I spent the day today at the GreenBiz Forum 12 in New York. I’m a senior writer at GreenBiz, which does a great job producing events. I interviewed Dan Hendrix, the CEO of Interface, who’s picking up where the company’s legendary and visionary founder, Ray Anderson, left off; more here. And I wrote about Israel Ganot, the co-founder and CEO of Gazelle, a fast-growing startup that recycles electronics. Please read this story if, like many of us, you don’t know what to do with your old gadgets. I first covered Gazelle back in 2009. [See Cash for (electronic) clunkers.]

Here’s how the story begins:

Think, for a moment, about that one place in your house where you don’t like to go.

That closet. The garage. In my house, it’s the attic. Ugh.

The place where you put stuff you no longer want or need.

“How much is enough?” asks Israel Ganot.

Ganot, who is the president, co-founder and CEO of Gazelle, spoke today at the GreenBiz Forum 12 in New York. He has a way to help you de-clutter your home, at least when it comes to electronics. Gazelle buys back cell phones, laptops and other electronics, offers free shipping and then pays you for them. Gazelle makes money by reselling the used goods in the U.S. or abroad. What it can’t resell, it recycles.

“We give new life to old gadgets that still have value,” he says.

You can read the rest here.

This blogpost about climate preparedness is part of the 2012 State of Green Business Report, published by GreenBiz, where I’m a senior writer. You can download a copy of the full report here.

Last December, government officials, corporate executives and activists met in Durban, South Africa, for high-level climate talks. They went home with an agreement … to keep talking. Meanwhile, we’re emitting more carbon dioxide every year, and atmospheric concentrations of greenhouse gases are steadily rising. If CO2 levels were somehow to stabilize now–they won’t–the world will keep warming. The bottom line: Climate change is inevitable. The world needs to learn how to prepare for it.

Increasingly, smart businesses are starting to do just that. Utilities, the oil and gas industry, agricultural companies and insurers are building assumptions about rising temperatures and extreme weather events into their scenario planning. This is what’s being called climate adaptation or climate preparedness.

The payoff from investing in adaptation could be substantial.  In 2011, insured losses in the U.S. from natural catastrophes, including tornadoes, floods and hurricanes, topped $105 billion, breaking the record of $101 billion set in 2005, the year of Hurricane Katrina, according to Munich Re, the world’s largest reinsurance firm. Some of those losses had nothing to do with climate change, but others did.

Let’s get specific about what adaptation means: Entergy, an $11 billion-a-year utility company based in New Orleans, commissioned a Gulf Coast Adaptation Study that has opened up conversations with customers and elected officials about preparing for a warming climate. Not surprisingly, the company got focused on the problem after Hurricanes Rita and Katrina hit in 2005, followed in 2008 by Gustav.

“That really put a face on what the future was going to be like,” said Jeff Williams, director of climate consulting for Entergy. “Clearly we are facing risks from sea level rise, more intense storms, flooding and surge damage.” The company has looked at “hardening” key assets including power plants, substations and transmission lines; the goal is to make Entergy “more resilient in ways that minimize business interruption loss,” Williams says.

For example, Entergy has begun a five-year $73.5 million project to relocate and harden transmission and distribution lines serving Port Fourchon, LA, which is the single largest point of entry for crude oil coming into the U.S., handling about 13 percent of national imports. (After Katrina damaged the electrical instructure, 25 percent of oil production and 44 percent of natural gas production became shut in, Entergy says. National oil prices went from $60/bbl before Katrina to $70/bbl after Katrina because of supply interruption; national natural gas prices went from $8/Mcf to $15/Mcf.) Smaller businesses are acting, too. The McIlhenny Co., which makes Tabasco Sauce and was founded in 1868 on coastal Avery Island, LA, has made its factory and visitor center more resilient to better absorb future storms.

Agriculture is another industry that will be reshaped by a warming world, with some regions and crops doing better, thanks to a longer growing season and higher levels of CO2 in the air, and other suffering. Seed companies have renewed their efforts to develop drought resistant crops, said John Soper, director of product development at Pioneer,  a unit of DuPont.

“We’re expecting some drier weather to move into the key corn growing areas,” he says. “The climate in Illinois might be more like the climate in Arkansas.” Pioneer is testing drought-resistant corn and other crops in desert-like test fields in California and Chile, he said, in part because farmers who now irrigate their fields are already telling Pioneer that they expect limits on the availability of water. In India, Pioneer is working to develop drought-tolerant varieties of rice, which is now grown on flooded land but may have to adapt to a drier climate. Other seed companies including Monsanto, Syngenta and Bayer Crop Science are working on their own drought-resistant crops.

The insurance industry, meanwhile, has been declining to write property coverage along the Atlantic Coast, in part because of fears that stronger hurricanes will do more wind damage. Citizens Insurance of Florida, a non-profit, state-run company which takes on property owners who can’t get private coverage, has become Florida’s biggest insurer.

Even the oil and gas industry–which, of course, is a major contributor to climate change–is paying heed. Several years ago, IBM, a UK consulting firm called Acclimatise and the Carbon Disclosure Project published a report called Building Business Resilience to Inevitable Climate Change [PDF, download] urging oil-and gas companies to review their strategies, business models and supply chains to “check their resilience to the new risk landscape created by inevitable climate change.”

Environmental groups, which once focused solely on curbing carbon pollution, are now looking at adaptation, in part to underscore the urgency of the climate threat. Theo Spencer, a senior advocate at the Natural Resources Defense Council, which helped organize a meeting early this month with utilities, insurance companies and others to talk about climate preparedness, says companies are coming to understand that “the weather is changing and we really need to do something about it.” He quotes the White House science adviser John Holdren who said the task ahead is not just “avoiding the unmanageable” but also  “managing the unavoidable.” Unavoidable climate change, and its consequences, is likely to be a corporate worry for years to come.

You can rent this penthouse in Rio for $258/night on AirBnB

You hear a lot these days about the sharing economy and collaborative consumption, especially if you spend time in northern California. I spent last week in San Francisco, where people told me about AirBnB, which allows people to share their homes or apartments with visitors, RelayRides,  Share My Ride and getaround, which allow people to rent their cars for a few hours or days, and ThredUp, where parents buy, sell and share children’s clothes, toys and books. Meantime, Prosper.com and Lending Club connect people who want to lend money with those who want to borrow. With peer-to-peer lending, who needs Citi or Bank of America?

