A panel of financial and environmental experts spoke on Oct. 2 in the KJ auditorium on the topic of "Market Sustainability." The event, which was sponsored by the Levitt Center, featured Charter Trustee Rich Bernstein '80, Bob Fryklund '80, and Associate Professor of Economics Julio Videras. The panel was moderated by Associate Professor of Economics and Director of the Levitt Center's Sustainability Program Ann Owen.
First to speak was Videras. He opened by stressing the importance of corporations, the largest emitters of harmful carbon dioxide, reducing their ecologic footprint by adopting environmentally friendly practices. The simplest and most obvious way to enact such change would be by changing the law and mandating firms to meet certain standards. This, however, would be costly and subsequently upsetting for major corporations. Corporations would be much more receptive to change if there were incentives to deliver it.
One of three solutions to the ecological dilemma is to create markets for carbon dioxide, which would encourage coal-burning plants and other industrial polluters to sell their carbon dioxide rather than pump it into the atmosphere. Although in its beginning stages, the business of buying and reselling industrial CO2 to oil and coal companies that can make use of it is not unheard of.
Second, there is a market for individuals and institutions to pay to offset their own carbon emissions. Videras pulled up the Web site Terrapass, which can approximate the CO2 that can be given off by anything home energy use to weddings. Videras typed in hypothetical numbers for a fictional wedding, and seconds later learned that the modest wedding he had planned would be responsible for more than 237,000 pounds of carbon dioxide, and also that he could offset the environmental cost of the emissions with a payment of $1,416.10, which Terrapass uses to fund carbon reduction projects.
Last is the option of tradable permits. In this option, the government sets a cap on the amount of CO2 that can be released, and sells permits that allot a certain amount of CO2 to be emitted. In order for a company to be able to give off any carbon dioxide at all, it would need to own a permit. Permits could either be given out for free (grandfathering), or sold at auctions. Either way, it is estimated that the worldwide market for permits is worth in excess of $60 billion.
Next to take the floor was Rich Bernstein, Merrill Lynch's chief U.S. strategist and chief quantitative strategist. Bernstein, after conceding that he was not an expert in the field of green energy, spoke mostly on the economic aspect of market sustainability.
Investors, since the beginning of the 21st century, have had an unfounded preoccupation with suave, green energy companies. Some clean technology companies sell at 400 times their earnings, often only on private markets, making investments virtually impossible. But, because clean technology will not peak for at least another decade, the volatility of these stocks on public markets often makes them undesirable.
There has also been a misconception that investors looking for "value-based investing," screening and investing in companies based on the company's green policies, will always underperform. In fact, the corporations that screen better on socially-responsible issues are the largest, most well-known businesses, simply because smaller companies do not have the financial resources to make ecologically-friendly changes.
Bob Fryklund, the final speaker, is vice president, industry relations, for IHS, a leading provider of information services to industries in the area of engineering and energy. Fryklund asked the audience first to take a moment to close their eyes and imagine a world with no cell phones, no television, and no technology of any sort. That, just a few weeks ago, was 2.5 billion people in the city of Houston.
The energy world, in our time of the oil crisis and shift towards renewable resources, is at a crossroads. Because our oil resources in the United States are running dry, the energy supply has shifted to an even more drastic emphasis on foreign countries, not only in the Middle East but also less traditional regions such as West Africa and Brazil.
Oil companies control more than 75 percent of oil reserves, and in these tough economic times, they have asserted this control to an even larger extent than before, jacking up prices and scaring consumers into believing that the crisis is worse than it actually is, creating volatility in the energy sector of the stock market.
Fryklund also addressed the issue of peak oil, and what he called the "myth" of energy independence. So far, about one trillion barrels of oil have been used, and most people would not believe that there is still that much oil in reserve and located in oil fields across the world. Oil companies would have consumers believe that there is far less oil on reserve than there actually is because it gives them an excuse to raise prices and, consequently, revenue. He also asserted that, no matter how vast the energy resources of a country, no country can get by without importing energy from foreign sources, summarizing his lesson that any change in the energy market has global financial implications.
