After Stern: let's get technical

John Elkington
2 November 2006

"I'm John Elkington - and I'm an environmentalist." Welcome to a meeting of Environmentalists Anonymous in November 2027. Far-fetched, perhaps, but if you have even skimmed - a marathon task in itself, due to the length and wealth of technical detail - the Stern Review's report on the economics of climate change it is not hard to imagine a future in which environmentalism is a marginal, even proscribed activity.

As the climate begins to rock on its hinges and nation-states and regions jockey for position in a series of bitterly-fought rearguard actions, much of humanity could all-too-easily switch to its default setting: when in trouble, blame others. And who might be the principle target, for a while at least? Don't be surprised if it is environmentalists.

Their antics, the powers-that-be might conclude, misled us into thinking that this was just one more excuse for media-friendly stunts - rather than a systemic challenge that could stunt the global economy in a rerun of the "great crash" almost a century earlier. The Stern report, from the perspective of twenty years, would indeed be seen as a tipping-point - but for the greens.

The Stern Review on the Economics of Global Climate Change published its report on 30 October 2006. Its author Nicholas Stern, former chief economist at the World Bank, says:

"There is still time to avoid the worst impacts of climate change, if we act now and act internationally. Governments, businesses and individuals all need to work together to respond to the challenge. Strong, deliberate policy choices by governments are essential to motivate change.
But the task is urgent. Delaying action, even by a decade or two, will take us into dangerous territory. We must not let this window of opportunity close."

Also in openDemocracy on the Stern review and the climate-change debate:

Simon Zadek, "Accountability: the other climate change"
(31 October 2006)

Andrew Simms, "The climate-change choice"
(1 November 2006)

Let's get technical

It is uncomfortable to recall here that I wrote my first report on climate change - commissioned by the transatlantic arm of Herman Kahn's Hudson Institute - as long ago as 1978.

Kahn was one of the architects of the United States's MAD nuclear arms strategy, the acronym standing for Mutually Assured Destruction. My conclusion - that climate change was set within a few decades to become a driver of Mutually Assured Disruption (no, I didn't use that now-familiar phrase then) - wasn't at all popular at the time. "One minute you lot are warning us about the next ice age, the next about global warming", was a typical response.

But the honest assessment is that I failed, we failed, to get the world to switch on in a timely and effective way. And, to be honest, I'm not sure that the awe-inspiring Stern effort will manage the trick, either. Why not? Well, I suspect that some aspects of climate change are going to massively outpace our ability to respond.

The last time I visited the Woods Hole Oceanographic Institution (Whoi) on Cape Cod, I arrived thinking I more or less had the measure of the climate-change agenda. But I came away with my knees almost literally knocking. The Whoi work on climate was diligently scientific. It was also courageous, given the extent to which the George W Bush administration was breathing hellfire at anyone foolhardy enough to assert either that climate change is happening or that current models of agriculture and industry are among its key drivers.

But the implications of the changes observed in key components of the north Atlantic climate machine - the Greenland and Labrador heat-pumps and the Great Ocean Conveyor Belt - were genuinely shocking. At the time, the possibility that much of northern Europe might find itself plunged into Siberian conditions so fast, within a few decades, was still news to me.

But that's the nature of the planet we have chosen to live on. Clearly we make things worse, on occasion much worse, as Jared Diamond makes clear in his mind-altering book Collapse: How Civilizations Choose to Fail Or Succeed. As a long-time champion of transparency and accountability, I agree with Simon Zadek's call for these ideas to be placed at the centre of the agenda to help dig us out of the hole we find ourselves in. But the painful fact is that we can be as transparent as we like, we can exert every sinew to be good citizens - including good corporate citizens - and yet still fail in the central task of shifting the world onto a sufficiently low-carbon footing in time.

So what advice is the British government getting on all of this? Nicholas Stern, economist's economist that he is, is trying to retune political mindsets by demonstrating that climate change could wipe anywhere between 5% and 20% off GDP. But, sugaring the pill, he also is at pains to insist that these dark clouds can turn up shimmering silver linings. Markets for low-carbon technologies, he suggests, will be worth at least $500 billion - and perhaps much more - by 2050 if the world acts on the scale required.

