See who came out top in our list of Britain's 50 greenest firms

At the Lotus engineering works in Norfolk, researchers are working on an idea that seems almost too good to be true: a car that runs on CO2. The very gas that comes out of exhausts and poses the threat of climate change could, they believe, be extracted from the atmosphere and used as a source of synthetic fuel. Hey presto: a carbon-neutral car, planet saved.

From theory to practice is a bumpy road, of course, and Mike Kimberley, chief executive of Group Lotus, readily admits that some alternative fuels “could be more easily implemented than others”. He is optimistic, however, and determined to make Lotus a “world leader in green transport engineering”.

These days even diehard petrolheads know that in the long run there is no choice but to find an alternative to the black gold that has lubricated the world for more than a century. All sorts of initiatives for clean, green and renewable energy are being supercharged by oil prices that hit a new record last week of $146 a barrel – and may well go higher.

Among mainstream analysts, predictions of the price reaching $200 are unexceptional. Last month Gazprom, the Russian oil giant, suggested it would hit $250 next year. The maverick energy guru Robert Hirsch, who forecast the present oil squeeze, has suggested the price could reach $500 a barrel within three to five years.

Gas prices are also soaring and coal, though cheap and plentiful, is one of the worst emissions. sources of CO2 What is bad news for businesses and consumers, however, is good for investors in green energy. Vast sums of money are pouring into technologies that until relatively recently were the preserve of niche businesses and environmental campaigners. This year should see a record £73 billion or more invested in “clean technology” despite the credit crunch, according to a report published last week by the consultants New Energy Finance for the United Nations.

“The green energy gold rush is attracting legions of modern-day prospectors in all parts of the globe,” said Achim Steiner, head of the UN environment programme. Dotcom entrepreneurs, Wall Street financiers and venture capitalists of every hue are piling in.

This 21st-century “green Klondike” stands in stark contrast to the fortunes of ageing icons of the oil age, such as the US carmaker General Motors.

Until recently the biggest vehicle manufacturer in the world, GM is in the middle of an enormous, possibly fatal, slow-motion crash. It has been running low on gas for some time, losing $51 billion in just three years. Last week one of the wheels fell off as it axed four plants that build thirsty sports-utility vehicles and trucks. The company’s outlook is so poor that the investment bank Merrill Lynch has warned that bankruptcy is “not impossible”.

These tectonic shifts are driven in large part by the surging development of China and its 1.3 billion people. While the demand for oil in most western countries has flatlined or even declined over the past 12 months as economic conditions have worsened, in China it is powering away. This demand, and for other commodities, is driving up prices – but also spurring investment in technologies that might unlock a new era of clean, affordable energy.

It prompts several questions: are consumers finally beginning to change their habits? Will alternative energy sources become economically competitive? And could China’s thirst for oil in fact save the planet?

That high oil prices are changing consumers’ habits is clear. In the US the latest figures show that American motorists drove 1.4 billion fewer miles in April than in the same month last year. It was the sixth consecutive monthly drop. Bus and train use has jumped 10-15%.

In Britain similar concern is evident. Petrol sales are down and an AA survey shows that 48% of drivers are considering cutting out short journeys by car and 62% would consider buying a more fuel-efficient model.

Last month Toyota sold its 25,000th Prius in the UK and the hybrid car, powered by petrol and electricity, is in such demand that buyers sometimes face waiting lists, depending on colour and specification. Worldwide, Toyota has sold more than 1m Priuses.

Michael Meacher, the former environment minister, is one of those being spurred into action. His home is heated with oil, and at $146 a barrel it’s time to change. “I looked into wind turbines, which are fashionable, and solar panels, but neither would really work for me,” he said.

“So I’m installing an air-heat pump and a woodchip burner.” The pump will bring heat from the air into his home rather like a fridge in reverse.

Consumer action is also illustrated by Rosemary Randall. Three years ago she founded Cambridge Carbon Footprint, a volunteer group that spreads the message of greener living. It offers to measure people’s carbon footprint for free, explains how to reduce it and advises on deploying renewable energy technologies.

“We are just coming up to measuring our 2,000th carbon footprint, and we think that as a result of coming on our courses people drop their carbon emissions by about a ton a year,” Randall said. “People who come to our groups go on to facilitate other groups. It’s a cascade system.” Juliet Davenport, chief executive of Good Energy, a niche company that supplies consumers with electricity from renewable sources, said: “A lot of people want to be green but haven’t reallyfound it economically necessary.

“I think the urgency is there now. Our website hits are going up 10-15% a month.”

Vital though such local consumer interest is, for renewable energy to become mainstream will require huge investment. That step change now seems under way after funding for “clean tech” surged 60% last year.

Although the credit crunch dented the figures earlier this year, they have rebounded and the UN believes global investment will grow to £225 billiona year by 2012. In Germany, the government believes it will be bigger than the car industry by 2020.

Among those searching for change are the Google billionaires Sergey Brin and Larry Page. Through Google.org, a philanthropic arm of the company they founded, they have committed £42m to developing solar and wind power, plug-in hybrid cars and other ideas. One of their aims is to make “RE<C” – shorthand for renewable energy cheaper than coal.

Elon Musk, co-founder of PayPal, the internet payment system, is the driving force behind the Tesla, a high-per-formance sports car powered entirely by electric batteries.

Vinod Khosla, one of the founders of SunMicrosystems, is an advocate of certain types of biofuel as the answer to new energy for cars. And the veteran tycoon T Boone Pickens recently announced a deal with General Electric to build the world’s largest wind farm in the heartland of the US oil industry – Texas.

In the UK the venture capitalist Martin Wright and mechanical engineer Peter Fraenkel are leading the way in tidal power. Their company Marine Current Turbines installed the first commercial-scale tidal power system in the UK and it should start generating this summer. If it works as planned, the company intends to develop an entire “tidal power farm” off the coast of Anglesey by 2012.

For the moment wind power is the favoured technology, since it is proven, simple and enjoys political support. In the longer term solar cells will come to the fore, according to a leading international investment company specialising in clean tech.

“At present wind is cheaper,” said Alexander Rohde, a spokesman based in Switzerland for Good Energies, which has an annual investment budget of £250m. “The question is, over the long run can you make it cheaper than it is? We do not see over 20 to 30 years that there will be technology to bring the cost down. On the other hand, the solar cost per watt is coming down quite steadily.

“In the US they are asking where the next great technology will come from. We are not sure that is needed. The technologies are there in solar and wind – the point now is to get the cost down.”

Jeremy Leggett, a long-standing proponent of solar photo-voltaic power (PV), feels vindication – and despair that the British government is still doing too little. “It’s now inevitable, and I used the word advisedly, that solar electricity is going to be cheaper than electricity from gas and coal,” he said. “It’s straight manufacturing economies of scale, while we all know what is happening to oil and gas.”

Bulky panels that used to be bolted on are giving way to integral thin-film technology. Solar-century, a company founded by Leggett, now supplies some builders with solar tiles that fit seamlessly onto roofs alongside ordinary tiles. “The technology is so efficient now it just needs grey light to work,” said Leggett. “The future can be really different from the way we have done things in the past.”

US researchers are manipulating materials on the nano-scale to keep sunlight “bouncing around” inside solar panels to boost the amount of electricity produced. They reckon this could bring the cost per watt down to about £1 – much closer to the cost of electricity from coal and without the emissions.

So far, however, the UK government has concentrated on wind, at the expense of solar. “The government has just put out a consultation which is supposed to be a green revolution. It’s pretty much all about wind,” said Leggett. “If you look at the figures, they have solar PV producing less than 0.5% of UK primary energy 12 years from now. It’s a catastrophic failure of imagination.”

From tomorrow Gordon Brown and leaders of the other main nations will gather in Tokyo for a G8 summit. On the agenda are oil and food prices, and climate change. Though many observers would like to see an agreement to cut carbon emissions by 50% of their 1990 level by 2050, the scale of the challenge is enormous.

At present renewable energy sources make up just 1% of the world’s primary energy consumption; gas accounts for 21%, coal 25% and oil is the single biggest energy source at 35%.

When it comes to electricity, 40% is produced from coal and a further 20% from gas; hydro power produces 16% and nuclear 16%; renewables again account for just 1%.

To escape our reliance on oil and to create energy that is clean will require more than the endeavour of private investors and individuals. It needs political courage.

Lord Browne, European managing partner of the Carlyle investment group and former chief executive of BP, recently argued that the necessary knowledge and skills are available, but one other factor is key, he said: “It is one thing to know what needs to be done and quite another for the details of those policies to be worked out, enacted and enforced.

“Getting from the former to the latter requires political leadership. I believe this remains today’s determining step.”

There is an added motivation for western politicians. The spike in oil prices is handing yet more power to oil-producing nations, some of them hostile.

To reduce the dependence on these countries is becoming more of a geopolitical priority.

Innovators, investors and entrepreneurs are optimistic change can be achieved with political backing. Michael Liebreich, chairman and chief executive of New Energy Finance, said: “The high oil and gas prices are certainly helping to drive that investment, but investors are still looking for stronger signals on policy because they worry about what will happen if, or when, the prices recede.”

In the right political environment, even hard-nosed bean counters are optimistic. A report by Price Waterhouse Coopers last week reckoned the change to a low-carbon future can be achieved by 2050 at the cost of “one year of global GDP growth . . . ie, reaching the same level of GDP in 2051 as might otherwise have happened in 2050”.

It seems a modest price to pay for what Liebreich calls “nothing less than the complete restructuring of the world’s energy industry”. Are you listening, Mr Brown?

