Chinese walker

On 11 June 1770, six weeks or so after becoming the first European to make landfall on the east coast of Australia, Lieutenant James Cook unexpectedly ran aground. His ship, the Endeavour, had struck a reef now known as the Endeavour Reef, within a manifestly far bigger reef system, nearly 40 kilometres from shore. Only the urgent jettisoning of 50 tonnes of stores and equipment (including all but four of the ship`s guns), a delicate operation known as fothering (in which an old sail was drawn under the hull, effectively plugging the hole), Cook`s expert seamanship and a great deal of hard pumping saved the vessel and her crew.

It would be another 30-odd years before the great English explorer and cartographer Matthew Flinders, having circumnavigated the entirety of Terra Australis Incognita, the Unknown Southern Land, gave the vast reef system its name. But despite his astonishing success in charting a safe passage through its treacherous waters, mainly by the expedient of sending small boats ahead to sound the depths, Flinders himself was later stranded on it while heading home for England in 1803.

For nearly 250 years, the Great Barrier Reef has been a hazard to shipping. It is the world’s largest reef system, made up of more than 2,900 coral reefs and 900 islands scattered over 344,400 square kilometres off the coast of Queensland in north-east Australia. Covering an area bigger than the United Kingdom, it is also a priceless and unimaginably fragile world heritage site, home to 30 species of whales, dolphins and porpoises; six species of sea turtles; 125 species of shark, stingray and skate; 5,000 species of mollusc; nine species of seahorse; 215 species of birds; 17 species of sea snake; 2,195 known plant species and more than 1,500 species of fish.

And it is still a hazard to shipping. In recent years, its pristine waters, in theory protected by the statutes of the Great Barrier Reef Marine Park, have become known as the “coal highway”, a busy thoroughfare for foreign-owned bulk carriers bound for Asia. Laden with coal and fuel oil from Australia, thousands of ships — such as the Chinese-owned Shen Neng 1, which ran aground off the country`s eastern seaboard on April 3 — continue to jeopardise the largest marine conservation site in the world. As salvage teams worked to prevent disaster, environmentalists were not slow to accuse the government of turning a blind eye to the problem.

“This is the $60-billion-a-year, largely foreign-owned coal industry that is making a coal highway out of the Great Barrier Reef,” said Bob Brown, leader of the Australian Greens party. “There needs to be a radical overview of this huge coal-export industry, whether these ships need to use the reef at all, and what the alternatives are,” he said. Local fishermen have dubbed it the “reef rat run”, saying ships routinely take short cuts to save time and money on their voyage to China.

It was this so-called short cut, near the Douglas Shoal, off Rockhampton, that is believed to have caused the Shen Neng 1 accident. According to reports, the 230-metre-long ship, carrying 975 tonnes of heavy fuel oil and 65,000 tonnes of coal, was travelling at full speed when it hit a sandbank in a protected part of the Great Barrier Reef. Its fuel tank ruptured, causing a three-kilometre-long oil slick.

[After the vessel was refloated on April 12, the Great Barrier Reef Marine Park Authority`s senior scientist, David Wachenfeld, said the ship had gouged a channel about three kilometres long in the reef.]

The Queensland premier, Anna Bligh, has said the ship`s owner, Shenzhen Energy – which allegedly has been involved in three major international incidents in four years – could face a fine of up to one million Australian dollars (nearly US$930,000) for straying from a shipping lane that is currently used by some 6,000 cargo vessels each year.

The stricken ship was travelling to China from Gladstone, a port playing a growing role in the booming export trade of Australia`s natural resources to Asia. The incident follows a similar accident in March last year when 60 kilometres of Queensland`s south-east coast were declared a disaster area after 42 tonnes of oil spilled into the ocean from the MV Pacific Adventurer during a cyclone.

Conservationists say the fact that there is no legal requirement to have marine pilots on board ships in the area, to guide them safely through the 2,500-kilometre reef system, puts it in grave danger. “The current lack of safeguards around shipping in the Great Barrier Reef is akin to playing Russian roulette with one of the world`s most treasured natural icons,” says Gilly Llewellyn, the conservation director of WWF Australia, who called for ships to be piloted. She also wants improved monitoring systems so authorities know where large vessels are situated on the reef at all times.

The Australasian Marine Pilots Institute (AMPI), the organising body for Australia`s marine pilots, says the grounding of the Shen Neng 1 should focus attention on the lack of protection Australia`s maritime regulations afford the reef. An Australian maritime law expert, Peter Glover, says public opinion and government legislative reaction to marine pollution by commercial shipping in the Great Barrier Reef have got noticeably tougher since 1996, when the Panamanian-flagged vessel Peacock, en route from Singapore to New Zealand via the inner route of the Great Barrier Reef, ran aground on Piper Reef. The ship was carrying approximately 605 tonnes of bunker heavy fuel oil, and its owners were not even prosecuted.

Following the grounding of the 22,000-tonne Malaysian-flagged container vessel Bunga Teratai Satu on Sudbury Reef in 2001, legislative changes were introduced to allow both state and Commonwealth authorities to prosecute those who pollute in the waters surrounding the reef.

Those changes were put to the test almost immediately in the wake of another potentially catastrophic grounding the following year, of the Greek-flagged bulk carrier Doric Chariot. But Peter Glover believes it still “remains to be seen %26hellip; how effective legislative changes are in addressing the prosecution of individuals responsible for causing damage” in the reef.

Inspecting the scene from the air, Australia`s prime minister, Kevin Rudd, expressed concern that the Shen Neng 1, balancing precariously in the crystal-clear waters, had strayed so far from official shipping lanes. “From where I see it, it is outrageous that any vessel could find itself 12 kilometres off-course, it seems, in the Great Barrier Reef,” Rudd told reporters in tropical Queensland, where the reef park is a major tourist draw. He pledged an overhaul of measures to protect the Great Barrier Reef from any future environmental disasters. “There is no greater natural asset for Australia than the Great Barrier Reef,” he said.

But maritime traffic through the Great Barrier Reef is projected only to increase, with contracts reportedly signed for the export of US$60 billion worth of liquefied natural gas from coal seams as shrinking resources spur energy companies to turn to unconventional gas reserves to feed Asian demand. Work is under way to expand the port of Gladstone in Queensland to lift capacity by up to 25 million tonnes a year, driven by surging demand from Japan, South Korea, India and China.

Local fishermen fear any increase in traffic will put Australia`s most precious environmental asset at further risk. “We see ships through there every day,” Graham Scott, who has been fishing and chartering boats on the reef for 40 years, told the Sydney Morning Herald. “We see many, many boats within 15 miles [24 kilometres] of that spot [where the Shen Neng 1 grounded]. One or two boats a day, every time we`re out. We`ve assumed in the past that they`re not coal boats, because what would a coal boat be doing there?”

www.guardian.co.uk/

Copyright Guardian News and Media Limited 2010

In terms of fundraising, the main Western environmental groups have kept pace with increasingly sophisticated marketing techniques. In terms of campaigning, however, we are stuck in a 1970s world of slogans, stunts, posters, placards and banners. There is little understanding of the audience`s frame of mind, and no really tangible communications objectives. The green movement in Europe has become effective only at talking to itself.

