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I recently was “followed” by Dennis McMahon of mygreenflight, a company that bills itself as offering carbon offsets for the air traveller. This author isn’t necessarily a fan of offsetting (see here) so being followed by an offset provider, especially one so bullishly named was an act just bound to make me poke around a little to see what was what. After some surfing around mygreenflight’s site for a while I emailed off some questions to the vendor, which Dennis subsequently and thoughtfully answered - more on that in a moment.

Before getting to that detail however it is worth spending a moment looking at why the entire concept of offsetting might be a little flawed. Offsetting is best described as a cousin of carbon cap and trade schemes (CCT), which themselves are the market led approach to managing and eventually reducing industry emissions. CCT schemes, like the UK’s Carbon Reduction Commitment, the European Emissions Trading Scheme, and the hotly debated nascent Australian scheme seek to create a finite market in emissions permissions. That subtlety is often ignored, such schemes do not actually trade emissions, they trade permission slips. Such permission slips are really no more than promissory notes that have a financial value intended to be significant enough that a nation or industry that needs to buy them will eventually be pushed into actually taking steps of their own to actually reduce the levels of GHG they emit. In theory, the costs associated with reducing actual emissions is less than the cost of continually buying the permission slips, therefore setting up an economic incentive to change. Meanwhile, a purchased permission is withdrawn from the market thus reducing the pool of permissions available, and the money garnered through the purchase of the permission slip might even be invested in some form or another of carbon sequestration equal to the task of absorbing the GHG emitted.

In reality however several major flaws are evident.

For a start, the cash value of the permission slips does not encourage investment in techniques, technology, or behaviour that actually reduces GHG emissions. The EU ETS is infamous for the wild fluctuation in the value of the permission slips. Such fluctuations will only be eliminated when the market is regulated and managed in a planned and interventionist manner (much to the angst of those who trust entirely in the free market approach - they see the open trade as being that akin to any other commodity while ignoring the fact that the price needs to be managed as the intention is actually to influence behaviour).

Secondly permission slips don’t reduce actual emissions. Meanwhile the GHG were almost certainly actually emitted by the individual/organisation that purchased the permission slip, and lets not forget that those emissions then stay in the atmosphere for a considerable period of time - think tens to hundreds of years. Offset schemes often claim that investment in them will result in creation of carbon sinks that will absorb a quantity of GHG equal to that emitted. Even if such action does occur (and there have been many cases where such claims are entirely fraudulent) it is highly unlikely that such schemes will effectively sequester GHGs for the entire duration that those GHGs that were actually emitted remain active in the atmosphere.

Some schemes claim that the money raised through permissions trading is spent encouraging the retention of the world’s existing carbon sinks, usually in the form of forest conservation. For example offsets can be purchased to buy a chunk of Amazon rainforest, thus protecting it from logging or clearing to enable urban expansion, the growing of monoculture crops such as corn for biofuels, or beef cattle grazing. Of course the only significant remaining stands of such forests are in developing (none G20) countries and such clearing is as often performed to enable the farming of produce (as well as the logged timber) for export to the G8 nations as it is for reasons of domestic poverty and lifestyle pressures. Putting aside for a moment all the not insignificant questions regarding unwanted foreign intervention and ownership of land in such countries it is worth remembering again that stewardship of such carbon sinks needs to be maintained for the duration that the actually emitted GHGs remain active. Most importantly, remember that such schemes do not incrementally add sequestration capacity, they simply attempt to retain the paucity of what natural sequestration capacity that remains. Meanwhile we already know that that remaining capacity is insufficient to actually absorb the levels of GHGs being emitted. Therefore such efforts might best be described as knocking around the edges of the question of ownership of natural carbon sinks, rather than incrementally adding capacity or actually reducing real emissions.

With all that in mind lets return to the specific example of mygreenflight. The first thing to know is the roots of the company are in a logistics business the mission of which is to enable the airline industry to further expand. Therefore you have the conundrum of this being an offset company with a tactical goal of reducing emissions through the trading of permission slips, which meanwhile has the strategic goal of expanding an industry which is arguably already unsustainable. GHG emissions aside it is worth also remembering that the entire airline industry’s future is tenuous at best in light of ever rising fuel prices. The answer by the way to rising fuel prices lies not in a move to biofuels. Despite early and highly publicized PR stunts dressed up as trials biofuels remain a potential solution that even the IATA regards as being at least 15 years away from reality and anyway the demand for biofuels from the global airline industry would require biofuel crop monoculture on almost all of the Earth’s available arable land, including all that currently used for food crops and all that currently “used” by all those virgin forest carbon sinks.

All that aside, to test mygreenflight’s scheme I used the company’s offset calculator to see what it would cost me financially to purchase offsets, and meanwhile to see what they think is required to “absorb” the GHGs actually emitted in my flight. To do so I added one long haul flight and one short haul flight (economy return, using bmi and Qantas as my chosen airlines).

My flight details as entered were:

Shorthaul: London Heathrow to Edinburgh (LHR-EDI) bmi, Economy Return. 0.17 t of CO2 emitted, requiring an offset costing £1.30
Longhaul: London Heathrow to Sydney, Australia (LHR-SYD) Qantas Airways, Economy Return. 5.31 t of CO2 emitted, requiring an offset costing £41.86

Total: 5.47 t of emissions for a cost of £43.16 in purchased offsets.

