Peter Willis – The importance of a Sustainability Strategy

Peter Willis, the South African Director of Cambridge Programme for Sustainability Leadership, was recently interviewed by Chris Whitfield for GIBS FN. They spoke about the importance of a sustainability strategy.he

“Actually the way we frame it is we are talking about the sustainabilty of the human project.”

Click here to download Part 1 of the interview (audio or video). Part 2, download here.

Jeremy Baskin – SA has compelling reasons to cut hothouse emissions

SA has no detailed climate change policy, as the government acknowledges. It is too late to develop one before next month’s Copenhagen conference. This is disappointing, given that SA is a Group of 20 economy and the world’s 13th-biggest CO² emitter, but not fatal as long as detailed, informed policy measures are in the pipeline.

Most troubling is SA appears to be going into Copenhagen with a position arguably not in the national interest, nor in the interests of combating climate change. It is also hard to square with some of the strong policy signals given by the government to date.

I write as a South African living abroad, who has for the past eight years worked on issues of climate, development and business risk and watched the policy debates in a number of countries closely.

Southern Africa is likely to be among the world’s hardest-hit regions when it comes to the physical, human and economic effects of climate change. These effects will vary between regions, districts, towns and suburbs (the details urgently need more research). But all indications are that changes in temperature, weather patterns and rainfall are likely to be especially nasty in Southern Africa and affect the livelihood and physical existence of millions of people. So SA has a strong self-interest in achieving the maximum possible mitigation and the highest possible global emission-reduction targets.

Without cuts from all major emitters, including developing countries such as China, the biosphere won’t get the reprieve it needs to avoid dangerous climate change. It is vital to encourage deep cuts by China, the US and Europe, which together account for more than 55% of global emissions. Our focus in international talks should be on maximising the extent of overall global mitigation.

In relation to global mitigation targets, it is in our interests to bridge the developed/

developing country divide, notwithstanding our historic and emotional identification with the Third World. There is, of course, a real issue of climate justice. The argument is ethically persuasive that most developing countries are not responsible for historic emissions, and they need emissions headroom to develop and financial assistance to adapt.

This is the position adopted by the African bloc, and argued strongly by, among others, India and China. There is certainly a valid argument to be made by, say, Mali or Bangladesh or even India (which emits less than two tones of CO² per capita a year).

These are all poor countries using less than their share of a scientifically credible global carbon budget. On any consideration of equity, they deserve our support for special consideration. But even China (with about half SA’s per capita emissions) is not a credible member of this group, a fact it implicitly recognises when it makes major emissions- reduction commitments even as it avoids the language of targets.

We delude ourselves to think we are in this special category. We are already a high-emissions country, one of the highest per capita emitters both historically and today. The science now suggests that, if we are to reduce the risk of dangerous climate change, the biosphere can only tolerate concentrations closer to 350ppm than to the more commonly cited 450ppm. This, in turn, equates to a global carbon budget of about two or three tones per capita emissions by 2050, about a fifth of SA’s current emissions.

Other than in the very short term, we will not get away with the argument some in government are voicing, that we be allowed to increase emissions in the name of development and get financial assistance to cut later. We will be accused, as the middle class is in India, of “hiding behind the poor”. Not only will we not get away with it, but we risk undermining our primary interest, which is to see the highest possible global mitigation efforts. The most we can expect, and what we should push for, is some financial assistance to transition to a low-carbon economy now.

It is true that our average emissions, like our middle-income country status, conceal deep inequalities. This is an argument for ensuring our domestic adaptation and mitigation policies, at the very least, reduce inequality. It is not an argument for being given space to ramp up our emissions. Many countries have seen growth and development and still have lower emission profiles today than we do — South Korea, Brazil, and post- war Japan to name but a few.

To be credible in pushing for global reduction SA needs strong domestic mitigation targets. From outside it appears SA may be diluting its previously announced targets. This would be unfortunate. “Growth and development first, climate later” may be in the interests of the fossil fuel industry, or convenient for politicians facing other challenges. But it is a false dichotomy ultimately not in the national economic interest.

