By David Whitford and Peter Elkind
April 8, 2013

FORTUNE — China Light and Power’s roots are more than a hundred years deep in Hong Kong. It’s still the city’s largest utility. But today what’s known as the CLP Group operates across Asia — on the mainland (where it’s China’s biggest foreign electricity producer), and in Australia, India, Thailand, and Taiwan.

That makes CLP a player in the greatest challenge of our time: How to balance Asia’s soaring energy demands with the planet’s urgent need to wean itself from fossil fuels. Andrew Brandler, CEO of the CLP Group since 2000, has degrees from Cambridge University and Harvard Business School, and he’s co-chair of the energy and climate group within the Geneva-based World Business Council for Sustainable Development. He’ll be leaving CLP’s corner office later this year to join Sir Elly Kadoorie & Sons Limited, the private company of the Kadoorie Family, CLP’s largest shareholder. This week he sat down with Fortune’s David Whitford in Hong Kong.

What is your current fuel mix, and where are you headed?

In Hong Kong we’re 25% nuclear. Across the whole group, it’s mostly fossil fuels — about 60% coal and 15% gas — plus 20% renewables and 5% nuclear.

And you’re not building any more coal plants? 

In Hong Kong, no, we would not do that. The government in 2010 came out with a public consultation about the future energy needs for the whole of Hong Kong that postulated by 2020 nuclear being 50% of the electricity supply, gas 40%, and coal 10%. We were an investor in China’s first commercial nuclear power station at Daya Bay, which supplies about 25% of Hong Kong’s electricity. If Hong Kong needs more nuclear, we’re keen to invest in that. We’re also looking to invest in new nuclear stations that are supplying Guangdong, like the Yangjiang project.

What technology will you be deploying there?

It’s PWR [pressurized water reactor, second-generation] technology, the same as Daya Bay. China will be moving to third-generation. They are building the [Westinghouse] AP1000, they’re building the [Areva] EPR, and they are looking to develop their own versions of each as well as their own third-generation technology. I suspect they will standardize the design, and they will localize the fabrication and get the whole supply chain geared up, and they will mass-produce to get the cost down. This is what the French did in the ‘70s and ‘80s with their nuclear program. There’s no fundamental reason why you can’t implement an aggressive buildout of nuclear power at reasonable cost. If you’re doing a one-off project, like in the United States, with all the regulatory issues and design issues, the costs just balloon. But if you can spread all those upfront costs over a whole program, it’s not so burdensome. And if you can get the supply chain working — which China is very good at — you can bring those costs down dramatically.

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Do you think nuclear is the answer to Asia’s energy dilemma?

If you’re serious about climate change, I think you’ve got to be serious about nuclear. The U.S. is going down an intermediate path, saying “We don’t need nuclear, we’ll just back out of coal and we’ll use natural gas.” That will defer the problem in the U.S. for a period of time. But gas is still pretty carbon intensive. Without nuclear it’s hard to see how the world will continue to meet energy demand growth without catastrophic risk to the climate. Nuclear is the only technology that exists today that can provide base-load power at a reasonable cost — if you get the program right — with zero carbon emissions.

China has by far the most aggressive nuclear buildout underway in the world today, with 28 new plants planned or already under construction. Can we trust them to do this safely?

They are very sensitive about the world’s perception, and they want to make sure they are getting it right. Everything we’ve seen on the ground at Daya Bay suggests it’s not just rhetoric. The safety record and the safety culture are extremely high. Did you see the headline in the South China Morning Post? Second explosion in one coal mine in four days. Twenty-nine people killed Friday and another seven people killed yesterday. How many people were directly killed by the meltdown at Fukushima? Zero. Well, the tsunami killed 30,000 people; the nuclear accident itself hasn’t killed anybody. We have choices to make. None of them are easy.

And it’s up to Asia to take the lead on this?

Yes, because the majority of the growth in power demand is going to come from this part of the world. China builds 80,000 megawatts a year new capacity. We’re a big company — $20 billion market cap — and we are 20,000 megawatts across the region. But every quarter China builds another CLP. And something like 60,000 megawatts is coming from coal. The good news is that the coal will be done cleanly, in the sense of conventional emissions.

No more yellow smog in Beijing? 

After a while, sure. China is building efficient, modern coal-fired plants, but they are still carbon-intensive. Climate change is not something they’re ignoring but it’s a problem to be dealt with later. They have to deal with the conventional emissions first and meet the demand for energy.

What do you think is going to happen? Are we doomed? 

