Energy and Forestry in the UK

Spoke to the Institute of Chartered Foresters annual conference in London this week, an event where people think very hard about trees. The UK is a pretty small island in forestry terms. One Canadian Speaker said “stick to gardening” (he was joking a bit) and I got an insight into the realities of biomass-fuel.

As well as being one of the UK’s biggest CO₂ polluters, Drax power station is also our biggest renewable energy source, as it now mixes dried biomass pellets into the coal it burns. This relies on large-scale imports of biomass (UK timber resources are too small and thinly spread), which mirrors the plant reliance on large-scale imports of coal (after extraction, similar supply chain logistics are involved).

That’s not to say we should give up on the UK’s woodfuel, but it needs to supply smaller local markets. Community buildings, communities and homes are all looking to burn more wood. The UK has under-managed small woodlands that could supply this resource, giving energy and ecological benefits.

Furthermore, our future energy deficit is going to be big enough that we’ll need both sources of biomass energy: large-scale importers like Drax, and utilisation of our domestic resources in smaller-scale generation. And more energy efficiency too.

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Rio+20 Business Summit

Limu and Betsy attended the Rio+20 Business Summit organised by the Aldersgate Group which took place last night. Thoughts from both are below:

Limu:

A fantastic Aldersgate Group event was held on Wednesday evening, featuring a ‘dragons den’ of business ideas for Rio+20. The panel included Secretary of State for the Environment Caroline Spelman, who gave creditably informed responses on the ideas proposed by nine business representatives.

Global food security ‘won’ the vote on the best idea, but the most interesting fact of the evening came from hosts PWC. Giving an insight into their ‘pulse survey’ of global CEOs pre-Rio, they said 70% were ready to substantially increase their sustainability commitments if decisions in Rio led the way. The business world is getting ready to act on sustainability, politicians in Rio need to be able to trust them.

Betsy:

The Rio+20 Business Summit was an interesting setup whereby the representatives of 9 companies had 100 seconds each to sell to the audience and a panel of experts (a Dragon’s Den including Caroline Spelman, our Secretary of State for the Environment) their ‘business pitches’ for how businesses will be involved in obtaining goals that will come out of Rio+20 (the United Nations Conference on Sustainable Development taking place June 20-22 in Rio de Janeiro, marking the 20th anniversary of the 1992 United Nations Conference on Environment and Development). At the end of the night the audience had to vote and prioritise each of the pitches.

Rio+20 has two main themes: 1) a green economy in the context of sustainable development poverty eradication; and 2) the institutional framework for sustainable development. The business pitches we heard last night were for ideas that businesses hoped would make their way into the institutional framework for sustainable development.

To anybody interested in the environment these ideas weren’t new, but it was interesting to see which businesses were focusing on which ideas. The ones put forward were:

1) Natural Capital – Value and maintain the Earth’s natural capital with a commitment to no net loss, holistic policy frameworks and national action plans (B&Q, Matthew Sexton)

2) Sustainable Development Goals – Governments must work with business to secure a commitment to Sustainable Development Goals (Unilever, Karen Hamilton)

3) Circular Economy – Programmes on sustainable consumption and production should provide new leadership on circular economy (Siemens, Ian Bowman)

4) Sustainability Reporting – An international convention to require companies, on a ‘comply or explain’ basis, to integrate sustainability issues in their Annual Report and Accounts (Aviva Investors, Steve Waygood)

5) Information Technology – We need to harness the power of ICT to turn data produced across various systems like buildings, transportation, energy grids, water and air quality, ocean health, corp yields, human health implications of pollution – into actionable solutions and results (Microsoft, Josh Henretig)

6) Transport Strategy – A clear strategy for access to sustainable energy solutions which recognises that transport is essential for linking societies and markets, within and between developed and developing countries (Virgin Atlantic, Sian Foster)

7) Food Security – Governments must place the challenge of feeding over 9 billion people on a sustainable, healthy and affordable diet, top of the agenda (ASDA, Paul Kelly)

8) Energy Efficiency – Governments need a longer-term financial view when investing in green technologies and to lead by example – committing to making public sector assets energy efficient. (Philips, Jayson Otke)

9) Water Security – Governments should commit to working in partnership with the private sector and others to respect, protect and fulfil the right to water and sanitation by 2020 in a way that is compatible with climate and food security goals (PepsiCo, Andrew Slight)

As you can see, many of these 9 pitches are in fact interconnected. For example, including natural capital into national and business accounts will help achieve sustainable development goals. Sustainable development goals can also be helped along by the three enabling pitches (4-6). Food and Water security must go hand-in-hand. So it was quite difficult at the end of the evening, to separate these out when it came to the audience voting (by ranking the pitches for which should be the highest priority).

We did anyway and the results were interesting – I unfortunately wasn’t able to get them all but I’m sure we will see some of the results from Aldersgate soon. I did catch the highest and second highest ranking pitches though – and they were Food Security and Natural Capital respectively. It is refreshing to see Natural Capital being given such a high ranking in priorities, particularly once we saw the breakdown. More of the audience from business had voted for Food Security while more of the audience from NGOs had voted for Natural Capital!

