How best to balance economic growth and protection of the environment?

Commentary by Yani Saloh, Office of the President for Climate Change, Indonesia -- special to mongabay.com

August 30, 2010

When people are hungry for an uncertain income, they will destroy everything. When people become poor due to a poor decision they were excluded from making, who should be responsible for that?

Development is seen as the answer to poverty. However, many controversial developments have actually increased poverty, and while the investors in such schemes may benefit, the local people pay the price.

This happened in Tundai, a fishing village in the ex-mega rice area near Palangkaraya, Central Kalimantan. When central government in the 1990s decided to convert the peat swamp forests into rice fields, the community had no voice or involvement in the decision. The project failed. Now over a million hectares of former lush forests have become a wasteland, and the people of Tundai have been thrust into poverty.

The wider environmental impacts have become clear over time. The deforested and drained peat swamps easily catch fire in dry years resulting in huge fires and suffocating smog that may linger over the village for months. The haze affects public health and especially young children and the elderly. In dry years over 30% of the children have respiratory disorders because of the resulting smog.

Nobody knows the long-term effects are of many years of breathing - for months on end - the toxic peat smoke. The peat degradation also results in continuous emissions of huge amounts of carbon dioxide (CO2), a greenhouse gas that contributes to global warming. Yet another consequence of the environmental destruction is the decrease in fish productivity in the area’s rivers and streams. This has directly affected the economy and livelihoods of the local people.

The decision to convert the peat swamps into rice fields enabled the rapid harvesting of the valuable timber in the area. Some people got very rich. But the people of Tundai village were left with a degraded environment and increased poverty.

With a new international financing scheme named REDD+ (reducing emissions from deforestation and forest degradation), there is hope that there will be payments for forest restoration and protection. Whereas in the past the conservation of tropical forests was seen as the responsibility of tropical countries alone now – there is international interest to pay substantially for the regeneration and conservation of forests and peatlands.

Reducing emissions and sequestering carbon has become a new business opportunity. It will be essential, however, that the local communities are involved in these developments from the outset: in planning, decision-making and implementation. These developments will again attract people from the outside. This brings a risk that the carbon projects will fail unless they are developed with, and by, local people, who need compensation for their efforts.

"REDD provides an opportunity for international communities, namely developed countries and companies, to contribute to the solutions of maintaining carbon stocks above and below the ground, while creating new sustainable livelihood opportunities for the locals," explains Agus Purnomo, Special Staff to the President of Republic Indonesia for Climate Change.

But REDD is complex, and clear mechanisms for international funding to reach the local people and action on the ground are still in their infancy. “I never heard anything about such a thing,” I was told by the local people. “If this mechanism can become reality, we hope that the funding will provide benefits directly to the local people.”

“Grants currently received often go to the ground like an inverted pyramid” said Suwido Limin, head of Center for International Tropical Peat Forest Research (CIMTROP) at the University of Palangkaraya, meaning that while a lot of money goes into the system, only a small percentage of funding is received by local people. “The challenge is how to reverse the pyramid of benefits so the people on the ground will be receiving more than those at the top?”

“The government should ensure that payments will be reaching the right targets,” said Alue Dohong, Kalimantan Site Coordinator of Wetland Indonesia Program.

“The management of large areas of degraded peatlands for forest regeneration and emission reductions can create thousands of local jobs,” asserts Marcel Silvius of Wetlands International, a Netherlands-based environmental NGO. “Local communities could become shareholders in carbon credit schemes, thus benefiting from successful projects.” To unlock this potential, national and local governments need to create the necessary regulations and oversee the governance of the projects.

There is a need to balance economic development and conservation of natural resources. The natural resources utilization should according the state laws and be aimed at economic growth for the welfare of the people at large, not just a few. It is time for the local people to be empowered in these exciting and new opportunities for sustainable development. Local wisdom needs to be respected and included into the decision making process for policies that will impact their lives.

Source: Mongabay

Energy conservation: Not such a bright idea

Making lighting more efficient could increase energy use, not decrease it

Aug 26th 2010 | From The Economist print edition

Less is more

SOLID-STATE lighting, the latest idea to brighten up the world while saving the planet promises illumination for a fraction of the energy used by incandescent or fluorescent bulbs. A win all round, then: lower electricity bills and (since lighting consumes 6.5% of the world’s energy supply) less climate-changing carbon dioxide belching from power stations.

