Business leaders from across the country headed to Washington D.C. this week to push for a federal price on carbon emissions. Over 75 businesses descended on Capitol Hill on Wednesday, representing a range of industries with over $2.5 trillion in assets and over 2.8 million employees globally. The group organized by Ceres, American Sustainable Business Council, and a coalition of partnering organizations, was the largest demonstration of support for carbon pricing in Congress in over a decade.
Shareholders as well as a mounting pressure from an awakening American public has set the stage for business leaders to not only push a pro-climate policy agenda, but also tout their own leadership. According to the Business Council for Sustainable Energy’s 2018 Report Card, corporate power purchase agreements accounted for 8.6 GW of renewable energy, 374,000 jobs were generated in solar and wind energy alone, and in many states these industries are the fastest growing sector of the economy. This latest push for federal policy demonstrates a new catalyzing force in the private sector as businesses put their shoulder against the wheel for climate-forward policies
While consumer brands and industrial giants have been supportive of government action on climate change for years, the most recent signal of strong support came earlier this month when a group of 13 U.S. and Global Fortune 500 corporations, including PG&E, BP, DuPont and Dow, launched CEO Climate Dialogue called on the President and Congress to move forward with a set of principles around a market-based policy to address climate change.
Since the Trump administration signaled their intent to withdraw from the Paris Agreement, many brands have jumped on the opportunity to support and uphold the international agreement and distance themselves from the administration’s policies. Now, they are going one step further. Not only are corporations no longer opposing policy, they are lobbying the Federal government to pass legislation that would have a real impact on lowering the nation’s carbon emissions, and therefore, have an effect on current business practices. They aim to change the “business as usual” paradigm that many believe has failed to address the future threats of climate change.
Recent Moves on Federal Carbon Pricing
While the businesses remained open minded to federal policy approaches, many were supportive of the bipartisan Energy Innovation and Carbon Dividend Act, introduced in the House last year. The bill is revenue neutral, meaning all revenue collected from the fee will be returned back to consumers in the form of rebates. This type of policy design has proven to be popular among conservatives, as it would not expand the size of government, nor increase costs to consumers, while also generating needed investments for critical infrastructure and R&D.
In a separate move, oil giants BP and Shell each pledged $1 million to Americans for Carbon Dividends, a conservative-backed lobbying group that also supports revenue-neutral carbon pricing. ExxonMobil, ConocoPhillips, and other major corporations have already backed the measure and pledged lobbying dollars, too. The outcry of support from these global leaders may give more conservative lawmakers the coverage they need to embrace climate action ahead of the upcoming elections where it is poised to be a top issue.
“We need bold action now if we are to mitigate the worst impacts of climate change and build a better future for generations to come. A well-designed price on carbon is the most direct and cost effective way to reduce carbon emissions. It is a critical component of a comprehensive policy portfolio designed to reduce carbon emissions on a scale that the planet will notice.” Patrick Flynn, Vice President of Sustainability at Salesforce
Why the change?
There are a number of reasons why companies are jumping at the opportunity to support a market based solution to climate change. Falling prices for renewable energy, new bounties of cleaner-burning natural gas, and notably, growing public concern about a warming planet’s impacts have also played a big role in global corporations’ change of course on climate.
The shift in corporate opinion towards climate-forward federal policy, and carbon pricing in particular, can also be traced back to investor and legal pressure. An example came just recently when 58 BP investors holding the equivalent of around $12.7 billion of shares in the oil giant, co-filed a resolution urging the company to set out a business strategy consistent with the goals of the Paris Agreement. It was the first time globally that shareholders holding a 10 percent stake in a major listed company have filed a resolution on climate change.
While there is a suite of policies that can achieve the Paris Agreement’s commitments to minimize warming and lower carbon emissions, the one that stands tall above the pack in terms of corporate backing is carbon pricing. The simple explanation for why this is the case is that it allows corporations to remain in control of their emissions reductions in a way that direct regulation does not.
