Monthly Archives: December 2007

Population is key to cutting emissions

Posted on by
4

Michael Backman in his latest Age column writes about the issue of population and its connection to greenhouse gases.

WHAT is the ultimate cause of greenhouse gases? Excessive reliance on cars? Coal-fired power stations? Clear-felling forests? The answer is none of these. The ultimate cause is people and population growth.

Having one child with your partner instead of two or more is the biggest contribution to reducing greenhouse gases you can make. Have one child instead of two and you will be directly responsible for cutting your family’s greenhouse gas emissions by about 50% in the next generation.
[...]
Determining which countries have been responsible when it comes to population growth generates a different picture when it comes to developing countries. China is a big and growing greenhouse gas emitter. But it has one of the lowest population growth rates in the region due to the success of its one-child policy and also due to its rising wealth levels — richer people tend to have fewer children.

India, on the other hand, is not yet as big a gas emitter as China. Gas emissions per head are about three times less — but its population is growing much faster than China’s. Its population will overtake China’s in the 2030s, when both countries can be expected to have populations of about 1.5 billion. But South Asia, taken as a whole, is already the clear winner in the population stakes. Had partition not taken place in 1947, then India would have overtaken China for the No. 1 spot years ago. The combined population of pre-partition India today (India, Pakistan and Bangladesh) is 1.4 billion, compared with China’s population of 1.3 billion.
[...]
Indeed, the population of pre-partition India is expected to rise by another 900 million people in the first half of this century. Changing to energy-saving light bulbs will be a drop in the ocean compared with this

Cities and Warming

Posted on by
1

Bjorn Lomberg makes some interesting arguments on how cities around the world are experiencing high temparature rises, are coping with and what possible low-cost solutions would be.

Most of the world’s urban areas have already experienced far more dramatic temperature hikes over the past few decades than the 2.6°C increase expected from global warming over the next hundred years.
[...]
Today, the fastest-growing cities are in Asia. Beijing is roughly 10°C hotter than the nearby countryside in the daytime and 5.5°C warmer at night. There are even more dramatic increases in Tokyo. In August, temperatures there climbed 12.5oC above the surrounding countryside, reaching 40oC – a scorching heat that affected not only the downtown area, but also covered some 8,000 square kilometers.

Looking at a fast-growing city like Houston, Texas, we can see the real effect of the urban heat island. Over the last 12 years, Houston grew by 20%, or 300,000 inhabitants. During that time, the night time temperature increased about 0.8°C. Over a hundred-year period, that would translate to a whopping 7°C increase.
[...]
Even as temperatures have risen, heat-related deaths have decreased, owing to improved health care, access to medical facilities, and air-conditioning. We have far more money and much greater technological ability to adapt than our forebears ever did.
[...]
These options are simple, obvious, and cost-effective. Consider Los Angeles. Re-roofing most of the city’s five million homes in lighter colors, painting a quarter of the roads and planting 11 million trees would have a one-time cost of about $1 billion. Each year after that, this would lower air conditioning costs by about $170 million and provide $360 million in smog-reduction benefits. And it would lower LA temperatures by about 3°C – or about the temperature increase envisioned for the rest of this century.

Carbon Winnes and Losers in the ASX 200

Posted on by
Reply

The Australian fund managers, especially the pension funds are investing $1 trillion dollars and they are interested in the effect of Environmental, Social and Governance (ESG) aspects on the financials and future of large organizations in Australia. They set up Regnan to work in this area.

Their latest study conducted with the help of Monash Sustainability Enterprises (MSE) has come with some interesting information.

From the ABC:

Research conducted for Regnan estimates that 43 of Australia’s biggest 200 companies would suffer a significant loss in earnings under a carbon trading scheme in which carbon was priced at $30 per tonne.

Erik Mather is Regnan’s managing director.

“For the analyst community we’re saying, ‘Now is the time to get on top of this issue,’” he said.

“There is no longer a question of whether we are going to be facing a carbon-constrained future.

“It is just a question of price, and now is the time to understand all the variables – and there are many – that are going to impact that future valuation.”

