Google is diversifying into offshore wind energy, but to whose benefit?

Google recently announced that it invested in the development of a “backbone” transmission project off the mid-Atlantic coast which will hopefully accelerate the development of offshore wind energy. Despite the stated good intentions of Google, are they really doing this to boost their image? If not, then the question instead becomes “Why is shareholder money being used for diversification and altruism?” After all, Google is a rational, public company.

Diversifying into new areas only makes sense for corporations if they can bring expertise and have a synergistic effect with their existing operations. The goal there is to improve shareholder returns over what they could normally get in the market. In this case, that would be a company that specializes in energy transmission.

While Google has invested in another wind project, this investment is not like the majority of its operations. Nor is it like its foray into phones, price indexes or content providing where their existing market share, technology and talent can uniquely provide value to shareholders. Remember: Google is an information company, not a venture capital fund or utility.

Now, before anyone accuses me of being reactionary to a positive development in the renewable energy world, let me say that I am pleased that this money is being invested. I see a bright future for offshore wind as a reliable, cost-competitive, and clean source of electricity. Nevertheless, I am trying to understand the motives of Google to see if we can expect more developments of this kind in the future.

My belief is that Google is in fact trying to boost its ‘Green’ and ‘Socially Conscious’ credibility after its spat with China earlier this year and the revelations its relationship with the government concerning its vast supply of user data. In an audio interview you can find here, Rick Needham, Google’s director of green business operations, dismisses that idea simply saying that this will provide a “solid return.”

Neither the interviewer nor Needham talk about how investors could ultimately choose where to invest their money if Google’s profits were distributed to them. Instead, we are led to believe they are looking to ‘do good’ and be profitable at the same time, even if this sort of direct investment isn’t the best value for the company’s owners.

Google and many other public companies participate in many socially conscious initiatives. These have a tendency to make them look altruistic and compassionate and put them in a positive light in the public view. Still, they are looking to benefit in the long-run by being able to sell more, attract better talent, and avoid scrutiny. If managers weren’t truly acting in the best interest of their shareholders, they would be replaced. This is what people should understand about the actions of a public corporation: they should and will only act when it makes financial sense.

With that in mind, the increased tendency to ‘greenwash’ products or entire companies has been well-noticed. We’ll see more of these types of investments and projects, as long as the public is still attuned to these issues.

Still, there is one more explanation for Google’s expansion aside from establishing ‘green’ credibility or corporate altruism: empire building. Empire building is a huge agency problem in that the interests of the managers and shareholders are at odds. The heads of Google may prefer to have a far-reaching company that is ‘changing the world’ and are looking for a new way to have a huge impact while destroying some value.

People have often accused Google of trying to take over the world. However, this project is most likely an example of greenwashing. For anyone thinking Google may be different in some way, remember: they have much to gain from those exact thoughts.


CBO Blasts Ethanol

An article published last Thrusday by the Washington Times suggests that federal support for corn ethanol has large negative consequences and a dubious impact on the environment. It seems that the Congressional Budget Office is catching up to the many critics of ethanol (for some of our own criticism of ethanol, feel free to check here). This should be the final nail in the coffin for aggressive corn-based ethanol policies. Continue reading

Transatlantic Carbon Trade

New York Times

Out of Brussels comes word that the European Union wants to work with the United States to lead a cap-and-trade emissions system for wealthy nations. A well-implemented cap-and-trade system has the perks of providing an absolute maximum for the traded emissions, and of taking advantage of the efficiency of the competitive market equilibrium (the CME is always in the Core, to put it technically). In short, an ideal cap-and-trade system allows for fully effective environmental regulation within the market system, rather than throwing the baby out with the bath water.

Unfortunately, the EU plan previously has been the model of how not to implement a cap-and-trade system. Individual countries would routinely demand vastly overinflated quotas so that they would not have to make an effort to actually restrict emissions. The New York Times says however, that word out of Europe is that they are well on their way to improving the system: Continue reading

Intimacy Instead of Consumption

“Have More Sex to Save The Planet” reads the headline on this Times Online Green Central Blog Post. Certainly, it’s quite an attention grabber. Unfortunately the post itself is quite simplistic and does little to create a positive image of sustainability and environmentalism. Humans will have to grapple with shrinking the environmental footprint of our activities, and soon. As the Times Online post highlights, drawing happiness from non-market goods such as family time, or intimate relationships might provide greater fulfillment and less waste.

One wonders though, what kind of imagery that language conjures. The modern environmentalist community has been careful to avoid associations with so-called “hippies” of the 1960s. Talking about sex saving the planet evokes images of utopian communes. Still more alarming is Flintoff’s unsubstantiated, doom-and-gloom assertion that emission cutbacks will cause wholesale economic collapse Continue reading

If Global Warming Is Real Then Why Is It Cold

An amazing collection of idiotic political cartoons pushing the “If Global Warming Is Real Then Why Is It Cold” talking point:

Carol Browner Tapped as ‘Climate Czar’

Along with Obama’s appointment of Stephen Chu to Energy Secretary comes word that he has chosen a so-called ‘climate czar’. Browner will likely be instrumental in implementing Obama’s climate policy. Like Obama, she supports a cap-and-trade policy, an extremely promising way to reduce greenhouse gases. In fact, Browner called for the winner of the 2008 election to pursue capping with tradable permits months ago:

Browner’s resume includes a record-long tenure as Administrator of the EPA. As the New York Times reports, she began the fight to regulate greenhouse gases as part of the Clinton Administration only to have the Bush Administration undermine the authority of the EPA and the Supreme Court. The creation of a ‘climate czar’ post, and the appointment of someone with Carol Browner’s credentials and principals may be very good news for those concerned about the environment and climate change.

OECD Nations Unwilling to Internalize the Costs of Climate Change

One of the developments out of the UN Climate Talks this week in Poland was the launching of an Adaptation Fund to help poorer nations deal with the disastrous effects of climate change such as drought, floods and rising sea levels. Where the fund fell short was its endowment as just $80 million dollars  were allocated to addressing this critical element of the fight. The cash will be raised by a levy on a U.N. system of projects to cut greenhouse gas emissions in poor nations. The real question is, should countries most responsible for climate change contribute most to mitigating its consequences?
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