The Big E of Big E Toys
“While the exact incident that occurred on December 3 may not happen again, the continued potential for similar crowd problems remains. Since the tragedy in Cincinnati, other serious problems resulting in injury and death have occurred elsewhere at a variety of events – sporting, entertainment, religious, etc. The contrast in occasions, crowds, and sites emphatically underscores the point that, regardless of the attraction, when large assemblages of people gather effective crowd management is essential for minimizing or preventing crowd disorders.”
- Taken from the foreword of Crowd Management, Report of the Task Force on Crowd Control and Safety, submitted to Sylvester Murray, City Manager of Cincinnati, Ohio July 8, 1980
Last week I got up early and stood outside a Target store in Minneapolis waiting for the store to open. By the time I arrived a line of about 150 people had already formed. By the time the store opened an hour and half later, I’d estimate at least 350 were in line waiting to get in. And this wasn’t an isolated phenomenon. The same scene could be witnessed at other Target stores throughout the Twin Cities that same morning.
This wasn’t a dress rehearsal for the after Thanksgiving Day rush. Target employees were not practicing how best to handle the deal-seeking crowds that will arrive later this week. There were no Black Friday specials to be had this day. Rather, this day marked the release of Cities 97 Sampler Vol. 21, a musical collection of live performances from popular artists such as Jason Mraz, Ingrid Michaelson, Rob Thomas (originally of Matchbox 20 fame), and others recorded at Studio C of radio station Cities 97.1 FM in Minneapolis. As the CD title suggests, this is the 21st year such a disk has been released. Proceeds from its sale ($700,000 this year alone, $8 million all time) are donated to various Minnesota charities. Pretty impressive considering the pressing was limited to 30,000 disks this year.
I’ve not personally witnessed scenes in other cities, but I know similar disks are produced by radio stations throughout the country – KBCO in Denver comes to mind. And I know KCRW in Los Angeles and WBCN in Boston have released disks as well, but perhaps not always specifically for local charities.
The atmosphere outside Target last week was pretty docile. Perhaps it was a function of “Minnesota nice”. Perhaps, after 21 years, everyone simply knew the routine. Perhaps it was because everyone sought the same single item. There would be no running throughout the store attempting to quickly grab multiple things. Whatever the reason, the scene was decidedly different than what often happens at various retailers at the start of Black Friday.
These are moments not necessarily filled with holiday cheer.
Last year, in a scene a bit reminiscent of the tragedy that occurred at the December 3, 1979 Who concert in Cincinnati (where 11 concert goers lost there lives), a Wal-Mart employee was trampled to death as thousands of people rushed through the doors at the opening of the store in Valley Stream, NY. Even the rescue workers responding to this particular scene were reportedly continually bumped and jostled as they attempted to provide aid.
The crowd at the Valley Stream Wal-Mart a year ago like that at the Cincinnati Who concert, was not likely a violent and riotous crowd. It was a crowd though. A description from the Crowd Management report submitted by the Task Force on Crowd Control and Safety that was formed after the Who concert tragedy in ‘79, probably sums it up best:
“The term stampede has been inaccurately associated with that tragedy. A more insightful description came from pedestrian planner John J. Fruin, Ph.D. who referred to the December 3 incident as a craze, “where no apparent danger is perceived (by members of a group) but (where) the group is given direction…by an induced sense of urgency.” Regardless of how the tragedy is labeled, the senseless deaths and injuries are a painful lesson in the necessity for thoroughly planned and implemented safety procedures for events that attract large crowds.”
Large crowds. Induced sense of urgency. Hmmm.
Sounds like Black Friday to me.
I wonder whether Wal-Mart officials or other retailers have read the full Crowd Management report.
The final lines from the foreword of this report are telling. “Neither this report nor its recommendations can change the events of December 3. They might, however, help to prevent us from reliving them.”
Sometimes innovation simply means learning from the past.
Tuesday, November 24, 2009
Mark W. Johnson of the Harvard Business asks this important question in his piece published today.
