Stick It To Carbon, Not The Man.

Editor’s note: The following is excerpted from Climate Shock (2015) by Gernot Wagner, Lead Senior Economist, Environmental Defense Fund, and Martin L. Weitzman, Professor of Economics, Harvard University. Published here with permission from Princeton University Press.

Gernot & MartinTwo quick questions:

Do you think climate change is an urgent problem?

Do you think getting the world off fossil fuels is difficult?

If you answered “Yes” to both of these questions, welcome. You’ll nod along, occasionally even cheer, while reading on. You’ll feel reaffirmed.

You are also in the minority. The vast majority of people answer “Yes” to one or the other question, but not both.

If you answered “Yes” only to the first question, you probably think of yourself as a committed environmentalist. You may think climate change is the issue facing society. It’s bad. It’s worse than most of us think. It’s hitting home already, and it will strike us with full force. We should be pulling out all the stops: solar panels, bike lanes, the whole lot.

You’re right, in part. Climate change is an urgent problem. But you’re fooling yourself if you think getting off fossil fuels will be simple. It will be one of the most difficult challenges modern civilization has ever faced, and it will require the most sustained, well-managed, globally cooperative effort the human species has ever mounted.

If you answered “Yes” only to the second question, chances are you don’t think climate change is the defining problem of our generation. That doesn’t necessarily mean you’re a “skeptic” or “denier” of the underlying scientific evidence; you may still think global warming is worthy of our attention. But realism dictates that we can’t stop life as we know it to mitigate a problem that’ll take decades or centuries to show its full force. Look, some people are suffering right now because of lack of energy. And whatever the United States, Europe or other high emitters do to rein in their energy consumption will be nullified by China, India and the rest catching up with the rich world’s standard of living. You know there are trade-offs. You also know that solar panels and bike lanes alone won’t do.

You, too, are right, but none of that makes climate change any less of a problem. The long lead time for solutions and the complex global web of players are precisely why we must act decisively, today.

What we know is bad, what we don’t is worse

If you are an economist, as we are, chances are you answered “Yes” to the second question. Standard economic treatments all but prescribe the stance of the “realist.” After all, economists live and breathe trade-offs. Your love for your children may go beyond anything in this world, but as economists we are obligated to say that, strictly speaking, it’s not infinite. As a parent, you may invest enormous sums of money and time into your children, but you, too, face trade-offs: between doing your day job and reading bedtime stories, between indulging now and teaching for later.

Trade-offs are particularly relevant on an average, national or global level. And they are perhaps nowhere more apparent on the planetary scale than in the case of climate change. It’s the ultimate battle of growth versus the environment. Stronger climate policy now implies higher, immediate economic costs. Coal-fired power plants will become obsolete sooner or won’t be built in the first place. That comes with costs, for coal plant owners and electricity consumers alike. The big trade-off question, then, is how these costs compare with the benefits of action, both because of lower carbon pollution and because of economic returns from investing in cleaner, leaner technologies today.

Economists often cast themselves as the rational arbiters in the middle of the debate. Our air is worse now than it was during the Stone Age, but life expectancy is a lot higher, too. Sea levels are rising, threatening hundreds of millions of lives and livelihoods, but societies have moved cities before. Getting off fossil fuels will be tough, but human ingenuity — technological change — will surely save the day once again. Life will be different, but who’s to say it will be worse? Markets have given us longer lives and untold riches. Let properly guided market forces do their magic.

There’s a lot to be said for that logic. But the operative words are “properly guided.” What, precisely, are the costs of unabated climate change? What’s known, what’s unknown, what’s unknowable? And where does what we don’t know lead us?

That last question is the key one: Most everything we know tells us climate change is bad. Most everything we don’t know tells us it’s probably much worse.

Stick it to carbon

“Bad” or “worse” doesn’t mean hopeless. In fact, no prediction of climate outcomes or damages can stand without being prefaced by a version of the words unless we act. We don’t venture predictions only to see them become true. We talk about where unfettered economic forces may lead in order to guide them in a more productive, better direction. And guide we can.

