Exxon, the Rockefellers, and the Future of Big Oil
Last week, the Rockefeller family made an historic challenge to Exxon Mobil Corp., the company founded by John D. Rockefeller in 1870 (as Standard Oil), and in which dozens of family members still hold stock. The challenge came in the form of a shareholder resolution to require an independent chairman of Exxon's board of directors, so that the company can better maximize long-term shareholder value in a rapidly changing energy environment.
Making the board chair independent of the CEO may seem a technical governance matter, but it has great significance. The family argued that having a board that was independent from the day-to-day operations of company management would enable Exxon to better assess the risks and opportunities that are altering the energy and environmental landscape — and that Exxon might alter its business strategy based on a different set of assumptions than those under which the company has been operating.
Research conducted by my colleague Ron Pernick and me at Clean Edge in 2006 looked into Exxon and its set of assumptions about our energy future. Exxon has long adopted a stance that renewable energy will be a negligible part of the energy mix for the foreseeable future, and that operational and market conditions will remain static and relatively unchanging. At the time, we wondered, given the realities of our increasingly volatile global energy marketplace — growing demand, declining production, global security issues, climate change, rising food costs, and other business, social, and environmental challenges — whether Exxon's narrow view would leave the company at risk from competitors and less able to seize new opportunities and adapt to shifting market conditions.
We found some of Exxon's assumption flying in the face of the facts — for example, that only 2% of the world's energy will come from renewable sources by 2030, despite estimates by the Renewable Energy Policy Network that already attribute 4% of the world's energy to new renewable sources. The company consistently underestimates the annual growth of solar, wind, geothermal, biofuels, and other alternative energy resources. Moreover, company statements — as underscored by its actions — is that they are waiting for a major breakthrough in renewable energy technology, at which point it will deploy its significant resources in bringing that technology to market.
There is good reason for the Rockefellers and other shareholder to be concerned about this strategy. By placing nearly all of its emphasis and focus on oil and gas, Exxon risks losing out on the new markets for renewables and places the company strategy within an outdated model of energy markets. As the renewable energy market has developed, it has become clear that our energy future won't be based on a single breakthrough, but on dozens, even hundreds, of smaller ones — new technologies, products and services, and business models. Everyone from GE to Goldman Sachs to Google seems to get this, and are investing accordingly.
So, diversifying investments more aggressively into clean-energy research and development would position Exxon to be better able to adapt to changes, capitalize on anticipated carbon trading schemes and expected developments in the regulatory environment, hedge its bets, and build new business opportunities as alternatives to petroleum-based technologies gain market traction.
Instead, the company seems to be biding its time, waiting for renewable energy markets to develop rather than jumping in to help build them. As a result, rather than taking a proactive role in advancing these technologies, Exxon runs the risk of either not having sufficient access to a viable partner when it finally decides to enter the renewables market in a substantive way, or of arriving too late and losing first-mover advantage, if not significant market share. Most of the other majors — BP, Chevron, Shell — have at least some robust renewable energy programs in place — wind, solar, geothermal, fuel cells, tidal power, and more — albeit relatively small ones in terms of revenue. But at least they're gaining experience and partners in the renewables space.
There are billions of dollars being invested by some pretty smart people in the notion that there's a Moore's Law of energy — that is, that innovation can make clean energy both ubiquitous are cheap. They're betting that energy can follow the path of microprocessors, hard-disk storage, and wireless telecommunications, where costs have plummeted as technology has steadily improved — and carbon can, in effect, be taken out of the energy equation. If even some of these bets pay off, Exxon's assumption — that oil and natural gas will remain the dominant energy sources for decades to come — could put them at a competitive disadvantage. Hence, the interest of long-term, multi-generational shareholders like the Rockefeller family.
It doesn't take much to roil the markets, as Exxon found out last week. At the same time that it revealed gusher-level profits, it's stock took a dive. The reason: Exxon's oil production was down 10 percent, continuing a yearlong decline. It's unclear whether the company will continue to have difficulty finding sufficient new reserves to replenish the billions of barrels it is pumping out of the planet, but if the trend continues, Exxon could find itself in trouble.
It's not too late. By changing strategies, Exxon stands to capture a better foothold in the evolving energy market and a significant percentage of revenues that would otherwise be lost.
Experts believe that the most viable technologies for the near term — such as cellulosic ethanol, next-generation solar technology, and plug-in hybrid technology, along with copious amounts of energy efficiency — represent the future of energy. With the likelihood of such events as a carbon tax or carbon caps within the next decade, the conditions for market acceptance of lower-carbon solutions become more attractive. The concept of negawatt programs is gaining traction, with power companies investing in conservation (average cost of $350/kilowatt) over coal ($1,000/kilowatt). The emergence of small, lightweight, long-running lithium-ion batteries has helped create a market for notebook computers, cell phones, and other portable devices. Efforts to scale that technology for use in automobiles could do for that industry what improved batteries did for computer and phone companies, building a market for hybrid, plug-in, or electric vehicles with great efficiency, acceleration, and range — at the same price or cheaper than today's gas-powered vehicles.
It's not just technologies that are changing. So are markets. For example, until relatively recently, the distribution of gasoline has been controlled by entities with an interest in keeping alternatives out of the infrastructure — the oil companies. But Wal-Mart and other independent retailers with large fuel distribution networks are largely impartial to the type of fuel they carry, and their market reach to consumers can accelerate the growth of alternative products and infrastructure. Large fuel purchasers like the Defense Department are actively creating conduits for the market acceptance of oil and gas alternatives by encouraging economies of scale and increased R&D. There are other disruptive technologies on the horizon that could gain market acceptance, further dampening demand for oil and gas. By waiting for a single "breakthrough" technology, Exxon is overlooking that this sector is engaged in an iterative process that is building a new approach to energy applications; waiting for the perfect solution is a potentially dangerous approach, from a business strategy perspective.
The modern history of innovation suggests that being big is no assurance of survival. Consider that six of the thirty multinationals included in the Dow Jones Industrial Average 20 years ago are gone today (Allied-Signal, American Can, Bethlehem Steel, Texaco, Union Carbide, and Woolworth), and a seventh, AT&T, exists in name only, the original entity having been scattered into multiple companies. Several others — Eastman Kodak, IBM, Sears, and Westinghouse — look radically different today than then. In many industries, the dominant players not that long ago are gone. Burroughs, Data General, Digital Equipment, NCR, Sperry, Univac, Wang — all leading computer manufacturers of the 1970s and 1980s — are cases in point.
The Rockefellers' efforts are aimed at ensuring that Exxon doesn't follow this path, and that it will overcome its stubborn, decidedly non-green, outlook toward one that recognizes the realities of a world in which carbon and climate become significant business considerations.
