ChargePoint, which has the world’s largest network of EV charging stations, recently put this into perspective. The company, which has 18,000 charging locations in North America, decided to compare the presence of its stations to the number of locations of several big name fast-food and big-box retailers operating across Canada and the United States.

It turns out there are more ChargePoint locations than there are Starbucks (14,958), McDonald’s (13,890), 7-Eleven stores (8,160) or Walmart retail outlets (5,256).

Creating that context, said ChargePoint chief executive Pasquale Romano, is an important part of driving the popularity of electric vehicles. “When people realize how many places there are to charge an EV, they’re more likely to consider one for their next vehicle,” he said.

In total, there are more than 25,000 locations in North America to charge an electric car, not including residential chargers. That’s more than eight times the number of liquefied natural gas or E85 ethanol pumps.

The post EV charging on the rise appeared first on Corporate Knights.

Demonstrating the impact of public policy, in Canada – where government purchase incentives of up to $8,500 per vehicle are only offered in Ontario and Quebec – EVs represent about one-quarter of one per cent of new car sales. The country’s 10,000th EV is expected to drive off the lot around the end of the year.

In the United States, where buyers receive up to $7,500 (U.S.) in federal tax incentives, sometimes supplemented by state-level support, plug-ins represent about three-quarters of one per cent of new car sales, and 10,000 plug-ins are typically sold each month.

This contrasts dramatically with Norway, where electric cars are exempt from luxury and value-added taxes that can double the price of combustion vehicle purchases. Plug-ins represented about 16 per cent of new cars purchased in the first half of 2014. With 30,000-plus EVs now on Norwegian roads, more than one per cent of the country’s cars are now powered by its plentiful hydroelectric energy.

Electric vehicles generally come in two flavours: plug-in hybrid electric vehicles, or PHEVs, and battery-electric vehicles, or BEVs. PHEVs supplement their batteries with a gasoline propulsion system, which activates when the batteries are depleted. As a result, they match the range and refuelling times of conventional gasoline-fuelled vehicles. The Chevy Volt is probably the best-known PHEV, though Ford and Toyota both offer plug-in hybrids in their lineups.

BEVs, on the other hand, rely exclusively on their batteries so generally have shorter ranges than their conventional counterparts. The Nissan Leaf and Smart ForTwo Electric Drive both boast about 130 km of range – plenty for most drivers’ everyday needs – while the luxury Tesla Model S offers 370 to 480 km, depending on the options chosen.

Though BEVs far exceed average daily driving needs, many car buyers remain worried about their range and recharging time, and so reject them when deciding on their next purchase. Realizing this, automakers have accelerated their efforts to improve these two limitations.

One of the ways automakers have improved plug-in vehicle fuel efficiency in recent years is by substituting lighter components for heavier ones, a process known as “light-weighting.” This trend particularly benefits electric vehicles.

For example, the BMW i3’s body panels are made of carbon-fibre-reinforced plastic and the slim seats weigh half as much as their predecessors. Measures such as these, and a selection of driving modes, allow the i3 to be driven up to 200 km between charges – one and a half times the range of the Nissan Leaf – using a smaller battery.

Though most electric cars are charged overnight in their owners’ garages, drivers sometimes need a top-up during the day. At one of the 1,000-plus Level 2 charging stations across Canada, a Nissan Leaf driver could gain 20 km of range per half-hour of charging time. A small number of direct-current Fast Charging (Level 3) stations will give them about 100 km in a half-hour.

Meanwhile, the Tesla Supercharger network – with more than 100 stations enabling coast-to-coast travel – will return almost 200 km of range in about 20 minutes.

With Tesla having recently declared its intent to open its patents to other automakers, other vehicle brands may soon be able to take advantage of the supercharger network. On this point, Nissan and BMW are rumoured to be in talks with the California carmaker.

 The most anticipated upcoming electric vehicle, meanwhile, is the Tesla Model III, which is expected to debut in 2017. With a range of more than 300 km and a $35,000 target price, it’s intended for the entry-level luxury vehicle market currently targeted by the BMW 3-series.

To help it achieve this price point, Tesla is building a “gigafactory” in Nevada in partnership with battery supplier Panasonic. The goal is to produce as many lithium-ion batteries under one roof as are currently produced around the world. Through economies of scale, the company hopes its factory will push battery costs down a further 30 per cent from today’s levels in its first year of mass production.

Whether the company achieves its characteristically audacious goal, or hits speed bumps along the way, the collective dedication of other automakers – such as Nissan, GM and BMW – should ensure the electric vehicle market continues to accelerate. 

The post Electric vehicle turning point appeared first on Corporate Knights.

Not known for shying away from controversy, as agriculture minister in the 1990s he grabbed headlines after feeding his four-year-old daughter a burger during the height of the mad cow scare. In December, he enraged fracking opponents after endorsing new legislation meant to facilitate natural gas extraction in the U.K.

Corporate Knights recently sat down with Lord Deben to hear his thoughts on the sustainability movement, resource scarcity and the role of business in combating climate change:

CK: What are the fundamental building blocks of a sustainable society?

DEBEN: They start with the key things that all societies need: food, water and energy. Food is the biggest issue for me, as we are moving into an entirely different world involving greater scarcity and supply constraints. A comprehensive sustainable food policy demands that you tackle these issues in a holistic manner.

One of the biggest agents of change, supermarkets around the world, have not yet come to terms with the fact that their business model is soon to go bust. What Walmart and Tesco and others really ought to be concerned about is that you can’t simply dominate the market anymore. You can’t force your suppliers to reduce prices if their raw materials are rising significantly, and this is especially true if you have nowhere else to go. The switch away from boasting about a lack of contracts with suppliers to highlighting the presence of long-term deals has been very noticeable in the past five years. Tesco, for example, are now constantly talking about having all of these long-term contracts, because they are being forced to protect themselves. It’s partially because they are very big, so you can’t make adjustments in the way you were once able to. There are only two companies in the world that have the capacity to meet Tesco’s demand for plastic bags. The need to build relationships with smaller producers is set to revolutionize the marketplace.

CK: Which mechanisms are needed to help preserve and protect our water resources?

DEBEN: You have to take the Coca-Cola concept, which involves putting every drop back. It’s a very simple process. By the nature of the way in which water is created, you can, through rainwater harvesting, through efficiency and other tools, reduce the amount of water you use to a level at which you can put it all back. I’m rather in favour of moving from water neutrality to something more than that, so that it’s water “plus.” This means that all industry that has the ability to actually increase the amount of water available should be doing so. We need to treat water as a renewable substance, whose renewal depends on us. So you build a circular logic into the system, which will require a significant psychological adjustment across society. Essential to this is becoming much tougher on the consumers of water, particularly on the commercial side.

CK: You’ve spoken out in favour of a carbon tax. How do we go about selling it to the general public?

