SRI English

India’s spiralling food prices

By Dirk Seel

The recent high volatility in the price of rice, fuelled by fears of severe supply shortages, has further strengthened our belief that the world is currently merely taking a break from the food crisis that started in late 2007. The structural imbalances, exacerbated by increased incomes in emerging markets, rising production of subsidized biofuels, and climate change-induced weather anomalies, have not gone away. Currently, the dramatic consequences of spiralling food prices are particularly visible in India.

Historically, the country has been self sufficient in major crops such as rice, wheat, corn, millet and pulses. However, this obscures the fact that after decades of financial neglect, India’s agricultural sector is stagnating, while its people’s income and appetite are growing. As a result, local prices for lentils, meat, dairy products, vegetables and fruit – in short, prices for all nutritious foods – have sharply increased. The ones who suffer most from this are low-income urban and rural households who no longer can afford their usual consumption patterns. What is more, global prices are affected, too. Most notably, sugar prices continue to trade near 29-year highs, not least due to the negative impact of drought on India’s sugar production. The latter aspect illustrates another alarming signal: although cropland constitutes two-thirds of its land area and half of its labour force is employed in agriculture, India depends more and more on importing goods to balance its own production shortfalls.

The country’s failed agricultural policies have caused hunger, food insecurity and malnutrition. In order to ensure that staple foods are available to the poor and to avoid social unrest, the Indian government will have to declare food security the top priority on its political agenda. Significant investments into the infrastructure of farmland must be undertaken. For example, small-scale irrigation projects are a feasible and sustainable means by which to raise farmers’ productivity while reducing their dependence on monsoon rainfall. Likewise, grain supply is in need of reform. The country’s existing public distribution system is not capable of reaching the specific needs of its various working classes. Last but not least, the country needs to address the detrimental influence of lobbying interests. Only then will there be a chance for food price inflation to stop.

Energy efficient LED solutions off the blocks

By Martina Jung

The application of light-emitting diode (LED) technology in consumer products is increasing rapidly. In particular, the consumer electronics industry is demonstrating a very aggressive approach towards integrating the latest technological advances into new products, thereby offering customers more attractive and energy-efficient solutions.

When Samsung launched a range of energy-efficient LED TV products last April, it triggered a surge in LED chip production, and left competitors such as Philips, Sharp and LG scrambling to follow suit. The resulting mass production of LED chips and the continued development of LED technology have paved the way for other advanced LED applications.

Another attractive area is LED lighting. Although LED lighting has struggled to hold its own against significantly less costly—but less energy-efficient—conventional lighting solutions, Cree, a US-based leader in LEDs for lighting, indicated with the release of its results in January that LED lighting is gaining traction.

Furthermore, a new screen technology – organic light-emitting diodes (OLEDs) – is about to emerge. OLED screens are far more energy-efficient than current LCD screens and, what’s more, OLED screens are flexible. Last April, Japan-based Kyocera presented a flexible OLED cell phone concept, which users can fold like a wallet.

If LED technology continues to develop at the current pace, its market penetration and energy savings potential is set to outpace all prior expectations. Already, Bank of America/Merill Lynch expects the proportion of TVs with LED backlighting to rise to 32 % by 2012, from just 1 % in 2008.

Some governments have drafted energy efficiency regulations that will boost LED technologies. Under new legislation in the EU, for example, homeowners must replace inefficient incandescent bulbs with more efficient alternatives, including LED lights. And last year, China installed more than 100,000 LED lamps across ten cities in a pilot project; the next stage will be 1 million LED lamps across 20 cities.

Policy makers such as those in China and the EU, and beyond, may soon realise that the contribution of LED technologies to climate protection is accelerating far beyond their expectations. For investors, this could mean there will be growing numbers of compelling investment opportunities in the LED market.