Well, no. Not if history is any guide. Solid-state lamps, which use souped-up versions of the light-emitting diodes that shine from the faces of digital clocks and flash irritatingly on the front panels of audio and video equipment, will indeed make lighting better. But precedent suggests that this will serve merely to increase the demand for light. The consequence may not be just more light for the same amount of energy, but an actual increase in energy consumption, rather than the decrease hoped for by those promoting new forms of lighting.

The light perceived by the human eye is measured in units called lumen-hours. This is about the amount produced by burning a candle for an hour. In 1700 a typical Briton consumed 580 lumen-hours in the course of a year, from candles, wood and oil. Today, burning electric lights, he uses about 46 megalumen-hours—almost 100,000 times as much. Better technology has stimulated demand, resulting in more energy being purchased for conversion into light.

That, at least, is the conclusion of a study published in the Journal of Physics D: Applied Physics by Jeff Tsao of Sandia National Laboratories in New Mexico and his colleagues. They predict that the introduction of solid-state lighting could increase the consumption of light by a factor of ten within two decades.

To work out what solid-state lighting would do to the use of light by 2030, Dr Tsao and his colleagues made some assumptions about global economic output, the price of energy, the efficiency of the new technology and its cost. Assuming that, by 2030, solid-state lights will be about three times more efficient than fluorescent ones and that the price of electricity stays the same in real terms, the number of megalumen-hours consumed by the average person will, according to their model, rise tenfold, from 20 to 202. The amount of electricity needed to generate that light would more than double. Only if the price of electricity were to triple would the amount of electricity used to generate light start to fall by 2030.

Dr Tsao and his colleagues see no immediate end to this process by which improvements in the supply of light stimulate the desire for more—rather as the construction of that other environmental bête noire, roads, stimulates the growth of traffic. Even now, the interiors of homes and workplaces are typically lit at only a tenth of the brightness of the outdoors on an overcast day, so there is plenty of room for improvement. And many outdoor areas that people would prefer to be bright at night remain dark because of the expense. If money were no object, some parts of the outdoors might be illuminated at night to be as bright as day.

It is worth remembering that when gas lights replaced candles and oil lamps in the 19th century, some newspapers reported that they were “glaring” and “dazzling white”. In fact, a gas jet of the time gave off about as much light as a 25 watt incandescent bulb does today. To modern eyes, that is well on the dim side. So, for those who truly wish to reduce the amount of energy expended on lighting the answer may not be to ban old-fashioned incandescent bulbs, as is the current trend, but to make them compulsory.

Source: The Economist

How Sustainable Is Sustainability in a For-Profit Organization?

Published: February 1, 2008

Author: Jim Heskett

Summing Up

How will sustainability be achieved? To sum up responses to this month's column, the question is not whether global sustainability will be achieved but how.

One school of thought could perhaps be characterized as enlightened self-interest, a realization on the part of managers and investors alike that, as Gaurav Goel put it, "Sustainable businesses have lesser risks associated with their future earnings ... triple bottom line (economic, social, and environmental sustainability) reduces uncertainty." Or as P. Nanjunda Pratap said, "Sustainability defines the life line of any organization." Carol Holding associated brand value with sustainability: "As brand value will soon be included in a company's valuation ... we can more than ever monetize sustainable behavior."

Others see the market working its effects on behavior to lead us to a sustainable future. Gerald Nanninga, for example, commented that "If we deplete resources too quickly, the shortage of supply ... will make conservation issues more financially viable."

Some felt that the free market might need some help. Elizabeth Doty put it this way: The "invisible hand" may not lead us to the greatest common good ... without government action(s).... These might take the form of incentives." Richard Eckel expanded on this idea, saying that "To suggest that for-profits embody any form of moral restraints is to infer an attribute foreign to the concept and history of these entities.... When it is monetized" (whether by competition or government) "the for-profit enterprise will select the lowest price alternative." But Allen Howlett expressed reservations about this approach, saying, "To do nothing will invite social pressure and 'one size fits all' legislation."

All of this will take time. Adrian Gonzalez commented that "There's a limit to what can be accomplished ... because today's products, manufacturing processes, and supply chains were not designed with sustainability in mind." Wole Fayemi added that sustainability is more achievable "if the concept is integrated into the business model at inception." And as Laura Howard put it, "This works best in small companies who can design their entire business and brand around a set of coherent sustainable values .... (They will) "change the conversation in the industry."

