Leonard Greene ponders.
About a year ago, back when we thought the earth we were standing on was really there… I happened upon an op-ed article that had appeared in the May, 2005 issue of the Washington Post. Titled “The Courage to Develop Clean Energy,” its authors, Jeffrey Immelt and Jonathan Lash, CEO of General Electric Company and president of the World Resources Institute respectively, opined that a new clean energy economy would require three essential components. First, the brainpower to develop new technology; second, a market that makes clean technologies profitable; and third, a strong dose of public will. The first two components, they said, were already securely in place within the hallowed walls of their corporate boardrooms and their well-funded labs – proof positive of the infallibility of their brand of market capitalism. What was missing, according to them, was will.
Since then, of course, corporate titans have proven themselves such poor stewards of even their own commercial self-interests that we are entitled to wonder what is to be gained from hauling these old warriors out of their muck while the very innovators they champion languish on the vine for lack of capital now vanished into air. As we noted in the Winter 2009 issue, the renewable-energy business – wind, solar and solar thermal in particular – lapsed into sudden stasis last fall when new projects ground to a halt. Their financing, dependent on selling renewable energy tax credits to Wall Street firms, evaporated once those firms began to hemorrhage billions, canceling any corporate need for those credits.
Rereading the story several times, I was struck by the authors’ pointed emphasis on the word “profit,” the requirement for which, under some conditions, would seem to actually eliminate many promising options that are either not ready yet, are intrinsically cheap, or otherwise lacking in cache. (Fill in the blank here with any battery chemistry of your choice.) The implication here is that if a new energy technology yields smaller profits, then it would not be worth sufficient corporate effort to press forward with development. This explains why Royal Dutch Shell just announced plans to scale back its renewable energy business to focus purely on oil, gas and biofuels, all yielding higher profits. Interestingly, Shell has invested $1.7 billion on alternative energy in the past five years, compared with total capital expenditure of $32 billion in 2008 alone.
Given the current meltdown wrought by the self-proclaimed “best and brightest,” however, one wonders if certain accepted truisms as the profit axiom might do with some re-evaluation. American evolutionary biologist, geographer and physiologist Jared Diamond has attempted to do just that in his 2005 book, Collapse: How Societies Choose to Fail or Succeed, in which he examines how past societies dealt with progressive environmental crises to their benefit, or their destruction. He also studies contemporary environmental challenges to which perfectly rational individuals and governments have reacted with decisions profoundly damaging to their societies’ future survival.
One of his more interesting observations is that in societies where the privileged can insulate themselves from the consequences of their decisions, they are more likely to pursue their short-term interests, even to the detriment of long-term interests of the society, including their own children. He cites, among many, the example of the North Sea floods in Holland in the late 1940s and ’50s that, sweeping fifty miles inland, killed all Dutch, rich and poor alike, because everyone lived in the lowlands. Learning from that experience that no one, no matter how rich, could survive a breached dyke, the country mobilized public and private capital to build the finest dyke system the world has ever known, to the benefit of the entire society.
Given the galactic economic and environmental crises we now face, and the disorganized responses we’ve seen so far, we have to wonder if corporate entities as presently structured and managed, are capable of saving us. As corporate excesses and bad judgments snag headlines and sink companies, criticisms of business education and practice – too scientific, too focused on hasty theoretical solutions such as maximizing shareholder value, balanced by only a limited understanding of ethical and social considerations, of sound business leadership – have become legion; all ring perilously true.
If we know anything, in our current economic trough, it is that clean energy technology probably represents the single most important driver to long-term economic growth over the next two decades, just as IT was in last two. Consider that fifteen years ago, there was no web browser, the very joystick of every aspect of modern life. American talent led the IT revolution, harnessing a billion and a half users to generate one trillion dollars annually. The energy economy, by contrast – four billion users of electricity generating six trillion dollars in revenues – represents the mother of all markets. It is effectively the greatest economic opportunity of the 21st century – and yet the world’s top companies in wind, solar and advanced battery technology and manufacturing have struggled to gain funding and commercial traction in a market seemingly driven solely by commercial interests.
This is not to suggest that companies should not profit from new energy developments; rather, that the “profit axiom” may not offer the optimal modus operandi for realizing them. If we have learned anything in the last year, it may be that we have looked too long to privatization as the only mechanism by which to address economic challenges – that the corporatization of basic human activities can lead to unhealthy accumulations of power, and flawed judgment.
CEOs of huge corporate entities can speak eloquently about clean energy innovation on one hand while blaming the public for a lack of will to change (we could name certain automakers,) but how many have the courage to tame the profit motive in order to support significant new energy breakthroughs toward long-term societal, and even commercial, benefit? The answer may determine the key to our collective survival.
If there was ever a case to be made for the catalytic power of federal spending, it may be now, when private sources, battered by markets, are disinclined to invest, and when our intellectual resources and public will have reached an unprecedented apogee of expertise and enthusiasm. In the stimulus packages recently launched around the world, most particularly in the US, we may now finally be seeing some meaningful consensus and commitment among lawmakers, regulators, executives, entrepreneurs and citizens toward accomplishing what the corporate model has to date been reluctant to do.