How to address climate change with Business ethics

This is a follow up from the previous post on the way business marketing authors approached the Viread retro-viral drug and its use in Africa during clinical testing trials. In the chapter on business ethics in this textbook, International Marketing, the authors subtly discuss environmental ethics and its effect on business.

Activists are the bane of a marketer's professional life. They are constantly working to destroy the image of a business and expose its innermost flaws. This is something the business class needs to reply to with skill because it could tarnish the image and the profit of the business. Exxon Mobil, for example, funded climate change skeptic groups - the Heartland Institute, Advancement of Sound Science Center, etc. - in order to refute the claims of environmental activists who were making it difficult for the oil industry to ignore climate change.

"Business ethics" comes to the rescue. It provide business professionals with better rhetorical skill and strategies to further exploitation. The study of "business ethics" is an excuse to teach the student of marketing how to get around ethical norms, how to promote an image of ethical leadership, and how to make business as usual viable for the business.

Here is a section of the book that discusses global warming.

"The Ethical Nature of Promoting Large SUVs

Cars emit carbon dioxide, which is thought to contribute to global warming. Such emissions can be reduced when fewer people purchase large SUVs, which are generally fuel-inefficient vehicles. CAFE (corporate average fuel economy) rules are set at only 20.7 miles per gallon for SUVs as compared to 27.5 mph for full-size cars. Hence, SUVs have come under attack as making the United States more dependent on imported oil, as well as for their poor safety record. The industry, by manufacturing and promoting more fuel-efficient cars and trucks, could help reduce dependence on energy imports. Should car companies, therefore, promote fuel-efficient cars and encourage to buy them at the expense of pricier, more profitable, large, fuel-guzzling SUVs? In Canada, the answer has been a resounding "yes." Canadian automobile companies signed an agreement with the Canadian government, agreeing to reduce greenhouse gas emissions by 17 percent over five years, which would involve using fuel-saving technologies and alternative fuels such as ethanol, clean deisel, and biodiesel."

The book says that when there are multiple stakeholders, corporations need guidance as to how to deal with and prioritize values.

"A puzzle for corporations is that there are many worthy causes and constituencies. A firms' consumers and its shareholders might ask what it is doing about global warming, terrorism, governmental corruption, and poverty, among other issues. An automobile company might well argue that its products have little to do with terrorism, governmental corruption, and poverty. The company may go on to state that it is working on reducing emissions and is devoting funds to research to develop an engine that is clean-burning, thus helping to reduce global warming. In rebuttal, activists might point out that the company imports thousands of containers full of parts every year and that its manufacturing processes in other countries, coupled with these shipments, contribute to pollution and global warming."

In the Questions and Research section, the book asks students to consider a few points from the chapter and discuss them in groups. The question relevant to this portion of the textbook is not, "What is the role of business in addressing climate change?" or, "What are some ways the automobile industry can address climate change?" or something along those lines. The question is,

"How does the presence of multiple stakeholders affect conduct? Focus on the issue of reducing environmental pollution globally to discuss how the green lobby affects global business practices."

Oil Sand Trade between Canada and the U.S.

As oil prices climb, tar stand oil extraction in Canada is increasing. Tar sand oil, or bitumen, has a higher price premium than drilled oil - because its harder to produce and is higher quality - and is the dirtiest solution to U.S. "energy independence".


Even though "methods of separating oil from sand leave behind huge waste ponds of thick, caustic sludge", this is already a major oil production method. Since the 1980s, patents touting new extraction methods as "environmentally friendly" - by using chemical solvents and naphtha as opposed to boiling water under the tar- cannot live up to the expectations. All methods have a negative net-energy use. U.S. and Chinese demand for the tar oils, and the business's rapid expansion in Alberta, is the main reason why Canada has "no chance" according to Canadian environmental ministers at meeting its Kyoto commitments.

