Article in Business Week
Global Warming: Consensus is growing among
scientists, governments, and business that they must act fast to combat climate change.
August 6, 2004
The idea that the human species could alter something as huge and complex as
the earth's climate was once the subject of an esoteric scientific debate. But
attorneys general more used to battling corporate malfeasance are taking up the
cause. On July 21, New York Attorney General Eliot Spitzer and lawyers from seven
states sued the nation's largest utility companies, demanding that they reduce
of the gases thought to be warming the earth. Warns Spitzer: "Global warming
threatens our health, our economy, our natural resources, and our children's
It is clear we must act."
The maneuvers of eight mostly Democratic AGs could be seen as a political attack.
But their suit is only one tiny trumpet note in a growing bipartisan call to
arms. "The facts are there," says Senator John McCain (R-Ariz.). "We have
to educate our fellow citizens about climate change and the danger it poses to the
world." In January, the European Union will impose mandatory caps on carbon
dioxide and other gases that act like a greenhouse over the earth, and will begin
a market-based system for buying and selling the right to emit carbon. By the end
of the year, Russia may ratify the Kyoto Protocol, which makes CO2 reductions mandatory
among the 124 countries that have already accepted the accord. Some countries are
leaping even further ahead. Britain has vowed to slash emissions by 60% by 2050.
Climate change is a greater threat to the world than terrorism, argues Sir David
King, chief science adviser to Prime Minister Tony Blair: "Delaying action
a decade, or even just years, is not a serious option."
There are naysayers. The Bush Administration flatly rejects Kyoto and mandatory
curbs, arguing that such steps will cripple the economy. Better to develop new
technologies to solve problems if and when they appear, says Energy Secretary
Abraham. And a small group of scientists still argues there is no danger. "We
know how much the planet is going to warm," says the Cato Institute's Patrick
J. Michaels. "It is a small amount, and we can't do anything about it."
But the growing consensus among scientists and governments is that we can --
and must -- do something. Researchers under the auspices of the National Academy
and the Intergovernmental Panel on Climate Change (IPCC) have pondered the evidence
and concluded that the earth is warming, that humans are probably the cause,
that the threat is real enough to warrant an immediate response. "There is no
dispute that the temperature will rise. It will," says Donald Kennedy, editor-in-chief
of Science. "The disagreement is how much." Indeed, "there is a real
potential for sudden and perhaps catastrophic change," says Eileen Claussen,
president of the Pew Center on Global Climate Change: "The fact that we
uncertain may actually be a reason to act sooner rather than later."
Plus, taking action brings a host of ancillary benefits. The main way to cut
greenhouse-gas emissions is simply to burn less fossil fuel. Making cars and
factories more energy-efficient
and using alternative sources would make America less dependent on the Persian
Gulf and sources of other imported oil. It would mean less pollution. And many
that have cut emissions have discovered, often to their surprise, that it saves
and spurs development of innovative technologies. "It's impossible to find a
company that has acted and has not found benefits," says Michael Northrop,
co-creator of the Climate Group, a coalition of companies and governments set
up to share such
That's why there has been a rush to fill the leadership vacuum left by Washington. "States have stepped up to fill this policy void, as much out of economic self-interest
as fear of devastating climate changes," says Kenneth A. Colburn, executive
director of Northeast States for Coordinated Air Use Management. Warning of flooded
coasts and crippled industries, Massachusetts unveiled a plan in May to cut emissions
by 10% by 2020. In June, California proposed 30% cuts in car emissions by 2015.
other states are weighing similar actions.
Remarkably, business is far ahead of Congress and the White House. Some CEOs
are already calling for once-unthinkable steps. "We accept that the science
on global warming is overwhelming," says John W. Rowe, chairman and CEO of Exelon
Corp. (EXC ) "There should be mandatory carbon constraints."
Exelon, of course, would likely benefit as the nation's largest operator of commercial
nuclear power plants. But many other companies also are planning for that future.
