a greener shade of gold

Happy Earth Day! (Migrated to the Green Leap Forward)

2008-04-23T00:19:00.001-05:00

Happy Earth Day everyone!

In addition to my solar blog, I have resumed my critical analysis of broader environmental and energy issues in the context of China, the world's fastest growing and most important economy. I am now located in Beijing where I am doing research on such issues as a Fulbright Scholar. You can my thoughts on www.greenleapforward.com.

There's also a facebook page you can join for The Green Leap Forward.

Hope you enjoy its contents!

Woops!

2007-10-12T20:49:00.000-05:00

Greetings! Thanks for visiting my blog. This blog is temporarily inactive as I focus my efforts on a new blog dedicated to solar energy at http://solarcoaster.blogspot.com

In some future reincarnation of this blog, I hope to start covering China-related green issues as I spend time on the ground next year. But in the mean time, I congratulate AL GORE and the INTERNATIONAL PANEL ON CLIMATE CHANGE for their historic Nobel Peace Prize win.

See you at the solar coaster, and stay tuned for future announcements on my China blog.

Live Earth Rocks the World!

2007-07-07T19:31:00.000-05:00

7.7.07, some say, is the luckiest day of the century. Will this be the case for planet Earth?

Today, in cities across all 7 continents (yes, even Antarctica), music rock stars and fans come together for a 24 hour benefit drive to spread awareness of global climate change. The artists, ranging from Madonna, to the Dave Matthews Band, to the Police, are performing pro bono, with proceeds of the concerts going to Al Gore's Alliance for Climate Protection, which is a member of Save Our Selves, the organizer of Live Earth (the logo of Live Earth, above, is "SOS" in Morse code).

Take the Plegde
During the concerts people will be asked to support the following 7-point pledge:

To demand that my country join an international treaty within the next 2 years that cuts global warming pollution by 90% in developed countries and by more than half worldwide in time for the next generation to inherit a healthy earth;
To take personal action to help solve the climate crisis by reducing my own CO2 pollution as much as I can and offsetting the rest to become 'carbon neutral;'
To fight for a moratorium on the construction of any new generating facility that burns coal without the capacity to safely trap and store the CO₂;
To work for a dramatic increase in the energy efficiency of my home, workplace, school, place of worship, and means of transportation;
To fight for laws and policies that expand the use of renewable energy sources and reduce dependence on oil and coal;
To plant new trees and to join with others in preserving and protecting forests; and,
To buy from businesses and support leaders who share my commitment to solving the climate crisis and building a sustainable, just, and prosperous world for the 21st century.

The Start of a Global Movement
The reach of Live Earth extends far beyond the eight main concerts--there are going to be more than 6,000 satellite Live Earth events have been spontaneously organized in 109 countries under the Friends of Live Earth event; Live Earth is being broadcast on television and radio in more than 100 countries; more than 10 million have accessed the concerts on LiveEarth.MSN.com; and a book (David de Rothschild's The Live Earth Global Warming Survival Handbook: 77 Essential Skills To Stop Climate Change) on climate change has been released in conjunction with the event. The organizers have indicated that this will not be a one-off event, but rather, a three to five year campaign to create a sustained awareness.

Green Practices
The campaign, has not been without controversy (an execellent summary can be found in this Wikipedia entry), one of the most commonly heard among them being that the logistics and transportation involved in organizing the event has consumed a lot of energy and created a lot of carbon emissions.

“This is going to be the greenest event of its kind, ever,” Gore has countered. The concerts will follow "Green Event Guidelines" developed by the U.S. Green Building Council, creators of the LEED Green Building Rating System. The following green measures will be implemented:

all electricity that powers the shows will be from renewable sources;
concessionaires will be encouraged to use suppliers of biodegradable plastics;
waste will be minimized through recycling and reuse;
venue offices will use as little energy as possible;
production lighting will include the use of LED light bulbs;
staff and artist air travel will be offset through carbon credits; and
ground travel will be by hybrid or high-efficiency vehicles where possible

Said Gore, “the carbon offsets and the innovative practices that are being used to make this a green event, I think will set the standard for years to come.”

Unofficial Launch of The Solar Coaster!

2007-06-10T02:01:00.000-05:00

Apologies for the lull in postings, but I've been busy getting a new solar energy-focused blog online, and after almost three weeks of testing, its now ready for an unofficial launch! So please visit The Solar Coaster for your daily dose of solar news.

The Solar Coaster will provide regular news updates on the latest developments in solar energy technology and other solar industry initiatives.

I will continue to post on a greener shade of gold more analytical pieces on a more intermittent basis, with the next post on energy efficiency in the not too distant future!

Thanks for your continued readership, and please send me any comments!

Why I Didn't Become an Environmental Lawyer

2007-04-19T02:19:00.000-05:00

I've been passionate about green issues since my early youth, majored in ecology and got a joint law and environmental policy masters degree, and was even co-chair of the Environmental Law Society in law school. Yet, the practice of environmental law (which in practice means environmental litigation or regulatory compliance) has never appealed to me (all I currently do is corporate transactional work).

In my initial assessment, the reason for shunning environmental law was that environmental litigation is tedious, expensive and usually imposes a disproportionate burden on resources to the potential benefits it brings, and such litigation deals with very particularized issues, the resolution of which has little meaningful impact to the greater ecology. As for providing counsel on regulatory compliance? Not unimportant work, but too boring and promotes finding loopholes or merely "doing the minimum" to not get in trouble. As for advocacy in an NGO context? Admirable work and certainly very crucial, but the realities of law school loans means that I would sooner be evicted from my apartment than be able to make any meaningful contributions to the cause.

Attacking the Wrong End of the Pipe
Recently, after reading Hermann Scheer's latest book, Energy Autonomy, I have reached a new understanding of the limits of environmental law. Without dwelling on too much background, the first thing to recognize is that creating a sustainable energy future requires a fundamental reorganization in the way we harvest, deploy and use energy. The centralized, dirty and resource limiting fossil fuel energy structure and mentality of today has to be deconstructed to make way for cleaner, decentralized renewable energy systems. But governments, through environmental laws, focus primarily on the consequences of resource consumption--e.g. how much pollution can a firm emit, and what are the punitive consequences for exceeding such limits. It attacks the problem at the end of the resource chain, instead of catalyzing change at the beginning, i.e. addressing the question of what types of resources we should be using in the first place, and how we ought to use them.

Environmental law is prescriptive rather than preventative. It is retroactive rather than prospective. It attempts to clean messes up, rather than avoid them in the first place. It accepts the current fallacy of a fossil-fuel based economy as legitimate, but attempts helplessly to mitigate its ecological footprint. The most encouraging result of effective environmental laws is eco-efficiency. But what good is efficiency in a growing economy where the aggregate number of emitters are increasing?

The Need for a Paradigm Shift
The assumptions of the fossil-fuel energy structures need to be challenged, and the compelling benefits of renewable energy need to be recognized, articulated and implemented. Environmental law, by design and definition, will not get us there. Eco-efficiency, while a seemingly laudable interim goal, is being manipulated by fossil energy companies as a tool of delay. What is needed are progressive energy laws that (a) strip the fossil fuel industry of its US$250 billion a year of annual subsidies so as to create a level playing field for renewable energy technologies to compete, and (b) renewable energy standards and other incentives to promote the deployment and proliferation of renewable energy on a mass scale with the goal of completely replacing fossil fuel architecture.

The Private Sector as the Drivers of the New Energy Economy
But policies alone are not going to be the primary innovators or commercializers of renewable energy. The government can only do as much as create a favorable economic and political environment for renewable energy deployment and proliferation. Ultimately, it will be renewable energy entrepreneurs, with the aid of far-sighted capital and other service professionals, who will bring renewable energy to the masses. And they will do so not because its the moral thing to do (which it is), but because it is the profitable thing to do.

The writing is on the wall--the greatest economic opportunity in the coming decades will be the clean energy sector (see article by Red Herring on where the best talents of the Silicon Valley are now focusing their energies to) and the champions of the next green wave will be the business sector. Just in the past 48 hours, we have read about the likes of Sharp and Sunpower stepping up their efforts to bring solar power to the masses. What makes the business case for renewable energy so compelling is worth a separate blog post, and post I will, so do stay tuned.

The Roadblocks to the Ethanol Superhighway

2007-02-01T23:31:00.000-05:00

Collateral Damage of Alternative Energy: Part One in a series of postings to consider carefully the potential downsides to various alternative energy strategies that have been touted as sustainable energy solutions.

The ethanol boom in the U.S. has been fuelled by a top down regulatory policy, in part to replace toxic methyl butyl tertiary ether (MBTE ) as an additive to vehicular gasoline, and also as an outright substitute to gasoline in order to wean the U.S. off its dependence on foreign oil, which now account for two-thirds of U.S. oil consumption. President Bush's "20-in-10" policy (reducing gasoline use by 20% in the next 10 years) announced last week in his State of the Union address, under which a target was set to produce by the year 2017 35 billion gallons of alternative fuels (including biofuels like ethanol; but also ominously blatantly less sustainable fuels like gasified liquid coal), will ensure that ethanol will continue to attract investments. Derived primarily from corn, ethanol production in the U.S. is propped by a 51 cents a gallon subsidy to the agent who blends ethanol into gasoline. Furthermore, U.S. corn farmers are further protected by a a 54 cents per gallon of tariffs on imported ethanol (most likely from Brazil, where ethanol is made more cheaply with sugar).

