Energy Efficiency Index from Merrill Lynch

Merrill's Efficiency Index
July 30, 2007 -- By Cassandra Vinograd, WSJ: Energy Roundup

Merrill Lynch announced a new Energy Efficiency Index, currently comprised of 40 companies, to identify industry sectors that it says should benefit from the growing drive to improve energy efficiency.

“While there has been a clear shift of resources and investor attention into renewable energy, energy efficiency remains an area that is relatively under-explored,” said Asari Efiong, Merrill Lynch SRI/ Renewable Energy equity analyst. “We believe that energy efficiency represents a significant market opportunity for investors, as policy changes look set to force a structural shift in demand.”

Merrill analysts say they think the global manufacturing industry could improve its energy efficiency by between 18% to 26% overall, while cutting the sector’s CO2 emissions by 19-32%. The four sectors most exposed to this theme, according to Merrill, are the automotive industry, capital goods, semi-conductors and building materials.

Among the companies in the index are those with technologies that boost automotive fuel efficiency; building-insulation companies; power-semiconductor makers and efficient-lighting companies.

Voluntary Restrictions Protect Quarter of World's High Seas from Trawling

Nations seek end to trawling seas
May 5, 2007 -- Associated Press via CNN

More than 20 nations agreed Friday to discourage unregulated and destructive bottom trawling on the South Pacific high seas, a victory for environmental groups.

The agreement, which takes effect September 30, is intended to protect about a quarter of the world's high seas, a vast area extending roughly from the Equator to the Antarctic Circle and from Australia and New Zealand to the west coast of South America.

Observers and ship locator monitoring systems are to be used, and vessels must remain at least five nautical miles (9,260 meters) from deep-water corals and other vulnerable marine ecosystems.

The agreement reached in Renaca, Chile, follows a U.N. General Assembly resolution in December aimed at getting tough on high-seas bottom trawling, which involves fishing boats that drag giant nets along the sea floor.

Enormously effective at catching fish, the nets also wipe out almost everything in their path, smash coral and stir clouds of sediment that smother sea life, marine experts say.

Orange roughy is the main commercial fish in the South Pacific high seas, mainly caught by New Zealand fishing vessels. Estimates of the fishing trade range up to about $10 million (euro7.4 million).

New Zealand officials agreed to the voluntary restrictions in the South Pacific high seas, but they said the restrictions could "severely constrain" its fishing vessels. The ecological costs of the huge nets are far higher, environmental groups said.

"This area contains thousands of these underwater sea mountains, or seamounts, that are considered to be some of the most ecologically rich habitats in the world," said Joshua Reichert, director of the private Pew Charitable Trusts' environment division, which coordinated the groups' campaign. "For all of us, this really represents a major step forward for marine conservation."

A U.N. report last year called bottom trawling a danger to unique and unexplored ecological systems. It said slightly more than half the underwater mountain and coral ecosystems in the world can be found beyond the protection of national boundaries.

The new agreement is among members of the fledgling South Pacific Regional Fisheries Management Organization: Australia, Canada, Chile, China, Colombia, Cook Islands, Ecuador, the European Commission, Federated States of Micronesia, France, Japan, New Zealand, Niue, Palau, Papua New Guinea, Peru, Russia, South Korea, Ukraine, the United States and Vanuatu.

Gore, Gandhi, and Dioum

Al Gore at TED

March, 2008







Here is an excellent presentation on issues pertaining to the new environmental movement--global climatic disruption and resource constraints (in comparison to the previous environmental movement--biodiversity, toxins, air/water quality, and population). In the past, I have been skeptical towards Al Gore for a few reasons. The most prevalent being that he flies around the world, after leaving one of his mansions, to tell the general public to reduce emissions.



"You must be the change you wish to see in the world."

-Mohandas Gandhi



However, I am beginning to think less about his vanity and more about his ability to promote ideas in a compelling way.



"For in the end, we will conserve only what we love. We will love only what we understand. We will understand only what we are taught."