DEBEN: The most important thing is that you price carbon, and you do so using the British Columbia model. What it does is offset green taxes by lowering other taxes concurrently. What has been problematic in Britain, and one thing I’ve warned against all my life, is that green taxes should either be the replacement for other taxes, or they should be directly hypothecated for ends with which they’re connected. So you can have a congestion charge, if it directly pays for the expansion of the tramway. To do that, there’s one other trick that British Columbia adopted. To assuage the public’s fears, you have an outside body that ensures every penny raised by a carbon tax goes to reducing other taxes at the same time. That’s absolutely crucial.

CK: What are some of your greatest frustrations with the green movement today?

DEBEN: The first thing is the puritanical streak that remains quite prevalent. This is about practicality. I’m not a puritan, and the idea that there’s something wrong with our society because people are able to travel, or people are able to be warm, is just not true. When people sound like that, and they very often do, it’s a very damaging thing. The thing about puritanism is that it never wins. If the green movement looks like a killjoy movement, it will not succeed. There’s not enough emphasis on the idea that the world we are trying to create will be a better world, a more exciting world and a safer one.

If we don’t present our policies properly, we give the deniers another hook in order to sell their gospel of comfort and ease. They will continue on convincing people that everything will be alright, right up until disaster strikes. We need to be smart enough, or else it will be exploited. The biblical notion of being as wise as serpents and as gentle as doves is absolutely spot on. We’re often as gentle as doves but not as wise as serpents.

The third thing is that we’re not going to win this battle unless business is at the forefront. There’s nothing stronger than the market. Now, the market will need to be corrected to account for some very important elements that are currently missing, but the point remains that the market will be the one making the difference.

CK: What role do you see business playing in carving out policies that move us towards a more sustainable future?

DEBEN: Business has the capacity to see in what direction the world is moving, and to prepare itself for it. The cheapest way for business to meet the demands of the new world has always been to do it in the course of business. Delaying until regulation or popular demands require an immediate change in the business model is needlessly disruptive. Gradual adoption is much more cost-effective for business. So it must be consistently ahead of the curve, because that is the nature of good business leadership. Now, this does not mean pure guesswork. T.S. Eliot said one step ahead means that you’re a genius, but two steps ahead means that you should start looking out for men in white coats. You mustn’t ask business to be so far ahead of society that you can’t make any money, but one step ahead ensures continued viability.

For those businesses that see the writing on the wall, a greater demonstration of peer pressure is needed. As it stands, the naysayers and worst companies are almost always able to get the ear of government. A good example comes from when I was working to ban Tributyltin, the stuff you used to paint on the bottom of yachts. There were three big paint companies, and two of them were progressive. One was extremely reactionary, and it was much more effective at getting its views out to the general public. Now, I did win that battle, but it was an important lesson. Today, in Britain, the vast majority of good, big businesses are supportive of the policies we have in place for climate change. At the same time, the Engineering Employers Federation is demanding that we go slower. The rest of business has to be explaining to Britons the need to ignore the naysayers, not remaining silent on the sidelines.

The post The elder statesman appeared first on Corporate Knights.

Among them were Canadian Prime Minister Stephen Harper, former prime ministers Jean Chretien, Paul Martin and Brian Mulroney, five Quebec premiers, former French president Nicolas Sarkozy, and corporate dealmakers from across North America, Europe and Asia.

The eulogies summarized a man who was smart and scrappy in his youth, yet unfailingly courteous and charming in his last decades – especially when escorting guests at his secluded, ornate chateau-estate in Sagard. A personal net worth estimated at $4.4 billion can buy such Renaissance-era replicas.

Desmarais’s corporate locus was the aptly named Power Corp., which controlled legions of leading Canadian and U.S. insurance companies, mutual funds and holding companies, each of which in turn took valuable positions in yet more companies.

Think former newspaper baron Conrad Black, but without the scornful bombast, debt-plagued vanity press and recently discarded Florida jail jumpsuit. When Desmarais completed a corporate coup, it occurred at a bare whisper. He refrained from making newspapers like La Presse a personal pulpit. And he never faced prosecutors in a courtroom for criminal fraud or fleecing his own shareholders. Call him the mild-mannered mogul.

But no man is a saint. This is the story of one rogue oil company the powerful Desmarais family has controlled, but failed to properly govern, for decades.

In December 1999, disaster struck the French Atlantic coast region of Brittany when a Maltese-flagged oil tanker called the MV Erika foundered in high seas, broke apart, and sent 20,000 tonnes of crude lapping toward prized beaches and fishing grounds. The slick eventually contaminated 400 kilometres of coastline, killed thousands of birds and marine animals, and dealt a body blow to regional fisheries and tourism.

It was the single worst oil spill in European history. The escaped oil belonged to French oil giant Total S.A. In a common industry practice, it had hired the Erika to deliver a cargo of crude across international waters, delegated the ship-worthiness inspection to an Italian company, and allowed it to be shipped under a flag of convenience.

When Total was charged in French civil and criminal courts for the oil spill damages, it sought legal immunity on the grounds that the French courts lacked jurisdiction (since the Erika sank in international waters), and that the insolvent Italian inspection company or untraceable ship owner were solely liable.

Facing intense fury from the French public, press and many politicians for its cunning courtroom evasions, Total belatedly paid some $260 million for cleanup costs, and another $200 million in 2008 after a French court found it criminally liable for the Erika oil spill. Yet the legal ordeal did not end then. The oil company formally sought to have that criminal judgment overturned, but lost that appeal in 2012.

The Erika case was infamous in France, but only a handful of Canadians knew that the Desmarais family has held the controlling block of shares in Total S.A. since the 1980s, and is still the guiding force behind its global operations. Paul Desmarais Jr., CEO of Power Corp., is a current Total director and proxy for key share and voting rights.

It is doubtful any of the Desmarais clan knew the Erika had a badly corroded hull before it left on its fateful sailing, or chose that particular Maltese rust-bucket, or approved a shoddy ship inspection report. But what is telling is that Total spent a decade, and a fortune in legal fees, denying liability for the calamity the Erika caused others on the French coast. And that the tragedy did not compel its powerful directors to adopt a far tighter code of governance. Or instil tougher due diligence measures to prevent future marine oil accidents.

In the spring of 2012, Total’s mammoth gas drilling platform in the North Sea reported a serious, deep natural gas leak. Slated to be a saviour and to reverse slumping company revenues, the Elgin project became known as the “well from hell.” The blowout caused Total share values to plummet $10 billion in mere days. The leak took several weeks to plug, put the expensive, state-of-the-art North Sea rig out of commission for a year, and halted production at the Elgin and adjacent Franklin projects off the Scotland coast.

Total’s North Sea blowout was traced to deep-sea pipe corrosion, which the company claimed last March was understood and preventable. But in October, corrosion-induced pipeline leaks knocked out a huge new oil project under the Kazakhstan portion of the Caspian Sea just as it was being commissioned by a consortium led by Total.

The $40 billion Kashagan oil deposit is one of the world’s biggest, richest discoveries in recent years. The project partners include Total, ExxonMobil, Royal Dutch Shell and Italian oil company Eni. Despite companies with such experience and deep pockets, the ominous corrosion leaks put Total’s Caspian project in peril and its oil revenues in limbo, and hammered company stock.

