Haddock Research

Transforming the auto industry - Incentives, Regulation, Technology & Events

2010-05-03T08:17:00.000-07:00

For a number of years, commentators have been discussing how to move the auto industry away from oil dependency. Back in 2004, in his book 'The End of Oil' Paul Roberts discussed how the US government could bailout the Detroit auto-makers such that it could retool and provide improvements in fuel economy (p.318).

And this process now really seems to be gaining significant momentum. It is now realistic to expect the cars people drive to change significantly over the next 5 to 10 years. As ever, there is great uncertainty amongst the auto industry as to whether people will actually buy the new green / low-carbon models.

At Haddock Research, through our Environmental Choices monitor, we are tracking data about the exact car models people have in their households, and to understand how this links with consumer segments and household composition - available in our section report on transport and cars. As part of the questionnaire, we collected information on the make, model, engine size, model year and fuel type of each car within a household - and to ask about who was mainly responsible for each car within the household, what it was used for and annual mileage. This information could then be matched against US EPA data (for Canada and the US), and Department of Transport data (England) to see how the cars rated in terms of Greenhouse Gas scores, and the 'A to G scale' calibrated by CO2g/km, respectively. This information can also be used to categorize cars according to the general types (in North America - Large Cars, Midsize Cars, Minivans, Pickups, Small Cars, Station Wagons, SUVs, Vans).

We collected a huge amount of other information about each respondent - including demographics, other transports methods used, attitudes towards climate change, and the associations and emotions (aka the affect heuristic) towards a SUV, a Prius and a suburban train.

This analysis provide solid evidence that concern about climate change is making a difference in the cars that people are buying. As we summarize in the Interim Highlights of the first wave of our Environmental Choices survey:

The EPA database provides a Greenhouse Gas score (0 to 10; with higher scores being more 'low carbon') for each specific car - and, for Canada and the US combined, the averages correlated to concern about climate change. For the respondent's own car, the average Greenhouse Gas score for Climate Citizens is 5.85, for Mild Greens is 5.51, and for Sceptics & Uninvolved is 5.28. At a very general level, car companies should draw encouragement that Climate Citizens will likely be interested in the low carbon (hybrid, hydrogen fuel cell, electric) models in development.

Here is a summary of some key factors transforming the auto industry in North America and the UK:

A number of incentives programs have been launched to encourage people to switch away from older, less fuel-efficient models - such as the 2009 'cash-for-clunkers' deal in the US, the 2009 'vehicle-scrappage-scheme' and forthcoming electric-car grant in the UK, and the Retire Your Ride scheme in Canada. In Canada, a number of auto manufacturers have devised their own schemes in collaboration with the Retire Your Ride scheme - most recently an expansion of the scheme by Ford.

Regulation is being used to improve the fuel-efficiency standards of cars. The state of California, and province of Quebec, had been active in drafting their own standards, but it would be tough for auto manufacturers to adapt their cars to these sub-national regions. On April 1 2010, there was an announcement to implement stringent fuel-efficiency standards throughout North America - which will improve efficiency by 40% by 2016. The EPA predicted it "would boost the average cost of a vehicle of less than $1,100 (U.S.) by 2016. However, the EPA estimated consumers would save several thousand dollars in fuel costs over the life of a car built in 2016."

The technology used in creating fuel-efficient cars is now moving quickly, and electric cars (BEVs) are now getting a great deal of attention. (BEVs can include pure EVs, and also hybrid plug-in PHEVs.) GM's Volt is due to be launched in November 2010 and Ford is also investing heavily in electric cars. China's BYD has announced the plans to launch their e6 later this year, locating its new North American sales offices in California. Toyota currently has field trials of their plug-in Prius in Canada, with commercialization due in 2012 - the same year that the Nissan Leaf is due to be available (with a factory to be built in the UK). In Canada, the auto-car parts giant Magna has just announced their focus on the E-car systems division with founder, Mr. Stronach taking personal control. Founded in 2000, the ZENN Motor Company has now halted production of electric cars, and will concentrate on selling its drive-train technology to other manufacturers.Hydro-Quebec and Mitsubishi are undertaking field trials of their all-electric i-MiEVs. The Better Place company provides networks and services to the electric car industry ... and the list goes on.

And events can be a tremendous factor for change (as Chernobyl was for the nuclear industry). The last couple of years has seen the auto sector being massively influenced by oil price volatility, the financial crisis and government bail-out money. Will there be a significant impact from the current oil price spill in the Gulf of Mexico, which threatens a potential environmental catastrophe? There are 2 significant stakeholders here - consumers/public opinion and government/cleantech investment. With public opinion, will it make people think more about the consequences of using oil in their cars, and encourage greater demand for more fuel-efficient cars (and electric cars, in due course)? With governments, will they push more money towards clean tech investment (and away from oil). Private investment in these sectors is significantly impacted by government policy (see, for example, the Blackrock New Energy Investment Trusts' April 30 2009 report, p.9 - pdf). And then there is the price of oil - is this event going to push prices higher - and how much impact would gas price increases have on the types of cars people will want to buy? Let's see how this plays out!

June 30, 2010 UPDATE
There is a lot of excitement about the Tesla IPO. Could this be a crucial milestone for the electric car industry, capturing the zeitgeist for moving away from oil fueled cars? Keep in touch with the Tesla share price here.

July 14, 2010 UPDATE
And here is how the electrification coalition is linking how electric cars can tackle the need for oil ...

July 14, 2010 UPDATE
A powerful TED talk linking the oil spill with a call for clean energy ...

The UK election and the policies that conservative Climate Citizens support

2010-04-29T07:04:00.000-07:00

In the US, the policy response of tackling climate change through cap-and-trade has come under a great deal of criticism, particularly from Republican politicians. Yet it is not always clear whether this criticism is based on not agreeing that climate change is a problem; or whether the problem is recognized, but that cap-and-trade is the not the right way to tackle climate change. In July 2009, Sarah Palin wrote in the Washington Post about why she believed that cap-and-trade was dead without once mentioning climate change. As David Roberts commented, it would be useful when discussing climate change policy to know whether people actually believed in climate change or not!

And if you are a conservative/Republican politician who does believe that the threat of climate change is real, serious and urgent, what policy responses would you advocate?

In the UK, this is a question which Mark Lynas also posed in February of this year. With the General Election now just a week away, the leaders of the 3 main political parties (Gordon Brown, David Cameron and Nick Clegg) have now all stated that climate change is a serious problem, and described their policy responses for tackling it. At Haddock Research, we have just produced a press release which describes how voters who are concerned about climate change (Climate Citizens) think about different policy responses to tackle climate change. In a nutshell, when David Cameron talks about the need for tough and effective regulation, and for investment in the green economy, he is pushing the right buttons - but read the press release for more details.

And regulation is becoming a key policy approach in Canada amongst conservatives, where there is active debate about belief in climate change and appropriate policy responses.

In Canada, a key conservative politician who is concerned about climate change is Environment Minister, Jim Prentice. The main policy approaches that they are taking are to do with getting international agreement, especially harmonization with the US, and for tough regulation. (Carbon taxes are off the radar after the 2008 federal election.) A recent interview with Jim Prentice in Diplomat Online provides a nice overview of both his thoughts about climate change, and his policy priorities. This month he has announced both auto emissions standards, and the retirement of coal-fired power stations. And in Canada, there is a growing recognition that these types of regulations will likely imply more expensive cars, and more expensive electricity for consumers.

One academic who argues for the power of regulation is Scott Barrett in his 2003 book, 'Environment & Statecraft'. Applying game theory, he describes the shortfalls of the Kyoto treaty, and the power of regulation through Technology Standards (p.395).

Volcano and Virtual Business

2010-04-21T18:24:00.000-07:00

I think the flight disruption of the past week has made a lot of business people rethink how they conduct their business given the wide variety of virtualization tools which are now available. Here are a couple of opportunities, given the type of business we are in at Haddock Research.

BACK-UP FOR MEETING DISRUPTION
Over the course of my career, I have had to give hundreds of research presentations - but sometimes things get in the way. My first ever public research presentation was set for October 16, 1987 when I lived in London - but was cancelled due to a huge storm. Other presentations did not happen due to an unexploded second world war bomb, the birth of our second child and some other more mundane reasons.

But the virtualization tools we have now means we don't have to face this risk. I live in Montreal and was due to speak at a conference in Birmingham, England today (April 21st), but the flight was cancelled. So, instead I worked on pre-recording the presentation on Brainshark - which allowed close collaboration with my UK-based business partner, James Ambler, and enabled stranded delegates to also view the presentation (and has had some press comment).

But I am sure there were other options using virtualization. I'd love to hear them.

CONDUCTING QUALITATIVE RESEARCH
I have met with quite a few telepresence companies in the last year or so - mainly in connection with our section report on telepresence & flying. We have now launched a pharmaceutical research arm, with an agency called Virtual Pharma Research. A lot of qualitative interviews still involve researchers travelling all over the world, and I think there is still a good opportunity to provide effective virtual interfaces for qualitative group discussions and in-depth interviews. Do contact me if you would like to explore developing such a solution.

Importance of experimentation to behavioural economics

2010-03-11T11:26:00.000-08:00

Prompted by such books as 'Predictably Irrational', the application of behavioural economics is quite in vogue as it applies to advertising, marketing and market research. As Dan Ariely writes on page xii of this tremendous book:

"my goal is to fundamentally rethink what makes you and the people around you tick."

This theme has been picked up by Rory Sutherland (vice-chairman of Ogilvy's and president of the IPA) in his article 'Why advertising needs behavioural economics'; now also available on the site of the American Association of Advertising Agencies.

Robert Bain covered this subject in the February 2010 edition of Research magazine in a piece called 'Thoughts into Action'. What I found curious about this article was its comment about the methodological implications of behavioural economics. He wrote that:

"There are signs, however, that the MR industry is shifting its focus towards qualitative techniques such as ethnography, which both Fiona Wood and Les Binet pick out as one of the areas where behavioural science can be usefully applied. When Research asked some industry voices at the start of the year for their predictions for market research in 2010, the most prominent theme that came through was the rise of qual."

