The New Climate Imperative

Climate change is no longer just an environmental concern; it’s a business reality. No CEO can afford to ignore the changes taking place in our environment and the impact on the global economy.

Business schools focus on the long game, teaching skills for not just the next four years but the next four decades. MBA students don’t enroll in climate courses for ideological reasons; they see an opportunity to stay ahead in a changing business landscape. That’s why business schools—which traditionally focus on finance, marketing, and management—must make climate a bigger part of their programs.

"Climate change will shape businesses for decades. Future leaders need to understand both the risks and the opportunities."

• Professor Bruce Usher

Climate change is emerging as a new–and essential–topic in MBA programs, as nearly 80 percent of global greenhouse gas emissions are linked to business activities, meaning the private sector isn’t just affected by climate risks; it has the power to shape the solutions. And in business, when there’s a challenge, there’s also an opportunity.

Companies are already seizing this opportunity. In 2024, global investment in clean energy was double the entire fossil fuel industry. And for good reason: Research from Goldman Sachs found that solar is now the cheapest source of new power generation in most countries, without subsidies. Low-cost renewable energy can now be paired with batteries to provide inexpensive power 24/7. That’s why NextEra, the most valuable utility company in America, announced it will meet most of this decade’s forecast growth in electricity demand with solar, wind, and energy storage.

Electric vehicles represent another massive opportunity. Industry analysts predict that EVs will soon be cheaper to manufacture than comparable gasoline-powered vehicles. As prices decline, consumers are increasingly attracted to the better performance and lower operating costs of EVs. And driving range is a fading concern. Take the Stellantis Ram 1500 Ramcharger, which reviewers are calling the “Goldilocks” electric pickup truck, traveling nearly 700 miles on a single charge.

This shift is playing out globally. Europe generated more electricity from solar and wind last year than from fossil fuels. In China, more than half of all new car sales are EVs, and more solar was installed in 2024 than the United States has in its entire history. India’s solar sector achieved record-breaking growth of 204 percent last year. Kenya has incubated several of the world’s most innovative off-grid solar companies and now generates 90 percent of its electricity from renewable sources. Even Saudi Arabia has a booming clean energy industry, commissioning the world’s largest battery energy storage system.

But as companies embrace these opportunities, they must also address the risks that come with climate change, which creates new and growing risks that will separate the best-run companies–and their leaders–from the rest. Insurance companies that navigate wildfire and storm risk will survive and prosper, as will real estate investors that prepare for rising seas. Swiss Re and Munich Re, the world’s largest reinsurers, already understand this, using risk management to minimize their losses on the devastating wildfires that swept through Los Angeles.

The opportunities to create value by tackling climate change are vast, disruptive, and advancing quickly. For people early in their careers, disruption creates opportunity, and growth creates wealth.

In my experience, no one enters business school hoping to work in a dying business. Success requires an understanding of the global trends that underpin growth, which is why many business schools are focusing on two trends that are certain to impact business for decades: AI and climate change. Both trends are influenced by policy, but government action–or inaction–merely affects the speed of change; it cannot reverse the direction. Climate change is heading in only one direction and will affect nearly every business, everywhere. JPMorgan recently had this to say about climate change: “Those who adapt will lead, while others risk falling behind.”

At Columbia Business School, we have created the Open Climate Curriculum to share resources with other universities globally. Leveraging AI, this platform creates lesson plans using knowledge sourced in any language from any country, which proves useful for teaching the rapidly changing subject of climate change and business. Educators from more than 250 universities and colleges have already joined the platform.

Success in business comes to those who minimize risk and maximize return. My colleagues and I are teaching our students how to do that in the era of climate change. But our objective is greater than helping our students to compete and win. By acquiring the knowledge to build the low-carbon economy of the future, my students will benefit not only themselves but all of us.

Bruce Usher is a professor of professional practice at Columbia Business School and Elizabeth B. Strickler ‘86 and Mark T. Gallogly ‘86 Faculty Director of the Tamer Institute for Social Enterprise and Climate Change. He directs the development of the Open Climate Curriculum and is the author of the book Investing in the Era of Climate Change.

