Oil & Water

This talk surprised me in the sense that Matt Simmons used to be very focused on energy. He comes from the oil investment world. He has now expanded the discussion to include other resources - mostly water. He sees ocean energy as the way forward. I often find Matt Simmons to be ahead of curve - not that he needs my endorsement.

I am seeing more references everday to the interplay between energy and water. Jeremy Rifkin mentioned in a recent talk that during the heatwave in Europe that killed 10K people, one of the reasons France's nuclear power plants could not generate more energy to drive the air conditioners and mitigate the problem is that the power plants were constrained by their water availability. Here Matt Simmons suggests that USA's power generation uses 40% of the fresh water. Arnold Schwarzenegger, Governor of California, in a talk claimed that 20% of the energy generated in the state of California is used for pumping water around.

Twin Threats to Resource Scarcity: Oil & Water Marsh’s National Oil Companies’ Conference 2010, February 24, 2010

Simmons marsh-talk

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Vacation

I will be away for a month (traveling abroad) but will be back to continue chronicling the journey.

Some observations so far:

1. I am seeing greater amount of involvement every single day from the financial industry (pension funds, insurance, banks, exchanges). I blogged extensively about this. I believe that they already changing the dynamics.

2. The progress on the technology front is a lot more diffused and unclear. In particular, I am beginning to have doubts about EVs primarily due to extremely limited availability of cruicial raw materials (Li). You cant build a trillion dollar industry around rare earths metals.

3. A big chunk of the low carbon economy will be regulation driven (cap-n-trade, EU ETS etc). Looks like the financial crisis has postponed cap-n-trade bill in the US by a year or two but local initiatives at state and city-level are proceeding at full steam.

4. The news on the climate change gets worse by the day. Even sticking to 450PPM of CO2 may not be enough to prevent 3+ centigrade rise in global temperature. We may be looking at a violent 21st century.

Ceres Roadmap for The 21st Century Corporation

CERES ups the ante with a new report detailing the roles and responsibilities of corporate stake holders in the low carbon economy. Given the backers of CERES including major institutional investors such as CalPERS, I would expect this document to have some impact.

A couple of words from the very first line caught my eye - 'win' and 'resource-constrained'. These words are meaningful to investors and management. They indicate what the risk (of being left behind, hit by consequences) and opportunity (what is source of new value) are about.

Reuters has an article (Time for next stage of sustainable business) talking about the ceres report.

The 21st Century Corporation: The Ceres Roadmap for Sustainability

Companies must make immediate and meaningful social and environmental improvements if they are to win in the resource-constrained 21st century.

That’s the message of a new Ceres report outlining the urgency, vision and competitive advantages for companies that fully embrace sustainability in their business as energy prices rise, water supplies are increasingly contested and the world’s population grows.

"Sustainability performance is fundamental for business success in the 21st century,” said Mindy S. Lubber, president of the investor coalition Ceres, which published the report, The 21st Century Corporation: The Ceres Roadmap for Sustainability. “If businesses deepen their efforts to solve social and environmental threats, it will position them to innovate and compete in the fast-changing, resource-constrained global economy. It is no longer enough for companies to have special projects or initiatives. Comprehensive sustainability strategies are expected.”
...
Anne Stausboll, chief executive officer of the California Public Employees Retirement System, voiced strong support for the report's key findings.

"We expect our portfolio companies to do what is necessary to position themselves for a sustainable economy," said Stausboll, whose office oversees more than $200 billion in assets. "Environmental and social issues are core to business performance in the 21st century. We are looking for companies that are managing these risks and developing opportunities.

China and India Join Copenhagen Accord

This is a step in the right direction.

Climate Goal Is Supported by China and India

China and India join more than 100 countries that have signed up under the accord, which calls for limiting the rise in global temperatures to no more than 2 degrees Celsius, or 3.6 degrees Fahrenheit, beyond pre-industrial levels.

The agreement also calls for spending as much as $100 billion a year to help emerging countries adapt to climate change and develop low-carbon energy systems, to bring energy technology more quickly to the developing world and to take steps to protect tropical forests from destruction. ...
China has said it will try to voluntarily reduce its emissions of carbon dioxide per unit of economic growth — a measure known as “carbon intensity” — by 40 to 45 percent by 2020, compared with 2005 levels. India set a domestic emissions intensity reduction target of 20 to 25 percent by 2020, compared with 2005 levels, excluding its agricultural sector.

Carbon Caps Through the Backdoor

WSJ discusses the role of NAIC (National Association of Insurance Commissioners) - insurance regulators from 50 states - in development and enforcement of climate change-related disclosure norms. It is somewhat ideological in its take. The states have legitimate interest in climate change impacts and its cost (often paid through insurance companies). It is not very different from actions by any number of interest groups - many of them much more odious than this.

Carbon Caps Through the Backdoor

Since the beginning of the climate debate, environmental lobbies such as Ceres (a coalition of activists and investors that pressures companies to go green) have expressed particular interest in insurers. Rather than nitpick every company to adopt climate-change policies, these organizations realized it would be more efficient to target a gatekeeper. Everybody needs insurance. If insurers could be bludgeoned into requiring policyholders adopt carbon-mitigation practices as a requirement for insurance, the activists would have imposed their will widely and quickly.

Links for March 4, 2010

Why the “Petro Metro” wants electric cars

“Houston’s not a natural market for electric cars,” Crane admitted, when we met the other day. “But electric cars are good for our business in all kinds of ways,” he added. So NRG and Reliant is working with officials Houston, America’s 4th largest city, to persuade Nissan to make Houston one of the leading launch markets for the Nissan Leaf, the all electric vehicle that the Japanese automaker plans to start selling later this year.

“We are the Petro Metro, but we are also a car city,” said Houston’s newly-elected mayor, Annise Parker, at an event earlier this month to welcome Nissan to the city. Certainly there’s a sizable market awaiting Nissan in the city. Houston is home to 4.5 million vehicles that travel 86 million miles a day, according to Reuters.