The first observation is that if the goal of offsetting is to allow me to trade in a CCT scheme, the goal of which is to provide an economic framework that ultimately changes behaviour through the internalisation into the balance sheet of the economic externality that is the emissions, through the mechanism of incremental cost then it has done little to actually deliver. £43 and change is unlikely to actually encourage me to seek alternatives to flying - though to be fair there really isn’t an alternative to flying in order to get to Sydney, however £1.30 (less than the cost of a coffee at Heathrow) isn’t going to encourage a potential traveller to catch the train to Edinburgh (an act that the train operator Stagecoach calculates would result in 86.4Kg of carbon emissions). Of course given that mygreenflight’s strategic mission is to enable expansion of the airline industry it stands to reason that the emissions calculated, and the offset costs assigned to them be finely balanced between providing a feeling that the passenger is making a difference without actually encouraging the passenger to take up an alternative mode of transport (or even consider not travelling at all).

But I also wanted to know more on what my £43.86 was going to buy, and this is where I emailed mygreenflight for more details. To ensure that I capture the full Q&A exchange copied here is the email I received in reply from mygreenflight’s Dennis McMahon (spelling and grammar errors, if any are “sic”).

-snip-
Hi Simon,

My apologies for the delay in responding to your questions.
Please find my responses to your questions below:

YOUR QUESTION: What audit trail is there of what this money is actually used for?

MY RESPONSE:

Our systems will see the funds being applied to Voluntary Carbon Standard Projects that generate Voluntary Carbon Units or VCU’s, which are a subset of Verified Emission Reduction Units (VERs).

All projects from which we purchase offset credits need to have the following criteria:

· Third party verified by accredited Verifiers in this field
· Credits must be issued
· Credits must be listed (or able to be listed) on the TZ1 VCS Registry
· Credits when allocated to offsets purchased by passengers will be formally “retired” on the TZ1 Registry

Re the audit trail – our processes and systems are being reviewed by Bureau Veritas (UK office) to ensure that we have the correct systems in place now. Bureau Veritas will also be conducting periodic audits of the funds trail, and providing reports for same, to ensure that we accurately retire the equivalent number of credit tonnes to match the offset credits purchased.

Initially, there will be a delay between offsets purchased from the site and the retirement, as there is a need to purchase a commercial qty of credit tonnes from project developers. As we gain purchase trend data (both quantities and preferred project types) from clients such as yourself, and expand our airline partnering program, this approach will be replaced by forward purchases, so that retirement can be made from a pool of credits we have forward purchased.

YOUR QUESTION:

a) Is it to purchase and maintain natural forests or other CO2 sinks, if so how much land equals how much CO2 and for what period do you guarantee to manage the purchased asset?
b) Is it to plant new trees and support reforestation?
c) Is it to support CC&S technology research?
d) Is it to trade in ETS permits and if so which markets do you use (EU, UK,,,?).

Basically I am looking for some info on what you actually do that practically makes a difference.

MY RESPONSE

We have decided that we will be guided by our clients as to the project types that we support – you will note that we offer a range of project types (but not specific projects) on the calculator page at the moment. This is to ensure that we get actual feedback from clients about the projects that are of interest to them. Based on that data, and the quantity of tonnes offset for each project type, we will purchase and offset credits from those projects that client shave told us they want to support. Naturally, our purchases will be partially dictated by availability of credits, but we are determined to match client preferences with project types as much as we can.

In specific response to your questions on this topic:

a) We are maintaining a watching brief on forestry projects and developments related to the REDD projects. We think there will be accredited projects in this category post-Copenhagen, but at the moment, there is too much uncertainty as to methodologies to give us the confidence to purchase forestry credits. I know that there are many forestry projects generating credits in North America and other parts of the world, but as far as I am aware, none of those projects have sufficient credibility to be verified and accredited under either VCS or Clean Development Mechanism (CDM) rules.

Simon, if you are aware of any projects that meet the VCS or CDM criteria, please let me know.

b) See a)
c) Funds are not to support CC&S technology. This technology is currently way too speculative for us to get involved in – we would prefer to utilise credits from projects that have a solid bases in accepted methodology, and that meet the “additionality” criteria required fro VCS and / or CDM project verification
d) We are not looking to trade in ETS permits as part of the MyGreenFlight Carbon Offset program. We may assist airline clients in this area if asked, but it would be as a separate consultancy service.

YOUR QUESTION

I have thoroughly read through what you say on your “About us” pages, and am looking for me insight than “..we will obtain all of the verification and accreditation documentation from the Projects to ensure that they are fully accreditied (sic) and verified”

MY RESPONSE

Simon, every CDM or VCS Project must have a number of documents to establish the Project, to define it’s scope and the number of credit tonnes projected to be generated.

These include:
· Project design document
· Validation Report
· Monitoring Report
· Verification Report

These are the documents we will be checking to ensure that projects meet our criteria. In addition, we (or agents employed by us) may visit certain projects to confirm “on the ground” additional social co-benefits that may be claimed by the Project Developers.

DENNIS MCMAHON

Sales Manager
Greenflight

-/snip-

It must be said that Dennis’s reply, on behalf of mygreenflight is entirely professional, thorough and reasonably precise. Specifically and impressively he also puts forward the view that current forestry projects are tenuously beneficial to say the least. It is also worthy of note that the company does not currently invest in carbon capture and storage (CCS) technology development as such projects do not currently meet the criteria for additionality - meaning they don’t actually currently result in an additional carbon sequestration capacity. He is to be congratulated for taking on my questions and dealing with them in this manner.

