Turning Black Swans Green: The Vittorio Santaniello Memorial Lecture

This article argues that the severe (or Black Swan) event of a financial crisis provides the opportunity to address other threatening issues-energy insecurity and climate change with the associated extreme weather events. The financial crisis has been catalytic in reassessing risk and the likelihood of extreme events-whether in finance or energy or climate. Already, a large part of expenditures from the global stimulus has been directed to diversifying the energy base of economies toward less carbon-intensive energy. Public expenditures, in an attempt to compensate for the fall in consumer spending, are stimulating a reformation of the capital and energy infrastructure of nations toward a lower carbon path of growth. Likewise, and consistent with this reassessment and transformation in energy, are the efforts to combat climate change and the prospects of extreme weather events. International negotiations and domestic legislation for cap and trade are moving towards providing more market-based incentives for this diversification of energy and at the same time stimulating lower-cost solutions for reducing carbon emissions. In both energy and climate, it is increasingly recognized that the economies of the world need to move to even greener technologies, which offer zero or even negative emissions. The 50-80% reduction in carbon emissions by 2050 currently called for by scientists can only be achieved through using energy-rich crops as a major source of fuels. Biofuels and biomass offer near zero emissions and when combined with carbon capture and sequestration could result even in negative emissions-providing energy while capturing carbon from the atmosphere. But advances in biotechnology are needed to reengineer plants to become more fuel rich and have lower cost in harvesting and processing if these ambitious reductions in carbon emissions are to be attained by mid-century.