Financing the Clean Energy Future: Panel from 2014 Investor Summit on Climate Risk

At the United Nations last week a panel of financial experts discussed the keys to quadrupling annual global investment in clean energy by 2030. The panel included my colleague Mark Fulton, who served as Editor of the new Ceres report – “Investing in the Clean Trillion: Closing the Clean Energy Investment Gap” – on which I had the privilege to serve as Lead Analyst. A full list of panelists is below; check out their thoughtful and provocative ideas on how to link capital markets to clean energy.

Watch the panel at the link below (to get to the start of the panel, fast-forward this video to 1:55, or an hour and fifty-five minutes in):

– Mark Fulton, Senior Fellow, Ceres; Founding Partner, Energy Transition Advisors
– Jack Ehnes, CEO, California State Teachers’ Retirement System (CalSTRS) (moderator)
– Lisa Carnoy, Head of Global Capital Markets, Bank of America Merrill Lynch
– Michael Liebreich, CEO, Bloomberg New Energy Finance

How many financial leaders does it take to quadruple investment in clean energy? – “Clean Trillion” report released at UN summit

What do Bob Rubin, Tom Steyer, Christiana Figueres, Richard Trumpka, and the NYS/NYC Comptrollers have in common?  They and 500 other global financial leaders were all at the United Nations last week for the release of a new Ceres report –  Investing in the Clean Trillion: Closing The Clean Energy Investment Gap – on which I had the privilege to serve as Lead Analyst (with my former Deutsche Bank colleague Mark Fulton as Lead Editor).

The report provides 10 recommendations for investors, companies and policymakers to increase annual global investment in clean energy to at least $1 trillion by 2030 – a roughly four-fold jump from 2012-13 levels.  Such an increase is the bare minimum necessary to limit future global temperature to two degrees Celsius (2 °C) above pre-industrial levels and avert the worst impacts of climate change.

ImageA list of the report’s recommendations are below, and you can read the full report (or much shorter executive summary) here.

Mobilize Investor Action to Scale Up Clean Energy Investment
1. Develop capacity to boost clean energy investments and consider a goal such as 5% portfolio-wide clean energy investments
2. Elevate scrutiny of fossil fuel companies’ potential carbon asset risk exposure
3. Engage portfolio companies on the business case for energy efficiency and renewable energy sourcing, as well as on financing vehicles to support such efforts
4. Support efforts to standardize and quantify clean energy investment data and products to improve market transparency

Promote Green Banking and Debt Capital Markets
5. Encourage “green banking” to maximize private capital flows into clean energy
6. Support issuances of asset-backed securities to expand debt financing for clean energy projects
7. Support development bank finance and technical assistance for emerging economies

Reform Climate, Energy and Financial Policies
8. Support regulatory reforms to electric utility business models to accelerate deployment of clean energy sources and technologies
9. Support government policies that result in a strong price on carbon pollution from fossil fuels and phase out fossil fuel subsidies
10. Support policies to de-risk deployment of clean energy sources and technologies

Megawords, not Megawatts: Introducing my New Monthly Podcast

This month I will begin podcasting conversations with leading professionals in energy, climate, and sustainability (tentative title for the series: Power Talk).  My aim is for Charlie Rose-style interviews that offer lively and informed discussion of key issues.   Unlike Charlie Rose, however, I hope to open up the conversation to include anyone eager to participate via phone, email, blog comment, or Twitter.

ImageMy first guest will be Eric Maltzer, formerly of the U.S. State Department’s Office of Global Change (i.e., America’s international climate negotiations team).  From 2005-2009 Eric served as a clean energy negotiator for this 20-person team and advised U.S. diplomats and foreign counterparts on energy and climate issues.  He also managed the U.S.-China climate portfolio through the EcoPartnerships forum and other initiatives.  Eric and I will be discussing the outlook for UN climate negotiations, the political landscape for climate policy in the US, and where China is headed on energy and climate issues.

Please share your questions for Eric via comments to this post, emails to, or tweets to @RCapalino.  Details to come on the exact broadcast date.  We look forward to hearing from you!


