Rural Economics and Social Systems in the Clean Energy Transition (Text Version)

This is the text version for the Rural Economics and Social Systems in the Clean Energy Transition video.

Female: Food systems are becoming more high-tech and require new energy types from farms to factories. How does this impact real economies and social systems? As part of its tenth annual meeting, the Joint Institute for Strategic Energy Analysis welcomed former U.S. Secretary of Agriculture Tom Vilsack, for virtual open dialogue about how rural places can thrive in the energy transition. Secretary Vilsack is also president and CEO of the U.S. Dairy Export Council and was 40th governor of Iowa, which in part, due to his energy goals, has the highest percentage of wind energy in the United States. The conversation was moderated by former Colorado governor, Bill Ritter, member of the JISEA advisory council and director of the Center for the New Energy Economy at Colorado State University. All right, let's jump in.

>>Tom Vilsack: I think there is a growing recognition and a growing understanding of two things. One, people are beginning to realize that our food and agriculture industry is a pretty important one. This pandemic, I think, has underscored it. It is an industry that represents, directly or indirectly, 28 percent of the workforce of America. It's one of the reasons why we're seeing so many unemployed people today because when the food service, restaurants, and so forth were shut down, a lot of those workers in those facilities, obviously, lost their jobs. Some of them are not going to get those jobs back. It represents and it impacts about 20 percent of America's economy. So, the food and ag industry, mostly centered in rural places, is a really big deal.

When we have a pandemic and we say to people, "Go home, do your work from home, kids will be taught online, you'll have access to health care online," the reality is, in rural places, many students don't have access to the internet or don't have access to high-speed internet. People aren't able to work from home as conveniently as they do in urban suburban areas. So, there's a growing awareness, I think, of this infrastructure gap that needs to be addressed. Hopefully, as Congress and state governments are looking at expenditures of significant monies to restart the economy, we not only will restart it but we need to rebuild it. I think one of the great opportunities for rebuilding and rebranding and reshaping the American economy to be a much more sustainable one starts in rural places.

So, first and foremost, there needs to be an effort by Cabinet members and by those in the federal government who have a direct responsibility for rural places to be able to market what they do and to be able to explain to people that, in fact, this is a department that needs to be adequately funded because it does represent 15 to 20 percent of America's population, 70 percent of America's landmass at number one. Number two, as we deal with some other emerging issues that have as much of a threat to this country as the pandemic currently is – I'm thinking of climate – if anybody wants to get serious about climate, then they need to understand that the solutions don't start in the middle of New York City. The reality is rural America is where a lot of the solutions will be developed and implemented. So, it will, again, make another incredible contribution to the security of this country.

Third, people take for granted the food security that we enjoy in this country. I think it's going to be important for federal officials to understand that we are a more secure nation because we can feed ourselves. So, we have this amazing advantage over virtually everybody else in the world. Finally, when you look at the cost of food in this country, it is relatively inexpensive as a percentage of our income. So, we have a tremendously complex economy in large part because we have relatively inexpensive food.

So, as you begin to market the benefits, the advantages, the things that rural America does, you then begin to say, "Well, geez, this is a really important place. It provides our energy, provides our food, food security, national security. Good Lord, climate. My heavens, we have to pay attention to this place." Because it is essential to mitigating the consequences of climate. It is essential to ensuring that pandemics don't spread. We all need to do a better job of marketing what rural America does to everyone else so that there's an understanding that this is an important place and requires investment and attention.

>>Bill Ritter: I referenced you earlier at the Western Governors Association. They had their initiative for 2019-2020. It was the North Dakota governor, it was his initiative. It was called Reimagining the Rural West. One of the number one – the number one recommendation is connectivity. Let's just turn to that and how important connectivity is because while this is about the Rural West, I think it really is about all rural places in America. If there's not connectivity – I'm talking now about broadband connectivity – it really does impact their ability to do different kinds of economic development that would certainly assist them.

>>Tom Vilsack: In a sense, we're sort of like a developing country. In many developing countries, they've been able to leapfrog from old technology to brand-new technology. As we're introducing 5G, maybe Rural America can actually catch up more quickly once we pay attention to this issue. So, that's number one. Number two, this was one of the most frustrating things when I served in office. I would constantly hear the private sector say, "No, we're working on this. We understand we've got to connect folks in rural places."

