Business Climate Advice

Climate Activists storm the bastion of Exxon Mobil, here seen without their shareholder disguises.

It’s not only big oil companies under siege from anti-fossil fuel activists. All businesses, small and large, private and publically traded are in the crosshairs.

Robert Bradley has a recent post directed at leaders of businesses, both large and small with respect to global warming/climate change. The article is Climate Alarmism and Corporate Responsibility at Master Resource. It is important advice since the large majority of business people are ethical and want to do the right thing, but their good intentions can be used against them in the current feverish media and political environment.

Everyone including business leaders needs to distinguish between two related but different threats from global warming/climate change. The first is the direct impacts upon one’s business and livelihood from natural conditions. The second is the indirect threat to prosperity from misguided public policies to “fight climate change.”

Climate Science: Where’s the Alarm?

On the outlook for the climate, of course there are both risks and opportunities to anticipate. Corporate plans typically involve assumptions and projections considered to be believable to a “reasonable person.” And as Bradley points out, no reasonable person can be expected to go beyond IPCC science, which is premised on concerns about global warming/climate change. Bradley:

Climate alarmism is not supported by the scientific reports of the Intergovernmental Panel on Climate Change (IPCC) on close inspection. There is no direct linkage between the IPCC finding that “the balance of evidence suggests a discernible human influence on climate” and climate alarmism. In fact, there is ample evidence in the scientific literature that the enhanced greenhouse effect is benign. Top climate economists have gone further to conclude that a warmer and wetter world predicted by climate models would produce net benefits in future decades for the United States and other areas of the world with the free market means to adapt. (my bold)

Corporate policymakers can discount climate alarmism by understanding several key arguments and facts:

  • Increasing atmospheric concentrations of carbon dioxide (CO2), the preeminent anthropogenic greenhouse gas, benefit plant life and agricultural productivity and are not a direct human health issue. It will be centuries before the plant optimum concentration is reached and exceeded, creating a long potential glide path for hydrocarbon energies to “green” planet earth. 
  • The surface warming (“greenhouse signal”) of recent decades shows a relatively benign distribution. Minimum (night, winter) temperatures have been increasing twice as much as maximum (daytime, summer) temperatures.[9] Higher nighttime temperatures and longer growing seasons reinforce the aforementioned carbon fertilization effect to aid plant growth and agricultural productivity.

  • Model-estimated warming from anthropogenic effects has fallen over time. . .The chart above shows IPCC (2007) projecting warming at 0.38C per decade and the last report (2013) dropped to 0.17 C per decade. With a more than 50 percent drop in the IPCC estimate in six years, there is clear evidence that model revision and more realistic forcing scenarios have weakened the alarmist scenario.

  • Today’s lower model-predicted warming estimates may still be too high. At the half way point of the feared doubling of the warming potential greenhouse gases in the atmosphere, the model scenarios are over predicting warming by a factor of two or more.

  • The two global temperature measurements from satellites and balloons in their two decades of existence have not picked up the “greenhouse signal” where it should be most pronounced or at least discernible—the lower troposphere. This suggests that surface thermometers may be overestimating warming and/or the surface warming is primarily the result of other factors than just the enhanced greenhouse effect (such as increased solar radiation). A natural warming trend neuters the case for climate alarmism.

  • The reduced growth rate of greenhouse gas buildup in the atmosphere in the last decade, as much as half the rate of some alarmist scenarios, extends the warming timetable to facilitate adaptation under any scenario. The reduced buildup is primarily related to greater carbon dioxide intake—the “greening of planet earth” phenomenon of robust carbon sinks.

  • Scientists who are confident about pinpointing the greenhouse signal from the surface temperature record have not substantiated a greenhouse signal with weather extremes. “Overall,” concluded the IPCC, “there is no evidence that extreme weather events, or climate variability, has increased, in a global sense, through the 20th century, although data and analyses are poor and not comprehensive.”


Business leaders have to balance the needs and interests of various stakeholders in the enterprise: principally the customers, the employees and the investors, as well as the larger society. Today’s social context presents the hazards of misguided public policies and regulations against fossil fuels, despite the unconvincing science case for them. The main risks are more expensive and unreliable power, more costly energy of all kinds, and a sluggish economy burdened with unnecessary expenses. To cope, Bradley makes some “no regrets” suggestions:

“No regret” policies—policies that are economical whether or not GHG emissions are worth addressing—should be pursued in their own right to help defuse the climate change issue. A prominent example is for businesses to profitably lower their energy usage wherever possible. Energy service companies in recent years have executed long-term contracts with guaranteed savings to completely manage the energy function of commercial and industrial users. Total energy outsourcing improves the allocation of core competencies and creates new incentives for optimal energy usage to benefit each party to the agreement.  (my bold)

Other pro-market “no regret” public policies that would have the effect of profitably reducing greenhouse gas emissions over time include:

  • Reducing criteria air pollutants in urban areas not in compliance with the Clean Air Act. 
  • Modernizing and simplifying the tax code to provide more incentives for capital-intensive businesses to modernize their physical capital, thus lowering energy usage and related GHG emissions. 
  • Maintaining incentives (or removing disincentives) for hydroelectric and nuclear power generation facilities that produce carbon-free electricity.Increasing energy conversion efficiencies of new electric generation capacity and a growing market share of natural gas-fired power relative to coal are natural market processes that will complement the above public policy reforms. Together, they will ensure that GHG emissions are not greater than their free market levels and will continue to fall per unit of output (the decarbonization phenomenon).

Summary

Agenda-driven climate alarmism should be rejected by corporate America on pragmatic and social responsibility grounds. Not only does the balance of evidence point toward net social benefits from a carbon dioxide enriched and moderately warmer and wetter world. Energy reality concludes that any short-term regulatory approach is futile and wasteful compared to perfecting business-as-usual strategies and using the wealth of energy abundance and free global markets to adapt to any weather and climate conditions in the future.

 

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