This blog will cover some news items related to Sustainability: Corporate Social Responsibility, Stewardship, Environmental management, etc.


Beyond The Green Corporation: a world in which socially responsible practices help a company's bottom line. Many noble efforts fail because they are poorly executed. "If there's no connection to a company's business, it doesn't have much leverage to make an impact"

The Global 100
(click above to access the list) Role models in sustainable business practices

The Global 100
is a list of publicly-traded companies based on research and analysis on 1,800 companies by
Innovest Strategic Value Advisors. The companies below are deemed to have the best developed abilities, relative to their industry peers, to manage environmental, social and governance risks, and to take advantage of new business opportunities in this area.

Beyond The Green Corporation
Imagine a world in which eco-friendly and socially responsible practices actually help a company's bottom line. It's closer than you think



Under conventional notions of how to run a conglomerate like Unilever, CEO Patrick Cescau should wake up each morning with a laserlike focus: how to sell more soap and shampoo than Procter & Gamble Co. (PG ) But ask Cescau about the $52 billion Dutch-British giant's biggest strategic challenges for the 21st century, and the conversation roams from water-deprived villages in Africa to the planet's warming climate.

Slide Show >>

The world is Unilever's laboratory. In Brazil, the company operates a free community laundry in a São Paulo slum, provides financing to help tomato growers convert to eco-friendly "drip" irrigation, and recycles 17 tons of waste annually at a toothpaste factory. Unilever funds a floating hospital that offers free medical care in Bangladesh, a nation with just 20 doctors for every 10,000 people. In Ghana, it teaches palm oil producers to reuse plant waste while providing potable water to deprived communities. In India, Unilever staff help thousands of women in remote villages start micro-enterprises. And responding to green activists, the company discloses how much carbon dioxide and hazardous waste its factories spew out around the world.

As Cescau sees it, helping such nations wrestle with poverty, water scarcity, and the effects of climate change is vital to staying competitive in coming decades. Some 40% of the company's sales and most of its growth now take place in developing nations. Unilever food products account for roughly 10% of the world's crops of tea and 30% of all spinach. It is also one of the world's biggest buyers of fish. As environmental regulations grow tighter around the world, Unilever must invest in green technologies or its leadership in packaged foods, soaps, and other goods could be imperiled. "You can't ignore the impact your company has on the community and environment," Cescau says. CEOs used to frame thoughts like these in the context of moral responsibility, he adds. But now, "it's also about growth and innovation. In the future, it will be the only way to do business."

A remarkable number of CEOs have begun to commit themselves to the same kind of sustainability goals Cescau has pinpointed, even in profit- obsessed America. For years, the term "sustainability" has carried a lot of baggage. Put simply, it's about meeting humanity's needs without harming future generations. It was a favorite cause among economic development experts, human rights activists, and conservationists. But to many U.S. business leaders, sustainability just meant higher costs and smacked of earnest U.N. corporate- responsibility conferences and the utopian idealism of Western Europe. Now, sustainability is "right at the top of the agendas" of more U.S. CEOs, especially young ones, says McKinsey Global Institute Chairman Lenny Mendonca.

You can tell something is up just wading through the voluminous sustainability reports most big corporations post on their Web sites. These lay out efforts to cut toxic emissions, create eco-friendly products, help the poor, and cooperate with nonprofit groups. As recently as five years ago, such reports—if they appeared at all—were usually transparent efforts to polish the corporate image. Now there's a more sophisticated understanding that environmental and social practices can yield strategic advantages in an interconnected world of shifting customer loyalties and regulatory regimes.

Embracing sustainability can help avert costly setbacks from environmental disasters, political protests, and human rights or workplace abuses—the kinds of debacles suffered by Royal Dutch Shell PLC (
RDS ) in Nigeria and Unocal in Burma. "Nobody has an idea when such events can hit a balance sheet, so companies must stay ahead of the curve," says Matthew J. Kiernan, CEO of Innovest Strategic Value Advisors. Innovest is an international research and advisory firm whose clients include large institutional investors. It supplied the data for this BusinessWeek Special Report and prepared a list of the world's 100 most sustainable corporations, to be presented at the Jan. 24-28 World Economic Forum in Davos, Switzerland.

The roster of advocates includes Jeffrey Immelt, CEO of General Electric Co. (
GE ), who is betting billions to position GE as a leading innovator in everything from wind power to hybrid engines. Wal-Mart Stores Inc. (WMT ), long assailed for its labor and global sourcing practices, has made a series of high-profile promises to slash energy use overall, from its stores to its vast trucking fleets, and purchase more electricity derived from renewable sources. GlaxoSmithKline (GSK ) discovered that, by investing to develop drugs for poor nations, it can work more effectively with those governments to make sure its patents are protected. Dow Chemical Co. (DOW ) is increasing R&D in products such as roof tiles that deliver solar power to buildings and water treatment technologies for regions short of clean water. "There is 100% overlap between our business drivers and social and environmental interests," says Dow CEO Andrew N. Liveris.

Striking that balance is not easy. Many noble efforts fail because they are poorly executed or never made sense to begin with. "If there's no connection to a company's business, it doesn't have much leverage to make an impact," says Harvard University business guru Michael Porter. Sustainability can be a hard proposition for investors, too. Decades of experience show that it's risky to pick stocks based mainly on a company's long-term environmental or social-responsibility targets.

Nevertheless, new sets of metrics, which Innovest and others designed to measure sustainability efforts, have helped convince CEOs and boards that they pay off. Few Wall Street analysts, for example, have tried to assess how much damage Wal-Mart's reputation for poor labor and environmental practices did to the stock price. But New York's Communications Consulting Worldwide (CCW), which studies issues such as reputation, puts it in stark dollars and cents. CCW calculates that if Wal-Mart had a reputation like that of rival Target Corp. (
TGT ), its stock would be worth 8.4% more, adding $16 billion in market capitalization.

Serious money is lining up behind the sustainability agenda. Assets of mutual funds that are designed to invest in companies meeting social responsibility criteria have swelled from $12 billion in 1995 to $178 billion in 2005, estimates trade association Social Investment Forum. Boston's State Street Global Advisors alone handles $77 billion in such funds. And institutions with $4 trillion in assets, including charitable trusts and government pension funds in Europe and states such as California, pledge to weigh sustainability factors in investment decisions.

Why the sudden urgency? The growing clout of watchdog groups making savvy use of the Internet is one factor. New environmental regulations also play a powerful role. Electronics manufacturers slow to wean their factories and products off toxic materials, for example, could be at a serious disadvantage as Europe adopts additional, stringent restrictions. American energy and utility companies that don't cut fossil fuel reliance could lose if Washington joins the rest of the industrialized world in ordering curbs on greenhouse gas emissions. Such developments help explain why Exxon Mobil Corp. (
XOM ), long opposed to linking government policies with global warming theories, is now taking part in meetings to figure out what the U.S. should do to cut emissions.

Investors who think about these issues obviously have long time horizons. But they encounter knotty problems when trying to peer beyond the next quarter's results to a future years down the road. Corporations disclose the value of physical assets and investments in equipment and property. But U.S. regulators don't require them to quantify environmental, social, or labor practices. Accountants call such squishy factors "intangibles." These items aren't found on a corporate balance sheet, yet can be powerful indicators of future performance.

If a company is at the leading edge of understanding and preparing for megatrends taking shape in key markets, this could constitute a valuable intangible asset. By being the first fast-food chain to stop using unhealthy trans fats, Wendy's International Inc. (
WEN ) may have a competitive edge now that New York City has banned the additives in restaurants. McDonald's Corp. (MCD ), which failed to do so, could have a future problem.

Rising investor demand for information on sustainability has spurred a flood of new research. Goldman Sachs, Deutsche Bank Securities (
DB ), ubs (UBS ), Citigroup (C ), Morgan Stanley, and other brokerages have formed dedicated teams assessing how companies are affected by everything from climate change and social pressures in emerging markets to governance records. "The difference in interest between three years ago and now is extraordinary," says former Goldman Sachs (GS ) Asset Management CEO David Blood, who heads the Enhanced Analytics Initiative, a research effort on intangibles by 22 brokerages. He also leads Generation Investment Management, co-founded in 2004 with former Vice-President Al Gore, which uses sustainability as an investment criterion.

Perhaps the most ambitious effort is by Innovest, founded in 1995 by Kiernan, a former KPMG senior partner. Besides conventional financial performance metrics, Innovest studies 120 different factors, such as energy use, health and safety records, litigation, employee practices, regulatory history, and management systems for dealing with supplier problems. It uses these measures to assign grades ranging from AAA to CCC, much like a bond rating, to 2,200 listed companies. Companies on the Global 100 list on BusinessWeek's Web site include Nokia Corp. (
NOK ) and Ericsson (ERICY ), which excel at tailoring products for developing nations, and banks such as hsbc Holdings (HBC ) and abn-Amro (ABN ) that study the environmental impact of projects they help finance.

Some of Innovest's conclusions are counterintuitive. Hewlett-Packard (
HPQ ) and Dell (DELL ) both rate AAA, for example; market darling Apple (AAPL ) gets a middling BBB on the grounds of weaker oversight of offshore factories and lack of a "clear environmental business strategy." An Apple spokesman contests that it is a laggard, citing the company's leadership in energy-efficient products and in cutting toxic substances. Then there's Sony Corp. (SNE ) vs. Nintendo. Wall Street loves the latter for a host of reasons, not least that its Wii video game system, the first to let users simulate actions such as swinging a sword or tennis racket, was a Christmas blockbuster. Sony, meanwhile, has a famously dysfunctional home electronics arm, and was embarrassed by exploding laptop batteries and long delays in bringing out its PlayStation 3 game console. Nintendo's stock has more than tripled in three years; Sony's has languished.

Viewed through the lens of sustainability, however, Sony looks like the better bet. It is an industry leader in developing energy-efficient appliances. It also learned from a 2001 fiasco, when illegal cadmium was found in PlayStation cables bought from outside suppliers. That cost Sony $85 million, says Hidemi Tomita, Sony's corporate responsibility general manager. Now, Sony has a whole corporate infrastructure for controlling its vast supplier network, helping it avert or quickly fix problems. Nintendo, a smaller Kyoto-based company focused on games, shows less evidence of the global management systems needed to cope with sudden regulatory shifts or supplier problems, says Innovest. A Nintendo spokesman says it meets all environmental rules and is "always reviewing and considering" the merits of new global sustainability guidelines.

Here's another Rorschach test. Which is the best investment: ExxonMobil, BP, or PetroChina (
PTR )? Exxon, one of the best-performing energy biggies of the past five years, seems like the obvious stock pick. PetroChina Co. is riskier but also alluring. It's a prime supplier of fuel to booming China, has seen revenues and profits rocket, and has been a hot stock for two years. Analyst Shahreza Yusof of Aberdeen Asset Management PLC rates the company a buy. Because of its access to China's market and new reserves, he writes, one day it will be as big as today's major oil giants—"if not bigger."

By contrast, BP seems to disprove the sustainability thesis altogether. CEO John Browne has preached environmentalism for a decade, and BP consistently ranked atop most sustainability indexes. Yet in the past two years it has been hit with a refinery explosion that killed 15 in Texas, a fine for safety violations at a refinery in Ohio, a major oil pipeline leak in Alaska, and a U.S. Justice Dept. probe into suspected manipulation of oil prices.Browne has recently announced his retirement. BP's shares have slid 10% since late April. Exxon's are up around 12%.

Innovest still rates BP a solid AA, while labeling Exxon a riskier BB. And PetroChina? Innovest gives it a CCC. Here's why: BP wins points for plowing $8 billion into alternative energies to diversify away from oil and engages community and environmental groups. Exxon has done less to curb greenhouse gas emissions and promote renewables and has big projects in trouble spots like Chad. "I would still say Exxon is a bigger long-term risk," says Innovest's Kiernan. Petro- China is easier to justify. Begin with its safety record: A gas well explosion killed 243 people in 2003; another fatal explosion in 2005 spewed toxic benzene into a river, leaving millions temporarily without water. PetroChina has been slow to invest in alternative energy, Innovest says, and its parent company has big bets in the Sudan.

Do Innovest's metrics make a reliable guide for picking stocks? Dozens of studies have looked for direct relationships between a company's social and environmental practices and its financial performance. So far the results are mixed, and Kiernan admits Innovest can't prove a causal link. That's little help to portfolio managers who must post good numbers by yearend. "The crux of the problem is that we are looking at things from the long term, but we're still under short-term review from our clients," says William H. Page, who oversees socially responsible investing for State Street Global Advisors.

Yet Kiernan and many other experts maintain sustainability factors are good proxies of management quality. "They show that companies tend to be more strategic, nimble, and better equipped to compete in the complex, high-velocity global environment," Kiernan explains. That also is the logic behind Goldman Sachs's intangibles research. In its thick annual assessments of global energy and mining companies, for example, it ranks companies on the basis of sustainability factors, financial returns, and access to new resource reserves. Top-ranking companies, such as British Gas, Shell, and Brazil's Petrobras (
PBR ), are leaders in all three categories. For the past two years, the stocks of elite companies on its list bested their industry peers by more than 5%—while laggards underperformed, Goldman says.

Still, BP's (
BP ) woeful performance highlights a serious caveat to the corporate responsibility crusade. Companies that talk the most about sustainability aren't always the best at executing. Ford Motor Co. (F ) is another case in point. Former CEO William C. Ford Jr. has championed green causes for years. He famously spent $2 billion overhauling the sprawling River Rouge (Mich.) complex, putting on a 10-acre grass roof to capture rainwater. Ford also donated $25 million to Conservation International for an environmental center.

But Ford was flat-footed in the area most important to its business: It kept churning out gas-guzzling SUVs and pickups. "Having a green factory was not Ford's core issue. It was fuel economy," says Andrew S. Winston, director of a Yale University corporate environmental strategy project and co-author of the book Green to Gold.

The corporate responsibility field is littered with lofty intentions that don't pay off. As a result, many CEOs are unsure what to do exactly. In a recent McKinsey & Co. study of 1,144 top global executives, 79% predicted at least some responsibility for dealing with future social and political issues would fall on corporations. Three of four said such issues should be addressed by the CEO. But only 3% said they do a good job dealing with social pressures. "This is uncomfortable territory because most CEOs have not been trained to sense or react to the broader landscape," says McKinsey's Mendonca. "For the first time, they are expected to be statesmen as much as they are functional business leaders." Adding to the complexity, says Harvard's Porter, each company must custom-design initiatives that fit its own objectives.