There are big backers to ethanol. Vinod Khosla is the most prominent venture capitalist advocating the ethanol push, predicting that "39 billion gallons of biofuels production is possible in the United States at reasonable cost by 2017 on 19 million acres, and 139 billion gallons by 2030 on 49 million acres. Soon we will be replacing all 150 billion gallons of gasoline that we use on a very small fraction of our agricultural lands." Bill Gates has put some money behind Pacific Ethanol, and big corporations such as Archer-Daniels Midland have invested heavily in seven ethanol plants nationwide. But several stumbling blocks exist:

1. The net energy debate:

Critics of ethanol charge that ethanol production consumes more energy than the ethanol itself provides. Others contend there is a net energy gain of at least 34% (which even if true, doesn't sound like a heck of a net gain, especially considering the fact that crude oil produces 10 times more energy than it takes to extract it). I remain on the fence on this one; there have been reports on both sides of this debate, and I haven't done all the reading (For a good collection of articles on this issue, click here) Vinod Khosla contends in his whitepaper "Is Ethanol Controversial?" that the overwhelming number of studies come out positive, and that in any case technology advances will over time eventually make it net energy positive in a convincing way (think cellulosic ethanol, the Holy Grail of ethanol production from corn husks, wood chips and other agricultural waste, which requires a bit more time to make commercially viable).

2. The food versus fuel debate:

The ethanol boom has created a surge in demand for corn, doubling corn prices over the past year to now over $4 per bushel. Corn just so happens to be one of the most ubiquitous ingredients in North American diets, as Michael Pollan accounts in The Omnivore's Dilemma. The Washington Post, in its review of Pollan's book, notes:

American cattle fatten on corn. Corn also feeds poultry, pigs and sheep, even farmed fish. But that's just the beginning. In addition to dairy products from corn-fed cows and eggs from corn-fed chickens, corn starch, corn oil and corn syrup make up key ingredients in prepared foods. High-fructose corn syrup sweetens everything from juice to toothpaste. Even the alcohol in beer is corn-based. Corn is in everything from frozen yogurt to ketchup, from mayonnaise and mustard to hot dogs and bologna, from salad dressings to vitamin pills. "Tell me what you eat," said the French gastronomist Anthelme Brillat-Savarin, "and I will tell you what you are." We're corn.

To say nothing of the Mexican community, whose staples are corn-based. Tortilla prices surged 14% in 2006 in Mexico (where inflation was just 4%), affecting the poor disproportionately. Not just Mexico, but China, where a moratorium on new ethanol production has been enacted to stem the surge in corn prices. Lester Brown of the Earth Policy Institute warns that the "unprecedented diversion of the world’s leading grain crop [corn] to the production of fuel will affect food prices everywhere. As the world corn price rises, so too do those of wheat and rice, both because of consumer substitution among grains and because the crops compete for land.”

3. The distribution problem:

The geographical situation of U.S. ethanol is that production is concentrated in the midwest, where the corn fields are, but consumed mostly in the coastal regions, where the urban centers are. Existing are not ideal for ethanol transport. First, ethanol is soluble in water, which is a natural occurrence along pipelines. Its mixing with ethanol renders the ethanol unusable in lower ethanol blends or as additives (but not an issue for higher ethanol blends such as E85). Second, gasoline blends that contain more than 10% of ethanol tend to be too corrosive for the pipes and gas pump infrastructure. Thus, ethanol producers have had to rely on rail and truck at a time where rail and truck rates have been increasing due to the tightening of transport capacity (the Wall Street Journal on Feb 1, p. B1, has an excellent article on ethanol's distribution woes). Barak Obama, leading Democratic presidential candidate and a sponsor of new biofuels legislation being introduced to the Senate, admits in a BusinessWeek article: "We've done a better job of focusing on production than we have on distribution."

4. Deforestation:

While it is unlikely that the U.S. government will lift ethanol subsidies and tariffs in the near future, the Bush administration has hinted recently that it would reconsider the tariffs, which would encourage more imports from Brazil. Indeed, because ethanol supplies cannot currently keep up with demand, some 11% of ethanol consumed was imported, two-thirds of it from Brazil. Ethanol in Brazil is derived from cane sugar, creating a shorter supply chain (if derived from corn, the corn has to be first broken down to simple sugars) and resulting in cheaper production. Indeed, the rising costs of corn feedstock and increased transportation costs in the U.S. has made even tariff-imposed Brazilian ethanol ($1.75 per gallon) cheaper that U.S. corn-based ethanol (about $2 ). Indications are that imports will continue to rise (see "Ethanol Imports are Rising" in the Wall Street Journal, Feb 1, p. B1), and this will increase pressure on Brazil ethanol production, spurring increased deforestation to make way for more agricultural land.

An analog in biodiesel with respect to clearcutting and forest fires in Indonesia (see earlier post, and also "Once a Dream Fuel, Palm Oil May be an Eco-Nightmare" in the New York Times, Jan 31, ) is a stark warning of what could happen in Brazil with regards to ethanol...as if current rates of Amazon deforestation were not worrying enough.

The Bottom line: In evaluating the sustainably of ethanol (or any energy source), policy makers must examine its entire supply-chain and life-cycle as well as the risk-risk tradeoffs (in this case the food vs. fuel issue) it presents.

So you had had a big 2006 bonus...What to do with all that money?

2007-01-12T12:19:00.000-05:00

A departure from my more anlytical postings to provide a piece of more useful/practical information for a change!

Sniffing out for clean tech investment ideas? Here's the most comprehensive listing of clean energy stocks in the market [List] that I have come across, courtesy of InvestorIdeas.com. Categories include:

Alternative Energy Funds
Biogas & Ethanol Stocks
Biomass
Clean Power Plants & Utilities
Energy Efficiency Stocks
Flywheel Stocks
Fuel Cell & Hydrogen Stocks
Geothermal Stocks
Green Certificates - Carbon Credit Stocks
Micro Turbines Stocks
Photovoltaic & Solar Stocks
Recycling Technologies Stocks
Renewable Energy Investment - General
Sustainable & Electric Transportation
Wave & Tidal Power Stocks
Wind Power & Wind Energy Stocks

The list is daunting, and not every stock is "investment-grade," so do your research! More over, many are traded on "pink sheets" / OTC, and hence are thinly traded and do not provide as much liquidity to trade in and out, if you're that kind of investor.

That said, I think the solar sector is going to be a huge winner in 2007 because of state legislation across the U.S. Biofuels will be a hit as well, again for the same political reasons, but I personally question the sustainability of many biofuel technolgies...I will talk about this in a future post.

Another prediction is that Bush will be pushing nucelar and plug-in hybrid technologies in his State of the Union speech at the end of month, sending counters in these areas north.

However virtuous the reasons, I'm bracing for a historic year for the clean tech sector, and I know I'm not the only one.

Accelerating Solar Adoption Through Third Party Financing

2007-01-08T23:42:00.000-05:00

Unlike other most other forms of alternative energy, solar energy is distributive and decentralized; the maturity of solar markets will be marked by the mounting of photovoltaic (PV) cells on the roofs of residents--everyday people taking it upon themselves to convert their homes to micro-power stations. One of the barriers to the adoption of photovoltaics in residential communities is the high upfront costs. Because fuel costs of solar are zero, and given the long life cycle of PV cells (about 30 years or more), a consumer installing PV essentially pays for 30 years of electricity upfront, rather than on a monthly incremental basis as one pays for plug-in electricity today. It a huge price tag for a consumer to stomach.

Enter the third party financier. Rather than the consumer making the upfront capital investment, and sustaining the installation costs and ongoing maintenance costs, all those costs can be borne by a third party financier in return for regular periodic fee payments. The third party PV financier in essence becomes an energy service company (ESCO), like a utility providing energy services in return for fees. In this way, the risks of PV installation and maintenance are more efficiently allocated to the party with greater PV expertise and which has greater financial resources.

One cryptic website explains:

The Third Party Financing (TPF) method...can be described as an optimum combination of the two elements necessary for the implementation of a modernisation project: on the one hand, a guarantee of the necessary finance and, on the other hand, professional technical assistance. As already mentioned, thanks to TPF an energy user lacking finance to implement a modernisation project does not have to bear any initial costs of the energy efficiency investment. Instead, a TPF company charges the user with a fee equivalent to a part of the energy saving achieved as a result of the modernisation. During the "payback period" the user incurs costs not exceeding those from before the modernisation. After the fee provided by the TPF company has been repaid, the user gets the full amount saved and gains the modernised installation. The TPF method can be attractive also to energy users who have free financial resources as it allows for getting profits from energy savings, without the necessity to freeze the capital. Thus the resources can be used for other purposes.

Wal-mart Goes Solar

The headline news is Wal-marts' request-for-proposal (RFP) for solar installations for 300 of its stores across 5 states. Joel Makower, who has read the hiterhto confidential RFP, estimates that the scale of the installations may be some 60 times the size of the largest exisitng solar installation (at Googles headquarters). As Joel explains in his blog, among the financing options being considered for the Walmart RFP are are:

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.

Sunny Grapes Shows the Way

As if to show Walmart how the second option should be done, last week, it was reported that MMA Renewable Ventures, a subsidiary of Municipal Mortgage & Equity, LLC (MuniMae; NYSE: MMA), coordinated the financial backing to own, operate and maintain a 901 kw PV system at Fetzer Vineyard (sustainable wine!), and sell the clean energy to Fetzer under a long-term Solar Services Agreement contract that sets the electricity costs at a fixed rate.

"We get clean power from new solar at a cost that is 10% less than conventional power from the utility. It will stay below the cost of grid power for the length of the contract. It also reduces our peak demand power charges by 70%. All this at no capital expense and no increasing in the asset base," said Susanne Zechiel, Fetzer's manager of facility resources for its California wine group.

..and Some Sweet News from the Honey Pot

And today, it was announced that Honeywell will provide solar power for a Californian school district by installing solar panels on seven school buildings and selling the solar-generated electricity at a discount under a 20 year contract.

Bundle it with Home Mortgages!

Yet another variation of solar third party financing is proposed by Travis Braford, founder of the Prometheus Insitute for Sustainable Development, in his new book Solar Revolution. Bradford observes that the mortgage industry should embrace solar panel installation in houses as a feature that enhances real property values, and bundle the financing of solar panels with the rest of the house--mortgage financing is after all the cheapest form of financing in the U.S.

As more innovative forms of financing emerges to alleviate the upfront capital costs to end-users, the adoption of solar technologies will accelerate. Solar ESCOs will be an important piece in the solar value chain puzzle, making affordable the scaling up of PV adoption for the mass markets. Indeed, variation of third party financing has been considered for clean coal technologies (see this report on 3P financing for IGCC plants). The business opportunity for clean energy financing as a support industry to the clean tech sector looks promising.