This may sound a little harsh. After all, there has been a steadily growing media interest in climate change. That`s true, but too easy a measure. Awareness of climate change isn`t the objective: people may know and still do nothing. So what should we do differently? I have three suggestions.

1. Don`t debate the science

Everybody knows that greens love getting into a good debate. It`s not surprising – there`s a powerful scientific, moral and commonsense case to be made for taking action. Unfortunately, those with a vested interest in doing nothing are too shrewd. In the United States especially, they have successfully entangled environmental change campaigners in detailed debates about the validity of the science.

It`s a simple strategy: the likes of Exxon throw money at some financially compliant scientists, who produce a report with the appearance of credibility and objectivity. The greens, of course, leap to an enthusiastic defense of their case – and the trap is sprung: the public tunes out (too boring), the media downgrade the story (too complex) and the politicians have the greatest excuse for doing nothing (let`s wait until the science is clear).

It`s entirely right to set out the case, of course – but the time has come to have confidence in the scientific consensus around climate change, and to stop debating the science. We urgently need to move the conversation from “is it really happening?” to “what do we do about it?”

2. Stop talking about the environment

Buried around page seven of your newspaper, you might find the occasional story about climate change, along the lines of “Global warming: bad news for polar bears”. Personally, I find this little short of infuriating: it`s counter-productive, yet this kind of story forms the bulk of green communications on climate change.

So what`s the problem? After all, people do care about the environment, don`t they? Indeed, there are plenty of surveys which report that as many as 92% of people care about the environment. Unfortunately, this means very little: ask anyone if they care about the environment, and they`re unlikely to say no. Environmentalists find it difficult to accept that most people simply don`t care about the environment as much as they do.

The problem is this: the steady stream of stories about polar bears and the like has a negative effect: it causes people to think of climate change as a purely environmental issue. Of course, it isn`t: climate change presents serious economic, political and health risks.

Communications around climate change should focus on non-environmental impacts. Let`s face it, there are plenty to choose from: widespread crop failures, outbreaks of disease, the threat of conflict over water, and the increased likelihood of tsunami-like disasters in places like Bangladesh, to name a few.

But here again we need to be careful. If the scale of the impacts we describe is too overwhelming, people will disengage: it seems too big, too uncontrollable, like the threat of sudden annihilation by a giant rogue asteroid. Also, if the impacts are too remote – distant famines, for example – people file it mentally under good causes.

Climate change is more than a “good cause”. If we want people to respond emotionally, practically and urgently to climate change, then we need to present impacts that are both tangible and relevant to their lives. In the UK, we might think of this as “the Daily Mail strategy”: link every story to readers` material wellbeing. So, we move from “climate change is bad news for polar bears” to “climate change may affect your house prices”.

Some may describe this as cynical. In advertising, we think of it as understanding your target audience. Of course, we would all like to believe in the better nature of our own species – but can we afford to rely on an appeal to people`s altruism? After all, we all know where charity begins.

The same logic applies to both consumers at large and the business community. We must move climate change out of the Corporate Social Responsibility box and into the CEO`s in-tray. We need to present this as a serious risk to business as usual: smart, responsible business leaders are taking climate change seriously, because they see it as a strategic issue, not a PR issue.

3. Set clear objectives

It`s sometimes quite tricky to work out exactly what the environmental movement wants to be done about climate change. For those interested to listen, there is a cacophony of messages about what should be done: families should downsize their cars; industry should become “carbon neutral”; kettles should be quarter-filled; investors should back sustainable energy; governments should sign Kyoto; everyone should buy halogen light-bulbs; businessmen should fly a little less – and when they fly, they should plant trees in penance.

It’s understandable, of course. The environmental movement consists of many different constituencies, each working hard to address their own particular areas of concern. Even within a single organisation, different campaign groups may communicate with the public on different issues at the same time.

Even if we are successful in presenting climate change as a real and urgent problem, we are failing to present clear solutions. Climate change campaigners are, of course, painfully aware that there are no easy answers. There’s no quick fix to climate change. However, if progress is to be made, we must be more strategic in the way we communicate solutions.

At the most straightforward level, this means we should always ask two simple questions each time we communicate with the public: who exactly are we communicating with, and what exactly do we want them to do? This may sound blindingly obvious – but there’s little evidence that these questions are being routinely asked.

Ultimately, however, something a little more radical is needed. The scale of climate change as a problem, and the complexity of its solutions, demands that the environmental movement speaks with one voice on this issue. At the very least, the high-profile campaign groups need a coordinated approach. We need to pick our battles with more care, uniting behind a coherent campaign strategy – with carefully chosen targets and clear communications objectives.

The management gurus will tell you that strategy is about deciding what not to do. Communications strategy is no different: for us, it may mean deciding not to talk to a mass audience about polar bears (or halogen bulbs, or half-filling the kettle) but to communicate instead on the solutions that will have highest impact – such as building pressure on the United States to get behind Kyoto.

If the environmental movement were able to speak with one clear, consistent voice, and to present clear, feasible solutions, then we may have a better chance of making some real progress. If our communications remain fragmented and with no clear strategic direction, then I fear we are fighting a losing battle.

Jon Miller is a planner at Ogilvy %26amp; Mather, currently working on Coca Cola in China.

The climate crisis results from a tragic misallocation of financial resources towards activities that fail to account for their environmental impacts. If we are to make the bridge to a secure climate future, then fresh thinking is urgently required on how to steer the world`s immense investment resources towards energy options that simultaneously deliver sustainability and decent returns for the world`s savers. The task ahead is daunting, but early signs are promising.

The total value of all the companies listed on the world`s stock markets now amounts to over twenty trillion US dollars ($20,000,000,000,000). To date, precious little of this store of financial wealth has taken account of the cost of carbon emitted from these companies` products and processes. And, looking ahead, business-as-usual projections from the International Energy Agency suggest that over $16 trillion will be invested in the world`s energy infrastructure up to 2030, mostly in fossil-fuel facilities, generating an additional 60% in greenhouse gas emissions. All indications suggest that this capital will be mobilised.

The multi-trillion dollar question is therefore how to mould those old financial drivers of “fear and greed” so that they work with the grain of a low carbon future rather than against.

This process has already started. The introduction of the European Union Emissions Trading Scheme on 1 January 2005 has transformed the way that financial markets value companies affected by the scheme. The scheme has created a new market in carbon dioxide allowances estimated at some Euro 35 billion (US$43bn) per year, potentially rising to over Euro 50 billion per year by the end of the decade. Investment banks now regularly factor in a cost of carbon into their valuation spreadsheets for affected sectors. For Chris Rowland, a leading City analyst, “it`s possibly the biggest change the European utilities industry has seen since the industrial revolution”.

The carbon caps might not have been as tight as many had hoped, but already the price for carbon dioxide allowances has risen from just Euro 7 in April 2004 to over Euro 28 in April 2006. This is equal to the UK government`s mid-point estimate of the actual damage done by a tonne of carbon dioxide of %26pound;19 (Euro 28).

It should be noted how easily financial markets absorbed this shift in costs. The sky hasn`t fallen in, and capital has started to move to those companies best positioned for a carbon-constrained future.

