Policy Innovation Lags Clean Tech Innovation

Last time I wrote that environmental challenges are so great that it is difficult to see how we will meet them. However,  I wrote,

The march of technological progress, which has transformed so many areas of business and life, will accelerate our environmental progress too, as long as we’re pointing in the right direction, as long as we are aligned with the vector of progress and can therefore harness that progress.

There’s no question that to meet our environmental goals while continuing to improve standards of living there will need to be advances in a range of energy and clean technologies.  But technology is not the only area were we need to innovate. A big chunk of what needs to be done can be achieved with current technology. It just requires innovation on the policy front.

I just reread a study issued by the McKinsey Global institute. The paper, “The Case for Investing in Energy Productivity,” was published a year ago. Using detailed economic and financial models, it makes the case that the technology available today is sufficient to halve the growth in energy demand through 202o. What’s more, if deployed in the manner suggested in the paper, it could deliver up to half the abatement of greenhouse gases required to stabilize global temperatures.

The global investment in energy productivity envisioned by the study would deliver an internal rate of return of 17 percent. The technology required already exists. It includes relatively mundane items such as combined heat and power generation, optimization of electric mothers, increased use of recycled paper, liquid membrane separation and many others.

What is so striking about this analysis is that it suggests that there are no trade offs required to achieve the benefits of reduced energy demand and reduced greenhouse gas emissions, since doing so produces a return that is better than many capital investments.

To achieve this, though, would be no small feat. It requires not technology innovation but policy innovation. Innovative policies are needed to stimulate and fund worldwide investments in energy productivity that market forces and micro-economic decision making alone will not.

Is it just me or does there seem to be a consensus emerging that some of the most important challenges facing society (see also economic melt down, health care, social security, among others) require policy, rather than purely market, solutions? I welcome your comments.

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