Funding Basic Science

One of the public sector's most important influences on the future of sustainability comes in the form of support for basic science. Why? Because in an increasingly challenging world there is a fundamental need to understand basic environmental processes in order to effectively manage anything, be it a household, a nonprofit organization, a multinational corporation, or a government agency. Decision makers must have insight into the resources and inputs that sustain their organizations or businesses. The resources we currently rely on most heavily are fixed and finite. Environmental and earth system processes are complex and not yet completely understood. Scientific research is required to continue to advance our knowledge of these systems so that we can ensure our ability to sustainably utilize them in the long run.

We are significantly more advanced in understanding the functioning of our economy than we are about how our environment is working. The gross domestic product (GDP) indicator has been around since the 1930s but there is still no such all-encompassing measure for environmental quality and planetary health. Basic environmental science and earth observation are the prerequisites to developing such an overall sustainability measure. Therefore, we must expand the collective understanding of natural resources, earth and environmental processes, and biological systems through additional public funding of basic research (U.S. Congress Joint Economic Committee, 2010, 4).

Many innovative cost-saving public programs would not be possible without a solid understanding of science. If we do not make the investment in the basic scientific research needed to make complex decisions regarding the planet's finite resources and sensitive services, a reduction in the planet's ability to produce goods and services is only a matter of time. We need to dramatically increase funding for basic and applied science, and focus attention on research and development in earth observation, energy, food, water, and other areas that can have an impact on sustainability.

One of the great strengths of the United States is our large number of research universities. In the post–World War II era, our country established an effective partnership between government-funded basic research and it's application by the private sector in a range of technologies, including computers, cell phones, the Internet, and, of course, a host of breakthroughs in medicine and medical technology (Bernanke, 2011). Much of the economic growth of the past hundred years directly results from this type of technological development. Government is especially crucial in funding basic science that is too far upstream from products and profits to generate significant private R&D investment (U.S. Congress Joint Economic Committee, 2010, 2). Government is also needed to help bridge the often-wide gap between basic and applied research.

Government-sponsored research can make a tremendous difference to qualified scientists. Let's look at an example from the field of earth systems science. The scientists at the Earth Institute's Lamont-Doherty Earth Observatory are among the world's top environmental scientists, but they are spending an increasing amount of time away from their laboratory and field-based research projects to draft the numerous research proposals required to keep their teams funded. The competition for limited science research funding is getting more intense all the time. While resource scarcity can stimulate important discipline and can help ensure efficiency, too much funding scarcity can endanger the quality and creativity of science.

We also need to develop the organizational and institutional capacity to both understand the planet's conditions and to develop the technology needed to mitigate the damage we do to it. These measurement and research tasks are basic governmental functions that must be funded and directed by public policy. The private sector and universities will do much of this work as contractors and grantees, but the long-term perspective requires government funding, and the connection to our long-term security and safety makes planetary science and basic research a government concern.

The private sector is clearly best at making and marketing renewable energy resources, and it will play an important role in commercializing government-funded research; however, it will not fund the necessary R&D on its own. Government must fund the basic science, research, and development of new renewable energy and energy efficiency technologies. A number of analysts and elected leaders have called for a “moon-shot” project to develop renewable energy technology. This is a focused effort, funded by government to develop a few specific technologies. Laptop computers, jet engines, cell phones, satellites, and the Internet are all examples of government-funded technologies that have grown into massive private businesses. We need the same resources once spent on shrinking computers for missiles and spacecraft to be devoted to developing low-cost, non-fossil fuel–based energy.

Support for basic environmental science research should not be seen as a conservative or liberal issue. Supporting scientific research is a fundamental role of government similar to national security, emergency response, infrastructure, and criminal justice. The quest for fundamental knowledge has allowed us to improve our standard of living and holds the promise of a sustainable planet, free from extreme poverty. Reducing the funding base of this research is a threat to our long-term economic growth. As former Federal Reserve Chairman Ben Bernanke stated in a speech on promoting research and development, “innovation and technological change are undoubtedly central to the growth process” (2011).

