Today I read a report by Bloomberg Businessweek that the Senate climate bill, which aims to cut greenhouse gas (GHG) emissions 17 percent from the 2005 level by 2020, could cut U.S. gross domestic product (GDP) by $452 billion , and cost the average household $206 annually from 2013 to 2035.

I do  not want to discuss the merits of the Senate climate bill in its current state — if there are merits at all, but I cannot wonder if we are really measuring the right things.

The problem that I see is that GDP calculation measures and weighs everything the same way, without accounting for effectiveness. A simple example: After we change a power generating process  to use less coal to put the same amount of energy into the grid, GDP goes down. Being more efficient means a negative impact on GDP. Because we consume less, even if we get a better outcome.

GDP rewards waste. Once we increase waste, GDP goes up. This is totally contradictory to any lean management approach, where we try to reduce waste to get more efficient, and where we measure the output of a process by its effectiveness.

To do more with less is sane, responsible and should be rewarded. Measuring the wrong things punishes otherwise useful initiatives. Should we not come up with other metrics than plain GDP to make sure we go into the right direction?

Your thoughts?

Claus Schafhalter, Management Consultant @ Sunogos

A new study issued by the German “Umweltbundesamt” comes to the conclusion that Germany should be able to switch energy production to 100% renewable sources within 40 years. Interestingly the head of the agency, Jochen Flasbarth, states that this is doable with technology that is available today. Building the necessary infrastructure would need decisive action and investment money.

One shortcoming of the study is that they do not include a quantitative cost — benefit analysis. Jochen Flasbarth is quoted “he feels on the save side, as the cost of the switch to alternative energy should be less than the cost of climate change.”

Here is my take: Switch to alternative energy can not come fast enough. Any economy that acts on a well thought out master plan to make the switch could very well be the leader in a wide range of energy technologies and reap economical and ecological benefits. Studies that concentrate on technological feasibility are very well, but not sufficient. There has to be a convincing business case that shows that this switch is beneficial so that  investors and entrepreneurs will invest. The German Umweltbundesamt would be very well advised to augment their study with cost — benefit scenarios and to come up with firm recommendations to the political leadership in Germany. It is very likely that other institutions like the European Union or other sovereign governments could take up the ball and advance the move away from a fossil economy to a sustainable economy.

Leaves me to wonder what the decision maker in our country will be able to do. Looks like any energy plan is stuck in the same old politics between the major parties as so many other things are stuck today. Will the US Administration and Congress be able to come up with a plan to lead us to a sustainable future? I do not hold my breath just yet, looks like climate change, Gulf oil spill and the huge amount of money for fossil fuel paid to foreign countries is not enough to initiate meaningful change.

Your thoughts?

Claus Schafhalter, Management Consultant @ Sunogos

It is no secret that many cities in Europe are bike-friendly, with dedicated bike lanes, paths solely for use by bicyclists, and generally a higher acceptance of bicycle in general traffic.

Still, if you are a person of the more lazy kind, the idea to work out just to get to work or do your shopping, might not be that appealing to  you.

Bring on the E-Bike, a (usually) two-wheeler powered by a small electric motor (and still by your muscles in many cases).

Stuttgart, Germany, known as the city where the Mercedes cars come from, will have a meet of 500 e-bikers on July 4th. This seems to be the biggest e-biker event so far. In Austria, the state of Upper Austria has a successful program to spread e-bikes to its citizens. Applicants can get a small subsidy from the state and enjoy their effortless movements.

Many holiday regions offer e-bikes for rent to discover scenic routes. I remember years ago when my family did a vacation bicycling from Passau to Vienna along the river of Danube. Although the route follows the river downwards all the time, there are many hills and side-trips where the help of an electric motor would have been very welcome. So why not try it out on you next vacation?

Sure, the e-bike will not solve our carbon addiction and use of fossil fuels for most of our transportation needs, but it is a small step into the right direction and has the ability to make m0re people comfortable with electric propulsion.

Claus Schafhalter, Management Consultant @ Sunogos

I am still concerned about what’s going on with the oil spill in the Gulf of Mexico. Previous estimates were that 800,000l oil spill into the sea every day. Some scientists come to the conclusion that it is more likely to be 10 times more! It seems to be consensus that right now nobody knows exactly how much oils streams into the Gulf.

This is what  BP Chief Operating Officer Doug Suttles had to say:

“This data is not easy to capture,” Suttles said. “We actually have to assign some of our technicians to gather that data.”

