Green NPV outweighs Finance NPV: Water Efficient Toilet Replacing Decision

My first finance course has given me to power to make decisions based on facts. During the time of recession that we are in, many of us are doing home upgrades. To convince my husband to upgrade our toilets I've planned to impress him with this NPV calculation (he loves finance). When we make our choices, increasingly we are including green in the picture. What I have learned about finance has given me the synergistic power of quantifying a green decision. In finance you learn about Net Present Value or NPV. NPV gives you the power to make a financial decision based on the future cash flow. If NPV is positive you will make money and you choose the decision. If it is negative you do not pick it. We can apply this financial principle to carbon flow as well. What do I mean by carbon flow? I mean the carbon inflow and outflow required to produce and distribute any product or service.

When you consider any decision you should also consider not only the financial NPV but NPV of carbon flows or the life cycle analysis, LCA flows. Expressed in an equation total NPV = NPVfinancial + NPVcarbon. One example I will give you is, the decision to replace all the toilets in your house with water efficient toilets.
If we look at the LCA flow of the old and new toilets we have:

NPVLCA = benefit for years – cost in the first year

If this is positive we replace the toilet depending on the financial reasons

= increased water efficiency – (energy required to make the ceramic toilet + transportation of toilet)

It is assumed that ceramic would be an approximation for cement and that an average toilet weighs 75 pounds. Water savings would be 68%. The average household uses 238 gallons of water per day[6] or 87,000 a year. Savings would be 59,000 gallons of water. How much carbon or energy does it take to make 59,000 gallons? The amount of carbon saved is per 80,000 year. One question I have is what to use for the discount rate and over how many years? We can assume forever. The discount rate would be equal to the rate that carbon emissions are increasing each year, which is currently 2.5%[9], oddly enough approaching about the same rate of inflation.

Because carbon is the universal metric we convert all quantities back to NPVcarbon
NPVLCA = NPVcarbon = carbon factor H20 – carbon factor ceramic + carbon factor transportation

NPV(year 1)= 80,000 tons saved every year - [(1 t C/t cement)(0.034) + 3 ton C/ton gasoline]yr 1

= (80,000/0.025) – 3.034 = 2.4 million tons carbon

2.4 million tons of carbon can be saved by replacing one toilet that is more water efficient over the lifetime of the toilet.

The financial NPV is
NPVfinancial= benefit – cost

= savings on water bill forever– cost to replace toilet

= (25/0.03)-(500) = 833 – 500 = 333

If you saved $25 a year by changing the toilet the benefit outweighs the cost in NPV terms by $333.

Looking at the combined effect of financial and carbon flows, overwhelming the answer to replacing your toilet with a water efficient toilet is a resounding yes for greens all around.

One thing to note about this calculation is how easy the financial NPV is to calculate, but how much more complex a carbon NPV is to determine. Many assumptions and approximations might have to be made. What is powerful about this calculation is that the environmental effect of replacing one toilet has such a huge impact relative to the financial impact.

1. http://www.survivalinsight.com/reduce-water-bill-costs.html
2. http://answers.yahoo.com/question/index?qid=1006032214497
3. http://www.sciencedirect.com/science/article/B873D-4P9MYFN-BK/2/c58323fdf4cbc244856fe80c96447f44
4. http://www.ghgprotocol.org/downloads/calcs/co2-mobile.pdf
5. http://www.crd.bc.ca/water/conservation/household/indoorsavingtips.htm
6. http://www.greenbuildingsupply.com/Public/Energy-WaterConservation/WatersavingToilets/CaromaDualFlushToilet/index.cfm
7. http://www.epa.gov/waterinfrastructure/bettermanagement_energy.html#basicone
8. http://www.epa.gov/watersense/
9. http://www.sciencedaily.com/releases/2006/11/061130190831.htm

On Crossing Over From Science to Business

I am half way finished with an MBA at DePaul, and the question of what ares of science/chemistry are most similar to business is becoming clearer. I've all but finished my required courses, and I'm down to the six electives and the one or two concentrations that I've chosen. I've chosen finance as my concentration and most likely entrepreneurship, but I'm still intrigued by marketing.

