Taking Care of Business: How Big Business Has Hijacked Climate Talks

A flower blooms under a floodlight. It is projected on to a huge
screen, behind a panel of expensively suited executives. A CNN business
correspondent struts up and down a catwalk, excitedly thanking UN
Secretary General Ban Ki-moon and the ubiquitous Al Gore. The scene of
this corporate love-in? The World Business Summit on Climate Change.

'The fact that I flew here to sit on a panel for one and a half
hours, then I'm flying straight back to the US, is an example of our
commitment to environmental sustainability,' boasts Indra Nooyi, CEO of
PepsiCo, blissfully unaware of the irony of her statement. Her fellow
industry representatives make similar claims about just how
energetically they are saving the planet.

This is the new face of the climate business.

Until recently, many of the globe's biggest corporations were firmly
in the climate change denial camp - and funding spurious research to
back up their claims. Now a new realism has emerged. Climate change is
no longer rejected as a bogus theory the economy can ill afford.
Instead, it's a business opportunity.

Back in the days of George W Bush, the ostrich-headed faction of US
industry held sway. Companies like ExxonMobil saw no profits in
'climate solutions', so opposed any climate legislation. Now, carbon
markets - the buying and selling of the right to pollute - are at the
heart of proposals for a new global deal at the UN Climate Conference
in Copenhagen this December, and the 'progressive' wing of big
business, backed by large US-based NGOs, argues that this market-driven
approach is the only way to secure an international emissions
reductions deal.

The problem is, critics say, that carbon markets are delaying
genuine action on climate change, and shifting attention away from the
fundamental task of rapidly phasing out fossil fuels. How did it come
to this?

The ostrich position

Of course, head-in-the-sand corporate opposition to serious policy
changes is still around. The US Chamber of Commerce and the National
Association of Manufacturers continue to bankroll resistance to the
American Clean Energy and Security (ACES) Act. Instead of simple
climate change denial, their rhetoric now focuses on 'threats to
American competitiveness'. But according to the US-based Center for
Public Integrity there were 2,340 corporate lobbyists in Washington in
2008, and a clear majority of them were pushing to weaken environmental
controls.

Companies hide behind 'trade associations' to side-step the bad PR
they might invite for opposing measures to fight climate change. The
American Petroleum Institute spent considerable energy last summer
stimulating fake 'grassroots' opposition to ACES. The Act has now been
so weakened by concessions to big business that the NGO International
Rivers estimates it could allow US companies to avoid actually reducing
their emissions until 2026. Now, with the US climate debate bogged down
in the Senate, negotiators are rapidly talking down expectations for a
strong climate agreement at Copenhagen.

This is not the first time that business has had a defining impact
on humanity's attempts to get to grips with the enormous challenge of
climate change. In the 1990s the Global Climate Coalition (GCC) - a
front group for 50 major oil, coal, auto and chemical corporations and
trade associations - played a key role in delaying and weakening
international climate agreements, mainly by pressuring US politicians.

The GCC successfully lobbied Washington to ensure that no binding
targets were included in the UN Framework Convention on Climate Change,
agreed at the 1992 Rio Earth Summit. It also promoted a 1997 Senate
resolution where US legislators expressed unanimous opposition to
legally binding greenhouse gas reductions unless developing countries
(responsible for a fraction of the current and historical emissions)
adopted the same rules.

Al Gore, the US chief negotiator at the time, took this message to
the UN climate negotiations and 'demanded a series of loopholes [in the
Kyoto Protocol] big enough to drive a Hummer through,' as British
journalist George Monbiot put it. Gore insisted on a new carbon offset
scheme, the Clean Development Mechanism (CDM). Northern companies could
avoid having to curb their own pollution by buying 'emissions
reductions' from the Global South. Larry Lohmann, of the UK advocacy
group The Corner House, recalls: 'Kyoto was written, largely by the US,
as a treaty friendly to big business. Companies like Enron, which as an
energy trader was well placed to make profits from carbon trading, were
happy about Kyoto and wanted the US to be part of it.'