-Baba Dioum



He is one of many voices that need to be listened to as humanity attempts to reduce the tragedy of the commons and improve the living conditions for all of life.

Absent-minded killers

Absent-minded killers
March 22, 2007 -- By Jeffrey Sachs, Project Syndicate

We kill other species not because we must but because we are too negligent to do otherwise.

As a species, human beings have a major self-control problem. We humans are now so aggressively fishing, hunting, logging, and growing crops in all parts of the world that we are literally chasing other species off the planet. Our intense desire to take all that we can from nature leaves precious little for other forms of life.

In 1992, when the world's governments first promised to address man-made global warming, they also vowed to head off the human-induced extinction of other species. The Convention on Biological Diversity, agreed at the Rio Earth Summit, established that "biological diversity is a common concern of humanity." The signatories agreed to conserve biological diversity, by saving species and their habitats, and to use biological resources (e.g. forests) in a sustainable manner. In 2002, the treaty's signatories went further, committing to "a significant reduction in the current rate of biodiversity loss" by 2010.

Unfortunately, like so many other international agreements, the Convention on Biological Diversity remains essentially unknown, un-championed, and unfulfilled. That neglect is a human tragedy. For a very low cash outlay - and perhaps none at all on balance - we could conserve nature and thus protect the basis of our own lives and livelihoods. We kill other species not because we must, but because we are too negligent to do otherwise.

Consider a couple of notorious examples. Some rich countries, such as Spain, Portugal, Australia, and New Zealand, have fishing fleets that engage in so-called "bottom trawling". Bottom trawlers drag heavy nets over the ocean bottom, destroying magnificent, unexplored, and endangered marine species in the process. Complex and unique ecologies, most notably underground volcanoes known as seamounts, are ripped to shreds, because bottom trawling is the "low cost" way to catch a few deep sea fish species. One of these species, orange roughy, has been caught commercially for only around a quarter-century, but already is being fished to the point of collapse.

Likewise, in many parts of the world, tropical rainforest is being cleared for pastureland and food crops. The result is massive loss of habitat and destruction of species, yielding a tiny economic benefit at a huge social cost. After cutting down a swath of rainforest, soils are often quickly leached of their nutrients so that they cannot sustain crops or nutritious grasses for livestock. As a result, the new pastureland or farmland is soon abandoned, with no prospect for regeneration of the original forest and its unique ecosystems.

Because these activities' costs are so high and their benefits so low, stopping them would be easy. Bottom trawling should simply be outlawed; it would be simple and inexpensive to compensate the fishing industry during a transition to other activities. Forest clearing, on the other hand, is probably best stopped by economic incentives, perhaps combined with regulatory limits. Simply restricting the practice of land clearing probably would not work, since farm families and communities would face a strong temptation to evade legal limits. On the other hand, financial incentives would probably succeed, because cutting down forest to create pastureland is not profitable enough to induce farmers to forego payments for protecting the land.

Many rainforest countries have united in recent years to suggest the establishment of a rainforest conservation fund by the rich countries, to pay impoverished small farmers a small amount of money to preserve the forest. A well-designed fund would slow or stop deforestation, preserve biodiversity, and reduce emissions of carbon dioxide the burning of cleared forests. At the same time, small farmers would receive a steady flow of income, which they could use for micro-investments to improve their household's wealth, education, and health.

Aside from banning bottom trawling and establishing a global fund for avoided deforestation, we should designate a global network of protected marine areas, in which fishing, boating, polluting, dredging, drilling, and other damaging activities would be prohibited. Such areas not only permit the regeneration of species, but also provide ecological benefits that spill over to neighbouring unprotected areas.

We also need a regular scientific process to present the world with the evidence on species abundance and extinction, just as we now have such a process for climate change. Politicians don't listen very well to individual scientists, but they are forced to listen when hundreds of scientists speak with a united voice.

Finally, the world should negotiate a new framework no later than 2010 to slow human-induced climate change. There can be little doubt that climate change poses one of the greatest risks to species' viability. As the planet warms, and rain and storm patterns change dramatically, many species will find themselves in climate zones that no longer support their survival. Some can migrate, but others (such as polar bears) are likely to be driven to extinction unless we take decisive action to head off climate change.

These measures are achievable by 2010. They are affordable, and in each case would ultimately deliver large net benefits. Most importantly, they would allow us to follow through on a global promise. It is too painful to believe that humanity would destroy millions of other species - and jeopardise our own future - in a fit of absent-mindedness.

Make Green Pay, Davos 2007: CNBC video

Make Green Pay is a discussion coordinated by CNBC at this years Davos meetings. The link provided will take you to the video for the entire program. The topics discussed are as follows:

MOTION 1: Nuclear energy and cleaner coal are the only workable alternatives to oil

James Rogers, President and Chief Executive Officer of Duke Energy argues for the motion that nuclear energy and cleaner coal are the only workable alternatives to oil. Today’s needs can only be met with today’s resources he says. Mr Rogers sees emission-free nuclear and advanced-coal technologies as the energy workhorses for the short-to medium term. Vinod Khosla, Founder and Partner of Khosla Ventures argues against the motion puts forward the case against the motion. He focuses on the hidden costs of nuclear and coal – the clean-up costs. Factor those in, he insists, and clean renewables start to look a whole lot more competitive.



MOTION 2: Markets are superior to regulation in leading corporations towards greener operations

In the board rooms and in the corridors of power there is increasing acknowledgement that the way in which we consume energy is damaging the earth. For most corporations though, changing attitudes are yet to translate into radically different practices. Reverend Nicholas Frances, Chief Executive Officer of Easy Being Green, puts forward the case for motion 2; that markets are the most effective influence on company behaviour. He says that a government’s ability to regulate will always lag the entrepreneur’s talent to innovate. Professor Daniel Esty, Hill House Professor at Yale University puts forward an opposing view. Professor Esty argues that business must be motivated to find solutions. Regulation, he points out, gives business the stability required for the risks associated with policy changes.



MOTION 3: A global carbon tax would do more harm than good

Professor Jose Goldemberg of Sao Paulo University reminds us that the developing world is unlikely agree to sacrifice economic development for an environmental agenda. He not only says that a global tax would do more harm than good but that to even aim for one would be unrealistic. Sir Nicholas Stern of the UK treasury and author of the Stern review stands against the motion. According to Sir Nicholas, companies must face with the full social cost of their actions and that, in economic terms, a common global carbon price would be the most efficient way of achieving this.

Grassroot Environmentalism Shifting American Policy

Waking up and catching up
January 25, 2007 -- The Economist

Belatedly, and for many reasons, America is embracing environmentalism

WHEN Jim Webb, the new Democratic senator from Virginia, replied to George Bush's state-of-the-union message, he could bear to endorse only one of the president's proposals. This was the idea of cutting America's petrol (gasoline) consumption by 20% in ten years, by increasing ethanol production to 35 billion gallons a year and raising fuel-efficiency standards for cars.

Such a plan would reduce America's dependence on imported oil from dangerous places (as would Mr Bush's plan to double the country's petroleum reserves). But it would address global warming only tangentially. The Democrats in Congress are weighing much more dramatic measures, including across-the-board cuts to the greenhouse gases that are heating up the planet. At the state level, politicians of all stripes are already taking more radical steps. Even big business is coming round. Mr Bush may be dragging his feet, but America is greening fast.

The Democrats' victory in last year's elections means that Congress's stance on environmental issues has changed dramatically. In one race for the House of Representatives, a Democratic consultant on wind power defeated a Republican ally of the oil industry. Barbara Boxer, an ardent advocate of firm action on climate change, has taken over the chairmanship of the Senate Environment Committee from James Inhofe, who often described global warming as “the greatest hoax ever perpetrated on the American people”.

Since Congress convened earlier this month, the Democrats have got to work fast. The House has passed a bill that would eliminate a tax break for oil production in America, and would impose penalties on firms that refuse to renegotiate the absurdly generous leases the government accidentally granted them in the late 1990s. The proceeds—perhaps $15 billion over the next decade—would be used to fund renewable energy schemes.

