Is Carbon Emission Trading Scheme feasible in China?

By HU Tao, WU Yanyang, ZHOU Lihuan

On November 12, a joint statement on climate change came after the presidents of the world’s two largest economies met in Beijing, following the Asia-Pacific Economic Cooperation (APEC) meetings. In this joint statement which draws applause worldwide, China and the U.S. revealed for the first time both countries’ post-2020 goals of coping with climate change. The United States has set a target of reducing its emissions by 26 to 28 percent below its 2005 level in 2025, while China has pledged to achieve the peaking of carbon dioxide emissions around 2030 and increase the share of non-fossil fuels in primary energy consumption to around 20 percent by 2030.[1] Earlier this year, during the UN Climate Change Summit in New York City, China’s Vice-Premier Zhang Gaoli pledged China would aim to cap emissions or have GHGs peak “as early as possible”.

So what kind of actions should China do? According to the views of many experts, the US experiences can serve as a template for China. About 15 years ago, U.S. EPA supported China to establish SO2 pilot emission trading programs, but almost all of the programs were failed[2]. This is an old story in last century, both China and the world have undergone tremendous changes over the next 15 years. China is now the world’s biggest-emitting nation, accounting for 28 percent of global greenhouse gas emissions. The government is putting a range of policies in place to help hit that goal. Although China has been relatively slow to jump on the carbon market bandwagon, it’s now clear a carbon market is also part of the plan.[3] Since 2011, the Chinese government has embarked on one of the largest endeavors in climate economics ever, to establish a national carbon emission trading system by 2016.[4] China has already introduced seven regional pilot markets in a bid to gain experience ahead of a nationwide program, including Beijing, Tianjin, Shanghai, Chongqing, Shenzhen, Guangdong and Hubei, to set regional caps and institute pilot programs for trading rights as part of its initiative to cut the intensity of emissions by as much as 45 percent before 2020 from 2005 levels. The success or failure of those experiments will to a large extent determine the future of climate policies in China.

China's pilot carbon trading

China’s pilot carbon trading markets. The size of the bubble represents the amount of emissions covered by each scheme. Source: CartoDB.

All the markets are experiencing teething problems. Some spurt in volumes and price occurred in the first 16 weeks in Shenzhen Emission Trading Scheme (ETS) with total transactions of more than 114,000 tons of CO2 allowances[5]. But the trading was muted in the following 6 weeks with only 16,000 tons of CO2 allowances[6]. Although Song Ranping, the Team Leader of the Climate & Energy Program in World Resources Institute’s China office, considers the ETS projects to be a strong starting point for a market-based approach to constrain emissions in China[7], it is still necessary to provide some insights about feasibility of China carbon ETS. For starters, China’s political culture and recent history means many participants have little experience of this sort of trading. But from the side of government, the scenario is slightly different. According to the data announced by the National Development and Reform Commission (NDRC), Chinese enterprises had traded over 8.56 million tons of carbon emission quotas as of June 29, and the quotas were sold for 338 million yuan, making China a major carbon trader, second only to the European Union. That’s why Chinese officials and carbon market experts urge tolerance, despite only a few trades a day with many firms struggling to understand how to trade.

Another big concern is the fierce competition between current pilot ETS regions in China for the title of “carbon financial center”, because of the allure of the huge carbon financial market. So it’s not strange to find that Shanghai, Shenzhen, Guangzhou and Beijing are all advocating the same slogans: “building China’s national carbon financial center”, while Hubei Province even goes further, whose ambitious target is “building the world carbon financial center”. Such competition is considered by LIAO Zhenliang, a scholar from UNEP, to be the biggest hurdle for NDRC to develop a nationwide carbon trading system which may be introduced as early as 2016.

Despite such issues, maybe the current biggest problem about China’s carbon ETS is governance issue. Without public information, the pricing mechanism would be opaque. In China, officials have divulged the size of the overall cap in most markets, but not always the historic emissions data on which the caps are based nor the precise number of allowances handed out.[8] Furthermore, some companies can’t provide robust records of their historical emissions, and regulators don’t have the tools to verify the companies’ estimates.[9]

Is data accurate and reliable?

