CC Cutting a new climate deal
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Cutting a new climate deal
For four years the US government has remained in deep denial about
man-made climate change. Yet some of America's biggest companies are
quietly but actively planning for a low carbon world and Polly Ghazi
spots their growing interest in emissions trading.
The US produces a staggering 25% of all man-made greenhouse gases,
much of it spewed out by industry. You probably know that. Less well
known, but much more encouraging, is that household names such as
Ford, Dupont, Dow Corning, American Electric Power (AEP), Cinergy, BP
America, Bayer and Motorola are investing significant sums in
emissions reduction programmes.
Looking beyond the four-year electoral cycle, these companies are
gambling that federal action to clamp down on US emissions is
inevitable, as climate change accelerates. Shrewd executives are
aiming to get ahead of the game by pursuing low-cost routes to reduce
emissions, protect their companies' future and earn Brownie points for
Carbon offset projects are part of this response. So too is a keen
interest in emissions trading. In the absence of national targets,
carbon trading is only a niche activity, but setting up or joining
voluntary schemes is becoming one of the most popular routes to
Some companies have started doing this privately with just one or two
others including some of the really big players, like Cinergy, the
Ohio-based electric utility company whose operations account for 1% of
the world's total greenhouse gas emissions [see right].
It may also be done on a more public stage, as when the giant food
sciences company Dupont helped Salt Lake City gain `carbon neutral'
status for the 2002 Winter Olympics [see right]. Dupont's chief
executive, Charles O. Holliday Junior, equates its aggressive climate
impact reduction policy with good business sense. "We believe that the
best approach is for business to lead, not wait for public outcry or
government mandates. From our experience of the past 10 years, we know
that integrating environmental considerations into our business
strategies enhances our ability to achieve sustainable growth."
Chicago shows the way
Probably the most potent initiative so far, however, is the Chicago
Climate Exchange (CCE), North America's first private sector
greenhouse gas trading market. Launched in September 2003, this
voluntary scheme is flourishing, despite the absence of mandatory
federal regulations to reduce industrial carbon emissions. Its
membership had grown by September 2004 from the original 14 founding
companies to 65, with collective emissions roughly equivalent to those
of the entire United Kingdom.
The CCE trades in all greenhouse gases (unlike the EU-wide emissions
trading system due to begin operating in January, which deals in
carbon dioxide alone). Members, including Ford, Dupont, Rolls Royce,
Dow Corning, IBM and Motorola, have agreed to modest emissions cuts of
4% by 2006. They buy and sell carbon credits in a multi-sector trading
system, for which detailed verification and accounting systems have
been set up.
"We believe that in the long run we will have some sort of mandatory
emissions reductions in the US, and that companies that are proactive
in their endeavours to reduce greenhouse gas emissions will have an
advantage," explains Bruce Braine, vice-president for strategic policy
analysis at AEP. His company is one of America's biggest electricity
generators (mainly from high-polluting coal plants) with three million
customers. It is also one of the exchange's founding members, and
Braine is a CCE board member. "The exchange establishes an experience
base for carbon trading and a policy precedent for the way in which
mandatory systems will ultimately be established," he says, adding
that its participants "look at it with some pride" and "feel we are
all in this together".
The potential US carbon trading market is huge: estimates range from
$100 billion to $500 billion. "Trading is going to make the costs of
reducing greenhouse gas emissions cheaper and easier. That's what
markets do best and forward-looking companies are realising this,"
says Jonathan Lash, president of the World Resources Institute in
Washington DC and a former member of the CCE's advisory board.
Companies are acting for a variety of reasons, he says, citing
pressure from NGOs and customers, growing awareness of climate-related
risks and evidence that capital markets reward environmentally
This said, however, carbon trading in North America lags well behind
European activity. Many of the biggest polluters, including ExxonMobil
and Texaco, are holding back from embracing emissions reduction
programmes, preferring instead to lobby against any climate mitigation
policies and programmes by the US administration and Congress. Only
one other major national power company, TECO Energy, has so far joined
AEP on the Chicago Climate Exchange, for example.
Advocates such as Lash concede that it is unlikely that carbon trading
schemes will hit the corporate American mainstream, unless or until
the politicians act to introduce mandatory caps on emissions from the
most polluting sectors. President Bush's re-election would make this
an unlikely prospect, although support for action is growing in the
Republican-controlled Senate. (In October 2003 the Climate Stewardship
Act, calling for mandatory caps on emissions from the electricity
generation, transport, industrial and commercial sectors and unlimited
trading of emissions allowances among these sectors, was defeated by
only 55 votes to 43.)
With John Kerry as president, a major shift in US climate policy might
be a lot more likely. Kerry is a longstanding advocate of alternative
energy sources and energy security and the existence of the
successful Chicago Climate Exchange could provide a new Kerry
administration with the confidence to tackle the politically difficult
terrain of mandatory cuts in industrial emissions. "By providing an
open, visible and economically viable voluntary trading system, the
exchange is a key step in proving to business leaders and politicians
that a mandatory national carbon trading scheme would work," says
A Massachusetts market
The Bush administration's failure to develop climate mitigation
strategies may have created a vacuum at the centre, but several
individual US states are stepping up to the plate. No less than 28 out
of 50 have published or are developing programmes to cut net
greenhouse gas emissions within their borders. Though the states lack
the power to legislate nationwide, they can give food for thought to
regionally based highly polluting companies, such as power plants.
Massachusetts led the way in 2001, setting binding reductions on
carbon dioxide emissions by 2006-8 from its six highest emission power
plants. Trading was built into the rules, which allow plants that fail
the deadline to buy emission credits from cleaner operators. New
Hampshire has followed suit, while Oregon requires tough CO2 standards
for all new power plants. New York State's governor George Pataki is
currently working with his counterparts in 10 other northeast states
to establish a regional cap-and-trade programme for power plants.
"These state initiatives are achieving real greenhouse gas reductions
and are opportunities for learning, although they are not a substitute
for a comprehensive national policy that includes mandatory measures,"
said Eileen Claussen, president of the Pew Center on Global Climate
Change. "Policy-makers would do well to be mindful of their successes
as they work toward federal and international programmes, and actively
involve states in their design and implementation."
Some companies, too, are already speaking out for a nationwide carbon
trading scheme, though without openly embracing mandatory greenhouse
gas cuts. A 2003 seminar organised by the Pew Climate Center and
attended by Shell, Rio Tinto, Toyota and AEP produced a blueprint for
hypothetical mandatory emissions caps on polluting industries. This
included staggered caps on emissions by utilities, manufacturers and
transport companies, and a nationwide emissions trading programme so
that companies that failed the grade could buy carbon credits.
AEP's Braine has no doubt that this should be part of the solution.
"We have been very clear," he says, "that we believe emissions trading
across sectors and including all greenhouse gases, so that costs are
fairly distributed would offer a win-win for everybody: the
environment, the economy and business."
Polly Ghazi is US correspondent for Green Futures.
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