Energy subsidy

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Energy_subsidy 

 

Fossil-fuel subsidies in 2015

 

Fossil-fuel subsidies per capita in 2015

Energy subsidies are measures that keep prices for customers below market levels, or for suppliers above market levels, or reduce costs for customers and suppliers. Energy subsidies may be direct cash transfers to suppliers, customers, or related bodies, as well as indirect support mechanisms, such as tax exemptions and rebates, price controls, trade restrictions, and limits on market access.

Eliminating fossil fuel subsidies would greatly reduce global carbon emissions and would reduce the health risks of air pollution.

Overview

Main arguments for energy subsidies are:

• Security of supply – subsidies are used to ensure adequate domestic supply by supporting indigenous fuel production in order to reduce import dependency, or supporting overseas activities of national energy companies.
• Environmental improvement – subsidies are used to reduce pollution, including different emissions, and to fulfill international obligations (e.g. Kyoto Protocol).
• Economic benefits – subsidies in the form of reduced prices are used to stimulate particular economic sectors or segments of the population, e.g. alleviating poverty and increasing access to energy in developing countries.
• Employment and social benefits – subsidies are used to maintain employment, especially in periods of economic transition.

Main arguments against energy subsidies are:

• Some energy subsidies counter the goal of sustainable development, as they may lead to higher consumption and waste, exacerbating the harmful effects of energy use on the environment, create a heavy burden on government finances and weaken the potential for economies to grow, undermine private and public investment in the energy sector. Also, most benefits from fossil fuel subsidies in developing countries go to the richest 20% of households.
• Impede the expansion of distribution networks and the development of more environmentally benign energy technologies, and do not always help the people that need them most.
• The study conducted by the World Bank finds that subsidies to the large commercial businesses that dominate the energy sector are not justified. However, under some circumstances it is reasonable to use subsidies to promote access to energy for the poorest households in developing countries. Energy subsidies should encourage access to the modern energy sources, not to cover operating costs of companies. The study conducted by the World Resources Institute finds that energy subsidies often go to capital intensive projects at the expense of smaller or distributed alternatives.

Types of energy subsidies are:

• Direct financial transfers – grants to suppliers; grants to customers; low-interest or preferential loans to suppliers.
• Preferential tax treatments – rebates or exemption on royalties, duties, supplier levies and tariffs; tax credit; accelerated depreciation allowances on energy supply equipment.
• Trade restrictions – quota, technical restrictions and trade embargoes.
• Energy-related services provided by government at less than full cost – direct investment in energy infrastructure; public research and development.
• Regulation of the energy sector – demand guarantees and mandated deployment rates; price controls; market-access restrictions; preferential planning consent and controls over access to resources.
• Failure to impose external costs – environmental externality costs; energy security risks and price volatility costs.
• Depletion Allowance – allows a deduction from gross income of up to ~27% for the depletion of exhaustible resources (oil, gas, minerals).

Overall, energy subsidies require coordination and integrated implementation, especially in light of globalization and increased interconnectedness of energy policies, thus their regulation at the World Trade Organization is often seen as necessary.

Impact of fossil fuel subsidies

The degree and impact of fossil fuel subsidies is extensively studied. Because fossil fuels are a leading contributor to climate change through greenhouse gases, fossil fuel subsidies increase emissions and exacerbate climate change. The OECD created an inventory in 2015 of subsidies for the extraction, refining, or combustion of fossil fuels among the OECD and large emerging economies. This inventory identified an overall value of $160 to $200 billion per year between 2010 and 2014. Meanwhile, the International Energy Agency has estimated global fossil fuel subsidies as ranging from $300 to $600 billion per year between 2008 and 2015.

According to the International Energy Agency, the elimination of fossil fuel subsidies worldwide would be one of the most effective ways of reducing greenhouse gases and battling global warming. Along with this, elimination of these subsidies was welcomed by the G20 nations as a way reduce expenditures during the recession during the 2009 Pittsburgh Summit. In May 2016, the G7 nations set for the first time a deadline for ending most fossil fuel subsidies; saying government support for coal, oil and gas should end by 2025. According to a 2019 report by the Overseas Development Institute, the G20 governments still provide billions of dollars of support for the production and consumption of fossil fuels, spending at least $63.9 billion per year on coal alone.

According to the OECD, subsidies supporting fossil fuels, particularly coal and oil, represent greater threats to the environment than subsidies to renewable energy. Subsidies to nuclear power contribute to unique environmental and safety issues, related mostly to the risk of high-level environmental damage, although nuclear power contributes positively to the environment in the areas of air pollution and climate change. According to Fatih Birol, Chief Economist at the International Energy Agency, without a phasing out of fossil fuel subsidies, countries will not reach their climate targets.

In 2011, IEA chief economist Fatih Birol said the current $409 billion equivalent of fossil fuel subsidies (in non-OECD countries) are encouraging a wasteful use of energy, and that the cuts in subsidies is the biggest policy item that would help renewable energies get more market share and reduce CO₂ emissions.

Environmental cost

Global fossil fuel subsidies reached $319 billion in 2017, although this number rises to $5.2 trillion (equivalent to 6.3% of world economy), when the economic value of environmental externalities such as air pollution are priced in. When measured this way, ending these subsidies can cause a 28% reduction in global carbon emissions and a 46% reduction in deaths due to fossil fuel air pollution. Total global air pollution deaths reach 7 million annually. Using this definition, "China was the biggest subsidizer in 2013 ($1.8 trillion), followed by the United States ($0.6 trillion), and Russia, the European Union, and India (each with about $0.3 trillion)."

IEA position on subsidies

According to International Energy Agency (IEA) (2011) energy subsidies artificially lower the price of energy paid by customers, raise the price received by suppliers or lower the cost of production. "Fossil fuels subsidies costs generally outweigh the benefits. Subsidies to renewables and low-carbon energy technologies can bring long-term economic and environmental benefits". In November 2011, an IEA report entitled Deploying Renewables 2011 said "subsidies in green energy technologies that were not yet competitive are justified in order to give an incentive to investing into technologies with clear environmental and energy security benefits". The IEA's report disagreed with claims that renewable energy technologies are only viable through costly subsidies and not able to produce energy reliably to meet demand. "A portfolio of renewable energy technologies is becoming cost-competitive in an increasingly broad range of circumstances, in some cases providing investment opportunities without the need for specific economic support," the IEA said, and added that "cost reductions in critical technologies, such as wind and solar, are set to continue."

