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The week in green
I know it has been a pretty busy news week, what with the government slowly imploding and all, but it still seems a trifle strange that the UK business community's Road to Damascus moment went so under reported.
For almost as long as businesses have existed their default policy has been to kick vigorously against governments and their red tape. Taxes and regulations were a burden to be borne grudgingly and new laws and rules were to be opposed as a matter of principle.
Until, that is, this week.
The report from the CBI's Climate Change Task Force was remarkable for so many reasons, but what stood out the most was the call for more, not less, regulation.
Under the previous head of the CBI, Sir Digby Jones, the organisation was a constant and vocal thorn in the side of regulators everywhere, calling for tax cuts and a lighter touch to regulation at every opportunity. Now, just over a year after his departure the leading lights in UK business want more green laws and they want them fast.
Moreover, they have learnt the lesson that was always beyond poor old Digby: that these green regulations and taxes are good for business. As the report articulately outlined a clear regulatory framework would not only limit climate change risks by driving emissions cuts, it would also provide a stable environment in which firms can make the investments necessary to decarbonise their operations, head off the managerial nightmare of a patchwork of different green laws across different jurisdictions, and help drive the market demand for new green products and services.
It is difficult to overstate the scale of the sea change in attitude at the top table of UK business - and what's more it is not just UK bosses have undertaken this policy u-turn. Prince Charles managed to get 150 of the world's largest multinationals to issue a similar call for legally binding emissions cuts, while a new survey from Clifford Chance found that 80 per cent businesses want more green regulations. That's four out of five business execs wanting more laws, the ice caps might be melting but some commentators would be forgiven for checking whether hell had frozen over.
Once you accept that there has been a fundamental change in attitude in many of the world's top boardrooms the green investment boom suddenly makes a lot more sense. Whether it is US VCs ploughing money into clean tech like it is going out of fashion or large multinationals like Philips tapping into their acquisition war chests to improve their green portfolios all these decisions are being informed by an understanding that the global legislative framework is changing.
Of course, some firms still don't seem to get it. But there is little doubt that as support for green regulations becomes the norm those that fail to fall into line will face a level of public opprobrium that will become all but impossible to ignore.
Have a good weekend,
James
What Brown should have said about Heathrow's third runway
Earlier this week, before his government lurched into its now weekly crisis, Gordon Brown gave a speech to the CBI in which he declared his support for a third runway at Heathrow, claiming "we have to respond to a clear business imperative and increase capacity at our airports".
Cue much wailing and gnashing of teeth from environmentalists arguing that Brown can’t make an impressive speech on climate change one week and commit to expanding airports the next and expect to be taken seriously.
The CBI, meanwhile, welcomed the move, but those members of its climate change task force who have looked at the various reports on the aviation industry's rapid expansion would be forgiven some private doubts, despite the conclusion in their new report that "air travel can be part of a low carbon economy".
Of course, even with its new commitment to "do what it takes" on climate change keeping the CBI and the treehuggers happy is never going to be easy, but Brown could have done a far better job. Here's what he could of, or, if I may be so bold, should have said:
"You have rightly called for action at Heathrow. Our prosperity depends on it: Britain as a world financial centre must be readily accessible from around the world. And this week we demonstrated our determination not to shirk the long term decisions but to press ahead with a third runway.
I know this commitment will attract the ire of environmentalists and may not even win full approval from yourselves, committed as you now are to transitioning to a low carbon economy, but this third runway will help secure London's position as the world's financial capital and drive the economic growth that is essential if we are to make the investments required to decarbonise the UK's economy.
However, while I will not make this government a hostage to fortune and say this type of airport expansion will never happen again it will become rare to the point of extinction over the next few decades.
In a speech to the WWF last week I pledged that every new policy will be examined for its impact on carbon emissions, and while this does not mean we will cease carbon intensive projects altogether it does mean that where such projects are authorised we will have to deliver a greater cut in emissions in other sectors.
This is a hard truth to face, but the rate of growth within the aviation industry is now so rapid that it threatens to cancel out all the carbon savings we make in other sectors of the economy.
We have attempted to sidestep this truth by excluding aviation and shipping from inclusion in the climate change bill, but to continue to do so will undermine the credibility of this important and groundbreaking piece of legislation. More importantly it will also make it nigh on impossible for us to avert dangerous climate change – sadly the atmosphere does not care whether the emissions come from a UK power station or a plane midway over the Atlantic and the legislation should account for that.
Ignoring this truth any longer would be foolish in the extreme and so I have instructed the new climate change committee to assess whether aviation and shipping should be included in our emission targets as its first duty of business.