The overall conclusion drawn is that climate change is the greatest market failure the world has yet seen. To redress the balance, Stern argues, three new forms of public policy are needed. The first is carbon pricing, through taxation, emissions trading or regulation, so that we are all faced with the full social costs of our actions. The aim: to build a common global carbon price across countries and sectors. Second, we need new types of technology policy to fuel the development and deployment at scale of low-carbon and high-efficiency products. And, third, we need to remove barriers to energy efficiency: informing, educating and persuading individuals about what they can do to respond to climate change.

A seismic shift

This is all very well, rather like the transparency and accountability wish-list. But even taken together, transparency, accountability and public policy only create the preconditions for change. The creative destruction of our high-carbon economies - and the development of the replacement industries on an appropriate scale - will be powered by the innovators who develop new thinking and technologies, and from the entrepreneurs who then turn those ideas and tools into new ventures.

After spending three decades of my working life trying to persuade big companies to embrace sustainability, it has become increasingly clear to me that most of these incumbents are locked in to high-carbon strategies by their mindsets, their business models and, most fundamentally of all, by financial markets which are constitutionally and increasingly myopic.

This seismic shift in my own mindset, which has been building since I began working with the World Economic Forum and the Schwab Foundation for Social Entrepreneurship in 2001, was given a major boost in 2006 when SustainAbility received a three-year, $1-million grant from the Skoll Foundation for Social Entrepreneurship to help build understanding of the need to evolve entrepreneurial solutions to our sustainability challenges. It received further significant support when I took part in a major gathering of venture capitalists in San Francisco earlier in the year, convened by the Cleantech Venture Network.

The Cleantech event attracted over 500 delegates, among them hundreds of venture capital (VC) players. For me, the most interesting session was led by two doyens of the VC domain, John Doerr and John Denniston of Kleiner Perkins Caufield & Byers (KPCB). We desperately need the inspiration and "impossible-takes-a-little-longer" thinking of such entrepreneurs - including social entrepreneurs - who are most likely to drive the innovation and creative disruption now needed to steer the global economy onto a more sustainable trajectory.

And they, in turn, require the help of venture capitalists, investment bankers, and all the other financial actors who will invest in, underwrite and hedge the next great wave of innovation, including "cleantech" - ranging from environmental cleanup technologies through solar photovoltaics to novel nanomaterials.

John Elkington is founder and chief entrepreneur at SustainAbility. He blogs at www.johnelkington.com

Also by John Elkington in openDemocracy:

"Why I'm going to Davos"
(16 January 2003)

"Biotechnology: the case for sustainability"
(20 August 2003)

"It's the system, stupid!"
(5 February 2004)

"Globalisation's reality check"
(7 September 2004)

Nicholas Parker and Keith Raab, co-founders of the Cleantech Venture Network, estimate that since 1999 around $9 billion has been invested in cleantech venture deals in north America alone. And north American demand for capital is estimated as likely to average $3.9 billion a year between 2006 and 2009. The current pace of deal-making puts cleantech ahead of the semi-conductor sector - and about level with telecoms.

With $100 million of its own funds earmarked for cleantech investment to date, KPCB has clearly bought in to what they choose to dub "greentech". At the current scale of activity, it isn't going to save the world anytime soon. Still, its voice is a critical one - and its arrival on the scene signals a very different world in the making.

So what's the conclusion? Well, for one thing it's clear that we environmentalists need to overcome our innate suspicion of technical fixes. Some fixes may be ugly and some are unquestionably bad or less good than they might be, but the key skill is going to be developing, replicating and scaling good-to-great ones.

In a nutshell, transparency and accountability are necessary conditions. Smart public policy, too. But unless we work out how to fire up innovators, entrepreneurs, venture capitalists, investment bankers and the full spectrum of other players in capitalist evolution, Jared Diamond is going to have yet another civilisation to add to his list of the fatally flawed.

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