THE SOLAR POWER EVANGELIST
Jeremy Leggett

WHO IS HE?
Social entrepreneur, author, geologist and former oil industry consultant

WHAT IS HE DOING?
Leggett is founder and chairman of Solarcentury, which is the UK’s largest independent company specialising in harvesting the power of the sun. He argues the local micro-generation of solar power will be the best way to combat climate change and declining oil production in the long term

WHAT IS THE PROBLEM?
The capital costs are still expensive for householders. Installing a small-scale system may cost £2,000, larger ones more than £10,000

DOES HE HAVE AN ANSWER?
Costs are falling, while fossil fuel energy is growing more expensive. The two will one day cross over. “These technologies are not called renewable for nothing,” he said. “Once people have found a way round the capital cost, that’s it; it’s free electricity.” Solar technology is advancing rapidly. Cells can now be made wafer-thin and printed on aluminium foil. They can then be “wrapped” on almost any object. American manufacturers claim it will halve the costs of producing solar cells. Nanotechnology is also being used to bounce the sun’s rays around the cells, so less energy is lost

THE GREEN ENERGY SUPPLIER
Juliet Davenport

WHO IS SHE?
Chief executive, Good Energy, a green power supply firm, and one of the Sunday Times 50 Best Green Companies 2008

WHAT IS SHE DOING?
Providing the firm’s 20,000 consumers with electricity from 100% renewable sources. Trying to simplify the fragmented process of creating and using renewable energy. “It’s a bit bitty at the moment – we’re trying to make it more straightforward for consumers,” she said. “We will see some step changes, not necessarily in anything brand new, but in existing technology. We will see a breakthrough on solar”

WHAT IS THE PROBLEM?
Finding sources of renewable energy is a competitive business and generators are scattered all over the place. Good Energy has about 450 suppliers, from a factory with its own wind turbine to householders with just a few solar cells on their roof

DOES SHE HAVE AN ANSWER?
Like other similar companies Good Energy pays people who generate renewable energy – even if they use that energy themselves. As that message spreads, more people will see the benefit of generating renewable power. “The interest in this area, where people can do it themselves, is increasing,” said Davenport. “We are seeing hits on our website go up by 10 to 15% a month”

THE BIOFUEL INVESTOR
Vinod Khosla

WHO IS HE?
Silicon Valley billionaire who was a co-founder of computing giant Sun Microsystems. Now a venture capitalist

WHAT IS HE DOING?
Investing in biofuels. He argues the only realistic competitor to petrol for cars in the next 20 years will be a biofuel called cellulosic ethanol. “We face an energy crisis, an environmental crisis and a terrorism crisis all related to oil,” he said. “Hybrid and electric cars sound good, but are unlikely to materially reduce carbon emissions . . . The only cost-effective option likely to achieve market acceptance in the next 20 years is cellulosic-fuel cars”

WHAT IS THE PROBLEM?
An unpublished study by the World Bank concludes that biofuels have been one of the main reasons behind the global rise in food prices as farmers switch crops diminishing stocks of wheat, maize and other staples. Critics complain Khosla is cashing in on subsidies for biofuels

DOES HE HAVE AN ANSWER?
Khosla argues cellulosic ethanol can be made from agricultural waste, municipal organic waste and sewage without taking up land used for food production. Suitable biofuel crops could also be grown on land otherwise left idle in winter

THE WIND FARMER
T Boone Pickens

WHO IS HE?
Billionaire former oil tycoon who was a corporate raider in the 1980s and is now an investor

WHAT IS HE DOING?
Pouring a fortune into wind power. “I have the same feelings about wind,” he said earlier this year, “as I do about the best oil field I ever found.” Pickens recently ordered 667 turbines from General Electric, the first batch of more than 2,000 he plans for the world’s biggest wind farm in Texas. When complete, the $10 billion project should produce 4,000 megawatts of power – about the same as the Drax coal-fired power station, which provides 7% of the UK’s electricity

WHAT IS THE PROBLEM?
Turbines still suffer from being at the mercy of whether the wind blows or not. And wind-generated electricity relies on government subsidy to be competitive

DOES HE HAVE AN ANSWER?
Technological advances now enable turbines to operate in a wider range of conditions, thus lowering costs. However, wind energy remains more expensive than electricity from gas or coal

THE ELECTRIC CARMAKER
Elon Musk

WHO IS HE?
Multi-millionaire entrepreneur and co-founder of Paypal, the popular internet payment system

WHAT IS HE DOING?
Building a high-performance electric car. Musk raised more than £50m to fund the development of the Tesla, a battery-powered sports car being put together by Lotus. It boasts sports car acceleration and style. At its launch earlier this year, Musk declared: “This is the culmination of an enormous amount of work”

WHAT IS THE PROBLEM?
Production has run behind schedule. And apart from the £50,000 price tag, the Tesla, like all battery cars, has limited range. And if you run out of power, you can’t fill up quickly like you can with petrol

DOES HE HAVE AN ANSWER?
Researchers are experimenting with new types of battery materials, some tweaked by nano-engineering. The most promising may be able to recharge in minutes, rather than hours. Last week Musk predicted that within 30 years the majority of cars produced in American would be plug-in electric

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