Doing the business on green power switch

Published Date: 12 October 2008
By Peter Jones

SOME environmentalists see business as a problem rather than the solution in the drive to cut greenhouse gas emissions and reduce the effects of climate change. The business view is quite different. It sees business as the solution and conflicts in the environmental movement as part of the problem.
This reversal of conventional wisdom emerges clearly from three business contributions to an imaginative project run by the David Hume Institute at Edinburgh University. The project asked people from different backgrounds – environmental, Government, political, academic and business – to imagine that they were in the year 2050 and that Scotland had achieved the target of cutting greenhouse gas emissions – carbon dioxide, methane, etc – by 80% from the 1990 level. They were asked to answer the question: how was it done?"Well first of all," says David Watt, director of the Institute of Directors, Scotland, "We began to realise that the economy – and the firms which make it up – was not the problem but the crucial solution. The private sector was in fact the main mover in meeting the targets. The market-driven economy was the saviour of our planet – some could argue."Yet the emissions reduction target is a tall and, some might think, impossible order. It means getting back to the levels of pollution caused just before the Industrial Revolution. Going back to the kind of society that prevailed in the 18th century is not an immediately appealing proposition.But, say the writers, it doesn't mean that at all. It does mean that Scottish society, businesses and the economy will be different, but it can also be a wealthy and prosperous society.Crucial to making it so, say the business writers, is a global price mechanism for carbon, something which has begun to happen at national level through such things as the climate change levy and at the supranational level through the EU Emissions Trading Scheme. Such a global price, says Iain McMillan, director of CBI Scotland, will speed up the drive towards renewable energy generation and adding carbon capture and storage systems to coal-fired power stations. He envisages that there will be schemes putting caps on emissions output and forcing all emitting sources to trade internationally in carbon permits.By 2050, force of economic circumstances will have moved the UK in this direction because by then we will have to have spent around £100bn replacing most of our current energy system anyway. And a world with carbon prices and caps will create big new opportunities which business will be anxious to exploit.He says: "Estimates suggest that global markets could be worth $1 trillion in the first five years of a global deal that limits GHG emissions. Taking advantage of these opportunities, new business models will be created which place carbon at the heart of management strategy – efficient and effective carbon management within the business and also down supply chains will reduce costs and wasted energy and so become the new token of a successful business." Consumers will also drive these changes. The CBI's task force on climate change estimated that consumer decisions in lifestyle and shopping choices controlled or influenced 60% of UK greenhouse gas emissions. He says: "By 2050 it is likely that consumers will be demanding low-carbon, energy-efficient products without giving it a second thought."This demand will have generated competition among business to provide the most efficient, lowest carbon offering. So that, just as the current A-G labelling for fridges has become the norm, by 2050 it is likely that we will make similar purchases for all household goods."David Watt takes that theme forward, imagining that by 2050, the national grid will have been re-engineered and the planning system streamlined so that consumers are able to install their own micro-generation schemes in their houses, again a major business opportunity.He says: "Vital here also to driving all these schemes forward was the new – primarily SME – industry which grew up led by companies like Windsave to design, manufacture and install domestic wind turbines, heat pumps, solar panels as well as fuel efficient and alternative fuel boilers."Larger projects again were founded on Scottish innovation, manufacturing and implementation and once again in the 21st century this country really did lead in Europe, if not the world, in developing the ideas and the technology to make carbon-efficient energy production turn from dream to reality."Fuel cell technology has allowed storage of electricity so peak demands can be catered for should the wind not blow or there be any other fluctuations in supply."But a critical factor in allowing the spread of renewable energy systems, says Ian Marchant, chief executive of Scottish and Southern Energy, is resolution of conflicts within the environmental lobby. Imagining himself writing in 2050, he sets out how that will have happened: "The professionalised environmentalists played an increasingly leading role as they realised that climate change threatened everything – and the arguments of some of their own, to oppose all windfarms as 'blots on the landscape' for example, became untenable. "In those early days of confusion and prevarication many sought the silver bullet solution. Energy efficiency was pitched against wind farms, offshore against onshore, heat against light, biomass against gas. But all that changed. That shift was given huge impetus by rises in prices for oil and gas. People didn't want to depend on unstable regimes in far-flung countries for their energy, and wanted more of it to be produced at home."He concludes: "In 2008 I set a target of reducing the carbon intensity of SSE's electricity generation by half by 2020. Little did I know then that it would be something like 90% by 2050. I wouldn't have thought it possible."But look at what happened with technology. Look at computers – I can hold a machine that is four million times more powerful in the palm of my hand today than I could in 2010. I remember that in 2010 I had great faith in the power of human ingenuity. Thank goodness we got the changes in attitudes and behaviours that meant that ingenuity was put to good use."This and other essays commissioned by the David Hume Institute, Edinburgh University, will be discussed at a seminar at the Dynamic Earth, Edinburgh, on Tuesday. Registration and information about this event can be found at www.davidhumeinstitute.com