Corporate Fleets Expected Early Adopters of Electric Vehicles

U.S. corporate fleets purchase about 300,000 vehicles a year, and they are expected to be among the steadiest customers of electric vehicles, including cargo vans, as they come to market.

Commercial trucks account for about 12 percent of miles driven but produce about 25 percent of all emissions, Scott Harrison, CEO of Azure Dynamics told the New York Times.

How Climate will Change Transportation: Part 2

What I thought was more interesting were her findings on climate change and its effects on DOTs. The Three-Part Challenge to State DOTs

1. Reduce transportation GHG’s: by as much as 60-80% by 2050
2. Adapt transportation infrastructure: most importantly to severe storms, but also rising sea levels, high temperatures and flooding
3. Find a new revenue stream: one based on low carbon fuels

In the US highway vehicles = 82% of Transportation CO2 emissions, 23% of total US CO2 emission

Carbon traders foresee lacklustre market in 2010

Panellists speaking at the Point Carbon conference in Amsterdam this week believe the floor for CERs will be around the €8 level, which is generally regarded as cheap. Currently the December 2010 EUA contract is around €13 per ton of carbon dioxide equivalent (/t CO2e) and the same contract for CERs is around €11/t CO2e in the over-the-counter market, according to Point Carbon.

Shareholders target climate laggards in proxy season

A record 95 shareholder resolutions related to climate change were filed with 82 US and Canadian companies, representing a 40% increase from the 2009 proxy season, according to Boston-based Ceres, a coalition of investors and environmental groups.

The effort is expected to intensify now that the US Securities & Exchange Commission (SEC) has issued guidance clarifying what publicly traded companies need to disclose about the material effects that climate change has on their business.

EU LP Group Asks PE To “Step Up Its Attitude To Climate Change”

In the guidelines, Institutional Investors Group on Climate Change (IIGCC), an organization whose more than 50 members manage some EUR4 trillion ($5.4 trillion) in assets, outline specific questions limited partners and general partners can ask to assess the potential impact of climate change on their portfolios.

Investments in World Bank Green Bonds Surpass USD 1 billion

“Investing in the World Bank's top-rated green bonds is a great way to promote smart and clean economic development in our planet's emerging economies while delivering dependable returns for the New York State Common Retirement Fund and its more than one million members. Investing in these bonds helps New York join the effort to curb harmful climate change while delivering bottom-line returns,” commented Thomas P. DiNapoli, New York State Comptroller, an investor in USD-denominated World Bank Green Bonds.

Hopes for USD 2 trillion global carbon market fade

The absence of legally binding global climate deal and a federal emissions trading scheme in the United States are standing in the way of the market in global emissions trading growing to achieve yearly turnover of USD 2 trillion by 2020.

"There will only be a USD 2 trillion market if the US gets on board," Trevor Sikorski, head of carbon research at Barclays Capital, told Reuters at a carbon conference in Amsterdam.

U.S. Postal Service to test a repurposed electric vehicle fleet

Starting this summer, the Postal Service, which operates the world's largest civilian vehicle fleet, will begin a year-long pilot program of electric mail trucks in the Washington area, using vehicles converted by five manufacturers.

"We have been integral to transportation since Day One," said Postal Service spokeswoman Sue Brennan, "so we consider this a role for us."

The experiment is the first field-testing of electric-powered long-life vehicles, a staple of postal delivery for decades. There are 142,000 delivery trucks still on the road. The small mail trucks are on their way to delivering their last packages -- most are between 20 and 25 years old. Last year, the Postal Service announced it would extend the lifespan of the vehicles to 30 years, buying the agency more time to make a decision about the future of its fleet while it wrestles with how to pay for replacements.

World's cheapest EV: Tata Nano electrifies Geneva show

The world's cheapest car, transformed into the world's cheapest electric car, went on display at the Geneva Motor Show.

India's Tata Nano EV seats four, has a predicted range of about 80 miles and will go from zero to about 35 miles per hour in a blistering 10 seconds. The car has super-polymer lithium-ion batteries, which Tata says provide superior energy retention.

Changing Attitudes towards EVs

The desire for EVs is growing. Will the system deliver (cars, charging stations, finance etc.)?
A huge unknown is the price of gas at the pump. The price is too low (3$+) right now. There could be a blowback if the savings are not appropriate for the price and convenience premium that is paid.

Are US drivers beginning to get switched on to electric cars?

# Roughly 10% of the survey participants said they would consider a plug-in hybrid and electric vehicle purchase.
# 34% of survey participants said they would subsidize local charging stations.
# Public awareness of emerging powertrain technologies remains weak across the US.
# Not many consumers are willing to embrace the new technology prior to it being well-established in the market.
# No other plug-in hybrid and electric vehicle incentive or benefit is considered nearly as important as saving money on fuel.
# Among several considerations, access to charging stations, battery driving range and vehicle cost are by far the three most significant consumer concerns.

A skeptical take from LA Times:

Do consumers want alternative fuel vehicles? Maybe not, new study says

"If government and manufacturers go down the path they’re on now, we’re not going to get alternative-fuel vehicles into the marketplace for quite some time," said Rosanna Garcia, an associate professor of marketing at Northeastern University who surveyed more than 7,500 car enthusiasts to gauge their interest in hybrid, plug-in hybrid, electric and diesel cars.

Garcia cited a lack of cost effectiveness, uncertainty about fuel availability, uncertainty about the cost of the vehicle and replacement parts and a lack of understanding about how the technologies work as obstacles to greater adoption of alternative-fuel vehicles, which currently account for less than 4% of registered vehicles in the U.S.
...
The main barriers to entry? For electric vehicles, it was price, coupled with insufficient range. Garcia’s study found that consumers were willing to pay as much as $70,000 for an EV, but they wanted a minimum of 110 miles per charge.

For consumers considering a gas-electric hybrid, fuel efficiency was most important. Cost was secondary. For such a hybrid, consumers were, on average, only willing to pay up to $30,000, as long as they got about 40 miles per gallon.

