Tuesday, March 31, 2009

The Road to Copenhagen (COP 15): Implications for Business

As business communities around the world are straining under the weight of this recession, in Bonn, UN Climate Change delegates continue to discuss possible frameworks for emissions reductions.

This is a pivotal year for climate change policy, in December, the UN Climate Change Conference in Copenhagen (COP 15) will convene and if they are successful they will forge a new international climate change treaty that will commit all signatory countries to broad reductions in domestic emissions. Ahead of COP 15, United Nations Framework Convention on Climate Change (UNFCCC) meetings are working out the details. See the Timetable for Action on Climate Change.

According to an article written by Ryan Schuchard, manager of environmental research and development at Business for Social Responsibility, this new climate policy will have a direct impact on how businesses operate, including raising the cost of energy, imposing new production process requirements, and changing competitive dynamics.

Understanding the issues associated with the new climate policy has important implications for businesses. Negotiators at the Copenhagen Conference will seek a global treaty for greenhouse (GHG) gas emissions, specifically solutions to the critical problem migrating sources of emissions to the places of least regulation (leakage). And under the notion of common but differentiated responsibilities, all countries will be held "responsible to protect the global climate, but taking into account their different historical contributions and relative capacity to act in requiring commitments."

A global treaty will shape domestic legislation which in turn has major implications for the business community. "[C]reating many layers of price and risk for companies that use, produce, or manage value chains that rely on carbon-intensive energy. Specifically, the treaty is expected to outline regulations and incentives related to not only reducing emissions, but adaptation, technology transfer, finance and international development, a global carbon market, and deforestation."

Although 183 countries have already indicated their willingness to support an updated version of the Kyoto protocol, for the first time the US is expected to participate under the guidance of President Obama.

Perhaps the most significant obstacle to American participation comes from China. American legislators will not ratify cap-and-trade legislation without guarantees that China will participate. "So far, however, China firmly opposes binding commitments, resists the need to act in advance of the U.S., and instead calls on developed countries like the U.S. to provide financial support and a transfer of technologies. Chinese leadership has taken this stance because it believes the country should be as unrestricted in industrializing as the U.S. was under the Industrial Revolution." Further complicating this debate, much of China’s emissions come from manufacturing goods headed to the West.

Business is sure to be affected as climate considerations are being factored into diverse policy arenas. From transportation to agricultural to national security, climate issues are an integral part of our wider economic and social dialogues.

According to an article entitled What Climate Change Policies Mean for Your Business, "policy is part of a general contract between business and society, and social groups may start to hold companies accountable via direct pressure. These actions, according to a recent Harvard paper (PDF), can range from events targeting single companies to strikes and riots deriving from social instability exacerbated by climate change.

The essence of climate policy is putting a price on carbon emissions, which means either regulation by taxes or cap-and-trade. However this also constitutes a regulatory risk as such a system would exposure business to the price of carbon.

Emissions targets can be achieved through direct regulation (a cap-and-trade system or a carbon tax) and various supporting policies. Supporting policies include standards like fuel efficiency. Standards define the requirements for end products and will eventually be applied to the production processes. Technology incentives, include "funding for R&D, the removal of barriers to enter new industries (particularly energy), and financial incentives such as tax credits to encourage companies to generate renewable energy on site."

Market mechanisms can also create positive incentives by taking advantage of the commodity aspect of carbon. The market can "promote activities being done at the lowest-cost locations where investments in activities that reduce carbon emissions are cheaper. With market mechanisms, companies can buy reductions when it is cheaper than “making” them."

The impact of these policies will differ depending on your industry and the country within which you operate. "These types of policies could also influence competitive dynamics. For example, incentives for renewables might lower entry barriers for ICT companies in the energy sector, while feed-in tariffs might enable consumer products companies to develop better cost positions over rivals. Also, with investor groups like the Carbon Disclosure Project demanding more information about companies’ self-appraisals of policy risk, those firms that are willing and able to disclose more have increasingly preferential access to capital."

Carbon taxes could also lead to "reduced availability of carbon-intensive inputs such as steel. Such a tax could also lower demand for products that create higher emissions during their use." Environmental leakage is another big issues, in addition to competition problems.

According to the Peterson Institute and World Resources Institute, the most vulnerable industries are those that have high energy intensity of production, low potential for efficiency improvement, little ability to switch to low-carbon energy sources, and high elasticity of demand. These include, in particular, energy utilities and heavy manufacturing sectors. [While] companies in industries that address adaptation problems, such as pharmaceuticals and biotechnology, stand to gain." Efficiency and renewable energy will be a lot more valuable especially for energy intensive industries.

In a recent interview, Ryan Schuchard predicted that "as the global market mechanisms form, we would expect probably some measures [border taxes or border tax adjustments]. He goes on to explain, "a border tax would be relevant if a country has a tax itself, as opposed to a cap-and-trade system, in which case, a border permit would be more likely. A border tax would probably be relevant for some of the heavy-emitting industries like aluminum, steel, maybe glass, paper products."

"[I]mports would likely be taxed or could be taxed if they were from a country that didn’t have adequate regulations by the view of the importing country... exports being taxed (by) the market that they would be exporting to. Specifically, you would see the most energy-intense or emissions-intense sectors getting likely caught there, and those would be things like aluminum, cement, steel, paper, glass, chemicals, iron -- these sorts of very intense industries. When countries like the U.S., Canada, China and other large countries have more serious taxes or caps on carbon, they would want to keep out or at least put constraints on imports. It’s both competitive and environmental reasons..."

"[N]o matter how you slice it, there’s increasingly pressure for the use and propagation of lower carbon fuel and energy. So being on the right side of that makes sense and that is true both in terms of the direct price on energy and carbon associated with the energy, as well as indirect effects, like how suppliers might be affected, about products that you’re selling. So in very many ways, indirectly and directly, there is increasingly a premium on using and propagating low carbon energy and fuels."

Despite the negative implications for some high energy intensity businesses, there are tremendous opportunities for low-carbon businesses. Many companies that generate renewable energy can expect to grow exponentially. Climate change legislation will drive efficiency innovation and provide opportunities for companies that can exploit novel technological applications.

Next: The Road To Copenhagen: Part 3, Positioning Your Business (Ahead of Legislation)

Monday, March 30, 2009

The Road to Copenhagen (COP 15): Timetable for Action on Climate Change

A host of climate negotiations are taking place ahead of the UN Climate Change Conference in Copenhagen scheduled for December (COP15). It is expected that ministers and officials from 192 countries will take part. In addition, there will be participants from a large number of organisations. The goal is to broker a deal replacing Kyoto which is due to expire in 2012.

Frameworks for climate change agreement are being discussed in UN sponsored climate conferences, forums and exchanges. Yesterday saw the commencement of the UN Climate Change Conference in Bonn, Germany. Earlier this year the Western Climate Policy Forum was held in Denver, Colorado, and earlier this month, the Research Congress on Climate Change was held in Copenhagen, Denmark concurrently with the Midwest Climate Policy Forum in Columbus, Ohio.

US involvement is crucial to success at COP 15 and although President Obama has many allies in the push for climate change legislation, others have made it known that they will oppose such legislation. Despite opposition, The House of Representatives climate bill is expected by May, a US Environmental Protection Agency (EPA) Greenhouse Gas Reporting Rule is due to be published by June. EPA is also expected to provide more guidance on the greenhouse gas reporting rule that the Clean Air Act outlines. An additional climate bill from the US Senate could also develop soon. Both the Senate and the House are working on various aspects of a climate bill.

The Senate's top environmental lawmaker suggested that a major component of climate change legislation could be introduced "in weeks, not months." "We are not sitting back and waiting for some magic moment," Barbara Boxer, a California Democrat who chairs the Senate Environment and Public Works Committee, told reporters. "We're ready to go. We may move in three weeks, we may move in six weeks, we could move in 10 weeks...but it will be before the end of this year," she said.

