Entergy and the Environment

Climate Change: The Defining Issue of Our Time

The Science

We have long believed the scientific evidence on global climate change was more than sufficient to act to curb greenhouse gases. In fact, we voluntarily committed to cap our own emissions at the level in 2000 and have exceeded our goal since then. We respect the fact that scientists tend to be skeptics and conservative in their assessments. Truth as defined by the scientific community is a concept none of us in the business community ever has the luxury of experiencing before we are forced to take action. There is always the risk of being wrong, but the risk or lost opportunity that comes from doing nothing is almost never acceptable.

We believe the evolving direction of the scientific assessments on climate change is correct. But achieving “truth” as defined by science will always lag the necessary actions to stay ahead of global climate change. Greenhouse gases stay in the atmosphere for decades to centuries and the climate is widely known to act more like a switch than a dial.

In particular, we believe current estimates of sea-level rise could ultimately prove to be very conservative, potentially by many multiples. Because of amplifying processes inherent to the climate system, we believe continued global warming will cause ice flow from Greenland and the West Antarctica Ice Sheet to accelerate. This process is already happening, but since scientists cannot agree on how to model it, they have not accounted for it in the sea-level rise projections. As a result, we believe the current forecasts will prove to be substantially low.

The Risk

Regardless of whether the forecasts for temperature or sea-level rise or climate change are conservative, no business schooled in risk management would ever consciously accept a proposition with a distribution curve of potential outcomes as risky and one-sided as even the current models of global climate change would suggest. The potential outcomes are decidedly asymmetric to the negative (any potential positives are reserved for high latitude regions and are temporary at best) and display what every company would see as a “deal killer,” a fat tail (large probability of a catastrophic outcome) that it is impossible to hedge against.

We don’t have an easy exit strategy (like another planet we can escape to) nor do we have an offsetting “hedge” we could execute like emitting huge quantities of particulate aerosols into the atmosphere to block some solar energy (which carries its own set of evils). In short, it is and always will be, our lack of the ultimate truth that is the most compelling reason to act sooner and more aggressively than science might tell us. The downside of doing nothing or delay and being “wrong” is a “bet the planet” strategy.

No rational person takes that bet.

The Business Case

Our service territory, which already loses one acre every 34 minutes due to coastal erosion, was devastated with 120,000 square miles of damage from hurricanes Katrina and Rita. As a responsible society that watched in horror at the devastation of Hurricane Katrina, can we knowingly accept the risk that larger, more intense hurricanes, fueled by a warmer world will not only make their way deep into the mid-south by traveling up the Mississippi River, but also ultimately subject entire coastal populations to the same kind of risk? As sea levels rise, coastal regions will be subject to the major threat of a giant storm surge. The destruction in our area of the nation alone, will be unprecedented on American soil. The Business Case is simple. As a company serving the Gulf Coast, billions of dollars of investment, our customer base, the welfare of our employees, their families and our communities are all in peril.

Our Point of View / What to Do

We believe that a healthy, protected environment is not free but rather requires positive action by individuals, industry and government. It is the classic tragedy of the commons. When actions are taken like installing pollution-control equipment, the costs are apparent.

However, when there are no limits placed on the amount of greenhouse gases pumped into the atmosphere, costs accrue to the most innocent, including future generations. Many of those costs are borne disproportionately by less affluent populations living near coastal regions – the very communities in which our utility and nuclear businesses operate.

Given our strong point of view on the environment, there are two broad strategies we are pursuing at Entergy. First, we are taking action to reduce our impact on global climate change.

We already have one of the lowest CO2 emission rates among our peers. As of 2005, we were the fifth lowest among the largest 100 power generators in the United States. In 2006, we made our second five-year commitment to voluntarily stabilize our CO2 emissions at 20 percent below 2000 levels from 2006 to 2010 after successfully completing our first commitment with emission levels that were 23 percent lower than our target. These results were achieved at a time when business as usual would have meant a steady four percent per year increase in absolute emissions as we grew our business.

We are also exploring a number of other actions to combat global climate change including:

• Expanding our use of safe, nuclear generation through high capacity factors, uprates and the construction of new nuclear facilities
• Using newer, more efficient generation technologies such as combined-cycle gas turbine plants
• Investing in equipment upgrades, carbon sequestration projects and carbon credits to lower CO2 emissions
• Considering the future cost of carbon when making investment decisions
• Encouraging energy efficiency
• Seeking opportunities to expand utilization of renewable resources

Second, we are aggressively advocating positive actions on global climate changes at all levels of government and within our communities. We participate in 10 organizations advocating equitable regulation of greenhouse gases in all industries. Other examples include:

• Supporting and encouraging energy conservation by our customers through online tools, weatherization and other energy efficiency programs
• Committing resources for environmental stewardship grants to 30 organizations within our utility region
• Launching a solar schools program in New Orleans in partnership with Nike, Shell, Environmental Resources Trust and Global Green
• Using the Environmental Initiatives fund to help create new and innovative greenhouse gas offset market mechanisms that cost effectively achieve climate benefits while also leveraging benefits for the communities we serve

If you decide that it is too early to address climate change or simply that any cost to the economy is too large to accept at this point in time, that is your right. If you believe, as we do, that taking no action is a decision that our own lives are more important than our children or grandchildren, and if you refuse to be part of that or remembered for that, then send that message to our elected officials. It is your choice, your vote. And both will matter.