What makes the decision hard is that I am uncertain what part of my past life as a scientist will lead me to a future in the business world. In the past it has always been technical skills that got me a job and not so much my people connections. The challenge I find is in marketing myself and breaking away from the scientist stereotype - something that I would like to make my strength and not my weakness (people tend to see me as only a scientist). My short term goal is to transition to marketing or operations management in the biotechnology or pharmaceutical industry where I have the most experience.

I've taken accounting, business statistics, organizational behavior, economics, management of information systems, operations management and now finance and marketing. The classes I find more reminiscent of "chemistry skills" are finance, marketing and operations management.

I'll first describe the disciplines of chemistry and then follow up with business and how they are related. In chemistry there are the basic disciplines of general, organic, analytical, physical and inorganic chemistry. Generally, the most jobs in industry go to organic and analytical chemistry. Organic chemistry has to do with the study of chemical reactions of compounds consisting mostly of carbon and hydrogen. If you are a strategic thinker and can apply rules, you'll be good at organic chemistry. It also has a lot to do with geometry and shape. Inorganic chemistry has many parallels as well with organic, but the chemical compounds contain a metal. Analytical and physical chemistry have more to do with analyzing and fitting chemical behavior to models. Quantifying and predicting are important. Building equipment and writing computer code can also come in to play.

Of the business courses I've taken I would divide them in to organizing/categorizing/efficiency, forecasting/predicting, organizing people/communication skills, analyzing/quantifying/research

Functional Skill	Business	Chemistry
organizing/categorizing/efficiency	Accounting, Ops Management	Organic, rxn type, % yield
forecasting/predicting	Economics, Finance	Physical
organizing people/communication	Organizational Behavior, HR	N/A
analyzing/quantifying/research	Finance, Marketing	Analytical, Physical Research applies to all

A person can over analyze decision making when it comes to careers. What it really boils down to is are you passionate and motivated about the path you've chosen. If you have these elements when you inevitably hit a stumbling block, you can keep going. If we could all forecast the future then that would be boring. For me, I'll be gathering information until the very last minute and then make the best choice possible.

Trend of Buying Green Inversely Proportional to Carbon Emissions Release?

It has been said that if the US does not return to its previous level of consumption that our economy will not fully bounce back. Is there a difference between good and bad consumption –green vs. petroleum consumption– like good and bad cholesterol?

Carbon emissions dropped 2.8% in 2008. The reasons: energy prices, slow economic growth and a decrease in energy consumption. At the same time that carbon emissions have dropped prices on the Chicago Climate Exchange have taken a hit as well with carbon CFIs plunging to $0.25 right now.

The average American is not aware of carbon futures trading or the amount of emissions. So what do we believe in? A recent marketing study shows the top three concerns are: #1 Recycling – #2 Renewable Electricity – #3 Green Transportation. These are things that we think about day to day. The year 2030 or 2050 seems far away. What can we do to help now?

How we make our decisions does make a difference. Here are some daily activities. How do you make your choices?

1. Food at the grocery store
2. Eating out
3. Transportation
4. Personal care
5. Cleaning products
6. Clothing, towels, blankets, sheets
7. Furniture
8. House maintenance – new energy efficient windows
9. Indoor and outdoor plants & landscaping – cutting grass
10. Waste disposal - recycling, composting
11. Water use - rain barrels

One way it might impact your choice is where you decide to eat. The news last night reported a story of the Green Chicago Restaurant Coop certifying green restaurants. Green Seal is the non-profit organization that certifies green restaurants. Green Seal commissioned a 2009 National Green Buying Survey that indicated that 9% of the green advertising influenced their decision; the biggest factor was the product reputation. Two equally good restaurants are your choice for dinner but one is a member of the Green Restaurant Coop. Where do you go for dinner?

So how do consumers know that the green claims are true? Third party verification through organizations like Green Seal.

