Like it or not, most decisions today are based on economics. It’s the way our system is put together and it has been, in many ways, successful in generating innovation and prosperity, for many if not for all. That fact is not one that is likely to change easily, though the system’s shortfalls are beginning to show up like cracks in a once impenetrable façade. Prominent questions that arise, for anyone when pondering a choice, whether it’s an individual or a large company, tend to fall along the lines of:
- Can I afford it?
- Is it a good investment?
- Will taking this action lead to more prosperity?
When we talk about large-scale change, we can talk about two kinds of change — one that works within this paradigm, or one that challenges it. I’m not here today to argue the respective benefits of each, but instead to acknowledge the fact that working within the system, if possible, has distinct advantages, given the deep interdependencies between the financial world and the world at large.
So, within this context, looking at an issue like climate change and the large-scale actions required to adequately address it, the question of whether these actions can have an economic upside is critical. If we had to rely strictly on a sense of civic duty and social responsibility, that would surely be a harder road.
CDP was engaged by a group of 767 major investors representing an enormous amount of money, some $92 trillion, to assess all the companies in the S&P 500 Index based on two things:
- Their level of disclosure regarding carbon emissions
- Their performance in responding to the need for action.
If you think that’s a lot of money, you’re right. In fact, if there is no double-counting here, $92 trillion represents over 38 percent of all the money in the world. So if the group of people and institutions representing 38 percent of the world’s wealth want to know, as investors, what the companies in the S&P 500 are doing about climate change, that ought to give some people pause as to how truly important this is.
So what did they find out? After looking at these metrics and correlating them with the financial metrics of the companies that participated, CDP made the following statement.
On a sunny summer day in Los Angles, a thousand air conditioners might easily turn on at the exact same moment. That would elicit a surge of electrical power to get all of those compressors running, driving up what is known as peak demand. Typically, a power plant must have enough capacity to meet that demand whenever it occurs. That requires the power plant to be much larger than what is needed most of the time, which makes it inherently less efficient. But if starting those thousand air conditioners could be spread out — using tiny delays, over a period of less than a minute — that would reduce peak demand, and the required plant capacity, considerably.
This is the idea behind demand management, an essential element of a smart grid architecture. Overall, a smart grid relies on a number of elements from the various domains. Generation includes the various sources and generating types, both variable and non-variable. Distribution includes storage, switches and transmission lines. Both of these domains have become smarter through the use of technology to control, measure and record the amount of power passing through them, as well as to protect the various elements from surges or overloads.
The customer domain is regulated primarily through the smart meter, which helps the user to optimize efficiency and manage demand. Software applications like MyMeter, from Accelerated Innovations LLC, help to “empower electric, gas, and water utilities and their customers to better manage end-use demand and consumption. It’s the engaging, intelligent connection that transforms meter data into insights for action.”
If knowledge is power, MyMeter provides power in that form, to both the customer and the utility, about the other kind of power being provided and consumed — allowing each to optimize their own interests.
It’s common knowledge that getting people to use public transportation instead of driving cars will reduce carbon emissions. According to Transportation Nation, transit riders last year saved 4.7 billion gallons of gasoline. That adds up to 37 million metric tons of CO2 or 10 pounds of CO2 per ride.
Intercity buses, which are gaining in popularity, can potentially save even more. Using figures provided by Megabus, a completely full bus, which holds 77 passengers, emits 14 times less pollution per passenger than a typical automobile. Using those numbers, any bus with four or more passengers in it will emit less per passenger than a car.
The numbers for city transit buses, which are less efficient and are constantly starting and stopping, are not as good. According to the Department of Energy, city buses achieve an average of 31 passenger miles per gallon, which is less than a typical car carrying 1.55 passengers, and thereby achieving 39 passenger miles per gallon. That is, in part, due to the fact that a typical city bus is less than 25 percent full.
Clearly, getting more people to ride the bus regularly instead of driving cars is one way to curb carbon emissions. Another way is to make buses more efficient. On that note, there is some very good news to report.
Volvo just announced that its new 7900 Hybrid Electric Bus will be launched at the International IAA Commercial Vehicles show next week. The bus which, utilizes a 201 HP electric motor in conjunction with a lithium-ion battery, could be a game-changer. Because the bus can be run in silent, emission-free, all-electric mode for up to 4.3 miles at a time, that means the bus can be used indoors and out. This can positively impact air quality in bus stations and shelters which has been observed to be a problem, not to mention the air quality inside the buses themselves.