IETA Fall 2009 Symposium

International Emissions Trading Association (IETA) is a decade-old trade organization in the carbon trading space. You may find their limited access IETA Fall 2009 Symposium proceedings useful. Their final report has a defensive tone in part as a response to recent attacks on their system (price crash, cyberattacks etc.).

Whats IETA?

The International Emissions Trading Association (IETA) is a nonprofit business organization created in June 1999 to establish a functional international framework for trading in greenhouse gas emission reductions.

Our membership includes leading international companies from across the carbon trading cycle. IETA members seek to develop an emissions trading regime that results in real and verifiable greenhouse gas emission reductions, while balancing economic efficiency with environmental integrity and social equity.

As of March 2009, IETA comprises more than 160 international companies from OECD and non-OECD countries. IETA has formed several partnerships such as with, among others, the World Bank, Eurelectric, the World Business Council for Sustainable Development (WBCSD) and the California Climate Action Registry.

Carbon War Room

Yet another initiative coming from Richard Branson et al. Interesting and amusing metaphor. The website has a military site look and feel. They have initiatives like this one on energy efficiency of buildings. I see a bunch of sponsors, links to other organizations and photos but nothing jumps out as an original initiative. I will comb through the site some more.

Carbon War Room

The Carbon War Room harnesses the power of entrepreneurs to implement market-driven solutions to climate change. The world needs entrepreneurial leadership to create a post-carbon economy.

The War Room’s unique approach focuses on bringing together successful entrepreneurs, business leaders, policy experts, researchers, and thought leaders to focus on market-driven solutions.

Our approach is to identify the barriers that are preventing market-based scale up of climate change solutions and thereby perpetuating the status quo. In addition to technology and policy gaps, these barriers include principal-agent problems, information gaps, and lack of common standards or metrics.

The War Room operates across 25 battles in 7 theaters and has three core functions:

* The Research & Intelligence team compiles a reliable, independent source of global research on the current carbon-industrial complex and leading market-driven innovations.
* The Communications team convenes successful entrepreneurs, experts, and leaders to ensure solutions are strategically sound, fast acting, and well presented.
* The Operations team plans the path to victory in each area using appropriate tools and partners to achieve the overwhelming force necessary. After determining partners, budgets, and leaders to execute the battle; funding is raised and milestones created; then the operation is closely monitored as each operation proceeds.

Emerging Business Model for Algae

Interesting. Algae can be used to reduce pollution-related costs in addition to providing energy. Given the multi-dimensional value, algae-driven energy doesnt have to be competitive w.r.t. energy sources alone but rather with a combination of existing inputs and costs (compliance, waste/pollution management, legal, and energy).

Co-location could make algae biofuels affordable

The answer? Turn the waste from other industries into a resource for this new one, helping to solve the waste problem at the same time. With or without realizing it, various scientists speaking at the American Association for the Advancement of Science annual conference, which wraps up here today, were promoting the notion that algae operations should be located next to industries that can supply one or more of the nutrient streams.

For example, algae production facilities could be located next to coal-fired power plants, which happen to be under increasing pressure and regulation to reduce CO2 emissions. Instead of spending money to sequester that carbon, say, underground, why not sell it, cheap, to an adjacent algae facility? Indeed, the Seambiotic algae plant in Tel Aviv, Israel, is tapping the flue gas of a coal plant next door.

Similarly, algae producers could locate near municipal wastewater treatment plants. "Cleansed" water that is usually deposited in rivers or other water bodies is generally safe for the environment, but still usually contains too much nitrogen or phosphorus for human consumption. Algae, however, thrive on those very compounds, and the alternative of purchasing them as fertilizer leaves a large environment footprint. Of course, the water itself is needed for algae production. A pilot plant run by Sunrise Ridge Algae in Austin, Tex., is piping in this resource from the Hornsby Bend wastewater plant there. Sunrise was hoping that enough CO2 could also be extracted from the wastewater, but the flow coming from Hornsby's anaerobic digesters was inconsistent, not a big surprise since the system was not built to supply CO2, per se.

Public Scrutiny of Fracking

Fracking or hydraulic fracturing is used to extract gas from rock formations (e.g., shale gas). The problem is that you have to pump toxic chemicals such as benzene into the ground, and you cant really prevent them from polluting into the ground water. The number of wells is large (15000) and are spread out over large geographic area. The potential social cost is huge. The 2005 energy act exempted the gas companies from disclosing any of the details of chemicals and/or be regulated by EPA. But there is real impact on the ground (captured in the documentary Gas Land; see the youtube videos below). Looks like a social movement is developing as a reaction to the negative impact of fracking. Congress has launched an investigation in this. This has natural gas industry worried.

Links for Feb 23, 2010

Fate and viability of carbon markets does not lie in UK hands alone - PwC

PwC comment on Environmental Audit Committee Report on Carbon Markets

* Uncertainty over EU and international targets impacting market confidence
* Traders and market theorists will argue against price floors
* Reserve prices would be needed across Europe, not just UK
* London markets and skills are dominant in £75bn EU and Global emissions trading

A new look at carbon offsets - McKinsey Quarterly

Carbon markets will continue to play a role in pricing—and limiting—emissions, but the opportunity in developing markets may be less promising than once expected.

The article identifies the combination of reasons that sound like people are still figuring out the parameters of the market

Two factors hamper price equalization among the offset market, domestic carbon markets, and the global market as envisioned by the assigned amount units (AAU) established in the 1997 Kyoto Protocol on climate change.

* On the one hand, countries have limited the amount of offsets that can be imported into domestic carbon markets. For instance, the European Union will allow only 1.6 metric gigatons2 (GT) of offset credits to be imported into its market from 2008 to 2020, or on average 0.1–0.2 GT per annum. As this quota will probably be exhausted by 2015, prices on the European carbon market might start to deviate from offset market prices.
* On the other hand, the demand for offsets from Annex I countries is less certain, as the global market is oversupplied with “hot air,”3 which limits the need to buy offset credits. Therefore, national demand for offset credits is typically seen as “soft.”

