Climate Change Opportunity

With every major change, there is massive opportunity. 

In the 1990’s, few business had an ‘IT Department’, let alone an internet strategy or integrated computer network. Today, that is unimaginable. By the 2025, this magazine predicts that every company will have an ‘ET Department’ to track energy and resource use across their whole supply chain; manage the costs of critical energy, water and transportation costs; and invest in technologies that help internal and external organizations adapt to or mitigate the impacts of climate change and the challenges of rising demands for resources from around the world. 

The world uses energy on a scale unimaginable 20 years ago. The world has water demands that are not met now, and will become worse as expectations rise and heat takes a toll. The United States is already facing an increasingly hostile global environment, driven more by thirst and starvation than ideology. We must take these challenges seriously: reducing our own use and building the technologies that can be transported around the globe.

This is opportunity.

As Kate Gordon, Vice President and Director of the Climate and Energy Program at Next Generation and a lead author of Risky Business, said, “When you do a risk assessment, you come out with very different solutions.”

Adaptation & Resiliency

Changes are being pushed by regulations and pulled by the risk assessment of future savings or losses. opportunity includes:

  • Sea walls.
  • Better building codes.
  • Designing or shifting crops to meet changes in local climates.
  • Siting new facilities to protect against future challenges.
  • IT that can track, monitor and control resources.
  • Water technologies such as desalination, point source and storm water remediation, pipeline quality.
  • Energy: solar, wind, hydro, ocean, energy efficiency.
  • Water neutral energy production.

Public Policy

An important piece is long term public policies that provide the kind of credit enhancements needed for large, long term projects. There are several public policy goals that businesses must endorse to provide a consistent environment for such investments.

  • Carbon and water quality trading mechanisms, such as the Western Climate Initiative and the Ohio River Water Quality Trading. 
  • Long-term production and investment tax credits for infrastructure projects.
  • Public loan guarantees that are paid back at various stages in the project. Such funds then provide funds for future projects.
  • Renewable energy and automobile fuel standards.

Public Private Partnerships

Such partnerships are more critical today that they have been in the past. The reasons are many, including lowered government resources and an appetite in the private sector for long term cash flows. Such investments can balance riskier investments and secure pension fund obligations. The public policies outlined above, as well as self-interest from business leaders, will create asset classes that are investment grade in size, transparency and quality.

Rating Agencies

Rating agencies are catching up, but still lag, stalling market potential. Since rating agencies may not have the resources to evaluate new asset classes, public agencies — in conjunction with private expertise — are stepping up to help define standards. The two areas that need to be addressed are:

  • Increase ratings agency sophistication about infrastructure projects with a multi-decade payouts. 
  • Quantify metrics that internalize the risks of climate change in bond ratings, especially for municipal bonds. 

Why Endorse Regulations? 

  • Locking in a competitive advantage for policies implemented to make money, or to reduce costs or risk.
  • Leveling the playing field for the costs of developing new revenue producing initiatives. 
  • To have a say in legislative processes that produce regulations, as opposed to those promulgated by Federal or State agencies.

Conclusion

Automobiles, television, the internet, cell phones: these are all innovations that were quickly adopted by some and denied by others. The Golden Gate bridge in San Francisco was fought by over 100 law suites. Although today it is possibly one of the most photographed man-made structures, one of the main arguments against the bridge was that it would be an ‘eye-sore’.  

Change is never easy, but inevitable. The revolutions of the past brought great wealth, but were born in an era that believed in unlimited resources. We now know that energy, water and other natural resources are finite, and that we must live within our means. Those that find the solutions are the Steve Jobs, Bill Gates, Warren Buffets of the future. All it takes is eyes open to risk, and the imagination for solutions. 

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