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New Lords of the Moving World
A revolution in corporate climate solutions may work yet...
Until the end of February, the two most important events this year in the global warming policy arena were:
1. George Bush's two sentences in his January State of the Union address: "America is on the verge of technological breakthroughs that will enable us to live our lives less dependent on oil. And these technologies will help us be better stewards of the environment, and they will help us to confront the serious challenge of global climate change."
2. A few weeks later came the unveiling of the Fourth Assessment of the Intergovernmental Panel on Climate Change (a United Nations sponsored group of 2,500 scientists from 130 countries called the IPCC) which very conservatively stated that man-made global warming is likely to raise the average temperature of the earth by 3 - 11 degrees Fahrenheit over the rest of the century - depending upon the model one chooses. The IPCC also makes clear that the earthâ€™s near surface air temperature increased by just one-degree Fahrenheit during the 20th century, but that "eleven of the twelve years in the period (1995-2006) rank among the top 12 warmest years in the instrumental record (since 1850)."
In essence, these two occurrences have all but eliminated the politification (my word) of global warming. If you listen carefully to the few nay-sayers, skeptics and green curmudgeons (I think of them as browns for obvious reasons) still standing, you will no longer hear arguments against the consensus conclusions of climate science about our warming planet. Jonah Goldberg, a columnist for the Los Angeles Times and a contributing editor to the National Review, has said of global warming: "There are no solutions in the realm of the politically possible.â€ "The worldâ€™s real problems are a result of poverty.â€ "We're better off learning to live with the effects.â€ And William J. Broad wrote a long-winded piece this week in the New York Times that was an odd little attack on Al Gore for all his calamitous claims in the movie "An Inconvenient Truth.â€ As if, somehow, Gore were at the center of global warming policy as we know it in America today (Uncle Albert is a good guy and a solid spokesman, but heâ€™s a very small piece of this enormous and overwhelming topic).
The new message, then, is a combination of holier-than-thou economic complaints, accusations of exaggeration and scaremongering, and a weird kind of dismissiveness that reeks of desperate, wishful thinking, and probably a bit of money-grubbing to boot.
For the most part, however, amongst reasonable people and those not dependent on the largesse of the fossil quo, the problem of heavy weather and climate chaos is no longer something to be ignored. And whatâ€™s most fascinating is who actually is at the center of things.
Ugly Giant Feats No More
During the past several years an unprecedented amount of environmental activity has been brewing in the world of business and finance. Some of this has to do with advocacy work by major environmental groups, but much also has to do with a growing awareness in business circles that environmental externalities will inevitably come home to roost.
As a result, on February 26th of this year a sea change occurred in the corporate world when a $45 billion buyout of the Texas utility TXU Corporation was announced. As recently as last December, shareholders questioned the wisdom of the companyâ€™s plans to invest in twenty-four new pulverized coal plants, increasing TXUâ€™s carbon dioxide emissions four-fold â€“ from 55 million to 225 million tons of carbon dioxide annually â€“ giving them "the largest corporate carbon footprint in the US.â€
A few months later the buyout was announced and everything changed. The private equity firms involved, including Kholberg Kravis Roberts, Texas Pacific Group, and Goldman Sachs, want to scrap most of the coal plants and redirect the companyâ€™s efforts with a $400 million investment in energy conservation and efficiency â€“ known in the power industry as demand-side management. Brought in to advise on environmental policy are the Environmental Defense Fund and the Natural Resources Defense Council. Henry Kravis, founding partner of KKR, said "we have developed a new vision with management of how we can turn TXU into a more innovative, customer-centric, environmentally friendly companyâ€¦ Our experienced energy team looks forward to providing strong support for this transformation, including making substantial, long-term capital investments in new innovation across each business â€¦We intend to hold this as a long-term asset, and we recognize the need to balance growth with environmental considerations.â€
In short, when billions of dollars start chasing the future of America, it should be apparent that global warming entropy is fading fast. Indeed, a week after the TXU proposal was announced, Bank of America unveiled a $20 billion program designed to help "fertilize green business practices.â€ The intent is to reduce energy use in this country and to advance new technologies that limit and mitigate greenhouse gas production. Services will include lower mortgage rates on energy-efficient homes, support for corporate green building initiatives, assistance in carbon-emission credit trading, and general advisory support for clients devoted to positive environmental products and services.
A Stern Review of the Future
Something truly remarkable is going on here. The nation is being led down a path of intelligence and environmental sensitivity by the corporate community. And itâ€™s not like a few CEOs just woke up with warm fuzzy thoughts at the end of February. Over the past year or so the world of investment, finance, and business has begun to crystallize decades of policy considerations and cost-benefit debate about our dependence on fossil fuels.
