Dissecting Climate Legislation Issues with E2’s Dr. Bob Epstein

March 9, 2011

JOHN SHEGERIAN: Welcome back to Green is Good, and we’re so honored today to have a repeat guest, our friend Dr. Bob Epstein, who is an entrepreneur, engineer, and he’s the co-founder of five amazing companies, Sybase, New Resource Bank, GetActive Software, Colorado Microdisplay, and most importantly, the co-founder of E2, Environmental Entrepreneurs. Welcome back to Green is Good, Dr. Bob Epstein. DR. BOB EPSTEIN: Thanks, John. Thanks for having me back. JOHN SHEGERIAN: Besides John and Patricia Adams, who changed the world together, you are truly one of those inspirational figures in the whole green revolution that we couldn’t have on this show enough, Bob. DR. BOB EPSTEIN: Well, thanks. JOHN SHEGERIAN: Well, seriously, that’s how we feel about you. You came on today to talk specifically about California Proposition 23, which would have suspended AB 32, the global warming act of 2006, which was on last year’s ballot. This is a very important topic near and dear to your heart and to many people’s hearts, and very important. Why was this so important for you, from where you sit at E2 and all the other great work you do? Why did it have national significance? DR. BOB EPSTEIN: Obviously, for California, our largest area of new job creation is clean technology, including clean energy, making water use more efficient, all those things. That is fueling a lot of the new job opportunities in California, so this bill would have crippled that. The other thing, if you look at it nationally, with everything that happened last year, the failed attempt to get climate legislation in Congress, a lot of other things that were going on, California’s a bellwether. So, California voters said, “No, we’re not going to do this anymore.” It would be pretty hard to imagine anything else happening in the United States. JOHN SHEGERIAN: Got it. Can you share for our listeners, what was the yes side of the message? What was the no side? Give both, and walk us through, because you’ve written an amazing article on this, which you’ve kindly shared with Mike and I. I’ve read it, and it was highly educational. For our show purposes, we need to get that condensed for our listeners. Can you explain the yes and no side and how the journey progressed? DR. BOB EPSTEIN: Sure. They were both pretty straightforward. The yes side called this the jobs initiative. Vote for this, and there will be more jobs in California. We all care about global warming, but we can’t afford to address it right now. Once we get our economy back rolling, we’ll be right back to it. Their message was get more jobs and stop the energy tax. JOHN SHEGERIAN: Right. And, so who funded this campaign, which is very important to understand? Explain about why the no campaign focused on clean air and not on climate. Explain that whole differential. It’s a little bit confusing to even me. DR. BOB EPSTEIN: In doing our analysis, we’re asking somebody to vote no on a proposition, so they need to give them something to say no to. They can’t exactly say, “If you believe that climate change is real and California is addressing it, just say no.” People can’t remember which way to vote, so they need to say something no to. The message was, “Say no to the dirty energy proposition,” because it’s absolutely true that if that passed, the air in California would get dirtier. So, the first message was say no to the dirty proposition. The second message is it’s brought to you by two out-of-state oil interests, and the third message is if it passed, it would kill our clean technology industry. JOHN SHEGERIAN: Got it. OK. So, let’s go back now. That’s a great point. Talk about Valero and Tesoro and how much money they put into this campaign, and why were they behind the yes side of this? DR. BOB EPSTEIN: Well, Valero was approached early in the year last year, and they were shown the polling that said if this is positioned as the California jobs initiative, it’s likely to pass, so putting your money in here is likely to provide you a return. Valero’s concern as an oil refiner, not an integrated oil company, is they were not in a good position to comply with California’s requirements to make stuff cleaner. The majors had done a lot of work, but Valero was not doing very much, so they and Tesoro looked and this and said it would be cheaper to spend our money trying to change the law than trying to comply with the law. MIKE BRADY: OK, Bob, for our listeners and for me too, what’s the difference between an integrated oil company and a refiner? I know the refining takes care of it. It suggests that integrated is from exploration to drilling to everything, right? DR. BOB EPSTEIN: Let me tell you, I had no idea either when I started on this campaign, but we were curious as to what would motivate them. We found out their only business is buying crude oil from somebody else, refining it, and selling the finish product, primarily