Environmental data fraud is already an open secret in China. China’s Ministry of Environmental Protection (MEP) recently punished 19 corporations for last year’s desulfurization data fraud, including many state-owned enterprises (SOEs) directly controlled by the Chinese Central Government. Companies in the state-controlled and district-controlled area have all installed the pollution control line monitoring equipment, so that the local environmental protection bureaus can monitor them for 24 hours every day, but no problem can be found only from the data, said Guo Peng, the director of Ningxia Environmental Enforcement Bureau. While according to Xu Yang’s opinions, who is the chief engineer of Shandong Provincial Environmental Information and Monitoring Center, there are more than 10 kinds of data fraud methods by interfering with the normal operation of automatic monitoring equipment, and such methods can be divided into two major categories. One is by modifying the operating parameters of the device software, to make the substandard data looks good. For example, as the actual monitoring emission concentration is 1000 mg per cubic meter, adding a 0.1 coefficient into the calculating process by the software can make the final result become 100 milligrams per cubic meter. The other method is through the destruction of the sampling system to change the actual data, such as adding dilution equipment on the sampling tube, unplugging the sampling probe, or disconnecting the sampling system to make the emission samples cannot be collected by the monitoring equipment.[10]

An accurate and reliable emission data is a fundamental basis for ETS, but both properties are questioned in China for two reasons, the indirect measurement method and China’s bad reputation for data quality. The emission data in China’s ETS is indirectly calculated rather than directly monitored by equipment. The indirect calculation uses emission factors multiplied by activity data, such as gas pump receipt. As data is solely provided by companies, the accuracy of data cannot be ensured as companies can manipulate and underreport activity data within a certain range without being found.

Emission data is hardly credible if official data, which is ensured by quality framework, is not trustworthy. China’s official statistics are not as reliable as those produced in the U.S. and Europe, and manipulation remains an important cause of unreliable statistics, according to a study conducted by U.S.-China Economic and Security Review Commission[11], a commission created by U.S. Congress. For example, Henglanzhen in Zhongshan, a town located 84 miles west of Shenzhen, was discovered of providing fraud statistics[12]: the reported gross output of 71 industrial companies in 2012 was 8.5 billion RMB, but it was only 2.2 billion RMB after auditing and investigating by National Bureau of Statistics of China, only a quarter of the original statistics.

The unreliability of China’s official statistics further renders ETS ineffective, as ETS fixes the GDP emission intensity to meet its carbon emission reduction goals. Unlike European Union ETS, which fixes amount of greenhouse gases that can be emitted, China ETS will adjust the emission allowances to maintain a fixed emissions-to-GDP ratio according to companies’ Industrial Added Value (part of GDP) each year. The emission allowances cannot be accurate if emission data and GDP are not accurate.

Are validation entities capable and objective?

Emission data need to be validated to ensure accuracy and reliability after calculating by companies. The capability of a validation entity is demonstrated by relevant certificates, such as Certificate of Accreditation and Provisional Designation issued by United Nations (UN)[13]. Only two of seven validation entities designated by Shenzhen ETS obtained certificates from UN. The rest five validation entities do not have any credibility, nor experience to conduct greenhouse gas emission validation.

The validation entities also need to be independent to validate emission data objectively. If a validation entity is funded by government or affiliated to government, the validation process might be under influence of government. Five of seven validation entities in Shenzhen ETS are government’s affiliation or funded by government. If the capability and objectivity of validation entities come into question, then good data quality is not ensured.

Are there other options?

Based on our analysis above, China is still not ready for carbon ETS, and need to overcome several obstacles. But China has already established other tools to reduce carbon emissions, such as resource tax, which has included coal already.[14] When tax is placed at the beginning of the coal consumption, the abatement would include not only CO2, but also other pollutants discharged by coal-fired power plant, such as SO2, NOx, and suspended particles. This is because the higher the coal price, coal-fired power plant will make more efforts to promote the efficiency, such as upgrading to supercritical and ultra-supercritical boilers and turbines, and using more renewable energies which are cleaner. As economic instruments to encourage reductions in greenhouse-gas emissions, coal tax has its advantages and disadvantages. If a coal tax is used, then the costs of emissions reduction are fixed – but the emissions target becomes unclear, and it is difficult to know if businesses will opt to make cuts. Some may prefer to just pay the tax, which will not help reduce emissions.[15]

To control coal consumption or pollution at the beginning of industrial chain is more effective and suitable for China today than controlling pollutions at enterprises or companies level, because it reduces various pollutions in a consistent way, rather than through different individual policies. Sometimes, individual policies are contradictory. For example, China plans to cut emissions of SO2 in 2015 by 8% comparing the level in 2010.[16] However, every ton of SO2 reduced at the coal-fired power plant will increase 5.41 tons of CO2 which offsets CO2 emission reduction efforts. China should have set up coal trading programs to reduce coal consumption, rather than setting up carbon trading programs.

