April 18 (Bloomberg) -- Printed on recycled paper, ``Earth: The Sequel'' arrives just in time for Earth Day on April 22.

Authors Fred Krupp and Miriam Horn argue that we can change our gluttonous, energy-depleting, air-soiling ways by forging smart bonds between investors and innovators: ``A revolution is on the horizon: a wholesale transformation of the world economy and the way people live.''

New energy linked to a carbon cap and trade system will not only solve the global warming problem but will jump-start economic growth.

I spoke with Krupp, president of the Environmental Defense Fund, at Bloomberg's New York offices.

Campion: You expect a lot of ``new energy'' ... that will not only solve our global warming problem and power our future but will jump-start economic growth as well?

Krupp: The energy business is a $6 trillion business. There's tremendous numbers of jobs there now and many jobs to be created as we retool that sector to be as clean as we need it to be in order to have a future.

And there will be huge profits to be made. It's not an optional thing: We're all going to continue to use energy. Many new fortunes will be made in the process of saving the planet.

Solar Energy

Campion: In market terms, energy industry types have long argued that alternative energy sources lack scale. Can the alternatives be bulked up fast enough to make a difference?

Krupp: Yes. It turns out, for instance, that with solar energy, a square of land, 100 miles long on a side, could provide all the electricity the entire country needs if it were just converting 10 percent of the sun's energy to electricity.

Right now, solar energy and wind power haven't been big things, although wind is coming on first and fastest. The reason is relatively simple.

The burning of fossil fuels receives many subsidies, but the biggest subsidy is that the pollution that comes from burning it is allowed to be just dumped in the sky. It's as though we allowed garbage trucks to dump their garbage in Central Park.

Until we change that subsidy and say that, in essence, garbage trucks need to dump their garbage where it's supposed to go, and power companies can no longer put this global warming pollution into the sky, then it will be hard for these technologies to scale up.

Cascading Money

Campion: Investor sensibility may or may not be a good indicator of the eventual success of a product or a strategy. But it is a measure of commitment, anyway. Somebody is going to put their money behind it. Which of the technologies you've checked out so far do you see money chasing?

Krupp: There's the beginning of a cascade of money going to these technologies. A company like Amyris Biotechnologies has had to turn away investors. They're a company that's already figured out how to create the cure for malaria out of sugar. So they've reprogrammed yeast in order to produce the only drug that cures malaria, and they're going to save the Bill and Melinda Gates Foundation a couple hundred million dollars having done that.

First Solar is the first of the solar companies that went public. They now have a market cap above $16 billion.

Campion: You make it clear that all the inventive alternative energies and strategies can only make a difference if the market is mobilized by the carbon cap and trade system. Can you say simply why you think that's so crucial that this market be established?

Krupp: What we learned with acid rain is that having a green market to sell pollution reductions into changes those incentives completely. So right now, the economic signals are all in favor of polluting for free.

Once you turn that signal on its head and you make a pollution reduction something that's valuable, then we enlist American entrepreneurs and people on the factory floor to innovate on behalf of getting more pollution reduction because that becomes more profitable.

Carbon Cap

Campion: With countries of the world at different stages of evolution, how do you imagine this market in carbon will work for Chad or China or India?

Krupp: The first thing that needs to happen is the U.S. needs to catch up with the rest of the developed world and put in a legal limit or a carbon cap. The attention then will turn to China and India and they will be asked by the world community and by public opinion to make commitments to reduce their carbon emissions.

Campion: How much time have we got?

Krupp: We don't have much time, that's why there's an urgency to get Congress to act right away, but once we get the incentives right and put our markets to work to solve this problem, we can still do it.

For more information on the Environmental Defense Fund: http://www.edf.org/home.cfm.

This is adapted from a radio interview that can be heard tomorrow on ``Bloomberg Muse Saturday'' on WBBR 1130 AM in New York and on Sirius Satellite Radio at 8 a.m., 1 p.m., 6 p.m. and 11 p.m.

(Kathleen Campion hosts Bloomberg's weekend arts and culture program, Muse. Any opinions expressed are her own.)

To contact the reporter of this story: Kathleen Campion in New York at kcampion@bloomberg.net.

Last Updated: April 18, 2008 00:01 EDT