The corporate climate crusaders

Think big business is against tough new climate change laws? Well, think again.

The corporate climate crusadersIn the lead-up to last month’s vote on the massive Waxman-Markey clean energy bill, American TV viewers were treated to an odd sight. There, during commercial breaks, was Jim Rogers, CEO of the country’s third-largest energy company, calling for tough new climate change rules. In a polished, 30-second spot, the chief executive of Duke Energy asked: “Why would the head of one of America’s largest coal-burning utilities support a cap on carbon emissions?” With dozens of huge corporations voicing support for the monumental climate change bill, which narrowly passed a vote in the House of Representatives on June 26, it’s a question being asked a lot lately.

For most of the last 40 years, the battle lines were clearly drawn between two diametrically opposed groups—environmental activists on one side, big business on the other, and a yawning chasm in between, filled with billions of dollars and enough bile to poison the atmosphere for generations. On almost any issue, from air quality to the ban on ozone- depleting CFCs, they were constantly at each others’ throats. But the climate change issue is different, so different that it’s fast changing everything that we know about the way business interacts with the environment.

To be sure, many corporations and trade groups remain staunchly opposed to the Waxman-Markey legislation, which would impose a cap-and-trade system on CO2 emissions. Critics denounce it as “disastrous,” “destructive” and the “biggest job-killing bill” in a century. But many others have emerged as keen supporters of the effort. For advocates of tighter rules, the sight of highly paid CEOs like Rogers working side-by-side with the Birkenstock crowd is a sign that genuine progress is finally being made to tackle global warming. But for others, it raises the troubling prospect of companies using government policy as a cash grab of historic proportions. “Many of the companies that traditionally, we’d expect, would be opposed to climate change legislation actually stand to gain a lot from it,” says Bjørn Lomborg, author of The Skeptical Environmentalist. “We should all worry very much when politicians, green organizations and business all get together and say they’ve found a compromise, because chances are that means consumers will end up paying a lot of money.”

Until recently it was tempting to disregard companies that flaunted their green credentials because many of them, like the Gap, emitted very little carbon dioxide from their operations in the first place. As such, they had little to lose from a carbon crackdown. But increasingly, big emitters as diverse as Duke, heavy equipment maker Caterpillar, aerospace giant Northrop Grumman and Google are spending tens of millions of dollars to lobby in favour of new rules. In the first quarter of this year, 140 new companies and organizations plunged into the climate change debate in Washington, according to a study of lobbyist records by the Center for Public Integrity.

Not surprisingly, there’s a lot of lofty talk of altruism among the newly green corporate set. But there’s also a practical desire for clarity and stability on the issue, they say. As it is, various states have begun pushing ahead with their own climate policies, which could leave companies struggling with a convoluted patchwork of regulations. A single, federal effort would resolve that, says Tom Williams, a spokesman for Duke, which serves 11 million customers in the U.S., delivering power that is primarily generated with coal. “Our capital budget is US$25 billion over the next five years. The sooner we have certainty about what the rules of the road are, the better the decisions we can make,” he says. “We’re not behind the bill 100 per cent, but we’re happy it passed out of committee.”

But there’s an even more practical incentive for many companies to surf the rising green tide—it promises a potential windfall in subsidies and clean energy tax credits. Businesses stand to make a killing off America’s move to clean energy. Northrop Grumman has said repeatedly that its satellite sensor technology can be used by governments to track climate change data. “Space, of course, is extremely important to any solution,” Alexis Livanos, the company’s chief technology officer, said recently. Down here on earth, Sun Microsystems, which is being taken over by business software provider Oracle, has developed low-energy servers that could get a big boost from strict energy efficiency standards set out in the new clean energy bill.

The nearly 1,000-page Waxman-Markey bill is filled with lofty initiatives. For instance, it promotes the development of a “smart grid,” a more robust way of managing the nation’s energy consumption. Such a challenge seems perfectly suited to Google’s powerful algorithms. Last month the company rolled out the Google PowerMeter, which allows homeowners to control energy use. The company has also begun to invest in clean energy technology. Recently, Bill Weihl, the executive in charge of Google’s clean energy research, said within three years the company could have “multiple megawatts of plants out there” producing renewable energy. But he also warned that the U.S. needs to dramatically step up investment in the sector.

With its “don’t be evil” mantra, it’s not surprising to see Google speaking out in favour of climate change legislation. But even James Owens, the CEO of construction and mining equipment maker Caterpillar, recently told President Barack Obama the new rules will “drive a lot of innovation,” despite the fact his company belongs to a trade association vehemently opposed to the clean energy bill. This apparent about-face by a large swath of the corporate world has stunned traditional allies of big business, like conservative think tanks and Republicans.

