Enterprise Resilience Management Blog

And the winner is ...

The winner of the beautiful Knoll desk lamp (worth nearly $200) courtesy of AllModern.com is Jason Camlic. Have a happy and safe 4th of July.

Celebrating Freedom

Although tomorrow is the actual anniversary of America's declaration of independence from Britain, many companies are giving their employees the day off today to celebrate. After all, what good is a holiday if it doesn't get you out work! Back in January Freedom House, an American lobby group, released its report about "how the world fared with its freedoms during the Bush years -- "an initial five years of improvement were followed by a three-year decline—less in 2008 than previously, but still disappointing" ["It never stays long," The Economist, 17 January 2009 print issue]. The report was gloomy because of "Russia’s rigged elections" and developments in countries that were once part of the Soviet Union. Iraq posted "a slightly better score" than the year before but Afghanistan moved "from 'partly free' to 'not free' in Freedom House’s broad three-category system." In general, "the Middle East and north Africa region—the centrepiece of Mr Bush’s efforts to promote freedom—showed little measurable improvement over the previous year" and next year will probably be even worse based on the travesty of Iran's presidential elections [see my post entitled The Tragedy of the Iranian Elections] and the drama unfolding in Honduras. The article reports:

"More widely, the number of 'electoral democracies' (those with tolerably free and fair elections) dropped by two, to 119 (thanks to four demotions and two promotions). The general trend was down too, with declines in freedom of expression and association, and a weaker rule of law."

Although people in the United States too often equate freedom with the type of representational democracy it enjoys, there are many people who long to enjoy even the most basic of human rights. In China, human rights lawyers are being disbarred. In Africa, activists against corruption are being killed. In Iran, protesters are beaten, jailed, and even gunned down. That is why it is important to have a day that celebrates freedom and reminds us that freedom is something to be cherished and protected. We can only hope that The Economist is wrong when it declares that freedom "never stays long." Dwight D. Eisenhower, who served as both a general and a president, said this about freedom:

"Freedom has its life in the hearts, the actions, the spirit of men and so it must be daily earned and refreshed - else like a flower cut from its life-giving roots, it will wither and die."

Freedom cannot be taken for granted. If it is, leaders will inevitably come along who will claim that they must provide security by limiting freedom. With cunning and guile, they will slip the noose of tyranny around the necks of their people and claim to be leading them to the promised land. In the end, they will only tighten the noose and strangle the last gasps of freedom from a country. Celebrating freedom is a good thing; but defending it daily is even better.

"Giveaway" Reminder -- Today is the Last Day

Just a reminder that there is still time to enter to win a beautiful Knoll desk lamp (worth nearly $200) thanks to AllModern.com. For details on how to enter, see my post The Office of the Future. The winner will be drawn today at 5 EDT. I will announce the winner tomorrow.

Innovating the Future

One of the frequently asked questions about the U.S. stimulus package centers on new jobs: Where are they? States like Michigan are shedding jobs so fast that even its high-powered campaign to attract businesses to the state can't keep up ["Michigan Works to Remake Itself Without King Auto," by Bill Vlasic and Nick Bunkley, New York Times, 9 June 2009]. "About 800,000 jobs have been lost in the state about one in every six — since 2000," reports Vlasic and Bunkley, "and its unemployment rate has reached 12.7 percent, higher than any other state." Michigan is trying to attract high tech businesses through a high-powered ad campaign and it is investing heavily in retraining laid-off workers. In other words, rather than trying to save dying businesses Michigan is trying to establish conditions that will make it stronger in the future. From the beginning of this current economic crisis, I have supported the idea that government's primary role is to establish conditions favorable for entrepreneurs. New York Times' columnist Steve Lohr reports that more and more governments are exploring the best role for them to fill ["Can Governments Till the Fields of Innovation?" 20 June 2009]. He writes:

"Governments are increasingly wading into the innovation game, declaring innovation agendas and appointing senior innovation officials. The impetus comes from two fronts: daunting challenges in fields like energy, the environment and health care that require collaboration between the public and private sectors; and shortcomings of traditional economic development and industrial policies. Innovation policy, to be sure, is an emerging discipline. It lacks crisp definitions or metrics."

I favor public/private partnerships, especially in emerging market countries; but the balance between what should be public and what should be private is not an easy one to achieve. Many government leaders, including those in the Obama administration, are coming to believe that innovation and entrepreneurship are critical for a brighter future. According to Lohr, the Obama administration has directed "the Bureau of Economic Analysis to develop statistics that 'uniquely measure the role of innovation' in the economy. And the government’s new chief technology officer, Aneesh Chopra, speaks of building 'innovation platforms' to spur growth." The focus of Lohr's article was a workshop about innovation policy for government leaders "organized and moderated by John Kao, a former professor at Harvard Business School and founder of the Large Scale Innovation. ... The main participants were innovation-policy practitioners from nine countries: Australia, Brazil, Britain, Chile, Colombia, Finland, India, Norway and Singapore."

"Innovation policy is an attempt to bring some coordination to often disparate government initiatives in scientific research, education, business incentives, immigration and even intellectual property. 'It’s about setting an agenda and helping build a portfolio of skills that let an economy and a society move forward in smarter, faster ways,' Mr. Kao said. Yet if the reach of innovation policy is broad, the attendees agreed, it is best done with a lighter touch than industrial policies of the past, which often focused on specific companies for government support. They used metaphors like 'impresario' and 'orchestra conductor' to describe government’s role. The ideal, they said, is 'stewardship,' not command and control."

One of the things that governments shouldn't do, participants believed, is pick winners and losers and then implement policies that favor the winners. Governments should "create the conditions so that new industries can rise more easily." I couldn't agree more. Every country, however, faces unique challenges and encouraging innovation that targets that challenge is also important. Lohr notes, for example, that Finland has the "second-fastest-aging society in the world, after Japan." As a result, it is looking to for ways to encourage innovation in medical-related fields. Australia, faced with a harsh environment, is looking to "improve strains of drought-resistant wheat and cotton for export." Boeing is also establishing an unmanned aerial vehicle (UAV) facility in Australia because UAVs can be tested without fear of running into something. India is supporting innovative industries that can export innovative technologies to the rest of the world, reversing the trend of having to import technologies from the developed world. Evidence that India's strategy is working, Lohr claims, includes the "Nano automobile, and low-cost drugs for tuberculosis and psoriasis."

America is still considered the world's most innovative country; but, as I have written before, many people believe that it may be losing its innovative edge (for example, read my posts Another Slowdown to Worry About -- Innovation?, America's Competitive Edge and Fostering Innovation and Restoring America's Competitive Edge). One writer questions the perception that America remains the world's most innovative country. He believes that most fields of innovation have lain fallow for the past decade ["Innovation Interrupted," by Michael Mandel, BusinessWeek, 15 June 2009 print issue]. Mandel writes:

"'We live in an era of rapid innovation.' I'm sure you've heard that phrase, or some variant, over and over again. The evidence appears to be all around us: Google, Facebook, Twitter, smartphones, flat-screen televisions, the Internet itself. But what if the conventional wisdom is wrong? What if outside of a few high-profile areas, the past decade has seen far too few commercial innovations that can transform lives and move the economy forward? What if, rather than being an era of rapid innovation, this has been an era of innovation interrupted? And if that's true, is there any reason to expect the next decade to be any better? These are not comfortable questions in the U.S. Pride in America's innovative spirit is one of the few things that both Democrats and Republicans—from Bill Clinton to George W. Bush to Barack Obama—share. But there's growing evidence that the innovation shortfall of the past decade is not only real but may also have contributed to today's financial crisis."

Mandel reminds us of the optimism that preceded the bursting of the dot.com bubble. The U.S. appeared to be on the verge of an exciting and profitable era. Reality, however, didn't keep pace with expectations.

"If the reality of innovation was less than the perception, that helps explain why America's apparent boom was built on borrowing. The information technology revolution is worth cheering about, but it isn't sufficient by itself to sustain strong growth—especially since much of the actual production of tech gear shifted to Asia. With far fewer breakthrough products than expected, Americans had little new to sell to the rest of the world. Exports stagnated, stuck at around 11% of gross domestic product until 2006, while imports soared. That forced the U.S. to borrow trillions of dollars from overseas. The same surges of imports and borrowing also distorted economic statistics so that growth from 1998 to 2007, rather than averaging 2.7% per year, may have been closer to 2.3% per year. While Wall Street's mistakes may have triggered the financial crisis, the innovation shortfall helps explain why the collapse has been so broad."

Having made his case for "innovation interrupted," Mandel then provides a bit of cheer amid the gloom.

