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The Devil’s Advocate

Is Fred Krupp an environmental savior or a corporate stooge?

On a hot spring evening in early May--the kind that elicits nervous global-warming jokes--a crowd of powerful and wealthy people are gathered at a cocktail party in the banquet hall in the Hart Senate Office building on Capitol Hill, sipping wine and talking carbon. The advocacy group Environmental Defense is throwing the party, but mixed among its staff and the requisite Democratic lawmakers are attendees who normally wouldn’t be caught dead in the company of career tree-huggers: bankers, energy company executives, suits from General Motors, Chevron, nascar--yes, nascar--and a bunch of right-leaning multimillionaires. Virginia Senator John Warner is here, with his lupine frown. Warner, of course, is a Republican, as is Indiana’s Richard Lugar, who spoke earlier in the day at E.D.’s board meeting. Both men rated a whopping 20 percent from the League of Conservation Voters last year.

Colorado Senator Ken Salazar, the official host of the party (and a rancher from a mining state, no less) gets up before the crowd.

“We have one person to thank fo--” Salazar begins, then stops. Everybody looks around. “Where’s Fred?”

At last, Fred Krupp peeks his still-boyish 53-year-old face out from behind a group that didn’t notice him standing next to them and flashes a sheepish grin.

“Theeere’s Fred,” Salazar says, before turning back to the crowd to attest to his concern for the fate of the earth.

Discrete by nature, Krupp can afford to be, especially so lately. Such is the clout he’s accumulated in Washington and on Wall Street. Krupp, of all environmentalists, has been the most successful in persuading the corporate world--and those who support its interests--to embrace the green cause. Among his accomplishments, Krupp has helped convince McDonald’s to abandon Styrofoam for paper, Wal-Mart to stock energyefficient light bulbs, Duke Energy to invest in wind power, and Federal Express to use hybrid trucks. He was one of the main architects of the Kyoto Protocol and is a linchpin in Mayor Mike Bloomberg’s GreeNYC plan. In January, he assembled the United States Climate Action Partnership, a watershed consortium of Fortune 500 companies pledged to cut global warming. And, in February, he convinced billionaire Henry Kravis and his partners to amend the biggest private equity buyout in history, the $45 billion TXU Energy deal, by scrapping plans for a raft of new dirty coal- burning electricity plants.

Krupp has been able to accomplish these feats because people who don’t like environmentalists like him. He was reportedly once called “my kind of environmentalist” by George H.W. Bush. After the TXU deal, The Wall Street Journal published a fawning article titled how fred krupp’s singular style serves business, environment well.

Krupp inspires such trust because he has imported the culture of the deal to the green movement. He’ll work with the GOP, oil men, obdurate polluters, and any other stock environmental bete noir open to sitting down and negotiating. And, unlike most environmentalists, he shares their reverence for the marketplace. “What Environmental Defense is trying to do is create markets that give companies the incentive to do the right thing--to harness greed, harness innovation,” he recently explained to me. “Capitalism is a powerful thing.” This philosophy has enabled him to transform E.D. from a small, litigious 1960s gadfly into arguably the most influential environmental group around, a

$70 million-per-year outfit with corps of scientists and lawyers, a board that includes machers ranging from Teresa Heinz Kerry to a scion of Wal-Mart’s conservative Walton family, and offices from New York to Sacramento to Beijing. Krupp’s supporters say he represents the future of American environmentalism.

But Krupp’s critics, who include more traditional and radical environmental activists, think differently. “[E.D.’s] major activity is really serving as lobbyists for commercial corporations in their dealings with environmental issues,” says Barry Commoner, a biologist and seminal movement figure. Others paint him as an opportunist. Robert Brulle, a Drexel University sociologist who studies the environmental movement, says, “Krupp looked around the room of environmentalists in the 1980s. He saw that the left side of the room was full. But the right side of the room was pretty open. So he went right.” Krupp’s nickname among certain movement radicals is Fred Corrupt. Whether supporter or critic, no one denies that, in his 23 years at E.D.’s helm, Krupp has changed American environmentalism enormously. The question is whether his pragmatic, market-friendly approach will help save the planet--or just help companies save their skins.

