Climate Change: The Next 50 Years - One Decade at a Time
Remarks of Eileen Claussen, President
Pew Center on Global Climate Change
SRI in the Rockies
October 18, 2002
Thank you very much and good morning. It is a pleasure to be here. I have to say that even the sound of SRI in the Rockies has an appealing ring to it. You can probably make just about anything sound better by adding those three little words: "In the Rockies." They're certainly more attractive than the three words I usually hear: "Inside the Beltway."
So I'd like to start by saying thank you to the conference organizers - not only for this wonderful setting, but also for the opportunity to speak with you about what I believe to be one of the most profound challenges of our time: the challenge of global climate change.
But I'd also like to say thank you to all of you. Because after many years of working to protect our environment, I've come to two very important realizations. First, you're better off working with the marketplace than against it. And second, positive change more often than not is the product of committed individuals who take the time to figure out what's right, and then act on it. Socially responsible investing blends those two realities into a very powerful force for change. And I can't tell you how pleased I am to be speaking to the SRI community about meeting the challenge of global warming. So again, thank you.
I'd like to cover a lot of ground today. I'll start with a quick overview of what science tells us about the risks and realities of global warming. Then I'll lay out in broad terms the challenge we face in the decades ahead if we are to avert the worst consequences of climate change. I'll highlight some of the efforts already underway to meet that challenge, both in government and in the business community. And finally, I'd like to talk about the critical role that all of you can and must play in getting more people and more companies to do the right and responsible thing.
So, as any informed discussion of climate change should, let's start with the science. In a word, it's compelling. There is overwhelming scientific consensus on three basic points: the earth is warming; this warming trend is likely to worsen; and human activity is largely to blame. Yes, you can find scientists who will argue otherwise. But these are the findings of the Intergovernmental Panel on Climate Change, which draws on the expertise of hundreds of climate scientists around the world. They are also the findings of a special, well-balanced panel put together by the National Academy of Sciences at the request of President Bush.
True, the earth's temperature has always fluctuated. But ordinarily these shifts occur over the course of centuries or millennia, not decades. The 1990s were the hottest decade of the entire millennium. The last five years were among the seven hottest on record. Scientists project that over the next century, the average global temperature will rise two to ten degrees Fahrenheit. A ten-degree increase would be the largest swing in global temperature since the end of the last ice age 12,000 years ago.
What are the likely consequences? We can expect rising sea levels, increased flooding and increased drought& more powerful storms, extended heat waves, and other types of extreme weather events. In some communities, global warming is no longer a theoretical matter. The impacts are being felt right now. Just ask the people of Alaska, where roads are crumbling and homes are sagging as the permafrost begins to melt.
Increasingly, we will all feel the impacts in our pocketbooks and our portfolios. Earlier this month, the United Nations Environment Program released a report done in collaboration with some of the world's largest banks, insurers and investment companies. The report found that losses resulting from natural disasters appear to be doubling every 10 years and, if this trend continues, will amount to nearly $150 billion over the coming decade. This summer's wildfires here in the West and floods in central Europe are some of the latest examples. It's impossible to conclusively link any one of these disasters to the broader warming trend. But linked or not, these events give us a very real and very frightening preview of what's in store if the warming trend continues.
So what do we do about it? How do we protect ourselves, and future generations, from the rising risks of global warming? The short answer is that we must fundamentally transform the way we power our global economy. To keep our planet from overheating, we must dramatically reduce emissions of carbon dioxide and other greenhouse gases. The primary source of these gases is the combustion of fossil fuels. So our goal over time must be to steadily reduce our reliance on coal and oil and to develop new sources of energy - clean energy.
Clearly, this is a tall order. In fact, it will take nothing short of a new industrial revolution. Some revolutions happen overnight. This one will take time. It takes time to develop and adopt new technologies. It takes time to turn over our capital stock. But we can't afford to let this revolution take too long - every day, our emissions of greenhouse gases grow larger. So the first step in this revolution might be setting a goal - a long-term goal. Allow me to propose one. I propose that within 50 years we have in place all the technologies we need to power our economy without endangering our climate. I think it's a reasonable goal, one we can reach - provided we start right now and keep at it, one decade at a time.
