ENVIRONMENT REPORT

June 2016

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CONTENTS

2 Key Achievements 11 Waste Reduction

4 Environment Policy & Goals 13 Engagement

6 Global Environmental Initiative 16 Solar Energy

8 Carbon Reduction 18 ECO:nomics Conference

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KEY ACHIEVEMENTS

We believe sustainability begins as a business proposition, but

doesn’t end there. Our mission is to inform discussions and decisions – our core business provides a platform for informing

people for the good of society. Our authoritative and trusted news

and information content sets agendas, starts conversations and

influences outcomes. We expose fraud, malfeasance and

negligence, and we engage our readers about critical issues such

as climate change with highly balanced, journalistic integrity. Our

information products are directed at a broad, influential audience

and provide accurate, fair and trustworthy information that helps

business become more sustainable.

The company’s achievements this year and in the recent past reflect investment and a corporate priority for protecting the

environment and energy conservation. Highlights include:

Reduction of carbon emissions globally by 48% in FY15 from

baseline year FY06, and a 6% reduction from previous year.

All 8 Dow Jones owned print centers are “Zero Waste” facilities for 2015.

Solar power at our Princeton NJ campus has reduced carbon

emissions by over 19,000 tons since its startup.

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Five offices are now LEED and/or EnergyStar certified,

representing 28% of leased office space, including our

headquarters at 1211 Avenue of the Americas in New York City.

At our Bronx Print Center, fluorescent bulbs were replaced with

over 3,000 LED tube lights, and over 70 new outdoor LED

lighting fixtures were added in the parking lots. With a payback

of less than 2 years, this project reduces our carbon emissions

by 126 tons/year and electricity costs by over $50,000 per year.

100% of all newsprint purchased for our newspapers is from

paper mills certified by either FSC, SFI, PEFC, CSA, or

equivalent.

Our ninth annual ECO:nomics conference featured top CEOs

and non-profit executives, government officials, entrepreneurs,

and investors discussing the intersection of business and the

environment, hosted by the editors of The Wall Street Journal.

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ENVIRONMENTAL POLICY

Integrity defines the culture at Dow Jones just as it does its journalism and business. Dow Jones strives

to be a responsible consumer of energy and resources, and as a positive influence in the communities

where we work and live.

We affirm to all our employees, customers and the public that we will conduct our activities in an

environmentally-sustainable manner while providing a safe and healthy workplace for our employees, in

compliance with all governmental regulations and company policies.

OUR GOALS

In 2007, News Corp & Dow Jones set a target to be carbon neutral in 2010. Upon reaching this target,

a new long-term vision was communicated with a set of short-terms goals and strategies to support that

vision. Dow Jones believes that tackling climate change risk, and related issues, requires a long-term

focus. Our new long-term vision, which is aligned with News Corps’ vision, is to:

1. Reduce our carbon footprint while growing our business, and minimize landfill waste within our business and communities

2. Engage our customers, employees, suppliers and partners on sustainability outcomes

3. Source our paper from paper mills using third-party certified sustainable forest management systems and/or recycled content, and power our operations with clean energy

Our targets to meet these goals are:

Reduce absolute carbon emissions 40% by 2016 (compared to 2006 baseline)

Secure new office leases at facilities using renewable energy and/or are LEED, BREEAM or

similar certified

Achieve zero waste to landfill at our owned print centers by 2016

Continue to lead the discussion where business & the environment intersect via the

ECO:nomics conference

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Source 100% of newsprint from paper mills operating under third-party certified sustainable

forest management systems by 2015

We have exceeded our 40% carbon reduction goal by achieving a 48% reduction in FY15, our owned

print centers have been zero waste facilities since 2013, and 100% of the mills used have sustainable

certifications, including our international contract print sites.

To achieve its carbon mitigation goals, the company conducts energy audits, solicits ideas for

operational improvements from local managers, and promotes best practices. Financial analysis,

including calculation of ROIs, is completed for proposed projects. Recently, the company adopted new

approaches to prioritizing and financing projects with high financial and environmental returns to further

help reach its goals. The company has also improved internal tracking and communications to better

respond to increased regulatory and customer requests for environmental data.

To ensure regulatory compliance, a compliance calendar cloud-based software system is in place for

our plants and major offices that tracks all federal, state, and local requirements. Tasks are assigned to

responsible managers and coordinators at each site and documents are submitted to corporate EHS to

verify compliance.

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GLOBAL ENVIRONMENTAL INITIATIVE

Prior to the company split from 21st Century Fox, News Corps’ Global Energy Initiative (GEI) managed

all sustainability and energy efficiency programs at the corporate level. As the new News Corp,

additional risks and opportunities were identified that directly impact their businesses, specifically

around the use of forest commodities in its publishing businesses.

As a result of the company split and revised sustainability strategy, the name of the corporate News

Corp team was changed to the Global Environmental Initiative (GEI) to more accurately reflect its

broader scope beyond energy and carbon. The GEI program is part of a broader “Corporate Citizenship” initiative at News Corp, encompassing both philanthropy and volunteerism in addition to environmental initiatives.

Dow Jones’ Global Environmental Initiative has

developed specific targets and strategies

implemented by green teams across the globe.

These teams have developed best practices to

reduce energy usage and engaged employees,

readers, advertisers and suppliers in the quest to reduce consumption and protect the environment.

Day to day implementation and management of environmental programs within the company is handled

by the VP of EHS & Sustainability, who also leads News Corp’s corporate GEI program. The Dow

Jones GEI team is made up of leaders from HR, Real Estate/Facilities, Communications, IT and

Operations.

The GEI team communicates regularly with

senior executives across the company about

energy/carbon reduction projects and other

aspects of the company’s environmental sustainability efforts, as well as the progress

being made within the businesses, via regular

summary reports and in-person meetings. The

GEI team conducts regular meetings to

discuss strategy, share successes and

challenges, and invite external experts to

share perspectives with the group. Internal

websites are also available for employees to

access environmental information.

Climate change risks and opportunities are

reviewed on an ongoing basis by the GEI

team. The team is responsible for monitoring

business impacts from climate change-related

issues (including regulatory changes, energy

costs, customer/consumer preferences, and

other sources), identifying opportunities or risks with the help of cross functional teams, and reporting

these to their respective senior management, as well as to the News Corp corporate GEI committee.

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For printing and distribution operations that can be impacted from climate change and energy issues,

there is a systematic evaluation process and dedicated personnel responsible to monitor, evaluate, and

report potential risks and opportunities.

The GEI team reviews risks and opportunities each year to determine priority areas and assigns

resources accordingly. The specific threshold for evaluating materiality and the related criteria are

variable depending on the potential magnitude of impact, likelihood, and timeframe presented, as well

as the aspect of the business that could be impacted. However, from a general perspective the

company reviews each of these components for each risk presented and determines the appropriate

response.

The GEI strategy – rooted in carbon

measurement and mitigation of its operational

impact – allows the company to take advantage

of opportunities to lower costs of inputs, work with

partners to reduce costs and generate new

streams of revenue, attract and retain top talent,

and build a reputation as a sustainability leader to

support business objectives and make an impact

on pressing environmental issues. Increasing

regulatory and market pressures are also drivers

of the company’s environmental strategy. The decentralized management structure and cross-

divisional communication allows Dow Jones to

leverage local expertise and experience and react

quickly to changing dynamics.

A key focus of the initiative has been on

improving the company’s own internal operations and on being as transparent as possible about the goals, actions, and progress that the company is

making. This sustainability program is part of Dow Jones’ identity and a differentiator in the

marketplace. In addition, as a new generation of employees looks to work for companies that are

addressing their environmental impacts, failure to do so could impact a company’s ability to recruit and retain talent.

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CARBON REDUCTION

Dow Jones shares the details of its carbon footprint in a transparent manner, publicly reporting

greenhouse gas (GHG) emissions through the Carbon Disclosure Project (CDP) via News Corp. The

GHG emissions covers Scope 1 (direct emissions from gasoline, natural gas and diesel fuel usage),

Scope 2 (indirect emissions from purchased electricity usage), as well as business air travel (Scope 3),

in accordance with the WRI/WBCSD Greenhouse Gas Protocol.

Dow Jones has a robust program in place for collecting, measuring and analyzing its emissions data,

and has developed a comprehensive repository of data with an enterprise data management software

tool. The company has been voluntarily reporting emissions and energy data since 2007. The results of

our carbon reduction projects are shown below:

In FY2015, Dow Jones’ footprint was 33,635 metric tons CO2e, a 48% reduction from its baseline FY06

year, and a 6% reduction from the previous year. The majority of our footprint is from electricity used in

our print centers and offices. Our footprint via News Corp is third party certified.

