Carbon Capture and Storage: To Be or Not To Be? Or, To Partially Be?

by Richard T. Stuebi

One of the more contentious questions in the cleantech community is the role of coal in the energy sector of the future. There’s a lot of coal in the world — many decades of supply left — including here in the U.S. It’s pretty darned cheap to mine. So, it would be great to figure out a way to use it in non-harmful ways.

And there’s the rub: it’s a pretty nasty fuel. Putting aside the issue of how to mine coal in an environmentally-acceptable manner, coal is one of the most highly carbonaceous of hydrocarbons, meaning that it generates a lot of carbon dioxide per unit of energy released when burned — much more so than oil or natural gas. As a result, the worldwide use of coal — primarily for power generation — is the largest component of global carbon dioxide emissions, which in turn is the most important of the greenhouse gas emissions contributing to climate change.

In the arena of climate change, coal is therefore the main culprit. Not the only culprit, to be sure, but the main one.

For coal advocates, the first line of defense is to dismiss the climate change issue outright. That tactic is still used, but is becoming increasingly untenable under the Obama Administration, which appears to be remaining steadfast in pushing for climate change legislation.

That leaves the coal industry in the position of promoting new approaches for coal utilization wherein the carbon dioxide produced from combustion is somehow prevented from being released into the atmosphere. The most well-known of these approaches is termed carbon capture and storage, or CCS.

The idea behind CCS is intellectually appealing, if a bit fantastic: extract the carbon dioxide from the exhaust stream of a powerplant, and inject the carbon dioxide underground in such a way that it stays entrained in the earth. The technological concepts are pretty well-understood.

Alas, as this article in the March 7 issue of The Economist shows, the main challenge associated with CCS is the cost. CCS has never been undertaken at a large-scale at any powerplant, much less attempted for a fleet of powerplants, because the capital and operating costs of a CCS system are seen to be so high as to be daunting.

As with many things in life, a half a loaf is better than none, and so may be the case with CCS. As indicated in this article in the March/April issue of Technology Review, perhaps the economic challenges can be tackled by biting off something less than 100% carbon capture and storage.

Many environmental advocates can’t stand the concept of coal utilization in any guise, and decry the use of the phrase “clean coal” as an oxymoron. I don’t think we can afford idealistic dogma, but neither do I think we can afford the environmental cost of unlimited conventional coal use. There’s got to be a middle-ground somewhere.

In the energy and environmental realm, I have consistently found in my 23 years of experience that there is rarely a perfect solution to any situation, and everything involves tradeoffs. Partial CCS might yield an outcome in which neither the green community nor the coal/power industry get all of what they want, but produces a far better result than the “worst-case” scenario each side fears.

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director at Early Stage Partners.

Cleantech Crunched

The cleantech crunch is on. And a few juicy tidbits are coming to light.

Optisolar – Crunched. Several 9 figures into it, what do we find? The only thing of real value are the development deals in a post subsidy boom year. Is it a “financial market” issue? Only if manufacturing and technology development are “financial market issues”. Several of my long time clients have deep pockets actively looking to finance “financial market issues” for renewable power plants – assuming the numbers actually stack up on the project, that is. Actual returns have proven to be quite skinny in many cases. Buyers from the energy sector looking under the hood can be such a downer.

Tesla – for all intents and purposes looking for a bailout. But at least they’re shipping now, sort of. 100 cars I think? Good money, if the margin is positive. Keep this up and they should be at several percent of tiny little Jaguar’s US sales volumes with a year or two. Why do sane people want to be in the automotive business again? Oh – that’s right, because it’s not really the automotive business – it’s the ELECTRIC automotive business, and we can really outcompete those dinosaur automotive companies in EVs. And I’m sure the new batteries will just solve everything. I wonder who will sell us the materials for those new batteries, maybe the oil companies, here, and here whom we are going to replace and our automotive competitors? Wow. That’s a business plan that gets me really, really excited. Not.

Solyndra – the bailout came through. Yippee! Will it be enough? I’m sure coating CIGS on 1,000s of cylinders is a brilliant way to be cheaper than CdTe and A-Si on large scale glass. The sounds like a great way to make replicable, scalable 30 year devices.

VeraSun – the deal that helped build the investor craze for ethanol – finally sold off in pieces in bankruptcy. To whom? A Texas refiner known for picking up refining assets on the cheap. Note to Vinod, yes, ethanol is much, much more expensive than gasoline, any way you cut it. And no, refining feedstocks into fuel is not a wonderful new business that should trade at tech multiples. Way to go Valero (VLO)! But don’t worry, all the “good” deals are doing cellulosic ethanol – you know the btu poor, hard to transport, pain in the rear to refine feedstock which we don’t own using technology currently at 0.25% of the scale of the average oil refinery. That’s where we’ll make our “smart” money.

MMA – Along with SunEdison one of two companies to create the solar PPA model. Sold off.

What are we learning? Energy – and yes, I’ll say it again, cleantech is energy – is all about owning the resource. Not the technology. In energy technology follows resources, not the other way around.

And lots of deals and money are there to be had, maybe just not for the cleantech venture capitalists who insist it’s all about the technology and the startup, not the resource. I guess it is if you like to gamble.

Learn people, learn. Or you could just follow Kleiner into their next Energy Bloom.

Neal Dikeman is a Partner at Jane Capital Partners LLC.

Top 10 Low Carbon Footprint Cars (and one SUV) for 2009

People and fleets that use vehicles with the lowest greenhouse gas emissions per mile are rewarded with making our future a little better and with their fuel costs being much lower. The following cars, wagons, and SUVs have the lowest greenhouse gas emissions per mile of any vehicles available for volume commercial sales in the United States in 2009. All can achieve freeway speed. In many cases, they also have the best fuel economy. Most are already selling in quantity.

From California to Capitol Hill to Copenhagen, plans and incentives are being created for a cap-and-trade of emissions. Passenger vehicles can get up to a $7,500 per vehicle tax break for being zero emission. The rewards for buying and selling low emission vehicles will increase. The incentives will be paid for, in part, by higher costs for gas guzzlers.

Reduced greenhouse gas emissions are becoming a priority with fleet managers and millions of conscientious consumers. These Clean Fleet Top 10 Low Carbon Footprint Passenger Vehicles are listed from lowest to highest in carbon footprint.

  1. Toyota Prius
  2. Honda Civic Hybrid
  3. Honda Insight
  4. Ford Fusion Hybrid
  5. smart fourtwo
  6. Nissan Altima Hybrid
  7. Honda Civic CNG
  8. Toyota Camry Hybrid
  9. Ford Escape Hybrid
  10. Mini Cooper and Clubman

This list was developed by first searching the U.S. EPA and DOE’s valuable, with its extensive search capabilities. The EPA combined miles per gallon rating is based on 45% highway and 55% city driving. The carbon footprint is carbon dioxide equivalent (CO2e) based on 15,000 miles of driving, using the GREET 1.7 model.

Fleets are also early adopters of vehicles with even less emissions including electric vehicles, hydrogen fuel cell, plug-in hybrid conversions, and diesel hybrid concept cars. Because these are not offered for commercial volume sale, they are not part of this 2009 list. Electric and alt-fuel vehicles are also covered in detail at Clean Fleet Report.

The Toyota Prius continues to lead the four-door sedan field in fuel economy and lowest lifecycle greenhouse gas emissions. This perennial favorite midsize is lowest on the list with 4 tons of carbon dioxide equivalent for the EPA annual driving cycle; combined fuel economy is 46 mpg. Yes, 4 tons of CO2e is a lot; but many cars, light trucks, and SUVs create three times that emission. At the North American International Auto Show, Toyota announced the 2010 Prius with an expected 50 mpg combined and an optional solar roof option to power accessories and thereby boost mileage.

The Honda Civic Hybrid compact rates at 4.4 tons of CO2e for the EPA annual driving cycle and a combined 42 mpg.

The new Honda Insight four-door sedan with an Ecological Drive Assist System is priced for thousands less than the Prius. The Insight will deliver 41 mpg combined, with annual emissions of about 4.5 tons of CO2e.

The Ford Fusion Hybrid midsized sedan has an EPA certified 41 mpg rating in the city and 36 mpg on the highway. Clean Fleet Report makes an unofficial estimate that emissions will be 4.8 tons of CO2e for the EPA annual driving cycle. The Fusion Hybrid and Mercury Milan Hybrid may travel up to 47 miles per hour in pure electric mode. The Advanced Intake Variable Cam Timing allows the Fusion and Milan hybrids to more seamlessly transition between gas and electric modes.

Complete Report

John Addison publishes the Clean Fleet Report and is the author of Save Gas, Save the Planet.

Ontological Shock

by Heather Rae

The term came up over lunch. A group of home energy evaluators convened at King Eider’s pub in Damariscotta. That morning, we had completed filming of an energy evaluation with the film crew from Maine Public Broadcasting Network. We were talking about the future of the country and the economy and our children; these topics, with this group, erupt out of discussions about energy and oil and staying warm in Maine. Curry Caputo, principal at Sustainable Structures, Inc. was one of the energy evaluators. He said his uncle, a therapist, uses a term to describe the end of cheap oil in America: Ontological Shock.

