By Kevin Parker and Mindy Lubber
Behavioral economists will tell you that the simple act of placing an electricity-consumption meter in plain view can substantially cut a home's energy use. The same goes for real-time miles-per-gallon meters in cars, which change the way we drive.
These findings tell us something about behavior: When the price of costly activities isn't hidden from us, we're more likely to pursue those activities prudently.
For too long, the free market's accounting system has disguised the cost of one of our most destructive activities: emitting pollution that is making the Earth warmer. It has done this by making the market price of emitting those pollutants zero. These costs have simply not figured into what we pay to power our factories, heat our homes and drive our cars.
That's why, outside of New York City's Madison Square Garden, Deutsche Bank unveiled in plain view a meter of sorts on human-caused climate change, the great challenge of our age. The bank activated a 67-by-32-foot electronic Carbon Counter where some 510,000 people see it daily. It monitors the real-time, cumulative pollution humans are emitting into the atmosphere, updated every tenth of a second by MIT's Global Climate Change Program and the National Oceanic and Atmospheric Administration.
The out-of-sight, out-of-mind illusion that polluting is free must end and it must end urgently, because the true cost of emitting greenhouse gases is far from zero.
Peer-reviewed science from every corner of the globe brings daily proof of warming global temperatures already melting glaciers and ice sheets, raising sea levels, disrupting agricultural patterns and requiring increased emergency spending from more extreme weather such as stronger hurricanes and prolonged heat waves and drought. That's why inaction in curbing this pollution — 800 tons going into the atmosphere every second — will be far more costly than acting now.
But that's where the good news starts:
First, we have the capacity to act.
Second, a bill taking action on climate and energy policy is moving through Congress.
Third, we have time — though scientists say we are moving perilously close to potentially severe climatic disruptions.
Deutsche Bank is part of a large wave of global businesses that understand both the bottom-line risks for business and the huge investing opportunity this challenge presents. A global transition to a clean energy economy is a tremendous opportunity to create millions of jobs, safeguard our health, build sustainable prosperity and energy security, and hand our children the planet they deserve.
This won't come without cost, so let's not muddle the picture with the false choices of minimizing or avoiding them: The only options now are between the price of investing in a safer future and far greater, far less productive spending on mitigation.
That's where investors and government come into play.
Investors need certainty and a level global playing field to act. They can get both from government through the clear market signal of establishing carbon-emission limits — limits that place a price on carbon pollution. That price will bolster energy-efficiency programs, renewable-energy sources and other low-polluting technologies and products. With the price of carbon pollution factored in, clean-energy alternatives to fossil fuels will quite rightly become far more price-competitive.
We shouldn't underestimate the challenge. The scale of investments needed to reduce CO2 emissions to the level scientists say is needed — a level that will limit temperature increases to 2 degrees Celsius — is quite substantial. The International Energy Agency estimates that $550 billion a year needs to be invested in renewable energy, energy efficiency and other clean energy technologies alone over the next two decades to meet that goal. Current global investments on these activities are less than a third of that.
Legislation with strong incentives and clear market signals for renewable energy, energy efficiency and other low-carbon technologies will help catalyze needed clean-tech investments.
In America that legislation now takes the form of the American Clean Energy and Security Act, sponsored by Reps. Henry Waxman (D.-Calif.) and Edward Markey (D.-Mass.).
Comprehensive legislation will boost America's economy, health and competitive future. Equally important, it will greatly bolster our country's ability to credibly lead the world on climate change. A major international conference to write new rules on emissions will take place in Copenhagen in December. Other major carbon emitters, especially emerging-market giants like India and China, will be unlikely to act unless the richest nation and largest greenhouse-gas emitter shows its own strong commitment.
What gets measured gets prudently regulated. The Climate Counter reminds us that we have gone too long without accounting for a major cost of building our prosperity. An honest accounting — honest with ourselves, our children, and our planet's fragile environment — is an essential cornerstone of our future prosperity. The prospect of building tomorrow's strong economy while simultaneously slaying its greatest threat should fill us with excitement.
Kevin Parker is head of Deutsche Asset Management and a member of Deutsche Bank group's General Executive Committee. Mindy Lubber is president of the Ceres coalition of investors, environmentalists and public-interest groups and director of the Investor Network on Climate Risk.