About 64 million people visit McDonald’s every day. That’s a stunning number. They’ll see changes in the year ahead, some driven by a renewed sustainability push at the $24-billion fast-food giant.

LED lights in new and renovated stores. “Greener” packaging. Eco-labels on fish sold in Europe.

None of this is earth-shattering or, more importantly, earth-saving, but it’s the start of something big, says Bob Langert, McDonald’s v.p. for sustainability.

“We’re on a path to mainstream sustainability,” Bob told me by phone the other day. “This is transformational for us. We want to be bolder, and we want to make a bigger impact.” Most important, he said, the company wants to embed sustainability into its operations and, eventually, into its brand.

Business-friendly environmentalists who work with McDonald’s–groups like the World Wildlife Fund, Conservation International and Environmental Defense Fund–will applaud any sign that the company is ready to integrate sustainability into its core business and dig deeper into its supply chain to find ways to raise beef and chicken that are better for the planet. Skeptics, and there are many, will call this greenwashing, or perhaps “farmwashing,” a term I hadn’t heard until yesterday when I saw this anti-McDonald’s posting in Grist.

In a way, McDonald’s is like Walmart–it’s never going to be beloved in the Whole Foods-shopping, arugula-eating, tony precincts of Berkeley, Brooklyn or Bethesda. But the company is much too big to ignore or wish away.

Today, McDonald’s released its 2011 Sustainability Scorecard. Under the umbrella of sustainability, the company includes environmental responsibility, its supply chain, nutrition and well-being, employees and community grants and programs, albeit in a way that highlights accomplishments and isn’t easily transparent. (Please let me know if you can find an accounting of the company’s carbon footprint or a greenhouse gas reduction goal, because I couldn’t.)  But McDonald’s can feel good about a couple of big initiatives in the year just past.

First, as you’ve probably read, McDonald’s will reformulate all of the Happy Meals sold in the U.S. and Latin America to automatically include fruit and reduce the overall amount of calories and fat, mostly by serving smaller portions of frees. This is a big deal if you choose to blame the obesity crisis on the companies that sell food. I don’t. (See my blogpost, Mmm…mmm..who’s to blame for obesity?) It’s dangerous to confuse corporate responsibility with personal responsibility.

Companies are, however, responsible for what they buy and here McDonald’s is making meaningful progress, moving forward with its sustainable land management commitment, which is supposed to “ensure that, over time, the agricultural raw materials for our food and packaging originate from legal and sustainably managed land sources.”

Just what this will mean in practice isn’t clear, but the company has, as an example, joined with the World Wildlife Fund and The Nature Conservancy, as well as Cargill and Walmart, to form the Global Conference on Sustainable Beef, which will try figure out how to make the beef production system more sustainable. For a host of reasons, not the least of which is the company’s desire to sell as many burgers as it can, I’m skeptical about this effort (see my blogpost, Meat: bad for you, bad for the climate) but the fact is that people will go on eating lots of beef. So we should wish McDonald’s and its allies good luck as they try to “green” the hamburger.

Meanwhile, McDonald’s has promised to source only certified sustainable palm oil by 2015, to buy more coffee certified by independent organizations like the Rainforest Alliance and to insure that its chicken products haven’t been fed soy from the Amazon. These are unglamorous initiatives that probably won’t drive sales, but they matter because of the company’s scale.

“We see our impacts on the supply chain as being paramount,” Bob told me. “We don’t buy niche products. We buy from the mainstream.” When McDonald’s says that beef needs to be raised differently, an entire industry will have to listen.

Bob Langert

It’s partly because I’ve known and trusted Bob for many years that I take these efforts seriously. He’s been in charge of the company’s corporate responsibility effort (now rebranded as sustainability) for nearly 20 years. (See my blogpost, What a long, strange trip it’s been for McDonald’s Bob Langert.) Most of that work, he told me, has been reactive and defensive. Remember Fast Food Nation? Or Super Size Me? Even McDonald’s involvement with the Marine Stewardship Council grew out of a crisis. “We had fisheries disappearing,” Bob said. More than 99% of McDonald’s fish now comes from MSC certified fisheries.

Now, Bob says, the company sees sustainability as an opportunity, and it’s willing to put real dollars behind it. “We’re investing a lot more into energy efficiency and green building,” he says, hundreds of millions of dollars to  rebuild and refresh restaurants, making LED lights standard. The company is buying renewable energy certificates to support the development of clean energy.

“Sustainability is going to be higher on the agenda for our senior management team,” he says.

To put its considerable muscle behind those words, McDonald’s needs to set some ambitious goals and targets, and report in a transparent way on its progress. Unlike, say, my local farmer’s market or yours, this is a company that can move the needle on environmental issues in a meaningful way.

Next April, FORTUNE will again bring together some of the smartest people we know in sustainability for Brainstorm Green, the magazine’s annual conference on business and the environment.

This is will be our 5th Brainstorm Green–hard for me to believe, since I’ve been involved since the beginning–and we’ve again got a first-rate lineup of leaders from corporate America, the  environmental movement, the investment community and government, as well as a scattering of interesting writers, thinkers and doers about “green.”

Once again, the event will be held at the spectacular Ritz Carlton in Laguna Niguel, CA. Dates are April 16-18, 2012.

