America wakes up to global climate change

Jeffrey D. Sachs, Project Syndicate

After years of debate in the United States, and opposition to action by the Bush administration, America is finally waking up to the reality of global climate change. Leadership is still not coming from the president, but the private sector has begun to act.

Leaders of major U.S. companies have decided that global man- made climate change is real, must be controlled, and that business must play a constructive part in the process. Thus, even as the Bush administration and some scientific contrarians pretend that there is no problem, U.S. corporate leaders are seeking practical solutions.

The basic situation has been clear for years. Global use of fossil fuels is contributing to a sharp rise in atmospheric carbon dioxide, which is causing the Earth to warm. Rainfall patterns are changing. Deserts and dry regions are becoming drier.

Extreme weather events such as hurricanes and typhoons are likely to increase. Flooding in Europe is likely to intensify, a process that may already have begun. Sea levels are rising, and could climb sharply if global warming leads to a destabilization of the Greenland and Antarctic ice sheets. In short, the scientific evidence is strong and growing that the planet is at grave risk, with many ill effects already being felt and more to come.

The proper responses are also increasingly understood. We must move to a sustainable energy system, one that does not mean a huge increase of carbon in the atmosphere. This will require a shift to renewable energy sources such as solar power, and perhaps nuclear power, as well as new technologies to capture carbon dioxide at power plants and then to dispose of the carbon dioxide in safe underground deposits. Society will have to pay a price for these investments in new energy technologies, but the benefits will be vastly greater than the price.

The U.S. is the world's major emitter of carbon dioxide from energy use, but it has done the least among all major economies to confront the global challenge. The Bush administration claims that more research is needed before any action is taken.

Yet real action in the U.S. is starting, thanks to leadership in other parts of the world, and thanks to the enlightened understanding of some major American businesses. First, the rest of the world ratified the Kyoto Protocol to control emissions of carbon dioxide. At the beginning of this year, Europe introduced a new Greenhouse Gas Emissions Trading Scheme that uses market- based incentives to control carbon emissions. American companies operating in Europe are part of that system for their European- based emissions, so that U.S. companies are being pulled into climate control even if their own government avoids the issue.

Second, major U.S. investors, such as pension fund managers, are realizing that U.S. companies that fail to control their emissions may be vulnerable to financial losses in the future. They know that, sooner or later, the U.S. will have to join the rest of the world in controlling climate change. At that point, power companies that use antiquated technologies that emit massive amounts of greenhouse gases may face serious financial losses.

So investors are telling companies to report their carbon emissions today in order to assess future liabilities. Similarly, many company bosses know that pretending that climate problems do not exist is bad for shareholders, because reality will one day strike. They know that investing today in clean technologies can give them a long-term competitive advantage. As a result, many companies are taking steps now to limit their emissions to avoid future financial liabilities and a lack of investor confidence.

The most dramatic breakthrough of this kind occurred when General Electric, one of the world's most important, innovative, and respected companies, announced that it was going "green" with a major new corporate focus on environmentally sound technologies and a commitment to limit its own greenhouse gas emissions. With GE's leadership, which it termed "ecomagination" (combining ecology with imagination), many U.S. businesses are sure to follow.

It is too early to count on success in engaging the U.S. on climate change. The Bush administration continues to delay and to avoid sound science. Yet it is reasonably clear that a tipping point has been reached. Reality is catching up with the U.S., as it already has elsewhere in the world. As U.S. citizens and businesses continue to suffer the results of climate change -- heat waves, droughts, hurricanes, and floods -- more and more Americans, including an increasing number of business leaders, will press America's political leaders for real action.

The solutions will not be easy, and the effort must last over many decades in all parts of the world. But the effort needs to start now. As with Europe's new carbon trading, all producers and consumers around the globe will need to face market incentives to adopt technologies and consumption patterns that slow (and eventually stop) the increase of greenhouse gases in the atmosphere. We will all need to pay a "market price" when we contribute to global climate change, so that we give true economic incentives to sustainable energy systems and new public investments -- for example, mass transit -- that reduce greenhouse gas emissions and thereby head off future climatic disasters.

The writer is Professor of Economics and Director of the Earth Institute at Columbia University.