policies are weak, right? When they make mistakes, nobody wants to admit that they're wrong. And the incentives to change and admit that you're wrong are low. So we keep doing silly things over and over again and there are lots of disincentives and in fact, what they end up doing is justifying those bad policies. So I'll just finish with this, which may sort of hint at the lunch speech we're going to hear, which is that thanks to technology we now can more closely connect environmental stewardship to individual people who feel the accountability, who feel those trade-offs directly and can make better decisions. I'll just give you this two quick examples. One is from the California energy crisis. That was a few years ago when there were going to be blackouts or at least brownouts, they did something they had never done, which is they sent out a text simply saying, look, we're facing shortages, please conserve where you can. And what you saw without any incentive was a sharp drop in the amount of electricity that people were using. Residential customers that probably avoided some brownouts people said, oh, it's very easy for me to just to turn off this or to turn off my dryer. Other things like that, just from the power of one text technology is now allowing these sorts of things which never occurred before. And you can see very clearly exactly when they sent out that text by the sharp drop. And there's more opportunities to use that kind of technology. This is not just in United States. These sort of technologies are now worldwide. This is one of my favorite example, a group called E water pay put in internet connected water pumps where people pay about a penny a day to get clean water. And you can see there's been 1.4 million liters dispensed, almost 340,000 people have used these because they are willing to pay to get that guaranteed water. And when the pump breaks down, the company has an incentive to fix it. That's the sort of local efforts that can be done, not just in California but across the globe. And I think tho that's the next step to take it from environmental federalism to sort of personal environmentalism using technology. Thank you so much. Okay. Thanks to Jonathan and Todd. So I'm, I'm gonna ask a few questions that are, have been on my mind about this. So it seems that when you think of the role of a higher level government, like the, the federal government, there's a role potentially in, in setting a floor environmental standards that might apply nationally. And there's also a role in potentially setting a ceiling against what states can do. And this is something I've, I've thought about a lot in the context of a, a class that I teach at Stanford Graduate School of Business called Energy Finance. And in, in a sense, this class was sort of week after week my learning about various restrictions and regulations that were put in at the state and local level that businesses were actually quite happy about in many cases because they were able to in fact, take advantage of them. So lemme give one example that might highlight my question about whether the federal government has a role in placing a ceiling on what states can do, which in New England, in the Boston area, on a cold winter day, they'll import about 25% of their, of their energy needs in the form of liquified natural gas. That is natural gas that is someplace else cooled down to negative 260 degrees Fahrenheit load onto tankers and shipped up to, to New England. Okay? It, the, the area is only a few hundred miles to the east of the Marcellus Shale. And if, if a pipeline were able to be built from the Pennsylvania Marcellus Shale over to New England, they could, they could avoid this entire process of having to liquefy natural gas elsewhere and ship it up to New England. Okay? There also happened to be federal regulations that, that make it so that that liquified natural gas is actually coming from places like Trinidad and Tobago, not, not Louisiana or places where they, they produce it, but that, that's a separate issue. But question being this, the, the reason that there's no pipeline is that the state of New York blocked it. So I guess my, my question is, you know, what is the role of the federal government in potentially setting a ceiling against what states can do? Because that's something that ceiling has actually pretty large financial consequences for individuals and businesses in multiple different states and also has some pretty serious environmental consequences. Because I just simply cannot imagine, I, I'm, I'm a, a finance economist, not, not not an environmental scientist, but I just cannot imagine the environmental consequences of building a a pipeline would be higher than those of liquefying natural gas and shipping around in, in, in, in, in, in tankers and then re gasifying it elsewhere. But interested in your thoughts, either one of you. Yeah, I mean, I, I'll say I'm, I'm not a fan of the federal government setting floors or ceilings. I, I think that's the wrong way to think about the role of the federal government. If the federal government, there are contexts where states are externalizing costs of their decisions. So if I'm a state that is preventing my neighbors from being able to access certain energy sources, there might be a rule for the federal government there, but it's not a, a ceiling or floor question, right? It's the, it's the nature of, of what's being done at the state level. That's an issue. And I, I have a paper, in fact, I, that I did with folks at PERK some years ago pointing out that that given the way that federal action affects incentives at the state and local level, even efforts for the federal government to set a floor actually can become a defacto ceiling and insulates state and local jurisdictions from the trade-offs we actually want them to face. So I, I would say that, that thinking about the federal, federal involvement, we should be thinking kind of more qualitatively about how the federal government is helping ensure that state and local states and local communities are bearing both the costs and reaping the benefits of their decisions as opposed to thinking about it in terms of, oh, let's, let's set boundaries on the sorts of trade offs they're allowed to choose. Yeah, I think it's, I think it's a really difficult question because you can give lots of examples where the line between, you know right. Federal imposition of rules is a bad thing, and then in cases like this, where I think it's probably good, right? Interstate commerce, we recognize interstate commerce and reducing barriers of trade between states as a good thing that has been positive. And in this case, you sort of have a regulatory version of interstate commerce where you're saying, okay, individual states can't put barriers on, you know, trade with other states. So I think it, you know, so many things, it's a case by case basis, but I, I think we really face a problem right now with states who, as you said, not assuming the costs of their regulations imposing costs on others, whether that is blocking a pipeline or, or, or in the case of the, the air pollution, right? I think those are similar sort of challenges and, and my instinct is generally to favor sort of that interstate commerce and the role of federal government of opening that as opposed to, but there are of course, you know, downsides and, and problems with that as well. And, and otherwise, is it, am I correct that your perspective is that, you know, state, state against state competition will, will work and that there'll be enough sorting so that, for example, you know, if, if you think about California and the, the, the policy policies that California makes that often weaponize environmental regulation to, you know, to hinder construction building of residential homes, building of high speed rail, you know, the, the, there are two views. You know, one view is that, well, you know, that's California's decision and people will move to other states if they don't like it. Some people might move to California if they, if they do like it. And that's, that's just the, the, the, the, the nature of it, you know, and another would be that maybe decisions like that have some types of national consequences and that the federal government shouldn't just sit back and let states en engage in policies that would harm, potentially harm the welfare of large numbers of people. But I, I take it that given that the topic of here is environmental federalism, you're both pretty comfortable with kind of state competition leading to the right sorting and, and, and kinda optimal outcomes or, or any concerns that that might not be the case? Well, I mean, for me, the concern is when a state is adopting policies that externalize its pre the cost of its preferences on its neighbors, right? So just as, I don't want Ohio emitting air pollution that causes harm in Vermont, where Ohio is capturing the economic benefits of that energy production, but external externalizing those costs. I don't, it's one thing if California is, say, regulating California land use in ways that impose burdens economic burdens on people in Cal in California, it's something else. If California is, as it arguably has done with, say for example, some of its low carbon fuel standards adopting standards that are, are imposing their costs, those outside of California. So California can reap the benefits or at least the psychic benefits of thinking it's doing something envir environmentally beneficial, but not bearing those costs internally, internally. So I think again that that's, that's the way, at least I would, would want to think about it. I'm, I'm okay with states making trade-offs in a way different than I would and different from each other. And my concern is that when those costs are externalized, then you don't have the accountability and the feedback mechanisms that at least help us learn about what the nature of the tradeoffs are and how we wanna make them. Yeah. And I think that what what ends up happening is, is that you get states taking defensive actions against the decisions of other states. So in Washington state we have a lot of hydropower, hydro is cheap, it's also dispatchable. So it's very flexible. And so what we see in Washington state is, is that what's called the, the duck curve is moving north. And the duck curve is, is that you have this huge increase in solar power because of California in the middle of the day where prices go down. And then as the sun sets and, and actually ironically, you know, the peak demand goes up California, either they've, they have some batteries, but for a long time and they still look to Washington state and others to fill in that gap between the declining solar power and the peak demand. And so now it's, it's driving our co costs up for spot prices and day ahead and things like that. So they are externalizing the costs of their policy to Washington state. Now we in Washington state don't mind that so much, although our prices are going up, but that what's been happening is, is that they, you then get defensive actions taken by other states, which impose a cost, you know, that add nothing. And so I think that that's a real danger, danger and I think there is a role potentially there for federal government to sort of, you know, prevent that sort of defensive activity, which is just a net loss. Great. Let's switch gears and talk a little bit about climate change and, and, and regulation that is geared towards addressing climate change. Do you think that the, that that that climate change regulation is really the purview of the federal government? And how would state's approach to climate change maybe differ if the federal government took a lighter touch approach to addressing climate change? Well, federal government has generally taken a, a lighter touch. And, and I, I've certainly argued that one of the consequences of jurisdictional mismatch is that the demand for environmental action at the state level is met by, at, primarily by efforts to act where the federal government is not perceived as acting. And so you have a, a situation where states are doing more than they should be doing in the context of climate mitigation because states are not capable of capturing the benefits of those policies internally, or at least the environmental benefits. Arguably, you can craft policies in ways where you capture economic benefits locally and externalize those costs. So we have no reason to think states are gonna be adopting mitigation policies that are remotely beneficial and, and the federal government has been largely absent. And what would make more sense is, at least on the mitigation side for the federal government to spend a lot less time on the things that state and local governments are particularly competent at doing. And in so far as we're gonna have climate mitigation policies trying to do those as much as possible on the national level where there's at least a greater likelihood that we're gonna get a match between the cost of those policies and, and the benefits they generate. Adaptation, I think is, is different in the sense that adaptation, climate adaptation policies have a lot more of the, the characteristics of, of the sorts of things where you would expect state and local governments to actually be better at, because you're dealing with a lot of a place specific concerns about, you know, water and things like that where the information and, and the costs and benefits are more likely to be realized at the local level. So if it were up to me, I would kind of wanna resort the way we think about these things. I would, I mean, there are lots of, in the context of climate, lots of other things you'd need to do. Like stop pretending that the Clean Air Act is a, is a remotely practical way of trying to think about climate policy. So it's not just a question of the federalism issue, it's also a question of instrument choice and as well, but, but that's, that's the way I would approach it. I think it's, I think climate change at the state level is a good example of the sort of sorting and people can choose their own priorities. There is no, in terms of, you know, reducing global CO2 emissions, there's very little reason for the state to do that because the vast majority of the benefits are outside the state. When Washington State passed its cap and trade system, they did an economic analysis and they said, oh look, using the social cost of carbon and other things like that, the, this program actually generates a net benefit. And I said, okay, can you break out both using the social cost of carbon, which is a global estimate and the benefit to Washington state? And the Department of Ecology said no. And the reason they said no is, is that they knew very clearly that the number, the benefit to Washington State would be absolutely tiny compared to the cost of it. Now, if the people of the state of Washington decide we don't care, we wanna, we are rich, we wanna do more than our fair share, that's up for, you know, that's up to them to make that decision. But what happens in, with climate change, especially at the local level, is that the benefits are, you know, identitarian, the benefits are emotional, the benefits are not to the planet. There's lots of better ways that we could spend this money to help the planet than the things that we are doing at the local level because those incentives are so detached from actual real results. But that's the sort, that's the sort of situation that you get into, which is that if you're looking at, okay, how do you spend the money or, you know, what are the benefits in aligning the incentives with the policies doing climate change at the state level, you get a lot of mismatches. Should nuclear power be regulated at the federal level or is there an argument that particularly small module reactors should be regulated only at the state level? I'd be okay with a lot of it being done at the state level. Yeah, that, so I, as I mentioned, I was on the Hanford advisory board, which is I the cleanup of the nuclear waste from the bomb building, not from the energy side, but the Department of Ecology in Washington State oversees the cleanup and has their own separate thing on top of the Department of Energy. And so they have to provide permits. And when I was there, the Department of Ecology was 15 years behind renewing the permit. So for 15 years the permit had just been going on and they were still in the process. So I think anything you can do to reduce the bureaucracy so that it's not duplicative, encourage the in innovation and incentives. I think especially in an area like small modular reactors, we have to do that. And what's really interesting is that you're seeing, you know, I understand we're gonna talk about data centers. Data centers are now I think, a, a real opportunity to provide some of that innovation. And in Washington state, some of the most interesting work on small modular reactors is being promoted by Amazon, Microsoft, other folks, because they need that energy source. So there's a lot of private effort outside the government that is pushing to do this innovation. And to the extent that we can reduce federal regulatory oversight and make it more local, I think that's a good thing. Okay. Questions from the floor? Terry, did you wanna Yeah, Go back to the climate issue. To what extent are the climate cases such as the one in Montana, which was based on a, on a constitutional right to quote a clean and healthful environment. And then the argument was because Montana isn't reducing greenhouse gases enough, the, the people of Montana, particularly the young people, are being deprived of their right to a clean and healthful environment. That case was lost in both the district court and then the state Supreme Court lost in the sense that the state was the, the defendant and, and lost. And I think it, it potentially creates a, a a a way in which states can get involved in the debate and the climate regulations without any kind of positive effect to come from it. I, I was involved in the case and looked at Montana's share of, of greenhouse gases, and if you, I like, I like Jonathan's bubble slide, I if you put that bubble over Montana and, and even over me. So I couldn't breathe it. It's, it's just not going to have any effect. And yet I think it provides a way for people who are concerned about climate and feel the federal government isn't doing enough to replicate the Montana Clean and healthful environment approach. And it, it could have serious costs as, as you suggested. Todd, to what extent is this a threat, this federalism kind of approach? I, I don't, I mean, I, I don't think the, the Montana litigation itself is a threat, much of a threat beyond Montana because it ultimately is based on the Montana Supreme Court's idiosyncratic interpretation of the Montana constitution. And there aren't many states that have similar constitutional provisions in their state constitutions and it's difficult to, to externalize it. Now there's another set of litigation that's kind of parallel that tries to make these claims at the federal level. Now those ca I don't think those cases are going anywhere. If they were, I think they would be a, a a, a significant concern in part because it's an effort to use litigation to bypass the normal policymaking process, right? I mean, as a, as a policy matter, one of my concerns about the Montana litigation is that it's not, it's, it's being done outside of the policy making process, right? It's a way of basically exercising a trump over what the legislature did. And rather than the legislature saying, we're gonna do this or not do this on climate and let the voters decide whether we like that for Montana, it's a way to try to use the courts to go around that. And that would con if that were done, or to the extent that is done at the national level, that concerns me because part of what we've been talking about with federalism is how, in a lot of context, decentralization helps enable the making of trade-offs by those who both bear the costs and stand to reap the benefits of those decisions. And we can learn about how that's made. Litigation is a way of bypassing that and is kind of, ANU can be another way of externalizing costs on people other than those who are involved in the decision. And that's something we should at least be, be concerned about and wary of. The other thing I think that's interesting about those cases is that what you see is that the cases are designed to create a specific pol set of policies and regulations, right? They have a set of policies that they want imposed, but what they don't do is they don't sue then when the policies don't yield the in inte anticipated outcome. So they say, look, I have a right to a clean air and a healthy environment. And so when the policies are imposed and they don't yield what they claim they want, they don't go back and sue for the failure in Washington state. We sued the Department of Ecology because they, they simply stopped releasing climate data about whether the state was on track to meet its own imposed targets. I think those targets are sort of silly, but nonetheless, we should at least see the data and the, the, we sued the Department of Ecology and the court told us, no, you as a citizen don't have a right to tell the Department of Ecology that they even have to release this data. No environmental groups who supported these lawsuits we're on our sides saying, yes, you like, we need to see the data. Are we achieving this? No, they were against us. And so that I think is a tell about what the purpose of these lawsuits are. Yes, sir. Oh, thank you. Well, it's very well on kind of ideological reason to defer to subsidiarity to which you, you, you said that the decision should be made at the lowest level, but practically, and since people mentioned here, small nuclear reactors, are states technically capable of actually doing it? Is there a capacity to do this? And what happens if one state has one set of regulations, another has another set of regulations? I mean, we had the same story with cars and catalytic converters for California, and that was handled because it's only one state and big market, but cars are a little bit simpler than nuclear reactors. So is this a practical solution to defer it to the state or then you go to a tribal level perhaps for nuclear reactors. But we have differences between states already in terms of regulations on pretty serious issues, GMOs, some people have big concerns about genetically modified foods. And so in some states you have regulations or warnings or things like that and other places that you don't. And you can make the same argument about is that state capable of assessing the impacts of GMOs or of climate change, right? Washington State says, oh, we are, we can assess the impact of climate change and these various different products. And Idaho says we don't really care. So I think it's, I think your point is well taken that you need to make sure that it, for the legitimate role government has, is that jurisdiction capable of doing it? Can Washington state, can California do it as opposed to the federal government? I think probably yes. Could the city of Seattle do it? Well, I mean, you know, maybe, maybe not in the case of modular nuclear reactors. So there is an appropriate level, but I think that we already do some of that on some very big issues. I just wanna point out, I mean there's a bit of a slippery slope here. What does can mean, I would argue that there's a, there's a good argument that California can't really properly, you know, regulate its economy in a way that's not harmful to its citizens. Look at what, you know, again, look at all of the, the harmful regulation that stops you often in the name of environmentalism that stops building, that stops public transportation and so on. Yet we kind of agreed you, you kind of agreed here that the federal government didn't have a role in, you know, having states, you know, in protecting citizens of states from the harm that states could potentially do to them. And so when you talk about something like small modular reactors where, you know, the, the, the harm would potentially be localized, why wouldn't the same principle be applied? You know, as long as it's not creating externalities to other states. So what Well, I mean, I said I I'm, I'm perfectly okay with that, right? In part because I have no reason to believe that the federal government's going to be making a better choice for California than California would, or that the federal government's attempt to set a federal standard for the nation as a whole is actually going to do a better job of matching the preferences or needs of, of a very diverse country, right? One size fits all is often one size fits nobody in, in the, in the context of technical expertise. You know, there, there's a lot of reasons why we expect the federal government to have a lot more technical expertise than states. But when we actually look at the history and what has occurred in practice, it's not clear that, that it's actually turned out that way. Right? California actually led the federal government in understanding air pollution, understanding the role of mobile sources and automobiles in air pollution was far ahead of the federal government on that. And the reason we got federal vehicle standards instead of state-based standards is because the automakers didn't like the idea of state-based standards and, and went to Washington DC to prevent different states from adopting different things. When other states were looking, before we had federal standards at adopting, at, at adopting state standards of their own, they were faced with a choice, right? Economically, do we do what California did? Because that will probably result in less a, a lesser increase in vehicle costs. And if we adopt our own standard and less bureaucratic costs in terms of we can just take their standard off the shelf versus developing our own. And that's a choice we would like states to make. Now, there may be context in which we think economies of scale are such that for certain products sold in national markets, the, the, the economic benefits from a single national standard are sufficiently large that it makes sense to do that. I, I I would argue we want to be wary of that because it's too easy to overestimate those benefits and to underestimate the benefits of local variation, right? There are lots of environment, there are lots of products that have environmental consequences in some parts of the country that are of concern that aren't gonna have similar consequences elsewhere because of na the nature of local environmental conditions. So we wanna be careful about, about adopting that argument. Last thing I'll just say is we need to pay a lot more attention to, to the way that the, the federal government's policy choices affect choices at the state level about whether to invest in their own capacity. And I would argue that what we've seen historically is that once the federal government's in a field, the incentive for states to invest in their own technical capacity drops dramatically. And if, and if the federal government inter involvement in that area is good, well then maybe that's okay. But the history is often the federal government intervening in areas where we would benefit much, much, we benefit much more from state variation and the federal government's intervention has discouraged the development of state capacity and that we lose out from that. And, and that's something that we, we need to, to pay more attention to. So your moderator has not done a terrific job of keeping time. We're a couple minutes over, but thanks very much to both of you for this very interesting panel and we will move on next session at 10 o'clock. Thanks very much. Thank you.

