The repercussions for the environment are well known, as buildings are responsible for up to 40 percent of all the CO₂ produced. Yet if China develops in a sustainable way, it can save annual CO₂ emissions of 8.4 billion tons by 2030—the equivalent of the entire emissions of the United States, the United Kingdom, and Germany combined. If it does not, energy use associated with buildings will rise 70 percent by 2020.

A wide range of policies to foster energy efficiency in buildings was articulated in China’s 2011 Five Year Plan, but as in the United States, Chinese developers generally associate the construction of green buildings with high upfront costs. Building green also requires a high level of precision in the design and construction phases that is hard to manage at a large scale, especially when much of China’s construction force is low-skilled migrant workers. And part of the current Five Year Plan is to increase sharply the construction of low-income housing, which tends to rely on inexpensive materials.

Still, China’s Ministry of Housing and Urban-Rural Development announced that changes must be made. On June 15, 2011, Hao Bin, the ministry’s director of building energy efficiency, announced that Beijing is finalizing a national energy-labeling system for new building construction and the government is evaluating plans to subsidize certain kinds of energy-efficient building materials. How this will happen or whether it will happen soon remains to be seen.

The French government, supported by the European Union Fisheries Fund, pays for the fishermen’s time. Europe’s plastics industry provides special debris-collecting trawl nets (which cost from $23,000 to $57,000 apiece), and also picks up the tab for recycling and other costs.

Maria Damanaki, European commissioner for maritime affairs and fisheries, says the novel effort is one of several action steps needed to reduce pollution and restore fish stocks in the Mediterranean. The sea has become “an open wound for biodiversity, ecosystems, and our civilization,” she warns. “The situation of marine litter and especially plastic litter has taken threatening dimensions.”

When fishermen are trawling for plastic debris, they aren’t depleting already dwindling fish stocks. Nor are they throwing back dead fish that bring low prices at market, a practice known as “discarding” that’s common in these waters.

Using government subsidies to provide fishermen with an alternate income makes good economic sense, according to Rashid Sumaila, economist and director of the Fisheries Centre at the University of British Columbia. By his analysis, nearly 30 percent of the global fishing industry’s $80 billion annual revenue comes from government subsidies. “Subsidies lead to overfishing. This (fishing for trash) approach leaves money in the fishing community and uses subsidies to do good work,” he says. Potential benefits are threefold. “It helps the fish, cleans the oceans, and provides livelihood for fishers,” Sumaila says. “It’s a beautiful solution, if implemented well.”

Fishing for trash may be a novel solution, but it represents a mere drop in the ocean compared to the size of the problem. Once plastic bags reach the sea, they start to break down into tiny pieces of aquatic trash. These bits can get into the food chain, creating potential health risks for a variety of species, including humans. Researchers estimate that there are 250 billion plastic pieces submerged in the Mediterranean, according to Damanaki, and another 500 tons of plastic floating on the surface of the sea. Some 80 percent of ocean pollution originates on land, Sumaila adds.

Because the Mediterranean is a closed sea, it’s especially vulnerable to pollution. Cleanup efforts will require a variety of measures. Italy recently banned plastic bags, and other efforts to reduce pollution at the source are under way. Meanwhile, Damanaki remains hopeful that the “visible result” of French fishermen hauling out tons of plastic will encourage other coastal communities to get in on the act.

Her willingness to pilot new ideas is drawing praise from ocean researchers. “She’s doing wonders,” says Sumaila, who cautions that there’s much more work to be done. “But this is a good beginning.”

If trawling for trash proves to be workable in the Mediterranean—which represents just 1 percent of the planet’s ocean surface—the idea could set off a wave of similar activity around the globe.

Kremer followed a spring protection project in rural western Kenya in 2005. “A typical unprotected spring may be like a mud pit in the dry season and in the wet season, a small pond,” says Karen Levy of Innovations for Poverty Action, the nonprofit that evaluated the project. “Because there’s no clean edge, it’s very easy for it to get contaminated when people and livestock come and wade in the water.” Spring protection seals off the source and encases it in concrete, so that the water flows out through a pipe above ground, where people collect it in jerry cans.

Household surveys showed that this does have a health benefit: Spring protection reduces child diarrhea by a quarter. But it could do better. Although the new infrastructure improved water quality at the source by 66 percent on average, it improved water quality at home by only 24 percent. Levels of education and sanitation in the household seemed to make no difference to recontamination, but ongoing research into dispensing chlorine at the springs looks promising.

Protecting a spring costs about $1,000. Although most of the springs in this study were on private land, almost none of the landowners had invested in protection—in part because local custom (and sometimes law) does not permit charging for water. Would allowing landowners to profit from their springs get clean drinking water to more people? Or would neighbors just walk farther to get free dirty water? The researchers created a mathematical model of the trade-offs and found that at current income levels rural western Kenyans are better off with the existing social norm.

“We’ve collectively spent billions of dollars on development aid over many decades, and there’s strikingly little evidence about what works and what doesn’t,” says Levy. This rigorous analysis of the benefits of spring protection show that “it’s good, it gets people cleaner water, and it reduces diarrhea,” says Kremer. “As long as enough people are using the water source, it’s quite cost-effective. I think it’s a good buy and I encourage NGOs to do it.”

Michael Kremer, Jessica Leino, Edward Miguel, and Alix Peterson Zwane, “Spring Cleaning: Rural Water Impacts, Valuation, and Property Rights Institutions,” The Quarterly Journal of Economics 126, 2011.

As of 1992, Mexico City had the world’s dirtiest air—and that was before its automobile boom. Between 1996 and 2006, the nation’s vehicle fleet nearly tripled to 21 million. Nearly a third of those cars could be found in Mexico City, leading to debilitating gridlock and even worse pollution. Those problems are not fully fixed, but a significant solution is on the road: two modern bus lines, running down what had been the city’s most congested traffic corridors.

Designed and implemented with EMBARQ’s help, the Metrobus system currently serves 440,000 passengers a day. The buses occupy dedicated lanes, cutting travel times in half. The result: The number of cars on Mexico City’s streets has dropped by 6 percent, and the system has become a model for other cities around the world.

EMBARQ has grown as well, now employing more than 100 people— civil and transport engineers, sociologists, scientists, and architects— in five Centers for Sustainable Transport in Mexico, Brazil, India, Turkey, and Peru. They’ve helped design transportation programs in each country—but their success isn’t rooted only in technical recommendations and traffic flow models, or even in the organization’s considerable funding. It’s as much about process: building relationships, catalyzing connections among multiple stakeholders, and helping develop the baselines of raw information necessary to make informed decisions.

“My belief is there’s no shortage of money to do transportation right. There’s a shortage of will, and a shortage of glue—something to make the shareholders stick together,” says Schipper.

RISK ASSESSMENT AND DATA

Of course, any discussion of EMBARQ’s lessons necessarily starts with the group’s unusually fortunate funding circumstances. Schipper worked at petroleum giant Shell during the 1980s, followed by positions at Lawrence Berkeley National Laboratory and then the International Energy Agency. He parlayed those connections and his vision into a $7.5 million Shell Foundation startup grant, with EMBARQ operating as the sustainable transport arm of the World Resources Institute, the Washington, D.C.-based high-profile environmental think tank. Mexico City became EMBARQ’s pilot project because Mexico’s secretary of the environment had been a student of Schipper’s at Berkeley. It was easy to get a seat at the table, though a seat didn’t guarantee success. “You can’t just pop in and say, ‘What’s the story?’” says Schipper. “You need to make long-term relationships.” EMBARQ established a headquarters in Mexico City, its staff on hand at a moment’s notice.

After devising a transportation plan—inspired in great part by the bus rapid transit of Curitiba, Brazil—the EMBARQ team mapped out the anticipated permitting process. They used an in-house risk analysis tool to evaluate the potential fallouts faced by the project’s various stakeholders: politicians, bus drivers, businesses on existing routes, all the people who would be affected by a massive project in a megalopolis.

“The engineering part is in some ways easier” than navigating competing social interests, says Luis Gutierrez, EMBARQ’s Latin America director. “You have to create a bridge of information.” The team helped arrange meetings among stakeholders and managed delicate negotiations and compromises, especially with transport providers that no longer would be allowed to work the Metrobus corridor.

When the dust settled around the initial 20-kilometer line down the Avenue of the Insurgents, Mexico City’s longest and most crowded street, Metrobus ownership was divvied up in an unusual public-private partnership. The city-operated Passenger Transport Network would be responsible for one quarter of all runs. The rest went to Corridor Insurgentes SA, an independent cooperative formed by microbus owners who had run the buses displaced by Metrobus.

It’s precisely these factors that often impede well-designed transport development plans, said Ralph Wahnschafft, a sustainable transport officer at the United Nations. “The participatory decisionmaking process is often overlooked,” he says.

Three years after EMBARQ arrived, the first Metrobus ran. A second line started in 2009. Similar projects are planned in 18 other Mexican cities—not necessarily with EMBARQ’s guidance, but with Mexico City as inspiration. “It took a lot of bargaining. All the concessionaires, the informal sector, the bus companies, they hated that. But now they have a model,” says World Bank energy specialist Todd Johnson. “The Metrobus is the best bus system I’ve seen in Latin America. The hard part was getting everyone to agree on it.”

Aside from Schipper’s personal connections, EMBARQ’s choice of Mexico City was fortunate in another way. Thanks to the city’s struggle with air pollution, solid data existed on pollutants, vehicle use, and other information needed to evaluate various Metrobus scenarios.

EMBARQ doesn’t have the institutional resources to perform these measurements itself, but it defines the parameters: investment leveraged, people served, travel time saved, carbon dioxide emissions avoided, air pollution reduced, road fatalities avoided, and increased physical activity. Sometimes the data are collected but scattered among institutions or private consultancies, in which case EMBARQ encourages sharing. Sometimes the capacity to gather data exists, but it isn’t used. “It’s not just about getting data; it’s also getting institutions to care about it and collect it,” says Schipper.

Being able to measure one’s own impact is a strategy “that can be applied to any organization regardless of resources,” says EMBARQ information director Rhys Thom. “It seems simple and even obvious, but it’s amazing how many organizations don’t have indicators to help them evaluate whether or not they are successful.”

In addition to its 440,000-person daily ridership and halved travel times, Mexico City’s EMBARQ-designed Metrobus lines have reduced accidents on its main thoroughfare by 30 percent. Air inside the Metrobuses contains 30 percent fewer pollutants than the buses before; outside the buses, 80,000 fewer tons of carbon dioxide are avoided each year, along with 690 tons of nitric oxide, 144 tons of hydrocarbons, and 2.8 tons of fine particulates. In absolute terms, those numbers represent a tiny proportion of all transportation pollution in Mexico City—but extrapolated to the anticipated 10-line service, the Metrobus “would have a huge impact on pollution savings,” Gutierrez says.

NO SHORTAGE OF FUNDERS

Thom noted that EMBARQ’s ability to measure project impact is a selling point to donors, of which there has been no shortage. The Shell Foundation has renewed its initial $7.5 million grant, a figure matched in 2006 by the Caterpillar Foundation. Other sources provide about $2 million per year, and in 2009 Bloomberg Philanthropies pledged $30 million over five years.

As its means and experience have increased, so has EMBARQ’s scope. The nonprofit is working beyond transportation—on, for example, a housing program in Aguascalientes, Mexico, where EMBARQ helped design a low-income housing development for 40,000 people; that project shaped an ongoing slum-upgrading project in Rio de Janeiro. EMBARQ is also active at national policy levels, helping governments develop white papers, action plans, and other technical minutiae that help vague development intentions become concrete plans. In India, EMBARQ helped India’s Ministry of Urban Development write the National Urban Transport Policy, which established bus-promoting guidelines for cities applying for federal sustainable transportation funds.

