8020 Vision

Interactive Climate Map from Google Shows Future Impact of Climate Change

Posted on 21 July 2010 | by Jay Kimball

Using Google Earth, the UK Foreign Office (FCO) and the Department of Energy and Climate Change (DECC) have released an interactive climate map that provides insight on the impact of climate change around the world.

The Google Earth map shows how the world would be affected by a global average temperature increase of 4C. It illustrates rising water levels and reduced crop yields in different parts of the world if temperatures are not curbed by cutting greenhouse gases.

The map service is directed at a global audience; it details the work of the scientists working in countries across Asia, Latin America and Africa. It uses Met Office data, and will also feature Foreign Office’s own work on the economics of climate change that it has been doing with the likes of the Asian Development Bank. The map is interactive, allowing you to roam the planet and explore projected impact and view video providing climate scientists and researchers discussing impact details.

Articles detailing the project can be found at The Telegraph and the Financial TImes. The online map is available here. If you don’t have Google Earth installed, you can download a copy here.

Consumer Behavior: Deleveraging

Posted on 19 July 2010 | by Jay Kimball | 3 Comments

Roger Lowenstein, an outside director of the Sequoia Fund, and author of The End of Wall Street has an article in The New York Times called Paralyzed by Debt.

Highlights of the article are below. It is an excellent example of the impact uncertainty and consumer unease can have on consumer behavior. To put the article in context, here are a couple charts I use when talking about consumer behavior and impact on business and government economic models.

In Maslow’s hierarchy, the higher level needs can only be met when the foundational needs are solid. When something like the current recession, or high oil prices, or job insecurity occur, uncertainty rises and undermines our sense of wellbeing. We shift our focus to the basics – do we have a stable home situation, can we pay the mortgage, do we have a job, can we depend on it, can we afford healthcare, etc.? In short, the consumer mind shifts from Thrive to Survive.

We can see a practical example of this in the Personal Savings Rate. As the US entered the 2008 recession, the Personal Saving Rate, which has been trending down, did a stunning reversal in a single quarter, pivoting from .8 percent to almost 6 percent.

Lowenstein details how economic uncertainty impacted refinancing his home.

Highlights from NY Times Article: Paralyzed by Debt

Last month, my wife and I refinanced our mortgage. Though the rate was lower and we could have afforded more debt, we paid down a chunk of the balance. Don’t ask me why — it just felt better to owe less money. Time was, such thrift would have been hailed as patriotic. Now it threatens the economic recovery. Less borrowing means less to spend.
Suppose everybody did this? Well, it turns out, everybody has. Eschewing trips to the mall, Americans are paying off credit-card balances and home-equity lines. Despite low rates, mortgage demand has plummeted.

12.5% of household after-tax income is devoted to repaying debts (source: The Federal Reserve Board, 2010)

Half of American workers have suffered a job loss or a cut in hours or wages over the past 30 months.

The economy is Deleveraging. Credit in the economy is shrinking, as opposed to the normal state of affairs, in which, each quarter, people borrow more money and banks issue more loans.

Remarkably, this deleveraging has been going on for nearly two years. Ordinary Americans are behaving just as the banks they love to excoriate — having, formerly, assumed too much risk, they are going into hibernation. If credit, in the words of the writer James Grant, is money of the mind, people have become psychologically indisposed to minting it.

Total household credit has contracted for seven straight quarters.

Mortgage debt is down $462 billion from the peak, which it reached in November 2008.

Bank-card borrowings, which peaked two months later, are off $126 billion.

Auto loans have fallen $122 billion; home-equity lines, $77 billion.

As Stephanie Pomboy, publisher of the newsletter Macro Mavens, has pointed out, government transfers like stimulus spending and tax credits masked the effects of diminishing credit for a while. That is to say, even if people were unwilling to borrow, they were happy to spend money they got from the government. Now that government supports are being pulled away, the effects of deleveraging are in plain view. Home and car sales are plummeting again. Job growth has shrunk to a sliver. Personal bankruptcies are soaring. Deflation, a dangerous state of economic dead air, when prices fall from lack of demand, is a distinct possibility.

In 2001, household debt reached a par with annual after-tax household income. (The average family owed what it earned.) By the peak of the bubble, in 2008, borrowings had surged to 36 percent more than income.

Which raises the issue: how much of that debt will have to be repaid before people return to their customary, and stimulative, profligacy? Thus far, we have undone only a portion of the excess. Household debt now stands at 26 percent more than income — still very high by historical standards. “There is no magical level where it should be,” says David Resler, an economist with Nomura Securities. “There is no clear equilibrium.”

