Presentation, Beijing, China, March 16, 2010. Philippe Roy, CMC, Canadian Association of Management Consultants

1. Climate Change - Climate Innovation,Applying Joseph Schumpeter’sEconomic Transformation PrinciplesTo A Major Global Challenge,And Unprecedented Global Business Opportunities Presentation, Beijing, China, March 16, 2010. Philippe Roy, CMC, Canadian Association of Management Consultants All intellectual property rests with the author; Written consent required for use. PhilippeRoy.CMC@Sympatico.ca

2. Introductory Remarks • A Great Privilege and Pleasure to Be in China, and to Speak in China, at this Important Point in History • China Is A Leading Global Nation With Power To Influence Other Nations; This Influence is Needed • Climate Change Is A Very Complex Issue, with Many Variables, and Many Unknowns • World Must Continue to do Multidisciplinary Scientific Research on Climate Change • World Must Seek Collaboration, Consensus, Confluence, Through Climate Innovation • Unprecedented Global Business Opportunities Abound in Climate Innovation • Wish To Share With You, Learn From You, With You

3. Climate Innovation Climate Change is a Global Threat Climate Innovation is Global Opportunity

4. Climate Innovation Climate Change Threatens Global Energy, Environment, Economics, Civilization In the Twenty-First Century

5. Climate Innovation Either We Fix Climate Change Or Climate Change Will Fix Us

6. Climate Innovation What Has Not Worked, What Might Work • Copenhagen Conference on Climate Change, 2009, World’s Best Meta Level Forum, Failed To Resolve Nations’ Divergent Interests in Energy, Environment, Economy • Many Countries Were Not Adequately Prepared at Macro Level, Did Not Have A Substantive National Policy Framework To Deal With Climate Change

7. Climate Innovation What Has Not Worked, What Might Work • Global Cities Contain 65% of Global Population, and Corresponding Economic Activity. Could Create A Viable Meso Level Strategy, Using Schumpeter’s Principles, Plus Special Purpose Climate Innovation Business Clusters, and Stimulate New Clean Energy Sources and Technology Enterprises, Move to Next Industrial Revolution, the Post Carbon Economy

8. Climate Innovation Climate Innovation Is The Systemic Use of Alternative Clean Renewable Energy Sources and Radical Technologies, To Replace Carbon Fuels, To Create the Next Industrial Revolution, And The Post Carbon Economy

9. Climate Innovation More Particularly, Climate Innovation • Replaces a particular class of economic driver (old energy), across many sectors using a particular economic engine with accelerator principles • Focuses on a mix of innovation, technology, entrepreneurship as primary factors, supported by interfirm collaboration, strategic marketing, new business models, new conservation models • Achieves outcomes of knowledge, skills, productivity, new innovation, new energy, new technologies, new enterprises, new competitive advantages,new capital, new wealth, new economic prosperity • Saves the environment, the economy, civilization 

10. Climate Innovation / Schumpeter Radical Innovation, Disruptive Technologies, Bold Entrepreneurship, Create New Businesses, Create New Wealth Joseph Schumpeter, 1883-1950, Austrian Economist

11. Climate Innovation Who Was Joseph Schumpeter? • PhD Economics University of Vienna 1906 • Taught Economics In Austria • Austrian Minister of Finance • Bank President in Austria • Held a Chair at University of Bonn, Germany • Lectured at Harvard University, Moved to USA • President of Econometric Society, USA • Known for Contributions in Econometrics, Business Cycles, Economic Evolution of Society, Significance of Gold Standard in Monetary Systems, Entrepreneurship, Innovation • Recognized by The Economist Magazine in 2009 as a “Champion of Entrepreneurship and Innovation”

12. Climate Innovation Climate Innovation is Multi-Disciplinary, Collaboration is Essential • Science, Environment, Geology, Atmospheric Chemistry and Physics, Oceanography, Glaciology, Hydrology, Forestry, Agriculture, Operations Research • Engineering, Civil, Electrical, Mechanical, Chemical, Nuclear, Environmental, Innovation, Urban Design, Transportation, Energy, Technologies, Systems • Economics and Business, Entrepreneurship, Capital Markets, Competitiveness, Interfirm Collaboration, Knowledge, Skills, Policy, Strategy, Models, Interdisciplinary Critical Analysis

