The Compactors – Buying Nothing for Christmas

December 21, 2006 at 9:58 pm
Contributed by:

Folks,

Here is another positive example of everyday people making a difference.

A group of ten friends in San Francisco made a compact between them not to buy anything new in 2006, except for food and the bare necessities for health and safety. They have mostly succeeded, and were featured in several newspaper stories, like the one below.

For Christmas, they’re either eschewing gifts, or making gifts, or finding good used stuff, and wrapping it up in newspaper and other paper that would otherwise have been put in the bin. I love this example, because it shows that, especially at Christmas, one can step out of the intense consumerism and still have a perfectly enjoyable holiday, with or without the gift-giving.

For my part, I haven’t gone quite that far, but I have succeeded in finally convincing my family (after years of trying) to limit the gift-giving to the kids (under 15 yrs) and spouses. I can’t tell you what an immense relief it has been not to have to do all that shopping, and spend money I can’t afford to spend, not to mention staying off the roads and out of the stores. It has turned a holiday that I had started to regard with anxiety and dread, back into what it should have been all along: a positive and relaxed time to enjoy the company of family, full stop!

So if you’ve been running around like a madman, singing under your breath “It’s the most stressful time of the year…,” maybe you want to stop a minute and consider those examples. You might be surprised at how willing your family and friends are to follow suit. You do have the right to be a person, and not just a “consumer.”

May your holiday season be filled with joy, companionship, and relaxation!

–C

From http://www.washingtonpost.com/wp-dyn/content/article/2006/12/17/AR2006121701122_pf.html


Nothing New Here — And That’s the Point
In California, 10 Friends Eschew Consumer Culture to Live Secondhand

By William Booth
Washington Post Staff Writer
Monday, December 18, 2006; A01

SAN FRANCISCO — In the living room, the group gathers to share inspirational stories about the joy of finding just the right previously owned shower curtain. To the uninitiated, these people appear almost normal, at least in a San Francisco kind of way. But upon closer inspection, you see it: Nothing in this house, nothing on their bodies, none of their products — nothing is new. Everything is used.

For these people, recycling wasn’t enough. Composting wasn’t a challenge anymore. No, they wanted much more of much less.

Attention holiday shoppers! These people haven’t bought anything new in 352 days — and counting. These 10 friends vowed last year not to purchase a single new thing in 2006 — except food, the bare necessities for health and safety (toilet paper, brake fluid) and, thankfully, underwear, and maybe socks (they’re still debating whether new socks are okay).

Everything else they bought secondhand. They bartered or borrowed. Recycled. Re-gifted. Reused. Where? Thrift stores and swap meets, friends and Dumpsters, and the Internet, from Craigslist to the Freecycle Network, which includes 3,843 communities and 2.8 million members giving away stuff to one another.

These people purchased old sheets this year. Tonight’s vegetarian feast was cooked in a hand-me-down Crock-Pot. Christmas presents? They’re making them, or — shudders — they don’t give them.

They call their little initiative “the Compact,” which they say has something to do with the Mayflower and the Pilgrim pledge to live for the greater good, save the planet, renew their souls, etc. And although these modern “Compactors” say they never intended to spark a mini-movement or appear on the “Today” show, that is exactly what has happened.

Since the San Francisco Chronicle ran an article about them in February, their story of not buying has appeared on media outlets around the world — everything from Yoga Journal to Martha Stewart’s Body + Soul to the London Times. Even Oprah’s producers called.

It appears they’ve pinched a nerve. Perhaps, the Compactors suggest, many people have the same feeling that the mall just isn’t working for them anymore.

“We’re just rarefied middle-class San Francisco greenies having a conversation about consumption and sustainability,” says John Perry, a marketing executive with a high-tech firm, and one of the founding Compactors. “But suddenly, we decide we’re not going to buy a bunch of new stuff for a year? And that’s international news? Doesn’t that say something?”

Their user group on Yahoo has grown to 1,800 registered members, representing SubCompact cells operating across the country (including Washington), and around the planet. So they apparently live among us, biding their time, quietly not buying, like some kind of Fifth Column of . . . Shakers.

The online Compact community ( http://groups.yahoo.com/group/thecompact) spends enormous amounts of typing-time discussing things most Americans probably do not. Such as how to make soap. Or whether a mousetrap counts as a safety necessity. Or how to explain to your children that Santa Claus traffics in used toys.

“And people hate us for it? Like it drives them nuts?” This is Shawn Rosenmoss, an environmental engineer in the original San Francisco group. Some have called the Compactors un-American, anti-capitalist, eco-freak poseurs whose defiant act of not-consuming, if it caught on, would destroy the economy and our way of life.