Increasingly intense hurricanes, more floods, more droughts, not to say anything of rising temperatures and rising seas are what we know is happening and will continue to happen. Tallying those effects — at least the bits we can put a dollar figure on — results in a minimum cost of $40 per ton of carbon dioxide we pump into the atmosphere today. But on average, the world isn’t considering anything close to these costs. The average global price is closer to negative $15 per ton, considering the massive fossil fuel subsidies in many countries.

None of that yet includes the truly frightening low-probability events. There’s a huge difference between a likely sea-level rise of 0.3 to 1 meters (1 to 3 feet) by the end of this century and eventual possible extremes of 20 meters (66 feet) or more in future centuries. And it’s debatable whether we can describe any of these extreme scenarios as “unlikely” or “low probability” to begin with. By our own, conservative calculations, there’s about a 1-in-10 chance of eventual global average warming in excess of 6 C (11 F), something that can be described only as “catastrophic” for society as we know it.

It would be easy to conclude that capitalism is the problem. Capitalism is indeed at the core of the problem. Or rather: misguided market forces are.

One seeming solution would be to simply change our ways — voluntarily change our behavior to be greener. If only we slowed down, went back to the land, and generally did more with less, climate change would be a thing of the past. Not quite. The math on voluntary action simply doesn’t add up. And the calculus of changing capitalism as we know it — however desirable that may be as an independent goal — is daunting, to say the least. It also confuses the issue.

Some, like author Naomi Klein, call for “taxing the rich and filthy.” That’s a nice turn of phrase. One might agree that we probably should be taxing the rich more. But that’s a different problem entirely. First and foremost, we ought to be taxing the filthy. Instead of “sticking it to the man,” the point is to stick it to carbon.

Far from posing a fundamental problem to capitalism, it’s capitalism, with all its innovative and entrepreneurial powers, that is our only hope of steering clear of the looming climate shock.

That’s not a call for letting markets run free. Laissez-faire may sound good with the right French accent — in theory. But it can’t work in a situation in which prices don’t reflect the true costs of our actions. Unbridled human drive — erroneously bridled drive, really — is what has gotten us into this current predicament. Properly channeled human drive and ingenuity, guided by a high enough price on carbon to reflect its true cost to society, is our best hope for getting us out.

Published on Ensia.com on February 25th, 2015. Continue reading in Climate Shock, available at booksellers everywhere.

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The Top Three Freight Sustainability Metrics

Do your freight transportation metrics include measures for sustainability?

With freight accounting for 16 percent of corporate greenhouse gas emissions, establishing green freight practices is becoming a greater priority for large shippers.

GF-Handbook-CoverTo learn more about how to establish freight sustainability metrics, check out Chapter 2 in EDF’s Green Freight Handbook – a practical guide to the strategies companies are using to reduce their freight operations’ impact on overall greenhouse gas emissions.

Establishing baseline metrics is the logical starting point for your green freight efforts. Freight sustainability metrics provide clarity, and keep transportation teams focused on the goal of achieving emissions reductions that are measurable, and therefore meaningful.

Your baseline will include both broad corporate freight sustainability metrics and more specific freight efficiency metrics.

At a corporate level, the three most popular metrics to gauge freight sustainability , are:

  1. Emissions per ton-mile – the average emissions associated with moving one ton of freight for one mile.
  2. Absolute freight emissions – the total greenhouse gas emissions generated by transporting freight.
  3. Total fuel consumption – the fuel used by direct freight operations and by third-partly logistics companies (3pl) and carriers in the transport of products.

Our Green Freight Handbook offers advice and formulas to determine all these numbers.

At a specific level, other freight efficiency metrics –such as average emissions per shipment, percentage of ton-miles by mode, and average miles traveled per shipment – link to specific strategies that, taken together, will ultimately drive the results you see in your corporate freight sustainability metrics.

In Emissions Reduction, Activity Doesn’t Always Equal Achievement

Real progress in freight sustainability can only be measured in numbers. That’s why starting with a baseline is so crucial. If your strategies don’t shift the numbers in a positive direction, they are clearly not the right strategies.

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Consumers Get Their Say in Supporting Sustainable Products

Like teenagers, all ground-breaking products or ideas go through an awkward adolescent phase.  And, like teenagers, the only way products or ideas can move past the clumsy stage and blossom into a sought after, form-meets-function icon is through experience.  Meaning, real consumers have to put them through their paces: does this work? How could it work better? Revise, improve, re-test, repeat… that’s how you make something truly effective; truly great.

