Force For Good

Why Is Energy Finance Poised For Growth?

March 9, 2010

One would assume that energy lending is suffering, but the contrary is true. Energy lending is growing by leaps and bounds. Read 5 reasons for enegy finance's explosive growth.

Is Coaching becoming the panacea for leadership development? See my article in HR Magazine

March 8, 2010

See my article in HR Magazine on successful coaching in organisations. www.hrmagazine.co.uk/news/987955/success-coaching-depends-clear-objectives-rigorous-measurement/ . Is coaching becoming a panacea for leadership development? The UK's largest organisations such as the Insitute of Directors, the NHS and Disney, are among those promoting coaching programmes for their management teams. But are they missing a trick to get the best value for money?

Running a Successful Business in the Low Carbon Economy

March 8, 2010

SMEs make a vital contribution to our economy - they are huge sources of jobs, innovation and are essential to our communities. But when we talk about the low-carbon economy of the future, it is all too often large businesses that lead the way.

In these difficult economic times, many small and medium-sized businesses may well be missing opportunities to not only reduce their cost, but also to open up to new possibilities in the low-carbon economy. We believe that this can largely be explained by the confusing and often contradictory information that is out there - not to any failing on the part of SMEs.

Tomorrow's Company works with and for the business community to develop effective solutions to the problems companies face: we have created this guide in partnership with companies, government departments and organisations to assist leaders of businesses large and small, to make the low-carbon transition in a way that makes good business sense and helps secure future business success.

If you would like to order a hardcopy of the guide, please contact info@tomorrowscompany.com

Why we need to know about Bonds and risk

March 8, 2010

There I was with what must have been over 100 Students all sitting down listing to a youngish looking lecturer.

He first told us how debt was not bad without debt it would take more than a lifetime for most of us to buy a house. If your company it could be even worse more often than not there are other companies who are chasing after the same customers.

There are other ways of raising capital if you are a company including selling shares and giving bonds. The problem with methods is not that they are bad but how these methods are used.

Bonds are a new way of raising cash where in the bond the issuer agrees to pay the holder the money. The issuer is also obliged to pay interest in the form of a coupen till the bond reaches maturity. The result is a sellable debt that even before it is fully paid can give the leader a stable income. They can also if times that can if there is a risk the issuer will not pay be sold on.

During the lesson for we were told how banks used bonds that they then sold on to each other. It did not take long till this became a very complex game of pass the buck in the end no one know what was in the bonds and as a result their value soon fell as many people did not keep up with repayments as they were overpriced.

Later that day I talked to a friend who was a doctor I soon found to my shock that he had little idea what a bond really was!

Maybe it is time to teach children at school from an early age about the financial markets?

Coal Plants in Transition - an economic case study in energy financy

March 8, 2010

This is an executive summary report on the “Coal Plants in Transition: An Economic Case Study” prepared by Natural Capitalism Solutions in Colorado. The report makes a strong business case for energy providers to consider transitioning away from coal to a combination of renewable and energy efficiency technologies. The transition becomes cost effective and quite profitable when combined with revenue streams that result from selling pollution credits (NOx, SO2), carbon credits, water rights, and also fuel savings.

The study specifically considers the Navajo Generating Station as an example. But the report is designed to provide information to utility managers all over the country who are faced with serious economic decisions regarding the future of their coal plants as we enter a carbon and water constrained world.

Coal Plants in Transition - an economic case study in energy financy

March 8, 2010

This is an Executive Summary report on the “Coal Plants in Transition: An Economic Case Study” prepared by Natural Capitalism Solutions in Colorado. The report makes a strong business case for energy providers to consider transitioning away from coal to a combination of renewable and energy efficiency technologies. The transition becomes cost effective and quite profitable when combined with revenue streams that result from selling pollution credits (NOx, SO2), carbon credits, water rights, and also fuel savings.

The study specifically considers the Navajo Generating Station as an example. But the report is designed to provide information to utility managers all over the country who are faced with serious economic decisions regarding the future of their coal plants as we enter a carbon and water constrained world.

Ending the disconnect between politics and business

March 4, 2010

Britain will soon be voting for a new government. Tony Manwaring is Chief Executive of Tomorrow’s Company. The opinions expressed are his own. -

Britain will soon be voting for a new government. It should be time to discuss the big issues which will define the years ahead, notably how are we, as a nation, going to pay our way in the years ahead? Our confidence that financial services and Cool Britannia will replace manufacturing and heavy industries now looks sadly misplaced.

Instead, the focus is on the short to medium-term: confidence in sterling, interest rates, and levels of public spending. The range of policy instruments being used is giving ‘business as usual’ a bad name. On the one hand, we are throwing the kitchen sink at the gaping, gnawing hole that is the fragility of recovery to stave off double-dip recession; on the other, a deep need to go back to the future, press ‘reset’, and hope for the best.

All of this is reinforced by the popular reaction to banking and finance. The popular mood – reinforced by opinion leaders and politicians alike – appears to suggest that we would rather go back to a barter economy, and do away with money, credit and, above all, bankers. This is not only illogical and perverse, but also seriously frustrating. Because many of the most interesting and reflective discussions we are having on what has gone wrong, and what needs to be done, can be had with, er, whisper it softly … bankers.

Stephen Green, interviewed in the Times, about his new book Good Value: Reflections on Money, Morality and an Uncertain World, reflected “there was a climate that developed where it’s as if you would say to yourself, ‘If there’s a contract, if it’s legal, if there’s a market, then I’ll do the deal, I don’t have to ask any questions, I don’t have to ask whether it’s right or suitable’. And I do think that we need to get back to that sense of what’s right and suitable and not merely, here’s something that’s a profitable transaction.”