Basic and applied scientific research can uncover new policy options, lead to cost savings in unexpected ways, and can help make sense of sometimes conflicting data or information. Keeping the public safe and secure is the quintessential governmental function. Damage to the environment needs to be seen as a life-threatening risk to the security of our families and communities.

Funding Infrastructure

Just as government built ports, canals, dams, railroads, and highways—the infrastructure of the 19th and 20th centuries—it must build the energy, communications, research, waste, and water management infrastructure needed for the 21st century. The issue of funding infrastructure becomes even more important as we consider the impacts of extreme weather events due to climate change. As we work to transition to a sustainable economy and begin the long process of reversing the causes of climate change, we will also need to adapt to the impact of the climate changes already under way—changes such as powerful hurricanes that can bring down power lines, intense rain storms that can inundate soil and cause rivers to overflow their banks, blizzards that can damage our roads and buildings, and droughts that can cause fires and famines—threatening our lives and livelihoods. As these events are predicted to happen with greater frequency and intensity, government will be expected to meet those challenges with smart and timely action.

Think about the public sector's leadership in building the U.S. transportation infrastructure, from the Erie Canal to the interstate highway system. In our home city of New York, government worked with the private sector to build the mass transit, water, and sewage systems. During the Great Depression, President Franklin Delano Roosevelt created an expansive public works program to put men back to work. The Public Works Administration (PWA) electrified rural America; it built airports, roads, bridges, tunnels, sewage systems, hospitals, and schools, many of which continue to serve local communities. After World War II, President Eisenhower asserted that “a modern, efficient highway system is essential to meet the needs of our growing population, our expanding economy, and our national security” (White, 2012).

Today, not only do we need to repair and rebuild existing infrastructure like dams and bridges, we need to invest in the infrastructure of the future such as:

• Smart grids
• Public charging stations and related infrastructure to support electric vehicles
• High-speed railroads and other advanced public transportation systems
• High-speed internet access
• New, more efficient waste and water systems
• Green infrastructure systems that utilize natural ecosystem services to support traditional infrastructure systems

Much of the need for government investment in infrastructure is centered on renewable, smart, distributed energy systems. We know that renewable energy has the potential to radically change the energy business. While some large-scale organizations will always be part of the energy industry, we are seeing the start of decentralized, distributed generation of energy. Although the conventional wisdom tells us that solar power, battery technology, and smart grids are far in the future, we are only a breakthrough or two away from a new age of decentralized energy technology. Large-scale implementation of smart grid technology would make it possible to accelerate this trend. This indicates a latent market that could expand rapidly following a major technological advance in solar generation or energy storage technology. The proper infrastructure to take advantage of these breakthroughs must be in place, and we need government to assume its historical role to help make this happen.

An important advantage of decentralized, distributed generation of energy is that it is less vulnerable to catastrophic, large-scale disruption (Umberger, 2012, 191). As our lifestyles require more and more energy, even a few days of disrupted supply can have a significant negative effect on quality of life. After Hurricane Sandy, many suburbanites in the Northeast went out and bought electric generators and gasoline tanks to keep their homes powered during and after storms. A solar generating system in the home, with an advanced storage battery, would be a cleaner, more convenient way to do the same job.

Climate resiliency or adaptation is one area of focus that lately puts the spotlight on the need to improve our national, state, and local infrastructure, and also consider the role that government plays. The risk of disaster does not mean we should abandon our coastal communities and head for higher ground. It's not clear that any area is truly out of danger, but recent events make clear that we must develop more resilient homes and infrastructure along with a more robust national program of emergency response and insurance.

Our buildings and infrastructure must be made more storm resistant. Over the past decade, most of our shore communities on the East Coast have been changing building requirements. For example, since the devastation of Hurricane Sandy in October 2012, new homes in Long Beach, New York, are required to have their living quarters raised off the ground (City of New York, 2013). Similarly, many people plan to create utility rooms to keep hot water heaters and boilers above the basement to protect them from flooding. Building new infrastructure (and enhancing our current systems) is one of the key building blocks toward a sustainable economy, and the public sector must embrace its critical role in developing these systems.