Dow Chemical is looking at the big picture. It sees a market in the need for low-cost housing and is developing technologies such as eco-friendly Styrofoam used for walls. CEO Liveris also cites global water scarcity as a field in which Dow can "marry planetary issues with market opportunity." The U.N. figures 1.2 billion people lack access to clean water. Dow says financial solutions could help 300 million of them. That could translate into up to $3 billion in sales for Dow, which has a portfolio of cutting-edge systems for filtering minute contaminants from water. To reach the poor, Dow is working with foundations and the U.N. to raise funds for projects.

Philips Electronics (
PHG ) also is building strategies around global megatrends. By 2050, the U.N. predicts, 85% of people will live in developing nations. But shortages of health care are acute. Among Philips' many projects are medical vans that reach remote villages, allowing urban doctors to diagnose and treat patients via satellite. Philips has also developed low-cost water-purification technology and a smokeless wood-burning stove that could reduce the 1.6 million deaths annually worldwide from pulmonary diseases linked to cooking smoke. "For us, sustainability is a business imperative," says Philips Chief Procurement Officer Barbara Kux, who chairs a sustainability board that includes managers from all business units.

Such laudable efforts, even if successful, may not help managers make their numbers next quarter. But amid turbulent global challenges, they could help investors sort long-term survivors from the dinosaurs.

By Pete Engardio, with Kerry Capell in London, John Carey in Washington, and Kenji Hall in Tokyo

Storm in a coffee cup: Starbucks defends itself over Oxfam campaign

Storm in a coffee cup: Starbucks defends itself over Oxfam campaign

Ashley Seager
Friday January 19, 2007

The Guardian

Starbucks, the US coffee giant, yesterday hit back at critics who have accused it of not doing enough to help coffee growers in poor countries.

The group said it had sharply increased the average price it paid for its coffee last year. But it acknowledged it had not reached any agreement with Ethiopia over a trademark dispute which has prompted thousands of people around the world to write in protest to the company's chief executive, Jim Donald.

Starbucks said it had raised the average price it paid for coffee in its fiscal year to last October to $1.42 (72p) a pound, 37% above the industry coffee price over the period and 11% more than it had paid in 2005.

It also said it had doubled to 155m lbs the amount of coffee it bought through the independently verified coffee sourcing and purchasing guidelines known as CAFE. This type of coffee now accounts for 53% of all the company's coffee.

The company's coffee bill was about $426m last year. Over the same period the its revenues surged 22% to $7.8bn.

"We are passionate about coffee but we are also passionate about the wider coffee-growing community and the leadership role we play," said Alain Poncelet, managing director of Starbucks Coffee Trading Company, which buys the company's coffee from 26 countries.

Mr Poncelet told the Guardian he thought the new price Starbucks was paying was the highest it had ever paid.

Starbucks has been stung by accusations from the charity Oxfam and the Ethiopian government late last year that it was indirectly blocking an attempt by the impoverished African nation to register the trademarks of its key coffee brands in the US. Around 90,000 people have written to Mr Donald to complain as a result of Oxfam's campaign.

Starbucks has recently put out a video on the website YouTube in which it says it would be illegal for the Ethiopians to trademark their beans Sidamo and Harar in the US since they are geographical regions which cannot be trademarked there. But that is disputed by trademark lawyers.

Mr Poncelet said he would hold further talks with the Ethiopian government in Addis Ababa next month but would not outline what any deal might be. Similar talks in November did not lead to a deal. "Our goal is to reward Ethiopian coffee farmers for the great coffee they produce," he said. He would not say how much money Starbucks spent in Ethiopia but its coffee represented only about 2% of the company's purchases.

Phil Bloomer, director of campaigns at Oxfam, said he recognised the efforts Starbucks had made in ensuring an increasing ethical commitment in its purchasing.

"But this latest PR offensive merely skirts around the real issue. Trademarking coffee names would help level the playing field in international trade and allow coffee farmers to trade on more equal terms with their suppliers.

"Starbucks ... has tied the hands of Ethiopian farmers who produce world-famous coffees, but who are prevented from taking full advantage of this to help work themselves out of poverty."

Ron Layton, head of Light Years IP, a Washington-based intellectual property rights organisation advising the Ethiopian government, said Ethiopia had already trademarked Yergacheffe coffee in the US and there was no legal reason it should not be able to trademark Sidamo and Harar.

"Currently they are able to get maybe $1.42 a pound for their coffee when Starbucks sells it for up to $26 a pound."

Tesco invests £500m to create 'green consumer revolution'

Tesco invests £500m to create 'green consumer revolution'
By Susie Mesure, Retail Correspondent
Published: 19 January 2007

Tesco will plough £500m over the next five years into turning the fringe green lobby into a mass consumer movement in the biggest attempt yet by any British business to combat climate change.

The retailer, which is frequently berated for the harm it causes the environment, intends to devise a "carbon calorie counter" that will allow shoppers to opt for a low-carbon lifestyle.

Sir Terry Leahy, the chief executive, refused to follow Marks & Spencer's lead and set a target for making his business carbon neutral, but he said Tesco would seek to reduce its carbon footprint. "I felt it inappropriate in an industry that is clearly carbon emitting to speak about carbon neutrality," he said.

Tesco's pledge to deliver "a revolution in green consumption" comes three days before the Competition Commission reports back on whether it thinks competition in the grocery market is distorted by having one dominant player. Tesco first publicly promised to "be a better neighbour" last May, days after the watchdog launched an inquiry into the supermarket sector.

Last night, Sir Terry told a roomful of environmentalists, civil servants, retailers and academics that Tesco would lead the charge to create a low-carbon economy. "We will bring down the cost of going green," he said, starting by halving the price of energy-efficient light bulbs.

Sir Terry believes Tesco is uniquely positioned to make "sustainability a significant, mainstream driver of consumption" because 17 million consumers visit its 1,900 stores every week.

Among the pledges outlined in a speech entitled "Green grocer? Tesco, carbon and the consumer", he said the group would donate £5m a year to help fund academic research into greener consumption. It will set up a body called the Sustainable Consumption Institute, in partnership with Oxford University, to develop an accepted measure of the carbon footprint of every product Tesco sells.

Sir Terry hopes that in the future all products will detail their "carbon calorie" values in much the same way as they break down their nutritional content. "There aren't many things that keep me awake at night but this is one," he admitted. He gave no timescale for when the new carbon counter would appear on the 70,000 items sold by Tesco around the world but said he was "confident we'll make good progress on it".

Other plans include limiting the amount of produce that is air-freighted to 1 per cent, down from as much as 3 per cent; rewarding shoppers who buy organic, Fairtrade and biodegradable items with extra "green" loyalty card points; selling more energy-efficient products through its Value range; and doubling the proportion of biofuels the group sells over the next 12 months.

It will also launch a "Kids Carbon Calculator" in conjunction with the Government to encourage good habits to start young. It said it would meet its existing target to halve the average energy use in its UK buildings between 2000 and 2010 by next year, two years early. It is spending £500m additional capital expenditure on cutting its energy use. This is on top of £100m already ring-fenced to support nascent low-carbon technologies.

Tesco's green overhaul does not stop at the UK. Plans to reduce emissions from its existing stores and distribution centres cover its 2,700 outlets in 11 countries around the world. All new stores opened between now and 2020 will emit at least 50 per cent less carbon than an equivalent store today.

Green lobby groups gave a cautious welcome to Tesco's plans. John Sauven, Greenpeace's UK director, called a universal system for measuring the carbon emissions associated with individual products "a major step forward".

Sandra Bell, supermarkets campaigner at Friends of the Earth, asked how Tesco could square its pledge to cut its carbon emissions with its global expansion plans, which will see it enter the US market later this year.

Tesco's climate change mission comes just days after M&S announced it would spend £200m on making its business carbon neutral by 2012.


Corporate participation in voluntary environmental programs is largely determined by internal company culture, rather than by the costs and benefits; these findings may be important lessons for govt agencies as they decide how to encourage better environmental performance by more companies

Corporate culture key to environmental initiatives
CAMBRIDGE, MA, January 11, 2007 (GLOBE-Net) – Corporate participation in voluntary environmental programs is largely determined by internal company culture, rather than by the initiatives' costs and benefits, say the authors of a new Harvard University study. The report's findings may be important lessons for government agencies as they decide how to encourage better environmental performance by more companies, the study concludes.

According to "Beyond Compliance: Business Decision Making and the U.S. EPA's Performance Track Program," it is still unclear if voluntary government programs such as the U.S. EPA's National Environmental Performance Track encourage companies to do more than they would normally do to improve their environmental behaviour.

[Note from JFB - here is the full report: ]

"What we've found is that it's not so much what the EPA does, but what certain companies need - some companies have a propensity to seek this kind of recognition," said Jennifer Nash, a co-author of the study and the director the Kennedy School of Government's Regulatory Policy Program. "They may not be the best performers, but it's a certain sort of extroversion that makes an individual or company go for the gold star."

The Harvard researchers focused on the 7-year-old EPA program to answer why companies join voluntary government programs and whether such programs improve the company facilities' environmental performance. Performance Track recognizes and rewards private and public facilities that demonstrate strong environmental performance beyond current requirements, the agency says.

"Program partners are providing leadership in many areas, including some that are not currently regulated, such as energy use, greenhouse gas emissions, and water consumption," EPA notes on the program's Web site.

Denver International Airport, Johnson & Johnson's World Headquarters and Coca Cola's Columbus, Ohio, plants are among more than 400 U.S. facilities enrolled in the program. Such facilities must have an environmental management system in place and demonstrate continuous improvement, among other things, to be accepted into the program. In return, EPA publicly recognizes such facilities as industry leaders and offers regulatory and administrative incentives, such as low-priority status for routine federal environmental inspections.

Few applicants

While EPA estimates that as many as 5,000 facilities meet at least some of the program's eligibility requirements, the agency averages fewer than 50 applications during its biennial enrolment cycle, according to the report.

To gauge why owners of such facilities enrol in the EPA program, the Harvard researchers sent surveys to 3,900 companies - including every facility that had applied for Performance Track since 2000, as well as a random sample of facilities from the chemicals, paper, transportation and electronics sectors.

Based on 678 responses to the survey conducted in late 2005, researchers found that facilities with more employees and support from top-level management reported a greater receptivity toward voluntary programs like Performance Track. So too did facilities that expected more stringent regulations to affect them in the future and facilities that were most likely to seek out approval from environmental groups and the broader community, the study found.

That is not to say that such companies sought out Performance Track to burnish their "green" image among investors, consumers and other influential groups, noted Cary Coglianese, Nash's co-author of the study.

"A company might be able to gain in its reputation through Energy Star, for example," added Coglianese, a law professor at the University of Pennsylvania. "The EPA, though, has well over 50 voluntary programs, and my guess is that the ordinary consumer knows about relatively few of these."

Attracting 'joiners'

Rather, Coglianese said he suspects such programs tend to attract "joiners" - companies that may not be the best environmental performers in their sector but, nevertheless, tend to enrol in several voluntary environmental compliance programs.

"These programs may not always be selecting the true and distinguished environmental leaders ... but rather there are good environmental performers who are not in this program or other programs," he added.

Key barriers causing many companies to shun such programs, Coglianese suspects, are the tradeoffs between the costs and rewards of voluntary participation. That is, inherent constraints make it difficult, if not impossible, for regulatory agencies to offer "significant rewards" for participation and set "low-cost and pragmatic" requirements.

The survey results found that companies find it burdensome to fill out the 29-page application and a nine-page annual progress reports that EPA requires. What's more, the survey found that as the level of reward increases, so does the stringency of entry requirements such that adding rewards actually reduces overall participation.

"Fewer firms want to assume the increased costs associated with gaining entry to programs with higher stringency, even when they promise greater standards," the report concluded.

Responses to the survey were kept confidential. The report also did not make specific recommendations, such as whether making voluntary compliance programs mandatory would improve facilities' environmental performance, Coglianese noted.

A paper released by a Chinese government environmental agency predicts that the country will reach its maximum disposal capacity for municipal garbage in just over a decade.

China's looming garbage problem
BEIJING, January 11, 2007 (GLOBE-Net) – A paper released by a Chinese government environmental agency predicts that the country will reach its maximum disposal capacity for municipal garbage in just over a decade.

"China's urban areas will generate the maximum amount of garbage its cities can handle in another 13 years," reports China Daily, citing a report from the China Council for International Cooperation and Development (CCICD).

As millions of rural inhabitants migrate to urban areas, the nation's garbage stockpiles will reach 400 million tonnes within 13 years, says the paper. That's equal to the total weight of global garbage generated in 1997. It is projected that 860 million people will be living in China's cities by 2020, pushing an already strained urban waste disposal system to the brink.

The CCICD reports that around seventy percent of China's urban waste goes to landfill, while the remaining thirty percent is used to make fertilizer. A continuation of this trend would contaminate large tracts of land, making them unsuitable for development, and cause toxic air and water pollution, it warns.

The CCICD advocated better waste management through clearer garbage classification and public education.

Most industrialized countries are able to achieve much higher landfill diversion rates than China. Ontario has set a goal of 60 percent diversion by 2008, and most Canadian cities recycle or utilize around half of their waste to prevent it going to landfills.

Waste disposal is one of many environmental challenges facing China, as rapid economic expansion has placed enormous pressure on the country's ecological resources. Reducing solid waste is one of the goals set forth in the country's latest Five Year Plan, which includes unprecedented amounts of environmental funding, as political attention has been drawn to the issue by near critical problems in many areas.

Solutions to municipal solid waste management are varied, and rely on two general approaches: targeting a reduction or diversion of waste at the collection point, and disposing of collected waste through various technological methods. The former method can be seen in public education programs, and recycling initiatives such as 'blue box' programs which can collect paper, plastic, and aluminum for recycling, as well as organic waste for compost.

Technology-based disposal methods included gasification of solid waste, which can produce electricity while incinerating waste. This avoids many of the air pollutants associated with traditional thermal incineration, although incineration has been the favoured disposal method employed in China recently.

Richway Environmental Technologies Ltd. is one Canadian company which has successfully engaged in the waste management market in China. The Richmond, BC-based firm has several projects underway in China, including an industrial waste incinerator, two municipal waste combustors, and a landfill leachate treatment facility – all four are government owned. The company is also engaged in a joint venture to construct a municipal solid waste facility in Guangdong Province, and is planning several other waste projects in China.

The U.S Commercial Service reports that recent government budgets have allocated significant resources for environmental technologies for solid waste management.

"China is increasingly using market mechanisms for solid waste management, and are looking abroad for expertise. Foreign companies that enter the market now will be well positioned for future growth," reports the Service.

Continuing with current trends, there will likely be further growth in the number of incineration projects. Therefore emissions equipment and technologies that help control ash management are good prospects.

