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The Week in Green
With the world's financial markets having once again narrowly avoided meltdown and the banking gurus that made it all happen currently doing their best impressions of naughty school boys - shuffling awkwardly, looking at their shoes and mumbling that it wasn't their fault really - many within the green business movement will be understandably concerned.
Perhaps more so than any other sector the success of clean tech is dependent on the taps controlling the flow of capital and credit being left firmly on. Green projects, be they internal business transformation initiatives or infrastructure projects, are large scale, R&D heavy, and as such inherently capital intensive.
Given this fact, the apparently ever worsening nature of the credit crunch looks like decidedly bad news.
And yet, despite some undeniable financial pressures and expected short term pain, there is no reason for clean tech and green executives to join their banking counterparts on the ledge.
As a panel of experts explained earlier this week, clean tech is not recession-proof, no industry is, but it is better insulated than most.
The most commonly quoted reason for this is that as recession bites and firms look to cut back they will realise that their energy bills are a good place to start and will invest in energy saving measures. There is some truth in this, but it is also imbued with a degree of wishful thinking. Sadly, when recession really begins to take its toll it is headcount, and not energy, that most firms focus on as the best means of cutting costs.
No, the real reason why green business leaders can remain optimistic is that any downturn we do experience has come a year too late – the factors that have stimulated the green business movement are too entrenched and while a recession won't help, nor will it derail the current trend.
The green technology breakthroughs, ranging from electric cars to air conditioning to solar cells, are coming too thick and fast for any short term reduction in R&D budgets to significantly slow them down.
Equally, many of the new green regulations may be imperfect in nature, but they are now emerging so quickly that, credit crunch or not firms, will have no choice but to invest in complying.
All of which means that even if green execs and business leaders may have to fight a little harder to find the capital they need, there will still be plenty of investment out there for the right ideas.
And on that moderately upbeat note, I'm off to fix that leaky tap and try and work out exactly what BA's Willie Walsh was thinking.
Have a good weekend.
Cheers,
James
Virgin wipes floor with BA in biofuel spat
A war of words has broken out between British Airways chief executive Willie Walsh and Virgin Atlantic boss Richard Branson over the later's headline grabbing biofuel powered test flight.
Amusing as it is to watch two of the UK's business heavyweights engaging in the oratorical equivalent of scratching and pulling others' hair, there is a salient lesson to be gained from the spat in how to promote green initiatives – and as with so many PR tutorials it is Branson and Virgin doing the teaching.
It was Walsh that landed the ill-advised first blow. Speaking at the opening of Heathrow Terminal 5 last week, the BA boss branded the Virgin biofuel flight "a bit of a publicity stunt", before adding that "I won't say [biofuels are the answer] because I don't believe it's true".
He went on to tell The Guardian that, "I recognise that we are a polluter. I recognise equally that we don't have an alternative to kerosene and carbon-based fuels at this point".
These are all pretty valid points. For the aviation industry there is no alternative to kerosene and fossil fuels at this point and biofuels are unlikely to provide the answer to the sector's climate change problems any time soon.
But if there is one thing any company operating in an industry that is struggling to come to terms with pressure to cut emissions should not do it is allow a competitor to occupy the moral high ground and present itself to increasingly environmentally conscious customers as the trail blazing operator that is taking climate change seriously.
Cue Branson and his response in today's Guardian in which he argues that far from being a PR stunt the considerable sums Virgin Atlantic is investing in its biofuels research are part of a serious attempt to develop cleaner fuels.
"At Virgin we are attempting to address a global catastrophe and preparing for a world of scarcer oil, carbon pricing and population growth," he writes, clearly implying that BA is doing none of these things.
As if the image of Virgin as the caring and ethical alternative to BA's head-in-the-sand approach is not explicit enough Branson goes on to make his central point clearer still. "It seems to me that the head of BA doesn't have an environmental strategy," he writes. "For Walsh to say "I recognise ... that we don't have an alternative to kerosene and carbon-based fuels at this point" is very short-sighted. There are alternatives emerging which need to be tested." Something, Virgin, of course, is doing.
