Oct 30, 2007

GreenWashing Gold Rush scramble covered by WSJ

"The green stampede is on.... Handicapping the Environmental Gold Rush"
"In the race to profit off the scramble to go green, there will be winners and losers. Here's how the players currently stack up."
From Capitol Hill to California and Brussels to Beijing, multinational companies are stepping up their lobbying and tweaking their product lines in response to demands that they get more environmentally attuned. New companies -- even new industries -- are challenging the established giants to exploit a growing market for everything from green cars to green fuels.

And a host of middlemen have sprung up to make markets in new financial instruments created by the proliferation of green-oriented subsidies and mandates. All these players are jostling to shape the new government rules to give them the bulk of the benefit -- and hit someone else with the bulk of the burden. Ultimately, the cost will be passed on to consumers.

Big energy burners are experimenting with ways to use fossil fuel more efficiently -- and to roll out supplemental fuels. General Motors Corp., for instance, is developing more hybrid gasoline-and-electric cars, a technology it dismissed a few years ago. ConocoPhillips plans to start brewing small quantities of diesel fuel from animal fat. Utilities are experimenting with a technique to turn coal into electricity that would shoot the resulting greenhouse-gas emissions underground instead of up into the air.

Alternative-energy producers are having a field day as new regulations and subsidies, and improving technology, make their power more attractive to investors. Hosts of new projects are springing up as Wall Street sinks money into everything from wind turbines to solar panels to ethanol. Credit Suisse Group just introduced a new "global-warming index" of stocks its analysts believe will benefit from the push toward lower emissions -- one of several new green-investment instruments from major banks.

Still, skepticism is warranted. A great green future has been heralded before -- and then it fizzled. In the wake of the 1970s energy crisis, Washington adopted generous subsidies for synthetic fuel and solar panels, the oil patch diversified into nuclear energy, and Detroit retooled to crank out fuel-efficient cars. Then oil prices fell back down, and those experiments fell by the wayside.

Two factors suggest today's energy crunch -- and resulting green interest -- may prove more enduring. Unlike the 1970s oil-price spike, which was due to the temporary supply disruption of the Arab oil embargo, today's oil-price rise is due largely to rising demand from the developing world, a trend many analysts predict will intensify. By 2030, annual global energy demand is projected to grow 53% above the 2004 level, according to the International Energy Agency. Even if governments adopt more aggressive policies to encourage energy efficiency, global energy demand would still rise 37% by 2030.

What's more, there's rising pressure to confront an environmental issue virtually unmentioned a generation ago: global warming. In 2005, European governments slapped utilities and some other big industrial sectors with caps on their emissions of greenhouse gases, notably carbon dioxide, which is produced when fossil fuel is burned. Now Europe is toughening those constraints. The U.S., the world's top greenhouse-gas emitter, is considering imposing a carbon cap, too. That would amount to a new tax on fossil-fuel consumption -- over time, a spur for corporations to make serious changes.

The financial flows in this green push remain relatively small for now. And they're competing against a huge, and cheap, installed energy base. But investment is growing fast. What follows is a snapshot of potential winners and losers as business tries to shift its green portfolio from the red side of the ledger into the black.

Read more from --Mr. Ball is The Wall Street Journal's environmental news editor,