by Bower, Tom
Branson had chosen coconut fuel after discovering that ethanol froze at 15,000 feet. The switch did not damage his credibility. With a forced smile he drank the fuel. ‘My God, it was horrible,’ he later admitted. After the plane landed safely in Amsterdam, some environmentalists hailed Branson as ‘a game changer in aviation’. His experiment, they said, had started a debate. Other venture capitalists, those environmentalists anticipated, would produce alternative fuels using algae and natural crops. Their enthusiasm was reinforced by Virgin’s publicists telling journalists that 20 per cent of the fuel for the fourth engine was the biofuel. Friends of the Earth challenged this assertion, claiming it was only 5 per cent. Among the crowd on the tarmac were representatives of Boeing and General Electric, the engine manufacturer. ‘Boeing has done five flights using biofuels,’ Virgin’s spokesman would later say as proof of the manufacturer’s commitment to using alternative fuels. Boeing subsequently explained the company ‘supported’ Branson’s idea but denied any ‘commitment’.
In the aftermath of the flight, Branson was asked whether burning biofuels in a jet engine was cleaner than kerosene. ‘Yes,’ he replied. Environmental campaigners, including Friends of the Earth, contradicted him. Burning biofuels is not cleaner than aviation fuel. Moreover, highlighting the production of crops for biofuels, his critics argued, had buried inconvenient truths about the carbon emissions needed to gather the coconuts and palm oil. Farmland and forests were being destroyed to grow the crops, and excessive carbon was emitted by manufacturing the fuel and shipping it around the globe. Branson’s performance, said his opponents, was a cheap alternative to greenwash advertising. As ever, Branson was not embarrassed. Although he admitted that there was insufficient palm oil and coconuts to manufacture the fuel regularly, even for a single Boeing engine, their objections were peripheral to one reality: on the same day as that flight to Amsterdam, the price of oil was $100 a barrel, the highest since 1980, and was certain to rise further. Virgin Atlantic’s financial hedging to protect itself from increased prices had been inept. His airline’s finances were deteriorating, and his investment in green technology was similarly hit.
Virgin’s Green Fund, based in London, was seeking, said Branson, a 30 per cent return from investments. ‘Up to now,’ he said, perplexingly, in 2009, ‘we’ve spent $300 million on this, so we’re ahead of the game because we haven’t actually made that amount of profit.’ A few weeks later, he spoke about the imminent ‘completion’ of raising another $400 million for the Virgin Green Fund. The manager of the fund, Shai Weiss, he said, would be investing between $5 million and $100 million in projects to develop renewable energy. Weiss’s record was inconsistent. In 2008, Virgin had invested $14.5 million in Green Road Technologies, a research group seeking to reduce cars’ fuel consumption. Within two years, the company was in financial difficulties. Alongside that loss was Virgin’s faltering investment in Cilion.
Soon after Vinod Khosla had opened the first ethanol plant in Keyes, California, he announced its closure ‘for technical and market reasons’. His plan to build eight others was abandoned in January 2009. Despite government subsidies, the project was unprofitable and, worse, ethanol had become unpopular among environmentalists. The conversion of natural land into cropland was destroying ecosystems, including the sponges and rainforests that absorb greenhouse gases. Khosla’s $200 million investment in Cilion was sold for $20 million in cash and shares to Aetatis. An evangelical advocate of green innovation, Khosla was burning money rather than producing biofuel. But his reputation did not suffer.
Khosla sermonised about ‘the green-technology revolution’ and dismissed critics as ‘Luddite jokers’. His interest in biofuels as ‘the single most important tool we have so far for alleviating climate change’ and his justification of profiting from environmental investments were opinions Branson easily agreed with. ‘The only way to predict the future is to invent it,’ was Khosla’s golden phrase. He ridiculed the notion that the world could reduce its energy consumption. The trick, said the billionaire, was to find alternatives to oil, coal, cement and steel. Like any disciple, Branson repeated the gospel to his friends, including Tony Blair, who in 2010 agreed to join Khosla as a paid adviser on ‘global relationships’.
Blair’s endorsement coincided with increased stridency in the US Congress about reversing climate change. The politicians spoke about a $500 billion green economy creating two million new jobs in pollution control and conservation. Their conviction that entrepreneurs would make a difference to the world reassured Branson about the profitability of green industries.