To return to the status quo of before the housing boom — say, back to debt to income ratios prevailing in 2000 — it would take five more years of deleveraging at the current rate.

McKinsey recently published an excellent review of the global deleveraging process that began in 2008. From their report:

Americans steadily increased their debt levels for a good six decades, but it wasn’t until the turn of the millennium that the ratio of household debt to income really soared. Yet by the second quarter of 2011, three years after the start of the global economic crisis, the US ratio had fallen 11 percent from its peak. At the current rate of deleveraging, it would return to trend as of mid-2013—a conclusion buttressed by a comparison between US households today and those of Sweden and Finland during the 1990s, when the two Scandinavian countries endured similar banking crises, recessions, and deleveraging episodes. In both, the ratio of household debt to income fell by roughly 30 percent from its peak. As the exhibit below shows, the United States has been closely tracking the Swedish experience, while households in Spain and the United Kingdom have only just begun to deleverage. To learn more, read “Working out of debt” (January 2012).

Rethinking the Measure of Growth

Posted on 19 July 2010 | by Jay Kimball | 1 Comment

Lat year I posted an article (Nobel Laureate Joseph Stiglitz on Sustainability and Growth) about an interview with economics Nobel laureate Joseph Stiglitz at the Asia Society in New York City. Stiglitz talked about how “what we measure determines what we grow” and the dramatic negative side-effects a metric like GDP can have on societal well-being.

Today, Wayne Arnold at The New York TImes builds on this idea in his article Rethinking the Measure of Growth.

Highlights from NY Times Article

The quest for more plentiful and less expensive oil for fast-growing Asian economies has also brought a wave of offshore drilling from India and the Gulf of Thailand, to Vietnam and Bohai Bay, on the northeast coast of China.
In considering this risk and the increasing evidence of the toll that rapid economic development is already taking on Asia’s environment, economists and other experts in Asia have taken up the call to re-examine the prominence of economic growth as a measure of policy success, particularly the use of gross domestic product.
Asian governments have become particularly enthralled with gross domestic product (GDP) statistics for validation, becoming what Vishakha Desai, the president and chief executive of the Asia Society in New York, has called “G.D.P. junkies.”

For local officials in China, gross domestic product was, until recently, more than just a barometer for gauging policies, it was the measuring stick against which their futures in the ruling Communist Party were determined. Economic growth still ranks as one of the chief criteria for determining party promotions, according to Tan Kong Yam, an economics professor at Nanyang Technological University in Singapore who offers a course for mayors from China.

For such officials, “there is an enormous incentive to promote investments and industrial production,” he said. “This explains why there’s enormous pollution.”

Gross domestic product has come in for some particularly hard knocks since the global financial crisis, notably after a report last year whose co-author was Joseph E. Stiglitz, a Nobel laureate in economics, that said reliance on gross domestic product had blinded governments to the increasing risks in the world economy since 2004.
Overlooking that risk has possibly cost future economic growth, the report said, and has contributed to a looming environmental crisis.

“Market prices are distorted by the fact that there is no charge imposed on carbon emissions,” the report said. “Clearly, measures of economic performance that reflected these environmental costs might look markedly different from standard measures.”

Economists in Asia say the debate about gross domestic product misses the point. Gross domestic product as a statistic is sound, they say; what is wrong is the fascination in government with what it measures — the sum total of a nation’s annual production.

“The problem is not G.D.P.,” said Bhanoji Rao, a visiting economics professor at the Lee Kuan Yew School of Public Policy in Singapore. “The problem is the culture of consumption.”

Mr. Rao is part of a growing body of economists, largely in academia, who question whether rapid economic growth rates in Asia — from the 10.3 percent expansion in giant-but-poor China to an expected 15 percent growth this year in tiny-but-rich Singapore — are necessarily producing a happier, healthier Asia.
Some Asian governments, China’s included, have been trying to recalibrate gross domestic product to include the cost of growth to the environment, creating a green gross domestic product. Such efforts, said Mr. Tan, the Nanyang professor, have been frustrated by the difficulty in determining the future cost of environmental destruction.
What is needed instead, some economists say, is a wholesale re-examination of development’s goals. “There needs to be an internal debate within the developing countries about what is the path of development we want to have,” Mr. Rao said.

