Archive for the ‘Innovation’ Category

Double Counting in the Carbon Markets

March 26th

As the US gets closer to considering Cap and Trade legislation once again, in the Senate this time, a troublesome story appears in the Economist that would make even the strongest supporters of doing the right thing on Global Warming a little queasy. (“The Wrong Sort of Recycling” Hungary’s sale of used carbon credits damages investor confidence. March 25, 2010. The Economist)

No doubt the Hungarians would feel that they had been slandered – after all it was out of their hands. And it’s OK to sell credits twice in Japan. So its unfortunate that this sent the market in Paris into turmoil.

But perhaps we get ahead of ourselves…The Hungarian Ministry of Environment and Water issued 800,000 certified emission-reduction credits (CERs). As the Economist explains “CERs are generated by the Kyoto protocol’s “Clean Development Mechanism, whereby reductions in greenhouse gases in developing countries can produce a carbon credit for use in industrialised markets.”

What happened with this sale of CERs was that Hungarian firms had already put the CERs to good use offsetting their own emissions. The Economist explains that Hungarian officials reported that the credits were ultimately destined for a buyer in Japan and in Japan you can use credits twice, something that you cannot do in Europe.

The point of having a carbon market is to be able to price the right to emit carbon dioxide efficiently. The Economist quotes Yuichi Takayama of Tokio Marine Asset Managementas explaining, “In Japan’s view, so long as some environmental benefit has occurred, then the CERs have a value”.

Not so much in the view of the European carbon markets. The CERs were not simply sent from Hungary to Japan but instead found their way onto BlueNext that is an exchange based in Paris. “By the time that the European Commission realized what had happened, all hell broke lose. BlueNext temporarily suspended trading.” The price fell and investor confidence appeared to be shaken. Since this trade was not in a government’s hands no one broke the rules.

In Europe you are not supposed trade the same credit twice. There has been support for making different kinds of credits fungible. The market will be bigger if new entrants aren’t discouraged from coming in. But if the new players bring credits that are sold in Hungary and again in Japan and then on the European exchange there’s going to be resistance from investors and then there won’t be a market at all.

Innovation and the Regulator

February 18th

What will be important to the future viability of the Postal Service in America will be to create a regulatory process that is agile, flexible and fair.  The goal should be to create a system where postal employees who may be carrying mail to households will bring their best, most innovative ideas forward, where entrepreneurs know that they can say “I have an App for that” and find a partner in the government’s monopoly postal system.

On February 17th 2010 the Postal Regulatory Commission held a hearing to receive comments on the Postal Service’s Annual Compliance Plan.  I participated in the forum and introduced Comments.

In my comments I noted that the Commission had been clear that it wanted to be judicious in “calling balls and strikes” but in a time of economic crisis where the future viability of the Postal Service may be in question its important for the Commission not only to do its assigned job, but also to work with the Postal Service, the White House and the Congress to widen the strike zone.

Testimony on Capitol HIll

November 5th

Today I testified on revenue generating opportunities and the future of the U.S. Postal Service before the Subcommittee of the Oversight and Government Reform Committee that is concerned with the Postal Service.  See Testimony PDF

Overall, my argument was that the Postal Service and the mailing community can become a source of innovation that is an engine for creating new postal revenue through the creation of  public private partnerships.

To make the Postal Service viable will require making mail relevant to future customers.  This will mean connecting hard copy mail with the Internet so that it can play a key role in a multichannel marketplace.

But the new revenue for the public postal service is not going to come from making the USPS into an Internet services provider.  If that was ever an option, its time to say “that was then, this is now.”  Fortunately there are a number key opportunities for the USPS to create new revenue and new mail by creating partnerships with private firms. I describe three broad concepts – Enabling the Last Mile, Extending Democracy’s Reach and Promoting Green Routes.

Some highlights include:

By enabling the last mile I refer to the many opportunities that exist for putting technology in the hands of the Letter Carrier, in other words, on the doorstep of the mailing consumer.  One of the areas of greatest interest to mailers has been wanting to know where their mail is while its on route to its destination.  The USPS has been seen as a black hole compared with FedEx and UPS who have invested billions of dollars to enable their higher end services to “track and trace” and much more.

In addition, I argue that

A second broad theme that Chairman Ruth Goldway in particular has championed has been Vote by Mail.  The Postal Service can do this and provide many other government services as well.

Third, there are opportunities for the Postal Service to again serve the nation by carrying parcels that today cause three and four trucks to travel the same route.  We can reduce carbon emissions by creating Green Postal Routes.

What is needed is to create a pathway that connects the challenged Postal Service of today with a viable business model of the future.  The broad framework should be a public policy framework that encourages public private partnerships as the postal reform law of (’06) and the President’s Commission on the Postal Service (’03) proposed.

The details of new services to customers will depend on the trials and tests and an innovation platform that has yet to be invented.

The coming years could be an exciting time of transformation or they could be a train wreck.  The difference will be whether there is clear public policy guidance that can define the creative balance between what should be public and postal and what should be a public private partnership.

Net Neutrality, Time to Take Sides

September 18th

In the modern equivalent of a story moving on the wire after the close of the stock market, The Wall Street Journal reported that the new FCC Chairman, Julius Genachowski, is expected to outline proposals on Monday to prevent Internet providers from selectively blocking or slowing Web traffic. In Washington buzzword speak this is a “net neutrality” bombshell.

This is one of those issues where someone throws a pebble into a clear pool and the ripples expand forever. You have to decide whether you are going to think about this in terms of this month (Asian nations joining China in limiting internet access), this year (Internet companies agreeing to make it possible for China to limit Internet use and even more insidiously hand over the list of users) or this decade or two.

There was the battle between the phone and the cable companies over who would control network email services (before Telecom Reform in 1996) and then there was the fencing that was taking place over data traffic versus analogue voice before Judge Harold Green had broken up AT&T (1984) or …

Reading the story in the Wall Street Journal can make it tough to figure out who the good guys are. Are the good guys the ones who fight heavy-handed network blockers? Or are they the ones who are fighting government intrusion in the private marketplace? Are the good guys protecting us from network slowdowns from mobile video file sharing? It can give you a headache.

Balancing equities and regulating bandwidth are of course what governments do. So it would seem that with due concern for the technical issues involved, it should be hard to vote against the opportunities that serious net neutrality would create. No doubt the companies involved have some issues here. But the extraordinary social value that gets created when Internet services are allowed to innovate has been demonstrated. Net neutrality could be the next milestone.