Kalle Lasn, editor of Adbusters magazine, who advocates taking a 24-hour timeout of the consumer merry-go-round, has promoted Buy Nothing Day since 1992, urging citizens to resist the urge to splurge on the day after Thanksgiving, the kickoff to the holiday shopping spree.

Lasn claims that millions of people have stopped shopping on Buy Nothing Day, although he admits there is no way to know for sure. But Lasn does know that Internet discussion about the movement has grown, and so, too, the backlash — against the backlash.

“I go on talk radio shows, and I’m amazed by the anger of some people, the Chamber of Commerce president who calls up and says, ‘You’re trying to ruin the economy,’ ” Lasn says. “I sympathize. I know you have to pay your rent, but try to take the larger view. We consume three times more than we did right after World War II. These things are connected.”

“I think it upsets people because it seems like we’re making a value judgment about them,” says Rosenmoss, who has two children. “When we’re simply trying to bring less . . . into our house.”

What are the rules to this particular game? “People are really into the rules,” Perry says, “as if it were a game, which it kind of is. I like that part of it. Figuring out how to do what I need to do without running out and buying something.”

The rules are simple — and flexible. The original Compactors decided they would get to vote on anything in the gray areas.

One member recalls asking permission to purchase a new toilet brush, contending that it was a health issue. Overruled. How about a new house key? Allowed. New tubes of shampoo, toothpaste, sunscreen are okay, but skin bronzer would be frowned upon.

At the potluck supper, the family dog is playing with a toy, which looks like a ball of yarn. Technically, it is new, and thus a Compact breaker. “But if she eats it,” points out Rachel Kesel, a professional dog walker, “then it’s food.”

“We all have our little weaknesses,” says Kate Boyd, a schoolteacher and set designer. Her challenge was getting used bicycle shoes, plus a used helmet and pump. Three buys through Craigslist through three sellers. “It was more of a hassle than going to the bike store,” she says, but more interesting, too. “You get to meet new people.”

The greatest challenge of the Compact? “The strangest things,” Perry explains. For example, he cannot find used shoe polish.

Then there are modern dilemmas. Is it better to buy a battery (allowed, if recycled and rechargeable) for a cellular phone for $70 or just have the company give you a new free phone if you switch providers?

Clothes? Easy, they say. Vintage stores. Consignment shops. Or more down-market, your Goodwill, your Salvation Army. Or your own closet, likely filled with outfits.

Toys? The easiest. Perry and his partner, Rob Picciotto, a high school language teacher, have two adopted children. “I take Ben to Target sometimes and we’ll play with the toys and then leave,” Picciotto says. The kid seems happy.

“I broke down and bought a drill bit,” Rosenmoss says. The Compactors nod their heads. “I just wanted it and I needed and I did it.” The group members understand. They’ve had their drill-bit moments.

But not a lot of them. Asked what they bought that broke the Compact, the list was not long: some sneakers, the drill bit, a map, and for Sarah Pelmas and her newlywed husband, Matt Eddy (fellow Compactors), some energy-efficient windows for the house renovation. The 1920s house, they remind us, was purchased used. Indeed, they painted it with recycled paint.

“By being so strict with yourself, you learn to take a deep breath,” Kesel says.

“You learn to do away with the impatience.” Boyd says, “You see that the craving will pass.”

One Compactor points out that the group’s members are not really denying themselves much. Boyd says that, for example, by buying less new, “I drink way better wine now.” Also allowed: services. So they could buy a massage if they wanted to. They can go to movies, theater, concerts, museums, bars, music clubs and restaurants. They can fly, drive (and buy gas), stay in hotels.

Judith Levine, author of “Not Buying It: My Year Without Shopping,” went really cold turkey in 2004 with her husband. The couple split their time between Brooklyn and Vermont. She applauds the Compactors, but says that not buying stuff for a year is only taking it halfway. Not going to the movies and restaurants for a year — now that’s cutting back.

Amazingly, the Compactors have all decided to renew their pledge for another year. There are, naturally, things they miss, and so they’ve decided to give themselves one day next month when they can buy a few things they really need new.

Like? “I need a drain snake,” Perry says. Is that not pitiful?

Pelmas is dying for new pillowcases. Used pillowcases, even this group agrees, are rather disgusting.

Lessons learned?

“We didn’t do this to save the world. We did this to improve the quality of our own lives,” Perry says. “And what we learned is that we all have a lot of more stuff than you think, and that you can get along on a lot less stuff than you can imagine.”

Staff writer Sonya Geis in Los Angeles contributed to this report.

Renewable Energy Set to Explode, with Government Backing

December 21, 2006 at 3:11 am
Contributed by:

Folks,

Building on the previous post about the CFR report, here’s a new article I wrote for Energy and Capital, about some radical developments at the government and policymaking levels that bode great things for the renewable energy sector.

