The Arctic Today

Last week I attended an E2 (Environmental Entrepreneurs) presentation on the arctic at Google headquarters. Going into the event, I had some pretty basic associations and assumptions of the Arctic. I think of glaciers, polar bears, seals, shipping, and the Race to the North Pole. I know the world's climate depends on the cooling effect of the Arctic glaciers, as global ocean currents pull cold Arctic water south, giving us mild temperatures and cool ocean breezes in California.

I also know that the Northwest Passage opened for the first time in 2007, and while this red flag went mostly unnoticed, the shipping industry gained an exciting new shipping route between Asia and North America. This also opened up the Arctic for all kinds of capitalistic interests, from its oil reserves to fishing and shipping.

Since I go to these kinds of events, I've also heard about the polar bear population declining with its habitat, and sad tales of polar bears drowning because the distances between icebergs is growing. These animals have become the pinnacle of the environmental movement, as they became the first animal listed as endangered by the US Dept of Interior from the effects of climate change in 2008.

However, I did learn many new things at this event. As the event was held at Google headquarters, we started with an overview of the information Google Earth has on this very topic. Within Google Earth, you can download a Sea Ice Index from the National Snow and Ice Data Center, and watch the satellite images of shrinking ice rapidly gain momentum in the last five years. These Google Earth screen shots are winter images of Arctic ice in both 1978 and 2008. Run the tool for yourself, and you'll also be surprised at the shocking rate the ice disappears between 2000 and 2008.
I was pretty impressed with the breadth and quantity of global awareness information Google has built into its application, making it a broadly informative and educational tool. As these glaciers continue to melt, what might happen? I believe we are already seeing some effects, although the causality may not have been ascribed.

Another big topic at this event was the fishing of the Arctic. Unbeknownst to me, the Arctic territory does not have agreed-upon national borders. The US, Canada, Russia, Norway, Denmark and Iceland all have placed claims to the territory, which are estimated to have 1/5 of the worlds remaining oil reserves. This political bombshell needs to be resolved quickly, as capitalist interests move into the area. Fish in the Arctic Ocean are unlikely to obey superficial boundaries, so these countries will have to work together for a standardization of fishing guidelines. However without formalized borders, these countries are at a stalemate for any fishing agreement. Like many ecosystems existing in extreme conditions, the sealife in the Arctic is superbly precarious. Any overfishing by one country, of just one fish or animal, could throw the entire ecosystem out of balance. As the speakers from NRDC, the Milken Institute, and the US Coast Guard emphasized, this ocean is our last chance to use an ocean responsibly. Let's not blow it.

Sure, climate cycles are cyclical. Yes, Earth is bound to warm, and then cool. Perhaps we won't slow this warming trend that we have significantly sped up. Perhaps some species will fail as a result of our activities, since they will not have time to adapt. But are humans adapted to deal with a completely different climate? Based on our ultra-reliance on air-conditioning, heat, and other fossil-fuel based comforts, I think not. You might say I'm an environmentalist. I happen to think it's the other way around. The Earth is going to be fine; it always is. I'm not worried about the Earth. I'm actually a humanist, fighting for our habitat to remain intact, so we can continue to flourish. Is that so progressive?

Tesla Re-Designs the Auto; In House.

Recently I had the privilege of touring Tesla Motors, the luxury electric vehicle manufacturer. Tesla is known for their high-end Roadster, which can go from 0-60mph in 3.7 seconds, and has a not-too-shabby range of 245 miles. Hey, that'll get you to Tahoe in one shot. This beauty of a car is accompanied by a luxury price range, upwards of $100K.

Tesla is now in pre-production for its sleek new car, the Model S. I'll admit that I'm pretty impressed by this sedan, which is all about no compromises. Tesla forecasts the Model S will be hitting the market in 2012.

While the products are selling points alone, what has impressed me the most about Tesla is its operational strategy. Tesla, contrary to popular business trends, has decided to vertically integrate as much of the company as possible. Tesla is taking complete control of the battery cells, battery, drive-train, and more. This type of hyper-vigilance has given them what they view as their competitive advantage. The best engineering, combined with the highest quality manufacturing, translating into a superior product. What's astonishing about this company's model is that it runs in completely the opposite direction of the auto industry as a whole. This is a bold move, but in light of recent bailouts and outsourcing issues, perhaps now is the time to buck industry norms.

