Andrew Steer: An economist atop WRI

“I’m an economist,” said Andrew Steer. “I’m not an environmentalist by training.”

This is a good thing because, unlike some U.S. environmental leaders, Steer, who is the new president and CEO of the World Resources Institute (WRI), is willing to deliver some straight talk about economic growth, environmental protection and the costs of clean energy. He’s also committed to WRI’s global, fact-based, business-friendly approach to addressing big environmental problems.

Over lunch the other day, Steer met with a group of reporters for the first time since joining WRI last month. A 60-year-old Brit, he is only the third president of the Washington-based nonprofit, following James “Gus” Speth, a lawyer and academic, and Jonathan Lash, a lawyer and former regulator who is now president of Hampshire College. By contrast, Steer spent most of his career at the World Bank, working in international development and as the bank’s climate change envoy.

While living in Vietnam, Steer saw first-hand how the past two decades have brought material progress along with environmental degradation. Not one of the bank’s 100 Vietnamese employees owned a car when he arrived in Hanoi in 1997, he told us. Today, nearly all do. They are better off, but the city is more polluted and global greenhouse gas emissions continue to rise.

“Per capita income in developing countries is twice what it was. More people have been lifted out of poverty in the past 20 years than in the prior 100 years,” he said. “But the price that we’ve paid, in terms of environmental debt, if you will, has been much too high. We have incurred a massive environmental debt.” [click to continue...]

Ted Roosevelt is lonely

I was headed out for a run one morning in April during FORTUNE’s Brainstorm Green conference in Laguna Niguel, CA, when I spotted Theodore Roosevelt IV jogging on the beach. Having a good run? I asked him. Yes, he told me, and he’d been swimming, too, in the big waves that crash onto the beach and draw hordes of surfers every day.

Legacy matters, I guess. Ted Roosevelt, as he’s known, is the great-grandson of our 26th president, Theodore Roosevelt, who was famous for his love of what he called “the strenuous life“—he boxed, rode horses, fought in the Spanish-American war, went big-game hunting and explored the Amazon. Ted Roosevelt, who is 68, played football at Groton, played ice hockey and rugby and rowed on the lightweight crew at Harvard; after graduation, he served two tours of duty as a Navy SEAL in Vietnam.

Like TR, Ted is a Republican, a conservationist and an independent thinker–which makes him part of a dying breed of moderate WASPy Republicans who are fiscally conservative and socially progressive.

Ted argues that environmental protection is good for America’s economic growth and strength. He describes climate change is “this century’s greatest challenge.” He believes that nature is worth preserving, not just because of its usefulness to humans but for its own sake. [click to continue...]

Jonathan Lash is leaving World Resources Institute

Jonathan Lash, one of America’s most respected environmental leaders, is leaving the World Resources Institute to become president of Hampshire College, a small liberal arts college in western Massachusetts.

Lash, who is 65, has been president of WRI for 18 years. Only two people have led the Washington-based nonprofit: He succeeded Gus Speth, who ran WRI for 10 years.

WRI is often described as an environmental think tank, and, in fact, it is trusted as an independent, nonpartisan, science-based organization. So when General Electric’s Jeff Immelt announced the company’s EcoMagination initiative back in 2005, Lash was by his side.

But WRI also gets involved in the nitty-gritty of environmental problems around the world. Its work on establishing the value of ecosystems helped the nation of Belize protect its coastlines. Its expertise in public transport has helped build bus networks in India and Brazil. It helped developed the protocol used by U.S. government agencies to manage and reduce their emissions. WRI’s got a dozen people in China. This isn’t glamorous work, but it matters.

In an email to staff, Lash wrote: [click to continue...]

WRI: Beyond the beltway, some bright spots

“It was a tough year for the environment, and a tough year for environmentalists, especially in the U.S.”

So said Jonathan Lash, the CEO of the World Resources Institute, one of Washington’s most respected environmental groups, as he began his annual look at the state of the environment in the new year.

2010 was indeed a dismal year–marked as it was by record warm temperatures, natural disasters linked to climate change, the BP Deepwater oil spill, the Massey mine disaster and, most importantly, the defeat of  climate-change legislation in Congress.

Given today’s political realities, it was hard for Lash to summon much optimism about 2011,  at least when it comes to U.S. policy. But he was able to identify pockets of progress in the business world and elsewhere–particularly in China–that could, over time, drive the decarbonization of the global economy required to curb climate change.

Policy will be needed–specifically a price on carbon, in some form–but if and when governments finally manage to peenalize companies for their emissions,  they will  set off “an avalanche, a shift that will go much faster than policy requires” as businesses compete in a low-carbon world.

[click to continue...]