2006 in Review

2007-01-02T07:23:00.000-05:00

A Happy New Year to one and all! After almost a month off, I'm ready to kick things off for 2007 with some links that look back at the newsworthy stories of the past year:

The Oil Drum's Top Stories of 2006
A diverse collection of 50 stories reflecting the banner year of biofuels (and the debate on the energy balance of ethanol), nuclear renaissance, and more peak oil discussions.

Renewable Energy Access' Top Stories of 2006
A majority of the stories here are solar related, suggesting a tipping point in the solar industry. The next link, on the proliferation of solar company public company listings, are consistent with this theme.

Red Herring's Energy Year in Review: Clean Energy's Big Year
Tile says it all: IPOs, solar, ethanol and electric cars.

Sunshine in the Public Markets: Solar Company IPOs in 2006 (and maybe 2007)
We saw SunPower and Suntech International make their successful U.S. market debuts in the second half of 2005, setting the stage for a banner year of clean energy IPOs in 2006, mostly in the solar and biofuel sectors. In the solar realm, we saw three Chinese solar companies--Canadian Solar (which really has its operations in China), Trina Solar and Solar Fun Power--list their shares on the U.S. in 2006. Another, First Solar (and specialist of thin film solar technologies) also listed. More solar IPO are in the cards, and interestingly, these are also dominated by Chinese concerns, such as Yingli Solar, LDK Solar Hi-Tech and CEEG (Nanjing).

Grist Mill's Top 10 Green Stories
The climate change awakening of various stakeholders (such as corporate America, the electorate/public and government) is the central theme running through most of these stories.

Joel Makower's Top 10 Green Business Stories
Headlined by Walmart's foray into corporate environmentalism.

Discover's Top 6 Environmental Stories of 2006
Extracted from its Top 100 Science Stories, the emergence of alternative energy tops both lists!

Warren Karlenzig's Top 10 Government Sustaibility Programs of 2006
A focus on groundbreaking state and local government environmental programs that made the news.

Springwise's Top 10 Eco & Sustainability Business Ideas of 2006
A focus on the best, innovative small business ideas of the year.

Corporate Social Responsibility: A Necessary Consequence of Market and Legal Failures

2006-12-01T15:26:00.000-05:00

The recent passing of Nobel Prize winning economist, Milton Friedman, has provided the opportunity to review some of his ideas that have helped shaped the field of business and economics today. One of his ideas, that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game,” has been frequently commented on in the corporate social responsibility (“CSR”) debate.

Henry Manne, former dean of George Mason University School of Law, reaffirmed Friedman’s views on the topic in a WSJ op-ed. The crux of Dean Manne’s argument rests on his characterization of a business corporation as nothing more than a nexus of private contracts, transactions which invoke private property rights, the unassailable freedom to contract, and the right of immunity from public intervention. Dean Manne laments:

“Any large enterprise, no matter how competitive its industry and no matter how successfully it is fulfilling the public's desires, has a social responsibility--a term that makes mockery of the idea of individual responsibility--to use part of its resources for "public" endeavors…

‘How did this transposition from private to public responsibility come about? After all, even the largest corporation started simply as an idea in someone's head. At first this person hires employees, borrows capital or sells equity, produces goods or service and markets a product. Nothing about any of these purely private and benign arrangements suggests a public interest in the outcome. But then the business begins to grow, family stock holdings become more diffused, additional capital is required and, voilà, another publicly held corporation…

‘But what has happened to implicate public involvement in the management or governance of these enterprises as they grew from a mere idea? Nothing. And if that nothing be multiplied by tens or hundreds or thousands, the product is still zero. So where along the line to enormous size and financial heft has the public-private nexus necessarily changed? True, there are now a large number of complex and specialized private contracts, but every single one of these transactions is based on private property, freedom of contract, and individual risk and reward. If one apple is a fruit, even a billion apples do not become meat.”

The Rebuttal

As a threshold matter, I am not persuaded by the premise of Dean Manne’s arguments, that private contracts and private property are entitled to a shield against government or public intervention. Then again, this is not his premise alone, it is that of the entire University of Chicago Law and Economics tradition, of which both Friedman and Manne are a product of. There is a wealth of literature arguing both sides, so I will waste electrons rehashing old arguments.

More pertinently, Dean Manne's premise that public comapnies consist of a nexus of private contracts that do not invoke the public interest rests of shaky ground. To be fair, Dean Manne acknowledges that there are sometimes arguments under certain circumstances for placing social demands on companies; his criticism is that in today’s debate, CSR advocates are never held to task to assert such justifications, rather, they are taken as a given:

“No arguments, weak as they are, about natural monopoly, market failure, government creation of corporations or the alleged government gifts of limited liability and perpetual existence, are required to justify the demands now regularly placed on business entities. Any large enterprise, no matter how competitive its industry and no matter how successfully it is fulfilling the public's desires, has a social responsibility--a term that makes mockery of the idea of individual responsibility--to use part of its resources for "public" endeavors.”

Externalities and Market Failure
I’m just not sure what there is to “justify.” I take an environmental angle to this deabte: The very axioms of the field of ecological economics lie in the observation that neoclassical economics fails to take into account the finiteness of natural resources and the environment’s capacity to absorb pollution. The result is that a privately generated social cost is borne by the general public. This critique directly implicates every business in primary (resource extraction) and secondary (manufacturing) industry (and indirectly most tertiary and quaternary industries) and thus virtually all business activity. [For an excellent overview of the field of ecological economics, read Ecological Economics: Priciples and Applications, by Hermand Daly and Joshua Farley]

The False Dichotomy of Public versus Private Property
I also will question another of Manne’s assumptions, that if “one apple is a fruit, even a billion apples do not become meat.” My college science background and amateur familiarity of systems theory informs me of the phenomenon of non-linearity, which in basic terms stands for the observation that a whole system can sometime be greater (or less) than the sum of its individual parts. While non-linearity is a mathematical concept, it has far reaching applications to biological systems and climate, among others (indeed in Complexity Theory, the idea of emergence is a direct product of the phenomenon of nonlinearity). But let’s cut the technical mumbo jumbo. My point is that there is something about this legal fiction called corporations that give it such power, the growth and accumulation of which is non-linear.

The perpetual survival of corporations and the limited liability of their shareholders (i.e. shareholders are entitled to all the upside of their investments, but, subject to certain exceptions, their losses are limited only to their investment) are almost ubiquitous of all public corporations. Such (1) immortality and (2) shielded liability, coupled with the (3) capacity for huge appetites (to gobble up corporations bigger themselves through mega mergers), (4) to win the lottery (through an IPO of its shares, and hence expereince an unprecedneted capital infusion), (5) the sleeping around with government (influencing governments through expensive lobbying and election campaign contributions) and (6) the ability to have unlimited children and be at hundreds of places around the globe at once (i.e. as in the case of a multi-national corporation having subsidiaries all over the world)...the list goes on, and if we consider that every itme on the list is accentuated at each step of the economic chain by multiplier effects (which is a concept associated with Kenysian Economics, and hence may be downplayed by laizzes-faire economists like Friedman and Manne), it is now easy to understand that all these factors allow a corporation (and its shareholders) to accumulate wealth and exert powers with such a scale that an individual cannot.

Thus, the growth of corporations are nonlinear, so that at a certain point, the accumulation of private contracts is not merely a quantitative transformation, but qualitative one. In practical terms, it is absurd to argue that the business of huge corporations such as Walmart, Exxon and Microsoft do not implicate the public interest. The growing nexus of private contracts, at a certain point, makes it quasi public. The distinction between private and public rights/property is an artificial straitjacket that is an oversimplification of reality. I cannot think of a day that goes by in which I or any of my friends do not use a product by any of these three companies.

Where the Law Ends
Friedman qualified his rejection of CSR by saying that corporations had to “stays within the rules of the game.” In other words, the behavior of businesses should only be limited by laws and regulations.

But the whole CSR movement arose from the very limitations of law to effectively govern corporate behavior. One only has to read about the daily stories of corporate mismanagement to wonder how much malfeasances go undetected. The best writing that I've seen on the limits of law to control corporate behavior is Christopher Stone’s Where the Law Ends. I wrote a paper in law school, relying heavily on Stone’s writings, discussing among other things the limitations of law in governing corporate environmental behavior. For what it’s worth, I reproduce verbatim the relevant section below.

Conclusion
I am not one of those types of people that Dean Manne characterizes as jealous of the American success story. The concept of the joint-stock corporation is revolutionary concept that has changed civilization forever (for a great overview of the history of the concept of the corporation, read The Company: A Short History of a Revolutionary Idea, by John Micklethwait and Adrian Wooldridge). It has brought enormous wealth to many, but you’d have to brain wash me to convince me that such wealth has been generated free of abuse.

I leave a final thought (or three) for champions of the free market and individual liberty: To the extent, for example, that the public make calls for CSR through consumer boycotts, as individual liberties would allow, shouldn't we respect the will of the "free market"? Taking this further, is it possible that markets exist not only for a company's products and services, but also for a company's reputation? If so, would it be in the best interest of a company to ignore the supply and demand curve of the reputational market?