Among his new investments was Solyndra, a manufacturer of solar panels based in California. $600 million had already been pledged to that ‘clean tech’ industry, whose advantage, said Khosla and others, was that its panels were made from a substitute for high-priced silicon. Virgin Green, said Branson, had scrutinised 117 different panel producers before investing $31.9 million in Solyndra. Joining other high-profile investors from Silicon Valley seemed a one-way bet after Khosla reaped a 100 per cent profit by selling Ausra, a solar thermal company, for $250 million. Soon after Branson’s investment, the Wall Street Journal praised Solyndra as America’s top ‘clean tech’ company. The seal of approval came in the form of President Obama’s personal support. The federal government advanced a $535 million loan to Solyndra, which triggered investors to pour in another $600 million. Holding on to Khosla’s coat-tails represented a break in Branson’s routine pattern of business. Usually he copied and challenged Goliaths. But Khosla’s mastery of government subsidies and regulations – mirroring Branson’s methods – was tantalisingly persuasive.
At that moment, Khosla was negotiating with the administration of Atlanta, Georgia, for a $162 million grant. He planned to build a factory to produce forty million gallons of cellulosic ethanol every year from local pine trees. Enthusiastic officials hailed Range Fuels, Khosla’s enterprise, as ‘liquid gold’. Warnings from sceptics about ‘a high-risk venture’ and ‘still unproven technologies’ were silenced by his admirers.
Branson did not invest in Range Fuels but, encouraged by Khosla’s overall success, in 2008 he entrusted more millions to Gevo, Khosla’s next venture, which planned to manufacture butanol rather than ethanol as a renewable fuel. Manufactured by fermenting sugar and yeast, butanol produces more energy and is easier to blend with petrol than ethanol. After raising $199 million from investors, including a 10 per cent stake for Branson’s Green Fund, Khosla began planning production in Luverne, Minnesota. Once again, Branson confidently predicted success: ‘Butanol will replace jet fuel within five years. We’ve set ourselves a target of using butanol instead of jet fuel on Virgin Atlantic within five years.’ He also pledged to use it on Virgin Trains. However, within weeks of announcing the venture, Khosla ran into legal problems. Butamax, a company jointly created by BP and Dupont in 2003 to make butanol, had patented their perfected process in 2005. After three years’ research in a plant in Hull, north-east England, Butamax announced their intention to exploit their patent in an American factory. One year later, in 2009, Gevo applied for US government funding to develop butanol and was granted $1.8 million. The application revealed the company’s intention to use the identical process that Butamax had pioneered in Hull, prompting Butamax to sue Gevo for infringing its patents. Branson’s Green Fund now owned a stake in a company accused of unethical behaviour. Gevo denied the allegation and claimed to be more advanced in butanol production than Butamax. The dispute coincided with Khosla’s receipt of $76 million of taxpayers’ funds in Georgia to produce cellulosic ethanol. Despite receiving this money, Khosla had to delay starting production and reduced his forecasted output from forty million to twelve million gallons a year.
The setbacks did not damage Branson’s reputation. The few cynics were silenced by the favourable publicity still surrounding the $25 million Earth Challenge. Few seemed to be aware that no winner had been named and that the prize remained unpaid. Among the hundreds
of disappointed applicants was James Lovelock, a Branson favourite. Lovelock proposed laying pipes across the surface of the oceans to suck carbon dioxide into the sea. ‘Richard has been in touch with Jim Lovelock about this idea’, said a Virgin spokesman, ‘and is very interested. We are looking into it to see if we can fund a trial.’ Nothing happened but, at no cost, Branson’s image was enhanced by his continuing association with three other outstanding environmentalists: Tim Flannery, Crispin Tickell and James Hansen.
That coterie of stars, combined with his own activities, elevated Branson’s standing among the environmental clan as preparations for the meeting of the UN Climate Change Conference in Copenhagen in December 2009 were concluded. The organisers were appointing ‘world business leaders’ to inspire the expected 15,000 delegates, 5,000 journalists and ninety-eight political leaders, including President Obama. With Al Gore’s help, Branson was given a starring role in the conference as a ‘councillor’ among the business leaders.