India’s per capita rates of private automobile usage are growing fast; in the next two decades, India’s urban population will rise from 28 percent to 40 percent. Cities like Indore, population 1.5 million, where EMBARQ started working in 2008, will absorb most of that growth, likely doubling in size. Indore represents an opportunity to solve transportation problems before they start. When EMBARQ arrived, the city’s public transport demand was met mostly by a loose mix of minibuses and taxis with no fixed schedules. EMBARQ started by launching a study, to learn residents’ transportation patterns and demands. As in Mexico, the network helped bring public and private stakeholders together, a crucial task given India’s entrenched bureaucracy. An EMBARQ-designed bus rapid transit system is expected to start operating this year.

In the absence of transport solutions, the transportation needs of what Prabhu calls India’s “exploding cities” will be met with gas-guzzling cars and sprawl. But in the United States, the home of gas-guzzling sprawl, there’s generally little hope for the sort of progressive, large-scale sustainable transportation projects being built in Indore and Mexico City. Private enterprise alone can’t provide the necessary investment; city and state budgets are tight; and at the federal level, the notion of sustainable transportation—with its implicit critique of pollution and wastefulness and explicit monetary investment—is anathema to many Republicans.

Perhaps most important, fossil fuel prices in the United States are still relatively low. It’s unlikely that new taxes or tariffs, or an end to oil subsidies, will raise prices enough to make green transportation a US requirement in the near future. So long as oil is cheap, says Schipper, “it’s really easy to do nothing.” And no amount of insider contacts, good intentions, and better planning is likely to change that.

Brandon Keim is a freelance journalist and associate editor of Wired Science based in Brooklyn, N.Y., and Bangor, Maine. For the Stanford Social Innovation Review, he has written about green building, Indian environmentalism, and the global coffee trade.

Giuliano originally embraced the Fair Trade-certification model—which pays producers an above-market “fair trade” price provided they meet specific labor, environmental, and production standards—because he believed it was the best way to empower growers and drive the sustainable development of one of the world’s largest commodities. Today, Giuliano no longer purchases Fair Trade-certified coffee for his business. “I think fair trade as a concept is very relevant,” says Giuliano. But “I think the Fair Trade-certified FLO model is not relevant at all and kind of never has been, because they were doing something different than they were selling to the consumer. … That’s exactly why I left TransFair [now Fair Trade USA]. They’re selling a different thing than they’re producing.”

Giuliano is among a growing group of coffee growers, roasters, and importers who believe that Fair Trade-certified coffee is not living up to its chief promise to reduce poverty. Retailers explain that neither FLO—the Fairtrade Labelling Organizations International umbrella group—nor Fair Trade USA, the American standards and certification arm of FLO, has sufficient data showing positive economic impact on growers. Yet both nonprofits state that their mission is to “use a market-based approach that empowers farmers to get a fair price for their harvest, helps workers create safe working conditions, provides a decent living wage, and guarantees the right to organize.”¹ (In this article, the term Fair Trade coffee refers to coffee that has been certified as “Fair Trade” by FLO or Fair Trade USA; the term Fair Trade refers to the certification model of FLO and Fair Trade USA; and the term fair trade refers to the movement to improve the lives of growers and other producers through trade.)

FLO rules cover artisans and farmers who produce not just coffee but also a variety of goods, including tea, cocoa, bananas, sugar, honey, rice, flowers, cotton, and even sports balls. Its certification process requires producing organizations to comply with a set of minimum standards “designed to support the sustainable development of small-scale producers and agricultural workers in the poorest countries in the world.” ² These standards—31 pages of general and product-specific standards—detail member farm size, electoral processes and democratic organization, contractual transparency and reporting, and environmental standards, to name only a few. Supporting organizations, such as Fair Trade USA, in Oakland, Calif., ensure that the product is properly handled, labeled, and marketed in the consuming country.

Like many economic and political movements, the fair trade movement arose to address the perceived failure of the market and remedy important social issues. As the name implies, Fair Trade has sought not only to protect farmers but also to correct the legacy of the colonial mercantilist system and the kind of crony capitalism where large businesses obtain special privileges from local governments, preventing small businesses from competing and flourishing. To its credit, Fair Trade USA has played a significant role in getting American consumers to pay more attention to the economic plight of poor coffee growers. Although Fair Trade coffee still accounts for only a small fraction of overall coffee sales, the market for Fair Trade coffee has grown markedly over the last decade, and purchases of Fair Trade coffee have helped improve the lives of many small growers.

Despite these achievements, the system by which Fair Trade USA hopes to achieve its ends is seriously flawed, limiting both its market potential and the benefits it provides growers and workers. Among the concerns are that the premiums paid by consumers are not going directly to farmers, the quality of Fair Trade coffee is uneven, and the model is technologically outdated. This article will examine why, over the past 20 years, Fair Trade coffee has evolved from an economic and social justice movement to largely a marketing model for ethical consumerism—and why the model persists regardless of its limitations.

THE ORIGINS OF FAIR TRADE

The idea of fair trade has been around since people first started exchanging goods with one another. The history of trade has shown, however, that exchange has not always been fair. The mercantile system that dominated Western Europe from the 16th to the late 18th century was a nationalistic system intended to enrich the state. Businesses, such as the Dutch East India Company, operating for the benefit of the mother country in “the colonies,” were afforded monopoly privileges and protected from local competition by tariffs. Under these circumstances, trade was anything but fair. Local workers often were compelled through force—slavery or indentured servitude—to work long hours under terrible conditions. In the 1940s and 1950s, nongovernmental and religious organizations, such as Ten Thousand Villages and SERRV International, attempted to create supply chains that were fair to producers, mostly creators of handicrafts. In the 1960s, the fair trade movement began to take shape, along with the criticism that industrialized countries and multinational corporations were using their power for further enrichment to the detriment of poorer counties and producers, particularly of agricultural products like coffee.

Adding to these perceived economic imbalances is the cyclical nature of the coffee business. As an agricultural product that is sensitive to growing conditions and temperature fluctuations, coffee is subject to exaggerated boom-bust cycles. Booms occur when farm output is low, causing price increases due to limited supply; bust cycles occur when there is a bumper crop, causing price declines due to large supply. Price stabilization is an objective commonly sought by less-developed countries through commodity agreements. Thus the International Commodity Agreement (ICA) evolved as a means to stabilize the chronic price fluctuations and endemic instability of the coffee industry. The first of these agreements arose in the 1940s to provide stability during wartime, when the European markets were unavailable to Latin American producers.

After the war, a boom in coffee demand made renewal of the agreement unnecessary. But during the late 1950s, down cycles threatened economies once again. The ICA essentially was little more than a cartel agreement between the member countries (coffee producers) to restrict output during bust periods to maintain higher prices, storing the surplus beans to sell later when output was low. Because the US government was concerned about the spread of communism in Latin America, it supported the cartel by enforcing import restrictions. In 1989, however, with the fall of the Berlin Wall and the waning of communist influence, the United States lost interest in supporting the agreement and withdrew. Without US enforcement, the cartel fell prey to rampant cheating on the part of its members and eventually dissolved. Attempts have since been made to resurrect the cartel—but though it exists in name, it remains largely ineffective.

Recognizing the dire circumstances confronting farmers during the late 1980s, when the price of coffee once again plunged, fair trade activists formulated a system whereby farmers could obtain access to international markets and reasonable reward for their labor. In 1988 a coalition of those economic justice activists created the first fair trade certification initiative in the Netherlands, called Max Havelaar, after a fictional Dutch character who opposed the exploitation of coffee farmers by Dutch colonialists in the East Indies. The organization created a label for products that met certain wage standards. Other similar organizations arose within Europe, eventually merging in 1997 to create FLO, based in Bonn, Germany, which today sets the Fair Trade-certification standards and serves to inspect and certify the producer organizations.

ETHICAL CONSUMERISM

Why do we care about fairly traded coffee? One reason is the importance of coffee to the economies of the countries in which the crop is grown. Coffee is the second most valuable commodity exported from developing countries, petroleum being the first. For many of the world’s least developed countries, such as Honduras, Ethiopia, and Guatemala, coffee exports make up an enormous share of the export earnings, comprising in some cases more than 50 percent of foreign exchange earnings.³ In addition, many of the coffee growers are small and their businesses are financially marginal.

Although some of the world’s poorest countries produce coffee, the preponderance of that production is consumed by the citizens of the world’s wealthiest countries. The United States is the world’s single largest consuming country, buying more than 22 percent of world coffee imports; the combined countries of the European Union import roughly 67 percent, ⁴ with other countries importing the remaining 10 percent. According to the Specialty Coffee Retailer, an industry resource site, specialty coffee in 2010 accounted for $13.65 billion in sales, one-third of the nation’s $40 billion coffee industry. The Specialty Coffee Association of America reports that approximately 23 million people in the United States drink specialty or gourmet coffee daily. Fair Trade coffee, which has grown steadily from 76,059 pounds in 1998 to 109,795,363 pounds in 2009,⁵ constitutes only about 4 percent of that $14 billion market.

The primary way in by which FLO and Fair Trade USA attempt to alleviate poverty and jump-start economic development among coffee growers is a mechanism called a price floor, a limit on how low a price can be charged for a product. As of March 2011, FLO fixed a price floor of $1.40 per pound of green coffee beans. FLO also indexes that floor to the New York Coffee Exchange price, so that when prices rise above $1.40 per pound for commodity, or non-specialty, coffee, the Fair Trade price paid is always at least 20 cents per pound higher than the price for commodity coffee.

Commodity coffee is broken into grades, but within each grade the coffee is standardized. This means that beans from one batch are assumed to be identical to those in any other batch. It is a standardized product. Specialty coffee, on the other hand, is sold because of its distinctive flavor characteristics. Because specialty coffees are of a higher grade, they command higher prices. Fair Trade coffee can come in any quality grade, but the coffee is considered part of the specialty coffee market because of its special production requirements and pricing structure. It is these requirements and pricing structure that create a quality problem for Fair Trade coffee.

To understand how the problem arises, one must understand that the low consumer demand for Fair Trade coffee means that not all of a particular farmer’s coffee, which will be of varying quality, may be sold at the Fair Trade price. The rest must be sold on the market at whatever price the quality of the coffee will support.

A simple example illustrates this point. A farmer has two bags of coffee to sell and there is a Fair Trade buyer for only one bag. The farmer knows bag A would be worth $1.70 per pound on the open market because the quality is high and bag B would be worth only $1.20 because the quality is lower. Which should he sell as Fair Trade coffee for the guaranteed price of $1.40? If he sells bag A as Fair Trade, he earns $1.40 (the Fair Trade price) and sells bag B for $1.20 (the market price), equaling $2.60. If he sells bag B as Fair Trade coffee he earns $1.40, and sells bag A at the market price for $1.70, he earns a total of $3.10. To maximize his income, therefore, he will choose to sell his lower quality coffee as Fair Trade coffee. Also, if the farmer knows that his lower quality beans can be sold at $1.40 per pound (provided there is demand), he may decide to increase his income by reallocating his resources to boost the quality of some beans over others. For example, he might stop fertilizing one group of plants and concentrate on improving the quality of the others. Thus the chances increase that the Fair Trade coffee will be of consistently lower quality. This problem is accentuated when the price of coffee rises to 30-year highs, as it has done recently.

One of the unique characteristics of the FLO and Fair Trade USA model is that only certain types of growers can qualify for certification—specifically, small growers who do not rely on permanent hired labor and belong to democratically run cooperatives. This means that private estate farmers and multinational companies like Kraft or Nestlé that grow their own coffee cannot be certified as Fair Trade coffee, even if they pay producers well, help create environmentally sustainable and organic products, and build schools and medical clinics for grower communities.