For example, Tesla has decided to operate its own retail stores, as opposed to licensed dealers. This gives it not only quality control of the sale interaction, but also increased margins previously lost to dealers. After the sale, Tesla is able to provide direct support to customers, and have a straightforward relationship with its customer, ultimately translating to brand loyalty.

To me, all this bears a striking resemblance to the Southwest Airlines story. Southwest came into an archaic market, and shook things up wildly by examining those missing revenue opportunities, and re-designing the process from the ground up. When the airline industry was moving towards luxury travel, Southwest simplified the whole concept of air travel, and its hair-splitting cost-efficiencies proved to be the bellwether through rocky financial times for the rest of the industry. While Tesla is certainly not modeling after Southwest, this concept of fresh ideas to re-design an old market is worth noting. Might we see other auto manufacturers model the Tesla way after a few years of success?

From a consumer standpoint, I am impressed by the results. The new ironclad battery for the Model S actually runs thinly under the car, almost negating the need for engine space. For this reason the Model S was given a best-in-class storage ranking, and boasts a carrying capacity of 5 adults and 2 children. This undercarriage battery serves as an additional safety feature of the car, as it further reinforces the frame.

While the price is a bit high for many sedan-drivers at ~$60K, Tesla has run the numbers on operating savings, comparing a full battery charge to about the same price as a single gallon of gas. The price of operating a Model S is substantially lower over the life of the car, with many federal and state tax credits to boot. For a person considering a luxury sedan in 2012, to me the choice, monetarily, environmentally, and domestically, is a sleek new Tesla Model S.

Middle East triumphs and US failures

I've been thinking a lot about the Middle East lately. Entirely coincidental to current events, I've been reading a lot of books by thought leaders from the Muslim world, hoping to understand more about the (historically recent) precarious balance of Islam and democracy. This reading has sent me to Benazir Bhutto, who no doubt is sending cheers of joy from the beyond for Egypt and Tunisia.

In her book 'Reconciliation', Benazir Bhutto systematically dissects the influence the West has had on these Middle Eastern and North African dictatorships. Ms. Bhutto paints a picture vastly different than any Westerner could learn from a textbook or the media. She shows the contradictory stances on democracy the US, Britain and France have had to advance their own political and economic gains. I tend to think it might not be the Western world's place to bring democracy to other nations. However, it's certainly not our place to oppose or suppress the spread of democratic institutions, and especially not to provide assistance to oppressive regimes. Ms. Bhutto's aim is not to throw the West under the bus. On the contrary. Her point is to unveil the twisted systems that have led up to this point, and illustrate how Middle East countries can live in harmony with democracy, the West, and Islam.

Here's one tiny example in a long and complex relationship between the West and Middle East: The United States worked with the Pakistan Intelligence Service in Afghanistan during the Cold War to help conquer Soviet invasions. This relationship developed into full support of several Afghan rebel groups, including one led by the religious zealot named Gulbuddin Hekmatyar. While Hekmatyar was outspoken about his disklike for Soviets, he was equally anti-Western. Despite this, the US showered Hekmatyar with funds, training, and high tech arms (including the effective Singer antiaircraft missiles). After the Soviets pulled out of Afghanistan, the US celebrated success, ignoring the fact that it had empowered and enabled known democracy-haters. The US packed up and left the now war-torn country, not assisting with any of the rebuilding of political systems or infrastructure it had invested billions into tearing apart. This strengthened the voraciousness of the mujahideen coalition, giving them a common hatred around which they could organize. I'll skip a couple of chapters, and tell you that the end game resulted in the creation and growth of the Taliban. And so, in our eagerness to shut down the Communists during the Cold War, we spawned and fed our next enemies. How will our assistance (or lack thereof) play into new political systems in the Middle East and North Africa?

When the protests began in Egypt, the United States, had it not needed to protect its relationship with Mubarak, should have thrown its full weight and public support behind the protests. But you saw how that panned out. Instead, we saw wishy washy statements coming from the White House, intended not to offend the government.

Which brings me to Saudi Arabia. While the US has interests in Egypt, these pale in comparison to the dependency we have on the Saudi government. We depend on full access to pipelines, reserves, and infrastructure. For this, we also need a level of predictability in our governmental relations. The Saudis most certainly deserve the same level of democracy that we and these other countries demand. But how will the White House react when (and I do believe this is when, not if) these protests begin? Will our unrivaled access to cheap and dirty oil be compromised with the rise of rebel groups overthrowing the government?