- Why are we doing tariffs? Oh, 'cause they'll raise revenue. Sorry. They don't raise any revenue. Oh. Because we need to reshore American manufacturing. Sorry, that's not working out either. Ah, they are a, we're going to threaten tariffs to force our trade partners into lowering their tariffs. Yeah. Yeah. Well at least you could say that and accept it when they say No, no, we're not doing that. Oh, no, no, no. Forget it's not economics. It's all a geopolitical, bludgeon, bludgeon to get them to do what we want on foreign policy. Yeah. Europe and Canada are just so happy with us right now. How's that working out for you? Okay. I'm a little grumpy, but as you can see, tariffs are an answer in search of a question. Well, maybe, oh, tariffs will save the environment. Well, I guess that's what we're supposed to talk about. But my grumpy comment is in all these cases, as in many answers in search of a question which dominates our policy agenda, if you ask the question, there is typically a much better answer. So, you know, let's think about trade and the environment. We have regulated a lot of industries to death in the us They moved abroad and they took all their pollution with them. You know, for the us for the environment, actually US environment moving steel and, and coal and rare earth mining and all that stuff off to China is just wonderful for the US environment. It's terrible for the global environment. We actually raising global carbon dioxide, pollution and and other pollutants by feeling holy about it ourselves. The Europeans are way worse at this than we are, but that happened. So maybe tariffs will bring those industries back to America. Now. Why would we want them? Well it is true that all of these industries done under American environmental standards pollute less. So maybe that'll raise American pollution, but lower global pollution. We'll see. I don't know. But if that's the question, I can think of a hundred better answers. Now you guys might wanna say at this point, oh well sorry, see you at 11 o'clock. But I, I think you have more intelligent things to say, but I would ask you if you identify a question to which tariffs are helping a little bit, maybe also tell us what the right answer is. Thank you. And I'll, let's see who wants to go first or do you care? I'm Joe Shapiro from uc. Berkeley. It's a pleasure to be here. I was actually an undergraduate at Stanford and people sometimes ask about my loyalties 'cause there's a bit of a rivalry, but I'm sometimes politely informed to root for my paycheck. So I'm gonna tell you about two kinds of crises and ways that they might be linked. And the first is about what's happening to the environment and environmental policy. This is a graph of annual increases in carbon dioxide in the atmosphere. And there's been a pretty steady increase last year, had a much more rapid acceleration than the trend. Part of that is due to wildfires, but I sometimes talk to people in and the media who say there's all this incredible progress happening in climate. Companies are innovating cities and states are entrepreneurial in their policies. Renewable technology is getting cheaper. It's just incredible. And my response is really, there's only one thing that matters to the atmosphere. And that's carbon press releases, technology prices. They're only a mechanism and carbon continues to increase relentlessly. And a little earlier, professor Adler had a narrative about the Cuyahoga River in Cleveland, Ohio, lighting on fire. That was really a galvanizing event for environmental policy. Justified or not, the picture in time was from an earlier era. But there's no Cuyahoga liver river lighting on fire for climate policy. It's a graduate acceleration of events. If you were in California in late 2010s, wildfire smoke was outlandish in 20 18, 20 19. But this is a gradually accelerating situation. And at what day do we declare it's a crisis? Well, I'm just going to say there's a crisis in the environment. So carbon is increasing, global temperatures increasing. Also, again, the last couple years had a much more rapid increase in global temperature than has recently been seen. And the last point I'm gonna mention about a crisis in environmental policy is that coordination is not going so great. A, a very different feature of climate from air versus water is that as several previous commentators here mentioned, if you move economic activity from the US to China, air and water pollution will tend to move with it. But if you move greenhouse gas emissions from the US to China, it's the exact same impact on the atmosphere. It does not matter if carbon is emitted from Ohio or Shanghai. It goes to the atmosphere and mixes uniformly. And therefore the cost to the planet of emitting a ton of greenhouse gases is the same everywhere. So the external cost or the optimal policy is essentially the same everywhere. And so you might think, well, whatever policy the world should have to deal with climate change. It might be reasonably similar around the world because the cost of emitting greenhouse gases is similar around the world. But that's not what we observe at all. This is a map from the World Bank that tries to track climate policy around the world. And there are incredibly heterogeneous policies. Many countries have no policy. Some countries have extremely strict policies in most countries. Some industries are regulated and not others and some greenhouse gases and not others. And the effect of price of carbon varies wildly and apart from the inconsistency of first order concern here is what economists sometimes call leakage. My undergraduates call it whack-a-mole. Europe tries to get rid of carbon emissions and then it pops up in China, India, Mexico, Morocco. And then one of those countries tends to do something about it and the carbon emissions leaks away. So if Europe has a strict climate policy, they end up just importing carbon intensive goods. So this kind of heterogeneous or incomplete regulation not only means the world is not doing all that much to address greenhouse gas emissions, but it's extremely costly because the carbon is moving away from places where it's regulated. And it may be moving to countries that even have higher rates of carbon emissions per unit of output. So that's my optimistic summary of environmental policy. And now let's talk about the focus of this session trade policy. I'm gonna show you just a few statistics to show what's been happening in that domain. The first is a measure of the average tariffs over many past decades. And I've researched environmental policy and trade policy for close to 20 years. And usually my summary is that in Europe and in the US the average import tariff weighted by the value of the countries you're trading with was usually in the ballpark of 2%. Some of the time one point a half percent, some of the time two and a half percent depends exactly how you do the weight. And every year I try to update my slides and teaching grads and undergrads. And that's one point that's definitely required updating, because average tariffs in the US have skyrocketed. It's not only tariffs, it's also non tariff barriers, whatever you think the optimal trade policy is, uncertainty and volatility creates costs for companies. It creates costs for regulators, it creates costs for trading partners. And really what you see in this long time series is that before World War II countries were setting trade policy unilaterally and then multilateral institutions after World War II tried to lead to coordination of trade policy. So countries would agree in coordination, there would ratchet down trade protection. There would be fewer tariffs, lower taxes at the border. And that's pretty quickly unraveled. I think this pattern is very well known from the news. But I wanna show you another one that actually began in the Biden administration and has expanded, which is that a mechanism for decreasing trade protection is that countries can dispute another country's actions and they can do that through the World Trade Organization, appellate body. This is really the rules of the game in international trade. This has been the legal mechanism by which, you know, within the US different companies can take each other to the court. We don't have something like that across countries, but this is the closest thing that's tried to decrease trade barriers around the world. And what happened under the Biden administration is that the federal government declined to reappoint a judge to the World Trade Organization, appellate body. And I know that sounds somewhat jargon and legalistic, but basically it took away the teeth of the World Trade Organization to resolve disputes. And tariffs are not the only impediment to trade. There are many non tariff barriers like quotas and product standards. There are many individual tariffs that have justifications and without rules of the game to adjudicate those tariffs. A lot of the cooperation that has evolved since World War II has started to unravel. The last point I wanna mention on trade policy is a connection between trade and the environment, which is a very rapid growth industry around the world in the past decade has been renewable technology. There's just been unprecedented and unfathomable progress in the price of solar and wind and batteries and electric vehicles. You know the, the comment is, since the 1960s and 1970s, people always said solar is gonna be cheaper than coal. Electricity within five to 10 years. That's been true for half century. But suddenly it's actually becoming true in parts of the world that solar is cheaper than wind, solar is cheaper than coal. But one caveat to note with this technology is that these supply chains are extremely concentrated for many renewable technologies. Much of the supply chain runs through China, China, allied companies and allies. And during the pandemic, the value of diversified supply chains became quite clear that it's useful to have a broad set of countries from which one can import economically and strategically important commodities. And that's definitely not the direction that renewable technology is heading in. So I told you about two crises climate policy not going so great trade policy not going so great. And when cities or states disagree about an environmental externality, like if a river is flowing from one city to another and a city is worried about the pollution upstream, they can appeal to a state government or a federal government that doesn't work across countries. And so countries sometimes ask what tools do we have to try to coordinate climate policy and trade policy is potentially a stick or a carrot. It's potentially a tool. And so it's natural then to ask, has trade policy been helping or hurting in the environmental domain? I just wanna give you a few statistic about a few statistics about what's been happening and maybe what could happen going forward in the future. So this is from a, a graph of a paper I published a few years ago where I said, look, in every country there are different levels of tariffs on different industries. There's also different levels of other kind of trade protections like quotas and product standards. And I said, look, let's just look at the trade policy countries already have and ask is that making environmental policy worked better or worse? And so I took every country in the global economy and all trade policies, tariffs and non tariff barriers. And I just asked, do dirty industries have higher or lower levels of trade protection? And so in this graph, I'm lining up industries in the global economy by their carbon emissions per dollar of output. Think of that as how dirty each industry is. And the vertical axis here is a measure of trade protection. This is the tax equivalent of non tariff barriers. Economists would call it an avalor tax. So higher values mean more trade protection, lower values mean less. Basically what this graph says is that the dirty industries on the right, like fossil fuels and coal and cement have very low levels of trade protection. And the clean industries on the left that have low carbon emissions per dollar of output have very high levels of trade protection. We have a lot of clean industries facing tax equivalents at the border of 30, 40, 50%. And then fossil fuels and cement and steel typically around the world have very low levels of trade protection. And this is almost like a negative carbon tax at the border. It encourages production, consumption and trade of dirty industries 'cause it's got low taxes on those and it discourages production, consumption and trade of clean industries. And when I send these around the world, it implies a global subsidy of greenhouse gas emissions to the tune of $500 billion. Now I sometimes have macro economists, my who say billions, millions tell me when we get to real numbers. But these are quite large implicit tax expenditures that are accelerating climate change. This is not true for just one country, it's true for most countries in the world. And we could talk about the political economy reasons for it. But basically this says the pattern of trade protection across industries is accelerating climate change. I wanna give you another statistic about what possible trade reforms might be able to do to help coordinate climate policy. So this is a paper by fare roki and Ahmad Laur to economists who write about trade. And they said, let's think about two ways that you could use trade policy to maybe coordinate on climate policy. One would be to put a tariff that's proportional to the carbon emitted in traded goods. That's what Europe is doing in its carbon border adjustment mechanism. That's the number on the left. They estimated that would decrease global carbon emissions by about half a percent. And the other option is to rewrite a global rules agreement like the World Trade Organization and say every country that's a part of this agreement guarantees they'll have some minimal level of climate policy and if they reneg they'll face a tariff as a threat. And they estimated that Bill Nord house won the Nobel Prize for some other research called this climate clubs. They estimated that would decrease global emissions by about 61%. And so the idea of using tariffs as a stick to try to coordinate climate policy seems to have some potential. I think I'm gonna, yeah, yeah, I think I'm gonna wrap up and just say that we have these two domains. They're each in crisis. And really the question is to what extent will linking them make them both better or to what extent will linking them unravel cooperation? That was actually good that we did that in that order, because I'm gonna pick up where Joe left off and I actually wanna rebut some of the grumpy economists comments at the beginning with some data. So, so we'll have some friction. I hope. There seems to be a bi bipartisan agreement that linking trade policy and and climate policy is a, is a good idea. And I wanna throw some shade at that. Bipartisanship environmental related tariffs come in two broad categories. There's the, there's the category of of tariffs on clean technologies like battery and solar panels that are the themselves, the solutions to pollution. They call those clean import tariffs. And I wanna table those for a few minutes and first talk about the other category, which is tariffs on imports based on the pollution content of the imports, how much was, how much pollution was caused in the production of those goods, wherever that that occurred. And that's the one that, that, that Joe ended with. Those are direct, those are justified on two grounds, or they're rationalized on two grounds, if you like. One is that they are basically indirect pollution taxes of the type that economists have advocated for a century, albeit on a very narrow slice of the economy imports. But the other more important justification for tariffs on, on polluting imports is that there are defense against offshoring. There. There a defense against the concern that as both Joe and John said, country companies facing environmental regulations will relocate overseas and merely import the products that used to be produced domestically. And that concern has been around for a long time. Back in 1991, Senator Bourne in Oklahoma introduced a bill into Congress that would've taxed imports based on the pollution content of those, but based on how much environmental tax, environmental compliance costs those imports would've faced had they been produced in the United States. It's sort of a precursor to the, to the European, European carbon border adjustment mechanism never got enacted. But fast forward to 30 years and Europe has a carbon border adjustment, which is tax on imports based on what those imports would've paid in European climate prices, carbon prices and Senators Graham and Cassidy have a bill in the US Senate to charge a tariff on imports based on the carbon content imports. Nevermind the fact that the United States doesn't have its own carbon prices. So it's been around forever. The New York Times highlighted this in a 19 eight in a 2018 article saying, you've heard of outsourced jobs but outsourced pollution is real. And it's tough to tally up. I think the New York Times is wrong on both counts. It we can tally it up and when we do, it's not real. Let me show you some evidence. So this is, let's call rich countries of the world, the the 24 OECD countries as of 1993, basically North America, Europe, New Zealand, Australia, Japan, the real inflation adjusted GDP of those countries doubled over 30 years. At the same time, pollution in those countries as measured hereby particulates in the atmosphere or PM 10 declined slightly and carbon dioxide emissions remained relatively flat. So how did GDP double while pollution remained constant or, or even declined? The natural explanation is imports. Maybe we're just importing the goods that we used to produce domestically. And if you look at the data imports over that time period to the OECD countries from the rest of the world went up by a factor of 10. So it looks like a smoking gun. But that makes sense except that exports also went up by a factor of 10 at that time. Now. So maybe the explanation is that the mix of goods we're importing and exporting has changed. Maybe we, we, the rich countries of the world are importing an increasingly pollution intensive mix of goods and exporting a increasingly less pollution intensive mix of goods imports from China. If we break out the imports into imports from China, those went up a a lot. And so that looks like that might be an explanation. And so to try to assess this directly, what we can do is consider the pollution intensity of each of the 300 plus industries that make up those trade flows on an industry by industry and basis. And multiply the dollar value of those imports on an industry by industry basis, by the pollution intensity of each industry, how much pollution is emitted per dollar of of of production and add it all up. And we get a measure of the pollution that is embodied in that trade, how much pollution was projected to be emitted when those goods were manufactured, wherever that happened. And we do that for imports. We see that the pollution embodied in trade, this one is for local air pollution. PM 10 went up by about a factor of four. Remember, GDP doubled pollution embodied in by imports went up by a factor of four. So it looks like this could explain some of the cleanup of of rich countries, except again, pollution embodied in exports also went up by a factor of four. And so that doesn't explain it. And pollution embodied in Chinese imports went up a lot as well. But that's a product of the fact that Chinese imports increased so much. And when we do the same thing for carbon dioxide as well as instead of local air pollution, we see basically the same phenomenon. Imports went up a lot and, but exports went up even more in terms of the, the pollution embodied in those. Finally, if we, if we, if we take the pollution projected in trade in these pictures and divide it by the total volumes of trade in the previous pictures, we get a measure of the pollution intensity of trade, how much pollution per dollar of trade over time in imports, exports and, and Chinese imports. And that looks like the following for particulate matter. And surprisingly to many, the pollution embodied both imports, exports, and imports from China are all decla decreasing and, and approximately the same rate. And the same is effectively true for CO2. If, if as the New York Times suggested outsourcing pollution is a big deal, then we would expect these dashed red lines to be falling and the solid blue line to be rising. And if China was a part of OECD outsourcing pollution, we would see the black dot lines rising even faster. So my take is that pollution is, is not difficult to tally and is not as big deal. Lemme turn in a couple of minutes that I have remaining to the other type of tariffs, the other type of environmental related tariffs. And those are tariffs on the clean goods, the batteries and the solar panels and both the Biden administration, the Trump administration have been enthusiastic about these why tax goods that that help reduce pollution and supporters offer five rationalizations. And we won't discuss them all, but let me pick on a couple of them. One is that the US is a large consumer, which means US tariffs drive down world prices benefiting US consumers. It's sort of a terms of trade or monopsony argument. That's fine in theory except that the US accounts for only 8% of global solar panel installations and 10% of electric vehicles other countries might retaliate. And worse, even if it does work, shrinking global demand reduces global sales, which increases carbon in intensity for everybody. This is sort of a cut off your nose to spite your face strategy. A second popular argument is the China shock story. It became trendy during the Biden administration to argue that tariffs would present a second China shock referring to the disruption in the US economy that occurred when China exceeded to the World Trade Organization in the early two thousands. But back in early two in 2001, when before China exceeded Tariffed industries apparel, textiles, furniture, electronics accounted for 20% of US manufacturing jobs. By contrast, US solar panel manufacturing today accounts for 0.3% of US manufacturing jobs. So it's like unlikely to roil the U US economy in the way that the Chinese accession to the trade organization did. If we wanna protect US sectors, there are two ways to do so. You could subsidize US production or you could tariff imports for industries that without climate benefits. The difference between those two is simply who pays the cost? Taxpayers pay the talk cost of subsidies and consumers pay the cost of tariffs for industries with climate benefits, solar panels, electric vehicles, the choice has environmental consequences. Subsidies increase global production, benefiting the environment, tariffs shrink global production, disregarding the environment. Another cutoff your nose despite your face strategy. The last one of these that I'll mention is national security. And there's sort of two fears that get listed as, as things we should watch out for. One is that China might weaponize clean technology by planting disruptive bugs or, or, or flaws or back doors into these solar panels or electric vehicles. If that's the fear and these goods are dangerous to Americans, then I would argue that taxes are not the right tool. Bans are the right tool. We don't tax cars that don't have brakes or or seat belts. We ban them, we don't tax goods with e coli, we prohibit it. So I think if these are actually dangerous things, a ban is appropriate. An alternative national security argument is that China might embargo solar panels in the same way that OPEC embargoed oil in the 1970s. But oil is not like solar panels. Oil is a costly fuel that's used by durable technologies to provide transportation and, and, and power. When OPEC embargoed oil American cars stopped driving solar panels are the durable technology that use a free fuel sunlight to power to generate electricity. If China embargoes solar panels, the ones that are already installed will keep generating electricity, OPEC can't embargo the sunshine. And so it would be a much less effective strategy. So let me wrap up by saying there are two categories of these tariffs. The dirty import tariffs are, are perhaps fine in theory even if offshoring isn't a huge problem. They're not what economists would define as a, as a carbon tax because they're, they only touch a small part of the economy, but they have that flavor more. The other category, tariffs on clean solutions to pollution are a lot harder to justify. My take is that we have to be vigilant that whatever environmental concerns are are cited as a, as a, as a, as a reason for tariffs. That they're not just a pretext for protectionism. Thanks. These were wonderful. I'm gonna do my moderator job by asking, by making a couple remarks and then we'll move on to audience q and a. Let's start with Eric just 'cause I have a smaller question here. Now, of course, if you're thinking about carbon dioxide, China and India is everything. You know what we, if we drive by a cyber truck to drive down to our, our private jets doesn't make any difference. It's all China and India. What I gather you're saying though is that that's not so much goods that they export to us, it's their own domestic consumption and and investment that is very carbon intensive. So if we're gonna use trade, we're trying to use trade to bludgeon them to change their domestic policies, which we do in, you know, human rights and all sorts of things to greater or lesser effect. And maybe that's not the best way to do it. I sense a a, a broad agreement, which I want to say yes to. Number one, get out of the way. The number one answer to any public policy problem is get out of the way. And it is really surprising how we don't allow China to sell us all sorts of stuff that displaces carbon. We don't let them sell us cheap solar panels. We don't let them sell us cheap electric cars. Those are, are, are just huge. You know, mother Earth does not care whether the electric car is made in China and sold to us for $15,000 or made in the US with union labor and American parts and proper standards in an army of lawyers and costs $80,000 plus a hundred thousand dollars a subsidy. So climate does not care, you know, get out of the way is the answer. If the question is climate, the question is create, create a government provided jobs, that's a different one. And that's the problem of this sort of thing as economists costs and benefits is, is the word I was hoping hear. So I'll say cost versus benefit. 'cause of course that's the key to any policy. And a couple of comments on cost versus benefits. I think there is a trait argument for trade and, and climate especially, you know, i a carbon tax with border adjustment and nothing else. That's the economist deal. That's the efficient way to do it. No subsidies, no industrial policy, no mandates border adjusted carbon tax. Don't we all wish that would happen? And, and it's fascinating how nobody wants this not right, not left. Anytime the voters are presented with it, they would rather have boondoggles than, than a border adjusted carbon tax. Certainly not what we're talking about in in current trade policy. It's gonna aim, you know, neither the Biden administration nor the Trump administration is, is really heading that way with its trade policy. And we'll see what the Newsom administration wants to do, but I doubt it. The, the American way of doing this has been in insistence on protection subsidies and mandates at extraordinarily cost per benefit. Three words, high speed train $230 billion down a rat hole that I think will clearly produce far more carbon than it will ever save. Two more words, corn, ethanol. Once down the track of industrial policy and protection, we seem completely unable to reverse it when it proves completely useless. Don't, if you want subsidies for today's enthusiasm, just remember this, the enthusiasms we just got over and that brings up the, the larger question of cost and benefits. Where here I'll, I'll push Joe particularly 'cause you, you heard the words you used that word crisis really crisis three parts per million you said per year, but the number is 400 parts per million. I'm channeling my Steve Coonan here. You mentioned wildfires, come on. Wildfires we all know are declining worldwide. They are not the result of carbon dioxide or warming the result of horrendous forest management policies. And they do not contribute carbon dioxide on the climate timescale of, of 50 to a hundred years. Why? Because where old forests burn, new forests grow and soak up a huge amount of carbon. I think that that's the kind of the crisis language has, is what has caused us to completely forget about costs and benefits when trying to address this thing. If the question, if five is 5% of GDP costs in a hundred years, the answer is certainly not trillions of dollars of mandates today. There's, you know, GD P's gonna grow two, 300% a hundred years anyway. It just doesn't justify the costs and benefits for that kind of policy. And that's where la last comment, we talked about particulates and climate. One thing that worries me about the climate crisis is how it is soaked up all the oxygen out of all the other really genuine environmental issues. I'll even call them crises, chemical pollution, people around the world who don't have clean water, who, who, who would benefit enormously from propane stoves 'cause they're burning cow dog things and getting emphysema, species extinction, ocean pollution, maybe microplastics, who knows if they're actually dangerous. But the so much else is really environmental problems that, that we're not paying attention to. I guess those are my comments. If you want to take a couple minutes and then we'll go to what people have to say here. Especially Joe, 'cause I was kind of harsh on you there. Jacob Fish. Thanks. I agree with almost what you said is optimal policy, a carbon tax plus a border adjustment? I would add a subsidy to research and development because there's a public good and there's a market failure of not sufficiently investing in innovation. The US 5, 10, 15 years ago was investing less in energy and innovation than most other countries and it's been scaling down, but I think most economists would agree those three would be the optimal bundle. And if every country was doing it, we wouldn't need the border adjustment. It's just that there's, and getting rid of the horrendous Diversionary regulation and so Forth. Yes. Yeah, I I have a new paper I didn't talk about where we pulled the representative survey of Americans using the same platform. The Associated Press uses a probabilistic sample and we described cost-effective policies like pricing pollution versus expensive cost ineffective policies like standards and voters love standards, they hate pollution pricing. We also surveyed a representative survey of environmental economists. They were exactly the opposite. And then we talked people about economic principles like pass through and allocated efficiency. And in with three minute videos, we turned them into economists. They started preferring cost effective policies. One thing I take from that is that policymakers are reflecting voter preferences and voters have different ideas about economic principles than economists do. And explaining them clearly can help change people's preferences. And the last thing I'll mention is the phrasing about crisis. You know, I use that partly as a contrast to the Clean Water Act, which I've written a lot about. And Professor Adler was nice enough to show a couple graphs that I spent many years putting together the visceral reaction to a river lighting fire was galvanizing. And that's not gonna happen for climate in the Greek quandary for climate is that the costs are gonna happen in a century, but mitigation would need to happen in the next 5, 10, 20, 30 years to mitigate those costs in the future. And there's many ways to do it. I completely agree on the value of cost effectiveness. And then the quandary is how do you achieve that kind of investment when people respond to originating on fire and rivers aren't lighting on fire for climate. I really liked Joe's new paper on surveying people about what? Surveying people and then trying to teach them about economics. And what you didn't say was you, you turned them into the idea that we should do use market-based policies rather than mandated policies. But you could not convince people that taxing the consumers was equivalent to taxing the producers. I'm delighted you rid of it. I was, I'm actually, I I'm in the camp of, I actually secretly hope that we don't go down your road because it would be really bad for my profession. All all of our, you know, most of the papers that that we write up here are papers about very complicated environmental regulations and that whole literature would disappear. John, You Honest defense of your intellectual capital. Go for it. This is off the record, right Joe, you said using climate policy to bludgeon China to do the right thing on using tariff poll to bl to bludgeon China. And I'm worried about that because maybe on human rights, the United States had a moral ground to stand on because we were doing better as soon as we abolished slavery and got rid of Jim Crow in the south, we could turn to telling the rest of the world how to behave on climate. We aren't. And so for us to say, yeah, we don't have a carbon tax here, but we're gonna put a tariff on you because you're not doing enough on car, on carbon and really you're the real problem in the world. I think there's a, I'm not speaking as economists here, but it just feels wrong to be saying to the rest of the world, we are not the problem anymore. We're accountable for most of the carbon in the atmosphere, but that's a sunk cost and so you China have to do what's right now. So maybe there's a demonstration benefit to cleaning up in the United States even if we aren't the sole contributor or the major contributor today. Well I love your, your three minute survey and maybe if we can phrase it as you get a discount for not using carbon, we'll get somewhere and if you can convince them that price-based policies are work, could we move on to rent control and taxing the billionaires and so many other things. Okay. Gotta start with One policy at a time. Well, let's start actually with the big ones, which this is not a big one. Let's, I I'm gonna take a bunch of questions and then time and then we will get some wrap up. So who wants to go, Steve? Oh boy. So thanks. You know, I'm a, I'm a physical scientist and so my touchstone is always the data and there was a paper a year or two ago in either science or nature, I can't remember which, that looked at more than a thousand different mitigation policies across 60 some odd nations and found that only 5% of them had any detectable effect on emissions. That's pretty sobering and I wonder if you can comment on that Next. I I can't see. Oh, is that Ken? Yeah, Yeah. I remember my trade course in my international trade course taken almost 50 years ago that the phrase effective tariff rate included the issues related to intermediate goods that you may in import something under a tariff and then it's taxed under a tariff and the circulation of intermediate goods and that, that dramatically affected, there's a paper by Roy Ruffin and others in the past and that whole interaction dramatically affected the real effective tariff rate in terms of the all misallocation of resources. Now I looked up, while you're talking, effective tariff rate now is just what tariff revenue is divided by trade volume. So I'm want, can you explain why this, this idea that we talked about many years ago is sort of ignored, particularly when we talk about the the supply chain being important. It seems like that would be, should be incorporated into the concept of effective tariff freight. Anyone else? We're gonna have fun if not, so I just wanna, I think Ken's right, the margin, the right marginal tariff rate, I dunno if you guys are trade experts. I'm not either is one of those numbers that is widely misquoted and there's another one I actually talk know people who import stuff and it's not just the tariffs. Things are a chaos down at the ports. So getting that the right form and the right tariff, you, you want to import, well one of my friends was importing a, a landing gear part and now had to chase down the country of origin for the steel that went into a thousand dollars, you know, 10 bucks worth of steel, a $3,000 landing gear. Oh nope, no, it's gonna be a whole week to find the country of origin on this steel. What a mess guys do you have our comments, especially to Steve's, is there anything, forget about cost benefit Is, is the benefit positive? Right. I would say two things. One is that Professor Adler's talk earlier made the point about the Clean Air Act. We've done a lot of relabeling of existing policies as climate policies. So fuel economy standards that have been around for 40 years are now called climate policy. They weren't designed for that. The Clean Air Act is, you know, successive democratic administrations have tried to shoehorn climate policy into a, a legislation that wasn't designed for it. It wasn't even designed for interstate pollution, let alone international pollution. And so I'm not surprised on that ground, but my takeaway from that article was that that's an argument for better policy, not no policy. I I wasn't making an argument one way or the other just observing. It's, it's That all the strum and drying we've had for the last 20 years to try to mitigate has not come to very much. And on, on Ken's point about the effective tariff rate rate, the, the chart that Joe put up was just, I think tariffs divided by trade volume, the average tariff rate rate. And that's a really tricky number because if tariffs are too high, then the trade volume goes down, it's endogenous. So think about this a you know, a tariff of a million dollars per per ounce of imports is gonna result in no imports and it's gonna be a zero in that calculation. It's gonna look like there's a, a low average tariff rate. And so it's, these numbers are, are moving targets, Joe. Yeah. Rather than reiterating what RX said, even though I agree, I'll mention a few of points, there's a lot of very ineffective policies in every domain. And one appeal of pollution pricing is that it's much simpler and more transparent. If there's a cap and trade market with a positive price, that means that firms are responding by optimizing along some dimension. But if there's a standard that's man, people do something, all bets are off the table. I put up that graph of carbon increasing partly to say we haven't deviated very much from trend over the last half century. If you take a global trend of carbon emissions per dollar GDP globally, it's close to a straight line. It doesn't mean that no policy is doing anything. You could certainly point to some. And on Ken's question, I showed a couple graphs. The one that you guys discussed that was from the media is the average tariff, which definitely ignores intermediate goods and input output links as we showed this graph of pollution intensity of industry is relative to trade protection. So that analysis does exactly what you're describing. It uses input output table and chases inputs to goods and inputs to inputs and all the way up the supply chain. And one quite fascinating result from chasing those down relating to to carbon is that it turns out there's a measure economists have begun using in the last five to 10 years. They made up this clunky word for it called upstream ness. So what does upstream ness mean? An upstream industry mostly sells to other firms. It's not being sold to consumers. And a downstream good is mostly being sold to consumers. So downstream goods are like bubblegum. You know, firms are mostly selling bubblegum to people like us at convenience stores not selling to other firms. An upstream industry would be like hot rolled cosal coils of steel. You're not usually buying those at Walmart or CVS. And it turns out there's this incredible and systematically strong relationship between upstream this and carbon intensity in any economy around the world. The most upstream industries, the ones primarily selling to other firms are also the most carbon intensive. So the paper is developing this measure of upstream, this lists the most upstream industries and there are industries like steel cement, refined petroleum, aluminum, rubber, and they're very carbon intensive. They also tend to have low trade protection. And then the very downstream industries tend to have very high trade protection. And John started off by saying, why do we have tariffs? It's ambiguous. I think trade economists would say political economy forces are very dominant and the reason some industries are protected and others aren't is a lot of political forces that give them influence. And one of the oldest trade lobby groups in Congress is a group lobbying for low trade protection on their inputs. They argue for low trade protection on steel, on aluminum. That hasn't gone so well in the last couple years. But a reason why we have low predict trade protection on these dirty industries is that people want low costs and they get low costs by having low protection on their inputs and their inputs. Inputs and the very end of that chain very upstream or the very pollution intensive industries. Can I I'll come back to you in a second, Steve. I just want to emphasize Steve's question 'cause I think it's an elephant in the room that we're not talking about. We talk about the border adjusted carbon tax and, and consumers, my my favorite version is the saleable carbon, right? Everybody gets, you have the right to emit so much carbon, you can sell this. They'll, they'll love that. It's the same way establishing a, a price on it. But we're, we're in lala land. Let us face the absolute disaster of our current carbon policies. Well we got rid of nuclear on other environmental regime. We suppose we were France, there would be no talk about carbon if we had not done that. Europe large, in large part through energy prices has stopped growing in 2010. We're talking trillions and trillions. Dollar dollars worth of cost at zero benefit from all this where fuel economy standards, which are jiggered, so that then look down the highway where Americans are driving Ford F1 fifties. Why? Ah, because they adjust for weight. So the one thing that you could do to save fuel, they don't do support for mass transit. Oh, save the, save the climate, save the climate. I think hundreds of billions down rat hole, zero savings in carbon and of course the high speed drain. We, we have not faced that. We have spent trillions of dollars, we have reduced economic growth in Europe's case two zero without any measurable benefit to the climate. That seems that I'm, I'm stating your question more loudly from the economist point of view. Do you wanna follow up? No, I had a different suggy different topic. Go ahead. Because Can I say one thing about the, your go ahead And respond first to John. I I wanna say one more thing about that Science auto, which is, you know, thousand policies around the world. One of the problems is we're rejiggering old policies to, to address the climate. The other is that we have inter overlapping policies. So California passes its global Warming Solutions act and it's got a cop and trade system, but it's also got fuel economy standards. And, and, and there's an overlapping federal policy that subsidizes clean power. So if you look at any one of them, you know, the ca the price of a permit in California was quite low for a long time. Is that a failure or is it that we did three different policies? One of them may have worked and the other two didn't have to work. We should Be able to find that out. I I wanted to just inject a note of science. Yeah, use the mic. One of my pet peeves is when people equate emissions to climate change, human influences on the climate depend upon the concentration of CO2 in the atmosphere. Actually the log of the concentration, not the emissions, not the way emission missions have changed. And so when you put your graph up, it would've been much better to show the contribution of CO2 to radiative forcing, if not the total radiative forcing, which is actually a more gentle thing than what you showed. I I I noticed that the vertical axis of the graph I was gonna complain too was three parts per million per year. The level is about 400 parts per million. So crisis m you know, you're gonna get another 10% in 15, 20 years and then take a log right height. Can I say a quick, I thought you were actually going towards geoengineering, a direct air capture which are off the current realm Until some billionaire says, well, I'll just, you know, Elon Musk has enough money to just do it if he wants to. Thank you everybody. We are at out of time and this was great and I look forward to the next session.

