The Paradox of 'Climate Profiteers'

(by Joel Makower) You gotta love the conservative media. They’ll grasp any available straws, however thin, to pooh-pooh climate action. For most of the past two decades, of course, the complaint was that any effort to
stem greenhouse gas emissions would ruin the economy, forcing big
business to all but fold up their tents and the global economy to go
down the tubes.

Now that a growing corps of corporations are mustering the moxie
to actually view climate change as an opportunity as well as a
challenge, the complaint is something entirely different:

Big business is engaging in climate profiteering!

Hardy thanks to Wall Street Journal columnist Kimberly
Strassel for unwittingly providing my Friday morning entertainment
not long ago with her href=”
id=110009578” target=”new”>essay bemoaning self-serving corporate
on climate change. The news hook was href=”
news/news_third.cfm?NewsID=34458” target=”new”>the January 22 
of the href=”” target=”new”>U.S. Climate Action
, a coalition of Big Business and Big Green calling
on Congress and the Bush administration “to quickly enact strong
national legislation to require significant reductions of greenhouse
gas emissions.”

Clearly, such collaboration in the name of climate change was
more than the Journal’s editorial board could bear. Strassel
took issue with the ten companies (the number has since grown)
present at the creation of this new group:

Four of the affiliates – Duke, PG&E, FPL, and PNM
Resources – are utilities that have made big bets on wind,
hydroelectric, and nuclear power. So, a Kyoto program would reward
them for simply enacting their business plan, and simultaneously
sock it to their competitors… . DuPont has been plunging into
biofuels, the use of which would soar under a cap… . Caterpillar
has invested heavily in new engines that generate “clean energy.”
British Petroleum is mostly doing public penance for its dirty oil
habit, but also gets a plug for its own biofuels venture.

Finally, there’s General Electric, whose CEO Jeffrey Immelt these
days spends as much time in Washington as Connecticut. GE makes all
the solar equipment and wind turbines (at $2 million a pop) that
utilities would have to buy under a climate regime. GE’s revenue
from environmental products long ago passed the $10 billion mark,
and it doesn’t take much “ecomagination” to see why Mr. Immelt is
leading the pack of climate profiteers.

Shame on all you corporations! Shame for making money while doing
the right thing! Shame for doing well while doing good! What were
you thinking?

The Journal, of course, is being absurd, not to mention
hypocritical. I’d be shocked if any members of its editorial board
ever deigned to criticize “war profiteers,” “Katrina profiteers”
or “health care profiteers,” never mind the windfall profiteering of
Big Oil or Big Pharma.

The reality is that a good many large corporations stand to gain
mightily from likely and imminent U.S. national climate policies,
however timid they may be. We’ve already seen that in Europe, where
the EU’s Emissions Trading Scheme has produced winners (and losers).
And in the be-careful-what-you-wish-for category, some of these
companies aren’t, suffice to say, environmentalists’ heroes.

All of which is driven home in a recent investment advisory from
Citigroup Research, part of the Citigroup financial empire. The 120-
page report, titled “Climatic Consequences” (href=””
target=”new”>Download - PDF
), by Edward M. Kerschner and Michael
Geraghty, discusses “the investment implications of a changing
climate.” It is, in my opinion, one of the more sober and succinct
discussions of the how companies will be affected, positively and
negatively, as the impacts of climate change accelerate – along
with the market and political changes aimed at minimizing them. I
recommend it highly to anyone interested in business and climate

Kerschner and Geraghty offer up dozens of companies that are well
positioned to do business in a climate-constrained world. The
companies will benefit from three different implications of climate

  • Physical: Select U.S. natural gas exploration and
    production companies, farm equipment suppliers, agricultural
    biotechnology companies, and select U.S. property insurers.

  • Regulatory: Select electric utilities, engineering
    and construction firms, capital goods companies, natural gas
    suppliers, select automobile companies, food processors, fertilizer
    suppliers, wind and solar power companies, and companies focused on
    building energy efficiency.

  • Behavioral: “Climate consultants” offering services
    that promote efficient energy usage, and companies that facilitate
    carbon trading.

    (You can view an 11-minute interview with Kerschner, chief
    investment officer at Citigroup Investment Research, discussing his
    report here.
    You’ll need to endure a 15-second commercial before it begins.)

    As I said, the 74 companies named by Citi as positioned to
    benefit from climate change trends aren’t all darlings of the
    environmental set. True, the list includes more than a dozen
    companies in the solar, wind, and biogas energy business (such as
    Conergy, Evergreen Solar, Ormat, Q Cells, and SunPower), but also
    utilities dependent on nuclear power (Constellation Energy,
    Electricité de France, Entergy, Exelon), which “are well positioned
    in the long run, compared to operators of ‘dirty’ coal-fired
    plants.” And biotech companies like DuPont, Monsanto, and Syngenta,
    whose products “offer the potential for greater ethanol yields.”
    Some of the companies operate largely behind the scenes, less
    familiar to the public, such as BorgWarner, whose key products offer
    the benefits of higher fuel efficiency and lower emissions from
    internal combustion engines; Johnson Controls, which operates in
    automotive and building efficiency; and Emerson, whose business
    units offer a wide range of energy-efficient technologies.

    Whether such companies garner obscene profits from solving
    climate problems remains to be seen, of course, but Citigroup’s
    intention of bringing these companies to investors’ attention makes
    perfect sense. Environmentalists and regulators similarly stand to
    gain from this report, as they come to grips with this brave new
    world of “profiteering,” in which companies offering climate
    solutions are rewarded in the marketplace. And maybe some
    conservative media folks will learn something, too.

    In her WSJ essay, Kim Strassel warns that the current wave
    of climate profiteering is merely a sign of what’s to come. She
    notes that

    Democrats want global warming as an issue through
    2008. With Al Gore getting his Oscar nod, they’ve got a “problem”
    that captures the public imagination, as well as an endless supply
    of cash from thrilled environmental groups. No need to spoil it with
    a solution. And a Democratic president in 2009 would be more open to
    any ultimate legislation.

    Best yet, they’ve got the “support” of the business community, or
    at least the savvier elements of it. Welcome, Big CarbonCap; we’re
    likely to be hearing a lot from you.

    I can only hope her worst fears come true.

  • You can return to the main Market News page, or press the Back button on your browser.