Although the cooperative requirement may seem unusual, it follows logically from the experience of Paul Rice, founder and president of Fair Trade USA. Rice spent most of the early 1980s working with cooperative farmers in Latin America, studying and implementing training programs for small farmer organizations on behalf of the Nicaragua Agrarian Reform Ministry under the Sandinista administration. In 1990, he became the first CEO of prodecoop, a fair trade organic cooperative representing almost 3,000 small coffee farmers in northern Nicaragua. Then in 1998, he founded Fair Trade USA. Rice sees cooperatives as the key to the empowerment of the independent coffee farmer, providing a union-like type of collective bargaining power that enables cooperative leaders to negotiate pricing for the individual members.

Membership in a cooperative is a requirement of Fair Trade regulations. Another core element is the premium—the subsidy (now 20 cents per pound) paid by purchasers to ensure economic and environmental sustainability. Premiums are retained by the cooperative and do not pass directly to farmers. Instead, the farmers vote on how the premium is to be spent for their collective use. They may decide to use it to upgrade the milling equipment of a cooperative, improve irrigation, or provide some community benefit, such as medical or educational facilities.

Fair Trade USA is a nonprofit, but an unusually sustainable one. It gets most of its revenues from service fees from retailers. For every pound of Fair Trade coffee sold in the United States, retailers must pay 10 cents to Fair Trade USA. That 10 cents helps the organization promote its brand, which has led some in the coffee business to say that Fair Trade USA is primarily a marketing organization. In 2009, the nonprofit had a budget of $10 million, 70 percent of which was funded by fees. The remaining 30 percent came from philanthropic contributions, mostly from foundation grants and private donors.

People in the coffee industry find it hard to criticize FLO and Fair Trade USA, because of its mission “to empower family farmers and workers around the world, while enriching the lives of those struggling in poverty” and to create wider conditions for sustainable development, equity, and environmental responsibility.⁶ “I’m hook, line, and sinker for the Fair Trade mission,” says Shirin Moayyad, director of coffee purchasing for Peet’s Coffee & Tea Inc. “When I read [the statement], I thought, there’s nothing I disagree with here. Everything here I believe in.” Yet Moayyad has concerns about the effectiveness of the model, mostly because she does not see FLO making progress toward those goals.

Whole Foods Market initially rejected the Fair Trade model. The supermarket chain only recently began buying Fair Trade coffee, through its private label coffee, Allegro, in response to the demand from their consumers. Jeff Teter, president of Allegro Coffee, a specialty coffee business begun in 1985 and sold to Whole Foods in 1997, said that his main concern has been the quality of Fair Trade coffee. “To get great quality coffee, you pay the market price. Now, in our instance, it’s a lot more than what the Fair Trade floor prices are,” he says. As for social justice for coffee growers, Teter responds: “We were living the model at least 10 years before Paul Rice and TransFair people got started here in America. … Paul Rice and his group have done an amazing job convincing a small group of vocal and active consumers in America to be suspicious of anybody who isn’t FT.” Rice disagrees, arguing, “Fair Trade is the only certification program today that ensures and proves that farmers are getting more money.”

AN IMPERFECT MODEL

My field and analytical research has found that there are distinct limitations to the Fair Trade model.⁷ Perhaps the most serious challenge is the extraordinarily high price of coffee. “The market today is five times higher than when FLO entered the United States. The market’s at $2.50 (per pound for commodity coffee) today vs. the 40 cents or 50 cents (per pound) it was at in 2001,” says Dennis Macray, former director of global sustainability at Starbucks Coffee Co. This price shift dampens farmers’ desire to sell their high-quality coffee at the Fair Trade price. Many co-ops, according to Macray, are choosing to default on the Fair Trade contracts, so that they can do better for their members by selling on the open market. Macray, who is now an independent sustainability consultant with clients such as the Bill & Melinda Gates Foundation, says the default problem is seriously compounded by the perceptions of quality. Some roasters express concern that the quality of Fair Trade coffee is not at the same high levels as other types of specialty coffee sold alongside it. “For some cooperatives the Fair Trade price became the ceiling, not the floor. … Many Fair Trade buyers do not see a reason why they should pay any more than the fair trade price for the value that is Fair Trade,” explains Macray.

In the past, coffee growers were often isolated in remote regions and had little access to market information on the value of their product. Unscrupulous buyers might offer only very low prices, taking advantage of farmers’ lack of information. Today, however, growers have access to coffee price fluctuations on their cell phones and, in many cases, have a keener understanding of how to negotiate with foreign distributors to get the best price per pound. In addition, the growing demand for very high quality coffee has led to a tremendous increase in the number of buyers traveling to more remote regions to ensure the supply they require.

Another important flaw is FLO’s inability to alter the circumstances of the poorest of the poor in the coffee farming community. Although FLO does dictate certain minimal labor standards, such as paying workers minimum wage and banning child labor, the primary focus and beneficiary is the small farmer, who, in turn, is defined as a small landowner. The poorest segment of the farming community, however, is the migrant laborer who does not have the resources to own land and thus cannot be part of a cooperative. In Costa Rica, for example, most small farms, including those selling Fair Trade coffee, employ migrant laborers for harvesting, particularly from Nicaragua and Panama. Rice believes that because the “yields are so low on a small farm and it’s basically family run, the migrant labor issue is not as relevant.” But at the same time he admits that the benefits of Fair Trade do not reach migrant laborers; he says he wants to expand the model to serve this population.

Rice has never wavered from his view that Fair Trade’s “central goal is to alleviate poverty,” and he is adamant that the organization’s model is as relevant as it was 20 years ago. But during that time many of FLO’s provisions of have become duplications of regulations already in place in Latin American countries, such as minimum wage requirements, credit financing, and contracting terms. “I just don’t think that the benefits are trickling down,” says Philip Sansone, president and executive director of the Whole Planet Foundation (the philanthropic arm of Whole Foods). Rice disagrees and defends his model. “The small holders in Latin America would have no way of climbing out of poverty,” he says. “One-acre farmers standing alone are pretty much always going to be victimized by stronger market forces, be they middlemen or moneylenders. At those farm unit sizes and yields, no one is viable in the global market if they stand alone.”

Another challenge for FLO is the issue of transparency in business dealings. FLO regulations require a great amount of record keeping, to ensure that individual farmers have access to all information pertaining to the cooperative’s sales and farming practices, enabling them to make more informed business and agricultural decisions. But this record keeping has proven to be a hurdle in some cases. In addition to being time-consuming, it has also raised language and literacy barriers. Certification forms, for example, only recently were made available in Spanish. “They want a record to be kept of every daily activity, with dates and names, products, etc. They want everything kept track of. The small producers, on the other hand, can hardly write their own name,” ⁸ said Jesus Gonzales, a farmer at Tajumuco Cooperative in Guatemala. Records kept by cooperatives have shown that premiums paid for Fair Trade coffee are often used not for schools or organic farming but to build nicer facilities for cooperatives or to pay for extra office staff. Gerardo Alberto de Leon, manager of Fedecocagua, the largest cooperative in Guatemala selling Fair Trade coffee, told me during my 2006 field research, “The premium we use here [at the cooperative]—you saw our coffee lab, it is very professional.”

Although the cooperative lab may improve quality or sales or aid in member education, it is not necessarily where consumers who buy Fair Trade coffee think their money is going. Macray says coffee consumers want to know that the extra premiums are being used for social services. “Many licensees have started to question whether the premiums were being used for social good: schools, education, health, nutrition, and so on,” he says. “It became difficult to tell the story of where that premium was going. So in your retail shop, you want to be able to tell your customers, yeah, how we provide all this extra funding for these co-ops and it made these differences.”

FLO also provides incentives for some farmers to remain in the coffee business even though the market signals that they will not be successful. If a coffee farmer’s cost of production is higher than he is able to obtain for his product, he will go out of business. By offering a higher price, Fair Trade keeps him in a business for which his land may not be suitable. There are areas all over Latin America and Africa where the climate and growing conditions are simply not conducive to coffee growing. “Fair Trade directs itself to organizations and regions where there is a degree of marginality,” explains Eliecer Ureña Prado, dean of the School of Agricultural Economics at the University of Costa Rica. “We’re talking about unfavorable climates [for coffee production]. … Regions that are not competitive.”

THE FUTURE OF FAIR TRADE COFFEE

The FLO model has changed little since its inception. Although the Fair Trade price and premium for coffee has been adjusted upward over time, the rules and regulations have remained fairly static. Fair Trade’s chief legacy may be greater consumer awareness among coffee drinkers. “We generate awareness to create demand in the market,” explains Stacy Wagner, public relations manager at Fair Trade USA. And they have had tremendous success doing so. Today, according to Wagner, 50 percent of American households are aware of Fair Trade coffee, up from only 9 percent in 2005.

Representatives from Starbucks, Peet’s, and Green Mountain Coffee Roasters (which owns such brands as Caribou Coffee, Tully’s, and Newman’s Own) all report a push from consumers for more transparency of contract and socially responsible business practices. It is rare to find a coffee roaster or retailer these days that does not address social issues in some way. Some do so by offering Fair Trade coffee. Others, however, have sought out other solutions, such as adopting other certifications or by developing their own programs. “A number of importers and exporters in the coffee business are saying we can get more money into the pockets of farmers through direct trade than if we use the FLO model,” says Macray.

Examples of businesses that have risen to meet consumer demands include Starbucks, Peet’s, and Whole Foods’ Allegro coffee. Although Starbucks offers Fair Trade coffee as one of a number of options, they also have put into place a C.A.F.E. Practice—a program that defines socially responsible business guidelines for their buyers. Many coffee producers have taken note of this model and made their practices more sustainable to attract the attention of Starbucks’ buyers. Likewise, Peet’s buys a lot of coffee from TechnoServe, an organization working to improve the business practices of farmers in developing countries. “One of the objections to Fair Trade could be that the term ‘cooperative’ doesn’t perforce equate to ‘farmer,’” says Moayyad. “Just because a certain price is guaranteed to the cooperative, doesn’t actually mean that the farmer is receiving it.”

With TechnoServe, farmers get a much higher percentage of the proceeds—up to 60 percent more according to Moayyad, even though their stated focus is “developing entrepreneurs, building businesses and industries, and improving the business environment.” ⁹ TechnoServe’s model focuses on quality production and farm management. “It’s not a charity,” says Jim Reynolds, roast master emeritus of Peet’s, who has more than 30 years of buying experience. “It’s building skills and better business organization, so they can run their own co-ops more efficiently and earn better pricing by finding good buyers.” Teter also follows this type of socially responsible corporate investment. Allegro pays well above the Fair Trade price to obtain the quality coffees its customers want. In addition, 5 percent of Allegro’s profits goes to charity, and 85 percent is spent in growers’ communities.

“The model for sustainable coffee that was popular five years ago has changed quite a bit,” says Macray. “Five years ago, it was common practice to just go out and buy certified coffees and check the box; and today it’s about integrating sustainability and transparency into your supply chain. Companies are making it a core way of doing business."

For more on Fair Trade:
Read a counterpoint to “The Problem with Fair Trade Coffee” article.

Read “The Future of Fair Trade…Is There One?” blog.

Listen to the “Alberto Irezabal – Bringing Fair Trade to Indigenous Farmers” podcast.

Colleen Haight is an assistant professor at San Jose State University, currently on leave to serve as the economics program officer at the Institute for Humane Studies at George Mason University. She previously worked at Adams Corp., a Silicon Valley start-up that was acquired by Adobe Systems.

“These firms have agreed to do something above and beyond what’s required by law,” says Jodi Short, an associate law professor at Georgetown University. But is that promise any more than window dressing? Short found that when firms commit to policing themselves, they do in fact have better compliance outcomes—under certain conditions. “There are things regulators can do to promote the meaningful implementation of self-regulatory commitments,” she says. In particular, watching them is more effective than warning them.