The need to give real weight to the ‘soft’ dimensions of behaviours and culture has been reinforced by our work on governance. Time and again, in understanding what went wrong in leading financial institutions, we have to face up to repeated examples of very qualified and successful business leaders seeming to suspend critical judgement, and failing to give voice to their inner doubts – to acting on the instinct that, as Mark Moody Stuart so memorably once called it, something is “squirwly”.

Which brings us back to the approaching election campaign because isn’t this precisely the time when political, business and other leaders should be making common cause raising the great questions of our age – rather than just focusing on the instruments of economic management, important though they are. If the credit crunch has proved anything, it is surely that value can be swept away if not rooted in values.

The problem is the ‘disconnect’ between the business of politics and the politics of business. Business leaders are supposed to be about creating value, but are increasingly talking about values. Politicians are supposed to talk about values, but are desperate to keep a system going which is capable of distributing value. And n’er it seems shall the twain meet …

When politicians do talk about the moral limits of the economy, what they are talking about is the need to create a societal approved framework within which markets operate: values, according to this view, exist outside of the value free operations of the economic system, but determine the conditions within which we permit markets to function.

This gap in understanding is reinforced by a gap in experience. All too often business people tend to want to get on with their job, and shun the media spotlight and attention beloved of politicians; and our political class has had scant experience of – and arguably respect for – what makes business people tick: getting things done, making things, building enduring organisations.

There is another view, which we have set out in ‘A new talent agenda for the UK’: that value is increasingly shaped by social and environmental drivers, as well as economic imperatives (we call this ‘the triple context’). That value is being co-created across complex value chains spanning the globe, through a myriad of decisions being taken every moment of every day.

From this perspective, values are woven into the DNA of economic activity and are the best guarantor of long-term and sustainable value; and talent must be inspired and engaged, speaking to the values within. And it is this realisation that should be the starting point in answering ‘how are we going to pay our way’.

An election campaign exploring the development of the moral foundations of a successful political economy therefore makes sound political and economic sense.

Blog also published in Reuters - The Great Debate.

Interface: Mission Zero - Tomorrow's Company Briefing Document

February 25, 2010

This Briefing Document, by Tomorrow's Company, summarises the steps taken by Interface, a global carpet manufacturing company, to eliminate its environmental impact on the planet by the year 2020. This project, ‘Mission Zero’ is amongst the most ambitious of its kind. Ray Anderson, chairman of Interface and ex-Chief Executive, set Interface on this path to becoming fully sustainable and since his ‘epiphany’ in 1994, Interface have led the way in sustainable business, achieving superb environmental results as a consequence.

The Tomorrow's Company Briefing Documents are intended to provide the reader with a comprehensive introduction to a particular topic.

You can find the full list of Briefing Documents on forceforgood.com here.

The Role of Aid and Trade in Reducing Global Poverty - Tomorrow's Company Briefing Document

February 25, 2010

This Briefing Document, by Tomorrow's Company, summarises the strengths and weaknesses of both aid and trade within a poverty reduction strategy. It shows that it is important to distinguish between different types of aid, as the efficacy of each is dependent on the context in which it is administered. An assessment of the success of trade led growth strategies in reducing poverty is made and the difficulties faced by developing nations in following such a strategy are explored.

The Tomorrow's Company Briefing Documents are intended to provide the reader with a comprehensive introduction to a particular topic.

You can find the full list of Briefing Documents on forceforgood.com here.

Tomorrow's Company Briefing Document – Contents List

February 25, 2010

This is the contents page for the Tomorrow's Company Briefing Documents. You can use the links below to reach the various Documents stored on forceforgood.com.

The Tomorrow's Company Briefing Documents are intended to provide the reader with a comprehensive introduction to a particular topic.

Please get in touch if you have any ideas for further briefings at admin@forceforgood.com.

Tomorrow's Global Talent - a new talent agenda for the UK

February 22, 2010

In Tomorrow's Global Talent we asked how leading global companies create value through people and challenged how we think about talent. We argued that talent is abundant, not scarce; that talent exists at every level, not just the high fliers and that the key challenge is how to inspire, engage and harness talent.

In our new UK based report, we have talked with business leaders, in the UK and abroad to find out if and how businesses in the UK are coming to terms with globalisation, and with the new drivers of value creation and as a result what this means for talent management in the UK.

We argue that as a nation we must pay our way through our one natural resource – the talent of our people, but that we can do this if we have a shared sense of national purpose, one which embraces the world we are a part of. We argue that we are being held back by a 'fortress Britain' mentality - this could mean huge problems for us as a nation, whilst failing to harness the talent of our people, which in turn will greatly impact business, UK based or not.

Above all, we call for a new mindset in the way we think about, lead and harness talent in the UK – a mindset that is about developing the talent for being global.

Powering Americas Defense: Energy and the Risks to National Security

February 22, 2010

In 2007, the CNA Military Advisory Board (MAB) released the landmark report “National Security and the Threat of Climate Change,” which found that climate change constitutes a “threat multiplier” to existing security risks in some of the most volatile regions in the world. A 2008 National Intelligence Assessment con?rmed the report ?nding that climate change is a serious threat to national security and long-term global stability. The MAB, which is comprised of some of the nation’s most respected retired admirals and generals, also found that “Climate change, national security, and energy dependence are a related set of global challenges.”

The following is a report produced by CNA expanding on previous findings.

The President’s Power Tools

February 22, 2010

On Capitol Hill, the ship of state is so bereft of rudder and sail that the crew is jumping overboard. The latest to abandon ship is Sen. Evan Bayh of Indiana, who minced no words about the dysfunctional Congress he is choosing to leave.

Forget for a moment about health care and financial reform. On national energy and environmental issues, which have been stalled in the congressional queue, we have a critical national security threat, a danger to public health and welfare, and national policy that encourages American families to inadvertently fund terrorists.

