Tom Steyer.

Fortune Live MediaTom Steyer.

Tom Steyer spent years as a wildly successful hedge fund manager, a vigorous philanthropist, and a sought-after funder of Democratic politicians, but most of that activity took place beneath the public radar.

A few years ago, however, Steyer stepped into the spotlight. In January 2009, he and his wife Kat Taylor donated $40 million to found the Tomkat Center for Sustainable Energy within the Precourt Institute for Energy at Stanford, and another $7 million to found the Steyer-Taylor Center for Energy Policy and Finance, run by ex-Google energy guy Dan Reicher.

In August 2010, he and Taylor signed the Giving Pledge, vowing — as with Bill and Melinda Gates and Warren Buffett — to give away at least half their fortune, which in their case runs to $1.2 billion. Later that year, Steyer poured $5 million into a winning campaign against California’s Prop 23, which would have rolled back the state’s seminal global warming legislation. In November 2011, he cofounded the Advanced Energy Economy, a trade association of clean energy businesses. In October 2012, he resigned from his hedge fund to pursue social change full-time. Also in 2012, Steyer crafted, and spent $32 million to back, California’s Prop 39 — which voters approved in November, closing a tax loophole benefiting out-of-state corporations and directing half of the resulting revenue to clean-energy initiatives.

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Most controversially, in March of this year, he dove headlong into electoral politics, pouring scorn and threatening to pour money into a Mass. Democratic senate primary campaign against Stephen Lynch, a supporter of the Keystone XL Pipeline. Lynch’s opponent Ed Markey won, but Steyer’s involvement drew fire. Markey himself disavowed the hardball tactics and political operatives everywhere clutched their pearls.

We met with Steyer when he came through Seattle, for a chat about climate, politics, and money. (This interview has been lightly edited for length and clarity.)

Q. What first engaged you on climate and energy in such a significant way? Was there a turning point or moment of clarity?

A. I don’t think there was a big epiphany. But getting involved in the No on 23 campaign in 2010 was an incredible education for me in how human beings think about this, how they relate to it, and what moves them on it. It definitely corrected a bunch of my preconceptions as to who cared and why they cared. People’s image of environmentalism is very different from the actual Americans who care about it. That Latinos care the most about environmental issues is not a popularly held view in the U.S., but it consistently polls that way.

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Q. What do you talk about to reach that audience?

A. You talk about environmental justice. You talk about health. The reason Latinos are so aware of environmentalism is that companies have traditionally put their dirtiest plants in poorer neighborhoods, because poorer communities have no political clout. Then their kids have breathing problems.

Q. Presumably the GOP has seen the same polls. Do you think, with their newfound love of the Hispanic vote, they will move to the left a little bit on environmental stuff?

A. No. I mean, I probably over-count the California experience in projecting the American experience. We went through a process very much like the one the U.S. is going through — a legislature which is totally stalled, very low legislative approval ratings, inability to get a budget, inability to change the tax code … just consistent failure. So we’ve had a chance to see whether Republicans would pivot away from stuff that was deeply unpopular with the majority of Californians.

I am the son of two Republicans — so, you know, I am hoping. I’m rooting for a healthy two-party system in the U.S. But what we actually saw in California was a dysfunctional two-party system that ended with one of the two parties having no statewide elected officials and the other party having super majorities in both houses of legislature. It took 10 years, but [California Republicans] never pivoted to the center … I mean, they ran a prop against immigration!

Q. But there’s no prospect of those kind of supermajorities at the federal level, right?

A. I would put money on the fact that if you go against 92 percent of Americans’ wishes consistently [as the GOP did on the background-check vote], you will end up with less than 40 Senate seats.

Q. You got involved in the Markey primary this year. He won, but you came in for criticism about the way you were involved with that race. Looking back on it, would you do anything differently? Do you plan to continue in the general election?

