In 2011, I published an article titled “From Foe to Friend? Business, the Tipping Point and U.S. Climate Politics” in the journal Business & Politics. It proposed a model for an expected strategic shift from private-sector opposition towards support for climate regulation over time. Due to conditions that emerge through a dynamic interplay between corporate interests and environmental governance, namely new market opportunities, regulatory threats and uneven playing fields, I argued that business interests could snowball towards “tipping points” where a critical mass of the private sector would begin to support or even demand regulation.

I used the tipping point model to analyze the evolution of U.S. climate politics from 1990 to 2010. As widely known and documented, fossil-fuel intensive industries reacted swiftly and aggressively when climate change first emerged on the political horizon. They launched a massive lobbying campaign to spread doubt about the science of global warming, and block both Presidential and Congressional support for greenhouse gas regulation. When President Bush Jr. withdrew the U.S. from the Kyoto Protocol in 2000, he echoed the antagonistic business lobby, preaching how climate regulation would reverse economic growth, lead to a loss of jobs and destroy the competitiveness of US businesses.

By 2007, however, a shift in business strategies was evident. After the election of President Obama, a new lobbying coalition (USCAP) including major companies from oil and gas, coal, automobile and electric power industries, began to lobby Congress for a federal cap-and-trade program to reduce U.S. emissions. They worked closely with Representatives Henry Waxman and Ed Markey, who drafted a bill that passed through the House by a 219-212 vote. But the Senate and more centrist version, crafted by John Kerry, Lindsey Graham and Joe Liberman to attract the 60 votes needed to override a filibuster, was declared dead without a vote in 2010. This time around, however, the collapse of efforts to enact federal legislation was not the result of private-sector opposition, but political factors such as Repugnican framing and lack of Presidential commitment.

After the article’s publication, some have questioned the truthfulness of USCAP’s advocacy. The companies didn’t really want cap-and-trade to succeed, it was argued, but ‘misrepresented’ their true interest to maintain the status quo and to get a seat at the policy table where they could favorably shape potentially inevitable legislation.[1]

Recent events clearly contradict this hypothesis. Since the failure of cap-and-trade in 2010, business backing of climate action has not weakened, but accelerated in both scope and intensity. The strong and vocal reactions coming from the U.S. business community when President Trump announced his planned withdrawal from the Paris Agreement in 2017, shows that business demand for climate regulation has indeed snowballed:[2]

In a letter entitled ‘We Are Still In’, businesses representing $6,2 Trillion of the U.S. economy, argued that “a failure to build a low-carbon economy puts American prosperity at risk”.[3] The CEO’s of 30 major U.S. companies also wrote a letter to President Trump, published in the Wall Street Journal. It urged him to stay in the Paris Agreement, and stressed that U.S. participation would increase their competitiveness, benefit American manufacturing and markets for clean energy, create jobs and stimulate economic growth.[4] Another big business coalition also published a letter in the New York Times, Wall Street Journal and New York Post, which argued that the Paris agreement would generate jobs and economic growth by expanding markets for innovative clean technologies: “US companies are well positioned to lead in these markets. Withdrawing from the agreement will limit our access to them and could expose us to retaliatory measures”.[5] As the Harvard Business Review noted, “This is no tree-hugger group. And it’s not a list of usual suspects from consumer-facing brands that want to impress or seem like they don’t have a carbon footprint. […] Heavy industrials are here. The biggest banks are here.”[6]

Even oil majors like ExxonMobil and Chevron urged the President to stick with Paris. In a personal letter to Trump, Exxon’s CEO Woods said “US participation in Paris was prudent”, and that America was “well positioned to compete” under the agreement.[7] Was this preference for Paris, as critics might claim, just a false misrepresentation of their true interest?

Not according to the tipping logic. As the model suggests, climate regulation increasingly facilitates new market opportunities for many businesses, including winning groups of major emitters. For companies like Exxon, carbon pricing may be attractive because it renders dirty coal uncompetitive against cleaner natural gas—in which oil majors are now heavily invested. Carbon pricing may trigger widespread coal-to-gas fuel switching in electric power around the world, a trend that has already caused natural gas to surpass coal in U.S. power generation, and brought emissions down to 1990 levels. Therefore, carbon pricing represents and an opportunity for Exxon and others in the evolving Big Gas industry to absorb coal’s market share, and partner with renewables. Even large emitters may turn a profit from the low-carbon transition, a dynamic that is more likely to explain oil majors’ support for climate regulation, than a false misrepresentation of a status quo-interest.

Read the original article ‘From Foe to Friend? Business, the Tipping Point and U.S. Climate Politics’ from Business and Politics here.

References:

[1] J.M. Grumbach, 2015. Polluting Industries as Climate Protagonists: Cap and Trade and the Problem of Business Preferences. Business & Politics, Vol 17, Issue 4

[2] https://abcnews.go.com/Business/business-leaders-react-trumps-paris-accord-decision/story?id=47779085 ; https://www.telegraph.co.uk/business/2017/06/02/trump-abandons-paris-climate-change-agreement-business-world/

[3] https://www.wearestillin.com/ ; https://money.cnn.com/2016/11/16/news/businesses-trump-climate-change/index.html?iid=EL

[4] https://hbr.org/2017/05/u-s-business-leaders-want-to-stay-in-the-paris-climate-accord

[5] https://www.c2es.org/content/business-support-for-the-paris-agreement/ ; https://money.cnn.com/2017/05/29/news/trump-paris-climate-change-business/index.html

[6] https://hbr.org/2017/05/u-s-business-leaders-want-to-stay-in-the-paris-climate-accord

[7] https://www.ft.com/content/fcf73abc-4202-11e7-9d56-25f963e998b2; https://www.independent.co.uk/news/world/americas/us-politics/trump-paris-agreement-climate-change-oil-companies-shell-bp-exxon-urge-president-stay-in-a7745666.html

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