October 2010

Geoengineering: A congressman’s thumbs up

October 31, 2010

Before we get to today’s topic–engineering the climate– let me call your attention to a couple of news items that got my attention last week.

First, a Chinese company called the Shanghai Electric Group signed a $10-billion deal to sell 42 coal-fired thermal-generation units to an Indian conglomerate called the Reliance ADA Group, the Wall Street Journal reported. Forty-two! I hate to say it, but all the efforts by enviromentalists to stop new coal plants in the U.S. won’t do much to curb global warming if India and China expand their coal-powered generation.

Second, The Nature Conservancy released a video and poster about the upcoming UN climate negotiations in Cancun saying “This is not a vacation!” and inviting people to submit videos calling for action on climate. Yes, it has come to this: So futile are the UN’s efforts to bring about a global climate treaty that environmentalists have to reassure people that there’s more to COP16  than sand and surf.

No wonder a thoughtful Tennessee congressman named Bart Gordon said this in a report published last week:

It is the opinion of the Chair that broad consideration of comprehensive and multi-disciplinary climate engineering research at the federal level begin as soon as possible in order to ensure scientific preparedness for future climate events.

Gordon, a Democrat, and his staff on the House Committee on Science and Technology, have been studying geoengineering. They held three public hearings, pored over research and worked with legislators in the UK to better understand climate engineering—which they define as

the deliberate large-scale modification of the earth’s climate systems for the purpose of counteracting and mitigating anthropogenic climate change.

Gordon’s 56-page report about climate engineering comes in the wake of a similar study from the General Accounting Office. Both favor a coordinated government research program, albeit with plenty of cautions.

In his report, Gordon notes that reducing greenhouse gas emissions must remain the top priority of dealing with global warming. This is smart because climate engineering won’t resolve the global warming threat; it will only buy more time to deal with it. Gordon goes on to say:

However, we are facing an unfortunate reality. The global climate is already changing and the onset of climate change impacts may outpace the world’s political, technical, and economic capacities to prevent and adapt to them. Therefore, policymakers should begin consideration of climate engineering research now to better understand which technologies or methods, if any, represent viable stopgap strategies for managing our changing climate and which pose unacceptable risks.

Translation: Environmentalists and forward-thinking politicians have been trying for years to come up with a way to curb GHG emissions. They have little to show for it. So it’s time to consider alternatives.

I’ve written about climate engineering more than most environment reporters  — see this, this and this – not only because it fascinates me, but also because I’m convinced we need to learn more about it. Plus, the debate is heating up. Last week, as the GAO and Congressman Gordon spoke out, ministers at a UN meeting on biological diversity in Japan called for a moratorium on geoengineering. [click to continue…]

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Glimpsing the future at Net Impact 2010

October 30, 2010

My favorite conference is Net Impact’s annual gathering, mostly because of the crowd—this weekend, about 2,500 people, most of them MBA students, undergrads and young professionals, gathered at University of Michigan’s Ross School of Business in Ann Arbor. These fare the smart, passionate and committed business leaders of tomorrow. I’m proud to be on the board of Net Impact, a nonprofit that helps its members harness the power of business for the greater good.

So much programming is crammed into the two-day event that it can’t be captured in a single blogpost or experienced by anyone, because dozens of sessions on different topics unfold simultaneously. But here are a few highlights:

What’s the future of recycling? It’s an unhappy fact that recycling rates haven’t moved up much since Earth Day. Yes, the original Earth Day, back in 1990. But innovative companies like TerraCycle, RecycleBank and Waste Management–yes, Waste Management, through a subsidiary called Greenopolis–are experimenting with clever and promising new ways to move the needle, by rewarding consumers for recycling.