Those are among the reasons the paralyzing partisanship on Capitol Hill is so serious a dereliction of duty.

So what can the President of the United States do? Quite a lot if he’s willing to use the executive powers he’s been given by the Constitution, the courts and past Congresses.

That’s what President Obama is planning now, according to the New York Times. “With much of his legislative agenda stalled in Congress,” the Times reports, “President Obama and his team are preparing an array of actions using his executive power to advance energy, environmental, fiscal and other domestic policy priorities.”

“We are reviewing a list of presidential executive orders and directives to get the job done across a front of issues,” White House Chief of Staff Rahm Emanuel told the Times.

Let’s hope this is more than a shot across Congress’s bow. We’ve fallen to a point at which the relationship between the Executive and Legislative branches is not so much checks and balances as mutual assured gridlock. For several years now, much to the discomfort of leaders as philosophically diverse as George Bush and Carol Browner, more environmental policy seems to be made by the Judicial Branch than by the other two.

Before elaborating on the president’s powers, let’s recall why energy and environment are so much more important to Main Street than gas molecules accumulating in the atmosphere. There’s American competitiveness and jobs in the emerging global green economy, of course. But amidst the ridiculous arguments about leaked e-mails and whether blizzards on the East Coast prove that climate change isn’t real, America’s military and intelligence communities have been trying to tell us something for the past several years: If you believe in a strong and secure America, if you support our troops, if you don’t want part of every gasoline dollar to end up financing terrorism, you need to support our transition away from carbon-intensive fuels, to the type of “clean energy economy” President Obama advocates.

I’ve quoted often in the past from the important work of the Military Advisory Panel at the Center for Naval Analysis, whose conclusions have been embraced by other flag officers and intelligence agencies, but three quotes deserve repeating:

•    U.S. dependence on fossil fuels undermines economic stability, which is critical to national security;

•    The U.S. should not pursue energy options inconsistent with the national response to climate change. Diversifying energy sources and moving away from fossil fuels where possible is critical to future energy security;

•    Some of the attacks on our troops and on American civilians have been supported by funds from the sale of oil. Our nation’s energy choices have saved lives; they have also cost lives.

I’m among the bloggers who’ve been sharply critical of the White House for not wanting to “get out ahead of Congress” on these issues. For example, although the Environmental Protection Agency has the authority to regulate greenhouse gases, President Obama has embraced the very low goal established in the House-approved Waxman-Markey bill, and he’s made even that goal contingent upon Congress passing a final climate bill.

In many other instances during his first year in office, however, Obama has made good use of his presidential powers to advance U.S. leadership on energy and the environment. It’s important that he expand on that record. He has no lack of ideas or authority. Dozens of organizations and initiatives, including the Presidential Climate Action Project, have submitted scores of recommendations to the Obama team since the 2008 election on energy policy and climate change.

Before Obama took office, the Center for Energy and Environmental Security at the University of Colorado Law School analyzed executive authority as it relates to energy and climate policy. The Center reviewed 96 provisions in current U.S. law where climate change, global warming or greenhouse gases are mentioned explicitly; it also reviewed 370 executive orders going back to 1937. It identified and created a searchable database of 112 relevant statutory delegations of authority for presidents to address energy and climate. The Center’s overall conclusion is that “Congress has delegated to the President substantial authority to develop climate change policy and organize and manage federal operations to address the issue.”

The President will have to walk a careful line to avoid the impression he wants to lead like the Bush-and-Cheney White House where national laws, international treaties and the U.S. Constitution itself were regarded as subservient to executive whims. But grounded in the public interest and the president’s legitimate powers, it’s a line Obama can walk and defend.

If President Obama fully uses his authority, the United States can continue making progress toward a clean energy economy. Meantime, the November election is an opportunity to begin fixing our broken Congress by removing the Members who are putting their petulant partisanship ahead of the nation’s welfare.

Beyond Copenhagen part two

February 14, 2010

Throughout the nineteenth century coal provided the cheap energy to drive factories. Being heavy, it generally made more sense to shift the raw material - like iron ore to build machines or materials used for manufacturing - to where the coal was rather than vice versa.

Industrial expansion throughout the nineteenth century therefore took place close to the coal fields of England’s West Midlands and North, South Wales and Central Scotland, the Ruhr Valley in Germany, etc.

Then, in the twentieth century, cheap energy was provided by oil. More potent and lighter, it was the perfect fuel for transportation. Coal could now be transported more easily, as could troops and tanks, trade, tourists and so on. From the First World War through the 20s and 30s, the car and the aeroplane went from miracles to mainstream.

In the twenty years after the Second World War, car ownership accelerated beyond the ability of urban planners to cope, leading to a reaction by planners towards unequivocally car-based patterns of urban development. Westerners started to fly away on holiday, and trade in food and goods went global. And lest we forget, a useful by-product of all this transport fuel are the plastics industry, fertilisers and a broad spectrum of other things that have become central to the modern world, forged in the post-war era.

First they laugh at you

‘Peak Oil’ has been a cause celebre among the green movement for some time, with roots reaching back to the oil shocks and subsequent self-sufficiency ethos of the 70s. Now, a succession of reports from mainstream institutions is calling time on the age of cheap oil. Firstly, the International Energy Agency in 2008 changed tack from consolidating national estimates of reserves to gathering direct empirical data. That year’s World Energy Outlook (http://www.worldenergyoutlook.org/2008.asp) started to hint at future percentage declines in oil output and a prospective time table for OPEC and Non-OPEC producers.

The UK Energy Research Council followed in October 2008 with a clear and clinical look at exactly what data was available and what assumptions could be made regarding global oil depletion (http://www.ukerc.ac.uk/support/Global%20Oil%20Depletion). This notes a ‘significant risk’ of oil production starting to decline by 2020, and the need for ‘serious consideration’ of the implications of this.

