A research team of USC Marshall MBA students has concluded that the goal of widespread sustainable-energy use is not within immediate reach as issues surrounding unclear global policies, affordability, and myopia among political leaders and consumers are thwarting businesses from investing in sustainable energy.

The USC research team traveled to Yokohama, Japan, late last year to present its findings to an advisory council of the Asia Pacific Economic Cooperation. APEC is an organization focused on promoting free trade and furthering economic growth among its 21 member nations spanning four continents: North America, South America, Australia, and Asia. The organization claims to be the world's largest regional cooperative, in a region that accounts for about 40 percent of the world's population and nearly half of the world's gross domestic product.

The USC team was the only business school invited to share its findings with the APEC Business Advisory Council, a collection of 63 economic and political leaders from each nation involved, who meet to advise the organization on strategy.

In the team's executive summary to APEC, the MBA students defined the issues that are creating a lack of confidence for investments in sustainable energy: "Policies push sustainable energy into the energy mix, rather than stimulating demand to pull sustainable energy into the market. Businesses lack clear price signals to inform investment decisions.

Regulatory uncertainty discourages investments with long-return horizons. Inertia in the form of myopia, misperception, and dulled motivation, at the economy, firm, and consumer levels creates resistance to change, and constrains solution-seeking to incremental improvements of known technologies rather than disruptive breakthrough innovations needed," the team writes.

"Our research team traveled to 14 APEC economies and conducted 183 interviews with business leaders," says Cathy Kim, who led the MBA research group. "Our goal was to capture the voice of investors in sustainable energy."

Businesses see a range of barriers for the investment landscape in sustainable energy, Kim says. The barriers include high capital costs for startup, a relatively small market, low prices for products, and uncertain international policies to support a strong move away from traditional fossil fuels.

"One of the multinational U.S. companies that we interviewed captured the concerns of many businesses," Kim says. "The company says, 'We are stuck in policies that have always supported (fossil-fuel) energy."

The USC research team found that fossil-fuel energy receives 12 times more subsidies than sustainable energy, by factoring in the actual production cost of fossil fuels and their carbon emissions. The team also concluded that the lack of storage solutions is an impediment to the development of renewable energy. Energy produced from solar or wind must be stored to meet the variable needs of consumers, and the infrastructure isn't currently in place in the vast majority of countries.

The team provided a series of recommendations to create new investment opportunities for sustainable energy. Those recommendations included creating a collective sense of urgency to pull investment in sustainable energy; moving toward transparent, global prices for energy; and creating incentives for consumers to use sustainable energy. Other recommendations included providing rewards for advances in basic research and storage technology, and encouraging cross-border investments to create energy interdependence.

Carl Voigt, professor of clinical management and organization at USC who serves as faculty advisor for the research team, says he believes the recommendations provide the organization with vital information to develop new strategies for encouraging the development of renewable energy.