How Charities Can Fight Global Warming, Peak Oil and the Credit Crunch and Make Billions...
The following is an innovation – a simple plan by which many charities could earn tremendous "profits" (to be plowed back into their humanitarian efforts) while dramatically reducing the impact of global warming and peak oil, and also easing financing problems faced by many cities and communities worldwide. This system is one of a series of inventions I am putting into the public domain for anyone to use freely, with or without attribution.
This plan may seem on its surface to be nothing more than another conventional way to tap the carbon-offset market to put in a few trees or solar panels somewhere. It is not. Rather, charitable organizations which employ this strategy will be able to earn a profit of 60% to 90% (less some minor expenses) on their carbon-offset investments. Yet this plan is not, for reasons that will become obvious, nearly as well suited for profit-seeking enterprises.
First, a summary of the issues involved. For those not following current events very closely, key warning signs (such as the rapid melting of Arctic summer sea ice, and severe forest fires and droughts linked to climate change) indicate that climate change (aka global warming) is emerging ever-more-rapidly as a dire threat. Meanwhile, global oil production appears to be on the verge of peaking (the highest rate of production we will ever see) if it has not already and much of the world is experiencing shortages of either food or water, even in the United States. Finally, grave issues surrounding the mortgage markets in the U.S. have damaged the global financial system, creating a level of uncertainty in which many creditors are unwilling to lend... even to low-risk customers like cities and towns.
Clearly, most people would like to do something about these issues.
Carbon offsets are one way in which some organizations are trying to help. A conventional carbon offset amounts to a promise from a company or charitable trust to remove or reduce carbon emissions by one ton for so many dollars (prices usually range from $4 to $40 per ton, depending on the entity). They typically try to fulfill this promise by either capturing or eliminating carbon emissions at the source (often installing renewables), by planting trees, or both. Some organizations even have a "carbon calculator" to help customers estimate how much carbon their lifestyle has generated, and hence how much they should feel obligated to pay for. And because most nations’ power grids are interconnected, determining how much carbon is generated on average by each kilowatt of power consumed from the grid is actually fairly easy. Calculating the CO2 released by a gallon of gasoline is even easier (it’s a known quantity). Many businesses and organizations simply use the Greenhouse Gas Protocol to determine what they need to offset. This carbon-offset market is potentially a vast source of funds. As noted in The Financial Times, "The burgeoning regulated market for carbon credits is expected to more than double in size to about $68.2bn by 2010, with the unregulated voluntary sector rising to $4bn in the same period." Present economic circumstances may cut into that latter estimate, but even a fraction represents a huge fundraising opportunity for most foundations, and if the carbon-credit market begins to inject funds into the following system, the impact on global climate and energy will be even more profound.
But unfortunately, as The Financial Times has pointed out, "some organizations have been selling carbon credits that yield few if any environmental benefits." The great irony is that, if done properly, it should be easy to overperform in terms of carbon captured or eliminated, while making far more than just a sliver of "profits" from each contribution – assuming, in the latter case, that you are a charity. And here’s why...
Assume, for the sake of the argument, that you run a small charity which has taken in some carbon-offset contributions. Offer a small loan to a financially stable city in the U.S. with ready access to one or more strong sources of alternative energy (solar, wind, micro-hydro, geothermal, tidal, etc). This loan would pay for an upgrade to a key piece of that city’s crisis-management infrastructure – either a permanent source of renewable energy or an improvement resulting in tremendous energy savings. Obviously, this would cut the "carbon footprint" of that infrastructure, but again, the real benefits are in the details.
First, contributors would know their money was going to a truly essential part of the city in question, a hospital, water treatment plant/pumping station, or a police or fire department. (As opposed to, say, merely padding the profits of a local strip mall.) And you would work with cities to choose projects not only ideal for their environment (solar in sunny climes, micro-hydro beside rivers, and conservation everywhere), but which will also be extremely productive to undertake, so that much of the money invested will be repaid in a very short period of time. (More on such financially hyper-efficient initiatives below.)
