July 15, 2008
By Jeffrey M. Sandman
It might seem counterintuitive, but sometimes the private sector can actually be a stronger advocate for the public interest than our own government. This is certainly the case with global warming, as the business, scientific and international communities are far ahead of the U.S. government in recognizing the dangers of global warming and seeking urgent action to prevent catastrophic climate change.
Business has recognized the urgency of the issue not because of politics, but because of economic self-interest. Alcoa chairman and CEO Alain Belda sees opportunity in fighting global warming, saying recently "I am convinced that we can build a global plan of action on climate change in ways that create more economic opportunities than risks."
The insurance industry has been a particularly strong leader in fighting climate change because its actuaries have recognized for years - even as U.S. policy makers were in denial - that their companies could be bankrupted by claims resulting from the devastating hurricanes, wildfires and flooding that will become more frequent as the planet warms. Swiss Re, the world's largest reinsurer, made a small step in addressing global warming by successfully designing and implementing innovative weather risk transfer solutions to villages in Africa that may see extreme droughts as result of climate change.
Even companies in fossil fuel industries, which traditionally have opposed emission standards, realize that economic dislocation and political turmoil caused by climate change threaten their viability. Elizabeth Moler, an executive vice president for Exleon said, "It is critical that we start now, we need the economic and regulatory certainty to invest in a low-carbon energy future."
Without a doubt, American and international corporations are behind fighting global warming by reducing greenhouse gases. Many of these companies are publicly calling for a 60 to 80 percent reduction in greenhouse gas emissions by 2050.
But businesses recognize the private sector cannot do it alone. Government leadership - both within the U.S. and globally - is essential to creating a level and predictable playing field, to spurring innovation, and to aligning market forces with the need to slash greenhouse gas emissions, most likely through a cap-and-trade system. This is hardly a revolutionary idea. The European Union already has such a system in place on global warming pollution and the same process was used successfully in the U.S. to reduce acid rain. Moreover, cap-and-trade is in many ways the ultimate form of partnership, with the public sector setting the limits needed to reduce global warming pollution while letting the private sector and free market work its magic in terms of how the cuts are made. Nevertheless, the Bush administration inexplicably opposes a cap-and-trade system for greenhouse gas emissions.
If America is to live up to its reputation as a world leader we must act quickly as we are already behind other nations in the greatest planetary challenge of the 21st century. Some question if the U.S. economy, already battered, can impose environmental restrictions and stay competitive with foreign countries. Well, the reality is we have partners in this fight, domestic and international corporations and foreign governments. Much can change after the November election. We are the one missing piece of the puzzle and must pressure our government to show up on the dance floor before the music stops.