Johnson writes, as we come out of the Great Recession facing the possibility of permanently lower demand in the credit-deflated West and look for growth to the millions of nonconsumers in India, China, and the rest of the developing world...That is, every company needs to ask itself: Can I reap those opportunities with my current business model?
We encourage you to read Johnson's piece in its entirety. Also, can you take the plunge and revamp your business model to reflect the current economic climate?
Is Your Company Brave Enough for Business Model Innovation?
Monday, November 23, 2009
Steven B Johnson
Author, The Invention of Air and The Ghost Map
Contributor to Time, Wired, and Discover
Steven’s writings have influenced everything from the way political campaigns use the Internet, to cutting-edge ideas in urban planning, to the battle against 21st-century terrorism. Newsweek named him one of the “Fifty People Who Matter Most on the Internet”, having co-created the pioneering online magazine FEED, the Webby-Award-winning community site, Plastic.com, and most recently the hyper-local media site outside.in.
Both social critic and technologist, Steven has a genius for mapping the future, has consistently been ahead of the curve predicting and explaining the real-world impact of cutting-edge developments in science, technology and media explaining why they’re immediately relevant to both personal life and business.
Here's the Time cover article in which Steven B Johnson speaks about Twitter and Innovation.
Steven B Johnson will be speaking at this year's Front End of Innovation Conference in May 3-5 2010 at the Boston World Trade Center and Seaport Hotel. Don't miss your chance to see him!
Saturday, November 21, 2009
Which to you is more important for innovation, a) math & computer science or b) creative problem-solving?The November 23, 2009 issue of Newsweek shares the results of the Newsweek-Intel Global Innovation Survey, and it showed some startling differences between perceptions of people in different countries. One statistic that jumped off the page at me was the disparity between what American and Chinese parents say are the most important skills their children will need to drive innovation. The American parents said it was "Math and Computer Sciences" (52% versus 9% of Chinese parents). The Chinese parents said it was "Creative Approaches to Problem-Solving" (45% versus 18% of American parents).
This struck a chord, because in America, too many blue-ribbon panels on innovation, made up of governement and/or business leaders focus on math & computer science as THE cure-all for innovation. But that is simply not enough. Math & computer sciences, as important as they are (and as much as we need to improve these skills in the US), are only a subset of creative problem-solving/creative process skills.
There is an overlap of the two, where math & computer science are more than creative problem-solving (2+2=4 is an example of non-innovation), yet still requiring creative problem-solving for difficult challenges (how to design and develop a smart electrical grid, or how to ensure that the electrical system and gasoline engine work together smoothly in a hybrid vehicle, are two examples). And there are creative problem-solving challenges that do not require math and/or computer sciences (creating new business models, developing new flavored products, or creating a more distribution channel). Yes, math & computer sciences may be useful tools for this, but they are only a portion of the complete tool box (in addition to marketing, finance, manufacturing, customer service, etc.).
If we take it to the next level, we see that innovation encompasses more than just creative problem-solving (for example, the launch of a new product that easily fits into a company's production, distribution, and brand portfolio doesn't require much problem-solving once the product itself is developed). And there is certainly math & science that are required for innovation, but there are still areas outside of math & science that have nothing to do with innovation (like how to program a computer to boot up a new software program, for example).
Let me be clear: math & computer science skills are critical for innovation, but they're not the only thing! They are necessary, but not sufficient.
Likewise, creative approaches to problem-solving are necessary yet not sufficient either. However, creative problem-solving is a skill set that relates more broadly than just math and science, and since it can be used in math & science, and beyond, I believe that it is a skillset that is more essential to driving innovation than just math & computer science.
Innovation doesn't happen without creative thinking and creative problem-solving. So if you want to drive innovation in your organization, it is critical to make sure that your people have -- in addition to math & computer science -- skills for creative thinking and creative problem-solving. These skills apply to math and computer sciences, plus marketing, finance, manufacturing, customer service, and so many more areas that drive your business.
No matter in what country you live, work, and innovate, make sure you and your team have creative problem-solving skills that they can apply to any innovation challenges they face.
