Energy & Technology

The Role of Coal Gasification in Ohio’s Economy and Energy Future

Creating Power, Technology and Products

Creating Power, Technology, and Products: The Role of Coal Gasification in Ohio’s Economy and Energy Future

Prepared for the Pew Center on Global Climate Change by Kleinhenz & Associates of Cleveland, Ohio
December 2007

Download a pdf of this report.

Read the companion study "The Role of CO2 Enhanced Oil Recovery in Ohio's Economy and Energy Future"

Executive Summary

The Pew Center on Global Climate Change commissioned Kleinhenz and Associates to examine how coal gasification (CG) combined with Carbon Capture and Sequestration (CCS) technology could play a role in Ohio’s economy and energy future – particularly in Northeast Ohio, a major center of manufacturing in the U.S. This working paper focuses primarily on opportunities for gasification projects to augment Ohio’s economy. It examines economic activity factors related to coal gasification and how the location of a number of key support industries in Ohio could provide the state with a competitive advantage in this area. The study focuses on a polygeneration facility that would supply electricity and some other products as an example of the type of gasification facility that could, if a sufficient number of similar facilities were located in the area, serve as the stimulus for a new or expanded industry cluster.

The potential economic impact of locating a polygeneration gasifier in Northeast Ohio is large. A significant portion of the inputs required for one $1.1+ billion facility can be supplied either within northeastern Ohio or from elsewhere in the state. Operation of the facility is estimated to increase annual statewide personal income by $39 million and Ohio output by $161 million. The Northeast Ohio region will account for 98 percent of the operational benefits.

The report suggests several possible steps to convert this research to an action plan to build support for, and interest in, a coal-gasification industry cluster in Northeast Ohio. Outreach should focus on engaging industry leaders, foundations, and state and regional economic development leaders.

Report on how coal gasification (CG) combined with Carbon Capture and Sequestration (CCS) technology could play a role in Ohio’s economy.
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Biofuels for Transportation

Full Article (PDF)

 

by Naomi Pena, Environmental Analyst and  John Sheehan, LiveFuels--Appeared in CDM Investment Newsletter, a joint initiative of BEA International and the Climate Business Network
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Reality Before the Renaissance: Making Nuclear Power Part of the Climate Solution

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

AMERICAN NUCLEAR SOCIETY/EUROPEAN NUCLEAR SOCIETY
INTERNATIONAL MEETING
WASHINGTON, DC

November 12, 2007

“REALITY BEFORE THE RENAISSANCE: MAKING NUCLEAR POWER PART OF THE CLIMATE SOLUTION”

Thank you very much. I am honored to share the stage with Jeff Immelt, Senator Carper and Adolfo Garcia Rodriguez – and honored also to be a part of this very important discussion.

The theme you are here to discuss this week is “Making the Renaissance Real.” And, thinking back to another Renaissance, I believe we can draw a few lessons for this industry. Because the Renaissance that happened in Europe in the 14th through the 17th centuries was founded on reason, facts, and the pursuit of knowledge. The artists of the time, Leonardo and the rest, set out to portray the human form, light and perspective in more realistic and more natural ways. The commitment across literature, science, and the arts was to render and understand things as they are in the real world.

And this is our challenge today, I believe, as we ponder the renaissance that is the focus of this meeting. We must render and understand things as they are in the real world. We must take a hard look at the facts before us, and we must commit ourselves to achieving a fuller understanding of our world.

In the context of this discussion, that means achieving a fuller understanding of the climate and energy challenges we face today. And it also means understanding the possible solutions to those challenges in a more complete way—taking a hard look at the facts, questioning every assumption, and embracing reason as we look at the implications of these solutions for our world.

And so, with that as a preface, I want to use the time I have this morning to take what I hope is a reasoned look at the future of this industry: nuclear power. And my focus, of course, will be to look at the future of this industry in the context of protecting the global climate. I want to paint a picture for you – and it will be a quick sketch, I promise – of where we are in our understanding of climate change, and in our understanding of what we need to do to address it. And I want to then talk about what you need to do, as an industry, if you are indeed serious about making the renaissance real.

I believe very strongly that nuclear power needs to be a part of the solution, a part of the picture, as America and the world respond to climate change. But, at the same time, I also recognize that there are real challenges standing in the way of this industry’s future growth. And those challenges need to be a part of the picture, too, or we are not living in the real world.

So, first a sketch of where we are today in our understanding of the climate challenge. 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. We now know from the science that this is a real and urgent problem. The most recent report from the Intergovernmental Panel on Climate Change projected that global temperatures will increase between 3.2 and 7.2 degrees Fahrenheit by 2100. Sea levels will rise by as much as a foot to a foot-and-a-half. 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.
And this is not solely a problem of the future; it is happening right now. I mentioned the Arctic sea ice. This summer, we saw it shrink to its smallest recorded extent ever. According to the National Sea Ice Data Center, at the height of the melting, sea ice declined at a rate of 81,000 square miles per day. That’s the equivalent of losing an area the size of Kansas – in a day. Researchers say this rate of loss was unprecedented in the satellite record. Of course, the sea ice will come back as winter temperatures return, but even the wintertime ice has been in decline – with 2007 and 2006 marking the lowest winter ice extent ever.
Clearly, we have a very serious problem on our hands. And the reason we know we have a problem is because of the science, which now tells us in unequivocal terms that, if left unabated, climate change will have tremendous negative consequences for our country and our world.
The science also tells us something else. … It tells us there is no longer any doubt about what is causing this problem: greenhouse gas emissions from human sources—and, most of those emissions come from three key sectors: electricity; transportation, primarily automobiles; and buildings.

As a result of all these emissions, the level of greenhouse gases in our atmosphere is growing. Advance details from the latest IPCC synthesis report tell us we are at 450 parts per million already; that is a measure of CO2-equivalent greenhouse gases in the atmosphere, if we discount the shading effect of aerosols. And the reason why this number (450 parts per million) is significant is that we have reached this level more than a decade earlier than we thought just a short time ago. What’s more, scientists tell us that in order to avoid the worst consequences of climate change, we must stabilize atmospheric concentrations of greenhouse gases at a level of roughly – you guessed it – 450 parts per million. Obviously, this is a mammoth task that will require bold actions, actions that must begin now and continue for decades to come.

What kind of actions? Well, to stabilize greenhouse gases in the atmosphere at this level, we need to reduce worldwide emissions by 60 to 80 percent before 2050 -- 60 to 80 percent. And we know which sector of the economy is the largest single source of these emissions? Electricity generation. In the United States alone, power generation and heat together produce 42 percent of all carbon dioxide emissions. Globally, the figure is 41 percent.

Now obviously, there is no way to reduce those emissions to the levels we need to see without making some dramatic changes. Many of you are familiar, I am sure, with the work of Robert Socolow at Princeton. Well, Professor Socolow took a very reasoned look at what kinds of actions it will take to prevent the worst effects of climate change. He came up with the concept of what he called “stabilization wedges.” These wedges show various actions we can take to stabilize carbon dioxide emissions at the current level of seven gigatons per year. I should note that the projection under a business-as-usual scenario is for those emissions to rise to 14 gigatons over the next 50 years. So basically, we need to lop 7 gigatons off the business-as-usual path. And, conveniently, the professor came up with seven wedges that could conceivably get this done. Each would deliver a 1-gigaton reduction in projected emissions.

Here is an example of a wedge: putting 2 billion cars on the road at 60 miles per gallon instead of 30 miles per gallon. Or, in the electric power sector, implementing carbon capture and storage at 1,600 large coal plants; or building 1 million 2-megawatt wind turbines to displace coal power. And here’s the wedge that should be of interest to this group: building 700 gigawatts of nuclear capacity to displace coal power. Do the math, and you see this is twice the current global nuclear capacity. Obviously, a huge endeavor – but it gives you an idea of the level of action that is needed to address this enormous problem we are facing.

Professor Socolow is not recommending any specific solution. He is not saying that these wedges he talks about are the exact paths we have to take. No, he is showing us the kinds of things we need to be talking about, the kinds of actions we need to consider. And, with these wedges now in mind, we can begin to weigh what’s doable – and where we might be able to find the reductions we need.

And so, as we look at these wedges, and as we scan the horizon for opportunities to reduce emissions of these gases in a substantial way, we have to consider how this industry, nuclear power, can be a part of the solution. We would be foolish not to. Nuclear is one of the few options on the table for producing electricity with no carbon emissions. And, it is already delivering 20 percent or more of U.S. electricity, and more in other countries: 78 percent in France, 54 percent in Belgium, 39 percent in South Korea, and 30 percent in Japan. The IAEA says nuclear accounts for 15 percent of electricity generation worldwide.

Some environmental groups feel that this industry poses as serious a threat to the world as climate change itself and should therefore be opposed at all costs. At the Pew Center, we don’t feel this way. What we have always said is that climate change is such a serious problem that we cannot afford to take any option off the table. We simply cannot ignore the fact that nuclear power could make a substantial contribution to our efforts to reduce greenhouse gases.