I first wrote about RecycleBank in 2007. [See Turning trash into cash at Fortune.com] The company measures homeowners’ curbside recycling, and then rewards those who recycle with points that can be redeemed for stuff at more than 1,500 companies. “The idea of consumer behavior change is at the heart of our business,” said Ian Yolles, the chief marketing officer at RecycleBank, who previously worked at Nike and The Body Shop. The company is growing–it now operates in more than 300 communities in 26 states — and its investors include Coca-Cola,  venture capitalists Kleiner Perkins and Generation Investment Management (the fund led by Al Gore and ex-Goldman partner David Blood). RecycleBank generates most its revenues by saving municipalities money (lower tipping fees, higher revenue streams from recycling) and taking a share of the savings. [click to continue…]

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The hidden costs of solar power

October 27, 2010

In this sluggish economy, you would think that selling expensive electricity to businesses or homeowners would not be a good business. But the solar-power industry is doing exactly that. Solar power is more expensive that making electricity from natural gas, coal, wind or existing nuclear plants, and yet the business is booming. [See: U.S. solar power: doubling in 2010!]

Hardly a day goes by without good news for the solar industry. For example:

BrightSource Energy, Inc. just announced that power generation company NRG Energy will invest up to $300 million to become the biggest owner of the  Ivanpah Solar Electric Generating System, the largest solar thermal system in the world, just beginning construction in California’s Mojave Desert. Gov. Schwarzenegger and Interior Secy Ken Salazar joined in a groundbreaking today. That’s a mock-up of the Ivanpah plant, above.

And:

SunRun, a California-based home solar company, said this week it received an additional commitment of tax equity from an affiliate of U.S. Bancorp to develop 1,900 residential solar installations. Given that the typicalinstallation costs about $35,000, that’s roughly a $65 million investment. SunRun has now raised more than  $300 million in project financing.

Recently, I visited a solar PV manufacturer,  Solyndra, at its headquarters in Fremont, CA. While Solyndra is worried about competition from low-cost manufacturers in China, it is still selling all of the photovoltaic panels it manufacturers. Recently:

It announced deals to installs its cylindrical solar panels on the roof of a Frito-Lay manufacturing plant and on rooftops in the Los Angeles area that will supply 16.2 MW of power to Southern California Edison.

None of this comes cheap, although calculating the cost of solar power is not simple–it depends on the kind of system in place, its location and the costs of financing, since “fuel” from the sun is free. Solarbuzz, a respected source, says that:

Solar Electricity Prices are today, around 30 cents/kWh, which is 2-5 times average Residential electricity tariffs.

According to the Energy Information Administration, the average residential price for electricity in June was 12 cents/kWh, the  average commercial retail price was 10.70 cents/kWh and the  average industrial retail price was 7.31 cents/kWh.

So why do the economics of solar power work for the industry? The answer, you won’t be surprised to learn, is generous government subsidies. [click to continue…]

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What’s beyond cap-and-trade?

October 26, 2010

Given that cap-and-trade is dead–yes, dead, dead, dead–what’s next for energy and climate policy in Washington?

Perhaps more than you might think, even though the incoming Congress will likely be more conservative that the outgoing crew.

So, at least, argued some of the Beltway  insiders and business executives brought together today at the Atlantic Green Intelligence Forum (streaming live on Oct 26-27). They agreed that comprehensive climate and energy legislation is off the table for at least a couple of years, and likely even longer. The political debate, instead, will evolve around such smaller-scale but significant ideas as renewable energy standards, investment in nuclear power and “clean coal,” and energy efficiency rules, all of which enjoy bipartisan support.

“It’s remarkable, the level of support, for a return to nuclear power,” says James Connaughton, an executive vice president at Constellation Energy. “If you focus, sector by sector, there’s a lot of opportunity for bipartisan agreement. But we have to dedicate ourselves to that.”

Jason Grumet

Jason Grumet, president of the Bipartisan Policy Center, said a reframing of the current renewable energy standards as a national “clean energy standard” could become  a political winner. So-called clean energy standards would provide incentives for nuclear power and natural gas, as well as solar and wind projects that are favored by today’s renewable energy standards.

Still another area to watch is EPA’s pending regulation of toxic pollutants emitted by coal plants. Grumet said: “This is kids and mercury and acid gases. What’s the chance that a majority of Congress will preempt EPA’s ability to protect kids from acid gases? Slim. And there will be carbon benefits.,”

The trouble is, without consistent and long-term energy and climate policy, the capital needed to finance clean energy on a mass scale will likely remain on the sidelines.