Resource recycling technologies also offer potential, though it should noted that many recyclable items are collected by scavengers before they reach the landfill. Metal recycling is the most promising area, as China's need for raw metals outstrips its current supply.

Wind power is now a cost-competitive electricity generation option in Europe, with a price range that is in line with conventional power from coal and natural gas

Wind energy cost-competitive in Europe
BARCELONA, January 11, 2007 (GLOBE-Net) – Wind power is now a cost-competitive electricity generation option in Europe, with a price range that is in line with conventional power from coal and natural gas, says a new report from consulting firm Emerging Energy Research (EER).

The group's survey of Comparative Costs of Energy in Europe 2007 reveals that "Wind energy is now in a range that is cost competitive with power from new conventional power plants. Most importantly, there is no fuel cost, and therefore no fuel risk, associated with wind power."

The analysis is based the cost per Megawatt-hour of energy for building a new conventional generation facility versus a new wind power plant in Europe.

Additionally, Europe's trend towards stricter carbon dioxide limits means that wind and other renewable energy technologies will become relatively less expensive than fossil fuels in the future. Were carbon emissions subject to a 30 Euro charge per metric tonne, land-based wind turbines would produce energy well below the cost of natural gas and coal plants. Interestingly, new nuclear facilities would also be energy cost leaders. Even without a carbon penalty, wind power is becoming cost competitive with traditional energy supplies, says EER. Under three price scenarios, electricity cost estimates show that wind power costs are converging with natural gas and coal power. The major cost concern for natural gas plants is fuel price, as surging gas prices make conventional energy more expensive. Increased commodity prices and requirements for advanced Nitrous Oxide (NOx) control systems also add to investment costs. Combined Cycle Gas Turbine plants are improving the efficiency of new plants.

New coal plants in Europe are required to employ Flue Gas Desulphurization, increasing the cost of construction. In the future, coal plants will remain vulnerable to carbon constraints, notes EER.

The report identifies wind power's other benefits over conventional generation sources, primarily the minimization of project risks related to security of fuel supply, construction time, and carbon emissions.

The size of the wind power industry is now allowing for economies of scale, reducing capital and operating costs significantly over the past decade. Despite supply chain shortages and increased metal prices over the past few years, the industry is adjusting to greater global demand and these capital costs will decrease, predicts EER. Wind remains more cost-competitive than other renewable energy sources such as solar and biomass, and offers the largest potential in Europe in the short term, concludes the report.

"With wind power becoming more cost-competitive it will play an important role in Europe's power generation mix going forward, especially in light of the growing risk of energy security, rising fuel costs, and climate change," says to EER senior analyst Alex Klein.

The U.S. Energy Information Administration (EIA) has found that a proposed cap and trade system for greenhouse gases would achieve emissions reductions without harming the U.S. economy

No economic harm from cap and trade systems
WASHINGTON, D.C., January 12, 2007 (GLOBE-Net) – The U.S. Energy Information Administration (EIA) has found that a proposed cap and trade system for greenhouse gases would achieve emissions reductions without harming the U.S. economy.

In response to a request from a bipartisan group of Senators, the government agency conducted an analysis of the impacts of cap and trade legislation proposed by Senator Jeff Bingaman of New Mexico. The resulting report includes detailed analysis of the economic impacts, changes in energy prices and supply mix, and forecasts of emissions reductions associated with the plan.

The proposed legislation would establish annual emissions caps based on targeted reductions in greenhouse gas intensity, defined as emissions per dollar of Gross Domestic Product (GDP). The targeted reduction in GHG intensity would be 2.6 percent annually between 2012 and 2021, then increase to 3.0 percent per year beginning in 2022.

Suppliers of fossil fuel and other sources of GHGs would be required to submit government-issued allowances (or 'carbon credits') based on the emissions of their respective products in order to meet these targets. The program also includes a "safety-valve" which allows companies to pay a pre-established emissions fee instead of submitting an allowance, initially set at $7 per tonne in 2012.

The EIA analysis contrasts a model of the cap and trade system with a reference case based on current trends. The report found significant impacts on energy markets and costs of fossil fuel generation, but overall economic growth was only marginally lower than the reference case.

Compared to the reference case, the EIA finds that under a cap and trade scheme:

  • Emissions are lowered by 5% in 2015, 11% in 2025, and 14% by 2030.
  • Total GDP over the period 2009-2030 is 0.10-0.19 percent lower, while consumer spending is 0.14 percent lower.
  • Electricity prices are 3.6-5.6% higher in 2020 and 11-13% higher in 2030.
  • Annual per household energy expenditures are $41-$58 higher in 2020 and $118-$136 higher in 2030.
  • Retail gasoline prices in 2030 are $0.11 per gallon higher.
The energy supply mix would also undergo changes compared to the reference case. Coal use would continue to grow, but at a much slower rate: 23% growth from 2004 to 2030 versus 53% in the reference case. Nuclear energy capacity would increase by 47 gigawatts, compared to only 9 gigawatts in the reference case.

Renewable energy would experience significant growth as well. In the reference case, renewable energy is projected to increase from 358 billion kilowatt hours (kWh) in 2004 to 559 billion kWh in 2030. Under the cap and trade scheme, renewable generation increases to 572 billion kWh by 2020 and 823 billion kWh by 2030, a 230% increase over the reference case.

Most of the increase in renewable generation is expected to be from non-hydroelectric renewable generators, mainly biomass and wind.

The report notes that while higher energy costs and lower consumption expenditures usually discourage investment, provisions in the bill support investment activity and in some cases will increase it. A portion of the allowances allocated to the private sector would generate funds to spur private investment in energy saving technologies.

The U.S. administration has thus far rejected legislated greenhouse gas constraints, citing the economic harm that would result from imposing a cap on emissions. However, in recent years support for climate change legislation has become stronger at the federal level, with many politicians and businesses declaring that greenhouse gas constraints are 'inevitable' for the United States, and with companies calling for long term certainty.

There have been recent media reports that suggest US President George W. Bush is contemplating emissions caps, a significant shift in White House policy which would have an immediate impact on global climate change negotiations.

The establishment of a carbon credit trading system within the United States opens up the clear possibility for integration with a Canadian credit system. Given the level of energy and manufacturing trade between the two countries, cross-border emissions trading should be viewed as an imperative by policy makers.

The green building movement is starting to make serious progress. Sustainable construction is on the rise, from single-family houses and planned communities, to schools, hospitals and other large built environments.

Green Building takes off
NORWALK, CT, January 12, 2007 - The green building movement is starting to make serious progress. Sustainable construction is on the rise, from single-family houses and planned communities, to schools, hospitals and other large built environments.

Today, five percent of new commercial construction meets standards set by the U.S. Green Building Council's Leadership in Energy and Environmental Design program (LEED), a voluntary, consensus-based standard for developing high-performance, sustainable buildings. Ten percent of new homes satisfy the US federal government's Energy Star guidelines, meaning they're nearly one-third more energy-efficient than regulations require, reports E-Magazine in its latest cover story.

Still, considering that U.S. buildings generate about a third of the country's greenhouse gases, at the rate green building is penetrating the market today it will be many years before serious emissions reductions are achieved.

A recent edition of Building Design and Construction (BD+C) contains an examination of progress in green building in the United States, and details the financial implications of sustainable building in a comprehensive report, Green Buildings and the Bottom Line.

The report shows that green building has matured from its early days as an environmental 'crusade' into a well established construction sector with a strong business backing. The shift from an environmentally principled approach to a view of green building as a lucrative financial opportunity is the focus of the paper.

A number of cities around the United States, including San Francisco, Boston, Seattle and Scottsdale, Arizona, are leading the way with laws that require new public buildings be green. So far, 54 U.S. cities and 23 federal agencies have adopted LEED standards for buildings, says Bill Browning, senior fellow for Rocky Mountain Institute and co-author of Green Development: Integrating Ecology and Real Estate.

In Canada, all new government office buildings must meet the Canada Green Building Council's LEED Gold level. Office Buildings with new long-term leases also have to meet the LEED-Canada Gold level. The Canada Green Building Council (CaGBC) is the exclusive licensee and certifier of LEED projects in Canada.

Cities including Vancouver, Calgary, and Ottawa, have also adopted LEED guidelines for municipal developments. All new civic buildings greater than 500 square metres in Vancouver are required to meet LEED Gold standards, and measures to reduce energy consumption by at least 30% are mandatory.

An example of cutting edge green building development in Canada is Victoria's Dockside Green, which will transform harbour front industrial lands into a mixed use community with extensive use of green energy, water recycling, and provisions for a variety of transportation options.

The CaGBC also recently certified its first residential high-rise condominium, The Radiance @ MintoGardens, in Toronto. The project has received a rating of LEED Silver for its variety of sustainable building features. Minto Urban Communities Inc. was nominated for a GLOBE Award in 2006 for its work in promoting green building in Canada. However, obstacles to further green building developments remain. Part of the problem is resistance to change and refusal by some professionals to learn new methods. Until economies of scale are realized, some of the technology will continue to cost more.

Some question whether the term "green building" is too easily co-opted for marketing purposes. Some builders, they charge, do little more than erect townhouses that increase urban density rather than build energy-efficient products that are truly lighter on the land. Critics wonder whether efficiency standards, when applied, can be objectively proven to deliver desired results - such as lower electric bills. Historic preservationists bristle at a perceived bias toward new edifices thrown up at the expense of older buildings that could instead by sustainably retrofitted while maintaining the character of a community.

Buildings are definitely energy hogs. While the SUV is the environmental bad-boy symbol, buildings consume far more energy than cars and trucks. It's estimated that commercial and residential buildings in North America consume 65 percent of all electricity, as well as 12 percent of drinkable water and 40 percent of all raw materials.

"The new green building movement arises from the realization that we can't go on living as we have in the past: that treating the environment in general and energy in particular as afterthoughts no longer makes sense," said author Bill McKibben at last October's opening of the 46-story glass-and-steel Hearst Tower in New York City. The building required 20 percent less steel than a conventional skyscraper and is made of 90 percent recycled material. Sensors switch off lights when no one is in a room.

"They're sensible, cost-effective, obvious measures," McKibben said. "Someday they'll be code. But for now they're noble, pioneering examples."

Climate plan in Canada: after a year of review and planning, the government has begun implementing concrete measures to promote environmental technologies and address climate change and air pollution

Climate plan: clean energy funding
OTTAWA, January 17, 2007 (GLOBE-Net) – The federal government has announced a $230 million fund to promote the development and demonstration of clean-energy technologies, including clean coal and carbon capture, in the first of a series of planned announcements on energy and the environment. The ecoEnergy Technology Initiative will form a large part of the government's climate change strategy, which is expected to include intensity targets for greenhouse gas emissions by 2015.
Natural Resources Minister Gary Lunn called Canada an "emerging energy superpower", that must meet the challenge of creating clean energy. In order to do this, technologies for renewable energy and to make conventional energy cleaner are necessary, he said. He also added that the greatest untapped energy source is energy efficiency.

The government will channel energy technology funds towards three main areas:

  • Increasing the supply of clean energy from sources such as wind, solar, biomass, ocean power and small hydro
  • Raising energy efficiency by supporting efficient technologies
  • Reducing pollution from conventional energy sources (fossil fuels) through technologies such as 'clean coal' and carbon dioxide capture and storage
Minister Lunn made the announcement at the CANMET Energy Technology Centre (CETC) in Ottawa, against the backdrop of a number of new energy technologies on display. These included an 'oxy-fuel vertical combustor', which allows coal to burn more cleanly by combining air with oxygen in the combustion chamber. This technology can be combined with CO2 capture to produce near zero air emissions.

The ecoEnergy plan

The $230 million ecoEnergy Technology Initiative will be used to support new energy technologies, focusing on research and development leading to demonstration projects and commercialization. As a key component of the government's "Science and Technology" (S&T) strategy for climate change, it will involve participation of industry, universities, and provincial and territorial governments.

Most of the investment will be directed towards public-private partnerships. "Industry can do much but not all" of the necessary technology development, mainly because industry tends to focus on late-stage technologies with low investment risk, "says a statement from Natural Resources Canada (NRCan). Because of this, the government will lead in medium and long term research and development which "(1) carries a higher investment risk, (2) is essential to the public good and (3) would not otherwise be done", says NRCan.

According to the announcement, one of the fund's top priorities will relate to sustainable fossil fuel use: carbon dioxide sequestration, clean coal, and clean oil sands production are all listed ahead of renewable energy, perhaps tellingly. The rationale for this is simple: for the foreseeable future both in Canada and abroad, the majority of our energy supply will come from fossil fuels. The oil and gas industry is vital to Canada's role as an energy supplier, and the government hopes to take advantage of that position by developing 'clean fossil fuel' technologies which will can reduce domestic emissions and increase exports to countries such as India and China.

Further priorities are to be developed through stakeholder consultation, including advice from the National Advisory Panel on Sustainable Energy S&T, provincial governments, and industry. Other key areas will include hydrogen fuel cells and plug-in electric vehicles, next generation nuclear power, and bioenergy. The structure of the funding organization and the details of the program are still being worked out and will be available in April.

One key component of the funding will be the tracking of results. Projects will be "expected to lead to significantly reduced emissions of particulates, gaseous pollutants, toxic substances and greenhouse gases from the production and use of energy."

The rest of the plan..

The 'Science and Technology' is one component of the government's climate change strategy; regulation is the other. Two more announcements related to energy are scheduled over the next week, and reports indicate that the government will also establish greenhouse gas emissions intensity targets that specific industries will be required meet by 2015. This Friday, Minister Lunn will make an announcement in Victoria, BC, on renewable energy. This is expected to include a re-launch of the Wind Power Production Incentive (WPPI), which provides a subsidy of one cent per kilowatt hour for the first ten years of a wind power project. This program was also placed on hold in 2006 pending a review of all climate programs. The 2005 Liberal budget had planned a 15 year extension of the program worth $920 million, and a separate $886 million fund for other renewable energy over the same period. According to media reports, officials are hinting that the government will combine the two funds in a long term package.

Energy efficiency is a clear priority, and will be the subject of an announcement next week. Speculation is that it will deal with programs such as the EnerGuide for houses, which provides a subsidy for energy efficient house construction but was placed on hold last spring. The government has also pledged new regulations under the Energy Efficiency Act to encourage the development of efficient appliances and equipment.

What it all means…

The flurry of announcements planned for this week indicate that after a year of review and planning, the government has begun implementing concrete measures to promote environmental technologies and address climate change and air pollution.