"Many of the technological high hopes of 1998, it turns out, were simply delayed. Scientific progress continued, the technologies have matured, and more innovations are coming to market—everything from the first gout treatment in 40 years to cloud computing, the long-ballyhooed phenomenon 'information at your fingertips.' The path has been long and winding, but if the rate of commercialization picks up, the current downturn may not be as protracted as expected."

For the latest on cloud computing, see my post entitled Update on Cloud Computing. One of the innovative technologies that has languished for the past decade is tissue engineering. Mandel details the story of Organogenesis, a small company in Canton, MA. A decade ago the company developed the world's first living skin substitute (called Apligraf) and had received FDA approval to sell it. Unfortunately, the tissue substitute cost more to produce than it could be sold for. The company went bankrupt. Skip forward a decade, however, and things have changed. Geoff MacKay, the new CEO of Organogenesis, has straightened out the company's manufacturing, logistics, and sales, and has turned Apligraf into a moneymaker.

"Sales of Apligraf are growing at more than 20% per year, the company is taking over two more buildings on the same street in Canton, and it has FDA approval to install high-reliability robots from Japan's Denso, the same supplier Toyota uses, he says. Employment is expected to climb from 350 jobs to about 600, the company is introducing products, and MacKay is talking about 'cautious globalization.' In other words, Organogenesis is fulfilling the promise of 1998—a decade later."

Mandel claims you can "multiply that story a hundredfold and extend it to other areas." One of those areas, he says, is "micromachines—miniaturized gyroscopes, pumps, levers, or sensors on a silicon chip—also known as MEMS (microelectromechanical systems)." A decade ago MEMS were the "next big thing" -- or maybe not. That may be changing, however, Mandel reports that a company called WiSpry "is now about to start shipping MEMS chips that will go into cell phones, improving battery life and reducing dropped calls." Another area of interrupted innovation has been the biotech sector. Mandel reports that "2008 was the first year that the U.S. biotech industry collectively made a profit, according to a recent report by Ernst & Young—and that performance is not expected to be repeated in 2009." For more on the future of biotech, see my post entitled Biotechnology's Third Wave.

"A December 2006 paper by the Brookings Institution, co-authored by Peter R. Orszag, now head of the Office of Management & Budget, observed: 'Because the U.S. is at the frontier of modern technological and scientific advances, sustaining economic growth depends substantially on our ability to advance that frontier.' The flip side: A shortfall in innovation could undercut growth and incomes, especially over a decade-long period."

Orszag's conclusion was correct. America's economy lives on the future's frontiers and its business leaders must boldly explore and advance those frontiers. Entrepreneurs are today's Lewises and Clarks. One of the things that I preach to leaders of developing countries is that they must diversify their economies. America is no different. Mandel notes that "no industrial revolution in the past has been based on a single technology." Any future economic revolution must be built on innovations in a number of sectors. Mandel concludes:

"The professor, trader, and author Nassim Nicholas Taleb calls technological breakthroughs 'positive Black Swans'—unexpected events with huge positive consequences that in retrospect look inevitable. Some, such as Google, come out of nowhere to dominate within a short time. Others take years to mature and are surprising only because people forgot they were there. We've learned over the past 10 years just how unpredictable technology can be. But right about now, the U.S. could use a few positive Black Swans."

Another BusinessWeek reporter, Reena Jana, discusses another decade-old idea that was once touted as the next big thing, automated innovation. She notes that the process turned out to be a dud for introducing new products, but "now it's a sharp tool for cutting costs" ["Dusting Off a Big Idea in Hard Times," 22 June 2009 print issue].

"Dozens of software companies are using algorithms once intended for product development to help corporations pinpoint ways to reduce spending. San Diego's Natural Selection, a 16-year-old company that created the program used by Pfizer to try to auto-invent drugs, is helping clients streamline delivery routes and retrofit facilities. Among its recent customers: General Electric and the U.S. Air Force. Some of the original corporate participants in auto-innovation are back at it, too, including Pfizer and HP. HP's adventures (or misadventures) in particular show how ideas that bombed at first can become valuable when given a second chance. 'Successful innovations are often built on the backs of failed ones,' notes Scott D. Anthony, president of business consultancy Innosight and author of a just-published book, The Silver Lining: An Innovation Playbook for Uncertain Times. 'It makes sense to make it a regular practice to go back and see what pieces of rejected ideas might offer important tools if they can be applied in new ways.' Like researchers at 3M and Google, staff scientists at HP Labs are urged to spend a chunk of their workweek on self-initiated projects. Evan Kirshenbaum, a computer programmer who has worked at HP since 1989 and holds more than 20 programming patents, began in early 1998 using his spare time on auto innovation writing code to combine and recombine snippets of ideas to discover new ones."

In past discussions about innovation, I've noted that many innovators fill their offices with interesting gadgets that they've picked up over the years hoping that someday they will help inspire a new use of an old idea. Apparently old software code can serve the same purpose. Of course I'm interested in automated computer processes because they were what initially led to me found Enterra Solutions. They remain an important part of the business. Mandel's and Jana's articles offer a glimmer of hope that we sit on the cusp of a new outburst of innovation and progress. If true, it couldn't come at a better time.

"Giveaway" Reminder -- Last Full Day to Enter

There is still time to enter to win a beautiful Knoll desk lamp (worth nearly $200) thanks to AllModern.com. For details, see my post The Office of the Future. The winner will be drawn tomorrow (5 pm EDT) and announced in on Saturday, July 4th.

Update on Cloud Computing

I posted my first blog about cloud computing in early 2008 [The Coming Age of Cloud Computing (Jan 2008)] and have occasionally followed the subject since [ The AIR is getting Blurry with Clouds -- Computing that is (Mar 2008), IBM Heads into the Clouds (May 2008), and Google brings Cloud Computing to the Masses (Sep 2008)]. Cloud computing proponents claim that the future belongs to this concept because no other arrangement will be able to handle the enormous amounts of data that businesses will want and need. As the attached illustration from BusinessWeek shows, cloud computing will place the data businesses depend on at their fingertips. As some of my earlier posts indicate, IBM has staked a portion of its future on the success of cloud computing and IBM's backing is generally enough to make something successful ["I.B.M. to Help Clients Fight Cost and Complexity," by Steve Lohr, New York Times, 14 June 2009]. Lohr writes:

"In 2000, the Linux operating system was a hot technology, but it had not spread much beyond scientists, researchers and computer programmers. Then I.B.M. declared that it would back Linux with investment, research and marketing, and the technology moved swiftly into the corporate mainstream. The same thing happened with the personal computer in the early 1980s, when I.B.M. endorsed that upstart technology and entered the market. Starting [in June 2009], I.B.M. is returning to the same playbook, introducing some initial products and services and a roadmap for its stable of corporate and government customers to comfortably embrace cloud computing."

Lohr notes that cloud computing "has the potential to cut the costs, complexity and headaches of technology for companies and government agencies." That's why a number of companies, including Amazon.com, Google, Qualcom, Nokia, and Salesforce.com, have also begun offering cloud-based services such as e-mail, computer storage and customer management software. Lohr notes that IBM's support of cloud computing may make it a staple of the IT world, but it won't necessarily mean that IBM will be the major beneficiary of cloud computing's success.

"Even if I.B.M. succeeds in its bid to make cloud computing more palatable for big corporations, there is no guarantee that it will be the main beneficiary of the trend. After I.B.M. helped create the PC industry, lower-cost competitors ended up dominating the business."

BusinessWeek columnist Steve Hamm asserts that Bill Gates first envisioned cloud computing back in 1990, although he didn't call it cloud computing ["Cloud Computing's Big Bang for Business," 15 June 2009 print issue]. Lohr writes:

"Only now is Gates' grand vision finally becoming a reality for businesses. While pieces of what he had in mind have been available for years, they typically were expensive and difficult to set up and use. Now that more personal PC is here in the form of smartphones and mini-laptops, and broadband wireless networks make it possible for people to be connected almost anytime and anywhere. At the same time, we're seeing the rise of cloud computing, the vast array of interconnected machines managing the data and software that used to run on PCs. This combination of mobile and cloud technologies is shaping up to be one of most significant advances in the computing universe in decades."

Even though many analysts believe cloud computing may be the next big thing, Lohr indicates that many companies aren't sure what to make of it.

"Many businesses are struggling to understand what this shift means for them. They're feeling their way forward, trying to figure out how best to take advantage of it. ... There are experiments popping up all over that offer lessons for other businesses. Serena Software has switched almost entirely to cloud services, even using Facebook as its main source of internal communications. Genentech has made medical experts available to sales reps in the field with a couple of button clicks. Coca-Cola Enterprises is equipping 40,000 mobile workers, including truck drivers, merchandisers, and sales staff, with portable devices so they're better connected to the home office while on the road. They can alert their bosses instantly about shifts in demand or problems they encounter. Such examples suggest the possibilities ahead for using these technologies to remake sales, distribution, and other parts of business. It won't be easy for companies to make good on the opportunities. There is still a great deal of work to be done to get all these technologies functioning seamlessly and reliably. Tech companies have shifted a lot of the software applications that businesses typically handle for themselves over to the cloud, but many more have yet to be switched over."