The truth is that globally we are seeing the emergence of a price on carbon. The price is still low, but the trend is clear and it is upwards. As one of the world’s most carbon- intensive economies, SA is highly exposed. Traditionally, we have used the lure of cheap electricity to attract investment and mineral- beneficiation projects. We are unlikely to do so in future if our electricity remains carbon intensive. Future aluminium smelters, for example, will gravitate to countries such as Iceland, Brazil or New Zealand, which have extensive geothermal or hydropower.

Our exports are vulnerable. Markets such as Japan, the US, Germany, China and the UK have signalled their carbon pricing intentions. A carbon tariff is emerging. Agricultural producers and component suppliers will have been asked by customers to account for the carbon-intensity of their products. If SA’s wine producers, for example, are not already planning to slash their footprint and lobby the government for low-carbon electricity they should sleep uneasily in the knowledge that their competitors in other countries are.

Given SA’s unemployment, the evidence globally is that renewable energy is substantially more employment friendly per megawatt hour or per rand invested than carbon-intensive alternatives. Viewed from afar, it is impressive SA is putting so much effort into fleshing out its climate policies and starting to pay more attention to the neglected challenge of adaptation. The devil will be in the detail and affected by electricity- sector investment, support for renewables at scale (such as pilot concentrated solar power plants), energy efficiency regulation, forestry policy, tax incentives, and so on.

It is in our interests to transition to a low- carbon economy sooner rather than later. notwithstanding our deep reliance on the resources sector, the best hope for the future is a low carbon one. It is not an easy route, and will involve higher energy prices and difficult structural changes. Handled skilfully it could also help to reduce inequality in the country. Those who argue, in relation to climate, “not us, not much, and not now” are being shortsighted and do the country a disservice.

* Jeremy Baskin is the Director of Cambridge Programme for Sustainability Leadership’s Australian office.

Original article: Jeremy Baskin. Business Day. 9 November 2009. Read more…

Paul Gilding – The Climate Giant Awakes. Have we turned a corner?

Regular readers may be a little surprised by this column. I am regularly arguing that the science shows we are inevitably approaching, or may have past, a tipping point where widespread, rolling ecological and economic crises take hold.

But there’s another critical tipping point, of a very different character – where the world’s political and business leaders turn firmly towards action. Here’s the surprise – I think we may be at this tipping point already.

Scientists have become increasingly alarmed in recent years, as climate change reality has raced ahead of the political response. They point to countless examples of accelerating feedbacks, such as the reduction in the ocean’s ability to absorb CO2 and rapid Arctic melting.

While they regularly point these out to our political masters, many of them express despair at the slow response.

So on what basis do I think the global political system has started to turn?

I think we have recently seen a number of developments that, taken together, indicate a profound shift is under way. When such a shift takes hold, it will rapidly accelerate – with significant implications for campaign and business strategy in this area over the years ahead.

The most significant and encouraging shift is what Tom Friedman in his recent NYT column called the shift from Red China to Green China. The Chinese leadership has for many years been talking about the need to act on climate but has in recent months shown serious potential to lead on this issue.

The rationale for them to do so is certainly there. As they have reeled under the negative economic and social impacts of pollution, China has accepted that the growth model followed by Western capitalism cannot work for them. Will they now pursue clean energy so vigorously they will dominate this new global market? Could climate even provide the issue on which China can manifest its global leadership ambitions?

I increasingly think the answer to both questions is likely to be yes, with far reaching economic and geopolitical implications. There is a good summary of recent developments and this potential for leadership, including China’s potential to see its emissions peak by 2030 in the article “Peaking Duck” by the Centre for American Progress’ Julian L. Wong.

