The ‘Governator’ is Mr. Clean Tech

Of all the people in the world, arriving in Copenhagen, Denmark these days, the ‘Governator’ of California, Arnold Schwarzenegger is generating the most interest.  Why? He is downplaying the importance of a global agreement.  And he is on to something.

Reporting directly from Copenhagen, which is trying the save the world from global climate change the pinnacle of the world is gathering as we move into the 11^th hour of top tier negotiations. The ‘Governator’ of California is also in Copenhagen to explain how California is not going to wait on Copenhagen to say ‘hasta la vista’ to climate change.

Representing the seventh largest economy of the world one such ‘head of state’ is the Governor of California, Arnold Schwarzenegger. And the media is all over him. It is not just his persona and movie star status. Attending the COP15 conference, he gave a rather impressive speech which is generating a lot of interest because he downplayed its importance just as heads of states from around the globe are arriving for the final push towards an agreement.

‘But by putting all of our eggs in one basket, we fail to see the eggs in the other baskets.’, believing that pinning global aspirations of mitigating climate change to a single global agreement would be imprudent.

‘If this conference does not get the strong agreement, some will say that Copenhagen has failed. That we talked grandly but we are fooling ourselves (…) No, ladies and gentlemen. This conference is already a success’, he remarked.

Citing an example of replacing kerosene lamps with clean solar power for 400 million Indians, he says

‘Think about that. So if the nations of the world does not sign a carbon agreement, does that mean that the doctor’s transformative work in India doesn’t count?’  he said.

The governor is convinced, that whether an agreement is reached or not, the state of California has already seen the environmental and economic potential.

‘The power of influence we [California] have is the equivalent of a continent (…) we do not believe and do not behave as if progress should has to wait for Washington, or Beijing, or Kyoto.’, he stated

Representing the clean tech region number one of the world, critics would of course argue that he is simply serving the special interests of the clean tech companies of California. But from the perspective of thecleandeal.com, his remarks underscore a core issue of clean tech and the role of politics. As the governor said:

‘The world’s governments alone cannot make progress. The kind of progress that is needed on climate change they alone cannot do it. They need everyone coming together, everyone one working together.’

To this we may add the host of technologies, rules and regulation, supportive policies and policy measures which makes clean tech more attractive than the conventional way. But the key message here is that a Copenhagen agreement is vital; not so much for what is stipulated in the agreement, but rather for the message and signals it sends. On the brink of a new decade, we are entering a new industrial and technological era of clean tech.  Whether California will take the lead is a different matter. But I am certain that the Governator ‘will be back’.

Are Americans Getting a Clean Deal from GM and Chrysler?

When U.S. automakers, General Motors and Chrysler, appealed for government funding for their failing businesses this past year, it was presumed that they were going to use that money for the development of cleaner cars. Now, it looks like they don’t have to. What is going on here? Are American taxpayers being shafted?

By: Shannon Arvizu

American taxpayers will end up paying $12, 200 for every GM car sold and $7600 for every Chrysler car sold through the beginning of 2011, according to a new study by Thomas Hopkins, an economics professor at the University of Rochester. Total funding for GM Chrysler and GMAC, the financing subsidiary for both companies, stands at $78.9 billion. The study is based on data released by the US Government Accountability Office this past month.

Initially, this money was believed to help American carmakers restructure their facilities to produce more fuel-efficient and plug-in electric cars. However, Ron Bloom, the government task force “Car Czar,” said this week that this is not a prerequisite or obligation as part of the bailout money GM and Chrysler received. While all automakers are expected to comply with the increased average fuel economy standards of 35 mpg by 2016, neither GM or Chrysler will be held to higher standards or expected to produce the million plug-in vehicles Obama announced that he would like to see by 2015. This is despite the fact that American taxpayers now own a 60% share of GM and 10% share of Chrysler.

So what is going on here? Apparently the focus is on repaying government loans as fast as possible. This means that, since it is cheaper to produce and sell the conventional internal combustion engine vehicles that American carmakers have made in the past, they will continue to do so. In other words, it’s business as usual.

