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Cracking the Carbon Code

In the 1950s, government and industry officials said nuclear power would be so cheap, there would be no need to meter it. In other words, electricity would be free. Imagine if that had actually happened (forget for a moment how much radioactive waste would be lying about) and imagine that because of the economic downturn the government decided to start charging for electricity in 2009.


Suddenly, you would look at your company and investment portfolio with a new lens. Any electricity-hungry businesses would be worth much less than those that put a premium on efficiency or used renewable energy like solar and wind power. Stock values would be revised over time as charges for electricity mounted up. Many previous darlings of Wall Street would be dogs and vice versa.


Well, we all know that nuclear power was actually too expensive to continue rather than too cheap to meter, so electricity was never given away. But in a similar vein, our atmosphere WAS given away - - but is very soon going to have a price. Smart businesses and investors will now need to crack "The Carbon Code" to figure out the winners and losers - - and just how much to adjust their business plans and portfolios.


Companies that are heavily dependent on energy from fossil fuels will find that a price on carbon, through the cap-and–trade system being developed in over 30 states and envisioned in the Waxman-Markey bill that’s making its way through Congress, are worth much less than those with less of a "carbon footprint". Energy and resource efficiency will be king.


The Carbon Code has actually been with us awhile, but so far mostly invisible. Investing in Toyota a few years ago turns out to be smarter than buying GM stock, in no small measure because Toyota and its Prius were more efficient than GM and its Hummer. Makers of compact fluorescent light bulbs are literally turning the lights out on makers of fluorescent bulbs, as many states and countries ban inefficient lights (watch out - - LEDs will soon replace those CFLs!).


In one of the most dramatic examples of The Carbon Code already at work is a company called iGPS, a maker of plastic shipping pallets. Wood pallets consume vast tracts of forest every year, something unsustainable in a literal sense as global demand outstrips supply, but also a product constrained by the worldwide effort to avoid deforestation to prevent more greenhouse gas pollution. The plastic pallet is 30% lighter than the wooden one, saving fuel and pollution immediately, and doesn’t require toxic fumigation or extra trips to the repair station. Bottom line? If you had applied The Carbon Code to these two businesses a year ago, you would have predicted that iGPS would capture a big/growing chunk of the market and CHEP, the wooden pallet monopoly, would lose over $3 billion in market cap as customers and retailers shift to plastic pallets - - exactly what has happened.


So educate yourself about the true carbon footprint and resource efficiency of your business (or those in your investment portfolio) and start shifting to the resource-efficient, low-carbon alternatives ASAP. As the resource that so many have taken for granted starts to cost real money, understanding The Carbon Code will make you look very smart and very profitable.