Regnan’s news release (PDF)has some more facts including that there could be some 50 winners due to Climate Change in the ASX 200.

Key results from the study include:
 Greenhouse Gas (GHG) intensity issues are more widespread than previously thought. Forty three
companies within the S&P/ASX200 index have GHG intensities above 1750 tonnes CO2-e per $M EBITDA,
over 5% of earnings at a carbon price of $30/tonne. 5% of earnings is a common accounting benchmark for material impact.
 Twenty-two of the most GHG-intensive companies in the S&P/ASX200 index do not disclose GHG emissions
to the market.
 Only 36% of S&P/ASX200 index companies that currently disclose historical GHG emissions show declining GHG intensity.
 25% of S&P/ASX200 companies were identified as having greater opportunity than risk from weather related or market changes.
 More than half of the S&P/ASX200 companies fail to provide any evidence of climate change risk
assessment.
 Clear and comprehensive consideration of climate change risks and opportunities in company strategy is
evident in only ten S&P/ASX200 companies.
 Weather impacts on earnings are rising as drought and extreme weather cause production stoppages,
project delays, impacts to supply chains, rising input costs, reduced sales and increased underwriting costs.
In some cases the earnings impacts were greater than 30% in 2006/07.

Are the earth’s resources the absolute limit on economic growth?

Posted on by
Reply

Dan Denning in today’s Daily Reckoning newsletter discusses the cause of the boom of the last decade and where new investment may go to in the future.

–And finally, are the earth’s resources the absolute limit on economic growth? Yesterday we asked this question and promised to answer it today: What if the end of the credit boom means the tide of credit recedes from global markets and demand for finished goods and commodities goes back to something…less over-stimulated?

–We now regret asking the question. But it’s an important one. So we’ll fulfil our promise and take a stab at it.

–Credit booms are so disastrous-in real life-because they accelerate the inefficient use of resources. When you have a bogus price for money, people make bogus decisions with money. They waste it on projects that don’t produce any wealth for anyone.

–Think of the massive over-hang of housing inventory in America. It all started with easy credit. That flood of cash to new borrowers conveyed bad information to home builders. They assumed, quite wrongly, that the demand for their product was in a long-term, irreversible upswing. So they built a huge armada of McMansions from the mountains, to the valleys, to the oceans, white with foam.

–But the demand was bogus. When the cost of money was jacked up by the Fed, demand suddenly constricted. Prices are falling. And the home builders are left with massive inventory.

–Houses are not widgets though. They have wood in them. And copper. And plastic and carpet and furniture and entertainment consoles and concrete for the foundation and the list goes on. Do you see what’s, happened then?

–An enormous amount of real resources have been tied up an investment that’s neither generating income nor rising in value. You would call this a massive “mis allocation of capital” in economic terms. And though the houses may some day be occupied, the capital that went into building them is essentially idle until then, sitting on its lazy butt doing nothing.

–You could make the argument, then, that the entire boom of the last ten years was born of cheap money. The world has too much productive capacity already. Too many things. This is not a metaphysical argument about whether material goods make us happy. It just means the world may have over-invested in productive capacity based on bad price signals that began when the Fed started fiddling around with the price of money.

–And based on this credit boom, we have been using up the earth’s resources at a much faster rate than we otherwise would have. Credit accelerates the use of natural resources. Too much credit leads inevitably to inefficient use of resources. That’s where we are today.

–Where do we go from here? To eat breakfast! But we’ll leave you with this thought. In the last 100 years, the price of labour and raw materials has gone down, in real terms. This makes goods cheaper for consumers. The one major economic input that could get cheaper still is energy.

–Energy HAS been pretty cheap for a long time. But its cost-measured not just in the price of oil but in geopolitical and environmental terms-is rising. Our guess is that for the industrial revolution to continue in China and India, the energy revolution will have to move from hydrocarbon power to solar power.

–The earth is not a closed system, in energy terms. It gets free, unlimited energy every day from the sun. We just haven’t figured out how to put that in a gas tank or turn it into base load power for the electric grid…yet.

TATA’s small car

Posted on by
Reply

More TATA news. Yesterday, it was about TATA Motors plan to create viable eco-friendly cars. Now, it is about the small car. The TATA’s have plans to launch a small car in the Indian market valued at Rs. 100,000 (USD 2,600).