For nearly 50 years, Americans have internalized “reduce, reuse, and recycle” for conservation. For many, the catchy slogan likely has become an underlying philosophy for their approach to protecting the planet.

But today, turning the tide on the rapidly worsening climate crisis requires a lot more than sticking to the 3 R’s alone. Unfortunately, the truth is that very few people know what actions they can take to make a real impact at reducing their own emissions.

More people than ever want to do something about climate change. According to an annual survey conducted by researchers at Yale University, 54 percent of Americans are concerned or alarmed about climate change, a steady increase over the past decade.

However, if people want to make a dent in their emissions, they need to know and recognize what does and doesn’t work. In a recent study, my Columbia Business School co-authors and I set out to test people’s knowledge. The results were astonishing and much worse than we expected: People overwhelmingly make the wrong sustainability choices. 

To ensure Americans are equipped to make sustainable choices, it’s important to first clear up misconceptions about what behaviors are most effective and what industries are best and worst for the environment, then make it clear what people should be doing, and finally, find strategies to ensure people are equipped with the right tools to make a real impact.

So, what are the misconceptions? Our study quizzed thousands of Americans, asking which changes in what they do every day would lower their carbon output the most, the second most, and onward. In other words, it asked participants to rank six things they could do, from the most effective moves they can make to the least effective. We have asked these kinds of questions of thousands of people, both in the United States and other countries.

On average, Americans make several mistakes. Many believe that reducing their garbage by 25 percent would reduce their carbon footprint more than forgoing a trip between New York and San Francisco. That’s wrong: Flying is about nine times worse. People on average think that recycling all their plastic is slightly more effective than cutting their meat consumption in half, but the reality is that recycling plastics is 10 times less effective.

How do we address and change this knowledge gap? Finding a solution requires understanding exactly why people make the wrong sustainability decisions. We found it’s because people tend to answer tough questions by swapping an easier question. For example, when asked about the economy, people might look at their wallets.

To ensure people make the right choices, we need to make it easier for them. Economists argue that the best way to do so is by increasing prices to reflect the emissions used to produce the goods. But we know that many people oppose this, particularly when something is labeled as a “carbon tax.” Another option is to include a label telling people how much carbon is emitted when using the product. Google Flights does this today, but I suspect it doesn’t help much. People don’t know how to think about 0.9 metric tons of carbon dioxide equivalent (the emissions of the New York-San Francisco flight).

"If people don't know what really works, they can't make the right choices. That's a fixable problem."

• Professor Eric Johnson

Products might present a Carbon Facts label like a Nutrition Facts label on food and provide a percentage of annual admissions: That single flight is about 6 percent of the average American’s carbon footprint. Reducing trash for the year reduces emissions by less than 1 percent.

But we shouldn’t put the burden on people alone. Companies should provide this information.

Just as some people are concerned about nutrition, the majority of Americans are concerned and alarmed about climate change. If companies are listening, they should respond.

Eric Johnson is Norman Eig Professor of Business and the director of the Center for Decision Sciences at Columbia Business School. He is the author of The Elements of Choice.

If you knew your home would burn down exactly one year from today, you’d take immediate action. You’d clear out flammable clutter, upgrade alarms, and perhaps install fireproof doors or sprinklers. You’d also prepare for the worst—update insurance, set aside savings, and make an evacuation plan.

The human brain responds best to threats when they are clear and certain. That unfortunate truth helps explain why we’re struggling to take action on climate change. Despite broad scientific consensus and growing certainty that the climate crisis will continue to worsen, there’s no way of predicting how or where it will strike. Knowing the exact dates and locations of disasters may not make it any easier to prevent—but it would likely spur decisive action.

Remember Y2K, the impending doom that would befall us all when ill-equipped computer systems switched from “99” to “00” at the stroke of midnight on December 31, 1999? The threat didn’t materialize, and not because it wasn’t real. It had a deadline, and the world’s governments and companies invested some $300 billion to $500 billion in upgrading computer systems and critical infrastructure to avoid it.

The threats are only going to get more frequent and more intense, but they are, by their very nature, erratic. As carbon dioxide crowds the earth’s atmosphere, the planet not only warms but also generates weather systems that increasingly behave in unstable and unprecedented ways. Unpredictability will be a predictable weather watchword throughout all of our lifetimes.

