World is Green

In his Sapientia, a daily newsletter, Keith Hudson tackles some of the toughest questions facing us with a depth and understanding generally un-common. This time he tackles the 4th strategic dialogue between China and the US.

Excerpts from today’s, DAILY QUOTE 471:

…what of global warming? This is already the major concern of Western European countries. But so far there isn’t the faintest scintilla of evidence that either America or China is yet persuaded that man-made carbon dioxide is the major cause of it. It may be that industrial growth is of such huge importance to both countries that they are in ostrich-like denial about any possibility of cramping their style.

It may also be the case that, because some very eminent climatologists still have doubts about the man-made cause of global warming, politicians and administrators are waiting for conclusive evidence. Contrariwise, it may also be that they are indeed already convinced, but that the likely higher sea levels, swamping of seacoast cities, ecological adjustments, human migrations and so forth are judged to be economically bearable while the era of cheap oil and gas reaches its peak during the next 40 years or so. After then it may be calculated that world-wide economic growth will be forced to decline as we move into much more expensive mined-coal or highly expensive solar technologies in order to generate electricity or make transportation fuels.

Some economists — and eminent ones, too — certainly believe that any money likely to be spent on reducing carbon dioxide emissions would be better spent — at least at present and the foreseeable future — on other matters, such as raising the educational standards of all countries.

My own view is that senior administrators in both America and China probably believe that anthropogenic carbon dioxide is making some contribution to global warming even if there are other more fundamental but as yet unknown climatological changes taking place. Furthermore, that there are insufficient energy and other resources in the world that will allow anything more than a fraction of the world population to even approximate to the way of life of, say, half of Americans, half of Western Europeans, most of the Japanese and the middle-class in the coastline provinces of China now enjoy.

All this is quite apart from global warming. Whether this continues or not, the world has already reached its maximum of food production due to freshwater constraints. Furthermore, as noted in a recent Sapientia posting, there is strong evidence from several research groups that there are sufficient minority metal resources of a crucial nature — such as uranium or germanium — to take all the countries of the world into the advanced technologies and the way of life that some in the West (and the coastline of China) already enjoy.

Stanford Graduate School of Business hosts the Centre for Social Innovation which aims to “inspire and educate social innovators, providing knowledge and ideas that strengthen the capacity of current and future leaders to champion social change”

The Centre shares its knowledge through the Social Innovation Review and the Social Conversations Podcasts. The podcasts provides debates and discussions on some of the important emerging themes in the social innovation area.

In the latest podcast, Eric Nee the co-host of the Social Innovation Conversations, discusses the growing Clean tech industry.

The internet boom was, in many ways, insane and wasteful. However, it was also rational and highly productive. What the boom did was kick-start an entire industry by bringing money and talent from around the world to an environment where doing something risky and even crazy was okay.

Today, we have the clean tech revolution. It hasn’t reached the frenzy of the internet boom, but it is gathering steam. Stanford University engineering students are flocking to courses on solar energy. Energy companies are setting up research centers in the San Francisco Bay Area. Venture capital firms have added solar energy and biofuel startups to their portfolios. And talent from around the world is once again flocking to startups.

There are even signs that investments in clean technology are getting a bit crazy—and this fact is a good sign. There are two companies, Planktos and Climos, which have an innovative and controversial (some say crazy) way to rid the atmosphere of excess carbon dioxide. Their plan is to grow vast fields of plankton out in the middle of the ocean that would ingest carbon dioxide from the atmosphere and sink to the bottom of the sea. Planktos already has a 115-foot research vessel out in the Pacific experimenting with the process of growing carbon-eating plankton.

If you are at all interested in the clean tech revolution, you’ll want to listen to the two panel discussions we now have on tap—dubbed Climate of Capital Change. These discussions include a number of people who are involved in the clean tech industry—including venture capitalists, entrepreneurs, engineers, and consultants. One of them is Dan Whaley, the founder and CEO of Climos, who interestingly enough was also involved in the internet boom, having founded Waiters on Wheels and Get-There.com.