If our access to Saudi Arabian oil is threatened, in any way, I'm very concerned about the environmental consequences which may unfold. Without our constant supply of cheap, dirty oil, we'll be forced to look for oil elsewhere - even within our own continent. And the oil that is available here is significantly harder to drill and refine, making it exponentially more energy intense. This oil includes the tar sands reserves in the Boreal forest in Alberta, or coal-to-liquid technology in the South. Both of these fuels are equivalent to a car spinning its wheels on ice - you're using way too much energy to get very little distance.

This type of last minute fire drill is very unfortunate. We've seen this coming. We've known we need to invest in clean domestic energy for decades now, but have let our own politics get in the way of something that is in our own best interests. Jon Stewart has a tragic its-funny-because-its-true monologue on this failed energy plan, one administration after another.

What really chaps my hide here is that I find myself not knowing whether to hope for Saudi independence or not. I hate that my country's lack of planning will affect the Saudis and their bid for democracy. I hate that one nation's triumph might mean terrible energy and environmental choices here.

So Saudi Arabia, do what you will. We are going to have our hands full of tough choices in the days after your impending success.

Prop 23 would kill advanced biofuels

I was published in Triple Pundit yesterday. Please check out my article!

NO on Prop 23

California is facing a very dangerous proposition this fall. Prop 23, the so-called "California Jobs Initiative" would suspend AB-32, California's comprehensive climate change bill. AB-32 calls for greenhouse gas emissions to be capped by 2020 at the levels emitted in 1990. This requires aggressive emissions reductions within the state, and provides massive opportunities for clean tech companies & policies.

However, Prop 23, also called the "Dirty Energy Prop", has been funded by Texas oil companies like Valero and Tesoro to suspend AB-32 until unemployment levels fall below 5.5% for four consecutive periods. This has only happened three times since 1976. In effect, Prop 23 would suspend AB-32 indefinitely, putting a hold on California's clean energy economy & investments.

It's of crucial importance that California send a clear message on November 2: NO on Prop 23. We must push forward with our clean energy policies. Not only does Prop 23 need to be defeated, but it needs to be defeated with such resounding force that any future attacks on AB-32 will heed the warning: California means it. Our businesses want AB-32, our residents want it, and our government wants it.

Consider the effect of AB-32 on the budding advanced biofuel industry. The Low Carbon Fuel Standard (LCFS) is a regulation under AB-32, requiring a 10% reduction in the carbon intensity of fuels sold in California by 2020. It is one of many approaches California is taking to address its aggressive AB-32 targets, including greater fuel efficiency and vehicle electrification.

In order to reach this 10% reduction in carbon intensity, fuel distributors will blend biofuels into standard fuels, creating a large, guaranteed market for the fuels with the lowest carbon intensity. Such a market guarantee results in a windfall of investment in advanced biofuel companies, and correlated job creation. Supporting AB-32 supports regulations like the LCFS, and ensures that these companies continue to grow and operate inside California.

Many of these biofuel companies are in the process of demonstrating their ability to scale production. Reaching this stage of development required a substantial amount of investment (and jobs) which was the result of signing AB-32. The loss of AB-32 would squelch this entire industry, and be a significant step backwards in our clean tech innovation.

Rather than invest in biofuels or innovative transportation solutions, Valero and Tesoro continue to grasp at straws to protect their billions of dollars in profits and old investments in dirty energy. Send the message loud and clear: We're sick of old, dirty energy. Give us clean energy, new technology, new solutions.

Energy 2010

As the BP oil disaster continues to unfold, Americans are reminded of the necessity to phase out old, dirty fuels, and begin to use clean, domestically produced renewable fuels - fuels that can last forever without compromising our air or water. Never has there been a more opportune time to advance our biofuel investment and technology.

It's been a busy week in the world of biofuel news, with rumors of a Low Carbon Fuel Standard possibly becoming part of an energy and climate package on the senate floor next week. Also, the biofuel community has been buzzing about a recent Congressional Budget Office report, and either applauding or reaming the results of the study. The study calculates the true costs of corn ethanol in light of tax credits and subsidies. This has directly led to the other big piece of news: the Volumetric Ethanol Excise Tax Credit (VEETC) looks like it will probably be allowed to run out in 2010, which is disappointing news for ethanol producers. This tax credit subsidizes blenders (read: Big Oil) to purchase ethanol. Paradoxically, this blending is already mandated by law, and so we are paying oil refiners to do something they are already required to do. The ethanol industry might lose a small portion of its market share without these tax credits, and they are still fighting to keep these antiquated credits in place.