These three examples – the 1999 Erika oil spill, the 2012 North Sea natural gas leak and the 2013 Caspian pipeline cracks – are particularly pertinent because Total has leased vast tracts of northern Alberta to dig up the greasy black bitumen known as oil sands, and export it for decades via the proposed Northern Gateway pipeline to oil tanker terminals on British Columbia’s spectacular, pristine coast.

Total announced plans last November to increase output from its $8 billion Joslyn oil sands site in northern Alberta from 100,000 barrels per day to 160,000 barrels per day. It also holds a joint-venture interest (with Suncor and Teck Resources) in the $13.5 billion Fort Hills oil sands project (estimated production 180,000 barrels per day), and another with ConocoPhillips called Surmont, which is ramping up oil sands output to 136,000 barrels per day.

Given these heavy bets on oil sands output, Total’s worst nightmare is having no pipelines to carry the crude to ocean export terminals. So it has pre-booked capacity on the proposed Keystone XL pipeline, which would link Alberta to Total’s diesel refinery in Port Arthur, Texas. And it is one of the companies that put up $10 million to help Enbridge get regulatory approval for the Northern Gateway pipeline across B.C.

But the Keystone XL option may already be dead. With major stateside refineries at full capacity, U.S. companies and politicians are now pressing Washington for unrefined oil export licences – and fast losing interest in aiding oil sands competitors from Canada or sharing tight U.S. pipeline and refinery capacity.

If the Keystone XL pipeline dies from such disinterest, then the Northern Gateway pipeline becomes the equivalent of a desperate Hail Mary touchdown pass for companies like Total. With Alberta oil sands output predicted to triple in the next two decades, pressure on Ottawa to ensure pipeline approvals will intensify. (This is even as a growing chorus of investors wake up to the risks of such projects becoming stranded assets in an increasingly carbon-constrained world, in which Total currently has the seventh-largest carbon reserves of all oil and gas companies.)

How far will Total go with its lobbying efforts? Will it push too far?

In May 2013 French prosecutors recommended criminally charging Total and its CEO, Christophe de Margerie, for corruption and embezzlement relating to secret oil deals with the Iranian government in the 1990s. Both the company and CEO have denied the criminal charges, saying Total acted at all times in accordance with applicable laws. The case has not yet proceeded to trial, and no convictions have been registered.

In a related, simultaneous U.S. court action, however, the U.S. Justice Department fined Total $398 million for bribing Iranian officials to obtain valuable oil concessions there, and violating the Foreign Corrupt Practices Act. It was the fourth-largest penalty ever paid under the statute.

Total agreed to pay the $398 million bribery penalty, but conceded no guilt. Instead, its chief financial officer merely remarked: “These settlements, the outcome of which are customary in the United States, allow us to put an end to this investigation.”

Sinking oil tankers. Deep-sea blowouts. Corrosion-cracked Caspian pipelines. Bribery schemes. If one of the most powerful, politically connected Canadian dynasties cannot or will not responsibly govern a company like Total S.A. from inside the boardroom, then who on the outside can?

The post Total desperation appeared first on Corporate Knights.

“A Purpose Economy is based on empowering people to have rich and fulfilling careers by creating meaningful value for themselves and others; it creates purpose for its employees and customers – through serving those in need, enabling self-expression, and building community.”

This isn’t just the “doing well by doing good” hippieish philosophy that we saw in Ben & Jerry’s or The Body Shop, two examples Hurst mentions; technology changes everything. So where farmers’ markets and crafts fairs have been around forever, now there are Etsys for crafts and networks like Ontario’s Local Food Plus to bring creators and careful consumers together. Hurst’s own Taproot foundation brings people who need help together with experts offering pro bono services. Hurst writes:

“Humans are social animals, and while community itself may not generate purpose, it is an amplifier. It creates a context and the relationships that make purpose so much richer. Purpose is most powerful when it is shared. It is the ingredient that makes farmers’ markets and local economies so much more compelling. It is the power behind so much going on in social media – from Facebook to Pinterest.”

The Purpose Economy is particularly relevant to the millennial generation that will be living in it. Having been born into a world where most of their basic needs have been taken for granted, and watching their parents “working harder and harder, spending less quality time at home with the family, in order to afford a big house, three cars, and all the accoutrements of success,” and probably unable to ever expect to have the same themselves, they want something different. They are spending their money on experiences and technology, “particularly technology that creates social experiences. It’s about interaction instead of consumption.”

The new technology has created a whole new economy of sharing, everything from office space (co-working spaces like the Centre for Social Innovation in Toronto and New York) to fundraising (Kickstarter now contributes more funding for the arts than The National Endowment for the Arts) to home- and room-sharing groups (like Airbnb). Hurst says it’s not just about the money:

“The popularity of sharing is not only a matter of saving money; it also comes from the desire for community, bonding people through the trust and reciprocity that are at its core, and allowing people to express their repudiation of materialism and the culture of accumulation.”

Hurst also notes the growth of the B Corp – hybrid companies that combine profitmaking with a social mission. They have been called the “Rock stars of the new economy” and include Patagonia, Seventh Generation and your publisher, Corporate Knights. There are over 850 of them now around the world, and they are where the millennials want to work, he says. It’s where everybody would want to work.

And of course, there is the rise of Freelance Nation, the home of so many of us these days. Hurst suggests that “so many have chosen the freelance path because they are put off by the strictures of corporate life and they want to have the latitude to select their clients, which they tend to do very carefully because they want to work with people they like and feel in sync with.”

Or not. Sometimes a cigar is just a cigar. More people, it’s safe to argue, are working freelance because they need money and there aren’t any jobs. As the parent of two university-educated millennials who are pumping espresso and mongering cheese and living in crowded apartments, I don’t see a lot of signs of a “purpose economy” in their lives. One has to wonder if Hurst is not in a Park Slope bubble; there is a workplace revolution going on right now, and it is technology driven, but it is destroying jobs in traditional sectors more quickly than it is creating them in new ones.

The Purpose Economy is a wonderful, inspiring book, particularly if you are rich and have time to spare to help others or are young with The Bank of Mom behind you. For them, “purpose is the currency of the new economy.” All others pay cash.

Purpose is the bonus we’d all like to earn, and which, it goes without saying, we should all aim for. If technology helps us achieve that, then all the better.

The post Embracing work with purpose appeared first on Corporate Knights.

Such questions are one sign of mounting interest in the cost of tougher greenhouse gas emission standards, tighter renewable energy requirements and other policies that are designed to stem global warming but could, in the process, hurt the commercial viability of carbon-intensive projects.

“It’s part of our overall strategy of encouraging all participants in the market to wake up to the possibility of very real carbon constraints,” said Dermot Foley, manager for environmental, social and governance analysis at Vancouver-based Vancity.

Starting with Royal Dutch Shell and BP in 2002, a growing number of oil and gas producers, including several Canadian ones, have expressed the future cost of containing carbon emissions as a notional dollar amount, known as a “shadow” carbon price. Indeed, shadow carbon pricing is now standard practice in the energy industry, though company approaches vary and public disclosure levels remain weak.