13. Climate Innovation Objective • Implement Climate Innovation • Create Special Purpose Advanced Clean Renewable Energy and Radical Technology Climate Innovation Business Clusters • HarvestUnique, Abundant, Global Business Opportunities Globally • Transition Quickly To Next Industrial Revolution, Post Carbon Economy

14. Climate Innovation / Schumpeter General Approach / Methodology • Schumpeter’s Model is driven by Business Opportunities, Free Markets, Radical Innovation, Disruptive Technologies, Bold Entrepreneurship, Productivity Improvement, New Competitive Advantages, New Jobs, New Capital, New Enterprises in New Economic Sectors, New Wealth Creation,New Economic Prosperity

15. Climate Innovation Context • Limits To Growth Study, 1972 Criticized When Published. Extensively Peer Reviewed, Validated, Denmark, Early 1980s • Limits to Growth: The 20-Year Update, 1993 • Beyond The Limits, 30 Year Update Report, 2004 • Causal Factors: Population Growth, Resource Depletion, Industrialization, Consumption, Create Pollution, Destroy Environment, Threaten Economy, Create Risk to Civilization • Global Population in 1972 was 4 billion

16. Climate Innovation Global Challenge • Anthropogenic Climate Change • Began 1750 with Onset of Industrial Revolution • Population Growth, Industrialization, Resource Exploitation, Urbanization, Agriculture, Buildings, Transportation, Consumption, High Use of Carbon Energy Leading to Increased CO2, GHGs, Soot • Global Population 2010 was 6.7 billion

17. Climate Innovation Geometric Curve of Climate Change: Three Stages, Characteristics, Actual And Projected Estimates • Stage One, 1750-2010; CO2, 280-390 ppm; Avg. Global Temp Increase approx. 1C, plus Polar Peaking x2, x3; Convergence of Climate Warming + Initial Tipping Points Emerging at end of Stage One, Provide Setting For Next Stage and Potential Acceleration • Stage Two, 2010- 2050 (est.); CO2, 390-500/550 ppm (est.). Avg. Temp Increase, 3C (est.), plus Polar Peaking x2, x3, Continued Industrial Activity + Population Increase + Tipping Points take world past Point of No Return (PNR). Trigger Points emerge (irregular weather, heat, fires, floods, drought, famine, penury), Provide Setting For Next Stage • Stage Three, 2050- 2060 (est.); CO2, 550 – 650 ppm (est.) Avg. Temp Increase, 5C (est.), Plus Polar Peaking, x2, x3. Continued Industrial Activity + Population Increase + Trigger Points take world to Chaos Factors, Catastrophic Consequences, Population Losses, Potential (Uncertain) New State of Global Environment, Weather Systems, All Major Changes Tend to New State.

18. Climate Innovation Current State of Geometric Curve of Climate Change • Stage One has passed, Early Climate Change, Beginning of Tipping Points • Stage Two now upon us, Accumulated Base of CO2 in Atmosphere, Increasing Global Population, Continued Industrial, Economic Activity, Increasing Intensity, Continued Climate Change, Plus Positive Feedback Mechanisms, Cause Acceleration of Change

19. Climate Innovation Five (5) Positive Feedback Mechanisms • Loss of Albedo Effect in Arctic • Loss of Thermohaline Effect in Oceans • Melting of Arctic Permafrost, Methane Release • Bursting of Ocean Floor Caltrites, Methane Release • Loss of Old Growth Equatorial Forests on Three Continents

20. Climate Innovation Atmospheric CO2 in PPM is Highly Significant • Long term historical stable level, 280 ppm, prior to on-set of Industrial Revolution, 1750 • Current Level, 390 ppm, with 1C average global temperature gain, Current carbon fuels usage rate produces a current increase of 2 ppm pa (actual), but on an increasing intensity accelerating curve, gaining 1 ppm pa per decade (est.), driven by lagging effect, plus cumulative population, industrialization, urbanization economic factorial increases, plus intensity usage increases • Estimated CO2 ppm increase rates: 2010-2020, 20 ppm; 2020-2030, 30 ppm; 2030-40, 40 ppm; 2040-50, 50 ppm. Net result, 2010-2050, 140 ppm increase. Net aggregate measure, 530 ppm CO2. Avg. Global Temp. Increase, 3-5C, plus Polar Peaking x2, x3. Keeling Curve baseline, plus factorial and intensity increases, plus positive feedback mechanisms, interacting, re-enforcing, accelerating