But the reality is they could never make the business case inside their boardroom to make the kind of investment required, because it's pretty hard to make an investment when you've got 300 people living in a community – right – and 200 of them don't even know how to use all of this stuff. So, this is something government must do and must do in a very large and significant way. Now, with the pandemic, now with the need for us to invest to keep this economy rolling, now is a perfect time for the government to make a substantial, I mean a substantial investment with the understanding of bring not the old technology but essentially the newest technology to rural places.

High-speed internet access isn't the cure. The cure is an economy that generates a lot of activity that requires this infrastructure. The infrastructure basically supports the economy. What do we have in rural places? What we have is a tremendous natural resource.

Historically, what we've done with that natural resource is we've basically just extracted stuff from the ground. When we extract it, it's a commodity. It's put on a truck or it's put on a barge or it's put on a train and it's taken someplace else. That someplace else then takes that commodity and turns it into something incredibly more valuable and creates opportunities, lots of good-paying opportunities doing that. Then sells it back to the very place that generated it at a higher cost.

So, what we have to do, I think, in rural places is to sort of reverse that. We have to recognize that we should be not in the commodity business but in the ingredient business. Because ingredients are value-added. I think there is a tremendous capacity in rural places – and it's in the West for sure, but all over the country – to essentially beginning to transition this economy from an extraction economy to something that is much more sustainable and much more profitable.

>>Bill Ritter: Well, what's interesting about that, Tom, is people hear you say that and they may think you're referring just to food. But if you think about food, if you think energy, whatever type of energy we're talking about, whether it's fossil fuel or renewables, biowaste, or water – in some cases, water – we're extracting it from rural places and taking it to other places and, in some cases, like you said, selling it back to them at higher prices. In all of those different aspects, not just in the food aspect.

>>Tom Vilsack: We've got to change that dynamic. We have to change it not just for the benefit of rural places and rural people, but we also have to do it to sort of reduce the stress and strain on cities and suburbs. Many of these cities are getting overcrowded. Many of these cities are – a lot of people in this pandemic are now beginning to question whether or not it's such a great idea to have so many people concentrated in these cities. So, the challenge here is to create an economy that allows rural places to thrive, not just survive.

That's the other thing. You talk to rural folks – God bless them. We'll say, "You know, if we can just keep our school, if we can just keep that hospital going, we're going to be okay." Well, they're always talking about tax-supported institutions instead of tax-paying institutions. They need tax-paying entities to be able to support people and then people then support the schools and the hospitals. So, the key here is for there to be a national initiative recognizing the importance of rural places to invest, not just in the infrastructure, but to invest in a new economy.

>>Bill Ritter: This is a good place to segue into a discussion about rural America and the energy transition. When I served as governor, coal was the main source in Colorado for energy portfolios for utilities. It was really true around the country. By 2035, we'll probably only have 5 percent of all the coal that existed in 2008 will still be – there will still be production from it.

In the West, there's no new net natural gas in that same timeframe since 2008. There's new natural gas, but there's old natural gas that went out. Most of it's been replaced by renewables, most of it in rural areas. One of the interesting things is the coal-dependent communities are in Rural America and, also, like you said, where we extract natural gas is largely rural and where we are building renewable resources, either utility scale or distributed, are in rural areas. So, talk about how you view that energy transition, Rural America's part in it, and whether or not it represents an opportunity.

>>Tom Vilsack: Well, first of all, Bill, I think, when we talk about transitions, I think, the country, we, as a country, do a very poor job of that. We really don't prepare people for the transitions that are taking place. We don't create new opportunities to redirect them so that they don't suffer significant unemployment or a significant change in their quality of life because the job they once had is no longer or the job that they once had – they now have a job that pays significantly less. So, as we transition, I think we need to take a look at the system that we use to help people and help industries transition to a new day.

One of the areas, I think, often that is misunderstood or perhaps not appreciated is the opportunity for agricultural waste, biowaste, biomass to be utilized in a way that creates energy and also creates additional revenue sources for farmers so that they are not necessarily solely relying on a commodity that they're selling. They need alternative revenue sources. One revenue source is the conversion of agricultural waste into energy, into renewable regenerative. That's one opportunity, I think, that we're going to see a lot more of. Obviously, there's some deep concerns that have been expressed about livestock, animal agriculture. One way of responding to those concerns is by a concerted effort by American agriculture to become a net zero emitter. So, you create new opportunities.