Second, the loan would be low-interest, say, 2% if repaid in the first few years, 0% if repaid in a year to 18 months, and 10% of the loan would be forgiven if repaid within one year. Given the time horizon on both peak oil and climate change, it may be necessary to include two further categories – the forgiveness of 20% of loans repaid within nine months and of 30% of loans repaid within six. (You can adjust these time periods and percentages to whatever the market and circumstances suggest is ideal.) These incentives would encourage cities to repay you as quickly as possible, enabling you to get most or all of the money back in a year (if not less), so you could then recycle the funds in question. Yes, technically that original pool of dollars from the first loan would diminish in time, but how many contributions do you normally get to spend over and over again? And meanwhile, the remaining 70%, 80% or 90% of that loan, less some small expenses, would amount to pure profit for your institution.
Third, if the cities you work with apply for relevant homeland-security or disaster-relief funding as appropriate, you may find loans for major projects are repaid much faster when governments are only borrowing part of the money from your foundation, thus enabling you to accomplish many good deeds quickly, while reclaiming the bulk of your investment each time for new enterprises. For example, a city could easily make the case that in the event of a disaster, it would want to have adequate backup generators at a particular hospital. If a federal grant to this city in, say, Florida were adequate to pay for half the cost of a full solar power system (perhaps with panels from Nanosolar), and your organization’s loan covered the other half, then the city would really only have to pay for half the overall cost (actually only 90%, 80% or 70% of that half (or 45%, 40% or 35% of the full price)).
Fourth, because the city would not be carrying any of the initial cost, by the time it had to repay a significant part of the loan, it would already be seeing a net savings due to the reduction in its power bill. In other words, if you choose a sufficiently cost-effective project, this is a win-win or win-win-win situation for all parties. The federal government (if involved) will have taken concrete action to make the city’s key operations safer, the city will have done likewise and also saved substantial money possibly without having invested a dime to make it happen. You will literally be carrying most or all of the short-term costs of making these long-term savings. The money saved on their energy budget will quickly dwarf the small payments they are making on 90/80/70% of the loan’s principal, even if they do not have any state, federal or other private money supporting a specific project. Freed of the burden of that particular energy bill, with only minimal upkeep on the ruggedized equipment required, the city will quickly make a net profit as a result of cooperating, and have all the more incentive to do so again. And your foundation will have done a good deed, gotten most of its seed money back, and only enhanced its credibility in this field and its experience in managing such partnerships. All of these benefits will simply encourage cities to present practical, well-designed upgrade projects a charity would be willing to fund with offsets and to seek supplementary funding (such as homeland-security support) on their own.
Fifth, traditionally, installing an alternative power source goes hand-in-hand with looking over your home or institution’s energy requirements and seeing what power demands can be most easily met through conservation rather than an ever-larger electrical supply. The functions of looking over buildings for wasteful problems, correcting those problems, and installing the new systems, are all jobs that can not be outsourced. As has been pointed out in The New York Times, these "green-collar jobs" may well be the wave of the future – particularly for disadvantaged youths who have few career or educational opportunities. Not only could an ongoing project of this kind in a greater metropolitan area serve as a valuable training program, but it could in fact be a further source of funds, as organizations with an interest in education, job training, economic development and related matters might choose to support that aspect of this larger design. Furthermore, depending on the quality of the energy auditors you have access to, just paying to have an audit done of major buildings (like hospitals) or city operations (like water treatment and pumping) might prove to be one of the "hyper-efficient projects" mentioned above – the kind of low-cost, high-yield efforts that would quickly pay for itself. Perhaps even before the city had to repay its loan.
Sixth, by first approaching solvent, stable local governments of sizable urban areas in a wealthy nation, you increase the odds of finding reliable partners. Most Western cities rarely declare bankruptcy unless faced with major long-term fiscal problems or disasters on the scale of Katrina. They also tend to have longer-term needs than simply improving their energy efficiency at one or two or a dozen sites. Imagine the number of hospitals, transportation hubs, police departments, water-treatment facilities and so forth that a mayor and city council might consider critical infrastructure in, say, Los Angeles, Chicago, Atlanta or even Charlotte.