Climate change and the investment chain

Other parts of the investment chain have also taken action. The socially responsible investment (SRI) community has been at the vanguard of the shift. At my firm, Henderson Global Investors, we now see long-term growth opportunities in the companies providing solutions to climate change, whether in cleaner energy systems, efficiency enhancements or sustainable transport systems. In 2005 we also commissioned Trucost to carry out a pioneering carbon audit of one of our Sustainable and Responsible Investment (SRI) funds, which shows that incorporating sustainability factors into the selection of investments can yield real environmental benefits for investors.

More broadly, the Carbon Disclosure Project has mobilised 143 leading institutional investors to request improved disclosure on climate change from the world`s leading 500 companies. And at the recent Institutional Investor Summit on Climate Risk in New York, two dozen US and European institutional investors with over three trillion dollars of assets under management issued a ten point call to action. This urged pension funds, fund managers, companies, and financial regulators to intensify efforts to provide the analysis and disclosure needed to manage climate risks. The group also committed to deploy $1 billion towards business opportunities emerging from the drive to reduce emission.

These are all positive developments, but they will still be insufficient to tip the investment balance unless smarter policy frameworks are introduced. Even in the UK, where the government has developed a relatively sophisticated approach, the word “investor” is still strangely absent from its climate change programme. Certainly, making sure that the cost of carbon is reflected in commodity prices is a necessary step – and large funds, such as those backing the Institutional Investors Group on Climate Change now support the UK`s long-term carbon reduction target of 60% by 2050.

Markets and a climate-constrained world

But to be truly “joined up” from a financial perspective, policy should also address other parts of the investment chain. Financial regulation now lags behind economic realities. This means it is still possible for companies to list on the world`s leading stock markets without disclosing potential carbon costs and liabilities; this gap needs to be closed.

In addition, the duties of investors need to be brought into line with a carbon-constrained world. Managers of institutional investments – whether pension or mutual funds – are governed by the concept of fiduciary duty, ensuring that their decisions are prudently made in the best interests of the end-beneficiaries. This has commonly been interpreted as meaning the maximisation of short-term returns, without regard to wider social or environmental realities. The harsh facts of climate change – along with other sustainability threats – should prompt governments to modernise this interpretation. Inspiration can be sought by looking once again at the long-standing “prudent investor rule”, challenging trustees and managers to recast the ancient virtue of prudence in light of climatic realities.

Financial markets move on sentiment, and investors are now awakening to the deep risks associated with climate change and the potential opportunities in finding ways to respond effectively. By updating financial regulation and investor duties to take account of carbon, governments would not only make the achievement of climate goals more likely, but could also help secure stable investment returns at a time of a global pension crisis. The prize is clear, and it`s worth at least twenty trillion dollars.

Nick Robins is head of socially responsible investment research at Henderson Global Investors in the City of London.

All too often Western commentators have presented the environmental costs of China`s development as the final straw that will break the planet`s already burdened carrying capacity. Over the past year, however, a new theme has been emerging from the business and investment community, one that emphasizes the profound commercial opportunity that this crisis presents. As leading investment bank, CLSA, noted this May in a special report on sustainable energy, “if environmental legislation in Asia were a stock, it would be a raging Buy”. China lies at the heart of this burgeoning market for environmental goods and services, driven by the pressing need to respond to its twin %26lsquo;resource crunch` of getting access to sufficient quantities of clean energy and clean water.

Far-sighted investment analysts such as Stephen Roach at Morgan Stanley are seeing signs of a new %26lsquo;commodity lite` model of development in China, “in effect, retrofitting China`s commodity-guzzling production platform with more commodity-efficient technologies.” China`s 11th Five-Year Plan contains an explicit target of reducing the energy intensity of growth by 4% each year through to 2010 – a target that is eminently achievable by adopting good practice standards from across the globe. For example, a recent assessment from the World Bank and the UN Environment Programme concluded that China – along with Brazil and India – could reduce energy demand by a quarter.

Until recently, reports such as these would probably have gathered dust on bureaucrats` shelves. But the rapid rise in world energy costs, increasing import dependency for energy and the emergence of new carbon markets has generated real demand for clean energy options. Installed wind power grew by 65% in China last year, and is forecast to expand by an annualised rate of 44% by end-2010 (CLSA, Clean and Green, May 2006). Growth rates such as these are underpinned by falling costs of energy from wind generation and government incentives flowing from the new Renewable Energy law. The momentum is such that industry executives believe that China`s official target to increase wind capacity to 5 giga-watts (GW) by 2010 could be exceeded by as much as 100%. Leading international wind developers, such as Spain`s Acciona and Iberdrola, are now positioning themselves to take a slice of this attractive market.

Burgeoning oil prices are also providing an additional stimulus for an expansion in bio-fuel production. China is already the third largest bio-ethanol producer in the world, and has prioritised clean fuels as a priority for the %26lsquo;green` Olympics in 2008. One sign of the growing investment opportunities in this area was the listing of the China Biodiesel International group on London`s Alternative Investment Market (AIM) in June. Importantly, this company produces its fuel predominantly from waste, thereby avoiding some of the growing environmental concerns about the conservation and water consumption impacts of increased biofuel production.

On top of this, China has also become a centrepiece of the emerging global carbon market thanks to the UN`s Clean Development Mechanism (CDM). Through the CDM, international capital is being deployed to achieve reductions in carbon emissions in emerging markets which then count against the industrialised world`s domestic carbon targets. China is projected to account for more than 40% of expected emission reductions under the mechanism, thanks to its competitive business environment which means that carbon savings can be made at a fraction of the equivalent cost in the developed world. Projects that will cumulatively help to achieve this target include a landfill gas to electricity initiative in the southern city of Nanjing. In August 2006, the world`s largest CDM project worth over US$1 billion was agreed between the World Bank and two Chinese chemical companies. For James Cameron, founder of Climate Change Capital, a London-based carbon bank, “choosing to put money in China to reduce emissions is simply an efficient allocation of capital on a global scale.”

With an unprecedented drought affecting China this summer, the severity of the country`s water crisis cannot be underestimated. With less than a quarter of the world`s average per capita water availability, China currently squanders what it has, using five times as much water to produce each and every dollar of national income. Not surprisingly, water shortages are already reducing industrial output by an estimated US$ 25 billion each year, with a further US$ 19 billion lost in terms of agricultural production. But rising demand and declining supply – exacerbated by local pollution and global climate change – is prompting an unprecedented national investment programme, worth perhaps US$ 61 billion by 2010. Serving this market offers major opportunities for international engineering companies such as General Electric, which is deploying advanced membrane and desalination technologies as part of its ecomagination initiative. International investors are also showing increased interest both in China`s stock-market listed water utilities – such as Shanghai Municipal Raw Water, Guangdong Investment and Tianjin Capital – as well as technology providers, including Hyflux and Sinomem.

The scale of China`s %26lsquo;green` opportunity means that it is enticing %26lsquo;mainstream` as well as specialist SRI investors from across the globe. And in China itself, the Bank of China International Investment Managers (BOCIIM) launched its Sustainable Growth Equity Fund in May to tap into the potential. Much still needs to be done to ensure that China`s growth is compatible with sustainability. But the early signs of the commercial bonanza this represents are already with us.