Your forgotten business partner: Nature

Most companies take for granted the fact that they are utterly dependent on a healthy planet. Nature provides not just the air we breathe and the water we drink, but an array of products and services to business—from the paper on which memos are printed to the sequestration of carbon in forests to the wild fish people eat for lunch.

450px-Forest_in_summer

The jargon-y name for these benefits is ecosystem services. Now a group of forward-thinking companies and nonprofits are asking:

What are ecosystem services worth?

How can companies protect them?

Should business pay for the services?

“Ecosystems and eco-system services do matter to the bottom line,”says Craig Hanson, director of the people & ecosystems program at the World Resources Institute, a Washington-based environmental think tank. “Nearly every business, to some degree, depend on ecosystems for its own profitability.” [click to continue...]

Kites, Coal and Waxman-Markey

If nothing else, the Waxman-Markey climate change bill is keeping the think tanks and Washington lobbyists busy. I’ve been surveying analyses and comment from critics including The Heritage Foundation (“a massive energy tax in disguise that promises job losses, income cuts, and a sharp left turn toward big government”), former Lotus CEO Jim Manzi in The National Review (“a terrible deal for American taxpayers”), the U.S. Chamber of Commerce (“expensive, complicated, regulation-heavy, domestic-only legislation”), The Breakthrough Institute (“may allow American emissions to continue to rise for up to twenty years”) as well as Greenpeace (“not strong enough to stop global warming”) and Friends of the Earth (“we have serious concerns and misgivings that prevent us from offering our support”). Now we are getting analyses of the analyses, such as the NRDC’s Laurie Johnson’s persuasive takedown of Heritage’s work. Lest you think that the climate-change bill lacks supporters, supporters last week released a list of backers that includes a broad swath of corporate America (GE, GM, PG&E, Exelon, Duke Energy, Shell, Starbucks and Nike), labor (the UAW, United Mineworkers, SEIU) and nonprofits (NRDC, Sierra Club, World Wildlife Fund, League of Women Voters, Consumers Union, National Wildlife Federation, etc.)

Inevitably, these analyses depend upon making numerous assumptions, stretching many years into the future, about trends and events that are inherently unpredictable:  GDP growth, energy supply, energy prices, geopolitical forces, the efficacy of domestic and international offsets and especially technology breakthroughs. What if Toyota, Ford or the Chinese company BYD quickly figure out how to build cheap electric cars? What if jatropha turns out to be an ideal biofuel? What if tidal  power or geothermal energy or something truly far-fetched — “clean coal,” maybe – turns out to be an affordable source of clean energy?

Or consider kites. Just the other day, I watched this mind-stretching TED talk by Saul Griffith of start-up Makani Power about the energy-generating power of high-altitude super-sized kites. Makani’s backers include Google, and the company is hard at work on Maui making kites that generate enough electricity to power several homes. (No word on whether Makani’s Hawaii office  is hiring.) “This is the dawn of a new age of kites,” Griffith says.  “This is a story about the audacious plans of young people with these dreams…I think we need to support all of the dreams of the kids out there doing these crazy things.”

makani_kite
What does Waxman-Markey have to say about kites? Nothing, it turns out. (No, I haven’t read the 932-page bill, but I did a search for the word kites) That’s actually a good thing. By contrast, the bill has at least 40 references to coal, as best as I can tell. According to this summary of the bill by House staffers provided by the tireless blogger and climate expert Joe Romm, the bill provides an estimated $60 billion in investments in carbon capture and sequestration technology and it uses a mix of “regulatory requirements and financial incentives” to ensure that new coal-fired power plants will operate with carbon capture and sequestration (CCS) technology. For example, Waxman-Markey decrees that…

Coal plants permitted between 2009 and 2015 lose eligibility for federal financial assistance if they do not retrofit CCS within five years after commencing operations; if they do not retrofit CCS by this date, they must retrofit CCS by no later than 2025 without federal financial assistance. The 2025 retrofit deadline is accelerated if four gigawatts of electricity generation is deployed with CCS before 2025; it may also be extended by EPA by up to 18 months on a case-by-case basis.

This is the kind of thing that worries me about Waxman-Markey in particular and about the willingness of the Obama administration more generally to manage so much of the economy—energy, autos, financial services. It’s hard, nay, impossible to know if CCS is a smart, workable and affordable technology or when, if ever, it should be deployed. Maybe kites are a better idea. Maybe not. But should the government decide?

It’s not just clean coal. As I wrote last week, Obama & Co. are ready to place bets on which companies and regions are likely to develop battery technology for electric cars. (See Uh-Oh: Obama’s battery gold rush).

