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November 07, 2019
Industry says it’s succeeding on climate change

Others answer that it’s not enough

Even the most militant environmentalist would have difficulty making the case that U.S. industry has not shrunk its carbon footprint and continues to do so. A recent hearing of the Senate Subcommittee on Clean Air and Nuclear Safety was filled with reliable facts and figures that demonstrate businesses in multiple sectors are acting individually and collectively to improve energy efficiency, a fundamental approach to reducing carbon emissions. Efficient systems require less energy and generate less waste, which means lower costs, better production, and less regulatory exposure. So, the industry argument continues, good environmental performance is an inherent part of good business.

But the question asked at the hearing is whether “industry-led initiatives” are enough to make the desired difference in climate change. Witnesses for industry argue that they are doing their fair share. Witnesses who do not believe that is sufficient argue that the federal government must step forward with a new policy—the preference is for a price on carbon—that will force industry to go even further in improving efficiency and cutting emissions.

A bipartisan issue

In Congress, climate change and the need to significantly reduce the human contribution to it are bipartisan concerns, at least up to a point. At the hearing, Senator Mike Braun (R-IN), who chairs the Subcommittee, stuck to the Republican position that government attempts to curb emissions may result in American families, workers, and businesses being hit with rising prices and utility bills. Therefore, Braun continued, progress on emissions must be balanced with policies that ensure energy security and consumer choice. Unfortunately, these assurances are not being made to a sufficient extent in the nation’s capital.

“You wouldn’t know it by watching the news, but we have all been thinking about and investing in this problem for a long time,” said Braun. “Everyone, that is maybe except Washington, which has been too polarized for too long to deal with much of anything, particularly our changing climate. Instead, American innovators and capital have been leading the way; our manufacturing, agriculture, and generation sectors have seen significant improvements from the voluntary adoption of new, lower-carbon corporate practices.”

But industry’s voluntary actions will not take us to the climate goal line, according to Senator Sheldon Whitehouse (D-RI), the Subcommittee’s Ranking Member.

“Innovation is a beautiful thing,” said Whitehouse. “America specializes in it, but it doesn’t happen in a vacuum. Without federal policies such as a price on carbon, there is little incentive for businesses to innovate. We have seen this principle proven out over and over, whether for criteria air pollutants under the Clean Air Act, or [chlorofluorocarbons] under the Montreal Protocol. Federal and international policies provided the framework for businesses to rely on and develop new technologies that reduced those emissions.”

Braun and Whitehouse set the stage for testimony by five witnesses: three who lavished praise on industry actions and two who agreed with Whitehouse that absent strong federal intervention, it is unlikely the United States will achieve the low-carbon economy viewed as central to averting a future climate calamity.

Chamber of Commerce

Perennially, the U.S. Chamber of Commerce is a fierce opponent of what it considers federal regulatory overreach, particularly rules issued by the EPA. Nonetheless, the Chamber is neither a climate change denier nor a skeptic.

“The climate is changing and humans are contributing to these changes. Inaction on climate is not an option,” said Marty Durbin, president of the Global Energy Institute, who spoke on behalf of the Chamber.

While Durbin says the Chamber believes in a policy approach that considers costs, benefits, and the competitiveness of the U.S. economy, the bulk of the climate change impetus will come from the private sector.

“It will be largely up to the business community to develop, finance, build, and operate the solutions needed to power economic growth worldwide, mitigate greenhouse gas emissions, and build resilient, lower-carbon infrastructure,” said Durbin. “Thousands of businesses already are taking action in their own operations and along their value chains by investing in technology solutions and enhancing their efficiency.”

As Durbin sees it “advanced technologies and innovation” offer the best solution for managing climate risks and reducing greenhouse gas (GHG) emissions.

“We believe that our free enterprise system is best equipped to address this challenge because it drives ingenuity and investment,” Durbin continued. “The public agrees. In fact, a poll conducted by the Global Energy Institute earlier this year found that 79 percent of voters believe that investments in innovation and technology are the best way to address climate change.”

Durbin goes on to describe a range of climate initiatives the private sector is undertaking, including work by DuPont to manufacture sustainable building materials; UPS’s deployment of more than 10,000 alternative-fuel vehicles; and NuScale’s development of small, modular nuclear reactors for energy generation.

National Cattlemen’s Beef Association

Todd Wilkinson, who operates a cow/calf operation and is part-owner of a commercial feedlot in South Dakota, spoke for the National Cattlemen’s Beef Association and quickly rebutted allegations that methane emissions from beef cattle are significant contributors to the U.S. GHG inventory.

“According to the U.S. Environmental Protection Agency, direct emissions from beef cattle represent just two percent of our country’s greenhouse gas emissions,” said Wilkinson. “The U.S. has some of the lowest greenhouse gas emissions from the cattle industry—10 to 50 times lower than cattle sectors from other countries around the world.”

What’s more, testified Wilkinson, American beef production and consumption is a “climate change solution.” Beef cattle do belch methane into the atmosphere, said Wilkinson, but that is part of a “natural methane cycle.”

