Climate Bill to Help Unlock a $10trln Opportunity for American Businesses

The best US investment in 2010 won’t be made on the floor of a stock exchange. It will be made on the floor of the US Senate with the passage of a bill to cap our carbon emissions. A bill that will help unlock a $10trln investment opportunity for American businesses and launch what Thomas Friedman describes as the world’s next great global industry.

The following is a list of five trillion dollar business opportunities created by both passing a climate bill in the US and adopting a global agreement that, together, would limit greenhouse gas concentrations to 450ppm. This list includes over $3trln of profitable domestic opportunities for American companies. Investments that will help dramatically lower of dependence on foreign oil, pay for themselves in fuel savings, and make our products more globally competitive. In addition, this list also includes over $8trln in new export market opportunities for America's leading manufacturers that will help re-power the American economy over the long-term by growing millions of new clean energy jobs.  

1) Advanced Vehicles - Economic Opportunity $4.75trln

The IEA estimates that an additional $4.75trln needs to be invested in the development of advanced vehicles if we are to cut the CO2 intensity of the global car fleet by half over the next two decades. Roughly 70% of this investment ($3.35trln) needs to be made to build more efficient passenger cars, creating signficant growth opportunities for makers of electric vehicles, hybrids, and plug-in hybrids relative to business as usual (see graph below):

These investments should present solid business opportunities for domestic auto manufacturers, especially as the House-passed climate bill contains over $25bln for re-tooling and $25bln in low interest loans to develop these advanced vehicle technologies.

Another $1.35trln in incremental investment will also need to go into cleaner planes ($700bln) and heavy trucks ($650bln) during this time frame according to the IEA's analysis, areas where US companies already play a substantial role. 

In total, these global investments in cleaner cars are also expected to pay for themselves in fuel savings, reduce global oil demand by 14% (cutting OPEC revenues by $4trln) and lower global oil prices by 22% over the next two decades. Energy and national security benefits which are both good for America and good for the planet.

2) Building Efficiency - Economic Opportunity $2.55trln

Reducing heating, lighting, and cooling costs in buildings and reducing the energy intensity of the building materials themselves is expected to require an additional $2.55trln in incremental investment under the IEA's 450ppm Scenario. $683bln of this amount is expected to go into renewable power investments (see graph below):

Retrofitting buildings to reduce energy consumption and developing more efficient appliances and office equipment are expected to make up the rest of the opportunity set in the buildings space. Efficiency investments that are expected to save global consumers $1.2trln on their fuel bills by 2030 and a total of $5trln over their useful lives.  

3) Low-carbon Power Generation - Economic Opportunity $1.75trln

Investment in renewable-based electricity production is expected to total $4.7trln over the next two decades under the IEA's 450ppm Scenario. This represents just over 60% of total global power generation investments ($7.95trln) and a $1.75trln increase in renewables deployment relative to the reference case. Wind is expected to be the biggest beneficiary (investments increasing by $800bln relative to the base case) with all renewable sector investments more than doubling over this time frame as production costs continue to fall, making these technologies more competitive with their fossil fuel competitors (see graph below):

4) Industrial Efficiency - Economic Opportunity $1.05trln

Globally, industry will need to invest an additional $1.05trln on more efficient technologies in order to keep greenhouse gas concentrations below 450ppm. This increase in demand for efficiency investments creates a significant business opportunity for companies involved in waste heat recycling, process engineering, sensor equipment manufacturing, and the production of various other efficiency technologies for the industrial market. More than half of these investments are needed outside the OECD with the highest concentration of opportunities for new business seen in the energy-intensive industries such as iron and steel, cement, chemicals and petrochemicals and paper and pulp (see graph below):

5) CO2 Enhanced Oil Recovery - Economic Opportunity $1.1trln

According to a recent study conducted by NRDC, the House-passed Waxman-Markey climate bill is expected to help increase production of domestic oil by 10bln barrels by 2030. An increase in domestic supply of oil large enough to cut our dependence on foreign oil by 30%, employ tens of thousands of workers, and generate over $1.1trln in additional domestic oil revenue.

This is expected to be accomplished through incentives in the bill designed to help capture CO2 at coal-fired power plants which can then be used to recover an additional 20% of the "stranded" oil remaining in existing domestic fields using a common oil recovery technique known as CO2-enhanced oil recovery (CO2-EOR).

Working with Advanced Resources International, a specialist in enhanced oil recovery (CO2-EOR), NRDC forecasts that there would be more than enough additional carbon dioxide available from power plants alone under the Waxman-Markey climate bill to help recover 37bln barrels of this stranded oil from existing oil fields. Enough of an increase in domestic oil output to lower imports as a percentage of total demand to less than 50% by 2023 and to roughly 25% by 2050 (see graph below):

In total, these investment opportunities present a truly unique opportunity for American businesses and the American worker. Congress holds the key to unlocking $10trln in new global markets for American companies through the passage of climate legislation and the sooner they do so the sooner we can get to work "cleaning the world's clock in clean-tech."

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