Right now people are buying green even during a recession. When and if we return to the “normal level of consumption” what will change? We will revert from green back to petrochemical?

Given that Walmart seems to be a sustainability leader they oddly seem to be shifting the consumption trend towards green. The creation of their new Sustainability Index says to me that any non-governmental power can create their own standards. Depending on the reputation of Walmart as a whole, the Sustainability Index name may attract buyers to their store.

References:
1. http://www.eia.doe.gov/oiaf/1605/flash/flash.html
2. http://www.buygreenchicago.org/green/bgcc/index.html
3. http://www.greenseal.org/resources/green_buying_research.cfm
4. http://www.greenbiz.com/blog/2009/07/16/walmarts-sustainability-index-hype-and-reality

Calculation of Greenhouse Gas Emissions on the Internet are Not Equivalent

Calculation of Greenhouse Gas Emissions on the Internet are Not Equivalent

By Wanda K. Hartmann

Recently, my husband asked me how greenhouse gases (GHG) emissions are calculated. My husband’s argument is, how accurate are these numbers and what are the approximations and estimations? What can we believe? Plato once said that “Science is nothing but perception.” In the case of measuring GHGs this is probably true. GHGs seem like a back of the envelope calculation, but measuring GHGs are really about measuring human activity. In contrast to plants that rely on photosynthesis and taking CO₂ and turning it in to O₂, we humans rely on respiration; our activity is based on producing CO₂ and related gases from byproducts.

As a chemist, my first guess on measuring GHGs is that they are calculated from the amount of energy and fuel that is used by a person or a company. When you consider that companies and individuals invest money in carbon offsets, a highly accountable system of checks and balances should be in place, as well as a system and method of standards. The Nature Conservancy is one company that offers a plan where carbon offsets can be purchased.

I set out to answer this question and found the EPA, Nature Conservancy and AOL sites

• http://www.epa.gov/climatechange/emissions/ind_calculator.html
• http://www.nature.org/initiatives/climatechange/calculator/
• http://reference.aol.com/planet-earth/global-warming/calculator

The EPA site considers mainly fuel and energy for calculating GHGs. However, the Nature Conservancy site also includes things such as air travel, composting waste and diet. A meat eater’s diet contributes 3.6 tons of CO₂/yr vs. vegetarianism at -6.4 tons of CO₂/yr. Eating organic and composing unused food can help a bit. 20% of GHG production according to the Nature Conservancy is from food and eating (12 tons). The sum total of my house hold activity on the Nature Conservancy site was 43 tons compared to 20 tons (40089 pounds) on the EPA site. If you subtract out food the Nature Conservancy value is still 31 tons compared to the EPA. There is another 10 tons of difference to be accounted for. In looking at the individual numbers, the Natural Conservancy differs from EPA by twofold larger numbers on waste and recycling, 10 times larger estimates on home energy (heat and electricity) and is 40% less on the estimate for the car emissions.

Table 1. Household emissions for two people

	EPA Pounds of CO2/yr	Nature Conservancy	AOL
Household emissions	Pounds	Pounds (tons)	Pounds
Car	13519	5403(2.7)	15145
Natural Gas – heat	6802	64000(32)	8469
Electricity	18577		20573
Waste	2036	4800(2.4)
Recycling	-875	-2000 (-1)	-940
Composting		-400 (-0.2)
Air Travel (4 short flights)		2800(1.4)
Food		16200(8.1)
Eating Meat		7200(3.6)
Total	40089	86-98000	40282

When it comes to recycling EPA gives a 845 pound CO₂ credit for recycling. The Nature Conservancy gives -1 ton or -2000 of CO₂. The credit given to by the Nature Conservancy is double.