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Some of the energy efficiency projects that were completed to reduce our carbon emissions include:

Installation of variable frequency drives on roof top unit HVAC fans

Installing new LED and other efficient lighting and occupancy sensors in our print centers and

offices

Continuing energy best practices such as minimizing lighting, heating, air conditioning and

production equipment during unoccupied times

Installing energy efficient variable frequency drives for chillers

Compressed air efficiency improvements

Forklift battery charging during off-peak times when electricity rates are lowest

A Six Sigma project that analyzed the most efficient use of press motors at our plants

Energy efficiency upgrades for our data center in Princeton, NJ

Energy Star, 100% recyclable white membrane new roofs installed at two printing plants to

reduce the cooling load on the facility. This roof is LEED-rated to radiate away 95% of the

energy absorbed.

Dow Jones continues to invest strategically in

sustainability, including in energy efficiency, energy

measurement/tracking systems, and analyses of

supply chains to find opportunities for improvement.

Many of the energy efficiency projects completed at

the company have an average payback of less than 3

years.

Due to the volatility of energy prices and the

expectation of consistent cost increases, continuous

evaluation of energy efficiency and renewable energy

opportunities will continue as part of a long-term

strategy.

The company’s process is already yielding some strategic

advantages, and with a continuous improvement

philosophy built into the program, it will continue to do so.

Benefits include operational cost advantages, more

efficient supply chains, and the opportunity to build

sustainability intelligence into content for news and

information media outlets. The company has also identified

opportunities to generate revenue through new product

deliveries, deepen partnerships with customers and

suppliers, and make more meaningful connections with

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customers.

For example, our Distribution & Delivery group reviewed its newspaper delivery operations and was

able to eliminate redundant truck and airline routes in the U.S., partnering with third party delivery firms

to use their existing routes. Dow Jones was able to remove 11 trucks in 2015 vs 2014, resulting in the

reduction of 524,000 driving miles per year.

News Corp’s GEI committee continues to monitor possible physical changes attributable to climate change. Additionally, Dow Jones sites have in

place Emergency Action Plans and business

contingency plans.

The company does manage physical risk by

preparing for potential disruptions to operations or

to its supply chain. For example, print centers and

newsrooms have backup power generators in the

event grid power fails. The backup power plan can

be used or modified to address increased climate

related risks, as the physical aspects of climate

change are more precisely modeled and

understood.

During past years, disruptive phenomena

highlighted the effect of extreme events on

business operations, while disruptions to

operations and employees caused by Superstorm

Sandy highlighted direct business impacts of

extreme weather. For example, weather-related missed deliveries have increased over the past few

years, resulting in a 10.1% increase in missed copies in FY15 vs FY14. To the extent that any increase

in frequency of extreme events can be correlated to a trend like climate change, there is a continued

need to prepare for business disruptions.

Current investments in on-site renewable power production, such as the installation of the solar power

system in New Jersey, will allow the company to meet at least some its power needs should there be a

disruption to grid-supplied power, and in the interim helps the company deal with the financial impact of

energy price volatility. Additionally, the company has various contingency and backup plans in case of

physical risk or damage. As an example, critical data records are backed up at offsite locations and

emergency communications plans are implemented in the event of extreme events.

Managing such risks requires consistent and effective communication. Measurement, disclosure, and

improvement of the company’s own environmental impacts help form a strong reputational basis on which the company may engage externally. The company also engages through partners and industry

groups on sustainability issues to drive improvement in the broader business community.

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WASTE REDUCTION

All Dow Jones owned Print Centers are “Zero Waste” facilities as defined by the Zero Waste International Alliance.

This means that at least 90% of waste generated at the

facilities must be recycled or reused to be considered a Zero

Waste facility. The plants raised the bar further by achieving a

95% average recycling rate for 2015.

All Dow Jones owned print centers recycle waste newsprint,

used aluminum plates, end rolls, cores & wrapper paper,

cardboard, scrap metal, wood skids, plastic drums, used

fluorescent bulbs, batteries, computer and electronic

equipment, and office paper, cans and bottles. The plant green

teams also continue to review ways to change processes and

eliminate the generation of waste, and look for alternate ways

to recycle or reuse raw material in order to minimize waste

entering landfills.

Our LaGrange GA print center recently conducted a waste audit, collecting 12 landfill bags of waste

from 2 days’ worth of normal waste generation. The plant green team then began of the sorting process

to remove items that can be recycled, and ended the process with only one half-full trash bag that was

truly not recyclable – a 96% reduction!

The Zero Waste print centers are located in:

• Beaumont, TX

• Bowling Green, OH

• Bronx, NY

• Chicopee, MA

• Highland, IL

• LaGrange, GA

• Seattle, WA

• White Oak, MD

This achievement by the print centers not only helps Dow Jones achieve its GEI goals, but it also meets

one of the business’s three goals to drive its business forward: rigorous cost management. Reducing waste reduces costs and creates a smart, efficient and green operational environment for print centers

to succeed in providing quality products to Dow Jones’ customers.

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Our plants use soy-based inks for our Wall Street Journal and Barron’s newspaper products, which minimizes Volatile Organic Compounds (VOC) emissions

into the air.

All computer

equipment that is no

longer usable at

Dow Jones’ U.S. locations is recycled

through approved

recycling facilities. A

milestone was

reached in 2012 when over 2.5 million pounds of computer

equipment waste was recycled since the inception of the

program.

Our print centers have reduced hazardous waste to just 1%

of the total industrial waste generated at its facilities.

News Corp has developed a new paper policy to ensure that

paper is purchased from suppliers who use sustainable

forest management practices.

At Dow Jones, 100% of all newsprint purchased for our

newspapers is from paper mills certified by either FSC, SFI,

PEFC, CSA, or equivalent. These considerations are

combined with investments that are part of a larger

sustainability and business strategy.

A waste management

plan has been

developed for our print

centers and major

offices to document

procedures and best

practices.

2.5M LBS Amount of computer waste recycled at

Dow Jones through 2012

70% of U.S. newspapers were recycled in

2012 (source: US EPA)

100% Percent of newsprint purchased by Dow

Jones from paper mills certified by FSC,

SFI, PEFC, CSA or equivalent

“Characteristics of an excellent business recycling program are

evident at Dow Jones… they

have a comprehensive and well

organized recycling program in

place." Montgomery County Maryland Department of

Environmental Protection, after awarding our

White Oak Print Center the “Outstanding Recycler Achievement Award”

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ENGAGEMENT

Employees

Reduction activities are supported through numerous employee led initiatives. Through these local

programs, employees are informed about the company’s overall environmental priorities and encouraged and empowered to take action locally. Several employee engagement programs recognize

and reward successful ideas for emissions reductions activities in the home and workplace.

News Corp conducted a staff survey to evaluate their

knowledge of the company’s sustainability initiatives, gauge

employee preferences, and evaluate the effectiveness of

the communications. 89% of News Corp employees

reported that it is important for their company to reduce its

impact on the environment. Hence, the company knows that

effectively communicating about the GEI is critical to

employee satisfaction and not meeting these expectations

could affect turnover or other HR issues.

Effectively engaging employees is critical to the success of

the GEI program. Not only can engaged employees help

carry out many aspects of the program, but communicating the company’s commitment to sustainability and giving employees the opportunities to get involved presents an opportunity for recruiting and

retaining talent who are increasingly looking for employers that share their values.

At Dow Jones, green recognition

initiatives has been integrated

into an existing employee

reward program called ONE,

with the first “ONE Goes Green” award announced in early 2015.

According to Gallup, businesses with the highest levels of employee engagement experience 37% less

absenteeism, 25-50% less turnover, 60% fewer quality issues, 12% higher customer satisfaction, 18%

higher productivity, and 16% higher profitability. Moreover, according to HR assessments, replacing a

good employee costs companies 70- 200% of an employee’s annual salary, making retention a key financial driver.

Effectively engaging employees is critical to the success of the GEI program

and can provide financial benefit through employee-led solution generation

and implementation, and by reducing costs for employee recruiting and

retention. Through these local efforts, employees are informed about the

company’s environmental priorities and are empowered to take action locally. These programs provide tangible carbon reduction opportunities, and have

played a significant role in fulfilling the company’s sustainability goals. Sustainability program details are utilized in recruiting efforts and materials as

well.

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Carpool/High MPG priority parking lot spaces

have been created at two of our major offices for

employees who take the personal initiative in

helping to conserve energy and reduce

greenhouse gases.

Suppliers

Dow Jones works with its suppliers to measure

the company’s environmental impacts and develop strategies to reduce them. The company

has engaged dozens of suppliers for

newspapers, and other important product

categories to collect data, calculate life-cycle

assessments (LCA), and address LCA hotspots.

For example, in 2008 the company conducted a carbon product life cycle analysis of the Wall Street

Journal newspaper to aid in understanding the impact of the company’s operations and supply chain. We recognize that a large portion of our product manufacturing processes reside within our supply

chain. The result was an analysis that begins with the harvesting of timber and ends with the disposal

of the non-recycled percent of newspaper that decomposes in a landfill. The company found substantial

emissions in the supply chain, principally on the production of newsprint. This data will help to focus our

efforts on future reductions in GHG emissions.