Fossil-fuel consumption subsidies in non-OECD countries were $409 billion in 2010, oil products being half of it. In OECD countries, fossil fuel consumption subsidies have largely been phased out. Global fossil fuel taxes, mostly in OECD countries and on oil products, yield around $800 billion in revenues annually. Renewable energy is subsidized in order to compete in the market, increase their volume and develop the technology so that the subsidies become unnecessary with the development. Eliminating fossil-fuel subsidies could bring economic and environmental benefits. Phasing out fossil-fuel subsidies by 2020 would cut primary energy demand 5%. Since the start of 2010, at least 15 countries have taken steps to phase out fossil-fuel subsidies.

According to the IEA the phase-out of fossil fuel subsidies, over $500 billion annually, will reduce 10% greenhouse gas emissions by 2050.

Subsidies by country

The International Energy Agency estimates that governments subsidised fossil fuels by US $548 billion in 2013. Ten countries accounted for almost three-quarters of this figure. At their meeting in September 2009 the G-20 countries committed to "rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption". The 2010s have seen many countries reducing energy subsidies, for instance in July 2014 Ghana abolished all diesel and gasoline subsidies, whilst in the same month Egypt raised diesel prices 63% as part of a raft of reforms intended to remove subsidies within 5 years.

The public energy subsidies for energy in Finland in 2013 were €700 million for fossil energy and €60 million for renewable energy (mainly wood and wind).

Canada

Fossil fuel subsidies

The Canadian federal government offers subsidies for fossil fuel exploration and production and Export Development Canada regularly provides financing to oil and gas companies. A 2018 report from the Overseas Development Institute, a UK-based think tank, found that Canada spent a greater proportion of its GDP on fiscal support to oil and gas production in 2015 and 2016 than any other G7 country.

In 2015 and 2016, the largest federal subsidies for fossil fuel exploration and production were the Canadian Exploration Expense (CEE), the Canadian Development Expense (CDE), and the Atlantic Investment Tax Credit (AITC). In these years Canada paid a yearly average of $1.018 billion CAD to oil and gas companies through the CDE, $148 million CAD through the CEE, and $127 million through the AITC. In 2017, subsidies to oil and gas through the AITC were phased out. Also in 2017, the federal government reformed the CEE so that exploration expenses may only be deducted through it if the exploration is unsuccessful. Otherwise, these expenses must be deducted through the CDE, which is deductible at 30% rather than 100%.

In December 2018, in response to low Canadian oil prices, the federal government announced $1.6 billion in financial support for the oil and gas sector: $1 billion in loans to oil and gas exporters from Export Development Canada, $500 million in financing for “higher risk” oil and gas companies from the Business Development Bank of Canada, $50 million through Natural Resources Canada’s Clean Growth Program, and $100 million through Innovation, Science and Economic Development Canada’s Strategic Innovation Fund. Minister of Natural Resources Amarjeet Sohi said that this financing is “not a subsidy for fossil fuels”, adding that “These are commercial loans, made available on commercial terms. We have committed to phasing out inefficient fossil fuel subsidies by 2025, and we stand by that commitment". In 2016, Canada committed to “phase out inefficient fossil fuel subsidies by 2025” in line with commitments made with G20 and G7 countries, although a 2017 report from the Office of the Auditor-General found that little work had been done to define this goal and establish a timeline for achieving it. Reducing subsidies to fossil fuels was an explicit part of the Liberal Party's platform in the 2015 federal election.

The largest provincial fossil fuel subsidies are paid by Alberta and British Columbia. Alberta spent a yearly average of $1.161 billion CAD on Crown Royalty Reductions for oil and gas from 2013 to 2015. And British Columbia paid a yearly average of $271 million CAD to gas companies through the Deep Drilling Credit.

Canadian provincial governments also offer subsidies for the consumption of fossil fuels. For example, Saskatchewan offers a fuel tax exemption for farmers and a sales tax exemption for natural gas used for heating.

A 2018 report from the Overseas Development Institute was critical of Canada's reporting and transparency practices around its fossil fuel subsidies. Canada does not publish specific reports on its fiscal support for fossil fuels, and when Canada’s Office of the Auditor-General attempted an audit of Canadian fossil fuel subsidies in 2017, they found much of the data they needed was not provided by Finance Canada. Export Development Canada reports on their transactions related to fossil fuel projects, but do not provide data on exact amounts or the stage of project development.

Iran

Contrary to the subsidy reform plan's objectives, under president Rouhani the volume of Iranian subsidies given to its citizens on fossil fuel increased 42.2% in 2019 and equals 15.3% of Iran’s GDP and 16% of total global energy subsidies. This has made Iran the world's largest subsidizer of energy prices. This situation is leading to highly wasteful consumption patterns, large budget deficits, price distortions in its entire economy, pollution and very lucrative (multi-billion dollars) contraband (because of price differentials) with neighbouring countries each year by rogue elements within the Iranian government supporting the status-quo.

Russia

Russia is one of the world’s energy powerhouses. It holds the world’s largest natural gas reserves (27% of total), the second-largest coal reserves, and the eighth-largest oil reserves. Russia is the world's third-largest energy subsidizer as of 2015. The country subsidizes electricity and natural gas as well as oil extraction. Approximately 60% of the subsidies go to natural gas, with the remainder spent on electricity (including under-pricing of gas delivered to power stations). For oil extraction the government gives tax exemptions and duty reductions amounting to about 22 billion dollars a year. Some of the tax exemptions and duty reductions also apply to natural gas extraction, though the majority is allocated for oil. In 2013 Russia offered the first subsidies to renewable power generators. The large subsidies of Russia are costly and it is recommended in order to help the economy that Russia lowers its domestic subsidies. However, the potential elimination of energy subsidies in Russia carries the risk of social unrest that makes Russian authorities reluctant to remove them.

Turkey

The energy policy of Turkey subsidizes fossil fuels US$1.6 billion annually including heavily subsidizing coal in Turkey.

United Kingdom

The government says that the 5% value added tax (VAT) rate on natural gas for home heating is not a subsidy, but some environmental groups disagree and say that it should be increased to the standard 20% with the extra revenue ringfenced for poor people.

