December 07, 2016 Categories: Clean Energy Climate Change

Investing in a Clean Energy Economy is a Winning Proposition for U.S. Businesses

The United States can build a clean energy economy using existing technologies according to the Risky Business Project’s new report – From Risk to Return: Investing in a Clean Energy Economy. The report comes from business leaders Tom Steyer, Hank Paulson, and Mike Bloomberg and presents the business case for transitioning to clean energy. It is backed by a Risk Committee consisting of business heavy weights and other leaders, including Henry Cisneros, Anne Mulcahy, James Owens, Greg Page, Robert Rubin, Donna Shalala, George Shultz, Dr. Alfred Sommer, and Rob Walton. Technical reports have reached similar conclusions in the past, but this is the first time a prominent group of national business leaders have gone beyond a general call for climate action or a price on carbon to embrace specific pathways showing it is technically and economically feasible to cut emissions 80 percent below 1990 levels by 2050.   

This business leadership on climate couldn’t come at a more important time. President-elect Donald Trump has threatened  to “cancel” the Paris Climate Agreement and is stacking his Administration with climate deniers. Although Mr. Trump told the New York Times that he had “an open mind” about climate change, he added:

“It also depends on how much it’s going to cost our companies. You have to understand, our companies are noncompetitive right now.”

While the Risky Business Project is studiously apolitical, the message for Mr. Trump is clear:  U.S. companies face major financial risks if they ignore the damage climate change will do, and will be less competitive if they miss the opportunities presented by clean energy markets.

The Massive Investment Opportunity in Clean Energy

Clean energy investment presents a massive investment opportunity; Risk to Return shows just how big those markets could be in the United States:

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An average of $320 billion per year in private sector investment through 2050 would build a clean energy economy in the United States and achieve the emissions reductions necessary to avoid the worst economic impacts of climate change. This investment would yield savings averaging about $370 billion per year due to lower expenditures on fossil fuels. But investors must take the long view in order to reap these benefits: In the first decade the investment needs exceed the savings by about three to one. Investments need to accumulate over many years to replace the carbon-intensive capital stock and infrastructure with efficient clean energy technologies that dramatically reduce the need for fossil fuels. The savings eventually exceed the investments by about two-to-one, but the crossover does not occur until the mid-2030s.

This level of investment is substantial, but not unprecedented; it is similar in scale to other major recent investments such as those in computers and software at $350 billion per year over the past decade.  

The Three Pillars of Success

Another important finding from the analysis is that there are multiple feasible pathways to cutting emissions 80 percent by 2050, but they all involve the same three pillars: moving from fossil fuels to electricity wherever possible, generating electricity with low or zero carbon emissions, and using energy much more efficiently, as shown here:

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The four pathways examined in the report differ with respect to their mix of low and zero carbon electricity generation sources, as well as their mix of fuel sources used for transportation, but they all involve scaling up wind and solar power significantly and a nearly complete conversion of passenger vehicles to electric drive, whether powered by batteries or fuel cells.

The Risk to Return pathways can also be compared to the scenarios published by the U.S. government in its Mid-Century Strategy for Deep Decarbonization. Both projects analyze the same goal – an 80% reduction in emissions by 2050 – and employ the same three pillars to support a clean energy economy. All the scenarios also envision a similar increase in total electricity generation as well as major expansions of wind and solar power capacity.

There are some significant differences: The U.S. Mid-Century Strategy has a broader scope that includes increasing carbon sequestration in forests and soils as well as reducing emissions of non-CO2 greenhouse gases, whereas Risk to Return focuses specifically on energy-related CO2 emissions. By including enhanced land sinks and negative emission technologies (biomass energy with carbon capture and storage, or BECCS) the Mid-Century Strategy allows for higher residual fossil fuel use in the energy sector, particularly petroleum use in transportation. Another significant difference is that the Mid-Century Strategy Benchmark scenario relies significantly on coal with carbon capture and storage, whereas the Risk to Return Mixed Resources pathway applies carbon capture and storage to natural gas power plants while phasing out coal (the Risk to Return High CCS pathway uses carbon capture and storage with both coal and gas, making it more similar to the Benchmark scenario).

The differences among clean energy strategies would be worth debating if the Trump Administration were committed to decarbonizing the U.S. economy, but small differences in approach pale by comparison to the difference between any of the clean energy paths and the burn-baby-burn fossil fuel-ishness that Mr. Trump and his cronies appear to be hellbent on pursuing.

Sadly, there is no reason to be optimistic that Mr. Trump will take a fact-based approach to addressing climate change and unlocking clean energy opportunities. If he were truly interested in the competitiveness of U.S. businesses he would do well to listen to the business leaders who comprise the Risky Business Project. As Risk to Return makes clear, clean energy is a winning proposition for American business–and the cost of inaction is one we cannot afford.

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