OPEC: a divided power

OPEC has always been divided over price. Its members differ strongly on the urgency with which to increase its prices because two different kinds of nationalized oil-producers operate in the cartel. One group of members - Saudi Arabia, Kuwait, and the UAE for example - have small populations, high GNP per capita, and ruling elites who benefit from slow modernization. For them, the best way to use their large oil reserves is to extend oil revenue for a long period of time into the future. This means a higher price today, and oil production that is slower than demand.

On the other hand, OPEC members like Indonesia, Nigeria, and Algeria have large populations, smaller GNP per capita, and smaller oil reserves. Their best strategy would be to decrease the price of oil in order to maximize oil revenue in relation to other OPEC member states. This would last a shorter period of time, and since the stronger members reject this idea, it would be "cheating" against the OPEC cartel. The U.S. has supported member-states who cheated on the cartel before, evidence by the First Gulf War when Saddam Hussein sought to punish Kuwait for lowering prices on OPEC. Then the U.S. stood by its defecting ally.

However, the U.S. does not necessarily want low prices coming from OPEC nation-states anymore. Because the largest oil reserves are located in mainly three Middle Eastern countries - Iran, Iraq and Saudi Arabia - it is reasonable to assume that the U.S. wants to see lower oil prices coming from places it has good political relations with, such as Canada.

Andrew Nikiforuk, author of Tar Sands: Dirty Oil and the Future of a Continent, says oil companies want to see Canada as "the next Saudi Arabia".




What OPEC wants is not what the U.S. wants

High oil prices negatively affect the 'consumer surplus' in the United States: being so dependent on petroleum imports, the higher the price of petrol, the less product the U.S. economy as a whole is able to produce and consume. A decrease in world oil supply, easily enough, raises the price of oil and sends all prices in the U.S. economy higher.

Walter Adams and James Brock, two economists who take a structure-conduct-performance approach to industrial organization, believe the U.S. policymaker's preferred outcome is that the U.S. receives a lower price of oil, but consumes less of it - at least from OPEC producers.

However, OPEC wants a position that - according to Adams and Brock - the market would not allow. OPEC wants a higher price for oil and even more consumption of it. Over time, producers of oil substitutes would earn more revenue from consumers in the U.S. and elsewhere because consumer demand is not as inelastic as OPEC wishes.

The reason why the U.S.'s preferred quantity of oil demanded is so low according to Adams and Brock, is because of the need for national security. Dependence on Middle Eastern oil, a politically unstable and unfriendly region, is too challenging to continue. Diversification of energy resources will provide the best substitute for Middle Eastern oil, they say.

Canada

Though Adams and Brock like the idea of diversifying into new forms of energy consumption: solar, wind, "green energy", it is more likely the the U.S. will diversify by expanding its resource base into Canada through trade and security agreements.

Canada and the U.S. have the largest and most comprehensive trade relationship in the world. Both are G8 members, founding OECD members, NATO members, joint members in the North American Aerospace Defense Command (NORAD), members of the new Security and Prosperity Partnership, and have dozens of agreements like the Business for Economic Security, Tourism and Trade (BESTT) and the Western Hemisphere Travel Initiative (WHTI). The tendency, then, for the U.S. to view Canada's oil-rich resources as close to a domestic resource as possible, is inviting. Importing dirtier oil from a friendlier source is a more viable option than dependence on Middle Eastern oil, in the eyes of the U.S.

That means Canadian bitumen will be the future of oil consumption and production in North America, regardless of the environmental impacts.

How to Create a Wind-Powered Pacific Northwest

According to the Northwest Power and Conservation Council, this is the electricity source makeup of the Pacific Northwest:

• 51% Hydroelectricity

• 20% Coal

• 21% Natural Gas

• 3.2% Nuclear

• 1% Wind
  

First of all, in an advanced and allegedly environmentally aware section of the country such as ours claims or pretends or feigns to be, you should by asking why we derive 20% of our energy from burning coal and get almost none from the winds coming down from Alaska and off the coast?

If environmental costs were included in the cost of production, "the electricity generated from coal fired plants would be 50-100% more expensive than it is today", according to the the Wind Energy Association of America.