There's obviously the wind and solar, another opportunity there. In fact, on any given day, 30 to 50 percent of the energy that's used in Iowa is wind. Tremendous opportunities there for this transition and for many industries that will spawn from that commitment and allow folks to transition from the old way to the new way and to do it in a less-disruptive way than we've seen in the past. The coal folks, your heart goes out to them because – the coal miners, the people that for generations, this is what they did and communities relied on it. Then, all of a sudden, decisions were made everywhere around the world to stop doing this or not use as much of it.

That has been incredibly disruptive. That creates animosity. It creates stress. It creates that division we talked about earlier. It creates the sense that people don't understand or don't care. I think we can do a much better job of that that we have.

>>Bill Ritter: So, one of the interesting things about that is – I run the Center for the New Energy Economy at Colorado State University. We pay a lot of attention to this, particularly in the West. We have an opportunity to really do something, I think, for coal-dependent communities because the closers are coming in 2028, 2030, 2032. So, we have a real opportunity over 8 or 10 or 12 years to go into communities and help in this transition.

I'll give you another data point. If you were to pretend every state in the country is its own country and you mapped out the portfolio of wind that's used around the world, Denmark would be the number one country for wind. Iowa would be number two. South Dakota would be number three. So, you did a real good job of building that economy.

So, it strikes me that in talking about needing an economy in Rural America, you talked about it before, to change from extractive to regenerative, that there's some elements of that. Again, let's just spend a little bit of time on the energy side and the food side, what would it mean to transition that away from an extractive economy to a regenerative economy?

>>Tom Vilsack: Well, let's start with a vision of American agriculture and food production being zero emissions. Currently, today, I think the U.S. agriculture contributes about nine percent of our emissions. What if we could eliminate the nine percent? What would it mean? Well, first of all, it would mean significant changes in the way in which we treat our land in terms of conservation, in terms of crop production, in terms of diversity of crop production, in terms of cover crops, of a wide variety of opportunities to create the kind of biomass that can be converted into energy.

So, essentially, what we need to do there is create the vision and then understand that in order for that to take place, farmers need partners. They need folks who are going to be willing to help them make this transition by creating revenue sources in markets so that they can – that allows them to diversify their income portfolio. Instead of just producing a single crop or a couple of crops or raising livestock, they have multiple ways to generate revenue.

Then you create ecosystem markets where you basically say, "If a farmer does X, Y, and Z, which we will know will sequester carbon and store carbon, we will be willing to pay that farmer to do X, Y, and Z." That creates another revenue source. If we create manufacturing facilities that convert agricultural waste into energy and to fuel and to chemicals and to materials. That creates another revenue source for the farmer, but it also creates new jobs from those folks who are transitioning from coal-dependent communities to a new bio-based manufacturing economy. That is regenerative. It's sustainable. It creates ingredients, not commodities. It transitions waste into something valuable.

As you create those kinds of jobs, you also create the marketing jobs, the sales jobs, the financing jobs, the accounting jobs, the marketing jobs, the repair and maintenance jobs, all of which help to support rural communities. Now you don't have to worry about if there are going to be enough kids in the school to be able to keep the school open. Or you're not going to have to worry about attracting a doc or two to a community because there's going to be plenty of opportunity for that doc. That hospital is going to stay open. That clinic is going to be supported.

Now, all of a sudden, you've got better paying jobs. You have an understanding and appreciation for what people in rural places do. So, that rural divide that we talked about begins to shrink. You also have opportunities to take some of the pressure off growing cities in terms of better distribution of people.

That's, to me, what we should be doing. We should be looking at that kind of future. When you create a diversification of crops, because you're reducing emissions, you also create the opportunity for those diversified crops to be sold more locally and more regionally so that you're not transporting them over thousands of miles, creating a large carbon footprint. So, all of a sudden, you've got an economy that people can really be proud of, an economy that's on the cutting edge. It's doing things that are innovative and creative.