As previously mentioned, Dow Jones purchases newsprint for our newspapers from paper mills 100%

certified by either FSC, SFI, PEFC, CSA, or equivalent. In addition, our international contract printers

were reviewed in 2016 and verified that they also purchase newsprint from certified mills. Dow Jones

has also utilized high levels of recycled fiber in its newsprint for many decades.

Partners

Through working sessions and meetings, the company also consults with outside experts, non-profit

organizations, industry peers and corporate sustainability leaders. Much like its engagement with

suppliers, Dow Jones collaborates with partners in areas of highest impact. Industry partners offer an

additional benefit of enabling improvement industry-wide. Therefore, engagement prioritization consists

of high-impact categories where industry collaboration can scale and amplify success. As the company

learns more about how to address its emissions, it continues to share lessons and best practices with

business partners.

In the US, Dow Jones participated in the Environmental Defense Fund’s Climate Corps program, an innovative summer fellowship program that placed specially-trained graduate students in our Bronx, NY

Print Center facility over the course of 3 summers to identify energy inefficiencies and reduce both

carbon emissions and costs.

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Dow Jones believes that its environment strategy – rooted in carbon measurement and mitigation of its

own operational impact – enables the company to strengthen relationships with its employees,

business partners and readers. Specific to business partners, given the evolving sustainability

requirements of companies that advertise through Dow Jones’ media platforms, a positive reputation on sustainability issues presents an opportunity for revenue generation.

Customers

Dow Jones has continued to take aggressive actions to reduce the impacts of its own operations and to

connect with its customers on sustainability issues. These actions have helped build the company’s reputation as a leader on the topic, both in the corporate and the environmental/NGO communities, and

are a key component of the company’s efforts to build its program on a platform of transparency and credibility. In

addition, through programs and efforts like The Wall Street

Journal’s annual ECO:nomics conference, the company has

strengthened its reputation as a leader in sustainability

among its customers.

As consumers become more aware of environmental

issues and change their buying habits, the company

has an opportunity to staying ahead of these trends; as

customers shift from products with physical footprints,

the company can gain an advantage by continuing to

lead in the area of physical to digital media

transformation. For example, the Wall Street Journal

continues to increase its readership in the digital and

social platforms, having reached 893,000 digital-only

subscribers in March 2016, accounting for nearly 45%

of all Journal subscribers. Our investment in and

collective focus on digital and mobile helped Dow Jones

reach an important milestone: digital now accounts for

more than 50% of total revenues.

Dow Jones continues to face new customer

requirements as they are increasingly asking for evidence of positive environmental and sustainability

performance from their suppliers and partners. A growing number of advertisers want to partner with

companies that are taking action on environmental issues. Other major advertisers have indicated that

they will pull ad dollars from companies who do not have sustainability strategies aligned with their own.

Building and maintaining a strong reputation by addressing its environmental footprint will continue to

provide a positive impact on Dow Jones’ relationships with customers.

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SOLAR POWER

The 4.1 MW system at our Princeton NJ campus is one of the largest solar power installations at a single commercial site in the U.S. Its 13,000 solar panels cover nearly 230,000 square feet of parking space, and produce 5 million kilowatt-hours of electricity per year. Capable of supplying 50% the site’s energy needs during a sunny day, it supplies nearly 15% of the campus’s energy needs over the course of a year.

Through May 2016, the solar installation has reduced over 19,000 tons of carbon emissions and $2.8M in electricity costs since its operational startup in 2011. This is equivalent to planting over 4,000 acres of trees or not

driving over 41 million miles.

Dow Jones was among the top 25 companies in America leading the use of commercial solar use as measured in the 2013 Solar Means Business Report. The 2013 Solar Means Business report is released by The Solar Energy Industries Association and Vote Solar Initiative and identifies major commercial solar projects and ranks America’s top corporate solar users. The Top 25 companies, ranked by installed capacity, also included Walmart, Costco, Kohl’s, Apple, IKEA, Macy’s, Johnson & Johnson, McGraw Hill, Staples, Campbell’s Soup, U.S. Foods, Bed Bath & Beyond, Kaiser Permanente, Volkswagen, Walgreens, Target, Safeway, FedEx, Intel, L’OREAL, General Motors, Toys “R” Us, White Rose Foods and Toyota.

Construction, Ceremonies & Quotes:

A groundbreaking ceremony at the Princeton campus was held in June 2010 with the late US Senator Frank Lautenberg of NJ, US Senator Robert Menendez of NJ, and Bob Martin, Commissioner of the New Jersey Department of Environmental Protection. Calling it a demonstration that “a clean energy future is both possible and profitable” and “groundbreaking in every sense of the word”, U.S. Senators Frank Lautenberg and Robert Menendez of New Jersey praised Dow Jones’ solar energy project.

“I salute Dow Jones for its leadership. The company is demonstrating that a clean energy future is both possible and profitable,” Senator Frank Lautenberg said in his comments to nearly 1,000 Dow Jones employees gathered for the groundbreaking ceremony.

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“This will be one of the most outstanding examples of what America’s clean energy future looks like, and it will be yet another innovation in the long innovative history of Dow Jones & Company,” said Senator Robert Menendez. “We need to embrace the potential of a clean energy future, and it is through bold investments like this that we are doing so." "Our dependence on fossil fuels hinders our state economically and hurts our environment," Commissioner Martin said. "Dow Jones' leadership in solar power is a significant step to a better energy future."

“Investing in solar power confirms our commitment to environmental responsibility. Dow Jones wants to be one of the companies making a difference,” said Les Hinton, former chief executive of Dow Jones. “What makes this investment attractive is that not only are there meaningful environmental benefits but we also will see significant tax incentives and a substantial reduction in our annual energy costs,” said Stephen Daintith, former chief operating officer for Dow Jones. “New Jersey is a leader nationwide in supporting solar power installation, and we’re grateful for the support of the state as well as PSE&G and the township of South

Brunswick for assisting us in sourcing alternative, renewable energy such as solar,” Mr. Daintith said. “Dow Jones’s leadership position with solar energy is a real-world example of how this technology can make sense for the environment,” said Ralph LaRossa, PSE&G president and chief operating officer. Discussing the "major commitment to the environment" made by Dow Jones and News Corp. at the solar christening event in 2011, Les Hinton, former chief executive of Dow Jones said: "(This) commitment to environmental responsibility pre-dates this system and extends beyond it. For decades, Dow Jones has aggressively strived to reduce waste, minimize hazardous emissions and optimize electric efficiency. These programs didn't begin with solar and they won't end there." "If this solar installation stands for anything at Dow Jones, it should stand as a testament to a company with vision," Hinton said. "Dow Jones isn't waiting for the future. We are making it. We are pioneering profitable digital business models, and we are developing innovative technology to make information more accessible and more useful and ultimately more interesting."

"Solar fits a company like this. It is consistent with a company that isn't limited by convention, a company that isn't afraid to lead the way," he said. In 2012, Dow Jones received an Environmental Stewardship award from the New Jersey Department of Environmental Protection for the solar project.

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ECO:nomics Conference

On April 6-8 2016, some of the world’s most influential leaders and experts in energy convened at the Bacara Resort & Spa in Santa Barbara, CA to attend The Wall Street Journal’s ECO:nomics Conference. Moderated by the Journal’s editorial team, the event featured interviews focused on how energy policy, sustainability and climate are impacting business today.

ECO:nomics 2016 kicked-off Wednesday afternoon with a boat excursion around Platform Holly, an oil

and gas producing rig, located just off shore from the Bacara. The tour was led by a geologist from

Venoco, the company which operates the rig, and a noted microbiologist from the University of

California at Santa Barbara. The conference continued into Wednesday night with an opening dinner

and evening program featuring Ban Ki-moon, United Nations Secretary-General, and Mark Fields,

President and CEO, Ford Motor Company.

Other notable speakers included: Sheryl Corrigan, Director of Environmental, Health and Safety, Koch

Industries, Inc.; David Crane, President and CEO (2003-2015), NRG; David T. Danielson, Assistant

Secretary, Energy Efficiency and Renewable Energy, U.S. Department of Energy; Thomas A. Fanning,

Chairman, President and CEO, Southern Company; Lynn J. Good, Chairman, President and CEO,

Duke Energy; Joe Manchin, U.S. Senator, (D., W.Va.); Kevin McCarthy, U.S. House Majority Leader,

U.S. Representative (R., Calif.) and Gérard Mestrallet, Chairman and CEO, ENGIE.The conference

was sponsored by PPG and Siebel Energy Institute.

To find out more, visit http://economics.wsj.com/. A Wall Street Journal special report on the conference

is provided on the next few pages.

