Global Warming Presents New Business Opportunities

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.

Moreover, it's not just to protect themselves, because global warming is also becoming a business opportunity.

ANDREW CASTALDI: After every mega event, there will be some type of economic loss that has to be recovered somewhere.

PAUL SOLMAN: In other words, the threat of global warming is a way to sell more insurance.

ANDREW CASTALDI: Insurance is the best way for people to sustain 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 the likelihood that something bad is going to happen is higher than I might have realized."

ANDREW CASTALDI: That is one way of looking at it.

PAUL SOLMAN: Another way of looking at it, that insurance is actually a metaphor for the global warming problem as a whole.

VINOD KHOSLA, venture capitalist: I won't contend that I can prove 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 to burn down.

PAUL SOLMAN: No, I don't think my house is going to burn down.

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 we willing to take that kind of risk at the planetary level for Earth, and not buy any insurance?

Biofuels. He's betting that consumers will pay a little bit more 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. Its products, Pratt & Whitney jet engines, Carrier air conditioners, Otis elevators, may emit as much as 2 percent of the world's total of greenhouse gases.

So the company has plenty of room to make and sell cleaner products.

LOUIS CHENEVERT, President, United Technologies: We've got 98,000 pounds of thrust basically flowing through the back of the engine. That's the equivalent of like 200,000 horsepower.

PAUL SOLMAN: This Pratt & Whitney engine is 11 percent more efficient than its predecessor, boasts UTC president Louis Chenevert, and it's 11 percent less carbon.

Worldwide, that means millions of fewer tons of greenhouse gas in the air.

The Carrier Division is also in the vanguard. Here's the hip-hop hype of its corporate video. There's its ever greener machines.

LOUIS CHENEVERT: Carrier just came out with a new line of product. Forty percent less energy consumption from the same level of cooling.

PAUL SOLMAN: The same goes for Otis Elevators, developed in a Connecticut building that's basically one tall shaft. Globally, 1.8 million Otis elevators carry up and back...

LOUIS CHENEVERT: ... the equivalent of the world's population every nine days.

So how do we make elevators even better? Well, we've invented the Gen-2 elevators, which basically are smaller, lighter, much more energy efficient.

PAUL SOLMAN: Fifty percent more efficient. And its movement generates electricity for the building, like your car generator feeds the battery.

LOUIS CHENEVERT: You know, our technology has made environment 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 using tires that have been recycled out to the sidewalk itself.

PAUL SOLMAN: Plus signs powered entirely by solar cells, the store heated with help of reused frying oil, cooled with recycled air, using UTC technology.

There are even low energy lights that shoppers trigger on and off when they walk by -- a P.R. stunt to some, it's an appeal to environmentally conscious customers and good economics in an era of high fuel prices.

Our tour guide put it bluntly:

FRANK PRELI:  Ultimately, many of these things are cheaper. We're buying less. We're using more. We're doing it more efficiency. We're saving money.

FRANK PRELI: And this is the area where we develop and work on fuel cells for space applications...

PAUL SOLMAN: We're not quite finished with UTC. Because the longest term environmental bet it's made is its biggest: fuel cell technology.

Ever since the Apollo missions to the moon, UTC has been making cells for NASA, portable power plants that chemically combine hydrogen and oxygen into water and in the process generate electricity.

It takes more than being a member of the Blueman Group, it turns out, to understand just how it works, but the effect is clear enough.

FRANK PRELI: By combining these fuel cells in a stack, you can increase the voltage and the current that you can get out of them.

PAUL SOLMAN: Combine enough of them, and you can power a hydrogen car.

FRANK PRELI: So what we've done in this vehicle is package the fuel cell power plant under the hood, along with all of the other electronics.

PAUL SOLMAN: UTC has spent 20 years and hundreds of millions of dollars to develop fuel cell technology here.

FRANK PRELI: So this is -- it's kind of like a very fast golf 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 you back a few hundred thousand dollars.

However, says Preli...

FRANK PRELI: Anything you make onesie-twosie, it's going to be expensive. You start talking about making millions, up to 60 million a year, our costs come down very, very dramatically.

Others might charge that UTC isn't out to clean up the planet for the rest of us, so much as clean up for itself -- make hay while the sun scorches, if you will.

But then, that's the nub of the private sector approach to global warming -- selling green -- the approach President Bush favors, says his environment chief, Jim Connaughton.

JAMES CONNAUGHTON, Chairman, President's Council on Environmental Quality: The most powerful incentive is profits. And there's enormous investments that can be made, that not only will help us address greenhouse gases long term, but will help us reduce harmful air pollution that affects 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 slow greenhouse gas emissions without regulation.

But many businesses themselves are now saying that's not enough.

John Stowell of the utility company, Duke Energy.

JOHN STOWELL, Duke Energy: So we need to build. But unfortunately, we're about to enter this era of massive capital investment under a cloud of regulatory uncertainty.

The uncertainty that we face is when will there be regulation, and what form will it take?

PAUL SOLMAN: There already is regulation elsewhere in the world, or course -- the Kyoto protocol, a treaty that commits its signers to cutting back carbon emissions. The U.S., however, has yet to sign it.

So states have begun to take the initiative, and more than half of them now have climate action plans, or emissions targets.

Shell Oil's David Hone.

DAVID HONE, Shell Oil: A federal initiative along these lines is something that would be preferable from a business standpoint to the multiplicity 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 how high profits can go if it cuts greenhouse gasses, and how much it will cost big business and us to insure against a potentially calamitous future.