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Accelerating Climate Change or Climate Progress?

-an optimistic, yet feasible and actionable proposal

Vinod Khosla
8/24/2011




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Clobal cllmaLe change conLlnues Lo be a subsLanLlal rlsk. 1he unlLed SLaLes has falled Lo enacL a
cllmaLe blll and lnLernaLlonal negoLlaLlons, posL Cancun, are also sLruggllng. !onaLhan ershlng, uS
negoLlaLor, observed, some counLrles are walklng back from progress made ln Copenhagen, and
whaL was agreed Lhere."
1
lnLeresLlngly, whlle Lhe lnLernaLlonal blame-game conLlnues, some
counLrles are acceleraLlng concreLe domesLlc acLlons deslgned Lo unleash broad-scale clean energy
lnnovaLlons. A race for Lhe clean energy fuLure" ls afooL. Meanwhlle, drlven more by Lhe need for
headllnes Lhan accuraLe reporLlng, Lhe popular medla (lnaccuraLely) blames cllmaLe change for
everyLhlng from record-breaklng heaL waves Lo eplc floods. Away from Lhe nolse of Lhe press, Lhe
sclenLlflc communlLy conLlnues Lo see mounLlng evldence of cllmaLe change, and more lmporLanLly
medlan sclenLlflc assessmenL polnLs lncreaslngly Lowards ampllfled negaLlve lmpacL of cllmaLe change
ln Lhe comlng decades. ?eL Lhe llkellhood of pollcy lnacLlon ls lncreaslng rapldly. ln our vlew, an
lmmedlaLe focused assaulL on cllmaLe change ls akln Lo buylng lnsurance Lo proLecL agalnsL oLher
poLenLlal caLasLrophes such as Lerrorlsm (Lhrough securlLy lnvesLmenLs and mlllLary) or nuclear
prollferaLlon.

Cne musL ask, whaL are Lhe rules governlng soluLlons Lo Lhe global cllmaLe crlsls and who makes
Lhem? 1he counLrles wlLh Lhe blggesL bulk and heavlesL sLlcks? Someone's moral and eLhlcal
prlnclples? lf so, whose morals and eLhlcs? uo we conslder a glven counLry's ablllLy Lo pay, lLs naLural
resources, and lLs raLe of economlc developmenL lmporLanL Lo Lhelr conLrlbuLlon Lo soluLlons? Clven
Lhe global budgeL deflclLs and debL loads, addlLlonal spendlng seems very unllkely. Any soluLlon
Lowards cllmaLe rlsk reducLlon musL necessarlly operaLe wlLhln Lhese consLralnLs or be consldered a
dreamer's soluLlon. A dose of pragmaLlsm ls vlLal - ln mosL counLrles, lmmedlaLe pollLlcal and
economlc needs Lrumps Lhe planeL's needs ln Lhe year 2030.

1echnology and economlcs wlll be Lhe drlvers of any relevanL global cllmaLe change soluLlons LhaL geL
pasL local lnLeresLs, naLlonal pollLlcs and slmllar barrlers Lo carlng for Lhe common good. A dynamlc
soluLlon ls crlLlcal, one LhaL responds and morphs as global and reglonal clrcumsLances change. lL wlll
need Lo dynamlcally reacL Lo cosLs, pracLlcallLy of approaches, Lechnology advances, and evolvlng
cllmaLe change forecasLs. lurLhermore, lL should lnclude LargeLs and mechanlsms LhaL allow
developlng counLrles Lo prosper whlle lncenLlvlzlng lmproved emlsslons Lra[ecLorles. 1he currenL
approach of Lrylng Lo plan for sLaLlc LargeLs aL some daLe ln Lhe fuLure, lndependenL of changlng
Lechnology, changlng cosL esLlmaLes or changlng wllllngness Lo pay are, ln my vlew, unllkely Lo
succeed.

l have prevlously advocaLed Lhe use of carbon lnLenslLy of Cu growLh over absoluLe carbon caps. Cn
Lhe global agreemenLs' fronL perhaps Lhe mosL slgnlflcanL advancemenL aL Copenhagen lasL
uecember was Lhe adopLlon of volunLary emlsslons lnLenslLy LargeLs by Lhe largesL developlng
naLlons: Chlna, lndla, 8razll, SouLh Afrlca, Mexlco, SouLh korea, and lndonesla.
2
1hese Lmlsslons

1
http://www.bbc.co.uk/news/science-environment-10900798
2
For a summary of these commitments see: http://www.nrdc.org/international/copenhagenaccords/