Everything as you know it and believe it to be true — will come into question. After an evening of “Googling” ontological shock, and watching the indie film, Crude Awakening/The Oil Crash, (a chillingly calm alarm) it occurred to me that we in Maine are getting a taste of what’s to come as the age of easily accessible and cheap oil comes to a close.

February’s storms put a stranglehold on mid-coast Maine. First, there were the power outages. Wide swathes of mid-Coast Maine remained without power for days. Which meant many were without heat. Which meant water pipes were a-freezin’ and a-crackin’. The toilets didn’t flush. Parents shuttled their broods to coffee shops and YMCAs and college gyms to find warmth and hot showers.
Generators rumbled throughout the neighborhood and town. The regulator on the propane tank froze somewhere around 5am. (For a minute, it appeared that the silencing of the generator’s roar meant the resumption of grid power, but no.) The 90-year old great-aunt in the apartment unit was out of power and heat and hot water. Schedules were scrambled; meetings were canceled and offices closed.
As if we were living in a third world — struggling to engage in a first world economy — we shoveled snow from roofs, walkways, driveways. And then we were hit with back-to-back storms. Construction workers removed the sky’s deluge before they began repairs. Snow plows plied the roads throughout the night long, their drivers appearing bleary eyed at the local Irving station to down coffee and donuts…or as the day became night, they joined the plumbers at the local bar, on emergency call for bursting pipes and flooded basements, smelling of oil in their insulated overalls, taking in a beer or two before the next call. The hair is greasy and the clothes aromatic. For all of us. A giant yellow DOT plow had stuck in a towering bank of snow, and the plow itself had cracked into threes. The tips of trees bowed into roads, cracking huge limbs, strewing twigs and draping power lines.
My drive to town was glistening and beautiful. We settled in to simply getting by.
And, I couldn’t help but wonder, what if there were no fuel for the furnaces and boilers and DOT trucks…or it were so expensive to operate snowplows and heat homes that we could only wait for the sun to melt us into recovery?
Spring is officially here, event if the snow lingers. Trees remain bent to the roads, and the memory of this winter will be forced upon us for a while.

An Open Letter to Fred Krupp

“The Clean Development Mechanism [the offset part of the Kyoto Protocol], which provides about 95% of the offsets used in the European market, is clearly broken and should be quickly phased out.”

My first reaction to reading that parting statement in what was otherwise a very rational and cogent interview was unprintable in a family blog like this.

First of all, let’s get a few things straight. When it comes to protecting the environment and harnessing market forces to that end, Fred Krupp is a god. Maybe I should even capitalize that description. There is nobody who has done remotely as much for that particular cause—including our Nobel Prize winning inventor of the Internet—as Fred Krupp. I have been a regular and long-standing contributor to the Environmental Defense Fund (EDF), even during the unfortunate period when their abbreviated acronym likely confused a fair number of Viagra seekers on Google. The staff there is analytical, innovative and ferociously dedicated to their cause. They’ve gotten their viewpoint into the inner workings of many of the US’s mega corporations, generally at the CEO or Board level. They basically investment-banked the biggest private equity deal of all time—the KKR takeover of TXU – mainly to stop a massive planned expansion of coal-fired power. Calling EDF and Fred the father of environmental markets is not remotely an exaggeration.

While to my regret I don’t know Fred personally, we did actually once spend the better part of an afternoon together, though I doubt he would remember it. It was in the lovely city of Kyoto, Japan, on a Sunday in the middle of the 1997 namesake climate conference, and our Japanese hosts had arranged a series of different tours around that historic city. Coincidentally, I ended up on the same tour as Fred, and for at least one portion of the tour, we ended up chatting as we walked down a small winding street together with a multi-star admiral from the Defense Department who was part of the US delegation. At the time, EcoSecurities was less than a year old, still had a grand total of two employees and to say we (and therefore me) were nobodies would be a gross exaggeration; we had several steps to climb before we would even register at the “nobodies” level. Fred, on the other hand, was already a superstar.

At Kyoto, the CDM was hardly born of unanimous acclaim, and EDF had no small role in getting the negotiating buy-in on market based approaches that helped convince a number of skeptical countries. In 2001 when the US largely disappeared from the international climate world, it’s not an exaggeration to say that EDF also took a hiatus from the dialogue about the operational aspects of the CDM. Fair enough—EDF’s main constituency is the United States and US policy (though they also run an extensive China program). But to be frank, it was very unfortunate to lose their rationality and capability in the process, and I would argue that some of the maddening aspects of the current CDM—from a business perspective—are a direct consequence of losing the US (and by association, EDF) influence on its development in those crucial startup years.

So, when phrases like “should be quickly phased out” get bandied about, my first question (after my blood pressure settles) is: exactly how has the CDM has failed so much that the father of environmental markets believes it to be beyond saving? Let’s take a look at the results. The first CDM project was registered at the end of 2004, just a little more than 4 years ago. Today there are 1,500 projects registered (representing some 1.5 billion tons of emission reductions through 2012) and at least another 2,500 in the pipeline. Billions of dollars have been raised in the capital markets and there are methodologies covering at least 100 different project types. A sector dedicated to financing global environmental improvements has emerged. Projects are distributed across some 68 countries around the world. When you’ve tramped across a landfill in Brazil, a piggery in Mexico, a steelworks in China and a refinery in Ghana, all of which are linked by the single commonality that their management wants to become more climate friendly (and get paid for it), you know that a sea change in global business attitudes has occurred. Maybe Fred and the guys from EDF need to get a bit more mud on their boots and see what what’s actually happening out in the field at the micro-level.

There are many indisputable shortcomings of the CDM. First, far too many first-generation CERs came from HFC-23 reductions, rather than from changeovers to renewable energy and energy efficiency. Second, the process of assessing the “additionality” of certain clean energy assets that were at various stages of development has been deemed questionable by some outside observers. Third, an overwhelming preponderance of CDM capital flows have gone to China. And fourth, the regulatory process that oversees the CDM often seems to have been designed by Kafka, with a helping hand from Dante.

There are answers to all of these critiques, not the least of which is that we’ve barely passed the fourth year of what should be a many decade process of “learning by doing.” The main issue is that you cannot set up a legitimate market system that only lasts a few short years, sunsetting almost as soon as it starts. Of course in these conditions projects that paid the highest immediate returns were identified and executed first. Of course in these conditions clean energy projects that were at some stage along the development pipeline were the most likely to try to engage the CDM financing instrument. And of course China grabbed the lion’s share of projects—half the developing world’s emissions are there, they can be found in large concentrations, and the Chinese government has made a regulatory system that was rational and workable through which to tackle them.

We Americans who basically went offshore about eight years ago to actually buikd the CDM “business” that was vaguely envisioned by the US and EDF are now coming home. We think our experience to date has some relevance and should be heard in the US policy debates. Though it’s been a never ending challenge, I can’t think we didn’t succeed at some important levels. Just for one, that two person company I was half of at Kyoto now has some 300 employees, offices throughout the world and has registered more than 150 projects within the CDM system representing 100 million odd tons of potential reductions by 2012. Anybody who thinks this is so easy is welcome to join our staff on one of several exciting field trips—climbing a 200 foot smokestack to check the calibration on flow meters, negotiating coalmine gas royalty agreements with provincial officials over endless baijiu, or trying to dry clean the stench of pig feces from biogas plants out of your clothes are all popular options. It’s not easy, it’s not always fun, but if you want a market instrument that’s going to work in the developing world, this is where you have to go. Blithe statements about failure are frankly a bit insulting to those of us who actually followed up on the promise and trajectory that was laid out a dozen years ago.

The latest concept that EDF is promoting around global carbon market solutions has been dubbed “ClearPath.” Though sparse in detail, the basic idea involves developing countries taking on voluntary caps that are somewhat greater than their current emissions, so they can sell excess emission rights today and use the proceeds to finance transitional energy technologies to move their emissions downward. EDF estimates that this will raise some $250B to $1.5T over the first decade of operation—a fairly substantial range, to say the least. In principal, it’s an admirable concept, and it is undeniable that covering the broadest possible sweep of countries with hard caps is something to which we should aspire.

However, the idea that it’s going to be easy to come up with the “right” amount of extra emissions allocation for any sizable number of countries is ludicrous. A simple observation of developing country emissions profiles should immediately raise the question of how to construct something even remotely equitable. On a GHG per capita basis, South Africa is at 50% compared to the US, China is at 25%, Mexico is at 20% and India is at about 10%. It is already hard enough to get industrial countries to seriously talk about hard caps – now we need to layer this variable into the equation and create a reasonable supply and demand balance that will be both politically palatable and still incentivize serious reductions ? And this is assuming we can get the necessary monitoring, reporting and verification of GHG emissions data for developing countries in place to ensure that ClearPath could distribute credits accurately and appropriately.