Without wishing to detract at all from what qualitative research has to offer, my interpretation is quite different. Following Dan Ariely's book, he makes quite clear, in his introduction, that his methodological approach is based on experimentation. He talks about the impact a Professor Frenk has had on his thinking when he would challenge Dan Ariely to devise an experiment to test any theory he had (page xv). On page xxi, he writes:

"For social scientists, experiments are like microscopes or stobe lights. The help us slow human behaviour to a frame-by-frame narration of events, isolate individual forces, and examine those forces carefully and in more detail. They let us test directly and unambiguously what makes us tick"

And Dan Ariel's book is full of quantitative-style tests of people's reaction to various situations.

This is, for me, a key element of how research can be applied to a behavioural science approach. I can imagine that there could be frequent testing of all types of marketing and communications testing, based on specific experiments amongst the target population. For very frequent testing, branded custom panels could be the way to go - as described recently by Vision Critical. Companies do not need to commission big quantitative projects to do this - ongoing quick experimentation can provide the appropriate answers.

And if you listen to Rory Sutherland's podcast interview with Robert Bain about behavioural economics, Rory Sutherland does talk about the need for solid, verifiable evidence which follows the science of behavioural economics. This is the type of evidence which will impress the boardroom - 'numbers' not 'mood boards'.

Methodological issues aside, I would totally concur with Rory Sutherland that behavioural economics potentially brings great value to the discipline of marketing. It helps demonstrate that marketing can be very important.

The Benefits of the Feed-In Tariff for British Business

2010-03-08T07:42:00.000-08:00

At Haddock Research, we are addressing the international consumer impact of Feed-in Tariffs (FiT) within our next wave of our syndicated Environmental Choices monitor (section 2c). Specifically, we intend to cover interest and behaviour change relevant to FiT, as appropriate, across all countries in the study (Canada, USA, UK, France, China & Australia). At an holistic level, we will also make an assessment about whether such micro-generation leads to greater 'energy literacy' (as suggested by a 2005 study 'Seeing the light'), or whether there is evidence of a 'rebound effect' (as suggested, in an exaggerated fashion, by Jeff Rubin in a 2010 article) - and how this varies according to a person's concern about climate change.

This survey information we are collecting is intended to contribute to the understanding of the business and political value of FiT. This is especially relevant given that the polemic environmental writer, George Monbiot, has created quite a stir in the past week about his attack on the imminent implementation of feed-in tariffs for micro-generation in the UK (see tariffs).

Feed-in tariffs do look to be a tremendous opportunity for consumers to do something practical about energy security and climate change - but let's see what our survey data shows. At this stage, I will just comment that FiT does offer a very positive opportunity for Britain's low carbon business sector. It fits very well with Gordon Brown's vision, stated in November 2007:

"While climate change presents an immense challenge to the world, it is also a huge opportunity which could lead to the creation of thousands of new businesses, hundreds of thousands of jobs and a vast new export market for the UK with the next two decades, said the Prime Minister"

1. Benefit to UK businesses for the domestic market
A number of UK low carbon businesses have reacted enthusiastically to the implementation of FiT, in the UK - here are just a few examples. Good Energy has launched a campaign to get people to register for their FiT initiative. Solar Century and Ceres Power (pdf) both welcomed the FiT programme, and were both quick to provide worked illustrations of what it meant for UK home-owners. With the UK facing an energy crunch in the coming decade, the market environment is particularly good for such business innovation.

2. Benefit to UK businesses for export to North American market
Intuitively, it would seem that the UK FiT programme would also put British businesses in a position to export their services - such as to the North American market. FiT is starting to take off in North America, where it is supported at the state/provincial or local level rather than the federal level. And data from the first wave of our Environmental Choices study indicate that there is already greater interest in micro-energy amongst Americans and Canadians than English people. Ontario is now a pioneer in establishing FiT in North America, a move which has been applauded by the Association of Power Producers of Ontario. Hydro One is one organization looking for support from companies with 'relevant industry experience' in elements of FiT implementation - with proposals due by March 24, 2010.

Prima facie, this looks like an opportunity for British exporters. And the weakness of sterling should put British businesses in a competitive position. Back in 2004, I exchanged some pounds to Canadian $ at 2.50 (not enough, in hindsight), whereas today's rate is 1.55 - a drop of 38%.

Importance of Segmentation for telepresence companies

2010-02-07T18:08:00.000-08:00

We have just updated our analysis for our final Environmental Choices report on telepresence and flying. One of the things we have discovered is how important 'heavy business flyers' are for telepresence companies - especially in America.

Here is some commentary from a much longer article which will appear in Greenline magazine.

Issue. “I am a telepresence provider. How can segmentation help me?”
A. It is vital to identify which groups of business people are most likely to use your services, and to take account of their opinions and needs, rather than other people. Indeed, people’s opinions outside your target group can sometimes be quite misleading. Our data suggests that current ‘American business flyers’ and especially ‘American heavy business flyers’ are important target groups for telepresence companies.
American business flyers are more ready to substitute at least some of their flights with telepresence than either Canadian or English business flyers. American Climate Citizen business flyers are particularly interested in switching away from business flights in favour of telepresence.
Around a half of American ‘heavy business flyers’ (take either 3+ short-haul business flights or 3+ long-haul business flights per year) already use telepresence to some degree – a much greater proportion than other business groups. They are already aware of a broad spectrum of telepresence providers.
Whilst American ‘heavy business flyers’ are a key group to target for telepresence companies, for airlines they are absolutely crucial. For short-trip business flights, the 9% of Americans who are ‘heavy business flyers’, we calculate are responsible for around 87% of airline seats in this category. For long-trip business flights, the 8% of Americans who are ‘heavy business flyers”, we calculate are responsible for around 89% of airline seats in this category.

Carbon Offsets: Current threats and opportunities

2010-01-29T14:27:00.000-08:00

Recent challenges for carbon offsetting companies ... and the need to engage, and measure, public opinion

LET'S GO BACK A COUPLE OF MONTHS
A couple of months ago, before COP15, I was cautiously bullish about the ongoing growth prospects for carbon offsets, particularly for the compliance market, and wrote the following analysis:

"The idea of paying others to reduce carbon emissions was hatched by Maurice Strong, at the 1992 Earth Summit. According to the European Climate Exchange (accessed Dec 1, 2009, and has now been rephrased) by 2008, worldwide $118 billion was traded on the carbon markets, with volumes growing 171% from the previous year. Carbon offsetting makes use of this market mechanism where government bodies, companies or individuals can reduce their carbon footprint by buying 'emission reduction credits'. (Note that if the voluntary offsets market is included, the World Bank estimates that a total of $126 billion of carbon-trading was conducted in 2008, pdf.)

One of the reasons for the popularity of carbon offsets has been that governments, contemplating a significant price on carbon, are facing public opposition to taxes placed directly on flying and driving. By moving the price of carbon 'upstream', cap-and-trade provides governments with a mechanism for avoiding public discontent, particularly if it is part of an integrated plan to tackle emissions. In addition, policy-makers, such as Yvo de Boer and Lord Stern, anticipate a massive wealth transfer from the developed world to the developing world to facilitate a low carbon growth path. International offset mechanisms regulated by cap-and-trade have the potential for the private sector to manage the financing for much of this wealth transfer. Whilst great uncertainties exist about what cap-and-trade arrangements will be enacted, especially pre-COP15 and pre-US legislation expected in 2010, there appears to be vast potential for growth."

RECENT THREATS
Yet, the idea of carbon offsets has taken three significant knocks recently.

The first knock has been the lack of international legislative direction for cap-and-trade, at COP15. Paul Kelly, chief executive of EcoSecurities recently commented that whilst markets had not expected a definitive post-Kyoto Protocol deal at Copenhagen, they had expected some progress.

The second knock is a sense I get of increasing political and media disquiet about cap-and-trade, at least in North America. It's now quite difficult to believe that both the Democrats and the Republicans campaigned on implementing cap-and-trade legislation in the 2008 US election! As cap-and-trade loses bi-partisan support, perhaps more and more people will consider cap-and-trade as a type of tax (as conservative opposition leader, Tony Abbott, did when blocking Australian cap-and-trade legislation at the end of 2009)? If this happens, it would presumably erode its anticipated political advantages compared to carbon taxes.

The third knock has been the recent strong political rhetoric, especially in the US and the UK, against Wall Street and The City. This is relevant since investment banks, such as Morgan Stanley and JP Morgan, currently play a crucial role in enabling carbon markets. They have the expertise, the entreprenerial spirit and access to capital to develop large-scale carbon markets - yet there is a great deal of political anger against the banks, and who knows where that will lead? (In our Aug 3 2009 press release about carbon offsets, we noted (page 11) that people might associate offsets with 'fat cat', 'bailed-out' 'Wall Street investment banks.) Is this going to have a significant impact on people's trust in investment banks to handle carbon offset money? Could carbon offsets be tarnished by this association?

OPPORTUNITIES
So, what are the current opportunities for carbon offsets?

An interesting article by Matthew C. Nisbet argues for greater involvement of (American) citizens in tackling climate change:

'Policies to address climate change will bear directly on the future of Americans, impacting their pocketbooks, lifestyles, and local communities. These decisions are therefore too significant to leave to just elected officials and experts; citizens need to be actively involved.'

In line with this argument, an important opportunity would be to engage people in carbon offsets more directly. Not only would this help to increase subscription to voluntary offsets, it should also provide implicit legitimacy for the compliance market. Indeed, British Airways, in addition to offering voluntary carbon offsets for their flights (managed by Morgan Stanley), also explicitly make the case for carbon trading.

And I think there are a number of examples of companies already doing a good job at engaging the public about carbon offsets. A couple of examples caught my eye in the past week.

The first example is a Canadian-based company called Zerofootprint, whose founder and CEO, Ron Dembo (ex-Goldman Sachs) was featured in an article in the Globe and Mail on Jan 27, 2010. From the article, I like the stated focus that 'doing good doesn't stop at getting large organizations on board ... a big part of its efforts focus on engaging the public'. I also like the amount of detail the company provides about what they are doing - such as with its BC forestry restoration projects, and that they prompt you to make further contact about each project.

And our Environmental Choices research indicates that Zerofootprint is having an impact amongst Canadians. Around 10% of Canadians are aware that Zerofootprint is active in climate change, and around 4% think this company has had an impact on their thoughts and/or behaviour. (You can see the full list of results at our website, in a file called 'Haddock EC_W10809 Free Summary 3b Organisations Campaigns.pdf').

Another nice example is with the Helical Group. As a corporate user of offsets, I like the way they have included details of their offsetting on page 5 of their company brochure (pdf). Besides a large Climate Care logo they write:

'To play our part in tackling climate change, we have teamed up with Climate Care to offset the greenhouse gas emissions from our international travel. Climate Care funds projects in sustainable energy and forest restoration to reduce greenhouse gases on our behalf'.

That is a very clear and concise way to express what the offset is about!

(I might also give a little plug for Greenscroll as, at Haddock Research, we are supporting this Canadian start-up offset provider. Writing this blog prompts me to think about how we can partner with them more closely!)

THE VALUE OF MEASURING PUBLIC OPINION
But we need good information about whether these efforts are working. Should we be concerned about 'climate fatigue', as US pollsters are calling an apparent drop in American public concern about climate change, most recently reported about on Jan 27, 2010? Is this phenomena restricted to the US? For example, a report released on Jan 28, 2010, suggests that concern about climate change, amongst the British public, remains fairly stable (see page 2 of PDF report).

I believe that public engagement will have a crucial role in the future of carbon offsetting and carbon trading. Survey research can help us understand this engagement and what influences attitudes and behaviour. Appropriate segmentation and profiling (by demographics, attitudes towards climate change, values, media / social media consumption, and brand attachments) provide essential information to make this survey information actionable - guiding business and government initiatives.

Contact us at Haddock Research if you would like to discuss this further. One specific initiative is the second wave of Environmental Choices, due to be fielded in April 2010. Part of this survey will address public engagement with carbon offsetting in Canada, US, UK, France, Australia and China.

UPDATE, FEB 10 2010 - Nikolai Bratkovski of Greenscroll has just told me that they buy RECs from Carbonfund.org, as announced on Jan 20, 2010.

Going beyond averages in describing climate

2010-01-10T20:48:00.000-08:00

The weather has been unusually cold in the UK over the last few weeks, which has prompted some media comment questioning climate change, and a vigorous response from environmentalist George Monbiot (similar to one he wrote last year) drawing the distinction between 'weather' and 'climate'. As the Met Office writes, this cold snap 'doesn't tell us anything about climate change'.

In his latest article, George Monbiot, attacks this question by John Redwood MP of Jan 5, 2010:

Redwood: Why are we in the northern hemisphere having such a very cold winter this year? Which climate model predicted that?

Miliband: I can hardly believe the question, Mr Deputy Speaker. The weather fluctuates, as everyone knows, and the notion that a cold spell in Britain disproves the science of climate change is something that I believe not even the Right Hon. Gentleman believes.

Yet, is Mr. Redwood's question unreasonable? From my perspective, it does not query what is known about climate change. Whilst the climate models often talk about average temperature data (and the Met Office provides a good general sense of what is likely to happen to global temperatures given a high and low emissions trajectory to 2100), Mr Redwood's question seems to be one about variability.

It leads me to think about what kind of weather we might expect in the future, with greater concentrations of greenhouse gases in the atmosphere. Should we expect greater weather temperature variation in a country such as the UK? Is George Monbiot correct in assuming that climate change will mean that he 'might never skate outdoors again' .. or maybe people living in the UK will likely have occasional severe winters?

In a nutshell, this discussion makes me wonder if climate scientists could go beyond describing future temperature average scenarios to describing what weather conditions might really be like in the future given different greenhouse gas concentrations.

And it seems like this is what the Met Office is hoping to do at some point. Writing on February 2, 2007, Dr. Vicky Pope (head of the climate program at the UK Met Office Hadley Centre) provides an overview of the importance of climate models, and ends by writing that "in the long term, we would hope to have a climate model that could capture the observed regional detail and represent variations in weather systems (my emphasis)."

As Stephen Jay Gould wrote 'Central tendency is an abstraction, variation is the reality'

As a footnote, the quote from Stephen Jay Gould (above) comes from p.48 of 'Life's Grandeur'. I strongly recommend chapter 4 for his description of how not to be misled by averages based on his cancer diagnosis at age 40. I have commented on the use of averages in market research in another blog.

January 19, 2010 - As a further footnote, James Hansen et al recently commented on the 2009 temperature record with the subtitle - "If it's that warm, how come it's so damned cold?" The paper describes how variable the weather can be compared to mean global temperatures, and draws specific reference to 'Arctic Oscillation':

'December 2009 was the most extreme negative Arctic Oscillation since the 1970s'

February 12, 2010 - A further footnote is that the Repower America campaign addressed a related point about increased snowfall in the North East of the USA. It speaks to extreme weather events rather than variation in temperature, so I am still wondering if we might expect some regions (specifically the UK, to answer John Redwood's question) to have some colder winter snaps in future. Anyway, here is what Repower America is saying:

Call it “Snowpocalypse” or “Snowageddon,” the mid-Atlantic and Northwestern U.S. have seen winter storms this year that rival anything in decades. Scientists agree that this kind of extreme weather is not just consistent with climate change research, it’s the direct result of rising temperatures in our oceans.

Arm yourself with facts and join Repower America in sharing the truth about climate change and extreme weather:

Fact: Climate change causes more frequent and severe snowstorms

Record snowstorms need two things: temperatures below freezing, and very high humidity. On a planet warmer by a few degrees on average, the Northeast US will still have plenty of days below freezing; the big difference will be warmer seas producing higher levels of moisture in the air — and therefore more severe cold-season storms.^1,2

Groisman et al. “Contemporary Changes of the Hydrological Cycle over the Contiguous United States: Trends Derived from In Situ Observations” Journal of Hydrometerology, (2004) http://ams.allenpress.com/archive/1525-7541/5/1/pdf/i1525-7541-5-1-64.pdf
Changnon et al. “Temporal and Spatial Characteristics of Snowstorms in the Contiguous United States” Journal of Applied Metereology and Climatology, (August 2006), http://ams.allenpress.com/archive/1558-8432/45/8/pdf/i1558-8432-45-8-1141.pdf

February 13, 2010 - According to a letter in the New York Times, by Paul R. Epstein, it is the accumulated extra heat in the oceans that can cause 'bitter cold spells' ..

Two physical findings stand out. In the last 50 years the world ocean has accumulated 22 times as much heat as has the atmosphere (data provided by the National Oceanic and Atmospheric Administration of the Department of Commerce). It is this repository of heat — through processes like evaporation and ocean overturning — that drives the changes in weather we are experiencing: heavier precipitation events, sequences of large storms, bitter cold spells and prolonged droughts in some regions.

Opportunities for mCHP in North America through Direct Energy Marketing?

2010-01-04T13:32:00.000-08:00

At Haddock Research we have been following the business opportunities for mCHP (press release of Dec 17, 2008), and for more residential power to come from natural gas in the U.S. (blog article of Sep 10, 2009). But which retail energy companies could help distribute mCHP systems? In the Globe and Mail of Dec 31, 2009, there is an interesting interview of Chris Weston, chief executive officer of Direct Energy Marketing - and it made me wonder if Direct Energy Marketing might offer opportunities for such mCHP distribution in the parts of North America in which it operates.

Direct Energy Marketing is committed to tackling climate change, and could potentially choose to partner from a range of mCHP companies. Its UK parent company, Centrica, is currently working with (and a minority owner of) Ceres Power. Other companies include Acumentrics (with new President and CEO, Adam Briggs), newly-formed BDR Thermea and Ceramic Fuel Cells - although the latter companies seem mainly focused on Europe.

Yet, choosing a mCHP boiler system for Direct Energy Marketing would need to take account of specific characteristics of the North American market, which include:

1. Business related issues - both Canada and the US have a decentralised energy infrastructure where utilities are tend to be regulated at the state (USA) or provincial (Canada) level. These regulations (including prices) can vary a great deal from state-to-state, province-to-province. These utilities have developed from 'the ground up' in a rather patchwork fashion (which is making a federal-level Smart Grid quite a challenge!).

2. Gas infrastructure - Currently, the usage of gas by retail customers varies considerable around different parts of Canada / USA.

3. Technical issues - There would likely be a number of technical issues to address. My layman queries include - Would the mCHP boilers work with the forced air systems common in North America? - Could they work with the 120v electrical supply? Presumably, field tests would be required to test any mCHP systems within the North American market.

4. Consumer needs - There could be many ways that Americans and Canadians are different to Europeans in terms of what they expect of a home heating system. From our Environmental Choices data we can see that there is more demand for air-conditioning in North America than in England. 83% of Americans and 65% of Canadians agree that they 'would like to use air conditioning in summer' compared to just 20% of English people - see the chart on this blog for Canadian regional distribution. How suitable would mCHP boilers be for these energy needs? (Our geothermal forced air system in Montreal offers both winter heating and summer cooling.) Additionally, there seems to be a focus on off-grid, uniterruptible power in North America. And there are likely to be a wide number of other consumer issues.

All these differences might prove quite a challenge to Chris Weston, who has only recently arrived in North America from the UK. Yet, maybe he can draw inspiration from a fellow countryman, Samuel Insull, who helped mould the current U.S. utility system a century ago.

I should mention that this blog is based on publically-available information, and our own Environmental Choices public opinion study. I am just speculating on what Direct Energy Marketing might do.

What Brand Equity is about - A cranberry-coloured minivan

2009-12-18T08:44:00.000-08:00

A mother's fond recollection of her, recently-departed, minivan caught my eye, in December 15 2009 edition of the Globe and Mail. If you want to get a feeling of what brand equity is about, read Christine O'Leary's article as she remembers her family experiences through the van.

These types of emotional connections are enormously important for businesses, especially when there is little functional difference between products.

Along with my friend Tom Hargroves of Novartis, I presented a paper at the 2007 annual BHBIA pharmaceutical conference. The paper discussed how to measure brand equity in pharmaceuticals. It showed data from 2 quantitative surveys which considered 7 drugs from the ARB class - Amias, Aprovel, Cozaar, Diovan, Micardis, Olmetec and Teveten. These drugs are therapeutically very similar, but have very different market shares.

Here are some key snippets from the script of the paper relevant to this point:

Rationally, it might seem sensible that all doctors would agree as to which brand was “best” within a therapy class, and prescribe this one in preference to others. Yet, unless there is a clear therapeutic advantage for one drug over others, this does not happen.

What does happen is that whilst one doctor might think “Brand A” has significant benefits over the others; another might think this of “Brand B”, a third doctor would think this of “Brand C”, and a fourth might think that all these drugs are much of a muchness.”

…. doctors develop relationships with brands over time based on their experiences with it. These experiences will likely include the marketing support that the brand has had, the reps seen, the patients treated with it, and so on. The exact experiences that each doctor has had, with a specific brand, is going to be unique to that doctor. In general, the more positive emotional experiences that a doctor has had with a brand, the closer the relationship the doctor will likely have with it. One could imagine that a brand could become connected to the emotional fulfilment that a doctor achieves in pursuing his career - such as caring for patients.

Relationships are dynamic – they can strengthen and weaken. However, we know, intuitively, that strong relationships with brands are not likely to disappear overnight.

It is the number and strength of these relationships between doctors and pharmaceutical brands, which we believe, can be considered as a useful measure of brand equity.

… It is possible to measure how one brand differentiates from another, but the associations, emotions and values of a respondent to your brand is best understood within the context of their specific relationship with your brand.

And, intuitively, we know that strong relationships have momentum. The evidence is all around us in the relationships that individuals develop with BMW cars, with Sainsbury’s, with British Airways (or not), with Manchester United (or not), with the Grand National, with Apple Computers, with Coca-Cola, with Nike sports clothes, and so on.

And there are many other brands, big or small, that people come into contact with, and that people build relationships with.

Measuring these relationships can help us both forecast the future, and manage the future.

Climate change : Targets and Policies

2009-12-09T14:28:00.000-08:00

Recent international and US-based polls show how much public opinion is behind a strong deal on climate change at Copenhagen. However, what policies would people accept to achieve those goals, and can we categorise people into different groups according to the types of policy they would accept?

We used cluster analysis on data from 8 attitudinal statements about 'green policy' from our Environmental Choices study, which generated 6 different groups. These groups can be considered to be on a spectrum of support for government 'green' policies. Below is a short description of these groups, leading with the most supportive, and ending with the least supportive.

1. SUPPORTERS
Supporters of all climate change policies - The most 'green' group, is supportive of all policy types - investment, regulation and carbon taxes.

2. REGULATORS
Supporters of strong regulation and green investment; against car taxes - 'Regulators' are the second most 'green' group; they believe that green policy should focus on strong regulation supported by green investment - but are resistant to higher car fuel taxes, and road pricing.

3. INVESTORS
Supporters of green investment; strongly against car taxes and air taxes - The third most 'green' group believe that green policy should focus on green investment - and are particularly strongly resistant to extra car taxes and flying taxes.

4. UNDECIDED
Mostly undecided; mildly pro-investment and mildly anti-car taxes - This fourth most 'green' group is currently not engaged with any of the different policy options tested. Without a reason to believe, in reality, people in this group are likely to resist regulation and carbon taxes.

5. NOT MY PROBLEM
Anti-car taxes; ambivalent of investment; some support for regulation - This fifth most 'green' group disagrees with car taxes, and is ambivalent about green investment. There is some agreement that airports should be restricted and coal power stations should not be built; perhaps because they see climate change as really a 'business problem'.

6. OPPOSERS
Disagreement with all climate change policies - The least 'green' group disagrees with all policy options - and they unanimously resist the idea of road pricing!

There is more analysis for Canada, UK and the USA on the Haddock site.

Climategate, and the power of metaphors

2009-12-07T13:46:00.000-08:00

Metaphors are a great way of quickly getting your message across!

In the last few weeks, there has been concern about Climategate, - using the 'gate' as in Watergate, which has become a metaphor for 'scandal/deception'.

On December 5, 2009, Avner Mandelman, reported in the Globe and Mail, about "Climategate - how thousands of hacked emails from climate scientists revealed that they colluded to fudge their conclusions about global warming, told each other to destroy incriminating e-mails and perhaps even dumped raw data to mask the fraud'. He then provided investment advice based on avoiding the 'madness of the crowds', when it comes to global warming, with such metaphors as:

- 'the global cooling in the 1970s'
- the Club of Rome's fear that we are running out of resources
- the Internet dot-com bubble
- Nortel's share collapse
- Madoff's ponzi schemes
- windmills supported by tax credits
- modern portfolio theory

In contrast, this weekend, the British Prime Minister Gordon Brown responded used a metaphor from the classical world - saying that we must not be distracted by 'flat-earth' sceptics.

For our own part at Haddock Research, we have been searching for a metaphor for the innovation opportunities of the low carbon economy. The one we used was of how Henry Ford's car was able to transform New York City so quickly, away from the environmental problems of horse transport, in the early years of the 20th Century.

But whilst metaphors are great for communication, they should not be a substitute for considering the facts. Indeed, metaphors can often be very misleading. We should know more about 'Climategate' after the investigation headed by Sir Muir Russell. In the meantime, I am guided by Elizabeth May's reading of the emails, and my general view is that these climate scientists are tremendous public servants and working very hard for the public good.

PS. I intend to add links to official investigations about 'Climategate' as they become available:
Feb 3, 2010 - New York Times 'Researcher on Climate is Cleared in Inquiry' - about Michael Mann

Feb, 19, 2010 - Jeffrey D. Sachs's view.

The Political Space for Michael Ignatieff to act on climate change

2009-12-05T19:02:00.000-08:00

Further to my blog of November 28, I decided to make Michael Ignatieff rather than Stephen Harper the focus of the 'Canadian Political Space' article. It's now available on the Haddock site.

Political Space for COP15; UK, USA & Canada

2009-11-28T19:15:00.000-08:00

Now it's getting interesting!

With the COP15 meeting now very close, leading politicians are under intense pressure to commit to stringent emissions targets, and to articulate which policies they support to achieve them. At Haddock Research, we are producing reports for the UK, the USA and Canada outlining the 'political space' that politicians have to act on a range of policies.

Based on our Environmental Choices public opinion survey data, our report for the UK was released yesterday, available from the Haddock Research website. The UK stance on climate change is fairly established - but that is not the case for Canada or the USA!

Canada has taken increasing heat for its performance on climate change, such as with the release of a report from WWF/Alliance (pdf) earlier this year. The current federal government position is that Canada will reduce emissions by 20 percent below 2006 figures by 2020, but without providing a policy framework for doing so - saying they need to wait to see what cap-and-trade legislation is agreed in the USA. We should remember that in Canada, much of the power for setting policy lies with the provinces, and there is considerable tension between the provinces regarding climate change policy, in large part reflecting the energy economic base of different provinces (Quebec has clean hydro; Alberta has the tar sands).

In mid-October 2009, an influential oil sands group was lobbying for allowing increased emissions from the oil sands. In contrast, a report released a couple of weeks later, sponsored by TD Bank and produced by the David Suzuki Foundation and Pembina Institute, provided some sense of what what happen to the economies of different provinces should strong climate change policy be implemented (at its foundation, they suggest a significant price on carbon starting at $50 a ton now, moving to $200 a ton by 2020). The report argues that such an approach would be manageable, and the Canada would still have a healthy, low carbon economy - but that such policies would severely affect Alberta relative to other provinces, and should be compensated as a result. This report provoked a strong negative reaction by the premier of Alberta, and others.

Things are now moving quickly. On Tuesday, Nov 24, the premier of Quebec, Jean Charest announced that the province would break from the federal government position and commit to reducing emissions by 20 percent below 1990 levels by 2020. This prompted a response by the premier of Alberta, Ed Stelmach, to work towards a realistic co-ordinated plan between the provinces. On Thursday, Nov 26, Liberal leader, Michael Ignatieff, outlined the opposition Liberals plan to tackle climate change. On Friday, Nov 27, following commitments made by the Americans and the Chinese, Stephen Harper, reversed his position and said that he would attend COP15. And today, Nov 28, the intention of India to cut back emissions has created further pressure on Canada - and the UN Secretary General Ban Ki-moon and the Queen are amongst others urging further action on climate change. Within the last few hours, Stephen Harper announced Canada would contribute $10 billion to a climate change fund (but no change in climate change targets or policies).

We'll be releasing our 'political space' documents for Canada and the USA within the next week. Watch this space for details!

Critical of Freakonomics

2009-11-23T17:48:00.000-08:00

Overall, I like the (often counter-intuitive) insights that micro-economics and game theory provide. Steven Levitt and Stephen Dubner have become popular authors, in this area, with their book Freakonomics and more recently, SuperFreakonomics. Yet, this later book has come in for some strong criticism for how it tackles climate change, and how it uses statistics generally.

Even without these reviews, I was not inclined to read SuperFreakonomics after being rather disappointed by Freakonomics. (If you want an enjoyable and insightful read, I thoroughly recommend Game Theory at Work by James Miller.) Below comes from a review of Freaknomics that I wrote a couple of years ago:

We should also be very careful on how to interpret statistics as a guide to action. Specifically, I believe that the inappropriate use of averages to be the most common cause of analytical error in the social sciences.