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lnLenslLy 1argeLs" represenL a dynamlc approach Lo developlng a low carbon global economy and
reduclng emlsslons Lo avold Lhe caLasLrophlc consequences, buL don'L penallze counLrles for rapld
Cu growLh. ln facL, fasLer growLh enables hlgher levels of lnvesLmenL ln new Lechnology, energy
efflclency and lmproved carbon lnLenslLy of Cu. CounLrles whlch lnvesL ln efflclency and lmproved
carbon lnLenslLy of Cu reward Lhemselves wlLh lncreased markeL compeLlLlveness due Lo reduced
energy cosLs. 1hese LargeLs also prevenL Lhe Lragedy of Lhe commons by addresslng global carbon,
and focus Lhe besL mlnds of each counLry on Lhe challenge of achlevlng low carbon prosperlLy.
8egardless, creaLlng a low carbon, affluenL world wlll noL be free. Clven Lhe scale of caplLal needed,
publlc fundlng ls noL enough and prlvaLe caplLal (moLlvaLed by proflL as opposed Lo soclal goodwlll")
ls essenLlal. 1he global communlLy can focus on acLlon, lnsLead of rheLorlc, by bulldlng on
commlLmenLs made aL Copenhagen Lo prompL fasL sLarL fundlng and supporL lnLenslLy LargeLs by
revamplng and creaLlng flnanclal lnsLrumenLs LhaL lnLegraLe lnLenslLy LargeL commlLmenLs Lo
ulLlmaLely drlve clean energy developmenL and deploymenL.

1o maxlmlze lnvesLmenL lmpacL, we musL encourage baslc 8&u Lo develop Lrue 8lack Swan"
Lechnologlcal dlsrupLlons: ulLra-low carbon Lechnologles whlch compleLely change convenLlonal
assumpLlons. 1hese musL obey Lhe laws of economlc gravlLy, whlch sLaLe LhaL ln order Lo deploy a
Lechnology wldely, lL musL be markeL compeLlLlve unsubsldlzed agalnsL fossll compeLlLors as lL
approaches scale. 1hls ls Lhe only way Lo reduce Lhe need for publlc fundlng, whlch ls scarce ln Lhe
debL-rldden wesLern world. Many of Lhe world's cleanLech lnvesLmenLs Lo daLe have been
lncremenLal lmprovemenLs and dead-end Lechnologles almed aL mllklng preferenLlal regulaLory
reglmes, and wlll never reach markeL compeLlLlveness. lnsLead, we need Lo Lake more shoLs on goal
by lncreaslng focus on hlgh rlsk (and hlgh poLenLlal upslde) Lechnology developmenL: 8lack Swans.
1he key lnslghL ls LhaL lmprobable does nC1 equal unlmporLanL provlded we Lake enough shoLs on
goal. 1hough unllkely LhaL any slngle shoL works, even 10 dlsrupLlons ouL of 10,000 shoLs wlll
compleLely upend convenLlonal wlsdom, economeLrlc forecasLs and mosL lmporLanLly our energy
fuLure. ln everyLhlng from baLLerles, solar cells, LLus, wlnd, and englnes, lnnovaLlon wlll upend
convenLlonal wlsdom and forecasLs, and wlll hopefully produce economlcally drlven Lechnology
englnes of growLh, proflLs and carbon reducLlon. 1he dlrecLlon and Llmlng of lnnovaLlon ls hard Lo
predlcL, so none of Lhls ls ever lncluded ln economeLrlc models.

ulLlmaLely, pollcy LhaL encourages 8lack Swans also supporLs bulldlng crlLlcal carbon reducLlon
capaclLy" Lechnologles LhaL are on a paLh Lo aL leasL 80 less carbon lnLenslLy Lhan Lhose Lhey
replace. Lxamples lnclude economlc carbon sequesLraLlon, 80 more efflclenL lCL drlveLralns,
blofuels wlLh 80+ lower llfecycle emlsslons Lhan gasollne, appllances and llghLlng LhaL are 80 more
efflclenL, and 80 cheaper sLorage. lf we focus on Lhese raLher Lhan deploylng marglnally economlc
currenL Lechnologles, early carbon savlngs wlll be lower, however, reducLlons wlll rapldly acceleraLe
once Lhese 8lack Swans are deployed. AfLer all, Lechnologles LhaL sLarL wlLh economlc carbon
reducLlons around 30 have a flghLlng chance of reachlng 80 reducLlons, as opposed Lo Lhe 10-13
lncremenLal reducLlons LhaL are Lyplcally LargeLed. We should learn from Cralg venLer: he sequenced
Lhe human genome fasLer and cheaper Lhan Lhe governmenL-funded Puman Cenome ro[ecL by
deslgnlng beLLer Lools for sequenclng raLher Lhan spendlng hls Llme on bruLe force sequenclng LhaL
compeLlLors were pursulng when he sLarLed. 8y bulldlng Lhe Lools for radlcal carbon reducLlon now,
Lhls economlc carbon reducLlon capaclLy" bulldlng wlll geL us Lo our LargeLs more qulckly and cosL
effecLlvely Lhan Lhe currenL focus on lncremenLal reducLlons. ulLlmaLely, some of Lhese Lechnologles

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wlll scale and wlll have decllnlng cosLs wlLh scale whlle oLhers won'L scale or won'L have decllnlng
cosLs wlLh scale. 1hls makes declslons Lrlcky.

