It is that time of year again. The time that anyone who has any influence (and the illusion of power) will want to be on the snow hills of Swiss Davos to show off how important he or she is. And yes, I would not mind being there myself but, then again, I probably do not have the story “Davos-man” loves to hear. Nor do I have the influence
This year’s Davos has as its motto “Rethink, Redesign, Rebuild”.
- Rethink “business models, financial innovation and risk management”;
- Redesign “institutions, policies and regulations”, and
- Rebuild “trust”.
Wonderful how these PR companies always manage to find “3-somethings” for what needs to be done (yes, guilty myself too, this blog being called 3E…).
Problem is: there are a few RE’s missing if we want to have the correct diagnosis of our failing economic system and as every good doctor knows: without good diagnosis, no good medicine.
What about resilience (to the coming shocks of our “long descent”) and re-discovering biophysical limits to growth? After the “Great Reckoning” (Gillian Tett in the FT), maybe it is time to start re-questioning our economic growth paradigm and to review our concept of prosperity?
I wonder when Davos Man will have the courage to tackle those questions. Always ready to come to Davos 2011, Mr Schwab, to put these challenges to your favorite power elites!
Time had an interesting story about Richard Branson at the end of last month. Apparently the business “visionary” (some would say “maverick”) has taken Lester Brown’s metaphor of climate change action as being similar to the Second World War mobilization a bit too serious.
“Virgin” Branson has set up the Carbon War Room, a new think tank to harness “the power of entrepreneurs to implement market-driven solutions to climate change”.
I guess this is what happens when some people just have too much money, whereas others are struggling to find the financing for sustainability projects which would really make a difference.
Although I agree with Branson that “the world needs entrepreneurial leadership to create a post-carbon economy”, I am still not convinced that the war metaphor is the best way to go about this. It feels to me a bit too close to that other war metaphor, President Bush’s famous “war on terrorism”.
Why does this climate war metaphor fail? Because there is no REAL enemy but for the enemy of our own greed, our political and business obsession with economic growth and our consumer passion to buy, consume and throw away and replace quickly stuff we actually to not need. So much for “market-driven solutions”! And, oops, as the Time article says: “Branson has no interest in any solution to global warming that would involve cutting back on the growth of business or, ultimately, consumption”.
Lester Brown and Richard Branson seem to forget that a war actually makes a lot of innocent victims and destroys lives. It also quickly leads to the call for authoritarian leaders, prisoners of wars and exceptions to the rules of human rights. Furthermore, even if the metaphor would work, climate change is only one of the theatres of this war. What about the new energy scarcity, water, biodiversity, soil and all the other “enemies”?
I am sorry, Mr Branson, but I guess the road to our peace with nature will have to be a lot less violent but also a lot more difficult than playing Churchill.
This year’s CEBIT (the world’s biggest IT technology fair) was all about greening the computer and related technologies’ sector. Although the global ICT industry has discovered the environmental and energy impacts of its production and use, companies still have a long way to go in terms of action, says a new report published during the Hannover fair by Greenpeace.
The Greenpeace report tested 37 products from 14 major electronics brands evaluating them against green criteria such as the use of hazardous substances, energy efficiency and the product lifecycle (recyclability and upgradeability). Several market leaders such as Apple and Microsoft did not provide any data and were therefore not included in the study.
Sony notebooks and Dell PCs got some of the highest ratings, although Greenpeace underlines that even these companies still have a lot of challenges ahead.
According to a 2007 Gartner report, the ICT sector accounts for approximately 2 percent of global carbon dioxide (CO2) emissions, a figure equivalent to the aviation sector.
One week after it presented its new energy/climate change package (see my post of 23 Jan), the EU is holding its annual Sustainable Energy week. Just as in last week’s proposals, the use of renewable energy will be in the spotlight. Two sessions on Monday will be dealing with the role of renewables in respectively the heating and cooling sector and rural electrification.
Energy efficiency is the other focus of the first day with a special session on how the electricity sector is introducing best practices in energy efficiency in its operations and another one on the role of ICT for saving energy.
Over the weekend, the Independent on Sunday published the findings of a new Accenture report showing that climate change is still very low on big businesses’ agenda.
As one of the world’s biggest economic sectors, banks should play a leading role in the mitigation and adaptation actions needed to stop global warming. But a new report presented on 9 January by CERES, a US-based coalition of investors and environmental groups, shows that the banking sector’s climate actions to date are only “the tip of the iceberg of what is needed”. CERES and its research partner RiskMetrics Group looked at 40 of the world’s largest banks (16 American, 15 European, 5 Asian, 3 Canadian and 1 Brazilian banks) and how they deal with the business implications of climate change.