I’m not against the ClearPath – far from it – and if EDF and its negotiator allies can convince a sweep of key developing countries to take this up (while not just flooding the market with a next generation of “Hot Air“), my hat is doffed with genuine admiration. But in my heart, I don’t think that’s realistic. And to be honest, I’d like to know what Plan B is, in case ClearPath is greeted with the skepticism I expect.

As far as I’m concerned, Plan B must involve fixing the CDM so that it can continue mobilizing capital, incentivize emissions entrepreneurs and technologies, and slowly push the global supertanker of emissions slightly away from its current trajectory. There are many ways to fix the CDM to keep it moving, and to make it more environmentally credible, transparent and predictable for capital allocation and project development. Perhaps we can indeed get a small handful of countries to experiment with ClearPath. But as a colleague is fond of saying, climate change will have no silver bullet; rather, will require multiple rounds of silver buckshot.

I guess my problem with a throwaway quote like Fred’s regarding the CDM is that it feeds a (very ironic) attitude encapsulated in the US policy debate about international offsets—the “not made in America” issue. Ironic, because the CDM, emissions trading—and the whole idea of environmental markets in general—sprouted from American soil. In coming back to the global negotiating table, the US can make a real difference by addressing the various shortcomings of the CDM, and by coming up with constructive solutions that actually learn from past experiences. The essentials would be to make the regulatory process simpler and more conservative (by endorsing real technology benchmarks across sectors, avoiding the project by project system of the CDM) and creating a longer time horizon for achieving emissions value, (so that the benefits of emissions savings can correlate with project finance timelines). To be frank, what we have accomplished—given those shortcomings of the Kyoto/Marrakech architecture—is to my mind remarkable.

In 2008, Fred wrote a book called “Earth: The Sequel.” Disappointingly, it was not a sci-fi thriller about moving to another, hipper, planet, but rather about how we fix our relationship with this one through emerging markets for new energy technology. I’d like to think the CDM deserves the same kind of consideration for a sequel, and I don’t think it’s unfair to ask exactly which particular shortcomings of the CDM have convinced Fred that we exclusively need to tread a radically different path. CDM is far from perfect—few have ever claimed otherwise – but it has indeed lit a wildfire of enthusiasm for emissions reductions that we will not rekindle easily if it is summarily doused with a bucket of “been there, done that” cold water. ClearPath is an admirable idea, but fraught with complexities that make the CDM look like a crayon maze on a kid’s meal menu at Denny’s. If we can get five or ten countries with different profiles to sign up and work out the kinks for the next decade, that’s a triumph right there. In the meantime for the other 150+ countries in the world, let’s discuss the strengths and weakness of CDM and international credit systems rationally, with some nuance and with aims of improvement—and not just pander to popular misconceptions.

Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities, a global carbon trading firm. The views expressed are his own and do not necessarily represent the view of EcoSecurities.

Report from GridEcon Conference

by Richard T. Stuebi

My colleague Carter Williams, formerly CEO of Gridlogix, which was bought recently by Johnson Controls (NYSE: JCI), invited me to participate in a panel in last week’s GridEcon conference in Chicago. Because it had been awhile since I had plugged into (so to speak) the Smart Grid discussions, I accepted Carter’s offer so that I could get more up-to-speed.

If you are one of the seven people in the U.S. who haven’t pored over the American Recovery and Reinvestment Act of 2009 (better known as the Obama Economic Stimulus package), you may not know that a large pot of money — $4.5 billion to be exact — has been allocated to the Smart Grid, plus other pockets of money may also be accessible for Smart Grid development. The Smart Grid is thus going to be the subject of a lot more attention than it has been so far. The national TV ads about the Smart Grid products from GE (NYSE: GE) are only intensifying that interest.

What did I learn from the GridEcon conference? I was hoping to crystallize my thinking about the Smart Grid, but unfortunately I walked away with my thinking just about as muddled as it had been. Joe Miller of Horizon Energy Group did provide a fairly good primer on the Smart Grid, grouping innovations into five technological areas: (1) grid condition sensing/measurement, (2) grid controls, (3) decision-support tools (for both electricity companies and users), (4) advanced customer-sited components, and (5) communications to/from and/or between any of the first four areas.

Probably most intriguingly, I discovered that, the philanthropic arm of Google (NASDAQ: GOOG), has recently begun toying with a Google PowerMeter, which is aimed to allow just about anyone to be able to assess their electricity consumption over the web (or over their BlackBerry or iPhone) on a real-time basis. Of course, the real question is: how many people will be interested in watching their electricity use the way they text their friends or surf Facebook?

Beyond Google’s presentation (by David Bercovich), I was a little underwhelmed by the insights offered by the speakers. Candidly, many of the topics discussed — wholesale power market structures, electricity pricing — seemed to me like they were lifted straight out of the late 1990’s. And, the discussions of the carbon markets did not seem cutting-edge or particularly illuminating.

At least the second day of the conference was more energized (again, no pun intended, or maybe it was, I don’t know) than the first. No doubt, this was because of the provocative comments of Marc Levinson, an economist from JPMorgan Chase (NYSE: JPM), who had the gall of asking the uncomfortable question: does the Smart Grid really provide that much value, and if so, who really ought to be willing to pay for it? This hand-grenade punctured what had been a quiet, polite and therefore mostly dull set of sessions.

The panel on which I sat — including Carter, Jamie Wimberley of Distributed Energy Financial Group and John Moore of Acorn Energy — did our best to keep up the heat. The general perspective I offered was that the Smart Grid wasn’t going to happen anytime soon, no matter how good the intentions. This is mainly because of the complex tussle of jurisdiction between Federal and State authorities to which the grid is beholden, which is unlikely to be eliminated by fiat notwithstanding the comments of observers that ought to know better, such as Senator Harry Reid (D-NV). This is further amplified by the fact that electric utilities will remain the primary implementor of Smart Grid technologies on the grid assets that they own and control, and utilities just don’t move very fast even when all of the forces are aligned.

My overall take is that the Smart Grid community is still self-organizing and finding its footing. Now that it’s much more in the bright spotlight, I expect that leaders will emerge to help better coalesce the thinking and dissemination of information. Their mission will be to cut the Gordian knot that strangles the current not-so-smart grid.

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director at Early Stage Partners.

SGS Climate Change Head on the First Carbon Credits from the Voluntary Carbon Standard

I had the chance to catch up with Robert Dornau, an economist who is Vice President of SGS Climate Change Programme, one of the leading verifiers of carbon credits, just as SGS verified the first carbon credits under the Voluntary Carbon Standard.

Robert, I saw the press release on the first verified VCUs by SGS. Can you tell me a little bit about what VCS is and how it’s different?

I am happy to tell you that SGS also validated the first projects registered under the Voluntary Carbon Standard (VCS). The VCS provides a rigorous, trustworthy and innovative global standard and validation and verification program for voluntary emission reduction projects. It ensures that carbon credits generated from those projects can be trusted by business and consumers and have real environmental benefits. The VCS was initiated by the Climate Group, the World Business Council for Sustainable Development (WBCSD) and the International Emissions Trading Association (IETA). What sets the VCS apart from other voluntary standards is not only this prestigious group of founding fathers, but the fact that it has undergone two rounds of global stakeholder consultation and was developed under guidance of an international steering committee from the business, industry and non profit sector (including SGS).

The VCS provides innovative approaches to a credible and diligent approval of new methodologies especially for the forest sector. Another element that sets the VCS apart is the recently launched registry system.

We’ve heard the VCS discussed for some time now – are these really the first carbon credits from VCS? Why did it take so long? Are we going to see more of these?

The first version of the VCS was released on 28 March, 2006. Soon after, first projects were validated and verified against this standard. Until the recent launch of the registry system, the credits generated were only traded on the back of certificates issued by verification companies like SGS. Having a registry system that lives up to the high standards of financial registries was a number one goal of the VCS from the start. Unfortunately it took a bit longer than expected to develop this system. It now consists of three independent registries and the VCS database. I am absolutely certain this was the final launch pad for the VCS to establish itself as the standard of choice for any credible market participant.

What can you tell us about the differences between validation and verification of projects under VCS as compared to CDM and the Kyoto carbon project markets?

In principle there are not many different ways to conduct a proper validation or verification of a GHG project. The VCS relies on the principles for validation and verification of GHG projects established by the International Organization for Standardization (ISO). The new set of standards for the Carbon Market (ISO 14064 family) was develop taking into account best practice and experience from a number of global programs while being in itself program neutral.Two of the main differences are, that 1) the aim of the VCS is to assure that the emissions reduced by a project are measured, reported and verified correctly. If a buyer is interested in additional sustainability criteria, he/she can add those by applying a different add on standards like the Gold Standard for energy efficiency projects or Forest Stewardship Council (FSC) for forest projects. 2) Project developers can rely on methodologies approved in other accepted GHG Programs (like the CDM) to establish baselines, additionality and monitoring procedures. However, if the project developer wants to use a new approach towards additionality or a new methodology for baseline and monitoring of project emissions, this has to be approved by two verifiers (Double approval process). We expect this process to be a lot quicker than the current CDM process while delivering results of similar environmental integrity.