To illustrate my argument, consider the following quote from the popular Freakonomics (page 2005) by Steven Levitt & Stephen Dubner (page 142).

“As it happens, economists have a curious habit of affixing numbers to complicated transactions. Consider the efforts to save the northern spotted owl from extinction. One economic study found that in order to protect roughly five thousand owls, the opportunity costs – that is, the income surrendered by the logging industry and others – would be $46 billion, or just over $9 million per owl.”

There are all sorts of reasons to question the principles and accuracy of this calculation, but I particularly want to query the meaningfulness of the average of “$9 million per owl”. The northern spotted owl is an endangered species and it is critical to know, approximately, what the minimum viable population is thought to be (and likely margin of error!). If the numbers of such owls is at risk of being threatened, we are not talking just about these 5,000 owls, but also their offspring, and their offspring after that, and so on – for eternity. Is that an infinite number of owls? Clearly it now becomes impossible to calculate a value per owl into the indefinite future at this “phase transition” number of owls. If the number of owls is much larger than the minimum viable population size, then it would not matter very much, from an ecological systems point of view, if the logging industry took some of their habitat. If the number of owls were very small, they would tragically be doomed to extinction anyway.

We should do all that we can to protect biodiversity which approaches this critical “phase transition”.

As a footnote, I have just come across this wonderful critical review of Freakonomics by John DiNardo (pdf).

Environmental Choices 2008 : Interim Highlights

2009-11-18T07:24:00.000-08:00

At Haddock Research, we have just released Interim Highlights from our Environmental Choice 2008 study. We see low carbon innovation being at the heart of the process of reaching a low carbon world, and the text below comes from the document.

You can take a look at the results, from a downloadable 16-page PDF, available by going to -
http://www.haddock-research.com/EC2008_interim_highlights

Supporting low carbon innovation

In a world of finite ecological boundaries and rapidly growing human-induced impacts, many people are trying to work out the best ways to create a new, sustainable, low carbon world. These people include journalists, think tank analysts, government leaders, lobbyists, engineers, environmentalists, economists, scientists, designers, entrepreneurs and others - and a key focus is to harness the power of the market to develop low carbon innovations.

Yet innovations can look very different from the solutions that the public can readily imagine.

One hundred years ago, New York City had a problem. The city had to contend with disease and pollution caused by the ’40 dead horses, 2.5 million pounds of manure and 60,000 gallons of urine’ left on the streets each day (Source: ‘The End of Energy Obesity’, Peter Tertzakian (2009), p.30).

In 1908, Henry Ford introduced the Model T Ford, the first mass-market internal combustion car, and helped transform society. Somewhat incidentally, this innovation also solved the environmental problems of horse transportation in New York City!

Over time, cars have impaired local air quality and contributed to climate change. The current mayor of New York, Michael Bloomberg, has made an attempt to address this by requiring all taxis to be hybrids by 2012. But could Henry Ford’s internal combustion powered car be replaced as much by telecommunications and online networking tools as by using more fuel-efficient cars? Maybe the next UN climate change conference in New York could be attended by some delegates via telepresence rather than in-person?

For this to happen, we need innovators.

Innovators need to understand how they can justify investments in the low carbon sector – either in creating something completely new or in re-engineering something which exists already. And innovators can be fooled by the practical questions that potential customers tend to ask, rather than understand the underlying desires which get these customers thinking about their innovation in the first place.

The key theme from this research is that people who are concerned about climate change have different desires, and behaviour, from those who do not.

From all walks of life, in Canada, England and the USA, there are many members of the public who are deeply concerned about climate change – a group we have called Climate Citizens. Compared to others, this group tend to act in a more low carbon way, are more interested in low carbon products, and are more supportive of low carbon policies. They have a deep, though not uncritical, unmet need for products that could support a low carbon lifestyle.

This evidence suggests that there is significant business opportunity, across virtually all consumer sectors, for innovations which help tackle climate change.

But society is complex! Sometimes there are a number of factors which, consciously or unconsciously, influence people’s actions and desires – and concern about climate change is just one factor.

One question we get asked, in the words of someone who registered at our website, is to understand ‘Whether or not there is any tangible business value to greening your brand’.

Whilst the Environmental Choices survey demonstrates the appeal of low carbon brands to Climate Citizens, it does not necessarily follow that ‘being green’ is a core element of a low carbon brand’s positioning. Each brand should strive for differentiation, including against competitors which are also low carbon. And people usually also need complimentary, rational hooks before making a commitment to buy. One other consideration is that some Sceptics & Uninvolved are positively antagonistic to the notion of climate change, and are annoyed, bored and/or even angry when the subject is mentioned – so communications sensitivity may be required!

Henry Ford famously remarked that ‘If I asked the public what they wanted they would have said faster horses’.

A mistaken inference from this statement is that ‘conducting market research is a waste of time since people don’t know what they want’. The real lesson is that market research needs to be sensitive to people’s needs (in Ford’s case, to get around faster) and emotional desires, in order to guide innovations that people will value, at a price they can afford.

Overall, our Environmental Choices study is designed to help understand these issues, and this document highlights some key, interim findings. Our hope is that it inspires and guides people to develop innovations which are (also) low carbon.

'Green Marketing' and Telepresence

2009-10-29T13:27:00.000-07:00

Last Sunday I met up with some old University friends I hadn't seen for 19 years. In the course of our chat, the conversation touched on what type of work we all did. I briefly described what I was upto with Haddock Research (it's about providing public opinion information about climate change / environmental issues etc. etc.).

"But will people pay extra for organic vegetables when the economy is bad?", my friend asked.

I didn't actually have data to answer his question (and I really should get around to finding out as this seems to be a top-of-mind issue when people think of 'green' and 'marketing'). But I think the interesting part of this question is the underlying assumption that 'getting people to go green' involves a common 'green marketing' approach to tackle this sort of issue. This thinking is evident in newspaper articles, which lump everyone together and any possible 'environmental issue', and then comment on the difficulties of getting people to 'act green'.

This seems to me to be fundamentally incorrect!

For example, we have been working quite a lot on flying and telepresence recently, and the 'green marketing challenges' involved in getting business travelers to switch from flying to telepresence could not be more different than that of marketing organic food!

At a very broad level, I believe that 'green marketing' needs to treat each business sector separately. As I blogged recently, 'flying' is not like 'recycling' or 'reducing heat use at home' - the incentives to 'act green' are very different.

Also, the marketing aims can be quite different according to who the key targets might be, what the marketing goals are, who the competition is, and so on.

'Green marketing' is certainly currently an important element of how telepresence is promoted. All the telepresence companies we studied (Avaya, Cisco, HP, Lifesize, Polycom, Tandberg, Teliris) market their green/low-carbon credentials to at least some extent. And, our survey evidence indicates that interest in switching from flying to telepresence is well correlated with concern about climate change (the chart at the top of this blog shows data from our Environmental Choices study).

But, how much should 'green marketing' be used to promote specific telepresence services?

This is part of the web conference we presented in association with AltaTerra. If you missed the web conference, you can still see the recording.

David Suzuki recognised for raising climate change awareness

2009-10-16T02:41:00.000-07:00

Earlier this week, David Suzuki was recognised for his efforts in raising awareness about climate change by receiving an 'Alternative Nobel' from the Right Livelihood Foundation. Our research indicates that this is very well deserved. As we wrote in a press release of October 9, 2008 -

'Canadians have an environmental superstar – David Suzuki. 41% of all Canadians have found David Suzuki effective in shaping their thoughts about climate change; just 8% found him wrong-thinking/annoying. There is not an equivalent non-political environmental leader in either the UK or the USA (and David Suzuki is not much known in either of these countries).

Over half of Canadians (53%) are aware that the David Suzuki Foundation is active in discussing climate change, and 37% of Canadians indicated that this Foundation has been effective in shaping their thoughts on climate change, with 5% thinking that it is wrong-thinking/annoying on this issue.’'

To think that well over a third of Canadians have been positively influenced by you on this subject is an extraordinary achievement. And he has clearly done this sensitively since, compared to other climate change influencers, relatively few think he is 'wrong-thinking'.

David Suzuki also took the opportunity to say that he was embarrassed by how poorly Canada was doing to address climate change, and that it must act.

I saw David Suzuki speak at a Generations Pact dinner in April last year, where he encouraged the young people in the room to tackle the environmental challenges that they will surely face. He was also kind enough to send me a hand-written note about what we are doing at Haddock Research (although I am not so young!). He memorably talked about his time with his father in the last month's of his father's life, and it encouraged him to understand what was really important in life. Al Gore also talks about his relationship with his father in 'An Inconvenient Truth' and maybe this is a powerful thought for many environmentalists?

Ignatieff moves cautiously on climate change

2009-10-14T03:24:00.000-07:00

In a blog of September 28, I discussed the opportunity for Ignatieff to act on climate change. Yesterday Ignatieff moved cautiously in this direction with a speech to the Vancouver Board of Trade. The speech focused on the need for Canada to invest in clean energy technologies and upgrading its energy infrastructure. This follows the general approach proposed in the G20 Communiqué of earlier this year, which we noted on April 2, where investing in low carbon technology is a politically popular approach for tackling climate change.

Yet, to really start tackling climate change, and to properly differentiate himself against Stephen Harper, Ignatieff will need to go further. He will need to articulate regulatory and taxation policies (or at least approaches) that he supports. As the climate change meeting in Copenhagen draws closer, there is increased international pressure for Canadian politicians to take 'politically risky measures to cut carbon emissions'.

Personally, I'd also be interested in what Ignatieff has to say about these 4 broad questions posed by Yvo de Boer:

1. How much are the industrialized countries willing to reduce their emissions of greenhouse gases?

2. How much are major developing countries such as China and India willing to do to limit the growth of their emissions?

3. How is the help needed by developing countries to engage in reducing their emissions and adapting to the impacts of climate change going to be financed?

