California vs Trump In The Battle For Clean Air | Ep234: Liane Randolph

BW

California is under a lot of pressure now to lose that special status it's always had to go ahead of federal regulations. Can you tell us what's been going on in recent months and how much pressure is California under? 

LR

So, as I mentioned before, every rule California adopts has to go to the EPA, and there have been arguments in the past, you know, there were past administrations that did not approve waivers, but the Trump administration has just been a whole new ball game.

BW  

This one more so than the last one? 

LR  

This one, I would say, is more effective at it. 

BW    

It's a really good example of where, if the US leans in, the world starts to take things more seriously, and if the US decides to do the exact opposite and smash things, then it's very effective at that too.

LR

Smash things. That's perfect. I mean, that is this administration. If you think about this administration and climate, they are just running around smashing things.

BW   

Hello, I'm Bryony Worthington, and this is Cleaning Up. My guest this week is Liane Randolph, who has just stepped down as chair of the California Air Resources Board, or CARB, having been appointed in 2020 by Governor Gavin Newsom, and also after serving on the Public Utilities Commission (PUC) for six years. California has a legally binding target to reach net zero by 2045 and during her time on both the PUC and CARB, significant policies were introduced to reach that goal. However, at a national level, the US has now done an abrupt about face on climate and is busy tearing things down. So I wanted to ask Liane about how this is impacting ambitions in California. I also wanted to find out a bit more about the ambitious transport electrification mandates that the state has used to kickstart mass production of EVs and the implementation of California's whole economy cap and trade system, both of which CARB oversees. And, as questions about the cost of living and affordability loom large, I wanted to explore whether she believed a pragmatic reset might be needed to secure political will for climate ambition in the future. Please join me in welcoming Liane Randolph to Cleaning Up. 

BW  

Liane, thank you so much for joining me here today. It's a delight to have you on the show. I wondered if we could kick things off, as we always do, by asking you to introduce yourself and your own words, please.

LR   

Sure, my name is Liane Randolph. I am a lawyer by trade, and I have spent the last 14 years in California State Government. The last five years I led the California Air Resources Board. The previous six years I was a commissioner on the California Public Utilities Commission, and prior to that, I was General Counsel and Deputy Secretary for the California Natural Resources Agency, which is the agency that oversees all of the state agencies that manage our resources, including CAL FIRE, including the Department of Conservation, which manages oil drilling in the state, state parks, Coastal Commission, several other agencies.

BW   

Wow, that's a really long career in public service. So thank you for that. And tell us a little bit about when you kind of realized the environment was something you cared about. So you trained as a lawyer, what led you to the environment?

LR    

So I did train as a lawyer, and in law school I took environmental law classes, administrative law classes. I was always very interested in government. Both of my parents were public servants. My dad was in the military. My mom was a public school teacher. I started working in corporate litigation, and realized very quickly that that was not for me, and I went up to Sacramento and actually started working in political law, which is the law that regulates campaign contributions and lobbying and conflict of interest disclosure. And then I ended up moving to the Bay Area because my husband got a job there, and I worked at a small firm that represents local governments, which turned out to be the most amazing career for me, because basically what the firm did is it represented small cities that were too small to have their own city attorney. So we would serve as city attorney for these communities, and we got to do land use. We got to do contracts. We got to do police and fire, personnel issues. It was fascinating, and I really liked the variety and the pace. That's where I really started working on those kinds of key environmental issues. And then I was appointed to chair the Fair Political Practices Commission by Governor Gray Davis, and it was the beginning of his second term. And for those of your listeners who don't know, approximately two or three months after I started as chair of the Fair Political Practices Commission, a recall election qualified on the ballot, and the governor was recalled and replaced by Arnold Schwarzenegger.

BW   

And what was the reason for the trigger for the recall? Was there some scandal, or was it just…

LR   

There were two key issues. The first is, there was an energy crisis in California that was the result of a fundamental restructuring of the energy, regulatory, retail market

BW   

That's around the time of Enron?

LR   

This was Enron, that’s right, and a lot of people unfairly, I think, placed the responsibility for that on Governor Davis. And the second issue was there was also a vehicle license fee increase that was passed in the first Davis administration. So when Governor Schwarzenegger ran his campaign, he ran the campaign very aggressively against the vehicle license fee. And that was a very cautionary tale, because it was classic ‘He raised your taxes, you need to kick him out of office.’

BW  

Yeah, and he failed to regulate markets.

LR

Right. So, because the chair of the FPPC cannot be removed, because it's supposed to be a non-political position, I just finished serving out the term, even though there was a completely different administration, a completely different governor. 

BW   

So you've got this passion for the environment, you've been exposed to all sorts of different types of law. And then you start at the Public Utilities Commission. And for our listeners, I mean, this is the regulator. It regulates almost everything. Like in the UK, for example, we'll have a regulator of the electricity markets Ofgem, and we'll have a water regulator Ofwat, communications regulator. You know, it's all separate, but the Public Utilities Commission is a huge regulator, right?

LR   

Yeah, it has a huge portfolio. So it is responsible for investor owned utilities, and so that includes electric utilities. It includes gas utilities, and it includes water utilities. Now there are many water utilities in the state that are public utilities, and so the PUC does not regulate those, but it does regulate those private water utilities and it regulates, Pacific Gas and Electric, San Diego Gas and Electric, Southern California gas, which is most of the gas customers in Southern California. So it has a very wide… And of course, Southern California Edison, which is the large electric utility in Southern California. It also regulates transportation network companies, so that includes Uber and Lyft. It regulates what are called charter party carriers, which are limo companies. So they've just had this really kind of very broad portfolio. They do not regulate publicly owned energy utilities. So for instance, the Los Angeles Department of Water and Power is not, the Sacramento Municipal Utility District is not regulated, right? So that's just the biggest example.