Wrapping up his response, Branson follows the golden rule of all green marketing and is careful not to overstate Virgin's environmental achievements, accepting that it is early days in the company's research and pledging to "go on looking for a renewable fuel source, such as algae, that could unlock our reliance on traditional kerosene".
There is only one winner in this particular bout, and it's sure as hell not Walsh.
It is a masterful piece of communication to be able to present an airline as somehow green, but by 'fessing up to its limitations and creating the impression that it is deadly serious about improving its environmental performance Virgin Atlantic has managed it.
Meanwhile, those, like Walsh, who snipe at its efforts, even while raising legitimate points about whether or not aviation biofuels can ever be generated in sufficient quantity to make much of a difference, simply end up looking uncaring, unimaginative and insufficiently committed to tackling climate change.
The Week in Green
Has there ever been a duller budget than Alistair Darling's effort this week?
The general consensus appears to be no, and having just woken up after attempting to endure the thing in full I have to say I agree.
The predictable response from many within the environmental and green business movement was that the budget was little short of a disgrace, which I again have to agree with, although only up to a point.
In Darling's defence, the speech was almost certainly Labour's greenest budget to date. This is of course like being awarded the title of fastest snail, but it is worth noting that the chancellor spent far longer discussing the environment than his predecessor ever did and did come up with a number of interesting proposals.
It is a sign of both how far the green movement has come and how urgent the challenge of climate change is that a genuine attempt to take on two of environmentalists biggest bete noires in the form of gas guzzlers and plastic bags were largely dismissed as wholly inadequate.
The indication that road pricing plans are not, as widely reported, dead in the water was also to be welcomed, as was the new target for zero carbon buildings and the hint that the government is willing to up its emission reduction target for 2050 to 80 per cent.
So given these welcome developments why was the budget so roundly pilloried by green leaders?
Well, despite the crackdown on gas guzzlers and moves to improve the construction industry Darling's effort represented another budget that failed to deliver anything close to the wide ranging measures and innovative policy ideas to genuinely drive a low carbon economy.
It is a deeply worrying sign for a government that looks increasingly tired that in this critical area the innovative policy ideas are coming from elsewhere. Be it George Osborne's recent proposals for Green ISAs or the German government's hugely successful feed in tariff the government's claims that it is leading the way on climate change look increasingly detached from reality.
The budget also featured the now familiar problem of focusing on penalties and targets without a similar level of attention being paid to incentives and investment. So the construction industry will be forced to ensure all new non domestic buildings are zero carbon by 2019, but programmes to improve the efficiency of the existing housing stock get £26m or just over a £1 a house. Similarly, a few more green taxes might have been introduced, but the travesty of Defra's budget shortfall and the accompanying cuts to green business services goes completely unrectified.
The temptation for businesses every time another budget comes and goes without delivering, or even hinting that it might deliver, the legislative framework required to support a low carbon economy is to ignore those commentators, this one included, who maintain such changes are just round the corner.
And yet to give into such temptation would be a huge mistake.
The government, as embodied by Darling, has largely failed to be bold enough or innovative enough when it comes to tackling climate change. But the legislative framework is still coming - it's just that it will emerge from Brussels, not Westminster.
One comment from Darling's speech that went largely unreported was his commitment to support EU plans to force energy providers to buy 100 per cent of the credits they require under the EU emissions trading scheme at auction from 2013.
Currently, the vast majority of credits are dished out to them free of charge and they only fork out when they exceed their emissions cap. But from 2013 they will have to pay for every tonne of CO2 they emit, creating an effective carbon tax. Once that cost is added into energy prices the incentive for firms to either buy clean energy or cut energy use will increase dramatically.
The day after the budget speech Gordon Brown travelled to Brussels to agree to the timeline that will see the EU formally adopt plans this time next year to expand carbon trading and renewable energy capacity and set targets to cut emissions by 20 per cent by 2020 and increase the proportion of energy coming from renewables to 20 per cent.
