IT vs Fossil Fuels

Who is leading the New Industrial Revolution?

Background - April 28, 2010
IT companies have a central role to play in the creation of an entirely new platform of how we produce, deliver and use energy.

Just as the power of the internet has made millions of new video producers, journalists, and authors, IT energy technologies have the potential to create a decentralized system of energy production, paving the way for a significant increase in renewable energy and putting the end consumers in better command of their electricity use.

Energy Revolution vs Slow Transition?

The scientific urgency of climate change demands that we need a clean energy revolution, not a slow transition. The good news for the IT companies, a revolution not only provides for a healthy planet, but tremendous business opportunities. But it will require strong government leadership to make it happen. This story is one quite familiar to the history of the IT industry, which itself benefited from the adoption of strong government standards to allow the industry to grow beyond the domain of a select few companies to become a new platform of entrepreneurial innovation and job creation.

Match Up: IT vs Energy Companies

The shift to an IT enabled clean energy system is not going to happen without a fight. Changing the status quo from an energy system that has been dominated by the fossil fuel companies will require strong government leadership and transformative new policies to drive the shift to a clean energy economy.

While the recent surge in “smart grid” technology and IT-electric utility partnerships are an important beginning, simply making the current dirty energy platform smarter or more modern is not enough to reach the level of reductions needed. We need a revolution in how we produce and consume energy.

Differently from the other sectors the IT industry has transformed, the energy sector is the much larger, more entrenched, and far more politically powerful. Fossil fuel energy companies have benefitted enormously from the status quo, and are at best interested in a slow transition in order to maximize their profits and investments (i.e. electric utilities), with little interest or appetitite for speeding the demise of a current business partner, and at worst willing to fight to the death any policies that would significantly reduce demand for their primary product (ie:oil and coal companies).

While big energy companies are long known for their ability to wield political power in Washington, D.C., the political power of IT companies has increased significantly in the past 10 years, as its economic footprint has grown dramatically and political donations have increased. Though fossil fuel companies are more powerful politically in terms of dollars to U.S. political system, IT companies can provide some of the strongest evidence of how environmental performance is also good business, as highlighted by IT companies occupying 9 of the top 20 slots in Newsweek's Fortune 500 Green Index.

Key Companies Employees Annual Revenue Fortune 500 Rank Newsweek "Green" Rank
Cisco Systems

Google

HP

IBM

Microsoft

66,000

20,000

321,000

398,000

91,000

$39,540M

$21,795M

$118,364M

$103,630M

60,420M

57

117

9

13

35

12

79

1

5

31

Duke

Excelon

FPL

PG&E

18,000

19,000

14,000

21,000

$13,212M

$18,859M

$16,410M

$14,628M

204

134

154

176

490

329

447

66

AEP

Chevron

Exxon Mobile

Southern Company

21,000

66,000

104,000

26,000

$14,442M

$263,159M

$442,851M

$17,127

180

3

1

149

494

371

395

492

Round 1: US Congress Climate & Energy Legislation

The legislative debate in 2009 following the election of U.S. President Obama started with the strong potential for setting a meaningful standard for reducing greenhouse gas pollution and kickstarting a transformation of the U.S. energy system toward a clean energy economy.

Yet despite IT industry analysis that identified putting a price on carbon was an essential policy change in order to spur innovation and drive the deployment of "smart" energy technologies, US IT companies did not use their political influence and significant access to elected officials to demand stronger government reduction committmentsand energy standards needed to drive the clean energy revolution.

  Lobbying Expense 09 Campaign Contribution 2008 Energy Lobbying Reports ACES Lobbying Reports ACES Rank in Lobbying
Cisco Systems

Google

HP

IBM

Microsoft

$1.2M

$4.0M

$3.7M

$5.4M

$6.7M

1.4M

1.6M

1.1M

1.1M

3.3M

1

16

2

2

1

0

1

6

5

0

NA

?

8

8

NA

Duke

Exelon

FPL

PG&E

$5.8M

$4.5M

$2.5M

$6.2M

$685k

1.3M

$879K

$385K

30

11

11

4

17

9

9

9

1

1

1

1

Exxon Mobile

Southern Co.

Chevron

US Chamber of Commerce

$27.4M

$13.4M

$20.8M

$144.3M

$1.4M

$1.1M

$1.1M

....

23

47

12

4

21

27

11

8

1

1

1

26



In absence of a strong clean energy business voice, the policy debate was instead framed by the utilities and other large polluters who want a slow transition that will largely persevere their monopoly position, and continue to heavily rely on fossil fuels. The American Clean Energy and Security Act (ACES, H.R. 2454) which ultimately passed the U.S. House of Representatives was substantially weakened as a result, and would at best push a slow clean energy transition, not drive the price on carbon pollution that would drive a revolutionary demand for clean energy technologies, and at worse delay such a transition for another 10 years.

Round 2: Copenhagen

In the lead-up to Copenhagen, IT leaders, such as Ericsson, Dell, Microsoft, and Nokia, strengthened their engagement in the climate policy debate. IT companies arrived at the UN climate summit eager to highlight the potential of IT technologies to reduce emissions. However, IT companies failed to express a clear definition of specific policy goals and global reduction targets, which they must do if they truly hope to catalyze a market shift towards carbon-cutting technologies.

IT companies must engage throughout the year at the national and international level if we expect to get the policies in place to drive the low carbon economy and deliver a meaningful outcome at COP16 in Mexico at the end of the year. If they really believe in their solutions and the business opportunities a low-carbon economy will bring them, the IT companies should speak with much greater authority and a common voice.

Cisco's CEO John Chambers seems to have gotten the take home message to businesses from Copenhagen, when he said simply "make yourself (politically) relevant."

Overall, Version 3 scores show some increased frequency in policy advocacy activity from the IT brands, most notably around the UN Climate Summit in Copenhagen. However, there has been little improvement in the quality of advocacy leadership, expressing a need for more robust policy positioning across the sector.

The days when just cutting your own emissions or offering products that are less harmful to the environment was good enough are over. In the climate battle the next step for corporations is to choose sides in the biggest issue facing the planet.

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