However, there are other things we can’t ignore . And these are the potential problems associated with the expanded use of nuclear power in this country and throughout the world. As I said at the start, the other Renaissance taught us about the rewards that come with rendering and understanding things as they are in the real world. And these are not just artistic or spiritual rewards I am talking about. The growth of this industry, its continued success, ultimately will depend on whether it follows the advice of Jim Collins, the bestselling author of Good to Great. “Confront the brutal facts,” he tells us. And the brutal facts for nuclear power include the fact that we as a society still have not resolved a number of threshold issues that are essential to this industry’s future.

Of course, nuclear power is not alone in this respect. Other energy technologies that could potentially deliver substantial reductions in emissions face their own hurdles. A lot of people, for example, myself included, regularly talk about how important it is that we figure out how to capture and sequester carbon emissions from coal-fired power plants, and do this on a large scale. But the technologies for doing this are still untested on a commercial scale at coal-fired power plants, we still haven’t proven you can store these emissions underground over long periods of time, and there will likely be serious public concerns about injecting these gases into the earth.

Wind and solar power face obstacles, too. To get renewables to a level where they could make an appreciable difference in reducing emissions, we would have to deal with a whole host of issues – from public opposition to large-scale wind farms to the thorny problem of these energy sources being intermittent. We need large-scale electricity storage.

So yes, nuclear power is not alone in having its challenges. But to move ahead without a full accounting of those challenges, and without plans for addressing them in a serious way, is to doom this industry’s renaissance before it even starts.

In other words, simply offering up a carbon-free source of electrical power is not enough. You need to do more. You need to show the world that it can enjoy the benefits of nuclear power without creating new risks or imposing new burdens on societies and the environment. The biggest brutal fact that this industry needs to confront? How to deal with nuclear waste.

We need a new conversation in this country, and around the world, about nuclear waste.
This conversation should be founded on a cool-headed assessment of what is feasible and practical for us to do. Even if the Yucca Mountain site ultimately is approved for long-term storage (and that’s still a big “if”), it will be decades before any waste ends up in Nevada. That is a fact. Yes, we can continue to store waste at the plants where it’s generated. But that’s not a realistic strategy for the long haul, especially if we want to add capacity, which will only mean more places in more parts of the country where more and more of this waste is stored.

We really need both an interim solution and a long-term solution. And it is time for a more serious conversation in this country about interim solutions for storing nuclear waste. I am talking, of course, about the potential of centralized dry cask storage, especially for spent fuel that currently is kept at decommissioned plants. Today, the debate is all about temporary vs. permanent storage. And it is getting us nowhere. It’s like Hannity and Colmes. There is never any resolution. We need to resolve this issue. And, I believe we will have a better chance of resolving it if we begin a new conversation, if we ratchet down the rhetoric, and if we consider other options, such as interim storage in selected, centralized locations, while at the same time working to make long-term storage a reality.

Responding to the nuclear waste issue in a reasoned and responsible way also can yield progress against other obstacles to this industry’s expansion. One of these obstacles is concern about reprocessing and nuclear proliferation.

Just the other week, we learned how the National Academy of Sciences feels about the Bush administration’s signature waste-reprocessing plan. The Global Nuclear Energy Partnership—and I quote—“should not go forward,” according to the NAS. Among the problems: it’s too expensive and it’s founded on unproven technologies.

It is hard to ignore the fact that more nuclear power means more waste and more reprocessing. While safeguards exist in the US and other countries to prevent the spread of these materials, there remain real risks that would have to be addressed; and the ability to cope with these risks varies widely around the world.

Of course, these are not the only barriers to the expansion of nuclear power. There also continue to be public concerns about the safety of this industry. We all know that U.S. plants are safer and more secure than in the past. But this is a fight you will have to continue to fight. There is no way around it if you are going to be building more plants. Transparency is crucial – companies need to build trust with the public so that people know you have taken every precaution. And, as an industry, you also need to pay attention to what is happening in other countries. Expanding the use of nuclear power in places with weak regulatory oversight, or unproven construction practices, is not in the long-term interests of this industry. Because, as you all know very well, just one problem at one nuclear power facility anywhere in the world can be a problem for nuclear power everywhere.

Last but not least among the potential barriers to nuclear power is the issue of cost. The participants in the Keystone Center discussions said a reasonable estimate for life-cycle costs of nuclear power is between 8 and 11 cents per kilowatt-hour. Granted, this is higher than some industry and US DOE estimates of 4 to 7 cents per kilowatt hour, but there is no denying that nuclear power, under present-day circumstances, is expensive relative to its main competitor: coal. For comparison’s sake, a coal plant operating without carbon capture has life-cycle costs of around 4.8 cents per kilowatt-hour. A conventional coal-fired plant, in other words, produces electricity at roughly half the cost of a nuclear plant. This is a huge barrier to this industry’s expansion, as all of you know very well.

But something interesting happens when you try to reduce greenhouse gas emissions from the coal-fired plant by adding carbon capture and sequestration. The life-cycle cost goes up significantly, and according to estimates, could be as high as 8 cents, which is the same as the Keystone Group’s low-end estimate for nuclear. So now, you start to reach a level of parity with coal. But again, this only happens if we launch a determined effort to capture carbon emissions from coal-fired plants.

And so even if we finally figure out solutions to the big issues like nuclear waste storage, this industry’s competitiveness ultimately will depend on one question: whether the United States and the world finally get serious about reducing emissions of greenhouse gases. There needs to be a price on carbon. That is the only way to create a level playing field for nuclear power. And it is the only way, in the Pew Center’s opinion, to achieve real progress in protecting the climate.

GE understands this, and I applaud Jeff Immelt for his leadership in the fight for climate solutions. I am proud to say that GE is a member of the Pew Center’s Business Environmental Leadership Council, along with others in the nuclear power industry, such as Exelon and Duke Energy. These companies also are leaders in the U.S. Climate Action Partnership. This is a coalition of 27 major corporations and six NGOs, including the Pew Center. And it is calling on Congress to enact mandatory domestic climate policies at the earliest possible date.

USCAP believes Congress should pass legislation that sets firm short and medium-term binding emissions targets in the United States. The ultimate goal: reduce emissions by 60 to 80 percent by 2050. In the view of the USCAP partners, a cap-and-trade system should be the cornerstone of U.S. climate policy. Right now, the cap-and-trade legislation that’s getting the most attention is the bill introduced by Senators Joe Lieberman and John Warner. And I believe very strongly that the nuclear power industry can and must play a constructive role in the debate on this measure.

The only caution I will offer is this: you need to focus on the big picture in this debate. And that is the competitive advantage this industry gains from a comprehensive climate policy that once and for all puts a price on carbon. More nuclear subsidies are not the answer; they are short term, ephemeral, and they may well scuttle the chances for this bill (and others) by emboldening (or simply ticking off) your opponents.

Right now, the best subsidy for nuclear power is a comprehensive climate policy. Because the sooner we have a cap-and-trade program in place, the sooner we will be able to determine in a reasoned way which energy options make the most sense, both for the economy and for the environment. And the sooner this industry can get past the cost issue and have a real discussion about the potential of expanded nuclear power as a solution to our energy and environmental needs.

Is cap-and-trade the only answer to climate change? No. Does this mean government should do nothing to help advance especially promising technologies? No. The Pew Center is a strong believer in technology-neutral policies like cap-and-trade. However, we also believe the federal government needs to be involved in solving some of the most urgent problems facing key energy alternatives (problems like nuclear waste storage).

I want to wrap up by making the point again that nuclear power can be an important part of the solution to climate change. We can make the nuclear renaissance real. But first, we need to learn from the other Renaissance and take a more discerning look at the world around us – what’s possible, where the problems are, and how to overcome them in ways that don’t create still more problems for humanity and the world. A great thinker from the earlier Renaissance, Galileo, said this: “I do not feel obliged to believe that the same God who endowed us with senses, reason and intellect has intended us to forgo their use.”

And so I encourage you to rely on your senses, your reason and your intellect as you set out to make this industry’s renaissance real. And I want to leave you with two priorities for the months and years ahead: one, help start a new conversation about the nuclear waste issue that leads to real solutions, including interim storage; and two, get out there and do everything you can to support comprehensive climate policies for this country – not short-term fixes but policies that offer real answers to our long-range climate and energy challenges.

Thank you very much.

 

 

 

 

 

Sustainable Innovation Summit

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

THUNDERBIRD SCHOOL OF GLOBAL MANAGEMENT
SUSTAINABLE INNOVATION SUMMIT
GLENDALE, ARIZONA

November 5, 2007

Thank you very much. It is great to be here at Thunderbird as part of your Sustainable Innovation Summit. And it a thrill it is to be addressing a group of T-birds. It inspired me, in fact, to consider all of the avian analogies we can apply to what’s been happening on the climate issue of late.

