A brighter day

If most climate scientists are right, the challenge of global warming will demand business innovation to keep reliable energy — and the prosperity it fuels — a hot commodity, without overheating the planet

By Aubrey Henretty

A hundred and twenty years ago, before the mainstream medical community had much to say about the connection between diet and cardiovascular disease, Americans regularly consumed heart-stopping quantities of animal fat for breakfast. Today, by contrast, an array of more healthy breakfast options crowds the table. Ready-to-eat cereal in particular has captured the hearts and stomachs of millions. And who brought about this morning revolution? Was it the grumbling physicians? Was it the tiny, maligned 19th-century American vegetarian community? Was it James Caleb Jackson, inventor of Granula, the bran-nugget cereal so packed with wholesome fiber that it had to be soaked overnight before the health conscious could digest it?

Hardly.

The men who would bring cereal to the most American tables were a couple of entrepreneurs named W.K. Kellogg and C.W. Post. With crispy flakes and perky packaging, they made healthy eating palatable, and in the process they built the nation's most trusted brands in breakfast.

Though global warming is a more formidable opponent than sausage gravy, the parallels are easy to spot. Almost no one wants to consume less energy or fried food, and with nebulous, far-off consequences like clogged arteries and melting icecaps, convincing most people to turn off their air conditioners or lay off the bacon can be tricky. To complicate matters, the last few generations have seen technological advances beyond the wildest dreams of their grandparents. Then too, many have begun to lose patience with the halting, sometimes contradictory, scientific process.

And, as always, economic considerations loom large.

"There is a misconception that fossil fuels can be replaced promptly and economically with renewable energy," says Steve Simon '67, senior vice president of ExxonMobil. Despite impressive growth of more than 10 percent per year, he notes, alternative energy barely scratches the surface of worldwide energy usage: "Even if wind and solar energy continue to grow at this rapid pace for the next 25 years, they will still only represent about 1 percent of the world's total energy demand," contends Simon.

In the meantime, a world of people will be driving to work, heating their homes, constructing new buildings, growing (and refrigerating and cooking) food, publishing books, watching television and surfing the Web. All that energy will have to come from somewhere.

"People need to understand how big the world energy market is, and how important all sources of energy will be to meet the world's growing energy demands," says Simon. "Fossil fuels like oil, gas and coal will continue to play the predominant role in providing low-cost, reliable energy to the developed and developing nations for decades to come."

Abundant, reliable energy is indeed an integral part of our lives, but our dependence on carbon-based energy sources has put the world's people in the hot seat, according to most leading climate scientists, including those at the International Panel on Climate Change (www.ipcc.ch). Their conclusion? If we don't clean up our act with a portfolio of more sustainable energy choices, the implications could be dire.

Even so, the development of alternative-energy technology has been slow going for a number of frustrating reasons, says David Dupree '76, a business development manager in BP's integrated supply and trading group. 

"Part of it is economies of scale, part of it is technology," Dupree says, and of course the two are related. "You almost need high conventional energy prices to stimulate [development of] these alternatives...when gas is a buck a gallon, no one is interested in conserving or looking for alternatives."

Few can pay for it, either. Over the next decade, says Dupree, BP plans to spend at least $8 billion — a sum almost comically unattainable for nearly anyone but an enormous international energy concern — on the research and development of alternative energy, no known source of which is simple to produce.

"Hydrogen sounds wonderful, but it doesn't occur much in nature [in free form]," Dupree says, adding that BP is currently developing the world's first low-carbon hydrogen power plants in Peterhead, Scotland, and Carson, Calif.

As for the better-known, somewhat more established renewables, Dupree affirms that they are in no position to displace the fossil fuels anytime soon. Solar power is far less efficient than conventional fuels, he says, and it is very costly (and energy-intensive) to produce solar panels. "They keep making it cheaper and cheaper, but it still hasn't reached the point of being competitive," he notes.

Even wind power, which Dupree says has shown great potential as an efficient source of clean, renewable energy, has its drawbacks. "Some places wind power works well, some places it doesn't," he says. "You can't put wind turbines in downtown Chicago."

What you can put in downtown Chicago if you're hoping to make a difference there is the Chicago Climate Exchange, the world's first greenhouse gas emissions trading post. Fran Kenck '99, CCX's director of compliance, says that member companies make a legally binding pledge to reduce their carbon emissions by a certain percentage each year. Then, the company allocates "carbon financial instruments" (CFIs) — each representing 100 metric tons of carbon dioxide — to member companies based on how much of the gas they emit annually into the atmosphere. CFIs are then traded on the exchange.