Check out the related podcasts.

The Climate of Capital Change: Social Entrepreneurs
The Climate of Capital Change: Funding a Cleaner World

GreenBiz.com reports on a SmartMarket report released by McGraw-Hill and produced in partnership with Siemens Building Technologies.

“Today’s corporate leaders are already very conscious of using green practices when considering new facilities, and they expect green building to have an increasing impact in the future,” said Brad Haeberle, director of marketing for Siemens Building Technologies. “Moreover, they believe that green building is in their company’s best interests, not only for the clear economic benefits, but for the market differentiation and competitive advantage.”According to the study’s findings, 18 percent of the corporate leaders surveyed are in a position to transform the market — 15 percent view sustainability as a competitive advantage and the other 3 percent are actually driving their entire businesses through this value-driven lens.

Over the next three years, more companies see themselves as entering this top tier, with nearly a third of the sample aiming to be market leaders in sustainability. The report found that by early 2009, but perhaps sooner, American businesses will have reached a tipping point in embracing green as a cornerstone of their corporate philosophy. At that point, 82 percent of the companies will have greened at least 16 percent of their building stock.

And over the weekend, the CERES annual conference, Advancing Sustainable Prosperity, in Boston conducted a survey. The CERES conference is based on the premise that “businesses can use their market-economy power for environmental good, which at this year’s conference largely means blunting climate disruption, while making an honest profit in the process.”

According to the “Advancing Sustainable Prosperity” survey conducted by Ceres last week at its annual conference in Boston, direct action by government and corporations are the best ways to improve the sustainability of the global economy.

Nearly 80 percent of the nearly 300 respondents cited climate change as the biggest global sustainability challenge today, while an overwhelming majority — 90 percent — of those surveyed said greenhouse gas emission reductions and improved energy efficiency are the most important sustainability issue that corporations need to address in 2007. Two-thirds of the respondents — 67 percent — cited renewable energy technology as the technology with the biggest opportunity for achieving sustainable prosperity.

“Achieving sustainable prosperity will require integrating environmental and social challenges into corporate strategies and capital markets so that the global economy and the global community can flourish hand in hand,” said Ceres president Mindy S. Lubber.

In December, we reported on a court case in the US where it was questioned whether the US EPA has the “the authority to regulate CO2 and other greenhouse gases? Are carbon dioxide, methane, nitrous oxide and hydrofluorocarbons - air pollutants?”

The BBC reports that the supreme court of the US has ruled that the US EPA should regulate car pollution and that CO2 is a air pollutant.

The ruling says that unless the EPA can show that carbon dioxide is not involved in the warming seen around the world, the EPA should regulate it - and if it tries to make the case that CO2 is not involved, it would have a hard time winning it, our correspondent says.

Supreme Court Justice John Paul Stevens, giving the majority ruling, wrote that the EPA’s position was “arbitrary, capricious or otherwise not in accordance with the law”.

“Because greenhouse gases fit well within the Clean Air Act’s capacious definition of ‘air pollutant’, we hold that the EPA has the statutory authority to regulate the emission of such gases from new motor vehicles,” the court ruled.

Coal powers most of the world by providing electricty and is also responsible for a large percentage of CO2 emissions. Even though there are efforts to create clean coal, energy companies need to have a better ‘green business strategy’.

In a previous post, there was a argument about how private equity may drive a “green business strategy”. This week’s TXU buy-out provides more evidence.

Matthew Wheeland, Managing Editor of GreenBiz, writes in this weeks newsletter about the unprecendented buyout of Texas energy utility TXU by Private Equity players.

The new owners announced that at least eight of the planned power plants would no longer be built, and that the new owners would increase TXU’s commitment to sustainability.

The Red Herring suggests that Coal is losing in this acquisition.