21. Climate Innovation Important Terms To Note • Long Term Historical CO2 Level, 280 ppm • Recommended Long Term Stable CO2 Level, 350 ppm • Current CO2 Level, 390 ppm • Projected CO2 Level, 450 ppm to 650 ppm of no changes • Annual Increases in CO2 in ppm, 2 pp, pa, currently, and rising • Factorial and intensity drivers impacting Annual CO2 ppm gains • Avg. Global Temp. Change, to date, +1C, increasing to +2C, +++ • Polar Peaking Temp. Increases, Factor x2, x3, Harbinger. • Lagging Effect, CO2 Emissions, To Atmosphere, To Current Measure, To Reporting • Tipping Points • Positive Feedback Mechanisms • Trigger Points • Chaos Factors • Catastrophic Consequences • Geometric Curve of Climate Change

22. Climate Innovation Set Firm Targets Now Or Risk Passing Point of No Return (PNR) • Set Maximum Safe CO2 level at 350 ppm • Set Maximum Avg. Temp. Increase at 2C • Replace Carbon Fuels With Safe, Clean, Renewable Alternative Energy Sources, Radical Technologies ASAP • Commit NOW to Rapid Transition To Next Industrial Revolution, Post Carbon Economy

23. Climate Innovation Possible Solutions • Meta = International Treaty • Macro = National Policy Frameworks • Meta = Cities and Economic Sectors Business Opportunities • Micro = Individual Enterprise Business Opportunities • Mini = Individual Consumer Clean Energy Opportunities

24. Climate Innovation Create New Market Place Mechanism Using Schumpeter’s Transformation Principles Special Purpose Advanced Clean Renewable Energy and Radical Technology Climate Innovation Business Clusters • Add Five (5) Adjunct Functions • Bring Key Stakeholders Together to Interact • Create Concentration, Synergy, Acceleration

25. Climate Innovation Add Five (5) Adjunct Functions To Support New Special Purpose Business Cluster • Favorable Conditions • Competitiveness and Interfirm Collaboration • Advanced Market Place Leadership Principles • Global Connectedness Via Internet • Learning Organization Sharing Global Best Practices and Challenging Further Success Stories

26. Climate Innovation Bring Key Stakeholders to New Special Purpose Business Clusters • Large, medium, small, micro, mini enterprises • Innovation funding agencies • Scientific, engineering, technology R&D agencies • Collaborative financial institutions, development banks • Accessible full spectrum capital • Universities, colleges for knowledge and skills • Entrepreneurship centers to drive enterprises through multiple stages of development • Rapid commercialization agencies and mechanisms • Public-Private-Partnership Formation Agencies • Trade and export financing agencies • Govt Depts, Policy, Industry, Science, Econ. Dev., Labour, Foreign Affairs, Defense, Finance

27. Climate Innovation Form Special Purpose Advanced Clean Renewable Energy and Radical Technology Climate Innovation Business Clusters • Assemble Key Stakeholder Participants • Define Charter, Mandate, Mission, Objectives • Commit Absolutely to Rapid Transition To Next Industrial Revolution, Creating the Post Carbon Economy • Define Priority Research, Radical Innovation, Disruptive Technologies, Bold Entrepreneurship Projects, Critical Timing • Implement Five (5) Critical Adjunct Factors: Favourable Conditions, Competitiveness / Interfirm Collaboration; Market Place Leadership Practices; Global Connectedness; Learning Organization Principles • Plan to Deal Strategically to Innovate Massively in Five (5) Major Categories: Alternative Clean Renewable Energy Sources, Radical New Clean Energy Technologies, New City and Economic Sector Clean Strategies and Models, New Individual Enterprise Clean Energy Models, New Conservation and Consumption Models