BW   

So we'll come on to talk about energy in a bit more detail. But so you leave there, and then you join the California Air Resources Board and become the board chair. And just for our listeners, again, CARB, as they're known, they inform or are the implementing body of Cal EPA (the Environmental Protection Agency), and you look after some specific policies that are about air quality and climate right? Do you want to tell us a little bit about their oversight? 

LR

Yes. So the Air Resources Board has responsibility for mobile sources of air pollution in California, for air toxics in California, which can be emitted by either mobile or stationary sources. Other types of stationary sources are regulated by local air districts. By air district I mean local stationary sources that have to get what are called Title Five permits to be able to do things that potentially emit pollutants under the Clean Air Act. Those are the local. But CARB does, because we have air toxics authority, sometimes there's some overlap there. And then when the first significant climate law in California was passed in, we were also given responsibility under AB32 to implement the state's climate programs. And so that includes doing what we call a scoping plan every five years to figure out our overall strategy for meeting our climate goals. And it also includes authority to run specific programs to achieve our climate goals, including what is now called the cap and invest program, including the low carbon fuel standard. We also implement quite a bit of incentive programs that spend either cap and invest funds or other types of funds that the legislature allocates to us to further those goals.

BW   

And just to put this in context, California has a legally binding target to get to carbon neutrality, or net zero by 2045 which is, I think, after Finland, probably the most ambitious target there is globally. Certainly five years ahead of the UK's target. And so that is written into a bill, it's the legislative target. And you also have a 2030 target, don't you? 

LR

Yeah, as part of that, yeah, 40% below 1990 levels by 2030.

BW

So it's 40% below 1990 by 2030, and how are things going at the moment? Is California on track?

LR   

You know, I get that question a lot, and we have met all of our targets up until this time. We started with an initial target in 2020 which we blew through six years early.

BW   

Oh, so blew through, as in over achieved. 

LR  

Yeah, we overachieved. And now there is a scenario under which we would be able to meet the 2030 target. However, that really depends on implementation, and given a lot of what's happening at the federal level, the implementation of that is definitely at risk. We have done really well in the energy sector. We've achieved a lot of reductions in the energy sector as a result of early policy decisions and policy decisions that have been carried through up until today and continue to be carried through.

BW   

And those are mostly around clean electricity, right? So is it a clean electricity standard, or is it more of a kind of renewables incentive scheme? That's because, I mean, there are now periods where California is just solely clean, right? Because it's got nuclear and it's got renewables… different types of renewables and a lot of batteries. So what was the actual policy mechanism that got those investments into the market?

LR   

There were several different programs. Probably the most critical was the renewable portfolio standard, which required utilities to purchase renewable energy in defined amounts, defined types. That policy has shifted somewhat. It's still in effect. They still have those requirements, but the legislature adopted a bill, I think it was in 2018 called SB350 which established a particular type of planning process that is geared towards the greenhouse gas emissions reduction target. So the Air Resources Board, as part of the scoping plan process, has the responsibility to set a target for how much greenhouse gasses need to be reduced on that path to meeting the 2030 goal. What SB350 did is it basically said that utilities need to be planning for that GHG target. So it's not just about the amount of renewables that you're purchasing, it's about what are your overall GHG emissions, and is that trajectory going down. So utilities now do something called the integrated resources planning process, which is managed by the Public Utilities Commission, where the Commission requires them to file plans that show how they are going to meet that 2030 target, and then eventually the 2045 target.

BW  

They're doing renewables easily, because it's the most cost efficient thing to do. But the concern was what? What if you decided to not. Like, if you shut nuclear down and put gas in instead, that could have the effect of negating the renewables additions. So, they have to take a holistic look at the whole market under the new sort of planning requirements. And is that what brought in the batteries? Because I've heard different numbers stated, but I think there's something like 10 gigawatts of battery storage now on the California grid. How did that come about? That's a lot of batteries.

LR  

Yes, so there are two reasons why batteries became so important. The first is the legislature passed a bill that basically said, PUC, you need to set a target for utilities to procure batteries. At the time they were very nascent. There was a recognition that there was going to need to be energy storage, but that bill really pushed the utilities to actually have to purchase what was then a new and expensive resource. And so when I first started at the PUC, one of my first votes was finishing up the process that the PUC had started to determine what that target was going to be. And to require the utilities to actually get that target implemented. So that sort of kicked it off, and it became very clear once the integrated resources planning process started that having resources that could come in and meet the attributes that the gas facilities were going to meet was going to be critical. I mean, there's no way we would be able to meet the GHG targets without, to your point, figuring out how to not build new gas.

BW  

And there was also the duck curve, wasn't there? The famous California duck curve. This is the big rise of solar during the middle of the day, and the falling off in the evening, when most people come home and start switching ovens on. And yeah, so was that already starting to show as a feature of grid management?

LR    

Oh, yes, it was definitely something that the grid operator was raising alarms about. And so in the integrated resources planning process, basically the way the process works is that the PUC models what's going to be necessary in 10 years. And so the duck curve sort of goes into that model, right? Because what that model is looking at, is it's looking at cost, and it's looking at what attributes are going to be necessary on the system every hour of the day. So there's 8760 hours in a year. And that planning process looks at that and says, ‘Okay, what are the resources that are going to be needed to serve the load at that time and that will support the GHG target.’  And so it was very clear, you had the grid operator saying, ‘Hey, this is what we're seeing in real life.’ You had this planning process kicking off that was taking into account cost and reliability. And the initial plans showed a significant need for batteries, and so utilities were already procuring it. But going through that planning process really kind of emphasized that, A) it was important, and B) it was cost effective.

