EnviroLine report from 2015 Milken Global Conference

Author: Sharon Szmolyan

Source: http://www.envirolinenews.ca

Publish Date: Thursday, May 28, 2015

Large photo is of Timothy Geithner, a former Treasury secretary, and Sheryl Sandberg, a Facebook executive. Photo by Mario Anzuoni, Reuters



LOS ANGELES – Bob Dylan was riding the unvoiced sentiment of a mass public in 1963 when he wrote what has become a seminal song of protest movements. The lyrics reflected his views on social injustice and the American government’s attitude towards the change roiling on the streets. They still resonate with youth today.

Ranked #59 on Rolling Stone’s 2004 list of the 500 Greatest Songs, Simon and Garfunkel, The Beach Boys and Bruce Springsteen are but a few of the artists who’ve covered it. In 1984, a young Steve Jobs recited the second verse while unveiling the first Macintosh computer in front of shareholders. The direction of the world had changed.

Having started on the streets, the change has taken centre stage in the world of finance today.

Sheryl Sandberg, chief operating officer of Facebook and author of Lean In: Women, Work and the Will to Lead, asked three former U.S. secretaries of the treasury – Timothy Geithner (Barack Obama administration), Hank Paulson (George W. Bush era) and Robert Rubin (Bill Clinton’s “Progressive Economics” generation) the question that was addressed throughout this year’s Milken Global Conference: “What is the most important issue people are not talking about?”

The answer from each was “climate change.”

Hearing this at the Beverly Hilton were 3,000 of the world’s leaders in business, finance, government, public policy, academia, philanthropy, law, science and the news media. Seven thousand guests heard it as well. The message went wide – even if Joshua Harris, co-founder of Apollo Global Management, said to German Consul General Bernd Fischer that Harris’s firm has to invest in economic opportunities and, in his view, renewables aren’t yet economic but it’s great if governments and other private institutions want to invest in them. “I think that with the U.S. continuing to reduce coal for natural gas, it [gas] is going to move the needle infinitely further than renewables,” Harris added.

Former treasury secretary Paulson – businessman, China expert, conservationist, author and chairman of the Nature Conservancy’s board of directors – referred to the Risky Business report, The Economic Risks of Climate Change. The report, by a group of former cabinet officers, lawmakers, corporate leaders and scientists, aims to frame climate change as an economic issue.

Paulson’s position is that American companies should be treating climate change as any other business threat. He clarified the goal of the report was to depoliticize the debate. Climate change could cost the United States billions of dollars over the next 20 years, according to the report.

Its analysis is rock solid. It was provided by Rhodium Group, which analyzes disruptive global trends and “risk management solutions” and is the world’s largest catastrophe modelling company for reinsurers and investment management firms, econometric research, climate modelling and private-sector risk assessment. The firm looked at regions across the U.S., organizing its research around shared geologic characteristics and impacts. In specific regions, the data is broken down to the county level.

A panel on “The Economic Implications of Climate Change” at the Milken conference provided more details.

Panelist Mark Tercek, former managing director and partner at Goldman Sachs and now president and CEO of The Nature Conservancy, identified himself as the “happy environmentalist.” He agreed with fellow panelist and the self-defined grumpy economist John Cochrane, professor of finance at the University of Chicago’s Booth School of Business and a senior fellow of the Hoover Institution, that it is essential to take a hard-headed look at things.

Referring to the Risky Business report, Tercek cited some of the costs of climate change in the U.S., including “hits to agricultural productivity in the range of 10 to 20 per cent in the next 10 years, huge hits to labor productivity, permanent costs of [approximately] $100 billion from coastal flooding, annual costs of in the order of $8 billion from coastal storms.”

“On top of that, we have lower probability but catastrophic outcomes that you can’t dismiss,” Tercek added, including “disintegration of Greenland, reversal of weather patterns, etcetera. And then on top of that, of course, I’m an environmentalist [who’s concerned about] the enormous impact on the nature that we feel morally responsible for protecting for future generations and things like biodiversity. You lose biodiversity, it’s gone.”

Panelist Aimée Christensen, founder and CEO of Christensen Global Strategies, has deep experience in energy policy in Washington D.C. Trained as an environmental and energy lawyer and with two decades of experience in climate change and sustainability strategy, she works with the corporate, investment, and philanthropic sectors.

