asian judges: green courts and tribunals, and...

Law and Policy ReformBrief No. 1 April 2010

Asian Judges: Green Courts and Tribunals, and Environmental Justice

Asia and the Pacifi c has experienced dramatic environmental change

over the last 10–20 years. While developing member countries (DMCs)

began adopting environmental policy and regulatory frameworks

beginning in the early 1970s, many environmental challenges

have still not been suffi ciently addressed in policy and regulatory

frameworks. Many DMCs have accepted international obligations

under new or amended international environmental laws, yet these

have not been suffi ciently refl ected in national legislation or translated

into implementing rules and regulations at national, provincial, and

local levels. Even where

DMCs have appropriate

p o l i c y , l e g a l , a n d

regulatory frameworks,

eff ective implementation,

e n f o r c e m e n t , a n d

compliance continue

to pose chal lenges.

The judiciary plays an

important role in meeting

these environmental

e n f o r c e m e n t a n d

compliance challenges.1

In response to this need, ADB has approved a regional technical

assistance (TA) on the Strengthening of Judicial Capacity to Adjudicate

upon Environmental Laws and Regulations (RETA 7474). Under the

regional TA, ADB will conduct a broad study of the experience of

environmental courts and tribunals (ECTs) and their jurisprudence

in Asia and several developed countries. It will focus on presenting

case studies of ECTs in diff erent countries, including Indonesia, the

Philippines, and Thailand, to determine how judges can determine

environmental and natural resource cases most eff ectively. ADB will

also conduct a regional symposium, which will include participants

from New South Wales (NSW) and Queensland (Qld), Australia; the

People’s Republic of China (PRC); India; Indonesia; the Philippines;

Thailand; and the United States (US) Environmental Appeals Board. ADB

is also helping certain DMCs institutionalize environmental expertise

within their judiciaries, including in Indonesia (through a certifi cation

program for judges in environmental law) and the Philippines (through

assistance on their environmental rule of procedure). This study is

expected to inform the work of other DMCs in establishing and/or

strengthening ECTs and national environmental jurisprudence. This

work will build on past ADB work in capacity building for environmental

law. It will also capitalize on work conducted by development partners

in strengthening environmental compliance and enforcement.

ADB’s Work in Environmental Law Capacity BuildingADB has done considerable work in building the capacity of judiciaries

to adjudicate environmental law cases. In 2002, and again in 2003, ADB

published a compendium on Capacity Building for Environmental

Law in the Asian and Pacifi c Region. This compendium reproduced a

set of materials that had been used for “train the trainers” workshops

for academics and members of the legal profession in the region (not

directed at or limited exclusively to judges).2 In 2004, ADB funded a

Judges’ Forum on Environmental Protection in the Philippines.

In 2005, ADB partnered with the United States Agency for

International Development (USAID) to launch the Asian Environmental

Compliance and Enforcement Network (AECEN). AECEN addresses the

need for increased enforcement and compliance with environmental

law in Asia and the Pacifi c. Among other activities, AECEN has been

supporting environmental agencies to improve environmental

compliance and enforcement, create environmental courts and court

divisions, and train judges to adjudicate in these courts.

In addition, ADB and the US Environmental Protection Agency (EPA)

have been collaborating on work related to RETA 7474 and recently

signed a funding arrangement under an ADB–EPA Memorandum

of Understanding (MOU), which provides a vehicle for funding EPA

expert involvement in these activities. EPA in-kind contributions

1 For example, the 2008 Philippine Supreme Court decision requiring cleanup of the Manila Bay, and the 1996 Indian Supreme Court interpretation of the Forest Conservation Act.2 Donna G, Craig, Nicholas Robinson, and Koh Kheng-Lian, eds. 2003. Capacity Building for Environmental Law in the Asian and Pacifi c Region: Approaches and Resources. Vol.1, Second Edition.

Manila: ADB.

Even where DMCs have appropriate policy, legal, and regulatory frameworks, effective implementation, enforcement, and compliance continue to pose challenges [and] [t]he judiciary plays an important role in meeting these environmental enforcement and compliance challenges

Box 1: Design Summary

Impact To improve implementation of environmental law in

selected DMCs by developing plans to institutionalize

the capacity of judges to apply environmental law

and regulations eff ectively.

Outcome Studies on the operation of environmental courts

to support or inform possible follow-up technical

assistance.

Output Assessments of good practices of environmental

courts and judiciary in selected DMCs, including

Indonesia, the Philippines, and Thailand.

LPR Briefing Note_Environmental Laws and Regulations4.indd Spread 1 of 2 - Pages(4, 1) 4/28/2010 9:45:32 AM

can include training materials and legal, enforcement, and judicial

expertise. ADB has also coordinated with other development partners,

including USAID, the Vermont Law School (fi nanced by USAID), and

the European Union.

Challenges FacedEnvironmental laws and regulations need to be better and more

effi ciently implemented, enforced, and complied with. The compliance

aspect of this process begins with the inspector collecting water

samples, or the forest official apprehending illegal loggers (the

upstream phase), and extends to the environmental regulator or

public interest litigator starting legal action, and to judges adjudicating

these cases (the downstream phase). The process of compliance and

enforcement of environmental laws and regulations—in both its

upstream and downstream phases—needs attention.

The eff ectiveness of these actions depends on a solid foundation of

environment laws, regulations, and implementing mechanisms, such

as permits. These should impose enforceable requirements that are

suffi ciently precise to enable the regulated entity to understand what

is required. It then requires ensuring these requirements are complied

with and/or the law is enforced.

For example, Indonesia faces many signifi cant environmental

problems. These include deforestation through illegal logging; the

illegal trade in wildlife; and endangered species; air and water pollution;

and excess groundwater extraction leading to subsidence; overfi shing;

vanishing biodiversity; and overexploited natural resources. The

need to adapt to climate change and the need to reduce Indonesia’s

contributions to global climate change—by constraining emissions

from deforestation and forest degradation—are also key issues.

Similarly, the PRC provides an example of signifi cant environmental

problems stemming from rapid economic development. These

problems include air and water pollution, signifi cant greenhouse gas

emissions, desertifi cation (particularly in the western provinces), and

water scarcity. The PRC has responded rapidly with many framework

environmental laws. However, the PRC has not been as eff ective in

adopting regulations that would lead to effi cient local implementation

of these environmental laws. Thus, yet to be developed implementing

regulations, legal frameworks, and institutions that implement

and enforce these frameworks will play a critical role in enhancing

environmental quality and controlling pollution. Ensuring that these

are complied with and enforced is essential.

Global Developments At the global level, over the last 10 or so years, there has been

considerable movement toward strengthening environmental

implementation, compliance, and enforcement—including by

establishing ECTs and strengthening the capacity of the judiciary to

handle environmental cases. In 2002, a Global Judges’ Symposium

was held at the World Summit for Sustainable Development in

Johannesburg, South Africa, to defi ne and promote the role of judges

in securing sustainable development. Since then, the number of ECTs

has increased. Worldwide, over 350 specialized ECTs authorized in

41 countries have been

identifi ed.

ECTs are seen as

one way to concentrate

expert ise to ensure

that judges deciding

on environmental and

natural resource cases

fairly and transparently

balance the conflicts

between protecting

the environment and

promoting development; manage environmental and natural resource

cases effi ciently and eff ectively; and support more public information,

participation, and access to justice and for achieving informed and

equitable decisions.3

Regional Developments

In Asia and the Pacifi c, ECTs have been established in Bangladesh, the

PRC, India, Japan, the Republic of Korea, Malaysia, Pakistan, Philippines,

and Thailand.4 These courts are listed in Table 1. Further details are

provided below.

3 G. Pring and C. Pring. 2009. Greening Justice: Creating and Improving Environmental Courts and Tribunals. USA: The Access Initiative.4 Ibid.

Table 1: List of Environmental Courts Tribunals in Asia and the Pacifi cBangladesh • Environmental Court of Dhaka

• Environmental Court of Chittagong

China, People’s

Republic of

• Guangdong Province

º Guangzhou Maritime Court

• Guizhou Province

º Guiyang Environmental Court in the Guiyang

Intermediate People’s Court (Guiyang Municipality

appellate)

º Qianxi County Environmental Collegiate Panel

º Qingzhen Environmental Court in the Qingzhen

People’s Court (Guiyang Municipality—trial)

• Hebei Province

º Jinzhou Environmental Court in the Jinzhou City

People’s Court (Shijiazhuang Municipality—trial)

• Hubei Province

º Wuhan Maritime Court

• Jiangsu Province

º Jianye Environmental Court in the Jianye District

People’s Court (Nanjing Municipality—trial)

º Wuxi Environmental Court in the Wuxi Intermediate

People’s Court (Wuxi Municipality—trial/appellate)

º Xinbei Environmental Court in the Xinbei District

People’s Court (Changzhou Municipality—trial)

• Liaoning Province

º Dongling Environmental Court in the Dongling District

People’s Court (Shenyang Municipality—trial)

º Tiexi Environmental Court in the Tiexi District People’s

Court (Shenyang Municipality—trial)

• Yunnan Province

º Chengjiang Environmental Court in the Chengjiang

County People’s Court (Chengjiang County, Yuxi

Municipality)

Environmental Courts and Tribunals are seen as one way to concentrate expertise to ensure that judges deciding on environmental and natural resource cases fairly and transparently balance the conflicts between protecting the environment and promoting development

continued on next page


China, People’s

Republic of

(continued)

º Kunming Environmental Court in the Kunming

Intermediate People’s Court (Kunming Municipality)

º Tonghai Environmental Court in the Tonghai County

People’s Court (Tonghai County, Yuxi Municipality)

º Yuxi Environmental Court in the Yuxi Intermediate

People’s Court (Yuxi Municipality)

India • Supreme Court—informal Green Bench

• National Environment Appellate Authority (NEAA)

• National Environment Tribunal (legislatively authorized, not

operating)

• National Green Tribunal (legislation pending in 2009)

• Regional environmental courts reported

Indonesia • Only environmental law trained “green” judges hear

environmental cases

Japan • National Environmental Dispute Coordination Commission

(Kouchoi)

• 47 prefecture-level Environmental Dispute Coordination

Commissions

Korea, Republic of • National Environmental Dispute Resolution Commission

• 16 regional Environmental Dispute Resolution Commissions

Malaysia • Planning Appeal Board of State of Penang

• 2 additional State Planning Appeal Boards

• National Environmental Quality Appeal Board (authorized)

Pakistan • National Environmental Tribunal

• Environmental Tribunal Punjab

• Environmental Tribunal Northwest Frontier Province

• Environmental Tribunal Sindh

• Environmental Tribunal Balochistan

Philippines • 117 municipal and regional trial courts designated as

environmental courts (Jan. 2008)

Thailand • Supreme Court, Environmental Law Division

Source: Greening Justice, footnote 3, p.106.

Table 1 continued

environmental courts would capitalize on and create further demand

for such training.

In April 2009, the Philippine Supreme Court, together with other

development partners including the USAID, the US EPA, and AECEN,

conducted a Forum on Environmental Justice held simultaneously in

the cities of Baguio, Davao, and Iloilo with videoconference facilities.

This videoconference forum allowed the Supreme Court to receive

direct input on how the courts can help protect and preserve the

environment, from stakeholders in the diff erent jurisdictions. In early

2010, the Philippine Supreme Court requested ADB assistance with

their environmental program, which ADB has started by assisting the

Supreme Court with its new Rule of Procedure for Environmental Cases

(Rule) adopted in April 2010.

The Rule features many best practices in environmental adjudication.

These best practices include provisions preventing Strategic Legal

Actions Against Public Participation (known as “SLAPP” suits); a statement

adopting the Precautionary Principle , which advises precaution when

human actions could lead to threats of serious and irreversible damage

to the environment but full scientifi c certainty cannot be achieved in

evaluating evidence; and an Environment Protection Order, which

empowers a court to direct or enjoin any person or government agency

to perform an act to protect, preserve or rehabilitate the environment,

or stop performing an act that causes it harm.

The Rule also provides for a Writ of Continuing Mandamus and a Writ

of Kalikasan (which means nature). The Writ of Continuing Mandamus

allows the court to compel the performance of an act specifi cally

required by law, and to also retain its jurisdiction after judgment in

order to monitor compliance with the decision it issues.

The Writ of Kalikasan is a world first. It seeks to protect the

constitutional right of persons to a balanced and healthy ecology by

directing a private person, an entity, or a public offi cial to perform a

lawful act, or stop committing an unlawful act involving environmental

damage of such magnitude as to prejudice the life, health, or property

of inhabitants in two or more cities or provinces. The new rule also has

provisions to expedite the hearing of environmental cases, including

a 1-year period to try and decide the case.

Indonesia. Since 1998, Indonesia has trained 20% of its judiciary in

environmental law. However, to further strengthen the judiciary’s

capacity to adjudicate environmental cases, the Ministry of Environment

has entered into an MOU with the Supreme Court. This MOU would

establish a program to certify judges as “environmental judges” after

they have completed a series of training and subject to ongoing

conditions to retain their environmental expert status. If the conditions

are breached, the ultimate sanction would be for the certifi cate to be

revoked. This environmental judicial certifi cation scheme would seek

to strengthen the capacity of the judiciary in handling environmental

cases, by institutionalizing environmental training and ensuring that

only trained (expert) judges decide environmental and natural resource

cases. The training should establish a cadre of judges qualifi ed to

adjudicate natural resources and environmental quality cases. The

scheme will also enlist the Supreme Court to establish new rules of

court with procedures for handling environmental cases. In March 2010,

a High Level Task force, including senior members of the judiciary and

senior offi cials from the Ministry of Environment, was established to

oversee the certifi cation program and development of the new rules.

ADB is assisting with this process.

The Philippines. In January 2008, the Philippine Supreme Court

designated 117 municipal and regional trial courts across the country

as environmental courts. The Philippine Judicial Academy has

also conducted environmental training of judges and the 117 trial

Philippine Supreme Court


For details, you may visit www.adb.org

Contact Persons

Philip Daltrop

Deputy General Counsel

[email protected]

Kala Mulqueeny

Senior Counsel

[email protected]

ADB’s vision is an Asia and Pacifi c region free of poverty. Its mission is

to help its developing member countries substantially reduce poverty

and improve the quality of life of their people. Despite the region’s

many successes, it remains home to two-thirds of the world’s poor:

1.8 billion people who live on less than $2 a day, with 903 million

struggling on less than $1.25 a day. ADB is committed to reducing

poverty through inclusive economic growth, environmentally

sustainable growth, and regional integration.

Based in Manila, ADB is owned by 67 members, including 48 from

the region. Its main instruments for helping its developing member

countries are policy dialogue, loans, equity investments, guarantees,

grants, and technical assistance.

Asian Development Bank

6 ADB Avenue, Mandaluyong City

1550 Metro Manila, Philippines

Tel +63 2 632 4444

Fax +63 2 636 2444

www.adb.org

Kala Mulqueeny, Senior Counsel and Sherielysse Bonifacio, Legal Research Associate (Consultant) prepared this LPR brief.

