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How can the federal government work with the IT sector to make the technology industry more energy efficient? During today's OnPoint, Bruce Mehlman, executive director of the Technology CEO Council and founding partner of the lobbying firm Mehlman Vogel Castagnetti, discusses how a private sector-federal government partnership could help promote greater efficiency. Mehlman explains how the United States' relationship with China affects the technology sector and what steps the United States should take to facilitate a successful trade partnership. He also assesses the United States' level of competitiveness in terms of innovation.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Bruce Mehlman, executive director of the Technology CEO Council, a group of executives from 10 leading technology firms. Bruce is a founding partner of the lobbying firm Mehlman, Vogel, and Castagnetti and he also served as an assistant secretary of commerce for technology policy. Bruce, thanks for coming on the show.
Bruce Mehlman: Thanks for having me here.
Monica Trauzzi: Bruce, the Technology CEO Council is made up of companies like Dell, HP, IBM, Intel, Applied Materials, all the big ones. Why was there such a need for the biggest IT companies to come together and sort of try to lobby Congress on energy efficiency and environment issues?
Bruce Mehlman: I think there are a couple of drivers for this. First of all, what the companies are hearing from their customers out in the marketplace. Energy, as you've noticed, costs $120 a barrel of oil. The costs are at extraordinary highs and there's no reason to expect it's about to drop any time soon. Information technology, though it is a net saver of energy, is increasingly driving costs. For example, data centers have power, heating, and cooling costs that are always going. So, first they're hearing from their own customers how can you be more energy efficient? How can you help us cut our costs and reduce our environmental impact? Also the products that these guys are making are increasingly becoming environmentally friendly, reduced energy consumption products. And so I think they perceived a need, a change in the marketplace. The government is a huge user of energy and I suppose, bottom line, there's a chance to do well by doing good and that's always a sweet spot to be in.
Monica Trauzzi: And the TCC sent a framework to Congress a few weeks ago that lays out some of the goals of setting national policies on energy and environment. And it really stresses this sort of private sector/federal government partnership and what are the main goals there?
Bruce Mehlman: Well, the goals, in part, are to highlight some of the things that can be achieved through the energy efficiency, and particularly with information technology driving energy efficiency. As you know, as anybody who watches this show understands, there are some big, hairy debates that are going on about whether it's carbon tax or cap and trade. And which alternative fuels, whether corn-based ethanol is in fact worse for the environment, whether we ought to reduce sugar barriers and let sugar in because sugar-based ethanol is nine times more efficient. They're all really important. They are all really significant. They're all really political. And what you often find is focus is lost on simpler things that can be achieved, for example, through energy efficiency. We're urging first the private sector to become more energy efficient. There are things the private sector can do. It needs to lead. Private sector leaders shouldn't wait for a piece of legislation. They shouldn't wait for a subsidy. There are things they can do now to cut their fuel bills and to cut their energy consumption and minimize their environmental profile. But also the governments, the biggest user of energy in the country and the government can and needs to lead more by example. Places like EPA are doing well, but the government has more data centers than just about anybody else. There's a lot more they can and need to do to green them.
Monica Trauzzi: And so what kind of legislation would be necessary though? And how much should the government be dictating what the private sector needs to be doing?
Bruce Mehlman: You know, to the credit of the government in this area they haven't been that dictatorial I suppose yet. Energy Star is an excellent program. The challenge for Energy Start is to give the flexibility that operators of say data centers might need to come up with the most energy-efficient results, just by way of example. If you had any data center and you had $10,000 to spend, some data centers, the best way to spend that money is to buy new, more energy-efficient servers. Another data center may say the servers are pretty good. We need to have better insulation, because that's where we are losing all our energy. And other servers need to bring an advanced power and cooling techniques so that the heat loss or the heat consumption are minimal, because right now it costs more in a data center for heating and cooling than it does to buy the equipment. As for what legislation is appropriate, the honest answer is we're not in there saying here is the silver bullet law. Obviously, tax policy offers a huge opportunity. For now, we'd like to see the government lead by example. Places like OMB right now tend to score things on a what will it mean for this year basis as opposed to a little bit more forward-looking assessment of it may cost money today to upgrade some of the equipment, but what does that mean over the energy costs say in five years from now? And the private sector is seeing fantastic returns from upgrades. The public sector needs to measure in such a way that they can understand the returns are there.
Monica Trauzzi: And you demonstrate some of the points that you're making in this virtual town that you created. It's called Greenville. What does Greenville help us understand about the energy efficiency?
Bruce Mehlman: Greenville is an attempt to show as opposed to simply tell the way a report might do. Concurrent with that, we ask the American Council for an energy-efficient economy, to go do an assessment study. And the question was we know things like telework, digital thermostats, so many uses of information technology enable greater energy efficiency, but what's the net? Because IT uses power, so is IT using more power than it saves, was the question. The answer that ACEEE came back with was roughly 10 to one energy savings are achieved through information technologies. So for every kilowatt hour of energy spent on IT you roughly save 10 kilowatt hours of energy across the economy by using the greater IT and displacing the more energy consumptive activities. The report is excellent. It's by economists, it's not quite for economists, but it tells a story that's not very accessible to, say the average high school senior board to the average history degree from the liberal arts college and certainly not the average member of Congress who have a lot on their plate. We wanted to show it. If you go to Greenville, which is a virtual world, you can access it through our web site www.technologyCEOCouncil.org, and then it will be obvious. Welcome to Greenville is a big sign. It shows you, so you think, how do you get that ten to one? And it will show an example of telework or it might show an example of a digital thermostat or it might show an example of traffic congestion management, which is something that IBM is helping folks in Europe realize significant savings from.
