Friday, August 7, 2009

Saving the Rainforest: Markets Succeeding Where Blame Game Failed

Protecting the environment does not mean stifling the economy. In fact, its just the opposite -- only in wealthy countries, where the economy is developed, can you turn toward priorities like preserving and cleaning up the environment. The sooner this lesson is learned, the sooner we can move beyond environmental partisanship and toward the implementation of actual solutions.

Below is a terrific example of this thinking. You've no doubt heard quite a bit about deforestation. Unfortunately, what you've probably heard is that biofuels are causing rainforest destruction. First of all, that's not true - as this article points out, by FAR, the leading cause of deforestation in Brazil, for example, is cattle production, not biofuels.

But the more important point is this: why are people spending thousands of dollars on "campaigns" to blame one thing or another for the destruction of rainforests vs actually creating a market to value rainforests as forests??

There are so many reasons why the rainforests are being cut down in developing countries. To attack one reason in a vacuum would merely shift the destruction to occur for the myriad of other reasons still pushing in that direction.

Instead, as the effort below shows, there are ways to create a market to preserve the forest -- a market that also allows people in developing countries to use their land and make a living -- which simply MUST happen if any cessation of rainforest destruction is to be sustained.

I hope more people will follow the example of John Carter - profiled in this story . . . and create markets to solve problems, rather than rhetorical blame game campaigns!! Just maybe, funders of environmental groups could start funding solutions instead of problems!!

I urge any and all of you who are interested in this issue to visit the website for Aliancia da Terra - the group that John Carter started and discussed in this article. If you are going to give money to fight this problem, give it to folks like this!

Can cattle ranchers and soy farmers save the Amazon?
An Interview with John Cain Carter:
Rhett A Butler,
June 7, 2007

The key to making conservation successful is making it profitable. John Carter may hold that key.

Since the early 1970s, environmental groups have spent billions of dollars on conservation efforts in the Amazon, but have failed to slow the destruction of its rainforests – the Brazilian Amazon has lost more than 700,000 square kilometers (270,000 square miles) of forest in that time. As donor dollars poured into the region, deforestation rates continued to climb, peaking at 73,785 square kilometers (28,488 sq mi) of forest loss between 2002 and 2004, before falling sharply in 2005 and 2006 due to declining commodity prices. To many, it's become apparent that the market, not conservation measures, will determine the fate of the Amazon.

The reasons for land-clearing in the Amazon are compelling: cheap land, low labor costs, and booming demand for commodities driven by a surging China and growing interest in biofuels. These factors have helped Brazil become an agricultural superpower – the world's largest exporter of beef, cotton, and sugar, among other products – in less than a generation. Amazon landowners have seen their land values double every 4-5 years in areas that just a decade ago were pristine rainforests. The market is driving deforestation.

John Cain Carter with his Xavante Indian neighbor
Given this landscape, John Cain Carter believes the only way to save the Amazon is through the market. Carter is a Texas rancher who moved to the heart of the Amazon 11 years ago with his Brazilian wife, Kika, and founded what is perhaps the most innovative organization working in the Amazon, Aliança da Terra. Carter says that by giving producers incentives to reduce their impact on the forest, the market can succeed where conservation efforts have failed.

While deforestation rates in the Amazon have accelerated, the problem is not a lack of laws, but rather a legal system where enforcement is so slow and so corrupt that it renders the laws effectively useless. On paper, cattle ranching in the Amazon may be the most restricted in the world, with landowners required to keep 80 percent of their land forested – a limitation no rancher in Texas faces. Carter wants to see farmers in Brazil benefit in following the law, by turning this restriction into a marketing advantage. However in order to do so, Amazon producers have to ensure that consumers ( i.e., buyers of commodities like McDonalds, Wal-Mart, and Cargill) can confidently say that agricultural products are produced legally and even more sustainably than stipulated by the law. The incentive for producers is market access: Aliança da Terra helps Brazilian farmers and ranchers get the best price for their products, but only if they follow the rules. While producers get higher prices for their goods, buyers like Burger King and Archer-Daniels Midland can say they are using legally and responsibly produced beef. Meanwhile more rainforest is left standing, ecosystem services preserved, and biodiversity conserved. Everybody wins.