Last year, Fast Company published a thoughtful and well-reported overview of the sharing economy by Danielle Sacks under the headline: “Thanks to the social web, you can now share anything with anyone anywhere in the world. Is this the end of hyperconsumption?” More than 3 million people from 235 countries have “couch-surfed,” she reported, and more than 2.2 million bike-sharing trips are taken each month.

Many sharing websites, like Freecycle and Couch Surfing, are nonprofits. Seattle and Berkeley have tool libraries, where people can borrow a lawn mower, power saw or drill. But other sharing ventures are business. Some analysts expect the sharing economy to generate real money, Fast Company reported:

Gartner Group researchers estimate that the peer-to-peer financial-lending market will reach $5 billion by 2013. Frost & Sullivan projects that car-sharing revenues in North America alone will hit $3.3 billion by 2016.

I’ve always liked the idea of sharing–hey, I paid attention back in kindergarten–because of its obvious environmental benefits: The more we share, the less stuff we need to own. But I’ve been skeptical of the claim that the sharing economy would end–or even slow down–hyperconsumption. My week in San Francisco made me less of a skeptic. This idea just might spread.

Partly I’ve changed my thinking because of my own experience. For the first time, I stayed in an apartment that I found through AirBnB. Because I planned to spend six days in San Francisco, staying in a downtown hotel struck me as unappealing. I liked the idea of exploring a neighborhood, making my own breakfast and saving a few dollars. So I found a studio in Potrero Hill for $140/night that I rented from a woman named Kepa Askenasy.  I chose it in  part because Kepa was rated a “SuperHost” by Air BnB and had about 70 favorable reviews from renters on the site. It’s the top floor unit, below.

My digs in San Francisco

I felt some trepidation as I boarded the plane for SFO–this wasn’t as predictable as staying at a Marriott, or at one of the Joie de Vivre hotels in SF, which I like a lot–but everything worked out really well. The apartment was small but comfortable, and Kepa kindly provided maps, neighborhood guides and her own advice on local dining and shopping.  I explored Potrero Hill, enjoyed a long walk to downtown for one meeting, got around on buses and the Muni,  went for a run with my pal Adam Lashinsky (buy his new book!) who leaves nearby and hung out at Farley’s, the local coffee shop.

The peer reviews on AirBnB took a lot of risk out of the transaction, for Kepa and me. She got paid in advance. I was reassured by her ratings. Afterwards, we rated one another, to guide future renters and lessors. She told me by email:

Airbnb emphasizes customer service, and accountability on both sides of the equation (host/ guest) through their transparent review process. It’s been exceptionally easy to handle the transactions. My guests seem to be happy with their side of the deal too.

Should Marriott and Hilton be worried by AirBnB? Probably not, but it’s not going to help their business.

Later in the week, I had lunch with Beth Trask of Environmental Defense Fund who told me that she’s renovating a home in Berkeley. And, yes, when she needs tools, she visits the tool library. She told me:

The Berkeley tool library is a real community gem.  I’ve borrowed everything from rakes and hammers to drain snakes, sanders and power tools.   The crusty old guys who run it love to tease me — since I never know the right names for the tools I’m looking for and they usually have to explain them to me – but they always help me out.  I’ve saved so much money and time, and have learned a lot about tools along the way.

On a visit with Net Impact, a great organization of MBAs, young professionals and college students who want to use the power of business to change the world for the better, several young staffers told me that they thought the sharing economy was a real phenomenon among younger people. Liz Maw, the executive director, was planning to rent a car the following day from getaround, but was stymied by a couple of glitches. But others in the group had used car sharing services, which provide peer reviews as well as insurance. Most cars, it turns out, sit around as much as 90% of the time.

I’d readily use AirBnB again, and I’m prepared to try car sharing. I’ve been using Freecyle for years [see my 2007 Fortune.com column, The amazing Freecycle story]. It strikes me that free or government-backed sharing programs, like Capital Bikeshare in Washington, D.C., function as gateway drugs for people who have forgotten the lessons they learned in kindergarten. They can move from there to Zipcar and from there to sharing their own car or apartment, and borrowing from others.

Lisa Gansky, an entrepreneur and author of a book called The Mesh: Why the Future of Business is Sharing, is the leading evangelist for the sharing economy. In a manifesto called Six Reasons Why the Sharing Society (aka the Mesh) Will Trump the Ownership Society [PDF, download], she has this to say about the environmental advantages of sharing:

Barring some miracle in space, there’s only one planet for us to inhabit. And by mid-century, roughly three billion more people will join us. With this math, it’s not hard to predict that businesses that figure out more efficient ways to use the earth’s resources will thrive. Also, urban areas will inevitably become more densely populated, which really favors the sharing economy. If you’ve got more people in a neighborhood, it’s easier to increase the number of bikes, tools, local farmers markets or clothing swaps you can offer. You can also make your offers more convenient—more shared cars in the lot or on a nearby street. Density deepens community and creates demand for shared products and services. Owning a car outright, on the other hand, becomes a bigger and bigger expense and burden to maintain and park.

Very cool.

Do you think the sharing economy threatens business as usual?

Imagine if you had to put a quarter in a slot every time you took a shower at home. Or 50 cents to run the dishwasher. Or $2 to water the grass.

You’d think about water differently, wouldn’t you?

A San Francisco startup called WaterSmart Software wants to remind people that wasting water is wasting money, and to show consumers how to conserve both.

“People don’t have a mental image of pennies going down the drain,” says Peter Yolles, a founder and CEO of WaterSmart Software, which is based in San Francisco.

But they should.

“We’re helping the consumer save money,” Yolles says. “And we’re helping the utility save money.”

WaterSmart is a small company–just six people–that wants to help tackle a very big problem: Fresh, clean water is a finite resource. As populations grow, incomes grow and the planet warms, water scarcity will create business opportunities.

If you’re like me (and I hope you’re not in this instance), you know very little about your water use. I just checked my quarterly bills for the past 12 months and found that I paid $994.21 for water, or $82.85 per month. That’s higher than I thought and, unfortunately, quite a bit higher than the average bill for US households of about $50 month, according to WaterSmart.