Time to clean up: UN study reveals environmental cost of world trade - The Guardian

Political pressure is mounting to make businesses pay for the damage they cause to the environment, and the latest UN study assessing the impact of the world's biggest companies is almost certainly the first stage in a concerted campaign to calculate how much damage is caused, what it is worth and ultimately how it can be stopped.

Another report due later this year, The Economics of Ecosystems and Biodiversity, led by the economist and UN special adviser Pavan Sukhdev, will be another significant step towards this goal.

Sukhdev has already warned that damage to the environment will cause the global economy to decline by 7% by the middle of the century if it is not stopped.
...
By far the most "damaging" were the utilities, where the $400bn total "cost" was dominated by carbon dioxide and other greenhouse gases blamed for global warming, nuclear waste, acid rain and smog precursors, and metal pollution in water.

The four sectors with the lowest impact – telecommunications, healthcare, technology and financial services – all caused environmental damage totalling less than $25bn each.

After the utilities, the two sectors with the biggest impacts were "basic materials" such as mining, forestry and chemical companies, with costs put at just over $300bn, and consumer goods such as cars, food, drink and toys, at just under $300bn. The breakdown of their activities is very different however.
..

Look for the report that Mercer is going to deliver in Oct 2010.

Excluding climate change breaches fiduciary care - Natixis

The integration of climate change into portfolio management remains a difficult task but not doing so is a failure of fiduciary care by asset managers, an institutional investor has claimed.

Carlos Joly, chairman of the Climate Change Scientific Committee of Natixis Asset Management, told IPE the integration of climate change into portfolio management is still in its early stages.

“One way is to take the narrow thematic approach such as investing in alternative energy funds,” he said. “However, that is unsatisfactory for us because it does not address the breadth of climate change impacts throughout the economy. It is also a niche approach, which all investors tend to enter and exit at the same time. Carbon footprinting on an index is a step forward from the thematic approach, but ultimately does not reflect the solutions to the problems,” argued Joly.
...
global consultancy Mercer has launched a research project to assess the implications of climate change on strategic asset allocation decisions made last October.

The two-part report– expected to be published in October this year – will consist of a public report in which the broad findings will be shared with the industry, as well as a tailored report for each asset owner that commits to the project, and they in turn will be benchmarked against other project partners.

The study will produce a qualitative framework to outline risks and opportunities by region and asset class, as well as considering the sector effects, which can then be used as an overlay to strategic asset allocation decisions.

Global Investments in Clean Energy Fell Less than Expected in 2009

Climate change: Agri experts paint grim future

India is confronted by a confluence of crises,” he explained. “Increasing energy demand, drought, deforestation, skyrocketing food prices and a population explosion threaten the very fabric of Indian society.” The dry tropics are home to over two billion people, 675 million of which comprise the poorest of the poor. According to Dar, the importance of rain-fed agriculture cannot be overstated. Rain-fed areas contribute over 40 per cent of all food grains and a majority of pulses and vegetables. Dar also accused the Indian government of showing “bias in grain price support and research subsides.” He claimed that “rain-fed agriculture is struggling against policies biased towards more favoured, generally irrigated land”.

Google gets go-ahead to buy, sell energy

Google has expressed a desire for access to larger amounts of renewable energy to help produce the electricity it consumes as part of its vast search-engine empire. Google has long maintained that its goal is to become a carbon-neutral company. As a side note, it's not unusual for large companies to be granted the authority to trade in the wholesale electricity market for the purpose of managing their own energy costs.

As recently as January--after Google Energy made its request to FERC--the company maintained that its expressed immediate wish was for more control over electricity pricing to more effectively gain access to affordable renewable energy.

"Right now, we can't buy affordable, utility-scale, renewable energy in our markets. We want to buy the highest quality, most affordable renewable energy wherever we can and use the green credits," Google representative Niki Fenwick told CNET News at the time.

But it seems that Google may actually enter the energy business. The search giant formed the Delaware-based subsidiary called Google Energy in December and when asked about it, hinted at a future in energy.

"We don't have any concrete plans. We want the ability to buy and sell electricity in case it becomes part of our portfolio," Fenwick told CNET News in January.

Looming Oil Crunch

A couple of things caught my attention. First, peak oil is mentioned very casually. Even Richard Branson has apparently made a statement about how he believes that the peak is in the next five years. I have been paying attention to peak oil discussion for the past several years. The peak oil group has been fighting this battle for attention for many years now. I dont know at what point the idea of peak oil went from being a fringe notion to a mainstream idea. Second, Ambrose and other economists seem to forecast a high oil price-driven economic crisis. Jeff Rubin, former chief economist, CIBC World Markets believes that the high oil price of 2007 triggered the current economic crisis. He points to declines in the export economies of Germany and China that occurred before the subprime crisis hit. In the next iteration, we will know which other non-CDO financial instrument emperors have no clothes.

Aside, I am a fan of Ambrose Evans-Pritchard. His logic is consistent, and his articles reflect an attention to details. I always learn something new in each of his columns.

Barclays and Bank of America see looming oil crunch

For oil markets, it as if the Great Recession never happened. Surging demand in China, India and the Middle East is making up for decline in the debt-crippled West, ensuring another global crunch within three or four years.

Bank of America and Barclays Capital, two leading oil traders, have told clients to brace for crude above $100 (£64) a barrel by next year, before it pushes relentlessly higher over the decade. This is a stark contrast from recessions in the 1980s and 1990s, when it took years to work off excess drilling capacity built in the boom.

"Oil has the potential to flirt with $100 this year. We forecast an average price of $137 by 2015," said Amrita Sen, an oil expert at BarCap. The price has doubled to $78 in the last year.

"The groundwork for the next sustained step up in oil prices is now almost complete. Global spare capacity is likely to be reduced to low levels within a relatively short time. The global economic crisis has postponed, but not cancelled, a crunch which would otherwise be starting to bite now," said Barclays.