Carbon trade-offs

When the Kyoto Protocol was agreed in December 1997, John Palmisano,
Enron's senior director for environmental policy, celebrated an
agreement that was full of 'immediate business opportunities'. Twelve
years later, the carbon trading market is worth over $100 billion.

One often-repeated claim is that reductions in greenhouse gas
emissions are equivalent wherever they take place - which is only true
up to a point. It is worth stressing that offsets are not reductions.
In practice, 'offsetting' allows generous subsidies for existing
technologies to mop up industrial gases, rather than stimulating the
speedy shift toward the low carbon world we desperately need. As of
September 2009, three-quarters of the offset credits being traded had
nothing to do with CO2 reductions. Instead, they were for large firms,
operating in developing countries, making minor technical adjustments
to eliminate HFCs (refrigerant gases) and N2O (a by-product of
synthetic fibre production). Corporations and governments in the North
then buy these credits to avoid taking action domestically.

This flawed assumption - that the market can effectively drive the
transition to more sustainable models of development - also underlies
one of the major new initiatives on the table for agreement at
Copenhagen: the proposal to curb deforestation, known as REDD (Reduced
Emissions from Deforestation and Degradation).

Deforestation is responsible for around 20 per cent of global
greenhouse gas emissions. But REDD assumes that this is because intact
forests have no dollar value attached to them; they're worth less than
forests that are cut down. So the solution is to put a price tag on
standing forests, and allow countries and companies to trade in the
amorphous concept of 'avoided emissions'.

Yet forest communities and indigenous peoples are deeply opposed.
They warn that treating forests merely as carbon stores, the rights to
which can be bought and sold on the international markets, will further
erode their land rights, despite the fact that they are the most
effective stewards and protectors of forests, when left in peace to
play this role. What REDD is doing, they argue, is financially
rewarding the owners of the major construction, mining, logging and
plantation developments that are the real drivers of deforestation.

The financial sector's main interest in the new climate deal is that
it will deliver bigger and more lucrative carbon markets. As Tracy
Wolstencroft, Managing Director of Goldman Sachs, told the World
Business Summit, carbon trading now encompasses 'some of the largest
emerging markets in the world'.

This rapid growth has already spawned more complex markets where
carbon credits are bundled together, then sliced up and resold -
similar to the structures that brought the derivatives market to its
knees during the recent financial crisis. It is dangerous for the same
reason: carbon markets sell a product that has no tangible underlying
asset - fertile conditions for the creation of a new 'bubble'. Traders
don't know exactly what they are selling. And it becomes increasingly
meaningless to talk about emissions reductions since what is 'reduced'
on paper is so far removed from any measurable change in industrial
practice or energy production. Speculation has become an end in itself.
Meanwhile, emissions continue to rise.

'Let the market play'

These developments are not simply the work of business lobbyists,
however. Governments have created a favourable regulatory climate which
assumes that markets know best. 'Our role is to keep the regulatory
structure as simple as possible and let the market play,' says Jos
Delbeke, Deputy Director-General for the Environment at the European
Commission. Delbeke has for several years been the EU's chief climate
negotiator. He was a key player in developing the EU Emissions Trading
Scheme which has allowed 'the market to play' by gifting large amounts
of free credits to major polluters and setting too generous a cap on
the total amount of emissions. So, as a consequence, there has been no
overall reduction in greenhouse gases, but vast windfall profits have
been generated for some of the EU's most carbon-intensive companies.

Professor Matthew Patterson, co-author of forthcoming book Climate Capitalism,
characterizes such an approach as the internalization of corporate
interest by public decision-makers. 'I think the best way to think of
corporate influence is in terms of structural power rather than
directly observable influence,' he says. 'Governments internalize the
interests of powerful businesses and act to promote those interests
(even unconsciously).'

Other academics talk of a revolving door between governments,
corporations and the large, pro-business NGOs. Take the International
Emissions Trading Association (IETA), probably the largest lobby group
at the UN climate talks. IETA's CEO, Henry Derwent, was previously head
of climate policy for the British Government and a special adviser to
the G8 in 2005: a good choice to represent corporate interests in
shaping the principles of a post-2012 agreement.