Accountability has other benefits. Aliança da Terra's growing clout even helps fight corruption – officials know they can't solicit bribes from Aliança's members while members know that passing bribes will only get them kicked out of the system. The promise of Aliança da Terra is so great that conservation groups and landowners are sitting down at the same table, when just two years ago they were the most bitter of adversaries – a substantial achievement and one that bodes well for the success of these efforts.

What is most remarkable about Aliança's system is that it has the potential to be applied to any commodity anywhere in the world. That means palm oil in Borneocould be certified just as easily as sugar cane in Brazil or sheep in New Zealand. By addressing the supply chain, tracing agricultural products back to the specific fields where they were produced, the system offers perhaps the best market-based solution to combating deforestation. Combining these mechanisms with large-scale land conservation and scientific research offers what may be the best hope for saving the Amazon.

In a June interview with Carter explains his experiences in Brazil and his approach to saving Earth's largest and most important rainforest.

To read the interview with John Carter, click here

Monday, August 3, 2009

It's About Competitiveness, Not Just the Climate

Over and over again I have heard the argument that we can't adopt policy that encourages greater energy efficiency in the U.S., a greater market for home made and home grown energy sources because we would be taking on a burden that the Chinese will never join. What's sad is that so often, this argument is made by people who have NO clue what is going on in China, have never been to China, and probably couldn't point to China on a map!

The article below does a great job of outlining why this argument is actually, all backwards. That in fact, China is already moving faster into the "clean energy" market than we are!! Though China may achieve gains differently than our policy structure (i.e. not taking a carbon cap) that is hardly a surprise when you consider how completely different their government and culture are from our own. Just one example, China's authoritarian government means that they literally "turn on" the nation's air conditioning on a set date and same with the nation's heating. They dictate things like the temperature allowed in business offices, and how many cars can be on the road.

I am NOT advocating for this type of complete government control. It makes my skin crawl. But the point is that China can and is controlling its energy use in ways that we would never consider. Just because they do it differently, does not mean they have no regard for energy efficiency and moving toward more clean energy.

This excerpt from the article below shows the amazing amount of activity in this area within China:

Consider: Chinese cars are more than one-third more fuel-efficient than U.S. cars. China is investing 10 times as much on clean power, as a percentage of gross domestic product, as the United States is. China is on track to create 150,000 jobs through the deployment of 120 gigawatts of wind power by 2020 -- an amount equivalent to today's global total and nearly five times America's. As a result, China is already curbing its carbon emissions substantially. This year alone, it will abate almost 350 million tons of CO2, as compared with business as usual. That's as much as is emitted by Argentina.

And why is China doing this? I think it is safe to say its not for the environment - but that is the larger point we seem to continually miss. They are taking these measures because they realize that controlling as much of their own energy use and production as possible means being less dependent on unstable and pricey foreign sources. More control over a country's energy means more strategic independence and a more efficient economy over the long run.

In the debate about whether the U.S. should adopt policies that send a market signal saying "invest in clean energy and efficiency," let's PLEASE remember that the larger reason for doing this is actually economic competitiveness with the environment getting a side benefit.

I urge you to read the article below co-authored by GE's Jeff Immelt for some very good examples of what I'm talking about.


The Washington Post
Falling Behind On Green Tech

By John Doerr and Jeff Immelt
Monday, August 3, 2009

America confronts three interrelated crises: an economic crisis, a climate crisis and an energy security crisis. We believe there's a fourth: a competitiveness crisis. This crisis is particularly evident in America's worldwide standing in the next great global industry, green technology.

There is no topic of greater importance to America's economic future. The question is whether the United States will lead or lag in tomorrow's global energy markets. And the difference between these two futures is dramatic.

Energy in the United States costs more than $1 trillion a year -- for oil, coal, natural gas, nuclear and renewables. This is on top of a similar sum spent on the things that use this energy -- our homes, shops, factories and cars. That means about $2 trillion a year is at stake right here.