Nancy Pelosi, the new speaker of the House, is now turning her attention to global warming. She is setting up a committee to address both that issue, and America's dependence on imported fuel. She wants to see legislation before July 4th, so that she can declare “energy independence” on the same day that the founding fathers severed political ties with Britain.

Meanwhile, some half-dozen bills on global warming are circulating in the Senate. Several propose cap-and-trade schemes, whereby the government would create a fixed number of permits to produce greenhouse gases and then auction them or allocate them to businesses. Firms without enough permits to cover their emissions would either have to pollute less, or buy up spare ones from firms that had managed to cut back.

John McCain, a leading Republican presidential candidate, and Joe Lieberman, a former Democratic one, are behind the most prominent cap-and-trade scheme. Barack Obama, one of the Democrats' current presidential aspirants, is a co-sponsor. It is the most ambitious of the bills with serious backing: it would cut carbon emissions to 2004 levels by 2012 and then mandate further reductions of 2% a year until 2020. Although these targets are less onerous than those of the Kyoto protocol, the United Nations' treaty on climate change, most analysts reckon they will prove too exacting for Congress.

An alternative cap-and-trade scheme, sponsored by Jeff Bingaman, chairman of the Senate Energy Committee, suffers from the opposite problem: excessive modesty. His plan would aim to slow the growth of emissions, and ultimately stabilise them at their 2013 level by 2020. It includes a safety valve, under which the government would automatically issue more permits to pollute if the price of those permits rose too far. The economic impact would be much smaller than under the McCain-Lieberman plan but so, too, would the reductions in emissions.

Dianne Feinstein, a Democratic senator from California, is proposing a third approach. She wants to create cap-and-trade mechanisms within industries rather than across the economy as a whole. She has, for instance, proposed legislation that would cut power companies' emissions by 25% of their projected levels by 2020.

All these initiatives face an uphill battle. The previous Senate rejected the McCain-Lieberman plan twice—by a bigger margin the second time around. Any bill that involves mandatory caps on greenhouse-gas emissions would need 60 of the chamber's 100 votes to succeed, since Mr Inhofe has pledged to filibuster all such measures. In the House the Energy Committee is chaired by John Dingell, a Democrat from the carmaking hub of Detroit who has long opposed mandatory caps. Mr Dingell, who says Ms Pelosi's new committee is “as useful as feathers on a fish”, will still have a big say in any legislation. And even if a bill overcomes all these obstacles, it would risk a presidential veto.

A matter of security
But whatever the fate of these proposals, the political climate is changing faster than the weather. Almost all the leading presidential candidates favour emissions caps. One of them, Hillary Clinton, has condemned the Bush administration's failure to act as “unAmerican”. That is a remarkable change since 2000, when Al Gore toned down his environmental rhetoric during his presidential campaign for fear of sounding pious and obsessive. Indeed, activists are so convinced that the next president will be greener than Mr Bush that they are debating whether to settle for immediate but modest measures on global warming, or wait for a new administration to take bolder steps.

The Democrats have always been the greener party, but environmentalism is budding among Republicans too. Take Saxby Chambliss, a moderate senator. He voted against the McCain-Lieberman bill in 2005, but changed his mind after visiting Greenland to view the melting ice cap. “There really is something to it,” he now says.

Many factors lie behind the party's shift. Most have to do not with sudden sentimentality in the face of Nature, but with national security (a motivation that lies, too, behind Ms Pelosi's new committee and Mrs Clinton's patriotic posturing). Fiscal hawks fret about the impact of growing oil imports on the dollar. Military types fear global conflict for dwindling resources in the event of catastrophic global warming. Neoconservatives worry about America's dependence on oil imports from unstable if not openly hostile countries in Latin America and the Middle East. Some think the solution is simply to pump more oil at home, but others argue that America needs to move away from oil altogether. One such figure, Jim Woolsey, a former director of the Central Intelligence Agency, pointedly drives a Toyota Prius, a famously fuel-efficient car.