What’s more, Yolles tells me, the water bill is “the fastest growing bill in your home,” faster then the electricity or even the cable bill.

Here’s a chart showing typical household water use:

You may be surprised, as I was, to see how much usage comes from leaks and the toilet as opposed to say, the dishwasher, which doesn’t merit its own slice of the chart. (This is from a 1999 study.)

WatersSmart software aims to give people, first, more information about their water use and then, second, advice on how to use water more efficiently. Using billing information from water utilities, along with real estate, climate and geographic data, WaterSmart will compare a household’s water use with the neighbors in a friendly, easy-to-use format, on line and in print. It’s similar in concept to a fast-growing startup called OPower which promotes energy conservation. [See my 2010 blogpost, Opower, peer presssure and climate change.)

Peter Yolles

Yolles, by his own description is a “water guy” having spent 20 years dealing with water issues from a business, nonprofit and government perspective. He’s got a master’s in water resources from Yale’s forestry school, as well as an MBA, and he has worked at GE Capital and the Nature Conservancy, as well as the Pacific Institute, a leading water think tank. He and his co-founder, Rob Steiner, started WaterSmart late in 2009 and they were one of the winners the following year in a competition called Imagine H2O. Since then, WaterSmart has raised venture money from Draper Fisher Jurvetson, Sand Hill Angels and Gary Kremin, an entrepreneur who founded match.com and Clean Power Finance. I heard about the firm from partners Andrew Williamson and Will Rosenzweig at Physic Ventures, which is also backing WaterSmart.

The business model for WaterSmart depends on the desire of water utilities, which are mostly publicly owned, to get their customers to conserve. “They want to provide a clean, reliable souce of water for their customers,” Yolles says. Some utilities are so concerned about the availability of water that they subsidize low-flow shower heads and toilets, or even pay for a homeowner to replace thirsty grasses on their lawns with native plants that need less water. If enough individual homeowners use less water, the utility can avoid the cost of new treatment facilities, reservoirs or even desalination plants.

In California (where I’m spending a couple of weeks), water is on people’s minds. “This is the third driest winter, so far, in California,” Yolles said. “Some California cities had no precipation in December.” WaterSmart software has two pilot programs underway in the state.

But the problem goes way beyond California, of course. Water scarcity, climate change and infrastructure requirements are driving up water prices throughout the United States. Using electricity requires lots of water.

Globally, population growth and urbanization are expected to drive demand for water up 40 percent within 20 years, according to a 2009 report from the 2030 Water Resources Group, an association of the World Bank, major industrial water users and the consulting firm McKinsey, according to The New York Times.

No wonder more companies are developing water strategies. Maybe the rest of us should, too.

Should we worry about Chinese government subsidies to its solar industry? Or send the Chinese a thank-you note?

A group of seven US-based manufacturers of solar panels is alarmed. These manufacturers, led by Solar World, a German firm with a plant in Oregon, filed a complaint with the United States International Trade Commission, which reached a preliminary conclusion in December that US companies were, in fact, being harmed by subsidized imports. If the Commerce Department goes on to find that Chinese firms have been dumping solar panels on the US market at prices below their costs, it could impose steep tariffs of 50 to 250% on Chinese panels, according to this report in The Times by Matt Wald. The Chinese government provides billions of dollars of low-cost financing and free or cheap land to Chinese solar firms.

Jigar Shah

But much of the solar industry–led by Jigar Shah, the founder of Sun Edison, entrepreneur and environmental advocate–thinks this complaint is a terrible idea. Tariffs  would raise the costs of solar power to US business and consumers, at a time when those are coming down; they could also set off a solar trade war that would harm other US solar companies.

As it happens, the U.S. had a trade surplus of nearly $1.9 billion in the solar sector with China in 2010, as exports of raw material and factory equipment more than offset imports of finished solar panels, according to the Solar Electric Industries Association,. What’s more, Jigar says, most of the 100,000 or so jobs in the US solar industry — he says as much as 97-98% — are downstream of the manufacturing business in project development, logistics, construction and installation.

“SolarWorld’s petition will do far more damage than good to the U.S. solar industry as a whole,” Jigar wrote in this letter to Gordon Brinser of Solar World. “Every morning, thousands of hard-working Americans put on their tool belts and go build solar power plants. Our country needs more of those jobs, not fewer.”

What got me thinking about this brouhaha was an email the other day from a California company called Solar Power Inc., or SPI, that underscored for me just how committed the Chinese are to getting their solar panels onto rooftops in the US.  SPI said it had secured construction financing worth $44 million from the state-owned China Development Bank to fund construction of solar projects in New Jersey.

Why would a Chinese bank finance solar panels in the US? Well, it turns out that SPI is 70%-owned by LDK Solar, a Chinese company founded in 2005 that now says it “the world’s largest producer of solar wafers in terms of capacity and a leading high-purity polysilicon and solar module manufacturer.” LDK bought its controlling interest in SPI Solar last year in an effort to gain direct access to the US commercial market. With revenues expected to top $90 million last year, SPI is small to mid-sized developer of rooftop PV–it installed panels atop the Staples Center and the Fox Studios in Los Angeles and a Costco in New Jersey. “We’re a downstream market for LDK,” said Mike Anderson, vice president of communications for SPI Solar.

Now consider those solar panels on their way to rooftops in New Jersey–the Chinese manufacturer, LDK, gets low-cost land and financing from the Chinese government, SPI borrows from the state-owned China development bank to construct the solar arrays, the US government grants the panels a 30% investment tax credit and New Jersey’s renewable portfolio standard makes the project that much more attractive to the state’s utilities. No wonder the solar market is growing!

Supporters of the petition filed by SolarWorld, which employs more than 1,000 workers in Oregon and is the only company named in the trade complaint, argue that too much of the solar PV market is going to China. Chinese manufacturers now enjoy better than 50% of the global market for modules, up from single digit percentages in the late 1990s. Cheap Chinese solar helped drive US firms like the now-infamous Solyndra and Evergreen Solar into bankruptcy.

In a blogpost titled Educating Jigar Shah on Solar Trade, Hari Chandra Polavarapu, a solar analyst at a small firm called Auriga USA, declares: “The lower prices of solar cells and modules from China have so far served as a battering ram in destroying overseas solar PV manufacturing competition.”