Thursday, November 19, 2009
Discovery World's water education programs are set to receive $500,000 from MillerCoors to fund a Freshwater Innovation Lab. The Associated Press reports that the lab will feature a micro-scale brewery that will focus on the beer production process and water's role in brewing.
It will also highlight water chemistry, microbiology and organisms, properties of water and water-based business and technology opportunities.
Museum President Joel Brennan says Discovery World already has adult classes on brewing, where people can brew and bottle their own beer.
The lab is expected to open in next spring.
What do you think of MillerCoor's foray into the water sustainability sphere? Are we to hear of more brewers following suit?
Wednesday, November 18, 2009
This week we're focusing on the Avoid Commoditization track, which will help your company move beyond product innovation.
Spotting opportunities for growth through Business Model and Service Innovation is critical for long term sustainability. Innovation is not only for products, it’s required throughout the entire Value Chain. And, these initiatives must start through the Front End.
This track will specifically focus on value innovation, how to make your entire organization more cost effective as well as how to avoid commoditization through services and new business models.
Some of the companies speaking on this track include Tom Tom, Dow Corning, Ericsson, and INSEAD just to name a few. Make sure to download the brochure for a complete run-down on topics covered. Hope to see you at the Front End of Innovation Conference in Amsterdam this February!
Tuesday, November 17, 2009
The Big E of Big E Toys
"Motivation: If a pretty poster and a cute saying are all it takes to motivate you, you probably have a very easy job. The kind robots will be doing soon."
- message included on a Demotivators® poster from Despair, Inc.
Given my somewhat wry and ironic sense of humor, someone must have thought a few years back I'd enjoy a Demotivators calendar from Despair, Inc. I must admit I found it a bit humorous.
For those unfamiliar with Demotivators, they're essentially the facetious antithesis of Successories posters - those framed leadership and motivation prints found on corporate walls throughout the world. (The Demotivators actually remind me a bit of the recurring Saturday Night Live bit "Deep Thoughts with Jack Handy.")
Both Demotivators and Successories prints include a colorful picture and an insightful saying meant to represent the overall topic of the piece - such as Teamwork, Inspiration, Leadership, Attitude, etc. Although similar in style and appearance, the messages themselves are dicotomous at best. Take for instance, the message associated with Teamwork.
Successories print (accompanied by picture of a rowing team working together on water)
"Teamwork: Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishment toward organizational objectives. It is the fuel that allows common people to attain uncommon results."
Demotivators print (accompanied by picture of snowball rolling down a snowy hill)
"Teamwork: A few harmless flakes working together can unleash an avalanche of destruction."
or how about Success?
Successories print (accompanied by picture of morning rays of light shimmering through some trees)
"Success: Some people dream of success...while others wake up and work hard at it."
Demotivators print (accompanied by picture of a quarterback being pummeled by a defensive football player)
"Success: Some people dream of success, while other people live to crush those dreams."
It's probably fair to say that simply reading the Demotivators messages probably doesn't do the humor justice. The punchline is mostly created by the downtrodden saying juxtaposed with the inspirational-looking glossy photo on each print. It's ironic. It makes me chuckle.
Having been given the Demotivators calendar a few years back, I must now be on their mailing list. Just in time for the holidays, I recently received their new catalog. Inside I noticed some new prints, one of which was Innovation.
Demotivators print (accompanied by picture of human hand and robotic hand shaking. The robotic hand looks like it came right out of the 1927 film Metropolis.)
"Innovation: If it can make your job easier, it can probably make it irrelevant."
Seeing this message made me begin to wonder what differences might exist between the motivations of an overall organization as it relates to innovation and the motiviatons of the individuals that make up those organizations. Everyday we see ads, read articles, read books, and generally absorb the goodtidings messages and promotions of innovation initiatives throughout the corporate world. But what of the people in the trenches? What of those that aren't readily in the public eye? Ideally their motivations would align with the goals and objectives of the overall organization. Ideally everyone is motivated to innovate. But are they?
I know there are opportunities throughout organizations for anyone and everyone to be innovative in their own way, however small their role might be. But does everyone in an organization want to be innovative? Might they have motivations for not being so?