That same month, a report called The Oil Crunch was launched from a group of concerned businesses dubbed ‘the UK Industry Taskforce for Peak Oil and Energy Security’ (or ITPOES). This consists of engineering consultancy Arup, Virgin, Richard Branson’s airline and train company, Stagecoach, a bus company, Scottish and Southern, a traditional energy utility with a growing renewables portfolio, Solarcentury, a solar panel firm, and Foster + Partners, the architects. This looked at the impacts both for the global economy as a whole, and the specific infrastructure and networks the modern world is based on.

Their second report out last week (10^th Feb 2010), produced in partnership with the London School of Economics, deepens the analysis of the economic implications of oil depletion in the wake of the credit crunch. They have been ramping up the pressure on governments to come clean about the possible effects this may have in the coming years and the potential steps that politicians should take.

Many voices have countered fear-mongering over oil depletion, perhaps for an inherent need not to scare the horses. Last week the boss of BP went on the radio maintaining that demand would fall faster than supply, supporting the plateau / gradual descent forecast rather than crunch forecast. The logic of supply and demand suggests attractive investment opportunities for new oil exploration and exploitation. On the other hand, transition to low carbon will produce radical reform of the demand side of the equation, which in turn may affect prices.

For the UK, the ITPOES report sees a hint of things to come with the depletion of oil from the North Sea and its possible effects on Sterling. This, they say, could have a significant impact on the way in which the UK economy will emerge from the recession. Within the next ten years an oil crunch could add to the problems of the credit crunch and climate change, with serious consequences for our way of life.

The first report from 2008 drew a number of interesting points about a post-carbon future. Firstly, many people including politicians and civil servants, business leaders and the public at large, have little awareness of the risks of global oil depletion. The crunch can come about not because all the oil in the world is gone but that the infrastructure and new investment needed to get it out cannot be delivered fast enough.

Next, there is also a significant risk that the problems of oil depletion will bite before alternatives can be brought into play. Thirdly, on a more upbeat note, cleantech solutions in the energy and transport sectors are likely to be classic ‘disruptive technologies’ that can knock out their predecessors very fast.

The 2008 report also neatly points out that whereas climate change policy may attempt a shift to a low carbon future over 40 years to 2050, the oil depletion agenda prompts a far more rapid mobilisation of alternative energy sources. If oil production declines slowly and steadily, then there is a 20 year timescale to re-engineer the world. Or if, for various reasons, production collapses, then we have more like 10 years.

The 2010 report, with its increased focus on issues of global economic stability, shortens this timescale even further, with the headline message that “oil shortages, insecurity of supply and price volatility will destabilise economic, political and social activity within five years” and that this should be a major priority for the new UK government to be formed after the 2010 election.

Running out of steam?

It therefore comes as no surprise that the US military is becoming a leading player when it comes to reducing the carbon footprint of its supply chains. A recent piece in The Economist, (Greenery on the March, 10^th Dec 2009), discusses the cost in money and carbon of delivering the oil to drive a tank a mile through central Afghanistan or run the generators on a military base.

Supply chains in the nineteenth century were similar, with mules cargo predominantly consisting of food for the cavalry’s horses. Today, electric vehicles from tanks to ships, recharged from wind and solar renewables back at base, and insulated operations centres that need less air conditioning are being deployed or are in development. Strategy is already advancing as to who will get the last of the fossil oil (it’s the airforce it seems).

Global businesses, consumers or policy-makers considering making the shift to low carbon need no longer be concerned that the prime motivation is doing what’s best for your children’s children, the good of the planet, or moral rectitude. Now, it is economic self-interest and national security that are the rising concerns. Both the general public and politicians to the right find these arguments far more compelling reasons for a behaviour change.

Ironically, all this brings us right back to where we started. If we want a lesson from history as to what our towns and cities might look like in a post-oil future we only need return to Copenhagen.

After the oil crises of the 1970s, when the price of oil quadrupled in a short space of time, the government of Denmark made the long term decision to reduce its reliance on foreign oil. Over the course of 25 years, energy efficient buildings, decentralised heat and power and a cycle-centred approach to urban movement have all helped make the capital Copenhagen one of the cleanest and greenest cities on Earth.

Public transport, generous cycle lanes, and even the creation of ‘cargo cycles’ (multi-wheeled, wide axel push bikes capable of replacing the car for the school run or weekly shop, see www.christianiabikes.com) have lowered carbon emissions from transport. As an added bonus, historic squares long demoted to hosting car-parks have been reclaimed as popular public spaces.

An unremarked minor tragedy of the UN climate conference is that it took place in December, when Scandinavia is dark and cold. When a major international conference next comes together to consider the issues of oil depletion, climate change and a post-carbon world, it should go to Copenhagen in the spring or summer instead.

Then they fight you

The leaders of the relatively small country of Denmark could see through their ambitions for a low carbon future with comparative ease. In the USA, by contrast, a major fight that hit the papers last September shows deep schisms opening up in the US economy. As reported in the New York Times (http://www.nytimes.com/2009/09/30/opinion/30wed3.html?_r=1) various large corporations are starting to quit the US Chamber of Commerce over its antagonistic approach to carbon reduction. Lobbyists from the carbon incumbents are pitted against cleantech pioneers keen to usher in a new dawn of low-carbon, disruptive technologies.

Looking ahead to the world of 2020 or 2025 we can expect things to be enormously different. Looking back a similar length of time to 2000 or 1995 shows how much society can be changed by new technology. The real problem may be just how a low carbon transition might start to take shape over the next five years. The report from Arup and the UK Taskforce for Peak Oil and Energy Security makes it clear that a post-carbon future may need to be brought into being far faster than expected by the recent frameworks of climate policy.

