My latest book, Cold Cash, Cool Climate, comes out TODAY! Here's a summary of the argument
This blog post summarizes the overall argument in Jonathan Koomey’s latest book, Cold Cash, Cool Climate: Science-based Advice for Ecological Entrepreneurs, released today (February 15, 2012) by Analytics Press. Written for entrepreneurs and investors, this book describes how to profit from tackling climate change, one of this century’s greatest challenges. The author acts as your company’s scientific advisor, summarizing the business implications of the climate problem for both new and existing ventures. Koomey helps you effectively allocate scarce time and resources to the most promising opportunities, drawing upon his more than 25 years of experience in analyzing and implementing climate solutions.
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When our children and grandchildren look back on our era the political squabbles of today will have been long since forgotten. What they will ask (I hope) is “How did they have the wisdom to build for the future?” That’s how we need to measure our actions now. Will they thank us for acting with reason, compassion and foresight? Will they express gratitude for our wisdom? Or will they wonder what the hell we were thinking? Let’s make sure we earn their gratitude, because the alternative is too unpleasant to contemplate.
In the book Cold Cash, Cool Climate I’ve outlined the depth and breadth of the climate challenge, and summarized some insights that entrepreneurs starting new ventures in this space should find useful. That exploration began with the insight that humans are now no longer small compared to the earth. Because of our wealth, our numbers, and our technology, we can (and have) significantly altered the global life support systems upon which we all depend.
If current greenhouse gas (GHG) emissions trends continue, the earth is in for at least two doublings of greenhouse gas concentrations in the next century, which implies more than a 10 degree Fahrenheit increase in average global surface temperatures, with no end in sight. This outcome would be disastrous for humanity and for the earth’s natural systems, and we should do everything in our power to avoid it. This path also opens up the real possibility of accelerated warming due to positive feedbacks (like release of carbon from rapidly melting ice, thawing permafrost, burning peat bogs, and warming methane hydrates), which in the distant past have led to even more significant changes in the earth’s climate, and could do so again if we push the climate system too far.
To meet this challenge we’ll need rapid GHG emission reductions in the next few decades. This conclusion is inescapable because it’s cumulative emissions that matter, due to the long lifetime of many greenhouse gases. If we want to prevent global temperatures from increasing more than 2 degrees C, we have a fixed emissions budget over the next century. If we emit more now we’ll have to reduce emissions more rapidly later, so delaying action (either to gather more data or to focus on energy innovation) is foolish and irresponsible. If energy technologies improved as fast as computers there might be an argument for waiting under some circumstances, but they don’t, so it’s a moot point.
Of course, we need new technologies and should therefore invest heavily in research and development, but there are vast opportunities for emission reductions using current technologies, and cost reductions for these technologies are dependent on implementing them on a large scale (learning by doing only happens if we do). So the focus in the next few decades should be on aggressive deployment of current low-emissions technologies, bringing new technologies into the mix as they emerge.
Conventional benefit-cost analysis has often led to a different view of the problem, one that emphasizes a more cautious approach. Studies of this type attempt to balance costs and benefits using computer models, but such efforts are dependent on accurate forecasts (which are impossible for economic and social systems), and for many reasons these efforts are biased towards preserving the status quo. The models ignore important effects like increasing returns to scale, assume that structural rigidities will continue into the future, omit relevant options from consideration (thus overestimating costs), and bury ethical judgments in ostensibly technical concepts like the discount rate or the economic value of climate damages (many of which are unquantifiable in principle). These limitations make it seem like fixing the climate problem is harder and more costly than it really is, and so use of these models in this way is bound to lead us astray.
I advocate instead an evolutionary approach to this problem, implementing many different technologies, failing fast, and doing more of what works and less of what doesn’t. This approach, which the National Research Council dubs “iterative risk management”, recognizes the limitations of economic models and puts such analysis into an important but less grandiose role: that of comparing cost effectiveness of different mitigation options in achieving a normatively defined target (like the 2 degrees C warming limit).
I call this approach “working forwards towards a goal” and it’s a more business-oriented framing of the problem. It mirrors the way companies face big strategic challenges, because they know that forecasting the future accurately is impossible, so they set a goal and figure out what they’d have to do to meet it, then adjust course as developments dictate. It also frees you from the mostly self-imposed conceptual constraints that make it hard to envision a future much different from what exists today.
This approach is useful in identifying and evaluating opportunities both at the very highest level (like global carbon emissions) but also for analyzing component parts of possible solutions. So for example, we can consider what would have to happen to allow the utility system to use huge amounts of variable generation from renewable energy in the case where solar generated electricity becomes three times cheaper than it is today (which is a real prospect over the next decade). These kinds of thought experiments can yield real insights into where new opportunities may lie.
As I’ve described in the first chapter, the climate problem is big, it’s urgent, and its misunderstood, which makes it fertile ground for new business ventures. The changes we need are so large that no part of the economy will remain untouched, and that means opportunity. In fact, we’ll probably need to scrap some capital in the energy sector, given the rate of emissions reductions that will be required to maintain a livable climate. Entrepreneurs can lead the way by designing new low-emission products, services, and institutional arrangements that are so much better than what they replace that people are eager to adopt them (and to scrap some of their high emitting existing capital along the way).
Emissions reduction opportunities start by focusing on the tasks we want to accomplish and associating those tasks with flows of energy, emissions, and costs, which you then work to minimize. This focus on tasks frees you from the constraints of how they are currently accomplished and allows you to capture compounding resource savings upstream. By considering the whole system and designing to approach theoretical limits of efficiency, it is often possible to achieve drastically reduced emissions while also improving other characteristics of products or services substantially.
Information and communication technology (ICT) is accelerating the rate of innovation throughout the economy, and that development has implications for business opportunities in this space. ICT speeds up data collection, helps us manage complexity, allows us to restructure our institutions more easily, and lets us rapidly learn and adapt to changing circumstances. It also creates a continuously renewable source of emissions reductions, and is a great place to look for opportunities because it generally offers rapid speed to market and low startup costs.
When considering the climate issue, we can’t avoid the issue of institutional governance. Government has an essential role to play in defining property rights, enforcing contracts, and internalizing external costs. No other institution can do these things, so we need to ensure that these tasks are performed in a way that leads to the kind of society we want. When it comes to government, more is not better. Less is not better. Only better is better. And better is what we as a society should strive for.
Surviving this stage of human development means we’ll need to evolve as a species to learn how to face challenges like this one. We’ll need to foster rapid innovation, fierce competition, and active coordination between businesses, all at the same time. We’ll also need to change how we think about our responsibilities to each other, to the earth, and to future generations. Innovations in our values can be as powerful as those for new technologies in opening up new possibilities for the future, and these we also need to explore.
The technology now exists for us to move past combustion in most applications, but scaling it up to meet the demands of a modern industrial society won’t be easy. Of course, not doing so will be harder still, because of the damages unrestricted climate change will inflict on the earth and on human society. It’s long past time to get started. There’s simply no more time to waste.