Lohr also raises questions of security and reliability. He notes, for example, that "on May 14, an outage at Google left many customers unable to use its online applications." BusinessWeek's Stephen H. Wildstrom also wonders about security and reliability ["What to Entrust to the Cloud," 6 April 2009 print issue].

"There are two kinds of risks in putting your data online. One is that you can never be quite sure who has access to your information once it has migrated beyond the hard drives and backup storage devices in your home. The other risk is that the information, and sometimes the applications you need to make use of it, may be available only when you are connected to the Internet and the service is up and running."

He also points to the Google outage as an example of what could go wrong. He urges caution and concludes that "ultimately, putting your data in the cloud involves choosing convenience and productivity at the cost of some security risk. In the real world, convenience almost always wins, and there's nothing wrong with that. What's important is that you understand the dangers."

Although cloud computing's future looks bright, there are a number of issues that must be resolved for it to really take off. The biggest issue is standards ["Clash of the clouds," The Economist, 4 April 2009].

"Cloud computing may be the next big thing, but its politics are as old as the mainframe. Geeks from the early years of the information-technology (IT) industry would have had no difficulty deconstructing a quarrel that has broken out among IT’s modern giants. At issue is an 'Open Cloud Manifesto', which was published on March 30th. Even before that date, accusations were flying around online. What caused the controversy was not so much the content, which is vague enough for almost everyone to agree with it. The 'manifesto' essentially calls for computing firms not to fall back on bad old habits by trying to lock in customers as computing becomes a utility, generated somewhere on the network ('in the cloud') and supplied as a service. Since there will be many different computing clouds, the manifesto points out, customers should be able to move their data and applications easily from one to another, and “open” standards, not controlled by one company, should be used whenever possible."

The Economist notes that such "clashes" should be expected in these early development days of cloud computing. After all, "the industry has still not even settled on a definition of cloud computing." Noting that there are a lot a technical issues yet to be resolved, the article continues:

"Agreeing on principles for openness and perhaps even standards at this stage would benefit some firms and hurt others. It would create opportunities for latecomers and for new start-ups, and make life easier for firms who help companies stitch together their IT systems. But it would also rein in those firms that have already built cloud-computing businesses, often using proprietary technologies developed to solve particular problems. Arguably, nailing everything down too early may also hamper innovation."

The magazine notes that since the "manifesto" was published "things have ... calmed down a bit." The article concludes, however, that "if history is any guide the controversy is sure to flare up again once cloud computing really takes off. There could even be an all-out standards war. But the row has at least ensured that the question of openness in the cloud has received a lot of attention." There is an interesting environmental sidebar to all this talk about cloud computing. Individual companies may reduce their power bills as they switch to using cloud computing providers; but providers themselves face enormous power bills maintaining server farms as well as environmental questions about the impact of large computer storage facilities. One country that hopes to cash in on the move to cloud computing is Greenland ["Warming up to Greenland," by Christopher Power, BusinessWeek, 15 June 2009 print issue]. Power writes that Greenland "has an abundance of swift rivers [and] the potential for cheap hydroelectric power is huge. Alcoa is now looking into locating an aluminum smelter on the island. Computer storage companies may follow. 'They can keep their server farms cool with cheap hydropower, and we have more broadband than we can use,' says self-government director Mininnguac Kleist." Other emerging market countries with the potential to produce power using renewable resources may want to position themselves to join the cloud computing revolution as well.

"Giveaway" Reminder -- Two More Days to Enter

There is still time to enter to win a beautiful Knoll desk lamp (worth nearly $200) thanks to AllModern.com. For details, see my post The Office of the Future. The winner will be drawn this Friday (5 pm EDT) and announced in on Saturday, July 4th.

Nukes, Development, and Port Security

North Korea's recent backsliding in the nuclear arena, Pakistan's troubles with the Taliban, and Iran's stunning election results have once again brought nuclear issues to the forefront. Last year, a Congressionally-charted commission concluded that "the development of nuclear arsenals by both Iran and North Korea could lead to 'a cascade of proliferation,' making it more probable that terrorists could get their hands on an atomic weapon" ["Panel Cites 'Tipping Point' On Nuclear Proliferation," by Walter Pincus, Washington Post, 16 December 2008].

"In the interim report, the commission called for a global nonproliferation strategy as the best way to keep nuclear materials out of terrorists' hands. Such a U.S. effort 'would require intense cooperation with other nations, especially other nuclear powers' and with the International Atomic Energy Agency, the panel added. It called for strong U.S. financial, technical and political support to the IAEA. ... At the same time, the commission called for the United States to begin discussing with allies how to strengthen the Non-Proliferation Treaty. That pact, the commission said, provides a legal framework but lacks the tools to make it work. 'Its effectiveness has been undermined by errors in how it has been interpreted and by failures of enforcement by the U.N. Security Council,' the panel said."

All sorts of debates rage about nuclear policy. Some individuals want to see the world freed from nuclear weapons and others want to see nuclear arsenals updated and strengthened. The Commission appeared ambivalent on this point.

"The commission said, its final report will 'define the most efficient and effective way to maintain a credible, safe, secure and reliable deterrent for the long term.' Eliminating nuclear stockpiles should remain a national goal, the panel said, although it conceded that nuclear weapons may be needed into 'the indefinite future,' albeit at a size 'appropriate to existing threats.' The commission added: 'The U.S. deterrent must be both visible and credible, not only to our possible adversaries, but to our allies as well.'"

Nuclear arms control talks -- once thought to be a relic of the cold war -- have once again begun between the United States and Russia ["Report Urges Updating of Nuclear Weapons Policy," by Walter Pincus, Washington Post, 14 April 2009]. A study by two arms-control advocacy groups, the Federation of American Scientists and Natural Resources Defense Council, concludes that the time is right to draft new nuclear policies.

"The study's main purpose is to propose a new nuclear doctrine for the United States, one it defines as 'minimal deterrence.' Under that doctrine, the nation would retain enough nuclear weaponry 'to deter nuclear use in the first place.' The study creates a new category called 'infrastructure targeting,' under which attacks would focus on 'electrical, oil and energy nodes' that support war industries. 'A minimal nuclear deterrence policy with infrastructure targeting does not require nuclear forces to be on alert or even to react quickly,' according to the study. The authors propose keeping weapons in the current stockpile but lowering their yields -- to a degree. The weapons, the report said, should remain devastating enough to deter any nation from striking the United States or any of its allies."

Talk about "infrastructure targeting" concerns a lot of countries -- many that have a reason to be concerned ["Developing Nations Seek Assurances on Nuclear Arms," by Colum Lynch, Washington Times, 16 May 2009].

"Cuba, Iran and other developing nations [have] demanded that the five original nuclear powers accept legally binding commitments to dismantle their nuclear arsenals and provide assurances they will not use such weapons against states that do not possess atomic weapons."

So-called rogue nations understand that they have been in the cross-hairs of other countries for some time. Leaders of countries like North Korea and Iran often pride themselves in taking a road apart from the rest of the world when it comes to nuclear proliferation -- on the other hand they have no desire to see nuclear weapons used against them. Other developing nations are also concerned that events in their country (such as the unwelcomed arrival of terrorists establishing training camps) could result in their infrastructure being targeted. As I have often noted, one of the things that keeps many developing nations from progressing is a lack of infrastructure. It should surprise no one that such countries are concerned that even their inadequate infrastructure could be targets for nuclear weapons. Original members of the so-called nuclear club insist that their nuclear arsenals will never be used that way; but, without binding assurances, potential target nations remain skeptical.

As a result of these differences of view, the recommended strengthening of the Nuclear Proliferation Treaty is unlikely to occur. There had been rising hopes that a strengthened treaty could be worked out. The 189 current signatories reached agreement on a procedural agenda for a major review conference on the treaty in New York next May, but the conditions insisted upon by countries like Cuba and Iran faced stiff opposition from France, who "said it would not yield to any legally binding commitments to undertake further reductions in its nuclear arsenal or to allow international inspections of its nuclear stockpile." One sign that nations are paying more attention to nuclear proliferation is that North Korea's latest nuclear weapons test "triggered a swifter, stronger and more uniform wave of international condemnation, most notably from the isolated nation's historical allies, China and Russia."

More recently, the United Nations Conference on Disarmament, after a decade of deadlock, "approved a working group to negotiate a treaty banning the production of fissionable material for nuclear weapons" ["U.N. Hopes to Ban New Fissionable Material, Space-Based Weapons," by Walter Pincus, Washington Post, 2 June 2009]. Despite the breakthrough, Pincus cautions that we shouldn't "expect quick action."