Recently, increased energy demand has been met by constructing coal and natural gas-fired plants. Why? Hydroelectricity in the Northwest is limited because there are few rivers left untouched by dams and political support for the construction of new dams is weak. Awareness of the rivers' role in the forested ecosystem is taught in public schools, and many people are aware of the effects on natural salmon reproduction in particular.

The current price of electricity generated by coal in Washington 5.8 cents per kWh. The Department of Energy estimates that 2.095 pounds of CO2 are emitted per kWh. Take the market price for CO2, $32.50 per ton, or 3.2 cents per pound, and multiply it by the amount of CO2 generated by one kWh and then add it to the current price of carbon, and you get an estimation of the true cost per kWh of coal generate electricity.

5.8+(3.2*2.095)=12.57, so $12.57 per kWh of coal-fired energy.

This is far more expensive than any wind-generated energy plant's costs, and the fact that substitutes like wind or solar are currently not competing at these true market prices is an example of market failure.

It is at this point that my blog becomes more inquisitive than matter-of-fact.

The problem as I see it is, even though both Presidential candidate are proposing carbon cap-and-trade systems, this will not ensure that the most environmentally sustainable energy sources will be the market's alternatives. (The next best choice in the Northwest would be hydroelectric, which is undesirable too.) But since this is a "market-based solution" the methodology is not to tell energy corporations what to produce and what not to. The methodology aims to put into place the correct cost structure and let the market find alternatives given the new parameters.

So - if there is going to be a carbon cap-and-trade system, it had better not create environmental loopholes so that energy corporations do not take over our rivers and streams. A mechanism to calculate the costs per kWh of hydroelectric energy could be capped and traded as well.

The other option, which actually makes more sense in terms of being "market-based", is to have every firm simply pay the full price of energy production per kWh to a third party. This way there would be no capping, and that certainly has its appeal to anti-paternalists. The problem with this is it would create a legal structure that would continually sue and appeal regarding the costs each plant had incurred by making energy. It would be difficult to say exactly how much each plant destroys per kWh produced without incurring more and more costs simply to monitor that output and destruction. It would also not encourage managements to design new ways of making each kWh of energy less harmful to the environment.

And there's also the grid system to factor into any decision about energy "policy", which was originally designed to be less wasteful, but has resulted in freerider problems and the creation of Enrons. Nothing seems right, nothing seems fair. I am at a loss for solutions :(

$4.25 a Gallon

This is how much a gallon of gasoline costs at the station down my street: $4.25 a gallon. That's roughly $1.13 a liter.

With gasoline so expensive by American standards, The Economist is speculating that diesel engines will come back as a popular solution, as an oily alternative to the hybrid cars and biofuels. Mercedes-Benz has developed a more fuel-efficient diesel sedan known as the E320 Bluetec, with a price of $53K. The petrol version of the same vehicle (at the same price) runs at 17 miles per gallon in the city and 24 on the highway, compared to the diesel engine's 23 (city) and 32 (highway).

But the price of diesel is expensive too. The diesel price in the US rose twice as fast as petrol this year. While both carry the same tax weight in the US, diesel now costs 60 to 70 cents more a gallon than regular gas. But while diesel is 20% more expensive than gasoline, it is also 35% more efficiently used.

Europe and the US differ in the way oil is refined too, giving way to different pricing schemes. The catalytic "crackers" used in American refineries are setup to produce as much petrol as possible, with the leftover being used for diesel, heating oil, asphalt and other products. In Europe the refineries' hydocrackers produce 25% petrol and 25% diesel. If Europe wants to produce more diesel, it implies producing the same amount of petrol as well, the exports of which are shipped to the US mainly. So producing more diesel in Europe implies lowering the world price of petrol as well.

At any rate, when I drive to and from cities that are somewhere between 30 and 40 miles away (Seattle and Olympia) it costs me approximately $5 per trip, which adds up even for my compact commuter car, the 1997 Geo Metro Sedan. It was once stolen and left somewhere in ditch. I bought it two years ago at an auction in Fife, WA for $1,800. For reasons other than my own self-interest, rising gasoline prices should be a positive influence, and should also be matched by changing consumer preferences and the development of petrol-using substitutes.

