Corporations and Climate Change

While the Bush administration remains skeptical of climate change, some of the largest Corporations not only believe in the science behind it, they are taking steps to reduce their energy consumption. Another great piece from Business Week:

The world is changing faster than anyone expected. Not only is the earth warming, bringing more intense storms and causing Arctic ice to vanish, but the political and policy landscape is being transformed even more dramatically. Already, certain industries are facing mandatory limits on emissions of carbon dioxide and other greenhouse gases in some of the 129 countries that have signed the Kyoto Protocol. This month representatives of those nations are gathering in Montreal to develop post-Kyoto plans. Meanwhile, U.S. cities and states are rushing to impose their own regulations.

A surprising number of companies in old industries such as oil and materials as well as high tech are preparing for this profoundly altered world. They are moving swiftly to measure and slash their greenhouse gas emissions. And they are doing it despite the Bush Administration's opposition to mandatory curbs.

... The pressure is forcing more players to wrestle with environmental risks, even if the coming regulations aren't right around the corner. As the debate over climate change shifts from scientific data to business-speak such as "efficiency investment" and "material risk," CEOs are suddenly understanding why climate change is important. "It doesn't matter whether carbon emission reductions are mandated or not," explains David Struhs, vice-president of environmental affairs at International Paper Co. "Everything we're doing makes sense to our shareholders and to our board, regardless of what direction the government takes." The nation's biggest paper company, with $25.5 billion in sales, IP has upped its use of wood waste to 20% of its fuel mix, from 13% in 2002. That's cut both net CO2 output and energy costs.

... A handful of big coal burners have also leaped to the forefront. American Electric Power, Cinergy, and TXU all did detailed studies of the risks posed by climate change -- and by expected new rules. Their biggest challenge: planning new power plants for an uncertain future. At some point in the next 40 years -- the operating life of a plant -- the U.S. is certain to join in a round of international greenhouse discussions, says Michael G. Morris, CEO of AEP, the nation's biggest coal consumer: "That's clear in my mind, and in our board's mind." If the U.S. rules are similar to Europe's, where it already costs a company more than $20 to release a ton of CO2, utilities and rate payers could face billions in expenses.

That would force utilities to invest more in lower-carbon alternatives such as wind power, "clean" coal, or natural gas, which emits one-third as much carbon per kilowatt as coal. But executives need to know soon what rules they will have to meet. That's why many are in favor of mandatory limits -- though they hesitate to say it publicly because of the opposition in Washington.

These companies are realizing that sustainability and environmental stewardship, makes business sense:

This change isn't being driven by any sudden boardroom conversion to environmentalism. It's all about hard-nosed business calculations. "If we stonewall this thing to five years out, all of a sudden the cost to us and ultimately to our consumers can be gigantic," warns Rogers, who will manage 20 coal-fired power plants if Cinergy's pending merger with Duke Energy is completed next year.

... Insurers in particular are staggered by their mounting bills for hurricanes, floods, fires, hailstorms, disease, heat waves, and crop loss. Many scientists agree that higher temperatures are causing more powerful storms and perhaps intensifying extreme weather events, ranging from drought and wild fires to ice storms.

... That's why climate change is causing insurance companies to ally with institutional investors, banks, and rating agencies. Together they are pushing companies to start thinking about greenhouse emissions as a material risk, just like other forms of financial risk that can impair future earnings. JPMorgan Chase & Co., for instance, is helping analysts and bankers model the impact of carbon on the banks' clients. "Global warming is on the radar screen of a lot of financial institutions," said Denise Furey, senior director of Fitch Ratings Ltd., at a recent climate conference.

The current administration? Still in denial:

The President remains opposed to any policy that would require carbon cutbacks. Instead, the White House asserts that climate change can be tackled with voluntary action and with major investments in alternatives to fossil fuels, such as hydrogen.

Yet the White House is growing increasingly isolated. U.S. public opinion is shifting. In October, a Fox News poll found that 77% of Americans believe global warming is happening, and of those, 76% say it's at least partly due to human activity. That's making greenhouse gas reductions trendy: The 2006 Super Bowl in Detroit, for one, aims to offset all of the new CO2 the championship generates by planting thousands of trees in the hills and towns near Ford Field.

... Some evangelical Christian groups, traditional allies of the Bush White House, have joined the call for action. "This used to be seen as just the passion of a few environmentalists on the left," says Jim Jewell of the National Association of Evangelicals, which includes 52 denominations serving 30 million parishioners. "But support on the issue has broadened. God's call on his people is to care for his creation."