There was a less hopeful tone to some comments. Peter Maxson said, "... we don't have a common vision of where we need to go as a global society, and even if we did, we don't have a viable means of getting there."

A former associate and sometime contributor to this column, Stever Robbins, was provoked to send me an email that helps sum up the further questions that these views pose for us. In his words, "One way or another, we will become sustainable. I just hope we do it ourselves ...." (Should we call this the doomsday school of thought?) His questions were: "Here's a deeper puzzle: What would a sustainable economic system look like? For starters, how would you define 'success'?" What do you think?

Original Article

Recent word that Google's leadership has identified sustainability as an important business initiative has given the issue new visibility alongside Al Gore's Nobel Peace Prize. At the same time, it raised some eyebrows among investment analysts who asked what sustainability has to do with Google's core business of making the world's information universally available. Will Google sacrifice focus and profitability in the name of sustainability? It remains to be seen whether this initiative is overblown, representing little more than solar panels on the roof of corporate headquarters.

This topic comes at a time when an interesting paper with the unfortunate title "A Framework of Sustainable Supply Chain Management Moving Toward New Theory" has crossed my desk. I receive these occasionally with a request for my blind (authors unknown to me) review for a juried academic journal with the equally unfortunate title International Journal of Physical Distribution & Logistics Management, which concerns itself with research in supply chain management.

The paper attempts to provide some context for those addressing issues of sustainability. Its intent is to get us beyond questions such as, Is sustainability desirable? or Does it pay to be green? Because supply chain management depends heavily on the sustainability of everything from energy sources to low-cost sources of products and services to security, it is not particularly surprising that for some of the most interesting thinking concerning sustainability we might turn to this field. The paper calls our attention to the fact that "68% of the Global 250 firms generated separate annual sustainability reports in 2004." Whether that represents a "management revolution" remains to be seen, but it's something that puts a number on a trend toward management attention to sustainability.

One oft-quoted definition of sustainability was provided in 1987 by the World Commission on Environment and Development: "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." In their paper, the authors, citing the practical difficulty of implementing such a broad definition, support the idea of sustainability as the integration—and intersection—of social, environmental, and economic responsibilities that are borne by managers. In for-profit organizations these responsibilities converge in what has come to be known as the "triple bottom line." The authors posit (but do not prove) that organizations that satisfy all 3 criteria in their decision-making will realize greater economic success than those that fulfill only 1 or 2 of them. By extension, one could argue that decisions intended to support sustainability that satisfy all 3 management responsibilities are likely to be made first and without outside (governmental) encouragement.

In fact, some researchers claim that these decisions, representing "low hanging fruit," have already been made. This prompts the question of just how decisions will be made in the context of significant trade-offs among these criteria that may lie ahead. Will this prompt a continuation of the proliferation of board committees on sustainability or its first cousin, risk? If so, will this just confuse management entrusted with a single bottom line? Will further progress in this realm require government intervention, even if this proves more costly than proactive efforts on the part of management? Or does government intervention tend to negate the competitive benefits for those who have acted proactively? How sustainable is sustainability in a for-profit organization? What do you think?

Source: Harvard Business School

Global Coal: Economic Blessing, Environmental Disaster

Economically Beneficial Weapon of Mass Ecological Destruction

Credit: IVAN IV

02 August 2010.

Coal is currently experiencing a phenomenal comeback everywhere. Demand has grown considerably, making coal the second-most important energy source worldwide, after oil. Billions of people depend on coal for their electricity supply.

Experts at the International Energy Agency (IEA) in Paris estimate that demand for coal will increase in the next two decades for more than any other energy source except wind and solar – from the current level of about 6.7 billion tons per year to almost 10 billion tons in 2030.

China and India are mainly responsible for the coal boom, with the two countries already accounting for more than half of global demand. According to the IEA, they will have more than doubled their coal consumption by 2030. Coal provides them with electricity, and electricity is the elixir for progress and prosperity.

In China, a new coal power plant is placed into service about once a week. Coal drives machines, illuminates apartments and houses, heats stoves and moves high-speed trains.

The raw material that made industrialization possible in the 19th century remains an essential element of modern life in the 21st. Politicians around the world can enthuse as much as they want about the potential benefits of renewable energy sources,

but the dirty truth is that the future of the world's energy supply is black. Given the alternatives, what else can it be?

Many people feel that nuclear power is too dangerous. Crude oil is getting more and more difficult and expensive to produce. Natural gas creates a dependency on temperamental suppliers. And solar, wind and water are not yet sufficiently developed to provide a large share of the energy supply. Which leaves tried-and-tested coal.