EPA Results

What I found from fueleconomy.com is that my Honda Accord 1997 puts out about 7.1 tons of CO₂ in a year. My husband’s Passat emits 8.0 tons of CO₂ in a year. For comparison the 2008 Prius puts out about 4.0 tons of CO₂ a year. Our home energy bill breaks down into heat and gas. GHG are estimated from the average monthly bills. The final aspect is waste. Recycling can offset GHG emissions by as much as 50% if you recycle. Our total emissions are 40,089 pounds of carbon a year (1 ton = 2000 pounds,) which is close to the average amount.

We can improve on emission most by buying an energy efficient water heater and replacing the windows in our house. If we do this we will save nearly 15-20% of our household emissions. The most interesting fact I found is that most of our GHG emissions come from using electricity by the EPA calcuations. If we had photovoltaic solar panels we might be able to improve upon that. In addition we could buy a car with better gas mileage and save another 4 tones of CO₂ a year or 8000 pounds a year.

Summary

When it comes to estimating automobile emissions EPA seems to be the most accurate as it considers the year of the vehicle. Of the three GHG online calculations EPA and AOL are in close agreement but still off by about 2000 pounds from each other. The Nature Conservancy numbers seem to be way off from the EPA and AOL numbers (conversion 1 ton = 2000 pounds). The home energy number of 32 tons or 64,000 from the Nature Conservancy seems to be far off from the other EPA and AOL numbers, although the Nature Conservancy brings up a good point with food and eating meat as a part of the GHG gas equation. If I considered buying carbon offsets I would serious reconsider after looking at these numbers. Some numbers are way off. The EPA bases the emissions on monthly energy bills. The Nature Conservancy bases these numbers data from geographical regions, which in my opinion may have more error. The next part in this series will discuss corporation based GHG calculations.

Genetic Testing Becoming the Norm

By Wanda K. Hartmann, Freelance Science Writer

Genetic testing is becoming commonplace. With the advent of new genetic testing companies, what does the future hold for diagnostic testing? Many Direct-to-Customer (DTC) genetics testing companies offer mail-in saliva test kits, similar to the first mail-in AIDS tests offered in 1986. Companies such as 23andme and Navigenics are offering a DTC tests for SNPs (single nucleotide polymorphisms), single mutations on the DNA backbone that may be linked to certain diseases. In addition, genetic tests for bipolar disorder and schizophrenia are coming on the market – offered by Psychnomics and SureGene, respectively. Other tests for Alzheimer’s may be coming as well. However, the tests do not offer 100% predictability. How will these future tests, the Genetic Information Nondiscrimination Act, and the interaction with patients, DTC genomics testing and healthcare providers come into play? Will genetic tests become as routine as blood tests?

The Genetic Information Nondiscrimination Act
An important bill was passed last year, the Genetic Information Nondiscrimination Act of 2007. In many ways, this bill opened the door for mass production of genetic testing, as it outlawed discrimination against individuals by health insurance companies and employers. This law grows out of the early sterilization laws in 1907-1981 that protected persons with genetic defects. Sickle cell anemia was one genetic disease that threatened discrimination against African Americans. One example of pre-employment genetic screening and discrimination was used at Lawrence Berkeley laboratory in California. This case resulted in a decision in favor of the employee. The Genetic Information Nondiscrimination Act has helped to protect the public from genetic discrimination and aims to allow consumers access to genetic testing and early detection of disease.

One SNP or the Whole Genome?
DTC genomic testing companies are not only offering a test for a single gene, but claim to be selling tests for a personal genome. In early 2007, the company 23andme started a new company based on a “personal genome web-based service.” The company was started by executives of pioneering companies in gene testing. Similarly, Navigenics offers, a “gene roadmap to health.” Curious about their services, in particular the issue of privacy of genetic information, I read their websites and contacted Navigenics. From the website information and response, it seemed that the customer service and privacy was of more concern to Navigenics than 23andme. Genome testing companies will gain power when they control genomic data. What rights does an individual have to their genome data files once they have mailed in their saliva? The temptation for genome knowledge and the long term exposure of an individual’s genome for information exchange is indeed both intriguing and worrisome. How much power do we place in the hands of the DTC genetics companies? What happens when these companies are bought out by others or change hands? How will policies change? The government can only control and protect the consumer to a certain extent. Eventually these genomic companies might be outsourced to other countries.