Alan Mulally

New faces for 2012 from the corporate world will include Alan Mulally, the president and CEO of Ford; Rob Walton, the chairman of Walmart; Andy Taylor, the chairman and CEO of Enteprise (they buy more cars than anyone in America); C. Larry Pope, the chairman and CEO of Smithfield Foods (they make more hot dogs than anyone in America, as I wrote in Smithfield Foods: Sustainable Pork?); Vance Bell, the chairman and CEO of Shaw Industries (the world’s largest carpet manufacturer, see my blogpost, This carpet has moral fiber); John Faraci, the chairman and CEO of International Paper; Gary Hirshberg, the CE-Yo of Stonyfield Farm; Russ Ford, the executive vice president of Shell; Bea Perez, the chief sustainability officer of Coca-Cola; and Trae Vassallo of Kleiner Perkins.

Other newcomers will include former EPA chiefs William K. Reilly and Christine Todd Whitman; he’s now with private equity firm TPG, and chaired the BP oil spill commission, she’s an energy and environmental consultant and nuclear-power advocate. We’ll talk politics and climate with  John Podesta, the chair of the Center for American Progress and former chief of staff to President Clinton. John Warner — the Ph.D. chemist, not the former U.S. Senator — will explain the promise of green chemistry.  Bonnie Nixon will deliver insight into The Sustainability Consortium. And I certainly hope that Jared Diamond, the Pulitzer Prize winning author and geographer, will counsel us on how to avoid Collapse.

Frances Beinecke

Although we meet just once a year, I like to think of Brainstorm Green as a community, albeit an ephemeral one. That’s largely because many of those who came for the first Brainstorm Green, back in 2008, have come back again and again. In particular, we are joined every year by the leaders of our programming partners–the Environmental Defense Fund, the Natural Resources Defense Council, The Nature Conservancy and Conservation International. EDF’s Fred Krupp, NRDC’s Frances Beinecke, TNC’s Mark Tercek and Glenn Prickett and CI’s Peter Seligmann will all be back in 2012.

Many other Brainstorm Green “alums” will return, too. In no particularly order: David Crane, the CEO of NRG Energy; Fisk Johnson, the chairman and CEO of S.C. Johnson; Jim Rogers, CEO of Duke Energy; Mike Brune, executive director of the Sierra Club; Scott Griffith, the chairman and CEO of Zipcar; David Neeleman, the founder and CEO of Brazil’s Azul airline; Ted Roosevelt IV of Barclay’s; Dara O’Rourke of Good Guide; and water expert Will Sarni of Deloitte.

[I'm also hoping that the incomparable Chuck Leavell -- keyboardist with the Rolling Stones, award-winning tree farmer and all-around good guy -- will return in 2012. My FORTUNE colleague Brian Dumaine, who is co-chair with me of Brainstorm Green, also functions as our musical impresario, and he tells me he's doing his best to persuade Chuck to come back.]

As always, there will be plenty to talk about–the shale gas boom, the future of renewable energy, the continuing “greening” of corporate America, the 2012 election, consumer behavior around green, corporate water strategies, electric cars, etc. The theme of the conference is, how can business help profitably solve the world’s big environmental problems?

The program remains in flux, so if you want to propose a speaker or call our attention to a new topic, please do so here at the Brainstorm Green website. You can also request a delegate invitation on the registration page. I hope to see many of you in Laguna Niguel in April.

We is smarter than me.

That’s the premise behind a partnership between the  Environmental Defense Fund and InnoCentive. You probably know EDF–they’re a (mostly) business friendly nonprofit that looks for solutions to environmental problems. InnoCentive is a company that has built an open Internet platform to connect other firms, governments and NGOs to creative people all over the world who can help them solve problems.

Last week, EDF and Innocentive declared a winner in their first challenge, which looked for a new approach to the old problem of agricultural nitrate pollution: He is Patrick Fuller, 23, who is studying for a PhD. in chemical and biological engineering at Northwestern. He’ll be awarded $5,000 for his idea, about which more below.

Beth Trask

To learn more about the partnership, I spoke with Beth Trask, who leads, along with David Witzel, leads what EDF calls its innovation exchange, an effort to spread new “green”  solutions among companies.

“Like many people,” Beth told me, “we’ve been looking with much interest at the open innovation space. Basically, the concept is that there are many more ideas and possible solutions out there in the world than any given company or organization can tap into on its own.”

This isn’t an entirely new approach. Prizes have been used an incentive to solve scientific problems for centuries [See my 2009 blogpost, The Strange Power of Prizes]. More recently, companies including Kraft Foods (“Do you have a new product or packaging idea?“) and GE, with its EcoMagination Challenge, have used the Internet to look outside their own walls for new ideas. Richard Branson’s Virgin Earth Challenge offered a $25 million prize for a commercially viable plan to reverse climate change by removing CO2 from the air, while the $10-million Progressive Insurance Automotive X PRIZE was set up to inspire new low-polluting cars.

EDF’s challenges aren’t as sexy, sweeping, or pricey. But, says Beth: “There are a lot of nuts and bolts sustainability problems that we believe could be solved but aren’t being solved.” The group is looking for new technologies to better measure point sources of water pollution, and for a cost-effective way to analyze crop growth. Other challenges are in the works.

Dwayne Spradlin

Breaking down big problems into their discrete parts is a key to success on Innocentive, according to Dwayne Spradlin, the company’s president and CEO. “Our view of the world is that very few problems are large, structural problems,” he told me by phone. “If you frame the challenge right, you dramatically increase the odds of getting a solution. I can’t say how religious we are about focus.”

InnoCentive was developed by drug company Eli Lilly in 2001, and spun out as its own firm in 2005. Today, Spradlin says, it manages challenges in a variety of fields, some unexpected. [I can't wait for the company to solve this one -- Increasing People's Ability to Start and Stay on Task. A $10,000 award awaits the winner.] InnoCentive has workedon challenges with Procter & Gamble, NASA and the Rockefeller Foundation.

