Today, China is setting up seven regional cap and trade trials as part of its 12th five-year plan, including one in Beijing. And if they apply one of those nationwide as part of the 13th five-year plan, it will be a very big deal indeed. India has enacted a coal tax — US$1 per ton on imported and domestic coal. Again, that’s not enough to stop global warming, but these are certainly steps in the right direction.
S+B: In Europe, there seems to be less impetus for environmental policy change than there was a few years ago.
WAGNER: The fiscal crisis has clearly hurt the effort. But there is a bubbling renewables revolution under way. Denmark gets on average about 20 percent of its electricity from wind. You don’t necessarily think of the manufacturing powerhouse of Europe as a particularly sunny place, but Germany at times gets more than 50 percent of its electricity from the sun. Once you find steel plants that are being powered by solar energy, that’s when you know a renewables revolution is happening. Those are amazing policy successes.
The renewable energy revolution may be somewhat below most radars, but it’s global, and, frankly, it’s pretty astonishing. Worldwide solar and wind capacity now tops 300 gigawatts — three times as much as the total capacity in Britain. That capacity produces as much electricity as about 50 nuclear reactors, half the entire U.S. nuclear fleet. Solar installations have increased by 50 percent per year, every year, five years in a row. For wind, the growth rate is more than 25 percent. Solar prices have decreased by two-thirds within three years. Solar right now competes with electricity piped over the grid in certain areas, despite a playing field tilted in favor of coal and oil (because they’re not paying for their pollution). In the U.S., solar nationwide costs about 15 cents per kilowatt-hour right now. That’s more expensive than coal-fired electricity in Ohio, which has a famously dirty coal fleet, but it is competitive in places like Southern California.
S+B: What do you see as business’s role in pushing for policy change?
WAGNER: I see the demand for action, in a sense, coming from industry. Anyone who does long-term planning — whether their business is producing electricity, steel, or hamburgers — should be in favor of putting rules in place sooner rather than later. We all know these rules are inevitable. It’s just a question of “when,” not “if.” And for anyone wanting to do any kind of planning, sooner is always better.
Some businesses, of course, will be better prepared to deal with this than others, and it’s the ones that prepare now that will have a competitive advantage going forward. You don’t have to believe every word Michael Porter, Andrew Winston, and others are saying to realize that there are long-term advantages in making sure your company is positioned to succeed in a world where large-scale policy change will happen.
S+B: Is there a good example of an industry that’s taken this to heart?
WAGNER: Yes, and ironically, it’s often those with the biggest carbon footprint and energy bills. The aluminum industry is one of the most energy intensive of all industries, and, basically, the entire aluminum supply chain — from Rio Tinto to Alcoa to Pepsi — has been an advocate for a comprehensive cap and trade system. These companies realize that their business models will change going forward, and that there may be things that need to happen if they’re going to survive and thrive in a low-carbon world. They are trying to minimize their footprint right now — out of necessity, because their energy bills are so large — and at the same time have been advocating for the larger policy changes that could really make a difference.