Thailand. The Thailand Supreme Court has established green courts

at the supreme and appellate level and is considering establishing

green courts at the trial court level. The Thai Supreme Administrative

Court is a general administrative court, whose jurisdiction includes

environmental cases relating to administrative actions of government

offi cials. The Environmental Division of the Thai Supreme Court and

the appellate level green bench were established through cooperative

engagement, with counterparts from Australia, India, and the US, and

with AECEN .

The President of the Supreme Court of Thailand recently issued a

court resolution establishing a judicial committee to prepare a draft law

on improved environmental adjudication. This resolution resulted from

its partnership with the NSW Land and Environment Court. In 2010,

the AECEN Secretariat is expected to continue to facilitate the court-

to-court partnership between Australia and Thailand to support the

legal drafting of environmental adjudication procedures and mediation

and expert witness rules. The Thai courts of justice intend to organize a

series of consultation meetings with key senior judges and international

experts, to introduce innovative environmental procedures for the

adjudication of environmental cases. The Thai courts of justice plan to

expand their “green benches” to all civil courts throughout the country.

India. The Supreme Court of India has long been known to have a

proactive environmental judiciary and it has decided many cases that

have served as precedents within India and internationally. It is a court

of general jurisdiction but has interpreted the national constitution’s

guarantee of a right to life, as including a right to a wholesome and

pollution-free environment. A broad assessment of its role, infl uence,

and the lessons that can be learned from this experience could benefi t

other fl edgling environmental judiciaries in the region.

The People’s Republic of China. The PRC’s increasing environmental

problems have led to a growing number of environmental disputes.

In 2005, the number of recorded environmental disputes heard in the

general people’s courts reached a record of nearly 700,000. There has

been an average increase in the number of environmental disputes of

25% each year since 1998. While the majority of disputes are resolved

through the administrative process, the amount of environmental

litigation is increasing. Accordingly, there has also been some

momentum to establish pilot environmental courts: 11 have so far

been established,5 with new environmental courts under consideration.

Although most of these have been established in the last 5 years, some

have a longer history, with one environmental trial court in operation

since 1989.

In December 2009, ADB published Green Benches: What can

the People’s Republic of China learn from environment courts of other

countries,6 which gave recommendations on how the PRC could

promote environmental justice. It recommended that more

5 ADB. 2009. Green Benches: What can the People’s Republic of China learn from environment courts of other countries? Manila.6 Ibid.

environment courts be established as a key action to promote an

eff ective nationwide environmental court system in the PRC.

Moving ForwardIn July 2010, ADB will host a regional symposium that will bring

together 40–50 participants: judges, environmental ministry offi cials,

and civil society participants from key DMCs, including Bangladesh,

the PRC, India, Indonesia, Pakistan, the Philippines, Thailand, and

Viet Nam. Experts from AECEN, the United Nations Environment

Programme (UNEP), and the US EPA, and judges from the NSW Land

and Environment Court and the Qld Planning and Environment Court

of Australia will also be invited.

At the regional symposium, ADB will share the ECT research and

country case studies conducted under the regional TA. Judges and

environmental offi cials will share relevant experiences and discuss their

need for further capacity building and an Asia Pacifi c Judges’ Network

on the Environment, which could be established in conjunction with

development partners, including ADB and AECEN, to serve as forum

for further capacity building. The papers from the regional symposium

refl ecting the experience of regional ECTs will be recorded in an

edited volume to serve as a reference on regional and international

environmental adjudication, including ECTs, to inform further work on

environmental adjudication in Asia and the Pacifi c.


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1 Stern, N. 2009. A Blueprint For A Safer Planet: How to Manage Climate Change and Create a New Era of Progress and Prosperity. London: Bodley Head.2 ADB. 2009. Improving Energy Security and Reducing Carbon Intensity in Asia and the Pacific. Manila.3 ADB. 2009. Building Climate Resilience in the Agriculture Sector of Asia and the Pacific. Manila. 4 ADB. 2009. Climate Change and Migration in Asia and the Pacific. Manila.

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About the Asian Development Bank

ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries substantially reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to two-thirds of the world’s poor: 1.8 billion people who live on less than $2 a day, with 903 million struggling on less than $1.25 a day. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

Asian Development Bank

6 ADB Avenue, Mandaluyong City

15550 Metro Manila, Philippines

Tel +63 2 632 4444

Fax +63 2 636 2444

www.adb.org

Publication Stock No. ARM101571March 2010

Printed in the Philippines

The Real Green Revolution

Clean tech will create jobs, but subtly.

by Rana Foroohar (/authors/rana-foroohar.html) April 02, 2010

There is no more fashionable solution to the current global recession than "green jobs." PresidentObama, Britain's Gordon Brown, Nicolas Sarkozy of France, and China's Hu Jintao are all eagerlypromoting clean-technology industries, like wind and solar power, or recycling saw grass as fuel. Itsounds like the ultimate win-win deal: create jobs, cut down on energy dependence, and save theplanet from global warming, all in one stimulus plan. Ever since the recession began,governments, environmental groups, and even labor unions have been spinning out reports onjust how many jobs might be created by these new industries—estimates that range from tens ofthousands to millions.

Those kinds of predictions, however, may be overoptimistic. As a new study from McKinsey pointsout, the clean-energy industry doesn't have much in common with old, labor-intensivemanufacturing industries like steel and cars. A more accurate comparison would be to thesemiconductor industry, which was also expected to create a boom in high-tech jobs but todayemploys mainly robots. Green-tech workers—people who do things like design and build windturbines or solar panels—now make up only 0.6 percent of the American workforce. McKinseyfigures that clean energy won't command much more of the total job market in the years ahead."The bottom line is that these 'clean' industries are too small to create the millions of jobs that areneeded right away," says James Manyika, a director at the McKinsey Global Institute.

On the other hand, a booming green sector could fuel job growth in other industries. Here, too,the story of the computer chip is instructive. Today the big chip makers like Intel employ only 0.4percent of the U.S. workforce, down from a peak of 0.6 percent in 2000. But indirectly they helpedcreate millions of jobs by making other industries more efficient: throughout the 1990s, newtechnologies based on advanced semiconductors helped firms achieve massive gains in laborproductivity and efficiency. Companies in retail, manufacturing, and many other areas got fasterand stronger.

McKinsey and others say that the same process could play out today if governments focused lesson building a "green economy"—by which they really mean a clean-energy industry—and more ongreening every part of the existing economy. U.S. efforts to promote corn-based ethanol, and giantGerman subsidies for the solar industry, for instance, are incredibly counter-productive. In bothcases the state is creating bloated, inefficient sectors, with jobs that are not likely to last.

A better approach would be to push businesses and consumers to do the basics, such as to

http://www.newsweek.com/2010/04/01/the-real-green-revolution.print.html

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improve building insulation and replace obsolete heating and cooling equipment. In places likeCalifornia, 30 percent of the summer energy load is sucked up by air conditioning, so the stategovernment now offers low-interest loans for consumers to replace old units with more efficientones. Consumers pay back the loans through their taxes and pocket the energy savings. Whenthat money is spent, it drives demand and thus job growth in other areas.

The energy and efficiency savings that companies can achieve lead even more directly to jobs. It'sno accident that Walmart, a company that looks for savings wherever it can find them, is one ofthe only U.S. firms that have continued growing robustly throughout the recession. In 2008, whenoil hit $148 a barrel, Walmart insisted that its top 1,000 suppliers in China retool their factories andproducts, improving environmental standards and doing things like cutting back on excesspackaging (which makes shipping cheaper). The company then added 22,000 jobs in the UnitedStates alone in 2009.

The policy implications are clear: governments should stop betting on particular greentechnologies and start thinking more broadly. As the McKinsey report makes clear, countries don'tbecome more competitive by tweaking their "mix" of industries but by out-performing in eachindividual sector. Green thinking can be a part of that. The United States could conceivably exportmuch more to Europe, for example, if America's environmental standards for products were highenough to meet European rules. Protecting the environment is often portrayed as a political redherring that undercuts how competitive American business can be. In fact, the future of growthand job creation in this country may depend on it.

http://www.newsweek.com/2010/04/01/the-real-green-revolution.print.html

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17 of 225 DOCUMENTS

The New York Times

March 7, 2010 SundayLate Edition - Final

Indonesia Tries to Recast Rebels as Forest Rangers

BYLINE: By PETER GELLING

SECTION: Section A; Column 0; Foreign Desk; Pg. 8

LENGTH: 1267 words

BANDA ACEH, INDONESIA -- For decades, the vast jungle interior that blankets the northern Indonesian province ofAceh provided a haven for thousands of rebel foot soldiers fighting a war of independence.

Now, still marginalized and largely unemployed despite nearly five years of peace, many former separatists have fledback into the forest, this time to chop it down.

''I spoke to an old rebel captain recently, and I asked him why he continued to illegally log Aceh's forests,'' saidMohammad Nur Djuli, head of the Aceh Reintegration Body, an organization set up by the provincial government in2006 to help former combatants rejoin society.

''He said, 'O.K., you feed my 200 men and I'll throw this chain saw into the river.' What can I say to that?''

A government program, called Aceh Green, hopes to provide an answer.

Five years after an earthquake and tsunami laid waste to much of Aceh Province, killing 170,000 people, theprovincial government has begun to institute a strategy of economic development. It aims to incorporate sustainabledevelopment, integrate former combatants into society and create jobs that fulfill the goal of the former separatistmovement: ensuring that revenue from natural resources benefits local people.

The Aceh Green program, although still in its early stages, has already yielded some results.

Hundreds of former rebels, who know the Ulu Masen jungle perhaps better than anyone, are being trained and recast asforest rangers by Fauna and Flora International, one of the oldest international environmental groups in Aceh. Thenew rangers trek through the woods, armed with compasses and climbing rope, on the lookout for illegal loggers andpoachers.

The rangers are picked by their local communities and act as an independent group supplementing an existing butsmall forest police force -- their former adversaries. The former rebels are trained for 10 days by Fauna and FloraInternational.

Their graduation ceremony looks like an episode of ''Survivor.'' Exhausted and dirty, they stand in a river surroundedby flaming torches to receive their diplomas, which come in the form of hugs. As in a baptism, they are dunked one byone in the river by their ''master trainer'' and given a clean uniform to begin their new lives.

Page 1

''A lot of them cry,'' said Matthew Linkie, program manager for Fauna and Flora International's Aceh branch. ''It isamazing to see that among these hardened men. These guys are going from outcasts and criminals to heroes. They arebecoming our eyes and ears. They let us know what is going on in very remote parts of the jungle, places that arenormally very difficult to monitor.''

Aceh Green is the brainchild of Gov. Irwandi Yusuf, who is a former rebel as well as an American-trained veterinarianand founder of Fauna and Flora International's Aceh branch. He presented Aceh Green to the world at the 2007 UnitedNations Climate Change Conference in Bali, where, to the applause of the world's environmentalists, he declared that heintended to turn his province into a worldwide model of sustainability.

Analysts have largely praised the spirit of the program, which hints at a potentially bright future for a region known fordisaster and conflict. Several months after the Bali conference, the governor declared a moratorium on all logging in theUlu Masen forest and began the ranger program with Fauna and Flora.

In February 2008, Ulu Masen became the first forest to be internationally recognized as protected under the UnitedNations program called REDD, for Reducing Emissions from Deforestation and Forest Degradation in DevelopingCountries. The system allows rich countries to offset their carbon output by paying poor countries to preserve theirforests. The project could net Aceh an estimated $26 million in carbon credits if it can successfully protect the entire1.9-million-acre Ulu Masen jungle.

''Aceh Green is the articulation of a vision that Pak Irwandi has had for a long time,'' said Lilianne Fan, a former aidworker who is now serving as an adviser to the governor on Aceh Green, using an Indonesian courtesy title before thegovernor's name.

Aceh, which covers the northern tip of Sumatra Island and supports a population of more than four million, has someof the world's richest stores of natural wealth, including natural gas, oil, coal, gold, iron, copper, tin and hardwoodtimber. It was the struggle to control revenue from these natural resources that prompted the long-running separatistrebellion.

Now, the provincial government, empowered by a 2005 peace agreement that gives it limited autonomy from Jakarta,Indonesia's capital, hopes to extract those resources in a sustainable manner and for the benefit of its residents.

Critics say that although Aceh Green is a good idea, the province lacks the government infrastructure and overall willpower to make it effective.

Some aid workers jokingly refer to the program as ''Aceh Brown,'' pointing out that in the remote areas where theywork, the sounds of chain saws have grown louder than ever in spite of Aceh Green and the logging moratorium. Inresponse, the government says it is not yet capable of monitoring the whole forest.

One of the forces behind Aceh Green is an urgent need to improve Aceh's economy. Analysts say growth is essentialfor maintaining peace, but the economy is faltering as the multibillion-dollar reconstruction effort after the 2004tsunami winds down. Local environmentalists now fear that, in the rush to compensate for the unemployment that hascome with the end of international aid projects here, the spirit of Aceh Green will be diluted.

The governor ''supports the investors, not the environment,'' said Arifsyah Nasution, coordinator for Kuala, anumbrella organization representing 25 local environmental groups. ''The governor says they are doing it in a 'greenway,' but we have yet to see any results. To us it is all just jargon, a way to attract large-scale investment.''

At the heart of Aceh Green's difficulties is the lack of a fully functioning government in much of the region. More than30 years of conflict and the tsunami have left provincial and local governments in tatters. Corruption, especially at thelocal level, remains prevalent, according to anticorruption watchdogs like Transparency International.

Page 2Indonesia Tries to Recast Rebels as Forest Rangers The New York Times March 7, 2010 Sunday

''The Aceh Green team works alone,'' Mr. Nasution said about the governor's team, which works out of Banda Aceh,the provincial capital. ''There is very little coordination or understanding among other sectors of government.''

''There are a lot of conflicting regulations coming from various levels of government,'' he added. ''It's a mess.''

Ms. Fan said that the governor's Aceh Green team planned to spend the next two years strengthening governing skillsamong local and provincial leaders. They are reviewing forest policy as well as resource extraction. Several projects arein the works, Ms. Fan said, including a partnership between the Indonesian government and the German developmentbank KfW to develop geothermal resources.

For some, including the rebels-turned-rangers, Aceh Green has become a new sort of provincial doctrine.

Kamarullah, 32, a former rebel fighter and illegal logger, who like many Indonesians uses only one name, said he nowconsidered himself an environmental activist.

''I never knew how to wisely use the forest,'' he said during a recent patrol. ''Now I understand the importance of theforest. I will always protect it, its wildlife and the environment as a whole from now on, even if I am no longer aranger.''