Andy Xie, a private economist in Shanghai, has long argued that the 1.3 billion people in China cannot realistically hope to live like Americans.

“That statement is truer than ever,” he said.

Beijing, at least, appears to have gotten the message, if its investments in green technology and public transportation are anything to go by. The Communist Party has also revised the promotion criteria for officials so that environmental conditions are included along with gross domestic product.

But economists like Mr. Xie and Mr. Rao warn that even with greener development, the result may still be the same if the goal remains an American-style standard of living. Asia may instead need to carve out a vastly different vision of prosperity that does not rely on ever-increasing levels of material consumption.

NOAA: June, April to June, and Year-to-Date Global Temperatures are Warmest on Record

Posted on 17 July 2010 | by Jay Kimball | 2 Comments

Climate change news from the National Oceanic and Atmospheric Administration (NOAA):

15 July 2010

Last month’s combined global land and ocean surface temperature made it the warmest June on record and the warmest on record averaged for any April-June and January-June periods, according to NOAA. Worldwide average land surface temperature was the warmest on record for June and the April-June period, and the second warmest on record for the year-to-date (January-June) period, behind 2007.

The monthly analysis from NOAA’s National Climatic Data Center, which is based on records going back to 1880, is part of the suite of climate services NOAA provides government, business and community leaders so they can make informed decisions.

Scientists, researchers and leaders in government and industry use NOAA’s monthly reports to help track trends and other changes in the world’s climate. This climate service has a wide range of practical uses, from helping farmers know what and when to plant, to guiding resource managers with critical decisions about water, energy and other vital assets.

NOAA Temperature Anomalies June 2010 — (source: NOAA National Climatic Data Center)

The Guardian did a nice job of going deeper into the story. Here are highlights from their article:

The figures released last night by the National Oceanic and Atmospheric Administration (NOAA) suggest that 2010 is now on course to be the warmest year since records began in 1880.
Scientists expressed surprise that the June land surface temperature exceeded the previous record by 0.11C (0.20F). “This large difference over land contributed strongly to the overall global land and ocean temperature anomaly,” said John Leslie, a spokesman for NOAA.
Separate satellite data from the US National Snow and Ice Data Centre in Colorado shows that the extent of sea ice in the Arctic was at its lowest for any June since satellite records started in 1979.
In a further possible sign of a warming world, the Jakobshavn Isbrae glacier, one of the largest in Greenland, lost a 2.7-square mile chunk of ice and retreated one mile between 6-7 July – one of the largest single losses to a glacier ever recorded.
The glacier, a tongue of the Greenland ice sheet, has retreated six miles since 2000 and more than 27 miles since 1850. It is believed to be the single largest contributor to sea level rise in the northern hemisphere.
Greenland’s ice sheet, a vast body of ancient ice covering 1.7 million sq km, is melting today more rapidly than only a few decades ago. Since 2000, the ice sheet is calculated to have lost about 1,500 cubic kilometres of water– enough to raise global sea levels by 5mm . If the entire ice sheet melted, the world’s oceans would rise by over 23 feet.
Glaciologists expressed surprise at the speed of the break-up of the glacier: “This is unusual because it occurs on the heels of a warm winter that saw no sea ice form in the surrounding bay … it lends credence to the theory that warming of the oceans is responsible for the ice loss observed throughout Greenland and Antarctica,” said NASA scientist Thomas Wagner.

Present concentration of carbon dioxide gas in the atmosphere is 31 per cent above pre-industrial levels.

Referring to the chart below, current emissions are tracking above the most intense fossil fuel emission scenario established by the IPCC Special Report on Emissions Scenarios-SRES (2000).

Global Carbon Emissions 2010 — (source: EIA, CDIAC, Raupach et al. 2007, Proceedings of National Academy of Sciences)

Referring to the chart below, NOAA has modeled change in seasonal mean surface air temperature from the late 20th century (1971-2000 average) to the middle 21st century (2051-2060). The left panel shows changes for June July August (JJA) seasonal averages, and the right panel shows changes for December January February (DJF). The simulated surface air temperature changes are in response to increasing greenhouse gases and aerosols based on a “middle of the road” estimate of future emissions. As we can see from the chart above, we are exceeding “middle of the road” substantially.

surface air temps change 2050 — (source: NOAA - National Oceanic and Atmospheric Administration)

Red areas on the map represent a 20 degree increase from averages in the late 20th century. This has major implications for food production, water, and energy, not to mention business as usual.