Far be it from me to second guess the committee's conclusions, but any sensible observer would accept that ultimately these emissions will have to be accounted for in some way.
Once the emissions associated with any new runaway have to be subjected to a carbon impact assessment it will become extremely difficult, if not impossible to authorise further projects and still hit our emission reduction projects.
I am loath to criticise the report this morning from the CBI's Climate Change Taskforce, because I truly believe that it is one of the most important documents on the challenges we face ever produced. But in my opinion it fails to take the issue of aviation sufficiently seriously.
The report accepts "that continuing growth in demand means that aviation will account for a bigger share of emissions over time" but fails to quantify how much it will grow or how big a share of emissions it will eat up. Let me fill you in.
The Department for Transport has estimated that the number of passengers passing through our airports will rise from around 200m a year now to between 400m and 600m by 2030. Without a miraculous revolution in aircraft design improvements in fuel efficiency will not be able to cancel out this increase in demand and emissions will soar. According to research from the Tyndall Centre, if we are to stabilise emissions at a level we have deemed safe while continuing to allow aviation to grow at its projected rate then the airline industry will account for half of the UK's emissions by 2050.
Such a share for aviation would make it all but impossible to hit our carbon targets and dangerous climate change and economic catastrophe will become increasingly inevitable.
This means that based on current trends we have no choice but to cap, or even scale back, airport capacity at some point in the future.
So, how can this be done without damaging the economic growth that as I explained earlier is essential to low carbon investments and is the justification for Heathrow's third runway?
If we are to mitigate the risk of climate change two things must happen: firstly, we must engineer the biggest technical revolution the aviation industry has seen since its birth as we attempt to move as far as possible towards decarbonising flight. And secondly, we must fly less.
I would argue that both of these things can be done without damaging UK plc, and if done properly they should even stimulate growth.
The aviation industry has made good progress in enhancing fuel efficiency and limiting carbon emissions, but it must go much, much further.
In order to drive this progress we have corrected the mistake we made in taxing air passengers - a move I now accept had little impact on emissions - and instead plan to begin taxing flights from November 2009. The level of the tax has not been agreed yet, but let me warn you now - it will be significant.
I understand your mutterings, but when introduced this tax will be accompanied by major tax cuts on energy efficient products and vehicles that will make the move revenue neutral. It will also provide a clear financial incentive for airlines to operate fuller planes and send a clear price signal to passengers that they should look to avoid flights wherever possible.
We are also committed to bringing aviation into the European emissions trading scheme – a move that will provide airlines with a financial incentive to cut emissions and only operate the most fuel efficient aircraft. Many within the aviation industry have signalled their support for this scheme, but many others in resisting these plans are displaying a short sightedness and irresponsibility that I find astounding. I implore you as some of their most influential customers to join with both the government and the CBI Climate Change Task Force in calling for them to drop their opposition to the proposals and join a scheme that already impacts many other sectors of the economy.
This will lead to an increase in ticket prices, but if it makes you as business leaders think more carefully about whether or not a flight is necessary then it is a price worth paying.
However, the stick alone will not be enough.
I will not hypothecate the taxes raised from flights because, as the Northern Rock episode has painfully proved, a government needs a certain flexibility in its spending decisions. However, I will pledge that we will dramatically increase our investment in R&D projects working to deliver lower carbon aviation.
The CBI's task force report notes that the Society of British Aerospace Companies has called for government investment in civil aviation technology of £130m to £150m per year. I will go far further than that and invest £300m in aviation R&D on the understanding that the focus of the research will be on limiting carbon emissions.
There are many exciting technology avenues open to the aviation industry, ranging from biofuels to new engine designs and lighter planes, and if the UK can deliver these innovations first then it will be able to tap into a global market desperate for more energy efficient technologies.
Furthermore, the CBI report outlines how 73m tonnes of carbon dioxide are wasted every year around the world due to inefficient use of airspace and infrastructure, such as the stacking of aircraft in the skies around Heathrow. Streamlining air traffic management systems in Europe alone could cut fuel consumption by 12 per cent and the case for our bringing airlines into the ETS is undermined by the EU's failure to deliver these reforms. I will make it a priority for our negotiations in Europe that these reforms are achieved.
However, with these legislative and technical improvements years away we must also act now to limit aviation's emissions and that is why I am asking you not to fly where possible.
I am not saying don't fly at all – because, as I said, I understand aviation's importance to business.
However, I am asking you to think back to the last time you flew to an international conference or business meeting and found yourself thinking it was a waste of your time. If you are anything like me you will not have to think back too far.
We all now have a responsibility to accept that flights are one of the biggest contributions we make as individuals to climate change and should think more carefully about when we take them.