Here’s another example of questionable industrial policy. This is the headline from an Energy Department press release that landed in my mailbox last week:

Secretary Chu Announces Nearly $50 Million of Recovery Act Funding to Accelerate Deployment of Geothermal Heat Pumps

Then there was this news from a company called Hearth and Home Technologies, a manufacture of wood stoves, pellet stoves and fireplaces which reported, approvingly, that

Under the 2009 Economic Stimulus legislation, U.S. homeowners who purchase a 75-percent efficient biomass (wood or pellet) burning stove, fireplace or fireplace insert and place it into service in their home during 2009 or 2010 can receive a 30-percent tax credit for costs incurred, up to $1,500.

Do you see the problem here? Just to be clear, I don’t have a position on biomass stoves and geothermal heat pumps. I just don’t think the government should have a position either.

To be sure, we need an energy revolution. Nothing less than the transformation of our fossil fuel-based economy into one that is cleaner and greener will solve the global warming crisis. Most important, we need to do whatever we can to spread that energy revolution to India, China and the rest of the developing world, because if we go green and they don’t, well, we’re still cooked. But how do we get from here to there? With clean coal? Electric-car batteries? Heat pumps? Wood stoves? Kites?

The unfortunate answer is no one knows. Not the president, not Congress, not Nobel laureate and energy secretary Chu, not venture capitalists or energy company CEOS or Fred Krupp or Jeff Immelt or Joe Romm. Our energy and climate problems are knowledge problems, too. And the best way to solve knowledge problems – which is to say the best way to spur technology change – is to create conditions that get lots of scientists and engineers to work on them, invite lots of investors to place their bets on which ones will work and then test those ideas in the marketplace. By aggregating thousands of decisions, markets will help us figure out which of today’s technologies or which ones yet to be invented get us closer to the clean energy economy we need.

Mind you, I’m not arguing here that markets alone will do the job. Forceful government action is needed to reshape markets and drive the clean-energy evolution. As my blogging colleague Jesse Jenkins has argued (as part of a friendly debate we’re having at The Energy Collective and elsewhere over energy policy), federal actions laid the groundwork for numerous technologies, including as microchips, commercial aviation, personal computing, the Internet, nuclear power and the railroads.

The real question is, just what form should the government action take? I’m all in favor of government funding for basic research, like the defense-oriented communications research that eventually made possible the creation of the Internet. I’m not opposed to the government using its considerable purchasing power to stimulate markets for electric cars or renewable energy, as it did when it installed a big solar power plant at Nellis Air Force Base in Nevada. But when it comes to energy and climate, I’d prefer to see a policy that is strong, simple, transparent, flexible and neutral when it comes to making technology choices. Outcome-based, if you will. A policy that uses a light but firm touch to unleash the power of markets to drive change.

This is what cap-and-trade, the centerpiece of Waxman-Markey, was supposed to do. Cap-and-trade puts a price on carbon, which is a jargon-y way of saying that it corrects a market failure, namely, the fact that people who burn fossil fuels (i.e., all of us) are not currently paying the costs of emitting global warming pollutants into the earth’s atmosphere. Cap-and-trade is an appealing policy because it addresses the fundamental problem—the global warming pollutants that cause climate change—but it is scrupulously neutral about the solutions. A carbon tax is an alternative way to accomplish the same thing.

Now I understand that the carbon price that would be created by Waxman-Markey’s cap-and-trade scheme is unlikely to climb high enough quickly enough to reshape energy markets and spur new technology. The EPA estimates that the carbon price—that is, the amount that polluters will have to pay to emit a ton of carbon—will be $11 to $15 in 2012, $13 to $17 in 2015, $17 to $22 in 2020, and $22 to $28 in 2025. That’s only pennies (or dimes or quarters) at the gas pump, the experts say, not enough to start a revolution. This is why there is so much more loaded into Waxman-Markey, including renewable portfolio standards, efficiency standards, more than $190 billion (through 2025) in clean energy and efficiency investments, and so forth.

But if the carbon price created by cap-and-trade under Waxman-Markey is insufficient, why not, then, raise the price or find another market-friendly way to promote clean energy, such as with a revenue-neutral $50-a-ton carbon tax or a hefty revenue-neutral gasoline tax, with all the proceeds being returned to American taxpayers in the form of lower payroll taxes (or rebates for poor or elderly people who don’t pay taxes.) That would reward consumers who live in smaller homes, use mass transit or drive drive smaller cars, and penalize those who choose to consume a lot of energy. The right price signals will do wonders to change people’s habits, as they did when gasoline prices spiked last year in the U.S. and as they have in Europe where gas taxes are high. Price signals are, quite simply, a more efficient way to promote change that prescriptive regulations: For example, ven under the Obama administration’s new CAFÉ standards for cars, U.S. cars in 2016 will be only about as efficient as European cars are now, Bryan Walsh reports in Time. That’s the power of markets.