According to Alex Wood, senior director for policy and markets at Sustainable Prosperity, an Ottawa research group, “the pricing that (companies) use is clearly meant primarily to inform decisions about capital expenditures – project X versus project Y – and how to reflect the anticipated compliance cost for that facility.”

For example, Syncrude, one of Alberta’s oldest and biggest oil sands producers, says that it runs a sensitivity analysis “from time to time, as needed” on the impact of various future carbon policy and pricing proposals on its business.

Scott Arnold, director of sustainability at Canadian Oil Sands, which holds a 37 per cent stake in Syncrude, compared the carbon-pricing analysis to other, more familiar aspects of the company’s business, such as assumptions on oil prices, foreign exchange rates, input costs and royalty rates.

No standard formula exists for calculating an appropriate shadow carbon price, given that no one can be sure what policies and regulations governments around the world may adopt in future years.

“We can make educated calculations about the potential impact of carbon regulations,” said Brett Harris, a spokesman for Cenovus, “but we can never know all of the factors that will be included in a particular set of regulations until the government publishes them.”

Existing carbon taxes provide a starting point for shadow pricing calculations. Syncrude uses a price of $15 per tonne of carbon dioxide equivalent for its planning and investment models, based on the level set in Alberta’s specified gas emitters regulation.

But the Alberta tax has serious shortcomings as a proxy for a realistic carbon price. For a start, Canada does not have a federal carbon tax, which arguably should also be factored into the equation.

The Conservative government in Ottawa has resolutely opposed putting a price on carbon emissions. “Everyone has their own approach and we know a carbon tax would increase the price of everything in Canada,” federal Environment Minister Leona Aglukkaq told the annual climate change conference in Warsaw in mid-November.

But business is one step ahead. Wood said most companies that use shadow carbon pricing reference a price that’s higher than the regulatory threshold. “The rationale is the expectation that the price will increase,” he said. “That needs to be factored into their investment decisions.”

Cenovus and Suncor also use the Alberta carbon tax of $15 per tonne as a base for their calculations of long-term market risk. “We will update that ($15 model) if Alberta’s price changes,” Harris said. But both companies also use models based on much higher prices – about $50 per tonne for Suncor and $65 for Cenovus.

“By running these scenarios, we’re able to create a marginal cost curve that gives us a better sense of the economics of various technology alternatives,” Harris explained. “So for instance, a technology that has the potential to reduce carbon emissions may be uneconomic to pursue when carbon is priced at zero, but it becomes more economic when carbon is priced at $65 per tonne.”

According to Suncor’s latest annual sustainability report, “our base case future carbon price assumption takes into account the best information we have from carbon markets and developing public policy. Our base case assumes that by 2025, the carbon price applies to an increasing percentage of our emissions.”

Suncor also assumes that the U.S. and Canadian governments will balance tighter environmental controls with economic and energy security concerns. It thus expects, according to its 2012 annual report, that “regulation will evolve with a moderate carbon price signal, and that the price regime will progress cautiously.”

Among other big Canadian producers, Imperial Oil follows the lead of ExxonMobil, its U.S. parent. According to ExxonMobil’s latest Outlook for Energy, the two companies assume a shadow (or “proxy”) price for carbon dioxide for most of their North American operations of “more than” $40 per ton in 2040 (measured in 2012 dollars). One exception is the Arctic, where the shadow price is under $20 per ton – the same level assumed for Africa, the Middle East and parts of Latin America. A recent report from the Carbon Disclosure Project has ExxonMobil disclosing that it uses $60 per ton as its internal benchmark.

However, some academics and environmental activists take the view that these shadow prices are far too low. They contend that the shadow price should be closer to $100 per ton given the tough measures needed to avert the looming global warming crisis.

Many companies are wary of disclosing full details of their calculations. Cenovus declines to describe the methodology behind its shadow carbon pricing model “for competitive reasons,” while Canadian Natural Resources declined to comment on any aspect of its carbon pricing policies.

Ryan Salmon, senior manager for oil and gas at Ceres, a U.S.-based research group, said it boils down to a single question for investors in these companies: “How robust are these companies’ business plans against a scenario that looks much different from the present in terms of carbon price, oil demand and other factors?”

A crucial issue for Canadian producers, Salmon said, is the commercial viability of the technology known as carbon capture and storage. Several pilot projects are underway in Alberta and Saskatchewan that involve capturing carbon dioxide emissions from the oil sands and transporting the gas through pipelines to deep underground rock formations, where they will theoretically be trapped forever.

“There should be a higher carbon price to make that kind of project economic,” Salmon said. “It’s unclear how much abatement could be gained from carbon capture and storage. It would certainly be interesting to know more about what companies are assuming.”

More generally, as Vancity’s questions to the banks and insurers suggest, pressure is intensifying for a credible measure of the cost of containing greenhouse gas emissions.

A report commissioned by the Association of Chartered Certified Accountants, representing accountants around the world, noted in October that “current financial reporting standards, stock market listing requirements, industry reporting frameworks and non-financial reporting guidelines do not alert investors to the risks of reserves associated with climate change.”

The report, compiled by Carbon Tracker, a U.K.-based non-profit, concluded that the strategies laid out in corporate annual reports talk of growth that is “incompatible with emissions limits.” It recommends that oil and gas producers be required to:

• Convert reserves into potential carbon dioxide emissions;
• Produce a sensitivity analysis of reserve levels for different price and demand scenarios;
• Publish reserve valuations using a range of disclosed price and demand scenarios;
• Discuss the implications of this data when explaining their capital spending strategy and risks to their business models;

On another front, last fall, a group of 70 money managers lit a fire under several dozen of the world’s biggest oil and gas producers, coal miners and power utilities. In a letter to 45 companies, the investors called on each one to conduct a wide-ranging review of the financial risks posed by climate change.

“We would like to understand (the company’s) reserve exposure to the risks associated with current and probable future policies for reducing greenhouse gas emissions by 80 per cent by 2050,” the investors wrote.

The companies were asked to evaluate, among others, “the risks to unproduced reserves, due to factors such as carbon pricing, pollution and efficiency standards, removal of subsidies and/or reduced demand.”

Jack Ehnes, CEO of the influential California State Teachers’ Retirement System and one of the signatories to the letter, said in a statement: “The world is taking climate change seriously and global pressures to reduce fossil fuel use will only grow stronger.

“As long-term investors, we see the world moving toward a low-carbon future in which fossil fuel reserves that companies continue to develop may actually become a liability, which could take a toll on share value.”

When and by how much remains the big gamble that investors make.

The post A matter of time appeared first on Corporate Knights.

It wasn’t that long ago that Prime Minister Stephen Harper started heralding the transformation of Canada into an energy superpower. The billions of barrels of oil held in Alberta’s oil sands – the world’s third-largest proven oil reserve – and its close proximity to the huge American energy market looked like a can’t-lose proposition for Canadian suppliers.