United States

Congressional Budget Office estimated allocation of energy-related tax preferences, by type of fuel or technology, 2016

According to Congressional Budget Office testimony in 2016, an estimated $10.9 billion in tax preferences was directed toward renewable energy, $4.6 billion went to fossil fuels, and $2.7 billion went to energy efficiency or electricity transmission.

According to a 2015 estimate by the Obama administration, the US oil industry benefited from subsidies of about $4.6 billion per year. A 2017 study by researchers at Stockholm Environment Institute published in the journal Nature Energy estimated that nearly half of U.S. oil production would be unprofitable without subsidies.

Allocation of subsidies in the United States

Congressional Budget Office testimony delivered March 29, 2017 showing the historic trend of energy related tax preferences

A 2017 study by the consulting firm Management Information Services, Inc. (MISI) estimated the total historical federal subsidies for various energy sources over the years 1950–2016. The study found that oil, natural gas, and coal received $414 billion, $140 billion, and $112 billion (2015 dollars), respectively, or 65% of total energy subsidies over that period. Oil, natural gas, and coal benefited most from percentage depletion allowances and other tax-based subsidies, but oil also benefited heavily from regulatory subsidies such as exemptions from price controls and higher-than-average rates of return allowed on oil pipelines. The MISI report found that non-hydro renewable energy (primarily wind and solar) benefited from $158 billion in federal subsidies, or 16% of the total, largely in the form of tax policy and direct federal expenditures on research and development (R&D). Nuclear power benefited from $73 billion in federal subsidies, 8% of the total and less than half of the total applied to renewables, while hydro power received $105 billion in federal subsidies, 10% of the total. Notable was MISI's finding that between 2011 through 2016, renewable energy received more than three times as much help in federal incentives as oil, natural gas, coal, and nuclear combined, and 27 times as much as nuclear energy.

In the United States, the federal government has paid US$145 billion for energy subsidies to support R&D for nuclear power ($85 billion) and fossil fuels ($60 billion) from 1950 to 2016. During this same timeframe, renewable energy technologies received a total of US $34 billion. Though in 2007 some suggested that a subsidy shift would help to level the playing field and support growing energy sectors, namely solar power, wind power, and bio-fuels., by 2017 those sources combined had yet to provide 10% of U.S. electricity, and intermittency forced utilities to remain reliant on oil, natural gas, and coal to meet baseload demand. Many of the "subsidies" available to the oil and gas industries are general business opportunity credits, available to all US businesses (particularly, the foreign tax credit mentioned above). The value of industry-specific (oil, gas, and coal) subsidies in 2006 was estimated by the Texas State Comptroller to be $6.25 billion - about 60% of the amount calculated by the Environmental Law Institute. The balance of federal subsidies, which the comptroller valued at $7.4 billion, came from shared credits and deductions, and oil defense (spending on the Strategic Petroleum Reserve, energy infrastructure security, etc.).

Critics allege that the most important subsidies to the nuclear industry have not involved cash payments, but rather the shifting of construction costs and operating risks from investors to taxpayers and ratepayers, burdening them with an array of risks including cost overruns, defaults to accidents, and nuclear waste management. Critics claim that this approach distorts market choices, which they believe would otherwise favor less risky energy investments.

Many energy analysts, such as Clint Wilder, Ron Pernick and Lester Brown, have suggested that energy subsidies need to be shifted away from mature and established industries and towards high growth clean energy (excluding nuclear). They also suggest that such subsidies need to be reliable, long-term and consistent, to avoid the periodic difficulties that the wind industry has had in the United States.

United States government role in the development of new energy industries

From civilian nuclear power to hydro, wind, solar, and shale gas, the United States federal government has played a central role in the development of new energy industries.

America's nuclear power industry, which currently supplies about 20% of the country's electricity, has its origins in the Manhattan Project to develop atomic weapons during World War II. From 1942 to 1945, the United States invested $20 billion (2003 dollars) into a massive nuclear research and deployment initiative. But the achievement of the first nuclear weapon test in 1945 marked the beginning, not the end, of federal involvement in nuclear technologies. President Dwight D. Eisenhower's “Atoms for Peace” address in 1953 and the 1954 Atomic Energy Act committed the United States to develop peaceful uses for nuclear technology, including commercial energy generation.

Commercial wind power was also enabled through government support. In the 1980s, the federal government pursued two different R&D efforts for wind turbine development. The first was a “big science” effort by NASA and the Department of Energy (DOE) to use U.S. expertise in high-technology research and products to develop new large-scale wind turbines for electricity generation, largely from scratch. A second, more successful R&D effort, sponsored by the DOE, focused on component innovations for smaller turbines that used the operational experience of existing turbines to inform future research agendas. Joint research projects between the government and private firms produced a number of innovations that helped increase the efficiency of wind turbines, including twisted blades and special-purpose airfoils. Publicly funded R&D was coupled with efforts to build a domestic market for new turbines. At the federal level, this included tax credits and the passage of the Public Utilities Regulatory Policy Act (PURPA), which required that utilities purchase power from some small renewable energy generators at avoided cost. Both federal and state support for wind turbine development helped drive costs down considerably, but policy incentives at both the federal and state level were discontinued at the end of the decade. However, after a nearly five-year federal policy hiatus in the late 1980s, the U.S. government enacted new policies to support the industry in the early 1990s. The National Renewable Energy Laboratory (NREL) continued its support for wind turbine R&D, and also launched the Advanced Wind Turbine Program (AWTP). The goal of the AWTP was to reduce the cost of wind power to rates that would be competitive in the U.S. market. Policymakers also introduced new mechanisms to spur the demand of new wind turbines and boost the domestic market, including a 1.5 cents per kilowatt-hour tax credit (adjusted over time for inflation) included in the 1992 Energy Policy Act. Today the wind industry's main subsidy support comes from the federal production tax credit.

