Adam can be reached at adam@ecosystempartners.com or by phone at 415-462-0163.
Thursday
Living Systems and Measurement
Scientists refer to ecosystems as "life support systems", but it's hard to understand this in a literal way. The things that ecosystems do are on such a large scale, often over such long periods of time, that it's hard to comprehend. This brief set of slides makes a comparison between the functions of ecosystems and the functions of organs in our bodies to help make the scientist's analogy more immediate and tangible. AD
Investing in Nature: Green Profits from Ecosystem Management
There’s one key concept that will allow your organization, your region, your constituency or your brand to really prosper in the next five and the next fifty years. It’s as simple as the weather and the water you drink. It’s investing in nature, and putting the living world on your map of economic growth.
Water systems, habitat for life of all kinds, even the climate itself have all been profoundly affected, and we are coming to find out that these things are not luxury items or amenities but in fact essential ingredients in our economy.
Environmental issues, not long ago seen by business as a burdensome cost are now core competitive issues. No matter what sector of the economy you work in, intractable large-scale trends in the wobbling natural world like severe and unpredictable rain and storms are affecting your costs, your customers, the way you produce your products or deliver your services, and your profits. Whether you make steel or ice cream, beverages or chemicals, clothing or electricity... whether your company picks up the trash or makes cell phones, produces movies or provides lawn care: nature is now critical to your bottom-line.
Awareness of this is growing across corporations, government at all levels, and the increasingly important environmental groups. As a partner in a private equity fund and a sustainability consultant I am continually asked in one way or another: Can we still afford to embrace the Western ideal of continuous growth and development? Do we just have to start making do with less, cutting costs, downsizing, and most of all, worrying? Is there really any way we can prosper and feel OK about it?
We are all now facing the same question: How can we continue to grow without damaging our life support systems – the ecosystems of the earth.
Business needs to know how investment of capital can help to preserve the systems that we need to draw upon and make competitive returns, in order to keep producing products and services, building factories, homes and schools. Government needs to know how to make rules that balance the value of natural infrastructure with the value of the built infrastructure. And advocates need a clear vision of what they are fighting for, not just what they are fighting against.
Since 1960, the
It’s not just the fact that there are so many of us, it’s the amount we produce and consume that’s putting the strain on natural systems. In 1960, the world Gross Domestic Product was about $7 trillion; today it is over $60 trillion. The CO2 in the atmosphere is a result of the energy we’ve used to create this incredible growth; it has been between 180 – 280 parts per million for all of human history. Today it is at 385 and increasing by about 2 parts per million each year. That may not sound like a lot, but we’re already feeling the effects, and the longer we stay over the 350 limit, the greater our risk of passing the ‘point of no return’ where change feeds on itself in ways that can’t be stopped.
We can no longer talk about setting incremental goals or revamping five year plans based on past performance. Leaders in business, in government, or in the nonprofit sector will not be able to react quickly enough to destabilizing events like aquifers running dry, extinction of species, or rising sea levels.
There are hundreds of books that describe the problems we face in exquisite detail. But most have remarkably little to say about what we should actually do. If you can make it through The Last Hours of Ancient Sunlight by Thom Hartmann, which has gotten tons of press and inspired Leonardo DiCaprio’s movie, Global Warming, you’ll find this prescription: “From that connection, that grounded place in the sacred here and now, you touch the power of life and transform yourself and thus those around you. They transform others and eventually every other living being on the planet.” His solution is to believe in new age gobbledygook.
Another, The Long Emergency by James Kunstler predicts an ongoing slow-motion catastrophe, and in the end has
And these aren’t the only ones. Some of the most intelligent and well-intentioned observers demand that we reduce the world population, eliminate poverty, stop using oil and coal, and so on, while it’s obvious that none of these things are going to happen in time to save us.
What Are We For?
Ecosystem services are the key to an affordable approach to sustainability. We're going to have to show that we can make ‘business as usual’ into a force for protecting and restoring our natural systems. To describe a way to move beyond donations and wildlife campaigns and everybody’s good intentions and put nature where it needs to be: squarely on the bottom line.
By now it is clear that success for our economy and success for our ecology are inextricably linked. We can’t talk just about supply and demand of and for commodities and consumer goods. We have to talk about supply and demand of and for the natural systems that underlie the economy, and on which we all depend.
It’s also clear that because of the conventional way we have valued nature, we’re going to be facing new forms of scarcity. It’s like we’re moving through a tunnel with narrowing walls. What we need is a new approach that lets us see the light at the end of that tunnel. We need to have a pragmatic and hopeful concept the future and how to get there. Our population is going to grow, and so is our economy, and we must balance natural systems with this growth if we’re going to remain a strong and independent nation.
Ecosystem services now provide a strategic approach for business, policy and advocacy. Unlike many 'environmental' issues, they provide more than another gloomy list of the problems you’re already aware of. It’s a concept of a new vision of wealth that includes the natural world. It’s about national security in an interdependent world. It’s about the path to a sustainable future. And it describes a practical and exciting way of getting there that will be useful to farmers and CEOs, regulators and scientists, investors and activists... all of us.