The author: Nick Robins is head of sustainable and responsible investment (SRI) funds at Henderson Global Investors in London where he has a particular focus on the investment implications of climate change. Previously, Nick worked at the International Institute for Environment and Development (IEED), at the European Commission’s Environment Directorate in the run-up to the 1992 Earth Summit and as an adviser to a range of government bodies in the UK, as well as the OECD, UNEP and UNIDO.

Homepage photo by Doreamon

The Carbon Disclosure Project was launched six years ago, with the support of the British government, as an innovative device to encourage the world`s biggest companies to disclose their greenhouse gas emissions. In 2006, the project was undertaken for the fourth time. Over two hundred institutional investors, with assets of US$31.5 trillion under management, signed a single global request for disclosure of information on their greenhouse gas emissions to 2180 companies, including the FT500 largest companies in the world.

Sam Geall: Briefly, what are the goals of the Carbon Disclosure Project?

James Cameron: The Carbon Disclosure Project is a philanthropic initiative, to construct a dialogue between the institutionary investor community and large publicly listed corporations on the subject of climate change.

SG: You have now published the responses to the fourth Carbon Disclosure Project. How has the project developed since it first launched?

JC: It has developed rather remarkably. Year on year, a larger number of investor companies have signed the letter, a larger number of companies have received and responded to the letter, and there has been a significant increase in the amount of money that makes the request through the Carbon Disclosure Project letter.

The quality of the responses has also improved. So there is a quantitative and qualitative improvement year on year. Now we have 225 institutions asking in the order of 2000 companies what they understand by climate risk to their business and what they are doing about it. That constitutes US$31.5 trillion under management – a significant proportion of the global emissions of greenhouse gases. It really does matter. Some significant scale has been achieved in four years of the process.

SG: The project seems to have been very effective at raising awareness of companies` carbon emissions. How much do you see this translating into action by companies and investors?

JC: I think it would be immodest and unrealistic to expect four years of awareness-raising to translate into a significant shift in the way either investor company assets or corporate assets are directed. However, the gap between awareness and action has been highlighted this year. In every presentation event and every launch event that we`ve held, that issue has come up and has been a question in the audience`s mind, and the message has been received and understood on both sides of the dialogue.

I don`t want to exaggerate this, because the first steps have been very modest indeed, and they match modest steps that governments have made to alter the conditions for investment in ways that favour the reduction of greenhouse gases. But we do now have, at last, a carbon market. It`s in its infancy, but it`s real. It enables a price for carbon to be established and it enables investors to invest in that marketplace. Every single penny that they invest reduces greenhouse-gas emissions, which therefore reduces risk to them, across the whole of the portfolio.

Putting on my other hat [as vice chairman of] Climate Change Capital, having just raised in the order of a billion dollars for a specialist carbon fund (which has attracted investment out of those big institutional investors who are Carbon Disclosure Project-signatories) is very significant for the carbon market. But not compared to the amount of money that`s flowing in a direction which increases risk.

SG: What was the response to the Carbon Disclosure Project from Chinese companies?

JC: The response was mixed. For instance, Sun Hung Kai Properties, a Hong Kong-based real-estate management and development group, was one of the companies that failed to respond at all, despite the fact that 48.89% of the total common shares is held by the Carbon Disclosure Project 4 signatories. That is to say, virtually half of the stock of the company is owned by the people asking for the response, but they didn`t respond. You can`t make out any case that real-estate management and development is unaffected by climate change.

However, if we look at Asia as a whole, the responses are pretty good. But it`s in its early stages. There are 39 companies that were contacted in Asia – 11 made no response, 12 declined, three provided information and 13 answered the questionnaire. So, 16 out of 39 provided something useful, which is not nearly as high as Europe, for example.

SG: It seems important than Chinese companies join in the project further.

JC: It`s absolutely crucial that the global nature of the problem is reflected in the global nature of the response. We live in a global investment market, with China increasingly attracting investment from overseas, and indeed investing itself overseas, building businesses that cross out of domestic markets.

SG: How do you think Chinese companies can be encouraged to participate?

JC: I think it`s to do with establishing credibility among institutional investors that they are aware of contemporary issues that matter in the world at large. I don`t claim that if you`re investing in China and you`re looking for returns in the emerging market as it is, that climate change is the top of your list of important criteria. But these big institutional investors – who command a very substantial proportion of the total amount of assets in the world that are available for investment, including investment in China — have identified [climate change] as a key concern. China is increasingly associated with both the problem of climate change and the potential solutions to climate change.

So it makes absolute sense that the Chinese corporate world as well as the Chinese investment institutions act like everybody else and understand how to factor in climate risk to their businesses, learn how to mitigate the risk, learn how to invest and find opportunity – that they learn how to invest to avoid loss.

SG: How do you see the future of the project?

Addressing the challenge of stabilising greenhouse gas (GHG) stocks in the earth`s atmosphere, the Stern Review: The Economics of Climate Change argues that such stablisation cannot be achieved without global emissions-reduction action – and the earlier the action is taken, the easier it will be. However, undertaking stabilisation is a delicate and complicated process. The report notes that it is “difficult to secure emission cuts faster than about 1% per year, except in instances of [economic] recession. Even when countries have adopted significant emission-saving measures, national emissions often rose over the same period.”

“China embarked on a series of measures to reduce deforestation and increase reforestation from the 1980s, with the aim of restoring forests and the environmental benefits they entail,” Stern says. “Between 1990 and 2000, forested land increased by 18 million hectares, from 16% to 18% of total land area. Despite cuts in land use emissions of 29% per year between 1990 and 2000, total GHG emissions rose by 2.2% over the same period.”

Noting that “no single technology or process will deliver the emission reductions needed to keep climate change within the targeted limits,” the review acknowledges the attention being paid to the potential of carbon capture and storage (CCS). The CCS process involves removing and storing carbon emissions from the exhaust gases of power stations and other large emitters. CCS technologies are expected to play a crucial role in the future, and could reconcile the continued use of fossil fuels with the need for drastic reductions in emissions.

CCS could, if shown to be effective, help cut emissions from the numerous new coal-fired power stations that China plans for the coming decades — and in which power companies have been investing rapidly. Stern also noted that some countries can reduce emissions more cheaply than others – for example, where big capital investments are being made. “Countries such as India and China are expected to increase their capital infrastructure substantially over coming decades,” the report said, “with China along accounting for around 15% of total global energy investment. If they use low-emission technologies, emission savings can be %26lsquo;locked in` for the lifetime of the asset. It is much cheaper to build a new piece of capital equipment using low-emission technology than to retro-fit dirty capital stock.”

On structural change and competitiveness, Stern also found that “countries most reliant on energy-intensive goods and services may be hardest hit” by costs. “Primary energy consumption as a percent of GDP is generally three or four times higher in the developing world %26hellip; though in rapidly growing sectors and countries such as China and India, primary energy consumption per unit [of] output has fallen sharply as new efficient infrastructure is installed.”

Referring to the economics of emissions stabilisation, Stern noted the link between climate-change policies and energy policy. While the expansion of renewable-power sources can reduce the exposure of economies to fossil-fuel price fluctuations, as well as reducing import dependence, the report said, coal was a different matter.

