May 15, 2001

Many Companies Cut Gas Emissions to Head Off Tougher Regulations


Despite the Bush administration's decision to back away from regulating emissions of global- warming gases, many multinational companies plan to continue reducing such emissions because they face strong pressure to do so in Europe and Japan, fear rising energy costs or want to promote their products as being friendly to the environment.

Some of the executives with plans to reduce emissions say they are trying to be good corporate citizens. But companies also cite a wide range of business reasons that have little to do either with the environment or with what happens in Washington.

And even as they move ahead on their own, some top officials at these companies say that while voluntary action is the right approach in the short run, at some point they expect the United States and others to adopt binding restrictions on the gases.

"Eventually, you're going to have to have a hard cap of some kind," said E. Linn Draper Jr., chairman and chief executive of American Electric Power, which owns coal- fired power plants across the Midwest and builds power projects overseas.

Because of the many steps being taken, emissions of global-warming gases by American industry are in fact falling, and at a surprising rate. The big increases these days come more from decisions made by consumers than corporations, as emissions from autos and homes continue to rise with people driving farther each year, buying less-fuel-efficient vehicles and building ever- larger houses with more appliances.

The shift in thinking at big companies is so marked that some executives who once led the fight against restrictions on the heat-trapping gases are now advocating action. Peter J. Pestillo, chairman and chief executive of the Visteon Corporation, one of the world's largest auto parts makers, said many companies had discovered that efforts to address climate and other environmental matters not only had marketing value but could often be addressed at a modest cost, provided the problems were identified early in the planning of each new project.

"People aren't debating global warming any more," Mr. Pestillo said. "It is more to take a high ground where you will be one day, rather than be driven to it."

Mr. Pestillo's views are significant because as a top executive at Ford in the 1990's, he used to coordinate the auto industry's opposition to many environmental rules.

In industry after industry, steps like these are being taken that have the effect of reducing global-warming emissions:

¶Every large automaker is investing heavily in new engine technologies to improve fuel economy, partly because the burning of gasoline in cars and trucks is one of the largest and fastest-growing sources of carbon dioxide, the main global- warming gas, and because gasoline prices are rising and regulators in Europe and Japan are demanding major improvements in fuel economy.

¶European-based oil giants like Shell and BP are taking steps to end the burning off of natural gas at oil wells — both to mollify environmentalists in their home markets and in hopes of selling the gas and gaining a competitive advantage by acquiring a greener image. American producers like Exxon Mobil are starting to move in the same direction.

¶Companies like DuPont are lowering their output of certain chemicals that contribute to global warming, an action begun years ago because some of the same chemicals damage the ozone layer.

¶Some big manufacturers like Alcoa, which release other heat-trapping gases, have been shifting to less polluting methods, partly to address the climate issue but also because cost-effective improvements in industrial processes reduce heat-trapping emissions.

¶Electric utilities are trying to reduce the amount of energy wasted by their power plants, so they can burn less fuel as well as head off government regulations.

The corporate moves to reduce emissions of global-warming gases add up, some environmental groups say, to a significant shift in approach.

"Many companies figured out in the 1990's that if an environmental issue reaches a certain level of public consciousness and seriousness, it's better to be proactive than reactive," said Philip E. Clapp, president of the National Environmental Trust, a private Washington group that has been lobbying to salvage the Kyoto Protocol, the proposed climate agreement that was rejected by President Bush two months ago. "You're then seen as a leader and get to be at the table framing all the rules."

But Mr. Clapp and many other environmental campaigners maintain that only government action to restrict warming gases will ultimately be sufficient to spur adequate changes.

Some business executives oppose binding restrictions on greenhouse gases but say that government must still play a role by establishing rules and methods — for example, a trading arrangement for credits earned by cutting emissions. This is what they are seeking from the Bush administration, which has been hearing from scientists, economists and industries as it ponders a counterproposal to the Kyoto agreement.

"There can't be an entirely free- market approach," said Norine Kennedy, vice president for environmental affairs of the United States Council for International Business, which represents about 300 American companies doing business overseas.

White House officials, for the moment, decline to say how the administration will deal with the contentious issue. "The president has pledged to review the full range of options" on dealing with climate change, a White House spokesman, Ken Lisaius, said. "He will be continuing to reach out to a wide range of groups and soliciting a diversity of views on the matter."

Yet many corporations say that by taking some voluntary steps now, they hope to head off regulations that could be much more stringent. Dennis Minano, vice president for energy and the environment at General Motors, said that even as G.M. tried to improve fuel economy, it continued to oppose all federal fuel-economy standards. The company welcomed Mr. Bush's decision to withdraw American support for the Kyoto agreement, which would require industrial nations to reduce emissions of the warming gases.

Overall emissions of global- warming gases in the United States climbed 0.9 percent in 1999 compared with 1998, according to the Environmental Protection Agency.

Industrial emissions in fact fell that year, by 2.1 percent. Commercial emissions — mainly from electric utilities that supply stores and other businesses — rose 1.9 percent. But residential emissions were up 2.9 percent, also reflecting the increased use of electric power. Global-warming emissions from transportation, primarily from the burning of gasoline in automobiles and diesel fuel in trucks, grew 3.4 percent in 1999.