- We are pleased to host a session on data centers and the local effects of the AI boom. So this session's gonna feature three experts on AI and energy issues, and we're gonna discuss how citizens and local communities across America, maybe even Europe, are grappling with whether to embrace data centers in their jurisdictions. So there are of course some trade-offs, as you might expect. On one hand is the promise of economic gains from jobs and payments to local governments and to landowners. On the other is the threat of high electricity prices, pollution, maybe reduced property values, and just an impaired quality of life. So discussions will consider how the benefits and costs are playing out thus far and how that might change. So we'll also complete, compare a little bit current debates over data centers to previous debates over energy infrastructure booms, at least local booms like solar, wind, and fracking. So to help us unpack these issues, I'm very pleased to have three very different perspectives do, starting I guess to my immediate left is Robert Bryce. He's an author and film producer with topics focused on energy, power, politics, and innovation. His work over the past three decades includes books about realities and myths of green energy and energy dependence. And most recently has launched a major study of community responses to data centers. To Robert's. Left is Daszak, he's the executive vice president of Energy, capital and Strategy at QTS data centers. It's a, a firm that was going to put a data center in my home county, Dane, Dane County, and Madison, Wisconsin. And it, it didn't happen. And having lived there for 14 years, I'm not surprised it didn't happen. David Fedder is to the left of of Doto. He is the Stevenson policy fellow at the Hoover Institution where he helps direct the George Schultz energy policy working group. David is a global expert on energy issues. So what I wanna do is just jump right in. I have some questions I'm gonna ask the panelists and then once we're, we're through with our questions, I wanna open it up to the audience. So lemme start with Doto and I just wanna ask like, you know, what are data centers and hyperscalers, how big are they typically? Like what's the range? What are they require to operate and are they gonna get bigger over time? Okay, so I'll take you through a brief temporal journey of data centers. Go back about 10 years. That was my early days in, in data centers. I was in infrastructure, private equity, investing in a category that wasn't investible at a time 'cause it was too small, very occasional. And those were data centers at a time. Some of my biggest investments, one of them being into a company named QTS, which made a lot of headlines, you can read about it. In 2018, hyperscale campus, 20 megawatts, that was huge. Typical deal size for us would've been half a megawatt, one megawatt that would have been very successful month. And the 20 megawatts therefore in 2019 was a, a true mile marker of how big these things are becoming. You fast forward into 2021 and two. Suddenly QTS at this time is we are exiting out. QTS is being taken private and the AI sort of revolution is creating demand that's unprecedented at a time. And suddenly data centers, the hyperscale version of them are becoming a hundred plus megawatts. And then the last transformation came after say 23 onwards where the hyperscale data centers have reached typical deal size of a gigawatt and larger. So lots of people talk about gigawatts QTS built and has several gigawatt plus campuses out there that have either been fully constructed or are in advanced stages of construction. There is an important nuance to data centers. There is, you know, three types. If you think about, there is a enterprise type data center, which will have lots of different customers inside of it. They will, they'll rent couple of racks or a cage, there'll be even a smaller version of data centers. They'll be hosting clouds or they'll be hosting small medium sized businesses, hospitals and so on. And they will, they'll really just sometimes rent space on the private cloud. So somebody owns the cloud and they'll rent a little piece of it. The hyperscalers. That's kinda what this conversation will, will most likely focus on. Those are today sized at gigawatt plus, which the equivalent of gigawatt plus that's, you know, a city of about 750,000 to a million people that's consummated in in one, you know, very dense, dense point. And that's where at least QTS, which is now the largest third party data center builder outside of the big techs, that's where QTS and others like it focus In, in terms of like square footage. The one that can power 750,000 people, is that like 10 Walmarts? How big is that? Yeah, so I don't know how big Walmarts are these days, but I hate shopping. But the most recent one, which is all over the news, is in Iowa by US, is in Iowa and that is north of one gigawatt across seven buildings. And you're thinking about million square feet per building in that setup. It's not a rule of thumb necessarily because different geographies that are more concerned, like in California, if you do the same, you will have a multi-story building. 'cause land is not as plentiful. So you can, every story cuts it in, in half or and so on. But it's, it's meaningful size. Yeah. Let, let me ask Robert, how many data centers there are currently across the us roughly, are they geographically concentrated? How many new ones are expected? Where do you think they might go? How many questions is this? Also, you had identified me as an expert. My father said an expert's, anybody from out of town? So I'm from outta town, so I guess I fit that for the moment. Rough numbers and I just looked Atter, A-T-E-R-I-O is very good source for data on the data center build out. I believe the number they published yesterday was 3000 data centers existing in the us the number under construction. I, I guess to me the headline, if I cut to the chase, what, what's my position on, on data centers and what's going on now? I studied land use conflicts and written about them maintain the renewable rejection database now for 16 years. Tracking rejections restrictions on solar, wind and battery projects. Documented now nearly 1200 since mainly since 2016 or so. What we have seen though, with the backlash against data centers is unlike anything I've ever seen, and I've been doing this for a long time already this year. There have been 81 rejections or restrictions of data centers in the US that compares to 49 in all of last year. There were two just last week. One in Wichita Falls, Texas, one in Ferguson, Missouri, Ferguson's, heavily democratic, Wichita Falls heavily Republican. What I'm seeing in this, this backlash is again, unlike anything I've ever seen. And it crosses a whole bunch of issues, which we can talk about in just a minute. But the bottom line is that AI and the backlash against data centers and AI is real. It's not going to stop ai. There are 81 rejections or restrictions, there are now 769 data centers under construction in the us. So the numbers are very large and by the way, that's up an increase of over 100 since Ontario published numbers in March. And the increase in power capacity for that 769 projects under construction today is 58 gigawatts, a 10 gigawatt increase in just two months. So final comparison here, meta is building a monster data center in Louisiana. It will draw two gigawatts is the power capacity that's equal to the power demand, peak power demand of a thousand Costcos. So these numbers are, I mean they're difficult to kind of get your mind around, but data center build out is happening. There is a big backlash and we can talk about that more. Great. Well you've, you've alluded to some of the costs, at least the perceived costs and that's, that's certainly why they're being rejected. But let's talk about the benefits for a moment. So let me ask Doto and then come back to Robert. What, you know, what do data centers offer communities economically? You know, I'll, I'll just, I'll say there's a few studies coming out in economics that are estimating like the county level effects of, of data centers and you know, the estimates are positive, you're getting more employment, you're getting higher wages, lower, lower unemployment households, hold income is going up, property values at sort of the broader, not right next to the data center. Property values there are going down, but further away they seem to be going up. At least that's what the, the data are suggesting. But with a lot of these studies, especially the ones that look at energy infrastructure effects on employment, it's never, it's never clear if the jobs are going to locals or if they're bringing in, you know, expert specialized labor from outside. So lemme ask you about like employment benefits and other local benefits and how that's playing out. Yeah, so let's go through I think of five, five categories. The, the jobs is the most obvious one to most people, you know, frequent question, how long are the jobs around? So I'll, I'll attack that first. So you'll have, during construction phase, which will be several years, you're talking about thousands of very well paid employees. We fill up those spots with local people. We, we set up typically training centers for local people. And whatever doesn't exist locally, you know, or comes from out state, comes from out of city, there is a tail. So that's several years. Those several years don't really disappear because you build a data center, then you build the next, I don't know, a power plant, they upgrade the system. So there is always construction, but in the tail end of the data center, once you've build a, you know, you talked about metas, two gigawatt facility, the capital that goes into that type of project, you're talking tens of billions of dollars could even be triple digit. I haven't seen their financials. So you're not going to leave. Some people think there's like nobody in the data center. There is, there is daily maintenance for every piece of equipment, people walking through security, white collar, blue collar. So there will be hundreds of people that are again, well compensated professionals. So that, that's one piece of it. The second piece is the, the local sourcing, at least for QTSI can speak for everybody. We will seek to source everything locally, right, your supply chain. So it, it creates a secondary employment. I mean if you look at several counties in Georgia, there are construction companies that were, that were built from scratch on the back of data center projects. Virginia families that built their sort of family wealth on the back of those. So there's the secondary employment, all of that plugs in with universities where we are working with universities to create, you know, a, a new kind of trade because there is a massive shortage of, of labor. So that creates new sort of education curricula. We are doing that in Iowa, we are doing in Arizona. Other geographies where this is necessary related to demands that we'll be placing on the, on the labor force. The, the next one is the kind of the money aspect, the tax revenues that are coming from data centers and the incentives that we are injecting into the community just by kind of looking at what the communities need and, and you know, listening to them and trying to satisfy that. That's been a transformation for many communities, especially, you know, some of the communities that maybe had industries move out, you know, think former coal communities, right there is not a, a new kick into the economy. So data centers coming in are the kick and they create years of revenues, new schools, new roads, the data centers themselves, QTS, we build, build the roads, we build it several times during the construction and then we'll follow whatever the city wants us to do with it. We'll decommission it, replant it or, or whatever kind of the local commissioners want. The final piece there is a sustainability component and, and I would wrap that, I don't use the word sustainability as much as kind of community impact. That has three angles. The first one is, you know, we talked last night over dinner here with, with the panelists around trees, reforestation. There is some people might be surprised, we count every single tree when we are acquiring land. Every tree is accounted for on the inventory list. Every tree gets replanted as the project is completing. There is pretty big effort with, you know, helping water sources. We don't actually use water. That's also surprised to many on an ongoing basis. It fills up once and then it doesn't. So there's, there's big sustainability effort, but aside from that, there is a community impact. Again, I'll use the Iowa project where the capital that comes from the data center serves as a, you know, revenue into the utility utilities regulated. I think you probably can speak to this better than I can. And through the revenue contribution, we are able to fix the rates for the, for the community members. So in Iowa, there will be five years of no increases for the C community members, which is in contrast with, you know, look at states that don't have maybe data centers. So that's another angle. And the final angle within the community is just, just partnering with local organizations. This has been, by the way, missed by the data center industry. And you kind of breached this topic where the data center industry just went out there, built big data centers, didn't talk to anybody, a lot of non-disclosures, we wouldn't tell what we are doing, what we are building for whom. And there was a wake up call that happened probably about a year ago. Some, some of us woke up, others are still in process of waking up. And so there's been a, a premeditated effort to combine our efforts with what the community wants to be wants to do and work with them. And there's been a, a tremendous receptivity in the communities where we are having those conversations. So that could be, you know, building out a new equipment in a fire department, helping them build new parks. These are all real examples. If you read, read news building parks for the community, which improves safety, security places for kids to do and play. So it can be meaningful because of the capital coming in. Sorry, that was very long-winded Way. Well thank, thanks for that. And I, so my, my follow up is twofold and I'm gonna ask David and then, and then Robert, okay, so then the big question then is why is there so much resistance? And it sounds like perhaps at an increasing rate of resistance. So David, let me ask you about the potential cost and then I'll circle back to Robert. What, what, what do you know of how data centers are in general affecting electricity prices? Yeah, thanks Nick. You know, I think, I'd argue that it depends on the, the impact of data center demand coming on the grid on power prices. I think particularly interested in residential power prices, those are the voters depends on choices that are made, policy choices that are made and the choices of some of the individual developers. But that there's the prospect from the fundamentals that they could lower prices for residential consumers. There are a lot of different formats of electricity markets in this country that range all the way from federal markets. Ous, public owned utilities like Munis and co-ops down to traditionally regulated investor owned utilities. Like we have, for example, in the southeast semi deregulated markets like we have here in California all the way to Texas at, at one extreme. And How it plays out would be different in each of those markets. And just taking a step back, when we pay for power, we are paying for portions of this overall exquisite system and that revenue goes into the generation side, which gets a lot of attention. It also goes into the transmission and distribution side and about equal amounts with a little bit of other costs for, for retail and public purpose programs. So we talk about costs, I think about, you know, who pays is sort of a question of the distribution of the cost of that whole system, the generation and the transmission distribution, the efficiency of the use and how much it actually costs to get stuff built. A lot of the conversation has been on who pays around data centers, so how you allocate to these new costs and, and there's actually I think, good, good promise, right? If you have these hyperscalers who are building, spending 40 or $50 billion in equipment on a gigawatt scale data center, then that's a big investment that's waiting on power. And so what we've seen is they generally have a willingness to pay for that power that exceeds the very price sensitive willingness to pay of the average residential customer. If they can get the, particularly if they can get the power faster. So, you know, from, from first principles basically if the hype scales will pay more than the cost to serve them in order to get that, that power fast, then you can use that to offset the rest of the cost and that overall system. And there have been different mechanisms to go to address that. For example, in the traditionally regulated vertically integrated investor owned utility markets, for example in, in the southeast in, in, in Georgia, we've seen for example, tariff cases that try to say your hyperscaler data center, if you can guarantee that you'll buy 70 or 80% of a certain lump of power over eight or nine years, then the utility gets a revenue guarantee they can invest around that. They know how they have to upgrade distribution or substations, et cetera. And then they can control costs for others, even reduce costs for others. If that's sort of well ordered, you know, that gets into this question of then the efficiency of the use of that system, how much you're getting out of the money that you're paying. And there it's a little bit more of a mixed bag. You know, I think that the people really got concerned about data centers affecting power costs. When the PJM market had an auction of what we call capacity, and this is sort of the ability for power for people to produce power at certain peak days of the year and they run an auction to say who's available to produce power. You know, we can talk about that particular auction that happened in PJM, I think it was poorly designed and they probably are too conservative and they try to go out and procure more capacity than probably they needed. I know Robert, you might have thoughts on this. And that ended up in very high cost to clear that auction, which have bill effects of something like 15 to $20 for residential customers ongoing in markets like New Jersey, which was, or in Pennsylvania, which, or Maryland, which was politically not great. You know, compare that. And that was a market where the, the, you were sort of at capacity already in terms of grid availability and generation availability. And so when you ask people to go on to procure extra power, then you are really high on the, the sort of marginal part of that supply curve and you felt it versus, say in the west for example, where our average utilization of grid is lower. So here, if you were to go to pg and e and say, I wanna have a gigawatt scale data center, you know, I think the CEO would say has a line which says I can reduce residential rates by 1% for every new gigawatt of load that comes on because I have capacity in my transmission distribution system. I can use that to pay for the broader system. I don't need to trigger new upgrades for that. And finally to say, you know, there's a promise here that you could actually reduce the costs of the infrastructure. If you have somewhat of a political bargain or a collective interest around powering AI and, and you know, Robert, you may think that that is broken down, maybe it has broken down, but if you can use that momentum to actually reduce permitting costs, et cetera, you could actually build new infrastructure more cheaply, then that really sort of reduces the overall potential for, for costs. But power costs are rising with or without data centers. That's sort of the background situation. So those were going up, there's a variety of reasons why that's happening. We can get into that in QA with data centers coming online. That's a very politically salient thing. And so it's easy to say your power costs are going up because of these data centers. And and of course that will play into the, the elections this fall and, and local discussions as well. But I think they actually have the capacity to bring down costs in a system where there's a lot of deferred investment in maintenance that is totally needed already. So I, I hear Can, can I jump in here because I think I've heard all this. And let me just say from what I see looking at the politics of this, the people don't care. Let me give you an example for why I say that. A week ago yesterday in Utah, at the box elder county fairgrounds, 900 people showed up for a county commission meeting, a hearing on the approval of a data center project, a proposed nine gigawatt data center project being pushed by Kevin O'Leary, who, you know, if he wasn't such a jerk, maybe they people wouldn't care as much. 900 people, 600 people inside the building at the county fairground 300 outside, almost all of them protesting. So what's going on here? I think it is a combination of people now electricity costs are suddenly for the first time I've followed politics, I've been a reporter for 40 years. I've never had a real job, I've never seen electricity costs being talked about in political races. And they are now, they were in the New Jersey race, they were in Maryland race. This is what people are talking about, the water. I, you know, you can say, oh, we don't use any water. People don't care because it's an emotional issue, right? And you can, and, and I'm, I'm just looking at this as soberly as I can, right? I don't have a dog in this fight. I use AI every day. I use perplexity, I use Grammarly. It's incredible. So what's going on? I followed these land use conflicts as I've said now for 16 years. I've interviewed people all over the world. Why they oppose solar projects, wind projects, battery projects now more, more recently. Well, they're concerned about property values. They're concerned about their neighborhoods, the character of their neighborhoods. I don't like the term nimby, I don't use the term nimby. I think it's a slur. Everyone, everyone, everyone everywhere cares about their neighborhoods. So you have the issues of noise, which were the same in with wind and solar and batteries, property values, view sheds, character of the neighborhoods, tourism. And then you, all of those are common for the opposition with solar and wind and batteries and now data centers. But with data centers, you add in electricity costs, water use, and this is the key, I think the distrust or outright hatred of big tech and the oligarchs and the people's fear about AI and job losses. And it's a perfect set of political issues that appeals across the political spectrum. So what I've seen with opposition to solar and wind and batteries, local people will band together across the political spectrum. Liberals, conservatives, wealthy, not so wealthy, be, and they'll band together to fight projects because they are concerned about their towns. I think it's the exact same dynamic with data centers. And you, and then you add in the AI layer where people are saying what's in it for us? And to your original slide today, Nick, you know what it's environmental benefits on the, on the y axis and, and economic freedom on the XI think local communities are looking at these projects and saying, you know, we don't get any benefit, right? It's great for national security. It may be important for QTS or Jeff Bezos, you know, when they, you know, they're happy with Jeff Bezos and his 500 foot long yacht. And so they're just saying, we can't fight the bottom line. I think the people are looking at, generally are looking at these projects and saying, there's no benefit for us and we can't fight Microsoft, Amazon, Google privacy is dead. We can't fight them in the virtual world, but we can fight them here in Box Elder County or fill in the blank or Madison, Wisconsin. So that's the political angle that I see. And I think it's the anger is growing. Is it, is it trending in a political way? I mean is it, is it becoming Oh sure More a blue red issue? Well, you see Josh Hawley talking about this, who's, you know, an, you know, a very conservative Republican and then you see a OC and Bernie Sanders introducing a bill in, in congress, you know, twin bills, which will go nowhere saying they wanna put a moratorium on data center. So I don't know, I I, I haven't, I don't think Josh Hawley and a OC have coffee often, but on this they agree. So it's, it, I think it's a very good example of how this, these issues around data centers are concrete examples for pe for people to say, we don't like big tech, we don't like ai. You take your data center and go somewhere else. We don't want you here. So there's a famous idea on economics called the Coast Theorem and I think applied here. The idea is basically that if the local benefits are big enough, all the things Doto was talking about, if those are greater than the local cost, you're gonna get development of data centers as long as the transaction costs are low enough of people coming together and, you know, and on the, on the same, on the other side of the coin, if the, if the benefits are smaller than the costs and the transaction costs are low, you're not gonna get data data centers. And that would be, both of those things would be good outcomes. That'd be appropriate. Doto do you, do you think that places are getting the appropriate outcomes that data centers are going where the benefits are greater than costs and being rejected where the costs are greater than the benefits? Or do you think it's more of a transaction cost problem, the failure to get the right people at the table and make the appropriate payoffs to those who need to be paid off to, to make everybody better off? That's an interesting, yeah. So first everything Robert said, that's, that's my life every day. So agree. Used to go from the popular guys one year later, we were the not, not so popular, but not everywhere. The, the reason why what you said has not been seen yet is data centers, just like office buildings. Nobody was like really interrogating office building in a town hall necessarily, right? A couple years ago I couldn't even get an, an email response from a mayor. It was like, what do you want? Why should I talk to you? Just another building. And it's different today, up until about 12 months ago in an organization like QTS, and, and mind you, QTS is is the largest data center builder out there. And, and asset manager didn't even have community engagement 'cause there was nobody to engage with, right? So we therefore didn't have anybody to communicate those benefits. The community just saw us as, oh, you're gonna come here, you're gonna take, you know, 5,000 people employ them. And maybe they felt they already have good enough jobs. Maybe they felt, you know, they prefer low traffic, quiet, no change, and we didn't communicate well, what's in it for you? We've started now. But it, it takes a while. Even the, the water comment, if a person already frames their mind about, oh, these are big evaporative chimneys in their mind and they think that's what data center is, it's too late for us to come and tell 'em. So there are communities out there that would tremendously benefit from a big injection of capital like that, but it's almost too late to help them kind of learn what, what's in it for them. There are others that are kind of new to the process and are getting educated and there's tremendous receptivity from those communities that see the benefit and that benefit is so much greater than the transaction costs. But if I can interrupt, I yeah, I think that, what's the old line in politics, if you're explaining, you're losing. Yeah. Right? And, and I mean, you know what the bumper sticker is for the opponents is big tech, QTS, Amazon, Google, they're gonna raise your electricity rates and your, and they're gonna use a lot of water and your only response is, no, we're not. Well then yeah, you know, from the pure political standpoint, you're, you're back footed, right? So I'm, again, I I don't think this opposition is going, there are a lot of places where data centers are being built a lot hundreds now. Yeah. But I think, you know, your job is, is getting harder, not easier. And, and, and the, the, in addition to those challenges, I think you've got the address, the issue of AI and why Yeah, maybe good for national security, maybe we have to beat China. But you know, in box Elder county, they don't care. Well, well let me, let me follow that up with, 'cause so I understand the Trump administration has made a public announcement to try to accelerate data center development. And one piece of that is the rate payer protection pledge. This was in March of 2026. And that would require tech companies to build their own power sources and, and that the idea is you'd have a commitment to keep energy reliable and prices low in these communities. Is that a good idea? Could that create some bad unintended consequences that you might worry about? I ask all three of you this, I only put that to David. You have to think about how concrete these rate payer pledges are. And I think it goes to this question of messaging, you know, trying to let people sort of feel it in their gut that they feel like, well, you know, there's a rule or a promise that this won't affect my electricity prices. Maybe that helps more on the, on the narrative side than actually changing the substance of what developers will do. You know, you think about the power as a, as a limiting function in the ability to deploy some of these data centers. And I heard this, maybe I heard it from you, this comment that, you know, two or three years ago, a data center developer would say, I want power that is clean, that is reliable and you know, that is, that is here or cheap. And then that became, well I just want power that is reliable and cheap. And then it just became a few months later, I just want power that's reliable. And that was just, I just want power. And so you've seen these developers be very creative in trying to get power. Again, if you're, if you're paying $50 billion in, in capital for a gigawatt scale data center, you know, energy is maybe one or 2 billion of that. And so you see efforts like, you know, Elon Musk with Colossus and Memphis, you know, putting these sort of temporary generators around the plant, et cetera, while they try to figure out how they're gonna get onto the grid, rehabilitate existing Tasks and didn't get a, and didn't ask for a permit, Right? But did it and said, sue me. Right. So, you know, I think it's, I think it goes those, those pledges sort of go maybe more to the narrative than actually affecting the behavior of individual players in the system. You know, when I, when I looked at the EIA data for like, where did power generation grow the most last year? It was actually in solar and in coal in the US that was the biggest increase in generation, not in new capacity, you know, so we talk a lot about the promise for what this growth and demand, what this injection of capital can mean from the big hyperscaler players who have very different capital profiles than traditional utilities. There's this kind of uneasy marriage between the developers and the utility side of the side of the aisle. And we talk about how, what that can mean for new technologies like batteries, for renewables, for nuclear, of course it's really changing, totally revolutionizing how we're thinking about nuclear. But in practice what we're seeing is people trying to build gas behind the meter. They're trying to build gas in friendly meter, they're trying to bring in generators, they're trying to rehabilitate plants. So we're doing whatever they can in the short term to get on and then hopefully figuring out these, these impacts later. I mean could this, could this Go ahead. Well I think the sentiment of the Trump move is directionally right, but I think it's limited in a certain way as well that they can take this pledge. But you know about higher costs. So I mentioned Ontario's latest data of 58 gigawatts of power capacity for data centers is under construction. So it's all about scale. So what's the comparison? 