How Israel’s green technology can combat climate change

Glenn Yago, Milken Innovation Center-Jerualem Institute/ Graduate School of Business Administration, Hebrew University of Jerusalem

Israel is heading to COP21 in Paris to confirm its pledge to reduce its carbon emissions to 7.7 tons per capita by 2030, a reduction of about 25 per cent from a decade ago. This goal will be met through government policy, regulations, education, community outreach, industry initiatives – and greater investment of capital. Israeli researchers are working to meet the technical challenges of mitigating climate change. And the Government has stepped up as well, approving significant budget expenditures and guarantees to investments that will reduce carbon emissions and develop new green technologies.

Government spending alone won’t solve the problem, but government investment that leverages greater channels of long-term, institutional investment will. Numerous studies have concluded that private investment will outpace anything governments can spend on climate change, and will play a critical role in slowing global warming while also preserving private-sector profits and growth. To win the fight against climate change we must double the share of renewable energy production and distribution in the global energy mix, increase energy efficiency in buildings, improve water recycling, implement better waste management and transfer inefficient fossil fuel subsidies (estimated at $548 billion by the International Energy Agency) to clean energy technology.

The consequences of climate change are huge and proven. The message from all countries in the run-up to the Paris summit in December is clear: if companies and countries do not make a serious effort to manage carbon risk, investors may dump their stocks, triggering a downward economic spiral. Standard & Poor’s, the credit-rating agency, has already started downgrading the creditworthiness of governments vulnerable to extreme weather events linked to climate change. Investors have begun to respond. Citigroup recently announced that it would ‘lend, invest and facilitate’ $100 billion for investment in businesses that address climate change. Bank of America declared a similar commitment, pledging to increase its involvement in low-carbon businesses to $125 billion through lending, investing and advisory services. If one includes the $70 trillion under management by institutional investors that have expressed commitment to low-carbon investments, the private sector is on track to spend large amounts leveraged through public-private partnerships. The market for ‘green bonds’ to fund climate friendly projects is growing rapidly among major investors whose balance sheets are large enough to ensure that projects are funded at attractive interest rates. These bonds have come from nowhere three years ago to $37 billion in issuance in 2015. The face value of bonds issued is expected to reach $70 billion to $100 billion by the end of this year.

The economic transition required to address climate change requires a redeployment of public money that leverages private investment through public-private funds. This is precisely the type of programme the Israeli government initiated last month when it appropriated 300 million shekels ($76.6 million) to help private companies improve energy efficiency. The government will also allocate 500 million shekels in government guarantees ($130 million) to leverage private capital to develop clean technologies to reduce carbon emissions in Israel and abroad.

Israel, accustomed to finding creative ways to cope with scarcity, is the ideal laboratory for perfecting technologies to address problems at the energy-food-water nexus. Climate change matters for Israel because it presents opportunities to exercise global leadership in a critical endeavour and help countries decouple economic growth from increased consumption of natural resources.

The effects of climate change are creating greater demand among developing and developed countries for technologies and systems that Israel can supply and help finance. The 2014 Global Cleantech Innovation Index ranked Israel No. 1 in clean technology startups per capita, citing its culture of innovation.  In fact, Israel already provides solutions to meet priorities set by the Asian Development Bank, which has singled out the need for precision irrigation, more efficient water use and waste-to-energy technologies. Desalination and leak detection, which create new sources of water and reduce use, are other important areas where Israel can provide expertise. The World Bank and the state of California have both signed agreements to expand use of Israeli water technologies. Over 350 Israeli companies have been mapped into a CleanTech Ecosystem focusing on everything from alternative energy, alternative fuels, water use, agriculture, infrastructure materials and disaster response.

The global demand for information and communications solutions drove Israel’s entrepreneurial culture, knowledge capital and government programmes during a three-decade economic expansion. Now, the scarcity of energy, water and agricultural resources are giving birth to new technologies that will propel Israel’s next wave of innovations for use at home and abroad. As the demand to address climate change and feed growing populations increases, Israel’s exports of technology and expertise in water, energy and food technologies will drive a new period of domestic economic growth while helping other nations meet their obligations to reduce humankind’s impact on natural resources.