With technology funding and fiscal measures in particular, the goal is to create a stable investment climate which will encourage the development and commercialization of technologies which provide environmental benefits. While the details of the ecoEnergy funding have yet to be established, it and other announcements should provide some certainty that the government is ready to support private industry in this area – if the government follows through on its commitment to show leadership in this regard, then the private sector will need to step up and demonstrate its own capacity for innovation.

New Environment Minister John Baird also faces a challenge in implementing the regulation needed to support climate change measures. The most immediate of these is the passing of the Clean Air Act, likely with the inclusion of specific emissions reduction targets for industry sectors.

But there are other challenges that should be met. For example, a comprehensive carbon trading regime is needed immediately. The machinery is in place and the corporate sector already primed to participate in such a market-based mechanism for dealing with climate change. Many would prefer this to a carbon tax regime.

The government needs to make it very clear to industry leaders in all sectors that greater control over greenhouse gas emissions is inevitable, and if companies can't exercise self control, the government will exert that control through tough, even handed regulation, with no favourites.

Real progress on the climate change file with these upcoming announcements will mean support for investments in clean technologies and infrastructure, and regulations which will bring about real emissions reductions. If the government can deliver on those two aspects, it will begin to address an issue that has become a priority for Canadians.

Toward a Flexible Energy Future: When the price of fuel reflects all the costs, government and industry will know where to invest.

Toward a Flexible Energy Future
by Lord Andrew Turnbull
When the price of fuel reflects all the costs, government and industry will know where to invest.

Illustration by Lars Leetaru

In most of the industrialized world, there is a growing consensus that nations must reexamine and restructure their energy portfolios. A number of factors have contributed to this awareness: increasing fuel prices, the insecurity of energy supplies, and the recognition that humanity must reduce its carbon dioxide (CO2) emissions to address global climate change. Even countries that have enjoyed steady supplies of electricity, transportation fuel, and heating fuel in the past will find it much more difficult to maintain control over those supplies in the future. Any responsible government that is not thinking seriously about its country's energy investments today — from both the public and private sectors — risks being caught cold, powerless, and immobile in the future.

But there is typically a five- to 10-year lag between an energy investment and the time the new capacity comes online. After that, countries are stuck with the facilities they have built for at least several decades. Thus, every major decision made now about energy involves a bet about the future. Because we don't know which mix of fuels will be available or most useful in the coming years, how can investments best be allocated among natural gas, coal, oil, nuclear power, renewables, or improved energy efficiency?

The debate over these choices is contentious. In my own country, the United Kingdom, there are heated arguments over whether nuclear power should be promoted or decommissioned; whether increased use of natural gas is or is not a viable option; and whether wind farms represent an ecological breakthrough or an inefficient blight on the countryside. In any given year, new energy technologies (hybrid cars, hydrogen fuel, biofuels) emerge and add to the contention. The only way that political and business decision makers can appropriately manage these options is through a flexible portfolio: not a choice about a particular mix of fuels but through an effective and resilient marketplace that can take advantage of economic principles to help us settle on the optimal combination of investments at any given time.

In policy circles, this is coming to be known as the "modified market approach." The government (or perhaps a regional political structure like the European Union) establishes a framework for energy prices. This framework incorporates the prices and costs of energy, as set by supply and demand, but also takes into account the social and ecological benefits and harms of each fuel source. Fuels that exacerbate climate change, for example, are made more expensive; fuels that reduce the danger cost less. An implied surcharge on carbon-based fuels reflects the desired CO2 reduction target. Once a rationale is agreed on, the government embeds the new framework in permits, surcharges, and regulations, after which the various technologies can effectively compete in the marketplace.

The modified market approach is a relatively recent innovation. Traditionally, governments have handled energy decisions in two ways: "Add it up" and "laissez-faire." Adding it up is a time-honored approach. Government planners assess worldwide energy needs and generation capacity, make projections for the next 20 years, calculate the gap between future demand and supply, and decide which mix of fuels to subsidize, tax, or invest in.

Flexible Portfolios
Even at its best, this approach has many shortcomings. It is static; if energy technologies, supply constraints, or demand patterns change, another plan will be needed. It is also vulnerable to lobbying, with the verdict going to whichever pressure group shouts loudest that "our favorite fuel is better than yours." And if political priorities change, the desired goals cannot be adjusted without a new plan. This makes it extremely difficult to take advantage of lower-cost opportunities, such as new technological developments, that emerge in later years.

Faced with these complexities, many governments take the "laissez-faire" approach: they leave it to the oil and power industries to govern their own investments. But this method, too, has many shortcomings. Market prices do not capture such externalities as the environmental impact of fuels, and they do not recognize the complex interdependencies among different forms of energy, the infrastructure required to maintain them, the security of supply, the needs of customers, and the uncertainties of the future.

To their credit, many governments are gravitating to the flexible portfolios of the modified market approach. In the U.K., for example, the government (controlled by the Labour Party) and the largest opposition party (the Conservative Party) agree on four basic objectives: to reduce CO2 emissions; keep the economy competitive (by reducing the price of energy); maintain security of supply; and ensure that people on all levels of society, including the poor, have heat and mobility. Both parties have encapsulated these objectives in a rationale that, when it is complete, will allow energy sources to compete and evolve, without regulators and investors having to predict in advance precisely which technologies will be adopted by the market.

For a modified market approach to succeed, there must first be a clear set of targets for the reduction of CO2 emissions. In setting the formulas that determine a nation's energy portfolio, we should favor not merely the cheapest fuels, but the optimal fuel mix that adjusts over time, operates effectively during scarcities and surpluses, produces energy when the wind blows and when it doesn't, and is independent of the vagaries of international oil politics (it must be viable whether or not a nation is on good terms with Russia, Nigeria, Saudi Arabia, Iran, or Venezuela). To accomplish this, three elements, in particular, must be reflected: the ecological impact of carbon, the variability of fuel supply, and the costs of energy security. If we understand how to factor in those elements, then all available energy sources — oil, gas, coal, alternative fuels, hydrogen, nuclear power, hydropower, and renewables — can compete on an equal footing.

Environmental Shadow Prices
In the coming years, faced with general climate change and more extreme weather patterns, every government will have to make a decision: To what levels must carbon fuel emissions be reduced to affect the rate of global warming, and by what year? No government can ignore this imperative for long. There is a growing body of opinion which (drawing on conclusions from such groups as the International Intergovernmental Panel on Climate Change and the American Association for the Advancement of Science) recognizes that human activities are contributing significantly to the dangers of global warming. Already, serious efforts to mitigate climate change are moving forward, with those political leaders who refuse to participate finding themselves marginalized; for example, a July 2006 greenhouse gas reduction agreement between U.K. Prime Minister Tony Blair and California Governor Arnold Schwarzenegger bypassed Washington completely.

The effective modified market approach must reflect the real environmental costs of different fuels. Having set a CO2 reduction target — taking into account the estimated effects of global warming on sea levels, crops, and the weather, and the destruction such effects could cause — governments must engineer a "shadow price of carbon" that delivers that target. The new framework would, in effect, modify the price of every fuel and technology, reflecting the increased risks caused by its CO2 emissions, while exempting fuels and technologies that emit little or no CO2.

The process for setting a shadow price must be transparent enough to draw open criticism from both environmental and economic experts, and robust enough to meet or incorporate that criticism without losing scientific credibility. It must also be consistent enough to enable suppliers to make informed predictions about costs and to set prices with confidence. Documentation would be required for each estimated cost — and costs would be revisited periodically to take into account changes in technology, practices, and damage assessment techniques. Priorities could no longer be determined by pressure groups demanding, for example, expansions of natural gas lines, bans on nuclear power, or restrictions on windmills.

In its approach to climate change, the E.U. has adopted a modified market system, at least in principle. The Emissions Trading Scheme (ETS), introduced in 2005, is still (as of late 2006) in the first phase of implementation. Each member country proposes a cap on greenhouse gases emitted by power plants and other major industrial sites; the E.U. approves the caps; and then companies are granted permits to operate within those caps. Carbon-profligate companies can buy more emissions rights from carbon-frugal companies, giving everyone more incentives for lowering emissions and building efficiencies.

But the ETS is an imperfect work in progress, in which political horse-trading overrides the best scientific judgment. The caps were so generous in the first year that no countries were forced to reduce total CO2 emissions — which (as many observers noted) undercut the entire purpose of the initiative. In the end, it is not clear whether the ETS will have the political will to overcome bargaining on the part of special interest groups, but only a tough stand will allow it to deliver a true shadow price for carbon that genuinely leads to the CO2 reductions required to mitigate climate change.

Because the ETS is still embryonic, most countries in the E.U. are retaining a national carbon or energy tax. This represents a significant structural difference: Trading systems, which fix the level of permitted emissions and allow the price to vary, tend to be more effective at capping emissions than tax systems, which fix the price and allow the amount of pollution to vary. Tax systems are also more prone to the arbitrariness of top-down control; the U.K.'s Climate Change Levy, for example, is a confused mixture of energy and carbon tax, levying on nuclear power, even though it is a low source of CO2.

The Price of Volatility
Emissions trading programs represent a valuable first step, but because they don't take the other uncertainties of the sector into account, they alone are not an adequate means of guiding energy investment. Volatility adds cost to any portfolio. Investors know this well; they diversify across a variety of assets, balancing their requirements for growth and security. A good modified market energy portfolio should do the same, taking into account the volatility of the availability and price of different fuels.

Natural gas, as the world has witnessed, can fluctuate enormously. In the U.K., the spot price of natural gas doubled between 2004 and 2006. Even more damaging were two price spikes, in which U.K. gas prices briefly rose about 400 percent. Importing nations, in particular, have little recourse if suppliers raise prices suddenly (as Russia's Gazprom has done) or supplies approach a natural peak (as has been predicted for oil). Other fuels are relatively stable; once reactors are built, the price of nuclear power remains relatively constant. Nuclear power can therefore take the role that bonds play in a pension fund: not necessarily the highest-yielding asset, but one that reduces volatility.

Another source of uncertainty that needs to be addressed arises from the protracted and uncertain nature of planning and licensing regulations. These are particularly damaging to highly capital-intensive options, such as the building of new liquid natural gas (LNG) or nuclear power facilities, or the recovery of heat from waste incineration. The U.K. government is proposing to address this uncertainty by allowing licensing of technologies to run in parallel with the planning process. Any resumption of nuclear construction should be preceded by agreement on a strategy for disposal of nuclear wastes (though those energy sources emitting CO2 as a waste are not required to meet an equivalent constraint). We should also insist that enough funds be allocated for waste disposal and decommissioning of plants, lodged outside the producer's balance sheet.

If nuclear power can compete with the benefit of the carbon adjustment while meeting its waste and decommissioning costs in full, then it should find a place in the energy mix. Conversely, if it is still uneconomical, it should not. And the same logic should apply to other technologies, including renewables. There is no reason why established renewable energy technologies such as wind power should receive both the preference of the CO2 adjustment and a guaranteed market share (as is currently the case in the U.K.).

Recent analysis conducted by the U.K. government shows that nuclear power would be viable over a wide range of scenarios. It would struggle to compete only if gas prices and the shadow price of carbon were both low. That combination is inherently implausible, however; it would almost certainly lead to a higher shadow price for carbon, bringing nuclear power back into contention.

During my tenure as Cabinet secretary, I saw the shortcomings of addressing the energy supply in piecemeal fashion. Although there were two attempts to write an energy policy paper, at the time no one wanted to challenge prevailing assumptions — for example, the assumption that greater energy efficiency, renewables (such as wind power), and natural gas would provide enough carbon reduction in and of themselves. Such assumptions were undermined when the price of energy shot up, and the Russians and others reminded us of the vulnerabilities of natural gas.

But as I write, a consensus is building in Europe and North America with respect to global climate change and energy security, and it is coupled with a growing sense of urgency. We now have a moment of opportunity to create a framework that enables the essential energy choices to be made — not by dictating them, but by providing open competition and building all the relevant factors into the marketplace where choices are made.

Reprint No. 06404

2100: A world of wild weather

2100: A world of wild weather
  • 18 January 2007
  • news service
  • Kate Ravilious
Climate change index, with greater changes in darker shades
Climate change index, with greater changes in darker shades

Additional number of hottest years within a 20-year period
Additional number of hottest years within a 20-year period
Additional number of wettest (+) and driest (-) years within a 20-year period
Additional number of wettest (+) and driest (-) years within a 20-year period
Where natural disasters now take their toll (from box, below left)
Where natural disasters now take their toll (from box, below left)

Think back to the hottest summer you can remember. Now imagine a summer like that every year. For those of us who are still around by the end of the 21st century, this is what we can expect, according to a new index that maps the different ways that climate change will hit different parts of the world. The map reveals how much more frequent extreme climate events, such as heatwaves and floods, will be by 2100 compared with the late 20th century. It is the first to show how global warming will combine with natural variations in the climate to affect our planet.

"We hope it will help policy-makers gain a quick overview of the scientific facts without getting lost in the detail," says Michèle Bättig of the Swiss Federal Institute of Technology in Zurich, who created the index with colleagues after talking to delegates at the 2005 UN Climate Change Conference in Montreal, Canada. The index allows anyone to compare the severity of the predicted effect of climate change on a chunk of the Amazon rainforest, for example, with its effect on a corner of Antarctica.

The results are presented on a global map (see top image), in which the areas experiencing the greatest changes are shown in the darkest shades. Swathes of the tropics and high latitudes are coloured a foreboding brown, signifying the most marked changes.

Perhaps the most startling feature is how few areas remain unscathed. "This reinforces what much of the piecemeal climate science is telling us - that many places will face severe challenges," says Neil Adger of the UK's Tyndall Centre for Climate Change Research at the University of East Anglia in Norwich, Norfolk. In the coming decades people in these areas could find it difficult or impossible to adapt to the changed conditions, he adds.

For many parts of the world it seems this trend is already under way. Climate scientists announced last week that 2006 has been the hottest year on record for the US, topping nine years of almost continuous rises. Meanwhile, Europe experienced severe heatwaves in both 2003 and 2006, and for the UK 2006 was the warmest year since records began. Nor does it look as if the mercury is going to stop rising. In an energy technology outlook study published last week, the European Commission warns of stark changes for EU countries over the coming century, including shrinking forests, floods, drought and the drying out of fertile land - unless radical steps are taken to combat climate change.

Yet in a global context, even these dramatic changes seem relatively modest. On Bättig's climate change index map Europe, the US and Australia are coloured in shades of yellow and orange, putting them at around 6 or 7 on the scale. Parts of South America's Amazon rainforest and Africa's Congo basin fare much worse, with a predicted climate change index of around 11 (Geophysical Research Letters, DOI: 10.1029/2006GL028159).

