The second annual Fortune Brainstorm Green Conference again proved to be one of the premier environmental conferences of the year, and Fortune Magazine’s co-chairs Brian Dumaine and Marc Gunther deserve congratulations for pulling it all together. For two and a half days, business, environmental and government leaders reported on their sometimes differing, but more-often similar, views on the environmental state of the world and its future.

Punctuating the meeting in the closing keynote address was the star power of former President Bill Clinton who impressed with his macro-to-micro-and-back-to-macro grasp of the world’s environmental challenges.

Global climate change was the main thread running throughout the conference, and all its attendant issues were presented and probed in detail. Topics included energy generation, transportation, food and agriculture, the global economic meltdown and its effects on environmental initiatives as well as Washington DC’s actions or non-actions in relation to all the above.

A surprising sense of optimism, a we-can-beat-this-global-warming-thing-if-we-all-work-together attitude seemed to prevail among ­all the presenters that I had the privilege to see. Their can-do attitudes were surprising in that most of the problems discussed — from an expanding world population to increasing coal use by China and India, to the global economic meltdown — were all so formidable, so dire that it seemed that a few more balancing voices of skepticism would have been in order.

Rose-colored shades notwithstanding, here are some of the sessions I found interesting:

Most panelists from big energy companies, NRG, Duke, big manufacturers, e.g., Applied materials, FedEx, etc., are pushing for cap and trade as one important key to transitioning our world away from carbon-producing energy generation and technologies. The consensus was that Congress would pass something in 9-12 months.

But, there was also general agreement that the legislative hurdles are dauntingly high. Coal-dependent districts could see a doubling of their electricity bills, and their Congressional representatives will be reluctant to support this legislation without some kinds of compensating elements. Much of the discussion centered on the need to make the transition fair and equitable, yet no one knows exactly how to do that.

Costs will go up with any carbon legislation and this is the rub for Senators and Congressmen.

Bill Clinton’s view was that the most important thing people can do, unless they have a vote in the US Congress or a seat at the Copenhagen conference in December, is prove that the transformation is, or can be made to be, good economics. That will do more than anything else to give the US a good global climate change bill.

Batteries for electric cars loomed as a large subject here. In fact, they were referred to as a holy grail. Several electric vehicles were on display and available for driving. I personally got to tool around in a fully electric Mini-Cooper, which was great fun in the meeting’s Laguna Niguel setting overlooking the Pacific Ocean. You can lease the mini right now for $850/month, and you get 100-200 miles on one 3-hour charge. While it looks like a regular Mini, the back seat is all battery.

Batteries of course are the heart and soul of these cars and there have been continued improvements in technology. But, most experts agreed the technology was still very much in its infancy. “We’re at the front end of battery technology, and we'll see a continued lowering cost curve along with improvements in performance.” That also means that standards are not going to come very soon, and standards will be necessary for the infrastructure support, connectors, charging stations, etc. that will also be needed. Standards are 3-5 years away.

Only four companies in the US are building advanced batteries, including conference presenters Ener 1 and Johnson Controls. Four or five different chemistries are in competition, most of them involving lithium, e.g., lithium-nickel. Chinese companies are using lithium ion phosphate. Charles Gassenheimer of Ener 1 (which was Delphi), said, hydrogen-based fuel cells are the most efficient.

Interestingly, Asian countries, mostly China, are already in the process of cornering the market on this technology. So, believe it or not, we in the US could be dependent on foreign batteries as we are today on foreign oil. Bill Ford, CEO of Ford, admitted this was a real risk.

But, many engineering hurdles to improving battery power and durability must be overcome, and some felt that battery technology was not yet up to snuff. “I dispute the premise that we have battery technology ready today for electric vehicles,” said Michael Andrew of Johnson Controls.

Lithium is part of the challenge. It’s a tricky material to work with as it has to be insulated fully from moisture, otherwise, dangerous reactions occur.

