ENVIRONMENT-U.S.: Shareholders Press Power Firms to Cut Emissions

By Jim Lobe Reprint | | Print |

Jim Lobe

WASHINGTON, Jan 17 2003 (IPS) - A coalition of institutional investors is calling on the five largest emitters of greenhouse gases among U.S. electric-power plants to lay the groundwork for cutting those emissions, which most scientists believe contribute to global warming.

The group, led by the state of Connecticut’s main pension fund and the Interfaith Center on Corporate Responsibility (ICCR), announced Thursday that they will file resolutions at the annual shareholder meetings of the five target companies later this spring.

They will be asking the companies to report to their shareholders on the economic risks associated with their past, present, and future emissions of greenhouse gases, their plans to reduce them, and the possible economic benefits of substantial reductions..

The five companies are American Electric Power, Southern Company, Xcel Energy Inc., TXU Corporation, and Cinergy Corporation. Together, their plants account for 25 percent of all U.S. power plant emissions, which, in turn, accounts for about 10 percent of total global emissions.

The shareholders’ announcement comes amid growing political ferment in the United States about climate change and President George W. Bush’s withdrawal from the Kyoto Protocol, an international agreement that requires industrialised nations to reduce their emissions by an average of about seven percent below 1990 levels by 2012.

Bush’s rejection of the treaty and his opposition to regulating emissions have created a policy vacuum that other policy-makers and actors, particularly at the state and local level, are moving swiftly to fill.

Last week, Democratic Sen. and presidential aspirant Joseph Lieberman and Republican Sen. John McCain introduced a bill that would require industry to reduce greenhouse emissions to 2000 levels by the year 2010, and to 1990 levels by 2016.

At the same time, New York Republican Governor George Pataki announced a programme to increase the use of renewable energy sources, such as solar or wind power, to 25 percent of the state’s total power supply within 10 years. He also called on the New York legislature to adopt California’s new auto emission standards, which are designed to meet or even exceed Kyoto targets.

Major U.S. businesses are also moving to reduce emissions. Giant multinational chemicals company, DuPont, which led U.S. efforts to phase out chlorofluorocarbons (CFCs) that damaged the Earth’s protective ozone layer a decade ago, joined a number of other corporate giants Thursday to launch the ‘Chicago Climate Exchange’, a trading scheme designed to provide incentives for companies to reduce emissions.

Next month, the Business Roundtable, which represents 150 of the country’s largest firms, will announce a voluntary scheme whereby each member agrees to measure and publicly report its annual greenhouse emissions and pledges to cut it by a certain percentage.

Corporations are not only responding to growing public and international concerns about global warming: shareholder resolutions, such as those announced Thursday, are forcing management to focus on the issue.

Support at shareholder meetings for emissions-related resolutions has mushroomed. Over the past year, such proposals have won the support of votes representing about 18 percent of shares, compared to about three percent three years ago.

While shareholder resolutions opposed by management rarely exceed five percent, showings of eight percent or more tend to be taken very seriously by corporate managers, particularly at times – such as now – when investors are worried about the stock market’s performance.

Just last month, the ICCR, which holds about 120 billion dollars in investment assets, joined several other institutional investors to announce resolutions aimed at the world’s two biggest carmakers, U.S.-based General Motors (GM) and Ford.

The resolutions, which argue that the two companies are losing their competitive edge in global markets – hence reducing the value of their stocks – by not investing in energy-saving technology or producing more energy-efficient cars, calls on their managements to report on how they could significantly reduce emissions over the next 10 to 18 years and what new public policies they should support that would facilitate such reductions.

The resolutions for the five power companies take a similar tack.

”We believe that taking early action on reducing emissions and preparing for standards could better position companies over their peers, including being first to market with new high-efficiency and low-emission technologies,” the preamble states.

”Changing consumer preferences, particularly those relating to clean energy, should also be considered,” it says. ”Inaction and opposition to emissions control efforts could expose companies to reputation and brand damage, and regulatory and litigation risk.”

”We need to know now where a utility will stand down the road when there are federal regulations in place,” said Jim Newland, chair of the investments committee of the Presbyterian Church USA, an ICCR member.

”If the company has not made the right amount of progress toward investing in alternative sources it will be extremely expensive and detrimental to stockholder return to adapt at that point.”

The sponsors noted that Bush failed to follow through on his campaign pledge to regulate carbon dioxide, the most prevalent greenhouse gas, from the electric power industry and, in another controversial decision, recently rolled back Clean Air Act provisions that required companies to upgrade older power plants to reduce emissions.

They noted a split in the utility industry regarding carbon dioxide regulations, with some largely coal-burning utilities fighting to stave off any regulation, and others calling for uniform regulation in the interests of reducing future uncertainties.

Meanwhile, they noted, individual states have begun taking action to regulate greenhouse emissions by power plants, effectively increasing pressure on the industry to support federal legislation that could provide uniform standards.

”The failure of the U.S. government to set standards is already creating a climate of business uncertainty,” said Robert Massie, director of CERES, an investment group and one of the sponsors.

”It creates a situation where the companies are vulnerable to the whims of state regulation, or even litigation costs, as suits are brought against the largest emitters. Those companies that haven’t invested in renewables and other cleaner technologies will be hit the hardest.”