No deal better embodies Krupp’s beautifully choreographed platinum activism than TXU. In April 2006, the Texas-based electric company announced plans to invest

$11 billion building eleven new coal-fired plants. Public anxiety about fossil fuels and their role in global warming tends to focus on oil, but coal-- especially in states like Texas with lax regulations--can put a lot more pollutants into the air. The utility had already inflamed environmental groups because it had some of the dirtiest plants in the country, and, in response to this latest outrage, local groups had launched protests. A coalition of Texas mayors formed to combat the new plants.

Krupp took a different approach--at first, in typically polite Krupp style, he contacted TXU chairman John Wilder and requested a meeting. When Wilder refused, however, Krupp launched a “Stop TXU” campaign that involved a federal lawsuit and TV ads. But his most effective maneuver was going to Wall Street to explain to banks and investors why they shouldn’t finance TXU’s expansion. The company’s stock began to sink. Wilder started to panic. He knew that Krupp could make a stink not only on Wall Street but in Washington, threatening TXU’s ability to get operating licenses.

However, a c-span-style fight over licenses was not what Krupp wanted either. He wanted TXU to atone and preach the environmental gospel. Most of all, he wanted a deal. Several months later, in February 2007, he got his chance. Henry Kravis’s Kohlberg Kravis Roberts (KKR) and its partners, private equity firm Texas Pacific Group and investment bank Goldman Sachs, announced plans to buy the Texas utility. William Reilly, EPA chief in the first Bush administration and a long-time friend of Krupp’s, was leading negotiations for Texas Pacific. He called Krupp and another environmental nonprofit, the Natural Resources Defense Council (nrdc), and asked them to sit down with the buyers. Reilly then convinced them that Krupp could be trusted. “I said, look, this is a guy who can keep secrets,” Reilly says, “and he’ll do deals.”

During a 17-hour negotiation in a San Francisco hotel room in late February, KKR and Texas Pacific agreed to scrap eight of the eleven new plants. Krupp’s lieutenant in the negotiations, Jim Marston, whom Krupp advised by phone, also got the buyers to sign on to Krupp’s Climate Action Partnership and to make future executive pay at TXU contingent on cleaning up. Finally, Krupp gave the deal his blessing, and the buyers, for their part, got to flaunt it. “Goldman Sachs decided they didn’t want to get in this war, they didn’t want people picketing them,” Marston says. “They wanted to use us, so our job was to figure out how to use them.”

The TXU deal was generally touted as a triumph for the environment as well as evidence of the green movement’s newfound sway in the boardroom. It was also a highly public victory for Krupp and his style of negotiation. Most executives and politicians I spoke to cited his patience and discretion, making it clear that other environmentalists they have encountered don’t share these traits. “He’s thoughtful and careful, and he’s nuanced,” Duke Energy CEO Jim Rogers says. “That gives him the credibility to be effective.”

But not everyone was pleased with the deal, including a number of environmentalists and their allies, who felt it didn’t go far enough, as well as smaller advocacy organizations, who felt big-footed by Krupp. “We couldn’t have stood up and said that building three coal-fired plants is the way to move forward on global warming,” Chris Williams, director of Greenpeace’s global- warming operations in the United States, says. Tim Hermach, Executive Director of the Native Forest Council, is blunter. E.D. and nrdc “should be hung for what they’ve done,” he told The Wall Street Journal.

Then-Dallas Mayor Laura Miller, who led the coalition of Texas mayors, calls Krupp’s agreement feckless and unenforceable and claims that Krupp allowed the buyers to leave the three worst-polluting plants in place. “The shocking thing to me was this supposedly great deal was not a big deal at all,” Miller says. “KKR and Texas Pacific are not stupid--they’re going to bring the guys in the room most likely to do a deal.”