“We think there has to be a disruptive change, i.e., a big breakthrough in battery technology,” said Ian Clifford, CEO of electric carmaker, Zenn Motors, whose vehicle was proudly displayed at the conference.

The battery discussions moved from chemistry to consumers. “Range anxiety” is the new watchword in the electric automotive world – a term describing drivers’ fears that they’ll be stranded when they lose their charge before reaching their destination.

And many marketing questions are still wide open. Finding answers to the marketing questions are one of the keys to determining the electric car’s future, because the viability of the cars will depend on massive consumer acceptance.

Li Lu, founder and general partner in LL Investment Partners, an investor in Chinese battery/cell phone and electric-car maker BYD (along with Warren Buffet), put it this way. “We can do 300-mile electric cars today, but is this what a consumer really needs? The real question is how fast can we get the price to go down? Is the answer a car selling for under $35,000 that goes 250 miles? We don’t know if that’s where the market is, and unless you get the scale…”

Agassi, founder and CEO of Better Place – the electric vehicle services provider – was the keynoter at last year’s Fortune conference. He was invited back to update us on his progress in introducing affordable, fully electric vehicles along with a supportive infrastructure of battery changing stations – a carwash-like affair where robotics remove the spent battery and replace it with a fully charged one in four minutes.

Israel and Denmark are on schedule, he reported, to introduce his system that will become commercial in 2011.

“You buy miles in a gas station, not gas, and electric miles are significantly cheaper than gas miles,” Agassi said.

“If you’re willing to give me what you pay for gasoline (in Europe it’s $8/gallon), I’ll give you a car for free, and you pay me for the gas (equivalent). At that point: who would want to buy anything else?” Agassi asked.

But, he has his detractors. Lots of engineering hurdles he hasn’t overcome they say. Complex chemistry, etc. And always that pesky range anxiety.

Not everyone on the “Future of Cars” panel agreed that Better Place’s idea will work. Representatives from BMW, Ford, Toyota and Fisker Automotive voiced their doubt, although they each had competing commercial agendas. His batteries, some said, won’t work for every kind of vehicle. There are durability challenges, e.g., the battery has to be completely sealed from water, requiring “space shuttle type hardware.” You have to control the temperature around the batteries. The connectors must handle 600 volts, which also presents big engineering challenges.

Susan Cischke, Group VP Sustainability, Environment and Safety Engineering at Ford, said, “It’s an interesting concept, but we want our Ford customers to have the same reliability, durability, etc. to ensure customer confidence.”

While Agassi conceded a few points to his critics, e.g., he agreed you can’t get all cars to use the same batteries, there have to be variations, but the costs for multi-battery changing stations, he argued, would still be cost-effective.

As for connectors: “We have lots of devices. Every train car gets power in and out of the car. They have connectors. Yes, battery packs have to be air tight with ability to exchange heat. If the battery is not absolutely contained, it’s a problem. But we’ve tested this successfully many times.”

Paul Hawken, an iconoclastic, seminal thinker, businessman and pioneering environmentalist was provocative, if a tad contradictory, during his after-dinner discussion with Marc Gunther. Hawken doesn't think the proposed Waxman-Markey legislation is a real plan. Environmental change legislation can't be approached piecemeal; it has to be systemic. He rattled off a litany of all the things that have to be done to stabilize the carbon in the atmosphere and it seemed absurdly unattainable, but then he concluded by saying he was optimistic we would attain carbon stabilization.

He's also an advocate of biomimicry. He believes the "green" tech of today, say a solar panel, is over-engineered. His new company is developing technologies, such as solar cells, that are more like a leaf in nature. They're cheap, are simple to make, etc. yet, like a leaf, they store solar energy efficiently, and release it when needed.

It's a good story, but unclear if this kind of biomimicry technology is around the corner, even though it has influential advocates in addition to Hawken, such as Ray Anderson, of Interface, Inc., another influential leader in transforming businesses to be more sustainable.