You’ve mentioned 3rd party verification. Is this similar to getting a CPA’s financial audit of a company? What role do you think 3rd party verification will play in the voluntary and US carbon markets going forward?

Market credibility requires that data used for emission trading is reliable, true and fair as well as credible. The third-party verification model has played an integral role in providing this credibility, and it has been accepted in major established markets. Third-party verification has been important in relation to both emission offsets, such as CDM and JI projects, and organization GHG emissions such as EU ETS, JVETS,.UK ETS, The Climate Registry, Western Climate Initiative. As emission allowances, related to the verified emissions, have the status of a financial commodity, it is a requirement that its verification and assurance meet financial market needs. In this regard, the third party verification model involves assessment of an organization’s internal control system including calibrations and QA/QC checks as well as actually data checks. It is also common in existing GHG programs for the verifier to assure the market risk of misstatements or omissions in any GHG emissions report and hence allowances or credits traded. We sincerely hope that a similar approach will finally be taken in the US for inventory and project emissions to assure that this market can be linked with other markets on the basis that “a ton is a ton” and the allowances traded have the same environmental and financial integrity.

I know that your main competitor in the global carbon markets, DNV, has also been growing it’s US presence.

Are we seeing a new wave of European carbon expertise moving into the US?
SGS is in the very fortunate position to be able use extensive global expertise in the development of our internal procedures. We of course always adapt those to local GHG program requirements. We bring in expertise from Europe in key technical quality management positions in the beginning of any new market. But the aim is and will be to run a local program with local capacity. I encourage everybody interested in the interesting job of a GHG auditor to apply with SGS an join our international team of experts.

You’ve told me that SGS has been hiring in the US for climate change, where is your office and what plans can you share?

SGS has offices in most US states and employs a staff of more than 3000 in the US working in all kinds of industry sectors. Our climate change program is headquartered in Ontario, California, but we are already in the process of training auditors across the country. SGS has been a first mover in all GHG programs globally and we understand that we have to develop expertise and manpower before the market is actually there. As such, SGS has been an active verifier under CCAR for years and is one of only six entities that achieved ANSI accreditation for ISO 14064 verification of TCR and CCAR. DNV by the way is not ANSI accredited.

And finally, you’re an economist by original training, so can you share a personal opinion on the causes of recent carbon price collapse and the recent article by Point Carbon suggesting that prices should rise by 2012?

The recent price collapse is a result of the international credit crunch and economic crisis. Decreasing industrial production resulted in lower emissions, which had an immediate effect on the demand for allowances in the EU. In addition companies were cash strapped and were selling EU allowances. 2012 is the final true up for phase II emissions in the EU ETS, until then companies will be able to borrow from next years allocation of allowances to meet last year compliance requirements, so that we should see the true demand and supply balance only towards the end of the period. Another result of the credit crisis is that less energy efficiency measures are being undertaken at industry and household level now, so that while the crisis caused relatively less emissions in the short run, it might cause relatively higher emissions in the medium and long run.

As EU companies can meet their compliance targets also with CDM credits, CDM supply also has an influence on the equation. The credits crisis results in less CDM project being started, meaning less supply of CDM credits. New GHG Markets in Australia, New Zealand and the US will compete for this reduced amount of credits. This will result in a decoupling of the CDM price from the EU ETS price, which has basically been the benchmark to date. So when you talk about the price of carbon, I don’t think that there will be a uniform price by 2012 yet.

So, depending on how deep and lasting the cuts in industrial production are, you will see an upward trend in prices towards the end of the Kyoto phase. So much for the different economic developments that will influence carbon prices, but as you know, the econometrician in me will simply say: the best forecast for tomorrow’s price is the price of today…

Thanks Robert, always good to catch up.

Neal Dikeman is Chairman and CEO of Carbonflow, providing software services to carbon developers and funds cut the cost of carbon abatement, including managing the validation and verification processes. Carbonflow is partnered with both SGS and DNV.

A Perfect Storm for Water

‘Growing world population will cause a “perfect storm” of food, energy and water shortages by 2030’. That is what a UK Government chief scientist told attendees at the Sustainable Development conference in London yesterday. Prof. Beddington told the group that demand for food and energy will jump 50% by 2030 and for fresh water by 30%, as the population tops 8.3 billion.

Despite this, investment in water deals represented just 1.8% of the total investment in the Clean Technology area in 2008. There are number of reasons for this and also signs that this is changing.

The Venture Capital Community has been slow to invest in the water sector. Last year out of a total investment of $8.4 billion into clean technology ventures, just $148million (1.8%) is reported by the Cleantech Group by having been made into water. Why?

Some companies are not convinced that there is enough activity in the sector. Others feel it is a conservative market. However DFJ just made their first investment in water by investing $10M into Oasys Water, a US company with a forward osmosis technology.

The Artemis Project is running a ‘Water Top 50’ to identify companies with game changing strategies in the water sector and to demonstrate to the VC community that there are quality opportunities in this space. Global Water Intelligence has number of potentially disruptive technologies as entrants in their ‘Water Idol’ competition and overall several Water Indices, while showing losses, are still outperforming major stock indices.

One of the problems with water is that we only use it once. Of the wastewater which is collected globally, 38% is actually treated and only 5% of that is actually re-used. Michael Braungart, the author of ‘Cradle to Cradle – remaking the way we make things’, is addressing this issue at the Water Meets Money Conference in Zurich with a talk entitled ‘The End of Wastewater’.

So yes, it may be a perfect storm in terms of water shortages, but it may also be a perfect storm which will see innovation, the end of wastewater and new ways of using and managing this resource.

This post is submitted by Paul O’Callaghan founding CEO of O2 Environmental .

Counting Calories and Counting Carbon: The Role of Offsets in our Climate Diet

“To illustrate the difference [between carbon offsets and allowances], consider two people trying to lose weight. One person decides to meticulously count the calories of the foods he eats, with the goal of reducing his intake each day. The second person, however, counts the calories of the foods he thinks he would have eaten that day but did not because he was on a diet. You can imagine which of the two will be more likely to actually shed a few pounds.”

Emily Figdor
Global Warming Program Director of Environment America

By Aimee Barnes and Marc Stuart

The quotation above was spoken during the U.S. Congressional hearing on the “potential role of offsets as a cost-containment mechanism in a U.S. cap-and-trade program.” two weeks ago. Host to this meeting was the House Subcommittee on Energy and Environment, chaired by Rep. Ed Markey, and widely anticipated as playing a vital role in the future shaping of U.S. climate legislation. Like most good analogies, it’s catchy, is framed within an everyday issue that most people understand and seems easy to comprehend. Unlike most good analogies, it’s also dead wrong.

In the analogy quoted above, the first person described who attempts to lose weight by counting calories is parallel to a regulated source, where in theory it should be easy to take stock of the total emissions and simply reduce what is necessary to reach target levels. The second person described, who attempts to lose weight by establishing a counterfactual of what he would have eaten but did not because he was on a diet, is at least in theory, parallel to a carbon offset project. Obviously the ridiculousness of the setup is intended to persuade the listener that offsets are equally ridiculous and should be rejected from any cap-and-trade program. After all, they are based on a scenario that never actually happens! (The irony that climate change itself is a counterfactual is not lost on us… but that’s for another blog.)

Let’s take the analogy and rework it a bit. Consider two people trying to lose weight. Both weigh 150 pounds and each wants to weigh 140. The first decides to meticulously count the calories he eats. But how can we be sure this person knows exactly how many calories they must eat to reach their goal weight? Likewise, many emitters may not have as precise an understanding of how to achieve greenhouse gas reductions as we would like to think. Setting this uncertainty aside, let’s assume the person knows how many calories to eat to reach his goal weight. Aided by precision, this first person will lose exactly 10 pounds to reach their goal weight of 140. In a precise world, emitters could do the same to achieve exact reductions to meet their goals.

Now let’s look at the second person. Applying the metaphor of the offset project, when this second person establishes her counterfactual of how many calories she would have eaten in the absence of the diet, the real parallel here is the “baseline” of the offset project—in other words, what would have happened without the project (or the diet). In the weight loss scenario, the second person reasons how best to lose 10 pounds taking into account their calorie “baseline” and the absence of true precision. So the second person might say to herself:

“If I did not go on a diet, I would usually eat around 2,000 calories. However, since some days I am busy and only eat around 1,700 calories, I will use that conservative estimate as my “business-as-usual” scenario. I know I should eat around 1,500 calories daily to lose 10 pounds, but I can’t always measure the precise caloric value of the foods I eat. To be safe, I’ll aim to consume 1,400 calories a day and use conservative estimates for the caloric values of the foods I do eat. That way I can avoid overshooting my limit and be sure to meet my goal.”

