Climate Change: An Environmental and Business Issue

Jan Collins

South Carolina's important tourism industry is just one reason why the effects of climate change must be addressed.

“The evidence suggests that humans are altering the atmosphere in ways never before seen. The only question is how damaging the consequences might be, and what can be done to head off or adapt to the worst.”
                    Philip M. Boffey, The New York Times, July 4, 2006

“We see climate change as a business issue as well as an environmental issue, and we’re accelerating our efforts to find solutions. Addressing this issue will require collaborative action across all sectors of our society, and I’m committing Ford Motor Company to do its part.”
                    William Clay Ford, Jr., Chairman, Ford Motor Company

Suddenly, the topic of global warming (or “climate change,” as some prefer to call it), is everywhere. It’s at the movies (former Vice President Al Gore’s “An Inconvenient Truth” opened in theatres across America in June). It’s on television and radio, in newspapers and major magazines, and on the Internet.

The 1998-2002 drought in South Carolina led to low water levels and
big trouble for boat owners on Lake Marion.

The Evidence Mounts

South Carolina's power plants alone . . . emit nearly 40 million tons of carbon dioxide annually, and the state ranks 23rd in the nation for the worst carbon dioxide pollution.

The United Nations’ Intergovernmental Panel on Climate Change, a group convened in 1988 and consisting of more than 1,500 scientists, economists, and social scientists from 60 countries, concluded in 2001 that humans have caused most of the warming observed over the past 50 years. A fourth updated report is due in 2007 and is expected to confirm and expand upon earlier findings.

The American Meteorological Society, the American Association for the Advancement of Science, and the American Geophysical Union all urge swift action to combat global warming. In June 2006, the National Academy of Sciences told the U.S. Congress that the Earth’s temperature is now the hottest it has been in at least 400 years, probably even longer. The panel of top climate scientists told lawmakers that “human activities are responsible for much of the recent warming.”

Last year, the world’s leading scientific journal, Science, studied all the scientifically creditable articles published between 1993 and 2003 that dealt with modern climate change. “Not one,” said writer Eugene Linden, “took issue with the consensus that humans are contributing to the changes we are seeing.”

One of those changes was hard to miss. Hurricane Katrina, which virtually destroyed New Orleans and portions of the Gulf Coast in August 2005, riveted public attention on the issue of climate change as never before. (New research by the American Geophysical Union shows that global warming produced about half of the extra hurricane-fueled warmth in the North Atlantic in 2005, and natural cycles were a minor factor.)

The number of weather-related events continues to soar:

• Every year since 1997 has been in the Top 10 list of hottest years, and 2005 set a new record. The year 2006 appears to be on its way to setting another new record, with more than 50 cities in the continental United States setting records for high temperatures, according to the National Climatic Data Center.

• Seven of the 10 most expensive hurricanes in U.S. history (Katrina, Rita, Wilma, Charley, Ivan, Frances, and Jeanne) occurred in the 14 months from August 2004 to October 2005 (The Insurance Information Institute).

• Eight of the 10 most expensive disasters in U.S. history – the 9/11 terrorist attack, an earthquake, and eight hurricanes – occurred within the past four years. Losses from these disasters totaled nearly $200 billion (The Insurance Information Institute).

• The number of Category 4 and 5 hurricanes has almost doubled in the past 30 years.

• There has been a 15-fold increase in insured losses from catastrophic weather events in the United States in the past 30 years (Ceres).

• Melt-off of ice from glaciers in Greenland has more than doubled over the past decade (“An Inconvenient Truth”).

• Malaria has spread to higher altitudes in places like the Colombian Andes, 7,000 feet above sea level (“An Inconvenient Truth”).

• At least 279 species of plants and animals are already responding to global warming by expanding their territories closer to the poles.

If global warming continues, most scientists warn, we can expect global sea levels to rise precipitously, devastating coastal areas worldwide. Heat waves will be more frequent and intense. Droughts and forest fires will occur more often. Hurricanes and typhoons will be more violent.

Despite the fact that the United States is the world’s largest contributor of carbon dioxide to the atmosphere—annually contributing upwards of 25 percent of the world’s carbon dioxide emissions—there is still no national plan to tackle the causes and effects of climate change.

Environmental experts say that an overarching federal policy with uniform rules and standards is necessary. Such a policy would include a higher gasoline tax, stricter vehicle-emission standards than the federal government now requires, more stringent air pollution controls on power plants and manufacturing plants, and a carbon emissions-trading scheme like the one already established in Europe.

