Branson pledges $3bn transport profits to fight global warming

 


Branson pledges $3bn transport profits to fight global warming
Billionaire to plough cash into new branch of conglomerate producing controversial biofuels
Dan Milmo and David Adam
The Guardian,
Friday September 22 2006

 

Sir Richard Branson joined the growing ranks of global warming activists yesterday by committing $3bn (£1.6bn) to tackle climate change. The billionaire pledged all profits from his Virgin air and rail interests over the next 10 years to combating rising global temperatures. However, the estimated $3bn will not go to charities and will be invested in a new branch of Sir Richard's ever-expanding Virgin conglomerate, Virgin Fuels. Much of the investment will focus on biofuels, an alternative to oil-based fuels made from plants.

The government has ordered petrol stations in the UK to source 5% of their fuel from renewable energy by 2010, one of several lucrative opportunities for biofuel producers such as Virgin.

A Downing Street spokesman said: "This is an extremely generous offer. The prime minister met Richard Branson and other business leaders in California in the summer and came back very impressed with the positive steps all the companies were taking to reduce their impact on global warming. The UK is already leading the way in Europe in reducing our greenhouse gas emissions. We will continue to press for an international agreement to control global emissions in the long run."

The Liberal Democrat environment spokesman, Chris Huhne, called it an "extraordinarily generous and imaginative gesture on Sir Richard's part".

Sir Richard may find some attempts to run his aircraft on biofuels struggle to take off. In 2000, scientists at Imperial College said that bioethanol was not suitable and could be dangerous. Small amounts of biodiesel could be mixed into existing aircraft fuel, kerosene, but critics say its green credentials have been exaggerated. Biodiesel is prepared from plants such as rape seed, and is supposed to be carbon-neutral because the carbon emitted when it is burned to release energy was absorbed from the atmosphere while the plant grew. But recent studies have shown the greenhouse gains are much smaller than assumed. Making the fertilisers and pesticides needed to grow the crop takes large amounts of energy, as does processing it into fuel. Others say the amount of land required to grow crops on a sufficient scale could increase deforestation.

In an editorial, this week's New Scientist magazine says: "We cannot grow our way out of the twin crises of climate change and energy security. There is a real danger of creating a biofuels bubble that will burst, leaving behind a pungent whiff of chip-fat oil, burning rainforests and rotting fields."

Mike Childs, head of campaigns at Friends of the Earth, welcomed Sir Richard's commitment but said his air interests were part of the problem: "The fast growth in air flights cannot be maintained without causing climatic disaster. The government needs to introduce a climate change law and stop the expansion of airports, tax air fuel and encourage business to invest in more sustainable alternatives."

Virgin made its first investment in so-called green fuels this month by injecting $60m into Cilion, a California-based venture that plans to make bioethanol from corn and to construct seven refineries by 2009. Virgin Trains is switching its diesel-powered trains to biodiesel and the group also plans to develop a biofuel for planes. A spokesman for the group said wave and wind technology would also be considered as alternatives to petrol: "Even nuclear power is not out of the question."

Virgin's environmentally friendly transport plans extend into space. The Virgin Galactic service, which plans to transport tourists, aspires to be the most fuel-efficient space launch system developed. However, environmental campaigners say Virgin Galactic serves no practical purpose and is even more environmentally damaging than passenger jet travel.

Speaking at a news conference for Bill Clinton's Clinton Global Initiative organisation in New York yesterday, Sir Richard said adults had a duty to pass on a "pristine" planet to the next generation: "We have to wean ourselves off our dependence on coal and fossil fuels. Our generation has the knowledge, it has the financial resources and as importantly it has the willpower to do so."

Airlines are coming under increasing pressure to account for their contribution to climate change, with the aviation industry expected to account for 15% of manmade global warming by 2015. Air transport was exempted from the Kyoto protocol on climate change, provided that airlines sought a way to reduce emissions through a trading scheme by 2007. With that deadline fast approaching and no agreement in sight, the prospect of taxes on aviation fuel or airline travel is becoming more realistic.

The industry strongly opposes new taxation and argues that its contribution to carbon dioxide emissions is comparatively small, accounting for around 2% of global emissions currently. Willie Walsh, chief executive of British Airways, said recently that governments were in danger of exaggerating the environmental threat posed by airlines: "The notion that flying is a selfish, antisocial activity that single-handedly threatens planetary catastrophe bears no relation to the evidence."

FAQ Where is the money coming from?

Can Sir Richard Branson afford $3bn?

Unpicking the gordian knot of the Virgin empire's finances is notoriously difficult. Sir Richard's transport interests generated dividends and profits of around $215m (£113m) last year, of which around $100m went to Virgin. So he can probably generate around $1bn over the next decade.

So where will the rest come from?

Sir Richard is about to launch the Virgin America airline in the US and he will pledge all profits from sales of shares in his assets. For example, Virgin Trains is being lined up for flotation. With the growth from his existing businesses, he hopes to reach the $3bn. Nonetheless, monitoring Virgin Group's progress will be difficult.

How can he run his businesses if he is giving away profits?

Sir Richard is not frittering away $3bn. He is investing the cash in his renewable energy business, Virgin Fuel. Its first investment, in a Californian biofuel business, is a hard-nosed business decision from which Virgin expects to make a return. The same rule applies to the $3bn investment over the next 10 years.

What else could Sir Richard do to help the environment?

Some environmentalists would say that Virgin's most positive contribution would be to quit air travel altogether. The airline industry is fighting proposals to tax aviation fuel. At the very least, the industry expects to be signed up to an emissions trading scheme.

Do experts approve of biofuels?

Scientists are not yet convinced biofuels are a genuine solution to global warming. Although they are considered carbon neutral, because the carbon they release when burned was absorbed from the atmosphere while they grew, there are concerns about emissions produced during farming and processing crops. (Credit: guardian.co.uk)