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Surf's Up: Catching the Next Green Innovation Wave

They have one of the world's largest economies; emit half the global warming pollutants per person of the average American, and less than Japanese, Germans and British. Their per person energy consumption has stayed even since the 1970s even as the rest of the world's has ballooned. This shows up as billions of dollars' worth of energy bill savings. This climate and energy leadership is a product of public policies they have enacted since the 1970s to encourage the world's most advanced energy technologies. And now they are positioning to lead the next wave of clean technology. They are already taking a lion's share of investment in the field. They are Californians, and other regions of the U.S. that aim to be serious players in what Silicon Valley venture capital legend John Doerr calls "the mother of all markets," green technology, had better pay attention to what they are doing. The Pacific Northwest, Northeast, Upper Midwest and Rocky Mountain states are all notably vying for places in the green tech economy, and each is chalking up successes. But a new index underscores that California is the one to watch and to emulate - Because California has already built the model for developing a clean economy with demonstrated economic benefits, and is now taking it to the next level. California has learned how to spur dynamic private-sector innovation with well-designed public policies. Its world- leading standards for energy efficiency and renewable power generation have driven growth and leadership in these sectors. Now California aims to leverage those advantages with leading edge policies to reduce global warming pollutants. "California has been at the forefront of the first wave of green innovation that began in the 1970s and continues to this day," reports the inaugural issue of the California Green Innovation Index. "The first wave proved that California could increase its energy efficiency and reduce its greenhouse gas emissions per capita, while also growing its economy." "There are growing signs that the State may be at the beginning of the next wave," the Index portends. "Based on recent trends, California is becoming a leader in creating and implementing breakthrough clean energy technologies that reduce emissions, drive the State's economy, and serve a multibillion dollar global clean tech market." The report reflects a vision emerging in many regions - How they can benefit the world and themselves as well by becoming launching pads for clean energy technologies. "California is increasingly positioned to play a dual role - as a leader in both the adoption and creation of new products that help reduce emissions globally while stimulating the State's economy," the Index notes. Powerful evidence comes in California's ability to draw the largest share of energy technology venture capital investment. California gains way more than any other U.S. region. The Index shows $884 million in 2006 investments, more than double the previous year's. Impressively, even as VC energy action has exploded, California has managed to hold its own. Between 2001 and 2002 the state's national share leapt from six percent to 30 percent and has remained around one-third of the total. The 2006 figure is 36 percent, with solar an especially attractive play. These charts from the report show investments and a related trend, California decoupling its economy from climate pollution. In the broader realm of clean technology, which can range from water remediation to more efficient resource use, California attracted 49% of the national total in the first quarter of 2007, around $750 million. No surprise - Well over half is flowing into the California high-tech heartland, Silicon Valley and the overall Bay Area. By the Index's counting, the California green tech sector now employs 20,000, a 50 percent increase over the last decade. The Index turns up another key indicator of green tech leadership, patent filings. In 2006 Californians registered 44 percent of U.S. solar patents and 37 percent of wind power patents, and those shares are no anomaly. The Index charts high levels of California clean energy tech patents throughout the 1990s and 2000s. Benefits of California energy leadership span far beyond entrepreneurs to everyone who pays a power bill. Pacesetting energy efficiency standards for buildings and appliances saved Californians $56 billion by 2003 and will shave another cumulative $23 billion off power bills by 2013. A combination of efficiency standards and utility efficiency programs has avoided the need to build 12,000 megawatts of power generation since 1975 and will cut out nearly 7,000 MW more by 2013. That is equal to 38 500-MW gas turbine plants. Those figures help explain why electric bills take only a 1.8 percent slice out of the state economy, down from 2.5 percent in 1990. For Texas the figure is 3.24 percent. "If California's annual statewide electricity bill was the same fraction of GDP as Texas, for example, Californians would be paying almost $25 billion more for electricity," the Index notes. Texans also emit twice the global warming pollutants per person as Californians. The amount of carbon released per dollar of the California economy has actually declined eight percent since 1990. Energy efficiency leaves more money in circulation to spend on other items. That is a significant reason why economic modeling studies show that policies to limit global warming pollutants actually result in more economic growth and jobs. These policies drive investments in efficiency, since it is the most economical way to reduce emissions. California studies on the impact of its global warming legislation bear this out. "California is an example of how an innovative economy can thrive and grow while simultaneously reducing the environmental damage associated with growth," the Index says. The California Green Innovation Index drives home a very important message. In green technology, surf's up and California's out there catching the next wave, a wave substantially generated by legal limits on global warming pollutants. Reducing climate pollution opens up market space for advanced energy technologies, and California is creating a huge new market with its climate legislation. Every region that is interested in playing in green tech had better get in the swim and emulate the Golden State. --------------------- Patrick Mazza is Research Director for Climate Solutions. He writes regularly on clean tech topics for Climate Solutions Journal. Please send comments to patrick[at]climatesolutions[dot]org.