58 gigawatts that's greater than the installed generation capacity of Pennsylvania. A state with 13 million people, Pennsylvania has 50 gigawatts of installed capacity. So these are massive increments of new demand. So yes, there can be these pledges that, oh, well your residential rates won't go up. But with the knock on effects for this massive build out of hundreds of billions of dollars in CapEx this year by big tech is higher labor costs. All the EPC firms are all tapped out. They're raising their rates. A friend of mine is trying to do a data center project. He got an initial bid for a data center build out, he, and then he got a, a more recent bid, it's up 50% in a span of 18 months gas fired turbines. GE Renova Mitsubishi and Siemens have effectively the three of them a monopoly on the global market. They're dramatically raising their, their prices. Transformers, switchgear, arresters, all of the kit that you need to build out the grid, all the prices for all of that stuff is going up. So the inflationary effects of this, you, you can't isolate the inflationary effects that are occurring in the broad power market sector and equipment sector from the data center build out. So yes, I understand they can maybe reduce rates, but I think broadly they're gonna be inflationary because of the impacts on the kit itself and also the eagerness of the investor owned utilities to build more transmission, which they can rate base. So again, I think, you know, it complicated and it depends on which market, which state, which, you know, which region. But yeah, I, I agree with David. Prices are going up for a lot of reasons and I think data centers are one of them. Lemme put for So back to your question, Nick. Yeah, yeah. The announcement by, by the white white House about creating protection and, and what, what, what is our feeling about it? If you have four hats, me, me as a member of community, anywhere in the US I feel, I feel comforted by a messaging like that or somebody's going to ensure that my rates won't go up because of them. That's very comforting. And and I love that I sit in a, a privileged chair where I understand the utility. Actually it takes two years as does the public utility commission to make sure that already doesn't happen. But that's not a discussion we can have right now. Let's put a second hat on. As a data center company, the, the job of a data center company is not to build power plants. And yet I spent, as my title indicates, I spent 75% of my time talking two, two IPPs independent power producers, gas companies talking to turbine companies, all the majors you've named. Those were majority of my day balance of the day I spend in communities. Literally community members take them to data centers, show them that it's not as evil as, as it may seem when you don't know what data center is. So that, that hat tells me, gosh, this is not something that we are probably best positioned and smartest to do. There is a whole industry that should be good at it. The third hat is the finance hat. That's my background as a financial professional. It sounds really exciting, except you cannot deploy capital into the unknown when you don't know what the rules of the game are. It's just impossible to underwrite risk. And we are talking about billions of dollars, which is a lot of money even for Blackstone. So that becomes, that becomes a big conundrum, a lot, a lot the direction. But gosh, what are the specifics? How do I actually build this and transport it to my facility such that I don't breach breach franchise rules, I don't breach public utility commissions mandate, the RTS mandate all these pieces, they don't take days or weeks to reside yet the orders for turbines take five years. So I need to make the order four years ago in order to complete my development next year. And then the final hat, which is as I think about going back to consumer, so here I am a community member, but I'm a consumer and, and I studied economics. So I know that all of this, that today feels free one day there is going to be a requirement for somebody who's spending all this capital to make return on it, right? These big techs, all these models. And so the higher the, the CapEx today, there will be a day when I, as a consumer, I'm gonna have to pay, maybe it's a higher subscription fee or whatever, but somehow I'm gonna ultimately pay for it. So those are sometimes synchronized and sometimes in conflict each other. But I applaud the, the move towards let's make sure that we have protected the communities where we operate because that will take one layer of fear away from them when we show up in the city. With that, I want to open it up to the audience. We still have 10 minutes or so for your questions. So if you have a question, I think the mic will be delivered to you. Can I ask a question? How many of you use ai? How many of you trust ai? Robbie, you raise a good point. It's, there's sort of this trust gap rather than a market gap. And I'm wondering for you and, and for Daddo or or, or David, I I, if there's, if there's this really potential big upside, which I believe there is, could you go in saying we're not an AI company, which although we are, we are going to generate four times more water. We're gonna generate four times more energy and you know, offset four times more carbon. We're gonna create net positive basically with that net creative instead of a don't worry, we're not going to have the impact. You think there's a potential, I'm just curious if this is something that the industry would, would get behind of saying we can offset this amount of water because there's so much waste in the utility, there's so much waste in the energy, there's so much waste in carbon that we are going to be just this way of neutralizing. And then a and then going beyond that neutrality to something positive. Is that something that you guys are exploring and and is there an industry association that's reaching consensus on that? So I can take a first stab at it. So we are and have been doing that. We are just terrible communicators and maybe it's a function they send the foreign guy have these conversations and people leave confused. The reality is we, we just did it because that's our DNA, right? So take, take example of of Phoenix the the water question. We built a gigawatt data center. We will have a closed loop and that, and that's been the case. There's zero evaporative data centers that QTS built since 2018 or 19, right? Closed loop system. So we'll fill it up. That's basically one swimming pool, one, one Olympic swimming pool of water doesn't get filled up thereafter, which means the use of the data center is like a restaurant 'cause it's just people going, it's an office building. It's what it is. It's just, that's it. And yet we have in seven years not been able to get to the cross to people that hey really we are not doing anything wild here. Your YMCA us your restaurant, this is, and and it goes across everything right in, in Arizona. I keep using that example. Well we have, we have project up north to help with the watershed. It's not because we are consuming the water 'cause we just, we just established the fact it's because Arizona has concerns around water. They've got, you know, golf courses, they've got other agriculture, other uses of water. And so us, Microsoft, the utility, we partner, we're doing the project, we just really aren't telling people about it because we view it as our employees of that data center who are showing up for the office every day. They're members of the same community that's consuming water. They're just normal citizens like everyone else. And it's in our best interest to do that. Now I'm not saying everybody, there's a, there's not, everybody's doing this. Not everybody has got the the balance sheet to do that like we do. So we are fortunate, but we have been actively taking the steps. The one step that I might even get fired for saying this, but, but the one step that we have taken that is different is when we show up in the meetings with new community, new sort of government officials, we ask them to not make it into a, we need to give you all these incentives. We asked them to create a program with us where we first take care of the community, right? Because 20 years ago it was about who gives you the biggest tax break type conversation. And now it's about, hey, how how do we, what, what can we do to inject money into the community's wellbeing? So they see that we are, whether we show up or not. So they see us as community oriented first. That's a big difference. Like that conversation dynamic. What can you do for us in order to come to your community versus us coming to them now, what can we do for you such that they think of us as good people. That is a big shift, I think. Not across the board but QTS. Yes. Many others. Yes, David. So I mean, Doto mentioned some of the, the, the market based mechanisms or the private choices to this point of flipping the script on the mandate side, you offer also efforts now to try to address this affordability problem by working out the interconnection queues as sort of the line of new data centers, new loads trying to come on the grid that far exceed the ability to serve. And so how do you prioritize? So there's currently a, a notice proposed rulemaking or request initiated by DOE to ferc, the Federal Energy Regulatory Commission that says, Hey, what if we prioritized new loads? That would agree because we build the grid for the sort of 30 hours a year of peak demand and that's where all the cost is to meet this really peak demand. If we can have new loads from data centers say that they will scale back their demand during those 30 hours of the year. So that helps reduce their overall cost of the system. And in fact, if they could even use the backup generation that they build to make sure they have a high up times if those could actually then be dispatched during those 30 hours of the year. So now you're not just reduce the impact on the grid, you are actually bringing a new peak resource to the grid that's really valuable. And there's a rule making that says, can we prioritize those sorts of arrangements? If people agree to do that, then they would get on the grid first. So along those lines, I I I think this is an important point that you're making, David and I I was it a get a panel or moderated a panel at Southern Methodist University in Dallas last week and Jim Burke from CEO of Vista was on, was one of the panelists with Ray Rothrock and he made this very point that we need better utilization of existing generation. And so I think that's a, you know, that's a key point. And also because all these data centers are building their own backup. Yeah, I mean this is why Caterpillar stock has been soaring for the last year or two because they're building these backup gen sets, two and a half megawatt gen sets and that's a massive amount of capacity that could be brought online in times of, of, of, of, of grid crisis. There's a, there's a federalism, the DOE in fact Chris Wright, the Secretary of energy made that point right in January I think said that data centers could do that. There's a federalism problem here to the earlier conversation, but we can take that conversation offline. I'm, I'm gonna stockpile the next two questions and then, 'cause I want to get, get people a chance to ask them. So let's start with Steve Just, just to pick up on this theme, about two months ago in this room, there was a meeting of about a hundred people. David was there. We had financial people, utility people, grids, regulators, energy company folks. And I came and one of the questions was could you bring on a significant amount of generation in a relatively short period of time, like a year or two? And I came away feeling much more sanguine about the possibilities of doing that. There are a lot of levers that can be pulled including using unused capacity or idle capacity Yeah. To at least meet the short term needs. Nick often, you know, it's an economic discussion, right? And we're talking about, you know, costs and benefits and something that we talked about yesterday is too often we forget about culture. And so you're going generally speaking into communities that are more rural by nature. And yes, an individual owns the land that you wanna buy, that individual sells, that's his that know property right to do. But it's changing culture and I think what you're seeing, what you've been talking about is a rejection from certain cultures in rural America that I don't think is gonna change very easily. I just for reference, I work with farmers and ranchers about a million and a half acres across 40 states. So I, I have these conversations every day and if that, if you buy that, why not go to where culture is more conducive? I mean we're sitting in Silicon Valley, everyone here is on board with ai. So you know, instead of keep keeping going to more rural places where you're having a huge cultural ask of somebody to change, which is where you get all this pushback, why not look at places where the culture is already aligned? I think that's a good, if I can just, I think that's a good point. But these data centers need a lot of land, right? And so they're looking for, you know, you need cheap land, cheap power, fiber, water, what else? I mean those are the main things, right? So, but there is a backlash. Part of the backlash is on protection of farmland. And I just heard from council member Mark Moody in Cheyenne, Wyoming, he just introduced a, a, a, a proposal for the city council in Cheyenne to implement a 12 month moratorium on new data centers. And one of the reasons was protecting ag land around Cheyenne, Wyoming. So, you know, I, I agree with your point and this is also one of the key battles in, again, a similarity with solar and wind and batteries preservation of, of prime ag land. And that's a commonality not just in the US all around the world. Datto, we have 30 more seconds. Did you wanna comment on going to places where the culture's conducive? Yeah, that's right. So it's, it is a Venn diagram which is what, what your answer implied. If you think about how we got here five, seven years ago, we're looking for where eyeballs were human, human population that would consume the, the workloads. Then we pivoted into let's make sure there is fiber there that that's now solved. 'cause fiber gets almost anywhere when you, when you pay for it. Then that pivoted into let's find inexpensive dirt incentive schemes from like state entities and that you know, all of these are now gone. Then the next question became, gosh we've got all these land parcels but no power to actually run electrons into the facilities. So the next iteration, this is about two years ago, was going to the utilities and saying, hey where would you send us such that we are a benefit to the grid where you've got so much capacity that you will never use it. So that's how we ended up in a lot of the rural areas 'cause they're never gonna grow into their capacity of gigawatts. And now the kind of the new problem that showed up where the Venn diagram isn't quite overlapping, it's, yeah the community angle needs to now overlap nicely with the power availability angle and the land angle and labor and so on. I can Just add one quick point and that is that it's about gas as well. And I speak from experience. I'm Tulsa, Oklahoma is my hometown proud Oklahoma roots. My nephew works at Williams. Williams is now a gas power company. They've been a pipeline company for a hundred years. So now the location, it's, it's land and gas and Williams has now done $7 billion in gas to power deals. So another indication of just how much capital's flowing into the sector. Well thank you very much for in enlightening discussion and we are out of time. Great. Great. Thanks y'all.

- Well, good afternoon and and welcome back. We talked a lot this morning about different institutions and frameworks that shape environmental outcomes and for this session, we're gonna actually bring it down to the ground and we're gonna talk with a couple of our environmental entrepreneurs are what we call here at Hoover are environ. I'm Holly Fretwell, I'm a visiting fellow here at the Hoover Institution. I work with Nick Parker and Terry Anderson on the Markets versus Mandates Project. And one of the things we've been doing for a little more than a year now is working with a group of environ. You've heard a few mentions of them in the past, but entrepreneurs are these individuals that are actually working through their sort of mid-career conservationists and they're working on projects that run through the marketplace and come out with environmental benefits and the outcome. And last year we had six environs. This year we have another seven envi entrepreneurs with us today. On the stage we have two of our cohort from 2025 and another en infopreneur that I've met along the travels that has a super cool project that I wanted to share with you. One of the things that we like about the Envi entrepreneurs and how it relates to our markets versus mandates project is their experiences actually offer us a window of how theory plays out in practice, where markets succeed, where they struggle, and why they struggle. And where we might want to have some mandates or where we might want to reduce what those mandates actually are. And environ actually have a really distinct challenge. They actually have to translate environmental value into something that can function within a market setting. That often means finding ways to get paid. When environmental environmental benefits are broadly shared. It means operating where property rights are unclear or incomplete and it means reducing transaction costs that make exchange difficult oftentimes. So today we have, again, three en infopreneurs. We have Mikey Ibec just to my left here. He's a 2025 Enviro entrepreneur fellow. He is a co-founder of Resi Lift and Resi Lift reduces the risk of flood damage. Resi Lift is also the winner of the 2024 Harvard Business School Tough Tech Prize. To his left we have Grant Canary Grant is the founder and CEO of Master Reforestation. They work on post-fire reforestation and carbon removal and they're the winner of Fast Company's most innovative company award. And then on the far end here we have Manuel Pinella. Manuel is another one of our 2025 EFP cohort. He's co-founder and CEO of TiVo and they turned degraded lands into investment grade natural capital assets. Cult TiVo was named Project Developer of the Year by Climate Action Reserve. So we've got some really spectacular examples of avir up here. I've asked each of them to begin with a, just a short presentation about what their business is, what they do, what they actually produce, and who pays and why they pay. And then we'll up with some questions just in the panel thinking about some of the barriers and the hurdles and the assumptions that they've made and had to either pivot with or push through before we lead into some questions and answers from the audience. So we're gonna start with Mikey. So yeah, so my name is Mikey Iberg Clyde, I'm the CEO of Resi Lift. And Resi Lift is a technology company focused on climate adaptation and right now we're focusing on flooding. So you can see houses that are at the base flood elevation are susceptible to flooding and there's a silver bullet solution for this. It's structural lifting. You lift the house above the base flood elevation onto concrete piers and they're, no matter what the flooding event is, the house, the water will go under the house instead of through the house. The problem with this solution is that it's expensive, it's time consuming and it doesn't really scale right now there's around 200 structural lifters throughout the country. They're all family businesses. They all have their little fiefdoms and they can charge whatever they want because they don't, there's no real competition in it. In order to be a structural lifter, you have to have 10 years of experience. There's no union, there's no trade school. So really there's no mechanism to incentivize any sort of competition. At Resi Lifter we're trying to do is bring technology to disrupt this, to remove the bottleneck and democratize structural lifting. So right now one of our projects is called RL S3, the Residential Structure Lifting System. And what it does is it creates a sensor based two dimensional map of the house as it's being lifted to provide information to a structural lifter that's reduce reducing the barriers to entry. So instead of having to have 10 years of experience, you now need to have five years of experience because the computer is basically giving you feedback as it goes, telling you what to do and what might be going wrong. And the plan is to eventually incorporate automation into this. So it's not only giving you feedback on the lift as it's being lifted, but it's actually performing the lift itself by connecting to the actual actuators, the hydraulic jacks that are doing the lifting. So who are cus who are our customers right now? It's primarily structural lifters. This is, this reduces the time and labor that requires, that's required to lift a house. It also flattens the learning curve, like I said, instead of five years, or sorry, instead of 10 years of having to do it in the in the field, we talk to insurance companies and said, if you have this system and the system performs as expected, we're willing to ensure lifters lift by lift with five years of experience, knowing that we can see the data by the lift instead of having to insure 'em for a full year. It also increases the bandwidth of how many house lifts a company can do. Some side customers as well are operator insurance companies who now are able to ensure more lifters than they would've beforehand because they have this feedback mechanism where they can see how well a lift is being performed based on the data collected by the sensors and prime government contractors. One of the things that's happening right now in the industry is that the government's realizing that instead of being reactive to flooding, it might be better to be proactive. So they're starting to put these big contracts for prime contractors to lift dozens of houses at a time. By having our structural S lifting s our structural sensor lifting system, they can actually get the feedback of every lift that goes on by their subcontractors and see who's doing a good job, who's cutting corners, and then continue to reward the ones who are doing well versus the ones who aren't doing so well. Thank you. Great. All right. Grant Canary here. Mastery Forestation. We are a carbon project developer, but we're also vertically integrated. So we have a wholly owned subsidiary Cal Forest that we purchased in 2022. It grows the majority of California's trees, it's conifers. We also purchase SI seed in 2021. So we are the seed bank for everybody, but Weyerhaeuser for most of the western US states, the Northwest. So that's our, we're a vertically integrated supply chain. When I come back to a couple comments on kind of how the supply chain is doing, remember that, what do we do? So I thought it'd be easier just to have photos 'cause I'm a visual learner. We start off with forests that look like mortar door there on the left. We take the fire killed trees and instead of pile burning them, we put them underground. So our first project, I like having a protagonist for our story. So mother daughter ranch, 2000 acres in Montana in Bighorn County. And the father is buried on the property. They are very proud of that property and they were impacted by the 2021 poverty flats fire. They don't have a couple million bucks for to do a couple thousand acres of reforestation. Where's that money gonna come from? They don't have it. So what we did is we take the most expensive part of reforestation, cutting down the fire, killed trees, and then we turn that into a revenue generator. So we bury them high clay content soils. So they're not going to compost an off GA gas methane and CO2, if you have a compost bin, you know you have to aerate it to get oxygen in there. Otherwise it just sits there and does nothing. So we want the does nothing part where it'll sit there for a couple for a hundred years or several thousand. Then from there we generate the carbon credits, we collect the seed that's native to the site, we grow the seed into a seedling on our, in our nurseries, and then we get it back out a hundred, we reforest it 125 acres for this mother daughter. That's important to them because they do Silva pasture so ranching. And so for them they need shade for the cattle so that the cattle don't abort their fetuses when they're pregnant 'cause they get too hot. They've got hunting leases that are coming on. Hunters do not want to go to Moreor. They've got Boy Scouts and girl scouts that come out. Same thing, it's a source of revenue there. And also the aesthetics and the stewardship of the property, like they're very proud of those forests. So the, the number one thing they wanted was their forest back. We created a revenue stream to pay for them to. One comment that I'll make, there was some, I love this conference because people are open to some conflict and just some contrary opinions here. Grumpy economists comments were made about, well the forest will just come back, let me give some grumpy forest policy expert opinions here. The forests do not always come back. The severity of fires has been increasing significantly. And when the seed sources are destroyed in the soil and in the crowns of the trees, those forests do not come back. It used to be 90% of the time you could count on that. Now that's dropped precipitously. So what comes in in place, invasives, Himalayan, blackberries and scotch broom, which are again a, a fire fuel issue. So we'll talk more about that. I'm excited. Hi everyone and delighted to be here and thanks for the invitation again to to the to the team and to Hoover. So I'm Manuel, I'm the CEO and TiVo. And what we do at TiVo is that we mobilize capital to grasslands, specifically in the US to ranches. One of those reasons is because TiVo is a PLA an infrastructure platform company. What we do is that we focus on a very important part of our planet. 