America Inc prepares for emission cuts

Written by New York Times | Updated: Dec 1 2009, 04:16am hrs
Jad Mouawad

Americas corporations have long been bracing for the day when they would be required to carry out sharp cuts in the emissions that cause global warming. That day seemed to move a bit closer last week, when President Barack Obama outlined a national target for such reductions.

Much of corporate America has already been thinking about how to comply. Many businesses concluded years ago that such limits were inevitable, and they have been calling on Congress to define the exact rules they will need to follow.

Already, many companies are recording their emissions and analysing the results. Some have set voluntary targets for reductions and are claiming substantial progress in meeting them. Sustainabilitya notion mostly heard in environmental circles only a decade agohas become a mainstream idea to which some companies are committed and many are paying lip service.

Major corporations, including General Electric, the Ford Motor Co. and PepsiCo, have teamed up with environmental groups to set up the US Climate Action Partnership, a wide-ranging coalition trying to find ways to cut emissions .

The White House said last week that the President would present a provisional target at the Copenhagen summit meeting on climate next month to reduce greenhouse gas emissions. It will be "in the range" of 17% below 2005 levels by 2020, and 83% below by 2050, the White House said.

That target reflects the goals specified by legislation that was passed in the House in June. A similar Bill is bogged down in the Senate, which would set cuts of 20% by 2020.

Limiting the growth in greenhouse gas emissions, let alone cutting them, will require a radical transformation of the nations energy consumption and fuels that will most likely take decades. It is bound to hurt some energy-intensive businesses, like petroleum refiners and coal-fired power plants, and some manufacturers, while bolstering the development of alternative power industries like solar and wind.

To reduce emissions, Congress has been looking at a mechanism called cap and trade, in which legislators would set a limit on the nations emissions and it would decline each year. They would also assign pollution permits that companies could then buy and sell depending on their needs.

Much of the legislative horse-trading in recent months centered on which sectors of the economy would receive these carbon allowances free, as a subsidy to switch to low-carbon fuels or to invest in carbon-abating technologies, and which industries must pay for them.

Corporate America is by no means unanimous in embracing the idea of emission limits. Larger corporations, especially those operating in both the United States and Europe, have gone furthest in tackling their emissions. By contrast, many small businesses and domestic manufacturers have made little headway, and they are worried about the higher energy costs that an attack on global warming would require.

Oil producers have opposed the current climate legislation being debated in Congress. Refiners and producers claim the Bill would result in higher gasoline bills, lower domestic output and an increase in fuel imports.

In the midst of a severe recession with 10.2% national unemployment, our economy, the creation of jobs and consumer impact should take much greater precedence over attempts to impress international bureaucrats during an annual convention, Charles T Drevna, the president of the National Petrochemical and Refiners Association, wrote on a recent blog post, referring to the Copenhagen meeting.

Some of the nations biggest trade groups, including the US Chamber of Commerce and the American Farm Bureau Federation, have also been fighting the climate legislation through ads and a protracted lobbying battle on Capitol Hill.

The National Association of Manufacturers said recently that a climate Bill would result in job losses and slower economic growth. The Senate Bill, it said, represents a significant technological and economic challenge to manufacturers while resulting in little benefit to the environment.

But the chambers attacks against climate policy have also led to a wave of well-publicised resignations from the trade group by prominent companies like Apple and Nike, and the utilities Pacific Gas & Electric, Exelon and PNM Resources. All of them assailed the chambers climate policy as counterproductive.

Since coming into office, the Obama administration has encouraged the development of lower-carbon technologies and has sought to increase the fuel efficiency of motor vehicles. Venture capital firms have also been pouring billions of dollars into alternative energy projects, car companies are working on electric vehicles, and some power utilities have welcomed incentives to switch to low-carbon sources of energy.

Adam Sieminski, the chief energy economist at Deutsche Bank, said that setting a goal was a constructive step, but that much more work remains to map out ways the country can actually meet the presidents target. That includes increasing the use of natural gas to replace coal in the short term, in his view, and adding more nuclear power in the long run.