Again, the government will move to help you change your company's approach to corporate flights. The latest video conferencing technologies are a wonder to behold and can genuinely cut the need for business people to fly and improve productivity. So to help drive their adoption we will offer both 100 per cent tax breaks on the technology and interest free loans to all firms installing them.
I also accept that our rail system is the laughing stock of Europe. With the high speed link to Europe now open the poverty of the rest of our network becomes even more apparent and it is an issue that must be resolved. That is why I am today launching an investigation into how we can deliver a genuinely world class high speed rail network that will make domestic flights completely unnecessary.
It will take a huge effort from everyone in this room as well as the fourth technology revolution that I spoke of in last week's speech to maintain economic growth while cutting emissions across the economy, including in aviation. But it is my belief that these measures, coupled with your ingenuity and entrepreneurial spirit, can help us increase prosperity while cutting aviations emissions."
The Week in Green
It is often said that the world we live in was shaped by the Second World War. Not so much the geopolitical landscape, though that too obviously, but more the technologies that define our lifestyles.
From jet planes to reliable cars and mobile phones to satellite, the technologies we take for granted all emerged during the Second World War and ensuing Cold War.
It is a common historical phenomenon that war, for all its misery and destruction, brings about golden periods in technological development. Consequently some commentators have already observed, tongue only somewhat in cheek, that what we need if we are to develop the technologies to solve the climate crisis is another great big war – some countries have even been working hard to oblige.
The manner in which military requirements could help accelerate the development of clean technologies was illustrated this week with the announcement that start up M2E Power is just eighteen months away from providing the US military with a battery that recharges by harnessing kinetic energy.
The inventor, an ex-soldier himself, recognised the back-breaking impracticality of soldiers carrying round batteries to recharge all the electronic kit they now carry and developed a version that constantly recharges itself as it is moved.
The solution will allow the company to tap into the massive defence market, but interestingly it could also make mobile phone chargers a thing of the past. And, perhaps most excitingly, because the innovation is based on an improvement in the efficiency of electromagnetic conductors it could deliver a major improvement in the efficiency of wind turbines and hydro power plants.
It might have been designed to help the military, but applied to the rest of society M2E's technology could help save the world by decarbonising the global economy.
Perhaps all we need now is for the military to demand an alternative to lead-based paints, an effective standard for sustainable palm oil and a UK-wide high speed rail network, because left to its own devices the market does not appear to be performing that well.
However, that is not to say that we must rely on the military is the only driver of invention and innovation. Humanitarian concerns can also lead to the development of mobiles that don't need mains recharging according to G24i, while a government that sets clear environmental targets and sticks to them might just deliver the "fourth technological revolution" needed to implement a low carbon economy.
Moreover, even voluntary green schemes can drive innovation and enhance environmental performance as long as enough players in the market choose to follow them. At least that's what Ofgem and the Walker Review on private equity will be hoping.
Have a good weekend,
Cheers,
James
Has Brown really gone green?
Apparently this time it's for real.
According to those shadowy figures who give political journalists their seemingly psychic understanding of ministers' thoughts Gordon Brown has really gone green this time.
The spin doctors insist that if the prime minister's attitude to climate change has in the past been somewhat equivocal, yesterday's speech marks a very real and very important shift in attitude that once and for all brings him down on the side of the environmentalists and green businesses.
According to The Guardian's chief sage, Polly Toynbee, recent reports that ministers were planning to wriggle out of EU targets to source 20 per cent of energy from renewable sources by 2020 finally brought the long-running battle between Defra and BERR to the boil. An argument ensued at a "stocktaking" meeting to discuss the targets and Defra carried the day. Brown ruled that the target must stay and must be met – end of.
The question now is how to hit targets that only a couple of weeks ago were deemed so demanding by ministers at BERR that they had to be watered down?
The signs from Brown's speech were heartening. There was very little in the way of new announcements - besides the eye catching commitments to phase out single use carrier bags and toughen car fuel efficiency rules further - but when all the government's various initiatives and targets were set out in one speech you began to get the sense that maybe this time the rhetoric will be followed by action.
For example, the plans for expanded carbon trading mean a price signal on emissions will impact almost every sector of the economy within the next few years; the launch of the tendering process for a carbon capture and storage project will make the UK one of the first countries to adopt the technology; the commitment to remove planning barriers and improve subsidies for offshore wind, wave and tidal power projects will help the UK finally tap into its massive renewable energy potential; and Brown's focus on green jobs and opportunities rather than costs should help get businesses and the public onside.
And yet despite these initiatives it is hard to avoid the impression that the government's carbon emission reduction programme looks more than a little lopsided.
