In Brief: The Business Case for Climate Legislation

In recent years, leading businesses have emerged as some of the strongest advocates for passage of national climate and energy legislation that mandates reductions in greenhouse gas (GHG) emissions. While many have cheered this business engagement, others have been left confused and at times suspicious of why businesses would support such a policy.

In many ways, the confusion is understandable. Environmental politics in this country have often pitted business interests against environmental advocates in a binary struggle over the need for new or more stringent regulations. But today, major corporations cutting across a range of industries are allying themselves with nongovernmental organizations (NGOs), unions, national security hawks, and even religious groups to urge enactment of legislation that requires reductions in GHG emissions. To some observers on the left and the right, business backing for new legislation is a foreign, if not completely counterintuitive, concept, and the strange bedfellows of the climate change issue have left many scratching their heads.

This is partly because climate change is not strictly an environmental issue. Instead, it is a multi-faceted problem, encompassing national security, international diplomacy, and most crucially for business, economic policy. On a fundamental level, the companies supporting climate and energy legislation have made a simple determination: the presence of a coherent national policy is better for the economy and their business than the status quo. Put another way, the absence of such a policy creates uncertainty, which is a hindrance to sustained economic growth and an obstacle to the development of new markets and business opportunities.

This brief lays out the business case for national climate and energy policy, and explains why leading companies have decided that legislation that limits GHG emissions is good for their industries. While the details of individual companies’ policy positions will vary based on their own specific circumstances, broadly speaking there are three main reasons businesses support legislation that addresses climate change:

The need for regulatory certainty. Most companies understand that some form of climate policy is inevitable, but they do not know exactly what it will look like or what will be required of them. Today, when businesses look to the horizon they see an uneasy mix of evolving state and regional climate programs and burgeoning U.S. Environmental Protection Agency (EPA) regulations. It is unclear how these policy initiatives will unfold and interact with one another. This creates uncertainty, which hobbles business planning, especially for industries, such as electric utilities, that build and operate long-lived, capital-intensive assets. A clear, long-term, legislative framework for reducing GHG emissions would alleviate much of this uncertainty, allowing for more intelligent business planning.

The economic opportunities arising from climate solutions. Clean energy is projected to be one of the great global growth industries of the 21st century. Policy support can accelerate growth in these industries, and help U.S. companies compete against foreign firms that are quickly establishing dominant positions in these important markets.

The reputational benefits of supporting public policies that combat climate change. Customers, shareholders, employees, and other stakeholders are increasingly pushing companies to demonstrate social responsibility and environmental stewardship. For many companies, support for mandatory policies that promote clean energy, improve energy efficiency, and reduce GHG emissions has become an important plank in their broader corporate social responsibility (CSR) agendas.

Some companies are driven by all three of these reasons, while others are compelled by just one or two of them. Regardless of the specific reasons, one thing is clear: more companies today support climate legislation than ever before. Companies that make everything from computer chips to potato chips, search engines to jet engines, rubber tires to rubber soles, have publicly stated their support for legislation that caps carbon dioxide (CO2) emissions. Trade associations representing electric utilities  and auto manufacturers  are on record supporting national climate policy. The remainder of this brief provides additional detail on why this is the case.