Having said that, I’m still not sure what my £43.86 is buying - a strong sense remains that any offsets purchased from mygreenflight is simply being banked until such time as a suitable way for the company to invest the funds is found. A traveller may therefore assuage the guilt now of GHGs emitted into the atmosphere now, on the promise that sometime later something will be done that will somehow sequester an equivalent amount of emissions. While the emissions are guaranteed to be making a difference from the instant that they are released, what contractual guarantee does the purchaser have that later they will be neutralised through an investment that mygreenflight will make (not that I am in any way suggesting that the company will do less than make a best effort)?

So at this stage this exercise leaves me unchanged in my view that offsetting isn’t worth the effort. Travelling short haul distances by methods other than flying and in ways that reduce actual emissions (train etc) are not always possible, but they are also admittedly often less convenient and more expensive than the flying option. I remain of the opinion that when and if I have no alternative to fly I am making more of an actual difference by “copping” the expense and extra effort of not flying on a later occasion when the alternative does exist - in effect “banking” the money myself that I could have spent on offsetting into an account that I can later use to pay for a possibly more expensive train ticket, or even just treating myself to an extra coffee (with my £1.30) as a personal reward for making the effort.

The debate, if you can call it that, in the US over health care system reform is a truly bizarre spectacle, and one that is an abject lesson in how to distract an argument away from the core subject being discussed.

The indisputable fact is that approximately 40,000,000 people in the US cannot afford access to basic health care services. By “basic” I refer not to agonising decision over whether to have nipple enhancement or not while you’re in to get your breasts done. No…by ‘basic’ I mean services like non cosmetic dental care, A&E care, blood pressure and cholesterol diagnosis and treatment, diabetes diagnosis and treatment, natal care, and services to repair all the wear and tear experienced during the average first 18 years of life. The bottom line here is that the current system, the status quo, is structured such that 40 million mothers, fathers, grandparents, sons and daughters have zero ability to pay for services to fix health problems that are chronically painful and perhaps life threatening. With no “health care net” available either “no ability to pay” translates into “zero access”.

To reiterate what is an important and fundamental point. The current population of the UK is approximately 60 million people. If 40 million people in the UK were similarly effectively blocked from access to health care then two thirds of the population could not go to the dentist or doctor ever. The current population of Australia is 21 million - so if you deported all the doctors, nurses and dentists from Australia and closed all the hospitals and clinics you’d still only be halfway to denying 40 million people basic health care services.

Meanwhile, for the other 260 million or so Americans who do have access to health care, services and treatments are eye poppingly expensive. However, be careful your eye doesn’t pop too far out as it may not covered by the health insurance scheme provided by your employer - which is shelling out an estimated US$12,000 per employee per annum to pay for that insurance (providing insurance for the employee and up to 3 dependants). That’s US$12,000 more that could be paid directly to the employee as wages if the employer did not structurally have to cover the health insurance costs. If you think twelve thousand bucks is chicken feed, it is worth remembering that that figure is the about the US minimum wage - though it is also worth remembering that if you were an employee actually on minimum wages, it is unlikely that your employer would also be providing health insurance making you perhaps one of those 40 million people unfamiliar with the inside of a doctor’s waiting room.

This author speaks from experience with regards to the platinum coated pricing schemes of US health care as we had a son born in New York state during the family’s four year tenure in the USA. It is worth providing a short summary of those costs to provide perspective:
- total time mother/son spent in a hospital: 12 hours (the minimum time before you’re allowed to check out after giving birth)
- total time doctor spent in room: 60 seconds (to sign a form)
- nursing staff: 1 “in and out” with the majority of nursing provided by self funded midwife
- drugs and other interventions: zero (yes you read that right; no drugs, no interventions)
- use of “machines that bleep”: zero
- use of ambulance or similar: zero

In short - you would struggle to describe a birth experience that required less support from neo-natal services other than a home birth.

Total cost: just shy of US$8000; with the employer provided insurance paying for 90% and leaving us with a 10% or US$800 deductible. Just what was worth eight thousand dollars of medical treatment remains a mystery to this day.

Meanwhile the US is ranked by the WHO in almost all indicators, except for cancer survival rates, far below Oman, Morroco and Colombia, as well as the UK, France, Germany (just keep listing other major European and Scandinavian countries here), and Australia. The USA ranks 37th.

To summarise: the US has a health care system today that under-delivers against important key performance indicators (infant mortality, average life span etc), is eye wateringly expensive for those treatments it does provide, and leaves 40,000,000 people with zero health care. Oh, and by the way the status quo is projected to bankrupt the country entirely as it will fail to scale further as the populations increases and ages.

The debate therefore ought to be a simple one - does the US maintain this status quo, or does it seek to reform health care in such a way as to drastically improve the USA’s WHO rankings , provide basic services universally, and reduce the overall costs to prevent budgetary collapse.

However that isn’t the debate that is taking place. The debate that is taking place is over whether the provision of universal health care is “socialist” (translation: pinko subversise communist), and whether fantastical death panels will rule over the worth of Grandma’s life (Sarah Palin says she can see the Death Panels from her medicine cabinet). Take these two distracting and emotive topics, add a little dash of Glenn Beck to the aforementioned Salt of Palin and you’ve just hijacked what was a needed and sensible debate, and you’ve turned it instead into a roiling mess of argument that churns onward and achieves nothing. Or more accurately, it achieves the maintenance of the status quo.