David Crane, CEO of NRG had one of the most quotable lines of the conference, especially in relation to power generation. “To power generators,” he said, “the electric car is the air conditioner of the 21st century.” That means that as the number of electric vehicles increases we’ll need more base load – which appears to be a strong argument for building more nuclear plants.

Crane also predicted the US would build three new nuclear plants in the next 10 years, although don’t try to site one just anywhere, he cautioned. Existing sites, brownfields, government land, maybe, but you won’t be able to site a nuke plant on a greenfield. “It’s the ultimate NIMBY issue,” he said.

Alan Hanson of AREVA predicted five or six new nuclear plants in the US in the next ten years. He also thought greenfield siting was a possibility so long as it was in a state, for example, Idaho, where people are more familiar with the technology.

The solar and wind industries were well represented at the meeting in all their various forms. While these technologies are both growing and hold promise, they remain expensive, diffuse and intermittent. Because these generators only work when the wind is blowing and the sun is shining, they are in need of power storage technologies.

Both solar farms and wind farms also are in need of new transmission to bring their often rurally based energy to urban areas. Several renewables advocates noted that these technologies therefore “depend on transmission, and it’s very hard to build new transmission in this country because of opposition.” Interestingly, participants in a session on nuclear power noted the same need for enhanced and “smart” transmission infrastructure.

Rich Lechner, VP of Energy and Environment at IBM, said that IBM is now in the energy and environmental business.  “We’re fundamentally redefining the role of IBM. We’re changing electric grids, water systems, transportation, etc.” Smarter Planet is name of the campaign.

1.      Green Infrastructure. We started in the IT space and now we’ve expanded significantly into buildings, cell towers, etc. We’re looking across everything to make them smarter.

2.      Sustainable business operations. Software, deep analytics, consulting services.

3.      Macro systems. We’ve done 50 smart grid projects around the world. In London, there was a traffic charging system. In Stockholm and Singapore, IBM adjusts rates drivers are charged based on the moments of congestion.

“I drive my car in and the system reads my license plate, and I get charged depending on congestion. But you get feedback to know the least costly way to drive. This smart traffic control system reduced traffic 20 percent and reduced CO2 emissions. You can regulate traffic in a smarter way. Stockholm now has reduced traffic and CO2. Now we’re talking to other cities in California and in Singapore.”

This panel generated the most heat at the conference, (even though it was a comfortable, dry heat), as they displayed their (usually, but not always) differing points of view on “clean” coal: Michael Brune, Executive Director of Rainforest Action Network, David Hawkins, Director of Climate Programs at the Natural Resources Defense Counsel and Michael Morris, Chairman, President and CEO of American Electric Power (AEP).

Often, Hawkins and Morris were on the same side, pragmatic, how do we get cleaner coal to work; how do we get it through Congress. But Brune was of the view that we shouldn’t spend one cent to keep any form of coal going – even if cleaner coal could work.

Brune: “I’m saying we shouldn’t even try, even if it were to work, because investment in clean coal delays investments in renewables and efficiency.”

Hawkins: “NRDC supports renewables, and efficiency AND better coal. Still, we think there are three big reasons why it’s better to have coal than not have it.”

1.      It’s politically easier. We won’t get money spent on efficiency and renewables without political support. Many states depend on power from coal. If you can’t answer to these guys, then you won’t get their support. To say you’ll do it with just efficiency and renewables, you won’t get there.

2.      This is tough. We don’t need to make it harder.

3.      It won’t help us with China and India. This technology can unlock a lot of doors.

“We don’t have time to change Congress with elections,” Hawkins continued. “We have to change their minds. It’s not viable to get them to vote for a strong energy bill we need if we’re trying to convince them without including coal in some form.”

Morris pointed out, “This is a global issue. China’s Carbon pollutes us. Therefore the US can’t disengage unilaterally from coal.” AEP is building new coal plants but they can be retrofitted with carbon capture and sequestration technology once that technology matures.

And what about those carbon capture and storage (CCS) technologies?

