Industry in U.S. Grows Aware of Threat From Climate Change
By CORAL DAVENPORT
Coca-Cola and other corporations are starting to see global warming as
an economically disruptive force affecting commodity costs and supply
chains.
Environment
Industry Awakens to Threat of Climate Change
WASHINGTON
— Coca-Cola has always been more focused on its economic bottom line
than on global warming, but when the company lost a lucrative operating
license in India because of a serious water shortage there in 2004,
things began to change.
Today,
after a decade of increasing damage to Coke’s balance sheet as global
droughts dried up the water needed to produce its soda, the company has
embraced the idea of climate change as an economically disruptive force.
“Increased
droughts, more unpredictable variability, 100-year floods every two
years,” said Jeffrey Seabright, Coke’s vice president for environment
and water resources, listing the problems that he said were also
disrupting the company’s supply of sugar cane and sugar beets, as well
as citrus for its fruit juices. “When we look at our most essential
ingredients, we see those events as threats.”
Coke
reflects a growing view among American business leaders and mainstream
economists who see global warming as a force that contributes to lower
gross domestic products, higher food and commodity costs, broken supply
chains and increased financial risk. Their position is at striking odds
with the longstanding argument, advanced by the coal industry and
others, that policies to curb carbon emissions are more economically
harmful than the impact of climate change.
“The
bottom line is that the policies will increase the cost of carbon and
electricity,” said Roger Bezdek, an economist who produced a report for
the coal lobby that was released this week. “Even the most conservative
estimates peg the social benefit of carbon-based fuels as 50 times
greater than its supposed social cost.”
Some tycoons are no longer listening.
At
the Swiss resort of Davos, corporate leaders and politicians gathered
for the annual four-day World Economic Forum will devote all of Friday
to panels and talks on the threat of climate change. The emphasis will
be less about saving polar bears and more about promoting economic
self-interest.
In
Philadelphia this month, the American Economic Association inaugurated
its new president, William D. Nordhaus, a Yale economist and one of the
world’s foremost experts on the economics of climate change.
“There
is clearly a growing recognition of this in the broader academic
economic community,” said Mr. Nordhaus, who has spent decades
researching the economic impacts of both climate change and of policies
intended to mitigate climate change.
In Washington, the World Bank president, Jim Yong Kim, has put climate change at the center of the bank’s mission,
citing global warming as the chief contributor to rising global poverty
rates and falling G.D.P.’s in developing nations. In Europe, the
Organization for Economic Cooperation and Development, the Paris-based
club of 34 industrialized nations, has begun to warn of the steep costs
of increased carbon pollution.
Nike,
which has more than 700 factories in 49 countries, many in Southeast
Asia, is also speaking out because of extreme weather that is disrupting
its supply chain. In 2008, floods temporarily shut down four Nike
factories in Thailand, and the company remains concerned about rising
droughts in regions that produce cotton, which the company uses in its
athletic clothes.
“That
puts less cotton on the market, the price goes up, and you have market
volatility,” said Hannah Jones, the company’s vice president for
sustainability and innovation. Nike has already reported the impact of
climate change on water supplies on its financial risk disclosure forms
to the Securities and Exchange Commission.
Both
Nike and Coke are responding internally: Coke uses water-conservation
technologies and Nike is using more synthetic material that is less
dependent on weather conditions. At Davos and in global capitals, the
companies are also lobbying governments to enact environmentally
friendly policies.
But
the ideas are a tough sell in countries like China and India, where
cheap coal-powered energy is lifting the economies and helping to raise
millions of people out of poverty. Even in Europe, officials have begun
to balk at the cost of environmental policies: On Wednesday, the
European Union scaled back its climate change and renewable energy commitments,
as high energy costs, declining industrial competitiveness and a
recognition that the economy is unlikely to rebound soon caused European
policy makers to question the short-term economic trade-offs of climate
policy.
In
the United States, the rich can afford to weigh in. The California
hedge-fund billionaire Thomas F. Steyer, who has used millions from his
own fortune to support political candidates who favor climate policy, is
working with Michael R. Bloomberg, the former New York mayor, and Henry
M. Paulson Jr., a former Treasury secretary in the George W. Bush
administration, to commission an economic study on the financial risks
associated with climate change. The study, titled “Risky Business,” aims
to assess the potential impacts of climate change by region and by
sector across the American economy.
“This
study is about one thing, the economics,” Mr. Paulson said in an
interview, adding that “business leaders are not adequately focused on
the economic impact of climate change.”
Also
consulting on the “Risky Business” report is Robert E. Rubin, a former
Treasury secretary in the Clinton administration. “There are a lot of
really significant, monumental issues facing the global economy, but
this supersedes all else,” Mr. Rubin said in an interview. “To make
meaningful headway in the economics community and the business
community, you’ve got to make it concrete.”
Last
fall, the governments of seven countries — Colombia, Ethiopia,
Indonesia, South Korea, Norway, Sweden and Britain — created the Global
Commission on the Economy and Climate and jointly began another study on
how governments and businesses can address climate risks to better
achieve economic growth. That study and the one commissioned by Mr.
Steyer and others are being published this fall, just before a major
United Nations meeting on climate change.
Although
many Republicans oppose the idea of a price or tax on carbon pollution,
some conservative economists endorse the idea. Among them are Arthur B.
Laffer, senior economic adviser to President Ronald Reagan; the Harvard
economist N. Gregory Mankiw, who was economic adviser to Mitt Romney’s
presidential campaign; and Douglas Holtz-Eakin, the head of the American
Action Forum, a conservative think tank, and an economic adviser to the
2008 presidential campaign of Senator John McCain, the Arizona
Republican.
“There’s
no question that if we get substantial changes in atmospheric
temperatures, as all the evidence suggests, that it’s going to
contribute to sea-level rise,” Mr. Holtz-Eakin said. “There will be
agriculture and economic effects — it’s inescapable.” He added, “I’d be
shocked if people supported anything other than a carbon tax — that’s
how economists think about it.”
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