URL: http://www.nytimes.com

LOAD-DATE: March 7, 2010

LANGUAGE: ENGLISH

GRAPHIC: PHOTO: In the Ulu Masen jungle of Indonesia's Aceh, forest rangers patrolled to prevent illegal logging,part of an effort to conserve the forest. Former rebels are being trained to do these jobs. (PHOTOGRAPH BY FAUZANIJAZAH FOR THE INTERNATIONAL HERALD TRIBUNE) MAPS

PUBLICATION-TYPE: Newspaper

Copyright 2010 The New York Times Company

Page 3Indonesia Tries to Recast Rebels as Forest Rangers The New York Times March 7, 2010 Sunday

November/December 2010ESSAY

Globalizing the Energy RevolutionHow to Really Win the Clean-Energy Race

Michael Levi, Elizabeth C. Economy, Shannon O'Neil, and Adam Segal

MICHAEL LEVI is Senior Fellow for Energy and the Environment, ELIZABETH C. ECONOMY is Senior Fellow

for Asia Studies, SHANNON O'NEIL is Fellow for Latin America Studies, and ADAM SEGAL is Senior Fellow

for Counterterrorism and National Security Studies at the Council on Foreign Relations.

The world faces a daunting array of energy challenges. Oil remains indispensable to the global economy, but it is

increasingly produced in places that present big commercial, environmental, and geopolitical risks; greenhouse

gases continue to accumulate in the atmosphere; and the odds that the world will face catastrophic climate change

are increasing. These problems will only worsen as global demand for energy rises.

Environmental advocates and security hawks have been demanding for decades that governments solve these

problems by mandating or incentivizing much greater use of the many alternative energy sources that already exist.

The political reality, however, is that none of this will happen at the necessary scale and pace unless deploying

clean energy becomes less financially risky and less expensive than it currently is. This is particularly true in the

developing world.

A massive drive to develop cheaper clean-energy solutions is necessary. Indeed, many claim that it has already

begun -- just not in the United States. They warn that the United States is losing a generation-defining clean-energy

race to China and the other big emerging economies.

They are right that the United States is dangerously neglecting clean-energy innovation. But an energy agenda built

on fears of a clean-energy race could quickly backfire. Technology advances most rapidly when researchers,

firms, and governments build on one another's successes. When clean-energy investment is seen as a zero-sum

game aimed primarily at boosting national competitiveness, however, states often erect barriers. They pursue trade

and industrial policies that deter foreigners from participating in the clean-energy sectors of their economies, rather

than adopting approaches that accelerate cross-border cooperation. This slows down the very innovation that they

are trying to promote at home and simultaneously stifles innovation abroad.

To be sure, clean-energy innovation alone will not deliver the energy transformation the world needs. It can drive

down the cost of clean energy and narrow the price gap between clean and dirty sources, but it is unlikely to make

clean energy consistently cheaper than fossil fuels anytime soon. Government policies will still need to tip the

balance, through regulations and incentives that promote the adoption of alternatives to fossil fuels.

Globalizing the Energy Revolution http://www.foreignaffairs.com/print/66770?page=show

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CLEAN BUT COSTLY

Clean energy is almost always more expensive than energy from fossil fuels, and often by a big margin. A recent

International Energy Agency (IEA) study found that in the United States, electricity from new nuclear power

plants is 15-30 percent more expensive than electricity from new coal-fired plants, offshore wind power is more

than double the price of coal, and solar power costs about five times as much. An even more pronounced pattern

prevails in China, where nuclear energy costs 15-70 percent more than coal, onshore wind costs between two and

four times as much as coal, and solar power is more than five times the price.

Clean energy for transportation fares just as badly in terms of cost. In most countries, ethanol and biodiesel are

considerably more expensive than conventional fuels. Cars that run on electricity, meanwhile, suffer from high

battery costs that can easily cancel out those cars' lower fuel bills. Compounding the problem, the cost of clean

energy is often highly uncertain: the cost of nuclear power, for example, depends strongly on the availability of

financing on reasonable terms.

Nor is cost the only problem that demands technological progress. Nuclear power, for example, remains

vulnerable to nuclear proliferation and uncertainties over the safety of waste storage. The sun and wind produce

electricity intermittently, and battery and grid technologies are not yet able to smooth over the gaps in their delivery

of power. No one has even tried to build and operate a commercial coal plant that captures and stores its

greenhouse gas emissions.

Yet the world is woefully underspending on clean-energy innovation. The IEA recently presented a scenario in

which global oil consumption would be reduced by a quarter and global greenhouse gas emissions would be cut in

half by midcentury. To reach this goal, the IEA estimated that the world would need to spend an average of

$50-$100 billion each year to support the research, development, and demonstration of clean-energy technologies.

Current public spending is a mere $10 billion annually. That number is set to plunge as global stimulus spending,

much of which was directed to energy, slows and then stops. Private financing of clean energy is harder to

measure but probably contributes only $10 billion more per year. The shortfall is staggering.

Some have found hope in reports that the major emerging economies -- China, Brazil, and India -- are making big

investments in clean energy. Yet their innovation efforts, although important, are not as impressive as they may

seem.

China has invested in a wide range of clean-energy technologies, pumping unprecedented amounts of money into

renewable energy and in 2009 leading the world in financing wind technology. Several of its companies are making

big investments in electric vehicles. Three Chinese power plants currently under construction will aim to

demonstrate carbon capture and sequestration on a commercial scale. China can also build highly efficient

conventional coal plants at costs far lower than in the West.

Yet China's innovation in the clean-energy field is following the same pattern as in other sectors of its economy:

the implementation of incremental changes in manufacturing processes that are usually developed abroad, rather

than the achievement of fundamental homegrown advances. In the area of photovoltaic panels (which convert

sunlight directly into electricity), for example, China has lowered the cost of finished modules and panels but has

not made big advances in more technologically sophisticated areas, such as silicon wafer manufacturing. Such


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lower prices help already mature technologies spread more quickly but often fail to deliver transformative

advances. The value of Chinese investments in research and development (R & D), meanwhile, is limited by an

economic system that has trouble moving ideas from the laboratory to the marketplace.

Brazil has narrowly tailored its clean-energy innovation to biofuels. Commercial investment in innovation has,

predictably, flowed mainly into improvements of existing technology, which in Brazil means first-generation

sugar-cane ethanol for cars. Yet on the most important international frontier for biofuels -- so-called second-

generation cellulosic ethanol, which uses waste or crops grown on land that cannot be used to produce food --

Brazil is relatively quiet. Its Center for Sugarcane Technology, a cooperative consisting of many of the country's

sugar-cane producers, has built a small pilot facility; Embrapa, the government organization that supports

agricultural research, is scheduled to complete a similar center this year; and the newly founded Brazilian

Bioethanol Science and Technology Laboratory is planning a third for next year. The United States, in contrast, is

home to more than three dozen commercial or pilot cellulosic ethanol plants. Brazil has also spent money

developing indigenous nuclear technology. The result has been not an internationally competitive industry but

delays in getting Brazil's domestic nuclear industry up to speed.

India is even further behind. It has not, to date, made major investments in clean-energy innovation. Its science and

technology spending in general has also lagged. New Delhi is, however, trying to turn a corner. Its National Solar

Mission, announced in 2009, aims to deploy 20 gigawatts of solar energy by 2022 and to back that up with

government support for everything from basic innovation to large-scale deployment. Earlier this year, the Indian

government upped the ante by proposing a fee on sales of coal-fired power; the proceeds would be channeled into

funding for clean-energy R & D. In the near term, however, India is not likely to offer major breakthroughs, but it

will create increasingly cost-effective business models for supplying energy in developing economies.

REENERGIZING WASHINGTON

Major scientific advances are still most likely to occur in the developed world, alongside much of the work

necessary to commercialize clean-energy technologies and the capital required to support those efforts. Chatham

House recently mined patent data for six major clean-energy fields: no emerging-economy company ranked in the

top 20 firms in any of the fields. U.S. companies, in contrast, consistently helped make the United States one of the

top three clean-energy patent holders, alongside Japan and Europe.

Yet the United States cannot rest on its past successes. The scale and pace of U.S. innovation in clean-energy

technology today are not commensurate with the challenges posed by climate change and by the growing demand

for oil. According to the American Energy Innovation Council, the U.S. energy industry and the U.S. government

together invest a mere 0.3 percent of total private sales in public and private R & D; this contrasts with 18.7

percent in the pharmaceutical industry and 11.5 percent in aerospace and defense. Bringing new clean-energy

products to market often takes decades, in contrast to other high-technology sectors, where it takes years. The

result is painfully slow progress.

This will not change without government intervention. The question is what kind of intervention makes the most

sense. The United States could, in theory, promote clean-energy innovation strictly through measures such as

cap-and-trade or renewable-energy mandates that directly drive clean-energy deployment. As technologies were

implemented, firms would learn through experience and make incremental innovations. In addition, once firms and


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inventors anticipated stronger regulations and incentives in the future, they would invest in more ambitious

long-term efforts to develop next-generation technologies.

But there are important limits to this dynamic. Companies are likely to underspend on innovation since they cannot

always reap the full rewards of their investments. A company that discovers new principles that allow it to make

far more effective batteries, for example, may see some of its ideas replicated by others without compensation. A

firm that experiments with different schemes for financing rooftop solar panels before finding one that works will

probably not be able to stop its competitors from copying it and competing with it. Many of these valuable and

necessary innovative activities will thus never happen in the first place, even if the right long-term market incentives

are in place.

Politics can also prevent those long-term incentives from being created. If people cannot be convinced that

radically improved cars will be available by 2030, their elected leaders will not be willing to mandate big cuts in oil

consumption by then; if politicians cannot be persuaded that eliminating greenhouse gas emissions from power

plants is possible by midcentury, they will not condone cap-and-trade systems that purport to do just that. Yet this

creates a vicious cycle. Firms and inventors will not pump enough money into game-changing technology without

the right long-term goals and strong policy support. Wariness about achieving ambitious long-term goals can

quickly become a self-fulfilling prophecy.

A U.S. strategy to break this cycle requires two basic elements. First, the U.S. government must create incentives

that promote the widespread adoption of efficient energy technologies and alternatives to fossil fuels. These

incentives could take the form of pricing instruments (such as gasoline taxes or cap-and-trade systems), focused

financial incentives (such as tax credits for electric vehicles and grants to wind-farm developers), or direct

regulation (such as fuel-economy standards for cars or pollution limits for power plants). Such policies would not

only increase the use of clean-energy technologies but also encourage innovation, since inventors would have

much larger markets for their technologies. In many cases, these policies would also encourage domestic

manufacturing, since for many clean-energy technologies (such as advanced wind turbines), there are significant

commercial advantages to locating manufacturing near deployment.

In addition to creating market incentives, the U.S. government should also support innovation directly by helping

fund clean-energy research, development, and demonstration projects. It should also adopt policies that encourage

investors to finance companies that operate in the "valley of death" between invention and commercial viability.

Washington could, for example, support R & D in U.S. government laboratories and in private companies, pay for

first-of-a-kind advanced biofuels and clean-coal facilities, and reduce risk for financiers who back early stage

clean-energy commercialization. The United States should also encourage other countries to take similar steps.

THE GLOBALIZATION OF INNOVATION

Even with extremely ambitious programs, no one country will produce the majority of the clean-energy innovation

that the world needs. Different countries' efforts need to be tightly connected so that they can build on one

another. U.S. utilities, for example, will need to utilize Chinese advances in clean-coal implementation; Indian solar

manufacturers will need to benefit from basic research done in the United States in order to meet their

government's targets; and Brazilian biofuel engineers will need to be able to tweak the inventions of Danish

enzyme companies to make them work with local sugar cane.


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This is already happening in certain places. California-based CODA Automotive, for example, was able to move

ahead quickly with its plans to field an electric vehicle thanks to a partnership with the Chinese battery maker

Lishen Power Battery, creating jobs in both the United States and China and improving the potential for more

affordable electric cars. Amyris, another California start-up, is developing synthetic biofuels in Brazil through

partnerships with local sugar-cane producers, allowing it to strengthen its technology before applying it to more

difficult challenges in the United States. This sort of cross-border fertilization needs to happen faster and on a

much larger scale.

Yet many governments may instinctively move in the opposite direction, particularly if they worry that they are

engaged in a clean-energy race with other nations. Aggressive government support for innovation is typically sold

as support for domestic workers and companies. That can quickly lead to "green protectionism," with politicians

coming under pressure to wall off domestic markets or to discriminate against foreign firms. Governments also

promote their own local technology standards in an effort to ensure that their domestic companies can control

markets and collect royalties. This sort of Balkanization of clean-energy markets blocks the free flow of

technology.

The most heated debate over cross-border flows of clean technology has focused on intellectual property rights.

When they think about intellectual property rights, many policymakers in emerging economies look to HIV/AIDS

drugs as their model. In the early years of the HIV/AIDS epidemic, expensive intellectual property associated with

the most effective drugs prevented their rapid diffusion to patients in Africa and elsewhere. Eventually, under

considerable political pressure, Western pharmaceutical companies granted significant concessions on intellectual

property rights, leading to much wider availability of the drugs.

With this experience in mind, policymakers from the emerging economies have used global climate change

negotiations to push the developed countries to relax their patent rules. The developed countries, in turn, have

responded by arguing that poor intellectual property protection is actually a major reason that clean technology

does not spread more quickly. (Their lesson from the HIV/AIDS experience is that even small concessions on

intellectual property rights lead to much bigger demands.) They have therefore advocated strengthening that

protection. But both sides overstate their claims.

Unlike in the case of HIV/AIDS drugs, the patents that protect intellectual property are only a small part of the cost

of essentially all clean-energy technologies. Relaxing them would not do much to change total costs in most cases.

Even in the few instances in which companies strategically withhold licenses in order to deny market entry to

potential competitors, forcing them to give up control over those patents would not speed up technology diffusion.

Most advanced clean-energy patents are relatively useless without the accompanying trade secrets, know-how,

and expertise, and thus active collaboration between the patent holder and the firm wishing to acquire the patent is

necessary. That cooperation is unlikely to occur if governments strip companies of their patent rights.

Nor would fixing weaknesses in developing-world intellectual property protection be a panacea for clean-energy

companies. Although they usually leave their most advanced technologies at home, foreign companies are already

active in the clean technology sector in Brazil, China, and India, despite problems with intellectual property rights

in all three. Better protections for intellectual property could accelerate and expand the spread of technology, and

should be encouraged, but there is no reason to believe that intellectual property rights are more important to the

flow of technology than other factors.


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Open investment and trade policies are critical complements to improved intellectual property rights. The power of

open investment is most clearly on view in Brazil and India. Brazil, for example, allows unlimited foreign

investment in biofuels, evidenced most recently by a $12 billion joint venture between Shell and Cosan, one of

Brazil's biggest ethanol producers. The deal will give Cosan access to two cutting-edge U.S. and Canadian

biotechnology firms with investments in second-generation ethanol, while offering Shell new markets. India,

meanwhile, is open to foreign investment in renewable-energy projects, granting automatic approval to joint

ventures with up to 74 percent foreign equity participation.

Brazil and India have uneven but relatively open approaches to trade. The wind sector provides a useful illustration:

Indian tariff structures and quality-control systems tend to promote the domestic assembly of wind turbines but still

allow components to be sourced abroad. Brazil, meanwhile, has traditionally used high tariffs and nontariff barriers

to encourage independence from imports across its economy. It tried this approach for several years in its wind

sector but failed. Brazil's government opted last year for a more nuanced mix: it barred imports of small wind

turbines, removed all restrictions on imports of bigger, more advanced ones, and strengthened subsidies for the

domestic production of turbines and their component parts.