At the same time, a growing number of evangelical Christians are beginning to see global warming as a moral issue. They argue that mankind, as steward of God's creation, has a duty to protect the environment. One outfit, the Evangelical Climate Initiative, encourages prominent pastors and theologians to sign a “Call to Action”. Another group, the Evangelical Environmental Network, runs a website called “What would Jesus drive?” Last year Pat Robertson, a prominent televangelist, told his flock, “We really need to address the burning of fossil fuels.”

The Republican Party has a strong, albeit fitful, tradition of environmentalism. Teddy Roosevelt expanded America's national parks. Richard Nixon created the Environmental Protection Agency (EPA). Mr Bush's father, when he was president, signed off on America's first nationwide cap-and-trade scheme to control emissions of the gases that cause acid rain.

But the strongest force propelling environmentalism among Republicans is self-preservation. Arnold Schwarzenegger, the decidedly green governor of California, was one of the few luminaries in the party unaffected by last year's electoral meltdown. Republicans in other western states, where a Democratic tide is rising and a pristine landscape is a major tourist attraction, are following Mr Schwarzenegger's moves with interest. They fear the party may lose ground with moderate middle-class types who dislike urban sprawl and unfettered oil-drilling.

The destruction wrought by Hurricane Katrina in 2005 had a big influence on voters, according to Jonathan Lash of the World Resources Institute. Americans seem to view the increasing incidence of freakish weather as proof that climate change is real. Many of them paid to see Mr Gore's film on the subject, making it the third-most-successful documentary of all time (and now a candidate for an Oscar). Polls show that Americans are gradually growing more exercised about global warming, although they are still less anxious than Europeans or Japanese.


The business view
Even big business, which stands to lose most from stricter environmental regulation, is beginning to accept that change is in the air. Exxon Mobil, led until recently by a fierce sceptic of global warming, now concedes that there is a problem, and that its products are contributing to it. Last year four-fifths of utility executives polled by Cambridge Energy Research Associates, a consultancy, expected mandatory emissions caps within a decade.

If regulation is indeed on its way, many firms would like Congress to fix the rules sooner rather than later, to help them plan investments in factories and power plants with long lifespans. Earlier this week ten companies, including Alcoa, Caterpillar and DuPont, called for Congress to set up a cap-and-trade system for greenhouse gases as quickly as possible. Since most of the firms involved produce clouds of emissions, they would obviously like to influence future legislation.

But the firms' bosses claim to see emissions caps as an opportunity, not a threat. GE, a member of the group, wants its executives to use their “ecomagination”. By the same token Rick Wagoner, the head of GM, the world's biggest carmaker, recently hoped aloud that oil prices would remain high, so that his firm would keep its incentive to develop fuel-efficient cars. Wal-Mart, America's biggest retailer, hopes to double its sales of low-watt lightbulbs.

Lots of firms are growing healthily on the back of America's sudden enthusiasm for alternative energy. Americans invested almost $30 billion in the sector in 2006, according to New Energy Finance, a research firm. American venture capitalists lavish seven times more on greenery than their counterparts in Europe. Ethanol production was expected to double in the next few years, even before the latest boost from Mr Bush. Wind and solar power are also booming. And the bigger green firms become the more influence they will have over politicians.


States to the fore
At the very least, businesses want to avoid a patchwork of conflicting local regulations on environmental matters in general, and greenhouse-gas emissions in particular. There is already a bit of a muddle, since several states have taken much bolder and more experimental steps than the federal government. California, the boldest of all, has taken on carmakers, electricity companies and the EPA, to name a few. Its politicians vie to out-green one another. Some 40 of its legislators drive hybrid cars. Mr Schwarzenegger, not to be bested, has converted one of his fuel-swigging Hummers to run on hydrogen.

Congress may be thinking about tackling greenhouse-gas emissions, but California has already done it. Its Global Warming Solutions Act, which was passed last year, aims to cut them to 1990 levels by 2020—an ambitious target for a state that has grown rapidly in the past 15 years and will probably continue to do so. The details have yet to be fleshed out, but the reductions will come from both a cap-and-trade scheme for industry and regulations of various sorts.

