It won't cost the Earth to save the planet

With all the apocalyptic imagery surrounding the climate issue, it is essential not to become numb to the facts. Atmospheric CO2 concentration, approximately 280 parts per million (ppm) before the Industrial Revolution, has increased to around 380 ppm today. Each doubling of greenhouse gas concentration raises the earth’s equilibrium temperature by about 3°C. Under ‘business as usual’ trends, the earth’s temperature will likely increase by between 2 and 4.5°C by 2100. The average temperature of the world is 15°C and a rise of 2°C is widely accepted as the threshold for unacceptable and unpredictable change.

Depending on personal perspective, one might argue that governments, businesses, or individuals should take the lead role in stopping the above scenario from playing out. Fortunately, there are good reasons for all these groups to reduce emissions irrespective of it being the right thing, morally, for them to do. In the business sector, for example, The Climate Group’s 2007 report Carbon Down Profits Up shows 27 companies (including BP, BT and HBOS) reporting direct cost savings as a result of actions taken to reduce emissions. On average these companies have cut their greenhouse gas emissions by 18 percent, with energy efficiency one of the most beneficial investments they have made. Companies such as HSBC and Sky are going even further, investing to achieve net zero carbon emissions, or ‘carbon neutrality’.

In politics, the space for action is also opening up. There are currently five climate bills in the US Congress – a highly unusual state of affairs, not to mention a groundswell of action at the city and state level with California Governor Arnold Schwarzenegger emerging as the ‘emissions Terminator’, introducing a target to reduce statewide emissions to 1990 levels by 2020 and leading the development of emissions trading across the west coast states. In the UK, green policies have rapidly become an area of competition for the main political parties; and on the global stage, Germany’s Angela Merkel has committed to keep climate change at the top of the G8 agenda.

Politicians are motivated, at least in part, by votes, and there is growing evidence that the public are ready for action. Research carried out by The Climate Group in 2006 found that 28 percent of individuals in the UK and 18 percent in the US were ‘strongly concerned’ about climate change. This group also expressed a latent demand for products, services and brands that would allow them to reflect their climate change concern in their spending. This drives not only the political landscape, but brings us back full-circle to the business agenda, with new market opportunities opening up, as demonstrated by the success of Toyota’s hybrid car, the Prius.

It’s clear to see that there are many examples of low carbon solutions being implemented at the micro-level. But do these actions have the potential to add up to something significant when replicated on a bigger scale? In 2004, the Princeton team of Stephen Pacala and Robert Socolow demonstrated that 15 existing technologies (the kind already being adopted by leading organisations – efficiency, fuel switching, renewable energy, for example) each has the potential to prevent one billion tons worth of carbon emissions a year by mid-century. Pacala and Socolow show that just seven one billion-ton-per-year ‘wedges’, made up from any combination of the identified technologies, are required to halt the rise in greenhouse gas emissions. Latest data suggests that the necessary scale-up of these technologies is already underway – global investment in clean energy reached $70.9bn in 2006; 30 percent growth in just one year.

The economics supporting investment in low carbon solutions certainly stacks up. The 2006 Stern Review, the most extensive analysis carried out to date on the economics of climate change, showed that the costs of inaction amount to 5-20 percent of global GDP by 2050, versus a cost of one percent of global GDP for stabilising emissions at safe levels, using the kinds of existing technologies highlighted by the Princeton team. Furthermore, a recent paper from McKinsey shows that 25 percent of the actions required, including fuel efficiency and building insulation, actually carry no net cost – in effect, they come free of charge. With many of the remaining technologies, such as renewable power, there is a strong ‘learning effect’, meaning that costs decrease with use. In other words, the quicker we take action the cheaper it will be.

Of course, there are challenges. For example, a substantial share of the low or no cost opportunities for emission reductions lie in developing economies, underlining the importance of a global political framework to tackle climate change. However, with watertight science, compelling economics and the solutions at our fingertips, there is no excuse not to act. This is our window of opportunity to spearhead a clean energy and technology revolution. Failure is not an option.

The World Resources Institute (WRI) is an environmental think tank that aims to go beyond research to create practical ways to protect the Earth. Climate change is a defining challenge for economic development in the 21st century, and understanding this issue will make the difference between success and failure for investors in the world’s vast energy markets, according to a report released in April by the WRI and unveiled at a conference in New York, sponsored by the Goldman Sachs Center for Environmental Markets. The release of the report, Scaling Up: Global Technology Deployment to Stabilise Emissions, is part of an ongoing effort by the WRI to engage the investment and policy communities in framing solutions that harness capital flows, smart policy and markets to protect the climate. The report expands on the ‘wedges’ approach proposed by Princeton researchers Stephen Pacala and Robert Socolow. The wedges approach frames the major technologies that will play a decisive role in reducing emissions. WRI’s report takes this model a step further, outlining a blueprint for implementing these technologies at the requisite scale.

Convened by the World Resources Institute (WRI) and Business for Social Responsibility in 2000, The Green Power Market Development Group’s (GPMDG) goal is to create 1,000 megawatts of new cost-competitive green power for corporate markets by 2010. The GPMDG is a unique commercial and industrial partnership, dedicated to building corporate markets for green power. Its members are Alcoa Inc, Cargill Dow LLC, Delphi Corporation, The Dow Chemical Company, DuPont, General Motors, IBM, Interface, Johnson & Johnson, Kinko’s, Pitney Bowes, and Staples. Green power can present an opportunity for companies to lower their exposure to fluctuating fossil fuel prices. On-site projects like fuel cells or solar power can help companies protect themselves against grid disruptions. In addition, purchasing green power reduces the carbon dioxide (CO2) emissions of business activities. “From hydrogen fuel cells to solar panels on rooftops, new green power products are emerging for corporate markets,” said Jonathan Lash, President of the WRI. “These purchases help bring down prices, reduce pollution, and build a robust market to deliver a clean energy future,” he added.

The Renewable Energy Foundation (REF) is a registered charity that funds independent research into renewable and alternative energy technologies and policy. REF is funded by private donations and has no political affiliation or corporate membership. The UK governments’ expectation is that three quarters of the 2010 renewables target, and the lion’s share of the ‘20 percent by 2020’ target, will be made up by windpower. However, research conducted by the REF offers predictions which are in keeping with Danish and German empirical experience, and demonstrate the need for a broader spread of investment in the renewable sector. The report was commissioned from Oswald Consultancy Ltd and funded by donations from the green entrepreneur Vincent Tchenguiz. Campbell Dunford, CEO of REF, said: “This important modelling exercise shows that even with the best efforts, a large wind carpet in the UK would have a low capacity credit, and be a real handful to manage. This isn’t the best way to encourage China and India to move towards the low-carbon economy. As a matter of urgency, for the planet’s sake, we need to bring forward a much broader range of low-carbon generating technologies, including the full sweep of renewables. Wind has a place, but it must not be allowed to squeeze out other technologies that have more to offer.”