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Looking back at the interaction of the business and finance community and climate change in the 1980s, two signals rise out of the noise. First, it was a decade during which the business community developed a playbook for questioning science and derailing regulation of atmospheric pollutants, which it would later put to use with devastating effectiveness in halting action on global warming. Second, it was the decade America lost its leadership in commercializing alternative energy sources to Europe and Japan after the Reagan administration slashed government support for wind and solar by 85 percent.
All in all, climate change barely registered as an issue for the business and financial community in the 1980s. Exxon, which later became a major promoter of climate denial and misinformation, invested in developing solar panels in the 1970s, though the motivation was not to reduce fossil fuel consumption but to diversify its energy portfolio. The business community was, however, very much concerned with the other big atmospheric threat of the 1980s—the ozone hole. Moreover, the business side of the ozone hole saga supplies the missing piece of the puzzle, explaining why it took thirteen years from the discovery of the problem to take meaningful action. It also helps explain why whole decades have passed without meaningful action on global warming.
Here’s how the CFC story unfolded. By the late 1970s, the Carter administration had already banned the use of CFCs as a propellant and was moving toward phasing out their use as a refrigerant. Manufacturers of CFCs sprang into action to defend the chemicals.
The story of CFCs and the ozone hole is widely regarded as an environmental success story because the global community and industry eventually took concerted action to phase out the chemicals. This kind of success with climate change would very likely spell the end of modern civilization.
Compared with climate change, the dangers of CFCs were easy to grasp. For most people, climate change in the early 1980s was an ambiguous threat that seemed decades in the future. CFCs posed a clear and present danger. For humans, the risks included blindness, skin cancer, suppressed immune system, and damage to the spleen. A 1 percent decrease in ozone in the upper atmosphere was calculated to lead to a 2 to 3 percent increase in skin cancer. In nature, unfiltered solar radiation can damage crops and leave them more vulnerable to disease; it reduces the productivity of phytoplankton (the basis of the oceanic food chain); and just as it can cause blindness in humans, so too is it a danger to a vast array of terrestrial animals, none of which have the option of donning sunglasses. It’s not much of an exaggeration to say that the destruction of the ozone layer posed a threat to life on earth and that by the late 1970s, most scientists involved in the issue knew it.fn1
The Carter administration took the problem seriously and would have likely banned all CFC use had Carter won a second term. Manufacturers could see the writing on the wall, and DuPont, the world’s largest producer of CFCs, began research on alternatives to chlorofluorocarbons. Then an extraordinary event distracted both the Carter administration and the public. On November 4, 1979, Iranian militants stormed the U.S. embassy in Tehran, taking fifty-two hostages. As the crisis dragged on, the odds of Carter’s reelection began dropping. He was forced to hole up in the White House during the crisis, unable to campaign. Worse, he had to fend off a primary challenge from Ted Kennedy, which kept Carter from directing his attention to Ronald Reagan. Savvy lobbyists for the CFC producers watched Carter flounder and began thinking that maybe there wouldn’t be a ban after all.
Industry mounted a campaign. They pushed back aggressively against the scientists. Lobbyists demanded proof that the chemicals were actually harming the ozone layer. Some argued that there weren’t enough CFCs being produced to matter, and even if there were enough, they wouldn’t stay up in the atmosphere for long. They also used the go-to argument business uses against any regulation: eliminating CFCs would throw tens of thousands of people out of work.
In 1980, DuPont ramped up the pressure. It took the lead in organizing an unusual lobbying organization. Called the Alliance for Responsible CFC Policy, it drew members from both manufacturers and users of CFCs. These were groups that ordinarily would have had opposing agendas (on matters such as pricing, for instance), but they had a common interest in protecting the industry. The manufacturers invited the small businesses to join because they realized that this allowed them to bring pressure in every congressional district in the country. The campaign worked; support for further limits to production disappeared in Congress.
Industry stalling tactics got another boost when Reagan was elected. Two things happened in short order: Industry realized immediately that Reagan’s new antiregulation regime was not going to pressure Congress to outlaw the chemicals. DuPont, which had expected a total ban if Carter was reelected, promptly halted work on producing alternatives to CFCs.
Then, in 1985, the story took another dramatic turn. Joe Farman’s data, painstakingly collected and analyzed during the previous three years, was published in Nature, documenting the precipitous drop in ozone levels in the skies above Antarctica. Understanding the dangers of increased UVB radiation reaching the earth and oceans requires only slightly more sophistication than understanding that ingesting Lysol is bad for your health. In case anyone still didn’t get it, Paul Newman, not the actor but the chief scientist for earth sciences at NASA’s Goddard Space Flight Center, put it simply to Space Daily: “If there were no ozone layer, the Sun would sterilize Earth’s surface.”