The first really comprehensive push popped up with the release of the Stern Review near the end of 2006. This report, a massive cost-benefit analysis examining the impact of global warming on the world economy, was probably a tipping point of no return. Sir Nicholas Stern, once chief economist at the World Bank, is Head of the British Government Economics Service.
Using data from the IPCC, Sternâ€™s report estimates that unabated climate change risks will hurt poor countries first and that, overall, the worldâ€™s countries may lose 5% of GDP annually and that this could increase to 20% reductions if newer data not included in the IPCC report is examined. Most importantly, Stern says that if no action is taken, this would be the equivalent of $85 worth of damage per ton of greenhouse gas emissions. Sternâ€™s team writes: "Emerging schemes that allow people to trade reductions in CO2 have demonstrated that there are many opportunities to cut emissions for less than $25 a tonâ€¦the benefits over time of actions to shift the world onto a low-carbon path could be in the order of $2.5 trillion each year.â€
While the Stern Review defines costs and benefits on a grand scale, business resources were published in 2006 providing firms with practical solutions and hardcore, step-by-step measures to begin grappling with their impact on the stratosphere. The question many businesses were asking themselves last year was no longer: "Are we going to deal with this problem?â€ it was: "How are we going to deal with this?â€ Some of the most notable guides presenting solutions were:
Hot Climate, Cool Commerce: A Service Sector Guide to Greenhouse Gas Management, World Resource Institute
A Three-Pronged Approach to Corporate Climate Strategy, Business for Social Responsibility
Getting Ahead of the Curve: Corporate Strategies That Address Climate Change, Pew Center on Global Climate Change.
Krishna and the Corporate World
To really hammer the corporate point home, Joel Makower, who publishes the online resources GreenBiz and ClimateBiz, recently made an entry in his blog entitled, The Corporate Climate Juggernaut. Makower, one of the more tuned-in and astute commentators on business and the environment, lists studies and reports by the likes of Lehman Brothers, Citigroup, and UBS Wealth Management. He also reports on the new U.S. Climate Action Partnership (USCAP) between mainstream environmental groups and the likes of GE, Alcoa, DuPont, Caterpillar, Duke Energy and BP.
Juggernaut is an interesting choice of words. The American Heritage dictionary defines juggernaut as: "Anything that draws blind and destructive devotion, or to which people are ruthlessly sacrificed, such as a belief or institution."
There is a second definition as well: "A title of the Hindu deity Krishna, whose idol is drawn in an annual procession on a huge car or wagon under the wheels of which worshipers are said to have thrown themselves to be crushed. [Hindi Jagannath, from Sanskrit Janganatha, 'Lord of the world' : jagat, 'the moving,' world from jigati, goes... + manata-, 'protector,' lord.]"
The next word after Juggernaut in the dictionary is "juggle."
Super Heroes On a Mission
All of this is not to say that corporate America, in its new Captain Planet uniform, is going to save the day by itself. There is clearly a need for political leadership (like, yesterday) and there is certainly a need for consumers to wake up and smell their own fumes. But the one component of our culture that all the nay-sayers are claiming will be hurt if we try to mitigate our effects on the climate â€“ commerce and business â€“ is already on board and leading the way. Are they doing so like a bunch of Krishna worshippers? Hardly. Itâ€™s obvious that they see the writing on the wall and that they know that whatâ€™s at stake is not the economic health of the status quo; rather, whatâ€™s at stake is whether they can take advantage of new opportunities and at the same time minimize the damage to our environment that has already been done.
What all of this means is that the table is getting set by the business world for Oh-Eight. The last component in the cultural mix to seriously address climate change is the establishment of true political leadership and will in America. There is most definitely going to be a national "cap and tradeâ€ strategy of some kind that lets those who innovate away from fossil fuels trade their emission rights to those who canâ€™t or wonâ€™t. The business community is demanding this. There is also going to be a "carbon taxâ€ of some sort applied to transportation fuels and power plants that use coal, natural gas or oil. The funds generated from this tax will be used to subsidize investments in climate mitigation technologies as well as R&D for renewable energy. And, yes, this is going to affect everyoneâ€™s pocketbook. But wars in oil-producing nations and cleanup after unprecedented weather disasters are already affecting pocketbooks. If we donâ€™t do something now to change course, these wars and natural disasters will very likely cost a lot more in the future.
The world is about to become more dynamic and volatile than it has since at least the dawn of the Industrial Revolution. There will be winners and losers. You can already tell who the losers are. Theyâ€™re dinosaurs in the way they do things. They invest in P.R. firms, confusing advertisements, and mercenary politicians to gloss over the problems they are creating for society. The winners, however, are moving forward and talking about reality; theyâ€™re acknowledging the need to change, and pushing the political arena to do likewise. The beauty of climate change and the massive and unpredictable nature of its implications is that the winners are going to be the ones left standing. And they will have no choice. They will be the new lords of the moving world.