40% of our planet is rangelands, and of that just the US has 600 million acres and in an average the US loses 2.5 million acres per year. More importantly, back to community, as it's been discussed several times this day already, it accounts for about 27,000 ranches and that's already filtering a lot of the smaller ranches. This is just 27,000 ranches that are more than 5,000 acres each. Now the reality is that many of these ranches, a lot of these acres of grasslands are very degraded. And so what we wanted as a mission was can we invest in those ranches as a fundamental existential infrastructure opportunity where we can take those distressed assets into performing assets. So the most important part of our stakeholder group is our ranchers. Our ranchers are not our customers or buyers or our investors. They are our partners. We strike partnership agreements where they have a profit sharing mechanism. Their land is completely unencumbered and we make sure that they benefit first on the CapEx and the opex that gets invested. So my customers are financial institutions well, but to be honest, I started with family, friends and fools. Then high net worth individuals, the hidden asset managers and now thankfully pension funds, those are the ones that are investing the regeneration of those, those ranches. So what they want is a return on their investment. So where is that return coming from? Our first projects completely develop that return based on carbon credits, specifically carbon credits that are coming from the voluntary carbon market. So one first mechanism, what we wanted to do was to show our technology platform to figure out how to originate due diligence. Those projects. So Terry and team have been talking about transaction costs. So we realized that we were not going to be able to achieve scale if we didn't reduce the transaction costs. So we use a lot of machine learning and data to identify the right ranches within those 600 million acres that we could actually have a big impact. We make sure that we're starting to change the cycles of many things, but I'll tell you a bit more about that. But effectively what we need is we need to retain more water, increase oil, moisture potential, increase biodiversity, the ability of that grassland to support life. And then when you have that, you can actually capture carbon. Now in the case of the US specifically, almost every ranch that we have is a cattle ranch is a cattle operation. And so what we want is that those perennial grasses to grow more and as they grow more they have deeper roots. And those deeper roots have carbon that is turns into soil organic carbon. That's what gets us the carbon grids. It's a frequently complex industry that needed a lot of data to be able to underwrite those credits but also underwrite the total investment and so together. Sure, I'm gonna say we deploy a lot of sensors, we deploy a lot of ways of capturing that, both social biophysical evidence, but a very important part that has really also helped us decrease transaction 'cause it's our ability to move water around the landscape. So we deploy a lot of investment into wells, water troughs, piping, some of our ranches actually have become piping companies so that we can distribute water. But also a very important one is that if you see on the bottom one, and with this out close, when you don't have native hery bores, you use cattle. But you need to make sure that the impact of the cattle in the land is one that is mimicking a natural herd. Traditionally in the US you would have different paddocks and you're moving the cattle in an adaptive multi paddock system. So you're basically trying to mimic what a bison would naturally do because it has a predator behind them. What we have now done is rather than starting with physical fences as we are the largest deployer and investor of virtual fences, that basically it's a caller. As Terry was saying, one of the questions, we put a caller on every head of every animal and we use artificial intelligence to help with local grounded data and evidence to create the grazing plan that moves them, the cattle by acoustic signals. Therefore, when we do that, we are able to capture more water because you have more ground cover. We're able to ensure food security because our ranchers have the ability to then start supporting more animal units. We are of course capturing carbon, but we're also, as we're designing this projects, we're bringing a lot of land resilience by creating fire breaks and other mechanisms that allow us, but more importantly our investors to make sure that they have the return on their investment. The landowners want a higher profit share and a shorter time span to get to the profit share. So every piece of that equation is aligned to make sure that this cress lands the rangelands across the US get regenerated. Thank you. Well thank you guys. Every new venture when you start it up has a lot of assumptions that go behind it and sometimes those assumptions are true and hold and oftentimes they don't. So I'm curious which assumptions you got wrong or maybe it was a constraint that you underestimated. So another type of hurdle that you might have to get through and how did you change your approach? And I'm gonna tie into there we talk a lot in our environment program about pivoting or pushing through and when did you actually have to pivot through? Or for this particular example, did you pivot or were you able to push through it? And any advice on helping others get through that point? Happy to start with one pivot. So seven years ago when TiVo started with a lot of ego, I thought, well, you know, we can turn this platform and to analyze any type of biome across the whole planet. I was completely wrong. You really need a lot of detailed data to be able to underwrite an investment grade. That's a big distinction in our case, an investment grade asset. And what we started to see was then WeHo in a second. Forest grasslands. Wetlands were very complex. So we started gathering more towards inland ecosystems and then we realized that when we were looking for institutional capital, even though we were bringing down transaction costs, it was not to the point that we were even able to on ther intrinsic risk at the country level. So we started, you can probably tell by the accent time from Mexico and we started in Latin America and in Africa, but the reality is that pension fund capital is very risk adverse. And so we pivoted from a global approach to the one that has consistently moved towards North America because we don't have that intrinsic risk here. And for the avoidance of that North America, Mexico, US, and Canada. And so the pivot was going from a vast ego driven all types of landscapes to then reduce into a specific biome such as grasslands, where the IRR is a lot more attainable from our perspective with the type of capital that we had. So matching our customers with the type of asset investment and then matching that risk by concentrating into the US. So it, four years ago, that reduced massively our pipeline, but then it allowed us to deploy more capital. So it was a terrific pivot for us. But in that wake we definitely engaged with a lot of communities across Latin America and Africa and some even in Southeast Asia that we just had to turn around and we tried to connect as best as possible with other NGOs. But there there was definitely a ripple effect in those communities. I see Eyes on me. So I guess I'm up. We've had two major changes in our approach. Our North stars make reforestation scalable mitigate the worst effects of climate change. And our first approach, we were known as drones seeded, we went through Techstars in Seattle 2016. So to a shout out to our prior speaker, we, I was an alumni that helped advise on the the nature conservancy Techstars approach. We got three precedent set setting FA, a waivers for heavy lift drone swarms to deploy seed vessels across the landscape. We also got five patents and we couldn't get the survival and establishment rate that we were looking for. We beat nature but was nowhere good enough. And we also as a team that started out as like two people in a PowerPoint and then evolved into something that had tens of millions of dollars behind it. We did not, we, we were small, we did not know that the reforestation supply chain is completely broken. And I mentioned made mention earlier that like when I say I, I can say that because we are the reforestation supply chain for California, we, if you have, if you purchase a company and you have over 50% market share from buying one company that employs 40 people, it's you are the supply chain, it's a, and it's a very broken supply chain that's not a supply chain, that is a supply liability. So we didn't know the seed supply was so dire. And why was it so dire? Because the assumption of forest burns, forest regrows had been the law of the land and forestry for umpteen decades. And with an increased warming. I, I would encourage people to think about forests as being in a kiln. The longer the dry season, the longer they're in that kiln, the drier, the wood drier wood, wood burns better. And then similarly the, we have warmer nights. So with climate change, so you also have less time to relax after the kiln. So the warmer wood dries better. And so we've seen a 90% survival and establishment rate drop to like precipitously to like 40%. So that was like step one for us. We went to climate action reserve and we're like okay, great, well what we will do is we'll use a market mechanism, we'll use carbon credits and pay for reforestation. We created an X anti credit, again a Montana project where awesome this was area was affected by fires. We'll go in, we'll reforest it, we'll create an ex anti credit or something that hasn't happened yet and people will buy that and they'll retire it against their prior missions. The challenge there is the carbon accounting has evolved. We're creating the gap standards effectively for carbon accounting and taking a a mi a mission that will be captured in 60 years, 80 years and retiring against something that's already happened. Basically between 2020 and 2024 like that was eliminated. So we're like, well, but how are we going to pay for the reforestation? Like I understand maybe you shouldn't take future revenues against prior expenses, but how are you gonna pay for the forests? Because these things that take 60 to 80 years to grow the net present value of something after 80 years is please set this on fire over here. I don't need it. So we evolved into what what you saw there and that's really been us trying to ride our mission of how do we make reforestation scalable first from a supply chain and then from a market mechanism. And that market mechanism is moving around. So we had product market fit, we lost it, we have regained it as evidenced by delivering six or 4,000 plus tons bought by the true hippies of the world. Bain Company RBC and BMO. So yeah, I guess for us we started as a construct, a tech enabled construction company. Just some background, there's 18 million homes in the US that have a one in four chance of total asset loss within their 30 year mortgage, which to us was like a huge red exclamation mark that's $8 trillion in property value, 500 billion in property taxes that can just be wiped out. So we just assumed that there would be a group of individuals saying, Hey, just do it for us. We want to get this done. And we segmented the market into like high net worth individuals, high net worth and kind of middle income, low income. And we went to the high net worth individuals and said, Hey, your house has a one in four chance of total asset loss. You should lift it, you have the funds to. And their response was, oh well why have an NFIP PO policy backed by fema? If anything happens they'll help copay for my brand new house. So we went to the next tranche of high net worth individuals and there was this same response of, well I have A-N-F-I-P backed flood insurance policy and they're gonna pay me, they're gonna help me pay for my new house. And basically everybody we asked had the same response. And then we realized that 95% of flood insurance policies in the US are issued by FEMA's NFIP program, which heavily subsidizes it. So you're basically being given almost free flood insurance. So there's no incentive for the market to recognize investment into structural lifting. So we then kind of pivoted to being a, a purely technology company hoping that we can bring down enough of the cost to lift a house from a quarter million dollars to about half of that to make the math make a little bit more sense. And fortunately we're also starting to see a lot of the reactive government bodies that react to a disaster flooding disaster start being more proactive. So there's projects by the Army Corps of Engineer Engineers in New York and FEMA in Florida to start proactively lifting homes. So we believe that if we have a technology and we can provide that technology to the lifters and enable more lifters, these projects can be a lot more effective than they currently are being. But right now, that's definitely something that we're hoping pens out, but we've had to pivot before and we're hoping to, we're open to kind of seeing where the market is. As Grant said, sometimes you find project market fit or product market fit and then you lose it and you have to find it back again. So we're kind of in that space right now depending on where the government puts money for adaptation and where the private market puts money for adaptation as well. Great, thank you. You bring us to another idea that, I know you've all had some, some hurdles. You talked a lot about the regulatory hurdles that that you've had. And I know you've had additional ones at the state level and even at the local level. But let's open it up to all three of you. What are the regulatory hurdles that you have really had to struggle with that have been the high cost preventers of you actually moving forward or having to jump over? And how have you gotten through those? Or again, have you had to, you, you're saying you have to pivot, but let's go back down to, to Grant and and Manuel, what are some of the regulations that you've had to address and how have you done that? Yeah, so thank you. So the, the first one, and actually many in the audience here helped me tackle this about nine months ago. So we were, so a lot of our ranchers have their acres and then they are less to either state land offices or federal agencies, mostly bureau of land management. And they, what was really tangible is that for our intervention to work, we need to make sure that we have the ability to demonstrate that that set of practices is going to be there for a very long time. What in the industry is called permanence or durability And the, and the ranchers incentivize as we do, as well as the investor, as well as the offtaker. But because the more durable those practices are, the longer that carbon is there, therefore also the higher that price in principle should be for that current credit. So they need to go to their state land office basically to their landlord or to the federal agency and say, Hey, I just subscribed to this program, please sign up because you are in the back of that deed that you're comfortable for me to do this. And so we started up through our ranchers, we started approaching land offices as well as federal agencies. And to my very pleasant surprise, no one, none of those state or federal agency appointees were saying no. But what they were not saying was yes, because there was no president or very few presidents to be able to, to say yes. And so it has taken a very long time, but finally we started having our first success proof points in different states that then give comfort to other states to be saying yes. But in a nutshell, what would be like if my Christmas shopping list year would be, if there was like has happened in many industries, if there was this predetermined contract that helps those people in each one of those jurisdictions to be able to say yes, it would go a very long way. Because the, the opposite of that would be hoping that from a federal level comes this aha moment where, you know, here is, here is the document, this needs to come from the ground up and we're starting to see that movement, but it's slow. So that's where regulation, it's not that regulation is stopping it, but it's just that the paperwork is not there to be able to unlock that opportunity, which in our case and I think is relevant to what has been discussed so far. It is very easy because it's coming from the community. The demand is coming from the community rather than trying to be imposed on the community. For us, on the regulatory hurdles, I've given you the sort of qualitative and the, the ranchers experience, the, the quantitative. There should be a lot of interest in moving forward on this and a lot of regulatory buy-in in the us wildfire is increasing significantly. 82 to 92 10 year average. We lost about 2.5 million acres present day we're losing about 7.5 million acres on a 10 year average. No cherry picking of numbers. That's an extra New Jersey that we're losing a year. Narrow that down to Montana. There's something like six 68 million tons of fire killed trees that we've identified, narrow it down to what is not on public lands and that we can access via roads, et cetera. You're looking at like six to 8 million tons. Our first project was 4,000, so there should be a lot of fire kill trees and a lot of regulatory buy-in from the state side, Montana executed our project. You know what state really sucks at permitting Idaho. Sorry, I just wanted, we, I just wanted to like mess with folks because Idaho has been ral it as the champion of being able to get stuff done very quickly. It takes about 24 months or some time around there to get permitted as a non municipal landfill. So from that perspective, Montana, we got through it in a couple weeks. You affecting groundwater? No, great, we're okay with that. Let us know what you're doing. Send us your communications, make sure you're, you know, compliant with sage grouse permit permits, make sure you're filing your permits for effects on, on streams, all of that. So that's been a fantastic experience. So I think from that perspective, like the, one of the challenges there are just how do you, how do you get through that on a state by state process. The other challenge I'll identify is if anybody has tried to get a Montana rancher to do something or to sign a legal document, you might have three generations involved. You might have a family that needs to sit around a kitchen table. So being getting that adoption, we use conservation easements for five acres out of the 2000 we, but we also give an endowment just like a land trust of a couple hundred thousand bucks to make sure that invested in the market pays for site visits to make sure that that vault that we have created is completely stable for the next a hundred if not several thousand years. But easements, especially conservation easements are something that's tricky for, for families to navigate. Are they creating all kinds of challenges for the next generation, et cetera. So that's a big challenge. And then lastly on the carbon accounting side, like I truly believe in what we are doing with carbon accounting being as important as the printing press or the cotton gin or pick your favorite advancement of humanity. We are taking, we are creating the generally accepted accounting principles and we are codifying them. What do we all agree on? What do we not? And it's messy, but if we do that we'll go from an extractive economy to one that values the outputs from a 2000 to 10,000 acre ranch. 'cause I'm firmly in the camp of, if you have a 10,000 acre ranch, nature is infrastructure, you have a desalination plant that would've otherwise cost tens if not hundreds of millions. You're generating additional water by shading the ground and seeing the extra stream runoff and you're also purifying the air, you're also creating biodiversity. All of those things can be credits and I'm very much in the like Jerry McGuire, like show me the money, get the landowners paid because altruism is great but it doesn't scale and I want to get those ranchers paid for the benefits they're providing to other ranchers as well as cities downstream. I'll also add, so I touched a little on the federal government and how by subsidizing flood insurance they create a higher hurdle for the value of the house. The house has to increase to make lifting worth it. I'll also say that we've seen at the local level to a huge difference between a state like Florida that's really streamlined the permitting process and made it a lot easier for homeowners to get their homes lifted versus a New Jersey where you think that they would've learned a lot of lessons after Sandy, but a lot of the homes that were destroyed by Sandy were built exactly the way they were before and the permitting process has only gotten more complicated since then. Not less complicated. So they're just making the problem a little bit worse at the local level. Great, thank you. Before we hand it over to the audience, I wanna give you guys the opportunity to think about what, what you see in the future for yourselves. What are some of the hurdles that are in the way for your biggest opportunity in scaling in what you're doing? And I'm gonna throw another one in there for, for the, the two on carbon and that is, do you see the, the future of voluntary carbon credits as being having stability in the long run or do you see them as maybe going away at some point in time for other types of credits or other types of investments that may come about? You Want start? Oh yeah, go ahead. I I was most long, long-winded. Go ahead. Yeah, so I mean if I had a a magic wand, I think Dr. Con here would agree with me, I would just eliminate the NFIP flood insurance program. Obviously the way you do it has to be mindful that people who depend on it now, but right now that perverse incentives that it creates just create a very, very high hurdle. But as far as challenges to scale, I think the sensing platform that we have is one that has already received positive feedback from the actual structural lifters. I think once we go into the actuating part, having the necessary permits and regulation around making sure that this automated house lift can be done safely I think is gonna be an interesting challenge. But after that, scaling is a lot more elegant because you can just send them to a manufacturing facility to produce the sensors in the system as opposed to having to send a structural lifter to school, which is now they're starting to do or having, having them have real world experience for five years. It's a tough job. A lot of people do it for five years and then say, you know what, maybe structural lifting's not for me. So I think the biggest barriers to to lifting would be those two. And I think just in general where I see this space moving forward, I think I'm happy that the federal government is realizing that being proactive is where they should be going. For every dollar that they invest in proactive flood resilience, they save anywhere from seven to $8 in post-disaster recovery. So it's a no-brainer. FEMA's already $20 billion in the red, it's just that political will given that blue states flood and red states flood, that is a bit of a, a trap that I'm most concerned and what keeps me up at night. You Go ahead. Alright, so, so one of the things that really excites where the business is right now is that since I was at the fellowship last year, we've close to travel the amount of capital that is flowing to ranches in the US and, and it goes back to this evolution that I think it goes to the fact that we now have track record to demonstrate it. I know it sounds trivial, but an institutional investor wants to see track record. We might have been doing the same thing, but now we have track record to demonstrate that evidence. But at the same time what what I really like is, and it's connected to the second question Holly, is that at the ranch level, carbon is an amazing catalyst for all the different activities that I mentioned. But fundamentally at the ranch level, when you see it as a business, carbon is a really good interesting revenue stream that it's there that pays, for example the J curve towards regeneration. And many of this practices, the fundamentals at the ranch level are improving as we are improving the assets. So the business has been constructed in a way that we see both an uplift of the ranch itself as well as many of the other revenue streams that happen at the ranch level. It all starts with that relationship through carbon. Do I believe that carbon is going to be there forever? I believe so. I wouldn't even dare define what the size of the carbon market would be, but I, we are already seeing very important signals of also a convergence to compliance markets both locally federally but more importantly also globally. And so what the business continues to do is to shift in between those markets and to position where the best IRR is and could it be, for example, the we, I focused a lot on the fact that there is an investor that then sells to an offtake in terms of that IRR. But recently we are now managing the, for example, the largest initiative towards a supply chain in capital in the US for McDonald's. This is a publicly available program called Gracie and we're deploying $200 million into ranches across the US that is for environmental attributes. There are not carbon credits, but the evidence is also converging with voluntary carbon markets. And so there are different levers that we continue to pull that fundamentally go back to are the revenue streams healthy enough at the ranch level to have those cash shields that keep those families and those communities together with a higher performing asset rather than a certifying asset. So I'm really excited about where we're catching this specifically in the US and in North America overall. And the reason of why I feel comfortable in carbon markets is because they're evolving from my point of view, positively still with a lot of noise so that that's still to be seen. I wouldn't play crystal ball just yet. I wanted to give some, some thought here. I have have three thoughts here on the carbon credits. Personal pet peeve. I, I struggle when people say like I don't believe in carbon credits. That is akin to saying like, I don't believe in interest. You're like, well what type of interest? Payday loans, mortgages, whatever. There is 180 different types of carbon credits and they sit in three different buckets. Your nation state, your compliance and your voluntary carbon market. We are in the voluntary carbon market. We are also not an avoided emission. We are a capture of the emission. The, the trees have captured the carbon, we bury it, ensure it's, it's secured just like direct our carbon capture uses a chemical, processes it and then buries it and ensures it's secured. So there's 180 different types, everything from cook stoves to direct our carbon capture to integrated forest management to what we do biomass burial or other biomass storage. And we're the voluntary carbon market is evolving and Microsoft, which is 90% of the market heat map scooped and said, hey, we're, we're pulling back. And there's very specific reasons that we can get into on data centers related to that. And so from that, it's not a market where does the market come from? And this may not be popular to say in this room, but the government creates the markets is a very strong belief that I have here. It creates the, the guardrails or the playing rules because otherwise you right now we have four or five different registries, we have five layers of diligence because there was a lot of, there was a pendulum swing towards like what's the quality of the credits? Okay, well now we've got five layers and people from Jeffrey's bank are saying like, look, they're all asking for the same information, they're all adding cost and none of them are adding any additional value. But there's five independent parties that we have to go through to get our credits verified, including the registry which is owned by nasdaq, a third party that they use, whatever your consortium or buyer consortium like Frontier Symbiosis. Then you've also got your ratings agencies that are like bond ratings, like B zero RA and Calyx. And then you've got the, the actual buyer themselves who would never just trust consultants. So for all of those reasons, there's an immense amount of diligence that's gone into creating high quality credits and it's still not moving the needle on getting the market up off the ground from a $10 billion market. This last year was a billion dollars a year before. So it is, it is growing, but there does need to be those guardrails. The other point that I wanted to say, and and where I think that's going is it's the voluntary market is going to become a compliance market and we, with California's emissions disclosures rules, like start measuring it, start figuring out what, what is coming as far as like what your, what your scope one, two, and three emissions are. And instead of shaming the companies that are actually reporting it and trying to do something about it, shame the the 50, 60, 70% of companies that are reporting nothing and trying to do nothing. And so measured gets done and start, start focusing on that as how do we make that a cost that then has to be paid for so that there are effective trade-offs. The other thing I just wanted to put on there is that forests are not going to take care of themselves. My master's degree was feedback loops and with tipping points what we're seeing is that globally wildfires are down, but that is because of grasslands going down. There is a sharp increase globally in what is happening with wildfires going up. And that is for two major reasons and there you can sort of take it outside of the US context. In 20 20 20 you had the like orange sky day as August complex fire, you had about a million acres burned. Canada recently had a 40 million acre fire. That is a just absolute order of magnitude. And what's happening there is arctic forests are warming four times faster. Similarly tropical forests because of logging, because of fractioning, the the different land ownerships, there's far less humidity. So they're far less susceptive or they're far, far less humidity and so they're far more likely to burn. So both of those are starting to see pretty significant tipping points and when you get into this cycle of great, the earth is warming to take it back to car repair and a simple metaphor, you need a spark, you need air and you need fuel. If you've got something wrong with your car and you check all these three things to see if it's running, when the climate warms you get a higher increase of lightning strikes. That is your spark. And when you have fire killed forest, 80% of the forest is, or of the carbon is still there. The easiest way to start a fire if you've ever started a campfire is with the old logs, got millions of acres of old logs with a whole bunch of invasive species that don't retain moisture through the summer waiting for a lightning strike. And you're just gonna see this cycle repeat over and over and over snowballing these forests are not gonna take care of themselves. Great, thank you. We actually have one of our entrepreneurs this year that's helping us work on taking care of those forests. So pay attention to our upcoming cohort and from there we'll take a few questions. We have a few minutes left Guys. Thank You. I wanted to ask and don't answer if this is private. Thank you. Sure. How have you pitched to venture capital and how do venture capitalists, maybe some around here evaluate companies like yours? Have you learned anything about your core business from how these fat cats have value have evaluated you? You want to, I think you have more VCs on your capital. I just gave a very long-winded answer. We have raised from venture capital, there is I think a balance between we need a 10 x return in 10 years and what does it take to get something accomplished in forestry where in the, basically in your best case, it takes seven to 10 years in the southeast in your high productivity forest. It takes 20 years for trees to grow to maturity in the sort of like wall street of timber on the west coast. And then in your low productivity lands, which is pretty much everything from the Rockies over to the, to the US south. Like it's gonna take 60 to 80 years. And so kind of what what fits there for us, one of the things that's changed is we can take fire killed trees and from the start of construction of issuance of credits to get it done in nine months. That's what we did. That's what we delivered. And that's a fit for vc. Trying to do something longer, like in some of the other carbon credit methodologies can be a significant challenge for that 10 x return in 10 years. And so it may not be the best fit for that approach. What is the right fit? It's gonna, it's gonna depend on the technology, but there's also a whole host of of solutions that I think don't have that there's not an easy answer to that question On, on my experience was so, so for a bit of background, this is my fourth venture and I realized with a few deep scars on my back that what we are doing on grasslands didn't fit the time horizon that a as grant is saying that a VC normally has. And also what we re realized is that there were some of those corporate VCs that would align with what we do better. So what we did was we split our stack, our capital stack where corporate VCs would invest at the holding level but all the project level funding would come from other sources of capital that had a lower cost. And so that way we don't get into the same problems of not matching expectations on that return. Yeah. And that's it on our end. Similar to the issues that people talked about before and the scaling just isn't there. We're not gonna grow as fast as most traditional VCs need us to grow. However, we have had productive conversations with end bottom line VCs similar to what Manu was talking about, where yes they want to have a return but conservation or climate adaptation is another part of their goals whenever they're making investments. So I think the best analogy that I was described, that I was told was we're a VC that doesn't look for home runs, we look for base hits and your company sounds more like a base. Hit One. One more thought on that. Also private equity versus vc. For us, the management of the biomass biochar is, has is responsible for 90% of carbon removal credit deliveries. You can check a leaderboard on cdr, FYI I love leaderboards. You get stuck in a situation where you're either building a 20 to 50, you know 2050, a hundred million dollars plant and it's got a 20 year life cycle. So you start moving away from burn forest into green forest just to fulfill the obligations to deliver for that plant. And that's not a great solution. It that's a much better, if you're doing fire kill trees, it's a much better for agricultural waste. The alternative is great. We have a small mobile unit for biochar. Well you're gonna be processing very small volumes for like five years running a triple shift. So that's not a good solution either. So if the, the project sort of build approach that we have taken with biomass burials born out of that necessity, we looked at doing biochar and that was not a fit for the fire killed trees. It's a great fit for agricultural biomass. But that speaks to sort of what is the project finance angle on how you fund the thing. Great. Well thank you. That is the end of our time. Please look up our envi here and the ones that are in the audience for our 2026 cohort.