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Law Paper Excerpt (from J. Wong, "Corporate Environmental Disclosure as a Reflexive Law Approach in Promoting Efficiency in a Marketplace of Morality" (unpublished))

Substantive Law and its Limitations
While U.S. environmental law matured into the most stringent of laws in any regime, they are falling short in promoting the responsibility in corporations that society seeks. One concern is over-deterrence. “Juridification,” meaning the “proliferation of law,”[1] can impose substantial economic costs, including the costs of compliance, reporting and enforcement. An increased reliance on legislation as a social fix inevitably requires a denser network of rules and stiffer penalties. While this may successfully deter bad actors, it can also discourage well-meaning economic actors from engaging in socially productive activities.[2]

Flowing from the problem of juridification is the need for lawmakers at Congressional level to delegate increasing amounts of discretion to administrative agencies to execute the laws, including rulemaking. This delegation raises the concern that legislation becomes separated from democratic procedures to the detriment of the system’s legitimacy.[3] Yet another challenge imposed by juridification is the difficulty for legislatures, agencies and courts to review and harmonize the sheer volume of old environmental laws in the face of new ones that get passed with emerging environmental crises.[4]

Paradoxically, the current legal system is also plagued by under-deterrence. One set of problems revolve around the peculiarities of agency rulemaking and enforcement. Firstly, agency rulemaking processes have become greatly inefficient in the face of serious costs and delays caused by notice and comment procedures.[5] This so-called “ossification” of rulemaking discourages agencies from revisiting any rules they have passed even in light of new circumstances. As a result, the modern administrative agency is unable to keep pace with technological advances and newly emerging information.[6] Secondly, the administration and enforcement of laws incur hefty costs, resulting in lags, gaps, and what Professor Dan Farber describes as “slippage,” where regulators depart from the intent and sometimes letter of statutes in the implementation and enforcement stage.[7]

Moreover, since it is practically impossible for law to control every form of misbehavior; legislation tends to be responsive rather than anticipatory.[8] The result is that much damage is done before any laws are passed to address these wrongs. For example, it is only after much of the air quality in urban America was heavily polluted that the Clean Air Act was passed in 1970, just as it was only after the monumental financial scandals of Enron, Worldcom and others that prompted the enactment of the Sarbanes-Oxley Act in 2002. Command-and-control regulations also have inherent limitations. Rather than promoting high performance, because such regulations only establish minimum standards in the form of bright-line rules, the tendency is for actors to “press their luck, to edge up to the very limits of what they think they can get away with.”[9]

Another set of limitations are typified by the laws’ weaknesses in addressing inherent scientific uncertainties. Environmental performance can be hard to quantify. Ecological systems are multivariate by nature, replete with uncertainties and non-linearities which we are only beginning to understand.[10] In many cases, there is a lack of confidence as to the causes and effects within ecological systems,[11] and there may even be a lack of consensus as to what environmental values or goals we want to advance.[12] Given all this, how can we translate these complexities of science into articulable legal standards? Another dimension to the law-and-science problem is the unsuitability of adjudicatory forums to address “polycentric issues”—“issues characterized not only by their technical complexity, but by their impact on large and diverse groups of people (far beyond the parties immediately represented in court).”[13] Judicial proceedings result in verdicts that are bipolar in nature (resulting in a losing and winning party). Cases involving questions of where to locate a nuclear plant or how large it should be are simply not suited for such adjudication.[14]

Footnotes
[1] Eric W. Orts, Reflexive Environmental Law, 89 Nw. U. L. Rev. 1227, 1239 (1995).
[2] Christopher D. Stone, Corporate Social Responsibility: What it Might Mean, if it were Really to Matter, 71 Iowa L. Rev. 557, 565 (1986). Regulatory costs may also include less obvious social costs such as “the costs of enlarging the role of government while atrophying the moral timbre of the individual citizen.” Id. at 568.
[3] Orts, supra note 3, at 1258. The counterargument to this concern is that it is the democratically elected Executive that appoints heads of agencies, thus providing an indirect form of accountability.
[4] Id. at 1259.
[5] See generally, Thomas O. McGarity, Some Thoughts on “Deossifying” the Rulemaking Process, 41 Duke L. J. 1385, 1387- 1436 (1992) (detailing the onerous procedural and analytical review requirements that have made rulemaking cumbersome and the modern administrative agency unresponsive to society’s problems).
[6] Id.at 1436. Cf. Christopher D. Stone, Where the Law Ends 113 (“Corporation are so often moving ahead of the society that at no time will present legal rules... be adequate to provide them with satisfactory standards.”).
[7] Richard B. Stewart, A New Generation of Environmental Regulation, 29 Cap. U. L. Rev. 21, 54 (2001 (citing Daniel A. Farber, Taking Slippage Seriously: Noncompliance and Creative Compliance in Environmental Law, 23 Harv. Envtl. L. Rev. 297 (1999)).
[8] Stone, supra note 8, at 94.
[9] Stone, supra note 4, at 568.
[10] Id. at 99-101.
[11] Cf. Id. at 103-04.
[12] Id. at 97.
[13] Id. at 106 (citing Barry B. Boyer, Alternatives to Administrative Trial-Hearings for Resolving Complex Scientific, Economic, and Social Issues, 71 Mich. L. Rev. 111 (1972)).
[14] Id. at 106 (quoting Maurice Rosenberg, Let’s Everybody Litigate, 50 Texas L. Rev. 1349 (1972)).

Excuse Me, Can You Spare 20 Trillion Bucks?

2006-11-26T23:11:00.000-05:00

Global Energy Infrastructure Demand
$20 trillion. That is how much in energy supply infrastructure that the world’s governments need to invest from 2005 through 2030 in order to meet the world’s growing hunger for energy, according to the International Energy Agency’s recently released report—World Energy Outlook 2006 (the “WEO”).

I had the pleasure of attending a presentation of the main findings of the WEO by Dr. Fatih Birol, IEA’s Chief Economist and Head of the Economic Analysis Division, at the Council for Foreign Relations on November 17. By the IEA’s analysis, production of non-OPEC oil will peak within the next decade. While acknowledging that are differing views on the peak oil debate, Dr. Birol rightly observes that the question of when oil production peaks—if it has already or if it will in 10, 20 or 50 years—is moot if the infrastructure to produce and distribute oil and other energy sources are not built.

The $20 trillion figure is a $3 trillion increase from last year’s estimates, driven by a “sharp increases in unit capital costs, especially in the oil and gas industry,” according to the executive summary of the WEO. I take this to mean, among other factors, the increase prices of metals (that are used to build the infrastructure) and, at least in the case of the U.S., hurricane-related damage to oil and gas infrastructure in the U.S. gulf region.

What accounts for this $20 trillion figure?

China and India’s surging energy demand, especially for transportation fuel as their emerging middle classes drive demand for automobiles;
Energy infrastructure in OECD countries built in the WWII era will be coming into retirement over the next decade, creating a huge need for replacement infrastructure.

[The gratuitous stock tip here would be to invest in global infrastructure contruction companies such as Bechtel and Fluor, which can best capitalize on this trend, especially in the Brazil-Russia-India-China (BRIC) markets]

The WEO warns that there is uncertainty as to whether the necessary investments will be made. It should be noted that the $20 trillion figure is based on a “Reference Scenario,” which assumes business-as-usual and current day energy policies. This is good news because it governments the opportunity to reassess their energy policies and induce their citizens to modify their patterns of energy consumption so as to bring that $20 trillion number down. In fact, the WEA points out that every $1 invested in efficiency in electrical appliances can offset the need of $2.20 in power infrastructure. For automobile efficiency, the ratio is $1:$2.40. The argument for demand-side management is thus very compelling; it is more than twice as cheap to reduce demand as it is to increase supply.

An Opportunity to Clean House
Dr. Birol emphasized, more than once, that the investment decisions over the next 10 years are extremely crucial because the infrastructure we build will be here to stay for the next 60 or so years; at least two generations will have to live with the consequences of our energy choices. This is a golden opportunity to reconfigure our fossil-fuel based economy into a more sustainable, renewable and cleaner one. The Stern Review, the landmark economic assessment of climate change released last month by the British government, offers its own warning of the importance of deceisve action over the next decade--in Chapter 8, we are told that greenhouse gas emissions must peak within the next 10 to 20 years, otherwise the stablization of CO2-eqvuivalents in the atmosphere will be highly costly and technically impossible with today's policies and technologies. (See Joel Makower’s post for more background to the Stern Review) Towards a solution, the Stern Review advocates for a well coordinated and financed technology policy is needed, covering the full panoply of research, development, demonsation and deployment (RD3). According to the executive summary:

“The private sector plays the major role in R&D and technology diffusion, but closer collaboration between government and industry will further stimulate the development of a broad portfolio of low carbon technologies and reduce costs.”

A Dire Need for Government R&D
I have previously written (see item #4 of previous post) that the clean energy sector is experiencing a venture capital boom, with some $3 billion projected by the end of the year. But the order of magnitude of clean energy technology development is of course just a component of, and a mere sliver compared to, the $20 trillion of energy infrastructure, which is really talking about the commercial scaling up of all energy technologies on a global basis. As a New York Times article points out, venture capital and private equity, while crucial, will not be a silver bullet:

“…there is a vital role for government spending, many experts agree, particularly on “enabling technologies”—innovations that would never be pursued by private industry because they mainly amount to a public good, not a potential source of profit…While private investors and entrepreneurs are jumping into alternative energy projects, they cannot be counted on to solve such problems [referring to nuclear waste and electricity storage], economist say, because event he most aggressive venture capitalists want a big payback within five years.”

Governments will have to take the lead in investing in “enabling technologies,” but as the several reports show (Joint Global Change Research Institute, Pacific Northwest National Laboratory, UC Berekely), governmental (and private) investment in R&D has declined in the U.S. and many other industrial countries. In the U.S., energy R&D, which accounts for $3 billion this year, is completely dwarfed by healthcare/biotech (almost $30 billion) and military (upwards of $75 billion) R&D (See this chart courtesy of the New York Times). Clearly, a “Manhattan Project” or “Apollo Project” for energy research is needed.

One way to make funds available for energy R&D is to eradicate the billions of dollars of energy subsidies and channel these funds to energy research. According to the WEO, subsidies on all energy sources in non-OECD countries amount to some $250 billion per year (almost all of it on fossil fuels and nuclear)—an amount equal to all investments needed in the power sector each year, in those countries. A reform of subsidies is needed, as a joint UNEP / IEA report “Reforming Energy Subsidies” argues. The report is also careful to distinguish between good subsidies and bad subsidies, but he evidence in the report suggests the majority of existing energy subsidies have net negative effects.