Will the strategy work? The odds are long, but we'll know more after the company's annual meeting on May 28. If history is any indicator, Exxon is likely to downplay dissent in favor of its own hellbent course.
May 5, 2008 in Business Practices, Clean Tech, Money Matters | Permalink | Save This Page | Comments (6)
Where Are All the Clean, Green Jobs?
The promise of the green economy and the clean-tech revolution is that they will bring a new wave of job opportunities — productive and respectable jobs at every part of the economic spectrum, from line workers to senior managers. Nonprofit groups like the Apollo Alliance have made this part of their raison d'etre. A steady drumbeat of studies since the late 1990s has told us that burgeoning markets for solar, wind, clean transportation, and other technologies would represent the next big wave of job creation. Cities and states have been positioning to become clean-tech hubs, eyeing the workforce development potential. Organizations representing low-income populations have been viewing the green economy as an entry point for those near the bottom of the economic ladder.
So, now that clean technology and the greening of business seem to be in full swing, where are all the jobs? So far, they're nowhere in sight — at least not in any appreciable numbers.
The reasons are many and varied. Most of the big companies in the clean-energy business — the BPs, GE, and PG&E's of the world — don't seem to be going on hiring sprees, typically creating clean-tech business units from within. So, too, with much of the green business activity — it has to do with efficiency, with doing more with the same or fewer resources, and that includes human resources. Few of the start-ups are undergoing massive hiring, and when they do, they're more often in the market for engineers and other skilled professionals. And the jobs that are being created are disperse, geographically, meaning that there are few robust Silicon Valley-like clean-tech clusters, where companies congregate and jobs proliferate.
Despite such obstacles, there seems to be new energy building behind the notion of a Big Green Job Machine. Last week in Pittsburgh, for example, a Good Jobs, Green Jobs conference, organized by the Sierra Club and the United Steelworkers union, drew more than 900 people from business, government, nonprofits, academe, and labor unions to share strategies for increasing job opportunities in the environmental and clean-tech sectors.
There were about 8 million green jobs in the U.S. in industries that attracted $148 million in investment in 2007, up 60 percent from the year before, Lois Quam, managing director of alternative investments at Piper Jaffray, told the conference. I haven't yet seen the research on which this was based, but I'm intrigued. As I noted in our State of Green Business report, tracking green job creation has been difficult. One reason is that green jobs, at least by my definition, aren't often identified as such, and can be found throughout companies of all sizes and sectors. Does a procurement manager — whose job entails implementing her company's environmentally preferable procurement mandate, thereby seeking out and purchasing millions of dollars a year of recycled, energy-efficient, and other green products — count as a "green job"? What about the loading dock laborer whose job it is to make sure all packaging materials are recycled? Or the facility manager working to replace maintenance staples with green cleaning products? Are these counted among the "green jobs"? Possibly, but I doubt it.
Fact is, there's no good definition of "green job." Consider this report, released last week, by Raquel Rivera Pinderhughes, professor of urban studies at San Francisco State University. Titled Green Collar Jobs: An Analysis of the Capacity of Green Businesses to Provide High Quality Jobs for Men and Women with Barriers to Employment (Download - pdf), it focuses on opportunities in the San Francisco Bay Area. According to Pinderhughes,
Green collar jobs are blue collar jobs in green businesses — that is, manual labor jobs in businesses whose products and services directly improve environmental quality. . . . What unites these jobs is that all of them are associated with manual labor work that directly improves environmental quality.
Pinderhughes lists 22 types of green collar jobs, from food production (using organic and/or sustainably grown agricultural products) to furniture making (from environmentally certified and recycled wood), from parks and open space (maintenance and expansion) to printing (with non-toxic inks and dyes and recycled papers). It's a good list, but it doesn't seem to cover all that's out there.
Another report, Green-Collar Jobs in America's Cities (download - pdf), released for the Pittsburgh event, lays out steps for creating comprehensive green-collar job strategies at the local level. It also profiles some of the great work already underway around the country. The guide — published by Green For All, the Apollo Alliance, the Center for American Progress, and the Center on Wisconsin Strategy — focuses on local green jobs in clean energy industries: energy efficiency, renewable energy, alternative transportation, and low-carbon fuels.
Yet another new report, Greener Pathways, from the same consortium, profiles some of the best examples in the U.S. where work is underway to develop green jobs, including green construction career development in California, Iowa's biofuels job-training bonds, wind technician training in Oregon; and Pennsylvania's green re-industrialization.
It's all very encouraging, but it feels like there's one key group that's not yet at the table: companies. A look at the impressive speaker roster for the Pittsburgh event reveals only eight of 86 speakers from the private sector — and only three large companies: BP, Gamesa, and Johnson Controls.
Why aren't bigger companies more engaged? Do they not foresee a need for talent in this arena? Are their labor pools overflowing? Or are they simply not tuned in to the opportunity? Any ideas?
For now, groups like the Apollo Alliance and Green for All will have to go it alone, and they have their work cut out for them, helping to ensure, in the words of Green for All founder and president, Van Jones, that "the clean-tech wave lifts all boats." It won't be easy, especially without the active participation of companies in the clean and green sector.
As Jones told me recently: "The next set of challenges have to do with going from rhetoric to reality."
March 17, 2008 in Clean Tech, Trendwatching | Permalink | Save This Page | Comments (9)
Clean Energy Trends 2008
The latest annual edition of Clean Energy Trends has just been published. My colleagues and I at Clean Edge have identified five key trends affecting clean-energy markets and produced our annual forecast of markets for four clean-energy technologies. And, working with our partners at New Energy Finance, we've analyzed the investment trends of the past year.
As we point out in the free, downloadable report, 2007 was a very strong year for clean energy technologies, with no signs of a slowdown in 2008. That said, with all of the uncertainties facing the economy, there are some potential speed bumps. One of the biggest is whether and how U.S. policies will extend the production tax credits for wind and solar, both of which are expiring at the end of the year. If these credits aren't extended before they expire, we could see the growth of solar, wind, and other renewables come to a standstill in the U.S., much as markets for wind power did at the end of 2006, when those credits expired for several months. During that period, the wind market simply flatlined. According to research by Navigant Consulting, more than 100,000 jobs within the solar and wind industry are in jeopardy, if the same thing happens again.
The problem is that Congress, in its infinite wisdom, seems to have an appetite to extend tax credits for only two years. That's not long enough to do the long-term planning that any emerging industry needs to scale up.Critics of clean energy like to point out that without subsidies and regulation, clean-energy sources would never be getting a foothold in the market. But that misses an important and critical point: all energy technologies are subsidized - some to the tune of billions of dollars a year. What would happen to oil and gas prices if those industries had to do away with federal subsidies and tax credits (not to mention the costs of fighting wars in oil-rich countries).
