Is Consumerism the Ultimate Climate Enemy?

COP21 ignores current economic growth model at its own peril.

Alibaba’s $14.3 billion “Singles Day” sales frenzy earlier this month was a triumph for consumption. Chinese lonelyhearts compensated for their empty dance cards by settling in front of their computers, going online to the e-commerce site and buying as much — in one day — as Ugandans buy in a year. Or, if that’s not striking enough, Chinese bought more in a day than the consumers of the 30 smallest countries in the world — combined — buy annually. Take that Vanuatu!

Markets were giddy to see Chinese spending 60% more on Singles Day than they did last year. Why? After decades of being the world’s factory of inexpensive consumer goods and enabling the West to keep buying more stuff, the world is now counting on China to become the next demand engine for global consumer spending, and therefore growth.

And it’s happening. China is already the world’s second-largest consumer market, largely on the back of China’s so-called “affluent class”. The affluent class is expected to be 280 million people, or 20% of China’s population, by 2020. And the spending of the affluent will grow fivefold to $3.1 trillion, which is the equivalent to approximately 35% of China’s total consumption and more than 5% of global consumption.

And that’s just with one-fifth of China achieving affluence. What happens when that number goes up to one-half? Or one whole? And what happens when India takes its turn as the star of the consumption passion play? And then Africa?

We are facing a consumption tsunami that has huge implications on our ability to address climate change. Heading into COP21, there’s lots of talk about creating a “circular economy” powered by clean energy that produces de-materialized consumer goods. But in China, as Alibaba founder Jack Ma said on Singles Day, they are only at the stage of trying to move from quantity to quality in their consumer products. More sophisticated approaches like cradle-to-cradle thinking are not even close to being broadly practical in such countries where most people haven’t yet had a chance to consume much compared to the West. It would seem therefore that the circular economy is trying to fit itself into a square hole in emerging markets such as China.

With China’s economic growth slowing because of weaker exports and reduced investment in infrastructure, the country’s new leadership has made it unequivocally clear that the solution for sustaining growth will be priming domestic consumption. For a country that is already suffering from toxic waterways, coal-choked air and a public health crisis, pursuing monetary affluence and its side-kick consumption is a deal with a devil we know too well in the United States and Europe. More consumption. More resource inputs. More ecosystem demise.

As world leaders gather in Paris for COP21 to address climate, they do so seemingly blind to the fact that their story of economic growth remains the same — growth on the back of increased consumption. It is perhaps the ultimate form of climate change denial. And yet the world’s people are bought in: Global middle-class spending is expected to more than double from $21 trillion today to $51 trillion in 2030.

Here’s where most articles will offer a prescription for solving the problem. But I’m not sure there is one.

Most people in the world still live in poverty. And we’re still producing more people (1.5 billion more in the next 15 years). They want to live better lives. And they should be able to. But let’s be honest about what that means. It means buying appliances, and eating more meat, it means using more energy. It means more consumption. That’s not a recipe for a solution. Yet, as we prove again today in the mad spree of Black Friday shopping, it is a big part of Human Nature, which in the battle with Mother Nature, often wins the day.

Whatever climate deal is reached in Paris, it won’t address the root of the problem — Us.

It will tinker with how we do things, but it won’t change who we are and what we’ve constructed: Consumers in a global economy built on creating more consumption.

COP21 — can you solve that? Because we need to.

Economy the Size of Russia’s Faces “End of Water”, World Yawns

California, the world’s 8th largest economy (bigger than U.N. Security Council member and nuclear power Russia and just barely smaller than Brazil) is on the verge of having no water left. That is according to a senior NASA water scientist, who said over the weekend that the “Golden State” is just one-year away from running out of water in its reservoirs.