Morris said we have the capture part of the technology already; it’s the sequestering part that’s difficult. But he envisions CCS technology will be viable in only a few years. “By 2012, we’ll have a CCS add-on to a big plant.”

Hawkins says if we’re going to induce better behaviors from the Chinese regarding coal and CCS, we need to set the example. In China, the people he meets there always ask him, “What is the US doing?”

The main argument for coal is its cheapness compared to renewables, but it comes at a steep environmental price in air emissions and damage from mining.

Morris agreed with both environmentalists that the mining process (he was referring to mountain-top mining) has been sloppy for years. “They deserve their reputation.”

Dr. H. Fisk Johnson, CEO of S.C. Johnson, maker of well-known household products, such as Windex®, Glade®, and Fantastic® had lots to say about how S.C. Johnson is leading the industry to greater transparency and environmental responsibility.

Fisk is an impressive man — a Ph.D. physicist from Cornell with a number of additional degrees in business and engineering. Since March, he’s been leading the charge at S.C. Johnson to make plain to all his customers the exact ingredients that are used in all of their household products. Go to the S.C. Johnson home page and you’ll see a prominently displayed box you can click on with the headline: “What’s inside: A closer look at the ingredients inside our products.” And then, product-by-product, you can learn more — in general, or in detail — it’s your choice — what’s in the product.

“We’re going to be disclosing everything in our products,” Johnson said, “for two reasons: So we can continue to have the goodwill of our customers, and as a way to upgrade the environmental profile of the ingredients we use.”

The company is still in the process of making this work. One of the challenges has been that fragrance manufacturers who supply S.C. Johnson products are highly and understandably protective of their intellectual properties. S.C. Johnson, therefore, plans to disclose the full smorgasbord of fragrance ingredients rather than ingredients specific to any one product in order to protect those intellectual properties.

And, the company has demonstrated it will change their products’ ingredients even when those ingredients are victims of public misperceptions. For instance, the company is well along in its phase out from all its products of the controversial chemical DEP, a type of phthalate – a class of plasticizer chemicals. While DEP has been thoroughly tested and deemed to be safe by independent scientists, public perceptions were not in alignment with the science, because controversies over other kinds of phthalates had heightened customer concerns over DEP. The company’s news release on the DEP phase out came right to the point: “So even though the chemistry was sound, we decided that making sure consumers know they can trust S.C. Johnson products was well worth the time and cost to change them.”

After being interviewed, Johnson then took part on a panel entitled, “Reimagining Consumption,” along with Carl Bass of Autodesk, Jeffrey Hollender of Seventh Generation, William Valentine of HOK and Adam Werbach of Saatchi & Saatchi S. This was the most philosophical session of the conference. We’re told to use less, but business’ credo is to get us to use more. Isn’t this a profound societal disconnect?

Media organizer, Marc Gunther, asked the panelists, “If within most problems lies a business opportunity, is there a business opportunity in solving the problem of over consumption?”

Environmental industrial leader Ray Anderson was one model cited.

Johnson said that government would have to be involved. Government? But, doesn’t that get us into a number of uniquely American ­third rails? Curtailment of economic freedom, freedom of choice, further government intrusion into our economy, further weakening of traditional capitalism?

Is it perhaps a fact we must face that the concept of using less fundamentally is at odds with our capitalist economy and culture?

The panel didn’t solve the problem, but one member posed an interesting thought problem: if you had a solar car that could go anywhere without polluting and was made of all biodegradable and recyclable materials, would you feel guilty owning one? How about having three of them?

There’s much more to say about this conference, but I’ll just cut to the last segment: Former President Bill Clinton.

He ended his truly comprehensive presentation on the environment, citing various successful programs around the world and making pronouncements on US policies, by confronting the mostly ignored 500-pound gorilla of the conference – unchecked population growth.

“We need to find a morally acceptable way to slow population growth,” he said, “and the only known strategy that works across all cultures and all religions is to put girls in school and give young women access to labor markets. The countries that do this have all been able to moderate their population growth.”

 

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