The development of commercial solar power was also dependent on government support. Solar PV technology was born in the United States, when Daryl Chapin, Calvin Fuller, and Gerald Pearson at Bell Labs first demonstrated the silicon solar photovoltaic cell in 1954. The first cells recorded efficiencies of four percent, far lower than the 25 percent efficiencies typical of some silicon crystalline cells today. With the cost out of reach for most applications, developers of the new technology had to look elsewhere for an early market. As it turned out, solar PV did make economic sense in one market segment: aerospace. The United States Army and Air Force viewed the technology as an ideal power source for a top-secret project on earth-orbiting satellites. The government contracted with Hoffman Electronics to provide solar cells for its new space exploration program. The first commercial satellite, the Vanguard I, launched in 1958, was equipped with both silicon solar cells and chemical batteries. By 1965, NASA was using almost a million solar PV cells. Strong government demand and early research support for solar cells paid off in the form of dramatic declines in the cost of the technology and improvements in its performance. From 1956 to 1973, the price of PV cells declined from $300 to $20 per watt. Beginning in the 1970s, as costs were declining, manufacturers began producing solar PV cells for terrestrial applications. Solar PV found a new niche in areas distant from power lines where electricity was needed, such as oil rigs and Coast Guard lighthouses. The government continued to support the industry through the 1970s and early 1980s with new R&D efforts under Presidents Richard Nixon and Gerald Ford, both Republicans, and President Jimmy Carter, a Democrat. As a direct result of government involvement in solar PV development, 13 of the 14 top innovations in PV over the past three decades were developed with the help of federal dollars, nine of which were fully funded by the public sector.

More recently than nuclear, wind, or solar, the development of the shale gas industry and subsequent boom in shale gas development in the United States was enabled through government support. The history of shale gas fracking in the United States was punctuated by the successive developments of massive hydraulic fracturing (MHF), microseismic imaging, horizontal drilling, and other key innovations that when combined made the once unreachable energy resource technically recoverable. Along each stage of the innovation pipeline – from basic research to applied R&D to cost-sharing on demonstration projects to tax policy support for deployment – public-private partnerships and federal investments helped push hydraulic fracturing in shale into full commercial competitiveness. Through a combination of federally funded geologic research beginning in the 1970s, public-private collaboration on demonstration project and R&D priorities, and tax policy support for unconventional technologies, the federal government played a key role in the development of shale gas in the United States.

Investigations have uncovered the crucial role of the government in the development of other energy technologies and industries, including aviation and jet engines, synthetic fuels, advanced natural gas turbines, and advanced diesel internal combustion engines.

Venezuela

In Venezuela, energy subsidies were equivalent to about 8.9 percent of the country's GDP in 2012. Fuel subsidies were 7.1 percent while electricity subsidies were 1.8 percent. In order to fund this the government used about 85 percent of its tax revenue on these subsidies. It is estimated the subsidies have caused Venezuela to consume 20 percent more energy than without them. The fuel subsidies are given more heavily to the richest part of the population who are consuming the most energy. The fuel subsidies maintained a cost of about $0.01 US for a liter of gasoline at the pump since 1996 until president Nicolas Maduro reduced the national subsidy in 2016 to make it roughly $0.60 US per liter (The local currency is Bolivar and the price per liter of gas is 6 Bolivars). Fuel consumption has increased overall since the 1996 policy began even though the production of oil has fallen more than 350,000 barrels a day since 2008 under that policy. PDVSA, the Venezuelan state oil company, has been losing money on these domestic transactions since the enactment of these policies. These losses can also be attributed to the 2005 Petrocaribe agreement, under which Venezuela sells many surrounding countries petroleum at a reduced or preferable price; essentially a subsidy by Venezuela for countries that are a part of the agreement. The subsidizing of fossil fuels and consequent low cost of fuel at the pump has caused the creation of a large black market. Criminal groups smuggle fuel out of Venezuela to adjacent nations (mainly Colombia). This is due to the large profits that can be gained by this act, as fuel is much more expensive in Colombia than in Venezuela. Despite the fact that this issue is already well known in Venezuela, and insecurity in the region continues to rise, the state has not yet lowered or eliminated these fossil fuel subsidies.

European Union

Subsidies per energy technology in the EU (2012)

In February 2011 and January 2012 the UK Energy Fair group, supported by other organisations and environmentalists, lodged formal complaints with the European Union's Directorate General for Competition, alleging that the Government was providing unlawful state aid in the form of subsidies for nuclear power industry, in breach of European Union competition law.

One of the largest subsidies is the cap on liabilities for nuclear accidents which the nuclear power industry has negotiated with governments. “Like car drivers, the operators of nuclear plants should be properly insured,” said Gerry Wolff, coordinator of the Energy Fair group. The group calculates that, "if nuclear operators were fully insured against the cost of nuclear disasters like those at Chernobyl and Fukushima, the price of nuclear electricity would rise by at least €0.14 per kWh and perhaps as much as €2.36, depending on assumptions made". According to the most recent statistics, subsidies for fossil fuels in Europe are exclusively allocated to coal (€10 billion) and natural gas (€6 billion). Oil products do not receive any subsidies.

Business action on climate change

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Business_action_on_climate_change 

Business action on climate change includes a range of activities relating to global warming, and to influencing political decisions on global-warming-related regulation, such as the Kyoto Protocol. Major multinationals have played and to some extent continue to play a significant role in the politics of global warming, especially in the United States, through lobbying of government and funding of global warming deniers. Business also plays a key role in the mitigation of global warming, through decisions to invest in researching and implementing new energy technologies and energy efficiency measures. (See also individual and political action on climate change.)

Overview

In 1989 in the US, the petroleum and automotive industries and the National Association of Manufacturers created the Global Climate Coalition (GCC) to oppose mandatory actions to address global warming. In 1997, when the US Senate overwhelmingly passed a resolution against ratifying the Kyoto Protocol, the industry funded a $13 million industry advertising blitz in the run-up to the vote.

In 1998 The New York Times published an American Petroleum Institute (API) memo outlining a strategy aiming to make "recognition of uncertainty ... part of the 'conventional wisdom.'" The memo has been compared to a late 1960s memo by tobacco company Brown and Williamson, which observed: "Doubt is our product since it is the best means of competing with the 'body of fact' that exists in the mind of the general public. It is also the means of establishing a controversy." Those involved in the memo included Jeffrey Salmon, then executive director of the George C. Marshall Institute, Steven Milloy, a prominent denialist commentator, and the Competitive Enterprise Institute's Myron Ebell. In June 2005 a former API lawyer, Philip Cooney, resigned his White House post after accusations of politically motivated tampering with scientific reports.