Let’s look at some of the main positive findings of the report:
- The banks are doing lots of research on the issue (more than 100 report, of which half written in 2007), so the awareness is clearly there;
- 34 of the 40 banks have responded to the annual survey conducted by the Carbon Disclosure Project, an NGO which reports on businesses climate risks;
- Only 24 banks have their own emission reduction targets;
- 29 banks have invested in alternative energy projects (renewables or clean energy)
That being said, “many of the 40 banks have done little or nothing to elevate climate change as a governance priority”, says the report:
- only a dozen of them have board-level involvement in climate change;
- only 14 have risk management policies or lending procedures that address climate change in a systematic way;
- only half a dozen calculate carbon risk in their loan portfolios;
- only one bank (Bank of America) has a specific target to reduce the rate of carbon emissions associated with the utility portion of its lending portfolio;
- no bank (yes zero) has a policy to avoid investments in carbon-intensive projects such as coal-fired power plants. So much for our low-carbon economy goals
The report has four recommendations:
- make climate change a governance priority for board and CEOs (maybe bank directors bonuses should be based on carbon reduction targets?)
- provide better information about the financial and material risks posed by climate change and about own targets and emissions from financing and investments;
- explain how they factor carbon costs into financing and investment decisions;
- set higher targets to shrink the carbon footprint of their lending and investment portfolios.
Last but not least a bit of “naming and shaming”. The report also includes a “Climate Change Governance Index”, an evaluation of the climate security activities of the 40 banks based on a set of 14 indicators. HSBC Holding PLC, ABN Amro and Barclays PLC take top three, with Deutsche Bank, Citigroup and Fortis also in the top ten, European companies which are doing less well are BNP Paribas, Crédit Agricole and Sociéte Générale (shame on my home country again …). In general, European banks score better than American ones.
How can Europe lead on the necessary transition to a carbon-constrained economic future when the policy measures needed might undermine the competitiveness of European industries? This was the subject of a major conference “Towards a global low carbon economy” organised as the closing event of the EU Commission’s high-level group on competitiveness, energy and the environment on 27 November.
What I learned from the conference is that the spectre of the emerging economic tigers (China in particular) is indeed looming over the European industry and that its leaders are seriously confused and internally divided as to how to respond to the new global challenges. That being said, the debate itself also showed a sophistication in the arguments which was not there when climate/energy issues started a few years ago to overshadow the famous Lisbon agenda (“to make the EU the most competitive economy by 2010″).
Commission Vice-President Verheugen kicked off the conference by underlining some of the key messages of the high-level group’s final reports: there is no solution without the industry as 80% of the investments needed for a low-carbon economy will have to come from business; the solutions need to be cost-effective and we should not undermine the competitive position of our industry and especially of our energy-intensive industries.
In the debate, competition commissioner Kroes claimed that there is no contradiction between energy liberalisation and the fight against climate change. “You just need to get the price right” was Mrs Kroes obvious but also a bit dogmatic recommendation.
Business Europe leader Antoine de Sellière observed that the industry had gone through a change of mindset. “It now understands the urgency of the threat”, he said, a claim that I fail to understand when I see his organisation clinging on to the illusionary “energy efficiency” credo, doing the lobbying of the (French) nuclear sector for a nuclear renaissance (and yes, I think nuclear will have to be part of the global solution) and trying to undermine the credibility of the renewables solution (and also here I share their concerns but less so because of ideological reasons).
Dow Chemical’s Theo Walthie underlined the efforts of his sector to reduce the energy intensity of its production and even went a step further stating that more growth of the sector would be good for climate change: “the more we produce, the more society will reduce its environmental footprint”. Although I believe the chemical industry will play a big role in the ecological economy of the future, this kind of loose generalities will not give it the credibility it seeks.
Environmental NGO leader Mikael Karlsson on the other hand sang the “polluter has to pay” song, and recommended to phase out fossil fuel subsidies. He also had a message for the entrepreneurs in the room: “the business idea of the 21st century is solar”, something which people like Hazel Henderson (“The politics of the solar age“) already understood back in 1981. But then again, big interests sometimes prevent the obvious and then call this the “invisible hand of the market”.
An interesting difference of opinion came to light between industry leaders on the future of the European emissions trading scheme (ETS). Several business delegates recognised the need for mandatory auctioning whereas others still wanted to protect their industries and their windfall profits. It is generally believed that the Commission will put auctioning forward in its upcoming revision of the system.