Providing Incentives for Private Investment

Government ought to employ a variety of market-based tools to support renewable energy and a more sustainable economy (Caperton, 2012, 2). Some of this comes in the form of direct taxes, while in some cases, government uses other incentives, like tax credits to promote or discourage certain behaviors. One way to address the energy issue might be to have energy prices reflect their true cost, so consumers and businesses directly absorb the costs associated with fossil fuel extraction and burning, including climate change, poor air quality, and serious health conditions. This would adjust the cost calculation for both renewables and fossil fuels. Examples of indirect taxes on fossil fuels include efforts to limit car emissions (e.g., fuel taxes, purchase or registration taxes, and congestion charges). Similarly, taxes on electricity or water consumption (e.g., electricity taxes and water fees) can be used to charge for externalities associated with wasteful or excessive usage. Taxes are almost universally recommended by economists as the most efficient mechanism to induce change in the market, and taxes are among the most transparent policy mechanisms available to governments; however, they are often politically infeasible (like a federal carbon tax in the United States) and resisted by elected officials.

The federal government has the extremely powerful tool of the tax code to adjust the cost-benefit calculus of organizations seeking to implement more sustainable practices. The goal should be to provide incentives that encourage the more rapid development of sustainability practices. This is not a new idea. Our very complex tax code is used to motivate a wide variety of economic behaviors. In the case of sustainability, communities, households, and businesses must be encouraged to become renewable energy generators and, when used properly, tax incentives can be extremely effective in changing behavior. One visible example is that of home ownership. In 1940, 43.6 percent of all American households owned their own homes. By 1960 that had reached 61.9 percent (U.S. Census Bureau, 2011). This was made possible by making mortgage interest and local property taxes deductible from income tax, and by the development of government-backed mortgage insurance.

During the past two decades, lax government regulation of the financial services industry led to high-risk behavior and, in some cases, outright abuse of the financial systems, which caused massive foreclosures over the past several years. The program had worked exceptionally well for more than 60 years, but when government abandoned its critical oversight, the private sector indulged in excesses that prioritized short-term gains with little regard for negative long-term impact. To advance sustainability, we need ongoing oversight as well as the creative policy to increase the percentage of people generating energy from renewable sources.

The transition to lower cost and plentiful renewable energy will happen and the private sector will deliver the necessary new technology. But the pace of change can be accelerated with carefully designed and targeted government policies. Subsidies, which are already characteristic of energy exploration and production policy, can be revisited to encourage the adoption of clean and smart technologies (UNEP, 2008, 2). For example, the current oil depletion allowance enables oil companies for tax purposes to treat reserves in the ground as assets that will eventually be exhausted (Leber, 2013). A percentage of the value of the asset is subtracted from a company's taxable income. The rationale for this subsidy is that once the oil in a well is pumped out, we want to encourage industry to dig another well. This made good sense when fossil fuels were our best option for generating a resource as critical to the economy as oil. It may even make sense as we begin the transition away from fossil fuels, but we must rethink this overall strategy and look to similar long-term methods to support renewable energy and the technologies that support it.

In the case of energy the important issue is: What types of subsidies are needed? The issue of the oil depletion allowance revolves around the need to attract capital to oil drilling and the degree to which our energy mix continues to require petroleum. Since capital flows toward the highest or safest rates of return and need not be invested in America, public policy must sometimes be used to encourage private sector investment in areas of national interest. We believe renewable energy and the supporting technologies of sustainability are worthy of such national investment.

Public policy can also be used to address challenges with financing energy efficiency and renewable energy. Financing remains a significant hurdle for widespread adoption of low-carbon energy technologies despite availability of capital for other purposes. Tax credits and mechanisms like guaranteed loan programs can help overcome this by lowering financial risks associated with clean technology development. These types of programs leverage public dollars into larger investments in the private sector. Feed-in tariffs, which provide long-term contracts to producers of renewable energy and offer price certainty needed to finance projects, are one of the most common policies to encourage renewable energy generation. At least 90 countries, both developed and developing, have some system of feed-in tariffs (REN21, 2012, 118). The U.S. does not have a national feed-in tariff, though many states are adopting feed-in tariffs or similar programs.

