ECO:nomics Kicks Off at Bacara

Bigwigs from the business world and their environmental counterparts gathered Wednesday evening to kick-off the annual ECO:nomics conference at the Bacara Resort & Spa. Hosted by The Wall Street Journal, the newspaper’s senior editors come to town each year to interview a collection of founders, CEOs, and environmental experts and turn the conversation into a yearly report. A collection of high-profile figures, such as Governor Jerry Brown in years past, are known to attend the swanky forum. Commencing the forum Wednesday was Michael T. Duke, WalMart chairman and former CEO.

Interviewed by WSJ Editor-in-Chief Gerard Baker, Duke touched on several issues pertaining to how the retail giant melds economic efficiency with environmental concerns. Success, Duke said, can be measured by the fact that 80 percent of what used to go to landfills is now recyclable. But the last 20 percent will be much more challenging, he said.

Whether or not average customers are willing to pay more for a “green” or biodegradable products than for a conventional one was also debated. A quick audience survey indicated quite a few people would be willing to pay more, though it was noted that attendees were hardly representative of the average customer. “This is not the 1 percent. It’s the 1½ percent,” joked WSJ Assistant Managing Editor John Bussey, who had joined the two to engage the audience.

Duke reasoned that WalMart does not want customers to have to pay more, and with innovation and efficiency, the company would be able to mitigate or eliminate a gap in price. There’s an expectation that greener products cost more, Duke said, but that should not have to be the case.

WalMart’s decision to “go green” is a shift from just five years ago as former CEO Lee Scott had said the company was not going to waste time with more expensive eco-products because the consumer didn’t want to pay for it. In response, Duke explained — more than once — there are several reasons why WalMart is taking a stance to enforce sustainability. Customers, associates, and stakeholders expect more, he said. “When I’m talking to millennials, they want to work for a sustainable [company].”

But Baker noted critics would point out that the corporation has continued to grow and its greenhouse gas emissions have greatly increased since 2005. Duke responded that nowhere in WalMart’s strategy are plans to shrink. In fact, the opposite is true.

When the issue of government came up, Duke said WalMart’s mission to become more sustainable is “not going to wait for policy.” He said, “We’re charging ahead regardless of what happens at Washington or other capitals around the world.” But Baker noted that the government could enforce stricter environmental regulations. “I’m not saying it should, but a carbon tax, one could argue, would be a much more effective way of doing what you’re trying to achieve not just for one company, but across the board. Since you believe in these things so passionately, are you arguing in Washington for policy solutions too?”

“I’m not always sure government involvement creates efficiency,” Duke quipped back with a smirk, prompting a chuckle from the crowd a joke from Baker about the health care reform act. Duke further emphasized that “partnerships” rather than pressure, in his mind, is essential for commercial success. Giving a nod to Santa Barbara’s sustainable business pioneer Ray Anderson, Duke acknowledged that the peak of the mountain is still a ways ahead.

Thursday Morning

Thursday morning’s talks focused largely on what the future could hold for energy sources including nuclear, coal, and solar, as well as agriculture production. The industry head honchos from each sector were all quick to champion the importance of the country maintaining its energy “portfolio” rather than focusing on type of source over another. Each of them also laid out the reasons for why they believe their product will live on.

When asked why an energy company would go the nuclear route, the chairman and CEO of Atlanta-based nuclear-plant operator Southern Company, Thomas Fanning, replied, “Piece of cake.” Fanning said that even in today’s post-Fukushima world, his company would consider constructing more nuclear plants, given that his company’s current facilities aren’t located near coasts or in areas of high seismic activity. (Oddly, neither the interviewer nor Fanning mentioned Diablo Canyon.)

Invoking the “portfolio” angle, Fanning said the country needs everything from nuclear energy to renewable sources. “We need them all,” he said. “We’ve got to reverse the trend in America that nuclear is ceasing to be important.” He maintained that nuclear energy is safe, clean, and affordable in spite of, as the interviewer said, its “public-perception problem.”

Coal also faces PR challenges. But Gregory Boyce, the head of Peabody Energy Corporation, a coal company headquartered in St. Louis with offices around the world, suggested that people weigh their worries about coal against the realities of “energy poverty,” which he said affects 1.5 billion people globally. Nationally, Boyce said, coal provides for almost half of the electricity .

Other countries, like Germany and Australia, have heartily embraced solar energy, said Edward Fenster and Theodore Craver, the chairs of Sunrun Inc. and Edison International, respectively. A majority of the audience, who participated in frequent polls throughout the morning, admitted that they hadn’t yet invested in solar panels for their roofs — neither has Craver, he admitted — but a significant chunk of the audience also voted in favor of charing homeowners with solar panels a monthly energy fee.