Mail Order Genome Test Results
As a doctor or health professional, how does one respond when a patent enters the office with a genetic test purchased through a mail-in saliva kit? What is the percentage error in these tests? How will the results be interpreted? Will the field of genetic counseling experience a huge growth? Speaking with a genetic counselor by phone or email in another state and eventually country is very impersonal. The NIH Genome 2004 study indicated that the risk of misinformation is not adequately transmitted and understood in DTC tests. Marketing on the internet leaves out the healthcare provider, a risky move, and leaves the burden on government agencies to oversee DTC testing.

Amniocentisis: The Most Frequently Used Test
In looking for the origins of genetic testing we should look to the most familiar genetic test, an amniocentesis. An amniocentesis is performed to check primarily for Down Syndrome and Cystic Fibrosis in pregnant women of advanced maternal age. The first genetic diagnosis of amniotic fluid was made in 1956 and published in the journal Nature. In 1968, Dr. Carlo Valenti made the first diagnosis of Downs Syndrome with a genetic test. Amniocentesis is regularly used as a genetic test in pregnancy. The results of this test have a profound impact on the mother. Care is taken to have appropriate genetic counseling available. The mental health aspect of finding out that you have a life threatening illness is just as important as finding out about a physical disease. Physical diseases that have been linked to genetic markers and tests are listed here:

Company
Year Genes Tested Disease

Myriad Genetics
2002 BRCA1 and BRCA2 Breast and ovarian cancer
2001 P16, CDKN2A or INK4A or MTS1 Melanoma
2000 MYH, MLH1 or MSH2, APC Hereditary Nonpolyposis Colon Cancer

Genzyme
2006 KRAS Non-small cell lung cancer
2006 CFTR Cystic Fibrosis
1999 nMLHI and hMSH2 Colon Cancer

deCODE
2007 TCF7L2 Type 2 diabetes
2007 PDE4D Stroke

Myriad, Genzyme and deCODE are three companies that have been developing genetic tests and have tests on the market for specific diseases. The company deCODE plans to enter the personal genome market and compete with 23andme and Navigenics. What does this mean for the patient/consumer and healthcare provider?

It means that not all tests are created the same. Different genetic tests will be looking for different genes, combinations of genes and gene linkages, possibly using slightly different technologies, with different variations in error. They will make judgments about different risk factors—how likely are you to develop the condition. Another factor is other non-genetic diagnostics tools that may either refute or support the genetic test. When it comes to a person’s health, a single test should not be the only predictor of disease, if there are other diagnostic tests available.

Advances in colon cancer cure rates alone are making it possible to receive diagnostic testing that is less painful and more technologically advanced. If you believe that you are at risk for a certain disease and have part of your genome tested, how will you follow up the genetic tests with other diagnostic tests? Would you change your lifestyle to minimize the risk? How might this change your life expectancy?

How Does a Patient Make Decisions Based on Genetic History and Tests?
Imagine you are one of 5-10% of the population with a family history of colon cancer. You make the decision to get a genetic blood test at age 39. There is a 1% chance that you will test positive for colon cancer at that early age. As you know you are already at risk, you might change your personal habits or diet. If the test came back negative, does it mean you are not at risk? No. There is error associated with the test and possible future environmental triggers. If the test came back positive you might be more cautious and agree to have a colonoscopy. Making these decisions in the absence of a doctor is not sound.

On the other hand, there are other diseases that have no other tests but genetic ones available. Many of these tests are for mental diseases. In the case of Alzheimer’s, only 25% of the cases are hereditary. Currently the NIH recommends against genetic testing for Alzheimer’s. There is not enough reliable data to make the test worthwhile. It is unclear how genetic testing will help.
Genetic testing is not a magic bullet, but advances in knowledge about gene linkages are important for the healthcare provider. Although there are tests available for many diseases (cancer, stroke, melanoma, cystic fibrosis and type-2 diabetes), many gene tests for diseases do not provide clear-cut answers. A Parkinson’s gene has been discovered in 20% of the people of Middle East origin. Genetics may only add a small increment of information to what we may already know – a sight predisposition to Parkinson’s.