"The last international pact this 65-nation group successfully negotiated was the 1996 Comprehensive Test Ban Treaty, which has yet to come into force, partly because the U.S. Senate has not voted for its ratification. It was in 1993 that the U.N. General Assembly first passed a resolution calling for negotiations on a fissile-material treaty. Then two years elapsed before the underlying mandate for an 'effectively verifiable' one was approved by the conference. President Obama has made a fissile-material treaty part of his arms-control agenda. But there are signs a fissile pact faces problems, in part because the conference approves only by consensus, meaning everyone must agree."

All of these articles point to one truth: nuclear weapons proliferation and similar threats are likely to be around for some time. That brings me to the article that really caught my eye because it touches on port and harbor security -- one of the areas in which Enterra Solutions works. I found the article particularly intriguing because it was written by a professor of management science at the Stanford Graduate School of Business rather than a typical national security expert ["A Threat in Every Port," by Lawrence M. Wein, New York Times, 14 June 2009]. Wein writes:

"While President Obama’s future vision of 'a world with no nuclear weapons' is certainly laudable, for the present America still needs to do everything it can to prevent a terrorist from detonating such a bomb on our soil. The Domestic Nuclear Detection Office, part of the Department of Homeland Security, is in charge of developing a worldwide nuclear-detection system that, primarily, would use technology to monitor vehicles and shipping containers along the various transportation networks by which nuclear weapons could be smuggled into America. Yet the Government Accountability Office found last year that the detection office 'lacks an overarching strategic plan,' despite the $2.8 billion a year spent on the initiative."

In drafting a strategy, Wein suggests that the DHS "view the problem strategically ... through game theory."

"In this case, the government plays first and uses its budget to place detection resources — technology, security experts and the like — at the various 'nodes' along the transportation network, like seaports, airports and border stations. The terrorists, in turn, can be expected to choose the path that gives them the best chance to carry out an attack. As the accompanying chart illustrates, there are a dizzying number of paths that terrorists could use to transport a foreign-built weapon to an American target city — 132 variations, in fact, taking into consideration all four likely modes of transport: commercial airplane, cargo airplane, container ship and cruise ship. So, how do we decide which route the terrorists are most likely to choose and which path we the are most vulnerable to? Game theory implies that we should maintain an equal chance of detecting fissile material along each of the 132 paths because if we harden one path too much, the terrorists will simply choose an easier one. On top of it all, the agency needs to consider cost-effectiveness: if certain sets of nodes along the transportation network are much more cost-effective to reinforce than others, then the best defense may not come from allocating resources equitably across the system."

Wein points out that since "transferring [a nuclear bomb] to a foreign airport or seaport are the two steps that are on all 132 paths" they "represent excellent choke points." I agree with Wein's basic point. When we talk with port operation authorities, we talk about security in terms of creating a trusted supply chain. This is particularly important for developing countries, which are considered likely transit points for such a bomb. If a country can become part of the solution rather than remain part of the problem, then its opportunities for development increase. Wein goes into some detail about how to address each path noted on the above diagram, but I want to concentrate on the maritime path. Wein writes:

"The Coast Guard is undertaking a three-year pilot project aimed at securing maritime routes, but faces daunting challenges in both identifying suspect vessels and detecting fissile material amid the background radiation present at sea. This pathway will perhaps be the weakest link in our border defense for the next several years, and should be one of the highest priorities of the Domestic Nuclear Detection Office."

That is one reason that sea services are extremely interested in creating a Maritime Domain Awareness system that provides persistent ocean surveillance that can help make the identification and tracking of suspect vessels easier. For more on this subject, see my post Persistent Ocean Surveillance. Wein is concerned about this subject because he understands that screening systems, inappropriately implemented, could negatively affect the flow of commerce around the world. Since the threats would come primarily from developing countries, this could have particular impact on countries desperately trying to connect to the global economy.

"Giveaway" Reminder -- Three More Days to Enter

There is still time to enter to win a beautiful Knoll desk lamp (worth nearly $200) thanks to AllModern.com. For details, see my post The Office of the Future. The winner will be drawn this Friday (5 pm EDT) and announced in on Saturday, July 4th.

Leadership and Good Governance in Africa

In my numerous posts about Enterra Solutions' Development-in-a-Box™ approach, one topic that regularly pops up is corruption. Corruption is inextricably tied to bad governance and bad leadership as well as bad business. Unfortunately, when one thinks about corrupt governments one's mind often turns first to the African continent. One organization that is trying to change that is the Mo Ibrahim Foundation. Many of you have probably never heard of Dr. Mo Ibrahim or his Foundation. Dr. Ibrahim is one of Africa's most successful business leaders. Born in Sudan in 1946, Dr. Ibrahim is the founder of Celtel International, a mobile telephone company with operations across sub-Saharan Africa. He worked for several other telecommunications companies before founding Celtel. Dr. Ibrahim earned a Bachelor of Science in electrical engineering from the University of Alexandria before moving to the United Kingdom. There he earned a master's degree, also in electrical engineering, from the University of Bradford and a PhD from the University of Birmingham in mobile communications.

Based on the fact that he has his own foundation, you have probably already concluded that he did very well in business. According to the Forbes 2008 Rich List, Dr. Ibrahim is worth about $2.5 billion. The Foundation's web site informs us that, "the Mo Ibrahim Foundation has been established to promote African development, with a special focus on promoting good governance in sub-Saharan Africa." To meet this objective, "the Foundation has established two major initiatives in support of better governance in sub-Saharan Africa. The Mo Ibrahim Prize for Achievement in African Leadership, awarded annually, recognises a former executive Head of State or Government who has demonstrated exemplary leadership. The Ibrahim Index of African Governance is a comprehensive ranking of sub-Saharan African countries according to governance quality." The fact that the Ibrahim Prize is only awarded to "former" government officials makes it a carrot held in front of active politicians as reward worth seeking. In order to be eligible for the prize, "candidates will have taken office through proper elections and left having served the constitutional term stipulated when taking office." Only former executive Head of State or Government in sub-Saharan Africa are eligible for the prize. The prize is extremely generous.

"The Mo Ibrahim Prize for Achievement in African Leadership, the world's biggest prize, attracts an award of US$ 500,000 per annum for a period of ten years, and US$ 200,000 annually thereafter. An optional facility of up to US$ 200,000 annually, to support suitable post-office initiatives and activities by the winner, may be offered at the Foundation's discretion."

The Mo Ibrahim Prize for Achievement in African Leadership was initiated in 2007 and, to date, there have been two winners. The first winner was ex-Mozambique president Joaquim Chissano, who served from 1986 to 2005 and helped to end that country's civil war and oversaw the transition to peace. His selection, however, was not without controversy. Chissano's son was implicated in the death of journalist Carlos Cardoso, a progressive Mozambican journalist who was murdered in 2000. Although Joaquim Chissano has never been connected to the death of the journalist, detractors note that Cardoso was often critical of Chissano's administration. The second winner was former Botswana President Festus Mogae. According to Reuters news service, "Mogae served two terms in office, nearly 10 years, before handing over to Seretse Khama Ian Khama in a peaceful transition in April 2008. Before that he was vice president for six years."

Not everyone believes that the Ibrahim Prize is a good thing. Issa Shivji, whom some claim is one of Africa’s most radical and original thinkers, believes the prize is an insult to Africans because its underlying assumption is that Africans can't govern wisely for the right reasons -- they need to be bribed ["The Mo Ibrahim Prize: Robbing Peter to pay Paul," Pambazuka News, 1 November 2007]. He writes:

"It is naïve, if not mischievous, to award a person – moreover with a cash prize – for bringing peace or democracy to his country. It is even worse to cite 'good governance' as an achievement for awarding an individual president of a country. What is 'good governance'? Who determines what is good and bad governance? What yardsticks are applied? And why are these yardsticks applied only to Africa? Why doesn’t anyone award a Norwegian prime minister for good governance? ... The point about these rhetorical questions should be obvious. Mo Ibrahim’s prize for a retired African president ... was in my view an insult to the African people. First, it is belittling African people. Dictators and undemocratic rulers exist all over the world, including the West which has arrogated to itself the right to judge others as 'good man' or punish them for being dictators (Saddam Hussein). Despots and dictators are not a monopoly of Africa. African people, like other people elsewhere, have always struggled against them. If they have attained some success in these struggles, it is their collective achievement. Their success is not due to particular qualities of any single leader. Good leaders are as much a product of our societies as are the bad ones. It is for the people to decide who is a good or a bad leader and how to award a good one and punish a bad one. ... Mr. Mo Ibrahim: you have made millions of dollars from the sweat and blood of the African people. If you want to return a few million to the people, build schools, dispensaries, and water wells in the south of your own country rather than giving them to Chisasanos of this world. Do not add insult to injury by robbing (poor) Peter to pay (rich) Paul."

