Table of Contents

It wasn’t long ago that industry views on global climate change were dominated by skeptics. When the first international treaty on greenhouse gas emissions (see box, “Kyoto Protocol basics” for a detailed discussion) was brokered in Japan in 1997, many industry critics scorned the effort as the work of “wild-eyed” greens. The view held by most industrial producers was that the science on global warming was inconclusive and that forcing costly emissions reductions on a regulated schedule could destroy the U.S. economy.

Cut to 2000 and this picture has changed dramatically. Industry has been forced to contend with evidence that global warming is a real and immediate problem. The previous decade was the warmest on record, with each of the past 3 years being successively warmer than the last. On the northern and southern extremes of the planet, glaciers have been melting at an unprecedented rate. Recently, a mile-wide patch of ocean opened at the North Pole, something scientists don’t think has happened for more than 50 million years. A draft report titled Climate Change Impacts on the United States, issued by the National Science Foundation in June, predicts continuing increases in global temperatures of between 5 and 10 °F over the next century, with a range of potential effects on health and the environment (1).

It is debatable whether these events have anything to do with industrial emissions, but their appearance now, ominously coincidental with climate modeling predictions, appears to be having an impact on public opinion. According to a 1998 survey by the World Wildlife Fund, ~60% of Americans believe global warming is a real problem (2). Furthermore, a March 1999 survey conducted by the Mellman Group, a Washington, DC–based polling organization, found that 76% of 450 congressional officials, industry association leaders, media representatives, economists, scientists, and policy experts think U.S. action is necessary to reduce greenhouse gas emissions (3).

A shift in the mainstream view

With these views now typifying the mainstream, the old guard critics in industry are increasingly on the defensive. For example, the Global Climate Coalition (GCC), an influential Washington, DC–based industry group—known for its hard-line skepticism on global warming and intense lobbying efforts against legislated controls—has softened its tone while trying to improve its radical image. Once the leading voice for corporate America in the climate debate, GCC has suffered a series of high-profile defections, including Ford Motor Co., Royal Dutch–Shell Group, Dow Chemical Co., and DaimlerChrysler Corp. An article in The Economist derided the GCC as a “spent force” (4). Speaking from the Ford Office of Environmental Strategy, Philip Colley, company public affairs spokesperson, explained why Ford decided to leave the group. “Going through the GCC had been a useful way for us to interface with the government on global climate issues,” he said. “But the GCC became a lightning rod for critics of the industry and membership was impeding our own environmental agenda.” GCC’s spokesperson, Frank Maisano, acknowledges that its affiliated companies increasingly saw membership with the organization as a public relations liability. As a consequence, in late summer of this year, the GCC restricted its membership to trade associations, something that Maisano hopes will help to “refocus attention on the climate debate rather than who is a member and who isn’t.”

While the GCC struggles to retain its relevance, other more moderate groups are taking center stage in the inter national debate about global warming. Perhaps the most influential is the Pew Center for Global Climate Change, an independent organization with funding from such sources as the Pew Charitable Trust, whose own industry group—the Business and Environmental Leadership Council—boasts a roster of blue-chip companies whose annual sales exceed $500 billion. Its 28 current members include industrial giants BP Amoco, Shell International, United Technologies, and DuPont.

The GCC and the Pew Center agree that climate change is a serious issue that warrants industry action, but their views differ in several key ways. Among their chief differences is that the GCC continues to lobby against all mandated controls on emissions, whereas the Pew Center believes that controls are necessary to address and reduce the ongoing problem of global warming. Eileen Claussen, the president of the Pew Center, says, “All our member companies agree in principle with the concept of a binding emissions reduction treaty. And they are all comfortable with me saying this on behalf of their involvement with the Pew Center.”