Giving equal consideration to both approaches, the weight loss winner is not as clear as the original metaphor suggests. The first person may be more precise in their weight loss, while the second person may be more conservative to compensate for a lack of precision and thereby potentially lose even more than the first person. If all we focus on is the target of 140 pounds, then that second person might even not receive “credit” for losing additional pounds and surpassing the goal. True, the second approach is less precise, but conservativeness proves an equally effective strategy to reach the same goal. Contrary to what the original quotation implies, one cannot go around claiming that one’s forthcoming diet will consist solely of whipped cream pies. Similarly, great efforts are made to ensure that the baseline of future emissions behavior is appropriate and realistic to the situation for offsets projects.

Now let’s take the metaphor a step further. Assume that the two people are trying to lose weight because they must get into an elevator that can only hold 280 pounds. The weight limit in the elevator is similar to our planet’s capacity for safely absorbing greenhouse gas emissions. Assume one person weighs 150 pounds and cannot lose any weight. The only way she could do so is by cutting off her arm, which weighs 10 pounds. For obvious reasons, this would be very inconvenient and messy. The second person weighs 140 pounds, and could easily lose 10. This person is also holding a 10 pound briefcase, so effectively weighs 160 pounds total. The easiest solution would be for this person to lose 10 pounds and then simply toss the briefcase out of the elevator to reach the weight limit. However, by suggesting that offsets be excluded from a cap-and-trade program we are essentially asking the first person to cut off their arm rather than simply asking the second person to get rid of their briefcase.

Figdor’s diet metaphor isn’t entirely flawed though: counting calories and counting carbon are in some ways surprisingly similar. For example, we might assume that a 100 calorie Snack Pack contains 100 calories exactly. In reality, however, food science is not that precise. Acknowledging this, the FDA requires food companies to regularly test their product to make sure the calorie content is within an acceptable margin of error of what is claimed on the label. So while on average, Snack Packs have 100 calories, your particular Snack Pack could have 95 calories, but it might also be packing 110! Since we don’t quite know in each individual case, the basic scientific concept of conservativeness is applied, and Kraft errs on the side of more snack packs having 95 calories so those on a diet don’t go over their limit. FDA oversight exists to prevent producers from cutting corners and make sure that the calories in the packs are what the company says they are.

The same theory applies to calculating how many credits an offset project should receive. In most cases we have advanced technologies such as continuous flow meters on site – the calibration certifications alone for meter efficacy in our projects have driven some of our team to drink!! – that must be installed at a project to monitor and record the key data points that create emission reductions. In many cases, emission reductions at a project site are probably recorded with more rigor than the calories in your snack pack, and in cases where there is some uncertainty, project developers are generally required to pick the most conservative number, to which a haircut is then applied. To make sure that corners aren’t being cut, third party verifiers (essentially like tax auditors) review all the details of the project to make sure no one is bluffing. Moral of the story? If your 100 calorie Snack Packs were monitored as strictly as your offsets, you might shed a few pounds and reduce your carbon footprint.

Aimee Barnes is senior manager of U.S. regulatory affairs at EcoSecurities, a company working to mitigate climate change through projects that reduce greenhouse gas emissions globally. Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities. The views expressed are their own and do not necessarily represent the view of EcoSecurities.

The T-Word

by Richard T. Stuebi

One of the bummers of having been in the energy/environmental field for so long is that rarely do I read or learn something I haven’t heard of before. It’s hard to for me get excited anymore.

Perhaps one of the silver linings of the current economic malaise is that thought-leaders are coming with novel and interesting ideas for the public sector to raise revenues. Yes, that’s right, new taxes.

Two recent examples. First, an intriguing idea put forth by Ian Ayres and Barry Nalebuff in the March 16 Forbes: a voluntary gas tax. This brings back, in different clothing, the concept of war bonds that could be marketed as a matter of patriotism to promote energy independence: citizens can optionally buy an advance tax rebate in exchange for paying an extra amount per gallon of gas purchased at the pump. If you drive little, or drive a fuel-efficient vehicle, you can actually profit from this transaction.

Second, Seattle city officials are considering a $0.20 charge per plastic or paper shopping bag. The idea is up for referendum in August, but unfortunately, it seems that the idea is on the ropes. It’s too bad, because the same idea has been in place (unbeknownst to me) in Ireland since 2002, and appears to be working well.

Although four-letter words are considered nasty, there’s no worse word in the American lexicon than that little three-letter devil. No politician can afford to raise the specter of new taxes, even when they’re desperately needed to balance budgets while encouraging more responsible behaviors.

The cap-and-trade legislation is being threatened by opponents who claim it is nothing but an energy tax (see, as an example, the March 9 editorial by the Wall Street Journal). The dirty little secret is that they’re right: cap-and-trade is a tax. Does the mere fact that something is a tax mean that it shouldn’t be adopted?

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director at Early Stage Partners.

Barking up the Wrong Tree: Forests vs the CDM in the US Climate Debate

This past week, the Energy and Environment Subcommittee of the new US Congress held its first hearing on the use of offsets within a future carbon regime, presumably within the cap and trade variety of such a regime. As anybody should be able to surmise from reading my byline, my past blogs, or doing a quick Google search, this topic has some degree of importance to me—kind of like oxygen is a bit important to me. I am definitely getting to that age where starting a new career would be a pain.

As I’ve written elsewhere, it’s my firm belief that the US holds the future of the CDM—the international offset regime—in the palm of its hand. So last week when we got wind of the E&E hearing, and the fairly negative testimonies that were planned on the subject of the CDM, my team who tracks and works on these things (okay, she’s just a hyper-accomplished whirlwind who SEEMS like a team) sprang into action and in about 24 hours, managed to work together with four major trade associations to write a letter on the benefits of offsets to Congressman Markey, the Chair of the Committee. Don’t get me wrong, there is plenty about the CDM that needs work, and I would suspect that at least a few folks on its Executive Board would get a laugh out of the fact that I am out there loudly defending it to Democrats and Republicans on the Hill. But there’s a difference between standing up for a concept and noting serious concerns about its execution and underlying architecture.

Anyway, the hearing went off and, on the whole, went OK, but a theme emerged that is worth noting. It’s the issue of deforestation, and in particular, international tropical deforestation. Quite quickly, this issue seems to be becoming a focal point of interest for the U.S.—and this is a really good thing. Congress seems to have begun to grasp the notion that smoking the world’s forests at the rate of 36 football fields a minute is a really bad idea. Tropical forests were utterly screwed in Kyoto – enormous amounts of work was done in establishing them as a cost effective carbon mitigation mechanism, and then they were traded away in the negotiations like an old shoe in a game of strip poker. Pedro Moura Costa, my co-founder at EcoSecurities, has been quoted saying that taking tropical forest conservation out of Kyoto was the greatest environmental crime of the 20th century. I don’t disagree. This is the world’s preeminent trove of biological heritage we are talking about—not Russia’s unknowable and absurdly inflated emissions profile circa 1988.

So on the one hand, I’m glad that the U.S. has decided to “invent” the idea of using carbon markets to save the forests (now operating under the new and improved rebranding of REDD—reduced emissions from deforestation and degradation). But I am also increasingly concerned at the virulent (and dare I say, uninformed) opinion swirling through the D.C. corridors that the U.S. should simply abandon the CDM. And most of all, I am concerned about the apparent trend of the CDM being thrown under the proverbial bus in the interests of differentiating international forest carbon markets as somehow better, more untainted, or more of a U.S. invention. Among others, the US diplomat who led our negotiating team at Kyoto a dozen years ago apparently pretty much suggested as much at the hearing, seemingly to a nodding bunch of Congressmen. Apparently there is now a sense that the U.S. can “own” this part of the emission solution (having abdicated our leadership for the last 8 years following the Florida recount).

Excuse me, but I’ve seen this movie. I got into the carbon field some 16 years ago (yes, really) on the back of international tropical forestry deal flows that morphed out of the original debt-for-nature swaps. I BELIEVE in both the intrinsic and carbon value of tropical forests. I’ve had my passport stamped and my malaria prescriptions filled for far off corners of primary woodlands in places like Papua, Brazil, Malaysia, Thailand and Costa Rica. And the ethical concerns and technical questions that drove the stake through the heart of tropical forests in Kyoto negotiations have not gone away a decade of deforestation later. It’s just become 12 years more urgent that we get our act together and find a path to saving these incomparable assets.