28. Climate Innovation Form Special Purpose Advanced Clean Renewable Energy and Radical Technology Climate Innovation Business Clusters • Focus on Specific Priority High Value Projects, and also Low Hanging Fruit • Immense Capital Required, 1-2% of GDP now, or wait 5-10 years and then have to contribute 5-10% of GDP and risk passing PNR. Best to apply Carbon Price or Carbon Tax now to help to raise capital to finance big projects, strategic clean energy technology changes now, e.g., Nuclear Fusion, Thorium Plants, Intelligent Electricity Grids, Massive Solar Thermal, Massive Geothermal, Massive Creation of Large Buildings as Net Energy Generators, Massive Off Grid Housing and Physical Plant, etc. • Get Started, Meet Regularly, Discuss Advances on Priorities, Brain Storm, Innovate. Work Hard and Fast • Network Globally, Share, Innovate, Challenge, Leapfrog • “Do” Collaboration, Consensus, Confluence very seriously • Harvest Early Rewards, Profits, Competitive Advantages

29. Climate Innovation Scalability Special Purpose Advanced Clean Renewable Energy and Radical Technology Climate Innovation Business Clusters Are Scalable and Flexible, May Be Implemented in Smaller Cities and Regions

30. Climate Innovation Essential Dynamics of Successful Special Purpose Business Clusters • Concentration • Synergy • Acceleration

31. Climate Innovation Innovation Strategies • Innovation Policy / Objectives • Innovation Systems / Funding / Infrastructure • Technology Road Maps • Competitive Analysis/ SWOT Analysis • Innovation Culture

32. Climate Innovation Disruptive Technologies Strategies • Significance of Disruptive • Examples of Past Disruptive Technologies • Future Requirements in Disruptive Technologies • Forcing Techniques

33. Climate Innovation Bold Entrepreneurship Strategies • Critical Success Factor For Economic Change, Market Based Growth • Multiple Scales of Enterprises Multiple Stages of Development • Knowledge, Skills, Financing, Infrastructure • Key to Creating Large Enterprises, Strong and Diverse Economic Sectors

34. Climate Innovation Vital Role Of Small Business / Entrepreneurship In Innovation, Technology, Change, Growth, in National Economies • SMEs contribute 25% of GDP in Developed Nations • SMEs are very significant innovators (notably high tech sectors) • SMEs can create and use new technologiesvery significantly (non high tech sectors can lag) • SMEs are wealth creators, job creators • SMEs can grow into MNEs, 9 stages of growth

35. Climate Innovation Vital Role Of Small Business / Entrepreneurship In Innovation, Technology, Change, Growth, in National Economies • Critical Success Factors are: *Knowledge, *Skills, Competencies, Dynamic Teams *Business Strategy, Specialization, Leveraging *Innovation Systems *Technology Road Maps *Business Incubators, Networks, Clusters *Intellectual Property *Access to Full Spectrum Financing

36. Climate Innovation Vital Role Of Small Business / Entrepreneurship In Innovation, Technology, Change, Growth, in National Economies • Critical Success Factors (cont’d): *Marketing, Exporting Opportunities and Drive *Developing, Increasing Competitive Advantages *Identifying Gazelles, Giraffes *Documenting, Analyzing Market Leader Success Stories Per Sector, Sub-Sector *Modeling on Success of High Performing Firms *Professional Mentoring For Growth, Acceleration *Imagination, Focus, Requirements *Can Do, Out Perform Attitude

37. Climate Innovation Vital Role Of Small Business / Entrepreneurship In Innovation, Technology, Change, Growth, in National Economies • Climate Innovation, Transition to Next Industrial Revolution, Post Carbon Economy, Requires Full Strategic Development and Deployment of SMEs • Focus Must be on Schumpeter’s Transformation Principles: Radical Innovation, Disruptive Technologies, Bold Entrepreneurship; Plus Five Critical Adjunct Factors • Successful, Leading Nations, will invest 1-2% of GDP p.a. in Climate Innovation (Stern says 2% now), including a particular focus on SMEs which are a growth engine

38. Climate Innovation Favorable Conditions • 1-2% of GDP (minimum) spent on Climate Innovation p.a. • Policy considerations, e.g., carbon pricing or carbon tax • Innovation tax credits for demonstrable pay-off innovation at point of market entry linked to S-curve • Innovation systems • Science / engineering / technology research institutes doing R&D • Technology road maps to guide future opportunities • Advanced educational institutions to provide specialized knowledge and skills • Entrepreneurship centers to train entrepreneurs through multiple stages of enterprise development • Collaborative financial institutions providing ready access to full spectrum capital • S-curve drivers to drive innovation climate • Intellectual property management agencies • Rapid commercialization mechanisms • Export development agencies • A national culture of collaboration and competitiveness

