Before Donald Trump won the US presidential election, he publicly declared he believed global warming to be a hoax.
Now it looks like he is going to walk the campaign talk and pull the US out of the landmark Paris climate accord.
European leaders have been openly critical of his plans, but the most significant dissenting voice may come from America’s largest companies.
Yet why would industry, including oil giants such as Exxon, band together on the issue? Here are three reasons:
1) The clean economy
Tesla chief executive Elon Musk has reportedly threatened to quit his advisory positions in the White House if the US exits the deal.
His reasoning is quite straightforward. He runs an electric car company and is selling solar panels. He believes in a greener, cleaner future.
But what about Apple, Google, Facebook, Dow Chemical, JPMorgan, General Electric and dozens of other company chief executives?
Business decisions for the most part come down to dollars and cents, costs and benefits.
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Fossil fuels such as oil, gas and coal have traditionally been the cheapest form of energy. Together they account for 86% of the power used worldwide.
But the cost of harnessing renewable energy sources such as solar, hydro and wind has dropped dramatically over the last decade.
Granted, they often still receive large government subsidies. But some research shows it can be cheaper than grid electricity and it can even generate savings – so businesses find it increasingly appealing.
Walmart, for example, claims it saves $1bn a year by getting a quarter of its power from renewable sources.
Many of the world’s biggest energy players, including BP, Total and Royal Dutch Shell have also been pouring hundreds of billions of dollars into researching and developing more sustainable, clean sources of energy, partly encouraged to do so by the collapse in crude prices in 2014.
A rollback on US government policy would be counterproductive to that.
2) Climate change risk
Climate change, or global warming, refers to the damaging effect on the atmosphere of gases, or emissions, released from industry and agriculture.
Whether you’re a tree-hugger, a climate change sceptic or somewhere in between, there is hard and soft data to underscore the financial toll environmental change takes on business and society.
That’s why companies like Kellogg and General Mills, which depend on the weather to grow grains to make cereals for example, are looking for ways to protect their supply chain.
And they’re also mindful that their new and future customers are the millennial generation, which will make up half of the global workforce by 2020. The younger demographic is far more passionate and vocal about social and environmental issues, particularly on social media.
What was agreed in Paris?
The Paris accord is meant to limit the global rise in temperature attributed to emissions. This requires signatories to:
- Keep global temperatures “well below” the level of 2C (3.6F) above pre-industrial times and “endeavour to limit” them even more, to 1.5C
- Limit the amount of greenhouse gases emitted by human activity to the same levels that trees, soil and oceans can absorb naturally, beginning at some point between 2050 and 2100
- Review each country’s contribution to cutting emissions every five years so they scale up to the challenge
- Enable rich countries to help poorer nations by providing “climate finance” to adapt to climate change and switch to renewable energy
3) Global reputation
It is hard enough getting two political parties to agree with each other on issues. Imagine trying to do that with nearly two hundred countries.
The Paris deal for the first time united most of the world in a single agreement on climate change.
It was signed by 195 countries out of 197 (with only Syria and Nicaragua abstaining) and came into force last November.
So far only 147 out of the 197 countries have ratified the accord, including the US, which is the world’s second-largest carbon emitter behind China.
If the US backs out, the deal becomes far less effective and President Trump risks further alienating its allies.
Ultimately that could make it harder to do business in those countries, which is bad news for US firms.
Source: BBC News