How is leadership in the low carbon economy different to any other kind of good business leadership? There are at least two key differences. Firstly, low carbon leaders really get it on energy and climate change. They understand what is settled science (it’s happening, it’s serious and the human impact is significant) and they know what’s uncertain (how fast, how severe). Secondly, low carbon leaders take a very broad view of what businesses are for. Great businesses prosper not by a short term focus on maximising shareholder value, but by taking a long term view of the needs of all stakeholders – owners, employees, customers, suppliers and society.
As the terrible tragedies in Japan unfold, the share price of renewable energy firms rises, while that of nuclear firms drops. What will be the long term impact of the events in Japan on the nuclear industry? No one knows. It’s hard to see western countries maintaining their current standard of living without nuclear power, but the nuclear option, already politically unpopular, looks even less appealing now.
In a speech to the Royal Geographic Society last week UK energy and climate change secretary made a compelling case for the low carbon economy. His key point? Other countries may not have signed up for any global agreements on emissions, but they are already investing in heavily in renewable energy, energy efficiency and low carbon transport.
As Chris Huhne said in his speech:
Take China. In 2009, they poured $34bn into their low-carbon economy.
China now leads the world in solar photovoltaic production. Six of the biggest renewable energy companies in the world are based in China.
Last year, one million people sat the Chinese civil service exam. The most popular post got 5,000 applicants. It was ‘Energy Conservation and Technology Equipment Officer’.
China will build 24 nuclear power stations in the time it takes us to build one. By 2020, their nuclear capacity will have increased ten-fold.
They will complete 16,000km of high-speed rail in the time it takes us to go from London to Birmingham.
They have the most installed hydro capacity and the most solar water heaters.
And they are forging ahead on wind power, offshore and on.
So China knows what’s coming.
The world’s second largest producer of oil, with a little under 10million barrels per day, is Russia. The politics of Russian oil is complex, and is best illustrated by a short story.
Last week Bob Dudley, the newly appointed boss of BP ( his predecessor Tony Hayward resigned after the Deepwater Horizon disaster) shook hands with Russian Prime Minister Vladimir Putin. They agreed a $16bn deal for in a joint venture between BP and Rosneft, Russia’s state controlled oil company, to develop Russia’s arctic oilfields. From a business perspective, the deal makes sense: Russia gains access to BP’s skills, and BP gains access to some unexplored oilfields. Politically, it’s more interesting. Before he became head of BP, Bob Dudley was head of a Russian joint venture called TNK-BP, and actually fled from Moscow in 2008 in fear of his life when it was intimated that he’s upset some of his Russian business partners. Dudley is still unpopular with the oligarchs who run TNK; they claim that BP has no right to do a deal with anyone else in Russia. Presumably he feels he’s safe now he’s got Vladimir Putin and the Kremlin on his side. Rosneft’s main assets used to belong to a company called Yukos, owned by another oligarch called Mikhail Khordorkovsky. Some years ago, Khordorkovsky and Putin fell out: Khordokovsky is now in jail and the assets of his firm were acquired at a knock down price by Rosneft, via a mysterious company registered at the address of a vodka bar in Tver, a small town north of Moscow.
This is what it’s like in the oil business in Russia.
The big three American car companies are cautiously optimistic. After a dreadful 2009 when sales plunged to 10m and the auto giants teetered on the brink of collapse, sales in 2011 are predicted to be up to 14m. After federal bailouts GM and Chrysler are still in business while Ford is even profitable.
The US manufacturers are wrong to be optimistic. They specialise in a product – the oil powered internal combustion engine – that is coming to the end of its product life cycle. The internal combustion engine has had a good run for 100 years but its days are numbered. Just as the era of the steam locomotive ended its 130 year run in the 1960’s, so the internal combustion engine will start to be phased out over the next 10 years or so. The future of personal transportation is electric and the big three just don’t get it.
Chinese car manufacturers do though. The China Association of Automobile Manufacturers is committed to putting half a million all electric vehicles on the road by 2015. While this is only about 0.5% of the total number of cars in China, the quantity of electric vehicles will rise rapidly as both the price of oil and the Chinese demand for cars moves ever upwards.