The index was calculated from nine separate indicators of climate change. These included years that are hot, dry or wet overall, and also those in which the months of June, July and August, or December, January and February, would be extremely warm, dry or wet. Bättig and her colleagues divided the world into squares measuring 375 by 375 kilometres, and for each indicator they identified the extreme climate events that in the period 1961 to 1990 would have been expected to occur in 1 year in 20.

Using three different global climate models, each based on a mid-range forecast for greenhouse gas emissions, they computed the likely change in frequency of these extreme events during the period 2071 to 2100. The changes were then weighted to provide a single number between 0 and 19 for each grid square. A value of 0 equates to all nine climate indicators remaining as 1-in-20-year events, whereas a value of 19 equates to all climate indicators becoming annual events.

"It is a very striking graphic," says Chris West, director of the UK Climate Impacts Programme at the University of Oxford. While other climate change indices have compared changes in average temperature or precipitation, this is the first global index based on climate extremes. "It focuses the debate on the big events we ought to be worrying about," says Tom Downing of the Stockholm Environment Institute and author of The Atlas of Climate Change.

The new index has its limitations. "Places that become hotter will face different problems to places that become wetter, but the index implies that they have the same level of risk," Downing says. Bättig has addressed this problem with separate maps for each climate indicator. The first of these, representing additional hottest years, shows the world in an ominous deep red (see Map). When it comes to overall temperature, 1-in-20-year temperatures are set to become annual events by the end of this century. "What we take now as a surprise will be normal", says Downing.

Meanwhile, Antarctica and the Arctic can expect exceedingly wet years to become 13 times more likely, while tropical regions like the Amazon rainforest and the Congo basin will suffer droughts around 13 times more frequently (see Map). Rainfall in places in the middle, like Australia and the southern US, is expected to remain fairly close to what it is now.

Where natural disasters now take their toll

Climate change is not the same as climate impact, as changes in temperature and precipitation will affect people in some regions far more than others. For example, sub-Saharan Africa is a drought hotspot, while south and south-east Asia are vulnerable to storms and flooding. Any changes in climate here could affect people more severely than, say, those in Europe.

Art Lerner-Lam and colleagues from Columbia University in Palisades, New York, have sketched out which natural disasters pose the greatest threat to life on a global map of their own (see bottom image, right). They produced their map by combining data on hazard frequency and intensity from the recent past with population density, GDP and geographical factors such as land use. This has already influenced organisations such as the World Bank in deciding which regions should be prioritised for emergency lending.

The next step will be to overlay the extent of climate change, as revealed by Bättig's index for example, and see how this affects the frequency and severity of future hazards. "We are working on this right now," says Lerner-Lam.

From issue 2587 of New Scientist magazine, 18 January 2007, page 6-7


Europe creates attractive clean energy scene

Europe creates attractive clean energy scene
By James Kanter
Tuesday, January 16, 2007



Making solar panels on the cloudy Welsh coast may seem an odd choice for a politician turned investor like Robert Hertzberg, who hails from a sunny and environmentally aware state, California, and hobnobs with Governor Arnold Schwarzenegger.

But a commitment by European governments to budding clean-energy entrepreneurs is creating a more welcoming environment than in America, where erratic support and onerous financial rules have given pause to some start-ups and investors.

"California does have this great image," said Hertzberg, a former speaker of the California Assembly and the co- founder of an investment firm, Renewable Capital. "But Europe still is much greener than anywhere in the United States, by several orders of magnitude."

Besides, Hertzberg said, his thin and flexible solar panels even work in overcast conditions. "Hey, don't you get it? It works in the rain!" he likes to tell the bemused Welsh.

As with other rages before it — consider the stampede into Internet stocks in the 1990s — a new wave of interest is sweeping ventures offering energy from nonpolluting sources.

Small incubator funds like Hertzberg's are racing against cash-rich venture capital firms and giant utilities to build up portfolios of projects that promise to harness energy from renewable sources like the sun and wind, as well as from tides, agriculture and geothermal heat. Behind the rush are hopes of vast returns for businesses that perfect alternatives to fossil fuels, as governments seek to curb climate change and secure new supplies of energy to meet rising demand.

Hastening the transformation in Europe is the Kyoto Protocol, an international accord aimed at stabilizing the concentration of greenhouse gases in the atmosphere. The Bush administration rejected the Kyoto accord in 2001 as too expensive.

Venture capitalists and private equity investors in North America have been more bullish, providing $3.5 billion to clean-energy developers in 2006, roughly triple the amount raised in Europe, the Middle East and Africa, according to New Energy Finance, a research firm based in London.

But Ken Bruder, executive director of New Energy Finance, said those numbers were an unreliable guide to the overall development of the sector. He said ready access to green-minded consumers and long-term government support would do most to create fertile territory for generating profits.

"Setting up power lines to reach wind and solar farms is a major task and not accomplished overnight," Bruder said. "Europe may be doing a better job than America in setting up these new infrastructures."

Another incentive for clean energy companies to locate in Europe is the lighter regulatory touch for publicly listed companies. More than half of the world's 22 most valuable publicly traded wind and solar companies are based in Europe and listed there, according to Jefferies Group, an investment bank.

Clean-energy companies raised about $4.4 billion on European stock markets in 2006, about four times the amount raised in North America, according to New Energy Finance.

Europeans have long paid more than Americans for their energy as a result of higher taxes, a factor that helped spur research and development in competing wind and solar technologies after energy ran short in the 1970s.

Among the most prominent companies to have emerged in Europe is Vestas, a Danish company supplying turbines that generate 35 percent of the electricity worldwide that comes from wind power.

But Vestas had a loss of €192 million in 2005, or $248 million at current exchange rates, on €3.6 billion in sales, partly because of weak results in North America. Rebates on wind power have lapsed several times in the United States, creating what Soren Madsen, a Vestas sales executive, called "wild swings" in demand.

Vestas has forecast improved profit margins this year, and its shares rose about 130 percent in 2006 — a sign that the drive for clean energy and alternatives to oil is pushing up valuations.

Apax Partners, a global buyout firm, multiplied its initial investment of €11.5 million by 27 times when it sold most of its stake in the German solar company Q-Cells from October 2005 to January 2006.

Investors also have welcomed moves by large utilities to expand into renewable energy.

Shares of EDF Énergies Nouvelles, a unit of the French power company Électricité de France with extensive wind operations, were more than 30 times oversubscribed during an offering in November. The stock rose 18 percent on the first day of trading.

Behind the attractiveness of many of these ventures is politics.

The European Union has imposed limits on pollution generated by dirty industries like coal-fired electricity generators, helping to create openings for new kinds of energy companies. Many European governments also back the use of new technologies with generous subsidies.

In Germany, for example, consumers who sell renewable energy like solar power to the central electricity grid are offered attractive tariffs. That helps consumers repay the cost of expensive new equipment like solar cells.

Countries like Britain, France and Norway also have adopted aspects of that model, making renewable energy viable and creating practical incentives for the switch to a low-carbon economy.

"You can't really make a comparison with the United States," said Mark Kerr, director for oil, gas and power at 3i, a buyout firm based in London. "There is a huge amount of public and government support for renewable energy across Europe."

Kerr said 3i had invested about €100 million over the past 12 months in Gamesa, a Spanish company that services wind turbines, and Electrawinds, a Belgian company operating wind farms and other ventures, including a plant in Ostend that turns animal fats into electricity. All those projects, Kerr said, will continue to depend directly and indirectly on subsidies for profits in the coming years.

Hertzberg, the Californian, said he did not come to Wales for the subsidies — at least not directly.

But he credits the commitment of European governments to renewable energy for making the region a more promising place to whip up investor interest in his latest venture, called G24i.

"Kyoto here is the real thing," he said. "The financial markets and those who control the big funds understand the importance of renewable energy."

Hertzberg chose a site near Cardiff, the Welsh capital, partly because it is within easy reach of the burgeoning community of financiers in London who cover markets for trading emissions credits and who closely track companies involved in clean technologies.

Hertzberg eventually wants to list G24i on a stock exchange like the London Stock Exchange's AIM, which has become a hub for renewable energy companies.

To get sales rolling, he plans to sell inexpensive devices in poor regions of Africa and India bundled with his solar panels that could charge a cellphone or power a light bulb.

Hertzberg declined to say how soon G24i would be profitable — a reminder that many renewable energy ventures will have to prove that their business models work.

Shares of Solar Integrated Technologies, a Los Angeles-based company co- founded by Hertzberg that makes roofing systems containing solar cells, have lost 78 percent of their value since a public listing on the AIM in May 2004.

Hertzberg sold his stake in that company in late 2003. He ran unsuccessfully for mayor of Los Angeles in 2005. Hertzberg, a Democrat, also has advised Schwarzenegger, the Republican California governor.

In fact, only 4 of 30 clean energy stocks on the AIM have a history of profitability, and the stocks are volatile, according to Simon Gottelier, an investment manager at Impax Asset Management in London. Even so, clean-energy companies on the AIM gained 14 percent last year, outperforming the overall AIM market, which rose 2 percent.

"There is question over whether there is a bubble, or has been a bubble," said Jens Lapinski, an analyst at Library House, a research firm in Cambridge, England. "All the venture capital houses in London still are asking themselves, 'Is this the big new thing?'"

But many analysts said those risks should be less of a concern in Europe, where the political commitment to renewable energy is strong and where government subsidy programs tend to be guaranteed for long periods.

"There's probably a lot of stupid money out there finding bad projects," Bruder of New Energy Finance said. "But that may turn out to be more of an issue in the United States."

Banks are urged not to finance coal power: A coalition of environmental groups is demanding that banks reject loan requests for projects that emit high rates of greenhouse gases, which contribute to global warming

Banks are urged not to finance coal power
By John Donnelly
The Boston Globe

Tuesday, January 16, 2007



A new front in the fight to slow down global warming follows trails of money, not wisps of polluting chemicals, straight to the doorsteps of banks.

A coalition of environmental groups is demanding that banks reject loan requests for projects that emit high rates of greenhouse gases, which contribute to global warming. The groups say they have won commitments from more than a dozen banks in the last few weeks to turn away from supporting coal-fired electric plants.

But because of the financial potential, several banks remain bullish about underwriting energy projects, including those that emit high rates of greenhouse gases.

Now, the issue is coming to a head in a plan by the Texas utility TXU Corp. to build 11 new pulverized-coal power plants at a cost of $11 billion. The plants, most of which would be built on the cattle-grazing plains of central Texas, would release an estimated 78 million tons of carbon monoxide per year, the equivalent of the exhausts of 14 million automobiles.

At the moment, three banks -- Merrill Lynch, Citigroup, and Morgan Stanley -- have agreed to arrange TXU's financing, and are trying to persuade investors to buy in.

Banks' moves are under scrutiny as the United States is undergoing a resurgence in proposals to build coal-fired plants, amid a growing awareness that climate change could soon disast rously affect the earth.

"That's why the lending of money to these projects is coming to a head here in the United States," said Dan Bakal , director of electric power programs for Ceres, a nonprofit group that aims to persuade investors to back environmentally friendly projects.

Bakal and other environmentalists believe that coal-fired energy plants pose not only environmental and reputational risks to banks, but financial hazards as well. With federal climate-change legislation expected to be approved in coming years, they argue, the plants could be faced with costly new levies and pollution controls.

Just one US bank -- Bank of America, which more than two years ago bought FleetBoston -- has committed to cut back all its funding of energy projects that produce large quantities of greenhouse gases. In its energy lending portfolio, Bank of America hopes to show a 7 percent reduction in its investments' greenhouse gas emissions .

"We are changing the mix of our loan portfolio, and adding customers who are using renewable energy resources," said Eloise Hale , a Bank of America spokeswoman. "We're applying good fiscal practices to good environmental behavior, and routinely asking them about their greenhouse gas emissions." She declined to say whether Bank of America would be involved in funding the TXU project, citing confidentiality.

Rainforest Action Network , an environmental group based in San Francisco, provided two faxes from banks in the Netherlands, Rabobank and Finance for Development, that said they would not invest in the TXU plan. A spokesman for a third bank, the Bank of Montreal, said in an e-mail it also will not fund the project.

The Bank of Montreal , wrote spokesman Ralph Marranca , "is committed to the principles of sustainable development and, in particular, to the belief that the quality of our lives improves when economic growth is integrated with respect for the environment."

But not all banks agree that coal power plants would run afoul of their environmental principles.

Forty-five banks have signed the Equator Principles , a set of guidelines used to determine the social and environmental risks associated with a project. Citigroup , one of the three banks arranging the financial package for the TXU project, has signed the principles.

The two other TXU backers , Morgan Stanley and Merrill Lynch, declined to comment.

Shawn D. Miller , Citigroup's director of environmental and social risk management, said in an interview last week that he could not discuss the TXU project, but added that Citigroup applies the Equator Principles to every loan request that has capital costs exceeding $10 million.

"For project financings, we go through a pretty judicious process to make sure Citigroup is investing in something that is not just meeting relevant laws and regulations, but is also meeting our internal robust standards," he said.

Asked how a coal power project would meet Citigroup's standards, Miller replied, "Currently, if a coal-fired power plant in the United States receives its environmental permits, receives an OK from relevant environmental authorities, goes through a public commenting process that allows locally-affected people and civil society to give their own point of view, and goes through our internal and independent environmental and social review, then I think it is meeting a robust standard."

Several banks also have vowed to reduce their own emissions of greenhouse gases. For instance, Citigroup, which owns or rents 13,000 properties, has pledged to cut its emissions by 10 percent by 2010; Merrill Lynch aims for a cut of 2 percent a year.

Tim Greeff , a global warming specialist at the Natural Resources Defense Council , a Washington, D.C.-based advocacy group, said Citigroup's internal and external environmental policies were not consistent. "It is sort of like allowing [tobacco-maker] Philip Morris to claim they are fighting tobacco addiction by asking their own employees not to smoke, while continuing to sell cigarettes to everyone else," Greeff said.

A decision by Texas regulators on the coal plants is still probably several months away.

TXU spokeswoman Lisa Singleton said the environmentalists' campaign was not yet interfering with the projects. "At this point, we're not concerned," she said. "We're continuing discussions with everybody. It's a complex issue, balancing the need for power with environmental concerns." The project, she said, would add 9,100 megawatts of new energy.

And another TXU spokesman, Thomas Kleckner , said that "cutting-edge technology" would result in emissions that would be "80 percent cleaner than today's average coal plant."

But Dana Clark , a global finance campaigner for the Rainforest Action Network, said her group is asking banks if they "really want to be associated with this massive increase of greenhouse gases that undermines everything?"