At the same time, developing country emissions have also skyrocketed. China’s emissions are more than double what they were in 1997 and other developing countries are following similar trajectories. The CDM is starting to make a dent in that trajectory – China will be the world’s largest wind power generator soon enough – in part thanks to CDM incentives. Every year that we don’t give China and other developing countries some sense of incentive to continue that kind of changeover will result in embedding billions of dollars of long term higher emitting assets into their infrastructure and our atmosphere. Which means that chasing the forests at the expense of the CDM or similar financing mechanisms –even today – also has very severe potential consequences

So, it is imperative that we influence both forests and developing country emissions—a solution set that excludes one or the other and even has a shot at addressing climate change simply does not exist. The simplistic idea that one is good and the other is bad needs to be tossed in the dustbin. For critics to look at certain CDM projects and blithely claim they are not additional while advocating crediting for tens of millions of sequestration tons from standing tropical forests (where the change of an assumed deforestation rate by a single percent could easily mean the difference of hundreds of millions of dollars of value) is the height of hypocrisy. Both are good. Neither will ever be sufficiently precise to satisfy their most vociferous critics. Accepting some imprecision is fine – providing we use policy adaptations to mitigate the potential excesses of both (via discounting and conservative overall benchmarks) and create real processes to do so pro-actively and in response to real data.

Right now, the US alone emits about 7 billion tons of CO2e per year, about the same as China’s and roughly similar to the annual emissions rate from deforestation as well. The Obama proposal of reducing emissions 80% by 2050 would drop US emissions by more than 5 billion tons per year from current numbers. America will then ostensibly operate an economy twice its current size (assuming a 2% annual economic growth rate) on the emissions profile of its current automobile fleet. In those kinds of numbers, there is plenty of justification to load the shotgun with as much silver buckshot as we can lay our hands on to find emissions mitigation and sequestration in every corner we can. Savings us more emissions now to give us greater flexibility in the trajectory in the future can only be a good thing. And both a revamped CDM and a massive global forest protection regime need to be part of that. The US should not trade one for the other when we need both.

Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities, a global carbon trading firm. The views expressed are his own and do not necessarily represent the view of EcoSecurities.

Solar, Wind and Biofuels Grew 53 Percent in 2008

Despite growing economic uncertainty over the last year, three major clean-energy sectors — solar photovoltaics (PV), wind power, and biofuels — kept up a blistering growth rate, increasing 53 percent from $75.8 billion in 2007 to $115.9 billion in revenues in 2008, according to the Clean Energy Trends 2009 report released today by Clean Edge, Inc. By 2018, Clean Edge forecasts that these three sectors will have revenues of $325.1 billion.

During the conference call discussion of the report, Joel Makower, one of the report’s authors acknowledged that a 2009 shakeout will happen. He observed, “2009 will not be a happy year for start-ups.” A number of renewable energy and biofuel plants and projects have been delayed or cancelled due to lack of project financing. OptiSolar to First Solar for $400 million shows that major players are eager to acquire technology leaders faced with this credit crisis.

In spite of short-term challenges, Clean Edge forecasts strong growth over the mid- to long-term. Their past reports have forecasted growth and been correct.

Global production and wholesale pricing of biofuels reached $34.8 billion in 2008 and are projected to total $105.4 billion by 2018. Last year, the global biofuels market consisted of more than 19 billion gallons of ethanol and biodiesel production worldwide. In Brazil, ethanol from sugarcane surpassed petroleum use for the first time.

Wind power became the first clean-energy sector to surpass the $50 billion mark. Its $51.4 billion in worldwide revenue in 2008 is expected to grow to $139.1 billion in 2018. Last year’s global wind power installations reached a record 27,000 MW, including more than 8,000 MW in the U.S., pushing the U.S. ahead of Germany as the world’s leading generator of wind energy.

Solar PV (including modules, system components, and installation) totaled $29.6 billion last year and will reach $80.6 billion globally by 2018. Annual solar PV installations reached more than 4 GW worldwide in 2008, a fourfold increase from four years earlier, when the solar PV market reached the gigawatt milestone for the first time.

For the first time, the report examines the “green jobs dividend.” Solar PV and wind power provided more than 600,000 direct and indirect jobs globally in 2008 and are expected to generate 2.7 million jobs by 2018.

Clean Energy Trends 2009 also outlines five trends poised to make an impact on the markets in the coming year. It describes:

• What happens when the smart grid goes online

• How energy storage will become a key issue for utilities

• Where new clean-energy markets are emerging around the world

• Why grid transmission capacity will be making headlines in 2009

• The unseen growth in “micropower” grids

Smart grids often include smart charging of electric vehicles. Some smart grid trails, such as Boulder, Colorado, include vehicle-to-grid (V2G) pilot projects. During the conference call, report co-author Clint Wilder answered a question by stating that active utility investment in smart charging was not predicted until there are many more electric vehicles on the road – there is about 40,000 EVs in use in the United States. Joel Makower observed that innovators such as Coulomb Technologies and Better Place are active in the build-out of a charging infrastructure. Gridpoint’s acquisition of V2Green was also identified as boost for smart grid and smart charging. Gridpoint has raised over $220 million to date.

“The clean-energy sector, like the broader economy, faces many challenges,” said Clean Edge co-founder and managing director Ron Pernick. “But while 2009 will be a difficult year, we believe that clean energy will play a central role in any global economic recovery.”

Free download is available for the Clean Energy Trends report (20+ pages).

Green Education = Environmental Religion?

by Richard T. Stuebi

In a recent article in USA Today, a spokesperson of the Competitive Enterprise Institute was quoted as asserting that schools and teachers educating children about eco-friendly actions was tantamount to “environmental religion” and should be stopped.

Angela Logomasini of CEI went on to state “Let the parents teach the kids the values and the lifestyles….If [a child] is going to be ostracized for legitimate choices that people can make in a free world, that’s not right.”

According to their website, CEI is “a non-profit public policy organization dedicated to advancing the principles of free enterprise and limited government”, which believes “that individuals are best helped not by government intervention, but by making their own choices in a free marketplace.”

That all sounds well and good, but how does this mission coincide with concerns about what kids are being taught in schools? Oh, yes, I see: according to SourceWatch’s profile of CEI, the organization has a long history of being opposed to government action on most environmental issues, with a particularly strident focus on thwarting any action to mitigate climate change.

By the logic of CEI, children should be similarly shielded from concepts such as fiscal responsibility (“don’t spend more than you have”) or ethical behavior (“don’t lie or take actions that can benefit you while seriously harming other people”), as they place restraints on an individual’s free will.

I don’t know about you, but when someone criticizes teachers for exposing children to ideas and concepts that have considerable benefit without much downside, it’s hard for me to take their side of the issue. In my eyes, CEI looks really bad on this one.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director at Early Stage Partners.

Ethanol – the Good, the Bad, the Ugly, the Beautiful

The Good

By John Addison. The 9 billion gallons of ethanol that Americans used last year helped drive down oil prices. For those of us who fuel our vehicles with gasoline, as much as 10 percent of that gasoline is ethanol. The Energy Independence and Security Act of 2007 requires that more biofuel be used every year until we reach 36 billion gallons by 2022.

Reduced oil prices are good. We can go from good to great, if we move past fuel from food and haste to fuels from wood and waste. Although the economics do not yet favor major production, pilot plants are taking wood and paper waste and converting it to fuel. Other cellulosic material is even more promising. Some grasses, energy crops, and hybrid poplar trees promise zero-emission fuel sources. These plants absorb CO2 and sequester it in the soil with their deep root systems. These plants often grow in marginal lands needing little irrigation and no fertilizers and pesticides, standing in sharp contrast to the industrial agriculture that produces much of our fuel.

Cellulosic biofuels are becoming economic reality. Norampac is the largest manufacturer of containerboard in Canada. Next generation ethanol producer TRI is not only producing fuel, its processes allow the plant to produce 20% more paper. Prior to installing the TRI spent-liquor gasification system the mill had no chemical and energy recovery process. With the TRI system, the plant is a zero effluent operation, and more profitable.

A Khosla Ventures portfolio company is Range Fuels which sees fuel potential from timber harvesting residues, corn stover (stalks that remain after the corn has been harvested), sawdust, paper pulp, hog manure, and municipal garbage that can be converted into cellulosic ethanol. In the labs, Range Fuels has successfully converted almost 30 types of biomass into ethanol. While competitors are focused on developing new enzymes to convert cellulose to sugar, Range Fuels’ technology eliminates enzymes which have been an expensive component of cellulosic ethanol production. Range Fuels’ thermo-chemical conversion process uses a two step process to convert the biomass to synthesis gas, and then converts the gas to ethanol.

Range Fuels in Georgia is building the first commercial-scale cellulosic ethanol plant in the United States. Phase 1 of the plant is scheduled to complete construction in 2010 with a production capacity of 20 million gallons a year. The plant will grow to be a 100-million-gallon-per-year cellulosic ethanol plant that will use wood waste from Georgia’s forests as its feedstock.

The Bad

Over one billion people are hungry or starving. Agricultural expert Lester Brown reports, “The grain required to fill an SUV’s 25-gallon tank with ethanol just once will feed one person for a whole year.”

Corn ethanol that is transported over 1,000 miles on a tanker truck, and then delivered as E85 into a flexfuel vehicle that fails to deliver 20 miles per gallon is bad. GM and Ford have pushed flexfuel vehicles that can run on gasoline or E85, which is a blend with as much as 85 percent ethanol. For the 2009 model year, the best rated car running on E85 in the United States was the Chevrolet HHR using a stick-shift, with a United States EPA gasoline mileage rating of 26 miles per gallon, and an E85 rating of only 19 miles per gallon.