One important element which turned up regularly in the debate was the need for global sectoral agreements (agreements across industry sectors with benchmarking and standards of how to reduce emissions), but little details were given on how to implement this. For a good introduction to this global sectoral agreements solution, read the Pew Center’s excellent introduction.
In the second session Lakshmi Mittal of Arcelor-Mittal impressed with a strong defense of the steel sector and a warning to match carbon-restraint policies with trade policies in order to prevent delocalisation of heavy energy-intensive industries to China and India. Energy commissioner Piebalgs mentioned ETS, energy efficiency and additional regulation as the three keys to the low carbon economy.
For Vattenfall’s CEO Lars Josefsson, new coal power plants with CCS (and therefore heavy subsidies for carbon capture and storage) are an absolute necessity. I myself have my doubts about investing a lot of taxpayer’s money as long as there is not more transparency on the coal reserves (see my earlier post on this in May “Hopes for green coal futures in ashes?“).
Green MEP Claude Turmes hammered on the need for resource efficiency and said he had great expectations for the G8+5 meeting next year under Japanese leadership. Turmes also rightly stated that Europe “does not really have a problem of technology innovation but of organisational innovation” and put his hope in the lead market initiative the Commission is to present in 2008.
All in all, the conference demonstrated that the debate on climate/energy security has come a long way and the Commission’s high-level group certainly can take some credit for it. However, the ideological chains of an old-fashioned competitiveness understanding are still weighing heavily on some business sectors and their political champions. If the climate/energy crisis shows one thing, it is that our global economy is bound to a broader ecological system which provides it with the necessary natural capital (energy and material resources and “free ecological services). On such a “Spaceship Earth economy” the breakdown of these ecological services can only by solved by global cooperation and not by nation-centered competitiveness. An excellent study (“Changing climates“) on how the interdependencies on energy and climate security underpin the need for more international cooperation was last week presented by the UK’s Chatham House.
This does not mean that we do not have to protect our industries and more importantly our jobs. But on how to do this, we should be thinking a bit more out of the box instead of reverting to 20th century neo-liberal “market-only” remedies which have no more policy relevance in our endangered globalised society.
One week before the climate summit in Bali, the Confederation of British Industries (CBI) will be presenting a report on the UK government’s efforts to reach its greenhouse gas reduction targets (6O% by 2050). The report recognises the business opportunities related to the fight against climate change and proposes new nuclear power plants as one of the solutions. It also warns that the necessary policies will cost the average home in the UK 100£ per year.
CBI has for years opposed most measures to tackle global warming but seems now to have changed its rhetoric by going for the “green is good for business” slogan.
- Guardian: CBI report urges business to tackle climate change
- The Independent: Emissions cuts to cost £100 a home, says CBI
- EurActiv has finally published the interview I did with London Vice-Mayor Nicki Gavron during the EU’s last Green Week. The interview showcases Gavron’s strong belief in the need for a new “energy paradigm” with decentralised energy production as one of its main dimensions.
- London-based think tank Accountability published its “State of Responsible Competitiveness 2007” last week. The report evaluates the competitiveness performance of 108 countries on the basis of their “responsible business practices. The Nordic countries topped the list. A critical review of the Accountability report can be read at Celsias.com.
- The FT’s Gideon Rachmann recognises that the world is facing “two energy crises” in an excellent column in the British newspaper today. One of them is climate change, the other the struggle for declining energy resources. “Politicians find themselves pulled in two directions”, writes Rachmann.
- Swedish energy giant Vattenfall has quickly lost the “green leadership” image that had been built up by its executive directorLars Josefsson. Lobbying politicians openly for a global climate cap and trade system, Josefsson set up the 3C Initiative, which brings together more than 40 big businesses to fight global warming. But in the last two weeks, the company lost a lot of its “green shine” when it tried to cover up problems at two of its nuclear power plants in Northern Germany. More on this in Swedish online newspaper The Local and Financial Times Germany.
German government plans for a 40% reduction of greenhouse gas emissions and a 3% yearly improvement of energy efficiency will lead to the “de-industrialisation” of the country, warns the German Federation of Industries BDI. The warning came a few days before Chancellor Merkel’s third energy summit between government and industry representatives.
The summit is supposed to lay down the targets and direction of Germany’s energy policy until 2020. Industry’s main criticism is that Mrs Merkel’s government does not have a real concept and should re-assess its nuclear power policy.
More on this in German Handelsblatt.