Do we want to win the race to lead the next great global industry, clean energy? That is the choice before us.

We are clearly not in the lead today. That position is held by China, which understands the importance of controlling its energy future. China's commitment to developing clean energy technologies and markets is breathtaking.

Consider: Chinese cars are more than one-third more fuel-efficient than U.S. cars. China is investing 10 times as much on clean power, as a percentage of gross domestic product, as the United States is. China is on track to create 150,000 jobs through the deployment of 120 gigawatts of wind power by 2020 -- an amount equivalent to today's global total and nearly five times America's. As a result, China is already curbing its carbon emissions substantially. This year alone, it will abate almost 350 million tons of CO2, as compared with business as usual. That's as much as is emitted by Argentina.

What do Amazon, eBay, Google, Microsoft and Yahoo have in common? Two things: They are the world's five leading Internet technology companies, and they are all American. But when it comes to wind power, the most mature of the clean-energy sectors, of the top five manufacturers (Vestas, GE, Gamesa, Enercon and Suzlon) only one is American. Similarly, the United States is home to only one of the 10 largest solar panel producers in the world and two of the top 10 advanced battery manufacturers. How can we catch up? Not through protectionism or massive government intervention but through the power of good old home-grown innovation.

We are American businessmen. Our job is building businesses and commercializing innovation. Every year, GE invests 6 percent of its industrial revenue in research and development to produce more efficient and cleaner wind turbines, jet engines, locomotives, power turbines and appliances. Kleiner Perkins has invested $680 million in 48 of the most compelling new clean-energy technologies, with $1.1 billion more to invest. We are trying to do our part. But our government's energy and climate policies are our principal obstacle to success.

Right now, the United States has no long-term market signal to tell companies and consumers that it values low-carbon energy. It has no policies to discourage sending hundreds of billions of dollars a year overseas for energy. It does not offer adequate sustained R&D funding to be a serious competitor in this huge business.

Today's policies stifle American innovation and competitiveness. But good policy can flip this dynamic. Five basic changes are needed:

-- Send a long-term signal that low-carbon energy is valuable. We must put a price on carbon and a cap on carbon emissions. No long-term signal means no serious innovation at scale, which means fewer American success stories.

-- Get the rules of the road right for utilities. We must make our utilities a driving force for repowering America, driving efficiency through incentives, a renewable electricity standard and a national unified smart grid.

-- Set energy standards that grow steadily stronger. America should strive to have the most efficient buildings, cars and appliances in the world. The savings will land in the pockets of U.S. consumers and businesses.

-- Get serious about funding research, development and deployment, at scale. The federal government currently spends only $2.5 billion on clean-energy R&D a year -- 0.25 percent of our annual energy bill. Sen. Jeff Bingaman's Clean Energy Deployment Administration is a good idea that would be fast and flexible. But more such programs are needed.

-- Fulfill President Obama's commitment to "become the world's leading exporter of renewable energy." We need a robust trade policy that seeks to open markets abroad -- including the Chinese market -- for U.S. clean-energy products through new trade agreements. Such policies unleash American competitiveness disciplined by market forces. This is widely endorsed by U.S. companies that compete internationally and by the broad-based President's Economic Recovery Advisory Board.

We should carefully design policy to bring in other nations. Think of the Copenhagen climate summit in December as an opportunity to create world markets and momentum for a low-carbon future, just as the Internet set the world on course for an information-rich future. Some say we shouldn't move until China moves. In fact, China is moving full speed ahead -- with or without us.

There is still time for us to lead this global race, although that window is closing. We need low-carbon policies to exploit America's strengths -- innovation and entrepreneurs. We know that building such policies is a heavy political lift. But, without doubt, bad energy policy has cost our country dearly, and the costs of continuing it are incalculable.

John Doerr is a partner in the venture capital firm Kleiner Perkins Caufield & Byers. Jeff Immelt is chairman and chief executive of General Electric.