Which brings us naturally to the topic of peak oil (this as my old friend George Watt would say, is a “neat little seque”). The connection here is twofold and less tenuous than you might think. Firstly, oil provides the energy that enables modern health care. Secondly, and more directly relevant to the main point here is that the debate over the timing of peak oil has been allowed to overshadow the necessary debate over the future of (petroleum based) energy prices.

The truth of the matter is that we will only definitively know when global oil supplies have peaked once we’re well down the slope of decline. Far enough down perhaps to have put behind us a few (more) instances of supply having insufficient scope of growth to meet real demand. There is much evidence to suggest that we’re already basically at the peak point, or just beyond. However arguing this point tends to just around in circles. It is very easy for peak-deniers to point to the status quo and argue that “Providers report significant reserves as they have in the past. They didn’t stop pumping last year. So they won’t stop pumping this year. And anyway, we can just drill a few more holes in the Alaskan tundra if we need more.” Such drill-baby-drill responses are the peak-oil equivalent of the pinko-communist-death-panel responses in the US healthcare debate. The main purpose, intentional or otherwise, is to maintain the direction and rate of the status quo and delay or prevent structural change and improvement.

The real discussion that needs to be taking place concerning oil is whether cheap oil will continue to be available. “Cheap” is of course a relative term. Ignoring for a moment that (not insignificant) fact of the infamous US$147 p/bl price peak, by “cheap” means “the median price of oil over the period during which it has fuelled the development and growth of the current economic model.” Furthermore, given that the maintenance of the social/economic/world-balance-of-power status quo relies on the oil price remaining somewhat near that median price, what are the implications for the economic decisions that are made countless times every day, that are based on the price of oil?

The outlook is such that it is almost certain, on balance, that anything but the status quo will result. For example, OPEC has for some time now called for a price range of between US$70 and US$80 p/bl as being the minimum that can support the necessary infrastructure and exploration investments required to maintain supply levels. Shell CEO Jeroen van der Veer stated in June of this year that “(All this) points to new price spikes and volatility further down the road.” The same Kuala Lumpur hosted Asian Oil and Gas conference heard BP CEO Tony Hayward state that a target price of US$60 to $80 p/bl is also in BP’s sights in order to pay for required investments.

A per barrel target price of between US$70 and $80 p/bl is a very interesting one for a number of reasons.

For a start, it represents the upward slope of prices for petroleum and oil-derived products (fertilizer and plastics feed stocks) that are felt downstream by consumers and industry. The Wall Street Journal reports that petroleum prices as a percentage of disposable income more than doubled between 1981 and 2008. This is enough to change consumer behaviour, and certainly enough to alter the balance of cost calculations for heavily oil dependent industries.

Secondly, it is worth looking at the 2006 study performed by the US Department of Commerce titled “Macroeconomic and Industrial Effects Of Higher Oil and Natural Gas Prices”. The D.O.C. study was designed to predict the effects on the US economy (and by extrapolation all other developed economies) of an oil price that is maintained in the range of US$70.00 to $80 p/bl for two years or more. Not surprisingly, the study found depressive effects on GDP, industrial output, consumer disposable income levels and more. All other things being equal such a price would also result in an additional 500,000 people becoming unemployed due to cross sector job losses, compared to an oil price range in the US$50 to $60 p/bl range.

Those resulting changes occur for a very simple reason: as oil prices increase (and therefore the prices of products derived directly and indirectly from oil increase) the decisions made by individuals whether acting as individual consumers or in their capacity as business decision makers changes too. Spend less, invest elsewhere, carry less employees, locate and manufacture elsewhere. Scaling upwards to the strategic and structural as oil prices continue to go upward from US70+ we eventually reach a point where airlines downsize and go out of business en masse, and where commuters desert their SUVs and catch a train or a bus instead. Jeff Rubin, former Chief Economist of CIBC Worldmarkets is quoted as saying “I think we’ll see a return to triple digit prices (per barrel oil prices) very early into an economic recovery”. His book titled “Why Your World is About to Get a Whole Lot Smaller: What the Price of Oil Means for the Way We Live” is worth a read as a basic outline of his thinking.

This therefore is the discussion we ought to be having - how do we achieve a soft landing for society as oil prices increase, and the associated economic decisions are reworked? Sure, there are clearly some, like Mr. Rubin who are sounding the drum. However the majority of individual and corporate decision makers continue with the assumption that energy prices will remain roughly in line with those enjoyed during the past 50 years, and that therefore the same structural economic system will continue. All the rest have either not noticed at all, or have been distracted by the circular debate regarding peak oil.

All of which is a segue if I ever seen one. And a sick one at that.

Very pleased to be accepting contributions from my old colleague Tom Mellor on ThinkingString. Tom has spent more time at the pointy and unpleasant end of large scale, technology related infrastructure projects than most people I know.

Tom will be writing about risk management, infrastructure and information security, how to successfully implement infrastructure projects, and no doubt a few other things aside. See here for a short bio on Tom.

At school, I was taught that “mankind consumes two types of resources; renewable resources and non renewable resources”. Vague memories come to me of that being a core aspect of the early stages of either the economics curriculum or that of what was fuzzily called “Social Sciences”. The latter subject embraced everything from geography to politics to society, and if memory serves me was led for a while by one of the more interesting teachers to have chalked the blackboards during my formative years. I seem to recall that a number of prepubescent young ladies found the subject of renewable anything utterly engrossing as long as it was explained by a certain foppishly haired Social Science teacher.