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All this is by way of acknowledging a group of sustainable-minded collaborators on the coming-out party this week for Walmart’s “Sustainability Leaders Shop”, an online shopping portal that “will allow customers to easily identify brands that are leading sustainability within a special category”.  It is, literally, the very first time a quantifiable, science-based index of various products’ sustainable provenance is being placed in the hands of consumers at the scale that only Walmart can provide. Read more

To Drive Down CO2 Emissions, Focus on Freight

Did you know that, as the energy demand for passenger vehicles declines steadily over the next 25 years, the fuel demand for commercial transportation is predicted to increase 40 percent over current levels?

That’s a difference of well over 10 million oil-equivalent barrels per day.

Most of that demand will come from heavy-duty trucks, which account for 57 percent of all logistics-related greenhouse gas (GHG) emissions, and 16 percent of total corporate GHGs.

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As a society, our appetite for goods of all kinds—food, electronics, apparel, housewares – is growing. As the population grows, demand grows, and so does the number of trucks on the road. Read more

2015: A Year of Business and Policy Action on Climate

Tom Murray, VP Corporate Partnerships, EDFFor most of us, New Year’s marks the time when we set annual resolutions (personal and professional) and get to work on tackling the priorities for the year ahead. In my hometown of Washington, DC a new year also means that Congress comes back into session, lawmakers and speechwriters ready their agendas and proposals, and the president delivers the State of the Union address.

From what we heard last night and in recent announcements, 2015 could be a big year for action on climate – from government and the private sector alike. But big results will take leadership on all fronts.

Leadership from our government…

Addressing climate change is supported by the vast majority of Americans and the Obama administration is taking bold steps to curb the United States’ contribution to climate change. Last night, we saw President Obama tell the nation “no challenge – no challenge – poses a greater threat to future generations than climate change” in his State of the Union address. The President also strongly reiterated his commitment to work to ensure “American leadership drives international action” on climate change.

It is clear that climate change is an urgent national priority. Fortunately, the Administration is carrying out its promises under the Climate Action Plan, and steps taken and soon-to-be-taken have helped put us on the right path. From the proposal to reduce carbon pollution from power plants, expected fuel economy standards for medium- and heavy-duty trucks, to last week’s announcement of steps to address methane emissions from the oil and gas sector, we have seen a lot of progress to address climate change since the last State of the Union. Further, the November announcement of a joint China-U.S. agreement to address climate change on a global scale underscores how crucial U.S. leadership is at this juncture in achieving a binding worldwide climate deal. Much more work remains and leadership at all levels will be necessary to meet our climate goals. Read more

The Green Freight Journey: Create Momentum

The Green Freight Journey is a five-step framework for freight optimization projects. In this blog series, EDF is taking a brief look at each step of the Journey.

Once you have established a Green Freight goal and defined metrics for tracking your progress, it’s time to start putting the wheels in motion. Below are some tips for taking the next step, creating momentum, in your Green Freight Journey:

  • Choose a pilot project – Select pilot projects that can be scaled up and replicated elsewhere in the organization, if successful. See our Green Freight case studies for examples of replicable pilot projects.
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  • Track results – Be sure to capture good data and use the metrics you created in step one. The data you produce will be a powerful tool in communicating the results of your pilot to employees, customers, and key stakeholders. The data will also help you identify new opportunities.

Below is an example from our Green Freight Handbook, which can help you determine which pilot project would be most impactful for your organization.

Green Freight Diagnostic

To learn more about the Green Freight Journey, watch our recorded webinar, where we go into more detail about the Green Freight Journey framework, review real-world case examples and highlight tools EDF is making available to help companies progress on their journey.

Steps on the Green Freight Journey:

The Green Freight Journey: Take Your First Step

The Green Freight Journey is a five-step framework for freight optimization projects. In this blog series, EDF is taking a brief look at each of the steps along the Journey.

The first step, Getting Started, is about deciding where you want to go. To do this, companies:

  • Gather internal stakeholders  such as supply chain or transportation executives, sustainability officers or EHS professionals, and an executive sponsor.
  • Define their green freight objective  such as reducing climate warming emissions or cutting fossil fuel consumption.
  • Determine key metrics – by reaching each agreement on how to objectively measure progress. A metrics-driven approach helps to keep you focused on the actions that will deliver the biggest results for the best returns.