Copenhagen - low expectations mean no disappointment

by Martina Jung

We had not expected a global climate treaty – or anything close to it – to emerge from the Copenhagen Climate Change Conference 2009, and we had not been optimistic that emission reduction commitments would be made, in particular by China. So, we were not especially disappointed with the content of the Copenhagen Accord.

In contrast, the wider consensus view appears to be that Copenhagen failed to meet its goal: To reach binding agreements among the participating states to tackle global warming, which would serve as the basis for a global climate treaty to be signed in 2010. Indeed, participating countries have done little more than to take note of the Copenhagen Accord, without committing to accept it. The minimal compromise achieved does not include precise emission reduction targets or control mechanisms, nor is it legally binding or unanimous.

However, there are two points in the Copenhagen Accord which give us reason for optimism. The first is the recognition among UN member states that the increase in average global surface temperatures by 2050 must be limited to 2 degrees Celsius or less. This is the first time that scientific evidence of global warming has entered political documentation, applicable to 193 states. Looking ahead, this targeted restriction will serve as a universally accepted cap against which developments can be measured. The second is the pledge by industrialised nations to provide USD 30 billion to developing countries for the next 3 years. The pledge is aimed to step up action against climate change, and may be scaled up to USD 100 billion annually by 2020. This cash should accelerate installation of renewable energy capacity.

Achievements such as these are just a first step towards a global climate treaty. For now, they will have little immediate impact on the fundamentals of renewables stocks. But the need for continuing negotiations, and the growing pressure to achieve legally binding agreements, provides room for a positive mid- and long-term effect on renewables.

In the short-term, we do expect more ambitious action on a national level. In the course of the Copenhagen conference, China and the US presented various measures that they are prepared to implement in order to reduce their carbon emissions. All of them include the increase of renewable energy capacity, implying the potential for creating new jobs and reducing their countries’ dependence on foreign resources. The statements released by the world’s two largest emitters after the conference confirm their commitment to address the climate change problem and their willingness to further promote renewable energy technologies. We believe there will be more countries that follow this path now that 193 states are involved, at least politically.

The dawn of E-Paper

By Alvaro Ruiz-Navajas

The nascent market for e-readers has put e-paper into the spotlight, but the potential applications for e-paper are much wider.

The technology for e-paper has been developing since the late 1960s, but its potential applications have become apparent only since the advent of the e-readers. In theory, e-paper could replace ink and paper, but given the current state of technology, e-paper is better suited to display data rather than input data. Thus, rather than being useful only in consumer electronics, e-paper could find its core markets in disposable electronics and electronic signage. E-paper could expand rapidly to a USD 3 billion market by 2015.

Disposable electronics is likely to be an area where e-paper creates a new market. Potential uses include making packaging more appealing to consumers and advertisers – as shown by the Esquire magazine cover in 2008 - the change in pre-paid cards and, most interestingly, medical instructions. Doses and instructions could be changed so that they target a specific patient, and even the time to take the next dose could be displayed.

Electronic signage is where e-paper does have an advantage over current incumbents. Currently, TFT-LCD, LED and paper dominate this segment. However, with e-paper's ability to change rapidly and its low energy consumption, it is ideal for mobile message boards in airports and train stations. For billboards, e-paper could still provide an expensive alternative to paper, but the robustness of e-paper and the possibility to update it remotely presents a compelling case. E-paper price tags that can be updated centrally have proved successful in Japan.

A frequently cited benefit of electronic paper, however, stems from its direct effect on the environment. With an estimated 4 billion trees cut down each year and most of them going to paper, e-paper could not just open new markets, but also help preserve biodiversity.

Copenhagen – renewables likely to win

 By Martina Jung

The United Nations Climate Change Conference 2009 to be held in Copenhagen may fall short of agreeing a global climate treaty, but the renewables sector is likely to emerge as a winner.

The ultimate goal of the conference is a global climate treaty with the agreement of major economies to binding emission reduction targets and the implementation of cap-and-trade mechanisms. While the European Union already has its European Union Emissions Trading Scheme in place, the toughest challenge facing the UN in Copenhagen is to agree on the contribution of the world’s largest emitters, the US and China.

