FOR CLIMATE PROSPERITY, FORGET EMISSIONS & BUILD NEW ENERGY, ENERGY EFFICIENCY

Tomorrow’s Climate; Beyond Peak Carbon
July 2009 (Tommorrow’s Company)
and
Game Over!
Hazel Henderson, June 30, 2009 (Ethical Markets)

SUMMARY
Tomorrow’s Company sees the world as a complex global system made up of 3 interdependent sub-systems, (1) the natural environment, (2) the social and political system and (3) the global economy.

In Tomorrow’s Climate; Beyond Peak Carbon, it furthers its effort to define how the private sector can take a leadership role in creating science-acknowledging policy in the fight to reverse global climate change.

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The report was undertaken because global climate change, though widely recognized as perhaps the greatest threat to human civilization right now, is slipping as a business priority despite scientists' urgency and policy-makers' turmoil.

Science shows global climate change will not wait for business to wake up. As Hazel Henderson, a member of the Executive Committee of the Climate Prosperity Alliance of which the Tomorrow’s Company report is an expression, recently told NewEnergyNews, “Money in not the constraint, TIME is!”

The report ideas follow 2 key Tomorrow’s Company principles: (1) The fortunes of private companies are linked to all 3 sub-systems of the global system and (2) market forces are drivers for progress and growth but will only focus on sustainability if required to by legislated and regulatory frameworks.

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Interdependency is everywhere. Companies, the report points out, depend on eco-systems. Natural resources, which supply feedstocks, become scare and costly if there are floods or extreme weather events like drought that provoke crop failures. An environmental catastrophe is usually an economic catastrophe as well. Backward policies lead to unsustainable practices that hurry the onset of the climate change that will worsen the economic impacts. A pristine example is government subsidies to fossil fuels industries and deforestational agricultural practices, both of which stimulate climate-changing events and hasten the coming of the crisis.

The synergy between economy and ecology works in the opposite direction as well. “Green” policies and investments create jobs and revenues and growth even as they protect the environment and attract voters to political leaders and customers to businesses. And the more political leaders incentivize New Energy and Energy Efficiency and require those who spew to pay for it, the more successful the “green” policies and investments become.

Companies and policy makers can work together to further shape a “green” and sustainable marketplace, with policy makers as the architects and companies doing the building.

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The interdependency involves not just a pair of economic aggressors like China and the U.S., and not just a small group of economic giants like the G-8, but requires a new coalition of the entire world, dubbed the G-192 by Climate Prosperity leader and spokeswoman Hazel Henderson. This worldwide fellowship can seize the opportunity to build a New Energy economy. The result would turn the climate change fight on its head. Instead of fighting to reduce emissions, New Energy and Energy Efficiency will drive emissions reductions.

The Tomorrow’s Company report delves deeper into the Climate Prosperity concept by asking questions about how business can take the lead in weaving together concerns for the 3 sub-systems into the most effective action:

(1) What can companies and their leaders do in the next 10 years to prepare for the scale of the task that they face?
(2) How can they move policy-makers to stabilize and stimulate rather than aggravate the investment context?
(3) Can business help re-prioritize policy needs?

These questions are not about emissions reductions but emissions reductions will be the result.

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The goals are the building of more New Energy and Energy Efficiency. The means are partnerships at all levels of the 3 sub-systems of the global system throughout the G-192. The need is leadership, the very quality inherent in successful business practices. The report sets out recommendations for urgently needed leadership action.

The report organizes its purpose around 4 topics, each leading to a crucial question:

Topic 1: The scale of the challenge; Question 1: “Does the business world understand the true scale of what is likely to happen, post-Copenhagen?”

Topic 2: What global climate change could do; Question 2: “Should the policy-making system be strengthened, perhaps with business input?”

Topic 3: The opportunities in the New Energy economy; Question 3: “What specific policies should business most support?”

Topic 4: The costs and benefits of cap™ Question 4: “Can we use carbon price projections to plan, or should we simply strive for maximum efficiency and decarbonisation?”

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Following its detailed analysis of the costs of cap&trade, the report draws 3 conclusions:

(1) The costs of emissions reductions will be “bearable” unless technological progress stagnates.
(2) Costs will vary.
(3) The best way to control costs is to use every tool to improve Energy Efficiency and build New Energy.

Each company must assess its own costs and benefits but no forecast is going to be precise with the range of variables so wide.

