Fred Krupp is like a Timex watch.

He takes a licking but keeps on ticking.

Those of you old enough to remember the commercials when Timex tortured its seemingly indestructible watches, using high divers, water skiers, dishwashers, jackhammers, and the propeller of an outboard motor, know what I mean.

Except that the instruments of torture that Fred has endured as he has labored, literally for decades, to get climate change legislation through Congress include coal-state Senators, Republican obstructionists, Washington trade associations, a largely indifferent press corps  and left-wing green groups that accuse the Environmental Defense Fund, which he leads, of selling out to big business.

If nothing else, you’ve got to admire his persistence.

It can’t be easy to calmly discuss the need for cap-and-trade legislation and the challenge of getting 60 votes in the Senate while oil is fouling the Gulf of Mexico, global temperatures are rising and atmospheric concentrations of carbon dioxide are reaching dangerous levels.

Yet that’s Fred–calm, rational, pragmatic and seemingly undeterred by the fact that there appears to be only an outside chance that climate-change legislation will be passed this year, that next year looks a whole lot worse and that the congressional clock is ticking down.

Today, EDF invited reporters to the Washington offices of the Glover Park Group to hear Fred and Steve Cochran, the group’s chief lobbyist, make a last-ditch plea for a scaled-back bill, one with an emissions cap that initially covers only the utility industry.

They conceded for the first time publicly that EDF won’t get the economy-wide cap that it really wants and also, for the first time, gently criticized  President Obama and urged him to back up his climate-change rhetoric with action.

First, the EDF crew admitted that for now we’re not going to get a cap on carbon emissions that covers most polluters, even though that’s what the science of climate change says is needed and that’s what the green groups and the business-backed U.S. Climate Action Partnership, have been seeking for the past three years.

“A comprehensive, economy-wide cap and trade system is not going to be passed by the Senate,” Fred said. A cap that covers the coal-spewing utility  industry would impact  about 40% of the U.S.’s carbon output.

Second, he said, the only way we’re going to get even an admittedly insufficient bill will be if President Obama and the White House staff support one and put their shoulders behind it. This, regrettably, the administration has yet to do.

“We need the president to lead,” Fred said. “For all the good things he’s done, which we acknowledge, he’s got to roll up his sleeves and put together a bill.”

If the president and his staff get deeply involved–as they eventually did with the stimulus package, health-care legislation and financial industry regulation–a climate bill is “absolutely doable,” Fred said.

Neither of those things can have been easy to say–the first is admitting a sort of defeat, the second is admitting disappointment in a key ally.

Indeed, even while calling upon Obama to act, Fred and Steve went out of their way to praise him.

“This is the first time in history we’ve ever had a president who cared so deeply about climate change, and he has done an awful lot, more than any president has done before,” Fred said. They cited strong EPA mileage standards for cars, money for clean tech in the stimulus package and last month’s Oval Office speech on energy and climate.

“But the truth is we need him to do one more thing,” Fred continued. “We need him and his staff to directly engage in the politics and policy to actually produce a bill.”

“If he doesn’t do that, without his leadership, then everything he has done so far will lead to nothing.”

While EDF has proven willing to compromise, the group won’t support legislation without a carbon cap. After reading this thought-provoking argument from my friend Jesse Jenkins of the Breakthrough Institute, I asked whether EDF could accept a package of bipartisan measures that include renewable portfolio standards, energy efficiency rules, a broad electric-car initiative, money to stimulate clean energy research and “cash for dirty-coal-plant clunkers” program, absent a cap.

No, they replied, because if the U.S. doesn’t limit its CO2 emissions, it will be impossible to persuade other big countries like China to follow. Besides, an EDF analysis [PDF, for download] of the energy-only Bingaman-Murkowski bill that came out of a Senate committee and included some of those measures showed that it would actually permit emissions to increase over the next decade or so.

“What we absolutely will insist on is an enforceable, declining limit on carbon pollution coming from these big smokestacks,” Fred said.

For all the setbacks of the past couple of years, and even this week–several reporters mentioned that the White House now seems to be shifting its focus to immigration–Fred won’t allow himself to believe that the long crusade to stop global warming will fail.

Repeating a mantra of all the green groups, he said climate-change legislation is inevitable.

“There are a lot of reasons in this world to be cynical,” he said.  “But are you so cynical as to believe that human beings are going to pollute the planet to the point where we can’t survive anymore?”

Well, no, but it’s getting harder all the time to see how we–not just the Congress, but China, India, Russia and the rest of the world–are going to act quickly and firmly enough to do what needs to be done to curb global warming.

Fred and those Timex watches may be indestructible but human life on this earth, alas, is not.

Please, let’s not allow this crisis to pass without taking action to cap carbon emissions and promote clean energy. This is about our legacy.