Beyond Environmentalism
Conservationists have long been concerned about protecting wildlife, open land, and natural ecosystems. Meanwhile, environmentalists have been concerned about litter, pesticides, plastic bottles, cleaning products, energy efficient buildings, and a myriad of issues that fall into the categories of materials, energy and toxics. But it’s as if these two groups had never met each other.
What we call ‘sustainability’ is in essence the production of goods and services in a manner fundamentally aligned with natural systems. And we’ve had two different communities of advocates in the United States, each getting more educated, more sophisticated, more powerful… one working on the ‘goods and services’ part, and one working on the ‘natural systems’ part.
Sustainability is about integrating the natural world into the economy, and that’s going to require real shifts for both conservationists and environmentalists. It’s becoming clear to both camps that laws which stop the worst kinds of development and the worst impacts of business just aren’t enough anymore; after 50 years of environmental laws in America it’s no longer primarily illegal activities which are damaging the environment, it’s the combined impacts of totally legal activities.
In order to address this, we’re going to need more than new laws and regulations, more than donations from foundations or grants from the government. We need a whole new way of doing business. One that has a new kind of relationship with environmentalists, and one that is proactive about its dealings with the natural world.
We’ve developed an alphabet soup of environmental law: ESA, CRCLA, RCRA, NEPA, CWA, CAA, and so on*… and it’s clear that these laws have made an enormous contribution to our well being and quality of life. But at its core all that law said one thing, which is: stop it. Stop polluting, stop littering, stop damaging things, stop harming the environment. These laws were essential steps towards more responsible corporate behavior, but we’ve gotten to the point where new laws on top of the ones we have are hard to pass. The cost for each benefit used to be really obvious for environmental laws, but now that business and development already comply with 50 years of regulations, it’s harder to justify all the time.
And what’s worse, the way the ‘stop it’ laws work has left us engaged in an odd process of hair-splitting. Let’s say there’s a law that limits pollution of a certain kind to 10 parts per million. If the air or water emissions from my factory have eleven parts per million of the substance, then I’m a criminal, but if they have ten parts per million then everything is fine. How can this be right?
If I invest in reducing the pollution to nine parts per million, then I have costs my competitors don’t. How does this send the right signal to business?
And how did we get to the number ten anyway? It’s usually as much a result of political compromise as it is of scientific expertise. And this same process goes on all over, whether we are talking about how many housing units are allowed per acre, how many trees are allowed to be cut and how many feet from the stream, or how much CO2e** should be allowed in the atmosphere.
Environmentalists, meet Conservationists. Conservationists, meet Environmentalists. Together you have to tools to do what needs to be done: integrate ecology back into economy so the right signals get sent to the people making the business and investment decisions that affect us all.
**CO2e is “Carbon dioxide equivalent”, and is used to measure the concentration of energy trapping ‘greenhouse gasses’ in the atmosphere. This is used instead of CO2, because there are a number of gasses that trap energy, not just CO2, so to measure and describe what’s going on the amount of these other gasses are ‘converted’ to their effect as compared with the effect of CO2. So, for example, one molecule of methane (CH4) = 23 molecules of CO2, so the CO2e of an atmosphere with one CH4 and one CO2 = 24.
Leadership v. Legislation
In a 1997 speech he gave at
This announcement got a lot of press, of course, but there was something else in the speech that was so commonplace it got no mention at all. He said, simply, “No company can be really successful unless it is sustainable… Of course, that requires a competitive financial performance.”
Everyone thought of John Browne, like they still do of CEO’s and company presidents generally, as being enormously powerful. And it’s not like he didn’t have an influence; BP was beginning to seriously invest in solar power and in 2000 the company rebranded itself with a green sunflower. But the need for a competitive financial performance trumps all the good intention in the world, even if you’re the CEO. Even if he decided to invest all the money at his disposal in solar power instead of oil exploration he would have to be fired by his Board of Directors if it didn’t turn out to be profitable.
There are structural reasons that prevent even the most powerful among us from acting alone. If we want to create an economy aligned with natural systems, a sustainable economy, we’re going to have to have structures that make it more profitable to do the right thing than the wrong thing.
Corporations are often described as blind to everything but profit, as the soul-less destroyers of the common good, or greedy institutions that are uniquely responsible for the problems of the world. But actually, the exact same structural problem applies in the public sector. Non-profit organizations too. There are rules that apply to everyone, and one of them is: If you invest too much of your resources in something that isn't valuable enough, you'll run out of money.
The Missing Ingredient is the Value of Nature
It turns out that natural systems are life support systems. They’re not ‘parks’ or ‘open spaces’ or ‘amenities’, but the places where living things do stuff that purifies water, that creates the soil that gives us crops and that keeps the climate stable. Ecosystems are worth money.
For business to turn in a competitive financial performance in a manner that is aligned with natural systems there has to be a price for damaging them, but also a profit from their protection and restoration.
Capitalism is really not that complicated; it’s like a dog running after a bone. If you throw the bone to the left, the dog goes to the left. If you throw the bone to the right, the dog goes to the right. We need to reward investment and behavior by creating structures that pay for every unit of protection and improvement in the Earth’s natural systems. We need to throw the bone in the direction we want to go.
