Anita and Shirley talked about a wide variety of issues related to the energy transition, and the ways in which large companies respond to transparency dilemmas.

1. What is the transparency dilemma in the energy transition?  I think I’ve got the intuition behind the theory:  I tell you about my great idea because I need you to fund or buy what Im selling, but now you can copy my best insights.   Given the urgency of the climate crisis, how does this dilemma block energy companies from making green transitions?   Is it really preventing companies from innovating in nuclear, for example, or in reducing reliance on dirty sources of energy? 

Shirley's reply:  The dilemma is a paradox. This goes all the way back to a famous publication by Kenneth Arrow in 1962.  In her dissertation, Shirley called this a paradox because she wanted to say that there is something different here in that there are layers of tradeoffs that add up to create very difficult decisions about disclosure for corporate leaders.   At the same time, corporations sometimes rely on technology that is harmful for the consumer or the environment.  Non-disclosure clearly might be in the interests of preventing controversy as well as of protecting innovations.

1.  What are the layers of the transparency dilemma?   This sounds so awkward, but let me see if I can ask this question clearly.   For an innovator, transparency is two-sided because disclosing something makes me vulnerable to a competitive attack as an innovator. But for a polluter, transparency is two-sided because disclosure makes me vulnerable to criticism for the polluting.   So can’t a company hide behind a claim that it’s innovating when what it’s really doing is trying to hide its polluting activity?   Does the transparency dilemma provide me with a way to hide my bad behavior?

Shirley talked about the dilemma as evoking all these layers.  The short answer is “yes,” all these layers are in place.

1. How can we as environmental advocates be smart about this?  How can we overcome the complicated arguments that a company might make that it needs secrecy to protect its competitive edge while truly it needs secrecy to protect itself from being held accountable for its impact on the environment?  Should we make it safer somehow for companies to disclose?

We see the complexity play out in what Shirley calls “heterogeneity,” which is shorthand for differences across companies.   To root out bad behavior, we need data; we need proof.  If we can show data using rigorous data to show that there is bad behavior, then we can do something about it.  This requires various legal and governmental processes to get behind what’s really going on.  Targeted prosecution is what’s needed, she said.

1. Anita asked Shirley how we get both accountability and innovation.   We all agree that energy companies are critically important to our safety, productivity, economic prosperity…  really our whole way of life.  And over a period of centuries, exploration, extraction and production have had consequences that we now need to change on an enormous scale, which means that we have to find public policies that reshape behavior in a very big and internationally scaled way.    What are the kinds of public policies that you feel are going to be relevant for this?  How do we hold companies accountable for knowingly harming the environment while, at the same time, encouraging them to innovate at scale?  Do we need new transparency regulations?

Shirley is motivated by the challenge.   She described a Lancet article on chemical emissions in the US and found that company leaders were asking for protection from being held accountable for earlier behaviors of their organizations.  This is what sparked her research in this area on energy.

Some ideas for how to approach include appointing a third-party auditor that can assess whether proprietary technology is truly proprietary.   A compromise may be to randomize investigations to assess harmfulness of technologies to see if the best tech is being held back.  

Another approach is to address the argument that tech is critical for their long-term growth.  She asked, how about a tax credit to reward tech development?  We are used to the idea of using tax credits to encourage grand technologies.  If companies are saying they need to be protected, this is a way of overcoming that objection.   We need a plethora of tools.

Anita asked:  What about accountability though?   Shirley noted that many people in industry are very sensible and would even say that there is evidence of corporate secrecy to protect against accountability.   If we do a reckoning across time, that’s got to be very robust.   We may need more regulation, especially in the U.S.

1. How does variation in transparency rules across countries map to international competitiveness of nations?  Shirley is a citizen of the world, with experiences in China, the U.S., Italy, and elsewhere in this industry.   The international issues here are mind-bending.   Anita asked:  What are your thoughts about how variation in transparency rules across – and between – countries (and here I am thinking of China and the U.S.) map to the prospects for a clean transition and energy prosperity for these countries?   Does the U.S., for example, prevent innovation or encourage innovation through requirements on its companies for greater disclosure and transparency than may be in place in China?  Does transparency make a country that seeks to encourage innovation in clean energy more vulnerable to a loss of energy security through competitive imitation by foreign companies?

Shirley sees regulation in the EU as most advanced.  The EU does not allow trade secrets at all.  In contrast, she said, China is not focused on regulations, although many companies are socially responsible in the sense that they are state owned.  China puts business interests first in many instances.  In contrast, she said, the US is more progressive.  The public in the US does care a lot about innovation, but also engage in scrutiny of companies that can be intense.

Energy security, said Shirley, is a top priority.  The company that Shirley worked for was established for energy security in China.  This is evident in the US especially with political polarization. The solution has to be a systematic energy revolution.  This is the innovation agenda.  Chemicals and fracking is a very small issue in the big picture.

1. Are you optimistic that greater transparency requirements can encourage a clean transition that will occur fast enough and on a large enough scale to prevent warming above 1.5-2 degrees C? 

Shirley is optimistic.  But she doesn’t think that the energy revolution is going to come from the established big companies.   Methane reduction, carbon capture, etc., may come from the current companies but not the fundamental change we need.

Anita asked:  Shouldn’t we hold the big companies accountable, then?  If innovation is going to occur elsewhere, why do we need to protect them from transparency?   Shirley talked about the range of innovations we need.  We need both small and large breakthroughs to get through this.  We need offshore drilling by, for example, by medium-sized innovators, and at the same time, the scaled change that is accessible to large innovators in areas like nuclear and hydrogen.   For large energy companies, the approach might be to threaten the innovators.

But in the end, Shirley is optimistic that a clean energy revolution will occur.