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Sustainable company of the week: Novozymes

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Renewable energy, electric and hybrid cars, water conservation. These are a few of sustainable living’s favourite things.

Mentioned less frequently – but playing as important a role – is the increasing use of enzymes to replace chemicals. Detergents, for example, relied for decades on strong chemicals to eat away at dirt and stains; enzymes provide a sustainable alternative that is just as effective and is beginning to translate into other uses.

Novozymes, a company committed to industrial enzyme production, has served as a leader in the industry. The company enjoyed a 7% increase in organic revenues in 2013 due to growth in both its home and bioenergy enzyme divisions. The reported earnings are telling, as 36% of sales came from the home enzyme position and 16% of sales from bioenergy. Novozymes expects 2014 to be an even stronger year, anticipating 6-9% growth expected as a continuation of trends seen in 2013.

Home Enzymes

Detergents are increasingly replacing surfactants (soap) and other conventional ingredients with enzymes for improved washing performance. Enzymes are often used in detergents formulated for cold-water laundry, which results in lower energy bills. Last year, Novozymes launched a new enzyme that improves the performance in liquid dishwashing. 

Novozymes states its new enzyme is particularly effective at removing protein such as cheese, egg yolk and meats from dishes.  The company believes it has more than 60% of the detergent enzyme market in a “practical duopoly” with Dupont. Segment revenues increased 9% last year as enzymes are increasingly incorporated into detergents and as penetration grows in emerging markets as more people can afford washing machines and higher-quality detergents.

Better yet, this has plenty of room for further growth; while enzymes are found in more than 90% of the detergents sold in Europe, only 70% of North American detergents contain enzymes and less than 60% of the detergents sold in Asia contain enzymes.  That trend should change as enzymes becomes more prevalent in the market.

Bioenergy Enzymes

Enzymes are used in the production of ethanol, and investors have focused on Novozymes’ role in the biofuels market.  While there is concern about using food crops to produce ethanol, Novozymes takes the ‘second generation’ approach: fermenting sugars from scrap corn cobs, woody crops and other organic materials.  The ethanol is then blended into gasoline by refiners and helps contribute to growing the fuel supply.

Second-generation biofuels are renewable and domestically produced. They also reduces greenhouse gas emissions, since carbon dioxide is taken out of the atmosphere as the crops grows.  In fact, the US Department of Energy writes, “Corn-based ethanol… reduces greenhouse gas emissions by up to 52% compared to gasoline.”

Novozymes controls 60% of the enzyme market for biofuel enzymes. Segment revenues increased 12% in 2013 despite US fuel ethanol production remaining flat compared to the prior year. Revenues increased due to the introduction of products such as Avantec, which is an enzyme that helps convert more of the starch into sugar and enables ethanol producers “to squeeze an extra 2.5% ethanol out of the corn, thereby improving their profit margins significantly”, according to Novozymes.

Starch conversion

Novozymes is poised to make a greater impact in the food industry, as well, with the launch of its new product, Novozymes LpHera. The product will improve the liquefaction stage, significantly reducing the amount of chemicals needed to break down starch.

Approximately 60m tons of starch is converted into sweeteners and ingredients per year, and these are used in a wide variety of popular consumer food products, including confectionery, soft drinks, sauces and canned fruits”, according to the company.

The new enzyme “is designed to break down starch in a way that creates more dextrose when compared to the conventional enzymes used during this process stage”.

Looking ahead, we believe Novozymes’ broad-based business and market-leading position are attractive. We are also attracted to the environmentally-responsible aspect of the company.

Novozymes writes, “Typically, small amounts of enzymes are used in industrial processes in a targeted way to speed up reactions and reduce the temperature at which processes take place, thereby saving water, energy and chemicals.”  Therefore, while we may take some profits in Novozymes on valuation concerns, we continue to recommend holding the stock in accounts.

Chat Reynders is chairman and CEO of Reynders, McVeigh Capital Management. He brings more than 20 years of experience in investment management and social venture investing to the company. 

In accordance with the Financial Services and Markets Act 2000, Blue & Green Communications Limited does not provide regulated investment services of any kind, and is not authorised to do so. Nothing in this article and all parts herein constitute or should be deemed to constitute advice, recommendation, or invitation or inducement to buy, sell, subscribe for or underwrite any investment of any kind. Any specific investment-related queries or concerns should be directed to a fully qualified financial adviser.

Further reading:

The Guide to Sustainable Investment 2014

The Guide to Ethical & Sustainable Financial Advice 2013

The Guide to Sustainable Funds 2013

Economy

Will Self-Driving Cars Be Better for the Environment?

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self-driving cars for green environment
Shutterstock Licensed Photo - By Zapp2Photo | https://www.shutterstock.com/g/zapp2photo

Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?

But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?

The Big Picture

The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.

That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.

Driver Reduction?

One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.

There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.

As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.

Deadheading

Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.

Make and Model of Car

Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.

On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.

The Bottom Line

Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?

Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.

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Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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