Few bright prospects after the Sun King: if BP had demonstrated comparable leadership and commitment to process safety, that leadership and commitment would likely have resulted in a higher level of process safety performance in BP's US refineries

Few bright prospects after the Sun King

Nils Pratley
Wednesday January 17, 2007

The Guardian

The passage where Lord Browne will have felt the twist of the knife is on page 67 of the Baker report, just after the authors note that BP's chief executive was named by the Financial Times as the fifth most respected leader in the business world.

"Browne's passion and commitment for [addressing] climate change is particularly apparent," it says. "In hindsight, the panel believes that if Browne had demonstrated comparable leadership and commitment to process safety, that leadership and commitment would likely have resulted in a higher level of process safety performance in BP's US refineries."

In the context of the US oil industry, where attitudes to climate change are ambivalent, this accusation is almost gratuitous. Baker is not quite saying the "sun king" overdid the flim-flam on green issues and forgot about protecting his workers, but the remark is designed to wound. American oil executives, variously embarrassed and resentful of the way BP and Shell have spoken about the need to invest in alternative fuels, will lap it up.

It is one reason why one can't suppress some sympathy for Browne as he is mauled. As the report's introduction also notes: "We are under no illusion that deficiencies in process safety culture, management, or corporate oversight are limited to BP." Quite.

Unfortunately for Browne and BP, sympathy is irrelevant. The corporate game is unforgiving, and the more Browne insists the timing of his resignation as chief executive was unrelated to the publication of the Baker report, the less believable it sounds. It would have been impossible, surely, for him to survive another two years at the top in these circumstances.

BP, of course, cannot walk away. Far from being the end of the story of the Texas City disaster, the Baker report may simply mark the moment we start to think about "new BP". It is not only the lawsuits that could be expensive. Substantial sums must also now be invested in safety procedures; estimating the annual bill is almost impossible at this point, even if BP appears to have implemented many of Baker's major recommendations already.

But major acquisitions and deals are now effectively off limits, a penny that is yet to drop in the City, where too much wishful thinking imagines a piece of financial wizardry can rescue shareholders. Forget it. BP's overwhelming priority is to demonstrate that it is fit to run assets that many politicians in the US would regard as strategic. How quickly can BP's reputation be restored? It's anybody's guess.

The nightmare would be a piece of bad luck. BP has accepted its share of blame for Texas City, but risk can never be eliminated entirely when you are producing and refining volatile substances. Reports are also due into BP's oil spill in Alaska, its role in alleged propane trading irregularities, and other issues.

In other words, it is easy to imagine ways in which BP's sea of troubles become overwhelming. It is a company desperately in need of some friends in high places. James Baker was not one.

Borrowed time

"Dear chancellor, I've done my bit. I've put up interest rates three times and shocked 'em while they were still enjoying the January sales. Now the price of oil is falling. As long as it stays that way, we'll be OK. Let's hope the Americans don't do anything silly, like bomb Iran. All the best, Merv."

The worst did not happen yesterday. Inflation hit - but critically did not breach - 3% in December so Mervyn King, governor of the Bank of England, was not obliged to explain an overshoot in inflation. It could still happen in coming months, of course. If it does, optimists like to think the version above would reflect the Bank's view, if not its language.

On this view, the rate of inflation will not get much worse than 3%. Retailers' price rises in December were unhelpful, but may just be a prelude to widespread "50% off" offers this month on big-ticket items like sofas. Soon, British Gas and its rivals will be reducing their prices to reflect the falling price of oil. By the autumn, think many economists, target inflation will be back at 2%.

Unfortunately, King and his colleagues cannot afford to live so hopefully. Their obsession has been the need to avoid the "second round" effects of inflation, such as high pay settlements. At the moment, RPI, the measure of inflation that the world outside the Treasury follows, is 4.4%. It has doubled in 12 months and is more than twice the level of target inflation. Early reports suggest pay settlements this month are running at 4%, and the bank will inevitably be alarmed.

It cannot afford to wait for British Gas to cut prices. Another rate rise - probably next month but possibly in March - is odds on.


Technologies key to climate-energy vision: The options could include sustainable coal and gas technologies, fuel cells and hydrogen, renewables, biofuels and bio-refineries

Technologies key to climate-energy vision

ENDS Europe Daily, 10 January 2007- The European commission has put its faith in technology to help achieve the new climate and energy goals announced on Wednesday.

"New technology can be driven by political change, but we should not forget that technology can also lead to political change," said energy commissioner Andris Piebalgs in Brussels.

The commission will issue a "strategic energy technology plan" before next spring. This will include a range of large-scale initiatives from which member states will be able to "pick and choose" according to their preferred energy mix.

The options could include sustainable coal and gas technologies, fuel cells and hydrogen, renewables, biofuels and bio-refineries, it says.

Technological advances will be crucial to achieving the commission's vision of "near-zero emissions from coal after 2020", the title of another policy paper. It proposes that all new coal-fired power plants should operate with carbon capture and storage (CCS) by 2020.

Plants built before then should be made "capture-ready". The commission will also look to include CCS in the EU emissions trading scheme as part of its scheduled 2007 revision of the instrument.

In a "roadmap for renewables" the commission proposes that the sector should account for 20 per cent of all EU energy by 2020. Under legislation it will propose this year, member states would be asked to take on differentiated and binding national targets to achieve the overall goal.

Each would also have to specify detailed objectives and measures in national action plans. The EU executive estimates that meeting the 20 per cent target will cost between €10-18bn a year between 2005 and 2020.

New technology will also be needed to meet a proposed binding target for biofuels of 10 per cent of the overall transport fuel mix by 2020. The development of second generation biofuels will be a key priority, along with advances in car technology to adapt to fuels containing higher levels of biofuels.

Many analysts had been expecting a 14 per cent target for biofuels, but a progress report accompanying the roadmap argues that, while a higher target is feasible, "a more cautious approach should be adopted when fixing a binding, minimum target".

The commission also reiterated its commitment to a 20 per cent improvement in energy efficiency by 2020 – a challenge that demands technological as well as political solutions. The commission estimates that meeting the target could save 780m tonnes of carbon dioxide emissions, equivalent to a 13 per cent cut in absolute CO2 emissions.

The commission sees the development of nuclear technologies as central to achieving the EU's energy and climate goals. Its "nuclear illustrative programme emphasises the "important contribution" of nuclear energy to mitigating climate change. Driving advances in safety and disposal are top of the commission's agenda, with proposals for a new high level group to "eventually" develop new EU rules in this area.

Lloyd's boss demands action on climate change: Governments and businesses must act now against climate change, and the United States needs a bigger public debate about its risks -- "Today the insurance industry faces the prospect of a 100-billion-dollar mega-catastrophe twice the size of Katrina"

Lloyd's boss demands action on climate change

AFP, 12 January 2007 - Governments and businesses must act now against climate change, and the United States needs a bigger public debate about its risks, the chairman of the Lloyd's insurance market said Friday.

Peter Levene warned that vast storms bigger than Hurricane Katrina are likely to batter the United States in coming years despite a relatively calm 2006 Atlantic hurricane season.

"Today the insurance industry faces the prospect of a 100-billion-dollar mega-catastrophe twice the size of Katrina," Levene said in a speech at Washington's National Press Club.

Levene, formerly a skeptic on climate change, runs the world's biggest insurance market at London-based Lloyd's.

Lloyd's manages some of the world's most complex insurance risks, from celebrity body parts to oil rigs, and extends billions of dollars in global coverage.

The market expects to pay out six billion dollars in claims related to the record-setting 2005 US hurricane season, largely due to the devastating impact of Katrina on southern states like Louisiana and Mississippi.

Levene said Lloyd's is planning for fresh disasters, but questioned whether US lawmakers are seriously heeding the dangers posed by climate change.

"We cannot risk being in denial on catastrophe trends. So, two years after Katrina and one year away from a national (US) election, where's the public debate on catastrophe trends?" he said.

"Over the coming years, with warmer sea surface temperatures making wind-storm landfall more likely, particularly destructive storms are a likely scenario."

The insurance market chief called for tougher US building codes in coastal areas and said public awareness should be raised about the risks of more volatile weather patterns.

"We can expect the storm season to lengthen, and we will be at risk over a wider geographical area than ever before."

Levene argued against "political interference" in the pricing of risk premiums and expressed confidence that most "natural perils" can be insured if free market forces are allowed to prevail.

However, large US home insurers including State Farm and Allstate are refusing new business along wide stretches of the US east coast amid mounting concerns about bigger hurricanes.

Allstate is not issuing new homeowner policies in New York, where millions of people live just above sea level, and some insurers are refusing to pay Katrina claims, arguing that damage was caused by flooding instead of wind.

Generally, only the federal government offers US homeowners insurance against flood damage.

Levene criticized US regulations which he said discriminate against foreign insurers, requiring them to post collateral equal to 100 percent of their gross liabilities. In Lloyd's case this equates to over eight billion dollars.

"Domestic reinsurers have no such obligation," Levene chafed, calling for such "discrimination" to be ended.

The administration of US President George W. Bush has abandoned the Kyoto Protocol against climate change, but Levene said many state and local governments were working to reduce their own carbon dioxide (CO2) emissions.

Levene said addressing climate change is good for the environment and a company's earnings, citing an initiative by US chemical group DuPont to slash its emissions of warming gases and lower its energy costs.

"Even if we stop all man-made CO2 emissions now, we would still endure 30 years of warming before the effects take hold," Levene said.

"But we must not use that as an excuse not to act. History and future generations will surely not forgive us if we do."

The Atlantic hurricane season typically runs from June to November.

EU defends leadership in 'world war' on climate change

EU defends leadership in 'world war' on climate change, 12 January 2007 - 'A war economy is needed' to reduce global warming emissions, according to the EU's environment chief who said new measures will be tabled 'shortly' to tackle car pollution and expand the carbon trading system.


The Commission on Wednesday (10 January) invited EU members to endorse a 20% reduction in greenhouse-gas emissions by 2020 in a bid to reduce its dependency on imported fuels and trigger a new "industrial revolution".

But the proposal was criticised by UNICE, the European employers association, which said that unilateral action "could jeopardise the future of business within the EU".


Environment Commissioner Stavros Dimas defended the Commission's ambitious new proposals to reduce emissions of global warming gases in a bid to allay business fears that a unilateral move by Europe could seriously hurt the economy.

"Our proposals are not easy," Dimas told a group of British MPs in London on 11 January. But he said they were "essential" if the economic damage of climate change are to be kept "within manageable limits", as shown by the Stern review in the UK.

"Damaged economies, refugees, political instability, and the loss of life are typically the results of war. But they will also be the results of unchecked climate change," Dimas said.

"It is clear that the fight against climate change is much more than a battle. It is a world war that will last for many years."

"It is like a war because to reduce emissions something very like a war economy is needed," Dimas added, saying that benefits would come in terms of "increased energy security and public health". The Commission, he continued, is already working on new measures. These include:

  • Extending the EU carbon trading scheme "to cover more sector and more gases" and linking up to similar schemes across the world such as Japan's voluntary scheme and the emerging state-based scheme in the United States;
  • tackling car pollution , saying that the EU will review "shortly" its strategy on CO2 emissions from new vehicles. "It is clear that further actions will be needed to reach our 2012 target of average emissions of 120 grams per kilometre," Dimas said, adding that "the Commission will propose legislation later this year".
Meanwhile, in Brussels, Commission President José Manuel Barroso met with a group of 15 business leaders telling them it was "to their advantage to lead and not to be led" on the way to a low-carbon economy.

Most of them agreed. "Climate change is business and will lead to new jobs," said Lars Goeran Joesfsson, chief executive of Swedish power company Vattenfall.

"Combating climate change … is a business opportunity," agreed Fulvo Conti from Enel, saying the Italian utility and other energy groups were already investing billions in energy research and energy-efficiency.



EU actors positions

Asian nations make energy pledge: Sixteen Asian nations pledged Monday to work together to save energy and develop new supplies in order to cut the region's reliance on expensive oil imports.

Asian nations make energy pledge

AFP, 15 January 2007 - Sixteen Asian nations pledged Monday to work together to save energy and develop new supplies in order to cut the region's reliance on expensive oil imports.

Winding up a half-day summit, they signed an energy accord vowing to reduce dependence on traditional fossil fuels, develop alternatives such as biofuels, open up their energy markets and work to cut back greenhouse gas emissions.

While the pact does not set target dates, and largely repeats a similar statement they issued at the last East Asia Summit in December 2005, leaders underlined the importance of taking urgent regional action on energy.

Chinese Premier Wen Jiabao, whose country is one of the world's biggest consumers of energy, urged nations to "develop a new thinking" to help meet the region's needs in the years to come.

"We are prepared to take an active part in international cooperation to ensure stability of the regional and global energy market," he told the summit.

The accord acknowledges that "fossil fuels underpin our economies and will be an enduring reality in our lifetime" and says the region should consider fuel stockpiling to help manage the volatility of prices and demand.

But it highlights the problems of limited reserves, unstable world oil prices, worsening environmental problems and an urgent need to counter global warming and climate change.

"China will continue to rely on itself to meet its energy need and priority will be given to raising energy efficiency," Wen said. "Our goal is to meet the target of a 20 percent reduction

in energy consumption per unit of GDP in 2010."

The Cebu Declaration on Energy Security was issued at the end of the East Asia summit, which groups the 10-member Association of Southeast Asian Nations with Japan, China, South Korea, India, Australia and New Zealand.

The declaration stresses the need to strengthen renewable energy development such as biofuels and promote open trade and cooperation in the sector.

"Renewable energy and nuclear power will represent an increasing share of global supply," it says.

Biofuels, natural gas, nuclear power for selected countries, hydro-electricity and renewable energy should reduce reliance on traditional energy sources, it says.

The pact reaffirms the bloc's collective commitment to energy security, saying reliable and affordable supplies are essential for strong and sustainable growth.

It calls on nations to "explore possible modes of strategic fuel stockpiling" including "multi-country and or regional voluntary and commercial arrangements."

Calls to reduce dependence on oil intensified after prices surged to historic peaks last year. While prices have dropped since, their continued volatility -- owing in part to geopolitical tensions -- remains a concern.

South Africa considers biofuel for renewable energy: Potential crops include maize and sugarcane to create ethanol, as well as soya beans and sunflower for biodiesel

South Africa considers biofuel for renewable energy

SciDev.Net, 9 January 2007 - The South African cabinet has approved an ambitious biofuels industrial strategy, announced the Department of Minerals and Energy this week (8 January).

It is hoped that the draft biofuels plan will meet 75 per cent of the country's renewable energy target, in compliance with the Kyoto Protocol on climate change, which encourages nations to reduce their reliance on fossil fuels.

