Utility CEOs: Join Your Auto Colleagues in Leading on Climate

, former president | October 3, 2011, 1:15 pm EDT
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When President Obama announced his most important contribution yet to reducing global warming pollution, the 2017-2025 fuel economy and greenhouse gas emission reduction rules, he was accompanied on stage by leaders of 14 auto manufacturing companies representing 90 percent of the U.S. market.

Among those standing with the president in the Washington Convention Center, surrounded by the most advanced technology vehicles headed to dealership showrooms and stone-faced secret service agents scanning the invitation-only audience, were executives from the big domestic three: Ford Motor Co., General Motors and Chrysler. It was a remarkable moment for a domestic industry that over decades had blocked proposed mandates that they innovate, and was now supporting a far-reaching framework that will require all their companies’ creative and technical prowess.

The late arrival of these corporate leaders would be easy to criticize, but I think instead they deserve considerable credit for standing on that dais with the president. In agreeing to raise the bar on the energy and environmental performance of their products (increasing the average fuel economy of the American cars and light trucks to 54.5 miles per gallon by 2025), these executives are challenging their companies to do their share of meeting the climate crisis.

Detroit steps up

When the negotiations began, the outlook wasn’t so promising. The domestic companies’ Washington lobbyists elected to fight for 42 mpg – an embarrassingly modest increment above the 2016 standard. UCS’s vehicle engineers documented our case that an average standard of 62 mpg is attainable by 2025 with a smart combination of known technologies – a step that would all but guarantee our country could meet the president’s goal (or at least the equivalent) of cutting our dependence on imported oil by a third by 2025.

But the auto CEOs know that their engineers, designers and fabricators can build a fleet of passenger vehicles that average 55 mpg because the required technology can be found in their own technology labs and in the vehicles being driven by the first adopters among their customers. And despite their displeasure at being directed by government policy, they seem to welcome the certainty that comes from clear performance targets. Perhaps they also appreciate that industry-wide goals level the playing field, giving no individual company an inherent advantage over the rest.

The climate leadership of the auto manufacturing executives is especially impressive when compared to the failure of every other major emitting sector — electricity generation, heavy manufacturing, oil and gas production and refining, and building/construction — to make a comparable commitment.

CAP and the power of leadership

The diversity and caliber of companies that helped organize the Climate Action Project (CAP) in 2007 demonstrated that voluntary corporate leadership can be powerful. Joining General Electric, Dow Chemical Co., Honeywell, Ford Motor Co., Siemens Corp. and other companies were six major electricity generators: Duke Energy, AES, Exelon, PNM Resources, NRG Energy, and PG&E.

The CAP companies (along with five national environmental groups) called for the enactment of national legislation “to slow, stop and reverse growth of greenhouse gas emissions over the shortest time reasonably achievable“, and were emphatic in stating that “the climate change challenge will create more economic opportunities than risks for the U.S. economy.” It doesn’t get any clearer than that.

The risks these corporate leaders took, in stepping ahead of their respective sectors, helped legislative technicians Henry Waxman and Ed Markey win U.S. House passage of comprehensive climate and energy legislation in 2009. Because the corporations were at the table, the Waxman-Markey bill combined strong GHG reduction targets with exceptional flexibility for the regulated companies. It was deeply disappointing when many of those same companies seemed to disappear when climate legislation bogged down in the Senate in the face of heavily-funded lobbying by the fossil fuel sector.

Climate pollution rules: a new opportunity

That recent history aside, the leadership of the power generation industry — and by leadership I mean the CEOs, senior management and Boards of Directors of utilities and merchant power companies — have a new chance to step up and do the right thing. The Environmental Protection Agency, by order of the U.S. Supreme Court, is crafting a rule to reduce climate pollution, and that, along with other rules to reduce ground-level ozone, toxics like mercury and arsenic, and coal ash, is under punishing attack from the coal, oil and gas and utility industries.

Eight utility leaders, including Lewis Hay of NextEra Energy, Jack Fusco of Calpine Corp. and John Rowe of Exelon Corp., the second, fifth and eighth largest utilities in the country, late last year eloquently defended EPA’s air quality regulations in a letter to the Wall Street Journal. They noted that “the electric sector has known that these rules were coming”, and that their companies’ “experience complying with air quality regulations demonstrates that regulations can yield important economic benefits, including job creation, while maintaining reliability.”

Short-sighted strategies

In stark contrast to these leaders, laggards like Southern Company (the largest utility) and American Electric Power (third largest) have worked overtime to block progress to protect the health of all Americans, even as they are fully aware of the stakes to our nation and their own customers. Their business model not only pollutes the air we breathe but is also heating our climate at an unbearable pace.

A smartly designed policy will give them and their shareholders clarity for the future, a leveling of the competitive field across the country and a driver for modernization of our patchwork electric system. Yet short-sighted profits and the luxury of avoiding the real human costs of burning fossil fuels (e.g. respiratory disease, premature death and large-scale climate disruption) are dominating the strategic decisions in their executive suites and Board rooms. (Garry Trudeau’s recent Doonesbury comic exquisitely captured this phenomenon.)

Even with the recent legislative setbacks, it remains a matter of not if but when carbon will be regulated. As with the auto rules, some flexibility for utilities in the compliance elements is reasonable if – and if is a small word with resonant meaning – the emission targets are based on science and reflect the utility sector’s share of the problem. The moment is now for utility CEOs to match the leadership of their auto counterparts by putting their integrity and muscle behind strong new EPA rules on greenhouse gas emissions, ground-level ozone, and air toxics.

Posted in: Energy, Global Warming, Vehicles

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