No other fossil fuel is available in such large quantities; current coal reserves will last for generations. No fossil fuel is as comparatively cheap.

It costs only about 5 euro cents (around 6 US cents) to generate a kilowatt-hour of electricity from coal, compared with about 40 cents for solar power. And no fossil fuel is as widely distributed.

Every continent has adequate reserves and, unlike oil, most of those reserves are found in regions which are relatively stable in geopolitical terms, such as North America, Europe and Australia.

But no other raw material is as devastating to the environment when used. Coal is the worst climate killer in the history of humanity.

Coal thus comes with a high environmental price. Almost one kilogram (2.2 pounds) of carbon dioxide is emitted to generate one kilowatt-hour of electricity from black coal, and emissions from lignite are even higher.

By comparison, a modern gas power plant emits about 350 grams of CO2 per kilowatt-hour generated, while nuclear power is responsible for only about 30 grams.

In other words, it isn't geology that defines the limits of growth. Instead, environmental concerns raise doubts as to the future viability of the fuel. "Coal is the environmental problem of the 21st century," says Ottmar Edenhofer, chief economist at the Potsdam Institute for Climate Impact Research.

Not surprisingly, the industry is already warning of a potential power supply gap if further projects are torpedoed. The German Energy Agency, for example, estimates that by 2020 the country will lack about 13,000 megawatts in power generation capacity, which corresponds to about 10 large coal-fired power plants.

Coal critics counter that the supposed power supply gap is an invention of the energy industry. And coal areas around the world are booming, with Russia and Australia leading the shipping parade, but also Colombia, which is already the world's fourth-largest coal exporter.

Mining companies like BHP Billiton, Rio Tinto, Xstrata and Peabody Energy are outbidding one another for licenses to extract coal in the best production areas, which, as noted, are scattered around the globe, in, for example:

· Australia's Hunter Valley,

· the Powder River Basin in the US state of Wyoming, and

· on the eastern coast of Kalimantan, one of Indonesia's two main islands.

In places like these, the coal seams are readily accessible, mining is cheap and labor costs are usually low. Nevertheless, only one in seven tons of coal enters the global trade.

The biggest coal-producing countries need most of the fuel themselves. In China, in particular, the coal industry is in full swing. In Shanxi province in northern China, one coal train after another winds through the loess landscape, heading for the port of Qinhuangdao on the country's east coast.

A seemingly endless string of trucks, their beds inadequately covered with tarps, thunder along the highway running alongside the railroad line. The drivers take risks with their overloaded vehicles, as evidenced by the occasional truck lying overturned next to curves in the road.

The Shanxi region is one of the country's most important coalfields. During the day it resembles a smoke-filled back room in a bar. About 1,500 mines are in operation there, manned by thousands of miners working in shifts – except when a fire shuts down production yet again.

In December, 12 miners were killed in a mine near the city of Jiexiu. Authorities have kept it closed since then. Some of the survivors speculate that large amounts of coal dust developed underground and triggered the explosion.

Accidents are commonplace in Chinese mines. Some 3,215 workers died in accidents in 2008 alone. Rarely are the rescue attempts as successful as one spectacular operation in early April, when rescue crews managed to pull 115 miners out of the Wangjialing mine alive after they had been trapped there for eight days.

But China’s not the only place coal mining is a dangerous and dirty affair, as Greenpeace describes in a 2008 report entitled "The True Cost of Coal." In the US state of Kentucky, for instance, mining companies blast away entire mountaintops to reach the coal more easily.

In South Africa, the acidic pit water from abandoned mines is contaminating river. And in Colombia, mining companies are displacing families to expand the Cerrejón mine, the world's largest open-pit mine for black coal.

According to Greenpeace's calculations, the coal business causes €360 billion worth of damage each year. Environmentalists warn that if mankind continues along its current path, CO2 emissions from coal will increase by another 60 percent by 2030.

Given these consequences, can the world even afford to continue its reliance on power from coal? The coal companies, of course, say yes, saying new technologies, like carbon capture and storage, or CCS, and compression, can separate CO2 from coal and then capture it. "The technology is working," says Tuomo Hatakka, head of Vattenfall Europe.

In a few years, the Swedish company plans to build a demonstration power plant and test it to see how it performs on a large scale. "There is a future for coal," says Hatakka. "Coal without CO2 emissions."