George W. Bush’s White House has consistently played down global warming, claiming the science behind it is uncertain, but in recent months there has been some movement in the U.S. Congress. Several bills have been introduced, including the Carper bill, named after its primary sponsor, Sen. Tom Carper, that would significantly reduce mercury and ozone pollution from power plants while setting the nation’s first-ever carbon dioxide cap.

Among the group of bipartisan senators who have signed on to Carper’s bill, called The Clean Air Planning Act of 2006, is Sen. Lindsey Graham (R-SC). Sen. Graham “buys into the science” behind climate change and is looking for a policy that will support the environment and the economy at the same time, according to Matthew Rimkunas, Graham’s policy aide.

Another Palmetto State congressman, U.S. Rep. Robert Inglis (R-SC), is also concerned about global warming, particularly after taking a fact-finding trip last year to Antarctica. Inglis introduced legislation in the U.S. House of Representatives earlier this year that would establish a national monetary prize competition to “encourage the development of breakthrough technologies that would enable a hydrogen economy.”

Unlike gas, oil, or coal, hydrogen as a transportation fuel would be clean and abundant, and it could be produced in the United States. But there are technical problems that currently block its widespread, practical use, scientists say. Inglis hopes the proposed H-Prizes would spur scientists to overcome those technical challenges.

H.R. 5143, the H-Prize Act of 2006, was approved by the House of Representatives in May by a vote of 416 to 6. It has not yet passed the Senate.

There are many reasons why South Carolina should be concerned about global warming. The state's vital tourism industry is one of them.

South Carolina and other southeastern states contribute mightily to global warming, according to the Southern Alliance for Clean Energy (SACE), a nonprofit environmental group based in Tennessee. “If we were to combine the eight states covered by SACE—Kentucky, Tennessee, Mississippi, Alabama, Georgia, Florida, South Carolina, and North Carolina—and consider them one country, we would rank fifth in the world for [emitting] the most global warming pollution,” says Ulla Reeves, SACE’s regional program director.

South Carolina’s power plants alone, according to SACE, emit nearly 40 million tons of carbon dioxide annually, and the state ranks 23rd in the nation for the worst carbon dioxide pollution.

Reeves continues: “The Southeast is incredibly vulnerable to the impacts of global warming. We have extensive coastline just sitting out there in the Atlantic waiting to get slammed by hurricanes; we have increased heat wave potential because we in the South already have a hotter climate; we’ll be the first place to feel the effects of tropical diseases; and we already have smog problems, and they’ll only get worse.”

The irony, says Reeves, is that the Southeast “has beautiful treasured areas, from the Outer Banks to the Florida Everglades, all of the South Carolina and North Carolina coast, Georgia, Savannah, Tybee Island: those places are highly vulnerable. So we need to be leading the country in standing up and solving this issue, particularly when you see how much we in the Southeast are contributing to the problem.”

. . . the Carolina Climate Network . . . is also contemplating a number of bipartisan initiatives on climate change that could involve legislative and/or executive action in South Carolina.

There are many reasons why South Carolina should be concerned about global warming. The state’s vital tourism industry is one of them.

South Carolina’s beaches and coastal areas, which would be imperiled by rising sea levels from global warming, are the jewels in the state’s crown and the primary draws for the majority of tourists who visit the state. The Lowcountry and other coastal areas could see up to a 19-inch rise in sea levels by 2100, according to the Environmental Protection Agency. The sea level at Charleston already rose 9 inches during the 20th century.

The potential impact of climate change on South Carolina’s tourism industry is “the elephant in the living room,” says one veteran environmentalist. This is because tourism has an annual impact of $15 billion on the state’s economy and, according to the S.C. Department of Parks, Recreation and Tourism, is responsible for 11 percent of the state’s jobs and $1 billion each year in state and local tax revenue. Nearly 60 percent of that tax revenue comes from just three coastal counties: Horry, Charleston, and Beaufort.

Many scientists also say that warming weather and hotter oceans mean stronger hurricanes, leading to more beach erosion. And beach renourishment to combat that erosion is very expensive.

The personal finances of most South Carolinians—in the form of having to pay higher insurance premiums—are also being impacted by global warming. And don’t think only homeowners at the beach will have to reach deeper into their pockets.