Says Stern: “Coal is much more carbon intensive than other fossil fuels: coal combustion emits almost twice as much carbon dioxide per unit of energy as does the combustion of natural gas (the amount from crude oil combustion falls between coal and natural gas). Many major energy-using countries have abundant domestic coal supplies, and hence see coal as having an important role in enhancing energy security. China, in particular, is already the world`s largest coal producer; its consumption of coal is likely to double over the 20 years between 2000 and 2020.”

As well as using coal directly, China and other producing countries are investing in “coal-to-liquids technology, which would allow them to reduce their dependence on imported oil” and use domestic coal to meet some transport-fuel demands. However, the full lifecycle emissions of such road transport use have been estimated as almost double those from using crude oil. Extensive CCS deployment, the report emphasises, “can reconcile the use of coal with the emissions reductions necessary for stabilising greenhouse gases in the atmosphere.”

Stern also notes that climate-change policies can reduce local air pollution, with important health and quality-of-life benefits for developing countries. “[O]nly malnutrition, unsafe sex and lack of clean water and adequate sanitation are greater health threats than indoor air pollution” in such countries. In China, says Stern, a recent study showed that “for CO2 reductions up to 10-20%, air pollution and other benefits more than offset the costs of action.”

Reducing agricultural GHG emissions also could have health and local environmental benefits. “For example, in China, nitrous oxide emissions associated with overuse of fertiliser contributes to acid rain, severe eutrophication of the China Sea and damage to health through contamination of drinking water.”

In recommending the acceleration of low-carbon, high-efficiency technological innovation to tackle climate change, the report cited hydrogen for transport as an example. “Hydrogen could potentially offer complete diversification away from oil and provide very low-carbon transport,” it said, adding that “hydrogen would be best suited to road vehicles”. Indeed, Stern noted, China plans to use hydrogen buses at the 2008 Olympic Games in Beijing.

On the topic of innovation, the report also noted a down-side: Some markets, such as the highly energy-intensive cement industry in China and other developing countries, are made up of small, local businesses “which are less likely to undertake research [in energy efficiency] since their resources and potential rewards are smaller”. Still, the report makes clear, “Policies to support deployment [of new technologies] exist throughout the world %26hellip; China and India have both encouraged large-scale renewable deployment in recent years and now have respectively the largest and fifth-largest renewable energy capacity worldwide.”

Moving beyond carbon markets and technology, Stern notes that the planned eco-city of Dongtan, on Chongming island near Shanghai, “provides an important example of the potential for sustainable urban development across the rapidly urbanising transition and developing economies of the world”. The 86-square-kilometre community will feature highly energy-efficient buildings employing renewable energy sources as well as passive energy systems; recycling and composting of waste also are a factor.

Says the report: “Chinese policy-makers and planners have been impressive in scaling up best practice to help achieve their objective to reduce the ratio of energy demand to output by 20% over 5 years. In the case of Dongtan, a high-speed rail link to Shanghai is planned, while the city itself is being designed in a compact, inter-linked way, supported by mixed patterns of land use, and a network of pedestrian and cycle routes, in order to reduce the demand for private motorised transport (and associated infrastructure costs).”

Stern also cited China`s rapid expansion of appliance standards in the 1990s to include refrigerators, lamps, air conditioners and other items. “By 2010,” the report said, “energy savings are estimated to reach 33.5 TWh [terawatt hours, or one trillion watts], or about 9% of China`s residential electricity. This is equivalent to a CO2 emission reduction of 11.3 Mt [metric tons] CO2. A more recent study highlighted the potential for significant energy savings in the longer term from more stringent performance standards on three major residential end-uses: household refrigeration, air-conditioning and water heating.” China is also considering adoption of the International Energy Agency`s “1 Watt Initiative,” to reduce energy waste from appliances on standby power.

Much of what governments do in adapting to climate change “is what they should be doing anyway – that is, implementing good development practice,” the report says. Such adaptation is key to reducing developing countries` vulnerability and increasing their capacity to adapt. Rapid growth, as in China and India, Stern asserts, “will equip these countries with the economic resources to invest in appropriate policies and tools to better manage the effects of climate change.”

To that, Stern added a significant point: “In some circumstances, there may be additional costs, which the international community will have a role in helping to finance, bearing in mind the differences in income and historical responsibility for the bulk of past emissions.”

Improving disaster preparedness and management not only save lives, the report said, but also “promotes early and cost-effective adaptation to climate-change risks”. For example, China`s $3.15 billion spending on flood control from 1960 to 2000 is estimated to have averted some $12 billion in losses.

China is among the nations and regions that have adopted strong mandatory initiatives to reduce GHG emissions. Additionally, the country is involved in dialogue with other large energy consumers on international collective action through a number of forums, including the Gleneagles Dialogue and the Asia-Pacific Partnership. At home, Stern notes, China has adopted goals on climate change and clean energy. The country`s 11th Five Year Plan contains such objectives as a 20% reduction in energy intensity of GDP from 2005 to 2010; a 10% reduction in emission of air pollutants; and sourcing 15% of its energy from renewables within the next decade. At the same time, China plans to double its economic growth. A wide range of incentives support these policies, including using sales taxes to encourage purchase of cars with smaller engines. China also applies a lower rate of value-added tax to renewable energy technologies, and has adopted EU standards for vehicle exhaust emissions.

Stern also cited China`s growing role in promoting international technology cooperation, which “enables the sharing of risks, rewards and progress %26hellip; and enables co-ordination of priorities”. A number of Chinese companies, for example, export solar water heaters to other developing countries. Other international cooperation is reflected in agreements such as the Near-Zero Emissions Coal initiative, announced as part of the EU-China Partnership on Climate Change in 2005. That joint initiative — to develop a near-zero emissions coal plant in China — is expected to lead to the construction of a carbon capture and storage project.

Other collective international actions, the report says, can centre on land use, particularly regarding forests. “Rigorous enforcement of forest protection in one country without action to reduce demand for timber can displace logging to neighbouring countries,” Stern says. “Following floods associated with deforestation in the upper reaches of the Yangtze River, China banned the logging of natural forest in 1998 and has greatly increased its own forest cover. However, timber imports from the Russian Far East, southeast Asia and Africa have risen strongly since the ban has been enforced.”

China led the world in the largest annual net gain in forest area in 2000-2005, according to UN Food and Agriculture Organisation statistics. The country added forests, in area terms, at a rate equal to nearly half of global deforestation over the past five years.

Maryann Bird is a London-based journalist with a special interest in environmental and human-rights issues. A writer and editor, she was previously a staff member at Time magazine (Europe), The Independent, the International Herald Tribune and The New York Times.

Homepage photo by Ari Bronstein

China`s attitude to corporate environmental management has developed in three stages. From the foundation of the People’s Republic in 1949 to the start of the reform era in the late 1970s, the government regarded environmental pollution as a consequence of capitalism – something that socialism would simply not suffer from. The role of enterprises was to manufacture goods in accordance with government planning. There was no need for them to consider environmental issues, nor was there any conception of what corporate environmental management might be.

During the second phase, from the reform era up to the mid-1990s, the government realized the importance of dealing with industrial pollution and put many environmental laws and regulations in place – but their implementation was not strictly enforced. Businesses were unwilling to take the initiative, while the exploitation of loopholes was rife. Also, some local governments opted to tolerate pollution for the sake of maintaining income, and so failed to enforce environmental law. Business paid lip-service to environmental management, but it was not actually implemented.