39. Climate Innovation Favourable Tax Conditions To Support Special Purpose Climate Innovation Business Clusters • 1-2% of GDP p.a. investment in Climate Innovation; some countries spend more than this. Stern recommends 2%. If 5-10 year delay in rapid progress with Climate Innovation, then 5-10% of GPD p.a. may be req’d to deal with extensive degradation within next decade • Carbon Pricing, Carbon Tax, beginning at a 20% consumption tax, and increasing annually for five years up to 100% of pre-tax market pricing • Business Innovation Tax Credits for new energy and technology products, for demonstrable products at market entry, relative to a specifically identifiable S-curve baseline • Business Income tax credits for creation of new energy and technology product lines, to last for five years • Consumer tax credits for residential energy and environment specific retrofits with new energy sources and technologies, to last for five years • Consumer tax credits for totally off-grid residential housing, to last ten years • Consumption taxes on purchase of large vehicles • Significant daily operation and parking charges for vehicles • Significant surtaxes on two or more vehicles per family

40. Climate Innovation Positive Incentives Re: Climate Innovation • Objective Information, Concentrated Education Programs for Corporate Executives, Boards of Directors, SMEs, on Climate Innovation • Corporate Social Responsibility (CSR) Codes on Climate Innovation • Mandatory Annual Reporting and AGM Reporting Against Performance Criteria For Climate Innovation • Rewards and Recognition Program for Business Sector • Auditing Down the Road, With Sanctions for Failure to Comply (Possible WTO Sanctions for Non Green Enterprises, Sectors, Countries in Future, at Least Equal to a Carbon Tax, Possibly More)

41. Climate Innovation Competitiveness / Interfirm Collaboration • Promotes additional entrepreneurship relationships and undertakings • Enhances scale, scope, speed of entrepreneurship undertakings • Produces externalities of: (a) increased knowledge, skills, experience, teams (b) increased productivity, (c) new innovation, intellectual property (d) quicker time to market, (e) quicker earned profits, (f) new competitive advantages, (g) new competitiveness platforms for round two, three, four, five, up to ten rounds, with an average of one round per annum, (h) but with possibility of quantum shift if new disruptive technologies create major new platforms of competitiveness • Contributes to increased profits and re-investment, producing increased forward momentum

42. Climate Innovation / Schumpeter Nearly Two Dozen Forms Of Interfirm Collaboration Available • SME forward and backward linkage learning groups • Micro, Mini, SME informal self-help learning groups • Third generation business incubators (L.Hewick; P.Roy, Canada) • Flexible business networks (S.Rosenfeld, USA; P.Roy, Canada) • Business clusters (G.Beccatini, Italy; P.Roy, Canada) • Dynamic Licensing • Strategic Alliances (two parties) • Joint Ventures (multiple parties) • Export Consortia (twenty to fifty enterprises) • Old nurse log generators • Spinoff ventures • Enterprise linked mentoring • Local Supply Chains, International Value Chains • Local Economic Development Cross-Sectoral Learning Orgs • Advanced Technology Industry Sector Leadership Groups • Public-Private-Partnerships • Multi-Sector-Enterprise-Function-Partner, Dynamic Regional Economic Hubs

43. Climate Innovation Advanced Market Place Leadership • Strong, Highly Visible, Industry leadership champions • Demonstration projects of new energy, new technologies • Government procurement • Identify and celebrate market leaders across economic sectors, ie, high performing, high growth enterprises, including MNEs, SMEs, gazelles, giraffes, etc. • Business case analysis, investment payback analysis • Success stories • Analysis of critical success factors • Leveraging effect of modeling competitiveness, success • Replicating the entrepreneurial DNA of successful, high growth enterprises with advanced training to others (lessons learned) • Recognition and rewards • Create contagion, leading to growth, leading to a market leadership critical mass

44. Climate Innovation International Connectedness / Internet Linkages, Globally • Link Global Cities which are implementing Special Purpose Advanced Clean Renewable Energy and Radical Technology Climate Innovation Business Clusters • Tele-conference, share progress, resolve issues • Focus on Collaboration, Consensus, Confluence