BW   

Yeah, I'm listening to this, and I'm thinking in my head about how it compares to the UK. And what's remarkable to me is the degree to which you have a public regulator who is making plans and doing its own modeling. It's coming up with scenarios, and it's picking technologies, and it's setting targets, and for the longest time, the UK, post market liberalization, left it all to the market. Really, there was very little in the way of public direction of the market. We set some long term goals, but there's always this conflict between energy pricing, security and environment, and it was not being dealt with in this way of a very detailed, sensible plan. And now we created a system energy operator (NESO), which is a kind of government body, you know, this is 10 years later, or 20 years later. We realized that you actually do need some central planning in order to get the market to deliver to those three quite sometimes in conflict goals, right? Someone has to make a call.

LR  

Yes. And these were things that sort of built up over time in California. California has always been on the leading edge of things like energy efficiency, but having, for instance, a significant rooftop solar initiative that was huge in bringing solar to rooftops all over California

BW   

That then created the duck curve, which then creates…

LR  

Well, yes. But this was an example of a program that turned out to be wildly more successful than anticipated. 

BW  

Well, I can see why, having lived here for nearly three years. It's an incredibly sunny state, right? So it is a technology that really plays to California's strengths.

LR  

Yeah, and early policymakers were also incentivizing utility scale solar. 

BW  

And that’s the other thing about California, there's a lot of space, right? You can put large scale solar, and especially into neighboring… I've been driving up to Nevada and seeing the huge installations there. So again, geography plays a big role, right?

LR  

Yes, so you know it was sort of that perfect marriage of consistent policy direction towards reducing greenhouse gas emissions and figuring out ways to do it, and having the PUC implement aspects and make policy decisions that furthered this deployment. 

BW    

How did you stand up to the argument, which is, ‘oh, this is all going to be too expensive.’ Or often what you'll get is, ‘it's just not possible,’ from industries that don't want to change. How did you have the confidence to say, ‘no, no, we think lithium ion batteries are going to come down in price.’

LR   

Yeah. So that was why the legislature said, ‘PUC, we want you to set a goal.’ We want there to be a storage goal, and we want you to set it. And what that enabled the PUC to do was the technical analysis and the market analysis and the cost analysis and just and say, ‘Okay, here's a logical target to start with, knowing that it will be adjusted over time.’ And what ended up happening is, because of the duck curve, doing battery storage became much more cost effective because there needed to be resources to meet that need. And so you had the technology cost coming down, because lithium ion batteries prices were coming down at the same time as you had the value in the marketplace going up. Because for utilities to meet their resource adequacy requirements, they needed more resources that were going to be able to do this at the same time. You also had older, dirtier gas plants that we were retiring, so you were having less gas capacity, and you had this need that was increasing.

BW   

And when you set those targets, did you just stipulate lithium ion, or did you just say this is the characteristic of the storage that we need. 

LR 

The latter. 

BW  

The latter. So today, we're seeing the advent of thermal electric storage, right? So I just came back from Beijing, where I've learned that China's just installed a huge molten salt battery store. I think it's like 1,000 megawatt hours that it can store — it's huge — at the site of a coal station. And so they're starting to now experiment with storing electricity as heat and then returning that as steam. So those sorts of storage technologies are just at the cusp of commercialization now. Are they starting to make inroads into California's market?

LR  

There is a market that's starting to grow for other types of batteries, particularly because one of the questions is ‘is there an opportunity to do longer duration, more than a four hour battery?’ The other thing that's happening, which is really important, is even lithium ion batteries are evolving. Famously, there was a battery fire at Moss Landing, and that facility was older technology, and current technology has moved well beyond it. So you have not only the cost coming down, but the efficiency and the safety increase improving as well.

BW    

And this will kick us onto transport. That whole sector benefited from the supply chains that were brought in for electric vehicles. And I wanted to, could you just tell us the story of how it came to be that California basically started a market in electric vehicles like way back in the 1990s? I think it's a fascinating story of how regulation can drive innovation.

LR  

Yes, so the story starts all the way back in 1967. CARB was formed and regulating emissions in California. The very first chair of CARB was a scientist named Arie Haagen-Smit, who was a scientist who discovered that vehicles were causing smog in Los Angeles.

BW

Did he need to discover it? Was it not obvious?

LR   

Well, no, it’s interesting, because if you think all the way back to like, some of those things that happened in London.

BW

Those pea soup smogs.

LR  

Well, LA almost got to that level, right? And they didn't have quite the horrible death toll from some of those critical events in London, but so a lot of the thinking at the time was that that was the result of these big industrial facilities, and Dr Haagen-Smit was the person who kind of said, ‘you know, I don't think it's just the big factories.’ And he did research to figure out that these vehicles were emitting NOx, and NOx was a precursor to smog, and that was a significant cause of air pollution in the LA basin. And so he was doing that at the local level. And then CARB was formed, and then the Clean Air Act, the Federal Clean Air Act, the most significant version of the federal Clean Air Act, was adopted in 1970. And one of the battles that took place, sort of the political battles around that law, was the fact that it would step in and preempt California. And that California's regulatory structure that they had just built would just be preempted by federal government.

BW  

And probably be weaker, right, because it had to apply for the whole country.

LR   

Right. And so a provision was added to the Clean Air Act, saying that California could regulate emissions in a more strict manner than the federal government. Well, the same as, or more strictly than the federal government. In order to do that, when California passed a rule, they would submit that rule to the US EPA. The US EPA’s job was not to redo the whole thing and rethink the whole rule. It was to simply determine, is it necessary for California to meet its Clean Air Act requirements, and is it arbitrary and capricious? And so that is what gave California the authority to set its own emission standards. And so throughout the 70s and 80s, California took various steps to regulate NOx emissions from vehicles, to regulate other Clean Air Act pollutants. It introduced the catalytic convertor.

BW   

Did it also introduce those very clever nozzles you have? 

LR  

Yes, the vapor recovery system. 

