Business

Remarks by Eileen Claussen at the Aluminum Association 2008 Spring Meeting

Speech by Eileen Claussen, President, Pew Center on Global Climate Change

Aluminum Association Spring 2008 Meeting
ALEXANDRIA, VA

April 22, 2008


Thank you very much. I am honored to be here at your spring meeting, and let me say you have chosen a delightful time to gather here in Washington. And it is an important day, too. Today is both Earth Day and the Pennsylvania Democratic primary election. So Americans will be planting a lot of trees today – and we may get closer to determining how to replace a Bush.

President Bush, in fact, has taken so many shots to his public approval rating in recent months that he said he feels like Hillary Clinton arriving in Bosnia in the 1990s.

And John McCain … when he was asked about the unique convergence of events happening today, said that every day is Earth Day as far as he’s concerned … and, given the way the Democrats have been going after each other, he said he wished every day could be the Pennsylvania Democratic primary.

In all seriousness, I am delighted to be here, no matter what day it is. Because it gives me a chance to address a group of industry leaders whose efforts will be crucial as we finally get serious about addressing this enormous challenge known as climate change.

What you do within your companies to reduce greenhouse gas emissions, through increased energy efficiency and process and product design improvements, will make a major contribution to the broader effort to protect the climate. Primary aluminum production, as you know better than anyone, is among the most energy-intensive industries in the nation. At last count, it was responsible for 1 percent of all U.S. energy use; and more than 3 percent of all energy use in the manufacturing sector. And the indirect contributions to climate change from that level of energy use are substantial. But aluminum production is also a major direct source of greenhouse gases – including process CO2 emissions as well as PFCs, although you have made enormous strides in reducing these emissions in recent years.

At the same time, of course, all of you know that it’s not just upstream and process emissions that have an effect on your industry’s climate footprint. It’s downstream as well. And there, your product, aluminum, actually can play a crucial role in reducing emissions from other sectors of the economy, primarily transportation. Reducing a vehicle’s weight by 10 percent yields about a 7-percent reduction in greenhouse gas emissions. So at the same time that many of you may be concerned about what’s coming down the pike in terms of government action on this issue, a comprehensive climate policy could present both real opportunities and real challenges.

Aluminum – this wonderful material that all of you produce – is uniquely malleable and adaptive. And your industry, I believe, will need to exhibit the same properties as the climate debate moves forward. You need to show that you yourselves are malleable and that you can continue to adapt your processes and your operations and your core business strategies in the search for ever-increasing reductions in emissions. Because, I am here to tell you today that the table is being set for serious domestic and international action on this issue. And, unless you want to be on the menu, it’s in your best interest to keep serving up progress – because that’s the best way to be involved in shaping solutions.

With that as an extended prologue, my main task today is to provide you with a sense of where we are right now in the domestic and international response to climate change, and why I believe we will see serious action on this issue in the next one to two years. A new international treaty may take a bit longer than this, but U.S. enactment of a national climate policy will certainly galvanize efforts toward a strong global agreement.

The Science of Climate Change

But before all of that, a quick update on climate change science. Because the science is really the basis for everything else. The reason we are even having this conversation is because the science on this issue has developed to a point where there is no longer any doubt that this problem is real, it is urgent, and it demands solutions right now. Over the last decade, the case for a skeptical, wait-and-see approach to climate change has melted faster than summer sea ice in the Arctic.

Just last month, the world was alerted that an ice shelf that was seven times the size of Manhattan had collapsed … disintegrated in a matter of days. Faster than Bear Sterns even, but in this case there was no Fed or JP Morgan standing at the ready to try and piece things back together. Scientists immediately attributed the collapse to global warming. They noted that these sorts of things are happening with increasing frequency in recent years and, in fact, we may be reaching a tipping point where many of these changes that are happening start to feed on one another and cannot be reversed.

The Nobel Prize-winning Intergovernmental Panel on Climate Change has said the warming of the climate system is – I quote – “unequivocal.” This group of more than a thousand scientists from throughout the world represents the most comprehensive source of science-based information on climate change. The IPCC’s 2007 report stated that it is certain that most of the observed warming of the past half-century is due to human influences.

Looking ahead, the IPCC affirms that climate change will accelerate unless we achieve substantial reductions in worldwide emissions of carbon dioxide and other greenhouse gases. Their projection: global temperatures will increase between 2.0 and 11.5 degrees Fahrenheit by 2100. Sea levels will rise by a foot to a foot-and-a-half or more. Many species will be lost. In addition, there is a 90-percent chance or greater that the world will see more hot extremes, heat waves and heavy precipitation events. And it is likely we will see more droughts as well, plus an increase in the intensity of tropical cyclones.

So that’s the bad news – we have a very serious problem on our hands. The good news is that people are listening. A recent Harris poll showed that 81 percent of Americans agree that the United States needs to be in the lead when it comes to controlling greenhouse gases. Eighty-one percent. That’s an important number to think about as your industry, and others, develop strategies for the future. To the extent that you are seen as part of the solution, you will have the people behind you – your customers in America and abroad. And that kind of public support and goodwill, as all of you know, is an invaluable asset as your companies and your industry move forward.

The Business Response

For a long time, many in the private sector preferred to dodge this issue. In meetings like the one you are having now, there was a great deal of hedging and denial.
But beginning in 1998, when we formed the Pew Center on Global Climate Change, we began to see major companies step out from behind this curtain of denial. One of our priorities from the start was to recruit major companies to serve as founding members of our Business Environmental Leadership Council. Companies that joined our organization early on included industry leaders like Dupont, Toyota, and Alcoa. These firms agreed to a set of principles that basically said this: we know enough about the science of climate change to justify taking action now.

Today, 10 years later, our Council includes 42 companies representing roughly $2.8 trillion in market capitalization and over 3.8 million employees. It is the largest U.S.-based association of companies committed to climate change policy and business solutions. Members come from a range of sectors, including high technology, diversified manufacturing, oil and gas, transportation, electric and gas utilities, chemicals, healthcare, insurance, financial services -- and, of course, aluminum.
So the question is: why has this Council grown? Why are all of these businesses joining in? The growth of our Council is a reflection of business leaders’ understanding that serious government action to address this issue at all levels is inevitable; it is only a matter of time. Ninety percent of the companies we polled in 2006 said they believed climate regulations were imminent in the U.S. A more recent McKinsey study revealed that more than 80% of business executives polled expected climate change regulation within 5 years.

But the problem for business is that we don’t know exactly how governments will act. And not knowing what’s on the horizon, as all of you know very well, is not good for business. Taking a seat at the table will help ensure new legislation and regulations that make sense for your industry.
Of course, there are other motivating factors for business to get involved in this issue, including mounting concerns about a patchwork of sub-national regulations. And then there is the main motivating factor that drives all business: profits. Your companies and your industry, for example, regularly tout the benefits of aluminum as a lightweight material for the transportation sector – cars and planes, as I already noted, can go farther on a given amount of fuel if they are made of aluminum. And to the extent that the transportation sector responds to climate change by using more of your product, then …. Ka-ching! Addressing climate change becomes a good thing for your businesses.

Other industries, and other companies, are recognizing the same potential for profits. GE, for example, has committed to doubling its investment in environmental technologies to $1.5 billion by 2010. That is the equivalent of starting a new Fortune 250 company focused exclusively on clean technology. Real opportunities for real profits in a world where carbon constraints become the norm. And, of course, none of this has escaped the notice of investors around the world. Wall Street in recent years has exhibited a growing interest in and affection for those companies, industries and sectors that stand to benefit in a world that finally gets serious about constraining carbon. And that is helping to drive the business response.