! #$% &'(')*+,

1he LradlLlonal vlew surroundlng Lhe lnLernaLlonal lmpasse ls slmple: Lhe uS does noL wanL Lo
parLlclpaLe ln a global LreaLy because Chlna and lndla won'L agree Lo blndlng LargeLs. unLll Lhey know
how Lhe remalnlng carbon space" wlll be carved up ln Lhe fuLure, Chlna and lndla won'L commlL Lo a
blndlng agreemenL for pollLlcal reasons. lurLhermore, Lhe developlng world seeks economlc growLh
parlLy Lo Lhe developed world wlLhouL any consLralnLs placed on Lhelr growLh raLes by absoluLe
carbon reducLlon LargeLs. AbsoluLe carbon caps are much harder for poor economles and fasL
growlng economles Lo meeL, and easler (buL noL easy) for slower growlng rlch economles.
CompllcaLlng maLLers, carbon caps are less crlLlcal for poor, slow growlng economles. 1hls poLenLlal
lnequallLy leads Lo flnger polnLlng beLween developed and developlng counLrles.

WhaL ls falr" and whaL ls pragmaLlc" are ofLen lnconslsLenL wlLh each oLher, especlally ln
democracles. erhaps Lhe only morally defenslble falr Lhlng" Lo do ls Lo glve every human belng an
equal rlghL Lo polluLe Lhe alr. As of 2006, Lhe approxlmaLely 1 bllllon-person populaLlon of Lhe CLCu
emlLs roughly as much carbon dloxlde equlvalenL as Lhe remalnlng 3.3 bllllon people.
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8esldes, Lhe
developed world ls malnly responslble for Lhe currenL carbon levels ln Lhe aLmosphere and should be
held responslble. Why should developlng economles be forced lnLo Lhe same carbon reducLlon
LargeLs glven Lhelr low hlsLorlcal and currenLly lower per caplLa emlsslons? Pence developlng naLlons
reasonably argue LhaL lL ls only falr LhaL Lhey [Lhe CLCu and Lhe developed world] bear Lhe prlnclpal
burden for reducLlons, especlally slnce Lhey have Lhe hlghesL lncomes and greaLesL capablllLy Lo
lnvesL ln Lhe reducLlon of Lhelr carbon fooLprlnL. unforLunaLely Lhls falr formula does noL work well
for Lhe planeL. lL also does noL work for Lhe pollLlcs, heavywelghL clouL and self-lnLeresL of Lhe
WesLern world, whlch would have Lo radlcally change lLs carbon emlsslons and hence lLs energy use
proflle, dralnlng lnvesLmenL funds and causlng slgnlflcanL buslness dlslocaLlons. Moreover, Lhe
common refraln (lncludlng ln envlronmenLal clrcles) ls LhaL lndla and Chlna don'L wanL Lo do Lhelr parL
ln global carbon emlsslons reducLlon, and LhaL any coordlnaLed acLlon wlLhouL Lhem ls doomed Lo
fallure. Cf course, every counLry wanLs Lo conLlnue lLs developmenL prlorlLles whlle pushlng off Lhe
burden of carbon abaLemenL Lo Lhe commons" - Lhe classlc free rlder" problem. lnLeresLlngly, a
low carbon economy may noL need Lo be sold" Lo Lhe publlc ln Lhe end, Lhe argumenL for clean
Lechnology can be drlven (or aL leasL lnfluenced) by self-lnLeresL, as we explaln laLer. Self-lnLeresL
drlven pollcy ls Lhe only common pollcy l suspecL ma[or world powers, be Lhey developed or
developlng, wlll be able Lo agree on.

ln facL, counLrles lncludlng Chlna and lndla are movlng forward wlLh acLlons aL home Lo reduce Lhelr
emlsslons Lra[ecLory and lncrease Lhelr lndusLrlal compeLlLlveness. More and more counLrles are
recognlzlng Lhe envlronmenLal lmperaLlve and dlrecL economlc beneflL Lo Laklng acLlon on cllmaLe
change.