Of course, Mr. Shivji doesn't mention that most of the world is in much better condition than most of Sub-Saharan Africa. There are plenty of good reasons for singling out that region for special attention and help. His criticism, however, is probably echoed elsewhere in Africa. Perhaps the most important thing that the Mo Ibrahim Foundation has done is establish the Ibrahim Index, "a new, comprehensive ranking of sub-Saharan African nations according to governance quality." According the Foundation's web site:

"It has been created in recognition of the need for a more comprehensive, objective and quantifiable method of measuring governance quality in sub-Saharan Africa. The Index assesses national progress in five key areas, which together constitute a holistic definition of good governance.

• Safety and Security
• Rule of Law, Transparency and Corruption
• Participation and Human Rights
• Sustainable Economic Development
• Human Development"

The Index was developed by Professor Robert Rotberg, Director of the Program on Intrastate Conflict at Harvard University's Kennedy School of Government. He is a world-recognized authority on good governance. Professor Rotberg spent over five years developing an index to rank the countries of sub-Saharan Africa according to the quality of their governance. Hopefully, the index will have a positive impact on the area. When the World Bank issued its Doing Business Index, countries immediately began reforming in order to make their ranking rise. Hopefully, the same effect will occur with Ibrahim Index. The section of the Index that interested me most was the section on Sustainable Economic Development. Authors of the index introduce it this way:

"Sustainable economic opportunity is an essential political good. Well-governed nation-states enable their citizens to pursue personal entrepreneurial goals and potentially prosper. They do so by providing regulatory frameworks conducive to such prosperity and by creating stable and forward-looking monetary and fiscal policy environments that facilitate and encourage national and personal wealth creation. Arteries of commerce -- a robust physical communications and transportation infrastructure -- are also critical to the achievement of these national and personal objectives. Significant, too, is the extent to which African countries are safeguarding their environments while fostering economic growth and infrastructural development. Doing so assists in sustaining economic opportunity and human development over the long term."

There is some evidence that countries are taking notice of the Index and improving as a result. Sitting atop the Sustainable Economic Opportunities Rankings of 48 Sub-Saharan countries is Mauritius. It began with a score of 63.8 (2000), improved to 66.2 (2002), then to 70.9 (2005), and achieved a score of 71.4 in the latest index (2008). Regardless of what you may think of the Mo Ibrahim Prize for Achievement in African Leadership, Dr. Ibrahim is correct that good governance is a critical pre-condition for sustainable development. Past efforts have done little to improve governance in Africa and any new direction is worth trying. More importantly the Ibrahim Index provides "objective criteria by which citizens can hold their Governments to account." If leaders will rise to the challenge, Africa can finally begin to progress more rapidly.

"Giveaway" Reminder -- Four More Days to Enter

There is still time to enter to win a beautiful Knoll desk lamp (worth nearly $200) thanks to AllModern.com. For details, see my post The Office of the Future. The winner will be drawn next Friday (5 pm EDT) and announced in on Saturday, July 4th.

Carbon Capture and Storage

In a recent blog, I noted that legislation being voted on today and aimed at controlling greenhouse gas emissions is counting on the fact that technology will be developed that effectively and efficiently captures carbon emissions and stores them underground. The Obama administration supports Congress in its efforts and recently announced that it is restarting a public-private project to capture and store carbon dioxide emissions that was abandoned by the Bush administration ["U.S.-Private Bid to Trap Carbon Emissions Is Revived," by Kate Galbraith, New York Times, 12 June 2009]. The Bush administration abandoned the project because "costs had doubled to $1.8 billion, from $950 million. A study later found that a math error had caused the increase to be overstated; costs had actually risen 39 percent, to $1.3 billion." The project goes by the name FutureGen. Even though the U.S. Secretary of Energy, Steven Chu, announced that the project had been resurrected, Galbraith reports that life has not yet been fully breathed into the project.

"The project does not have a green light yet. The Department of Energy said it and FutureGen would make a final decision early next year, after additional cost assessments. For now, the department is estimating government contributions at slightly more than $1 billion, with most of that coming from stimulus money designated for advancing clean coal technologies. The FutureGen Alliance of large coal producers and users will provide $400 million to $600 million."

If the project receives a green light, "a coal plant will be built in Mattoon, Ill., that will store nearly all of its emissions underground, where they cannot contribute to global warming. ... The plant would test techniques for converting coal to a gas, capturing pollutants and burning the gas for power. The carbon dioxide would be compressed and pumped into deep soil layers. Monitoring devices would test whether any had escaped into the air." During his campaign for president, Mr. Obama expressed his confidence that clean coal technology could be developed and he promised to pursue that technology. Restarting FutureGen represents partial fulfillment of that campaign promise. The Economist warns, however, that "politicians are pinning their hopes for delivery from global warming on a technology that is not quite airtight." ["Trouble in store," 7 March 2009 print edition]. The magazine writes:

"The idea that clean coal, or to be more specific, a technology known as carbon capture and storage (CCS), will save the world from global warming has become something of an article of faith among policymakers too. CCS features prominently in all the main blueprints for reducing greenhouse-gas emissions. The Stern Review, a celebrated report on the economics of climate change, considers it “essential”. It provides one of the seven tranches of emissions cuts proposed by Robert Socolow of Princeton University. The International Energy Agency (IEA) reckons the world will need over 200 power plants equipped with CCS by 2030 to limit the rise in average global temperatures to about 3°C—a bigger increase than many scientists would like. ... Despite all this enthusiasm, however, there is not a single big power plant using CCS anywhere in the world. Utilities refuse to build any, since the technology is expensive and unproven."

This is not the first time that I've written about doubts surrounding the development of "clean coal" technologies. Read my post entitled The Conundrum of "Clean Coal" for more information. Some environmentalists worry that no carbon capture and storage scheme will be foolproof and that leaks could occur. Such leaks would wipe out years of effort to clean up the environment and mean that billions of dollars would have been wasted. The Economist continues:

"CCS sounds beguilingly simple. It entails isolating carbon dioxide wherever it is produced in large quantities, such as the smokestacks of coal-fired power plants, compressing it and pumping it underground. The oil and chemical industries already use most of the processes that this involves, although not in combination. And oil, gas and salt water seem to stay put in certain rock formations indefinitely, suggesting that carbon dioxide should as well. ... In a purely technical sense, CCS looks promising. There are several proven ways to isolate carbon dioxide from fossil fuels, using a variety of combustion techniques and an assortment of chemical 'scrubbers' to react with the gas."

The article also points out that oil companies in the U.S. already have extensive experience moving carbon dioxide through pipes into the ground to pressurize expiring oil fields. All of that sounds very promising, but [and there always seems to be a "but"] the article notes that the long-pole in the tent is cost.

"The chemical steps in the capture consume energy, as do the compression and transport of the carbon dioxide. That will use up a quarter or more of the output of a power station fitted with CCS, according to most estimates. So plants with CCS will need to be at least a third bigger than normal ones to generate the same net amount of power, and will also consume at least a third more fuel. In addition, there is the extra expense of building the capture plant and the injection pipelines. If the storage site is far from the power plant, yet more energy will be needed to move the carbon dioxide."

There are also health concerns surrounding carbon capture and storage.

"Spills would also be a health risk, since carbon dioxide is heavier than air, and so can build up in low-lying or poorly ventilated spots. Earlier this year, Zurich Financial Services said it would offer insurance for CCS plants and storage sites while they were operating, and for a limited time thereafter. But CCS advocates all assume that governments will eventually take charge of reservoirs, along with all the monitoring costs and legal liabilities. America’s lawmakers went a step further, and agreed to insure the proposed FutureGen plant and to indemnify the firms behind it from all lawsuits arising from leaks."

Although the article concludes that "for the moment, at least, CCS is mostly hot air," it does provide examples of projects, like FutureGen, to make it work. Another example is "Vattenfall, a Swedish utility [that] opened the first power plant to incorporate CCS at Schwarze Pumpe, in Germany." For more about this plant, read my post entitled The Search for Clean Coal. In an accompanying article in the same issue, The Economist discussed technology that removes carbon dioxide directly from the air ["Scrubbing the skies"].

"Some researchers think there might be a simpler way to reduce the level of CO₂ in the atmosphere: to build 'air capture' machines that, as their name suggests, grab it from the air. This is not as mad as it sounds. After all, such machines already exist: they are used to 'scrub' carbon dioxide from the air on board submarines and spacecraft. 'It has been around for decades, but the only people who cared were at NASA, because too much CO₂ in a space shuttle means you die,' says Matthew Eisaman, a researcher at the Palo Alto Research Centre (PARC) in California. Proponents of air capture propose scaling up such machinery so that it can process the atmosphere directly, extracting the CO₂ so that it can be sold for industrial use or stored underground."