The five trends we cover in this year's Trends report cover electric cars (how all of the action seems to be from smaller players, not the major automotive companies); sustainable cities (the emergence of new, fossil-fuel, carbon-neutral cities - in the Middle East, of all places); wind (how the U.S. market is being driven by foreign companies); geothermal energy (it is experiencing a global renaissance, particularly as large, utility-scale projects); and shipping (the new push to create cleaner oceangoing transport, including putting sails on freighters).
You can download the free report here.
March 11, 2008 in Clean Tech, Trendwatching | Permalink | Save This Page | Comments (0)
Google's $10 Million Search for the Keys to the Plug-in
Google today is launching a fascinating experiment in clean-tech investing in the form of a worldwide search for products, services, and technologies that can advance the market for plug-in electric vehicles. And it plans to invest a total of $10 million in the ones it likes.
The request for proposal just issued by Google.org, the company's philanthropic arm, invites "entrepreneurs and companies to show us their best ideas" with the aim of making "catalytic investments to support technologies, products and services that are critical to accelerating plug-in vehicle commercialization." Google.org says it will invest between $500,000 and $2 million in the companies it believes stand the best chance of advancing plug-in technology.
Think of it as "The Apprentice" meets "An Inconvenient Truth."
As the company explains in a "Googlegram" it distributed this morning:
We realize that this type of open call for proposals is not the usual model for investment, but we wanted to use a process that was open to new ideas and new entrants. Part of our goal is to get as many people as possible to work on solutions to our vehicle emissions challenges. We welcome and expect to receive submissions from a wide variety of companies -- from cutting edge battery technologies to innovative service businesses - and from companies of all sizes. We also encourage participants from all over the world to submit proposals. This is a global challenge, and it will take all of us to solve it.
Entrants are asked to submit a five-page proposal by October 15. Those entries selected will be asked to submit a more complete business plan, which will then go through the usual vetting and due diligence processes. (Read an FAQ doc here.)
Why the open RFP? "It is, admittedly, an unusual approach, but we felt as though we wanted to reach the largest number of people with potentially interesting products, services, or technologies that could advance plug-in vehicles," Dan Reicher, Director of Climate Change and Energy Initiatives at Google.org, told me earlier this week. "We felt these technologies, services, products need to be developed sooner rather than later given the climate challenge that we've got. We thought this would be an interesting way to get maximum response."
A worldwide competition for the chance to have Google invest two million bucks in your fledgling firm? "Interesting way," indeed.
As the Googlegram puts it:
This open RFP process is a new approach to mission-focused investing, and we're interested to see what we can learn from it, both in terms of opportunities and gaps that exist in this space today, as well as ways that we can improve on this solicitation process for future investments. Our focus on learning is the primary reason we decided to narrow this first RFP to investments in private companies, rather than a combination of grants and investments.
The RFP is the latest in a string of efforts by Google to advance electric vehicles. Earlier this year, Google.org launched the RechargeIT Initiative that aims to "reduce CO2 emissions, cut oil use, and stabilize the electrical grid by accelerating the adoption of plug-in hybrid electric vehicles and vehicle-to-grid technology." RechargeIT to date has focused on philanthropy, committing $1 million in donations to nonprofits, and has created a small demonstration project that, the company says, will eventually lead to 100 or more plug-in hybrids in Google's corporate fleet. In addition, the foundation is putting its money toward advocacy and policy matters related to growing the plug-in hybrid market.
So, how will Google vet what could be a tsunami of investment proposals? "We're going to take advantage of the talent we have here at Google," explains Kirsten Olsen, Project Manager for RechargeIT initiative. "We have a lot of people here who have experience either screening business plans or have worked for electric vehicle companies." Eventually, she says, they'll whittle down the initial pool and use Google.org's management team, along with outside advisers, to choose the company that will comprise Google's investment portfolio.
I suggested to Reicher the potential for Google.org to receive countless business plans from small, struggling players with little to offer beyond a promising idea -- the kinds of things that many of us working in this space see on a daily basis. "We're not looking to fund research," he replied. "We're looking for commercially viable products, services, and technologies." On the other hand, he said, "some of these may look like earlier-stage ventures."
In the end, Reicher emphasized, these are investments, not grants. "We're going to put money to work in an equity-like way and expect to make something on it." But it's clear that making the most bang for the buck is not Google.org's mission. And, in Google's typically quirky way, there's a significant fudge factor here: Google.org isn't committed to how much it will actually invest -- "we could invest less than $10 million, we could invest more," says Reicher. It doesn't have any goals to actually make money, though it could easily do so if any of the investments take off. Instead of setting out internal rates of return, he says, "We have a specific problem we're trying to solve."
It will be interesting to watch, both to see what products and services eventually come out of this quirky experiment, but also how much the RFP investment approach itself is replicated by others. On the one hand, it seems obvious to invite the best and the brightest to compete for a relatively small but meaningful pool of money. On the other hand, like so many of Google's other innovative initiatives, no one has done this kind of thing before -- or at least done it well.
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September 12, 2007 in Clean Tech, Climate Change, Money Matters | Permalink | Save This Page | Comments (6)
Capturing the 'Clean Tech Revolution'
The drumbeat of news stories, events, and other developments focusing on clean technology seems to gain strength every week. There are countless billions being invested each year in clean energy technologies, as well as technologies that more efficiently create clean water, advanced materials, or alternative transportation. The growing number of websites and magazines seem to capture pieces of the puzzle, but it's easy to miss the enormity of the clean-tech world.
A new book, written by my colleagues Ron Pernick and Clint Wilder, manages to capture the big picture, as well as many of the salient details.
Pernick is co-founder and principal at Clean Edge, Inc., the clean-technology research and publishing firm (full disclosure: I am Ron's partner and co-founder). Wilder is a contributing editor to Clean Edge publications. Together, they have penned The Clean Tech Revolution: The Next Big Growth and Investment Opportunity, just published by Collins. If you want to get the authoritative lowdown on the clean-tech marketplace -- what it is, who the players are, and where it's going -- this is the one book you need to read.
The book's ten chapters cover the major clean technologies -- solar, wind, biofuels and biomaterials, green buildings, transportation, smart grid, mobile technologies, and clean water technologies. Each chapter gives a you-are-there feeling -- the authors traveled the U.S., China, and beyond to examine the field firsthand -- and offers mini-profiles of leading companies in each technology.
The final chapters look at the job-creation potential of clean technology, and some of the marketing challenges clean-tech companies face (they're not that different from challenges encountered by all green marketers). And, finally, a six-point action plan on how to build a clean-tech future.
It's an easy read, written by two true experts in the field. I encourage you to check it out.
