The Great Transformation

The 42nd World Economic Forum in Davos has closed and the rich, powerful and famous have returned home. The theme of this year’s annual meeting was ‘The Great Transformation: Shaping New Models.’ The opening day set the scene with accusations from Sharan Burrow, General Secretary of the International Trade Union Confederation (ITUC) that widening income inequality and high unemployment, especially among young people, are an indication that the capitalist system has failed society. David Rubenstein, Co-Founder and Managing Director of the Carlyle Group, a private-equity firm offered a defence of capitalism using the old adage “Capitalism may be the worst economic system except for any of the others.” The problem, he explained is not capitalism but a lack of investment in education and failure to promote innovation and creativity. We have heard all this before but where does it leave us in the search for a new model of capitalism?

Has the Davos Economic Forum made progress with setting off a great transformation? I fear not; despite the good words and recycled arguments there was little sign of breakthrough ideas or even a willingness to acknowledge deep rooted problems with the global economy and world society. It seems to have become fashionable to talk about each of the challenges the world faces, complete the conversation and move on to the next issue. An example which illustrates the point is ‘climate change’. Already there is danger I will lose the reader at this point – “Oh no, not climate change again, we did that a few weeks ago, let’s move on”. Climate Change may not be the most severe problem we face but it is high up on the list of important and intractable problems. Following the Durban climate talks, there is now an agreement to start discussing an agreement to be finalised by 2015 to come into force by 2020. The conversation is regarded as closed and discussion moves onto more immediate urgent issues such as the financial crisis in the euro zone. There is confusion between what is ‘urgent’ and what is ‘important’.

It is time that world leaders stopped continually hopping between the issues responding to the apparent urgency of immediate crisis and use forums like Davos to focus on the really important issues and the tough choices that have to be made. The world badly needs real-world solutions and a new model for the economy and society. I argue that the new model is ‘proximization’; it is my model so it is not for me to decide if it is the best model but it is better than the alternatives. In a world of many problems and few solutions, ‘proximization’ of human society and the economy truly does offer the prospect of a great transformation.

More UK Airport Capacity

Extrapolation of growth trends in aviation leads to the conclusion that the South East of England will run out of airport capacity sometime before 2020. But predictions of continued growth of conventional aviation are based on the assumption that aviation will remain largely exempt from policy to reduce carbon emissions (noting that the inclusion of aviation in the EU ETS will have little real impact).

The arguments put forward in defence of business-as-usual, range from ‘aviation is vital to the economy’ to ‘emissions are only 2-3% of global emissions’ so policy makers should look for reductions elsewhere. These are attractive arguments, allowing policy makers to ignore the challenge of drafting sustainable aviation policy. As the UK government shapes its new aviation policy through 2012, I hope it does not take this easy detour but tackles the issue head on and grasp the opportunity to move aviation into a new era.

Until policy makers carry out the research and deep analysis and that should underpin sustainable aviation policy, the current debate about building new airport capacity is at best premature, at worst just froth and posturing by vested interests. Green campaigners are no better, refusing to acknowledge that engineers could transform aviation to dramatically reduce the environmental impact allowing us to fly with a clear conscience – if politicians give the engineers an appropriate policy framework. Greens should be arguing to change policy, not arguing against flying per se.

The environmental impact of aviation can and should be reduced. This must be the foundation of sustainable aviation policy. Accepting this, would be a big step forward to a real debate.

Blue Monday

High debts, high anxiety and highly polarised society are all good reasons to be blue, coupled with high pressure over the UK giving cold weather and Christmas holidays a distant memory remembered only by an expanded waistline. This is the day of year when we are at our lowest ebb.

Today is also the day of publication of ‘The Pursuit of Happiness’ a report by the Institute of Economic Affairs (IEA), commissioned by UK Prime Minister David Cameron. It is expected to refute the results of previous research reported in Green Outcomes in the Real World: Global Forces, Local Circumstances, and Sustainable Solutions:

‘increases in average individual income correlate with measures of quality of life up to an annual income equivalent to $10,000; the relationship no longer applies with increases to income beyond this level. We get richer but we do not get any happier.’

According to the Sunday Times, the team of academics who wrote the IEA report have concluded that ‘there is no evidence’ for a ‘satiation point’ beyond which income is not linked to an increase in happiness. This will be seized upon by those who believe that GDP is the only true measure of progress to justify a narrow focus on economic outcomes in government policy. Where the authors of the report are correct is that attempting to use government policy to control happiness is not likely to succeed but I stand by my assertion that GDP is too limiting:

‘I leave it to others to work out what might be the best parameters, but we can be sure that GDP will be a poor measure of how we are doing when it comes to building a sustainable world. Governments should move away from using growth in GDP as their prime measure of success. GDP is, indeed, likely to continue to grow but it is the wrong measure and the wrong target.’

Imagine that the IEA report writers did their research whilst traveling on the Titanic enjoying good food, good company and the prospect of a safe luxurious journey. Sitting in the Dining room it would be easy to refute ideas that something terrible might be on the way and ignore the safety briefing about muster points and lifeboats. If they had gone up to the bridge and surveyed the ocean, the cold, the icebergs and the speed of the ship, they might have drawn a different conclusion. Looking through the lens of sustainability, taking in a wide range of factors, is like being on the bridge of the Titanic. We need to slow down and ensure that we don’t smash the ecosystem on which we rely to live well; that means reining in consumption and moving away from the uncertain assumption that monetary wealth correlates with happiness.