Now, before I go any further, I want to make a few notes about how your industry, aluminum, is responding. Because I think there are a lot of good things happening in this industry. Consider our Business Council member Alcoa, which has established a goal to reduce its greenhouse gas emissions by 25 percent from 1990 levels by the year 2010. When the company’s inert anode technology is fully commercialized, it anticipates an overall reduction of 50 percent.

Or Alcan, a company that joined us in 2005, before it was purchased by Rio Tinto, which conveniently is also a member of our Council. And Alcan has its own story to tell about reducing emissions. The original objective of the company’s TARGET program was to reduce GHG emissions by 800,000 metric tons of CO2 equivalent. But the company more than quadrupled that – reducing emissions by a remarkable 3.5 million metric tons. Today, the second phase of the TARGET program is under way and it is delivering still more reductions.

I suppose you could say that these aluminum industry leaders are thinking “outside the bauxite” when it comes to climate change. Sorry, I couldn’t resist.

And it is not just these two companies. As I said, the aluminum industry as a whole has made important strides in recent years in reducing emissions. The industry’s Voluntary Aluminum Industrial Partnership reduced PFC emissions by about 45 percent between 1990 and 2000. And industry-wide recycling continues to account for a substantial share of production – all of you should be very proud of the 1.5 billion pounds of used beverage cans that were melted in 2005. That’s a lot of Diet Cherry Vanilla Dr. Pepper empties. And it amounts to a huge level of energy savings – and reduced emissions.

U.S. Action

But the bottom line – and in business it’s all about that – is that all of the efforts I have talked about still have not contributed to an overall slowing of U.S. emissions growth. Yes, it’s great news when individual companies or industries begin to see climate change as a problem – and, for some, as an opportunity – and when they pursue voluntary actions that will reduce their contribution to the problem over time. But a global issue like climate change does not respond to voluntary actions taken here and there – in various pockets of the private sector, or in various places around the world.

Global greenhouse gas emissions continue to grow. For the United States, the Energy Information Administration says greenhouse gas emissions in 2005 were 17 percent higher than they were in 1990. Eighty-three percent of the total in 2005 consisted of carbon dioxide from the use of fossil fuels. This simply cannot continue—scientists say we need to reduce – reduce – emissions on a global basis by as much as 80 percent from 1990 levels in the next half century. Voluntary action is a great place to start and learn, but it is not going to get us where we need to be … it won’t even get us close.

And this is why I believe the President’s announcement last week, suggesting that the United States should continue to grow its emissions until 2025, was a non-starter. From an environmental perspective, it simply does not address the problem we are dealing with. And it ignores the reality of what is happening in the business community, in the states and in Congress.

The businesses we work with at the Pew Center understand that we need mandatory policies to compel broad-based action on this issue, both here in the United States and around the world. That’s why Alcoa, Alcan and several of the other businesses on our Council have joined with the Pew Center and others in a high-profile appeal for U.S. government action to address climate change. We’ve come together as the U.S. Climate Action Partnership, and this isn’t just a blanket call for government to do something. Rather, the USCAP group has issued a specific cap-and-trade proposal with specific targets and timetables—a real plan of action to slow, stop and reverse U.S. emissions. In addition to cap and trade, the group has embraced an array of other policies aimed at building a low-carbon energy economy.

When Fortune 500 CEOs take a stand for policies that in the past were tagged by private-sector leaders as extreme or unwarranted, and worse, it moves the politics on this issue to a new place. Senator John Warner, Republican of Virginia, summed up the impact of this unique coalition when some of its members appeared before a U.S. Senate committee hearing last year. “A group like this, you’ve got my attention,” he said.

And so, on Capitol Hill, after years of inaction, we see Congress finally gearing up to address global warming by requiring mandatory reductions in U.S. greenhouse gas emissions. A cap-and-trade bill from Senator Warner and his cosponsor, Joseph Lieberman, has emerged from the Senate

Environment and Public Works Committee, and is really the vehicle to watch at the moment. It would reduce U.S. emissions by 19 percent by the year 2020, and by 71 percent by 2050. Vote counters on Capitol Hill believe the bill, with some modification, could get the 60 votes needed in the Senate to beat a certain filibuster from opponents of climate legislation. In the House, Representatives John Dingell and Rick Boucher, influential moderate Democrats who lead the key committee, are working on a similar bill.

Now, I know what you’re thinking. You’re thinking the chances of climate legislation being enacted in 2008 are about the same as the chances of Hillary Clinton or Barack Obama ending their quest for superdelegates tomorrow. But I believe there are signals that President Bush might sign a cap-and-trade bill with strong bipartisan support. A number of Republican senators have made it clear that they support cap-and-trade – by voting for, sponsoring, or even coauthoring various pieces of legislation. And outside Congress, support for climate action has become even more bipartisan. Of the 25 governors who have committed their states to mandatory reductions in GHG emissions, eight are Republicans. And so the reality is that any climate bill that gets to the president's desk this year will, in fact, have significant bipartisan support, and therefore it will not be easily dismissed.

And then there is the U.S. presidential race. The three remaining candidates all support strong action on climate change – so it is going to happen one way or another in the next couple of years. I do not buy into the arguments that some advocates have made that we would be better off waiting for the next president to get a bill enacted. We have a shot – not a great one, I grant -- at getting a good climate bill this year. It would be irresponsible to pass that by, and, from my perspective, industry influence this year will be greater than in subsequent years. Furthermore, if we lose this opportunity, we will see emissions continue to rise unchecked for another year or maybe two before Congress can act again.

A final argument for enacting a climate bill in this Congress is that an important early responsibility for the next president will be to lead the world in forging a new climate treaty. Getting this done will be much easier – indeed, some would say it is the only feasible way to do it – if we have a U.S. cap-and-trade policy in place before our negotiators sit down at the table. We need only consider how a country like China will respond when the next U.S. president says in the course of these negotiations that all countries have to do their part. Unless the United States is already committed to reducing its own emissions, that kind of talk is just not going to fly.

Action in the States

At the same time that there is all of this discussion going on in Washington, it is easy to forget that the U.S. states have been strong movers on the climate issue for several years now. They aren’t just talking about it. They are designing and implementing real solutions. California is a case in point. If it were a country, California would rank 13th in the world in greenhouse gas emissions. Recognizing this, the state’s leaders have established an ambitious set of greenhouse gas emissions targets—such as reaching 1990 emission levels by 2020. Not only that, but California also has gone the next step and passed legislation, with real enforcement, to give the targets the force of law.

Of course, California is not the only state to be exercising a leadership role on this issue. There are 26 states, including large emitters like Texas, that require electric utilities to generate a specified amount of electricity from renewable sources. Seventeen states have targets for reducing their emissions.

And then there are the 23 states that are working across their borders to develop regional cap-and-trade systems through the Western Climate Initiative, the Regional Greenhouse Gas Initiative in the Northeast and Mid-Atlantic, and the Midwestern Greenhouse Gas Reduction Accord.

And it is not only state leaders who are acting. There is also local action on this issue across the United States. To date, more than 800 U.S. mayors have signed a commitment to reduce emissions in their cities. The target: a 7-percent reduction below 1990 emission levels before 2012, which not coincidentally is what the Kyoto Protocol would have required for the United States as a whole.

So, if anyone tells you there is nothing happening on this issue in the United States, I hope you will correct them. There is a great deal of activity and a great deal of commitment at the state and local levels … where leaders are developing real plans to reduce emissions. However, despite all the great things that are happening, and despite the leadership of the nation’s states and cities and businesses, U.S. emissions still are trending up not down, as I said. Which is why we need national, mandatory policies that will put the United States on an environmentally sustainable path.