But, in Krupp’s book, that is precisely the point. Doing a deal is how things get done in business and politics. Kravis and his partners were under no obligation to play ball and, faced with any other environmentalist, probably wouldn’t have. Krupp convinced them to. “We’re all about winning,” he says. “If we can’t win everything, we work to win as much as we can.”

E.D.’s main offices, on the upper floors of an office building on Park Avenue South in Manhattan, are not very nonprofit in feel. They’re spacious and airy, with large, glossy photographs of wildlife framed on pristine white walls. Nor does Krupp much look the part of a vocational bleeding heart. From certain angles, he strikingly resembles Richard Gere. More gentleman than officer, Krupp favors under-pressed gray and blue suits, subdued ties, and black wingtips in need of resoling. Not inappropriately, the overall effect is of an unbothered wasp banker, not the Jewish lawyer Krupp in fact is.

In Krupp’s corner office are photos of him with assorted big wigs, including George W. Bush.

“Surprised to see that one?” Krupp asks. “I was kind of surprised to be there.” With Bush, perhaps, but not in the White House: The neighboring shots show Krupp with George H.W. Bush, Bill Clinton, and Al Gore.

Krupp is an operator, and, like all operators, he has no shortage of ego, albeit ego of the self-effacing, even bashful, kind. First clauses like the following are common when he talks: “So I was visiting with [former AIG chairman] Hank Greenberg, and he said ...” “Then I had lunch with [Dupont CEO] Chad Holliday, who ...” “I called [General Electric CEO] Jeff Immelt to say ...”

“Sometimes they joke that I know more of them than they do of each other,” Krupp says of the CEOs. But he bristles when I ask if he’s particularly close with any of them. “There’s no one I vacation with.” Still, Krupp’s life more closely resembles that of a successful New York businessman than an environmental advocate. This year, he will make about

$415,000 in salary and benefits. His shoulders are slightly slouched from rowing; he competes in races on the weekend, near his colonial-revival home in New Canaan, Connecticut. There are no solar panels on the roof, no wind-farm in the yard. But he rarely uses air conditioning and drives a Prius, as does his wife, Laurie Devitt, a nutritionist he met in New Haven where he spent his undergraduate years at Yale.

Krupp’s ambition to save the earth began in childhood. One set of windows in his office looks to the west, towards New Jersey, where Krupp grew up in the town of Verona, where his father was a small-time businessman and his mother a teacher. The local lake was contaminated by chemical run-off. A field where Krupp played as a boy was overrun by suburban sprawl. “I can literally remember seeing wildlife scurrying away from the bulldozers,” he says.

Krupp recalls the engineering professor at Yale who convinced him that he was meant to be an environmentalist. The professor did not share the disdain for industry that Krupp found in the campus radicals. “He talked about people lowering their voices and understanding each others’ goals,” Krupp says. “I just found his philosophy so positive and optimistic. That you could solve problems if people could really talk to each other.”

After law school at the University of Michigan, he returned to New Haven to start his own law firm and help found a nonprofit, the Connecticut Fund for the Environment, which is still there. Five years later, at the age of 30, he took over E.D. It was the mid-’80s, and American environmentalism was foundering. After two decades of growth triggered by Rachel Carson’s 1962 book, Silent Spring, the movement faced a ferociously hostile White House. Love Canal, Three Mile Island, and the opec crisis were still fresh in the collective memory, and yet the Reagan administration was busy gutting the EPA. The public was worn out, and Wall Street, in the midst of a bull market, could not be bothered.

E.D., too, was rudderless. Founded in 1967 around a kitchen table by a cadre of Long Island lawyers, its mandate was plain: litigate. The group scored a victory in the ‘70s when it helped ban the pesticide DDT. “Sue the bastards” was its informal motto. But, by the mid-’80’s, conservative judges less inclined to rule in its favor were in the ascendancy, and brash, publicity- savvy organizations like Greenpeace were absorbing more and more donor dollars.

