Companies Are Ready: Where Is a Carbon Tax?

With each passing year the world loses another 365.25 days to combat climate change. You may not agree on the causes of climate change, but I find it highly unlikely that an overwhelming majority of the world's scientists are involved in an epic conspiracy. Companies across the globe in every sector of the economy have adopted strict emissions diets. Why? Because reducing emissions is directly related to improving energy efficiency and lowering costs (it helps your brand's image too!).

At the same time, the world economy is suffocating under massive piles of debt and the Earth's atmosphere is reaching alarming levels of CO2 and other greenhouse gases, or GhG. Yet somehow, despite an avalanche of data, no one has the guts to kill two birds with one stone. Where is a comprehensive carbon tax?!

In protest, I have made a list of four of the world's largest companies and their respective sustainability goals. Here they are in alphabetical order:

Anheuser-Busch InBev (NYSE: BUD  ) is known for selling Budweiser, the King of Beers, but perhaps it should be known for being the King of Sustainability. The company was the top-brewer in point score and combined grade in the Carbon Disclosure Project's 2010 environmental rankings. In 2009, AB InBev announced ambitious goals of reducing energy use per hectoliter by 10%, CO2 emissions by 10%, and water use to an industry-leading 3.5 liters for every liter of product. The company also aims to increase waste and by-product recycling up to 99%. The target date for these goals? How does 2012 sound?  

Featured project: Kudos to AB InBev for including direct and indirect CO2 emissions in its reported figures. The company's facilities directly contributed 68.5% of emissions in manufacturing, while transportation and other indirect sources spewed out about 31.5%. To reduce these figures the company benchmarked its Chinese breweries to more efficient facilities scattered worldwide. Forcing this strict emissions accounting system onto its eastern facilities resulted in a staggering 13% reduction in emissions for the region from 2010 to 2011 alone.   

Be sure to hold AB InBev to its 2012 targets when its sustainability report is published this year. In the meantime check out the 2011 report (link opens PDF).

Caterpillar (NYSE: CAT  )  has goals to reduce absolute GhG emissions 25% by 2020. The goal, using 2.96 million metric tons of emissions in 2006 as a baseline, would give the company approximately 2.22 million metric tons of emissions in seven years. In 2011 (the one-third mark to the goal) emissions stood at 2.75 million metric tons, or one-third of the target. When you consider that Caterpillar's businesses revolve around heavy-duty equipment that's seemingly not so green, the ambitions are quite impressive.  

Featured project: In China, coke oven gas is often released into the atmosphere during the production of coal derivative chemicals. Allowing this gas to slip out of a process is pretty wasteful, as it can be burned in a turbine to generate electricity and waste heat while taking a bite out of emissions. Where Chinese officials saw a mounting pollution problem (if they could see through the smog at all) Caterpillar saw an opportunity. The company created the combined heat and power system that reaches 68% efficiency, consumes 26% less fuel, and lowers CO2 emissions by 40,000 metric tons annually – equivalent to removing 6,600 cars from the road. At the end of 2011, Caterpillar had enough turbines in operation to eliminate 540,000 metric tons of CO2 from the Earth's atmosphere.  

You can read about the company's sustainability goals, such as using renewable energy to meet 20% of energy needs by 2020, in its 2011 sustainability report (link opens PDF).

Ford (NYSE: F  ) has already enjoyed tremendous success in greening its product pipeline, supply chain, and manufacturing process in the last decade. The company reduced facility CO2 emissions per vehicle by 31% between 2000 and 2010, landfill waste per vehicle by 20% from 2010 to 2011, and fleet CO2 emissions by 9% between 2007 and 2011. But why stop there? Each year every Blue Oval production facility must submit an environmental scorecard to help the company achieve its various sustainability goals, such as reducing GhG emissions 30% per vehicle by 2025 and energy consumption per vehicle by 25% from 2011 to 2016. Newer, more-efficient vehicles and a commitment to reducing emissions and increasing efficiency ensure Ford will continue to wield a green thumb.   