Some environmentalists are hailing this buyout as a possible win because it comes with an announcement that the company has given up plans to build eight of the 11 proposed coal-fired plants. The scale-back represents a 75 percent reduction in new coal capacity, or 56 million tons of annual carbon emissions, according to a TXU statement on the sale.

Executive Editor of GreenBiz Joel Makower said that the deal is a major development because the environment became a “top line negotiating point for utility acquisition.”

“I think it puts everybody on notice that carbon is an investment risk and that utility growth going forward needs to look beyond fossil fuels,” said Mr. Makower.

GreenBiz.com explains why this buy-out may provide a signal to other energy companies.

Eric Kane, an analyst at Innovest, said this his company recently highlighted the risks to investors from TXU’s expansion plans. “Although the TXU case was unique in its proposed scale, the challenges faced are indicative of a growing trend throughout the utility industry,” Kane said, and added that “the lessons learned from TXU will have national implications. Industry peers will face similar challenges as they move forward with expansion strategies that rely on new power plants that utilize outdated, highly polluting pulverized coal technology.”

Update: Andrew Winston at Eco-Advantage talks about being “On the Right Side of History”.

As reported yesterday on WorldisGreen.com, the Fast 50 was about the business and the environment. I mentioned yesterday about how the government is a major part of the solutions in this area, the Fast 50 has a web exclusive interview with Arnold Schwarzenegger. It was revealing to read the interview and finding out that Schwarzenegger has studies business in college and using it all his life.

We get a lot more done when we create a great partnership to tackle problems. Whenever government does something alone, inevitably it fails. Why? Because even if we include Democrats and Republicans and Independents and say, “We’ve got the best brainpower,” that’s only the public sector. We need the best brainpower from the other half, the private sector. The important thing, as we’re creating a vision and setting guidelines, is that we’re working with business. We can say, “We want to reverse global warming and go after it from every angle without hurting business.” We want to show we’re friends and not the enemy.I come from a business background. I studied business in college, and I was always interested in the business side of everything. In all I’ve ever done–you know, bodybuilding, fitness, the movie business–I’ve always looked at it not only as the joy of doing the sport or the joy of acting but also, how do we make $1 into $10? How can we make a business out of it? Because everything has a business aspect.

What we are trying to do is show leadership in this area. If you look at the globe, you see California as a tiny box geographically speaking. But if you look at the power and influence of California, it immediately changes the picture. We have this huge name. This is what I want to benefit from to get the ball rolling all over the world.

First of all, you should never say, I can’t believe all the obstacles we’re facing. Every time there’s some new idea about anything, you will have people who despise any change. They love to hang on to the status quo. They will fight and they will take it to court. You have to expect it. The car companies have, you know, 25,000 lawyers, and this is what they do. We said, “Look guys, we understand, but eventually you’ve got to come our way, because it’s the best way to go.”

The bigger the obstacles, the more fun it is for me. Because anyone can overcome little obstacles. To overcome the big ones, it’s a huge challenge. If you have the personality that enjoys that, then you enjoy this job. For me, it’s inspirational to have big goals. You can have a tremendous impact on people’s lives. People say, “You can’t get everything done. There’s no way. It’s just too big. You’re one of these big action guys that likes big things, but everything can’t get done.” Well, so be it. But the only way to know if you can lift 500 pounds is if you put 500 pounds on the bar.

Walmart is known for a lot of things - from everyday low prices, destroying local communities to creating imbalance in US-China trade. However, for the past year or so it has been creating ripples in the Sustainability field. The ripples were for two reasons. One, should Walmart be believed? and two, if what Walmart is saying is true then it can effect the whole business world due to the size and influence of the organization.

Last year, H. Lee Scott, the CEO of Walmart have a speech on Leadership in the 21st Century. In this speech he outlined the need for sustainability and three ambitious goals for the corporation.

1. to be supplied 100 percent by renewable energy;
2. to create zero waste; and,
3. to sell products that sustain our resources and the environment.

After this speech, Walmart took many steps forward(PDF) in the sustainability field.

