Global Warming Presents New Business Opportunities
[Sorry, the video for this story has expired, but you can still read the transcript below. ]
ANDREW CASTALDI, Swiss Re: Caribbean waters were warmer than normal, and the warmth went deeper than normal
PAUL SOLMAN, NewsHour Economics Correspondent: And that’s what that ridge shows?
ANDREW CASTALDI: That’s right.
PAUL SOLMAN: Andy Castaldi heads up the Catastrophe and Perils Division at Swiss Re, one of the world’s top insurance firms. This time-lapse footing of last August in the Gulf is for his clients.
ANDREW CASTALDI: And hurricanes are so sensitive, even a half-degree difference above average is going to cause greater potential for more intense hurricanes.
PAUL SOLMAN: Now there’s Katrina forming, right over Florida.
ANDREW CASTALDI: A Category 2. Then, all of a sudden, it hits the warmer waters of the Gulf, and it grew to a Category 5.
PAUL SOLMAN: The storm cost insurance companies a fortune. Property losses twice those of September 11th.
Warmer waters, global warming — seems connected, but maybe it isn’t. If it is, however, insurance firms could face a flood of future claims.
And glaciers are melting, sea levels rising.
AL GORE, former presidential candidate: This is what would happen in Florida.
Around Shanghai, home to 40 million people…
PAUL SOLMAN: If Al Gore’s new film is right, the waters could, as in Noah’s day, prevail exceedingly upon the Earth, inundate cities, bankrupt the insurance industry.
AL GORE: Think of the impact of a couple hundred thousand refugees — and then imagine a hundred million.
Preparing for the worst
PAUL SOLMAN: Small wonder, then, that insurance companiesare taking action.
Moreover, it's not just to protect themselves, becauseglobal warming is also becoming a business opportunity.
ANDREW CASTALDI: After every mega event, there will be sometype of economic loss that has to be recovered somewhere.
PAUL SOLMAN: In other words, the threat of global warming isa way to sell more insurance.
ANDREW CASTALDI: Insurance is the best way for people tosustain themselves and rebuild their lives thereafter.
PAUL SOLMAN: So I watch your presentation, and I say,"Hmm, I'd better buy more insurance than I'd thought, because thelikelihood that something bad is going to happen is higher than I might haverealized."
ANDREW CASTALDI: That is one way of looking at it.
PAUL SOLMAN: Another way of looking at it, that insurance isactually a metaphor for the global warming problem as a whole.
VINOD KHOSLA, venture capitalist: I won't contend that I canprove with 100 percent certainty, but 98 percent of the scientists, maybe more,believe that we have a serious climate problem.
PAUL SOLMAN: Vinod Khosla is a Silicon Valley mogul.
VINOD KHOSLA: You can't prove that your house is going toburn down.
PAUL SOLMAN: No, I don't think my house is going to burndown.
VINOD KHOSLA: No, you don't, but you still pay every year,year after year, your insurance premiums to make sure, just in case. Are wewilling to take that kind of risk at the planetary level for Earth, and not buyany insurance?
Green is good business
PAUL SOLMAN: The insurance Khosla's pushing?
Biofuels. He's betting that consumers will pay a little bitmore for greener, cleaner products.
A business a lot bigger than Khosla's, or even Swiss Re's,is making a similar bet: United Technologies, UTC, is one of America's top 50 companies. Itsproducts, Pratt & Whitney jet engines, Carrier air conditioners, Otiselevators, may emit as much as 2 percent of the world's total of greenhousegases.
So the company has plenty of room to make and sell cleanerproducts.
LOUIS CHENEVERT, President, United Technologies: We've got98,000 pounds of thrust basically flowing through the back of the engine. That'sthe equivalent of like 200,000 horsepower.
PAUL SOLMAN: This Pratt & Whitney engine is 11 percentmore efficient than its predecessor, boasts UTC president Louis Chenevert, andit's 11 percent less carbon.
Worldwide, that means millions of fewer tons of greenhousegas in the air.
The Carrier Division is also in the vanguard. Here's thehip-hop hype of its corporate video. There's its ever greener machines.
LOUIS CHENEVERT: Carrier just came out with a new line ofproduct. Forty percent less energy consumption from the same level of cooling.
PAUL SOLMAN: The same goes for Otis Elevators, developed ina Connecticutbuilding that's basically one tall shaft. Globally, 1.8 million Otis elevatorscarry up and back...
LOUIS CHENEVERT: ... the equivalent of the world'spopulation every nine days.