In other words, if you passed on using E85 and drove a hybrid with good mileage, you would double miles per gallon and produce far less greenhouse gas emissions than any U.S. flexfuel offering. Top 10 Low Carbon Footprint Four-Door Sedans for 2009

The problem is not the idea of flexfuel. You can get a flexfuel vehicle with good mileage in Brazil. The problem is that GM and Ford used their flexfuel strategy as an eay way out, instead of making the tougher choices to truly embrace hybrids and real fuel efficiency. Flexfuel buying credits and ethanol subsidies have created incentives to buy cars that fail to cut emissions.

A new paper – Economic and Environmental Transportation Effects of Large-Scale Ethanol Production and Distribution in the United States – documents that the cost and emissions from transporting ethanol long-distance is much higher than previously thought. Ethanol is transported by tanker truck, not by pipeline, although Brazil will experiment with pipeline transportation.

The Ugly

It’s a tough time to make money with ethanol. Major players, like Verasun, are in bankruptcy. For the industry, stranded assets are being sold for pennies on the dollar. With thin margins, low oil prices, and high perceived risk, it is difficult to get a new plant financed.

Activists worry about oil refiners, such as Valero, offering to buy ethanol producers such as Verasun. But oil companies can bring needed financing, program management, and blending of next generation biofuels with existing petroleum refined gasoline, diesel, and jet fuel.

Government mandates for more ethanol do not match today’s reality. Subsidies to industrial corn agriculture are not good uses of taxpayer money. Encouraging federal, state, and local governments with their 4 million vehicles to give priority to flexfuel vehicles with lousy mileage is government waste.

Not all government help is misplaced. Range Fuels large-scale cellulosic ethanol production was helped with an $80 million loan guarantee. The loan guarantee falls under the Section 9003 Biorefinery Assistance Program authorized by the 2008 Farm Bill, which provides loan guarantees for commercial-scale biorefineries and grants for demonstration-scale biorefineries that produce advanced biofuels or any fuel that is not corn- based.

The Beautiful

Beautiful is the transition to electric drive systems and the development of next generation biofuels. Last year, Americans in record numbers road electric light-rail in record numbers. In 2008, Americans drove 100 billion miles less than 2007. Americans also drove 40,000 electric vehicles.

Critics and special interests try to stop the shift to electric vehicles by wrongly stating that if there is coal power used, then there are no benefits. Mitsubishi estimates that its electric vehicle is 67 percent efficient, in contrast to a 15 percent efficient gasoline vehicle. Efficient electric drive systems lower lifecycle emissions. With the growth of wind, solar, geothermal, and other renewables, lifecycle emissions from electric transportation will continue to fall. For example, my main mode of transportation is electric buses and rail that use hydropower. My backup mode is a Toyota Prius that I share with my wife.

Long-term we will continue to see the growth of electric drive systems in hybrid cars, plug-in hybrids, battery electric, fuel cell vehicles, light-rail, and high-speed rail. Over decades, the use of internal combustion engines will decrease, but the transition will take decades, especially for long-haul trucks. During these decades we can benefit from next generation biofuels that will replace corn ethanol and biodiesel from food sources.

Shell has a five-year development agreement with Virent, which takes biomass and converts it to gasoline – biogasoline. Gasoline, after all, is a complex hydrocarbon molecule that can be made from feedstock other than petroleum. Unlike ethanol, biogasoline has the same energy content as gasoline. Unlike cellulosic ethanol alternatives, Virent produces water using a bioforming process, rather than consuming valuable water. Virent has multi-million dollar investments form from Cargill, Honda, and several venture capital firms. Biogasoline will be its major initial focus. Its technology can also be used to produce hydrogen, biodiesel, and bio jet fuel.

Sapphire is an exciting new biofuels company backed with over $100 million investment from firms such as ARCH Venture Partners, the Wellcome Trust, Cascade Investment, and Venrock. The biotech firm has already produced 91-octane gasoline that conforms to ASTM certification, made from a breakthrough process that produces crude oil directly from sunlight, CO2 and photosynthetic microorganisms, beginning with algae.

The process is not dependent on food crops or valuable farmland, and is highly water efficient. “It’s hard not to get excited about algae’s potential,” said Paul Dickerson, chief operating officer of the Department of Energy’s Office of Energy Efficiency and Renewable Energy “Its basic requirements are few: CO2, sun, and water. Algae can flourish in non-arable land or in dirty water, and when it does flourish, its potential oil yield per acre is unmatched by any other terrestrial feedstock.”

Scale is a major challenge. Producing a few gallons per day in a lab is not the same as producing 100 million gallons per year at a lower cost than the petroleum alternative. Yet, some of our best minds are optimistic that it will happen in the next few years. We will see fuel from marginal lands, from crops and algae that sequester carbon emissions. The fuel will blend with existing gasoline, diesel, and jet fuel, and run in all engines, not just those with low mileage.

Some think that such a transition is as impossible as an interception with a 100 yard run for a touchdown in a Superbowl. It is exciting when the impossible happens.

John Addison is the author of the new book – Save Gas, Save the Planet – which is now available at Amazon. He publishes the Clean Fleet Report.


By Guest Columnist Sonia Medina, US Country Manager, Ecosecurities

At 24, a recent graduate from Oxford, I thought the idea of joining a tiny consultancy firm doing carbon reduction projects was something very cool. At the time, I did not mind that I had to cycle 5 miles across town to work at a country house in the outskirts of Oxford. That did not have heating during the winter. Not the kind of job expectation one may have when you have graduated from a so-called good university. But five years later, I have travelled a million miles, visited more than 50 countries across five continents, negotiated contracts to build a portfolio of hundreds of carbon-abatement projects and spent an enormous amount of time learning about other cultures. What a ride!

After that fantastic experience, I thought that the next frontier for climate change is the sleeping giant of the United States and I found myself buying a one-way ticket to JFK to ‘try to figure out how to make it here’ as the new US Country Director for that same firm I joined five years ago (and which now has nearly 300 employees, plus heating). In my first three months, it already feels like going back to that small cold country house in Oxford when it comes to the debates about the science of climate change or the rationale of a carbon market that I hear in NY, DC and Sacramento, but with a twist – I have to facebook people the information about my company – something people in the developing world prefer to do over a beer, rice wine or green tea!
Four years ago, our work really picked up when the Kyoto Protocol was finally ratified by Russia, after years of back and forth. It was almost an anti-climax when they finally decided to go ahead after so much playing around. I guess Putin has always like intrigue games from his days at KGB. It was at that point when the Clean Development Mechanism (CDM) – a project-based mechanism to generate offsets regulated by the United Nations and part of the Kyoto Protocol – found itself flooded with real demand.

Most of my work these five years has been in building a portfolio of CDM projects worldwide ranging from landfills in Latin America and biomass-to-energy projects in India to industrial energy efficiency in South Africa and China, to name a few. During that time, my relationship with CDM has been of love and hate. There have been days that I thought it was the most fantastic mechanism of the world, that allows people to align themselves to do good, channels foreign investment to clean projects in the developing world and truly promotes sustainable development. Other days I’m convinced that the bureaucracy that the UN has built around the system will make it collapse under its own weight, and I put my hands up in desperation and I think. ”we will never go anywhere!”

But to be fair, even though the process to get an offset certified through the UN system can be onerous, it is also true that the mechanism does preserve environmental integrity, has helped built enormous awareness around the issue of climate change across continents, has created a pipeline of over 4,000 projects across five continents and has issued over 250 million of high-quality offsets in the last three years. Accomplishments other carbon standards cannot even dream of.

That is why knowing the good and the bad on the CDM, it is quite shocking that policy-makers and industry groups in the US totally ignore the work done and lessons learned from this incredible period of growth. It’s especially ironic when funnily enough, the CDM was actually created by the Clinton Administration back in 1997 when negotiating Kyoto. It is important that knowledge builds rapidly because there is no time to reinvent the wheel. When the Obama administration enacts a cap and trade bill, industry groups know very well that environmentally sound offsets are a key price control mechanism. The US could do a double-service to the world and to itself by fixing the procedural issues of the CDM, and adopting an already-created high-quality pipeline of projects seeking to make real emission reductions.

Next Week: The rights and wrongs of CDM criticisms and why knowing the difference should matter to the US

Ruminations on Vegas and NASCAR

I spent two days last week overlapping the two of the least sustainable parts of the American experience – Las Vegas and NASCAR. Now I like a good Vegas juxtaposition as much as the next guy – heck, Fear and Loathing in Las Vegas was pretty much my sophomore year bible. But attending a clean energy exhibition in our southwest desert Gomorrah while the 8000 rpm, 500 hp travelling road show is roaring into town for the Shelby 427 – an homage to the biggest and baddest V8 engine block in the history of Detroit – is even a bit much for me to handle. .