Whatever strategy is pursued, it is clear that strong global political will is needed to meet the formidable challenge of creating a sustainable energy future. International institutions and frameworks, such as the G8, G20, UNFCCC / Kyoto Protocol and Energy Charter Treaty can play important roles, but it is imperative that action starts sooner rather than later.

Related:
Last week’s issue of The Economist highlights in its cover story "Green Dreams":

“[c]lean energy fever is being fuelled by three things: high oil prices, fears over energy security and a growing concern about global warming…Analysts confidently predict that the clean-energy business will grow by 20%-30% a year for a decade.”

While it is good news that clean energy investments are all the rage with venture capitalists and investors, the bad news is that the 20%-30% growth rate comes off a tiny base as a proportion of all energy sources, so that in a decade’s time, clean energy will still only make up maybe 15% of the world’s energy sources, assuming the very high range of the growth rate. Given that our energy infrastructure built over the next decade has a 60 year shelf life, and short of any technological break through in the clean energy realm, conventional fossil fuel and nuclear infrastructure will likely continue to dominate.

All the more reason for a ramp up in energy R&D.

Blue Congress, Green Energy

2006-11-13T19:02:00.000-05:00

What a Democratic Congress means for Energy and the Environment
President Bush has acknowledged the political "thumping" that has been inflicted on his Republican Party the day after Tuesdays mid-term elections as the Democratic Party seized power in both houses of Congress. He has extended an invitation to the Democrats to work with him for the final two years of his presidency. and the Democrats have accepted that invitation for a new phase of bipartisonship. Environmental and clean energy causes are a very likely beneficiary of this new pact. New York Senator Chuck Schumer, credited as the architect of the Dem takeover of Congress, identified energy as an avenue of cooperation (Wall Street Journal):

"There are some of us who are willing to entertain -- I think 12 or 13 Democrats were willing to drill in a portion of the East Gulf. I think in exchange there should be an increase in [automotive fuel efficiency] standards. In other words, on energy, the right says increase supply, the left says decrease demand. They aren't mutually exclusive and there is room for a real compromise to do both. There are intrinsic forces on each side to block it, but together you could retain a critical majority to do it."

Senator Schumer's measured response reflects the delicate balance of power that prevails despite the convincing Democratic victory; with only a 51-49 Dems to Republicans advantage in the Senate and a 229-196 (with 10 seats still undetermined) in the House, margins are relatively thin, and the space to make sweeping changes remains limited.

The Re-Arrival of John Dingell
Representative John Dingell's (Dem-Mich.) return to the chairmanship of the House's Energy and Commerce Committee (he lost the position in 1994) has been highly anticipated by greens. The Washington Post reports that "Dingell said he would back measures to promote new energy technologies, diesel fuel and cars, electric vehicles, and conservation in buildings." But as a Michigan man who has to look after his constituents, Dingell is known as a the automobile industry's protector against CAFE (Corporate Average Fuel Efficiency) standards. According to USA Today:

" Dingell is not eager to force automakers to improve fuel economy by boosting what's known as CAFE, for corporate average fuel economy. In an interview, he said, "The committee only has so much time," and noted that the CAFE standards recently were boosted. Fuel economy standards, he said, "can be addressed very well, automobile or light trucks, within the framework of existing law," which "gives an awful lot of freedom to the administration" to adjust the standards to keep up with improving technology."If you're talking about straight CAFE, you can't regard the arrival of John Dingell in that position as good news," said Therese Langer, transportation program director for the American Council for an Energy-Efficient Economy."

Climate Change
Dingell does care about Climate Change, though. The Wall Street Journal reports that "Dingell warned the utility industry that legislation on climate change will be one of his high-priority items and his committee aides say they plan a series of hearings to help Congress determine which approaches toward regulation of "greenhouse gases" may be the most cost-effective." Indeed, a number of climate change bills have been floating in Congress the past few years may just start to gain traction, but experts believe that it will take a new President for anything solid to pass.

Biofuels
Perhaps the one energy issue that both sides can find most common ground on is the development of biofuels and ethanol. A Democrat Congress means that "Corn Belt Democrats" will replace southern Republicans at the helm of the powerful agricultural committees of Congress. Representative Collin Peterson (Dem-Minn) and Senator Tom Harkin (Dem-Iowa) will take the chairmanships of the House and Senate agriculture Committees, respectively. Harkin was the architect of the environmentally friendly Conservation Security Program that was part of the 2002 farm bill. Says Mark McMinimy of the Stanford Washington Research Group:

"You're putting people in key positions who would be supportive of the ethanol industry's agenda. Put it this way, even more supportive than in the 109th Congress -- and that was relatively supportive ... A good situation gets better for ethanol is the way I see it."

Big Oil is a Target
One of the other things John Dingell is interested in is repealing some of the lavish tax subsidies that the Republican Congress gifted the oil and gas industry under the Energy Policy Act of 2005. As this piece explains, there is much suspicion behind the way Vice President's Energy Task Force operated and how it dealt with oil and gas companies, and during the oil price peaks of the past two summers, there have been noise made by members of both parties that the market practices of Big Oil companies should be investigated for any evidence of price gouging. Expect some Congressional hearings on this front.

California Dreaming
The Democratic takeover puts California, a state considered the last bastion of liberalism and which has been marginalized in the Republican era through reduced federal funding . But with its Democractic base is gaining new access to Washington:

the new speaker of the House will be California's Nancy Pelosi (Dem-Calif), who has promised to tackle energy issues in her first 100 hours of office;
Senator Barbara Boxer (Dem-Calif), a believer in aggressive climate change policies, will replace Senator James Inhofe (Rep-Okl), a climate change skeptic, on the Senate's Environmental Committee;
Senator Richard Pombo (Rep-Calif), long time attacker of the Endangered Species Act and advocate of aggressive oil drilling in the Gulf region, was handily defeated by newcomer, Jerry McNerney , a wind energy entrepreneur.

California a long-time national leader in environmental politics. California Governor Arnold Schwarzenegger, who should be dubbed the 'Green Governator', recently signed into state law mandatory caps on carbon emissions, linked up its climate change initiatives with the efforts of the northeast states (RGGI), and signed an agreement with Tony Blair and the UK to collaborate on clean tech research.

Outside of the policy arena, California is also important because of the Silicon Valley and the new wave of clean technology investment fever that has swept the biggest names in the VC industry. The ability of the private sector to influence clean energy policy should not be underestimated; the narrowly defeated Proposition 87 in California is a testament of how effectively the heavy hitters of the investment community can raise awareness of clean energy issues (See also this commentary on Prop. 87 in Red Herring).

As such, California will have a new influence in national green politics, reports the New York Times (Nov 13, 2006):

"We will have a voice again on environmental oversight," said Art Torres, chairman of the California Democratic Party. "Over the last six years, funding has stopped for enforcement of environmental laws, and those issues are important to California."

Morgan Stanley Jumps on the Greenwagon

2006-10-27T15:41:00.000-05:00

Morgan Stanley has become the latest big corporate titan to join the fight against climate change. It announced (see official press release) yesterday that it plans to invest about $3 billion over the next 5 years in the brokering of carbon emissions credits trading and in structuring and financing carbon reduction projects.

Morgan Stanley's announcement is just the latest in the string of events in what I perceive as a fundamental "green shift" in corporate America and Wall Street, spurred on by the following trends and factors, among others:

1. Sustained high oil prices created by geopolitical uncertainty and hurricane damage to oil rigs in the gulf region has created a money gusher for oil producers (see most recently Exxon and Shell) and infrastructure companies building additional refining and oil rig capacity;

2. The high oil prices have created a sense of political urgency for oil security, creating new investment opportunities in biofuels as an alternative to gasoline, and energy efficient cars like the hybrids (see earlier posting on hybrid cars);

3. Volatile swings in natural gas prices have wrecked the fortunes of multi-billion dollar hedge fund Amaranth, among others, highlighting symptoms of a bigger problem--the uncertainty of natural gas supply and its potential to create jolts in the world economy (see earlier posting on Russia's stronghold on natural gas supplies);

4. The "clean tech" sector has received a surge of venture capital funding, making it the third most invested VC sector after life sciences and software (see also cleantech's record breaking Q3);

5. Despite a lack of carbon emissions regulations in the U.S. at the national level, various states are forging ahead to create regional carbon markets (read about California joining forces with northeastern states)

6. The ratification of the Kyoto Protocol and as a result, the implementation of the EU-wide Emissions Trading System has created a market for carbon, providing financial players with opportunities to trade, broker and arbitrage;

7. The clean development mechanism (CDM) and joint implementation (JI) schemes under the Kyoto Protocol, both similar programs which allows a country to invest in carbon reduction projects in other countries and gain emissions credits that can either be traded or used to offset the country's Kyoto emissions quota, can creates opportunities for ecopreneurs to structure, finance and broker such carbon reduction projects (click here for a recent example of a CDM project brokered by Ecosecurities);

8. China, soon the be the world's dominant economy, is taking bold moves, amongst which is the investment of US$175 billion over the next 5 years in environmental protection, and conducting a "green accounting" of its national economy (see earlier post on China's Green GDP). When China moves, Wall Street and corporate America notices;

9. The recent Clinton Global Initiative has made green sexy, raising some $4 billion in commitments for a green technology investments highlighted by the Virgin Group's Richard Branson's $3 billion commitment and former World Bank head, James Wolfensohn's launch of his $1 billion green technology private equity fund.

These are just some of the many drivers which has created a green wave of corporate environmentalism (see earlier post), especially with respect to climate change issues. Morgan Stanley's foray into the carbon market comes in the heels of Goldman Sach's own carbon initiatives, and is important for its signal that Wall Street is ready to get involved in the fight against climate change in a big way. Details of how this $3 billion will be deployed by Morgan Stanley and about the source of these funds are scarce, but the rest of Wall Street will surely be paying attention.

Related:
Climate Change Capital, a boutique London-based investment bank, raises $1 billion for CDM investment fund (article); China dominates world CDM market (article).