The world’s largest consumer of energy? China (the United States remains the largest consumer of energy per person, by quite a long way, but in absolute terms it’s China)
The world’s biggest producer of oil? No longer Saudi Arabia, and certainly not the United States – it’s Russia.
Until now, most Russian pipelines had transported oil westward towards Europe. Today, for the first time, oil starts flowing through pipes eastwards. The pipeline will supply China with 300,000 barrels of oil a day.
The balance of power has shifted.
Compared to last year’s fiasco at Copenhagen, the world climate summit at Cancun was a modest success. Here’s what was agreed.
- National emission plans are now part of a formal UN agreement and will be monitored and evaluated.
- Delegates confirmed that climate change remains a serious issue and there was a renewed commitment to prevent global warming exceeding two degrees.
- There was a new emphasis on adaptation. While preventing global warming remains an important goal, there was an acceptance that mitigation efforts could be too little, too late. Putting mechanisms in place to support poorer countries adapt to climate change is equally important.
- Renewed support for REDD, Reducing Emissions from Deforestation and Degradation. Something like 20% of all greenhouse gas emissions are caused by the destruction of rain forests, so slowing this process will have a big impact.
- A green climate fund will help poorer countries with new technologies to reduce their carbon intensity.
It’s by no means all good news – it remains unlikely that global temperature rise can be restricted to two degrees this century, and the really tough negotiations will be in South Africa next year when the Kyoto protocol expires. But the Cancun agreement is not only a small step in the right direction, but a lot better than many people hoped.
Last year’s Copenhagen climate summit attracted a huge amount of media attention. This year’s similar event in Cancun, Mexico, is attracting almost none. Why?
Pre Copenhagen, many people believed that is was still possible to reach some kind of global agreement that would reduce the emissions of CO2 and other greenhouse gases in order to have a decent chance of restricting global warming to less than 2 degrees.
Post Copenhagen, almost no one believes that any more. It’s incredibly difficult to predict climate change, but most people now accept that we’re in for at least three degrees by the end of this century, if not considerably more. It’s too late to prevent it happening.
That’s not to say that we shouldn’t still decarbonise the world’s economy – there are sound reasons to do so, not only in relation to climate change but also for reasons of energy security and economic growth. And we should certainly put lots of effort in mitigating the effects of climate change, especially on the poorest people in the world who will be hardest hit. But it’s naïve to think that we can prevent significant, game changing climate change from happening.
Persuading the seven billion people who live on this planet to reduce their CO2 emissions is proving to be quite a hard sell – especially to those 310 million North Americans who are each responsible for more than 20 tonnes of CO2 every year.
Geo engineering offers a different solution to the problem of climate change. Why not carry on burning fossil fuels, and instead reduce the amount of CO2 in the atmosphere directly? Better still, allow CO2 levels to rise but restrict the sunlight hitting the earth’s surface.
Once the domain of science fiction, geo engineering has become increasingly respectable, as today’s conference at the Royal Society in London demonstrates.
Amongst geo engineering solutions discussed – paint roofs white to reflect back more sunlight; breed crops to be shinier so they reflect back more sunlight; sprinkle iron fillings into the oceans to increase the take up of CO2 by algae; sprinkle sulphates into the atmosphere to mimic the effects of volcanic dust in screening the sun’s rays; put giant mirrors in space to reflect sunlight away from the earth.
Geo engineering is fraught with technical and moral dilemmas – but history shows that if human beings become desperate enough, they’ll try anything.
In California, you can put any proposition you like to a referendum, providing you can get 5% of the registered voters to say that they want one. In the recent elections ten 
propositions were put to the vote, including one that would have effectively scrapped the state’s commitment to reducing its CO2 emissions to 1990 levels by 2020.
The yes campaign spent more than $10m, largely funded by the oil companies. The no campaign spent $25m, largely funded by Silicon Valley firms (including Google) that support renewable energy.
The motion was defeated and California retains its commitment to CO2 reductions, and to supplying a third of its power from renewables within the next ten years.