© 2016 Dow Jones & Company. All Rights Reserved. THEWALL STREET JOURNAL. Wednesday, April 13, 2016 | B5

JOURNAL REPORT

Ban Ki-moon on the Paris accord’s fate, B6

Michael Brune’s energy optimism, B6

Lynn Good looks into the future of coal, B7

Sheryl Corrigan defends Koch Industries, B8

Thomas Fanning and David Crane differ onclean-energy strategies for utilities, B8

Jeffrey Holzschuh and Douglas Kimmelmanoutline their investment portfolios, B9

Lynn Jurich and Tom Warner on solar, B9

Plus: Anne Finucane, Rep. Kevin McCarthy,Sen. Joe Manchin and Alan Armstrong

INSIDE

50%

50%

47%

46%

45%

42%

41%

Source: KPMG survey of 800 auto executives world-wide, conducted online between July and November 2015 THEWALL STREET JOURNAL.

Change on Wheels | Auto executives increasingly see big changes in the industry soonHow likely is a major business-model disruption in the next 5 years? Howmuch will legislation and regulation

influence the development of the industry?Percentage rating each trendextremely important

Connectivity and digitalization

Hybrid electric vehicles

Battery electric vehicles

Market growth in emerging markets

Fuel-cell electric vehicles

Mobility as a service

Customer data/big dataSomewhatunlikely

43%

15%

Not likelyat all

14%

3%

Neutral

32%

1%

20152016

Very highinfluence29%

17%

2%

Highinfluence

51%

Averageinfluence

Low or no influence

Extremelylikely

3%

28%

Somewhatlikely

54%

9%

MR. FIELDS: You could say therewould be less vehicles sold, butwe’re changing our businessmodel to look at this as vehiclemiles traveled. And when you lookat it that way, it changes yourmind to think about what kind ofservices can we offer via ourproducts. I could argue that withautonomous vehicles, the actualmileage on those vehicles will ac-cumulate a lot more than a per-sonally owned vehicle, plus theservicing. That could actually be abit of an offset.

The electric company?MR. BAKER: Does Elon Musk keepyou awake at night?MR. FIELDS: They always ask me,“What keeps you up at night?”Nothing. I am dead tired by thetime I get to bed, because I lovewhat I do. But clearly, we take ourcompetitors very seriously. Whenyou look at the level of competi-tion we have from traditional andnontraditional competitors, we’reembracing that.

Please see FIELDS page B6

The auto industry has been un-dergoing a remarkable transfor-mation—and it’s only the begin-ning. Energy prices and a toughregulatory environment are com-plicating product planning. Elec-tric motors and autonomous driv-ing systems may redefine howpeople move around.

To get a glimpse of how carmakers are navigating this uncer-tain environment, The Wall StreetJournal’s Gerard Baker spoke withFord Motor Co. Chief ExecutiveMark Fields. Here are edited ex-cerpts of their discussion.

Tough terrainMR. BAKER: We’re seeing an ex-traordinary transformation of theauto market. We’re talking aboutelectrification and autonomousdriving. And we’re seeing compa-nies like Google and possibly Ap-

ple getting into the business.You’re seeing car sharing. Tell ushow you are preparing.MR. FIELDS: We’re going to disruptourselves. We have this core busi-ness of designing, developing,manufacturing, marketing andservicing and financing great cars,utilities and trucks. But also wesee these emerging opportunitiesaround what we call smart mobil-ity. We want to lead in specific ar-eas around autonomous vehicles,around the connected car as it be-comes part of the Internet ofthings, around mobility, ride shar-ing, car sharing, around data andanalytics and how we can antici-pate customers’ needs.

MR. BAKER: What are you doing toprepare for an age when a hugeamount of car mobility may bedone through sharing?

Ford’s Road MapTo the FutureChief Executive Mark Fields getsready for driverless cars

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Weaning the world off coal, doubling downon renewables and investing in breakthroughtechnologies that can help stop climatechange were hotly debated topics last weekat The Wall Street Journal’s ECO:nomics con-ference in Santa Barbara, Calif.

At the annual gathering, environmentalistsand energy experts sparred over lofty envi-ronmental goals as well as the current reali-ties of fossil-fuel demand. Can natural gas re-place enough coal-fired power generation toclear the air of carbon emissions? The SierraClub’s Michael Brune thinks not.

Energy banker Jeffrey Holzschuh of Mor-gan Stanley predicted solar power will over-take wind. But he warned that better batterystorage of electricity is needed to truly ce-ment green power in the U.S. energy mix.

Koch Industries defended its environmentalrecord. And U.N. Secretary-General Ban Ki-moon said that while the Paris climate talksheld in December were flawed, they were thebest outcome that could be hoped for and anecessary step toward combating the topthreat to humanity. “This is not the end,” hesaid. “This is the beginning.”

—Lynn Cook

TheFutureMayBeClear. ThePath Isn’t.

B6 | Wednesday, April 13, 2016 THEWALL STREET JOURNAL.

JOURNAL REPORT | BUSINESS & ENERGY

Are government and indus-try doing the right things tofight climate change? Whatcan they do better?

To get an insider’s view ofthe question, The Wall StreetJournal’s Russell Gold spoke

with Michael Brune, executivedirector of the Sierra Club.

What follows are edited ex-cerpts of their discussion.

MR. GOLD: I saw a speech thatyou gave on YouTube, and you

started your speech by askingthe audience whether they feltgovernments and corporationswere going to be able to re-spond to the challenges of cli-mate change. Are you optimis-tic?

MR. BRUNE: I am. We’re con-fronted with two realitieswhich are going to happen al-most no matter what. Climatechange will continue to getworse. We’re also seeing thegrowth of clean energy. We’restarting to see renewables dis-place fossil fuels, starting withcoal. That will accelerate al-most no matter what. I’m opti-mistic because I think that to-gether we can solve some ofour biggest problems. I seecountries coming together ona very large scale to addresswhat’s being done.

MR. GOLD: You introduced civildisobedience to the SierraClub. Why was that necessary?MR. BRUNE: We engaged incivil disobedience on the Key-stone XL Pipeline because atthe time, it was an importantissue substantively and sym-bolically, and it needed to beelevated. It needed to havemore attention, more focus onit. We may engage in civil dis-obedience on voting-rights is-sues because we depend on ahealthy and thriving democ-racy in order to address envi-ronmental issues.

MR. GOLD: Shouldn’t we be cel-ebrating natural gas because

it’s allowing companies to re-place coal? You’re not a fan ofnatural gas.MR. BRUNE: The reduction incoal is coming from a varietyof factors, a significant part ofwhich is the low price of natu-ral gas. So our goal is to phaseout of coal as quickly as possi-ble and use as little naturalgas as we can in doing so.

The climate impact of burn-ing gas is half that of coal.However, the amount of fugi-tive methanes that come bothat the well head and fromtransmission and distributionis so significant that it nar-rows the difference betweengas and coal.

MR. GOLD: The Sierra Club hassaid for many years it’s op-posed to nuclear. Why can’tyou support nuclear?MR. BRUNE: The Sierra Clubhas been opposed to nuclearpower since the late ’60s forconcerns about safety, storageof radioactive waste, etc. Ifthere was an actual debateabout nuclear power in thiscountry, and if you had finan-ciers who really were going toput serious money behind nu-clear power, then it would be adifferent question. It is not anactive question. There is not a

serious proposal, particularlyin the U.S., to scale up nuclearpower in any way that wouldmake a big difference. I don’tagree that nuclear power is areal solution.

MR. GOLD: You probably heardSheryl Corrigan of Koch Indus-tries say that Charles Koch be-lieves climate is changing andhumans have a part in it.What are your thoughts onthat?MR. BRUNE: Koch Industriesand the Koch brothers havebeen funding some of ourtoughest opponents. Theyhave been putting millions ofdollars behind candidates oron issues that are making itdifficult to solve the world’sbiggest problem.

The fact that we have oneexecutive who makes a state-ment that shows that this ispart of a problem to be solved,it’s great. I’d love to see the$900 million that the Kochbrothers are putting into thiselection not go into fundingcandidates who don’t believeclimate change exists, whodon’t think that humans haveany role and are spendinghuge amounts of money de-stroying the world that mykids are growing up into.

The Sierra Club’s ViewWhy Michael Brune is optimistic about

combating climate change

mechanism?MR. BAN: Yes. We are not go-ing to shame, but everybodyknows which country is doingwhat and how much they aredoing. Everybody has an inter-est to fully comply.

MS. STRASSEL: The U.N. has itsGreen Climate Fund, with agoal of I think $100 billion by2020. But the India environ-ment minister said that if youwant developing countries toget on board, industrialized

countries owed trillions. Doyou think industrialized coun-tries are willing to do that?And how important is thatpiece to making this happen?MR. BAN: The initial promise bythe OECD countries and big de-veloped countries was to pro-vide $100 billion by 2020. Un-fortunately, the firmcommitment has not beenmade. It has been pushed backuntil 2020. When it comes to2020, there will have to be afirm commitment, as well as aroad map, framework, how$100 billion per year will haveto be provided to developingcountries. After that, thereshould be more than $100 bil-lion.