It is precisely this uncertainty that makes the climate crisis so costly and even deadly. While many impacts are predictable, the exact form disasters will take remains unknown—complicating insurance and disaster preparedness. Earlier this year, fires hit Los Angeles. Next, it could be Palo Alto, Phoenix, or any number of equally vulnerable cities and suburbs, just as science long warned.

All that leads to a straightforward messaging problem with anything but an easy answer: Over the decades, climate scientists have been striving to improve on their ability to be “certain” about the causes and impacts of climate change. (For their part, IPCC reports have steadily dialed their declarations up on their own likelihood scale, achieving the Holy Grail of “virtually certain” for many key conclusions.)

"Scientists should not be afraid to acknowledge what’s unknowable about the future before us. Perhaps, if we humbly accept this uncertainty and, in fact, trumpet it as a reason to mobilize around rapid decarbonization, we can repurpose uncertainty from the barrier to climate progress that it’s long been into a benevolent cudgel on the side of spurring climate action."

• Professor Gernot Wagner

But that all-too-human desire to close in on perfect certainty is causing us to miss an important point: We can never actually achieve total certitude about the shapes climate change will take, nor do we need to arrive at certitude to take action.

Nobody takes out insurance because they know their home will burn down with certainty. In fact, no insurance company would offer such an insurance policy in the first place. Every investor, actuary, or corporate risk manager understands that it is the element of not knowing that creates the impetus to invest in mitigating risks and adapting to those that remain.

Climate change is no different. Scientists have provided conclusive links between us burning fossil fuels and any number of impacts, from more intense floods and fires to lower student test scores and worker productivity on the one hand, and lower life spans and home prices on the other. All told, the social costs for each ton of carbon dioxide burned by now add up to numbers in the high $200s, with a wide range that is heavily skewed toward much larger costs. Providing such a range is anything but an “admission” of some kind or a call to “wait and see” before we can be more certain.

Climate deniers often point to the unanswered—or unanswerable—questions about climate change and insist those are good reasons to wait, to second-guess, to preserve the status quo. Take Russell Vought, head of the Office of Management and Budget, who was pushing for the next version of the National Climate Assessment to include more “diverse viewpoints,” as Project 2025 puts it, before the assessment was all but canceled recently. A phrase like “diverse viewpoints” sets off warning bells for many climate scientists, pointing to the transparent effort to continue to foment confusion about the causes and impacts of climate change.

It’s nothing new: For decades now, uncertainty has been leveraged by those with an economic stake in the fossil fuel-powered status quo. In response, it’s tempting for us, as scientists, to point to all the “virtual certainties” in our bodies of work, to insist that yes, we do know what the future holds for the climate.

When we get locked into this back-and-forth, we overlook something crucial: The uncertainty that is baked into this crisis is all the more reason to take urgent and decisive action to address it.

Scientists should not be afraid to acknowledge what’s unknowable about the future before us. Perhaps, if we humbly accept this uncertainty and, in fact, trumpet it as a reason to mobilize around rapid decarbonization, we can repurpose uncertainty from the barrier to climate progress that it’s long been into a benevolent cudgel on the side of spurring climate action.

Let’s finally acknowledge how much we don’t know and, from that new point of departure, do everything we can to save our home.

This op-ed was originally published by Salon.

Gernot Wagner is the senior lecturer in discipline of economics at Columbia Business School and faculty director of the Climate Knowledge Initiative at the Tamer Institute for Social Enterprise and Climate Change.

The changing political winds in Washington can feel like whiplash for renewable energy. Under the Biden administration, the Inflation Reduction Act channeled enormous subsidies to solar and wind energy, including generous tax credits worth $127 billion. The new Trump administration has quickly replaced this largesse with a stranglehold: It immediately paused approval for renewables on federal land and attempted to pause or rescind billions of dollars of grant funding and loans to renewable energy projects.

It’s tempting to think that the new federal turn spells disaster for clean energy. But in the long run, these shifts may not be as disruptive as expected. That’s because the United States is just one player in a global transformation that is accelerating—one that no single government can meaningfully slow, let alone stop.