Biofuels in S.E. Asia--"Technology Gone Mad"

2006-10-19T00:30:00.000-05:00

Singapore's air quality has taken a hit as forest fires in neighboring Indonesia. The Pollutant Standards Index (PSI) hit the "unhealthy" 100-plus range for the first time this year in the last two weeks, hitting as high as 150. This is not the first time that Indonesian forest fires have made its impact felt across borders. In 1997, Indonesian fires caused the PSI in Singapore to hit a record 226. The haze, as it is euphemistically termed, has has directly had direct economic consequences for the tiny island-state, costing Singapore in 1997 an estimated US$300 million (including lost tourism revenues and respiratory health costs) and US$50 million since September of this year. Its bitter pill for Singapore, which has tough environmental standards and prides itself as being "clean and green," to swallow.

The traditionally-cited causes of the Indonesian forest fires have been the poor logging practices driven by shifting cultivators, and in the case of 1997, especially dry weather brought on by the El Nino climatic phenomenon. The deep irony is that the slash-and-burn logging that has created the fires in 2006 is a product of the frenzied drive to cultivate biodiesel crops such as oil palm (see Businessweek.com article).

Sustained high oil prices have pushed biofuel investments over the tipping point, not just in the U.S. but also in China and Southeast Asia. Investors have been throwing heaps of cash into the ethanol/biofuels sectors, underlined by a couple of high profile IPOs (Aventine and VeraSun) in the US stockmarkets. GreenCarCongress has been tracking the swell of news of the big investments that the likes of Malaysia and Indonesia--the worlds largest producers of palm oil--are making biofuels, particularly as derived from oil palm. The international NGO Friends of the Earth (FOE) has been very vocal about the unsustainability of such oil palm plantations (See the FOE report- "Oil for Ape scandal").

As excerpted from the businessweek.com article:

"Why are we burning our forests to plant something that we have been told will be clean, environmentally friendly fuel?" asks S.M. Idris, chairman of environmental lobby group Sahabat Alam Malaysia. "This is technology gone mad."

Hong Kong Redux
The timing of the Singapore haze is ironic because of recent press coverage of deteriorating air quality in Hong Kong, a victim of manufacturing-intensive industrial pollution from neighboring Guangdong province. The Wall Street Journal (Oct. 18, reproduced here, and related blog posting on The China Expat here) reports that status of Hong Kong's preeminence as Asia's financial capital is at risk, as evidenced by the relocation of various hedge funds relocate to Singapore because of the bad Hong Kong air.

It is at one level tragic that these hedge funds have traded one bad for another. It underscores why law alone, because of its existence is boxed in by geopolitical boundaries, can never be a complete solution. And perhaps it will impress upon the high financiers, like those in Singapore and Hong Kong, to consider the ecological and social implications of their investment allocations.

Gross Domestic Pollution?

2006-10-02T21:24:00.000-05:00

Last month, China has released a report announcing the results of a joint study by the State Environmental Protection Administration and the National Bureau of Statistics to conduct a "Green GDP accounting" and monetize the cost of pollution to the Chinese economy in 2004 [See press release here]. According to the report, some US$64 billion of damage was incurred by environmental pollution and ecological damage, amounting to some 3% of its US$2 trillion economy.

From the Wall Stree Journal ("Why Beijing is Trying to Tally the Hidden Costs of Pollution"; October 2, 2006, page A2):

"Green GDP is one part of the budding field of environmental economics, which aims to apply rigorous business-accounting methods to environmental problems. "Green economists" are driven by the notion that typical methods of measuring growth -- namely GDP -- are too crude a way to measure the overall health of an economy...While GDP looks at the market value of goods and service produced in a country each year, it ignores the fact that a nation might be fueling its expansion by polluting or burning through natural resources in an unsustainable way. In fact, the usual methods of calculating GDP make destroying the environment look good for the economy. If an industry pollutes in the process of manufacturing products, and the government pays to clean up the mess, both activities add to GDP. China's report estimates it would take a one-time direct investment of about $136 billion -- nearly 7% of GDP -- to clean up all the pollution pumped into the nation's air, water and soil in 2004."

Another take of the limits of GDP (or GNP, a slightly different notion) can be summed up in the words of former U.S. Senator Roberty Kennedy:

"The gross national product includes air pollution and advertising for cigarettes and ambulances to clear our highways of carnage. It counts special locks for our doors and jails for the people who break them. GNP includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm, and missiles and nuclear warheads... it does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry or the strength of our marriages, or the intelligence of our public debate or the integrity of our public officials. It measures everything, in short, except that which makes life worthwhile."

[For an excellent review of further criticisms on the way GDP/GNP is calculated, see Wikipedia's entry for "Gross domestic product"]

While the concept of a green GDP is not new, what is groundbreaking is a government's official announcement and calculation of such figures, and even more surprising is that it is China, for so long a target of environmetnalists' ire, is the first government to do so. (For a great article on the environmental paradox that is China, read this post titled "A Tale of Two Chinas" from Joel Makower. Sidebar: I query whether it really a paradox rather than a case of "drastic sitruations calls for drastic measures" which results in China having the most challenging of environmental problems on the one hand, and having the most progressive of environmental policies on the other hand, with the latter being a rational reponse to the former.)

Due to the limitations of data availibitlity, the China study was limited in that only "environmental pollution" and "ecological damage" costs were factored in. Ideally, according to Beijing officials, five types of natural resource use costs (minerals, forest, water and fishery resources) should also be accounted for. Furthermore, only 10 of 20 submetics under "environmental pollution" were included in the study. This suggests that the $64 billion figure is clearly an underestimate.

In any case, this Green GDP accounting is a landmark study which may catalyze an revolution in the way economists measure economc growth. Let's hope this is not a one-time study, and that green GDP accounting will be eventually integrated into the mainstream.

Branson Pledges Billions to fight Climate Change

2006-09-21T12:55:00.000-05:00

Sir Richard Branson, with former President Bill Clinton, announcing Virgin's commitments to clean technologies at the Clinton Global Initiative in New York

Surely a tipping point in private sector initiated environmentalism has been reached with Sir Richard Branson's committment of all profits of Virgin Group's aviation and locomotive businesses over the next 10 years--projected to amount to $3 billion--to invest in environmental technologies.

Make Money on Hybrids!

2006-01-12T02:20:00.000-05:00

(Click image to enlarge; courtesy of Time.com)

This one's a no-brainer. Energy Conversion Devices (ENER, $48.54) is set to capitalize not only on the solar boom (I neglected to identify ENER in my previous post on Solar), but hybrid/fuel-efficiency trend. The company profile of ENER on Yahoo Finance is described here:

Energy Conversion Devices, Inc. engages in the invention, engineering, development, and commercialization of materials, products, and production technology in the fields of alternative energy technology and information technology. The company also involves in research and development, and production of proprietary materials and products, as well as in designing and building production machinery. In addition, it offers Photovoltaics, which provides clean energy by converting sunlight into electricity. Further, the company, through a joint venture with Chevron Technology Ventures, provides nickel metal hydride batteries for various applications, including transportation, telecommunication, uninterruptible power supply, military, homeland security, stationary power, and other prismatic battery applications. Energy Conversion was co-founded by Stanford R. Ovshinsky and Iris M. Ovshinsky in 1960. The company is based in Rochester Hills, Michigan.

It is ENER's nickel metal hydride batteries that are used in Toyota's hybrid gas-electric technologies in its sensationally popular and chic Prius cars, the iPods of the automotive industry. See this article on a bullish forecast on hybrid sales by respected market analysts, J.D. Power and Associates (click here). At this week's 2006 North American International Auto Show, the theme "Small is Big" carried the day (see "What's Hot at the Detroit Auto Show", SmartMoney, Jan. 11, 2006). The market has spoken and it wants fuel efficient, smaller cars!

Some recent developments over the past few days:

Ford has shifted strategy to smaller passenger cars
Both GM and Ford are developing flex-fuel cars that run on both conventional gasoline and gasoline-ethanol blends
The Toyota Camry Hybrid to be released in 2007 will help seal Toyota's place as America's #1 auto company
The EPA is improving accuracy of gas mileage ratings by revising calculation methodologies (to prevent overinflated ratings)
Traveler's Insurance to provide hybrid users with discounted auto insurance premiums.

All these stories can be found at this wonderful blog: Green Car Congress.

ENER's leadership in nickel metal hydride batteries (and PV cells) make it a great bet going forward. It may be at a 52-week high $48+, but I think it's worth $60.

Note: I do not own ENER stock. Yet.

Energy Security in Peril

2006-01-12T01:30:00.000-05:00

In an effort to post more often, I will now change my posting style to shorter, punchier posts. I start the new year with a look at the Russia-Ukraine gas supply spat, which has gained a lot of press coverage and analysis.

Most of the western press have characterized Russia's "compromise" to restore gas supplies after two days as a defeat to Russia and an embarrassment to its new G8 presidency. However, an Asia Times article ("The Kremlin and the World Energy War", Jan. 9, 2006) convincingly argues that Russia mostly got the upper hand. I highly recommend this article for an in depth analysis of RussiaÂs motivations.

The Economist ("Nervous Energy", Jan. 7, 2006) misses the point. In interpreting the end-result as a Russian defeat, the venerable British newspaper argues that the moral of the Russia-Ukraine incident is that energy suppliers need its consumers as much as consumers rely on their suppliers. On the contrary, it has reaffirmed the potency of the energy weapon and more dangerously, undermined the U.S.' regime change drive in the former Baltic states. The ironic result of the U.S. driven Colored Revolutions in Eastern Europe is that it has instigated Russian backlash and exacerbated AmericaÂs energy security problem.

Natural gas has often been touted as the bridge of our oil-based economy to the hydrogen economy. But as Paul Roberts points out in his book, The End of Oil, the natural gas economy faces the same geopolitical risks as oil. Just as Oilsville has to contend with politically unstable OPEC, Natural Gasville has Russia and Iran to tout as its top two producers, not exactly the most democratic or Western-friendly of states.

U.S. foreign policy is not helping one bit.

Solar bullrun!