In 2002, in the wake of both declining membership and President Bush's withdrawal from the Kyoto Protocol, the GCC announced that it would "deactivate" itself.

Ex-World Bank economist Herman Daly suggests that neoliberalism and globalisation bring about "a permanent international standard-lowering competition to attract capital". If accurate, this contemporary economic environment therefore also aids businesses who are hostile to action against climate change. They are able to relocate their activities to states which have less climate based regulations.

At the same time, since 1989 many previously denialist petroleum and automobile industry corporations have changed their position as the political and scientific consensus has grown, with the creation of the Kyoto Protocol and the publication of the International Panel on Climate Change's Second and Third Assessment Reports. These corporations include major petroleum companies like Royal Dutch Shell, Texaco, and BP, as well as automobile manufacturers like Ford, General Motors, and DaimlerChrysler. Some of these have joined with the Center for Climate and Energy Solutions (formerly the Pew Center on Global Climate Change), a non-profit organization aiming to support efforts to address global climate change.

Since 2000, the Carbon Disclosure Project has been working with major corporations and investors to disclose the emissions of the largest companies. By 2007, the CDP published the emissions data for 2400 of the largest corporations in the world, and represented major institutional investors with $41 trillion combined assets under management. The pressure from these investors had had some success in working with companies to reduce emissions.

The World Business Council for Sustainable Development, a CEO-led association of some 200 multinational companies, has called on governments to agree on a global targets, and suggests that it is necessary to cut emissions by 60-80 percent from current levels by 2050.

In 2017, after the election of Donald Trump, backing was shown in the business community for the Paris Agreement, which became effective November 4, 2016.

In 2020 the demand for business action to stop climate change grow steadily. An organisation named "Task Force on Climate-related Financial Disclosures" was created with a specific aim to show which companies are trying to stop climate change and which not. The bank of England launched an initiative for showing what investment can become non profitable with climate action. British Petroleum pledged to become carbon neutral by 2050 and the biggest finance management company BlackRock said it will not serve those who will not try to reduce GGG emissions. Investors with a capital of 5 trillion dollars pledged to have 100% fossil free investments by the year 2050.

Global Climate Coalition

A central organization in climate denial was the Global Climate Coalition (1989–2002), a group of mainly United States businesses opposing immediate action to reduce greenhouse gas emissions. The coalition funded deniers with scientific credentials to be public spokespeople, provided industry a voice on climate change, and fought the Kyoto Protocol. The New York Times reported that "even as the coalition worked to sway opinion [towards denial], its own scientific and technical experts were advising that the science backing the role of greenhouse gases in global warming could not be refuted."

In the year 2000, the rate of corporate members leaving accelerated when they became the target of a national divestiture campaign run by John Passacantando and Phil Radford with the organization Ozone Action. According to The New York Times, when Ford Motor Company was the first company to leave the coalition, it was "the latest sign of divisions within heavy industry over how to respond to global warming." After that, between December 1999 and early March 2000, the GCC was deserted by Daimler-Chrysler, Texaco, the Southern Company and General Motors.

The organization closed in 2002, or in their own words, 'deactivated'.

World Economic Forum

In the beginning of the 21st century the forum begun to increasingly deal with environmental issues. In the Davos Manifesto 2020 it is said that a company among other things:

"acts as a steward of the environmental and material universe for future generations. It consciously protects our biosphere and champions a circular, shared and regenerative economy."

"responsibly manages near-term, medium-term and long-term value creation in pursuit of sustainable shareholder returns that do not sacrifice the future for the present."

"is more than an economic unit generating wealth. It fulfils human and societal aspirations as part of the broader social system. Performance must be measured not only on the return to shareholders, but also on how it achieves its environmental, social and good governance objectives."

The forum launched the Environmental Initiative that covers climate change and water issues. Under the Gleneagles Dialogue on Climate Change, the U.K. government asked the World Economic Forum at the G8 Summit in Gleneagles in 2005 to facilitate a dialogue with the business community to develop recommendations for reducing greenhouse gas emissions. This set of recommendations, endorsed by a global group of CEOs, was presented to leaders ahead of the G8 Summit in Toyako and Hokkaido held in July 2008.

In January 2017, WEF launched the Platform for Accelerating the Circular Economy (PACE), which is a global public private partnership seeking to scale circular economy innovations. PACE is co-chaired by Frans van Houten (CEO of Philips), Naoko Ishii (CEO of the Global Environment Facility, and the head of United Nations Environment Programme (UNEP). The Ellen MacArthur Foundation, the International Resource Panel, Circle Economy and Accenture serve as knowledge partners.

The Environment and Natural Resource Security Initiative was emphasized for the 2017 meeting to achieve inclusive economic growth and sustainable practices for global industries. With increasing limitations on world trade through national interests and trade barriers, the WEF has moved towards a more sensitive and socially minded approach for global businesses with a focus on the reduction of carbon emissions in China and other large industrial nations.

The World Economic Forum is working to eliminate plastic pollution, stating that by the year 2050 it will consume 15% of the global carbon budget and will pass by its weight fishes in the world's oceans. One of the methods is to achieve circular economy.

The theme of 2020 World Economic Forum annual meeting was "Stakeholders for a Cohesive and Sustainable World". Climate change and sustainability were central themes of discussion. Many argued that GDP is failed to represent correctly the wellbeing and that fossil fuel subsydies should be stopped. Many of the participants said that a better capitalism is needed. Al Gore summarized the ideas in the conference as: "I don't want to be naive, but I want to acknowledge that the center of the global economy is now saying things that many of us have dreamed they might for a long time," and "The version of capitalism we have today in our world must be reformed".

In this meeting the World Economic Forum launched the Trillion Tree Campaign - an initiative aiming to "grow, restore and conserve 1 trillion trees around the world - in a bid to restore biodiversity and help fight climate change". Donald Trump joined the initiative. The forum stated that: "Nature-based solutions – locking-up carbon in the world's forests, grasslands and wetlands – can provide up to one-third of the emissions reductions required by 2030 to meet the Paris Agreement targets," adding that the rest should come from the heavy industry, finance and transportation sectors. One of the targets is to unify existing reforestation projects.

In 2020, the forum published an article in which it claims that the COVID-19 pandemic is linked to the destruction of nature. The number of emerging diseases is rising and this rise is linked to deforestation and species loss. In the article there are multiple examples of the degradation of ecological systems caused by humans. It is also says that half of the global GDP is moderately or largely dependent on nature. The article concludes that the recovery from the pandemic should be linked to nature recovery.