Anywhere, there you have it, we have a group of important people (mankind, one presumes the woman were off doing things like cooking the latest Margaret Fulton pavlova recipe) doing the important things they are destined to do (consume stuff) while the world sits there doing exactly what it ought to do (provide resources for the consuming of). Furthermore, the world either provided all those resources as a one-off (gold, diamonds, hit singles by The Vapors), or in the form of an almost magical cut-and-come-again manner (trees, water, foodstuffs, The Magic Pudding. Thus enlightened a classroom full of eager eyed students were that little bit readier to be sent out to play their parts in the great circle of consumption and commerce that is modern life.

Except for one little oddity: oil.

Oil, which logic dictates ought to be classified as a non-renewable resource has thus far been treated as a renewable. Oil supplies have truly been treated as though they are the Magic Pudding energy supply. However, given that the source of oil is what you get when you compost prehistoric algal blooms for a really long time, under conditions of heat and pressure it stands to reason that oil must be a non-renewable resource. Finite algae = finite algal bloom derived product. QED.

Meanwhile, oil literally powers the engines of commerce, while being the feedstock for diverse products from fertilisers to plastics. The history of the 20th century, and the conflicts and problems of the 21st could not more intimately connected with the history and realities of oil production then they are. We are literally living in an oil based society.

Oil’s status as a non-renewable resource, combined with its unique role as the foundation for society’s structure and everyday actions means that we must ensure that we have a plan for the eventual decline of supply. Now if that eventual decline was a long time off, say 100+ years from now, then we would still have enough breathing space to engineer a switch away from using this resource the way we do today (notwithstanding the fact of oil’s role as principle AGHG pollutant - but climate change is a whole other issue). But if a material decline in supply levels were to be only a short time away, say between 10 and 30 years, then good governance would dictate that humanity ought to be applying some of that unique ability to forward plan that is said to differentiate Homo Sapiens from the rest of the animal kingdom. In short, the urgency with which we take action to seek alternatives to oil ought to dictated by how long it is until oil supplies materially decline.

Back in the 1950’s the “science” of calculating just when an individual oil producing field’s production rate will begin to decline was formulated by M. King Hubbert. Hubbert’s seminal work resulted in the concept of what has come to known as “Hubbert’s Peak” - referring to the point at which an oil field’s production peaks and then begins to decline. I’ve written at length on the science and history of Hubbert’s peak here, and here (latter link opens a PDF which provides an introduction to the concept of peak oil). However the fact that we might be approaching the decline in worldwide production capacity in the near term rather than the long term has continued to be treated as a fringe theory by much of the mainstream, and certainly by the markets.

However the Chairman of the International Energy Agency Dr Fatih Birol is an individual one would hardly label as “fringe” or as being an individual prone to conspiracy theories. Therefore his statements as published in UK newspaper The Indepedent are of the “sit up a little straighter and pay attention” variety.

Dr. Birol is quoted as saying “One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day. The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously,”

How seriously?

The IEA Chairman’s statements come on the back of the agency updating its calculations regarding the health of known oil fields, their remaining capacity, and the potential for there to be significant reserves yet to be found. The IEA recently updated its estimate of the rate of decline for production from 3.7% per year to 6.7% decline per year. That means two things; firstly that the rate of decline is increasing, which would tend to indicate that we are at or near the peak point already (maybe just before, maybe just after the peak). And secondly it means that for oil production capacity to remain steady, we need to find new supplies equal to the capacity being removed from the system through the very natural phenomena of individual oil field decline - at a rate of 6.7% per year. Meanwhile, the global demand for oil holds steady and is forecast to grow as emerging economies such as India and China ramp up their needs.

Business as usual just doesn’t seem to make a lot of sense in such circumstances.

Which is why it is both refreshing to see Dr. Birol’s statements being made in the mainstream press. It is also very concerning that 24 hours later it was all as if nothing ever happened. Which perhaps just goes to show that Homo Sapiens might not be that good at forward planning after all. I am betting that there is not a single organisation I will speak to in the coming 12 months that will have flagged this issue as being one that is fundamental to the question of its business strategy, looking forward to the decades ahead. I await the pleasant surprise of a contrary experience. Meanwhile, its back to the fringes of conspiracy theory. At least while there I will have the good company of Dr. Birol, Jeremy Legget, Matthew Simmons and a whole host more.

Organisations seeking to develop a successful sustainability strategy will need to do much to develop and foster a “culture of sustainability” amongst staff. The aim for such an exercise is to develop a consideration for sustainability in all decision making that is second nature. There are a lot of parallels here to the efforts that companies undertake to bed in attitudes towards “putting customers first”, “ethical behaviour”, “thrift and financial efficiency”, “information security and handling practices” and even just the general “winner’s attitude” that is especially valued in sales teams. Developing such cultures involves leading from the top, and ensuring that staff are not simply trained, nor “wacked” when out of line, but rather than they are provided the skills and awareness they need in order to make informed decisions, while being rewarded and encouraged through alignment of organisational goals, compensation models and personal development goals towards that end.

Effectively leading from the top will require executives and senior management to set a direction and tone, and to clearly communicate goals and progress. While detailed measurement of progress will be part and parcel of project management efforts, internal and external reporting and strategic governance, there will also be a requirement for somewhat abstract “high level” signposting of the importance placed on sustainability, and the relative priority given towards achieving related targets.

