Marketplace - All in on clean energy

Episode Date: March 25, 2024

The Biden administration, through legislation like the Inflation Reduction Act, has its sights set on facilitating the transition to clean energy. But can the federal government control clean energy supply and demand? Is decarbonizing the industrial sector even possible? We’ll dig in. Also in this episode: Boeing’s CEO plans to step down, homes remain unaffordable despite new supply and mobile home residents come together to secure stable housing.

On the program today, ticker symbol B-A. Here's a hint, it's not British Airways. A-I as well, if you're looking for more initials. From American Public Media, this is Marketplace. In Los Angeles, I'm Colin Rizal. It is Monday today, the 25th day of March. Good as always to have you along, everybody. We start the program today with a company that's seen a lot of, well, turbulence the last couple of years. I'm sorry about that, but it's true. Boeing has been up against airlines and regulators, both of which are calling for big changes after quality and manufacturing defects that have killed hundreds of people and spooked some large part of the flying public.

Those changes, as it turns out, came today. CEO David Calhoun is going to leave at the end of the year. The chairman of the board is going to step down, too, and the head of the commercial airplanes unit is out now. Here to break it all down is David Slotnick. He's an airlines business reporter at the travel site The Points Guy. David, good to have you back on the program. Thanks for having me. It was, I think if you read the tea leaves, only a matter of time before big changes at Boeing. What do you suppose took them so long? You know, it's hard to say. You have to wonder if they thought they could ride it out or if they wanted to have more of a succession plan in place. But, you know, I would certainly agree that this was inevitable.

Also, Calhoun, by the way, sticking around to the end of the year, that's transition time, right? He's going to give the board time to find somebody else who can do this. Yeah, exactly. It's a big company and that kind of just sudden shock, I think, would be difficult for it to manage through. Let's talk about the culture of Boeing for a minute, because so much of it has come down to the culture of safety or perhaps the lack thereof. Boeing used to have the highest possible reputation manufacturing in this country. What happened? Yeah, it did through the 90s. You know, they merged in 1997 with McDonnell Douglas, which was another aerospace firm, another American company. And it had a notorious reputation for basically bean counting. It was seen as a company

that led, made decisions by finance only. It wasn't really engineering led. And, you know, I think critics would say that Boeing has sort of absorbed that culture, and that's what's become the predominant factor there. Do you suppose they can turn it around? I mean, I grant you this is a crystal ball, spitball kind of question, but what do you think? experts and analysts and everyone. And I think the general consensus is that's a really hard thing to do, right? Turn around 30 years of culture at such a big company. Can it be done? Sure. But, you know, I think we would maybe need to see more changes than just a CEO and just a couple executives. It's worth a note here that the woman who is going to take over the commercial airplanes unit, which is, of course, responsible for the 737, is a Boeing insider. What does that tell you about the prospects for change? Yeah, absolutely. I mean, what these critics are generally saying is we need something,

but we need something from the outside to just reset the culture. And what we're seeing is this person taking over who doesn't have much of an engineering background, has been in financial roles and various executive roles at different divisions of Boeing. So I think a lot of people would say that there's not much change there. Yeah. Of note here, this is the second Boeing CEO in a row, I believe, to, I mean, I don't, you know, Calhoun said he's going to retire, not being fired, but certainly he's being squeezed out. Dennis Muhlenberg also about four or five years ago was forced out because of 737 problems. That that cannot possibly be a good sign.

Yeah, I mean, there have been a number of Boeing CEOs since the merger who've left under not great circumstances. You know, I think it's telling that Muhlenberg left during the last Boeing 737 MAX crisis. And now we're on to the next one. All right. So, look, what happens if Boeing cannot fix this? You and I talked last time about the fact that, you know, you got Boeing and you got an Airbus and that's about it. You know, there's a Chinese startup, but they're decades away from competing. What if Boeing can't do this? You know, frankly, no one knows. I think a complication here. Well, there's two complications. One, Boeing is in a lot of ways too big to be allowed to fail. It would devastate the global markets. But beyond that, you know, Airbus is booked up for deliveries through the 2030s, through the early 2030s. Boeing is too, to a degree. But there's just too much demand for airplanes for Boeing to suddenly stop producing them.

But there's just too much demand for airplanes for Boeing to suddenly stop producing them. So one way or another, I think Boeing is going to stick around and continue to make airplanes. I think that really it's up to regulators, shareholders, the board to try and just make sure it's doing it properly. David Slotnick at The Points Guide. David, thanks for your time and your expertise. Appreciate it. Thanks so much. Appreciate having me on. Boeing shares today up 1.3% down, almost 24% year to date. Elsewise in American capitalism, off were the major indices. We'll have the details when we do the numbers. We've been getting a whole lot of housing data of late. Last week, it was existing home sales in February up 9.5%. That's from the National Association of Realtors. Today, it was February new home sales down a bit month to month, up 6% from a year ago, so says the Commerce Department.

