Editor's Page -- Ready Or Not: Here Comes Kyoto

Jan. 21, 2005
International effort to curb global climate change moves forward without the U.S.

Now that Russia has ratified the Kyoto Protocol, the United Nations' pact setting mandatory reductions in greenhouse-gas emissions, executives of U.S. multinational manufacturing companies are living in a carbon-constrained world. Though the accord doesn't formally go into effect until 2008, Feb. 16 marks the start of a pre-Kyoto pilot program, when signatory countries -- and the companies operating within them -- are required to begin reducing emissions of six key greenhouse gases. However, this does not mean that other U.S.-based companies, both large and small, shouldn't reassess their energy and public policy strategies. Whether you still believe that Kyoto is based on fuzzy science or is a stealth campaign by other countries to damage U.S. companies, it's time to face reality. Kyoto likely will affect how you do business no matter where your company is.

You'd do well to follow the lead of the many companies that have already committed to voluntary emission reduction, either independently or through such organizations as the Environmental Protection Agency's Climate Leaders program, the Chicago Climate Exchange (CCX) and the Environment Defense Partnership for Climate Action. For example, members of the CCX, a greenhouse-gas emission reduction and trading pilot program, have entered into a voluntary, legally binding agreement to reduce emissions by 4% below the average of their 1998-2001 baseline by 2006. In the first year, member companies, which include Bayer Corp., Ford Motor Co., IBM Corp., and International Paper Co., cut emissions by 9%, according to Richard Sandor, CEO of the exchange. The exchange, notes Sandor, is the U.S. counterpart to the European Climate Exchange that will facilitate the Kyoto Protocol-related transactions for EU countries.

Other companies, such as Cinergy Corp., a Cincinnati-based electricity company that has committed to reduce total U.S. greenhouse gas emissions by 5% from 2000 to 2010 as part of the EPA program, have gone a couple steps further. Cinergy has created businesses to provide energy management services to industrial and large commercial customers (See "Best Practices -- Productivity Surge"). Further, it's called on Congress to pass "a long-term, multi-emissions bill that would take the unnecessary uncertainly out of national environmental policy."

While it's heartening to see that U.S. companies have kept up -- and even lead -- the global effort to reduce greenhouse-gas emissions, there's still work to be done. As Cinergy's call to Congress suggests, U.S. efforts are numerous and could become a cacophony of confusion. Some states, including New Jersey, New Hampshire and California, frustrated with the slow pace of national legislation, have already enacted legislation of their own.

Another difference between U.S. companies' voluntary efforts and Kyoto's mandatory ones is, of course, size and scope. In the EU, the Kyoto Protocol covers 12,000 companies. By comparison, combined U.S. efforts have enlisted only hundreds.

Perhaps less urgent and less certain, but no less important, U.S. executives will need to reassess what the passage of this international protocol -- without U.S. participation, let alone leadership -- means to the future of their companies' efforts to influence public policy beyond our national borders. U.S. business might have mastered the art of U.S. politics, but the larger playing field remains to be conquered. One thing is for sure: You can't lead from the sidelines. A consensus supporting efforts to reduce greenhouse-gas emissions is building among major U.S. companies. You'd be wise to join them.

Patricia Panchak is IW's editor-in-chief. She is based in Cleveland.

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