This 50-year climate revolution must reach across each of the major energy-producing and -consuming sectors of our economy. In the electricity sector, we must burn coal more efficiently, increase our use of natural gas -- and ultimately move to renewables like solar and wind. In transportation, we can dramatically improve fuel economy right now, but at the same time should be switching to hybrid engines and developing alternatives like hydrogen fuel cell vehicles that will make the internal combustion engine obsolete. In the building sector, we need to take advantage of all the smart designs available right now to make our homes, offices and stores far more energy efficient. And in the industrial sector, we need to redesign the entire chain of commerce -- from inputs, to production processes, to product mixes, to the reuse and recycling of both waste and the products themselves.
All told, these changes imply technological and economic transformation on an unprecedented scale. How do we start? Here are some of the things we can do in decade one to get this revolution underway.
We can start by requiring companies to track and disclose their greenhouse gas emissions. We can assure companies taking steps now to reduce their emissions that their efforts will be recognized in any future regulatory system. We can raise efficiency standards. We can make strategic public investments in promising technologies. We can encourage farmers and foresters to adopt practices that take carbon from the atmosphere and store it in soil, crops and trees. We can step up efforts to determine whether we can safely and permanently sequester carbon in geologic formations deep underground. And we can begin building an economy-wide system that sets mandatory targets for reducing emissions and uses market approaches like emissions trading to meet them at the lowest possible cost.
So that's the challenge - revolutionize the way we power our economy in 50 years, one decade at a time. Is there any evidence that we're stepping up to the challenge? Not enough, I'm afraid, but perhaps more than you think.
Let's look first at the international picture. After a decade of negotiations, we are on the verge of establishing the first international constraints on greenhouse gas emissions. The European Union and Japan have ratified the Kyoto Protocol and if, as promised, Russia follows suit, the treaty will enter into force next year. Kyoto is only a start - its targets are far short of the emission reductions that ultimately will be needed, and it doesn't address developing countries, where much of the emissions growth in the coming decades will occur. But Kyoto is an important start. It lays a foundation and it reflects the determination of the international community to face up to this challenge.
The United States, of course, has chosen to stand outside this international effort. President Bush has rejected Kyoto and offered up instead a domestic strategy that relies exclusively on voluntary action. The President's strategy sets a goal of reducing greenhouse gas intensity 18 percent by 2012. That might sound good, but it allows actual emissions to keep on growing. It is essentially business as usual. It effectively writes off decade one.
But if you look past the administration - if you look at what's happening elsewhere in Washington and across the country - the picture is a bit more encouraging. And that's in part because a funny thing happened on the way to Kyoto. Just as the President's rejection helped save the Protocol by rallying other nations to its defense, it elevated the issue here at home as well - both in the press, and in the political arena.
In Congress, members of both parties are more eager than ever to demonstrate their interest in climate protection. Nearly twice as many climate change bills were introduced in Congress over the past year as in the previous four years combined. One of the major sticking points in the stalled negotiations over an energy bill is a set of bipartisan climate provisions that would force the administration to start taking the issue seriously.
And in an interesting bipartisan pairing, Senators Joe Lieberman and John McCain plan to introduce a bill this year setting a national cap on greenhouse gas emissions and allowing companies to buy and sell carbon credits. The bill is not likely to move anywhere fast, but it will help spark a long overdue debate on just how the United States will live up to its obligations as the world's largest emitter of greenhouse gases.