Companies that use a lot of energy, especially a lot of Old Energy with a lot of spew, will likely pay the most, potentially losing as much as 25% of present profits. Service sector companies with little energy consumption and little spew will be little harmed. Most companies will be able to manage, despite worst-case scenario energy price rises.

It is other, unforeseen costs associated with worsening global climate change that will burden business most.

These conclusions lead to a final question: “Can we use carbon price projections to plan, or should we simply strive for maximum efficiency and decarbonisation?”

The Climate Prosperity approach advocated so passionately and insightfully by Hazel Henderson says the mechanisms for pricing carbon may be too compromised or politically controversial to wait for. On the other hand, a ten-year $10 trillion investment in New Energy, Energy Efficiency and ecosystem protection in developing countries would “leapfrog” Old Energy and its obsolete economics with a New Energy economy. The $10 trillion, Henderson insists, is less than the Wall Street bailouts and no more than 10% of the of $120 trillion world pension fund assets. (For more details, see Climate Prosperity or Global Urban Development)

click thru for the Silicon Valley greenprint

COMMENTARY
To achieve sustainability it is necessary to first define sustainability. The Tomorrow’s Company definition of a “sustainable company” is “one that pursues long term success, understanding that it depends upon - and therefore must contribute to - the health of the economy, the environment and society.”

Thinking about sustainability may seem superfluous during this severe recession. It is not. Climate change will not wait. The next ten years will determine the fate of future generations.

Indicative of the falling importance given climate change by business leaders, the annual PricewaterhouseCoopers Global CEO 2009 Survey found only 26% of CEOs listing it as a concern, down from 34% IN 2008, which was down from 40% in 2007. In 2009, “global warming” was seen not just as a lesser risk than recession but as a lesser risk than inflation, skill shortages and protectionism.

On topic 1, the 3 reasons why business leaders must regard climate change as a greater and more urgent issue:

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(1) The Intergovernmental Panel on Climate Change (IPCC), the United Nations scientific body that was awarded the Nobel Prize in acknowledgement of its rigorous work defining and describing climate change, now puts the crucial level of greenhouse gas (GhG) atmospheric concentrations beyond which the world must not go if it is to prevent the worst impacts, at 400 ppm, just 20 ppm beyond the present level. To stop the growth will require turning around a process that has been going on for 200 years. It will require the cooperation of the entire world, including developed countries struggling to break their habituation to GhG-spewing fossil fuels and emerging economies far hungrier for economic growth through the consumption of fossil fuels than for protecting the atmosphere.
(2) The International Energy Agency (IEA) estimates it will require an investment of $10 trillion through 2030, ~$500 billion per year, in New Energy and Energy Efficiency to turn climate change around. Such an investment can only come if the business community is behind it.
(3) The 2009 Copenhagen climate summit is expected to generate an international agreement that will set 2015 and 2020 GhG-reduction goals and a 10-year program. But such a program is unlikely to be effectively implemented by policy-makers if the business sector is not behind it.

On question 1, the business community will not commit itself to the policies and the spending if it does not grasp the scale and urgency.

On topic 2, science only gradually becomes policy. Today’s policy is based on yesterday’s science. Even as the world prepares to meet at Copenhagen about a policy to control GhGs, science is asking what the tipping points might be beyond which there is no reversing climate change. The melting of polar ice, for instance, could release long-sequestered methanes that could cause a massive build-up of GhGs. While policy-makers discuss preventing the atmosphere from reaching a 400 ppm GhG concentration, climate guru James Hansen, of NASA, is saying atmospheric concentrations must be dialed back to 350 ppm.

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The problem may be in the resources dedicated to the scientific study of climate change. Business leaders will not respond to a situation that science does not describe accurately but how can science be accurate if lead bodies like the IPCC and organizations like the United Nations Framework Convention on Climate Change (UNFCCC) operate on an annual budget (~$30 million) that is about what GE spends for R&D every week?

If the business community appreciates the scale and urgency of the challenge, it might choose to fund a UN-backed science study group or help set up a public-private research arm.

On topic 3, there are 3 ways the New Energy economy will offer opportunity: (1) Energy Efficiency, (2) New Energy, and (3) ecosystem preservation. Business will find risks and opportunities in all 3 areas.

There are 7 policies that will drive expansion in these 3 areas: (1) direct government investment, (2) emissions trading, (3) taxation, (4) regulation, (5) subsidies, (6) price guarantees (Feed-in Tariffs) and (7) mandates or quotas that require certain proportions of energy to come from New Energy sources.