The current low prices of natural gas also make it harder to justify investment in cleaner but more expensive energy sources such as solar, wind and nuclear.

“With gas at its current prices, it’s very hard to justify the economics” of nuclear,  said Jeffrey Holzschuh, chairman of the Morgan Stanley Global Power and Utility Group.

The same goes for renewable projects, he said: “I do think we will see a material decline in capital put to work in the space…It’s a very difficult environment for a board of directors or a management team, to try to figure out the right answers for shareholders.”

Connaughton, of Constellation, agreed: “You make minimalist decisions. You make conservative choices. What you’re going to see is a lot of small ball.”

Nuclear power, in particular, will languish in a policy vacuum because of the huge capital bets required to build new plants. Constellation has, at least for now, dropped its plans to build a new plant in Maryland because, it says, the cost of obtaining a federal loan guarantee is too high.

As Daniel Weiss, director of climate strategy for the Center for American Progress, put it: “Financing, in my view, is going to be the biggest impediment to advancing any of these technology, particularly nuclear.”

The fact is, it’s difficult for anyone to know what’s going to happen in Washington after next week’s elections. Few of the signs look good. As Ronald Brownstein of the National Journal, has written:

..it is difficult to identify another major political party in any democracy as thoroughly dismissive of climate science as is the GOP here.

It’s no wonder that Eileen Claussen, president of the Pew Center on Global Climate Change, says: “I don’t see Congress doing very much that’s constructive in the next two years.”

Grumet recalled that for a year after the 1994 election, when Republicans captured the House and fiercely opposed President Clinton, not much got done. But by 1996, Clinton and the Gingrich-led Congress worked together on tax reform and welfare reform.

“A divided government, sometimes, actually works pretty well,” he said.

“The alternative is that it’s just a friggin’ food fight. And that’s possible, too.”

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Can one person change a company? Discuss…

October 25, 2010

I’m giving a speech to the grocery and food manufacturing industry–and I’d like your help.

I’ll be the closing keynote speaker at a Sustainability Summit in December in Arlington, Va., organized by the Food Marketing Institute, a trade association of grocery retailers and wholesalers (Ahold, Kroger, Price Chopper, Publix, Wegman’s, Winn-Dixie,  etc.) and the Grocery Manufacturers Association, a trade association made up of the companies that produce much of what we eat (Campbell Soup, Coca-Cola, Dannon, DelMonte, General Mills, Kraft, H.J. Heinz, Kellogg, Kraft, Nestle, PepsiCo, Unilever and many more).

These folks, needless to say, can have a huge impact on the environment and on our health. So it’s a great opportunity for me.

Because I’ll be the last speaker that people hear before they go home, my plan is to give a talk called “The Power of One.” It’s about how one person can change the world–not by himself or herself, of course. But by mustering the right arguments, and enlisting the right allies, one person can change a company, an industry and eventually change the world. I’ve seen it happen, more than once. In my 2004 book, Faith and Fortune, I devoted a chapter called  “Can One Person Change a Company?” to a woman named Barbara Waugh and her impact on Hewlett Packard which was, then and now, an enormous global company.

Where do you come in? Well, I have some stories in mind of people who have had an impact on corporate America, but I’m eager to hear more. If you know of someone who, with their passion and commitment and smarts and strategic thinking, helped make a company, big or small, more sustainable, please let me know. (Post in the comments below or send an mail to marc.gunther@gmail.com) I’m going to write  about some of those people for this blog and tell their stories in the speech. They need not work in sustainability or corporate social responsibility–in fact, I’m interested in individuals or small groups of people  who broke through silos or made things happen without having institutional responsibility.

And, if you work in the grocery or food business, by all means come to the summit. Ken Powell, the chairman and CEO of General Mills, will give the opening talk–it’s always an encouraging sign when a CEO is willing to give a speech on sustainability. Other speakers include Matt Arnold of Pricewaterhouse Coopers, Gwen Ruta of Environmental Defense, Jason Clay of the World Wildlife Fund, Jon Johnson from the University of Arkansas (who is leading the Sustainability Consortium), writer Andrew Winston, Dave Stangis of Campbell Soup, chef Barton Seaver, Aron Cramer of Business for Social Responsibility–and those are just people I’ve met or interviewed. I’m looking forward to reconnecting with then, as well as meeting new people. As my friend Joel Makower likes to say, networking is great–and not just because it’s only one letter away from being not working!