See, for too long, climate skeptics and some of our political leaders have been too chicken to address this issue. They’ve ducked the hard choices. Fowled the debate with doubts about whether climate change is really happening. Hawked their own bogus theories. Parroted the same old tired lines. Well, I am here to say their goose is cooked and it’s time to take a gander at reality. Because it’s our tern now. That’s T-E-R-N. And I hope you T-Birds will join me in helping climate solutions take flight.

In all seriousness, I applaud Thunderbird’s mission to “educate business leaders who create sustainable prosperity worldwide.” I also want to congratulate Thunderbird for receiving – for the 7th consecutive year – the prestigious designation as the #1-ranked school for International Business. The award highlights your school’s global mindset, an apt description for an institution that is preparing future business leaders to tackle the greatest of global challenges – climate change.

Because today, I believe, there is no greater threat to sustainability (or prosperity) than climate change. And I am not alone in this belief. Over the last decade, there has been a remarkable change in how people think about the climate issue, what they believe, and what they feel we should do. And nowhere has this transformation in opinion and outlook been more pronounced than in the global business community.

The introduction this fall of Thunderbird’s Carbon-Free Degree, fosters exactly the type of innovative ideas and concrete actions needed in this country, and around the world, to find climate solutions. Equipping yourselves with the knowledge and practical experience to succeed in a future low-carbon economy is critical. But what’s truly important is that Thunderbird graduates will now enter the business world as leaders who both understand and can implement sustainable solutions that firms need to gain competitive advantages in today’s global marketplace.

Today, I’d like to reflect a bit on why business opinion on the climate change issue has changed, and on why some of the strongest support for climate solutions now originates not in the halls of government or in non-governmental organization offices, but in corporate boardrooms around the world. I will talk about the history of business engagement (and disengagement) on this issue. And I will offer a couple of examples of major companies that are walking the talk when it comes to climate solutions.

The main idea I want to leave you with is that there has been a major shift in the global business community – from denial to acceptance and now to active engagement in public policy on the climate issue. And it is a shift that I believe bodes well for national and international action to protect the climate in the months and years ahead.

But before I get to all that, it’s important to reflect on why there has been this shift, why the business community (or segments of it) is now responding seriously to climate change when simply talking in a rational way about this issue in private-sector circles was viewed as heresy just a few years back.

The biggest influence has been a need for certainty about how markets are going to change, sparked by a growing patchwork of state by state and country by country climate policies, and a sense that aggressive federal and global responses are inevitable. But the advancing science has been important for some companies too. 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. We now know from the science that this is a real and urgent problem, with a real cause – and that cause is human activity. The most recent report from the Intergovernmental Panel on Climate Change projected that global temperatures will increase between 3.2 and 7.2 degrees Fahrenheit by 2100. Sea levels will rise by as much as a foot to a foot-and-a-half. 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.


But climate change isn’t solely a problem of the future; it is happening right now. I mentioned the Arctic sea ice. This summer, we saw it shrink to its smallest recorded extent ever. According to the National Sea Ice Data Center, at the height of the melting, sea ice declined at a rate of 81,000 square miles per day. That’s the equivalent of losing an area the size of Kansas – in a day. Researchers say this rate of loss was unprecedented in the satellite record. Of course, the sea ice will come back as winter temperatures return, but even the wintertime ice has been in decline – with 2007 and 2006 marking the lowest winter ice extent ever.


Clearly, we have a very serious problem on our hands. Left unabated, climate change will have tremendous negative consequences for our country and our world.
But the science also tells us something else. … It tells us there is no longer any doubt about what is causing this problem: greenhouse gas emissions from human sources—and, more specifically, from three key sectors: electricity; transportation, primarily automobiles; and buildings. Consider this: China is building a new coal-fired power plant every week to 10 days. And it’s not just China and other developing countries. As of 2006, U.S. emissions were up nearly 18 percent compared to 1990.

As a result of all these emissions, the level of greenhouse gases in our atmosphere is growing. Advance details from the latest IPCC synthesis report tell us we are at 450 parts per million of CO2-equivalent greenhouse gases in the atmosphere, if we discount the shading effect of aerosols. And the reason why this number (450 parts per million) is significant is that we have reached this level more than a decade earlier than we thought just a short time ago. What’s more, scientists tell us that in order to avoid the worst consequences of climate change, we must stabilize atmospheric concentrations of greenhouse gases at a level of roughly – you guessed it – 450 parts per million. Obviously, this is a mammoth task that will require bold actions, actions that must begin now and continue for decades to come.

So this is what the science says: It says that the climate is changing, that these changes will accelerate in the years ahead, and that human activity is the major cause. Is anybody listening to the science? Fortunately, the answer is yes. As I said before, some of the most attentive listeners are in the global business community. And I want to use the remainder of my remarks to provide an overview of how business has responded to this issue, and what kind of response we can expect to see moving forward.

I want to start by reflecting back on the late 1980s and early 1990s. As you may recall, this was a time when most major U.S. companies responded to climate change in the vein of Alfred E. Neuman: “What … me worry?” But they didn’t stop there, with a simple shrug of their collective shoulders. No. In many cases, business actively sought to confuse the debate by disputing the basic science behind global warming.

They did this because they saw the writing on the wall; they saw what was happening globally on this issue. They saw how the world had united around the goals of the United Nations Framework Convention on Climate Change in 1992. The UNFCCC, as it is known, set an ambitious long-term objective: to stabilize greenhouse gas concentrations in the atmosphere at a level that would – and I quote – “prevent dangerous anthropogenic interference with the climate system.” This is a goal that the United States, and virtually every other nation, embraced.


Businesses also saw how the world came together five years after the signing of the UNFCCC in an effort to try and give that agreement some teeth. This is what happened in Kyoto, Japan, in 1997, when the United States and other countries signed the Kyoto Protocol, with its mandatory emission targets for developed countries. Well, whatever you think of Kyoto, this agreement just didn’t sit well with many segments of the global business community. And so they set out to undermine the agreement – in part, by attempting to undermine the science behind it.

The prevailing sentiment on this issue in global business circles was embodied in the work of an organization called the Global Climate Coalition (GCC). This is a group that held sway in the U.S. during the 1990s, and it had one of those classic Washington names that make you think they’re on the side of reasonable solutions … when, the fact is, their major objective is to muddy the issue just enough to stop any solution they don’t like.

Well, the Global Climate Coalition was quite good at this for a time, and it recruited some major players to try and demonize Kyoto and torpedo the scientific case for action – including Exxon, Ford, Royal Dutch Shell, Texaco, BP, General Motors, and Daimler Chrysler. But over time, many of these companies left the coalition and began distancing themselves from GCC’s views. The GCC suffered major membership losses in 2001, and simply went out of business. In the end, the GCC fell victim to changing views in the corporate community about climate change and the need for action on greenhouse gas emissions. I saw this change firsthand when we formed the Pew Center on Global Climate Change in 1998.

One of our priorities from the start was to recruit major companies to serve as founding members of our Business Environmental Leadership Council . Thirteen companies joined in the beginning, including such industry stalwarts as American Electric Power, Boeing and Toyota. And all of these companies agreed to a set of principles that basically said this: we know enough about the science of climate change to justify taking action now.
Now remember: this was happening just months after the Kyoto Protocol was negotiated, at a time when most major businesses still viewed climate change with either indifference or hostility, one where serious action, if it came at all, was decades away. And yet a small group of business leaders joined with us at the Pew Center to say the time was right to do something, and that international action was needed. And the formation of our Council in 1998, along with other actions and statements around that time emanating from the corporate sector, marked the moment when the first wave of business leaders finally moved from denial of climate change to acceptance that this was a real problem and that solutions were needed.


Today, almost 10 years later, the Pew Center’s Business Environmental Leadership Council consists of 45 companies representing approximately $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. Membership spans a range of sectors including high technology, diversified manufacturing, oil and gas, transportation, electric and gas utilities, chemicals, healthcare, insurance, and financial services.

The growth of our Council over the last decade is a reflection of the growing acceptance among business leaders that climate change is a real problem. It is also 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.

Consider what businesses say about the likelihood of U.S. government action. Ninety percent of the companies we polled in 2006 said they believed climate regulations were imminent in the U.S. Of those, 67 percent believed regulations would take effect between 2010 and 2015; 17 percent expected this before 2010. And I should note that this survey was taken before the 2006 elections, when Democrats took control of both the House and Senate with new promises of swift action on this issue.

Globally, the feeling is the same ... business understands that this train is rolling down the tracks and can’t be stopped. And, in fact, companies operating in Europe and elsewhere already live under climate regulations.

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.

Businesses are not hunkering in a cave somewhere. They see governments around the world taking action on this issue—or, at least, talking about taking action in a serious way. And, part of the motivation among the companies that have been out front on the climate issue is to help shape the actions that the world’s governments ultimately take. They want a seat at the table when international and national leaders talk about policy solutions to the climate problem.

