Last week’s signing of the Paris climate accord successfully returned international efforts on climate change to the media spotlight. As private investors in cleantech startups since 2006, Element 8 members have been following the developments since December very closely.
We are notably encouraged about the future of clean technologies in the wake of not just the agreement, but several other concurrent developments—developments that have not necessarily been in the limelight, but that deserve mention under the umbrella of progress sparked by COP21.
The Breakthrough Energy Coalition, announced on the eve of COP21, will funnel investment into the cleantech economy and shares the Element 8 dual mission of accelerating the transition to a cleaner, more sustainable world, while seeking a profit on those investments. The coalition is a $1 billion fund backed by leading philanthropists, entrepreneurs and CEOs of top US and global companies, with the goal of expanding clean energy investment and deployment.
It was joined by the announcement of the Mission Innovation initiative, in which the U.S. was joined by 17 other countries–including China—with a commitment to double government spending on clean energy research in the next five years.
Also announced in concert with the event was the partnership between the Compact of Mayors, a global coalition of nearly 400 mayors committed to reduce local greenhouse gas emissions, and the Covenant of Mayors, an initiative of several thousand local governments in the European Union committed to addressing climate change in their territories.
The Breakthrough Energy Coalition and increased support from federal and local governments are key steps in addressing climate change and reflect what we’ve seen in nearly a decade of angel investing in cleantech companies.
Perhaps most encouraging in the U.S. was a series of environment and climate-related bills that passed in a bitterly divided Congress in the wake of COP21: the extension of tax credits for the wind and solar industry; the reauthorization of the Land and Water Conservation Fund supporting conservation efforts; and even a reform of the Toxic Substance Control Act (albeit still in bicameral negotiations to iron out the differences in legislation passed by the two chambers).
The tax credit extensions, according to Bloomberg New Energy Finance, will support the addition of 20 gigawatts of solar power (which is more than every panel ever installed in the U.S.), while the wind credit will help contribute another 19 gigawatts of new generating capacity over five years.
“Combined, the extensions will spur more than $73 billion of investment and supply enough electricity to power 8 million U.S. homes,” wrote Tom Randall of Bloomberg BusinessWeek.
The deal reached in Paris, and last Friday’s signing, represent major strides in pledged emissions reductions globally. But the responsibility now lies with each and every country, state, and city, along with every company, university, research lab, and individual to act in order to make good on those pledges. Even if all of the Intended Nationally Determined Contributions (climate reduction targets set by individual nations) were enforced and commitment levels reached, it wouldn’t be enough to limit global warming to 2 degrees Celsius. This emphasizes the importance of the deals made along the sidelines of COP21 and domestic efforts such as the measures passed through Congress: climate change needs to be attacked from all angles.
These sideline deals also have a tangential, but—from our perspective—equally important impact: They are key steps towards correcting the existing structural incentives that subsidize unsustainable practices. Current structures in fact artificially hold back novel technologies in energy, waste, water, and agriculture. Incentives lead to innovation, which leads to job creation and subsequently growth. Signs post-COP21 point to the dawn of an era with corrected and renewed incentives, sparking sustainable growth.
If we have a complaint about COP21, it is that its singular focus on energy left a great number of other issues unaddressed. For instance, in part because of climate change, we face a looming water crisis globally, and by extension a looming food crisis.
At Element 8 we believe that cleantech investments should transcend energy technology. In fact, we renamed our organization from Northwest Energy Angels to reflect the importance of sustainability beyond energy. Since inception, we’ve poured more than $20 million into 57 companies that are at the forefront of developing a broad range of technologies, products, and business models to help meet the sustainability challenges we face.
From drought-resistant agricultural technologies, to water purification and treatment methods, to low-carbon chemicals and polymers, to less resource-intensive batteries, non-toxic chemicals and products, we peek around corners at solutions that do far more than simply mitigate temperature increases. They hold the promise to increase the health of the planet, and all of us who live on it.
So, several months after nearly 200 fellow countries stepped up to the plate, we are watching private investors following suit and local and regional governments across the globe making their contributions. This momentum is noteworthy—we would even be so bold as to say exciting—but all parties must keep their noses to the grindstone to effect the groundbreaking changes necessary to pivot the global trajectory.
Eric Berman is co-chair of Element 8 Angels, the first angel investment group in North America to focus exclusively on cleantech, and a leading funder of early stage companies across the continent.