The Hope Behind the Holes in the Waxman-Markey Climate Bill

Friday was a historic day for the United States with the passage of our first comprehensive climate change bill. While some criticize the American Clean Energy and Security Act (ACES) authored by representatives Henry Waxman (D-CA) and Edward Markey (D-MA) for falling furiously short of what we need, and what President Obama promised during his campaign, all is not lost.
That may sound like twisted logic, but I’m hopeful because even if Congress passes this watered down legislation, I think there will be many areas where the market will step in to pick up the slack.
Regulation is important – and don’t get me wrong, if we fumble on this cap-and-trade bill, we’ll be facing an even greater challenge – but business solutions to climate change need to come from all angles, and there are many factors that influence the market, not just federal policy. And this is where I hold hope.
We’re seeing these market signals in several different aspects of business: insurance, financial markets, energy prices, marketing and corporate social responsibility (CSR) reporting. Here are some examples:

Financial markets:
For years institutional investors such as CalPERS and Socially Responsible Investment (SRI) firms have been putting screens on corporate activities. However, more recently, Wall Street has been looking at environmental, social, and governance (ESG) performance of companies as an indicator of financial performance.
In fact, AT Kearney reported that companies that had ESG policies averaged a market cap of $650 million more than companies that did not – even after the market collapsed. Compelling data such as this could very likely fuel a trend among analysts and investors to pressure companies to create policies and take action on climate change.
Insurers who’ve taken a bath in recent years due to weather-related losses attributed to hurricanes, floods, drought, forest fires, etc. are moving aggressively to reduce their climate risk exposure.
Some companies have had premiums increase dramatically while others are watching their executive and officers insurance renewals freeze until they come up with a climate policy. Others are offering new products for customers that are committed to energy efficiency and green building.
Moreover, this spring the National Association of Insurance Commissioners agreed that insurance companies with more than $500 million in assets must disclose their climate risk starting in 2010. You can bet insurers will be leaning on businesses and policyholders to not only disclose, but to reduce climate risk, to lower the insurers’ exposure.
Energy prices:
Businesses that burn a lot of gas may be breathing a sigh of relief at the prospect of getting free permits, but they shouldn’t be. Energy prices remain highly volatile. Just yesterday oil jumped over $71 a barrel due to the attack on the Shell Oil platform in Nigeria, and Goldman Sachs reported in early June that it now believes oil will once again go above $85 a barrel by the end of 2009.
Several recent studies indicate that younger Gen X, Gen Y and Millennial consumers care much more about the environment and climate change than our aging Baby Boomer generation. Even in the absence of regulation, companies will be in trouble if they continue with business as usual. When price, performance, and quality are the same, the deciding factor for this fast-growing segment of conscious consumers is sustainability, not celebrity endorsements or flashy commercials.
CSR reporting:
More and more companies are publishing CSR reports, and what I’ve witnessed through my consulting work is that companies are already starting to jockey for leadership within their respective industries. Companies are raising the bar and those that want to keep up with – or beat – the competition now must set aggressive carbon-reduction goals and take bold action on climate change.
While I don’t want to underscore the disappointment I and others in the sustainable business community have felt over the watered down version of this bill, hope still exists. The most important thing about this bill is that it opened a national dialogue, and gets businesses moving in the right direction and regulation started.
Remember, we’ve just come off 8 years where the President doubted that climate change was even happening. The market was forced to step in and fill the void of the government left. So let’s not all freak out. Let’s celebrate what was in the bill, push the Senate for passage, and continue to encourage the market to fill in the rest.
Kevin Wilhelm is the CEO of Sustainable Business Consulting and the author of Return on Sustainability: How Business Can Increase Profitability & Address Climate Change in an Uncertain Economy.

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4 responses

  1. Of the US environmental movement’s numerous initiatives to address climate change, two are critical in the short term: influencing the legislative process through elections & lobbying, and getting the public to take action. While the 6000 or so US environmental non-profits and hundreds of green-tech firms coordinate on specific initiatives, the lack of true synchronization, especially among non-profits, is a major barrier to achieving significant scale and impact. Further, many key non-profits draw on the same few funding sources. Massive duplication of effort, inefficiency, fragmentation, and reduced impact result from the competition for funds and the overlapping and at times conflicting actions aimed at the same target populations.
    In contrast, big business significantly outspends and “out-coordinates” environmental organizations on lobbying, getting legislators elected and informing the public. While it would be difficult to match business’ spending, the environmental movement can significantly enhance its leverage and impact by taking a page from big business’ playbook on how to align organizations with disparate yet overlapping interests; using the key harmonizing mechanism of a national trade association such as the US Chamber of Commerce or the American Banking Association. Further, associations have been instrumental in swaying public opinion, e.g. the insurance industry’s “Harry & Louise” campaign, the United Negro College Fund’s, “A Mind is a Terrible Thing To Waste,” campaign and the California Milk Processor Board’s “Got Milk?” advertisements.
    Even with differences in philosophy, interests and approach among environmental organizations there are areas of considerable overlap in which coordinated decisions, actions and funding would greatly enhance their power. A national trade association, properly structured with a core set of high-value services, provides this leverage. This association would:
    ‚û¢ Foster agreement on the few key issues that are the most urgent to address in the short- and medium-term
    ‚û¢ Present a common face and single voice to external stakeholders, especially legislators and the public
    ‚û¢ Enable members to re-focus their efforts and spending on the areas closest to their missions
    ‚û¢ Identify key influence and education opportunities and get the right members collaborating on these initiatives
    ‚û¢ Assist in allocating resources to the most fruitful research areas, serving as a focal point for the most topical research and reducing the overlap in members’ research agendas

