Corporate concern on climate rises

More companies favor action on emissions, both for environmental and pragmatic reasons.

By , Staff writer of The Christian Science Monitor

American businesses have reached a new phase regarding global warming, with more CEOs focused increasingly on what steps government should take, not on whether major new policies are needed.

Duke Energy's Jim Rogers, for example, runs a large electric utility but supports a mandatory cap on carbon-dioxide emissions. And last week, General Motors joined a list of companies urging policies that include tighter standards on vehicle emissions and a US economy-wide cap on carbon output.

Even Big Oil has changed its tune, with ConocoPhillips shoulder to shoulder with GM in the US Climate Action Partnership, or USCAP.

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All this doesn't mean that corporate America has locked arms with the environmental community. But it adds momentum to the policy discussions that are now getting under way in earnest on Capitol Hill.

Legislation will take time to crystallize. But, judging by the jockeying for position by powerful corporations, it's on the way.

"A compromise will eventually emerge," says Jeff Holmstead, a former US air-quality official now in private legal practice in Washington. But "figuring out how to do it is enormously complicated…. A huge amount is at stake."

Federal policies could emerge piece by piece, with some being relatively easy to enact. But an overhaul, anything with the potential to cap or reduce total greenhouse-gas emissions, would represent an environmental-policy push "bigger than anything that has been done," says Mr. Holmstead. The firm he has joined, Bracewell & Giuliani, works with a range of corporate clients on climate-change issues.

The shift by business has come about gradually, and for varied reasons. For one, public consensus on the science of climate change has solidified, and corporations have followed with varying degrees of commitment. Some chief executives, though, simply have "got religion" on what they see as a major threat to both ecosystems and the economy.

In addition, some companies see an entrepreneurial opportunity ahead, developing products and services to mitigate greenhouse-gas emissions.

Beyond that, many business leaders are galvanized by two forces: the desire to have a seat at the table when policy is written, and the desire for certainty about the regulatory environment. It's a pattern that has emerged on other issues in the past, especially when business sees the risk of a patchwork of state regulations.

"We've seen the movie before. There's no need to sit around and wait for the end. That's where a lot of companies are coming from now," says Truman Semans of the Pew Center on Global Climate Change in Arlington, Va. [Editor's note: The original version misstated the name of the center.]

The Pew Center supports both USCAP and another coalition called the Business Environmental Leadership Council, a group Mr. Semans directs. While not lobbying for any specific bill, both groups support concrete steps by government to reduce carbon emissions.

The membership roster doesn't look that different from the Dow Jones Industrial Average. The leadership council includes Intel, Alcoa, Whirlpool, and the electric utility PG&E. In all, the companies in this group have a market capitalization of $2.8 trillion – a sizable chunk of the roughly $50 trillion in corporate stock traded worldwide.

Among companies on record as favoring action on climate change, many are nonetheless preparing to lobby against proposed solutions that they worry could harm the economy – or their particular business. This is a delicate question that will be central to the debate.

The leading policy option, for example, would set a cap for emissions in most of the economy, and would encourage creation of a market to buy and sell the rights for those emissions.

"When Congress determines how expensive a cap-and-trade will be, it'll make it very difficult to pass," predicts Paul Cicio, who heads Industrial Energy Consumers of America, a coalition of manufacturing firms worried about policies that cap emissions before enough alternative fuels are available.

Still, Mr. Cicio recognizes the political momentum for new policies. "The majority of companies have come to the political reality that Congress is very serious about taking action," he says.

Evolution is also visible within the Bush administration, long skeptical of implementing new policies to curb greenhouse gases.

President Bush called Monday for two agencies to collaborate on new standards for auto fuel economy. The move follows a Supreme Court ruling in April that put new pressure on the White House to regulate greenhouse emissions as air pollution. Mr. Bush did not, however, lend support to the strict fuel-economy standards supported by some in Congress.

Vehicle emissions are one piece in a tapestry of potential policies.

Such ideas include:

•Research on new technologies, such as how to sequester carbon emissions to avoid their release into Earth's atmosphere.

•A cap-and-trade regime to limit emissions from power plants and industries.

•Incentives or regulations to make buildings, appliances, and vehicles more efficient.

•A "carbon tax" on fossil fuels, to create market incentives for alternatives.

The list goes on. An overall plan to stabilize greenhouse-gas emissions would have significant costs, by some estimates. But, by improving efficiency, it also has benefits.

On May 4, the International Panel on Climate Change estimated that the tab for such actions could be anywhere from negligible to high – using up perhaps 3 percent of the world's economic output in 2030.

At the high end, that's a significant price to pay for one public-policy goal. But many experts also say the economic cost of not acting could be even higher – affecting the health of the planet itself, with all its economic activity.

Even with gathering pressure for new policies, several challenges complicate the effort:

Who will win and lose? Some policies involve choices that favor some companies over others within an industry. Under cap-and-trade, for example, utilities that operate coal-burning plants would want the industry's initial emissions allowances to be based on their current output of greenhouse gases, Holmstead says. Utilities with cleaner fuel sources, by contrast, would gain an edge if the allowances were based on current output of electricity, not carbon.

Will China and India be part of the picture? Eventually, everyone agrees that any viable effort to curb global emissions will have to include action in India and China. But where some say US action, on its own, is a vital first step, others say that could simply cause jobs and emissions to move overseas. One idea: a kind of tax on goods imported from countries with poor emissions controls.

How can market forces be brought to bear? The goal of many policies is to impose a "price signal" that encourages consumers and businesses to control greenhouse gases in the most efficient ways possible.

A cap-and-trade system may be easier to impose, politically, than a new tax on carbon. But since the price of fossil fuels can fluctuate widely, some experts say that one form of carbon tax could serve a crucial purpose: setting a price floor, so that alternative energy can be nurtured by a predictable price environment.

"What do we do with a precipitous fall in gasoline prices?" asks David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

"We've been there," he says, referring to aftermath of the 1970s oil-price shock. "Prices fell dramatically, and the [alternative energy] game was over."

Now, with oil prices relatively high, it might be a politically palatable moment to create a new price floor – using a tax that's imposed only if the market price for oil falls to the ordained floor.

On these and other issues, the lobbying promises to move into a higher gear as lawmakers press forward. This year, Mr. Semans says, Congress has already held 48 hearings on climate change.

Some analysts say a major bill, such as one imposing a cap-and-trade system, could pass Congress before the next presidential election. Others say that controversial issues involved could require several years and active involvement by the next US president.

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