Editor’s Note: This article is part of a short series on creating resilient cities, sponsored by Siemens. Please join us for a live Google Hangout with Siemens and Arup on October 1, where we’ll talk about this issue live! RSVP here.
The 9-foot storm surge from Superstorm Sandy, which came on top of a 5-foot high tide, inundated the low-lying areas of the city — wiping out electrical service to substantial portions of the city, and ultimately causing some $50 billion worth of damage. Approximately 800,000 customers lost power in the city, along with millions more along the East Coast. The question posed in a recent toolkit was was: What actions can be taken to reduce the impact of a similar event?
With our climate in upheaval, many cities, organizations and businesses are talking about building resiliency into their operations, in order to allow them to better deal with extreme events such as heavy storms, droughts and floods. While these expenditures are often high, given today’s reality they are considered necessary — in keeping with Ben Franklin’s adage that “an ounce of prevention is worth a pound of cure.”
While taking steps to improve the resiliency of, for example, a city’s electrical grid, won’t prevent the increasing number and intensity of storms from coming (only reducing our carbon emissions can do that), they can prevent the kind of system-wide damage that New York City and its residents suffered in the wake of Superstorm Sandy.
The grid’s 61 substations, 94,000 miles of underground cable and 34,000 miles of overhead cable are susceptible to damage and disruption caused by events ranging from tidal surges, flash floods, blizzards, droughts, high winds and heat waves, all of which are more likely to occur given the onset of global warming. Recommended actions fell into three categories: robustness and redundancy of equipment, keeping the demand from overwhelming supply, and enhanced coordination of resources through smart infrastructure.
One aspect of our world that has undisputedly changed is the increased transparency and availability of information. This makes it harder for companies and politicians to get away with making false claims.
Last month, Chiquita Brands International received notice of a lawsuit filed by Seattle-based Water and Sanitation Health (WASH) accusing the company of deceptive advertising practices. Specifically, the company claims in their advertising that their “bananas are farmed in an ecologically friendly and sustainable manner.”
This, according to WASH founder Eric John Harrison, “is far from the truth.”
Says Harrison: “Chiquita sells millions of pounds of bananas that are produced in ways that destroy natural ecosystems and contaminate the drinking water of local communities living next to Chiquita’s largest Guatemalan supplier. The pesticides and fungicides used on these Chiquita-contracted plantations are toxic, and the aerial application falls on homes, schools and residents.” According to the lawsuit, some 7,200 residents are at risk in the Guatemalan communities of Ticanu, Barra Nahualate, Playa Semillero, San Francisco and Madre Vieja.
WASH has previously reached a settlement with Chiquita’s rival Dole in Guatemala in which Dole agreed to provide clean drinking water to seven communities in the vicinity of Ocos.
Chiquita’s practices, according to Harrison, were hidden, even to Rainforest Alliance, which monitors activities in the area and has endorsed Chiquita with their green frog logo. This could be due to the use of independent contractor COBIGUA, which sells million so of pounds of bananas to Chiquita annually and even bears the Chiquita logo on its trucks.
How much room is there to maneuver between a rock and a hard place?
That’s a question President Barack Obama must be asking himself, when it comes to the question of climate change. On one hand, you have overwhelming evidence of an increasingly unstable climate system, posing an existential threat to the future of mankind — and most of the entire world angry at the U.S. for being the leading cumulative emitter and doing so little at the governmental level to address the problem. On the other hand, you have some Senate Republicans who are politically entrenched in denial of the problem, along with coal-state Democrats ready to contribute enough down-votes to block any attempt at a climate treaty — which requires a two-thirds majority to pass.
With a United Nations summit meeting coming up in Paris next year that will attempt to come up with some kind of meaningful global agreement, the president is determined not to show up empty-handed this time.
People, primarily skeptics, often want to know what is the business case for taking action on climate change. Typically, all they can see is the prospect of energy prices going up since, they imagine, energy companies will be forced to make expensive modifications or pay taxes or credits that will raise the price of everything else while providing nothing additional in return. My favorite answer to the question is this one: What is the business case for not taking action? But recently I discovered another set of numbers that justify taking action, which leads me to believe there are probably even more waiting to be discovered.
Consider this: A cost-benefit study conducted by a team of MIT researchers and published in the journal Nature Climate Change looked at three different climate intervention scenarios, taking into account the health care cost savings. What they saw was that in one scenario, the health care cost savings achieved were actually ten times greater than the cost of implementing the scenario. In fact, in two of the three scenarios, the savings achieved by reducing the need for health care, avoided hospital visits, and decreased incidence of pollution-related illnesses more than covered the cost of the program.