The commitment to necessary regulation is there in abundance, while Brown's evoking of the Post-War Marshall Plan suggests there is a willingness to raid the public purse to help build the low carbon infrastructure required, but where government policy remains a good deal less clear is in the support and incentives it will offer businesses to help them make the low carb transition.
As Toynbee observed today, "Brown resists intervention in markets, but industry needs a kickstart".
Where the government does intervene in markets its record is mixed. For example, only the most loyal Whitehall apparatchik can continue to argue that the Renewables Obligation subsidy mechanism is as successful as the far simpler feed in tariff that has made Germany a world leader in green energy.
Meanwhile, plans to expand carbon trading will help drive adoption of low carbon products and processes, but without a concurrent attempt to incentivise greener business models many firms will argue that they are being hit with extortionate new costs while the government does little to help them change their operations.
One of the key challenges for the government's low carbon strategy will be to keep businesses onside, particularly over the next five to ten years when European firms look like they will inevitably face higher costs and tighter regulations than many of their competitors in China, India and possibly even the US.
To do this there has to be an indication that government is willing to help with the low carbon transition, and if that means titling the market in favour of the green market leaders while continuing to hammer away at the laggards then so be it.
Initiatives like the £1bn public-private Energy Technologies Institute to help bolster clean tech R&D are a step in the right direction, but when you consider Brown's speech came on the same day that German chemical giant Bayer pledged to spend not that much less on green R&D you realise that the government's fund is an order of magnitude too small.
What is needed is a real helping hand for all green business products and practices in the form of massive tax breaks. If the government must make the lost tax revenue up from somewhere it can do so by increasing tax on the polluting activities all businesses now know they must wean themselves off.
Only yesterday, I was speaking to an IT exec who bemoaned the lack of government support for green technologies such as video conferencing that are just on the edge of commercial viability and simply need a little push. He added that even where there were tax breaks for products such as energy efficient cooling systems most firms had little idea of how to access them.
If the government was to impose and, just as importantly properly promote, a wide ranging tax incentive programme incorporating everything from solar panels to hybrid cars and triple glazing to LCD lighting then not only would businesses find it easier to justify green investments, but they would also get the impression that the government was on their side and willing to help with the technological revolution Brown demands.
Economists of the Brown School might argue that market forces can and will drive this revolution without intervention, just as they did the IT revolution twenty years ago – and they'd be right. But the fact is that without intervention this revolution will take years and decades that the scientists insist we don't have.
If Brown is as serious about climate change as his speech suggests then it is time to break with his convictions and give the invisible hand of the market a sizable shove in the right direction.
The Week in Green - Europe's politicians limber up for a scrap
It looks like Europe's politicians are spoiling for a fight. Whether its US climate change negotiators or the global airline industry they don't seem too fussed. Lines are being drawn in the sand.
This week saw two clear warning shots fired from the European parliament. Proposals to pull airlines into the Europe's emissions trading scheme may represent a compromise and may have pulled off the unlikely feat of annoying both environmentalists and airline execs, but they are tougher than they could have been and mean that despite the aviation industry's vocal protestations flights should now be included within the scheme within four years.
Meanwhile, the resolution detailing Europe's position ahead of the UN's Bali climate change conference may have been a formality, but it again underscores how serious they are about getting a meaningful agreement in place. Given that US negotiators are reported to be again attempting to water down the IPCC's report on the risks and opportunities posed by climate change it looks like we are due for one almighty political scrap next month. The US is likely to be isolated with even its old ally Australia set to ratify Kyoto if next week's election goes as expected, but sadly that does not make agreement inevitable.
It is difficult to overstate the importance of the conference. The green business movement is now so entrenched that it will continue regardless, but its progress will become far easier with binding emission targets and a global price on carbon through an integrated cap-and-trade scheme.
With such measures in place suddenly many of the developments we have seen this week, such as urban wind turbines, Eurostar's extension of high speed rail links, Manchester's congestion charging plans, sneeze-free green offices, and even solar-powered mobile phones, could quickly become the norm.
Moreover, such an agreement would also limit the sizable business risk posed by a patchwork of national and regional environmental regulations; something already evident in the polarisation of US green policy, the otherwise admirable plans for a UK climate change bill and talk of a London ban on plastic bags.
Some businesses, like many in the aviation industry, will prefer to keep their heads stuck in the sand, but those who fully appreciate the long term risks and opportunities posed by climate change should be cheering on Europe's negotiators as they pack their rhetorical boxing gloves into their suitcases.
Have a good weekend,
James
Why the China excuse is getting old
I'm not sure when it happened exactly but at some point over the last five years China became the world's favourite excuse. It has become the dog that ate the homework, the leaves on the line, and the dodgy pint all rolled into one.
