Climate Change is 87% Business
Turn down your thermostat. Turn off lights when you’re not using them. Buy an electric car, and a heat pump. Floss after every meal.
We’ve all heard this refrain, suggesting that climate change is largely in the hands of consumers. It’s true that individual choices have a role to play, but it’s a secondary role. In fact, the entire idea of our individual “carbon footprint” is a deliberate distraction, invented by an advertising firm working for British Petroleum.
The real climate action takes place in the business world. It’s critical that we find ways to change the behavior of businesses, not just individuals.
(Yes, I threw in the bit about flossing to see whether you were paying attention. But it’s good advice.)
Technology Is Not The Hard Part
A famous quote, attributed to Thomas Edison, states that “genius is one percent inspiration and ninety-nine percent perspiration”. Well, mitigating GHG emissions is going to be about 1 percent genius (inventing new solutions), 9 percent scaling, and 90 percent deployment. The biggest challenge will be driving adoption of all the new green technologies.
Mitigating emissions is a grand undertaking, requiring us to rebuild vast swathes of the global economy. However, there won’t be any unified, top-down project, like mobilizing the troops and materiel for D-Day. Rather, it will play out as millions of separate decisions. There are 2000 coal plants to be closed, even more cement factories to be converted to new processes, billions of gas heaters, billions of vehicles. Each plant, factory, or vehicle will only be updated or replaced when the individual owner decides to do so.
The technical challenges are significant, but for each sector, we only need to “win once”: taking cement as an example, we only need one successful carbon-neutral replacement. But when it comes to adopting the new technologies, we only need to “lose once”. If most cement factory owners update, but some do not, that remainder will emit a significant amount of CO2.
The Important Decisions Are Business Decisions
Most vehicles are owned by individuals, and households are responsible over 1/3 of electricity usage. But most of the important decisions on climate will be made by businesses.
Working from the emissions breakdown at https://ourworldindata.org/ghg-emissions-by-sector, the following components of greenhouse gas emissions originate in systems selected or operated directly by consumers:
Road transportation of passengers accounts for 7.1% of emissions; mostly consumer-owned cars, but also busses, taxis, etc. Let’s conservatively assign 7% to personal cars.
Energy use in residential buildings accounts for 10.9% of emissions. Much of this is for electricity, where the associated emissions relate to decisions outside of the consumer’s control, such as whether to build a natural gas plant or a wind farm. Direct emissions from the home are primarily heating, cooking, and hot water. I don’t know what fraction of that 10.9% consists of direct household emissions, but let’s say 6%.
The upshot is that consumers only control about 13% of global emissions. The other 87% of emissions sources are controlled by businesses (and governments).
Of course consumers have indirect power to influence that 87%. They can buy fewer products, use less electricity, travel less. However, austerity is a difficult idea to sell. Worse, it is not a real solution; conservation can reduce emissions but can never eliminate them. As Saul Griffith says, “you can’t ‘efficiency’ your way to zero”. In fact, as Matthew Yglesias argues in The case for more energy, the vision of a future with lots of clean power is extremely compelling. To push the climate agenda, we will do better to associate it with an optimistic future rather than a future of conservation and limitations. Climate optimism of the will is another good essay on this topic.
Consumers can also exert power by choosing to buy from green brands, but in this case the consumer is not directly adopting a new steel process or agricultural technique. The ultimate decisions are still being made by a business.
Why Might a Business Go Green?
Of course, most businesses are not rushing to lead the way on climate. This is not surprising; cost, limited availability of carbon-neutral solutions, and friction are all major impediments.
And yet, there are exceptions. Stripe is working aggressively to reduce their emissions and purchase solid offsets for more than 100% of the remainder. Microsoft is working hard to tackle their data center emissions. Two coal-fired electricity plants in Colstrip, Montana closed last year. Why do businesses sometimes make climate-friendly choices? There are many potential factors, each of which represents a lever we can use to accelerate change:
In some sectors, green solutions are starting to win on price (but don’t count on that happening everywhere)
Public pressure
Consumer preference for green products
Employee preference to work at a green company
Executives with a genuine desire to help the planet
Pressure from shareholders (e.g. ESG investors – I know, this is severely overhyped, but still)
Government regulations or subsidies
Anticipation of any of the above. For instance, the possibility of increased regulation of carbon emissions and decreased costs of green power in the years to come might make a utility reluctant to build a new gas-fired power plant today.
Climb Every Mountain, Pull Every Lever
We can, and should, use every point of leverage to encourage businesses to eliminate emissions. I’ll explore some of the specific avenues in future posts, but one aspect is so critical that I want to mention it here: closing the gap between appearances and reality.
Many incentives are based on appearance: seeming to reduce climate impact, whether or not the reduction is real. Sadly, it’s so common for these to diverge that there’s a word for it: greenwashing. Examples include loose future commitments that don’t require any change today; promises to not cut down trees that weren’t economical to harvest in the first place; or changes with minimal impact relative to the overall business (e.g. adding solar panels to gas stations).
To convince businesses to address the 87% of emissions that are under their direct control, we will need to harness consumer, employee, executive, investor, and public pressure. And to do that, we will need aggressive transparency, tied to firm standards for measuring the climate emissions of every business (and government) on Earth.