Yet this isn’t front-page news. An economy with GDP of more than $2 trillion and home to more than 50 Fortune 500 companies, including the world’s most valuable company, Apple. An economy that produces more than 95 percent of all U.S. artichokes, broccoli, walnuts, kiwis, plums, grapes, celery and garlic, and overall half of all fruits, vegetables and nuts that Americans consume every day. Plus being America’s top dairy producer. The state also exports a lot of the food it produces, so the impact isn’t just domestic.

So why isn’t there a global panic? If Russia were about to run out of water, stock markets would tank, currencies would get jittery, and fears of mass migration and social dislocation would be stalking the halls of the EU in Brussels and the Hague. U.N. resolutions would be passed. Aid packages would be cobbled together. CNN would create a snappy new news alert and call it something like “WaterRussiaGate”.

But there is an almost deafening silence as sunny California — home of Disney la-la land, the Hollywood dream machine and the sometimes nauseating hubris of Silicon Valley’s often trivial innovators — marches merrily toward its own demise, and in doing so threatens to disrupt the global economy and countless lives.

It’s not as if the international water threat isn’t well known. The World Economic Forum said that in 2015 water crisis is the top global risk facing the world. And 2015 is the last year of the International Decade of Water, so presumably we’ve all been fully educated over the last 10 years about the size of the problem. Right?

Yet on the eve of the 22nd World Water Day (next week, March 22), water is still the red-headed step-child of the natural resource discussion. The media hardly cover it compared to energy. No sexy billionaire has made it their pet issue in the same way that Bill GatesSir Richard Branson and others have become the sugar daddies of energy innovation.

So here we are, on the brink of a major disaster for the world’s 8th largest economy.

Just as Hurricane Sandy brought the impact of climate change home for many Americans for the first time, could it be that the California water crisis is the event we need to finally get serious on the issue? The destruction of Sandy was quick and dramatic, while the crisis in California has been slower to develop. Until now. According to NASA scientist Jay Famiglietti, the clock is ticking. There is now an urgency that was previously missing.

Hopefully Gov. Brown will stop supporting fracking and start worrying about water. Reform of water pricing must get serious. Introduction of drip irrigation must be mandatory in agriculture (which uses more than 2/3 of the state’s water), and other conservation and efficiency measures must become a more ingrained way of domestic and business life. Investment in water infrastructure and innovation needs to be accelerated as well.

Famiglietti also suggested three immediate steps: water rationing, accelerating implementation of the Sustainable Groundwater Management Act and the formation of a task force with vision and teeth.

I am not a water expert. But I know stupidity and myopia when I see them. It’s time to get smart and to have clarity. It’s time to act. And it’s time to treat water like the invaluable natural asset that it is.

Shell Game: why climate policy is all business

More than 70 businesses, including fossil fuel giant Shell and utility EDF Energy, recently signed the “Trillion Tonne Communique”, asking governments to put a price on carbon in order to limit emissions to one trillion metric tons (we’re already more than halfway there). The ultimate goal is to make the world net-zero emissions by 2100. Sounds great.

Unfortunately communiques are toothless tools. Reminiscent of empty Cold War rhetoric and decades of failed Middle East Peace talks, they are easy to sign and difficult to realize.Same with the many petitions floating around.

The fundamental problem with the new communique, however, is that it reinforces a flawed assumption – an assumption that must change if we are to achieve the communique’s worthy goals. It assumes that the critical actor on the climate issue is government. If lobbying didn’t exist that might be true. But today’s reality is that buying influence (whether sanctioned or not) is core to global policy making and regulation. In fact, big multinational businesses asking government to fix a problem is a Shell Game. To use the U.S. as an example, it would be like asking Congress or the White House to spoon feed you when you made and owned the spoon, produced the food on the spoon, and controled the arm that’s delivering the food into your mouth. In essence, business is asking for something that it has the influence and ability to provide.

Business, not government, is the critical actor in the battle to halt climate change.

And within business, multinationals dominating the energy, mining and utilities industries, such as Shell and EDF, are the ultimate masters. A report issued in 2013 found that 50 of the 500 biggest listed companies in the world account for emissions of 3.6 billion metric tonnes, or 73 percent of total greenhouse gases (GHG).

Shell, for example, despite signing numerous communiques and joining several climate groups, until recently was aggressively investing in Arctic oil exploitation. It shifted its strategy in early 2014, but that was less the result of its commitment to climate action, and more about P/E ratio.

It’s time for businesses to stop whining like spoiled toddlers, put on some grown-up pants and act like the decision-maker that they are. Enough talk (R.I.P. communique and petition). It’s time for businesses to use their influence (and especially lobbying dollars) to be the change, instead of pretending that change is someone elses job.

The businesses that lead the change will be the beneficiaries of climate wealth. Those that don’t, won’t.



Push-Me, Pull-You: Is the Private Sector Climate’s Dr. Do Little?

Rex Harrison– <em>Doctor Dolittle</em>About two thirds of chief executives – 67 percent – believe that business is not doing enough to address global sustainability challenges, yet there has been a precipitous drop in the proportion of business leaders who described sustainability as very important, according to a just released survey of 1,000 CEOs by the United Nations Global Compact and Accenture.

It is clearer than ever that the private sector, in particular multinationals dominating the energy, materials and utilities industries, hold the key to addressing climate through action on sustainability. Another new report, issued by CDP and written by PwC, found that 50 of the 500 biggest listed companies in the world account for emissions of 3.6 billion metric tonnes, or 73% of total greenhouse gases (GHG). These emitters primarily operate in natural resources and energy.

In the CDP Global 500 Climate Change Report 2013, Malcolm Preston, global lead, sustainability and climate change at PwC, said the findings raise “questions for some organizations about whether they are focused on sustaining growth in the long term, or just doing enough to recover growth until the next issue arises… Corporate emissions are still rising. Either business action increases, or the risk is regulation overtakes them.”

Meanwhile, the UN Global Compact-Accenture CEO Study on Sustainability 2013: Architects of a Better World found that 78 percent of surveyed CEOs see sustainability as a route to growth and innovation, and 79 percent believe that it will lead to competitive advantage in their industry. Paradoxically, however, CEOs see the economic climate and a range of competing priorities creating obstacles to embedding sustainability at scale within their companies, and the proportion describing sustainability as very important has fallen from 54 percent to 45 percent, including only 34 percent of CEOs in economically hard-hit Europe.

So we have a situation where businesses aren’t doing enough, yet the leaders of those businesses say they want to do more.

Put another way: The road to hell is paved with good intentions.

What needs to change to narrow the gap between intent and action? This is one of the fundamental questions of our time.

The answer to that question, according to the surveyed CEOs, is that we need better policies. Forty two percent of respondents listed governments among their top three stakeholders in sustainability, a rise from 32 percent in 2007. Eighty three percent thought more efforts by governments to provide the enabling environment will be integral to the private sector’s ability to advance sustainability. Specifically, 85 percent demanded clearer policy and market signals to support green growth.

Put another way: Pay no attention to that man behind the curtain. Because business lobbying dollars control politicians, CEOs are really just blaming policy makers for a problem that the CEOs – along with their investors and consumers – are creating and prolonging.

When asked which policy tools should be prioritized, 55 percent pointed to regulation and standards and 43 percent called for governments to adjust subsidies and incentives. A further 31 percent sought intervention through taxation. Softer measures, such as information and voluntary approaches, were supported by only 21 percent of CEOs.

Polite attempts were made in the authors of the UN report to pull back the curtain and place responsibility back on business.

“Business leaders should recognize that even in today’s imperfect markets, high performing companies do manage to combine commercial and sustainable success. These companies are harnessing sustainability as an opportunity for growth, innovation and differentiation, and demonstrate that sustainable business is good business,” said Sander van‘t Noordende, Group CEO, Accenture Management Consulting.