Food production behemoth, Cargill, was also represented at the conference, with executive chairman Gregory Page talking about pink slime and food made with genetically modified organisms (GMOs). More than half of the attendees asserted their belief that GMOs are “essential for feeding the world,” a sentiment with which Page agreed. “We can feed the world without GMOs — we just shouldn’t,” he said, saying that to do so would take up more land and water. In defense of pink slime, Page said that “medieval farming practices” no longer make sense. “We need societal permission to use science to produce more food with less,” he said.

Thursday Afternoon

On Thursday afternoon, Fred Krupp, president of the Environmental Defense Fund, discussed his feelings about the current state of the environmental movement as well as what he sees as a lack of focus by corporations on how much climate change will impact their bottom lines.

“The CEOs are underestimating what’s coming,” said Krupp, though he noted that everyday people are waking up because they are already dealing with the effects, which will eventually change the politics. “Any political party in our country that wants the future is going to have to start talking about not so many incremental status quo things, but: How do we bring down carbon emission to avoid what otherwise will be a catastrophe?” But today, Washington D.C. is not tackling this issue head-on, no matter the party.

The conversation also touched on the surprise appearance of shale gas, which has made natural gas much cheaper and changed the country’s whole energy game. Krupp said the energy experts were “blindsided” by this discovery, and explained how his organization is working hard to seal all of the leaking pipes used by the natural gas industry. Those leaks, which contribute greatly to global warming by letting methane (which Krupp called the “sleeper cell” of climate change) escape, are actually quite cheap to fix, and would wind up saving the companies money. “It’s the biggest bargain in global warming,” said Krupp.

Later talks touched on the changing trends in insurance (lots more disasters, and more on the way, thanks to climate change), automobiles, and investing.

Thursday Night Keynote

The keynote conversation on Thursday night was between WSJ contributing editor Jeffrey Ball and Vaclav Smil, a professor emeritus from the University of Manitoba and a prolific author who is followed widely by the titans of industry, namely Bill Gates. Billed “Titling at Windmills: Tough Talk About Energy and the Environment with the Myth-Buster Who Has the C-Suite’s Ear,” Ball introduced Smil as “something of a rockstar among energy thinkers,” noting his 35 books and that he had recently turned down speaking engagements all over the world, from Berlin to Istanbul.

The more than an hour-long, fast-paced discussion, with Smil speaking rapidly in his accented English, first focused on energy transitions in history, specifically from wood to coal. Smil discussed China’s rise to more than three billion tons of coal in just eight years, which took the United States about 150 years to achieve. Ball, who had the tough job of reigning in his manic genius guest, tried to hone in on what’s pushing the current shifts in energy usage.

Smil credited government subsidies with both enabling progress and doing so in stupid ways, such as solar plants in wet German cities. “If you subsidize it, everything is possible,” he explained. He said that renewable resroucrs are “very significant,” but noted that there are limits. For instance, Smil lives in the windiest place in Canada, indeed the whole continent, making it perfect for wind turbines, and yet it doesn’t blow for a quarter of the year. “This is the windiest place in Canada, and what would I do for three months?” he asked.

Despite increased attention on renewables, Smil cited hard facts in explaining how entrenched fossil fuels are in modern society, explaining that, in 1990, fossil fusel accounted for 88 percent of total global primary energy sources, and that, by 2012, that percentage was still 87. “These are very embedded, inertial things,” he said.

On climate change, Smil uttered perhaps his most controversial statement of the evening, at least for a conference focused on the environment. ““Some places will benefit tremendously from global warming. Some places will be laid down flat.” So even the most global of things are very local, whether its the effect of climate change or which resource systems work best where.

Throughout the discussion, Smil expressed fascination with China’s “absolutely unbelievable” pace of growth. From 2009 to 2011, Smil explained, “China poured more concrete than the United States did in 100 years,” and they built a superhighway system longer than America’s in just 10 years. But he was also politely critical of American habits, from what and how much we eat (“you people overeat like piGs” he said with a smile), to the big cars we drive, to our gated communities, to our lack of true bullet trains. He said that China, though next door to Japan, where eating habits are much more sustainable and less, is following the United States’s lead in developing those same habits, which is a mistake. He said that the Japanese “kept the limit where its most difficult to keep the limit, on eating,” later joking, “What the hell is eating bean curd? These people eat more bean curd than the whole word put together!”

Before the talk was opened up to the crowd, Smil said he was personally supportive of more sustainable energy, but that it should emerge organically, not as a push from the government. “For me, it’s the pace,” he said. “I just don’t like when people force these things. Let those things occur naturally.” He poked particular fun at the initiatives to reach certain percentages that link to the year, like 20 percent by 2020 and 30 percent by 2030. “Is this anyway to run [energy policy,?” he asked. “42 by 2042?”

When asked what he thought of watching the conference for the day, Smil said he found the “crosstalk” humorous, with one speaker saying the future is coal, the other saying solar, the other saying natural gas. “No, it will be all of these,” he said. “Even if you terribly dislike nuclear. It’s here. It’s embedded. You may not like it, but that’s it. Energy infrastructure tends to be long-lived….Things are not going to change overnight, except in a special national circumstance.”