Looking at hundreds of industrial facilities subject to the Clean Air Act across the United States between 1993 and 2003, Short showed that surveillance of self-auditing firms increases compliance, whereas overt threats decrease it: Those companies that started self-regulating only when the EPA said it would punish them did not improve compliance outcomes. Coercion reframes self-regulation from a question of corporate honesty to a cat-and-mouse game, says Short, and “you can’t sustain voluntary regulation without a certain amount of non-calculative motivation—motivation to just do the right thing.”

The practice of imposing compliance auditing as a part of enforcement action settlements has become widespread across a range of fields, Short says. But her research shows it doesn’t help—a finding that field experience confirms. “For a self-audit to be effective, you really need to have major senior management buy-in,” says James Salzman, the former European environmental manager for S.C. Johnson, now a professor of law and environmental policy at Duke University. “And senior management buy-in is more likely if it comes organically than if it comes at gunpoint.”

This is not to say that sanctions aren’t important. “There’s a lot of data to suggest that big sticks lead to better compliance,” Salzman says. But it is regulators’ watchful eyes more than their shaking fists that make firms follow through on self-policing promises.

Short’s findings suggest an important role for social movement activism. As the idea of a “corporate conscience” spreads across industries—from occupational health and safety to industrial food processor inspection to financial auditing—one of the most important motivators is visibility. Activists offer “another source of surveillance,” Short says. “They can provide another set of eyeballs.”

"Jodi L. Short and Michael W. Toffel, Making Self-Regulation More Than Merely Symbolic: The Critical Role of the Legal Environment, Administrative Science Quarterly, 55, 2010."

Although most researchers study issues and organizations that already have made a big splash, Andrews and his coauthor sampled all the environmental organizations in North Carolina and then read all the coverage that those 187 groups received in 11 major daily newspapers over a two-year period. “Our sample includes everything from grassroots, completely volunteer-run groups, to groups with a dozen or more staff who are working full time for the organization,” Andrews says. By far the most attention went to the more professional and formalized organizations, which used routine advocacy tactics and worked on issues with which reporters were familiar.

The results for environmental groups echo findings in other relatively mature and stable sectors of social movement activism. Among civil rights groups, “the one that dominates media coverage over the course of the 20th century is the NAACP,” Andrews says. “There are more radical groups and more radical tactics that come and go, but the groups that have long-standing relationships to the media have a kind of legitimacy that makes them the obvious one to turn to when [reporters] are trying to understand what’s happening.” A confrontational organization can stage an occupation of a state building and call the paper, but coverage is steadier when the paper’s calling you.

It’s the professional organizations where employees find themselves answering the phone. “Reporters call Environmental Defense Fund (EDF) because of its science and economics and law expertise,” says Georgette Foster, North Carolina media director for EDF, one of the most heavily cited organizations in Andrews’s study. “The EDF strength in creating marketbased solutions is something that reporters respect and trust.”

EDF’s position at the intersection of environment and economy is also important to its media success. “It’s partly what the groups do that makes them effective, but it’s partly what the media care about that allows them to be effective,” says Andrews. Local papers will write about local economic and political issues, and an awareness of this coverage can help small movements gain visibility.

New organizations with fewer resources can promote themselves by “figuring out where the media already are, in a very practical sense, whether that’s at city council meetings or at other kinds of community events,” Andrews says. They should ask themselves: “What are the things that routinely get covered in the news, and what are the ways to make an organization’s events or agendas relevant?”

Kenneth T. Andrews and Neal Caren, “Making the News: Movement Organizations, Media Attention, and the Public Agenda,” American Sociological Review, 75, 2010.

Private sector investors in the United States have been similarly enthusiastic, investing a total of $8.9 billion in clean energy companies in 2009.¹ This is a sizable sum, but it does not guarantee that green technologies will provide a sufficient return on investment. Both the public and private sectors spent billions of dollars developing the market for corn-based ethanol over the past 20 years before a consensus emerged that ethanol would not solve the economic and environmental problems it targeted.

A similar story may be playing out in the solar cell industry, as evidenced by Massachusetts’s experience with Evergreen Solar. In 2007, the state invested millions of dollars to entice Evergreen to build a new plant near Boston. The plant did create 800 manufacturing jobs, but the excitement over the deal eventually soured. As solar cell prices plummeted from late 2008 onward, Evergreen faced mounting losses and saw its stock price crater from $15 to 80 cents. Then in January 2011, Evergreen announced it would close its factory and shift production to a joint venture with a Chinese company in central China—this after $43 million in assistance from the government of Massachusetts.²

Massachusetts’s experience should serve as a cautionary tale about investing in green energy. If governments pour large subsidies into green technologies, they run the risk of backing technologies that, like ethanol, are fundamentally flawed. Solar power is a similarly flawed technology if it is deployed in competition with the existing power grid.

We believe there is a better way to evaluate, invest in, and deploy green energy technology. Our research examines the drivers of successful innovation and illustrates how these drivers can yield a set of predictable rules that govern the success of new technologies. We also have developed a set of factors that predict the failure of a new technology. Green energy technologies, just like those that drive personal computers, mobile phones, and software, must follow the rules of innovation and avoid its pitfalls.

For our purposes, green energy technologies are those that either harness power from renewable, sustainable sources or seek to reduce adverse human impact on the environment. Many of these technologies also hold the potential to contribute to energy independence. We include such technologies as solar, wind, and geothermal power, biofuels, and smart power grids, as well as hydrogen and electric vehicle propulsion. In order for these new sources of energy to have the widest possible implementation, investors, technologists, and policymakers must understand not just their potential impact but also their commercial viability. Many technologies can be successful if they are deployed according to sound innovation theory.

WHY ADVANCED TECHNOLOGIES OFTEN FAIL

There are generally four reasons that advanced technologies fail to achieve commercial success: technical challenges, systemic complexity, head-on competition, and because customers don’t want it.

Technical Challenges

The first reason is obvious: The technological approach itself proves to be unworkable or unscalable. The plasmodium parasites that cause malaria, for example, evolve so quickly they have defied eradication by conventional immunological techniques. And similarly, the potential for generating energy from controlled nuclear fusion is still far away, because technological problems repeatedly defy techniques to initiate and control this reaction.

Most green energy technologies face some kind of significant technological hurdle. Solar cell technology has undoubtedly advanced, but it still faces technological hurdles to improving efficiency. Similarly, battery technology, which is critical for electric vehicles, is coming up against natural chemical boundaries. Fuel cells, elements of the smart grid, and wind turbines all run into technological problems.

Systemic Complexity

A second reason promising technologies fail is that they are rarely “plug compatible” with existing value chains. Hydrogen-powered fuel cells promise a means of powering vehicles with no emissions except a trickle of water out the tail pipe. But fuel cells face an extremely long and challenging road to commercial acceptance, as they suffer from extraordinary systemic complexity. The ubiquity of the gasoline filling station is one reason that fuel cells will have a difficult time achieving widespread adoption. The infrastructure required to refuel a hydrogen-powered car does not exist and would require the coordinated investment of billions of dollars. Existing gasoline station equipment cannot be adapted to store and dispense hydrogen. This entire stock of equipment would need to be replaced. Hydrogen-powered cars can catch on only if hydrogen filling stations are liberally sprinkled across our roadways. Unfortunately, such stations will not exist unless there are a lot of hydrogen-powered cars as well. It is a classic technological chicken-and-egg problem that can be overcome only through expensive government mandates and subsidies that would alter the fuel distribution infrastructure in a coordinated way. With such a large and thriving gasoline ecosystem in place, we are more likely to see adoption in technologies that either work with the existing system or bypass it entirely. Gas-electric and plug-in hybrid vehicles are examples of technologies that improve fuel efficiency while working within the constraints of the existing infrastructure.

The refueling station problem is a well-known barrier to hydrogen adoption, but the systemic problems associated with hydrogen production may be even more troubling. Hydrogen does not naturally exist on the earth in the form required for fuel cells. Ironically, the most common form of producing it is to separate hydrogen molecules from natural gas, which produces harmful carbon emissions. The other option to produce pure hydrogen is through electrolysis, which breaks down water into its constituent hydrogen and oxygen molecules. The problem with this method is that even if large-scale electrolyzers were technologically practical, such machines would require large quantities of electricity. With renewable electricity generation still limited, the only cost-effective way to power an electrolyzer would be from fossil fuels, again defeating the purpose of hydrogen-powered vehicles.

Without sufficient capacity of renewable electricity generation, hydrogen-powered vehicles will not solve any environmental problems. For fuel cells to make sense, the entire system of electricity generation must be substantially modified. And perhaps even more daunting: Should this feat be accomplished, every subsequent step in the value chain would require a wholesale redesign of its existing infrastructure. We are quite certain hydrogen fuel cells will find limited success in displacing gasoline-powered engines.

Head-On Competition

The third cause of the commercial failure of advanced technologies is head-on competition with established technologies. When a technology is forced into direct competition against an established foe, it will be adopted only if it is more cost-and performance-effective than the established technology in the markets where it is being used. This creates enormous barriers against commercial success. New technologies have much better success rates when they are aimed initially at nonconsumers—those who are not consuming the existing products or services because of lack of wealth, expertise, or access. These nonconsumers often embrace products with limited functionality or quality, because they are superior to the alternative: no product at all.

Consider the path that the transistor took in overthrowing the vacuum tube. Throughout the early 1950s, most electronics products were made with vacuum tubes—devices the size of a child’s fist that consumed a lot of power. The mass of these devices meant that the televisions and radios from which they were built had to be large. Radios were placed on tabletops and televisions stood on the floor. All of the vacuum tube companies—the giants of consumer electronics, such as RCA, Zenith, General Electric (GE), and Westinghouse— saw the potential of the transistor and spent hundreds of millions (in today’s dollars) trying to make the transistors good enough for the markets where vacuum tubes were used.

Meanwhile, some inventors saw the potential for transistors to create new markets altogether. The first commercial application for transistors was the germanium transistor hearing aid in 1951—an application where vacuum tubes weren’t feasible. Then in 1955 Sony introduced its first pocket radio, a simple, inexpensive, low-performance product. But Sony marketed its radio to teenagers, customers who were delighted to have a limited product because it was better than the alternative: no radio at all. While the vacuum tube companies continued to work on the technology, Sony introduced the world’s first portable transistor television in 1959. Again, it was a limited product. But by making a TV so much more affordable, a new population of customers whose apartments or wallets were not big enough to afford an RCA television now could have one. Again, because the simple Sony product was better than nothing, customers were delighted. New markets emerged as Sony wielded simplicity and affordability to compete against nonconsumption. By the late 1960s, solid-state technology had become good enough that Sony and Panasonic could begin building large televisions and radios. Within about five years, customers had switched over to solid-state electronics, and every one of the vacuum tube businesses vaporized.

Solar and wind power generation are green technologies that, at least in the developed world, are being deployed in competition with the existing electrical grid. As noted, whenever new technologies compete head-on with established systems, challenges loom due to the cost and performance gaps between the new technology and the old. Solar and wind power are no different. Both are more expensive than the existing grid, and both have performance deficiencies related to weather conditions. Even with significant government subsidies to encourage adoption, the percentage of total electricity derived from wind and solar in the United States remains tiny, illustrating the barriers these technologies face to displacing the existing grid.

Customers Don’t Want It

The fourth reason promising technologies fail commercially is that, although they provide technically sophisticated functionality, they do not help customers do a job they need to have done. By job, we mean a fundamental problem a customer needs to solve, including a specific result or outcome. If a technology helps users accomplish a job they are already trying to do in a superior way, it is far more likely to succeed. If a technology tries to solve a job with which a customer isn’t terribly concerned, it is likely to face headwinds.