2005-12-09T14:57:00.000-05:00

Photovolatic (PV) cell producers Evergreen Solar (Nasdaq: ESLR, $11.70) and Sunpower Corp. (Nasdaq: SPWR, $27.50) have made nice gains recently as benficiaries of the peak oil consciousness that has been stirred by rising oil prices and Hurricane Katrina. Both stocks were also boosted by bullish calls by Jim Cramer on CNBC's nightly Mad Money program on December 7; the solar industry may be big winners if the California Public Utilities Commision decides on December 15 to move forward to implement key elements of Governor Schwarzenegger’s failed Million Solar Roofs Initiative.

As Jim Cramer pointed out, ESLR and SPWR both have their own advantages. ESLR has entered into a 7 year agreement for the supply of polysilicone, a key ingredient of PV panels that is in short supply. What is not clear, however, is if ESLR has been able to lock in prices for these supplies (which if locked in at a favorable rate, would be advantageous for ESLR), or if they will be supplied at a then-prevailing market rate, which is on an increasing trend given its scarcity.

SPWR, on the other hand, has a slick black design that may be more aesthetically pleasing for the homeowner to install, and also claims to have the most efficient PV panels in the industry (20 to 21%). Neither ESLR nor SPWR are profitable just yet.Another solar hopeful is Suntech Power, a Chinese PV company that that makes its New York Stock Exchange debut when it launches its IPO next week. Unlike ESLR and SPWR, Suntech is already profitable. The Chinese market is surely lucrative not only for its size but also since the Chinese government passed its first Renewable Energy Law this year, requiring state grids to purchase a certain amount of renewable energy each year.

While on a large scale wind energy is in general the most commercially viable source of renewable energy, solar energy has an economic advantage in some contexts. Solar roofing gets an economic headstart over wind energy because while wind energy has to compete with the cheaper wholesale prices of fossil fuel energy, solar PV cells are installed at the retail level, on the roofs of homes and office buildings. As The Economist ("Sunrise for Renewable Energy," Dec 8, 2005) put it:

[T]he most efficient modern wind turbines can produce electricity at a wholesale price (the price at which electricity producers buy and sell power on the grid) competitive with non-renewable sources. Solar panels cannot produce power at such low cost, but comparing their cost-per-kWh with wholesale prices is arguably not the most relevant comparison. That is because in general, solar panels are used not by electricity producers selling power to the grid at wholesale prices, but by consumers who use solar power to supplement or replace power bought from utility companies at retail prices (typically 8 to 20 cents per kWh). So solar power need only match these higher retail prices in order for homeowners and businesses to start to consider it as a viable alternative. And it turns out that the most efficient of today's solar panels do indeed match the retail price of electricity in some parts of the world with high retail prices, such as Japan (which is now phasing out its solar subsidies).

Solar power has potential applications beyond retail stationery sources of energy. Solatec LLC has created a photovoltaic kit that can be mounted on the roof of the Toyota Prius Hybrid, boosting its mileage by 10% to 55 mpg city and 62 mpg highway.

As Paul Roberts, in what is perhaps the best book on the energy problem of the 21st century, The End of Oil, astutely observes, solar power, like other forms of renewable power, is disadvantaged in several ways: low energy density (the power prooduced per square foot of facilty) compared to coal technology, intermittency, and challenges to storing it. But it does, like other renewables, have some things going for it: there is no associated fuel price risk (solar input is free, unlike the cost of crude or coal which are subject to the unpredicatbilities of the commodity market), and modular nature of production (it can function on any scale, from just a few PV panels to a vast assemblage of it, compared to say a coal plant, which requires a certain minimum size and massive up-front financial commitment to gain economies of scale). The modular nature of solar energy also makes it much more amenable to decentralized power generation and hence a more viable solution in remote areas.

While solar power may not be a magic bullet to resolving the energy crisis, the technology has matured to a stage of serving as a commericially viable complement to fossil fuel sources, providing important offsets to fossil fuel use and emissions.

Greenman Sachs

2005-11-22T23:12:00.000-05:00

Goldman' Sachs new environmental initiative, while not the first among investment banks, is groundbreaking for its comprehensiveness, its outright acknowledgement of the gravity of global climate change and recognizing its responsibility as gatekeepers of the capital markets and its calling to ensure that environmental externalities are properly priced into the marketplace.

Apart from binding itself to concrete greenhouse gas targets, the Goldman Sachs seeks to:

Become a leading U.S. developer of wind energy through its subsidiary Horizon Wind Energy;
Invest $1 billion in renewable energy and energy efficiency projects;
Support the need for a national policies capping greenhouse gas emissions;
Educate the investment community on the environmental and social risks of companies and industries through its research activities (it hopes to expand on a report on the environmental and social drivers of the oil and gas industry that it recently authored);
Establish the business case for sustainable development;
Establish and fund a Center for Environmental Markets to undertake independent research with partners in the academic and NGO community to develop public policy solutions for establishing effective markets around climate change, biodiversity conservation and ecosystem services;
Adopt the Equator Principles as a framework in managing environmental risk in project financing;
Influence its clients and potential clients to adopt best environmental practices, and screen its private equity investments under environmental criteria.

What distinguishes Goldman's environmental policy from that of other corporations is not only the integration of sustainability analysis into its core business activities (e.g. screening investments and influencing clients) but also Goldman's unique position in Wall Street as a gatekeeper for thousands of companies to the capital markets, and perhaps the most prestigious one at that. While other investment banks such as JPMorgan Chase have adopted corporate environmnental policies, Goldman's plan has set the gold standard for comprehensivness and proactiveness. Goldman's willingness to cross the boundaries of the "business of business" to explore and develop public policy in collaboration with other stakeholders (bold added to distinguish from lobbying) is, as far as I am aware, unprecedented.

It is not entirely surprising that Goldman Sachs has taken this bold step. Recent history has hinted at Goldman's green streak. It was one of the first financial institutions to recognize the financial risks of climate change, establishing a weather derivatives desk in 2001. It has also been active in the insurance and reinsurance markets; through its whollly-owned Arrow Re, it has provided insurance and reinsurance coverage for its clients for natural catastrophes such as hurricanes, and hedged against those risks through a variety of innovative financial products such as catastrophe bonds and options. It is also already a market maker in SO2 emissions trading. (For a closer look into Goldman Sach's weather-risk hedging strategies, or for that matter, a survey of a vast variety of financial institutions and products with an environmental nexus, Environmental Finance by Sonia Labatt and Rodney R. White is a must-read.) Its CEO, Hank Paulson (pictured above), is also Chairman of the Board of Directors of The Nature Conservancy, the biggest envoronmental NGO by assets.

Last year in a high profile move, David Blood, then CEO of Goldman Sachs Asset Management, left with two of his colleagues to form Generation Investment Management. With former U.S. Vice President Al Gore as its chair, Generation is an investment firm that focuses on long term investment in companies with sustainable business practices.

Goldman Sachs' main legal counsel, Sullivan & Cromwell, after playing a role in shaping the Chicago Climate Exchange, Chicago Climate Futures Exchange, and European Climate Exchange, became the first law firm to be an associate member in the Chicago Climate Exchange, committing itself to purchase carbon credits or offsets sufficient to match the greenhouse gases from the energy usage of its lawyers and staff.

With Goldman Sachs' new initiative, coupled with the GE Ecomagination program and Wal-Mart's newfound green ambitions, corporate sustainability has be thrust into the mainstream. A spawn of new business courses and textbooks is sure to follow.

Related: NY Times, Goldman to Encourage Solutions to Environmental Issues

Corporate Sustainability Comes of Age?

2005-11-22T18:01:00.000-05:00

I think we have reached an inflection point in the corporate sustainability movement. Today, Wall Street's most prestigious investment bank, Goldman Sachs, became the first invesment to adopt a comprehensive environmental policy. This milestone comes quick on the heels of the world's biggest company and retailer (Wal-Mart) and the world's biggest conglomerate of industrial technology innovation (General Electric) pronouncing ground-breaking environmental initiatives of their own. What is happening here?

Today's New York Times (Saving the Planet, an Earnings Report at a Time) observes that environmental factors are becoming primary drivers in the business decisions of America's biggest corporations. While corporate environmental activism by stakeholders is nothing new, what has recently spurred more corporate boardrooms to take action is the competitive advantage of using clean technologies, rather than simply stakeholder pressure, altruistic corporate citizenship, or the need for good publicity. With energy prices at a high, petroleum-based inputs to production are cutting into profit margins. As the article accounts, companies like Kimberly-Clark is substituting vegetable oil for petroleum derivatives in its shampoos while Dupont is replacing petrochemicals with corn.

This trend undermines the hackneyed excuse that the sole business of business is business and that addressing environmental concerns takes money out of shareholders' pockets. To be sure, the environmental benefits may merely be incidental to the economic considerations. Maybe these companies are solely concerned about the costs of inputs, rather than the associated emissions of greenhouse gases by additional fossil fuels. Yet, corporations have not shied away from trumpeting the ecological implications of such economic decisions. The proliferation of corporatsustainablety reporting is testament to this. Going green thus takes on dual shades, an environmental and monetary one.

The various initiatives that the article covers includes: Cargill's greener packaging; Eastman Chemical Company promoting cleaner coal use; Air Products & Chemical, Inc. selling refinery hydrogen that is used to remove sulfur from oil; GE's Ecomagination products that enhance energy efficiency; Chevron Energy Solutions promoting energy conservation; and Wal-Mart's new environmental policies.

Can Wal-Mart Green the Dragon?

The significance of Wal-Mart hopping onto the green bandwagon (apart from negative accusations that it is trying to create a distraction from its heavily critcized labor practices) is not only the sheer number of consumers it reaches, it is ability to control it thousands of suppliers whose operations are based in China. As Clyde Prestowitz accounts in his book, Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, if Wal-Mart were a country, it would rank ahead the likes of Germany and Britain for volume of imports from China, amounting to some $15 billion in 2003. Should Wal-Mart begin demanding that its suppliers not only meet its expectations of "Everyday Low Prices" but also a minimum standard of environmental quality, its impact on the sustainable development of the world's fastest growing economy could be enormous.