Those of us in the 'ecosystem services business work on structural solutions that allow businesses to stop playing defense - worrying how they will comply with increasingly tough government regulations or make deals with increasingly smart and capable conservation and environmental groups – and start developing a competitive advantage in environmental performance.
There are many who are now taking bold, creative steps to ensure their own prosperity and the preservation of the natural world on which we all depend. But many of these steps from ‘environmentalism’ to ‘sustainability’ remain out of sight from the public. It’s partly because of the clunky way we’ve described them. The ‘Forestry Protocol of the California Climate Action Registry’, ‘Mitigation Banking and Section 404 of the Clean Water Act’, and ‘Total Maximum Daily Load trading’ all lack a certain zip from a marketing perspective.
Yet these programs are truly government innovations that create new markets and incentive programs to align profit and natural systems in remarkable ways. They have been developed with the support and tremendous intellectual contribution of environmental and conservation nonprofits. And they are allowing investment in climate, water and biodiversity, throwing the bone in the right direction.
As these programs have developed, I’ve followed the opportunities they’ve created by co-founding, as part of a team with the unlikely name Katoomba Group, the first global information website on these markets – Ecosystem Marketplace. Most recently I’ve co-founded, with the help and leadership of two extremely capable partners, a private equity fund to invest in ecosystems. I still enjoy thinking and writing and speaking about these new markets, but most of my time is now spent putting theory into practice.
We’ve raised an initial round of capital, and we’re delivering a solid risk-adjusted market rate of return by buying land, protecting and restoring specific ecosystem functions that produce clean water, climate protection and biodiversity habitat. We get paid because the clunky sounding programs mentioned above, and a host of others, allow business and development to offset the impacts of their activities by purchasing credits from others who have invested private dollars on private lands for public benefit.
We protect every piece of land we buy with a permanent conservation easement, just like conservation groups do, and we invest in the restoration of streams, wetlands, forests and habitats for endangered species too. But because the new markets allow us to make a return on investment, we don’t have to rely on gifts or grants; our capital comes from serious private and institutional investors.
This kind of market creates a price that reflects what nature does for us.
Still, the first reaction from many people is: “Is it really right to put a price tag on nature?” Sadly, it’s too late to ask. We already know what trees are worth if we cut them down. We know what land is worth as real estate and what the water is worth if we use it to grow crops. But ironically, the value of nature has been a minus on the balance sheet.
Science has been telling us for years that biodiversity is wonderful and valuable, but if you find an especially rare plant or animal on your property it prevents economic use of the land and even creates obligations. The trees are worth nothing if you leave them standing and the water is worth nothing if you leave it in the stream.
But the scientists are right about the value of biodiversity for very practical reasons. Diversity provides the resilience our life support systems require, especially as they get stressed by the impacts of our numbers and our needs. And they’re right about the value of the standing trees and the water in the stream too.
The new markets for ecosystems described in this book are ingenious because of how they take advantage of the new supply and demand for nature and what it does. The more good that’s created, the more money is made.
Whether we like it or not, we’re in the Planetary Management business. We are now responsible for natural systems everywhere, and we must provide the right incentives so that we can change our behavior more quickly and more effectively.
If a farmer can make more money from his acre of land by cutting down the trees and planting soybeans on that acre, the trees will, in fact, be cut down. If a fisherman is paid by the ton for his fish, it is in his interest to catch as many fish as he can. If a utility company is paid by the kilowatt hour, it is in their interest for you to leave your windows open in the wintertime.
We’ll continue to need real penalties for bad behavior. But now we also need to do far more. We need to recognize the new realities of supply and demand and act to align financial value with our values.
For business to turn in a competitive financial performance in a manner that is aligned with natural systems there has to be a price for damaging them, but also a profit from their protection and restoration.
Capitalism is really not that complicated; it’s like a dog running after a bone. If you throw the bone to the left, the dog goes to the left. If you throw the bone to the right, the dog goes to the right. We need to reward investment and behavior by creating structures that pay for every unit of protection and improvement in the Earth’s natural systems. We need to throw the bone in the direction we want to go.
Those of us in the 'ecosystem services business work on structural solutions that allow businesses to stop playing defense - worrying how they will comply with increasingly tough government regulations or make deals with increasingly smart and capable conservation and environmental groups – and start developing a competitive advantage in environmental performance.
There are many who are now taking bold, creative steps to ensure their own prosperity and the preservation of the natural world on which we all depend. But many of these steps from ‘environmentalism’ to ‘sustainability’ remain out of sight from the public. It’s partly because of the clunky way we’ve described them. The ‘Forestry Protocol of the California Climate Action Registry’, ‘Mitigation Banking and Section 404 of the Clean Water Act’, and ‘Total Maximum Daily Load trading’ all lack a certain zip from a marketing perspective.
Yet these programs are truly government innovations that create new markets and incentive programs to align profit and natural systems in remarkable ways. They have been developed with the support and tremendous intellectual contribution of environmental and conservation nonprofits. And they are allowing investment in climate, water and biodiversity, throwing the bone in the right direction.