Peak Oil Peak Oil Peak Oil Peak Oil!

Oops. Freudian slip. So I made the connection, I admit.

They say no one was monitoring a fuel transfer, so approximately 435 gallons of diesel was dumped into the Tacoma waterways on Monday. "There were no immediate reports of damage or contaminated marine life," the Seattle PI said. Not immediate, so shall we just wait? The Puget Sound already has 91,700 acres of toxic "muds and sands" alone. 435 gallons of benzene, toluene, carbon, and iso-octanes should fit in very easily. Who is going to assess the damage caused by one of the largest seafood distributors in the US, Trident Seafoods, and when do they get to compensate the oceans for their toxic-streaming, over-fishing habits and negligence?

Anti-Parturient

In a recent debate about the very subject of making babies, an older, conservative person said young people would come to reconsider procreation because he was once young like me and had the same concerns about population. He continued on this rhetorical 'ageist' point, saying he had reconsidered the "joys of parenting" once he grew older. Now in his baby-boomer prime, he says he is satisfied with his decision to procreate. Regardless of that fact the he magnified his ecological impact through the actions and consumer lifestyles of his offspring. Population is the underlying cause of most environmental problems.

Even if your goal is to raise morally-upstanding and civil people, there are other options. It sounds like missionary-work to presume you can mold your offspring into moral human beings, especially when moral is completely relative here. (Not to mention: why create a human being to better the environment, when by virtue of being a human being, he or she would consume and destroy it? Not that I hate human beings, I'm just saying...)

I heard a joke once about bacteria culture in the petri dish who overpopulated and asphyxiated on their own toxins? Well, this joke is a true story in biology labs. Just like the bacteria, we have too much forward momentum, but unlike them (presumably) we know we're putting to much pressure on our petri dish. But even at 6.7 billion strong we show are not showing signs of slowing down.

The Superior Environmental Paradigm

There is an old paradigm and a new paradigm in species conservation. Conservatives, of course, still hold to the old paradigm, which concerns itself with about ten or twelve popular animal species on the US List of Endangered Species, for example, the White Spotted Owl or the Gray Wolf, which is no longer endangered. Environmentalists, on the other hand, are concerned with whole habitats, which contain thousands of botanical species, microbes, fungi, and animals. This is a 'systems' approach. It is the superior approach.

The inferior approach focuses on primarily a small group of easily-recognizable animal species, when in fact, such species would be affected last by climate change. Conservatives hold to the species-approach since their movement (largely devised as a defense to charges of apathy about climate change) needs a familiar face from the zoo or the circus to give it impetus. Yet the first groups affected by climate change are not familiar faces; they are, of course, botanical species, amphibians, mollusks, and microbes, etc. Even so, if you look at the Red List of Threatened Species, you'll find that a total of 15,568 bird, reptile and animal species already face extinction today. One in 3 amphibians and almost half of freshwater turtles are threatened, and 1 in 8 birds and a quarter of mammals are in jeopardy. Read the IUCN summaries on this page, which conclude that disappearances of species since 1996, and thus their possible extinction, is attributed largely to climate change. In the case of disappearing amphibians, infectious fungal diseases in particular are believed to be promulgated by climate change. Pollution is a major endangering factor in mollusk populations, etc.

I fear that these conclusions are too subtle for conservative paradigms. They need extremely shocking or exaggerated conclusions to compel them to action, as if the Red List itself weren't shocking. Yet their approaches and expectations are outdated. It is clearly time to move on to better paradigms: environmental, cultural, philosophical, linguistic, etc. Are we all waiting for the Baby Boomer generation to die so that we can "believe in Global Warming"? (And do we need to speak about our "belief" in it?) It sounds perverse, but perhaps something like a demographic change is fundamentally necessary for cultural change. What we need is a new generation of cultured thinkers of the new paradigms.