–C

Renewable Energy Set to
Explode, with Government Backing


By Chris
Nelder


12/20/2006


A bomb went off
in the renewable energy world two months ago, but almost nobody heard it. And it
has stunning implications for the energy business, both the traditional
hydrocarbon side, and the renewable side.


Maybe it’s
because it was in the form of a 90-page policy paper from the Council on Foreign
Relations (CFR)—the kind of stuff that makes a normal person’s mind wander, and
eyes glaze over, after a few minutes.


Well, I’m not a
normal person (ask anybody!). Despite its pedantic prose and lugubrious language
that only a policy wonk could love, I read it.


And after
reading it, you could have pushed me over with a feather. This is HUGELY
significant stuff. And yet, even today, two months after it was published, a
Google search on the title of the report yields a mere 300 references to it—all
of them, it seems, from peak oil blogs and related sites.


I found not one
mention from a single recognized media source. Newspaper, TV, major news
sites…nada.


The report is
entitled “National Security Consequences of Oil Dependency” and was written by a
special task force of the CFR. Now, if you don’t know much about the CFR, you
should stop and Google them right now, because they are part of the cabal that,
literally, runs the world. The elite of the elite. The power center of
government and business everywhere.


To demonstrate
the seriousness of the report, the task force was chaired by two former CIA
directors,
James Schlesinger and John Deutch. (You may have come
across similar efforts by another former CIA Director, James Woolsey, who has
also made national energy security his personal ambition.)


Here are just a
few choice excerpts from the report (emphasis mine):



  • [T]he U.S. government has failed to pay sufficient
    attention to energy
    in its conduct of foreign policy or to adopt a
    consistent approach to energy issues.

  • The issues at stake intimately affect U.S. foreign
    policy, as well as the strength of the American economy and the state of the
    global environment. But most of the
    leverage potentially available to the United States is through domestic
    policy.
    Thus, the Independent Task Force devotes considerable attention to
    how oil consumption (or at least the
    growth in consumption) can be reduced and why and how energy issues must
    become better integrated with other aspects of U.S.
    foreign policy.

  • The challenge over the next
    several decades is
    to begin the
    transition to an economy that relies less on petroleum. The longer the delay,
    the greater will be the subsequent trauma.
    For the United
    States, with 4.6 percent of the world’s
    population using 25 percent of the world’s oil, the transition could be especially
    disruptive.

  • The voices that espouse
    ‘‘energy independence’’ are doing the nation a disservice by focusing on a
    goal that is unachievable

  • The central task for the next two decades must be to manage the
    consequences of dependence on oil, not to pretend the United
    States can eliminate it.

  • [W]hile reducing U.S. oil imports is desirable, the
    underlying problem is the high and growing demand for oil
    worldwide.

Then they spent
considerable time debunking these widely-held “myths” about energy:


Myth #1:
The United States can be energy independent.


Myth #2:
Cutting oil imports will lower fuel prices.


Myth #3:
Large Western companies like Exxon Mobil, BP, Shell, and Chevron control the
price of oil.


Myth #4:
There’s plenty of low-cost oil ready to be tapped.


Myth #5:
Renewable energy and nuclear power can quickly reduce dependence on oil and
gas.


And finally,
they gave some policy objectives:


• Increase
efficiency of oil and gas use;


• Switch
from oil-derived products to alternatives;



Encourage supply of oil from sources outside the Persian
Gulf;


• Make the
oil and gas infrastructure more efficient and secure; and


• Increase
investment in new energy technologies.


They go on to
call specifically for increased government R&D backing of new energy
technologies, including higher fuel efficiency innovations, plug-in hybrids,
ethanol, synfuels, and advanced nuclear designs.


Wow. What a
bunch of tree-huggers those CIA guys are, huh?


In short, this
policy paper is an unequivocal affirmation of the reality and the significance
of peak oil. It is a sharp critique of hypocritical U.S.
foreign policy that pretends to be about freedom, while deploying its troops not
where freedom is threatened, but where there is oil.


And best of all,
it is a stirring call to action for the government to invest a lot of R&D
money, without regard for return on the
investment
, in all kinds of fundamental energy alternatives and efficiency
technologies.


For a guy in the
renewable energy investing business, well, I could scarcely imagine a better
Christmas present.


But the CFR
isn’t the only organization that’s (finally) on point about energy policy. Here
are a couple of other news bites you might have missed:



  • Eighty House Members signed a letter to President Bush seeking
    substantially higher funding for renewable energy and energy efficiency in the
    White House’s 2008 budget request. Meanwhile, energy consumers and producers,
    including six oil and gas trade associations, have formed “a coalition of
    coalitions,” called the “Energy Initiative,” to develop national energy policy
    recommendations.