And there is something else they want … they also want what we call “regulatory certainty”—in other words, they believe it’s inevitable that governments are going to act in a more decisive way on this issue… but like everyone else, business leaders don’t know exactly how governments will act. And not knowing what’s on the horizon is not good for business. Think about those companies in the electric power sector that have to make significant up-front outlays for new plants and equipment that government actions could render obsolete in one fell swoop. Or, think about businesses that are primed to innovate and to invest in new, low-carbon energy technologies and products. … Figuring out the potential return on those investments just isn’t possible right now, in the absence of a clearer sense of the policy environment five, ten or twenty years out.

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. 17 states in the United States, for example, already have emission reduction targets, including California, Florida, Maryland, Massachusetts and Arizona. In the same way that business leaders don’t like uncertainty about what the global and national rules will be, they also don’t like having to live by a lot of different rules in different places.

And then there is the main motivating factor that drives business decisions: profits. Many businesses very plainly see climate change and the drive to respond to it as a business opportunity – at least by managing risks better than competitors, and ideally by building growth platforms around low-carbon products and services. And they want to ensure that national and international policies are aligned with their own objectives for making the most of emerging global markets for climate-friendly technology. Let me offer three examples:

• First, Caterpillar is the largest supplier of machinery to the mining industry. They have a strong interest in maintaining long-term spending on equipment. Thus, they have a strong interest in developing climate solutions that include support for clean coal with carbon capture and sequestration. In the absence of rapid progress on this, some of their mining customers might run into financial difficulty if power companies switch to gas, nuclear, and renewables. In some cases, companies like Caterpillar actually are able to take a longer-term view than their clients.

• Second, there is GE. GE has built an entire line of products called Ecomagination that focuses on developing solutions to the world’s environmental problems, including climate change. Its products include wind turbines, more energy-efficient appliances, and clean coal technologies. Ecomagination has been extremely successful, reporting revenues last year of $12 billion, putting the company on track to exceed its sales target of $20 billion by 2010.

• And, last but not least, I want to mention Alcoa. Alcoa is one of the world’s leading aluminum manufacturers. And this company believes federal policies to reduce emissions will lead to higher demand for their products, particularly in the automotive and aircraft sectors. The thinking is that GHG policies will drive carmakers to use more lightweight aluminum in producing cars and planes. Reducing a vehicle’s weight by 10 percent typically yields a seven-percent reduction in GHG emissions.

Again, these are 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. This may sound odd at a time when oil company stocks are at record highs, but it’s true: there has been a gradual awakening to the climate issue on Wall Street. And I want to highlight the six stages to the financial community’s awakening on this issue:

First, the emergence of shareholder activism as a tool for influencing corporate behavior. Sister Patricia Daly, from the order of the Sisters of St. Dominic of Caldwell, New Jersey was an early pioneer in this, as was the Christian Brothers Investment Services, and the Interfaith Center on Corporate Responsibility. Their big idea: to use the power of stock ownership as a way to get companies to pay more attention to their impact on the climate.

The environmental group Friends of the Earth, got into the act in 1990. As part of its climate change shareholder campaign, it filed a resolution with ExxonMobil, calling on the company to reduce carbon dioxide emissions from its energy production plants and facilities. Niagara Mohawk Power was the target of a 1994 church-sponsored resolution demanding that it prepare a report describing plans or actions to reduce GHG emissions. That one received support from 19.4 percent of the shares voted, one of the highest votes ever on a social issues proposal.

Since then, there has been steady growth in both the number of, and support for, shareholder resolutions. More than 150 climate change resolutions have been filed in the last five years alone. Over the past two years, climate change has emerged as the leading focus of non-financial shareholder resolutions.

While the content of these resolutions varies, most share a common set of goals: public reporting of GHG emissions and disclosure of climate-related risks and opportunities; voluntary goals and timetables to achieve absolute reductions in GHG emissions; and support for government programs that set mandatory limits on GHG emissions to bolster strategic planning and investor certainty.

And, it’s important to note that while these shareholder resolutions almost never pass, they have been very important in influencing corporate behavior. For example, after the Connecticut state treasurer’s office filed three consecutive climate resolutions (all unsuccessful), American Electric Power agreed to conduct an analysis of pending climate legislation and its impacts on the company’s bottom line. This analysis became the basis for AEP’s plans to invest up to $1.6 billion in a next-generation coal plant that emits substantially less CO2 than conventional coal plants and is designed for carbon capture and storage.

The second stage was the rise of eco-funds and environmental indices. Not too long ago, this was a tiny and not very influential corner of the capital markets. But in 2005, so-called socially responsible investment (or SRI) funds had approximately $2.29 trillion in assets under management worldwide. One of the largest SRI firms, Calvert, manages more than $16 billion in assets. And, there are also numerous funds focusing specifically on companies providing environmental solutions. An example is the Winslow Green Growth Fund.

The surge in investor appetite for environmentally friendly investment funds is leading investment banks to create special indices and structured products related to the industry. There are now at least a half-dozen indices tracking the clean-energy sector in North America alone, and several more in Europe.

Examples include the Dow Jones Sustainability Index, the ABN Amro Climate Change & Environment Index; Standard & Poor’s clean-energy index; and HSBC Holdings PLC’s Global Climate Change Benchmark Index. And that’s just a few.

The third phase in the financial community’s awakening was the engagement of public pension funds on this issue. These funds control huge pots of money, and they are showing an increasing willingness to consider climate change as an investment criterion.. How are they getting involved? By engaging directly with companies; by voting proxies against management; and by sponsoring shareholder resolutions themselves.

One of the major players in this arena is the California Public Employees Retirement System (or CALPERS). CALPERS has a total market value of approximately $250 billion. And now it has set up a $200 million Environmental Technology Program Board that targets investments in environmental technology solutions that are more efficient and less polluting than existing technologies. CALPERS also has $500 million earmarked for investment in stock portfolios that use environmental screens.

The fourth phase was the growth of cleantech venture capital flows. As all of these other developments have been unfolding, there have also been steady increases in venture capital and private equity flowing into clean technology companies, with particularly dramatic growth occurring in just the last three years. Cleantech encompasses a number of different sectors, from agriculture and air quality to recycling, water purification and management, and energy technology. And, today, this segment of the business world is one of the top venture capital draws, behind only software, biotechnology, and telecommunications.

What’s more, in the world of cleantech investing, energy technology has received by far the greatest levels of investment over the years. In 2005, the energy technology area was the beneficiary of about 44 percent of total U.S. cleantech investing ($590 million out of a total of $1.34 billion).

Which brings me to the fifth phase, the involvement of the major commercial and investment banking giants. One way this happened was through something called the Carbon Disclosure Project (or CDP).

CDP is a coordinating body for institutional investors. Each year, it sends out a questionnaire seeking information from companies about the business risks and opportunities presented by climate change. The success of CDP has grown every year in virtually every metric. This year, 315 institutional investors participated with $41 trillion in assets under management. The questionnaire went to 2,400 companies – and the response rate was a very respectable 77 percent.

CDP signatories include major mutual funds, and major banks and financial houses, such as State Street, Barclays, AXA, Northern Trust Corporation, UBS, and Morgan Stanley. Those six signatories alone account for about 10 percent of the holdings of GE, 11.7 percent of Apple, almost 12 percent of DuPont, and 12.2 percent of Duke Energy -- making climate every bit a C-level issue for these companies.

These major financial houses also are becoming directly involved in financing climate solutions. For example, Goldman Sachs since 2005 has invested about $1.5 billion in alternative energy and clean technology businesses; and Morgan Stanley this year bought a stake in MGM International, another company that invests in emissions reduction projects. Bank of America and Citi are among the other major banks that have unveiled major, multibillion-dollar cleantech and climate initiatives. And, several of these banks are backing up their investments with calls for federal action on the climate issue, citing the need for regulatory certainty, as well as the economic and ecological impacts of climate change.

Which brings me to the sixth and final phase in the world of finance: the effort to correlate environmental performance with financial performance. There is significant work under way right now to figure out whether companies that perform well on the environment in general, and perhaps specifically with regard to climate change and related market changes, indeed outperform their peers in the market.

If that analysis becomes widely supported by leading lights in Wall Street and in other financial centers, I expect many more companies to engage meaningfully on the climate issue. Some of the best firms already are noticing early evidence. A year ago, for example, Abby Joseph Cohen, chief U.S. investment strategist for Goldman Sachs, spoke at one of our BELC meetings. She said that while they weren’t ready to publish it, the firm’s analysis suggests that top performers in the environmental category achieved as much as a 5-7 percent share price premium over competitors.

Now, there are several hypotheses about why a company with a better environmental record is likely to outperform competitors financially. And my hunch, which I am sure would find support here at Thunderbird, is that exceptional performance related to the environment correlates highly with other management strengths. Those who are alert enough to perceive and understand looming climate risks and opportunities may simply be better than their peers in dealing with the many other long-term and uncertain market factors that all companies face.