Despite Ms. Boxer's determination, there is equally determined resistance to things like cap-and-trade from some US legislators. Some insiders have suggested that resistance to cap-and-trade will delay a climate change deal by at least six months. Even if we do not not see a signed deal replacing Kyoto in 2009, American participation is crucial and it is imperative that we have agreement well before Kyoto expires in 2012.

Ed Markey, chairman of the US House energy and environment subcommittee said, “We know the G8 and the rest of the world is waiting for the United States to stop being the laggard and be the leader,” Mr Markey told CERA, a week-long energy conference that began on Monday. “There are potentially catastrophic consequences for the planet if we do not act.’’

Here is a summary of key climate change policy events scheduled to take place in 2009:
May 24-26: World Business Summit on Climate Change (Copenhagen, Denmark)
June 1-12: U.N. Climate Change Conference (Bonn, Germany)
July 8-10: G8 Summit (La Maddallena, Italy)
Monday 28 September to Friday 9 October 2009United Nations Conference Centre (UNCC) of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP),
Monday 2 November to Friday 6 November 2009Barcelona Convention Centre,
Dec. 3-6: Copenhagen Climate Exchange (Copenhagen, Denmark)
Dec. 7-18: U.N. Climate Change Conference (Copenhagen, Denmark)
Dec. 15-17: Copenhagen Climate Conference for Mayors (Copenhagen, Denmark)

Next: The Road to Copenhagen (COP 15): Part 2, Implications for Business / Part 3, Positioning Your Business

Sunday, March 29, 2009

Earth Hour Makes History

Yesterday we witnessed the largest demonstration of public concern about climate change in human history. On March 28, 2009, at 8:30 PM, time zone by time zone, lights went out all around the world. By the time it was over, close to 1 billion people, in 4,000 cities and towns, voted for action on climate change by switching off their lights. To see images of major cities and landmarks going dark click here.

This is much more than a symbolic gesture, 88 countries turned out their lights to send an urgent message about climate change. From office towers to the humblest of abodes, businesses, organizations, families and individuals all spoke with one voice. Even in Antarctica, New Zealand's team at Scott Base, switched off all unnecessary lighting, appliances and computers.

Earth Hour reduced demand for electricity across the globe, with some cities like Toronto, reporting a 10% decrease in demand between 8:30 PM and 9:30 PM. Perhaps most importantly, climate change negotiators and world leaders can be left with no doubt as to the public's support for urgent action on climate change.

The extraordinary success of Earth Hour 2009 constitutes a huge wave of public pressure that is sure to influence Climate Change meetings scheduled for Copenhagen (COP 15) later this year. If leaders can agree on frameworks for action in Copenhagen, March 28, 2009 may well be viewed as the turning point in our efforts to forge a Greener world.

Next: The Road to the Copenhagen (COP 15): Part 1, Timetable for Action on Climate Change / Part 2, Implications for Business / Part 3, Positioning your Business.

Saturday, March 28, 2009

Live Video of Earth Hour as it Ripples Around the World

Scheduled to commence at 8:30 PM local time, Earth Hour will begin its journey in Kiritimati, Christmas Islands, Kiribati and it will ripple through all the time zones of the earth culminating in Honolulu 24 hrs later. Globally, the goal is participation by one billion people. More than 2,700 cities, towns and municipalities in 83 countries are officially participating. In Canada more than 260 cities and municipalities have pledged support for Earth Hour. In the US, Nearly 200 cities, towns and villages have signed on.

According to Carter Roberts Chief executive of the World Wildlife Fund (WWF), which sponsors Earth Hour, "The message we want people to take away is that it is within our power to solve this problem. People can take positive constructive actions."

A national poll by Environics earlier this month found that 81 per cent of Canadians plan to turn off their lights for Earth Hour. A wide array of groups and organizations are showing their support for Earth Hour. The business community is joining with others around the world to begin the task of managing climate change. Craig Noordmans, senior associate with Communica Public Affairs, has been working with property management companies in downtown Vancouver to ensure their participation in Earth Hour as a way to help the planet and save money at the same time. “We want them to instill awareness of energy conservation into their tenants and clients...and to spread the word.”

Some business people are using this year’s Earth Hour to plan what they and their companies will do year-round for the planet. Others are sharing the message of climate change and making resolutions to reduce, reuse and recycle. (Use the assessment tools in the Green Link Library to assess your company's energy consumption, calculate the ways you can save energy and reduce GHG emissions.)

Earth Hour goes way beyond turning out the lights, or even raising awareness about climate change. Earth Hour is an opportunity to act and be part of an unprecedented collective call for action. The collective voice of a billion people all around the world is sure to send a powerful message to world leaders preparing for the Copenhagen Climate Change Conference in December.

Watch the lights go out on live video feeds from all around the globe (Note: All times are Eastern Daylight Time)

5:30AM Sydney Opera House
8:30AM Hong Kong
12:30PM Dubai
1:30PM Moscow
2:30PM Table Mountain in Cape Town
2:30PM Istanbul
3:30PM Eiffel Tower in Paris
3:30PM Copenhagen
3:30PM Brussels
4:30PM London
7:30PM Buenos Aires
8:30PM Toronto
9:30PM Chicago
11:30PM Vancouver
11:30PM Las Vegas
11:30PM Los Angeles

Wednesday, March 25, 2009

Support Earth Hour

At 8:30 pm on Saturday March 28, individual citizens, businesses and people from all corners of the world will turn off their lights for one hour - Earth Hour - and cast their vote for action on climate change. With the goal of 1 billion people switching off their lights, Earth Hour is a global call to action for every individual, every business and every community. A call to stand up and take control over the future of our planet, Earth Hour is about taking simple steps everyday that collectively reduce carbon emissions – from businesses turning off their lights when their offices are empty to households turning off appliances rather than leaving them on standby.

Earth Hour began in Sydney in 2007 as a one-city environmental campaign, in 2008, The Green Market joined individuals and community groups in 371 cities across 35 countries in a united call for action on climate change. This year the number of cities and towns signing up to switch off their lights has already exceeded the ambitious target of 1,000 set by Earth Hour organizers. 2,712 cities, towns and municipalities in 83 countries have already committed to VOTE EARTH for Earth Hour 2009.

Earth Hour is being hailed as the biggest ever global movement. The historic event will see millions of people gathered in parks, streets, town squares and homes around the world to witness the lights going out on iconic landmarks and city skylines, while taking in the atmosphere of some truly unique Earth Hour events. All around the world, arrangements are underway for a host of concerts and parties.

The list of cities confirming their participation in Earth Hour 2009 includes 37 national capitals and some of the great cities of the world, including London, Beijing, Rome, Moscow, Los Angeles, Rio de Janeiro, Hong Kong, Dubai, Singapore, Athens, Buenos Aires, Toronto, Sydney, Mexico City, Istanbul, Copenhagen, Manila, Las Vegas, Brussels, Cape Town and Helsinki. Along with the great metropolises of the world, Earth Hour 2009 will also see the lights go out on some of the most recognized landmarks on the planet, including Christ the Redeemer in Rio de Janeiro, the Great Pyramids of Giza, Table Mountain in Cape Town, Merlion in Singapore, Sydney Opera House, CN Tower in Toronto, Millennium Stadium in Cardiff and the world's tallest constructed building Taipei 101.

Earth Hour Executive Director, Andy Ridley, says “Earth Hour is an opportunity for the global community to speak in one voice on the issue of climate change, while at the same time coming together in celebration of the one thing every single person on the planet has in common – the planet,” he said. “Whether it’s joining your community in a town square to watch the city lights go dark or hosting a lights out party in your own home, I encourage everybody across the world to be a part of this historic occasion. Turn off your lights, celebrate the planet, enjoy the moment and cast your vote for Earth,” said Mr Ridley.