Of course it is a bit unnatural to be comparing these ideas against each other when many go hand in hand, and they address entirely different ways of how we could be working towards sustainable development. But I still have those days where I have to explain the practicalities of environmental economics to environmentalists who vehemently disagree with the idea (and yes I encountered a couple in networking after!) and we even had that sadly misinformed article from George Monbiot, so it is good to see that the NGOs understand us and are on our side. Natural Capital got a large chunk of the business vote too – just not as much as Food Security did. And again, these two ideas are hardly comparable – they can both be implemented and inform each other. But at the end of the day it is heartening to know that environmental economics is going more mainstream and an increasing amount of people from all spectrums of life are engaged with how environmental economic concepts can help them pave the way to sustainable development.

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Rhino horn sell-off

The South African government is considering the sell-off of 20 tonnes of stock piled Rhino horn. The destination for any sale of the horn would be markets in Asia, where horn has been seen as a cure for cancer and as traditional alternative to Viagra. Lets be clear, Rhino horn does absolutely nothing, aside from any potential placebo effects. Rhino horn is made from Keratin, so unless biting your nails, or chewing your hair banishes your cancer, it is worthless as a drug.  In fact Rhino horn has been found soaking in liquid Viagra to give it its purported impotence busting properties.  So a valid trade which cures people, it is not.

The economic rationale for selling off stock piles of Rhino horn is simple. The legal trade of stockpiles of Rhino horn would depress the market price resulting in reduced incentives to poach therefore protecting Rhinos in the wild. This chain of logic is based on a number of assumptions:

1)      The demand for horn is limited and static, therefore an increase in supply will satiate consumers.

2)      The demand curve for Rhino is such that the stockpiled quantities would reduce price by the desired extent

3)      Insufficient profit margins exist in poaching Rhinos, to allow illegal traders to compete with legal supplies at the new reduced price

Many of these assumptions are pretty shaky. Selling off Rhino horn through legal channels is likely only to legitimise the market, resulting in more people demanding more horn.  What happens when the legal supply runs out, then we are back to square one, legal harvesting (costly, ignoring the odious moral connotations) or poaching with greater demand.

Legal sell offs have been tried with elephant ivory , which were initially supported by Traffic and WWF. But prices rose after the sell offs, with the supply proving insufficient to depress prices and poaching increasing.  In 2010 legal sell offs of ivory were banned for at least three years.

A stretched government agency sitting on a stock pile of Rhino horn, must be sorely  tempted to sell it. There is huge demand attracting high prices.  As economists we often weigh up the costs and benefits, we are supposed to be clinical observers of markets.  Do the ends justify the means? If a sell off supported conservation, unlikely but let’s suppose, should I hold my nose and support it. No. Supporting the trade in Rhino horn would be supporting quack medicine of the highest order. Just in this case the ingredients are not water and a sugar pill, but one of the most endangered species in the world.

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Making Connections II

Watching the 10 o’clock news is now a slightly more enlightened experience. They managed to make the connection between droughts and floods. A good explanation of how we are in the ‘wettest drought ever’ was beyond them though. After some reassurances from Government that they are trying to avoid soggy armagedon, the report moved on to puzzlement with our water cycle.

It featured a vox pop from a motorist held up in a flood: “I just struggle to understand why we still have a hosepipe ban” she chimed. Well if your car is sitting in it, it isn’t coming down your tap is it, let alone in a drinkable condition. How difficult is that to work out? For any given rainfall, the bigger the flood (i.e. the more water running off the surface) the lower the storage (water permeating through soil into the ground).

Obviously, there has been a lot of rain, but the important clue was in the reports, which noted the speed of the floods. The quicker the water enters rivers, the less chance it has to be intercepted, either by natural processes, or by water companies. Some attention on those natural processes would be nice next. How about a science correspondent’s report from arable land in the midlands, where all non-crop vegetation has been removed to allow water to reach Northamptonshire towns as quickly as possible.

Obviously, a link to climate change and fuel prices is just fantasy.

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For more information on droughts and why there can be flooding during a drought, see this Environment Agency page.

For the interested, the weekly and monthly water situation reports from the Environment Agency can be accessed by clicking here.

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Ecosystem Health

I attended a meeting researching ecosystem market opportunities yesterday. The research will inform the government’s ecosystem markets taskforce. It was an interesting gathering of people from across the environment sector, and there were lots of entrepreneurial ideas. However, these are largely extensions of existing environment sector activity. Much niche good practice is ready to be scaled up, if barriers like perverse subsidies were removed.

Links outside the environment sector were less conspicuous. Despite the strong evidence that access to the environment is the best treatment for many causes of ill-health (from heart-disease to avoiding diabetes to dementia) no one from the health sector was present. Apparently some patients are being prescribed gym memberships to stimulate physical activity, but are ‘green gyms’ being given the same level of attention?

Maybe the ‘indoor gyms’ sector is a bit better connected to the Dept of Health? It feels like more than an environment department research project is needed here. To shake the health sector out of its budget-pressured symptom-treating silo, some political leadership is called for. The greenest Government ever? How about a health-environment summit at no 10?

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