Climate Policy Is Coming. Is Business Prepared?

industrial plant emissions

by | Apr 5, 2016

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industrial plant emissionsBusinesses can expect stricter carbon pollution regulations coming soon — and that’s not necessarily a bad thing, according to some.

We saw this reasoning explained in companies’ briefs supporting the EPA’s Clean Power Plan last week, with major tech firms Apple, Google, Amazon and Microsoft, along with Ikea and Mars arguing that the power plant emissions rules are “good for business.”

“When companies representing half a trillion dollars in revenue publicly support smart climate policy like the Clean Power Plan, I think we can safely put to rest the argument that regulatory action on climate will lead to economic ruin,” Environmental Defense Fund’s Tom Murray told Environmental Leader.

The Clean Power Plan will actually reduce electricity costs, these businesses argue in friends of the court briefs filed April 1. Most of the largest businesses in the US have set specific goals to boost renewable energy use to help “cut costs and hedge the risks of relying on entirely on increasingly volatile fossil fuels,” according to one such brief. Keeping the Clean Power Plan on track will stimulate more renewable investments and “long-term price certainty.”

Additionally, uncertainty around the Clean Power Plan and the future of high-emitting fuel sources, both domestically and globally, makes long-term business planning a “difficult challenge,” they say.

Another reason to include climate risk in long-term business planning is the US-China joint presidential statement made last week announcing that both countries — the world’s two biggest carbon polluters, accounting for about 40 percent of such releases — will sign the Paris climate deal on Earth Day, April 22. The Paris climate deal, reached at COP21 in December, commits the world’s countries to keep a global temperature rise this century to below 2 degrees Celsius.

“This is really an example of how climate change is a mainstream thing businesses need to pay attention to,” MIT professor Noelle Selin said in an interview with Environmental Leader. “Of course, Paris is agreed to by countries but businesses have to go home and implement it.”

Selin is teaching a professional education course about why climate change is becoming a key factor for a successful business. Climate change affects businesses, from electricity prices to supply chain costs and resource availability, to extreme weather events, Selin says. She points to the insurance industry as an example of one sector already doing this: extreme weather events like super storms and floods increase insurance losses.

“If you’re planning strategically, you need to take climate change into account because it will affect you,” Selin says. “It’s a management of risk. Businesses that are out in front of this will see benefits because they will be able to compete better.”

The US-China announcement last week makes it clear to businesses that climate change policy is coming, which means in addition to the other environmental and business benefits, reducing emissions will lower compliance costs for companies and put them less at risk of facing regulatory action.

The Obama administration has said the Clean Power Plan will play a key role in helping the US achieve its global warming targets. The plan, which has been challenged in the courts, would cut carbon emissions by 32 percent by 2030, compared to 2005 levels. Having a set policy in place will benefit business, Selin says.

“For businesses, whether you think is perfect or not, the question is really adapting to what’s there and being able to have predictability,” she says. “Once you have a rule in place you can then adjust your business model accordingly and make decisions accordingly. What we’ve had over the past several years is the big unknown so the question has been how — if at all — is the US going to regulate CO2? Now, with the Clean Power Plan, it gives some certainty of what the landscape is going to look like. You see a lot of these companies saying OK we want to plan for the future and the Clean Power Plan is what we’ve got.”

Some businesses are already taking steps to plan for a low-carbon future, such as the 122 companies including Ikea, Coca-Cola Enterprises, Walmart, Kellogg and Dell that have committed to set emissions reduction targets in line with what scientists say is necessary to keep global warming below the threshold of 2 degrees Celsius. The Science Based Targets initiative is a joint effort of CDP (formerly Carbon Disclosure Project), World Resources Institute, World Wildlife Fund and UN Global Compact that works with companies to set science-based emissions targets and only approves corporate targets that meet its strict criteria.

To date, only 12 companies’ targets have been approved: Coca-Cola Enterprises, Dell, Enel, General Mills, Kellogg, NRG Energy, Procter & Gamble, Sony, Thalys, Pfizer, Coca-Cola Hellenic Bottling Company AG and International Post Corporation.

The US-China announcement should spur companies into action, Cynthia Cummis told Environmental Leader. Cummis is WRI’s lead on the Science Based Targets initiative.

“It’s notable that President Obama and President Xi Jinping reiterated the measures they would take to accelerate the growth of the low-carbon economy, citing their support for initiatives such as Mission Innovation and the Clean Energy Ministerial,” she says. “This puts companies on firmer ground to make the ambitious emissions cuts that climate scientists say are necessary. Companies should also consider the risks of ‘business as usual’ when the leaders of the world’s two greatest economic powers signal that change is coming.”

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