Another important indicator is the recognition in the US political debate that the strength of the Chinese response is an economic threat to the US. The fear is growing that the resistance to change in the US may leave that economy floundering in what will be the largest economic transformation in history. As argued by Tom Friedman in the column referred to earlier, while America is currently strong on innovation, research ultimately follows the market. Friedman pointed out that “America’s premier solar equipment maker, Applied Materials, is about to open the world’s largest privately funded solar research facility — in Xian, China.”

The goal posts are also shifting in the science. An increasing number of scientists are coming to the view that the global CO2 target should be closer to 350ppm rather than 450ppm. In recent months we’ve seen this get global credence in response to the 350.org campaign, with eminent figures like the climate economist Nicholas Stern and the IPCC Chair Pachauri coming out in personal support of the 350 target. They would both be well aware that such a target would require cuts far more dramatic than anything on the table now. With such a goal, the task becomes the elimination of net CO2 emissions from the economy rather than their reduction.

At a deeper level, Stern also lent his considerable intellectual weight to the debate on economic growth, stating what was previously heresy – that economic growth itself must now be questioned. He recently put the case that there were probably only 20 years left for further economic growth before the earth was full.

Equally important as these scientific and political developments are shifts in the business community. While debates are raging in Western economies including in the US, Japan and Australia on climate policy, there are signs of a profound underlying shift emerging in corporate attitudes. Symbolising this in the United States is the rapid withdrawal of major companies from the US Chamber of Commerce over their lobbying against action to regulate greenhouse gases. In recent weeks, major corporates such as PG&E and Apple have resigned, Nike has quit the Board of the organisation and GE and Johnson & Johnson have both publicly distanced themselves from the Chamber’s anti-climate action lobbying efforts.

Another example was a recent initiative by Cambridge Program for Sustainability Leadership’s Corporate Leaders Group, with 500 companies signing on to the Copenhagen Communiqué which endorsed strong action on climate by the world’s governments including keeping warning below 2 degrees and urging early action. “There is nothing to be gained by delay”, the communiqué states.

Many other countries previously in the background on the global climate debate like Indonesia (which is the world’s 3rd largest net emitter due to its extensive deforestation) recently announced its intention to cut emissions by 26% by 2020 compared to Business As Usual and by 41% if they get international financial support to go further. They also believe they can turn their forests into a net carbon sink by 2030.

And of course there is a storm of grassroots campaigning erupting around the world in the lead up to Copenhagen with campaigns like 350.org and many others.

Many of you will have the correct response that these are all only words – that we are yet to see action of real substance. That’s certainly true. Words are early signs, not conclusive evidence. But I think I can smell it now, and when these things do turn, they do so remarkably quickly – as we saw when governments responded to the recent financial crisis.

Of course this does not mean we can relax and it will all be OK! The climate system is now rapidly descending into crisis and the consequences will be felt for decades even with strong action now. What it does indicate however is that we will not be the proverbial boiling frogs who just sit here passively as the system collapses around us. It is only early signs of the turn, but it gives us an indication of what’s coming.

So we mustn’t back off, not even a little bit, with the pressure being applied to the system to encourage change. But we should perhaps reconsider tactics.

I think some of our energy should be focused for example on developing an emergency plan to fix the climate. The science clearly lays out what a stable climate looks like and it requires the elimination of net CO2 emissions from the economy within decades. Any rational analysis says this is going to require the equivalent of a war plan to achieve it. In future columns I’ll be saying a great deal more on that topic.

But for now, take a look around. The world is turning our way and while the crisis is still coming, the crisis response may not be as far behind it as we thought.

Original article: Paul Gilding. www.paulgilding.com. 8 October 2009. Read it…

TRUTH or COMFORT?

On Reading James Lovelock’s “The Vanishing Face of Gaia – A Final Warning”

By: Peter Willis

If I look back on the many moments of challenge and disturbance in my life it’s clear that a critical question at such moments has always been “How much truth am I willing to expose myself to?” I think it’s fair to say that the only reason I’ve been able to come through some of those challenges and move on has been because I’ve opened myself to a fresh degree of truth, usually truth about my character, assumptions or behaviour. This is always uncomfortable as it involves having to acknowledge that some aspects of my self with which I was perfectly content have in fact been causing problems for others and if I want the benefit of good relations with those others the old behaviours will have to change. And giving up on a view of myself that used to work just fine (at least, so I thought) is a hard wrench.