As these programs have developed, I’ve followed the opportunities they’ve created by co-founding, as part of a team with the unlikely name Katoomba Group, the first global information website on these markets – Ecosystem Marketplace. Most recently I’ve co-founded, with the help and leadership of two extremely capable partners, a private equity fund to invest in ecosystems. I still enjoy thinking and writing and speaking about these new markets, but most of my time is now spent putting theory into practice.
We’ve raised an initial round of capital, and we’re delivering a solid risk-adjusted market rate of return by buying land, protecting and restoring specific ecosystem functions that produce clean water, climate protection and biodiversity habitat. We get paid because the clunky sounding programs mentioned above, and a host of others, allow business and development to offset the impacts of their activities by purchasing credits from others who have invested private dollars on private lands for public benefit.
We protect every piece of land we buy with a permanent conservation easement, just like conservation groups do, and we invest in the restoration of streams, wetlands, forests and habitats for endangered species too. But because the new markets allow us to make a return on investment, we don’t have to rely on gifts or grants; our capital comes from serious private and institutional investors.
This kind of market creates a price that reflects what nature does for us.
Still, the first reaction from many people is: “Is it really right to put a price tag on nature?” Sadly, it’s too late to ask. We already know what trees are worth if we cut them down. We know what land is worth as real estate and what the water is worth if we use it to grow crops. But ironically, the value of nature has been a minus on the balance sheet.
Science has been telling us for years that biodiversity is wonderful and valuable, but if you find an especially rare plant or animal on your property it prevents economic use of the land and even creates obligations. The trees are worth nothing if you leave them standing and the water is worth nothing if you leave it in the stream.
But the scientists are right about the value of biodiversity for very practical reasons. Diversity provides the resilience our life support systems require, especially as they get stressed by the impacts of our numbers and our needs. And they’re right about the value of the standing trees and the water in the stream too.
The new markets for ecosystems described in this book are ingenious because of how they take advantage of the new supply and demand for nature and what it does. The more good that’s created, the more money is made.
Whether we like it or not, we’re in the Planetary Management business. We are now responsible for natural systems everywhere, and we must provide the right incentives so that we can change our behavior more quickly and more effectively.
If a farmer can make more money from his acre of land by cutting down the trees and planting soybeans on that acre, the trees will, in fact, be cut down. If a fisherman is paid by the ton for his fish, it is in his interest to catch as many fish as he can. If a utility company is paid by the kilowatt hour, it is in their interest for you to leave your windows open in the wintertime.
We’ll continue to need real penalties for bad behavior. But now we also need to do far more. We need to recognize the new realities of supply and demand and act to align financial value with our values.
How Nature Became Invisible: Income
Part I: Income
For nearly all of human history, economy was really a product of ecology. Your economic reality was determined by your control of land and the natural 'services' of the land.
This relationship between economy and ecology existed mainly because ‘ecology’ is a result of living things making productive use of current solar income. The energy from the sun is ‘organized’, you could say, through photosynthesis, into the full variety of life forms. The sun is also the source of the energy that drives water, through evaporation and weather patterns, through the system. So ‘ecology’ has almost always been fundamental to making a living.
When you burn a piece of firewood, the heat you feel is really just sunlight backwards. The energy from the sun was stored in the wood, and the flame releases it back out. This same energy manifests in ‘crops’ of all kinds, and also in ‘game’, which concentrates and stores plant energy as meat.
This is basically why wars have almost always been fought over land. Physical control of land and water, and access to its productivity were essential, because income was determined by the amount of the sun’s energy that could be captured each year in the form of crops, game and wood.
The world economy grew as human ability to make use of current solar income improved. Innovations such as the water wheel and the sail boat harnessed the forces of water and weather and increased the amount of work a person could do in a day, as did early metallurgy powered by firewood. Early gross domestic product (GDP) can be seen as a direct measure of the relative ability of a group of people to innovate using current solar income.
Part II: The Savings Account… Coal, Natural Gas, and Oil
Things changed, though, when we figured out how to use fossil fuels. It slowly dawned on us that we didn’t have to rely on our annual income, because we had discovered the savings account.
Fossil fuels, specifically coal, natural gas and oil, are stored solar income. Just like the firewood contains the energy of the sun radiating onto the tree over its lifetime, these underground deposits contain the energy from the sun shining on plants… but over a period of millions of years.
Life is made of carbon, and the carbon stores the energy from the sun. In fact, we call the period of time from about 354 to 290 million years ago the Carboniferous Period because that’s when the plants that are now coal lived.
The quick explanation is that trees are made of cellulose – the fiber we make paper from – and lignin – the yellow gooey stuff that makes newspaper turn yellow. It was at the start of the Carboniferous period trees that began to produce lignin, and bacteria had not yet evolved a way to digest this new material. As a result, woody material that ended up in the lowland swamps never decomposed… and instead slowly compressed and hardened into what we now know as coal.