“It’s true that lower prices benefit all rate payers — but if that is all there is to an economic argument, then the U.S. and the rest of the world should give up all manufacturing to China and services to India,” Polarapu writes.

My reactions:

1. Trade wars are risky. If the US imposes tariffs on Chinese solar panels, the Chinese will retaliate. They have already promised to investigate US subsidies.

2. Speaking of which, it takes chutzpah (that’s a technical term in economics) for US solar manufacturers to complain about subsidies in China since they, too, benefit from government-backed loans (yes, that means Solyndra), buy-American provisions in the stimulus package and favorable state tax treatment. SolarWorld got $40 million in tax credits from Oregon, where it employs about 1,000 people. Today’s Times has an excellent story about how the government pays for worker training programs for individual companies. Until the US brings a halt to crony capitalism (which would be good), US companies are in no position to whine when they find it elsewhere.

3. Maintaining solar panel manufacturing jobs in the US may be a lost cause. Solar cells and modules are not high tech products. They’re more like a flat-screen TV or an iPod than a Boeing jetliner. Chinese PV manufacturers benefit from efficient operations and low labor costs, according to this article in the MIT Technology Review.

4. The Chinese subsidies create a positive externality–lower carbon emissions, to the degree that solar panels replace dirtier fossil fuels. So long as they continue, we all benefit. If and when they stop, there’ll be no reason why other manufacturers can’t gear up to compete.

I’m not ready to send a thank-you note to China. But I’m thinking about it.

[Disclosure: I was paid last year to moderate an event for the Carbon War Room, which Jigar leads.]

If there’s one industry that ought to be concerned about the threat of global warming, it’s the insurance industry. OK, the ski industry, too, but I digress.

Dave Jones, California’s insurance commissioner, recently put it this way: “Climate change is an obvious physical threat to us all, but increasingly it also poses a serious financial threat to the insurance industry…” When extreme weather causes damage, insurers pay.

So you’d expect insurance companies to be among the most forceful voices in corporate America calling for the regulation greenhouse gas emissions.

Uh, no. They’ve been eerily quiet.

And, at the least, you’d expect them to be proudly steering some of their massive investments to clean energy or energy efficiency projects aimed at reducing emissions of greenhouse gases.

Wrong again.

“It’s surprising, in a sense, because they have so much to lose from climate change,” says Sharlene Leurig, senior manager of the insurance program at Ceres, a nonprofit coalition of investor and environmental groups. But, she notes, insurance is a conservative business. The industry is all about risk, but it doesn’t want to take the risk of speaking out on climate change.

This is the second of two blogposts about the insurance industry and climate. Yesterday, I blogged about federal and state-backed programs that are insure risky properties from flood and storm damage, creating potential liabilities for all of us. Today, I’ll ask why U.S. insurers–in stark contrast to the big European reinsurance companies–have been missing in action during the Washington climate wars.

Consider: The U.S. Climate Action Partnership, an alliance of big companies and environmental groups calling for a cap on carbon emissions, includes 21 companies–seven utility companies, industrial giants GE and Siemens, chemical firms Dow and DuPont, Alcoa, Shell, Rio Tinto, Johnson & Johnson, PepsiCo and not a single insurer since the departure of AIG (for reasons unrelated to climate).

Business for Innovative Climate and Energy Policy, or BICEP (which is a project of Ceres), another coalition pushing hard for policies to drive a low-carbon economy, includes Nike, Starbucks, Timberland, eBay, Gap, Avon and the Aspen/Snowmass, among others. No insurers.

Now…this isn’t to suggest that insurers have been entirely absent from the climate debate but mostly they’ve focused on their parochial interests. Some companies, for example, have asked the federal government to provide wind as well as water coverage in the event of hurricane damage. Others proposed want the federal government to offer reinsurance — that’s insurance for insurance companies — to protect against a major catastrophe, or “mega-cat” in industry argot. Fireman’s Fund, a unit of the German financial services firm Allianz, has been writing “green insurance” policies for building owners. (See my blogpost, Fireman’s Fund: an insuror that isn’t dull.)

But the industry has been a non-factor on the big issues, unlike the European reinsurance firms which have repeatedly warned of climate risks. Way back in 2007, Andrew Castaldi, head of the catastrophe risk unit for Swiss Re America Corp, told a Senate committee: “We believe unequivocally that climate change presents an increasing risk to the world economy and social welfare.” In a 2009 report, Lloyd’s of London warned of climate change contributing to “resource-driven conflicts; economic damage and risk to coastal cities and infrastructure; loss of territory and resultant border disputes; environmentally induced migration; government fragility; political radicalisation; tensions over energy supplies and pressures on international governance”. Munich Re, the world’s biggest reinsurer, said last year:  “It would seem that the growing number of weather-related catastrophes can only be explained by climate change.”

When I emailed the Property Casualty Insurers Association of America to ask why the industry hasn’t been more vocal, David Kodama, senior director of research and policy analysis for PCI, replied:

Climate change is one among many of important strategic risks for insurers. Broadly speaking, insurance companies assess and monitor developments associated with climate change and, as appropriate for the individual insurer, incorporate the relevant information into their business model and practices.

However, climate change is a particularly complex issue and its causes, effects and the relevant variables that impact it are multifaceted and not well understood.

…It is prudent for the many insurers to continue to study the issue.

Could the association be any more cautious? “Climate change is a heavily politicized issue in the US,” Ceres’ Sharlene Leurig says, when I ask her why the companies have stayed on the sidelines. “Why put your neck out there and start messaging about a topic that many consumers are confused about and, in some instances, downright hostile to?” Of course, that’s exactly what bolder companies like Nike and Starbucks are doing with BICEP.

There may, however, be another reason why insurers have been loathe to speak out: They write liability coverage for corporations, including oil and coal companies, which are being sued over climate-related liability.

An aerial view of Kivalina, Alaska

Claims have been filed against fossil fuel companies that remind some people of  class-action suits against tobacco and the asbestos makers. In Comer v. Murphy Oil, plaintiffs sued corporate defendants claiming personal injury and property damages caused by the allegedly climate change-induced impacts of Hurricane Katrina. In Village of Kivalina v. ExxonMobil, a native Alaska group sued oil and gas companies and US utilities claiming that coastal erosion caused by global warming would force them to relocate their fishing village.