According to the national Engineering News magazine, the fuels will come from a diverse range of sources. Potential crops include maize and sugarcane to create ethanol, as well as soya beans and sunflower for biodiesel. Government spokesperson Themba Maseko suggested that as many as 55,000 jobs, many in the agricultural sector, could be created through the use of biofuels.

The plan also suggests expanding the existing fuel tax exemption for biodiesel to include bioethanol.

Reports said a type of hedge fund could deal with the knock-on effect from changing crude oil prices. In periods when prices were high, biofuels producers may pay a certain amount of profits back to the treasury. In exchange, they could receive partial government protection at times of low oil prices.

A biofuels task team will report back to the cabinet in May following consultations with other stakeholders.

South African synthetic fuels company, Sasol, which pioneered the use of petrol and diesel from coal and natural gas, announced their participation late last year (November 2006). In a joint effort with the government's Central Energy Fund they will build a biodiesel production plant based on soya beans.

The biofuels announcement comes ahead of the department's Clean Development Mechanism (CDM) conference in Johannesburg this month.

Last year, South Africa registered a project to convert coal-fired brick-baking kilns to natural gas and in 2006 launched a low-cost-housing energy upgrade project in Cape Town, Africa's first project in terms of the CDM to be recognised by the UN.

U.S. emissions cap to spur modest price hikes for fuels, electricity -- EIA

U.S. emissions cap to spur modest price hikes for fuels, electricity -- EIA

Greenwire, 11 January 2007 - Draft Senate legislation to regulate greenhouse gas emissions through a cap-and-trade system would raise the cost of burning coal and provide an incentive to lower energy use and shift away from fossil fuels, particularly in the electric power sector, the U.S. Energy Information Administration says in a new analysis.

Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) and other lawmakers who requested the EIA analysis say it proves greenhouse gas emissions can be curbed at a relatively low cost without harming the economy.

Bingaman's bill would require suppliers of fossil fuel and other regulated sources of greenhouse cases to submit government-issued allowances based on their products' emissions. Among gases covered in the analysis: energy-related carbon dioxide, methane from coal mining, nitrous oxide from the production of nitric and adipic acids and hydrofluorocarbons.

The legislation would establish annual emissions caps based on targeted reductions in greenhouse gas intensity -- defined as emission per dollar of gross domestic product. The targeted reduction of greenhouse gas intensity would be 2.6 percent annually between 2012 and 2021, then increase to 3 percent per year beginning in 2022.

Finally, the proposal calls for allocating 90 percent of the allowances for free to affected groups, but the portion of allowances to be auctioned would grow from 10 percent in 2012 to 38 percent in 2030.

To limit the program's cost, it includes a "safety valve" provision that would allow regulated entities to pay a pre-established emissions fee in lieu of submitting an allowance.

In its analysis, EIA considered both the phased auction case and a full auction case, in which all allowances would be auctioned beginning in 2012.

Among EIA's key findings are that in the early years of the program, when allowance prices are relatively low, reductions in greenhouse gas emissions outside of the energy sector would the predominant source of emissions reductions. By 2020, emissions reductions other than energy-related CO2, would account for almost 66 percent of total reductions.

By 2030, however, the higher allowance prices would lead to a significant shift in energy decisions, particularly in the energy sector, according to the analysis. By then, the reduction in energy-related CO2 would account for almost 58 percent of total greenhouse gas emissions reductions.

Including allowance costs, the average delivered price of coal to power plants by 2020 would increase from $1.39 per million British thermal units (Btu) in the reference case to $2.06, an increase of 48 percent, EIA says. The increase would be more dramatic over the ensuing decade; by 2030, the delivered price of coal would increase from $1.51 per million Btu to $2.73.

Reaction from senators

The cost of allowances would presumably be passed onto consumers in most cases. EIA found that electricity prices would be somewhat lower in the phased auction case than in the full auction case because the full auction case would provide a portion of the allowances to the electric power sector for free.

Electricity prices in 2020 would be 3.6 to 5.6 percent higher than in the reference case in the phased and full auction cases, respectively, EIA found. In 2030, electricity prices would be 11 and 13 percent, respectively, above the reference case level.

Further, EIA estimated that, relative to the reference case, annual per household energy expenditures in 2020 would be 2.6 percent (about $41) higher in the planned auction case and 3.6 percent higher ($58) in the full auction case. A decade later, projected annual per household energy expenditures would range from 7 percent to 8.1 percent higher in the two cases, a range of about $118 to $136, according to the analysis.

Bingaman's office seized on the findings, declaring: "Mandatory steps to reduce greenhouse gas emissions can be achieved at a very low cost to American households and without harming the U.S. economy."

Bingaman added he plans to hold a committee hearing on the analysis and pass bipartisan emissions-capping legislation this year.

The other senators who requested the EIA analysis were Sen. Arlen Specter (R-Pa.), Mary Landrieu (D-La.), Lisa Murkowski (R-Alaska), Ken Salazar (D-Colo.) and Richard Luger (R-Ind.).

"Climate change is a serious issue that we need to address," Murkowski said in a statement. "As we consider placing mandates on greenhouse gas emissions, we must understand the impacts that such action will have on our economy."

A spokesman for Sen. James Inhofe (R-Okla.), an outspoken critic of emissions-capping legislation and the Environment and Public Works Committee's ranking member, did not return calls seeking comment.

Impact on wholesale energy prices

Among EIA's other key findings are that in the phased auction case, wholesale energy prices are projected to rise steadily. By 2030, calculating inflation, energy prices would be about 12 percent higher than the reference case levels. This would translate into 8 percent higher energy prices at the consumer level.

In the phased auction case, discounted gross domestic product (in year 2000 dollars) during the 2009-2030 period would be $232 billion less than in the reference case, while discounted real consumer spending would be $236 billion lower.

Further, in the phased auction case, real GDP is projected to be $59 billion lower than in the reference case, while aggregate consumption expenditures would be $55 billion lower. The analysis attributed the reductions in GDP and consumption to the rise in energy prices and the resulting decline in personal disposable income.

Icelandic firm to invest $1 billion in geothermal

Icelandic firm to invest $1 billion in geothermal

Environmental Finance, 11 January 2007 - An Icelandic investor, a bank and an engineering firm have set up a company with the intention of raising $1 billion to invest in geothermal energy around the world.

Geysir Green Energy has already raised $100 million from its founders, FL Group, an investment company with 239.5 billion Icelandic krona ($3.3 billion) in assets, Icelandic and Norwegian bank Glitnir and engineering consultants VGK Hönnun.

Ásgeir Margeirsson, chief executive of Geysir Green Energy, said that it will take about three years to raise $1 billion, but the firm plans to begin investing "within a matter of weeks".

It will invest in geothermal projects at all stages of development, as well as buying up companies and acquiring existing geothermal plants from utilities.

Margeirsson said that the company will focus on investment opportunities in Asia, Europe and the Americas.

He said that, as well as financing, the company will provide technology and know-how, "based on the Icelandic experience, which is vast". Margeirsson was previously a director at Reykjavik Energy, the municipal utility for the Icelandic capital.

Iceland is a world leader in geothermal energy, which involves mining heat from the Earth. The country has a high concentration of volcanoes and hot springs, which it taps to supply 85% of houses with heat, according to Reykjavik Energy.

Runólfur Maack, managing director of VGK Hönnun, said: "Icelandic engineers have had plenty of ideas for development in this area in the past, but have lacked the financial strength needed to implement them. Geysir Green Energy will combine the technical know-how we have in Iceland with international investment skills."

Bjarni Ármannsson, chief executive of Glitnir, said: "Harnessing geothermal power makes it possible to reconcile economic and environmental considerations."

Four articles: Walmart, "Marks & Sparks", and Tesco going green

Wal-Mart's Solar Energy Vision

It's been a busy holiday season for a corps of professionals, courtesy of Wal-Mart, and I'm not talking about store greeters or Santas. The retail giant recently issued an RFP, or request for proposal, to install solar energy systems on its stores in five states -- the largest procurement of solar ever proposed. Bids are due on January 5, hence the end-of-year scrambling.

The confidential RFP document, which I recently reviewed, is part of the company's stated commitment "to reduce our overall greenhouse gas emissions by 20 percent over the next eight years" and to "design a store that will use 30% less energy and produce 30% fewer greenhouse gas emissions than our 2005 design within the next 3 years," according to the RFP. At a higher level, it marks a significant first step toward Wal-Mart CEO Lee Scott's publicly stated, long-term goal (Download-PDF): "To be supplied 100 percent by renewable energy."

The goals of this project, as stated in the RFP, are somewhat more modest:

  • the establishment of a relationship "with one or more solar photovoltaic developers that facilitates the cost effective development of solar photovoltaic systems at a predetermined number" of Wal-Mart sites, and
  • securing alternative sources of energy "at competitive prices and in a form that is replicable among multiple sites and multiple building formats."
The request for proposal -- which was sent to a small, select group of prospective developers, who are no doubt scurrying to prepare their proposals as you read this -- asks bidders to consider three options in considering how to power Wal-Mart by sunlight:
  • a direct purchase by Wal-Mart of turnkey solar energy systems, along with a plan to maintain the systems;
  • solar systems that are installed, owned, and operated by the supplier, which would then sell all of the system's electricity output to Wal-Mart; and
  • an arrangement in which Wal-Mart would lease solar installations, own all of their electricity output, and have an option to purchase the systems if it desired.
Those three paths represent a pretty good overview of the options available these days to commercial and industrial purchasers of solar. The second and third options, in which the systems are developed and owned (at least initially) by a third party, help to overcome one of solar's major obstacles: its large, up-front capital expense. Since practically all of us -- companies and homeowners alike -- are accustomed to paying for electricity based on the amount we use on a monthly basis, we have little appetite to shell out thousands of dollars to suddenly own and maintain the power plants (in this case, solar panels) that generate that electricity. Companies are more willing to "go solar" if there's no large, up-front expenditure and their monthly energy costs don't change much, or even go down. In its RFP, Wal-Mart is asking solar companies to act like a small-scale utility, owning the equipment, but selling the electricity to Wal-Mart.

(By the way, such arrangements should by no means be limited to companies. Individual homeowners and renters should be able to purchase electricity generated by solar panels on their roofs, installed and owned by third parties, rather than having to buy and install pricey solar panels themselves. We want the power, not the power plants. As Amory Lovins has famously put it, "It's not kilowatt-hours that we want, it's hot showers and cold beer.")

Wal-Mart says it will begin installing solar on its stores in five U.S. states: California, Colorado, Connecticut, Hawaii, and New Jersey. The company anticipates that "that only a portion of the stores in each state will be physically and economically suitable for solar installations," according to the RFP. It calls for bids for projects to be carried out during 2007, but is asking bidders for "expansion or build-out plans, including projected prices and costs, over the next five years." The projects, says Wal-Mart, should "maximize available roof space and electric generation output" and create "maximum financial returns due to rebate, incentive, and tax impacts that may reduce or scale-back system sizing."

What's the impact of all this? Wal-Mart doesn't mention a specific purchase size, but my sources tell me that the company could put solar on as many as 340 stores in the next few years. Assuming that each store utilized about 300 kilowatts of solar panels (it could be as much as 500 kilowatts), we're talking roughly 100 megawatts of solar. To put that into perspective, the solar system currently being installed at Google headquarters in California -- the largest single corporate solar installation in history -- is 1.6 MW, about 1/60th the size.

Of course, it's unclear whether Wal-Mart will install solar in all of those locations. The company could look at the bidders' numbers and decide to install solar at only a handful of stores -- or none at all.

Assuming it moves forward with even a portion of its plans, Wal-Mart's move is significant, and historic. While a growing number of companies are staking their claim at being "carbon neutral" by purchasing power from developers of far-off wind farms or other large-scale installations, or have installed (often with much fanfare) solar panels on a single showcase facility, no one has yet made a long-term commitment to "alternative sources of energy at competitive prices and in a form that is replicable among multiple sites and multiple building formats," as Wal-Mart puts it.

As one insider told me: "Putting out the RFP alone has some level of significance. Going through with it will be epic. If they follow through, it will be profound and will have a long-lasting impact on the global solar industry. And probably on the mindset of retailers around the planet."

It's far from a done deal, and there are significant hurdles to overcome. Not the least of these will be to accommodate Wal-Mart's voracious appetite for renewables as well as its legendary cost-cutting pressure. The company's opportunity is to help bring the price of solar down to earth. The challenge will be to do it in a way that doesn't negatively exploit its suppliers, or those that toil for them.

Wal-Mart intends to notify the winner of the contract on February 28. I'm not a bidder, but I'll be watching anxiously nonetheless.

Wal-Mart's green impact

GLOBE-Net, 10 January 2007 - Wal-Mart's environmental initiatives have received widespread press coverage as the world's largest retailer 'goes green'. In addition to a new generation of environmentally friendly stores and more sustainable products on the shelves, the greatest impact of the mega-chain's environmental turnaround could be the changes it causes in its global supply chain. Sustainability campaigns by Wal-Mart and other large multinationals are showing that corporate leadership can move more companies to adopt sustainable business models that benefit not only consumers but also the environment.

Wal-Mart is the world's largest retailer, ranking second on the Fortune 500 list with revenues of over US$300 billion. It has been a target of environmental and social protests, partly due to the enormous impact of its global business model which moves inexpensive products throughout the world, often to the detriment of other smaller competitors. But the company has embarked on a major environmental initiative that is already having a profound impact on its operations and on its supplier network.

Wal-Mart CEO Lee Scott last year launched the company's environmental initiative by outlining three ambitious goals: (1) to be 100 percent supplied by renewable energy; (2) to create zero-waste; and (3) to sell sustainable products.

The company appears to be making progress on all three fronts. How good this will be for Wal-Mart's bottom line (and for the environment) will determine whether other large companies follow Wal-Mart's example.

Some of Wal-Mart's green initiatives are focused on its own operations, such as improving energy efficiency and purchasing renewable energy for its stores. Given that the company is the largest private energy user in the United States, this could have a significant impact. Wal-Mart Canada made the largest commercial purchase of green power in Ontario's history last year by buying - in partnership with Bullfrog Power - 39,000 mega-watt hours of green power over a three year period. The company wants to build stores that use 30 percent less energy and has also targeted packaging as a major initiative, moving to corn-based plastics for some groceries.

Wal-Mart plans to invest $500 million each year in technologies to reduce greenhouse gas emissions from store operations and transportation. Vancouver-based Cellex Power Products was involved in hydrogen fuel cell field trials at Wal-Mart Store's logistics subsidiary, and Wal-Mart's use of fuel-cell powered forklifts for warehouse operations could spur the mainstream adoption of this environmentally friendly technology.

