On Target | JAMAR | Volume

On Target Apr - May 08

Snapshot Series 4 (continuing a discussion on a theme)

THE EMERGING PARADIGM OF CARBONOMICS

In previous issues of On Target we have discussed that a number of lifestyle changes (from countries, organisations and individuals) are needed to achieve a substantial decrease in greenhouse gas emissions, such as reduced energy demand, increased energy efficiency, using less fossil fuels and more renewable energy sources. It will also require research and development of sustainable technologies that reduce CO₂ emissions. Such activity will be considered by some countries as reducing GDP and by others as having a potential of increasing GDP. Similarly, organisations will view carbon regulation as either a cost or a potential source of revenue.

There is a view developing in some businesses that there is a direct measurable correlation between lifestyle changes, environmental efficiency and economic results.  For example, Westpac, one of Australia’s large banks, sees carbon costs no longer as an "add on" but central to its operations. They claim that the reduction of emissions through lifestyle changes at the Bank had significantly boosted its bottom line.

Examples of the lifestyle changes that are required by governments, organisations and individuals to reduce CO₂ emissions were listed by the TIME Magazine (April 9, 2007) and it is clear that there will be winners and losers. Jobs will be created within companies in some industries (such as electricity companies) that are in the more enviable position of being able to use carbon credits earned by switching from coal fired to gas generators or alternative energy sources like wind farms to offset carbon debt. Similarly, forestry and logging companies can expand as they now have assets (if grown after 1990) from which they can source a second source of income via carbon credits. This is not unlike a coconut tree that has a residual value in its trunk for construction after its nuts are plucked. 

A majority of companies may not, however, have opportunity to reduce their emissions via ‘lifestyle’ changes in any significant way to impact its bottom line, let alone reduce global warming. These companies will treat carbon regulation as a cost. Further, for some companies, the embrace of a ‘carbon efficient lifestyle’ by (other) organisations and individuals will have a significant impact on the demand for their traditional products and services. For example, incandescent light bulb, paper, business attire, energy, packaging, transportation, airline and car manufacturing companies will have to adopt or die. There will be job losses in such industries as carbon lifestyle choices change. There may also be movement of employees from carbon efficient (but less comfortable) business environments to those that do not implement such measures. 

These actions, if undertaken in large numbers of organisations and individuals, will have a significant impact on strategic marketing information systems. Lifestyle changes will not only affect demand forecasts in industries already impacted by business actions, such as energy, paper, housing, petroleum, packaging, transportation, airline, whitegoods and car manufacturing companies (Table One), but also impact on fashion,  food, entertainment, farming and horticulture industries (Table Two). The cost to economy of such shifts in demand in terms of both impact on GDP and job losses need to be factored into the economic equation.

A report produced the Business Roundtable on Climate Change in Australia that found that early action by companies to reduce CO₂ emissions would add A$2 trillion to GDP by 2050 and create more than 250,000 jobs. Leaving aside the methodology adopted to come to this conclusion, this brings about an interesting economic question. Does the existence of a possible catastrophic situation actually add to GDP and create jobs? The answer is clearly in the affirmative. A close parallel could be existence of the Aids virus. This has certainly added to GDP and jobs via medical research, training of doctors and health care professionals, drug company patents and sales of condoms to name a few. Many related industries have also benefited. Governments have also benefited via the taxation of these new income sources. The cost of human suffering, however, does not impact on the GDP figures, and in some countries helps in reducing unemployment rates. The wiping out of the virus would have a negative impact on GDP and job rates.

Global warming is the equivalent of the Aids virus caught by Earth. There would be money to be made in trying to prevent the ultimate result if this catastrophic situation is left unabated, i.e. the death of most forms of life on Earth, including humans. Unlike the Aids virus, however, CO₂ emissions cannot be reasonably contained and controlled within a country.  The issue must be tackled globally and the Kyoto protocol is a first step. The problem is that the protocol considers the world in terms of developing and developed, instead of considering a ‘Single-Earth’ policy[1]. The result is that, at present, countries are taking a very parochial stance in the implementation of the protocol.

In the next issue of On Target: Shifts in Global Trade: Carbalisation