During the third stage, from the mid-1990s to the present day, industrial pollution has reached a level where it cannot be left untreated and the government has taken a firmer attitude, using stoppages, closures, company mergers and changes in production to force enterprises to make real improvements in their environmental management. Finally, businesses are starting to face up to environmental management issues.

It seems that Chinese companies have only changed their environmental performance when they are forced by external pressures. In the past, this pressure came mostly from government, but the situation now is more complex. For instance, pressure may come from overseas purchasers and investors. If a company’s products or technologies do not meet specified environmental standards, buyers may refuse to purchase and investors can pull out. Chinese companies may have no option but to spend on improving their methods and keep the other party happy. Pressure may also come from civil society, including the media and NGOs. When people become better-off, they are no longer willing to tolerate dust storms or polluted waterways and will protest to the companies responsible. In some areas, locals have blockaded factories. Meanwhile, NGOs and the media have taken on a supervisory role, repeatedly exposing offending factories. These voices of society may not have binding force, but their influence cannot be underestimated.

In China, a company’s response to environmental concerns differs according to its size. Large firms are relatively responsive as their corporate image directly affects profits. This is mainly true for state-owned companies and the China-based subsidiaries and joint-ventures of multinationals. State-owned companies are closely associated with government, and at least have to take a stance in support of the government’s sustainable development strategy. Companies owned by multinationals need to consider the parent company’s global image, and so take environmental concerns into account at every stage for fear that a mistake could set off a chain reaction in the global media and markets.

But corporate image is of less value to small and medium enterprises (SMEs), and the majority of them do not pay adequate attention to external pressure about environmental concerns. Many of these are Hong Kong and Taiwan-invested SMEs and local firms in heavily-polluting low-tech industries such as fur, clothing, paper-making and metallurgy, which present a serious threat to China’s environment. Over the past decade, areas where these firms are concentrated – such as the Pearl River delta – have already suffered serious damage. These companies are unwilling to change, believing that environmental management will bring nothing but increased costs. This leads them to attempt to evade government regulations or purchasers’ requirements. It has also lead to some bizarre situations – water treatment plants are installed and never used except during government inspections, or companies wait till nightfall to discharge their waste.

This is not to say that every business owner is at fault. Apart from a few corrupt bosses, I`m sure most would like to run a safe, environmentally-friendly operation. The mistakes they make are due to a lack of knowledge about environmental management and what they can do beyond buying new equipment.

I once heard an electroplate manufacturer complain that to meet environmental standards, he had needed to build a new factory, equipped it with modern, imported machinery using overseas technology, and installed a water treatment plant. The cost of his products rose greatly and sales went down as a result. He was extremely discontented and put the blame squarely on environmental standards. But in fact he was harbouring two key misunderstandings about corporate environmental management.

Firstly, he mistakenly believed that becoming an environmentally-friendly company required nothing more than the purchase of new equipment. Corporate environmental management is not just an issue of equipment and technology – the most crucial factor is the management itself. The equipment can be bought, but the management needs to be learnt. Generally speaking, good environmental management combined with decent technology can cut operating costs by saving energy, materials and human capital.

Secondly, he failed to target a new group of customers to match his new circumstances. In producing environmentally-friendly products, his customers should not have been restricted to China. He should have looked to global markets to find customers willing to spend the extra. Perhaps on the other side of the world, companies were complaining that they could not find an environmentally-friendly electroplate supplier. Bringing together the needs of both buyer and seller could have covered the additional costs of production, and his products would have remained competitive.

If a company can change its attitude towards the environment, it will see wider markets and increased competitiveness, not increased costs – something too few Chinese businesspeople have realised. But the government must also bear some of the responsibility. In the process of dealing with industrial pollution, the government has treated it as a public good. As a result, people feel the government is ordering business to sacrifice its own interests in order to protect the public interest. The government uses crude measures, such as inspections, punishments, stoppages and closures, which may scare a company, but cannot persuade it to change. Companies will always look for ways to get around the government. It becomes a never-ending game of cat and mouse.

To turn the situation around we should change our old ideas about dealing with pollution – particularly end-of-pipe treatment – and make competitiveness a starting point. Environmental management should be part of the essence of corporate management itself. Many Chinese companies use a low level of technology, and management techniques are often coarse – there is great room for improvement. But with the correct guidance, these firms could be given a new lease of life, becoming both environmentally friendly and more competitive.

China already has some innovative prospects. For instance, a Sino-German environmental consulting project in Zhejiang now helps local firms adopt the environmental management tools used in German companies. Profits have improved, and so have the environment and the company`s organisational management. It is an example worth learning from.

Guo Peiyuan is a researcher and PhD candidate at Qinghua University, focusing on finance, sustainable development and corporate social responsibility. He is the co-founder of Syntao.

Also about sustainable business on chinadialogue: Green grows the opportunity

Homepage photo by Astrid B

When I speak to people in the mainstream financial sector who are not involved in triple bottom line investing (TBLI) they all tell me it is not relevant, too small, too niche or too unimportant. Investment, I am told by financial experts in the City of London, in New York, Tokyo, Frankfurt and Paris, should only look at financial returns. It should not be bothered by social and environmental added value issues, or so-called non-financial criteria.

But doing that not only hurts the returns, it also breaks the solemn oath of fiduciary responsibility.

Another common excuse the professional investors give me for not looking at TBLI is that “there is no demand”. That might or might not be true. But what I find so interesting is that despite all these excuses and obstacles, TBLI, or sustainable investment, just keeps on growing: no matter what is thrown in its path, it doesn’t stop. I think it is the killer app.

TBLI includes all form of investment that looks at social, environmental and financial returns. It covers public equity, private equity, bonds, real estate, carbon finance, microfinance, project finance and many others. If you look at all these fields, every single one of them is growing and some are growing by leaps and bounds as institutional investors at last engage with Socially Responsible Investment (SRI).

Cleantech is investment in technology that reduces waste, energy use, water, toxicity and material and achieves financial returns. In the United States, Cleantech private equity is more than10% of the venture capital market, excluding corporate commitments. Walmart has announced that it will invest US$500 million per year in solar power to reduce their own energy costs and CO2 emissions and, at the same time, they are demanding a 20% reduction in energy and CO2 emissions from their own operations and those of all their suppliers.

General Electric recently announced that it will invest US$2.5 billion in clean water and energy technologies. BP has committed US$8 billion for renewable energy. Draper, Fischer, Kleiner Perkins, Robeco, Rabo, ABN, and dozens of others are establishing institutional mandates for cleantech space. Why? Because the market is booming. They are not doing it for the sake of their reputations but because they see a clear opportunity.

The amazing growth in commodity and energy demands due to the growth in emerging markets is creating a vast opportunity for resource efficiency. This will only increase as pressure on energy and commodities reaches the limits of supply. The Equator Principles, internationally recognised, voluntary project finance guidelines for the banking industry that establish social and environmental standards for project finance, began by covering project finance worth over US$50 million, and require social and environmental impact assessments before a loan is approved. Within 20 months of the Equator Principles being launched in 2003, 85% of the market had signed on. Now the figure has been reduced to US$10 million, and more than 43 banks have committed to it. Are all the banks doing this just for the sake of their reputation? No. They saw that the investment was more appealing if the risk was reduced. In addition, they saw that their project finance departments could do this.