For any politician or business leader looking for a reason not to act on climate change China has emerged as the "yeah, but" option of choice.
Sadly, the fact that the "But Sir, China's doing far worst" line of reasoning wouldn't look out of place in a primary school classroom has not proved enough to stop people who should know far better (you know who you are Blair) from using it.
The net result is that the statistic about the country building a new coal fired power station every week (or is it every two weeks, no one seems quite sure) has been repeated so many times it has become meaningless and western governments have managed to conceal their often embarrassing climate change policies behind a Chinese fig leaf.
Increasingly however there are signs emerging that this line of reasoning is not just intellectually and morally bankrupt – the atmosphere does not care where emissions come from and nor should we - it is also just plain wrong.
According to a new report from the Worldwatch Institute, far from being an eco-villain China is ready to leapfrog the very countries that cite it as the main reason for their inaction.
As with everything to do with China the numbers are impressive: $10bn will be invested in renewable energy this year, placing China second only to Germany in the world rankings; production of wind turbines and solar cells doubled in 2006 and should overtake the West within three years; solar PV production capacity jumped from 350MW in 2005 to over 1,000 MW in 2006, with 1,500 MW expected in 2007; 100 million square metres of solar hot water panels were operational by the end of 2006; and wastes from agricultural facilities in China could yield 80 billion cubic metres of biogas annually.
This revolution should not be a surprise to any one. It stands to reason that China will, in theory at least, find it easier to transition to a low carbon economy than more developed economies.
It is far easier to build an energy grid powered by renewable energy from scratch than it is to slowly dismantle your fossil fuel based infrastructure and replace it with a newer, greener version. Equally, it should be far simpler to give a city a green overhaul if that city is growing and you can incorporate sustainable design into new buildings and neighbourhoods as they are constructed rather than once they are already up. All it takes is a willingness to plan properly and enforce green standards – something the Chinese government claims to have in spades. Meanwhile, low costs should make China the ideal location for multinationals to site their clean tech projects.
Of course, it would be wrong to suggest everything in the Chinese garden is rosy. The country still faces numerous environmental problems, but in many ways it is these problems that are the driving force behind the current green investment.
According to Worldwatch, China's reliance on coal for 80 per cent of its power coupled with a boom in car ownership means that only one per cent of urban Chinese breathe air that meets European air quality standards. But it is this tragic statistic that at least partly explains why a recent BBC survey found that Chinese consumers are more interested in green products and initiatives than their western counterparts - pollution effects them directly and they want something done about it.
This popular pressure is combining with economic realities to ensure that Chinese investment in renewables will only accelerate. The country's political elite know that its economic revolution is unsustainable without a major diversification of its energy supplies. Power shortages are already hampering growth and with the country poised to take over from the US as the world's biggest polluter international calls for action are only going to increase.
The net result is that like any green investment trend China's renewables revolution is driven more by self interest than any love of nature. But either way the oft-quoted myth - let's call it the Bush folly - that China is not doing much to address climate change so the West can't be expected to do much either is now as far from reality as it is detached from logic.
Perhaps Western leaders are going to have to find some new excuses. It shouldn't be too hard; after all they have had years of practice.
Who's in the right in the plastic bag ban conundrum?
Why is nothing in the world of green business ever simple?
Take London's plans for a ban on all free disposable carrier bags. At first glance this is a surely A Good Thing: almost two thirds of Londoners support the idea; a ban on plastic bags has proved highly successful in the Devon town of Modbury; most of the supermarkets are already pushing reusable bags as an alternative; and it would strike a blow against one of the most visible symbols of consumer waste.
But as soon as you start investigating the proposals everything starts to get confusing.
Despite the proposal's popularity the government - whilst committed to phasing out single use plastic carrier bags through its waste strategy - seems strangely unwilling to endorse a ban.
Spokespeople for both Defra and the Treasury are quick to cite the supposedly poor example of Ireland, which introduced a tax on plastic bags in 2002 with a similar goal of slashing the number of bags in circulation. They argue that far from slashing the use of plastic bags the move simply resulted in a surge in sales of heavier reusable bags and bin liners, which require more energy to manufacture and transport.
The UK Packaging and Industrial Films Association (PIFA) even claims to have uncovered Irish customs and excise figures show that while the use of thin plastic bags in Ireland plummeted following the introduction of the tax the total weight of plastic bags being imported into the country has increased as people buy alternatives.
Meanwhile, Irish shops have reportedly simply started handing out paper bags, which (almost incredibly)some argue have a greater environmental impact than plastic bags as they release carbon dioxide as they decompose.