Branson adopted a Churchillian pose. Britain’s prime minister had directed the nation’s defence against Nazi Germany from a subterranean war room. To conjure a similar image, Branson created the Carbon War Room in Washington. Several passionate climate campaigners joined Branson to, in the jargon he adopted, ‘enhance low-carbon economic development, remake the carbon-industrial complex into a post-carbon economy and accelerate green solutions’. ‘Black Gold’, a War Room slogan, was dedicated to removing carbon dioxide from the atmosphere.
Naturally, Branson sought others to help finance his ‘think tank’. Two of the ‘founding partners’ were unusual: Novamedia, which manages the Dutch Postcode Lottery, and Strive Masiyiwa, the Zimbabwean owner of Econet Telecom, a mobile network in Africa. Branson and the other founders, who chose to remain anonymous, committed $3 million each over three years. Branson’s contribution was sourced from the fees paid for his public speeches.
A head-hunting agency recruited the executive directors through unsolicited telephone calls. Jigar Shah, who had created and then sold for $200 million SunEdison, a provider of solar-energy systems, agreed to be chief executive for $253,001 a year. ‘I want to give something back,’ he said, adding to Branson’s delight that ‘climate change is the largest wealth-creation opportunity of our lifetime’. The director of operations was to be Peter Boyd, Virgin Cola’s former head of marketing, who later worked for Virgin Mobile in America and South Africa. Travis Bradford, an investment-fund manager, was Shah’s deputy on $209,091 per annum. Mark Grundy, previously employed to promote Coca-Cola and PepsiCo and an advocate of greenwashing, was responsible for publicity. ‘Companies’, he said, on Branson’s behalf, ‘will be most successful if they tie their green efforts to a specific cause or issue – whether that is personal health, sustainable business practices or climate change.’ In the aftermath of the 2008 crash, he linked the environment to money-making: ‘Green is now always going to be part of marketing in a way that it wasn’t before 2007.’
To improve Virgin’s image through the War Room, Branson transferred Jean Oelwang, a Virgin marketing executive in Australia, to London to manage his charity, Virgin Unite. The symmetry between helping the poor and saving the planet was, in Branson’s opinion, natural. Oelwang explained that her purpose at the War Room was to ‘really drive business as a force for good in the world’. A similar role was assigned to Sean Cleary, a former South African diplomat who represented the white apartheid government between 1970 and 1980. Subsequently, Cleary represented the South African government in the regime’s wars against the liberation armies in Namibia and Angola.
Branson was good at recruiting idealists. Claire Tomkins, an engineer specialising in clean-energy technology, accepted his offer ‘at a moment in time when we all believed we would get an agreement in Copenhagen’, she said. ‘It was a supercharged atmosphere.’ But Tomkins was under no illusion about Branson’s motives: ‘Richard was looking for interesting deals out of the War Room. He was looking for money.’ Shah and Bradford were partners in his quest. ‘Many environmentalists’, Bradford believed, ‘are myopic. They act out of a false paradigm that earning money from innovation is a conflict of interest with the environment. They put their faith in bad solutions. They suffer from a perception gap about getting a good return on environmental energy-saving measures. You can make millions and simultaneously help the climate.’
Branson tasked the new team to provide a tub-thumping speech for him to deliver in Copenhagen. He wanted a theme that deflected attention from the aviation industry’s culpability. Jigar Shah suggested shipping. The industry admitted producing 250,000 tons of carbon every year, or about 3 per cent of annual emissions. ‘The shipping industry has no incentive to improve,’ Shah told Branson.
The International Maritime Organization, Shah discovered, had meticulously collected data showing the carbon footprint of 60,000 individual ships. In Shah’s plan, to be explained by Branson in his speech, the IMO’s data would be published on the War Room’s website. ‘We’ll put ships of the same weight side by side,’ continued Shah, ‘and show which ship is emitting more carbon than another ship of the same weight.’ By comparing every ship’s carbon emissions, charterers would be encouraged to reject the contaminators. ‘We’ll send a shock wave through the industry.’ This new territory, Branson agreed, would grab the delegates’ attention. It was so simple. ‘This is exciting and sexy,’ added Shah. ‘We’ll be catalysts, creating an irreversible momentum. We will prove that capitalism can solve climate change.’ Artlessly, he added, ‘This is the easiest one to pull off.’