I haven't yet formulated any insightful responses to these questions. I'm just sort of wondering out loud at this point. I do find such questions intriguing though. And perhaps I'll ponder some more and return to this topic at another time.
In closing I'll leave you with one more Demotivators saying. Given the medum, I found this simply too ironic to resist.
"Blogging: Never before have so many people with so little to say said so much to so few."
Monday, November 16, 2009
Daniel McGinn's article in Newsweek discusses how America has been the loser in innovation and what can be done to keep the country from falling further behind.
Friday, November 13, 2009
Here's a video interview I recently came across from BusinessWeek in which best-selling author & entrepreneur Seth Godin asks Virgin Group Founder & Chairman Richard Branson whether he finds innovation coming directly from his customers. Watch the minute and a half clip below. Enjoy!
Thursday, November 12, 2009
In an article at Boston.com, Business Update credits universities with the ability to promote Massachusetts as the most patents per higher education institution. It doubles the next state. Boston also hosts more start up companies created by university research. Read more about Boston's accomplishments here.
Wednesday, November 11, 2009
Today we'll be profiling FEI Europe keynote speaker Scott Anthony, Managing director of Innosight Ventures and author of three books on innovation.
Scott is the Managing Director of Innosight Ventures. He previously was the President of Innosight's consulting arm where he worked with Fortune 500 and start-up companies in industries such as media (print and broadcast), consumer products, investment banking, transportation and logistics, healthcare, medical devices, software, petrochemicals, and communications equipment.
Scott is a judge in the Wall Street Journal's 2009 Innovation Awards. He is a faculty member of the Leadership, Innovation, and Growth Program at GE Crotonville. Scott is also a member of the Board of Directors of Media General.
Scott has written three books on innovation: Seeing What’s Next with Harvard Professor Clayton Christensen (Harvard Business Press, 2004), The Innovator’s Guide to Growth with Mark Johnson, Joe Sinfield, and Elizabeth Altman (Harvard Business Press, 2008), and The Silver Lining: An Innovation Playbook for Uncertain Times (Harvard Business Press, June 2009). He has written articles in publications such as the Wall Street Journal, Harvard Business Review, BusinessWeek, Forbes, Sloan Management Review, Advertising Age, Marketing Management and Chief Executive, is a regular contributor to Harvard Business Online and serves as the editorial director of Strategy & Innovation.
Here's a YouTube clip of Scott Anthony introducing the concept of disruptive innovation.
Make sure not to miss his keynote session Seizing the Silver Lining at the Front End of Innovation Europe Conference in Amsterdam this February 8-10. Remember if you’re planning to attend the conference make sure to mention priority code FEINOVBLOG when registering to receive €300 Discount which Expires This Friday! Hope to see you all there!
Bio courtesy of Innosight Ventures.
Tuesday, November 10, 2009
The Big E of Big E Toys
“Do you have to be depressed to write a sad song? Do you have to be in love to write a love song?”
- William Miller [played by Patrick Fugit] interviewing Stillwater guitarist Russell Hammond [played by Billy Crudup] from the Cameron Crowe written and directed film Almost Famous
Among musicians and other artists, the notion that mood and attitude can have an affect on one’s creative output is a generally accepted truism.
Picasso’s “Blue” period.
Alanis Morisette’s album Jagged Little Pill.
Virtually every poem written by Emily Dickinson.
Countless other examples.
All were affected by mood, attitude, and intellectual dissonance.
These are the elements that fuel art.
A number of years ago a relatively obscure musical duo called Billy Pilgrim (who got some radio play with their song Sweet Louisiana Sound and whom I always referred to as the Indigo Guys because of their sound similarities to the Indigo Girls) put out an even more obscure album entitled Billy In The Time Machine. (For all those closet music genealogists out there, Billy Pilgrim was comprised of Kristian Bush, now one half of the mega country duo Sugarland, and Andrew Hyra, brother of actress Meg Ryan). The album was a limited success, yet was particularly interesting to me because of the approach taken by the group during its recording. Billy Pilgrim decided they would only work on the recording if all participants were in good spirits. Only good moods were allowed. If anyone had a bummer of a day, was a bit gloomy, or otherwise mentally preoccupied with something other than sunny days, they’d avoid the recording studio. As you might expect, the album took a long time to complete. Years.
