Sir Nicholas Stern and Bill Clinton both have it right.  Global climate change has been our greatest market failure. Now it’s our greatest market opportunity.  Market mechanisms are enormously powerful tools to apply to such challenges as climate change.

 

Mitigating greenhouse gas emissions worldwide will require a crash program to use energy more efficiently, and to use renewable energy sources.  Doing this can cut costs and drive competitiveness, spread the use of clean energy technologies that already are cost-competitive and available and develop next-generation technologies in virtually every sector of the economy.

 

Capturing these opportunities will all require investment, management attention, and determination. The fact that these resources are scarce goes a long way to explain why the opportunities remain to be captured: absent leadership and a widespread recognition of the urgency, resources have been deployed elsewhere.  Energy has also been a relatively small part of most organization’s budgets, so investing time and money in cutting energy use has been a relatively low priority for a typical manager.  Unless the issue is elevated to the level of CEO concern, it has been hard to get action in corporations or governments.  In addition, as described in detail below, there are myriad barriers to reducing energy use, even though doing so will save money quickly.  Collectively these hurdles have created a hassle factor that for most executives, it’s just not been worth surmounting – yet.
 
But when the necessity of implementing a new energy economy is understood, the entrepreneurial opportunities will be unprecedented.  Far from the crushing cost that some have called the price of climate protection, the investments in using energy more productively and in unleashing the new energy economy will deliver impressive returns.  For example:
•Researchers at Lawrence Berkeley National Laboratory estimate that an investment of more than $300 billion will be needed worldwide over the next 20 years to provide low-carbon electric power and equipment to1 billion people who now do not yet have access to electricity.   The World Bank estimates that an investment of up to $40 billion annually will be needed worldwide to adapt to climate change.  Such investments will create 10 times the jobs that a similar amount invested in conventional power stations would.   Clean technology has become the fastest growing sector in venture capital and private equity investment, with a 2005 market valuation of $50 billion.  The amount of global energy sector investment into renewables reached 10%.  A survey that year of 19 venture capitalists investing in 57 European clean tech firms showed average annual returns since 1999 of almost 87%.

 

•New low-carbon fuels are needed to replace the 85 million barrels of petroleum the world consumes each day and the 385 million gallons of gasoline burned daily in the United States  and the much higher fuel consumption projected for the future.  Production of biofuels grew globally by 95% between 2000 and 2005 and should account for 5% of transport fuels by 2020. By 2015 this should create more than 200,000 new U.S jobs in ethanol production alone.   In contrast, current high oil prices represent one of the biggest transfers of wealth in history, redistributing 1% of world GDP each year. Oil consumers now pay $5 billion more for oil every day than they did 5 years ago.  In 2007, $2 trillion will flow from customers to the oil companies and oil-producing nations.

 

•There were 700 million “light duty vehicles” worldwide in 2000, expected to increase to 1.3 billion in 2030 and more than 2 billion by 2050.  New applications of urban design, mass transit and vehicle efficiency are needed to prevent massive increases in transport-related carbon emissions.  Creating this will revitalize aging downtowns and generate jobs.

 

•In December 2006, Mayor Michael Bloomberg announced a remarkable plan – PLANYC 2030 -- to create affordable and sustainable homes for nearly one million more New Yorkers, ensure that all residents live within a 10-minute walk of park, add public transit capacity for millions more commuters, upgrade energy infrastructure and achieve “the cleanest air of any big city in America” – all while reducing the city’s greenhouse gas emissions by 30%.

 

In the past, the United States led the world in the development of “green” technologies. Solar electric cells and wind turbines were first developed here.  Today, due to intelligent government policies, countries such as Japan, Germany and Denmark have taken the lead in solar and wind power. Renewables now create more new jobs in Germany than any other industry.  Denmark aims to get 60% of its energy from renewables by 2010. Japan was first-to-market with hybrid vehicles. Toyota, which this year surpassed General Motors as the world largest car company, expects hybrid vehicles to rise from 6% of its U.S. vehicle sales in 2005 to 20% by 2012.   It is time again for the United States to become the world leader in developing the goods and services needed for low-carbon economic development worldwide.

 

The transformation of the U.S. economy already is underway, with a strong business case for acting more aggressively to protect the climate. Leading companies and communities are cutting their costs, creating jobs, increasing profits and strengthening shareholder value by doing this.

 

This paper, writen by L. Hunter Lovins,  presents some of the opportunities now being captured by leading companies and communities. To access the full document please click here.