In order to be an informed customer of the DTC genomics companies, a patient would need to start with a Ph.D. in genetics to understand what is being testing for. It is unclear what markers are included in genome testing and whether or not are they are true predictors in diagnosing disease. Many consumers may think they are getting their entire genome mapped, when in reality the test is only a portion of it. The cost and technology to date limit testing the genome for only a specific set of gene mutations. The cost of an entire genome map is prohibitively expensive for the average consumer.

Although it seems that the goal of DTC is to put power in the hands of the patient/consumer, in the process, the healthcare provider is potentially being left out. Patients need counseling both before and after they receive this test. Many people will receive counseling by phone or internet, not a high quality medium for healthcare services. This is a risky path to take. It places the burden on the uninformed patient. Knowledge can be powerful, but how does the knowledge of one’s genome change a life? When a genetic test for any disease becomes as easy as mailing in a test tube filled with salvia, it diminishes the importance of our lives and reliance on the medical field and a team of healthcare providers to guide us in important decision making.

Gene tests, counseling, and education of the general public on the matter of genetics has a long way to go. The science and biotechnology of genomic testing will only improve and become more affordable in the future.

The High Tech Way to Find Lead in Toys

The story on lead in toys had seemingly gone away, but today on NPR it resurfaced again. The Consumer Products Safety Commission has plans to increase regulations on consumer products such as toys. Until the safety issues with toys are cleared up, companies will be continued to be penalized for any lack of vigilance.

Curious about the current state of research and testing toys, I looked into high tech, rapid and accurate ways that lead can be tested for in metal and plastic.

Initial investigation led to the discovery that many do-it-at-home kits that test for lead available at home improvement stores are not accurate. As stated in an NPR story in December there are a few kits that test for lead on the surface of toys, but not imbedded lead. These tests are not recommended by the Consumer Product Safety Commission.

The best test for imbedded lead is state-of-the-art, fast and portable XRF. XRF is shorthand for X-ray fluorescence. X-ray is the type of radiation that we are familiar with when have our teeth X-rayed by a dentist. It is a high energy form of light and part of what scientists call the electromagnetic spectrum and not visible by eye. Fluorescence, on the other hand is visible light that is emitted when light interacts with an atom’s electrons making them energetically excited. In this excited state light is emitted and the electron returns to its normal state. The emitted light is fluorescence. The fluorescence wavelengths are characteristic to the identity of the atom or molecule.

XRF is a device that uses X-ray light to produce fluorescence from an atom or molecule. In the case of toys, X-ray light excites the electrons in lead and will emit specific colors of fluorescence that are a fingerprint for identifying that atom. XRF not only gives information about the surface of the toy but also what lead contaminants might be hidden below the surface. Much like how an X-ray can penetrate the surface of your tooth to find a cavity, lead fluorescence is extremely specific for identification and penetrates below the surface of the toy.

Although XRF may be out of reach to the average consumer, these hand-held devices are very useful for field work, in factories and to toy companies themselves for testing products for toxic metals and chemicals. In the hands of the skilled scientist, XRF can give detailed information about what metals are present in a toy or other product. With high tech tools like this available on the market, the testing of lead in toys should become more facile and their use more widespread.

References:

1. http://www.npr.org/templates/story/story.php?storyId=16951320
2. http://www.innovxsys.com/en/products/guard
3. http://www.easternapplied.com/pages/9/1/rohs-lead-free-testing
4. http://www.syracuse.com/articles/news/index.ssf?/base/news-12/1196762366262170.xml&coll=1
   

VW Competing for Green Car Market

New VW Golf has lower CO₂ emissions than Prius or Civic.

http://blog.wired.com/cars/2008/02/vw-unveiling-an.html