All this sounds so counterintuitive it is easy to imagine a well organised plastic bag lobby has simply constructed an argument to suit its own ends and both the UK and Scottish governments, which shelved plans for an Irish style bag levy, have fallen for it.
This is certainly the view of a spokesman for the Irish department for the Environment, Heritage and local Government, who argues that evidence claiming overall use of plastic bags has increased is anecdotal, that use of plastic carrier bags has plummeted 90 per cent and that use of reusable bags has soared.
He also points out, not unreasonably, that Ireland has now stuck with the ban for around five years and earlier this year increased the levy to ensure it remains effective – a strange thing to do if it was not delivering a positive environmental impact.
The intuitive position remains that the Irish government must be in the right and the plastic bag lobby is attempting to muddy the waters of the debate.
It stands to reason that any tax or outright ban on carrier bags, such as that proposed in London, will lead to the increased use of heavier reusable plastic bags and bin liners – after all people still need to carry their shopping home and line their bins, but it is hard to believ this increase offset the environmental gains from a full ban.
For example, I have been using a small rucksack and three reusable plastic bags to carry shopping back from my supermarket for the last year; they are all still going strong and there is no way they are heavier than all the disposable bags I would otherwise have used. This would surely be the default position if a ban was enforced with more reusable bags being used, far fewer disposal bags being used and overall demand for plastic bags falling.
And yet, some observers maintain that the evidence from Ireland is to the contrary.
If the Irish government is as proud of its plastic bag policy as it appears then it owes it to every other national, state, city and local government currently considering a bag ban to put this debate to rest one way or another and commission a full audit into the overall environmental impact of its levy.
Perhaps then the decision for MPs voting on the London councils proposals would prove simple after all.
The Week in Green
Whenever you speak to an executive at a company trying to develop a green business model two questions will invariably be asked. The first is whether or not the green business trend is "real" and the second is what is driving it.
Well for those still struggling to find the answers to these questions - they are yes and basic economics BTW - they were spelt out loud and clear this week as the cost of petrol cleared £1 a litre and oil edged ever closer to the oh so symbolic $100 a barrel mark.
It is this simple trend more than any other that explains the current interest in green business. Forget saving the world, this is about saving money, and you can see the ominous shadow of these burgeoning costs in almost every green business initiative out there.
Whether it's the boom in green construction, the consolidation in the solar market, plans for greener cities, sterling financial results from the renewables sector, or even those sci-fi dreamers and their plans for power stations in space it is the soaring cost of conventional energy that provides the all important economic driver.
But while concerns over soaring energy costs and even oil shortages mean businesses know they must embrace greener business models they are still less than sure about how best to do it.
Consequently, there have been some pretty damning stories this week highlighting firms getting it badly wrong, ranging from Shell's "misleading" green ads to those household names and burgeoning biofuel companies who may be touting their green creds but are also contributing to the deforestation of Indonesian rain forests.
New rules for sustainable biofuels may help, but in the mean time perhaps the companies in question should try and make up for their past indiscretions by taking a leaf out of Fiji Water's book and going "carbon negative".
Have a good weekend,
James
Not the beer, anything but the beer
If concerns over deforestation, food riots and increased carbon emissions aren't enough to turn you off biofuels, perhap this will work: the price of a pint of beer is about to increase and once again that pesky ethanol is to blame.
The problem is particularly acute in Australia - where beer is a staple apparently - because the drought has combined with a global shift away from barley and towards fuel crops to drive up prices.
Expect prime minister John Howard's opposition to Kyoto to soften any day now. If there is one thing that Howard's core supporter can't stand (besides losing at rugby) it's expensive beer.
Firms are playing with matches over biofuel
It's going to happen, it's just a matter of when.
Some business - most likely in retail, but possibly in transport - is going to announce it is using biofuel powered vehicles as part of its fleet and get a very nasty surprise.
A press release will be sent out talking up the vehicle's green credentials and spokespeople will be put forward to tell the world how the new vans or cars are just one example of the company's burgeoning green credentials.
At which point one of the world's most respected and recognisable environmental groups - most likely Greenpeace, but possible Friends of the Earth, WWF or Oxfam – will let loose their media attack dogs and go for the jugular.
"Why", they will ask across every media outlet that will give them airtime, "are you even bothering to trial a fuel that countless reports have proven does more harm than good?
"Aren't you aware your biofuel trial, however small, is contributing to food shortages and the rapid price inflation of basic staples which millions of people worldwide depend on for daily survival?
"Don't you know that the increased demand for agricultural land that is directly resulting from the rush to biofuels is leading to deforestation that accelerates climate change and increases the risk of extinction for many species, including those cuddly primates?"