This is a critical year for action on climate change, with the world's leaders due to meet at the UN Climate Change Conference in Copenhagen in December to sign a new deal to supersede the Kyoto Protocol. Mr Ridley, said that Earth Hour signals the beginning of the journey to Copenhagen, where the future of the planet rests with world leaders. “People will be telling their representatives to seal a deal in Copenhagen. A deal at the climate change talks that will protect people and the planet. We need an ambitious agreement. An agreement that is fair and effective. An agreement based on sound science.” One billion people voting with their light switch during Earth Hour will create a powerful mandate for our leaders to take strong and decisive action on climate change in Copenhagen.

Earth Hour is bringing together the diverse peoples from all walks of life in a global call for serious and sustained action on climate change. The Scouts, the world's largest youth movement with more than 28 million members in 160 countries, lead thousands of community groups around the world mobilizing their supporters for Earth Hour. In the US the National Education Association, representing 3.2 million teachers and education professionals, has also pledged its support for Earth Hour, as has the 1.4 million-strong American Federation of Teachers. Other community groups involved include the Church of Sweden.

UN Secretary-General Ban Ki-moon urged citizens around the world to join WWF's Earth Hour to demand action on climate change. In a video-taped address, the Secretary-General said that Earth Hour promises to be “the largest demonstration of public concern about climate change ever attempted...Earth Hour is a way for the citizens of the world to send a clear message. They want action on climate change.” said Secretary-General Ban. Secretary-General Ban went on to underline the seriousness of climate change and the scale of the task ahead. “We are on a dangerous path. Our planet is warming. We must change our ways,” he said. “We need green growth that benefits all communities. We need sustainable energy for a more climate-friendly, prosperous world. This is the path of the future. We must walk it together.”

Ban said that the United Nations would be doing its bit for Earth Hour. “In New York, we will switch out the lights at UN Headquarters. Other UN facilities around the world will also take part.” And he concluded: “I urge citizens everywhere to join us. Please send a strong message on climate change. Together we can find a solution to this most serious of global challenges.”

The Earth Hour campaign has a strong online presence: every seven seconds a new mention about Earth Hour appears on the web; Earth Hour social profiles have over 230,000 friends and followers with a new connection every 20 seconds; and an Earth Hour video is viewed every 20 seconds online."The global online community can be the catalyst to Earth Hour 2009 reaching one billion people and delivering on its goal of compelling world leaders to really tackle climate change," Mr Ridley said

The support of the business community has also extended Earth Hour's reach contributing to the greatest voluntary action the world has ever witnessed. As the campaign continues to gather pace, some of the world’s best known brands are leading the call for action from the business community. “The business community has an incredible ability and responsibility to engage employees, customers and suppliers to create a sustainable future for our planet,” Mr Ridley said.

HSBC is supporting Earth Hour by pledging to turn off lights in offices in 33 countries around the globe. Swedish furniture giant IKEA is running Earth Hour awareness campaigns in its stores, not only in its home country but as far away as China. Global leader in commercial real estate services, CB Richard Ellis, is encouraging lights-out participation in the more than 2.0 billion square feet of buildings it manages in more than 50 countries. Leading professional services firm, Pricewaterhouse Coopers, is providing consultants across Asia Pacific and other territories. Boutique companies are getting involved in creative ways, such as luxury travel business Abercrombie & Kent, which will be ensuring Earth Hour is celebrated in some of the most remote parts of Africa, including on wildlife reserves and on the Nile.

Turning your lights off for an hour is a great start, show your support by registering here. However, there are many other things you can do to make Earth Hour 2009 a success. Share Earth Hour with everybody you know, encourage them to sign up and email them a link to this website. Explain how climate change is affecting your family, your community or your business. Share your story about how you're becoming part of the solution. Run your own Earth Hour, download the quick guide for how to run Earth Hour in your city or town.

Earth Hour is also urging bloggers, podcasters, online video makers, mobile users and online social networkers to spread the word. Download the Blogger Tool Kit: Create a blog post about the importance of global action on climate change and how participation in Earth Hour can make a difference. Write a live blog post during the event tag it earthhour or voteearth. Visit http://12seconds.tv/earthhour to record a video for The Earth Hour Challenge or make a video of your event and add it to our YouTube group. Take a photo on the night and add it to Earth Hour’s flickr group.

Social media has proved it can be a powerful force for driving change, almost a month ago organizers began calling on the social media community to help this year’s Earth Hour campaign to reach out to one billion people around the world. People are joining social media profiles, (Facebook, YouTube, MySpace, flickr and Twitter). Update your Twitter status on the night and tag it #earthhour or #voteearth.

Get latest news, sign up your support and spread the Vote Earth message from your mobile. Simply use your phone to log on http://m.earthhour.org/. On your PC, download the files and install the launcher using your BlackBerry Desktop Manager. For BlackBerry support, please click here. Tell the world: Signup to GiverSign and make your e-mails, blog posts, Facebook feeds and MySpace pages advocate the Earth Hour message. Let everyone know that you signed up to participate and that they should as well!

To find out more about Earth Hour, visit the official website. To view the Earth Hour Global Schedule click here. Click here for a list of downloads including information and extensive support materials for businesses.

Earth hour is an opportunity to share support for the environment by being part of a global call for serious and sustained action on climate change. WWF Director General, Mr James Leape, said he is optimistic about the campaign's potential to drive key decision making by sending an unprecedented global mandate for action on climate change. With the combined support of businesses, cities and community groups one billion people are expected to participate making Earth Hour 2009 one of the greatest community events the world has ever witnessed. Be a part of history, be part of Earth Hour 2009.

Monday, March 23, 2009

The Future is Green

According to Trendwatching.com's recent Trend Briefing, despite the recession the future has never looked Greener. Trendwatching.com is an independent and opinionated trend firm that scans the globe for the most promising consumer trends, insights and related hands-on business ideas. They rely on a network of 8,000+ spotters in more than 100 countries worldwide. Their trend findings help marketers, CEOs, researchers, and anyone else interested in the future of business and consumerism.

According to the March edition of the Trend Briefing, although "financial woes may hold back some green initiatives, the future has never looked greener. Mainly because creating a more sustainable economy is not an option, but a necessity. And we all know that necessity is the mother of invention. Which is why this month, amidst crumbling banks, G20 meetings and stimulus plans, we highlight 12 eco sub-trends that any marketer or entrepreneur can act on today.

No, there won't be eco-fatigue in 2009, mainly because it's hard to ignore the mind-boggling fortunes (and accompanying power shifts and reductions in pollution) that are in store for those who figure out how to get the world off its addiction to polluting power sources and wasteful consumption.

So while banks are crumbling and multinationals are laying off people faster than you can say ‘downturn', every key player—from the Obama administration (find a short overview of its ambitious eco-goals here) to the Chinese government—plans to dominate the post-recession economy by going sustainable, including a heavy dose of rules and regulations. But it’s not all macro-economic-geo-political-powerplay. Recession or not, consumers will continue to demand responsible behavior from brands. Just one statistic: “Four out of five people say they are still buying green products and services today--which sometimes cost more--even in the midst of a US recession.” (source: Reuters).

Rest assured that the quest for an ECO-BOUNTY will continue at full force: ECO-BOUNTY refers to the numerous opportunities, both short and long term, for brands that participate in the epic quest for a sustainable society. Some of these opportunities exist despite the current recession, others are fueled by it, not in the least because of new rules and regulations. Downturn-obsessed brands who lose their eco-focus will find themselves left out in the cold when the global economy starts recovering.

So it's no wonder that we’ll continue to see a stream of eco sub-trends. Like the dozen or so relatively fresh ones you’ll find in this briefing, which are begging to be sustainably and profitably applied by smart entrepreneurs and marketers. Some of them are focused on the long-term (since when is a recession an excuse to not look beyond tomorrow...?), while others will help you come up with quick-fix, low-cost green innovations fit for recession-ridden times.**"


** Now, let there be no doubt that because of the downturn (and lower oil prices), we will of course see many green startups go bust in the next 6 months—especially those with high upfront investments and zero short-term revenues . And yes, some cash-strapped consumers will (temporarily) shun premium-priced green products and services.

