A New Climate Economy: Shifting Corporate America onto a Low-Carbon Path
As more businesses take action on climate change, new research could help accelerate the trend by showing why it’s in U.S. companies’ economic best interests.
WRI launched its study, Seeing Is Believing: Creating a New Climate Economy in the United States, before a packed house at George Washington University last week. The paper, which builds on the global Better Growth, Better Climate report, reveals that it’s possible to reduce emissions across five key areas of the economy while saving businesses and consumers money and improving human health.
Chad Holliday, former chairman and current board member of Bank of America, and Ken Gayer, vice president and general manager of Honeywell, joined WRI experts for the event and panel discussion, moderated by Amy Harder of the Wall Street Journal. Together, they highlighted the economic benefits cutting emissions can bring to U.S. businesses, as well as what’s needed to shift corporate America onto a low-carbon growth path.
An “Inflection Point” for Corporate Climate Action
Holliday, Gayer, and WRI President Andrew Steer noted the private sector’s recent progress on climate action. “I think there’s quite a lot of evidence that we may be at an inflection point,” Steer said. “More than 1,000 companies at the U.N. Climate Summit signed up to say ‘we should have a price on carbon.’ That simply wouldn’t have happened two years ago.”
At the same time, technological advances are driving down the costs of cleaner power. Solar photovoltaic prices have dropped 80 percent since 2008. New natural gas is now up to 44 percent cheaper than power from new coal plants, and the cost of electric vehicle batteries decreased 40 percent since 2008.
“We now have an economic argument [for climate action],” said President Felipe Calderon, former president of Mexico and chair of the commission that produced Better Growth, Better Climate. “We can talk not only about carbon reduction, we can talk about revenues and profits. We can talk about jobs.”
Seeing Is Believing shows how some U.S. businesses are already saving money by cutting emissions. Companies like PepsiCo, Heineken, and Ben & Jerry’s, who have started using coolers free of hydrofluorocarbons (HFCs), potent greenhouse gases, have seen energy savings of 10 to 20 percent or greater. Utilities found it was 50-67 percent cheaper to improve energy efficiency rather than pay for new electric power generation, such as natural gas or coal plants, between 2009 and 2012. And energy prices for customers of Iowa’s MidAmerican utility are projected to drop by $10 million annually as more wind power comes online.
“It does make good economic sense,” Holliday said. “I’d say this is the biggest market opportunity, and the United States is prime to take it.”
Capitalizing on the Opportunities
Yet despite recent progress from business leaders, U.S. corporations as a whole have a lot of work left to do. As Nicholas Bianco, lead author of Seeing Is Believing, said, America is still the world’s second-largest greenhouse gas emitter, with per capita emissions three times the global average.
That’s where policy and other interventions come in. While the new research lays out win-win economic opportunities associated with climate action, fully capitalizing on them requires overcoming market barriers.
“Companies are always going to innovate and invest,” Gayer said. “The issue is scale. Without the action from government, you don’t get the scale.”
The study lays out several ways to overcome these market barriers. Panelists also noted a few opportunities to help scale up business action on climate change, including:
Put a Price on Carbon
A carbon tax or other policies would provide the right signals to investors and business to direct their finance toward low-carbon options rather than business-as-usual fossil fuels. “How much longer are we going to tax good things like work and profits and not tax bad things like pollution?” Steer said.
Secure a Global Climate Deal
Countries are currently working to establish a global climate treaty under the U.N. Framework Convention on Climate Change, with a deadline of December 2015. Securing an ambitious deal could get businesses moving in the right direction. “Currently, businesses do not know which side to go,” Steer said. “They know that probably, 10 years from now, there’s going to be a serious price on carbon, but they’re not sure of that.”
Invest More in Research & Development
While technology like solar photovoltaics are becoming increasingly cost competitive with conventional power sources, we need more innovation to develop cost-effective, low-carbon infrastructure. “We’ve seen overall public R&D decline 88 percent in the power sector since 1980,” Bianco said. “The industry only invests .05 percent of its annual revenues into R&D. The pharmaceutical industry invests 11 percent.”
Finalize Emissions Standards for Existing Power Plants
In the absence of Congressional action, one of the most significant policy signals the United States can send to business is finalizing ambitious emissions standards for existing power plants, which emit the largest share of U.S. greenhouse gases. “They can help the United States get started, and I think once we get started, we’ll find that this is actually much easier than people think,” Bianco said.
In the meantime, it’s in businesses’ own best interests to start taking action now. “This report says the economics make sense now,” Holliday said. “And I really believe it.”
- LEARN MORE: For more recommendations on how cities, states, and the country can reduce market barriers to low-carbon opportunities, please download our paper.