Friday, June 27, 2008

Market alone can't take us to a more sustainable economy


By Kenneth D. Lewis

The private sector can produce a lot of change in a short period of time. But when it comes to climate change, there simply isn't time to depend solely on the market to drive needed change toward an environmentally sustainable economy. Our desire to balance economic growth with climate protection and to reduce our dependence on carbon-based fuels requires further action not only from the private sector but from policy-makers as well.

This transition to a more sustainable economy has begun. But more can be done to help move us toward the right solutions for the future.

Already, the green economy is booming. Despite slow growth overall, 2007 was a banner year for clean technology, with revenues up 40 percent and global investments in new energy up 60 percent. California represents almost half of all green-tech investment in the United States. Venture capitalists last year invested $1.78 billion in California green technology companies - double the prior year.

In my industry, banks are also embracing environmental business opportunities, ranging from reducing carbon emissions in their operations to creating "green" credit cards and mortgages to help customers reduce their carbon footprints. We're helping municipalities, like the San Jose and Milpitas school districts, switch to renewable energy sources. And, banks are financing everything from solar, wind and hydro power, to giant buoys that capture energy generated by ocean waves.

Some banks are even looking to invest in clean tech companies, not just lend to them. In the same way banks helped finance California's early agriculture and film industries a century ago, we're taking a fresh look at these opportunities to determine how we can play a productive - and profitable - role.

Public policy leaders are also showing the power of effective government action to stimulate the green economy. But our policy partners can do more to help create a market environment in which sustainable energy alternatives are economically competitive.

First, we need a stable regulatory environment with a bias toward clean energy. When innovators and financial backers are confident of government support, risk calculations change and good things happen. Congress should move to renew the alternative energy and efficiency tax credits that expire at the end of this year. Renewable energy industries need help to build enough market scale to compete with hydrocarbons.

Incentives matter. Some banks, for example, have been looking for financially viable ways to help solar companies create a large-scale market for residential solar leasing. The mayor of San Jose and local solar companies have been working on this challenge, and I applaud them for it.

Second, policy leaders need to work across jurisdictions to determine which incentives or regulations are appropriate at the state level and federal levels. We need to strike a balance between the benefits of states acting as laboratories of innovation and the inefficiency that results from a patchwork of regulation across geographies.

Third, Congress must pass cap-and-trade legislation to reduce greenhouse gas emissions. A system that gives companies "emissions credits" they can trade on an open market will create financial incentives to reduce emissions.

It may sound strange to hear a banker calling for government intervention. It's not a position I take lightly. But, landmark laws like the Clean Air and Clean Water acts have been environmental and economic successes. And it's estimated that California's climate change legislation will create nearly 90,000 new jobs statewide by 2020.

There is a strong connection between our willingness to diversify our energy sources and our ability to grow the global economy sustainably. The good news is that we have access to the financial markets, scientific knowledge, technology and human ingenuity needed to succeed. Just as important, all of us - entrepreneurs, bankers and policy leaders - are working together to preserve our planet for future generations.

KENNETH D. LEWIS is chairman and chief executive officer of Bank of America. He wrote this article for the Mercury News.

No comments: