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Fortune Features PG&E/PHEVs and Schwarzenegger in Green Issue
Mar 23, 2007 (From the CalCars-News archive)
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The business magazines and the business sections of many daily newspapers are covering the climate crisis. Fortune Magazine's cover says it all: "The only GREEN ISSUE that matters." Below read the introduction to the story. Then the writeup on Pacific Gas & Electric, one of 10 companies that "have gone beyond what he law requires to operate in a responsible way" -- you guess right if you hope they highlight PHEVs. Finally, a pretty astonishing interview with Governor Schwarzenegger. (We don't yet know how it will happen, but we're looking forward to him getting revved up about PHEVs. We've already talked with Maria Shriver: see http://www.calcars.org/­photos-people.html.)

Green is good No, it's not just greenwash. Business in the U.S. really has become cleaner and greener. Environmentalists actually have embraced market-based solutions. And the politics are about to get very interesting, says Fortune's Marc Gunther. FORTUNE Magazine By Marc Gunther, Fortune senior writer March 22 2007: 2:52 PM EDT http://money.cnn.com/­magazines/­fortune/­fortune_archive/­2007/­04/­02/­8403418/­index.htm

Big business and environmentalists used to be sworn enemies - and for good reason. General Electric (Charts) dumped toxins into the Hudson River. Wal-Mart (Charts) bulldozed its way across America. DuPont (Charts) was named the nation's worst polluter. The response from the environmental movement: mandate, regulate and litigate. Those days are mostly over.

Today big companies and activists are at least as apt to hammer out a partnership over a cup of sustainably grown coffee as to confront one another in court. No, they do not always see eye to eye, but the areas of common ground are getting broader. Why? For one thing, because there is money to be made. "The opportunity to provide environmental solutions is going to be one of the big four or five themes of our generation of business leadership," Jeffrey Immelt, the chief executive of GE, told the 25th anniversary dinner of the World Resources Institute.

Like Immelt, Fortune sees big changes ahead. For the past 30 years, most of what passed for environmentalism in corporate America was driven by two things: compliance and efficiency. Industry stopped polluting the air and water after it became illegal or unprofitable to do so.

Going a step further, some companies also recognized that by reducing their consumption of energy and materials, they could save money, help the planet and maybe clean up their image. Now we're at the threshold of a different era, one in which smart companies are trying to figure out how to profit by solving the world's big environmental problems.

This era won't be about efficiency - although there are still lots of gains to be made there - but about increasing revenues and inventing entirely new businesses. That, at least, is what DuPont has set out to do, albeit with mixed results. That's also why GE is selling wind turbines as fast as it can produce them.

Global warming is the game changer. A number of influential Fortune 500 CEOs, including GE's Immelt, Wal-Mart's Lee Scott, the heads of America's four biggest carmakers and utility industry leaders like Jim Rogers of Duke Power and Peter Darbee of PG&E, have agreed that climate change is real and that national action is required to slow, stop and then reverse the growth of greenhouse-gas emissions. That is a very tall order.

Transitioning to a low-carbon economy will require new ways to generate power, run our cars, grow our food and design, build, heat and cool our homes and offices. Only business is capable of innovation on that scale.

And many businesses are taking up the challenge with verve. We identify ten companies that are ahead of the learning curve on the strategic value of environmentalism in their industries. Selecting them was difficult - another sign of how the world is changing.

We began by soliciting nominations from environmentalists and consultants who have worked in the trenches of corporate America. They nominated nearly 100 companies. We decided to concentrate on bigger firms because their environmental footprint is more important. (We could not, however, overlook the remarkable story of Patagonia). We also left out two very big companies, GE and Wal-Mart, whose environmental initiatives have been widely covered.

Like Arnold Schwarzenegger, Fortune is basically optimistic. As the statistics show - and we highlight a few of them - the U.S. has made enormous progress in some areas, while backsliding on others. Change for the better is certainly possible; building a sustainable economy is a plausible goal.

And what is sustainability? The ability to meet our present needs without compromising the ability of future generations to meet theirs. Getting there won't be easy - and business will have to help take us on the journey.

10 green giants These companies have gone beyond what the law requires to operate in an environmentally responsible way. PG&E http://money.cnn.com/­galleries/­2007/­fortune/­0703/­gallery.green_giants.fortune/­6.html The methane byproduct of these California cows' waste is delivered by pipeline to PG&E and turned into electricity. PG&E Location: San Francisco Year founded: 1852 Revenue: $12.5 Billion Employees: 20,000 Strategic investments in efficiency and renewables.

PG&E Played a big role in getting mandatory controls on greenhouse gases enacted last year in California, and CEO Peter Darbee is now pushing for federal legislation.

The utility generates 56 percent of its retail electricity sales from non-greenhouse-gas-emitting sources, and it aggressively helps customers become more efficient. For instance, it subsidizes homeowners who buy energy-efficient appliances with $75 grants. PG&E is also experimenting with a variety of clean power alternatives. It is seeking permission to develop generation projects that could convert wave energy off the Pacific Coast into electricity. It is bullish on solar thermal technology, and it has a pilot project in the San Joaquin Valley in which cow manure is turned into electricity. "That's a dung good idea," cracks Darbee.

