Houston Floods and the Question of a Carbon Tax  

Carbon Emissions

Still roiling over the Gulf of Mexico as of Wednesday, Harvey and its massive rainfall have devastated Houston, the fourth largest city in the United States. As the latest in a recent string of epic weather disasters, this story begs the American people to embrace the idea of a carbon tax.

Science and, increasingly, common sense tells us that carbon emissions are steadily raising the earth’s surface temperatures, which pulls more water into the air, only to punish us with severe storms, droughts and blizzards. Add this to an unequivocal and apparently-accelerating rise in sea level, and we’re clearly playing with fire.

The Los Angeles Times posted an uncompromising and politically-charged editorial this week, chiding the President for his views on climate change. Unfortunately, such critiques seem likely only to harden resistance to logic, since political discourse has descended to farce.

The better question is whether we can isolate a single powerful lever and find a way to pull it. That lever could be some form of carbon tax.

Rising Tide

Fifteen years ago, while at AMR Research (now a part of Gartner), I asked Dr. Stephen Stokes about global warming, and what to expect. As a massively-credentialed earth scientist with a Ph.D. from Oxford University, Stephen told me the issue was not just warming but an increase in extreme weather events. Sea levels would rise, yes, and so would global temperatures. But the big impacts we’d feel first would be mega-storms. Sure enough, that’s what has happened.

From a supply chain perspective this means more risk to transport networks, agricultural commodity prices and continuity of supply. The immediate impacts of Harvey include fuel price spikes arising from refinery capacity losses and, of course, product flow to and through Gulf coast logistics nodes. As for the next one, maybe it’ll be a hurricane in New York, a blizzard in Boston or a heat wave in Seattle — oh wait, those have already happened.

Supply chain leaders know this, and have already started to treat climate change as a fact of life. The rising importance of digital control towers and scenario-modeling tools is one proof point. But I also wonder whether attitudes about carbon emission reductions are as much about dampening extreme weather threats as about being good corporate citizens.

Paying for Carbon

Data collected in 2016 on sustainability practices in supply chains shows that, at the highest level, 40% of 1,301 survey respondents say they are investing in carbon emission reductions because “it’s the right thing to do and has financial payback.” Another 36% make these investments only because “it’s the right thing to do.” Fewer than a quarter choose to do nothing.

Sustainability Initiatives Chart

As for the symbolic (rather than operational) tactic of buying carbon offsets, only 28% invest for financial payback.. What this suggests is that buying green is not as effective as actually being green. Carbon reduction implies energy and material efficiency, and therefore cash savings, while carbon offsets suggest a marketing business case which consumers don’t really buy. Carbon is something supply chain leaders already treat as a de facto tax.

Carbon Emissions Chart

When we look at respondents’ data by seniority and industry, we see also that higher-ranking executives are more bullish on carbon emission reductions than their juniors, and that heavier, dirtier industries are more aggressive than the rest. This means that higher levels of awareness on the carbon question generally align with more readiness to treat it as a cost.

Supply chain is ready and able to handle a carbon tax.

Lose the Politics

I’ve written about these topics many times before, with the hope that supply chain’s natural quest for efficiency would ultimately win out. I’ve supported the Keystone pipeline, been pro-fracking, and at the same time a big fan of the Paris climate agreement. Taxing carbon is about using metrics and financial scorekeeping to drive continuous improvement in the earth-friendliness of our global system for making and delivering goods.

Too much of what we hear around climate change centers on the tension between earth scientists’ views, which move in geologic time, and political hacks’ views, which are pumped out in 140-character tweets.

Supply chain knows better.

Author Kevin O'Marah

Chief Content Officer, SCM World

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