The fissure has flared up in other ways too. Consumer products maker Johnson & Johnson fired off a letter to the U.S. Chamber of Commerce criticizing it for taking a hardline stance against the new climate change legislation, which, by 2020, aims to cut U.S. greenhouse gas emissions 17 per cent below their 2005 levels. It’s a rift environmental groups have been quick to exploit. Peter Altman, climate campaign director with the Natural Resources Defense Council, recently analyzed the public statements of companies that belong to the chamber. Most have avoided taking a stand one way or the other, but of those that have, 19 favour a federal climate policy while four, mostly coal companies, are opposed. “Who is the chamber representing here?” says Altman. “The broad scope of their membership or the very fixed positions of the coal companies?”

The ballots had barely been counted after Obama’s election victory last November when companies began to speak out more loudly in support of new rules. That month, Ceres, an international group of institutional investors and environmentalists, teamed up with Nike and other companies to launch a new coalition called Business for Innovative Climate and Energy Policy (BICEP). Since then others have joined, including eBay and Symantec. For Anne Kelly, a director at Ceres, it’s a far cry from her old relationship with big business when it came to the environment. “I’m someone who has a real background in the adversarial approach. I used to sue companies,” she says, referring to her time as part of an environmental strike force with the attorney general’s office in Massachusetts. “But the ground has shifted in a big way.” If it weren’t for the efforts of business-funded lobbyists, she says, the current climate change bill might not have survived. “The fact that businesses, and not just small boutique businesses but major international companies, were coming out and calling for change made a huge difference. The proof is we never got this far before.”
Big business hasn’t been the only group to change its tune, though. Environmental organizations, which once decried capitalism’s obsession with profits, now go to great lengths to endorse the idea of climate change legislation as a for-profit endeavour. “We’re not going to explore their motives,” says Kelly. “If they’re doing the right thing, if they’re on the right side of climate energy legislation, if they’ve decided the business case works for them, there’s no problem.”

It’s a trade-off meant to ensure passage of the bill. But it could come at a steep price, says Lomborg, an economist at the Copenhagen Business School in Denmark. He says businesses, environmentalists and government have formed something of an unholy trinity—he calls it the environmental-industrial complex—that, if left unchecked, will drive up costs to consumers across a huge range of industries, and leave taxpayers holding the bill. As an example he points to a decision by officials in Denmark to subsidize electric-car maker Better Place. By Lomborg’s calculation, the subsidies could add up to billions over the next decade when far more efficient alternatives for fighting climate change exist. Likewise, the shipping industry has begun to lobby for a global cap and trade framework, even though it’s a notorious source of emissions. Why? Perhaps in part because if every shipping company sees energy costs rise at the same level, they can be passed onto customers without risk of losing market share.

Even energy utilities stand to do brisk business trading those carbon emission allowances that get handed out to them for free under the new clean energy bill. Down the road, Lomborg worries that such schemes, when their full costs are tallied, will create a backlash among consumers against efforts to fight climate change. “I think most environmentalists right now are somewhat intoxicated by the fact they’ve got their traditional enemies on board,” he says. “They’re not worrying too much about the fact that this will be a problem in the future.”

For their part, activists are sticking with their strategy of welcoming corporations into the fold. Altman, at the Natural Resources Defense Council, says talk of a “great climate change price spike” is simple fear-mongering. The same dire predictions were made when air quality standards were being debated. “Invariably those regulations turn out to be much cheaper to comply with than those scare projections ahead of time,” he says. But the great risk is that the headlong rush to change climate rules will create a massive revenue opportunity for a handful of businesses, an environment that’s no better off, and a huge bill for consumers.

The corporate climate crusaders

  1. Lomborg is no economist, only a political scientist who taught statistics and abuses them now.

    • Agreed. Using him as the main support for the article's thesis very much weakens the credibility of both the author and this magazine.

  2. Lomborg is a hack. His book took very great liberties with facts. That's not my issue with this article however. It's content is legitimate. I'm worried at to the effect an alliance of the three factions will have on Canada's energy policy. Our government is loathe to drive innovation or even believe in climate change. There are standouts such as Ontario's Clean Energy legislation, but without federal action, we will only experience the same thing: a wasted opportunity to show leadership and make a contribution to the world, not to mention Canadian citizens and our own endangered land.

  3. Big business can adapt to almost any rules. What they can't take is uncertainty. Besides there is BIG money to be made in environmental cleanup as well as clean technology.
    The best government can do is make the rules and then try not to "help" because they can't.

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