By Eileen Claussen
This article originally appeared in Environmental Finance.
The prospects for serious US action to address climate change have never been better – and it’s not just because we have a new President. In fact, an important reason why we’re likely to see real action on this issue by the current Congress is because of leadership not in the world of politics but in the world of business. Even in the middle of a serious economic downturn, many of America’s top business leaders are standing firm in their support for climate solutions.
Just days before the inauguration of President Barack Obama on January 20, the US Climate Action Partnership (USCAP) took its engagement on the climate issue to a new level, issuing “A Blueprint for Legislative Action.” The Blueprint represents two years and literally thousands of hours of work by USCAP members and offers federal lawmakers a consensus plan for an integrated package of policies to slow, stop and reverse the growth of US greenhouse gas (GHG) emissions.
USCAP includes the CEOs of 26 major companies in industries from automobiles and oil to coal mining and coal-burning utilities, together with representatives of five non-governmental organisations, including the Pew Center. The coalition’s role as a catalyst for change, and one that has significant influence across the political spectrum, was evident when USCAP CEOs testified before the powerful House Energy and Commerce Committee in January. During the hearing, the panel’s new chairman, Henry Waxman, pledged to pass a climate bill through the committee in May.
Since USCAP’s launch in 2007, its corporate members – which include General Electric, Duke Energy and DuPont – have been calling with their NGO partners for enactment of a domestic cap-and-trade programme. USCAP’s new landmark recommendations provide Congress with details for how such a programme could be designed to achieve steep reductions in emissions in an economically sustainable manner.
The USCAP Blueprint calls for a cap on US emissions of 14-20% below 2005 levels by 2020, 42% below by 2030, and 80% by 2050. USCAP believes we can achieve these targets while rebuilding and reinvigorating the US economy. Its key features include:
- A robust carbon offsets programme, setting an overall annual upper limit for offset use starting at 2 billion metric tons with authority to increase the amount to 3 billion metric tons should market conditions warrant. Within this upper limit of 2 billion metric tons, domestic and international offsets would be limited so that each is no more than 1.5 billion metric tons in a given year. For example, the programme would allow for the use of 1.5 billion metric tons of domestic offsets and 500 million metric tons of international offsets;
- A Carbon Market Board to oversee a strategic offset and allowance reserve pool, containing a sufficiently large set of other offsets and, as a measure of last resort, allowances borrowed from future compliance periods that could be released into the market in the event of excessive allowance prices; and
- A combination of an auction of allowances with a significant initial free allowance allocation that facilitates the transition to a low-carbon economy for consumers and businesses, provides capital to support new low- and zero-GHG-emitting technologies, and funds adaptation measures. The free distribution of allowances would be phased out over time.
All of these measures were painstakingly negotiated as a way to both reduce emissions and revitalise the U.S. economy. They are joined in the USCAP Blueprint by a range of other proposals that would complement the national cap-and-trade programme with incentives for rapid technology transformation in areas from coal technology and transportation to buildings and energy efficiency.
Now to the question at the top of everyone’s mind: What are the actual chances of this kind of plan getting enacted during the 111th Congress? While we can only speculate at this point, the Pew Center’s belief is that the chances are very good. And we see several reasons why.
President Obama, in one of his first major policy statements after the election, reaffirmed his commitment to reducing US emissions to their 1990 levels by 2020 and to 80% below that by 2050, and to enacting a GHG cap-and-trade law. He has since appointed an environment and energy team with tremendous expertise and commitment to climate action.
In Congress, the Democratic leadership is made up of some of Congress’s strongest advocates of climate action, including Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi, and the chairmen of the key committees: Waxman of the House Energy and Commerce Committee, Barbara Boxer of the Senate Environment and Public Works Committee, and Jeff Bingaman of the Senate Energy and Natural Resources Committee. Key Republicans are also continuing their leadership on the issue, including Senator John McCain, who plans to reintroduce a cap-and-trade bill with his longtime ally, Senator Joseph Lieberman.
Finally, we see the prospects for near-term enactment of a serious cap-and-trade law as good because of the very fact that these proposals have the backing of many of the nation’s leading businesses. Today, for the first time since climate change appeared as a faint bleep on the national radar screen in the mid-1980s, we are seeing what appears to be a critical mass of leadership and engagement in the White House, Congress and the business community.