In full flight, Branson stepped on to the podium at the Copenhagen headquarters of Maersk, one of the world’s biggest shipping groups. ‘The shipping industry’, he said, enjoying the possibility of denouncing his hosts, ‘is just as big a polluter as the airline industry, if not more. But they’ve managed to keep under the radar and have done almost nothing about their carbon footprint.’ Shipping, he said, should be subject to a global tax on emissions. Thanks to the War Room’s database, charterers could force the industry to change. With a smile acknowledging the applause, he stepped down to accept congratulations from the delegates.
One man in the audience was outraged. Peter Hinchliffe, the IMO’s secretary general, condemned Branson’s speech as ‘dismissive and aggressive’. Hinchliffe had previously accused Peter Boyd of misinterpreting the IMO’s data, but he had been ignored. As Branson mingled with the audience in the auditorium, he was introduced to Hinchliffe.
‘You’re completely wrong in everything you said,’ Hinchliffe told him. ‘You’re not giving the true picture. You can’t compare ships as if they were all Boeing aircraft. Even if two ships are the same weight, you can’t compare a tanker and a container ship. Every ship is a different trade and type, and has different safety requirements. So the energy consumption varies.’ Branson fell silent. ‘And we’re already doing a lot,’ added Hinchliffe, listing the industry’s initiatives.
‘I didn’t know anything about that,’ stuttered Branson, who Hinchliffe believed ‘seemed quite shocked’.
‘And why are you attacking us?’ continued Hinchliffe. ‘Shipping emits 3 per cent of the world’s carbon and carries 90 per cent of the world’s trade. Planes emit 4 per cent and carry only 10 per cent. You’re not telling the true story.’
Branson shuffled away, promising to ‘look at everything’.
Travis Bradford was not surprised by the exchange he had witnessed. ‘Branson’s very good at raising awareness,’ he said, ‘even when he doesn’t understand what we are saying.’
The exchange delighted Jigar Shah. ‘We’re completely disrupting the shipping industry,’ he chortled. ‘They’re completely pissed off.’
To Hinchliffe’s disappointment, Branson did not live up to his assurance. ‘It’s become impossible to work with the Carbon War Room,’ he reported to his members. ‘Branson pulled a stunt, got good publicity, but they’ve got no influence.’ On reflection, he asked rhetorically, ‘And why is B
ranson lecturing shipping, considering all the energy his planes use?’ He was baffled when Branson subsequently wrote, ‘We have gathered a tremendous amount of support for our vision of a low-carbon shipping industry.’
The contradiction was highlighted by questions to Branson during the conference. One year earlier, Branson had supported a global tax on aircraft to reduce carbon and had criticised those who resisted his campaign. But in Copenhagen he somersaulted. Like all airlines, that year Virgin Atlantic was fighting for survival. A global tax on emissions, he told the delegates, was ‘unrealistic’. Airlines, he said, should be exempt, otherwise they would be ‘taxed out of existence’. He even joined those demanding that carbon trading be removed from the agenda.
The inconsistencies reflected Branson’s fixation with the price of oil. About one-third of an airline’s costs is jet fuel, and after the oil price spiked at $147 a barrel in July 2008, Branson feared that the world’s economy was doomed. His airlines and his lifestyle were threatened. Searching for culprits, he placed the blame on a cartel of oil traders who were secretly rigging the prices. He had no evidence of a conspiracy, but at the time Branson was preoccupied by price-fixing. Virgin had just confessed to manipulating the Passenger Fuel Surcharge, so his conflation of oil prices, renewable fuels and cartels was understandable. In his reliance on Will Whitehorn, Virgin’s media supremo, for facts, he was unaware of the unique circumstances causing the oil-price spike: namely, thanks to America’s new environmental laws there was a shortage of special oil products, which coincided with China’s high demand for those same goods in anticipation of the 2008 Olympics. By relying on the peak-oil illusionists, Whitehorn also apparently omitted to tell him that every official inquiry in Washington had failed to discover hard evidence that the oil market was artificially fixed.