Setting such a compass is about internalising a simple balanced ratio between the relative importance assigned to profit making compared to that assigned to “treading lightly”; “Economic Sensibility” versus “Ecological Sustainability” ($ES:ES). Imagine you have $/£/€200 to spend in the best way possible to help your business, how much of the money do you assign to “economic sensibility” measures and how much to “ecological sustainability”? $190:10 might be a score for Chernobyl Nuclear Power Plant (i.e. disproportionately more emphasis placed on revenue generating business as usual and hardly over that placed on safety and sustainability), while an eventual score for on target balanced company might be $105:95, and for one that has a lot to achieve on the green front perhaps $65:135 (note that putting the “$” at the front serves to remind everyone which number refers to profit and which to sustainability.). At a top level, a target $ES:ES score can be set toward which everyone in the chain of command can aim towards as they perform their everyday roles, providing a simple and perhaps more meaningful top level performance indicator than the “traffic lights” so often used.

Anyone who’s ever attempted to avoid certain foodstuffs, whether for reasons of taste, allergy, diet, belief or morals, will know that it’s the fine print in the ingredients list that is all important. The ingredients list, together with standardised disclosure labels such as the Soil Association’s “Organic” symbol, the Fairtrade mark, and the Food Association’s “traffic light” symbol help consumers make informed decisions over what they put in their mouths. It’s worth noting that many foods have ingredients lists longer than the fine print in a mobile phone contract, which is an indicator that when required to by legislation, manufacturing companies can manage to track a complex set of base ingredients in a way that supports required disclosure.
It must be said that such disclosure requirements aren’t always welcomed by industry, however there’s a grudging acceptance of the need to label together with a strong desire to happily seek a stamp of approval if having one is suddenly recognised as being a positive brand differentiator. Disclosure, and informed choice, are after all powerful market shaping forces that have created new markets and enabled the phasing out of products, sources, and manufacturing methods newly considered undesirable or dangerous. There are many examples of these phenomena, but the two most powerful examples in the fast moving consumer goods (FMCG) food market in the last two decades are the Fairtrade and Organic Produce marks. There have also been notable “issues based” campaigns such as that conducted by Hugh Fearnley-Whittingstall in the UK against battery farmed chickens during 2008 and 2009. The power of such issues-based campaigns ought not to be downplayed especially when sufficient media attention gets behind one. Consumer preference can be extensively shaped when attention is drawn to the sourcing of produce tainted with the whiff of dubious morals or unsustainable practices.

Disclosure also supports one of the most basic and powerful tools of international diplomacy; the application of economic pressure through sanctions and market control. Forcing companies to identify and disclose the use of materials sourced from a particular country allows for the enforcement of laws restricting trade between certain countries. The U.S.A’s Export.gov site provides full information regarding international trade restrictions, as does the UK’s Foreign and Commercial Office site. Such restrictions fundamentally shape market behaviour, and restrict everyday company actions such as selling to or sourcing from specific countries.

By now, you may be wondering what all this has to do with the ICT and consumer electronics industries; and the answer is Tantalum. Tantalum is a rare mineral with conductance properties that make it an essential ingredient in the capacitors inside every mobile phone (and many other ICT devices). Tantalum is sourced from only a few mines around the world, with the majority of supplies now coming from the Democratic Republic of Congo (DRC). The DRC has been in a state of guerrilla warfare for many years to the tune of around 6 million deaths, and Tantalum mining and export is to the conflict what opium poppy farming is to Afghanistan; providing a rich source of international trade that funds continued conflict. Tantalum’s role in the DRC conflict has long been recognised, with the U.N. creating a panel to look at the issue back in 2001, at the direction of then UN secretary general Kofi Annan.

While the intervening years have seen little real change, Tantalum’s presence in consumer and office electronics goods is facing renewed focus. In April, U.S. Senators Sam Brownback, Dick Durbin, and Russ Feingold drafted and introduced a new act called the Congo Conflict Minerals Act of 2009. Under the draft legislation, U.S.-registered companies selling products using columbite-tantalite (a source of tantalum), cassiterite, or wolframite, or derivatives of these minerals, would be required to annually disclose to the SEC the country of origin of those minerals. If the country of origin is the DRC or neighbouring countries, the company would need to also disclose the specific mine that the minerals are sourced from.

How significant that act might be in shaking up the electronic supply chain is perhaps indicated by the fact that meanwhile, the world’s largest source of Tantalum outside of the DRC is busy shutting down operations. Australia’s Talison Minerals, which previously enjoyed a 50% market share for supply of the mineral, mothballed its largest mine at the end of 2008, a move that reduced its active Tantalum mine operations from three to one. In announcing the action Talison cited unviable market prices related in part to cheap supply from the DRC. Perhaps the U.S’s Congo Conflict Minerals Act will see a reversal in this market state in the coming years, as the restrictions and market pressures make electronics manufactures reconsider their supply chains. Right now, electronics manufacturers are unnecessarily and significantly exposed as far as the provenance of the Tantalum supply.

All of which is a good lesson as to why “sustainable IT” is more than a passing nod toward an energy efficient server or a refillable printer cartridge. While the newly drafted Congo Conflict Minerals Act has a way to go before being adopted (as is or amended) it is a sign that far more scrutiny can be expected into the ICT industry supply chain in the future. Such scrutiny no doubt introduces complexity in both adherence by manufacturers, as well as in the level of consideration a buyer might have to take in selecting a product and supplier. However scrutiny crucially enables informed decision making, which is never a bad thing. Meanwhile, take another look at your mobile phone, there’s more inside it than just your contacts list and a battery that never lasts long enough.