Economic times has more:

Mr Mashelkar also revealed how the small car concept first struck Ratan Tata, who’s now in the race to acquire two iconic British brands — Jaguar and Land Rover. “You know how ‘Ratan’ (Ratan Tata) thought about this small car. He talked to me on several things. One day, he was going on the road and saw a family of four getting soaked in the rain. That was when he decided to create a small car for all,” he said. “Just a month ago, I was at the Tata Motors’ factory in Pune, talking to their engineers and their fantastic team there. It was there that I had the privilege of sitting in that small car — the Rs 1-lakh car that they plan to roll out at Singur. It is incredible,” said Mr Mashelkar. “I sat in that car by the way, and it was amazing,” he said.

“I am a six footer and it’s spacious both in the front and in the rear. In terms of acceleration, it is equivalent to a Maruti 800 and has an incredible design finished by indigenous Tata Motors’ engineers,” Mr Mashelkar added.

Talking on the potential of economics of this car, the top-notch scientist said: “It will create a paradigm shift in low-cost transport and the whole world is looking forward to a car that efficiently runs 25 km on a litre of petrol and offers international specifications. These kind of fuel-efficient cars will be in demand as pollution is on the rise, climates are changing and fossil fuels are running out. People are looking at a new global eco-car and I have a feeling that this can be the new eco-car not only in the country but elsewhere — in other countries. I feel a sense of pride that it will be manufactured in India.”

At 25 km a litre it will be a great car for city driving if it matches the international standards. I have deep respect for the TATA group and especially Ratan Tata. If anybody can do it, it is his team. 2008 will be a year to look for.

Update:

NyTimes has more on the Tata’s bid to acquire Jaguar and Land Rover from Ford.

The combination of luxurious, specialized products and cheap, commodified ones may seem like an unlikely business model, but the Tata Group, the sprawling family-run conglomerate that owns a third of Tata Motors, is full of similar contradictions.

The group’s Taj Hotels command some of the highest rates in the world — one night in a luxury suite in the Taj Mahal Palace in Mumbai costs 110,000 rupees ($2,795) in high season. But the group is building no-frills hotels around India, with rates as low as 1,499 rupees ($37.95) a night for a double room in some cities.

Tata owns a chain of high-end jewelry stores, Tanishq, and makes fertilizer though its Tata Chemicals unit. The company has an exclusive charter airplane business, serving clientele like chief executives and Bollywood stars, and owns Tata Sky, which beams business news and hit movies into a million Indian households.
[...]
As in many family-run conglomerates, there is a “strong emphasis on the long-term perspective,” said Subir Gokarn, Standard & Poor’s chief economist in Asia. Tata focuses on building institutions, on social responsibility and ethics, and on fair dealing with government, he said.

But it is also highly profitable. After-tax profits at Tata Motors, which is publicly traded, increased 21 percent in the first half of this fiscal year, to 9.94 billion rupees ($253 million).

Sustainability and Business Strategy in Emerging Markets

Posted on by
1

SustainAbility, the organization, along with the International Finance Corporation (IFC), has come out with a “case study + sustainability strategy building steps” report called Market Movers: Lessons from a Frontier of Innovation, where they analyzed in detail 4 companies in the emerging markets of China, India, Brazil and Sri Lanka and how their sustainability focus has influenced their business success.

The report goes on to draw some lessons from their experiences and to make recommendations as to how other emerging-market businesses might create value from sustainability. The report identifies a number of ‘ingredients of success’ – factors that contributed to the strong results in all four case studies and helped them overcome some of the constraints that many emerging-economy companies face. The five ingredients are:

Leadership: the role of the chief executive or chairman in pushing through a strategy based on sustainability.

Integration: the embedding of sustainability elements in corporate strategies from the very beginning.

Innovation: using sustainability as a source of innovation.

Differentiation: having the courage to be different.

Quality of relationships: business benefits from strong relationships with stakeholders – suppliers, customers, employees.