Key Messages from Climate Congress Scientists

On March 13, over 2,500 scientists at the Climate Congress issued a summary of the conference's findings in the form of six key messages for the Intergovernmental Panel on Climate Change. These messages are intended for participants in December 2009 meeting of world leaders in Copenhagen. As reported in a BusinessGreen report, here are the key messages:

1. Recent observations confirm that, given high rates of observed emissions, the worst-case IPCC scenario trajectories (or even worse) are being realised. For many key parameters, the climate system is already moving beyond the patterns of natural variability within which our society and economy have developed and thrived. These parameters include global mean surface temperature, sea-level rise, ocean and ice sheet dynamics, ocean acidification, and extreme climatic events. There is a significant risk that many of the trends will accelerate, leading to an increasing risk of abrupt or irreversible climatic shifts.

2. The research community is providing much more information to support discussions on "dangerous climate change". Recent observations show that societies are highly vulnerable to even modest levels of climate change, with poor nations and communities particularly at risk. Temperature rises above 2 degrees Centigrade will be very difficult for contemporary societies to cope with, and will increase the level of climate disruption through the rest of the century.

3. Rapid, sustained, and effective mitigation based on coordinated global and regional action is required to avoid "dangerous climate change" regardless of how it is defined. Weaker targets for 2020 increase the risk of crossing tipping points and make the task of meeting 2050 targets more difficult. Delay in initiating effective mitigation actions increases significantly the long-term social and economic costs of both adaptation and mitigation.

4. Climate change is having, and will have, strongly differential effects on people within and between countries and regions, on this generation and future generations, and on human societies and the natural world. An effective, well-funded adaptation safety net is required for those people least capable of coping with climate change impacts, and a common but differentiated mitigation strategy is needed to protect the poor and most vulnerable.

5. There is no excuse for inaction. We already have many tools and approaches - economic, technological, behavioural, management - to deal effectively with the climate change challenge. But they must be vigorously and widely implemented to achieve the societal transformation required to decarbonise economies. A wide range of benefits will flow from a concerted effort to alter our energy economy now, including sustainable energy job growth, reductions in the health and economic costs of climate change, and the restoration of ecosystems and revitalisation of ecosystem services.

6. To achieve the societal transformation required to meet the climate change challenge, we must overcome a number of significant constraints and seize critical opportunities. These include reducing inertia in social and economic systems; building on a growing public desire for governments to act on climate change; removing implicit and explicit subsidies; reducing the influence of vested interests that increase emissions and reduce resilience; enabling the shifts from ineffective governance and weak institutions to innovative leadership in government, the private sector and civil society; and engaging society in the transition to norms and practices that foster sustainability.

Friday, March 20, 2009

Quebec's Green Budget

Quebec's Minister of Finance and the Minister responsible for Infrastructure, Monique Jérôme-Forget announced a plan to tackle the recession and prepare for an economic recovery emphasizing Quebec's reliance on clean and renewable energies.

According to yesterday's Press Release from Catherine Poulin, Press Officer for the Office of the Minister,“The government wants to bank on our strengths Québec has enormous potential. Our economy is diversified. We are leaders in several cutting-edge industries. We have clean and renewable energies that are the envy of our neighbours. We have a labour force whose skills are recognized worldwide,” declared the Minister.

The 2009-2010 Budget has a plan to make Québec a world leader in clean and renewable energy. It includes "measures to affirm Québec’s place as a world leader in the environment and green technology. It also provides substantial funding to develop and market Quebecers’ know-how in the new industries of the future."

"The government is mandating Hydro-Québec to carry out projects that will produce another 3 500 megawatts of electricity, of which 700 megawatts will be reserved for the development of other renewable energy sources, in particular wind power. The projects recently implemented or scheduled for implementation in the short and medium terms raise our targeted energy development to 14 000 megawatts of hydroelectricity and other forms of renewable energy by 2035. Implementation of the Northern Plan is a major project for the future of Québec, a project for a generation that consists in developing northern Québec in partnership with the First Nations, the Inuit and all local communities inhabiting this vast territory."

“With this budget, we are taking the first steps toward giving life to this vision for the future...we are stepping up our efforts to reduce greenhouse gas emissions. We are involved in the development of new green technology sectors,” affirmed Minister Jérôme-Forget.

Among other things, she announced:

- $500-million capital expenditure program for the installation of bioenergyproduction equipment

- Creation of a research and development program for new energy technologies

- Adoption of tougher energy efficiency standards for the construction and renovation of public buildings.

- Acceleration of the $204-million plan to modernize management of public dams.

- A refundable tax credit for the purchase or lease of new green vehicles.

As explained in the press release, "Québec relies on research and innovation to set itself apart from other economies and thus ensure its prosperity. New companies that commercialize intellectual property will benefit from a 10-year tax holiday. Quebecers want their government to look beyond the current situation to prepare Québec for recovery. This budget includes an ambitious plan to position Québec as a technology, energy and environmental power,” the Finance Minister concluded. Quebec also intends to stimulate the sluggish market for recycled materials by mandating that companies use more recycled materials.

Quebec's emphasis on clean and renewable energy and incentives for innovation will make Quebec one of the leading Green provinces in Canada. Unfortunately not all Canadian provinces are as eco-friendly as Quebec. Saskatchewan released its budget the same day as Quebec, but they appear to be following the federal Conservatives and do not offer much in terms of ecology or sustainability.

Quebec's budget may not be entirely Green but even initiatives with less than desirable environmental impacts (like hydrocarbon development in northern Quebec) will be managed in a 'responsible and respectful' manner, according to the minister.

Wednesday, March 18, 2009

Solar is Under-Performing Markets at Pivotal Rally Points

The last week saw the best stock market rally of 2009, and the best week since November of last year. These results are leading optimists to suggest we may be seeing early indications of recovery, but as The Green Market indicated prior to last week's rally, solar remains volatile despite the strong performance of the wider markets.

Markets are being buoyed by positive housing and banking news. Yesterday (March 17, 2009) investors restarted Wall Street's rally, buying financial and homebuilder stocks following a favorable report on home construction and better-than-expected readings on retail sales.

Solar was up last week providing wide ranging returns, (SPWRA increased 4 percent while ESLR increased 38 percent). Yesterday the Dow Jones industrial average added nearly 180 points and the Standard & Poor's 500 index rose 24.21, or 3.21 percent, to 778.10, while the Nasdaq composite index rose 58.09, or 4.14 percent, to 1,462.11. The Russell 2000 index of smaller companies rose 8.73, or 2.3 percent, to 395.09. Overseas, Britain's FTSE 100, France's CAC-40 and Japan's Nikkei stock average all rose with the German DAX index recording a slight decline of 0.7 percent.

Despite the sunny performance of the wider market, solar is under-performing the major indices at pivotal rally points. Yesterday (Tuesday March 17, 2009) the Dow, S&P and Nasdaq were up approximately 3% yet SPWRA was down 10% and industry leader FSLR was down over 7%. The strongest players in American solar (FSLR, SunPower and SunTech) declined more than 6 percent while wind stock and the three major market indicators rose more than 2 percent.

As reported in The Green Market, on the second day of last week's rally (March 11), all three of the major indices were up including the Dow (which reported gains of over 600 points for the week) and solar's renewable sister stock, wind power also posted gains, yet The Green Market's solar stocks declined.

We may be seeing the initial signs of recovery in the housing market and like the credit market this is an important part of the road to recovery. The momentum in the stock market is a great sign because it means investors are holding on to gains rather than taking quick profits.

However solar's short term future may not be as bright as some had hoped. Twice in the course of this momentus rally solar stock plunged as markets surged. Increased oil prices may help to buoy the solar industry, but even if OPEC members decide to reduce oil production at their meeting this weekend, tight credit remains a problem that may hurt solar demand over the next 2 quarters.