Conclusion

Although it’s a good start to arouse companies’ awareness of emission reduction by putting a price tag on CO2, due to a lack of reliable emissions data, inadequate capacity to integrate carbon trading into business models, and restrictions with regard to the development of derivatives and futures markets, whether the ETS pilots will be effective is still a question with such challenges in CO2 emissions reduction. As the international Clean Development Mechanism (CDM) market collapsed, China’s nascent carbon markets have attracted global attention. China must learn lessons from European failures, and the policymakers should make some changes after taking stock of this first round of ETS experiments. China should increase data quality for both official and unofficial data, and establish carbon certification system, however, these tasks are hard to accomplish in short term. From a short-term policy feasibility perspective, the coal resources tax and carbon tax might be more efficient than the carbon trading mechanism. Through the establishment of a coal tax, and setting the schedule of tax rate adjustments based on the overall emission reduction targets, government can make changes in the cost of carbon emissions become predictability, and businesses can identify future production and the corresponding energy conservation technological innovation based on their own situation. In addition, introducing coal tax can avoid the thorny issue of allocation of emissions quotas, so that the government can flexibly implement emission reduction obligations according to economic performance by adjusting the level of taxation. Thus, compared to the carbon ETS, coal tax or overall coal consumption control may be more suitable for China’s current critical situation.

[1] The White House. FACT SHEET: U.S.-China Joint Announcement on Climate Change and Clean Energy Cooperation. Retrieved from http://www.whitehouse.gov/the-press-office/2014/11/11/fact-sheet-us-china-joint-announcement-climate-change-and-clean-energy-c

[2] The development of China’s pollution rights trading faces difficulties: The effect of pilots is not good. (2011, November 8). The Economic Reference. Retrieved from http://www.cec.org.cn/xinwenpingxi/2011-11-08/73955.html

[3] Mat Hope (2014). Analysis: China’s big carbon market experiment.

[4] Han, G., Olsson, M., Hallding, K., & Lunsford, D. (2012). China’s carbon emission trading: an overview of current development.

[5] Yang L. (2013, October 9). Investors are successful in carbon market. Nanfang Daily. Retrieved from http://epaper.nfdaily.cn/html/2013-10/09/content_7231539.htm

[6] Shenzhen carbon ETS has transactions of more than 130,000 tons] (2013, November 30). Retrieved from http://www.tanpaifang.com/tanjiaoyi/2013/1130/26481.html

[7] Song R. (2013, June 21). Emissions trading in China: First steps and the road ahead. Retrieved from http://www.chinafaqs.org/blog-posts/emissions-trading-china-first-steps-and-road-ahead

[8] Pilita Clark. (May 13, 2014). The ‘black hole’ of Chinese carbon trading. Retrieved from http://www.ft.com/cms/s/0/c9b0faf8-d9e1-11e3-b3e3-00144feabdc0.html#axzz3Hz4aA900

[9] Mat Hope (Sep 2, 2014). Analysis: China’s big carbon market experiment. Retrieved from http://www.carbonbrief.org/blog/2014/09/analysing-china-carbon-market/

[10] http://news.xinhuanet.com/fortune/2014-07/06/c_1111477703.htm

[11] Weser I. (2013, January 28). The reliability of China’s economic data: An analysis of national output. Retrieved from http://origin.www.uscc.gov/sites/default/files/Research/TheReliabilityofChina%27sEconomicData.pdf

[12] Liu Z. (2013, June 14). Bureau of Statistics exposes fake data reported by Henglan Town, Zhongshan, Guangdong. Xinhua News. Retrieved from http://www.gov.cn/jrzg/2013-06/14/content_2426433.htm

[13] List of DOEs. (2014). Retrieved January 15, 2014, from http://cdm.unfccc.int/DOE/list/index.html

[14] China considers resource tax to include coal. (2013, May 9). UPI. Retrieved from http://www.upi.com/Business_News/Energy-Resources/2013/05/09/China-considers-resource-tax-to-include-coal/UPI-85641368115457/

[15] https://www.chinadialogue.net/article/show/single/en/7002-Climate-talks-will-decide-the-future-carbon-price-

[16] State Council issued statement on 12th Five-year plan of energy saving and emission reduction. (2012, August 6). Retrieved from http://www.ndrc.gov.cn/rdzt/jsjyxsh/t20120822_500736.htm

A New Force in International Development: Why did China propose to establish the Asian Infrastructure Investment Bank?

By HU Tao, LU Xuege, ZHU Li

In November this year, China will likely launch the Asian Infrastructure Investment Bank (AIIB) when leaders in the Asia Pacific region meet at this year’s APEC summit in Beijing.

Chinese President Xi Jinping first unveiled the AIIB plan during his visit to Indonesia in October last year. Since then, China has held five rounds of consultations with countries in the region and successfully recruited 21 founding members. Mr. Jin Liqun, the Former Finance Minister of China and Vice President of ADB, is to be appointed as first President of AIIB, according to the proposal of Chinese Government.

With AIIB, China, now almost the worlds’ largest economy by purchasing power, aims to “promote interconnectivity and economic integration in the region”. It is also seen by some as an effort by China to harness its vast financial resources and infrastructural expertise to expand its regional influence. So what’s behind this new initiative?

Why?

