Taxing carbon at Disney, Microsoft and Shell

urlMany economists, left and right, favor a carbon tax. Requiring companies and, ultimately, all of us to pay when we generate greenhouse gas emissions would deliver many benefits. By raising the costs of fossil fuels, a carbon tax would help drive efficiency and conservation. It would stimulate investment in low-carbon sources of energy, and encourage research into new clean-energy technologies. It would, of course, reduce the emissions that cause global warming; right now, anyone is free to dump the equivalent of garbage into the atmosphere without paying a penalty.

More broadly, economists say, governments should impose taxes on things that we want less of, like alcohol, tobacco and pollution–these are known as Pigovian taxes–and try to reduce the costs of the things that we want more of, like jobs, which, unfortunately, cost more to create when government burdens employers with payroll taxes and health care mandates.

What impact might carbon taxes have on business? In my latest story for the Guardian Sustainable Business, I look at three companies — Disney, Microsoft and Shell — that have decided to impose carbon taxes on themselves. They also favor government action to regulate carbon emissions.

Here’s how the story begins:

Visitors who climb aboard the steam trains in the Disneyland resort in southern California need not worry about their carbon footprint. The trains are powered by soy-based cooking oil recycled from the resort’s kitchens.

It’s a Mickey Mouse gesture, really, when set against the millions of miles that park visitors travel by car and plane to reach Disneyland. But it’s driven, in part, by an innovative and forward-thinking tool that Walt Disney, which posted revenues of $42.3bn (£27.8bn) in 2012, uses to regulate its greenhouse gas emissions. A self-imposed carbon tax.

It’s not just Disney. Although most of the world’s governments have declined to put a price on carbon emissions, a handful of global companies, including Microsoft and Shell, have chosen to act on their own. They have established internal carbon prices in an effort to reduce emissions, promote energy efficiency and encourage the use of cleaner sources of power, just as a government tax or cap-and-trade program would.

You can read the rest of the story here.

Shell: Get ready for a warmer world

image.1614211676Solar power and natural gas will grow rapidly in the next few decades, if new scenarios from global energy giant Shell prove accurate.

And as the technology to capture carbon from the burning fossil fuels reaches scale, and sources of clean energy grow, net carbon emissions could drop to zero by 2100.

Even so, it will be hard, if not impossible, to meet the goal set by the world’s governments of holding the average increase in global temperatures to 2 degrees centigrade.

6280287836_2ccdb72913_mToday in Washington, Royal Dutch Shell’s chief executive, Peter Voser, and Jeremy Bentham, the head of Shell’s scenarios team, unveiled a pair of “New Lens” scenarios, dubbed “oceans” and “mountains,” and available in much greater detail here. In essence (and it’s more complicated this), the “mountains” scenario envisions a strong role for government and coordinated global policy, while the “oceans” scenario sees dispersed power, greater volatility, a stronger role for markets and rapid economic growth. Shell has been generating scenarios for about 40 years, to help guide the company’s long-term planning as well as influence policy makers.

Underlying both scenarios, though, are assumptions about the world’s increasing population and economic growth that together will drive demand for energy by about 80% by 2050. That rising demand is all but unavoidable, Bentham said, even assuming strong policies to promote efficiency or high energy prices that discourage consumption.

Meeting that demand for energy, while reducing carbon emissions dramatically, will be extremely difficult, to say the least, the Shell executives said. [click to continue…]

Shell: We need tough fracking rules

Marvin Odum, the president of Shell Oil, made a revealing and insightful observation at the “Shell 2011 Energy Summit” last week in Houston.

“You are only as good as the worst operator in your industry,” he said.

Marvin Odum

He could have been talking about BP. Shell wants to drill offshore in Alaska, home to some of the richest undeveloped oil and gas reserves in North America, but there’s little chance of that so long as memories of the BP Deepwater oil spill remain fresh.

Or he could have been talking about the Tokyo Electric Power Co. Last month’s accident at Fukushima has cast a cloud over hopes for a global nuclear renaissance, fueling opposition to nukes from India to Germany to Minnesota.

In fact, he was talking about hydrofracking—the technology that will allow vast amounts of natural gas to be tapped from fields around the U.S., creating a boom in the shale fields of Wyoming, Texas, Louisiana and Pennsylvania.

But fracking, as it’s called, is controversial. When wells are improperly drilled, water supplies can become polluted. Some gas drilling companies won’t say what chemicals they are injecting into the shale to drive out the gas. Just last week, an unpublished study challenged the conventional wisdom that natural gas is a cleaner fuel than coal, arguing that the release of methane during drilling could aggravate global warming.