BW  

The vapor recovery system. So as a European, it's quite remarkable when you come to an American filling station, there are no fumes. You can't smell the characteristic awful smell of petrol. You don't need to keep your windows up and tell your kids not to open the windows, because the nozzle does it for you. And Europe, we don't have that. So you are still inhaling these benzene chemicals that are actually linked to really bad health impacts. And I always think, why is it that Europe, which is supposedly such a progressive area, hasn't actually had the same requirements. And it exists in California, and now I think all over America?

LR   

Not all over America. I was in Salt Lake City not that long ago, which has particularly bad air quality in the wintertime. They do not have them. They do not have vapor recovery systems, just like that's crazy.

BW   

Well, it's equally crazy in the UK and Europe.

LR

So other states can follow California's rules if they choose to. So there's a separate section of the Clean Air Act that says other states can follow California's rules or the federal rules. They have two choices. They can't do their own, but they can follow California or the Fed’s.

BW   

And so there’s a period when you couldn't do much more with the end-of-pipe, right? So you needed to incentivize a whole new type of vehicle, which is the EV, and there's a moment, isn't there, when General Motors introduces an EV very early on. 

LR  

So the other thing about when you're doing regulation, you have to show under our rules, you have to show under a lot of case law as well, but you have to show that it's feasible, that there's a path. In 1990, California, for the first time, said ‘we are going to have an increasing requirement for zero emission vehicles to be produced.’ And that requirement is going to be an increasing percentage over time. It was a very, very small percentage. And one of the challenges with regulations like that, where you're kind of pushing technology, is that there's an opportunity for opponents of the technology to say, ‘wait a minute, this is not going as planned. This is not progressing as much as you said it was going to, and it's not feasible. And here's the reasons why we think it's not feasible.’ And famously, that's what happened for a few years with EV requirements, where the auto industry was basically pulling back. You know, GM had done the EV1. They were pulling back from…

BW  

Well, they famously recalled it, and then they scrapped them. Literally mashed them up, wouldn’t allow them  to stay in the market. So there was then this period where the measures got watered down.

LR

So yes. And then CARB got its footing back, and, you know, with a series of rules, continued to push forward both cleaner combustion engines and really started to see that it was feasible to do these increasing percentages of zero emission vehicles. And so the important thing about these rules is that CARB did something that was very groundbreaking at the time, and said, vehicle OEMs — what we call OEMs, original equipment manufacturers — OEMs, you have to produce a certain percent of zero emission vehicles, but if you can't, and someone else can, then you can buy their excess regulatory requirement and use it as your own.

BW  

Yeah, a trading mechanism, essentially introducing a marketplace into a mandate, right, which you innovated? That was a CARB innovation, right?

LR

Yeah. So two very sharp engineers who were developing a really sexy groundbreaking, small EV roadster…

BW  

This is the original Tesla. The original Tesla, sporty, very high end.

LR  

Yeah, they looked at the regulatory scheme and said that will help finance our vehicle. Because every EV we produce, because we're not making combustion vehicles, we can sell those credits to other people

BW

And that is the beginning of the story of Tesla. Basically, yeah.

LR  

And that revolutionized the industry generally, because they were working with companies to make really efficient batteries. They were making cars that people liked, that they thought were cool.

BW

And they were getting the charging infrastructure right as well. 

LR

And they were doing the charging infrastructure. Yeah, it's a great story.

ML    

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BW

Here we are today in 2025. Since January, we have a new administration in the White House that  has done a total 180 on climate. Climate no longer… even the science isn't even settled again. You know, it doesn't exist, it's a hoax. And California is under a lot of pressure now to lose that special status it's always had to go ahead of federal regulations. Can you tell us what's been going on in recent months and how much pressure is California under? 

LR

Yeah, so as I mentioned before, every rule California adopts has to go to the EPA. And there have been arguments in the past, you know, there were past administrations that did not approve waivers, but the Trump administration has just been a whole new ball game.

BW  

This one more than the last one?

LR

This one, I would say, is more effective at it. So the last one, they did repeal waivers, and we took them to court, and we were able to not lose too much, because we kind of kept moving. We took them to court and then after the election, we were able to readopt and importantly, we were able to enter into agreements with several automakers to continue making that progress. So the industry was somewhat split. Fast forward to this administration, and they have been much more aggressive, because when you adopt, I mean when you grant a waiver, when the EPA grants a waiver, they have to go through a whole process, they have to take public comment, they have to have a hearing, they have to do the whole thing. This administration says: Well, you know what? We're going to shortcut that. We're going to take what's called the Congressional Review Act, which is a law that allows Congress to review federal regulatory action, federal rules. We're going to use that for the first time ever, in the history of the United States, to take away this state rule that California adopted. And so they targeted our advanced clean cars rule, which is the 100% by 2035 mandate. They targeted the advanced clean trucks rule, which is something that was adopted even before I started. It was adopted back in 2020 to have certain percentages of heavy duty, medium and heavy duty vehicles zero emission. And that rule did not go all the way to 100%, recognizing it's a more complex industry. Third, they repealed the waiver for something we call the Omnibus Rule, which is a suite of combustion engine rules for medium and heavy duty that has nothing to do with zero emissions. It's standard combustion regulation. And as a gift to the truck engine manufacturers, they repealed that waiver as well.

BW

So here we are, then, and you are now countersuing that. So all of that's in court, and in the interregnum, when there's a court dispute, how do companies know what to do? Like do they carry on complying with yours? Do they just stop and hope that what happens? 

LR  

So CARB has an emergency rule making going on right now that basically says you can certify to the rules that were subject to the waiver, or you can certify to the old rules that were in place. We're essentially bringing those old rules back into place to make it clear that you do have to have an engine certified in California. You can't just sell vehicles in California without having them certified, but we will certify to this older, less ambitious standard, right?

BW   

That precedes this new waiver. They haven't repealed that old one then? They couldn't, they couldn't do that?

LR

We would argue they can't do that. But they reached back and tried to get ACT

BW

What's ACT? 

