The private sector’s promising progress on climate change
By Stephanie Sides
Even faced with discouraging signals from the new presidential administration on climate change, the private sector is moving ahead. Businesses, of course, focus on the bottom line in terms of profits and stockholder satisfaction, and both are relevant to their interest in addressing climate change. And business should be interested, since 46% of greenhouse gas emissions in the U.S. are caused by the private sector. (That statistic comes from the November 2016 White House Mid-Century Strategy for Deep Carbonization, which has been removed from the White House’s website since President Trump’s inauguration.)
Standardizing calculation of climate change risks
The first step for private sector companies is to get on the same page about how they identify their risks and quantify their costs in a climate-changing world.
One place they look for advice is the Risky Business Project, founded in 2013 by former NYC Mayor Michael Bloomberg, former Treasury Secretary Henry Paulson Jr., and climate activist Thomas Steyer. Risky Business quantifies and publicizes risks to coastal property, infrastructure, crop yields, and labor productivity, so businesses know just how much they stand to lose from an unstable climate. And, as many U.S. corporations are global in reach, they are also paying attention to their risks and costs in other parts of the world, notably sub-Saharan Africa and Asia.
The Task Force on Climate-related Financial Disclosures, organized by the G20 (the world’s major economies) and led by Bloomberg, is another group working with businesses to standardize how they calculate their financial risks related to climate change and communicate it to their investors. Its report, published December 14, offers detailed advice on the types of risk likely to impact companies across all industries, how to estimate the costs, and how to standardize the language of risk so companies can compare financial reporting.
The task force’s recommendations, when implemented, will help us know which companies are most vulnerable to climate change, which are best prepared, and which are taking action. This information is of particular interest to investors. It’s also likely to be used by climate change activists to celebrate greater commitment from those companies moving in the right direction and to encourage those that haven’t yet begun to act. The recommendations, in effect, will provide peer pressure across the private sector. More comprehensively, while promoting a smoother transition to a lower-carbon economy, they will help avert sudden losses in asset values and disruption to the global financial system.
Increasing reliance on renewable sources of energy
Knowing the risks of unmitigated climate change, many companies are already taking steps to reduce emissions by procuring renewable energy. Companies are realizing that investing in clean energy is not only good public relations, but it’s also profitable, thanks to declining energy costs and the ability to sign long-term, fixed-price contracts that protect against price volatility.
Greentech Media writes, “Just after the U.S. election, over 300 businesses signed an open letter to the incoming president in support of the Paris climate accord and continuation of low-carbon policies.” This powerful group includes DuPont, General Mills, and Intel; 91 have annual revenues of more than $100 million.
In addition, 22 Fortune 100 companies have committed publicly to procuring 100% of their energy from renewable sources, and 71 have established targets for sustainability and renewable energy. These are important steps because companies compete with utilities in the highest demand for new renewable energy.
Information technology companies in aggregate consume 7-12% of all electrical use, with 21% of that number powering their data centers. The largest ones are purchasing renewable energy through wholesale wind and solar farms with energy delivered through their respective regional power grids. This kind of demand then promotes construction of new renewable power plants.
Significantly, Google is on track to reach 100% renewable energy this year, and Apple, Facebook, and Microsoft are pushing the “green Internet” movement. The percentages they publish, though, need to be taken with a grain of salt because they incorporate carbon offset credits they buy that support projects to theoretically “cancel” the impact of burning coal somewhere else.
In addition to controlling their own emissions, all these companies have the stature to influence their supply chain and overseas manufacturing partners in making the move to renewables.
Support from new tech and regulations
Technology companies are keeping pace with these kinds of clean energy investment decisions by developing new types of battery storage, intelligent solar inverters (that convert DC output from solar panels into AC that can be fed to a commercial electrical grid), and new electricity rate designs and utility analytics/controls. But because the new administration is likely to be uninterested in supporting development of these technologies, this kind of investment may fall to the larger Internet companies and utilities.
To encourage more efficient energy consumption, the private sector is also being goosed by the California Energy Commission, which has passed the first-of-their-kind energy-efficiency regulations. These regulations should reduce computer energy consumption in California by one-third, equivalent to the power used by San Francisco and San Luis Obispo counties combined. Of course, computer equipment produced in California under these regulations but sold in other states would reduce consumption of energy in the latter as well.
Receptive to a carbon price?
Since the private sector is already making greater use of renewable energy sources and being encouraged to design more energy-efficient devices and products, it seems reasonable to think that it would be receptive to CCL’s Carbon Fee and Dividend. This proposed legislation would place a steadily increasing fee on carbon emissions, starting at $15/ton and increasing by $10/year.
Companies who are already using more renewables will see even cheaper energy costs than their competitors who may still be using carbon-intensive energy sources. Soon enough, those competitors will make the shift too, ultimately resulting in more renewable energy jobs and fewer emissions. With such a large percentage of greenhouse gas emissions coming from the private sector, their progress on climate action will be a boon to the economy, the environment, and our way of life.