You've got America leading agriculturally to a new day in terms of emissions which allows us to sort of export that technology, export that knowledge, export what we know to the rest of the world. It will enhance America's image around the world. But it's going to require partnerships. You can't expect farmers and ranchers and landowners to do this on their own.

I'll just give you one data point so that people understand how hard it is to be a farmer. In the best year we ever had in farm income, which was 2013, '14, 75 percent of the farmers in this country made $10,000.00 or less from their farming operation. The best year ever. Now I guarantee you, that's not happening today. Right?

>>Bill Ritter: Wow. Yeah.

>>Tom Vilsack: So, you can't ask that 75 percent of those farmers to say, "Hey, spend a little bit more money to put a cover crop in," if there's no market for that cover crop. Or, "You really ought to be doing this more sustainable practices over here," when it's going to cost money. You need to have a partnership where government is supportive of this, where ecosystem markets are supportive, where corporations and foundations that want to talk about how sustainable they are or they want to be able to market their products as being sustainably produced. They have to have skin in the game and they have to partner with farmers and to create a structure and a system that creates the revenue that allows farmers to do this and creates the opportunities for us to have a much better, vibrant rural economy.

>>Bill Ritter: Thank you. We looked at Colorado, when I was governor, and over the last 20 years, the prior 20 years. The average profit in all ag was about two percent in any given year, over a 20-year period. There were losses and there were gains. But the average over that 20-year period was 2 percent. There's no other sector that really survives with those kinds of numbers. It seems to me like – well, people in Rural America often don't feel like they're heard in the state capital, and Washington, D.C. There's also – there's just the politicization of some of these things that I think impede the vision. People who represent Rural America are often not the champions of doing the things that would be necessary to fulfill the vision you just articulated.

>>Tom Vilsack: You know, Bill, I think folks have to understand what's been happening in rural places and why those commissioners reacted the way they did. I mean, just think about this. You grow up in a small town. You start life in a small town. You start raising your family in a small town. You begin to see a manufacturing facility that was a major employer shut down because it's in an industry that's not working very well. So, it shuts down. So, that leaves. Then you begin to see your central business district hollowed out a bit. Store fronts are empty.

Then you begin to see stress on the school and, eventually, that's got to merge with the school down the road that's been the big rival. The hospital goes from a nice hospital to a small clinic. Eventually, your kids leave and your grandkids leave. So, essentially, there's a sense of hollowing out. So, the reaction of most people in that circumstance is to try to hang on to what they have, to fight like heck to hang on to what they have. It's really hard to ask those people to have faith in a new vision. Okay? Because we haven't sold that new vision. They've basically watched for the last 10, 15, 20, 30 years a hollowing out of their community.

So, first of all, you have to understand the emotional aspect of this. Then, secondly, when we've got people who are talking about sustainable practices and so forth and talking about greenhouse gas emissions and so forth, they almost always talk about it in terms of how devastating this is going to be. They never talk about it in a sense that this is the opportunity that – there's an opportunity side to this crisis. We have to start marketing the opportunity side of this crisis because, frankly, that's going to motivate a lot more people than trying to scare folks.

So, I think we have to really think about the marketing of these. I think there's a better way to do this. I think our national government, our national leaders have to articulate this vision. One of the things about this pandemic, Americans, historically, when they've been faced with immense challenges, they, historically, have found the opportunity in that challenge. They've tried to figure out a way to build back better and build back stronger and more resilient.

I think this notion of resiliency is going to take hold. I think companies are going to be less interested in short-term profits and more interested in long-term resiliency. I think that's going to change mindsets. The time is now for leaders at every level of government to look for those resilient opportunities to transform the economy. Food and agriculture is going to be a really big deal in the next 15, 20, 30 years. Rural America is poised to take advantage of it. We just have to make sure it's marketed in the right way.

I do think American agriculture, the leaders of American Agriculture, I think they understand a simple thing. I'll finish with this. If they are interested in marketing their products to consumers in cities or marketing their products to folks outside of the United States, which they're going to have to do, they better understand that – to be able to market successfully, they're going to have to be able to make the case that it's been sustainably produced because consumers are demanding it, everywhere.

>>Tom Vilsack: Yeah. Well, thank you for articulating the vision and for all of your responses this morning.

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