The Least Risky Business Case

Cross-posted from

The report highlights the importance of driving energy efficiency, switching to electrification, and finally decarbonizing the electricity supply.

For the past two years, we have watched as the Risky Business Project expertly detailed the economic risks to the U.S. from unabated climate change. Now, this group, founded by co-chairs Michael R. Bloomberg, Hank Paulson, and Tom Steyer, has shifted its focus from the risks—which are increasingly being realized as costs—of climate change to the tremendous opportunity that reducing these risks presents to the U.S. economy. Sophisticated economic modeling and analytical rigor were hallmarks of the project’s work on the risks of climate change. Its new report, From Risk to Return: Investing in a Clean Energy Economy, meets the same high standard. It is a convincing exposition of the business case for a clean energy future, and shows that transforming to a clean energy economy is not a cost that we must bear, but an opportunity that we must seize.


From Risk to Return models various pathways for the U.S. economy as a whole, ranging from a business-as-usual scenario to various mixes of clean energy and energy efficiency. Like Rocky Mountain Institute’s 2011 Reinventing Fire analysis, it finds that transforming the economy will be cash positive. For instance, the results indicate that cutting carbon emissions 80 percent economy-wide by 2050 would return $150 billion more in fuel cost savings than the required capital investments. The analysis, like RMI’s, only includes commercial or near-commercial technology, making a striking business case with conservative assumptions. The authors state, “We can’t predict which new technologies will emerge in the next 35 years… The costs of creating a clean energy economy are thus likely to be lower—and the benefits greater—than we project.”

The economic modeling and analysis in From Risk to Return takes into account the co-benefits and feedback loops in both the business-as-usual and clean energy pathways in a way that captures the full costs and values of various possibilities for the total economic system. It recognizes the interconnectedness of the transformations that are just beginning, such as the rapid adoption of electric vehicles and the move to a smart electric grid that must be decarbonized in order for electric vehicles to reduce climate risk and which, in turn, can use charging electric vehicles to provide valuable grid services. 

The report states in no uncertain terms that “investing in clean energy can ensure American economic security and competitiveness for decades to come.” So it can, and increasingly is, for other nations including Germany and China. And though the upfront costs are significant, the report finds that they are manageable, especially compared with the costs of unabated climate change, but also in comparison with other recent transformative investments in the U.S. economy, such as those underpinning the computer and software industries.


The Risky Business Project’s analysis demonstrates that the future clean energy economy needs to be based on three pillars. In line with the thinking at RMI, the report highlights the importance of driving energy efficiency, switching to electrification, and finally decarbonizing the electricity supply. Of these three, it may well be that the dramatic reduction in final energy intensity of GDP based on a dramatic scale-up of energy efficiency and a further shift in the economy to services is the most challenging, as well as the most important. Taking a whole-systems view of the energy transition, including these three pillars, is a robust approach.

For the decarbonization of the power sector, the report lays out multiple scenarios. In our minds, a high-penetration renewables scenario, rather than reliance on increased nuclear power (which is too expensive) or significant deployment of carbon capture and storage (which is not happening), is the more likely outcome. The report correctly identifies that such high renewable penetration is no longer a technical challenge, but it may still overemphasize the need for larger-scale storage. Our analysis, and that of others like the National Renewable Energy Laboratory, has shown time and again that storage is only one of many balancing solutions for a reliable high-renewables grid.

The Risky Business report further notes, as others have, that vehicle electrification is critical to decarbonizing the economy; it also recognizes the less-well-known central role that making buildings more efficient must play—they account for 40 percent of energy use—especially in a warming world where energy for cooling will be in higher demand. And it identifies the great opportunity that exists at the end of life of long-lived infrastructure, and the critical importance of timing transformative investments correctly. 

Another point worth repeating is the need to stop putting clean energy investments at a disadvantage. Corporations with lucrative investment options are liable to unfairly judge such investments as though they were competing for the same dollars, instead of contributing to strategic climate goals. As the report makes clear, “Such practices limit many cost-effective investments in energy efficiency and clean energy technologies. A project may offer a reasonable payback within five to ten years, but that may not be competitive against a high hurdle rate.” In this state of affairs, investments that “analysis shows are cost-effective will not be made despite their clear benefits from a climate risk-reduction perspective.”


The Risky Business Project’s From Risk to Return report is an independent confirmation of RMI’s focus on market-based solutions to confront the climate challenge. Its modeling of clean energy and energy-efficiency pathways for the U.S. economy finds much the same opportunities as our Reinventing Fire analysis. But it is more than a confirmation because of the unparalleled authority of the experts behind it. 

These findings are presented not by scientists and engineers, but by three outstanding business leaders with distinguished track records in business and finance as well as in public service. When they write, “We, the Co-Chairs and Risk Committee of the Risky Business Project, are united in recognizing the need to respond to the risk climate change poses to the American economy,” and that reducing greenhouse gas emissions by 80 percent by 2050 in the U.S. and across all major economies “is technically and economically achievable using commercial or near-commercial technology,” it is another independent confirmation of the inevitability and direction of the energy transition. When they say the business case is real and compelling, then it is time to act.