Originally written for eWeek Europe:
http://www.eweekeurope.co.uk/comment/sustainable-supply-and-the-trouble-with-tantalum-850?page=1

In the lead up to this week’s ICT 2020 conference, the EU Commission has called upon the Information and Communications technology (ICT) sector to “lead the way” on dealing with climate change by “by setting itself concrete targets (for greenhouse reductions)”.

The Commission quite rightly identifies some important ways that ICT can contribute to achieving a low carbon economy, from smart metering of electricity to the increased use of IT in the construction, building management and transportation sectors. But the Commission is misguided in its call for ICT to “lead the way” and has made the grave mistake of misidentifying which part of the dog is controlling the wagging of the tail.

It’s important to remember that ICT serves the business, and not the other way around. This is true even in companies that make strategic use of ICT. ICT departments prioritise according to business imperatives, and while there might be some degree of deferment to ICT when scheduling business initiatives (for instance timing the launch of a new sales initiative based on the capability of IT to deliver the new web based sales infrastructure), technologists will always be part of a service function to departments like finance, marketing, sales and supply chain operations.

To say that ICT can lead the way forward on climate change is to misdiagnose the problem and in doing so to avoid the necessary strategic change required in the way that organisations operate overall. It seems that ICT is perceived as the magic method by which the relationship between economic growth and energy usage will be decoupled. A few simple examples will suffice to demonstrate that the EU’s call for ICT leadership is flawed.

Firstly, there is the question of efficiency. Both the IPCC and the IEA have calculated that efficiency efforts will deliver significant returns with regard to cutting energy usage, and therefore reducing greenhouse gas emissions. Not coincidentally, ICT vendors and ICT buyers are pushing hard on products and projects that claim to be more efficient than last year’s way of doing things.

So a data centre may well be redesigned with a consideration to cooling, rack placement, aisle layout and so on, and servers may be virtualised to ensure higher utilisation loads on the newly chosen “energy efficient” hardware. The ICT department may even take on some new workloads like supporting high-end video-conferencing as an alternative to staff business travel.

Meanwhile, even while in recession survival mode many business strategies call for continued and unbridled overall growth and increased market share. So having achieved a highly efficient operating level, ICT will simply be asked to deliver even further computing services to support that growth. More business demand ultimately equals more computing, albeit delivered more efficiently then before.

Eventually the push for expanded service delivery capacity will exceed the ability of efficiency efforts to reduce energy usage, and overall energy usage will rise again. Efficiency in the absence of a business level cap on overall emissions is often an encouragement to further growth.

Secondly, it is worth remembering that ICT is estimated to account for a mere 2 percent of overall global emissions with the other 98 percent coming from all the other things that businesses and individuals do. Indeed the EU Commission states “The use of ICT across all sectors of the economy and society can reduce the remaining 98 percent of European emissions.” Clearly the ratio between ICT’s emissions and “everything else” is going to vary when the same breakdown is applied at the level of a single organisation. In some organisations ICT may account for 20 percent and in some next to zero.

Regardless of the actual amount however, there is generally a clear link between some aspects of the actual business’s operations and the processing that ICT performs. Applications “map” to business functions if you will.

The bulk of the emissions savings will come from shutting down or tuning those business functions, not by addressing the ICT that supports them. Sure, ICT may measure, meter, manage and provide guiding intelligence to the business on how those various functions may be improved, but ultimately it will be a business decision whether or not the business functions are left as-is or are changed. If the business decides a function will continue, then ICT will simply be asked to get on with delivering the application environment in a cheap and efficient manner.

Finally, the emissions of greenhouse gases are being internalised into a company’s balance sheet via the proxy of real currency (meaning you’ll have to pay for it), via cap and trade and carbon taxation schemes like the UK’s Carbon Reduction Commitment. This will introduce a sliding scale of charges related to total emissions resulting from business activity.

It will be a business decision how such charges will be allowed to influence operational strategy, not an ICT one. Sales, Finance, the executive management team and the Board will ultimately decide, and the CIOs will do what they need to provide the required set of services.

This isn’t at all to say that ICT won’t play a strong role in achieving a low carbon economic model. Indeed, there will be additional opportunities and challenges ahead for the ICT industry as a whole and for individual CIOs to grapple with. The mantle of strategic leadership lies elsewhere however – dealing with climate change and formulating a successful path forward for the company is a challenge that must be spearheaded at corporate executive level.

With all due respect to the EU Commissioner for Information Society and Media, Mrs Viviane Reding: ICT isn’t the right place for leadership if we are to solve this problem correctly.

Originally published in eWeek Europe:
http://www.eweekeurope.co.uk/comment/get-real-reding-ict-can-t-save-the-world–427

Sometime in the next one thousand, four hundred and fifty eight days its all going to get really ugly. There will be no single day of reckoning, but rather a wave of reckonings - somewhere around 303,824,640 of them. According to no less an authority than the CIA 303,824,640 was the USA population back in mid 2008, though there have been a few burials and births since then so perhaps this piece of intelligence, like so many others from the CIA should be taken with just a pinch of salt.

Arguably more than a few have already tipped into the realisation of just what is in store for them should the newly elected US President, Barack Hussein Obama II actually bring into reality the promise of a low carbon economy. Most however are still dazed by the spectacle of the inauguration to give it real thought. Carrying on his shoulders the hope of so many Americans (and no small number of the majority of the world’s population i.e. the rest of us) that he can steer the USA away from its socially, morally, and physically destructive ways, President Obama cocoons many from the reality of what those changes might mean for them. When they’re told, or when they find that they can’t do today what they could do yesterday, stand well clear ladies and gentleman of the spinning fan blades.