“The old [insurance company] view of risk was that storm surge and flooding and wind dropped off quickly as you went inland, but that’s no longer the view,” says Andrew Logan, an insurance expert and program manager with Ceres, a Boston-based network of climate-focused institutional investors. “Homes that would have been considered low or moderate risk a year ago are now considered to be higher risk,” Logan said in a recent interview. “And so this has led to a sweeping change in the pricing of insurance, as well as to less availability and affordability.”

In 2006, there was a 15 to 25 percent increase in insurance premiums for properties along the South Carolina coast, which has nearly $150 billion in insured value, according to Logan. And because, for political reasons, not all the higher insurance costs can be charged to coastal homeowners, insurance companies tend to spread the increases around the state. In July, South Carolina insurance company spokesmen began saying publicly that premiums for many customers across the state would be increasing, perhaps substantially.

A few months earlier, AIG, the world’s largest insurer, became the first U.S.-based insurance company to adopt a policy to manage the risks and capture the business opportunities posed by climate change. The company’s new policy states that it is “actively seeking to incorporate environmental and climate change considerations across its businesses, focusing on the development of products and services to help AIG and its clients respond to the worldwide drive to cut greenhouse gas emissions.”

But as hurricane season began anew in June 2006, disaster insurance across the United States, particularly in coastal areas, was running short. “The crunch isn’t coming just because companies and individuals are buying more insurance [after last year’s violent hurricanes],” said The Wall Street Journal in its July 10, 2006, edition. “Insurers themselves, anticipating future destructive storms, are trying to buy more coverage on the policies they write—a crucial segment of the business known as reinsurance. But reinsurers, which also paid out billions last year, are wary of getting hit hard again and have raised their rates substantially. Businesses and homeowners are paying the price.” The consequences of this, said the Journal, are “rippling through the economy.”

Yet another consequence of global warming is the impact it could have on fishing and wildlife in the state. A recent survey of hunters and fishermen by the South Carolina Wildlife Federation shows that hunters and anglers are concerned.

According to the poll results released in May, 68 percent of South Carolina sportsmen agree that global warming is an urgent problem requiring immediate action. Sixty-five percent say global warming is a serious threat to fish and wildlife, and 71 percent are concerned that wildlife and fish populations in areas where sportsmen typically hunt or fish will decrease significantly or disappear in the next 10 years.
Hunting and fishing expenditures total more than $1 billion a year in South Carolina, and nearly one in every four residents of the state hunts or fishes, the Wildlife Federation said.

Finally, global warming is impacting South Carolina’s farmers. There are 24,300 farms in the state, according to the U.S. Department of Agriculture, and many farmers are worried.

“Quite a few folks in agriculture are very concerned about the weather changes,” says John Long, a longtime farmer in Newberry, South Carolina, who is past president of the American Soybean Association and who ran for S.C. Commissioner of Agriculture in 2002. “We’ve been asking for years and years, ‘Is this just an aberration in climate, or are we actually experiencing climate change?’ And more and more we’re beginning to hear the answer: we’re having climate change. It’s very concerning to those of us who make our livelihoods from tilling the land and depend on good old Mother Nature and the good Lord to look out for us, you know?”

Long, who earned bachelor’s and master’s degrees in agricultural engineering from Clemson University and who currently farms land that once belonged to his great-great-grandfather, frets that many colleagues will “simply quit farming” if the seasonal dryness that has been plaguing South Carolina for the past decade continues or worsens, because that cuts into profits. He also says, though, that the changing climate could present an opportunity of sorts for Palmetto State farmers.

“Down the road, there would be more uses for things we’re already growing, such as corn [which could be turned into the alternative fuel ethanol], and opportunities to grow new crops that we haven’t grown in the past, like switchgrass,” a native, warm-season grass that is also easily converted into ethanol.

Long muses that South Carolina farmers could also participate in “carbon sequestration through cap-and-trade initiatives” now being tried in various European and Asian countries, in which industries that don’t create much carbon as a by-product sell credits to those industries that do need credits, because they produce too much carbon. “And agriculture could fall into that category of having credits for sale,” says Long.

South Carolina is not in the forefront of states taking action against global warming. In fact, “in one of the most flood-prone stretches of the South Carolina coast, regulators have allowed construction of four oceanfront condominium towers that experts worry will cost taxpayers a bundle in insurance claims and shoreline maintenance,” according to an article in the July 9, 2006, edition of The State newspaper in Columbia.