Through all this hubub, it's the 11th hour of trying to get a new national energy policy passed through Congress, and Friedman does a good job of showing us why this is cause for concern. Biofuels will continue to exist and receive investment as long as AB-32 exists in California and is modeled in other states. However, we need the US to recognize that new, domestic energy might require some upfront investments. Sadly, it's looking grim for the sweeping changes we need, and we might have to settle for Reid's push in the fall.

This week the pundits are all equally disappointed in the lack of energy policy changes. With a democratic majority and a massive environmental disaster, there could not be better timing for a paradigm shift. However, Obama's pre-election rhethoric has not been matched by post-election action. Energy policy has simply been a lower priority than healthcare or Afghanistan. I agree that these other issues are pretty hot fires, but these are also symbolic of remarkably shorter-term thinking. Long-term, strategic planning would make us consider our position as a slipping world leader. How can we secure our national economy, security, and have the money to fix our healthcare system? We need to stop sending our money overseas for our growing energy needs. We need to invest in existing sources of energy (both electricity and fuel) that will never run out, and that do not pollute our air or water. We can do this by investing in renewable fuels and energy sources that create jobs here, now. We can invest in a new grid system, renewable energy, our public transportation system, and demand more efficient vehicles and fuels. And yes, all these cost money. Quite a bit, in fact. But that's exactly where the problem lies. We can all agree that we need domestic energy, but we won't pay for it. Well, if we don't put our money where our mouth is, then we can't start investing, creating jobs, recirculating money inside the country, putting money back into our healthcare or schools. We will just keep sending our money overseas. Consider that energy policy could be part of the solution to the other issues.

Energy policy could be the key. It could be the pivotal issue that tips the scales in our favor on all other issues, and secures our stronghold as the world power. It can stabilize our economy. Our legacy could be defined based on this single issue. I still hold out hope that we might see the energy policy we need push forward this fall. But is it too late?

Replacing oil with sugarcane

Following up last week's post, I'd like to highlight some biofuel companies that make scientists in lab coats look sexy. First of all, you should know the difference between a biodiesel and a renewable diesel. Biodiesel indicates that some sort of engine conversion is necessary, while renewable diesel alludes to a drop-in fuel. Drop-in fuels are able to go directly into your traditional fuel-combustion engine, no conversion needed. Genius.

Secondly, you should know that many of these biofuel companies believe that as the electric grid goes renewable, personal transportation is likely to go electric, too. Most of us can get to work and run our errands on an average electric charge. However, fuels that will stay liquid for the forseeable future include shipping, military, and aviation. Liquid fuels provide more energy and greater range, and are indispensible for these uses. (Yes, I did see the plane that flew 24 hours on solar, but even they don't have any grandiose plans to make the Air Force go solar) With all this in mind, many biofuel companies are targeting diesel & jet fuel as their fuels of the future, since these will not be outdated with advances in personal transportation.

Bearing this in mind, I'd like to introduce you to Amyris Biotechnologies. Amyris is located here in Northern California, and is perfecting its substitution of petroleum. A few Berkeley PhDs started a project to create a low-cost anti-malarial drug, artemisinin. Once they accomplished this goal, they decided to look further. This, and a common love of beer, made the three founders develop a special fermentation process that they realized could be modified to replicate countless chemical compounds. Using a sugarcane input, the fermentation process can yield nearly anything oil can: a cosmetic base (they recently partnered with Proctor & Gamble), plastics, fuels, and plenty more. Their facility is one huge laboratory after another, showing that as soon as they nail one product, they are off and testing another. They are currently showing the functionality of their distribution system by selling third-party ethanol. According to Amyris, this is a short term solution to get some revenue in the door, and get their relationships with suppliers and distributors on solid ground. They hope to be a full scale producer as early as next year. With a recent minority-share purchase by Total, they seem to be positioned and ready.

Amryis has plenty of challenges in the short term: finding a sustainable source of sugarcane, demonstrating it can produce its fuels at scale, deciding whether or not to go public, and doing this all while keeping beer & burritos a Friday tradition.

It's companies like this that give me hope for the future. Amyris provides jobs, is producing fuel domestically, and has an environmental conscience. While adding to our economic, social and environmental bottom line, they also stand to gain through California's climate legislation - AB32. I support this legislation, and any company that will benefit from AB32 is a company I want to see flourish in California. There are dozens of other fascinating biofuel companies like Amyris out there, and I will continue discussing more next week.