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After Copenhagen, Getting Business into Green Tech

By Bryan Walsh
Time
This was the fourth Investor Summit on Climate Risk, occurring after Copenhagen, before the U.S. Senate begins its real work on climate legislation this year and just as investors begin to climb out of the recession. Investors, especially large-scale institutional funds that need to worry about the long term, are ready to bet on cutting carbon — but impatient.

If you weren't yet fed up with the seeming inability of governments to get anything done, December's U.N. climate summit in Copenhagen might have pushed you over the edge. Representatives of 192 nations gathered for two weeks with the goal of hammering out an international environmental accord, and instead parliamentary stasis reigned. Late-night negotiating sessions went nowhere, powerful developing nations like China seemed determined to block any progress, and the U.S. itself — which still hasn't passed a carbon cap of its own — lacked much diplomatic leverage. As late as the evening of Dec. 16 — just two days before the Copenhagen summit was due to close — "it looked as though we were headed to failure," said Todd Stern, America's top climate envoy.

Though President Barack Obama's on-the-ground diplomacy on the final day of the summit produced what came to be called the Copenhagen Accord, there are more than a few environmentalists who believe the conference was a failure. That may be going too far. A three-page, nonbinding agreement that wasn't fully accepted by all of the nations in attendance may be a diplomatically flimsy thing, but it does hold real promise. Major developed and developing countries agreed that by Jan. 31 they will submit their emissions-reduction plans — plans that will be crucial in pushing the world down a low-carbon path. If there's a secret weapon buried in the accord, it's this: governments will not act alone but will vigorously engage the business world. "We can only meet this challenge," says Stern, "if we can generate sustained, long-term investment in the clean-energy economy." (See the top 10 green ideas of 2009.)

That was the main message behind the one-day Investor Summit on Climate Risk at the U.N. on Jan. 14. The event connected green luminaries like Al Gore with the unfamous people who direct hundreds of billions in private investment. This was the fourth annual summit, but it may have been the most fortuitously timed of the lot — occurring after Copenhagen, before the U.S. Senate begins its real work on climate legislation this year and just as investors begin to climb out of the recession. The feeling at the session was hopeful — investors, especially large-scale institutional funds that need to worry about the long term, are ready to bet on cutting carbon — but impatient. The key, as many of them see it, is a policy that would make carbon more expensive, leveling the playing field so that competing technologies like wind and solar can gain traction.

"We had a good start at Copenhagen, but we're still without a very clear goal, without clear carbon caps, without a price on carbon," says Mindy Lubber, president of Ceres, a national network of major institutional investors and public-interest groups. "The private sector is ready to rock and roll." (See pictures of the effects of global warming.)

It had better be. The International Energy Agency estimates that more than $10 trillion in investment will be needed over the next 20 years to support a global transition to a lower-carbon economy. We're nowhere near that — Lubber says that $140 billion was invested globally in renewable and low-carbon technologies last year, a number that she estimates will rise to $190 billion this year. "Those are significant numbers, but it's not enough," she says.

What's needed? At the U.N. on Thursday, institutional investors from the U.S., Europe and Australia who represent more than $13 trillion in assets called for Congress and other policymakers to take swift action, principally through a cap-and-trade bill, which would limit the amount of carbon industry can produce and allow manufacturers to buy and swap credits, so that those who come in under the limit can sell polluting permits to those who exceed it. It's speculative capitalism with a bright green tint. For the idea to work, the private-investment community needs TLC from government policy: transparency, longevity and certainty. "That's what investors are looking for," says Kevin Parker, global head of Deutsche Bank's asset-management division. "But they're not getting it at the global level." (See the top 10 scientific discoveries of 2009.)

Nor, for now, are they getting TLC in Washington. The House of Representatives has already passed a cap-and-trade bill, but the going will be tougher in the Senate, where supporters will need to get 60 votes to overcome a Republican filibuster. Already, conservative Democrats — especially from the coal-dependent states of the Midwest and South — have made noises about opposing a cap-and-trade bill or perhaps replacing it with a law that would include wider support for clean energy but without the price on carbon. That, however, might not be enough to kick-start scaled-up clean-energy investments. "Without a cap, you don't put a limit on the stuff that is doing us in," says Lubber. "This is only going to ramp up when there's a cap on carbon."

Stern, the U.S. climate envoy, was quick to reassure the audience at the U.N. that the Obama Administration remained behind a climate bill. "There will be a significant effort on the part of all in the Administration to press forward," he said. "The President is focused on it, and the White House is focused on it." Obama will have to be. As the exhausting experience at Copenhagen showed, climate policy is not for the faint of heart.

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