Supreme concernMS. STRASSEL: The U.S. has aplan to reduce emissions by28%. It went to delegation afterdelegation and said, “Look atour commitments, look at thepresident’s climate plan.” Butthe plan is now mired in the Su-preme Court. How much does itconcern you that one of theleading things that got thisdone is now uncertain?MR. BAN: As the largest econ-omy in the world, I believethat this climate change issueshould not be a subject of apolitical debate.

MS. STRASSEL: But it is.MR. BAN: Unfortunately. I’mconcerned. But I do appreciatePresident Obama’s strong com-mitment.

He knew that, with all thisopposition of the RepublicanParty’s stance, he may not beable to have all this legally—through a legal process. But healso has executive power. Hewill do whatever he can underhis executive power.

MS. STRASSEL: Do things fallapart internationally if thiscontinues to be stalled?MR. BAN: It has given a certainnegative wave to the interna-tional community. But I believePresident Obama’s assurancesthat he will do whatever he cando under his presidential exec-utive power.

MS. STRASSEL: PresidentObama said climate changewas a bigger threat than ter-rorism. Do you agree?MR. BAN: Longer term, it is amuch, much more serious is-sue. Of course, terrorism, ex-tremism must be defeated. Butlook at the consequences. Ter-rorism terrifies the people ofthe world, but climate changedoes not respect any borders.It affects a whole humanity, itaffects our planet Earth.

One of the biggest events ofthe past year in energy and en-vironmental policy was theParis climate talks. More coun-tries than ever have pledgedsignificant carbon cuts. Yet inmany people’s views, thosepledges fall far short of what alot of scientists say is necessary.

United Nations Secretary-General Ban Ki-moon sat downwith Kimberley Strassel, amember of The Wall StreetJournal editorial board, to dis-cuss the future of climate di-plomacy. Edited excerpts oftheir discussion follow.

Paris and afterMS. STRASSEL: The U.N. wasnot actually there doing thenegotiations in Paris, but yougot called in at the last minuteto make a few countries fall inline.MR. BAN: I am very grateful toPresident Obama and Presi-dent Xi Jinping for their lead-ership and strong commit-ment. Basically, it was the U.S.and China who really helped[make] this Paris agreementpossible. These are the two

largest emitters of the world:China and U.S. They agreedthat there should be an agree-ment, and we worked andreached out to many coun-tries. [It] was very positive.

MS. STRASSEL: Some wouldsay there is no enforcementmechanism to make any ofthis happen. What do you sayto critics who say this is moreof a feel-good agreement thana consequential way of reduc-ing carbon?MR. BAN: This is an interna-tional agreement; thus, it’sobligatory. It’s not that all theclauses, all the articles, areobligatory. But core elementsare. For example, the nationaltargets, Intended NationallyDetermined Contributions, arenot binding. But every fiveyears, this will be monitoredand reviewed, and in 2018, theparties will gather to reviewwhat happened from 2015 un-til 2018. From then on, everyfive years there will be moni-toring and reporting. This ismandatory. And there is much,much more possibility that

member states will have anopportunity to verify whichcountry has done how much.This is an obligatory clause.

MS. STRASSEL: But for China,maybe it was a little bit easierto agree to its targets; itseconomy has slowed, its de-mand for energy has slowed.But in five years, let’s say thathas changed and the amountof carbon emissions have goneup and they’re not hitting thetargets. What does the U.N. doabout it?MR. BAN: Every member of theParis Agreement will have aninterest to abide by their agree-ment. These are very strictpeer reviews. Every year there’sa UNFCCC meeting [U.N.Framework Convention on Cli-mate Change] to review all this.But every five years, therewould be four-month review-and-reporting sessions, andtherefore, for their own na-tional economy and the worldeconomy, every country has aninterest to keep their promise.

MS. STRASSEL: So a shaming

Carbon CompactBan Ki-moon on enforcing the Paris Agreement

‘Everybody knows whichcountry is doing what andhow much they are doing.’

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Latin America 74%

Africa 61%

Europe 54%

Asia/Pacific 45%

U.S. 45%

Middle East 38%

China 18%

* Regional medians, except for U.S. and China

Source: Pew Research Center's Spring 2015 Global Attitudes Survey of 45,435 adultsin 40 countries, conducted in person and by telephone, March 25 to May 27, 2015

✗� ✕✁gn of ✏✂✄✂✁☎✁✆yAttitudes toward climate change differ markedly by region aroundthe world and by political affiliation in the U.S.

Percentage* saying climate change is a very serious problem

Percentage in ✝✞✟✞ saying:

Global climate change is a veryserious problem

Support limiting greenhouse-gas emissions

Very concerned that climatechange will harm me personally

Climate change is harmingpeople now

Republican

Independent

Democrat

20%

41%

68%

50%

72%82%

24%42%

53%

12%

30%42%

THEWALL STREET JOURNAL.

MR. BAKER: But he does seemto have something of a headstart here.MR. FIELDS: I would disagree.What he’s done with Tesla hasbeen amazing. The biggestbenefit he’s done is raise theawareness of electrified vehi-cles. Now, his company has ca-tered to a very affluent con-sumer. Our approach [is that]we have one of the largest se-lections of electrified vehicles.We’re the No. 2 seller in theU.S. in electrified and No. 1 inplug-in hybrids. We’re invest-ing another $4.5 billion, so bythe end of the decade, 40% of

Continuedfromthepriorpage

our nameplates around theworld will be electrified.

MR. BAKER: Some of your com-petitors, most notably GM,have made some pretty big,splashy investments them-selves. Billion dollars, I think,on cruise automation, half abillion dollars in Lyft, the ride-sharing company. You haven’tgone down the same route.MR. FIELDS: We formed FordSmart Mobility LLC a coupleof weeks ago. Our businessthere is to design, build, growand invest in mobility solu-tions. On some things, we willdo on our own, in others, wewill partner with others.

MR. BAKER: On autonomousdriving, tell us more aboutwhat you’ve invested in, whatyou might be looking to do.MR. FIELDS: We’ve been work-ing on autonomous vehiclesfor over 10 years. Our ap-proach is twofold. One is to bea leader in advanced driver as-sist and semiautonomous fea-tures, features that will keep

you in your lane, that willalert you about traffic, thatwill adapt your speed. We’reone of the leaders in thatspace. That was what they calllevel zero through three,where the driver has to be incontrol. Then there’s levelfour, where the driver or pas-senger does not need to beprepared to take control. Thatis what we’re working on. Wewill have by some time thisyear the largest autonomous-vehicle testing fleet.

MR. BAKER: How close are weto autonomous vehicles beingavailable, driven on our roads,carrying our children around?MR. FIELDS: Level-four vehi-cles—[which operate] in a de-fined area that’s been 3-Dmapped—we think that some-body in the industry will haveby the end of the decade.

A level-five vehicle, whichis, you go into your car, youhit a button, you go to sleepand you wake up at grandma’shouse, that is a long wayaway—15, 20 years.

Fields

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still being a fossil fuel that isemitting carbon, albeit at amore modest rate, and nuclearhaving the challenges that ithas with building and financ-ing new plants, I would agreethat if we’re going evendeeper and deeper in carbonreductions that larger-scale24/7 solutions need to be apart of the discussion.

MS. HARDER: What about car-bon capture for natural gas? Isthat something that’s even re-

motely on your mind or in someof the R&D that’s going on?MS. GOOD: It is.

MS. HARDER: How costly wouldsomething like that be?MS. GOOD: We are still study-ing that. I don’t have a quot-able figure for that, but actu-ally I think there are a fewpeople in the audience whoare looking closely at thattechnology. As we think aboutthe transition from coal tonatural gas, I think putting

carbon capture and sequestra-tion into that analysis will bea natural evolution. And Ithink there’s some infrastruc-ture that’s going to go withthat—capture and movementto geological formations orothers that would make thatfeasible. We have done somestudies with the Energy De-partment on where the geol-ogy works. Not very good inthe Carolinas, better in theMidwest. So that has to bepart of the discussion, as well.

‘The enthusiasm aroundcarbon capture andsequestration wasprobably greater beforethe shale-gas discovery.’

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Lynn Good is the chief exec-utive of Duke Energy Corp.,the U.S.’s largest power pro-ducer and one of the country’sbiggest coal burners. Withglobal leaders increasinglycalling for the phaseout ofcoal due to environmental con-cerns, she sat down with WallStreet Journal energy reporterAmy Harder to discuss the ex-tent to which that is economi-cally feasible.

Here are edited excerpts.

The impact of gasMS. HARDER: In 2005 Duke En-ergy’s coal generation wasnearly 60% of its [power gen-eration] mix. Today that’sdown to 35.3%. And in 2030you predict it will be 23%.That’s a big drop in a shorttime. What is driving the shift?MS. GOOD: Over the last 10years, we have had a target oflowering our carbon emissionsconsistently through invest-ment. The transition haslargely been driven by invest-ment in natural gas. So if I goback to 2005, no natural gas.And then today it representsabout 25% of our mix. We’vealso been investing in renew-ables since 2007 and todayoperate one of the largest re-newable fleets and have drivenNorth Carolina into a leadingposition in solar penetration.