  2. DOE to Provide Up to $17.6 Million for Solar Photovoltaic Technology Development
    WASHINGTON – The U.S. Department of Energy (DOE) today announced up to $17.6 million, subject to annual appropriations, for six early stage photovoltaic (PV) module incubator projects that focus on the initial manufacturing of advanced solar PV technologies. Including the cost share from industry, which will be at least 20 percent, the total research investment is expected to reach up to $35.4 million. These projects support President Bush’s Solar America Initiative, which aims to make solar energy cost-competitive with conventional forms of electricity by 2015. Increasing the use of alternative and clean energy technologies such as solar energy is critical to diversifying the Nation’s energy sources to reduce greenhouse gas emissions and dependence on foreign oil. As the lead agency for President Bush’s Advanced Energy Initiative, DOE is committed to the diversification of our energy resources by spurring widespread commercialization and deployment of clean solar energy technologies. The development of innovative technologies will help to provide long-term economic, environmental, and security benefits to the United States.
    “These projects will help promote the development of a diverse set of photovoltaic technologies and ensure that the U.S. is a world leader in next-generation, cost-effective solar technologies,” Acting Assistant Secretary for Energy Efficiency and Renewable Energy John Mizroch said. “These solar photovoltaic incubator awards will help accelerate the time it takes for innovative start-up companies to get their technologies to market.”
    Through these projects, companies will seek to accelerate the time it takes to move innovative PV technologies from laboratory demonstration into pilot production, and to reduce the cost, improve performance and expand the manufacturing capacity of PV modules. These awards will help fill the commercialization pipeline with advanced solar technologies and bring a new generation of PV product suppliers into the marketplace. The announcement of this funding opportunity was made March 3, 2008.
    Upon negotiation of their subcontracts through DOE’s National Renewable Energy Laboratory (NREL), the following six companies will begin their 18-month projects:
    1366 Technologies (Lexington, Mass.) is developing a new cell architecture and related processes for low-cost multi-crystalline silicon cells. This project is expected to enhance cell performance by light-trapping texturing and grooves for self-aligned metallization fingers. By improving the light trapping and charge carrier movement within the cell, this project will significantly increase the efficiency of multicrystalline cells. By the end of the project, 1366 Technologies plans to deliver a 19 percent efficient, 15.6×15.6 cm2, multi-crystalline silicon cell with a technology that is applicable across the crystalline silicon cell industry. (Up to $3 million)
    Innovalight (Sunnyvale, Calif.) is developing very high-efficiency, low-cost solar cells and modules by ink-jet printing their proprietary “silicon ink” onto thin-crystalline silicon wafers. The company’s contact-less printing process has been demonstrated to significantly reduce both the manufacturing costs and the complexity required to make today’s highly-efficient cells and modules. (Up to $3 million)
    Skyline Solar (Mountain View, Calif.) has developed an integrated lightweight, single-axis tracked system that has been demonstrated to reflect and concentrate sunlight over 10X onto silicon cells. The use of mirrors to concentrate light will reduce the use of the greatest cost driver for traditional silicon modules, the solar cells, by over 90%. Additionally, the design leverages the mainstream PV industrial base and amplifies its capacity through significant concentration to enable rapid scaling. It seeks to dramatically lower the cost to manufacture modules and install complete systems to achieve a levelized cost of energy below grid parity. By the end of this project, Skyline plans to deliver modules that exceed 12m2 area and 15 percent aperture-area efficiency. (Up to $3 million)
    Solasta (Newton, Mass.) is using a novel cell design based on an amorphous-silicon “nanocoax” structure, which increases current and lowers materials cost by shortening the path charge carriers must travel to the cell’s conducting wires. This approach effectively decouples the optical and electronic pathways. If successful, Solasta will deliver 15 percent efficient, 100-cm2 pre-production cells at the end of the project. (Up to $2.6 million)
    Solexel (Milpitas, Calif.) plans to commercialize a disruptive, 3D, high efficiency mono-crystalline silicon cell technology, while dramatically reducing manufacturing cost per watt. Through a series of novel yet low cost processing steps, this project will manufacture a solar cell architecture which efficiently traps light using minimal material. At the end of this project, Solexel plans to deliver a 17-19 percent efficient, 156×156 mm2, single-crystal cell that consumes substantially lower silicon per watt than conventionally sliced wafers. Solexel aspires to be a gigawatt-scale PV producer within five years. (Up to $3 million)
    Spire Semiconductor (Hudson, N.H.) plans on opening up the design space for three-junction tandem solar cells by growing differentiated bi-facial cells on a Gallium Arsenide substrate. This approach will allow spire to better optimize the optical properties of their device layers to better match the solar spectrum. Spire Semiconductor is targeting cell efficiencies over 42 percent using a low-cost manufacturing method. (Up to $2.97 million)
    Read more information on the Solar America Initiative.

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