Six phases. Six developments in the world of finance that are helping to drive business interest in and action on the climate issue. But there is still the question: once they are interested, what can businesses do?

That’s a question we tried to answer in the 2006 Pew Center report, “Getting Ahead of the Curve: Corporate Strategies That Address Climate Change.” The report compiles the experiences and best practices of large corporations that have developed and implemented strategies to address climate change, and it is available on our website.

I’ll now walk you briefly through the steps that a couple of leading companies profiled in our report took to establish their corporate strategies.

First, Duke Energy. As a major provider of electric power, Duke Energy is convinced that carbon constraints are inevitable and is taking action in a couple of ways: it is reducing its own emissions and it is actively engaging in the policy debate on this issue.

Duke’s involvement in climate policy dates back to when its chairman, Jim Rogers, was the CEO of Cinergy, the company that merged with Duke in 2006. Cinergy first studied ways to lower emissions in the early 1990s and adopted a voluntary goal to reduce annual emissions to 5 percent below 2000 levels for the years 2010 through 2012.

The company’s decision to more aggressively embrace climate change was made possible by three converging forces: an internal management push, pull from external stakeholders, and technological developments that would allow the company to move forward in a carbon-constrained world.

In order to meet its goals for reducing emissions, Duke plans to rely mainly on power plant efficiency projects, many of which actually return value to the company in the form of fuel savings and generation of pollution allowances for sulfur and nitrogen oxide reductions. Looking long-term, Duke is examining the potential of larger scale renewable energy sources in its service area, including wind, solar and biogas/biomass. Duke also is interested in pursuing carbon capture technologies for coal generation, and continues to view nuclear power as a potential option

Duke’s involvement in the climate issue is a reflection of a fact of life facing the electric utility industry. This industry needs short-term regulatory and market clarity in order to properly value its investments. Duke and other companies are making decisions about investments in generating capacity that have an expected life of 40 or 50 years. As I said before, they need to know what’s on the horizon in terms of the rules and regulations governing their business. Uncertainty is not cool.

My second example is DuPont. Perhaps more than any other major company, DuPont is shifting its focus on climate change from an emphasis on risk management to business opportunity. This is a company, you may recall, that rapidly responded to early scientific information implicating chlorofluorocarbons (CFCs) in the depletion of the earth’s ozone layer. After the Montreal Protocol, an international treaty to protect the ozone layer, was signed in 1988, DuPont announced a voluntary CFC phase-out. Shortly thereafter, it began producing safer alternatives and today is a leading manufacturer of those substitutes.

Well, DuPont has applied the same, forward-thinking mindset to climate change. Around the same time that it began producing CFC alternatives, DuPont began tracking its GHG emissions. Three years later, DuPont publicly announced a target to reduce emissions by 40 percent below 1990 levels by 2000. When DuPont realized its initial 40-percent goal would be readily met through changes in industrial processes, it adopted a new set of targets. The company committed to hold energy use flat at 1990 levels; to source 10 percent of its energy from renewable resources; and to reduce GHG emissions to 65 percent below 1990 levels, all by 2010.

DuPont has now moved into what CEO Chad Holliday calls a “third phase of sustainable growth.” In this phase, sustainability will be fully integrated into DuPont’s business models, and will become the market-driven business priority throughout the value chain.

DuPont also has launched a joint initiative with BP to develop biobutanol. Biobutanol is a renewable transportation fuel that can be made from all the same plant sources as ethanol. Biobutanol, however, has significant potential advantages over ethanol, including higher energy content (meaning you can get more miles per gallon out of it), higher blendability (meaning you can mix it in higher concentrations with gasoline), and better supply and distribution dynamics (meaning you can ship it through the existing oil and gas pipeline, as opposed to ethanol which has to be shipped by more expensive rail or barge).

I mention biobutanol because this is an initiative that attempts to achieve the hardest, but also the most rewarding, goal in climate change corporate strategy-making: implementing a game-changing strategy that allows a company to leap far ahead of competitors by creating or reshaping key markets they can dominate. The creative collaboration between BP and DuPont on biobutanol, I believe, illustrates the types of ventures we’ll see more of as more companies seriously explore climate change-related market opportunities.

And it is important to note that the biobutanol strategy adopted by these companies includes a clear policy component, as both companies are relying on their vast knowledge of energy and environmental regulations to make the strategy work.

Engagement in public policy. As I said before, it is one of the key corporate strategies with respect to climate change. And it is where we have seen a pronounced shift in business activity on this issue. Don’t just take it from me. When we surveyed Fortune 500 companies on how they ranked activities related to climate change according to most profitable, government affairs and lobbying ranked fourth. And that surprised even those of us who operate largely inside the Washington beltway.

Both Duke Energy and DuPont have been very visible players in the climate policy debate. And both of these companies are part of the U.S. Climate Action Partnership, which has taken business engagement on this issue to a new level in the United States. USCAP, as it is known, is a coalition of 27 major corporations and six NGOs, including the Pew Center. And it is calling on Congress to enact mandatory domestic climate policies at the earliest possible date. The founding membership of USCAP was drawn mainly from the Pew Center’s Business Environmental Leadership Council.

USCAP believes Congress should pass legislation that sets firm short and medium-term binding emissions targets in the United States, on a trajectory to reduce emissions by 60 to 80 percent by 2050. In the view of the USCAP partners, a cap-and-trade system should be the cornerstone of U.S. climate policy, but they also advocate additional policies in the initial phase for specific sectors, such as coal-based energy, buildings, and transportation in order to help advance new technologies.

The corporations involved with USCAP recognize that policy engagement is an integral part of business strategy, right up there with marketing and product development. And it’s not just in the United States where business is engaged in shaping public policy. The Canadian Council of Chief Executives, for example, issued a formal declaration in October encouraging Canada to be a global leader in supporting global emission cuts. The more successful businesses are in reducing energy use and related costs, the more profitable they’ll be, the Council president said.

So the case for business engagement on the climate issue does not rest solely on altruistic grounds. There are clear strategic drivers, investment drivers and profit drivers that have prompted Duke Energy, DuPont and others to become a force for change on this issue – and to shift over time from denial of the problem to acceptance and now to leadership in the policy debate.

Responding to climate change, in other words, is not about sticking it to industry and business. That’s the old way of thinking. It’s so 1980s and 1990s. Today, we know that responding to this challenge is a core business issue. It’s about managing risks and opportunities; developing and entering new markets; positioning businesses and industries for the future. It’s about achieving the Thunderbird credo of “sustainable prosperity.” And any business that is not working right now to make sure that it can prosper in a carbon-constrained world is behind the times.

In the years and decades to come, climate change will have enormous implications not just for business but for all of society. And I hope that all of you, as future business leaders, will help make sure that we are doing everything in our power to respond to this issue in ways that make both dollars – and sense.

Thank you very much.

Coal Initiative Reports: White Paper Series

Coal Initiative Series

One of the most significant challenges in addressing global climate change is reducing greenhouse gas (GHG) emissions resulting from the use of coal.  Coal use, primarily for the generation of electricity, now accounts for roughly 20 percent of global GHG emissions.  Rising energy demand will continue to drive up coal consumption, particularly in countries with large reserves such as the United States, China, and India.  By 2030, GHG emissions from coal-fired power plants in these three countries alone may be equivalent to one-fourth of total global energy-related emissions today.  To avoid—or minimize—dangerous human interference with the climate system and at the same time ensure adequate, affordable energy supplies, it is critical that these and other countries adopt policies and technologies that enable continued use of coal while dramatically reducing its GHG emissions profile.    

To help address this challenge, we undertook a major initiative to identify policy options for reducing coal-related GHG emissions.  This initiative will produce a series of papers examining:

  • Technology pathways for future coal use, both for power generation and other potential end uses, that will assist in reducing emissions, particularly by enabling the introduction of carbon capture-and-storage (CCS) technologies; and
  • Policy options at the national, state, and international levels to drive the deployment of advanced generation technologies and, ultimately, widespread capture and sequestration of coal-related GHG emissions. 

These papers will be undertaken in collaboration with leading experts and with advice and input from a Consultative Group of experts, policymakers, and stakeholders.

Read more (pdf)

White Paper Series

Coal In China: Resources, Uses, and Advanced Coal Technologies, March 2010

A Performance Standards Approach to Reducing CO2 Emissions from Electric Power Plants, June 2009

Positioning the Indian Coal-Power Sector for Carbon Mitigation: Key Policy Options, February 2009

A Resource and Technology Assessment of Coal Utilization in India, October, 2008

State Policy Options for Low-Carbon Coal Policy, February 2008

A Trust Fund Approach to Accelerating Deployment of CCS: Options and Considerations, January 2008

A Program to Accelerate the Deployment of CO2 Capture and Storage: Rationale, Objectives, and Cost, October 2007

Coal Initiative Series: A Program to Accelerate the Deployment of CO2 Capture and Storage

 

A Program to Accelerate the Deployment of CO2 Capture and Storage

Coal Initiative Series White Paper:

A Program to Accelerate the Deployment of CO2 Capture and Storage: Rationale, Objectives, and Cost

Download the full white paper (pdf)

Prepared for the Pew Center on Global Climate Change
October 2007

By:
Vello A. Kuuskraa, President, Advanced Resources International, Inc.

