Climate change is a substantial risk, and the risk of global inaction is real. In the long-‐term, for rapidly developing nations, carbon intensity targets are more feasible than absolute carbon caps. In the near-‐term, technology-‐driven carbon reduction capacity building is more important than absolute carbon reductions.
Global climate change continues to be a substantial risk. The United States has failed to enact a climate bill and international negotiations, post Cancun, are also struggling. Jonathan Pershing, US negotiator, observed, “some countries are walking back from progress made in Copenhagen, and what was agreed there.” Interestingly, while the international blame-‐game continues, some countries are accelerating concrete domestic actions designed to unleash broad-‐scale clean energy innovations. A “race for the clean energy future” is afoot. Meanwhile, driven more by the need for headlines than accurate reporting, the popular media (inaccurately) blames climate change for everything from record-‐breaking heat waves to epic floods. Away from the noise of the press, the scientific community continues to see mounting evidence of climate change, and more importantly median scientific assessment points increasingly towards amplified negative impact of climate change in the coming decades. Yet the likelihood of policy inaction is increasing rapidly. In our view, an immediate focused assault on climate change is akin to buying insurance to protect against other potential catastrophes such as terrorism (through security investments and military) or nuclear proliferation.
One must ask, what are the rules governing solutions to the global climate crisis and who makes them? The countries with the biggest bulk and heaviest sticks? Someone’s moral and ethical principles? If so, whose morals and ethics? Do we consider a given country’s ability to pay, its natural resources, and its rate of economic development important to their contribution to solutions? Given the global budget deficits and debt loads, additional spending seems very unlikely. Any solution towards climate risk reduction must necessarily operate within these constraints or be considered a dreamer’s solution. A dose of pragmatism is vital – in most countries, immediate political and economic needs trumps the planet’s needs in the year 2050.
Technology and economics will be the drivers of any relevant global climate change solutions that get past local interests, national politics and similar barriers to caring for the common good. A dynamic solution is critical; one that responds and morphs as global and regional circumstances change. It will need to dynamically react to costs, practicality of approaches, technology advances, and evolving climate change forecasts. Furthermore, it should include targets and mechanisms that allow developing countries to prosper while incentivizing improved emissions trajectories. The current approach of trying to plan for static targets at some date in the future, independent of changing technology, changing cost estimates or changing willingness to pay are, in my view, unlikely to succeed.
I have previously advocated the use of carbon intensity of GDP growth over absolute carbon caps. On the “global agreements’ front perhaps the most significant advancement at Copenhagen last December was the adoption of voluntary emissions intensity targets by the largest developing nations: China, India, Brazil, South Africa, Mexico, South Korea, and Indonesia. These “Emissions
Intensity Targets” represent a dynamic approach to developing a low carbon global economy and reducing emissions to avoid the catastrophic consequences, but don’t penalize countries for rapid GDP growth. In fact, faster growth enables higher levels of investment in new technology, energy efficiency and improved carbon intensity of GDP. Countries which invest in efficiency and improved carbon intensity of GDP reward themselves with increased market competitiveness due to reduced energy costs. These targets also prevent the tragedy of the commons by addressing global carbon, and focus the best minds of each country on the challenge of achieving low carbon prosperity.
Regardless, creating a low carbon, affluent world will not be free. Given the scale of capital needed, public funding is not enough and private capital (motivated by profit as opposed to “social goodwill”) is essential. The global community can focus on action, instead of rhetoric, by building on commitments made at Copenhagen to prompt fast start funding and support intensity targets by revamping and creating financial instruments that integrate intensity target commitments to ultimately drive clean energy development and deployment.
To maximize investment impact, we must encourage basic R&D to develop true “Black Swan” technological disruptions: ultra-‐low carbon technologies which completely change conventional assumptions. These must obey the laws of economic gravity, which state that in order to deploy a technology widely, it must be market competitive unsubsidized against fossil competitors as it approaches scale. This is the only way to reduce the need for public funding, which is scarce in the debt-‐ridden western world. Many of the world’s cleantech investments to date have been incremental improvements and dead-‐end technologies aimed at milking preferential regulatory regimes, and will never reach market competitiveness. Instead, we need to take more shots on goal by increasing focus on high risk (and high potential upside) technology development: Black Swans. The key insight is that improbable does NOT equal unimportant provided we take enough shots on goal. Though unlikely that any single shot works, even 10 disruptions out of 10,000 shots will completely upend conventional wisdom, econometric forecasts and most importantly our energy future. In everything from batteries, solar cells, LEDs, wind, and engines, innovation will upend conventional wisdom and forecasts, and will hopefully produce economically driven technology engines of growth, profits and carbon reduction. The direction and timing of innovation is hard to predict, so none of this is ever included in econometric models.
Ultimately, policy that encourages Black Swans also supports building critical “carbon reduction capacity” technologies that are on a path to at least 80% less carbon intensity than those they replace. Examples include economic carbon sequestration, 80% more efficient ICE drivetrains, biofuels with 80%+ lower lifecycle emissions than gasoline, appliances and lighting that are 80% more efficient, and 80% cheaper storage. If we focus on these rather than deploying marginally economic current technologies, early carbon savings will be lower; however, reductions will rapidly accelerate once these Black Swans are deployed. After all, technologies that start with economic carbon reductions around 50% have a fighting chance of reaching 80% reductions, as opposed to the 10-‐15% incremental reductions that are typically targeted. We should learn from Craig Venter: he sequenced the human genome faster and cheaper than the government-‐funded Human Genome Project by designing better tools for sequencing rather than spending his time on brute force sequencing that competitors were pursuing when he started. By building the tools for radical carbon reduction now, this “economic carbon reduction capacity” building will get us to our targets more quickly and cost effectively than the current focus on incremental reductions. Ultimately, some of these technologies will scale and will have declining costs with scale while others won’t scale or won’t have declining costs with scale. This makes decisions tricky…