The rise of digital photography offers an illustration of how consumers will change their behavior in response to new technology, but not the fundamental job they are trying to do. When prints were the only way to view photos, people had the best of intentions to arrange photos in albums, but the vast majority of prints were viewed once, then placed in a shoebox. Despite this tendency, most people would ask for double prints so they could mail the best photos to a family member, not knowing beforehand which prints would turn out well. Once digital cameras were fully adopted, consumers changed their behavior, but not the fundamental job they wanted to perform with photos. Now, the killer app for photos is e-mail. Despite all the systems for online photo albums, the dominant consumer behavior is to attach photos to an e-mail for sharing. The technologies for online photo albums were always going to be challenged as they tried to perform a job that most consumers weren’t trying to do. The challenge is not in changing consumer behavior, but in changing the job that consumers are trying to accomplish.

Although we believe the smart grid will be an important incremental innovation, certain aspects of it run afoul of the jobs-to-be-done concept. The term “smart grid” encompasses a set of technologies that allow both electricity producers and consumers to make better decisions about power use through real-time data. Portions of the smart grid system are necessary, evolutionary improvements to the existing power grid. For example, advanced smart meters benefit power companies by eliminating the need for manual meter reading, automating the billing process, and providing real-time detection of outages.³ We believe smart grid technologies that lower cost or improve performance will be readily adopted by power companies.

But smart grid enthusiasts may be disappointed as they find that the behavioral change from consumers is not as strong as they had anticipated. A subset of smart grid technologies are intended to provide electricity users with price signals to help people manage their power consumption more efficiently. These technologies envision a home in which a consumer, seeing the high cost of electricity from 2 p.m. to 4 p.m. in the summer, will turn down his air conditioning, turn off lights, and lower the temperature in the fridge. The potential savings from this technology could be substantial—as much as 30 percent of a typical consumer’s power bill.

Although smart grid technology makes it possible for consumers to achieve such savings, it does not ensure that consumers will change their behavior. Just as we saw in the photography example, consumers will change their behavior only if the technology helps them accomplish a job they were already trying to do. For frugal consumers who already monitor their power consumption to reduce their power bills, real-time price signals will be welcomed as a way to manage their bill more efficiently. Unfortunately, not all consumers fall into this category. Those who are not looking for a system to help manage electricity usage will probably have little interest in smart grid technologies. They will not change their behavior, because the technology does not help them do a job they already were trying to do.

Are green energy technologies doomed to failure for the reasons we’ve outlined? We don’t think so. What follows are recommendations on how to develop and deploy green energy technology to maximize its chances for success in the developing and the developed world.

GREEN ENERGY IN THE DEVELOPING WORLD

Solar energy is both less reliable and more expensive than traditional power generation, despite its desirable environmental impact. Given its limitations, would-be commercializers of solar energy should ask themselves: Where are there customers who would value a technology that generates unreliable electricity? The answer: the rural villages of India, Mongolia, Indonesia, Tanzania, and other developing nations. These are the locations where solar energy can be successfully commercialized, because solar will be competing against nonconsumption of energy rather than a reliable, inexpensive power grid. Just as Sony’s transistor radio gained acceptance among nonconsumers, green technologies will find enthusiastic reception in the unconnected villages of the developing world.

Commercializing green technology in the developing world has the added benefit of contributing to the fight against carbon emissions. Currently, nearly half of carbon dioxide emissions are from developing nations. According to the U.S. Department of Energy, by 2030 developing nations will produce nearly double the carbon dioxide emissions of developed countries if their energy sources develop along the same lines. So green technology can enable both greater energy consumption and a cleaner path to economic development.

Although competition with nonconsumption will greatly aid its commercial success, green technology faces unique challenges in the developing world. First, technologies succeed best when the business unit responsible for developing and deploying the technology is also located where its targeted customers are. That way, the business unit will have the cost structure and managerial incentives that make pursuing “good enough” products at lower price points an attractive proposition.⁴ For example, when the management of GE’s medical imaging business was largely located in the developed world, it focused on producing the most advanced and highest margin CT and MRI scanners possible. Once GE created an autonomous business unit in China, it was able to develop a low-cost ultrasound machine that had great benefits in rural China. Furthermore, as GE continued to develop these products, it began to find applications for them in the developed world, opening up large markets for its innovative products.

The second requirement for succeeding in the developing world is to sell a product that provides a full solution for a customer need. In the developing world, it may not be enough to sell solar panels. Such a product may be of little use to a village with no electrical infrastructure or appliances. Rather, it is important for companies to deploy a technology that is tied to an application. D.light design, which is based in India but was founded in Silicon Valley, illustrates the importance of understanding customers’ circumstances. Rather than just offer a lamp in a place with unreliable energy or offer a raw solar cell, D.light bundles its lamps with solar panels fit for consumers’ energy requirements, which are small—often around 0.5 watts. Their products are far better than commonly used kerosene alternatives, because they are significantly safer, are more durable, and provide far better light. D.light design has distributed 1.7 million lamps to rural Africa and India; it continues to develop its business.

The third requirement for the developing world is that companies may need to integrate their activities across a wider spectrum of the value chain. In many of these countries, a well-functioning sales and distribution infrastructure with wholesalers and retailers does not exist. As a result, companies that usually rely on partners to sell and distribute their product may find a similar strategy impossible in the developing world. In these regions, companies may need to take on sales and aftermarket servicing to develop their markets. One successful approach is the creation of a network of rural entrepreneurs who sell a company’s products to friends and family. D.light design has developed such a system to increase its reach.

GREEN ENERGY IN THE DEVELOPED WORLD

Green energy adoption faces more daunting challenges in the developed world. With a convenient, low-cost, and pervasive energy infrastructure in place, green technologies must prove themselves more affordable or better performing to displace their competitors. By and large, the only way green energy has been able to meet that standard is through government subsidies that bridge the gap between actual cost and grid parity. Although a small segment of consumers actively seek renewable energy sources out of concern for the environment, the battle to win the hearts and minds of hundreds of millions of developed world consumers will not be won quickly enough to solve our energy and environmental problems. We believe that there are some spaces in which green energy technologies can succeed and thrive in the developed world, but they must comply with the rules of innovation.

One of the green technologies that can find a market is the electric vehicle (EV). The EV contains certain limitations that will prevent it from winning in head-on competition with traditional vehicles. Remember, to win in head-on competition, a technology must be either less expensive or better performing, and the electric vehicle is neither. Despite undeniable progress, no manufacturer has succeeded in bringing the cost of EVs below that of traditional sedans. And even if EVs reach cost parity with gas vehicles, their performance limitations remain. Battery technology caps an EV’s range at 100 miles between recharges. Because a full recharge takes eight to 12 hours, EVs cannot be used for long trips, which make up an important part of the job-to-be-done for which consumers buy a car.⁵ Furthermore, most EVs accelerate slowly and have maximum speeds well below the 80 mph that consumers typically demand.

We believe there is a set of customers who would actively seek out a car with both limited range and acceleration. The parents of American teenagers have precisely the job-to-be-done for which an electric vehicle would be a perfect match. These parents want to allow their teenagers to transport themselves to and from school, work, and friends’ homes, but nowhere else. They would actually prefer a car that does not accelerate quickly or drive on freeways. To complete their appeal to this market segment, EVs need to be priced cheaply so that affluent families could plunk down cash to buy one. Again, this is good news for EV manufacturers, as they can offer a bare-bones version of their vehicles and not worry about their performance relative to standard sedans. Compounding the good news for manufacturers is the fact that by getting a product on the market, they will incrementally improve their EVs, slowly closing the performance gap with gas-powered vehicles. In this way, a low-priced EV could disrupt the predominance of the gas-powered vehicle, just as Sony’s transistor radios disrupted vacuum tube radios.

Although a real market for low-cost electric vehicles exists, it is unlikely that EVs will achieve substantial market share for some time. Disruption often unfolds at a glacial pace, especially in an industry like autos with high capital costs and long design-to-production cycles. For that reason, the primary mode of competition in the auto industry will continue to be a sustaining one. By sustaining competition, we mean that competitors will continue to try to best each other within the framework of well-established technologies, incrementally improving performance or reducing costs.

In industries where sustaining competition dominates, hybrid technologies are likely to be adopted. This is because hybrid technology enables exactly those incremental performance or cost advantages that allow companies to win a head-on competition while remaining within existing systems of use. In the automotive industry, we have already seen hybrid vehicles, such as Toyota’s Prius, make significant inroads as fuel efficiency becomes an increasingly important basis of sustaining competition. Such vehicles do not suffer from any of the problems of systemic complexity that hydrogen- or battery-powered vehicles face. They operate wholly within the existing automotive infrastructure, not requiring the infrastructure to bend to its needs. Hybrid vehicles also may compete very effectively in a head-on manner by being more convenient, if not eventually lower cost. Although current hybrid technology cannot yet win in head-on competition with gasoline vehicles, hybrids are far more likely to be adopted in head-on competition than are pure-play electric vehicles. We are particularly optimistic about the coming generation of plug-in hybrids, which will propel cars up to 40 miles on electricity before requiring the gasoline engine to kick in. This solution provides the vast majority of everyday driving needs on electricity alone, while preserving the flexibility to take longer trips. Early models will not be cost competitive, but as the technology improves and scale advantages arise, cost competitiveness may well be achieved, especially if gasoline prices continue to rise.

CONSERVATION IN THE DEVELOPED WORLD

So long as green technologies follow the rules of successful innovation, they will be adopted readily in the developed world. The problem is that the developed world’s existing energy infrastructure is so cheap and convenient that it creates large barriers to adopting new energy technologies. And with few nonconsumers of energy, they offer hardly any space in which green technologies can take hold organically. This is why governments in developed countries must play a large role in formulating and enforcing conservation mechanisms to reduce energy use.

The recent move by some governments to phase out the incandescent lightbulb is a good example of the kind of conservation measures that are required. The incandescent lightbulb traces its history back to Thomas Edison. These bulbs produce light by heating a filament until it glows inside a glass bulb. Although the technology has served the developed world well for more than a century, it is terribly inefficient in its use of energy. Up to 90 percent of all the energy used in a lightbulb is wasted as heat, with the bulb producing only 15 lumens per watt. By contrast, a compact fluorescent lightbulb (CFL) produces 50 to 100 lumens per watt, and the energy savings more than make up for a CFL’s increased cost ($3 per bulb vs. 50 cents per bulb for incandescents). If a consumer were to spend $90 on 30 CFLs for her house, total energy savings could range from $440 to $1,500 for the five-year life of the bulbs.⁶ The United States has now mandated that the incandescent lightbulb be phased out of the U.S. market in 2012. Experts have estimated that if everyone in the country switches to CFLs, it will eliminate the need for 30 coal-fired power plants, and will save an amount of electricity equivalent to that used by all the homes in Texas each year.⁷

Government-mandated conservation efforts succeed best when they align with the interests of entrenched stakeholders. In the case of the lightbulb, manufacturers find the mandate attractive as CFLs represent a higher priced, higher profit margin product than incandescent bulbs. Consumers also stand to benefit from the energy savings reaped from CFLs. By contrast, California’s attempt to establish quotas for electric vehicles in the early 1990s was challenged from the beginning. As the quotas applied only to California and EV technology was so expensive at the time, it would have been very difficult for automakers to earn a profit on vehicles produced in such low quantities. This ran counter to their natural interest to produce higher volume, higher margin vehicles. The resulting industry opposition eventually caused California to retreat from its proposal. We don’t argue that government should cater to powerful interests, only that it should be prepared for a much more difficult path if conservation mandates create large burdens for industry.

