Monthly Archives: September 2007

Timberland and Carbon Labelling

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The Age reports on the new initiative by Timberland to provide carbon labelling on their shoes.

The US-based company’s autumn collection includes a grey fabric sneaker, priced at $US49.99 ($A59.40), and a wool-lined leather clog for $US105.

A close look at the labels reveals, however, that the clog is a bargain when it comes to greenhouse gases that cause global warming: 66 pounds (30 kilograms) of carbon dioxide and other gases were emitted in producing the clog, compared with 88 pounds (40 kilograms) for the sneaker.
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Though mostly in use in Britain, the labels are gaining ground in the US. Corporations such as PepsiCo and Wal-Mart are conducting inventories of their products’ carbon emissions and considering labelling.

But climate experts say today’s complex, transnational supply chains make it challenging to accurately assess a product’s carbon footprint — the total emissions generated during production and transportation. And no national standard exists to verify such assertions.
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Calculating carbon emissions was simple enough when you’re talking about buying a tank of gas, said Jonathan Pershing, director of the climate program at the World Resources Institute, which developed a widely recognised method for companies to figure their overall greenhouse gas emissions. But it gets tricky for a more complex product, such as a pair of jeans.

“You have to ask, where was that pair of jeans made?” Pershing said. “Was it made with hand labour or a machine, and what was powering the machine? Where did the cotton come from, the United States or Egypt? If it was from Egypt, was it grown with an irrigation system or (rainwater)? All of a sudden, the analysis becomes, at the moment, beyond what we can do.”

Does carbon labelling increase sales? That is the crux of the issue for companies.

Michael Norster on China, India and Alt Energy

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From the Eureka Report:

Will China’s growth impact on your investment decisions?

I think China is an absolute powerhouse. The world has underestimated China for far too long even though there are all these platitudes now about how important China will be in the global economy. America has a serious problem because China will emerge as a global power. They have high educational standards and are hard-working people. Their biggest issues will be their inefficient use of resources and a big pollution problem. China is a well of opportunity for energy, which is what my speciality has been, and the energy sector up there has massive potential. I’ve got contacts working in China and I’m constantly monitoring its economic growth. The reason why I haven’t invested to date is that firstly, I don’t have enough money to play in the game up there and secondly, the risk of doing business up there is heightened by the lack of a proper legal system. I think this poor legal system has been their Achilles heel and has really impeded their growth. Compare that with the US, parts of Europe and Australia, which are very rules-based.

What about India?

I think India has huge potential but is a very different scenario to China. It has a very large middle class and an English legal system, which has served them well. It has the same type of potential and issues as China in relation to resources and pollution. I think the biggest problem with India (and this is also happening in Australia) is their huge paper-based bureaucracy.

Businesspeople and entrepreneurs just hate red tape with a passion and the bureaucrats want you to fill in forms all day.

What’s your view on alternative energy investments in Australia like wind farms and solar energy?

Alternative energy is quite limited in Australia because we don’t have the regulatory or economic climate to encourage investment in that direction. We have some of the cheapest electricity in the world down here and that gives no incentive to begin any large-scale alternative energy projects. My experience with the wind farms is a case in point. But on a global scale there are massive opportunities in the sector. I’ve been looking at solar energy and the feeling seems to be that it’s nearly there as an investment opportunity. There are lots of countries getting into alternative energy (including solar), like Brazil, parts of Europe, Germany and Holland. These will turn out to be great investments because people will start to deliberately buy their energy needs from alternative and green sources.

Kurt Richebacher

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“All this emphasis on statistics and calculations…,” he went on, rapping his silver-handled cane on the table for emphasis, “without a proper theory, it is all nonsense. And your economists seem to have no theory at all…they just think they can manipulate the system in order to get whatever outcome they want. They think economic growth comes from consumer spending and that they can control consumer spending by adjusting lending rates. It is unbelievable that anyone takes this seriously. It is capital formation that really matters. A rich society is one with a great stock of capital…one that builds capital and puts it to work to create more capital. A rich society is not one where people consume. Just the opposite. It is not what is consumed that creates wealth; it is what is NOT consumed. Yet, all the Anglo-Saxons focus on motivating consumers to consume. And now they are consuming more than they make. I tell you, in 70 years of studying economics, I have never seen such nonsense.