They get to tap into a network of about 250,000 “solvers” who are located in more than 200 countries. About 60% have masters degrees or PhD’s, the company says.

Patrick Fuller

Pat Fuller, the Northwestern student, is on his way. A fellow grad student who had won an award told him about Innocentive, and as he scanned the site a few months ago, EDF’s request for help with fertilizer runoff got his attention. He was inspired to come up with a solution not so much by his current reserch–which is mostly computational, he told me–but by something he’d seen growing up in Rhode Island where he’d worked in a store that sold fruits and vegetables. A farmer there told him that he’d used algae collected from local ponds to help his plants grow faster. So Pat wondered what would happen if the runoff could be captured, and the nitrogen-rich water recyled to grow algae, as fertilizer.

“I sat down for a weekend, worked out the mathematics and wrote the paper,” Pat told me. Nice way for a grad student to earn $5,000. Says Beth: “We never would have found this kid.”

This is more than a nice story, though. Patrick’s idea will be tested by Iowa soybean and corn farmers, who have built a good working relationship with the Environmental Defense. As EDF explains, while farmers have good reason to want to cut down on wasted fertilizer, so do the rest of us–sediment and fertilizer runoff  “create algae-filled ‘dead zones’ and pollute drinking water supplies” in the Great Lakes, Chesapeake Bay and the Gulf of Mexico.

Now, maybe, EDF, InnoCentive, Iowa farmers,  a $5,000 prize and a 23-year-old grad student will find a way to change that.

Arguably, Walmart has done more than any environmental group, politician, government regulator or Silicon Valley clean tech firm to nudge the U.S. economy towards sustainability in the last five years.  Walmart’s 2011 Global Responsibility Report, published last week, makes clear that despite the recession and some revently rough going for the company–lately its stock has lagged the S&P500 –Walmart is pushing ahead towards its big goals: To generate no waste, to be 100%-powered by renewable energy, and to sell lots more products that sustain people and the environment.

Yet a closer look at the report demonstrates that there are limits to what any company, even one as vast as Walmart, can do. Most of its environmental gains have come from doing what Walmart has always done very well–driving efficiency in its stores and supply chain. When sustainable initiatives cost more money, as they sometimes do, progress has been halting.

Still, Walmart deserves at least two cheers, maybe two-and-half for its efforts, particularly in the current, dispiriting political climate.

As Elizabeth Sturcken of the Environmental Defense Fund, which works closely with Walmar, told me:

Leadership on environmental issues is coming from Bentonville these days, not from Washington. Some people in Washington want to roll back basic environmental protection on clean air and clean water, saying it’s bad for business. Our work with Walmart proves that’s not true….Generally,  all the signs that I see are full speed ahead.

Andrea Thomas, who has led Walmart’s sustainability work for the past six months, made a similar point. The company set big, bold, broad goals back in 2005, without knowing how it would meet them. Since then, it has discovered unexpected business benefits.

Rather than being paralyzed by (the goals), they ignited  a lot of energy behind doing experiments, trying different things. Today, there’s a lot of interesting work going on, not just in the U.S., but all over the world. I’m very encouraged by the progress we’re making.

Here’s one success story from the report, a promising new initiative and an arena in which Walmart’s progress appears to have stalled:

Walmart recycling with "super sandwich bale"

Waste: WMT has turned its garbage into an asset, just by thinking about the stuff it throws away in a more disciplined fashion. Across California, more than 80% of waste has been diverted from landfills and made into something else, turning what was a cost center into a source of new revenue.

Said Thomas: “We would pay for people to haul our trash away. And we paid to put it in a landfill. Now people are paying us.”

Success hasn’t come as easily as it sounds, of course. To help find an outlet for food waste, Walmart’s foundation donated 100 refrigerated trucks to food banks. “ Now they have a means to pick up and deliver some of the food that we can’t use in the stores, but that’s still good food,” Thomas said.

Supporting small, local farms: Last fall, WMT announced an array of targets related to agriculture. In the U.S., the company promised to double sales of locally-sourced produce, so that it accounts for 9 percent of all produce sold by the end of 2015. Globally, WMT said it will sell $1 billion in food sourced from 1 million small- and medium-sized farmers in emerging markets by the end of 2015.

To achieve those goals, Thomas told me, WMT has to simplify its supply chain to deal directly with farmers and eliminate some middlemen. “The logistics aren’t as difficult as you might think,” she said. “The farmer can actually drop off produce at the distribution center or at the store.”

If all goes according to plan, WMT  should be able to sell fresher, local food at lower prices, and eliminate some of the greenhouse gases generated by a global supply chain for food. Like the waste initiative, the agriculture initiatives mostly dovetail nicely with the culture of efficiency at Walmart.

Clean energy: To achieve its goal of being powered by 100% renewable energy, WMT has made its fleet, stores and distribution centers more efficient. But its commitment to wind and solar power  has been limited because they cost more than electricity from fossil fuels. The report says:

During FY11, we successfully completed several renewable energy projects, including the installation of 35 solar projects in Arizona, California and Puerto Rico. Eight of the solar projects installed in FY11 utilized thin-film solar, which created manufacturing jobs and accelerated this new technology’s entry to market. We installed seven fuel cell projects in California this year and completed two microturbine wind projects on the parking lot light poles at the Walmart in Worcester, Mass., and at the Sam’s Club in Palmdale, Calif.