However, while the stars may be aligned as never before, the push for serious climate action still faces enormous challenges. Designing an effective cap-and-trade programme will be very hard work – and hard politics.
But progress is possible, and we are beginning to see the outlines of a consensus approach to this problem. Even as the US is facing a significant economic challenge, the nation’s business and political leaders are increasingly vocal about their commitment to addressing climate change not at a later date but right now.
The current consensus bodes well for serious climate legislation finally emerging from Congress – and for the US finally to start exercising leadership on the most important global issue of our time.
- Eileen Claussen is President of the Pew Center on Global Climate Change.
To inform the climate change dialogue, the Center for Climate and Energy Solutions has produced a series of brief reports entitled Climate Change 101: Understanding and Responding to Global Climate Change, Updated January 2011.
These reports provide a reliable and understandable introduction to climate change. They cover climate science and impacts, climate adaptation, technological solutions, business solutions, international action, federal action, recent action in the U.S. states, and action taken by local governments. The overview serves as a summary and introduction to the series.
For more information, be sure to listen to our Climate Change 101 podcast series
The complete set of six reports plus the overview in one volume.
This overview summarizes the key points from each of the Climate Change 101 reports.
This report provides an overview of the most up-to-date scientific evidence and also explains the causes and projected impacts of climate change.
This report details how adaptation planning at the local, state and national levels can limit the damage caused by climate change.
This piece discusses the technological solutions both for mitigating its effects and reducing greenhouse gas emissions now and into the future.
This report discusses how corporate leaders are helping to shape solutions.
This report discusses what will be needed for an effective global effort, one calling for commitments from all the world's major economies.
This report discusses federal policy options that can put the country on the path toward a lower-carbon future.
This report highlights states' efforts as they respond to the challenges of implementing solutions to climate change.
This report describes the actions taken by cities and towns.
This report explains the details of cap and trade.
November 12-14, 2008
Marriott Wardman Park Hotel
The Pew Center on Global Climate Change and Point Carbon invite you to Carbon Market Insights Americas 2008, taking place in the heart of political decision making, the week following the U.S. presidential election.
The event will involve key decision makers in the forthcoming U.S. Administration and Congress and provide participants with a fresh analysis on climate policy and carbon markets in North America. It will offer key insights into how federal policy changes are likely to affect regional cap-and-trade schemes in North America, the global carbon market, and emissions trading around the world.
Click here to Register and to get more information about the conference.
October 22, 2008
Pew Center Contact: Tom Steinfeldt, (703) 516-4146
Johnson Controls, Inc. Contact: Jennifer Mattes, (414) 524-2349
THE DOW CHEMICAL COMPANY AND JOHNSON CONTROLS JOIN
PEW CENTER’S BUSINESS ENVIRONMENTAL LEADERSHIP COUNCIL
Industry Leaders Show Strong Commitments to Advance Climate Change Solutions
WASHINGTON, D.C. – The Pew Center on Global Climate Change announced today that The Dow Chemical Company and Johnson Controls, Inc. have joined the Pew Center’s Business Environmental Leadership Council (BELC) and its efforts to address global climate change.
“It is a testament to both the continued leadership of the business community and the critical nature of the climate issue that in the midst of these trying economic times ¬– we welcome two new members to our Business Environmental Leadership Council,” said Eileen Claussen, President of the Pew Center on Global Climate Change. “Both Dow and Johnson Controls have demonstrated excellent corporate leadership on the climate issue over the years, and I look forward to working with them to fashion a reasonable and economically sustainable climate policy for the U.S.”
Dow is a leading diversified chemical company that combines human innovation, science, and technology to deliver products and services in about 160 countries. With annual sales of $54 billion and 46,000 employees worldwide, the Midland, Michigan-based company helps provide a range of products and services, including fresh water, food, pharmaceuticals, paints, packaging, and personal care products.
“We are very excited about joining the Business Environmental Leadership Council,” said David Kepler, Dow’s Executive Vice President, Chief Sustainability Officer. “At Dow, we believe providing humanity with a sustainable energy supply while addressing climate change is one of the most urgent environmental issues society faces. We look forward to working with the Pew Center on solutions to slow, stop, and reverse the growth of greenhouse gas emissions here in the U.S. and around the world.”