Of course there is always the option of denial, to which I am no stranger. I simply discount the new, challenging information and re-affirm that I am fine just as I am and it is the others who have misunderstood the situation. It is usually possible to find evidence that validates this ‘status quo’ and allows me to carry on in my groove. That is, until the next time, when the challenge tends to arrive with much greater force.

If you are wondering why this bout of psychological introspection, it is because I have just read “The Vanishing Face of Gaia – A Final Warning” (Allen Lane 2009), written by one of the greatest living earth scientists, James Lovelock. At the age of 90 Lovelock is a master with no need to prove anything to anyone. An independent scientist and inventor for the past 45 years, reliant not on government grants but what he could make from his own inventions and advisory work, he speaks about the future of human civilization on Earth with a breadth of knowledge and a freedom of perspective that comes like a breath of fresh air…and fresh truth. I cannot remember when I was so challenged by a single, short book.

Lovelock is widely known as the creator of Gaia theory, named after the ancient Greek goddess of the Earth. Gaia theory states that, rather than life taking place on an inert planet made up of rocks, gases and other lifeless elements, living organisms (including us) form an interactive system with these elements in order to create the conditions for further life to emerge and flourish. For example living organisms will use all their evolutionary ingenuity to, for example, create and maintain an atmosphere that favours their own survival and growth. The idea that plants, microbes and animals could influence the atmosphere has been a hard one for most physicists, geologists, chemists and others to accept, maintaining as they do that the atmosphere is made up of a mixture of inert gases and particles driven primarily by the power of the sun. Indeed it has taken all of 40 years for the wider scientific community to allow the validity of this theory and even now its full implications are far from being grasped by both mainstream scientists and certainly the wider public.

So why is Gaia theory important, and especially now? Any scientific theory is only as important as its ability to predict how the system that it refers to will behave in future. Look at how successful the theory of Gravity has been in predicting how and where objects will fall, even though nobody fully understands why gravity operates in the way it does.

Gaia theory is critically important now because it has been pointing all along to a strong link between the health of the Earth’s living systems and the state of the climate. Nobody doubts that a hotter climate will have big impacts on living systems like agriculture, forests, water and indeed us humans, but Lovelock has for years been saying the opposite as well – that the more we interfere with (i.e. destroy, pollute or build over) nature’s complex eco-systems, the less able they are to do their work of regulating atmospheric temperature. One of the predictions he made using Gaia theory was that tropical and boreal forests play an important role in regulating global temperature. This has been proven and is now generally accepted, hence the growing focus on preserving what we have left of these forest systems.

But as a student of the field of sustainability for the past twelve years all of this on its own would not have been enough to surprise or shock me. What has stopped me in my tracks is Lovelock’s argument that we humans have done so much damage to eco-systems and have put so much CO2 up into the atmosphere at such an extraordinary speed during the past 200 years that we have overwhelmed nature’s ability to regulate the atmospheric temperature at an optimal level and he believes that we are very close to witnessing a swift rise of 5°C in global average temperature, from which it will take thousands of years to retreat back to our current ‘normal’. Such a ‘hot state’ will make it impossible for human settlement to continue in many parts of the world as agriculture will fail. This will almost certainly result in mass migration, conflict over shrinking resources and much premature death. By the second half of this century Lovelock sees the Earth carrying only about 100 million people instead of the current load of about 6,3 billion, a culling of 62 out of every 63 people now alive.

Those who survive will, he suggests, be clustered in the few areas still blessed with an ability to grow food. His hope is that, from this new, stable ‘hot state’ human civilization will be able – if all goes well – to partner with Gaia much more consciously and help ‘her’ to become a more fully intelligent planet with a much longer life span than she might otherwise manage.

