A short piece I wrote for Work Style Magazine‘s Jan 2012 issue.
Nearly two decades of UN talk about climate change have not produced much in the way of concrete results. For businesses, the status quo of endless conventions presents a real problem. Many companies with significant carbon emissions are increasingly desperate for clear guidance on coherent, transnational climate policy, whether it comes through the United Nations or not. The EU’s carbon market is a case in point. While it has been in place since 2005, price volatility and outright low prices for carbon have not made investment decisions any easier.
2011 has been a record-breaking year in terms of losses, providing a sense of how chaotic climate change itself may unfold. Many companies are exposed to environmental risks especially via their global supply chains. Unfortunately, public resistance in the United States is a major problem for moving forward, even with the extreme drought in Texas and the steady march of convincing science. Businesses are in a position to take a much stronger leadership role, but they must think broadly about what they should advocate for.
Business needs clear climate policy because in a competitive system no one can act first without exposing themselves. Consulting, finance and insurance industries have all made significant strides in creating the right knowledge infrastructure for assessing regulatory and environmental risk. Institutional investors like mutual fund managers increasingly demand emissions data from the companies they invest in, but there is little comparable for smaller firms in spite of the potential cost savings.
Of course, the dirtiest industries, especially fossil energy extraction firms, are more than willing to forestall climate policy while still ramping up new investment in discovery, infrastructure and technology. Carbon Tracker estimates that a serious global climate policy will require 80% of proven fossil fuel reserves to remain locked underground. Risk for non-fossil energy commerce is amplified without a clear exit from the carbon trap.
Climate change means we must unwind from this dangerous situation. Everyone around the world can look toward a future of diminished expectations. People who are already economically and politically marginalized have little choice but to face increasingly restricted options. For Americans, addressing climate change represents a loss of important and pleasurable cultural symbols. Dirty industries must also recognize the diminished futures they can expect. We need an open acknowledgement of change, acceptance of diminished futures and a process of public mourning.
The IEA estimates climate investment postponed beyond 2020 will cost 4.3 times investment now, while the fossil fuel industry received six times more subsidies than renewables in 2010. In this context, stiff national carbon taxes look increasingly attractive for providing market and climate stability.
There is no reason businesses can’t advocate for strong climate commitments with governments and even the public. Leadership on climate requires a much more subtle, committed relationship with governments, the countries they operate in, and the people they depend on and serve. Companies like Nike or Alcoa are already very clear that climate is an important issue for them. To take one example, how might Americans step to the challenge if high profile companies were publicly to champion clear, durable and robust climate rules?