They may even bring along a Brazilian farmer or wildlife reserve warden directly affected by the biofuel revolution to help them make their point.
The firm, disorientated by the sudden assault on a strategy it thought would be universally applauded, will then put out some sort of statement to the effect that it is only sourcing its biofuels from sustainable sources.
To which the environmental campaigner will respond: "If you are using any form of conventional fuel crop, as opposed to waste crops or algae, then regardless of where it is being grown it is still taking up agricultural land that could be used for growing food at a time when world food stocks are dangerously stretched. The knock on impact of such biofuels is damaging, even if it is sourced from an otherwise 'sustainable farm' in the UK."
Sticking to its guns the firm may try to argue that the trial will deliver significant carbon savings compared to fossil fuels.
To which the campaigner - who is, by definition, far more familiar with these matters than the company's corporate PR department - will ask, "How can you be so sure? Have you included the emissions from the harvesting, processing and transport of the biofuels in your carbon calculations? How are you assessing whether farmers displaced by biofuel plantations aren't in turn contributing to deforestation? Are you following the recommendations of Nobel laureate Paul Crutzen and including the contribution of nitrogen fertilizers when working out biofuel's carbon footprint?"
Finally, the company will give up arguing the toss and try and remind people it is only a trial after all and the aim is to find out if there are any problems with the fuel.
To which the environmental group, by now joined by the entire green blogosphere and possibly even consumer groups, will say ,"why don't you just pull the plug now then? National Express did it and they know a thing or two about transport fuels. We need a moratorium on all biofuels based on fuel crops until genuine second generation fuels made from waste organic matter or algae are available.
"Until then, trials like this are almost certainly increasing carbon emissions, leading to loss of natural habitats and contributing to global food shortages."
Waitrose may have just managed to avoid just such a damaging confrontation - but only because its trial of rape seed oil powered vans is small in scale, its fuel is sourced from "sustainable" sites in the UK and Germany, the company has one of the best reputations for sustainability in the UK, and the environmental groups have not yet readied their anti-biofuel arsenal.
But there is every chance the next firm unveiling biofuel powered vehicles will not be so lucky, particularly if it is simply sourcing the fuel on the open market with no knowledge of where it originated.
If I was in the purchasing, marketing or sustainability department of any large company, I would be standing well back from any biofuel initiative, just in case it goes off in the company's face.
Why Girls Aloud have got it right on hypothecated taxes
The first time I stumbled across the term hypothecated taxation was in an article late last year about an interview the pop group Girls Aloud had given with the New Statesman.
Now there's a sentence you don't get to write too often.
In the interview the UK's finest purveyors of innovative power pop and lad mag photo shoots revealed that they are broadly in favour of higher taxes, but only if you get an indication where the money is being spent.
As band member Kimberly Walsh observed in a comment that revealed the group to be a bit more politically astute than you'd expect given the majority of their public pronouncements are reserved for the slagging off of Charlotte Church: "You'd happily pay taxes if you thought, I'm paying them so a fireman or a nurse can have a decent wage. People just want to know it's going to the right people."
I only mention this little vignette, because up to that point I had never before stumbled across the term hypothecated taxation and a quick straw poll of the office revealed that I was not alone.
Since then however the concept, if not the term itself, has emerged as one of the defining debates for the whole environmental movement as report after report has suggested that such a taxation model represents the best means of garnering public and business support for taxes on carbon emissions and waste.
Just yesterday we saw two further studies suggesting the appetite for green taxes where the revenue is immediately diverted into environmental projects is substantial.
According to a major BBC survey of 22,000 people worldwide half of respondents are in favour of increased green taxes on fossil fuels, but that figure soars when asked if they would support green taxes where the revenue raised was used for green purposes.
Similarly, a new survey from accountants Hacker Young found a whopping 90 per cent of businesses felt cash raised from green fences should be ringfenced for environmental purposes.
It is easy to understand this widespread support for hypothecated taxation. As Doug Miller of research firm GlobeScan, which carried out the BBC poll, observed most people instinctively dislike taxes because they feel tax revenue is not spent in the right areas. Give them an insight that green tax revenue is being spent directly on tackling the environmental issues that they are increasingly concerned about then they are far more likely to support the taxes in the first place. He pointed to China as a prime example where support for green taxes is far higher than in other countries, because people are "literally dying" because of high levels of pollution and they see how green taxes can work.
It seems that at best people will be happy to pay hypothecated green taxes, telling themselves they are contributing to the fight against climate change, while at worst they will see them as a necessary and understandable evil.
