For much of the past two years one of the most compelling drivers behind green business investments has been the soaring cost of energy. So what happens when those energy costs begin to fall?

As the UK today has its recessionary status officially confirmed, businesses are facing a new energy landscape where bills are falling for the first time in years.

The price of oil has slumped, and even green energy providers such as Good Energy are now lowering their tariffs alongside conventional players such as British Gas. Moreover, the fall in industrial output has pushed the price of carbon to record lows, putting still more downward pressure on energy prices.

For business leaders falling energy bills mean the temptation to push energy efficiency issues back to the bottom of the corporate in-tray will become ever more beguiling. Many will understandably ask why they should fork out for more efficient technologies or buildings when their bills are already falling and capital is unbelievably hard to come by.

And yet there are compelling reasons for businesses to continue to curb energy use that go far beyond the obvious truism that during a recession you should look to control all operational costs as tightly as possible, even if they are already falling.

The fact is that those firms that don't address their energy use now could recover from the credit crunch and find themselves thrown right into an energy crunch characterised by soaring power bills.

There are already signs that a perfect storm is brewing that could well break just as we'd hope to see the economy surging forward again.

The most obvious basis for this prediction is the simple reality of supply and demand. The price of oil may have fallen over a $100 from its peak of around $140 last year, but that collapse in price is the result almost entirely of falling demand, not an increase in capacity.

When demand recovers to pre-recession levels or above - and while it might seem hard to believe at the moment the history of recessions tells us this will happen - then the oil price will soar again. In fact, with many of the oil giants scaling back investments in new capacity as the recession bites the situation will likely be even worse than it was in mid-2008 as supply inevitably struggles to keep pace with rising demand.

Rising oil prices would not only lead to increased transport fuel costs they would also have a knock on impact on wholesale electricity prices that will already be being forced upwards again as a result of the raft of green regulations that are scheduled to converge upon the energy sector between 2010 and 2013.

As a leaked Whitehall memo revealed this week, the UK government is concerned new EU legislation designed to limit air pollution from power stations could add as much as 20 per cent to energy bills. And that is before you even begin to consider that EU targets requiring the UK to cut emissions and generate 15 per cent of energy from renewables by 2020 mean that by the early 2010's work on a huge expansion in renewable and nuclear capacity will be well underway, leading to a predictable impact on energy bills.

Meanwhile, the current low price of carbon in the EU's emissions trading scheme is subject to much the same rules of supply and demand that will impact the oil market once the recovery materialises.

Prices have dropped in recent months because heavy industries are producing less, releasing less carbon into the atmosphere and therefore require fewer emission allowances. The number of carbon credits issued between now and 2013 however remains constant, so as the recovery materialises and production and emissions increase again the price of carbon will also rise placing further cost pressures on energy producers. Again, these pressures will become more pronounced from 2013 when the EU moves to impose still tighter emission caps on heavy polluters.

The net result is that companies that fail to address their energy use could find themselves climbing out of the credit crunch only to find themselves locked into an energy crunch characterised by 100 per cent plus increases in energy costs and fuel bills.

That is why businesses such as Tesco and Sainsbury's this week announced new stores and initiatives that display a continued commitment to addressing energy issues despite tough trading conditions, and why those companies that really want to position themselves to fully exploit the inevitable economic recovery would do well to follow their lead.

Posted by James Murray on January 23, 2009 | Permalink | Comments (4)

For much of the past decade one of the most common complaints about the UK political landscape has been the utter absence of any ideological and sometimes even policy differences between the two main parties.

This blandness has been particularly acute, if that's not a contradiction in terms, in the field of green policy where it has often been difficult to draw any distinction between Labour and the Tories.

Which is what makes the launch today of the Conservative's green strategy and its continued opposition to Heathrow expansion so interesting, and, more importantly, influential.

There had been reports that the Tories would can much of the green messaging that Cameron used to re-launch the party as soon as the recession began to bite, but while some of the "let the sunshine in" rhetoric has been shelved the ultimate goal of positioning the Tories as a greener alternative than the government remains.

In truth, the differences between the much of the government's low carbon strategy and that put forward by the Tories are not as pronounced as the Conservative's positioning would have you believe.

The eye-catching plans for a £1bn smart grid may look impressive, even if the price tag the Conservatives have put on the project looks absurdly optimistic, but the government is also investigating major grid upgrades, has said it will introduce feed in tariffs and recently mandated the roll out of smart meters to all homes.

Similarly, Cameron's talk of investing in renewables and other forms of green infrastructure to create jobs, stimulate the economy and enhance energy security could have come directly from any number of the prime minister's recent speeches. While proposals for an increased focus on tidal energy and biomass, simply pre-empt government plans that are bound to feature in its upcoming renewables strategy to be published this summer.

Proposals for a loan guarantee for households investing in energy efficiency and an incentive scheme for those businesses that help their employees improve domestic energy efficiency arguably offer an interesting alternative to the government's plans to directly subsidise house insulation. But again there will be questions over whether or not the Tories could afford such a wide-reaching loan guarantee scheme in the current economic climate, while the government can claim that it too is looking at pushing the banks to deliver green loan schemes along similar lines.

Equally, Cameron's plan to give councils greater freedom to approve local renewables projects may fit with his vision for more decentralised power, but you have to ask how effective it will be when it is these same local councils who tend to be one of the main obstructions to renewables projects.

So given the fundamental similarities between Labour and Tory policy, what actually has changed?

The answer can be found in one word: Heathrow.

In a remarkably brave move Cameron has effectively locked up the green vote at the next election. If he has read the public mood right, and at the moment it looks like he has, then it might just prove decisive.