...
Supply is scarce. Sir Richard Branson warned this month that the world faces 'peak oil' within five years. "Don't let the oil crunch catch us out in the way that the credit crunch did," he said.

CDP Backing Continues to Grow

Climate Risk Disclosure is starting to look inevitable with this level of SEC and institutional backing.

Record number of investors support CDP’s 2010 request for climate change information

The Carbon Disclosure Project (CDP) today announced its eighth annual request for information on greenhouse gas emissions and climate change strategies to over 4,500 companies globally. Companies this year will report to CDP through an upgraded system, developed with Accenture, Microsoft and SAP, that will for the first time utilize the full power of online analysis tools to drive improved carbon management.

A global, independent, not-for-profit organization, CDP is the world’s largest institutional investor collaboration working to inform the global market place on investment risk and commercial opportunity. The number of institutional investors that signed CDP’s annual request for climate change information this year has risen from 475 in 2009, to a record 534 with a combined US$64 trillion of assets under management. New signatory investors include Wells Fargo, BNY Mellon, Generali and the Industrial Bank of Korea.

CDP continues to act on investor interest in emerging markets with requests for information going to companies in the S&P/IFCI Carbon Efficient Index. This year CDP is, for the first time, writing to companies in Turkey, Peru, Morocco, Egypt and Israel as well as continuing to expand its coverage in areas such as Asia, Poland, Chile and Mexico.

CDP gives companies the tools they need to identify and report material risk and opportunity to their business from climate change. This is an increasingly important skill for US corporations to master, following the recent publication of climate change risk disclosure guidance by the Securities and Exchange Commission (SEC).

Coalition Shakeups

This may be a hint that cap-n-trade is not going to be tabled this year. But there could be some organizational issues as well.

WSJ: Defections Shake Up Climate Coalition

Three big companies quit an influential lobbying group that had focused on shaping climate-change legislation, in the latest sign that support for an ambitious bill is melting away.

Oil giants BP PLC and ConocoPhillips and heavy-equipment maker Caterpillar Inc. said Tuesday they won't renew their membership in the three-year-old U.S. Climate Action Partnership, a broad business-environmental coalition that had been instrumental in building support in Washington for capping emissions of greenhouse gases.

The move comes as debate over climate change intensifies and concerns mount about the cost of capping greenhouse-gas emissions.
...
ConocoPhillips's senior vice president for government affairs, Red Cavaney, said the USCAP was focused on getting a climate-change bill passed, whereas Conoco is increasingly concerned with what the details of such a bill would be.

"USCAP was starting to do more and more on trying to get a bill out without trying to work as much on the substance of it," Mr. Cavaney said.
...
As long as climate legislation appeared imminent, companies were willing to paper over their differences and continue to work together. But by late last year, momentum had stalled in the Senate as Washington turned its attention to health care, the economy and the midterm elections. Few experts expect a bill to pass this year.

Catholic Green Initiative

This came through my Google Alerts. There are many reasons to go green including those based on religion. One of the first investors in Chicago Climate Exchange was a church. I wrote earlier about Islam's Green Initiative. Turns out that Vatican was going green as well. I wish it was publicized more.

Perpetual Energy Systems and the Diocese of San Jose Activate Six Solar Energy Installations

erpetual Energy Systems (PES), a national power purchase agreement (PPA) provider/financier of solar powered renewable energy systems, and the Diocese of San Jose (Diocese), in conjunction with MBL-Energy (MBL) and Photon Energy Services (Photon), today announce the activation of six distributed solar energy installations, consisting of an aggregate nameplate capacity of 886 kW DC. The systems are projected to generate an estimated 1.4 million kilowatt hours of clean energy in its first full year of operation, representing 70 percent of each site’s individual energy needs.

The systems are hosted by the Diocese on five parish/school combinations, including Holy Spirit, Holy Family, Saint Christopher, Queen of Apostles, Saint Lucy as well as Gate of Heaven Cemetery. As part of the Catholic Green Initiative of Santa Clara County, the Diocese entered into a 25-year power purchase agreement (PPA) with PES to host the solar installations requiring no capital outlay from the Diocese or its parishes. Under the PPA, the Diocese will purchase clean solar energy produced by each installation at a predetermined, fixed rate. All operations of the system will be assumed by PES.

Catholic Green Initiative of Santa Clara County Announcement

Everywhere we turn these days, we are reminded of the need and desire to be "green." Cities, counties, states and nations are calling us to better care for our planet. Almost 15 years ago, the United States Catholic Bishops issued a statement entitled Renewing the Earth: A Invitation to Reflection and Action on Environment in Light of Catholic Social Teaching, calling all people of faith "to examine how we use and share the goods of the earth, what we pass on to future generations, and how we live in harmony with God's creation."

Catholics around the world have already initiated many innovative ecological projects that have highlighted the need for all of us to live more sustainably and to leave a lighter "ecological footprint." In response to this call to ecological stewardship, I have formed The Catholic Green Initiative of Santa Clara County under the direction of Father Brendan McGuire, Vicar General, Special Projects.

This team includes the Presentation Retreat and Conference Center, Santa Clara University, Catholic Charities of Santa Clara County, and the Diocese of San Jose. We will work collaboratively to bring all Catholics of our local Church together with a single "green" vision. This team will identify and encourage "green initiatives" here in our own Valley of Saint Clare and they will ask all Catholics of Santa Clara County to make a difference in an organized and sustainable way.

This initiative will start with a Town Hall Meeting on February 7, 2009 with our guest speaker - Mr. Dan Misleh, Executive Director of the Catholic Coalition on Climate Change. The gathering will focus on the theology of stewardship, how stewardship is central to our Christian heritage, and why it must be a Catholic concern. It will include breakout sessions discussing how we can act in environmentally-conscious ways. All attendees will be asked to commit to action determined by the collective voice of this group. This event is by invitation-only and will be limited to a maximum of 100 attendees. Formal invitations will be coming shortly via another email.