Mr Schwarzenegger issued the first such regulation earlier this month, obliging producers of petrol and other fuels to cut the emissions of carbon dioxide from their products by 10% by 2020—presumably by mixing in more ethanol and other biofuels. It is not California's first attempt to reduce emissions from transport: its legislature voted for stringent cuts in 2002. That move has become snarled in a court battle over whether states have the right to set fuel-economy standards. Meanwhile, the politicians keep trucking. In September, the state showily sued six car manufacturers, alleging they had damaged its climate. It is also suing the EPA, for failing to regulate greenhouse-gas emissions.

California's politicians are keen on renewables too. State law requires utilities to generate 20% of the power they sell from sources such as windmills and biomass plants by 2010, and 33% by 2020. Solar power has won even greater favour: under the “million solar roofs” scheme, the state plans to spend more than $3 billion over the next decade subsidising the installation of solar-power panels.

California has also pioneered the practice of “decoupling”, which deprives power firms of their incentive to sell as much electricity as possible. Instead, the local regulator has devised a formula to reward firms whose sales are lower than expected, and to allow the recovery of the costs of energy-efficiency schemes.

Such measures (along with high power prices to pay for them) have helped California rein in its electricity consumption—although lovely weather and a relative lack of heavy industry have also played a part. Power use per person has remained roughly stable in the state since the 1970s, even as it has doubled in the rest of the country. As a result, California's greenhouse-gas emissions per person are on a par with those of Denmark. Relative to the size of its economy, they are lower.

But California is not America's only green enclave. Nine states in the north-east have combined to reduce emissions from power generation through a cap-and-trade scheme. Two of them plan to auction all the permits, unlike the countries in the European Union's Emissions Trading Scheme, which handed them out for nothing. Ten states have signed up to follow California's standards on car exhaust, including its requirements on greenhouse gases. Many more promote ethanol, or renewables, or energy-efficient buildings.

On the whole, left-leaning states are keener on greenery than right-wing ones, which tend to be more energy-intensive. But politicians of all stripes in the Midwest are keen to promote ethanol for the sake of local farmers, who grow the corn from which it is made. And Texas recently overtook California as the country's biggest generator of wind power.

Greenery is also popular at the local level. Almost 400 cities have devised plans to curb or reduce their greenhouse gas emissions. Many buy only fuel-efficient cars for their municipal fleets. Laura Miller, the mayor of Dallas, has spoken out against the plans of local utilities to build 17 new coal-fired power plants. What is the point of her city buying police cars fuelled by natural gas, she asks, when they will soon be overshadowed by clouds of soot?

Despite all this grassroots environmentalism, America remains the biggest contributor to global warming, accounting for roughly a fifth of all the world's emissions. The federal government's recalcitrance on the subject remains the biggest obstacle to an effective global scheme to tackle the problem. But whereas in Europe or Asia new ideas often flow from the centre to the regions, in America the states are the incubators of big shifts in policy. This means that change is coming—fast.

Africa: Investing in Conservation

On June 20th 2006, CNN wrote this article on sustainable development throughout Africa.

"People who think that development and conservation cannot go hand-in-hand are wrong," President Marc Ravalomanana said Tuesday at the opening of a major international symposium on Africa in the capital of Madagascar, Antananarivo. Organized by Conservation International, a Washington-based environmental group, the five-day conference of more than 400 delegates will examine how to use Africa's unmatched biodiversity to ease poverty and lay a foundation for sustainable development.

"In Africa and elsewhere, let us all put an end to the exploitation of natural resources for one-time payoffs, and instead develop strategies for using them sustainably, in ways that will benefit all people," U.N. Secretary-General Kofi Annan said in a statement before the conference.

Oil-rich Equatorial Guinea announced Tuesday that it was creating a new national forest of more than 1.2 million acres and establishing a $15 million conservation trust fund. Fortunato Ofa Mbo, the former Spanish colony's minister of fisheries and the environment, told the conference the new national forest would increase Equatorial Guinea's total protected territory to 37 percent of the tiny country nestled between Cameroon and Gabon on Africa's western coast. That is one of the highest percentages of any country in the world.