China, in contrast, has taken a much more aggressive approach to trade. For the last two decades, foreign

companies have faced pressure to grant critical intellectual property rights to Chinese firms as a condition of

market access. Until recently, for example, wind turbines produced in China had to have at least 70 percent

domestic content, and Chinese-owned companies were given preferences in wind-power contracts. And since

2006, under the rubric of "indigenous innovation," Beijing has adopted a range of policies designed to raise the

technological capabilities of Chinese firms, including the use of government contracts and the development of

competing technology standards, which favor Chinese intellectual property. China also continues to provide

inexpensive capital to domestic firms, helping them outperform U.S. and other foreign companies. China's currency

policies add to the advantage that its firms find in international markets, by making Chinese exports cheaper.

The result of all this forced technology transfer has been an unprecedented backlash from foreign companies that

do business in China. The risk to China is that these efforts could backfire; foreign firms might shy away from

investing in China or selling goods there, potentially slowing the flow of foreign clean-energy technology and thus

hampering China's ability to quickly replace fossil fuels with clean energy on a large scale. A hostile environment

also makes it politically difficult for Washington to support policies that actively accelerate the spread of clean-

energy technology to China.

The United States should push back strongly against Chinese protections while encouraging Brazil and India to

open up their markets even further. This means protesting promptly and loudly if and when China first announces

a new protectionist policy; there is often a significant lag between Beijing's proclamation of a policy and its

implementation, offering a window of time during which the United States can try to alter Chinese policy. In

addition, Chinese protectionism typically affects clean-technology innovators in Europe and Japan. The United

States should work closely with other concerned parties to pressure China to reverse or moderate its policies.

The United States should be careful, however, not to kill off policies that support clean energy in the process of

promoting openness. Sometimes, rules requiring domestic content may be a necessary price for getting clean-

energy schemes off the ground. If the United States were to succeed in persuading developing nations to end such

requirements, it might gut domestic political support there for clean-energy programs in the process. That would be


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a Pyrrhic victory, on environmental, technological, and commercial grounds.

The United States should also set a good example with its own domestic markets. Several senators have called for

barriers to the use of imports and for foreign investment in clean-energy projects supported by the economic

stimulus package. Their stated goal is to maximize the returns to U.S. firms and workers. Yet such policies would

make it more difficult for the United States to build on overseas innovation -- and for foreign firms to access

technology developed in the United States. In addition, by cutting off U.S. firms from cheap clean-energy solutions

developed overseas, these policies could raise U.S. energy prices, thus damaging competitiveness and employment

throughout the economy.

JUMP-STARTING THE GREEN REVOLUTION

An open innovation system is essential to speeding up the development and diffusion of clean-energy technologies.

But even in an open system, energy technology tends to spread slowly, making openness alone insufficient.

Moreover, although U.S. firms may applaud a push to strengthen intellectual property rights and increase trade and

investment, many developing countries will resist, fearing that it will cost them their own positions in the clean-

energy race. The U.S. government needs to lend a hand, actively helping spread advanced energy technology,

something that developing countries have demanded for years.

Shortfalls in the chain that spreads energy technology around the world exist from the R & D stage, to

demonstration and commercialization, to the eventual diffusion of mature technologies. Even in the most advanced

developing countries, scientists often lack access to resources comparable to those in the United States. Brazilians

working on R & D in sugar-cane biotechnology, for example, report that even limited access to U.S. scientific

facilities and personnel could yield big returns. Moreover, since early stage R & D is disproportionately conducted

by governments or on government contracts, relying on market mechanisms such as trade and investment to create

cross-border R & D collaborations will invariably fail. Instead, governments will often need to arrange collaborative

projects by providing targeted financial support and linking government laboratories. The United States has taken

some initial steps toward strengthening joint R & D programs with Brazil, China, and India through efforts such as

the U.S.-China Clean Energy Research Center, launched in late 2009, but much more could be done in all three

countries if more government money were available.

Another important target is small and medium-sized enterprises, which play critical roles in experimenting with and

commercializing new technologies but have limited capabilities in much of the developing world. In India, for

example, large, vertically integrated conglomerates dominate the clean-energy industry, and in China, big

state-owned enterprises are the major players. Venture capital and private equity, on which smaller companies

normally rely to support innovative activities, are also relatively weak in all three countries. U.S. policy cannot fix

all these gaps, but it can help.

First, the United States could partner with the Brazilian, Chinese, and Indian governments to provide intellectual

property insurance for initiatives involving small or medium-sized clean-technology enterprises. Intellectual

property rights are often critical to the survival of small U.S. technology firms, and worries about the protection of

intellectual property can deter them from partnering with foreign firms. Smaller companies in the big emerging

economies, meanwhile, face greater barriers than large companies to establishing trust with U.S. companies;

intellectual property insurance could help break down those barriers. The United States should only pursue such


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programs, however, if its counterparts have not adopted a hostile approach to intellectual property rights, as China

has done in recent years.

Second, the United States could strengthen its efforts to help familiarize U.S. companies and researchers with

potential partners in the big emerging economies. The U.S. Department of Commerce has already taken some first

steps, creating guidebooks on doing clean-energy business in China and India and hosting several popular sales

trips to Asia. These efforts could be extended -- in number, geographic scope, and the participation of early stage

companies -- leading to more profitable connections between U.S. and developing-country firms.

Third, the United States could help create permanent hubs in developing countries where researchers and firms

could exchange ideas and identify joint opportunities. A similar idea was proposed by India in advance of the

December 2009 UN climate negotiations in Copenhagen, where it received broad support.

Fourth, U.S. policymakers should help establish cross-border demonstration projects and commercialization

efforts. These might, for example, include demonstrating the viability of U.S. carbon capture and sequestration

technology in India or commercializing U.S.-developed biofuel enzymes by applying them to Brazilian sugar cane

in commercial-scale pilot plants. Good ideas often die because they cannot get money to help them grow; as is the

case in the United States, financial support for demonstration projects and commercialization efforts abroad will

help new clean-energy technologies become commercially viable.

Cross-border commercialization may at times boost foreign manufacturers at the expense of manufacturers in the

United States, but the benefits to U.S. companies are likely to outweigh the losses, particularly if those efforts are

packaged with increased access to growing clean-energy markets. Many U.S. inventions that might fail at home, or

only spread internationally after several product cycles, could find robust demand abroad, where consumers have

different needs and preferences. Moreover, participation in demonstration projects helps U.S. firms gain insight

into foreign markets. The alternative is not U.S. dominance in those markets but, more likely, stronger roles for

companies from more flexible developed countries, such as Japan.

U.S. support for cross-border demonstration and commercialization projects should not be unconditional, however.

Before supporting costly, large-scale demonstration projects, the United States should make sure that the host

country is on its way to developing the necessary policy infrastructure to support widespread adoption of the

technology under testing. U.S. firms should also be promised access to the new clean-energy markets in exchange

for these commercialization and demonstration projects. And such efforts should be co-financed by the host

countries, since their firms and economies will benefit as a result. The United States should be flexible when it

comes to sharing any financial burden, particularly in the case of India, where government resources are severely

limited.

The last area in which the U.S. government should provide support is in directly encouraging U.S. clean-energy

exports and overseas investment by U.S. companies. The U.S. Export-Import Bank and the Overseas Private

Investment Corporation both currently support these missions, but their financing and mandates could be

expanded. They should also be given stronger roles in policy promotion. The Export-Import Bank helps finance

U.S. exports regardless of any trade barriers imposed by the destination countries; a new strategy should more

actively connect U.S. financial support to reduced trade barriers. Similarly, OPIC must tie its support for clean-

energy investment to more open investment climates for clean-energy companies. Both organizations should also


8 of 10 11/1/2010 10:27 AM

encourage recipient countries to strengthen their backing for clean energy.

Many of these initiatives -- particularly those that focus on the more commercial end of the innovation spectrum --

could cost a considerable amount. But they would have their benefits -- not only in terms of cutting global oil

consumption and reducing greenhouse gas emissions but also in helping U.S. clean-energy innovators and

companies. And when it comes to climate change, they might present a more attractive alternative to the other

options, which tend to involve financial support for clean-energy deployment in the developing world with few

strings attached. Money that boosts U.S. clean-energy companies while helping the big emerging economies adopt

advanced technologies is likely to be much easier to sell politically than funds that are not tethered explicitly to

U.S. economic goals.

WINNING TOGETHER

None of these policy initiatives will reduce demand for oil, lower greenhouse gas emissions, or create bigger

markets for U.S. clean energy unless they ultimately boost demand for clean energy around the world, and, in

particular, in Brazil, China, and India. A system that drives down costs for clean energy should go a long way

toward promoting the creation of bigger markets: the cheaper clean energy is, the more likely countries are to

enact policies that promote its adoption. Moreover, an approach that helped ensure that the big developing

countries became producers rather than just consumers of advanced technologies would lower those costs even

further, since those countries can often exploit lower local labor costs and economies of scale, particularly when

producing for their own markets. In Brazil, China, and India, empowered clean-energy producers can also be an

important constituency pressing for stronger clean-energy regulations and incentives, just as they are in the United

States. In China, for example, solar manufacturers have been pressing for strong domestic solar requirements, in

order to mop up excess supply.

To be sure, active U.S. government intervention to make clean-energy markets work better is not without its own

risks. Even smart and well-informed policymakers are bound to make mistakes. Some technologies that they

support will turn out to be commercial dead ends, and the interests of U.S. firms and potential partners in Brazil,

China, and India will sometimes conflict. Resources will no doubt be wasted. But the costs are dwarfed by the

perils of inaction.

The success of other nations in clean energy does not imply U.S. failure. The United States can benefit greatly

from clean-energy innovation around the world, so long as it also pursues its own robust efforts at home. Each

major economy has its own natural advantages when it comes to energy technology innovation and development.

An enlightened U.S. strategy should aim to create a global innovation environment that weaves together those

distinct strengths in pursuit of common energy goals. Not everyone will like every part of the package. Some U.S.

firms will chafe at efforts that might help competitors in the developing world. Some emerging economies will

resist opening up their markets to those same U.S. firms. Only by enlarging clean-energy markets can everyone

enjoy a bigger piece of the pie.

The alternative is not a world in which the United States dominates the clean-energy field alone, or even one in

which another country solves the United States' problems for it. It is more likely to be one in which the cost of

clean energy does not drop as quickly as needed, particularly in the developing world, and in which massive

markets for clean-energy technologies do not materialize. In that case, the United States and the world will both


9 of 10 11/1/2010 10:27 AM

lose.

Copyright © 2002-2010 by the Council on Foreign Relations, Inc.

All rights reserved.

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10 of 10 11/1/2010 10:27 AM

The Great Battery RaceA 19th-century technology could determine which nation triumphs in the 21st. Steve LeVine reports from the

global competition to replace the combustion engine.

BY STEVE LEVINE | NOVEMBER 2010

In 2007, the Chinese government approached Wan Gang, a 54-year-old engineer-turned-university-president

from Shanghai, with a remarkable offer. Chinese President Hu Jintao had taken up the political mantra of

"scientific development," and the authorities wanted someone of Wan's caliber to serve as the country's minister

of science and technology -- so badly, in fact, that they were willing to violate longstanding convention and

elevate Wan even though he wasn't a Communist Party member. It was the first time in more than five decades

that such an exception had been made for a government minister.

What made Wan of such interest to Hu was his expertise in a once-obscure corner of automotive engineering:

After 10 years working for the Audi car company in Germany, he was a world authority on electric-vehicle

technology. Just as important, Wan possessed the technical know-how necessary to supervise groundbreaking

research in advanced batteries, the make-or-break component that could separate an electric vehicle that

consumers would actually want to buy from an expensive exercise in engineering vanity. Shortly after returning

to China, he was named the chief scientist on the country's blue-ribbon research panel for electric cars.

The Great Battery Race - By Steve LeVine | Foreign Policy http://www.foreignpolicy.com/articles/2010/10/11/the_great_battery_rac...

1 of 9 11/1/2010 11:24 AM

The Chinese government saw in the technology that Wan had mastered a potential future pillar of its economy.

Starting virtually from scratch, Beijing announced last year it would become the world's largest producer of the

vehicles within the next few years. "China is committed to developing clean and electric vehicles," Wan told me

when I met him in Chicago this summer. "Batteries and clean vehicles are a national strategic priority."

Indeed, the battery, among the most humble and unsexy of inventions, might just be the most important

technological battleground of the next two decades. The discovery of the next key breakthroughs in the field

could mean not just a fortune for a handful of companies, but the remaking of whole economies -- and the

rebalancing of geopolitical power that typically accompanies such shifts. A Chinese triumph could speed the

country's global advance; an American one could give U.S. dominance a new lease on life.

Two developments have brought us to this pass. Developed countries and rising powers alike are looking to curb

their oil-guzzling habits, for any number of reasons: climate change, unsavory petrostate politics, the looming

fear there simply isn't enough petroleum on the planet to satisfy everyone. The result is a new global interest in

alternatives to petroleum and the internal combustion engine -- most prominently advanced battery technology,

the necessary precondition for the development of an affordable, powerful electric car.

But the world doesn't just need a better car -- it also needs a better means of building and sustaining economies.

Over the last 20 years, Asia's growth has been mostly driven by manufacturing exports, while the United States'

was fueled first by Silicon Valley's tech boom and later by elaborate (and ultimately ruinous) financial

instruments. But those platforms have reached or are nearing their limits, and in the scramble to avoid another

recession, the world's great economies are looking for the next big thing, an engine of economic growth for the

future.

These two aspirations -- for a less oil-dependent world and for a more prosperous one -- are rapidly converging

in a global race for a better battery. By 2030, experts say, advanced batteries will swell into a $100 billion-a-year

business. They will also enable an electric-car industry on the order of half a trillion dollars, on a par with the

global pharmaceutical industry and capable of spawning companies on the scale of ExxonMobil, General

Electric, and Toyota. "It is a matter of national wealth and national economic advantage in a way that few new

things in society can be," Peter Harrop, who heads the Britain-based technology consulting firm IDTechEx, told

me. "But it is a high-stakes game. It is going to be beneficial [only] to certain companies in certain countries."

Two of the likeliest beneficiaries are Japan and South Korea, the top producers of today's cutting-edge batteries

and the favorites to develop tomorrow's. But the more interesting -- and potentially world-changing -- rivalry is

between the United States and China, both of which are scrambling to get into the game. Each country has a

great deal to win by establishing itself as an early leader in advanced batteries, in competition or in partnership

with East Asia's technological heavyweights. The contest has taken on ultraserious geopolitical heft for the

United States, at its lowest economic ebb in recent memory, and for China, eager to cement its position as a

globally influential superpower. Both countries' governments have adopted an unapologetically hands-on

approach, attempting to drive innovation from the top down and viewing the project through the lens of national


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strength. The analogies tend more toward the Manhattan Project than Microsoft.

On a July visit to the Smith Electric Vehicles plant in Kansas City, Missouri, U.S. President Barack Obama vowed

that within five years, the United States would be making 40 percent of the world's advanced batteries. (It made

just 2 percent in 2009.) "That's how we ensure that America doesn't just limp along," he declared, "but instead

that we're prospering -- that this nation leads the industries of the future." Obama's point man for this ambitious

project defines his goals in equally sweeping terms. "The ability of a country to manufacture batteries and

vehicles will help to create wealth, will help to provide resilience against oil-supply disruptions, and help to

create jobs," David Sandalow, U.S. assistant energy secretary for policy and international affairs, told me. "And

those, in turn, will create national power."

But while U.S. officials have been sweeping in their rhetoric, China has been breathtaking in the scale and

specificity with which it is ordering up an electric-car industry. Beijing in recent years has issued government

directives that, if realized, will result in the production of some 30 electric-vehicle models by 2012; expanding

lithium-ion battery manufacturing into a $25 billion-a-year industry by that same year; and the construction of

about 100 charging stations this year alone across the country.

It's not just the United States and China. Google the phrase "electric car" and the name of any reasonably sized

country, and you will turn up yet another aspirant. More than a dozen would-be contenders from South America

to Scandinavia are talking about the technology in positively existential terms, even those with little plausible

hope of coming up winners. German Chancellor Angela Merkel hopes that "in the 21st century we are again

the nation that is able to build the most intelligent and environmentally friendly cars." French Ecology Minister

Jean-Louis Borloo has announced a government-industry plan to win "the battle of the electric car." Those

who develop and manufacture the next-generation technology for electric cars, these leaders believe, will be the

haves. And those who don't will be at the mercy of those who do.

ONE, TWO, THREE DOORS, AND JEFFREY CHAMBERLAIN is into the "dry room," a state-of-the-art,

moisture-proof chamber customized for fiddling with the exacting technology of advanced lithium-ion batteries.

Chamberlain, the 44-year-old manager of a scientific team at the U.S. Energy Department's Argonne National

Laboratory in suburban Chicago, walks over to a machine loaded with giant rolls of white plastic film. Peering

through plastic protective glasses, he explains how the film is coated: slowly, with a liquid mixture of aluminum

and carbon. The coating process is crucial to the lithium-ion battery. It's also very, very old. "It's a 19th-century

technology," Chamberlain says; in labs in other countries, he adds in a whisper, he has seen scientists actually

dip a finger into the slurry to judge its quality.

The battery, like the light bulb, is at its heart an archaic device, an artifact of the early Industrial Revolution

tucked inside the gadgets of the 21st century. In 1749, half a century before Alessandro Volta invented the first

battery, Benjamin Franklin coined the word to describe a rudimentary electric contraption he built out of glass

panes, lead plates, and wires. The modern Energizer is a remarkably close descendant of the first lead-acid

battery -- two sheets of the pliable metal divided by a piece of linen and suspended in a glass jar of a sulfuric


3 of 9 11/1/2010 11:24 AM

acid solution -- invented by French physicist Gaston Planté in 1859. The world's two largest car-battery

manufacturers, Johnson Controls and Exide Technologies, both U.S.-based enterprises, make most of their

money selling what are essentially variations on Planté's 151-year-old workhorse.

The greatest advance in battery design since Planté originated in the United States in 1977. The world's faith in

petroleum had been shaken by the oil shocks earlier in the decade, and even Exxon, the world's most profitable

oil company, was in the market for alternatives. Exxon developed and commercialized the lithium-ion battery,

which generated power by discharging ions from one side of the device and absorbing them on the other -- an

innovation that allowed the battery to store far more energy than earlier technologies. But as memories of the

energy crisis faded, and with them the imperative to escape from dependence on oil, Exxon abruptly abandoned

the lithium-ion business. Japan's Sony picked it up, combining advances by American and Japanese researchers

and releasing a much-improved version of Exxon's lithium-ion invention in 1991; it packed four times the energy

of its lead-acid predecessor.

Today, Japanese companies like Panasonic, Sony, and Toyota dominate a $9 billion-a-year lithium-ion battery

industry. The future of the business is bright enough that even Exxon is trying to get back into it, belatedly

reinvesting in lithium-ion R&D. The world is fast moving from nickel-metal-hydride batteries -- an intermediary

technology, also developed in the United States and commercialized in Japan, that is used in Toyota Priuses,

among other things -- to lithium-ion ones, which store twice the power in the same space. Lithium-ion batteries

power most of our laptops and cell phones. For the next decade at least, they will be the favored technology as

well for hybrid-electric and electric cars, which for the first time are being seriously contemplated as a widely

used replacement for the conventional internal combustion engine.

But as they have gone from curiosity to great green hope, electric cars have run smack against the limits of

today's batteries, limits that are likely to keep such vehicles too expensive and underpowered to go mainstream if

no one can figure out how to get past them. As it stands, lithium-ion batteries cost $1,000 per kilowatt-hour of

energy output. Engineers say it's theoretically possible to bring that figure down to $300, but the laws of physics

prevent going beyond that. Even if they hit that target, however, battery-powered cars would still have costs too

high, ranges too limited, and recharge times too long to truly compete with conventional vehicles. (Lithium-ion

batteries also have a rather unsettling tendency, on rare occasions, to burst into flames. This is unpleasant

enough when it happens in a cell phone or laptop, but an entirely different matter in a car.) The Tesla

Roadster, a lithium-ion-driven electric car that debuted in 2006, has the range and speed -- up to 130 miles per

hour -- to compete with sports cars. But it takes more than 6,000 individual batteries to pull it off, and the car

currently costs north of $100,000. Both the American and Chinese governments are offering generous rebates to

make their domestically manufactured electric cars more affordable, but even with the government discount,

General Motors' soon-to-be-released Chevy Volt will still cost a steep $33,500.

That's why the future of the electric-car industry belongs not to the scientists and engineers who perfect the

batteries we have now, but the ones who figure out what comes next, in the 2020s, the 2030s, and beyond. The

holy grail is a battery powerful and safe enough to challenge the energy density of gasoline and the freedom of


4 of 9 11/1/2010 11:24 AM

the internal combustion engine -- if such a battery could be made, consumers would presumably flock to cleaner,

quieter electric cars. Which is why scientists at Argonne and around the world are working feverishly to develop

what comes next.

Consider the potential: Just the currently expected advances in lithium-ion technology will allow hybrid-electric

and electric cars to take over up to 15 percent of the world's new-car sales by 2020, estimates research firm IHS

Global Insight; by 2030, the figure could rise to about 50 percent, according to U.S. Energy Information

Administration projections. The 2020 prediction works out to about 7.5 million cars a year at today's production

rates. Let's say that economies of scale bring the cars' average cost down to $30,000 by then. That's a $225

billion-a-year business, just under the entire global sales last year of Toyota, the world's largest carmaker. By

2030, it could be more than three times that.

No one can accurately project the market for a product that doesn't exist yet, of course. But these estimates

matter because they are believed, to a greater or lesser degree, by the leaders of most of the world's

industrialized countries. And most of them seem to agree with Spanish Prime Minister José Luis Rodríguez

Zapatero's call to get in on a competition "not to be missed." The appeal isn't hard to grasp: The possible

windfalls are tantalizingly large at a time when nearly everyone's economy has taken a beating. And the

breakthrough is far away enough, and the terms by which victors will be decided are vague enough, that

everyone can envision winning.

ON THE AFTERNOON OF JULY 21, Wan Gang and about a dozen other Chinese engineers paid a visit to

Argonne National Laboratory. The secure research campus is the direct descendant of the University of Chicago

lab where Enrico Fermi conducted the first nuclear chain reaction in the early days of the Manhattan Project;

today it is home to the vanguard of the U.S. government's advanced battery research. The Argonne scientists in

charge of the work, along with Sandalow, the U.S. assistant energy secretary, had gathered in a conference room

to meet Wan and his team.

"You have made remarkable achievements here," Wan told the Argonne researchers. "So today I have many

questions for you."

"That's why I am sweating," replied Al Sattelberger, a senior Argonne scientist. The room erupted in laughter --

mostly from the Americans, who were acutely aware that they were the underdogs in their race with Wan and his

team.

Although the U.S. government began promoting battery development during the George W. Bush years, its

interest in the technology began in earnest after the pre-recession spike in oil prices, which reached an

unprecedented $147 a barrel in July 2008. The following month, the newly nominated Obama declared in his

Democratic National Convention speech, "For the sake of our economy, our security, and the future of our

planet, I will set a clear goal as president: In 10 years, we will finally end our dependence on oil from the Middle

East."


5 of 9 11/1/2010 11:24 AM

After the presidential election, Obama staffed his Energy Department with people who felt similarly. Steven Chu,

Obama's Nobel laureate energy secretary, had led pioneering alternative-fuel research as director of the

department's Lawrence Berkeley National Laboratory. Sandalow is a former executive vice president of the

World Wildlife Fund who had spent the previous five years at the Brookings Institution puzzling over a

technology he believed to be key to kicking America's petroleum habit: the advanced battery. In his 2008 book,

Freedom from Oil, Sandalow sketched a plan for how the next U.S. president could promote the adoption of

electric cars, beginning with subsidized vehicle purchases and battery-performance guarantees and ending with

investment in research to improve the technology to the point where it would be viable on its own. "The biggest

barrier to mass [electric car] production," he wrote in Freedom from Oil, "is battery technology."

The American Recovery and Reinvestment Act passed by the U.S. Congress in February 2009 gave Sandalow the

opportunity to road-test his ideas. The stimulus bill handed the Energy Department $167 billion for grants and

loan guarantees, six times the department's annual budget and a near-blank check for innovation; $2.4 billion of

the grants have since gone to efforts to build a battery-manufacturing base, and Chu has included battery

research in the portfolios of the nationwide network of energy research centers he has funded. Labs backed with

Energy Department money, such as Argonne, are now experimenting with an exotic array of nascent

technologies: batteries powered by zinc-bromide solutions, magnesium, lithium-sulfur combinations, and even

just the movement of electrons.

But the United States is sprinting to catch up. Technologically speaking, Japan is the current leader -- it has a

two-decade jump on the competition in research and development. South Korea, which has dominated

electronics manufacturing since 2005, is a close second. Still, it's China that inspires the most fear in the United

States.

In 1986, the same year that Ronald Reagan removed Jimmy Carter's solar panels from the White House roof,

Chinese leader Deng Xiaoping launched the 863 Program, an initiative with the aim of jump-starting

technological innovation in the Middle Kingdom. In the 1990s and 2000s, as China's accelerating growth

brought with it dependence on oil imports and coal-fired power plants that choked the skies, the project's

attentions turned to alternative-energy technology. Funding for energy research under the 863 Program grew

nearly 50 times its original size between 1991 and 2005, according to the New Yorker. Among the new initiatives

was a push, launched in 1998, to develop a domestic lithium-ion battery industry. The Chinese government

began handing multimillion-dollar grants to companies looking to get into the electric-car business.

In 2006, China ramped up its investment again, bankrolling 16 scientific research projects totaling about $147

million a year each. This time the aim was explicit: The Chinese government vowed to "build an innovation-

oriented country," becoming a tech-exporting superpower. "Scientists and engineers are at the spearhead of

China's economic development," Mu Rongping, director of the Chinese Academy of Sciences' Institute of Policy

and Management, told the South China Morning Post last year. "They are aiming for the heart of China's

business rivals."


6 of 9 11/1/2010 11:24 AM

At the tip of the spear is Wan Gang, whose ministry oversees the 863 Program and virtually every other

technology-oriented effort of the Chinese government. Speaking to Britain's Guardian last year, Wan

compared the global financial meltdown to past crises that had provided the impetus for great technological

breakthroughs -- breakthroughs that in turn became engines for new economic development. "This time," he

said, "new energy technology will probably be the new driving force."

China may lag Japan and South Korea in battery expertise, but its size, not to mention its government's ability to

mobilize whole industries, is a substantial equalizer. Beijing is betting that by sheer force of will and scale of

investment it can overtake its more technologically sophisticated neighbors. Working with the public

encouragement of Premier Wen Jiabao, Wan has set targets that call for Chinese companies to put an

unparalleled 500,000 electric cars on the road next year, up from a few thousand today (though Wan offered

more modest goals in his discussions with American policymakers and scientists). By government edict, some

two dozen Chinese companies are bringing models to the country's auto market -- the largest in the world as of

2009 -- in the next two years. All-electric taxis built by auto manufacturer BYD already troll the streets of the

company's home city of Shenzhen. "China is spending more than anyone else. They are coming on very strong

technically and physically," says Ralph Brodd, a longtime authority on the battery industry. "Being there

recently, it was very much like what I experienced in the '60s and '70s in the United States -- everyone is

enthusiastic and working hard."

The United States isn't just competing against China -- it's trying to escape its own recent history. Over the last

quarter-century, the country has lost much of the manufacturing capital required to launch a new industry from

whole cloth. The same trends that led American companies to hand over previous generations of the battery

industry to Japan -- the loss of heavy industrial capacity and diminished investments in research and

development that followed the shareholder-value mania of the 1980s and 1990s -- have left the country

ill-prepared to establish itself as a leader in the next generation. Meanwhile, rising middle-class living standards

and job opportunities in China, India, and elsewhere mean that the United States can no longer count on

attracting the world's best and brightest. Increasingly, the sharpest minds in engineering and the sciences would

just as soon stay home -- or, like Wan Gang, move back. "I fear for the Americans," says Harrop, the technology

consultant. "They are so far behind in terms of mass production and also don't have the customers in their own

area. The Obama money gives Americans a chance. But it certainly doesn't guarantee success -- and doesn't

outspend the East."

So the United States has done what any outmatched competitor would do: It has looked around to see who its

friends are. Foremost among them is South Korea, which currently accounts for 33 percent of the lithium-ion

battery market. Much of Energy Secretary Chu's multibillion-dollar investment in the battery industry isn't going

to American companies, but to South Korean ones with assembly plants in the United States -- enough,

American policymakers hope, to build a strong production base while they continue to try to create the batteries

of tomorrow. Of the U.S. stimulus awards to battery-makers, the second-highest sum, $160 million, went to

Seoul-based LG for a factory building lithium-ion batteries for the Chevy Volt in Holland, Michigan. "We want to


7 of 9 11/1/2010 11:24 AM

get these cars to market," Sandalow told me. "And if the only supplier right now is elsewhere, that's a reality

some of our businesses will have to deal with."

FOR ALL THE EYE-POPPING DOLLAR FIGURES thrown around when governments talk about the

battery race, only one number matters to the scientists who are actually running it: 1,600. That is the number of

watt-hours per kilogram of gasoline, the energy potency that people have come to expect from their personal

transportation. Today's lithium-ion batteries produce only one-eighth that amount; scientists believe the laws of

physics will keep them from getting much better than double that figure, a paltry 400 watt-hours per kilogram.

Ultimately, the winner of the battery age will be the country whose technology comes somewhere close to

crossing the 1,600 bar.