- You have a phenomenal set of experts in the wildlife field, and I don't wanna lose any of the time that we have available for this particular panel. So I'm Buzz Thompson. I'm a professor in the law school here, as well as in the Do School of Sustainability at Stanford. And I have the privilege of moderating this panel on markets mandates and the future of of wildlife abundance. And to talk about this particular subject, we have two people that I've known for in one case I've known for a long time. In the other case I've known of for a, a long time. And I've enjoyed every moment I've spent with them simply because of the density of things I've learned from their particular expertise immediately to, well my left, your right is, is Nick Parker. And Nick is one of the organizers of this conference. More importantly, he is the Anderson picu Bascom Bascom Professor of Applied Economics at the University of Wisconsin Madison. He is also the Eileen and Morton Harris Senior fellow here at the Hoover Institution. He's an expert in environmental economics, natural resource economics, very interested in law and economics, and basically the economics of of everything. And I knew I was gonna like Nick when I first met him because he was one of the few other people I'd ever met who got really excited about talking about the theory of conservation easements. And Nick is one of those people who is, is a true expert in that particular area. He also though shares my love of surfing and my love of of New Zealand. And our other speaker at my far Rob left is Jamie Workman. He studied and rode at both Yale and at Oxford and is one of these people that has worked in a whole variety of, of areas and more importantly, has done a fantastic job of writing books about them. I first became aware of Jamie when he came out with a book called Heart of Dryness, which focuses on how the Bushman in the Kalahari Desert have survived over time. And if you've never read the Bud read the book, I really highly recommend it because it's phenomenal. And more importantly for today, he just recently published a book called Sea Change, unlikely Allies, and a Success Story of Oceanic Proportion. He also runs Aqua Shares, which is an online trading platform for water credits. And with that, I realized that the one thing that we never established was which of you guys is gonna go first, I think. Okay. So Nick, I'll hand it over to you. Thank you Buzz for the very kind introduction. And also thanks to Buzz who que squeezed us in. He's got a busy day of teaching on both sides, and grateful to have him here as a moderator. So I want to talk about a case study or the legacy of what I think is America's first major environmental mandate. This was a trade ban on commercial sale of wildlife products. I want to ask, was it necessary? What is its legacy and should we abolish it? Oops. So let me set the stage and put it in context, and I wanna situate it in. What was really America's first environmental crisis. European settlers that arrived on the continent were just stunned by the abundance of wildlife. They talked about passenger pigeons that were so thick, you could see no sky. They talked about the woods abounding with deer and elk and songbirds of every kind. But those species were decimated, especially during the age of extermination. From about 1850 to 1900 beavers. Geese, turkeys, bison driven to the brink, the passenger pigeon was driven to extinction. The last one died in the Cincinnati Zoo. Her name was Martha. And the early 19 hundreds, even deer, which we see all the time now, went from over 20 million in 1850 to less than 500,000 by 1900. So the proximate cause of this was commercial markets. The underlying cause was open access. So landowners were not given clear rights against trespass. There was rapid population growth, a lot of it from immigration, no local law enforcement capacity. There's a few laws on the books. They were not enforced. There were some private conservation efforts, hunting clubs that were conserving some species, but that was really difficult to do at a large scale, especially without rights against trespass. And so the governmental response was twofold. There was a ban on commercial hunting and the sale of wildlife products. That was through the Lacey Act of 1900. That still is the law today. In addition to that, there was a creation of these government game agencies. So they did and do manage recreational hunting. They enforced laws, call them game wardens. They also, during the early part of the 20th century and into the middle administered aggressive predator removal programs, especially wolves, come back to that. So today, most states you need a license even to hunt on private land. This is a very different system than most countries where private landowners effectively own wildlife. Okay? And so I wanna say without a doubt that this was a stunning success. The trade ban, which is the red line in 1900 for game animals, led to a stunning rebound in game animal populations. I have the best data on deer, so that's why I'm showing you that estimated deer population is about the same as it was in 1700, crashed to 500,000. Now back up to about 35 million. Think about that. There's as many deer in the continental US today than there was in 1700. There's 300 million more people today. For context, there's about 27 million beef cattle. So more more deer than beef cattle. And I think this expansion was really a result of single-minded management of game species like deer for recreational hunting. They were critical for lobbying recreational hunters for the conservation mandates. And now I'd say they have captured the policy. So here's part of the legacy. So let's think about, was the explosion in the growth of species an indication of too much success? So this is my vehicle. This is 2022. I had one passenger in the car. Neither of us were seriously hurt. Obviously the animal was, that's a elk, not a deer. But when the police arrived, and this was in Montana, they said it was the third collision in that same stretch that day. Wow. Wow. So this is not a unique experience. There's about 2 million deer vehicle collisions in the US each year. Let's see, that leads to about 30,000 injuries, 200 fatalities annually. It's about 10% of total accidents, much higher in rural areas. Total cost in the US is about 20 billion alone. This is not unique to the us. There's the same issues in lots of places of the world, including including Europe. There's of course other large costs of over abundant deer. They are involved in the spread of Lyme disease, which is huge cost to humans. They damage crops, timber gardening, and really maybe surprising, surprising to me, the problem's getting worse, not better. So I guess concerns about deer over abundance are not new, although Leopold wrote about it is in the 1940s even. But the new problem, I think is there's a waning number of recreational hunters to coal populations. There was about 10% of the population that hunted in the eighties. That's down to about 5%. But it's fallen, especially young, among young males, which is traditionally the cohort that would, that would take on to recreational hunting. So it's below 5%, I think, in that demographic. So a question to think about, and when I think about is what will limit limit future damage? There are lots of options, but I'm gonna highlight a couple. One is to bring back the commercial markets. Allow venison at the grocery stores. Health influencers laud it as lean, healthy source of protein. It would provide a stronger incentive to hunt if you could sell the meat that you, that you get could potentially provide a lower cost alternative to beef, which is getting more expensive. That's showing you the CPI of beef in the US compared to the overall CPI. So we have a stagnant and even declining number of cattle. We have a growing number of deer. This would require a legal change given the Lacey Act. Recreational sportsmen associations seem to be opposed, but you know, we don't need to eat trophy animals. So it's not obvious. There's a big conflict there. Okay, so another option, and one that's happening all over the world is to bring back the predators, especially the wolves. Livestock producers are opposed, recreational hunters have mixed views about this. Again, wolves don't really kill trophy animals so often, which would be the target of some recreational hunting. It's happening across Europe, France, Spain, all over. It's happening within the us. Most recently, Colorado voted through an initiative to reintroduce wolves. So this is all providing opportunities to study their impacts on ecological systems, economic systems, especially on deer and other prey, which I have done with co-authors. This is an illustration of data that we have from radio collared wolves in Wi Wisconsin. And you can see their spread over time. And so what we've done is use the spread of the deer to study how or the spread of the wolves to study how they're impacting deer vehicle collisions, which is a big ticket dam damage item. So here, let's see. The red line shows counties that eventually were colonized by wolves. The gray line shows counties that weren't. Panel B shows that deer density climbed in counties without wolves. They're kind of stable elsewhere. Panel C shows that deer vehicle collisions went up in counties without wolves, where there were wolves. If anything, they fell. Panel D shows that other types of vehicle collisions were basically stable. So based on these data and econometric estimates, we estimate that wolves decreased deer vehicle collisions by about 24%. Interesting. In part, that's because wolves, coal, deer populations. But the larger effect seems to be that wolves change their behavior. We think that they're creating a landscape of fear where wolves are wa radio collared, we know they travel around linear corridors, including roadways. It seems that deer learn this and stay away. So this, if true, is not a, a, a thing that human hunters who are temporarily in the landscape could easily replicate. Speaking of replication, this paper got a lot of attention. There were lovers and haters of it, and we wanted to try to replicate it in a different setting with totally different data, different empirical methods to see if it really was robust. And to do that, we took advantage of a natural experiment in Quebec, Canada. The north part of the St. Lawrence River has always had wolves. The south part hasn't had wolves for about a hundred years or over a hundred years. This barrier is different, difficult to cross. So we compare animal vehicle collisions, deer vehicle collisions on both sides of the river. It's not just deer there, it's moose as well. We find a huge difference that the south has just along the border using a regression discontinuity approach. There's 38% lowered deer vehicle collisions, I'm sorry, in the north where wolves are, are present just along the river. That's about 30 million in annual savings extrapolated to America, where ecologist tell us there's habitat for wolves. That would be about 6.5 billion in savings from damage and injury, et cetera, annually. Of course there's costs of wolves. As we all know, livestock producers are our primary opponent of wolves in both Europe and the us. Serious losses, important concerns. But the estimated benefits just through the Deer Vehicle Collision Channel are enormous relative to at least what has been verified losses of wolves. There's also another important dynamic in terms of the effect of wolves on livestock. And one that we've only recently started to think about and have a working paper about, which is to keep in mind that you know, when wolves prey on cattle, they're often ecologically displacing other animals that also prey on livestock. So coyotes, cougars, bears. And so what might be important is the net effect of a new predator on livestock loss. And when we look at the net effect that's much smaller, in fact maybe even about zero once you, once you think about the total ecological effect, because coyotes are of course really over abundant in places just like dear. So I'm gonna wrap up with some questions and one, I'm one's I'm not, you know, firm on an answer to, to recap. Historically, this open access combined with rapid immigration led to an environmental crisis, in part because there was a failure to support property rights against trespass. That led to a big mandate, a ban on hunting that was very successful. But now there's serious problems with it. I think many lessons mandates deal with crisis quite well, or they can, they yielded quick measurable effects. But over time, this one and many others I think have proved rigid, inflexible, and ignorant of trade-offs. Can we have markets to the rescue? Well, there could be venison markets create a stronger incentive to coal, perhaps more private ownership where those markets exist. And we could try to encourage environmental markets, those who benefit from wolves could offer payment to those who lose. And so who benefits? It seems insurance companies do drivers, of course, wolf advocates and environmentalists who loses still landowners, I think, although it's more complicated than I used to think. And so, you know, payments for losses are established, but we I think can do more with markets, with the technology. We have to compensate landowners for having wolf presence. New technologies could help with that, including the kinds of echo location things that signal werewolves are that Raj talked about. So that's, that's what I wanted to say about America's first environmental mandate. And I yield the floor. Okay, Nick, just to read the room, I want you to raise your hand if you guys love seafood, ordering it, cooking it, eating it. Okay. Good turnout here. Raise your other hand if you've ever gone fishing and you love fishing. Okay, now raise both hands if you're a little bit concerned that 7 billion people who love these things as much as you might put a strain on the resources. Yeah, that's the topic of the conversation I, I want to get into because it really, you know, we, we've gone from this abundance that Nick was talking about earlier. We whacked it down with the bullet. This is the hook side of the equation. It took us a lot longer, but we did get there. And advancing this is just pushing the green one right from the start. We think of Thanksgiving, we had so much fish back then you could, you know, put it in. We've all learned the story, put it in the ground to help with fertility and so forth. And there was this abundance. You could just get your Turkey wherever you went that brought lots of immigrants, lots of people saying, my gosh, there's meat that's free in this new world. And that's been a driving force that's really contributed to our culture, our mindset. And that's been the case for, you know, hundreds of years. But after World War, sorry, after the Revolutionary War, you had this situation again of abundance, of so much cod that we really needed to figure out how we get out there and catch it. And we all know the story of Hamilton and Jefferson, right? They hated each other. One had this idea of like the yeomen farmer, the yeomen fishermen, maybe gathering up enough fish for his family and anything excess, maybe sell that. That was his idea of, of a good fisheries policy. And then you had Hamilton saying, look, fisheries need capital. They need concentration, they need trade, they need commerce, they need markets, they need all these things. And that's not gonna cut it. Washington made these guys work together. And this is like the one policy where these guys did come together and came up with the first stimulus package in the United States, which was a fisheries policy to get fisheries back on. Its on its feet after the war, after it had been destroyed. And go out and catch that. And it was based on this concept of shares, men, of balancing labor, getting a, a stake in the outcome with capital. So that there is an, you know, a proportionate of how much you work. It's driven by incentives. Hugely successful, almost too successful. It really recognized how good we are as a country at catching fish. And it led, you know, a couple hundred years later to the Magnus and Stevens act, which we're celebrating our 50th anniversary today. And pushing Soviet fleets, pushing Japanese fleets out of what we called American water's. 200 nautical miles offshore. Every other country replicated this. And it became a way of first defining the rights to fish, but it was still at this national level. And you still had this race to fish of, we gotta catch more fish before the neighbors do, before the arrivals do. And it was an us against nature, us against each other, us against the government to if I don't catch the last fish someone else will. And so you go in the, the state of under fishing to overfishing and you can see the, the impact over time from the 1950s repackaging all this World War II equipment, sonar radar into fish finders and other things to really catch more fish. We were started emptying the seas and we got really good at that. And the government said, well, let's try new ways of control command and control coercion so forth. Instead of using nets, you can only use hooks. Well then we developed long line hooks. So thousands and thousands of hooks instead of one or two. Okay, that doesn't work well, we're gonna compress the season from one year to three months. That way you'll catch a third of the amount of fish. Well they just concentrated more effort in those three months. And they said, okay, well maybe not three months, two weeks. And then in halibut, for example, we're gonna compress that down to two days with a starting gun. And it was again, just accelerating this race to fish, creating a glut. It didn't work and it was, you know, making things worse. It was intensifying the race. You guys have probably all heard of the deadliest catch with the crab fleets and so forth. That was real. And then it changed and there was a new system that came about and it was very market oriented, incentives driven, rights-based. And this is what I'm talking about. It's called catch shares, has different names, that's the colloquial one for it. Individual fisheries transfers or quotas, IQs. And the concept is that when we overfish we get a smaller pool, harder to find the fish, we spend more time chasing them around in that race to fish of, you know, open access or even the, the controlled inputs. So how do you turn this around? Well catch shares basically divvy up that catch. It says this much is off limits. That's the reserve, that's sort of the capital. But fisheries, reproduce, we're going to divvy up that into groups of communities of reserves, of individual vessels. And now you have 0.3%, you have 1.1% based on your historic catch. And that changes fishermen's incentive system to saying, oh, so I could fish year round and I know no one else is gonna catch my share of the fish. Now I'm gonna start thinking of it. I can start selling my fish before I go out and catch it and I can get a better price 'cause it's not going in a glut. And I actually now want marine protected areas because that becomes like a fish bank. And this is wonderful. And I'm not, I'm not gonna start sharing data with my buddies here because we're not competing with each other. We're just looking at now market share and who we can sell it to and get the top dollar. And as you think about your own slice, how do I get this bigger over the next 10 years? All the slices get bigger and there's more fish in the sea and there's more fish on the plate and there's more prosperity. And it's been an unmitigated, you know, success story, bipartisan support, you know, across the board, across the administrations, each one's contributing more and support to this. It's, you know, been now exported in other countries in many ways. Some of 'em are as successful or more successful. New Zealand, Iceland, places like Namibia, Belize that have spatial area quote as same, same concept, but it's ter territorial that fish out there from that ridge to that reef that's ours. And that changes the fishermen's incentives. And you know, economists at the, you know, Santa Barbara, Chris Costello has modeled this out saying, if we did this, you know, globally, it would reverse the whole negative trend. And they've been able to quantify this in great detail because you have a lot of that information of how much more food on the plate, how much more biomass of fish in the water, and how fast it can happen in 10 years. So all success story, right? This is something that began in Nick state of Wisconsin on the, you know, lake Superior and, and and Michigan commercial success story. They're making more money. They've, they've rational, they're not, you know, dying in Alaska anymore. It's safer, more productive, more precise and clean. So what's the problem? Well, the problem is people like me and people like you guys, because in in the Great Lakes, the people who are hammering the fisheries up there, the whitefish aren't the commercial industry, it's the recreational guys. It's guys like me and my dad. This is just offshore here at a half Moon Bay a few miles away. And it's an exciting day. You're actually reconnecting, you're feeling your manhood again. And it's just like, yes, me against the sea. And, and you're learning to hold the fish really close to the camera, so it seems a lot bigger than it is. And you're holding your dad's fish claiming it's your own fish that you cut. Anyways, this is, this is the, the kind of tale of two fishermen that I'm talking about on the left, one of the, the lead stars of, of, of my story is, is Buddy Gwen, and we built this around him. He's a commercial fisherman outta Galveston, Texas, amazing guy. Been fishing all his life and he, you know, is on one side of Wharf Road. And then on the other side is the Galveston Bay yacht charters. And that's, you know, Scott Hickman operates his vessel out of there. These guys hated each other. Scott was like, you're a pirate, you're out there, you're over fishing, you're depleting making me have to go farther and farther offshore guys, like, you give fishermen a bad name and buddy's like, well get outta here, whatever. And then they went to a catch share system and then the red snapper fishery started rebuilding and it's like twice then three times the biomass. It was. And they're able to point to how they're under fishing and they've got the data to prove it. And then they're looking at the recreational guys like Scott and saying, you know, what have you got? And Scott had to get really quiet at that point, and he started saying, we, we got nothing. And this is the, the challenge that we're under right now, mostly in the Gulf to some extent on, on the west coast here, but it's happening around the world where the fish in the sea are more valuable to the yeomen recreational fishermen that, that Jefferson was talking about. It becomes very powerful, a strong clout of rewriting the regulations about who has access to the fish in the sea and the money involved in this changes, these competing visions of what the fish are for, who are they for, who gets access to that? Is it, you know, for drying out like way back when for hundreds of years back when Jefferson and Hamilton were hammering out this policy and that's gonna be our export and that's gonna be our, our currency. Or is it more like, look at this honking cod that I caught offshore. Those are two visions for cod fishery for example. And you know, there's different equations that go with that for halibut, fishermen, they've got cameras on board, they know what they're catching, where they're going. And then on the recreational side, it's kind of off the radar. It's very opaque, it's a different motivation. It's me again, bonding with my buddies, my siblings, my parents, my kids and, and having this, you know, rich experience. But there's also this blurry line of, you know, you hear fishermen, hey, tight lion, go for it. But it's not just for the recreational interest anymore. When we go out for half Moon Bay or for, for for salmon or for, you know, rockfish off the phons, the commercial head boat, the party boat will throw in, Hey, we're gonna give you some crab on your way back. It's like, oh great. So they pull up the crab pots and so forth and we get like $300 worth of crab for a, you know, $150 fishing trip. And this is also happening all over where you book a trip to Alaska and they say, well, we're also going to give each of you about a thousand dollars worth of, you know, meat that you catch and that goes back home with you. And that's a lot easier to sell to your family than I'm just gonna go up to Alaska for a good time and, and spend a thousand dollars. It's like, we've got food now for the next couple months. And it is blurring that line between the two. And it also gets a little confusing and contentious when the recreational industry says, you know what, we don't wanna share the fishery with these commercial guys. You know, they, they're bad guys, they're pirates. We need to push them off the water. And that's happened with red fish, it's happened with striped bass, with spotted sea trout down in, in off of Florida. And it's now being pushed for other issues of halibut, of rockfish flounder snapper. And that's one future that's, that's one op option of saying, you know, look how much we've generated so far. There's more people wanting to fish, there's more opportunities to fish. The barriers to entry are coming down. There's like, you know, 3, 4, 5, 6, 7 million of us going out to catch fish and there's only two or 300 of those commercial guys who do you care more about? So they got the votes, they've got the money, they've got the lobby for that, but are we really, you know, here ready to give up, you know, halibut off the menu. These are the challenges. And if we're not and if we want to have no, we can have both thriving industries together rebuilding. How do you get the recreational guys to stop over fishing, which is what they're doing. How do you, you know, monitor them? How do you incentivize them to fish more precisely? And there are several approaches and AI has played a role in that, in remote sensing and in in apps and technology. So this is a party boat. They tried a version of basically a head boat catch share where charter fishermen would trade quota. They had an allocation, they knew how much they could catch, and because they could catch year round, that was a huge incentive for them to say, well, we're gonna monitor ourselves, we're gonna put cameras on board, we're gonna, we make sure each person is not putting their fish back in the water to try to catch something bigger, but they're accountable. And it worked wonders. They made more money, they were more efficient with the kitch and you know, they, they, they helped rebuild the fishery, but still you have this part of the compliance aspect for commercial fishermen is that they're more transparent. They, they have these, you know, systems, smart boats where the camera goes on when your gear goes out and everything is, is watched, everything is accountable and the fishermen, commercial guys were ready to make this trade because it helps them make more money, be more accountable and make sure that none of their buddies are, are cheating that they can't cheat. But imagine trying to put this on 3 million private vessels, you know, you really can't do that. The, the guy and his family that want to go out for several hours and, and in the middle of nowhere and catch fish, they don't want to camera monitoring what they're doing. They don't want to have to go back and open their cooler on the deck. And it's implausible to do that. So how do you get them? And one of the things being pioneered along this coast is basically remote sensing, watching the boats that go out, identifying them, picking up their license and being able to check on them when they come back again, that's still kind of a, a bit of a coercion, a bit of a mandate saying we're gonna make sure that you are watching this others is an aspect of self-regulation. And I'm usually skeptical of that, but because the trade in recreational fishing isn't so much money, it's status, it's bragging rights, it's the guy holding the picture, the fish up close to the camera. And most fishermen love this. They love taking a picture of themselves with the fish that they caught and putting it up on social media. And so a lot of innovations in Florida and elsewhere started saying, let's capture that. Let's capture the bragging rights as a data source, as a self-regulatory system. And so for speckled trout and and off of Florida, they were able to say, oh, on this side of Florida people are more catch and release and there's more fish in the water. I'm going there, but I'm gonna adopt the ethos of catch and release on the other. It's catch, you know, put it in the cooler, there's not as much, the experience isn't as good there. And so it becomes kind of self-correcting as a way of doing, you know, this self-regulation. But I'll end on one, one of the most innovative things for me, and we talk about unlikely allies, Jefferson, Hamilton, environmentalists and fishermen, these two guys are now not just friends, they're business partners and they've come up with a really innovative approach that would make, I think Jefferson and Hamilton very proud, basically Scott Hickman on the right leases quota from Buddy, he takes fishermen out on a full day so they can catch more than, you know, as as much snapper as they can hook in line, come back, sunburn happy, loving the day. They buy some of that, you know, at the price that that buddy's market is able to sell 'em. They're not paying Scott, but they're, they're committing to a, a purchase. And so they're getting the experience, they're getting, creating sushi grade fish, they're providing buddy with free labor and it's really, you know, generating more fish. It's staying within the limits, it's being responsible and precise and careful and yet it's giving both sides something they really like. And so that's, that's just kind of the exciting thing of, of that, you know, markets then mandates combination. It all comes back to how you design these systems and I'm working with some colleagues in terms of how to incentivize this kind of planning on the front end. So it's not an afterthought. How do we bring in the recreational industry, how do we start from that platform? Thank you. So we have like about a little under 15 minutes at this particular point. I wanna make sure that we have plenty of time for those of you in the audience to also ask questions. But, but I have like two or three hours worth of questions. So let me try to boil down a couple of them for Rob, for both Nick and, and and Jamie. So Nick, when I hear your story, one of the questions I have isn't just like a simpler solution. Why don't we just start paying people to go out and and shoot the deer? Isn't that simpler than trying to balance out the deer population by increasing the wolf population, which might then require us to bring in yet another species to balance the wolf population? Yeah, well