There are many reasons of course. A primary one is that China’s rising economic and financial strengths call for a corresponding power increase reflected in major multilateral development banks and international financial agencies. However, the current capital shares and voting rights for China as well as other BRICS countries are disproportionately low in the International Monetary Fund (IMF) and the World Bank Group (Figure 1).

IMF-World Bank Group

In contrast, the AIIB as well as BRICK Development Bank will provide an alternative avenue for China and other emerging economies to have a bigger say in financing infrastructure in the region. In addition, the new capital made available by AIIB will provide much needed investment in the region where infrastructure development needs remain extraordinarily high.

Other considerations?

Besides seeking stronger influence that matches its rising economic power, China has other financial, economic and geopolitical considerations for creating the AIIB.

First, China’s pursuit of the internationalization of its currency RMB will greatly benefit from the AIIB. Given that China and the ASEAN are looking to double their two-way trade by 2020, settling accounts through RMB under AIIB would substantially elevate China’s financial status in the global currency market.

Economically there is also the growing need for China to tap into the markets overseas. Equipped with formidable experience and technology in infrastructure development it has accumulated in recent years, China is on the lookout to invest heavily in transportation and infrastructure construction in the region, such as highways, railroads, sea ports, and airports. For example, in October 2013, China expressed its interest to participate in the high-speed rail project in Thailand. This is just the tip of the iceberg.

In addition, China and the ASEAN have also agreed to promote further economic cooperation in a wide range of sectors, from civil aviation, maritime development, environment protection, to agriculture, information technology, human resources development, and tourism. AIIB will no doubt provide the indispensable financing to strengthen such bilateral economic ties.

From a geopolitical perspective, to establish such a bank is also strategically significant to enhance the China–ASEAN Free Trade Area and China’s relationship with the ASEAN members.

Why Asia?

It is in China’s interests to set its sights on Asia. Many Asian countries, though keen on driving economic growth through inbound foreign direct investment, are faced with the almost insurmountable challenges of securing funding from traditional multinational development banks and bilateral funds, which are often known to be slow, inefficient and insistent on additional conditions. AIIB, as a result, might provide an alternative option for these countries. For members of the ASEAN, having one more investment player to bid for their projects means lower financial risks and more negotiation power, hence a better chance of getting a more favorable deal. China, with an immense foreign exchange reserve at its command, has the means and confidence to go head to head with big players like Japan and its finance arm Japan Bank for International Cooperation (JBIC).

In a broader context, this is consistent with China’s strategy to increase its regional influence incrementally. Such efforts began with the Shanghai Cooperation Organization Development Bank, proposed in 2010 to strengthen China’s economic ties with the rest of the Eurasian nations. AIIB is a further step in this direction with a focus on Lower Mekong countries. Why infrastructure?

Despite substantial growth in recent years, the ASEAN countries still faces challenges to overcome their infrastructure deficit and bottleneck. According to the Asian Development Bank, Asia needs to invest about $8 trillion in national infrastructure and $290 billion in regional infrastructure between 2010 and 2020 to sustain its growth trajectory. It is against this backdrop that AIIB, as a new multinational financial institution that answers the infrastructure needs of the region, rises to the occasion.

Our concerns

With the creation of AIIB, we have reason to believe that the infrastructure development in the region will be markedly sped up. While this greatly improves the physical interconnectivity between countries and facilitates trade flows across national borders, it will also pose mounting challenges for biodiversity conservation in the region. For example, large scale infrastructure will further encroach into natural habitats, intensify the human interference on wildlife, and aggravate wildlife trafficking, to name a few. How to encourage the AIIB to incorporate credible environmental safeguards into its lending policies presents both a challenge and an opportunity for WWF and its conservation partners.

1) http://www.channelnewsasia.com/news/business/china-proposes-setting-up/835722.html
2) http://www.economist.com/blogs/analects/2013/10/asian-infrastructure-bank-1
3) IFC, IBRD, IDA, MIGA are members of the World Bank Group.

Following the Green Brick Road with MES and IGEL to Real-World Sustainability

By: Nathan Sell*

January to July 2014 were the quickest and perhaps busiest months of my life to date. As a Masters student in the Environmental Studies program at Penn I was finishing up my degree, joining the Initiative for Global Environmental Leadership (IGEL) team, and job hunting. My time at IGEL was an invaluable experience in many ways. I joined in the thick of event planning just as the annual conference and a host of other events were all being planned.  This “trial by fire” had me leveraging my new knowledge as an MES student, as well as my educational background, and building a new set of communications and outreach skills.

I was in awe at the audience that IGEL has and the power that its events have to bring together leaders in sustainability and push the discussion on what companies can do for business and the environment. A lot of the skills I refined while at IGEL both caught the attention of my current employers and have served me well in my new role.