The Obama/Biden administration is the first to unequivocally state that anthropogenic global warming (AGW) is reality, and that it represents a major risk for the survival of life. While there have arguably been many missed opportunities to say more on the subject during the 2007/2008 election cycle and during the limbo days since the election it is worth quoting again from the Vice Presidential debate of 2008:

“MODERATOR: Senator (Biden), what is true and what is false about the causes (of global warming)?
BIDEN: Well, I think it is manmade. I think it’s clearly manmade. And, look, this probably explains the biggest fundamental difference between John McCain and Barack Obama and Sarah Palin and Joe Biden — Governor Palin and Joe Biden. If you don’t understand what the cause is, it’s virtually impossible to come up with a solution. We know what the cause is. The cause is manmade. That’s the cause. That’s why the polar icecap is melting.”

Obama gave further nod to the road ahead when, in his inauguration speech he said:
“And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to the suffering outside our borders, nor can we consume the world’s resources without regard to effect. For the world has changed, and we must change with it.”

On those scores the Obama/Biden ticket would have got my vote (had I been entitled to one), though in fairness to my Inner Sceptic I should hasten to add that action is what will make the difference not words. And it is that action which brings me back to my original thesis: its going to get real ugly some time during the next four years.

Of those three hundred and three odd million American people there are very few who really get what those words might mean to them and their daily lives. It is one thing to hear the words, it is another to listen to them, it is yet another thing to internalise them and absorb the implications. The challenge ahead no longer lies with convincing a nation’s leader of the reality of AGW, the challenge ahead lies in bringing the citizenry of that country along the same road. I suspect that for most, it is today somewhat akin to the cynical exercise of going to Church on Sundays. Being inspired by the rhetoric of the preacher, washing out the stains of a few sinful acts in the confessional, praying with heartfelt earnestness for the redemption of those who have lost the way on the true path…and then going right back to the same shit way of living by Sunday evening.

So sometime during the next four years, those 303,824,640 or so people are going to find that navigating the road ahead involves their participation. The problem hasn’t been solved by a newly elected President dropping one sentence into his inauguration speech. The problem won’t be solved the by Washington twiddling a knob or two on the economic and social control panels that mysteriously manages (or not) the ebbs of flows of the macro economic maelstrom. Nor will it be solved by changing a light bulb or two, turning down the thermostat a degree, and manufacturing the same old stuff in the same old way but with a nod toward any resulting device having a better energy efficiency than last year’s model.

Obama’s implementation of his campaign words will instead involve changes in the running of every day American life. And seeing as so many other countries are followers and imitators of that social and economic model a lot of other lives too. Yours. Mine. Your neighbours. Your parents and your friends. What we drive, whether we drive. Where we holiday and how we get there. What we eat, how that food is grown and where it is grown - and therefore when it is available. Where and how we design our communities and buildings. How we define success and freedom and how we reward it. What our expectations for economic and social growth are. Which businesses make sense. Which businesses need to be deliberately shut down. These are just a few of the smaller questions that we must address as we enact change.

Some of them have undoubtedly already twigged. A largish number who perhaps already have one of these plastered on the back of their Chevy Suburban. Any slick talkin’ Dem-o-crat who tries to wrestle the keys for their Chevy from their clenched fist and swap it for the electronic keyfob for a shiny new Prius (or even a Chevy Volt) is probably going to find themselves staring down the barrel of a constitutionally legal firearm. These people are going to resist with every braincell, every dollar, every decision, and perhaps even with their physical might any effort to have them change their day to day way of life.

There are to be counted also the relatively small number of people who already truly understand the personal implications of dealing with AGW. They have proactively made personal decisions, and have set themselves on a course somewhat different to the day to day path followed by mainstream. They are the Eco-Amish. They already walk. They already eat a little differently. They already holiday locally. They already teach their children that unbridled economic expansion derived from profligate consumption of fossil fuels might well be mainstream, but it is also a truly dangerous thing.

Then there are the rest of them. To quote the newly elected President - change is coming. What worries me isn’t whether the newly installed US administration says and believes those words, it is whether the everyman understands the truth of those same words. And most importantly, whether the everyman accepts the change to them that delivering on those words means.

Hang on for the ride, this is where it gets really interesting.

ThinkingString has moved to a new hosting provider to enable the migration of the site onto a WordPress platform. Hope you like the new look and feel, which has been chosen to be clean and uncluttered. The new platform allows us to keep the site content far more dynamic, and as things settle down the blog will be regularly updated with (hopefully) useful and interesting content.

The migration is however not without some challenges for us, in that existing content must be manually moved over. All that will take place over the coming weeks - possibly interrupted by that little pesky day called Christmas.

In the meantime, suggestions and comment welcome..

Quocirca has taken up a phenomenal amount of my time since I joined with them earlier this year (which is a good thing). I’ve been busy writing and blogging under the Quocirca brand here and here (and check out other articles at the Quocirca web site). Meanwhile this blog has been left to rot alone.

At Quocirca the focus is on technology, specifically IT hardware, software, software as a service and related services as they relate to whatever business problem that is being solved. In relation to sustainability there (of course) much focus on energy efficiency at the device and datacentre levels, innovations in the energy metering world, and nascent efforts to produce sustainability dashboards. And much more as well.

But that leaves all the social changes, politics, legislation, and general societal trends out of the picture. Hence I intent to swing some of those voices to this blog, giving me a clear separation between technology and none technology discussions. However all related to sustainability.