The convergence of climate change policy, massive spending on breakthrough advances in renewable energy sources (e.g., solar, on- and off-shore wind) and energy storage technology, complete upgrades to electricity infrastructure, and commitments from industry to reduce CO2 emissions, require that manufacturing and all other industry develop real climate strategies now. Industry can no longer stay under the radar; front-facing true strategies must be implemented in each industry sector and company-wide. Legal advice will supplement these efforts.
Thus far, the Biden Administration is seeking carbon reductions and a national climate change strategy and policy through investment in technology improvement in partnership with industry to achieve real and permanent CO2 emissions reductions. While advanced and effective CO2 reduction technology is likely decades away, partnership with industry is the only way to achieve climate policy goals. Thousands of renewable and other low CO2 projects are underway. Aggressive development of energy sources that emit CO2 well below traditional levels of CO2 per Kw/hr of electricity are the only way to achieve technology improvement without customers and ratepayers paying for all associated costs. On the industry side, reductions in CO2 emissions per MMBtu/hr of steam and other energy accomplished through efficiency improvements and enhanced maintenance must also be part of any national climate strategy supported by government investment and industry expertise. Customers should not foot these bills either.
In my view, lasting CO2 and other GHG reductions can only be made by- bringing government support to cutting-edge engineering, science, and manufacturing technology. I view it unlikely that carbon markets, other carbon taxes, or stringent new legal and regulatory requirements can achieve real, permanent CO2 emissions reductions. Increasing the price of electricity or energy only will significantly increase consumer energy costs. Utilities can generally recover these costs through increases in rates. Industry can possibly raise prices on goods. Most of these costs, however, will be absorbed by industry. Climate strategies must take such challenging and potentially flawed policies, laws, and regulations head-on.
On his Inauguration Day, President Biden issued Executive Orders making climate change a central focus of all aspects of federal domestic and international policies and actions. Large portions of the Covid Relief Package, the Infrastructure bill, and the proposed budget contain unprecedented investments to address climate change. The current proposed 2022 federal budget contains tens of billions of dollars for climate change measures. The budget package includes $1.9 billion to the Energy Department devoted to the electricity grid, $8 billion for clean energy technologies, $7.4 billion for science and $1 billion to fund a new department named Advanced Research Projects Agency for Climate. The door is open if industry is allowed to and can step through.
Why Climate Strategies?
Why should industry devote the significant time and resources required to develop a climate strategy? The answer is real business opportunities. Traditional industry will bear the cost of the climate change investments through electricity rate increases, new regulatory requirements applicable to manufacturing, and additional challenges to electricity and natural gas reliability. An easy first step is to aggressively look at the development of renewable and low carbon technology projects either as a company or as a participant with other parties. Direct access to renewable and low carbon electricity will allow industry to be less dependent on utility electrical service by sourcing electricity directly from the project. There are also significant tax credits, renewable electricity credits, and other carbon offsets that can be monetized and provide a direct return on investment.
As noted, industry can partner with renewable and storage developers and governmental entities like the new Advanced Research Projects Agency for Climate to develop and sell state-of-the-art technology that can make significant and sustainable reductions in CO2 and GHG emissions. In particular, battery storage appears to be the key technology that must be improved if net-zero or zero carbon electricity generation will ever be achieved.
Corporate Leadership
Large corporations, many of whom produce electricity and fossil-fuels, and others that are very large energy consumers, are adopting and promoting pro-climate change promises. The Center for Climate and Energy Solutions recently issued an open letter committing to true CO2 reductions from each of its member companies:
The United States has made important strides – emissions are down, and clean energy is up. With the election of a new President and Congress, we now have a critical opportunity to significantly strengthen these efforts. We stand ready to work with stakeholders on all sides and with our elected leaders to seize this moment and achieve ambitious, durable climate solutions.
Amazon • Bank of America • BASF Corporation • BHP • bp • Cargill • Carrier Corporation • The Chemours Company • Citi • Danone North America • Dominion Energy • Dow Inc. • DSM DTE Energy • DuPont • Edison International • Entergy Corporation • Exelon Corporation • Ford Motor Company • General Motors • Goldman Sachs • Google • HP Inc. • IBM Intel Corporation • Johnson Controls • JPMorgan Chase • LafargeHolcim • Microsoft Corporation • Morgan Stanley • National Grid • Nestlé • NRG Energy, Inc. • Ørsted Offshore, North America • PG&E Corporation• PSEG • Schneider Electric • Shell TOTAL • Trane Technologies PLC • Unilever United States • Walmart
Obviously, these types of promises are goals at best. Further, every company and industry must look at all factors associated with plans for internal climate measures. Examples could be on-site solar, efficiency upgrades of all kinds, production of low carbon fuels that can be used or sold, new technologies or use of carbon offsets.
Climate strategies should also include the development and reporting of sustainability programs, disclosure of carbon emissions, and commitments to Environmental Social & Governance (“ESG”) measures. These efforts provide objective measures of a company’s or industry’s commitment to climate and other environmental issues. Integral to these measures is the ability to ensure that goods made in the United States are compared on an equal basis with goods made in higher CO2 emitting countries by higher emitting manufacturers. Third party rankings of the strength of corporate ESG and Sustainability Programs provide other objective measures that can be utilized in climate strategies to compete with countries and corporations that do not have these measures or score much lower on ESG, Sustainability, and CO2 emissions rankings.