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Here are a few words about the video from David Yarnold, the executive director of Environmental Defense Fund:

The point is, WMT and GE are changing business, often in unseen ways. So it’s worth keeping up with their efforts to meet their own ambitious sustainability goals. Where are they succeeding? Where are they falling short? How strong is their commitment?

WMT’s 2010 Global Sustainability Report, which was released recently, provides a snapshot of the retailer’s work. The 47-page report (available here) is, if nothing else, a reminder of the scope  and depth of WMT’s efforts—the company is buying renewable power, reducing packaging, reducing waste, making its fleet more efficient, and selling more sustainable products, and not just here in the U.S.

Here are some highlights:

Bentonville Buddies: Mike Duke and Environmental Defense Fund's Fred Krupp

When CEO Mike Duke took over last year from Lee Scott, there were questions about his commitment to the sustainability efforts. He now appears to be a believer. In the introduction to the report, he writes that  WMT has been able to “broaden and accelerate” its commitment to sustainability even during the recession. And he says:

Sustainability continues to make Walmart a better company by reducing waste, lowering costs, driving innovation, increasing productivity and helping us fulfill our mission of saving people money so they can live better.

That’s about as good a summary of the business case for sustainability as you’ll find.

WMT is going well beyond “green.” Working on its own and with other retailers, WMT is conducting audits of factories in its supply chain, particularly in China, to make sure they comply with social and human rights standards. By 2012, the company says, “all direct import suppliers” (as opposed to suppliers to its suppliers” will be required to “source 95 percent of their production from factories that receive one of our two highest ratings in audits for environmental and social practices.” WMT is also pushing suppliers to achieve higher standards of product safety, quality and energy efficiency.

Wal-Mart’s environmental efforts are truly global.  The company is uying solar and wind power in Mexico, sourcing local food in China and India, and analyzing the life cycle impact of consumer products in Brazil. Alleviating hunger has become a goal of WMT’s charitable efforts, and so with CARE it is backing education, job-training and entrepreneurial programs for women in Peru, Bangladesh and India.

The company reports not just on victories but on frustrations. As you’d expect, WMT touts gains in such areas as fleet efficiency and building super-efficient, green prototype stores but it also admits where it has fallen short. But the company also said it was unable to meet a goal of eliminating PVCs from store-brand packaging because it couldn’t find a suitable alternative.

It’s harder than it should be to get a sense of WMT’s overall progress and impact. As Elizabeth Sturcken of the Environmental Defense Fund says in a Greenbiz story about the report, the report lacks context that would enable readers to assess WMT’s progress. WMT, for example, talks about keeping waste out of landfills but Elizabeth writes that

we’d like to see a report of the total volume of waste produced annually, and the change in total volume from 2008 to 2009. We’d like to know whether Walmart’s waste reduction and diversion efforts are actually resulting in a net reduction from one year to the next.

Similarly, I couldn’t figure out what percentage of WMT’s energy consumption comes from renewable energy. (I’d guess it’s very, very small.) And I’m still confused by WMT’s reporting on its carbon footprint. The company says (on p. 33) that it reduced its emissions by 5.1% in 2008, when compared to 2005, but the company also says (on p. 6) that “our company’s absolute GHG footprint continues to rise.” It’s clear that emissions per $1 million of sales are falling, and that’s progress of a sort.

WMT is just getting started. All signs are that WMT is committed to sustainability over the long term, and that’s exciting. Its efforts to measure the environmental impact of individual products are just getting started. There’s lots of room for improvement around packaging. Over time, WMT is going to democratize and popularize the idea of  “green.” Check out these shelves of GE compact fluorescent bulbs.

As Elizabeth Sturcken writes:

From what we see on the ground, Walmart is indeed working hard to “broaden and accelerate” their sustainability efforts, as CEO Mike Duke says.  The folks working on this at Walmart have taken to proudly wearing buttons emblazoned with a “37” representing the number of Walmart sustainability goals (though there are actually 38 with the new climate goal added in).  It’s a symbol of how intently they are focused on moving forward to meet those goals.

Five years ago, few believed that WMT would have come this far.

The $405-billion a year retailer has worked hard since 2005 to save energy, reduce waste and sell more sustainable products.

But it resisted pressures to reduce or hold steady its own greenhouse gas emissions. In fact, its carbon emissions have grown, as the middle graphic below shows. (There’s a cleaner version in WMT’s responsibility report, here.) When it comes to global warming, Walmart would appear to be doing more harm now than it was three or five years ago.

Today, Walmart made its first major commitment to reduce greenhouse gases–although, in typical WMT fashion, rather than set a tough goal that might affect its own growth curve, the company plans to turn up the pressure on its thousands of suppliers to reduce their emissions.