  • A panel of U.S. renewable energy industry experts recently
    estimated that the U.S. could produce, at a minimum, 25% of the country’s
    electrical energy requirement with renewable energy by 2025, making the
    “25X25″ proposal feasible, reasonable, and doable.”

  • The European Commission will nearly double its target [to 20%] for
    the adoption of renewable energy in 2020, versus its [12%] goal for 2010.

To top it all
off, just yesterday, on the front page of the Wall Street Journal, there was a
story entitled “Choke Points – As Threats to Oil Supply Grow, A General Says
U.S. Isn’t Ready,” wherein a former Air Force general, who was the deputy
commander of U.S. forces in Europe, Central Asia and Africa, was interviewed
about his continuing efforts to secure the supply lines of oil from the Caspian
Basin and the African coast. How’s this for a startler:


Back in
Washington,
Gen. Wald has joined forces with a movement that some are calling the “green
hawks.” Prominent former policy makers and retired armed-forces officers, they
argue that a tough military and foreign policy won’t be enough to ensure energy
security, and the only real solution
lies in changing consumption at home
.


If the major
policymakers and military men in the U.S. are agreed that reducing
domestic consumption is the only solution, then surely, even the knuckleheads in
the Congress and the White House can’t be too far behind. It’s past time to
consign Cheney’s derision of energy conservation to the dustbin of history, and
start making some tracks to the future.


Finally, the
time has arrived to get our foreign policy objectives aligned with our energy
policy objectives, and come clean about our reasons for being in the Middle East. Let’s face it, their main export isn’t
broccoli, and when the CFR says it’s OK to admit that, it’s OK.


Finally, the
government seems ready to step up to the renewable energy challenge and deliver.
Almost exactly one year ago, the U.S. government laid off a
substantial fraction of the workforce at the National Renewable Energy
Laboratory, citing budgetary constraints. Perhaps now we can put such idiocy
behind us for good.


Finally, we can
come clean about our hidden subsidies to the traditional hydrocarbon industries,
and start encouraging the right solutions, rather than the wrong ones. Big Oil
doesn’t need tax relief, even Bush has admitted that. It’s time to let the
Invisible Hand go to work on the real solutions we need.


I’m so excited
about the future of renewable energy, I can hardly sit still long enough to type
this. A new day is dawning. Let’s roll!

We Don’t Know Jack

December 20, 2006 at 11:20 am
Contributed by: Chris

Folks,
Here’s my latest, going out to the newsletters & other peak oil sites today. It’s my investigation into the “elephant”-sized oil find in the Gulf of Mexico that was announced in September. As you might expect, I found that the reality didn’t quite measure up to the hype.

–C
(more…)

Go Solar for Less than Forty Cents on the Dollar

December 20, 2006 at 11:00 am
Contributed by:

Folks,

I’m catching up the blog today with some of the articles I have written for the free Angel Publishing newsletters. (If you want to read the ones I’ve written for the premium subscriptions, I’m afraid you’ll have to pony up!)

Here’s the first, about the recent extension of the federal tax credits for solar.

–COriginally published at http://energyandcapital.com/editorials.php?id=323

Go Solar for Less than Forty Cents on the Dollar

December 18, 2006

by
Chris Nelder, Solar Designer

Commercial solar got a new lease on life last week. It’s only a one-year lease, but it’s enough to keep business humming. As one of its final actions, the “Tax Relief and Health Care Act of 2006″ or H.R. 6111, the 109th Congress extended the federal investment tax credits for solar, wind, geothermal and other projects for one more year.

The most important element to keeping it alive is a consistent set of incentives so that everybody — from customers all the way back to the refiners of silicon — has a future they can bank on.

For commercial solar this is a very big deal because the tax credit is a full 30% of the cost of the project.

The loss of an incentive that big can turn a viable project into a dead one — and I have seen it happen. It’s a tragic waste for everybody concerned, because getting a commercial solar project done usually requires a good deal of planning and work on both the vendor’s and the client’s side.

For that reason, incentives are truly a double-edged sword. When they’re in place, they can cause explosive growth in the industry. When they’re withdrawn, they can put entire companies out of business.

You see, commercial solar projects can take well over a year to complete. A typical project will cost over $1 million to install, so time and planning are needed to get it budgeted for a fiscal year. The design phase can easily go on for several months as everybody reviews the look and functionality of the system, and evaluates the financial picture. Then several months of work will be required to get the engineering done and approved. Then it’s usually another month or more just to get all the paperwork completed, contracts signed and payments collected. And possibly another month to get the building permit.

So an incentive that is assured for only one year isn’t a recipe for growth. But it does keep projects alive that are already in the pipeline, and it holds out hope for future incentives.