In fact, major companies around the world already have internal real or ‘ghost’ carbon prices, including Microsoft and Disney. Corporate use of an internal price on carbon is becoming the new normal for major multinationals; in 2017, almost 1,400 companies were factoring an internal carbon price into their business plans. This widespread adoption shows how mainstream climate concerns are becoming for businesses, and are included in budgeting and strategic planning. A carbon price is a way to account for the real threats climate change presents for corporations, as well as account for the future, where carbon intensive assets and investments will be liable to regulation and public scrutiny.
“At PepsiCo, we believe that implementing solutions to address climate change is important to the future of our company, customers, consumers and communities. That is why we set a goal to reduce absolute GHG emissions across our value chain by at least 20 percent by 2030. We have made reducing GHG emissions a priority because it is good for the economy, the environment and our bottom line. As a growing number of companies join us in these efforts, a price on carbon is an essential part of realizing a clean energy future and a thriving American economy.” Roberta Barbieri, Vice President, Global Water and Environmental Solutions at PepsiCo
The case for a Federal carbon price
Emissions from electricity generation have fallen significantly in the United States in recent years, due mainly to the transition to natural gas, while emissions are growing in other sectors as the United States has reached an era of unprecedented energy production. While this access has helped to rebound the economy, it has done so at a true future cost born by climate impacts. The companies supporting this legislation know that acting in the present will help protect their businesses in the long run and could even provide them a competitive advantage in the short term. They also understand that by being at the table, they can help craft the policy and make sure their business understand the impact and potential outcomes when it comes to enforcement.
There is currently only one federal bill that aims to put a price on carbon emissions country-wide, however, this will certainly change in the near future. Candidates on both sides of the isle will be looking to carve out their own approach and preferred system as incumbents look to create their own approach ahead of the 2020 elections. For strategies on policy drafting, many can look to local governments where there have been an increasing number of states introducing their own versions of carbon pricing, too. This year alone, 16 states introduced carbon pricing bills, signaling that they are taking the lead in the absence of meaningful climate action from the federal government.
“Climate change poses a direct threat to the outdoor recreation industry, both in our home state of Colorado and across the country. That is why Aspen Skiing Company is committed to delivering on our goal of reducing our carbon emissions 25 percent by 2020. A well-designed price on carbon is another critical tool in U.S. efforts to reduce greenhouse gas emissions and tackle climate change while protecting the economy and the longevity of our industry.” Matthew Hamilton, Sustainability Director at Aspen Skiing Company
So far, H.B. 763 is the sole standing policy in front of Congress and boasts bipartisan support with Republican and Democrat chief sponsors. If passed, it would reduce national emissions by 40% by 2030 and reach a 90% reduction by 2050. Currently with 39 cosponsors, it is on target to gain majority support by the end of this session in the House. If the Democrats are able to regain leadership of the executive office and Senate in the 2020 election, it could become the main vehicle for federal policy.
Questions remain on how any federal policy would impact or relate to state-level action. States such as California that have already had a policy in place for the past decade would stand to be negatively impacted if a weaker federal policy was to supersede it. One solution would be for a federal carbon price to serve as a floor or base-level policy that leaves it up to states to continue to raise the price as well as to make the transition towards a low-carbon economy. It could provide a price signal strong enough to reduce the need for future regulation of carbon emissions, while preserving the EPA’s present Clean Air Act regulatory authority.
Carbon pricing has inundated public discourse around climate action and policy options in recent months. Everyone seems to be talking about pricing carbon emissions, even making it to the center of John Oliver’s HBO show Last Week Tonight just a couple of weeks ago. With increasing public concern and awareness around climate change, and the urgency of reducing carbon emissions, it is not surprising that corporate leaders are also stepping up to bat They understand that acting sooner rather than later won’t just allow us to meet the climate change challenge, but also do it in a way that bolsters investments in future technologies, and spurs American innovation and growth.