White House Co-opting Industry on Kyoto

Published March 1, 1999

WASHINGTON–The Clinton administration has racked up some surprising successes in marshalling corporate support for the greenhouse gas reductions called for under the Kyoto climate change treaty.

The key to the White House’s success in co-opting such industry giants as Boeing, Sunoco, Weyerhauser, DuPont, and American Electric Power Co. lies in economic self-interest: Every corporation that has endorsed emission reductions stands to profit from the implementation of proposed climate change policies.

Although it is not surprising that companies specializing in alternative energy sources were immediate supporters of emission reductions, the Administration’s success in securing the backing of key oil companies was unexpected. In May 1997, British Petroleum (now British Petroleum Amoco) became the first major oil company to endorse the White House’s position on global warming, announcing it would take steps to reduce its own greenhouse gas emissions. Later that year, Royal Dutch/Shell followed suit.

“The science doesn’t matter anymore,” said American Electric Power’s environment chief, Dale E. Heydlauff. “The world has become convinced that this is a matter of considerable urgency, and they want to take action. But if we don’t arrive at the right policies, it could be a stake through our heart.”

Mike Shanahan of the American Petroleum Institute, while sympathetic to AEP’s position, ultimately disagrees with the company’s support of the early credit program. “This is truly a case where the devil is in the details. There is some risk that a system of corporate winners and losers would be created, dividing companies by the difficulty they might face in meeting future greenhouse emission targets without regard to their contributions to economic growth and long-term technology development.”

Signed by the United States and 158 other nations in Kyoto, Japan in December 1997, the Kyoto protocol would require industrialized nations to make significant reductions in their emissions of carbon dioxide and other greenhouse gases–emissions alleged to be causing a dangerous warming of the planet. The United States would be required to reduce its greenhouse gas emissions by more than 30 percent over 15 years.

Economic forecasting firms have projected that U.S. compliance with the mandate would result in the loss of millions of jobs, loss of global competitiveness, and rampant inflation. Yet at least 19 U.S. companies–including some of the biggest names in American industry–have endorsed the emission reduction requirements.

While publicly expressing their concern that global warming represents a threat requiring immediate action, both Royal Dutch/Shell and BP Amoco clearly recognize there is money to be made in renewable energy. A 1998 Royal Dutch/Shell study concluded that renewable sources could supply half the world’s energy by the middle of the twenty-first century. With an eye on that future market–and aware of how emission reductions would increase its profitability–both companies announced plans to increase investments in renewable energy development, by a combined $1.5 billion, soon after endorsing the Administration’s calls for cutting emissions.

One of the most significant developments in the emerging White House-industry alliance occurred in May 1998, when the Pew Center on Global Climate Change announced that 13 corporations had joined its efforts to promote the Administration’s global warming policies. Among them were Toyota, 3M, Lockheed-Martin, American Electric Power, Intercontinental Energy Corporation, U.S. Generating Company, Whirlpool, Maytag, and United Technologies. All would profit from implementation of emission reduction policies.

Toyota’s decision to endorse emission cuts, for example, is clearly in its economic self-interest. The company already has developed a reduced-emissions vehicle, giving it a substantial edge over U.S. competitors. Toyota has already unveiled the Prius sedan, a “hybrid” car that runs on a combination of gas and electricity and gets 66 miles per gallon. Unlike other cars, the Prius could easily meet the higher fuel mileage standards that greenhouse gas emission reductions would require.

Aerospace giants Boeing and United Technologies also stand to gain, as both are leaders in developing technologies such as lightweight metals that reduce fuel use. No doubt Boeing and United Technologies endorsed the Administration’s emission reduction strategy well aware of the new markets that could open for their technological expertise.

Similarly, Maytag has developed a new–and expensive–washing machine that is more energy efficient than older models. It could be in high demand if energy prices rise .

Other companies have federal contracts that depend on the Administration’s global warming agenda; supporting emission limits is good business for them. Lockheed-Martin, for example, operates several of the Department of Energy’s research laboratories, where validating the global warming theory is a top priority. Likewise, Honeywell has contracts with the Department of Energy to upgrade federal facilities to make them more energy efficient, an activity that would be in higher demand if emission reductions are mandated.

Although much of the country’s business community remains opposed to the Kyoto Protocol, additional defections are likely as the White House’s lobbying efforts continue. Companies will face increasing pressure to take what they can from an agreement the Clinton Administration seems unlikely to scrap.