Production soared from a couple of hundred thousand barrels a day to over a million. Royalty revenues poured into the Alberta Treasury – so much so that the Alberta government thought nothing of spending millions on a public relations campaign to change the nomenclature of the province’s treasured resource from “tar” sands to the much more benign-sounding “oil” sands. Meanwhile, share prices of oil sands producers soared, along with new underwritings, making the sector a darling of the big investment banks and the Toronto Stock Exchange (TSX).

How quickly the world has changed for Alberta’s oil industry. What was once seen as the nation’s most important economic asset looks today more like a liability. And the only thing that the development of the oil sands has transformed Canada into is an environmental pariah, viewed by the rest of the world as oblivious to the challenge of global climate change.

But it’s not just Canada’s international image that the oil sands have tarnished.

Much worse is what the resource has done to investors lately. Suddenly the market is eschewing the crown jewels of Canada’s energy assets. The reason is simple enough and bedevils much of the newfound production in North America. Pipeline capacity has failed to keep pace with production, creating costly transportation bottlenecks that have severely restricted market access, forcing deep price discounts from Alberta’s oil producers.

Western Canadian Select, the benchmark price for Alberta’s heavy crude, ranks among the cheapest oil globally. It trades as much as $40 a barrel below the U.S. benchmark price, West Texas Intermediate, and at times over $50 less than the global benchmark price, Brent. Unfortunately for Alberta producers, those depressed selling prices are coupled with some of the highest cost structures of any hydrocarbon resource on the planet.

The oil sands rank as one of the most expensive energy resources, according to a Citibank analysis, which looks at 300 of the world’s largest oil and gas projects. As noted in a recent report by Carbon Tracker, estimates for break-even oil prices on new Canadian oil sands projects range from $80 to $100 per barrel based on reports from Goldman Sachs, Wood Mackenzie and IHS CERA. Those kinds of costs are challenging enough on their own, but when you consider that producers only get a fraction of global oil prices, the picture starts looking pretty grim.

In recent years those dismal economics have rendered the tar patch a graveyard for investors. The sector has lost more than half its market capitalization since the last recession using BlackRock’s iShares Oil Sands Index as a benchmark (i.e., a basket of all the major TSX-listed oil sands players including Suncor, Cenovus, Canadian Natural Resources, Imperial Oil and Canadian Oil Sands). Once a dynamic driver of the TSX, the energy sector has become a drag on index performance. Indeed, at a 25 per cent weighting in the index, the sector represents a very significant drag that even passive index investors have had to bear.

Investors shouldn’t expect it to get better. The sector’s profitability – let alone its grandiose plans to more than double production by 2030 – hinges critically on solving the market access problem and busting the so-called bitumen bubble. Unless Western Canadian Select can materially close that huge price gap with the U.S. and global benchmark prices, revenues will be severely challenged to cover rising costs, leaving investors increasingly reluctant to finance the enormous capital expenditures needed to continually grow production.

The capital investment required to ramp up oil sands production to the industry’s target of five million barrels a day is staggering in scale. According to the Conference Board of Canada, the required investment spending will run well north of $300 billion. That scale of capital isn’t going to flow into new production without the infrastructure to move all that oil to markets and dramatically improve pricing for Alberta producers.

But that infrastructure looks nowhere in place. Even if President Barack Obama were to ultimately approve TransCanada’s Keystone XL pipeline, the 700,000-plus barrels a day it would move from Alberta to the U.S. Gulf Coast (keeping in mind 100,000 barrels a day is reserved for Bakken oil producers in North Dakota) is only a fraction of the pipeline capacity needed to realize the industry’s production targets.

It would take a whole network of new pipelines running from coast to coast, including Enbridge’s proposed Northern Gateway line to the Pacific Ocean and TransCanada’s proposed Energy East pipeline to the Atlantic, to provide the kind of pipeline capacity needed to accommodate the massive ramp-up in production that is planned.

But pipelines to carry bitumen from the oil sands are no more popular on the Canadian side of the border than they have been on the U.S. side. That same transportation problem is equally vexing for oil producers in the prolific shale plays springing up across the United States. Just as the need for new pipelines in North America has never been greater, the politics of pipeline approval has never been more problematic.

So far, rail has come to the rescue, providing a critical transportation role that hasn’t been seen in the oil industry since the early part of last century. In the U.S., over a million barrels a day of oil is being moved by rail, with some new areas of production, like the Bakkan, critically dependent on rail to get oil delivered to coastal refineries.

Alberta producers are now similarly looking to railways to solve their transportation problems. Three oil-loading terminals are slated for construction in western Canada. All told, proposed new rail terminals across the country could facilitate as much as 900,000 barrels a day of oil moved across Canada by railcars. To put that number in perspective, it’s a larger flow of oil than even the yet to be approved Keystone XL pipeline would carry.

Moving oil by rail is not only a more costly mode of transport than pipelines, but it is a far more hazardous one as well. We’ve already had one tragic derailment in Lac-Megantic, Quebec, and a number of close calls, including derailments near Calgary and Saskatoon and a derailment and subsequent explosion in rural Alabama. Start moving millions of barrels of oil across the continent and unfortunately the laws of probability dictate that there will be more accidents. If the next one happens to be near a major metropolitan area like Chicago or Toronto, it won’t be long before the lawsuits and soaring insurance premiums dampen railways’ appetite for hauling oil.

Transportation issues, as pressing as they now are, are not the only problem faced by investors in oil sands stocks. Ultimately, their resource, which is one of the most emission-intensive oils extracted and refined anywhere in the world, faces an even bigger risk from carbon emissions.

Today, investors in energy companies act as if there are no constraints on how much carbon the world can burn. Even in this bubble of climate change denial, the tandem of high costs and weak pricing power make the oil sands a losing proposition. But in tomorrow’s world of constrained carbon emissions, the sector’s future will be even more in doubt.

According to the International Energy Agency, two-thirds of the world’s hydrocarbon reserves must be left in the ground in order to limit the rise in average global temperature to the 2-degree-Celsius threshold that climate scientists warn we must not cross. Considering their cost structure, poor pricing and the almost 20 per cent heavier carbon footprint than conventional oil, Alberta’s oil sands seem precisely the kind of stranded energy assets that the energy agency says we must leave in the ground.

In tomorrow’s world of constrained carbon emissions, costs will become even more important than they are today in determining which hydrocarbon reserves get developed and which ones do not. Already facing marginal costs that are higher than the deeply discounted price of Western Canadian Select, the economics of production growth in the oil sands is simply unsustainable. The huge capital expenditures needed to expand production, which continues to flow, are incompatible with the crashing returns on investment in the sector. Investors would be much better served if oil sand producers paid out their cash flow in dividends or used it for share buybacks than pouring ever more capital into expanding, unprofitable production.

If management can’t figure that out, chances are shareholders will.

The post A crude reality check appeared first on Corporate Knights.

Yet more recently, industrial scale farming has tainted natural rubber’s reputation. As Ford’s Model T ushered in the automotive age, demand for tire rubber soared. Intensive plantation farming of Hevea – the dominant variety of rubber trees – emerged as an early cause of tropical deforestation.