Krupp set out to turn E.D. around as Henry Kravis might an ailing company. He stepped up membership and marketing, implemented performance reviews, cultivated the press, and encouraged staff scientists to research big issues, such as a then-little-understood phenomenon--global warming. He recruited wealthy, dialed-in board members such as Wren Wirth, wife of former Colorado Senator Tim Wirth, and Heinz Kerry (she’s still involved). Sensing which way the wind was blowing, Krupp downplayed litigation in favor of promoting market incentives. Instead of taking companies to court, he urged, why not minister to them--offer them expertise, show them how to profit from recycling and conservation, introduce them to legislators.

Krupp trumpeted his vision in a 1986 op-ed column that he published, tellingly, not in The New York Times or The Washington Post, but in The Wall Street Journal. It heralded a “third stage” of environmentalism. “The American public does not want conflict between improving our economic well-being and preserving our health and natural resources,” he wrote. “The early experience suggests it can have both.”

The column did not win Krupp a lot of friends among the Greenpeace crowd, but it had an immediate impact in Washington. C. Boyden Gray, George H.W. Bush’s personal attorney, read it, and, when Bush took office, he called Krupp in. Most environmentalists reviled Bush (and still do) for his role in the rampant deregulation of the Reagan years. Not Krupp. He knew Bush was a patrician at heart, far more environmentally sympathetic than he let on to his conservative base. After all, Bush was proposing the first amendments to the Clean Air Act since 1977, and he had poached Krupp’s old friend William Reilly from the World Wildlife Fund to head the EPA. In fact, Bush even proposed elevating that post to the cabinet.

Krupp was ready for his debut. He was ready to make deals. And, if his pulley into Washington’s power circles happened to be hooked to a Republican president, so be it.

Gray, who has gone on to become a stalwart of the right, brought Krupp in for a reason: Bush needed a fresh green face to get behind his revamped Clean Air Act. Back in 1988, Bush had narrowly beat out Bob Dole and Pat Robertson in the New Hampshire primary, in part by promising to reduce acid rain. Since then, Bush’s ratings had been slipping. If he delivered on the acid-rain pledge, Bush hoped, he could gain some badly needed traction with a recession-weary public.

Krupp agreed to back the amendments. But, in return, he wanted from Bush a number of concessions, among them a controversial new idea--a cap-and-trade program for sulfur emissions from power plants, the cause of acid rain. Krupp’s plan was this: The government would put a mandatory ceiling on sulfur, and companies would then buy or sell pollution credits on a trading market. Lower polluters would save money, while big polluters would have to shell out. It was the ultimate market incentive. Krupp didn’t invent the idea--emissions trading had been discussed for years but never implemented on this scale. Other environmentalists were skeptical, as was Reilly, but Krupp was adamant about the idea.

And, in the fall of 1990, Krupp, all of 36, stood behind Bush in the East Room as the president signed his plan into law. Bush thanked Krupp for “bringing creativity to the table to end what could have been a hopeless stalemate,” a line that caused liberal environmentalists to cringe. Not Krupp. “It was kind of neat when he said that,” he tells me.

Bush lost the next election, but the trading program eventually worked, winning praise on both sides of the aisle. “His program was one that many of us were skeptical about,” California Representative Henry Waxman recalls. “But we went ahead and adopted it, and it’s been very, very successful.”

Shortly before Krupp made his name in Washington with the Clean Air Act amendments, he had burst onto the corporate radar when he convinced McDonald’s to stop using Styrofoam. It all began with a polite letter, in which Krupp offered to design a waste program for the fast-food chain--a proposition McDonald’s accepted. Krupp’s deal put an end to years of protests and boycotts against McDonald’s, to the consternation of certain of his compatriots, who had fomented a good deal of public outrage against the company. According to McDonald’s, Krupp’s plan has cut their garbage by hundreds of millions of tons.