great, great question. We are doing that in some places. We have bounty hunters that are paid to move in, sometimes surreptitiously into suburban areas, especially where deer are particularly problematic. And you can't have any recreational hunting. These bounty hunts are super expensive, highly trained specialists and kind of urban, suburban areas. I would say if you tried to hire people in rural areas, it could also get expensive. And relative to a commercial market, you, you still aren't getting the benefit of the meat, which feels wasteful. You are right that wolves are a way to address this problem that create other problems as well. But if wolves do create this kind of landscape of fear, and if they have long-term effects on the natural selection of deer, it's not obvious that, you know, paying bounty hunters is gonna be a very close substitute to the predator in the landscape. So, so it is happening, it's pretty expensive. If you want to sell the meat, you still need to amend the law and wolves do some things, humans can't. Yeah. So what I'm hearing both your and and and Jamie's presentations, which are both fantastic, one of the things that I think both of 'em have in common is that they're about people and the behavior of people and sometimes the biases of, of people. So Nick, what I heard your presentation, one of my takeaways, and I just wanna make sure this is a correct takeaway, is that ranchers are overreacting to the risk of wolves. So that's my first question are, are wolves not as bad as ranchers think they are? And if that's the case you have any sense to Yeah. Why ranchers think the way they do about wolves and how do you change that attitude? Well, great, great question. I think if you're an economist and your conclusion is that people on the ground are, are being irrational, then you, you better revise your analysis both theoretical and empirical. I don't know if they're overreacting to wolves, but I-I-I-I-I think they're reacting to two separate things that happen when you have a species that's protected by the law and it preys on your livestock and they're hard to decouple. But I think they're both important and one is the regulatory effect. So if, you know wolves are protected by the law, it means that livestock owners can't take action, lethal action to protect their livestock. So they're really constrained in their choice set. It makes it more expensive to defend their livestock. And I'm sure it's deeply, deeply frustrating to, and, and, and also importantly, like, you know, a lot of places where wolves entered prior to that you had coyotes, you had, you had maybe cougars or mountain lions. You ranchers could lethally protect their animals and you get wolves, they're protected. And it's not just that now you're exposed to the what wolves could do and you can't protect yourself against that. You're also worried about doing what you used to do to coyotes and to other animals because you might incidentally violate the endangered species act. So I think this regulatory effect is unambiguously negative, but there's a second effect that's I think coupled with that, which is an ecological effect. And the ecological effect is, well, wolves can push out other predators like coyotes and the ecological effect could actually be favorable for the ranchers. It could be neutral, it could be negative, it could be in any direction. So you have, you have something that I think is the regulatory effect is unambiguously bad. The ecological effect could go in either, either direction. Okay. Okay. So let me switch over to you. Well, Jamie, for for a second. I was really intrigued at the end by the notion that maybe the solution to the conflict between the commercial and the recreational fishermen is that you set up a quota system and then you let the recreational fishermen, if they want to buy quotas from the commercial fishermen. And I'm just curious, when we've set up catch trading systems, do they normally include both the commercial and the recreational? Yeah, it's, it's a design issue. I think Scott and Buddy were really creative. Scott looked at every legal aspect of this. Am I, am I crossing the lines? One of the reasons why he has to offer what they call catch share adventures for free. And then the people, you know, get the condition, you'll, you'll buy some, some of the fish that you caught back from, from buddy's market and he gets the rest of it. And so it, you know, it sets a price for it, but it's not, we're not selling one service and a bait and switch. I think that can be institutionalized. I think halibut would be a, a great target for that. I think, you know, to some, to some extent rockfish would be, but it's a natural where you have, you know, millions and millions of, of recreational anglers going out in, in the Gulf. And the challenge there isn't whether you'll catch fish as a recreational angler in the ocean. You'll catch it too quick. So you'll go out with your, your kid and you're like, oh, go ahead and, and you'll, you'll catch your limit in the first 20 minutes. Yeah. And then, then why? It's like, well I guess we go in because you, you, it's unethical then to sort of throw, let's see if we can get a bigger one. 'cause you're killing those fish. And and that's the, that's the compliance, that's the transparency side. So, you know, I think they worked within the law, but I don't think it's been really formalized. The head boat, the party boat thing, that was a trial and there's tensions between that recreational business sector and the charter boat sector. Like, like Scott and the individual fishermen, which represent the bulk of recreational fishing alliance, the lobbyists that focus on the boats, the hotels and so forth for individual fishermen going outta their private slips. Yeah. If you had a system where the recreational fishermen could buy quota from the commercial fishermen, would they just buy out the entire commercial Fisher? It's a good question. I've, I've, I've brought that to commercial fishermen. They're like, it'd be interesting because they like bragging the, you know, there's still obviously tensions at the federal level between the two industries. The, the Seafood Harvesters of America and Recreational Fishing Alliance are both lobbying the government to make sure that their shares are recognized and protected. And recreational fishing, it's like ahs no, no question. We're, we're totally dominating and it's, and the commercial guys are like, put your money away, your mouth is, if you really think that you can get more value out of the fish than we can selling it up through the value chain, be my guest. And so it's, it's kind of a gauntlet down. It's, it's a little, yeah. Like I think the equivalent would be if, you know, and I proposed this at one point as a hypothetical, you auctioned off wolf permits to the hunters or to the Hollywood celebrity that didn't want to hunt, but just wanted to keep that wolf out there. That's a pure market solution, but it, it changes the dynamics. Yeah. And again, thinking about both of these stories as stories about people and norms, how do you change the behavior of recreational fishermen? Right? And, and it strikes me, I think all of us are are, are fly fishermen, right? And there the norms are totally different than when you go out on a head boat on your own boat in the, in the ocean. So how do you get these guys to behave more sustainably? It's, it's with with difficulty is the question, but you, you think of like a river runs through it. Everybody's seen the Brad Pitt movie and Yeah, yeah. And the wonderful evocative, you know, storytelling that begins with that famous line in my family, there was no clear line between fly fishing and meat production. No, hey, that's not the line. It was fly fishing and religion, right? But it actually was meat production. They would go out and they would catch every single fish that they could. And the bigger fish wasn't just for bragging rights, it was meat. And that was the source that we were talking about in the beginning there. And you know, that took until the sixties or seventies when they start to see, you know, the overfished rivers and lakes. We need to do something about that. And some, you know, leading lights early before, you know, trout unlimited that were saying we need fair chase, we need c crimped hooks and we need to recognize that that fish is too valuable to be caught just once. And you're starting to see some of that shifting offshore for the recreational anglers, as I said, you get a fish and you go like, oh, I want a bigger wine, throw it over, it's dead because of the bar trauma. I'll wonk out for a sec. They, you know, they, they can't take going from the depths to the surface. But there are ways to mitigate that of puncturing, you know, their, their swim bladder coming out their mouth, lowering them back down so that they're like, okay and, and not becoming just chum for, for sharks or other fish and fishermen are doing that and they're doing that for the biggest fish the most after they get their glory shot. They wanna make sure that that fish goes back down to create more and more baby fish. The bigger the mama fish, the, they call 'em fat old fertile or feca female fish the BS and they, you know, they want those to reproduce. And that's a whole different way of thinking about the fishing experience than let's get one for the cooler. Let's get one for the, for the wall at, at the lodge and let, let's get one for the grill or something like that to say like, I've had my shot, I've got my ego now let's put it back. Okay. I wanna make sure we get to questions from the audience and we only have a few minutes left. So a question right here and yeah, Thanks. First of all, landscape of fear should be like a metal band so you can trademark that. Nick, do you feel like, obviously hunting is near and dear to my business and my personal life. There is like religious lines drawn over the idea of market hunting because of what the country experienced, whatever, 150 years ago. And thank god the mandates happened and like you said, it was kind of like a way to turn something off and try to save it. However, to your point, there's more deer than there almost ever has been. All, you know, all of this happening, but we've been ingrained with North American wildlife model and market hunting is bad and it almost killed everything. But then you can look to fishing and some of these other like lionfish and you know, invasives. Do you think there is an opportunity to change culture within hunting to say like, guys, this is, we can easily do this. I don't know. Do you think it's possible? 'cause it, it's, it seems implausible right now. I don't know. I mean I I think the, you know, you have a lot more stakeholders for the game agencies than you did in the thirties, forties, fifties, sixties, seventies. And with a shrinking number of recreational hunters, you know, I think you're gonna have a more concentrated interest. And I could see that concentrated interest sort of banding together and saying, you know, to preserve some of the things that we really do love and enjoy, we have to make some concessions. I'm not sure there's a ton of conflict and you might know better than I do, between what would be targeted for commercial venison production and what's targeted for recreational hunting. You know, they're, they're different animals. It's probably a different management process if you're just calling for meat, which, you know, there is, there is seems to be big demand and you saw what's happening to the CPI for beef. So that that's, that's been growing. So I I think there might be less conflict. And you think, and there's lots of examples abroad where this happens. I mean, we, we import venison from New Zealand and it costs more New Zealand. Yeah, that's right. It costs more per pound than, than than cattle, you know, and, and people are buying it. So, so I think, I think there's a lot of forces that can change things. Other questions, Robert? Here. Check, check. There we go. Love the studies on the wolves. And I can empathize with the ranchers family house love beavers. There's some learned experience from North American history and wouldn't let my folks shoot 'em. And then it cut down one of my favorite trees and I really wanted to shoot that beaver. So I, I can empathize there. I'd be curious from a design perspective if the, if the problem and the challenge is really on the vehicle collisions, like starting to see a couple of different places do wildlife overpasses for species that are not back up to their 1700 populations, especially those in the wwe, the wildland urban interface. That's a, it's a big challenge. And, and what's been successful about those just from oil and gas in Canada is when they install a pipeline and they have to do a bunch of cuts and such and it creates sight lines. And so the various wildlife don't like to be in those sight lines because that opens them up to predators from wolves. So it definitely changes that behavior. Curious if there's papers that you're seeing, if that's a policy you'd advocate for. 'cause I feel like there's been sort of a lack of consideration given to how people versus nature, whether nature goes first, people comes first, kind of where that sits and Yeah. And then another policy consideration would be Africa, giant predators, basically breeding very large dogs. They've had some success selling those dogs to folks raising various forms of wildlife to protect them. But they, they didn't know that that was an option. And so that created a similar product where you could purchase a dog that would protect your livestock. Yeah. From competitors. Very, very big dogs. Yeah. Yeah, yeah, yeah. I've seen them. So just quickly on the, on the beaver point, I mean I've, I've been interested in globally the reintroduction of not just predators, but lots of species and it's happening all over, all over the world. It's just, I think, you know, fascinating. You're taking something that's been out of an ecosystem for a long time. You're putting it in what's gonna happen. And I, I think this sort of regulatory ecological effect that contrast is general and it need not apply to predators. It could be something like a beaver where if a beaver's reintroduced and you, you know, you can't trap the beaver, you can't shoot the beaver and you wanna manage your land in a certain way that has a negative effect. But ecologically the beaver could be favorable or unfavorable. And so it just seems always bundled as providing me a new way to think about like endangered species regulations with respect to overpasses. I mean, what surprised us is that a lot of engineering solutions to deer vehicle collus collisions have proved either pretty une ineffective or very like site specific and really costly. So overpasses can be really costly, you know, clearing spaces in a particular hotspot can work in that hotspot. But predators seem to work in a more general, you know, in a more general geographic area. Dogs are a very important non-lethal method for protecting livestock. They're used a lot in France. Yeah. So thanks. Okay, well the worst thing you can do as a moderator is to go significantly over the allotted time. So I have to bring this to a conclusion, even though I would love to have it continue. But if you can join me in thanking Nick and Jamie for a fantastic panel.

- Thank you for coming back in. So for the last session, we have the, the topic that I always hated to have when I was lecture, when I've been lecturing more on, on the book I mentioned earlier, free market environmentalism. 'cause I would think, okay, so I've talked about water or land first. That one's really easy. Got property rights, you know, no problem. Water, well not bad. In the west we have the prior appropriation doctrine and so on. And then you got the fisheries. And I could rely on Jamie to give me lots of examples there. And then I would try to end it and somebody would say, whoa, whoa, whoa, wait about climate, what about climate change? Oh, well, I'd usually say that's too hard and it's a real world problem and we economists don't deal with those. But as, as I've continued working on it, I do think there are market markets that affect cl how we respond to climate change. And that's what this session is all about, how we adapt. I wrote a piece on the first adapters. People who crossed the land bridge from Asia to the North American continent were adapting. They were adapting in that case because now there was a way to walk across and it's, it's hard to imagine what they mu must have encountered on the other side in terms of, of the megafauna, truly mega. And, and how they, what, what do you do when you've got this huge animal in front of you? How do you, how do you treat it compared to whatever you had on the other side? But, but we, human beings are really good at one thing and that is at adapting. So the, the problem with the last session of the day is, well the good part is we saved the, the hard till the last. So you'll be tired. But the bad part is, the hard part is, you know, you want to keep the audience awake. And we have two people who are more likely to put you to sleep than, no, I mean, nah, not true. You want some energy in the last session, we got it. These two speakers are maybe the most energetic of any I've ever encountered. Steve Coonan, and maybe you didn't hear his questions earlier, but he gets a little excited and he said he, he restrained himself from jumping up on the chair, no surprise there. And Matt Kahan, he doesn't have to jump up. He's tall and he's got a good voice. Voice that carries without Mike's, I think they'll keep you awake. Neither of them have presentations they told me. And so I'm a little, I'm actually not worried whether they have something to say. I've been with both of 'em enough times to know that there will be plenty for them to say, even if you don't ask any questions. So with that, I'm going to at least force them to make a few comments before I turn it over to the audience. As I said, I'm not too worried about either of these guys having some comments, even if they don't have a PowerPoint presentation. So with that, let me just take it down the row here. I'll turn it over to Steve Koonin. He's just a wonderful guy. I throw his name out all the time at the two Bassett Brewery in white Sulfur Springs, Montana, because the brewer there just loves work that Steve Coonin writes about. And I bet there aren't too many people in, in breweries around the United States that would know Steve Coonin, but, but bury at the two Bassett certainly does. And I told Steve last night, I'd like to get him up to Montana. We could muster a big audience at Bassett Brewery. So Steve, Sounds good. Look, the question before us is how do we deal with the circumstance that human influences on the climate are growing predominantly due to carbon dioxide accumulating in the atmosphere and that predominantly due to the burning of fossil fuels. There are, in my taxonomy three ways of dealing with that circumstance. One is obviously mitigation, not migration, although I think you started with that across the land bridge mitigation, which is jargon for reducing emissions. The second is adaptation, which we will talk about. And the third is geoengineering, which I really don't want to talk about this afternoon. I Thought you were the scientist here. Well, yes. How many time do we have? Okay, Sorry. Okay, let me talk about mitigation first, which has been an effort ongoing for probably 20 some odd years to reduce greenhouse gas emissions globally. And I would assert that it has been an abysmal failure. Greenhouse gas or carbon dioxide, let's just focus on that, which is the main greenhouse gas of concern. Carbon dioxide emissions keep going up. There are, they are globally at an all time high fossil fuel consumption for coal and oil is at an all time high. Gas is very close to being at an all time high as well. Fossil fuels still provide 83% of the globe's primary energy. That is not because of the evil fossil fuel companies. It's because in fact that coal, oil and gas are pretty damn good reliable sources of energy that the world increasingly needs both for economic development of most of the planet and also to power the data centers that we talked about among other things. So fossil fuels are gonna be with us for quite a while. How effective have we been? I quoted a paper, it turns out I looked it up, it's in nature in August of 24 that looked at 1500 different policies across 40 countries for 25 years and found 4% of them had a detectable impact on emissions amounting to a total of about two gigatons of CO2 a year. Alright? No, not a year total, right? So it's turning out to be really hard to reduce global emissions. What we've gotten for that effort, having spent several tens of trillions of dollars is a lot of disruption dependence upon China in the supply chains, increasing instability and unreliability in our electrical grid, the de-industrialization of the UK, Germany. And increasingly the US as energy has gotten more and more expensive and the scaring the bejesus out of a generation of young people who think that the climate is broken and all sorts of catastrophe is impending. Lemme just say a few words about what we know about the climate right now and then I'll turn it over to, to Matt. It's really hard to find evidence that the climate is already broken. There are few extreme weather events or types of extreme weather events for which we can see long term trend associated with human influences. Yes, it's getting warmer. Somebody had a picture up. I think of the global temperature. Heat waves are becoming a bit more common, but cold snaps are becoming less common. And in fact there are then fewer deaths overall because more people die from cold than heat, heat, heat. You can't find global trends in hurricanes, tropical cyclones, droughts, floods and so on. People routinely confused weather with climate. Let me just give you one example. Last summer we saw terrible floods in Kerrville, Texas, 20 some odd kids died in, in a summer camp. And many people immediately said, aha, it's climate change. Well you can find, and I have a wonderful graph, which I didn't bring with me, the handwritten observer's record from July of 1900 at Kerrville. And what you see is the month is mostly dry except on July 13th and 14th, he records 14 inches of rain and has a note that says the river rose 33 feet last night. Exactly the same thing happened when human influences were essentially negligible. And so it's very easy for the media politicians, activists to blame every extreme weather event on climate change, when in fact the record of observations, the data say exactly the opposite. Alright, that's probably, well yeah, you wanna say what about projections going forward? Yeah, So a soft, but no, but I wanna set you up with a softball. So our, our optimism about small nuclear reactors of progress there fracking and that, talk to folks about our smooth RCP 4.5 scenario at war. Okay? If you're going to try to project what the climate is going to do going forward, you need two things. You need some assumption about future concentrations of greenhouse gases in the atmosphere and therefore emissions and therefore technology that we would use in the future to get our energy. And then you need a model for how the climate responds to those influences. How warm does it get? How do storms change and so on. There are lots of difficulties in building such models. There are also lots of assumptions that go into making the projections, but nevertheless, there has been some evolution in both of those factors. In terms of the models, we have realized that the current generation of models, the so-called CIP six models, about 40% of them are too sensitive. The modelers themselves just throw out about 40% of them because they are respond too rapid or too greatly to growing greenhouse gases compared to what we observe on the scenario side, the assumptions about future emissions. Very recently, the UN panel has published a set of scenarios to be used for the next UN assessment report that deems the most extreme scenarios that were used previously as implausible. Those two factors together, decreasing model sensitivity, more benign projections about emissions going forward, suggest that future climates will not be anywhere near as dire as what has driven the panic over the last decade or so. And so, folks, this has been a great conference and I, I think the markets versus mandates initiative is so important. And so there's a question of why are we on a flatter emissions path? And I think that that ingenuity and innovation and the fracking space and in the nuclear space, if regulation allows this is gonna continue to flatten the curve. And I continue to teach young people. I I'm very worried about youth pessimism and of how it plays into their investment over the course of their lives. And so I I, I wanna know the truth of what paths we're on. I'm a very risk averse person. I know that I don't know what Steve knows about climate change, but when I read the New York Times, I get scared, but I also wanna know the truth that I come back to Hoover, Steve. So, so let me give you one other reason to be optimistic. Since 1900, the global temperature has gone up by about 1.3 degrees Celsius, about the same amount of warming is projected over the next century. According to these plausible scenarios. You can ask what happened over the previous warming, the last a hundred years or so. And the answer is, humanity has flourished like never before. Population has gone up by a factor of five. Lifespan has gone from 32 years to 73 years. The literacy rate has gone from 20% to 80%. The GDP per capita has gone up by a factor of seven. And the death rate from extreme weather has gone down by a factor of 50. We have been wonderfully adept at adapting to that 1.3 degree Celsius rise. And there's every reason to expect that we will continue to be able to do so. And it comes back to economic growth. So we had a great Hoover conference last week on monetary po policy and macroeconomics, and we need economic growth to continue to help everyone and friends of Hoover poor people to achieve their living standards going forward. Folks, I wanna make a bunch of small ball points. I'm I'm taking a look at Joe Shapiro in the back of the room. There was a National Bureau of Economic Research conference where a presenter talked about the world in 2300. And Joe presented a great discussion where he said, given where Harvard and MIT now stand in Cambridge, which will flood, oh, tough room. And so I, and and, and so a theme in my work is that climate science expands our imagination about possible futures, turns unknown unknowns into known unknowns. And as Joe alluded with a brilliant point and with a half a joke, as Harvard and MIT are aware of the threat they face, they want to continue to be great institutions that will live forever and they will proactively take steps to adapt to the challenges that they're aware of. So folks, as that's gonna be the theme of my brief remarks. So a a I'm gonna make five points and I'm gonna stop. I'm looking forward to having a drink. I'm a small ball micro economist. I think little thoughts. I was told at the University of Chicago that I didn't have a future in macro and I sub I adapted to what Robert Lucas said to me and I adapted it, switched to Gary Becker and microeconomics folks think of the challenges. So the LA wildfires got close to my house and scared the hell out of us. My wife turned our car around, she packed for herself. She said, I should pack for myself. There's a question of what gambles we take. I wanna make five points thinking about the Los Angeles fires and, and the markets versus mandates thoughts. So folks point number one, I'm very excited about insurers at the, as the adult in the room, so many, the majority of Americans are homeowners and have the majority of their, their wealth in their house. But we're also like Tim Allen and home improvement, were amateurs. And so there's a question going forward, if you face risks to your house, flooding, wildfires, tornadoes, do you have the information to know in real time the risks you're facing? And Steve, maybe we can come back to this. The, there's a question of asymmetries. Would you prefer to, if people currently underestimate risk, do we wanna scare the hell outta people? So to, so they update their beliefs are, are we more concerned that homeowners lose if they overestimate a risk or if they underestimate a risk? I've been part of a field experiment where Redfin, the internet search company informed households using First Street Foundation flood risk scores about the property level risks. And we found that both in red states and blue states, that people respond to this information, it changes their bidding for housing and they become more sophisticated searchers for homes. Now let's flip this around. Suppose hypothetically that Terry owns a home at a flood zone. And suppose he now knows that this is common knowledge. If he wants to sell this property and wants there to, to sell it at a high price, he will have incentives to contact the environmental preneurs in this room. Like Mickey to think about what are cost-effective strategies. And so information, trusted information, Steve, we can come back to trust in climate science if investors if, but I mean investors in real estate, if homeowners and if commercial real estate people deciding where people work, if they do their homework beforehand about flood risk and fire risk, then there's gonna be less buyers' regret and there'll be new opportunities for entrepreneurs like Mickey to help cost help people to achieve their goals. Terry, if I had a tattoo, it would say markets not mandates. Tough room point number two is the big data revolution. I wanna give a plug for a company. I don't have equity in tough room placement tree, which two good friends of mine, Eric Johnson and Anya Samak their company. What they're doing is they are driving cars down streets and taking street images of people's homes. Terry and I discussed at lunch last week how creepy this is. But, but let's talk about the adaptation benefits of this folks. If there's a home that has overgrown vegetation or if there's things on the roof, or even if the homeowner is tidy, like at my house, that there's a motorcycle out in front that was a joke of a placement. Trees, cars can capture these images and provide information to insurers about both the property's wellbeing but also the homeowner in the property. There's very interesting issues about risk. Where does risk come from? When do insurers face less risk from ensuring a property? If insurers can write contracts and aren't limited by regulations from Ricardo, Laura, if insurers can write contracts to encourage more ex-ante investment in technologies like Mickey's wildfire risk adaptation, flood risk investments, and if placement tree and if aerial drones can fly over and that's a property rights issue. If homeowners opt in to allow insurers to monitor them, they will get a discount on their insurance. Santa Claus knows who's Naugh