In the weeks since the election, pundits have speculated that a significant push to regulate the advance of climate change will be initiated by President Obama in his second term, many asserting that this initiative will manifest itself in the form of a carbon tax. These conjectures, somewhat timely in the wake of Hurricane Sandy and just before the kick-off of California’s cap and trade program, have so far been dispelled by the Obama administration – the President himself stating that a climate change initiative will not be his number one priority in light of the economy. And while several Republican members of Congress have indicated a willingness to entertain a carbon tax, bi-partisan support is not strong enough at the moment to move the ball forward.
Although a carbon tax is not likely to appear in any part of the fiscal cliff remedy, it is also not likely a dead issue. Exxon Mobil Corp. has publicly backed the institution of a carbon tax and the National Academy of Sciences is moving forward in preparing a carbon tax analysis, which will be presented to Congress this spring. Additionally, while the presidential candidates were virtually mute on the issue of climate change, various commercial entities and organizations that mind the international markets have increased their climate change dialog, suggesting that some type of clear government action is necessary.
Just this past week, for example, a coalition of some of the world’s largest institutional investors sent a letter to governments of the world’s largest economies urging them to establish an investment-grade climate change and clean energy policy, i.e., defined predictable policies that encourage low carbon investment. Although the letter did not explicitly call for the development of a carbon tax, such a policy has been cited by many economists as a simple, cost effective method of regulating carbon emissions with the least amount of impact on financial markets. Among the groups signing on to the letter is the American Investor Network on Climate Risk, whose members include entities like BlackRock, Deutsche Asset Management and TIAA-CREF, as well as public pension funds in California, Florida and New York. The coalition’s letter is available here. Insurance companies and other businesses that assess and attempt to mitigate risk have also cautioned that climate change will bring about a substantial negative economic impact if not properly managed – see for example, the Pricewaterhouse Coopers’ report “Too Late for Two Degrees,” issued on the eve of the presidential election.
So, while the world should not expect to see a carbon tax at the onset of 2013, the issue will most likely resurface again (and again and again) as part of any climate change discussions that take place during President Obama’s second term.
Filed under: Sustainability
Pepper Hamilton LLP and Freeh Group International Solutions are presenting two in-person seminars on “The New SEC Conflict Minerals Rule: Overcoming the Challenges of Compliance.” The programs will be held at 8:30 am on Dec. 4, 2012 in Pepper Hamilton’s Philadelphia office, and on Dec. 5, 2012 in the New York office. CLE credit is available. A light breakfast will be served. (more…)
There have been a couple of developments recently that suggest the U.S. Green Building Council (USGBC) is becoming more user friendly.
In October, USGBC announced that it was introducing a “simpler and more inclusive” membership structure, with dues options that will reduce the barrier to entry. The crux of the change is to replace the current dues structure, which involves relatively hefty dues set based on the number of people in an organization. Under the new structure, a member can elect one of three levels of membership packages that start at $300/year. (As someone who has been tasked with justifying the cost of the firm’s involvement in USGBC, I can vouch that it will be much easier to get support for paying $300 than $3,500!)
More recently, the Green Building Certification Institute (GBCI), which administers the LEED© Accredited Professionals program for the USGBC, revamped the Credential Maintenance Program (CMP). The new CMP is intended to make it easier to report continuing education required to maintain a LEED AP. Although there have been glitches in the reporting system as initially rolled out, once they are resolved completing the continuing education reporting requirements will indeed be easier. In addition, USGBC is offering six hours of LEED specific courses for free. To put this in context, generally during each two year reporting period a LEED AP must obtain 30 hours of credit, of which at least 6 hours must be LEED specific, in order to maintain the credential
Both are interesting developments for an organization that already has almost 13,000 members (which does not include individuals) and over 80,000 accredited LEED professionals.
One of the relatively unsung recent corporate trends is the growth of sustainable practices (i.e., the consideration in business operations of environmental, social and economic factors), despite a sluggish economy and lack of direct statutory mandates at least in the U.S. The percentage of companies that are “highly engaged in sustainability” has nearly tripled in the last six years to forty-two percent in 2012 (see 2012 Greening of Corporate America, which surveyed 200 corporate executives). In fact, fifty-eight percent of companies are selling green products (i.e., products that are energy-efficient, save resources, reduce the carbon footprint of buildings, or have other green characteristics) and sixty-five percent of the companies surveyed believe that adopting sustainability practices gives them a competitive advantage (more than double the number in 2006).
Similarly, the Global Reporting Initiative 2011/12 reports that the number of companies preparing sustainability reports has increased between seventeen percent and twenty percent every year from 2007 to 2011 with ninety five percent of the two hundred and fifty biggest companies in the world now reporting their sustainability performance.
Additionally, green buildings are become the new normal in the non-residential building market. For example, forty-seven percent of companies surveyed in 2012 Greening of Corporate America stated that sixty percent or more of their new projects will be sustainably built. Similarly, the McGraw-Hill Construction Green Outlook 2013 expects that fifty-five percent of the non-residential construction in the United States is expected to be green by 2016 (an estimated $75 billion market). Despite the recent controversies associated with the adoption of LEED green building criteria (see, e.g., http://sustainability-counsel.com/2012/05/24/how-will-gsa-respond-to-congressional-opposition-to-leed-2012/), McGraw-Hill’s construction database (cited in the McGraw-Hill Construction Green Outlook Report) (which tracks bids and sub-bids by contractors) found the term “LEED” appears in sixty percent, by value, of project specifications.
The motivation is not entirely altruistic. Ninety percent of companies surveyed in the 2012 Greening of Corporate America report anticipate reduced costs due to sustainability practices, primarily from energy savings. Climate-change issues are also among these considerations. Trusted consultants are advising businesses that they will face more unpredictable and extreme weather, and disruptions to market and supply chains, thus “corporate risk management must evolve to help their organizations track these issues and respond.” Pricewaterhouse Coopers LLC (PwC), Risk Ready: New Approaches to Environmental and Social change (November 2012). Specifically, any “investment in long-term assets or infrastructure, particularly in coastal or low-lying regions, needs to address” more pessimistic climate change scenarios and “scrutinise the resilience and viability of … supply chains.” PwC, Too Late for Two Degrees? Low Carbon Economy Index 2012 (November 2012). In fact, PwC found that eighty-three percent of S&P 500 companies state that they are integrating climate change issues into their risk management processes.
In summary, despite the uncertainties in defining and funding sustainability initiatives, this concept is becoming an important element of corporate strategy.
The Tesla Model S has garnered almost universally rave reviews by the automotive press and wide criticism from some politicians and some investment pundits. An on-line investment advisor recently uncharitably called the Tesla company “Solyndra on wheels.” So what’s next? While the Model S has been delivered in small numbers (a few hundred) to owners and has been compared to a Mercedes or BMW by the automotive press, Tesla is far from being a money-maker. In a bold move it has been showing preproduction versions and taking orders for an ambitious next model. This is the Tesla X – a large, versatile 7 passenger SUV that will be available with two or all-wheel drive and battery packs up to 85kWh in size. The four wheel drive is accomplished by having two electric motors – one in the back and one in the front. The Model S is extremely fast with just one motor. Tesla has not made any performance claims for speed or range. The Model S has been real world tested by a few automotive journalists who got about 235 miles out of a claimed 265 mile battery pack in a Model S.
The Model X has two interesting features. The motors and battery pack are very low down in the car and smaller than the drive train in a conventional passenger car. That should give the Model X a low center of gravity and good handling. From photos of the Model X it looks like the interior is quite large, another benefit of the drive system used by Tesla. The other interesting feature are fold up rear doors that that rise up over the car’s roof. How practical that will be in tight parking spots and garages is unclear. The only production car with the same sort of doors was a 1950’s hyper-expensive Mercedes sports car called the 300SL. In that case the doors were impractical and a bit of an affectation.