To head off the criticism, and clean up the highly-fragmented natural gas drilling industry,  Shell wants strong regulation of hydrofracking. The company says it will monitor its own wells carefully and disclose the chemicals it uses in its fracking fluids.  The goal, it appears, is to engage with critics and demonstrate to them that when well managed, fracking has benefits that far outweigh any harm. [click to continue…]

Codexis aims to stand out from the biofuels crowd

Biofuels development at Codexis headquarters in Redwood City, CA.

In the overcrowded biofuels business, it’s hard to tell the pretenders from the contenders.

Every company claims to possess breakthrough technology that is just about ready for commercialization. Just ask Algenol, Amyris, Bluefire Ethanol, Coskata, Genencor, Gevo, LS9, Mascoma, Novozymes, Range Fuels, Synthetic Genomics (which is funded by ExxonMobil) and Terrabon. In the last couple of years, I’ve taken a look at Poet, (See Poet, seeking patronage), Qteros (Qteros: Turning mud to big money) and Solazyme (Gee whiz, algae!), among others.

Today, I’ll turn my attention to Codexis, which, like its rivals, has a beautiful website, big ideas and very little in the way of commercial production of a biofuel not made from food. That’s the problem here — a sustainable biofuel such as cellulosic ethanol, which is ethanol made from the wood, grasses or the non-edible parts of plants, always seems to be a few years away, despite the hopes of venture capitalists and politicians.

It was back in 2007, after all, Congress mandated that the U.S. use 100 million gallons of cellulosic ethanol yearly by 2010, and 250 million gallons by 2011. Congress, alas, can’t mandate technological progress or persuade algae to grow faster, no matter how much money it throws at the problem, so neither target will be met, not by a long shot. For a skeptical view of the biofuels biz, see Robert Rapier’s blogpost, Cellulosic Ethanol Reality Begins to Set In. A former ConocoPhillips exec and a chemical engineer, Rapier doesn’t think that “large-scale commercialization of cellulosic ethanol will ever be viable.”

Alan Shaw

And yet…many scientists, investors and corporate executives, including some in the oil industry, believe strongly in biofuels, which brings us to Codexis. Shell has invested $350 to $400 million in Codexis, according to the company’s CEO, Alan Shaw, who spoke with me this week in Washington. “It’s the largest privately funded biofuels program in the world,” Shaw told me.

Codexis also has partnerships with Merck and Pfizer, because its enzymes can be engineered to produce pharmaceuticals, and with Alstom, which is using Codexis technology to capture carbon dioxide emissions from coal-fired power plants.

“Our model is to work with Big Brother,” Shaw said.

Codexis (CDXS), which was spun out of a biotech firm called Maxygen in 2002, went public last April. The company reported $107 million in revenues in 2010, with most coming from Shell, which, in effect, is outsourcing its biofuels R&D to Codexis. The company isn’t making money yet and the stock’s down by about 20% since the IPO.

If I’d taken biology and chemistry in college, I might be explain to explain Codexis’s technology in a sophisticated away. Here’s the best I can manage: In brief, the company rearranges the DNA of enzymes–which are proteins that speed up or slow down chemical reactions–in order to make new industrial processes possible and make existing processes faster, cleaner and more efficient than conventional methods.

In Codexis’s biofuels business, that means turning feedstocks like sugar cane bagasse and leaves, wheat straw, woody biomass, or waste from pulp and paper mills into sugars that can then be fermented into ethanol.

Shaw does not believe that using corn or sugar as feedstocks makes long-term sense for the biofuels business. He’s surely right about that. The environmental benefits of corn ethanol are questionable at best, and groups including the American Meat Institute, the American Jewish World Service, the Competitive Enterprise Institute and (strange bedfellows!) all oppose further federal subsidies for corn ethanol.

Sugar, meanwhile, costs more than $700 a ton, which makes the economics of turning sugar cane into ethanol very challenging. Prices will only raise as the world’s population grows, Shaw says. Instead of turning sugar into ethanol, why not find ways to take biomass with no food value and turn it into sugar?

That’s Codexis’s approach, of course. In Canada, Codexis is working with Iogen, which has been making cellulosic ethanol from wheat straw in a small demonstration plant since 2004. In Brazil,  Codexis is working with Cosan, the world’s largest sugar and ethanol company, and Royal Dutch Shell, which have formed a joint venture called Raizen. They’ll focus on sugar cane bagasse, leaves and stalks, none of which are edible.

Shaw told me that he expects to see Codexis’s technology used in pilot plants in Canada this year and Brazil next year.

And when will the technology be commercialized?

“You’re talking about hundreds of millions of dollars of investment,” Shaw said. “Large scale, I think we’re looking at 2015.”

In the long run, there ought to be a future for sustainable low-carbon biofuels. Even if the automakers electrify most or all of their cars, clean transportation fuels will be needed to power planes, trains and ships.

What’s more, no industry wants to be dependent on oil forever–not even the oil industry.