China’s Conservation Culture

Posted on April 22, 2013 by Doug King

Having spent the last 2 weeks in Chongqing, China’s fastest growing industrial city, I realise on returning to the UK last week just how cosy and indolent our western economies have become. China is a powerhouse of making and doing, whilst we luxuriate in our undemanding jobs, manipulating imaginary paper wealth whilst ignorantly squandering natural resources in our disposable consumer society.

It is forecast that some 300 million Chinese will join the middle classes this decade. This is in addition to China having the fastest growing urban population in the world. The pressure on Chinese cities and their economy is phenomenal, but they are preparing for it. Our guidebook to Chongqing, published in 2011, lists only one metro line. We arrived to find that they already have four, with seven anticipated by 2015! Compare this with the 20 plus years it has taken to get London’s Crossrail underway.

But it is not just the phenomenal rate of development that I believe will set China apart, it is their culture of conservation and re-use.

Walk down a street in any Chinese city and you can find people who can repair, re-purpose or recycle just about everything you can imagine, from building materials to mobile phones. Demolition sites are immediately picked over for re-usable materials and you can find plenty of trade in recovered reinforcement and plywood shuttering from concrete. Cardboard packaging is collected from high street shops and carried off in huge bundles by little old ladies.

All the litter bins in public places, not just on the street, but out of town too, are all segregated for recyclable and non-recyclable, as you would find in Germany or other more enlightened Euro countries. On corners throughout the cities you will find the street cleaners sorting and packaging up the waste from the litter bins for re-use or recycling.

With a street food culture such as China’s you would expect to find large quantities of disposable food containers in the litter bins. However, you will also find people collecting the containers, clearly for re-use. One might question the hygiene implications of such a trade, but it is unquestionably avoiding substantial quantities of plastic going to landfill, reducing the costs of packaging for the food businesses and providing a subsistence income for the recyclers.

This culture of avoiding waste has clearly grown out of necessity. However, if this culture can be retained and nurtured, particularly in relation to Chinese manufacturing industry and the emerging middle class then there is no question that it will result in a fully developed economy that is far more resource efficient than we can boast in the West.

Whilst we in the West merely debate the principles of a circular economy, the Chinese live and breath it. The disposable consumer culture of the West is simply not for them, and long may it remain so.

FiT for Investors

Posted on August 19, 2012 by Doug King

Aviva, on of the UK’s largest financial investment operations has bought up 23MW of domestic PV installations from Homesun, one of the UK’s largest installers of “free” solar panels.

How does Homesun provide people with free solar panels? It allows homeowners to benefit from the electricity generated (if they are at home during the day to use it) but keeps the Feed in Tariff (FiT) payments. Obviously Homesun will have done their homework to ensure that all their installations are on optimally sited roofs (they don’t do installations in Scotland) and as a business I’d guess that they are knocking out installations for little more than £5,000 each with a return of £1,000 PA from the FiT. Of course Homesun don’t use their own money for the installations, they borrow money and now pay a hansom return on those loans, keeping a healthy profit for themselves into the bargain.

Does this sound familiar? In March 2010 I wrote in this blog that FiTs were a public subsidy for the rich and I have gone into print predicting that they would become a means of funneling tax payer’s money to the bankers.

So why would Aviva be interested in Homesun? When the financial markets are in turmoil investors run for low risk investments, typically gilts, but with concerns about sovereign debt even those are not guaranteed anymore. So imagine the attractiveness of a government guaranteed annual payment well in excess of the rate on gilts. That is what Aviva bought when it bought Homesun’s 23MW portfolio, a guaranteed annual income of around £9M. No wonder they were happy to pay some £100M for it.

As I’ve said before: everybody wins, the homeowner with free electricity, Homesun’s shareholders and Aviva’s investors. The only people who lose are those who Homesun judged to have unsuitable roofs, who will fund the FiT payments through increased electricity bills.

Since the recent cut in FiTs, Homesun no longer offers “free” PV installations.

Hooray for Capitalism

Posted on August 7, 2010 by Doug King

The recent announcement that BPs quarterly profits were down as a result of providing for the Gulf of Mexico disaster hid the fact that BP is still making huge annual profits by anybody’s standards. Following this thought I looked up some financial results for other oil companies.

The top 10 oil companies in the world, on average in 2007/2008, cleared profits of around 0.25% of world GDP! This is even when you allow some adjustment for inaccuracy in reported figures for the Chinese and Iranian state owned oil companies. If you extrapolate these figures to total world oil production and include some guesswork for coal and gas then the global profits from fossil fuels could possibly be around 1% of world GDP. Anyway it is in that sort of region.

Now in his review, Sir Nicholas Stern suggests that the ultimate cost of living with a changed climate could be 5% – 20% of world GDP, but that the cost of mitigating climate change would be of the order of 1% of world GDP. Notice any similarity between these numbers?

From my brief investigation it looks a lot like the cost of paying for remediating the climate damage done by our thirst for fossil fuels is about the same as the profit that the oil companies make from it. So the answer has been there all the time, if we had re-invested the profits from fossil fuels in cleaning up the atmosphere over the last century we might well not be in this fix. Unfortunately the profits of a global resource have not been used to benefit mankind, but have instead lined the pockets of a few – hooray for capitalism.