Playing the Energy Lottery
Last year Americans spent $65billion on lottery tickets. In some games, the odds of winning have been compared to the probability of being struck by lightning while sinking a hole-in-one. The average U.S. homeowner spends $600 a year on fire insurance, but the likelihood of ever claiming against that policy is less than 1%. Why then are we so reluctant to make investments that are guaranteed to return profits and which provide insurance against real risks on a planetary scale?
As many of us were lathering up with sunscreen one last time this summer, the UN’s Intergovernmental Panel on Climate Change (IPCC) released a draft of its five-year review on the causes and effects of climate change. The report will be finalized in the coming months, but the inescapable conclusion was that human burning of fossil fuels, returning to record levels as economies struggle out of the global recession, are 95% likely to be the cause and that the consequences will include more severe and frequent storms, like Hurricanes Sandy and Irene, and more droughts and wildfires, like those that have gripped the Midwest and west this year.
The IPCC is an unprecedented collection of scientists from 195 countries who only look at peer-reviewed research to form their unanimous opinions (that’s right, nothing gets into the final report that does not have 100% agreement). In fact, many conclusions that are backed by a majority of the scientists, concluding that things are even worse than the report says, never make it into these periodic assessments because there are even a few holdouts.
So while actuaries make educated guesses for insurance companies about whether you are likely to be in a car crash or watch your house burn down, the IPCC’s science is telling us unequivocally that the way we’re driving our economy is guaranteed to burn our collective house down. But unlike spending billions on insurance policies or lottery tickets, from which most of us will never collect a penny, investing in climate change solutions comes with great paybacks for everyone.
By now, most companies know that energy efficiency retrofits of equipment, lighting, and insulation can save many times more than the cost. Many small businesses, especially in the still-depressed construction industry, are benefitting from the boom in rooftop solar installations. But there are still more ways to cut carbon pollution and increase profits.
For example, Republic Services in San Jose, California has opened a waste processing facility that goes far beyond mere recycling, taking in all kinds of mixed garbage and using technology to sort up to 80% of the feedstock into valuable commodities. By comparison, relying on consumers to separate these wastes in homes or workplaces captures about 40%, the rest ending up in landfills. Harvesting more value from waste keeps materials from decomposing into greenhouse gases and cuts the resource and carbon footprint of new products compared to using virgin materials.
In another example, Smithfield Foods produced nearly 16 million hogs in 2012 and will likely increase the number under new Chinese ownership to feed that country’s demand for pork. Each hog produces about 300 gallons of manure daily, all of which can be converted to electricity and diesel fuel using modern gasification technology. Imagine the economic benefits compared to using oil – – which hit record highs again last week – – and the far lower carbon footprint of that feedstock for producing domestic, renewable energy. This becomes even more compelling when contrasted with the high-sulfur oil being extracted from tar sands in Canada that would be shipped in the controversial Keystone pipeline and require far more energy-intensive, polluting processing to convert into useful energy.
And finally, KPMG’s report “Water Scarcity: A dive into global reporting trends” warns “Water scarcity has risen to the top of the corporate agenda…in the face of dire predictions about dwindling supplies [and] more than 350 institutional investors (who, together, manage more than USD43 trillion in assets) supported the Carbon Disclosure Project’s 2011 water survey. Simply put: no water, no products, no business.”
In a growing number of places around the world, water is produced with desalination or pumping of aquifers from greater depths as supplies are depleted, all of which consumes vast amounts of energy. New water conservation technologies, including in-situ repair of leaking municipal pipelines, are creating local jobs and business opportunities, while cutting carbon pollution by saving energy. Some nations are addressing the issue with market signals. Portugal levies a tax on water-intensive industries and invests in new water projects, while China prices water to incentivize conservation and encourage use of treated wastewater.
Meanwhile, Washington dithers over both energy and water policy, China also announced last week that it will pay 7 cents/kwh for electricity from solar rooftops. Expect thousands of solar “flowers” to bloom as China – – often vilified as a carbon laggard – – creates new local jobs, increased energy security, and cuts carbon pollution simultaneously. Given that more than half of the states in the U.S. have various incentives or mandates for solar, why wouldn’t Congress consider catching up to China with this policy on a national level?
It’s time we heed the actuarial evidence provided by the IPCC and take advantage of these opportunities to solve economic and environmental challenges simultaneously. Or, we could keep hoping the scientists are wrong and buy more lottery tickets in case they’re right.