It is time for fact-based public debate on the type of policies that are needed to speed the transition to a fossil fuel–free economy. We need policies that encourage companies, localities, and even families to adopt new technologies as they are brought to market. Market-based tools can help move the United States toward energy sustainability.

Setting and Enforcing Rules to Protect the Environment

In the United States, we've learned that there is no such thing as complete freedom to do whatever we want to do. In order for democratic values to persist successfully, we also need laws, rules, and regulations to provide structure and safety. In a democracy, citizens are free to voice their opinions and contribute to the development and enforcement of those laws and regulations. Those who enforce laws are also subject to and held accountable for those rules (Stroker, 2012). In a democracy, citizens are involved in the process to adopt new legislation, which aims to confirm that people are willing to accept society's rules and ensure that people are well served by laws that benefit the general public (Bakken, 2014). The government provides societal structure in a way that is meant to serve citizens' values and interests, and contribute to the public good (Tomain and Shapiro, 2014). We may want to drive fast, but we follow the rules of the road because these rules benefit everyone—ourselves included.

These same concepts apply to protecting the environment. In the United States we've learned that protecting the environment requires laws, rules, and regulations. Why should a company be able to pollute the air that we breathe or the water we drink? Valuable and vulnerable natural resources and public health must be protected from those that ignore or neglect the negative environmental externalities associated with their actions. Incentives to stimulate behavior are not always sufficient. Sometimes we need the rule of law to draw a line in the sand distinguishing right from wrong. In addition to making our environment less toxic, environmental regulations reduce the cost of health care attributed to environmentally induced illness and stimulate technological innovation.

Environmental regulations follow the same logic as traditional limits on the free market. Economic regulation and rules on fraud and protection of private property limit free enterprise. Businesses know they must operate within a system of law; that system both constrains and protects them. The regulatory process is a bargaining process where rules are proposed and adjusted to minimize costs while maximizing benefits. All environmental rules go through a process of give and take. Some disputes are settled by changes in rules as political leaders respond to industry demands. Some are settled in the courts when the Environmental Protection Agency (EPA) cannot find a way to get environmental groups and industry to compromise.

During nearly half a century of back and forth, we have developed an imperfect but effective process of environmental regulation that has resulted in cleaner air, safer water, and a nation that knows how to reduce pollution while growing its economy. While economists and policy analysts will advocate more creative and economically efficient climate policies such as carbon taxes and cap and trade programs, there is something to be said for a policy approach with a proven record of success. The landmark environmental policies formed in the 1970s—the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and Superfund, among others—continue to serve us well, enabling us to grow our economy while ensuring environmental quality.

Overall, the U.S. EPA has done a reasonably good job of developing, enacting, and enforcing environmental regulations. Policies made in Washington are coordinated by the agency's 10 regional offices and then implemented by state governments under delegated authorities. Local businesses and environmental groups weigh in and sometimes sue during the implementation process. No one would ever call this process rapid and efficient; but it does work. The effectiveness of U.S. environmental rules are dramatically demonstrated by pictures of Pittsburgh, Pennsylvania, in the 1970s (dark at noon on a Sunday) or modern-day Beijing, particularly in the winter.

While corporations and communities do incur costs for protecting the environment, resulting in some short-term pain, this is typically followed by long-term gains. American governments at all levels are very careful and quite flexible when imposing new rules on private parties. When the EPA designs environmental programs, they generally provide long adjustment periods that allow regulated parties time to gradually modify their practices. Auto fleets are given many years to meet fuel economy standards. Local governments are given long compliance schedules to meet water quality standards.

Regulations applied with firmness and care provide incentives for organizations to innovate and develop new ways of operating. Energy efficiency standards have created incentives for innovative engineers to build appliances that deliver higher levels of performance while using less energy. Start-up companies are launched to meet these new requirements, and established corporate giants such as General Electric reinvent themselves to compete under new rules. Industry opposition to technology-forcing environmental rules is nothing new. In the early days of air pollution control in the 1970s, American automakers argued that the catalytic converter could not be mandated because it was not ready for use. They maintained this argument until Congress began discussing banning the internal combustion engine. Suddenly prototypes of the catalytic converter began to appear everywhere, including in congressional hearing rooms.