The 30% solar tax credit actually applies to both residential and commercial PV systems, but the residential tax credit is capped at $2000, which is far less than 30% of the cost of a residential system. So for all intents and purposes, residential systems get a $2000 tax credit and that’s it.

But for commercial systems, the tax credit isn’t capped. That 30% federal tax credit, combined with a typical 30% rebate such as we have here in California and sweetened with special depreciation, means that a business can go solar for less than forty cents on the dollar.

When you’re talking about projects that start around a million dollars and go up from there, that’s a powerful motivator. It means that the ROI on commercial systems is often 14% or better. It means that the thing pays for itself in five to seven years and then starts putting hundreds of thousands of dollars back in the customer’s wallet, year after year, for over 30 years. (Actually, today’s solar systems will still produce some power after 75, even 100 years . . . just not that much.)

So it’s very important to keep the train moving and not derail it every year, as has been the unfortunate situation in the past. Incentives may not make for a perfect free market, but they do keep a new market alive long enough to thrive and become competitive.

The solar industry has been wracked and wrenched repeatedly as incentives have come and gone and come again. The most important element to keeping it alive is a consistent set of incentives so that everybody — from customers all the way back to the refiners of silicon — has a future they can bank on.

The lack of consistency has everything to do with why the retail solar industry suddenly found itself starved for product starting about a year and a half ago. The shortage of solar panels was, in turn, the result of a shortage of refined silicon. And that shortage was the combined result of growing demand for solar plus increased demand from the recovering semiconductor industry, which was pulling out of a long depression.

Why didn’t the silicon refiners and wafer manufacturers see the growth ahead and plan to increase the supply of their products? Because a plant like that can cost hundreds of millions of dollars to build and take over a decade to pay for itself. If the solar business is booming this year and busted the next, then investors are very reluctant to go on the hook for such an expensive expansion. They’d rather wait and see if the tax credits and rebates are going to be around for another year before they commit.

In the meantime, the shelves go empty at the module manufacturers and some of the installers out in the field start to lay off workers or go out of business. Just as the business is really starting to take off.

That’s exactly what happened last year. My friends couldn’t understand why solar was all over the media, and lots of people they knew were thinking about going solar, but I was so glum. I knew that I didn’t have any product to sell them. In fact, I was starting to get worried about delivering to customers who had paid in full, up front, more than six months previously — and I still had nothing for them. It’s not a position that any salesman wants to be in, let me tell you.

The shortage that started a year and a half ago still isn’t resolved. It’s better now than it was then, but some think it will take another full year to sort everything out and get all the supply lines running full tilt again.

All of the above is true for photovoltaic solar technologies, but it’s even more so for the new concentrating solar power (CSP) technologies, which require even longer-term investments in R&D and have a longer road to travel to deployment in the field.

The solar industry is pushing for the next renewal of the investment tax credit to be not for a period of one year, but eight! That’s the kind of assurance that’s needed to keep the golden goose of large commercial solar systems laying those nice, fat, megawatt-hour-sized eggs every day. Megawatts that don’t produce greenhouse gases, don’t make any noise, don’t disturb the environment, and don’t consume anything but sunshine.

This is why solar tax credits are so critically important to the continued growth of this nascent industry. Not just because we need them to bag new sales today, but because we need everyone in the supply chain to have confidence in tomorrow.

With the current extension I predict that 2007 is going to be a blowout year for solar. A lot of business owners haven’t realized what an incredible deal solar systems are under the current package of incentives. (And in some states, like New Jersey, the incentives are even better.) But word is getting out. Potential customers who sniffed at a 100 kW design last year and decided to wait are coming back around now, eager to do 300 kW projects.

Because from a financial standpoint, if you are in a state with decent incentives, commercial solar PV is absolutely a no-brainer.

If you can come up with the cash — and most businesses can, particularly with the growing availability of innovative financing like low-cost “green building” improvement loans and third-party financing — then you really have no reason not to go solar. No other investment in your physical plant can even come close to the payoff of PV when you’re buying it for forty cents on the dollar.

Chris Nelder is a solar designer in Marin County, California and a contributing editor to GreenChipStocks.com; an investment advisory service that focuses solely on renewable energy and organic food markets. He is also a contributing editor to WealthDaily.net and EnergyandCapital.com.

The Great Awakening (or, Slouching Toward Sustainability)

December 18, 2006 at 10:22 pm
Contributed by: Chris

Folks,

I am pleased to announce that I have a new gig, writing for a family of investing newsletters. Their support will enable me to continue my efforts, beyond this blog, and with a much wider readership. They’re totally hip to peak oil (in fact, they’ve built several of the newsletters around it), they’re young and smart and insightful, and I’m honored to join their crack team of investors and pundits.

