ResponsibleChina.com: Environmental sustainability, corporate social responsibility and social entrepreneurship in China. | Ecomagination and Environmental Laws Make Money for GE in China

Search

Business

Ecomagination and Environmental Laws Make Money for GE in China

By Sophia Mendelsohn ⋅ April 8, 2008 ⋅ Post a comment

Big money, big change: General Electric pushes for environmental laws and revs up Ecomagination in China

The Wall Street Journal recently hosted a special event, ECO:nomics: Creating Environmental Capital, that focuses on a “CEO-level view of the rapidly developing relationship between the environment and the bottom line.” Program participant Jeffrey Immelt, chairman and CEO of General Electric, spoke on “The Environment and the Business of Business.”

The interview focused on why he believes in good old capitalism, in all its shades of green. Immelt is planning on greening his sizable pile of green bills mainly through Ecomagination and pushing for stricter climate change regulations. China is a key part of the Ecomagination plan to green and profit from the Olympics. In the long-term China and Ecomagination are planning a long-term relationship, also.

GE has received its fair share of attention for Ecomagination, a campaign lead by Immelt to promote sales of GE’s energy saving and creating technologies. Ecomagination is doing big, profitable business in China and the relationship is only growing.

Immelt is also lobbying the U.S. government for mandatory caps on carbon emissions. He helped form the U.S. Climate Action Partnership, a group of corporations and environmental organizations “that have come together to call on the federal government to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions.” Stronger laws like the USCAP wants will weaken China’s argument that it doesn’t have to act because industrialized nations have not acted either. Also, stronger laws means businesses need to buy new technology, such as the technology that GE makes in China.

USCAP goals include encouraging innovation and fostering economic growth with green house gas policies, a cap-and-trade program, and research and technology.

Immelt makes a concise case for putting more money into green research and development.

I’m an investor, I’m a capitalist and I’m a businessman. So I believe that I could generate earnings for my investors through technology.

He is not alone in this stance. Some leaders, like Barack Obama, think Detroit could take a listen. Immelt keeps going, with what I think is a very strong logic.

There’s no percentage for any CEO in the world to run his or her business thinking that there are not going to be carbon caps someday. Because the day it becomes law, you’re five years late. And you either get out ahead of these things or you get stomped by them.

If the CEO of one of the world’s largest companies thinks that serious action on climate change is inevitable, the fight on Capital Hill maybe coming into the final rounds.

Of course, Capital Hill and politicians need to consider how other countries are legislating greenhouse gases, or GHG. China comes into this debate more than any other country because of its geo-political size, the size of its economy, and the size of its export business to the United States. Many politicians, including George Bush, refuse to move on GHG legislation before China does.

The WSJ reminded Immelt of this common argument by saying, “…we face extreme competition from emerging countries in Asia…” Fair enough. The obvious follow-up question asked is, “does it make sense for you to say, OK, in the U.S., we’re going to impose a cap on our businesses, but there’s going to be no such cap in China…?” Immelt answers:

What legislation will try to do, is to have some market-clearing mechanism for what’s going to happen globally. But, I’ve got to tell you that we’ll do, I don’t know, $15 billion, $16 billion of Ecomagination products this year. Probably $2 or $3 billion will go to China and India. So it’s a great opportunity for this country to develop technologies that are going to be used on a global basis.

Immelt also takes on another popular argument against action on climate change: it costs too much and will hurt the economy. He defends his position by saying,

Costs are going to be borne no matter what. I would say we’re actually already paying for it. $110 oil, we’re already paying for it. Costs are going to go up.

The question is do we get ahead of it and bring these [clean] technologies down the learning curve ahead of time, or does it just get thrust on us in an incredibly impossible way? And that’s what leaders have to decide.

The WSJ’s reporter made a legitimate point by asking:

Part of people’s business plans is to go to Washington and get legislation passed that requires people to buy their products. So one question I would have is how much of Ecomagination is actually underwritten by tax subsidies? And how, as a private investor, do you justify having public taxpayers get into this business?

Immelt defended his tax subsidies perfectly:

Government tax policy, or economic policy, ought to reflect the benefits to the economy and what the government wants to have happen.

Think about something like the production tax credit [which gives tax credits to alternative-energy companies]. One of the reasons the government wanted to use it was to get more renewable energy in place. We acquired our wind business in 2001. The cost for electricity and wind was about 16 cents, 17 cents a kilowatt-hour. Now it’s half that. The production tax credits worked.

Immelt, whose business is international, is thinking about GHG regulation internationally. He knows that he stands to benefit from regulations in the U.S., specifically boosting his production and sales in China. Not afraid to get out ahead of China on these laws, Immelt is betting China will eventually have to follow if the U.S. leads. Can Immelt and his CEO friends push the U.S. out of the blame game with China over global warming? Can we get past finger-pointing and make money for global companies in the process? Ecomagine that.

Immelt talks more about Washington here, and tree-huggers like Grist.org support him here.

Click on the links below for more stories related to global green business and Jeffrey Immelt’s interview: