To many, the US government’s approach to climate change is notable not for what it has done, but for what it has not. The Bush administration’s rejection of the Kyoto Protocol in 2001 placed the US in a very small group of industrialised countries. Only Australia joined the US among the larger developed nations in what some cynics labelled a “coalition of the unwilling.” Meanwhile, some two dozens others, including the UK and its EU neighbours, as well as Japan, Canada and New Zealand, all went ahead and ratified.

REJECTING KYOTO
The Kyoto Protocol sets targets for countries to reduce their emissions of carbon dioxide and five other greenhouse gases that are contributing to climate change (“global warming”). Countries that ratify the treaty must reduce overall emissions by 5% between 1990 and 2008-2012. Controversially, President Bush rejected the treaty, arguing that the science was too uncertain, the economic costs too great, and that it would place the US at a trade disadvantage, since the accord exempts China, India and other developing countries from taking on mandatory emissions targets. While some applauded Bush’s stance, critics argued that it had several flaws. First, mainstream scientists are convinced climate change is caused by human activity and that significant increases in temperature and a rise in extreme weather events are highly probable. Such changes pose a profound threat to human health and the global economy.

In addition, an increasing number of economists and businesspeople, led by those in the insurance industry, believe that not addressing climate change will be more costly in the long-term than dealing with it now. Climate modelling shows that, by acting earlier to rein in global emissions, the long-term impacts on our weather can probably be controlled, meaning the rise in extreme weather events and other economically-damaging consequences may be less severe. Finally, some experts have noted the financial payback of combating global warming: companies such as DuPont and BP have enjoyed significant cost savings through energy conservation and efficiency programmes.

EMBRACING VOLUNTARY ACTION
The US federal government’s rejection of Kyoto does not mean the US is ignoring the climate change problem, though: far from it. Numerous initiatives have been introduced at the national, state and local levels to address the issue. At the national level, the US government was one of the first to ratify the UN Framework Convention on Climate Change more than a decade ago. This treaty recognises the seriousness of the threat and obliges industrialised nations to develop policies and measures to reduce greenhouse gases.

Although the US subsequently rejected the Kyoto accord that tried to build on the Climate Convention through mandatory targets, it has not been idle in introducing measures at home. Rather than imposing mandatory limits, it has favoured less prescriptive solutions, promoting voluntary partnerships with the private sector, states, and local government. While critics say the problem is too serious for voluntary initiatives, the approach does have both repercussions and opportunities for those doing business in the US. Since Bush launched his Climate Plan in 2002, government-led initiatives focused on the private sector have increased. The “Climate Leaders” programme encourages companies to develop long-term, comprehensive strategies and set emissions goals.

Another presidential initiative, “Climate VISION”, seeks to develop public-private partnerships to limit the growth in US emissions. The aim is to reduce America’s greenhouse gas intensity by de-linking economic growth from the growth in fossil fuel use. While reducing energy intensity is not as ambitious as cutting emissions, Bush’s initiative does mean the private sector has avenues it can explore in areas such as energy efficiency. Other government initiatives include the Environmental Protection Agency’s agreements with industries that emit methane and the “Smartway” Transport partnership with the ground freight industry. The government has programmes for the forest and agriculture sectors and schemes to improve energy efficiency in industrial plants and in appliances. The Bush administration has also emphasised research and development of new technologies that could offer some short- to medium-term relief.

NATIONAL LEGISLATIVE FRAMEWORK
The US federal government has passed various laws that are relevant to the climate change problem. These include the 1970 Clean Air Act and 1990 Pollution Prevention Act. The Clean Air Act, which was established to address problems such as acid rain and ground-level ozone, has relevant provisions dealing with cleaner fuels and transportation policies.

In August 2005, the US government passed the Energy Policy Act 2005. The law offers US$14.5bn in tax breaks over a 10-year period – mostly to businesses – to support energy conservation efforts, increase domestic production, and support renewable sources of energy such as solar, wind, and biomass power. It also offers support for clean-coal technologies. While some environmentalists complained that it gave away too many tax breaks to producers and users of oil, gas and coal, the legislation did include tax breaks for a wide range of businesses, as well as for consumers (including those buying hybrid cars). A tax credit for manufacturers of energy-efficient refrigerators and other appliances was also included.

STATE AND LOCAL ACTION
An increasing number of states have been taking a pro-active approach that has arguably been more progressive than the federal response. States such as California and New Jersey have introduced emissions targets, while others such as Massachusetts have set in place limits for specific industries. At the city level, many approaches are being tried. Some cities have even backed a controversial lawsuit against the federal government accusing it of a “failure to evaluate the impacts of its actions on the earth’s climate and US citizens”.

LOOKING AHEAD
Businesses looking to invest in the US – or elsewhere for that matter – are likely to find a somewhat fluid situation both in terms of the politics of the issue and public perception. The US perspective on climate change does appear to be changing, although the dynamic is hard to read. On the one hand, there seems no likelihood that either President Bush or Congress will undergo a dramatic change of heart on the Kyoto Protocol. In fact, some governments that ratified Kyoto and agreed to mandatory emissions cuts now seem uncertain whether to take on targets beyond 2012, or indeed how to achieve their current targets.

Pro-Kyoto countries such as Japan, Canada and even the UK, appear to be struggling to meet their Kyoto pledges. The apparent refusal of India, China, and other developing countries to consider targets of their own only adds to the quandary, as emissions in these emerging economic giants continue to grow rapidly. The US response of pushing voluntary measures and technological solutions seems to be finding more support internationally, at least in some quarters. At the same time, the scientific evidence for climate change is also growing, thus increasing the pressure for urgent and stronger action. While voluntary measures are all well and good, questions remain over whether they can deliver the sort of emissions cuts the experts believe are actually needed.

Recent events are adding to the public pressure. In the US, rapid oil price rises and the devastation wrought by hurricanes Katrina and Rita in September 2005 have fuelled a vitriolic public debate on global warming. While most respectable scientists would hesitate to link any individual weather event to climate change, the public is increasingly aware that global warming will make extreme weather more common. Thus, while some are detecting a new political undercurrent internationally against mandatory targets, the tide of US public opinion and the policies of individual states appear to be heading in quite a different direction.

For the private sector, the key message from this is that the US, along with the rest of the world, is still wrestling with how to respond to this massive challenge. Preparing both for the impacts of global warming and for possible changes in the long-term investment climate would be wise. Climate change presents opportunities as well as the obvious risks and the best-prepared companies will obviously be more likely to avoid exposing themselves to unnecessary threats. As any visitor to London quickly discovers, even if there’s barely a cloud in the sky when you leave for the office in the morning, it stills pays to prepare for the possibility of rain.

Chris Spence is a climate change expert and the author of Global Warming: Personal Solutions for a Healthy Planet (Palgrave MacMillan, 2005). For more information: E-mail: chris@iisd.org