American Electric Power Co. (AEP ) once fought the idea of combating climate
change. But in the late 1990s, then-CEO E. Linn Draper Jr. pushed for a strategy
the No. 1 coal-burning utility -- preparing for limits instead of denying that
global warming existed. It was a tough sell to management. Limits on carbon emissions
the whole idea of burning coal. But Draper prevailed. Why? "We felt it was inevitable
that we were going to live in a carbon-constrained world," says Dale E.
AEP's senior vice-president for environmental affairs.
Now, AEP is trying to accumulate credits for cutting CO2. It's investing in renewable
energy projects in Chile, retrofitting school buildings in Bulgaria for greater
efficiency, and exploring ways to burn coal more cleanly. Scores of other companies
taking action -- and seeing big benefits. DuPont (DD ) has cut its greenhouse-gas
emissions by 65% since 1990, saving hundreds of millions of dollars in the process.
Alcoa Inc. (AA ) is aiming at a 25% cut by 2010. General Electric Co. (GE ) is
anticipating growing markets for its wind power division and for more energy-efficient
And General Motors Corp. (GM ) is spending millions to develop hydrogen-powered
that don't emit CO2. A low-carbon economy "could really change our industry," says
Fred Sciance, manager of GM's global climate issues team. As Exelon knows, the
need for carbon-free power could even mean a boost for advanced nuclear reactors,
which produce electricity without any greenhouse-gas emissions.
Global warming could change other industries, too. Even if the world manages to make
big cuts in emissions soon, the earth will still warm several more degrees in coming
decades, most climate scientists believe. That could slash agricultural yields, raise
sea levels, and bring more extreme weather.
For businesses, this presents threats -- and opportunities. Insurers may face
more floods, storms, and other disasters. Farmers must adjust crops to changing
Companies that pioneer low-emission cars, clean coal-burning technology, and
hardier crop plants -- or find cheap ways to slash emissions -- will take over
that can't move as fast. "There is no silver bullet," says Chris Mottershead,
distinguished adviser at BP PLC (BP ): "There is a suite of technologies that
are required, and we need to unleash the talent inside business" to develop
Are we ready for this carbon-constrained, warming world? In some ways, yes. "There
is a case to be made for cautious optimism, that we are making small steps," says
Indeed, there is surprising consensus about the policies needed to spur innovation
and fight global warming. The basic idea: mandatory reductions or taxes on carbon
emissions, combined with a worldwide emissions-trading program. Here's how it could
work: Imagine that each company in a particular sector is required to cut emissions
by 20%. The company could meet the target on its own by becoming more energy efficient
or by switching from fossil fuels to alternatives. But it could also simply buy the
needed reductions on the open market from others who have already cut emissions more
than required, and who thus have excess emissions to sell. Under a sophisticated
worldwide carbon-trading system, governments and companies could also get sellable
credits for planting trees to soak up carbon or for investing in, say, energy efficient
and low-carbon technologies in the developing world. As a result, there is a powerful
incentive for everyone to find the lowest-cost and most effective cuts -- and to
move to lower-carbon technologies.
A key element is long-term predictability. If the world sets goals for the next
50 years, as Britain has done, and then implements the curbs or taxes needed
them, companies will figure out solutions. "Give us a date, tell us how much
we need to cut, give us the flexibility to meet the goals, and we'll get it done," says
Wayne H. Brunetti, CEO and chairman of Xcel Energy Inc. (XEL ), the nation's
fourth-largest electricity and gas utility.
Such clear policy signals should bring major efficiency gains. Even 30% to
40% reductions in emissions by 2020 are possible, says Northrop. After that,
shifts to new energy technologies "can get the other 35% to 40% that we
to get to the low-carbon emission future."
The good news is that the world sees the threat and has begun to respond. The
bad news is the magnitude of the task. Rising CO2 levels in the atmosphere can't
or reduced if only a few countries -- or even all the industrialized nations
-- take action. The world must also figure out a way to permit growth in China,
other developing nations while lowering consumption of coal, gasoline, and other
fossil fuels. "It's hard to think of a public policy issue that is harder than
this one," says economist Jeffrey D. Sachs, director of Columbia University's
Developing countries are responsible for just over one-third of the world's greenhouse-gas
emissions. But they emit less than one-fifth as much per person as do the industrialized
nations. That will increase as their citizens buy more cars and consume more energy.
By 2100, these countries will emit two or three times as much as the developed world,
The Bush Administration and Congress have seized upon this issue as one reason
for rejecting the Kyoto Protocol, which doesn't include the developing world.
negotiators are beginning to talk about a plan that would go beyond Kyoto. The
first step: showing that the industrialized world is serious about leading the
one of the motivations behind Britain's vow to slash emissions by 60%, for example.
Britain knows it can't solve this global problem by itself. But committing to
CO2 "is the right thing to do," says British Energy Minister Stephen
Timms. It will also keep the country from becoming dependent on foreign oil when
Sea oil fields start to run dry in a few years.
The next step is to help the developing world adopt new technologies. China and
other nations could avoid the West's era of gas-guzzlers and dirty power plants
to highly efficient clean coal plants and hybrid or advanced diesel cars. What's
needed, experts say, are incentives to stimulate companies to make investments
advanced technology in developing countries. Once an international carbon-trading
system is put in place, suggests Elliot Diringer, director of international strategies
at the Pew Center on Global Climate Change, "we can reduce our own costs
in the U.S. by allowing our companies to get the benefit of low-cost emissions
Still, even if the developing world comes on board, staggering reductions in
emissions are needed. Consider the math. For the past 450,000 years, the amount
of carbon dioxide
in the atmosphere has stayed below 290 parts per million (ppm). Now, we are spewing
out more than 7 gigatons of carbon a year and large amounts of other greenhouse
gases such as methane. As a result, the CO2 levels in the air have climbed past
With no action, those levels could jump to 800 to 1,000 ppm by the end of the
century. "We are already in dire straits," warns Columbia University
Klaus S. Lackner.
Can serious consequences be prevented? The British government, many scientists,
and some executives are urging an all-out effort to keep the earth from warming
than two degrees Celsius. "The consequences of changes above two degrees are
so dreadful that we need to avoid it," says BP's Mottershead. To hit that
target, scientists calculate that CO2 concentrations in the atmosphere must be
reaching 550 ppm -- twice the preindustrial level. Getting there may require
the world's per capita emissions in half by 2100.
Of course, there is great uncertainty surrounding the science of global warming.
No one can really know the size and consequences of climate change. "Without
a doubt, it will be a very different world -- a much warmer world," says David
S. Battisti, atmospheric scientist at the University of Washington. But how much
warmer? Which regions will be better or worse off? Will there be more floods and
droughts? There's even a chance of surprises beyond the scary predictions of some
computer models. "What's worrisome are the unknown unknowns," says Daniel
P. Schrag, director of the Laboratory for Geochemical Oceanography at Harvard University.
"We are performing an experiment that hasn't been done in millions of years,
and no one knows exactly what's going to happen."
What scientists do know is that carbon dioxide and a number of other gases act like
the roof of a greenhouse. Energy from the sun passes through easily. Some of the
warmth that normally would be radiated back out to space is trapped, however, warming
the planet. With no greenhouse gases at all in the atmosphere, we would freeze. The
earth's average temperature would be a cold -17C, not the relatively balmy 14C it
But the atmosphere is fiendishly complicated. If an increase in greenhouse gases
also makes the sky cloudier, the added clouds may cool the surface enough to offset
warming from CO2. Tiny particles from pollution also exert warming or cooling effects,
depending on where they are in the atmosphere. Naysayers argue that it's just too
soon to tell if greenhouse gases will significantly change the climate.