“I have always thought it was the duty of each generation to leave the next one a little better off. That means, each generation has to consume less than it produces. It has to leave a little something extra. The problem, you see, is not an economic one…what we are doing to our children with this use of credit and debt is deeply immoral. It is wrong. It is wrong to burden the future with our mistakes, our conceits, our ambitions. This is what we are doing, and it is shameful.”

Source: The Daily Reckoning. Newsletter on Sep 13th 2007.

D. Light

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The Mint reports on D.Light and its plan to provide LED lighting to Base of the Pyramid markets in India.

‘We don’t think it’s right that families are using kerosene in 2007,” said Tozun, who added that kerosene and candles are polluting, bad for respiration, can cause fires, and often have very dim lighting. “With today’s technology available, it is possible to have safer, better lighting. We want to provide that.” The product, called Forever Bright, will have a retail value of about Rs500 and is small enough to hold in your hand, said Tozun.

Uused in modern appliances such as the numbers on digital clocks, images on a television screen, and traffic lights, LEDs are tiny light bulbs that fit into an electrical circuit, but unlike ordinary bulbs, they don’t have a filament or get too hot.

According to Light Up The World, an international humanitarian organization whose goal is to light up the world’s poor, benefits of LEDs include ultra low power usage, durability and extended lifetime.
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The for-profit company was formed a year-and-a-half ago, after Tozun and a few colleagues took the “Entrepreneurial Design for Extreme Affordability,” class at Stanford University’s design school. They learnt to design for folks who earn a dollar or two a day.

D.Light’s plan is a good example of socially motivated, highly educated entrepreneurs to target a base of the pyramid market. And it’s just not easy.

Sam Goldman, the CEO and founder, is sharing his experiences on his blog.

Some lessons to sell in India from him.

There’s plenty of budget airlines and a quarter million cell phones being made a day. India is ‘calling all entrepreneurs.’ And yet its not that easy. Razor thin margins, an older bureaucracy, whole neighborhoods of C&D (copy and develop instead of research and development), and the little things – like trying to get a cell phone present constant challenges. I was shocked by how demanding the Indian consumer is – requiring high quality, low price, and service guarantees even or $10 purchases. If we can crack this market – we can crack any.
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India is the ultimate retail market and quite a challenge. As far as base-of-the-pyramid and rural marketing is concerned, I have found a few surprises. The first is how sophisticated the market has become. For example, the Chinese imports coming in as emergency lights have received a terrible reputation for low quality, and although they are still sold by the tens of thousands, newer Indian brands are springing up. Although the Indian brands are higher priced (often 2X) they come with guarantees (6mo-1yr) and often service warranties (up to 3years). Consumers are not only demanding high quality at low prices, but they want to be able to easily and inexpensively repair their products. If you are offering products that cannot be easily repaired – it is going to be hard to crack this market.

Organic farming in Kerala – Economic nonsense

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Sustainability is a good thing. Everybody agrees on it. However, what is the process of achieving this?

Previously we reported that 9 Indian states are looking at organic farming to tap into the $37 billion
global market. That is good. The Mint reports that Kerala is planning to get into the field by converting all its cultivable land into organic farms in 5 years.

“The policy will be ambitiously aimed at freeing Kerala of all chemical fertilizers and pesticides in five years. This is with a long-term vision of ensuring that future generations here do not consume food contaminated by toxic pesticides and fertilizers. The strategy is clear: Convert 20% of the cultivable land to organic farming using biofertilizers and biopesticides every year so that total conversion can be achieved in five years,” adds Vijayan. Currently, there are around 7,000 certified organic farmers covering a minuscule area of 5,750ha, when the net sown area in the state is 2.13 million hectares.

To begin with, 100 villages across the state will soon be organized as organic farm villages. Mullakkara Ratnakaran, state agriculture minister, says the government will set up an Organic Agriculture Authority of Kerala, which will be the nodal agency to interact with grass roots level groups, and also national and international agencies.

The authority will have a governing council headed by a chairman, to be elected from representatives at the pan chayat and village levels, where organic farmer interest groups will be formed. The council will also have officials, scientists, farmers’ representatives and non-governmental organizations (NGOs) promoting organic farming, he adds.
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Vijayan admits that a major stumbling block will be funds and the lack of a market for this produce.

For the first three years, conversion to organic farming means a drop in yields, putting farmers to hardship. It is for this that the authority will have funds both from the Union and state governments to support the farmers. Financial support from international agencies can also be looked at, Vijayan says. As part of the marketing thrust, the authority will look at independent retail outlets and also tie up with others to market these products, which will include rice, vegetables and fruits.

