Introduction
On September 4, 2024, the CFA Society Chicago Education Advisory Group and the Harvard Club of Chicago combined efforts to present a discussion regarding climate change and the path to decarbonization. Matt Roling moderated the discussion. The panel consisted of Representative Sean Casten, Dr. Y. Shirley Meng, and Dr. Zara Summers.
The event opened with welcome remarks from Chris Vincent, CFA, and President & Chief Executive Officer of CFA Society Chicago. He briefly acknowledged both organizations hosting the event. The Harvard Club of Chicago was founded in 1857 and is the oldest continuously operating Harvard club in the world. CFA Society Chicago is the 6th largest society under the CFA Institute umbrella and will be celebrating its Centennial 100-year anniversary in 2025. He then introduced the panel and briefly elaborated on their professional backgrounds.
Matt Roling is a Director based in Chicago and specializes in Energy Transition & Sustainability Advisory at KPMG. Representative Sean Casten is a scientist, clean energy entrepreneur and CEO, and now a Member of Congress, representing the western suburbs of Chicago. Dr. Y. Shirley Meng is a Professor at the Pritzker School of Molecular Engineering at the University of Chicago. She serves as the Chief Scientist of the Argonne Collaborative Center for Energy Storage Science (ACCESS) Argonne National Laboratory. Dr. Zara Summers is the Chief Science Officer at LanzaTech, where she oversees the technology pipeline and supports both innovation and commercial technology deployment.
Opening Remarks and Professional Accomplishments
Roling opened the discussion by commenting that climate concerns are among the most urgent challenges facing humanity. The good news is that the United States has made progress in addressing these concerns. He thanked the panel and asked them to share each of their accomplishments in the field of decarbonization and climate change.
Meng responded first. She “graduated 42 PhD students, 30 post-doc researchers and 90% of them are in the [climate] industry in the United States”. She originally migrated from China to Singapore before coming to the United States. Early in her career, she realized that manipulating atoms and molecules can change the world. Ultimately this led to her focus on battery research. In addition to her research and academic career, she has three start-up companies.
Casten described his early influences and interest in climate change. In 1976, his father testified before the Senate on a bill which ultimately became The Public Utility Regulatory Policies Act of 1978 (PURPA). He also recalls the Chicago heatwave of 1995 which was generally ascribed to climate change. He notes that roughly 50% of all CO2 produced by our species has been emitted since that heatwave. So, he is proud of everything he has done to address the climate issue. After selling his company, he turned his attention to the public sector in Congress. In this capacity, he is on both financial and climate sub-groups. He is an advocate of scoring legislation not only on financial impact, but also CO2 impact.
Summers is a microbiologist who started in academia. She has been in the industry for 15 years. Initially, she worked for ExxonMobil’s Bio-Division. After her experience at ExxonMobil, she decided to take a risk on LanzaTech, a company that she believes can change the world. LanzaTech takes emissions from heavy industry and pumps them through 500,000-liter reactors. Bacteria then rapidly consume these emissions. In turn, this process is used to produce ethanol which can be sold back to industry. What is remarkable to consider is that this bacterium evolved 2 to 3 billion years ago. Zara believes that anyone searching for a better use of CO2 is up against billions of years of evolution.
On a personal note, Summers is also proud that she ran her first marathon last year. She presented an athletic running shirt as an example of products made with LanzaTech produced materials. They also have partnerships with Lululemon and other brands.
Optimism for the Future
Roling noted that, last year, emissions fell 2% while GDP grew by 2%. He then asked, “Are we turning a corner?”
Casten believes that we are turning a corner. He argues that there is no reason to tie economic growth to carbon emissions. The ability to create useful energy without carbon is virtually infinite. He is an advocate for tracking energy productivity in the same way that labor productivity is tracked. From an energy productivity perspective, the US is lagging countries such as the UK and Switzerland. This is an unbelievable opportunity to improve. The US can either continue to produce “dirty” exports or choose to export clean technologies to other countries. In choosing the latter, we address the climate challenge on a global level – not just regionally.
As an academic, Meng commented that she is always hopelessly optimistic. She attributes this, in part, to working with young and brilliant people. When she first obtained her PhD in 2000, electric batteries were just recently commercialized. At the time, the estimate for the cost of an electric car was 2 million dollars. If you consider the progress since that time, you can see that the tide has turned. Not only is clean energy achievable, but it is also the key to economic growth. She believes that one of the responsibilities of academia is to communicate both social and economic benefits to the business world.
Summers emphasized that the move to clean energy is not “flipping a switch”. It is a transition, and you must take care to bring existing market participants along. Developed nations will have to upgrade grids and other infrastructure to mitigate and adapt to climate change. At the same time, she sees a different dynamic in developing nations. Most developing nations are building out infrastructure for the first time. This is an opportunity to include climate concerns during their initial build out.
Government Policy and the Inflation Reduction Act
Roling then drew attention to the Inflation Reduction Act. Some have called this the single greatest investment in climate action in history. Yet, he also noted that many people are unaware of the included climate provisions. Roling asked Casten if he could provide behind the scenes insights on the intention of the bill.
Casten stated that, in 2020, the highest priority was to recover from recession. With that in mind, the Biden administration wanted to do as much as possible on a bipartisan basis. Initiatives in the infrastructure bill were those that could be accomplished through bipartisanship. Very few climate provisions were included at that time. Later, the Inflation Reduction Act was the best opportunity to include bipartisan climate provisions.
Casten opined that climate policy can be partisan because of the near-term impact on various constituencies. For example, areas that depend on legacy energy extraction are often represented by Republicans. These constituents may be averse to initiatives perceived as a threat to their livelihoods. It is important to convince these constituents that they will not be left behind in any transition to cleaner alternatives.
