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Companies Get Ready For Greenhouse-Gas Limits

JOHN J. FIALKA and JEFFREY BALL / Wall Street Journal 26oct04


WASHINGTON Some major corporations, anticipating that they may soon be facing government regulations on so-called greenhouse gas emissions at home as well as abroad, are already taking steps to reduce the financial risks of tighter controls and searching for ways to make money on them.

A new study of nine corporations by World Resources Institute, a nonprofit, environmental group based here, concludes that "proactive work" by companies to measure emissions and minimize the costs of the coming rules could be much less expensive than "reacting to events at a later date."

The Kyoto Protocol, the international treaty that will regulate carbon dioxide and other emissions believed to be causing global warming, could be imposed on U.S. multinationals operating in other industrial nations early next year after Russia, as expected, ratifies the treaty. Meanwhile, efforts by state and regional officials in the U.S. Northeast and in California could result in new regulations on power-plant and vehicle emissions.

The bulk of U.S. industry remains opposed to the notion of mandatory government limits. Next week, officials from the utility, auto and oil industries are expected to file a legal brief supporting the Bush administration's decision that the administration has no authority to limit emissions of carbon dioxide and other global-warming gases unless Congress gives it that authority. The decision, reached last year, prompted a lawsuit from several state attorneys general and environmental groups that want the federal government to cap such emissions.

Still, the report shows that some corporations are aware that there will be winners and losers under stiffer emissions rules, and are trying to position themselves to be among the beneficiaries. The report's author, WRI, is a centrist environmental group that tries to persuade companies that such moves can help their bottom lines.

Utilities, such as Consolidated Edison Inc. in New York, will feel the direct brunt of emissions controls being planned in the Northeast, which will be focused on emissions from coal-fired power plant starting as early as 2006. Consolidated Edison's effort to get a better measure of its emissions, according to the study, has already yielded about $5 million in savings by pinpointing and eliminating leakage of natural gas, which is believed to be 20 times more potent as a global-warming gas than carbon dioxide. In addition, the utility is marketing and selling at a premium wind-generated "green power" to customers from a partner in upstate New York.

Non-utility companies, such as Johnson & Johnson, the consumer health-products company based in New Brunswick, N.J., will feel the impact of new regulations in the Northeast and the West indirectly, because emissions cuts on power plants mean that its electricity costs will rise. "The energy efficiency projects we have underway are by far the biggest," said Dennis Canavan, director of the company's world-wide energy-management program, referring to projects that have cut emissions. Johnson & Johnson, according to the study, has also become the nation's second-largest user of solar panels that produce electricity.

Pfizer Inc. has been working since 1993 to lower energy consumption, based on a goal of reducing greenhouse-gas emissions by 35% per dollar of revenue by 2007, according to the study. So far the pharmaceuticals company, which operates 102 facilities world-wide, has identified more than 600 energy-saving projects, ranging from new solar and wind-powered projects to finding ways to prune costs of existing lighting, heating and cooling systems.

"There's a competition for capital within the company," explains Al Forte, Pfizer's assistant director of environmental affairs. "These guys have other priorities at plant sites, mainly getting products out the door. Having a company-wide goal allows us to have a greater amount of visibility for a lot of these projects."

General Electric Co., the conglomerate which operates 6,000 facilities in 56 countries, has focused its reduction efforts on the 11% of its operations, plants and offices that produces 95% of the company's emissions. In addition, it is preparing a variety of products including wind-powered turbines and equipment for coal-gasification plants.

"We think these are real businesses and we think there will be a real return for our shareholders," said John Rice, president and chief executive of GE Energy, an Atlanta-based unit of GE. "We also think we can change the game. We have the scale to make these investments when we need to, and move the technology forward." GE says it spends hundreds of millions annually on clean-energy, though a GE spokesman declined to give a more specific number.

Citigroup, which operates more than 270 retail branch banks in the New York City area, has developed an automated system to monitor their energy usage using computerized sensors with a wireless satellite link. It allows a central office to tailor maximum energy use to business hours and to reduce maintenance and service calls by spotting problems early. The system, which cost $2.5 million to install, has resulted in almost $500,000 in energy efficient rebates from area power authorities, according to Stephen Lane, director for global projects for the company.

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