International Action

And, of course, domestic action alone is not enough. We also need to commit as a nation to play an active part in crafting an effective global response to climate change. Even if the United States were finally to get serious about reducing its emissions, our actions will amount to precious little if they are not part of a wider global effort that commits all major emitting nations to do their part.

Today, there are a number of countries that are indeed taking serious action on this issue—and they deserve credit for what they are doing. The EU’s Emissions Trading System, for example, is the world’s most ambitious and far-reaching example of a cap-and-trade program. The initial program design includes limits on carbon dioxide from approximately 12,000 facilities in 27 European Union member states; it covers power plants and five major industrial sectors. Has the effort faced some challenges? Definitely. For example, the system generated excessive profits for some companies that received too many emissions credits to start with. But adjustments can and are being made to address these problems as more is learned about the system. And the fact is, the EU has established a functioning market for CO2 reductions in a relatively short period of time. Europe now has a price for CO2 that is being included in business decision-making.

Elsewhere, we see that Australia has come out in favor of a nationwide cap-and-trade system. And, Canada has adopted a regulatory framework aimed at achieving significant cuts in emissions. Even in China, we see significant progress. That country’s leaders have established a domestic target of a 20-percent reduction in energy intensity by 2010. China also has aggressively developed its renewable energy sector. It has established a goal to raise the proportion of renewable energy in the primary energy supply to 16 percent by 2020, up from 7 percent today.
But, as we all know, isolated actions on the part of individual nations, just like isolated actions by individual U.S. businesses or states, are not enough. We need a global solution, with commitments by all major emitting countries.

What kind of commitments are we talking about? Well, I will start by telling you what we are not talking about. We are not talking about having the United States ratify the Kyoto Protocol. We could not possibly meet our target at this late date. Kyoto is too politically tarnished in the United States for us to return to it, and it is unlikely that the major emitting countries in the developing world would agree to binding absolute targets for their emissions. But what they might agree to, especially if they see the United States and other developed countries adopt economy-wide emission targets, are binding commitments of another type. The major emerging economies, for example, could agree to policy commitments, such as renewable energy targets or fuel economy standards.

Or, they could participate in international sectoral agreements, agreements within a particular sector to a set of intensity targets or performance standards that become part of a binding international agreement. Already, the International Aluminum Institute has put forth voluntary objectives for your industry, such as an 80-percent reduction in PFC emissions per metric ton of aluminum produced. Making this agreement part of a broader framework could address competitiveness concerns, broaden participation among more countries, and result in significant benefits.

But whether we are talking about sectoral agreements or some other form of commitments, what’s essential is that any international commitments be measurable, reportable, and verifiable. And they must – they must -- put us on the path to stopping and reversing the growth in global emissions.
International engagement has recently drawn greater attention in Congress. Last month, the Senate Foreign Relations Committee, headed by Senators Joseph Biden and Richard Lugar, declared its intent to make international climate change negotiations a top priority. Their efforts will focus on the Bali roadmap. This plan, approved by more than 180 countries – including the United States ¬– calls for a new global climate agreement to be reached by the end of 2009.

Now, obviously, 2009 is not very far away, and I have my doubts as to whether the date can actually be met. But I am confident that if we in the United States move forward with our own mandatory emission reduction policy, we will be able to engage as a powerful and respected player on this issue at the global level. And that will increase the chances of reaching an agreement with developing and developed countries alike about the path that we must take to address this critical issue.
The world has made real progress in trying to figure out what will work to reduce emissions and protect the climate. Your industry is a case in point – from recycling to increased energy efficiency to the work that all of you are doing to reduce PFC emissions, these are important steps forward. But we have a much-longer journey ahead of us to transform the way we do business, transform the way we produce and use energy, and transform the way we think about our economy, our environment and our climate.

This nation recently commemorated the 40th anniversary of the death of Dr. Martin Luther King, Jr. Dr. King once said that the ultimate measure of a person is not “where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”
The controversy about climate change may be over, but there is no doubt that this is a time of great challenge for our nation and our world. And the measure of each of you, and of your industry and of the companies you lead, will be where you stand on one of the most urgent problems of our time – and, more importantly, what you do to address it.


I thank all of you for listening, and I look forward to your leadership on this issue in the months and years to come.

Thank you very much.

Adapting to Climate Change: A Business Approach

BusinessAdaptationCover

Adapting to Climate Change: A Business Approach

Prepared for the Pew Center on Global Climate Change
April 2008

By:
Frances G. Sussman and J. Randall Freed
ICF International

This report outlines a sensible business approach to analyzing and adapting to the physical risks of climate change. It focuses on a critical first step in assessing these climate impacts: understanding the potential risks to business and the importance of taking action to mitigate those risks. Not all businesses need to take action now; this paper develops a qualitative screening process to assess whether a business is likely to be vulnerable to the physical risks associated with climate change, and whether a more detailed risk assessment is warranted.

Press Release

Download entire report (pdf)

Introduction

 

In 2007, the Intergovernmental Panel on Climate Change (IPCC) affirmed that warming of the climate system is unequivocal, with effects such as increasing land and ocean temperatures, rising global average sea level, and reduced snow and ice already being observed. These changes—which are linked directly to human activities producing greenhouse gases—are already causing changes in ecosystems, water supply and availability, and patterns of extreme events, with (in many but not all cases) consequent damages to human health, buildings, livelihoods, and infrastructure. The question is no longer, “Is there human-caused climate change?” but “What can be done to react and adapt to it?” Adaptation does not preclude steps to reduce greenhouse gas emissions, but recognizes that we are unavoidably committed to some amount of climate change, and that changes are already occurring.

The business community has for some time been aware of the risks and opportunities associated with greenhouse gas mitigation and current and future climate change policies. Many businesses have taken steps to reduce greenhouse gas emissions voluntarily. Many are taking into account some of the impacts of climate change—potential state and federal regulations, shareholder perceptions, and changes in consumer and supplier markets, for example—on the cost of doing business now and in the future. Fewer businesses, however, are incorporating the risks and opportunities associated with the physical effects of climate change in their business planning. As trends in climate become clearer and the uncertainty surrounding future changes is reduced, more businesses will want to consider whether to adapt to projected changes by taking action now. This, in turn, involves reacting to and managing risks as well as taking advantage of opportunities.

Climate change represents a new and somewhat daunting topic for many businesses. The challenge is compounded by the diverse and uncertain projections of changes in temperature, precipitation patterns, extreme events, and other effects. This paper outlines a sensible business approach to analyzing and adapting to the physical risks of climate change. It focuses on a critical first step in assessing these climate impacts: understanding the potential risks to business and the importance of taking action to mitigate those risks. Not all businesses need to take action now; this paper develops a qualitative screening process to assess whether a business is likely to be vulnerable to the physical risks associated with climate change, and whether a more detailed risk assessment is warranted.

Section I of this paper offers context on the broader risks and opportunities presented by climate change. Sections II and III summarize the case for business action to adapt to the physical effects of climate change, and the pathways by which climate can affect business. Section IV describes a screening process that businesses can use to assess whether they are likely to be vulnerable to the physical risks associated with climate change. If the screening indicates that climate change may pose a significant risk, a business can decide whether to undertake a more detailed financial risk assessment, and then, if indicated, take action. Section V presents case studies of three companies that have begun to look at climate risks. These case studies highlight the very different circumstances that motivated each company, and how the companies may be moving towards different conclusions about the appropriate response to the changing climate. Section VI concludes with a summary of key points.