Here’s how a press release from Walmart and its lead environmental partner, Environmental Defense Fund, explained it:

Walmart today announced a goal to eliminate 20 million metric tons of greenhouse gas (GHG) emissions from its global supply chain by the end of 2015. This represents one and a half times the company’s estimated global carbon footprint growth over the next five years and is the equivalent of taking more than 3.8 million cars off the road for a year.

The footprint of Walmart’s global supply chain is many times larger than its operational footprint and represents a more impactful opportunity to reduce emissions.

You can think of this as the biggest carbon offset in global history, and I’m being only partly facetious when I say that.

Walmart wants to grow–the company is expanding in the U.S., and elsewhere in the world–and it will likely grow its own carbon footprint, directly and indirectly, as it sells more stuff and builds new stores, most in suburbs and rural areas, surrounding by acres of parking.  But the companies that supply WMT–that is, Procter & Gamble, Unilever, Clorox, Coca-Cola, PepsiCo, Kraft, General Mills, Sony, Apple, HP, Dell and hundreds more, all of whom must be wondering about their carbon emissions right now–will be asked to make things more efficiently, use less energy, buy more recycled content and the like.

As Leslie Dach, a top Wal-Mart executive, put: “It is really a Wal-Mart approach to solving a problem…The size and scale of this company can be put to use to make a real difference in the world.”

That’s no doubt a good thing. Better, as one of my sources told me, to improve practices at 10,000 factories around the world than simply to make WMT’s operations more efficient.  “Sensational” was how Fred Krupp, the president of Environmental Defense Fund, described it, during a lovefest with Walmart CEO Mike Duke, which was webcast on Treehugger, of all places.

Duke praised EDF, saying: “Our NGO partners have pushed us and been patient with us.”

Krupp returned the favor. EDF has planted two staffers in Bentonville, Arkansas, to work closely with WMT, and he said: “I don’t think there’s any better money we are spending anywhere.”

Specifics about how the carbon reduction effort would work were few, understandably so since it is new.  “This is uncharted waters,” said Elizabeth Sturcken of EDF. (Here is her excellent analysis, with some detail on initiatives in packaging and around dairy products.) Right now, there’s little data available to measure the carbon impacts of the products that Wal-Mart sells, particularly if you want to include how they are made, shipped, used and thrown away, as WMT does.

Walmart said it would start with the products that have the most “embedded carbon” and seek GHG reductions thatn are “economically viable.” The company has already had success getting suppliers to use smaller packages, from concentrated detergents to lighter-weight DVD cases.

Walmart itself, though, wants to get bigger. Duke was straightforward about this. “We are a growth company,” he said. “We want to add square footage. That’s the reality of our business.”

Critics are unsatisfied. Here’s reaction from Stacy Mitchell, a senior researcher with the New Rules Project, a program of the Institute for Local Self-Reliance:

By focusing on suppliers, Wal-Mart continues to deflect attention from the enormous greenhouse gas implications of its own business model. Wal-Mart is rapidly expanding in China, Mexico, and other countries, where it is destroying neighborhood businesses and replacing them with an auto-oriented form of big-box shopping that is highly polluting. Under Wal-Mart, local and regional systems of economic production and distribution are giving way to global supply chains, which almost invariably means longer distances and greater fuel consumption.

She’s got a point, but the story is more complicated, for a couple of reasons. (Warning: geeky analysis ahead.) First, look at the graphic on the far right, above. Walmart is reducing its GHG emissions per unit of sales, meaning that it’s more efficient. So, if its competitors are not doing as well in terms of efficiency, and if it takes market share away, then it’s possible that WMT can sell more stuff and the planet will be better off. For example, if Walmart sells lots of Fair Trade coffee, and the locally-owned convenience store around the corner sells less conventional coffee, that’s a good thing. Local isn’t necessarily better.

Second, and paradoxically, Walmart is actually becoming more local. For example, Walmart has made a concerted effort to buy more from local farmers. Corby Kummer has a terrific article about this in the current Atlantic, in which he asks: Will Walmart and not Whole Foods save the Small Farm and Make America Healthy? The company, he reports, “wants to revive local economies and communities that lost out when agriculture became centralized in large states.” Best quote in the story is from Michelle Harvey of EDF who says: “It’s getting harder and harder to hate Walmart.”

True enough. Nevertheless, in my ideal world, Walmart would set a cap on its own emissions, sell used goods as well as new, nudge people to buy vegetables instead of meat, and share profits with its workers.  In today’s world, Walmart will try to grow (profits) and shrink (pollution) at the same time. That’s about all we can ask of a big company until we, collectively, can find a way to decouple economic growth from environmental harm. That’s a job too big even for Walmart.

But if you can’t avoid cancer, chemotherapy may be your best option. And, if it becomes evident that the earth can’t avoid the catastrophic impacts of climate change, it is not merely possible that governments will turn to geoengineering.