Because this process occurred over such a long time period, there is an enormous amount of coal in the earth. We know where there’s approximately 910 billion tons of coal and altogether people are burning about 6 billion tons each year now. About 75% of all coal mined is used for electricity production, and it’s the fastest growing energy source in the world.
Oil and natural gas were created a little differently than coal was, but the basic idea is the same. Organic material, in this case, plants and animals that lived in the water and were eventually buried, got compressed and essentially ‘cooked’ by heat, pressure and bacteria under layers of silt. Oil formed first, but as the cooking process continued, natural gas was formed, and this material has been held under rock formations at various depths beneath the earth’s crust since then.
Like coal, oil and natural gas were formed over a long time: during both the Jurassic (180 million to 140 million years ago) and the Cretaceous (140 million to 65 million years ago) periods, or a total era of 115 million years. The world’s first oil well was drilled in Titusville, Pennsylvania in 1859, and we’ve burned about 1 trillion barrels since then… about half of the total inheritance of 115 million years.
While natural gas has been used since antiquity (like oil) when it naturally seeped out of the ground, the first use of the stuff in lighting was in Fredonia, New York, in 1821. We’ve got about 6.5 trillion cubic feet of natural gas left on the planet (estimates vary from 6.1 to 7.0).
Keeping track of the exact accounting can drive you a little crazy, with all of the competing statistics and political objectives behind them. If the measures used to describe energy supplies and energy use were intended to be incomprehensible, they couldn’t have done a much better job… but it’s possible to simplify some of the terms used in order to get a better general understanding of what’s going on.
First of all, the standard measure, which is a ‘barrel’ of oil. Back when oil was first drilled in earnest, in the Pennsylvania fields, it was held in old whiskey barrels, and these came in both 40 and 42 gallon sizes. It was the Standard Oil Company (no surprise) that standardized the measure, and began shipping supplies in barrels that always contained exactly 42 gallons. These Standard Oil barrels were painted blue, which accounts for the abbreviation “bbl” which you see used to this day, and which means, absurdly, “blue barrels”. Because you’ve probably never seen a barrel of oil, but you’re probably pretty familiar with gasoline and what it can do, each 42 gallon barrel makes 19.5 gallons of gas.
The amount of energy in both natural gas and coal can be measured in their ‘equivalent’ barrels of oil… one barrel being approximately equal to 6,000 cubic feet of natural gas, and 410 pounds of coal.
So: here’s a description of our inheritance , measured in a unit you can actually imagine, which is gallons of gasoline.
The Reserve:
Coal 86.5 Trillion
Natural Gas 19.8 Trillion
Oil 19.5 Trillion
Total 125.9 Trillion
Current Use:
Coal 570 Billion/year
Natural Gas 325 Billion/year
Oil 604 Billion/year
Total 1,500 Billion/year
Years left
Coal 151.67
Natural Gas 61.12
Oil 32.26
If you investigate these figures, you'll find that there is tremendous, and very heated, controversy over pretty much all of them.
But the reason we all care so much about this stuff is that when we discovered the savings account, we didn’t have to rely so much on current income.
Part III: How Energy Disconnected the Economy from Ecology
The book you’re reading, and your desk and the lights that illuminate your room, your computer, your carpet, your furniture, your books, your clothing, your lunch, the car or bike you used to get here --- pretty much everything you need in the course of the day---comes from one of four primary industries. Mining, timber and agriculture, along with oil itself, are the starting point for all these things and it’s our energy inheritance that allowed us to go and get the millions of tons of them we use.
This tremendous inheritance has created wealth and abundance for billions of us, but at the same time it’s the primary reason that nature has become ‘invisible’ to the economy. To the extent it is ‘seen’ at all, nature is a place to go get the stuff we need to make into products. The terms we use are ‘raw materials’, ‘natural resources’, or ‘commodities’, and we use oil and gas and coal to power their mining and drilling and transport.
While energy hid the basic fact of our dependence on healthy planetary life support systems like water cycles, pollination and soil, resilient plant and animal populations and weather, it didn’t change it. Both the price of fossil fuels and the impact of climate change are connecting us back to ecology.
The price of fossil fuels is affecting our ability to drive around in cars, protected from the rain, the heat and the cold. It’s affecting the price of our food, as the price of fertilizer made from natural gas goes up and the cost of moving food to our grocery stores goes up. It’s making us more aware of what life would be like if we didn’t have the power of fossil fuels to buffer us from the challenges and uncertainties of planetary life.
Climate change is making us more aware of how dependent we are on being able to predict the weather. Since date, the Farmer’s Almanac has had good advice on what day to plant what crop in what part of the country. If you’re a gardener, you probably know about the planting zones published by Sunset Magazine that tell you what kinds of plants grow in what locations. Both of these sources are already changing the lines on their maps, because the weather itself is changing.
I wrote the outline for this book on June 12, 2008. At the back of the book is a simple list of weather records that were broken between that date and insert date here when I finished working on it. I’m sure this isn’t a complete list; it’s just the records that I came across when I read the NY Times in the morning or caught site of as I was web-surfing for one reason or another.