As the picture that accompanied the article shows, proponents are talking about "industrial-sized" sky scrubbers. The big advantage for sky scrubbers, the article notes, is that they can be located anywhere -- not just at the source where CO₂ is being generated. This is a big advantage because it could help eliminate miles of pipeline needed to carry CO₂ to underground storage facilities. The scrubbers could be built right above the storage facility and pumped directly into the ground. This would reduce both cost and risk. Scrubbers would also capture CO₂ emitted by mobile emission sources like cars, trucks, and airplanes.

Since scrubbers could be located anywhere, there is the possibility that developing countries with few resources aside from vast tracts of non-productive land could eventually find wealth by working scrubber farms and monitoring underground storage facilities. Since the scrubbers require power to work, adjacent solar or wind farms could use these same tracts of previously non-productive land to generate and store energy. The article discusses a couple of ways scrubber designs would work:

"Several designs are being developed, but they involve variations on the same theme. In each case air is brought into contact with a 'sorbent' material, which binds chemically with the carbon dioxide. The efficiency of this process depends on the surface area of the sorbent, and an easy way to increase the surface area is to spray a liquid sorbent into the air as a fine mist. At PARC, researchers propose building towers several metres high through which the air would be wafted, coming into contact with a sorbent mist. Having absorbed CO₂ from the air, the liquid would drain into a chamber where the gas would be extracted from the sorbent by a series of chemical reactions, or by applying an electric current, depending on the system’s design. The sorbent can then be recycled, and the CO₂ compressed into liquid form for removal. A group at the University of Calgary, led by David Keith, has already demonstrated an air-capture prototype based on a spray tower. Klaus Lackner, professor of geophysics at Columbia University and a pioneer in the field, has devised another approach that uses a solid sorbent, consisting of thin sheets of material coated with proprietary chemicals. Carbon dioxide is trapped as the air wafts over these sheets, and is then absorbed by liquid chemicals that are washed over the sheets. The CO₂ is extracted from the liquid by applying heat. A cupboard-sized prototype (pictured) has already shown that the concept will work, and Dr Lackner is a member of a company, Global Research Technologies (GRT), that hopes to commercialise the technology. A machine the size of a standard shipping container, he estimates, could capture one tonne of CO₂ a day."

Current estimates are that about 36.7 gigatons of carbon dioxide are emitted each year. Of course, not all of those emissions must be dealt with by scrubbers; but it doesn't take a math genius to know that a lot of scrubbers would be needed to deal with the problem if no other technologies were also in place. Cost is again the long pole in the tent. Some of those costs could be offset by placing scrubbers next to plants that require carbon dioxide for commercial uses. "By mass," the article reports, "carbon dioxide is in fact the 19th most important commodity chemical in America, according to the Department of Energy." Still, the article notes, that unless the cost per ton of capturing carbon dioxide can be reduced to below the cost of a permit that allows the release of a ton of CO₂ the project is probably doomed. Currently, a scrubber can produce a ton of CO₂ for about $200, while a permit to release a ton of carbon dioxide recently fell below $10. That's a big cost deficit to overcome.

"Giveaway" Reminder

Just a reminder that there is still time to enter to win a beautiful Knoll desk lamp (worth nearly $200) thanks to AllModern.com. For details, see my post The Office of the Future. The winner will be drawn next Friday and announced in on Saturday, July 4th.

Biotechnology's Third Wave

Several years ago I recall reading an article by Francis Fukuyama in which he predicted that biotechnology would be one of the world's largest economic sectors in the future. Although the biotechnology sector continues to grow, it hasn't quite been equal to Fukuyama's glowing prediction. The Economist reports that "a 'third wave' of biotechnology is arriving." It wonders if "it will be able to avoid a poor reception from the general public this time around?" ["Third time lucky," 6 June 2009 print edition]. The magazine writes:

"For a long time the public has perceived biotechnology to mean dangerous meddling with the genes in food crops. But biotechnology is of course about much more than transgenic food: it also encompasses the use of microbes to make pharmaceuticals, for example. The many benefits of the first wave of biotech products, in medicine, have unfortunately been overshadowed by the supposed risks of biotech’s second wave, in agriculture. Might its third wave—so-called industrial biotech, also known as 'white biotech' or 'green chemistry'—resolve biotech’s image problem?"

Before leaving the subject of the so-called second wave of biotechnology that deals with agriculture, its future may be brighter than its dim past. In its report entitled Global Trends 2025, the National Intelligence Council predicts that “resource issues will gain prominence on the international agenda. Unprecedented global economic growth … will continue to put pressure on a number of highly strategic resources, including energy, food, and water, and demand is projected to outstrip easily available supplies over the next decade or so. … The World Bank estimates that demand for food will rise by 50 percent by 2030. … Lack of access to stable supplies of water is reaching critical proportions, particularly for agricultural purposes, and the problem will worsen because of rapid urbanization worldwide and the roughly 1.2 billion persons to be added over the next 20 years.” Agriculture biotechnology may hold part of the solution to the challenges detailed by the NIC.

Returning to the third wave of biotechnology, The Economist continues:

"As with other forms of biotechnology, industrial biotech involves engineering biological molecules and microbes with desirable new properties. What is different is how they are then used: to replace chemical processes with biological ones. Whether this is to produce chemicals for other processes or to create products such as biopolymers with new properties, there is huge scope to harness biology to accomplish what previously needed big, dirty chemical factories, but in cleaner and greener ways."

The agricultural wave of biotech concerned (and still concerns) some people because they aren't sure what kind of unintended consequences the release of genetically-altered crops might have on the environment. The third wave of biotech begins with the assumption that it will make the environment better not worse. That is why The Economist is more sanguine about its reception. The article notes that the industrial-biotechnology sector is already large (about $140 billion in 2007); but it still has enormous potential. Only about 6% of all chemicals sales are currently generated with the help of biotechnology.

"Steen Riisgaard, chief executive of Novozymes, a biotechnology company, says he imagines a future in which bio-refineries are dotted around the countryside producing fuels and other chemicals from biomass such as agricultural waste."

The article provides several examples of companies that are using industrial biotechnology techniques.

"One company which has been working in industrial biotechnology for years is DSM, based in Heerlen in the Netherlands. In the 1990s it started making enzymes for cheese and omega-6 fatty acids for infant formulas, and went on to develop a biological process to produce cephalosporin, an antibiotic, in a much cleaner way than the chemical processes used to make the drug. Its most recent effort has been to find a biological way to produce a chemical called succinic acid, which is used to make a wide range of products including spandex, biopolymers for agriculture, de-icing salts, esters, resins and acidity regulators in foods."

The process, the article reports, uses 40% less energy and produces fewer carbon-dioxide emissions than the process it replaces. Another company mentioned is Novozymes.

"Novozymes, as its name suggests, has focused its attention on supplying optimised enzymes—biological molecules that help make reactions happen faster, or at lower temperatures. This sounds trivial but it can make the difference between a commercial and a non-commercial process. The company says it has 47% of the market for industrial enzymes, which are used in areas such as detergents, brewing, baking or to produce animal feeds. ... Novozymes says it is close to completing its acrylic-acid process. Around 40% of acrylic acid produced is used to make super-absorbent material like that found in nappies (diapers); most of the rest goes into paints and coatings. Novozymes says its process will be competitive with chemical methods at an oil price of $60 a barrel or higher."

Oil prices have been steadily creeping back up and it looks like they will hold above the price Novozymes needs to be competitive. For people like me who are interested in helping emerging market countries achieve sustainable development, any process that can help market countries develop using processes that are kinder to the environment than those used in the past is exciting.

"Proponents of industrial biotechnology are optimistic that they can avoid the pitfalls that hindered the adoption of biotech crops, which have been criticised by their opponents as unnatural 'Frankenfoods' that extend corporate control of agriculture. For one thing, unlike transgenic tomatoes, say, industrial-biotech products are not sold directly to consumers. And instead of displacing “natural” products with bioengineered alternatives, as in agriculture, industrial biotechnology generally displaces fossil fuels and their associated chemical processes with greener biological alternatives. Surely that should make it easier to convince people of its benefits, and hence to rehabilitate the notion of biotechnology more widely?"