Eric Maltzer, currently an MBA student at MIT’s Sloan School of Management, was until August a Foreign Affairs Officer in the Office of Global Change (i.e., America’s international climate negotiations team) at the State Department. In this role, he served as a clean energy negotiator for the 20-person team and an expert resource on energy and climate change for U.S. diplomats and foreign counterparts.  Eric also managed the U.S.-China climate portfolio and the sub-national engagement portfolio in that office from 2010-2013.  Before joining the State Department, Eric was an environmental strategist in the Boston office of Esty Environmental Partners. Eric has a Master’s in Public Policy (M.P.P.) from Harvard’s John F. Kennedy School of Government and a B.A. from Yale University.

“Sometimes you don’t get to pick the perfect fight” – Comments on the Politics of Keystone XL

This week’s New Yorker profiles the movement prevailing on President Obama to oppose construction of the proposed Keystone XL oil pipeline.  To this excellent article, I’ll merely note the following: whatever the Administration’s conclusion as to whether this pipeline will “significantly exacerbate the problem of carbon pollution,” there remains a clear political rationale for opposing it as part of a larger climate strategy.  Withholding approval for Keystone XL could make it a bargaining chip in future negotiations over comprehensive climate legislation – thereby giving the President (or whoever succeeds him) sorely needed leverage with members of Congress from oil-and-gas states.


In his June climate speech the President reaffirmed his support for a “bipartisan, market-based solution to climate change, like the one that Republican and Democratic senators worked on together a few years ago.”  As detailed in another New Yorker piece from 2010, the last major effort to enact a “bipartisan, market-based solution” died in the Senate amid near-complete opposition from Republicans and weak support from Democrats in coal/oil-and-gas states.  Securing 60 votes for any future such legislation is likely to require every conceivable source of leverage; recall that the beginning efforts to court Republican and industry support for the 2010 Kerry-Graham-Lieberman bill included promises to, among other things, vastly expand offshore oil drilling along the East and Gulf Coasts and pre-empt the EPA’s approval to regulate greenhouse gas emissions under the Clean Air Act.

Unseemly (and, in the case of Kerry-Graham-Lieberman, futile) as this political horse-trading may be, it will be essential to shepherding any “bipartisan, market-based solution” to climate change through Congress (just as backroom deals were key to passing the Affordable Care Act).  The Administration ought therefore to be stock-piling every possible source of leverage to be used in future climate negotiations.  Continuing Republican efforts to force the President’s hand on the Keystone XL decision suggest the approval permit for this pipeline to be a potentially valuable chip indeed.  Even if credible climate legislation does not surface for a few years, the Administration could help lay the groundwork for its success by withholding approval for the Keystone XL pipeline.

Preserving Keystone XL as a bargaining chip in future climate negotiations will enable the Administration to compensate for some of its previous gaffes in this area.   During the 2010 push for the Kerry-Graham-Lieberman bill, the Administration repeatedly rolled out energy/climate policies favored by Republicans and moderate Democrats – expanded offshore drilling,delayed implementation of EPA carbon regulations, billions in nuclear loan guarantees – without extracting any cooperation in return.  This effectively squandered the inducements that Kerry-Graham-Lieberman could have used to solicit votes.  Approving the Keystone XL pipeline risks repeating that same mistake.  When comprehensive climate legislation again reemerges in the US Congress – a development that, however distant it may now seem, is the President’s own avowed goal – climate advocates will be in a stronger position if they can use pipeline approval as a means to bring reluctant colleagues to the table.

The idea of maintaining the Keystone XL as a politically controversial energy issue (similar to the status of oil drilling in the Alaska National Wildlife Refuge) is open to criticism.  Perhaps the Canadians will instead ship oil to the Gulf Coast by rail and/or build pipelines to export oil from their coasts (though a pipeline to the Gulf will always be more cost-effective than rail, and new pipelines within Canada will take years to build).  Perhaps the strategy will backfire and diminish support for action on climate change (though a grassroots “build Keystone” movement has yet to materialize).  Perhaps, after bowing to popular pressure to oppose the pipeline, it is unrealistic to expect President Obama (or any Democratic successor) to reverse the decision (though, as noted, past negotiations over comprehensive climate legislation have effectively put everything on the table).  Or, perhaps Republicans – though eager to torment the President over Keystone now – will simply never care about building a pipeline to Canada enough to endure the blow-back from climate deniers in their own party.  In my view, the need for all available leverage to pass future climate legislation justifies accepting these risks.