Added Peter Lacy, the study lead from 2007 to 2013, and managing director, Accenture Sustainability and Strategy Services, Asia Pacific. “To move from incremental to large scale transformation, businesses must accept that instead of  persuading consumers about sustainability they must give them sustainable products and services they want at prices they can afford. And instead of showing investors the savings made from sustainability, the will have to demonstrate the positive business value it can generate.”

At the end of the day, with policy-makers in the clutches of business, the only meaningful change will come when CEOs, their boards, and their investors all realize that action today on climate and sustainability means long-term business success and mitigation against risk from resource constraints. And then upon that realization, use their power over policy-makers to make the changes they are asking for (not the other way around). The UN report found that although 52 percent of respondents see investor interest as an incentive for them to advance sustainability practices, only 12 percent of respondents see investor pressure as a leading motivator. Nevertheless, only a small minority of CEOs (15 percent) blame the short-termism of financial markets as a barrier, and 69 percent believe that investor interest will be increasingly important in guiding their approach.

The crucial role of business is one of the under-lying themes at next week’s fifth ClimateWeek NYC. I look forward to hearing from CEOs who are turning intent into action.


$1 trillion… a solution to climate change?

My 10 year old son and I were talking the other night and he asked me: “Dad, what would you do with $1 billion?”. What followed was a conversation about how we’d try to invest the money in ways that had social impact (climate, child poverty, cancer were high on his list), while also saving just enough for our family to be secure. But then he asked me, “What about $1 trillion?” That’s a big number. Only two countries – China and the United States – each have a gross domestic product (GDP) of more than $7 trillion.  Add Japan and Germany if you’re talking over $3 trillion, with just 15 countries in total with more than $1 trillion in GDP.

And then we stumbled upon an idea. Could we address one of his concerns – climate change – if we bought up oil companies and then figured out a way to shut them down without major social, economic and political disruption? A little bit of back of the envelope calculation and we figured out that $1 trillion could buy you ExxonMobil ($400 billion market cap and world’s 4th largest oil company) and #6 BP ($130 billion), $210 billion for #7 Royal Dutch Shell and #8 Chevron ($200 billion), with room to spare. If half of the world’s 7 billion people could invest $200 to a general fund that would get you most of the way. If one-fifth of the world’s population invested $700 that would be more than enough.

But what would the climate impact be to take four of the top 10 oil producers in the world offline? Not totally precise (but close enough), let’s assume daily oil production of the four companies of 2.5 million barrels per day, or a total of 10 million per day, or 3.65 billion barrels per year. Assuming 430 kilograms of CO2 per barrel of oil burned, that’s about 1.6 trillion kg of CO2, or 1.6 billion tonnes. Total CO2 emissions in 2011 were 34 billion tonnes. So the net result would be a 4% decrease in CO2 emissions if the four oil companies stopped producing oil tomorrow.

Worth a $1 trillion? Not sure, but an interesting exercise in the power of crowdsourced impact investment. And given the current international talks on climate, perhaps no less feasible in achieving emission reduction goals.


Human Health: the Cure for Climate Insanity?

While reading Bryan Walsh’s thoughtful review of a new book The Conundrum by David Owen, I noticed that the review was posted under’s “health” section. The book is about energy efficiency.  What does energy efficiency have to do with health? The seeming disconnect between the two, plus a number of other things I’ve seen in the past week, prompted me to revisit an idea that I’ve been meaning to address for a while: Is is possible that humanity’s selfish concern for its own health will be the ultimate road block to inevitable ecological destruction?

I’m not sure. But I’m pretty sure that the answer will likely come from China (or India).

My old friend Bill Bishop, a long-time Beijing resident, posted a recent photo of his air filter after a couple of months removing coal dust and other harmful particulates. Scary. He is not alone, with a recent rush on indoor air filters reported by the Chinese media.  But as those reports point out, most people cannot afford the costly systems.

A lot of China-watchers tend to discount the impact of environmental pollution on the country’s development, preferring instead to debate the possibility of a hard landing due to loose bank lending, housing bubbles or other economic causes.