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June 21, 2007 in Clean Tech | Permalink | Save This Page | Comments (1)
Wal-Mart's Solar Play
Wal-Mart has announced the results of the request for proposal it issued in December to put solar panels on the roof of its stores. The winners -- notified a couple weeks ago but made public today -- include BP Solar, SunEdison, and the PowerLight division of SunPower. The three were culled from the eleven proposals the company received.
All told, the combined contracts represent only a fraction of the potentially 340 stores covered by the request for proposal: just 22 stores in California and Hawaii. The original request asked for bids to cover stores in five states. In the end, the numbers didn't work for the others. "The expectation was that this had to be good for both the environment and the business," Kim Saylor, Wal-Mart's VP Energy, told me. "We couldn’t pay a premium for solar energy."
Saylor emphasized that Wal-Mart views this as a pilot for a potentially larger solar roll-out. "We will learn from these sites and also with our experimental stores in Aurora [Colo.] and McKinney [Tex.]. "To meet our 100% renewable goals, we have to look at all the opportunities."
Exactly what future "opportunities" might be is a big question. Clearly, more solar photovoltaics are in order. But Saylor says the company is looking at "all the things you'd expect," including wind, biomass, solar thin film, solar concentrators, even solar farms. The retailer already runs its own energy utility, Texas Retail Energy, which currently sells energy only to itself, but it's not inconceivable that one day we might find ourselves buying kilowatt-hours from the world's biggest retailer, presumably at the "lowest price."
For now, it's a modest first step in solar. "This whole process has been exciting for me and our team," says Saylor. And while the process of weighing proposals may have taken somewhat longer than expected, she says, "This whole process has been exciting for me and out team."
She added, with perhaps a tad of understatement: "Now the hard work begins."
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May 8, 2007 in Business Practices, Clean Tech | Permalink | Save This Page | Comments (2)
The Automotive X Prize: Ladies and Gentlemen, Start Your Ingenuity
The Automotive X Prize is coming out of the gate this week, a high-profile competition aimed at jumpstarting the somnolent automotive industry to produce high-mileage vehicles, and lots of them. The Draft Competition Guidelines, released today at the New York Auto Show, describe the myriad criteria the cars must meet -- performance, fuel economy, emissions, creature comforts, and all the rest.
Getting the competition rules right has been a mammoth job to date. I've had the privilege of playing a small supporting role as one of two dozen advisors to the competition. It's been a fascinating process, and what shows up in the 1-page Competition Guidelines Overview (Download - PDF) and the detailed, 37-page Draft Competition Guidelines (Download - PDF) belies the many debates that ensued and the dozens of good ideas that, by necessity, were left on the shop floor.
First, the basics. The Automotive X Prize (AXP) has been developed by the X Prize Foundation, the folks behind the $10 million Ansari X Prize that successfully challenged teams to build private spacecraft to open up the space frontier, among other competitions.
This time around, the goal is more down to earth: design and build super-efficient, production-capable vehicles that exceed 100 miles per gallon or its equivalent. There are two vehicle classes: "mainstream" vehicles must carry at least four passengers and have at least four wheels; "alternative" vehicles must carry at least two passengers with no minimum wheel requirements. Both classes have the same requirements for fuel economy and emissions, though they have different design constraints.
The winner of the multi-million-dollar prize (the amount is still to be determined) will be judged not just on the car's design and its performance, but a business plan that shows that the car can be manufactured profitably in volume, and with the comforts and features that consumers want. The winning team will have to compete in two races that showcase the car's speed and handling, as well as all of its performance characteristics, including high fuel economy and reduced emissions.
In other words, this isn't about designing concept cars or other such science projects. It's about bringing to market comfortable, affordable vehicles that can be built using current technology and sold successfully to today's consumers.
Designing such cars won't be easy, but neither was the process of designing the competition, which took place over the past year.
"The axioms we began with were that 'the technology exists' and 'the market must be a central determining actor in awarding the prize,'" Mark Goodstein, the Auto X Prize (AXP) executive director, recalled last week. The first big idea was that the prize would be a sales race -- a competition to see who could sell the greatest number of the most efficient vehicles. But that led to a number of complex issues. For example, a sales race would favor companies that had existing sales channels and marketing budgets, leaving smaller companies in the dust. And what happens if a company sold cars for little or no profit? Again, this could favor large, well-financed companies that could afford to absorb a loss (much as Toyota did for years with the Prius).
"We couldn't come up with a mechanism to get over all the objectives," Goodstein told me. "So we abandoned it."
Sustainability was another challenge -- whether and how to consider the cradle-to-cradle impacts of the materials and manufacturing processes used by the competitors. This turned out to be another complex issue. For example, it was determined that any cradle-to-cradle criteria would likely burden smaller players who don't have extensive procurement departments or dedicated sustainability staff. "We realized, after talking to some start-up owners and the [big automakers], that this would put the start-ups out of business," says Goodstein. In the end, AXP decided not to focus on the environmental details of vehicle production, recycling, and destruction.
There were still other challenges: what metric to use (fuel economy, fuel cost per mile, etc.) in designing the goal; which fuels would be allowed; and how to measure the carbon equivalency of different fuels -- gasoline, biofuels, electricity, hydrogen, and combinations thereof. None of these is an exact science, and each required a great deal of back-and-forth discussions, not to mention more than a little number-crunching.
"We've created and thrown out all sorts of guidelines," says Goodstein with a sigh.
Perhaps most contentious was AXP's decision to cap fuel economy at 100 miles per gallon equivalent (MPGe). Why 100? Why not, say, 150? Goodstein admits that 100 is a "nice round number," but beyond that is another calculus: going beyond 100 MPGe creates diminishing returns and increases the chances that the resulting car designs won't be very appealing.
As the Draft Guidelines explain:
At 20 MPG, it takes 5 gallons to go 100 miles. At 100 MPG it takes 1 gallon so you save 4 gallons. Double it to 200 MPG and it takes 1/2 gallon, so you save only 1/2 gallon more. In fact, an 80 MPGe vehicle achieves 94% of the energy savings as a 100 MPGe vehicle.Thus, for example, achieving 150 MPGe offers only a relatively modest increase in fuel saved, but likely at the expense of the features, performance, and safety that are needed to make these cars attractive to consumers.
Not everyone agreed, countering that every gallon of gas and barrel of oil saved is important, and that the 100 MPGe cap could stifle breakthrough ideas and designs. But in the end, AXP chose the nice round number.
Some of these issues will be mitigated in what's being called the AXP Awards, a still-evolving series of J.D. Power-like awards to recognize such achievements as highest fuel economy, lowest carbon emissions, and most sustainably manufactured vehicle. These would at least acknowledge extraordinary cars and technologies, even if they don't win the grand prize.
There are miles to go before all this plays out, of course, the first step of which is the 60-day comment period for the newly minted Guidelines. Based on public reaction, they could be revised, or even overhauled.