The mix of planned public policy and leaving the market at large to work it out is a key and complex question. A balance between the two will be the reality of course, and this is a theme that must be returned to in more depth. However, on the topic of oil depletion - and its close correlation with the dynamics of the natural gas industry, central to the UK’s domestic heating infrastructure - the growth of new consumers in emerging economies, and the impact on the poorest consumers both in the UK and elsewhere, are highlighted as key aspects to watch out for. On the first point, whilst oil demand is level or falling in OECD countries, it is rising across non-OECD countries. On the second, rising fuel costs will cause a rise in the prices of food and other consumer goods.

The actual point of ‘peak oil’ is predicted as being 95 million barrels a day, by 2015 (10 million barrels per day above the 2008 level). The reports recommendations include requiring central and local government, and businesses to devise contingency plans, and the continuation or increase in support for the sustainable transport policies by government going forward.

Then you win

Some of what is needed is already sketched out in principle - in Labour’s Low Carbon Transition Plan, which breaks down targets by sectors such as transport, energy and so on. Government is also supporting innovation in sectors such as electric vehicles with the West Midlands recently identified as a low-carbon transport innovation sector, following from a similar initiative centred around Newcastle and Sunderland.

In the pure private sector, without the need for government pilot schemes, Sunderland’s Smith Electric Vehicle firm, established in the 1920s, is running at full capacity making electric trucks and vans for firms ranging from telecoms utilities like BT to international courier firms like DHL. Recent partnerships with Ford indicate that innovative British companies like this are set to take a leading role in a future world in which carbon is constrained not just because of a need to stop polluting the climate system, but also because there simply won’t be enough of the old black gold to go round.

Seeing any topic in isolation is a threat for policy making if it misses the fundamental interdependencies that exist in reality. Investors backing oil and gas exploitation founded on high oil prices, or the emerging markets investment funds backing cleantech will be in dynamic opposition, and the results are likely to be unpredictable. I have always been inclined towards the optimistic view of progress, but I suspect we may well be in for an extremely turbulent time.

Anthony Alexander

14-02-10

www.anthonyalexander.info

International Energy Agency, World Energy Outlook, December 2008

http://www.worldenergyoutlook.org/2008.asp

UK Energy Research Council: Global Oil Depletion - October 2009

http://www.ukerc.ac.uk/support/Global%20Oil%20Depletion

UK Industry Taskforce on Peak Oil and Energy Security: The Oil Crunch 2008 and 2010 reports

http://peakoiltaskforce.net

Copenhagen’s Cargo Cycles

www.christianiabikes.com

Way Behind the Curve, September 29^th, 2009

http://www.nytimes.com/2009/09/30/opinion/30wed3.html?_r=1

http://www.theengineer.co.uk/news/low-carbon-cars-for-midlands/1000950.article

http://www.smithelectricvehicles.com/

Developments in New Reporting Models

February 12, 2010

Developments in New Reporting Models addresses recent calls for a new
reporting model for business and forms part of the Information for Better
Markets thought leadership programme of the Financial Reporting Faculty
of The Institute of Chartered Accountants in England and Wales (ICAEW).

Beyond Copenhagen

February 12, 2010

With the passing of the UN conference in Copenhagen at the end of 2009, climate politics has entered a new phase. Far from the beginning of a new global accord to a low carbon future, we have entered a period of apparent turbulence. The somewhat opaque mechanisms of international law via the UN can be heralded as either significant progress or scorned for lumbering ineffectiveness.

Progress can be declared on the grounds that unlike the limited membership of the Kyoto Treaty, as of the 31st of January deadline set at Copenhagen, countries accounting for nearly 80% of global emissions, including the USA and China for the first time, have now stated (non-legally binding) domestic targets for national carbon reduction to be met during the decade to 2020. (See the full list here)

If these countries then enact national legislation to attempt to meet these targets - as the UK has done with the 2008 Climate Change Act - then things will at last be starting to head in the right direction, provided such efforts are successful. The lively metaphor of the carbon in the atmosphere being like a bath with the taps on is a reminder of urgency. Slowing down the rate at which the water is pouring out of the tap will not necessarily prevent the house from being flooded.

Expectations were high over Copenhagen, in part due to the UN’s own deadline for the end of Kyoto’s first phase in 2012. Investors have no certainty in a carbon price beyond that date and so forth. But the carbon is only one part of the climate change challenge, and we must not neglect the impact of other greenhouse gases, and potent new ones unwittingly incorporated into manufacturing, should not be forgotten. The manufacturing of some high definition televisions and thin-film solar panels risk emitting far more potent greenhouse gases than CO2, such as the unregulated NF3 (See Michael Prather’s work on Nitrogen Triflouride at the University of California - http://www.physsci.uci.edu/psnews/?id=424). Meanwhile, away from the hubbub of Copenhagen, the low profile Montreal Protocol related to the control of ozone depleting gases recently underwent major review regarding related impacts on global warming.

A few bad apples?

The recent calamity over the UEA and IPCC errors is also a storm in a tea cup. Controversy relating to the conduct of individual scientists or the wider political context might be usefully contrasted with the story of Isaac Newton and his attitude towards his rival, Leibniz. Science is still carried out by human beings.

As for the IPCC Himalayan glacier data, this relates to a forecast consequence of global warming but does not disprove climate change. And neither does a spate of extremely cold weather in northern Europe. A warmer global climate will be a more chaotic one.

It is also notable that James Lovelock - who I would call the most important natural scientist since Darwin - outlined in his recent book on the Gaia Theory, an attack on the modelling approaches of some climatologists who fail to recognise the interconnections between the biosphere, hydrosphere and atmosphere. Into this Gaian mix we have added the ‘technosphere’ and its accelerating chemical redistribution of fossil carbon - and other mined minerals - from deep within the Earth into the biosphere, hydrosphere and atmosphere above.