Winfried Wilcke, a program director at IBM's San Jose, Calif., laboratory, has been tasked with getting there. A

physicist and brilliant polymath, Wilcke worked on heavy-ion nuclear reactions at Los Alamos National

Laboratory before moving to IBM, where he developed the models on which some of today's most powerful

supercomputers are based. Lately he has turned his attention to lithium air, a technology that would replace

some of the crucial heavy and expensive minerals in today's batteries with, quite literally, air. In conversations I

had with him over the past year, Wilcke sounded optimistic that his team would succeed -- not soon, but perhaps

in the next decade. Even if IBM could get lithium air reasonably close to the performance of gasoline, Wilcke

told me, the auto industry would be "dancing in the street."

But lithium air has many skeptics. Jeff Dahn, who researches lithium-ion technology at Dalhousie University in

Halifax, Nova Scotia, believes the breakthroughs Wilcke envisions are beyond the possibilities allowed by

physics. "Lithium air is an oxymoron," he told me. "I personally believe [it] has no place in any discussion of

advanced battery chemistry for policymakers." He enumerated the reasons: "It's a totally unforgiving technology.

You have to prevent moisture in the air from getting on the lithium. You need a flow field in the cell, and pumps.

The cost will be through the roof. Lithium ion is so easy by comparison."

The disagreement illustrates just how difficult it is to predict the outcome of the battery race and just how

ill-suited analogies are to the geopolitically charged technological competitions of the past -- the atom bomb, the

conquest of space, the perfection of the semiconductor. Compared with the rocket scientists who knew the

physics of launching a rocket to the moon long before they figured out how to accomplish it, today's battery

researchers are operating without a map. The breakthrough that makes the technology a reality could come from

any number of avenues of exploration -- or not at all.

But the same ambiguity that makes the battery race so daunting is the source of its appeal to governments and

scientists alike. All believe that someone, somewhere -- whether it's in a lab at Argonne or one in Shanghai -- will

make the transformative discovery. For them, the only thing worse than losing the battery race is not competing

at all.

Like 262 people like this.


8 of 9 11/1/2010 11:24 AM

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For most companies these days, � pwo� ol Ccxal u ol p2 k wciw� cb� b, l al , u a. b� k cpw� i ycu npo� i wnl —o�

max� u nl , � odoi . pcCob2 wnb� voi au o� nl � cu gaxpnl p� pagci � � � au gnl cob� s l ak � pwnp� i al b. u oxb� nl r �

ou gya, oob� i nxo� nva. p� pwo� ol Ccxal u ol p� � nl r � pwocx� cl poxobp� ampol � gxobol pb� xony� v. bcl obb� aggaxp. l cpcob�

nl r � xcbsb� � � . p� nl apwox� so, � ol Ccxal u ol pny� i al i oxl � cb� ou ox—cl —� � vcar cCoxbcp, � � ax� pwo� r cCoxbcp, �

am� bgoi cob� � Cnxcop, � am� oi ab, bpou b� � nl r � Cnxcnvcycp, � am� —ol ob� � � car cCoxbcp, � l ak � ai i . gcob� n� bcu cynx�

gabcpcal � cl � pwo� g. vyci � r ovnpo� nb� i ycu npo� i wnl —o� r cr � cl � � � � � � . x� b. xCo, � nbsor � xobgal r ol pb� nva. p�

k wnp� vcar cCoxbcp, � u onl b� � wak � cu gaxpnl p� cp� cb� pa� pwocx� v. bcl obbob� � nl r � k w, � � t wo� b. xCo, � nyba� nbsor �

pwo, � nxo� pnscl —� pa� nr r xobb� cbb. ob� xoynpor � pa� cp� � nl r � k wnp� s cl r b� am� xo—. ynpcal b� pwo, � k a. yr � b. ggaxp� pa�

u ncl pncl � vcar cCoxbcp, �

am� nl � aggaxp. l cp, � pwnl � n� xcbs � max� pwocx� i au gnl cob� � t wo, � cr ol pcm, � n� Cnxcop, � am� gapol pcny� aggaxp. l cpcob� �

b. i w� nb� vaybpoxcl —� i axgaxnpo� xog. pnpcal b� k cpw� ol Ccxal u ol pnyy, � i al bi ca. b� bpnsowayr oxb� v, � ni pcl —�

pa� gxoboxCo� vcar cCoxbcp, � nl r � r oCoyagcl —� l ok � gxar . i pb� ax� cr onb� mxau � xol ok nvyo� l np. xny� xoba. xi ob� �

t wo� gabcpcCo� a. pyaas � al � vcar cCoxbcp, � cb� cl � bpnxs � i al pxnbp� pa� odoi . pcCobO� Ccok b� al � i ycu npo� i wnl —o� cl � � � oxwngb�

nr r xobbcl —� i ycu npo� i wnl —o� aCox� pwo� gnbp� mok � , onxb� wnb� i wnl —or � bau o� odoi . pcCobO� Ccok b� al � pwo�

gapol pcny� . gbcr o� am� ol Ccxal u ol pny� cbb. ob�

�t wo� al ycl o� b. xCo, � k nb� cl � pwo�

�

�

mxau � odoi . pcCob� xogxobol pcl —� �

pwo� m. yy� xnl —o� am� xo—cal b� �

cl r . bpxcob� � pol . xob� � nl r �

m. l i pcal ny� bgoi cnypcob� ��0� ak � i au gnl cob� pwcl s �

nva. p� i ycu npo� i wnl —o� � �

� � � i � cl bo, � � yavny� . xCo, � 7� �

u i s cl bo, f . nxpoxy, � i au � � �

� ovx. nx, � � � � �

Gianpaolo P

agni

The next environmental issue for business� i � cl bo, � � yavny� . xCo, � xob. ypb�

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� i � cl bo, � � yavny� . xCo, � xob. ypb

vcar cCoxbcp, � � � apnvy, � � nu al —� pwabo� � pwo� pk a� u abp� mxof . ol p� bpogb� nxo� i au u . l ci npcl —� nva. p� pwocx�

i au gnl cobO� . bo� am� xol ok nvyo� l np. xny� xoba. xi ob� nl r � i wnl —cl —� agoxnpcal b� pa� xor . i o� b. i w� . bo2 oCol �

cl � cl r . bpxcob� pwnp� nxo� l ap� wc—wy, � xo—. ynpor � nl r � k wabo� agoxnpcal b� r al Op� wnCo� u . i w� r cxoi p� cu gni p�

xayo� am� v. bcl obb� cl � bai cop, � � k wci w� b. ——obp� pwnp� goxi ogpcal b� am� pwobo� cbb. ob� wnCo� bwcmpor � aCox� pwo�

, onxb� � odoi . pcCob� al i o� nggxaniwor � pwou � g. xoy, � nb� n� g. vyci � xoynpcal b� xcbs � ax� aggaxp. l cp, � v. p� l ak �

xoi a—l cBo� pwo� xony� cu gni p� pwo, � i nl � wnCo� al � agoxnpcal b� nl r � i axgaxnpo� Cny. o� �

How much it matters

� oCoxpwoyobb� � xobgal r ol pb� r al Op� i al bcr ox� vcar cCoxbcp, � l onxy, � nb� cu gaxpnl p� nb� u nl , � apwox�

ol Ccxal u ol pny� nl r � b. bpncl nvcycp, � cbb. ob� � � onxy, � pk a� pwcxr b� bn, � vcar cCoxbcp, � cb� np� yonbp� bau ok wnp�

cu gaxpnl p� pa� pwocx� i au gnl cob� � v. p� al � n� ycbp� am� � cbb. ob� � vcar cCoxbcp, � xnl sb� pol pw� cl � aCoxnyy�

cu gaxpnl i o2 vowcl r � l ap� al y, � i ycu npo� i wnl —o� v. p� nyba� gayy. pcal � nl r � w. u nl � xc—wpb� � � dwcvcp� � �

� � � oo� � max� odnu gyo� � 0� xau � xcbs � pa�

aggaxp. l cp, � � � ak � —yavny�

odoi . pcCob� Ccok � bai cagaycpci ny�

cbb. ob� 7� � i pavox� � � � � � �

0hny. cl —� i axgaxnpo� bai cny�

nl r � 0� ak � i au gnl cob� u nl n—o�

b. bpncl nvcycp, � 7� � nxi w� � � � � �

� yy� nxo� nCncynvyo� al �

u i s cl bo, f . nxpoxy, � i au �

Exhibit 1

What matters most to business

% of respondents, n = 1,576

Survey 2010BiodiversityExhibit 1 of 6Exhibit title: What matters most to business

Climate change/ energy efficiency

Extremely importantDon’t know

Very important

Somewhat important

Not at all important

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

Waste/pollution/recycling

Water scarcity/water quality/sanitation

Data privacy/identity theft

Human rights/labor issues

43

42

27

26

18

Financial inclusion

Ethical advertising/ marketing

Toxic materials

Obesity/malnutrition/ hunger

Biodiversity

15

15

14

10

9

HIV/AIDS and other global public-health issues

No such issues are important to our business

Animal rights

Other

Don’t know

7

2

2

5

3

9

18

37

32

4

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� i � cl bo, � � yavny� . xCo, � xob. ypb

pa� vcar cCoxbcp, � nxo� cl i xonbcl —� nl r � pwnp� i axgaxnpo� ni pcal b� nxo� gnxp� am� pwo� aCoxnyy� pwxonp� � � axo� pwnl �

n—ol r n2 pwo� bnu o� bwnxo� pwnp� � cl � � � � � bncr � i ycu npo� i wnl —o� bwa. yr � vo� n� gxcaxcp, �

� ncxy, � ynx—o� bwnxob� am� odoi . pcCob� gacl p� a. p� boCoxny� k n, b� cl � k wci w� vcar cCoxbcp, � cb� cu gaxpnl p� pa� pwocx�

i au gnl cob� � � dwcvcp� � � � obgal r ol pb� np� ol ox—, � i au gnl cob� � k wa� nxo� pwo� u abp� ycsoy, � pa� bn, � pwocx�

i au gnl cobO� agoxnpcal b� wnCo� n� r cxoi p� cu gni p� al � vcar cCoxbcp, � � nyba2 l ap� b. xgxcbcl —y, 2 wc—wyc—wp�

xo—. ynpcal � aCox� nyy� apwox� nxonb� am� gapol pcny� cu gaxpnl i o�

� al Coxboy, � � mncxy, � bu nyy� bwnxob� am� xobgal r ol pb� gxor ci p� pwnp� al o� ax� u axo� xcbsb� xoynpor � pa� vcar cCoxbcp, �

yonr b� pwo� ycbp� � k cpw� � � goxi ol p� am� xobgal r ol pb� boyoi pcl —� cp� � � � p� cb� nl � obgoi cnyy, � —xonp� i al i oxl � nu al —�

cp� �� . i w� bu nyyox� bwnxob� am� xobgal r ol pb� boyoi p� apwox� xcbsb� � cl i y. r cl —� cl moi pca. b� r cbonbo� � maar �

Exhibit 2

Where biodiversity and business interests meet

% of respondents, n = 1,043

Survey 2010BiodiversityExhibit 2 of 6Exhibit title: Where biodiversity and business interests meet

Building, maintaining, or improving our corporate reputation

Engaging with leadership’s or employees’ personal interests

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

Aligning with the company’s business goals, mission, or values

Responding to pressure from external stakeholders such as NGOs,1 consum-ers, or distributors or retailers

Attracting funds from investors interested in supporting companies with good biodiversity practices

Responding to regulatory requirements

Strengthening our competitive position

53

49

48

37

34

33

Improving our operational efficiency and/or reducing costs

Other

30

17

15

� � � � � � � � � � � � � � � � � � � � � � � � � � � �


am� i x. i cny� cl g. pb� pa� pwocx� gxar . i pb� xob. ypcl —� mxau � vcar cCoxbcp, � cbb. ob� � pwabo� cl � ol ox—, � nl r �

u nl . mni p. xcl —� nxo� pwo� u abp� i al i oxl or � � � dwcvcp� � � � � � . i w� ynx—ox� bwnxob� bn, � pwo, � k cyy� mni o�

gxobb. xo� pa� i wnl —o� agoxnpcal b� ax� gxar . i pb� nl r � boxCci ob� pa� xor . i o� pwocx� cu gni p� al � vcar cCoxbcp, �

xoynpor � pa� vcar cCoxbcp, � aCox� pwo� l odp� pwxoo� , onxb� � nl r � � � � goxi ol p� odgoi p� l a� pwxonpb� mxau � odpoxl ny�

cbb. ob� b. i w� nb� k npox� bi nxi cp, �

pa� pwocx� i au gnl cob� � nl � aggaxp. l cp, � � nl r � nyc—l or � k cpw� v. bcl obb� —anyb� � � ax� pwcb� —xa. g2 k wciw�

cl i y. r ob� n� xoynpcCoy, � wc—w� bwnxo� am� odoi . pcCob� np� maar � nl r � voCoxn—o� � gwnxu ni o. pci ny� � nl r � ol ox—, �

i au gnl cob� � nb� k oyy� nb� wabgcpnyb2 k npox� bi nxi cp, � � cl moi pca. b� r cbonbo� � nl r � maar � boi . xcp, � pag� pwo�

ycbp� am� gapol pcny� xcbsb� pa� vapw� vcar cCoxbcp, � nl r � v. bcl obb� � t wo� maar � nl r � voCoxn—o� cl r . bpx, � xoycob�

al � k npox� max� n—xci . yp. xny� gxar . i pcal � nl r � cb� xonbal nvy, � i al i oxl or � k cpw� m. p. xo� ni i obb� pa� maar � �

gwnxu ni o. pci ny� i au gnl cob� nl r � wabgcpnyb� wnCo� n� Cobpor � bpnso� cl � pwo� r oCoyagu ol p� am� pxonpu ol pb�

max� cl moi pca. b� r cbonbob� � nl r � max� ol ox—, � i au gnl cob� � pwo� gxar . i pcal � gxai obb� cl CayCob� k npox� . bo� nb�

Exhibit 3

Biodiversity can be risky business

% of respondents1

Total, n = 1,576

Energy, n = 103

Financial,n = 207

High tech/telecom, n = 159

Manufacturing, n = 216

Survey 2010BiodiversityExhibit 3 of 6Exhibit title: Biodiversity can be risky business