In a fascinating interview with an Australian newspaper, Gerald Maples, the lead attorney in the Comer case, said he’ll go after those fossil fuel companies that misled the public about the dangers of climate change, just as tobacco companies sowed doubt about the danger of smoking: “It’s pretty much accepted history that asbestos and tobacco are the role models for climate change litigation now.”

Miami Beach oceanfront properties

Well-to-do Brazilians are buying up luxury condos on the beach in Miami, The Times reported last week. “They are taking Miami by storm,” one real estate executive declared.

It’s an unfortunate metaphor.

That’s because, sooner or later, storms will likely damage or destroy much of the property on the Florida shoreline. And, while a beachfront real estate revival may be welcomed by developers who, according to the Times, are “starting or restarting ambitious condo projects,” the risks are being borne not by the developers or by the condo buyers or even by private insurance companies but, for the most part, by a state-run, not-for-profit, tax-exempt corporation called the Citizens Property Insurance Company. Citizens has become the biggest insurance company in Florida since it was created in 2002, and many of its policies ($232 billion worth, according to a 2009 story in the Miami Herald, referenced here) are written on riskier, coastal properties. As a government-sponsored entity, Citizens has the implicit backing of Florida taxpayers who, you can be sure, will turn to the rest of us for help if the big one hits.

“Who’s on the hook when a wall of water hits the coast of south Florida? You and me,” says Sharlene Leurig, senior manager of the insurance program at Ceres, a nonprofit alliance of investors and environmental groups. Her  job is to raise awareness of climate risk within the insurance industry, and to prod the industry to respond.

It’s not just a problem in Florida–many states are assuming the risk of natural disasters, despite the rising costs of extreme weather events, which are more frequent and more severe because of climate change, scientists say. So is the federal government: The National Flood Insurance Program (NFIP) has $1 trillion in exposure, according to Ceres, and it’s $20 billion in debt. Although no individual storm can be attributed to climate change, the rising prevalence and intensity of storms, floods, droughts and wildfires are consistent with what scientists say can be expected as global temperatures rise.

Sharlene Leurig

Today, I’m devoting the first of two blogposts to the insurance business and climate change. Have another cup of coffee if you must, but this is important. According to Leurig and a September 2011 report from Ceres, the insurance industry has yet to fully recognize the risks posed by climate change. This isn’t just their problem. It’s ours because what Ceres describes as he industry’s “sluggish and uneven response to the ever-increasing ripples from global climate change” threatens not just the insurance business but the stability of the global economy.

The most pressing worry is the  federal flood insurance program, which insures about 5.5 million homes, and the state-backed insurance pools that are underwriting seashore development. They’re under political pressure to make insurance affordable and available. If this sounds familiar, it should: Fannie Mae and Freddie Mac felt political pressure to make housing affordable and available, and that didn’t turn out so well.

More broadly, we depend upon insurance companies, acting in their own self-interest, to make the world a safer place. To avoid losses, insurers helped bring about fire safety codes for buildings and seat-belt laws.

They could be performing a similar service, by sounding an alarm on climate change, but they’re not, at least not in the U.S. By contrast, big European reinsurance companies like Munich Re and Swiss Re have been among the loudest voices in the corporate world, calling attention to climate risks and urging action.

“The reason that Ceres works with insurance companies is that they have a unique ability to change the way we behave,” Leurig told me.

In the U.S., insurers have responded to climate risk by excluding coverage or exiting markets. The federal flood insurance program was created in 1968 after Hurricane Betsy caused more than $1 billion in damages along the Gulf Coast. Private flood insurance was unavailable.

A 2010 report on the NFIP from the Institute for Policy Integrity at NYU Law School found:

• Because of its below-market insurance rates and the intense, hurricane-related floods in recent years, the NFIP has accrued a substantial deficit: $19 billion. [Now $20B] As currently structured, the program will not be able to repay this debt
• Since the NFIP cannot charge market rates, hold reserve funds, or purchase reinsurance, the program faces a constant financial risk of insolvency. The NFIP also causes environmental damage, by externalizing the risk of building in ecologically-sensitive floodplains.
• Those costs—financial risk and ecological damage—are widely distributed to taxpayers and citizens across the country.
• The benefits of the NFIP, by contrast, are enjoyed largely by wealthy counties and by a significant number of owners of vacation homes.

On the state level, special property insurance plans, known as residual insurance, have been set up by regulators to provide insurance in locations where the risk of severe storm damage is substantial. This is a classic example of moral hazard, where developers or homeowners take the risks but others — the insurance industry as a whole, or taxpayers — will be left with the bill if things go wrong.

A report issued last month by the Insurance Information Institute found that residual property insurance has grown dramatically over the past two decades:

Over the period 1990 and 2010, total exposure to loss in the residual property insurance market (FAIR and Beach and Windstorm Plans) surged from $54.7 billion in 1990 to $757.9 billion in 2010, which means that if all the policyholders insured by the two plans suffered a total loss, property damage claims would total that amount. Over the same period, the number of policies in force in the residual property insurance market went from 931,550 in 1990 to almost 2.8 million in 2010, a record.

It also said:

In July 2010 the Government Accountability Office (GAO) released a study that examined the condition of state natural disaster funds. Of the 10 state programs examined, the GAO found that six of the 10 charged rates that were not actuarially sound in that they did not accurately reflect potential losses.

Some government officials are addressing the problem. Florida Gov. Rick Scott has sought ways to shield taxpayers from the future claims that Citizens may be unable to pay. Louisiana’s Citizens Insurance has been shedding policyholders, returning them to private companies. Alabama and Mississippi offer discounts to owners whose homes are fortified to withstand strong winds. The chart below shows that exposure peaked back in 2007, so the, er, tide may be turning.

Still–the industry’s losses from extreme weather are a big worry, or they should be. Just last week, Bloomberg News reported that “U.S. property and casualty insurers’ profitability fell to the lowest level since 2008 as losses from natural disasters exceeded gains in sales and investment income.”

Until the insurance industry and its regulators recognize climate risks–and prices them into their products– those losses are likely continue.

According to the Financial Times, no less an authority than Lloyd’s of London, the largest reinsurer of US risk, said last fall:

“We don’t believe that the U.S. has the balance between industry and government intervention right, you have government intervention in federal and state level, it demonstrates this is not a sustainable way to proceed,” said Sean McGovern, Lloyds general counsel and the director of North America. He added: “The cost to the U.S. taxpayer is huge and is not sustainable.”