In July 2020 the forum published the "Future of Nature and Business Report", saying that "Prioritizing Nature" can give to the global economy 10.1 trillion dollars per year and 395 million jobs by the year 2030.

U.S. Climate Action Partnership

The U.S. Climate Action Partnership (USCAP) was formed in January 2007 with the primary goal of influencing the regulation of Greenhouse gas emissions by the United States. Original members included General Electric, Alcoa, and Natural Resources Defense Council, and they were joined in April, 2007 by ConocoPhillips and AIG.

Energy industry

ExxonMobil

ExxonMobil has been a leading figure in the business world's position on climate change, providing substantial funding to a range of global-warming-denialist organizations. Mother Jones counted some 40 ExxonMobil-funded organization that "either have sought to undermine mainstream scientific findings on global climate change or have maintained affiliations with a small group of "skeptic" (denialist) scientists who continue to do so." Between 2000 and 2003 these organizations received more than $8m in funding.

It has also had a key influence in the Bush administration's energy policy, including on the Kyoto Protocol, supported by both $55m spent on lobbying since 1999, and direct contacts between the company and leading politicians. It was a leading member of the Global Climate Coalition. It encouraged (and may have been instrumental in) the replacement in 2002 of the head of the IPCC, Robert Watson. It has also invested $100m into the Global Climate and Energy Project, with Stanford University, and other programs at institutions such as the Massachusetts Institute of Technology, Carnegie Mellon University and the International Energy Agency Greenhouse Gas Research and Development Program.

Some of Exxon's activities on climate change produced strong criticism from environmental groups, including reactions such as a leaflet produced by the Stop Esso campaign, saying 'Don't buy E$$o', and featuring a tiger hand setting fire to the Earth. The company's carbon dioxide emissions are more than 50% higher than those of British rival BP, despite the US firm's oil and gas production being only slightly larger.

According to a 2004 study commissioned by Friends of the Earth, ExxonMobil and its predecessors caused 4.7 to 5.3 percent of the world's man-made carbon dioxide emissions between 1882 and 2002. The group suggested that such studies could form the basis for eventual legal action.

ExxonMobil made several modest climate pledges. There are some concerns about the implementation.

BP

BP left the Global Climate Coalition in 1997 and said that global warming was a problem that had to be dealt with, although it subsequently joined others in lobbying the Australian government not to sign the Kyoto Protocol unless the US did. In March 2002 BP's chief executive, Lord Browne, declared in a speech that global warming was real and that urgent action was needed, saying that "Companies composed of highly skilled and trained people can't live in denial of mounting evidence gathered by hundreds of the most reputable scientists in the world." In 2005 BP was considering testing carbon sequestration in one of its North Sea oil fields, by pumping carbon dioxide into them (and thereby also increasing yields). Throughout 2006 BP, led by their CEO Lord John Browne, has continued to make statements on climate change. It has cut its own operational emissions of CO₂ by 10%. It is investing $8 billion in renewable energy over the next 10 years. Most recently it has launched a 'target zero' campaign in the UK to encourage its customers to offset their vehicle emissions when they fill up at the petrol station.

BP's American division is a member of the U.S. Climate Action Partnership (USCAP) (see above).

BP pledged to become 100% climate neutral by 2050. It also declared that it will increase 10 times the investment in low carbon technology, like Renewable energy by the year 2030, stop searching for oil and gas in new countries, cut its oil and gas production by 40%. After the declaration the share price of the company rose by 7% - 8%.

Shell

In 2021 Royal Dutch Shell announced that its CO₂ emissions peaked in 2018 and its oil production in 2019. The company intends to cut emissions by 6% - 8% by 2023, 20% by 2030, 45% by 2035 and 100% by 2050.

Koch Industries

From 2005 to 2008, Koch Industries donated $5.7 million on political campaigns and $37 million on direct lobbying to support fossil fuel industries. Between 1997 and 2008, Koch Industries donated a total of nearly $48 million to climate opposition groups. According to Greenpeace, Koch Industries is the major source of funds of what Greenpeace calls "climate denial". Koch Industries and its subsidiaries spent more than $20 million on lobbying in 2008 and $12.3 million in 2009, according to the Center for Responsive Politics, a nonpartisan research group.

Others

American Electric Power, the world's largest private producer of carbon dioxide, said in 2005 that targets for carbon reduction "represent a common-sense approach that can begin the process of lowering emissions along a gradual, cost-effective path." The company complained that "uncertainties over the cost of carbon" made it very difficult to make decisions about capital investment.

DuPont has cut its greenhouse gas emissions by 65% since 1990, saving hundreds of millions of dollars in the process. "Give us a date, tell us how much we need to cut, give us the flexibility to meet the goals, and we'll get it done", Xcel Energy CEO Wayne Brunetti told Business Week in 2004.

Duke Energy, FPL Group, and PG&E Corporation are members of the U.S. Climate Action Partnership (USCAP) (see above).

Total and Royal Dutch Shell pledged to reach zero emission by 2050. Chevron and ExxonMobil made a more modest pledge. There are some concerns about the implementation of the pledges.

Transportation

A large proportion of carbon dioxide emissions occur because of transportation. Several companies have formed or invested in electric substitutes for standard automobiles. The Tesla Roadster (2008) is an all-electric sports car, and Tesla also produces the Tesla Model S sedan. Vectrix produces and sells an electric scooter rated for 100 km/h (60 mph).

There has also been greatly increased interest in personal rapid transit, which applies system engineering principles to reduce energy use, eliminate traffic jams, and produce an acceptable substitute to replace cars, all at the same time. Most systems fully meet Kyoto Treaty carbon emission goals now, 60 years ahead of schedule. Korean steel maker POSCO and its partner Vectus Ltd. have produced a working safety case, including test track and vehicles, that remains fully functional in Swedish winters. Vectus and Suncheon S. Korea signed a memorandum of understanding to install a system. Advanced Transportation Systems' ULTra passed safety certification by the UK Rail Inspectorate in 2003, and won a demonstration project at Heathrow Airport due to be in service in early 2010. ATS Ltd. estimates its ULTra PRT will consume 839 BTU per passenger mile (0.55 MJ per passenger km). By comparison, automobiles consume 3,496 BTU, and personal trucks consume 4,329 BTU per passenger mile. 2getthere Inc. sells automated electric freight handling and transit vehicles designed to share existing rights of way with normal traffic. The company recently won the personal rapid transit competition for Masdar.