Christensen’s view is the sooner we support corporations and investors who have been the polluters of our past and present in their green efforts, the better off we’ll be. She pointed out that the economic calculation has shifted. Copenhagen in 2009 saw the CEOs of Duke Energy, Dow Chemical, Coca- Cola and the huge Mexican beverage company FEMSA getting together to call on governments to negotiate an agreement. They were talking about a war on carbon.

Tercek referred to Jerry Taylor, previously at the Cato Institute and now leading his new libertarian Niskanen Center, who wrote in his March 23, 2015 paper “The Conservative Case for a Carbon Tax,” that “the risks imposed by climate change are real, and a policy of ignoring those risks and hoping for the best is inconsistent with risk management practices conservatives embrace in other, non-climate contexts. Conservatives should embrace a carbon tax (a much less costly means of reducing greenhouse gas emissions) in return for elimination of [Environmental Protection Administration] regulatory authority over greenhouse gas emissions, abolition of green energy subsidies and regulatory mandates, and offsetting tax cuts to provide for revenue neutrality.”

Tercek pointed to the compelling case both libertarians and conservatives make for a carbon tax, noting that property values are being destroyed by emitters, and that the issue of climate change needs market- oriented solutions.

Panelist Gérard Araud, French Ambassador to the U.S., said the United Nations climate change conference in Paris in December 2015 (COP21) is focused on being business friendly. Expectations are for a strong message to be coming from that community – there is a lot of money to be made.

Christensen, in response to a question from moderator Susan Goldberg, editor in chief at National Geographic Magazine and News, said businesses today are making money from mitigating climate change. Walmart has made the commitment to using 100 per cent renewable energy and driving energy efficiency because of its cost savings.

Christensen pointed out that energy is a material cost and that renewable energy is price stable. Walmart, the world’s largest company by revenue according to the 2014 Fortune 500, is the second-largest buyer of solar energy, after The Pentagon. Whereas The Pentagon and U.S. military installations are buying solar from a security position, Walmart is doing it for the financials.

            A panel session on “Power Shifts in Global Energy” revealed how much oil and gas producers are suffering with oil at $50 per barrel. In the “Economic Implications of Climate Change session,” Christensen noted that is the case even with $US40 billion a year in subsidies – 10 times greater than what the renewable energy sector receives.

She pointed out that since 2011, investment in renewable energy has been greater than investment in fossil fuel-based electricity and that, according to Bloomberg New Energy Finance, investment in renewables is going to grow ten times in the next 15 to 20 years. No other sector is going to grow at this pace.

In fact, according to Bloomberg, in 2013 4.2 gigawatts (GW) of new solar PV were installed in the U.S. – more than Germany’s estimated 3.3 GW. China’s goal is to have 20 per cent of its total energy demand sourced from renewable energy by 2020. In 2013, China made the biggest investment in the solar space worldwide – 12 GW.

During President Barack Obama’s visit to China in October 2014, the two countries signed an agreement to reduce greenhouse gas emissions. The U.S. commitment is to cut its emissions by 26 to 28 per cent below 2005 levels by 2025. China committed to 20 per cent of its energy coming from non-fossil sources and to peaking its greenhouse gas emissions by 2030.

Even Japan under Prime Minister Shinzo Abe’s “Abenomics” is impressive. The country aims to replace most of its nuclear power facilities, and installed approximately 7 GW of new solar PV capacity in 2013.


Drivers of change are diverse

What initiated this remarkable change?

On September 21, 2014, more than 2,640 rallies and other solidarity events happened in 162 countries[M1] . It was a worldwide call for action to confront climate change.

Some 400,000 people gathered in New York City for a two-mile march through midtown Manhattan. Satellite events drew 40,000 in London, 30,000 in Melbourne and 4,000 in Berlin. Organized by writer and activist Bill McKibben of 350.org as “an invitation to change everything,” the call to action was endorsed by more than 1,500 organizations. Called the “People’s Climate March,” it was the largest climate change march in global history. (See McKibben’s May 21, 2014 article in Rolling Stone magazine).