Zayed Future Energy Prize

The Zayed Future Energy Prize will be awarded at the World Future Energy Summit in Abu Dhabi, 16-19 January 2012.

‘Through the prize, we honour the legacy of environmental protection and concern for conservation established by Sheikh Zayed bin Sultan Al Nahyan, the late ruler of Abu Dhabi and the Founding Father of the United Arab Emirates. By honouring and rewarding those people who are tackling the energy crisis today, we hope to educate and inspire future leaders and innovators. Creating a sustainable energy future is the surest way to combat the impending threat of climate change and global warming, and to ensure a clean, liveable environment for future generations.’

This prize is a fitting legacy for a good man. Sheikh Zayed was the founding father of the United Arab Emirates (UAE) and President until his death in 2004. It was rumoured that he was the world’s richest man with control of something like 10% of the world’s oil reserves. Despite great wealth he lived a pious life and ruled with compassion and tolerance. He shared the wealth with his people and was a champion of conserving the biodiversity of the desert environment. This legacy of environmental sensitivity and concern for the conservation is the driving force behind Abu Dhabi's focus on clean energy.

The extreme wealth of the oil nations of the Middle East is a temporary aberration which will last as long as there remains oil to pump, or as long as the world remains addicted to oil. Which will come first, the end of oil or the end of the world’s craving? Either way the rulers of the Middle East have to plan a sustainable future for their people beyond the era of oil; and the rulers of Abu Dhabi are leading attempts to find a way.

Zayed Future Energy Prize is a small part of Abu Dhabi’s search for a sustainable future. The main investment into a more sustainable future is the Masdar project, reflecting Abu Dhabi’s vision for 2030. It comprises a number of elements including a research institute, a renewable power company, investment fund and the iconic centre piece, Masdar City. Aspiring to be one of the most sustainable cities in the world, situated close to Abu Dhabi, Masdar City is a ‘high-density, pedestrian-friendly development where current and future renewable energy and clean technologies are showcased, marketed, researched, developed, tested and implemented’.

‘The city, which at full build out will house 40,000 residents and hundreds of businesses, will integrate the full range of renewable energy and sustainability technologies, across a living and working community.’

Abu Dhabi has bold ambitions and massive oil wealth to be able to deliver the vision but it will still be a huge challenge. Whilst oil revenue flows, Masdar will grow and expand but it will have to be sustainable beyond the era of oil. Abu Dhabi has the potential to be an oasis of high-tech, high quality green living in the deserts of the Middle East. Each country will have to find its own route to sustainable living and it is perhaps fitting that the winner of the Zayed Future Energy Prize will be decided by a jury chaired by a world leader with a different challenge: Ólafur Ragnar Grímsson President of the Republic of Iceland.

Fly and be Damned

From 1 January 2012, airlines are included in the EU Emissions Trading Scheme. This requires airlines flying into Europe to hold EU Allowances to cover carbon emissions from their flights and operations. The bulk of these will be provided free based on the airline’s historical aviation emissions averaged over the calendar years 2004, 2005 and 2006. Additional allowances will have to be purchased. With the price of EU ETS Carbon Trading Permits hovering around €8, this will cost airlines up to €1bn ($1.4bn) in 2012 rising to perhaps €10bn ($14bn) by 2020.

The additional cost to airlines is minor compared with their fuel bill but the measure has met with a barrage of complaints from the aviation industry. US airlines are particular opposed arguing that the measures represent a tax and therefore contravenes international law that prevents countries from levying tax on aviation fuel. In a letter dated 16 December leaked to the Financial Times, Hillary Clinton, US Secretary of State wrote to her counterpart at the European Commission, Catherine Ashton, to express US displeasure warning that the US government will be “compelled to take appropriate action” if ETS application to US carriers is not removed.

One of the more bizarre complaints comes from The International Air Cargo Association (TIACA). The group wrote to EU climate commissioner Connie Hedegaard claiming the scheme would divert investment away from cleaner technologies, such as biofuels or more efficient engines. This is an odd claim to make in an industry that pays no tax on its fuel. Taxing fuel or carbon, or both, is the way to drive forward investment in more efficient engines and more efficient aircraft. To attempt to persuade politicians otherwise makes the industry look ridiculous.

The airlines will pay up and get on with their business. The inclusion of airlines in the EU ETS will have very little effect on airline profits and very little effect on the emissions from aviation. The huge furore has been more about holding back future action over aviation emissions. The industry is terrified that the EU ETS could be a trip wire to a process leading to real action over aviation and climate change.

My immediate advice to the aviation industry is to invest in purchasing all copies of the first print run of my book Fly and be Damned: what next for aviation and climate change when it comes out next month. Delaying copies getting into the hands of the politicians will give airlines a little more breathing space. When politicians and policy makers digest its contents they will understand that the EU ETS is not the end but only the first small step on a long journey to a sustainable aviation industry.