Will it all be worth the effort? Goodstein and his team are convinced that AXP will lead to dozens of new car designs, many of which will go into production, helping to influence the $1.5 trillion spent annually to build cars. And that the AXP logo that finalists will be allowed to use will be a marketable badge of honor that will help innovators succeed on the showroom floor.
They also point to the salutary effect all this can have on the future of car designs. One inspiration for the original Ansari X Prize was the Orteig Prize in 1919, which offered a $25,000 bounty for the first aircraft to fly nonstop from New York to Paris. A 25-year-old named Charles Lindbergh won that race in 1927, and within 18 months the world saw the number of aircraft increase fourfold and airline passenger traffic increased 30-fold, with concomitant take-offs in the numbers of airports and pilot licenses.
Will the Automotive X Prize similarly lead to sales of high-mileage vehicles soaring to new heights? This time, the race isn't simply to more efficiently traverse our planet, but possibly to save it altogether.
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April 1, 2007 in Clean Tech, State of the Art | Permalink | Save This Page | Comments (4)
Clean Energy Trends 2007
The clean-technology revolution continues apace, with each week bringing a new and exciting development, it seems. Over the past year, we've seen an explosive growth in new investments in renewable energy and other clean technologies, from venture funds, investment banks, pension funds, governments, and, of course, corporations. As I've previously pointed out, a diverse range of large companies now find themselves in the energy business, with more entering the field. And, of course, there's the long list of start-up companies, each with an implicit promise to address our global environmental, security, and energy challenges -- and create jobs and investment returns along the way.
Just today, Bank of America added to the mix, committing a whopping $20 billion over ten years toward "environmentally sustainable business activity to address global climate change," as the company put it. Undoubtedly, some billions of this will go to support clean technology companies.
It's in this supercharged atmosphere that my partners at Clean Edge and I have just published Clean Energy Trends 2007, the sixth in our annual series. Each year, we track the growth of benchmark clean-energy technologies, forecast their market size a decade hence, and identify five key trends we believe are worth watching. We also feature an assessment of venture capital trends in energy tech, courtesy of our colleagues at Nth Power.
You can download this year's free report here (registration required).
Clean Edge has been tracking the clean-energy sector since 2000. At that time, the markets for solar photovoltaics (PV) and wind power represented annual global revenues of just $2.5 billion and $4 billion respectively. Six years later, these two industries combined equal more than $30 billion in annual revenues, a roughly fivefold increase.
Indeed, PV and wind have become big business. GE's wind division now sells around $3 billion in wind turbines annually (up from $2 billion last year) and Sharp, the world's leading manufacturer of solar PV modules, now racks up more than $1 billion annually in PV sales.
In this year's report, we project that:
As usual, we identify five noteworthy trends. For 2007, they are:
You can read more about each of these in the full report.
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March 6, 2007 in Clean Tech, Trendwatching | Permalink | Save This Page | Comments (4)
California's Bold STEP Toward Sustainable Mobility
For all the recent attention being given to alternative-fueled vehicles -- the Prius, Tesla, Volt, and all the rest -- very little has been given to the larger system of mobility in which such vehicles must operate. What is the role of engineers, planners, architects, designers, and others in creating more sustainable transportation systems, not just greener vehicles? After all, if we're commuting long distances or are stuck in endless traffic jams, even the cleanest cars won't help us much.
I addressed some of these questions earlier this month at a panel I moderated at a conference on Designing Sustainable Mobility at the Art Center College of Design in Pasadena, Calif. My panel focused on "creating new business models and incentives that drive innovation in sustainability," as the program put it, and included innovative thinkers on both the design of cars, but also the larger communities in which they must drive and thrive. It was an engaging hour, to say the least.
One subject we didn't adequately cover is the role of policymakers in encouraging and supporting sustainable transportation systems. After all, we've seen how federal and state policies can be a drag on clean-tech innovation through perverse incentives that discourage energy efficiency and clean-energy generation. What would a policy framework promoting sustainable mobility need to look like?
As it has in so many other things green, California is leading the way, in the form of a little-noticed study published recently by a little-known group called the California Secure Transportation Energy Partnership, or CalSTEP.
The group -- a diverse partnership of industry, government, academic and nonprofit leaders, from automakers to conservation groups, including former Secretary of State George Shultz -- was convened by CALSTART, an independent group of companies and agencies "dedicated to expanding and supporting a high-tech transportation industry that cleans the air, creates jobs, and improves energy efficiency."
CALSTART created CalSTEP after two state agencies, the California Energy Commission and the Air Resources Board, set strong goals for petroleum reduction in the state but didn't necessarily provide guidance on how to get there, John Boesel, CALSTART's CEO, told me recently. An action plan was needed. The goal, he said, was to "create a framework under which the private sector can thrive."
The resulting 80-page plan (Download - PDF) targets three key areas where the state can take action to secure its energy future: increasing vehicle efficiency; diversifying the state's fuel supply; and reducing the overall need to drive. It offers ten key "action recommendations" to achieve the overall goals of reducing petroleum use by 15 percent and increasing alternative fuel use to 20 percent. It's the most comprehensive and best-thought-through plan I've seen on how government and the private sector can work synergistically to promote clean technology while creating jobs and a cleaner environment.
At its core are three principal actions that represent the bulk of the benefits in terms of reducing petroleum use and cutting global warming emissions. They also represent a blueprint every state should consider to support the growth of local clean and green technologies.
Alternative Fuel Portfolio Standard (AFPS) - a market-based approach for increasing alternative fuel use through fuel blending, dedicated use, and/or credit trading. Goals would be 10% alternative fuels by 2012 and 20% by 2020. Smart Communities - a program to spark more transportation energy efficient community design and development that sets goals for reducing vehicle miles traveled (VMT) by 10% by 2020 in California's urban regions and rewards communities who achieve who this goal. Energy Security Tax Relief and Realignment (ESTRR) - a program to help protect Californians and investors against foreign oil price volatility and gaming that would use a revenue-neutral foreign oil security fee coupled with a rebate to all taxpayers to encourage the long-term production of and investment in efficient vehicle technologies.
Suffice to say, it's a big improvement over simply advocating an ambitious and doubtful Hydrogen Highway.
I asked Boesel if the final plan represented everything he would have hoped. "We'd like to have seen more done to encourage efficiency within the automotive sector," he responded. "However, that is really the purview of the federal government. The Alternative Fuel Portfolio Standard, which is very similar to the Governor [Schwarzenegger]'s Low Carbon Fuel Standard, is a key new policy that should really have an impact. We're also seeing climate change and energy security as two new drivers that may help advance the smart-growth agenda. Much can be done with the vehicles and fuels, but all of the partners agreed that we need more land-use planning and transit policies that reduce the use of oil."
