Climate Bills and a Green Economy

U.S. Unveils Climate Report in Runup to Senate Bill

April 20, 2010

Scientific American - The United States released a new draft report on climate change on Monday, one week before the expected unveiling of a compromise U.S. Senate bill that aims to curb heat-trapping greenhouse emissions.

The report, a draft of the Fifth U.S. Climate Action Report that will be sent to the United Nations, says bluntly:

"Global warming is unequivocal and primarily human-induced ... Global temperature has increased over the past 50 years. This observed increase is due primarily to human-induced emissions of heat-trapping gases."

Without action to stop them, climate-warming greenhouse gas emissions will rise over 8,000 megatonnes by mid-century, the draft said. By adopting measures detailed in a bill passed last year by the U.S. House of Representatives, these emissions will drop beneath 2,000 megatonnes. They're now about 6,500 megatonnes. The United Nations measures greenhouse gas emissions in megatonnes, or million metric tons.

The effects of climate change are already evident, the draft said: warming air and oceans, vanishing mountain glaciers, thawing permafrost, signs of instability in the ice sheets of Greenland and Antarctica and rising sea levels.

The State Department draft, now open for public comment, precedes the expected April 26 unveiling of Senate legislation by Democrat John Kerry, Republican Lindsey Graham and Independent Joe Lieberman.

Supporters of the bill hope this will pave the way for the full Senate to debate and pass a measure in June or July.

The State Department report will ultimately go to the United Nations Framework Convention on Climate Change; previous U.S. reports to this body were in 1994, 1997, 2002 and 2007.

The draft report is available online at http://www.state.gov/g/oes/rls/rpts/car5/index.htm.

Betting on Climate Change

April 19, 2010

Reuters - ... The number of climate visionaries in industry is still quite small. Certainly, companies with skin in the game are preparing for a warmer world. But as the McKinsey report found, they’re in the minority. The grand majority are deeply myopic, focused narrowly on goosing profits in the next quarter—who cares what’ll happen ten years from now?

In a sense, that makes them a mildly agnostic force. When climate change finally does impinge on their business, they’ll probably take action to adapt to it. But it also means that if they can see a short-term profit from fighting against climate science and sowing doubt, they’ll do that, too.

This is precisely what’s still happening in the energy industry, where many firms that pay lip service to the reality of climate change also quietly funnel millions to lobbyists who fight ferociously to prevent Congress from passing laws that curtail C02 emissions.

“We all know big companies who are doing all this green stuff, and their lobbyists are trying to kill the carbon bill as quickly as they can,” says Mindy Lubber, president of Boston-based CERES, an association of environment-minded investors whose members have $10 trillion under management.

It may be that the corrective force comes not from inside corporations, but from investors. Many large investors, including the California State Teachers’ Retirement System—the nation’s second largest public-pension fund—have begun demanding that firms examine and disclose any potential risks from global warming.

Shareholder resolutions demanding action on climate change have nearly doubled in the last two years, rising from about 55 in 2007 to 99 in 2009, Lubber notes.

In February, the Securities and Exchange Commission issued guidelines requiring that publicly traded firms better disclose their climate-change risk, including potential “physical” risks.

“Anyone that’s building out new manufacturing facilities without working out water shortages related to climate change is getting itself into trouble,” Lubber adds. “Or anyone that’s building on waterfront property.”

Another common request from shareholder resolutions is for companies to calculate the cost of their carbon footprint. Even if electric utilities and the U.S. Chamber of Commerce are fighting against carbon-limiting legislation, investors seem to believe it is inevitable—indeed, they evidently think the government might cap carbon even in the next few years, which could dramatically increase the cost of electricity.

To make corporations true partners in tackling climate change, Lubber thinks investors need to push for basic changes in the way their companies function.

CEOs whose bonuses are based on bumping next-quarter results will make short-term decisions. Those who are paid based on reducing carbon usage will make long-term ones—investing in technology and processes that reduce greenhouse gases.

“If they’re compensated for producing 86 percent more widgets, they’ll do that. But if they use less fuel, they ought to be compensated for meeting their carbon-reduction goals.”

In the short run, though, there’s probably only one force that will get today’s blithe firms to snap to attention–and that’s legislation.

If Congress actually puts a price on carbon, it’ll hit the world of industry with tsunamic force.

At minimum, it would probably goose the price of electricity and make emissions-heavy industries instantly less profitable. (Indeed, this is one of the things the SEC and many investor groups are urging firms to do: calculate how badly they’ll be shellacked if new regulations make spewing carbon expensive.)

Not everyone will be a loser. The McKinsey study calculated that alternative-energy firms will do quite well (for obvious reasons), but so will less-predictable sectors like the construction industry, as people rush to retrofit buildings with extra insulation and energy-saving rebuilds. The farsighted firms—and the ones who work on the colder fringes of the world—can see the future clearly, because they’re living it. But with the stroke of a pen, Obama can bring it a lot closer.

Whether it’s a melting Arctic or a bold new law, the biggest forces shaping industry are, as it were, man-made.