The grassroots anti-Keystone movement has succeeded at forcing President Obama to reconsider what had seemed a foregone conclusion.  At the end of the New Yorker piece, billionaire environmentalist Tom Steyer observes that: “Sometimes you don’t get to pick the perfect fight.  Sometimes, someone punches you in the face and you’re in the fight.”  As President Obama decides whether to approve Keystone XL, he ought to favor a decision that will strengthen his hand in the fight he does want – the fight in Congress for a market-based solution to climate change.  The demands of that fight suggest withholding approval for Keystone XL to be the politically smart move.

Tough Economics and Loose Nukes, not Environmentalists, Are Biggest Obstacles to Growth of Nuclear Power: Comment on Eduardo Porter NYT Column

In yesterday’s Times, Eduardo Porter makes the case for nuclear power as a means to combat climate change.  Though Porter is right to emphasize the potential role for nuclear power in reducing greenhouse gas emissions, he both misdiagnoses the causes of nuclear power’s current woes and overlooks legitimate risks associated with its scale-up.


Getting the story straight: Prospects for new nuclear power plants vary considerably across the globe.  The future for nuclear is bleakest in Germany and other European nations that have made political commitments to ban construction of new reactors and phase out existing programs (post-Fukushima, Japan may ultimately join this category as well).  The future for nuclear is brightest in China and other Asian economies in search of new (non-polluting, energy secure) sources of base-load power; through 2035, the IEA projects that developing Asian economies will add 147 GW of new nuclear capacity (an amount equal to nearly 40% of current installed nuclear capacity).  Somewhere in between Continental Europe and Asia is the United States, where the politics permit new nuclear development – Southern Company recently began construction on the first new US nuclear plant in three decades – but the challenging economics of nuclear have so far deterred investment in new reactors.

Bane of US nuclear industry is economics, not environmentalists:  Porter suggests that the US nuclear industry essentially never recovered from the public backlash following Three Mile Island and Chernobyl; one could label this the “Ralph Nader and Carly Simon killed the atom” thesis.  Regrettably, this does not correspond to reality.  Through 2009 the combination of high natural gas prices and concern about climate regulation led to talk of a “nuclear renaissance,” with utilities across the country planning dozens of new projects; what has done in (or delayed) nearly all of these projects is not a groundswell of environmentalist opposition, but a nosedive in natural gas prices – from $13/MMBtu in 2008 to $3.55/MMBtu today.

Current gas prices in the US make the cost of electricity from a new nuclear plant more than 60% more expensive than electricity from a new natural gas combined-cycle plant.  By depressing wholesale power prices, cheap natural gas is making it uneconomic to even maintain existing nuclear plants, let alone invest in new ones.  To wit,  the Department of Energy has yet to find any takers for the remaining $10 billion in loan guarantees it has set aside for nuclear projects.  Getting this money out the door – and two to three new reactors in the ground – would strengthen confidence that new US reactors can (with some level of government assistance, in at least some markets) be a sensible investment.

Can nuclear power be decoupled from nuclear weapons?:  Porter rightly emphasizes that the “merciless arithmetic” of climate change will be averted only through rapid global deployment of low-carbon energy sources.  Yet he overlooks how building new nuclear plants on the scale and time-frame necessary to affect climate change may increase proliferation of nuclear weapons.  The current technologies of civilian nuclear energy (enrichment of uranium and, in some cases, reprocessing of spent plutonium) and framework of governance over the nuclear fuel cycle (each country sets its own rules) do far too little to separate the virtues of nuclear power from the dangers of nuclear weapons.

In a 2009 paper titled “Balancing Risks: Nuclear Energy & Climate Change,” Princeton professors Robert Socolow and Alexander Glaser examine the tradeoffs surrounding a large-scale expansion of nuclear power.  To craft a scenario where new nuclear plants contribute significantly to reducing CO2 emissions (i.e. where nuclear becomes a “stabilization wedge“), the authors contemplate increasing global nuclear generating capacity four-fold over the next four decades – from 394 GWe in 2010 to 1,500 GWe in 2050.  A nuclear build of this magnitude will necessarily involve developing nuclear plants “in regions that are politically unstable today” – thereby, in the judgment of these two experts, creating “significant” additional risks of nuclear terrorism or even regional nuclear war.   Such perils underpin the authors’ conviction that – despite its potential to mitigate climate change – “the world is not now safe for a rapid global expansion of nuclear energy.”

