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Feb 28, 2012

How Entrepreneurs Can Make Money by Facing the Climate Challenge


When our children and grandchildren look back on our era, the political squabbles of today will have been long since forgotten. What they will ask (I hope) is “How did they have the wisdom to build for the future?” That’s how we need to measure our actions now. Will they thank us for acting with reason, compassion and foresight? Will they express gratitude for our wisdom? Or will they wonder what the hell we were thinking? Let’s make sure we earn their gratitude, because the alternative is too unpleasant to contemplate.

In the book Cold Cash, Cool Climate I’ve outlined the depth and breadth of the climate challenge, and summarized some insights that entrepreneurs starting new ventures in this space should find useful. That exploration began with the insight that humans are now no longer small compared to the earth. Because of our wealth, our numbers, and our technology, we can (and have) significantly altered the global life support systems upon which we all depend.

As I describe in the first chapter of the book, the climate problem is big, it’s urgent, and it’s misunderstood, which makes it fertile ground for new business ventures. The changes we need are so large that no part of the economy will remain untouched, and that means opportunity. In fact, we’ll probably need to scrap some capital in the energy sector, given the rate of emissions reductions that will be required to maintain a livable climate. Entrepreneurs can lead the way by designing new low-emission products, services, and institutional arrangements that are so much better than what they replace that people are eager to adopt them (and to scrap some of their high-emitting existing capital along the way).

Emissions reduction opportunities start by focusing on the tasks we want to accomplish and associating those tasks with flows of energy, emissions, and costs, which we then work to minimize. This focus on tasks frees us from the constraints of how they are currently accomplished and allows us to capture compounding resource savings upstream. By considering the whole system and designing to approach theoretical limits of efficiency, it is often possible to achieve drastically reduced emissions while also improving other characteristics of products or services substantially.

Information and communication technology (ICT) is accelerating the rate of innovation throughout the economy, which has implications for business opportunities. ICT speeds data collection, helps us manage complexity, allows us to restructure our institutions more easily, and lets us rapidly learn and adapt to changing circumstances. It also creates a continuously renewable source of emissions reductions, and is a great place to look for opportunities because it generally offers rapid speed to market and low startup costs.

Surviving this stage of human development means we’ll need to evolve as a species to learn how to face challenges like this one. We’ll need to foster rapid innovation, fierce competition, and active coordination among businesses, all at the same time. We’ll also need to change how we think about our responsibilities to each other, to the earth, and to future generations. Innovations in our values can be as powerful as those for new technologies in opening up new possibilities for the future, and these we also need to explore.

The technology now exists for us to move past combustion in most applications, but scaling it up to meet the demands of a modern industrial society won’t be easy. Of course, not doing so will be harder still, because of the damages unrestricted climate change will inflict on the earth and on human society. It’s long past time to get started. There’s simply no more time to waste.

This blog post summarizes some of the arguments in Jonathan Koomey’s latest book, Cold Cash, Cool Climate: Science-based Advice for Ecological Entrepreneurs, released by Analytics Press. Written for entrepreneurs and investors, this book describes how to profit from tackling climate change. Koomey has been a consulting professor at Stanford University since 2004. He worked as a researcher and scientist at Lawrence Berkeley National Laboratory for more than two decades. He serves on the Editorial Board of the journal Contemporary Economic Policy and as a research affiliate of the Energy and Resources Group at the University of California, Berkeley.

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