Clearly, health concerns can help drive change. The oil company-backed Prop 23 campaign in California – which sought to overturn the state’s progressive climate policy – was in part successful because of the support of the American Lung Association, and its ad campaign.

In China, where three decades of double-digit economi growth has resulted in a water crisis, unprecedented air pollution, the toll on human health is just starting to be quantified. But it doesn’t take data for people to know that something in China is wrong, and there is growing social unrest because of pollution.

Social unrest is the boogey-man for China’s rulers. It will be interesting to watch as the dynamic between continued growth and continued deterioration of public health plays out.

Here’s hoping health wins.

GHG: regulation vs. legislation?

I asked my friend Graham Noyes, attorney at renewable energy law firm Stoel Rives focused on bioenergy projects, federal energy incentives and carbon monetization, for his thoughts on the Kerry Lieberman bill.

Q: What was your main takeaway from the bill?
A: Some context first. There’s a massive potential hammer out there on GHG emitters in terms of the risk of regulation under the Clean Air Act (CAA) by the EPA, which has already issued an endangerment finding that found GHGs to be a danger to public health and welfare, thereby making the EPA obligated to regulate GHG’s under the CAA. So the wheels are turning forward at the EPA to regulate GHG. That’s what the EPA will do if nothing else happens. So it’s really surprising that Kerry Lieberman imposes what I think to be much stricter limitations on the EPA than the status quo.

In that sense the bill is very favorable to those industries that have the most to lose from GHG regulation, because it essentially weakens the regulatory landscape for GHG intensive industry when compared to what the EPA is likely to do. That’s why we have the strong industry support lined up for the bill. What’s odd is that we have universal Republication opposition (from a party known for its pro-business stance), and near universal Democratic support (from a party known to support more environmental protections). That is a fundamental disconnect.

The 800 lb gorilla in the room is the EPA’s ability to utilize the CAA if the Kerry-Lieberman bill stalls. That’s a really interesting regulatory and political landscape for this thing to play out.

Q: Can you be more specific on how Kerry Lieberman is easier on emitters?
A: We don’t know what the EPA will do precisely in order to get its targets in the endangerment finding. Emissions levels, cost implications for regulated industries – we don’t know. But it’s easy to imagine a scenario in which the EPA ratchets down harder and harder on these emissions to get the problem under control, specifically the PPM concentration of CO2 in the atmosphere. By contrast, Kerry Lieberman has a slow front-end phase-in (with only some industries included in the first years), price collars and very substantial offset programs to lower the economic impact, none of which the EPA would necessarily do. Most people expect the EPA would be more onerous than Kerry Lieberman.

Q: Is legislation or regulation better at the end of the day?
A: The Clean Air Act was not designed for GHGs, but for what we usually think of as pollutants – emissions that are directly unhealthy. CO2 is not something people worry about breathing, it’s the indirect risk of global warming caused by the escalating CO2 levels that triggered the finding. CO2 is also more ubiquitous than other pollutants hence the tailoring rule actually reduces scope of CAA enforcement.

The EPA would regulate by mandate, not by consensus. If we can’t get legislation passed and the EPA begins enforcement, there will be a lot of criticism about over-reaching and strangling industry. EPA would take a lot of heat for this.

Q: Some argue that EPA will take much longer to regulate than legislation.
A: I don’t necessarily think so. This legislation requires extensive rule-making that will take a long time to happen, consider the RFS2 delay. And the EPA won’t build in phase-in limits like Kerry Lieberman. If EPA moves ahead on its present course, I think it would have a faster impact on emissions than the bill. Ultimately, I think this landscape will spur a deal with a surprising alliance.

Q: What are the top three ramifications on business from this bill?
A: The bill would establish a long-term value to CO2e reductions. This will benefit all renewable energy projects andsupport US offset projects in methane capture, agriculture and forestry that make good GHG sense.