(As an aside - because of its delay, I can’t help wonder whether Axl Rose set down some variation of these parameters while working on the Guns ‘N’ Roses release Chinese Democracy.)
Moods, good and bad, affect art.
But what of innovation?
From what well do good ideas spring?
And under what mental circumstances should we evaluate our ideas?
Common sense (as well as research) suggests positive moods promote creativity, flexibility, and cooperation - all the workings of a solid idea development system. And although negative moods, as is the case in the world of art, can produce inspired innovative works, we generally equate positive demeanor with creativity and innovation.
But innovation is a process. And at various points along its arc, a little negativity isn’t necessarily a bad thing.
Recent research by psychology professor Joseph Forgas at the University of New South Wales suggests negative moods might have intellectual benefit. The study, published under the title Think Negative! in the November/December edition of Australasian Science journal, showed that people in a negative mood were often more critical of, and paid more attention to, their surroundings than happier people. Happier people were more likely to believe anything they were told. “Negative moods trigger more attentive, careful thinking paying greater attention to the external world,” Forgas wrote.
But why might this matter for innovation?
Although perhaps counterintuitive, because no one wants to promote cantankerous attitudes at the office or be around generally grumpy people, the study suggests to me that perhaps we should use good moods to generate innovative ideas, yet harness bad moods to evaluate them.
How many times have you emerged from a Stage-Gate® meeting (or some other project evaluation session) aggravated and cranky? How often do your meetings get prolonged and increasingly unproductive because decisions go unmade? I can’t imagine you went into the meeting with such a bad attitude. There’s typically a certain level of excitement and optimism before most meetings. Hope springs eternal. Today, you think, will be the day you give the green light to your next great innovation.
“Positive mood is not universally desirable: people in negative mood are less prone to judgmental errors, are more resistant to eyewitness distortions and are better at producing high-quality, effective persuasive messages,” Forgas wrote.
So consider this. The next time you go into a Stage-Gate® meeting, go in already cranky and frustrated. Perhaps you'll make better decisions and the meeting will be a bit more productive. Perhaps you’ll emerge a much happier person.
Monday, November 9, 2009
Morgan Witzel of the Los Angeles Times recently looked at the book "The Design of Business: Why Design Thinking Is the Next Competitive Advantage" by Roger Martin, the Dean of Rotman School of Management at the University of Toronto. In this book, he states that the key to success is design thinking, and taking all of the creative talents of your team and sending them towards one goal. Businesses, for the most part, have been relying on two models: the analytical and the intuitive. Martin then spends the book focusing on why it is important to harness both models. Do you harness your innovation analytically or intuitively? Do you think your innovation could grow if you combined them? Read the full article here.
Friday, November 6, 2009
Being that it's a Friday we'll keep a light post today. Here's a video from when President Barack Obama visited Hudson Valley Community College in Troy, NY back in September in which he lays out his vision for innovation, growth, and quality jobs. Take some time to check out the video below. Enjoy!
Thursday, November 5, 2009
The Silicon Valley Mercury News has broken down the recent innovations taking place in the search engine industry. With Bing and Microsoft gaining ground slightly on Google, Google could soon face their first real challenge as the search leader. Search is now an important function of people's use of the internet, and is currently the #2 activity for users, behind using email. New innovations in the industry include Microsoft announcing that Twitter updates will be available in real time with their searches and Google followed up with improving their music searching functions, allowing users to go straight to the songs. Read the full article here.
From the stance of a internet user, I think that the Microsoft/Google/Yahoo challenge is great. We, as surfers of the internet, have the chance to benefit from this healthy competition. We can utilize search capabilities to improve our performances and gain the knowledge that we need to know faster. What do you think will be the next big turn in search innovation?