About the Authors

Frances Sussman is a senior economist with ICF International and has been analyzing issues associated with the economics of climate change for nearly two decades.  For several years following the adoption of the UNFCCC in 1992, Dr. Sussman led ICF’s climate change economics group, which conducted pioneering research on design options and practical considerations for greenhouse gas (GHG) emissions trading and credit programs, and developed the seminal GHG mitigation cost curves for the United States. Recently, her research has focused on the appropriate use and interpretation of economics and economic models in policy analysis. As part of this, she has been investigating approaches to setting priorities for adaptation and evaluating the business opportunities and risks associated with the physical effects of climate change. She is also the one of the lead authors of a Synthesis and Assessment Report of the Climate Change Science Program (CCSP), Analyses of the Effects of Global Change on Human Health and Welfare and Human Systems.  In addition to her affiliation with ICF, she is an adjunct instructor at Southern Connecticut State University. Prior to joining ICF, she worked as an economist in the Office of Toxic Substances at the Environmental Protection Agency and at the Congressional Budget Office. She received her doctorate in Economics from the University of Maryland. 
 
Randall Freed leads ICF International’s Climate and Energy Policy group, with staff in the US, Canada, UK, Brazil, Russia, and India.  The group develops GHG inventories/ carbon footprints, programs and strategies for mitigating GHG emissions, risk assessments of climate change impacts, and risk management plans to promote sustainability and adapt to climate change.  Mr. Freed’s expertise includes analyzing climate change impacts and adaptation related to water resources, ecosystems, land use, and infrastructure; GHG emissions and sinks associated with waste management and non-energy uses of fossil fuels; and policies and programs to mitigate emissions.  He has over 30 years’ experience and is an internationally recognized expert in exposure and risk assessment, environmental program development and policy analysis, and water quality issues.  Mr. Freed has an MS in Water Resource Management and a BS in Zoology, both from the University of Maryland.

Related Reading:

Adaptation Planning: What U.S. States and Localities are Doing

Corporate Strategies That Address Climate Change

Frances G. Sussman
J. Randall Freed
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Press Release: Pew Center Report Outlines Adaptation Strategies for Business Community

Press Release
April 16, 2008
Contact: Tom Steinfeldt, (703) 516-4146

PEW CENTER REPORT OUTLINES ADAPTATION STRATEGIES FOR BUSINESS COMMUNITY
Climate Change Poses Significant Risks; Need for Private Sector Action


WASHINGTON, DC -- The Pew Center on Global Climate Change today released a new report that outlines a business approach to adapting to the physical effects of climate change. Adapting to Climate Change: A Business Approach examines a range of risks businesses face from the physical impacts of climate change and presents a framework for assessing vulnerability to these risks across a company’s operations, value chain, and broader commercial environment.

Authored by ICF International senior economist, Frances G. Sussman, and senior vice president, Randall Freed, the study focuses on a critical first step in assessing climate impacts: understanding the potential risks to business from the physical effects of climate change and the importance of taking action to reduce those risks. It examines case studies of three companies in the Pew Center’s Business Environmental Leadership Council (BELC) that have taken initial steps to address these risks.

“We know climate change is occurring and the real world ramifications of that change are already being felt,” said Eileen Claussen, President of the Pew Center on Global Climate Change. “In addition to policies that reduce greenhouse gas emissions, we also need strategies to adapt to those climate change impacts that are unavoidable. The private sector faces a range of risks and it is important that they begin now to assess their options and strategies for adapting.”

The study adds to the Pew Center’s expanding body of work on adaptation, an issue that has grown in importance as governments and businesses around the world recognize that a certain amount of climate change is unavoidable and that impacts are already being observed.

The report finds that susceptibility to the physical effects of climate change varies considerably across sectors of the economy. For example, higher demand for air conditioning during prolonged heat waves could stress and possibly overwhelm the electricity grid. Longer and more intense rains could restrict access to construction sites and slow productivity in the buildings sector. And the agriculture industry is at risk of extreme drought that could render previously arable land unusable. While some sectors are more at risk than others, all businesses face the possibility of property damage, business interruption, and changes or delays in services provided by electric and water utilities and transport infrastructure.

Despite these known threats, relatively few companies have developed climate change adaptation strategies. A few have begun taking steps to evaluate and act on the physical risks of climate change, and their experiences offer important insights to other companies. The report’s case studies highlight actions three BELC companies have taken on adaptation:

  • Entergy, the New Orleans-based utility, which suffered $2 billion in losses from Hurricanes Katrina and Rita, has begun relocating important business operations to areas less vulnerable to severe weather events.
  • Mining giant Rio Tinto is using high-resolution climate modeling to conduct detailed site assessments and gauge risks to high-priority assets.
  • Travelers, a major insurance company, is exploring new pricing strategies to encourage adaptive actions from its commercial and personal customers.


This and other Pew Center reports are available at www.c2es.org.

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The Pew Center was established in May 1998 by The Pew Charitable Trusts, one of the United States’ largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is an independent, nonprofit, and non-partisan organization dedicated to providing credible information, straight answers, and innovative solutions in the effort to address global climate change. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.

The BELC was established by the Pew Center in 1998. It is comprised of mainly Fortune 500 companies representing a diverse group of industries including energy, automobiles, manufacturing, chemicals, pharmaceuticals, metals, mining, paper and forest products, consumer goods and appliances, telecommunications, and high technology. Individually and collectively, these companies are demonstrating that it is possible to take action to address climate change while maintaining competitive excellence, growth, and profitability. The BELC is the largest U.S.-based association of corporations focused on addressing the challenges of climate change, with 42 companies representing over 3.8 million employees and a combined market value of $2.8 trillion.

About Markets & Business

C2ES’s Markets & Business Strategy (MBS) Program conducts research and analysis at the nexus of climate change and business. Market-based environmental policies are not unique to climate change, and their success in other contexts is why they have been embraced by both sides of the political spectrum. By employing the power of the market, market-based climate policies are designed to minimize compliance costs of reducing GHGs. The MBS program also seeks to help companies, policymakers and investors understand how to successfully manage carbon risks and capture new business opportunities as changes in public policy and customer preferences transform global markets.


About Markets

The MBS Program works with the business community to develop policy solutions to achieve important climate goals that provide flexibility and incentives for innovation. Market-based environmental policies are those in which a price associated with pollution emerges, and each regulated business is able to choose independently how much pollution abatement is appropriate, and how to best achieve that based on its individual circumstances. Some companies can reduce pollution more cheaply than others (because of the age of their equipment or the technology they are using), so allowing them to reduce their pollution more, and compensate for others doing less, means that the environmental objective will be achieved as cheaply as possible. 

Importantly, these policies allow a great deal of flexibility by encouraging firms to achieve environmental outcomes through pollution reduction in the least costly way they can find, and allows new or unexpected solutions to emerge. Because there is a constant financial incentive, companies will continually work to reduce emissions and do not just remain at a status quo level of emissions output. By creating a dynamic market for pollution reduction, market-based policies achieve environmental objectives at the lowest possible cost in the near term and lead to even greater environmental outcomes through innovation in the long-term.


About Business

In addition to our work on markets, the MBS program educates policymakers on how to shape policies that unleash private sector low-carbon innovation and investment. To this end, C2ES collaborates extensively with the business community, primarily through our 34-member Business Environmental Leadership Council (BELC). An invitation-only group, the BELC is now the largest U.S.-based association of corporations focused on advancing business and policy solutions to climate change. The program’s report “Getting Ahead of the Curve: Corporate Strategies That Address Climate Change” is illustrative of its approach to the climate issue. The report lays out a step-by-step process for companies to reshape their core business strategies in order to succeed in a future marketplace where greenhouse gases are regulated, carbon-efficiency is rewarded, and low-carbon products are in demand.