Ah, yes: land-use planning and transit policies -- the overlooked stepchild of most green transportation plans. They seem too often to slip between the cracks: the oil and automobile companies never seem to talk about them, and they are rarely discussed by policymakers or environmentalists as cures for our "addiction to oil." And yet there is no end of smart policies to consider. (You can find a great list of them here.)
For now, the CalSTEP action plan is the best thing going -- a comprehensive set of actions for getting sustainable transportation going in the right direction.
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February 25, 2007 in Clean Tech, State of the Art | Permalink | Save This Page | Comments (3)
Tapping into the Clean-Tech Job Machine
For the past few years, U.S. cities, states, and regions have been vying to harness clean technology as an engine for economic and workforce development -- in short, a job machine.
With good reason: Such companies -- building, marketing, and servicing the next-gen clean-energy, alternative-fuels, sustainable mobility, and advanced materials companies -- represent highly desirable neighbors. They employ technical and other skilled workers, often have blue-sky growth potential, tend to be less-polluting than other industrial companies, and are engaged in the highly regarded task of helping build a greener economy. Not only do they create jobs, build local economies, and generate tax revenue, they also create good P.R. for their host cities and regions.
And so mayors and governors (if not presidents) have become increasingly aggressive in courting clean-tech companies.
But how well are they doing? Measures of success to date have been largely anecdotal -- there aren't yet any economic metrics I know of that track clean-tech's region-by-region economic impact. But some new research by SustainLane Government, which helps state and local agencies track best practices, rates the top five U.S. cities for clean technology. It assessed each region's start-up or advanced-stage venture capital and investor network access; academic or federal research lab collaboration; and active state or local government participation (field testing, prototyping, and pilot programs) and incentives.
Who rated well? The results weren't entirely surprising to those of us who've been tracking the fast-growing clean-tech sector, but it still offers a useful baseline of where the action is. The top five include Austin, Texas, home to a robust clean-energy incubator; San Jose, Calif., which also boasts an incubator and is on the cusp of Silicon Valley, where venture capitalists are pouring tens of millions into clean-tech companies; Berkeley, Calif., which just landed a $500 million biofuels research lab; Pasadena, Calif., home of Caltech, IdeaLab, and other incubators of clean-tech companies; and the greater Boston area, the second-biggest hotbed of clean-tech VC activity, as well as the home of MIT and other great institutions.
Runners up included San Francisco, New York, Seattle, San Diego, and Houston.
I wasn't surprised that the San Francisco Bay Area was so well represented, but was curious why the Pacific Northwest didn't make the list. I've been watching a host of clean-tech firms spring up around Portland and Seattle, including some big biofuel companies. "Seattle was close," Warren Karlenzig, SustainLane's Chief Strategy Officer, who wrote the report, told me this week. He mentioned Seattle Biofuels and the 2.5 percent 2008 statewide mandate for biodiesel as drivers for future growth in alt fuels. The Seattle area also has Prosperity Partnership through Puget Sound and Portland's Development Commission is investigating clean tech-potential. "There is, however, currently a lack of significant city involvement in the Northwest, with universities and federal research laboratories in clean tech," he noted, though acknowledging that this is starting to change.
"The key ingredients came down to money, brains, networking opportunities, and practical testing opportunities," said Karlenzig. It was also the presence of venture networks for funding and networking, top-rated university or federal research labs involved in clean-tech collaboration, and engineering knowledge networks, he said.
But it's more than that, as my Clean Edge team found out a couple years ago, when we helped San Francisco Mayor Gavin Newsom understand what it would take for his city to become a clean-tech magnet. We came up with ten recommendations for the mayor, most of which are transferable to other cities and regions. (Over the past two years, San Francisco has adopted nearly all ten of these, including creation of a Clean-tech Advisory Council, on which I sit.) You can view the 2004 recommendations here, along with a 2005 subsequent progress report here.
It's a model worth considering by any city, state, or region seeking to exploit the new clean-tech opportunities -- and, perhaps, make SustainLane's leadership list in the future.
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February 16, 2007 in Clean Tech, State of the Art | Permalink | Save This Page | Comments (6)
The Paradox of 'Climate Profiteers'
You gotta love the conservative media. They'll grasp any available straws, however thin, to pooh-pooh climate action. For most of the past two decades, of course, the complaint was that any effort to stem greenhouse gas emissions would ruin the economy, forcing big business to all but fold up their tents and the global economy to go down the tubes.
Now that a growing corps of corporations are mustering the moxie to actually view climate change as an opportunity as well as a challenge, the complaint is something entirely different:
Big business is engaging in climate profiteering!
Hardy thanks to Wall Street Journal columnist Kimberly Strassel for unwittingly providing my Friday morning entertainment with her essay bemoaning self-serving corporate action on climate change. The news hook was last week's announcement of the U.S. Climate Action Partnership, a coalition of Big Business and Big Green calling on Congress and the Bush administration "to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions."
Clearly, such collaboration in the name of climate change was more than the Journal's editorial board could bear. Strassel took issue with the ten companies (the number has since grown) present at the creation of this new group:
Four of the affiliates -- Duke, PG&E, FPL, and PNM Resources -- are utilities that have made big bets on wind, hydroelectric, and nuclear power. So, a Kyoto program would reward them for simply enacting their business plan, and simultaneously sock it to their competitors. . . . DuPont has been plunging into biofuels, the use of which would soar under a cap. . . . Caterpillar has invested heavily in new engines that generate "clean energy." British Petroleum is mostly doing public penance for its dirty oil habit, but also gets a plug for its own biofuels venture.Finally, there's General Electric, whose CEO Jeffrey Immelt these days spends as much time in Washington as Connecticut. GE makes all the solar equipment and wind turbines (at $2 million a pop) that utilities would have to buy under a climate regime. GE's revenue from environmental products long ago passed the $10 billion mark, and it doesn't take much "ecomagination" to see why Mr. Immelt is leading the pack of climate profiteers.
Shame on all you corporations! Shame for making money while doing the right thing! Shame for doing well while doing good! What were you thinking?
The Journal, of course, is being absurd, not to mention hypocritical. I'd be shocked if any members of its editorial board ever deigned to criticize "war profiteers," "Katrina profiteers" or "health care profiteers," never mind the windfall profiteering of Big Oil or Big Pharma.
The reality is that a good many large corporations stand to gain mightily from likely and imminent U.S. national climate policies, however timid they may be. We've already seen that in Europe, where the EU's Emissions Trading Scheme has produced winners (and losers). And in the be-careful-what-you-wish-for category, some of these companies aren't, suffice to say, environmentalists' heroes.