Wednesday, November 4, 2009
NACCM 2009: Two-Way Invention: Co-generating New Products and Services with Your Customers Through Ongoing Dialogues Online
Here's an interesting post on customer-driven innovation from our live coverage at the NACCM event in Phoenix. Make sure to subscribe to their feed if you haven't yet already to receive live updates.
In today’s presentation, Sami Hero, Vice President of Global Web Strategy at LexisNexis shared his company’s approach towards social media engagement and its evolution. LexisNexis built their web strategy over the past several years. In 2007, they launched their Web 2.0 initiatives and engaged in sporadic blogging, building focus groups and using Net Promoter Scores to gather feedback from their customers. In 2008, their focus was on building solutions and services for customer problems and creating 17 customer communities. Growth continued in 2009 as they developed global websites and grew customer communities to 30+. LexisNexis continued to grow its customer engagement in 2010 by adding mobile applications, building deeper customer relationships, and making it a common practice to listen.
Customer-driven innovation needs to be measured says Hero. It takes special talent…find them in your organization and “let them loose”. Age doesn’t matter, skill set does. When asked what skill sets are most important, Hero said that people with excitement, those that display strong writing skills, and those who are passionate about customer engagement make the best choices for managing customer conversations.
LexisNexis actively listens to its customers and users through their website. Hero sees the value in these community sites as customers tend to go back to the main website. When at the main site, customers typically end up buying something. This cross promotion has significant value to an organization says Hero. He cautions us, however, in that if you aren’t giving good content, your community will die. Invest the resources to keep the customer conversations alive.
We'll be alternating between speaker profiles and track spotlights from the event every Wednesday leading up to FEI Europe. This week we're focusing on the Generate Partnerships track, which will help make open innovation & external collaboration work.
Moving beyond the fundamentals- you will discover specific tools and techniques that make open innovation and partnerships really work for your organization. Though Open Innovation (OI) can be a difficult process to manage, creating an organizational structure that supports OI can unlock several opportunities for your organization. New for 2010 – in an interactive panel hear how companies are overcoming Intellectual Property challenges. Plus a new sessions on working with venture companies to build future growth as well as a session on metrics and measure that drive OI success.
Some of the companies speaking on this track include Logitech, GlaxoSmithKline, Heineken, Nestlé Co, J&J, and The Hebrew University of Jerusalem just to name a few. Make sure to download the brochure for a complete run-down on topics covered. Hope to see you in Amsterdam in February!
Tuesday, November 3, 2009
The Big E of Big E Toys
“I believe that you can do good by doing well.”
Blake Mycoskie - Chief Shoe Giver, TOMS Shoes
Chances are you’ve already read or heard about this company. Perhaps it was a story in Time magazine, a feature in People, or one of another dozen or so articles in prominent magazines or newspapers across the country during the past couple years. Or maybe you saw the “More Bars In More Places” AT&T television advertising spot earlier this year. It was kind of a cool spot. But even if you’ve heard about this company, their story is worth telling again. Their approach to business is totally Gonzo Innovation.
A couple years after taking third in the 2002 reality television show The Amazing Race II, entrepreneur Blake Mycoskie returned to one of his favorite destinations from the show – Argentina. While there, visiting a remote village, Blake was struck by the number of barefoot children who were unable to afford the basic footwear worn by most locals. In that moment, seeing that many of these children had infected cuts on their feet and wondering what he might be able to do about it, Blake Mycoskie had an epiphany. In that moment, the underlying “One for One” premise of TOMS Shoes was born. And in May 2006, after developing a more commercially viable version of the alpargatas (simple roped soled shoes) worn throughout Argentina by everyone from farmers to polo players, TOMS Shoes became a reality.
Later that first year, made possible because of caring TOMS customers, Blake with a group of family, friends, and staff, returned to Argentina to distribute its first 10,000 pairs of shoes. As of August 2009, TOMS has given over 150,000 pairs of shoes to children in need throughout the world, with plans to give over 300,000 pairs in 2009.