Since 1990, Dow has reduced its absolute greenhouse gas emissions by more than 20 percent, a more rapid reduction than required by Kyoto Protocol targets. Through its conservation and efficiency efforts, Dow has reduced its energy usage by 1,400 trillion BTUs since 1994, equal to the electricity used by California households for 16 months. These actions by Dow have resulted in preventing 70 million metric tons of CO2 from entering the atmosphere.
Johnson Controls is a diversified industrial company that provides innovative automotive interiors, offers products and services that optimize energy use and improve comfort and security for buildings, and provides batteries for automobiles and hybrid-electric vehicles, along with systems engineering and service expertise. The Milwaukee-based company has 140,000 employees in more than 1,300 locations serving customers in 125 countries.
Through its business practices, products and services, Johnson Controls demonstrates a commitment to sensible climate action. Johnson Controls’ guaranteed energy savings retrofit projects have saved their customers $1.5 billion in energy costs and 11.2 million metric tons of greenhouse gas emissions since January 2000. The company has also pledged to work with major cities around the world, through the Clinton Climate Initiative, to reduce emissions by improving energy efficiency in buildings.
"We're honored with this recognition of our climate action initiatives," said Steve Roell, chairman and CEO of Johnson Controls. "As partners with the other 43 members of the BELC and the Pew Center, we are committed to making the world more comfortable, safe, and sustainable by helping our customers around the world address global climate change."
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 44 companies representing over $2 trillion in combined revenue and nearly 4 million employees.
The other members of the BELC are: ABB; Air Products; Alcoa Inc.; American Electric Power; Bank of America; BASF; Baxter International Inc.; The Boeing Company; BP; California Portland Cement; CH2M HILL; Citi; Cummins Inc.; Deere & Company; Deutsche Telekom; DTE Energy; Duke Energy; DuPont; Entergy; Exelon; GE; Hewlett-Packard Company; Holcim (US) Inc.; IBM; Intel; Interface Inc.; Lockheed Martin; Marsh, Inc.; Novartis; Ontario Power Generation; PG&E Corporation; PNM Resources; Rio Tinto; Rohm and Haas; Royal Dutch/Shell; SC Johnson; 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.
The Pew Center was established in May 1998 as a non-profit, non-partisan, and independent 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.
About Johnson Controls
Johnson Controls (NYSE: JCI) is the global leader that brings ingenuity to the places where people live, work and travel. By integrating technologies, products and services, we create smart environments that redefine the relationships between people and their surroundings. Our team of 140,000 employees creates a more comfortable, safe and sustainable world through our products and services for more than 200 million vehicles, 12 million homes and one million commercial buildings. Our commitment to sustainability drives our environmental stewardship, good corporate citizenship in our workplaces and communities, and the products and services we provide to customers. For additional information, please visit http://www.johnsoncontrols.com.
October 6, 2008
Alcoa Contact: Tricia Napor, + 1 212 836 2798
Pew Center Contact: Katie Mandes, +1 703 516 4146
The Pew Center and the Alcoa Foundation Partner for Unique Employee Program
Growing concern around the environmental impacts of climate change and rising energy costs has prompted many to question what they can do to take action in their daily lives.
In what is believed to be a first for corporate America, aluminium company Alcoa and the Pew Center on Global Climate Change have launched a unique new program to help find the answers.
Make an Impact provides the tools for Alcoa's employees and the local community to manage their individual carbon footprint, reduce their energy costs, and become part of the solution to global climate change.
The Make an Impact program includes:
- Interactive website with tools and resources on reducing energy bills and living more sustainably;
- Custom-built carbon calculator with individual 'footprint' analysis and personalized action planning;
- Comprehensive outreach program of localized interactive workshops.
Pew Center President Eileen Claussen applauded the project, "We often think that solutions to climate change and energy costs can come only from business and government. But everyone needs to play their part - and through our partnership with the Alcoa Foundation - we are making that possible.
"We expect this program to serve as the benchmark on personal carbon accounting across business and the community and we look forward to sharing it with our business partners in the near future.”
Alcoa CEO Klaus Kleinfeld said that this was a part of a global leadership position on addressing climate change and in addition to Alcoa reducing emissions inside its operations 33% from a 1990 base, Alcoa Foundation had invested over $8 million in community-driven climate change projects in the last year.
"Climate change is the most critical sustainability issue of our time and to make a real difference we all need to take action - on all fronts and at all levels, individually and together, said Mr Kleinfeld.