This is all to the good. By buying renewable energy in selected markets, WMT will help bring costs down. But because wind and solar power generally cost more than electricity from coal, nuclear or natural gas in most places, WMT can’t or won’t buy clean energy on a  scale that matters. (If the company says in its report how much of its energy now comes from renewable sources, I couldn’t find it. I’d guess it’s well under 10% of  WMT’s total energy spend, but I’m ready to be corrected.) Buying renewable energy would drive up its costs, with no tangible benefits to customers, and put the company at a competitive disadvantage, as the company says in the report:

In our efforts to ensure our operations are contributing to everyday low prices for our customers, it has sometimes been difficult to find and develop low-carbon technologies that meet our ROI requirements.

This, then, is where we run up against the limits of efficiency and, more broadly, what any company can reasonably be expected to do to become more sustainable.

More broadly, it’s a reminder that the rhetoric of green business — how green is gold, how green is green, how clean energy will generate jobs and growth — hasn’t always served the cause well. Sometimes, indeed often, “green” is more expensive than “brown,” or to be more precise, the full costs of “brown” (air and water pollution, GHG emissions) aren’t captured in its price. This is why policy matters. This is why we need to price carbon emissions into the energy economy.

Put another way, so long as environmental leadership is coming from Bentonville and not Washington, we’re in trouble.

Fred Krupp

What a different just a few years can make. Hard as it is to believe, there was a time not long ago when Congress appeared to be on the verge of a bipartisan agreement to regulate global warming pollution.

Republicans John McCain, John Warner, Newt Gingrich and Tim Pawlenty all supported efforts to put a cap on greenhouse gas emissions. Gingrich and Pawlenty went so far as to appear in commercials with the Environmental Defense Fund supporting climate regulation. And now?  “It was a mistake, it was stupid, it was wrong,” Pawlenty says.

The radical shift in the political climate means that big NGOs like the Environmental Defense Fund, the Natural Resources Defense Council and the Sierra Club now must fight merely to  preserve the status quo in Congress.

Environmental groups are playing defense rather than offense in Washington, said Fred Krupp, the president of the Environmental Defense Fund,  during a panel today on climate policy that opened FORTUNE’s Brainstorm Green conference.

He noted that House Republicans have voted to block funding not just for EPA’s efforts regulate carbon pollution (efforts that are required by a Supreme Court decision) but also for EPA efforts to control, on public health ground, mercury pollution from cement factories.

On climate issues, Fred said: “It’s hard to have a meaningful exchange of viewers, a serious conversation in Washington.”

That’s a big, big problem because, as he noted, every major piece of environmental legislation in the U.S has been enacted with bipartisan support. Fred himself was a leading advocate for the  late 1980s cap-and-trade system–to regulate sulfur dioxide pollution–that was put into place by President George Bush and his EPA chief, Bill Reilly.

I moderated the panel on climate policy that included Fred, Jim Rogers, the ceo of Duke Energy, Connie Hedegaard, the EU commissioner for climate and Michael Shellenberger, the president of the Breakthrough Institute. It was, unfortunately, a little grim. All of the panelists agreed that despite nearly 20 years of talk at the highest levels of government and business about global warming, global carbon emissions continue to grow. They’re up by 40%, roughly, since 1990. Neither China nor the U.S has agreed to put a cap on  emissions or tax fossil fuels.

What’s the best path forward, I asked? No one had a simple or single answer. Shellenberger argued for a shift away from making fossil fuels more expensive towards policies that will make clean energy cheaper, by investing government funds in clean energy R&D, both through government grants and military procurement. His Breakthrough Institute has thought and written a lot about how to make this happen, but it’s likely to require more, not less, government spending, which is a hard sell in today’s Congress.

Connie Hedegaard

Hedegaard noted that the EU is going forward with cap-and-trade — a regulatory scheme in which governments set a declining cap for  carbon emissions, and then auction or give away permits to pollute, which can then be traded among companies — and that its market could soon be linked to others. She was on her way to a meeting with Gov. Jerry Brown of California to talk about linking California’s cap-and-trade regime to the one in Europe and to another under development in China.  “Is cap and trade too complicated?” she asked. “It might be for the Americans. it’s not for the Chinese.”

Rogers lamented the fact that, at least for the moment, the nuclear accident in Japan will slow down the development of new nuclear plants in the U.S.  He said nuclear is a safer energy source than coal, without even taking climate change risks into affect. “Nuclear is clearly part of the climate solution,” he said.

The session flew by quickly, and I neglected to thank all four panelist for the time, energy and brainpower they have all devoted to trying to do something about the climate threat. I wish that together we’d come up with better answers to the question of  “where do we go from here” but it occurs to me now that that was too broad a question.

A better question might have been, how do we make the environment a bipartisan issue again? Or, how can  “greens” engage with Republicans around climate? Because until that happens, environmentalists will continue to play defense in DC. I had a brief chat about this at Brainstorm Green with the rarest of creatures, a moderate Republican–Theodore Roosevelt IV–and I hope to address that questions soon.

Bob Langert worked in logistics for McDonald’s in the late 1980s when he was asked to take on a “temporary” six-month assignment to get chlorofluorocarbons out of the company’s clamshell packages.

Twenty years later, Bob has worked with WWF and Conservation International on marine stewardship and sustainable beef, spent a decade with Temple Grandin dealing with animal welfare issues, visited chicken farms and slaughterhouses, picked tomatoes with migrant workers in Florida, lectured on sustainability in China and taken a nine-day raft trip down the Amazon River with his pals at Greenpeace.

“I never, ever imagined this,” Bob said. “To have the good fortune to do this work, and make a difference in the world is beyond my expectations.”