"Those that exceed their emission reductions may bank their credits for future years, or can sell them on the exchange to other direct emitters who did not meet their reduction targets or to other members who participate on the exchange in some other capacity, most notably associate members and liquidity providers," Kenck explains. For member companies, greater emission reduction means greater gains, and for the general public, it means a greater net drop in pollution.

Kenck says CCX has even attracted outside investors. "There is a mix of trading on the exchange between those who must buy these allowances for compliance purposes (i.e. those who have not met their reduction targets) and those who are buying and selling for speculative purposes."

CCX is not the only organization dedicated to the principle that energy efficiency can be both a good business and a good investment. Another is Toyota. Long a pioneer in fuel-efficient vehicles, the Japanese auto manufacturer now has a lock on hybrid fuel technology. Toyota Executive Vice President Yoshimi Inaba '76 says persistence pays.

"For any industry, environmental protection really is the future ... but there are a lot of technical barriers to making the technology commercially viable." One such barrier, says Inaba, is the higher up-front cost that comes with any new technology.

"The basic motivation of today's customers who are buying the hybrid technology is that they are doing the right thing," he says.

Because fuel is still relatively cheap, he notes, it can take longer for the savings to start showing up, and many consumers are unwilling or unable to make the extra initial investment. But, he adds, there will come a day when scarcity, civil unrest or other market factors will drive up the price of gas to $6 a gallon in the United States, which will speed up the savings significantly. "When that happens," Inaba says, "I think the demand will be huge."

And as demand soars, so will hybrid technology. "There is great potential for this technology to come down in price and to become more economically viable," says Inaba, noting the tendency of engineers to make things smaller and less expensive as new technology matures.

"To assure the sustained growth of the industry, you've got to come up with a way to be compatible with the environment."

Lisa Jenkins '85, an information management specialist at the U.S. Environmental Protection Agency, says the EPA has been promoting this idea for years through a number of voluntary programs for businesses and other groups (see epa.gov/epahome/programs.htm).

"One very important program that hits close to home and business for most of us is the Energy Star program," Jenkins says. The program, a joint effort of the EPA and the U.S. Department of Energy, encourages appliance manufacturers to produce more energy-efficient products.

"Companies win by producing and selling products that use less energy," says Jenkins. "The Energy Star label on their product means that consumers will save more on their energy bills over time, and that helps sell the product. Consumers win because they are given lower energy-consuming product options that either don't cost more or don't cost much more than other options and will save them money during the life of the product." The result — a net decrease in overall energy consumption over time — is rewarding for companies and consumers alike. Jenkins adds that the EPA is leading by example in energy-efficient practices, including greener architecture (epa.gov/greenbuilding).

EPA Chicago Section Chief Ken Westlake '86 agrees that EPA initiatives like Energy Star are important, but he says they are only the beginning: "We've recognized for a long time that that alone will not get us to the level of sustainability we all want."

Higher gas prices alone won't get us there either, adds Westlake. "[When] gas goes up to $3 a gallon, people may drop a few discretionary trips, but for the most part they're locked into their usage habits in the short run based on the vehicles they own and how far they live from their jobs. However, if energy costs rise dramatically for an extended time, consumers will get a much stronger signal from the market and make more fundamental changes in their energy use patterns."

Meaningful change will come with a drastic shift in how people think about energy efficiency and conservation, says Westlake. He has seen such shifts before, most notably during his early days at the EPA, when a radical new idea called curbside recycling would ask citizens to organize their trash before dropping it at the curb: "[Critics said] 'Oh, people will never do that; we're talking about a major lifestyle change.' But now it's the norm."

Just as business people once proved that a healthier body need not mean compulsory meals of barely digestible bran, today many are taking on a challenge far greater. Some are showing the world that a healthier planet is possible even as people continue seeking prosperity. No doubt balancing massive energy needs with ecological sustainability will demand innovation, vision and discipline, but Westlake is hopeful.

He points out that the move to embrace recycling was neither this nation's first nor its latest large-scale adoption of a healthy habit. "Seatbelts and [curbing] smoking are two great examples of society taking a collective turn," he says. Though it will take a lot more than color-coded waste bins to align people and the planet, Westlake concludes that humanity is up to the task.

"We can turn those corners, too."