Do prizes pay off for the world--or just for the winners?

Prizes have a strange hold on us. Some are just fun. (Cracker Jack has put a prize in the box since 1912.) Others create incentives that are intended to solve big problems.The Longitude Prize, established in 1714 by the British government, inspired clockmaker John Harrison to develop the marine chronometer, enabling ships to know their locations at sea. The Napoleon III Butter Substitute Prize brought us margarine. Charles Lindbergh flew across the Atlantic in 1927 to claim the $25,00 Orteig prize.For the last decade or so, we've seen a proliferation of prizes from foundations and governments designed to spur environmental innovation. Best known of the prize givers is, of course, the X-Prize Foundation, which created prizes for super-efficient cars and ways to clean up oil spills from the ocean. Other environmental prizes have been offered by the government of Abu Dhabi (the Zayed Future Energy Prize), the US Department of Labor (an L-prize for an energy efficient light bulb), by WWF (for smart fishing gear) and by the Goldman Environmental Foundation (for grass roots activism).The latest environmental prize--and the reason for these musings--was announced this month by Ivan Tse, the chairman and president of the Hong Kong-based Tse Foundation. A relative newcomer to the world of philanthropy, Tse, who is 43, has put together a consortium called The Global Friends that is seeking candidates for The Global Friends Prizes, three annual awards of $500,000 each to be given to organizations in China and US that demonstrate significant potential to spur reductions in CO2 emissions.Why another environmental prize? The climate crisis deserves more attention than it's been getting from philanthropy, Tse told me the other day by phone from Vancouver, where he was attending the annual TED conference."Climate is the issue of our time, the defining challenge of our time," he says, noting that an estimated two percent of philanthropic dollars are devoted to climate. That does seem low. If the world's leaders, and its people, fail to prevent catastrophic climate impacts, the many other issues on the philanthropic agenda will recede in importance.Giving a prize to groups in the US and China makes sense because our two countries are the world's leading greenhouse gas emitters. Trust and cooperation between the two will be required to lead a global transition to a low-carbon economy."The US-China relationship is the most important bilateral relationship in the world," Tse says. "There's a lot of good will and good intentions. But there's also a lot of misunderstanding."

Tse is well-positioned to promote US-China cooperation. Born in Hong Kong, he moved to Texas at age four and was educated in the US. He lived in London and Amsterdam (where he briefly ran a luxury-goods retailer called We Are Beauty) before returning to Hong Kong to lead the 25-year-old Tse Foundation. "I consider myself a global citizen," he says.

The foundation was created by his grandfather, Joseph Tse, who was orphaned as a young man in China, left in 1949 after the Communist revolution and became a successful trader on the Hong Kong stock exchange. It previously devoted much of its grant-making to building schools in China. It does not disclose its assets.

The Global Friends decided to create a prize instead of doing traditional grant-making because prizes "have a multiplier effect," Tse says. "More people get involved. One of the challenges we face with climate is sparking the imagination of the public at large." Businesses and NGOs are eligible. “We’re looking for projects  that have achieved some degree of success and some momentum,” he says.Matt Peak, a clean-energy strategist who spearheaded the creation of what became the NRG Cosia Carbon X Prize for the Prize Capital, is helping Tse with The Global Friends prize. He says it's the beginning of an effort to spur more philanthropy around climate in China and the US. “Our effort is a big call to increase philanthropic funding for climate progress,” he says. Contestants are being accepted through April 30, and winners will be announced in December. The Global Friends prize will not, by itself, move the needle on climate change. It's too small, for one thing. (By comparison, the MacArthur Foundation last fall announced a $50 million commitment to climate change which I wrote about, critically, here.) There are no guarantees of results even when it comes to big, splashy awards like the Progressive Automative X-Prize. It was given in 2010 to a startup company called Edison2, which hasn't accomplished much since then.That said, there's a lot to like about prizes. Unlike traditional grants, which usually flow to insiders or accredited professionals, prizes are open to anyone with a good (or bad) idea. A prize does more than deliver financial benefits to a small organization or startup; it also attract new investors or media attention. (Previous winners of the Zayed Energy prize include M-KOPA Solar and d.light, which are delivering clean energy in the global south.) They can also focus attention on an issue or problem--and the more attention paid to climate change, the better.To its credit, Global Friends is seeking to magnify its efforts by assembling a network of 20 philanthropists in China and the US to award the prizes. The goal is not only to expose more donors to the prize winners but also to connect them to a large number of groups which may be worthy of philanthropic assistance. What this means is that a wide variety of organizations -- those deploying clean-energy technologies, those leading social movements, farming groups, consumer groups and others -- will be exposed to philanthropists from the US and China. That's smart.Ultimately, though, climate change -- like poverty, education, human rights and other issues on the philanthropic agenda -- is a problem that will requires a political solution. Only governments can regulate carbon emissions, and finance research into clean-energy technology at the scale that's needed. Philanthropy's most important contribution may be to support those who are best positioned to drive political change.A final note on prizes: This week, Timothy Taylor of the Conversable Economist blog wrote an excellent post headlined The Problems With Prizes As Innovation Policy. It's mostly about so-called inducement prizes, like the X Prize, which are designed to solve hard technology problems; it also adds some context to the conventional wisdom about the longitude and margarine prizes.