MS. HARDER: What would yousay is the single biggest driverdragging down the U.S. coalindustry?MS. GOOD: Natural gas hasbeen a game changer. If youthink about the discovery ofshale and the low natural-gasprices that we’ve experiencedfrom the harvesting of that re-source, it’s had an extraordi-nary impact on the economyat large and certainly on thegeneration of electricity. Iwould also put a weakeningeconomy generally and world-wide as another driver aroundcoal. At one point over the lastmany years there was a lot ofhope and interest in the ex-porting of coal. Of course, thathasn’t materialized.

MS. HARDER: Do you ever envi-sion a future, whether it’s2050 or 2100, when coal willbe next to 0% electricity herein the U.S.?MS. GOOD: I certainly thinkwe’re moving in that direction.Under the rules that exist to-day, you can’t build a new coalplant without capture and se-

questration [of carbon], and atthis point we don’t have a via-ble technology that is eco-nomic for that. So you’re talk-ing about extending lives ofexisting plants, and those eco-nomic decisions become verychallenging when gas is cheapand renewables are available.

MS. HARDER: President Obamaand the secretary-general ofthe U.N. have called climatechange the biggest problemfacing humanity. As the CEOof a major utility company, doyou believe you share in a re-sponsibility to address climatechange?MS. GOOD: I look at my respon-sibility as serving about 20million people in the U.S. withaffordable, reliable, safe andclean energy. And so you thinkabout that responsibility 24/7,these lights have to work allthe time and have to work for20 million people. And so cer-tainly environmental responsi-bility is a part of my responsi-bility, but so is affordability,so is reliability, so is safety.And so you look at all of thosethings together, and I think Ihave to be at that intersection.

MS. HARDER: Southern Co. CEOTom Fanning had some prettycritical words for carbon cap-ture and sequestration in thelast panel. He said he doesn’tthink it’s going to be economichere in the U.S., given cheapnatural-gas prices. Do youagree?MS. GOOD: The enthusiasmaround carbon capture and se-questration was probablygreater before the shale-gasdiscovery and the low priceswere so prevalent. And Iwould step back again to thepragmatism of an investmentin carbon capture and seques-tration, or retiring an [existingcoal-fired] plant and buildingnatural gas and renewables. Ialso think that as a nation wehaven’t invested as much inresearch and developmentaround [carbon capture] as wehave other technologies.

MS. HARDER: How much areyou investing in carbon cap-ture and sequestration now?MS. GOOD: Modest invest-ments.

MS. HARDER: And where doyou see that going over thenext 10 years?MS. GOOD: I would say stayingabout the same or going down.

Carbon capture for gas?MS. HARDER: Former NRG En-ergy CEO David Crane saidthat if we’re going to achievethis 2-degree limit in tempera-ture rise that the scientists saywe need, carbon capture needsto succeed. Do you agree?MS. GOOD: I believe that for usto meet the broader aspirationaround climate, carbon cap-ture is going to be important,and I would also argue thatnuclear is important. Ofcourse there will be technolog-ical breakthroughs—I thinkbattery storage is somethingthat we all have some hope in.We have probably six or eightpilots ourselves, trying to putbattery technology to workwith renewables and otherparts of our system.

But I think we need to rec-ognize that running a 24/7power system requires 24/7power. And the options wehave today for 24/7 power arenuclear, natural gas and coal.And if you think about coal asbeing phased out over time,you think about natural gas as

The Future for CoalLynn Good on why coal is being phased out,and what needs to be done to replace it

✤✑

✢✒✓✔✖✘✙✘✔✚✔✓✓✛

✣✜✥ ✦✧Wind26%

9.5 ✦✧Solar37%

✥✜★ ✦✧Natural Gas

31% ✩✪✫✬✭✮✯✰✱✰ ✲✳ / 4%

✴✵✶✯✷✸✱✹ ✲✳ / 1%

✺✭✻✯✷✬✭✪✼ ✮✽✶ ✷✻✾✭✯✸✱✹ ✲✳ / 1%

✿❀❁❁❂ ❃❀❄❅❆❆❇

If all goes as planned, this will be the first year that solar poweraccounts for more new utility-scale electricity-generating capacity inthe U.S. than any other source

Source: U.S. Energy Information Administration THEWALL STREET JOURNAL.

Scheduled capacityadditions for 2016

JOURNAL REPORT | BUSINESS & ENERGY

VOICES FROM THE CONFERENCE

‘We saw a business here and, from a public-pol-icy point of view, we see the future as goinggreener. I think the world is moving in that di-rection. And you have almost 200 countriesmaking a commitment. Even if they fail at theircommitment, they’re moving in this direction.We see business.’

Anne M. Finucane, Vice Chairman,Bank of America

Advancing the Scienceof Smart Energy

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All research results will be shared in the public domain.

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B8 | Wednesday, April 13, 2016 THEWALL STREET JOURNAL.

JOURNAL REPORT | BUSINESS & ENERGY

VOICES FROM THE CONFERENCE

‘The No. 1 thing I’d want to have happen is tobring common sense back. Do not allow oneindividual or one agency to pick what’s going tohappen. I don’t think that’s productive for any-body. And it’s better to have all voices at thetable. And then let’s base things on science.Base it in reality, common sense, and make itsustain itself based upon science.’

Kevin McCarthy, U.S. House Majority Leader(R., Calif.)

wooden poles. It’s shockingthat we could be this obsolete.

But every utility in the coun-try except one, Green MountainPower in Vermont, is fightingthe market penetration of peo-ple making their own electric-ity. That’s why, if you have anindustry that’s based, “Oh,we’re gonna give this companya monopoly and hope that theydo the right thing by the cus-tomer,” that’s not going to bethe best approach.MR. FANNING: Tom and I aregreat friends, we really are.He’s dead wrong. SouthernCo., actually our largest sub-sidiary, Georgia Power, wasnamed by the solar industry asthe investor-owned utility ofthe year by the solar industry.You want to buy rooftop so-lar? I am glad to sell it to you.

Utilities have gone throughhuge dislocations and disrup-tions in recent years, and bigfinancial bets are being madeas they position themselves forenergy markets of the future.Wall Street Journal Global En-ergy Editor Elena Cherneytalked to two key players withdivergent approaches: ThomasA. Fanning, chief executive ofSouthern Co., and DavidCrane, who until Decemberwas CEO of NRG Energy Inc.Edited excerpts of their con-versation follow.

MS. CHERNEY: You both tookvery different approaches totransitioning to cleaner en-ergy. David, you told me youwere fired by your board atNRG for being too radical. Youalso said that you wished youhad been more radical. Whatdid you mean?MR. CRANE: There are roughly55 power companies in the U.S.that produce most of the gener-ation. In 2006, when I becamevery sensitized to the carbonissue, I looked at the carbon in-tensities of the 55 companies.We were 54th, or second-mostcarbon intense, and the onethat was ahead of us, Mirant,we ended up buying.

I went to the board andsaid, “Look, it’s unlikely thatthe world’s going to allow usto [continue to] do this.”

So we started on renew-ables. We tried to build a nu-clear plant, because I’m a bigbeliever in nuclear as a zero-carbon source. But I foundthat you had to talk about thatto motivate an employee basethat wants to basically dowhat it has always done. Soone of the reasons I was sooutspoken was to motivate theemployee base, and ultimatelythat made me a bit of a con-troversial figure.

MS. CHERNEY: Tom, you took adifferent approach. You de-scribed it as a more naturalevolution.MR. FANNING: I take my man-agement group through this ex-

ercise from time to time wherewe really try to think abouthow much change is out there.It is up to us, as leaders, tokind of see around the corners.

We’ve moved in our energyproduction: Coal, before I gotthere, 70%; coal this year willbe 28%. Gas back then was15%, 16%; now it is going to beabout 50%. We’ve developedour own technology that pro-duces less carbon than naturalgas. Renewables, we’re movingforward in a big way on solar,particularly, and some wind.Energy efficiency, we just an-nounced a really important ac-quisition, PowerSecure Inter-national [a provider ofdistributed generation, givingpower customers more controlover the energy they use].

The whole notion is to un-derstand really how thismodel will evolve and try toskate to where that puck willbe. If you do it in kind of atransparent, orderly way, youdon’t have this notion of dis-ruption. You have a notion ofnatural evolution.

MS. CHERNEY: Also, you’rebuilding a nuclear facility. Nota lot of people are doing thosethings. Where do you see thatmix going?MR. FANNING: All of the above.

Nuclear, we are leading the re-naissance in new nuclear. Ifthe country is serious aboutcarbon, we need nuclear in themix. It’s really hard to do nu-clear. Our deal, if you includeall capital costs and all financ-ing costs: $15 billion over 10years. Coal, we all know thatcoal is under pressure. We de-veloped this technology wherewe can actually consume coal,gasify it, capture 65% of thecarbon and move on. We’vetaken our lumps on that deal.That deal, probably, becausegas is so cheap right now, isn’tgoing to happen elsewhere inthe U.S. But I’m darn sure thatthere’s a great market for itaround the world.