Yet the climate is changing. In the past 100 years, global temperatures are up 0.6
degrees Celsius. The past few decades are the warmest since people began keeping
temperature records -- altering the face of the planet.
For instance, the Qori Kalis glacier in Peru is shrinking at a rate of 200 meters
per year, 40 times as fast as in 1978. It's just one of hundreds of glaciers
that are vanishing. Ice is disappearing from the Arctic Ocean and Greenland.
a hundred species of animals have been spotted moving to cooler regions, and
starts sooner for more than 200 others. "It's increasingly clear that even the
modest warming today is having large effects on ecosystems," says ecologist
Christopher B. Field of the Carnegie Institution. "The most compelling impact
is the 10% decreasing yield of corn in the Midwest per degree [of warming.]"
More worrisome, scientists have learned from the past that seemingly small perturbations
can cause the climate to swing rapidly and dramatically. Data from ice cores
taken from Greenland and elsewhere reveal that parts of the planet cooled by
Celsius in just a few decades about 12,700 years ago. Five thousand years ago,
the Sahara region of Africa was transformed from a verdant lake-studded landscape
Minnesota's to barren desert in just a few hundred years. The initial push --
a change in the earth's orbit -- was small and very gradual, says geochemist
Peter B. deMenocal
of Columbia University's Lamont-Doherty Earth Observatory. "But the climate
response was very abrupt -- like flipping a switch."
The earth's history is full of such abrupt climate changes. Now many scientists
that the current buildup of greenhouse gases could also flip a global switch. "To
take a chance and say these abrupt changes won't occur in the future is sheer madness,"
says Wallace S. Broecker, earth scientist at Lamont-Doherty. "That's why
is absolutely foolhardy to let CO2 go up to 600 or 800 ppm."
Indeed, Broecker has helped pinpoint one switch involving ocean currents that circulate
heat and cold. If this so-called conveyor shuts down, the Gulf Stream stops bringing
heat to Europe and the U.S. Northeast. This is not speculation. It has happened in
the past, most recently 8,200 years ago.
Can it happen again? Maybe. A recent Pentagon report tells of a "plausible...though
not the most likely" scenario, in which the conveyor shuts off. "Such abrupt
climate change...could potentially destabilize the geopolitical environment, leading
to skirmishes, battles, and even war," it warns.
There are already worrisome signs. The global conveyor is driven by cold, salty
water in the Arctic, which sinks to the bottom and flows south. If the water
enough -- thus heavy enough -- to sink, the conveyor shuts down. Now, scientists
are discovering that Arctic and North Atlantic waters are becoming fresher because
of increased precipitation and melting. "Over the past four decades, the subpolar
North Atlantic has become dramatically less salty, while the tropical oceans have
become saltier," observed William B. Curry of the Woods Hole Oceanographic Institution
in recent congressional testimony. "These salinity changes are unprecedented
in the relatively short history of the science of oceanography."
If the global switch does flip, an Ice Age won't descend upon Europe, scientists
now believe. But that doesn't mean the consequences won't be severe. The sobering
lesson from the past is that the climate is a temperamental beast. And now, with
the atmosphere filling with greenhouse gases, "the future may have big surprises
in store," says Harvard's Schrag.
In some scenarios, the ice on Greenland eventually melts, causing sea levels to rise
18 feet. Melt just the West Antarctic ice sheet as well, and sea levels jump another
18 feet. Currently shrinking glaciers may mean threats to water supplies for farmers
and cities. Meanwhile, higher temperatures can cut crop yields, inhibit rice germination,
and devastate biologically vital ecosystems like coral reefs. A paper in the July
16 issue of Science suggests that increasing CO2 levels in the ocean could affect
the growth of marine life, with consequences for the oceanic food chain.
Prevent or Adapt?
Perhaps the central debate in global warming now is not about the underlying
science, but whether it's better -- and cheaper -- to take steps to prepare for
or prevent climate change now, or to simply roll with the punches if and when
Opponents of greenhouse-gas curbs say we should be able to adapt to a warmer
or even cool it back down. "I'm convinced there will be engineering schemes
that will allow our children's children to have whatever climate they want," says
Robert C. Balling Jr., a climatologist at Arizona State University and coauthor
of The Satanic Gases, which argues that the worries are vastly overblown.
Yes, human beings can adapt, advocates of immediate action retort. But why run even
the small risk of catastrophic changes, when important steps can be taken at a modest
cost now? A British government panel, for instance, concluded that the cost of its
share of the task of limiting the level of CO2 to 550 ppm would be about 1% of Britain's
gross domestic product.
Compare that, says Sir David King, with the cost of a single flood breaking through
the barrier in the Thames River -- some 30 billion pounds, or 2% of current GDP. "Common sense says that it's time to purchase some low-cost insurance now," says
economist Paul R. Portney, president of Resources for the Future.
The Business Response
When CEOs contemplate global warming, they see something they dread: uncertainty.
There's uncertainty about what regulations they will have to meet and about how much
the climate will change -- and uncertainty itself poses challenges. Insurance giant
Swiss Re sees a threat to its entire industry. The reason: Insurers know how to write
policies for every conceivable hazard based on exhaustive study of the past. If floods
typically occur in a city every 20 years or so, then it's a good bet the trend will
continue into the future. Global warming throws all that historical data out the
One of the predicted consequences of higher greenhouse-gas levels, for instance,
is more variable weather. Even a heat wave like the one that gripped Britain
in 1995 led to losses of 1.5 billion pounds, Swiss Re calculates. So an increase
floods, and other events "could be financially devastating," says Christopher
Walker, a Swiss Re greenhouse-gas expert.
That's why Swiss Re has been pressing companies to plan for possible effects of warming.
Lenders may require beefed-up flood insurance before issuing mortgages. Chipmakers
must find replacements for greenhouse-gas solvents. Utilities need to prepare grids
to handle bigger loads and to boost power from renewable sources. Oil companies need
to think about a future where cars use less gas -- or switch to hydrogen.
Swiss Re says the word is getting out, but not fast enough. In a recent survey, "80%
of CEOs said that climate change was a potential risk, but only 40% were doing something
about it," says Walker. "That's not good to hear for insurers."
Shareholders are also demanding that companies assess the risks of global warming
and devise coping strategies. Moreover, multinationals have no choice but to plan
for emissions cuts because of the coming EU carbon limits and possible restrictions
on other greenhouse gases.
Intel Corp. (INTC ), for example, is worried the EU could ban the use of perfluorocarbons
(PCF), chemicals used in chipmaking that are potent greenhouse gases. "We are
looking for substitutes but don't have any yet," says Intel's Stephen Harper.
"We decided to craft a worldwide agreement to reduce PFC emissions 10% by
2010 -- upwards of a 90% reduction per chip. We wanted to show leadership and
the EU regulate us."
Utilities face the greatest threat since the bulk of the power they generate
comes from climate-changing fossil fuels. That's why AEP, Cinergy Corp. (CIN
), and others
are probing new technologies that would enable them to capture the carbon as
coal is burned. That carbon could then be pumped deep into the ground to be stored
thousands of years. AEP has helped drill a test well in West Virginia to see
sort of "carbon sequestration" is feasible and safe. And dozens of utilities
are turning to alternative fuels, from wind to biomass. Florida Power & Light
Co. now has 42 wind power facilities and has pushed energy efficiency, reducing emissions
and eliminating the need to build 10 midsize power plants, according to Randall R.
LaBauve, vice-president for environmental services. "We are seeing more companies
committed to voluntary or even mandatory reductions," he says. Renewable
energy, not counting hydropower, now produces only 2% of the nation's electricity.
states -- along with Presidential candidate John Kerry -- are proposing that
be increased to as high as 20%.