With its neighbours committed to meeting these targets there are signs the government is willing to shake off its timidity, which was always caused in no small part by the fear of undermining UK competitiveness, and finally introduce some innovative policies that will really drive organisations to decarbonise their operations.
For example, as confirmed this week a huge expansion of carbon trading is on the cards through the Carbon Reduction Commitment, which will make it far more cost effective for 5,000 of the UK's largest energy users to invest heavily in energy efficiency measures.
Similarly, Brown is even now lobbying his European counterparts to embrace plans to slash VAT on green goods as part of a move that could effectively eradicate energy profligate electrical appliances and white goods from the market.
None of this excuses the years of inaction, as exemplified by Darling's decision to defer planned increases in fuel duty, or the government's penchant for setting targets and commissioning reviews when what is needed is investment and action.
And yet it also shows that any firm banking on the government repeatedly and continuously deferring the introduction of these environmental measures will be badly burnt. It might still be a frustrating few years away, but once a Europe-wide, and if Tony Blair has his way international, agreement on climate change is reached the regulatory framework needed for a low carbon economy could emerge extremely rapidly.
Right, I'm off to try and work out whether or not failure to protect Polar Bears constitutes a Deadly Sin.
Have a good weekend.
Cheers,
James
The Week in Green
One of the most common observations you will hear from people in the green business movement is that there is "no silver bullet" to solve our environmental problems.
When you think about it, this is less a piece of sage advice than a blatant truism. There will no more be a single solution for solving climate change, water scarcity, soil erosion, biodiversity loss and air pollution than there is a single product for broadcasting music and keeping your shoes clean. The challenges are far too distinct and varied for a single technology or policy to overcome them.
However, it also needs to be noted that just because no one solution will solve environmental problems that is categorically not the same thing as every different clean technology having an equal role to play.
One thing I've noticed is that the more someone says there is "no silver bullet" to combat climate change the more likely it is that the technology they are touting has a pretty niche role to play.
The clean technology sector is undoubtedly booming, but it is also highly fragmented, which brings with it huge risks for both customers and investors.
I was speaking recently with an analyst at McKinsey who agreed that while huge sums were now being invested in clean technologies the sector was still being hampered by a "Betamax syndrome" – the fear that inevitably plenty of people are going to back the wrong horse.
Given the scale of the problems climate change presents it is entirely right and proper that every avenue that could lead to a decarbonised economy is explored and all of these different approaches require financial backing.
So investors could and should continue to invest in the many wild and wonderful projects emanating from the cleantech sector. From manure fuelled power plants to gas powered fuel cells, electric cars to wood-based biofuels, and electricity generating bacteria to whisky based clean up operations there is a solid case for investment. But there also needs to be a realistic expectation that some cleantech investments will not pay off, that some technologies will do a Betamax and fall by the way side.
The flip side to this gamble is that where they are winners they will be huge winners. For example, the idea that there is no silver bullet to the emissions problem posed by cars is a patent nonsense. We do not have countless different alternatives to the internal combustion engine because for decades it made economic and technical sense for to become the standard. Now, no country is going to build a network to support electric cars, fuel cell powered cars and biofuel powered cars. In the long run there must be one winner, one silver bullet, and the firms that develop the technology that allows that winner to emerge will become global powerhouses.
What I am trying to get at is that the temptation to interpret the "no silver bullets" argument as an endorsement of every wild and wacky green technology out there needs to be resisted, and while there is a need to fund a wide assortment of different clean tech projects proper due diligence must still be applied to every single investment.
Anyone doubting this needs only look at the problems the biofuel industry, and by extension everyone else on the planet, is now facing as people fast wake up to the fact that a little bit of common sense and proper due diligence was all that was needed to avoid what is beginning to look like a global food crisis.
Right, I'm off to move the office pot plant and see if I can convince my bank manager to accept the Defra definition of a spending limit
Have a good weekend.
Cheers,
James