What you as an organization want to do is home in on the "low-hanging fruit" – every simple change that offers near-term savings as great as the percentage of the loan the city will be repaying... preferably yielding these savings as quickly as they choose to repay (most of) the loan. This may sound like a tall order, but remember, as fossil fuel prices continue to rise, savings of fuel and electricity will become increasingly valuable. Something that made no sense at $25-a-barrel and that was barely logical at $60-a-barrel may become absolutely essential at $150 or $200-a-barrel. We will be discussing, in later columns, extremely inexpensive public-domain inventions which can easily meet this standard – a high level of savings in exchange for a low level of investment.
Furthermore, as you develop experience in this field and as conventional energy costs become even more prohibitive, you will be able to expand your range of operations to include cities and towns with slightly less access to plentiful renewable power, to businesses and non-profits engaged in work critical to their communities’ survival (such as organic farms producing affordable food for local consumption) and ultimately to somewhat less stable cities and towns around the world. You will still want most of your loans to be as secure as reasonably possible, but once you are established in this work you will have the flexibility to take a few risks where success would yield great benefits.
A note on the advantages of being a relief organization in the voluntary carbon-offset field:
1. A genuine non-profit obviously has no need for profit, only for sufficient revenues to handle overhead and the talent to make the best use of available funds. Hence, if a charitable trust that invests the great majority of its contributions into actual relief work (as opposed to overhead and fundraising) begins to make enormous "profits" from their work, there is no backlash against them. So long as those excess funds are devoted to good works, whether global-warming/peak-oil related or otherwise, donors will merely be pleased to see that their funds are being stretched so far and used so well. In other words, a 60% or 70% profit margin that gets diverted as far afield as children’s vaccinations will be far more accepted than a corporate profit of 20% that goes to the CEO’s annual bonus and the investors’ bottom line.
Giving an "unfair advantage," ironically, to the institutions traditionally least interested in competing for profitability.
2. Well-known and respected non-profits have greater credibility than a for-profit enterprise. The simple fact that many established charities are known for doing good works in sustainability and disaster relief, have verifiable track records to that effect and have no ulterior motive in terms of reaping huge profits from an initiative, both carbon-offset customers, typical contributors and other organizations are apt to take their pronouncements and initiatives much more seriously than if they were seen as yet more "money-grubbing corporations."
3. International charities already have ready access to the relief infrastructure, contacts and personal experience that other, less practiced organizations would have to develop on their own. All of which means that they could step right into carbon-offset reforestation or emissions reduction without missing a beat, simply by adding the work to existing efforts.
The above options are just a couple of ways in which purchases of carbon offsets could provide a dramatic new influx of funds into a charity. These funds could then be leveraged to raise their profile by performing far more good works than anyone could normally ever manage.
Now you may ask: "What if some government gets in the act, and takes over this kind of work, pushing us out of the business?" Simple, you smile, step back, and appreciate the fact that you’ve helped stimulate real progress, but that someone with far greater resources is stepping in now, thus completing the mission of upgrading critical infrastructure in the country or region in question. If anything, this is a result you will want to encourage. Rest assured, there’s plenty more to be done. Until the entire planet has been reached by these kinds of services, there will not only be more "markets" to open in other places, but there will be plenty of "low-hanging fruit" to be exploited, unfortunately, for some time to come. And once that fruit is gone, higher conventional energy costs will have brought an even larger harvest into easy reach.
I make no claims for any of these concepts, only to tell you they are here and they can now be used by anyone. Thank you for listening.
Ralph Cerchione
Renewing the Earth: Public Domain Inventions for a Sustainable Future Solar desalination, solar steel, reversing global warming, etc.