LR

So ACT is the one that was adopted in 2020 which is large trucks, and had already been in effect, and was already being complied with.

BW  

So that's in the courts. And what does this do, then, for your modeling, right? You said at the start, you've got this 2030 target. You have this 2045 target, your models presumably have a bit in there about transport. Decarbonisation and electrification is a really good way of getting there. So you're gonna have, I mean, they can't do anything about those headline targets can they? 

LR

No.

BW

They can't challenge those, right? Those are allowed because states have jurisdiction over their own standards. So what are you gonna have? Like… this is a big chunk of the problem, right? 

LR

Yeah, that's a great question, and I think it's an incredibly critical question for a couple of reasons. First, yes, it does significantly impact our modeling for reaching the 2045 goal and the 2030 target. Second, it also impacts our Clean Air Act responsibilities, and it impacts them in two ways. One is the obvious way, which is that the federal government has enforcement authority if we don't meet our Clean Air Act standards, so we are at risk of enforcement action by a hostile federal government. And in the first Trump administration, they did try to wield that enforcement power against us. The second, which is a much more weedy topic, is what's called conformity. And conformity is, if you're doing a new transportation project, is that transportation project going to conform to the Clean Air Act? And because so many of these rules, including the Omnibus Rule, which, again, is a combustion rule… because so many of those rules have not been approved or and are not in effect, then that is going to make it very hard for the transportation agencies that are trying to do new projects show that they are in conformity with the Clean Air Act. 

BW  

Because they'd only be in conformity if a certain percentage of vehicles on that project or that new road were electric, or that there was a method of compliance?

LR   

It's a little more weedy than that. Basically the concept is they're like, ‘we're out of compliance with the Clean Air Act, okay, we have not met our target.’ And you know that puts California at risk.

BW    

But California has another backstop, kind of a whole economy policy, which we should come on to talk about, which is your cap and invest, used to be called cap and trade. We call ours an emission trading system now. Not scheme, scheme sounds bad. So yeah, Europe's got an emissions trading scheme. California had this cap and trade, and now cap and invest, And its a whole economy approach and it was recently restated that it would be extended. So what can the federal government do? Because that seems like the broadest measure you could have to try and get economic incentives that get you towards your targets.

LR  

Yes, exactly. That provision, all the covered entities…

BW  

And the covered entities include static sources, so industrial and power. They capture the mobile sources at the refinery. Is that right?

LR

They capture both at the refinery and in fuel sales. So the sale of fuel is also covered.

BW  

So refineries get caught for their end-of-their pipe emissions, but also the fuel that they produce. And that also then captures gas going into the heating market for heat, right? So it covers everything.

LR  

Right, so you know that there's a declining cap, and each company has their cap that they have to meet, and they can purchase or sell allowances that equate to those emissions. And the state is allocated a certain number of allowances. And that spins off revenue. We auction those that spins off revenue that we are able to use for, famously, our high speed rail project. 

BW

We'll come on to that. 

LR

But also for other greenhouse gas reducing projects, including vehicle incentives, including community-based mobility projects. We funded bike sharing projects. We funded car sharing projects. We funded charging infrastructure planning grants to local agencies so that they can plan more sustainable transportation. So CARB has a whole unit called Sustainable Communities that works on things other than just focusing on the vehicle itself, but ways to get have more sustainable transportation.

BW   

And just to get a sense of this then. So those auctions have a fixed price attached to them. I think it's like $25-26

LR    

It's a floor, yeah.

BW  

Oh, so they can go higher, but they can't go lower. And what proportion is being auctioned relative to being given to industries for free? Do we know?

LR   

It varies by industry, and there's a whole incredibly complex formula. And they get a certain amount of free allowances, and then they're responsible for the other allowances themselves. And then up to 4% this year, 6% going forward, of their compliance can be met by purchasing offsets.

BW  

Oh, yes. And that's important, because you introduced incentives into non-energy sectors, like agricultural sectors. But you did it in quite a closed way, right? You didn't say any old offset will do. You chose three or four really, kind of the most easily provable that they were real offsets.

LR

Yeah. So in order to use offsets in the system, you have to use what are called compliance offsets, which are offsets that we approve that are consistent with the protocol that we approve. So we have a limited number of types of protocols. Forestry is by far the biggest one, and we have some protocols that really aren't used very much. Like we have a rice protocol to reduce methane emissions from rice cultivation. It’s not used much.

BW    

I'm just kind of curious, because maybe listeners don't know this, but California produces rice. 

LR  

Oh yeah, oh yeah, big producer of rice. And we are a significant exporter of rice to Asia.

BW  

To Asia, interesting. 

LR  

Oh, yeah, we still have a huge export to Japan. 

BW

Still with the tariffs?

LR

Oh, well, I don't know how the tariffs have affected it.

BW  

Yeah, I was gonna say: well, that's kind of a neat accidental bridge into the question of tariffs, because if there's one thing our listeners will know about it is that America has introduced almost crazy blanket tariffs that have really disrupted global trade. And some things we've talked about, including the solar revolution, the battery revolution, they're highly dependent on low-cost imports. So is that also affecting your modeling? Are prices being increased because of those policies?

LR   

Yes, you know, the tariff issue is another thing that is increasing the uncertainty around meeting the targets, because it has increased prices. A lot of the work we need utilities to do is improving their distribution system, their transmission system, and hardening for wildfires. All those things rely on a supply chain that is now being impacted by tariffs. It just increases the uncertainty. You know, one of the interesting things about this time in California is that for the first time we are trying to increase electricity use. For many years it was ‘electricity use should go down.’ It is going down in California, energy efficiency. Now we're trying to get people to fuel switch. So we're trying to get them to move away from natural gas and gasoline and towards electricity. And so having prices increase for the kinds of equipment that people need to buy for themselves, as well as the equipment the utilities need to buy, and the things that they need to do to scale up and increase capacity have been affected by tariffs. And, you know, Governor Newsom has been very vocal about the impact that tariffs have had on the economy in California and on the goals that we need to achieve in California.

