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New Bottom Line Volume 1.4 – Couldn't Do That. Wouldn't Be Prudent.

September 11, 1992

In the face of uncertainty, is it wisest to operate with impunity? or humility?

Consider the debate over global warming. President Bush has resisted action in support of the global consensus represented at the Rio Earth Summit, saying “let’s wait until there is scientific certainty.” Challengers Clinton and Gore propose energy efficiency strategies to reduce production of carbon dioxide. Pundits bash each other with quotes from their favorite scientists (with varying degrees of accuracy and scientific understanding).

It’s true that the models are complex and imperfect. Yes, there is uncertainty. So for a business leader or politician who is not a scientist, what is the appropriate course of action?

Assume, for the sake of discussion, that the global warming case is not proven, but merely possible ‹ something everyone concedes. Do you proceed with business as usual? Or do you decide that it may be most prudent to not perturb complex systems that you doesn’t completely understand (just bcause nothing happened when you poked the dog doesn’t mean that you ought to poke it again) especially if the prudent course yields other significant benefits (in addition to the risks averted).

Economists who claim that “the cost of delaying action for a couple of decades is probably not large…”, as Gary Becker did this summer in Business Week, miss the point. Economists have not even been able to generate economic models that accurately predict the behavior of the economy. Atmospheric models are even more complex, needing to take into account cumulative effects, lag times, and more. If the global warming warners turn out to be right, the proof could come too late to do anything about it, given the time dynamics of atmospheric systems. Damage to the ozone layer, for example, will worsen for 18 years after the generation of ozone-damaging gasses ends. By the time effects are absolutely proven, reversing them could be like trying to stop a supertanker.

Now, if carbon reductions necessarily meant suffering, the opponents of efficiency and proponents of waiting might have a point. But carbon reductions can be achieved — in fact are being achieved — through a variety of efficiency measures that bring with them a host of second and third order economic, as well as ecological, benefits, rangning from reduced energy bills to job creation. Utility companies like Pacific Gas and Electric, Southern California Edison and New England Electric are demonstrating bottom line benefits for themselves and their customers when they take prudent action to reduce the risks of global warming.

In fact, Richard Clarke, CEO of PG&E, called on President Bush to agree to the target of stabilizing CO2 emissions at 1990 levels, the level most other industrial powers had called for in the draft climate treaty for Rio. “I am convinced,” Clark wrote, “that such a goal can be achieved . . with measures that are not only cost-effective but also have substantial benefits to the U.S. economy and to the competitiveness of U.S. businesses.”

Those who advise inaction seem intent on diverting this country from a major economic growth opportunity. The countries that reduce production of CO2 and other greenhouse gases are likely to pull ahead of those who don’t, for many reasons ‹ not just because of consumer preference, also because there industry will be more efficient. (Japan already produces twice the GDP per unit of energy as does the US, and enjoys a resulting cost advantage in international competition estimated at five percent.)

The economic model that Dr. Becker cited in Business Week actually ignored new technology that will reduce carbon emissions to the atmosphere and provide a powerful source of cost savings for industry and a major manufacturing opportunity. What is the value of an economic model that overlooks new technology in an economy that is largely driven by new technology? Ten years ago such a model would have ignored the impact of microcomputers, cellular phones, fax machines, to name just a few.

In just the last few months we’ve learned of a new air conditioning technology uses no CFCs, and is far more efficient efficient than current models; a $30 million competition, funded by the nations’s utility companies, for design and production of a super-efficient refrigerator; and a new 60mpg car from Honda. Is anyone prepared to predict what efficiencies will emerge in the next ten years? What is certain is that many of them will come out of Japan and Europe. What is not certain is whether many of them will come out of the US ‹ and whether our government will help or hinder that process.

The only possible reason to not embrace a national energy policy built on efficiency is to protect one special interest Mr. Bush rarely talks about ‹ the oil industry. But are we prepared to sacrifice our national economy to protect one industry? Or will we recognize that the industrial mix of every nation’s economy will change in the future, as it has in the past? The challenge now is to design and implement a phased transition that minimizes both regional economic impact and global environmental impact, while building a sustainable energy future.

(c) 1992 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

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