This plan may seem on its surface to be nothing more than another conventional way to tap the carbon-offset market to put in a few trees or solar panels somewhere. It is not. Rather, charitable organizations which employ this strategy will be able to earn a profit of 60% to 90% (less some minor expenses) on their carbon-offset investments. Yet this plan is not, for reasons that will become obvious, nearly as well suited for profit-seeking enterprises.
First, a summary of the issues involved. For those not following current events very closely, key warning signs (such as the rapid melting of Arctic summer sea ice, and severe forest fires and droughts linked to climate change) indicate that climate change (aka global warming) is emerging ever-more-rapidly as a dire threat. Meanwhile, global oil production appears to be on the verge of peaking (the highest rate of production we will ever see) if it has not already and much of the world is experiencing shortages of either food or water, even in the United States. Finally, grave issues surrounding the mortgage markets in the U.S. have damaged the global financial system, creating a level of uncertainty in which many creditors are unwilling to lend... even to low-risk customers like cities and towns.
Clearly, most people would like to do something about these issues.
Carbon offsets are one way in which some organizations are trying to help. A conventional carbon offset amounts to a promise from a company or charitable trust to remove or reduce carbon emissions by one ton for so many dollars (prices usually range from $4 to $40 per ton, depending on the entity). They typically try to fulfill this promise by either capturing or eliminating carbon emissions at the source (often installing renewables), by planting trees, or both. Some organizations even have a "carbon calculator" to help customers estimate how much carbon their lifestyle has generated, and hence how much they should feel obligated to pay for. And because most nations’ power grids are interconnected, determining how much carbon is generated on average by each kilowatt of power consumed from the grid is actually fairly easy. Calculating the CO2 released by a gallon of gasoline is even easier (it’s a known quantity). Many businesses and organizations simply use the Greenhouse Gas Protocol to determine what they need to offset. This carbon-offset market is potentially a vast source of funds. As noted in The Financial Times, "The burgeoning regulated market for carbon credits is expected to more than double in size to about $68.2bn by 2010, with the unregulated voluntary sector rising to $4bn in the same period." Present economic circumstances may cut into that latter estimate, but even a fraction represents a huge fundraising opportunity for most foundations, and if the carbon-credit market begins to inject funds into the following system, the impact on global climate and energy will be even more profound.
But unfortunately, as The Financial Times has pointed out, "some organizations have been selling carbon credits that yield few if any environmental benefits." The great irony is that, if done properly, it should be easy to overperform in terms of carbon captured or eliminated, while making far more than just a sliver of "profits" from each contribution – assuming, in the latter case, that you are a charity. And here’s why...
Assume, for the sake of the argument, that you run a small charity which has taken in some carbon-offset contributions. Offer a small loan to a financially stable city in the U.S. with ready access to one or more strong sources of alternative energy (solar, wind, micro-hydro, geothermal, tidal, etc). This loan would pay for an upgrade to a key piece of that city’s crisis-management infrastructure – either a permanent source of renewable energy or an improvement resulting in tremendous energy savings. Obviously, this would cut the "carbon footprint" of that infrastructure, but again, the real benefits are in the details.
First, contributors would know their money was going to a truly essential part of the city in question, a hospital, water treatment plant/pumping station, or a police or fire department. (As opposed to, say, merely padding the profits of a local strip mall.) And you would work with cities to choose projects not only ideal for their environment (solar in sunny climes, micro-hydro beside rivers, and conservation everywhere), but which will also be extremely productive to undertake, so that much of the money invested will be repaid in a very short period of time. (More on such financially hyper-efficient initiatives below.)
Second, the loan would be low-interest, say, 2% if repaid in the first few years, 0% if repaid in a year to 18 months, and 10% of the loan would be forgiven if repaid within one year. Given the time horizon on both peak oil and climate change, it may be necessary to include two further categories – the forgiveness of 20% of loans repaid within nine months and of 30% of loans repaid within six. (You can adjust these time periods and percentages to whatever the market and circumstances suggest is ideal.) These incentives would encourage cities to repay you as quickly as possible, enabling you to get most or all of the money back in a year (if not less), so you could then recycle the funds in question. Yes, technically that original pool of dollars from the first loan would diminish in time, but how many contributions do you normally get to spend over and over again? And meanwhile, the remaining 70%, 80% or 90% of that loan, less some small expenses, would amount to pure profit for your institution.