The three scenarios selected were a clean energy standard, a policy aimed specifically at emissions from transportation, and a cap and trade program. What the researchers found was the following:
|Scenario||Cost||Health Care Savings|
|Clean Energy Standard||$208 billion||$247 billion|
|Transportation Emissions||~$1000 billion||$260 billion|
|Cap and Trade||$14 billion||$147 billion|
The Heritage Foundation-backed National Center for Policy Analysis pumps out a steady stream of misinformation about climate change, continuously reinforcing the smokescreen behind which billions of dollars in fossil fuel profits continue to be made. Generally speaking, it’s best to ignore them, figuring that giving them attention only helps them do their job. But this latest item is so egregious, that someone needs to call them out on it.
Numerous international aid agencies, as well as ratings services like Standard & Poors, have stated that the areas of South Asia and Southeast Asia are among the most vulnerable to the impacts of global warming.
Yet this article, entitled “Calming Fears of Climate Change in South and Southeast Asia,” assures its readers that not only is there nothing to worry about, but things are going to get far better, since the increased carbon dioxide in the atmosphere is causing a boom in food production.
Their source is none other than Craig Idso, a former executive of Peabody Energy, the world’s largest private-sector coal company. Idso reports that South Asian food productivity has increased 7.5-fold in the past years, and attributes that, without evidence, to the increased presence of carbon dioxide in the air.
The increase in agricultural productivity is real enough. It is sometimes referred to as the Green Revolution. Most scholars attribute the Asian increase to four things: fertilizers, technology, labor and livestock. Irrigation has also played a major role in other regions. Indeed, just as in the period from 1980 to 2007, the utilization of fertilizers and tractors increased more than three-fold in places like Vietnam and Thailand recently, which is in line with the increase in productivity. None of them attribute it to the presence of increased CO2 in the air. Attempting to make this connection sounds a lot like what Idso has previously written about climate science, saying, “A weak short-term correlation between CO2 and temperature proves nothing about causation.” So where is the cause-and-effect linkage here?
A captain steers his ship using a compass. If the compass has become magnetized and no longer points north, the ship is likely to get lost. Likewise, governments use metrics and indicators to adjust policy to try and steer their economies. They depend on these metrics for reliable and meaningful guidance toward the direction that serves the greater good.
Gross domestic product (GDP), which measures the overall level of economic activity, has been the key indicator of growth which has long been considered the goal of economic policy. In recent years though, with multiple crises impinging on our world, many of which were created by ourselves, thoughtful people have suggested that maybe our course needs correction and maybe GDP growth no longer reflects what is most needed in our quest for economic progress. What kind of world are we striving for, and what measures can help us identify whether we are moving closer or further away from that goal?
What is it exactly that we are trying to grow? To what extent does GDP growth measure well-being, and what other metrics might more accurately reflect it?
The fact is, GDP makes no distinction between activities that enhance quality of life and those that diminish it. For example, expenditures related to recovery from a disaster or a crime are included as part of GDP, while all activities that take place within households, as well as actions by volunteers are excluded. It also includes the depletion of natural capital as income.
In 1972, Bhutan made Gross National Happiness its key indicator. Results are compiled by means of a nationwide survey.
Last week, a group of Nobel prize-winning economists met, for the fifth time, in the German town of Lindau near the Austrian and Swiss border. This year’s meeting featured a special guest, German chancellor Andrea Merkel. Joining the notables are young economists from 80 countries, hoping to learn, become inspired, and perhaps reflect deeply on what role their science might play in shaping the future.
Marc Hafstead of the nonpartisan think tank Resources for the Future, along with Lawrence Goulder of Stanford University, have come up with an idea that could potentially address two important problems in one broad policy action. The first, which is where they’ll likely began, is the problem of corporate inversions. No, that’s not corporations standing on their heads; it’s when they buy another company in a country with a lower tax rate so that they can begin paying taxes there instead of here in the U.S., where they receive the most government services. The other problem is climate change.
The two did an analysis of the gross domestic product (GDP) impact of a revenue-neutral carbon tax, under three scenarios. In the first scenario, revenues are returned directly to Americans in a lump sum. The second uses the revenue to pay for tax cuts on individuals, while the third did the same, except that the tax cuts would go to corporations.
In all three cases the impact was small. Based on a carbon tax beginning at $10 per ton, and then increasing each year by 5 percent, they found that the GDP impact by 2040 would range from 0.24 to 0.56 percent of GDP, with the lowest stemming from the proceeds being used to reduce corporate taxes, while the highest came from the lump sum rebates to individuals.