Once again, industry found itself on the defensive. DuPont in particular was in a bind. The company had committed to stopping production of CFCs if “reputable evidence” showed that they were a hazard to the ozone layer. A hole in the atmosphere the size of a continent would seem to provide such reputable evidence.
As it turned out, a threat to life on earth was less of a concern for DuPont’s C-suite than a threat to quarterly profits. Realizing that they had a friend in the Reagan administration, the company continued to seize any scrap of contrary information that might delay taking action.
With NASA confirming Farman’s readings, DuPont’s argument that CFCs didn’t damage ozone was starting to look like a loser. So they fell back on other arguments, and a retrospective look at that record is damning. Over the years, ample evidence has surfaced indicating that the company was acting disingenuously in those crucial years between the discovery of the ozone hole and when the world finally took action in 1987.
For instance, a 1983 update from the National Academy of Sciences slightly lowered its estimates of ozone loss if production of CFCs remained flat (in fact, this was the year Farman discovered the ozone hole, though he did not publish the findings for two years). Robert Watson, a British atmospheric chemist, was at NASA during those years, and he recalled that DuPont spokesmen would show up at meeting after meeting, arguing over and over that the CFC market was mature. They could say this with a straight face because of a convenient by-product of the severe recession of 1982. Production of CFCs actually did drop that year, as did the production of most other industrial chemicals. Consequently, if you smoothed the data between 1980 and 1983, it looked like a flat market. What the DuPont spokesmen knew, but didn’t say, was that tremendous demand for refrigerants in the developing world was going to spur rapid growth in the use of CFCs for years to come. Between 1983 and 1987, actual production increased by 7 percent a year. Yet DuPont officials publicly insisted until 1986 that they did not know that the market for CFCs was going to grow.
The other fallback argument for DuPont and the industry was that the chemicals would not live long in the atmosphere. When I interviewed chemists from the company for Time, they admitted that it was established in the 1970s that the chemicals remained in the atmosphere for decades. Yet in public documents as late as 1982, the company was still arguing that atmospheric CFCs were short-lived.
In 1986, DuPont realized the jig was up when the Vienna Convention established a framework for the phase-out of the chemicals. Was the company actually acknowledging its global responsibilities? Possibly, but more likely its executives realized that when CFCs were banned, DuPont would have a huge competitive advantage because of their head start on production of alternatives. Moreover, by this time, CFCs were a low-margin product, priced as a commodity. DuPont would have fatter profit margins when selling CFC alternatives.
On September 16, 1987, delegates from many nations met in Montreal to sign the protocol specifying a CFC phase-out. That same day, Newman was one of the scientists at Goddard receiving the data from the NASA flight into the vortex of the ozone hole. This produced what came to be called the “smoking gun,” the data that showed the tight relationship between the prevalence of chlorine compounds and the destruction of ozone. As the evidence became overwhelming, even the Alliance for Responsible CFC Policy recognized that a phase-out was inevitable and endorsed the protocol.
Between 1978 and 1988, global production of CFCs amounted to roughly 19 billion pounds. Had the phase-out begun a decade earlier, as the Carter administration planned, the problem of ozone depletion might never have reached the proportions it did. As it stands, thirty-five years after the Montreal Protocol was signed, the ozone layer has not completely healed, and this year a new hole opened up in the layer above the Arctic.
In 1993, Time magazine published an article in which I explored the history of the CFC threat to the ozone layer. Here’s how I ended the piece:
The ozone story shows what can happen when the world underestimates problems. It also underscores the difficulty of imposing environmental regulations that clash with economic interests, especially in the face of scientific uncertainty. If policymakers wait until there is unarguable evidence of danger before they act, it may be too late to prevent serious environmental damage.
This dilemma is now being faced on a related issue, that of carbon dioxide emissions and the global warming they could cause. Even though scientists are still debating how bad the warming trend might be, President Clinton has pledged that the U.S. will draw up a plan to get emissions of carbon dioxide back to 1990 levels by the year 2000. But will the plan, which may be opposed by utilities, automakers and a host of other business interests, make it through Congress? Corporate forces have already come up with their own version of the CFC alliance, called the Global Climate Coalition. One of the founding members: DuPont.
The Global Climate Coalition was established in 1989, the year the Montreal Protocol went into force. It not only included many of the companies from the old CFC alliance but also used the same experts (and some of these experts, notably Fred Singer, had earlier cut their teeth opposing anti-smoking regulations). A sponsor of the organization, the National Association of Manufacturers, lent it an imprimatur of respectability, but the group’s hard-knuckle tactics came right out of gutter politics: sow doubt about the consensus on the science, challenge the motivations of advocates, dig up dirt on groups and individuals, and strong-arm politicians.