Tuesday, March 17, 2009

Green Stimulus and Free Markets

Green stimulus spending accelerates the proliferation of Green, buoys the economy, makes industry more competitive and lays a foundation that will benefit future generations. Free market purists disagree and refute the notion of an economic stimulus altogether, although they concede that spending stimulates the economy, they point out that demand-driven consumer spending is the engine that grows economies, not government spending for future needs. In its simplist essence supporters of the free market are concerned that government is making decisions about capital allotment that are better made by the free market.

An article entitled 'The Abracadabra Stimulus Plan' by Anthony B. Bradley reflects the fears of free market advocates. Bradley says, "economic crises arouse an emotional panic that tempts us to believe that centrally planning the economy is the medicine for economic recovery and the best safeguard against future volatility." He questions the wisdom of government spending and oversight and indicates that government cannot "save the economy by controlling the decisions of the millions of human beings who participate in it every day."

Bradley mirrors concerns about the stimulus' unproven programs and massive cost. "[A]s long as consumers feel insecure about their futures the economy will remain sluggish" Bradely says. "Arrogance leads politicians to think that they can fix the economy by waving the wand of government spending. But magic economic spells do not work."

Free market advocates subscribe to the view that when the forces of supply and demand are left to interact freely, a price level that enables the most efficient allocation and use of scarce resources will be determined and the welfare of society will be maximized. The problem is that in practice this theoretical view does not always prevail and to the extent that the welfare of society is not maximized, government involvement is required.

In his article, Bradley quotes 'Principles of Economics' a 1911 book by Harvard economist and past president of the American Economic Association, Frank Taussig: “We must accept the consumer as the final judge." However, during periods of great volatility Keynesian economics suggests that governments should play a more activist role. "In 1936, John Maynard Keynes published The General Theory of Employment, Interest and Money suggesting that the classic model that Taussig supported was a special case and applied only in times of full employment...Keynes advised governments to increase money supply to overcome depression, a recommendation that influenced the New Deal and one that echoes in Obama’s recovery plan."

The Cowles Commission for Research in Economics (1932) was assembled in response to the Great Depression, it related economic theory to mathematics and statistics. Mathematical models are now used to predict future preferences.

As evidenced by the work of Keynes and Cowles and rendered in the modern context by Bernanke, free markets are not sacrosanct. Free markets are indispensable due to their efficiency allocating and using resources, but free markets are not perfect and sometimes require government involvement to enable them to function more effectively.

Monday, March 16, 2009

A Secret Plan to Save the Earth

As many are enduring economic hardships, news of multi-million dollar bonuses for corporate 'fat-cats' and scandals from white collar criminals make it easy to revile the super-rich. To add insult to injury, the lifestyles of the extravagantly wealthy often come with a massive carbon footprint.

However, Edward Hume's new book 'Eco-Barons' reviewed in a recent Times article, offers a rarely publicized take on wealth. According to this book there is a surprisingly large number of opulently rich people who are using their position as a platform to advance their environmental convictions.

Humes' eco-barons use their vast wealth to help protect the earth's environment. "In an era in which government has been either broke, indifferent or actively hostile to environmental causes," writes Humes, "a band of visionaries ... are using their wealth, their energy, their celebrity and their knowledge of law and science to persuade, and sometimes force, the United States and the world to take a new direction."

Humes' book profiles a wide range of eco-barons, from businessmen to inventors, all of whom share a "clear view of the insanity attached to the way we live." Doug Tompkins, who founded the clothing line Esprit, began buying acres of threatened virgin forest in Chile. "He's preserved more rain forest than anyone else on Earth," says Humes. Tompkins and his wife Kristine DeWitt, the former CEO of the ultragreen clothing company Patagonia, now own 2 million acres of Patagonian wilderness in Chile and Argentina called Pumalin Park, which they plan to give to the Chilean people.

Andy Frank, who created the plug-in hybrid car, is yet another example of the many wealthy eco-activists Humes reviews. Humes makes the point that as the Bush administration abdicated their environmental responsibilities, the eco-barons stepped in. "We'd be years behind where we are now without these individuals," says Humes.

Thankfully environmental philanthropists are now joined by a more responsible administration in Washington. Humes' collection of eco-barons illustrate how private interests can effectively compliment government and serve the environment.

Sunday, March 15, 2009

Obama Will Stimulate Credit Markets

Credit is key to recovery, and tomorrow President Obama will act to restore credit markets for the business community. As the global economic leader, the Obama administration wants to see America at the forefront of the clean-tech revolution, yet the growth in the solar and other Green sectors cannot occur without credit. Unfortunately credit remains scarce despite the billions of dollars poured into the American banking system.

Tomorrow (Monday, March 16) Obama is expected to announce a plan designed to reinvigorate the small business credit market. It includes $730 million from the original stimulus that will immediately reduce small-business lending fees and increase the government guarantee on some Small Business Administration (SBA) loans to 90 percent.

To restore the frozen secondary credit market the government package will inject more than $10 billion and buy between $10 billion to $20 billion in SBA loans. They will also reduce the costs associated with borrowing by temporarily eliminating some of the upfront fees and processing charges on certain SBA loans. It also increases the government guarantees on certain loans to 90 percent, up from 85 percent for loans below $150,000 and 75 percent for larger loans.

The Obama administration understands that credit is the life blood of free markets. Facilitating access to credit will not only energize the Greening of America, it will restore confidence and provide the capital required to spark innovation and drive the renewed growth needed for recovery.

Friday, March 13, 2009

China-US Cooperation: The Way to Recovery

The environmental impact of China's prodigious growth often obscures the Chinese government's comprehensive efforts to manage the economy and the environment. China is a leading proponent of close cooperation and Green stimulus spending, the very things needed to manage the global economy and slow our assault on the world's environment. The coordinated government response advocated by China has already yielded dividends according to some early indications of recovery. To underscore the point, world stocks jumped today on stimulus news from China/Japan and the US rally.

During an address to the American business community yesterday President Obama reaffirmed his ambitious plans to address global warming through increased alternative energy supplies while imposing a market-based cap on pollution. Yesterday as President Obama addressed the American business community and reaffirmed his support of free enterprise, Chinese Foreign Minister Yang Jiechi was delivering a speech entitled "Broaden China-U.S. Cooperation in the 21st Century," here are some excerpts of that speech:

"Let me say that the [US and China] share the view that the upcoming meeting between our two presidents in London is of great significance for China-U.S. relations in the new era. Both sides are committed to pushing forward this vitally important relationship between our two countries. The tremendous progress of China-U.S. relations goes well beyond what those who were most optimistic about this relationship 30 years ago have ever expected.

[I]n the 21st century...mankind faces major opportunities and challenges....I for one believe the strategic foundation of China-U.S. relations lies in our major and unique responsibility of maintaining world peace and stability. As permanent members of the UN Security Council and as the world's largest developing country and largest developed one respectively, China and the United States have maintained close consultation, coordination and mutually beneficial cooperation in many international affairs. We have worked together to manage complicated and tough regional hotspot issues, fight terrorism, proliferation and transnational crimes, meet global challenges such as climate change, energy and the environment and undertake necessary reform in the international system based on justice and equity. One can hardly find an area where China-U.S. cooperation is not needed. Comprehensive cooperation in the global sphere has tied our two countries and peoples to each other.

I for one believe the strategic foundation of China-U.S. relations lies in our ever expanding common interests in promoting sustainable economic development in the world. We live in a world where countries are more interdependent with their interests more closely interconnected than at any time in history. At a time when the international financial crisis continues to spread and develop, the primary common interest of China and the United States is to weather the storm together like passengers in the same boat and support each other to get through the tough times and emerge from the crisis victorious. We should make due contribution to bringing about a new round of world economic growth. Even when the train of world economy drives into fairly smooth areas one day, there will still be the need for China and the United States, the two big engines, to jointly push it forward on a continuous basis.