Yes, clearly someone has to look at this. Does it matter how much oil is leaked?

Well, you can’t control what you can’t measure. This begs the following question:  If BP cannot measure the spill, how do they think they will be able to stop the spill?

Claus Schafhalter, Management Consultant @ Sunogos

Wherever you stand on the global warming debate, one thing is indisputable: Carbon dioxide content in the earth’s atmosphere increased over the last 100 years by more than 25%. And again, wherever you stand on the global warming debate, it should be clear that such a change in CO2 does trigger changes. Whether you think that the earth will get warmer or cooler does not matter for today’s consideration, it is sufficient to accept that there will be a change. And changes either cost or save money.

Economists and scientists across the world are trying to put a price tag (or earning tag) on impacts of changes in the earth’s CO2 Content. I find it pretty interesting to look at some results.

There is one study that combines 88 estimates of the marginal costs of carbon dioxide emissions gathered from 22 published studies. They combined the results to form a probability density function. According to their numbers the cost of emitting carbon dioxide (as calculated per tonne Carbon) shows the mean as $104/tC, and the 95 percentile $446/tC.

A different study calculated the following numbers (Yohe, 2007): Average value of $43/tC with a standard deviation of $83/tC.

These numbers are interesting in itself, however there are two striking things I can take away: There is a cost impact when emitting CO2. However the actual amount of this cost is highly uncertain.

At the end of the day we currently do not know the actual cost of emitting Carbon Dioxide. Okay, does this mean we should wait and see and do nothing? I don’t think so!

Claus Schafhalter, Sunogos

Walmart, the largest US-retailer, makes another move to get more sustainable. This time the targets are specific popular product categories and their suppliers. Suppliers are asked to examine and reduce their carbon footprint by using less energy, less packaging, more efficient processes, etc.

It sounds good and it is good, at least in my opinion. However, if you are one of the suppliers targeted you might feel differently. Walmart makes it clear that they expect greener products from their suppliers. But beware, any costs related to make the products differently will be the responsibility of each supplier.

You can see this initiative from two different perspectives:

1) It is a great idea that an organization as important as Walmart starts an initiative to reduce the carbon footprint of the products it sells. Who could argue with that?

2) A Walmart supplier most certainly already faces high pressure from Walmart to supply goods at rock bottom prices. The supplier likely already analyzed processes to find efficiencies and savings. Following this thought, further efficiency improvements to reduce the carbon footprint might not be cost efficient any more. The reason is that at a certain level of efficiency the costs to improve efficiency go up while the additional savings go down. This has a lot to do with how we account – or better do not account – for environmental costs. The cost a polluter has to pay for pollution is still not anywhere near to the real cost of polluting.

If you are a supplier you need to get more green, at least you need to appear more green in Walmart’s eyes. To get there you have the choice to really get more sustainable, which will cost you money. Or you try to compensate for these costs and cut some corners elsewhere.  For instance reducing quality of your product.

You don’t think so? Well, it happened before, in a different context. When car manufactures were forced by increased competition to bring down their costs substantially, they pressed their suppliers to reduce costs. Costs came down, quality of their products too. Which lead to some interesting unintended consequences.

Hopefully Walmart recognizes that they are in this together with their suppliers. And hopefully Walmart offers more than only pressing their suppliers into a greener future. Partnering with suppliers to achieve a common goal would be an important step, I think.

Claus Schafhalter, Sunogos

What do Pop Rocks, Soda, and yeast have in common? Carbon dioxide (CO2) is behind their most significant characteristics. Pop Rocks, the candy that pops in your mouth, uses pressurized CO2 for the pop, carbonation is used in water, beer and Soda to provide the prickling sensation. And carbon dioxide generated by a process using yeast causes dough to rise.

There is nothing inherently bad with carbon dioxide. On contrary, the gas is used by earth’s plants during photosynthesis. So is there a problem?

The problem is that Carbon Dioxide is a proven greenhouse gas. While some are still arguing if there is something like global warming, and if it were, what impact human generated carbon dioxide emissions have, there is no doubt that the level of Carbon Dioxide in earth’s atmosphere increased by about 35% since the beginning of the industrial revolution.

The main culprit here is our use of fossil fuels to generate energy. What we burn today as coal, oil, or gas was stored over millions of years in the ground. And burning coal, oil, or gas delivers – besides energy – mostly CO2.