The reports using a nice little matrix which provides sustainability parameters like environmental performance, social and governance performance and the business benefits of these startegies. As the case studies show, each company has used a different mix of sustainability parameters for generating business value.

A very interesting read. However, it is important to remember the following advice from the authors.

While we recognise that any measure of the value added either to their bottom line or to society by businesses’ sustainability strategies is necessarily imprecise, it is none the less real for that. In all our cases there is a close correlation between sustainability and business success, even if there is no irrefutable evidence of causation between the two. The entrepreneurs who built up these companies invariably attest to it.

Profiting From China’s Green-Tech Movement

Posted on by
Reply

Money Morning investigates the green tech opportunities flowing from the problems in China.

Money isn’t the only thing flowing through China right now. Pollution has filled the streets, contaminated the rivers and clouded the skies.

Half of China’s population – 600 people to 700 million people – drinks water contaminated by human and animal waste. In fact, 1 billion tons of untreated sewage is dumped into the Yangtze River each year. And, according to a recent study conducted by the World Bank, air pollution causes more than 400,000 premature deaths every year.

With the health of its population fading and global opposition to carbon emissions rising, China has no choice but to address its pollution epidemic. And thanks to a blistering economy and a stockpile of cash reserves, throngs of investors are eager to help Beijing wash away its troubles.
[...]
According to a Cleantech Network report and industry insiders attending the clean energy forum in Beijing, water treatment and energy efficiency projects boast the greatest investment potential.
[...]
Both Guo and Liu agree that the greatest obstacle to solving the nation’s water crisis is economics.

“Artificially low water prices, as well as lack of preferential policies from the central government, mean that it doesn’t make economic sense for companies to adopt costly technologies to improve water usage efficiency and re-utilize wasted water at the moment,” Guo told InterFax.
[...]
The second biggest environmental concern for China is the nation’s suffocating air pollution. So far, China has relied heavily on coal-fired power plants to power its rapid industrial expansion.

Between 2003 and 2006, worldwide coal consumption increased as much as it did in the 23 years prior. China was responsible for 90% of that increase. China used 2.5 billion tons of coal in 2006, more than the next three highest-consuming nations combined. The country is home to more than 2,000 coal-fired power plants, and a new one goes into operation every week.
[...]
The nation’s climate-change program has set a target of reducing greenhouse gas emissions by 950 million tons over the next two years. Last week, at the U.N. climate conference in Bali, Xie Zhenhua, vice chairman of the National Development and Reform Commission, said China’s investment in renewable energy would reach $20 billion this year.

“China is already the world’s factory,” Yang Ailun, climate change program manager at Greenpeace China, told Bloomberg News. “It could be and should be the manufacturing hub of clean technology for the world as well.”
[...]
China-based manufacturers of alternative energy technologies are already taking off in a big way. Companies specializing in alternative energy have seen their stock prices soar. Suntech Power Holdings Co. (STP) has seen its stock price skyrocket by 137% this year. Solarfun Power Holdings Co. (SOLF) has jumped 125%.

Vcs are already there. Large companies like GE are building desalination plants. Suntech’s technology was developed in Australia. More entrepreneurs are looking to China for growth in this area. For individual investors, ETFs can be a possibility. However, figuring out the right value at this time is tough. And there is always the need for people who can understand China and the green tech sector!

TATA’s green strategy

Posted on by
2

With all the big automobile majors and even new upstarts like Tesla Motors in the green race it is not far away when the forward thinking Indian conglomerate, the house of TATA, is going into building eco-friendly cars.

Money Morning has more:

The new vehicle line would showcase cars capable of running on electric, hydrogen and other alternative and organic fuels.

Most of Tata’s efforts have been focused around the company’s Indica, a compact hatchback, popular in India and Europe. According to the Times of India, the company wants to produce five electric variants of the Indica using lithium ion batteries that will run up to 200 km on a single charge. It is also interested in building an Indica hybrid, which would combine electricity and petroleum-based fuel to average 20 km per liter.
[...]
Now, Tata is gearing up to roll out India’s first hydrogen-fueled vehicle in a partnership with the Indian Space Research Organization (ISRO). According to a recent report from DNA Money, the vehicle in question will be a mini- or microbus scheduled to debut in 2009. ISRO will provide its recently tested cryogenic engine technology.