The hope is these and other technologies could even turn into a significant source of economic growth, as it opens up new business areas for advanced heavy industry companies like Linde, Siemens and BASF. The United States and China want to try out the first of the new generation of coal-fired power plants in the next few years. It is clear, though, that anything like this will come at an enormous economic cost.

Retrofitting power plants, transporting the CO2 through pipelines and compressing it underground – all of these things bring up costs considerably, which will affect electricity prices accordingly. Experts estimate it will take at least 10 years before the new technology is used on a large scale worldwide.

When carbon capture and storage, CCS, is used, power plants lose about 10 percent of their efficiency, because the capture of carbon dioxide consumes an immense amount of energy.

In other words, more coal has to be burned to produce the same amount of electricity, which essentially means that raw materials are being wasted. But no matter how sophisticated the technology, the biggest obstacle remains nearly impossible to overcome: the lack of acceptance by citizens who live near planned CO2 storage sites.

Not everyone shares these concerns. And even the environmental movement is divided over the CCS issue. Greenpeace and the leading German environmental group BUND flatly reject the process. Greenpeace argues that the technology constitutes "an enormous gamble," while BUND describes it as nothing but a "fig leaf" for the power companies.

Germany's Nature and Biodiversity Conservation Union (NABU), and the global conservation organization WWF, previously known as the World Wildlife Federation, on the other hand, believe it is at least worth trying out.

Their argument is that it would be foolish to rule out this option from the outset. In this sense, they are joined by Lord Nicholas Stern, an economist who caused a stir four years ago with his report for the British government on the costs of climate change.

He sees no alternative to clean coal technology in the foreseeable future, and recently devised a scenario on what the global energy mix could look like in the future.

In his scenario, coal plays a key role in the mix, for many years to come – largely because there seems no other economically viable choice. Even if the most optimistic forecasts came true, and the world could satisfy half of its energy needs from renewable sources, massive amounts of fossil fuels would still be needed, Stern argues.

He believes that industry, if it hopes to achieve the world's climate goals, must do everything possible to reduce CO2 emissions – and that the use of CCS technology will be an unavoidable part of the equation. "We need several thousand facilities," Stern said recently, speaking at a conference in Berlin. In this view, the age of coal seems far from over, according to this article from Der Spiegel On-Line.

Until water, wind and the sun can provide enough energy, "clean" coal could at least play a role as part of a transition to renewable technologies. Of course, Stern has no illusions about the amount of time it will take before a low-carbon future can be reached.

"It will be a long bridge," he said. Which, given its evident environmental destructiveness, means the future will belong to nations that can lead the way in clean / green technology – yet another reason China, despite its current reliance on coal, seems more likely every day to be the global leader of the future – providing, of course, the proponents of the China bust are wrong, and it doesn’t collapse in a heap of bad debt and the resultant political chaos.

Let’s hope that doesn’t happen – for not just the Chinese, but the rest of the world’s economy AND ecology as well.

David Caploe PhD

Editor-in-Chief

EconomyWatch.com

President / acalaha.com

Source: Economy Watch

How to Speed Up Energy Innovation

Q&A with: Rebecca Henderson

Published: August 9, 2010

Author: Julia Hanna

Is there a special sauce for stimulating innovation in the energy sector, a concoction to spur cost-effective developments toward solving the climate change problem?

HBS professor Rebecca Henderson doesn't claim to know all the ingredients for that special sauce. But as someone who has spent a career studying technological change, Henderson has observed trends and common traits across a variety of industries.

"I believe energy is the problem of our time."

And her message is optimistic. Moving to clean energy "is not hopeless at all. We've hardly started to invest in energy innovation."

In a forthcoming book to be published by the National Bureau of Economic Research in association with the University of Chicago Press, Accelerating Innovation in Energy: Insights from Multiple Sectors, Henderson and coauthor Richard G. Newell explore the histories of innovation in four sectors of the U.S. economy that have experienced enormous change and growth: agriculture, chemicals, life sciences, and information technology.

By examining the intersecting roles played by the federal government, public policy, and the private sector to encourage innovation in these industries, the authors establish a clearer pathway to what it will take to drive the magnitude of change needed in the field of energy.

Julia Hanna: What drew you to focus on the field of clean energy?

Rebecca Henderson: The enormity of the challenge. We have before us the seemingly impossible task of taking about 80 percent of the carbon out of the energy system in 40 years. I don't know much about energy, although I know much more now than I did when I started this project. But I've spent my life studying innovation, so I thought maybe I could be of some help. I believe energy is the problem of our time. I have a hard time focusing on anything else.