All of which is driven home in a recent investment advisory from Citigroup Research, part of the Citigroup financial empire. The 120-page report, titled "Climatic Consequences" (Download - PDF), by Edward M. Kerschner and Michael Geraghty, discusses "the investment implications of a changing climate." It is, in my opinion, one of the more sober and succinct discussions of the how companies will be affected, positively and negatively, as the impacts of climate change accelerate -- along with the market and political changes aimed at minimizing them. I recommend it highly to anyone interested in business and climate change.
Kerschner and Geraghty offer up dozens of companies that are well positioned to do business in a climate-constrained world. The companies will benefit from three different implications of climate change:
(You can view an 11-minute interview with Kerschner, chief investment officer at Citigroup Investment Research, discussing his report here. You'll need to endure a 15-second commercial before it begins.)
As I said, the 74 companies named by Citi as positioned to benefit from climate change trends aren't all darlings of the environmental set. True, the list includes more than a dozen companies in the solar, wind, and biogas energy business (such as Conergy, Evergreen Solar, Ormat, Q Cells, and SunPower), but also utilities dependent on nuclear power (Constellation Energy, Electricité de France, Entergy, Exelon), which "are well positioned in the long run, compared to operators of 'dirty' coal-fired plants." And biotech companies like DuPont, Monsanto, and Syngenta, whose products "offer the potential for greater ethanol yields." Some of the companies operate largely behind the scenes, less familiar to the public, such as BorgWarner, whose key products offer the benefits of higher fuel efficiency and lower emissions from internal combustion engines; Johnson Controls, which operates in automotive and building efficiency; and Emerson, whose business units offer a wide range of energy-efficient technologies.
Whether such companies garner obscene profits from solving climate problems remains to be seen, of course, but Citigroup's intention of bringing these companies to investors' attention makes perfect sense. Environmentalists and regulators similarly stand to gain from this report, as they come to grips with this brave new world of "profiteering," in which companies offering climate solutions are rewarded in the marketplace. And maybe some conservative media folks will learn something, too.
In her WSJ essay, Kim Strassel warns that the current wave of climate profiteering is merely a sign of what's to come. She notes that
Democrats want global warming as an issue through 2008. With Al Gore getting his Oscar nod, they've got a "problem" that captures the public imagination, as well as an endless supply of cash from thrilled environmental groups. No need to spoil it with a solution. And a Democratic president in 2009 would be more open to any ultimate legislation.Best yet, they've got the "support" of the business community, or at least the savvier elements of it. Welcome, Big CarbonCap; we're likely to be hearing a lot from you.
I can only hope her worst fears come true.
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January 28, 2007 in Clean Tech, Climate Change | Permalink | Save This Page | Comments (18)
Is GM Reviving the Electric Car?
In November, General Motors chairman Rick Wagoner made a rather provocative statement. In a speech to kick off the Los Angeles Auto Show, he said, "At GM, we believe tomorrow's automobiles must be flexible enough to accommodate many different energy sources. And a key part of that flexibility will be enabled by the development of electrically driven cars."
Was GM "unkilling" the electric car?
That seems to be the case. This weekend, at the North American International Auto Show in Detroit, where this is being written, GM (which is a client of the sustainability strategy firm GreenOrder, with which I am affiliated) unveiled what might be called "EV2": E-Flex, a platform of plug-in electric vehicles that are able to recharge via a small, efficient engine that can burn anything from gasoline to biofuels to hydrogen.
The first model in the E-Flex series, the Chevy Volt (pictured here), works something like this: You can drive it in pure electric mode for about 40 miles, after which it needs to be recharged, via a standard 110-volt outlet. So, if your commute is typical -- 78% of U.S. households drive under 40 miles a day, according to GM -- you'll rarely have to rely on additional fuel. However, if you drive more than 40 miles between charges, the supplementary engine kicks in. Unlike, say, a Prius, in which the engine sends power directly to the wheels, the Volt's engine is used only to recharge the battery. That extends the range of the Volt to about 640 miles, giving the car the equivalent of about 50 miles per gallon of gasoline (or many times that, if you're using E85 or any other non-gasoline fuel).
That all sounds pretty good, you're likely thinking. So, when can you buy a Chevy Volt? Well, you can't. You see, it's just a concept car.
Like many of the coolest cars on display at the COBO Center here in Detroit, the Volt is not yet for sale. And GM isn't officially saying when you'll be able to find a Volt in your local Chevy showroom. (Unofficially, I'm told that GM is racing to get it out by the end of the decade.)
The barrier is the battery: there is none yet available that meets the Volt's technical requirements. That's changing, albeit slowly. More than a score of companies are developing batteries for electric vehicles. Just last week, GM announced that it awarded contracts to two suppliers to design and test lithium-ion batteries for use in the Saturn Vue Green Line plug-in hybrid SUV that is under development.
(Battery technology turns out to be incredibly complex, as evidenced by the explanation I received from my colleague Michael Millikin, who runs Green Car Congress. "The battery systems for the first production plug-in hybrids and electric vehicles depend on the interrelationship of a number of factors," he began, "but basically boil down to cell optimization for a given category of application and battery system design for the application." I admit to getting lost after that. You are encouraged to visit his fine site for more on the topic.)
Could GM release an interim version of the Volt before it had the perfect battery? Some would like to see that. For example, Felix Kramer of CalCars.org, who is readying a campaign to put 1,000 plug-in hybrids on California roads (not unlike GM's Project Driveway, which will be putting 100 hydrogen fuel cell vehicles on the road starting later this year). Kramer says interim demonstrations can drive innovation and refine plug-in vehicles as well as "show America and the world what's possible now."
For their part, the folks at GM -- who, only a year or so ago were fairly despondent about the prospects of ever establishing GM as a player in the green arena -- are practically giddy about the Volt announcement, and the resulting positive media coverage. They view E-Flex and the Volt as a potential turnaround technology for the company, which until relatively recently hadn't had many good, green stories to tell.
"We wanted to show our overall commitment to environmental excellence," Beth Lowery, GM's vice president for environment and energy, told me after the Volt event. "We’ve been working on it for decades, but nothing was showing through. I think this really broke through. This allows people to take us seriously."
But it's not just GM singing its own praises. At the Volt launch, l ran into Chris Paine, producer of the documentary Who Killed the Electric Car? During the Volt launch event, I couldn't help but note Paine's rapt attention and enthusiastic applause. I caught up with him afterwards to get his reaction and he was positively ecstatic. "I think it's fantastic," he responded. "This is better than any award I could ever get as a filmmaker."
Paine says he's currently working on a sequel to his movie, about who's reviving the electric car. This time, I'm guessing, GM could be the hero, not the goat.
