As multinationals are proving, countless clean technologies make sense right now - waiting for an indeterminate R&D breakthrough is a waste of time
The many millions of words and thousands of hours of talks that have been devoted to combating the climate crisis have always boiled down to one critical question: How do we make clean technologies more competitive than the dirty technologies they have to replace?
Seasoned observers of the UN's long-running climate change talks, including former head of the UN climate secretariat Yvo de Boer, have long argued the failure of the negotiations to make sufficient progress is a result of the failure to convince all the key parties that genuinely clean technologies will soon become a more attractive default option for businesses and investors, making it possible to slash emissions and continue along the development path. Even those climate sceptic voices who argue we don't need to act to curb emissions, insist the main reason we shouldn't embrace green investments is because they are not competitive with fossil fuel based technologies and business models. It would take a particularly perverse defender of the status quo to argue we should stick with dirty technologies that are demonstrably worse than more attractive clean alternatives.
So central is this question to any attempt to build a green economy that numerous policies and techniques have been developed to try and make clean technologies more competitive: carbon pricing to correct the externality allowing fossil fuels to pollute for free; subsidies to help emerging renewable energy technologies compete with established fossil fuels; natural capital accounting techniques to highlight the undervalued economic benefits generated by sustainable business models and better acknowledge the health and well-being costs associated with dirty technologies; and calls for companies to relax return on investment requirements and embrace long termism to recognise how clean technologies deliver greater benefits in the long run than incumbent polluting technologies. All of these admirable and justifiable measures are designed to make clean technologies more competitive than the technologies they have to replace and in so doing correct the market failure that means long term climate change and environmental damage is not factored into short term investment decisions.
However, in focusing on the urgent and over-arching need to embrace the clean technologies that can deliver steep cuts in greenhouse gas emissions the debates surrounding these various policies are often guilty of missing the reality that is staring them in the face - in many areas clean technologies are already more competitive than dirty technologies.
This simple truth is evident everywhere you look, in the rapid shift towards LED lighting, the emergence of electric cars, and the evidence from countries such as Germany and Brazil that renewables are undercutting fossil fuels on costs. It was hammered home again for me this week during a conversation with Len Sauers, vice president for global sustainability at Procter & Gamble (P&G), about the company's latest sustainability report. Now, like any large multinational, P&G is far from perfect and I don't doubt a half decent investigative journalist could find examples of it failing to embrace environmental best practices in relatively short order. However, like many large companies P&G does have ambitious long term commitments to slash its carbon emissions, achieve zero waste status, and source all its energy from renewables, as well as some specific and stretching goals that it wants to meet by 2020. As such, the company has made some impressive progress in recent years, particularly on embracing zero waste principles at over 50 of its facilities and steadily curbing its emissions and energy use while upping its reliance on renewables.
As any climate hawk will tell you, when we require deep and immediate cuts in emissions P&G and many of its multinational peers with ambitious sustainability strategies are not moving fast enough as they transition towards greener business models. The company's emission reduction goal of a 20 per cent cut per unit of production by 2020 against a 2010 base line is short of what many climate scientists believe is required from industrialised nations and as such an industrialised company should be aiming higher. Its target of generating 30 per cent of its energy from renewables by 2020 could and should be more ambitious. But what is particularly encouraging about P&G's recent performance is Sauers' revelation that it has been achieved without any special allowances being made for clean tech investments. "We hold the investment in sustainability measures to the same standard as any capital investment we make," he says. "We are doing this because it helps the bottom line and top line."
It is a remarkable admission and one that means the company's development of a more sustainable business model is being built on the firmest of foundations. Think about what that simple commitment to comply with the company's capital investment requirements means. It means that without any recourse to internal carbon prices or an acceptance of longer return on investment periods, P&G has been able to decouple revenue and emissions growth, source 7.5 per cent of its energy from renewables, and make over a third of its facilities globally zero waste. It means the company will continue to invest in waste reduction, biomass and solar power, and energy efficiency measures, because for many locations these are the most attractive investments available. Improved waste management efforts alone have delivered $1bn in new revenues and cost savings, even for a company of P&G's size that is not to be sniffed at.
And P&G is not alone. IKEA and Google have not started buying up renewable energy projects because they want to save the world or because they need the PR boost, they are making multi-billion dollar investments because the business case is sound and because they firmly believe sourcing energy in this way will make them more competitive in the long run. The likes of DHL and UPS are not making the transition towards electric and alternative fuel fleets because they want to cut air pollution (although they no doubt welcome the air quality improvements they are helping to deliver), but because these highly competitive new technologies allow them to slash running costs that have remained stubbornly high along with the oil price. Astute utilities in emerging economies are not investing in wind and solar because of climate change obligations, they are doing it because they know that in the right location these new technologies offer the cheapest means of providing much needed power.