I have to admit that I had been quite encouraged by GM’s and Chrysler’s prior commitments to plug-in vehicles. While GM has made it clear that it will still produce and sell the Volt, Chrysler has now put its electric vehicle program on the back burner. Overall, we should not expect these companies to make plug-in and fuel-efficient cars the cornerstone of their total vehicle sales.

It is a shame to see precious billions that were initially earmarked for clean tech development go towards helping “dinosaur companies” stay afloat. This is the exact opposite of what a clean tech policy should be.

The U.S. Chamber of Commerce Has a Better Idea?

The U.S. Chamber of Commerce may actually have a better idea than a cap-and-trade bill for cutting emissions. And, contrary to popular opinion, they do recognize climate change and the need for clean tech development.

This past week I interviewed Dan Letourneau, the Communications Director for the U.S. Chamber of Commerce, as part of a clean car web radio show called the EVCast. What I learned was quite surprising, given the amount of negative attention the Chamber has been getting lately from environmental groups and the green media.

It appears that the main reason the Chamber opposes a cap-and-trade bill in Congress is because it believes that it will not do enough to help businesses incorporate clean tech into their operations. It has issued an official statement detailing its position and has created an affiliate Institute for 21st Century Energy to develop what they call a “common sense energy strategy.” Letourneau remarked that the Chamber has, in fact, proposed 88 different policy recommendations to Congress that reflect real-world approaches to helping businesses curb emissions.

So – what is the real deal here? Is this just a facade to cover up prior opposition to clean energy…or does the Chamber have a valid point? As I’ve written on TheCleanDeal, a climate treaty should work directly to implement clean technology in the market place. A “cap-and-trade” bill does not necessarily lead to mass market clean tech outcomes. In fact, under Europe’s carbon market system, it has often been cheaper to buy credits than invest in clean tech to reduce GHG emissions.

Putting a price on carbon seems to make sense, at first, as a way to rationalize ecological concerns into the economy. However, the reality is that it is a “round-about” way to actualize climate change goals. An effective climate policy should work directly with businesses to find ways to conserve energy and develop and deploy clean technology. This is what the Chamber is also proposing.

After talking with the Chamber’s representative, I believe they have some valid points that are worth considering…but can the Chamber regain its climate credibility? After the multiple waves of bad publicity in the green scene, it may be difficult for the Chamber to get some traction in this discussion once again. As for the groups that have been active in pointing fingers, it is in their best interest to really understand what a cap-and-trade bill accomplishes at the end of the day. It would also help to understand what an organization’s real position is before making claims to the contrary.

Clean Tech – The Bottomless Money Pit

The Danish clean tech industry is running out of money, and may soon be forced to shut down. The economic crisis and credit crunch is blamed. In a response to the deteriorating situation, the industry is calling for further investments to save the industry. But as The Clean Deal can reveal this week, money is not the core issue. Once again, the culprit is counterproductive regulation discouraging demand and investments.

By Adam Buchhorn

According to a survey conducted by the Danish newspaper, Berlingske Tidende Business, a majority of Danish clean tech companies have depleted funds and require additional capital to continue. This tendency has been confirmed by one of the largest mutual funds in Denmark, Danske Invest. In their view, more capital is needed to maintain operations and continue with R&D activities.

Check out one such company in this predicament. Biogasol, a Danish producer of second generation biofuels (based on agricultural crops such as straw, livestock manure and industrial waste) has been granted $20 million from the government. But the grant is conditional and  is based on whether the company can attract an additional $25 million from private investors. They had until April 2009 before the government grant expired. They depleted existing funds following a 2008 deficit. Biogasol is in a serious deficit, even though they offer commercially available technology that can churn out thousands of gallons of biofuel. Why have they not been able to leverage the capital they need?

The major problems are existing agricultural subsidies. The EU is known for its controversial and expensive subsidies to keep European farmers, especially in the South, from going bankrupt. Denmark is no exception. Danish agriculture is the largest supplier of biomass material for renewable electricity production. In 2006, they delivered the biomass used to produce 50 percent of Denmark’s renewable electricity. To encourage them, they received $120-150 per ton of straw in government subsidy. The program has been so successful it results in an annual surplus production of around one million tons of straw, which is simply left on the fields unused.

