Creating Wealth by Reducing Carbon

Investors and U.S. policymakers today face a historic choice: Invest in energy infrastructure now or wait for economic recovery. Certainly, the world faces serious challenges to both capital markets and the global economy as the effects of the financial crisis unfold, but this is not an “either/or” issue.

Green investment is not a luxury that we cannot afford, as some commentators say. Rather, investing in clean energy infrastructure is a business and environmental necessity that we cannot afford to postpone.

Reducing carbon emissions by the 17 gigatons necessary by 2020 to stabilize global temperatures can go hand in hand with economic growth. Separately, clean energy innovation is the largest wealth creation opportunity of our lifetime. Without the clean energy revolution, emerging markets will industrialize using 20th century technologies, becoming highly energy-intensive societies dependent on fossil fuels. As their demand for energy-intensive products -- cars, planes, air conditioning and imported goods -- rises, their thirst for oil, coal and natural gas will become unquenchable, leading to higher levels of carbon emissions.

How do we break this cycle and slow the de-stabilizing shift in the world’s climate?

Governments, intergovernmental organizations, the modern environmental movement and the scientific community have focused on reversing this trend over the last 15 years. But despite international policy breakthroughs like the Kyoto Protocol, greater consensus on the science, and ambitious national and regional climate programs, we still find ourselves struggling to de-couple emissions from economic growth in the minds of the general public.

Today, the vast majority of the philanthropic investment in climate change solutions goes to efforts supporting a price on carbon. This must be expanded to include more diverse initiatives. We can create real momentum and move the $550 billion needed annually in less than five years to develop tangible solutions that will bring about an absolute reduction of 17 gigatons of CO2e by 2020.

To shift the collective mindset, we must develop a more balanced, diversified approach to addressing global climate change. Specifically, a broader set of priorities is needed:

1. Focus on the co-benefits of clean tech solutions

By pushing for a comprehensive CO2e negotiation, we have deliberately shifted the conversation away from co-benefits. People care about clean air, clean water, reduced health impacts, lower bills, good jobs, economic development and other co-benefits; people don’t care directly about CO2e. By refocusing on the good work already being done, we will gain more uniform support without the rancor surrounding greenhouse gas emissions.

2. Create new financial products

The1 percent shift in private capital allocations can be accomplished by investing in profitable opportunities that already exist. We have invested heavily in educating the finance sector, but still have not created the suite of financial products necessary to achieve a 1 percent shift in investment. These financial products need to exist, and if the investment banking community chooses not to create them, entrepreneurs must. With more than $125 trillion of the investment capital in private hands, we must bridge this gap now.