From the company website:
“TOMS Shoes was founded on a simple premise: With every pair you purchase, TOMS will give a pair of new shoes to a child in need. One for One. Using the purchasing power of individuals to benefit the greater good is what we're all about.”
TOMS (short for Shoes for Tomorrow) is everything Gonzo.
It is infused with passion
It is filled with purpose.
It’s efforts are experiential.
It’s team is committed.
For a consumer, shopping with TOMS equals giving. The company’s “One for One” business model has transformed customers into benefactors. And in doing so, TOMS has created a truly sustainable gonzo business that isn’t dependent on fundraising for support. Pretty amazing.
Perhaps you should consider putting someone else in TOMS shoes this holiday season.
TOMS shoes are available at department stores and specialty shops throughout the U.S. Find a retailer or purchase online at http://www.tomsshoes.com/.
[This entry was posted simultaneously on gonzoinnovation.com]
Monday, November 2, 2009
Why some EU Member States need to restrict carbon trading
EU member states cannot avoid taking different approaches to the implementation of the EU emissions trading scheme (ETS) if the integrity of the system is to be sustained. What works in the West might not work in the East.
There are questions whether new measures by the Lithuanian government to restrict the use of cash gained through the carbon sales in the second phase of the scheme are in line with the spirit of the EU ETS to provide a flexible mechanism and cash incentive for the companies for the reduction of carbon dioxide across the block.
The idea of emissions trading was to provide a flexible mechanism to stimulate environmental progress in our most polluting industrial sectors. Lithuania takes the view that in order to preserve the integrity of the ETS in fighting climate change, governments must implement legislation that would underpin and reinforce the rules on carbon trading, but also lay a foundation for sustainable development of a country, particularly in the face of economic downturn. Every country has a specific economic and social background that requires differentiated approaches in steering a state towards a sustainable economy. It means that EU regulation will have to be adjusted to the requirements of individual members.
Voluntary investments towards pollution reduction can be expected among the EU ETS operators in developed member states, such as Netherlands, in part because of the exposure to international competition, caring for the company brand as well as public checks and balances ensure operators investing in ‘cleaning up’. But other countries without these ‘drivers’ cannot engineer a laissez-faire move towards carbon reductions and a greener economy. In these cases regulation can and must fill in the void to surge financing of economy greening.
Lithuania is facing closure of the Ignalina Nuclear Power plant in 2009 and subsequently moving towards dirtier and more carbon intensive fuels in the coming years. Still, Lithuanian companies are able to sell allowances they didn’t need - in turn making profits but passing CO2 costs on to consumers. It happened at a grand scale during the ETS phase 1, when companies were making up to €35 million in profits and no investments towards pollution reduction, transforming industry or cleaning up production processes, which could have eased the need for additional allowances in the future.
The existing surplus of permits if not managed properly is failing the “polluter-pays principle” as it represents “hot air” in the system. To avoid permits being bought and used without any effort towards emissions reductions having taken place, some governments especially amongst the new member states will have to take a more active role.
Thus article 5 of the Climate Change Financial Mechanisms Act, which sets a duty upon the operators to use the proceeds from the permits trade exclusively for the environmental projects, has been introduced in Lithuania. Under the new law, companies sustain a level of discretion which projects to spend the carbon revenue on: from implementing best available practices to environmental programmes that can be rolled out on a wide scale. The new regulation applies only until 2013, when centralized allocation of emissions allowances is proposed by EU authority and the auctioning share as opposed to free allocation is envisaged to be bigger. But in response to dialogue with the European Commission over the contested national allocation plan and the need for the government to promote the transformation of industry to minimise the impact of ever decreasing free allowances, the Lithuanian government felt such regulation is necessary.
It will help to sustain the integrity of EU ETS, promote sustainable development, and to protect the public from hefty energy prices that will be inflated by the need of extra EUAs in the face of changing energy sources in Lithuania and cut of free allocations.Indeed such legislation is being considered by other new member states in the Czech Republic and Poland, which are both reported to be considering placing restrictions on how revenue raised from selling EUAs is spent in the third phase of the scheme.