The exact same straw could be used by Biogasol to produce climate-friendly biofuels to the transportation sector, the fastest growing contributor to CO2 emissions. With a domestic market for biofuels, attracting capital should be easy. However, when farmers leave surplus straw to rot on the fields, they do so to maintain the subsidy. Straw used for biofuel production is not eligible for government support.

There you have it. Agricultural policies are preventing farmers from harvesting the straw Biogasol needs to produce biofuels. In the era of climate change and with unprecedented global efforts directed at mitigating climate change, it strikes me as odd when the very same host of the UN conference on climate change, the Danish government fails to effectively gear regulation.

This situation echoes previous posts on counter-productive regulation in Denmark (e.g car tax, solar power) and the general concern that it will take more than a global agreement on climate change to save the world. It is bit of paradox. While we invest millions in clean tech industries to come up with technological solutions, we are either ignoring existing solutions ready out of the box, or inadvertently preventing their use as is the case with Biogasol. On a global scale the consequences for Denmark could be much worse. Without access to domestic markets, let alone capital, clean tech companies will fall behind in the global race to benefit from increased global demand for clean tech, especially biofuel. And as previously reported, ‘green growth’ has become a top priority for the Danish government.

Any further investment is merely a short-term solution to a long-term problem. Until such counterproductive regulation is removed or augmented to provide companies such as Biogasol with clean tech markets, and allow Denmark to benefit from increased export of Danish clean tech, any further investments will simply go down the bottomless money pit.

What is required is a comprehensive study of counterproductive regulation and similar administrative barriers, followed by regulatory housecleaning to augment whatever deal is reached in Copenhagen. Otherwise, there can be no clean deal.

‘That won’t help a goddamn thing!’

After a meeting between top experts on mitigating agricultural contribution to climate change this week in Copenhagen one thing was clear. While everybody agreed the global situation is critical there was no sign of agreement on how to solve it. But if no one can agree on the fundamental issues, agriculture is left with little hope of seeing the solutions needed, let alone for clean tech markets to receive any orders.

By Adam Buchhorn

According to the IPCC, agriculture and land usage such as deforestation accounts for almost 40 percent of global GHG emissions among them the potent methane gas. In other words, ‘agriculture’ is the second largest emitter only surpassed by the energy sector. This Monday over 50 experts on agriculture and biotechnology sat down in a posh location for a day (with a climate-friendly lunch) to frame a vision on mitigating climate change for Danish agriculture. It will be presented at the COP15 in December. As a researcher in environmental technology markets for agriculture, I was invited along to express my opinion. The event was organized by the powerful lobby organization, the Danish Agriculture Council and one of the world’s largest enzyme producer Novozymes – hoping to sell biotech to agriculture. The starting point was clear: we have the solutions to mitigate the agricultural climate change footprint but how should we go about it?

As the day proceeded, it quickly dawned on me that while climate change was taking place outside the venue with massive rain showers, inside there was major disagreement and controversy over how to solve the problem. It even got to a point when people interrupted each other, which was highly unorthodox and out of place at a luncheon among respected authorities. On one memorable occasion, the WWF representative shouted ‘that won’t help a goddamn thing!” across the room in a quick response to a suggestion by someone else to allow further use of GMOs. Rather than framing a vision, the day was spent on arguing. Which solution is ’optimal’? Who bears the responsibility? Who is to pay for them? Why not just wait and see if climate change is real? Is GMO a ‘bad’ or a ‘good’ thing? Should we give up meat? And so on.

I was not surprised. My latest research has revealed that the single-greatest challenge in creating markets for clean tech is reaching some form of closure on the numerous controversies over climate change and technology which govern the political, public and scientific agenda. To my professional satisfaction, my research came alive right there in front of me. I was right. Climate change and solutions to it was still highly controversial, even after almost 20 years of debating.

To my personal dissatisfaction and on behalf of the millions who currently live with the dramatic and potentially fatal consequences of climate change, I was left with a sour taste in my mouth. If the pinnacle fails to reach some form of agreement on the basic questions and issues, how then will policy measures be developed and proper technology chosen, let alone implemented? According to the IPCC, time is of the essence. There is no more room for half measures.