Says Leurig: “People should understand just how risky their behavior is, and price has become a good way of communicating that risk.” If the insurance industry, Florida real estate developers and Brazilian condo-buyers don’t pay a high enough price for the risk they are taking, the rest of us will get stuck with the bill.

Tomorrow: The eerie quiet of the insurance industry, on the climate issue.

Happy New Year! And good riddance to 2011, a year during which we made little or no progress on some of the issues that I care most about: climate change, the long-term federal debt, social mobility (aka the American dream), and our dysfunctional Congress. Yet I remain an optimist.

Texas drought 2011

I could write many words about our woes. Instead, I’ll try to be succinct. On the climate issue, global emissions of carbon dioxide from fossil-fuel burning jumped by the largest amount on record in 2010, we learned recently, and 2011 surely brought further increases.  Concentrations of CO₂ are 39% above where they were at the start of the industrial era and approaching the point when some scientists say it will be nearly impossible to contain global warming, the Guardian reports. Neither the US nor the UN moved closer to regulating CO2. In a discouraging development, Republicans Mitt Romney and Newt Gingrich backed away from their once-sensible support of greenhouse gas regulation, in what can only be seen as shameless pandering to the know-nothing wing of the Republican Party. Discouraging, too, was the Fukushima nuclear disaster, which will slow down the growth of carbon-free nuclear power. So will the failure of Solyndra. Meanwhile, the U.S. suffered massive flooding of the Mississippi and Missouri Rivers, a terrible drought in Texas, record wildfires and at least 2,941 monthly weather records that were broken by extreme events, according to the NRDC.. Coincidence? Uh, no.

Like the atmospheric concentrations of CO2, the federal budget deficit has been growing.That’s no coincidence either. We’re living beyond our means, whether by burning fossil fuels or taxpayer dollars, and sticking future generations with the cleanup bill. Just last week, the White House asked for a $1.2 trillion increase in the federal debt limit, raising it to about $16.4 trillion. According to Marketplace Radio, that amounts to about $52,000 for every American. For a typical  family of four, that’s bigger than the mortgage.

Social mobility is harder to measure than income inequality (and more important, methinks), but indications are that it’s more difficult to climb the economic ladder in the U.S. than in other western democracies. The Economic Mobility Project, a  bipartisan effort to study the issue, reported recently on a study of 10 western nations that concluded: “In the United States, there is a stronger link between parental education and children’s economic, educational, and socio-emotional outcomes than in any other country investigated.” The sluggish U.S. economy in 2011 didn’t make life easier for those on the bottom who want to work hard and better themselves.

And yet.

As I wrote a year ago (see my blogpost, China, cappuccino and cell phones: reasons to cheer!),  life on this planet is getting better all the time. We humans are richer, healthier and and more peaceful than ever. It’s easiest to forget that, especially if you focus too much on the day-to-day headlines.

Here are several reasons to feel good about the year ahead:

Western economies are slumping, but the rest of the world is growing robustly. The most urgent problem facing mankind isn’t climate change: It’s the human misery that’s caused by poverty. There’s less of that today than there was a year ago, and there will be less on Jan 1, 2013, I’d bet. China’s GDP grew by about 10% in 2010 and by an estimated 9% in 2011. India grew by 6 to 7 percent last year.

A Nairobi street

Then there’s Africa. As Forbes reported last week, in the middle of the 2009 global economic recession, Africa was the only region apart from Asia that grew positively, at about 2%. The continent’s growth has been on an upward trajectory ever since then- 4.5% in 2010 and 5.0% in 2011.

Reliable statistics are hard to come by, but you can be sure that this means that many millions of people are living longer and healthier lives, and that their children have a better shot at an education. This is good  for all of us because the global economy is not a zero-sum game. An expanding pie means a safer world, and more markets for U.S. goods. And there’s even reason to hope believe that the US economy is due for a rebound. See what Matthew Yglesias writes in Slate that Happy Days Are Here Again.

Corporations are taking a more expansive view of their responsibilities: One reason why I write about business is that I believe that corporations can be a powerful force for good. Many are not, but I found reason in 2011 to applaud changes at Walmart (Have I Fallen in Love with Walmart?), McDonald’s (Mainstreaming Sustainability? ), Smithfield Foods (Sustainable pork?), Office Depot (No tree hugging, please), Shaw Carpets (This carpet has moral fiber), Unilever (CEO Paul Polman: Don’t stay on the sidelines), Starbucks (We are indivisible), Marks & Spencer (Sustainability, profits and a carbon-neutral bra),  TD Bank (America’s greenest bank?) and GE (How GE learned to think small and serve the poor). My most popular post of the year, by far, was about Patagonia (Maybe the best retail ad ever).

These companies are responding to rising expectations–from advocacy groups, consumers, a handful of shareholder activists and especially from their own workers. The changes they are making aren’t big enough, and they aren’t happening fast enough, but the forces driving companies to become more sustainable are getting stronger all the time.

Protesters in Egypt

Citizens’ movements are growing here and abroad. Whatever you think of Occupy Wall Street, they got one thing right–the deck is stacked in the US in favor of the well-to-do and the powerful, not just the 1% but the 10 or 20 or 30%, and it’s stacked against those at the bottom of the income ladder. So many laws and cultural practices that we take for granted–from the mortgage interest deduction to the dismal quality of the public education system in our big cities and poorest rural areas–serve the interests of the rich and powerful. Wall Street got bailed out. Main Street got left behind. Thank goodness for people didn’t take that lying down. Thanks, too, to the Tea Party, which is wrong about most things but right about the fact that the federal government can’t keep spending money that it doesn’t have.

Of course, Occupy Wall Street was largely inspired by citizens uprising in Tunisia and Egypt, which in turn seem to inspired people in Russia and even in China to demand more of a voice in their own affairs. This is all to the good, and it should be a reminder to those of us here in the U.S. not to take our freedoms for granted and to exercise our rights as citizens. A big job ahead is to convince Congress to act like adults and treat us that way, understanding that they were elected to solve big problems, even if that requires. We can’t have big government, generous services and low taxes. Or cheap energy without climate risk. Or affordable, unlimited health care for all.