"The 11th Hour"

Produced by Leonardo DiCaprio, "The 11th Hour" is a courageous film about the imminent destruction of our planet through climate change. One thing I appreciated is that the level of understanding assumed by DiCaprio was relatively higher than Al Gore's film. So the oft-seen sequence about how greenhouses gases are being trapped in our atmosphere was only explained once and very quickly. The rest of the film was full of great ideas, and several that I'd like to explore more in further blogs. For example, saving the world through mycelium. A mycologist from Washington State shared his ideas about the health and environmental benefits of mushrooms. The architectural ideas of the film were outstanding, and on The 11th Hour website you can learn more about buildings that are biomimicked to behave like a tree or a microhabitat.
I have to make a political comment, however. Like most of what happens to the liberal agenda, the response to this film from the conservative audience is in the spotlight now. The conservative audience has seemed to find its way into the centerstage, amazingly. A conservative critic on IMDB noted that the film is an outrageous piece of the liberal "culture of fear". He says fear is the motivating factor in films like this.

To respond to this statement, it would make sense that he would need to first demonstrate that global climate change is nothing to be feared in the first place. However, let's cast that aside for the moment and consider whether the film is motivational only by means of fear, and we will find this to be misleading. I noticed several ways the film was motivational:

1) By giving the audience a view into a "green lifestyle" that we will want to live.

2) By demonstrating that climate change is a real possibility and we should act to stop it now out of a) fear b) compassion c) interest in solving problems.

3) By not wanting to disappoint future generations if it is catastrophic. Also known as inter-generational tyranny.

4) By showing us that everyone has their own niche in solving climate change issues. Filmmakers have a duty, senators have a duty, architects have a duty, engineers have a duty, business leaders have a duty.

There are attitudes this film is trying to legitimize (like all films) and I think the most important factor is the healthy and sustainable lifestyle option. And I think that's why most people become environmentalists. It's not mostly out of fear. It's mostly out of a deep conviction that this crisis is real and that there's an attractive lifestyle alternative which they can and want to be a part of.

Global Climate for Capitalism

The Canadian blogger from Fruits of Our Labor, quotes Marc Brodine in an article from Political Affairs magazine as making this sort of argument:

That is why we are burning all this carbon to produce lots and lots of commodities that capitalists think they can sell profitably, whether that’s actual goods like plastic bags or little toys, or the gas that we put in our car, or use for chemical processes like making plastic for example. So capitalism is part of the cause, and we have to change our economic system, because it is directly linked to why we have these problems.

Yet capitalism is the only economic system that has cared about the environment historically. No other industrialized economic system has had the level of awareness about the environment as capitalism has in a liberal democracy. Socialism does not work based on epistemological problems pointed out by F.A. Hayek and problems in pricing 'communication' pointed out by Ludwig von Mises. Yet socialism seeks to raise our awareness of living in a community together. If capitalists become enlightened, like for example Paul Hawken and other CEOs, and governments would cease subsidizing harmful industries like, oh I don't know -- the housing market! -- then perhaps the real capitalist enterprise will surface and start to balance things out. We're destroying the environment with consumerism, which is largely a product of fast economic growth, marked by wild changes in supplies due to labor and investment. Once populations become stable, and labor markets slow down, our ecological footprints will be less dramatic, and we can build the sorts of societies the John Stuart Mill talks about in Principles of Political Economy

Why I Am Opposed to "Tourism"

This sounds like a simple statement but too many tourists do not understand it: mass tourism defeats the purpose of seeing places as they have been created by people and nature. I prefer to see things the way they really are: deathly, destructive, and ugly. Traveling to lesser developed places and observing how people live in poverty appeals to me. So does thanatourism, which is related to historical places of death and grief, like Dachau. But Dachau itself is a rather attractive place for tourists. The tourist industry, which is largely sponsored by strong interventionist states, tries too hard to accommodate Westerners by giving them the same luxuries they expect in their white suburban homes. Five-star hotel infrastructures must be erected to serve the rich and seasonable men and women in skirts and flip-flops. All this infrastructure is boring and pointless. The tourist critical mass would travel anywhere as long as there is a golf resort. So why go someplace far away when they're all over the Everglades?