If we continue to fail to reach consensus on how to proceed we are left with little hope of addressing climate change with clean tech and other practical solutions. Keep in mind, controversies are never finally settled once and for all. At best they are temporally ‘cold’, only to become ‘hot’ once more at a later point in time. However, to mitigate climate change by means of clean tech a certain degree of closure must be accomplished.  There can be no clean tech markets amid outspoken controversy over whether clean teach is even a prudent response.  I am simply raising this matter, because in the words of the IPCC representative at the meeting: ”climate change isn’t something that will take place in the future. It is already taking place.”

Solar Power is No Good in Denmark

Despite huge potential in solar energy and a strong government push to capitalize on clean tech in the future, a look behind the curtains in Denmark reveal that little is being done to motivate ordinary Danes to switch from fossil fuels to renewable energy.

By Adam Buchhorn

You find any of these in Denmark

We are 45 days from what the Danish Prime Minister calls one of the greatest challenges in Danish foreign affairs in decades. In early December around 8.000 international delegates and visitors descends on Copenhagen. Not only to negotiate the much anticipated global agreement on climate change, but also to witness after hours what this small nation is doing to mitigate climate change. After all, Denmark pioneered renewable energy in the 1970s, is internationally renowned for its environmental leadership, and has one of the highest share of renewable energy production in the world.

The Danish government has already launched a clean tech strategy for the business environment, as reported on last week. And while I have previously raised the unpopular question over whether Copenhagen can save the world, the Danish industry is seeking to capitalize on every single opportunity to show the world, what we are good at: clean tech. Hoping to avoid accusations of being non-patriotic, I urge my fellow world citizens to ask why solar power only contributes with 0.05 percent in a country that is usually associated with renewable energy strides?  There are so many decimals, the Danish Energy Authority has chosen to list it as 0.0 percent. Is there no sun in Denmark?

As always, there is no single explanation. According to the Danish Energy Authority (DEA), the potential for solar energy in Denmark is ‘enormous’. An efficient focus on implementing solar energy technology in existing housing structures could provide total energy consumption with 30-60 percent in 30 years. In fact, the mild climate in Denmark is highly beneficial for the dominant silicon-based solar panels. So, it is not because Denmark is that one place on Earth, where the sun never shines.

Maybe the population does not support it? No. A recent Gallup survey with 1.100 respondents showed that 81 percent of the Danish population believed coal-powered energy should be dramatically reduced, and 71 percent felt the same about oil. Perhaps, not a surprising result given the current climate change frenzy. Instead, a massive 80 percent called for further use of wind power, biomass, and solar.

In researching for this post, I discovered something interesting that may elevate our thinking. Apparently, my previous post on automobile taxation is expanding into a separate theme. According to the IRS in Denmark, if a Dane decides to help mitigate climate change by connecting a solar panel to his house and supply the public grid with surplus electricity he is compelled to pay income tax of any proceeds. Moreover, if the installation exceeds 6 kW production capacity you become a power company in the eyes of the DEA, and are consequently subject to energy and CO2 taxes. As you already pay these taxes on your monthly utility bill you end up paying the same taxes twice. For the energy you consume and the energy you produce.

Interestingly, while the Danish government is motivating the industry to turn a profit from climate change, ordinary citizens are penalized for doing the exact same thing, not once but twice. In the fight against climate change, the population is willing to make sacrifices. But as one industry executive once replied to the Danish Minister of Climate and Energy: “you can ask for a lot, and we will do it. But we will not pay the same taxes twice”.

How to Build a National Lead Market for Clean Tech

So, it appears that Denmark has announced that it is the first country to institute policies to develop a lead market for clean technology. However, as Adam has remarked in a previous post on TheCleanDeal, their policies are not exactly “new.” Moreover, it will take some serious re-structuring of the market to actually achieve their intended goals. With that in mind, let us look at what exactly a lead market for clean technology entails.

A lead market for clean tech is believed to be a primary determinant for countries on the “eco-modernization” path. In essence, a lead market is created when governments create policies to stimulate the production and commercialization of technologies intended to reduce ecological impacts. It is assumed that government help is necessary because of the following unique characteristics of clean technology:

1- Assumed higher costs (and thus likelihood of market failure)

2-Global market potential (since they address issues of increasingly global importance)

3-Increased global demand (due to increasing scarcity of natural resources) [Janicke, 2008]

So, what types of policies are expected to work best to build a national industry for clean tech? Policies are believed to be innovation-friendly if they provide economic incentives and are based on strategic planning and goal formulation. These policies should also take account of the different phases of innovation and diffusion.