The fact that there are xx records in this list in just yy months is amazing, and this trend is increasing now. Just start checking it out for yourself. Look for the word ‘record’ in front of the words ‘rainfall’, ‘flood’, ‘drought’, ‘wind’, ‘temperature’, ‘snow’, ‘hail’ and so on when you read the paper or watch the news.
Because the records are falling all over the place, our basic ability to predict what the weather will do in a year or five years is crumbling. This affects investment, of course, in things like corn futures or home heating oil futures. It also affects how we design just about everything; roads, for example, are all sloped slightly to the side so that rain can run off quickly enough. The slope is determined by ‘100 year flood events’, which are simply the biggest rainfall to happen in a 24 hour period in the last 100 years. But if the last 100 years is no longer a good guide to the next 100 years, or even the next 5 or 10 years, it’s really hard to know how to design the road.
I can’t emphasize enough that this isn’t just some problem for the generations of the future. The US Department of Agriculture, for example, just released a major study entitled, “The effects of climate change on agriculture, land resources, water resources, and biodiversity,” and a major conclusion is that forest fires, insect outbreaks, precipitation, stream flows, stream temperatures, snowpack, peak runoff from snowmelt, plant growth, and migration of plant and animal species are all being affected now.
In 2008 the people of the earth are going to burn six billion tons of coal, xx tons of oil and yy tons of natural gas. Our share in the U.S. is 1.2 billion tons of coal, aa tons of oil and bb tons of natural gas. In the U.S., we’re burning the stuff more cleanly than ever, because the Clean Air Act has required everything from scrubbers to catalytic converters. This has cost some money (find out how much), but in comparison with the zz trillion dollar U.S. economy, this has been relatively affordable.
Because it was affordable, we were able to simply impose the cost through regulation.
The basic problem today is that we need to fix something that is really going to be hard to afford. This is the CO2 emitted from every ton of coal,CO2 emitted from every barrel of oil, and the CO2 emitted from every cubic foot of natural gas we burn to keep our economy going.
Part IV: How Economy and Ecology are Reconnecting
In the U.S. today, we emit about 20 tons of CO2 per person each year now. In China, the figure is about 5 tons of CO2 per person each year. Yet China already emits 17% more CO2 than the U.S.
We’ve been saying that we’re not going to reduce our CO2 emissions unless they do too, because it will hurt our economy if we absorb the cost of investing in reductions and they don’t. They’ve been saying there’s no way they can invest in reductions when they only create ¼ of the emissions per person that we do. The only way we’re going to get out of this mess is if the U.S. proves that investment in CO2 reductions, through creation of leading renewable energy and CO2 capture industries, creates jobs, growth, profits and improves the competitive position of the U.S.
What Americans need to realize is that there are already billions of dollars being invested in renewables and billions more being invested in CO2 capture through markets that reward every single ton of reductions.
Fortunately, we do know what to do.
We need to unleash the power of the $83 trillion dollar pool of investment capital now available by throwing the bone in the right direction. We need to create structures that allow competitive return on investment from two things. One is the creation of energy from renewable sources that don’t use fossil fuels so that we can create wealth and abundance with less CO2 emissions. The other is the creation of a new industry here in the U.S. that captures CO2 from the air with technical solutions and land management.
For nearly all of human history, economy was really a product of ecology. Your economic reality was determined by your control of land and the natural 'services' of the land.
This relationship between economy and ecology existed mainly because ‘ecology’ is a result of living things making productive use of current solar income. The energy from the sun is ‘organized’, you could say, through photosynthesis, into the full variety of life forms. The sun is also the source of the energy that drives water, through evaporation and weather patterns, through the system. So ‘ecology’ has almost always been fundamental to making a living.
When you burn a piece of firewood, the heat you feel is really just sunlight backwards. The energy from the sun was stored in the wood, and the flame releases it back out. This same energy manifests in ‘crops’ of all kinds, and also in ‘game’, which concentrates and stores plant energy as meat.
This is basically why wars have almost always been fought over land. Physical control of land and water, and access to its productivity were essential, because income was determined by the amount of the sun’s energy that could be captured each year in the form of crops, game and wood.
The world economy grew as human ability to make use of current solar income improved. Innovations such as the water wheel and the sail boat harnessed the forces of water and weather and increased the amount of work a person could do in a day, as did early metallurgy powered by firewood. Early gross domestic product (GDP) can be seen as a direct measure of the relative ability of a group of people to innovate using current solar income.
Part II: The Savings Account… Coal, Natural Gas, and Oil
Things changed, though, when we figured out how to use fossil fuels. It slowly dawned on us that we didn’t have to rely on our annual income, because we had discovered the savings account.
Fossil fuels, specifically coal, natural gas and oil, are stored solar income. Just like the firewood contains the energy of the sun radiating onto the tree over its lifetime, these underground deposits contain the energy from the sun shining on plants… but over a period of millions of years.
Life is made of carbon, and the carbon stores the energy from the sun. In fact, we call the period of time from about 354 to 290 million years ago the Carboniferous Period because that’s when the plants that are now coal lived.
