Road to Copenhagen, Part 3: Re-Tooling Industry

05 November of 2009 by

mg20126926.600 1 300 Road to Copenhagen, Part 3: Re Tooling IndustryIncase we need more evidence that an urgent economic transformation isrequired to avoid catastrophic climate change, it can be found in a new study commissioned by World Wildlife Fund International.

Conducted by Climate Risk Pty. Ltd. of Great Britain and Australia, the study concludes:

Runaway climate change is almost inevitable without specific action to implement low-carbon re-industrialization over the next five years [emphasisadded]…  World governments have a window that will close between nowand 2014. In that time they must establish fully operational,low-carbon industrial architecture. This must drive a low-carbonre-industrialization that will be faster than any previous economic andindustry transformation…Today, only three out of 20 industries aremoving sufficiently fast enough.

By “low carbon re-industrialization”, the authors mean energyefficiency and clean generation technologies, low-carbon agriculture,and sustainable forestry. They have identified 24 critical resourcesand industries the world will need to develop quickly to avoid climatecatastrophe. Among their conclusions:

  • By itself, emissions trading will not be enough to cause thenecessary re-industrialization of the world economy.  We will needmassive private investments; tens of trillions of dollars from theinvestment community; and more aggressive government action to create astable long-term investment environment.

“Starting with the least-cost mitigation solutions and working ourway forward to higher-cost solutions as carbon prices rise – thatapproach will take too long,” says Sean Kidney, Climate Risk’s managerin Europe. “We need to tackle all solutions at the same time.”

  • To achieve an 80 percent reduction of greenhouse gas emissions bymid-century, the world will have to invest $400 billion annually ingreen industries by 2025. Every year the economic transformation isdelayed will increase its costs and the rate of low-carbon industrialgrowth required for de-carbonizing industry.
  • Due to the large economies of scale created in the transition, theaverage production costs of renewable energy technologies will becomeless than energy produced from fossil fuels. The cost “cross-over” willstart as early as 2013 and all renewable industries will beindependently viable by 2050, even without a price on carbon. This willdeliver energy savings of $47 trillion by 2050.

“We can harvest these enormous future savings now to create anincome stream that funds the capital expenditures we need,” Kidneysays. How? Kidney and his colleagues are working on a number of ideasfor new bonding mechanisms designed specifically to finance low-carboninvestments.

What is government’s role?  The Presidential Climate Action Project has submitted several re-industrialization proposals to the Obama Administration and Congress. Among them:

  • Stabilize federal incentives for the development of green marketsand industries.  The federal government’s on-again/off-again incentivesfor solar and wind development are an example of disruptive rather thanconstructive government intervention. Uncertainty about the stabilityof those incentives in recent years put renewable energy companies on aroller-coaster ride rather than a stable up-ramp for development.
  • Make aggressive commitments at the federal and state levels todecarbonize government supply chains. At last count, the federalgovernment had more than 500,000 buildings, 600,000 vehicles and $18billion in energy expenditures each year.  Establishing low-carbonrequirements for the companies that supply those products will helpproduce the economies of manufacturing scale that drive down costs forthe rest of society.
  • Update and revitalize the Department of Energy’s (DOE) Industriesof the Future program. That Clinton-era initiative helped America’smost energy-intensive industries create technology roadmaps to a futureof much greater energy efficiency and much less pollution. The roadmapsguided federal R&D and industry investment. In its new incarnation,the program should be expanded to all of our most carbon-intensiveindustries and to define each of their paths to a low-carbon future.
  • Expand DOE’s Industrial Assessment Center program and includecarbon audits. In this program, graduate engineering students andfaculty at participating universities conduct free energy audits forsmall and medium industries. If carbon audits were added, studentswould learn some of the engineering skills they’ll need in a low-carboneconomy, while providing small manufacturing companies with thetechnical help they need to thrive in a carbon-constrained market.
  • Dedicate a significant portion of cap-and-trade revenues to thereinvention of American industry, including tax credits for businessesthat install, manufacture or service the products necessary to reducethe nation’s greenhouse gas emissions. Include transition incentivesfor small businesses – our largest source of new jobs and innovations.
  • Regularly update the Federal Trade Commission’s Green Guides– a set of guidelines first issued in 1992 to discourage corporategreenwashing.  In the wide-wide world of sustainability, consumersalready face a daunting array of green labels: the recycled-contentlogo, various forest-certification systems, Green-E certification forrenewable energy, LEED for buildings, the Green Press Initiative logo,the Ancient Forest Friendly initiative, Green Seal, USDA’s NationalOrganic certification, EPA’s Energy Star label. Canada has an EgoLogoprogram, the EU has the EcoFlower label, Germany has the Blue Angellabel and five Nordic countries use the Nordic Swan label. As greenproducts increase in popularity, we can expect more of these programs.We may not come up with a universal green label, but government canestablish the standards by which green labels are judged.
  • Support the United Nations’ Global Green New Deal initiative, whichis working to quantify and promote the potential of green industries toalleviate poverty, reduce environmental damage and create new jobsworldwide. The World Bankhas just estimated that developing economies will need as much as $100billion annually until mid-century – double current foreign aid fromdeveloped nations – just to adapt to climate change. That means newdemand for the products and services of companies that can help nationscut their greenhouse gases and cope with the climate changes already onthe way.

We will not avoid climate catastrophe merely by tinkering around theedges of industrial society or by counting on a slow evolution oftechnologies and markets. As businessman and environmentalist PaulHawken puts it, “There isn’t one single thing that we make that doesn’trequire a complete remake.”

Alex Steffen, the executive editor of worldchanging.com,says: “The magnitude of the crises we face, the speed with which theyare unfolding…mean that the solutions we need to embrace are not goingto be the same sort of solutions we’re used to thinking of now…Facedwith the need to reinvent the material basis of our civilization, weargue paper or plastic.”

Can we reinvent world industry in only five years? The rapidredirection of U.S. industry during World War II suggests that it maybe possible – but not without intense collaboration between governmentsand industries. There must be a third party in the deal, too: thecitizen-consumer.  In my next post, I’ll suggest how government,industry and consumers can collaborate in a new social contract foreconomic transformation.

– Bill Becker

[JR:  I would note that if this statement is true -- "To achievean 80 percent reduction of greenhouse gas emissions by mid-century, theworld will have to invest $400 billion annually in green industries by2025" -- the U.S. share is about $100 billion a year, which is justabout what the climate and clean energy bill would result in (see "The only way to win the clean energy race is to pass the clean energy bill").  I actually think we'll need a bigger investment, maybe twice as big by 2025.]

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