Scholars of eco-modernization have recognized that it is not just a matter of creating policy, but that policy styles and the ways in which policies engage relevant actors are equally important. A policy style is believed to be innovation friendly if it is based on dialogue and consensus amongst relevant stakeholders. It should be flexible, but”management-oriented.”

Policies work best when they create a network of communication and engagement between regulators and those who are regulated. “Horizontal policy integration,” or coordination amongst companies for goal formulation and implementation, is equally important.

Keep in mind, however, that this is just an “ideal type” of a clean tech lead market. Some countries, like China, are creating their own type of a clean tech lead market in very autocratic fashion. We should also keep in mind that other factors, such as the increasing business risks for producers of polluting technologies, also come into play.

A final point is that, while many countries are now implementing aspects of lead market policies (including the U.S.), this is an evolutionary process. We are currently in what I would call a “trial and error” stage. As such, I would hesitate to judge the predicted outcomes of any one policy, since we can reasonably expect these policies to shift in coming years.

The World’s First National “Business Climate Strategy”

…or is it? About a week ago, the Danish government launched the “world’s first business climate strategy.” It is designed to help Danish businesses capitalize on the global market for clean tech. But, what makes it so special?

By Adam Buchhorn

It has gone largely unnoticed in the world press (I cannot find news of it in English), but apparently the world has seen its first business strategy on climate change instituted by a national government. That is what the Ministry of Economic and Business Affairs in Denmark has argued. I believe, however, that there is nothing special about this particular strategy.

The policy is the final product of a series of meetings in the government’s Business Panel on Climate Change (which represents Danish businesses, industry organizations, and research institutions). I worked with them during a short stint as a government official. Our job was to advice the government on how to improve the conditions for Danish leadership on the global market for clean tech.

The strategy involves $120 million in funding to turn Denmark into a green clean tech lab. The policy plans to create a program for clean tech incubation and market maturity, increase Danish clean tech exports, and create a ‘Green Alliance’ between clean tech entrepreneurs and the established business environment. On the surface, these are all new policy measures.

But the strategy fails to understand some of the unique challenges in capitalizing on clean tech and instead resorts to classic Danish policy measures. For instance, there is no focus on core issues such as modernizing educational programs towards enhancing clean competencies. Clean tech incubation may require special innovation and management strategies, or new ways of understanding markets for clean tech to succeed in clean tech. Unlike other products such as diapers or cheese cake, many forms of clean technology have yet to be widely understood and trusted. Without a highly educated work force and an informed consumer market, these policies may not necessarily lead to their desired outcome.

And as I reported  last week, the Danish government fails to ‘walk the talk’ in many cases, such as missing a great opportunity to create domestic demand for clean cars. Instead, Denmark is currently a showcase for the belief that with a little dash of policy and good intentions we can succeed.

This so-called “world’s first national business climate strategy” echoes its predecessors. The financial support of this policy is spread too thin amongst different programs without acknowledging the fundamental changes needed. Naturally, these measures can help, but the expression ‘old wine in new bottles’ seams to apply. There is nothing special about this particular strategy.

If I were Soros…What Would I Spend $1 billion on?

The clean tech field is abuzz today with George Soros’ announcement to invest one billion dollars in clean technology. This investment fund is coupled with a pledge to donate $100 million over the next ten years to a Climate Policy Initiative think tank. Although no more specific details were released, Soros noted that there would be “stringent criteria” used to assess whether the tech investments ”actively contribute to tackling the issue of climate change.”

This news has me wondering…if I were to invest one billion in clean tech, what sectors/companies would I choose? How would I evaluate their effectiveness?

There are two major obstacles in the clean tech field today that make investing difficult. First off, there is great confusion about what classifies as a “clean technology.” Currently, many technologies classified as ”clean” do not have a high energy efficiency ratio. This includes some of the alternative fuels in the transportation sector, including ethanol and hydrogen.