The company, Angel Publishing, publishes seven free “e-letters” on investing in various niches, and eight premium subscription letters, packed with stock tips and valuable insights. See their whole list of newsletters and prices here.

I am currently writing for two of the free e-letters, Wealth Daily and Energy and Capital, as well as a premium e-letter, Green Chip Stocks. I am writing two or three pieces a week, and I will repost some of that material to the blog, as time and permission allows.

Here is the first piece I wrote for them. It’s a high-level view of everything that this blog is about, and much of what I’m about, and will probably serve as a guide to topics I will be exploring in depth for the newsletters. It’s long, but hopefully, worth your while. Print it out, check it out, pass around to your friends, and most importantly, send me your feedback.

Stay tuned to this space, and to the abovementioned sites, for much, much more!

–C
(more…)

Unintended Consequences

December 11, 2006 at 8:16 pm
Contributed by:

Folks,

This recent WSJ article expressed something that has long bothered me about the way that the press usually handles energy and climate change–as if they were separate issues. They are as intimately connected as my left hand and my right, but hardly anybody writes about that. Either the article is about the benefits of biofuels, or it’s about the climate effects of burning away forests to plant croplands. It’s about economic improvement programs in remote and impoverished parts of the world, or it’s about the effects of those programs on the native ecosystems. But almost never both, at once.

Well, just as there is no free lunch, there is no way to increase production of alternative fuels without also incurring some “externalized” costs somewhere else. And it’s about time that we understand that. Maybe we need to start telling newspaper editors that we can handle the truth, that we do have an attention span longer than your average TV commercial, and we want more well-rounded coverage of this stuff.

This article presented a balanced view of some new “sustainable” programs to grow biofuel feedstocks in Indonesia. Good stuff. Kudos to the WSJ.

–C
Crude Awakening
As Alternative Energy
Heats Up,
Environmental Concerns Grow

Crop
of Renewable ‘Biofuels’
Could Have Drawbacks;
Fires Across
Indonesia

Palm-Oil
Boom Ignites Debate

By
PATRICK BARTA and JANE SPENCER
December 5, 2006; Page A1


PONTIANAK, Indonesia — Investors are pouring billions of
dollars into “renewable” energy sources such as ethanol, biodiesel and
solar power that promise to reduce the world’s reliance on petroleum. But
exploiting these alternatives may produce unintended environmental and
economic consequences that offset the expected benefits.


Here on the island of Borneo, a thick haze often encloses
this city of 500,000 people. The cause: forest fires that have blazed
across the island. Many of them were set to clear land to produce palm oil
— a key ingredient in biodiesel, a clean-burning diesel fuel
alternative.







[See a slideshow]1
Patrick Barta
At a new oil-palm plantation, the hillsides have
been cleared and terraced.

The bluish smoke is at times so dense that it leaves the
city dark and gloomy even at midday. The haze has sometimes closed
Pontianak’s airport and prompted local volunteers to distribute face-masks
on city streets. From July through mid-October, Indonesian health
officials reported 28,762 smog-related cases of respiratory illness across
the country.


“I feel it in my breath when I breathe,” said Imanuel
Patasik, a 26-year-old delivery man, as he sat in one of Pontianak’s many
open-air coffee shops on a recent evening. When the smoke is really bad,
he wears a mask to work, but still wakes up the next morning feeling sick.
“It’s part of life here,” he sighed.


Seasonal rains have helped quell the fires over the past
few weeks. But the miasma of smoke from Borneo and the island of Sumatra
— an annual phenomenon that blankets large parts of Southeast Asia in
smog — underscores a troubling dark side of the world’s
alternative-energy boom. Among other problems, the fires in Indonesia spew
millions of tons of carbon dioxide and other greenhouse gases into the
atmosphere, experts say. In doing so, they exacerbate the very
global-warming concerns biofuels are meant to
alleviate.


Such side effects are not an isolated problem. In
Indonesia, Malaysia, Canada and elsewhere, forests are being slashed for
new energy-yielding crops or other unconventional fuels. In India,
environmental activists say, water tables are dropping as farmers try to
boost production of ethanol-yielding sugar.


“Let’s be brutally frank: [The push for alternative fuels]
is going to cause significant changes for the environment,” says Sean
Darby, an equities analyst and expert on alternative energy companies at
Nomura International in Hong Kong. He is most worried about the strain on
water resources caused by accelerated crop production. Water, he says, is
“just as precious” as oil.


Some experts are also concerned that crops for biofuels
will compete with other farmland, possibly driving up global costs of
basic food production.

[Chart]

It’s not clear how serious these problems will become — or
whether they eventually will be resolved through new technologies and
stricter environmental measures. Proponents of alternative energy,
including some palm oil industry executives, say the dangers are
exaggerated and are outweighed by the benefits new fuels promise.