4. How is that money going to be managed?

Necessity is the mother of invention

2009-10-09T11:20:00.001-07:00

There has been growing concern that Britain is facing an energy crunch over the next decade. As reported in the WSJ, today Ofgem announced that 'Britain will need to invest up to £200 billion ($321.5 billion) over the next decade and a half to ensure the country can meet its carbon targets and secure adequate energy supplies'. It's also the same week that plans for a new coal power plant at Kingsnorth were shelved.

So, energy prices are expected to increase for consumers in the UK. Whilst managing fuel poverty is a real issue, it also provides an aligned incentive for fuel efficiency and emissions reductions which is less evident in other countries, such as those in North America. In effect, it is helping to create a 'sufficient price for carbon' that business leaders are calling for.

Necessity is the mother of invention!

Energy prices rises will likely help increase British consumer interest in improving the energy efficiency of their homes.

And the British renewable energy sector does seem to be showing activity! On 30 September 2009, Renewable Energy Generation announced the planned sale of its Canadian assets since 'The Company has taken the strategic decision to focus on the UK onshore wind market where it sees significant growth opportunities over the next few years'. And on 7 October 2009, Novera, 'one of the leading quoted independent renewable energy companies in the UK' rejected an offer for its remaining shares by Infinis Energy.

Understanding people's willingness to fly less

2009-10-05T04:54:00.000-07:00

A number of thoughts came to mind as I read about the release of the 'Propensity to Fly' report yesterday, which discusses British people's unwillingness to fly less due to climate change.

1. 'Flying less' is not like 'recycling' or 'reducing heat use at home'

As far as I am aware, there is no lobbying group, or politician that advocates that the public should recycle less, or use more heat in their home. Yet, the commercial airline organization ATAG tells us that we do not need to fly less, Boris Johnson supports flying in favour of telepresence - and even the climate change secretary, Ed Miliband, appears unwilling to target emissions in this sector. Each of these groups are telling the public that climate change can be tackled by means other than not flying.

Nor are there advertising/marketing campaigns to encourage people to fly-tip their old TVs or help the gas companies by consuming more fuel at home. In contrast, their is a vast amount of advertising which attracts people to fly. Bottom line, I am not surprised that this report indicates that people are less willing to give up on flying than other high carbon/unenvironmental activities.

2. Diagnosing society

Beyond the overall findings, I would be interested in further analysis about how climate change is altering people's flying habits in the UK. On this topic, it is very important to be wary of confounding variables - and to control for them. Specific ones which we have worked on (particularly in the US business flying market in relation to telepresence) are to do with income, region, party affiliation, reason/distance for travel and attitudes towards climate change. In general, there is a very strong correlation between people's income and how much they fly (see chart attached), and people in the London area now have a greener alternative to short-haul flights in Eurostar than people from other parts of the UK. Unless your statistical model can isolate each variable, one can come to potentially false conclusions (recycling is associated with people flying more etc.).

3. English Climate Citizens fly fewer short-haul leisure flights than other groups

A particular important category of flying for English people is short-haul leisure flights. Since these are leisure flights, they can be considered 'discretionary' for the individual, and short-haul more easily allows for 'alternative means of transport'. According to our Environmental Choices survey, 47% of flights English people take are short-haul leisure flights, compared to 24% of flights Canadians take and 27% of flights Americans take. Those who are most concerned about climate change, Climate Citizens, representing 31% of English adults, make, on average, significantly fewer short-haul leisure flights (1.21 round trips pa; n=321) than other English adults (1.67 round trips pa; n=685) (p = 0.033, equal variances not assumed).

Supporting today's Prince's Rainforests Project campaign

2009-09-30T05:11:00.000-07:00

With an introduction by Sting, the Prince's Rainforests Project today launched their latest campaign in the run-up to December's COP15 meeting in Copenhagen.

Their campaign message is:

I [insert name] am sending my Rainforest SOS to the world.”

And the supporting explanation: “On behalf of the rainforests, we want to send the world’s biggest SOS to world leaders before the forthcoming global climate change negotiations in Copenhagen. Only if we take action to stop tropical rainforest destruction can we tackle climate change before it is too late.”

Personally, I think there could hardly be a more important campaign!

On a related note, we explored how a carbon offset scheme might be set-up to support saving the tropical rainforests in a press release of August 3, 2009.

The opportunity for Ignatieff to act on climate change

2009-09-28T10:01:00.000-07:00

Michael Ignatieff, who has been effective leader of the Canadian Liberal party since December 10 2008, and Leader of the Official Opposition, has withdrawn support for the Conservative minority government headed by Stephen Harper. This has naturally led people to question what Ignatieff stands for which is different from Stephen Harper, and commentators such as Rick Mercer and Rex Murphy believe he isn't clear on this.

But why doesn't Ignatieff make more of a stand on climate change?

As we posted in our September 22 press release, Canadians 'are particularly disapproving of oil companies for their stance and actions on climate change. This level of concern reflects the tension between Canadians’ relatively high level of concern about climate change, and Canada’s actual poor climate change performance, much of which is related to the development of the tar sands.'

It seems as though Ignatieff is concerned about the failure of Stephane Dion's Green Shift plan from last October's election, and doesn't want to repeat that mistake. Yet climate change policy can be addressed in many ways, with a 'carbon tax' approach being the least politically popular (see our press releases of October 9, 2008 and April 2, 2009 for further discussions). In a country where emissions growth is clearly highly related to industry, and the tar sands in particular, a policy which appears to focus on consumer behaviour is not going to be credible. A much more integrated approach is required.

And business is also calling out for strong political climate change policies! Also on September 22, 2009, at the United Nations Leadership Forum on Climate Change, 'Business Leaders, Investors & Civil Society' said 'governments must take collection action now to address climate change ... a global agreement on climate and a sufficient price for carbon will help ensure the continuation of a global marketplace based on openness and competition ... Climate Change is the test of leadership in the 21st Century'. Read the statement - the language is very strong!

This statement is signed by some oil companies - such as BP and Shell. This should be an open invitation for Ignatieff to follow-up with these companies in developing a compelling strategy. It would contrast with Harper's unwillingness to lead on this issue. To avoid the tactical mistakes of Dion's Green Shift, he ought to consider possible outcomes by using war gaming techniques.

Earlier this month, Ignatieff released some Liberal adverts - and it is interesting that one of the adverts in French, aimed at Quebec, focused on climate change. He should consider producing an English version!

Airline responds to telepresence

2009-09-15T07:18:00.000-07:00

Following our May 29, 2009 press release about how 'over 35% of ‘American business flights’ are threatened by telepresence', we have been working on a presentation about why (more) American business travellers don't actually use telepresence. We have listed potential 'drivers' and 'barriers' (see graphic shown above); and one of the barriers was to consider how airlines would respond. Surely the airlines would market the positives of face-to-face meetings in definition against telepresence?

Sure enough, last month British Airways announced a promotion which provides grants to support face-to-face meetings, endorsed by research from the Harvard Business Review. This promotion looks to be particularly targeted at US businesses.

And today it was announced that the mayor of London, Boris Johnson, has been enrolled in this campaign with a trip to New York. I do find it quite a stretch that Boris Johnson can both support the Conservatives position of reducing unnecessary air travel, and support this campaign. And will any airline take the position of saying that people should cut out unnecessary air travel? "If you must fly, fly with us!'. It might sound crazy, but utilities such as British Gas and Hydro Quebec try and get their customers to use less of their services, for environmental reasons.

But maybe something could be done! Would it be worth the airlines, and the telepresence companies, exploring what the strategic opportunities are for collaboration. My business partner, James, is very hot on the idea of airlines integrating their offering with telepresence companies - and he is not alone. I helped run a pharmaceutical war gaming exercise last year for EphMRA, and it can be pretty interesting what comes out of one of these exercises! Maybe there are ways for airlines to meet their commercial goals, and still limit airline travel to 'reasonable' levels?

Thinking about natural gas in the US

2009-09-10T03:23:00.000-07:00

New sources of 'unconventional' gas, have been dragging down gas prices in North America. Today's Globe and Mail describes a huge field in BC which will not be tapped until prices improve somewhat. This is surely an opportunity to switch a large amount of North American power to a relatively low carbon source - particularly away from coal. In time, it would be great to get rid of all fossil fuels, but a powerful interim measure seems to be to get out of coal for power generation as quickly as possible, and substitute with gas.

If you want to read a strong case for gas being part of the energy/carbon mix, I recommend Peter Tertzakian's 'The End of Energy Obesity' which came out this summer. And as described in this book (p.222), 'in 2008, as if out of nowhere, US natural gas supplies started soaring ... the shift is towards 'unconventional gas'.'

From a consumer perspective, it will be interesting to see what happens to residential energy supplies. The distribution of natural gas to homes has an uneven regional distribution in Canada and the US (see chart above for the US, using data from our Environmental Choices study) - in contrast to England, where residential gas is quite uniformly distributed. Will gas supplies open up to more houses in regions like Florida?

One thing which Peter Tertzakian also talked about in his book was the 'asymmetric' nature of power consumption. He focused on the point that if you 'not use' 1 unit of power at home, it saves many times that unit if the energy is generated in the usual way - from a power station.

If the power is generated at home, through mCHP, this asymmetric ratio has the potential to be much reduced. Using gas as the original power source, the hydrogen fuel cell market is anticipated to grow rapidly (as we described in our press release of Dec 17, 2008). In the press release, we noted low investor confidence for companies such as Ceres Power and Ceramic Fuel Cells, but this has since rebounded considerably.

Are we moving to a low carbon world?

2009-09-01T07:59:00.000-07:00

Further to a recent blog, I have been looking out for evidence that our efforts to decarbonise are making a significant difference, at a global scale.

On this point, a couple of pieces of analysis caught my attention.