On the one hand, it is true that regulation costs money, and some ideologues seem to have a reflex that causes them to oppose regulation whenever it is proposed. On the other hand, it's also true that lawlessness and an absence of rules can be quite expensive. Although many of the costs of regulation are borne by individual businesses and their customers, everyone pays the costs of the damage caused by a system operating without the rule of law.

Many of the complaints against regulation are that they are job-killing, anti-business policies. Rules of the game can create a level playing field that permits fair competition. The certainty and security of a fair business environment can actually attract competitors and creativity. Think of how badly traffic backs up when stoplights lose power and don't work. A world without rules and regulations is one of anarchy and chaos.

In fact, consistently over time, the total benefits of federal regulations far outweigh the total costs. The U.S. Office of Management and Budget (OMB) produces an annual report that monetizes the costs and benefits of major federal regulations. In 2013, their report concluded that the estimated annual benefits of major federal regulations over the ten-year period ending September 2012 were between $193 and $800 billion, while estimated annual costs were between $57 and $84 billion (OMB, 2013a, 3). For the EPA specifically, OMB estimated that the total annual benefits from its major federal rules over the same 10-year period were $112 to $637.6 billion and the costs were $30.4 to $36.5 billion (OMB, 2013a, 11).

Unfortunately, the old mindset persists: We must sacrifice environmental quality to achieve economic growth. While short-term benefits can be obtained by ignoring environmental conditions, polluted land, air, and water must eventually be cleaned if we are to remain healthy. The long-term costs of cleanup are far greater than the long-term costs of pollution prevention.

The result of our sophisticated and flexible system of environmental regulation is that we have learned how to grow the economy while protecting the environment. While some say this progress was due to the export of highly polluting industrial plants and jobs, the global economy, with its advanced communications and transport technology, were the real motors behind the export of manufacturing. Eventually, the standards we've applied here will come to be applied in the developing world as well. People will learn that no matter how rich you are, you can't build a walled community around environmental toxicity.

Our more complex economy and the increased use of toxics in production require rules that keep pace with economic, demographic, and technological change. The food, water, and air that sustain human life must be protected; only government rules and enforcement can ensure that those critical resources are maintained. Rules must prevent damage to the environment, but also must ensure that energy efficiency, recycling, and water efficiency are integrated into our structures, institutions, and daily routines.

Sustainability Metrics and Management

One sign of the growing importance of sustainability management is the impressive number of efforts at the company level to develop and utilize sustainability metrics. This is also leading to the incorporation of standard operating procedures for sustainability into routine organizational management. A wide variety of organizations have developed and implemented an even wider variety of sustainability measures. Many companies are measuring and reporting their sustainability performance to their shareholders and the general public in annual reports; however it is not clear that the measures under development are appropriate, reliable, or valid. Moreover, the collection and reporting of these metrics is voluntary, self-completed, inadequately audited, and without penalty for deceptive, incomplete, or incompetent reporting.

Measurement may sound like an arcane, technical subject, but it is actually critical to action. Its importance to management decisions in a data-driven environment cannot be understated. Anything pursued in a serious way in a modern organization is measured. The most talented people in any organization tend to gravitate away from activities that lack metrics guidelines or measurability because it is difficult to review progress and justify decisions. Without measurement, you can't tell if your management actions are making the situation better or worse. As a result, such activities can fall from focus and be considered unimportant. More companies are beginning to measure sustainability, which is a sign of significant progress. We need these actions to continue and expand, but we need clearer rules on how to do it.

Just as we have generally accepted accounting principles (GAAP) and clear definitions of financial indicators, we need agreed-upon organizational sustainability indicators that everyone can use. These universal indicators would be incorporated into a manager's traditional set of organizational performance measures like market share, return on equity, and profit and loss. In the public and nonprofit sectors, those performance measures would be different than private sector measures, but they are similarly important to overall management and effectiveness. In this case, sustainability metrics would be measured alongside organizational process and output measures such as labor productivity and efficiency, value of goods and services delivered, employment, and labor turnover. The indicators to measure are not settled, but the need is clear.