Detroit Mass Transit

This is a private effort, no doubt, but I had a dizzy feeling when I read this. I just finished a book - Internal Combustion by Edwin Black - that chronicled the multi-decade effort (1930s-1970s) led by GM to undo electric mass transit across the US. They systematically bought up poorly managed mass transit systems, got rid of the trams and switched to buses, and finally got rid of the electric network. There were congressional hearings in the 1970s around the role of the standard oil, GM, and Firestone Tires, among others, in this process. This is less important as a specific project, and more important for its symbolism. It also indicates the power lost by the car companies. They cant argue against mass transit as they bet their future on smaller and electric cars.

Mass transit for Motor City

The city plans to break ground this year on stage one of a $420 million project: the first modern, mass-transit initiative in a city long synonymous with automobiles.

"Transit in Detroit has kind of been a joke," says Matt Cullen, CEO of M1 Rail, a private consortium heading the development effort. "We've been a victim of balkanized politics and other efforts. But now we have a plan in place. We'll get it done, and we feel it will have a huge impact on this region."
...
It's the only project of its kind in the U.S., and the donor list reads like a Who's Who of area megamillionaires: Compuware (CPWR) CEO Peter Karmanos, Quicken Loans founder Dan Gilbert, Penske Corporation CEO Roger Penske and Red Wings owner Mike Ilitch are among those ponying up $125 million to cover the project's entire phase-one price tag.

The planned 3.4-mile first stretch of light rail service would encompass some of Detroit's best-known entertainment districts, including Comerica Park, home of baseball's Tigers, and Ford Field, where the Lions play football. The route winds past the Fox Theater district and extends into Detroit's New Center area, the center of gravity for many local hospitals and medical facilities, as well as much of the Wayne State University campus.

Hertz's Nissan Leaf Teaser

The story has no details, but still is interesting. Lesser maintenance and lower fuel costs can make the product attractive. In fact they can change the business model in three ways ways (1) Keep current business model, i.e., sell car time, but remove the fuel related charges, (2) Sell miles, (3) sell battery time - pick whatever model. If Leaf can withstand the heavy use in rental market, it will improve confidence in the EV model. It can generate a lot of operational data as well that can be used to design Leaf 2.0.

Hertz to include Nissan electric cars to fleet

Hertz will add Nissan's electric vehicle to its lineup next year in the U.S. and Europe, the rental car company said Friday.

Hertz Corp., the world's largest car rental agency, plans to use the Nissan Leaf, an all-electric vehicle with a rechargeable battery.

Green Supply Chain

Take this FWIW (For What It is Worth) but I thought it is interesting.

Perceptant: FCMG Companies Face Rising Supply Chain Pressures

Major retailers are under tremendous pressure to go green and reduce their carbon footprint. To achieve this, they first turned to initiatives close at hand, including the reduction of energy consumption at the store level, product packaging resizing and the more efficient construction of new stores.

Some would argue however that their supply chains represent the biggest source of carbon reduction and as close to home initiatives begin to dry up, retailers are now turning their attentions towards suppliers.

FMCG companies for example are being placed under tighter and tighter scrutiny to deliver on-time, with full loads that aren’t rejected. This can have a major impact on sustainability, as full loads mean fewer lorries on our roads, fewer rejections equal less waste and on-time deliveries reduce bottlenecks and returns
...
Picture, if you will, a supplier faced with a mandate from a major retailer to reduce its carbon footprint by 25%. That’s not a 25% reduction in its own internal footprint but the footprint it creates in trading with the retailer. Understandably, all eyes turn to logistics and product returns as two major areas that can achieve this. But how and at what cost?

Links for Feb 8, 2010

FT: Market for carbon trading is starting to look rather shaky
Simpler ways of cutting emissions, such as insulation, should be tackled by regulation. And at the other extreme, such as creating an integrated European...

FT: Property investors prepare for a green future
The built environment contributes significantly to carbon emissions; as much as 40 per cent of the total, according to the UK Institutional Investors Group ...

CFP: Disclosing the real risks of climate change
We are not weighing in on the climate debate. We are not opining on whether the world’s climate is changing, at what pace or due to what causes, Securities and Exchange Commission Chairman Mary Shapiro insisted on announcing the SEC’s new “interpretive guidance” on climate change.

Ernst & Young report: Carbon market readiness

This is one of the logical next steps - getting accountants involved so that they can do financial analysis and planning, among others. The report is here

New Ernst & Young LLP report examines greenhouse gas reporting practices as the SEC releases new climate change disclosure guidelines

The new report, Carbon market readiness: accounting, compliance, reporting and tax considerations under state and national carbon emissions programs, concludes that, while the timing and scope of climate change legislation in the US is uncertain, many countries around the globe (and many states) have some type of regulatory program to manage carbon emissions. With the strong likelihood that there will be more regulatory activity in the US, companies should consider carbon emissions requirements as part of their businesses and financial management strategies now, including establishing plans for measurement, monitoring, reporting and accounting.

“Being carbon market ready is logical business,” explains Steve Starbuck, the newly appointed Leader of Americas Climate Change and Sustainability Services for Ernst & Young LLP. Starbuck, a 30-year veteran of the Firm, coordinates climate change and sustainability services in the Americas and is a member of the climate change advisory board of the Global Ernst & Young organization. “The global carbon market is likely to grow significantly in the future. Preparing for and identifying related business risks and opportunities up-front, can better position an organization for growth and provide a competitive edge. Last week’s SEC action further highlights the increasing need for companies to have the systems and processes in place to keep their stakeholders informed,” Starbuck continued.

Ernst & Young’s report reveals that, in a survey of more than 1,000 US public registrants with revenues between $1 billion and $100 billion, just 29 companies disclosed an accounting policy related to emissions credits or allowances in notes to their financial statements. Additionally, far fewer than half of the approximately 1,000 corporate representatives participating in an Ernst & Young webcast on January 12, 2010 –- Climate change and carbon markets: what every business needs to know and why –- claimed to have a strategy in place to deal with carbon emissions regulations or markets.