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

� � � � � � � � � � � � �

Pressure to change our operations to reduce impact on biodiversity

30 49 24 28 37

Pressure to change our products, services to reduce impact on biodiversity

27 39 19 24 33

Lack of crucial inputs to our products 12 18 5 6 18

No biodiversity issues will be a risk to our business 39 21 48 48 26

Don’t know 9 4 12 6 9

Other 6 3 5 3 3


t wobo� xobgal r ol pb� nxo� u axo� pwnl � pk ci o� nb� ycsoy, � nb� apwoxb� pa� bn, � vcar cCoxbcp, � cb� cu gaxpnl p� pa�

pwocx� i au gnl cob� k cyy� mni o� pwo� xcbs � am� yabcl —� n� i x. i cny� cl g. p� pa� pwocx� gxar . i pb� cm� vcar cCoxbcp, � cb�

xor . i or � � eop� oCol � max� pwobo� i au gnl cob� � cp� cb� bpcyy� al y, � ma. xpw� al � pwo� ycbp� am� nyy� ol Ccxal u ol pny� nl r �

b. bpncl nvcycp, � cbb. ob�

What companies are doing and why

v. bcl obb� aggaxp. l cp, � � � apnvy, � � pwo� bwnxo� am� odoi . pcCob� k wa� boo� vcar cCoxbcp, � nb� nl � aggaxp. l cp, �

xnpwox� pwnl � nb� n� xcbs � cb� u . i w� wc—wox� pwnl � pwo� bwnxo� am� xobgal r ol pb� k wa� bncr � pwo� bnu o� nva. p�

i ycu npo� i wnl —o� cl � n� � � � � i � cl bo, � b. xCo, � � � dwcvcp� � � � � � Col � ba� � pwo� bwnxo� pnscl —� bau o� ni pcal �

xoynpor � pa� vcar cCoxbcp, � cb� xa. —wy, � i al bcbpol p� k cpw� pwo� bwnxo� am� xobgal r ol pb� k wa� k oxo� pnscl —�

bau o� ni pcal � al � i ycu npo� i wnl —o� �

r xcCoxb� am� ni pcal � al � ol Ccxal u ol pny� cbb. ob�

� l o� am� pwo� u abp� mxof . ol py, � i wabol � ni pcal b2 nl r � l a� r a. vp� al o� xonbal � pwnp� ba� u nl , � boo�

vcar cCoxbcp, � nb� nl � aggaxp. l cp, 2 cb� booscl —� pa� cr ol pcm, � l ok � gxar . i pb� ax� cr onb� mxau � xol ok nvyo�

� ak oCox� � u abp� xobgal r ol pb� nxo� pnscl —� ni pcal � cl � n� mncxy, � nr � wai � k n, � � goxwngb� voi n. bo� am� pwo�

xoynpcCoy, � yak � cu gaxpnl i o� am� vcar cCoxbcp, � i au gnxor � k cpw� apwox� cbb. ob� � � u al —� nyy� xobgal r ol pb� �

al y, � n� f . nxpox� wnCo� n� maxu ny� vcar cCoxbcp, � gayci , � ax� bpxnpo—, � � nl r � al y, � � goxi ol p� wnCo� maxu ny�

Exhibit 4

Environmental issues: opportunity or risk?

% of respondents

Survey 2010BiodiversityExhibit 4 of 6Exhibit title: Environmental issues: opportunity or risk?

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � W� � � � � � � � � � � � � � � � � � � � h�

Dec 2007, n = 2,192 40 3129

June 2010, n = 1,043 59 25 16

More of an opportunity

About equally both

More of a risk

� � �� l � pwo� � � � b. xCo, � � xobgal r ol pb�

k oxo� nbsor � nva. p� pns cl —� ni pcal � cl �

n� xnl —o� am� r cmmoxol p� nxonb� � b. i w� nb�

u nxsopcl —� � cl Cobpcl —� � nl r � boppcl —�

bpxnpo—, �

pwabo� am� 0hny. cl —� i axgaxnpo� bai cny�

xobgal bcvcycp, � 7� k wci w� ma. l r � pwnp�

vapw� i au gnl cob� nl r � gxamobbcal ny�

k wci w� pa� nbbobb� ol Ccxal u ol pny� �

—aCoxl nl i o� � ax� b. bpncl nvcycp, �

gxa—xnu b�


Exhibit 5

Taking action on biodiversity

% of respondents1

Total, n = 841

Energy, n = 70

Financial,n = 106

High tech/telecom, n = 69

Manufacturing, n = 130

Survey 2010BiodiversityExhibit 5 of 6Exhibit title: Taking action on biodiversity

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

Communicating our use of renewable natural resources, internally or externally

52 44 68 60 56

Changing our operations to reduce use of renewable natural resources

52 44 55 67 57

46 65 46 55 48Measuring our use of and impacts on renewable natural resources

42 48 28 49 56Actively seeking to identify new products or ideas from renewable natural resources

39 29 41 36 51Taking steps to reduce the use of renewable natural resources throughout our supply chain

37 64 24 39 41

Joining industry organizations or otherwise participating in problem-solving sessions on use of natural resources

35 29 34 29 32

Educating consumers on the relations between our products or services and renewable natural resources

23 30 21 16 19

Taking steps to improve or restore biodiversity, such as participating in forest carbon-offset markets

18 20 12 17 19Trying to influence regulation related to biodiversity

8 6 8 5 4Other

26 27 34 33 20Contributing to nonprofit organizations that improve or sustain biodiversity

obgal r ol pb� bn, � i al b. u oxb� � mayyak or � v, � xo—. ynpaxb� � nxo� pwo� bpnsowayroxb� k cpw�

pwo� u abp� cu gni p� al � pwo� ni pcal b� pwocx� i au gnl cob� pnso� pa� nr r xobb� vcar cCoxbcp, �


Not all companies need to act

� axo� pwnl � n� pwcxr � am� xobgal r ol pb� bn, � pwocx� i au gnl cob� nxol Op� pnscl —� nl , � ni pcal b� xoynpor � pa� vcar cCoxbcp, �

� u al —� pwou � � � � goxi ol p� bn, � pwo� xonbal � cb� cpb� yni s � am� cu gaxpnl i o� � mnx� bu nyyox� bwnxob� i cpo� n� yni s �

am� odpoxl ny� gxobb. xo� ax� u axo� cu gaxpnl p� . bob� max� pwocx� v. bcl obbobO� pcu o� ax� u al o, � � t woxoOb� ycppyo�

i al bol b. b� al � k wnp� u c—wp� bg. x� pwou � pa� pnso� ni pcal � � pwo� pag� i waci o� � boyoi por � v, � al y, � � � goxi ol p� am�

xobgal r ol pb� � cb� xo—. ynpax, � xof . cxou ol pb� �

pwo� bpnsowayr oxb� k wa� nxo� ycsoycobp� pa� ol i a. xn—o� ni pcal � � t wobo� bo—u ol pb� k oxo� nyba� pwo� pag� pk a� i waci ob�

nu al —� pwo� � � � b. xCo, � xobgal r ol pb� k wabo� i au gnl cob� k oxo� l ap� pwol � pnscl —� ni pcal � al � i ycu npo� i wnl —o� �

t wo� xob. ypb� wc—wyc—wp� vapw� pwo� bcu cynxcp, � vopk ool � pwo� pk a� cbb. ob� nl r � pwo� gapol pcny2 cm� i al b. u oxb� nl r �

xo—. ynpaxb� xnpiwop� . g � pwo� gxobb. xo� pa� pnso� ni pcal � al � vcar cCoxbcp, � � nb� pwo, � wnCo� max� i ycu npo� i wnl —o2 max�

u axo� i au gnl cob� pa� r a� ba� �

Exhibit 6

Influencing regulation

% of respondents

Total, n = 1,576 Total, n = 150

Survey 2010BiodiversityExhibit 6 of 6Exhibit title: Influencing regulation

� � � � � � � � � � � � � � � � � � � � � � � � �

� � � � � � � � � � � � � � � � � � � � � � �

� � � � � � � � � � � � � � � �

� � � � � � � � � � � � � � � � � � � � � � �

� � � � � � � � � � � � � � � �

Participating in industry groups to develop information for lawmakers and regulators related to biodiversity issues

55 70

Participating in industry groups to develop voluntary standards in lieu of regulation 52 58

Participating in national or international policy debates on biodiversity 42 61

7 20Lobbying for our business alone

Don’t know 15 7

3 6Other

Lobbying as part of industry or other coalitions 28 54

� �t wo� xobp� am� pwo� xobgal r ol pb�

nl bk oxor � 0r al Op� s l ak � 7


Managing threats to biodiversity

i waabo� gnxpci cgnpcl —� cl � cl r . bpx, � —xa. gb� pa� r oCoyag� cl maxu npcal � pwnl � nl , pwcl —� oybo� � � obi xcvcl —� k wnp�

cl i ol pcCob� ax� r cxoi p� b. vbcr cob� max� ni pcal b� xoynpor � pa� i al boxCnpcal � � � � � goxi ol p� bn, � cl r . bpx, � i xonpor �

Cay. l pnx, � bpnl r nxr b� al � pwo� . bo� am� xol ok nvyo� l np. xny� xoba. xi ob� k a. yr � vo� ni i ogpnvyo� � � obb� pwnl � n�

f . nxpox� bn, � pwocx� i au gnl cob� k a. yr � b. ggaxp� u nl r npax, � bpnl r nxr b� ax� xogaxpcl —�

� ak oCox� � pwo� xobgal bob� b. ——obp� pwnp� nr r xobbcl —� pwxonpb� pa� vcar cCoxbcp, � k cyy� pnso� n� i al i oxpor � ommaxp� �

nyal o� k al Op� xobayCo� nyy� am� pwo� pwxonpb� pa� pwo� maxu ox� pwnp� odcbp� par n, �

Looking ahead

pwo� ol pcxo� Cny. o� i wncl � pa� r opoxu cl o� k woxo� cp� u c—wp� vo� C. yl oxnvyo� pa� xcbsb� � k wci w� agoxnpcal b� u c—wp� vo�

pwxonpol � vcar cCoxbcp, � � ax� k woxo� cp� u c—wp� b. ggy, � aggaxp. l cpcob�

nl r � odgyaxcl —� gapol pcny� bay. pcal b� � � ypwa. —w� u nl , � i au gnl cob� nxo� nyxonr , � cl CayCor � cl � b. i w� i anycpcal b�

gnxp� am� t wo� � i al au ci b� am� � i ab, bpou b� nl r � � car cCoxbcp, � � t � � � �� bp. r , � �

� al pxcv. paxb� pa� pwo� r oCoyagu ol p� nl r � nl ny, bcb� am� pwcb� b. xCo, � cl i y. r o� Sheila Bonini,� n� i al b. ypnl p�

Jeremy M. Oppenheim,

� ag, xc—wp� : � � � � � i � cl bo, � � � � au gnl , � � � yy� xc—wpb� xoboxCor �

Share 53

Share 53

ECONOMICS AND JUSTICE

A New Path to a Low-Carbon EconomyJeffrey D. Sachs

2010-10-27

NEW YORK – The solution to manmade climate change depends on the transition to electricity production that, unlike burning oil, natural gas,

and coal, emits little or no carbon dioxide – the main greenhouse gas responsible for global warming. Low-carbon electricity can be produced

by solar, nuclear, and wind energy, or by coal-burning power plants that capture and store their CO2 emissions.

The policy problem is simple. Coal is a cheaper and more easily used energy source than the alternatives. It is cheap because it is plentiful. Itis easier to use than wind or solar power because it can produce electricity around the clock, without reliance on weather conditions.

To save the planet, we need to induce power suppliers to adopt low-carbon energy sources despite coal’s lower price and greater ease of use.

The obvious way is to tax coal, or to require power plants to have permits to use coal, and to set the tax or permit price high enough to

induce a shift towards the low-carbon alternatives.

Suppose coal produces electricity at a cost of $0.06 per kilowatt-hour, while solar power costs $0.16/kilowatt-hour. The tax on coal-based

electricity would have to be $0.10/kilowatt-hour. In that case, consumers would pay $0.16/kilowatt-hour for either coal or solar. The utilitieswould then shift to low-carbon solar power. The switchover, however, would more than double the electricity bill in this example.

Politicians are loath to impose such a tax, fearing a political backlash. For years , this has stymied progress in the United States towards a low-carbon economy. Yet

several European countries have successfully introduced the idea of a “feed-in tariff,” which provides the core of a politically acceptable long-term solution.

A feed-in tariff subsidizes the low-carbon energy source rather than taxing the high-carbon energy source. In our example, the government would pay a subsidy of

$0.10/kilowatt-hour to the solar-power plant to make up the difference between the consumer price of $0.06 and the production cost of $0.16. The consumer price

remains unchanged, but the government must somehow pay for the subsidy.

Here is another way. Suppose that we levy a small tax on existing coal power plants in order to pay for the solar subsidy, and then gradually raise consumers’

electricity bills as more and more solar plants are phased in. The price charged to consumers would rise gradually from $0.06/kilowatt-hour to the full cost of

$0.16/kilowatt-hour, but over a phase-in period of, say, 40 years (the lifespan of the newest of today’s coal plants).

Assume that as of 2010, the entire electricity system is coal-based, and that the electricity price paid by the consumers is $0.06/kilowatt-hour. By 2014, suppose that

10% of the 40-year transition to solar power has been achieved. The consumer price is raised 10% of the way from $0.06 to $0.16, thus reaching

$0.07/kilowatt-hour.

The coal tax for 2014 is then set at $0.01/kilowatt-hour, which is just enough to pay the needed solar subsidy of $0.09/kilowatt-hour. Solar producers fully cover their

costs of $0.16/kilowatt-hour, since they sell power to the consumers at $0.07/kilowatt-hour and receive a subsidy of $0.09/kilowatt-hour. A small coal tax can

support a large solar subsidy.

Suppose, further, that by 2030 the transition to a low-carbon economy is halfway completed. The consumer price for electricity is now set at $0.11, exactly halfway

between $0.06 and $0.16. The coal tax is now raised to $0.05/kilowatt-hour, just enough to cover the solar subsidy of $0.05/kilowatt-hour. Once again, the solar

producers cover their costs exactly, since the subsidy of $0.05/kilowatt-hour closes the gap between the consumer price ($0.11/kilowatt-hour) and the producer cost($0.16/kilowatt-hour).

Let us presume, finally, that by 2050, all electricity production has made the transition to low-carbon energy sources. The consumer price finally reaches

$0.16/kilowatt-hour, enough to cover the full cost of solar power without a further subsidy.

This approach allows higher consumer electricity prices to be phased in gradually, yet establishes strong, immediate incentives for adopting solar power. Moreover,

the government budget is balanced every year, since the coal tax pays for the solar subsidy.

The actual transformation in the coming years will have one major advantage compared to this illustration. Today’s solar power plants might cost an extra

$0.10/kilowatt-hour compared to coal, but such plants will be much less costly in the future because of improved technology. Thus, the magnitude of subsidies

needed in a decade or two will be lower than they are today.

Energy debates in the US, Australia, and other countries have centered so far on introducing a cumbersome cap-and-trade permit system. Every major user of fossil

fuel would need to buy permits to emit CO2, and those permits would trade in a special marketplace. The market price of the permits would be equivalent to paying

a tax on CO2 emissions.

Unfortunately, cap-and-trade systems are difficult to manage and don’t give clear signals about the future price of permits. Europe has adopted such a system, but

other parts of the world have repeatedly rejected it. In fact, Europe’s biggest successes in promoting low-carbon energy have come from its feed-in tariffs, and

carbon taxes in some countries, rather than its cap-and-trade system.

The time has come for the US, China, India, and other major economies to declare how they will foster their own transition to a low-carbon economy. A small and

gradually rising carbon tax that funds a feed-in tariff system could win political support in the US. It could also help to foster consensus among the major coal-based

economies, including China and India.