He reminds us that since humans first emerged on earth about 1 million years ago there have been seven extreme climatic shifts, from cool to warm and from warm to cool. Each of them was devastating to the humans alive at the time and some geneticists believe that one of the incidents caused the human population to sink as low as around 2,000 people, a period known as “the genetic bottleneck”. Lovelock believes our enormous population growth and burning of fossil fuels have made it likely that the coming transition will be more violent than any before, requiring all our best qualities of leadership and collective compassion and ingenuity to avoid it becoming the end of human civilization altogether.

When one of the finest scientific minds our species has produced makes an assessment like this after 90 years of life and still in full possession of his brilliant faculties (see his fascinating interview about the book on YouTube) one must take notice. Though he would be the last to say he had discovered “the truth” about our future, his arguments for predicting a very rough time ahead are based on rigorous scientific method and a lifetime of experiment and engagement with the great scientific minds of his age. Though he comes across as a cheerful man, Lovelock has clearly thought deeply about the consequences of what he is seeing. Being responsible, he shares what he sees with us.

What we do with his unpalatable information is, of course, up to us. I’ve taken the decision to hold his analysis in the front of my mind from now on (until it is superseded by something even more convincing) and not do what I’m strongly tempted to do, which is to sweep it under the rug and go on believing that we are merely facing a set of severe problems to which we may, if we work hard and swiftly at it, soon find the solutions.

I am now working on the assumption that we have passed that point. There is nothing we can currently conceive of doing that will preserve a remotely decent life – indeed any life at all – for between 6 and 7 billion people on earth. How soon will the large-scale destruction of life-supporting systems begin? Interestingly, Lovelock sees this coming not next year or even necessarily within the next 5-10 years, but he believes that once it begins “it will be very rapid indeed”.

So where has this left me? Two thoughts predominate for me as I write this – one looks backward, the other looks forward. First, I am profoundly struck by the realization that we humans, in what has been our ‘grand project’ of the past seven millennia, to settle the earth and achieve the comfortable living of our dreams, have failed comprehensively. For just as that dream appears within our grasp (look at the extraordinary levels of comfort in which about 1 billion people now live all over the world) it is revealed to us as being built on illusory foundations. Before we embarked on agriculture we barely disturbed Gaia, in fact probably contributed to the evolution of her self-regulatory systems. Once we learned how to create food surpluses and started altering large landscapes we began to weaken other aspects of the Gaia system. With the Industrial Revolution we slammed our foot to the floor and have not lifted it since.

As Lovelock puts it, “If there were only 100 million of us on the Earth we could do almost anything we liked without harm. At 7 billion I doubt anything sustainable is possible or will significantly reduce fossil fuel combustion; by significantly I mean enough to reduce global heating. Seven billion living as we do, and aspire to do, is too many for a planet that tries to self-regulate its climate.”

This being the case, I look around me at so many examples of human success (technological, institutional, cultural, etc.) and ask “How can we judge anything a success if the whole project of human civilization is basically a failure?” Something in me refuses to take this in fully. I still find pleasure and joy in small things human and man-made – I am still terribly attached to my tribe and its achievements. But in the harsh reckoning of the likely near future so many of my tribe’s successes are going to look so very hollow.

The second thought that arises for me is about what is worth doing now. For despite feeling a disabling sense of grief and near despair, I also feel moved respond by taking action. Each of us has a different gift to bring to the world and mine, I think, is to do with bringing diverse people together to think beyond their normal boundaries. So I am thinking about how to draw together people of influence from all corners of South African society to start thinking through the practical implications of what Lovelock and other systems scientists are telling us. I have no illusions that this will be easy – my own attempts to imagine what it might be like to plan for mass migration away from low-lying coastal areas, to take just one example, show me that this is no picnic, and as the great early 19th century philosopher Bertrand Russell once said, “The average man would rather face death or torture than think.” But I believe that once any group of intelligent, responsible people is given the chance to engage with the science and start their own personal journey of grasping what may lie ahead, they will become available for creative, humane leadership, of which we will need plenty.

