Cost of Climate Change: Coca-Cola, the Coal Industry, and Conservative Economists Have At It
The debate over climate change, and -- as some still argue -- whether it is even occurring, are becoming moot as an increase in droughts, floods, and wildly unseasonal temperature extremes interrupt food and water supply chains and increase commodity and financial risk. Or, as the old adage goes; if you want someone to stand up and take notice, hit 'em in the wallet.
According to an article in today’s New York Times, Coca-Cola has become more focused on global warming than its economic bottom line -- or more accurately, Coke has come to view climate change and its causes as enemy number one due to the significant impact on formerly lucrative global operations. The recipe for Coca-Cola is a highly guarded secret, but it's easy to see that water is the most voluminous ingredient. Coke actually has a VP for Environment and Water Resources, Jeffrey Seabright, who has said: “Increased droughts, more unpredictable variability, 100-year floods every two years... were also disrupting the company’s supply of sugar cane and sugar beets, as well as citrus for its fruit juices... When we look at our most essential ingredients, we see those events as threats.”
As an economics major prior to the advent of unleaded gasoline, I'm heartened that Adam Smith's invisible hand remains at work -- somewhat like the unattached hand that was named "Thing" on “The Addams Family.” Back then, "air and water pollution" concerns – and the subversive concept of requiring the culprits to pay for environmental damage by buying "pollution rights" to balance their economic externality offenses – were viewed as an enemy of commerce and capitalism. Some even called these concerns a Communist plot.
Fast forward to now, as Mr. Smith smiles in his grave, the Times also reports that "Coke reflects a growing view among American business leaders and mainstream economists [whose position) is at striking odds with the longstanding argument, advanced by the coal industry and others, that policies to curb carbon emissions are more economically harmful than the impact of climate change." And even though a coal lobby report "released this week [says], even the most conservative estimates peg the social benefit of carbon-based fuels as 50 times greater than its supposed social cost... Some tycoons are no longer listening."
And voilà, political and geographic debate is also melting away, though less so in China and India. Henry M. Paulson Jr., a former Treasury secretary in the George W. Bush administration, is quoted saying that “business leaders are not adequately focused on the economic impact of climate change.” And, "Arthur B. Laffer, senior economic adviser to President Ronald Reagan; the Harvard economist N. Gregory Mankiw, who was economic adviser to Mitt Romney’s presidential campaign; and Douglas Holtz-Eakin, the head of the American Action Forum, a conservative think tank, and an economic adviser to the 2008 presidential campaign of Senator John McCain... all now endorse the idea of a price or tax on carbon pollution."
Organized study and analysis to assess climate risk to advance economic growth is happening. The Global Commission on the Economy and Climate will release a major report this fall and a project funded by hedge-fund billionaire Thomas Steyer titled "Risky Business...to assess the potential impacts of climate change by region and by sector across the American economy,” along with others, are also slated for release later this year. And maybe, just maybe, Coca-Cola Workers Worldwide (IUF, UITA & IUL) will powwow with the United Mine Workers to discuss climate change as an economically disruptive force.