A new paradlgm has emerged ln Lhe pasL couple of years: developlng counLrles movlng forward Lo
bulld low carbon economles because lL ls ln Lhelr domesLlc lnLeresL, and developed counLrles

3
http://www.eia.doe.gov/oiaf/ieo/pdf/highlights.pdf

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supporLlng furLher emlsslons reducLlon because lL ls essenLlal Lo solvlng cllmaLe change. lndlan rlme
MlnlsLer Manmohan Slngh's remarks aL Copenhagen frame Lhe new paradlgm:

We ln lndla, Loo, are vulnerable, buL neverLheless as responslble clLlzens of Lhe globe, we have
agreed Lo Lake on a volunLary LargeL of reduclng carbon lnLenslLy beLween 20 and 23 percenL by
2020 from 2003. We wlll dellver on Lhls goal regardless of Lhe ouLcome of Lhls Conference. We
can do even more lf a supporLlve global cllmaLe change reglme ls puL ln place.
4


1here are aL leasL four reasons why Lhls should be Lhe new paradlgm for how counLrles engage on
Lhls lssue and how Lo Lhlnk abouL lnLernaLlonal efforLs.

llrsL, desplLe skepLlclsm ln WashlngLon, Lhe race for Lhe clean energy fuLure" ls real. 1he
lnLernaLlonal Lnergy Agency esLlmaLes a $13 Lrllllon global markeL for low-carbon Lechnologles" over
Lhe nexL Lwo decades. LasL year, accordlng Lo 8loomberg new Lnergy llnance, clean energy
lnvesLmenL cllmbed Lo over $160 bllllon - a 230 percenL lncrease over Lhe pasL four years.
3
1he
world's besL mlnds are focused on Lhls problem now, whlch was noL Lhe case a few years ago. ln 2004
l gave energy lecLures aL unlverslLles around Lhe counLry, and Lhe rooms were mosLly empLy, Lhere
were almosL no hu's lnLeresLed ln energy aL Ml1, SLanford, CalLech and oLher Ller 1 schools. !usL 18
monLhs laLer, an lnformal survey showed 30 percenL of Lhe professors were lnLeresLed ln energy
Lechnologles. Lnergy ls now Lhe #1 prlorlLy aL Lop Ller lnsLlLuLlons globally. CounLrles LhaL are
compeLlLlve ln Lhls race can expecL cuLLlng-edge lnnovaLlon, [ob creaLlon, new lndusLrles, and
slgnlflcanL economlc beneflLs. Cver Lhe nexL few decades, Lhey can also expecL Lo be Lhe home of
new Coogle and Apple-llke companles ln Lhe energy space. 1he mosL lmpacL wlll be creaLed by Lhe
developmenL of meanlngful carbon reducLlon capaclLy: economlc Lechnologles LhaL are radlcally more
carbon efflclenL. CounLrles LhaL enable Lhese 8lack Swan Lechnologles Lhrough 8&u spendlng and
Lhen use gradually decllnlng subsldles Lo scale Lhem Lo meeL Lhe Chlndla prlce polnL (Lhe prlce aL
whlch lndla, Chlna and oLher slmllar economles would adopL Lhe Lechnology wlLh no subsldles) wlll be
leaders ln Lhe new economy. 1hough lnvesLmenL ln clean energy Lechnologles has lncreased, we need
Lo acceleraLe lL subsLanLlally and dlrecL lL more effecLlvely. SusLalned subsldles or mandaLes are noL
scalable and should decllne ln abouL flve Lo seven years afLer a Lechnology sLarLs scallng or when lL
reaches a few percenL markeL peneLraLlon ln lLs segmenL.
6
1he lncreased cosL of Lhose few years and
few percenL should be vlewed as an lnvesLmenL" by socleLy ln Lechnologles LhaL wlll have reLurns
Lhrough lncreased compeLlLlon. 1hls way, a small segmenL of each markeL can be vlewed as Lhe
playground Lo nurLure compeLlLlon and conLlnuous lnnovaLlon. When Lechnology Lakes Lhe lead, lL
wlll enable enLrepreneurs Lo repeaLedly prove Lhe markeL models, experLs and pundlLs wrong and
develop Lhe besL Lechnologles we can wlLhln our flnanclal consLralnLs. l suspecL LhaL by 2040, or even
earller, Lhls paLh wlll resulL ln larger reducLlons ln carbon emlsslons Lhan Lhe regulaLory paLhs belng
aLLempLed Loday by envlronmenLallsLs.

Second, a LasLe of Lhe poLenLlal lmpacLs of cllmaLe change are belng experlenced ln communlLles
around Lhe world. 1he popular medla would have you belleve everyLhlng weaLher-relaLed ls due Lo


5
See: http://www.pewglobalwarming.org/cleanenergyeconomy/pdf/PewG-20Report.pdf
5
See: http://www.pewglobalwarming.org/cleanenergyeconomy/pdf/PewG-20Report.pdf
6
http://www.foreignpolicy.com/articles/2010/12/10/long_shots?page=0,1;
http://www.greentechmedia.com/articles/read/corn-ethanol-time-to-move-on/