When you take into account the hindrances to the growth of TBLI`s growth over the last five to 10 years, the results are even more extraordinary. Very few business schools teach their MBAs anything about sustainable finance. I know, because I have been teaching one of the few courses that does. All the schools, that I approached to with the offer of the course declined.

Most universities have been teaching the same lessons on finance for the past 15 years. Few, if any, banks give incentives to their staff for TBLI performance or targets. The CEOs stay around only a pitifully short time, so they have no incentive to create long term projects which will benefit their successor. Added to that, the tax system externalises all cost onto society and provides no incentive for environmentally or socially beneficial activities.

Look at the airplane industry. If you buy a bicycle in the Netherlands, you pay 19% VAT. If you buy gasoline in most of Europe, it costs Euros 1.30 or more per litre. But if you buy an airplane ticket, you will pay no VAT and no excise tax and the kerosene your plane uses costs about Euro 0.35 to 0.40 per litre. This is not a level playing field or a market mechanism.

In theory we subsidise green energy but we do not tax fossil fuels for the true cost of their societal impact. (Has anyone kept track of the cost of the wars in middle east lately? Should that not be added to the cost of oil?) But asset management employees only know what they know and they are not expected to know anything else.

The media are no help either. Most of the press focuses on the least important bit of financial information: what did the DOW or the FTSE or the other stock markets do today? They occasionally offer a token bit of information on TBLI, if it can be squeezed into an advertising special. For most of the time, the press is busy processing press releases and going to annual general meetings, where none of the journalists ask any major industrial company why their carbon risk is not clearly stated. If they did ask, they would find that nobody had an answer, but they don`t know to ask. The press was created by the same system that produced the rest.

In the United States, the neo-cons have even mounted a campaign (NGOWatch) to discredit the Corporate Social Responsibility (CSR) movement and SRI.

Even the organisations that have a clear moral and ethical purpose – organisations such as the churches, grant-making foundations, NGOs, and trades unions – fail to invest and manage their own assets responsibly. Private banks keep their clients in ignorance about the opportunities that sustainable alternative investments offer because it is a new sector and the private banks tend to avoid anything new like the plague. They prefer the familiar opportunities – like Enron, Parmalat, Worldcom and so on. This barrier is high, thick and well guarded and TBLI was not intended to get through, but it did.

We have an ignorant profession, reinforced by an educational system that reproduces the same ignorance, an institutional sector that hides behind the fiduciary responsibility of maximising returns and does not look at all the risks, a government that reinforces harmful behavior and a society that is fed on financial news designed to entertain rather than inform. The wealth management sector advises its foundation clients to give away 5% in charity, but invests the principle assets in destructive industries. With hundreds of similar roadblocks, it is a miracle that TBLI has come so far.

Perhaps the force behind TBLI was so powerful, that nothing could stop it. In the last 10 years, it has felt like driving on a highway behind five trucks that were dropping barrels in our path. But the industry that feels that social and environmental issues are as important as financial concerns, in assuring the financial return, has endured, grown and prospered and is now poised now to become the “mainstream”. Why? Because it is the smart, professional way to manage money for the long term.

TBLI is the Killer App.

Robert Rubinstein is the Founder and CEO of Brooklyn Bridge-TBLI Group. The TBLI Group runs the Triple Bottom Line Investing Conference, which will be held in Bangkok May 24-25, 2007.

Robert Rubinstein %26copy;

If railways replaced horses and cars replaced trains, what will be the next evolutionary step after the car? Like its counterparts in north America and Asia, the European Union auto industry believes the answer is the car. Some manufacturers in Detroit still hope – against the odds – that their beloved, highly profitable sport utility vehicles will long roam the freeways as the vast, lumbering buffalo herds once did the Great Plains. But the evidence suggests that they, too, are doomed.

Technical fixes – of the sort currently being promoted – will not save the day. True, bringing hybrid technology to SUVs (as Ford did with its Escape) or fuel-cells (as General Motors and others plans to do, eventually) may improve things at the margins, for a while, but we seem to be on the verge of an intensifying series of wars over the future of mobility.

Some wars will continue to rage – over oil and other energy supplies as the global scramble for resources intensifies. But others will rage between economies, industries, value chains and corporations. Early skirmishing looks set to develop into set-piece battles as the race to develop fixes for our energy security and climate change challenges moves into top gear.

Europe`s car industry, for example, has just forced a climbdown by the European commission over proposed new emissions standards. With her colours snapping from her lance, German chancellor Angela Merkel rode out between the lines and declared that Brussels should not impose standards that would dent car-makers like BMW and DaimlerChrysler. Understandable, perhaps, but a decade from now these companies could turn out to have been industrial dinosaurs.

Meanwhile, confronted by the united legions of the car industry, EU environment commissioner Stavros Dimas appears to have done something of a U-turn, scaling back plans to slash car emissions linked to climate change. The original idea was that the car industry should adopt new technology that would meet a CO2 emission target of 120 grams per kilometre by 2012. Instead, Dimas is now hoping to compromise on a softer target of 130grams per kilometre. True, this would be lower than the 138 grams per kilometre target adopted by Japan for 2015, but none of this is likely to bypass accusations that the car industry has won a short-term battle at the expense of exposing Europe – and the world – to significantly greater risks from climate change.

A new coalition

All of which makes sense if you are BMW CEO Helmut Panke or DaimlerChrysler CEO Dieter Zetsche. But it is deeply worrying if you are familiar with the conclusions of the Stern Review on the Economics of Climate Change, or of the latest report of the Intergovernmental Panel on Climate Change, the first part of which was published on February 2, 2007.

One of Stern`s key conclusions is that the cost of inaction is likely to be dramatically greater than those associated with timely, effective action. If the costs of greenhouse-gas emissions are properly internalised, the market opportunities will likely run to hundreds of billions of dollars annually. No surprise, then, that some leading companies are beginning to break ranks – and even switch sides – as the evidence of climate stress builds.

An extraordinary new coalition of leading companies and NGOs, the Climate Action Partnership, has emerged in the United States. In a statement timed to break just ahead of President Bush`s 2007 state-of-the-union address and the IPCC report, it called for US regulation to limit greenhouse-gas emissions to deliver concentrations of carbon dioxide equivalent (the carbon dioxide equivalent of all greenhouse gases in the atmosphere) which will stabilise at 450-550 parts per million (ppm) of carbon dioxide equivalent. The current concentration of 430 ppm makes their sense of urgency understandable.

As the fight gets nastier, it was no surprise to see the US administration leaking the IPCC report – presumably to give climate sceptics time to get their defences in order. Indeed, with the Bush regime`s days numbered, climate specialists are increasingly outspoken about the ways in which it has suppressed, doctored or distorted research on climate change and its implications. But, however nasty the political end-game may become, end-game it is.

The IPCC`s predicted conclusion is that the scientific case for urgent action is hardening, suggesting that the auto and fuel industries will face a growing barrage of criticism and, more importantly, increasingly powerful regulatory and market drivers for fundamental change. The answer to at least some of tomorrow`s mobility needs could still be a car – but it may well be Chinese rather than European, a diesel-hybrid rather than petrol-powered, and owned by someone other than the driver.

