Top 5 Climate & Energy Issues for US Business in 2010: Rocky Road or French Silk?
5. Where Will Things Go Internationally?
Coming out of the United Nations Conference of the Parties (COP) in Copenhagen, the role of the COP in international climate negotiations is in flux. Some issues will be negotiated in this forum, yet other issues may move out of this forum. The role of the Copenhagen Accord is uncertain. It remains to be seen what new governance structures will emerge and where different countries will place their political priorities. Relatedly, enhanced China-US bilateral cooperation on reducing emissions and sharing technology promises to be an important prong of the Obama Administration in 2010.
Business Concern: Private sector interests from both climate change risk and opportunity perspectives will need to monitor and understand the direction of international negotiations and cooperation particularly as related to climate finance and post-2012 carbon market design.
Continue Reading...A Business Model Stimulus
Most companies, naturally, are choosing to tighten their belts in this recessionary economy.
In this week’s New Yorker, James Surowiecki makes a compelling case for ramping up spending in a downturn. He cites Kellogg’s success launching and marketing Rice Krispies during the Great Depression.
I don’t know of many companies doubling down on consumer marketing right now, but I know plenty of companies looking to understand how the federal stimulus plan might be relevant to their business.
Continue Reading...Time for a More Climate-friendly Mobile Air-Conditioning Refrigerant?
Climate Change Compliance as a Business Opportunity
A great deal of attention is being paid to the development of multilateral and national accords and legislation designed to compel private industry to reduce carbon emissions. The key assumption underlying these efforts seems to hold that private industry worldwide cannot be counted on to initiate or facilitate carbon emissions reductions voluntarily, and certainly not as part of a preferred business model. But suppose for a moment that this assumption is not entirely correct, that private industry is in fact ready to start embracing climate change as a function of its own self-interest. The implications of such a trend could be far reaching.
Continue Reading...Climate Adaptation
As we consider climate legislation, we do not like to be reminded that despite our best efforts, the likelihood is that national and global GHG reductions will not be enough in time to keep regional climate from changing significantly. A new two-year Resources for the Future project, “Adapting to Climate Change,” has as its purpose developing an array of on-the-ground measures to allow our institutions to mitigate the effects of climate change, when and if it occurs. [summary]
Continue Reading...Now is the Time to Assess the Impacts of Climate Change on Your Business
Companies can no longer postpone consideration on the impact of climate change regulation and the resulting carbon-constrained economy on their business until the day after climate change legislation is enacted. Jeffrey Immelt, CEO of General Electric, recently described his company's consideration of climate change regulation on its business plans as follows: "I run my company assuming there is going to be a market for carbon some day, and a cap and trade system some day. No publicly traded company should have a different philosophy. The day you decide is already ten years too late for me." (Remarks before the National Governors Association Annual Meeting, Washington, DC, February 23, 2008.)
In the absence of federal climate change legislation, how should a company evaluate the impact of forthcoming climate change regulation on their business plans? Companies can start by recognizing that in many parts of the country climate change regulation already has been enacted at the state level, and that federal policy is likely to resemble this effort, only on a national scale. In this regard, most northeastern states have joined the Regional Greenhouse Gas Initiative ("RGGI"), which will take effect January 1, 2009. Under RGGI, greenhouse gas emissions from fossil fuel burning power plants will be capped at 2009 levels until 2015, and thereafter must reduce emissions 2.5 percent annually until 2018. Similar schemes have been adopted in several other states. These measures will have a significant impact on the cost of electricity; businesses that buy power from these utilities will face higher energy costs which could price their products out of the market. Planning for such contingencies must begin now.
Another sign of the changing perception of the pressures on the carbon economy is the recent adoption of the so-called "Carbon Principles" by three of the world's largest financial institutions – JP Morgan Chase, Citi, and Morgan Stanley. Under the Carbon Principles, these financial institutions state that they will consider the cost of carbon emissions or mitigation of the emissions on their investment decisions and investment advice. Thus, for example, before financing a coal-fired power plant these banks would estimate the cost per ton of carbon of carbon dioxide emissions which the plant might have to pay to emit under future legislation – and consider that cost as part of the investment decision. This new approach will have profound effects on carbon-intensive industries: for firms with plans to expand operations or open build new plants, the cost of borrowing just went up.
While costs will undoubtedly increase, climate change legislation will also create opportunities for investment and new ways to do business. These are but a few of the concrete climate change-related developments that firms can assess now.
With that in mind, every business should consider starting the evaluation process to determine where they are today and how they may be able to prosper in the new climate change world.
CONTINUE READING - Full Advisory PDF
Published McKenna Long & Aldridge LLP Climate Change Advisory (March 2008)