As the question implies, few things are black and white. Some biotech processes use food crops as raw materials. As the article notes, the use of food crops for any purpose other than feeding people or livestock has generated a lot of controversy. Biofuels were highly touted until last year's food crisis, when their widespread use was called into question. The article concludes:

"The use of agricultural waste is less controversial. Mr Riisgaard reckons that converting agricultural waste into other chemicals (including fuels) using industrial biotechnology could replace 20-25% of global oil consumption. And there is plenty of waste about. He also suggests that raw materials could be grown on marginal land which is unsuitable for food production. That is true, but it could have knock-on effects on biodiversity. Perhaps the most promising approach for advocates of biotechnology’s third wave is to emphasise the potential for a new, greener chemicals industry to create jobs in remote rural areas."

I'm particularly excited by the prospect that agricultural waste can be used in industrial biotech processes because it means that land can remain in use to feed people and livestock. It also provides another revenue stream for those involved in agriculture. Development begins and ends with jobs. If this third wave of biotechnology helps create good jobs for people in both developed and developing countries it will likely receive the warm reception anticipated by The Economist. The current economic crisis has given most of us a renewed appreciation for our work. Those living in poverty have always had an appreciation for labor and its spoils. The better the jobs people can find, the better their futures will be.

"Giveaway" Reminder

Just a reminder that there is still time to enter to win a beautiful Knoll desk lamp (worth nearly $200), thanks to AllModern.com. For details, see my post The Office of the Future.

U.S. Still Searching for Way Forward on Greenhouse Gases

Recently, the United States and China have been in negotiations about to move forward in an effort to reduce greenhous gas emissions ["China and U.S. Seek a Truce on Greenhouse Gases," by John M. Broder and Jonathan Ansfield, New York Times, 7 June 2009]. Broder and Ansfield report:

"For months the United States and China, by far the world’s two biggest emitters of greenhouse gases, have been warily circling each other in hopes of breaking a long impasse on global warming policy. They are, as President Obama's chief climate negotiator puts it, 'the two gorillas in the room,' and if they do not reach some sort of truce, there is no chance of forging a meaningful international treaty in Copenhagen later this year to restrict emissions. ... Both sides are demanding mutually assured reductions of emissions that are, in the current jargon, 'measurable, verifiable and reportable.' In the background hover threats of great retaliation in the form of tariffs or other trade barriers if one nation does not agree to ceilings on emissions. ... Many take the simple fact that the two nations, jointly responsible for more than 40 percent of the world’s greenhouse gas emissions, are even talking seriously to each other about the issue as a propitious sign after years of mutual distrust. But there is cause for profound skepticism as well. The Chinese continue to resist mandatory ceilings on their emissions and are making financial and environmental demands on the United States that are political roadblocks. The United States, despite optimistic words from the White House and Congress, has yet to enact any binding targets on greenhouse gas emissions. The energy bill now before Congress proposes emissions targets that are far short of what China and other nations say they expect of the United States. Compounding the difficulty is the fact that both countries are struggling economically and the Chinese and American publics appear far more interested in jobs than in tackling environmental problems, a task that would necessarily be costly. ... Yet the clock is ticking. Only six months remain before the opening of United Nations-sponsored talks in Copenhagen to produce a climate change treaty to replace the 1997 Kyoto Protocol. Without the full participation of the United States and China, most negotiators believe that any agreement is doomed to fail. Congress and two American presidents refused to accept the Kyoto accord, which expires in 2012, because it imposed no pollution limits on China or other developing countries. The American refusal to ratify the treaty and the lack of participation by China and other developing nations have left the pact all but toothless."

In order to make emissions more 'measurable, verifiable and reportable,' lawmakers in the United States are seriously considering enacting legislation that dictates caps, trades and offsets on carbon emissions ["Caps, Trades and Offsets: Can Climate Plan Work?" by David A. Fahrenthold, Washington Post, 26 May 2009]. Fahrenthold reports:

"It sounds like alchemy, an act of bureaucratic magic. Under the climate-change bill just approved by a House committee, the U.S. government would literally make a commodity -- as tradable as a Pontiac or a pork belly -- out of thin air. The bill would require polluters to obtain 'allowances' -- permits allowing them to emit a given amount of a greenhouse gas such as carbon dioxide or methane. Today, these gases are invisible, free and floating all around us. This bill would put a price on them. That would accomplish an economist's version of a triple back flip. It would divide a problem of the global commons into pieces and make those who use gas or electricity pay for their share of the emissions that result. ... The proposal would also create official carbon 'offsets' -- in some cases, a government-certified hypothetical calculation of an amount of gases that would have been emitted but were not. Those, too, could be bought by polluters."

Although there is a lot of support for a cap and trade market, there are also a lot of pitfalls to such a system according analysts interviewed by Fahrenthold. The biggest pitfall is the fact that the market is being created by the government which means that the rules under which it will operate will be subject to tremendous political pressures by special interests.

"To satisfy Democrats from states with coal mines or heavy industry that would be hit hard, committee leaders dropped their target for emissions reductions by 2020, from 20 percent to 17 percent. And they agreed that, instead of all credits being sold to the highest bidder, 85 percent would be given away. This had the effect of simultaneously outraging both Greenpeace -- 'If you give all the pollution credits away, it doesn't actually serve the market principle of making carbon have a cost,' spokesman Michael Crocker said -- and House Republicans. The bill's complexity led one Republican to cite the adage that a camel is a horse designed by a congressional committee. It may prove to be an elephant before long: The rest of the House and the Senate are waiting for their crack at it."

Despite the horse-trading that will go on, most environmental groups favor a cap-and-trade system:

"Many environmental groups say they support the bill, because it still creates a 'cap-and-trade' system. This requires polluters to amass credits equal to their emissions and then allows them -- and others, including Wall Street trading firms -- to sell them on an open market if they cut their emissions, giving them a surplus of credits. 'We have decided we're going to regulate the commons, which is the sky, or the air,' said Liz Martin Perera of the liberal-leaning Union of Concerned Scientists. And this is the best way, she said: 'It is able to harness the power of the market, to find the cheapest reductions first. If it's going to be cheaper for me to reduce [emissions] than you, then I'm just going to go ahead and reduce and sell you my permit.' The United States already has a working cap-and-trade system, used since 1995 to cut back the gases blamed for acid rain. The Environmental Protection Agency says the trading system has reduced the overall cost of cutting acid-rain-causing pollutants to one-third of what was projected. But comparing the two problems is like comparing a horn section and an orchestra. Acid-rain pollutants can be sucked out of a smokestack by adding 'scrubbers.' But nothing like that is commercially available for carbon dioxide -- polluters might have to replace the coal they burn with a different fuel, or replace the coal-burning plants with solar 'farms' and windmills."

It's because new ideas need to be created to make the cap-and-trade system work that the Democrats believe the emissions bill will create jobs. Another group that is eager to see a cap-and-trade system implemented is banks ["How Banks Will Pounce on Carbon Trading," by Mark Scott, BusinessWeek, 8 June 2009 print issue].

"While U.S. policymakers continue to squabble over the details of the 'cap-and-trade' proposal, big banks are gearing up for what they see as a new profit center. 'U.S. carbon trading is coming,' says Louis Redshaw, head of environmental markets at Barclays' investment bank. 'You have to be in it to win it.' The industry is calling on its experience in Europe, where regulators set limits on emissions in 2005 and the carbon market now tops $79 billion. With no such rules in the U.S., carbon trading is limited to a number of regional exchanges in which participation is often voluntary. Last year trading stateside amounted to less than $400 million. But that's about to change. ... Analysts figure rules will be in place by 2013, and carbon trading could top $1 trillion a year by 2020, according to research firm New Carbon Finance. At that size, carbon would rival oil as one of the largest commodity markets."

While the cap-and-trade system is fairly straight forward, the "offsets" portion of the bill isn't quite so clear. It requires the Environmental Protection Agency to predict how well new buildings and plants will do at eliminating emissions. Fahrenthold reports:

"Instead of buying an allowance to cover their pollution, a factory could buy an offset to negate it. An offset would be a certificate showing that, for example, emissions have been avoided, or taken up by newly planted trees, or captured and pumped underground."

Carbon capture remains a hot topic and I'll discuss the current debate in a future post. According to Scott, investment banks want to get in on the offset business as well.

"The carbon credits themselves could be a source of profit for financial firms. That's why Morgan Stanley, JPMorgan Chase, and Goldman Sachs are buying stakes in so-called offsetting companies. These independent businesses invest in eco-friendly projects, such as reforestation programs in Oregon, that reduce greenhouse gases and produce carbon credits as a result. The credits can be sold to companies looking to mitigate—or offset—their carbon footprint. Prices on the credits could soar once the U.S. imposes emission caps and the carbon market takes off. Says Seb Walhain, the global head of energy and commodities at Holland's Fortis Bank Nederland: 'Carbon soon will become part of the regular business for banks.' Some investment banks are doling out advice to companies preparing for restrictions in the U.S. Citigroup, for example, is working with utilities and oil refiners, which want to know whether carbon caps will hurt their bottom lines.