“Cattle consume grasses and then emit methane, through belches, as part of the ruminant digestive process,” said Wilkinson. “Within 10 years, more than 90 percent of that methane combines with oxygen in the atmosphere and converts to CO2. The CO2 is then absorbed by grasses via photosynthesis, those grasses are eaten by cattle, and the process starts over. Methane has no long-term impact on the climate when emissions and oxidation are in balance.”

American Petroleum Institute

Apart from coal (a sector that is in steep decline), no manufacturing sector has been the target of more adverse criticism regarding climate than the oil and gas (O&G) industry (which is showing no sign of decline). Answering his own question about why Congress has undertaken no serious legislation to address our climate crisis, Whitehouse said, “Because hundreds of millions of dollars are spent by the fossil fuel industry to block climate action. Much of this is spent through trade associations and front groups that are controlled by the fossil fuel industry.”

The most influential of those trade groups is the American Petroleum Institute (API), which was represented at the hearing by Frank Macchiarola, an API vice president. According to Macchiarola, the O&G industry is promoting clean air in two ways—first, by producing cleaner gasoline and diesel fuels.

“[These fuels, when] coupled with advanced vehicle technologies, mean today’s new cars, SUVs, and pickup trucks are about 99 percent cleaner for common pollutants than vehicles in 1970,” testified Macchiarola. “Cleaner fuels played a significant role in a 73 percent reduction of the six Clean Air Act Criteria Air Pollutants between 1970 and 2017—even as vehicle miles traveled increased 189 percent.”

Second, Macchiarola says the sector is advancing technologies to ensure the capture of methane, the primary component of natural gas and a potent GHG.

“From 2000–2016, the U.S. oil and natural gas industry has invested more than $108 billion in low and zero greenhouse gas emission technologies including renewable energy sources, advanced technology vehicles, fugitive gas reduction technologies, combined heat and power, carbon capture and storage, and basic and applied research,” said Macchiarola.

Macchiarola devoted at least half his testimony to collaborative efforts by the O&G sector. The best known is The Environmental Partnership, which has the goal of improving the industry’s environmental performance. The program started with 26 participants at the end of 2017 and has 67 members, representing every major onshore production basin in the United States. Participants include 18 of the top 20 natural gas producers in the country and 32 of the top 40. One goal of Partnership programs is to further reduce emissions from operations.

“Companies are using advanced monitoring technologies to find and repair leaking equipment, replacing or modifying higher-emitting process control equipment, and implementing best practices to minimize emissions associated with the removal of liquids from natural gas wells as they age,” said Macchiarola.

The oil and natural gas industry remains committed to smart regulatory structures, Macchiarola said, as long as the industry is provided with “the flexibility to incentivize innovation and enhance the deployment of new technologies.”

A price on carbon

As noted, Whitehouse advocates for a price, or tax, on carbon. This position was endorsed by the two remaining witnesses at the hearing.

Andrea Dutton, a professor of geoscience at the University of Wisconsin-Madison, specializes in the behavior of sea level and polar ice sheets during past warm periods. According to Dutton, the impact of climate change will vary by region and will be “devastating.”

“Some will contend with worsened wildfires, while others will grapple with intensified inland flooding or rainfall, inundation from sea-level rise, or more intense, slower-moving hurricanes,” testified Dutton. “This list may evoke personal memories of extreme weather events from the past few years. That is because climate change is already here and it is going to get worse before it can get better.”

“Are voluntary reductions in industrial emissions enough to avoid such futures?” asked Dutton. “The answer is NO. They don’t even come close. Voluntary reductions are but proverbial drops in the bucket. Because of decades of relative inaction, the scale of the problem has grown and time to act is rapidly shrinking. Policy solutions must therefore be bold, moving us rapidly towards net-zero emissions with the aid of stringent and integrated policy interventions including putting a price on carbon. Reductions don’t happen in a vacuum. They are driven by policy, which, in turn, drives innovation to meet new targets.

A price on carbon was also endorsed by John K.S. Wilson, a vice president with Calvert Research and Management, which, said Wilson, sponsors “one of the largest and most diversified families of responsibly invested mutual funds.”

According to Wilson, climate change is a critical issue for fiduciaries because investment returns generally depend on a robust and growing economy. He said that a recent analysis of 32 studies found a negative correlation between carbon emissions and financial performance.

“This stands to reason—in many industries where these issues are material, lower greenhouse gas emissions correlate with more efficient operations, forward thinking product strategy, and better engagement of employees, many of whom care deeply about this issue,” said Wilson.

Nongovernmental industry initiatives are not the solution, he added, stating, “Despite the efforts being made on all sides, we find a clear consensus among both investment professionals and corporate executives that voluntary efforts will not be enough.”

“At the moment, business incentives are misaligned because those responsible for the emission of greenhouse gases do not bear the costs of climate-related harms such as extreme weather events, drought, and sea level rise,” testified Wilson. “Instead, these costs are borne by us all. For this reason, many investors support policies such as a carbon tax to better align the real costs of climate change with those parties responsible for the emission of greenhouse gases.”

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