and nice insurers using this technology. If we don't get creeped out by it, can use this to incentivize property owners to raise their game. And if Matthew's a sleepy Homer Simpson who doesn't know about these risks, the insurer can wake me up saying, Matt, you could get a 50% discount if you take these steps. And insurers wouldn't be walking away from insuring properties if they felt that they could earn an expected profit. They could use their big data here thanks to companies like placement rate. Folks. Three more points. I'm in doing research with a friend of mine at UCLA on homeowner associations. Folks, I'm looking at this room. People still seem compass meant this. How many of you are in a homeowner association? Do you spend your days talking about whether homes can be painted pink going forward? If communities we're in a weakest link technology, if Steven mattered neighbors and if Steve is central in the middle of the community and if he under invests in precaution, we get an O-ring weakest link. Sorry Steve. It's okay. It's hypothetical, hypothetical, hypothetical. And so if he doesn't take these precautions, that puts me at risk. Even if Dora and I are Eagle Scouts, a homeowner association in some sense is cosent of lowering transaction costs and allowing neighbors to work together and the insurer can work with the association. And so going forward, we're doing, we're beginning to do a survey of California homeowner associations on what steps they're taking and would they, would they prioritize? Are there a set of incentives that could be offered for them to raise their games? You get into externalities. We had a talk earlier by Jonathan about if we devolve and have regulation at the local level, are there spatial spillovers? So if there's a homeowner association that's next to another area of just single homes, do you have spatial externalities there? But that gets into the excitement of big data, spatial correlations and who's imposing risks on whom. And so Terry, in adapting to climate change, I think there's a fundamental issue of property rights. What are people's rights and responsibilities? And if you have the right to not maintain your home, then someone needs to pay you to buy that, right? If your home and roof poses risk to others. And so I think there's gonna be all sorts of interesting cosent issues. Folks. Two last points. I'm starting a new project. So how many of you have read Andrew Kaplan and Joe Tracy's book Housing Partnerships? Did anyone read that bestseller from 1997? So 30 years ago, One, one book was sold And I bought it. Hey, we are Andrew Kaplan and Joe Tracy and Sue and Chan 30 years ago wrote a book, why are our choices to Rent versus Own? Why can't you own half your House? So what the Housing Equity partnership is about is a new contract. It's no longer debt financing it, Steve could own half my house. And so our project is a nice project about BlackRock and of the role of, of, of private equity in helping homeowners to, to, there would be several benefits. So for young people, they could buy at an earlier age 'cause they'd only need half the down payment. Older people who are house poor, but cash rich, I'm sorry, house rich, but cash poor could sell off a slice of their house while still living there. But on a conference, in a session on adapting to climate change, if Matthew knows that he doesn't know how to adapt to wildfire risk, and if I face liquidity constraints to buy a $25,000 roof, if Steve is my equity partner with Big Data, wall Street, big brains and loaded with capital, he has the right incentives to work with me in our partnership to raise my adaptation iq. So a big chunk of my optimism about our ability to adapt to climate change is unknown. Unknowns are becoming known. Unknowns, we always face it investment under uncertainty problem. But there are entrepreneurs like Mickey designing solutions. I see many bald people in this room. When there's enough people who are bald and don't want to be bald, we get rogan. That same holds for adapting to climate change. If government doesn't bail us out, if we have skin in the game, if we as property owners who have put too much of our money in a single place-based asset, our home, if we're aware of these risks, we have no excuses to not use market forces to protect us. And this actually creates jobs for entrepreneurs and for young people. And so I, Steve, I I'm gonna speak for both of us and I'm gonna, I'm gonna get punched, but I, there's an some optimism on this panel of, of not, we're not naive. Part of why I'm so optimistic about our ability to adapt is we have, we, we've seen the headlines there. There've been some benefits of these headlines, but this unleashes market capitalism to do what friends of Hoover expect. And so just like Milton Friedman's pencil video substitute the word adaptation for pencil and Milton Friedman would've nailed this issue. Lemme stop there. So I want to ask you a question another, you know, I lived in Altadena Los Angeles area for 30 some odd years. I had a house that I sold but did burn in the fires a couple years ago. The question is earthquakes. So earthquakes are a fact of life in Southern California here as well. We have adapted to that. You bought your house, et cetera. Are there any lessons to be learned from Yes. How we adapted? So my Japanese friends have told me that in Japan, the housing stock is less durable. So, so there's two equilibrium you can, so I know engineers have made great progress with respect to, to earthquakes. And this has allowed San Francisco to have bigger buildings. But I wrote a paper, this's gonna put everyone asleep on the optimal durability of capital. And if you expect that there's gonna be horrible shocks, you don't build a 200 year building. And so if we actually had a less durable capital stock, you hold a real option to rebuild. It's been said that Stanford builds temporary buildings 'cause they expect the endowment to keep doubling tough room. And so and so from Dixon and Pen Dyke's work on real options. A one way to adapt is to have a less durable capital stock because you lose less in a shock. It's the paper walls that you see in Japan, et cetera, et cetera. Well, to to the, the point of durability, I've always thought that is I, Monica and I liked to go and look at ghost towns and they were often company towns and the company would build homes for the workers to live in because the workers weren't going to, they weren't gonna just come in and start mining. They had to build a home first. And, and so the companies would build them, but they understand, understood this durability point. They did not build them to last until today. They built them. Yeah, they were pretty good. But they would either rot down or burn down or just fall into the, So Terry, the brilliance of your point is Ed Glazer and Joe Jko have a famous paper in the Journal of Political Economy of durable capital and urban decline that Detroit would not be poor today if the capital stock weren't so durable because as the, as the big three automakers didn't make that many cars anymore, if the housing stock wasn't durable, people would've just moved away. But if there's no jobs and a very durable capital stock, you're asking, you're setting up a setting for poor people to live in an unproductive, risky place. And the the same logic might hold in adapting to climate change, that if certain areas proof to be as dangerous as Greta say they are, if we have a modular capital stock, if we were a bunch of turtles, we would just walk away from that area and take our shells in our houses to higher Ground. So, so let's pick up on an example you cited before. Would Harvard or MIT be underwater? So the current rate of sea level rise globally is about two millimeters a year, which is eight inches a century. 2,303 centuries from now. Puts us at what about two feet? Okay, I I think we can manage that. Now of course some people say it's accelerating and it's gonna go up faster in the future. There's a lot of debate about whether that's going on or not, because the tide gauges which measure the actual height of sea level show no acceleration. Whereas the satellite measurements of sea level show some modest acceleration. And this may explain why Stanford has set up the campus with so much land. These are wetlands that Hoover, so in the George Schultz cube building in the year 2300, it will be on higher ground. Okay, Well you can see why I wasn't too worried about the conversation going on here. Matt, you said we were the optimists here. I'm gonna see if, if this isn't enough to make you a little less optimistic and maybe even pessimistic. The the two markets that, that I always call out as the ones that offer the most hope for having price signals to, to induce us to adapt are the real estate market and the insurance market. And you could add to that just more generally finance markets. But you look at the first two of those, and in the case of insurance markets, we heard earlier in the discussions about resilient housing, for example, what happens when you regulate the insurance rates so that that signal isn't quite what you might want it to be. And and then with respo respect to the, the real estate market, to the monetary conference that Matt and I attended last week, I had never realized the extent to which monetary policy, gosh, we can't have high interest rates. Well guess what that does to people's investment in housing risk aside. And so that market is more distorted than I would've said a week ago. But having listened to that, I thought, well, there's another distortion. So I'm not as optimistic as I would be about adaptation if those markets were were You're right, Reflected more of reality. So Terry, a comment, 'cause this is very important and I I'm looking at John Cochran. So folks, as the federal deficit continues to grow, It won't will it. So Ken Judd and I traded emails that a benefit of a rising deficit is does that create a commitment device that the federal government will bail out fewer areas. President Trump has talked about scaling back fema and I'm a fan of scaling due to the moral hazard effect. I think states should be handling their own disaster budgets. So Terry, I'm always, I need optimism in my life. But Two points e what leads to political reform? Is it the case that as the deficit grows, the federal government will eventually have to tighten MTS belt and decentralize costs back to localities? Milton Friedman emphasized the importance of not spending other people's money. And that when you are at a restaurant or when you are deciding re it, when a locality has to pay its own bills, it makes more prudent decisions. And so what do you think of that? That, and so I, so I'm not claiming that deficits are good, but I think that the thought leaders at Hoover and Friends of Hoover need to be thinking about when does political reform occur. Ram Emanuel said, don't waste a crisis. So there's interesting links between macro and land use patterns. Do, do subsidies. John talks about money heading into rat holes. When would Gavin Newsom cut off high-speed rail? He do it when the federal government isn't subsidizing that rail. Well, you're not likely to get me to be optimistic on that front. And and this is the point at which I say, well, there are some advantages to being old that problem isn't likely to, to ha to really come to fruition until I'm gone. But So isn't that the, the real question? I mean, how far outta whack do you get the further outta whack you get before you reform the more traumatic it's you think like An Economist? No, but I don't You think like A Physicist. I meant that as a compliment. Thank you. You know, it's another thing. Just one more thing about adaptation. Again, naively adaptation can be proportional. Things change it, you adapt a little bit, things change more, you adapt a little bit more. Whereas mitigation, it's kind of all or nothing. You gotta really cut it down a lot in order to have an impact on the Yeah, No, that, that's a, I think the margins are important. That's the way life is, at least through these economist classes. I want to take you to a, an experience this summer that, that sort of shook my foundation in rationality and, and responses to these kinds of markets. Monica and I, when we bought our house in, in Bozeman, Montana, we were, we bordered the Forest Service rock out our back fence and you're on forest service lands. And I looked up, my God, this is just waiting to burn and if it burns, it's not gonna quite know where that fence is. Well, the Forest Service has recently done a fair bit of heaven forbid, logging in the area behind us, which was good. But even before that, Monica and I looked at the property we had and thought, well, maybe we could build a buffer somewhat of a buffer. We took 200 tons off of probably 16 acres of land. Some of those logs were so big there were no mills nearby that could deal with them because they had only been dealing with small dimension lumber. And so, so our property looked pretty good. You can, you can even see where it is driving up a street that, that faces our property. And we were kind of, I think, proud of the fact that we did that. And, and it wasn't that we had big data. It wasn't that the insurance company called us and said, you know, if you take 200 tons of logs off, we'll do this to your insurance rate. We just kinda like, geez, that looks like a lot of forest up there to burn and if we cut some of it down, it might really help. And then one, a young guy who worked for us said, you know, but you didn't get enough of the brush gone. And I said, oh, you're right. And I called a guy with a thing called a bush hog and he came up and this is a pretty steep slope and he drives across there with this machine that just chewed all the underbrush and so on. And again, we had to pay him, but you know, wasn't, wasn't half the value of the house. So we did all that. And I I, I thought to your point about the homeowners association, geez, maybe the rest of the people should have been contributing. What again, what wasn't that costly? We just told Mo and Curly the two loggers that they could have the trees and sell 'em for whatever they wanted. So it didn't cost us much to take those trees, but nobody ca called us and said, geez, can we ante in and help in any way? So, so we did it on our own, but I think we created a bit of a public good. Now, fast forward, that was 20 some years ago, fast forward and this summer I go down through the houses all below us, which are now acres, a long distance from the land that we managed, if you will, and, and not a lot of trees in between them because those trees were cut when the people built their houses. And it's, it's flatter terrain, easier to take care of in that regard. And I, I drive through and everybody down there is clearing tree limbs and, and cutting some brush down and, and I said, what's going on here? What, how did you guys see the light? Oh, well we have a government grant. Ah, and so all I could think of was, you know, it, it actually, I think it made the houses look nicer. So the housing value may, if you did a hedonic pricing study, you might show that the values went up. But I don't think it's because they were any more fire resistant. I think it was because they looked better. But we subsidized all of that on the, on the grounds that this would, would reduce the fire risk. I think the risk of fire in those places was nil. And yet, so this goes back a bit, I think Matt, to your point about what's the optimal longevity of, of, of any, any changes you make. And this is a case where I think they have way overdone whatever fire mitigation they, they might have thought about and they did it because it was free to them. They told me it was free. I gave 'em my lecture on somebody's paying for this. But The lesson is you should have waited Terry a couple Weeks. That's right. Subsidy. But, but I guess Monica and I were worried enough about the possibility of fires. So to put this in the form of a question, it's, is it that, that the people who did this were just responding to their price zero? Or was there a certain almost I, I mean I wouldn't, I I wouldn't have taken the money, of course. That's partly outta principle, I suppose. But, but I I, I was far less likely to take the grant money and do that in part because a lot of what they did, I wouldn't want done, even if you said it helped on the fire risk side because they were cutting down bushes that I thought looked pretty nice in some cases. So do people haven't, I almost can't spit this word out, but do people become somewhat irrational because of these, the kind of crises that, that we're, we're told we need to worry about? Overreact, I think is a more polite, so That would've been easier for me to spit out. But, but coming back to Thomas soul, this sounds like a trade off that if there's a couple who love their beautiful vegetation of, might take on a little more fire risk of, of versus living in this Mars landscape. Everything in moderation, including wine at the reception Is, is there an analogy here between vaccinations for contagious diseases you don't clear you are endangering others? Yeah, I I had not thought of it in that context, but it seems to me there's a clear analogy there that, But a but the beauty of urban economics is if you know it's an unvaccinated community, you are free to choose to move there. Oh yeah. So, so if you know that your neighbors have made these choices, you are free to choose to move away. So Steve, maybe migration should have been in the title, right? What do you think of that man? Yes. No, well, I I think that that is actually an, an, I thought the same thing when, when, when I looked down and said it does say migration, but I Intelligent design. Yeah. Well we, we have a conference coming up next week as well. Nick Parker's organized, that's Oh yeah. Focuses much more on adaptation entirely. But one of the papers that I was asked to discuss totally misses the, the role that markets play in migration here. And so if, if, if I'm going to adapt because I think I can't grow grapes where I did before, where do I to, where do I migrate? Do I migrate to someplace like Montana? Which if it, all these predictions are right, might be a great producing area, but, but if, if I migrate there and I don't get a subsidized insurance rate, well maybe I don't wanna migrate there. So I, it seems to me migration is a, a real part of this. It certainly is, is reflected in housing prices near, near coastal flooding areas. So migration in a much more general way, it seems to me is, is really, and It's what we do. I mean, you know, I I don't live where I was born. My grandparents came from some of the continent, et cetera. It's a very human thing to my Yeah, yeah. Well as I said, I said the crossing the land bridge Is One that is pretty, pretty vivid. And are there questions? Let's see what we have out here. Oh heavens, there we go. Steve Hayward, take it away. Oh, that Guy. Yeah. Okay, Got you. Right here. Yeah, don't run. Yeah, I, a question for both of you. I'm, and I want to sort of, I generally share your optimism matthew com but I want to press it a little bit. It's always struck me that we weren't gonna get more sensible climate policy until the problem changed from being an apocalyptic problem to a normal problem. In other words, it became more like conventional air pollution or labor policy or healthcare edu you name a problem, they're always a red hot mess, but they're at least normal and recognizable. And so with the, the dropping of RCPA 0.5 looks like, ah, an important step in the mainstream toward this becoming a more normal problem. So maybe you saw this New York Times op-ed a couple days ago, the headline was, Democrats don't have to campaign on climate change anymore. And you're seeing a lot of this, right? You know, the, the abundance folks saying, gosh, we've been overdoing it on energy suppression. By the way, I dunno if you saw this article, but it turned out that the reason this author didn't want democrats to talk about climate change was it's an obstacle to getting socialism, which is what we really want. And so that is what provokes my question, which is right now we see some signs, but do you really think that things have changed that is now becoming a normal problem? Or is the residual malt tism the almost religious desire for the apocalypse? I mean, I, you know, I've had this experience for 30 years now. You, you tell an environmentalist that actually there's good news, things are improving. They get really angry because apocalyptic threats make them happy for perverse reasons. Right? And that's a very powerful social political current. So go Ahead. I'm pressing you beyond your optimism for reasons I completely share to say this seems irrepressible and I think that, you know, the, the me Oh, so the big, the two biggest hindrances last point, sorry to sensible environmental policy are environmentalists and the news media who both reinforce each other's worst tendencies. So Let me, if I can't just interject be it was directed to you. So I'll let you answer Steve's question, but I, I think I, I contacted you, Steve, about were people, are people getting a little more sanguine about the future regarding climate change? And I, I I, I watched the papers in Montana this summer when we are facing one of the biggest droughts in a long, long time in my memory, at least with very little mountain snow pack. And the predictions are, we're gonna have bad fires. I just kept expecting them look at the paper and see climate change is happening there. I could not find a single article searching hard that talked about this being due to climate change, which I thought was rather shocking. And I guess is sort of the opposite of what you're suggesting, Steve, that it seemed to me that people aren't just taking a one year occurrence and extrapolating from low snowfall in one year at certain elevations and saying, aha, climate change, we knew it. They weren't So take, take that Excuse. So I, the political process is above my pay grade. I'm always focused on the entry of young people, what problems they're working on and what venture capital is flowing in to entrepreneurship in a Julian Simon sense, if we have enough ingenuity working on a question, we're gonna solve it. I am, I agree with every word you said, but I'm not looking for Senator Whitehouse from Rhode Island to design the perfect legislation to save Us. But he might not get reelected. I, you know, I, I'm a great fan of Anthony Downs' issue attention cycle. And I think that's what we're seeing now. Phase one, right? Experts realize there's a problem. Phase two, public recognition and great enthusiasm for solving it. Phase three, realizing this is gonna cost a lot of money and be very disruptive. And then there's a down slope. So that's what we're seeing. It's being taken over by either microplastics or AI or both as the threat du jour. Yeah. And now say the cycle for environmental issues would be longer. Yes. Yes. Yeah. John Cochran, I, I I have three comments, one of which is actually a question. First climate policy, there's three parts. What's gonna happen to the weather climate is the probability distribution of the weather. Second, what's the economic damage of it? And third, what policies might pass cost benefit tests to do something about that. As an economist, I I look at the, yes, it's uncertain what's gonna happen to the weather, way more uncertain what the damages are. And I can report that the economic study of the climate damage has more skullduggery in its empirical work than I have ever seen. You need to know one fact, it's cold in Maine, it's hot in Texas, and there's hurricanes in Florida and business is moving from Maine to Texas and Florida. This is an order of magnitude greater than climate change. And it's carefully avoided in all empirical studies. It's very hard to see a huge economic damage even though Maine's prettier than Texas and Florida Second adaptation. And here's where the actual question is. It is said that we need adaptation policy. And I'm dubious, isn't it good enough to adapt when it occurs? It strikes me we're we're, we're vulnerable to a fallacy of time compression. That a hundred years we think is all gonna happen in a week. Migration, hordes will migrate. Yeah, we got a hundred years, 70% of us lived on the farm in 1900. The entire country got populated by migrants in, in a hundred years here in San Francisco, they're already spending huge amounts of money to fortify the Bay area, the the bay against climate, against sea level rise, which as Steve mentioned, the units are two millimeters a year. They're act as if it's feet per year. Again, we're, we're, we're people say we need to rebuild the sewer system 'cause the climate, the sewer systems are gonna decay indeed rebuilding anyway. Well, it strikes me as an un uninformed person on adaptation that simply letting people adapt as the time comes is good enough. And in fact, I think what Matt was bringing out, that policy efforts are likely to be counterproductive as they are in, in the Bay. We're wasting money on sea level defenses that are gonna all crumble before the sea level actually rises. And we tend to subsidize people to live in places they shouldn't live. The number one adaptation we should have done is let, let New Orleans sink and leave know we're paying people to, to be there. So the question part of that is do we need an adaptation policy or would it not be better simply to say, yeah, we'll adapt when that time comes. And the last comment on the pessimism thing, which I think is very important, i I just, I just wanna echo some optimism that it does seem like climate catastrophism is slowly fading and sanity is breaking out and it's becoming slowly just another technical problem as ozone was. And, and that will be very healthy for climate policy. But don't worry, the, the merchants of of of catastrophe are still with us. Remember, population growth was going to, we're all gonna starve and then we were gonna all run out of resources. And then nuclear waste was going to lead to, was going to poison the planet and GMO foods were gonna franken, foods were gonna kill us. All. Climate of course turned from global warming to climate change, to climate, climate crisis to climate catastrophe, to, oh, well I think we actually need some industry around here. And now of course AI is gonna take all the jobs we need, universal basic income and socialism, they, they're moving on, which is kinda sad for our young people who are now told, you know, don't have kids because of ai, but at least climate perhaps can come back to somewhat sane policy issue. Neither of you go ahead. Yes. You know, adaptation has got a lot to recommend it. I talked about proportionality, it's also agnostic. It doesn't matter why the climate's changing, you adapt, but it's also autonomous. It's what we do. I mean, Terry started with that example. I don't think you need policy. You might need a little bit of a light hand in the following sense. If you are gonna raise sea walls, for example, you have to decide how much am I gonna raise 'em, right? And so, you know, the principle I think is at least prepare for the past and we don't do that. So a little bit of a light hand, but some general principles probably warranted. Nick had a question up here and perhaps the last question. Okay. So Steve, to your opening statements, and again, it's probably one of the lower IQ people in the room, non-academic, you talk about, you know, CO2 and then you look at the last a hundred years and you know, by all, by all means a lot of growth. Maybe I'll ask a heretical question and say like, principal's basis, why is CO2 bad for, you know, is is it, is it a bad thing? It seems like it's a building block of life. Yeah. So I mean, CO2 has been demonized over the last 30 or 40 years. It is plant food, you know, in, in a hot house or a greenhouse. We raise the concentration of CO2 to three times what it is in the air right now. Well, maybe it's a little higher in the room because we're all breathing, but, but no, the, the reason that people think it is detrimental is that it increases the heat trapping ability of the atmosphere just a little bit. It, it's like a one half a percent effect, but that's in principle to raise the temperature by one or two degrees, depending upon the details of the climate system. So why that's bad? I keep asking, you know, alarmist, what are you really worried about? And while you get the sea level rises, John said, a, a foot in a decade or something like that, right? Or you get more storms of which we see no evidence, et cetera, et cetera. So it is, it is a sciencey thing that has been exaggerated by the politicians, the media and the NGOs to great detriment in society. And I hope someday there's gonna be accountability for the people who said things that they knew were wrong. So it's a hoax. No, it's been grossly exaggerated. How grossly factor a 10? So the question was, is it a hoax? And then how, how exaggerated, in case you couldn't hear it, I apologize for, you know, putting you guys to sleep. But these two wallflowers are always the way they are and they're uncontrollable that way. So join me in thanking them for indeed keeping us alert as we prepared for drinking wine. Good. Do I see Nick Parker out there? It says closing comments. You, oh, I have to make a closing comments. Let's see, I'll, I'll this, I will not be Matt Kahan or or Steve Coonan by any means. I'll simply say thank you all for coming. Thank you for sticking with us this late in the afternoon. And most of all, I hope you gathered as this last panel suggested, gained a little optimism about the future. Started out saying, as Tom Sol says, it's not about solutions. There are always tradeoffs. And I think why I'm optimistic is, is human beings are truly good at making trade-offs. You don't even have to be an economist who learns marginal benefits, marginal costs, but you watch how people behave and, and they, they are good at looking at the information before them and taking actions accordingly. The question of markets or mandates is one of do we have mandates that distort the information or improve it? And do people get accurate reflections through the marketplace with prices? Obviously I wouldn't be here at the Hoover Institution if I didn't have a lot of faith in markets, but I also don't discount the role that mandates need to play. The question is back to how we started is trade-offs. How do we trade off the good things that can come from mandates against the things that aren't quite so good and the same with respect to markets. So I hope you will just continue to, to ask that question. That's what Tom Sowell would ask us to do. Ask the question, what are the trade-offs and how are they made? And we welcome any, any time you want to contact people like these speakers, myself or any of the others, let us know. We can get you the information to make those contacts and stick with the way we, the way we've talked about it today. I hope. And stay optimistic. There's lots of reason to be that way. Thank you very much. And now to the wine.