            At the UN climate summit in September 2014, the Obama administration weighed in with the third National Climate Assessment report. It underscored predictions made in 2009 in a report, What We Know: The Reality, Risks, and Response to Climate Change, by the American Academy of Sciences’ climate science panel: We are at risk of pushing the earth’s climate system toward “abrupt, unpredictable, and potentially irreversible changes.”

In September 2013, the report by the United Nations Intergovernmental Panel on Climate Change supported for the first time the idea that a large portion of the planet’s fossil fuel reserves would have to stay underground for the world to avoid dangerous rises in temperature across the planet.

Three years earlier, American political heavy weights joined forces with formidable financial capital. George P. Schultz, former treasury secretary under then-president Ronald Reagan, and Tom Steyer, founder of Farallon Capital Management and co-founder of Next Generation, led a California campaign to ensure that the only U.S. economy-wide cap-and-trade program to reduce carbon dioxide emissions was not indefinitely suspended. 

That was a decisive win, a defining moment, as strategists Schultz and Steyer built a coalition of business, labor, environmental and community groups that worked on the ground to ensure success.

Backing up their efforts were heavyweight environmental organizations, including: Natural Resources Defense Council, Environmental Defense Fund, California League of Conservation Voters, Blue Green Alliance, Bay Area Council, and Environmental Entrepreneurs (E2).

Also onside were business and innovation community leaders: Los Angeles Business Council, California Business Alliance for a Green Economy, Cleantech San Diego, Silicon Valley Leadership Group, American Lung Association in California, and the Ella Baker Center for Human Rights.

The commitment was and remains loud and clear: to support national, state, regional and local clean energy policies that protect public health and promote job growth and national security.

            California Governor Jerry Brown, speaking this year at the Milken Global Conference, articulated his goal of generating 20,000 megawatts of renewable electricity – including 12,000 MW of locally generated electricity – by 2020. He called it “exciting, bold and absolutely necessary if we are to have any chance of stopping potentially catastrophic changes to our climate system.”

In a state that is the breadbasket to America north of Mexico but is suffering from a catastrophic doubt, such a step bodes wise. The development of clean energy and clean technology happens to be the fastest-growing sector of the California’s economy.

Allianz, an international finance service company and reinsurer to the world, reported on its Open Knowledge website that there’s a market opportunity worth as much as $2.2 trillion between now and 2020 for new technologies to meet existing clean energy demand.

That opportunity might be something Alberta wants to pay attention to, not just because billionaire philanthropist Steyer has it out for the Keystone XL pipeline. It could mean as many as 20.4 million jobs worldwide by 2030 across all clean energy sectors.

            In January, President Obama travelled to India to meet with Prime Minister Narendra Modi, looking for international support around his efforts to address climate change and to add another dimension to the COP21 talks. India’s environmental challenges became front-page news. Delhi now is the world’s most polluted city.

Modi’s commitment is to ramp up India’s energy supply to be able to take hundreds of millions of the rural poor out of poverty, which brings the opportunity of those 20.4 million clean energy jobs to front of mind. Predictions are that by 2017, India will exceed China in terms of economic growth.

Perhaps this is the real economic opportunity of Canada’s future as a global energy superpower: partnering with India, so that its crippling environmental problems and projected increase in greenhouse gas emissions are resolved hand-in-hand with realizing the country’s economic targets.

Today’s writing is on the wall: Out-green your competition and take advantage of huge opportunities in the marketplace.

As Morris Mark, founder of Mark Asset Management, a panelist on the “Reading the Tea Leaves: Markets on the Edge of Order and Chaos” session, said at the Milken Global Conference: “Make sure to regularly get away from the unstoppable torrent of information coming from markets and shut the door, and think.”

Or, as Bob Dylan put it in his visionary lyrics:

“And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone . . .

For the times they are a-changin'.”

The future begins with helping to create it – proving to our children that we give a damn about the biggest crisis our civilization has ever faced.

Sharon Szmolyan, MBA is a catalyst, founder and managing partner of the Alberta Media Investment Fund. Her focus is risk management in the entertainment and energy industries, and she divides her time between Los Angeles and Calgary.

 [M1]I’ve used the “official” figures from the People’s Climate March site (http://peoplesclimate.org/wrap-up/) rather than the figures from Wikipedia, which is not always the most reliable source.

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