45. Climate Innovation Five (5) Key Areas To Innovate, In The Special Purpose AdvancedSpecial Purpose Advanced Clean Renewable Energy and Radical Technology Climate Innovation Business Clusters • New alternative clean renewable energy sources • Innovative clean renewable energy technologies • Innovative clean renewable energy economic sectors and city strategies • Innovative clean renewable energy and innovative technologies business enterprise models • Innovative conservation strategies

46. Climate Innovation Fifty (50) Big Climate Innovation Opportunities • Nuclear Fusion (vs. current nuclear fission) • Clean Nuclear Plants Using Thorium • Geothermal, Short Holes for Residential • Geothermal, very deep holes for institutions, cities • Hydro-electric where natural assets exist • Ocean Wave, Tide and Current Turbines • Wind Turbines and Wind Turbine Farms • High Altitude Wind Turbines • Solar Thermal Collectors • High Altitude Solar Concentrators • Photovoltaic Panels for Buildings • Smart Urban, Regional Electricity Grids • Direct Current Lines (vs. current AC lines) • Photonics Light Energy Transmission For Systems, Data, Etc. • Large Urban Buildings As Net Energy Generators • Improve Productivity of All Economic Sectors by 30%

47. Climate Innovation Fifty (50) Big Climate Innovation Opportunities • Off-grid, smart clean energy self sufficient housing • More efficient home appliances, particularly for hot water heating • Alternative high efficiency lighting • Develop High Efficiency, High Effectiveness HVAC Systems • Efficient Urban Design, Multiple Multifunctional Nodes, Tightly Limit Ad Hoc Expansion of City Peripheries, Hold Boundaries Firm • Rapid Urban Transit System • High Speed Intercity Trains • Discourage use of individual vehicles; charge fees • Hydrogen Fuels • Biofuels from post agricultural byproducts • Pyrology to create linked heating, industrial applications • Co-Generation Energy Plants • Rechargeable Electric Batteries for Vehicles • Convert Diesel Trucks and Buses to Natural Gas • Alternative High Efficiency Aviation Fuels

48. Climate Innovation Fifty (50) Climate Innovation Opportunities. • Algae Production and Farming to Consume CO2 in Oceans • Phytoplankton Farming to Consume CO2 in Water • Create microbic life to absorb CO2 in land, agriculture, forests • Create 100-200 km agricultural zones near cities • Create urban gardens, roof top gardens • Bio-engineer pastured animal guts to replicate kangaroo guts to eliminate gas, methane production • Develop Grains and Crops to survive in above +3C to +6C environments • Vegetable protein, and protein combining diets, to replace meat protein • Create Synthetic Protein Foods • Create Clean Water Systems • Create Clean Sewage Systems, Process, Eliminate Heavy Metals, Recycle • Create Clean Urban Composting, with Carbon, Nitrogen Cycles Synergy • Plant large urban forests, many, many trees as huge urban carbon sinks • Bury persons beneath a new tree to recycle human body respectfully and usefully

49. Climate Innovation Fifty (50) Climate Innovation Opportunities. • Carbon Capture Sequestration and Deep Earth Storage, Must be Chemically Bound with A Salt or in Equivalent Fixed State, Not Gaseous State, and Full Risk Assessment Must be Carried Out. Absolute Five Year Limitation on this Strategy While other “Get Off Carbon” Energy Sources and Technologies are Implemented • Carbon Trading Permits with Tight and Quickly Reducing Targets and Unused Credits Trading Systems; contains implicit or explicit price for carbon, following Sir Nicholas Stern principles; to complement CCS / DES Strategy. Absolute Five Year Limitation on this Strategy While other “Get Off Carbon” Energy Sources and Technologies are Implemented • Developed Countries Support Development of Developing Countries with well defined strategies (see new slide) • Atmospheric CO2 Extraction Technologies (further R&D required) • Continued Science, Engineering, Technology, Agriculture, Transportation, Manufacturing, Energy, etc., R&D to find solutions to complex problems

50. Climate Innovation Fundamental Symbiosis of Energy, Economics, Innovation, Technology, Entrepreneurship, Civilization • Energy Essential For Civilization To Thrive • Environment Essential For Civilization To Live • Economics Essential For Civilization To Prosper • Innovation, Technology, Entrepreneurship, Essential for Civilization to Progress