As a participant in the ORISE (Oak Ridge Institute for Science and Education) program, I’m working with the EPA Office of Water at the headquarters in Washington, DC. As part of the Climate Change Team, I work on issues closely tied to sustainability.  Balanced between communications and research, a portion of my work is dedicated to facing EPA’s message to the public through social media and outreach. My research at the moment focuses on “Blue Carbon,” carbon sequestered within coastal marine ecosystems such as mangroves, sea grass beds, and salt marshes. Blue Carbon is getting a lot of attention, and for good reason. These ecosystems are shown to store carbon up to 100X faster than terrestrial ecosystems such as forests, and store this carbon for incredibly long periods of time. They’re part of the puzzle to building climate change resilience. Seeing how policy can be leveraged for additional protection and expansion of these threatened environments, and seeing where business can build blue carbon into international carbon markets are some of the drivers that will be increasingly important in the future.  It’s an exciting intersection of science, policy and business that I’m thrilled to be working on, and an amazing way to begin putting my MES degree and IGEL experience to use.

*Nathan is the former IGEL Coordinator and currently works with the EPA Office of Water on their Water Policy Staff.  @mister_sells

Adapting to Climate Change: Environmental Liability

By: Anthony Wagar

Over the past several years, more and more companies are becoming increasingly aware of climate change issues and the necessity for sustainability/resiliency planning.  This awareness comes in many forms but primarily centers on how their business might be affected financially (through legal liability, fines/penalties, government regulations, and financial disclosure requirements) or just simply public relations surrounding responsible corporate citizenship. 

As the climate change threat becomes more real, based upon its estimated path into the future, industries are preparing for the potential impact, the importance of sustainability planning and facing that possibility that they may need to be prepared to pay a price on their carbon output.

This is not isolated to only major oil companies or large manufacturing companies who utilize vast amounts of coal to generate energy (some companies that have already taken the initiative to consider sustainability planning include firms such as Microsoft, General Electric, Walt Disney, ConAgra Foods, Wells Fargo, DuPont, Duke Energy, Google and Delta Airlines just to name a few).

Storm Surge and/or Flooding

Adverse weather events such as flooding, storm surges, droughts and heat-wave could lead to unexpected clean-up costs and/or pollution legal liabilities issues.  A few “real life” examples illustrated below.

Historic/Pre-Existing Contamination

Properties having historical or pre-existing contamination could be disturbed and, subsequently, carry pollutants to multiple locations resulting in the cross-contamination of various parts of the property and/or neighbouring properties.

Landfills

Heavy water infiltration can cause landslides carrying with it pollutants and/or contaminated waste water into nearby waterways or sensitive third party receptor areas.

Drums and Storage Tanks

Drums containing hazardous waste and storage tanks containing oils and other chemicals could be raised afloat and damaged during transport from their original locations, thereby distributing pollutants downstream.

Sewerage Authorities

Sewerage authorities have limited storage and processing capacity, therefore, large unanticipated volumes of water could result in the overflow and/or release of raw untreated sewage.

Mold Damage

Mold can grow at alarming rates given proper moisture, temperature range and food source (cellulose based substrate) following a saturation event.

“Green” Materials

Many environmental insurers are now providing coverage which give Insured’s an option to replace property with “green” materials following damage from pollutants, hence, further reducing their “carbon footprint” and addressing sustainability issues.

Many businesses experienced these scenarios during Hurricane Sandy, which resulted in costly remediation, bodily injury/property damage and staggering legal defense costs.

Droughts and Heat-Waves

While most of these loss scenarios discussed above would be addressed under a pollution legal liability policy, there are other “non-pollution” related environmental damages that would not be covered. For example:

Loss of Operating License

A major soft drink company lost their lucrative operating license in India because of an exhaustion of water resources used as raw material.

Supply Chain Disruption

A major footwear and clothing manufacturer was disrupted because an extreme weather event negatively affected cotton growth (which as one of their primary raw materials).

From a risk-management perspective, all of these exposures affect a company’s business risk and, ultimately, how insurers may view them in terms of underwriting appetite, coverage, premium, and limit for certain classes of risk.

While public policy and government intervention can help raise the importance and address the climate change issue, it’s actual corporations that can make the most impact through their own individual greenhouse gas reduction and sustainability efforts to ensure their own business success and longevity.

Climate change will continue to be one of the top concerns facing businesses across the board. Therefore, adapting proper risk management strategies and loss control planning measures early on is key.

- See more at: http://blog.willis.com/2014/04/adapting-to-climate-change-environmental-liability/#sthash.7eCgYB7w.dpuf

Build the Clean Energy Movement with NRG

As NRG makes the transformation from being a traditional power company to being a leader in the clean energy economy, our basic objective is very simple: we want to continue to provide the vast number of energy consumers who either are current NRG customers (roughly 3 million)  or are prospective NRG customers (virtually everyone – we think big)  with safe, affordable and reliable power but we want to do so in a manner that doesn’t melt the earth. 