a diesel and gasoline. That’s all they do for a living. Now it turns out, because of the success of fuel efficiency that’s really starting to happen in the fleet, the United States now has more refineries than we need. So, that puts tremendous pressure. If all you do is refine product, you’re trying to find the cheapest way to do it, and they even had to shutter some refineries because we just have too many in the United States. The integrated oil companies, on the other hand, make their money in a lot of different ways. Refineries is just one of them. So, they’re in a better position if refineries are unprofitable at the moment, they make their profits in other places, so they have a better ability to manage it. They tend to be international in their outlook, whereas the refiners tend to be domestic. And so because of those various reasons, we gradually learned that the major oil companies, we’ll call them that, generally were either neutral or they were opposed to Prop 23, and it was really almost entirely a small number of independent refinery-only companies that were supporting Prop 23. JOHN SHEGERIAN: Prior to this interview, over the past couple days, I pulled some public documents. Is it fair to say Valero put in over $4 million and Tesoro put in over $1.5 million? DR. BOB EPSTEIN: Yes, a little bit more than that. JOHN SHEGERIAN: Right. So, they put in millions of dollars. DR. BOB EPSTEIN: They put in the majority of the funding. JOHN SHEGERIAN: Wow. Unbelievable. DR. BOB EPSTEIN: And, they started early and did it off. It’s kind of a weird thing, but there’s a lot on the voters’ minds. There’s a lot of different measures on the ballot, and they have a small amount of time to look at something. So, when you see that this is being funded primarily by two out-of-state oil companies, you’re suspicious. Why should they be in here trying to change California laws? Because all they care about is the best interest of California citizens, or what’s going on? Of course, it’s completely their right. They’re companies. They stay in business by being profitable. They’re acting in a perfectly reasonable way, but the voters had every right to be suspicious. JOHN SHEGERIAN: Interesting. Bob, it’s no secret why you’re so successful. For any one person to have one of the companies that you created and the success that that brings is truly a feat in this world, but to have your serial successes, both in the private sector and in the public sector, to me, after having gotten to know you and follow you, is truly an accomplishment that most people never get to reach. What I love about you and your writing here, and what I read what you sent over and what we’ve read, your article, is lessons for the future. What did you learn about environmental campaigns by this major victory, but also the campaign itself and the journey? What are the lessons learned here? DR. BOB EPSTEIN: There’s a couple, and I’m glad you asked. The most important one is the difference between a policy and a campaign. If you go to somebody and say, “This is an important policy. Let me explain to you how it works and why you should support it,” they kind of gloss over it. It’s way too much to ask. A campaign says, “This is an objective we’re trying to achieve and why it’s worth pursuing.” And, so if you look at what we did, we didn’t have time. There wasn’t enough money or time to say, “Let’s explain to you how all these policies work and how they help address climate change in a way that’s going to make us economically better off.” They don’t have time to learn all that, so what’s the motivation? It turns out that in polling, in every state and every political persuasion, people care about clean air. If somebody’s going to dirty the air, they expect them to clean it up. So, focusing first on clean air, and then building it from there was the important policy frame. I see the same thing happening now if you look at all of the attacks on the environmental protection agency. I mean, everything from clean air to clean water, it’s being positioned as this is just government and bureaucracy run amok. We need to rein it back. The fact is that if these changes are here, your water will be dirtier and your air will be dirtier. Is that what you want? So, they’re trying to start it, if you will, the opposition, is positioning the frame as bureaucracy run amok, big government, and the right frame is not to respond to that, but to say, “They’re describing a scenario where let’s have dirtier water and dirtier air.” Who wants that? JOHN SHEGERIAN: Your message here on that lesson learned is just keeping it simple. DR. BOB EPSTEIN: And, having a frame that describes the aspirational goal as opposed to the details of the policy. I’ll give you a great example. We didn’t talk about the clean energy economy. The short phrase was cap and trade. Cap and trade is a policy detail. Who cares? What are we really trying to achieve? That’s how you lose a lot of people. So, the