Turning to the other panelists, Roling then asked how government policies have impacted their climate efforts.
Meng clarified that her field of energy storage innovation is not directly part of the incentives referenced by Casten. Instead, support comes from the DOE and other incentives such as the Chips Act. Meng argues that consistent long-term policies are needed to accelerate the success of clean energy companies. She pointed to progress in other countries to illustrate the impact of government policy.
In 2000, Japan led the electric battery market with an 80% market share, Meng explained. Korea had 10% with another 10% from the rest of the world. Today, China holds 65% of that market share. Korea now has 25%. Japan has 5%. The rest of the world has the remaining 5%. She attributes these changes largely to varying degrees of government support. Considering refinery, manufacturing, production, shipping and recycling, this represents a huge amount of economic activity. The US and European Union should also view green energy from a national security perspective. Both wind and solar technologies represent opportunities for the US and Europe to secure energy sources independent of other global powers.
Summers approached the question from an entrepreneurial viewpoint. Many start-ups face “the valley of death” as their trajectory moves past seed funding. There are challenges in achieving company scale, successfully launching, and going commercial. However, what is less discussed are the numerous other “valleys of death” that are faced after going commercial. Zara believes that government policy can play a role in ensuring that companies survive long enough to reach their full potential. Many potential clients do not want to be first when it comes to new technology. Here, government funding may encourage the earlier client implementations and derisk implementations for future clients.
Potential Impact of a Conservative Administration
Roling asked, given that these incentives were added during the Biden administration, “what might occur if a more conservative administration was in the White House?”
Casten took this into consideration as part of the Climate Committee and drafting the Inflation Reduction Act. While “carrots and sticks” may be equally effective in controlled economic models, there is a difference in political reality. He believes that “Carrots are hugely more valuable than sticks.” Incentive programs have more durability regardless of which party is in power. “Incentives can create a whole menagerie of winners who do not want their winnings to be taken away.” However, he did express concern if something like Project 2025 were to be implemented. He believes Project 2025 would replace virtually all government employees with political appointees who may not have the deep scientific expertise or willingness to execute current climate initiatives as intended.
Tariffs on Importing Green Technology from China
Roling noted that tariffs on Chinese solar, batteries, etc. were implemented under the Trump administration and continue under the current administration. Economists generally criticize tariffs as inflationary. Meanwhile, some environmentalists argue that these specific tariffs have hindered environmental progress. He asked the panel for their perspective.
Meng explained that US companies initially did not pursue new battery technologies because the margins were so low. Meanwhile, China had failed to produce a competitive and reliable combustion engine. Considering these conditions, China made the strategic decision to focus on electric vehicles and leapfrog combustion engines in terms of technological advancement. She views the current tariffs as a temporary measure to allow US companies time to catch up. Long term, the only competitive solution is to innovate. Opportunities remain in green hydrogen, nuclear fusion, battery technologies and hydroelectricity. We are only 1% into the green energy marathon. Whatever advantage China may currently have at this point, is not as significant in the long term.
Casten also believes tariffs can be interesting in the short term, but the long-term conversation should be focused on US Industrial policy. If the US places tariffs without having planned capacity, the net impact is higher cost on consumers without additional production in the US. Further, by simply focusing on the cheapest possible production, we risk economic loss as production shifts outside the US. For Casten, the more interesting conversation extends beyond the immediate price of goods. He would like to focus on industrial policies that incentivize bringing production back to the US including green energy initiatives. Further, he would like to see a more wholistic policy across agencies.
Potential Headwinds
Addressing Summers, Roling asked about the biggest headwinds facing climate initiatives.
Summers believes that the biggest headwind is simply doing nothing. Despite whatever clever ideas, incentives or disincentives, most companies believe that they can survive by doing nothing. She believes that you really must show stakeholders the benefits of climate initiatives and costs of doing nothing. She has seen this come to fruition at LanzaTech. In both their Skokie and Georgia locations, she has seen people who have different political backgrounds collaborate with a shared passion and mission. With true understanding of the value proposition, resistance to new ideas is replaced with genuine support and excitement.
Call to Action
Roling noted that there are students in the audience from both Northwestern and University of Chicago. He then asked the panel to offer the students a call to action.
Meng advised that the students keep up to date on battery technology. She believes that we are getting closer to EVs that can run 500 miles on a single charge. In a broader context, she reminded them that the only way to win the technology race is innovation.
Given that this is election season, Casten advised the students to get out and vote. He also referenced an often-heard comment, “they should do something about that.” He reminded the students that we all are the “they”. He challenged them to step up and reminded them that change comes from people at the grass roots level.
Summers advised students to get curious. She quipped that their knowledge of electricity should go beyond knowing that it comes from the outlet in the wall. She explained that there are apps which allow us to understand the source of our electricity. If consumers educate themselves and care, then companies will follow suit. Not only should you vote, but you should vote with your dollars.
Q&A
The first audience member inquired why the US hasn’t built more nuclear plants. Casten replied that most newly built plants do not come in on time and on budget. Governments of countries such as China, Russia and France are more willing to build plants because they are not purely focused on capitalism. He noted that the Inflation Reduction Act includes a loan program office which includes certain nuclear expertise. This may lead to future successful projects that, in turn, can demonstrate a viable way forward.
The second audience member raised concerns with politicians who she believes are courting the Chinese nuclear industry. Casten elected not to speak directly to any of his colleagues but addressed the question at a higher level. He acknowledged that foreign ties among politicians may raise questions and concerns. He offered that one aspect to combat potential corruption is to ensure that the financial incentives of the public sector are properly aligned.
After the formal session ended, the Congressman departed to meet another commitment, but Meng and Summers took more questions from the attendees over drinks and hors d’oeuvres.