It is undeniable that the world needs cleaner and more sustainable sources of energy, and green energy technologies can contribute to that effort. Yet our research into innovation and technology commercialization cautions us that the development and success of these technologies must conform to well-established rules. It would be a mistake for governments to pour large sums of money into technologies that will have difficulty finding commercial acceptance. But that is precisely the path many governments appear to be following. A better way to develop and deploy green energy technologies is to incubate them in places where they can succeed commercially from the outset.

Clayton M. Christensen is the Robert and Jane Cizik Professor of Business Administration at Harvard Business School. He is best known for his book The Innovator’s Dilemma: The Revolutionary Book that Will Change the Way You Do Business,a study of disruptive technologies and their impact on business.

Shuman Talukdar is a business development executive for Silicon Valley startups and a graduate of Harvard Business School (email: st at inspiredvc.com).

Richard Alton is a senior researcher at the Forum for Growth and Innovation at Harvard Business School.

Michael B. Horn is the co-founder and executive director of education of Innosight Institute, as well as the co-author with Clayton Christensen of Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns.

Locals told us that açaí is from the Amazon and grows wild in an area the size of England. Although it has been a staple of the Amazon people’s diet for centuries, the berry was just becoming known to Brazilians; in the late 1990s, less than 10 percent of the wild crop was being harvested. We also learned that the açaí trade could be a positive force in the Amazon if the berries were harvested in a socially and environmentally responsible manner. Locals could harvest açaí as a renewable resource and protect the forest rather than work in the timber, charcoal, or cattle ranching trades. We decided to call our company Sambazon, an acronym for Sustainable Management of the Brazilian Amazon, and made it our mission to share this incredible berry with the world.

In our research, we learned that açaí berries are handpicked by local growers, who scale the 40-foot palm trees that flourish along the Amazon’s riverbanks. Baskets of berries are sold, transported by boat through a series of middlemen, and resold at large farmers’ markets in cities like Belém, Bréves, and Macapá. By the time the berries arrived at these open markets, they had changed hands so many times that determining origin and farming conditions or ensuring quality control and organic practices was virtually impossible. In addition, this system created opportunities for middlemen to exploit growers who didn’t have transportation to the markets. The açaí berries perish within 48 hours of picking, so middlemen offered “take it or leave it” terms to the growers.

We realized that if we established direct relationships with the growers, we could cut out the middlemen and bypass the open market, enabling growers to plan their annual crops (and their lives) more consistently. This direct contact also could help us to certify the growers and their farms organic and fair trade, improving quality control and helping protect the forest’s biodiversity.

This had never been done before with a wild-harvested fruit, and it was not an easy task. We knew that constructing a certified supply chain for açaí in the middle of the Amazon rainforest wouldn’t happen overnight. But we saw an incredible opportunity that could generate sustainable jobs for thousands of small family growers. The effort would create a positive economic chain reaction.

With the help of prominent Brazilian nonprofits, including the Foundation for Advancement of Science and Education (FASE), WWF Brazil, and the Federal University of Pará, we developed a sustainable agroforestry program and sponsored U.S. Department of Agriculture organic certification of a small group of growers. From that pilot program in 2002 to today, the number of participating growers has leaped from 100 to more than 10,000. Through our nonprofit partners, we have provided technical assistance, social services, and business courses to the growers and their families. We also assisted Ecocert, a leading European fair trade organization, to develop and implement standards with which to certify açaí for the first time. And in 2005, we built a world-class açaí fruit processing facility in Macapá, on the banks of the Amazon River, which employs nearly 100 people and enables Sambazon to have an even greater impact in the local community.

GROWING A TRIPLE-BOTTOM-LINE BUSINESS

As we developed our supply chain in the Amazon, we began another challenging task in the United States: building demand for an unknown fruit with a name that’s hard to pronounce. We borrowed $50,000 to buy a container of frozen açaí fruit pulp, designed some marketing fliers, and started trying to convince mom-and-pop juice bars in Southern California that açaí was the next big thing. We did endless samplings, demos, and events, so people could taste açaí and learn about the powerful nutrition in the berry. Laboratory tests show that açaí has antioxidants like blueberries or red wine, as well as healthy omega fatty acids similar to olive oil, dietary fiber, and almost no sugar.

By the end of that first summer, in 2001, more than 100 juice bars were selling Sambazon Açaí. We slowly expanded around the country, approaching the best juice bars in Miami’s South Beach, New York City, and Oahu’s North Shore. We made friends with top athletes like surfer Rob Machado and skateboarder Bob Burnquist, who found out that we had brought açaí to the United States in a socially and environmentally responsible manner and wanted to help promote it. Bob helped convince ESPN to allow us to provide Sambazon to athletes at the X Games. Many of the athletes became daily users and shared Sambazon products with their friends and families.

After getting national distribution with Whole Foods Market, still our largest retailer, we began expanding into supermarkets across the country and eventually into superstores like Walmart and Costco. From the very beginning, we studied the experiences of socially responsible business leaders such as Anita Roddick of the Body Shop and Ben Cohen and Jerry Greenfield of Ben & Jerry’s. We also sought out mentors like Gary Hirshberg, founder of Stonyfield Farm, and Steve Demos, founder of White Wave Foods. They gave us tremendous guidance and direction on how to build a strong natural food brand and cross over into the mainstream market, while maintaining our values, brand integrity, and product quality.

We received recognition along the way, and we were proud and humbled by it. In 2006, Sambazon won the U.S. Secretary of State’s Award for Corporate Excellence for helping to support indigenous communities in Brazil through a sustainable business model. Later that year, Sambazon was awarded Ashoka’s Changemakers Innovation Award.

COMPETITION AND VISION

In 2006 and again in 2007, açaí was named a key consumer trend by the global consumer research firm Mintel, and shortly thereafter the market was filled with everything from açaí-flavored Jelly Bellys to Absolut Berri Açaí Vodka. Slick multilevel marketers began selling $50 bottles of açaí cure-all potions, and Internet scammers offered bogus açaí weight loss pills. Today you can still find deceptively labeled products on supermarket shelves that market açaí’s benefits but fail to communicate that the products have been filtered of important nutritional properties, such as omega fatty acids and fiber, which make açaí a highly nutritious food. Although this surge of products brought increasing visibility to the word açaí, it damaged and manipulated the public’s understanding of the berry’s true health benefits. Also, because açaí is new to this country, the U.S. Food and Drug Administration does not have a legal “standard of identity” for the berry. Recently, we launched a campaign called Real Deal Açaí, which educates and informs consumers on how to compare products and encourage competitors to be transparent in their health claims and ingredient labeling.

Our goal wasn’t simply to market a new product. We founded Sambazon to promote positive social and economic change from the forest to the consumer, and to prove the case for sustainable development in the Amazon rainforest. Running a socially responsible business has its costs and benefits. Educating consumers has been capital intensive and challenging. We have nearly 150 full-time employees and provide a healthy livelihood to thousands of Amazon growers and their families. We’ve received multiple rounds of investment funding, and at each stage we have incorporated our values and principles into our partnerships to ensure that our investors understand that profitability and sustainability are not an either-or option but a mark of triple-bottom-line success.

Ten years after founding Sambazon, the company is the market leader in branded açaí products and wholesale açaí supply. Our products are sold in thousands of health food stores, juice bars, and supermarkets in the United States and beyond. As the ecoconsciousness movement builds, we’re seeing more and more people who want to vote with their dollars to help improve the world. To underscore this, we launched a major advertising campaign in 2010, asking people to “Warrior Up” and help create positive change with us. It’s a concept that originated from the Sambazon logo—the Amazon warrior, protector of the forest—and is coming to life through modern-day citizens who are social and environmental change makers.

Twenty years from now, our goal is to show that Sambazon açaí has brought health and wellness to people and is an example of a successful triple-bottom-line business. Business combined with democracy can be a powerful tool to promote innovation, social equality, and biodiversity protection. It’s imperative that leaders of this and future generations continue innovating market- based solutions that protect the environment, alleviate poverty, and make the world a better place. We hope that Sambazon can further this movement and serve as an inspiration to socially responsible entrepreneurs everywhere.

Ryan Black left professional football to pursue social entrepreneurship, founding Sambazon in 2000. He is the company’s CEO.

Jeremy Black, Ryan’s older brother, left a successful career as a financial planner to start Sambazon, where he is chief brand officer.

Bapna brings a great deal of global experience to this work. Before joining WRI, he was the executive director of the nonprofit Bank Information Center (BIC), which promotes sustainability in the projects and policies of international financial institutions. Before joining BIC, Bapna was a senior economist and task team leader at the World Bank, where he led multidisciplinary teams in designing and implementing community-driven water, watershed, and rural development projects in Asia and Latin America.

WRI focuses on policy research and analysis, working with government, business, and NGOs. With more than 200 employees and an annual budget of about $28 million, WRI has been an important behind-the-scenes player, helping Belize protect its ocean reefs and prodding the U.S. Environmental Protection Agency to create new regulations for biofuel greenhouse gas emissions.

In this interview with Stanford Social Innovation Review Managing Editor Eric Nee, Bapna explains the deliberative way that WRI went about setting up its Beijing office, the challenges of working with the Chinese government, and the lessons WRI has learned from working in China that other organizations can benefit from.

Eric Nee: Until recently World Resources Institute had only one office, your headquarters in Washington, D.C. Why did you open a second office in China?

Manish Bapna: Over the past decade there has been a fundamental shift of economic and political power away from the United States and the West to countries like India, Brazil, and in particular, China. One striking example would be China’s central role in the Copenhagen climate talks, where Europe was largely sidelined.

It’s not a stretch to say that the development choices China makes over the next 20 years are going to profoundly shape the future of the planet. So we believe that to deal with climate change it is absolutely essential to engage proactively with China.

This is also true for a wide range of other global environmental issues—for example, China’s appetite for commodities. WRI has a major forest program, and we recognize that to find more effective ways to protect the world’s forests, we need to deal with the buyers. And one of the biggest buyers of forest products is China.

So why can’t we influence Beijing from Washington, D.C.? The main reason we opened an office in Beijing is the complexity of working in China. Not only are there time, linguistic, and cultural barriers, but understanding the political economy of how decisions are made, and engaging effectively in those processes, is not easy to do from afar.

There are many environmental issues that you could tackle in China. How did you decide what to concentrate on?

We have been active in China for quite some time, but this represented a whole new ballgame. So after making the decision that we wanted to deepen our presence in China, we spent at least a year talking with government officials, Chinese NGOs, international think tanks, and multinational companies trying to understand what the opportunities in China were for WRI. What value can we bring? Whom should we partner with? What are some of the legal issues for how we scale our presence in the country? The process was crucial for being able to articulate our identity in China.

In addition, we decided to appoint a Chinese country director and to hire primarily Chinese staff. That was important in bridging the cultural gap that otherwise would have existed. We also thought it was important to have non-Chinese staff in our Beijing office who can offer lessons from other countries. This bridge building is seen as particularly useful from a Chinese perspective. We also set up an advisory committee to help ensure that our priorities and strategies were relevant to the Chinese.

What issues did you end up focusing on?

We asked ourselves three basic questions. First, what are China’s most important environmental most interested in? And third, given our expertise and skills, where can WRI add the greatest value? We decided, for example, not to work on forestry. We have quite a bit of capacity in this area, but there were a lot of organizations already working on forestry issues in China and it was not clear what more we would add. We chose to concentrate on water and climate change because it was clear what value we could add, and because these areas embrace both economic development and environmental issues. We did not want to focus exclusively on climate change, because it’s perceived in China to be largely a global issue. So we balanced that by selecting an issue that was of significant domestic interest within China, which is water. It was important for WRI to be perceived as understanding and responding to the day-to-day pressing challenges facing the country. challenges? Second, what nearterm issues are Chinese decision makers.

How has WRI had to change in order to be effective in China?