BW  

And this is a topic that's coming up everywhere. Affordability is now the big political moment that we have to address. And as you mentioned, there's a lot of going on. I mean, California has high electricity prices, and a lot of people who are trying to slow down climate action will say, ‘Oh, well California, everyone's paying because of renewables.’ But actually a lot of that increase in costs is partly just the rising gas prices, right? Which is because we're all paying market prices rather than the actual cost of production. And you've got this requirement now for fire safety that the transmission company is having to underground a lot of the infrastructure, which is very, very expensive to do.

LR  

Yes, absolutely. I mean, we are in a situation where we are having to mitigate the impacts of climate change and adapt to the impacts of climate change at the same time. And so you have utilities who need to do things like underground or harden their poles or use covered conductors to address the high heat of wildfires that are just much more severe than they have been in the past. So the criticality around avoiding ignition from energy infrastructure is so fundamental to the utility's operation, and to have them out in the market trying to buy the equipment they need, and have those prices going up, or have uncertainty about what those prices are going to be, makes it very difficult.

BW   

So we've got this perfect storm, in a way. You've got adaptation costs bearing down, and you've got inflation driven partly by gas prices, partly by tariffs. And then you've got these targets that you're still having to bring in incentive schemes and incentives, because even though, once you get to an electrified system, it'll be more efficient, you know, is the ultimate efficiency measure, right? You start burning things, you start using electrons. You get an inherent benefit of efficiency, but, but you need higher capital investment to get there. So what can California do to address this affordability question? I mean, it does feel like there might need to be some sort of pragmatic reset, perhaps not getting away from climate, but just to perhaps find ways in which people can really benefit, speed up the arrival of the benefits, which should be, over time, that their bills are reduced. What can be done?

LR  

Yeah, I think it's a very challenging question. I mean, when you think about rates, for instance, there are various ideas about how to reduce rates. One is to continue to increase electrification. The more electrons are sold, the more you're spreading the costs of the fixed assets. And encouraging electrification will drive down the costs of providing that electricity. And when you talk to the big utilities, they say, ‘yeah, we can see a path where, as usage increases, costs will come down.’ Secondly, California has had rate payers bear some of the costs of these more innovative strategies. And one possibility is to think about maybe the rate payer shouldn't necessarily be the ones to pay for some of these policy decisions. Having cap and invest funds or having general funds pay for that. That's a conversation that is happening in the legislature. They have made some changes, and they have moved some programs off of customer bills, and I suspect some of that will continue. And, you know, I think the challenge is that the fossil fuel is so subsidized that it's hard to compete.

BW   

Well, you have very, very low fossil fuel prices in America. You fill up your car, it’s nothing like as expensive as Europe. Gas is being imported very cheaply, presumably from neighboring states, by pipelines. It's kind of affordable. If electricity remains high relative to those other two very cheap commodities, you're going to struggle to get people to electrify and want to pay more for the thing that's most expensive in their lives, which is electricity. 

LR

Well, the other thing I would say is that the cost of driving in California, if we're thinking about vehicles specifically, has gone down over time, because vehicles are so much more efficient and there are so many more choices. It's cheaper in many instances — if you have the ability to charge at home, it's cheaper to have an electric vehicle versus a combustion vehicle, even with our current rate structure.

BW    

It would be even cheaper if you had more affordable EVs.

LR    

Well there is that, there is the upfront cost.

BW

Yeah, and you're not allowing Chinese EVs. The UK, actually, interestingly, at the moment, is holding the line on allowing Chinese vehicles in, which means we now have super affordable EVs arriving, which means more people can get their hands on them and at a much lower upfront cost. So it's way more equitable than everyone running around in a fancy Tesla or a Rivian. That end of the market here seems to be missing.

LR  

Yeah, I mean, automakers are starting to try to serve that market, but you're not wrong. There are very high quality, very affordable vehicles in China that the US market just doesn't have access to. So we have to continue to work with what we have, continue to push the automakers to make more affordable versions. And even with those higher costs, it's still more cost effective. And so we need to just make sure and keep it that way. And frequently, renewable diesel is at a lower price point than fossil diesel for heavy duty vehicles. So you know, they have an opportunity to travel with lower cost and lower GHG as well.

BW  

Yes, because, of course, America also produces an awful lot of renewable biofuels, or, biofuels that are direct drop-in substitutions. So ethanol into the road fleet. One thing that's interesting to me is if these cascading sectoral advances happen. So batteries get developed for laptop computers, which then means that they're more available for EVs, which then means they can do lithium ion storage. And then I see a similar cascade where we're going to electrify transport, or the majority of it, which will release a lot of ethanol into the market. So once the ethanol is released, which sectors could make use of it? And I'd argue, if you can refine it into jet fuel or refine it into marine oil for sale to shipping, that gives you another cascading effect, right?

LR

Absolutely. I mean, as in our scoping plan, we talk a lot about sort of the hard to electrify sectors like aviation, like marine, like heavy industry. And definitely you're seeing progress in heavy industry, where more of that will be electrified. But there are still high heat processes that either are difficult to electrify, or you have both the fuel use and the process emissions, like cement, where you are really challenged to significantly reduce emissions. And so having fuels that are not fossil fuels to be able to serve those industries is really important. I think the challenge we have is the industrial sector is so diffuse, like there's so many different types of uses, and also the regulatory structure around marine fuels and aviation fuels makes it more challenging. And in fact, it is just a tragedy that the International Maritime Organization was making progress on having climate goals for international shipping, and the United States has been doing everything they can to squash it.

BW    

Yeah, we just did an episode on that with Professor Tristan Smith, and it's a really good example of where, if the US leans in, the world starts to take things more seriously, and if the US decides to do the exact opposite and smash things, then it's very effective at that too.

