The Will to Change: Private Enterprises Reduce Their Emissions

Summary: Global average temperatures have been at record levels month by month up to the time of writing (August 2016), and for most years since 2000.  When attention focuses on the U.S., the number of days in a year above 100ºF (37.8ºC) is forecast to grow dramatically, for example by 2060 and 2100.

Contrary to the operating strategies of large fossil fuel companies, we present here examples of two companies and an industry that embrace the changes demanded by the growing global warming crisis.  A large electricity generating utility, NRG Energy, is developing renewable energy sources as part of its electricity portfolio.  The American trucking industry embraces the regulations just issued requiring trucks to be more fuel efficient and to emit lower amounts of greenhouse gases.  Apple, following examples set by Walmart and Google, is contracting with renewable energy providers for long-term supplies of electricity to fulfill its growing needs.

When confronting the challenges of global warming American capitalism has to rediscover the positive entrepreneurial attitude that led to American expansion in the last two centuries.  Fossil fuel companies are resisting such change.  But the three examples presented here show what can be achieved when will prevails.  They illustrate the “can-do” approach that will successfully address global warming.

  

Global average temperatures in 2016, month by month, are higher than in recorded history for the same month in earlier years, according to the U. S. National Aeronautics and Space Administration.    Three of four recent heat waves yielding record high temperatures were caused at least in part by man-made global warming .

Temperature extremes in the U. S. are projected to increase drastically in the remainder of this century (see the graphic below)

Number of days in 48 states of the U. S. in each year in which the temperature exceeded 100ºF (37.8ºC) historically averaged from 1991 to 2010 (upper left), and projected for the case that no measures are in place to abate emissions of greenhouse gases, for 2060 (center) and 2100 (lower right).  In each map, NEUTRAL SHADING characterizes 0-5 days per year; TAN, 5-10 days; LIGHT ORANGE, 10-25 days; MEDIUM ORANGE, 25-50 days; and FULL ORANGE, more than 50 days.  The BOLD NUMBERS give the historical or projected number of days per year over 100ºF for the cities named.

Prepared by and adapted from Climate Central http://www.climatecentral.org/;

Source: The New York Times http://www.nytimes.com/interactive/2016/08/20/sunday-review/climate-change-hot-future.html. 

  

The data for the recent past in the upper left map show that the area around Phoenix, AZ and the southern plains are already very hot, as many Americans already know.  But if worldwide emissions continue unabated for the rest of the century warming of the climate will continue.  Climate Central projects that much of the U. S. will have more days over 100ºF in regions that are now relatively temperate.  By 2100 this trend yields projections for drastically hot climates in the California central valley, the southwestern desert, and much of the central Great Plains extending all across the South to the Atlantic coast.  These results reflect that projected global average temperature increases at any time are directly related to the additional amount of carbon dioxide (and other greenhouse gases, GHGs) in the atmosphere at that time.

Extremes of heat of the extent shown in the above graphic strongly suggest that agricultural yields may suffer seriously, and that human wellbeing may be severely affected.

Companies and industries grasp the need for reduced emissions.  NRG Energy is the largest independent electricity producer in the U. S.  The power industry emits the most GHGs, mostly as carbon dioxide (CO₂), of any sector in the economy, burning vast amounts of fossil fuels to drive generation.  In 2014 NRG was the fourth largest emitter in the power industry. 

David Crane became its Chief Executive Officer in 2003.  Although his earlier experience had been in the conventional power industry, shortly after taking over he undertook to transform a significant portion of NRG’s generation into renewable energy production.  He invested in the Ivanpah thermal solar plant in the California desert, and in a smaller solar panel farm in Massachusetts, as well as wind energy and electric car charging stations.  Mr. Crane stated “It’s the destiny of NRG to be a leader, to create a more sustainable and prosperous future while winning the fight against climate change.”  One year ago NRG set the goal of reducing emissions by 90% by 2050. 

The Ivanpah plant, however, encountered problems; it produced less power than expected, and a May 2016 fire in a major component damaged its ability to generate electricity.  NRG also faced competitive challenges from solar panels, whose price was falling more than expected. 