Business

 

To inform its research and advance action on climate change, the Center for Climate and Energy Solutions collaborates extensively with the business community. The primary vehicles for business engagement is the Center’s Business Environmental Leadership Council (BELC). Read More

 

A Look at Emissions Targets

United States:

State & Regional
Proposed Federal Legislation
Bush Administration

International

Business

United States - State & Regional

Entity

Target

Notes and Source

Arizona: State-wide2000 levels by 2020
50% below 2000 by 2040
Executive Order 2006-13
California: State-wide

2000 levels by 2010
1990 levels by 2020
80% below 1990 by 2050

Executive Order S-3-05
California: Major industries state-wide1990 levels by 2020AB 32
Connecticut: State-wide1990 levels by 2010
10% below 1990 by 2020
75-85% below 2001 levels in the long term
Connecticut Climate Change Action Plan
Florida: State-wide

2000 levels by 2017
1990 levels by 2025
80% below 1990 levels by 2050

EO 07-127
Florida: Electric Utilities

2000 levels by 2017
1990 levels by 2025
80% below 1990 levels by 2050

EO 07-127
Hawaii: State-wide1990 levels by 2020Act 234
Illinois: State-wide1990 levels by 2020
60% below 1990 levels by 2050
Press Release
Maine: State-wide1990 levels by 2010
10% below 1990 by 2020
75-80% below 2003 long-term
LD 845 (HP 622)
Massachusetts: State-wide1990 levels by 2010
10% below 1990 by 2020
75-85% below 1990 long-term
Massachusetts Climate Protection Plan of 2004
Massachusetts: Electric Utilities10% below 1997-1999CO2 target only.
310 CMR 7.29
Minnesota: State-wide

15% below 2005 levels by 2015
30% below 2005 levels by 2025
80% below 2005 levels by 2050

Next Generation Energy Act
New Hampshire: State-wide1990 levels by 2010
10% below 1990 by 2020
75-85% below 2001 long-term
The Climate Change Challenge
New Hampshire: Electric Utilities1990 levels by 2006CO2 target only.
HB 284
New Jersey: State-wide1990 levels by 2020
80% below 2006 levels by 2050
Press release and executive order
New Mexico: State-wide2000 levels by 2012
10% below 2000 by 2020
75% below 2000 by 2050
Executive Order 05-033
New York: State-wide5% below 1990 by 2010
10% below 1990 by 2020
State Energy Plan of 2002
Oregon: State-wideStabilize by 2010
10% below 1990 by 2020
75% below 1990 by 2050
Oregon Strategy for Greenhouse Gas Reductions
Rhode Island: State-wide1990 levels by 2010
10% below 1990 by 2020
Rhode Island Greenhouse Gas Action Plan
Vermont: State-wide1990 levels by 2010
10% below 1990 by 2020
75-85% below 2001 long-term
 
Washington: State-wide1990 levels by 2020
25% below 1990 levels by 2035
50% below 1990 levels by 2050
Executive Order 07-02

Western Climate Initiative

15% below 2005 levels by 2020Western Climate Initiative Statement of Regional Goal
Regional Greenhouse Gas Initiative: CO2 emissions from power plants

Cap emissions at current levels in 2009
Reduce emissions 10% by 2019.

our summary
New England Governors and Eastern Canadian Premiers:
Regional economy-wide
1990 levels by 2010
10% below 1990 by 2020
75-85% below 2001 long-term
Climate Change Action Plan of 2001

United States - Proposed Federal Legislation

Entity

Target

Notes & Source

Lieberman-Warner Climate Security Act
S.3036

4% below 2005 level by 2012
19% below 2005 level by 2020
71% below 2005 level by 2050 
As introduced 5/2008

Low Carbon Economy Act (Bingaman-Specter)

S.1766

2012 level in 2012
2006 level in 2020
1990 level in 2030
President may set long-term target greater than or equal to 60% below 2006 level by 2050 contingent upon international effort

As introduced 7/2007
Climate Stewardship and Innovation Act (McCain-Lieberman)

S.280
2004 level in 2012
1990 level in 2020
20% below 1990 level in 2030
60% below 1990 level in 2050
As introduced 1/2007
Global Warming Pollution Reduction Act (Sanders-Boxer)

S.309
2010 level in 2010
2%/year reduction from 2010-2020
1990 level in 2020
27% below 1990 level in 2030
53% below 1990 level in 2040
80% below 1990 level in 2050
As introduced 1/2007
Climate Stewardship Act (Olver-Gilchrest)

H.R.620
2006 level in 2012
1990 level in 2020
22% below 1990 level in 2030
70% below 1990 level in 2050
As introduced 1/2007
Global Warming Reduction Act (Kerry-Snowe)

S.485
2010 level in 2010
1990 level in 2020
2.5%/year reduction from 2020-2029
3.5%/year reduction from 2030-2050
62% below 1990 level in 2050
As introduced 2/2007
Safe Climate Act of 2007 (Waxman)

H.R.1590
2009 level in 2010
2%/year reduction from 2011-2020
1990 levels in 2020
5%/year reduction from 2020-2029
5%/year reduction from 2030-2050
80% below 1990 levels in 2050
As introduced 3/2007
Electric Utility Cap and Trade Act (Feinstein-Carper)

S.317
2006 level in 2011
2001 level in 2015
1%/year reduction from 2016-2019
1.5%/year reduction starting in 2020 (may be adjusted by Administrator)

Electricity sector; all GHGs

As introduced 1/2007

Clean Air Climate Change Act of 2007 (Alexander-Lieberman)

S.1168
2300 MMT CO2 (approx. 2006 level) from 2011-2014
2100 MMT CO2 (approx. 1997 level) from 2015-2019
1800 MMT CO2 (approx.1990 level) from 2020-2024
1500 MMT CO2 (approx.17% below 1990 level) from 2025 forward
Electricity sector; 4 pollutants

As introduced 4/2007
Clean Air Planning Act of 2007 (Carper)

S. 1177
2006 CO2 level in 2012-2014
2001 CO2 level in 2015
1%/year reduction CO2 level from 2016-2019
1.5%/year reduction CO2 levels starting in 2020
1.5%/year reduction CO2 levels starting in 2020 (may be adjusted by Administrator to 3% in 2030 & beyond)
25% below 1990 CO2 level in 2050
Electricity sector; 4 pollutants

As introduced 4/2007
Clean Power Act of 2007 (Sanders)

S. 1201

Goal is to facilitate the worldwide stabilization of atmospheric concentrations of global warming pollutants at 450ppm CO2e by 2050*

2300 MMT CO2 (approx. 2006 level) by 2011
2100 MMT CO2 (approx. 1997 level) by 2015*
1803 MMT CO2 (approx. 1990 level) by 2020*
1500 MMT CO2 (approx. 17% below 1990 level) by 2025*

* If Congress has not passed, and the President has not signed, legislation to address 85% of GHG emissions economy-wide by 2012, further 3%/year reduction in CO2 limits until global GHG emissions reach 450ppm.