For a hint of what to expect, look at the infamous 2003 heat wave that struck Europe for just 7 days:

30,000 heat-related deaths, 14,802 in Fance alone.
Extensive forest fires (10% of Portugal forests burned).
Temperatures ranged from 104 ºF to 118 ºF (40 ºC to 48 ºC).
Melting glaciers in the Alps caused avalanches and flash floods in Switzerland.
Extensive crop loss of wheat across Europe (13% to 80%).

Here’s a picture of the temperature anomaly across Europe during the heat wave. (N.B. Red indicates +10 ºC, +18ºF anomaly)

2003 European heat wave — (source: NASA)

For related articles and books, see:

Climate Change May Reduce Protein in Crops

Creating Leaders Great at Performing in Uncertainty without a Clue as to Why

Posted on 14 July 2010 | by Belina | 3 Comments

There is an interesting phenomena going on in some of the major business schools in Europe. In some – you are not allowed to mention environmental factors as a major catalyst for new business models/thinking. It is “understood” that as a lecturer, you inspire the students with fresh thinking but only so far. Go further, and people just roll their eyes and pigeon-hole you as a treehugger.

Here are three quotes from top business leaders:

“The era of ‘abundance’ is over. The future will see our natural resources, from oil to food, having some level of restriction placed on them.” – Andy Bond, CEO, Asda (May 2009)

“We must rapidly wean ourselves off our dependence on coal and fossil fuels.” – Richard Branson, announcing investment of all profits from Virgin transport business, estimated at $3 billion over 10 years, to be invested in fighting global warming. (21 September 2006)

“Sustainability is here to stay or we may not be.” – Niall Fitzgerald, UK CEO, Unilever

Now, none of these guys are particularly treehuggy. And most MBAs would give their eyeteeth to fill the shoes of these guys – and yet – in many MBA programs – coverage of sustainability issues is absent, apologetic, sidelined, or sketchy.

Let’s stop tiptoeing around the obvious. Business leaders can handle the truth. Though there is uncertainty on what the impact will be, climate change is a global issue that will impact business. Period.

In 2008 the US Director of National Intelligence (DNI) presented to Congress the DNI report National Intelligence Assessment on the National Security Implications of Global Climate Change to 2030. Here are a few excerpts:

“The United States depends on a smooth-functioning international system ensuring the flow of trade and market access to critical raw materials such as oil and gas, and security for its allies and partners. Climate change and climate change policies could affect all of these—domestic stability in a number of key states, the opening of new sea lanes and access to raw materials, and the global economy more broadly—with significant geopolitical consequences.”

“In addition, anticipated impacts to the Homeland—including possible increases in the severity of storms in the Gulf, increased demand for energy resources, disruptions in US and Arctic infrastructure, and increases in immigration from resource-scarce regions of the world—are expected to be costly. Government, business, and public efforts to develop mitigation and adaptation strategies to deal with climate change — from policies to reduce greenhouse gasses to plans to reduce exposure to climate change or capitalize on potential impacts—may affect US national security interests even more than the physical impacts of climate change itself.”

“Climate change is a threat multiplier in  the world’s most unstable regions.”

“From a national security perspective, climate change has the potential to affect lives (for example, through food and water shortages, increased health problems including the spread of disease, and increased potential for conflict), property (for example through ground subsidence, flooding, coastal erosion, and extreme weather events), and other security interests.”

These leaders are talking about fundamental shifts in ‘givens’ that require action, a joined up way of behaving, new ways of thinking, and new approaches. And our top business schools should be on the leading edge.

I first got interested in business schools ignoring the big elephant in the classroom two years ago when I was delivering a course on dominant business metaphors and implementing change. I wanted to say one line – one sentence inviting students to ponder how the nature of sustainability planning would be different if organisations, in addition to approaching business as a ‘competitive sport’, also approached it as a living organism. The professor who brought me in said ‘no’ – that the MBAs would feel they were being hijacked away from the course they had paid for. There was a specific elective for sustainability – and outside of that – best not to mention those issues.

Over the past few months, I’ve been speaking with several top MBA programs in Europe. Each is saying that leaders need, more than at any other time in history, to be able to lead in the presence of ambiguity, and to be able to perform collaboratively with high levels of uncertainty. Applied Improvisation skills are rather good for that, which is why I’m there in the first place.

What I find interesting in talking with these top MBA programs is that many are not contextualising the WHY of this new emphasis. Not addressing why managers/leaders would need to be so good at ambiguity.