LR

That's a… Smash things, that's perfect. I mean, that is this administration. If you think about this administration and climate they are just running around smashing things. They're not even having the kind of policy drags that we have seen in the past, where it's like, ‘oh, well, we're not going to make any progress.’ No, no, they're like, actively destroying things.

BW   

And also, sometimes there are unintended consequences, because one of the things that could have come out of those shipping regulations was a bigger market for LNG in the short term. And actually, the US stands to benefit from that. They're not playing chess, it doesn't feel. It's kind of… maybe it's a chimpanzee playing chess.

LR  

Pieces being thrown.

BW  

Pieces are being thrown. But we skipped over slightly there the question about the high speed rail. And I do want to come back to that, because it is such a big project, and it's been so slow and so expensive, and yet, I hear there's a private sector high speed rail initiative that's going to try and connect LA to Las Vegas that's moving much faster. There must come a point where you think: is this the best use of public funding and public energies to try and make this thing happen which doesn't seem to be happening?

LR   

Two things. First, that private project just announced that they are having significant cost and time overruns.

BW  

Okay, it's not just the public one. 

LR    

It's not just the public one. I think there was a lot of lost time with the high speed rail project, but they are continuing to make significant progress. And if you go to the Central Valley, you realize how much work they are doing. You see the overpasses they built, you see some of the tracks that they are putting in now. And you can see it coming to life. And I guess I would say, in order to bring projects like that to life, you have to get them started, and they have to get that momentum. And I think for a long time, it was not gaining momentum, and now it is moving forward. It is progressing, and it is something that will hopefully bring significant… It has already brought significant jobs to the Central Valley, and will hopefully continue to bring significant economic opportunities in a region of the state that has been really impacted. And it's cleaner than having everybody drive up and down I-5.

BW   

I suppose I feel like the way to make progress is to go with the grain of what a country's good at and what a state is good at, in the same way you've done with solar, which just seems to lend itself, and the geothermal that California's done. I'd argue you should get back into nuclear, which is currently banned. But another strength that you have is aviation. And for me, the promise of short-haul hybrid electric planes, if you could lean in on that, would speak to what America is great at first of all. Aerospace innovation is just, you know, there's a storied history in California and it fits with the geography. We did an episode with Heart Aerospace, who have got these four prop planes. Two of them are running on jet fuel, two are running pure batteries. They have a range of 800 miles now, because of that range extension hybridized design. I just hope that they'll get through their various development gates. And they've come to America, left Sweden to come to America, because they know this market could make it happen. So I would just love there to be a kind of centrist, progressive, pro-development group. Because if we get planes back serving regional airports that are clean, that are quiet, that are running on electricity, that's an economic development opportunity, and it also can take the pressure off everyone having to live in the Bay. You know, we could all maybe live in Tahoe or wherever. Infrastructure and transport is an unlocker of economic development. I get the feeling aviation can move a lot faster than rail in this country.

LR  

Yeah, I don't disagree that there is a huge opportunity with some of the cleaner aircraft technology. And one of the things, when I talk to some of the companies who are doing this, one of the things they point out: not only is there an opportunity to build that market in and of itself, but that technology is something that, as it gets perfected over time, can be scaled up. So you go from a six person to a 12 person to a 50 person. And the next thing you know, you're building clean jets.

BW

Yeah, we hope. Or you're building medium sized, smaller jets that are serving people in a different way, right? So our pattern of usage, because the prices will essentially come down for the short haul and go way up for the long haul, we might all decide to go on holiday to somewhere much more local than do that big transatlantic or that big trans-Pacific flight. Perhaps, then, as we come to the end, you described a process of planning that CARB does and that the state does. How sophisticated is that? Is that able to take a view out to 2045? It’s still quite a long way away. How many scenarios are you able to run? How often do you do these scenarios, and how many scenarios are you able to look at? 

LR

So the last scoping plan that we did was in 2022. So that modeling was done in 2021 and for the purposes of the scoping plan, we took four different scenarios. And two of them had an earlier carbon neutrality date, I think it was 2030, and then 2045. And different models had different sensitivities around what sectors do you prioritize, and what investments do you put into them? And of course, we always do, ‘what if we just did the status quo, what would happen?’ We do that as a scenario. And I think there's a couple things that are clear in that modeling. First of all, it's hard to predict what new technology would be, but it is easy to say that there are situations where new technology is going to be needed. So for instance, it's going to be really challenging to meet our goals without carbon capture, which is a technology that exists, but it's not heavily… well, it's not really used in California.

BW

And this carbon capture on gas, you're talking about here? DAC, yeah, yeah, yeah. And then

LR   

And then direct air capture (DAC).

BW  

So DAC features in your plans? Even though it's going to be  just a net cost? Like, there's no upside to doing DAC. 

LR  

Well, with direct air capture, like I was saying before, there are certain facilities like cement that have no path at this point.

BW

Unless you shift off, you have to get off limestone basically to a different aggregate. Which is possible.

LR

Yeah it's possible, but it does involve a lot of technology and cost. 

BW  

Well, it involves the incumbents having to write off their assets, actually, because a lot of cement producers are really limestone quarriers who have got land banks. So this is the case in Europe, where really, if you're a cement producer, you're a limestone quarrier. And to give up on that land bank that you have and then move to a wholly different system of production is just too much disruption. It may happen, though, and I'd like to see it happen.

LR  

But yeah, it's a long time. And if you're looking at 2045, right, you're looking at, okay, how are we going to pave our freeways and build our buildings between now and 2045. And so you go: okay, we have, we depend on cement for that. And so there's… actually the Trump administration canceled a half a billion dollar grant on a cement plant in the Central Valley, and they were going to match it. It's a Texas based company, and they were going to match that half a billion dollars. So the federal government put in half a billion, and the company was going to put in half a billion, and they were going to have a capture project on that facility. And that's the kind of thing that our modeling assumes that there's going to be activity like that. And so those are the kind of things that you can identify in the plan, but it's hard to know what exactly the uptake is going to be and what is the case of uptake going to be like.