Exhausted after an immense build up and the apparent failure to agree a global deal to cut carbon, the climate agenda may seem to be waning. But with little change in the underlying un-sustainability of modern development it should come as no surprise that the problem will not go away. Instead we might start asking slightly different questions, and looking at the issues in slightly different ways.
Climate change has come to dominate the environmental agenda in recent years, but it is not the fundamental issue. In fact, it is merely a symptom - an effect - of a deeper problem, and that problem is cheap energy, mined from the ground in the form of fossil fuels.

Anthony Alexander
10-02-10
www.anthonyalexander.info

Obama’s Rope-Line Debate on Coal

February 11, 2010

If you suddenly came face to face with President Barack Obama, what would you say?

Gillian Caldwell found herself in that position last week when she encountered the President on a rope-line. Caldwell – the leader of the climate-action group 1Sky – decided to debate the President over his position on coal.

As she shook Obama’s hand, Caldwell appealed to him to stop supporting federal investments in “clean coal” and to put the money instead into renewable energy. To his credit, Obama stopped long enough to engage. Here are excerpts of their exchange (see the video and full transcript):

Caldwell: It’s got to be renewable energy. No more clean coal. It’s a unicorn. It doesn’t exist.

Obama: I disagree with you…We are not going to get all our energy from wind and solar in the next 20 years.

Caldwell: Let the market do it…Can’t the market make the investment?

Obama: They can’t do it. The technology’s not there. I’ve got a nuclear physicist in my Department of Energy who cares more about climate change than anyone and he will tell you you can’t get it done just with that – so you’ve got to have a transition period to do all this other stuff. Don’t be stubborn about it…If I could do it all with wind and solar, I would! We can ramp it up. That’s what we’re working on.

Obama made his case for coal more formally in his State of the Union address, where he called for more investment in carbon capture and sequestration (CCS). In an energy policy meeting with governors at the White House Feb. 3, the President said:

One of the things that we’re going to be talking about today is investing in the kind of technologies that will allow us to use coal, our most bountiful natural resource here in the United States, without polluting our planet. It’s been said that the United States is the Saudi Arabia of coal… If we can develop the technology to capture the carbon pollution released by coal, it can create jobs and provide energy well into the future.

The President then announced he’s created a Carbon Capture and Storage Task Force charged with figuring out how to deploy coal burning on a “widespread scale” within 10 years.

As the dirtiest and the most abundant of fossil fuels, coal is a dangerous bridge to a clean energy economy. How has the president who vowed to restore America’s leadership on climate change become coal’s First Friend? One explanation may be the advice he is receiving from his inner circle – Emanuel, Axelrod, Gibbs and Jarrett – political savants who may assume that expedient politics is the same as good public policy. According to an analysis by Edward Luce in Financial Times, Obama may be relying on these four advisors far more than he listens to his talented Cabinet, including Secretary Chu. None of the four is an energy expert, and it shows in Obama’s position on coal.

For example, if our objective is jobs, renewable energy technologies have been found to produce more than fossil fuels. Coal is not our “most bountiful natural resource”. Assuming the President was referring to energy resources, that honor goes to sunlight. We have a 7 billion year supply. The fuel is free and we don’t have to blow the tops off of mountains to get it. Collecting sunlight doesn’t kill rivers, contaminate groundwater, make people sick or destroy their culture, as is happening today, every day, in the rape of Appalachia. We don’t have to capture the sun’s greenhouse gas emissions because it doesn’t produce any. So if abundance, cost, jobs and low carbon are our criteria, then the money we’re dumping into coal should be invested in pre-fossilized solar energy.

Instead, Obama is taking the path of least political resistance – the position that to meet America’s energy appetite all our supply options must be on the table. With respect, that’s a cop-out designed to evade hard choices and to keep coal-state congressmen pacified. If we assume we do not have enough taxpayer money to subsidize all supply options and if we want to simultaneously achieve energy independence, economic vitality, global competitiveness and greater national security while managing the risks of climate change, then some options need to come off the table as quickly as possible . One of them is coal.

I like the fact that Obama stopped on the rope-line long enough to engage Caldwell in this discussion. I like that he went eyeball to eyeball with House Republicans on national TV. Now, it would be good politics as well as informative for him to engage his disillusioned base in the same type of open discussion. Here’s how he might proceed on energy policy.

First, if he hasn’t done so already, the President should order Air Force One to fly over Central Appalachia. On a clear day, he’ll see what surface mining and rampant corporate greed are doing the some of the world’s oldest mountains and to North America’s most biologically diverse region. After the flyover, he should land long enough to talk to some of the Appalachian people most affected by mountain top removal. These visits may change his mind about the true costs of coal.

Next, he should invite Caldwell and a few dozen of her closest friends in the really clean energy movement to the White House for a televised conversation about energy policy. In addition to the big mainstream green groups from inside the Beltway, he should include the leaders in smaller organizations who are dedicating so many of their waking hours to this issue – people like Jessy Tolkan, Alec Loorz, Mike Tidwell, and Eban Goodstein. Bill McKibben should be there. So should Terry Tamminen, the architect of Gov. Arnold Schwarzenegger’s climate program.

A respectful conversation should ensue, with the President examining his position on coal rather than defending it. For example:

1)    Caldwell deserves a better answer to her question about why the market can’t make the investment in clean coal. Why shouldn’t coal and electric power companies pay for their own research into CCS? Public funding for mature, well-financed industries such as coal is classic corporate welfare. It’s also inconsistent for a White House that has proposed eliminating subsidies for fossil fuels.