Following various state and federal reporting frameworks, as well as the evolving accounting standards and tax regulations governing carbon emission management could pose many challenges. To stay ahead of the curve, companies should fully embed carbon-related considerations in their business strategies to address climate change issues effectively. They should review their risk management processes as well as day-to-day business operations, accounting and tax planning.

Business of Climate Change Report

Two reports that I am reading. They are two years old and things have moved forward with Copenhagen etc. but they are some of the best analyses I have read so far.

The Business of Climate Change Challenges and Opportunities (Feb 2007)

Lehman Brothers decided to take a hard look at global warming, starting with the scientific and climatological evidence, then proceeding to the economic consequences and implications for policy; and finally – with significant help from the Firm’s equity analysts – considering potential impacts on major business sectors. The result is this publication: The Business of Climate Change: Challenges and opportunities. It reaches a number of broad conclusions. Global  warming, we judge, is likely to prove one of those tectonic forces that – like globalization or the ageing of populations – gradually but powerfully changes the economic landscape in which our clients operate, and one that causes periodic sharp movements in asset prices.

And, as the title indicates, we consider that climate change poses many challenges but also presents many business opportunities. Firms that recognise the challenge early, and respond imaginatively and constructively, will create opportunities for themselves and thereby prosper. Others, slower to realise what is going on or electing to ignore it, will likely do markedly less well.

This study is far from the last word: indeed, we see it as just the starting point for adialogue with our investing and corporate clients. As the discussions with our clients and policy experts progress, we will take this work further.

Dr John Llewellyn
Senior Economic Policy Advisor
Lehman Brothers

There was followup to the previous report The Business of Climate Change II Policy is accelerating, with major implications for companies and investors (Sep 2007)

There is, in our view, a particular sense in this. Until recently, many – and in some countries most – climate change policy proposals have originated mainly outside government. Today, however, governments themselves are increasingly becoming directly involved in policy  proposal and design. Thus far, in most national administrations, responsibility has come in as far as ministries of environment, technology, energy, and industry. However, we judge that ultimately the nexus of responsibility, at least for key climate change policies, will move inwards still further – into treasuries and ministries of finance. And when these ministries take over responsibility, policymaking will acquire a harder edge: the objective of policy design will be not only to reduce greenhouse gas emissions, but to reduce them at the lowest possible cost.

Thus economic considerations are poised to assume their greatest weight yet in policy debate and design. A year or two from now, of course, the debate will have moved on: client concern will likely be with analysing the consequences of actual policies, or at least of more concrete policy proposals. But that is for tomorrow.

We trust that this volume will be a constructive sequel to The Business of Climate Change: Challenges and Opportunities, for clients and others who seek clues about how policy may look, a year or two from now, and about what some of the implications may be for business.

Business of Climate Change Conference 2009

A recent conference held in canada.

Business of Climate Change Conference 2009

Businesses all over the world are looking to transition to a low carbon economy in order to manage increasing regulatory, investor, physical and reputational risks. Unlike previous recessions where the environment was put on the back burner, governments around the globe are forging ahead with green stimulus investments and carbon constraining legislation.

At this year's conference you'll hear from public policy experts on the probable domestic and international regulatory context, short and medium term scenarios and implications for Canadian business. Learn from leading corporate executives about their strategies, successes and challenges in analyzing climate change across business units, reducing risks, increasing value and realizing positive bottom line results.

The most interesting (and only publicly available) presentation was by Jeff Rubin who is author of Why Your World is About to get Smaller: Oil and the End of Globalization . He is an economist and makes arguments are familiar to those of us following peak oil discussions. His basic thesis is that globization will reverse itself for low value goods. The margins, he says, are too small to withstand triple digit oil. I am looking forward to reading his book on the specifics. Intuitively it makes sense but numbers are always good.

Hidden Costs of Energy

This is a very conservative study that puts the price at 120B$ mostly derived from health costs associated with air pollutants (particulate matter, sulphur, nitrogen oxide). This will help develop new ways to measure true cost of energy similar to the new FBCF (Fully Burdened Cost of Fuel) methodology for energy use in military.

Hidden Costs of Energy:
Unpriced Consequences of Energy Production and Use





There is a podcast as well. Snippets from the summary:

Based on the results of external-cost studies published in the 1990s, we focused especially on air pollution. In particular, we evaluated effects related to emissions of particulate matter (PM), sulfur dioxide (SO2), and oxides of nitrogen (NOx), which form criteria air pollutants.1 We monetized effects of those pollutants on human health, grain crop and timber yields, building materials, recreation, and visibility of outdoor vistas. Health damages, which include premature mortality and morbidity (such as chronic bronchitis and asthma), constituted the vast majority of monetized damages, with premature mortality being the single largest health-damage category.

...

The damage estimates presented in this report for various external effects are substantial. Just the damages from external effects the committee was able to quantify add up to more than $120 billion for the year 2005.15 Although large uncertainties are associated with the committee’s estimates, there is little doubt that this aggregate total substantially underestimates the damages, because it does not include many other kinds of damages that could not be quantified for reasons explained in the report, such as damages related to some pollutants, climate change, ecosystems, infrastructure and security. In many cases we have identified those omissions, within the chapters of this report, with the hope that they will be evaluated in future studies.

Washpost: SEC to require disclosure of climate change risks

Yet another technical hurdle has been crossed with this SEC resolution. It will make climate change consideration a norm, a concern for the shareholders, and reduction a responsibility of the management.

Washpost: SEC to require disclosure of climate change risks

The commission, in a 3 to 2 vote, decided to require that companies disclose in their public filings the impact of climate change on their businesses -- from new regulations or legislation they may face domestically or abroad to potential changes in economic trends or physical risks to a company.

Schapiro said companies already must disclose anything that can have a significant effect on their bottom lines. But she said the SEC's action on Wednesday was intended to provide more guidance on what might be taken into account. "The commission is not making any kind of statement regarding the facts as they relate to the topic of climate change or global warming," Schapiro said.

A number of large institutional investors had been urging the SEC to put more pressure on companies to disclose more details about the effects of climate change on their businesses.