Third, if the cities you work with apply for relevant homeland-security or disaster-relief funding as appropriate, you may find loans for major projects are repaid much faster when governments are only borrowing part of the money from your foundation, thus enabling you to accomplish many good deeds quickly, while reclaiming the bulk of your investment each time for new enterprises. For example, a city could easily make the case that in the event of a disaster, it would want to have adequate backup generators at a particular hospital. If a federal grant to this city in, say, Florida were adequate to pay for half the cost of a full solar power system (perhaps with panels from Nanosolar), and your organization’s loan covered the other half, then the city would really only have to pay for half the overall cost (actually only 90%, 80% or 70% of that half (or 45%, 40% or 35% of the full price)).
Fourth, because the city would not be carrying any of the initial cost, by the time it had to repay a significant part of the loan, it would already be seeing a net savings due to the reduction in its power bill. In other words, if you choose a sufficiently cost-effective project, this is a win-win or win-win-win situation for all parties. The federal government (if involved) will have taken concrete action to make the city’s key operations safer, the city will have done likewise and also saved substantial money possibly without having invested a dime to make it happen. You will literally be carrying most or all of the short-term costs of making these long-term savings. The money saved on their energy budget will quickly dwarf the small payments they are making on 90/80/70% of the loan’s principal, even if they do not have any state, federal or other private money supporting a specific project. Freed of the burden of that particular energy bill, with only minimal upkeep on the ruggedized equipment required, the city will quickly make a net profit as a result of cooperating, and have all the more incentive to do so again. And your foundation will have done a good deed, gotten most of its seed money back, and only enhanced its credibility in this field and its experience in managing such partnerships. All of these benefits will simply encourage cities to present practical, well-designed upgrade projects a charity would be willing to fund with offsets and to seek supplementary funding (such as homeland-security support) on their own.
Fifth, traditionally, installing an alternative power source goes hand-in-hand with looking over your home or institution’s energy requirements and seeing what power demands can be most easily met through conservation rather than an ever-larger electrical supply. The functions of looking over buildings for wasteful problems, correcting those problems, and installing the new systems, are all jobs that can not be outsourced. As has been pointed out in The New York Times, these "green-collar jobs" may well be the wave of the future – particularly for disadvantaged youths who have few career or educational opportunities. Not only could an ongoing project of this kind in a greater metropolitan area serve as a valuable training program, but it could in fact be a further source of funds, as organizations with an interest in education, job training, economic development and related matters might choose to support that aspect of this larger design. Furthermore, depending on the quality of the energy auditors you have access to, just paying to have an audit done of major buildings (like hospitals) or city operations (like water treatment and pumping) might prove to be one of the "hyper-efficient projects" mentioned above – the kind of low-cost, high-yield efforts that would quickly pay for itself. Perhaps even before the city had to repay its loan.
Sixth, by first approaching solvent, stable local governments of sizable urban areas in a wealthy nation, you increase the odds of finding reliable partners. Most Western cities rarely declare bankruptcy unless faced with major long-term fiscal problems or disasters on the scale of Katrina. They also tend to have longer-term needs than simply improving their energy efficiency at one or two or a dozen sites. Imagine the number of hospitals, transportation hubs, police departments, water-treatment facilities and so forth that a mayor and city council might consider critical infrastructure in, say, Los Angeles, Chicago, Atlanta or even Charlotte.
What you as an organization want to do is home in on the "low-hanging fruit" – every simple change that offers near-term savings as great as the percentage of the loan the city will be repaying... preferably yielding these savings as quickly as they choose to repay (most of) the loan. This may sound like a tall order, but remember, as fossil fuel prices continue to rise, savings of fuel and electricity will become increasingly valuable. Something that made no sense at $25-a-barrel and that was barely logical at $60-a-barrel may become absolutely essential at $150 or $200-a-barrel. We will be discussing, in later columns, extremely inexpensive public-domain inventions which can easily meet this standard – a high level of savings in exchange for a low level of investment.