“We’re unfairly targeted,” says M.R. Chandran, former chief
executive of the Malaysian Palm Oil Association. He contends that the
timber industry and local farmers are much to blame for destroying
Indonesia’s forests.


The alternative energy field “is almost like the Internet
in terms of the pace of how fast all this is changing,” says Chris Flavin,
president of Worldwatch Institute, an environmental organization. He
believes that new technologies could help resolve some concerns over
collateral damage. One of the hottest, for example, is called cellulosic
ethanol, which uses different kinds of waste — including municipal
garbage — to create fuel.


In the U.S., questions about corn-based ethanol are
swirling in academic and agricultural circles, in part because of the work
of a Cornell University professor. David Pimentel, who teaches
environmental policy, has long held doubts about the fuel’s value. He
argues that expanding corn production for biofuels would deplete water
resources and pollute soils with added fertilizer and chemicals. It would
also require huge volumes of traditional energy for farming equipment and
ethanol-conversion facilities — a toll that could nullify gains from the
less-polluting fuel produced.


Other studies, including reports by researchers at the U.S.
Department of Agriculture, have reached much more optimistic conclusions
and have criticized Mr. Pimentel’s methodology.


Big Implications for Business


Critiques of alternative energy — even if they prove to be
exaggerated — could have big implications for business. Last year,
investors globally poured a record $49 billion into energies such as solar
power, ethanol and biodiesel, according to New Energy Finance, a
London-based firm that specializes in analyzing renewable energies. That
was a 60% increase from the previous year.


But commercializing many alternative fuels relies on
political support in the form of government subsidies or tax incentives.
So the rise of local resistance could jeopardize the new fuels’ economic
viability.

[Chart]

This is particularly true for palm oil, a once-mundane
commodity whose price has climbed about 31% so far this year. The spike is
partly attributable to demand for biofuels.


In October, a European Parliament committee recommended a
ban on all biofuel made from palm oil, citing fears that the crop
encourages deforestation in tropical countries. In Indonesia, activists
helped block an $8 billion Chinese-backed project that would have created
one of the world’s largest palm-oil plantations.


And last month, one of Britain’s largest power companies,
RWE npower, a subsidiary of the German power giant RWE AG, said it
would abandon a project that was to use several hundred thousand tons of
palm oil a year to generate power. An environmental group, Friends of the
Earth, had complained that the project would contribute to unsustainable
global demand for palm oil, contributing to rain-forest destruction in
South East Asia. RWE npower said it dropped the project because it
couldn’t secure an adequate supply of sustainably grown palm oil.


Most consumers still think of palm oil mainly as a source
of cooking oil. The oil is squeezed from bunches of red fruit that grow on
oil palms, primarily in Malaysia and Indonesia. But the oil can also be
processed to make fuel. Then it’s mixed with conventional diesel to form a
hybrid energy source — for instance, 80% regular diesel and 20% biofuel
— that can be pumped directly into fuel tanks.


Biodiesel offers lots of upsides. Renewable crops such as
palm oil reduce the need for fossil fuels such as petroleum whose supplies
are finite. It also burns more cleanly than carbon-based liquid fuel,
releasing fewer of the gases thought to cause global warming.


As oil prices have surged, a number of companies, including
Chevron Corp., have announced plans to build or invest in biodiesel
plants. In a recent report, Credit Suisse analysts said there’s enough
refining capacity under development to produce as much as 20 million
metric tons of fuel annually by late 2008. That capacity, more than twice
that of today’s levels, would “easily soak up” all the world’s available
palm oil — creating even more demand for plantations.


Indonesian authorities hope to capitalize on such demand to
bring economic growth to impoverished regions. The government is offering
low-interest loans for plantation companies, with a goal of adding 3.7
million acres of new plantations over the next five years, an area more
than half the size of New Hampshire. Officials maintain this can be done
on designated land areas without causing widespread environmental
damage.


Different Outcome


But what’s happening on the ground in Borneo suggests a
different outcome. Among the world’s most fabled islands, Borneo — which
is divided between Indonesia and Malaysia — is considered by
environmentalists to be one of the last great tropical wildernesses. It’s
home to rare and unusual species, including the wild orangutan, the
clouded leopard and the Sumatran rhinoceros.


It’s also home to some of the world’s last headhunters. The
indigenous Dayaks resurrected the grisly practice as recently as the late
1990s in interethnic clashes. Some Dayaks still live in villages that can
only be reached by river, and sleep in wooden “longhouse” buildings on
stilts.





[Forest Fires Photo]
A fire at this oil-palm plantation near
Pontianak, Indonesia, made some local villagers
sick.