A Program to Accelerate the Deployment of CO2 Capture and Storage: Rationale, Objectives, and Cost is the first in a series of Pew Center papers that explore strategies for addressing CO2 emissions from using coal to provide electricity.

This white paper analyzes one strategy for accelerating the deployment of carbon capture and storage (CCS) by the coal-fueled electricity generation industry. This strategy involves providing reimbursement for the incremental costs of installing and operating CCS systems, with reimbursement provided for retrofitting existing coal-fueled electricity generation plants with CCS, incorporating CCS into new plants, and launching large-scale demonstrations of geologic storage of carbon.

Vello A. Kuuskraa
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Climate 2050: Technology and Policy Solutions Conference

Promoted in Energy Efficiency section: 
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Climate 2050

Climate 2050: Technology and Policy Solutions

October 24 - 26, 2007
Montreal, Canada

The Pew Center is proud to partner with Institut Veolia Environnement and the National Round Table on the Environment and the Economy to host a unique event designed to explore technologies and policies that can deliver effective climate action over the coming half century.  For all engaged in the climate policy debate, Climate 2050 offers a timely, substantive look at the choices facing governments, businesses, and citizens in tackling the long-term climate challenge.

Please join us and and others from around the world for an innovative forum of speakers, panel discussions and workshops.

Download the conference flyer (pdf).

Visit the conference website at: www.climate2050.org.
Please direct questions to: climate2050@unisfera.org.

InstitutVeolia Environment       Natl Round Table on the Env and Economy

Climate 2050 Pew Logo

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/
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Contacts and Acknowledgements

Please contact C2ES staff (703-516-4146) for inquiries regarding Climate TechBook content.

C2ES would like to thank the following individuals for their assistance on technology factsheets:

  • Sanjana Ahmad
  • Grayson Badgley
  • Steve Caldwell
  • Amanda Chiu
  • Lauren Cooper
  • Chris Costello
  • Jack Eggleston
  • Bjorn Gangeness
  • Pat Hogan
  • Paulina Jaramillo
  • Matt Kocoloski
  • Kaveh Madani
  • Nick Nigro
  • Olivia Nix
  • Derek Przybylo
  • Logan Rhyne
  • Philip Sheehy
  • Brinda Thomas
  • Tara Ursell
  • Alex Zheng

C2ES also gratefully acknowledges the following individuals for their review of earlier drafts of the technology factsheets:

Name

Affiliation

Richard Bain

NREL

Roger Bedard

EPRI

R. Gordon Bloomquist

 

Joel Bluestein

ICF

Keith Chanon

EPA

Anna Chittum

ACEEE

Peter Ciborowski

MN Pollution Control Agency

Dean Current

University of Minnesota

John Cuttica

University of Illinois at Chicago

Dick  DeBlasio

NREL

Paul Denholm

NREL

Douglas Dixon

EPRI

Kimberly Duncan

American Physical Society

Charles  Forsberg

MIT

Patti  Garland

Oak Ridge National Laboratory

Paul Genoa

NEI

Jan Gilbreath

DOE

Kenny Gillingham

Stanford

Anand Gopal

 

Michael  Gravely

California Energy Commission

George Hagerman

Center for Energy and the Global Environment, Virginia Tech

Bruce  Hedman

ICF

Joe Kantner [Kantenbacher]

 

Carl Koch

EPA

Jonathan Koomey

LBNL

Lea-Rachel Kosnik

University of Missouri-St. Louis

Dana Levy

NYSERDA

James Miller

Argonne National Laboratory

Michal  Moore

Institute for Sustainable Energy, Environment and Economy, University of Calgary in Alberta

Gregory Morris

Green Power Institute

Robert Neilson

Idaho National Laboratory

Brad Nickell

Western Electricity Coordinating Council

Francis O'Sullivan

MIT

Katrina  Pielli

U.S. EPA

David Rapson

UC-Davis

Kenneth Richards

Indiana University

Harvey Sachs

ACEEE

Anna Shipley

Sentech, Inc.

Frank Southworth

Georgia Institute of Technology

Patrick Sullivan

NREL

Tom Tyler

EPA

Charles Visser

NREL

Ed  Wall

U.S. DOE

Susan Wickwire

EPA

Dora Yen-Nakafuji

LLNL

Alex Zheng

KSG/Horizon Energy

 

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Can Technology Transform the Climate Debate?

CAN TECHNOLOGY TRANSFORM THE CLIMATE DEBATE?

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

EXXONMOBIL LONGER RANGE RESEARCH MEETING, MAY 16, 2007

PAULSBORO, NEW JERSEY



Thank you very much.   It is a privilege to be here at your longer-range research meeting. I must admit that I generally steer clear of events whose titles include the words “longer” and “meeting.”  But in your case, I am happy to say I made an exception.

I know that all of you have been busy all week in these meetings—and I am sure you haven’t had much time to keep up with the news.   So I thought I would start my remarks today by telling you a few things that have been happening in the outside world: 

  • First, scientists have discovered still more new evidence of global warming: after an exhaustive study, they have confirmed that M&Ms now melt in your hand.
  • The President, when asked to comment about this finding, said he prefers Skittles.  

With that out of the way, let me say again how honored I am to be here.   When I was told that I would be one of two external plenary speakers for your internal technology advances meeting … well, let’s just say I am internally grateful.  And I hope that any internal technology advances you are working on with respect to climate change become external before very long. 

The reason I say this is because climate change is a problem in desperate need of innovative solutions—the kind of solutions you are working on every day.  

The title of my remarks is “Can Technology Transform the Climate Debate?”   But I could just as easily use the title, “Can the ClimateDebate (and Climate Policy) Transform Technology?” And my answer to both is a resounding “Yes.” We cannot change the debate without the technologies to address the problem. And without the right policies, we will not see technology development and deployment proceed with the urgency that is required.

So let me briefly deal with the first of these questions, where you really know more than I do, and then proceed to the second question, where I hope I can provide some insights.

What kinds of technologies do we need to make a real difference in our ability to address the challenge of climate change? Well, all of you know as well as I do that we need new and better technologies across the board. But I like to think about the world’s technology needs in terms of key sectors. And, with respect to climate change, there are three: the power sector, transportation, and buildings.

In the power sector, which accounts for the largest share of our (and the world’s) greenhouse gas emissions, we have a number of specific challenges. We need to show that carbon capture and storage can work and be affordable; and we need to get renewables to a point where they are competitive on cost. In transportation, we need to work hard on engines and fuels, while at the same time devoting more energy (pun intended) to potential breakthrough advances like hydrogen and fuel cells. And, in buildings, it’s about taking energy efficiency to the next level, and making it easier and more feasible for people to consider on-site power generation using renewables and other low-carbon sources.

We have seen a certain amount of progress in all of these areas, but it’s been largely hit-or-miss. So let’s consider just one example, carbon capture and storage, or CCS, which I understand you’re doing a fair amount of work on yourselves. Carbon Capture and Storage (CCS) is the key enabling technology for a future in which we can continue to use our vast coal resources and also protect the climate. CCS involves the separation of CO2 from other gases emitted when fuels are combusted or gasified and the injection of the CO2 deep underground into geological formations. CCS is still under development, but many experts are optimistic about its advancement. The United States has the geological capacity to store the emissions from its coal–fired plants in depleted oil and gas reservoirs for several decades. Capacity in other geological reservoirs is estimated to be in the hundreds of billions of tons (500 billion tonnes of capacity), enough to store current levels of domestic emissions for over 300 years.

However, at current rates of technology progress and deployment, CCS will not be utilized by power companies at a meaningful level for many decades. We at the Pew Center believe we must accelerate the development of this critical technology. We are exploring a number of options for making this happen. One option would entail demonstrating CCS at a number of commercial coal-based electric generation plants.

While one could pick any number, we have focused on two possible size: A smaller-scale program involving 10 commercial-scale demonstrations, or a program of 30 such demonstrations. The total cost of the demos would be $10 to $30 billion for 10 to 30 plants. This could be funded, for example, by a Trust Fund created by very modest (a hundredth of a cent or less per kwh) fee on electricity generation. The smaller program would build confidence and experience with the technologies and related regulations both within industry and among ordinary citizens; and would provide real-world cost and reliability information. The larger program would be more likely to actually bring down the costs of these technologies, which would have significant national economic advantages if these technologies are to be widely used, as will be necessary if we are going to both avoid serious negative impacts from climate change and to continue to use fossil fuels for a large part of our electricity.

So simply waiting around for these technologies to make their way from the laboratory into mainstream use is not an option. We don’t have the luxury to sit and watch this process evolve ever-so-slowly, like we’re watching American Idol week after week to see who the ultimate winner is. We need to speed the process along. Without picking winners ourselves, we need to enact policies that provide the incentives and that create the climate in which new technologies can succeed.