2)    Conservatives warn that pricing carbon will cause energy prices to rise. But so will avoiding carbon. The price of electricity is expected to be considerably higher from “clean coal” technology. CCS requires more energy and coal to produce a given amount of power. The power plants are more expensive to build. Carbon storage will cost money. So will the pipelines to move carbon dioxide from power plants to storage sites. Responsible environmental regulation of coal mining will add to the price of coal, too. Meantime, the cost of generating power from wind and solar technologies is coming down. In CCS, are we wasting time and money on a technology that won’t be cost-competitive by the time it’s ready for market?

3)    Why will the politics of storing a toxic gas be different than it has been for storing nuclear waste? The ability to store huge amounts of carbon dioxide for long periods of time isn’t just a technical issue; it’s also a legal and political issue. Whoever is responsible for sequestering CO2 will have to purchase sub-surface rights from landowners over large geographic areas. All those landowners will have to agree to allow a colorless, odorless gas to be stored beneath them – a gas that can contaminate groundwater and kill people if it escapes in concentrated form. Isn’t the endless fiasco over nuclear waste a preview of the politics of storing carbon dioxide?

4)    If America needs a fossil fuel for the transition to a de-carbonized economy, why not natural gas? Now that we know we have ample domestic reserves of gas, doesn’t it make more sense to replace the dirtiest fossil fuel with the cleanest? Gas extraction has its own environmental problems, but they seem easier to solve than coal’s. If we’re going to spend money on a transition fuel, shouldn’t we invest in the processes and technologies that will reduce the environmental and social impacts of gas extraction?

5)    In his meeting with governors, President Obama talked about using coal “well into the future”. Does he regard coal as a transition fuel or part of our lives for generations to come? The coal industry likes to argue we have hundreds of years of supply. Hundreds of years is not a transition; it’s an energy epoch.

6)    What is the Administration’s timetable for America’s transition to a truly sustainable energy mix? Do we have a roadmap for the journey to a clean energy economy, with goals, timetables and the policies we’ll need to get there? (For an example, see the United Kingdom’s “route map” to a low carbon economy by 2020) A comprehensive transition plan would guide public and private investments. It could prevent policy collisions, false starts and wasted time by coordinating the powers of federal, state and local governments. Shouldn’t the President convene an Economic Transition Task Force before he creates one on clean coal?

There’s a lot to talk about here.

When he spoke to the governors at the White House, President Obama took pains to show he has an open mind about national energy policy. “I want to be clear that my administration is following a non-ideological approach to this issue,” he said. What’s less clear is whether the President and his advisors have found an energy policy that makes good sense as well as expedient politics.

A question of risk

February 2, 2010

It’s been a good month for climate-sceptics. Following the failure of the Copenhagen summit to deliver a global treaty, they have revelled in the discomfiture of the Intergovernmental Panel on Climate Change as it admitted it was wrong to say that the Himalayan glaciers could disappear by 2035. Critics have seized on this admission, using it to call the entire credibility of the IPCC and the science of climate change into question.

There is a lesson in this for those who think global warming is worth worrying about. And counter-intuitively perhaps, I would suggest that the lesson is not to try to prove global warming is a fact and simply show that it is a significant risk – because that should be cause enough for action.

Over the past decade, those who question climate change have cleverly made the issue one of proof. They have portrayed the case for action as if it were a complex mathematical equation requiring a clear ‘QED’, with the implication that if any part of the equation is flawed, then the whole construct falls apart. This is a classic political tactic. The easiest way to undermine an argument is to pick holes in it rather than challenge its overall direction.

The UK’s Daily Telegraph for example says “The case that global warming is man-made needs to be constantly tested” - as if something might come along at any moment that would utterly destroy that case. Once the debate is set up in this way, the case for action can be infected by a flaw in any part of it.

But this approach is a poor basis for public policy. If governments waited until a security threat was proven before investing in armed forces, for example, they would rightly be pilloried as irresponsible. In defence matters, as in protecting against pandemics, hackers and other threats, they take action on the basis of risk rather than proof.

Climate change should be no different. It should be an issue where we do not wait for proof but act on the basis of risk. We should be comfortable with the fact that certainty in science is rare. As the IPCC reports show, while the warming itself is ‘unequivocal’, most observations about climate change are not 100% certain and all projections of future impacts are risks rather than sure-fire bets. But for many of us they are big enough risks to worry about: the principle of risk-based decision-making being to examine both the scale of the risk – how bad will things be if the risk becomes reality - and the degree of likelihood that it will come to pass.

If someone tells you that the plane you’re about to fly in has a 99% chance of crashing, you won’t get on it. If you are then told that as a result of data errors the chance is in fact only 5%, do you get on board? I suspect you’ll still take the train – even if there is a 65% chance it will arrive 10 minutes late. You weigh the scale and the odds.

A risk based approach is the right one for climate change and those who believe we have a real problem to confront therefore need to recast the debate as a balancing of risk rather than a quest for certainty. That changes the terms of engagement. The big picture starts to matter more than this or that disputed statistic.

And the big picture starts with the fact that in the last 200 years – or the last one thousandth of human history - the relationship between humanity and nature has changed irrevocably. The population has increased seven fold. Fossil fuels that took millions of years to form have been burned in massive quantities. Forests that took centuries to grow have been destroyed in a few decades. And carbon dioxide levels have reached the highest levels for half a billion years.

We then need to consider that eleven of the last 12 years have been the hottest on record; Arctic ice is melting at an unprecedented rate; villages are being flooded in Bangladesh; drought is afflicting east Africa; monsoons are failing in India. And, by the way, glaciers are still melting at historically high rates, as the World Glacier Monitoring Service has just reported.

Thousands of scientists say these two series of events are probably connected and if no action is taken then the impacts will worsen in the lifetimes of people alive today and become devastating in those of future generations. Call me naïve, but on that basis I am prepared to believe there is a prima facie case for doing something. You can see that as intellectually lazy; or you can see it as a commonsense response to a widely documented risk.

