To go green, you need (private) green

Yesterday about a hundred people—reporters from Fortune and the New York Times, Environmental Protection Agency suits and employees of green non-profits, entrepreneurs and venture capitalists—crowded into one of the ballrooms of the L’Enfant Plaza Hotel in downtown Washington, D.C. In the hotel’s main conference room, a much better-attended conference for business executives was taking place. But in Ballroom A, the flash of expensive suits was offset by a certain feeling of virtuousness. Sure, the people were there to make money, but they were also out to change the world.

It was the press conference for the Gigaton Throwdown, a project started 18 months ago by cleantech venture capitalist Sunil Paul with support from the Clinton Global Initiative. A team of academics and consultants compiled a 140-page report analyzing what it’s going to take to reduce carbon dioxide emissions by 9 billion tons (or 9 gigatons) by the year 2020. The authors analyzed nine key clean energy technologies: biofuels, building efficiency, concentrating solar power, construction materials, geothermal power, nuclear power, plug-in hybrid electric vehicles, solar photovoltaics, and wind power. They asked this question: in ten years, can we scale up these technologies to provide more than half of the world’s demand for energy, each reducing the equivalent of one gigaton of carbon dioxide emissions?

The answer, they found, is yes, at least for 8 of these 9 techs. (Plug-in hybrid electric vehicles fell by the roadside, since scaling up would require that every new car manufactured in the next ten years be a hybrid.) The authors argued that transforming the viable 8 from fringe energy providers to major players “could add 5 million direct jobs to the global economy, strengthen energy security by reducing dependence on foreign oil, and abate more than the total carbon dioxide equivalent emissions currently projected to be necessary for 2020 climate stabilization goals.”

Good news, eh? You, like me, probably thought we were already doomed, what with the Maldives disappearing under the rising water line and climate-change-induced mass migrations already beginning. But the picture isn’t entirely rosy.

While the audience oohed over a PowerPoint graph of new jobs created by gigaton-scale cleantech, a sweeping upward rainbow, a battle was—and still is—raging nearby on Capitol Hill. Tomorrow, Congress will vote on what might be the most influential climate-change legislation we’ve seen Waxman-Markey Bill. Toothless it may be, compared to what we need to top out carbon dioxide concentrations at the IPCC’s projected “maybe-we-won’t-be-totally-doomed” 450 parts per million. (Secretary of Energy Steven Chu thinks we’ll overshoot that, if we’re lucky, by 100 ppm.) But the bill will introduce a cap-and-trade system in an attempt to rein in carbon emissions, and provide funding for research into clean technology. It’s a step forward.

While the Gigaton Throwdown is firmly in favor of Waxman-Markey, it does not hug trees; neither does it eat granola. In a way, it’s shrewder and more realistic than most green campaigns I’ve seen. The most vocal panelists were Silicon Valley venture capitalists and entrepreneurs, and their point was clear: if we want clean energy technologies to increase in that broad, hope-inducing rainbow, private investment must triple by 2020. And the biggest obstacle in the way, Paul said, is policy.

According to Paul, 8 trillion dollars of investments are sitting on the sidelines, “waiting for the appropriate market signal,” he said. “Right now the rules of the game are designed for fossil fuel industry.”

Case in point: shrinking gas prices might seem like the recession’s silver lining, but they’re only hurting the chances of clean energy sources that are more expensive up front. “The price we pay does not take into account the harm fossil fuels do,” Paul said. He also cited how the on-again, off-again production tax credit has crippled the American wind power industry. As Josh Green puts it in his article in theAtlantic:

Plotted on a graph, the history of clean-energy production in the United States resembles the blade of a saw, rising and falling each time subsidies came and went. Japan, Germany, Spain, and Denmark show smooth, upward-sloping yield curves, a reflection of consistent government policy.

Martin Lagod, managing director and co-founder of Firelake Capital Management, made this very point. “Uncertainty can be lethal,” he said. “We won’t invest if we can’t see a way to compete without subsidies.”

Will Coleman, a partner at Silicon Valley venture capitalist firm Mohr Davidow Ventures, pointed out that investment works on a 10 to 20 year time frame; policies that change with a new president or Congress can yank the rug from under budding companies. And this big green bus isn’t going anywhere if it’s not profitable.

“This project puts out a sense of the capital needed,” Coleman said. “You have to get private investment involved.”

Well, the businessmen have spoken. Stay tuned for tomorrow’s vote.

[Image courtesy of Gigaton Throwdown/Drew Wisniewski.]

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