The climate change problem is simply too urgent, too consequential and too big to do this any other way. ExxonMobil Research and Engineering has been a part of the IPCC process, so all of you know the facts by now: 11 of the 12 warmest years on record have occurred since 1995. Ice sheets are melting. We’ve seen a fourfold increase in major wildfires. And this is just the start of it. Looking ahead, the recent IPCC report projected that global temperatures will rise by between 3.2 and 7.2 degrees Fahrenheit by 2100, and sea levels will rise as much as a foot to a foot-and-a-half. In addition, there is a 90-percent or greater chance that the world will see more hot extremes, heat waves and heavy precipitation events. And it is likely that we will see more droughts as well.

The IPCC is now on record saying, and I quote, that “warming of the climate system is unequivocal.” The group also states that there is a 90-percent-or-greater chance that lion’s share of the increases in temperature we are seeing are a result of increasing concentrations of greenhouse gases from human sources.

All of the scientific evidence sends a clear message, and it is this: if left unabated, climate change will have tremendous negative consequences for our country and the world. And, to solve it, we need to spur a global technology revolution—and we need to do it quickly. For business and government leaders alike, that means acknowledging and understanding the risks, while also seizing the opportunities that climate change presents to think differently about the future of our businesses, our communities and our world.

Risks and opportunities. They are what drive business decision-making every day. And therefore, I don’t think it’s an accident that business leaders are in many cases leading the charge for climate solutions. Nine years ago, the Pew Center established the Business Environmental Leadership Council. The idea was to bring together a group of leading companies who agreed with us, very publicly, that enough was known about the science of climate change to justify taking action to address it.

Now remember: this was a time when most major businesses still looked at climate change as a fringe concern. The perception in business circles—and political circles too—was that serious action was decades away, if indeed it would happen at all. And yet a small group of business leaders were brave enough to join with us at the Pew Center to say the time was right to do something.

Our Council, which began with 13 companies, is now the largest U.S.-based association of corporations focused on advancing solutions to climate change. It includes 43 companies with 3.8 million employees worldwide and a combined market value of over $2.8 trillion. Members are a who’s who of U.S. corporate leadership, from Alcoa and GE to IBM and Intel, PG&E and many more.

Of course, the members of our Council are not the only business leaders who are embracing strong action on this issue. In all sectors of the economy, there are companies and CEOs who are reducing emissions and calling for broader action to reduce emissions. And the reason they’re doing this, as I said, is because they understand the risks and the opportunities that climate change presents.

Let’s start with the risks. These businesses that are out in front on this issue have seen the science, and they understand that our lives, our environment, and our national security – they are all at risk from climate change.

And these businesses also understand something else. They understand that climate change poses real risks to their operations. According to the global insurance giant, Allianz, climate change already is increasing the potential for property damage at a rate of between 2 and 4 percent each year.

Just last week, super-investor Warren Buffett said that climate change – and I quote – could “materially change” the probability of catastrophes, increasing both the frequency and the intensity of storms. Citing the risks to Berkshire Hathaway’s catastrophe reinsurance operations, he said the firm would be charging more for coverage. Because of global climate change, he said “it would be crazy” to keep the firm’s rates at the same level as before.

And that just covers the risk to the insurance industry. Tourism, agriculture, finance, real estate, offshore oil and gas exploration … all of these industries (and more) face serious and compelling risks. And consider the risks for electric utilities and other businesses that do nothing to address this issue now—and then are forced to play a costly game of catch-up down the road as governments finally (and inevitably) get serious about reducing emissions.

The Energy Information Administration says U.S. 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—and business leaders increasingly understand this. They understand that climate change is a real problem, and that regulation is inevitable. They understand that they had better be ready to operate in a world of carbon constraints.

According to the group CERES, investors filed 42 shareholder resolutions on the climate issue as part of the 2007 proxy season. This was nearly double the amount of resolutions filed three years ago, and ExxonMobil was on the list of companies that were the targets. The filers of these resolutions included state and city pension funds, foundations, socially responsible investment firms, and religious pension funds. Altogether, they represented more than $200 billion in assets, so these aren’t your average board meeting gadflies. And an important focus of their resolutions was risk disclosure – in other words, the shareholders simply wanted to know what these companies were doing to prepare for looming constraints on their emissions.

Again, people see government regulation as inevitable. It’s going to happen – it is just a matter of when. Last October, the Pew Center released a report based on a survey of 31 members of our Business Environmental Leadership Council. In the survey, 90 percent of these companies said they believe that government regulation is coming. Seventeen percent, in fact, said regulation would take effect before 2010, and 67 percent said it would happen between 2010 and 2015. And remember: this survey was taken before the shift in congressional leadership in 2006.

So business leaders – and investors too -- understand that this train is rolling down the tracks. And, rather than trying to throw something in front of it, many leading businesses have made the strategic decision that they want to get on board and help shape the policies that are going to affect how they do business for years to come. Because not being ready is a serious risk.

There is also serious risk in not knowing what’s coming down the tracks at all. Consider this quote: “Uncertainty about regulations, both for 2008-2012 and beyond 2012, creates a higher level of risk for companies. In Europe and Canada, for example, concerns are growing regarding companies’ willingness to invest in energy-intensive activities … The uncertainty about future regulations raises questions about the longer-term viability of such investments.” End quote.

It sounds like part of a Pew Center report. But this is your company, ExxonMobil, talking about climate-related risks to its operations and the need for more certainty in government policies so that it can plan ahead. You can find that document on the ExxonMobil website. It’s called “Tomorrow’s Energy.”

Now, from the risks that climate change poses for business to the opportunities. There’s a little U.S.-based company you may have heard of called GE … and GE has done a remarkable thing. It has committed to doubling its investment in environmental technologies to $1.5 billion by 2010. This is the equivalent of starting a new Fortune 250 company focused exclusively on clean technology. Is GE doing this for PR purposes? Not only. No, they’re really doing it because they see enormous opportunities in developing and marketing the clean-energy and energy-efficiency technologies of the future.

And GE is not alone. In the energy business, ExxonMobil and other quote-unquote “oil” companies are investing billions in alternative energies and other climate-friendly technologies—not out of the goodness of their corporate hearts but because they see real opportunities for profits and growth.

Climate concerns have initiated a wave of new investments in the technologies that will help to reduce emissions in the decades ahead. Consider this:

  • In the first quarter of this year, venture capital investing in so-called “cleantech” industries in North America and Europe totaled $903 million, a jump of 42 percent from the year before.
  • In 2005, Goldman Sachs bought one of the largest wind power developers in the United States and led financing for a $60 million fund for development of rooftop solar systems. Later that year, the firm committed up to $1 billion more for renewable energy and energy efficiency projects.
  • And the largest public pension fund in the United States, CalPERS, has teamed up with California’s teachers retirement system to dedicate more than $500 million to seed alternative energy businesses.

Clearly, a growing number of businesses and a growing number of investors see a growing number of opportunities in developing the energy technologies that are going to help us finally get a handle on the climate problem. But still, the current level of investment and the current level of activity is not enough. Emissions continue to grow by leaps and bounds—even as scientists are telling us with almost unanimous certainty that our current course will take us to a very dangerous place.

And so this is where the question I really wanted to answer comes in. We need mandatory policies that will light a fire under what’s happening now to address this issue, policies that will take us to another level of action and commitment. We need policies that will slow, stop and reverse our emissions, policies that send a clear signal that reducing greenhouse gas emissions will be rewarded in the marketplace. And we need policies that will speed up the process by which new low-carbon technologies are developed and deployed.

Now, I am sure that many of you are thinking this all sounds wonderful and good. But what are the chances of these kinds of policies actually making it into law? And, if you are skeptical, I understand. Under Democratic and Republican leaders alike, our nation has not exactly had a record of strong action on this issue.

But times have changed. I believe we have reached both a turning point and a tipping point in the policy debate on this issue. The turning point has come in large part from the science—people now accept that this is an open-and-shut case. They accept that we have a very serious problem on our hands, and they’re ready to consider solutions.

The turning point also has come from the actions of state leaders on this issue. Businesses are not the only ones who are stepping up to the climate problem and trying to shape solutions. At the state level, governors and other officials are taking action on their own, they’re starting to explore what works to reduce emissions, and they are showing that it’s politically possible to do this: you can adopt serious policies to reduce emissions without putting yourself at grave political risk, and without throwing down roadblocks to continued economic growth.

Consider just a few examples of what states are doing. In February, the governors of California and four other western states joined forces to set a regional target for greenhouse gas emissions. By August 2008, the states will establish a market-based system to enable companies and industries to meet the target as cost-effectively as possible.

In addition to the western governors’ agreement, there is the agreement among 10 Northeastern and Mid-Atlantic states (including New Jersey) to create their own emissions trading system. Known as RGGI, it is aimed at reducing carbon dioxide emissions from power plants in the region.