6
cllmaLe change (or none of lL ls). ln reallLy, lL ls lnaccuraLe and dlsLracLlng Lo blame currenL evenLs on
cllmaLe change. 1o do so ls Lo confuse cllmaLe (long-Lerm Lrends) wlLh weaLher (shorL-Lerm Lrends).
SLlll, Lhese recenL weaLher lncldenLs echo Lhe warnlngs of Lhe lCC on whaL we look forward Lo ln Lhe
decades Lo come lf we Lake no acLlon - lncreased probablllLy of exLreme weaLher evenLs. LasL year,
we have seen devasLaLlng evenLs ln aklsLan, 8ussla, Chlna, and Lhe unlLed SLaLes, resulLlng ln human
sufferlng and economlc losses. Monsoon floodlng ln aklsLan affecLed over 14 mllllon people and lefL
more Lhan slx mllllon people homeless. 1he 8usslan heaL wave and flres devasLaLed over 13,000
llves, wlped ouL crops, and cosL Lhe economy $13 bllllon. LxLreme ralns lefL Chlna ravaged by
mudslldes and floods. ln Lhe uS, floods swepL Lhrough lowa and 1ennessee whlle oLher reglons had
record-breaklng LemperaLures. 8usslan resldenL umlLrl Medvedev's sLaLemenLs calllng for head of
sLaLes and organlzaLlons Lo Lake a more energeLlc approach Lo counLerlng Lhe global changes Lo Lhe
cllmaLe" followlng hls counLry's Lragedy provlde a slgnal LhaL even Lhe greaLesL crlLlcs are beglnnlng
Lo Lake Lhe longer vlew and recognlze Lhe need for acLlon.

1hlrd, Lhere are real and meanlngful co-beneflLs" Lo bulldlng a low carbon economy. 8educed
dependence on lmporLed fuels (and peLro-dlcLaLors), fewer power shorLages, lmproved alr quallLy,
greaLer [ob creaLlon, lmproved llvellhoods, and reduced healLhcare cosLs are some of reasons LhaL
many naLlons are Laklng domesLlc acLlon Lo curb emlsslons. Lvery dollar LhaL a counLry saves as a
resulL of energy efflclency programs ls a dollar LhaL Lhey don'L send overseas and can be more
producLlvely used Lo employ someone domesLlcally. 1echnology LhaL dellvers greaLer efflclency
economlcally creaLes wealLh for naLlons faclng energy poverLy. Conslder lndla where nearly 400
mllllon people lack access Lo modern elecLrlclLy, lnLroduclng clean energy Lechnologles ls ln LhaL
naLlon's own lnLeresL. Moreover, lmporLlng less energy also has naLlonal securlLy lmpllcaLlons for
every naLlon, developed or developlng. noL only LhaL, lncreaslng a counLry's efflclency Lhrough new
Lechnology lowers Lhe effecLlve cosL of energy, lncreases Lhelr global compeLlLlveness and can
produce valuable exporLs.

LasLly, we musL begln Lo Lake concreLe acLlons. 1he value of lnsurance agalnsL cllmaLe change ls huge,
even lf you're a skepLlc. 8ased on a recenL Swlss 8e sLudy, unabaLed cllmaLe change could creaLe
anywhere from 1 Lo 12 Cu penalLy ln many counLrles dependlng on Lhe magnlLude of Lhe
changes, so Lhere are several Lrllllon (uS) dollars aL sLake.
7
Whlle lndlvlduals may dlsagree on wheLher
Lhls cenLury's probablllLy of caLasLrophlc cllmaLe change ls 10 or 80, we sLlll need lnsurance. 1he
greaLer Lhe uncerLalnLy and downslde rlsk, Lhe greaLer Lhe need. lf Lhere ls a 0.1 chance our home
wlll burn down, we buy home lnsurance. Why noL planeL lnsurance? lnsLead of belng mlred ln
dlsagreemenL and flnger-polnLlng, we need Lo focus on Laklng concreLe sLeps now whlle bulldlng
momenLum for greaLer acLlon ln Lhe fuLure. 1he noLlon of noLhlng ls agreed, unLll everyLhlng ls
agreed" musL be seL aslde, oLherwlse, everyone wlll be worse off as cllmaLe change wlll be even
harder Lo relgn ln.
8
1he momenL a dynamlc and forward-looklng global pollcy ls ln place, far more
prlvaLe funds wlll flow lnLo new Lechnologles. 8y Laklng far more Lechnology shoLs on goal, Lhls wlll
vasLly lncrease Lhe llkellhood of dlsrupLlve 8lack Swan Lechnologles.


