Saturday, March 03, 2007

Capitalistic Environmentalism

There has been a tremendous amount of interest since the Oscars directed at Al Gore's terribly wasteful energy lifestyle. Most of that interest has of course come from bloggers, but a few MSM types have at least mentioned it in passing. I won't go into how huge Mr. Gore's energy bills are, or the amount of carbon monoxide his private jet pumps into the atmosphere. Instead I would like to discuss the concept of buying "carbon offsets". Mr. Gore proudly proclaims he has a neutral "carbon footprint" because he buys enough of these offsets to neutralize his wasteful lifestyle.

Just where does one go to buy a couple of "carbon offsets"? Why, to your friendly neighborhood carbon offset store, of course. Not really. There are companies that are set up just for the purpose of selling such items though. Mr. Gore buys his through Generation Investment Management
Generation is an independent, private, owner-managed partnership established in 2004 and with offices in London and Washington, D.C.

We invest in long-only, global, public equities with a concentrated portfolio of 30-50 companies. We aim to buy high quality companies at attractive prices that will deliver superior long-term investment returns. Sustainability research plays an important role in forming our views on the quality of the business, the quality of management and valuation.

Our performance fees align our interests with that of our clients by being based on long term performance.
Generation Investment Management buys companies or stock in companies that either are effectively reducing their greenhouse gas emissions or are producing the technology that will enable other companies to do so. Generation Investment Management does not ship Mr. Gore a "carbon offset certificate" when he makes his purchase, though. What they send him instead is a plain old ordinary stock certificate. See, a "carbon offset" is really just a stock purchase. A purchase of shares in a company that is hopefully more energy efficient than it's competitors, but a stock purchase just the same.

What really makes all of this interesting is Mr. Gore himself.

Al Gore is a founding partner in Generation Investment Management. He is also the Chairman.

Now pay attention. Mr. Gore buys stocks through his own brokerage company, stocks that presumably will produce a profit. One would assume Mr. Gore also receives a salary of some sort from the company he chairs. Then Mr. Gore gets to claim that this transaction negates his wasteful lifestyle, in effect "balancing the books" environmentally. He gets the conservatives off his back and gets a clean conscience at the same time.

Now that's a great gig, if you can get it, I don't care who you are. Hell, I'm just as much a capitalist as the next guy, so I certainly am not going to criticize his neat little scam.

But, let's revisit the idea of "carbon offsets" for just a moment. In effect it's very similar to a strategy that has been used for years by many other industries. Perhaps most notably, the coal industry I used to work in.

If your process can not be "cleaned up" for less than the fine that would result from an environmental discharge conviction, you simply pay the fine and life goes on. In the words of John Lennon, Obladi oblada...

Al Gore does exactly the same thing, except he is not paying actual "fines" for his wasteful lifestyle. He has instead taken it a step further and is making a neat profit from the "fines" themselves.

Capitalistic Environmentalism. Like I said, it's a great gig. If you can get it. And so far, as far as I know, ex-vice Presidents are the only ones who are able to pull it off.

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