Wal-Mart is also seeking to capitalize on the growing green consumer movement by offering environmentally-friendly products. Organic food consumption is on the rise thanks to retail outlets such as Whole Foods, and Wal-Mart is entering this market on all fronts. It could become the largest organic retailer in North America in the next few years.

As was noted in a GLOBE-Net article on the rising power of green spending , organic foods and 'green' household goods that used to be considered niche products have now become staples in many mainstream markets.

Wal-Mart's pledge that within three to five years it will sell nothing but wild-caught seafood that meets standards for sustainability has rippled through the global seafood trade. Other major consumers of seafood such as McDonald's, Darden Restaurants (the parent of Red Lobster) and many others are contemplating similar steps.

Following a boom in ethanol investments, Wal-Mart announced plans to begin selling E85 blended ethanol at its retail outlets and could also become a continental leader in that market. A strong push by Wal-Mart has helped boost sales of compact fluorescent light bulbs (CFLs), a more energy efficient technology which uses up to 80% less energy than incandescent bulbs and lasts ten times longer. According to studies, if each American household purchased just one of these bulbs, the annual energy savings would power a city of 1.5 million people. Wal-Mart recently announced a goal of selling 100 million CFLs by the end of 2007. If the company meets this goal, consumers will save $3 billion in energy costs over the lifetime of the bulbs.

Worldwide repercussions

Wal-Mart's focus on sustainability will have its greatest impact throughout the company's massive global supply chain. CEO Scott estimates that this is where up to 90 percent of the change the retailer hopes to influence will take place. Scott recently announced that the company will require its 60,000 suppliers to reduce the amount of packaging they use, and by 2008 will grade them on their progress. Through the use of smaller, lighter packages that are easier to transport and stock, he expects to save $3.4 billion in direct costs and almost $11 billion through the entire supply chain.

Engineers hired to evaluate energy consumption at Wal-Mart stores have also been sent into supply-chain factories. Initial results showed electricity bill savings of up to 60 percent through installation of commercially available lighting and energy technologies.

Wal-Mart suppliers will also be encouraged to subscribe to the firm's "Preferred Chemical Principles", which specify product ingredients that are less harmful to human and environmental health. By adopting such policies and purchasing according to environmental principles, Wal-Mart will spread its green philosophy around the globe.

Wal-Mart's operations produce around 23 million tons of CO2 equivalents each year, reported the company in Senate hearings where it testified in favour of greenhouse gas regulations. During the same hearings, the company estimated that there are 220 million tons of emissions in the supply chain directly related to Wal-Mart products. The emissions reduction potential here is enormous.

Aligning business and environmental goals is what Wal-Mart is attempting to do, and if successful it will help make the world a better place. Along with other global firms such as BP and GE that have made the environment and sustainability core strategic priorities, Wal-Mart's position as a corporate leader gives it the ability to enact change on a worldwide basis.

Going for the green!

As a major corporation accountable to its shareholders, Wal-Mart must consistently demonstrate business strategies that improve the company's bottom line. There is no doubt in Mr. Scott's mind that the move to make Wal-Mart more environmentally friendly will do just that.

Reducing packaging alone will cut transportation costs and lower store display and waste disposal costs. Wal-Mart also sees a huge potential in earning carbon credits by reducing greenhouse gas emissions throughout its operations and supply chain. Add rising sales of energy efficient appliances, light bulbs, organic foods, and environmental products that are in high demand these days, and Wal-Mart is confident its profits will continue to grow.

As noted by GLOBE Award winner Interface Americas Inc. executive Jim Hartzfeld in his comments at GLOBE 2006, the switch to a more socially and environmentally responsible business model was originally perceived by Wal-Mart as a "license to operate" necessity. But it is now seen by its top executives as a major opportunity to grow the company.

Some environmental groups are embracing the company's green initiatives, while others remain skeptical. The World Wildlife Fund (WWF) for example, is working with Wal-Mart on a number of sustainability initiatives. Other groups point out that Wal-Mart's worldwide production model will inherently result in greenhouse gas emissions and pollution from transportation.

Nonetheless, holding corporations such as Wal-Mart to their public declarations is important in encouraging others to be good corporate citizens. When a company of Wal-Mart's size links environmental and social initiatives to profitability, the benefits can be widespread and significant.

As noted in a GLOBE-Net review of a report by Andrew Hoffman of the University of Michigan for the Pew Center on Global Climate Change, in order to succeed in a future marketplace where greenhouse gases are regulated and carbon-efficiency is in demand, companies will need to reshape their core business strategies.

The determinants of success in this regard will be strategic timing, establishing an appropriate level of corporate commitment, influencing policy development, and creating business opportunities by positioning the company to capture emerging opportunities for competitive advantage wherever possible.

Through its actions and by virtue of its market size, Wal-Mart is well on the road to success in a carbon-constrained future. But more important than market size or strategic advantage is the personal commitment of the company's top executives.

As noted by Bob Elton, President & CEO of BC Hydro speaking at the opening of the EXCEL Partnership's Workshop on A Next Decade Vision for Canadian Corporate Sustainability , "as business leaders, each of us must take personal responsibility. A commitment to sustainability is a very personal thing. It is a commitment to taking care of the future."

At Wal-Mart, that level of commitment was demonstrated by Wal-Mart CEO Lee Scott at the launch of the company's sustainability initiative and will be a key factor in determining how successful it will be over the long haul.

M&S promises radical change with £200m environmental action plan

Simon Bowers
Monday January 15, 2007

The Guardian

Marks & Spencer is to spend £200m over five years on a wide-ranging "eco-plan" which sustainability campaigners yesterday welcomed as the most progressive project of its kind by a mainstream retailer in the UK.

The programme, to be announced today, promises to "change beyond recognition" the way M&S operates. Initiatives within the 100-point plan include transforming the 460-strong chain into a carbon neutral operation; banning group waste from landfill dumps; using unsold out-of-date food as a source of recyclable energy and making polyester clothing from recycled plastic bottles.

"If you believe that all of us are going to have to espouse this green issue - whether it is climate, waste or whatever else - then there is no alternative," said M&S chief executive Stuart Rose. "And I also believe this is another way of differentiating ourselves - rather than just going down the normal bog-standard supermarket tactic of all pretending we're reducing prices by £70m."

It is the latest high-profile initiative among retailers eager to outdo each other in terms of green credentials. Asda recently stopped landfill waste, while Tesco has pledged to halve its carbon footprint.

But Blake Lee-Harwood, campaign director at Greenpeace UK, said the retailer's approach was particularly laudable. "We're glad a company like M&S has proposals that begin to match the scale of the challenge of climate change ... Probably it is fair to say it is the most comprehensive sustainability programme by a British supermarket. But it is still only a step in the right direction. Not a revolution."

Mr Lee-Harwood picked out M&S's decision to provide customers with clear labelling on air freighted food lines as a particularly bold measure. "This is an area where other mainstream retailers haven't dared to go. And now it will be hard for others to ignore the move."

The environment group WWF and green campaigner Jonathon Porritt also gave their backing to the plan. Mr Porritt described it as a "new benchmark".

M&S declined to give a precise breakdown of the £200m cost of the programme. "On aggregate I think it will be £200m over five years. It is very difficult to calculate in finite terms but it is that order of magnitude," Mr Rose said.

He admitted some of the initiatives were not new, but many are to be accelerated under the plan. The group's trial of Fairtrade cotton, for example, is to be extended, with M&S planning to buy one-third of the available cotton from this market. The 100-point plan reiterates M&S pledges to cut the use of plastic bags and packaging, but it will not bring an end to the retailer's propensity to package fruit and vegetables in moulded trays and clear plastic. Packaging will, however, become fully degradable, using corn starch derived plastic, Mr Rose said. Stores will also test composters which will produce biogas from out of date food and other waste

Mr Rose, who is planning to swap his company BMW for a hydrogen powered model, said: "This is a deliberately ambitious and, in some areas, difficult plan. We don't have all the answers but we are determined to work with our suppliers, partners and government to make this happen."

M&S unveils carbon-neutral target
High Street chain Marks & Spencer has announced a £200m, five-year plan to make the company carbon neutral.

Under its "eco-plan", the company says it will cut energy consumption, stop using landfill sites and stock more products made from recycled materials.

Chief executive Stuart Rose, who has overseen a recovery in M&S's fortunes, said the project would "change beyond recognition" the way it operated.

He insisted extra costs under the plan would not be passed on to customers.

Mr Rose, who took over as chief executive three years ago, told the BBC that it was "a massive plan".

"I don't say it's not without risk," he said.

"What we're saying, effectively, is look, we believe responsible business can be profitable business."

Local food

Businesses or homes which offset the carbon emissions they produce, by planting trees for example, are described as being carbon neutral.

M&S said the carbon savings it aimed to achieve under its plan would be like taking 100,000 cars off the road each year.

This plan raises the bar for everyone else - not just retailers but businesses in every sector
Jonathon Porritt, Adviser to M&S

As well as cutting energy and using more renewable materials, M&S will aim to source its food from the UK and the Republic of Ireland as a "priority" in an attempt to reduce air freight.

Labels will identify food that has been flown into the UK.

"We don't have all the answers but we are determined to work with our suppliers, partners and government to make this happen," said Mr Rose.

"Doing anything less is not an option."

He added: "We will become carbon neutral, only using offsetting as a last resort. We will ensure that none of our clothing products or packaging needs to be thrown away."

M&S was advised on its new environmental policy by former Friends of the Earth director Jonathon Porritt.

"This plan raises the bar for everyone else - not just retailers but businesses in every sector," said Mr Porritt.

Powered by waste

Under its plan, much of the chain's polyester clothing will be made from recycled plastic bottles, instead of oil, and millions of garments will be made from fair trade cotton, he said.

M&S will also trial the use of food waste to power its 500-plus stores across the UK.

News of the plan comes days after Mr Rose finally acknowledged a "recovery" at the iconic chain after a sales surge in the lead up to Christmas.

The retailer said like-for-like sales - which ignore sales at new stores - in the October to December period were up 5.6% on the similar period a year ago.

The company's share price has risen steadily over the past 15 months as its fortunes have improved, but until last week Mr Rose had refused to use what he calls "the R-word".

Tesco follows M&S with climate change move
By Susie Mesure, Retail Correspondent
Published: 16 January 2007

Tesco is to put its customers at the heart of its latest green initiative when it unveils its new strategy to combat climate change on Thursday.

The move by Britain's biggest grocer, which is today tipped to issue a strong Christmas trading update, will cap the busiest week yet for retailers jostling for pole position in the race to save the environment.

Sir Terry Leahy, Tesco's chief executive, wants to help empower consumers to cut their carbon footprints. His speech, which will be delivered to a roomful of environmentalists and businessmen at an event hosted by the sustainable development charity Forum for the Future, is expected to list ways shoppers can do their bit by buying home-grown produce.

Tesco has already stated its corporate commitment towards reducing climate change by, for example, pledging to invest £100m in sustainable environmental technology; halving its energy use per square foot by 2010; and reducing the amount of carbon dioxide produced per case of product delivered by 30 per cent by 2009.

But Tesco's plans have so far stopped well short of promising to make its business carbon neutral - the pledge made by Marks & Spencer in the £200m "eco-plan" it unveiled yesterday.

Stuart Rose, M&S's chief executive, said he had "signed my life away in blood" in terms of the group's commitment to tackle the "enormous challenges of climate change and waste". Calls from private investors flooded the lines to his office yesterday, he said, welcoming the move, despite the inevitable cost.

M&S intends to reduce its carbon emissions by 80 per cent by 2012 by using more renewable energy and doubling the amount of food sourced from the UK and Ireland within 12 months. It will only offset its energy needs "as a last resort" to cover the environmental hit from air freighting products such as out-of-season blueberries to its stores.

It intends to slap a sticker on all products flown in by air to see if that encourages shoppers to switch instead to locally-grown alternatives. "Customers can vote with their feet. We will audit it," Mr Rose said. The retailer will also cut the amount of packaging it uses by a quarter and only use materials that are easy to recycle or compost on the packets around its ready meals and pre-chopped vegetables.

M&S's plan to give itself a green healthcheck drew mixed reaction from environmental and sustainable lobby groups.

Jonathan Porritt, Forum for the Future's founder director, said: "It is not cheap bandwagoning for the sake of it. It would be mad to do anything other than welcome it." Blake Lee-Harwood, campaign director at Greenpeace, said M&S had made the "best stab yet" at attempting to create a sustainable society. But he added: "This is a step forward, not a revolution. They are not changing the business model."

Tony Juniper, director of Friends of the Earth, urged other businesses to follow the practical steps M&S was taking to cut its waste and reduce its carbon emissions. But the lobby group's food campaigner Sandra Bell said supermarkets needed to start tackling the "fundamental issue about the way they do business and the way they treat their suppliers", which left farmers with "far less money to invest in environmental improvements".

The green and the not-so-green

Companies doing relatively well in the fight against climate change:

* Unilever
* Cadbury Schweppes
* Diageo
* Tesco
* BP
* Royal Dutch/Shell
* Rio Tinto

And those who need to work on cutting their emissions:

* Standard Chartered
* Scottish & Southern
* SABMiller
* Royal Bank of Scotland
* Prudential
* O2
* Lloyds TSB
* British American Tobacco

Solar cell breakthrough claimed: Boeing-Spectrolab has managed to create a solar cell with 40.7% sunlight-to-energy conversion efficiency

Solar cell breakthrough claimed

Thomas Claburn
(12/06/2006 2:00 PM EST)
URL:   A breakthrough in solar cell technology promises to make solar power a cost-competitive energy option and to reduce U.S. dependence on oil.

With funding from the Department of Energy, Boeing-Spectrolab has managed to create a solar cell with 40.7% sunlight-to-energy conversion efficiency, said DoE assistant secretary for energy efficiency and renewable energy Alexander Karsner on Tuesday.

The solar cell represents "the highest efficiency level any photovoltaic device has ever achieved," according to David Lillington, president of Spectrolab. That claim has been verified by the DOE's National Renewable Energy Laboratory in Golden, Colo.

Most of today's solar cells are between 12% and 18% efficient. Some of the ones used to power satellites are around 28% efficient. In 1954, 4% efficiency was state of the art.

High energy prices and environmental concerns are prompting businesses to consider solar power. In October, Google said it planned to install 9,200 solar photovoltaic panels at its Mountain View headquarters in 2007. Google's solar panels, made by Sharp, are 12.8% efficient. It expects to generate 30% of its peak energy usage during the summer from solar power.