“State regulators say it’s OK to build the condo towers close to the ocean at Cherry Grove [a section of North Myrtle Beach] because $20 million in tax-funded beach renourishment has widened and stabilized the shoreline,” the article added.

Officials with the S.C. Department of Health and Environmental Control originally moved setback lines seaward in 2000, something many coastal geologists and erosion experts at the time said was a terrible idea. (Less than two weeks after the newspaper’s July 9 story, an administrative law judge approved another request from developers of a 17-story condominium at Cherry Grove to move the setback line even further seaward so that the resort’s pool could be built closer to the shore. Environmentalists predict that the judge’s ruling will lead to similar requests.)

South Carolina has not followed the lead of a dozen other states, including North Carolina, that have already taken steps to address global warming. Vehicle emission standards that are stricter than those of the federal Clean Air Act have been adopted by California, Oregon, Washington, Connecticut, Maine, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. (In December 2005, the Alliance of Automobile Manufacturers filed a lawsuit to block California from implementing its higher emission standards.)

In 2002, North Carolina enacted the Clean Smokestacks Act to study potential control of carbon dioxide emissions from coal-fired utility plants and other stationary sources. And in May 2005, the North Carolina General Assembly created the N.C. Global Warming Commission, which is charged with developing proposals for dealing with global climate change in the state, including business opportunities in curbing global warming and cutting-edge technologies that will help reduce pollution.

"There are enormous economic opportunities here," says Dr. Gregory Carbone, an associate Professor of geography at the University of South Carolina who has been studying climate change for more than two decades.

In the past year, there have been some stirrings in South Carolina.

A coalition of environmental, business, and community leaders, along with sportsmen’s groups and farmers, is sponsoring workshops and conferences to raise community awareness about climate change.

That coalition, called the Carolina Climate Network and funded by the national advocacy group Environmental Defense, is also contemplating a number of bipartisan initiatives on climate change that could involve legislative and/or executive action in South Carolina.

“We hope to have a firm direction by the end of this year,” says Bob Wislinski, a Columbia consultant who usually works with Democrats. He and Tony Denny, a former executive director of the S.C. Republican Party, are staffing the Carolina Climate Network, whose Web site says it recognizes that “stopping global climate change is not only good for the environment, but can create economic opportunities in South Carolina.”

Indeed, experts say the state could reap large economic benefits if it were in the forefront of producing alternative fuels such as bioethanol, biodiesel, and hydrogen, and if it moves quickly to create more “green” manufacturing and building industries.

“There are enormous economic opportunities here,” says Dr. Gregory Carbone, an associate professor of geography at the University of South Carolina who has been studying climate change for more than two decades. “The longer time passes before anything is done, the fewer economic opportunities there will be,” he adds.

“There’s a tremendous industry to be built in the conservation arena,” agrees Dana Beach, the longtime executive director of the S.C. Coastal Conservation League. “We are hopeful that the state will look at this very serious threat [of global warming] as an opportunity to enter into a new realm of economic activity that might be called more sustainable -- where we’re actually looking at ways to produce energy from renewable sources and also conserve.”

The first steps in this area were taken near the end of the 2006 legislative session, when the South Carolina General Assembly approved several little-noticed alternative energy bills. The new laws give: (1) a $300 sales tax rebate for each purchase of an E85 (85 percent ethanol, 15 percent gasoline) flex-fuel vehicle, (2) income tax credits for production of ethanol and biodiesel fuels, (3) income tax credits for purchase of equipment to produce ethanol and biodiesel fuels, (4) income tax credits for purchase of equipment for fueling vehicles with ethanol and biodiesel fuels, and (5) five cents per gallon retailer rebates for sales of E85 and B20 (20 percent biodiesel, 80 percent diesel) fuels. (For a list of retail locations in South Carolina where ethanol and biodiesel fuels are sold, check the S.C. Energy Office’s Web site at www.energy.sc.gov).

The 2006 legislation also provides tax incentives for hydrogen fuel cell vehicles, plug-in hybrid vehicles, homeowner purchase of solar heating and cooling systems, and industrial purchase of equipment to utilize energy from landfill gas.

All of this new legislation prompted John F. Clark, director of the S.C. Energy Office, to call 2006 the “most productive year for renewable energy in South Carolina in over 20 years.”