More homes trading hands seems like good news for a housing market that has been sluggish, to say the least. But that does not necessarily mean homes are any more affordable. Marketplace's Justin Ho is on that one. There is some good news on housing affordability. Mortgage rates are down almost a full percent from October of last year. But I think you know where I'm going with this. You know, when you sort of zoom out, affordability is still very, very low from a historical perspective. That's Odetta Cushy, deputy chief economist at First American. She looks at affordability as a factor of home prices, mortgage rates, and household incomes. And even though incomes have been rising.

Unfortunately, the rise in household income has not been enough to offset the impacts from rising mortgage rates and higher house prices. Cushy says when you take mortgage rates, housing prices, and incomes into account, homes are 44 percent less affordable than they were two years ago, before the Federal Reserve started raising interest rates. Charlie Dougherty, senior economist at Wells Fargo, says even if people's incomes rise further... The problem is that home price depreciation is likely to continue probably a little bit quicker than income goal. The big issue here, Dougherty says, is housing supply. There still just aren't enough homes to meet demand.

That said, the supply picture isn't quite as bad as it was last year. So more supply is starting to come to market. I think actually lower mortgage rates helps explain that. That's because homeowners are more willing to sell if they can find a decent rate for another home. Chen Zhao leads the economics team at the real estate company Redfin. She says that could help to slow down home price appreciation. So I'm not saying that prices will fall, but I do think that prices may become much more flat than we have seen in the last couple of years. Zhao says home builders have also been offering

to buy down people's mortgage rates. They're also focusing more on building homes that are within reach. Think fewer square feet. So that's good news for buyers, right? There's more affordable homes on the market, but you know, the catch is that you're getting a smaller home.

And all these little bonuses, Zhao says, are not going to solve the affordability problem. You can think of them more like bandages. I'm Justin Ho for Marketplace. The European Union is more intentional, shall we say, in regulating technology and big tech companies. Just ask Apple and Google and the other U.S. technology companies on the receiving end of fines and sanctions well into the nine or more digits. Earlier this month, the EU passed the first major legislation regulating AI, the EU AI Act, if you want to look it up and if you want more initials. It says companies are not allowed to use AI to read worker emotions. It requires some AI-generated images and audio to be labeled as computer-generated,

and it requires high-risk AI systems to be safety-tested. Passing those rules was hard. Arguably harder for the EU, the U.S., or any government trying to regulate AI. Finding the humans to prevent all those nightmare AI scenarios from actually happening. Marketplace's Matt Levin takes us inside the global talent search for AI regulators. The newly created European AI office recently hosted a virtual after-work event for tech talent. Welcome to our information session about the job opportunities. They're trying to fill 30 technical positions, computer scientists, software and data engineers, hardware experts.

These are the folks who will help test whether the most cutting-edge AI systems are biased or can offer a recipe for a biological weapon. And about seven minutes into the presentation... So the presentation just came to an abrupt stop, looked like a technical difficulty. Now we're seeing a stay tuned, we'll be live soon. This actually happened twice during the webinar. And sure, glitches happen to everybody, although the OpenAI hiring presentation, maybe less so. Gerard de Graaf is the EU digital envoy to the United States. A lot of his job now is recruiting AI talent

from his post in San Francisco. And about those webinar glitches? I like to think it because it was maybe a session that was oversubscribed or so, or blame it on the video conferencing facility. He says the perception that governments aren't great at tech isn't really a hindrance, at least for Europe. The big obstacle in luring the young Stanford

and Berkeley grads he's trying to recruit? It's the obvious one. The money. If you're offered like maybe a couple hundred thousand dollars from like an AI company here in Silicon Valley, so that's hard for us to compete on. It'll vary by position and experience, but de Graaf says the beginning salary for a junior-level EU technologist with a master's degree would be between $65,000 and $80,000. The Googles and Metas of the world can offer a lot more, which is why de Graaf appeals more to heartstrings than wallets. If you want to have an impact on society, if you want to be able to tell your parents and in the future your kids, look, I was there, I helped shape, I made sure that we put

AI to good use, then to work in the EU AI safety office is a fantastic opportunity. Part of de Graaf's challenge is because generative AI is so young, there really isn't a huge talent pool he can draw from yet. Jack Clark is the co-founder of Anthropic, the company behind AI chatbot Claude. He's also a member of the federal government's National AI Advisory Committee. I think it'll be a few years till you have a surplus of labor here.