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Any and all of the policies can be effective and can have costs to consumers and businesses. Smart policies will minimize impacts on consumers and provide opportunities for even businesses reliant on emissions-spewing Old Energies to succeed if they make smart choices.

The first impulse is that the smart choice for business is all of the above: Implement Energy Efficiency, build New Energy, and invest in ecosystem preservation. The same goes for governments: Enact all the policies.

But businesses also have to decide where to put the first dollar and governments have to consider what is most politically viable.

The report suggests: (1) that Energy Efficiency is the lowest hanging fruit and will provide the most return on investment, especially if a cap&trade system is instituted to reward GhG cuts; (2) that carbon capture and sequestration (CCS, or “clean” coal) is a “must” - though some consider it too expensive to be viable; (3) that the best New Energy investment is wind, especially backed by a Feed-in Tariff (FiT); (4) that the best use of R&D money is solar and other New Energies; (6) it is crucial to invest in deforestation-stopping opportunities; and (6) the best use of private investment capital such as pension funds is “green” bonds that support all of the above.

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At this point, according to the report, the most important thing business can do to help make smart policy is simply to be engaged in the debate.

Topic 4 raises the most specific question in the report by evaluating the costs that will come from using a cap&trade system modeled on the European Union (EU) Emissions Trading Scheme (ETS) to control GhGs.

The report writers worked with the economic consultancy Z/Yen to make estimates of costs for 20%, 30% and 40% GhG reductions with better and worse improvements in Energy Efficiency and New Energy technologies.

With reasonable improvements, even 30% or 40% cuts by 2020 would leave emissions allowances only costing €25-to-€35 in 2015 and €19-to-€29 in 2020.

With poor improvements, allowances could be as high as €65 in 2015 and €114 in 2020, making the cost of emissions reductions too burdensome for business.

Even if technologies improve, the cost of emissions reductions for business will be high because caps will be ratcheted down, requiring business to purchase more and more allowances. Companies and customers will pay progressively more, either for emissions or for building more New Energy and more Energy Efficiency, although effective and just cap&trade systems have built-in mechanisms protecting consumers.

Biofuel mandates and more stringent building codes will likely add to these costs and must, therefore, be designed carefully.

These are today's insights offered to today's companies so they can begin to prepare to deal with climate change-related inevitabilities and become tomorrow's companies.

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QUOTES
- Sir Richard Branson, President, Virgin Group (in the forward to the paper): “Over the next few months, we are choosing our destiny. Either we work together across borders and interests to tackle climate change – or we choose a future with huge environmental and economic risks and uncertainty…We are locking the planet onto a course as we speak with huge investments going into roads, buildings, grids, cables and power stations. So the decision is now. What destiny do we choose?”
- Sir Richard Branson, President, Virgin Group (in the forward to the paper): “It is vital that the UNFCCC Copenhagen process is successful. We must seek to build trust between the developed and developing nations. The developed world must show its commitment to bold action in cutting its greenhouse gas emissions drastically. The developing world must show its commitment to following a pathway to energy efficiency and a low carbon future…”
- Sir Richard Branson, President, Virgin Group (in the forward to the paper): To sum up, I’m very much on the glass half full side of the debate. The challenges are massive and at times, the outlook seems black. None of us can sit on the sidelines. Otherwise our own way of life is at risk and we could see millions of people dying of starvation or in extreme weather conditions. But this is what provides us with the impetus to act and to act now…”

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- Sir Richard Branson, President, Virgin Group (in the forward to the paper): “In a matter of a few decades, our children will ask us: What did you do, when you realized how bad things were? Did you act? Did you think about us? …I sincerely believe that business is the force of change. Business is essential to solving the climate crisis, because this is what business is best at: Innovating, changing, addressing risks, searching for opportunities…There is no more vital task.”
- Martin Luther King: “Over the bleached bones and jumbled residue of numerous civilizations are written the pathetic words: ‘Too late.’ ”
- John Maynard Keynes: “It is better to be roughly right than precisely wrong…”
- Hazel Henderson, Executive Board member, Climate Prosperity and President, Ethical Markets Media: “Instead of focusing on the cost of capping carbon to the incumbent fossil fuel sectors, we are demonstrating the savings, benefits and revenues from ramping up investments in the Global Green New Deal, as 21 agencies of the UN and the new G-192 called it at their historic meeting of the UN General Assembly in June…”