We work actively to promote good environmental governance around the world, framed by the universal principles of transparency, inclusiveness, and accountability. We recognize that how these principles are put into practice will vary quite a bit from country to country. And quite candidly, we’re still struggling over how to advance these principles in China.

We’ve found that there isn’t as much receptivity to these issues in China if we try to address governance head on. But if we frame these issues in the context of specific environmental challenges, like water, we can have considerably more traction. For example, we’re developing a water scorecard that can provide people living near a body of water with basic information on the health of the lake or the river system. This information can be used by the government to evaluate its own performance and by the public to hold local government and businesses accountable for keeping that water body healthy.

Interestingly, China has strong environmental policies in place on paper. The real challenge is ensuring compliance with these policies at the local level. By creating tools like the water scorecard we can begin to address some of the environmental governance challenges that underpin many of the problems that China faces. We are trying to focus on solutions rather than problems.

There’s a terrific piece of advice that I received while we were developing this strategy: Be neither a panda hugger nor a dragon slayer. What that means is that we try to stay true to our values, but find ways that are not directly confrontational. We’re often asked to comment on China’s environmental policy positions, especially on climate change. So striking a balance between commenting on their positions and building a working, trust-based relationship with the Chinese officials can be tricky. But at the end of the day, when we have to think about how we will respond to what China is doing, our core value of maintaining independence informs what we do. I would argue that the Chinese government actually values and respects an independent view if it is premised on strong analysis.

Which plays to WRI’s strengths.

Right. WRI’s focus is nicely aligned with China’s goal of scientific development and the values that their society places on sound science and analysis. Most Chinese government officials are engineers and scientists and that plays to the value proposition that we bring to China. For example, in China there’s a premium placed on in-depth analysis, which results in an interesting difference in how we communicate and engage with policymakers. We were struck that Chinese policymakers actually prefer lengthy, rigorous reports, and that these reports are often read carefully. It’s striking to contrast this with our communication efforts in the United States, where we spend quite a bit of effort distilling our work into two-page summaries for U.S. policymakers.

What has been your biggest success since opening your Beijing office?

China is a huge and complex country, and the most that a relatively small organization like WRI can do is to facilitate new, more sustainable approaches to development. So our theory of change has been to focus on creating pilot projects that demonstrate new models or approaches to a more ecologically sustainable and socially inclusive approach to growth. If these pilots are successful, they can be easily replicated or scaled.

One of our projects that we are most excited about is helping the Chinese cement industry measure and manage its greenhouse gas output. China is the leading emitter of carbon dioxide in the world. The cement sector alone accounts for about 15 percent of China’s emissions, or 3 percent to 4 percent of global carbon dioxide emissions. Given the rapid pace of urbanization in China, this is going to increase if left untouched. We played an important role in supporting the government’s planning agency requirement that cement companies measure their energy use and greenhouse gas emissions.

You can manage and reduce only what you measure. A few years ago we worked with the World Business Council for Sustainable Development to create a measurement tool called the Greenhouse Gas Protocol. The Chinese government mandated that this protocol be used by all 5,000 cement companies in China. If the program is successful it can serve as a model for measuring greenhouse gasses in other carbon-intensive sectors such as steel or aluminum.

Earlier in the year, the Chinese government, as part of the International Climate Negotiations, made a commitment to reduce the carbon intensity of its growth by 40 percent to 45 percent by the year 2020, relative to 2005 levels. They are actively seeking opportunities to reduce energy use, especially in their heavy industry sectors.

Why is China so aggressively cutting emissions?

They are doing this for many reasons, to reduce cost, to address energy security challenges, and to demonstrate to the world that they are responsibly trying to tackle the climate change problem. For those working on environmental and social causes, framing these issues in a way that is aligned with China’s national economic priorities is essential. So we framed our work on climate change as an opportunity to create high-quality jobs, improve energy security, and reduce costs. We find that provides much better traction with the government than if we talk about greenhouse gas reductions. It is no different in the United States. At the end of the day, national interests matter, and we need to think about how to connect or align our issues with national interests.

China appears to be embracing green energy much faster than the United States and most other countries.

Thirty years of economic growth that has averaged around 10 percent a year has created tremendous change. It is difficult for those of us in the United States to fully appreciate this pace of change. In the past year more money has been invested in clean energy in China than in any other country. China has significantly scaled up wind production and is actively deploying new solar technologies. Energy efficiency is a national priority.

Let me give you one anecdote. About two years ago, I accompanied one of our colleagues to an appliance store in China. We were shopping for a washer and dryer and wanted to see the efficiency ratings for those machines. It was virtually impossible to find any information about how efficient a washing machine was. Today, that information is available for almost every household appliance. It is remarkable how quickly the environmental issue is moving in China, not just in policy and investment, but also in public awareness and purchasing decisions, especially in the larger cities. One needs to remember that China is many countries. There are the rich cities, like Beijing and Shanghai, which are more similar to New York and Washington, D.C., than they are to the rural parts of China. But there are also many poor areas. We shouldn’t forget that China is still a developing country, with 36 percent of the population still living on less than $2 a day.

At this point, most of the new technologies and solutions for solving environmental problems originate in the West. Do you see a time when China will provide the solutions for the West?

We are going to have to rely on the ingenuity of the engineers and the scientists in India and China to solve many of our problems. In recent years India has developed the $2,000 car, the $35 tablet computer, and the $30 cataract surgery. Because they have such a significant but relatively poor population, they have taken existing products and driven down the cost radically. It’s a concept called frugal innovation. There is an incredible opportunity in these countries to turn their creativity toward driving down the cost of the technologies that are needed to solve many of the world’s most pressing environmental problems.

Is that happening?

It is starting to happen. If you look at the production cost for wind or carbon capture and storage in a developing country such as China, compared with Germany or the United States, there is a big difference. But we need more dramatic reductions in costs. And the nature of the markets in China and India, where you have significant populations that have relatively less purchasing power, can help create the incentives for those radical redesigns.

What’s clear from our conversation is that unless you’re in China interacting with people daily, it’s easy to have misconceptions about what’s going on there.

Yes. One of the things that I’ve been particularly struck by is the considerable suspicion that still exists between the United States and China, which might even be widening. If any major global challenge is going to be tackled in the near future, then building trust between the two countries is essential.

We’ve been trying to construct mechanisms for the exchange of ideas and perspectives in both directions, not only to ensure that ideas and solutions from the rest of the world are channeled to China, but to ensure that Chinese perspectives and solutions are shared with the rest of the world. The Chinese are keen for such a platform because they believe they have much to contribute. We believe such a platform can help build trust. And that trust is critical if more cooperation between China and the rest of the world is to emerge.

Kahn speculates that competition among cities and individual entrepreneurs will lead to fundamental changes in the structure and functioning of cities. Some cities will be well positioned to naturally reduce the very real risks associated with climate change, and others will be poorly situated. All else equal, the former will thrive and the latter will shrink as people vote with their feet. But it is not simply the natural advantages and disadvantages of cities that will speed or slow their growth. Leadership actions in those cities—some motivated by city leaders and others demanded by their residents—may be even more fundamental in determining how cities fare.

An objective evaluation of this approach can help assess which cities will thrive and which will falter with climate change. But such an evaluation remains speculative, because most human decisions about urban adaptation to climate change have not yet been made. And these decisions will change—positively or negatively—the consequences brought about by climate change.

Kahn is no stranger to speculation, and sure enough, speculation pervades his book. But it is speculation informed by deep understanding of the dynamics of cities and the economic forces that motivate invention, innovation, investment, and change.

Kahn’s book is not utopian. He recognizes that many consequences of climate change remain unknowable. He points out that enlightened institutions are failing to implement adaptations to reduce future climate change risks. One reason is that the consequences of global climate change will evolve slowly enough that many institutions can wait to adapt later. And with profound uncertainty about future patterns of climate change, most people don’t know whether particular adaptations will be desirable. They can analyze; they can speculate; but most cannot be certain that particular changes will be worth the cost. City leaders also underestimate the real risks or have incentives to hide such risks. Climatopolis points at but does not sort out these possible reasons for lack of institutional change.

One of Kahn’s focuses is municipal corruption, particularly in developing countries. Corruption takes resources from cities that could be used to make necessary changes. And corruption reduces adaptation, because decisions by corrupt officials are not generally motivated by best long-term outcomes. Even non-corrupt governments can get in the way of adaptation. Regulation can mask market signals needed to motivate individuals and corporations to reduce overall climate risks. For example, buildings constructed in areas that may flood as the sea level rises should face higher insurance premiums than those constructed on higher ground. Such price variations would give market signals that motivate appropriate adaptation. Yet governments may label such differentiation as price gouging, and blunt price variations. Elected governmental members may be too absorbed with the short-term consequences of their actions to focus on the fate of their cities. Their cities will not adapt prospectively to climate change either.

The subtitle of Kahn’s book is How Our Cities Will Thrive in the Hotter Future. They may in fact thrive. But Climatopolis provides plenty of reasons why many cities will not thrive. And the specific adaptations, although not the general process of innovation and adaptation, are highly speculative—not only in their form but also in their consequences. Appropriately, Kahn provides encouragement for readers to develop their own speculations about how individual cities may flourish or falter with climate change.

Kahn characterizes his book as optimistic. It may be. But one is left with a profound sense of not knowing how severe the consequences of climate change will be for any particular city or region of the world. Adaptation ultimately may be insufficient to solve most problems caused by global climate change. And adaptation is definitely not free; typically it requires many costly investments. Even the best adaptation to global climate change will be very costly to the world’s cities.

A careful read of Climatopolis is an invitation not to rely solely on urban adaptation. As the author argues, adaptation should not be the sole strategy to deal with global climate change. Mitigation is still crucial. Yet the U.S. government continues to shun economic incentives, such as carbon taxes or carbon markets, needed for aggressive mitigation.

My advice: Read the book with an open but critical mind. Reading and reflection should stimulate your own speculations about urban adaptation in the face of climate change. And your mind will be nicely stretched, whatever you ultimately conclude about Kahn’s speculations.

James L. Sweeney a professor of management science and engineering at Stanford University, directs the Precourt Energy Efficiency Center and is a senior fellow of the Hoover Institution, the Stanford Institute for Economic Policy Research, and the Freeman Spogli Institute for International Studies.

People, from sociologists to activists to policymakers, “like to reduce problems like pollution to a single factor, such as race or income. But our findings suggest it’s more complex than that,” and should include traits of the polluting firm, says Grant. “It doesn’t make sense to focus on one particular variable; it makes more sense to talk about these things coalescing in certain ways.”

Grant and his colleagues used data from the U.S. Environmental Protection Agency’s Risk-Screening Environmental Indicators on the toxic emissions of individual facilities and their associated health dangers. They appended to these data not only neighborhood characteristics such as race and income, but organizational features like the size of the facility. Then the researchers employed a novel statistical technique called “fuzzy set analysis,” which, instead of simply assuming linear and straightforward causes, allows for the unexpected.

“What we’re finding is that there are multiple pathways to the same dangerous outcome,” says Grant. By changing the framework, Grant and colleagues resolved many of the field’s paradoxes. It’s not that one study is wrong and another is right, he says. “Our study is showing that poverty and minority presence do have inconsistent effects: They are important in some contexts and not in others.”

Each of the recipes for risk that Grant identified validates seemingly contradictory, prior case study findings. For example, one of the most potentially hazardous combinations is a large absentee-owned plant in an African-American neighborhood. Another is a neighborhood with both large African-American and Latino populations—a contributing factor other studies have described as ethnic churning. A third is the interaction between being poor and being African American.

“It’s not race or class, it’s both, and it can be both in different ways in different kinds of neighborhoods and in relation to different kinds of firms,” says Scott Frickel, an environmental sociologist at Washington State University who reviewed Grant’s paper. Frickel thinks the new method “actually gets us a lot closer to what’s really going on out there.”

