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U.S. consumers, companies feeling green

It took a war, a deadly hurricane season and an unusually mild winter, but U.S. consumers seem ready to cut back on energy usage for good.
/ Source: Reuters

It took a war, a deadly hurricane season and an unusually mild winter, but U.S. consumers seem ready to cut back on energy usage for good.

While it’s hard to shake a reputation as obese Americans tooling down the freeway in gas-guzzling SUVs, economists and business leaders say consumers are increasingly aware of oil-related environmental damage and national security risks, and they are prepared to do something about it.

Sales of Hummers -- those over-sized SUVs that became the poster child for poor gas mileage -- were down 10.9 percent in December, according to auto maker General Motors Corp..

Honda Motor Co. Ltd plans to run a Super Bowl advertisement touting fuel economy -- a major shift from a year earlier when it promoted hefty Ridgeline trucks.

Ken Goldstein, an economist with The Conference Board in New York, said consumers faced a shock after Hurricanes Katrina and Rita drove gasoline prices above $3 per gallon in 2005, double what people had been used to paying since 1990.

Prices spiked again last summer but quickly retreated, so with gasoline now closer to $2 per gallon, will consumers go back to their full-sized trucks and SUVs?

“Hell no,” Goldstein said. “Those days (of cheap gasoline) are gone and they’re never coming back.”

Rob Tregenza, who specializes in transportation at Minneapolis-based consumer trend research company Iconoculture, said consumer driving behavior shifted dramatically post-Katrina and the changes appear permanent, affecting both the kinds of cars people buy, and how they use them.

“Consumers are actually modifying how they get from Point A to Point B,” he said, pointing to rising demand for alternatives such as car-sharing service Zipcar, which allows members to reserve a car when needed.

Big business
Corporate America, which takes much of the blame for the United States’ poor record on greenhouse gas emissions, has started to take the lead on green issues, recognizing that energy efficiency can cut costs and earn big PR points.

Ten major U.S. corporations, including manufacturing giants General Electric Co. and Caterpillar Inc., joined environmental groups earlier this month to press for a nationwide limit on carbon dioxide emissions.

Wal-Mart Stores Inc. -- a popular target for environmentalists who accuse the retailer of gobbling up green space with its massive stores -- has been pushing energy efficient light bulbs. Its chief executive has vowed to use only renewable energy and create zero waste.

Wall Street has long tracked a strong correlation between rising gasoline prices and falling sales at Wal-Mart, which caters to lower-income consumers who are most sensitive to energy costs. But the trend broke last fall when sales failed to rebound even as gas prices retreated, and Wal-Mart itself acknowledged that consumer habits had changed.

Customers who cut back on shopping trips when oil prices spiked apparently found that they could do without twice-weekly treks to the suburban superstore.

For Adam Parker, president of Conservation Services Group in Westborough, Massachusetts, the sign of the changing times is in his company’s 20 percent annual sales growth -- driven primarily by demand for energy-efficient homes.

Temperatures that reached 73 degrees Fahrenheit this month where Parker lives near Boston got people talking about global warming. Former Vice President Al Gore’s Oscar-nominated documentary film “An Inconvenient Truth” also helped make the issue a hot topic.

“Maybe that’s part of a normal temperature fluctuation, but between Katrina, the weird temperatures we’ve been having, Gore’s movie, and 10 major CEOs all calling for federal carbon caps, this is different,” Parker said.

“We’ll look back and see 2006 as the tipping point.”

Stars aligned
With consumer awareness high and corporations calling for change, conditions appear to be ripe for policy change.

Edward Snyder, dean of the University of Chicago’s Graduate School of Business, said the window of opportunity for government to act may close in just 10 months as the 2008 presidential election cycle ramps up.

“There may be some common ground between the Republican White House and the Democratically controlled Congress, and energy policy is an area where they seem to have some runway,” Snyder said.

While President Bush devoted a large portion of his State of the Union address to energy, he did not utter the two magic words that Snyder wanted to hear -- carbon tax.

“The political consensus is coming together but we’re still a ways away from good policy,”  he said. “We need to recognize that carbon is a ’bad,’ tax it, and let the market work.”  REUTERS