As we have progressed towards that essential objective, we have realized that our most effective approach is to proceed on two tracks: certainly we have to invest in carbon capture and other approaches to reduce if not eliminate the GHG emissions from our traditional fleet of power plants – and that we are in the process of doing – but we also have to pave the way to a distributed “post-grid” future, where energy consumers are empowered by new technologies and by the freedom of choice to make their own energy decisions; to generate the lion’s share of their own energy needs from their own largely clean and inexhaustible resources whether it be wind, geothermal, in situ waste conversion or, most importantly, distributed solar.

But we have a problem and it is NOT that the appropriate new technologies don’t exist or haven’t reached a competitive price point. The problem is us.

We haven’t figured out how to engage and motivate the end use energy customer – which basically is the entire American public and electorate – to pay attention, to take control of their individual energy destiny, to make energy decisions that are not only in their economic self-interest but critical, collectively, to the long run health of the planet that we all cherish and depend upon.

We need your ideas and we need you to challenge and critique our ideas. The idea of blogging and on line conversations may not come naturally to us but we have to adapt to how things get done, problems get solved and movements get launched in the modern age. And that, first and foremost, is what we need right now, a consumer-driven clean energy movement.

Please help us figure out how to make it happen.

We are running out of time.

David Crane

NRG CEO 

Is Your Business Safe from Climate Change?

By: Anne Coglianese

Climate change poses global threats to the environment, but do you know how it will affect the quality of life where you live and work? If you own a business, do you know how climate change will affect your bottom line? A recent report called Risky Business: The Economic Risks of Climate Change to the United States helps businesses identify and prepare for the specific, local risks that climate change poses.

To the average citizen, climate change may feel abstract, and many people believe that only coastal communities will be affected. However, the Risky Business report draws attention to effects far beyond sea level rise, including mortality, storm surge, crop yields, and energy, to name just a few.  For the first time, individuals can narrow in on their region to learn which issues are most relevant in their state, discovering how closely climate change will affect all of us.

The report was released by the Risky Business Project, started in the fall of 2013 when the nongovernmental organization Next Generation paired up with Bloomberg Philanthropies and the Paulson Institute to research climate change’s economic threats. The report stresses “this is not a problem for another day. The investments we make today—this week, this month, this year—will determine our economic future.”

The Risky Business Project’s website makes the group’s report highly interactive and more informative. Due to the many videos, images, and charts found on the website, visitors can easily digest information on climate change risks.  For example, the website contains a video designed to help individuals understand the progression and threat of extreme weather changes.

What makes the report truly unique is the focused analysis provided. By breaking the US into regions and states, Risky Business targets the climate concerns in specific parts of the country as well as nation-wide.  The website then allows individuals to scroll through date on their prospective locations.

The report focuses on climate risk education in order to provide businesses with the information necessary to begin taking action to sidestep catastrophe. It highlights three areas to reduce risk: business adaptation, investor adaptation, and public sector response. Throughout various sections of the report, one thing becomes clear: a shift towards sustainable business and investment needs immediate action.

Former New York City Mayor, Michael Bloomberg, a co-chair of the Risk Business Project, and a key player in the development of this report, recently stated in an interview:

Damages from storms, flooding, and heat waves are already costing local economies billions of dollars—we saw that firsthand in New York City with Hurricane Sandy. With the oceans rising and the climate changing, the Risky Business report details the costs of inaction in ways that are easy to understand in dollars and cents—and impossible to ignore.

To learn more about climate change and find your business’ next move, visit the Risky Business Project website.

The Win-Win-Win of Impact Investing

By: Nathan Sell*

Ask not what your investment dollars can do for you, but ALSO what they can do for others, and the environment. That’s the idea behind Impact Investing, an emerging paradigm shift in philanthropy. This form of socially responsible investing generates both measurable social and environmental impact as well as returns on investment. Mark Tercek, CEO of the Nature Conservancy and former Managing Director at Goldman Sachs is at the forefront of linking business and the environment for a better world as he discusses in his recent book “Nature’s Fortune.” Tercek, and the new wave of impact investors are proving that your investments can make money AND do good.

Impact investing in the environment is quickly coming to scale as the value of ecosystem services to clean air and water, armor shorelines, as well as climate change mitigation and adaptation is being realized. Cities like Philadelphia are leading the way in green infrastructure investment. Over the next 25 years, Green Stormwater Infrastructure will help the city to combat the extreme weather patterns as well as prevent Combined Sewer Overflows resulting in greener cities and cleaner waters for which the initiative is named.

Novo Nordisk entered China in 1994 and immediately noticed that a diet high in starch was leading to diabetes in a large portion of the population. Combined with rapid pathogen spread due to urbanization, the health of the people in China was (and continues to be) at risk. Novo Nordisk put their efforts toward alleviating some of these health concerns. By training doctors in diabetes care and prevention, the company has helped to save over 140,000 life years. The shared value of impact investment ensures companies like Novo Nordisk remain profitable while helping the communities in which they work.