In addition to joining together in these regional efforts, states are acting on their own to reduce emissions. To date, 14 U.S. states have adopted their own statewide targets for capping and, ultimately, reducing their greenhouse gas emissions. The District of Columbia and twenty-three states, including large emitters like Texas and California, have required that electric utilities generate a specified amount of electricity from renewable sources. And there are countless other things states are doing.

And then there is California. Not content with establishing an ambitious set of greenhouse gas emissions targets—such as 1990 levels by 2020—California has gone the next step and passed legislation, with real enforcement, to give the targets the force of law. California also has taken steps to begin regulating carbon dioxide emissions from cars and trucks.

So this is a major turning point: California and all of these other states actually are doing something to protect the climate. Under Republican and Democratic leaders alike, they are embracing real action to reduce emissions—not because it’s the politically fashionable thing to do but because, like the business leaders I have talked about, they understand the risks. And they also see the opportunities for their states. By embracing renewable fuels and other technologies, states are carving out a niche for themselves in the new-energy economy of the 21st century.

So if that’s the turning point, then what’s the tipping point? Well, the tipping point, I believe, happened earlier this year. That’s when several members of our Business Environmental Leadership Council joined with the Pew Center and others in a high-profile appeal for U.S. government action to address climate change. The group is known as the U.S. Climate Action Partnership (USCAP for short), and this wasn’t just a PR move. Rather, the USCAP group 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 USCAP group embraced an array of other policies aimed at building a low-carbon energy economy.

As of last week, the USCAP group includes 26 members, including major businesses, from General Motors and Dow Chemical to Alcoa, GE and PG&E; and major NGOs, including not only the Pew Center but also the Natural Resources Defense Council, the National Wildlife Federation and others. The company partners have total revenues of $1.7 trillion and a collective workforce of more than 2 million in every U.S. state. And the reason I say this is a tipping point is because this unique, nonpartisan collaboration has sent a clear message to lawmakers—and that message is this: America needs national policies to address the climate problem, and we need them ASAP.

But don’t just take my word that this is a tipping point. Others are saying so as well. At a hearing in February, Senator John Warner of Virginia, who sits on the Environment and Public Works Committee, paid tribute to USCAP's role in helping to bring the issue of climate change into what he referred to as the “big leagues.” He added, "When I see such an extraordinary cross-section of America's free-enterprise system, together with the environmental groups, come and form a group like this, you've got my attention.”

What types of policies does USCAP recommend? First and foremost, we are urging our nation’s leaders to enact policies for mandatory reductions of greenhouse gas emissions from major emitting sectors. That includes large stationary sources such as power plants, as well as transportation and energy use in commercial and residential buildings. The cornerstone of this economy-wide approach would be a cap-and-trade program.

Cap-and-trade, as you know, is a policy that requires emissions reductions while allowing companies to trade emission credits. The most important benefit of this approach: it provides a price signal for greenhouse gases. This price signal, in turn, will stimulate investment and innovation in the new technologies we need.

The USCAP partners recommend that Congress adopt specific short- and mid-term emission reduction targets for our nation. Within five years after what we refer to as the “rapid enactment” of mandatory legislation, USCAP says emission levels should be at 100 to 105 percent of where they are today. After ten years, they should be at 90 to 100 percent. After 15 years, the target would be 70 to 90 percent of today’s emissions.

USCAP also recommends a “target zone,” or aspirational goal, that is 20 to 40 percent of today’s emission levels by 2050. In other words, by 2050, we believe greenhouse gas emissions levels should be cut by 60 to 80 percent from where they are today.

Now remember who is saying this—together with the Pew Center and the other NGO partners, these are some of the largest companies in the world, companies that are major sources of greenhouse gas emissions. And the report that this coalition produced together was just the start of it. All of the partners in this coalition are committed to working together to turn their recommendations into legislative reality.

Although there have been business-NGO coalitions on environmental issues before, none to date has had the impact on key audiences—policymakers, the public, and other business people—that USCAP appears to be having, based what's we’ve seen over the past few weeks. We have shown Congress that there is a consensus emerging in the business community that the time is right for federal climate legislation. While there are still voices opposed to reasonable action, it is increasingly clear that these opponents are out of step and out of touch.

So just in the last few months, we have seen both turning points and a major tipping point in the climate debate. And together with the change in power on Capitol Hill last year (which could be considered another tipping point), these developments have brought Congress much closer to real action to begin to rein in U.S. emissions.

Already this year, there have been more than 65 hearings on the climate issue on Capitol Hill—serious, substantive hearings convened to help members of Congress draft mandatory climate legislation. And 106 bills that either directly concern or mention climate change have been introduced. The leadership of the House has made it clear that they want to pass legislation as soon as possible. And the Speaker of the House and the Senate Majority Leader have both said that, after Iraq, climate change is their first priority.

And there is additional political pressure for solutions due to the 2008 Presidential contest. On the Democratic side, you have a number of candidates who have pledged to make climate change an important part of their platforms. Among the Republicans, there is U.S. Senator John McCain, who co-wrote the first cap-and-trade bill in the U.S. Congress way back in 2003.

Given the changing politics on this issue, it is plausible that the United States could have a mandatory climate policy in place by 2008, and it’s likely we will have such a policy by 2010.

But, again, a mandatory cap-and-trade policy, no matter how ambitious or how broad its scope, is not the only policy we need. In the same way that there is no single technology fix to the climate problem, there is no single policy fix either. We need technology and research incentives. We need policies to ensure that we can adapt to the level of climate change that is already built into the atmospheric system. We need specific policies aimed at specific sectors of the economy, from transportation and energy to agriculture. And we also need to join all these other policies with a commitment to re-engage in the international negotiations on this issue.

Climate change, as we all know, is a global problem—and, therefore, it requires global action. Even if we were to embrace the most aggressive program imaginable to reduce the United States’ contribution to climate change, global energy use will continue to surge and climate change will remain a significant threat. We cannot protect the climate without a global framework that enlists all countries to do their part to reduce emissions, and that provides poorer countries with the support they need to do so.

All of you know about the Kyoto Protocol. This is the international agreement that sets specific targets for developed countries to reduce their greenhouse emissions by the year 2012. President Bush rejected Kyoto early in his first Administration—and so the United States is not a part of it. Australia also opted out. And, without those two countries, the Protocol covers only about one-third of global emissions. What’s more, even if all the countries that are part of Kyoto meet their targets, which is unlikely, global emissions in 2012 will still be 30 percent higher than they were when the Kyoto Protocol was signed in 1997. Clearly, that’s not good enough.

International talks have begun on what to do after 2012, when Kyoto’s current targets expire. And there is only one way forward in my view: the United States is going to have to drop its go-it-alone attitude and be a part of these discussions. Because if the world’s largest emitter were to step up and say we are ready to make a deal, then China and other emerging economies might also be willing to enter the negotiations in a substantive way. And we could potentially see an agreement that committed all major economies to action.

At the Pew Center, we’ve done a great deal of work on how to structure an international climate agreement that is fair and effective and politically palatable for everyone. And we believe you can do this in a way where everyone has binding commitments. They’re not necessarily the same type of commitments, but they are commitments. And they ensure that everyone is a part of the solution, including developing and developed countries alike.

Again, this is not solely the view of the Pew Center. The members of the USCAP also agreed that the United States has to make international engagement on this issue a priority. And the companies that are part of the Pew Center’s Business Environmental Leadership Council have always said that the U.S. must lead the global climate fight.

I want to close today by asking my opening question again: Can technology transform the climate debate? I believe that it already has. As I said, we have seen some progress in developing some of the key technologies—enough progress, in fact, to convince policymakers and others that there are solutions out there, that this is do-able but only if we ramp things up in a big way. And I hope I have offered some clues about how the climate debate (and climate policy) have the potential to transform technology as well.

I hope that I have also left you with a better sense of the passion for solutions and the level of commitment I am seeing among business leaders today with respect to climate change. The companies we are working with at the Pew Center believe very strongly that, given the risks and the opportunities, it is in their interest—and in our nation’s interest as well—to act on this issue in serious and substantive ways. And these business leaders now have a seat at the table as Congress is shaping solutions.

A few years back, one of our nation’s top leaders said this when he was asked about U.S. action on climate change: he said that those who think they are vying for a seat at the table are mistaken – because there is no table. He was saying there was no place to discuss what we needed to do about this issue because, in his view, nothing needed to be discussed.

Well, there is certainly a table now. And not only does this table exist, but today we are bringing in many more chairs and making the table even bigger as more and more business leaders gather round. I will say it again: we have reached a tipping point—and we’ve seen some remarkable turning points as well. And what they’re all pointing to are real changes in both policy and technology.

Again, I thank all of you for the important work you are doing to find solutions to the climate problem. And I encourage all of you to pull up a chair as the debate continues. This is a table where there is always room for more.

Thank you very much.

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