JetBlue announced a plan to become carbon neutral on domestic flights in the US through use of carbon offsets, with longterm plans including the possibility of alternative fuels and other technologies. However, the International Air Transport Association reports that such alternative fuels are in short supply as of January 2020.

General Motors

General Motors announced in the year 2021 that by the year 2035 it will completely stop producing cars powered by diesel and gas and will become carbon neutral by 2040.

Insurance industry

In 2004 Swiss Re, the world's second largest reinsurance company, warned that the economic costs of climate-related disasters threatened to reach $150 billion a year within ten years.

In 2006 Lloyd's of London, published a report highlighting the latest science and implications for the insurance industry.

Swiss Re, has said that if the shore communities of four Gulf Coast states choose not to implement adaptation strategies, they could see annual climate-change related damages jump 65 percent a year to $23 billion by 2030. "Society needs to reduce its vulnerability to climate risks, and as long as they remain manageable, they remain insurable, which is our interest as well," said Mark D. Way, head of Swiss Re's sustainable development for the Americas.

AIG is a member of the U.S. Climate Action Partnership (USCAP) (see above).

Zurich Insurance Group, according to Ben Harper, the head of the sustainability unit in the North American section of the company, has a program for reducing its carbon footprint: make the facilities 100% renewables in a few years, reduce the use of paper by 80%, stop using single-use plastic, invest $4.6 billion in green and social projects. The company already has many green products and services and want to make more. The work on the implementation was not stopped at the time of Coronavirus disease 2019 and the pandemic may result even in higher ecological consciousness, among other it increase demand for ecological products, walking, biking, simple living.

The company was the leading insurer of the Trans Mountain pipeline, but stopped supporting it, in July 2020.

Media

In the UK, some newspapers (Daily Mail, The Daily Telegraph) are significantly anti-science, while most others (with varying enthusiasm, The Independent giving it most prominence) support action on global warming. Overall, British newspapers have given the issue three times more coverage than US newspapers. In 2006 (British Sky Broadcasting (Sky) became the world's first media company to go 'climate neutral' by purchasing enough carbon offsets. The CEO of the company James Murdoch (son of Rupert Murdoch and heir apparent for the News International empire) is a strong advocate of action on climate change and is thought to be influential on the issue within the wider group of companies. In June 2006, to much industry interest, Rupert Murdoch invited Al Gore to make his climate change presentation at the annual News Corp (including the Fox Network) gathering at the Pebble Beach golf resort, (USA). In August 2007, Rupert Murdoch announced plans for News Corp. to be carbon neutral by 2010.

Facebook

Facebook announced in 2021 that it will make effort stop disinformation about climate change. The company will use George Mason University, Yale Program on Climate Change Communication and the University of Cambridge as sources of information. The company will expand its information hub on climate to 16 countries. Users in others countries will be directed to the site of the United Nations Environment Programme for information.

Finance management

Black Rock

In January 2020 BlackRock, the largest finance management company in the world, announced that it would begin divestment from thermal coal and take another measures to make its assets more sustainable. Other companies that made similar statements include "Goldman Sachs, Liberty Mutual,... the Hartford Financial Services Group, Inc.,... and the European Investment Bank—the largest international public bank in the world "

JP Morgan

The company is the biggest investor in fossil fuels in the world, therefore many try to persuade it to take climate action. In 2017 the company committed to giving 200 billion dollars to clean finance by 2025 and take 100% of its energy from renewables by the end of 2020. It expects to reach both targets. In 2020 the company pledged to give 200 billion to support climate action and reaching Sustainable Development Goals in the year 2020, expand the restriction on investment in coal and stop investment in arctic oil and gas drilling, create a more sustainable investment portfolio, join the climate action 100+ coalition. It did not pledge to stop investments in tar sands, fracking and other fossil fuels.

In October 2020 JPMorgan Chase declared that it begun to work on achieving carbon neutrality by 2050.

HSBC

In October 2020, HSBC, the biggest bank in Europe committed to achieve zero emission by 2050, e.g., by this year it would not only become carbon neutral by itself but also will work only with carbon neutral clients. It also committed to provide 750 - 1,000 billion dollar to help clients make the transition. It also pledged to achieve carbon neutrality in his own operations by 2030.

More on business action

Businesses take action on climate change for several reasons. Action improves corporate image and better aligns corporate actions with the environmental interests of owners, employees, suppliers, and customers. Action also occurs to reduce costs, increase return on investments, and to reduce dependency on uncontrollable costs.

Increased energy efficiency

For many companies, looking at more efficient energy use can pay off in the medium to long term; unfortunately, shareholders need to be satisfied in the short term, so regulatory intervention is often required, to encourage prudent conservation measures. However, as carbon intensity starts to show up on balance books through organizations such as the Carbon Disclosure Project, voluntary action is starting to take place.

Recently there has been a spate of companies acting to improve their energy efficiency. Possibly the most prominent of these companies is Wal-Mart. Wal-Mart, the largest retailer in the US, has announced specific environmental goals to reduce energy use in its stores and pressure its 60,000 suppliers in its worldwide supply chain to follow its lead. On energy efficiency, Wal-Mart wants to increase the fuel efficiency of its truck fleet by 25% over the next three years and double it within ten years, moving from 6.5 mpg. This seems an attainable goal, and by 2020, it is expected to save the company $494 million a year. The company also wants to build a store that is at least 25% more energy efficient within four years.

Use of renewable energies

In August 2002, the largest gathering of ministers in the history of the world met at the World Summit on Sustainable Development in Johannesburg. The global environmental community discussed the role of renewables and energy efficiency in lowering carbon emissions, mitigating poverty reduction (energy access) and improving energy security. One result from WSSD was the formation of to carry forward the international dialogue on sustainable energy and its role in the energy mix.

Partnerships formed include the Renewable Energy and Energy Efficiency Partnership, the Global Village Energy Partnership, the Johannesburg Renewable Energy Coalition (JREC), and the Global Network on Energy for Sustainable Development.

