The Court’s Green Light for Green Tech
In San Francisco last month, I found myself discussing the concept of carbon sequestration with my friend Kevin while he was giving his daughter Emma a bath. The fact that we were chatting about injecting carbon dioxide into untapped oil fields as we squirted water at a 2-year-old highlights just how trendy the U.S. green-tech market has become. Kevin is what you call a “serial entrepreneur,” who spots business trends and invests in start-ups before selling them and moving on to the next promising venture.
So when the Supreme Court ruled last week that the Environmental Protection Agency has the authority to regulate greenhouse gases linked to global warming, I knew that Kevin was busy calculating how soon he might be able to enter the bold new world of carbon capture and storage. The legal decision marked a watershed moment for the United States, with the nation’s highest court sending a powerful signal to the political and business communities that amandatory cap on carbon dioxide is no longer a matter of if, but when.
Years from now, Massachusetts v. EPA may be seen as akin to the Roe v. Wade ruling on abortion, in which the Supreme Court answered a question that U.S. politicians were unable to resolve. In this case, the justices stepped in to referee a scientific debate that had become so highly polarized that individual states decided to sue the federal government for what they saw as its failure to protect them from a possible future catastrophe.
Massachusetts’s attorney general had argued before the court that rising sea levels and more intense storms linked to global warming were threatening the state’s residents and their livelihood, and the court agreed. In the majority opinion written by Justice John Paul Stevens, the court said that the EPA’s steadfast refusal to regulate greenhouse gas emissions presents a risk of harm to Massachusetts that is both “actual” and “imminent,” and that “The harms associated with climate change are serious and well recognized.”
This is the sort of ruling that may finally give Congress the oomph to deal with climate change on its own. As Tim Profeta, director of Duke University’s Nicholas Institute for Environmental Policy Solutions, observed, the legal authority to act “is firmly established, and everybody in the political arena knows it. I think this debate has exploded it. It’s a pressurized system that’s had the lid taken off.”
And in fact, that’s what seems to be happening nationwide, as private equity firms pour millions into clean-energy projects in anticipation of stricter federal curbs on carbon dioxide. Investors put $2.4 billion into green start-ups in 2006, a 262 percent increase from 2005.
“If you ask me, the floodgates had already opened,” said Adam Wolfensohn, director of Wolfensohn and Co. in New York. “People have been investing in low-carbon projects as they’ve been seeing the writing on the wall.”
I happened to go to college with Adam, who in the early 1990s was a talented composer but is now — along with his father, former World Bank president James Wolfensohn — an investor in environmentally friendly projects such as sugar cane-derived ethanol from Brazil.
Adam is also preaching the globalwarming gospel to other clean-tech investors, having just made a film on the subject titled “Everything’s Cool” (billed on its Web site as “a real-life disaster movie”). Last month he showed the movie to clean-tech investors at the Sundance Institute, because these money-makers were eager for a crash course on the reality of climate change before opening their wallets.
President Bush made it clear last week that he’s not eager to impose an industry-wide cap on greenhouse gases, instead touting his administration’s proposed automobile fuel-efficiency standard, which aims to save 8.5 billion gallons of gas by 2017. “Whatever we do must be in concert with what happens internationally,” he told reporters. “Unless there is an accord with China, Chi- na will produce greenhouse gases that will offset anything we do in a brief period of time.”
But the majority of Supreme Court justices didn’t buy that. “Agencies, like legislatures, do not generally resolve massive problems in one fell regulatory swoop,” wrote Stevens, who further noted that “reducing domestic automobile emissions is hardly a tentative step. Even leaving aside the other greenhouse gases, the United States transportation sector emits an enormous quantity of carbon dioxide into the atmosphere.”
The immediate question before the EPA is whether it will grant a waiver to California that would allow it to regulate tailpipe emissions. The state has passed a law that would cut carbon dioxide emissions from new vehicles by a third by 2016. Automobile manufacturers are fighting this law in court. If they lose, the nation’s auto market will be transformed, because 10 other states have moved to adopt the same rules and two more states — Arizona and New Mexico — plan to follow soon. Meanwhile, Maryland’s legislature adopted them last week.
The answer from the EPA will not come instantly. Spokeswoman Jennifer Wood said the agency will “shortly” give official notice of a public hearing-andcomment period on the waiver, and this process probably will take a few months. But the Supreme Court has already said what it thinks of the administration’s argument that it can’t regulate CO from cars because it’s really the Transportation Department’s job to set fuel-efficiency standards for automobiles: It rejected it.
None of this administrative wrangling inside the Beltway bothers my friend Kevin, who has plunged ahead with his carbon capture-and-storage idea since we spoke two weeks ago. He has already put together a business plan with his partner, and they’ve been shopping it to firms up and down Sand Hill Road in Palo Alto, Calif.
“The venture capital community’s appetite for green-tech deals has skyrocketed since the Supreme Court ruling,” he told me on the phone last Thursday, with obvious pleasure. “People are comparing it to the Internet boom of 1999.”