Yes, the adoption of many of these technologies have been aided by various favourable policies and subsidies (albeit still not as big as the subsidies handed out globally to fossil fuel industries), but support for many clean technologies is now falling and in some jurisdictions is non-existent. And yet many of the world's leading corporations are continuing to deploy cleaner and more efficient technologies, because, quite simply, they are more competitive than the technologies they replace.
The implications of this ongoing technological transition are potentially game-changing. The trend obviously needs to be accelerated, it needs to be accompanied by continued research and development efforts to bolster those clean technologies that are not yet a compelling alternative for fossil fuels (most notably we need progress in the field of energy storage in order to make intermittent renewables truly competitive with thermal power), and it needs to be supported with policies to help overcome the cultural inertia that means the most competitive technologies do not necessarily become the default choice for all businesses. But if policymakers and business leaders can manage the emergence of these technologies effectively we might find that, with or without a global climate change deal, encouraging recent indications that the world can decouple emissions and economic growth can herald the rapid transition to a low carbon economy.
Crucially, this trend is also emerging at a time when the slightly more coherent wing of the global "climate sceptic" community has found itself a new argument courtesy of Bjorn Lomborg and his insistence that shelving climate policies and instead focusing on the R&D efforts that will make clean technologies truly competitive represents the most cost effective means of tackling climate change. There are many reasons why this argument is, in my view, deeply flawed: it underplays climate risks and uncertainties; it fails to account for how industrial transitions are based on research, development and deployment, which commonly needs to be encouraged through policy interventions; it is based on the assumption R&D funding can successfully pick a winning silver bullet that will be delivered in time, which is a bit strange when you consider how many of the commentators supporting this course of action abhor "picking winners" in other policy contexts; and it ignores the way in which market failures mean that even when you develop a low cost and competitive technology it is not always adopted at sufficient scale and at sufficient pace - anyone doubting this needs to look at our continued inability to embrace basic energy efficiency measures, or envisage the lengths certain politicians will go to in order to protect the oil and coal industries even once they are undercut by solar power.
But most of all, Lomborg's latest argument for delaying concerted and multi-faceted action on climate change ignores the fact that many of the clean technologies we need are already competitive and are being adopted by leading corporations today. We do not have to wait 20 years for these clean technologies to become competitive, thanks in no small part to the kinds of climate policies Lomborg wants to axe many of these technologies are here and many more are in the pipeline.
The question for political and business leaders now is not how do we make technologies more competitive than the dirty technologies they have to replace, but how do we make people realise that many clean technologies are already more competitive than the dirty technologies they have to replace? How do we overcome the market failures and cultural barriers that make it harder than it should be for people to switch to energy efficient buildings or fuel efficient vehicles? How do we accelerate the transition to the clean technologies that make sense now and give ourselves the time we need to develop the clean technologies, like energy storage and even lower cost wind, solar and nuclear power, that we will need to complete the development of a genuinely green economy?
For business leaders, the answers have to lie in an ambitious and vocal communications and marketing effort to demonstrate once and for all that clean tech investments are not being made out of charity, they are being made because these technologies make compelling business, financial, and economic sense.
For political leaders and the diplomats gathered in Warsaw this week, there has to be a realisation that while many clean technologies are maturing fast their adoption still needs to be accelerated given the escalating scale of the climate change threat. Moreover, that acceleration can only be achieved if a stable and coherent policy framework helps give companies the confidence they need to build on their early investments. That does not mean endless subsidies, as critics claim, but rather a well-managed gradual withdrawal of support mechanisms as the compelling rationale for clean technologies becomes ever more obvious. This is already happening in many of the key high emissions economies that will ultimately determine whether we are able to tackle the climate crisis. But deployment can only be accelerated to the level that is so urgently required if those policies that can correct the underlying market failure - the carbon pricing, the focus on long termism, the acknowledgement of natural capital - are still pursued. The good news is that, unlike five or 10 years ago, many of the technologies we need to make these policies cost effective and politically palatable now exist, we only have to recognise that their mass deployment is both viable and desirable.
Couple progress on these policies with the increasingly encouraging investment decisions that are being made in progressive boardrooms and the breakthroughs that are emerging from labs around the world and we can make the appeal of competitive clean technologies even more obvious than it already is. And then, perhaps, we can move on to wrestling with a new question.
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