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No easy bet on climate change

No easy bet on climate change

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In July 2011, GE cancelled its agreement with the University of Wyoming to build a $100 million coal gasification test facility for Powder River Basin coals. Commenting on this setback on Wyoming PBS six months later, then-UW President Tom Buchanan acknowledged GE’s challenge in deciding whether a given energy investment will “fit into a national energy policy, if one is forthcoming.” But then he went on to say, “what better time is there to take a risk and set the stage for what that policy ought to look like, through your own actions as one of the largest corporations in the country?”

So much of the politics of climate change are driven by fear and uncertainty. It’s a pretty sure bet that climate change is real and is happening — with potentially devastating consequences for the planet — yet we really don’t know where and how to place our bets in mobilizing our resources against it.

We know that technology will produce winners and losers, but we don’t know how to pick one from another. As for policy, it’s anybody’s guess what kind of regulatory regime will emerge – whether it will include clean energy standards, market-based emissions trading, or a carbon tax – or even whether we will have one at all. A strategy of “all-of-the-above” only postpones the need to make hard choices, particularly at a time of budget and financial constraints.

Some energy providers and users have responded to these uncertainties by joining forces to create a cross-section of interested parties to leverage each other’s efforts and outreach capabilities. The Coalition for Green Capital is a group of state government agencies, independent power providers, financial institutions, citizens organizations, and energy consulting firms that seeks to establish “green banks” to finance renewable energy projects. By leveraging existing state renewable energy funds to access private sector capital, the coalition is helping states to meet their renewable portfolio standards, while deploying renewable energy on a scale which can help bring the costs down.

Natural gas vehicles offer another opportunity to reduce carbon emissions, while enhancing U.S. energy security as a widely-available and affordable transportation fuel. But consumers face uncertainties in recouping the return on their original investments in the vehicles and in being assured of reliable access to fueling facilities, while investors will not build the stations if there are not enough vehicles. There are also legitimate concerns over the impact of fracking over water quality and supplies.

To address these uncertainties, a coalition of natural gas producers and distributors, fleet owners, state governments, and U.S. Department of Energy “Clean Cities” organizers have come together in Wyoming and other states to promote educational efforts, the enactment of federal and state tax incentives, and the purchase of NGVs for federal and state government fleets. The result has been a patchwork of pressures which has encouraged auto manufacturers, consumers and investors in facilities to go forward where they may otherwise have hesitated.

The auto industry has also been the focus of the most significant step in recent years to reduce oil consumption: the tightening of auto fuel efficiency standards. It used to be that auto manufacturers had to be dragged into these negotiations. No more, after the industry’s “near death” experience in the 2008 financial meltdown. Recognizing that higher gasoline prices were here to stay, they joined with the United Auto Workers and U.S. government agencies (Environmental Protection Agency, National Highway Safety and Transportation Board) in embracing a more aggressive set of standards. What was in it for them was predictability — the assurance that, with a new set of standards firmly in place, they could safely make their plans.

What all these partnerships have in common is the advantage they yield in spreading the risk of climate change action over multiple partners, investments, and technologies. In contrast to previous strategies of risk management (for example, derivatives, collateralized debt obligations), they do this by engaging real people in a process of real feedback. That feedback, in turn, is what connects the partners to reality, helping them shape their assessments and see a wider range of possibilities.

The risks of climate change action are exceeded only by the risks of climate change inaction. Climate change activists need to be cognizant of the risks faced by large corporations in contemplating climate change action in an uncertain policy environment. It is not easy to lay down enormous sums of money for an uncertain outcome.

But that is all the more reason why these organizations need to seek out partners with whom they can work to find ways to reduce these risks.

Buchanan had it right: We don’t just have to hunker down in the face of the uncertainties of climate change policy. Through partnerships, we can give each other the confidence to respond proactively to this clear and present global threat.

David Wendt is president of the bipartisan Jackson Hole Center for Global Affairs. He was the Democratic nominee for Wyoming’s seat in the U.S. House of Representatives in 2010.

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