Framed this way, the debate also highlights the risk of inaction and challenges the climate sceptics. Instead of sitting back and rejoicing at ‘Glaciergate’, they need to put up their own peer-reviewed case to demonstrate global warming is not a risk. It’s not enough to chip away at it so it ceases to be a 100% bullet-proof certainty. Given its scale, they have to show that it isn’t even a 20% or 10% risk. Do you happily play Russian roulette because you only have a 16.6% risk of blowing your brains out?

And what if the consensus turns out to be wrong? What if the scientific academies and governments of the leading economies have had the wool pulled over their eyes? What if climate change has all been cracked up in a mass conspiracy by researchers looking for grants?

Will it have been a waste of time to invest in using energy more efficiently? Will it have been a waste of effort to switch to renewable energy? These measures have an intrinsic logic to them beyond reducing emissions. Energy efficiency saves money and conserves resources while low-carbon energy provides the alternatives that will be needed when shrinking reserves of non-renewable fossil fuels become too expensive to extract. We need to do this stuff anyway.

Post-Copenhagen, advocates of action on climate change need to set out the bigger picture and present climate change it for what it is – a massive global risk. The issue should cease to be one of proof, which is a pedant’s paradise, and become one of risk and judgement, in which wisdom prevails.

David Vigar authored Tomorrow’s Company’s report on global warming and business, Tomorrow’s Climate: Beyond Peak Carbon. It is available at forceforgood.com here.

Sixteen Questions from the Cadbury takeover

January 21, 2010

So many questions arise from this takeover. Some of them are raised by Will Hutton and Philip Blond in today’s FT. But while Hutton and Blond (rightly) worry about the UK national interest, the outcome actually appears to make little sense in terms of the self interest of most of the people involved.

Even if you accept that the stock market should be left to get on with the business of creating long term shareholder value, here are questions that the major participants in that system need to answer.

They are all summarised in one key question: If we accept that an efficient capitalism needs effective stewardship, why are the implications of stewardship ignored in a takeover situation?

Tomorrow’s Company is now creating a forum which will, among other things, be examining these questions.

See also the Wall Street Journal piece by Mark Goyder and Philip Goldenberg which explains why boards and investors are not obliged to make decisions by price alone.

Sixteen Questions from the Cadbury takeover

For the board of Cadbury:

Do you accept that your duty of stewardship of the companies applies in a takeover situation? Why did the Cadbury chairman focus so heavily on price in his negotiations and ignore questions about the appropriateness of Kraft as an owner of Cadbury?
In making your recommendation did you consider what was right for the company in the long term, or were you, as some reports suggest, primarily influenced by the advice you received on what your shareholders believed to be the right price?

For fund managers owning shares in Cadbury:

Do you accept that you have a duty of stewardship towards the companies in your portfolio as well as a duty of stewardship towards your clients?
What guided your decision in this case?
Do you have a vested interest in cashing in that could skew your decision? Or do you set that on one side?
Many of you sold your shares to hedge funds at an early stage in the bidding process. Why?
Does the high level of debt taken on by Kraft concern you? Is there a risk of this burden adversely affecting the future wellbeing of Cadbury?

For the pension funds and other beneficial owners of Cadbury:

Do you accept that your duty of stewardship of the companies applies in a takeover situation?
Have you thought about whether, in general, you want to encourage takeovers? Much of the research evidence suggests that most hostile takeovers destroy value. They also create conditions in which managements worry more about the short term share price than long term shareholder value and that this damages investment in talent, R&D and sustainability. The conditions which you lay down can determine how fund managers decide to vote in a takeover bid. Have you given them guidance, either in principle or in particular cases? If not, why not?
Do you believe that future pensioners are served well in a system in which hostile takeover are as common as in the UK? In particular what guidance have you given fund managers on their attitude to such takeover when the current leadership of the company is thought to be competent and when the acquired company is effectively burdened with debt to finance the acquisition (as in the case of Manchester United)?
Are there any circumstances where you would turn down a takeover bid regardless of price because of the inappropriateness of the future owners?

For the UK Government:

The 2006 Companies Act defines the duty of directors as being to the company, but it also specifies the impacts on stakeholder groups other than the shareholders? Are you happy that boards of companies in takeover bids are properly complying with that duty?
The original Company Law Review proposal for an Operating and Financial Review could have been used to require those seeking to bid for a company to set out their plans for the company in the form of a narrative report which covers all the stakeholder categories mentioned by the Companies Act statement of Directors Duties. Should the government not now revise the reporting requirements upon companies and strengthen them so that shareholders and the wider public are given fuller information before any takeover is approved?
Should not all pension funds and beneficial owners be unambiguously required in law to specify their policy on stewardship generally and stewardship in the particular circumstances of a bid?
Should there be a requirement upon fund managers to seek a clear voting mandate from pension funds, especially where investment managers are conflicted or incentivised to accept rather than reject bids?
To discourage irresponsible bidding activity, should the bidding company not have to pay the costs of the bid-for company if the bid fails a successful defence?

Lean and Grean: Leadership for the low-carbon future

January 20, 2010

This report presents full analysis of the research ?ndings. It includes results from a UK- wide survey of 1,500 managers and ten case studies based on interviews conducted among a range of organisations in different sectors. It also provides key conclusions and recommendations, drawn from the research, to help individual managers and organisations adapt to the challenges they face.

This research has been led by the Chartered Management Institute in partnership with the Institution of Engineering and Technology (IET) and the UK Business Council for Sustainable Energy, supported by EDF Energy and the Association of Chief Police Of?cers, Cymru. The Centre for Environmental Strategy at the University of Surrey was the research partner.