For businesses the appeal of such ring fencing is even more pronounced. They understand that green taxes will likely lead to increased costs and that passing these costs onto customers will be far easier if they can point to widely supported green taxes as the cause. They also know that government is currently not investing nearly enough in the large public works and mitigation measures required to limit and adapt to climate change and that ring fencing a major revenue stream to spend in this area will finally force them to throw serious cash at the defining problem of the age.
So given all this support why is the government so reluctant to even consider the idea? Gordon Brown could urgently do with a populist tax idea – or at least one he didn't have to nick from the Tories - and yet when I last asked the Treasury about their position on hypothecated green taxes I was told in no uncertain terms that it was simply not on the agenda.
The problem is that hypothecated taxation is anathema to many at the Treasury. They fear, with some justification, that to introduce just one hypothecated tax would prove the thin end of the wedge and once tax payers were empowered in such a way they would demand that more and more of their taxes were assigned to certain sectors and causes before they are even paid.
Such a scenario, while looking appealing and democratic at first glance, would prove an unmitigated disaster.
Dostoevsky once said that "the degree of civilization in a society can be judged by entering its prisons", but can you imagine how loudly some people (and newspaper proprietors) would vehemently object to seeing a hypothecated tax diverted into improving our prisons.
Many people, like the aforementioned Walsh, would love to see how much of their taxes went to nurses and firemen, but how many would want to know the amount being spent on traffic wardens and health and safety inspectors?
Widespread hypothecation would be a recipe for regular and vigorous protests and anti-tax camapaigns and as such it is easy to see why the Treasury would is so twitchy about the concept.
Moreover, the model also denies government the flexibility it requires to respond to unexpected crises. Passing a law demanding that all revenue from fuel duty goes into improving public transport and flood defences for example would be widely welcomed by environmentalists and businesses, but you know mandarins at the Treasury would be thinking "what happens when there's a recession and we need that money to invest elsewhere".
And yet, while this reasoning explains why the government dismisses the idea of hypothecated green taxes it is hard to imagine it can continue to ignore a concept that has such widespread support.
There are hypothecated taxes that work - the TV licence is probably the best example – and the fact remains that the government will have to invest vastly more in the next couple of decades to drive the transition to the low carbon economy and adapt the UK's infrastructure to the risks posed by climate change.
To do this tax revenues will have to increase. The idea, as the Tories claim, that green taxes can be made revenue neutral by cutting other taxes sadly won't wash – driving efficiencies in other areas of government simply won't free up enough funds to divert into essential environmental projects and overall government spending will have to increase if we want the public transport and flood proof rivers that will be increasingly essential to UK business and growth.
As Gordon Brown learnt during the fuel protests increasing taxes on fossil fuels is a dangerous game to play. But the only way to do it is to convince people that such taxes are not a revenue grab but an essential means of discouraging polluting activities and raising revenue for essential climate change projects.
Hypothecated green taxes are the only option and if it means less flexibility for the Treasury and more pressure on politicians to reveal how our taxes are spent then that is a price they will have to pay.
In short, if it's good enough for Girls Aloud, it should be good enough for Gordon Brown.
The Week in Green
It's been a week of green dilemmas.
Are banks such as HSBC better off using their influence as investors in carbon intensive industries to improve standards or is it hypocritical for a supposedly green bank to be happy investing in hydrocarbons?
How do you ensure that energy efficiency measures deliver genuine energy savings and don't result in a painful "rebound effect", particularly when energy prices are about to soar?
Why is the UK simultaneously home to a new breed of green consumer and lagging behind its international counterparts in its adoption of green business models?
How do you put those green business models into place, and is the CSR officer a help or a hindrance in doing so?
Can junk mail ever be green?
Why on earth is IBM quite so interested in solar panels?
And lastly why is everyone so obsessed with rubbish?
We tried to get to the bottom of all these this week with varying degrees of success (seriously, there's a prize for the person who can work out definitively if the Khazzoom-Brookes postulate makes sense or not).
Let us know if you think we succeeded resolving any of these dilemmas and if not please feel free to drop us a line if you have the answers.
Have a good weekend.
Cheers,
James
Why the subprime crisis is worse than climate change
Occasionally you hear someone frame the debate surrounding the transition to a low carbon economy in such a way that it makes you wonder why we are having a debate at all.
Yesterday, I attended a conference on green banking hosted by BT Global Services where the keynote was delivered by Jon Williams, head of group sustainable development at HSBC. Here he is on the cost of mitigating climate change if the world acts quickly and decisively:
"Most of the assessments I see put the cost at 0.3 to 0.6 or 1 per cent of GDP – that is a mild recession. It'll have a smaller impact than the subprime crisis in the US."
Makes you wonder what all the fuss is about.