Audience members asked why politicians did not bite the bullet and raise taxes drastically on gasoline to reduce use in the United States. Videras said this could be done but that it would be politically difficult to do, a reiteration that ordinary people have to take the lead in initiating global change.
-- by Patrick Dunn '12
First to speak was Videras. He opened by stressing the importance of corporations, the largest emitters of harmful carbon dioxide, reducing their ecologic footprint by adopting environmentally friendly practices. The simplest and most obvious way to enact such change would be by changing the law and mandating firms to meet certain standards. This, however, would be costly and subsequently upsetting for major corporations. Corporations would be much more receptive to change if there were incentives to deliver it.
One of three solutions to the ecological dilemma is to create markets for carbon dioxide, which would encourage coal-burning plants and other industrial polluters to sell their carbon dioxide rather than pump it into the atmosphere. Although in its beginning stages, the business of buying and reselling industrial CO2 to oil and coal companies that can make use of it is not unheard of.
Second, there is a market for individuals and institutions to pay to offset their own carbon emissions. Videras pulled up the Web site Terrapass, which can approximate the CO2 that can be given off by anything home energy use to weddings. Videras typed in hypothetical numbers for a fictional wedding, and seconds later learned that the modest wedding he had planned would be responsible for more than 237,000 pounds of carbon dioxide, and also that he could offset the environmental cost of the emissions with a payment of $1,416.10, which Terrapass uses to fund carbon reduction projects.
Last is the option of tradable permits. In this option, the government sets a cap on the amount of CO2 that can be released, and sells permits that allot a certain amount of CO2 to be emitted. In order for a company to be able to give off any carbon dioxide at all, it would need to own a permit. Permits could either be given out for free (grandfathering), or sold at auctions. Either way, it is estimated that the worldwide market for permits is worth in excess of $60 billion.
Next to take the floor was Rich Bernstein, Merrill Lynch's chief U.S. strategist and chief quantitative strategist. Bernstein, after conceding that he was not an expert in the field of green energy, spoke mostly on the economic aspect of market sustainability.
Investors, since the beginning of the 21st century, have had an unfounded preoccupation with suave, green energy companies. Some clean technology companies sell at 400 times their earnings, often only on private markets, making investments virtually impossible. But, because clean technology will not peak for at least another decade, the volatility of these stocks on public markets often makes them undesirable.
There has also been a misconception that investors looking for "value-based investing," screening and investing in companies based on the company's green policies, will always underperform. In fact, the corporations that screen better on socially-responsible issues are the largest, most well-known businesses, simply because smaller companies do not have the financial resources to make ecologically-friendly changes.
Bob Fryklund, the final speaker, is vice president, industry relations, for IHS, a leading provider of information services to industries in the area of engineering and energy. Fryklund asked the audience first to take a moment to close their eyes and imagine a world with no cell phones, no television, and no technology of any sort. That, just a few weeks ago, was 2.5 billion people in the city of Houston.
The energy world, in our time of the oil crisis and shift towards renewable resources, is at a crossroads. Because our oil resources in the United States are running dry, the energy supply has shifted to an even more drastic emphasis on foreign countries, not only in the Middle East but also less traditional regions such as West Africa and Brazil.
Oil companies control more than 75 percent of oil reserves, and in these tough economic times, they have asserted this control to an even larger extent than before, jacking up prices and scaring consumers into believing that the crisis is worse than it actually is, creating volatility in the energy sector of the stock market.
Fryklund also addressed the issue of peak oil, and what he called the "myth" of energy independence. So far, about one trillion barrels of oil have been used, and most people would not believe that there is still that much oil in reserve and located in oil fields across the world. Oil companies would have consumers believe that there is far less oil on reserve than there actually is because it gives them an excuse to raise prices and, consequently, revenue. He also asserted that, no matter how vast the energy resources of a country, no country can get by without importing energy from foreign sources, summarizing his lesson that any change in the energy market has global financial implications.
Audience members asked why politicians did not bite the bullet and raise taxes drastically on gasoline to reduce use in the United States. Videras said this could be done but that it would be politically difficult to do, a reiteration that ordinary people have to take the lead in initiating global change.
-- by Patrick Dunn '12