first thing is really having a campaign frame that’s really motivational. But then the next thing I learned is that a really good campaign has three things. It has a victim, it has a villain, and it has an opportunity. In the case of Prop 23, the victim is anybody who breathes air because dirty air hurts everybody. The villain in this case was clearly Valero and Tesoro. That was very generous of them to offer that. You don’t always get that lucky. The opportunity is the clean energy future. When you have those three elements together, people take to the streets. If I look at the fight going on EPA now just by comparison, there’s a victim, there’s an opportunity, but the villain is hidden. There’s no one player going on. It makes it harder to do, but any time you have victim, a villain, and an opportunity, I think you can make it. JOHN SHEGERIAN: Recipe for success. DR. BOB EPSTEIN: It’s a recipe for success. The other thing we learned is to be very broad-based and very bipartisan. We were very fortunate there to be able to work with former secretary George Schultz and other Republicans, including the Republican candidate for governor, Meg Whitman, to come out opposed to Prop 23. So, it wasn’t viewed as one party versus the other. It was broad-based and bipartisan. The other thing we learned is research. We all think we know what method we’d like to hear for ourselves, but we’re not always the ones we’re trying to speak to, so doing independent research, somebody saying, “This is what people will respond to, what they won’t. This is what they think, whether you like it or not.” Doing that fact-based research made a big difference. Those are the four things that maybe I knew, but now I know them really well. MIKE BRADY: So, really, to recap, I mean, what you really need to do is come up with a broad strokes message that is a concept that people can understand, first and foremost, then focus on the details, and then you need a victim, a villain, and an opportunity. DR. BOB EPSTEIN: Right. Yeah. If you can put it together like that, people can understand it quickly. When we interviewed people after the election, we had incredible recall. People remembered the messages we delivered, and a lot of the initiatives they couldn’t remember which way they voted. On this one they did. So, the say no to dirty energy, it was numbers two and three. JOHN SHEGERIAN: You know, Bob, when you interview any successful person during the ebb and flow of a campaign, or for that matter a business, from inception to liquidation, there’s always a favorite moment. What was your favorite moment in this successful campaign? DR. BOB EPSTEIN: My favorite moment was the video we put together. A friend sent me these lyrics to the song, the original song is “The Yellow Rose of Texas,” but this was “The Valero Oil of Texas Is Not the Oil for Me.” The lyrics were incredibly clever, and so then we went and we found a country western singer and a small band to record it for free. We found a recording studio to donate their time, and on a Friday afternoon they sent me this tape, a 90-second tape, and I just loved it. So, I spent all weekend pulling images together of various things, and put together a YouTube video that went viral on Tuesday, and quickly grew. It was a small point. It didn’t swing things one way or the other, but I love it when you have a campaign song. JOHN SHEGERIAN: That is awesome. You’ve got to have an anthem. How many people ended up watching it on YouTube? I love these kind of stats. DR. BOB EPSTEIN: In the first couple weeks, there were about 10,000 people that I remember seeing it, then it got spread around on Facebook, too, and we had a fairly large circulation there. JOHN SHEGERIAN: So, social media played a role here, too. DR. BOB EPSTEIN: No, the biggest media play here was Tave Media. We spent over $20 million, unfortunately, on targeting these very specific areas. My favorite part there is the opposition went live in the Sacramento area. They turned their ads on first, and so we viewed it as a test case, so we redirected some of our efforts and didn’t match them dollar for dollar, but increased our advertising in the same area. At the end of one week, the market position had moved in our favor by about 10 points, and so, that said, their best ad running against our ad caused people who vote to turn away from them. JOHN SHEGERIAN: Talk about a villain. That’s great. DR. BOB EPSTEIN: Yeah. At that point, I think they knew that this wasn’t just about raising money, that our campaign frame was the one that people remembered. They remembered the dirty energy proposition. They didn’t remember the California jobs initiative, and that’s why we won by 22 points. JOHN SHEGERIAN: That’s the next point here. When you have the numbers here, when you look back on the numbers, and everybody’s vision is always perfect in the rearview mirror, failing by 22 points in both conservative and liberal counties, lesson learned. What do you