Thursday, May 25, 2006

Teleportation & Carbon Guilt, "we call it life"

I'm still catching up on sleep from a spectacular weekend back in the States where I had the honor of participating in the beautiful wedding between my dear friends.

After a euphoric weekend of catching up with my crew after way too long, it came time for the Sunday good-bye brunch. Naturally, the conversation turned to teleportation, as it so often does at that stage of the weekend when everyone has to think about getting back home.

It was quickly and unanimously decided that my efforts in achieving a cost-effective societal shift to sustainability would be better spent on looking into achieving a cost-effective solution to man's age-old desire to disappear, and instantaneously rematerialize in another desired location. Check out this earlier post on quantum physics and non-locality to see why the two subjects are not as disparate as one might think. 

But until that glorious day when we have that upstream solution to our global travel woes, we're left with the reality of our globe-trotting impacts, chief among them: CO2 emissions. The impacts of climate change were all too obvious this past week back home, where record rains caused some serious flooding damage.

(Though, no it is not possible to attribute a causal relationship between anthropogenic emissions and recent extreme weather events with absolute certainty, the climate change models I've seen do call for higher participation in the Northeastern US). These pics from St. Paul's in New Hampshire, the school year ended early:

(check out this link for more pics of NH:
So, I'm sacking-up non-existent student budget to off-set my carbon for the trip - a very small but important step towards accounting for the true costs of activities. Here are some sites that offer the service:
Of course, as we all know from these awesome new commercials, we got nothing to worry about, Carbon is LIFE!!!!

Seriously, you've got to check those ads out -- when I heard about them it was with a touch of anxiety and sadness. I thought: "here we go again, big business funneling their valuable time and resources in a counter-productive direction." And it is that, but in such an unsophisticated, laughable way, I think it really might represent the "last gasp" of the over-politicized debate, so we can get on with working together to implement the exciting solutions that exist. It does also underscore the broad misunderstandings and potential for confusion about even the most basic attributes of the issues, and reinforces why we all need to keep learning and engaging with each other. On that note, thanks to all for the great conversations over the weekend, the interest and excitement was awesome to see. Stay going 

Sunday, May 14, 2006

Carbon Expo 2006

I’m just traveling home from an incredible week in Cologne, Germany at the CarbonExpo. The city of Cologne was beautiful and a lot of fun – we got there a day early and had some time to catch some sights, hit a Salvador Dali exhibit and put back a few K├Âlsh (the local brew) while editing the first draft of our thesis.

Here’s a picture of the massive cathedral in the city center – quite a sight:

The real excitement, though, came from the conference. It really brought home for me how fast the carbon markets are growing. I’ve been meaning to give an overview of carbon finance, the basics behind cap & trade schemes, etc. and I will soon, but for now I’ll just run through some of the highlights.

The EU ETS (emissions trading scheme) traded around €9.4 billion in 2005, since it went into effect when Russia ratified Kyoto. (The EU ETS is not technically a part of Kyoto – it was created by the EU to get all the systems in place for international emissions trading, and to get member states on track to meet their Kyoto commitments for the first period, which is 2008-2012). Early in the year I had heard estimates that the EU ETS would hit around €22 billion in ’06 – at the conference, people were saying it would probably be more like €30 billion.

With this huge growth comes some exciting times – the market has a real ‘wild west’ feel to it, with tremendous opportunities. The head of one of the bigger firms in the space referred to it as a “land-grab.” And another noted the market is “full of cowboys.” All of this made for really exciting atmosphere at the conference and a great job market.

Participants were all over the map – but mostly policy and finance types (i.e. a lot of suits, the conference was all business). There were a few of the big banks there (Goldman, Morgan Stanley), technology providers (including GE), government reps from all over the world, World Bank reps, carbon finance firms (EcoSecurities, Natsource, CO2e, Asia Carbon Funds), reps from the exchanges, market news firms (Bloomberg, Reuters, PointCarbon), and a slew of CDM project developers and consultants.

We caught up with a bunch of the experts who have been reviewing and commenting on CDM Select (the tool we’ve developed as part of our thesis), and we got a lot more interest from other project developers, investors, NGOs and governments who said they would have a look and provide feedback.

I was surprised (pleasantly) by how much the market is focused on the CDM (refresher: the Clean Development Mechanism (CDM) is a Kyoto instrument, which allows projects that mitigate GHG emissions in developing countries to generate credits called Certified Emissions Reductions (CERs) that can then be bought by industrialized nations (or companies in them) to meet their emission reduction commitments). A lot of the ‘low hanging fruit’ projects are going fast – these are mostly industrial gas destruction projects that are relatively cheap and straightforward (end-of-pipe technologies) that create a lot of CER revenue due to the high global warming potential of the gases. But more and more developers of all types and sizes (large and small private firms, governments, World Bank, etc.) are looking to more involved with potentially more beneficial kinds of projects like renewable energy, energy efficiency, afforestation/reforestation, etc.