I interviewed Bob, who is vice president for corporate social responsibility, at McDonald’s, today at the State of Green Business Forum in Chicago. We talked about what he’d learned about working with NGOs, his accomplishments, frustrations and whether selling hamburgers can be “green.”

Here are a few highlights:

A pioneering partnership: Langert’s work with packaging led to a partnership with the Environmental Defense Fund, which ruffled feathers in the corporate world and the environmental community.

“Fred Krupp [EDF’s chief] was a visionary back then,” Bob said. “It was not politically correct to work with big companies.”

EDF’s crew did a shift working in a McDonald’s, and proceeded to help with dozens of initiatives—from trimming the size of straws to using recycled paper in napkins.

Recalled Bob: “We didn’t spend one penny more. We saved millions and millions of pounds of packaging and costs.”

The future of fish: McDonald’s joined with the WWF to develop guidelines for the companies that supply its fish. What’s the business case, I asked, for investing corporate time and money in sustainable fisheries?

“Assured supply,” Langert replied. “The guy in charge of buying fish for McDonald’s, he was really concerned with being able to buy fish 10 or 20 years from now….The No. 1 job of everyone in supply chain at McDonald’s is to make sure we have stuff on the menu tomorrow.”

This kind of long-term thinking—so rare in big public companies—is a key to sustainability.

Picking tomatoes: When McDonald’s was urged to support efforts by migrant workers in Florida to win better wages, Langert worked side by side with the pickers. “ I couldn’t keep up with people half my size,” he remembered. “Females doing the work all day long in the sun and you see the living conditions which are not good at all.” Just last month,  the workers hashed out an agreement that should bring them higher pay.

Bears and the Amazon: When Greenpeace protesters dressed as chickens picketed a McDonald’s in London, accusing the company of destroying the Amazon, Langert’s first job was to calm down his colleagues.

He recalled saying: “Let’s not get all in a tizzy about their tactics. Greenpeace doesn’t have an advertising budget, so they had to use McDonald’s to get the word out. Let’s look at the issue.” The allegation was that tropical forest was being cut down to grow soy to feed chickens in Europe that became McNuggets.

When he asked trusted partners at Conservation International and WWF about the charge, he decided Greenpeace had a point. He approached the group and, before long, McDonald’s, Greenpeace and big suppliers like Cargill had agreed to stop buying soy from deforested land.

The raft trip came later. “We spent nine days—four of us from McDonald’s, four of us from Greenpeace, to get the lay of the land. I gave up a Chicago Bears Superbowl game to go so that tells you where my passion is. Anyone who knows me knows that besides my family and my faith, it’s the Chicago Bears.”

Langert’s to-do list: He’d like to find new ways to engage consumers in McDonald’s sustainability work. The company serves about 64 million people a day.

He also wants to do more to reduce the environmental impact of the company’s 33,000 stores, most of which are  owned and operated by others. “Energy’s a big issue for us,” he said. New initiatives are on the way, he hinted.

The problem with burgers: Because beef has such a big environmental footprint, I asked Bob how he could reconcile the company’s desire to grow—and sell more beef—with its environmental ethic. I told him that my rabbi, Fred Dobb, has said that one of the easiest things people can do to help the planet is to eat less beef, and asked if McDonald’s would try to wean its customers away from Big Macs.

“I’d like to talk with your rabbi,” Bob replied. He acknowledged the beef production has a big footprint, but said that “at the end of the day, we’re going to give people what they want. We’re going to do it in a good, responsible, clean, safe way. We’ve tried veggie burgers. They hardly sell at all. The day we can sell 500 a week in a restaurant, they’ll be on our menu forever and ever. I don’t have angst. You’ve got to face the realities of the world. And the reality of the world is that people eat protein from livestock and meat. Nothing wrong with that from my moral compass. I respect others that have a different moral compass. It’s our job as a company to make things better, though. We’re starting on that path–working with WWF on sustainable beef. That’s the  next step.”

Certainly McDonald’s offers choices to those who would prefer to avoid beef. Hey, the company even gave out pedometers and yoga CDs a few years ago to encourage people to be more active. But…given the climate crisis and the obesity crisis, maybe the next step ought to be to encourage those 64 million customers to make choices that are healthier for themselves and for the planet.

Nat Keohane

In a blogpost the other day (Cancun can’t: Ten reasons why the climate talks will fail), I devoted a paragraph (see below) to what could have been a longer critique of the way environmental groups tried to sell legislation to limit greenhouse gas emissions as a jobs program. I was reflecting my sense that green groups, in an effort to get cap-and-trade through the Senate during a recession, had latched onto a convenient but specious argument about “green jobs” that polled well, instead of trying to make what was a politically more-challenging argument: That we ought to adopt climate protection, despite its  modest short-term costs, because it’s important to protect the climate. Let me add that this question of political messaging isn’t an either-or; of course the green groups talked about climate along with jobs, and energy security, and any other semi-reasonable claim they could make on behalf of cap-and-trade.

But the debate, it seemed to me, was not as honest as it could or should have been. One word that rarely appears in any messaging from the green groups is “sacrifice”–even though doing the right thing about climate will require some short-term sacrifice. Another word you don’t hear much is “moral.”

In any event, I singled out Environmental Defense as a proponent of the green jobs argument. I did so because I remembered TV commercials like this one from EDF which says “Carbon Caps = Hard Hats,” and leaves viewers with the impression that cap-and-trade is a jobs creation program. I could have just as easily cited the Natural Resources Defense Council, Sierra Club or the Apollo Alliance (“working to catalyze a clean energy revolution that will put millions of Americans to work in a new generation of high-quality, green-collar jobs”).