I for one believe the strategic foundation of China-U.S. relations lies in the longstanding friendship and mutual-learning between our peoples... Each day, over 5,000 people travel across the two sides of the Pacific Ocean. Ever closer exchanges and interaction between people of our two countries contain enormous energy and have far-reaching impact. They will make people better appreciate the fact that the world is a diversified place, human civilizations are colorful and all countries should live in harmony.

In the face of the profound changes in the international landscape and mounting global challenges, China and the United States have a new historic opportunity for the development of their relations. Our two countries shoulder greater responsibilities for world peace and stability, have more common interests and enjoy broader prospects for cooperation.

Exchanges, cooperation and mutual benefit should be the defining features of the 21st century. Gone should be the days when countries competed at the expense of each other's interests under a zero-sum mentality because those who preach such a competition approach and model are bound to be the biggest losers today. China and the United States should and can set an example in achieving win-win progress and making greater joint efforts for an even better world.

To advance China-U.S. relations in the new era, we should adopt a strategic and long-term perspective and keep the relations on the right track. Mutual respect means that we should respect international law and norms governing international relations, view each other in an objective and sensible way, respect each other's choice of development path and core interests, and refrain from doing anything that may harm each other's sovereignty, security or development interests.

The priority for China and the United States at the moment is to tackle the international financial crisis through intensified cooperation and work together to maintain and promote world financial and economic stability.

Let me in this connection say a few words about what China will do to counter the financial crisis this year. The Chinese government will focus on the implementation of a 4 trillion RMB yuan (585 million U.S. dollars) investment program, including 1.18 trillion yuan (173 million dollars) that will come from the central budget. This program will kick-start growth by boosting domestic demand, reinvigorating industries, developing science and technology, and improving the social safety net. Some of these measures have already produced initial results, as evidenced by the recent signs of economic recovery. We will issue more than 5 trillion yuan (732 million dollars) of new loans to help enhance financial regulation and support economic growth with adequate money and credit supply. We are confident that we will maintain steady and relatively fast economic growth this year.

We have been following closely measures taken by the U.S. government to stabilize financial markets and stimulate economic recovery. We sincerely hope these measures will achieve the desired results and restore the U.S. economy to growth soon. This is in the interest of the United States, China and the rest of the world.

Since the outbreak of the financial crisis, China and the United States have engaged in close and effective communication and coordination, and played an important part in the international efforts to tackle the crisis. China is ready to strengthen macroeconomic policy dialogue with the United States, work with you to oppose protectionism, and make fresh contributions to the stability of international financial markets and growth of the world economy. We also want to work with the United States and other countries for positive outcomes at the London G20 summit on the basis of the achievements of the Washington summit. In times of hardships, it is all the more important for China and the United States to broaden and deepen bilateral trade and economic cooperation, properly handle possible frictions and differences and forge a strong bond to weather the crisis.

China and the United States share important common interests with respect to climate change, energy and the environment. Energy security, clean energy, energy conservation and pollution reduction feature prominently in our respective national development strategies. China stands ready to strengthen dialogue and consultation with the United States, pursue practical cooperation in energy conservation, new energy and renewable energy, and work with other parties under the principle of "common but differentiated responsibilities" to ensure the success of the Copenhagen conference scheduled for the end of the year.

China and the United States should build sustained, sound and stable relations, as this not only serves the fundamental interests of the two countries and peoples, but also contributes to world peace, stability and development. The development of China-U.S. relations has proven time and again that China and the United States are partners for cooperation, not adversaries or enemies. Cooperation brings benefits to both countries, while confrontation hurts both sides. Some Americans often say, "It is through cooperation, rather than conflict, that your greatest successes will be derived." So let us join hands and work together for a splendid future of China-U.S. relations."

Thursday, March 12, 2009

Solar Update: Ongoing Volatility

Markets have been up since early this week. The Dow is up nearly 600 points since Monday's close and all three of the major indices are reporting gains. Wind, smart grid and efficiency stock are all up, yet with the exception of CSIQ, The Green Market's solar stocks were down yesterday, today solar stocks are back up again.

There has been a lot of volatility in the clean tech sector. Many investors are hoping to see returns from Obama's massive Green stimulus while others are concerned that government involvement is distorting market forces. As anticipated by The Green Markets Solar Analysis last week, solar has been especially volatile.

Last Friday March 6 a Fool article put forth 3 reasons why solar module maker First Solar (Nasdaq: FSLR), warrants a sell recommendation. Cost of FSLR is high relative to other stocks that are at bargain-basement levels. The outlook for 2009 is grim, with worse-than-expected quarterly losses and weak outlooks coming from STP CSIQ LDK JASO. The level of government stimulus relief may be inadequate to entice many solar consumers. With the majority of solar projects financed by debt, financing will be a problem for both buyers and providers.

Despite this pessimistic assessment of industry leader FSLR, there continues to be considerable optimism for the cleantech sector. As reported in another Fool article, "Investment in the sector continues to be hot. Recent data from Cleantech Group showed that venture capital investment in green tech increased 38% in 2008 to $8.4 billion. And support of clean, renewable energy and energy independence has become one of the key strategies in the new federal budget...John Doerr, one of the world's most successful venture capitalists, called cleantech the "biggest economic opportunity of this century."

Solar stock is volatile to be sure, but there are opportunities developing if you know what to look for and what to avoid. Consider solar stock with a compelling valuation and remember, the key to capitalizing is buying at the right price.

Monday, March 9, 2009

China's Green Stimulus, US/China Cooperation and Economic Recovery

The US and China are investing a large portion of their respective economic stimulus efforts in Green as are many of the worlds largest economies. Last Wednesday, markets rallied on speculation of a new Chinese stimulus. However rather than announce new government spending, Prime Minister Wen Jiabao, promised to combat corruption and provided details of China's blueprint for its US$585-billion ($908 billion) stimulus.

As reported by NRDC, "China disclosed a 4-trillion-yuan (US$585 billion) package that designates at least 350 billion yuan (US$51 billion) for biological conservation and environmental protection. Moreover, China’s Ministry of Environmental Protection (MEP) has announced that the stimulus will 'not be spent in the energy and resource-intensive industries or high-pollution industries' and will benefit the renewable energy and pollution-control industries."

This Chinese Green stimulus plan, originally announced last November, was joined earlier this year by similar government initiatives elsewhere in Asia. Japan and the Republic of Korea announced that they will invest billions of dollars in Green projects to create jobs and spur economic growth. Some have interpreted this as evidence that the United Nations 'Green New Deal' is gaining momentum.

As reported by China Green Space, a recent Natural Resources Defense Council (NRDC) report provides evidence of this greater cooperation between the US and China. The report is a recapitulation of similar reports issued by the Brookings Institute and the Asia Society. These reports indicate that both the US and China share the common objectives of creating Green jobs and expanding the use of Green technologies.

This crisis provides a powerful justification for Washington and Beijing to coordinate the Green components of their stimulus packages. The NRDC report suggests the US offer technical assistance to help China to accurately report its greenhouse gas emissions. Beyond more accurate environmental monitoring and reporting, US cooperation with China implies greater supervision, transparency and enforcement.

China View reports that Chinese stimulus efforts are already paying off, according to information released at two ongoing annual political conferences, there are "some signs of a return to stability and warmth" of the Chinese economy. The two Chinese conferences are the Second Session of the 11th National People's Congress (NPC) and the Second Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC).