But perhaps the most profound development is Goldman Sach's new environmental initiative, which is so rich in detail and bold in promises that it deserves a post by itself.

More Geo-greening: How National Security and Global Economic Competition Make the Case for Oil Independence

2005-04-03T15:26:00.000-05:00

I realize that in my previous post, "Greening the Elephants?", I understated the national security dimension of US energy policy as well as economic competitivenss concerns of high oil prices, resulting with the pessimistic conclusion that Texas and Business would outweigh the Christian stewardship ethic, and tip the balance in favor of policies detrimental to the environment. I must acknowledge that my analysis and conclusion might have been oversimplistic, given the more nuanced observations of qman (see comments to "Greening the Elephants?"), but also if fuller consideration was given to the increasing momentum that the national security / oil-independence argument is gaining in the case for a sustainable energy policy.

National Security
A few days ago, The Washington Post ran an article ("An Unlikely Meeting of the Minds," Mar. 31) detailing the increase interest that conservative groups, like the Center for Security Policy, have in decoupling America's dependence on foreign oil. The US imports 60% of the oil it consumes, and most of that foreign oil lies in countries perceived to be sponsors or allies or radical anti-American Islamists. Set America Free, a coalition of prominent individuals and NGOs, recommends the use of various strategies such as manufactuer and consumer tax credits, federal research funding, and technology R&D to promote alternative energy sources in vehicles so as to ease the national security and economic vulnerability concerns of oil dependence. These concerns and strategies form the crux of the geo-greening movement, as referenced in my previous post, that Thomas Friedman calls for. But see Alan Reynold's critque ("Blowing smoke on gas savings?", The Washington Times, Apr. 2) of Set America Free's proposals as grounded on poor science.

Economic Competitiveness
Another noteworthy part of the article discusses the changing attitudes of the United Auto Workers. The UAW has previously perceived the calls for increased vehicle fuel efficiency as a threat to the SUV and truck market, and hence a threat to US jobs. Now, in the era of increased oil prices and declining SUV and truck sales, an increased popularity of foreign-made hybrids and advanced diesel technology poses new threats to jobs. UAW has come round 180 degrees to promote a federal program to encourage US manufacturers to develop their own alternative-fuel technology so as to retain jobs in the US.

There are plenty of other good reasons, particularly environmental ones, that make the case for US oil independence. But national security and economic competitiveness are two reasons that the Right Nation is likely to stand behind, and enough reason to temper my own pessimism , at least in regards to energy and environment issues, that nothing positive will be achieved with a conservative stronghold of US governement.

Another bipartisan effort that highlights the willingness of conservatives to advance the oil independence cause is the letter to President Bush, organized by the Energy Future Coalition and authored by 26 former national-security officials, including a number of defense hawks, urging the government to commit to $1 billion--"a level proportionate to other priorities for our nation's defense"-- over the next five years to reduce oil consumption and developing alternative fuel technologies.

Acknowledgements:
My thanks goes to Dr. Claude Gravatt for bringing the Washington Post article to my attention.

Greening the Elephants?

2005-03-27T21:21:00.000-05:00

Oil prices are soaring, but America is not paying heed by reducing consumption. Thomas Friedman ran another op-ed on geo-greens today ("Geo-greening by example," N.Y. Times, Mar 27) as a follow up to an earlier piece ("No Mullah Left Behind", N.Y. Times, Feb 13). Friedman's main point is that George Bush's failure to articulate any coherent energy policy, let alone a sensible one, is causing the American people to finance both sides of the war in the Middle East; American tax payers are funding U.S. military operations, and their continuing avarice for oil is supporting world oil prices that fill the pockets of Saudi Arabia, Sudan and Iran and reduce their incentive to liberalize their economy and politics. The result is acontinued reliance on expensive imported oil, an increasing trade deficit and an ever weakening U.S. dollar. Friedman is dumbfounded at Bush's failure to embrace geo-greening, a sustainable energy policy which marries environmentalism, fiscal discipline, and sound foreign policy.

Even the The Economist is advocating that a green agenda would serve Bush well ("Greening Bush", The Economist, Mar 3). The self-proclaimed "newspaper" argues that environmentalism is consistent with the conservative movement in so far as conservation and stewardship is consistent with the values of the evangelical Christian right. It also observes that over the course of history, a string of key Republicans such as Teddy Roosevelt (who expanded national parks), Barry Goldwater (member of Sierra Club), Richard Nixon (created the EPA, presided over the passage of the Clear Air Act and created 600 national parks), Ronald Reagan (who was a notably green governor of California), George H. Bush (adopted the successful "cap and trade" sulfur dioxide trading regime) have embraced green issues. One might add the current Californian "governator" (adopting stringent regulation of mobile source greenhouse gases) to the list. The greening of the Republican party, The Economist argues, "is a revolution waiting to happen."

I wish I could be as optimistic.

It is questionable, for one, how green the motives of some of the above really were. Nixon and Bush Sr., for example, only jumped on the green bandwagon largely because such initiatives were popular among voters at the time, and not because of some independent green ethic. Furthermore, despite the the elegant argument that stewardship should resonate with the Christian right, there are at least two strong countervailing features of today's conservative movement that will keep environmentalism in check--Texas and business. Chapter 5 ("For Texas, Business and God") of John Micklethwait & Adrian Wooldridge's The Right Nation sheds insight on the rest of my thesis.

The Bush political dynasty finds its home in Texas, together with all the state's ethos. In fact, America today is Little Texas. Texas embodies size, optimism, self-confidence and materialism. For starters, its sheer size of this frontier state engenders a "slash and burn" attitude towards the environment. In the view of Texans, the vastness of the state exists for man's dominion. The rich Texas oil resources have created a "gusher elite" leaving the pollutive byproducts of such bucaneering capitalism in its wake. The state's immensity has also bred a "swaggering boastfullness" that is personified with its unofficial "Don't Mess with Texas" slogan. It is easy to see how Bush, former governor of Texas, has carried these values into his presidency; pulling out of the Kyoto Protocol at the risk of pursuing an isolationist foreign policy never troubled his conscience.

The other distinctive feature of Bush's presidency is its unprecedented pandering to business interests. While regulatory capture by corporations is a recurring theme in U.S. politics over the past century, consider these facts. Bush is the first president to hold an MBA. More Bush cabinet members than any other administration are former CEOs (in Bush's first cabinet were Dick Cheney, Don Rumsfield, Don Evans and Paul O'Neill). In the 2000 elections, Bush out fund-raised the "incumbent" VP Gore by being the businessperson's candidate, outperforming Gore among businesspeople in almost every state and in every industry. Tax cuts and deregulation are music to industry's ears. The drilling of the Alaskan wilderness for oil is part of Bush's "energy policy," shaped in the early years of his administration from advice by Enron executives.

What Micklethwait & Wooldridge note is that Bush's weakest moments have resulted from the taint of his association with business interests, such as his decision to allow higher arsenic levels in drinking water, his questionable choice of Harvey Pitt as chair of the Securities and Exchange Commission (Pitt had blatant conflicts of interest given his prior intimate association with the accounting industry), his initial cool response to the Enron accounting scandal, his closing of one eye towards the dubious business practices of Halliburton, Dick Cheney's old firm, and resistance to the corporate governance statute, the Sarbanes-Oxley Act.

Given the Republican's Texanism and corporatism, how effectively can environmentalism be pitched as a "faith-based initiative" that can appeal to Bush's "big-government conservatism" (explained by The Economist as the use of government to promote conservative values, such as national security and education)?

Not very, I argue.

The Republican Elephant is and will be very much more red than green.

S’pore and Kyoto: Irresponsibility and Missed Opportunities

2005-02-17T15:46:00.000-05:00

(This piece was adapted and reprinted in Elements (Apr-Jun Issue 1), pg. 6, the newsletter of the Singapore Environmental Council.)

The Kyoto Protocol, the international treaty to fight global warming by imposing caps on carbon dioxide emissions in developed countries, has just come into force. Singapore, a non-signatory to the Protocol, is the world’s second largest emitter of carbon dioxide on a per capita basis. This is largely due to our energy-intensive urban lifestyles, but also our extensive offshore petrochemical refining activities.

The Ministry of Environment’s observation that a large proportion of our carbon dioxide emissions is the result of production of goods that are exported, rather than consumed locally (Straits Times, Feb 17, “Singapore Committed to Cutting Carbon Emissions”) is a tenuous reason to hesitate against signing on to Kyoto; from these exports, our economy prospers from the resulting trade surpluses and our workers earn living wages that drive domestic consumption of other goods. As beneficiaries of the release of greenhouse gases, we must take responsibility.

There are other good reasons to sign on to Kyoto. Not only would we be exempt from the mandatory emission caps (Singapore is not on the list of developed countries to which those caps apply), Singapore would also be able to take advantage of the treaty’s incentive mechanisms that could promote technology transfer to Singapore, and help Kyoto signatories meet their emission caps, at minimal cost to us.

While Singapore’s energy-efficiency proposals deserve credit, one must not confuse carbon-efficiency with carbon emission levels. Having the most efficient system says nothing about its absolute size. In the context of climate change science, it is absolute emissions, not emissions as a proportion of a country’s GDP, that matter. Although carbon efficiency measures are crucial, we must not lose track of our absolute levels of carbon use (and hence emissions).

Emissions caps do not mean that we sacrifice economic welfare. As even Michael Porter, world-renown business management guru, recognizes, environmental regulation can create “innovation offsets,” where compliance to environmental standards spurs quality improvements in business production processes, which either result in energy consumption savings or superior and higher-priced products, that more than compensate for the cost of compliance.

Singapore has a real opportunity to be an international model of sustainable development. The technology and know-how is certainly within reach, as demonstrated by our parade of world’s bests in so many other fields. Indeed, in some respects of sustainability, such as our truly first class public transportation system, we are arguably second to none.

Many of our ASEAN neighbours have ratified the Kyoto Protocol.

For the sake of our children, so should Singapore.