Renewable energies and renewable energy technologies have many advantages over their fossil fuel counterparts. These advantages include the absence of local pollution such as particulates, sulphur oxides (SOX's) and nitrous oxides (NOX's). For the business community, the economic advantages are also becoming clearer. Numerous studies have shown that the working environment has a significant effect on workforce morale. Renewable energy solutions are a part of this, wind turbines in particular being seen by many as a potent symbol of a new modernity, where environmental considerations are taken seriously. A workforce seeing a forward-looking and responsible company is more likely to feel good about working for such a company. A happier workforce is a more productive workforce.

More directly, the high petroleum (oil) and gas prices of 2005 have only added to the attraction of renewable energy sources. Although most renewable energies are more expensive at current fuel prices, the difference is narrowing, and uncertainty in oil and gas markets is a factor worth considering for highly energy-intensive businesses.

Another factor affecting the uptake of renewable energies in Europe is the EU Energy Trading Scheme (ETS or EUTS). Many large businesses are fined for increases in emissions, but can sell any "excess" reductions they make.

Companies with high-profile renewable energy portfolios include an aluminium smelter (Alcan), a cement company (Lafarge), and a microchip manufacturer (Intel). Many examples of corporate leadership in this area can be found on the website of The Climate Group, an independent organization set up for promoting such action by business and government.

Carbon offsets

The principle of carbon offset is fairly simple: a business decides that it doesn't want to contribute further to global warming, and it has already made efforts to reduce its carbon (dioxide) emissions, so it decides to pay someone else to further reduce its net emissions by planting trees or by taking up low-carbon technologies. Every unit of carbon that is absorbed by trees—or not emitted due to funding of renewable energy deployment—offsets the emissions from fossil fuel use. In many cases, funding of renewable energy, energy efficiency, or tree planting—particularly in developing nations—can be a relatively cheap way of making an event, project, or business "carbon neutral". Many carbon offset providers—some as inexpensive as $0.10 per ton of carbon dioxide—are referenced in the carbon offset article of this encyclopedia.

Many businesses are now looking to carbon offset all their work. An example of a business going carbon neutral is FIFA: their 2006 World Cup Final will be carbon neutral. FIFA estimate they are offsetting one hundred thousand tons of carbon dioxide created by the event, largely as a result of people travelling there. Other carbon neutral companies include the bank HSBC, the consumer staples manufacturer Annie's Homegrown, world leading society publisher Blackwell Publishing, and the publishing house New Society Publishers. The Guardian also offsets its carbon emissions resulting from international air travel.

Many companies are trying to achieve carbon offsets by Nature-based solutions like reforestation, including mangrove forests and soil restoration. Among them Microsoft, Eni. Increasing the forest cover of Earth by 25% will offset the human emissions in the latest 20 years. In any case it will be necessary to pull from the atmosphere the CO2 that already have been emitted. However, it can work only if the companies will stop to pump new emissions to the atmosphere and stop deforestation.

Carbon projects

A carbon project refers to a business initiative that receives funding because it will result in a reduction in the emission of greenhouse gases (GHGs). To prove that the project will result in real, permanent, verifiable reductions in greenhouse gases, proof must be provided in the form of a project design document and activity reports validated by an approved third party.

Reasons for carbon project development

Carbon projects are developed for reasons of voluntary environmental stewardship, as well as legal compliance under an emissions trading program. Voluntary carbon (GHG) reducers may wish to monetize reductions in their carbon footprint by trading the reductions in exchange for monetary compensation. The transfer of environmental stewardship rights would then allow another entity to make an environmental stewardship claim. There are several developing voluntary reduction standards that projects can use as guides for development.

Kyoto Protocol

Carbon projects have become increasingly important since the advent of emissions trading under Phase I of the Kyoto Protocol in 2005. They may be used if the project has been validated by a Clean Development Mechanism (CDM) Designated Operational Entity (DOE) according to the United Nations Framework Convention on Climate Change. The resulting emissions reductions may become Certified Emissions Reductions (CERs) when a DOE has produced a verification report which has been submitted to the CDM Executive Board (EB).

There may be new project methodology validated by the CDM EB for post phase II Kyoto trading.

United States

In the United States, standards similar to those of the Kyoto Protocol schemes are developing around California's AB-32 and the Regional Greenhouse Gas Initiative (RGGI). Offset projects can be of many types, but only those that have proven additionality are likely to become monetized under a future US Cap & Trade program.

One example of such a project, the Valley Wood Carbon Sequestration Project, receives funding from a partnership that was developed by Verus Carbon Neutral that linked 17 merchants of Atlanta's Virginia-Highland shopping and dining neighborhood retail district, through the Chicago Climate Exchange, to directly fund thousands of acres of forest in rural Georgia. The unique partnership established Virginia-Highland as the first Carbon-Neutral Zone in the United States.

Operation

An entity whose greenhouse gas emissions are capped by a regulatory program has three choices for complying if they exceed their cap. First, they could pay an alternative compliance measure or "carbon tax", a default payment set by the regulatory body. This choice is usually the least attractive given the ability to comply by trading.

The second option is to purchase carbon credits within an emissions trading scheme. The trade provides an economic disincentive to the polluter, while providing an incentive to the less polluting organisation. As fossil fuel generation becomes less attractive it will be increasingly unattractive to exceed a carbon cap because the financial disincentive will grow via market forces. The price of a carbon allowance would go up because supply would decline while demand stays constant (assuming a positive growth rate for energy consumption).

The final option is to invest in a carbon project. The carbon project will result in a greenhouse gas emission reduction which can be used to offset the excess emissions generated by the polluter. The financial disincentive to pollute is in the form of the capital expenditure to develop the project or the cost of purchasing the offset from the developer of the project. In this case the financial incentive would go to the owner of the carbon project.

Project selection

The most important part of developing a carbon project is establishing and documenting the additionality of the project - that the carbon project would not have otherwise occurred. It is also essential to document the measurement and the verification methodology applied, as outlined in the project development document.

Developing a carbon project is appropriate for renewable energy projects such as wind power, solar power, low impact-small hydropower, biomass, and biogas. Projects have also been developed for a wide variety of other emissions reductions such as reforestation, fuel switching (i.e. to carbon-neutral fuels and carbon-negative fuels), carbon capture and storage, and energy efficiency.