One thing that's interesting is that when you get outside Washington - when you're no longer inside the Beltway, that is - you find people moving right past debate to action. A growing number of states and communities are taking steps to cut their greenhouse gas emissions. At least 42 states have programs that, while not necessarily directed at climate change, are achieving real emission reductions. Texas and 13 other states require utilities to generate a share of their power from renewable sources. New York State's new energy plan sets a goal of reducing emissions 10 percent below 1990 levels by 2020. Some states are going beyond target-setting and establishing direct controls on carbon from power plants and - in the case of California - from cars and SUVs.
The message being sent by the states is that with or without Kyoto - and for that matter, with or without Washington - there is growing support in the United States for getting serious about climate change.
Increasingly, we are hearing the same message from the business community as well. Many companies are not waiting for government mandates - they're taking steps to reduce their emissions right now. At last count, we had identified more than 40 major companies that have publicly committed themselves to greenhouse gas reduction targets.
Let me share just a few examples. Alcoa is aiming to reduce its emissions 25 percent below 1990 levels by 2010. DuPont is aiming for a 65 percent reduction. Toyota, IBM, Intel, Johnson & Johnson& all have adopted targets for reducing emissions. Rohm and Haas, TransAlta, and BP have already achieved their targets and set new ones. BP, in fact, has cut emissions 10 percent below 1990 levels - eight years ahead of target - and now has pledged to keep them there at least until 2010.
The list of companies taking voluntary action keeps growing. Many are signing up with EPA's Climate Leaders program, which helps companies measure their emissions and begin to reduce them. Even Exxon-Mobil, a leading champion of the administration's business-as-usual strategy, recently ran ads touting its efforts to get a handle on its emissions.
These voluntary efforts are encouraging. They're to be commended. But they're not enough. The companies that are truly committed to tackling climate change know that we will never achieve the deep emission cuts we need unless everyone moves far enough, and fast enough, in the right direction. And that will happen only if the government requires it. That is why the companies we work with at the Pew Center recently called for the development of a comprehensive national climate strategy that is flexible and market-based but also has teeth - a strategy of mandatory, not voluntary, reductions.
And this leads me, finally, to your role in launching our 50-year climate revolution. I said earlier that I've learned it's better to work with the market than against it. In fact, I believe that ultimately only the market can mobilize the resources and the ingenuity needed to meet the challenge of climate change. The market, of course, will only deliver if there is a demand. That is why mandatory government policies are so critical. But the demand should not come from government alone. It should come from each of us as well - as consumers and as investors. And there, you are at the leading edge.
As socially responsible investors, you can help distinguish between the companies that are just painting themselves green, the companies that are actually cutting their emissions, and the companies that are going the next step and calling on government to mandate action by all. To do that, you need to need to know how a company is managing its carbon risk - what its emissions look like and what it's doing to reduce them. You need to know which companies are seizing the opportunities presented by climate change - which companies are looking ahead and investing now in the technologies we need in place 50 years from now. And you need to know which companies are pressing our elected leaders to do the right thing.
Increasingly, investors are demanding the information they need to make these assessments, and they're demanding corporate accountability on climate change. This year saw a record number of shareholder resolutions on climate change, and record support for them. Some drew votes of nearly 30 percent. In most cases, the resolutions were withdrawn when the companies agreed to enter into dialogue about their greenhouse gas emissions and their disclosure practices.
We talk a lot about the environment. But if you are a business, or an investor, or a fund manager, the environment within which you operate is the market. And the rules of the market will change. The climate, in essence, will stop being free. There will be a cost for emitting carbon. Those who understand that reality, and make the adjustment, will not only survive but thrive. Because in every change there is opportunity, and the rewards flow to those who seize them first. But those who ignore the realities and fail to adjust will pay the price.
You can help focus attention on these new realities - on both the risks and the opportunities. Keep impressing upon other investors, analysts, and companies themselves that climate change is a serious challenge that demands serious action. Tell them that if they want to be winners in the carbon-constrained world of the future, the time to start is now. Make sure CEOs understand that they ignore this issue at the peril of their companies and their shareholders -- not to mention, future generations.
Keep spreading the word because the market is both a harsh arbiter and the great mobilizer. And you are the market.