First, I like the work of Peter Tertzakian of ARC Financial who breaks out what is happening in the OECD 'WealthyWorld' (28 countries with total of 800 million people) compared to the rest of humanisty (150+ countries with total of 5.9 billion people). In recent years, he does see a breakpoint in energy usage in the WealthWorld as shown by how GDP is losing its close correlation with oil usage (Oil: A story made and Broken, ARC Financial, July 6, 2009). Is this a good basis for believing we are making a difference? I suspect it is reasonably good with BAU showing no breakpoint. The chart shown by this blog is taken from his July 6 editorial, and I am currently enjoying his book 'The End of Energy Obesity' - easy-to-read, insightful and quite optimistic!

Secondly, the EU just announced that emissions have been declining, principally due 'to lower CO₂ emissions from fossil fuel combustion in the energy, industry and transport sectors'. However, as they say, some of this was due to the economic slowdown of the last year. Could an analysis be done to assess how much was due to the economic slowdown, and how much was due to low carbon measures?

Culture, passions and motorbikes

2009-08-21T19:32:00.000-07:00

It's interesting how much focus Tony Blair (representing the Climate Group) is placing on technology in tackling the climate crisis. I think he should also consider how cultural values could evolve to be an important part of the solution.

In yesterday's Guardian, it was reported that:

'In a report forecasting 150m cars on China's roads, which will produce a fifth of global exhaust emissions by 2020, the former UK prime minister said it was impractical to expect governments to curb sales.

"I think the way we consume has to change, but I think it is completely unrealistic to say to people you can't have a car, you can't use a motorbike. It is just not going to happen," he said.'

I happen to be working through some of our Environmental Choices data about values and passions, and it is striking how passions can be interrelated with concern about climate change.

In Canada, a group that is relatively likely to be enthusiastic about motorbikes are middle-aged men. According to our data, 10% of men aged 35-54 are passionate about 'motorbikes'. Also, 19% of men aged 35-54 are passionate about 'nature watching/nature shows'.

We have developed a 3-fold segmentation categorizing people by their concern about climate change - these groups we have called 'Climate Citizens', 'Mild Greens' and Sceptics & Uninvolveds'.

There is very little chance that a middle-aged male, Canadian, Climate Citizen is 'into' motorbikes - just 2% are. In contrast, he is particularly likely to be passionate about 'nature watching/nature shows' - 30% are. (A general cross-cultural finding from our study is that Climate Citizens tend to be much more passionate about nature than other groups.)

In contrast, a middle-aged male, Canadian, 'Sceptic & Uninvolved' is relatively likely to be passionate about motorbikes - 22% are. These people generally don't 'do' nature - just 5% are passionate about 'nature watching/nature shows'.

My point is not to be anti-motorbike (indeed, I used to have one). It's about people wanting different things based on how the world is changing, and our interrelated changing values and passions. If relatively few people actually want motorbikes, then there isn’t going to be much of a problem dealing with their total exhaust emissions!

I hope that people's passions can help make a low carbon world more attainable.

As regards, the photo by this blog - that is me about to have an impromptu game of road frisbee with a couple of members of the Mandalay cycling club we met on the road between Mandalay and PyinOo Lwin (Maymyo) in 1994. I was making a cycling trip in Burma with a friend. (Jerry and I wrote up the trip in the now defunct Cycling & Mountain Biking magazine, August 1995 - and upset some people - but that is another story). We were struck by the ease of getting around the cities and quiet country roads of Burma (and extreme friendliness of the people) compared to the transport nightmare of Bangkok!

Problems of knowing whether we are really making a difference

2009-08-19T10:06:00.000-07:00

Describing an analysis by Bickel and Lane, Neil Reynolds of the Globe and Mail wrote today about global warming:

'So what have we done to lessen the destructive consequences of this impending and certain environmental disaster? In a paper released earlier this month, two climate change authorities reckon that we - meaning the world - have achieved zilch.'

There is then a discussion about how carbon emissions have continued to rise over the last 2 decades.

Yet, to make this claim, they really should provide evidence of where the world would have been without the efforts made so far. And in the real world, this is extremely difficult to do, in a compelling way, since we do not have the option of running an experimental control.

This is relevant to a range of current issues - such as in whether to provide aid to Africa, initiate government stimulus spending during the 'credit crunch', or whether carbon offsets provide 'additionality'.

In our decision-making, we need to be clear about how we would likely make a difference to a problem. We should also build our best appropriate measurements to judge whether it really did make a difference (comparing actual outcome with most likely outcome if we did not do this action).

Prince Charles is England's leading climate change influencer

2009-08-18T09:17:00.000-07:00

I noticed that Grist has commented on how 'green' 10 royals are - with Prince Charles the first mentioned figure.

I dug out some information from our Environmental Choices survey indicating that he is England's most positively influential political figure, when it comes to climate change.

Details about the question from the survey are shown below.

Fieldwork - Sep 25 to Oct 3, 2008

Q. 28 Please look quite quickly down these lists of political figures and indicate which of these people, if any:

a) you have found as being effective in shaping your thoughts and/or understanding about Climate Change in a way that you agree with. Please mention any other politician like this, if you wish,

and,

b) are any of these political figures you have found as generally wrong-thinking and/or annoying in their opinions or actions to do with Climate Change? Please mention any other politician like this, if you wish.

Please mention as many or as few people as you like. To make the task easier, we have separated the people by which region they are based and ranked alphabetically on last name.

The Importance of Segmentation in Understanding Public Opinion to Climate Change; And a critical review of the HSBC Climate Change Index 2007

2009-07-06T14:09:00.001-07:00

FIRST POSTED ON DECEMBER 9, 2008

In my last blog, I set myself the challenge of convincing business leaders about the green value of their low-carbon brands. In developing my case, this blog article addresses the critical importance of segmentation – to be able to identify, measure and target those who are concerned about climate change.

IMPORTANCE OF MEASURING PUBLIC OPINION

Public opinion is an important factor in moving the world to a low-carbon economy.

Jared Diamond is probably close to the truth when he writes:

“Businesses have changed when the public came to expect and require different behaviour, to reward businesses for behaviour that the public wanted, and to make things difficult for businesses practicing behaviours that the public didn’t want. I predict that in the future, just as in the past, changes in public attitudes will be essential for changes in businesses’ environmental practices.” (Collapse, 2005, p.485)

By accurately and insightfully measuring public opinion, market researchers have a vital role in guiding business and government strategy. And yet there is a tremendous amount we do not yet know about how people think, feel and behave towards climate change - and we are in danger of being misled by survey results we do know. To illustrate my argument, I am going to make some critical comments about the information provided by the HSBC Climate Confidence Index 2007.

(These comments are intended to be constructively critical; and we would be delighted to receive constructively critical comments of our work! They should also not imply any criticism of what HSBC is doing with the HSBC Climate Partnership, which looks to be an excellent initiative. Also, whilst it still does not cover segmentation, the analysis in the 2008 report does not have the analytical shortcomings of the 2007 report, which I discuss below. Specifically, the 2008 report does not characterise each country as an average, and it focuses on more robust comparisons between attributes rather than between countries.)

The 2007 UK report summaries the results as follows:

“The HSBC Climate Confidence Index 2007 shows the UK as the least engaged of any of the economies surveyed. People in the UK have the lowest level of concern, the lowest confidence in what is being done today to address the issue, the lowest level of personal commitment, and nearly the lowest optimism about the outcome. A fatalistic view is prevalent, with significant ‘green rejection’, especially in younger age groups.”

But what does this really mean? Are they claiming that all British people are like this? After all, I am British and I don’t recognise myself at all in that description?

Although HSBC has not said it explicitly, their analysis is based on taking the averages of various quantitative measurements. To my mind, there are 4 critical questions one should ask about this kind of survey summary, to do with a) the data distribution around an average, b) the relevance of an average, c) the importance of segmentation and d) reliable measurement of public opinion.

1. THE DATA DISTRIBUTION AROUND AN AVERAGE

First, when given an average, we also need to know what the distribution is around the average. Although we have become very familiar with headlines based on averages such as perhaps “the average age of menopause is 51”, we cannot really make judgements about what it means for an individual without knowing what the distribution is around this average. We need to know what proportion of women reach menopause at the ages of 46, 47, 48, 49, 50, 51, 52, 53, 54 and 55.

As regards the HSBC survey summary mentioned above, we need to know whether all (or almost all) of people in the UK are considered to be fairly unengaged with climate change, or are there some people completely unengaged and others who are pretty committed to tackling this issue?

2. THE RELEVANCE OF AN AVERAGE

Secondly, we should also question whether an average is a reasonable way of describing the data. An average is described as a measure of central tendency (and can be calculated as a mean, median and/or mode), and the normal distribution (also known as the Gaussian distribution, or bell-shaped curve) has long been a core methodological assumption of market research analysis. In my opinion, this is often a grave error!

For example, although true, it is misleading to say that, on average, every person has one testicle and one breast. The obvious first step is to segment people, into men and women, before taking an average! I believe that market researchers commonly make less evident mistakes of this kind. Averages do have an important role in the market researchers’ tool-kit, but they are overused and often misapplied.

As Stephen Jay Gould remarked, “We still carry the historical baggage of a Platonic heritage that seeks sharp essences and definite boundaries. … In short, we view means and medians as the hard "realities," and the variation that permits their calculation as a set of transient and imperfect measurements of this hidden essence .. But all evolutionary biologists know that variation itself is nature's only irreducible essence. Variation is the hard reality, not a set of imperfect measures for a central tendency. Means and medians are the abstractions.”

From our Environmental Choices study, we can see that people in Canada, England and the USA are extremely divided in how they think about climate change.

Many people are very engaged with climate change – a group we have termed Climate Citizens. They represent 41% of Canadians, 31% of English people and 28% of Americans. This group is fairly consistent internationally, and have very little in common with the views of the group we have called Sceptics & Uninvolved. 24% of Canadians, 26% of English people and 31% of Americans can be classified as being Sceptics & Uninvolved.