-,*..*/0. 1$)234*/0 '0) 56'37 8%'0 4$390/6/+: )$;$6/<,$04

7
Economics of Climate Adaptation: Shaping Climate Resilient Development
8
As discussed here: http://switchboard.nrdc.org/blogs/jschmidt/key_steps_on_global_warming_in_mexico.html

7

Cne of Lhe mosL slgnlflcanL and perhaps Lhe mosL underappreclaLed advancemenLs aL Copenhagen
was Lhe commlLmenL of emlsslons lnLenslLy reducLlons by Lhe largesL developlng naLlons. Chlna
pledged Lo reduce emlsslons per unlL of Cu by 40 Lo 43 percenL of 2003 levels by 2020, whlle lndla
commlLLed Lo a 20 Lo 23 percenL reducLlon ln emlsslons per unlL of Cu by Lhe same Llmeframe.
9

8oLh of Lhese counLrles made lL clear LhaL Lhese commlLmenLs would be achleved wlLh no flnanclal
asslsLance from Lhe ouLslde.

1hese counLrles are effecLlvely saylng LhaL Lhey wlll reduce Lhe raLe of growLh of Lhelr emlsslons ln
Lhe near Lerm-reflecLed ln a commlLmenL Lo reduce emlsslons lnLenslLy of Lhelr developmenL- as
Lhey brlng mllllons of people ouL of poverLy. Clven a 3.1 percenL world Cu growLh raLe,
10
Mcklnsey
has esLlmaLed LhaL Lhe carbon efflclency of Lhe world Cu needs Lo grow aL abouL 3.6 percenL per
year Lo meeL Lhelr recommended seL of global carbon reducLlon LargeLs.



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9
http://www.nrdc.org/international/copenhagenaccords/
10
McKinsey Global Institute, June 2008 projection through 2037 from Global Insight, extrapolated to 2050
11
McKinsey Global Institute, June 2008

8


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Worklng Lowards carbon lnLenslLy reducLlons now ls lmporLanL Lo bulld LrusL, confldence, and supporL
for Lechnologlcal lnnovaLlon Lo drlve even deeper fuLure acLlon. lL also enables key developlng
counLrles Lo become more efflclenL and compeLlLlve by lnlLlaLlng economlcally beneflclal carbon
reducLlon lmprovemenLs LhaL are ln Lhelr besL lnLeresL. ln facL, lL ls well known LhaL lnLenslLy
reducLlons can be beneflclal, ArL 8osenfeld, Lhe creaLor of Lnergy SLar ls a case example. As a resulL
of hls efforLs, Callfornla's per caplLa energy consumpLlon has noL lncreased slnce 1973 whlle Lhe
economy has grown rapldly, an achlevemenL now referred Lo as Lhe 8osenfeld LffecL. Powever, Lhe
sLaLe of clean Lechnologles ls noL aL a polnL where we can slmply deploy" ourselves all Lhe way Lo an
economlc ulLra-low carbon fuLure. Clven LhaL some Lechnologles are qulLe maLure, some are sLlll
uneconomlc, and oLhers are sLlll on Lhe drawlng board, we sLlll need Lo make slgnlflcanL Lechnology
progress Lo compleLely address cllmaLe rlsk economlcally.

1herefore, lL ls crlLlcal LhaL we bulld crlLlcal carbon reducLlon capaclLy. As shown ln llgure 2, shlfLlng
upfronL lnvesLmenLs Lo radlcal and lnnovaLlve Lechnologles may provlde less lmmedlaLe carbon
reducLlon, buL wlll drlve more cosL-effecLlve emlsslons reducLlons ln Lhe long Lerm. 1hls fronL-loaded
8&u lnvesLmenL develops Lhe compleLe seL of Lools" Lo reduce carbon qulckly. lL ls cheaper and
more effecLlve Lo fund 8&u of radlcal carbon reducLlon Lechnologles Lhan Lo aggresslvely
commerclally deploy all of Loday's marglnally cosL effecLlve or cosL lneffecLlve low-carbon
Lechnologles aL very large scale (alLhough many should sLlll be deployed where economlcally vlable,
or ln small mandaLed markeLs Lo LesL new Lechnologles and lncenLlvlze developmenL). 1o be falr,
some maLure Lechnologles are qulLe cosL effecLlve, such as llghLlng, lnsulaLlon and oLher efflclency
relaLed Lechnologles, buL Lhey rely on consumer behavlor, and are senslLlve Lo consumer borrowlng
raLes. 1he developmenL of a full sulLe of carbon reducLlon capaclLy Lechnologles glves Lhe world Lhe
flexlblllLy Lo rapldly drop emlsslons even furLher lf cllmaLe sclence lndlcaLes larger, more caLasLrophlc
changes are lmmlnenL.


9
1aken as a whole, Lhe landscape of clean Lechnologles can be separaLed lnLo Lhree groups: maLure
Lechnologles, early scallng Lechnologles and poLenLlal 8lack Swan Lechnologles. MaLure Lechnologles
such as wlnd, convenLlonal llLhlum lon baLLerles, and cane sugar/corn eLhanol are aL a polnL where
Lhey should noL need conLlnued subsldles. lor economlc maLure Lechnologles, lL may make sense Lo
provlde low cosL developmenL funds and aLLracLlve lnLeresL raLes for pro[ecLs ln developlng counLrles
(e.g., for wlnd pro[ecLs and land and foresL managemenL) where caplLal ls scarce. Meanwhlle,
llLhlum-lon baLLerles are sLlll Loo expenslve for boLh mass markeL elecLrlc vehlcles and mosL of Lhe
energy sLorage markeL. 1herefore, lL appears Lo be a less effecLlve use of funds Lo lncenLlvlze bulldlng
slgnlflcanL capaclLy where Lechnologles are marglnal and noL lmprovlng, as Lhey are ln Lhe uS and Lhe
developed world.

