The new environmental frontier

Local author argues for viewing climate change from a business perspective

Thomas Stoner
Photo courtesy of Smith Publicity

In Thomas Stoner’s book Small Change, Big Gains: Reflections of an Energy Entrepreneur he makes a case for taking the environmental movement to the free market. Major government intervention could only hope to succeed by mandating that everyone turn off everything powered by fossil fuels immediately — and thereby generate riots. But some intervention is required to make the reductions in carbon dioxide in the atmosphere climate scientists say will have massive effects to weather, agriculture and human health. The key to creating that shift, Stoner argues, lies in putting a price on carbon, fixing the subsidies for fossil fuels to a certain number of gigajoules and moving the rest of the 8 percent of global government expenditures that currently goes to energy subsidies to renewable energy sources.


Using a climate change model from a group associated with MIT and the equivalent of a mortgage calculator, he says, “allowed us to have windows into the forecast where we could see the impact of suppliers, users, the environment and even lending institutions … and it led us to the very interesting observation that it’s possible to get benefits to each one of the stakeholder classes, including the environment. It basically says that whole notion of there being a tradeoff between environment and business — there’s no tradeoff.”

Stoner, a graduate of the London School of Economics, drew from his 30 years as an energy executive, working for energy service companies to undertake tasks like building commercial-scale wind farms in Brazil, to write a book that’s meant to go where he spent most of his working life — to boardrooms, not backrooms in Washington, D.C. There, it can illustrate a model for change that benefits suppliers, users and the environment, while sparking new technology development.

“Investment in renewables is still gaining under business as usual,” Stoner says. “But what this analysis is, well, we’re not doing it fast enough.”

Under the models used by Stoner and fellow members of Project Butterfly, the organization he created to oversee the research that went into this book, investment in renewables and, subsequently, the percent of power supplied by them, takes off.

Boulder Weekly caught up with Stoner, a Boulder resident, for a few questions about the ideas in Small Change, Big Gains.

You write that the 350 parts per million of carbon dioxide in our atmosphere goal desired by environmentalists is no longer a reasonable target and that even 450 ppm is probably too low. What in your model brought you to that conclusion?

Right, it was a very discouraging result. I think originally we intended to do a feasibility study of the kind of scenarios that would allow us to stay under 450 ppm. We realized halfway through our work that the 450 ppm just was unrealistic. …

You have so much built-in energy infrastructure. When you build a nuclear plant or a coal plant or a hydro facility, these things have very, very long lifetimes. Some hydro facilities are 100 years old, there are coal plants that are 50 years old, most of the nuclear plants were built in the 1970s — and these things are still making electricity today. So if we’re still building coal plants today, those coal plants will continue in operation for 40 or 50 years — at least. You’ve got to shift your investment behavior, and the benefit doesn’t show up until well after that. …

You have to change everything about how we think about energy at a really basic level, and the way to do that is to allow innovation to come in. … I’m talking about anything from the carbon content associated with the manufacturing of your shoes all the way to the power plant. It’s the whole thing. And we’re talking about real small changes that’ll change the entire relationship, and I said, look, we’ve got to move from an economy that’s about saturating the market with products and services to one that tries to produce satisfaction in the market at the least amount of consumption. When you do that, you change everything, and that’s the only way we can live with 7 billion people on the planet.

And one of the things that’s hindering the market from doing its job is the subsidies that are going to oil and gas industries instead of to solar industries?

There’s a trillion dollars a year in energy subsidies. Eight percent of all global governmental expenditures go to energy subsidies. These are big numbers.

So there’s often a suggestion, well, just eliminate the subsidies, that’s a solution. Well, is that really a solution? Those subsidies were put there for a reason. They were put there to try to reduce the cost of energy so that you could make energy available to people who couldn’t afford it. … Those subsidies were put there because somebody was trying to lower the cost of buying a new car or getting gas to a pump or incentivizing new oil production so that the energy could be brought into the market at cheaper prices. … What we’re arguing is we need to redirect those subsidies.

There’s a misallocation between the amount of subsidies that are going to fossil fuel development and the amount of subsidies that go into renewable, especially if you know, fundamentally, that your mix is wrong. Look at it from a financial perspective. Usually, you want diversification in your assets, right? You don’t want to have a single source — especially if that single source is killing you, not because you’re using it, but because you’re using too much of it.

So diversify. Your subsidy structure should look more like what you want your asset allocation to look like. So we have to remember why those subsidies are there, because they’re used to bring down the cost of energy so you can allow people to afford it, or you’re trying to stimulate the development of it, so continue to subsidize. Just know what you’re subsidizing, make those subsidies reflect the kind of portfolio that you want to have.