Featured project: Engineers pioneered a new painting system called "Three-Wet" that replaces stand-alone primer applications and curing oven systems. In addition to reducing GhG emissions by 40% and volatile organic compound, or VOC, emissions by 10% the new technology reduces paint processing time by 25%. Ford plans to implement the system in all global facilities as they refurbish old production platforms. The company's "fumes-to-fuel" project concentrates VOCs released during the painting process and burns them in a turbine, therefore reducing the need for natural gas and reducing CO2 emissions by up to 85%.  

You can read more about the company's sustainability initiatives by perusing its sustainability webpage.

Procter & Gamble (NYSE: PG  ) is the world's largest consumer packaged goods company, which means it has the potential to be one of the environment's biggest enemies. So investors may be surprised to learn that the company is one of the greenest and most ambitious on the third rock from the sun. By 2025, P&G wants to reduce packaging by 20% per consumer use, truck transportation by 20%, replace one-fourth of its packaging with renewable materials, and source 30% of its energy needs from renewable sources.

Featured project: P&G is working toward a long-term goal to power all of its manufacturing plants with 100% renewable energy. To my knowledge, no other global company has announced such an ambitious goal. I have toured the company's Mehoopany, Penn., facility -- its second-largest in the world -- several times and each time I returned I was greeted by new energy projects and production floor upgrades. So, while 100% seems like a broken promise waiting to happen, I am cautiously optimistic P&G can make it happen. Reaching such a target would have a tremendous impact on the company's GhG emissions. Consider that using 52% less energy since 2002 has resulted in a 54% cut to the company's direct CO2 emissions.  

View all of the company's social and environmental goals in their 2012 sustainability overview (link opens PDF). 

Foolish bottom line
Unless the world's top climate scientists hold a press conference tomorrow and unveil a massive banner that reads "Gotcha!" I will continue to invest in companies that take steps to reduce their impact on climate change. Think about what a tax of $20 per metric ton of CO2 could do for both government (always in need of revenue) and companies (always in need of incentives). Such a tax could be gradually applied to the world's economy and have profound results. The world economy would be more efficient, more robust, less wasteful, and more thoughtful of future generations. It might be seen as one of the most forward-thinking accomplishments in human history.

Despite becoming greener, or perhaps because of it, Ford has been performing incredibly well as a company over the past few years -- it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt. The stock has recently taken off, and it appears investors have started to notice what Ford is doing right. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Simply click here to get instant access to this premium report.


Read/Post Comments (7) | Recommend This Article (2)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 30, 2013, at 6:45 PM, TimsRedbeard wrote:

    This article I ran across this past year via MSNBC, so the first sentence is longer than "two months ago." As for me I don't believe in global warming. Even the alarmist, James Lovelock, who began as the climate change theory has changed his mind says it’s now clear the doomsday predictions, including his own (and Al Gore’s) were incorrect.

    Here's the interview:

    Two months ago, James Lovelock, the godfather of global warming, gave a startling interview to msnbc.com in which he acknowledged he had been unduly “alarmist” about climate change.

    The implications were extraordinary.

    Lovelock is a world-renowned scientist and environmentalist whose Gaia theory — that the Earth operates as a single, living organism — has had a profound impact on the development of global warming theory.

    Unlike many “environmentalists,” who have degrees in political science, Lovelock, until his recent retirement at age 92, was a much-honoured working scientist and academic.

    His inventions have been used by NASA, among many other scientific organizations.

    Lovelock’s invention of the electron capture detector in 1957 first enabled scientists to measure CFCs (chlorofluorocarbons) and other pollutants in the atmosphere, leading, in many ways, to the birth of the modern environmental movement.

    Having observed that global temperatures since the turn of the millennium have not gone up in the way computer-based climate models predicted, Lovelock acknowledged, “the problem is we don’t know what the climate is doing. We thought we knew 20 years ago.” Now, Lovelock has given a follow-up interview to the UK’s Guardian newspaper in which he delivers more bombshells sure to anger the global green movement, which for years worshipped his Gaia theory and apocalyptic predictions that billions would die from man-made climate change by the end of this century.

    Lovelock still believes anthropogenic global warming is occurring and that mankind must lower its greenhouse gas emissions, but says it’s now clear the doomsday predictions, including his own (and Al Gore’s) were incorrect.