Those opposing action on climate change recognized from the outset that they had a far greater advantage combating efforts to halt global warming than they did with CFC regulations. Kevin Fay, the former director of the Alliance for Responsible CFC Policy, later became a director of the International Climate Change Partnership, a more moderate industry group, seeking more collaborative solutions than other scorched-earth industry organizations popping up to oppose climate action. As recounted by the World Resources Institute, Fay recognized “that climate change was a much more complex issue than ozone depletion.” As he put it, “A handful of companies manufactured ozone-depleting chemicals, and there were a limited number of uses for them. Controlling carbon dioxide emissions would affect every aspect of life on earth.” Moreover, in the 1980s the CFC crowd had a massive ozone hole staring them in the face, while with climate change, it was still difficult to tell whether the suite of hottest years was a natural phenomenon or a result of loading the atmosphere with greenhouse gases.
Phasing out CFC use should have been easy. Instead it took thirteen years from the time the threat was first recognized to the time when global action was initiated. And for all the hailing of this “environmental success story,” we are still dealing with the impacts of ozone depletion (one of which is an alteration of atmospheric and ocean currents) thirty years after the treaty. If we have to wait for the climate change equivalent of the ozone hole before the world is galvanized into action, any treaty will be protecting the remains of an uninhabitable planet.
There was one other consequential story involving business, finance, and climate change in the 1980s: Reagan’s tax cuts. Though the impact of Reagan’s tax regime on renewables was scarcely noted at the time (with the press focused instead on how they would impact individuals, corporations, and the deficit), Reagan’s reversal of tax incentives and disincentives that were a legacy of Carter’s 1978 national energy initiative played a major role in the loss of America’s leadership in developing cost-effective alternative energy sources. The tax changes also constituted a knife in the gut to the prior administration’s efforts to promote energy conservation and fuel efficiency.
The late, great investor Leon Levy often remarked, “Give me control of the tax code, and I will give you any society you want.” What he meant was that by manipulating incentives and penalties, the tax code was the most efficient way to shape behavior. It doesn’t involve much bureaucracy, and, in contrast to regulation and state planning, it leaves it to the citizen to decide what to do. It also allows a country to shift the costs from society as a whole to the entity that imposes those costs. The huge taxes on cigarettes, for instance, both discourage smoking and provide revenue to offset the costs to society that smoking imposes in terms of health and lost productivity.
In its push for energy independence and to promote renewables, the Carter administration used both top-down regulation and the tax code as its tools. It imposed a windfall profits tax on oil producers; forced utilities to encourage conservation, not increased electricity use; forced utilities to buy excess energy (nicknamed “cogen”) from industries that produced a lot of otherwise wasted energy; encouraged utilities to enter into long-term contracts with alternative energy sources such as solar and wind; and provided tax incentives for investing in solar and other alternative energy technologies.
The Reagan administration undid almost all these initiatives. The investment tax credit for solar, for instance, was killed in 1986 to fund the Reagan tax cuts. The late Philip Clapp, a major figure in the environmental movement until his death in 2008, said that Reagan “set back solar a decade.”
The real cost of the 1980s was one thing that did happen and so much that didn’t happen. Industry used the 1980s to optimize a playbook that would be used in the 1990s and beyond to hamstring any efforts to avert climate change. And business interests, allied with a like-minded Reagan administration, used the decade to snuff out virtually every climate-related initiative launched by the previous Carter administration.
For business and finance, the clock on climate change had barely started ticking. During the decade the moneyed interests had other fish to fry. Until the end of the decade there was no movement to control greenhouse gas emissions, and even if the scientific evidence for warming had been as dramatic as that for the ozone hole, fossil fuel interests could rest assured that they had a friend in the Reagan administration (and it turned out they had one in the Bush administrations as well). With tax incentives gone and government support for research and development on renewables cut to the bone, financial interests had little incentive to push development of alternatives. With regard to climate change, the 1980s were indeed a lost decade. Unfortunately, it was only the first.
What might have happened had Carter been reelected? He was a victim of external events, notably the Iranian hostage crisis and the primary challenge from Ted Kennedy. No Ted Kennedy and no hostage crisis, Carter might have won a second term. With continued momentum on the phase-out of CFCs, DuPont would have continued work on alternatives, and ozone depletion might not have been as severe.
Perhaps the Alliance for Responsible CFC Policy wouldn’t have been as effective at slowing action. In turn, that might have led industry to be more cooperative in the next decade, rather than adversarial, as climate science and a suite of record hot years made the case for controlling greenhouse gases more compelling. With tax and other incentives still in place, costs of solar, wind, and geothermal would have come down more quickly, advancing the date when various renewables would have grid parity with fossil fuels. Today, many of the largest companies recognize the threat of global warming and resisted the Trump White House’s efforts to lower fuel economy standards and otherwise promote the further release of greenhouse gases. Could this have happened thirty years earlier? And if it had, would the climate changes we are seeing be less extreme? We will never know.