I am not sorry to have been shaken out of my comfort. I fully expect to seek out fresh comfort in different forms for the rest of my life – I think it’s part of my nature – but I also acknowledge that comfort can bring great danger and to be shaken out of it by an exposure to new truths is a necessary part of being fully alive and enables me to play my own modest, ephemeral part in this much greater story of Life.

2 August 2009

Jonathon Porritt – Prosperity without growth

At last, the Sustainable Development Commission’s magnum opus has landed. Prosperity Without Growth? was launched on Monday, representing the culmination of five year’s work. Tim Jackson, our Economics Commissioner has produced an absolute ‘tour de force’. And there’s a lot riding on this for the Commission.

Way back in the mists of time, through the 70s and into the early 80s, there was an extremely lively debate about the compatibility between economic growth and big-picture resource and sustainability issues. Heavyweight economists batted academic papers back and forth; party political conferences formally debated the pros and cons of economic growth. All this was nicely stoked up by the two Opec-induced oil shocks, and even the media were all over it. Then oil prices came plunging back down, Jimmy Carter got stuffed by Ronald Reagan, and free-market fundamentalists began their long march through the knackered ranks of superannuated Keynesians.

The consequence of which has been hardly any serious discussion about economic growth and sustainability since then. Unbelievable, in retrospect, as even a fool could tell you that if you continue to grow both the number of human beings and the volume of goods and services consumed by each of those human beings, on a planet with limited resources and stressed-out life support systems, then you are heading inevitably for a bust. Sooner or later.

Politicians of all persuasions have hugely enjoyed their 20-year leave of absence. But it’s an inexcusable dereliction of duty to go on avoiding this crunch point in the light of what’s been happening over the last few years – with oil going to $147 a barrel, food reserves at their lowest level for decades, chronic water shortages the world over, accelerating climate change and so on. Paradoxically, the collapse in the global economy gives us some breathing space – but not much. If it’s back to business-as-usual, growth-at-all-costs as the sole route to progress, then biophysical reality will not long be delayed.

Politicians have got used to using one get-out clause in terms of avoiding any intellectual encounter with that crunch point: decoupling. Just decouple the benefits of economic growth from its costs (or externalities, as economists call them) through technology-driven resource efficiency, and all will be well.

If only. One of the toughest messages in “Prosperity Without Growth?” comes in Tim Jackson’s clinical critique of “the myth of decoupling”. The reality is that even progress on relative decoupling (reduced environmental impact per unit of GDP) has been limited, whilst progress on absolute decoupling (reduced environmental impact, full stop – which is what we have to achieve) has been non-existent.

That isn’t to deny the critical significance of decoupling. We desperately need far more of it than anything we’ve seen so far. Which means governments have got to do it, rather than just talk about it, even as they come to the inconvenient conclusion that it won’t be enough on its own anyway.

Politicians may not want to hear these messages. But it’s our task to broadcast them much more loudly and much more clearly than we’ve done over the last 20 years. And “Prosperity Without Growth?” is what you need to make that happen.

Article by: Jonathon Porritt. www.jonathanporritt.com. 31 March 2008. Read it…

Paul Gilding – Scream Crash Boom (2)

AND so the moment arrives.

In my first Scream Crash Boom letter of 2005 I forecast the inevitable crash of the global ecosystem. I said the resulting economic and social crises would then drive an investment boom in a new industrial revolution and economic transformation. I thought I was forecasting events a decade or two away. Now, just three years later, look around us. The global economy is trembling under its own weight. We see:

• riots and political crises across Asia as surging food prices, driven by extreme climatic events and surging economic growth, put severe pressure on the daily lives of billions of people;
• protests, strikes and political upheaval across the world as oil prices respond to the reality of limited supply, threatening recession, or worse;
• global financial markets lurching from crisis to crisis as complexity, greed and interconnectedness drives the financial system to the edge;
• debate about external military intervention in countries that can’t deal with the humanitarian consequences of extreme weather, such as Burma;
• scientists mystified by dramatic increases in melting at the Northern Polar and Antarctic icecaps, at rates way beyond their forecast models;
• and countless more impacts with floods and fires in the USA, droughts and dying rivers in Australia, melting glaciers all over the world, and on and on.