Some people believe that it is all but certain.

Geoengineering, as you probably know, is the deliberate large-scale manipulation of the planet to counter global warming. It can take a number of forms, as the graphic below shows, some perhaps still to be discovered. Long a taboo subject, geoengineering is being talked about openly these days by scientists, environmentalists and policy thinkers.

The National Academy of Sciences held a workshop on geoengineering in June. Influential books including SuperFreakonomics and Whole Earth Discipline, by longtime environmentalist Stewart Brand, argue that it’s time to take geoengineering seriously. A congressional subcommittee held its second hearing on geoengineering just last week.

Among those testifying was Keith, who directs the energy and environmental systems group at the University of Calgary and, interestingly, also leads a team of engineers who are developing a technology to capture CO2 from ambient air. I heard him speak a week ago during a six-hour workshop on geoengineering organized by the Environmental Defense Fund, a nonprofit known for its pragmatism. EDF invited me to attend, on the condition that I seek permission from the scientists before quoting them.

Geoengineering is not a new idea — it was mentioned in a 1965 report on the environment delivered to President Lyndon Johnson. But until recently, environmentalists have avoided talking about it because they worry that a focus on geoengineering will divert attention and resources from their attempts to get governments and business to curb carbon emissions–attempts which, it must be said, have had limited success so far.

Nor is geoengineering entirely unproven. Experts say solar radiation management (SRM), the form of geoengineering that has drawn the most attention lately, can be achieved by adding light-scattering aerosols to the upper atmosphere or increasing the reflectivity of clouds below.

What makes scientists think it will work? When the Mount Pinatubo volcano in the Philippines erupted in 1991, spewing fine particles of sulfur dioxide into the stratosphere, enough sunlight was reflected back into space that the earth was cooled by about 0.5 degrees C, at least for a time.

The trouble is, solar radiation management surely will have  other consequences as well. Some are known—less precipitation and less evaporation, which is bound to affect agriculture—and others are not.

“The concerns, really, are the unknown unknowns,” says Keith.

The EDF workshop was itself a sign that geoengineering is moving closer to the mainstream. It was organized for EDF’s  trustees and senior staff during a board meeting at Cavallo Point in Sausalito, Ca.; the organization hasn’t decided yet whether to support further research into geoengineering but, to its credit, it is open-minded about the idea. Listening to the presentations, I found myself appalled at times and thrilled at others. This is a fascinating subject, one that raises many more questions than there are answers.

One useful way to think about geoengineering in general and SRM  in particular is to compare them to mitigation, the current approach to climate change. Mitigation means reducing carbon emissions, most importantly by replacing the burning of fossil fuels (coal and oil) with low-carbon energy sources such as wind, solar, nuclear power, so-called cleaner coal and biofuels–on a vast scale. Mitigation requires enormous expenditures of capital and takes a very long time to work because CO2 emitted today persists in the atmosphere for decades. Even if we could arrange for an international agreement to curb emissions, which we cannot, it will take decades to reverse the rising concentrations of carbon in the atmosphere.

David Keith

By contrast, solar radiation management is arguably “fast, cheap and imperfect,” said Keith–particularly if it is done crudely and without proper governance, oversight and testing. As little as $5 to $10 billion a year could pay for a short-term program, scientists estimate. By email, Keith put it this way: “The raw cost of implementation is less than 10% and probably less than 1% of the cost of cutting emissions when you average costs over 100 years.” Most of the technology required is within reach.

“It’s pretty clear that you could do it if you wanted to, and you could do it now,” Keith said. “If we put a lot of reflective aerosols in the upper atmosphere, it gets colder and it gets colder quickly.”

What the best way to block the sun’s rays? That’s to be determined. Keith explained that high-flying planes could scatter sulfate particles in the stratosphere, although little is known about how the aerosols would be formed into particles and therefore how long they would stay in the air.  Stephen Salter, an emeritus professor of engineering design at the University of Edinburgh, said a fleet of about 500 self-driven sailing ships could be designed to spray salt water into the air that would increase the reflexivity of clouds, thereby blocking sunlight.

SuperFreakonomics, meanwhile. put a spotlight on Intellectual Ventures Lab, a Seattle-based company led by former Microsoft chief technology officer Nathan Myrhvold that is researching geoengineering. Here’s a four-minute video about an Intellectual Ventures’ invention called the StratoShield, essentially a giant hose held up by helium ballo0ns that would inject  a fine mist of aerosolized sulfur dioxide 18 miles above the earth.

You can be sure that if research money is made available to study geoengineering, new ideas for tinkering with the earth on a global scale will arise. Two years ago, I wrote a cnnmoney.com column about a startup called Climos that is exploring techniques for removing carbon dioxide from the air by sprinkling iron dust on oceans. (For what it’s worth, the scientists at EDF’s event told me that will never work.)

In any event, the very fact the crude geoengineering can be done inexpensively and easily is one reason why it’s worrisome. “It is cheap enough so that small countries could act alone,” Keith said. In theory, a wealthy island nation that felt threatened by rising sea levels could try geoengineering. Countries have done dumb things before.

Surprisingly little research has been done on geoengineering. A article by David Victor et al called The Geoengineering Option, published last spring in Foreign Affairs, said:

Nearly the entire community of geoengineering scientists could fit comfortably in a single university seminar room, and the entire scientific literature on the subject could be read during the course of a transatlantic flight.

Nor is it clear how geoengineering can be tested, and how useful any tests would be. Writing in the Jan. 29 issue of Science, Alan Robock et al tackles this subject and says that “stratospheric geoengineering cannot be tested in the atmosphere without full-scale deployment.” (Here’s a link to their story and here’s one to Keith’s work.)

David Victor, a professor at the University of California, San Diego, and an author of the Foreign Affairs article, told the EDF gathering:  “The odds of deploying a bad geoengineering system are greater today than the odds of responsible nations coming together and deploying something that is well-designed.”

This is why it’s not just the science of geoengineering that demands further study; policy and governance issues are equally important, if not more so. Imagine, for example, a scenario in which injecting aerosols into the atmosphere would cool the earth and slow down a rise in sea levels that threatened one country, while reducing the amount of rainfall in a neighboring country that was struggling to feed its people.

As Alan Robock, an environmental scientist at Rutgers, put it:

What temperature do we want the planet to be? Whose hand is going to be on the thermostat? What if Russia and Canada decide it’s fine to get a little warmer, but India wants it cooler?

Stewart Brand

There’s lots more to say about all this, obviously. I’m going to devote a future blogpost to the ideas of Scott Barrett, an economist who has an interesting analysis of the economic incentives that drive both climate change mitigation and geoengineering. If you want to know why Stewart Brand supports geoengineering research, you can sign up for a free webinar on February 18 at The Energy Collective where I’ll be talking with Stewart. I’m also going to try to organize a conversation about geoengineering at Brainstorm Green, FORTUNE’s conference on business and the environment, that will be held April 12-14 in Laguna Beach, CA.

A final thought on why the chemotherapy analogy is imperfect. With cancer, you can reduce but not eliminate your risk of getting the disease. By contrast, we know what to do to curb global warming.

So the question is, can we summon the collective will to stop burning fossil fuels? If you ask me, the alternatives–including geoengineering–are pretty darn scary.

To see which of the company’s 65 drivers were racking up the most idle time, McKenna ranked them, based on data from onboard computers. “All we did was talk to them about it, and put a list up in the break room,” he told me. “Human nature, no one wants to be at the bottom of the list.” To sweeten the deal, the 10 drivers with the lowest idling time got a gift card for fuel they could use for their own cars.

The results were dramatic. Idle time dropped from 1,400 hours in February 2007 to 1000 hours in February 2008 to just 380 hours in February 2009. Depending on fuel costs, cutting idle time has saved the company thousands of dollars a year—roughly $20,000 during 2008, for example.

There are two lessons here. First, as I wrote recently about OPower, changing behavior is a powerful and low-cost way to curb climate change. Second, small changes can add up to big impacts, as the Environmental Defense Fund makes clear in this cool video from its Innovation Exchange website.

As EDF notes, fleet vehicles are driven hard, averaging nearly double the mileage, fuel consumption and emissions of personal vehicles. Currently, EDF says there are more 3 million corporate fleet vehicles in the United States emitting 45 million metric tons of carbon dioxide per year.

I spoke with Chris McKenna last summer while helping EDF write a series of case studies on greening fleets. (The case studies are available here.) I also spoke with fleet managers at Carrier, the global manufacturing firm that’s part of United Technologies, and at health-care firm Novo Nordisk.

At all three companies, dedicated fleet managers came up with simple, win-win strategies that saved their companies money and reduced GHG emissions. Carrier took unnecessary parts and tools out of its repair vans, reducing weight. At Novo Nordisk, Donna Bibbo, manager of fleet and travel, made small changes to the list of company cars made available to sales people; those who wanted an SUV or minivan could still get one, but they needed approval from a supervisor. “For the whole year, I don’t think I ordered 25 minivans,” Bibbo says. In past years, she would order 300 to 350. Behavioral economists Cass Sunstein and Richard Thaler called this choice architecture.

EDF and Jason Mathers, who oversees its work on fleets, is now spreading the word, and providing other companies with step-by-step plans to reduce costs and green their fleets. This isn’t glamorous work. But it matters.

In the latest sign that China takes the threat of global warming seriously, Chinese business executives with close ties to the government have launched a voluntary market in Beijing to buy and sell carbon credits.

Just don’t call it cap-and-trade, which is the regulatory approach embodied in the climate legislation pending in the U.S. Congress. The “cap” part of cap-and-trade remains anathema in China. As a developing country where billions of people earn less than $3,000 a year, China simply won’t accept mandatory limits on its emissions of greenhouse gases.

David Yarnold, Environmental Defense Fund

But the Chinese have enlisted western partners to build a market that will, as they put it, “limit and incentivize.” The theory is that a voluntary market in carbon credits will limit emissions by providing financial incentives to Chinese companies to develop renewable energy, promote energy efficiency and, above all, find environmentally-friendly ways to burn coal. Some of that money would come from outside China and would would come from within.

This could lay the groundwork for a mandatory market in the not-too-distant future.

That, at least, was my takeaway from a Low Carbon Conference held today in New York that brought together leaders of the world’s big stock exchanges, energy industry executives, environmentalists and experts in carbon finance. [Disclosure: I hosted the event for BlueNext, a French company that recently announced a partnership with the China Beijing Environmental Exchange to develop carbon trading in China.] Not surprisingly, the Chinese are looking for money from the west, specifically from companies and governments looking to offset their emissions. They argue that they can reduce emissions faster and cheaper than the U.S. or the EU. But they also expect to raise money from businesses and individuals in China that care about climate change.

One company represented at the event, the Tianping Insurance Company, has said it will become China’s first carbon neutral business, in part by buying credits. It bought its first credits last month.

David Yarnold, the executive director of the Environmental Defense Fund, which has worked with the Chinese to develop a carbon market, put things in perspective nicely:

This new partnership between Wall Street and the Great Wall flies in the face of conventional wisdom.

Today, you will witness tired conventional wisdom drawing its last breath. You will learn that China is no laggard in the race to develop clean energy and reduce global warming pollution. In fact, it is moving ahead.

Just five years ago, who would have thought that the New York Stock Exchange would be hosting a meeting on carbon trading? Who would have thought that China would have an environmental exchange?

Of course, it’s no surprise that Yarnold and business-friendly EDF, which pioneered emissions trading in the U.S. during the first Bush administration, would endorse a market-based solution to climate change. As he put it:

Many believe markets are the source of environmental problems.  They think that the relentless search for profit that leads to the sacrifice of the environment and that money is the root of all environmental evil.  In contrast, here we are, convening to assess how markets can be put to the service of environmental protection, how markets can be the engine of innovation that will support the growth of the new low carbon economy.

What was striking was to hear Chinese executives like Xiong Yan, chairman of the China Beijing Environmental Exchange, who has impeccable Communist Party credentials, wholeheartedly agree that banks like Merrill Lynch and Citi and utilities like Duke Energy need to help solve the climate crisis. Merrill, Citi and Duke were all invited to speak by the Chinese, who shaped the agenda for the event.

While there was lots of talk about wind, solar and efficiency, the conversation – like so many conversations about climate – inevitably kept coming back to the question of coal. China gets about 80% of its electricity from coal. The U.S. gets about 50%.

Jim Rogers, Duke Energy

“Coal binds the U.S. and China together,” said Jim Rogers, CEO of Duke Energy, a major coal-burning utility as well as a supporter of a mandatory U.S. carbon cap. “Our challenge is to find a way to use coal in a low carbon world.”

Duke is betting on the technology of carbon capture and sequestration. By contrast, a Chinese coal executive touted the virtues of using algae to absorb CO2 emissions. Whatever technology proves to be most effective–assuming clean coal is more than a distant chimera–ought to be shared quickly and widely, U.S. and Chinese execs said.

For more on China’s role this week in New York, where President Hu Jintao addressed the United Nations, see Is China Turning Into the Climate Good Guy? by Time’s Bryan Walsh and Are Chinese Emissions Pledges a Game Changer for Senate Action? at Joe Romm’s Climate Progress.

That’s because, as anyone who has driven a Toyota Prius knows, the stopping and starting, braking and accelerating required in traffic is ideal for hybrid-electric engines, which capture energy from brakes and turn it into electric power.

President Obama checks out a hybrid truck

So Eaton, which has been developing electrical and hybrid power systems for trucks and buses for more than 20 years, is now building a nice business around selling hybrid power systems for commercial vehicles. On a California trip last spring, President Obama got a sneak peak at a plug-in hybrid electric utility truck with a power system developed by  Eaton.

According to Alexander M. “Sandy” Cutler, Eaton’s chairman and CEO, the hybrid truck industry—while much smaller, and not nearly as visible as the hybrid car business—is finally taking off.

“It’s ramping quickly, and that’s encouraging,” Cutler told me in a recent telephone interview, largely because the technology, economics and policy are coming together. Delivery trucks are the early adopters, but others will follow, he says: “If you think about a truck that’s going make to hundreds of stops a day, they’re going through the acceleration and deceleration process. That’s right when hybrids hit their sweet spots.”

