Former Vice President Al Gore discussed various topics during a March 1 “fireside chat” at the U.S. Department of Energy’s Advanced Research Projects Agency-Energy (ARPA-E) Energy Innovation Summit held in Maryland, including the need for a price on carbon, as well as what makes the millennial generation different from other generations.
Gore noted that the way value is measured in the market system is “deeply flawed,” adding that “the measurement of value excludes not only negative externalities like pollution, but also positive externalities. If we invest in education or … health care, that’s counted as an expense, but the benefits that come rolling back in over the years are not measured. We don’t measure the depletion of natural resources, so we have emerging crises with top soil and ground water, for example, and there are other problems.”
Noting his excitement to see innovation at ARPA-E’s summit, he said, “[T]he point of all this exercise is to remedy one of the blind spots in the market system and that is to allocate sufficient resources to explore the limits of what new technologies can do in helping us to save energy and if these stranded carbon assets are going to be replaced by renewable sources, we need better batteries, we need better solar cells,” for example.
He added, “I think ARPA-E has already proven itself to be a fantastic success in bringing some of these creative ideas to the point where they can then go into the marketplace.”
Of his investment work and Generation Investment Management LLP, Gore said that “hopefully, we’ll be able to continue proving the business case that if you fully integrate sustainability into the entire investment process, you not only do not sacrifice returns, you can actually improve returns and, fortunately, thus far, we’ve been able to do that over 10 years, which begins to be statistically significant.”
He continued: “[I]f you think of the value spectrum, everything that we deem valuable in our lives, in the economy, the portion of that spectrum that shows up … in the quarterly reports or the filings with the [U.S. Securities and Exchange Commission] or other regulators around the world, it’s a very tiny part of that spectrum. How does a company treat its employees, how do they deal with the communities where they’re located, their supply chains, the environment, health care – all of those things often turn out to be way more important in predicting the future trajectory of a company than the quarterly reports.”
Companies that adopt renewable energy and reduce their greenhouse gas emissions learn that doing so “improved their profits, they were saving money, and that is a lesson that is now very commonplace in the corporate world – when companies get into this transformation for one reason, they find out that there are a lot of benefits they didn’t count on,” he said.
For instance, he said, it is “much easier to recruit millennials and to get the best and brightest to come and work for them.”
The millennial generation is “way different” from earlier generations in that it is important for millennials to not only make a good salary, but to also work for “a company that is about more than just making money, they’re helping to make the world a better place,” Gore said.
Discussing his investment work, he said: “[O]ne classic question that we will frequently ask, almost always, do you have a shadow price on CO2? If you don’t, why don’t you? The world is moving in that direction, but even more importantly, CO2 emissions are a marker of inefficiency and when you develop systems and teams to really pay attention to that, it’s almost like putting on a magic pair of goggles that allow you to see waste and inefficiency that would otherwise be invisible to you.”
To this day, he said, 85% of all the energy used is from fossil fuels, and for a century and a half, it has been priced at an artificially cheap level because none of the externalities have been included.
“[A]s a result, we’ve had a century and a half of decisions involving a trade-off between spending more and being more efficient on the front end, or just absorbing the monthly energy cost at a higher level on the other hand,” he said, adding that almost always, that second choice has been made.
Now, the true cost of burning fossil fuels and its effect on the planet is beginning to be more accurately perceived, Gore said.
Seeing the exhibits at the summit “reinforces your sense that we can deal with it,” he said, noting that the costs for photovoltaics and wind electricity have decreased and that the costs for battery storage are also coming down.
All of those choices that were made over the last century and a half in favor of inefficiency and absorbing the cost of artificially cheap energy, “creates the biggest business opportunity in the history of the world and a lot of the new innovations on display here really are aimed at remedying those defects, collecting that low-hanging fruit, and doing it in an efficient way,” he said.
Noting that “[w]e are in the early stages” and there is momentum now, he said, “We’re going to win this struggle, but it matters a lot how quickly we win it.”
The longer it takes, the more hardship will be bequeathed upon future generations and “there’s a lot more that needs to be done,” he said, adding that there is still a lot of resistance from those who are heavily invested financially and “psychologically in the old, dirty carbon fuel economy.”
The exciting news, he said, is that here and in markets around the world, people are “saying, ‘Hey, we can actually transform the global economy, make money in the process, improve the quality of life and create tens of millions of new jobs, maybe provide that lift for the global economy that’s needed, and, as a byproduct, we can save the future of human civilization.”
Responding to a question on what role legislators should play, Gore discussed the need to “insist on fair competition and get rid of” subsidies for carbon-based fuels, for example, as well the need “to put a price on carbon.”
He continued: “Other companies … have to deal with their own waste disposal. Why is it different if it’s gaseous waste that destroys the future and we say to them, ‘Oh, use the sky, no charge, no problem, just spew it out there as much as you want.’ That’s crazy and we need to change that. So, the good news is with the Paris agreement, we are now beginning to move in that direction.”
Later in the discussion he noted that China, for instance, is going to adopt a cap-and-trade system and it is likely to link up with the European Union, adding, “That will be a tipping point for the global economy where cap and trade is concerned.”
Noting that he first proposed a tax on carbon 25 years ago, Gore said that he still thinks the best approach is a revenue-neutral tax on carbon, “but I think that it’s more likely in the international sphere that we will be able to implement the kind of cap-and-trade approach that China and the EU” are launching.
While it looks like they will be the ones to follow, he said: “California is leading, New York is now in the early stages of a process that may link them with California; the Canadian provinces are leading, Mexico is leading. It won’t be that long before North America has a continental cap-and-trade system; even if the U.S. national government doesn’t, I think that the states and provinces are going to link up. Now, President Obama’s Clean Power Plan is very, very important.”
Among other things, to the crowd at the summit, he said: “These are the best of times for innovation in energy. Your timing is perfect, you’re in the right place at the right time. Does that guarantee your success? You already know it surely does not because the marketplace is a wild West, very challenging, lots of competition, and a lot of you will fail.”
Those who succeed, though, will “have the great pleasure of doing well and doing good at the same time.”
Responding to a question on whether the momentum is irreversible, Gore said that while he is optimistic about the future, “it does matter a lot how we as a people are able to hold our elected officials and leaders to account and insist that they pay attention to science, that they don’t pretend the Earth is flat, or that the moon landing was staged on a movie lot, or that global warming isn’t real. It is real.”