Furthermore, as you develop experience in this field and as conventional energy costs become even more prohibitive, you will be able to expand your range of operations to include cities and towns with slightly less access to plentiful renewable power, to businesses and non-profits engaged in work critical to their communities’ survival (such as organic farms producing affordable food for local consumption) and ultimately to somewhat less stable cities and towns around the world. You will still want most of your loans to be as secure as reasonably possible, but once you are established in this work you will have the flexibility to take a few risks where success would yield great benefits.
A note on the advantages of being a relief organization in the voluntary carbon-offset field:
1. A genuine non-profit obviously has no need for profit, only for sufficient revenues to handle overhead and the talent to make the best use of available funds. Hence, if a charitable trust that invests the great majority of its contributions into actual relief work (as opposed to overhead and fundraising) begins to make enormous "profits" from their work, there is no backlash against them. So long as those excess funds are devoted to good works, whether global-warming/peak-oil related or otherwise, donors will merely be pleased to see that their funds are being stretched so far and used so well. In other words, a 60% or 70% profit margin that gets diverted as far afield as children’s vaccinations will be far more accepted than a corporate profit of 20% that goes to the CEO’s annual bonus and the investors’ bottom line.
Giving an "unfair advantage," ironically, to the institutions traditionally least interested in competing for profitability.
2. Well-known and respected non-profits have greater credibility than a for-profit enterprise. The simple fact that many established charities are known for doing good works in sustainability and disaster relief, have verifiable track records to that effect and have no ulterior motive in terms of reaping huge profits from an initiative, both carbon-offset customers, typical contributors and other organizations are apt to take their pronouncements and initiatives much more seriously than if they were seen as yet more "money-grubbing corporations."
3. International charities already have ready access to the relief infrastructure, contacts and personal experience that other, less practiced organizations would have to develop on their own. All of which means that they could step right into carbon-offset reforestation or emissions reduction without missing a beat, simply by adding the work to existing efforts.
The above options are just a couple of ways in which purchases of carbon offsets could provide a dramatic new influx of funds into a charity. These funds could then be leveraged to raise their profile by performing far more good works than anyone could normally ever manage.
Now you may ask: "What if some government gets in the act, and takes over this kind of work, pushing us out of the business?" Simple, you smile, step back, and appreciate the fact that you’ve helped stimulate real progress, but that someone with far greater resources is stepping in now, thus completing the mission of upgrading critical infrastructure in the country or region in question. If anything, this is a result you will want to encourage. Rest assured, there’s plenty more to be done. Until the entire planet has been reached by these kinds of services, there will not only be more "markets" to open in other places, but there will be plenty of "low-hanging fruit" to be exploited, unfortunately, for some time to come. And once that fruit is gone, higher conventional energy costs will have brought an even larger harvest into easy reach.
I make no claims for any of these concepts, only to tell you they are here and they can now be used by anyone. Thank you for listening.
Ralph Cerchione
Renewing the Earth: Public Domain Inventions for a Sustainable Future Solar desalination, solar steel, reversing global warming, etc.
posted by Ralph Cerchione | Saturday, May 24, 2008
2 Comments:
Great post...very thoroughly thought through. I was recently at a site (because I was thinking about carbon credits) that lists a bunch of organizations offering them, each with a slightly different flavor. Your readers may get some insight from them.
http://www.greencollareconomy.com/Directory/Environment/Carbon/Carbon-Offset-markets/
Keep up the good work
Thanks. I should have a much more thorough (multi-post) global draft survival plan for responding to peak oil and climate change. The idea being to create a draft, submit it various places looking for feedback, and constantly editing it to include the best suggestions offered. You may find that ongoing work interesting.
Oh, and thanks for the link to the carbon-offsets summary, also. This looks like some useful information.
Post a Comment
<< Home