When determining your metrics, consider these examples from the EDF Green Freight Handbook:

Metrics

To learn more about the Green Freight Journey, watch our recorded webinar, where we go into more detail about the Green Freight Journey framework, review real-world case examples and highlight tools EDF is making available to help companies progress on their journey.

Steps on the Green Freight Journey:

EDF Climate Corps Continues to Drive Results for Private Equity Firms

The results are in. As my colleague Victoria Mills wrote recently, this year’s cohort of EDF Climate Corps fellows found $130 million in potential energy savings across 102 organizations.

Among the engagements, 12 fellows worked with private equity firms and portfolio companies on a diverse set of projects. Each engagement offers its own story, but we’d like to showcase a few examples demonstrating the value the Climate Corps program can bring to firms of all sizes and at all stages of understanding of energy management.

Energy audits and retrofits for a major manufacturing company

amiHellman & Friedman’s portfolio company Associated Materials, which specializes in exterior building products, hosted two fellows this past summer, its first year with the EDF Climate Corps program.

Fellow Karunakaren Muthumani Hariharan audited two of the firm’s 11 manufacturing locations to identify opportunities for energy efficiency, including lighting upgrades, process equipment upgrades and manufacturing process modifications. He suggested improvements with potential net present value savings greater than $1.4 million and reductions of greenhouse gas emissions by approximately 2,700 tons per year. Hariharan also proposed funding the energy efficiency projects through a new Green Energy and Sustainability Fund.

Krishna Chaitanya Vinnakota analyzed Associated Materials’ total expenditure on energy, over $15 million, and focused on energy saving opportunities in the company’s supply centers, including an approach that could result in energy expenditure savings of 20 to 50 percent in some supply centers. He also suggested strip doors as a simple but effective way of conserving energy during winter. It’s a project that could save the approximately half a million dollars per year if rolled out across the company’s 125 supply centers and 11 manufacturing plants. Read more

It Can(‘t) Be Done

I recently read the inspiring story of how Farmers Electric Cooperative, one of the smallest utilities in the country, overcame some formidable financing challenges to develop the biggest commercial solar project in Iowa.

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This idea, of conquering seemingly impossible obstacles, is one I’ve seen reflected in a number of new advances in corporate sustainability, including many discussed at the conference and others from our own work. Each demonstrates how entrepreneurs (and intrapreneurs) are harnessing major environmental and social challenges to create real solutions: Read more

Good News for America: Cleaner, More Efficient Trucks that Protect Our Environment and Strengthen Our Economy

jason_mathers2014 is shaping up to be a great year for truck equipment manufacturers. Sales through October are running 20% higher than their 2013 levels. It’s a banner year that continues to pick-up steam. 2015 is looking even stronger, with forecasts suggesting it will be the 3rd strongest year ever for truck sales. There are several factors driving this market. Higher fuel efficiency is top among them.

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The CEO of Daimler Trucks, the leading producer of class 8 trucks for the U.S. market, acknowledged recently that their most efficient engine and transmission combination was “already sold out for 2014” and that the “demand is beyond their expectations.”

It’s not just Daimler that is having a good year.

2014 is a banner year for truck sales; and 2014 trucks are the most efficient ever.  2014 trucks are the most efficient ever because of smart, well-design federal policy.  This is the first year of the 2014-2018 heavy truck efficiency standards that will:

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  • provide $49 billion in net program benefits.

The 2014-2018 heavy truck fuel efficiency and greenhouse gas program demonstrates that climate policy benefits businesses, our economy, and human health, while also cutting harmful climate pollution.

Or, as Martin Daum, president and CEO of Daimler Trucks North America noted, these standards “are very good examples of regulations that work well.”

In its first year of existence, the 2014-2018 fuel efficiency and greenhouse gas program is boosting sales for manufacturers, reducing operating costs for fleets, and cutting climate pollution for all of us. It is clear that well-designed federal standards can foster the innovation necessary to bring more efficient and lower emitting trucks to market.   That is very good news, because we have an opportunity to further improve and strengthen these standards – creating more economic and environmental benefits in the process.  For this, we all can be thankful.