The increasingly influential greens within the cabinet - the splendidly monikered Milibenn axis - may have actually won huge environmental concessions from the department for transport in the form of tough rules on carbon emissions, a cap on flights at half the level requested by BAA and plans for new high speed rail.

But these sweeteners look pretty feeble against the Tories commitment to scrap the whole thing and build a far wider high speed rail network than the one being proposed by the government.

What makes Cameron's move so clever (and brave) is that it is the Tory old school business lobby that has been campaigning most vociferously for the new runway.

Cameron, however, is confident his base will always vote Tory, particularly after over a decade of Labour government, and as such he is free to reach out to a raft of new voters, many of whom will not be natural Conservative supporters, by opposing Heathrow expansion.

It is hard to envisage a general election becoming a simple referendum on Heathrow expansion, but it will mark one of the major differences between the two parties and Cameron will plausibly be able to say that if you want airport expansion stopped and care about climate change then you should vote Tory.

The government, of course, will point to its climate change bill and argue, with some validity, that it has a strong record on tackling carbon emissions. While it will also argue, with even more validity, that the Tories plans for more restrained public spending is incompatible with building a low carbon economy and that the costs it has attached to its proposed green infrastructure projects are completely unrealistic.

But whenever the government does attempt to attack the Tories over the environment, Cameron will simply be able to point at Heathrow and slam Labour for its hypocrisy on climate change.

If a week is a long time in politics, a year can be counted in aeons. But barring a major shift in the government's policies and fortunes, Cameron might just have already wrapped up the green business vote.

Posted by James Murray on January 16, 2009 | Permalink | Comments (2)

Greenwashing is A Bad Thing, right?

As we all know, companies that promote products and services by overstating or lying about their green credentials not only insult customers' intelligence, they also stoke cynicism against the entire green business movement.

And yet I'm starting to think that the vociferous criticism that greenwashing increasingly attracts is starting to do more harm than good.

Yesterday, I appeared on a web TV show for small businesses from the IT company Dell and the British Chamber of Commerce to discuss how businesses can still make the case for going green in the current economic climate.

During the broadcast, one audience member emailed in to ask what the point was in undertaking green initiatives when your customers would only end up seeing it as a cynical marketing ploy, an example of "greenwash"?

You have to say it is a valid question.

My colleague at BusinessGreen.com's sister title vnunet.com, Iain Thomson, neatly summed up the attacks those companies that seek to promote their green credentials can in a blog posting from the annual Consumer Electronics Show in Las Vegas this week.

In it he complained that if he had to listen to one more company talk about its environmental commitments he would seriously countenance an assassination attempt on the offending party.

His criticism of the raft of green technology announcements that dominated this year's show centred on the oft-argued point that businesses promoting new recycling services and energy efficient products were only interested in the bottom line and did not really give a stuff about the environment.

"All this supposed 'green' focus is nothing more than an attempt to sell us products," he wrote. "What these companies have recognised is that consumers want to buy green products so that they can feel better about themselves. I'm willing to bet some of these companies would cheerfully club seals or burn rainforest if people liked the idea and it got them more sales."

Thomson is certainly not alone in levelling such criticism at firms' green marketing campaigns, but the question his attack begs is "so what?"

If the end goal is to reduce businesses' impact on the environment, then should we really care whether or not a firm's motivations are in some way ethically "pure"?

Surely all that matters is whether they are seeking to cut their environmental impact or not and whether they are doing so effectively? In fact, I prefer it if their green initiatives are driven by a desire to make profits, as at least that gives them the ultimate incentive to make sure they are successful.

Obviously green marketing that relies on inaccuracies or lies is fair game for criticism and should be eradicated, but if companies start to get attacked for simply promoting their environmental improvements there is a real risk they will ask themselves why they are bothering.

Much of the criticism levelled at green marketing campaigns centres on the fact that green products and initiatives undertaken as part of some huge multinational often look incongruous when set against the firm's wider activities - the BP paradox if you will.

This criticism boils down to whether you think a firm should be allowed to promote green activities when they make up only a small fraction of its overall operations?

Well, I can understand why it grates with some old school environmentalists, but the answer has to be "yes, they should".

Green marketing messages might run ahead of a company's overall ability to deliver green products and services, and will almost certainly run ahead of their ability to decarbonise their operations. But what they demonstrate is the company's awareness that these products and services are desirable and will resonate with customers. They give you a vision of the way the company wants to be seen and sees itself. Advertising is a window into, if not quite a company's soul then certainly its ego.

For example, Samsung, which this week debuted a new range of energy efficient monitors at the CES show, may still make plenty of products that use lots of energy and contain potentially harmful chemicals, but the fact it made such a fanfare about its new green technology suggests it knows demand for these types of products will grow. Regardless of my colleagues protestations, Samsung has every right to communicate that understanding to as wide an audience as possible.

Like the food companies which in the 1950s routinely produced laughably inaccurate adverts trumpeting the health benefits associated with their products, many firms are now guilty of overstating the scale of the environmental benefits they can deliver. But those old school adverts, ridiculous as they may look now, displayed an awareness that healthy food resonated with modern consumers, and in so doing heralded the start of a 60 year long transformation that has seen nutrition become the issue that arguably defines the way the food industry operates. It is entirely conceivable that the raft of new green marketing campaigns that have emerged in recent years mark the beginning of a similar journey.

Moreover, if environmentalists do want to find misleading campaigns to criticise, they would do far better to train their sights on the Daily Mail and its ridiculous and grossly unbalanced criticism of energy efficient light bulbs and the UK recycling industry.

This "brownwash" does far more harm than even the most blatant examples of greenwash, and yet, while those companies attempting to produce genuinely green products get criticised, others are allowed to spread this type of self-serving misinformation almost unchallenged.

Posted by James Murray on January 9, 2009 | Permalink | Comments (2)