Why did you think it was time to reframe the conversation about climate change from environmental perspectives, which appeal to a sense of ethics and personal responsibility, to a financial discussion?

Looking at it from a financial perspective allowed us to look at it from the different stakeholder perspectives, and what we came to was, well, if you could create alignment and everybody’s better off, then what’s going on here? Why are we so attached to burning all these fossil fuels? And that’s when you started getting into, are we in an existential crisis as a planet? … If alignment is possible, then what’s really going on? And there is attachment, there’s embedded and entrenched interest. You see those, the gas industry and what they say, the coal industry and what they say, the nuclear industry and what they say. You can see the embedded interest, they’re very much there. But I mean you even kind of dig down deeper and you kind of ask yourself, what are these attachments to the business as usual, and what are the resistances to going to the new business case? And it really becomes a very humanistic issue and that’s what I’m trying to address.

And a lot of what you’re writing about in this book is how new technologies need to take hold of the market.

Yeah, and what it takes for innovation to occur in the market. If you think about it in a very broad brush, we needed to electrify our country a hundred years ago, and one of the ways to do that was to grant monopolies over certain territories so those monopolies or utility companies could raise capital and build power plants.

The new technologies that are out there increasingly — if you think about it simply, like a bunch of solar panels — you don’t need a utility to do that. But the regulatory structure is very restrictive in terms of the introduction of new technologies. So there are some cracks in the seams in terms of how you think about the electric system, but what we need to do is make those cracks a little bit bigger so that all of a sudden you can have competition and innovation in the market. … If you let the market on its own devices work, today it would be putting in new technologies, ones that are associated typically with distributor generation or energy efficiency and that are cost-competitive — and that happens to be the same kind of technologies that would be good for the environment.

Right, I think you’ve made the case that what would be good for the planet would be good for the U.S. economy.

And the global economy. It was a surprising result, because what you’re doing is you’re putting a price on carbon, which is normally, in economic thinking, it’s a cost. But when you look at it financially, what you see is innovation and opportunity, which will reduce electric prices in the end. … The innovators would win, and some companies would lose, but when we modeled it out, what we noticed was that as a class, suppliers would win, lenders would win, and the environment would win. … If you open the markets and you put a price on carbon, you would begin to see not only wind at a utility scale, but you might start to see wind at a distributed scale, which means much smaller scale, where wind technology could be brought in to an urban setting. It could be brought directly into a commercial setting. These kinds of innovations would really be powerful in a competitive market where there’s a price on carbon.

Now, are there some losers in that scenario? Sure, there are losers in that scenario, your fossil fuels would lose market share. The innovators in those markets would win. The ones that could manage to decarbonize within those sectors would win, but the other ones would fall out, but that’s what capitalism does and that’s what it should do.

The way to kind of stimulate that is to open the markets and put a price on carbon so that the people who are burning the fuel are paying for the cost.

And it’s not a cost to the overall system. That was the finding, was, that’s what the significance of putting a financial calculator on top of an energy and climate model.

Because everyone can benefit.

Yeah, business would benefit. That’s not to say there are not winners and losers, but when you look at it as a whole, business benefits.

Who’s your intended audience for this book?

[Based on the directive from Project Butterfly’s board of directors], I’m supposed to go to the corporate boardroom and I’m there to say, “Look, the challenge of climate change is not really a debate at all, because the data is pretty clear, the analysis from the scientists is pretty clear, and there’s an opportunity here. There’s an opportunity for businesses to invest in energy efficiency, renewable energy, technologies that decarbonize your existing infrastructure. These are all opportunities that are opportunities today, and eventually, when Washington, D.C., does get its act together — and I’m just saying eventually — it’ll even be a better investment.”

It sounds like Project Butterfly did a lot of work to make the book happen, but I’m wondering, what are you going to do with Project Butterfly now that the book is out?

We’re hoping Project Butterfly can contextualize the information that’s out there. In other words, scientists discover today that as the tundras melt, the underlying methane may be bigger than we ever thought and they’ll throw in some gigatons or whatever of methane and you sit there — I mean, here I’ve been reading this stuff for two years, and it’s like, well, what does that mean? Are we like totally screwed or is it all going to be OK? And one of the benefits is saying, well, here’s business as usual. Is business as usual better this year than last year? Or are people really working on stuff that might push us into a new business case? How do we know? This is a way, kind of benchmark, let me call it a barometer. … One of the things we’re going to try to do is contextualize it for a business person to understand what the science is telling us.

Visit for additional information on Stoner and his book.