Of Beach Sand, War and Carbon - New York Times (blog)

Three years ago, my colleague Andrew Ross Sorkin caught the British entrepreneur Richard Branson on his private island in the Caribbean in a pensive moment. With a little help from his friends, he was thinking hard about the problem of global warming, and whether he might be able to help.

Fast-forward to now, and we know Mr. Branson's answer to his own question. A year after that chin-scratching session on Necker Island, he founded an outfit called the Carbon War Room in Washington that is working on solutions. On Sunday, I interviewed him for a piece that ran in Tuesday's paper about a new business consortium the war room helped put together to tackle energy retrofits in the United States.

Recounting the creation of the Carbon War Room, Mr. Branson told me that he overruled his advisers and picked a martial name on purpose.

"I think the overwhelming scientific evidence indicates that the world is heating up, and the downside effects of that could be severe," he said. "A lot of people had compared the problems the world faces as being worse than World War I and World War II put together. And yet if that was truly the case, there wasn't a coordinating body that was trying to unite all the different industries in the world to get on top of the problem."

He set his group up with a specific mandate. Like many people who have studied the issue, Mr. Branson had come to the conclusion that society's first priority is not to find new sources of energy, but to stop wasting so much of the energy supply we already have, which would reduce emissions of carbon dioxide, the main greenhouse gas.

And here is where his case gets interesting: He believes that can be done now, at today's prices, under current governmental policies, in ways that save businesses and consumers money rather than costing extra.

In our interview, he added a twist to that argument: People do not even need to believe global warming is real to see that many of the things he advocates are sensible on their face.

"Government policy, particularly in America, is frozen," he said. "And yet, we don't just have a global-warming problem. We actually have an energy crisis looming. Demand for oil could exceed supply within this decade. For all the global-warming skeptics in America, at the very least they should be thinking energy dependency, their dependence on Mideast oil. They should be scrambling to join forces with the global-warming people to get on top of the problem."

What exactly does he prescribe? In a nutshell, he wants businesses to make investments that cut their carbon footprint.

The economic case for this approach could hardly be simpler. Burning fuel costs money, and it is costing more as oil prices spiral. Many technologies are available today to cut the use of energy. Cars and planes can be made lighter, buildings can be outfitted with insulation and better windows, and so on.

Both the cost of these upgrades and the savings can be quantified with some precision. With buildings, for example, energy use can often be cut by a third with a retrofit project that pays for itself in five years. The Empire State Building is a famous example, but the approach will work for a four-story medical building in Des Moines, too.

As a business problem, then, energy efficiency is straightforward: make a capital investment now to incur savings in operating costs in the future.

And yet, many obstacles have prevented it from happening on a larger scale. Perhaps the most important is the simple power of human inertia: it's easier for a company to keep paying the electric bill every month than to plan and execute some complex retrofit project. Beyond that, smaller companies in particular have trouble being certain the energy savings that they are promised by a contractor will actually materialize. Even if they become convinced, they have to finance what may look to a bank like a pretty mushy asset: estimated future savings on energy bills.

The list of these problems goes on and on. They have been understood since at least the 1980s, through the writings of Amory B. Lovins and other thinkers. But we have reached an interesting moment when some of the world's brightest business minds are starting to think about how to enlist global capital to solve them.

The best way to see the Carbon War Room, I think, is as an interesting new entrant in the field. It is no accident that Mr. Branson has stuffed it with people who have backgrounds as successful entrepreneurs and business thinkers.

The Carbon War Room has gone hard after a handful of issues with potentially large carbon savings, like fuel waste in the global shipping industry. In the case I wrote about, the war room announced a new business consortium that will attempt building retrofits on a large scale in the United States, starting in Miami and Sacramento.

The mechanism that the group plans to exploit, known as Property Assessed Clean Energy or PACE, was not invented by the Carbon War Room, but the Branson group is one among several that have grabbed the idea. It basically involves paying for energy retrofits through a surcharge on property-tax bills.

As I mentioned in the article, the hazards of the PACE mechanism are not insignificant, particularly the risk that disreputable contractors will be drawn to this new pot of money, promising more energy savings than they actually deliver. The cities and counties launching these programs have an obligation to be careful that they enlist upright players, and the courts that will validate the bond issues have an obligation to be meticulous.

But I suspect that if the approach does work, we will all be kicking ourselves a few years from now and saying, why didn't we try that earlier?

"There's a lot of things that seem obvious after they've been done," Mr. Branson said in the interview. "But it takes committed people to get the ball rolling."

21 Sep, 2011

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