Second, Lhere are Lechnologles such as solar, nexL generaLlon baLLerles and celluloslc fuels where Lhe
Lechnology ls sLlll developlng rapldly. 1hese beneflL from lncenLlves and subsldles Lo bulld plloL and
demonsLraLlon scale lnsLallaLlons Lo march down Lhe learnlng curve. Many of Lhese Lechnologles wlll
noL scale well and wlll fall, buL enough of Lhem wlll be successful and prove Lhelr economlc scallng
ablllLy. 1hey wlll graduaLe Lo Lhe maLure caLegory and no longer need subsldles ln Lhe medlum Lerm.
MosL solar ls squarely ln Lhe mlddle of Lhls LranslLlon, subsldles are requlred Lo deploy solar Lhermal
and v ln mosL locaLlons, buL we wlll know over Lhe nexL few years whlch Lechnologles work and wlll
be markeL compeLlLlve wlLhouL subsldles. As such, Lhese solar subsldles should decllne as early as
2013-2020, or whenever Lhe cosL curve flaLLens ouL. Llkewlse, LLu llghLlng wlll noL need subsldles or
regulaLlon as Lhey become Lruly economlc wlLh rapld payback ln Lhe nexL few years.

LasLly and mosL lmporLanLly, Lhere are new 8lack Swan Lechnologles whlch have Lhe power Lo reseL
assumpLlons ln energy. Lxamples lnclude advanced energy sLorage LhaL ls 3-10x cheaper (cheap
enough Lo be palred wlLh large scale renewables), solar cells wlLh 30-40 efflclency and Lhln fllm
solar cosLs, advanced drop-ln blofuels LhaL are compeLlLlve wlLh oll sands and deep offshore oll, 30-
80 more efflclenL alr condlLlonlng, and 30-100 more efflclenL lnLernal combusLlon englnes. We
need as many shoLs on goal as posslble and publlc-prlvaLe parLnershlps modeled afLer A8A-L and
exlsLlng bl-laLeral agreemenLs Lo provlde fundlng for venLures all over Lhe world. Lven lf mosL of
Lhese pro[ecLs fall, each success has Lhe poLenLlal Lo dramaLlcally lmprove our chances Lo address Lhe
Lwln challenges of cllmaLe rlsk and economlc prosperlLy. AL Lhe very leasL we need mulLlple hlgh rlsk
and hlgh reward shoLs on goal ln all of Lhe Lop Len areas of energy producLlon and consumpLlon.

&/6*3:

1o summarlze, we see a few key crlLerla LhaL any carbon emlsslons conLrol sysLem musL achleve

MeeL global CC2 reducLlon LargeLs - any scheme musL converge upon Lhls LargeL value, be lL
330, 430, or 330 M worldwlde.
8e pollLlcally accepLable ln mosL counLrles - no scheme ls llkely Lo flnd global accepLance, buL
we musL sLrlve for an approach LhaL ls pollLlcally vlable for mosL soverelgn enLlLles and Lhus
mlnlmlzes opL-ouLs or free-rlders".
Morally accepLable - whlle Lhe concepL of falrness" ls open Lo debaLe, any sysLem musL be
falr ln asslgnlng Lhe responslblllLy for Lhe problem ln rough proporLlon Lo Lhe prlmary
polluLlon caused hlsLorlcally and prospecLlvely by each counLry. ragmaLlcally, falrness wlll
have Lo be deflned Lo be maxlmally buL noL unlversally accepLable.

10
uynamlc - worklng Lowards carbon reducLlons now ls lmporLanL, buL Lhe prlmary goal ls Lo
work Lowards slgnlflcanL carbon reducLlon capablllLy/capaclLy ln Lhe fuLure (even aL some cosL
ln Lerms of emlsslons Loday), and an ablllLy Lo reacL more qulckly as research lmproves and
safe LargeLs" geL deflned wlLh lncreaslng cerLalnLy. ln oLher words, lnvesLlng ln Lechnology for
fuLure carbon emlsslon reducLlons offers greaLer beneflLs Lhan Lhe reducLlon" of carbon
emlsslon Loday.

