mitigating climate change would not be prohibitive by comparison. Stern declared, in economists’ language, that climate change was the biggest “market failure” of all time.
The impact of the Stern report was far greater than anyone had anticipated. With a certain degree of understatement, the Economist summed up the reaction thusly: “Rarely has a report with so many charts and equations in it caused such a stir.”11
The report set off a furious row among economists. Critics argued that Stern’s discount rate—the value of a dollar in the year 2100 as opposed to in 2006—was much too low, and that it was this choice of discount rates that drove the policy conclusions. Other economists who privately disagreed with the analysis felt peer pressure not to go public with any criticism. Stern’s rejoinder was that the critics did not understand that this was not a normal economic situation and that they failed “to appreciate the magnitude of the risks that the science was identifying.” But whatever the argument among professional economists, the report’s impact on policymakers, politicians, and the environmental activists, particularly in Europe, was very significant. It filled what turned out to have been a vacuum. For it built out an economic structure to complement the expanding edifice of the IPCC studies.12
GREEN CREDENTIALS
Companies were starting to demonstrate green credentials. For some that meant focusing on climate change, and figuring out how to adapt their businesses to a coming age of carbon regulation. John Houghton, formerly head of the UK Meteorological Office, was the coleader of the scientific assessment of the first three IPCC reports. In the mid-1990s he started a dialogue with BP. At one point he went to the BP office in London to meet with a group of senior executives. One way or the other, the same question kept coming up. “Could you prove it?” No, Houghton said. It could never be conclusive. But the evidence was overwhelmingly convincing.
One who was certainly convinced was John Browne, then the chief executive of BP. Much influenced by the IPCC reports, Browne decided that BP should take climate change seriously and act on it. In May 1997 he delivered a speech at Stanford University. “It would be unwise and potentially dangerous to ignore the mounting concern,” he said. “We must now focus on what can and should be done, not because we can be certain climate change is happening, but because the possibility can’t be ignored.”13
This was the first time that a major figure in the oil industry—and possibly in the whole energy industry—had so publicly and personally taken that position. Others in the industry said that “BP is going green,” which seemed to be borne out when the company expanded its logo to mean not only British Petroleum but also the slightly mysterious “Beyond Petroleum.” The speech triggered initiatives within the company: reducing CO2 emissions, developing alternative energy, establishing an internal BP CO2 trading system. It also set off an argument with Royal Dutch Shell, which, pointing to its most recent annual report, said that it had been the first international oil company to identify climate change as a risk.
Meanwhile, most of the American energy companies remained aligned with the Global Climate Coalition, which continued to challenge the IPCC scientific view and to lobby against climate change initiatives. The coalition argued that “radical reductions in the United States could cause “severe unemployment, decreased competitiveness of U.S. goods, and other grave economic disruptions.”
By the beginning of the new century, climate change was gaining attention on corporate agendas. General Electric’s businesses run the gamut from gas turbines to nuclear reactors and locomotives to lightbulbs. It had also recently acquired a wind-turbine business. In 2004 GE’s CEO, Jeff Immelt, convened, at the company’s educational campus at Croton-on-Hudson, New York, a meeting of electric-utility executives and environmentalists to discuss major energy issues. Over the preceding year Immelt had been hearing a recurrent refrain from his own senior executives: that customers were talking more about wanting “clean” or environmentally enhancing solutions. He called the Croton meeting to try to sort out thematically what was happening, and what was changing.
The conference was organized as pretty much of a free-for-all teach-in. Immelt himself sat in one of the upper rows in the tiered classroom, jumping into the discussion. While the “environment” was its overall topic, climate clearly moved to the front of the discussions in the lecture hall. That day helped set the stage for GE’s launch of a wide-ranging “eco-imagination” campaign and accelerated a refocusing of much of