Now is the Time to Create Climate Wealth
This week, business and non-profit leaders will meet in New York, for ClimateWeekNYºC, calling for bold climate action to secure a cleaner, greener, more prosperous future.
As they gather, this much is evident: Government and the general public do not believe that climate change solutions can scale to meet the problem, nor do they accept that reducing our carbon emissions by the 17 gigatons necessary to stabilize global temperatures won't harm economic growth. So, to build the political will and garner public consensus, we need to convince them that it isn't a choice between the economy and the environment.
As CEO of the Carbon War Room, I see ClimateWeekNYºC as a tremendous opportunity for us to convene as a community, identifying the best path for a transition towards a low-carbon economy. By expanding our efforts to focus on new financial and economic tools we can capitalize on the largest wealth creation opportunity of our lifetime.
Today, there are cost-effective climate change solutions capable of reducing 17 gigatons of carbon from our atmosphere which at the same time save people money and stimulate the economy. In fact, as reported by McKinsey & Company, 50 percent of all carbon reductions can be achieved without adding any undue burdens to consumers. Unfortunately, market failures are preventing capital from flowing to more sustainable low carbon solutions.
While comprehensive policy has worked in the past, it will NOT in this case. Even if policy is enacted, the tools to scale and diffuse the solutions are not ready to go. We must begin to add the skills necessary to work with capital sources and entrepreneurs to scale existing solutions that work within existing policy frameworks.
In the shipping industry, for example, customers of shipping services have no convenient way to choose efficient ships from inefficient ships. It is astounding to think that the simple inability to choose the most efficient ships is causing customers to miss out on cost savings of at least 15 percent. The right standards can ensure that these ships are upgraded and financial products that rely on savings can help pay for the available upgrades.
The formula of complementing policy with trusted financial products should be replicated across all sectors of the clean economy from building retrofits and industrial efficiency to alternative-fuel vehicles, shipping and aviation. If we can achieve this, it will instill the confidence needed to pass policy that levels the playing field for everyone.
But we need to set new priorities.
First and foremost, we should focus our efforts on the benefits and issues that matter most to people -- clean air, clean water, reduced health impacts, lower energy bills, creating jobs, economic development, etc. By communicating the co-benefits to business and society, we can seize control of the climate debate and enhance the great work already being done to garner support.
Next, we must work to create new trusted financial products for the implementation of clean technologies. The World Economic Forum and Bloomberg New Energy Finance estimate that we only need to shift approximately $550 billion to the clean economy in order to implement gigaton level reduction in carbon -- this shift represents less than 1 percent worth of current private capital allocations. If we ask pension funds, high net worth individuals, sovereign funds and retail money what financial products they want to buy -- and then collect the data necessary to provide them comfort -- they will adjust their investments to lower risk, clean climate solutions.
At the same time, it is critical to capitalize on interim policy initiatives that can offer the first steps to success, as seemingly small wins can bring about significant economic change. Real estate investment trusts and master lease partnerships, for example, don't currently take climate change solutions into consideration. Through small changes to policy, we can generate large opportunities for economic and sustainable growth. Opportunistic moments like these are possible, and can be capitalized on without the need for national legislation. Collectively the business community can leverage moments to exert influence in the development of gigaton pathways sector-by-sector.
Finally, we need to address the lack of information that maintains market failures and prevents capital from flowing to the right solutions. The tools of capitalism must complement existing efforts to harness the power of entrepreneurial energy to unlock market driven solutions to climate change. Capital sources are eager to invest into climate change solutions, but they need tested, financial products to invest in – not just climate education.
It is time for the business community to seize the opportunity and shift our focus. By doing so, we can achieve results in the form of tangible solutions to bring about an absolute reduction of 17 gigatons of CO2E by 2020.
This is our great opportunity -- creating wealth and jobs while ensuring the sustainability of the environment.
We invite you to join the Carbon War Room at BusinessClimate2010, an official ClimateWeekNYC event, tomorrow, Tuesday, September 21, 2010. To join, please visit www.livestream.com/businessclimate2010.
Jigar Shah is the CEO of Carbon War Room. Articles, analyses and resource material about Climate Week NYºC are available at www.greenbiz.com/topic/climate-week-nyc-2010. For more information and event developments, visit www.climateweeknyc.org and Twitter @ClimateWeekNYC.
Image CC licensed by Flickr user fihu.