A global framework can avold many of Lhe challenges LhaL Chlna and Lhe uS are so concerned abouL
by lncenLlvlzlng 8&u lnvesLmenL ln dlsrupLlve Lechnologles, and lncludlng Lhe ablllLy Lo ad[usL LargeLs
as economles change, cllmaLe research maLures, and Lechnology evolves. 1here ls no way Lo predlcL
whaL Lechnologles wlll be developed now LhaL Lhe world's besL mlnds are focused revoluLlonlzlng
energy and clean Lech. ln 3 years, Lhe Lechnologles avallable could be compleLely dlfferenL, ln 10 or
13 years, enLlre lndusLrles could be creaLed (or desLroyed) as a resulL of Lechnology LhaL has noL yeL
even been dreamed. We have seen Lhls Llme and Llme agaln, wlLh Lhe lnLernal combusLlon englne,
Lhe alrplane, Lhe personal compuLer, Lhe cell phone, Lelecom lnfrasLrucLure, and Lhe lnLerneL. A
global cllmaLe LreaLy musL have Lhe flexlblllLy Lo reacL Lo dlsrupLlve changes, and sLlll provlde a sLable
markeLplace for moneLlzlng low carbon advances. 1o use economeLrlc models exLrapolaLlng pasL or
currenL Lechnologles ls llke maklng year 2000 forecasLs for cell phones ln Lhe uS ln 1980's wlLh
assumpLlons of 1980 Lechnologles, when cell phones sLlll had handseL cords! Case ln polnL, a 1980's
forecasL of 0.9 mllllon phones ln Lhe unlLed SLaLes by 2000 was wrong by over 10,000. We musL
lnvenL Lhe fuLure we wanL by LargeLlng 8&u efforLs aL our end-goals. We have done Lhls already ln
many oLher lndusLrles, dlsprovlng many pundlLs' forecasLs.

=/0362.*/0


Lnergy ls an even blgger challenge and opporLunlLy Lhan lnformaLlon and Lelecom. lf we harness and
moLlvaLe Lhese brlghL new mlnds wlLh Lhe rlghL markeL slgnals, a whole new seL of fuLure
assumpLlons, unlmaglnable Loday, wlll be Lomorrow's convenLlonal wlsdom. l predlcL Lhere wlll be 10
or more Coogle's ln Lhe energy space ln Lhe nexL Lwo decades. none of us can predlcL whaL new
Lechnologles wlll change Lhe world, lL may Lake 10,000 dlfferenL sLarL-up efforLs Lo flnd Lhose 10
Coogle's. 1here ls an easy way Lo predlcL Lhese 10,000 new efforLs as wlLnessed by Lhe doLcom
Cambrlan llke" exploslon. We have a clean dozen" ln our porLfollo whlch we Lhlnk each have a shoL
of belng a 8lack Swan, Lhe world would beneflL from anoLher 10-100 porLfollos llke ours.

ln Lhe end, whlle near Lerm carbon reducLlons are nlce, Lhey are noL as essenLlal as whaL l call black-
swan Lechnologles-lnnovaLlons LhaL dlsrupL our currenL Lra[ecLory and bulld economlcally feaslble
economlc carbon reducLlon capablllLy" Lechnologles. 1hese rlsky lnvesLmenLs lndlvldually have a
hlgh chance of fallure, buL Lhey also promlse an earLhshaklng lmpacL lf successful. 1he besL parL ls
LhaL developlng 8lack Swan Lechnologles ls cheaper Lhan deploylng currenL marglnally economlc lf
subsldlzed" Lechnologles and can be almosL enLlrely economlcally drlven by prlvaLe lnvesLmenLs.

Maklng Lhese lnnovaLlons a reallLy wlll Lake a change of mlndseL. 1o daLe, mosL of Lhe world's clean-
Lech lnvesLmenLs have been almed aL Laklng advanLage of governmenL subsldles, Lax breaks, and Lhe
llke. We need Lo Lhlnk much blgger, and lnvesL ln Lhe blockbusLer ldeas LhaL wlll rewrlLe Lhe hlsLory of

11
cllmaLe change. ln Lhe end, black-swan lnnovaLlons wlll reduce carbon economlcally on a scale LhaL
lncremenLal lnnovaLlons cannoL.

1he world's lnnovaLors are ready and wllllng. WlLh Lhe rlghL pollcy framework and enough
lnvesLmenL, Lhey wlll creaLe a low-carbon world LhaL ls vasLly more prosperous wlLhln [usL a few
decades. We can'L wrlLe a global LreaLy Lo creaLe clean clLles and wealLhy rural communlLles, buL we
can lnvenL our way Lhere on Lechnologles LhaL don'L Lry Lo defy Lhe laws of economlc gravlLy. We can
relegaLe peLro-dlcLaLorshlps Lo Lhe hlsLory books and save mllllons from Lhe ravages of rlslng sea
levels and expandlng deserLs. Cr we can keep on our currenL paLh of lneffecLlve pollcy and face
energy shorLages and dwlndllng resources.