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Thomas Lyon and Martin Zimmerman
  Thomas Lyon and Martin Zimmerman

Dialogue on Climate Change Strategy Sparks Debate

5/17/2006 --

Forum brings business and environment to the public policy table.

ANN ARBOR, Mich.—There is no "one-size-fits-all" solution to creating a sustainable future for the world's industries. However, a blending of the best ideas must be incorporated into the United States' public policies and soon.

The University of Michigan hosted a high-level exchange of views on a carbon-constrained future among representatives of industry, environmental organizations, government, labor groups, corporate executives and leading scholars in May at the Michigan Union. The forum was sponsored by the Frederick A. and Barbara M. Erb Institute for Global Sustainable Enterprise, a joint venture of the Stephen M. Ross School of Business and School of Natural Resources & Environment. The two-day meeting was organized by Thomas Lyon, the Dow Professor of Sustainable Science, Technology and Commerce, and Martin Zimmerman, clinical professor of business administration and former Ford Motor Co. executive.

Building on the Erb Institute's previous forum titled "Reframing the Climate Debate: Jobs, Trade, Security and a Revised Research Agenda," the recent seminar identified challenges and opportunities for business leadership on climate change in both the private and public sectors.

Representatives of the corporations assembled agreed that business recognizes that government action to limit carbon emissions is likely and firms should be preparing for a carbon-constrained future. Among the firms represented were AJW Group, Alcoa, American Honda Co., BP, DTE Energy, Duke Energy and Ford Motor Co. Also participating were scholars and representatives from government and environmental groups, including Environmental Defense, the Environmental Protection Agency, the National Commission on Energy Policy, the Pew Center on Global Climate Change, Resources for the Future and the World Resources Institute.

Most in attendance discussed the cap-and-trade approach as the most likely public policy approach. This policy would set overall limits on carbon emissions and allow suppliers or users of fossil fuels to trade allowances. Those firms that could reduce emissions most efficiently would do so and likely sell emission permits to those firms who face high costs of emission reduction. The incentives created by such programs lead to efficient patterns of emission reduction and provide opportunities for compensating those who bear the costs of reduction.

Not everyone, however, agreed that cap-and-trade was the best approach. One view was that public policy should consider vehicle design, fuel characteristics and consumer behavior, and the point of regulation should match with the emitter. Others argued that this would be the old-style "command-and-control" approach, which has proven inefficient in the past. The price signals that are central to the cap-and-trade approach are ineffective in producing desired results, some participants noted.

Uncertainty about what type of climate regime will emerge has business scrambling to establish the ground rules. Adding to the mix is the fact that risks and opportunities associated with climate policy vary widely from industry to industry. Panelists agreed that a successful business strategy calls for integrating core market activities with activities in the public arena.

Auto manufacturers, particularly in light of high gasoline prices, are implementing fuel-saving technology. Panelists noted that several other near-term actions can be taken, including:

  • Allowing emissions credit-trading among automobile manufacturers.
  • Developing alternative fuels.
  • Revitalizing recycling, reduction and reuse campaigns.

For more information and to view panelist presentations, go to

Written by Nancy Davis

For more information, contact:
Mary Jo Frank
Phone: 734-647-4626