Today, two economists who work at EDF — Nat Keohane and Gernot Wagner — posted a very useful response to my blog at EDF’s excellent Market Forces blog. I’ve posted it below–note in particular the Peterson Institute study which shows that carbon caps would create some (green) jobs and eliminate other (brown) jobs.  In a phone conversation, Nat told me that he was disappointed in my comment because EDF has been extremely careful not to oversell the green jobs argument–certainly more careful than opponents of climate regulation who made wildly  overstated claims that carbon caps would kill millions of  jobs. He’s got a point, although EDF’s political messaging around cap-and-trade was, inevitably, not as nuanced as the writings of its PhD. economists. I’m hoping to have a conversation with Nat and Gernot about “lessons learned” and  “where-do-we-go-from-here” before long.

Marc Gunther lists ten reasons why “Cancun can’t.” We won’t go into his other nine points here, but number three on the list hit home:

Environmentalists have been disingenuous about the climate issue. They’ve argued that regulation of carbon dioxide will create green jobs and grow the economy. Typical is this graphic from Environmental Defense. (“Get a step-by-step picture of how a carbon cap will spark new jobs, lift the economy and clean the air.”) Uh, no. Most economists agree that dealing with global warming will entail short term costs. (See Eric Pooley’s excellent analysis at Slate.)

Talking about jobs is one of the most difficult things to do well in the arena of climate policy. The jobs issue is highly politically charged—and for good reason, given the state of the economy. But it struck us as unfair for Marc to use EDF as his bête noire.

To begin with, the graphic that Marc links to doesn’t make the claim he ascribes to it. We weren’t saying that climate policy was a free lunch. What we were pointing out was that doing something about climate can also create good jobs in some unexpected places. More on that in a minute.

Gernot Wagner

We have bent over backwards to be as balanced and rigorous as possible in our assessment of the economics of climate change.

This turns out to be perfectly illustrated by Eric Pooley’s analysis—the same one Marc links to.

Eric’s indeed excellent analysis makes two points:

First, there is a broad consensus that the cost of climate inaction would greatly exceed the cost of climate action.

That’s the main, often-forgotten point because it seems so obvious: “it’s cheaper to act than not to act.”

We should really stop here and reflect on that for a second. Many—if not most—economists do, in fact, agree on that statement and have for a while.

But that’s not our point here, either.

Small but positive

Eric’s second point concerns the cost side of the ledger. The irony here is that Eric cites our analysis as highlighting that the costs of reducing emissions will be real, but small:

The second area of consensus concerns the short-term cost of climate action—the question of how expensive it will be to preserve a climate that is hospitable to humans. The Environmental Defense Fund pointed to this consensus last year when it published a study [PDF] of five nonpartisan academic and governmental economic forecasts and concluded that “the median projected impact of climate policy on U.S. GDP is less than one-half of one percent for the period 2010-2030, and under three-quarters of one percent through the middle of the century.”

That’s a mouthful.

In short, yes, the best economic studies show that there will be a cost to climate action. The costs are so small that they often fall within the general noise of model predictions, but they are there. There’s no denying that, and we never have. And yes, it was a much-cited EDF study [PDF] that makes this point, as well as a more recent update [PDF].

Just to be clear: Marc points to us as proponents of the “free lunch” theory, and then points to Eric as the best source on the costs—while Eric actually cites us as fairly and accurately surveying the available evidence on costs.

So did we contradict ourselves? Uh, no.

There is no contradiction between the following two assertions:

1. There will be modest short-term economic costs associated with reducing emissions (although those will be much smaller than the economic costs of not reducing emissions!); and
2. Policies to reduce emissions, like a cap-and-trade program, will lead to job creation.

“Green jobs”…

One simple reason that there’s no contradiction is that there is an important distinction between gross and net job creation.

The EDF graphic Marc links to focuses on gross job creation: investments in low-carbon energy sources and energy efficiency will create jobs.

The fact that climate policy will create jobs in some sectors is an important point in itself—simply because there have been such strong and exaggerated claims by opponents of climate policy that it will be a “job killer.” Like any major policy, comprehensive climate legislation would increase employment in some areas even as it decreased employment in others.

And jobs increases might well come in sectors where you wouldn’t expect that to happen. Consider the two examples our graphic mentioned: the labor needed to retrofit buildings to make them more energy efficient, and the 250 tons of steel needed to make a wind turbine.

So why do macro-economic models still show small positive costs to the economy?

…and economic models

First, economic models are much better at capturing changes to existing industries than the emergence of new ones. That’s not because the modelers are deliberately ignoring those new industries, but because they are, by definition, much harder to include in models of the economy—which necessarily have to be based on current and past experience.

The result is that macroeconomic models systematically miss exactly the kind of changes that would yield more employment because we are transitioning to a lower-carbon world.

There’s a more general point here as well: economic models are notoriously bad at anticipating technological innovation. For an issue like climate change, where policies are measured in decades and where technological developments will be crucial, this means that economic models are almost certain to overestimate the long-run costs of reducing emissions.

While we are at it, it’s worth pointing out that many macroeconomic models don’t actually attempt to model jobs. In fact, they generally assume full employment no matter what happens, which doesn’t leave any room for estimating increases or decreases in jobs as a result of specific policies.

Recession economics

This leads to a fundamental point that goes to the very nature of most economic models. They assume the economy is humming along just beautifully.

These models are designed to maximize economic output given all the current assumptions around the economy. So pretty much any policy change is going to reduce GDP.

That makes sense from an economic point of view if you think that the economy is going at full speed to begin with. It clearly doesn’t make sense if the economy is stuck in a recession.

Now you want more investments precisely because you want to boost jobs and GDP.

What about jobs?

Given all these difficulties in modeling jobs, it’s hard to find a study that does this well.

A recent Peterson Institute study by Trevor Houser, Shashank Mohan, and Ian Hoffman is one of the first to fill in the missing pieces on jobs. It comes up with a total gain of 200,000 jobs by 2020 under the American Power Act, the comprehensive energy bill debated in the Senate.

Again, we shouldn’t put our full faith into any single economic study—something our own study goes to pains to explain—so we should clearly take the specific jobs figure with a grain of salt.

But it is still instructive to look at the logic of how Houser et al. derive their number:

Macroeconomic effects and reduced demand for fossil fuels are indeed negative. Higher energy prices also decrease employment. Most of these effects, however, are compensated for by investing in energy efficiency and other clean energy measures and also by refunding money back to consumers directly. These kinds of refunds were central to the Waxman-Markey bill that passed the House in 2009 as well as the legislation considered in the Senate.

Peterson adds another important category largely missing in most macro models: clean energy deployment—the low-carbon technologies that a transition to cleaner forms of energy generation would spur.

Small costs, large benefits

Will a transition to a clean energy future be a free lunch? No, there will be costs—small and manageable costs, but still costs. No pain no gain.

The answer to the employment question is a bit less clear. The Peterson Institute study is worth a look: 200,000 additional jobs by 2020 matters to those employees, but, first, it’s only one study, and, more importantly, it’s negligibly small when compared to today’s U.S. labor force in the order of 130 million employees.

Pending further studies, by far the best estimate for overall employment effects of any sensible climate policy is zero. Some dirty, old industries will lose. Clean, new industries will gain.

In the end, though, we cannot talk about any of this without returning to point #1: The costs of not acting dwarf the costs of any sensible climate policy. Environmental groups have been saying that for years, and we won’t apologize for that.

2010 has been a bad year for climate, and an even worse year for climate policy. But for that very reason, it’s been a good year for geoengineering—the notion that humans can deliberately manipulate the climate and cool the earth.

Official Washington is starting to take geoengineering seriously: The Government Accountability Office and a bipartisan task force of experts convened by the New America Foundation will soon report on geoengineering. Bill Gates has invested in geoengineering research. Environmental groups–notably Steven Hamburg, the chief scientist of Environmental Defense Fund–have engaged in the conversation. On a parochial note, at FORTUNE’s Brainstorm Green conference last spring, Stewart Brand talked about why geoengineering is important, to a rapt audience that included Bill Ford and Lee Scott.

David Keith

David Keith, a leading scholar of geoengineering who administers Gates’ $4.6 million grant with  with Stanford climate scientist Ken Caldeira, also spoke at Brainstorm Green. So I was pleased to have a chance to reconnect with him at the excellent annual conference run by the Society of Environmental Journalists at the University of Montana in Missoula.  I expected him to be pleased by the momentum gathering behind  geoengineering lately, but I was wrong.

“I think things are moving too fast,” David told me. “Research programs can be killed by spending too much money too fast.” Besides, he said, people need time to wrap their head around geoenginnering. (Juliet Eilperin of The Washington Post recently described it as playing God with the weather. ) “This is a topic—the first time people hear about it, they have wild ideas,” he said.

As I’ve written before – see this, this and this – geoengineering raises a host of thorny ethical, political and governance issues. Who gets to control the earth’s thermostat? Who decides if and when to deploy geoengineering techniques? Which should be used?

At SEJ, David was on a panel with Dane Scott, director of the center for ethics at the University of Montana, and journalist Eli Kintisch, author of a recent book about geoengineering called Hack the Planet. They all seemed to agree that the technology to cool the earth now exists—either by reflecting sunlight back into the sky, an approach known as solar radiation management, or by capturing carbon dioxide from the air. (Keith has a for-profit startup called Carbon Engineering designed to do just that.) They also agreed that the moral ethical issues surrounding geoengineering are daunting.

All also said the topic deserves further research. Small government-funded research projects, using computer models, are underway in Germany and the UK. Governments, and not business, should be the forum for research, particularly when it comes to solar radiation management which would have global impact.

“This giant leverage over the planet is a dangerous thing, and it shouldn’t be in private hands,” Keith said.

That’s not an idle worry. One of the most salient facts about geoengineering is that it will not cost much, especially when compared with the costs of reducing carbon emissions by switching away from fossil fuels, which have been estimated at about 1% of global GDP per year.

By contrast, geoengineering “is horrifically cheap to do. It now looks like you could alter the global climate for a couple of billion of dollars a year,” Keith said. (Less, in other words, than the cost of bailing out GM or running the National Park Service for a year.) “You can imagine scenarios in which small island nations got tired” of waiting for the major powers to act to curb global warming and took matters into their own hands. Or one where India or China, threatened by drought, acted unilaterally.

Perhaps not surprisingly, the talk about geoengineering has fed into conspiracy theories about how governments are already manipulating the climate, or worse. (Try googling chemtrails.) Keith has received hate mail, and Gates’ involvement has fueled suspicions that a cabal of the powerful is hatching secret plots.

Partly in response, Gates, Keith and Caldeira have decided to be much more transparent about how they are spending the research money. They’ve created a web page that explains where Gates’ money is being spent. They also make the point that they believe

that society should be spending many tens-of-billions of dollars per year developing and deploying affordable, scalable, near zero-carbon energy sources.

