Category: Economics and Business

Market signals

Katherine Ellison looks at today’s carbon offset market. The upshot: offsets are helpful (though there are skeptics when it comes to forestry offsets), but you may not be getting what you pay for.

I returned to Stanford’s Schneider to ask what kinds of offsets he might buy. “It’s legitimate to put windmills in if you displace fossil-fuel power,” he said. “It’s legitimate to put coal emissions underground if you could figure out how to make that permanent. Financing a gas plant in India if they were going to put in coal would also be good.” The key with all of these is they reduce carbon emissions at their source.

Bring it up again

A leader from the traditionally eco-skeptic Economist admits that recycling is “mostly worthwhile,” and proposes three steps to encourage the practice. Relying on mechanisms technological, political, and economic, the magazine recommends

  1. a single stream from the consumer, with automated conveyor belts at the processing facility to separate items;
  2. selling recycled waste to emerging markets; and
  3. monetary rewards to consumers based on how much they recycle.

I haven’t yet read the magazine’s current Technology Quarterly, which features recycling and other environmental issues; I’m interested in how the writers handle the question of streaming recyclables into the third world.

A wish list item: 1

I recorded Stuart Hart’s 1997 paper for Harvard Business Review, “Beyond Greening,” at the the studio yesterday, as part of a collection of articles on organization development. As is typical for papers in that publication, it’s a mousse of hard-nosed analysis whipped together with long-term vision and topped with blue-sky dreams, but the central point may turn out to be sound: the smart businessman will find a way to cash in by solving environmental problems instead of creating them. He has elaborated his position in the book-length Capitalism at the Crossroads. Hart is unique, in my limited reading, in that he treats poverty issues and environmental concerns as being of a piece.

Gassing up

Revised testing methodology from the Environmental Protection Agency means substantially reduced gas mileage estimates for hybrid vehicles, as John Gartner reports. This reduction is in keeping with anecdotal reports that mileage estimates for hybirds had been inflated. As an example: while the previous estimates for the Toyota Prius were 60 mpg City/51 mpg Highway/55 mpg Combined, the new numbers are 48/45/46. (Remember that hybrids paradoxically get better mileage for EPA City conditions.)

What Gartner’s report doesn’t point out is that estimates for conventionally-powered cars are also being reduced. The old numbers for the 4-cylinder manual transmission Honda Accord were 26/34/29, dropping about 10% to 23/31/26.

No one is neutral

Andrew C. Revkin explains why I feel uneasy about the current carbon-offset market:

As long as the use of fossil fuels keeps climbing—which is happening relentlessly around the world—the emission of greenhouse gases will keep rising. The average American, by several estimates, generates more than 20 tons of carbon dioxide or related gases a year; the average resident of the planet about 4.5 tons.

At this rate, environmentalists say, buying someone else’s squelched emissions is all but insignificant.

The worst of the carbon-offset programs resemble the Catholic Church’s sale of indulgences back before the Reformation,” said Denis Hayes, the president of the Bullitt Foundation, an environmental grant-making group. “Instead of reducing their carbon footprints, people take private jets and stretch limos, and then think they can buy an indulgence to forgive their sins.”

“This whole game is badly in need of a modern Martin Luther,” Mr. Hayes added.

Crooked CA watch: 2

Wang is wrong: a blistering report by Computer Associates’ board of directors implicates former head Charles Wang as the leader of a pervasive culture of fraud.

Mr. Wang created a “culture of fear” at Computer Associates — now called CA — and deliberately put inexperienced executives in senior positions so that he would have more control, according to the report. He discouraged executives from meeting with each other and arbitrarily fired managers or employees who disagreed with him.

“Fraud pervaded the entire CA organization at every level, and was embedded in CA’s culture, as instilled by Mr. Wang, almost from the company’s inception,” the report said.

How convenient for Wang, who stepped down as chairman in 2002, that the statute of limitations is only five years.

Crooked CA watch

The former chief of what was known as Computer Associates International, Inc., Sanjay Kumar, has been sentenced to twelve years in prison for his role in a massive accounting fraud. Charges were made that

Kumar and other executives instructed salespeople to complete deals after the quarter had closed — a practice known within the company as the ”35-day month”…