Sure, there’s reason to be gloomy but it always helps to think long term. More people are free today than at any time in human history. More people live comfortably. We’re more tolerant and loving that we used to be. We’ve got an African American president and my daughter, who is gay, will get legally married in June. MLK Jr. had it right: “The arc of the moral universe is long but it bends toward justice.”

Pity the much-maligned plastic bag.

Plastic bags are being banned or taxed in cities and counties across America–just this week in Seattle, before that in San Francisco, Portland and Washington, D.C.  Beginning in January, Montgomery County, MD, where I live, will impose a five-cent charge for carryout bags at all retail stores. Like most of my neighbors (median household income in the county tops $92,000) I can afford the extra nickel.

But I’m not persuaded that plastic bag bans or taxes makes sense. Here’s why.

They’re not  based on science. Independent studies show that plastic bags are environmentally preferable to paper. Other suggest that, when they are reused, they are preferable to the reusable plastic or cloth sacks that many of us tote around.

Some of the arguments put forth for the bans don’t hold up. That plastic waste waste in the oceans you’ve probably read about? No, it’s not the size of Texas. Nor is it made of plastic bags.

Getting rid carryout bags won’t lead to a long-term solution to the problem of plastic waste. Maybe instead of banning or taxing bags, we should be recycling them. That’s the argument being put forth by a company called Hilex Poly, which will recycle tens of millions of pounds of plastic bags, sacks and wraps this year, and would like to do more.

You may disagree but after digging into this subject for a while, I’m certain about only one thing: It’s complicated.

The arguments for plastic bag bans or taxes are, by now, familiar.  The Montgomery County carryout bag law  “is designed to improve our environment by cutting down plastic bags—a significant source of litter—which pollute our streets, streams, and playgrounds, and harm property values.” Econ 101 tells you that charging 5 cents for plastic bags creates an incentive for people to use fewer of them, and carry reusable bags instead. Proceeds go to “programs that fight litter and provide stormwater pollution control.”

Bill Hickman, who leads the Rise Above Plastics campaign at the Surfrider Foundation, an advocacy group, told me by phone: “We’re trying to stop the plastic impact on the marine environment. Plastic doesn’t biodegrade in our lifetime…Anything, single use, at the end of the day has negative effects on our environment.”

All true, but…

Studies say that plastic bags have a lighter environmental footprint than paper, and in some cases are preferable to reusable bags. A thorough life cycle analysis done in the UK by the government’s environment agency in 2006 (download, PDF, here) found that HDPE (high-density polyethylene, the typical lightweight plastic bags) are superior to paper because they require less energy and far less water to make and take up less space in landfill. Comparing them to reusable non woven polypropylene (PP) bags–the typical reusable bag, made in China, and sold by grocers–the study found that their impacts depend upon the number of times that plastic bags are reused. Data on this is scarce and controversial–critics of plastic say the bags are typically  used just once, but the industry says they are frequently used, often as garbage bags, or to carry kids’ lunches to school, or pick up dog poop. (Banning plastic carryout bags means that people may have to buy bags for those purposes.) Focusing on the climate issue, the 120-page-long UK study says:

The paper, LDPE, non-woven PP and cotton bags should be reused at least 3, 4, 11 and 131 times respectively to ensure that they have lower global warming potential than conventional HDPE carrier bags that are not reused.

If I understand that correctly, it means that one reusable bag has the carbon footprint of 13 disposable bags that are used just once. If you use the disposable bag twice, you’ll need to deploy the reusable bag 26 times before you are ahead in terms of global warming. By the way, this doesn’t include the impact of washing the reusable bag in hot water, which is highly recommended because bacteria like E. coli and fecal coliform can thrive in reusable bags, according to this study, which, it must be said, was financed by the plastics industry.

A study from the University of California, Chico, funded by Keep California Beautiful, (PDF, download) analyzed the UK studies, as well as research from Scotland, Australia and a U.S. consulting firm and found that “reusable plastic bags can have lower environmental impacts than single-use polyethylene plastic grocery bags.” But it also found traces of cadmium and lead in the reusable bags. The professor who did the study has consulted for both plastic bag and reusable bag makers. Like I said, it’s complicated.

Plastic pollution of the oceans probably isn’t as bad as you think. You can find dire stories of plastic pollution, as well as birds being strangled by plastic bags, on the websites of Surfrider and Save the Bay. Oprah Winfrey devoted a television program to the problem, saying:

The Great Pacific Garbage Patch stretches from the coast of California to Japan, and it’s estimated to be twice the size of Texas. “This is the most shocking thing I have seen,” Oprah says.

Whether Oprah has actually seen the garbage patch is anyone’s guess. But Angelicque “Angel” White, an assistant professor of oceanography at Oregon State, participated in one of the few expeditions solely aimed at understanding the abundance of plastic debris in the Pacific. He says the claim that the “Great Garbage Patch” between California and Japan is twice the size of Texas is flat wrong. OSU reports:

“There is no doubt that the amount of plastic in the world’s oceans is troubling, but this kind of exaggeration undermines the credibility of scientists,” White said. “We have data that allow us to make reasonable estimates; we don’t need the hyperbole.

According to NOAA and others, plastic debris in the oceans comes from many sources, including fishing lines, PET bottles, polyester clothing, detergent bottles, plumbing pipes, drinking straws and toothbrushes. The photo below comes from the website of a group called Heal the Bay, which crusades against plastic bags. Do you see a lot of plastic bags in the picture? Should we tax or ban all plastics because some end up as litter?

Why not recycle? Since we’re never going to ban all plastic bags and containers–plastics used to carry fruits and vegetables, plastic newspaper wrappers, styrofoam containers used for carryout food, etc–maybe the answer is to support and develop robust recycling streams for plastic. Like PET bottles, plastic bags are 100% recyclable. The plastic isn’t the problem; litter is the problem.

This is from my local Safeway. What's so hard about recycling?

Unfortunately, recycling rates are low, but the good news is that they are climbing. EPA recently reported (PDF, download) that in 2010  recycling was up from 12% to 15% for polyethylene bags, sacks and wraps. The more plastic bags are recycled and reused, the less their environmental impact, of course.