Electricity sector; 4 pollutants

As introduced 4/2007

United States - Bush Administration

Entity

Target

Notes & Source

Voluntary "greenhouse gas intensity" target for the U.S.18% below 2002 intensity levels by 2012Announced 2/14/2002
Our Analysis

International

Entity

Target

Notes & Source

Australia

8% above 1990 by 2008-2012

Kyoto Target

Canada

6% below 1990 by 2008-2012

Kyoto Target

European Community

8% below 1990 by 2008-2012

Kyoto Target

Japan

6% below 1990 by 2008-2012

Kyoto Target

New Zealand

1990 levels by 2008-2012

Kyoto Target

United Kingdom

20% below 1990 by 2020
60% below 1990 by 2050

CO2 target only.
Energy White Paper of 2003

European Community
Kyoto Bubble Targets
[i]

Target for 2008-2012

European Community Council Decision of April 2002

Austria

13% below 1990

 

Belgium

7.5% below 1990

 

Denmark

21% below 1990

 

Finland

1990 levels

 

France

1990 levels

 

Germany

21% below 1990

 

Greece

25% above 1990

 

Ireland

13% above 1990

 

Italy

6.5% below 1990

 

Luxembourg

28% below 1990

 

Netherlands

6% below 1990

 

Portugal

27% above 1990

 

Spain

15% above 1990

 

Sweden

4% above 1990

 

United Kingdom

12.5% below 1990

 

[i] The EU-15 nations have joined a "bubble" which allows the joint fulfillment of emissions commitments and preserves the collective emissions reduction goal of 8% below 1990 levels by 2008/2012

Business

Our Business Environmental Leadership Council (BELC) is a group of leading companies worldwide that are responding to the challenges posed by climate change. This section provides a sampling of GHG reduction targets set by these companies. Through their efforts, they are demonstrating that GHG emissions can be reduced significantly and cost-effectively.

0

Press Release: The Travelers Companies, Inc. Joins Pew Center’s Business Environmental Leadership Council

Press Release
October 30, 2007

Pew Center Contact: Katie Mandes (703) 516-4146
Travelers Contact: Jennifer Wislocki (860) 277-7458

THE TRAVELERS COMPANIES, INC. JOINS PEW CENTER'S
BUSINESS ENVIRONMENTAL LEADERSHIP COUNCIL

Insurance Industry Leader Commits to Advancing Climate Change Solutions

WASHINGTON, D.C. - The Pew Center on Global Climate Change announced today that The Travelers Companies, Inc. has joined the Pew Center's Business Environmental Leadership Council (BELC) and its efforts to address global climate change.

As one of the largest property casualty insurance companies in the world, Travelers is sensitive to the changing climate and the risks and opportunities it poses to both the company and the economy as a whole. The potential for more frequent and severe weather events arising from climate change affects a wide range of the company’s business activities, including catastrophe modeling, coastal underwriting, claim services, risk control, and other operations. Travelers has become a leading voice calling for proactive collaborative private and public sector strategies to adapt to the physical impacts of climate change and increased resilience to future weather-related catastrophes.

Travelers recently formed a multi-disciplinary team to investigate ways to integrate its core business strategies with initiatives to address the impacts of climate change, including strategies that respond to customer needs arising from the effects of climate change. The company is also in the process of calculating its own carbon footprint and has taken several steps to reduce greenhouse gas emissions, including reducing energy consumption through workplace design and operation, as well as utilizing more energy efficient heating and cooling methods.

“Travelers is committed to supporting initiatives and actions for our company and customers that mitigate the negative impacts of climate change and encourage environmentally responsible behavior,” said Jay Fishman, Chairman and Chief Executive Officer of Travelers. “We are proud to join the Pew Center’s efforts to develop a thoughtful approach to adapt to the inevitable physical effects of climate change.”

“Perhaps no other industry is more exposed to the financial risks of climate change than the insurance industry,” said Eileen Claussen, President of the Pew Center on Global Climate Change. “But the unique risks faced by the industry also present it with an opportunity to take a leadership role in responding to the climate challenge. I am delighted to have Travelers and their considerable expertise join us as we work to advance practical solutions to climate change in this country and globally.”

Headquartered in St. Paul, Minn., Travelers provides a range of commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals. It is the second-largest writer of commercial U.S. property casualty insurance, and second-largest writer of U.S. personal insurance through independent agents. Travelers has total assets of approximately $114 billion, total revenue of $25 billion, and employs approximately 33,000 people. The company’s stock (ticker symbol: TRV) is traded primarily on the New York Stock Exchange. For more information on Travelers visit its web site at http://www.travelers.com/.

The BELC was established by the Pew Center in 1998, and the Center is a leader in helping these and other major corporations integrate climate change into their business strategies. The BELC is comprised of mainly Fortune 500 companies representing a diverse group of industries including energy, automobiles, manufacturing, chemicals, pharmaceuticals, metals, mining, paper and forest products, consumer goods and appliances, telecommunications, and high technology. Individually and collectively, these companies are demonstrating that it is possible to take action to address climate change while maintaining competitive excellence, growth, and profitability. The BELC is the largest U.S.-based association of corporations focused on addressing the challenges of climate change, with 45 companies representing over 3.8 million employees and a combined market value of over $2.8 trillion.

The other members of the BELC are: ABB; Air Products; Alcan; Alcoa Inc.; American Electric Power; Bank of America; Baxter International Inc.; The Boeing Company; BP; California Portland Cement; CH2M HILL; Citi; Cummins Inc.; Deutsche Telekom; DTE Energy; Duke Energy; DuPont; Entergy; Exelon; GE; Georgia-Pacific; Hewlett-Packard Company; Holcim (US) Inc.; IBM; Intel; Interface Inc.; John Hancock Financial Services; Lockheed Martin; Marsh, Inc.; Novartis; Ontario Power Generation; PG&E Corporation; PNM Resources; Rio Tinto; Rohm and Haas; Royal Dutch/Shell; SC Johnson; Sunoco; Toyota; TransAlta; United Technologies; Weyerhaeuser; Whirlpool Corporation; and Wisconsin Energy Corporation.

For more information about global climate change and the activities of the Pew Center and the BELC, visit www.c2es.org.

A Cap's in Hand

Full article (PDF)

by Truman Semans, Director for Markets and Business Strategy--Appeared in the World Energy Book which is available from http://www.petroleum-economist.com/
0

White House Major Economies Meeting

REMARKS DELIVERED BY EILEEN CLAUSSEN, PRESIDENT, Pew Center on Global Climate Change 

whITE HOUSE Major Economies Meeting
WASHINGTON, d.C. 
 

September 27, 2007  

  • There are a number of reasons why it is critical that our strategies to address energy and climate change take full account of the land use sector.  
    • First, from an environmental perspective, agriculture, deforestation and other land use activities account for nearly a third of greenhouse gas emissions globally.  For some countries, they are by far the largest source of emissions.  Indeed, some countries [Indonesia, Malaysia] rank among the world’s largest emitters only by virtue of their emissions from deforestation.  For those countries, and globally, a comprehensive approach to climate change must reduce emissions from this sector.
       
    • Second, from an economic perspective, some of the lowest-cost opportunities for emission reduction are to be found in this sector.  A number of analyses, including the Stern Review and work done by McKinsey and Company, show significant mitigation potential in the forestry sector for well under $20 per ton of CO2.  The Stern Review concluded that in some regions emissions from deforestation could be reduced for less than $5 a ton.   
       
    • Third, from a development perspective, addressing emissions from this sector can deliver some very significant co-benefits.  Protecting forests protects biodiversity and soils and creates new opportunities to reduce poverty.  Healthy ecosystems support healthy economies.  Putting a value of the climate benefits provided by forests is one of the keys to sustainable development.  
  • So for all of these reasons, this is a sector we can not afford to ignore.     
     
  •  That said, there are number of caveats and complications. 
    •  First, land use is an area where it’s been notoriously difficult to measure emissions and monitor trends.  We’ve made significant headway, with new methodologies technologies, in particular remote sensing by satellite.  But greater progress is needed.  We need enough precision so that we are confident that a ton is a ton.  
       