If we look at a whole range of independent attitudes, emotions and behaviours regarding the environment and appeal of low-carbon brands and policies, we can see clear differences between Climate Citizens and Sceptics & Uninvolved. To give just a couple of specific examples, we can see that Climate Citizens are more likely to support restricting airport expansion (see our Government Mandates report) and more likely to be interested in installing a new hydrogen fuel-cell home boiler (see our Fuel Cells report) than people who are either Mild Greens or Sceptics & Uninvolved.

This is not to imply that attitudes towards climate change provide the only, or even most important input, towards understanding every aspect of how people are reacting to the low-carbon economy. We need to look at the survey data to understand this. In real-life, events tend to have multiple contributory factors[1]. For example, the Environmental Choices survey data indicates that contributing factors to public opinion against airport expansion include, a) respondent’s attitudes towards climate change, b) whether the respondent is a flyer or not, and c) whether the respondent lives in England (rather than Canada or the USA; where restricting airport expansion is not currently such a political issue).

3. THE IMPORTANCE OF SEGMENTATION

The comments I have made about averages lead to the conclusion that market researchers need to get much better at understanding how to segment people into relevant groups.

As an analogy to thinking about climate change segmentation, let’s consider people’s attitudes towards God. We should expect clusters of associated beliefs which come with being a believer, an agnostic and an atheist. Surveys which wish to understand religious/ethical opinion (such as on abortion) or behaviour (such as buying hymn books) would first need to classify people into these segments.

With regard to climate change, the Environmental Choices survey data indicates that the main groups, Climate Citizens, Mild Greens and Sceptics & Uninvolved – have quite different clusters of beliefs to do with climate change, and their receptiveness to the low-carbon environment. These clusters of beliefs are quite substantial, which seems to reflect the importance of climate change in people’s lives.

The tools that market researchers have to classify people can be created before analysing the data (a priori), or by using the data to create classifications (a posteriori) or a mixture of both. In the analysis we have done for our Environmental Choices survey, we created the main classifications, a posteriori, using a method called cluster analysis across the international sample. This used as input, 5 variables used to understand people’s attitudes towards climate change – and the analysis grouped people into 3 main types.

What can also be useful is, on particular issue, to classify people into groups on an a priori basis – particularly whether people are users, considerers or non-users of a particular product or service.

4. RELIABLE MEASUREMENT OF PUBLIC OPINON

We also need reliable measurements of public opinion! To make valid inferences between different respondents, or groups of respondents, it is important to have confidence that the measure is reliable. This is not a problem for certain things we would want to measure - such as age and gender.

However, a large number of measurements collected in market research are quite subjective. A popular question type is to ask people to rate something using a “1 to 7” or “1 to 10” scale where “1” is “very poor” and “10” is “excellent”. Responses to these types of questions are not consistent between respondents. My score of “8” may be equivalent to your score of “5”, for a particular attribute.

The scores generated from this type of data are really only robust for measuring between similar attributes or similar products on one scoring task. What you can do with this type of question is then consider which issues are more or less important for a particular individual – and then gross the results up to the group as a whole.

It becomes less reliable to compare between respondent groups, although the level of reliability does depend on how the question was asked exactly, the subject matter and whether there are different cultural norms between the groups. On this last point, comparing between countries can cause major reliability problems since, for example Latin cultures tend to respond to these types of question scales much more positively than those from Northern Europe. I have seen this phenomenon in numerous international studies. In one particularly study a few years ago, the comparison between countries was totally discounted since a literal reading that Italian doctors were exceptionally positive about their medical reps, and that the Dutch doctors were exceptionally negative about theirs, was not at all credible.

Consider now the HSBC Climate Confidence Index 2007 which included the question such as “how much do you agree or disagree with the following statement on a scale of 1 to 7 with “1” meaning disagree strongly and “7” meaning agree strongly (or similar) - ‘Climate change and how we respond to it are among the biggest issues I worry about today.’

How should we interpret the reliability of these measures?

There are 4 main dimensions that the survey considers – which they summarise as relating to Concern, Confidence, Commitment and Optimism – and they report on the “top box” proportions (people who score 6 or 7 on a 7-point scale). Following the argument expressed above, prima facie we should be happy to consider the reliability of the relative agreement between these attributes – that people are more concerned about climate change than confident it can be dealt with (and so on).

However, we should question the reliability of comparing between countries with these questions. Using a “1 to 7” rating scale, on almost any issue I would expect a survey of Brazilians to show higher agreement than a survey of Britons – as is the case with this study. Whilst I am not suggesting that we totally discount this comparison, I am saying that we should be very wary of taking these results at face value. It may be that some “cultural adjustment” analysis could be done to make country comparisons more reliable?!

I am not sure we can ever create perfectly reliable attitudinal measures, but we can certainly look at ways to improve reliability. Personally, I am quite persuaded by the work of Gerald Albaum and his advocacy of the two-stage Likert scale[2]. I think we will also see developments of implicit measurements of attitude in the near future, and look forward to testing their reliability.

End comment

Nearly 100 years ago, Bertrand Russell published his book “The Problems of Philosophy”. In the first chapter he addresses the question of “Appearance and Reality” and asks “Is there any knowledge in the world which is so certain that no reasonable man could doubt it”? He then considers the table he is writing on, and suggests that a painter has to unlearn the habit of thinking of things in a common sense way, and to learn the habit of seeing things as they appear.

In much the same way, I believe that market researchers have the tools to try and understand this intangible thing called “public opinion” much better than we do today. We should unlearn the habit of thinking of public opinion in a common sense way, especially the idea of “the average man”, and provide much more insightful analyses to support businesses and policy-makers.

Peter Winters

[1] Jared Diamond’s five possible contributing factors to understanding a civilization’s collapse are - 1) environmental damage, 2) climate change, 3) hostile neighbours, 4) friendly trading partners and 5) society’s response to its environmental problems.

[2] Albaum, G. 1997. The Likert scale revisited: an alternate version. Journal of the Market Research Society, 39(2), 331-348.

Convincing business leaders about the “green value” of their low-carbon products

2009-07-06T13:43:00.000-07:00

FIRST POSTED ON NOVEMBER 6, 2008

Developing a new, green energy revolution is seen as a very high priority for politicians in North America, Europe and elsewhere. It was a key focus of Barack Obama’s successful campaign to be the next US president - and raises hopes and expectations that the US government will become much more proactive in supporting this revolution.

In a consumer society, business ingenuity and entrepreneurial spirit are essential to make this green energy revolution happen.

There are now many emerging companies working to develop low-carbon products. These companies typically face a large number of challenges, as is reflected in the volatility, and often slumps, in their share prices. It’s a tough challenge to raise finance, choose and develop the most appropriate technology, negotiate collaborative deals with business partners, keep abreast of relevant government policies, integrate with a supply infrastructure of both today and the future, deal with unexpected events (such as the credit crunch), keep an eye on the competition, and then to market and sell the end products to consumers to run a healthy, profitable company.

A lot to think about!

In this article, I’d like to focus on the challenge of marketing low-carbon products to the public. I am prompted to start my blogging on this point as there seems to be a belief, amongst some business leaders, that people will “not pay extra to buy green”. Challenging this view is one of the fundamental reasons as to why we started-up Haddock Research!

Take the case of Stephen Voller, the then-CEO of Voller Energy plc in the UK. In an interview early in 2008, he described his concern about climate change and the green benefits of fuel cells, and yet he also said:

“In a nutshell, people will not pay to be green. We know if low-emission products are cheaper and better than the conventional alternative people will buy them. No brainer. But consumers will neither pay a “green premium” in most cases, nor accept a performance premium or put themselves out. Yes there are a few exceptions to the rule, but these eco-warriors generally have no money and there are very few of them. … For example, imagine that a new type of gasoline (petrol) was introduced that you could run in your car that produced lower emission out of the tale pipe. But this new fuel cost more per gallon (litre) and when you filled your car with it the acceleration wasn’t nearly as good. How many people would actually queue up at that pump?

Or consider John Halfpenny, CEO of CMR Fuel Cells; a company which was the winner of the 2005 Carbon Trust Innovation Award. In early 2008, he described how his business with portable fuel cells was mainly driven by being able to “deliver better performance and convenience than exiting technology solutions” and the “the current focus on green issues does not help us much here”.

Yet I believe that these viewpoints under-value the green credentials of their products! I believe that the climate crisis is creating an enormous unmet consumer need; and that selling low-carbon brands can offer considerable marketing advantage.

The green credentials of a brand can create interest in the target audience. It can provide a narrative for the low-carbon brand. It can be the reason that users, who have developed a relationship with a low-carbon brand, talk to each other and recommend the brand to others.

But marketing is a creative exercise, with different approaches and ideas required for different situations. Quality of the product needs to be assured, and ideally the brand proposition would be sufficiently unique and distinctive that consumers would not easily be able to make a direct price reference to a non-green competitive product. It is not a question about “would you pay 5% extra for a green alternative” as this draws too much attention to the product – and not enough on the passions, interests and feelings of the consumer.

But, am I right? I need evidence to test my ideas and persuade others – especially the entrepreneurs who are investing so much of their time and effort creating these low-carbon businesses.

To answer these types of question, I needed some survey data! So, we ran an international study amongst nationally representative samples of adults in Canada, England and the USA in late-September/early-October 2008 – our Environmental Choices survey.

Over the next few weeks I would like to share some of the results of this survey which specifically relate to the issues I have raised in this post. My next blog will cover the importance of segmentation. I would very much welcome feedback to the results I show, and challenges to the points I make (that’s all part of Web 2.0, so I am led to believe!).

I believe these issues are very commercially important. Many of these low-carbon businesses are listed on AIM, part of the London Stock Exchange. A look at the share price of the 2 companies mentioned in this blog, Voller Energy (code VLR) and CMR Fuel Cells (code CMF), shows that their share prices have declined to a very low level (as of 6 November 2008). Indeed, Voller Energy issued a statement on 1 October 2008 saying that the future of the company was dependent on additional financing.

At Haddock, we would like to help give such companies, and their investors, greater direction and confidence in how they could market their low-carbon brands.

Peter Winters