Q: Can you talk a bit about the rationale behind using insights from other sectors to accelerate innovation in energy?

A: Part of the idea is to bring attention to industries that have experienced radical transformation at great speed, which is just what we need in energy. For example, 100 years ago, half the country worked in agriculture. Now almost no one does. Agriculture has also seen a massive increase in productivity. Some of that is due to mechanization and the use of fossil fuels. But much of it is due to innovation in the breeding of plants and animals, as well as fertilizers and new techniques. There's a huge amount of human capital and knowledge invested in farming.

Q: What sets energy apart from these other industries?

A: The first and most obvious is that it's difficult to differentiate energy as a product at the delivery point. It just looks like electrons or gas in the tank. The striking thing about these other sectors is that they invented new things that met new customer needs, or existing needs in different ways. Whereas with energy, what we're looking for is basically the same product but produced in a much cleaner way.

Another difference is the sheer size of the industry. Telecom is now of comparable size by some measures but certainly wasn't initially. Before the Second World War there was no information technology industry. That's an important difference when you consider the amount of capital that will be required to green the energy system—it's very large by the standards of the early years of the other industries we consider. With that said, it's not a large amount by modern standards. Annual capital investment in telecom is roughly the same order of magnitude as capital investment in energy.

"We know what to do."

The third and last difference is that with the exception of agriculture, all the other industries we consider were moving into empty spaces. An IT industry? There was no IT industry. Biotechnology? It didn't exist.

So, it's a commodity product that can't be differentiated, the sector already exists, and the change needs to happen at enormous scale.

Q: So why take the trouble to consider the other sectors if they're so different?

A: They're the best examples we have of innovation at the speed and order of magnitude that is needed in energy. So the trick is to try and learn from the other sectors while being very much aware of the degree to which what we learn does or does not translate to energy.

Q: What do you see as the most pressing change needed to drive clean energy innovation?

A: We need to have a price for carbon. Simply trying to improve rates of innovation without simultaneously creating demand for low-carbon energy is unlikely, in my opinion, to have much of an effect. We can pour money into nifty energy technologies, but if there's no demand that's not a sustainable solution. Aggressive regulation such that everyone had to reduce and use less carbon-based energy would certainly be helpful. However, my preference would be for a carbon tax or some kind of cap-and-trade regime. We do have the beginnings of that in the renewable portfolio standard approach.

With that said, one of the things that I think can be learned by looking at these other sectors is that it's very unlikely that one can pick the winning technology in advance. The lovely thing about a price for low-carbon energy is that it's technology neutral. It tells innovators what we want, and lets them explore the many different ways to get there. That seems to be a much more flexible and effective way of supporting innovation.

Q: Can you talk a bit about the other sectors and how they relate to clean energy innovation?

A: In many ways, agriculture is the closest to energy. It's completely pervasive, and it's fundamental to the economy. Rates of innovation in agriculture have been enormous, as I mentioned, and were significantly driven by public investment. There was a centralized approach to investment in the science of the field, but innovation also occurred through agricultural extension stations where you could try things out on the ground. There are a number of proposals to do something like that in energy, which is particularly interesting in areas like conservation.

Biotech and pharma are more dependent on patents than energy is likely to be; but one of the most important things we learned from looking at this sector is the power of collaboration between the public and private sectors. We know that if you can build what the authors of that chapter call an innovative ecosystem, it appears to really accelerate innovation in very productive ways.

What's striking about energy innovation to date is that a lot of it has been channeled through government labs. And although those labs have a lot of smart and thoughtful people, they're often remote from industrial centers and not tightly linked to local ecosystems. And so one of the implications of biotech and pharma is that you'd want to tie these labs more to major industrial centers and universities.

A common touch point for all of these industries is the importance of training human capital. Historically very few people have gone into energy. It was viewed as a sideline, as something that hasn't been exciting or fun or innovative. In biotech and pharma, you see the very important role that federal funding of universities plays in training the next generation of the workforce. We need to do something like that in energy.

IT and telecom are similar to energy in that they're both infrastructural and large scale, with investments made overwhelmingly by the private sector. Also, IT was an industry kick-started by the Department of Defense. In his chapter on the history of the Internet, Shane Greenstein examines the role of the federal government and the iterative process that DARPA engaged in to develop what would become the Internet. So it's an example of how major infrastructural investments can be triggered by federal engagement in very productive ways.