"Our 97,000 employees are finding new ways to meet this challenge every day and our product is also playing key role – not only can aluminum be recycled endlessly - taking only 5% of the energy needed to make new metal - but it is also reducing fuel use in transport by making lighter vehicles.”
"By providing our employees and neighbours the tools to understand and manage their environmental impact, we support them in being part of the solution to global climate change. Because as individuals we can all make a difference, but by working together, we can really make an impact.”
The Make an Impact program builds on the success of the program developed in Australia in 2006 through an Alcoa Foundation partnership with Greening Australia.
Make an Impact will kick off in the US on September 18th and initially be introduced at nine Alcoa locations from Washington to Pittsburgh, with plans to take the program elsewhere to other US locations and beyond.
To find out more visit www.alcoa.com/makeanimpact
PEW CENTER ON GLOBAL CLIMATE CHANGE
The Pew Center on Global Climate Change was established in 1998 as a non-profit, non-partisan, and independent organization dedicated to providing credible information, straight answers, and innovative solutions in the effort to address global climate change.
The Center engages decision-makers at the federal, state, regional, and international levels to achieve its goals for mandatory federal climate change policy and a post-2012 international climate agreement.
The Center's Business Environmental Leadership Council (BELC), a group of 42 mainly Fortune 500 companies with over $2 trillion in combined revenue and employing more than 4 million people, is the largest U.S.-based association of corporations committed to advancing mandatory policy and business solutions to address climate change.
The Pew Center is also a founding member of the influential U.S. Climate Action Partnership.
ABOUT ALCOA FOUNDATION
Alcoa Foundation is a separately constituted nonprofit U.S. corporate foundation with assets of approximately $500 million. Its mission is to actively invest in the quality of life in Alcoa communities worldwide. Throughout its history, the Foundation has been a source of positive community change and enhancement, with nearly $466 million invested since 1952.
The Foundation's grants address global and local needs in over 36 countries by partnering with Alcoa communities around the world to make a difference. Global and local grantmaking is responsive to the needs and aspirations of Alcoa communities and marshals the combined expertise, energies, and values of Alcoa and Alcoa Foundation to provide a world-class standard of excellence in corporate citizenship.
In 2007, Alcoa and Alcoa Foundation invested a combined total of $49.0 million in community programs in 36 countries, focusing on four areas of excellence: conservation and sustainability, global education and workplace skills, business and community partnerships, and safe and healthy children and families. Alcoa Foundation manages the Alcoa employee volunteer programs ACTION and Bravo! For more information, visit www.alcoa.com/foundation.
News Release: For Immediate Release — July 28, 2008
Alexia Kelly, The Climate Trust, 541-514-3633
Tom Steinfeldt, Pew Center on Global Climate Change, 703-516-4146
NONPROFIT COALITION ISSUES RECOMMENDATIONS FOR
DESIGN OF GHG OFFSET PROGRAMS IN CAP-AND-TRADE SYSTEMS
Group Receives Major Grant from the Energy Foundation
PORTLAND and WASHINGTON, D.C. — The Offset Quality Initiative (OQI) will release a white paper today in San Diego at a briefing to be held before the opening of the Western Climate Initiative stakeholder meeting. Titled “Ensuring Offset Quality: Integrating High Quality Greenhouse Gas Offsets Into Cap-and-Trade Policy,” the document offers policymakers practical recommendations regarding the integration of greenhouse gas offsets into emerging regulatory systems at the state, regional and federal levels. OQI, a coalition of six leading non-profit organizations—The Climate Trust, Pew Center on Global Climate Change, California Climate Action Registry, Environmental Resources Trust, Greenhouse Gas Management Institute, and The Climate Group—was founded in November 2007 to provide leadership on GHG offset policy and best practices.
“The availability of high-quality offsets is key to containing the cost of climate policy while delivering real greenhouse gas emission reductions,” said Eileen Claussen, President of the Pew Center on Global Climate Change. “A rigorous and adaptable offset program design can ensure that offsets play a valuable role in an effective cap-and-trade system. OQI’s work will assist policymakers seeking to develop core components of a credible offsets program.”
In addition to regulatory design guidelines, the white paper addresses the key criteria for offset quality and discusses offset project types most appropriate for inclusion in emerging regulatory systems. OQI member organizations will discuss their recommendations with policymakers and other stakeholders over the next several weeks, beginning with today’s briefing in San Diego.