So how do we make elevators even better? Well, we'veinvented the Gen-2 elevators, which basically are smaller, lighter, much moreenergy efficient.
PAUL SOLMAN: Fifty percent more efficient. And its movementgenerates electricity for the building, like your car generator feeds thebattery.
LOUIS CHENEVERT: You know, our technology has madeenvironment a priority, because we believe that it makes good business sense.
PAUL SOLMAN: Especially good sense when fuel prices jump.
It's like this experimental Wal-Mart we visited last year.
FRANK PRELI, United Technologies Corporation: So we're usingtires that have been recycled out to the sidewalk itself.
PAUL SOLMAN: Plus signs powered entirely by solar cells, thestore heated with help of reused frying oil, cooled with recycled air, usingUTC technology.
There are even low energy lights that shoppers trigger onand off when they walk by -- a P.R. stunt to some, it's an appeal toenvironmentally conscious customers and good economics in an era of high fuelprices.
Our tour guide put it bluntly:
FRANK PRELI: Â Ultimately, many of these things are cheaper. We'rebuying less. We're using more. We're doing it more efficiency. We're savingmoney.
Driving technology forward
PAUL SOLMAN: Meanwhile, back in Connecticut...
FRANK PRELI: And this is the area where we develop and workon fuel cells for space applications...
PAUL SOLMAN: We're not quite finished with UTC. Because thelongest term environmental bet it's made is its biggest: fuel cell technology.
Ever since the Apollo missions to the moon, UTC has beenmaking cells for NASA, portable power plants that chemically combine hydrogenand oxygen into water and in the process generate electricity.
It takes more than being a member of the Blueman Group, itturns out, to understand just how it works, but the effect is clear enough.
FRANK PRELI: By combining these fuel cells in a stack, youcan increase the voltage and the current that you can get out of them.
PAUL SOLMAN: Combine enough of them, and you can power ahydrogen car.
FRANK PRELI: So what we've done in this vehicle is packagethe fuel cell power plant under the hood, along with all of the otherelectronics.
PAUL SOLMAN: UTC has spent 20 years and hundreds of millionsof dollars to develop fuel cell technology here.
FRANK PRELI: So this is -- it's kind of like a very fastgolf cart. We prefer to describe it as a very fast automobile.
PAUL SOLMAN: It'll take more R&D and mass production,before hydrogen cars become affordable. This experimental model will set youback a few hundred thousand dollars.
However, says Preli...
FRANK PRELI: Anything you make onesie-twosie, it's going tobe expensive. You start talking about making millions, up to 60 million a year,our costs come down very, very dramatically.
An unsteady future
PAUL SOLMAN: Now, some skeptics wonder where the hydrogen isgoing to come from, how safe it will be.
Others might charge that UTC isn't out to clean up theplanet for the rest of us, so much as clean up for itself -- make hay while thesun scorches, if you will.
But then, that's the nub of the private sector approach toglobal warming -- selling green -- the approach President Bush favors, says hisenvironment chief, Jim Connaughton.
JAMES CONNAUGHTON, Chairman, President's Council onEnvironmental Quality: The most powerful incentive is profits. And there'senormous investments that can be made, that not only will help us addressgreenhouse gases long term, but will help us reduce harmful air pollution thataffects human health today, as well as address our energy security objectives.
PAUL SOLMAN: The administration thinks rising energy prices,plus, perhaps, a subsidized nudge to promising technology, should slowgreenhouse gas emissions without regulation.
But many businesses themselves are now saying that's notenough.
John Stowell of the utility company, Duke Energy.
JOHN STOWELL, Duke Energy: So we need to build. Butunfortunately, we're about to enter this era of massive capital investmentunder a cloud of regulatory uncertainty.
The uncertainty that we face is when will there beregulation, and what form will it take?
PAUL SOLMAN: There already is regulation elsewhere in theworld, or course -- the Kyoto protocol, a treaty that commits its signers tocutting back carbon emissions. The U.S., however, has yet to sign it.
So states have begun to take the initiative, and more thanhalf of them now have climate action plans, or emissions targets.
Shell Oil's David Hone.
DAVID HONE, Shell Oil: A federal initiative along theselines is something that would be preferable from a business standpoint to themultiplicity of state regulations that we're starting to see.
PAUL SOLMAN: So if global warming regulation is revving up,better to get on with it, to give big business a more accurate sense of howhigh profits can go if it cuts greenhouse gasses, and how much it will cost bigbusiness and us to insure against a potentially calamitous future.