What Lebron James and Renewable Energy Have In Common

Depending on who you talk to, Cleveland forward Lebron James may or may not be the best basketball player alive. But nobody can deny his greatness: he scored the last 25 points in a conference finals overtime game against the Detroit pistons; he made a three point shot that tied up last year's conference finals with less than two seconds left in the game; he jumps out of the gym; shoots video game range threes; and practically averages a triple-double.

LeBron James-Highlights 08-09 from bRonJke on Vimeo.

Needless to say every team in the NBA would be ecstatic to have him on their team. The problem for the Cavs is he will be a free agent this coming summer: he is up for grabs to the highest bidder.

This situation has created an uncertainty that is ultimately harmful to his team. You see, no other free agents want to sign with the Cavs, because they don't want to go to a a team that Lebron may leave.

The paradox creating this situation is this: Lebron will stay only if he gets better players around him; but better players won't sign unless they know Lebron will stick around.

What's Lebron Got To Do With Energy?

This paradox can be easily extrapolated to a variety of topics (can you think of a few?). The one I want to shine a light on is renewable energy.

Everyone likes renewable energy (its clean, creates jobs, and lasts forever). We all want more of it, and we want it to replace energy produced by oil, coal, and gas. But unfortunately renewable energy only accounts for 7% of u.s energy production (EIA).

The question is how do we spur investment in renewable energy projects that will increase that percentage? Or in terms of Lebron: how do the Cavs get better players to sign?

The answers to these questions are simply: eliminate uncertainty. Uncertainty leads to inaction ( I guess I should say leads to nothing). We discussed the uncertainty surrounding Lebron. The uncertainty around energy that makes investments in projects risky is the unset price for renewable energy.

(Footnote: check out Thomas Friedman book hot flat crowded for an excellent explanation)

Uncertainty's Effects on Energy Investments

Carbon, other greenhouse gases, or any other form of pollution for that matter is called an externality. An externality is something that is produced by a third party. For example a coal power plant produces electricity by burning coal, which produces carbon as a by product. The coal plant does not explicitly pay to emit that carbon, a third party does. In this case the whole world with a changing climate.

This is a huge problem if you want more investments in clean energy. Because carbon-emitting plants do not have to pay for those emissions their costs to produce or lower and they can charge a lower price for the electricity they produce. This makes it very difficult for renewable energy to be adopted broadly. The economics does not allow renewables to compete with dirty plants that charge less for their electricity. Thus the price one can charge for renewable production varies greatly and makes investments risky enough to stay away from.

The solution is obvious: make plants that emit greenhouse gases, mainly carbon, pay for that externality they impose on the world. ELIMINATE THE UNCERTAINTY. This can be done two ways: tax each ton of carbon, or impose a cap-and-trade program. Both do the job, but the difficulty is political and one I will not go into here.

The Consequences

Currently our energy that we pay for an use is far too cheap. Artificially cheap because of the externalities we do not account for or pay for.

But we cannot ignore this problem for long. The consequences of climate change are real. The problem is that climate change seems so far away. It's such a long term and slowly evolving problem, that it sneaks up on us. Problems like the earthquake in Haiti are examples of short-term, in-your-face problems that are easy to recognize. But you know what? The earthquake was the catalyst that shined a light on Haiti's real problems. Haiti had tons of problems before the earthquake, but the earthquake made all those other problems real.

Climate change is a difficult issue to grasp. But the sooner we ban together with all your collective resources the more effective we will be at confronting the problem. It can't be ignored, the economy of the future is going to be a carbon economy. What are you doing to get ready for it?

This is the first of my mini-series on environmental and sustainability topics. I want my generation and other generations to be more aware about issues that will effect the world and our lives. There are no excuses to be ignorant or act like problems are getting worse. Most of all I want to show that there are solutions and that we all need to work together. Topics will include:

• History of the environmental movement (with help from "Death of Environmentalism") and the transition to sustainability
• Collaborating and innovation is the solution
• Why environmental support is broad but shallow
• A break down and summary of great Stanford Podcast
• Multiple Videos
• Why prices are everything
• How pretending "the environment" is separate from human beings
• Asking, "what's your excuse for ignoring ecological destruction?"
• Of course much, much more