Oil change

We are living in interesting times. We know now that climate change and natural resource depletion may soon leave the biosphere and our civilisation crippled. But we also see green shoots of change, in the markets and corporate world, even in politics. Is it merely that this seasons' colour is green, or is this the new industrial revolution?

Heres another reason why looking after the environment is not a passing fashion. We are running out of oil. We may not completely run out for a while, but a growing number of experts in the field argue that demand may outstrip supply pretty soon. This is known as ‘peak oil'.

The issue first came to prominence in 2004 when Shell had to restate their reserves downwards by around 20%. A scandal erupted as investigators found an email to the CEO from the head of exploration, complaining that he was "sick and tired of all this lying".

Oil production from any field follows a bell curve, and all fields together also follow a bell curve. Almost no major new oil finds have been achieved in the past decade.

An ominously titled website (www.lifeaftertheoilcrash.net) by the US campaigner Matt Savinar describes the issues. "In practical and considerably oversimplified terms, this means that if 2000 was the year of global Peak Oil, worldwide oil production in the year 2020 will be the same as it was in 1980. However, the world's population in 2020 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, the price will skyrocket, oil-dependant economies will crumble, and resource wars will explode."

Jeremy Leggett, founder of independent photovoltaics company solarcentury is a former oil geologist, so he should know. In Half Gone - Oil, Gas, Hot air and the Global Energy Crisis, he shows how published estimates of oil reserves are based on some dubious claims. There was apparently a mysterious jump in OPEC oil reserves around 1985, due to a political exercise designed to reassure the rest of the world. When the full extent of the issue becomes public, Leggett predicts, there will be panic on the financial markets.

The natural tendency is to dismiss people like Leggett as catastrophists. Perhaps if we are lucky, oil will merely become more expensive and create an increasingly positive climate for the growth of alternatives - and we are seeing the start of this trend today. But political leaders are failing to prepare our economy by investing in energy efficiency and renewables - and this hardly improves the chances of a soft landing.

One place where we are seeing leadership right now is from the corporate sector. My company has recently been working with BT and the consultancy carbonsense to help develop its long term response to a carbon-constrained world.

BT already have the largest green electricity contract in the world (they are one of the country's largest electricity customers, powering the telephone and data network), and are investing in renewable energy and energy efficiency across their portfolio. Along with leading international bank HSBC, Swiss Re reinsurance company and Hilton Hotels Europe they join a growing number of organisations on the path to carbon neutrality.

In our work with BT and other companies we are encouraging them to go further - to be not just carbon neutral, but carbon positive. All businesses now need to have a view of the opportunities and threats to the business model presented by carbon constraints. But a carbon positive business goes further, and ensuring that its business model and operation are making the maximum possible commitment to driving change and minimising societal impact.

XCO2 are also seeing strong commitments from developers of larger high-end urban projects in London, Maldives, Malaysia, and the Caribbean. Savvy developers know that low carbon local generation is the future. They are no longer arguing about payback. More and more companies are announcing their commitment to driving change.

Why are businesses doing this? Doesn't it damage the bottom line? Partly it's because they know that if they don't do it, there won't be a bottom line any more. But if they do it right, they might just steal a march on the next wave of profits.