This is more than just theoretically important. “When you can identify the types of facilities that are dangerous in certain types of communities, that lends itself to some kind of policy remedy,” says Grant. It could help regulators to focus their efforts on the most potentially harmful facilities, firms to focus their improvements on the most efficient pathways, and scholars to focus their research on the most fruitful case studies. “There’s an entirely different way to look at this,” says Frickel.

Don Grant, Mary Nell Trautner, Liam Downey, et al., “Bringing the Polluters Back In: Environmental Inequality and the Organization of Chemical Production,” American Sociological Review, 75, 2010.

Setting aside the inevitable comparisons to Thomas Malthus, whose predictions about famine proved to be vastly overstated, Cribb’s book, without a doubt, is alarmist. The message he hammers home: “The coming famine is a planetary emergency,” which should not be ignored.

Surely Cribb, in researching this book, is aware that writers before him have sounded a false alarm on the same topic and have miscalculated the timing of a world famine. But he does not refute their arguments. Rather, he believes that we are approaching a hungry time “for the simple reason that the world has never been so populous or its resources so fragile.”

I agree with Cribb that a major problem is brewing, one that if ignored will be disastrous. My life’s work is devoted to preventing the very food shortages that he predicts. And I, too, believe that the human population will create serious strains on the current food production system, and that broad changes must occur to head it off. But I see the possible solutions differently.

Foreshadowing the situation that will arise when shortages occur, Cribb points out that many of the hungriest parts of the world tend to be the most war-torn. “Food … is a powerful peacekeeper,” writes Cribb. “We either eat—or we fight.” In his view, there is more at stake than chubby Americans dropping a few dress sizes. What we face is all-out warfare, even in places where people historically have been both well fed and peaceful.

To stave off this calamity, Cribb urges consumers to waste less, to consider food sources, and to develop small farms, which he calls “smallholdings.” Cribb believes that technology holds some solutions, although he is disheartened by “paralyzing complacency and neglect of agricultural science and technology.” Spending on agricultural technology research has, in fact, dwindled since the 1970s, and as a result crop yields have not seen the double-digit increases that they had during the Green Revolution. Cribb argues that “the world’s food supply is not sufficiently secure that we can afford to turn our back on any technology that may help to address these issues in a safe and sustainable fashion,” and I wholeheartedly agree. Although much of the world is stable in terms of food, many of the gains are tenuous at best, and the quest for new technological solutions must continue.

Yet I disagree with Cribb’s designation of who should catalyze this research. Although he suggests that governments should invest more in “sustainable agricultural research and development,” I feel strongly that the solutions will come from the private sector and collaborations among profit-driven entrepreneurs, much as recent environmental solutions have come from companies focused on clean energy and fuel-efficient automobiles. Venture capital investors are already hunting for companies that can solve the food system’s complex problems. Meanwhile, research initiatives driven by the U.S. Department of Agriculture tend to support the tried-and-true, the multinational agribusiness companies that have both improved global food security and perpetuated dependence on petrochemicals, pesticides, and phosphate-based fertilizers. I prefer to place my bets on small companies, university spinouts, and farmers, to commercialize resource-efficient ways of producing food without destroying the planet.

Still, I applaud Cribb for rolling up his sleeves and recapping the strongest arguments for the coming famine. In doing so, he has created an excellent—almost encyclopedic—primer on the topic of global agriculture reform. But if you are looking for a new angle, you will not find it in The Coming Famine. There is no new information, no new theory here. Instead, Cribb uses the book’s 248 pages to catalog the most prevalent arguments for a food crisis, most of which have been in circulation for a decade.

If you are looking for an entertaining read, this is not your book, either. Cribb’s writing is fluent but dry; there are few anecdotes to make this pill easier to swallow. As a result, his book may find its way into the hands of academics and public policy wonks, but it is unlikely to reach an audience big enough to catalyze grassroots change. Perhaps Cribb will inspire Malcolm Gladwell or Michael Pollan to tackle the same topic with a mass-market audience in mind.

Janine Yorio is the founder of NewSeed Advisors, a New York City-based investment bank that focuses on the sustainable agriculture industry and hosts the Agriculture 2.0 conferences.

That changed recently when Hunte took part in a pilot project called Clean Energy Works Portland. The program helps homeowners finance and install energy upgrades like high-efficiency furnaces, hot water heaters, and insulation. Hunte spent nothing up front to have her home weatherized from top to bottom. Instead, she is repaying the low-interest, 20-year loan on her utility bill. Energy savings and rebates are factored in, so her monthly outlay hasn’t increased. “What’s changed is where the money goes,” she says. “A lot less of it goes to my gas bill now.”

Clean Energy Works Portland also delivers social benefits that Hunte appreciates. The work crew on her house included a woman she had recently placed in a pre-apprenticeship training program. “Since she worked on my house, she’s already been promoted. Now she’s training to be an energy auditor. Even in this terrible economy,” Hunte adds, “she’s on a career track.”

Locally adapted versions of Clean Energy Works Portland could soon be coming to neighborhoods all over the country. The Portland pilot, launched in 2009 with $2.5 million in federal stimulus and municipal money, was designed to reach 500 homes and quickly scale up. Another $20 million from the U.S. Department of Energy was approved in April to fuel expansion statewide, and leveraged funds from a variety of sources will bring that to $120 million. In 10 years, Clean Energy Works Oregon aims to retrofit 100,000 homes, creating up to 10,000 local jobs. (Clean Energy Works does not use PACE bonds, a federal program to finance home retrofitting that recently was cancelled.)

The public-private partnership model incorporates several strategic components, including sustainable financing for energy retrofits, worker training for family-wage green jobs, and consumer advocacy to ease homeowners through the sometimes confusing process of selecting from weatherization options. Phaedra Ellis-Lamkins, CEO of the Oakland, Calif.-based green economy advocate Green for All, says of the Portland program, “If not a silver bullet, it’s close.”

Partners Galore

Portland, a hotbed of sustainable development, was primed to move fast on the home weatherization front. A Climate Action Plan adopted by the Portland City Council in 2009 sets a goal of cutting local greenhouse gas emissions by 80 percent by 2050. Adding to the urgency, unemployment rates in this green metropolis have been stuck in the double digits throughout the recession. Home energy retrofits offered the city a practical way to make progress toward clean energy goals and simultaneously expand job opportunities, especially for those hit hardest by the poor job market.

To design the program, the city pulled together diverse stakeholders—grassroots activists, union leaders, financial partners, utility executives, and bureaucrats from federal, city, and county agencies. “They don’t necessarily collaborate or even know one another,” says Derek Smith, the city’s point person for Clean Energy Works Portland.

Before coming to City Hall in 2008, Smith directed sustainability efforts for Norm Thompson, a direct marketing company. With no preconceptions about the pace of government work, he pushed ahead with an ambitious timeline. “We invited everyone—more than 50 stakeholders—to the table, and relied on them to help shape this. Nobody was an afterthought,” he says, “and everyone just rolled up his sleeves and made it happen.” Three months and five meetings later, “we had an agreement,” Smith says.

Jeremy Hays, director of special projects for Green for All, helped guide the conversation. “We talked about what it will take to build this new American economy,” he says, “including an honest discussion of trade-offs when you look at the three E’s: environment, equity, economy.”

Out of that process emerged a Community Workforce Agreement that sets expectations for contracting, training, and employment. Portland’s population is 78 percent white, but people of color, women, and others underrepresented in the building trades are expected to account for 30 percent of worker hours on home weatherization projects.

The city should have no trouble meeting these diversity goals, predicts John Gardner of Worksystems Inc., a Portland nonprofit focusing on workforce readiness. “Weatherization is a great pathway into the trades. You’re going to see a higher percentage of women and people of color cutting their teeth here,” he predicts. After completing a five-week training program, entry-level weatherization installers can expect to earn about $15 per hour. Gardner is also seeing more seasoned workers sign on for training. “If you’ve done construction but been out of work for six months, maybe getting weatherization certification gets you into this new wave of commercial and residential retrofits we’re all expecting.”

Portland Mayor Sam Adams predicts the program will pave the way to “long-range social transformation by creating a scalable model for energy-efficiency programs that include an equitable job creation component. This is an effort that we hope more cities will consider to help create green jobs.”

Interest from other regions is indeed “surging,” Hays says. Twenty-five communities were recently awarded a share of $452 million from the U.S. Department of Energy’s Retrofit Ramp-Up initiative in a competitive process, “and they all want to do what Portland is doing.”

Recycling Dollars

Buildings account for 40 percent of U.S. energy use, and making them more efficient “is truly low-hanging fruit,” Energy Secretary Steven Chu noted in a recent op-ed piece for the World Economic Forum. Home retrofit programs are most successful in achieving savings, he added, when they target the least-efficient houses and concentrate on the most fundamental work: airtight ducts, windows and doors, insulation, and caulking. The challenge is making those unsexy repairs appealing to homeowners, who will likely have to borrow to pay for major retrofits that on older houses can exceed $10,000.

To overcome the financing barrier, Smith started looking for low-cost sources of capital to fund low-interest loans. The money arrived unexpectedly when the federal stimulus bill passed, unleashing “a tidal wave of federal investments to fund models that can bring this [green] industry to scale,” Smith says. Portland allocated $2.5 million from its share of stimulus funds to start a revolving loan fund for retrofits, doubling the pot with support from foundations and the Living Cities Catalyst Fund. “Then we were off to the races,” Smith says, “with no debt on our shoulders.”

Another piece fell into place when ShoreBank Enterprise Cascadia, a nonprofit, signed on to manage financing. Three Portland utilities agreed to use their monthly bills for loan repayment, further streamlining the process for consumers. The long-term goal is to bundle consumer loans and create a predictable secondary market for home retrofit mortgages. “Then the dollars can be replenished into the fund and redeployed locally,” Smith says, “ensuring that these jobs don’t go away when the federal money dries up.” The city of Portland is gathering data on loan repayment rates and actual energy savings to make the case for a secondary market.

Growing the Market

Scaling up a local green economy means growing an entire system. Consumers have to want home energy improvements. Contractors have to be ready to respond to demand. Blue-collar workers need training, certification, and experience “in new processes, materials, and procedures,” says Gardner. At Worksystems, Gardner focuses on preparing workers for currently available, not future, jobs. “What entry- level, mid-level, high-level jobs can we prepare folks for today? We don’t want to train a group and then have them sit around for six months. Training needs to reflect actual hiring,” he says.

Timing has been a challenge in other communities that have sought to catch the green jobs wave. Solar Richmond in Richmond, Calif., began offering career training in solar installation in 2007. But the jobs weren’t necessarily waiting on the other end. By this spring, 23 of 90 graduates had found permanent jobs in solar installation and another 32 had temporary jobs, according to a San Francisco Chronicle report.

To grow demand, Clean Energy Works Portland has sought to make the process easy on consumers. When homeowners sign up for a retrofit, they are assigned a qualified contractor and an advocate from Energy Trust of Oregon. The advocate sticks with them—starting with a whole-house energy audit and continuing with comparison of upgrades, application for financing, and final installation and testing.

Even with the focus on making weatherization painless, demand has been “less than we expected,” Smith admits. The city plans to engage its network of community-based organizations to spread the word. Word of mouth from satisfied consumers like Hunte could help spark interest. Her biggest surprise from weatherizing, she says, “is how much more comfortable my house is now.”

Consumer outreach needs to convince people that “there’s a benefit of comfort, savings, and predictable confidence that you’ll get value out of this investment if you sell your home,” Smith says. In the short term, he adds, “we have to figure out how to make retrofits as appealing as new kitchen countertops.”

Suzie Boss is a journalist from Portland, Ore., who writes about social change and education. She contributes to Edutopia and Worldchanging and is coauthor of Reinventing Project-Based Learning.