Liberian President Ellen Johnson-Sirleaf also appeared in a videotaped statement to announce her government would make forest conservation a key component of development policies after years of ruinous civil war. Johnson-Sirleaf said new regulations would seek a balance between the development benefits from logging, including job creation and foreign exchange, and the benefits from conserving forests that provide clean air and water, food and other vital resources. "My government is committed to protecting these benefits," she said, announcing that legislation is being prepared to create a $30 million conservation trust fund that will finance the creation and maintenance of new protected areas. "We need to invest in the future of our people."

Protecting nature means safeguarding the cheapest and most effective source of clean water, food, natural resources and other benefits of ecosystem services, said Conservation International President Russell Mittermeier. "The challenge is how to maximize these benefits in a sustainable way through biodiversity conservation, so that they exist in perpetuity," Mittermeier said. "That is exactly what the Madagascar symposium will be tackling."

One strategy is branding, in which developing nations such as Madagascar market their unmatched nature as ecotourism destinations. Such policies signal stability and control of natural resources to the international community, attracting increased foreign investment, said Juan Carlos Bonilla, head of Conservation International's Central Africa program. "It's something we've seen happening in places like Costa Rica and Belize," he said. "They have progressive environmental policies and they also have liberal economic frameworks. While unrelated, the two have worked well to attract both investment and eco-tourists." Madagascar has dozens of species of lemurs along with colorful birds and frogs, huge bats known as Madagascar flying foxes, giant plants and flowers found nowhere else on Earth. Many are threatened with extinction. By protecting their habitat, Madagascar invests in its nature as a commodity that cannot be matched by even the most powerful nations.

In Mitsinjo, Madagascar, they are growing seedlings of native tree species to plant as new forests that will ingest fossil fuel emissions in the atmosphere, mostly from industrialized nations. The carbon-consuming role of the forests will be sold as carbon credits on the global market under a system given impetus by the Kyoto Protocol that limits fossil fuel emissions in member countries, said Rainer Dolch of Mitsinjo, a private initiative specializing in conservation and ecotourism.

Impoverished local communities also benefit from re-established forests that provide traditional resources such as fruits, medicines, fibers and housing materials, as well as higher yields in their subsistence farming of native species, Dolch said. Persuading subsistence farmers to take part in the planting expected to begin in January has been challenging, due to the abstract concept of a forest having economic value. "They wondered how they can get money for nothing," Dolch said.

Rachel Carson Meets Adam Smith

On April 21st 2005, The Economist published an article entitled 'Rescuing Environmentalism'. Here are some snippets from this great article:

Market forces could prove the environment's best friend—if only greens could learn to love them.

The environmental movement's foundational concepts, its method for framing legislative proposals, and its very institutions are outmoded. Today environmentalism is just another special interest.” Those damning words come not from any industry lobby or right-wing think-tank. They are drawn from “The Death of Environmentalism”, an influential essay published recently by two greens with impeccable credentials. They claim that environmental groups are politically adrift and dreadfully out of touch.

...
Consider, for example, their invocation of the woolly “precautionary principle” to demonise any complex technology (next-generation nuclear plants, say, or genetically modified crops) that they do not like the look of. A more sensible green analysis of nuclear power would weigh its (very high) economic costs and (fairly low) safety risks against the important benefit of generating electricity with no greenhouse-gas emissions.

...
Yesterday's failed hopes, today's heavy costs and tomorrow's demanding ambitions have been driving public policy quietly towards market-based approaches. One example lies in the assignment of property rights over “commons”, such as fisheries, that are abused because they belong at once to everyone and no one. Where tradable fishing quotas have been issued, the result has been a drop in over-fishing. Emissions trading is also taking off. America led the way with its sulphur-dioxide trading scheme, and today the EU is pioneering carbon-dioxide trading with the (albeit still controversial) goal of slowing down climate change.