The chemicals industry is really the outlier in the set because much of the innovation there was conducted in the private sector. Like energy, however, it's about building infrastructure. The similarities between a chemical plant and a large power plant are quite strong. Coming back to innovation, what's striking about chemicals is the role of small, independent engineering firms in transmitting innovation across the industry. So there's an interesting model here: Could we imagine building a sector like that in energy, where much of the innovation is held by design-build construction firms? I don't think we know the answer to that, but it's interesting to consider what sort of policies in the areas of procurement, IP, and antitrust legislation would support that level of activity.

Q: The book cites Germany and California as examples of how public policy can create demand for low-carbon energy.

A: Yes, you can certainly subsidize clean energy, as the Germans and Californians did with a solar feed-in tariff. As I mentioned, the danger with that kind of policy is that it may not be the most efficient way to achieve innovation. If that's what is politically possible, it's much better than nothing. The massive investments by California and parts of Europe have had the effect of halving the price of solar photovoltaics, which is a major achievement. But it's quite expensive.

Q: Sometimes it seems that there's a certain sense of hopelessness around climate change and making a major shift to clean energy.

A: Technically, it's not hopeless at all. We've hardly started to invest in energy innovation. That's one of the reasons I wanted to do this project—because I thought there was enormous hope given what we'd accomplished in other sectors. We know what to do. Establish a price for carbon, invest money in R&D, manage the money well, and we'll see enormous change very quickly.

Source: Harvard Business School

China Combining Environmental Concern and Economic Growth

Chinese Coal Factory: Why China’s Elite Sees Three E’s As So Necessary

Credit: Adam Cohn.

17 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com

Many lifetimes ago, I had the pleasure of advising the Master’s Thesis of a brilliant young man named Andres Edwards, whose thesis has become one of the most important books of the sustainability movement: The Sustainability Revolution, in which I was honored to be the first name in the Acknowledgments.

It was from Andres that I learned about the so-called “Three E’s” of Sustainability: in its mainstream version, Environment + Economics + Equity; in its more alternative formulation, Ecology + Employment + Equality.

Through this encounter via Andres, I learned there is no fundamental opposition between Environment/Ecology and Economics/Employment – leaving aside, for the moment, the aspect of Equity / Equality. This is a key insight, as most discussion of environmental / ecological and economic / employment issues ASSUME – wrongly – the two are necessarily in opposition to each other: as the saying goes in the US, it’s tree-huggers vs. lumberjacks.

This is, of course, a totally non-productive way to approach the situation. Indeed, the whole experience with Andres convinced me that it is absolutely imperative to COMBINE the Three E’s, in whatever version you find most comfortable.

And while China has certainly had its problems in the area of environmental – not to mention occupational and product – safety, it has clearly realized its best bet for future economic growth lies precisely in the areas of green / clean high-tech that in the US, sadly, have lost almost all funding for the capital- and labor-intensive research and development stage, that, while expensive, is absolutely crucial for the technological innovation that will – eventually – lead to “sustained” economic growth.

In this context, it’s encouraging to see that China’s Ministry of Industry and Information Technology quietly published a list last week of 2,087 steel mills, cement works and other energy-intensive factories required to close by Sept. 30.

The larger initiative within which this takes place was announced earlier this summer by Prime Minister Wen Jiabao, who promised to use an “iron hand” to improve his country’s energy efficiency.

And this follow-through on the rhetoric has a growing number of businesses are discovering that it feels like a fist. Over the years, provincial and municipal officials have sometimes tried to block Beijing’s attempts to close aging factories in their jurisdictions.

These officials have particularly sought to protect older steel mills and other heavy industrial operations that frequently have thousands of employees and have sometimes provided workers with housing, athletic facilities and other benefits since the 1950s or 1960s.

To prevent such local obstruction this time, the ministry said in a statement on its Web site that the factories on its list would be barred from obtaining bank loans, export credits, business licenses and land. The ministry even warned that their electricity would be shut off, if necessary.

The goal of the factory closings is “to enhance the structure of production, heighten the standard of technical capability and international competitiveness and realize a transformation of industry from being big to being strong,” the ministry said, which is a MAJOR distinction that few countries – including, since the 1980s, the US – have been able to make, either conceptually or in action.