It has been clearly demonstrated around the world that centrally managed economies do not work.

Even though organic farming may be a good thing; the process of converting all lands compulsorily without figuring out the market for the produce and creating more hardship for already poor farmers is totally unacceptable.

This is the exact kind of economic nonsense that has troubled India all these years. If this is the same thinking used for “sustainability issues” then it will not make any difference and can actually harm the people and the environment. Economic sense matters.

Isadore Sharp

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You build a hotel and it’s going to be there for the next 50 years. In that time you are going to have economic cycles that go up and down, you are going to have trauma that the world experiences. You have to have to put your business model in place, where you can get through the good, the bad and the ugly. So, your whole purpose of developing a longterm business plan is to under stand, that is what you’re facing. The people that we have partnered with, these are professionals who know the real estate business really well.

Source: The Mint 

The Sydney Declaration

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The Australia hosted APEC summit in Sydney has come to an end with 21 world leaders agreeing to “aspirational targets” for cutting down greenhouse gases, and this non-binding agreement is called the “Sydney Declaration”.

Even though condemned by some as lacking any strict targets I think the declaration is meaningful. Considering the scale of change required it is not easy to convince 21 countries to do anything, especially international co-operation on uncertain effects 75 years into the future.

The declaration has the following actions:

In summary, and without prejudice to commitments in other fora, we have decided to:
• highlight the importance of improving energy efficiency by working towards achieving an APEC-wide regional aspirational goal of a reduction in energy intensity of at least 25 per cent by 2030 (with 2005 as the base year);
• work to achieve an APEC-wide aspirational goal of increasing forest cover in the region by at least 20 million hectares of all types of forests by 2020 – a goal which if achieved would store approximately 1.4 billion tonnes of carbon, equivalent to around 11 per cent of annual global emissions (in 2004);
• establish an Asia-Pacific Network for Energy Technology (APNet) to strengthen collaboration on energy research in our region particularly in areas such as clean fossil energy and renewable energy sources;
• establish an Asia-Pacific Network for Sustainable Forest Management and Rehabilitation to enhance capacity building and strengthen information sharing in the forestry sector; and
• further measures in trade in environmental goods and services, aviation transport, alternative and low carbon energy uses, energy security, the protection of marine biological resources, policy analysis capabilities and a co-benefit approach.

It has for the first time made possible for China and the US to agree to some targets and importantly, to work under the current United Nations Framework Convention on Climate Change (UNFCCC); thus not creating another rival framework. (Incidentally, China played a major role in this)

John Howard’s experience in the last decade in managing Australia’s greenhouse gases through agri-management has provided the impetus for forest cover targets. In fact, the Stern review has suggested that forestry management (afforestation and reducing deforestation) is a good way to tackle climate change. Considering the costs of changing current economic systems, in the short term this is a valid strategy.

The effort on improving energy intensity is a good one. Even though this may not ultimately reduce actual consumption it will improve the efficiency of all countries involved. The importance of trade of economic and social development is well known. These principles are being supported in the declaration.

This declaration is also a good step forward because it acknowledges that “differences in economic and social conditions among economies” and that this would mean “differentiated responsibilities”. Also the emphasis on adaptation is important. As Schelling has suggested,

The sooner Malaysia can become like Singapore, the sooner it can worry less about the impact of climate change on health, comfort, and productivity.

In that sense, trade and economic development is the key to adaptation for climate change.

More importantly, Schelling talks about inputs and outputs.

One striking contrast between NATO and the Kyoto Protocol deserves emphasis: the difference between “inputs” and “outputs,” or actions and results. NATO nations argued about what they should do, and commitments were made to actions. What countries actually did — raise and train troops; procure equipment, ammunition, and supplies; and deploy these assets geographically — could be observed, estimated, and compared. But results — such as how much each NATO nation’s actions contributed to deterring the Warsaw Pact — could not be remotely approximated.

The Sydney declaration takes a small step towards “inputs” — energy intensity, forest cover, trade barriers, clean technology — and this makes it a valid strategy as it is not possible to guarantee the exact emission reduction (outputs) in 10-15 years.

Overall, I think that the Sydney declaration is a good step forward in tackling climate change.

Organic Farming: The New Cash Crop for Indian farmers

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Organic farming seems to be the new growth area for Indian farmers.

So what exactly is a Cash crop?

