As a longtime participant in various aspects of the issues covered, I looked forward to the opportunity to listen to, interact with and learn from a number of creative minds grappling with the challenges and opportunities at the intersection of business and the environment. I was not disappointed.
Among my takeaways:
- Multinational companies, such as Procter & Gamble, continue to find value in deepening relationships with their customers. This is vital for those such as P & G, whose products can have an intimate place in people’s lives.
- Social media continues to change the game. P & G is discovering, in real-time, what I wrote about a decade ago in “Corporate Politicians”: the tasks of CEOs and elected/appointed government officials are merging. This is an inevitable result of the necessity to engage far greater numbers of stakeholders. Large enterprises now have communications functions operating 24-7, much like political campaign “war rooms,” covering the world linked via social media.
- Bill Gates was insightful, demonstrating tremendous capability as a strategic thinker. He has prioritized clean tech below education and health care, at least in part because he evaluates energy innovation as a longer term play.
- Gates cautioned that the information technology revolution may have made some people over-optimistic about energy sector innovation. The latter has significant barriers to entry, regulatory bounds, and sunk costs of legacy systems. Setting a profitable price point under such conditions can be difficult.
- Based on his experience in the nuclear power arena, Gates identified the U.S. regulatory process as potentially becoming an issue of international consequence. The lengthy permitting times in America are becoming a competitiveness issue. In turn, regulatory issues may come to be framed and renegotiated as competitiveness issues. In the absence of presidential initiative, global competition for cheaper energy will spur the USA to improve on-site permitting, transmission, storage and pricing of new technologies. Though Gates was focused on nuclear regulatory issues, the same trend may well be seen elsewhere: the stalemate among longstanding interest group antagonists may yield to a much wider array of stakeholders, reframing the issue and demanding results.
- Boone Pickens aptly summarized the emerging changes in energy policy worldwide: “There’s a big game going on… America doesn’t have a team.”
- The emergence of fracking has been an unanticipated game changer. It could only have happened in the USA, where innovation is prized–though the effects will be global.
- Some of the discussions of fracking moved rapidly from the technical to the theological, with familiar line ups. It appears that the result will be negotiation on technical and zoning arrangements, primarily driven by state governments. The reliance on state regulation is in part the result of longstanding political paralysis in Washington. From a perspective of environmental results, it may well be that states are able to move more rapidly, spurring greater innovation. The presumption that states are less able to handle such issues than the national government merits a new look in the 21st century.
Four overarching issues caught my attention. There was little or no direct discussion of them, though their implications were ubiquitous:
Carbon Taxes: Almost any economist, business person or environmental advocate will acknowledge, at least privately, that pricing carbon through a tax mechanism would be a superior approach to traditional regulation. With cap-and-trade approaches discredited by disappointing political machinations in Washington in recent years, will carbon taxes rise on the policy agenda? If so, will they be considered in the context of broader tax reform?
Triumph of Economics as Environmental, Energy Driver. In recent decades there has been an ongoing struggle in the policy arena between those who believe that capitalism is inevitably environmentally destructive, and those who see capitalism as providing the best source of future environmental progress. As one of those in the latter camp, the conference was a reminder of just how far the latter view is prevailing today. The key task, as illustrated at the conference, is determining how businesses can best serve a range of social goals. Doing so is, increasingly, a competitive advantage amid 21st public and stakeholder expectations.
Generational Change. A conference of this nature inevitably tends to include a strong representation of middle-aged and older people. Nonetheless, the participation of younger people was striking, particularly among those representing new ventures. It’s a sanguine indicator that the melding of energy-environment-economics is ongoing, becoming part of the accepted wisdom. Interestingly, a Washington Post analysis of recent polling results, “Young Americans less interested in the environment than previous generations,” was released shortly before the conference. I encountered some informal discussion of the article, with several people expressing concern about its findings. By contrast, I view it with less alarm. The article–was it written or edited by a Boomer?–framed the issue in terms of longstanding political understandings. My experience is that young people tend to assume that environmental protection is a shared value. They are also skeptical of the contemporary practice of environmental politics in the United States–as well they might be. They may also be tending, implicitly or explicitly, toward the conclusion that continued environmental progress is a matter better addressed in business than government. After all, young people born after, say, 1980, may have limited experience with government as an effective force for innovation and accountability.
Presidential Leadership. No matter how much innovation and strategic thinking emerges from the private sector, government has an important role. The ongoing, decades-long absence of effective presidential leadership is troubling. It is not an exaggeration to say that our national future is greatly affected by decisions being made–or not being made–on matters relating to diversity of energy sources, updating the electricity grid, renewable energy options, and so on. Though this was not discussed directly as part of the conference agenda, it cast a long shadow across the proceedings.
2012 ECOnomics Conference Takeaways