The ecosystem crash I thought was decades away is now underway and the resulting economic crash is not far behind, perhaps the slide has already begun. As our global market empire eats its way through the natural resources of the planet, stealing from our children, it now overextends, as all empires do before they decline. Desperate for more resources to feed its hungry masses, to shore up the middle class’s wealth, to keep the elites supportive and to protect itself, the system makes promises of continued riches. Promises it can no longer keep. Look how our system responds to oil prices – a response so ridiculous it’s almost funny. We see that our addiction to a non-renewable, polluting resource threatens the economy. Our solution? To try to increase supply and reinforce our dependency.

Madness surrounds us now. This empire has no emperor. There is no senate, no central committee, no board of directors. No-one is in charge and no-one can control what happens next. The system is too complex and intertwined and the momentum is too great. The system is breaking down and we need to prepare for what’s coming. When we look back, 2008 will be a momentous year in human history. Our children and grandchildren will ask us “What was it like? What were you doing when it started to fall apart? Could you see it? What did you think? What did you do?

Read more

Paul Gilding – Market Wimps

THE latest calls for delays to action on climate change in Europe and Australia shows just how weak our captains of industry and their political supporters are when it comes to their commitments to markets. It exposes their Stalinist, command and control tendencies and reminds us, despite their protestations otherwise, they really are more comfortable with oligopolies and private gatherings in the old club, than with the rough and tumble of a genuine market.

The transformation of the economy to a low carbon one requires change driven by new incentives. This should be music to the ears of anyone who believes, as I do, in the innovative power of people and markets when given the right incentives. Yes, change can be hard work and must be managed, but it sorts out those who are innovative and courageous, those prepared to have a go, from those lazy, over protected sections of the economy that need shaking up for the greater good.

This of course is what our captains of industry argue about markets, that if we expose our ideas, technology and management capacity to the rigours of an open process of capital allocation then the best will rise to the top. That is why many of them are so nervous and now scream for protection, because they fear that their day is coming to an end and more innovative technologies and companies will replace them. So they seek any excuse to slow down that process.

A classic example of this is the debate over trading vs taxes. The corporate sector argued strongly for trading as the most effective and efficient method of identifying where capital should be directed to cut CO2 emissions. They were right to do so as a well-designed market for carbon, without free allocation of permits, is the right answer. It lets government guarantee a steadily reducing level of CO2 pollution (the cap and trajectory) and lets the market find the right price to achieve it.

Having argued for this, many so called market advocates then wimped out and started complaining about “certainty” – that they would face uncertainty on price. Well duh, that’s what markets are, a way to set the price given limited but unknown supply. So now the market advocates seek government intervention – compensation, price caps, longer term trajectories and delay – anything to avoid this being a real market.

There are notable exceptions, such as Grant King at Origin Energy. Origin has long recognised the inevitability of a carbon price and argued strongly in favour of one, even when it was very unpopular in the corporate sector to do so. King was a part of a small group of CEOs – the Business Roundtable on Climate Change – that pushed the Howard government to act, despite derision from the conservative members of the BCA.

Beyond policy advocacy, Origin saw the writing on the wall and invested in gas and renewables and positioned their brand as a green one with consumers. So now while the market wimps are calling for protection and delay, Origin is saying “bring it on”. Their recent submission to the government called for stronger targets than Garnaut. No wimps there.

The business community needs to decide if they want a market solution or not. Either they face up to the market and let it do its work or get out of the way and let government regulate a command and control solution. You can’t have it both ways and if we don’t get to work on the market approach soon, the heavy hand of government will be the only option left.

Original article: Paul Gilding. www.paulgilding.com. 17 October 2008. Read it…