This is partly because no one claims that geoengineering will be able to solve all our climate-related problem. It has no effect, for example, on the problem of ocean acidification, which will get worse until greenhouse gas emissions are curbed. An unintended but predictable consequence of geoengineering is likely to be changing rainfall patterns. And, as always, we don’t know what we don’t know.

You can understand why this scares people. Probably, it should. Big ambitious technology projects works well until they don’t. Think the BP oil spill or the Challenger disaster.

So why go forward at all? Because, as I said, it’s been a bad year for the climate and worse year for climate policy.

Time to get ready for Plan B.

Fred Krupp is like a Timex watch.

He takes a licking but keeps on ticking.

Those of you old enough to remember the commercials when Timex tortured its seemingly indestructible watches, using high divers, water skiers, dishwashers, jackhammers, and the propeller of an outboard motor, know what I mean.

Except that the instruments of torture that Fred has endured as he has labored, literally for decades, to get climate change legislation through Congress include coal-state Senators, Republican obstructionists, Washington trade associations, a largely indifferent press corps  and left-wing green groups that accuse the Environmental Defense Fund, which he leads, of selling out to big business.

If nothing else, you’ve got to admire his persistence.

It can’t be easy to calmly discuss the need for cap-and-trade legislation and the challenge of getting 60 votes in the Senate while oil is fouling the Gulf of Mexico, global temperatures are rising and atmospheric concentrations of carbon dioxide are reaching dangerous levels.

Yet that’s Fred–calm, rational, pragmatic and seemingly undeterred by the fact that there appears to be only an outside chance that climate-change legislation will be passed this year, that next year looks a whole lot worse and that the congressional clock is ticking down.

Today, EDF invited reporters to the Washington offices of the Glover Park Group to hear Fred and Steve Cochran, the group’s chief lobbyist, make a last-ditch plea for a scaled-back bill, one with an emissions cap that initially covers only the utility industry.

They conceded for the first time publicly that EDF won’t get the economy-wide cap that it really wants and also, for the first time, gently criticized  President Obama and urged him to back up his climate-change rhetoric with action.

First, the EDF crew admitted that for now we’re not going to get a cap on carbon emissions that covers most polluters, even though that’s what the science of climate change says is needed and that’s what the green groups and the business-backed U.S. Climate Action Partnership, have been seeking for the past three years.

“A comprehensive, economy-wide cap and trade system is not going to be passed by the Senate,” Fred said. A cap that covers the coal-spewing utility  industry would impact  about 40% of the U.S.’s carbon output.

Second, he said, the only way we’re going to get even an admittedly insufficient bill will be if President Obama and the White House staff support one and put their shoulders behind it. This, regrettably, the administration has yet to do.

“We need the president to lead,” Fred said. “For all the good things he’s done, which we acknowledge, he’s got to roll up his sleeves and put together a bill.”

If the president and his staff get deeply involved–as they eventually did with the stimulus package, health-care legislation and financial industry regulation–a climate bill is “absolutely doable,” Fred said.

Neither of those things can have been easy to say–the first is admitting a sort of defeat, the second is admitting disappointment in a key ally.

Indeed, even while calling upon Obama to act, Fred and Steve went out of their way to praise him.

“This is the first time in history we’ve ever had a president who cared so deeply about climate change, and he has done an awful lot, more than any president has done before,” Fred said. They cited strong EPA mileage standards for cars, money for clean tech in the stimulus package and last month’s Oval Office speech on energy and climate.

“But the truth is we need him to do one more thing,” Fred continued. “We need him and his staff to directly engage in the politics and policy to actually produce a bill.”

“If he doesn’t do that, without his leadership, then everything he has done so far will lead to nothing.”

While EDF has proven willing to compromise, the group won’t support legislation without a carbon cap. After reading this thought-provoking argument from my friend Jesse Jenkins of the Breakthrough Institute, I asked whether EDF could accept a package of bipartisan measures that include renewable portfolio standards, energy efficiency rules, a broad electric-car initiative, money to stimulate clean energy research and “cash for dirty-coal-plant clunkers” program, absent a cap.

No, they replied, because if the U.S. doesn’t limit its CO2 emissions, it will be impossible to persuade other big countries like China to follow. Besides, an EDF analysis [PDF, for download] of the energy-only Bingaman-Murkowski bill that came out of a Senate committee and included some of those measures showed that it would actually permit emissions to increase over the next decade or so.

“What we absolutely will insist on is an enforceable, declining limit on carbon pollution coming from these big smokestacks,” Fred said.

For all the setbacks of the past couple of years, and even this week–several reporters mentioned that the White House now seems to be shifting its focus to immigration–Fred won’t allow himself to believe that the long crusade to stop global warming will fail.

Repeating a mantra of all the green groups, he said climate-change legislation is inevitable.

“There are a lot of reasons in this world to be cynical,” he said.  “But are you so cynical as to believe that human beings are going to pollute the planet to the point where we can’t survive anymore?”

Well, no, but it’s getting harder all the time to see how we–not just the Congress, but China, India, Russia and the rest of the world–are going to act quickly and firmly enough to do what needs to be done to curb global warming.

Fred and those Timex watches may be indestructible but human life on this earth, alas, is not.

So much has been written about the disaster in the Gulf that I’ve felt no need until now to add my two cents. But I’ll ask you to check out this video from the Environmental Defense Fund which uses music and images to get to the heart of the issue. Better, I might add, than our president did last night.

Please, let’s not allow this crisis to pass without taking action to cap carbon emissions and promote clean energy. This is about our legacy.

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Here are a few words about the video from David Yarnold, the executive director of Environmental Defense Fund: