Gaining Competitive Advantage in a Carbon-constrained World:: Strategies for European Business

Beginning in 2005 over 12,000 industrial facilities throughout the European Union were granted allowances to emit carbon dioxide, the most common of greenhouse gases. A trade-able asset, these allocations will be but the first in what is likely to be an ever stricter limitation on greenhouse gas emissions. This article makes the case that companies need to view "carbon exposure" as more than just an environmental compliance issue, but rather a key factor in future corporate competitiveness. Karl Schultz and Peter Williamson discuss the impacts on different types of companies of both policies to address global warming, and climate change's direct potential to impact business decisions. They then assess the various risk exposures of companies. A number of strategies are provided for corporate managers and boards to understand their corporate exposure, and take steps to mitigate risk and, in many cases, come up with competitive advantage in a business environment that is becoming increasingly carbon constrained.