“Establishing confidence in the environmental integrity of offsets is critical for the successful launch and acceptance of future cap and trade regulatory systems. The goal of our paper is to provide policymakers with well-conceived and comprehensive recommendations for offset program design based on the collective knowledge and experience of the OQI members. Each nonprofit member of the coalition is a well-respected and established organization in climate change and brings valuable experience and knowledge to the group,” said Gary Gero, President of the California Climate Action Registry.
OQI recently received a one-year grant of $235,000 from the Energy Foundation to support its work. “We were excited and honored to receive the grant,” said Mike Burnett, Executive Director of The Climate Trust, which was awarded the grant on behalf of OQI. “This generous support from the Energy Foundation highlights the need for the unique work and perspective of OQI. We will use the funds to continue to advance sound greenhouse gas offset policy.”
For a copy of the white paper or for more information on the briefing, please visit www.offsetqualityinitiative.org.
About the Offset Quality Initiative
The Offset Quality Initiative (OQI) was founded in November 2007 to provide leadership on greenhouse gas offset policy and best practices. OQI is a collaborative, consensus-based effort that brings together the collective expertise of its six nonprofit member organizations: The Climate Trust, Pew Center on Global Climate Change, California Climate Action Registry, the Environmental Resources Trust, Greenhouse Gas Management Institute, and The Climate Group.
The four primary objectives of the Offset Quality Initiative are:
- To provide leadership, education, and expert analysis on the issues and challenges related to the design and use of offsets in climate change policy.
- To identify, articulate, and promote key principles that ensure the quality of greenhouse gas emission offsets.
- To advance the integration of those principles in emerging climate change policies at the state, regional, and federal levels.
- To serve as a source of credible information on greenhouse gas offsets, leveraging the diverse collective knowledge and experience of OQI members.
Ensuring Offset Quality: Integrating High Quality Greenhouse Gas Offsets Into North American Cap-and-Trade Policy
An Offset Quality Initiative White Paper
Download full paper (pdf)
This paper aims to provide policymakers with practical recommendations regarding the integration of greenhouse gas (GHG) offsets into emerging regulatory systems. Offsets have an important role to play in controlling the costs associated with regulating and reducing GHGs, and in driving technology transformation in sectors not mandated to reduce their GHG emissions. In order for offsets to deliver on their intended purpose — the achievement of a real and verifiable reduction in global GHG emission levels beyond what would have otherwise occurred —regulatory programs must be designed to ensure the quality and effectiveness of offsets used to meet GHG reduction requirements. Policymakers must also have a clear understanding of both the opportunities and challenges presented by the integration of offsets into GHG emission-reduction systems.
This document represents the consensus of the member organizations of the Offset Quality Initiative: The Climate Trust, Pew Center on Global Climate Change, California Climate Action Registry, Environmental Resources Trust, Greenhouse Gas Management Institute and The Climate Group. The GHG mitigation field is evolving at a rapid pace and will continue to do so over the next several years; this document will be updated over time to reflect any changes in the Offset Quality Initiative’s consensus positions.
The work of the Offset Quality Initiative is generously supported by the Energy Foundation.
This article originally appeared in ClimateBiz.
The past several years have seen a steady transformation of business attitudes and behavior on climate change.
Faced with the prospect of new regulations, increased pressure from shareholders and changing consumer demands, many companies are developing comprehensive corporate strategies to address new climate-related risks and opportunities. Companies have set internal greenhouse gas reduction targets, developed new low-carbon products and services, and become increasingly engaged in the national policy debate.
Despite these actions, businesses have been relatively slow to address one critical piece of the climate challenge: adaptation to the physical impacts of climate change.
As with most climate-related issues, adaptation can initially appear complex. Some businesses are reluctant to take it on because it adds a new layer to the existing challenge of preparing for regulatory changes and shifting markets. Meanwhile, projections of physical impacts of climate change are often characterized by uncertainty and extended time horizons.
A new report from the Pew Center on Global Climate Change, "Adapting to Climate Change: A Business Approach," attempts to break down the adaptation challenge to more tractable components. Authored by Frances G. Sussman and J. Randall Freed of ICF International, the report builds a clear business case for adaptation, presents a screening process companies can use to assess climate-related physical risks, and provides three case studies of companies in the Pew Center's Business Environmental Leadership Council (BELC) that have taken action on adaptation.