As a result, the NRG board and its investors lost faith in Mr. Crane, and he was replaced late in 2015 by the company’s Chief Operating Officer, Mauricio Guttierez.  Mr. Crane’s problems may have been due to his ambition to implement renewable energy too fast.  Indeed, Mr. Guttierez is continuing to steer NRG along a similar renewable path, but at a more measured pace.  In retrospect Mr. Crane’s vision served an important function, pioneering a positive culture in the company to expand the role of renewable energy in its operations.

The American trucking industry worked to prepare new fuel standards in collaboration with the Federal government and some environmental organizations.  Currently the nation’s truck fleet averages about 6 miles per gallon (39 liters per 100 km) of fuel.  Although trucks number only 5% of the vehicles driven they produce about 20% of the CO₂ emitted by transportation vehicles.  The industry was involved in the negotiations leading to the final rule, winning its support.  The rule imposes an improvement in efficiency of 25% over ten years, producing an estimate of US$170 billion in savings over that time and reducing fuel demand by 2 billion barrels in the useful lifetime of a tractor.  The costs of modifying the tractors to achieve this efficiency are recovered by the long-term savings in fuel use.  PepsiCo provides an example of corporate support for the rule.  Its chief executive said “The steps we have taken to boost efficiency of our fleet … have significantly reduced emissions while lowering our operating costs.  And we are committed to doing much more.”

This rule complements the Obama administration’s earlier rule governing passenger vehicles, whose fuel efficiency is to double over a similar period of time.

In its editorial on the trucking rule, the New York Times wrote “it is heartening, if not downright astonishing, to see an industry targeted by an aggressive rule to reduce GHGs welcoming that rule. It is also heartening to be able to provide proof … that regulators and industry can, in fact, produce a mutually acceptable result”.  The Times contrasts this case with the fierce opposition of the American electricity industry to President Obama’s Clean Power Plan, the rule intended to reduce emissions from large power generation plants.

Apple Goes Green.  The technology company Apple is on track to furnish most of its electricity demand in the U. S. from renewable sources – solar, wind and hydroelectric power, both in California (where its head office is located) and elsewhere in the U. S.  Its demand is growing rapidly, because not only is it building a new corporate headquarter campus and increasing the number of retail outlets, but importantly its power needs for cloud storage are growing rapidly. 

Like Walmart and Google, Apple has been granted federal recognition as a wholesale provider of electricity, permitting it to operate nationwide; in fact its main customer will be itself.  For example, about 50% of its needs will be provided by a 25 year contract with First Solar’s California Flats solar farm, now under construction.  Apple’s motivations are both environmental and economic; renewable energy provides carbon-free power, and its contract costs are highly favorable.  Google’s Gary Demasi, director of operations for data center energy and location strategy, praised Apple’s strategy, saying “Renewable energy, from a cost perspective, is now competitive with other forms of energy, much more so than it was a few years ago.”

 

Discussion

 

American expansion in the nineteenth and twentieth centuries, and its development into an economic power, were fostered by a positive attitude with respect to enterprise, a “can-do” culture that saw unmet needs, overcame obstacles and created successful enterprises in the private sector.   Machinery and technologies were invented, matured into widespread use, and perhaps declined as progress in allied fields overtook them.   But in the late twentieth century scientific investigations showed that certain technologies had dangerous or toxic side effects on society, demanding new creativity to overcome them.  But the industries in question, instead of rising to the challenge, sought to entrench themselves in the status quo, resisting change.  Instead of continuing with a “can-do” mentality, they adopted a “won’t change” mindset, overtly resisting change, seeking to continue reaping profit from their tainted technologies.  The conventional energy industry, based as it is on burning fossil fuels, is a prime example of the “won’t change” framework.  It promotes continued use of fossil fuels indefinitely, just as it has for more than a century.  It fails to concede the unintended harms wrought by use of fossil fuels on the global climate, and dismisses or belittles the damage foreseen by continued release of GHGs.

The three cases outlined here, NRG and its changing culture of developing renewable energy, the American trucking industry embracing the regulatory changes that will reduce GHG emissions, and Apple’s development of its own renewable energy sources, are all examples of a resurgent “can-do” operating culture in American enterprise.  This attitude is essential in addressing the worldwide crisis of global warming.  These companies and groups have embraced the existence of the problem and recognized that they can play a significant role in minimizing its future effects.  They shun the “won’t change” approach shown by many.  They accept the challenge that global warming confronts us with, and proceed enthusiastically with a “can-do” attitude.  The winds of change are at their backs.

© 2016 Henry Auer