There is not a lot of CO2 in our atmosphere, on average only about 388 ppm (parts per million), or 0.0388% of the air by volume. Charles David Keeling, an American scientist, measured CO2 concentrations starting in 1958. The data collection taken at Mauna Loa shows that the Carbon levels have risen from 315 ppm in 1958 to almost 390 ppm today. Scientist were also able to show that there is a correlation between carbon levels and fossil fuel emissions.

So what is the bottom line? Fossil fuels were stored in the earth’s crust over a period of millions of years. We modern humans are able to burn off all that fossil fuel within a few centuries. We should not be surprised that our environment is impacted by this massive consumption of carbon based fuels as shown by its by-product, the increased CO2 level in our atmosphere.

If I had the choice I would prefer to have all that increased CO2 in my Pop Rocks, Soda or baked bread. As this choice is not available, we’d better start to contain our CO2 emissions.

Claus Schafhalter, Sunogos

As reported elsewhere these little devices consume energy all the time when they are plugged in. The modern ones do not use much electricity, so there happened a lot of progress in the last few years. Here is the data for Apple’s latest Iphone power adapter:

- Power adapter power consumption no load: 0.25W (at 115V)

Good, 0.25W is really not a lot. But it is power used for no benefit, just wasted!

Let’s assume that every new cell phone comes with a modern and efficient power adapter that uses only 0.25W waiting for something. Let’s also assume that one half of consumers really unplug their charging device when they do not charge. That would mean that more than 500 Million consumers use a total of 125 megawatts just because they did not unplug!

Now, that’s not paltry! Germany’s thin film solar power plant near Cotbus, the biggest at this time, has installed a total of 53 megawatts solar modules. So, they built this plant and it does not even cover half  the consumption of all cell phone chargers sold 2009 doing nothing but waiting and wasting energy!

Little sucking critters they are. A few of them are not a problem, but when you add them up they are!

Claus Schafhalter, Sunogos

© Gabi Schoenemann / PIXELIO

A widely discussed concept to reduce carbon emissions into the atmosphere is CCS – Carbon Capture and Storage. Especially coal fueled power plants could be reconfigured to blast carbon dioxide not into the air but store the stuff safely into deep geological formations.

As with many ideas for emission reduction research in this area is moving fast. The target is to produce energy cheaply using abundant available coal without contributing to global warming. Some numbers I saw recently are less convincing:

• Capturing and compressing CO₂ could add 30% to 40% to the energy need of a typical coal power plant.
• Cost of energy (per kWh) from a newly built power plant would increase by more than 50%
• Retrofitting existing plants would add even more to the cost per kWh sold.

Here is why I am not convinced that CCS is such a great idea: One major principle in lean management is to increase efficiency and reduce waste. Efficiency is defined as ratio between value (output) and sum of all inputs. Output that does not have value is waste.

In its simplest form the value (output) of a power plant is the electricity that can be sold / fed into the grid. The input to generate electricity is fuel (coal). Everything else equal CCS adds 30% to 40% input (coal!) to a power plant without increasing the valuable output: electricity that can be sold. The added input is simply used to lessen the impact of waste while increasing the amount of waste!

Carbon Capture and Storage is therefore by definition not lean! It might have benefits, but I can hardly see them through my lean management lenses. Is there anyone to convince me otherwise?

Claus Schafhalter, Sunogos

Cap and Trade is one of these ideas that sound good. But when executed poorly it does not benefit our planet, instead it benefits the same kind of gamblers that brought us the near financial collapse and the following big recession.

What is the idea behind Cap and Trade? — Cap sets a limit for carbon emissions, an entity emitting carbon needs to have licenses sufficient to cover their emissions. Trade means that licenses to emit can be bought and sold on exchanges. Emissions become a cost for an emitting entity, and in an attempt to reduce costs corporations would reduce emissions. Sounds good, at least in theory.

However, there are many flaws with this system. The most fundamental one is that the cost of emitting carbon is not based on a real cost approach, but is set mainly by two parameters:

1) The “cap” set by a central authority at the introduction of “cap and trade” and its reduction over time (the target curve).

2) The power of regulatory agencies of issuing too many or too little emission credits, diluting the effectiveness of any regulation, and providing the opportunity to effectively remove the cap.

In my opinion a Cap and Trade regime is too flawed when too many parameters can be adjusted by regulatory agencies instead of market participants. Until there is a global commitment for the total amount of carbon emissions (cap) and change over time, and a trusted system to measure carbon emissions and offsets, other methods of reducing carbon emissions will be more effective.