Around the world, solar, wind, and battery storage are scaling at an unprecedented pace, driven by economics rather than politics. In 2010, over 80 percent of new electricity generation capacity installed worldwide was in traditional energy, primarily natural gas and coal. By 2023, this had flipped to be 86 percent renewable energy, with solar alone accounting for 62 percent gigawatts (GW). Twenty years ago, the world was building 1 GW of solar power every year. In 2024, it was building over 1 GW every single day.

The scale of this growth is almost hard to grasp. To take one example, China recently announced plans to dam the Brahmaputra River to generate hydroelectricity. The capacity of this new dam would be a stunning 60 GW, almost three times as large as the current world-record holder, the Three Gorges Dam. A plant that size could generate enough electricity for 27 million American households. However, it will likely take up to a decade to construct and test. Meanwhile, China installed almost 280 GW of solar capacity in a single year in 2024.

While China is the clear world leader for sheer scale, all across the world we are seeing the same patterns. India is now the third largest producer of solar power, after the United States and China. In the past 10 years, coal-burning Australia went from having 5 percent to 36 percent of its energy coming from the sun and wind. In the same timeframe, Germany hit 47 percent, Chile 42 percent, and Spain and the Netherlands 40 percent. Households in Pakistan installed so much behind-the-meter solar last year that total grid demand plummeted 10 percent

“The energy future isn’t being shaped in Washington. It’s being built in factories, supply chains, and labs around the world.”

• Professor Conor Walsh

The new economics of renewable energy driving this change is dominated by three concerns: cost, storage, and time to build. When it comes to cost, the debate is over. Renewables are the cheapest source of bulk new supply almost everywhere on the planet. Their costs have fallen astonishingly fast, by 90 percent for solar in the past decade and 70 percent for wind.

The reason behind this is a process common to many manufactured goods. Increased production scale gives rise to lower unit cost. Lower cost then increases the number of markets where the technology can compete, driving further increases in production. This process has many names, but for solar, it is often called Wright’s Law, and it has overseen rapid cost reduction on the order of 20 percent a year for decades.

Crucially, however, renewables are intermittent. The sun is not available at night, and wind energy can disappear for days at a time. As renewables account for a larger share of generation, storage becomes ever more important.

Fortunately, the good news on this has been unrelenting. The same process of rapid cost reduction is playing out with lithium-ion batteries, which have declined in price by 97 percent in three decades. As a result, they have quickly become commercially viable. In California, large batteries now supply 20 percent of the state’s evening demand—something unimaginable just three years ago. Texas, hardly a climate champion, is seeing similar explosive growth in storage, with capacity doubling every year since the pandemic.

In fact, over 50 percent of solar projects in the interconnection queue in the United States now include storage, enabling them to sell electricity at more high-value times like the evening and shore up the grid when needed. Battery cost reductions are expected to only accelerate as electric vehicles roll out globally, driving further increases in production scale for lithium-ion batteries.

he last concern driving the uptake of renewables is how quick they are to build compared to fossil fuel infrastructure. Build times for solar, storage, and wind are currently around 18 months. Fossil fuel infrastructure is much slower to construct. NextEra Energy CEO John Ketchum recently noted, “To get your hands on a gas turbine and to actually get it built across the market, you’re really looking at 2030 or later.” Nuclear, of course, takes even longer to build given stringent regulatory hurdles. To meet the expected boom in US demand from AI data centers and electrification, faster renewable rollouts will account for the bulk of new supply.

The newly announced US tariffs, if held in place, will certainly mean a rocky 2025 for US renewables. The high tariffs on Vietnam and Thailand in particular will hurt US solar developers, and US factories will not be able to fully compensate for panel imports from these countries.

But in the longer term, tariffs are likely to be nothing more than a speed bump. Despite political headwinds, the energy future is not being shaped in Washington, but in factories, supply chains, and research laboratories around the world. Like the shift from landlines to mobile phones, the global move to clean energy is now driven by practicality and cost. Governments may slow it or redirect it—but they can no longer stop it. Welcome to the age of renewables.

Conor Walsh is an assistant professor of business in the Economics Division at Columbia Business School.