In a keynote speech to the Prince of Wales’s Business and Environment Programme, Lee Scott unveiled a company wide program called “Sustainability 360″. The sustainability program will now be part of its associates, customers and more importantly suppliers.

In the realm of the supply chain Walmart can make a huge difference. For example, Walmart’s target to reduce 5% packaging in all its products by 2013 will result in its 60,000 suppliers changing and saving a whooping $3.4 billion in Walmart’s supply chain and the potential to save $11 billion in the global supply chain.

Walmart is clearly showing leadership in its short 1.5 year journey in the sustainability area. It is a matter of time other large organizations around the world take this up. Clearly, the discussion for the “business case for sustainability” is over. The time is now for ideas, strategies, frameworks and tools and ofcourse the right people to make this happen.

In his 2007 State of the Union Address George Bush failed to acknowledge Climate Change and provide a concrete plan to solve the issue. He did suggest twenty-ten, an ambitious plan to cut down America’s oil consumption by 20% in ten years. Steve Bell from the Guardian provides a great cartoon.

As Julian Borger writing in the Guardian says that replacing 75% of middle east oil to the US would constitute only 15% of America’s oil imports.

To achieve his goals, the president wants to rely - once more - on market incentives spurred on by an American spirit of innovation, and avoid government regulation. But that approach has done little to curb greenhouse gases. The White House opposed a bipartisan congressional measure to tighten fuel economy standards four years ago, and the tax system actually encourages the use of huge four-wheel drive SUVs (sports utility vehicles).

Reacting to last night’s speech, Jason Mark, of the Union of Concerned Scientists, said: “We could save more than 75% of Middle East oil imports within ten years by increasing the fuel economy of our cars and trucks to 40 miles per gallon. The investments in renewable fuel technologies the president proposed will pay important dividends down the road. But you can’t transform transportation by research alone. We need aggressive policies now to wean ourselves off oil.”

Bush’s plan is concentrated on things which can provide more growth for business and farmers (ethanol production). He has not concentrated on providing mandatory increases on vehicle efficiencies in Cars and trucks in the US which will be a longer term solution to using less resources. Resource efficiency is far more important than substituting alternate fuels in the longer run.

With increasing understanding of climate change and pressure from the general public the top US corporations have decided to join with environmental groups forming the US Climate Action Partnership (USCAP) to lobby for greenhouse emissions caps and a carbon market in the US.

Why are 10 of the biggest CEOs of US corporations like Alcoa, BP America, Caterpillar, Duke Energy, DuPont, FPL Group, General Electric, Lehman Brothers, PG&E, and PNM Resources working with four leading non-governmental organizations — Environmental Defense, Natural Resources Defense Council, Pew Center on Global Climate Change, and World Resources Institute?

Just a year back this would not have been possible. But with increasing legislation in various US States, European Union and the Kyoto Protocol, the corporations are worried that a national policy would be better than piecemeal solutions.

Jim Owens, Caterpillar’s chairman and CEO says, “We felt it was better to be in the formative stages of this legislation and have a constructive voice. … You could cost yourself out of the market if you aren’t careful,”

This is a good sign. With Bush’s State of the Union address coming up, there is increasing expectation that there could be a change in White House’s policy on Climate Change.

Sterling Burnett, a senior fellow at the National Center for Policy Analysis, believes that the utilities that are investing in wind and nuclear energy are trying to create a competitive advantage.

“I think a lot of these companies, especially the utilities, have thrown in the towel and think that legislation is inevitable,” said Burnett. “Rather than fight regulation in every state they operate in, they would much rather have one unified national standard.”

“If you force carbon caps, it is going to hurt the coal industry while helping those invested in wind power and nuke power,” he said. “There is a very strong profit motive here.”

He is right but that is not bad. Profits will create new markets and these markets can help curb greenhouse gases.