The second major obstacle is that many new companies focusing on the clean tech sector are not public. For Soros, this  means that more opportunities are available for equity investments than through stocks.

Which brings me back to my question, how would I spend a clean one billion? As someone who has done due diligence in this field, I would take the “Google.org” approach.

Google.org is investing millions in what it believes are the two promising solutions towards climate change – renewable energy and plug-in vehicles. They are mostly investing in start-up companies at this point, but I would also include investments in established companies that appear to be moving steadily in this direction (like Nissan, SharpUSA, and Mitsubishi).

Another clean tech investment group that I think has a promising portfolio is Vantage Point Venture Partners. The companies they’ve chosen to fund include Tesla, Aptera, and Solar City – some of the field’s shining stars at the moment.

Of course, this move by Soros is largely symbolic compared to the hundreds of billions of investment dollars poured into the dirty energy economy every year. Nonetheless, it is a move in the right direction. With the right expertise to guide his decisionmaking, the clean tech field could get a significant boost.

Great Offer: Get one car, pay for three!

Whereas the US government offers tax incentives for replacing your gas guzzler with more fuel-efficient cars, Denmark still charges you about  two times the value of the car for at set of license plates. Welcome to Denmark.

By Adam Buchhorn

Danes stuck at rush hour

As all eyes settle on Denmark in connection with the UN Conference on Climate Change (COP15), the world will also be scrutinizing Denmark’s own policies and policy measures. What is Denmark doing to combat climate change? I suggest they start by looking at the Danish car fleet.

Denmark has the world’s most expensive cars. Not because they are gold plated and more fancy than elsewhere. We drive the exact same cars as everyone else. But because we pay 180 percent – I repeat, 180 percent of the MSRP ( the actual price of the car charged by the local dealership). While most international readers will be shocked and appalled by this fact, there are both politically and socially sane and insane arguments for this tax burden.

The range of hybrid models offered in Denmark is limited to Toyota, Honda, and a very expensive Lexus. An entry model Toyota Prius is around $75.000. But even with its 50 mpg, it is dwarfed by the $60.000 VW Golf diesel BlueMotion (European model), which gets 48 mpg. The price of fuel would have to pass $75 per gallon before the overall fuel economy makes the Prius a better choice.

Some of us 3 million Danish car owners (including yours truly) would argue that it is time for change. Both the IEA and the UN expects transportation will account for the largest increase in CO2-emissions in years to come. Surely, lower taxes, at least on environmentally friendly and low CO2 emission cars such as hybrids, EVs, and high mileage diesels, would be an important and relatively easy measure to implement.

And as previously reported on thecleandeal.com, Denmark will soon be forced to purchase oil and natural gas on the world energy markets, as its domestic supplied in the North Sea will be depleted in the next 5-10 years. Moreover, the Danish car fleet is among the oldest in Europe (with an average age of 9.2 years, according to the Danish Census Bureau). A nine year old car is not only fuel inefficie, it doesn’t live up to current safety standards. A recent study from the EU revealed Denmark has the poorest traffic safety in the EU, twice as high as in Norway and Sweden, according to the European Transport Safety Council (ETSC)

But no! The Danish liberal-conservative government (led by the Danish equivalent to the US Republicans) is refusing to reform the taxation scheme. Apparently, the government is awaiting the arrival of hydrogen and full battery electric vehicles. While Better Place and Renault have plans to release full electric vehicles in the next two years (which will have 0% tax), hydrogen fuel cell vehicles are still predicted to be 15-20 years from commercialization.

Last year, when the government reformed the automotive taxation scheme, it was more focused on maintaining a zero-sum change and protecting what has become a major source of tax revenue than reducing CO2-emissions. In 2008, it banked around $4 billion. Naturally, any radical changes would result in too much uncertainty for the government’s fiscal budgets. The point is that the Danish government has missed a golden opportunity to replace its aging car fleet with more fuel efficient and safer cars. The sheer demand for new cars, and benefits from reduced traffic fatalities, petrol and diesel consumption, would outweigh any loss in tax revenue. But even if it didn’t, that is sometimes the price society has to pay for solving fundamental problems that have gone unresolved for years. In the meantime, Danes are compelled to pay for three cars when they buy one.