A. Any time you’re involved in an election, it’s going to be a little chaotic. You could say, “I shouldn’t have thrown the left hand, I should’ve thrown the right hand.” But by and large, it is what it is. It was important not just to win, but to win for the right reason. It was going to be one more conspiracy of silence about energy and climate — no one wanted to talk about it. We had to create intensity; it had to get put on the ballot. From what we can tell from the polling and focus groups, it worked really well.

Should we not have done that because people didn’t like it? If people aren’t pissed off, it ain’t working. That’s the truth. We have a system where elected officials are extremely happy. It’s just the other 317 million Americans who are getting screwed. If elected officials are upset, I think that’s a good sign.

Q. Do you have plans for other races?

A. We certainly want to do more races. We just have to be strategic and have some idea as to where we’re going.

Q. At what point does it make sense to go the initiative route?

A. It kind of implies that representative democracy is failing, right? You can’t have less than a 10 percent approval rating for your legislature and think it’s working. It was failing; and so we did everything by proposition [in California].

There are good sides and bad sides to that. The bad side is that it’s really expensive. People seem to think that’s wicked, but if you think about spending money on a proposition as educating people about something complicated, then spending money’s not bad. The bad part is, is it coming from a good source? Are we spending money to obfuscate, to pursue our own monetary or business interests, or are we actually using it to educate Californians? It takes a lot of education for people to think about some of these topics.

[The proposition process] was put in to protect from failed legislatures, and it has been used in California to replace a failed legislature. I don’t know what will happen now that we have [Democratic] supermajorities in both houses. Maybe now we’ll have a functioning legislature again, and there will be no more need for props.

Q. The Keystone pipeline has become a flash point. Is there a plan for what to do if Obama approves it? What will the backlash be among the donor class, and what should it be? What’s the strategic way to respond?

A. One, getting an approval from the president is obviously a huge step forward for the pipeline, but there will still be lots of challenges, particularly in light of the EPA opinion on the State Department [draft environmental impact statement]. I think this thing will get litigated for a long time. So approval does not mean that construction will begin the next month.

Also, this is about [fossil fuel] supply. We already have multiples of the supply we need to destroy ourselves. [Keystone] will be one more multiple of supply. If we have six times more than we need, we’ll have seven times more than we need. Obviously, if he doesn’t allow Keystone, we’re not going to stop fighting, and if he does allow Keystone, we’re not going to stop fighting. So the question is, politically, what do you do? How do we relate to him? Here’s somebody who’s going to be saying, in effect, “I’m your only choice.” Right? “You have no choice but to support me.” I don’t think that works in politics.

I don’t know if [Obama] thinks the oil companies are now going to support him, or if he thinks that the Tea Party is now going to support him, or if he thinks that he’s gaining any political advantage by trying to appease them. When you appease people like that, they don’t think we should meet in the middle, they think, “He’s weak, we should get more.” So I think, politically, it would be a very poor decision.

Obama’s job is to lead in the United States overtly so he can lead in the world overtly. It is very hard to go to China or India or Europe and say, “I want you guys to suffer in order to get this right, and by the way, I’m not willing to do the right stuff myself.” So I think it would be a terrible decision for him.

If he thinks it won’t affect how people think about him, that’s extremely naïve. And he’s not naïve, he’s a really smart politician, right?

Q. But then again, he’s not running again, so it’s hard to concretely punish him.

A. That’s not true. If you look at the people who support Obama, and then you look at the people who support him actively and give money, the number of people who care about climate in this second group is actually a majority — not out of the people who support him, but the people who are really active and give money. It’s an enormously high percentage.

And if those people decided that he was no longer somebody who’s worth supporting, even though he doesn’t have to run again, it would be terrible for him. His whole thing is, he’s trying to retain popularity to push his agenda. It’s absolutely about polls. There is no doubt in my mind, the reason that he’s considering approving Keystone is because Keystone polls well.

Q. The next big item on the environmental agenda for Obama is EPA carbon standards on power plants. How does resolution of the Keystone question affect that battle? And are you going to get involved in that?