For its part, the US government is currently discussing a draft climate bill that could be a powerful tool to persuade the world’s other heaviest polluters – particularly China – to pass binding emission reduction legislation. However, as the US industry struggles with the effects of the financial and economic crisis, resistance to the planned cap-and-trade bill is growing.

China, meanwhile, is taking tentative first steps towards reducing its emissions. The country’s president, Hu Jintao, recently expressed his intention to slow increases in China’s carbon pollution relative to its economic growth. Nevertheless, Mr Hu refuses to commit to specific numerical targets, and he insists that richer countries should pay for poorer nations to reduce carbon emissions.

Despite these efforts, it is unlikely that the US will arrive in Copenhagen with a finalised cap-and-trade bill. Nor will China be willing to quantify any emission reduction commitment by December. However, participants in the Copenhagen conference will likely achieve a clear strategy to expand renewable energy production.

Already, the US has decided on measures to support the use of renewable energies as part of its economic stimulus package. There are still problems with the implementation. Efforts to address these problems should provide scope for more ambitious targets for the installation of renewable energy capacity in the US.

China has also taken steps to support renewable energies. It has set itself the goal of deriving 15% of its energy needs from renewable sources by 2020. The Chinese government is currently putting together a renewable energies subsidy scheme. As part of its contribution to discussions in Copenhagen, it is possible that the Chinese government will provide clarity on the details.

Renewables are key to reducing carbon emissions, and they offer countries such as China a palatable way to begin tackling emissions. While both an expansion of renewable energy production and a cap-and-trade system will represent a cost burden for national economies, the development of local renewable energy industries also has the potential to create new jobs. Therefore, expect ambitious renewable energy generation commitments among UN member states accompanied by the implementation of crucial measures to achieve these objectives to emerge from Copenhagen.

Electric cars on the horizon

By Florian Sommer

While hybrids are already on the move, electric cars are firmly on the rise. The debate has now moved on from whether electric cars will be a feasible solution to when they are going to enter the mass market.

This year’s government stimulus programmes have accelerated this process. Obama announced in August a grant of US$ 2.4 billion for the development of electric vehicles (EV) and the batteries to be used in EVs. The EU and several national European governments have also made significant funds available to make the shift. China has set a goal of producing half a million electric cars annually by 2011 and has committed US$ 1.4 billion for R&D. 

A major part of the funding is earmarked for making advances in battery technology. This is a serious bottleneck for electric cars. Batteries need to become more powerful, longer lasting, and most of all, much cheaper. Current progress looks promising. The cost of batteries has been declining by 6 to 8 percent annually and most analysts predict they will continue to do so over the next 10 years with rising production volumes. The market potential is huge. McKinsey estimates that the market for batteries will be US$ 60 billion assuming six to eight million electric vehicles sold per year.

Markets have realised that batteries are a very promising technology. Our battery / energy storage index has risen by 97.5% since the beginning of this year. This is the strongest performance amongst our 30 different indices, each addressing a different sustainable technology area. 

Another area where we need to see a radical change is in the development of a reliable energy infrastructure for charging up cars. China, pushed by its urban air pollution problems, has announced some ambitious plans. It seeks to build a network of charging facilities in at least three of the country’s largest cities by 2011. Hawaii has also announced plans to build up to 100,000 charging stations for electric vehicles by 2012.

Finally, the electric car lobby needs to stay firmly focussed on winning the carbon argument. It is not a given that electric cars are necessarily more carbon efficient. Studies have shown that an electric car using pure coal-based energy would be less carbon efficient than a car with a petrol or diesel motor. However, the electric car is superior when using the current energy mix of the EU.

Ultimately, only a strong green argument for electric cars will convince governments to create the required incentives that will enable mass market roll-out of electric cars.