"Reuters said China's economic leaders struck a note of quiet confidence at a press conference that the economy is already reviving in response to swift action to counter the shock of the global financial crisis." "The economic figures are stabilizing and recovering, which demonstrates that the policies have begun to show an impact," a Reuters report quoted Zhou as saying. Japan's Kyodo News also quoted Zhou as saying that China's efforts to combat the impact of the global financial crisis is taking effect. With regard to the detailed effects of the economic stimulus measures, the German Press Agency (dpa) quoted Zhang Ping as telling reporters that "there are already signs of recovery, including a rebound of consumption, investment and some product prices." Financial Times Deutschland said China's Purchasing Managers Index (PMI) in the manufacturing sector rose to 49 percent in February, the third monthly increase in a row since December 2008.This indicates China's economy is probably on the threshold of consecutive recovery and the government's big stimulus package is taking effect."

Francisco Encina, president of Chile's Deputies Chamber said "New decisions to be made during the ongoing sessions will not only guide the development of China's economy, but also have a profound impact on the world. Sustained growth in China will be of vital importance to the world economy and trade, and China's efficient and responsible economic stimulus measures will be a powerful backup for the world's ailing economy, he said. The annual meetings are crucial and may be a "catalyst" to speed up the recovery of the troubled world economy."

Friday, March 6, 2009

Solar Sector Analysis

President Barack Obama's stimulus encourages the use of solar power as his administration is racing to reduce America's carbon dioxide emissions. The President remains committed to replacing imported oil with renewables. To help meet these new objectives, US solar installations will significantly increase the amount of power they supply to utility companies.

Increasingly, government incentive programs are accelerating the adoption of solar power. As reported by Zack, the global market for solar power installed capacity has grown at a compound annual rate of approximately 40% since 2001.

According to SolarBuzz, prior to this recession the global solar power market, as defined by 2007 solar power system installations, generated $17.2 billion in revenue, up 56% over 2006 global revenue. Global solar cell production also increased 56% in 2007 and worldwide installations grew 62% to a record high. The total global solar market installation revenue is expected to be between $18.7 billion and $31.4 billion by 2011.

Solar is a huge and growing international industry that will play an ever increasing role in meeting the world's energy demands. This is certainly true in the US where electricity accounts for the vast majority of energy demand. Huber and Mills point out that "more than 85% of the growth in US energy demand since 1980 has been met by electricity."

America has some catching up to do, although the US is the world's largest energy consumer it is not amongst the top three in solar power production. The US is not the only place where solar is expected to rapidly expand. To meet its own targets, Europe will also have to massively increase the amount of green energy it produces. And China's clean-tech market will be worth $555 billion by 2020.

In 2008 record oil prices powered the rapid growth of clean energy production, then oil plummeted and the global economy fell into recession. Although this was understandably distressing for investors, the current economic climate has significantly lowered solar's cost and thereby made it more viable. The solar industry has benefited from struggling computer sales and the resultant decreased demand for polysilicon used for semiconductor/microchip production. Due to oversupply, polysilicon prices have dropped about 30 percent in the past two months. Solar panels are down 30 percent, from $4.20 per watt to just over $3.

The lower the cost of solar energy the more it moves in the direction of being able to compete with fossil fuels. A Money article points out that, "Rooftop solar panels already are producing cheaper electricity than traditional power plants during the day in California and Hawaii. And industry analysts say that as early as next year utilities could build solar power plants able to compete with traditional coal-fired or natural gas power plants."

The ability of solar energy to compete also depends on the price of natural gas, (natural gas costs $5 per 1,000 cubic feet and is the fuel used in many power plants). As pointed out in the same article, "at current natural gas prices, it's impossible to produce solar electricity at a competitive cost; if gas prices triple, as they did last summer, solar would be close. Experts say solar panels will eventually be able to compete even with cheap natural gas as they continue to get more efficient."

When it comes to low cost power generation it is hard to compete with coal. But the passage of proposed cap-and-trade laws in the US would make energy from coal or other fossil fuels more expensive and renewable sources of energy like solar much more competitive. In the US, this should drive more solar manufacturers to acquire or develop their own power projects.

Advances in the home market will also help solar grow. Under the Obama stimulus plan, incentives like treasury grants will allow American consumers to recoup 30 percent of the cost of installing solar equipment. People in cities accross America can immediately lower the cost of home electricity by installing solar panels on their rooftops. They can also benefit from the incentives offered by power companies, as well as state, and municipal governments. According to a YahooGreen article, "consumers are not only being pulled toward solar power, they're also being pushed away from fossil fuels. Americans' electric bills rose for the sixth straight year in 2008, making the increasingly affordable option of solar power more attractive."

There have been vast improvements in solar power technology and costs have plummeted due to manufacturing innovations. Solar researchers say they've found many ways to get more electricity out of the sun. Large-scale solar power plants are being built, in Southern California and New Jersey and when utilities start incorporating solar power into the energy grid, this will stabilize utility bills. However in some communities, electricity bills could rise as power companies invest in solar projects.

The Green Markets solar stocks have been going up and down with the rest of the market, but price volatility is a reaction to uncertainty rather than a reflection of a change in companies’ fundamentals. Market prices are being set by emotional investors, many of whom do not know the first thing about stock market valuation. Eventually real values will permeate the current fog of uncertainty. Despite current volatility, over longer time frames, the stock market has proven to be very predictable, almost consistently trending upwards over those periods.

Low stock prices actually present a significant opportunity over the long term. recessions are a great opportunity to buy something on sale. Although the The Green Market has benefited from rallies and short side profits in solar, presently, markets are too volatile to call. It may be wise to wait for solar to find the floor before reentering the market. Analyze and highlight the stocks with the strongest fundamentals and develop a strategy that will help weather these more stressful periods when the market is more volatile.

Investor timing should focus on seeking evidence of hitting bottom. On average, recessions last less than a year, but the market will improve months before the economy picks up. The best time to get the best yield is at the midpoint of the recession.

The solar power industry is being dragged down by the recession, low lying oil and the absence of credit. But it is being buoyed by stimulus spending, falling polysilicon prices, and manufacturing innovation.

We may be near the bottom in polysilicon and oil and this has important implications for investors. Oil prices cannot remain at these levels forever and there is evidence that they are slowly increasing. An eventual recovery will drive up oil prices and solar is sure to soar as oil becomes more expensive, less desirable and more scarce. The passage of cap-and-trade legislation in the US would drive this point home.

Wednesday, March 4, 2009

Solar Stock Review: Cost vs Efficiency

Solar stocks are wildly unstable despite the Feds ongoing multi-billion dollar infusions into the financial markets. Although central banks around the world are responding in unison to preserve the financial system, Asian markets have experienced massive declines and the Dow has hit a 12 year low. It appears that US investors joined a world-wide sell off that began in Asia and rippled through industries from financials to consumer durables to technology.

'Market Watch' consumer confidence fell in February to record lows. Pessimists believe the world cannot escape the next great depression, citing growing US deficits, increasing bankruptcies and the attainment of peak oil, optimists claim that this volatile market will begin to stabilize this year.

A bit more than a week ago (February 24) Federal Reserve Chairman Ben Bernanke prompted a Wall Street rally by suggesting that the recession may end this year. The Dow Jones Industrial Average jumped by 236.16 points to close the session out at 7,350.94. Broader stock indicators also ended with gains.

Those of us who look for patterns are forced to concede that the markets are more volatile than ever and stock market movements of 2% or 3% from one day to the next may be with us for a while. However, rather than being a function of underlying economic or financial events, this volatility is the result of investors’ nervousness, fear and greed.

Last week the Green Markets solar stocks saw one day gains between 4 and 20 percent, only to see these gains reversed later in the week. The Green Market's solar stock picks are not immune to macroeconomic headwinds, but companies like Suntech are well positioned to survive market volatility. The Fool reports that "Suntech Power Holdings (NYSE: STP), the world's leading manufacturer of photovoltaic (PV) modules announced that it will offer the Enphase Micro-inverter to its rapidly growing network of U.S. Authorized Dealers as part of its commitment to bringing cutting edge technology to customers."