On the political side, there was very little talk of the US, aside from some encouraging remarks about the activities at the state level with CA’s proposed scheme and RGGI (regional greenhouse gas initiative) in the Northeast. For the most part the market has written-off the US until the next administration. These days Canada was taking the heat as their new government has essentially said they won’t meet their Kyoto targets, and they won’t try. Couldn’t help but get the sense that we were being left behind in some ways and that the ramifications extended well beyond the carbon market. But given the growing awareness among the people of the US, I have little doubt that we will get on track soon and hopefully take the lead in creating a sustainable energy future. (on that grassroots tip, check out this cool link that’s going around - - sign up!)

Anyway, I’ll stop here, and promise to have more posts on the carbon market soon – which I’ve neglected on the blog, because I spend so much work-time on it – but I think it really is the most exciting aspect of sustainable development going on today. So, the bottom line is that it was a great time with a great bunch of people with all kinds of backgrounds and motivations, the market is unlike any other, but has shown signs of quick maturity (including weathering its first “crash” over the past couple weeks, and models on the exhibition floor at the conference), and there’s plenty of opportunity to ‘do well while doing good’ in environmental markets. Stay going…

Thursday, May 04, 2006

Ethanol - hype, threats and opportunities

News was out a few days ago that Goldman Sachs picked up a $30 million piece of Iogen, which is backed by Shell and is one of the two big cellulose ethanol players (along with Celunol (formerly BC International) of Dedham, MA).

There’s no doubt the hype is growing in the ethanol space – as this article from my brother points out – certainly wouldn’t recommend buying stock at this point. But I think there’s little doubt that ethanol and other biofuels (methane, biodiesel) will play a significant role in a sustainable future – as they already are in Brazil and Sweden.

Another big piece of news in the space is that the IRS just published Form 8911 Alternative Fuel Vehicle Refueling PropertyCredit which provides the first ever federal income tax credit for the installation of E85 fueling systems. It was part of the 2005 Energy Policy Act and provides a 30% federal income tax credit, up to $30,000 per property, to install alternative fuel dispensing systems (this news from the National Ethanol Vehicle Coalition)

Clearly the momentum is building in the US, which is great. There are some criticisms and concerns, however.

First: ‘ethanol takes away from needed food production.’ This is a marginal concern – we subsidize farmers not to grow food, global hunger is not a supply issue, and obviously it’s irrelevant in the case of biomass ethanol (produced from crop residues or other biomass, not necessarily food like corn, sugar cane or beets).

Second: ‘it still emits CO2.’ This is true, but it theoretically could be a ‘carbon neutral’ process because the carbon from the biomass will be stored in new biomass – so it’s not a violation of Sustainability Principle 1 (substances from the crust). In reality it's not completely true - E85 means 85% ethanol, 15% gasoline, which is sometimes needed for cold starts. Also, currently in practice, ethanol uses fossil fuel inputs for production, transport, agricultural production, etc.

Third: ‘it deprives the soil of nutrients.’ Here’s where it gets interesting. Fritjof Capra (fantastic writer on sustainability) more or less writes off ethanol for this reason. And he’s got a valid point – soil is the basis of civilization, and oil is not the scarce resource of the future – phosphorous is (with Morocco and China holding the cards). Closely related, is the huge issue of unsustainable agriculture and forestry. Regardless of the source for the feedstock for ethanol (corn, sugar, or other biomass), it must be sustainable in terms of growing (without chemical fertilizers and pesticides – Sustainability Principles 1 & 2, substances from the crust, substances produced by society) and harvesting (Sustainability Principle 3, physical degradation). But I think this could be solved in a sustainable way – primarily through closing the loop on nutrient losses from human and animal waste, and implementing large scale composting operations.

A whole-system perspective highlights some of the threats of a large-scale shift to ethanol – and there are more than those addressed here, many specific to various regions (particularly water) – but it also highlights the opportunities. While there are only ~600 filling stations with E85 pumps in the US, that number is growing and that tax incentive will surely help. There are already over 5 million flexi-fuel vehicles on the roads in the US – not a huge number, but significant and growing, with more and more models available (check your VIN # to see if you already own one). Here's a shot of the thesis team - all business with our rented Flexi-Fuel Volvo V50:

The shift to a renewable fuel base will likely happen fast once it reaches a critical mass, as is happening in Sweden, and as it does, it will be vitally important to have this whole-system perspective to ensure that it’s done right. Stay going…