Customers include FedEx, UPS, Coca-Cola Enterprises, PepsiCo and Wal-Mart, all of whom own and manage big truck fleets.

What’s interesting about this story is that its impact goes well beyond a single company going “green.” If hybrid-electric power systems for trucks and buses achieve economies of scale, they could transform an industry—replacing thousands of diesel-powered vehicles, dramatically reducing fuel consumption and curbing greenhouse gas emissions and other pollutants. It’s this kind of industry transformation that’s needed to address the dangers of global warming.

By itself, Eaton can’t change the industry, of course. But the company has had help selling its hybrids from a key customer, FedEx, and from the nonprofit, business-friendly Environmental Defense Fund.

Back in 2000, EDF and FedEx formed a partnership to promote hybrid-electric trucks. The idea was to use FedEx’s purchasing power to encourage truck manufacturers to produce the vehicles. Eaton was selected as the first supplier of the power trains, and a couple of prototype trucks were put into service in 2004 in Sacramento, with kudos from California Gov. Arnold Schwarzenegger. After FedEx took the lead, UPS, which has made its own substantial investments in alternative fuel vehicles, got into the game in a hurry.

Today, Eaton makes three distinct hybrid platforms, each of which delivers fuel efficiency and environmental benefits. They are:

Hybrid electric. These are the systems used by FedEx and UPS, and they are now available as a factory-built option at four major U.S. truck makers. Truck and bus manufacturers in Europe and Asia are selling them as well.

Hydraulic Launch Assist systems. The HLA system is designed for heavy vehicles, like garbage trucks, which make lots of stops and starts. Waste Management is an early customer. These engines are quieter as well as cleaner—a welcome development for anyone who’s heard a garbage truck screeching on the street.

Series hydraulic hybrid systems. Eaton’s getting subsidies from U.S. EPA and the U.S. Army to develop an “infinitely variable hydraulic drivetrain” which will improve fuel economy by 50 to 70%.

I don’t claim to understand these technologies—if you want to know more, here’s an explanation from Eaton’s website—but the particulars are less interesting than the idea that sustainability, broadly defined, can be an engine of innovation.

To be sure, Eaton was driven by economics, above all. “We started with the base conviction that we live in a world where fuel economy is increasingly important, and where carbon footprint is increasingly important,” Cutler says. So were customers like FedEx and UPS. But the Environmental Defense Fund and Schwarzenegger got involved because the hybrid trucks deliver substantial environmental benefits, too.

“As fuel prices continue to rise, fuel-efficient trucks are an investment every company should be making,” EDF’s Gwen Ruta says. “And since hybrids also reduce air pollution, oil dependency and climate change, they’re not only good for business but good for America.” (EDF tells the story here. Disclosure: I’ve done research and writing for EDF.)

As with hybrid cars, hybrid trucks cost more up front than conventional diesel-powered trucks. “Probably the payback is two to two and half, maybe three years longer than it would be on a traditional truck,” Cutler says. That depends on the cost of diesel fuel, of course.

Eaton makes the hybrid power trains at factories in Michigan and North Carolina, but Cutler says “a lot of competitors are developing around the world.” He says U.S. industry’s annual production of hybrid platforms is still below 2,000; it probably needs to get to 10,000 to achieve economies of scale. “The U.S. currently has the lead in commercial vehicle power trains,” Cutler says, in contrast to cars, where Japanese automakers are setting the pace. His hope, of course, is that American companies and particularly Eaton will stay out in front.

To listen to a podcast or read a transcript of my interview with Sandy Cutler, visit Greenbiz.com.

In Washington, it’s a popular climate conundrum everyone talks about: Even if the U.S. lowers its greenhouse gas emissions, China and India are on track to dwarf the entire Western World’s as they build enormous coal-fired power plants. Politicians regularly say we must get China and India to use less coal, the dirtiest of fossil fuels, to power their emerging economies.

But who do you think is financing all these new coal plants in the developing world?

Try the World Bank, the Asian Development Bank and other international public financial institutions supported by the world’s wealthiest nations.

That’s right. While the industrialized world is struggling to cut emissions, and gearing up to negotiate an international climate treaty in Copenhagen, it is bankrolling the construction of thousands upon thousands of megawatts of new coal-fired power in developing countries.

A new study by Bruce Rich, formerly of Environmental Defense Fund (EDF), shows that international public financial institutions have provided $37 billion to finance the construction of at least 88 new coal plants in the developing world since 1994. What’s more, that $37 billion in direct financing secured another $60 billion or so from private and local sources, bringing total investment in new coal plants in developing nations to over $100 billion.

Even worse, the World Bank classifies these coal plants as “low carbon” financing projects if they are the so-called supercritical type with marginally better CO2 emissions rates.

Collectively those 88 coal plants will pump out 792 million tons of CO2 a year — essentially negating pollution reductions the Waxman-Markey climate bill hopes to achieve over the next decade.

Bear in mind that 88 is a minimum number because most export credit agencies do not release detailed information on transactions and only plants for which the financing could be verified were included in EDF’s study.

If you’re wondering why 1994 is the baseline, it’s the year the United Nations Convention on Climate Change took effect, committing industrialized nations to provide funds and technology to mitigate climate change in poorer nations. Instead, the wealthier nations have been locking into place a carbon-intensive energy infrastructure, one that will endure for decades since coal plants typically operate for 40 to 50 years.

Sure, these public international lenders have committed $6 billion over the past 15 years to help the world’s most vulnerable citizens adapt to a warming planet — but it’s a fraction of the $100 billion spent on new coal plants.

Some would call that shooting yourself in the foot.

And it’s not as though the World Bank is unaware of the dangers of continued reliance on coal. It commissioned a three-year independent study on the future role of the World Bank Group in supporting coal, oil and gas. But when that study recommended decisive action away from fossil fuel lending, the World Bank refused to endorse its findings — even at the urging of six Nobel Peace Laureates and the European Parliament.

The World Bank also knows that the poorest countries will suffer the worst effects of global warming. In 2003 it published Poverty and Climate Change: Reducing the Vulnerability of the Poor through Adaptation, which stated “climate change is a serious risk to poverty reduction and threatens to undo decades of development efforts.”

Why then does it finance coal? Here’s what the World Bank’s Chief Economist has to say: “Because coal is often cheap and abundant, and the need for electricity is so great, coal plants are going to be built with or without our support. Without our support, it is the cheaper, dirtier type of coal plants that will proliferate.”

Not true, says the Center for Global Development. It says most new coal plants that are built without World Bank funds, at least in India, ARE the cleaner, so-called “supercritical” type because the operating and fuel costs of the supercritical coal plants are cheaper.

More to the point, supercritical coal plants are only slightly cleaner, producing about 15 percent less C02 than traditional coal plants, according to EDF. They are still not as clean as even a natural gas-fired plant.

Which leads me to alternatives. Clearly, bringing electricity to the world’s poor is a worthy goal, but there’s a better way to achieve it: Renewables, energy efficiency and grid modernization. International financial institutions should be scaling up their support for these rather than financing coal.

Today the Bank spends twice as much on fossil fuel projects as new renewable energy and energy efficiency projects combined and five times as much as new renewables alone.

That’s a missed opportunity when large-scale renewables are so feasible in the developing world. Take Gujarat State in India, where a monstrous 4,000-megawatt coal-fired plant, the Tata Mundra, is being built with World Bank support. More than 7,000 megawatts of renewable energy are also in the works there — with no help from international development banks. AES, a US based energy company, is constructing a $1.2 billion 1,000 megawatt solar thermal array as part of that plan.

Think how many more renewable energy projects could be built if public international financial institutions changed their lending priorities.

Equally important, international financial institutions must also tighten the definition of “low carbon.” Supercritical coal plants now meet that feeble standard, which gives the World Bank’s claim that 40 percent of its energy lending is “low carbon” a hollow ring.

These reforms are imperative, for if we do not slow the rise of CO2 emissions from coal in the developing world, no amount of emissions cuts in industrialized nations will make a difference.

When it comes to climate change–the defining environmental issue of of our era—Wal-Mart is moving in the wrong direction.

As Gwen Ruta of the Environmental Defense Fund, a Wal-Mart partner, writes in her frank assessment of the company’s 2009 sustainability report, the problem is that all the good things that Wal-Mart is doing–increasing its use of renewable energy, driving efficiency in individual stores, improving its fleet operations and pushing up its recycling rate–are offset by the fact that the company is adding more stores and selling more stuff.

So although WMT’s greenhouse gas emissions per unit of sales is decreasing (the bars on the right), its overall carbon footprint is growing (the bars in the middle).


Wal-Mart executives have a sophisticated response to this; they’ve told me that if the company takes market share away from other, less efficient retailers, it could actually be increasing its own emissions while reducing emissions in the aggregate because people are buying less stuff from its competitors. Certainly that’s possible.

If the earth’s atmosphere could speak, it would tell us that it doesn’t care about efficiency or renewables or recyling–or market share. It cares about absolute emissions of the greenhouse gases that cause global warming.

The trouble is, Wal-Mart hasn’t figured out how to get bigger and smaller at the same time. Bigger: more revenues and profits. Smaller: a reduced environmental footprint.

This a fundamental problem facing not just Wal-Mart, but all of corporate America. Until we solve it, we’re in trouble.