A. There’s two ways to think about it. One is, I’ll trade Keystone for stationary source [regulations]. There are people who are talking about that: I give you this, so I get this.

That will never work. You really think you’re going to go to climate deniers and say to them, “I’ve already given you this, now why don’t you give me this”? Do you really think that’s going to happen? If you think about this as a kind of fight — which is what it is — who takes a punch in the face in order to get the next punch? That doesn’t make any sense. You want to punch him in the face.

So I’m hoping this administration will realize that appeasing these guys is going to get them nothing. It’s gonna get them nothing. It’s only going to convince everybody that they’re weak. I mean, these guys didn’t get background checks on felons for guns! Their counter-parties aren’t compromising.

Q. The problem is a group of “centrist” Democrats — that’s why they didn’t get background checks, right? Because four or five Democrats bailed on them. If there’s a vote on whether to overturn EPA authority and that same group of Democrats …

A. I think that’s so unlikely, that they could overturn EPA authority and overturn a veto. That is so absurd. If you’re scared about that, you’re scared about everything.

These are two things he has the absolute right to do. He has the right to turn down Keystone and he has the right to regulate existing coal plants. There is no legislative check on this. Doing this Kabuki dance of worrying about every single possibility, it just means it’s not your issue. It’s not the top issue; it may not even be the second issue.

Q. So will you pull more donors into the climate fold?

A. We’ll find out. We’ll talk to a whole bunch of those people and see how they feel about it. People are changing.

Q. You think there’s going to be more donor muscle in electoral politics around clean energy?

A. Well, if you have a dysfunctional legislature where nothing can pass, then democracy can find other ways to work. It happened in California. It’s going to happen in the United States of America. There’s going to be democracy. It’s going to happen in ways we’re not ready for. People love to laugh at California for the props. But it was really democracy being channeled to a new place. Well, democracy is going to be channeled to a new place.

Q. So where is that? State elections?

A. I think it will be. If D.C. doesn’t work, the American people work through the states.

Q. What about 2016? It doesn’t look to me like it’s a top priority for Hillary Clinton either, or any of her possible contenders in the primaries. Who would be a climate champion at the presidential level?

A. I bet you the world will change by 2016, in a big way, politically. That’d be my bet. It will depend to some extent on events. We have three and a half years to go. There will be a lot of events between now and the first Tuesday of November 2016. People always extrapolate forward from where we are now, but that is not going to happen.

Q. How far away is clean energy from being a real force in politics?

A. Far. The oil and gas industry makes $155 billion a year. They spend $200 million a year on disinformation campaigns. I mean, we’re trying. The truth is, incumbent industries always have the political advantage against disruptive industries. Disruptive industries have to disrupt. Incumbent industries will use all their political muscle to support something that doesn’t make sense anymore. Happens every time.

The three things that people care about politically are jobs, health, and when companies are dishonest. Everything else on this issue is noise. Every time you get off those points and you think you’re being smart, you’re being dumb. And every time you come back to those points and you think you’re being dumb, you’re being smart.

Q. The jobs thing is a double-edged sword for the climate community. Green jobs were touted in the first term, and the reality is, it’s not an immediate thing.

A. Well, I think the stimulus over-promised and under-delivered. But the fact of the matter is, this will be an enormous jobs creator. Enormous. Just redoing all the buildings — that’s a ton of construction. That’s a couple million construction jobs. You know, we’re not going to jump to getting rid of fossil fuels in a day and if we had to rebuild the pipes for natural gas, that’s a ton of jobs. There are a lot of American jobs here.

Q. Let me ask you a California question. The fracking folks have their eye on heavy oil in Monterey County. You have supported an excise tax which would raise a bunch of revenue off fracking. Would you support a moratorium? What’s your take on California fracking?

A. First of all, as you pointed out, it’s heavy oil, not natural gas. Second of all, Monterey County has a lot of people in it. [Fracking] is being used in a different situation than in the places most people are familiar with. Since it’s heavily populated, it’s especially important not to blow it. The way I understand fracking, it’s very specific. Different geological formations and different regulations will produce a safe or an unsafe outcome. Since I live in California, I think it’s incredibly important that we have a safe outcome — particularly in a part of the country where there are a lot people who live and drink the water.