The announcement was the latest in a series of Chinese moves to increase energy efficiency. The National Development and Reform Commission, the government’s most powerful economic planning agency, announced recently it had forced 22 provinces to halt their practice of providing electricity at discounted prices to energy-hungry industries like aluminum production.

The current Chinese five-year plan calls for using 20 percent less energy this year for each unit of economic output than in 2005. But surging production by heavy industry since last winter has put in question China’s ability to meet the target. The success or failure of China’s energy-efficiency campaign is being watched closely not just by economists,

who cite the campaign as one reason that growth of the Chinese economy has slowed down a little this summer, but also by climate scientists, understandably concerned by the increase in pollution that has accompanied China’s remarkable economic growth.

China’s energy consumption rose so sharply last winter that it produced the biggest surge ever of greenhouse gases by a single country, as power plants burned more coal to generate enough electricity to meet the increased demand.

As China has become increasingly dependent on imported oil and coal, its national security establishment has become more visibly involved in energy policy and energy security, including efforts to improve energy efficiency.

Efficiency improved 14.4 percent in the first four years of the current plan, only to deteriorate by 3.6 percent in the first quarter of this year, according to official statistics.

Mr. Wen responded by convening a special meeting of the cabinet in May to address the situation. Energy efficiency was only 0.09 percent worse in the first half of this year than in the same period in 2009, according to statistics released last week.

Energy analysts said those statistics indicated improvement in efficiency in the second quarter that nearly offset the deterioration in the first quarter, although the government has not released separate figures for the second quarter.

Zhou Xizhou, an associate director for IHS Cambridge Energy Research Associates in Beijing, said that the ministry’s new list of factory closings was a strong measure to improve efficiency.

But he added that China’s goal of achieving a 20 percent improvement by the end of this year compared with 2005 was “still a tall order for the rest of the year.”

The ministry said in its statement that the factories to be closed would include 762 that make cement, 279 that produce paper, 175 that manufacture steel and 84 that process leather. The factories were chosen after discussions with provincial and municipal officials to identify industrial operations with outdated, inefficient technology, the ministry said.

The ministry did not provide figures for the percentage of capacity to be closed in each industrial sector. The ministry also did not say how many employees would be affected, which shows how crucial it is to link ecological concerns with employment.

Closing factories is more palatable now than in the past because a labor shortage in many cities has made it easier for workers, particularly young ones, to find other jobs, a dynamic we have discussed in detail in both Features and various In the News items.

The list of steel mills to be closed appeared to emphasize smaller, older mills producing fairly low-end grades of steel. Edward Meng, the chief financial officer of China Gerui Advanced Materials, a steel-processing company in central China’s Henan Province, said that the closing of such mills was consistent with the government’s broader goals of consolidating the steel sector and pushing steel makers into the production of more sophisticated kinds of steel, again pointing out how critical it is to link – rather than oppose – economic and environmental concerns.

The International Energy Agency in Paris announced last month that China surpassed the United States last year as the world’s largest consumer of energy. China passed the United States as the world’s largest emitter of greenhouse gases in 2006.

That milestone came earlier because of China’s heavy reliance on coal, an especially dirty fossil fuel in terms of emission of gases contributing to global climate change – again, a topic that we have examined in significant concept and detail.

In addition to the energy-efficiency objective in the current five-year plan, a plan announced by President Hu Jintao late last year called for China to reduce its carbon emissions per unit of economic output by 40 to 45 percent by 2020, compared with 2005 levels. Carbon emissions are a measurement of a country’s man-made emissions of greenhouse gases like carbon dioxide.

Even if China meets its energy-efficiency goal this year and its carbon goal by 2020, its total carbon emissions are still on track to rise steeply in the next decade, according to forecasts by the International Energy Agency, cited in this article from the New York Times.

That is because of factors including rapid growth in the Chinese economy, growing car ownership and rising ownership of household appliances.

The relationship between economic growth and environmental degradation is, clearly, complex.

But the Chinese leadership – while obviously committed to maintaining a sustainable rate of economic growth – is also CLEARLY aware that increasing prosperity MUST be accompanied by improvements in the overall environmental situation. No one ever said such an achievement will be easy.

But of all the governments in the world, China’s is one of the few that – explicitly or not - recognizes the absolute imperative of combining in a deeply integrated fashion environmental and economic concerns.

Now let’s see what can be done about the equality / equity aspect of those vital Three E’s.

David Caploe PhD

Editor-in-Chief

EconomyWatch.com

President / acalaha.com

Source: Economy Watch