In agriculture, a cash crop is a crop which is grown for money. The term is used to differentiate from subsistence crops, which are those fed to the producer’s own livestock or grown as food for the producer’s family. In earlier times cash crops were usually only a small (but vital) part of a farm’s total yield, while today, especially in the developed countries, almost all crops are mainly grown for cash. In non-developed nations, cash crops are usually crops which attract demand in more developed nations, and hence have some export value.

The Mint reports that 9 India states have applied to the “Agricultural and Processed Food Products Export Development Authority (Apeda), a government-run export promotion body, asking for accreditation to do the same.”

In the seven years since the National Programme for Organic Production was notified by the government, only 11 accreditations have been issued by Apeda, of which only one is to a state government organization, the Uttaranchal State Organic Certification Agency. The rest are international private agencies.

“Now, nine states, Andhra Pradesh, Chhattisgarh, Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan and Tamil Nadu, have submitted proposals for approval (for accreditation),” says K.S. Money, chairman, Apeda.
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According to a study by the US department of agriculture, consumers in the US and the European Union account for 95% of the world’s retail sales of organic foods, estimated at more than $25 billion (Rs1.03 trillion).

In 2005-06, India exported organic products worth $228 million.

Currently, India ranks 33 in the world in terms of total land under organic cultivation and 88 in terms of the ratio of agricultural land under organic crops to total farming area. With an eye on the market, a few states have begun to take organic farming seriously.

Interestingly, the state of Orissa, which has no policy for Organic farming has the largest organic farming production. Why?

“If you see, organic farming is working out in states which have a higher percentage of smaller farmers. It is difficult to push farmers, who own large tracts of land, to go organic. These farmers have been using pesticides for years and years,” says Arun Chandra, executive director, Chetna Organic Farmers Association, a group representing 7,500 organic farmers across five states.

The market is clearly there for the taking.

VCs and Green Business in India

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Rana Rosen on the rising cleantech venture funding in India by VCs.

Private equity (PE) investors, including early-stage venture capitalists, have poured more than $433 million (Rs1,775 crore) into environment-related businesses, primarily wind energy and clean fuel, in the country since 2001.
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So far, investors have put down an average of $33 million into companies that, for example, turn sugar into clean fuel or make cars that run on an electric battery. Overall, investments favoured wind energy, which saw four companies receive funding worth $224 million, and clean fuels, where five companies got $141 million (see accompanying table).
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Most investors are driven by the domestic need for power and water in India, and making that energy supply sustainable as the country develops. “People are looking at India as a market for things, not as a source for things,”
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“India has already seen its wind industry develop rapidly, and looking at China, where solar production and installation are increasing rapidly, India certainly has great potential here,” says Dan Kammen, professor in the energy and resources group at University of California, Berkeley. Many investors see India’s potential in tapping solar energy as even greater than wind, given that its sunny days are around 93% of the year and can be more easily distributed. Companies doing work in biofuels also will continue get attention.

“Anyone who has a biofuel plan, they are sold out,” said Buch. “They sell every litre they manufacture.”

This continues to show the growing market for energy in India. Energy efficiency, Uranium, Wind, Solar, Bio Fuels, Coal, Gas and Oil. India needs all of these and some more .

Irrespective of the correct number it is prudent to remember that VC investing is always the tip of the iceberg in most markets. One good source for this fact is the annual Inc 500 listing. This year they have taken a big step forward and created the Inc 5000 listing. The funding strategy for these high growth companies? Only 7% of them relied on VC funding. If this is true for the US, then India should be even lesser considering the smaller VC market.

The end point: Using the above reasoning, the clean tech venture market in India may have received $8-$9 billion dollars($433m*20 times) from 2001 till now.

Greening the IT agenda

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IDC and Gardner have started looking at the benefits of greening technology.

In a sign that issues regarding technology’s environmental impact are climbing the IT executive’s agenda, both Gartner and IDC plan to devote a session to green IT in their annual conferences.
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In a statement, IDC said that for most the initial driver to green the IT infrastructure was cost cutting, but scarcity of resources and increasing energy costs was making it increasingly attractive. Legislation was also pushing change, and IT managers were taking green issues into consideration when taking to suppliers and production, it said.

Martin Hingley, chief research officer at IDC EMEA, said: “IT managers are taking into account the green credentials of suppliers when making purchasing decisions, and ‘greenness’ is already gaining traction in the marketplace and could serve as a key differentiator in purchasing decisions.”