Clark says the good news is that for plenty of AI safety jobs, you don't necessarily need a PhD in computer science or math. It's less hacking and more the ability to trick machines into doing things they're not supposed to do, like making that biological weapon. If I'm testing out an AI system, I basically come up with prompts or tests that are mostly written in plain text. You don't need very, very rare elite tier qualifications. If you look at the EU or US federal government's job postings around AI, you'll see lots of openings for technical talent, basically people good with computers.

But Brandy Nonicky at UC Berkeley's Goldman School of Public Policy says considering how many parts of life AI will and already does touch, the public sector should also be looking for more social scientists, like economists and anthropologists. We cannot regulate or oversee this technology just from the technical side. Good regulators shouldn't just be experts on AI. They also need to be experts on humans. I'm Matt Levin for Marketplace. There is no AI involved in the production of our podcast, just lots and lots of humans. You can check it out at marketplace.org or follow us on the platform of your choice. As you might imagine, we love a good reference to Econ 101 on this program.

So we direct your attention now to the recently released economic report of the president. Nearly 500 pages of insight into the Biden administration's economic priorities, one of which is the clean energy transition and what government's role ought to be in tinkering with that basic economic concept of supply and demand. Marketplace's Elizabeth Troval explains what's going on. In a growing U.S. economy that's dependent on fossil fuels, the invisible hand just ain't cutting it when it comes to addressing climate change, says Noah Kaufman with Columbia University. Future damage is caused by greenhouse gas emission. Markets left to their own devices

won't capture those in prices, so we need policies in place to do that. And do it fast, which is why the White House calls the energy transition towards net zero emissions a structural change. And supply and demand can help us get there. Billy Peyser is with the think tank Resources for the Future. You can either try to make the fossil fuel use more expensive through regulatory approaches, or you can try to make the alternatives to fossil fuels cheaper. The government has done the latter. It's invested in renewable technology, research, and infrastructure through things like tax credits that can boost supply.

Akshay Jha is with Carnegie Mellon University. When I think about supply-side policies, I think about what are policies that can be put into place to incentivize these suppliers of electricity, suppliers of, let's say, electric vehicles, suppliers of installers of heat pumps to do more of these activities. These are the kinds of incentives in the Inflation Reduction Act and bipartisan infrastructure bill, which are also concerned with demand, like boosting demand for batteries through tax credits. Though Jha says we should also think about reducing demand for energy. There are incentives in place to make your home more energy efficient, meaning you can use less energy to heat or cool the same amount.

Of course, another market tool for addressing the energy transition, a carbon tax, still lacks political support. I'm Elizabeth Troval for Marketplace. Not for nothing, but we are doing a whole series on this program about how the Biden White House is trying to change the government's role in this economy. It's called Breaking Ground. You can find it on our website, marketplace.org. Coming up. Some of these meetings looked like the U.N.

I mean, it was pretty incredible. Kind of does take a village, you know. First, though, let's do the numbers. Dow Industrials off 162 points today, 4 tenths percent, 39,313. The Nasdaq subtracted 44 points, almosttenths percent, 16,384 there. The S&P 500 gave up 15 points, about three-tenths percent, 52 and 18. Wall Street seemed pretty sanguine about that management shakeup at Boeing that we talked about up at the top of the program. Shares ascended, as I said, one and a third percent. Related shares in United Airlines went down three and four-tenths percent today after the FAA announced its increasing safety oversight of the carrier

due to a series of events, including at least two involving Boeing aircraft. EV maker Fisker says its efforts to hook up with an established automaker have broken down. That may leave the company on the brink of bankruptcy. Fisker slid more than 28% today, well under a dollar a share. Halted trading. That one did. Bond prices fell. Yield on the 10-year T-note up 4.25%. You're listening to Marketplace.

This is Marketplace. I'm Kai Risdahl. As Elizabeth Troval was talking about just a minute ago, the Biden White House is dabbling in the clean energy market. Today, the Department of Energy announced $6 billion from the Inflation Reduction Act and the infrastructure law for several dozen projects that will, one hopes, help clean up American industry and help make clean manufacturing cheaper. Iron, steel and cement, food and beverages, glass, paper and chemicals,

all industries that the DOE says generate a lot of emissions but are really hard to decarbonize. Marketplace's Samantha Fields has that one. Making cement, steel and glass requires a ton of energy, and much of that energy comes from fossil fuels. But Joe Shapiro, an environmental economist at UC Berkeley, says that's not the only reason these industries generate a lot of carbon emissions. Take cement. Cement is basically cooked limestone mixed with some other materials. And this is a little bit nerdy, but the chemical formula for limestone