The reasoning behind their paper goes something like this: There is a perception that U.S. corporate tax rates are too high, making it difficult for American companies to compete. Indeed, nominal U.S. corporate tax rates are among the highest in the world. But that is not what most companies pay. Indeed, the U.S. corporate tax rates are a bit like the MSRP on new cars. Nobody actually pays that amount. U.S. tax laws are filled with loopholes that companies routinely take advantage of. According to Edward Kleinbard at USC, even though the nominal tax rate in 2010 was 35 percent, in fact, companies paid an average of only 12.6 percent. Most people remember the headline that GE paid zero taxes a few years back. According to Citizens for Tax Justice, 26 companies including GE, Boeing and Verizon paid no taxes at all during the period from 2008-2012. All were presumably playing by the rules, using legitimate deductions that are part of the federal tax code. Some companies are better at playing this game than others.
With another school year about to start, it’s a good time to reflect on the basic sciences: physics, chemistry and biology, and how important our understanding of them can be in dealing with what have become substantial threats to our existence.
A relatively small change in the mixture of gases that constitute our upper atmosphere has altered an obscure physical property known as its radiative transmissivity. The additional gases are the byproduct of the fossil fuel energy sources that have made our modern way of life possible. The result is that heat emanating from our planet that formerly passed into space is now being reflected back to Earth, resulting in a warmer planet. While this might sound benign, it’s is causing massive melting of polar ice, releasing tremendous amounts of moisture into the ocean and atmosphere, and dramatically altering our climate. That’s physics.
Synthetic fertilizers containing nitrogen, phosphorus and potassium, primarily produced from natural gas and ammonia, have powerfully enhanced our ability to grow food to feed our ever-increasing population. However, as soils have changed their composition in response this modified diet, their ability to hold moisture has lessened. This means that heavy rains produce runoff, allowing large amounts of these chemicals to be washed into streams, rivers and lakes, altering their composition and, in some cases, making the water unfit to drink. That’s chemistry.
Micro-organisms that survive by invading animal hosts in the wild sometimes evolve to live on human hosts as well. These new diseases can appear suddenly, as in the most recent Ebola outbreak, and given the speed and intensity which we now travel and interact, can also spread rapidly before any treatment or cure can be developed. Massive epidemics that can threaten the existence of entire populations are now increasingly possible. That’s biology.
These existential threats underscore the need for increased emphasis on the STEM (science, technology, engineering and math) disciplines that have been in decline here in the U.S. in recent decades.
Public relations (PR) is a powerful but unseen force in our society. Companies hire PR firms to make them look as good as possible. When the companies do something they are proud of, they do everything they can to make sure everyone hears about it (including, sometimes contacting reporters like us). When the companies do things that are not so great, they “spin” the news to make it sound harmless. PR firms make their money from fees paid by their clients and have typically been value-neutral, meaning that they promote whatever their clients want them to promote.
So it’s a pretty big deal when a number of the largest PR firms come out, in response to surveys administered by the Guardian and the Climate Investigations Centre, and collectively announce that they will no longer represent firms that want to spread messages denying the reality of man’s role in climate disruption. Among these firms are: WPP, Waggener Edstrom (WE) Worldwide, Weber Shandwick, Text100 and Finn Partners.
Weber Shandwick spokeswoman Michelle Selesky told the Guardian that, “We would not support a campaign that denies the existence and the threat posed by climate change, or efforts to obstruct regulations cutting greenhouse gas emissions and/or renewable energy standards.”
Likewise, Rhian Rotz, speaking for WE said, “We would not knowingly partner with a client who denies the existence of climate change.”
WPP, based in the U.K., is the world’s largest advertising firm by revenue. They commented that, “We ensure that our own work complies with local laws, marketing codes and our own code of business conduct. These prevent advertising that is intended to mislead and the denial of climate change would fall into this category,”
However, a spokesperson noted that individual entities within the organizations remain free to make their own client decisions, which could include “campaigns opposing regulations to cut greenhouse gas emissions.”
Notably absent from this group was the U.S.-based Edelman, the largest, independently-owned PR firm in the world. Edelman’s sizable client roster includes the American Petroleum Institute, a group that actively campaigns against climate regulations, as well as Shell and Chevron. The firm took the position that it evaluates clients on a case-by-case basis. Spokesman Michael Bush politely dodged the question, stating only that, “Expanding the dialogue in a constructive manner, and driving productive outcomes to solve energy challenges are the key criteria for evaluating client engagements.”