The fourth quarter was awful for Suntech and the first quarter is looking pretty soft as well, with the Fool reporting that revenues are "being guided down to the $340 million to $380 million range. At the midpoint, that's about a 13% sequential decline." Credit is a serious issue for Suntech as project financing is still difficult, but projects are still moving forward and last week's preliminary release from Suntech includes better-than-forecasted results. Yesterday STP was up 0.13 or 2.50 percent.

As reported in the Fool, Suntech reported some signs of stabilization, including a pickup in orders toward the latter part of the first quarter. Fortunately, polysilicon costs are falling faster than average sales prices (ASPs) and this should benefit margins over the course of this year. Suntech is having no trouble renegotiating its long-term contracts with suppliers.

The same article notes that "Market weakness has arguably helped Suntech in some ways. Noting a 'flight to quality,' Suntech says that modules are getting less commoditized as customers scrutinize whether suppliers will survive long enough to back up their product warranties. In a more stark example, the firm shared its understanding that 'potentially 50 plus percent of module vendors' in its native China are no longer producing. [I]n terms of liquidity, Suntech was aided by a significant recovery of past taxes paid. This cash inflow did a great deal to offset a slowdown in accounts receivable collection." Suntech will be one of the solar firms that will be able to survive these hard times.

Evergreen Solar, Inc. (Nasdaq: ESLR), a manufacturer of string ribbon solar power products with its proprietary, low-cost silicon wafer manufacturing technology, announced that its solar panels have received high ratings in two key industry performance tests. Evergreen Solar's ES-Series String Ribbon solar panel was the top-rated panel after completing six months of a year long test being conducted by T Rheinland Group, a leading independent test institute in Germany. Last week ESLR announced that it is nearing completion of the first stage of construction of a 2.8MW solar installation atop Germany's A3 highway tunnel. Last Tuesday saw one day gains of over 20% for ESLR, but the end of last week and early this week, ESLR is declining, yesterday ESLR was off 0.8 or just over 7 percent.

SunPower (Nasdaq: SPWRA), producer of its efficiency leading photovoltaic cells, tripled its revenue in 2007 and earned approximately $1 billion of revenue in 2008. On news of last quarter's surprisingly positive results SPWRA shares rose over 10% last week, only to be followed by a plunge of more than 8% Monday, as traders reacted negatively to a warning from solar sector peer First Solar. As reported in the Fool, as part of its fourth-quarter earnings report, First Solar warned that the short-term outlook for the solar industry has never looked more difficult, citing a "serious risk of oversupply in the market."

There is a wealth of pessimism from options traders and short sellers who are heavily betting on a continued decline for SPWRA, indicating that many investors have accepted the stock's poor technical performance. SPWRA steadily declined after its high last Tuesday (February 24) But SunPower has a huge global dealer network and massive demand from the utility market, with SunPower actively negotiating more than one gigawatt of projects on top of the work it's already doing. SunPower has expanded its business to Europe and the Far East, and is now going to Israel. Sunpower has joined Brightsource Industries (Israel) Ltd. in the $70-80 million tender to build a photovoltaic power plant at Ashelim in the Negev.

A Febrary 19 report from Zacks Investment Research suggest that SPWRA will benefit from an extension of the ITC in the U.S., resolution of tariffs in Spain, higher average conversion efficiency, improved silicon usage, and gradually improving ASPs. Zack's SPWRA buy recommendation comes with a six-month target price of $40.00 (24.6% upside potential).

As reported by Schaeffers Research, some analysts "apparently saw potential for SunPower in the wake of this negative reaction within the solar sector. Currently, SPWRA has acquired 9 "buys," 7 "holds," and 2 "sells," according to Zacks. This bullishly skewed ratings configuration is backed by equally optimistic price targets. Specifically, Thomson Reuters reports that the average 12-month price target for SPWRA rests at $40.06 per share, implying that analysts are expecting the shares to rally more than 33% during the next 52 weeks. But the bullish sentiment ends once you step out of the confines of the brokerage community."

SunPower's geographically diversified business will benefit from higher captive generation of panels, declining silicon cost and consumption, assured silicon supply as well as other cost reductions. All of these elements combine to put the company on a solid competitive footing. SunPower's strength in the household market may also prove to be a powerful competitive advantage as this sector grows.

As reported in the Fool, First Solar (Nasdaq:FSLR), profit more than doubled to $1.61 a share. FSLR primary strenght is the lower cost of their thin film photovoltaic solar cells over the silicon-based cells that dominate the market. Last week FSLR announced that its quarterly earnings and revenue had more than doubled to $433.7 million as demand for its low-cost solar panels grew. Fourth-quarter net income was $132.8 million, compared with $62.9 million, a year ago. This exceeding expected earnings of $1.30 per share, according to Reuters Estimates. However First Solar shares have lost 27 percent of their value since the beginning of October, when the global credit crisis worsened.

As reported in the Fool, FSLR CEO Michael Ahearn, explained in a conference call, "In our view, the recent drop in the share price appears to be a knee-jerk reaction to the company's short-term headwinds, with no regard for the tremendous tailwinds solar stocks are receiving from the Obama administration....In three to five years, the market outlook for solar has never been better, but the short-term outlook for the solar industry has never looked more difficult." FSLR is trying to manage short term difficulties by reducing pricing, co-investing in some large-scale projects and extending some payment terms from 10 to 45 days but it may still get firm to get caught with uncomfortably large inventories in the first half of the year. First Solar attributed its short term difficulties to "stifled demand due to inadequate access to credit and project financing, and module oversupply. The greatest threat is probably posed by overproduction."

First Solar announced on Monday that it was acquiring rival thin-film photovoltaic startup OptiSolar. Fortune reports that the acquisition of OptiSolar "vaults First Solar into the ranks of big solar power plant developers, giving it control of the worlds largest photovoltaic solar farm (PG&E's 550-megawatt project) as well as 1,300 megawatts’ worth of projects in the pipeline. The deal also includes federal land claims OptiSolar filed on 136,000 acres in the Southwest desert that could support power plants generating 19,000 megawatts of solar electricity."

According to a Street article, Sempra Energy intends to become a major supplier of solar power to the consumer market. Sempra wants in expand The El Dorado Energy Solar facility, North America's largest and most cost-efficient thin-film solar power plant. The plant currently has 10 megawatts of electricity-generation capacity. The plant is powered by 167,000 solar panels manufactured by First Solar. Sempra has a 20-year contract with a California subsidiary of PG&E to sell the power it generates from the El Dorado facility. Sempra wants to add the next 40 megawatts of power capacity before the end of 2009.

Blogging Stocks reports that, "First Solar is one of the few whose earnings outperformed consensus estimates: its fourth-quarter results reported yesterday after the market's close were nearly 25% better than estimates. although the company reduced 2009 revenue estimates by about 10%, citing short-term credit concerns for customers. Still, management sees at least 45% top-line growth for the full year. While manufacturing advances kept cost reductions on track and lowered its module cost per watt below $1 during the period, margins felt some pressure courtesy of the economic environment."

The long-term outlook for FSLR continues to be very positive. The company is somewhat protected by its differentiated product, which is less commoditized than traditional PV. The Fool notes "the firm's milestone sub-$1 per watt manufacturing cost, down from $1.08 last quarter. The next target in First Solar's sights: $0.65 to $0.70/watt by 2012." The firm thinks it can more or less maintain its target of 20% return on net assets.

FSLR has the wherewithal to survive the negative operating environment and may be poised to gain ground over its peers.

Both First Solar and SunPower are well positioned solar players capable of riding out this economic storm. In the solar sector low-cost leader FSLR is pitted against high efficiency leader SunPower. The proliferation of FSLR's least expensive thin film solar technology gives SunPower's energy efficient solar technology cause for concern. Despite SPWRA's many strengths, FSLR's low cost thin film solar, may be better suited to the current economic climate.

Yesterday FSLR was up over 6.22 percent, while SPWRA experienced modest gains of 1.69 percent. In a head to head bid for solar preeminance in the US, FSLR's low cost appears to be trumping SunPower's efficiency.

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