Monica Trauzzi: One of the issue areas that you're keeping a close eye on is the U.S.-China relationship. And in the technology sector there's certainly a big crossover between the House two countries. What does China need to be doing right now to live up to their end of the bargain? And what does the U.S. need to be doing to engage China and help them along?
Bruce Mehlman: Well, now there is a topic rich for its own show, if not its own channel. Look, the run-up to the Beijing Olympics makes it pretty clear that China is not a particularly environmentally friendly place. Their industry is extraordinarily dirty. Their energy consumption is driving up the price now, so is ours. They develop relationships, and subsequently political relationships, with some of the most despotic regimes around the world because that's where the oil is often found. You can start with there are geopolitical as well as economic reasons why it is in their interests and in our interests to have both their country and ours become more energy-efficient and to reduce both of our dependencies on foreign fuel. I think as the two nations look to engage, as we look to make sure that they don't erect trade barriers or have specific standards within their nation that advantage Chinese businesses, there's a huge market opportunity and it's an opportunity for things as simple as Owens Corning Fiberglass to things that are more complex like energy-efficient servers. I think you're seeing some interest particularly in the more polluted cities and the more advanced industries over there. At the same time, it seems that economic growth uberolis is what really drives that country and so they don't have a clean water act. They don't have clean air policies nearly like our country does. And I think both countries can and need to do more as the two largest users and consumers of energy to improve their environmental profiles.
Monica Trauzzi: Is there enough money being put towards innovation in the U.S.?
Bruce Mehlman: Never. I really don't think there is, neither the private sector nor the public sector. If you take a look at federal research funding that's actually out laid as opposed to that's authorized but not appropriated in Congress, it's been pretty flat since the Reagan administration. This administration has spiked it up a little bit, but there is a lot more that can and should be done. Some folks in Congress have talked about the need for an energy DARPA as it were, which DARPA refers of course to the defense research agency that created the Internet, sorry Al Gore, among a lot of the other things that are really advanced technologies originally intended for military use. We, in my opinion, ought to make energy independence the same level of priority that we made going to the moon or fighting terrorism. They're very integrally related. You know, if you think about the countries, the rogues and cartels and despotic regimes that are the world's leading oil producers, whether in the Middle East or Nigeria or Sudan or Russia or Venezuela, these are nations that don't need more of our dollars. They don't do good things with those dollars and we shouldn't want, from an economic perspective, to be having our dollars flow in those directions. So there's a geopolitical imperative. The environmental imperative you guys cover all the time and you do a great job of pointing it out, but it's in the interests of the planet to have each GDP dollar be less energy intensive and less environmentally impactful.
Monica Trauzzi: Is the U.S. losing its competitive edge in terms of innovation? Are we not going to be the ones to solve the problem? Might it be some other country?
Bruce Mehlman: I think we are the best positioned nation to solve the problem and while you can and fairly should and could make a case that our edge is diminishing, we are relatively losing it, no nation has been dealt the hand of cards that you'd trade for now. You'd rather be in America than any other country on the planet. That said, our share of the world's are indeed used to be at 75 percent. It's down around now 40 percent today. Our share of global patenting, our share of producing the best and brightest scientists and engineers and then retaining them in our economy is shrinking. It has to be shrinking in part because of the communist world, the 3 billion people who are in the former Soviet Union and its satellites and in China realized that communism was a failed system and they looked at the United States and they said, "These guys are investing in R&D, they're investing in infrastructure, they're investing in talent and their people. They're having an open immigration regime where they attract and they retain the best and brightest." And you're seeing a lot of the really smart kids from around the world who used to come and study here staying home more often. What breaks my heart is when they come and study here and then our backwards immigration policies boot them out of the country and say go back to India, go back to China and compete against us from there when they'd rather stay here and help our companies be more competitive and help grow jobs at home.
Monica Trauzzi: We can't talk about the IT sector without talking about e-waste. What are the companies in your group, in TCC, doing to address this issue? It's getting some traction on the Hill right now. How big of a concern is this and what are they doing?
Bruce Mehlman: I think it's a huge concern and it's been a huge concern for a while. You have folks like HP and Dell and IBM which are really among the world leaders. There's always more that they need to do. IT is becoming increasingly ubiquitous. I mean before I sat down for this interview I took off a cell phone, a Blackberry, I didn't bring my iPhone, but more and more of this equipment, we have multiple computers whether in the office or at home. These things are made with materials that if not properly disposed of are an environmental challenge or an environmental hazard. And that's why I think you've seen companies like the member companies of mind step up and try to figure out how to lead. How do we recapture this? It's good business. It's something consumers want and it's something increasingly government's demand.
Monica Trauzzi: All right. We're going to end it right there on that note.
Bruce Mehlman: Great.
Monica Trauzzi: Thanks for coming on the show.
Bruce Mehlman: Thanks for having me.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
[End of Audio]
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