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Floating islands, inspired by nature

October 24, 2010

It would not be accurate to call Floating Island International, the business led by Bruce and Anne Kania, a mom-and-pop operation–for one thing, although they are married, Bruce and Anne don’t have children–but that description gives you a sense of the scale of their startup. With fewer than a dozen employees, the Kanias are tucked away in the small town of Shepherd, Montana (population: 208) and the firm’s annual revenues are less than $1 million.

But Floating Island International already lives up to its name: Its man-made islands can be found in New Zealand, China, South Africa and Canada as well as in the U.S. Its customers include U.S. Army Corps of Engineers, American Electric Power and Disney World, which suggests that they may be onto something. And the Kanias’ ambitions seem to know no bounds.

“I’m pretty sure we are going to be one of the most successful businesses of all time,” says Bruce.

Bruce, who is 57, is an inventor and entrepreneur who worked in prosthetics, textiles and sporting goods (he invented a broadhead arrow). Then, about a decade ago, he came up with the idea of turning plastic trash into man-made floating islands that can clean polluted water, spur the growth of fish, provide species habitat and sequester carbon.

Not to mention create beachfront property.

“We’re learning how to grow real estate,” he says. [click to continue…]

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Big business’s big innovation problem

October 21, 2010

To create a new green economy, industrial capitalism must destroy itself. Disruptive, radical, breakthrough innovation is needed, on a mass scale. Government isn’t delivering the change we need. Can business step up to the challenge?

Innovation is on my mind because I’m just back from the GreenBiz Innovation Forum, a two-day event devoted to “sustainable innovation.” The San Francisco confab brought together smart and dedicated business people who engaged in lots of stimulating conversation and did some fun stuff—like trying to build a tower out of uncooked spaghetti, tape and a marshmallow. There’s video, photo and print coverage here.

I came away wondering whether the emerging orthodoxy of green business – one that is willing to settle for incremental changes by big companies, and clever but insubstantial breakthroughs by small ones—is going to get us where we need to go.

Two examples:

Procter & Gamble sets “carbon intensity” targets, meaning that it will produce its products (Tide, Bounty, Cascade, Crest, etc) with less energy. But because of the company’s growth imperative, it will pollute more, not less, in absolutely terms. [See P&G: A bold green vision but...]

Stonyfield Farm devises a corn-based yogurt cup, which gets us closer to a zero-waste, cradle-to-cradle consumption model. But the bigger challenge is to get  petroleum out of cars, trucks and planes, not yogurt cups.

These initiatives deserve applause, and their stories are worth sharing. But let’s not fool ourselves into thinking that they are the kinds of innovations that will deliver the environmental change we need.

Tim O'Reilly

The GreenBiz event was a reminder that big, multibillion dollar corporations aren’t good at disruptive innovation, even when they try. They don’t attract the right people; inventors and creative thinkers are repelled by cultures with lots of meetings, process, politics, budgets  and bureaucracies. Big companies are slow to move. They aren’t about having fun—and as Internet mogul Tim O’Reilly noted in a lively and provocative talk at GreenBiz breakthroughs are often driven by people  (the Wright brothers, the hackers who started the computer revolution, the Google guys) who want to have fun or make something cool.

Even when facing existential threats, big companies don’t cannibalize themselves, as Clayton Christensen has written. Newspapers didn’t invent Craiglist, which destroyed their classified business. The record industry tried to fright iTunes. My cool new “barefoot” running shoes (below), which challenge the business of conventional running shoes,  come from Vibram, an upstart, not from Nike or Adidas. Ford and GM didn’t invent Zipcar, and BP ain’t going beyond petroleum. [click to continue…]

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Can sustainable investing beat the markets?

October 20, 2010

This week, Newsweek released its second annual  Green Rankings of the largest companies in America, as well as a new analysis of big global corporations. These sorts of cross-industry comparisons of companies are difficult to do, but my sense is that Newsweek has done a credible job, with the help of partners MSCI ESG Research, Trucost and CorporateRegister.com. Given the attention that the list is getting,  it seems like a good time to return to a question I’ve thought about for years: Do companies committed to sustainability represent good investment opportunities?