The business case rests on the notion that early preparation can prevent, or at least reduce, future losses from climate-related impacts. Many of these projected impacts, including sea level rise, increased incidence and severity of extreme weather events, and prolonged heat waves and droughts, could have serious consequences across a range of businesses.
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 extended drought could render large swathes of previously arable farmland unusable. While some sectors face greater risks than others, all businesses face the possibility of property damage, business interruption and changes or delays in services provided by private or public infrastructure.
The report stresses the importance of proactive adaptation, or recognizing and acting on threats before they occur. This means relying less on historical trends and past decisions to guide business planning, and instead relying more on the anticipation and analysis of projected future impacts.
Proactive adaptation will initially be more difficult but, ultimately, less costly for most businesses to execute than a strictly reactive approach. Consider, for example, the cost of moving an existing manufacturing facility further inland to avoid damage from rising sea levels compared to the cost of conducting a preliminary study to select a less vulnerable construction site. The guiding principle is a familiar one -- an ounce of prevention is worth a pound of cure.
Businesses that begin evaluating potential physical risks will also be better positioned to exploit climate-related opportunities. For example, some tourist regions may benefit from an extended spring and summer recreation season. Biotechnology companies could profit from early development of new seed and other agricultural products that help crops withstand new climatic extremes. Melting ice could open new shipping routes in the Arctic. While these opportunities exist across various sectors of the economy, it is important to note that the Intergovernmental Panel on Climate Change made it clear that climate change will almost certainly result in net costs to society, with these costs growing steeper over time as temperatures increase.
The Pew Center report lays out a screening process companies can use to evaluate the potential physical risks of climate change and decide if more action is needed. In brief, the first step is to determine whether climate is an important factor in business risk. If the answer is yes, the next step is to determine whether climate change presents an immediate risk or threatens assets and investments over a longer-term horizon. The final step is to determine the cost of a wrong decision. If the costs are large, then a more comprehensive risk assessment that looks in greater detail at climate projections and their impact on the business may be warranted.
Depending on how these questions are answered, the screening process will lead to one of three possible outcomes: 1) climate change poses a significant risk that should be managed in the short term; 2) climate change poses a potential risk that should be monitored and reassessed over time; or 3) climate change does not appear to pose a risk and no further analysis is required.
A key message from the report is that companies should take a broad view of climate risks as they conduct the screening process. This means going beyond core operations to include a review of the entire value chain, along with broader supply and demand networks such as electricity, water and transportation infrastructure. A manufacturing plant may escape direct damage from a major storm but still face business interruption risk if transmission lines delivering power to the facility are knocked out, or roads and highways surrounding the facility are left inoperable.
While adaptation is a new issue for many companies, there are some notable exceptions. Three of these are highlighted in the report:
- A New Orleans-based utility, Entergy, suffered $2 billion in losses from Hurricanes Katrina and Rita and has begun relocating important business operations to areas less vulnerable to severe weather events. Entergy also recognizes that, if it goes unchecked, climate change poses long-term risks to the economic viability of its service area and is working with local government agencies and civic organizations to enhance the region's adaptive capacity.
- Travelers, a major property insurance company, is exploring new pricing strategies to encourage adaptive actions from its commercial and personal customers. It is also working with a range of stakeholders to help better integrate climate change science into catastrophe modeling and loss estimates.
- Mining giant Rio Tinto is using high-resolution climate modeling to conduct detailed site assessments and gauge risks to high-priority assets. Extreme flooding and prolonged drought have emerged as the greatest sources of concern, creating additional justification for the development of a strong water strategy.
Not every business will need to take action to adapt to the physical impacts of climate change, but all firms should be aware of the potential risks. An initial screening can often be conducted relatively easily using publicly available information on climate trends and projections. This screening helps companies determine whether more focused action is needed. It can also help firms uncover hidden opportunities that a changing climate may hold. The companies that take early action on adaptation may gain a competitive advantage over industry peers that stand idle as the physical effects of climate change creep up and surprise them -- and their bottom line.
Andre de Fontaine is a Markets and Business Strategy Fellow with the Pew Center on Global Climate Change.
Speech by Eileen Claussen, President, Pew Center on Global Climate Change
Aluminum Association Spring 2008 Meeting
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.
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.
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.