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Summary:

Jonathan Koomey’s first essay in a series of four this week that highlights, and excerpts from, his upcoming book, “Cold Cash, Cool Climate,” which discusses how entrepreneurs and investors can profit from tackling climate change, one of this century’s greatest challenges.

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Dr. Jonathan Koomey, Stanford University

This essay is the first of a series of four appearing this week on GigaOm. It draws from material in Jonathan Koomey’s latest book, Cold Cash, Cool Climate:  Science-based Advice for Ecological Entrepreneurs, which is being released by Analytics Press on February 15, 2012.  

Written for entrepreneurs and investors, this book describes how to profit from tackling climate change, one of this century’s greatest challenges. The author acts as your company’s scientific advisor, summarizing the business implications of the climate problem for both new and existing ventures. Koomey helps you effectively allocate scarce time and resources to the most promising opportunities, drawing upon his more than 25 years of experience in analyzing and implementing climate solutions.

A big lesson from climate science for entrepreneurs

One of the reasons I wrote the book Cold Cash, Cool Climate was because the climate and energy sciences have some important lessons to teach entrepreneurs seeking to reduce emissions and make a profit at the same time. Unfortunately, these lessons have not until now been summarized for that audience. My new book aims to change that.

The most sophisticated analysts of the climate problem think in terms of emissions budgets, defined by questions like “How many greenhouse gases (GHGs) can we emit in the next century and stay under some specified warming limit (like the widely accepted temperature goal of 2 Celsius degrees above preindustrial levels?” Because some important GHGs (like carbon dioxide and nitrous oxide) stay in the atmosphere for centuries once emitted, it’s the cumulative emissions that matter. That’s why people use emissions budgets over many decades to think about the problem.

In the book I lay out a carbon budget and an associated emissions pathway that I call the “Safer Climate case”, which has about a 2/3 chance (based on the latest climate simulations) of keeping global average temperatures from rising more than 2 Celsius degrees from preindustrial levels. This case implies that we’ll keep most fossil fuel reserves in the ground, or find a way to safely sequester that carbon if we choose to burn these reserves. It also implies very rapid emissions reductions: For about three decades, starting in 2012, we’ll need to reduce global carbon emissions by on average almost 7 percent per year (compounded) to meet the constraints of the Safer Climate case, even as population and economic activity grow substantially, and poorer countries continue striving towards modernity.

We’ll also need comparable reductions in other greenhouse gases. This rate of emissions reductions is historically unprecedented, at least over decade long time-scales, but that doesn’t mean it is impossible.

Feasibility depends on context, and on what we are willing to pay to minimize risks. What if there’s a big climate-related disaster and we finally decide that it’s a real emergency (like World War II)? In that case we’d make every effort to fix the problem, and what would be possible then is far beyond what we could imagine today.

At the start of World War II, the US auto industry took six months to transition from building a few million autos a year to building planes and tanks for the war effort. This shift wasn’t easy, but it happened, and it offers a lesson in what is possible when we really put our minds to attacking a problem.

This example illustrates another important point about rapid emissions reductions: they will likely result in some capital being scrapped before the end of its useful life. This is a problem from a political perspective, of course, but many analysts dismiss scenarios with premature capital retirements as infeasible. Based on the analysis in Chapter 5 of the book, I suspect strongly that we won’t have that luxury, given the rapid reductions we’ll need to achieve (and the problem will grow in size if we continue to build high carbon infrastructure after 2012).

Since the constraints of the Safer Climate case will probably force us to scrap some capital stocks before the end of their useful lives, it’s the entrepreneur’s job to make existing capital stocks obsolete more quickly. That means developing replacement products (and ways to retrofit existing buildings and equipment) that are so much better than current ways of delivering energy services that people are willing to scrap or repurpose that equipment to gain the advantages your product provides. That approach will allow us to minimize and sometimes sidestep the difficult political choices caused by premature retirements of existing capital.

As one example of such a product, consider light-emitting diode (LED) down lights that fit in those recessed ceiling cans that are so common in U.S. homes. We installed almost 50 of these in our new house last year to replace our aging fixtures. We would have had to spend $20 to replace each fixture anyway, according to the contractor, and the LED fixtures we bought instead cost $50 each and fit right into the existing cans.  Not only do they look better than what they replaced, they deliver bright and directional light, they come on instantly and dim just fine, their color rendition is so good that even my wife (who is a stickler in such matters) thinks they are great, and they will last 35,000 hours, which is probably 20 years at the rates that we use most of these fixtures.

The long lifetime (compared to at most a few thousand hours for incandescent bulbs and about ten thousand hours for compact fluorescents) was what put them over the top for us. We have relatively high ceilings throughout the house so the prospect of climbing a tall ladder more than a dozen times a year was not an enticing one. The LEDs eliminate that hassle, and in fact are so good that they will surely encourage others to replace their fixtures before the end of their useful lives, because they are so better than what they replace.  And did I mention that they cut lighting electricity use by more than 80 percent?

Conclusions

Because the required emissions in the Safer Climate case are so rapid, some existing energy sector capital will need to be retired in coming decades (and the more high-carbon infrastructure we build in the next few years the more that will have to be scrapped later).  An entrepreneur can assist that process by building low emission products that are so good that people are eager to buy them and happy to scrap existing capital to put them to work. That won’t make all the difficult political problems of the climate issue go away, but it will help.

Image courtesy of Julipan.

By Jonathan Koomey

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  1. A must read for entrepreneurs building profitable enterprises to address climate change.

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  2. @Christy The book comes out Wednesday! Can’t wait to read it.

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  3. > it’s the entrepreneur’s job to make existing capital stocks obsolete more
    > quickly.

    That’s a nice little picture you’ve painted, but there’s a problem which this, which is that you also need to convince the government and hence the IRS to understand this and take it into consideration with respect to the tax structures. Good luck convincing the lethargic government to change (which government is led by politicians with their typical 4- to 8- year re-election short term view).

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