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Article

7 Sep 2006

Author:
Economist

A coat of green

Business seems to be buzzing with green activity. Newspapers are full of advertisements from companies parading their environmental credentials. Some of this is driven by consumers. Greenness has become a moral issue, and companies such as Wal-Mart, which are seen by some as oppressing their workers and destroying communities, can improve their image by looking good environmentally. Some of it is driven by recruitment...Some of it is about saving money...Most of the wave of greenery, however, is driven by government. Companies are investing in climate-friendly products and processes because governments have changed the rules to make it worthwhile doing so, and because companies believe that there will be more of the same in the future...Economists were arguing for a carbon tax. Industry wanted emissions limited by quantity, rather than by price...Industry won. Economists argued that the most efficient way to run the system would be to auction permits to emit CO2. Industry wanted permits handed out free. Again, industry won...But there is more than just lobbying going on. Climate-change regulation, and the prospect of more of it, is changing the way business thinks about carbon and leading it to invest in new areas. The Shell greenhouse project is an example of how regulation drives investment...And there is a bit more investment in cleaner technology and renewable energy than there used to be...But the green-business boom needs to be kept in perspective. Take BP, which announced last November that it would be investing up to $8 billion in renewables and alternatives over ten years. It sounds a lot, but at this year's rate of capital spending it would be only 4% of BP's total over that period. Shell is spending $1 billion on renewables over five years. GE has made much of Ecomagination, which is made up of 32 clean-technology products...much of the Ecomagination product list is made up of new, somewhat more efficient, versions of old products...GE, BP, Shell and their peers all believe that governments will regulate CO2 a bit more in the future than they have done in the past. That will tip the market towards greener technologies, and the modest investments they have made in environment-friendly products will pay off. [refers also to Virgin, British Airways]