There are also those who believe that one answer will be to develop new generations of electric car, like the TH!NK or the 0-60-mph-in-about-4-seconds Tesla Roadster; but for the moment the big push is towards biofuels.

It is no accident that President Bush visited DuPont the day after his state-of-the-union address, given that the chemical giant is partnering with BP to develop new generations of biofuel. And the European Union is now vigorously pushing new legislation to force oil companies to blend expensive biofuel into petrol supplies.

Unfortunately, a shift to growing fuels is not going to be any sort of magic wand. For one thing, biofuel production will compete for food crops. While the US department of agriculture has predicted that bioethanol distilleries will require 60 million tons of corn from the 2008 harvest, the Earth Policy Institute (EPI) estimates that distilleries will need 139 million tons – more than twice as much.

If the EPI estimate is at all close to the mark, the institute itself concludes: “the emerging competition between cars and people for grain will likely drive world grain prices to levels never seen before. The key questions are: How high will grain prices rise? When will the crunch come? And what will be the worldwide effect of rising food prices?”

Europeans probably won`t much like horizon-to-horizon crops of genetically modified fuel plants, while anyone who grows these crops will face an array of challenges linked to fertilisers, pesticides and water.

The false and the true

So here is our list of several fixes that are likely to be “true” fixes – and of some of those likely to be false fixes:

False (quick) fixes:

- Market fixes: be very careful of assuming that we can turn all climate issues into economic opportunity without triggering behavioural and lifestyle changes.

- Biofuels: yes, they have their place in any sensible fuels portfolio, but they will also trigger an array of economic, social and environmental concerns.

- Fertilising the oceans: some people want to seed the oceans with iron filings, to speed plankton growth and absorb more carbon. Makes sense at the test-tube level, but having destablised the atmosphere are we really happy to risk doing the same with the oceans?

- Give the planet an umbrella: if bioethanol is a boondoggle for corn growers, this one goes to the aerospace industry. The US government is calling for the IPCC to recognise the potential role of advanced technologies, including the positioning of giant solar shields in place to cut down the amount of incoming solar radiation.

True (longer term) fixes:

- Conservation: this must be the absolute number one priority. Simply changing the energy mix and attempting to find technical fixes to reducing carbon emissions must always be a second-best option.

- Regulation: voluntarism may help spur early experimentation by business, but the key will be regulation – and enforcement. This message is core to the US Climate Action Partnership agenda.

- Incentives: auto manufacturers need to be incentivised to redirect technological advance into improving fuel economy rather than performance. If congestion and other forms of road charging were widely adopted, our consumption of energy – and with it our CO2 emissions – would fall more dramatically and more quickly than chasing new technologies.

- Politics: the biggest challenge is a political challenge, requiring political will, leadership and action. We need to see more US Climate Action Partnerships, working for smarter, more effective incentives for change. If Stavros Dimas and the rest of our Cecil B DeMille cast of European commissioners can`t persuade us and move us along, maybe we need a new commission.

John Elkington is founder and chief entrepreneur at SustainAbility. He blogs here.

Geoff Lye is vice-chairman of SustainAbility, and a research fellow at Green College, Oxford.

Sky TV recently reported that the world’s largest container ship, the Emma Maersk, had arrived in south China`s Lianjiao, laden with 170,000 tonnes of rubbish. The local economy has relied on waste recycling for years. As a result, fumes can be seen pouring out of Lianjiao`s chimneys, its rivers are blackened, its soil is contaminated, its water is polluted and trash can be seen piled up like mountains. The story has ignited controversy in both the UK and China.

But this is not a new phenomenon. Western nations started exporting waste to developing countries as early as the 1960s and %26lsquo;70s, with disastrous consequences. In August 2006, a boat chartered by a Netherlands-based firm dumped hundreds of tonnes of toxic waste in the Ivory Coast, killing seven and hospitalising 24, with almost 40,000 people suffering to some degree.

The overwhelming opinion of online commentators is that this demonstrated how western countries adhere to double standards with regard to the environment. But waste dumping is not carried out by nations: it is carried out by corporations.

Exporting trash has allowed firms to earn money from governments in the developed world, cutting government costs and avoiding local regulations, while the exporters earn an additional income from selling the rubbish. At the same time, developing countries get a source of raw materials. China is the world’s second largest consumer of plastic; one tonne of synthetic resin costs 11,000 yuan (around US$1,420), but a tonne of imported plastic, discarded in the west, can be bought for as little as 4,000 yuan (around US$515). The work of sorting the waste is hard and dirty, but for many it is more lucrative than the alternative. “We`re poor, so we still have to,” explained one interviewee. “If we plant crops, we can only earn around 2,000 yuan (around US$260) every year. But this work pays much more quickly: as much as 800 yuan (around US$100) every month.”

When there is this kind of profit to be made, there will always be someone willing to risk others` health by importing trash, and many more who will endanger their own to sort it: it is simple economics.

Or is it? If the UK had weaker environmental laws, money could be made processing waste there, and nobody would export rubbish to China. Trash ends up in China because developed countries have more robust green laws, greater social supervision and more effective governments; high fees associated with waste processing and pollution emissions have made it uneconomical to process the trash locally.

But the low cost of waste processing and the large profits to be made in China make it a lucrative industry. Meanwhile, government oversight is weak and punishment is mainly in the form of fines that go directly to government rather than compensating the victims of pollution. As a result, companies and individuals involved can keep on polluting.

Globalisation benefits both developed and developing nations, but environmental laws and their enforcement are weaker in poorer countries. This gives richer nations a chance to export their waste and pollution. The economic and environmental differences are, in essence, the result of underdeveloped systems.

Globalisation increases the interaction between different systems, and exposes the gaps between them. In the same way that less-developed systems attract unregulated and risky investments, they also attract waste.

Governments, businesses and the international community should make a sustained effort to prevent the continuation and expansion of this serious problem.

International agreements that invoke the authority of a third party should be implemented. Sponsored by the United Nations or global environmental groups, such agreements would reduce the potential for harm to developing countries. The third party should also be able to help with the costs of environmental protection.

It is also important to control those factors that allow this unregulated trade. In this particular case, the UK government should bear responsibility for not implementing international agreements, take its rubbish back and discuss more effective systems for managing the international flow of solid waste with the Chinese government. Similarly, China should increase the cost of waste production and waste imports to reduce the price differentials: only this can get to the root of the problem. Otherwise, this issue will become intractable, and more problems will arise.

The Chinese government recognises the harm caused, and a law on solid waste is being rushed through the legislative process. Laws and regulations should be enough to improve the management of imported waste and reduce its environmental harm. But many have concerns about their effectiveness; waste processing and plastics are still highly lucrative industries, and the companies at the heart of the industry may just relocate.

The most basic and important measure is to build the public into the new systems. In the west, it is social pressure that blocks interest groups, keeps the government in line and pushes for strict environmental policies. Public movements inspired by environmental disasters in the 1960s and %26lsquo;70s led to a solid environmental protection system and a tradition of public oversight of the environment.

NGOs such as Greenpeace, the media, strict laws and responsible local governments must all play a part in helping China’s environment to ensure that situations like this do not continue to arise.

Tang Hao is a Guangzhou-based academic and commentator