Carbon emissions are going to rise quite dramatically in the next 20 to 30 years. At some stage it will need a major crisis in order for the world to get its act together. Hard to say what form that will take. You need something really catastrophic. Hurricane Sandy or Katrina, that’s not a big enough crisis. You do not have to be an expert to understand there’s a major risk of climate destabilization that requires action today, not after it hits you. But the problem the politicians face is the electoral cycle is just too short to deal with that. It’s very hard to say to voters, “Look, I have to make you poorer now because we’re going to have to slow down growth or increase costs of energy production which will have the consequence of slowing down growth. But don’t worry, it’s going to benefit your children or your grandchildren by the year 2050.” That’s a difficult sell. [British economist] Nick Stern tried it in his Stern report; he said it’s only 1% of GDP by 2050, you won’t even notice. But translate that into specific policies that you have to implement today, and it is much harder. It’s a difficult political sell in a liberal western democracy.

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So maybe the best hope for the planet is that China remains under an authoritarian political regime so that those in power have the ability to force change fast.

I wouldn’t put too much hope in that. At the end of the day, economic growth is still important for the delivering of wealth to the population, and that’s important for the legitimacy of the government. If the consequence is cutting back on growth, it’s going to be as tough in China as it is anywhere else. All governments need legitimacy.

You’ve got your hands on some pretty powerful levers at CLP. What are you doing? 

We articulated a climate strategy in 2007 that by 2050 will see us decarbonize dramatically. First goal was 2010, then 2020, 2035, and 2050.

Did you hit your 2010 goal?

Yes, we did. It’s a modest start. We’re well down the path for hitting the 2020 target as well. What we say essentially is that if everybody followed our strategy — if the whole industry did it — then there’s some chance by 2050 that the electricity supply industry in this part of the world is largely decarbonized, and on a trajectory to hit what the UNFCC [United Nations Framework Convention on Climate Change] has said is what you need to in order to avoid massive climate change.

You’ll be carbon-free by then?

Not carbon-free, but what we’re saying is we want to get our portfolio to a carbon intensity of 0.2 kilograms per kilowatt hour. We’re now at about 0.8. That is a material reduction. And if the rest of the world did the same thing, the industry is not carbon-free, but it’s largely decarbonized.

What might stop you from reaching that goal?

I don’t think CLP will have a problem. One thing we could say is we’re going to stop growing, stop investing, in which case someone in a white suit comes into my office, puts my arms in a straightjacket, marches me out, and someone else takes over. That’s the nature of capitalism. But we can make choices that will allow us to continue to grow the business in line with our carbon strategy. We can make more investments in nuclear, more investments in renewable energy, more investments in gas-fired generation. We can still do the occasional coal plant, and we can close other coal plants, and still bring our carbon down. We can be a niche player, but not everybody can do what we can do. Because if you’re a mainland generator who’s there to implement national developmental goals, you can’t say you are not going to do coal anymore. It’s easier for us, and it’s glib, frankly, for us to say, if the rest of the world followed our strategy, the world would be better off. But what else can we do? We do what we think is right for our company and our stakeholders, and we hope the rest of the world can figure out what they should do as well.

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In my experience, big electricity producers such as CLP seem to be ahead of the pack on climate change, which doesn’t really make sense to me. Do you agree, and if so, why do you think that is?

At the end of the day for business — I know this sounds cynical — it is all about risk management. I do not have a mandate to save the planet. I’m here to develop and implement a responsible strategy for a large organization in a way that is ultimately sustainable. CLP cannot be on a trajectory of continuing to increase its carbon emissions without regard for the consequences and hope to continue to be in business. We have been in business for over 100 years, and we want to be in business for another 100 years. That does not mean stopping all investments that have carbon emissions, that’s unrealistic. But it’s about de-risking the portfolio slowly over time so that we can still grow the business and earn returns for our shareholders, risk-adjusted for carbon, while preserving our broader franchise.

What’s your most optimistic scenario? 

The idea that renewable energy is going to solve the world’s problems, I’m not so sure about that. There are lots of renewable resource out there — lots of wind, lots of sunlight, lots of tidal impact. But the cost of harnessing all that is very high. The hope for the world is technology, and the world’s been pretty good at developing technology.

I think there needs to be a technology breakthrough — a black swan that no one has thought about that comes along and solves the world’s energy problems. The closest to a black swan that I have heard about is nuclear fission. The question is whether it can be done in time, and whether they can get the cost down. Human beings are quite inventive creatures. History has shown that with the right incentives, they can figure things out.

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