As to what would make the world safer for a rapid global nuclear build-up, Socolow and Glaser recommend:

  • Greater progress toward nuclear disarmament: As of today there are still more than 20,000 nuclear weapons in the world.  Nuclear powers have been reluctant to trim their arsenals, and many countries without such weapons see getting them as the key to status and long-term security.  This logic reinforces the unfortunate relationship between civilian nuclear power and nuclear armaments.  Continuing the efforts of the Obama administration and others to rid the world of nuclear weapons will help build momentum for changes (discussed below) necessary to reduce the link between nuclear power plants and nuclear weapons.
  • An end to fuel reprocessing to separate plutonium: In order to ensure a reliable supply of nuclear fuel, six countries (chiefly France, India, Japan, and Russia) reprocess their commercial spent fuel in order to separate fissionable plutonium.   Separated plutonium, however, a critical ingredient for the production of nuclear weapons – hence vulnerable to being diverted to military uses  or acquired by terrorists.   Given that global uranium reserves are sufficient to enable a major expansion of nuclear power without the need for plutonium, Socolow and Glaser recommend phasing out reprocessing and moving all countries toward the “once-through” fuel cycle.
  • Uranium enrichment plants under multinational ownership and control:  Nuclear reactors need enriched uranium – that is, uranium with a sufficiently high content of the U-235 isotope.  While nuclear fuel from a commercial enrichment facility cannot form the basis of a weapon, the same facility can in principle manufacture weapons-grade “highly-enriched uranium.”  To reduce the risk of rogue enrichment facilities (such as Iran’s Natanz plant), Socolow and Glaser urge bringing all enrichment facilities under multinational ownership and control.  How to motivate countries to cede national ownership of the nuclear fuel cycle is a thorny issue.  That said, any strategy for scaling up nuclear power must include a plan to safeguard uranium enrichment plants.

Socolow and Glaser’s reminder that “nuclear war is a terrible trade for slowing the pace of climate change” is a necessary addendum to Porter’s conclusion that “if nuclear power is to play a leading role combating climate change, it should start now.”  Making nuclear power a part of the solution to climate change should start now – but, in addition to breaking ground on new plants (such as those needed to at least maintain the current 19% nuclear share of the US power supply), these efforts must include new technology choices and structures of governance that disconnect the growth of nuclear power from the spread of nuclear weapons.

Addendum for true energy nerds (more on the economics of nuclear):

What of Porter’s reference to the 2010 International Energy Agency (IEA) finding that, with a $30/ton price on CO2, “a new generation of nuclear power… is potentially the cheapest energy source of all”?  Though the IEA’s projections for Europe and Asia may be sound, note that the assumed natural gas price for North America ($7.78/MMBtu) appears high relative to both current and projected future prices; for example, the latest Energy Information Administration reference case for the US electricity sector does not see a natural gas price above $7/MMBtu until 2036.  Because fuel costs account for 75% or more of the levelized cost of electricity from gas turbines, the IEA’s gas price assumption for North America disadvantages the projected costs of gas-fired plants relative to nuclear plants.

Assuming instead a North American gas price around $4-5/MMBtu, then even with a $30/ton price on CO2, gas-fired plants with carbon capture and storage (CCS) are likely to be competitive with new nuclear plants.  My point here is not to dismiss new nuclear plants as a potentially cost-effective source of low-carbon energy (delays at projects such as Finland’s Olkiluoto 3 nuclear plant notwithstanding); rather, it is merely to qualify Porter’s enthusiasm about the projected costs of nuclear relative to other technologies (notably, gas-fired plants with CCS).  Rather than tout the competitiveness of nuclear in a world with a $30/ton CO2 price, the focus should be on legislative and regulatory efforts to actually make that $30/ton CO2 price a reality.