    He responds to attacks on his revised views by noting that, unlike many climate scientists who fear a loss of government funding if they admit error, as a freelance scientist, he’s never been afraid to revise his theories in the face of new evidence. Indeed, that’s how science advances.

    Among his observations to the Guardian:

    (1) A long-time supporter of nuclear power as a way to lower greenhouse gas emissions, which has made him unpopular with environmentalists, Lovelock has now come out in favour of natural gas fracking (which environmentalists also oppose), as a low-polluting alternative to coal.

    As Lovelock observes, “Gas is almost a give-away in the U.S. at the moment. They’ve gone for fracking in a big way. This is what makes me very cross with the greens for trying to knock it … Let’s be pragmatic and sensible and get Britain to switch everything to methane. We should be going mad on it.” (Kandeh Yumkella, co-head of a major United Nations program on sustainable energy, made similar arguments last week at a UN environmental conference in Rio de Janeiro, advocating the development of conventional and unconventional natural gas resources as a way to reduce deforestation and save millions of lives in the Third World.)

    (2) Lovelock blasted greens for treating global warming like a religion.

    “It just so happens that the green religion is now taking over from the Christian religion,” Lovelock observed. “I don’t think people have noticed that, but it’s got all the sort of terms that religions use … The greens use guilt. That just shows how religious greens are. You can’t win people round by saying they are guilty for putting (carbon dioxide) in the air.”

    (3) Lovelock mocks the idea modern economies can be powered by wind turbines.

    As he puts it, “so-called ‘sustainable development’ … is meaningless drivel … We rushed into renewable energy without any thought. The schemes are largely hopelessly inefficient and unpleasant. I personally can’t stand windmills at any price.”

    (4) Finally, about claims “the science is settled” on global warming: “One thing that being a scientist has taught me is that you can never be certain about anything. You never know the truth. You can only approach it and hope to get a bit nearer to it each time. You iterate towards the truth. You don’t know it.”

    Redbeard

  • Report this Comment On January 30, 2013, at 7:23 PM, spawn44 wrote:

    Maxx. The polar bears are not dying from starvation. I think you will find those so called scientists, who beat the drum for the AGW scam, are the same ones receiving compensation for keeping the scam alive. There has not been any PROVEN SCIENTIFIC EVIDENCE that supports CO2 as the driver in climate change. NONE. The left had to COOK THE BOOKS when their own data did not support CO2 as the cause. Maybe you heard of the term HIDE THE DECLINE. They weren't referring to the Obama Regimes economy when that term was used by the Climate Gate Scammers.

  • Report this Comment On January 30, 2013, at 10:17 PM, TMFBlacknGold wrote:

    "Maxx. The polar bears are not dying from starvation."

    Somewhere in the world on an ice floe far, far away, a polar bear is crying.

  • Report this Comment On January 30, 2013, at 10:38 PM, SuntanIronMan wrote:

    Polar bears are remorseless killing machines. They would kill you and everybody you love if they had the opportunity. Don't give them that opportunity. It is us or them. And I vote for us!

  • Report this Comment On January 30, 2013, at 11:10 PM, jackc37 wrote:

    Man made global warming is fiction. I don't have to elaborate because spawn44 did it for me. Thanks.

  • Report this Comment On February 04, 2013, at 12:36 PM, NoSoundComes wrote:

    spawn44, I think you're overlooking quite a great deal of scientific evidence. NASA is a great starting point for some things, particularly their comparison of four major earth-monitoring agencies. You can read it here: http://earthobservatory.nasa.gov/IOTD/view.php?id=80167. (You might also enjoy some discussion on the more historic climate cycles of the Earth, too; Brian M. Fagan wrote some nice books, particularly "The Little Ice Age" and "The Great Warming.")

    It's fine to post your opinion, but at least educate yourself and read up on some facts before spewing that centuries-old and ignorant "Man made this up!" propaganda nonsense. There's no excuse for ignorance when technology brings the entire collection of human knowledge at the end of a Google search.

  • Report this Comment On March 07, 2013, at 4:15 AM, thidmark wrote:

    Hey, just because we're morally bankrupt, doesn't mean our planet has to be an eyesore!

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