Is this our moment?

Leonardo DiCaprio would like you to think so!. He is not first Hollywood celebrity to go green. Tom Hanks went electric sometime back. The ad is interesting. It has a business case, explicit threat ("we are watching you senator"), and action for the viewers ("flood inboxes", "tweet", "share"). The slogan 'This is Our Moment' is a familiar one from Obama's campaign.

Deutsche Bank 2010 Investing in Climate Change Report

Deutsche Bank 2010 Investing in Climate Change Report released at the Investor Summit on Climate Risk at the U.N that I talked about in my previous post. I am copying first section of the summary which itself is very detailed. I am ploughing through this as I write. I think this report with all its detailed investment analysis and the nature of the audience means that people think there are serious money at stake here. The document is very readable. Highly recommended.

Climate Change Investment Thesis and Opportunity

1. Demographics, socio-economic change and long-term energy demand drive increased global consumption of scarce resources
2. These drivers result in rapidly increasing emissions and corresponding changes to the earth's climate
3. DBCCA has established "Four Pillars of Climate Change" investment to provide an analytical framework for understanding the investor response to climate change
4. The scale of mitigating/stabilizing our climate will require unprecedented economic growth, which will result in low-carbon prosperity and job creation
5. Climate change must be understood in the context of an integrated framework of both halting and adapting to its effects
6. The climate change investment universe is broad, covering many technology sectors and themes
7. These sectors and themes are applicable to a variety of asset classes
8. Investors will pursue many different strategies across these asset classes, each with different risk attributes and environmental impact
9. A strategic risk premium for climate change, such as carbon beta, can be applied to traditional portfolios to analyze risk an optimize return

Investors Push for Rapid Action

This is from the Investor Summit on Low Carbon Economy .


Investors Representing $13 Trillion Call on U.S. and Other Countries to Move Quickly to Adopt Strong Climate Change Policies
“Cannot Wait for a Global Treaty,” Investors Tell Congress and other Government Policymakers at United Nations Investors Climate Summit

Saying “we cannot wait for a global treaty,” U.S., European and Australian investor groups representing $13 trillion in assets called on U.S. Congress and other global decision-makers “to take rapid action” on carbon emission limits, energy efficiency, renewable energy, financing mechanisms and other policies that will accelerate clean energy investment and job creation. Investors made clear today that there are competitive advantages for countries with comprehensive climate and energy policies.

I have written in the past about this coalition (INCR) which is pushing for systemic changes to get the low carbon economy. It represented 7T$ of assets when I last wrote. Now it looks like the coalition has expanded to represent about 13T$ of investment including CalPERS.


The investor statement suggests a great opportunity to make money.

While leading studies indicate that the costs of action to reduce GHG emissions are both affordable and significantly lower than the costs of inaction,2 developing a global low-carbon economy will nonetheless require substantially increased levels of investment from the private sector. For example, the UNFCCC Secretariat estimates that more than $200 billion in total additional investment capital for mitigation is required each year by 2030 just to return GHGs to their current levels by then,3 while the International Energy Agency estimates that additional investment of $10.5 trillion is needed globally in just the energy sector from 2010–2030 to stabilize GHG emissions at around 450ppm.4 This equates to roughly 0.1% of the total value of world financial assets and approximately 0.23% of the total value of debt and equity securities,5 so this is certainly an achievable level of investment – and one that would yield returns in terms of energy savings, energy security, reduced capital expenditures for pollution control, and avoided climate damages. But it is also well above current investment levels. Although public spending in this arena has increased recently to hasten recovery from the global recession, more than 85% of the total investments needed to meet the climate challenge will likely have to come from private capital.

Investors will seek every sound investment opportunity, but until governments establish policies and rules that make low-carbon strategies the clear strategic choice for all businesses, we will not be able to deploy capital into low-carbon investments at the scale required. Until then, our billions of dollars in investments will remain a ‘drop in the bucket’
compared to the trillions of dollars needed. To enable the necessary flows of private capital and allow us to fully assist in achieving a low-carbon and sustainable global economy, policymakers around the world must act swiftly. National policies are needed that provide greater certainty about the direction of climate and energy regulation, ensure transparent markets, facilitate wider and more open capital flows for carbon trading and investment, and benefit consumers and workers as they transition to a low-carbon economy. Accordingly, we see the following measures as being critical for unleashing the volumes of private capital urgently needed to meet the challenges of climate change:

Going green increasing disputes?

Not the least bit surprising. It is easy to judge others in terms of environmental performance. I often turnoff the water tap when my apartment-mate is cleaning utensils because it is wasteful. How much is good enough is an endless discussion. I foresee norms evolving to reduce this conflict similar to notions of personal responsibility and private space.

Therapists Report Increase in Green Disputes

As awareness of environmental concerns has grown, therapists say they are seeing a rise in bickering between couples and family members over the extent to which they should change their lives to save the planet.

In households across the country, green lines are being drawn between those who insist on wild salmon and those who buy farmed, those who calculate their carbon footprint and those who remain indifferent to greenhouse gases.

“As the focus on climate increases in the public’s mind, it can’t help but be a part of people’s planning about the future,” said Thomas Joseph Doherty, a clinical psychologist in Portland, Ore., who has a practice that focuses on environmental issues. “It touches every part of how they live: what they eat, whether they want to fly, what kind of vacation they want.”

While no study has documented how frequent these clashes have become, therapists agree that the green issue can quickly become poisonous because it is so morally charged. Friends or family members who are not devoted to the environmental cause can become irritated by life choices they view as ostentatiously self-denying or politically correct.

Those with a heightened focus on environmental issues, on the other hand, can find it hard to refrain from commenting on things that they view as harmful to Earth — driving an oversize S.U.V., for example.

Off for a few days

I have been catching up with some research into military
energy. Stay tuned.

Visit to Travel Town Railway Museum, Los Angeles

I visited The Travel Town railway museum. It is small but has a pretty decent collection. There was only one electric and one diesel engine. Even within the small collection, you can see the progression in terms of technology.