In addition to organizational level indicators, we need to do some hard thinking about developing some multiple indicator scales that might chart local, state, and national progress toward a sustainable economy. An easy-to-understand measure like the gross domestic product (GDP) or the unemployment rate would help guide public policies encouraging sustainability management. One possible approach could include environmental benefits and costs in the GDP measure itself.

Some academics have attempted to calculate a green GDP by subtracting ecological costs from traditional GDP; however, this fails to capture the true economic value of ecosystem services and the benefits provided by environmental protection and sustainability efforts. While efforts to refine the notion of green GDP are sure to continue, its actual use and application today is extremely limited, remaining almost entirely within academia.

One example of a national sustainability metric is the Labor Department's effort to measure and report on green jobs beginning in fiscal year 2010. That year, 3.1 million U.S. jobs were associated with the production of green goods and services, accounting for 2.4 percent of total U.S. employment that year (BLS, 2012a). In March of 2013, this very important project was suspended in a shortsighted decision by the Department of Labor to respond to budget cuts imposed by Congress. We hope that this measurement effort will be restored, and that other aggregate measures of sustainability at the macro level will be developed and implemented.

One of the problems with the current drive to develop sustainability metrics is the absence of an authoritative and potentially objective moderator of the discussion. Corporations and environmental interest groups are key stakeholders in any metrics discussion, but they each have their own axe to grind and cannot be allowed to have the final word. Academics, business leaders, and government officials must work together to develop and refine acceptable indicators. A standardized system of data collection, verification, and audit needs to be put into place. Government again has a key role to play.

Transferring Technology to the Developing World

As the developed world makes the transition to a more sustainable, renewable resource–based economy, it is important that newly developing nations are provided with incentives to use new technologies instead of older ones that might get cheaper as they are discarded by the developed world. Coal and coal-fired power plants could get very inexpensive as they are replaced by cleaner sources of energy. A variety of financial tools could be used to lower the cost of new technology for export to the developing world (World Future Council, 2009, 2). Technology transfer can include resources, but also expertise, knowledge, and training. If the United States and other developed countries lower their greenhouse gas emissions while developing nations increase emissions, the climate will continue to be degraded. The mitigation of climate change will require new energy technology, but without effective technology transfer, the climate problem will remain.

Public–Private Partnerships

Rules, regulations, governance, and investment are necessary conditions for prosperity in the modern global economy, but they are not sufficient for generating the necessary level of progress. We also need a creative and competitive private sector, cutting edge research and educational institutions, and a sense of shared purpose and vision. The goal should be to create a sophisticated partnership between government, industry, and nonprofits. The technology breakthroughs required to transition from fossil fuels to renewable energy will likely be developed by university-based researchers, collaboratively funded and operated by government, nonprofit, and private organizations.

Public-private partnerships have been around since the start of the United States. That partnership built the transcontinental railroad, the interstate highway system, the air traffic control system and the nation's many ports and shipping terminals. Public–private partnerships exist at all levels of government, “and enhanced public–private collaboration and understanding are required more than ever” (WEF, 2014, 1).

In 1817, New York State Governor DeWitt Clinton invented a new kind of public–private partnership to build the Erie Canal. When the federal government refused to invest, New York State built the canal without federal funding. The canal was finished ahead of schedule and under budget—and it had a transformative effect on New York's economy. New York City became a commercial powerhouse when it was able to cheaply ship agricultural goods and natural resources from the Midwest using the canal and the port of New York. In modern times, since Ed Koch's mayoral administration and continuing to today, New York's city government has maintained a sophisticated relationship with local nonprofits who now implement most of the city's social welfare programs.

To be a community, America requires public institutions. To build and maintain public institutions, we must have a vibrant public sector. Government is not a beast to be starved, but an institution that requires nurturing. An active partnership between the public and private sectors will be needed to transition from a resource-consumptive economy to one that manages, reformulates, and reuses resources. This transition will depend on an active government, a vibrant research establishment, and a fully engaged private sector.