    • Second, there is no resource more fundamental than land, and we must be mindful of the many competing demands on it.  This is especially true in the case of biofuels, which potentially are a very important part of the answer to climate change and energy security.  But the move toward biofuels will be beneficial only if we ensure that these truly are low-carbon fuels, calculated on a life-cycle basis.  Our land use and biofuels policies need to be closely coordinated to make sure that we are not simply substituting one form of emissions for another. So, what can be done internationally to fit land use into our climate change strategies? 
       
  • I would first emphasize how encouraging it is that this question is being put on the table by those countries that have the most to contribute.  A coalition led by Papau New Guinea and Costa Rica, and separately Brazil, are calling for new measures under the Framework Convention on Climate Change to reduce tropical deforestation.  At the moment, this appears to be among the most promising avenues for deeper developing country engagement in the global climate effort.
     
  • Let me offer a few observations on how forestry and land use can be addressed in a post-2012 climate framework.  
    • First, there appears to be a growing consensus among the experts and policymakers that we should approach this not project by project, but sector-wide.  In other words, a country’s progress is best ascertained by measuring emissions and changes in those emissions across its entire forestry or land use sector.   
       
    • Second, the overriding message from the tropical forest countries is that incentives are needed if they are to undertake stronger efforts.  There are differences among them on just what form these incentives should take.  Realistically, I think we are far more likely to see significant flows under a market-based approach than through an international fund supported by donor countries.  Either way, it is perfectly reasonable for these countries to ask for incentives.  By the same token, though, I think it’s reasonable for those countries providing the incentives to ask in exchange that the countries receiving them be prepared to deliver action on the basis of commitments, not just voluntary pledges. 
       
    • And this leads to my third, and final, point: I do not believe we will be able to mobilize the efforts needed globally in this sector or in any other without a comprehensive set of binding international commitments.  An aspirational long-term goal is not enough.  To sustain ambitious efforts nationally, and to generate the strong incentives tropical forest countries are asking for, countries must have confidence that their counterparts are contributing their fair share to the global effort.  That’s best done through fair, credible, and verifiable commitments.  We should be open to different types of commitments – for some countries, a commitment to reduce deforestation might be the best approach.  But we are fooling ourselves if we think that we can do what’s needed without binding international commitments.  I look forward to our discussion.  Thank you. 

7th IETA Forum on the State of the Greenhouse Gas Market

REMARKS BY EILEEN CLAUSSEN, PRESIDENT, PEW CENTER ON GLOBAL CLIMATE CHANGE 

7th IETA FORUM ON THE STATE OF THE GREENHOUSE GAS MARKET
WASHINGTON, DC 

September 27, 2007  

Thank you very much.  I am honored to be a part of IETA’s very impressive program.  I was looking over the schedule for your three days here in Washington, and it’s really quite remarkable.  The program here, and the success of this event, is just one more tribute to Andrei’s leadership of this great organization—he has steered IETA to a leadership role on the climate issue, and I wish him all the best in his new position.   

Not only is the program very substantive and strong, but IETA seems to have a superior sense of timing, too.  This forum is taking place at a truly amazing moment— a blizzard of climate activity and meetings, a flood of proposals for domestic and international action, the melting away of industry resistance. Scientists say to expect more extreme weather as a result of climate change, and it appears it’s already here.   

And even though the China Olympics don’t start until next summer, we already have an Olympics competition going on as countries lay out their climate plans.    

  • Most countries, it appears, plan to compete in the biathlon – growing their economies while limiting emissions growth.
     
  • Then there is the synchronized swimming event, where the countries of the EU will try to align their climate activities without the whole thing turning into a freestyle contest. 
     
  • And the United States, under the current Administration, is favored in the stationary target-shooting event.  This, of course, is an event where you don’t really have to move from where you are now, but you make an awful lot of noise.  And, of course, participation is entirely voluntary.  We’ve actually become quite good at this here in America.   

Seriously, this is a remarkable moment.  Consider all of the other climate change-related events going on.  Of course, we had the Secretary General’s sessions at the United Nations in New York at the start of the week, and right now, also here in Washington, there is President Bush’s meeting of major economies.  In addition to these, there are all kinds of conferences and meetings: the Pew Center did two, the U.N. Foundation is doing one; the Brookings Institution did one.  And there is also the annual meeting in New York on the Clinton Global Initiative, which includes a very substantive track on energy and climate change.   

And, of course, these events follow fast on the heels of the Vienna climate change talks in August, and it is not long before the very important U.N. Climate Change Conference in Bali, where I hope we will see real progress toward an effective, post-2012 framework for international action.   

I mention all of these other events because things are heating up on this issue in more ways than one.  And progress, I believe, will depend on finding a way to bring people together and forge practical and effective climate solutions that can draw broad support.  This is what I call the “sensible center.” 

Now, I am sure all of you are familiar with Google maps.  This is where you go online and you get detailed directions by typing in a starting and an ending address.  Well, today, I’d like to borrow the Google maps approach and see if it can help us find our way to the sensible center, if it can provide some insights on how to get to the place where all of us (or at least most of us) want to go.  

So first we need a starting address—and that’s easy enough.  Let’s look at where things stand right now on this issue.  And that means starting where every conversation about climate change must begin: with the science.  All of us are familiar with the latest findings from the IPCC.  “Warming of the climate system is unequivocal,” they tell us.  They also talk about a 90-percent-or-greater chance that we (humanity) are the cause of this—and a 90-percent-or-greater chance that the world will see more hot extremes, heat waves and heavy precipitation events. 

Just last week, we learned that Arctic sea ice is now at its smallest recorded extent.  There is simply no denying any more that our climate is changing, and that human activities are largely to blame. 

But, despite the science, despite knowing we have a very serious problem on our hands, we continue to burn coal at an alarming rate—China alone is building a new coal-fired power plant every week to 10 days.  The world continues to consume 83 million barrels of oil per day.  Here in the United States, we continue to debate back-and-forth about how to address this issue as a nation—Should we do cap-and-trade?  Carbon tax?  Voluntary approaches only?  And, at the global level, we continue to wander about in this no-man’s land we’ve created between Kyoto’s short-term targets and what comes next.   

All of this is part of our starting address—where we are now as we consider how to get to the place where we ultimately want to go.  However, there are also signs of hope, signs of progress.  Here in the United States, for example, we see an increasing number of states taking independent action to establish targets, experiment with trading, and otherwise reduce their contribution to the climate problem.

  • California, as you all know, has an ambitious set of enforceable emission targets, and the state also is a part of the Western Climate Initiative, together with five other western states and the provinces of British Columbia and Manitoba, all are committed to agreeing on the design of a cap-and-trade program by next August.
     
  • The Regional Greenhouse Gas Initiative, including 10 Northeastern and Mid-Atlantic states, aims to get going in 2009.  Right now, the states are working on adopting the model rule and setting up auctioning and allocation.
     
  • And think of Florida’s ambitious program and the 25 states with renewable portfolio mandates.

At the same time that we see these states taking the initiative, we see members of Congress putting forward very serious proposals (with bipartisan support) aimed at limiting emissions at the national level.  We have had more than 120 hearings on climate change since January, and we have numerous bipartisan bills on the table and emerging.   We are clearly on our way here in the United States—and our journey is aided, in large part, by corporate leaders embracing climate policies that in the past would have been universally condemned by U.S. industry.   