Whether acceptance of mandated controls “in principle” extends to the Kyoto Protocol is a whole different question. At press time (which predates a pivotal meeting for Kyoto delegates held in early November at The Hague), the protocol was referred to as flawed by the GCC and the Pew Center. Although most stakeholders see the protocol as loaded with a variety of problems (e.g., limited involvement by developing countries), the key issue for even the most treaty-friendly companies is the short timeframe for compliance among nations. For example, the United States is held to a 7% reduction below 1990 levels by 2008–2012, a target that Claussen concedes is totally unrealistic. “It doesn’t take an engineer to see that a 7% reduction is overly ambitious in a country where emissions have already grown to more than 11% above 1990 levels and are likely to continue to rise,” said Claussen at a speech in London in June (5). But Claussen acknowledges that with more flexible deadlines and a clear road map for reducing emissions, a binding treaty—maybe even a revised version of the Kyoto Protocol—could be agreeable to the Pew Center companies.

Explaining the shift

The question of whether or not mandated controls are needed to address climate change is probably the most conspicuous issue for companies on either side of the debate. The result is that for some companies, mandated controls would produce serious economic hardships. According to John Grasser, vice president of external communications at the National Mining Association, the coal mining industry could be “killed off” by mandated controls. But beyond this example, it is not obvious which industry sectors stand to lose the most, because the vulnerability of companies depends on many factors, such as market diversification, available capital, and technical resources. Furthermore, companies that position themselves to take advantage of mandated controls could come out ahead, should controls come to pass. Therefore, it is not unusual to see two companies in the same industry sector with sharply diverging views on the issue. Connie Holmes, chair of the board of the GCC, says, “It doesn’t matter if you’re talking about utilities, the oil industry, the automobile industry, or any industry, you’ll find a range of opinions within each of them on whether climate change is happening and what the best strategies are for dealing with it.”

Another source of disagreement is an emerging concept in environmental policy called the “precautionary principle”, which holds that in situations in which serious or irreversible damage is possible, lack of full scientific evidence should not stand in the way of actions designed to prevent environmental damage. The concept has many advocates when it comes to highly charged and scientifically ambiguous issues, of which climate change is a clear example. Some companies exploit the uncertainty of global warming to justify minimal action in lieu of more definitive data, whereas others act unilaterally to reduce their emissions.

Consider the differences between BP and ExxonMobil, both giant multinational oil companies that should have a similar stake in the debate. BP, a former GCC member, is now entrenched in the Pew Center philosophy and has released a statement claiming that “the precautionary approach to climate change is the only sensible way to progress in light of the uncertainty over the issue.” As part of a program to green its operations, BP has set a goal to achieve a 10% reduction in greenhouse gas emissions below 1990 levels by 2010. On the other hand, ExxonMobil has consistently downplayed the science of global warming and rejected precautionary approaches for dealing with it. Chair Lee R. Raymond has stated, “We do not have a sufficient scientific understanding of climate change to make reasonable predictions to justify drastic measures.” Consequently, ExxonMobil has not set an internal timetable for reducing emissions, but rather, is continuing to make “investments in environmental technologies”.

Observers point to several factors that might explain the opinion differences among companies. First, BP is headquartered in the United Kingdom, where pro-environment views dominate across the political spectrum. In the United States, home of ExxonMobil, skeptics retain a good deal of political influence, which lessens the threat of mandated controls. On a broad level, European (and Japanese) companies may lean toward the precautionary principle and an acceptance of mandated controls out of political motivations. There are some notable exceptions. For example, DuPont’s green reputation on the topic of climate change is almost unsurpassed in any industry. DuPont committed to reducing greenhouse gases in 1991 and claims to have cut its emissions by 45% since then.

Second, BP’s investment in alternative capabilities, particularly hydrogen fuel cells and solar energy, is considerably greater than that of ExxonMobil. Some observers suggest that companies investing in alternative energy markets stand to gain considerably from mandated controls and that this explains their more “progressive” positions. Jeff Morgheim, BP’s climate change manager, vehemently rejects this suggestion. “I put this in the realm of conspiracy theory,” he says. “If anyone thinks we can push binding reductions on the world community then we have a lot more power than I ever dreamed of. The fact is that we believe the world is headed for a decarbonized energy economy that someday may be carbon free. And we are positioning ourselves to take advantage of it.”

Third, the influence of a company’s chief executive should not be underestimated. BP’s CEO John Browne has a long history of aligning himself with environmental causes and has worked to orient the company around precautionary ideals—providing what Morgheim calls a “well-entrenched and lasting legacy that goes beyond any one person.”

