Sonicare Founder David Giuliani on Washington’s I-1631

Carbon pricing is on its way to the ballot box in Washington and we are continuing our coverage of the ballot initiative and what it means for the state. Recently, our Executive Director was able to sit down with entrepreneur and recognized social responsible business leader, David Giuliani. David is co-founder of Plan Washington and the Low Carbon Prosperity Institute, authors of the most recent report, The prospects for I-1631 eliminating 20 million tons of carbon pollution annually by 2035. Prior to serving in his current role, David was the founder and CEO of both the Sonicare toothbrush and Clarisonic skin care system.

The following is a transcript interview from Climate XChange Executive Director Michael Green and David Giuliani. Answers have been edited and shortened for clarity.

Michael Green (MG): David, thank you for taking the time to sit down and speak with me. It was a pleasure to read through the recent analysis by Low Carbon Prosperity Institute, and I appreciated one of the key takeaways, that carbon reduction is really dependent on the efficiency of the investments. What do you think the ballot initiative’s largest challenges and opportunities in regards to efficiency of investments are in Washington?

David Giuliani (DG): This ballot initiative has a lot of complexities with respect to how the money needs to be spent and who controls its spending. The risk is first, that the money that could be spent on investments to reduce carbon is diverted to other priorities.

The second risk is that money spent on carbon reductions is not necessarily spent in the most cost-effective ways. One example mentioned frequently is solar panels on the homes of low-income people, like in south King County, rather than just the wealthy.  That’s a totally reasonable intention on the face of it. However, south King County runs on almost 100% hydro, so the amount of carbon avoided by switching to solar is negligible.

The prospects of getting carbon reduced in an economically attractive fashion, is what led us to the analysis. We analyzed I-1631 to determine how much funding would be available for carbon reduction, then compared that to the goals. The result was an estimate of how cost-effective investments would need to be to hit the carbon reduction goals.

MG: In the analysis you focus on freezing the fee, which would demonstrate market efficiency of the investments and carbon reduction. In the study you focus on investments that are between $15-45/ ton of carbon sequestered. How do you go about dealing with investment co-benefits besides market efficiency that might be prioritized by other stakeholders? How do we evaluate those, many of which are hard to monetarily quantify?

DG: Well, it’s an impossible task to evaluate them until we know the specific plans proposed. That’s not going to happen until the initiative is enacted, and then see who sits on the planning boards and see what processes they use to develop their investment priorities. It’s the uncertainty about how these boards will operate that raises skepticism.

MG: I saw that the ballot creates committees and oversight committees to serve as a watchdog over those investments. But, talk to me a bit more about the politicization of this. Is there something to say about key influencer roles around those investments potentially falling to people who maybe weren’t supportive of the ballot initiative. Is that something we could run into?

DG: An initiative that’s backed by a coalition of various interests can produce understandable expectations of how its passage can benefit them. If the initiative’s governance isn’t sufficiently balanced, there’s a risk these interests will compete with the intentions the voters had in mind when they enacted it.  By comparison, the legislature has balancing forces that vet issues and say, “wait a minute, this isn’t right.” In the case of I-1631, there are two years before revenue gets collected, about the same time required before the legislature can make changes to the initiative with a simple majority.

MG: Right, so there’s time and space, which can really ensure that this isn’t thwarted or being foiled with negligence. I want to go back to the idea of freezing the fee. I saw, again, the prioritization of market efficiency, but what I was really concerned about was how do we know that the market can or can’t handle a higher carbon price, and for not continually pushing for a higher and higher carbon price, isn’t that to the detriment of more innovation, and making funding available for tougher sequestration of carbon or more difficult projects to finance? Wouldn’t we want the price to just keep going up?

DG: The initiative proposes what’s basically a deal being with the voters.  If the state achieves some specified carbon reduction goals, the fee rate will stop rising. Then the fee money collected will fall with more reductions in carbon emissions.  It’s a performance reward, which can be motivational, and might overcome some of the skepticism about how well I-1631 can work. It’s not receiving a lot of attention—I haven’t seen anybody write about that. We’re the only ones to publish on this so far, and we’re interested in it because it’s a business-like proposal.

MG: One of the things that I was thinking about, was what about the long-term horizon of projects such as large reforestation. When you get into investments like forestry, it could be 20-40 years until the project is profitable. How concerned are you with future technology costs, carbon market forces, or other things could change or impact the rate of returns that you were studying in this $15-45 dollar range?

DG: These are significant issues which are basically at the core of our organization’s purpose.  Our intention is to be a constant force of analysis and review of changing trends and conditions and experience, so that we can supply the best navigation tools possible to the decision makers––whether they be in the form of boards within 1631 or whatever governance system evolves from I-1631, or whatever else gets enacted if 1631 fails. We can’t get the best results unless decision makers have the best information possible. What’s also encouraging is California having amassed a fair amount of experience over its years making the California Climate Investments.  California reports a projected aggregate carbon reduction cost about $67 per metric ton, without necessarily prioritizing carbon reduction economics as the highest priority, and with an overlay system that seems similar to 1631. So our estimate shows Washington state will need to perform at about twice the cost-effectiveness of California to hit the fee-freeze target.

MG: Another piece I took from your analysis was the importance that you put on the various investments to be paired with other incentives to have an amplifying effect. How important is this, and are there places where you see the highest opportunity? I know in one of the report op-eds you talked about the investment of solar on your home and how even with incentives currently offered by the state that actually wasn’t really reaching the level of efficiency that you might want from other investments from this initiative.

DG: Wind and roof-top solar panels in Washington state often come to mind when people think of carbon reduction.  However, popularity in these cases competes with economic efficiency. So a strong focus on achieving carbon goals can result in a lot of disappointment unless we seize the opportunity to educate folks about better ways available that cost less.

One example that tends not to get a lot of discussion is one you just mentioned — improving forestation. Modeling work that was done in Oregon a few years ago showed large increases in carbon sequestration resulting from expanding our forests, so moving more in the direction of where we started, when the entire North American continent was one giant forest. The cost of that were estimated to be $12 per metric ton —  gobs of net carbon reduction for a relatively modest costs. It also would be a boon to rural economies because most trees grow in rural environments.

MG: Yeah, but I question––how does that benefit the community just because they’re investing in forests—does that translate to jobs, or what is the opportunity for that rural community?

DG: Well, if the investment is in the form of planting trees, then people who plant trees are going to have jobs There’s also benefit through active management of forests in ways that will make them healthier, less prone to fire, and more productive both economically as well as in terms of carbon reduction.  That’s a win-win.

MG: I’m asking you to wear your economist and carbon pricing analysis hat right now, but as a business-savvy entrepreneur, what do you think businesses need to be paying attention to post ballot initiative, if it passes?

DG: I think everybody needs to get more involved than they have been, especially business. What’s interesting about 1631 is that virtually all opposition funding is coming from the fossil fuel industry.  Most businesses are just staying quiet, not getting involved, which often doesn’t end well, especially for the business community.

The world wants to reduce carbon––the US current leadership, not so much. So there’s  a huge global market for doing things that are going to work. I think we’re really just getting started. As we move into getting more aggressive, we’ll get into not just reducing emissions, but actively pulling carbon out that has already been emitted – going “carbon negative.”  The concept of sustainability will take on new meaning.

The US Government’s social cost of carbon projected over time are revealing, with the SCC costs rapidly increasing over time.  The entrepreneur in me sees opportunity — a lot of money that can be made, through finding better ways to solve our problems.  The role of government is to point the way, invest in needed infrastructure, and engage the private sector and population towards common goals.  There’s plenty of money looking for good investments.