Why is Cleantech Important?

Why is cleantech important?

Cleantech innovation and the “green economy” are critically important to the United States in general, and to Los Angeles in particular. Globally, the sector is massive and growing at a tremendous rate. A recent study commissioned by the German government found that the global market volume of the cleantech sector today is $2.7 trillion per year, and projected that it will more than double by 2025. Mirroring global trends, renewable energy is the fastest growing sector in the US economy, growing 49 percent between 2007 and 2011. 

Along with this enormous new market opportunity comes opportunities for creating well-paying, sustainable and diverse jobs. Nationwide, cleantech jobs pay 13 percent more than jobs outside the sector, and 26 percent of all cleantech jobs lie in manufacturing as compared to only 9 percent of jobs in the economy as a whole. Los Angeles is currently home to the second largest green economy in the US. We employ more workers in “green jobs” than any other city, and these jobs are higher paying and growing at 10 times the rate of non-green jobs. Important as cleantech is to LA’s economy today, it will be orders of magnitude more important in the decades to come as the world rebuilds its transportation and energy infrastructure. 

Los Angeles is not alone in identifying the opportunity and the competition for sustainable business, capital, talent, and government support is intense amongst US and global cities. Northern California (“Silicon Valley”), Boston (The MIT Cluster), Austin, Chicago, Wisconsin, New York, and the North Carolina Research Triangle all have more established—and often much larger—cleantech economic clusters than Los Angeles. This competition is fierce, serious, and has a direct impact on Los Angeles’ ability to reach its vision of becoming the cleantech center of the United States and the world. 

Even though Los Angeles has important strengths helping to establish us as a cleantech center (our research universities and labs, our port, and our talents pool to name a few), LA’s biggest advantage versus other regions is this: the size of our private/public green economy is huge and growing. We believe this is the primary reason that Los Angeles had more cleantech startups than any other region. Simply, entrepreneurs want to start companies where they can sell their products. 

Yet despite all this success, LA’s cleantech innovation economy is not reaching its full potential. The purpose of this Candidate Discussion is to explore the candidate’s thoughts on what Los Angeles can—must—do to become more competitive as a global leader in clean technology innovation and the green economy. 

Topic 1: Economic Development Priorities for the City

The new mayor will have more competing economic development priorities: transportation, entertainment, health care, growing the ports, etc. Within this context, where does building a green economy fit into your priorities? What’s more important?

Topic 2: Specific Programs to Build the City’s Innovation Ecosystem and Green Economy

During the last five years, the City has taken huge steps towards creating a sustainable innovation and commercialization ecosystem for clean technologies: LA is now the second largest green economy in the country; the City helped create CTLA and LACI, designated a Cleantech Corridor, attracted new sustainable economy businesses, etc. Our challenge now is to take it to the next level.

Topic 3: Programs to Help Entrepreneurs

It’s now widely acknowledged that creating new companies is the best way to create new jobs. For example, during the last three decades, all net new jobs created in the United States—44 million—have come from companies less than five years old. The Kaufman Foundation did an important study about economic growth and found that new companies create an average of three million new jobs every year in the US while existing companies lose one million jobs. Hence, it’s critically important to make Los Angeles a city of/for startups. 

New York City has created eight business incubators and has pledged $100 million in funds and $300 million in real estate towards converting Roosevelt Island into a center of entrepreneurship and innovation. The State of New York has created a $1 billion green bank, hired the nation’s premier green economy financial expert to lead it, and has launched a $50 million innovation venture capital fund to invest in the commercialization of early stage technologies. Silicon Valley has long led the way in promoting innovative technology startups, attracting talent, and deploying investment capital. 

Topic 4: Competitiveness

Los Angeles competes directly with other regions for federal and state funds to create a cleantech ecosystem, to build critical infrastructure, and to stimulate the acceptance of green technologies. In the private sector, Los Angeles also competes to attract large cleantech companies, talent, and capital. Many regions have put more resources behind their cleantech efforts than Los Angeles (New York, Chicago, Massachusetts, Toronto, to name a few) and are using innovative public/private partnerships to build their innovation ecosystems. Funding for these initiatives has come from a variety of sources. For example, Massachusetts launched a renewable energy trust fund that provides around $25 million in funding per year for their ecosystem by applying a $0.0005 per kilowatt-hour surcharge of around $38 million per year to support commercialization of emerging technologies to provide ecosystem support.