think this means? Because you’re involved with so many things, which we’re going to talk about after this, but lessons learned nationally, what is the visibility now in the future look like with regards to environmental issues, campaigns, and the fight that we’ve got to continue fighting across this great country? DR. BOB EPSTEIN: It says to me that the voters strongly care about clean air, clean energy, and clean water. They have a few special places that mean a lot to them, and if you remind them of that being at stake, you can win most of these battles. But if you end up trying to fight about which regulations changes will create more jobs one way or the other, you can’t win that argument. There is an answer, but you can’t win it that way because that’s not the only thing that matters. I mean, it’s like Toyota saying, “We could make the accelerator not stick, but it would cost jobs.” For the clean air and the clean water, it’s kind of a right that everybody has. JOHN SHEGERIAN: For our listeners out there, I know Dr. Bob is not picking on Toyota. He drives a Prius himself. He’s just giving that as an example. DR. BOB EPSTEIN: I have two Toyotas. JOHN SHEGERIAN: There you go. I just wanted to make that clear to all our great listeners. That’s a great example, though. DR. BOB EPSTEIN: But, it’s just the example that there are certain things that’s not about jobs, it’s about the public safety, and you don’t risk the public safety arbitrarily. JOHN SHEGERIAN: Right. And also as you said earlier, which is such a brilliant point, don’t muck it up with policy. Keep it to a campaign. DR. BOB EPSTEIN: That’s right. I mean, you need the right policy behind the scenes, but people need to have a belief. MIKE BRADY: You know too, Bob, it’s a very good point that you made. You countered very well because in today’s economy, I know an awful lot of people that really went online and researched both the pros and cons of AB 32, the dirty energy bill. As a jobs initiative, when they came out saying this is going to kill a lot of job, your brilliant master stroke was to say it will kill a lot of clean energy jobs and emerging technology, which are the future of California. DR. BOB EPSTEIN: That’s right. We had one debate I participated in where they said if you take all of the clean energy jobs in California, it’s 3% of the total. So, what about the other 97%? My answer there is the other 97% is dependent on affordable energy. That’s not going to happen if we just keep competing with China and India for the last drop of oil. That affordable energy, which the other 3% is working on, will come from making it more domestic sources and more alternatives to fossil fuels that are not dependent on digging in the ground for resources. JOHN SHEGERIAN: Amazing. Bob, we’re down to the last two minutes, unfortunately. Your depiction of the journey of your victory of California Prop 23 has been so inspirational for us and our listeners too. You’re a trustee of the NRDC, which is one of Mike’s and my favorite organizations. We have the great thought leaders from the NRDC on the show all the time, and also the co-founder of E2. Tell us a little bit about 2011 and 2012. What’s up to bat? What are the leaders like you thinking about and working on right now? DR. BOB EPSTEIN: Well, you have to look at the national and the state level. At the national level, there’s a reexamination of some of our foundational laws in the name of jobs and government bureaucracy, and that frame has to be turned around to where we talk about clean air and clean water, like we described. At the national level, a lot of it is defensive, with the exception that, as President Obama outlined, the opportunity to go for a very high percentage of clean energy and a proposed increase in the Department of Energy’s investment in research, there’s some great opportunities to move forward there. I hope the nation will move forward as a nation, but I know that a lot of states are moving forward, and we see a lot of opportunities. We’re moving forward in California in terms of advancing the percentage of renewable energy we have in the state. There’s a bunch of new ideas about how to make that work. It is saving people money. The cost curves have dropped amazingly, so I see states exploring a lot of different opportunities. There’s enough investment now in the area that you’re starting to see and other product prices become very competitive, so that’s really poised well. The states will do well, I feel. I’m hoping at the national level that will go well because, otherwise, China’s happy to do this off. I want a clean China, but I want them to buy U.S. products. In the next two years, that’s the dynamic I want to fix. JOHN SHEGERIAN: That’s what we all want, and I think that’s just a great way to end today. Of course, Dr. Bob Epstein, you are always welcome here. You continue to be an eco-visionary, an eco-preneur, and you’re truly living proof, Dr. Bob Epstein, that green is good.