Their six principles are,

1. Account for the global dimensions of climate change;
2. Create incentives for technology innovation;
3. Be environmentally effective;
4. Create economic opportunity and advantage;
5. Be fair to sectors disproportionately impacted; and
6. Reward early action.

One worry for me still is that there is an excessive concentration on climate change and not on sustainability as a whole. However, this is a good change.

Robert Cringely is a tech commentator who writes a weekly column called I, Pulpit on PBS. He is considered a maverick for his unusual predictions in the tech industry. Sometimes he is right and a lot of times he is wrong, however, he is entertaining.

Now, Robert is trying to tackle the energy crisis of US and falls flat on his face. It goes on to show that it is better to stick to your knitting than comment on issues which are not within your core area of competence.

Robert believes that the money earmarked for building the National Information Infrastructure in the US ($200 billion) has gone to waste and that the $500 billion spent on the Iraq war was fruitless so he thinks of a better use for that money.

He suggests using $200 billion to buy 10 million Prius and gift it to the owners of the highest driven cars in the US and another $300 billion for increasing Ethanol usage in the US. The rest $200 billion in wiring some 20 million households to work from home. This he believes will cut down the energy consumption by 20% to 30% in the US and will help towards global warming, meeting Kyoto targets, decreasing price of oil and solving some of the US dependence of Middle East oil.

Now, there are many flaws in the argument.

For starters, the $500 billion cost to the US economy is not the entire amount. According to Joseph Stiglitz and Linda Blimes it could cost somewhere around $2 trillion dollars if such costs as lifetime disability and healthcare for troops injured in the conflict as well as the impact on the American economy are included.

Coming to the argument for buying 10 million Prius. First, by providing a free car to the highest using car owners you are only increasing their chances of driving it further rather than changing their behaviour. Like some technologists, Robert thinks that technology is the solution to everything. In fact, rather than penalizing their behaviour you are providing a incentive for bad behaviour.

Second, a Prius is not the solution to our problem. Even though it has the highest mileage of all cars in the US, it is solving only one part of the problem. Cutting down operational use of energy.

For a product like a car you need to look at its entire life cycle. The production, operation and disposal of a car.

What is the ecobalance of a product? Products themselves do not pollute: it is the factories that made them, the trucks that transported them, the user who uses them and the incinerator that burns them.

In this case, the product pollutes too. When replacing with the Prius, there is a need to take care of the 10 million cars disposed of. The decision as Robert suggests is not as simple as sending scrap metal to China after using it to create a new Prius.

With a lot of products, it is not very clear if disposal and substitution creates more or less benefits than using the product. In the waste mantra “Reduce, Reuse, Repair, Recycle,” it is better to reuse than recycle or dispose of products. In that sense, scraping the 10 million cars is a huge waste of natural resources.

Coming to the Ethanol debate. Is it prudent to invest all of $300 billion dollars in one alternative fuel? Is Ethanol a good substitute of gasoline? Is Ethanol from Corn (which is where it comes from in the US) is the best in terms of energy economics? What about the effect of increased ethanol production through corn on land usage and food prices around the world?

As mentioned in a previous post, there is increasingly a choice between food and fuel. As Lester Brown writes,

By the end of 2007, the emerging competition between the 800 million automobile owners who want to maintain their mobility and the world’s 2 billion poorest people who want simply to survive will be on center stage.

The attempt to solve one problem—growing U.S. dependence on imported oil—is creating another far more serious problem. Fortunately this can be avoided. The 3 percent of U.S. automotive fuel supplies now coming from ethanol could be achieved, several times over and at a fraction of the cost, by raising automobile fuel-efficiency standards by 20 percent.

All this and we have debated only on the basis of the first principles. Implementation, government systems, practical production problems are not even tackled yet.

As is evident from this analysis, solving these problems is not simple. I am no expert in this and would surely have missed some more points but suggesting solutions require a greater depth of understanding and a wider thought process including a better understanding of the subject at hand. Robert should better stick to predicting Apple’s products and Vista’s woes.