These, however, are obvious targets. What is really intriguing are efforts to value previously ignored “ecological services”, both basic ones such as water filtration and flood prevention, and luxuries such as preserving wildlife. At the same time, advances in environmental science are making those valuation studies more accurate. Market mechanisms can then be employed to achieve these goals at the lowest cost. Today, countries from Panama to Papua New Guinea are investigating ways to price nature in this way (see article).

If this new green revolution is to succeed, however, three things must happen. The most important is that prices must be set correctly. The best way to do this is through liquid markets, as in the case of emissions trading. Here, politics merely sets the goal. How that goal is achieved is up to the traders.

A proper price, however, requires proper information. So the second goal must be to provide it. The tendency to regard the environment as a “free good” must be tempered with an understanding of what it does for humanity and how. Thanks to the recent Millennium Ecosystem Assessment and the World Bank's annual “Little Green Data Book” (released this week), that is happening. More work is needed, but thanks to technologies such as satellite observation, computing and the internet, green accounting is getting cheaper and easier.

Which leads naturally to the third goal, the embrace of cost-benefit analysis. At this, greens roll their eyes, complaining that it reduces nature to dollars and cents. In one sense, they are right. Some things in nature are irreplaceable—literally priceless. Even so, it is essential to consider trade-offs when analysing almost all green problems. The marginal cost of removing the last 5% of a given pollutant is often far higher than removing the first 5% or even 50%: for public policy to ignore such facts would be inexcusable.

If governments invest seriously in green data acquisition and co-ordination, they will no longer be flying blind. And by advocating data-based, analytically rigorous policies rather than pious appeals to “save the planet”, the green movement could overcome the scepticism of the ordinary voter. It might even move from the fringes of politics to the middle ground where most voters reside.

Whether the big environmental groups join or not, the next green revolution is already under way. Rachel Carson, the crusading journalist who inspired greens in the 1950s and 60s, is joining hands with Adam Smith, the hero of free-marketeers. The world may yet leapfrog from the dark ages of clumsy, costly, command-and-control regulations to an enlightened age of informed, innovative, incentive-based greenery.

WSJ Quote of the Day

In the June 15th 2006 Wall Street Journal, the Morning Report's Quote of the Day addressed the increased risk of certain markets due to the stressed environment and asking the SEC to require full disclosure of increased risk due to environmental concerns.

"Investors have a right to know if a company's buildings are in the path of hurricanes that might be exacerbated by climate change, or if it will face high costs when greenhouse gas emissions are regulated. They need that information to reduce their portfolio risk," said James Coburn, a policy adviser at Ceres, a coalition of environmental groups and investors who collectively manage more than $1 trillion in assets that sent a letter asking the Securities and Exchange Commission to require that companies disclose their financial vulnerability to changes in climate, the New York Times reports.

The article continues on a different page with writings from the New York Times.

Investors worried about the possible financial fallout from greenhouse gas emissions have asked the Securities and Exchange Commission to require that companies disclose their financial vulnerability to changes in climate.

Yesterday, a group of 27 investors who collectively manage more than $1 trillion in assets sent a letter to the S.E.C. chairman, Christopher Cox, asking that financial risks linked to climate change issues be included as part of routine corporate financial reports.

The letter, whose signers included several state officials, including the New York Comptroller Alan G. Hevesi, defines risk broadly.

"Investors have a right to know if a company's buildings are in the path of hurricanes that might be exacerbated by climate change, or if it will face high costs when greenhouse gas emissions are regulated," said James Coburn, a policy adviser at Ceres, a coalition of investors and environmental groups that sent the letter. "They need that information to reduce their portfolio risk."

Just as important, Mr. Coburn said, companies that are forced to quantify and disclose their vulnerabilities are far more likely to address them. "What is measured is managed," he said.

Mr. Coburn said Ceres faxed the letter to Mr. Cox, and sent e-mail copies to several staff members. It has also mailed copies to the chairman and commissioners.

A spokesman for the S.E.C., John Heine, said the agency had no comment at this time.