MS. CHERNEY: David, can car-bon capture be made to workcommercially in the U.S.?MR. CRANE: First, Tom andSouthern Co. should be com-mended for what they’ve donewith nuclear and with pre-com-bustion carbon capture. Butthey’ve essentially demon-strated that those two technol-ogies are not cost effective. Wecannot afford for post-combus-tion carbon capture not to becost effective. If we’re going towin the fight against climatechange, it must succeed in thatregard when you include India

and China plants. I don’t thinkpost-combustion carbon cap-ture, as it’s done, with a tech-nology that’s borrowed fromthe chemical industry, is goingto get it done.

We need a disruptivechange. Overall, I would tellyou that I believe this country,the world, will win the fightagainst climate change by tak-ing the carbon out of fossil fu-els before it wins the waragainst climate change bymaking the world an all-renew-able plus battery-storage place.MR. FANNING: Nuclear abso-lutely needs to be part of theportfolio, and in the portfolioit’s cost effective. Let me ex-plain that. The energy fromour nuclear plant that we’rebuilding in Georgia is going tobe the equivalent price ofabout $1 per million BTU. Now,gas is really cheap right now.The query is how long will gasremain at that price.

Think about stock owner-ship as you build your own per-sonal portfolios. You buy somestocks that are really secure.Then you want to have somestuff that’s kind of risky andmore volatile. Maybe it’s got along-term return potential.

When you think about con-structing an energy portfoliothat has got to achieve the bal-ance of clean, safe, reliable, af-fordable, it is absolutely clear.Now, there’s a temporal featurehere. It will change over time.But it is a dominant solution tobuild nuclear—relatively highcapital cost, very cheap energy,zero volatility, essentially.

It looks like coal is windingdown.Renewables becomemuch more important. I’ve al-ways been a fan of solar. Thebridge in the middle is gas. Ev-ery one of those has a differentrisk/return profile, a differentcapital and energy mix, and asa portfolio, they work.

MS. CHERNEY: David, do youagree?MR. CRANE: In the sense thathe has to get his cost basispassed through the public ser-vice commissions of variousstates, arguments like he justmade about diversification of

portfolio work. In the compet-itive [market for energy] di-versification of portfoliodoesn’t necessarily work. En-ergy has usually been a win-ner-take-all business. Andright now in the U.S., the win-ner-take-all is natural gas.

One of the things we shouldbe talking about is the role theutilities are playing in snuffingout distributed generation.The premise [put forth byTom] is that a central gridsystem is only as strong as itsweakest link. We’re talkingabout an economy we built inthe U.S. built off 130 million

Two Utilities, Two ApproachesThomas A. Fanning and David Crane on their different strategies for cleaner energy

company mandate and thiscompany philosophy?MS. CORRIGAN: We are not per-fect. But I will tell you thatwhen we do have issues, orwhen we do have incidents, wetry to do our best to meet theexpectations of the folks thatwe serve as customers and inour communities. And we tryto learn from them.

The climate questionMR. BUSSEY: The environmenthas been a flashpoint in thereputation of Koch publicly—Charles being ambiguousabout to what degree humanshave a role in climate change.He acknowledges that thingsare heating up. But he says,“Look, you know, maybe nothumans.” What is Koch’s posi-tion on climate change?MS. CORRIGAN: I think Charleshas said the climate is chang-ing. So the climate is chang-ing. I think he’s also said, andwe believe, that humans havea part in that.

I think what the real ques-tion is, and I think it’s some-thing that we’ve talked aboutpretty much all day today is,what are we going to do aboutit? Right? What is the rightanswer?

I’m a baseball fan. Just byassociation, I’m a Yogi Berrafan. So there’s a great quoteby Yogi Berra: “It’s impossibleto get a conversation goingbecause everybody’s talking somuch.” What I think needs tohappen and what our companyis really focused on is, wewant to make sure that thepolicies and the actions wetake are good for people.

Koch Industries is one ofthe largest—and most contro-versial—private companies inthe world. Maker of a wide ar-ray of products, including Di-xie cups, pipelines and refinedoil products, Koch has drawnfire for its massive contribu-tions to conservative causesand concerns about its recordon environmental safety.

To get an insider’s view ofthe company, The Wall StreetJournal’s John Bussey spokewith Sheryl Corrigan, directorof environment, health andsafety at Koch and a formerpollution-control commis-sioner in Minnesota. Here areedited excerpts of the discus-sion.

The big principleMR. BUSSEY: Tell us what youdo inside the company, andhow you would articulate thecompany’s guiding principlesthat you think that the rest ofthe world doesn’t know about,that you think are elements ofthe culture that they should beinformed about.MS. CORRIGAN: I was a regula-tor. And I started with KochIndustries about 10 years agonow. What I learned fromlooking at the company fromthe outside in is, it’s a com-pany that is very principle-based.

So our philosophy, our busi-ness philosophy, talks about

making the stuff that you andI use every day. What makesus unique is that we do that ina principled way and in a waythat really is focused on mini-mizing waste. We’ve beenpracticing sustainability for 75years as part of our businessphilosophy. We just haven’tcalled it sustainability. We’vecalled it long-term value andminimizing waste. I wouldventure to guess that not toomany people know that aboutus.

MR. BUSSEY: It is a business

objective to minimize waste, toincrease profit. But your argu-ment is that it intersects moreclosely with the environmentalconcerns of your customersthan they might think.MS. CORRIGAN: I think a greatexample is we’re an energycompany, we have an energysubsidiary. And since 1997, sowe’ve been at this for a while,we have reduced our air emis-sions at our refineries by 76%.So that’s a pretty big bite outof our emissions.

Likewise, at our Georgia-Pa-cific company, we use biomass

for 50% of our energy require-ments there. Our philosophyis, around the waste minimiza-tion, taking every molecule,every bit of raw materials thatwe bring into our processesand upgrading that to a value-added product. So that’s thewhole mind-set of pretty mucheveryone that works in ourcompany, from the folks at theproduction floor, all the wayup.

MR. BUSSEY: Koch is in the eth-anol business. Charles Koch isvery clear that he believes that

business in the United States isoversubsidized. And yet, etha-nol, heavily subsidized by thegovernment, is a big businessfor Koch. How do you squarethat circle?MS. CORRIGAN: We buy busi-nesses like ethanol and biodie-sel because we are convinced,based on our analysis of thebusiness, that those productscan stand on their own with-out a subsidy or a mandate.Something that folks mightnot understand about ethanolis that it is a very efficient ox-ygenator. And it also increasesthe octane of gasoline proba-bly better than the chemicalsthat have been used in thepast. So we believe that mole-cule for molecule, and gallonfor gallon, ethanol can com-pete with the next-best alter-native for oxygenators andalso for octane enhancers.

MR. BUSSEY: Not a problemthat it’s heavily backed by thefederal government and tax-payer dollars?MS. CORRIGAN: At Koch Indus-tries, we actively lobby againstsubsidies. We lobby to get ridof mandates and subsidiesthat actually, in some cases,benefit us.

MR. BUSSEY: Koch gotslammed for instances of vio-lations with the EPA. Howdoes that square with this

TheKochPerspectiveInsider Sheryl Corrigan defends the company’s environmental record

‘We lobby to get ridof mandates andsubsidies thatactually, in somecases, benefit us.’

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U.S. utility-scale electricity net generation by selected sources,in billions of kilowatt hours

2006 ’07 ’08 ’10 ’11 ’13’12’09 ’14 ’15

❈❉al Natural gas Nuclear Hydroelectric*,solar and wind

Natural ProgressionNatural gas nearly overtook coal last year as the most commonsource of electricity in the U.S.

2,000

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

*Includes only conventional hydroelectric power, not hydroelectric pumped storage

Source: U.S. Energy Information Administration THEWALL STREET JOURNAL.

Thomas A. Fanning (left)and David Crane

VOICES FROM THE CONFERENCE

‘We’re realistic enough to know what renew-ables will do and what they can’t do. They can’tgive you base load power. They can’t give youreliability 24/7. Not yet. Nationwide…But today,you got three months of coal sitting here. I cangive you three months of power. You’ve got re-actors, I can give you nuclear power. Other thanthat, I can’t guarantee anything.’

Joe Manchin, U.S. Senator (D., W.Va.)

THEWALL STREET JOURNAL. Wednesday, April 13, 2016 | B9

Despite meteoric growth, so-lar is still a tiny slice of theglobal energy pie. Jeffrey Ball,a contributing editor at TheWall Street Journal, spoke withtwo industry executives aboutwhere solar is headed: Lynn Ju-rich, co-founder and chief exec-utive of Sunrun Inc., and TomWerner, president and CEO ofSunPower Corp. Edited ex-cerpts follow.

MR. BALL: The InternationalEnergy Agency says if theworld implements pro-renew-ables policies, solar’s share ofglobal power production in2040 will be about 4%—bothglobally and in the U.S.—upfrom about 1% now.