There really are effective long-term solutions to manmade climate change that are politically acceptable and feasible to implement. It is time to embrace them.

Jeffrey D. Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. He is also Special Adviser to United Nations

Secretary-General on the Millennium Development Goals.

Copyright: Project Syndicate, 2010.

www.project-syndicate.org

You might also like to read more from Jeffrey D. Sachs or return to our home page.

A New Path to a Low-Carbon Economy - Project Syndicate http://www.project-syndicate.org/commentary/sachs171/English

1 of 2 11/2/2010 1:36 PM

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contact [email protected].

alexferro 11:05 28 Oct 10

An emphasis on 30-40 years.

A New Path to a Low-Carbon Economy - Project Syndicate http://www.project-syndicate.org/commentary/sachs171/English

2 of 2 11/2/2010 1:36 PM

China’s Entrepreneurs Take the Leadin Environmental Protectionhttp://asiafoundation.org/in-asia/2010/06/09/chinas-entrepreneurs-take-the-lead-in-environmental-protection/November 3, 2010

June 9th, 2010

By Huang Zhen

Zhang Jiao earned her wealth in the agricultural wholesale fruit business, buyingbananas from Hainan Island, oranges from Sichuan Province, and rice fromNortheastern China, and selling it to wealthy markets such as Beijing. Despite herfinancial success, Zhang wanted to get back to the countryside, away from the harsh,constant urbanity of Beijing’s Wukesong area where she lived. She packed her things,and left for Yanqing, a mountainous, distant suburb of Beijing, where she spent threemonths hiking in the mountains. The state of the hillsides, bald from years of carelessdeforestation, shocked her, and spurred her to action.

In 1997, one year after her trip, Zhang closed her wholesale business and leased over600 hectares of mostly mountainous, barren land from the Yanquing local government.

On her land, Zhang Jiao launched Nature University as a place where urbanites canexperience nature, as well as learn how to protect it.

Without much prior knowledge of ecology and reforestation, Zhang encountereddifficulties and failures when she first began her reforestation project. Many of the treesshe planted, not native to the area, couldn’t survive the harsh conditions and died assaplings.

After shifting to planting local species and years of experimenting, Zhang finally foundthe right balance. Now, healthy, growing trees cover 90 percent of her land.

http://www.printfriendly.com/print/n?url=http%3A%2F%2Fasiafoundation.org%2Fin-asia%2F2010%2F06%2F09%2Fchinas-entrepreneurs-take-the-lead-in-environmental-protection%2F

http://asiafoundation.org/in-asia/2010/06/09/chinas-entrepreneurs-take-the-lead-in-environmental-protection/zhangjiao/

Small and medium-sized enterprises (SMEs), such as the wholesale fruit businessZhang used to own, play a critical role in China’s economic development, povertyalleviation, and employment creation and have contributed significantly to China’seconomic success. In fact, SMEs in China make up over half of the country’s GDP. ButChina’s rapid development, powered both by SMEs and heavy industry, have taken atoll on the environment. According to a 2007 World Bank report, the combined healthand non-health cost of outdoor air and water pollution for China’s economy comes toaround US $100 billion a year (or about 5.8 percent of the country’s GDP). Air pollutionis leading to higher incidences of lung diseases, including cancer, and respiratoryproblems, especially in large cities. The challenge that Zhang and others face is how tofind a new path for development that integrates environmental concerns alongsidebusiness profits. Environmentally-speaking, Zhang’s reforestation work succeeded, butfinancially-speaking, it was a failure – Zhang had to borrow from friends after depletingher substantial savings from her wholesale business to keep investing in her projectthat yielded no return for years. To continue expanding her reforestation work, she hadto find a solution that was economically viable. To do that, she realized she couldn’t justtoil away in the mountains, more or less isolated from society.

In 2008, she learned about an eco-entrepreneurship training program supported byThe Asia Foundation and jointly implemented by the local Beijing-based partner GlobalEnvironmental Institute.

One entrepreneur in Zhang Jiao's training group now markets wind and solar productsas an alternative to on-ship batteries, which are typically tossed in the ocean whenexpired.

The program helps local entrepreneurs like Zhang who may already be working inenvironmental businesses, develop economically viable business plans. At the sametime, the program trains entrepreneurs to develop business models that eitherminimize negative environmental impact or even directly address some of theenvironmental challenges that China faces. In this way, the program harnesses theimportant role SMEs play in China, and why that they can significantly help, or harm, theenvironment.

Since 2008, 70 young emerging entrepreneurs with diverse backgrounds, including aninvestment manager, a post-Ph.D. researcher in auto design, an eco-farm contractor,

http://www.wilsoncenter.org/index.cfm?topic_id=1421&fuseaction=topics.event_summary&event_id=449812

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/EXTEAPREGTOPENVIRONMENT/0,,contentMDK:21406465%7EmenuPK:502892%7EpagePK:2865114%7EpiPK:2865167%7EtheSitePK:502886,00.html

http://asiafoundation.org/in-asia/2010/06/09/chinas-entrepreneurs-take-the-lead-in-environmental-protection/chinagreenentrepreneur/

program officers from local and international environmental NGOs, and journalists, haveparticipated in the landmark trainings.

Some, like Zhang, have already started their own eco-friendly businesses and want toimprove them; others are poised to enter the field and need a broader understandingof how to begin; others are committed to the concept of green business and hope toseize opportunities in this emerging field. Before being accepted to the program,participants must submit their own business plans on how to set up anenvironmentally-friendly business. Throughout the program, experts and practitioners,including water and energy experts and green business leaders, mentor participants.As they learn and become more savvy, the green entrepreneurs update their businessplans, present them to the group to refine them and develop the necessary resourcesto make the businesses successful in the marketplace.

In this way, Zhang narrowed down to two main business opportunities that could helpher generate profits: one was to grow organic food and vegetables to sell directly toChinese urban citizens who are increasingly concerned about food safety; and theother was to organize environmental education and eco-tourism opportunities on herreforested land. She worked with the well-known Chinese environmental reporter FengYongfeng to launch Nature University on her land, a place where urbanites canexperience nature, as well as learn how to protect it. Meanwhile, her newenvironmentally-friendly agriculture business, with the help of her previous careerexperience, is now succeeding.

Another green entrepreneur in Zhang’s group secured a low-interest loan to market awind and solar product as an alternative to on-ship batteries, which are typically tossedin the ocean when expired. Another, Emma Chen Xiangdian, who spent years workingfor multinational companies in product design and marketing, started a companyfocusing on visual communications and the environment. She honed her business planinto an online clearinghouse that publishes abstracts from professional literature ongreen solutions for business. Her website, VisavisNet.com, was launched last year andprovides a channel for information on environmentally-friendly solutions for businesses.

Meanwhile, program alumni are now beginning to meet regularly every month or two toshare their experiences and challenges. In May, about a dozen alumni and currentgreen entrepreneurs gathered in a Beijing café for a salon-style discussion on greenbusiness opportunities in China. The alumni group has begun to attract other youngpeople interested in green business ideas as well. In the future, this emerging networkof entrepreneurs has the potential to connect young businesspeople throughout Chinawho are trying to develop environmentally-friendly business models, and to reach outto other entrepreneurship initiatives to foster eco-friendly business planning on abroader scale. Such initiatives will help bring about changes in doing business that areneeded to positively affect the future of China’s environment.

Huang Zhen is The Asia Foundation’s environment Program Officer in Beijing. She canbe reached at [email protected].

This entry was posted on Wednesday, June 9th, 2010 at 6:00 pm and is filed under | Notes from the Field .

http://www.ecovisavis.com/index.php?p=1_11_About-visavisNet

mailto:[email protected]

http://asiafoundation.org/in-asia/2010/06/09/chinas-entrepreneurs-take-the-lead-in-environmental-protection/?cat=3

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STATE AND TRENDS OF THE

CARBON MARKET 2010

Alexandre Kossoy Philippe Ambrosi Senior Financial Specialist Environmental Economist Carbon Finance Unit Climate Change Team

Environment Department

The findings and opinions expressed in this report are the sole responsibility of the authors and should not be cited without

permission. They do not necessarily reflect the views of the World Bank Group, its Executive Directors, the countries they

represent or of any of the participants in the carbon funds or facilities managed by the World Bank. This report is not in-

tended to form the basis of an investment decision.

1

Yet even as global GDP declined by 0.6% in 2009,

and at a more perilous rate of 3.2% in industrial-

ized economies,1 the carbon market demonstrated

resilience. !e total value of the market grew 6%

to US$144 billion (€103 billion) by year’s end

with 8.7 billion tCO2e traded (see Table 1).

EXECUTIVE SUMMARY

�e carbon market endured its most challenging year to date in 2009. �e

global economic crisis, which started in late 2008 and intensified early in

2009, negatively impacted both the demand and supply sides of the mar-

ket. As industrial output plummeted the demand for carbon assets fell.

On the supply side the financial crisis spurred financial institutions and

private investors to deleverage and redirect their positions away from risky

investments and toward safer assets and markets. Capital inflow to de-

veloping countries fell dramatically, while already internalized resources

flowed out. As a result, many project developers found it impossible to

lock in finance and project origination effectively ground to a halt.

TABLE 1

Carbon market at a

glance, volumes and

values, 2008–09

Sources: World Bank, and

Bloomberg New Energy

Finance and Ecosystem

Marketplace for data on

the voluntary market

2008 2009

Volume (MtCO2e) Value (US$ million) Volume (MtCO2e) Value (US$ million)

Allowances Markets

EU ETS 3,093 100,526 6,326 118,474

NSW 31 183 34 117

CCX 69 309 41 50

RGGI 62 198 805 2,179

AAUs 23 276 155 2,003

Subtotal 3,278 101,492 7,362 122,822

Spot & Secondary Kyoto offsets

Subtotal 1,072 26,277 1,055 17,543

Project-based Transactions

Primary CDM 404 6,511 211 2,678

JI 25 367 26 354

Voluntary market 57 419 46 338

Subtotal 486 7,297 283 3,370

Total 4,836 135,066 8,700 143,735

Subtotals and totals may not exactly add up because of rounding.

1 International Monetary Fund, 2010, World Economic Outlook (April).

State and Trends of the Carbon Market 2010

2

!e European Union Emissions Trading Scheme

(EU ETS) remained the engine of the carbon

market. A total of US$119 billion (€89 billion)

worth of allowances and derivatives changed

hands. Futures trades continued to account for

the bulk of transactions with a 73% share, while

spot market volume swelled to 1.4 billion tons as

cash-strapped EU companies monetized allow-

ances to raise funds in a tight credit environment.

Sophistication also increased in the options mar-

ket, which grew 70% to 420 million tons. How-

ever, trading volume in the secondary market for

Kyoto o#sets leveled o# at one billion tons and

value fell by one third to US$18 billion (€13 bil-

lion) as prices declined.

Market consolidation accelerated in 2009 as &-

nancial players that had weathered the economic

storm chose to acquire undervalued portfolios

rather than engage in project origination. Other

players exited the market or signi&cantly reduced

their activity and, as a result, project-based trans-

actions declined by 54%.

China remained the largest Clean Development

Mechanism (CDM) seller, although Africa and

Central Asia, historically overlooked regions, in-

creased their share as buyers sought diversi&cation.

CDM contracted severely, by 59%, to US$2.7

billion (€1.9 billion). !e Joint Implementation

(JI) market fared no better. Finally, the number of

Assigned Amount Unit (AAU) deals increased as

the health of the o#set market declined, with the

Czech Republic and Ukraine as the major sellers.

Structural issues hobbled the CDM market as

well. !e complexity and changing nature of reg-

ulations, ine*ciencies in the regulatory chain and

capacity bottlenecks caused delays and negatively

impacted project &nance. As a result, it now takes

over three years for the average CDM project

to make its way through the regulatory process

and issue its &rst Certi&ed Emission Reductions

(CERs).

Yet the same problems that have hindered the

project-based market may ultimately be the silver

lining that sets the stage for a stronger post-2012

market. EU installations will have used fewer

CERs and ERUs than allowed under their import

limit during Phase II of the ETS, thus, theoreti-

cally, sustaining future demand. Under this sce-

nario sound upcoming projects and programs,

mainly in emerging regions and sectors, should

have greater opportunity to sell their assets. In-

creased competition for eligible primary CERs

should also prevent their prices from falling in

coming years.

Nonetheless, clear policy and regulatory signals

must be urgently provided if a stronger global

market is to emerge. As things stand, the Copen-

hagen climate conference’s inconclusive outcome

has deepened the sense of uncertainty over the fu-

ture of the global emission reductions e#ort and

the likelihood that international policymakers

will be able to reach a legally binding agreement

next December in Cancún.

Residual demand for Kyoto assets through 2012 will total

230 MtCO2e

Analysts have continuously revised downward their CER issuance projec-

tions and now forecast a total of just one billion tCO2e by 2012. Although

an increasing number of JI projects have begun to deliver assets, slightly

less than 200 million Emission Reduction Units (ERUs) will be available

for compliance buyers prior to 2013. Potential AAU supply has risen to 1.8

billion tCO2e thanks to the significant progress several countries have

made in implementing Green Investment Schemes (GIS).

As emissions projections have also been revised downward, expect-

ed gross demand for Kyoto assets from governments of industrialized

Annex B countries through 2012 has fallen to 475 MtCO2e. EU-15 remains

the chief source of demand with more than 70% of volume or about 350

MtCO2e. Japan is now believed to be well on track to comply with its

Kyoto commitment and gross demand from the government remains on

the level of 100 MtCO2e.

Gross demand from private entities is estimated at 750 MtCO2e.

The projected CDM and JI demand from European entities over Phase

II of the EU ETS is about 540 MtCO2e. Private sector companies in Ja-

pan were among the hardest hit by the global economic downturn and

the corresponding fall in industrial output. Their demand should not total

more than 200 MtCO2e.

Taking into account what was contracted through 2009, the estimat-

ed residual (net) demand for Kyoto assets over the next three years is 230

MtCO2e, virtually all of which is attributable to European governments.

BOX

SECTION 1 Executive Summary

3

In the United States, the Regional Greenhouse

Gas Initiative (RGGI) grew almost 10-fold to

US$2.2 billion (€1.6 billion) in expectation of

federal carbon regulation; it now appears unlikely

that such regulation will emerge anytime soon. To

make matters worse, Australia’s e#ort to develop

a national scheme has stalled. !ese challenges,

combined with more limiting import rules un-

der Phase III of the EU ETS, threaten to erode

the long-term interest of major actors in carbon

&nance despite the strong support of developing

countries for the Kyoto mechanisms.

New Zealand provided a glimmer of hope in

2009 when it became the &rst country outside

of Europe to adopt a mandatory, economy-wide

ETS. In addition, new initiatives in developing

and developed countries have emerged that ex-

plore innovative market approaches to climate

&nance. Still, considerable e#ort, ingenuity,

and capacity will be required for carbon &nance

mechanisms, along with other policy and &nance

instruments, to address the immense scale of the

climate challenge.

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