The stock-market performance of Dell, which tops the 2010 list, is not encouraging: The firm’s shares have fallen by 55% during the last five years, while the NASDAQ is up by 18% during the same time period. Of course, one company’s performance over one time period doesn’t prove a thing. It turns out that over the past year, the top 100 companies on the 2009 Newsweek list outperformed the S&P500 by 6.8%.  While this data point doesn’t prove anything either, it’s interesting. So I arranged an email interview with Cary Krosinsky of Trucost to explore the issue further.

Cary Krosinsky

Cary is head of investor and corporate services for North America for Trucost, which is based in the UK. He’s also the author and co-editor, with Nick Robins of HSBC, of Sustainable Investing: The Art of Long Term Performance (Earthscan Publications, 2008), and he has taught classes on investing and sustainability at Columbia.

Marc: Cary, let’s start by defining “sustainable investing.” Is it different from socially responsible investing?

Cary: Socially responsible investing, or SRI, is too broad an investment category.  SRI encompasses very different things—alternative energy investing on the one hand, funds with a religious mandate on the other, as well as funds investing in a mainstream index such as the S&P 500, and subtracting out alcohol, tobacco and firearms.  We see many different styles of SRI.

Sustainable Investing is the more positive strand of SRI – one that is future-oriented, risk-adjusted and opportunity-directed. It looks at what companies can do to lessen risk, as well as capitalize on opportunities, in order to be ahead of the curve in their respective industries. It helps create long-term value, identifies “predictable surprises,” (as opposed to “black swans,”) such as climate change, diminishing water availability, human rights issues and others that influence investment outcomes.  Innovation emerges as a key driver of value through sustainability, as does the active management of environmental impacts.

Marc: It sounds like sustainable investing means identifying the smartest, most forward-thinking companies. In your book, you write that “sustainable investing funds have already outperformed consistently over the short, medium and long term.” How can you support that claim?

Cary: We found that for the 1, 3 and 5 years leading up to the end of 2007, when looking at SRI funds with this positive, opportunity-focused sustainable investing methodology, that they consistently outperformed their mainstream index equivalents.  When updating this study for a UN Principles of Responsible Investment academic paper in 2009, this still held true, both before, through and after the recent financial crisis of 2008 into 2009.

Further correlation of this has been demonstrated by diverse investors including Paul Hawken, who helps manage the Highwater Global Fund as well as Abby Joseph Cohen of Goldman Sachs.  Mark Fulton of Deutsche Bank spoke earlier this year regarding how the climate change sectors they are tracking have been outperforming their benchmarks since the recent market bottom. Matthew Kiernan, formerly of Innovest, now runs money and is also demonstrating outperformance from this more positive approach. The top 100 performers in the Newsweek Green Rankings which we actively participate in at Trucost, have outperformed the S&P 500, on an equally weighted basis, by 6.8% over the last year. [click to continue…]

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What business can learn from Sea-Monkeys

October 19, 2010

If you were one of those kids who looked forward to science class, you probably remember Sea-Monkeys.

I wasn’t into science but, as I recall, you could order Sea Monkeys from the back page of a comic book. According to Wikipedia, Sea Monkeys are the brand name for a

variant of brine shrimp… a species which enters cyptobiosis,  a natural state of suspended animation, allowing their cysts (dormant saclike embryos) to be distributed and sold as a dry powder. When the “eggs” are poured into saltwater, the Sea-Monkeys start to come out of their cysts.

Now, it turns out,  the coating that kept the brine shrimp alive can do more than entertain science geeks on a Saturday night. Its properties have inspired a startup company called Biomatrica, which makes a “room temperature stabilization technology” used to preserve vaccines and other medicines that would otherwise have to be refrigerated. Don’t ask me to explain how the science works — yes, I should have paid more attention back in high school — but I can tell you that this product is potentially a very big deal. Think of how it can help overcome the challenges of delivering medicine to the many places in the world without an electricity grid, where keeping them reliably cold is all but impossible.