Jokes aside, Darbee is seriously excited about the prospect of plug-in hybrids that would draw power from the electricity grid at night and then feed power back into the grid during the day when demand peaks. These clean cars would burn less gasoline, pollute less and take advantage of the utility industry's capital-intensive infrastructure. "The energy industry," Darbee concludes, "is on the brink of a revolution." --Marc Gunther

The Governator's green agenda When Arnold Schwarzenegger was elected governor in 2003, the environment was not high on his agenda. Now it is. That matters, because where California goes, the rest of the country just may follow. Fortune's Nina Easton reports. FORTUNE Magazine Interview by Nina Easton, Fortune Washington bureau chief March 23 2007: 6:46 AM EDT http://money.cnn.com/­magazines/­fortune/­fortune_archive/­2007/­04/­02/­8403410/­index.htm?postversion=2007032306

(Fortune Magazine) -- Arnold Schwarzenegger's private office is in a commercial building in Santa Monica, and it bulges with manly-man props from the movies. It's a long way, then - in every way - from Theodore Roosevelt's rambling Long Island, N.Y., home, which is crowded with stuffed animal heads and books.

But the statues by Frederic Remington on display hint at a spiritual kinship with T.R., who also appreciated the artist's dynamic bronzes of Western life (though he might have been bemused by the Andy Warhol hanging above Schwarzenegger's desk).

The California governor looks to Roosevelt, the great Republican conservationist, as inspiration for his mission to make his state, and the GOP, leaders on the environment. Last fall, Schwarzenegger signed a bill into law to cut the state's greenhouse-gas emissions 25 percent by 2020 and followed with an executive order requiring a dramatic drop in the carbon content of transportation fuels. He has vowed to fight attempts to reopen the California coast to offshore drilling.

This record was central to a political comeback that culminated last November in a reelection victory with 56 percent of the vote. At home, he has retooled one of his famed Hummers to run on hydrogen and another to use biofuel, and he's installing solar panels to heat the family residence.

Puffing on a Monte Cristo cigar with the same gusto he showed discussing his environmental vision, Schwarzenegger sat down with Fortune to make the case that the environment is good politics and good business. Here are some excerpts:

How did you get to this point on the environment?

We now know that what we've done in the past 100 years has caused such unbelievable damage to the world. We didn't know better, but now we do, and now it's not okay. There are certain things we know will happen in the next 30 to 40 years if we don't roll it back. So we have to start doing it now. Every marathon starts with a first step.

I know the American mentality when it comes to finances is to look at the quarterly returns. But there are decisions you will make today, right now, that will take you in a different direction if you think ahead. I have to think, How is California, with its population growth, going to get its energy supply in 50 years?

Does the GOP get this?

No. There are people in both parties who don't get it, but I would say I have a tougher time selling those things to the Republicans.

There's a billboard in Michigan accusing me of costing the car industry $85 billion. [Sponsored by Republican Congressman Joe Knollenberg, the sign says, ARNOLD TO MICHIGAN: DROP DEAD! The message refers to the damage that detractors say the new emissions standards will cause the U.S. auto industry.]

Those people look at this in a narrow way rather than really studying the subject and recognizing that this actually gives us an opportunity to create a whole new industry of clean cars and clean engines and components to build those engines. In California, what we call clean-tech industries are exploding left and right.

Won't there be losers with stricter pollution standards?

Only as much as the auto industry or any industry has to make changes to adapt to the behavior of customers. You have to react quickly. Even if we don't do anything about it, the Japanese will, the Chinese will, the Germans will. Detroit is struggling with it, yes, because they are behind.

Cement factories said there is no way to produce cement without polluting the way we do now. We found that there are many European companies producing cement that release only half the greenhouse gas, so there is the technology there. They are already using it in Texas. When we passed our $20 billion infrastructure bonds, we said, Let's not build any of those roads without that technology. We let the cement companies know this: Adopt that technology, and we'll sign contracts with you. We don't want you to suffer; we want you to make money. I'm a businessperson who sympathizes with both the economy and the environment. So we say by 2012, we start making changes. We're giving an immense amount of time.

What should be the balance between government-driven vs. market-based solutions?

Market-based solutions alone won't work. It is up to us [in government] to say, Here are the laws: You have to inspect the milk so it's clean. You have to inspect the meat. If you screw up with the spinach, we have to take action to make sure people don't get sick. I never think of industry as being villains. I'm not for you getting taxed, if you're an oil company, just to punish you. But we [the government] have to guide you and say, This is the new direction we are going to go.

Do you see alarmism in the discussion of global warming?

Let's assume for a second that global warming is 10 percent less of a problem. No matter what percentage you take off, we are in big trouble. That's the reality. We've seen the photographs of glaciers melting. We know that is a phenomenon that is happening. We know that the water is rising. We know that we are polluting the world. All of this is reality.

I'm not an environmental fanatic. That's why our program [in California] works, because people know that I have not come from that background. As governor, you talk to scientists at universities. These are not wacky people, but they will tell you straight. Then you see the reports of 3,000 scientists, then you read reports of the UN. There is no conspiracy, this is real stuff.

I'm an optimist. I don't look at this as if the world is coming to an end. I see it as a great opportunity to clean up our mess. We're grownups, we aren't children, and we can do it. That's why we like to be out front in California. That's power.

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