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January 7, 2007 in Business Practices, Clean Tech | Permalink | Save This Page | Comments (29)
Top Green Business Stories of 2006
It's that time again -- a time of "bests," "worsts," and "top tens" from the year just passed. I'm happy to jump into the fray, having just reviewed more than 500 news and feature stories we ran on GreenBiz.com and its sister sites during 2006. That little trip down Memory Lane presented an opportunity to see shapes as well as details -- to observe the trends that emerged or accelerated during the year in the area of business and the environment.
In choosing the year's Top Ten, it would have been easy to home in on the headline-grabbers: our addiction to oil, An Inconvenient Truth, the Stern Review -- oh, and that U.S. election in November. All critical developments, to be sure. But I prefer to focus on how companies are responding to these and other developments -- and leveraging them to derive business benefit and leadership status.
The quick summary: While a couple of new issues or companies gained traction last year, 2006 did not offer any sea change in how companies are addressing environmental challenges. Rather, the year saw a continuation of existing trends: big companies moving in the right direction, but most having a long, long way to go.
I supposed that's all one can expect from the mainstream business community: a gradual, incremental transition to more sustainable policies, products, and practices -- not breakthrough, disruptive change. A boy can dream, though.
Herewith, in no particular order, are my picks for oh-six:
1. Wal-Mart Goes from Zero to Hero
If you've been reading these pages lately, you've seen a succession of stories about Wal-Mart's environmental commitments: its efforts to reduce the toxic ingredients of the products it sells; its five-year plan to reduce packaging; its commitment to green its textile supply chain; its pledge to sell 100 million compact fluorescent light bulbs in 2007; its potentially ravenous appetite for solar; and more.
I'll be honest: I didn't see it coming. The green utterings (PDF) of the company's CEO, Lee Scott, notwithstanding, it was hard to imagine that this much-maligned, seemingly intransigent company could change much, if at all. But I'll be the first to give credit where it's due. Wal-Mart -- like Nike, Starbucks, McDonald's, and several other corporations prodded toward sustainability by activists -- seems hellbent to be a leader, and appears to be putting its considerable heft behind that notion. And there's much more to come, I've been told by several of the consultants, enviros, and others that have been spending more time than they ever imagined in Bentonville, Arkansas.
To be sure, Wal-Mart is far from green, and it has other issues -- labor, community, etc. -- to clean up before it can be considered a truly "good" company. But over the past year, I've found myself fascinated with the conversations taking place in Bentonville. And if Wal-Mart can embrace green, it feels like anything is possible.
2. Alt-Fuel Vehicles Get in Gear
Just one year ago, it didn't feel like there was much hope for alternatively fueled vehicles, notwithstanding a handful of hybrids and a few bold but hopelessly miniscule companies seeking to create a market for small commuter cars and other niche products.
But seemingly out of nowhere, alt-fuel vehicles have gotten traction. And while it may not yet have hit the fast lane, it's at least moving in the right direction. General Motors began the year with its Live Green, Go Yellow campaign, along with a larger effort to help grow a "flex-fuel" infrastructure. It seemed to garner a measure of eco-cred that the company hadn't seen in quite a while. Of course, many people are asking tough questions about the viability and sustainability of a corn-based fuel supply -- and debating when alternatives to corn could be ready for market. Still, the quest for the "flex-fuel freeway" is in forward gear.
But a funny thing happened on the way to the pump: without a lot of fanfare or hype -- indeed, with some initial resistance from Big Auto -- the notion of the electric vehicle, which some had famously considered to have been killed, started showing signs of life. Starting with hobbyists and tech-geeks, then spreading to venture-backed companies like Tesla Motors, plug-in electric vehicles became the talk of Detroit, Tokyo and beyond. By year's end, Toyota and GM had both announced plans to introduce plug-in hybrid-electric vehicles, and the electric car seemed like it might be on the road to recovery.
3. Carbon Neutral Brings Hope and Hype
In the be-careful-what-you-wish-for category, "climate neutral" became the word of the year for 2006. That's good news, of course: the notion of offsetting or zeroing out one's climate footprint has long been a dream of environmentalists. But the word gained such popularity, with no clear guidance over its use, that it became -- well, not exactly full of hot air, but close.
Everyone and everything, it seems, went climate neutral last year: cars, fuels, vacations, corporate headquarters, flowers, musical acts, major sporting events, even large multinational institutions.
But what does it all mean? The onset of offsets has led to growing scrutiny by climate experts, activists, and others about how to define "carbon neutral" (or what to even call it) and what standards companies and others seeking that lofty status should meet. It's controversial stuff, to be sure, and the debates will only become more heated as more companies offering carbon-neutral services enter the field -- and more of their customers hype their carbon-neutral achievements. With offsets expected to become big business, this will be one hot topic for the foreseeable future.
4. Financial Sector Takes on Climate
"Follow the money," goes the classic movie line, and if you want to see who's driving corporate action on climate change, that's exactly what you need to do.
With climate change increasingly seen as a serious risk to insurers, that industry last year ramped up its efforts to fully understand and address those risks, along with the inherent opportunities. The U.S. association of state insurance commissioners launched a task force to examine how climate change may affect the availability and affordability of insurance. A few companies began to introduce innovative products and services, such as carbon emissions credit guarantees, or rate credits and other incentives for commercial building owners who re-build damaged properties to LEED-certified standards. A Japanese insurer, Tokio Marine & Nichido Life, took it upon itself to reforest more than 7,500 acres of mangroves in Asia to minimize losses from rising cyclone-related risks.
It wasn't just the insurers. The smart money on climate seems to be moving in the direction of large investment firms, which are beginning to see climate as a driver of risk and opportunity for publicly traded companies. Barclays, Citigroup, Credit Suisse, Goldman Sachs, HSBC, and Swiss Re -- financial giants all -- stepped up efforts to integrate climate change into their lending policies, investment portfolios, or overall strategy.
And where the money goes, as Deep Throat taught us, politicians are sure to follow.
5. Investors Flex Their Muscle on Climate
In some ways, banks and insurers are the least of it. Shareholders -- specifically, large institutional investors like pension funds and university endowments -- are emerging as the real power brokers in the climate arena. Last year, the Carbon Disclosure Project, a coalition of institutional investors with more than $31.5 trillion in assets, pressed big business to disclose corporate risks and opportunities associated with climate change. Much of this was done under the leadership of the nonprofit group Ceres, which began ranking the top 100 global companies on how climate change will impact them -- whether from expanding greenhouse gas regulations, direct physical impacts, or surging demand for climate-friendly technologies.
The leading investment firms are jumping in, too. Merrill Lynch, for one, issued a report profiling seven companies it believes are best positioned to capitalize on what it calls the "clean car revolution." Citigroup, JP Morgan Chase, and Morgan Stanley also published research reports analyzing the financial performance of the carbon markets, sometimes identifying who's naughty and nice -- that is, the leaders and laggards in their various sectors.
That kind of involuntary disclosure from the investment community may be exactly what