This argument was put to me by Mark Daniels, who is vice president of sustainability for Hilex, a leading manufacturer and recycler of plastic bags. Hilex pays about $300 to $400 a ton to supermarkets and others for used plastic bags, stretch wrap, the plastic wrap that goes around bottles, etc.  They company says it will recycled between 35 and 38 millions pounds of post-consumer plastic bags this year–a tiny fraction of all bags, but still–and it wishes it had more. Hilex does its recycling at a plant in Indiana that it opened in 2005, and doubled in size in 2010.

“It is less expensive for us to collect, purchase, transport and reprocess and redistribute that materials to all of our other plants than it is to purchase virgin material,” Mark told me. That’s true even though plastic bags are made from natural gas, which is cheap right now.

Hilex does its recycling at a plant in Indiana that it opened in 2005, and doubled in size in 2010. But a robust supply of post-consumer plastic is needed to keep the plant busy. “We can triple our capacity to nearly 100 million pounds,” Mark said. “But it’s difficult for our company and our board of directors to commit those tens of millions of dollars,” without the support of cities, towns, retailers and environmentalists for more recycling. “We should be 100% aligned with environmentalists,” Mark said.

The truth is, we don’t really have a clear answer to the age-old question of “paper or plastic,” now amended to say “paper, plastic or reusable?” Too many variables are at play.

My own answer? I carry several reusable bags in the trunk of my (hybrid) car and bring them into the grocery store when I remember. When I don’t, I take plastic and bring it back to be recycled. I don’t feel bad about that. Neither should you.

–

A personal note: Thanks for reading and commenting on my blog in 2011. This is my 188th and final post of the year. Enjoy the holidays, and see you in 2012.

About 64 million people visit McDonald’s every day. That’s a stunning number. They’ll see changes in the year ahead, some driven by a renewed sustainability push at the $24-billion fast-food giant.

LED lights in new and renovated stores. “Greener” packaging. Eco-labels on fish sold in Europe.

None of this is earth-shattering or, more importantly, earth-saving, but it’s the start of something big, says Bob Langert, McDonald’s v.p. for sustainability.

“We’re on a path to mainstream sustainability,” Bob told me by phone the other day. “This is transformational for us. We want to be bolder, and we want to make a bigger impact.” Most important, he said, the company wants to embed sustainability into its operations and, eventually, into its brand.

Business-friendly environmentalists who work with McDonald’s–groups like the World Wildlife Fund, Conservation International and Environmental Defense Fund–will applaud any sign that the company is ready to integrate sustainability into its core business and dig deeper into its supply chain to find ways to raise beef and chicken that are better for the planet. Skeptics, and there are many, will call this greenwashing, or perhaps “farmwashing,” a term I hadn’t heard until yesterday when I saw this anti-McDonald’s posting in Grist.

In a way, McDonald’s is like Walmart–it’s never going to be beloved in the Whole Foods-shopping, arugula-eating, tony precincts of Berkeley, Brooklyn or Bethesda. But the company is much too big to ignore or wish away.

Today, McDonald’s released its 2011 Sustainability Scorecard. Under the umbrella of sustainability, the company includes environmental responsibility, its supply chain, nutrition and well-being, employees and community grants and programs, albeit in a way that highlights accomplishments and isn’t easily transparent. (Please let me know if you can find an accounting of the company’s carbon footprint or a greenhouse gas reduction goal, because I couldn’t.)  But McDonald’s can feel good about a couple of big initiatives in the year just past.

First, as you’ve probably read, McDonald’s will reformulate all of the Happy Meals sold in the U.S. and Latin America to automatically include fruit and reduce the overall amount of calories and fat, mostly by serving smaller portions of frees. This is a big deal if you choose to blame the obesity crisis on the companies that sell food. I don’t. (See my blogpost, Mmm…mmm..who’s to blame for obesity?) It’s dangerous to confuse corporate responsibility with personal responsibility.

Companies are, however, responsible for what they buy and here McDonald’s is making meaningful progress, moving forward with its sustainable land management commitment, which is supposed to “ensure that, over time, the agricultural raw materials for our food and packaging originate from legal and sustainably managed land sources.”

Just what this will mean in practice isn’t clear, but the company has, as an example, joined with the World Wildlife Fund and The Nature Conservancy, as well as Cargill and Walmart, to form the Global Conference on Sustainable Beef, which will try figure out how to make the beef production system more sustainable. For a host of reasons, not the least of which is the company’s desire to sell as many burgers as it can, I’m skeptical about this effort (see my blogpost, Meat: bad for you, bad for the climate) but the fact is that people will go on eating lots of beef. So we should wish McDonald’s and its allies good luck as they try to “green” the hamburger.

Meanwhile, McDonald’s has promised to source only certified sustainable palm oil by 2015, to buy more coffee certified by independent organizations like the Rainforest Alliance and to insure that its chicken products haven’t been fed soy from the Amazon. These are unglamorous initiatives that probably won’t drive sales, but they matter because of the company’s scale.

“We see our impacts on the supply chain as being paramount,” Bob told me. “We don’t buy niche products. We buy from the mainstream.” When McDonald’s says that beef needs to be raised differently, an entire industry will have to listen.

Bob Langert

It’s partly because I’ve known and trusted Bob for many years that I take these efforts seriously. He’s been in charge of the company’s corporate responsibility effort (now rebranded as sustainability) for nearly 20 years. (See my blogpost, What a long, strange trip it’s been for McDonald’s Bob Langert.) Most of that work, he told me, has been reactive and defensive. Remember Fast Food Nation? Or Super Size Me? Even McDonald’s involvement with the Marine Stewardship Council grew out of a crisis. “We had fisheries disappearing,” Bob said. More than 99% of McDonald’s fish now comes from MSC certified fisheries.

Now, Bob says, the company sees sustainability as an opportunity, and it’s willing to put real dollars behind it. “We’re investing a lot more into energy efficiency and green building,” he says, hundreds of millions of dollars to  rebuild and refresh restaurants, making LED lights standard. The company is buying renewable energy certificates to support the development of clean energy.

“Sustainability is going to be higher on the agenda for our senior management team,” he says.

To put its considerable muscle behind those words, McDonald’s needs to set some ambitious goals and targets, and report in a transparent way on its progress. Unlike, say, my local farmer’s market or yours, this is a company that can move the needle on environmental issues in a meaningful way.