Impact investing also has the potential to bring promising technologies to scale. Without investment, it’s possible that companies like d.light may never have gotten off the ground. With the help of investment, this for-profit social enterprise has been able to sell affordable solar lamps to those without reliable power. The result? D.light is bringing safe, bright and renewable lighting to people around the world, allowing students to do their homework, families to cook, and an overall better quality of life to over 34 million people.

Impact investing may prove better for people and the planet than charitable giving. Investing in businesses that do good by people and the planet can ensure the success of their mission, allowing for long term solutions, rather than a potential band-aid in the form of a grant or gift. If your investment could benefit the triple bottom line, rather than just YOUR bottom line then you’ve found the rare win-win-win scenario. The next time you invest, think strategically about what your money can really do.

*Nathan is a recent graduate of the Master of Environmental Studies program at the University of Pennsylvania and a current ORISE Fellow with EPA Water.

The Impact of Climate Change on Global Food Production

By: Anne Coglianese

Water scarcity is a growing global issue and one that is significantly exacerbated by climate change. Agricultural industries around the globe are facing drastic consequences due to limited access to freshwater. According to the Intergovernmental Panel on Climate Change [IPCC], the change in supply will “exacerbate competition for water among agriculture, ecosystems, settlements, industry and energy production, affecting regional water, energy and food security.”

Such scarcity may seem surprising because the world holds 332.5 million cubic miles of water, a seemingly infinite supply. However, very little of this is life-sustaining freshwater. In fact only 2.5% of water on earth is fresh, and much of this tiny amount is inaccessible for human use due to storage in either glaciers or the ground. According to the US Geological Survey, water sources, such as “rivers and lakes, only constitute about… 1/150th of one percent of total water.” However, these are the very water sources upon which humans rely most heavily.

The IPCC states in its 2014 report that climate change is projected to strain freshwater resources significantly. The report also states “each degree of warming is projected to decrease renewable water resources by at least 20% for an additional 7% of the global population.”

My interest in issues surrounding climate change and water grew as I attended a semester abroad last year with the International Honors Program, studying climate issues in four countries: the US, Vietnam, Morocco, and Bolivia. I, along with 25 other students, looked at ways to mitigate and adapt to issues that climate change will bring to food, water, and energy. Throughout the semester, I conducted independent research on the impacts that climate change and water scarcity have and will continue to have on agriculture around the world.

I learned quickly that the two are viciously linked: food production will be drastically affected by water shortages caused by climate change, but conversely agriculture plays a huge role in creating water shortages.

Technology is making great strides to help farms conserve water resources and adapt to an increasingly arid climate. Most farmers around the world use open-air irrigation systems, such as sprinklers or channels, which lose a large quantity of water to the air as vapor, long before reaching crop roots. This means that significantly more water is being used in irrigation than is being effectively used in crop production.

Drip irrigation systems have been developed to reduce water needed for irrigation. These systems dispense water directly to the crop roots through underground hoses that slowly release water. The implementation of drip irrigation can do an incredible job of reducing the strain agriculture puts on limited water resources.

Unfortunately, the average farmer in most countries cannot easily implement this technology. Whether in the US or in countries like Morocco, farmers already face narrow profit margins and struggle to become more sustainable without the financial support and education needed to implement new technologies.

Advances in technology are going to become key in preserving agricultural sectors around the world; however, technology will not be enough to sustain farming in many regions. It will become increasingly important for farmers to begin tailoring the food they produce to match the climate.

In the last fifty years, our export-oriented world has driven farmers to seek out the most profitable crops and grow them in the highest quantity possible. For example, Morocco has high fruit exports and high imports of grains; however, the arid farms of the Atlas mountains would be better suited to growing less water-demanding crops, like grains, rather than the more water-intensive crops, like fruits. Around the world, crops produced for export often lead farmers to strain the natural capacity of the land, requiring the use of fertilizers and extensive irrigation, which threaten water supplies.

The scope of the issue of water scarcity and food production is vast and growing due to climate change. No one individual or farmer has the power to reverse this scarcity, but with needed support from governments and corporations the agricultural sector can transition to widespread sustainable food production in order to avoid looming social and economic fallouts.

Andrew Winston’s “The Big Pivot”

Image

By: Nathan Sell*

What does it mean to live in a world that is hotter, scarcer and more open?  Andrew Winston, business sustainability guru, debuts his follow up work to “Green to Gold.”  “The Big Pivot” looks at what it means to live in a world ravaged by unpredictable weather patterns, scarcity of precious resources, and openness of information that comes with living in the world of today and tomorrow.  Most importantly, Winston examines how businesses must react (or pivot) for survival.  Sustainability has slowly been gaining ground in business, but it can no longer be a “buzz word,” but rather a piece of day-to-day operations and decision making in every company and business.