The quick explanation is that trees are made of cellulose – the fiber we make paper from – and lignin – the yellow gooey stuff that makes newspaper turn yellow. It was at the start of the Carboniferous period trees that began to produce lignin, and bacteria had not yet evolved a way to digest this new material. As a result, woody material that ended up in the lowland swamps never decomposed… and instead slowly compressed and hardened into what we now know as coal.
Because this process occurred over such a long time period, there is an enormous amount of coal in the earth. We know where there’s approximately 910 billion tons of coal and altogether people are burning about 6 billion tons each year now. About 75% of all coal mined is used for electricity production, and it’s the fastest growing energy source in the world.
Oil and natural gas were created a little differently than coal was, but the basic idea is the same. Organic material, in this case, plants and animals that lived in the water and were eventually buried, got compressed and essentially ‘cooked’ by heat, pressure and bacteria under layers of silt. Oil formed first, but as the cooking process continued, natural gas was formed, and this material has been held under rock formations at various depths beneath the earth’s crust since then.
Like coal, oil and natural gas were formed over a long time: during both the Jurassic (180 million to 140 million years ago) and the Cretaceous (140 million to 65 million years ago) periods, or a total era of 115 million years. The world’s first oil well was drilled in Titusville, Pennsylvania in 1859, and we’ve burned about 1 trillion barrels since then… about half of the total inheritance of 115 million years.
While natural gas has been used since antiquity (like oil) when it naturally seeped out of the ground, the first use of the stuff in lighting was in Fredonia, New York, in 1821. We’ve got about 6.5 trillion cubic feet of natural gas left on the planet (estimates vary from 6.1 to 7.0).
Keeping track of the exact accounting can drive you a little crazy, with all of the competing statistics and political objectives behind them. If the measures used to describe energy supplies and energy use were intended to be incomprehensible, they couldn’t have done a much better job… but it’s possible to simplify some of the terms used in order to get a better general understanding of what’s going on.
First of all, the standard measure, which is a ‘barrel’ of oil. Back when oil was first drilled in earnest, in the Pennsylvania fields, it was held in old whiskey barrels, and these came in both 40 and 42 gallon sizes. It was the Standard Oil Company (no surprise) that standardized the measure, and began shipping supplies in barrels that always contained exactly 42 gallons. These Standard Oil barrels were painted blue, which accounts for the abbreviation “bbl” which you see used to this day, and which means, absurdly, “blue barrels”. Because you’ve probably never seen a barrel of oil, but you’re probably pretty familiar with gasoline and what it can do, each 42 gallon barrel makes 19.5 gallons of gas.
The amount of energy in both natural gas and coal can be measured in their ‘equivalent’ barrels of oil… one barrel being approximately equal to 6,000 cubic feet of natural gas, and 410 pounds of coal.
So: here’s a description of our inheritance , measured in a unit you can actually imagine, which is gallons of gasoline.
The Reserve:
Coal 86.5 Trillion
Natural Gas 19.8 Trillion
Oil 19.5 Trillion
Total 125.9 Trillion
Current Use:
Coal 570 Billion/year
Natural Gas 325 Billion/year
Oil 604 Billion/year
Total 1,500 Billion/year
Years left
Coal 151.67
Natural Gas 61.12
Oil 32.26
If you investigate these figures, you'll find that there is tremendous, and very heated, controversy over pretty much all of them.
But the reason we all care so much about this stuff is that when we discovered the savings account, we didn’t have to rely so much on current income.
Part III: How Energy Disconnected the Economy from Ecology
The book you’re reading, and your desk and the lights that illuminate your room, your computer, your carpet, your furniture, your books, your clothing, your lunch, the car or bike you used to get here --- pretty much everything you need in the course of the day---comes from one of four primary industries. Mining, timber and agriculture, along with oil itself, are the starting point for all these things and it’s our energy inheritance that allowed us to go and get the millions of tons of them we use.
This tremendous inheritance has created wealth and abundance for billions of us, but at the same time it’s the primary reason that nature has become ‘invisible’ to the economy. To the extent it is ‘seen’ at all, nature is a place to go get the stuff we need to make into products. The terms we use are ‘raw materials’, ‘natural resources’, or ‘commodities’, and we use oil and gas and coal to power their mining and drilling and transport.
While energy hid the basic fact of our dependence on healthy planetary life support systems like water cycles, pollination and soil, resilient plant and animal populations and weather, it didn’t change it. Both the price of fossil fuels and the impact of climate change are connecting us back to ecology.
The price of fossil fuels is affecting our ability to drive around in cars, protected from the rain, the heat and the cold. It’s affecting the price of our food, as the price of fertilizer made from natural gas goes up and the cost of moving food to our grocery stores goes up. It’s making us more aware of what life would be like if we didn’t have the power of fossil fuels to buffer us from the challenges and uncertainties of planetary life.
Climate change is making us more aware of how dependent we are on being able to predict the weather. Since date, the Farmer’s Almanac has had good advice on what day to plant what crop in what part of the country. If you’re a gardener, you probably know about the planting zones published by Sunset Magazine that tell you what kinds of plants grow in what locations. Both of these sources are already changing the lines on their maps, because the weather itself is changing.