If you put your industry inthe context of a kid growingup, where is solar?MS. JURICH: This industry hasarrived and is at a place wherethe momentum is there. Theindustry in the U.S. crossed [athreshold of] over a million so-lar homes this year. So there’sall this talk about electric vehi-cles, but there are more thandouble rooftop solar homes asthere are electric vehicles.MR. WERNER: We’re like a 13-year-old or 14-year-old in highschool who’s really athletic,and so you’re going, “Wow,that person is going to be re-ally good.” But this is a 13- or14-year-old. So that would bethe short answer.

IEA is like SunPower: Ourforecasts are always wrong, onthe low side. Solar’s share oftotal generation is probablymore like 10% by 2040.

MR. BALL: There’s effectivelya trade war in solar going on.There are allegations thatChina is selling solar panelsbelow production cost, deci-mating the solar industries inthe U.S. and Europe. How sig-nificant is this?MR. WERNER: We’re always go-ing to have some policy issues.But you have such a massive

opportunity, it creates twothings. It creates the desire tomake sure that the way itworks has the correct policy.And secondly, it brings in mas-sive competition.

Generally speaking, it’s fric-tion, so the consumer loses.You’re not going to be able topick exactly the right place toput a tariff on and make itright. So when you do that,you get counter-tariffs andcosts go up.

MR. BALL: Lynn, let’s talk aboutthe net metering fight. Whathas happened in Nevada?MS. JURICH: What’s happeningright now is we’re buildingtwo infrastructures out. We’rebuilding an energy infrastruc-ture that’s customer-sided atthe grid edge, and we’re build-ing out our traditional central-ized energy. And the econom-ics are very strong on thecustomer side now.

MR. BALL: Your company leasessolar panels to homeowners,puts the panels on the roofsand the homeowners don’t payany capital cost. They pay youeffectively as their electricityprovider and that’s how youmonetize your business?MS. JURICH: Exactly. Andwhat’s happening is that thehome on average uses about70% of that power. About 30%of it flows back into the grid.

The framework we’ve usedin this company predomi-nantly is that that homeownershould be credited at the retailrate when that energy flowsback into the grid, because itflows to the neighbor. It’smuch cheaper for the power togo to the neighbor than it is…

MR. BALL: So I have a houseand I buy my power from youfor less than I would pay if Ibought power from the grid.That’s why I buy power fromyou. And I sell it back into thegrid at a higher price than I

have paid you for it, becauseI’m being paid prevailing…MS. JURICH: Correct.

MR. BALL: That’s a prettysweet deal. Is it going to last?MS. JURICH: Not in Nevada. Solet’s talk about this and howwe can sort of resolve this.

When you look at the stud-ies, what happens is you actu-ally see that at our penetra-tion levels, when we put homesolar onto the grid, itstrengthens the grid. It savesmoney for all customers. Andmany of the studies, and all ofthe independent studies, haveshown that.

There is a utility trade groupthat just did a survey thatasked, “What should consumersbe compensated”—solar cus-tomers—“for energy that flowsback to the grid?” And 80%said, “At retail rate or higher.”

What happened in Nevada,the legislators said, “We wantthis thriving rooftop solar mar-ket. Come on in.” Then the util-ity commission said, “You knowwhat? We’re going to changethe rate on what we pay forcustomers’ power that flowsback to the grid. We’re going topay you two cents, two cents akilowatt-hour, for the powerthat flows back to the grid thatgoes to your neighbor. Butwe’re going to charge thatneighbor 12 cents.”

That’s what happenedthere. That will not stand thetest of time.

MR. BALL: Some say it isn’t fairfor people who are hooked upto the grid but have solar pan-els not to be paying somethingfor the maintenance of theelectrical grid.MR. WERNER: The challengehere is the economic model forelectricity was established along time ago, and wasn’t es-tablished to think you couldhave distributed generationthat made sense. So the eco-nomic model needs to change.

The Big Fight in SolarLynn Jurich and TomWerner discuss the futureand the battle in Nevada over net metering

JOURNAL REPORT | BUSINESS & ENERGY

long-term capital decisions.

MR. BALL: Doug, what is yourthinking on coal?MR. KIMMELMAN: There are bigswatches of this country thatare very comfortable with thecoal that they’re burning, andI don’t see that going away.

For us, the most profitableway [to make money fromcoal] is by cleaning it up, sowe built a large activated-car-bon facility in Louisiana thatremoves the mercury emis-sions from coal-fired powerplants. We also have a busi-ness that deals with removingnitrogen-oxide emissions. Car-bon capture has a long way togo. We aren’t investing in that.

MR. BALL: Let’s move on to re-newables. Some people in thisaudience will say renewablesare a charade and a money

loser. Others will say renew-ables have a viable possibilityof supplying all the world’selectricity and can be profit-able. Jeff, where do you stand?MR. HOLZSCHUH: Right in themiddle. Renewables are hereto stay. Having said that, thequestion has always been,“Without subsidies, are theyeconomic?” I think scale andlow-cost financing has madethem much more competitivethan they were even threeyears ago, and that will getbetter and better. I’m not a bigbeliever that the technologiesare at parity yet [with conven-tionally produced power], butthey are getting closer. I thinksolar will overtake wind overtime. It’s more ubiquitous. It’sgot better characteristics. Andthen, if we get storage, thesupply sector will grow evenmore dramatically.

GENESIS

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Jeffrey Holzschuh (left) and Douglas Kimmelman

they’ll come under the sameconstraints, I’m sure, that thedeveloped countries face now.

Here to stayMR. BALL: What are you tellinginvestors about the advisabil-ity of investing in coal assets?MR. HOLZSCHUH: There is nodoubt that there is a macrotrend toward cleaner genera-tion of energy.

But coal isn’t going any-where. It’s going to remain athird of the [energy] mix inthe world. In the developedcountries it’s dropping fairlydramatically and will continueto go down as plants getclosed and new build is allnatural gas and renewables. Sowe’re helping clients thinkthrough this as they make

kets versus developed mar-kets. But our view now is thatwhen something is clearly en-vironmentally hazardous, wearen’t going to participate.

MR. BALL: But you are going toparticipate in the developingworld, right?MR. HOLZSCHUH: Because thereare no other choices. Look, wefundamentally have to alloweconomies to continue to growand people to have standard ofliving. You can’t go to someplaces in the world and notburn fossil fuels. There justisn’t any economic alternative.And so there has to be someflexibility in that policy to beable to help those economies,governments and companiescontinue to grow. Over time

Jeffrey Holzschuh, thechairman of Morgan Stanley’sInstitutional Securities Group,and Douglas Kimmelman, se-nior partner at Energy Capi-tal Partners, move billions ofdollars through energy invest-ments around the world.

The veteran bankers satdown with Jeffrey Ball, a con-tributing editor at The WallStreet Journal, to discuss howthe energy picture is changingand where they are placingtheir bets.

Here are edited excerpts.

No alternativeMR. BALL: Is there really aglobal energy revolution goingon? And where are you puttingyour money now?MR. KIMMELMAN: I’m in pri-vate equity. We’ve raisedabout $13 billion from inves-tors, mainly public pensionplans. We invest that in en-ergy, largely in North America.

We don’t invest in [explora-tion and production]. We don’tlike the volatility around that.Our focus is in power genera-tion—fossil generation as wellas renewable generation—andmidstream business such aspipelines, gathering systemsand storage, which are fee-

based businesses that aremore dependent on the vol-ume of fossil-fuel movementsrather than the price. We’reinvolved in service businesses,things like constructing trans-mission lines, and we’re alsovery involved in the decom-missioning of nuclear plants.

MR. BALL: Jeff, Morgan Stanleyhas said it isn’t going to fi-nance strip mines or new coal-fired power plants in devel-oped markets. What motivatedthat decision?MR. HOLZSCHUH: Almost adozen years ago some in theenvironmental communitycame to Wall Street and said,“You guys can’t finance coal.”And actually, there was an in-credibly constructive outcomecalled the Carbon Principles,[a series of guidelines on fi-nancing electric-power proj-ects] that has gotten incre-mentally more stringent andmore defined over time.

We have an incredibly envi-ronmentally sensitive philoso-phy within Morgan Stanley. Onthe client side—and we coverevery industry and everycountry—there are going to bedifferences in those policies,depending on emerging mar-

Bankers Place Their EnergyBetsJeffrey Holzschuh and DouglasKimmelman on where theirinvestment billions are going

Lynn Jurich (left) with Tom Werner

VOICES FROM THE CONFERENCE‘We haven’t learned to produce [natural gas]at the price it sits right now, but we havelearned to produce it at a very low cost. Andso that demand is building. I think we’ll prob-ably be surprised when all that demand finallykicks in, when all that infrastructure gets builtout and the facilities built to consume all thatnatural gas actually get built out, we won’thave the rigs ready fast enough to get backand caught up.’

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