“We have been successful in adapting the system for a bus or car engine and are fine-tuning it. The vehicle will be ready in two years. It will emit only water vapor and will not pollute the environment,” ISRO chairman G Maharani Nair told DNA. A car is rumored to be next in line.

The different flavours of Carbon Offsets

Posted on by
1

Carbon offsets are being the used by organizations and individuals to cut down their greenhouse gas emission (in net) or to become carbon neutral. Carbon offsets are sold by different companies and they do come in various flavours.

ABN AMRO in Australia does a good job of explaining the various offsets.

Carbon Offsets are created by projects that reduce, avoid or remove greenhouse gas emissions from the atmosphere.

For example:

A landfill gas project that traps and uses the methane gas caused by decomposing waste reduces the emissions that would otherwise escape to the atmosphere

A windfarm project produces electricity instead of coal-fired power stations and avoids the emissions would otherwise have been caused by those coal-fired power stations

A forestry project removes emissions from the atmosphere as carbon dioxide is taken in by the trees as they grow

Carbon Offset units are created according to the rules of regulated schemes to which those projects belong or according to international standards for emission offsetting projects.

  • RECs are “Renewable Energy Certificates” created under the Commonwealth Government’s Mandatory Renewable Energy Target (we only use RECs to offset electricity emissions)
  • GACs are “Greenhouse Abatement Certificates” created under the New South Wales Government’s Greenhouse Gas Abatement Scheme
  • GFCs are “Greenhouse Friendly Credits” created under the Commonwealth Government’s Greenhouse FriendlyTM program
  • CERs are “Certified Emission Reductions” created under the Kyoto Protocol
  • ERUs are “Emission Reduction Units” created under the Kyoto Protocol
  • VERs are “Verified Emission Reductions” created under international standards such as the WWF, Gold Standard and the International Emissions Trading Association’s Voluntary Carbon Standard

Check the link for the explanation for each type of offsets.

Putting a Different Face on Disruption

Posted on by
Reply

Reuben Abraham points to an article in Knowledge @ Wharton on Euvin Naidoo, president and CEO of the South African Chamber of Commerce in America where he talks about the potential of Africa in terms of business and new technology.

…with the world pushing for alternative sources of energy such as windmills or geothermal power, it will be easier to develop and implement these new technologies from scratch in Africa than to impose them on the entrenched power grid in the West. “The key about disruptive technology is that it really has a chance to innovate at the base of the pyramid,” Naidoo said in his keynote address at the 15th annual Wharton Africa Business Forum. “The base of the pyramid is the bottom — the millions who are underserved.”
[...]
Naidoo showed his audience a map of global Internet connectivity, with bloated depictions of web-savvy western nations from Japan to Portugal to the United States. But the massive African landmass is virtually invisible. He insisted that the African void today represents a massive future opportunity for an entrepreneur who can develop a scalable solution for multiple nations on a continent that is currently divided into 53 different governments.

“Africa is in … a unique position. It almost has a competitive advantage due to that very situation of not having the connectivity, of not having the electricity grid,” Naidoo said. He cited the example of windmills as a low cost and innovative power solution that would work better in a local, start-up situation, such as a remote African village, than it would in the West, with all its regulatory and economic obstacles.

Like the previous post on Africa it provides a good example of business opportunities. More importantly, Naidoo provides a framework in which to capture the opportunities by connecting Africa’s lack of electricity and connectivity as opportunities.

This is true to most other bottom or base of the pyramid markets. Like the example of Harish Hande who provides the numbers where solar energy is cheaper to poor people than the current prices they pay. Disruptive innovation makes sense in “base of the pyramid markets”. (BOP)

Disruptive Innovations compete against nonconsumption – that is, they offer a product or service to people who would otherwise be left out entirely or poorly served by existing products and who are therefore quite happy to have a simpler, more modest version of what is available in the high-end markets.

- Stuart Hart and Clayton Christensen (Sloan Management Review)

If any technology entrepreneurs are looking for new markets, they should check out the BOP markets.