NEW YORK - Last Friday’s gathering of more than 170 countries to sign a sweeping global climate agreement was remarkable on so many fronts – perhaps the most monumental being the continued unwavering business support for tackling climate change.
Two days before the United Nations event, 110 companies – including iconic brands like DuPont, Johnson & Johnson, Kellogg’s and Nike – heralded the climate deal and called for strong policies such as EPA’s Clean Power Plan aimed at reducing carbon pollution from the electric power sector. More than 400 investors managing $24 trillion in assets also praised the accord in a letter to world leaders.
This solidarity from the business and financial communities illustrates the core of what businesses and investors care about: averting risks, operating with clear, stable policies, and creating opportunities.
Businesses are surely concerned about climate risks, which are already causing wide-ranging disruptions to their operations and supply chains. Consumer giants IKEA, and Mars Inc. made this exact point in a recent legal brief filed in the U.S. Court of Appeals supporting the Clean Power Plan. “The economic risks faced by domestic businesses are staggering,” they wrote. Apple, Google and other tech giants made similar arguments in a second legal brief filed with the federal appeals court.
Investors also are worried about climate risks. A rapidly warming planet means economic instability, which, in turn, means weaker investment portfolios. A new study by the London School of Economics estimates that climate change could cut the value of the world’s financial assets by $2.5 trillion. Under worst-case scenarios, losses could be 10 times higher, a virtual wrecking ball to the global economy.
The obvious step for reducing climate risks is to curb the pollution that is causing it, and companies clearly see the benefit of staying ahead of the game and doing their part. Most Fortune 500 companies, for example have set targets to lower greenhouse gas emissions and boost renewable energy sourcing. Some are even targeting 100 percent renewable energy, and it’s because of the business imperative, not a green-inspired agenda. In their recent legal brief, Mars and IKEA described how running their facilities with renewable energy is becoming far less risky than relying heavily on price-volatile fossil fuels such as natural gas.
“Reliance on utilities that employ mainly fossil fuel fired generation exposes (us) to price spikes and variations on fossil fuel costs,” they wrote. “On the other hand, renewable energy such as wind and solar, is a fuel-free option and greater investment in these resources can provide long-term price certainty.”
Solar and wind energy costs have already dropped precipitously, and are already less expensive than fossil fuel utility sources in states such as Minnesota and Texas. Deutsche Bank recently predicted that utility-scale solar prices will reach grid parity in most states this year. Specific details on these trends will be highlighted in a Benchmarking Utility Clean Energy: 2016 report Ceres is releasing this summer.
Businesses are encouraged by these trends, but the U.S. Supreme Court’s surprise “emergency stay” of the Clean Power Plan in February sends the wrong market signal – and one that companies are pushing back against. In their legal brief filed in advance of oral arguments before the D.C. Circuit Court on June 2, companies praised the EPA plan as a viable “national market solution” that will create certainty and warned of “economic and social disruptions” if it is delayed further.
These companies get it exactly right. If we want to be serious about limiting global temperature increases to less than 2 degrees Celsius – the goal set by the Paris climate agreement – we cannot afford inconsistent policy solutions that hinder business and investor low-carbon activities.
Just as the government leaders and the American public came together during World War II, we need the same broad resolve in fighting climate change. And, as we saw 70 years ago, American businesses are ready to do their part to protect the world and make our economy more competitive than ever.