So this is our starting address.  And it is honestly a mixed-bag kind of a place.  A place where we are not doing nearly enough to address this looming crisis, but where there are these signs of hope.  Which brings us to the next question: Where do we want to go from here?  What is our ending address? And our ending address, I believe, is a destination we all can agree on.  That place may not have an exact zip code or street number, but we can describe it in enough detail, I believe, to get a solid set of directions.   

It is a place where the United States and other major emitting countries are--each and every one of them--doing their part to protect the climate.  It is a place where the world is united in pursuing the goal of the U.N. Framework Convention on Climate Change, which was signed by the United States and 190 other nations—nearly every nation on this earth.  And that goal is to “avoid dangerous anthropogenic (or human-cased) interference with the climate system.” 

As I said, the interesting thing about this place we want to get to is that there is no real dispute about it.  It’s how to get there that’s in dispute.  The only thing I can compare it to is going on a trip with your family and agreeing that you want to get to, say, Florida but disagreeing on the best route to take to get there.  And so you have to go to that all-purpose, neutral resource, Google, to find out.  At the Pew Center, we like to think of ourselves as providing the Google map toward practical climate solutions (and this will be my only sponsored link!). 

So what would this Google map tell us about how to get to this place where we want to go, now that we have plugged in our starting and ending addresses?  Well, finding the best route is not an easy task because there are a lot of people throwing out different directions to a climate solution.  And, if we were to follow many of these directions, we would either veer way off course or, more likely, never reach our destination at all. 

These directions tend to fall into opposite extremes.  For example, some call for a mandatory, worldwide cap on greenhouse gas emissions with trading, where every major economy accepts a binding emissions target.  Sounds great but it’s a political non-starter. At the other extreme, many people want the world to join hands and unite around an “aspirational goal” – such as an X percent reduction in global emissions by 2050.  Don’t get me wrong: having an aspirational goal is not a bad thing.  But if aspiration is all you’ve got, well, all you’ve got is aspiration.  Under these proposals, no one is required to do much of anything.  We might all feel good for having this goal but the lack of clear commitments would result in more of the same: a little movement that barely brings us closer to where we need to go.     

The same opposing directions appear when the talk turns to emissions trading.  Some say let’s give away all the allowances; others say auction all of them.  Some say allow offsets for all projects that could conceivably reduce emissions.  Others say don’t give credit for any offsets.  

We know, based on Europe’s experience this past year, that we need a price on carbon that is high enough to give firms a reason to invest in new climate-friendly technologies.  Yet we see proposals that talk about limiting that price to something that will motivate very little innovation.  

Well, there’s another direction we can go—there is a route we can take that avoids all of these detours, and that takes us to our destination.  It involves taking what is useful from all of these highways and by-ways, making the necessary compromises, and following a route that lets us go as fast as we can, and as directly as we can.  For example, we can embrace an aspirational goal but we must back it up with international commitments that are binding but flexible.  And, we can design a cap-and-trade program based on a hard-nosed look at what will be both economically viable and environmentally effective.    

It’s not about aiming low, but rather about abandoning the impossible.     

FOR EXAMPLE: It’s great to talk about the potential of voluntary approaches to reduce emissions, but history has shown that while they do deliver something, they don’t deliver the level of reductions we need.  In the same way, it is pure fancy right now to expect developing countries to agree to binding limits on their emissions.  It actually makes things harder when we lay out these expectations, because when developing countries refuse to join in the global effort because of a perception that they are being asked to do too much, then we lose the United States and others as well. 

And so we need to look for the best route—both domestically and at the global level.  Here in the United States, this means pushing ahead with plans for a cap-and-trade system.  I know there has been some commentary recently about the relative merits of cap-and-trade vs. a carbon tax.  But, once again, the thing we need to look at is what’s actually do-able, what gets us to the place we want to go, and what will actually pass?   

Anyone who thinks this Congress or the next will come close to passing a substantial new tax (even if it is offset by other tax reductions and even if it is designed to achieve the very important goal of reducing U.S. emissions) … well, I have some 20-year-old carbon offsets to sell you.  What’s more, the notion that designing a carbon tax is somehow simpler than designing a cap-and-trade program is simply not true.  It’s just as complex.  Plus, to top it all off, there is no environmental certainty in a tax – you enact it, and you have to wait and see what the effect will be, and you need to adjust it and keep adjusting it to get the effect you want. 

With cap-and-trade, there’s certainty in what the cap will be—and, as a result, you know how much of a reduction in emissions you can expect.   

What are the chances of cap-and-trade legislation passing the Congress?  Well, I will tell you one thing.  The chances improved in a big way when companies such as GE, Caterpillar, Chrysler, Duke, and DuPont all became part of the U.S. Climate Action Partnership.  The USCAP plan would reduce U.S. emissions by 10 to 30 percent within 15 years, and by 60 to 80 percent before 2050.  And, with a whole host of America’s leading companies behind it, I believe USCAP has been, and will continue to be, a significant game-changer.  In fact, I feel confident that I can predict here today that enactment of a cap-and-trade measure is still plausible in 2008, and almost inevitable by the end of 2010.  

Looking internationally, we see the same need for cool-headed, practical answers to the climate problem.  The same need to find the sensible center.   Looking at things in this way, we can see that the post-Kyoto framework must have two essential features.  First, it must be based on binding international commitments; and second, it must be flexible in the sense that countries should be able to take on different types of commitments. 

Why commitments?  Because it’s the best and maybe the only way to deliver the level of effort needed to significantly reduce global emissions.  Without commitments, countries can’t be confident that others are contributing their fair share to the global effort.  And without that confidence, it’s hard for any one country to sustain an ambitious climate effort.  

Why different kinds of commitments?  Because countries are different – very different.  Among the major economies, you have developed countries, developing countries, and economies in transition.  Their per capita emissions range by a factor of 14; their per capita incomes by a factor of 18.  The kinds of policies that work for some won’t work for others.  It’s not one-size-fits-all.   

So the post-2012 framework has to integrate different approaches.  Binding emissions targets make sense for developed countries.  But, as I said, it’s naïve to think that China, India, and the other emerging economies are going to agree to them anytime soon.  Still, we need some form of commitment from those countries, so we have to be open to other possibilities.  One possibility is policy-based commitments.  A country like China, for instance, already has some ambitious national policies: an energy intensity goal, renewable energy targets, and fuel economy standards for cars that are stronger than those here in the U.S.  What if China were to commit to fully implementing those policies in a binding international treaty?  What’s key, I think, is that the commitment be credible, quantifiable, and verifiable.   

This, again, is the sensible center … we need a new set of multilateral commitments.  New kinds of commitments.  Which brings us to the other major climate meeting here in Washington this week – the major economies meeting.  What are we to make of it?   

Well, one thing to be said for it is that it brings together the right group of countries.  But what’s the real objective here?  The administration has said its goal is to get a consensus among the major economies by the end of 2008 – just as the president’s about to leave office – contributing to a global deal under the U.N. convention in 2009.  What kind of deal are they hoping to set up? 

From all appearances, a very weak one.  Just about the only thing the Administration thinks countries need to agree on is an aspirational long-term goal.  And, as I have said, that’s not enough.   

The best way to judge the value of the major economies meeting this week is whether it moves us toward or away from a new set of multilateral commitments.  In other words, does it move us toward the sensible center, or not?  That should, in fact, be the test of everything we do on the climate issue in the months ahead.  

I know that some of us are better at following directions than others, but this is one time when we cannot afford to get lost.  By staying on course to the sensible center, we can begin the long-overdue work of figuring out how to reduce domestic and international emissions as cost-effectively as possible — and in ways that deliver real results for the climate.   

We’re just pulling out of the driveway right now, so fasten your seatbelts.  It’s going to be a long and interesting ride.  Thank you very much.    

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