American Opinion: Industry needs government to step up in battle against climate change
From the editorial: Let’s hope the bottom-up approach can make progress where top-down has faltered. Otherwise, don’t be surprised if copper and other basics that most people take for granted suddenly are in short supply.
Psst, here’s a hot tip from the commodity markets. Now would be a good time to get into copper.
That’s right, copper. The industrial metal used in batteries is expected to experience strong demand as vehicles go electric. For those with the money and expertise to develop copper mines, especially in stable countries such as the U.S. and Canada, a business opportunity awaits.
But it takes at least a decade to bring a new mine online. And let’s face it, no one wants one in their backyard. Mining creates pollution that needs to be mitigated. Banks these days are wary of financing new projects likely to be declared “dirty” and targeted for protests. Plus, rising interest rates have raised the cost of the capital needed for such long-term investments.
And while copper demand is currently expected to increase as much as fivefold by 2050, innovations could change the outlook. Anyone running a copper mine needs to consider the possibility of a breakthrough technology that makes the commodity irrelevant. Witness the latest advances in lithium battery technology brought about in part by Illinois-based scientists.
On second thought, maybe copper is not such a good idea, at least for those angling to produce the metal.
A similar line of thinking is making it tough for many companies in the commodity business to justify big capital investments. Climate change is happening, and the world is slowly coming to grips with the measures necessary to reduce carbon dioxide and other greenhouse gases that contribute to global warming.
Yet unless U.S. policymakers step up their game, the future looks shaky for some basic building blocks of the economy. Adapting to a carbon-free world is going slowly in industries ranging from agriculture and energy to mining and finance.
The Inflation Reduction Act and Bipartisan Infrastructure Law threw a ton of money into the pot. But to head off shortages of basics, more needs to be done. A stronger regulatory framework is needed to clear the way for the big projects that can help American industry prepare for a future with reduced emissions.
Consider carbon trading. In Europe, a government-organized marketplace enables hedgers and speculators to set a price for carbon emissions. The U.S., on the other hand, has stubbornly rebelled against a market-based approach, which incidentally is tailor-made for a city like Chicago with deep roots in commodity trading. Using financial markets to establish an accurate price for each ton of carbon emitted would provide an important tool to manage the risks associated with air pollution.
Today’s divisive national politics make progress difficult. The prospect of charging polluters a so-called carbon tax is a no-go for the same crowd on the right that demonizes corporate ESG programs aimed at curbing emissions (and promoting diversity).
At the same time, environmentalists on the left keep demanding big changes that industry isn’t prepared to make. Fossil fuels will be needed for years to come, and the related infrastructure must be maintained to supply power, heat and motor fuel.
What might help encourage these long-term, big-ticket investments? Along with championing a global trading system for carbon emissions, the U.S. could provide financing for projects that advance green goals even if they’re dirty, and create a Superfund-type mechanism to handle the mines, refineries, pipelines and other long-lived assets that are at risk of becoming obsolete as the world decarbonizes.
Another big plus would be a framework for measuring emissions at the corporate level. Thousands of companies have made “net zero” commitments, for instance, promising to eliminate their emissions of carbon dioxide and other greenhouse gases. But as it stands, companies hire self-declared consultants to validate their claims in exchange for fees. More reliable and consistent standards are needed.
As leadership at the national level is in short supply, Illinois and other states can help to fill the gap.
California and Washington, for instance, are pioneers in carbon trading, having organized markets for companies operating within their borders. Seven Midwest states, including Illinois, recently partnered to advance the use of hydrogen as a fuel. The Illinois Finance Authority’s Climate Bank last year directed about $250 million in private capital to green projects, and also manages a big chunk of federal money pushed down to the states through the recent legislation.
Let’s hope the bottom-up approach can make progress where top-down has faltered. Otherwise, don’t be surprised if copper and other basics that most people take for granted suddenly are in short supply.
This American Opinion editorial is the view of the Chicago Tribune Editorial Board. Send feedback to: email@example.com.
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