There’s quite literally a storm brewing, as Hurricane Sandy, and numerous other disasters have proven in recent years. Climate Change is not an event that will happen one day, it is happening now.  The demands of seven billion inhabitants on this planet is showing in nearly every way, from resource use and carbon emissions, to water and food scarcity.  We’ll reach the nine billion mark somewhere around 2050.  Not only will there be nine billion people, but the emerging global middle class means that those nine billion people will be more demanding on the earth’s resources than ever before.  To sustain the human race “The Big Pivot” must take place.

While sustainability, social responsibility and environmental programs have long formed niche departments in a variety of businesses, Winston identifies the “Pivot” as moving these “niche” departments into leading roles.  Businesses operate within the confines of our planet’s resources. The sooner environment and sustainability are the main informants in decision making, the sooner we can hope to operate within the limits that exist, yielding a zero footprint or even restorative change.

Many “early movers” in the sustainability realm are reaping the benefits of sustainable operations.  By dismissing the notion of operating on a quarter-by-quarter basis, but looking to long-term sustainable investment as a means of ensuring longevity and continued growth, these companies are leading industries in both sustainability and sales.  Some of these forward thinking companies include IGEL Corporate Advisory Board members such as Dow, Johnson & Johnson, Xerox and GE to name a few.

Winston reminds us that when taking action to enhance business in a hotter, scarcer and more open world, the first step is goal setting.  These goals must be informed by science.  If we hope to live in a world with no more than a 2 degree Celsius rise in temperature, emissions must be curbed 80% by 2050.  It is clear that working in the confines of “what we think we can do” is no longer acceptable.  Aggressive, process altering goals must be set, and these goals must align to the 2050 benchmark or they are too little too late.  The proof is out there, as outlined in Winston’s writing, that not only do these reductions yield environmental benefits but profits as well.  Evaluating how your company can help to reach this 2050 target can be daunting but the tools available at pivotgoals.com can help to guide change.  Still unsure that your business can benefit from “The Big Pivot?” Get your copy, available on Amazon.

*Nathan Sell is a recent graduate of the Master of Environmental Studies program at the University of Pennsylvania, and is the current IGEL Coordinator.

3rd Plasticity Forum comes to NYC June 24th

plasticity_high_newNY small PNG

By: Nathan Sell*

The 3rd Plasticity Forum kicks off next week on June 24th in New York City.  Originally launched in Rio at the Earth Summit, and last year in Hong Kong, New York is an opportune location for Plasticity’s first US forum, given the innovative work America’s biggest city has been undertaking.  Many may wonder, what is Plasticity, and why should I care?  To begin, consider this: how long could you go without using or wearing an item made of, or containing plastic? A day? An hour? A minute?  Plastic is cheap, versatile and convenient.  Because of this we view many plastic products as “disposable,” but even if their functional life is a short, like a stir straw or a soda bottle, their actual lifetime is decades or centuries. Despite our best intentions, only 10% of the plastic we use is recycled, much is landfilled, and still a great deal ends up as pollution, often in the “great pacific garbage vortex” where ocean currents move much of our plastic waste debris.  This debris is confused for food by many marine animals from birds to fish and turtles, and wreaks havoc on delicate ecosystems.

We should remind ourselves that plastics are made from a non-renewable resource which takes a great deal of energy to extract, refine, mold, and transport.  This begs the question, why would we throw this stuff out?  When we take this into consideration it becomes clear that there’s a great opportunity in changing the way that we use and reuse plastics.  We need to take a look at plastics from their formation (cradle) to their disposal (grave).  Better design (sometimes referred to as “design for the environment”) can make plastic products more easily recycled, diverting waste where it can be used as a raw material again (cradle to cradle). Reducing the amount of plastics in products, light-weighting and biodegradability are all solutions that need to be brought to scale in the plastics industry.  Technologies exist that can turn plastics into fuel (low-sulphur diesel fuel, giving an air pollution improvement along the way), making plastic waste a desirable system input.  These technologies should be considered prime investment opportunities.

Plasticity Forum will bring together leaders in industry including Nike and Dell together with leading advocates of responsible product use/reuse such as Interface and the Cradle to Cradle Products Innovation Institute.  Altogether, the forum will be the most influential dialogue on plastic pollution, design, reuse and innovation, all of which need to scale for us to bring out the opportunities that these issues represent.  Make sure to register and be part of this important conversation.

www.plasticityforum.com

View the Plasticity Forum Trailer Here

 * Nathan Sell is a recent graduate of the Masters of Environmental Studies program at the University of Pennsylvania and is the current IGEL Coordinator.