Today, with demand exceeding global supply, Hevea is facing a host of new worries. Pressure to boost the yield of natural rubber has inflated the use of harmful pesticides, and disease is a rising worry. More than 90 per cent of natural rubber is grown in a few East Asian countries, leaving growers vulnerable to the sort of catastrophic blight epidemic that had swept away Latin America’s plantations by the 1950s. Rubber trees are also water hogs, making them vulnerable to climate change-induced drought.

Jeffrey Martin, chief executive and co-founder of Yulex, sees the answer to natural rubber’s proliferating problems in a low-growing shrub named guayule – pronounced why-YOU-lee. A native to the arid U.S. southwest, guayule thrives with little water and zero pesticides, and can be made into latex that doesn’t trigger allergies.

In studying the plant, Martin unearthed a cache of research reaching back decades. Guayule, he found, had been temporarily commercialized many times. In the 1910s, during World War II and again in the 1970s and ’80s, industrial and government labs pursued large-scale guayule cultivation as an alternative to Hevea rubber. Each effort collapsed, however, in the face of lower-priced supplies of natural or synthetic rubber.

These mishaps didn’t daunt Martin. He used them to develop a business plan designed to avoid the mistakes of those earlier ventures. So in 2000, Martin started Yulex in Chandler, Arizona, armed with $20,000 in patents and 20 guayule seeds.

Unlike earlier efforts, which targeted the tire market from the get-go, Martin is putting off sales to high-volume, low-cost markets. Instead, he’s lowering costs and scaling production by first selling into high-margin, niche markets and plowing the proceeds into technologies that can help grow capacity. “You can’t just go straight after a commodity market like tires,” says Martin. “You have to sell the benefits of the technology first.”

California-based Patagonia, a manufacturer of performance gear, is among the first to commercialize a product made from guayule rubber. Following a four-year search for alternatives to petrochemical-based neoprene for its wetsuits, Patagonia found a match in guayule.

The company liked that growing and processing guayule had less impact on the environment in terms of water use and chemicals used in processing. Plus, “its performance is great,” says Todd Copeland, environmental product specialist for Patagonia and an avid surfer.

This winter Patagonia planned to release a wet suit made of a 60:40 blend of guayule and conventional neoprene. Yulex is also exploring new product lines including latex mattresses, athletic shoes and yoga mats.

Looking ahead, Martin is focusing on a variety of ways to scale up production and lower costs. Developing a more productive strain of guayule is at the top of this list. To that end, Yulex has teamed up with California-based SGB, an agri-biotech company, to apply advanced crop science methods that will accelerate the natural process of breeding more productive strains of guayule.

Already, compared with data from the 1980s, when the crop was last intensively grown, Yulex has tripled yields. Yield improvements are on track to double again by 2020, says Martin, and will match or better today’s average output of Hevea rubber trees, which can yield about one metric ton of latex per acre.

The company is also looking to dramatically expand the area of guayule being cultivated. Today, farming is limited mostly to Arizona. But given the crop’s suitability to arid regions, it could be grown on every continent, save Antarctica, says Martin.

Fields of Yulex-licensed guayule will sprout next in Southern Europe, thanks to a $270-million deal with Versalis, a global leader in biomaterials and a subsidiary of Italy’s Eni.

Since Yulex’s incorporation, the company has raised $75 million in private equity. Last March, it signed a deal with Italy’s Pirelli Tire to help develop guayule polymers and resins for tire applications. That deal could, in time, pave the way to the very tire market that foiled earlier efforts to commercialize guayule.

In the Yulex boardroom, Martin keeps a souvenir from one of those earlier failed eras: a faded, decades-old tire made from guayule. It serves as a reminder of the huge potential market opportunity if Yulex can get volumes up and pricing down.

Martin is convinced it’s achievable. That at the right price, guayule can win a major share of the $50-billion-plus market for tire rubber now split between Hevea and synthetic rubber.

Click here to view our complete Tech Savvy series.

The post Tech savvy: Yulex appeared first on Corporate Knights.

“If we stay on the current path, we will not come close to the internationally agreed goal of limiting the rise in global temperatures to 2 degrees C,” said Maria van der Hoeven, the agency’s executive director. Indeed, even taking into account all government measures announced to date, carbon dioxide emissions are still likely to rise by 20 per cent by 2035, according to the report, leaving the world on course to an average warming of 3.6 degrees C.

Australia followed a day later by rubbing salt in that international wound. Making good on his vow if elected to kill Australia’s one-year-old carbon tax, Tony Abbott, the country’s new prime minister, wasted little time when on November 13 he introduced a bill to repeal the tax.

It wasn’t Australia’s first climate casualty. On September 19, within 24 hours of being sworn in as prime minister, Abbott pulled the plug on the country’s Climate Commission, which had been led by Australian scientist and international climate activist Tim Flannery. It was a disappointing, if not unexpected, outcome. But Flannery, who was named Australian of the Year in 2007, has not missed a beat in his march to educate about climate issues and advocate for change.

Corporate Knights had the opportunity to chat with Flannery about his post-commission initiatives and a global energy landscape in transition:

CK: Prime Minister Tony Abbott was quick to disband the Australian Climate Commission after being elected. Can you offer some context to his decision?

FLANNERY: That commission had been set up in February 2011 because the Australian government felt the Australian people deserved access to the best scientific knowledge about climate change, about what’s happening internationally in terms of climate change, and what the economists are telling us in terms of best options for countries like Australia. There were six commissioners, including one guy who was the ex-CEO of BP Australasia, another, an engineer working in the steel sector, a couple of climate scientists, and myself. The new hard-right government was elected in September (2013), headed by someone who is quite skeptical about climate change and whose main platform was dismantling the key climate change initiatives the previous government had put in place. Their first act in government was to disband us and take down our website, where we had 27 reports with lots of information being used widely by Australians.

CK: That must have been a disturbing turn of events for you and your fellow commissioners.

FLANNERY: As a group we weren’t happy with that outcome. The Australian people deserved an absolutely objective apolitical source of information on climate change, so we thought we would set up a new organization – a not-for-profit organization – and see if we could raise some money through crowdfunding. We set up this thing called the Australian Climate Council. Five days after we were sacked as commissioners we went live with that. The result was really amazing. We got this massive flow of goodwill and money. Within those five days we raised $1 million. We’re the largest crowdfunding venture in the history of the country. It was a real vote of confidence in what we were doing. It really took off.

CK: Technology, it could be argued, has made us better stewards of the planet by giving us more watchful eyes and allowing for rapid local, regional and global response through social media and crowdsourcing. It reminds me of your book, Here on Earth, which draws on Gaia theory but also talks about humanity evolving into a superorganism. Do you see technology as an enabler of the human superorganism?

FLANNERY: Yes, I do, and I think what it is doing is really empowering people and diminishing to some extent the power of government and industry. One of the big themes I’m seeing emerge out of this is not just seeing people form into groups and making sure we do what we need to do, but in terms of changing the actual energy mix. There are some huge things at the moment afoot that are going to be very important in terms of empowering people with their own energy systems.