We write a lot of stories these days about the remarkable growth of solar and wind power and how they are truly transforming the energy landscape. Another important component of this sea change is energy efficiency (EE), though we haven’t been writing as much about that, perhaps because it’s not as sexy and exciting as shiny new solar panels or towering wind turbines. But there is another reason: Investment in energy efficiency projects has been in a long-term decline, going back to a peak of about $2 billion annually in 1992, which has drifted down to about $1.2 billion in recent years.
Last year, utilities in Indiana were ordered to refund $32 million to ratepayers. Those funds represented the balance of $74 million that was collected for energy efficiency projects, many of which were never implemented.
In Nevada, EE savings declined 61 percent last year, compared to those realized four years earlier. Reports blamed a lack of state policies and incentives for the decline. This seems apparent when comparing Nevada with neighboring Arizona where utility customers saved three times as much due to efficiency measures, despite the similar climate.
State incentives constitute one factor in the decline; financing is another. A program called PACE had been quite popular until 2010, when it ran into trouble. PACE, which stands for Property-Assessed Clean Energy Financing, essentially allowed homeowners to borrow money from the city for clean energy and energy efficient upgrades, and then repay the loans through annual property tax assessments. Complex financing rules made it impossible for the loans to be sold to Fannie Mae and Freddie Mac for consolidation, which really put a damper on things.
Chris Hummel, chief marketing officer of Schneider Electric, thinks that all of that is about to change. After ticking off some $7 billion in new financing going into efficiency from state banks in Europe and the U.S., he told the Guardian the reasons why energy efficiency is about to come roaring back.
There has been a well-documented trend over the past 50 years to tweak the rules of the economic game to favor those at the top. The movement has been called “trickle-down economics,” among other things. Though it was mostly perpetuated by greed, it was consistently justified as being good medicine for the economy, even if it tasted bitter to those at the bottom, or even to those in the middle who found themselves drifting in that direction.
Now, a new report, issued by mainstream economic authority Standard & Poor’s (S&P), acknowledges, perhaps for the first time, that the extreme level of income inequality in this country is actually hurting the economy. In fact, the revered oracle has actually cut its forecast for economic growth (from 2.8 percent to 2.5 percent) based on these conditions.
The rationale behind this is simple. Consumer spending is responsible for 70 percent of GDP. Poor people don’t have much to spend, but they tend to spend every bit of it. Wealthy people tend to spend a smaller proportion of their incomes. So, as more and more wealth is concentrated in the hands of the very rich, less of it is circulated through the economy. That’s exactly what has been happening. Between 2009-2010, for example, income growth of the top 1 percent was 15 times higher than everyone else. Setting policy that gives those at the bottom more, by adjusting tax rates or increasing wages, will provide more direct benefit to the overall economy than piling ever more into the bulging bank accounts of those at the top.
This has been the subject of some controversy, with those in the investment community claiming that investment, not consumer spending, is the major driver. That idea is now being debunked by S&P, which acknowledges that “changes in federal tax policy over the years has exacerbated inequality, as tax rates for top earners have fallen faster than rates for average Americans.”
It may come as a surprise to learn that much of the coal that is mined in this country is mined under lease arrangement on federal land. The Bureau of Land Management (BLM) maintains coal leases, primarily in the West, on 570 million acres of land. If that sounds like a lot, it is. That constitutes an area larger than Alaska, California and Georgia combined, or about a quarter of the entire country
That includes, among other things, most of the Powder River Basin in Wyoming and Montana, which currently supplies 40 percent of all the coal produced in this country. Because this land belongs to the American people, its commercial uses should be generating revenue to help offset taxes, in the form of rents and royalties.
It does indeed do so, though some have questioned whether the amounts collected represent the true market value of the coal, or if, in fact, artificially low prices are not only depriving the American people of fair revenues, but also encouraging more coal mining and coal burning than might otherwise occur if the coal were priced fairly.
A report produced by Sightline Institute, entitled Unfair Market Value, alleges that the BLM does not include the substantial markup that coal companies receive when they sell coal overseas, in assessing the value upon which royalties are based. This, they claim, leads to millions of dollars of lost taxpayer revenue each year.
Even as the U.S. is moving away from coal, both in response to the increased availability of domestic natural gas, as well as the call to reduce carbon emissions, exports of coal, particularly Western, coal have soared from 7.6 million tons per year during 2006-2009, to 19 million tons per year in 2010-2012.