Having said all that, Waxman-Markey may, unfortunately, be the best we can do in the current context. The environmental movement is politically weak. Coal-state politicians need to be won over. Neither the president nor Congress seem ready to begin a serious conversation with Americans about taxes, even those that are revenue neutral. Although some green groups say the bill won’t do nearly enough to address global warming, I was heartened last week to see that the World Resources Institute, a widely-respected NGO, released its own study arguing that the bill, as it now stands, would reduce GHG emissions by 28 percent below 2005 levels by 2020 and 75 percent below 2005 levels by 2050. See the chart below.

But I can’t help but feel that there’s going to be an enormous amount of waste and inefficiency along the way.

larsen_chartpreview

Poznan: It’s all a pregame show

Strip away the mind-numbing complexity of this week’s high-level, multinational negotiations over a UN global climate change treaty and you are left with a simple question, no pun intended: Whose ox will get gored?

These talks are supposed to pave the way (oops, another bad pun) for a global climate agreement to succeed the Kyoto protocol, which expires in 2012. The goal—ambitious, by all accounts–is to get the new deal in place by December 2009, when the next big UN conference will convene Copenhagen.

The problem? No country wants to regulate itself in a way that could leave its economy, particularly its polluting industries, at a competitive disadvantage, even in the short term.

So far, the EU and Japan have led the way by regulating their own greenhouse gas emissions and signing onto Kyoto. The U.S. has lagged, to put it kindly, but President-elect Obama supports a federal cap-and-trade bill to dramatically reduce U.S. emissions by 2050. (That’s the cap part of cap-and-trade.) Whether he can pull it off in this dismal economy is anybody’s guess. Putting a price on carbon will raise energy prices, but it will also spur innovation and, potentially, create jobs in the clean energy and energy efficiency sectors.

The thing to remember is that none of this will matter unless India and especially China can be persuaded to come along. See the chart below.

I talked about these issues today with Jennifer Layke of the World Resources Institute, and (briefly) with Manik “Nikki” Roy of the Pew Center on Global Climate. Both expressed hope that Obama can simultaneously move forward with domestic regulation and engage in the global climate talks, in the way that the outgoing Bush folk have not.

“That’s the big challenge,” Layke says. “A new administration will barely have its appointments in place by the time that people need to be reviewing what the U.S. has to say about a global treaty, probably this spring.”

The global treaty doesn’t have to be done by December 2009 but “having the time frame slip when there is so much riding on it is less than ideal,” Layke says.

What no one wants to see is a repetition of Kyoto—where the Clinton administration agreed to the treaty in 1997 but never obtained passage from Congress.

It must be said that all of this – even a U.S. cap-and-trade bill – amounts to pregame show before the real action begins: the development of India and China. Those two countries and the rest of the developing world simply cannot develop energy-intensive, carbon-intensive industries based on the western model, or we’re cooked. China is building one coal plant a week at the moment, I’m told, and that is literally a quite literally disaster in the making.

So how to bring China along? Lots of ideas are on the table, a mix of carrots and sticks. The nice-guy approach includes work the Bush administration has done to encourage technology transfer, as part of Hank Paulson’s strategic economic dialogue with China. (Details about the environmental work are here.) The World Bank, again urged on by the U.S., has created a clean technology fund to incentivize the Chinese and others to reduce their emissions. The EU carbon trading scheme includes a provision known as the Clean Development Mechanism (which I wrote about in this long FORTUNE story) that allows western polluters to pay for projects in poor countries to offset their emissions.

Then there’s the stick. Some people want the U.S. to include what amounts to a border tax on pollution as part of its cap-and-trade law. Its purpose, economists say, would be to prevent what’s called “leakage” of production and jobs to foreign countries like China and India that have not imposed their own GHG regulations. So far, China and India and the rest of the developing world have resisted all global entreaties to impose a cap on their emissions. They argue, quite logically, that they pollute far less that the U.S. and EU, at least on a on a per capita basis. See:

Jennifer Layke says the choice between a carrot-and-stick is a false one. “You’re probably going to need both,” she says. Nikki Roy doesn’t like the idea of border controls. “We’re not going to intimidate China,” he says.

Besides, the U.S. simply lacks the moral authority to lecture the Indians or Chinese or anyone else about climate change. Remember, it’s been 11 years since Kyoto was negotiated and we’ve mostly stayed on the sidelines. It would be like me not cutting my grass for a decade or so and the lecturing my neighbor about lawn care. I’ll ask Paula Dobriansky, who’s leading the U.S. delegation here, about this tomorrow.