Auto executives are working on their own to reduce emissions amid popular dismay in Japan and particularly in Europe, where there has been much more public interest than in this country on global warming. Japanese regulators have ordered automakers to improve average gas mileage to 35.5 miles a gallon in 2010, from 30.3 now. Automakers with operations in Europe, including Ford and G.M., have reluctantly agreed to increase fuel economy there to 41 miles a gallon from 33 miles now.

Both of these standards go well beyond those now in the United States, which require new cars to average 27.5 miles a gallon and light trucks, like pickups and sport utility vehicles, to achieve 20.7 miles.

Some American auto executives say they are coming under pressure from European managers within their companies who want them to tone down their criticism of the Kyoto agreement to avoid antagonizing prospective buyers there.

Detroit's leading automakers — DaimlerChrysler, in addition to G.M. and Ford — have each announced plans to increase the gas mileage of light trucks, especially sport utility vehicles, but oppose any toughening of federal standards.

Big gains in fuel economy are possible in Europe because most drivers there prefer smaller vehicles and because of the growing use in cars of diesel engines, which will be virtually banned in the United States in 2004 by air pollution rules. In Japan, vehicles increasingly use an engine valve technology that improves fuel efficiency but tends to restrict acceleration.

Toyota, which has factories in Asia, Europe and North America, plans to reduce the energy needed to manufacture a vehicle 15 percent by 2005, after years in which energy use has been flat. Toyota has already taken lots of little steps, like turning off the lights in factories between shifts, and installing computer-controlled thermostats throughout the plants to fine-tune the level of air-conditioning needed.

The complex mixture of corporate motives is illustrated by the pledge of Royal Dutch/Shell to stop burning off natural gas at oil fields by 2008. Natural gas often comes out of the ground with oil, but it is expensive to build pipelines or construct factories to liquefy and ship it.

Shell is working harder to sell the gas now anyway. Expecting industrial nations to impose some kind of restrictions on greenhouse gas emissions, Shell has modified its accounting of the costs and benefits of future projects in these countries. In deciding which projects to carry forward, the company has begun including a $5 penalty for each ton of carbon dioxide that will be emitted in these countries from 2005 to 2009, and a $20-a-ton penalty thereafter.

Including this accounting device will give the decision-making process a bias toward more efficient projects, Shell says.

The split among electric power producers, which are responsible for about a third of the country's carbon dioxide emissions, tends to reflect their views of how long they will be allowed to operate without further restrictions. Some companies that rely mainly on coal, the fuel that produces the most carbon dioxide, have expressed doubt that global warming is a problem. But despite that, a few of these companies have joined with government agencies in programs aimed at voluntarily reducing greenhouse gas releases.

Other utilities, including American Electric Power, have accepted the idea that government limits on carbon dioxide and other greenhouse gases are inevitable.

It is the seeming inevitability of such emissions limits that prompted some utilities to support legislation cutting carbon dioxide emissions from power plants as part of a broader cleanup of factory pollution. This idea gained momentum when Mr. Bush, as a presidential candidate, pledged that he would seek mandatory cuts in carbon dioxide from the plants. But the momentum died in March, when Mr. Bush abandoned that pledge and rejected the Kyoto accord.

Some of the same utilities are lobbying the White House to come up with a concrete plan to cut greenhouse gas emissions that can be presented as an alternative to the Kyoto agreement. Executives say their goal is to save money in the long term by establishing clear rules early.

In heavy manufacturing, one leader in addressing climate change has been Dupont, which by last year had reduced emissions of greenhouse gases from its factories worldwide more than 50 percent below levels of 1990. This came mainly through changing the way that DuPont makes nylon, a process that once produced enormous emissions of nitrous oxide — a gas that, molecule for molecule, is 300 times as potent as carbon dioxide in trapping heat in the atmosphere. By 2010, company officials say, their goal is to reduce greenhouse gas releases to 65 percent below 1990 levels.

Executives in other businesses also say there is the potential for major improvements, not just slow progress. The aluminum industry is testing new smelting processes that if widely adopted, could greatly cut releases of both carbon dioxide and perfluorocarbons, another group of potent warming gases.

Alcoa, which until recently was run by Paul H. O'Neill, now secretary of the Treasury, announced plans last month to reduce its greenhouse emissions by 2010 to levels 25 percent below those in 1990. If its tests of a new smelting method succeed, the company said, it could double that, achieving a 50 percent cut within a decade.

Many power company officials say they are also ready to help pay farmers, here and abroad, to sop up carbon dioxide, which would be far cheaper than upgrading existing power plants to produce less greenhouse pollution. G.M. is helping the Nature Conservancy buy 30,000 acres of Atlantic coastal rain forest in Brazil, which are to be preserved to absorb carbon dioxide and protect wildlife.

Thomas C. Jorling, vice president for environmental affairs of the International Paper Company, said government officials had identified 65 million acres of degraded pasture or cropland that could be planted with trees, and in so doing pull millions of tons of carbon dioxide out of the atmosphere. The company is in discussions with manufacturers that are big emitters of greenhouse gases over ways to share the costs, and greenhouse credits, of such an effort.

But first the government must establish the rules to ensure the fairness and effectiveness of this kind of deal, he said. "Bush can still come out of this as a very positive force," Mr. Jorling said.

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