CK: On the flipside of that is nuclear power. Your views of nuclear power have evolved over the years. Recently, more climate scientists have spoken out about the need for nuclear despite the many concerns it raises. What is your view today on this energy source?

FLANNERY: You’re better off in my view to go with nuclear over coal. That’s the right way to go, but what has absolutely changed in recent years is that the role of renewables has become so much larger, so much cheaper. There’s real active debate now in Australia on whether renewables could run the entire grid. I think that potential is there. So the need for nuclear in my view, particularly in OECD countries, is diminishing by the month as these changes kick in. We’re seeing Germany now revamping its energy mix without nuclear, and eventually fossil fuels will be knocked out. When I say eventually, that may happen in the next decade.

CK: The worry is that places like Germany and Japan are, at least in the short term, going to be burning more fossil fuels to make that transition happen.

FLANNERY: What they’ve done is they didn’t abide by the formula I just suggested, which is to prefer nuclear over coal if you still have an energy deficit. They’ve preferred coal over nuclear. But in the medium term, there is no doubt renewables are going to win out because they are a zero-cost fuel.

CK: It’s unbelievable for many to think that renewables can do it all in fast-growing countries like China and India. What is your view on that?

FLANNERY: It’s probably the case in those big countries with massive populations, particularly in China with its huge manufacturing sector, that there still may be a role for nuclear. And they’re certainly pursuing that. But we’re in a period of rapid transition and what is true today might not be true in five or 10 years’ time. So at the moment I would say provisionally, yes, there probably is a role for nuclear in China or India, but watch this space.

CK: That appears to be the main question for many countries: Do we lock in for 50 years or more with new nuclear, or wait 10 years to see how things turn out on the renewables front?

FLANNERY: That’s right. The competition is solar, where the cost of production has dropped 80 per cent in the last four years, and wind, which has not dropped as precipitously, but the projections are that in the next five years the production costs will halve. So, if you’re thinking about a 50-year payback and you’re thinking about that kind of fast-moving competition, you’re in real trouble. Those big nuclear projects just won’t get funded without government help.

CK: Are you concerned about the role that natural gas is increasingly playing? That the “bridge to renewables” is getting longer and longer?

FLANNERY: There has been an argument that gas will be a stepping stone to an entirely clean energy future. That may well be true, but what’s definitely uncertain is how long that stepping stone is going to last. The good thing about gas is these fracking wells only last two or three years, so it’s not a long-term commitment. The power plants themselves last 30 years, rather than 50 for coal and nuclear, so there’s the possibility of switching out of them sooner. But this is one of the great unknowables.

Technology innovation in the gas area has caught everyone by surprise, and certainly it has created a niche for itself, currently at the expense of coal. But you’re quite right, we need to get away from all fossil fuels by 2050. Is gas going to be a significant stepping stone? At the moment who can tell?

CK: There have been some impressive and quite aggressive moves by China with clean energy, largely driven by air pollution issues. Do you think their efforts are genuine? That they will be effective?

FLANNERY: Absolutely. I’m just back after two months in China and its commitments have expanded just over the months. The latest widely publicized information in China was that air pollution in Northern China has cut average lifespans by five and a half years, so there are very serious health impacts there now. It’s not surprising the Chinese government has decided to reduce coal burning in its major population areas by 5 per cent in the next four years. And you’re seeing the impact of that on the Australian and global thermal coal market, where the price of coal has dropped from $94 a tonne to $82 a tonne. The impact of that on the industry has been huge. It’s just not worth getting the coal out of the ground.

CK: But fossil fuel prices do generally have their ups and downs. Is what you’re talking about a permanent hit to the industry?

FLANNERY: When I look at these fossil fuel futures, what I see is that 40 years ago the price of coal or oil could fluctuate quite a lot and it wouldn’t really affect the market. So it could be very cheap, but that didn’t matter because the cost of production is cheap. It could be very expensive and that didn’t matter because there was nothing competing with it at the top end in terms of cost. The band of tolerable price for these fossil fuels has now narrowed considerably. And what we’re seeing with coal is that it’s dropped out of the bottom of the tolerable bandwidth. You can’t dig coal up at $82 a tonne now and make a profit. For the higher priced mines it’s a real challenge.

CK: You see this happening with the coal industry. What about oil?

FLANNERY: With the tar sands you easily see the same sort of thing. The tar sands cost of production has got to be up to $60 a barrel. That’s okay while oil is selling at $90 a barrel, but if you look at the historic fluctuations in oil prices, going back to 1993 when it was $27 a barrel, everyone at that rate is out of business very quickly. It’s the same thing as with coal. The cost of production just keeps going up, up and up, and the competition from the top end – from biofuels to electric vehicles and everything else – is cutting off the top-end flexibility because alternatives are getting cheaper. So the fossil fuel industry is like an old man. Its arteries are hardened. It doesn’t have the flexibility to adapt when price shock comes through.

CK: It doesn’t look good for the old man the way you describe it.

FLANNERY: I think it is in serious trouble. This transition to a clean energy future is going to happen a lot faster, and is a lot closer than we imagined. What was thought to be impossible just a few short years ago is now seen as the common sense thing to do. Natural gas is the one thing that has broken that paradox – we don’t know what’s going to happen with gas. But for oil and for coal, you can see what the future is going to look like.

CK: There have been many reports about the “carbon bubble” – how fossil fuel companies are overestimating their burnable reserves and that this has artificially inflated their market value. Curious to get your thoughts on this.

FLANNERY: It’s actually more like four-fifths of the reserves can’t be burned. What it means, and I’m pretty confident in this, is that the corporate giants of today are not going to be corporate giants for very much longer.

CK: What do you think is accounting for this shift? Changing economics? Supportive policy? Concerns about climate change?

FLANNERY: Surely the economics are important, but it’s not always the only thing. And yes, business is the engine – the powerhouse – that moves this forward, but the other conditions have to be right. What’s really happened is a social revolution, and we’re coming right to the pointy end of that. You can’t look at the energy sector and see that European utilities have lost half a trillion in value in four years and not call that an absolute revolution. The fact that China has cut its coal use, that’s revolutionary stuff when just five years ago people were saying impossible. When China made that announcement even 12 months ago, the Australian coal industry said they’d never do it. But we’re seeing it unfold right now.

CK: Is this the human superorganism in action?

FLANNERY: Yes, it is. It’s the superorganism in action. Exactly. The superorganism has embraced a new, cheap, clean renewable energy source and it’s moving towards it as fast as it can.

CK: Your book on climate change, The Weather Makers, made a huge impact in 2006 and continues to be one of the most influential books on the subject. In the eight years that have passed, are you more or less positive about our ability to effectively tackle the climate problem?

FLANNERY: I’m far more positive. Things have come together with the speed and in a way that I couldn’t have imagined when I wrote The Weather Makers. I outlined the problem in that book, I could see some of the technical solutions, but I couldn’t see how we would conquer the vested interests of the oil industry and others. At the time the dominating discussion was the second great petroleum war that we fought in 2001. We were still rebounding from the consequences of that when I wrote the book. I was doing the research for it in 2005 and we were in a world where petroleum politics were paramount. That’s no longer the case. Investment in clean energy now outweighs that going into fossil fuel infrastructure. It’s a different world.

