SustainAbility Radar Carbon June 2006

The Business of Carbon
Geoff Lye
lye@sustainability.com

Inventors and entrepreneurs at the heart of the 18th-century Industrial Revolution could have had little idea that unlocking the power of fossil fuels would trigger an unprecedented concentration of CO2 in the earth’s atmosphere. When James Watt invented the steam engine, CO2 concentration in the atmosphere was at about 270 parts per million (ppm). Today it stands in the region of 387 ppm and is rising fast: the outlook is for it to break 700 ppm this century unless we take drastic and urgent action.

The issue of climate change first took to the world stage in 1988 through a ground-breaking speech given by the UK’s then Prime Minister, Margaret Thatcher (a speech in part developed and written by Sir Crispin Tickell, uncle of SustainAbility Chair Sophia Tickell). By the time of the Earth Summit in 1992, the issue — recognised as the most serious global environmental threat — was addressed by the UN Framework Convention on Climate Change which had at its heart a commitment to the ‘stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system’.

When the convention was signed, no specific target was set for the level of stabilisation, but the Intergovernmental Panel on Climate Change (IPCC) has since concluded that the range of 450—550 ppm is the highest concentration which is not only practically and economically achievable but also likely to avoid the most abrupt and catastrophic shifts in weather patterns and intensity. Yet only a handful of governments and even fewer businesses are willing to commit to those levels of CO2 concentrations as guiding principles for regulation and business strategy.

That said, the business community has been increasingly active in recognising the inevitability of carbon constraints and higher energy costs. Most carbon intensive industries have been focusing on energy savings to deliver both environmental and economic benefits; some have demonstrated significant reductions in the carbon intensity of their operations — often delivering huge cost savings. The range of global companies’ responses and actions on climate change has been admirably reviewed by Ceres, a US coalition of investors and NGOs working with companies to address sustainability challenges. Their recent report Corporate Governance and Climate Change: Making the Connection (page 07) provides real insight into current best practice.

When it comes to the specific issue of climate stabilisation, few companies appear to have accepted the strategic implications of the IPCC’s recommendations. A number, including American Electric Power, DuPont and Shell, have public positions which implicitly accept and support the concept, calling on governments to act to avoid future uncertainty and to enable long-term investments to be made with greater confidence and a level playing field.

Another 24 leading CEOs signed up to a statement, prepared by the G8 Climate Change Roundtable convened by the World Economic Forum, in response to an invitation from the UK Prime Minister to provide a business perspective on climate change in advance of the 2005 G8 summit. Among its many progressive and urgent calls for governmental action, it pressed the G8 to ‘move expeditiously to adopt climate stabilisation targets that will define the
scope and scale of mitigation needed in the years ahead’. Notably, however, they did not specifically support (or dispute) the IPCC proposed ceiling.

Two of those signatories were Bill Ford and Lord Browne. Ford and BP are the only major companies I can identify which make explicit commitments in their own strategic planning to climate stabilisation with specific CO2 concentration targets.

It is no coincidence that these were the two lead sponsors of research by Princeton into the viability of stabilising emissions of CO2 at 2005 levels within 50 years. The research concluded that it should be possible to secure emissions stabilisation on the basis of global programmes to shift the mix of fuels to low(er) carbon energy sources and to use fossil energy more efficiently. They refer to the potential strategic shifts as ‘wedges’ (illustrated in their figure overleaf). Princeton’s conclusions were clear, encouraging and sufficiently convincing for their sponsoring partners, BP and Ford, not only to adopt as policy the need for society to act to stabilise at the 500 to 550ppm level, but to go further and acknowledge that they have an active role to play in driving towards that goal.

For many years, BP’s public position on climate has been that they:

‘support precautionary action to limit GHG emissions, even though aspects of the science are still the subject of expert debate. In our view, the goal must be to stabilise GHG levels through sustainable long-term emissions reductions. We support the emerging consensus that it
would be prudent to limit the increase in the world’s temperature to about 2°C above pre-industrial temperatures. One way to achieve this would be to ensure that global emissions in 2050 are no higher than today’s — around 25 billion tonnes of CO2 a year. This is a major challenge, but we believe that the reduction can be achieved using a mixture of existing and emerging technologies.’

Similarly, Ford make a specific commitment to ‘playing a leadership role in the reduction and stabilisation of GHG emissions’. They further acknowledge, as do BP, that:

‘many scientists, businesses and governmental agencies have concluded that stabilising the atmospheric CO2 concentration at around 550 parts per million (ppm) (compared with the current 380 ppm and the pre-industrial level of approximately 270 ppm), may help forestall or substantially delay the most disruptive aspects of global climate change’.

Ford’s overarching strategy is to ‘drive to stabilisation in which low GHG vehicles reach dominant market share and fleet CO2 emissions converge with a target global stabilisation curve’.

The biggest issue for both companies is that the use phase of their products is where the greatest release of CO2 occurs. In the lifecycle of cars and trucks and of the oil business, over 90% are generated during use rather than production. Both companies accept a degree of accountability — if not full responsibility — for these emissions as well as for their direct operational emissions. This sets an interesting perspective and precedent for all businesses whose products or services are carbon intensive in any part of their lifecycle.

While making bold public statements, both companies realistically recognise, however, that they cannot address the issue of stabilisation alone and highlight the need for a multi-lateral and multi-dimensional approach. Ford’s words would no doubt be readily endorsed by BP when they note that ‘climate change is also an example of a complex 21st-century challenge that requires a systemic social, political, technological and business solution. It requires global coordination of technologies, government policies, markets and infrastructures’. To date, the record of governments as an active partner does not give cause for optimism.

Ford and BP’s commitments to stabilisation of atmospheric greenhouse gas concentrations are, regrettably, both notable as exceptions to the broader corporate landscape. Both companies also face robust challenges from campaigners that their short term business investments and actions are not aligned with their proclaimed long term commitments. Furthermore, as I write this piece, fossil fuel prices are hitting record levels, with early signs of markets and consumers shifting towards more energy efficient goods. The rising price of oil may just succeed where science and common sense have failed.

GL

For office emplyees that qualify, telecommuting would:

• Increase fuel efficiency by the number of vehicles driven
• Decrease the number of vehicle miles travelled
• Use best efficiency practices in all residential and commerical buildings.

Telecommuting would reduce Ford's carbon footprint every work day (which is good for the world). And reduce their operating expenses (which is good for Ford).