Who Will Lead?
Even without mandates, scores of companies are taking concrete actions. "The
science debate goes on, but we know enough to move now," explains AEP Chief
Executive Michael G. Morris. It helps that thwarting global warming often brings
cost savings and business benefits. Indeed, one goal of the newly formed Climate
Group is to share tales of how climate strategies helped the bottom line. "The
ones who have been at it for a while are finding they can do more than is asked for
in Kyoto, and are achieving all kinds of benefits," says Northrop. BP, for
instance, developed its own internal strategy for trading carbon emissions. That
companywide search to find the lowest-cost reductions. Many of the measures were
simple, such as identifying and plugging leaks. The overall result: a 10% reduction
in emissions and a $650 million boost to the company in three years.
Climate-savvy execs are hoping that when carbon limits are imposed, they'll get
credit for actions already taken. But they're also anticipating big future opportunities.
GE bought Enron Corp.'s wind business and a solar energy company in addition
research on hydrogen and lower-emission jet engines and locomotives. "We can
help our customers meet the challenges they are going to face," says Stephen
D. Ramsey, GE's environmental chief. In Arizona, startup Global Research Technologies
LLC is developing systems that use solvents to grab CO2 out of the air and isolate
it for disposal.
Given this progress, many scientists wonder why the world -- and especially the
U.S. -- isn't moving faster to reduce the chances that global warming will bring
surprises. The reason for the inaction is "not the science and not the economics,"
says G. Michael Purdy, director of Lamont-Doherty. "Rather it is the lack
public knowledge, the lack of leadership, and the lack of political will."
The Bush Administration counters that taking steps is simply too costly. Imposing
limits on the U.S. would throttle growth and put America at a competitive disadvantage
around the world. "No nation will mortgage its growth and prosperity to cut
greenhouse-gas emissions," says Energy Secretary Abraham. In any case, the White
House is not ignoring the issue. It has called for voluntary reductions and it is
funding research into new technologies. "If we are successful in developing
carbon sequestration and cars that run on hydrogen fuel cells, that solves most of
the problem with global warming," Abraham argues. "We may disagree
but no one is going to reach any targets if we don't make these investments."
But most experts believe that mandatory curbs are essential and that they can
be implemented at reasonable cost. Indeed, as states jump in with their own patchwork
of rules, execs are beginning to say that it may be time to push for uniform
limits. That's what happened in 1990 with pollution rules. Faced with the prospect
of dozens of state regulations, companies helped push for federal Clean Air Act
amendments that reduced sulfur dioxide emissions through a market-based trading
law was a huge success. "We reduced emissions ahead of schedule and at lower
cost," says Xcel Energy CEO Brunetti. "It's a great example of what
The same sort of trading scheme would bring similarly inexpensive greenhouse-gas
reductions, many economists, politicians, and execs believe. The EU plan puts a cap
on emissions for each country and allows emitters to buy and sell permits to release
certain amounts of emissions. In the U.S., a market for trading carbon emissions
-- the Chicago Climate Exchange -- already operates. And a bill to set up a cap-and-trade
scheme, introduced by Senators John McCain and Joseph I. Lieberman (D-Conn.), is
expected to win more votes than the 43 it garnered -- against the odds -- last year.
These steps are just the beginning, though. Even drastic measures -- such as
implementing revolutionary energy technologies or grabbing carbon from the air
-- won't stop this
great global experiment from being conducted. "We won't cure this problem,"
cautions Henry Jacoby, co-director of Massachusetts Institute of Technology's Joint
Program on the Science & Policy of Global Change. "The hope is that we can
lower the risk of some of the more possible damaging outcomes." Companies
and nations have begun to respond, but there is a long way to go, and only two
Get serious about global warming -- or be prepared for the consequences.
By John Carey