CK: Yet energy transitions, historically, have taken a long time. Do you think this time is different? Are we making a break from the past?

FLANNERY: Absolutely. Energy transitions may have taken a long time in the past, but with this one, fossil fuels are facing a perfect storm. I think the energy transition is going to be quite swift. Just to give you a sense of that, if you look at global emission figures up to 2012, which have just been published, for the first time we’ve turned the rate of increase down at a time when economies are growing. And that’s prior to China really getting serious about this stuff. The chances of a peak in global emissions this decade is now very real. It’s incredible, and absolutely unanticipated.

The post A reason for optimism appeared first on Corporate Knights.

This program, recently introduced at the school, draws kids from a wider catchment and typically higher-income families. There’s a perception in the school community that French immersion parents with their busy lives and expensive cars make particularly belligerent drivers. Of course, a Lexus SUV with tinted windows is a fearsome sight if you’re four years old and just had your training wheels taken off. Even so, I didn’t think there was any substance to the claim that rich people drive badly.

In fact, that’s precisely what social psychologist Paul Piff argues. In a 2012 study published in the Proceedings of the National Academy of Sciences, Piff, a professor at the University of California, Berkeley, observed several hundred cars passing through a four-way stop and a crosswalk where a pedestrian was waiting. He categorized car-types from one to five, with one being beat-up Hondas and the like and five being luxury models. Put simply, the best cars behaved the worst. At the crosswalk, all the cars from the first category stopped for the pedestrian, versus only half of cars in the fifth category.

Piff is one of a growing number of scientists studying the impact of wealth on social behaviour. The interest comes as income inequality in North America continues to rise with the rich lining their pockets muct faster than any other income group and the most dramatic gains being made by the super-rich. Between 1998 and 2007, the richest percentile of the Canadian population netted a third of all income growth.

Psychologists, economists and neurologists are honing in on what kinds of behaviour contribute to wealth and, in turn, what impact wealth has on behaviour. It’s hard to distinguish chickens from eggs in this field and it’s impossible to “get the 1 per cent into the lab,” as Piff puts it, but he and his colleagues at Greater Good Science Center at Berkeley are designing lab situations and studying real-world phenomena to better understand what wealth does to people.

In a much publicized experiment, Berkeley psychologist Jennifer Stellar put subjects from various socio-economic backgrounds before two videos – one demonstrating how to build a cement wall, the other showing a medical facility where children with cancer are courageously undergoing medical tests. While all viewers reported to have been moved by the second video, those of higher socio-economic status demonstrated significantly less physiological response (empathy typically triggers heartbeat deceleration).

It’s quite contentious to suggest that rich people are unfeeling and Stellar and her colleagues are quick to clarify that richer subjects are not indifferent, just less acutely affected. Neuroscience offers a value-neutral explanation for this: Growing up in poverty or adversity means constantly coping with a certain degree of threat, a state that makes people connect with others. This connection creates heightened awareness of the social environment. Psychologists have found, for instance, that people of lower social-economic status are better readers of subtle facial expressions.

At the same time, wealth affords separation. Rich people live in bigger houses, drive larger cars, take taxis rather than subways, fly in roomy business class seats and cabins, and holiday in exclusive, remote resorts. If they want to get away from the maddening crowds, they certainly can. Some never get near them.

Consumer culture reinforces this exceptionality. Take car ads. As often as not, a pick-up truck ad will show a bunch of them in a parking lot for a country fair with a slogan about family time or belonging. But what high-end sports car markets itself on how well it fits into the flock? The sports car is a means to escape humanity (with the possible exception of a sexy mate) on a ribbon of road cutting through a remote bluff.

There’s nothing inherently bad about such individualism – and in fact, there’s a lot good. Without self-interest, it’s impossible to obtain wealth which undeniably affords better health, greater opportunity and longer lifespan. But the “hidden cost” of wealth, according to Piff and his colleagues, is a social disassociation that can result in ungenerous, selfish and “socially costly” behaviour.

Rich individuals will, of course, take exception to such claims. In a radio interview with Canadian news network CBC, prominent millionaire and television personality Kevin O’Leary dismissed Piff’s work as a “total load of crap.” He claimed that “most wealthy people want to give back,” then went on to cite his own charitable activity as evidence.

Piff rebuts that in the United States, poorer households contribute more to charity than wealthy ones as a percentage of income. And much philanthropy the world over is motivated by the “reputation gain” associated with it. The Greater Good scientists are less interested in grand charitable gestures than small quotidian ones and day-to-day civic behaviour. Among the worst offenders in Piff’s crosswalk study were Toyota Prius drivers who are evidently willing to pay a premium for an environmentally virtuous car – and the status that comes with it – but less willing to apply its brakes for the common man.

It’s impossible to know what proportion of this behaviour can be attributed to dulled empathy and how much to simple pragmatism, given that wealthy people have good lawyers and barely notice the dent a traffic fine puts in their pocket. Perhaps a more relevant question is whether the sense of freedom from social mores brings pleasure.

In the burgeoning field of happiness studies, much has been made of the finding that increased wealth doesn’t invariably increase “subjective well being,” as it’s called. A 2010 study by economist Angus Deaton and Nobel prize-winning psychologist Daniel Kahneman determined $75,000 to be the optimal annual income. Up until that level, increased wealth leads to increased happiness. Beyond it, however, happiness levels plateau and even possibly fall off. One explanation for this has been put foreword by University of British Columbia psychologist Elizabeth Dunn, who posits the centrality of savouring to happiness. That is, to savour something means it has to be in limited supply. As Dunn and her co-author Michael Norton, a business professor at Harvard University, put it in the forward to their recent book, Happy Money, an astonishing number of people don’t get maximum happiness bang for their buck.

“When people receive money, they have a strong tendency to spend it on stuff for themselves,” Norton explains. “This strategy is wrong at two levels. First, stuff doesn’t make us happy and second, buying for ourselves doesn’t make us happy.”

In their book, Norton and Dunn detail the kinds of investments that actually yield happiness: shortening work commutes, going on trips, giving to charity, spending more time with friends and family and less with television. The common denominator: experiences that bring you together with others. According to happiness researchers, the strongest predictor of human happiness across class and geographic boundaries is solid social relationships.

I once knew a very wealthy retired World Bank banker who lived in a sprawling penthouse in Geneva. Apart from the odd voluntary consulting gig, his life was one of leisure – trips to Milan for an opera, Paris for dinner or Morocco for a week at the beach. Much of his time was spent alone. We lost touch for a while but he recently re-surfaced on Facebook. Apparently, he’s sold his Swiss real estate, given away gobs of money and moved to South America where, judging by the pictures, he’s living closer to the ground, closer to people and happily.

Of course, I have no way of knowing how he behaves at crosswalks.

The post Do those with more give less? appeared first on Corporate Knights.