It's the giveaway of offset credits that has created most of the stir around the propoosed legislation ["Cap and trade, with handouts and loopholes," The Economist, 23 May 2009 print issue].

"Giving away permits creates several problems. First, it generates no money, thereby royally messing up Mr Obama’s budget. Second, it means that the permits go not to those who value them most (as in an auction) but to those whom the government favours. Under [ the Henry] Waxman-[Edward] Markey [bill], electricity-distributors would get the largest share, with the rest divided between energy-intensive manufacturers, carmakers, natural-gas distributors, states with renewable-energy programmes and so on. Oil firms, with only 2% of the permits, feel hard done by. But most polluters, having just been promised hundreds of billions of dollars’ worth of permits for nothing, are elated. So it is not just the owners of ski resorts and businesses with negligible carbon footprints that are queuing up to praise the bill. Duke Energy, a power generator with lots of coal-fired plants, is also enthusiastic. ... Another problem with Waxman-Markey is its complexity. At 932 pages, it is half as long again as an already-bloated previous draught. It includes a dizzying array of handouts, mandates and technical standards for everything from hot-food-holding cabinets to portable spas. It allows for a huge increase in 'offsets'—where a polluter pays someone else to stop polluting instead of curbing his own emissions. These are open to abuse, as Europe’s experience shows. There is little to stop foreign factories from starting to pollute just so that someone will pay them to stop."

The Economist complains, "Ideally, politicians who want to save the planet would be honest with voters about how much this will cost. But America’s leaders do not seem to think Americans are ready for straight talk about energy." The whole point of passing legislation controlling greenhouse emissions is to place a price on carbon. Such a scheme will undoubtedly raise costs of producing everything from cars to electricity, but environmental benefits are deemed by most to be worth the cost. Many of the beneficial effects of changing how we measure and pay for carbon use won't be immediately apparent. In the long run, however, new industries (and new opportunities) are likely to emerge. Because such industries are likely to be innovative, they are likely to create good jobs that benefit the economy as well as the environment. Obviously, the way ahead remains challenging, but doing something appears to be better than doing nothing. The U.S. House of Representatives has scheduled a vote on the legislation for this Friday ["Vote Set on House Climate Bill," by Steven Mufson, Washington Post, 24 June 2009].

"Giveaway" Reminder

Just a reminder that there is still time to enter to win a beautiful Knoll desk lamp (worth nearly $200), thanks to AllModern.com. For details, see my post The Office of the Future.

Battle to Stop Corruption Wanes

In posts about development and Enterra Solutions' Development-in-a-Box™ framework, I have repeatedly lashed out against corruption. Sustainable development is simply not possible if corrupt leaders are skimming national treasure for their own use. Sustainable development requires countries to meet several pre-conditions -- quashing corruption is one of them. Other pre-conditions include a healthy, skilled and educated workforce, adequate infrastructure (roads, electrical power, sanitation systems, etc.), security (both national and domestic), and government policies that foster foreign direct investment and entrepreneurship. Although the battle against corruption has been going on for years, Celia W. Dugger reports that in some countries corruption seems to be winning the battle ["Battle to Halt Graft Scourge in Africa Ebbs," New York Times, 9 June 2009]. She writes:

"The fight against corruption in Africa’s most pivotal nations is faltering as public agencies investigating wrongdoing by powerful politicians have been undermined or disbanded and officials leading the charge have been dismissed, subjected to death threats and driven into exile. 'We are witnessing an era of major backtracking on the anticorruption drive,' said Daniel Kaufmann, an authority on corruption who works at the Brookings Institution. 'And one of the most poignant illustrations is the fate of the few anticorruption commissions that have had courageous leadership. They’re either embattled or dead.' Experts, prosecutors and watchdog groups say they fear that major setbacks to anticorruption efforts in South Africa, Nigeria, and Kenya are weakening the resolve to root out graft, a stubborn scourge that saps money needed to combat poverty and disease in the world’s poorest region."

To make her point, Dugger points out the deaths of two anticorruption campaigners in Zambia that are surrounded by suspicious circumstances; the stabbing death of an anti-corruption NGO worker in Burundi; and the death of a journalist in the Congo who "was joining a lawsuit brought by Transparency International to reclaim the ill-gotten wealth of his country’s president." Corruption is not something that can be treated solely by those from the outside. It's a cancer that corrodes nations from within and the people of those nations must fight it from within. I realize that is easier said than done. People generally become corrupt because they can. That implies that they have power. Most people in poor countries believe themselves powerless. In some cases they are because they live in fear of their lives under tyrannical regimes. Dugger notes that powerful people don't give up their power easily.

"The broader anxieties about Africa’s resolve to combat corruption have emerged from troubled efforts in several countries. In oil-rich Nigeria, Africa’s most populous nation, where watchdog groups say efforts to combat corruption are backsliding, Nuhu Ribadu who built a well-trained staff of investigators at the Economic and Financial Crimes Commission, said he fled his homeland into self-imposed exile in England in December. Officials had sent Mr. Ribadu away to a training course a year earlier, soon after his agency charged a wealthy, politically connected former governor with trying to bribe officials on his staff with huge sacks stuffed with $15 million in $100 bills. Mr. Ribadu, who was dismissed from the police force last year, said he had received death threats and was fired upon in September by assailants. 'If you fight corruption, it fights you back,' he said. In South Africa, home to the region’s biggest economy, a new crime unit with less statutory protection from political interference was stripped of the authority to both investigate and prosecute crimes."

Dugger comments that the case of South Africa is perhaps the most troubling because it had an effective anti-corruption unit called the Scorpions, that worked for the state's prosecuting authority. The Scorpions had "built potent corruption cases against Jacob Zuma, who became president of South Africa in April, and Jackie Selebi, the national police commissioner and an ally of former President Thabo Mbeki. The Scorpions were abolished last year and the country’s chief prosecutor, Vusi Pikoli, who had pushed forward with both cases, was fired." Another troubling case is Kenya, which remains east Africa's economic anchor.

"In Kenya, ... scandals have continued to flourish and anticorruption prosecutions have languished since John Githongo, who was the country’s anticorruption chief, sought safety in self-imposed exile in England in 2005. Aaron Ringera, who apparently advised Mr. Githongo in taped conversations in 2005 not to push for prosecutions of President Mwai Kibaki’s ministers, is the current anticorruption chief. Mr. Ringera said in an e-mail message that Mr. Githongo had twisted advice he offered him 'in his own best interests.' In an interview, he said he had recommended prosecuting eight ministers, but had been blocked by either the courts or the attorney general."

This is all very discouraging for a continent in desperate need of outside assistance. That assistance, especially in the form of foreign direct investment, may be a long time coming if corruption remains unchallenged. In a post entitled Investing in Africa that discussed reasons that U.S. businesses are hesitant to invest in Africa, I wrote: "Companies are not willing to risk the lives of their employees because an environment is unsafe; nor are they willing to waste scarce resources lining the pockets of corrupt bureaucrats." Dugger's report offers little hope that things are changing. She continues:

"The search is on for more effective ways to tackle corruption, including intensified legal efforts to prosecute multinational corporations that pay the bribes and reclaim loot that African political elites have stashed abroad. Transparency International’s suit seeks to force the French justice system to investigate how the leaders of Gabon, the Congo Republic and Equatorial Guinea and their families acquired tens of millions of dollars in assets there. Still others say rich countries and international organizations that provide billions of dollars in aid to African countries each year must more vigorously use their leverage to make sure aid does not fuel corruption. Based on his finding that more than $1 trillion a year is paid in bribery globally, Mr. Kaufmann, formerly director of global programs at the World Bank Institute, estimates there are tens of billions of dollars of corrupt transactions each year in sub-Saharan Africa. Mr. Githongo, who failed in trying to fight corruption from the inside, has returned to Nairobi to start a nonprofit group to mobilize rural people to press politicians to clean up a rotten system."

Africa is continent long on potential and short on hope. A renewed and successful battle against corruption there could help displace frustration with hope. It would also make African nations much more attractive to foreign investors. Difficult economic times provide an ideal opportunity to renew the fight against corruption. In flush times, people are happy and find it easier to turn a blind eye to those who skim from the treasury. When the treasury is bare and people are suffering, blind eyes have a way of regaining sight. The fight must be waged nation by nation and person by person. African corruption is an "African" problem -- like politics all corruption is local. Systems may be organized so that corruption can flourish, but, in the end, it is the people within those systems who are the corruptors. The world has a moral obligation to support efforts aimed at eliminating corruption -- be it in Africa or in America.

"Giveaway" Reminder

Just a reminder that there is still time to enter to win a beautiful Knoll desk lamp, thanks to AllModern.com. For details, see my post The Office of the Future.