Claussen describes the role of the chief executive as “absolutely crucial”. “I think it makes all the difference in the world,” she says. “When you look at Pew Center companies that have set internal targets, almost all of them have CEOs who are engaged on the issue of global warming, for example, Chad Holiday at DuPont, Mark Moody-Stewart at Shell, and George David at United Technologies.”

Voluntary programs

If stakeholders tend to agree on anything, it is that voluntary industry action will be necessary to address future environmental problems. In fact, the GCC promotes voluntary programs and new technology as the cornerstone of its agenda, rooted in the belief that market solutions can handle global warming (if indeed industry has anything to do with it) without any regulatory interference. In the absence of a binding regimen for reducing emissions, companies have been free to develop their own climate programs, and many have done so to varying degrees. Specific activities vary by industry and include improving process efficiency in industrial operations, reducing energy consumption, finding ways to sequester carbon, and many others. According to a 1999 fact sheet released by the GCC, “[In 1998] nearly 190 companies and organizations from nearly every industry sector reported on more than 1500 [emission reduction] projects to the Energy Information Administration, the Department of Energy’s statistical and forecasting arm” (6).

Some of the greatest initial successes come with finding the “low-hanging fruit”, that is, actions that yield environmental results without much economic pain. Obviously, the low-hanging fruit varies among companies: For United Technologies, it was energy conservation; for BP, it was limiting fugitive emissions from gas lines; and for DuPont, it was limiting releases of non-CO₂ greenhouse gases such as nitrous oxide and halocarbons.

The overriding question is “will voluntary programs be sufficient over the long haul?” According to Maisano of GCC, environmental technologies spawned by voluntary programs will build on each other and yield exponential emissions reductions into the future. But will these technologies keep up with industrial growth? Even Maisano describes them as “the great unknown”; he concedes, “We can’t predict how well they are going to perform.”

Most environmental managers worry about sustaining their climate change programs once the low-hanging fruit is plucked and their companies merge and expand operations. Morgheim commented, “We’d like to grow the companies we have now at several percent a year. The challenge is to grow organically without increasing emissions, and this is where we see the costs start to go up. It’s going to take some radical thinking about how we achieve efficiency in our plants and platforms.”

At some point, voluntary programs might get so expensive that they could begin to compromise a company’s position in the marketplace. Claussen says this is one of the reasons the Pew Center believes that in addition to voluntary programs, mandatory controls will also be necessary—they level the playing field for industry. Another problem with a strictly voluntary approach, she adds, is the lack of any mechanism for ensuring that emissions control programs are equally effective. Pointing to the existing situation, she says, “Some of these programs are good; some are not so good. And not everyone has voluntary programs. This is one of the reasons emissions are up by 11% overall since 1990.”

Ironically, some multinational companies that reject the notion of mandated controls may have to adhere to them anyway if they conduct business in countries that ratify a binding instrument to reduce greenhouse gas emissions. And indeed this is one of the key remaining questions about the Kyoto Protocol: Will sufficient numbers of countries ratify the protocol to bring it effectively into force despite the objections of the United States? This question, and many other concerns regarding the future effects of global warming, remain unanswered.

References

1. Climate Change Impacts on the United States: Potential Consequences of Climate Variability and Change (draft report); National Science Foundation, National Assessment Synthesis Team: Washington, DC, June 12, 2000 (under review).
2. Survey of the National Voter Data; World Wildlife Fund: Washington, DC, 1998.
3. Presentation and Analysis of Findings for the Pew Center for Global Climate Change; Mellman Group Inc. and Wirthlin Worldwide: Washington, DC, March 1999.
4. Changing the Climate of Opinion. The Economist, Aug 12, 2000; www.economist.com (available on the Web by subscription only).
5. Claussen, E. Kyoto: The Best We Can Do or Fatally Flawed? Speech presented at Royal Institute of International Affairs Conference, London, June 20, 2000.
6. 1999 Inventory of Industry Voluntary Actions (fact sheet); Global Climate Coalition: Washington, DC.

Charles W. Schmidt is a freelance writer on science-related topics (171 Danforth St., Portland, ME 04102; 207-772-9672; cschmidt@gwi.net).