The S.C. General Assembly this spring also created the Strategic and Tactical Research on Energy Independence Commission (STREIC) to make recommendations on existing and potential renewable energy legislation aimed at reducing dependence on oil and enhancing economic development. The seven-member commission is to report to the General Assembly and the governor by Jan. 15, 2007, on “what additional things the state needs to be doing in terms of renewable fuels,” says Clark.

Another bill, introduced by South Carolina Rep. Joan Brady (R-Richland) made it through the S.C. House—but not the Senate—this year. The bill would have required that any new construction of state-funded buildings costing $15 million or more comply with specific environmentally friendly certification requirements.

Brady told Business & Economic Review that she will reintroduce her bill in January 2007. She is optimistic that it will eventually pass both chambers and be signed into law. Her bill, she says, is “a start, it’s a beginning. It’s not only in the right direction, but I believe it’s the only direction to keep ahead of the curve with rising energy costs.”

Some mayors, small businesses, utility companies, large firms, and government agencies in South Carolina are also moving forward with educational programs and more.

• The mayors of Charleston, Sumter, and Greenville have signed the U.S. Mayors Climate Protection Agreement, the first step to becoming a “Cool City” as defined by the Sierra Club. Columbia is considering doing so. These mayors are among more than 200 mayors in 38 states agreeing to reduce carbon dioxide pollution in their cities to 7 percent below 1990 levels by 2012.

• The S.C. Small Business Chamber of Commerce sponsored a conference in Columbia in May on the expected economic impacts of climate change on South Carolina. Previously, said Frank Knapp, Jr., the group’s president, global-warming dialogue in and around Columbia had been “nonexistent.” Knapp warns that the impact of climate change in the state will be felt mainly by small businesses because “the tourism industry in South Carolina consists mainly of small businesses.” If the business community gets involved, says Knapp, “hopefully the issue will start gaining some traction.”

• Utility companies in South Carolina such as Santee-Cooper are producing a significant amount of electricity by harnessing methane gas from landfills.

• The German automaker BMW is using methane gas naturally produced in landfills for about 25 percent of the energy needs of its Spartanburg, S.C., plant, and is aiming for 50 percent, says the S.C. Energy Office’s John Clark. “This is one of the biggest success stories,” he says.

• The S.C. Biomass Council, assembled by the S.C. Energy Office, held its inaugural meeting in Columbia on April 21. The group is working to develop a long-term strategy to make biomass energy a feasible large-scale alternative in South Carolina. (Biomass includes such things as agricultural products, wood waste, construction debris, landfill gas, and poultry manure.) “Today, only a tiny fraction of all energy generated in the state is renewable, and it could be far greater,” says Clark. If a biodiesel industry were in place in South Carolina today, 15 years from now, according to the Energy Office, the industry would have produced 380 million gallons annually for total sales of $1.14 billion, generated some $2.3 billion of direct and indirect economic impact annually, and be supporting a total of 1,560 jobs. Those same figures for an ethanol industry in the state 15 years hence would be 780 million gallons for sales of $2.34 billion, nearly $5 billion of direct and indirect economic impact annually, and supporting a total of 1,280 jobs.

• In August, the S.C. Department of Health and Environmental Control held a two-day conference in Columbia to generate and exchange ideas to enhance local programs aimed at reducing the fossil fuel emissions that are causing climate change.

• South Carolina entrepreneurs and the University of South Carolina are teaming up to research and promote the nascent hydrogen fuel cell industry. Converting hydrogen to usable energy would be clean and efficient, and is expected to be a huge industry if some of the scientific kinks can be worked out. Two USC professors have endowed chairs at The Center for Hydrogen Research in Aiken County, where ground was broken in August 2004 for the $9 million research laboratory.

• SC Gov. Mark Sanford’s office is working with two outside climate change and “clean energy” experts “to explore options that we
  have out there and get a state perspective on this issue,” says Scott English, a senior policy advisor to the governor.

Everyone needs to make their voices heard about climate change, says Carolyn E. McCormick, managing director of North Carolina’s Outer Banks Visitors Bureau and a member of a technical working group reporting to the N.C. Global Warming Commission. McCormick has led her tourism board in advocating positions against offshore drilling for natural gas or oil and in support of a climate action plan for her state.

“The North Carolina beach is my life,” says McCormick, whose home sits atop a sand dune in Nag’s Head. “I see it every day. It’s out my front door. So you either become a part of the conversation and get people to encourage our [decision makers and business leaders] to make policy changes and alter the way we do business, or you just shut up and let it happen.”
And we can’t afford to do that. ¨