I wrote the outline for this book on June 12, 2008. At the back of the book is a simple list of weather records that were broken between that date and insert date here when I finished working on it. I’m sure this isn’t a complete list; it’s just the records that I came across when I read the NY Times in the morning or caught site of as I was web-surfing for one reason or another.
The fact that there are xx records in this list in just yy months is amazing, and this trend is increasing now. Just start checking it out for yourself. Look for the word ‘record’ in front of the words ‘rainfall’, ‘flood’, ‘drought’, ‘wind’, ‘temperature’, ‘snow’, ‘hail’ and so on when you read the paper or watch the news.
Because the records are falling all over the place, our basic ability to predict what the weather will do in a year or five years is crumbling. This affects investment, of course, in things like corn futures or home heating oil futures. It also affects how we design just about everything; roads, for example, are all sloped slightly to the side so that rain can run off quickly enough. The slope is determined by ‘100 year flood events’, which are simply the biggest rainfall to happen in a 24 hour period in the last 100 years. But if the last 100 years is no longer a good guide to the next 100 years, or even the next 5 or 10 years, it’s really hard to know how to design the road.
I can’t emphasize enough that this isn’t just some problem for the generations of the future. The US Department of Agriculture, for example, just released a major study entitled, “The effects of climate change on agriculture, land resources, water resources, and biodiversity,” and a major conclusion is that forest fires, insect outbreaks, precipitation, stream flows, stream temperatures, snowpack, peak runoff from snowmelt, plant growth, and migration of plant and animal species are all being affected now.
In 2008 the people of the earth are going to burn six billion tons of coal, xx tons of oil and yy tons of natural gas. Our share in the U.S. is 1.2 billion tons of coal, aa tons of oil and bb tons of natural gas. In the U.S., we’re burning the stuff more cleanly than ever, because the Clean Air Act has required everything from scrubbers to catalytic converters. This has cost some money (find out how much), but in comparison with the zz trillion dollar U.S. economy, this has been relatively affordable.
Because it was affordable, we were able to simply impose the cost through regulation.
The basic problem today is that we need to fix something that is really going to be hard to afford. This is the CO2 emitted from every ton of coal,CO2 emitted from every barrel of oil, and the CO2 emitted from every cubic foot of natural gas we burn to keep our economy going.
Part IV: How Economy and Ecology are Reconnecting
In the U.S. today, we emit about 20 tons of CO2 per person each year now. In China, the figure is about 5 tons of CO2 per person each year. Yet China already emits 17% more CO2 than the U.S.
We’ve been saying that we’re not going to reduce our CO2 emissions unless they do too, because it will hurt our economy if we absorb the cost of investing in reductions and they don’t. They’ve been saying there’s no way they can invest in reductions when they only create ¼ of the emissions per person that we do. The only way we’re going to get out of this mess is if the U.S. proves that investment in CO2 reductions, through creation of leading renewable energy and CO2 capture industries, creates jobs, growth, profits and improves the competitive position of the U.S.
What Americans need to realize is that there are already billions of dollars being invested in renewables and billions more being invested in CO2 capture through markets that reward every single ton of reductions.
Fortunately, we do know what to do.
We need to unleash the power of the $83 trillion dollar pool of investment capital now available by throwing the bone in the right direction. We need to create structures that allow competitive return on investment from two things. One is the creation of energy from renewable sources that don’t use fossil fuels so that we can create wealth and abundance with less CO2 emissions. The other is the creation of a new industry here in the U.S. that captures CO2 from the air with technical solutions and land management.
Friday
Adam Davis bio
Adam is the President of Solano Partners, Inc., a consulting firm focused on environmental investment and conservation finance issues. Recent projects have addressed the use of conservation and restoration incentives on Trust Lands and in the Puget Sound Partnership, and the use of these incentives in Foundation grantmaking strategy.
He is a Co-Founder and previous Editor-in-Chief of the Ecosystem Marketplace, a global information service on market mechanisms and financial incentives for conservation. Adam is a member of the Advisory Council for the Aldo Leopold Leadership Program which provides training for environmental scientists from across the
Adam served as Director of the Environment Division for EPRIsolutions, a consulting firm owned by the Electric Power Research Institute. This Division of EPRI develops financial value from land and ecosystem conservation strategies for private sector clients. His team there used the sciences of ecological economics, restoration ecology and conservation biology, combined with decision analysis tools, appraisal methods and tax strategies to enable market based conservation choices.
Adam got his start in business by driving a truck and operating a front-end loader for a local composting company. He became fascinated by the whole question of economic incentives for environmental outcomes, and he ended up spending nearly ten years at Waste Management, Inc., the world's largest recycling and solid waste management company. While at WMI, he implemented programs to recycle a wide range of materials including tires, motor oil, and construction and demolition debris, as well as more traditional curbside stuff. He conceived and developed collection and marketing systems that now process and recycle over 500,000 tons of green waste each year in the
Adam lives in San Rafael, California with his wife of 20 years,
Contact Information:
President, Solano Partners, Inc.
Office: (415) 462-0163
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