With billions at stake, there are numerous CEO-led initiatives to
set the global agenda by lobbying national governments (see Hall of
blame, above). The pressure is relentless. James Rogers, CEO of Duke
Energy, remarking on the frequency of his lobby visits to Capitol Hill
says: 'My hotel doorman in Washington greets me more regularly than my
dog.'

More typically though, corporate leaders, and even the names of the
companies they represent, are protected from exposure by faceless
industry associations, operating at national, regional and global
levels. The same lobbyists often juggle multiple hats. Take Nick
Campbell, climate lobbyist for Arkema (oil giant Total's chemical
business). Campbell doubles up as head of the climate change working
groups of CEFIC (the European chemical association), Business Europe
(the general European business platform), and the International Chamber
of Commerce (a global corporate lobby platform).

'Basically the climate message of those groups is the same, they
just act at different levels,' says Belen Balanya of Corporate Europe
Observatory.

As Copenhagen approaches, a confusing mass of negotiating texts
remain on the table - while outside the conference rooms, existing
legislation and new pilot projects are being primed to take advantage
of any new business opportunities. The Sydney Morning Herald
recently reported that 'scores of carbon traders... have been active in
Papua New Guinea and Indonesia trying to sign up landowners for
not-yet-agreed REDD schemes'. Meanwhile, in Bangkok the Clean
Development Mechanism Board approved a new measure last October to help
biodiesel production count as an 'offset' - despite evidence that its
expansion contributes to deforestation.

At the negotiating table both the EU and US have been working to
redefine the role that public finance could play in any new deal.
Jonathan Pershing - head of the US delegation at recent UN climate
talks in Bonn - advocates 'changing the debate'. Public money, he
argues, should no longer be regarded as a means of helping Majority
World countries adapt to climate change or to mitigate its worst
effects, but as a 'catalyst' for private gain. Anders Turesson, chief
climate negotiator for Sweden and chair of the EU Group, echoed this
message, suggesting that public funds should be a 'lubricant' for
private sector investments.

Critics agree that carbon markets could yield significant profits.
But they could also end up making climate change worse - by
perpetuating the failed economic and industrial models that helped
create the problem in the first place, and delaying a rapid transition
to a more climate-friendly future.

So what should concerned citizens do about all this? It's clear that
we need to rethink and restructure energy production, industry and
agriculture in ways that rediscover and promote local knowledge. But
policy changes alone will not be enough. Above all, we need to get
organized politically. To roll back the advance of the nouveau-green
chief executives there are no short cuts, because the struggle against
climate change is part of a much larger fight: for a more just,
democratic and equal world.

Hall of blame

A who's who of corporate lobbyists at the UN climate talks

International Emissions Trading Association

Largest corporate lobby group at UN climate negotiations - it
brought 250 business representatives to the talks in 2008. Leading the
push for the expansion of carbon markets to include forests,
agriculture, and carbon capture and storage (CCS) - technology to
neutralize the climate impact of fossil fuels that will not be viable
for many years.

International Chamber of Commerce (ICC)

Grandfather of corporate environmentalism, active on climate issues
since the Rio Earth Summit. Main focus has been to avoid regulation and
taxes.

World Business Council on Sustainable Development

'CEO-led coalition' of over 200 companies created in 1991 to lobby the
Rio Earth Summit.

World Economic Forum

Hosts its own Climate Change Initiative.

Project Catalyst

Initiative of the non-profit ClimateWorks Foundation which draws
heavily on research by consultancy firm McKinsey. Although it claims to
be a 'neutral adviser' it emphasizes that a majority of 'emissions
savings' before 2020 should be made in the Global South, creating
business opportunities for large corporations.

3C (Combat Climate Change)

Initiative of CEOs of major companies, hosted by Swedish energy
giant Vattenfall. Pushing proposals for a global carbon market and for
the 'streamlining' (ie relaxing of already weak environmental checks)
of carbon market rules.

The Climate Group

Non-profit organization whose members include some of the world's
largest corporations. Task force working on the climate agreement, led
by former British Prime Minister, Tony Blair.