Q. So why not support a moratorium?

A. I haven’t supported it or not supported it. I just haven’t read the bill. I don’t know the answer and I don’t think we should do anything until we do know the answer.

I want to separate putting an excise or lifting tax [also known as a “severance tax”] on existing oil in California from whether there should be oil fracking in California. The reason I want to put an excise tax is, we’re the only major oil-producing state — and we’re, I think, the third biggest [Ed. note: fourth; North Dakota has come on strong] — that doesn’t have a lifting tax. The difference is around $3 or $4 billion dollars a year. They’re going to lift the oil; why shouldn’t we tax them like Texas does? Texas has a huge amount of money from oil-lifting taxes. They’re the right-wingers! Why are we not doing this?

Q. How should average citizens and also political donors who care about climate be spending their time right now?

A. This is going to have to happen on a variety of levels. And I think for all of us, including me, in order to have some credibility, you’ve got to try and clean up your own life. It’s actually a pretty interesting, fun thing to do, and it gives you some real-life experience. That’s an exercise that people should do, and will enjoy, and will be valuable to them in a variety of ways, honestly.

And this is a political fight. Democracy is not a spectator sport. If people think this is the big issue, then they should stand up on the big issue. In 2010, the climate bill in the Senate, the American people were not engaged. They were going to pass a hugely impactful bill that 1 in 100 Americans understood. I honestly did not think that was right. This is a huge deal, this is the No. 1 issue. We aren’t going to World War II without telling the American people. And we shouldn’t.

Q. We thought about staging a reading of that bill with our readers. It might have taken three weeks. But the bill did have its defenders.

A. [Laughs.] It’s not about the bill. It’s a question of whether there was any grassroots awareness, support, or understanding. No. That’s why I keep saying: We have to talk about it. You can’t ask people to fix a problem that you’re scared to talk about in public.

Either the science will be wrong or we will win politically. Those are the only two possibilities. It’s only a matter of how much damage we’ll do to ourselves until then. And this is still a global problem. We can’t just win in the United States, we have to have a solution here that we can then provide a coalition of other countries. Winning here is a first step. It’s not the last step.

Q. The U.S. is reducing carbon emissions from energy in the short term in part via natural gas, which is shaping up to be a huge and divisive fight inside the green community. Is natural gas a “bridge” or a distraction that’s suppressing investment in renewables?

A. Of course both are true, right? Obviously. The question is what should we be doing. We’re not in a position right now where we have a [low-carbon] replacement for coal, which is a baseload fuel, other than natural gas or nuclear. We really don’t have the storage capability to make wind or solar serve as baseload. So if we’re going to get our carbon down in the short run, we pretty much have to [use natural gas]. Natural gas is fine. But if that’s the end of the line, then we’re just dead.

The real issue — and the argument on Keystone — is, we have to make a change. We have to make a political change so we can make a policy change and do all these other things. I don’t know if it’s going to be solar or wind. I don’t know what American business is going to come up with to make this happen. None of us knows. But the fact of the matter is, we have to make the change and put in place incentives and a framework so people can work from dawn ’til dusk figuring out those questions and trying to make a lot of money doing it. This is a huge industry. They’re going to make a lot of money. And God bless them. That’s fine with me.

The biggest question here, and the reason Keystone does matter, is about priorities. And that’s huge! That’s why it has to be a conversation. There is no one policy that’s the answer here; we have to change the framework. And if we change the framework, all these individual things will fit into that framework.

Q. Do you have aspirations for political office yourself? (We’re required by law to ask you that.)

A. You know what I say — this is actually the truth, I’m actually not being clever or disingenuous: The only jobs that I’ve done politically are jobs that no one else wanted. So if there was something that no one else wanted, but I thought was important, that was just a completely bad idea, I would probably do it.

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