Vegas and NASCAR are both about over the top fantasy, wanton consumerism and conspicuous consumption. Combining sound, noise, adrenaline and a hermetically closed environment keeps you from noticing that the overall sustainability of what you are involved in is somewhat akin to living in a power plant at the mouth of a Chinese coalmine.

But let’s be honest, the environmental footprint of these things is just boggling. According to NASA, Vegas is The Brightest Spot of Earth. Those lights – burning in conjunction with air conditioning more appropriate for a meat locker – illuminates people that primarily flew there from all over North America and beyond. Las Vegas’s direct carbon footprint is not as bad as it might be (as they have proudly issued press releases on), because it gets a huge percentage of its power from 70 year old Hoover dam, just down the road. But all you have to do is fly by it once at night and you’ll know that there are a lot of megawatts working extra hard just to keep the masses entranced with Celine Dion and Cirque de Soleil.

NASCAR is a lot tougher to find a silver lining in. Just to give you a sense of the ethos, NASCAR just manage to switch to unleaded fuel in 2008. NASCAR vehicles get about 4 miles to the gallon. What that means is the racers who finished the good old Shelby 427 each emitted about a ton of CO2 in their wake. In about three hours. I’m far from a carbon saint, but it takes me some 3-4 months of driving to put a ton up in the atmosphere (my flying habit is a different story). At the average NASCAR race, a huge percentage of the fans drive long distances to get there – generally driving big American trucks and house-on-wheels American RV’s. It’s no coincidence that when Toyota finally decided to make a full size trucks for the American market, the first thing they did was get themselves a real NASCAR team

No, this blog is not going down the sackcloth and ashes. The reality is that it’s going to take some time, effort and thinking to get homo americanus to stop taking energy, fossil fuels and the atmosphere completely for granted. People LIKE the stuff of Vegas and NASCAR – just as they liked smoking, driving without seatbelts and the purr of an engine running on full leaded gasoline. Heck, it’s not my thing, but I could feel myself falling into the indulgent trance walking the casino floor . So, just hoping that people learn to turn the lights off and install low flow showerheads a fool’s hope – a changeover has to be driven by some innovative thinking, some policy nuance and the liberal use of the bully pulpit. And then competition and, ergo, markets.

Which is where Vegas and NASCAR can become part of the solution, rather than the problem. Everybody who has ever seen a Hong Kong martial arts film – or opened a fortune cookie – knows that the Chinese symbol for danger is also that for opportunity. President Obama talks about infrastructure investing and technology development as keystones to resuming long-term prosperity. And therein lays the rub – what BETTER place to attack the US’s incorrigibly wasteful ways than these dual beating hearts of self-indulgent capitalism. Let’s be honest with ourselves – is another happy initiative from holier-than-thou bastions of Boulder, Berkeley or Austin or going create anything more replicable than another soy ink, recycled paper, press release?

And frankly, in regard to NASCAR at least, the Government has the upper hand. Remember, the American taxpayer pretty much owns the US auto industry these days. And let’s not forget that auto racing began as a way to demonstrate technology. Around the turn of the century when the Indy 500 was in its early years, gasoline was just one of a couple technology options out there – electric, diesels and even exothermic Stirling engines all wanted a piece of the pie – to be the transport technology of choice. Things like Indy showed the nascent consumer that these newfangled cars were safe, efficient and reliable.

So, as we hit the next inflection point in auto technology, how about President Obama sending his car emissary (reputedly Steve Rattner, ex-Quadrangle Group) go on down to the France (family) NASCAR empire, point out quite correctly that the entire petro-advertising complex they live on is at the end of its era and come up with a set of new rules for 2010 that will start the process of moving to hybrids, electrics, mixed fuels, etc. Give every team the energy equivalent of 25 gallons of gas (I’m flexible on the numbers – maybe ratchet down over a couple years) to go five hundred miles at speed and see how innovation blooms. Teslas, Chevy Volts, Fiskers, souped-up Prius’ – let a thousand flowers bloom under the hot lights of Talladega and Daytona. There will still be plenty of speed – my hybrid goes 0-60 in about 5 seconds and I don’t even have the tires quite inflated right. Put the car companies and the pit crew wizards on the task and I’ll guarantee you we’ll push clean transport innovation faster. And instead of being a Ford or Chevy fan, you can go with electric, hydrogen or hybrid. OK, maybe that’s pushing it a bit.

Vegas is all about light and action – and casino’s competing with each other for the best show, the hottest entertainer, the coolest restaurant. What a laboratory for mass energy efficiency, especially in lighting – a place to bring in LEDs en masse. We’re on the cusp of a global revolution in lighting – how about finding a policy structure to have all the casino’s compete to show who can do most with the least. Most Vegas casinos don’t even have the standard European or Asian system where you need a room key card to turn on the lights. The spectacles around the Wynn, Mirage, Bellagio and Venetian – just to name a few – are all energy hogs of extraordinary degree. They’ve gotten away with it to date, because it hasn’t mattered – to their bottom lines, to their engagement with customers and in their relationships to policy and the government. But that’s all changing quickly.

The potential is just beyond enormous – and as tight and focused a target market as you’ll find anywhere on the planet. Eighteen of the world’s twenty five largest hotels (by room count) are on the Las Vegas Strip, with a total of over 67,000 rooms without having to even make a single turn off Las Vegas Boulevard. For the city, imagine the follow-on effects of becoming the center for hotel/resort energy efficiency expertise.

People don’t necessarily want to change their ways of life and the way they get entertainment – at least not too much and not too fast. People will still want to see racing and they still will want to be dazzled by the distractions of a place like Vegas. But that doesn’t mean that we just sit in the stasis of the past – if we can create the excitement and verve of these kinds of experiences, but with a fraction the energy signature – well, that can’t be a bad thing. And if that occurs – well, to paraphrase the famous saying – hopefully what happens in Vegas won’t just stay in Vegas.

Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities, a global carbon trading firm. The views expressed are his own and do not necessarily represent the view of EcoSecurities.

California Dreamin’

by Richard T. Stuebi

as posted to Huffington Post

No-one has ever accused California of being timid. Certainly, in the area of energy and environmental policies, California has long been considered the leader among the 50 United States. But, maybe, California has bitten off more than it can chew — or at least, more than it thought it had bitten off.

The issue is the Global Warming Solutions Act of 2006, better known as AB 32, which compels the state to plan to achieve CO2 emission levels in 2020 equivalent to the emission levels in 1990.

As covered well in an article entitled “California Plans a Carbon Diet” by Heather Mehta, Briana Kabor and Dr. Robert Weisenmiller of MRW & Associates in the January 2009 Project Finance Newswire, a publication produced by the law firm of Chadbourne & Parke, two years after the passage of AB 32, California continues to struggle in implementing a regulatory approach for enacting the program.

Meanwhile, economically, the state is suffering, as well profiled in this recent article in The Economist, which argues that “California makes Washington DC look like a model of fiscal probity.” Facing a massive budget deficit of about $42 billion, the state government reached a painful agreement to slash spending and raise taxes.

In turn, these fiscal concerns are putting pressures on AB 32. Earlier in February, Stephen Moore in the Wall Street Journal wrote a highly negative piece entitled “California’s ‘Green Jobs’ Experiment Isn’t Going Well”, in which the state’s employment and budget downturn are implicitly linked to the passage of AB 32, while few of the “green jobs” and other economic benefits suggested by advocates of AB 32 have yet to materialize.

This is a damaging line of argument for the “green economy promoters”. In my opinion, Mr. Moore’s story is way too negative — most of the economic downturn in California has nothing to do with AB 32, and almost everything to do with the simultaneous collapses in housing, credit and equity markets, which are completely independent of AB 32.

But, underneath it all, Moore is onto something: that proponents of climate action have often been far too fast and loose with the promises of economic growth, and too-easily-dismissive of the economic costs and dislocations that will be endured. Those of us in the cleantech community must respect the near-certainty that there will be losers in the move to a low-carbon economy, and we can’t simply ignore that “inconvenient truth”, just as we are appalled when others deny the “inconvenient truth” of climate change.

At a micro-level, it’s interesting to see how one entrepreneur has responded to the doldrums in California. As profiled in the February issue of Fortune Small Business, Bob Hertzberg launched a company called Solar Integrated Technologies in Los Angeles, got fed up by government bureaucracy and changing of policies/programs at a whim, and moved from sunny La-La land across the ocean to cloud-shrouded Wales, where he started another solar company, G24i.

A solar company in Wales, as opposed to California? Hertzberg is convinced its a better place to be. Maybe some of the other VC-backed PV companies in the Bay Area could take note? Word through the grapevine suggests that the Sand Hill Road gang is now beginning to recognize that maybe other geographic areas are better-suited (i.e., lower cost) for building-out their ventures.

California may be the place of dreams, but with the hard realities it’s facing right now, the state is tossing and turning through nightmares.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director at Early Stage Partners.