USCAP Version 2.0

23 Jan 2012Andy Hoffman

The US Climate Action Partnership (USCAP), once the primary spokesman for the corporate sector on climate change in Washington, has gone dormant. Why? The reasons are multiple. Climate legislation is a nonstarter in Washington. The term itself has become toxic, that sharply divides the political left and right. The collapse of Solyndra stands as a poster child for those who wish to see an end to the idea of the “green economy.” A deep recession has pushed environmental issues, and climate change in particular, down the list of priorities among Americans. Sustainability in general is seen as a luxury to be addressed at another time.

As the market shift to a carbon-constrained economy becomes a distant hope, what is the corporate executive to do? The answer is to watch closely, prepare, and move when the time is right. The future of a carbon-constrained economy is not “if” but “when”. And management in the face of a pending but uncertain market shift is about balancing timing, pragmatics, and leadership. Central to this strategy is a new coalition of forward thinking corporate leaders that can help usher in the next energy economy. It is time for the next iteration of USCAP.

Timing

The issue of climate change will not go away. The scientific consensus that humans are altering the global climate is too compelling to be ignored or denied for long. The Intergovernmental Panel on Climate Change has concluded that, “the balance of evidence suggests a discernable human influence on the global climate.” That conclusion has been endorsed by the National Scientific Agencies of the each of the G8 + 5 countries (including the US National Academies of Science) as well as another 80 scientific agencies worldwide. It is also overwhelmingly supported by surveys of climate scientists and the scientific literature. The charge that climate change is the product of either a corrupt scientific establishment or a socialist environmental movement that seeks to restrict freedom and collapse the capitalist system simply won’t stand the test of time. Jon Huntsman is correct when he warns that the Republican Party should shift its stance on climate change lest it been seen as the “anti-science” party. The vast majority of Americans believe in the scientific process and the conclusions it creates; they assert that belief every time they go to the hospital; every time they start their car; every time they help their child study for their chemistry or biology exam.

With the power of science behind it, the market will shift. The market is quite malleable and adaptive; it seeks to satisfy needs as they arise. And the need for a reduction in carbon is here and now; the science compels it and the opportunity in the market demands it. At the moment, those resisting change are simply holding out. Any market shift creates winners and losers and at present, those that stand to lose are fighting to hold the status quo. But they cannot stop the power of science and the market. While the political process may quell government action during a Presidential election, the market is still shifting and the next administration will have to face scientific and economic reality. Hastening that reality check is the responsibility of forward thinking business leaders.

Pragmatics

This is not rocket science; it is basic business pragmatism. The market shift is being driven by a desire to reduce our carbon footprint, but also to reduce our dependence on foreign oil, protect valuable domestic ecosystems, protect our national competitiveness in the face of rising technological development in the global marketplace (Stephen Chu calls the investments being made by China on renewable energy a threat on a par with the Soviet launching of sputnik), and protect our children’s future. The shift will come in the form of government policy (a carbon price, building efficiency standards, automobile efficiency standards, renewable portfolio standards, feed-in-tariffs, net metering, RD&D subsidies, smart metering, procurement policies, the list goes on). But it will also come in the form of shifts in the more central aspects of the market: rising and uncertain energy prices; technological advancements; shifting consumer demand; increased insurance risk; supplier and buyer standards; rising cost of capital; and the list goes on. These drivers will snowball as more companies see the shifting market landscape and move to capture the opportunities it presents. The fact is that we are in the midst of an energy renaissance where we are beginning to think about energy in an entirely new way: virtually every nameplate in the auto sector offers a hybrid vehicle and many are offering electrics; virtually every company in the construction sector offers green construction materials and supplies; private equity firms are looking to the next big breakthrough in the energy sector; consumers no longer think of gasoline as the only fuel source that can run their automobiles and consider energy efficiency in the products they buy. The interesting thing about a renaissance is that one rarely knows when they are in one until it ends. And at present the market is shifting beneath our feet. The federal government is the one that is lagging.

Leadership

In Washington, Republicans loath the word ”climate change” and President Obama is afraid to invoke it. In that vacuum, it is now time for a new coalition of business leaders to step forward and lead. When the static of the Presidential election comes to an end, they need to shift the public and political debate to recognize what both scientists and the market are telling us – we need to develop a new energy economy. Forward thinking companies know that they need sound energy policy to secure stable, long term energy supplies; they need sound and predictable technology policies for long term investment planning; they need clear and coherent industrial policies that recognize we operate in a globalized marketplace where we are competing against countries that heavily subsidize their domestic industries; they need a knowledgeable consuming public that can make informed purchasing decisions.

Business leaders must lend their voices to the host of “climate brokers” that are calling attention to the issue of climate change by framing it in their own language, one that engages the audience to whom they most directly connect. For example, when people hear about the need to address climate change from their church, synagogue, mosque, or temple, they connect the issue to their moral interests. When they hear it from Republican political leaders, they connect it to conservative ideals. When they hear it from their military leaders, they connect it to their interests for a safe and secure nation. And when they hear it from their business leaders and investment managers, they connect it to their economic interests.

This last group is critically important for the future of this debate. The simple truth is that business institutions hold great import in our society. Scientists can present the evidence of anthropogenic climate change until they are blue in the face and people still still ask each other if they believe in “that theory.” But if business leaders say that it is in their strategic interests to address climate change, then more people will accept it as true. And as companies develop technologies to reduce carbon emissions and show people that solutions are possible, a social consensus around the issue will form. Much like the debate over the link between cigarette smoking and cancer, we will grow to accept the link between man-made greenhouse gases and climate change and teach it to others as being true.

What is needed to make this link is a powerful coalition of corporate leaders that can present a united vision for the next generation economy based on new forms of energy generation, transmission and use. It is now time for a USCAP version 2.0, one that will assert the strategic rationale for reducing our carbon emissions that goes alongside the scientific rationale that is presently at the center of the debate.

Andrew J. Hoffman is Director of the Erb Institute for Global Sustainable Enterprise, University of Michigan and a member of the SustainAbility Council.

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