In the 1800s, Dutch and British traders began carving up
parts of the island to produce rubber and other commodities. Later,
Malaysian and Indonesian timber barons devastated millions of acres of
forest logging tropical hardwoods. Today, only a little more than half of
Borneo’s once-ubiquitous forest cover remains, according to WWF, the
global conservation organization.


Now, the palm-oil boom threatens what’s left. In West
Kalimantan, a province along the western coast, the palms cover about
988,000 acres or more, up from less than 37,000 acres in 1984. Fleets of
orange and mustard-colored trucks ply the province’s few paved roads,
ferrying the oil to river ports.


The plantations have meant jobs and opportunities for many
Dayak families. Some have even taken ownership stakes in the
operations.


As residents are discovering, though, the spreading
plantations have deleterious effects. They can alter water-catchment
areas, destroy animal habitats and contribute to the months-long bouts of
haze that spreads hundreds of kilometers across Southeast Asia.


As fires burn deep into the dry peat soil beneath
Indonesia’s forests, centuries of carbon trapped in the biomass are
released into the atmosphere. A study presented last month at a U.N.
Climate Change Conference in Nairobi showed that Indonesia is the world’s
third-biggest carbon emitter behind the U.S. and China, when emissions
from fires and other factors are considered.


“Stopping these fires could be one way of getting rid of
some significant carbon emissions to the atmosphere,” says Susan Page, a
senior lecturer at Britain’s University of Leicester who studies carbon
emissions in Southeast Asia.





[Smoke Photo]
A ship on the Kapuas River, in the Indonesian
section of the island of Borneo, is shrouded by smoke from forest
fires.

To be sure, palm-oil plantations aren’t the only cause of
deforestation and smoke on Borneo. Loggers have degraded huge swathes of
forest. And indigenous residents have long practiced their own form of
slash-and-burn agriculture that involves setting fires to clear fields for
planting.


But Indonesian environmental officials say plantation
companies are exacerbating the problem, and some palm-oil executives
concede their industry is partly to blame. Often, companies hack down the
trees, leaving behind a mass of debris that must be removed before they
can plant oil palms. The cheapest and easiest way is simply to torch
it.


One new oil-palm plantation, four hours by dirt road from
Pontianak, offers a glimpse of the fallout from the flames.


The plantation stretches across some 2,740 acres and
features a series of blackened and largely bare hills. Charred stumps
stick up from the soil and blistered tree trunks litter the ground. In the
distance, a wall of misty jungle marks the border of the property.


Villagers nearby say smoke and flames from fires at the
site destroyed fruit and rubber trees on which they relied. They also made
many people in the area sick. One villager began acting like he was
possessed and was placed in a cage where he remained for weeks, the
village chief says.


Nearby, on a ridge overlooking the property, a man in a
floppy sun hat who identifies himself as the plantation manager says he
didn’t know who started the fires. “We are one of the victims,” says the
man, Kong Tamcheng.


Mr. Kong says his employer, an Indonesian company called
Incasi Raya Group, has a strict no-burning policy. He suggests the fire
might have been started by a careless worker flicking cigarette butts, or
by “interested parties” out to “smear” the company’s reputation.


But Untad Dharmawan, director of environmental impact
assessment for West Kalimantan, says Indonesian authorities are
investigating nine palm-oil companies for illegal burning, including
Incasi Raya Group and its manager, Mr. Kong. He displays a dossier of
photos of the Incasi Raya site, adding that his department has witnesses
with evidence the company started the fires.


Phone calls to Incasi Raya’s office in Padang, Indonesia
went unanswered.


Indonesian officials say they’re doing the best they can to
fight the fires and prevent illegal forest-clearing. Among other tactics,
they hired two giant Russian planes to drop “water bombs” and launched
projects to hand out water pumps to local villagers.


But they’re hamstrung by tight budgets and the logistical
difficulties of policing such a vast area with few roads. At best, “we can
just minimize the spread” of fires, laments Mr. Dharmawan, the provincial
environmental official.


Palm-oil companies, meanwhile, have joined with environment
organizations, energy companies and others to set up a group known as the
Roundtable on Sustainable Palm Oil that plans to certify plantation
companies that follow guidelines to minimize ecological damage.


Back in Borneo, Tony Hartono, head of a local plantation
association in West Kalimantan, says he still believes biodiesel derived
from palm oil will play a big role in solving the world’s energy problems.
After all, “it’s a renewable energy,” he says. “It’s our future.”



—-
Puspa Madani in Jakarta and Celine Fernandez in Kuala Lumpur contributed
to this article.


Write to Patrick Barta at patrick.barta@wsj.com2
and Jane Spencer at jane.spencer@wsj.com3







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