BW  

I guess you didn't have in your plan federal like, huge federal opposition that's going to make any difference. So now the next set of planning is going to have to perhaps be a bit more mindful of those headwinds. But equally, could you run a scenario which is, ‘we just want to do more of the cheap stuff and less of the expensive stuff.’ Let's not rush to doing DAC right now, because all that's going to do is push costs up for everybody. Let's just try and speed up the things where we know there's a win-win, which is electrification, right?

LR  

Yeah, the plan doesn't prescribe the pace, necessarily, right? It assumes that we will continue to do what we're doing now. It assumes that we will continue to meet our GHG targets for our energy sector, which we're well on the way towards doing so. It assumes that our battery deployment will continue to increase. It assumes that we will continue to use other carbon-free resources that we have in place, like large hydro, which is not qualified under RPS (renewables portfolio standards), for instance.

BW

And Diablo, the nuclear site. 

LR

Which is also not qualified under RPS, but can be counted in terms of the GHG target. So it's not an either or. It's more like we know we're going to do these things. And as we get closer to 2045 we know those things aren't necessarily going to be enough. So what are we seeing, kind of at the end of the horizon.

BW

But I suppose I've been happily influenced by my co-host, Michael Liebreich’s pragmatic reset, which I agree with. A lot of it, not all of it. But one of the things that I really think he's put his finger on is, let's do the easy stuff. Let's not try and do everything all at once, all at the same time, because that's just going to keep adding costs to people's bills, at a time when, as you said, we're also now paying adaptation costs and inflation costs. So let's just focus on the easy stuff. Let's not like, also run really expensive hydrogen experiments, really adding on costs with DAC right now, when, at the moment that's that, it's hard to see that that can be justified.

LR

My pushback to that would be, I think you're generally right in that there's a lot you can do in the energy sector that's pretty straightforward. You know, demand response being a good example. There's a lot you can do in the vehicle sector, where we already have the technology and it's just a matter of deployment, right? However, one of the things that was, I think, beneficial about the Biden administration's climate policy was that they were recognizing that looking around the corner takes time, and so we do want to have at least some investment in what is around the corner. Doing every single thing on the list, you're right is maybe not always feasible. But some amount of, yeah, you know, we want to have proofs of concept.

BW  

And first of a kind demonstrations and all those good things, yeah.

LR   

And it’s interesting because with direct air capture, right now, it's being deployed on fossil fuel facilities in other states, and it's like, why would we want to just deploy it on fossil fuel sites?

BW   

As in end-of-pipe capture, carbon capture, rather than direct air.

LR  

Sorry, carbon capture, yeah. I mean, that's an example where it's like, it's already being used in these states where they don't have any climate goals.

BW  

Yeah but they’re using it for enhanced oil recovery.

LR  

Well, exactly which is prohibited in California, yeah, and hugely problematic. But if you're going to… If in Nebraska, they're going to use it for these ethanol facilities, or in Louisiana, they're going to use it for EOR, like, why not try it out on cement in California?

BW   

Well, because it'll push up the price. That's why. Because it's an end-of-pipe, like, it's not like electric cars, where you can see this S-curve coming down, where it's just going to be better, cheaper, more efficient, to run. Even the price point, that purchase is going to be lower. With CCS, you're only ever adding a cost onto something that's a commodity, that's also quite expensive.

LR  

But you're assuming that there is going to be something transformational in the cement industry. And I think that’s going to take a lot longer than you think it is.

BW    

I think we'll get there. Or I guess the other way out is using more land-use sinks or offsets that you described. Like, yeah, maybe California should push hard on methane from rice, because that is something that you do. You've got the technology, you've got all these brilliant scientists in all these academic institutions. That could be something you double down on, because it's here and deliverable and measurable. 

LR  

Yes. I mean, that is something that Governor Newsom has been really supportive of. How do we reduce emissions from natural and working lands, and how do we make them carbon sinks? Our modeling shows that in the short term, they're going to be carbon emitters, but there is potential in the long term if, as you said, we take those opportunities in different agricultural sectors and with offset programs like, how do we take those opportunities to turn all this land we have into carbon sinks? 

BW  

Thank you so much. You've been so generous with your time. We covered a lot of ground, and I'm sure there are a dozen questions we didn't cover. So thank you so much. I'm really looking forward to staying in touch and following and watching what California does next in this new world that we're in.

LR

Well, thank you for having me. It was a great conversation.

BW   

So that was Liane Randolph, former chair of the California Air Resources Board. As always, we'll put relevant links in the show notes, including to Episode 194 with Anders Forslund, CEO of Heart Aerospace, who's working to commercialize a range-extended electric airplanes in California. My thanks to Izo Creative for hosting us at their studios in Oakland, California, to our producer, Oscar Boyd, our video editor, Jamie Oliver, and the rest of the wonderful Cleaning Up team and Leadership Circle members who make this podcast possible. And thanks to you for listening. We hope you'll join us next week for another episode of cleaning up.

ML 

Cleaning Up is supported by its Leadership Circle. The members are Actis, Alcazar Energy, Arup, Cygnum Capital, Davidson Kempner, EcoPragma Capital, EDP of Portugal, Eurelectric, the Gilardini Foundation, KKR, National Grid, Octopus Energy, Quadrature Climate Foundation, SDCL and Wärtsilä. For more information on the Leadership Circle, please visit cleaningup.live. If you've enjoyed this episode, please hit like, leave a comment, and also recommend it to friends, family, colleagues and absolutely everyone. To browse the archive of over 200 past episodes, and also to subscribe to our free newsletter, visit cleaningup.live.