Why the Copenhagen Climate Talks Are Important for Silicon Valley

Over 5,000 miles away from the Bay Area and Silicon Valley, where tech entrepreneurs often have an undying faith in the free market, world leaders will be meeting to make major policy decisions over the next two weeks that will determine not only how the world will tackle climate change, but also how the business of building green technology will unfold. While it’s looking like a legally-binding agreement on emissions cuts might be put off until 2010, negotiators at the UN climate talks starting in Copenhagen next week will determine how aggressive countries will be with their emission targets and how the world will put a price on carbon.

At stake for greentech companies is how big or small their markets will be, how long until those markets pick up and how to determine the price on carbon, which is an integral key to many greentech firms. As Frost and Sullivan’s Renewable Energy Analyst Zeinegul Hassan put it in a research note this week, future investments in clean technology are “heavily dependent on the outcome of the 15th Conference of Parties,” commonly known as COP15.

Without aggressive action and agreement from governments on emissions reductions, “private companies will be timid in making large scale investments in clean technologies,” explained Hassan. The Combat Climate Change business group, which has members like BP, General Electric and Siemens, has expressed similar sentiment, explaining that without firm international action, the private sector will be hesitant to make major investments, as the landscape and time line for greentech markets could shift.

In a research note Deutsche Bank Research says that important decisions will be made at the talks for financial institutions, which will “play a key role” in fighting climate change, including establishing efficient carbon markets, and cap-and-trade systems. Of particular importance DB Research says is: reaching a consensus to limit the average global temperature increase to 2°C, articulating a series of intermediate targets for 2015, 2020 and 2030 to reach long term goals, ambitious emissions caps for developed countries, agreements to share technology development while keeping innovation incentives in place, delivering enough funding from developed nations for developing nations to mitigate and adapt to climate change, and decisions and funding for anti-deforestation methods.

A wealth of greentech entrepreneurs and innovators will be attending the events (Better Place’s Shai Agassi says “See You in Copenhagen”) in hopes that their presence will show how important the international decisions and agreements are to their industry. While entrepreneurs won’t necessarily be able to change the outcome of the talks, as Agassi put it in a video clip, their presence is important for helping create a high level of public awareness about the climate crisis and the green economy, and showing governments that the public stands behind action against climate change. “[T]he signal,” that “we’d like this thing [action on climate change] to happen,’ is critical. It’s amazing what a galvanized shared vision does to a political body,” Agassi said.

While many in Silicon Valley still eye the greentech industry warily — as a bubble that will pop as soon as the stimulus funds run out or the price of gas drops low enough — the industry actually became the largest venture sector last quarter in the U.S., eclipsing U.S. investment in biotech and IT. Yes, a lot of those plays had to do with government support for greentech, but in a dampened economy, that’s where the money often comes from.

Over the next two weeks, governments galvanized by public support, media, business, and NGOs will in essence be determining if the greentech industry will see another boom/bust type cycle, similar to the aftermath of the 1970’s energy crisis. If global leaders show weak posturing to emissions target reductions, it will send the impression that business can continue as usual. That would have dire consequences not only for the planet, but also for the potential of greentech markets.