At the 2013 Climate Leadership Conference in DC, Rod West, Executive Vice President at Entergy Corporation urged the 450 attendees to stop focusing on converting people to climate change believers and start focusing on the cost of doing nothing. “I could give a rat’s cheek whether you’re a true believer – as a business people you need to pay attention to the risk. How do you go about assessing the cost of doing nothing?”
Entergy Corporation is a New Orleans-based utility company that has taken a leadership role in reducing the carbon impact of their energy portfolio. The company scored #16 on Newsweek’s 2013 green rankings for utilities and holds the honor of being one of only two utility companies on the Dow Jones Sustainability World Index.
Entergy’s energy portfolio is made up of primarily nuclear (34%), gas/oil (24%), coal (13%), and purchased power (28%) which comes from a variety of sources. The company provides electricity to 2.8 million utility customers in Arkansas, Louisiana, Mississippi and Texas.
As a New Orleans resident, West saw the devastating impacts that extreme weather events can have on at-risk communities. He’s a true believer in climate change and its human cause. But he’s not interested in converting other “true believers.”
Mitigation and climate change risk management
He believes that urgency of the situation demands a more straightforward business approach. Here’s how the utility giant applies risk management to the real world impacts of climate change:
Entergy drew a line from Port Arthur Texas to the Florida panhandle, creating a map of the giant flood zone on the Gulf of Mexico that overlapped with the company’s operations. Then, they figured out all the upgrades the company would need to make, from building reinforcements to levies to critical upgrades to oil refineries, in order to protect the company’s assets in the event of a flood. The zone represented two trillion dollars in assets. The cost of doing nothing to protect them was a staggering $14-18 billon. As the number of severe hurricanes rises, the potential that another extreme weather event may impact the coverage area is too much of a risk to ignore, which means that whether or not the utility “believes” in climate change, it needs to prepare for its outcomes.
The bad news is the good news
West spoke frequently about Maslow’s hierarchy of needs – the idea that humans must focus on their basic needs like food and shelter – before they can focus on future needs or self actualization.
He explained that Maslow’s hierarchy is one reason why we as a nation have collectively failed to take on carbon reduction in a really sweeping manner, “We can talk about the global good, but getting there is going to have consequences for someone. The reason carbon tax is dead is that the country is dealing with the immediacy of economic strife.”
But the “good” news is that extreme weather events like Hurricanes Katrina and Sandy demonstrate the devastating impacts of inaction. Suddenly, climate change moves from being a distant problem to a present problem – which, according to Maslow’s hierarchy, makes it much easier to address.
Cooperation for change
West spoke to our policy makers’ impotence to implement sweeping climate legislation. “We’re not motivated to cooperate in the U.S. We’re fighting over an incremental change today that will impact people who aren’t even born yet. We won’t see and can’t benefit from those changes.”
Furthermore, despite the fact that climate change represents an economic risk, acting is also expensive. Right now, “There’s too much of an economic incentive to fight the EPA. There’s going to be a pushback. Not because of a philisopic difference or disagreement about whether or not we need to reduce carbon, but because businesses can’t afford to comply.” Now that extreme weather events are more publicly visible, the economic tradeoffs between action and inaction should be as well.
Utilities heat and cool our residential and commercial spaces and keep them well lit. Emissions from the power sector represent roughly a third of the total U.S. emissions, so this sector will play a key role in meeting President Obama’s emissions reductiongs goal of 17% below 2005 levels by 2020.
Since their portfolio relies heavily on nuclear energy, Entergy is ahead of its peers in terms of the carbon footprint of the electricity it produces. However, its investment in renewables is still modest. The company’s most recent sustainability report states, “Entergy performs ongoing analysis of favorable financial and technical conditions for use of renewable energy resources. In addition to the utility’s 74 megawatts of hydro, EWC’s generation portfolio includes 80 megawatts of wind power.” We look forward to the company expanding that renewables portfolio in the coming years.
West spoke frankly about his industry’s approach to mitigating climate change. “As an industry, we have reduced our emissions 17% since 2005 and we do take credit for that. But the truth of that is that it’s largely gas that’s replaced coal. That’s the rooster taking credit for the proverbial sunrise.” Which is to say, according to West, the industry can and should be doing a lot more.