“Growth for the sake of growth is the ideology of the cancer cell.” – Edward Abbey

I sat up when I saw this quote. It was refreshing to see in a lecture to potential MBAs at a leading business school in the Netherlands a few weeks ago. During my time at the school, two of the guest lecturers talked about sustainability – kind of…

The first lecturer used the Abbey quote (Abbey is a renown outspoken sustainability activist) and talked about the need to create ‘sustainable businesses’ quickly dismissed the notion of ‘sustainable’ as being linked to any ‘environmental’ issues… – it was about a business which can keep going, despite ‘adversity’. Given what scientists are saying about increasing disruptions over climate change, peak oil, peak minerals, peak water, how could adversity due to these factors not be mentioned?

The other lecturer had just hosted a biomimicry event two weeks before and deeply cared about the environment and sustainability. He works with top leaders in the best companies around the world on developing leadership skills. In his session, he talked about the profound need for leaders to be comfortable leading in the presence of ambiguity, but didn’t say why. In the break he confided that there are some groups with which you cannot talk about the environment directly. He had been gently testing the water with that day’s group and found he could mention it a bit…but only a bit. Several people were there for the express purpose of earning more money with an emphasis on value extraction, not particularly wealth creation/exchange.

Contextualising is a vital part of learning. The military does this routinely in their simulations – creating real world scenarios in the classroom. If we are facing a series of challenges (climate change, scarcity of water, oil, minerals, etc.) we must mention that as part of what leaders will face.

One initiative that gives me hope is the UN Principles for Responsible Management Education (PRME) initiative. The head of a leading MBA program in the UK turned me on to it. Finally – a global effort is being made to transform business schools and the Assocation of MBAs is part of it. In theory – that should mean that the taboo-ness of sustainability issues being explicitly mentioned, or mentioned only in specific electives – disappears.

As I continue to work with MBA programs, I will keep you posted on what I see going forward in this arena. And if you know of any best practice in this area – please post it here. Let me know!

“Unless we change direction, we are likely to end up where we are going.” – Chinese proverb

US Energy Use: The Big Picture

Posted on 13 July 2010 | by Jay Kimball | 3 Comments

This chart from Lawrence Livermore National Laboratory provides a simple clear way to understand how energy is used in the US.

I use this chart a lot in my presentations. It is a classic example of the adage “A picture is worth a thousand words.” On a single page it shows the sources for the energy we use, where it goes, how much is used and how much is wasted.

Energy use in US — Energy Use in the US (click to enlarge) (source: Lawrence Livermore National Labratory and DOE)

Some things to note:

Energy sources are on the left side – solar, nuclear, hydro, wind, geothermal, natural gas, coal, biomass, petroleum.
Energy users are broken in to four categories – residential, commercial, industrial, and transportation.
The gray boxes on the right sum up the energy that was used and the energy that was lost (rejected).
The width of the lines running from the various energy sources to their destination uses is proportional to the amount of energy used.

Zeroing In On Oil

As can be seen, the lion’s share of US energy consumption comes from fossil fuel sources (oil, coal, natural gas). Of the fossil fuels, oil is the source most in demand, the bulk of which is used by the transportation sector. And oil consumption in the transportation sector is growing fast.

US Oil Consumption By Sector — (source: DOE)

Zooming in to the transportation sector, we can see that most of that oil is used for personal vehicles (cars, light truck and SUVs).

US Oil Consumption Transportation — (source:DOE)

Any attempt to reduce our dependance on oil will require grappling with transportation in general, and personal transportation in particular.

Price of Oil and Consumer Behavior

Personal transportation is 4 to 10 times less efficient than public transportation (commuter rail, trains and buses). When oil prices rise quickly, as they did in 2008 (to over $140 per barrel), consumer behavior shifts rapidly. Automobile manufactures saw their large car sales plummet. Airlines saw their fuel costs skyrocket, and bookings plummet. Commuters embraced public transportation, with many metropolitan areas seeing 30 to 45 percent increases in use of public transportation in just one quarter.

Transportation Efficiency — (source: Lawrence Livermore National Laboratory)

That rapid behavior shift represents risk and opportunity for business and government. For more on that, check out two related posts: Sustainable Energy Security: Strategic Risks and Opportunities for Business and Walmart Partnering with Patagonia on Sustainable Business Practices.

The last century was a time of abundance in energy. There is a new economy of scarcity emerging in the 21st century. Understanding the energy trends shaping our world is essential to managing risk and innovating solutions for business, government and community.