is CaCO3. And you notice that C in the middle, that's carbon. And he says when you heat limestone to make cement, that carbon gets released into the atmosphere. Around half of the greenhouse gas emissions from manufacturing cement are from the carbon built into limestone and not from energy or burning fossil fuels. So even if you were able to transition fully to using renewable energy to make cement, you would still have a lot of greenhouse gas emissions because that carbon is built into the limestone. Some of the projects the Department of Energy is funding are focused on developing new ways to make cement with something other than limestone and new ways to make iron and steel,

too, without coal. It really is redesigning an industrial process. Stephen Nadel at the American Council for an Energy-Efficient Economy says that's challenging, but it's also critical for the environment and the economy. About a quarter of U.S. carbon dioxide emissions comes from industry, whether it's cement and concrete, chemicals, aluminum, steel. And realistically, Barbara Cates Garnick at the Fletcher School at Tufts University says private industries aren't going to invest enough in decarbonizing on their own. They see huge risks. They see huge investment. You need to have government funding in all of this.

To make it happen more quickly. I'm Samantha Fields for Marketplace. Let's do a little more affordable housing now, picking up where Justin Ho left off a little bit ago. We don't have enough of it, first of all. That much is pretty well understood. Less clear to many is the makeup of American housing stock and the role that it plays in affordability. Mobile homes are what I'm talking about, an often overlooked but crucial element of affordable housing. Although residents might own their manufactured home or trailer outright, they do usually have to pay rent for the land that that home or trailer sits on. Here in California, a group of mobile home park residents has done

something extraordinary. They've bought their park from their corporate landlord, but as KQED's Mari Bolaños reports, the road to get there was not easy. When Juanita Perez Sierra was seven years old, her parents moved their family of eight from San Miguel Cuevas in Oaxaca, Mexico to the U.S. After weeks of living out of their van, her parents purchased a home at Shady Lakes Mobile Home Park in Fresno County. They were very happy to have a place to call home, she says. Perez Sierra's family was one of the first from San Miguel Cuevas to move there. That was some 30 years ago. Now the vast majority of the park's 60 families are from her same Oaxacan village. They always felt safe there. The landlords were easygoing. And then she says the situation seemed to change overnight. In 2019, a Stockton-based corporation

named Harmony Communities California purchased the park. Several residents say the new landlord started enforcing different rules and issuing eviction notices. Resident Marcelino Santos says he began to worry his family would get kicked out and become homeless. No teníamos idea dónde íbamos a ir. The community is made up of mostly farmworkers. They'd chosen the park because of the low rent. But soon after Harmony came in, residents say the company increased rent by more than 30 percent. So the residents decided to fight back. They formed the Grupo Comunitario de San Miguel Cuevas and got legal

aid. They sued Harmony over alleged poor management of the park and retaliation against residents. Harmony declined an interview and did not respond to questions about the allegations. As the lawsuit moved forward, something unexpected happened. A nonprofit that helps residents form housing cooperatives got in touch. And began having conversations about the potential of this park becoming a resident-owned community. That's Mariah Thompson, the resident's attorney. To sort of take those mobile home parks off the free market, off the private investment market, and so they can remain resident managed and affordable.

Under that model, the residents would each have part ownership of the park. They'd be able to make decisions about how much rent to charge, park finances, and operating rules. Thompson says residents were hesitant at first, but after months of organizing, they were ready to take on the challenge. It took a ton of coordination on the part of residents to get 52 families to attend the Zoom meetings, not to mention the multiple non-profits. Then there was the matter of language, English, Spanish, and Mixteco, the local language in Oaxaca. Some of these meetings looked like the U.N. I mean, it was pretty incredible.

They also had to get the funding, more than $7 million to purchase the park. That required yet another organization to help them with state loans. Eventually, the corporation agreed to sell the park to residents if they dropped the lawsuit. the corporation agreed to sell the park to residents if they dropped the lawsuit. In all, the entire process took five years, three non-profits, and the unflappable will of residents. They finally closed the deal in February. Marcelino Santos says he hopes their story serves as an example to other mobile home park residents. He says if they can do it, others can too. In Fresno County, I'm Adibo Laños for Marketplace. This final note on the way out today,

prompted by regular gas being $5.09 a gallon at my local Shell station. That was yesterday, might be higher now. Crude oil today, U.S. benchmark West Texas Intermediate, up another percent and a third today, $82 and a change of barrel, 70 bucks. At the beginning of the year, it was. Our daily production team includes Andy Corbin, Elise Hassan, Maria Hollenhorst, Sarah Leeson, Sean McHenry and Sophia Terenzio. I'm Kai Risdahl. We will see you tomorrow, everybody. This is APM.

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