Inaction Has Consequences

Actions have consequences. But so does inaction. This is particularly true in the field of climate policy. Environmental advocates have long complained that by failing to take decisive action in curbing emissions now, we lock ourselves into an unpalatable future of a warming world. The catastrophic floods in Pakistan demonstrate in chilling fashion what a climate-destabilized world might look like — in which flooding, drought, heat extremes, sea-level rise, and many other disastrous occurrences become increasingly common.

But inaction also has other consequences. In the gathering movement toward a greener economy, those who fail to invest in more environmentally benign technologies, products, and infrastructures run the risk of increasingly falling behind key 21st century innovations, economic opportunities, and job creation chances.

As Meera Bhaskar explains in the article below (originally posted in Worldwatch’s Revolt blog), a major international financial institution has now decided that it is better off not investing green funds in the United States. It is not too late to correct course, particularly if the Senate, and more generally the political leadership, demonstrate soon that they understand what is at stake.

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As U.S. Climate Policy Lags, “Green” Investors Take Their Money Elsewhere

The United States is falling further behind in the clean energy race. For the past year, U.S. climate and energy policy has been marred by a series of missteps and back-pedals, the most recent being the disheartening withdrawal of the Kerry-Lieberman bill from the Senate agenda.

Deutsche Bank Headquarters in Frankfurt, Germany – Source: Deutsche Bank

So far, the most vocal criticisms of U.S. climate and energy policy have come from environmental groups, taking the relatively passive form of critical fact sheets, briefings, and blogs. However, a recent snub from the international financial institution Deutsche Bank provides a grim preview of the negative implications that stagnant policy can have on the U.S. economy as a whole. In a Reutersinterview, Kevin Parker, head of DB’s Asset Management Division, expressed his exasperation: “You just throw your hands up and say…we’re going to take our money elsewhere.”

Parker’s division typically devotes a hefty US$7 billion of its total $700 billion in managed funds to climate change and energy efficiency products, an investment that would provide the necessary kick-start to a burgeoning green economy. Spurning the United States, Deutsche Bank instead decided to focus its green investment capital on China and Western Europe.

And who can blame them? China has already pledged $738 billion for renewable energy projects over the next 10 years, and European countries such as Italy and Germany have imposed ambitious emissions reductions targets and implemented feed-in-tariffs to encourage alternative energy sources. These actions show initiative, which is the main criterion Deutsche Bank uses to determine worthy investments.

In its final assessment, DB identified Germany, Italy, Spain, and China as the countries with the most potential for returns on green investment. Each of these target countries was chosen based on the “transparency, longevity and certainty” of its climate and energy policy. According to Parker, the United States didn’t even enter the discussion, and as a result only 0.06 percent of his fund’s $7 billion of green investments originated in the United States.

The news that China now has the world’s second largest economy is a powerful reminder of the mounting pressures in the global economic race.  Instead of viewing DB’s investment decision as a snub, U.S. leaders should see it as a wake-up call to catch up in the competition for developing a green economy. Increasingly, this will determine whether a country can maintain its edge as a world leader.

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