Janine Benyus

The story of Biomatrica, one of a number of companies using a practice known as biomimicry to drive innovation and become more sustainable, was recounted yesterday by Janine Benyus, the biologist who dreamed up the idea of  biomimicry. She now leads a consulting firm and a nonprofit to spread its ideas; their website defines biomimicry as” an emerging discipline that studies nature’s best ideas and then imitates these designs and processes to solve human problems.”

Janine spoke on a panel today at the first GreenBiz Innovation Forum, a two-day event intended to help business rethink their products, processes and business models to make them more sustainable. She was joined by John Warner, the president of the Warner Babcock Institute for Green Chemistry.

Benyus and Warner are among the most original, creative and inspiring thinkers you’ll find anywhere in the sustainability world. They made a bit of news during the GreenBiz event by disclosing that they will be working together in the future, at least for certain clients. They’re both big thinkers: This is a crude way of putting it, but Benyus and Warner are trying to transform industry to become more like nature and less like, well, industry — by using more benign materials and processes, by becoming more efficient and generating less waste.

John Warner

Green chemistry, Warner explained, “is a science of active pollution prevention.” His institute works in a variety of industries–solar energy, industrial chemicals, pharmaceuticals, personal care and cosmetics–to reduce or eliminate substances that are hazardous to human health or to the planet. His institute says:

Green Chemistry presents industries with incredible opportunity for growth and competitive advantage. This is because there is currently a significant shortage of green technologies: we estimate that only 10% of current technologies are environmentally benign; another 35% could be made benign relatively easily. The remaining 65% have yet to be invented!

The benefits to consumers and to the environment of green chemistry are obvious. Business gains because if hazardous materials are eliminated from products or manufacturing processes, the cost of disposing and handling those materials should disappear as well. “If you render the molecules safe in the first place, you don’t have the expense of exposure controls.” Warner said most major chemical firms are at least dabbling in green chemistry, and some are taking it very seriously. [click to continue…]

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Is geoengineering ready for prime time?

October 18, 2010

2010 has been a bad year for climate, and an even worse year for climate policy. But for that very reason, it’s been a good year for geoengineering—the notion that humans can deliberately manipulate the climate and cool the earth.

Official Washington is starting to take geoengineering seriously: The Government Accountability Office and a bipartisan task force of experts convened by the New America Foundation will soon report on geoengineering. Bill Gates has invested in geoengineering research. Environmental groups–notably Steven Hamburg, the chief scientist of Environmental Defense Fund–have engaged in the conversation. On a parochial note, at FORTUNE’s Brainstorm Green conference last spring, Stewart Brand talked about why geoengineering is important, to a rapt audience that included Bill Ford and Lee Scott.

David Keith

David Keith, a leading scholar of geoengineering who administers Gates’ $4.6 million grant with  with Stanford climate scientist Ken Caldeira, also spoke at Brainstorm Green. So I was pleased to have a chance to reconnect with him at the excellent annual conference run by the Society of Environmental Journalists at the University of Montana in Missoula.  I expected him to be pleased by the momentum gathering behind  geoengineering lately, but I was wrong.

“I think things are moving too fast,” David told me. “Research programs can be killed by spending too much money too fast.” Besides, he said, people need time to wrap their head around geoenginnering. (Juliet Eilperin of The Washington Post recently described it as playing God with the weather. ) “This is a topic—the first time people hear about it, they have wild ideas,” he said.

As I’ve written before – see this, this and this – geoengineering raises a host of thorny ethical, political and governance issues. Who gets to control the earth’s thermostat? Who decides if and when to deploy geoengineering techniques? Which should be used?

At SEJ, David was on a panel with Dane Scott, director of the center for ethics at the University of Montana, and journalist Eli Kintisch, author of a recent book about geoengineering called Hack the Planet. They all seemed to agree that the technology to cool the earth now exists—either by reflecting sunlight back into the sky, an approach known as solar radiation management, or by capturing carbon dioxide from the air. (Keith has a for-profit startup called Carbon Engineering designed to do just that.) They also agreed that the moral ethical issues surrounding geoengineering are daunting. [click to continue…]

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