More recently, Krupp has taken on a similarly reviled partner in Wal-Mart. Reacting to the public backlash against his company, CEO Lee Scott has undertaken a massive--and, by most accounts, sincere--green campaign. He’s courted Krupp, and vice versa. In April, E.D. opened an office across from Wal- Mart headquarters in Bentonville, Arkansas, and, last year, Krupp took Scott on a global-warming field trip, visiting farms in Kansas and climatologists in New Hampshire.

Krupp’s relationship with Wal-Mart does not stop there. E.D. receives the lion’s share of its funding from foundations and charitable trusts, and Krupp pointed out repeatedly that he is very careful not to take donations from its corporate partners or their foundations. But records show that E.D. does take money, quite a lot of it, from foundations closely affiliated with and deeply invested in those companies. According to its IRS filings, for instance, the Walton Family Foundation, a large holder of Wal-Mart stock (the foundation is known primarily for funding conservative causes), has given E.D. at least

$1.7 million since 2003. “The family’s money and the company’s money is almost indistinguishable,” Nu Wexler, a spokesman for the group Wal-Mart Watch, says. Sam R. Walton, grandson of Wal-Mart founder Sam Walton, is also an E.D. board member.

Unsurprisingly, Krupp doesn’t view this as a conflict of interest. “We see a distinction between taking money from companies and their corporate foundations and from families that are supporting our work,” he says of E.D.’s connection to the Walton family.

But it may be too simple to discredit Krupp on the basis of his organization’s symbiotic relationship with corporations. Despite his reputation for being discrete, Krupp has not shied away from publicly attacking powerful allies when they abandon pro-environmental positions.

Though Duke Energy’s Jim Rogers was eager to extol Krupp, he didn’t mention the fact that E.D. recently sued Duke over its pollution controls--and won. Then there’s George H.W. Bush. In 1992, Krupp was present at another White House ceremony, but, at this one, Bush--in the midst of a flagging reelection campaign--announced a freeze on environmental regulations for economic reasons. Afterward, Krupp let loose to reporters. He called the freeze a “wholesale handout to the American business community.” The next day’s Washington Post reported that Gray and Bush aide Michael Boskin stood by fuming while Krupp unleashed. “Outrageous, outrageous, who let him in?” Boskin sputtered.

Krupp, for his part, defends his relationships with his corporate allies, even those who don’t share his lofty goals. “It’s true a CEO might have a combination of motives, including improving their reputation, including making money, including doing the right thing,” he says. “And it may be that doing the right thing is the least important motivation. We don’t really care about that. What we care about is, are we putting them on track to do big and important things?”

Indeed, those goals may even depend on Krupp keeping the movement’s traditional enemies closer than its friends. Krupp is going to need Walton and every other conservative moneybags in his Rolodex, as well as every politician he’s ever met, to pull off his next big idea: the United States Climate Action Partnership (uscap). Krupp was a bellwether on global warming 20 years ago, and now, with uscap, he means to take the issue head-on, with a national emissions- trading system along the lines of what’s currently being implemented in Europe. Uscap calls for the government to set a cap on greenhouse gas emissions and then to oversee a mammoth market in which companies will buy and sell emission credits. Its dull acronym aside, the plan is actually revolutionary.

With it, Krupp is doing something no other environmentalist would propose, much less attempt to implement: He’s essentially trying to set up his own federal-size shadow regulatory agency. Krupp is convinced, as he was in 1990, that a trading program is the only way to get industry to clean up fast. He hopes uscap will form the basis for an international market, one that will lure China, the sine qua non of any such scheme. E.D. estimates it could exceed

$1 trillion. And, if the Bush administration is too retrograde and Congress too dithering to create such a program, he will do it himself. So far, GM, GE, Dupont, British Petroleum, PepsiCo, TXU and dozens of other behemoths have signed on. No other environmentalist could corral that kind of boardroom power. Krupp is betting that, when he shows up in D.C. with a phalanx of CEOs, the politicians will have to act. “With every additional company that joins uscap, opposition in Congress melts away,” he likes to say.

Describing the plan as ambitious is inadequate. Hubristic is more apt. Some experts and lawmakers also warn that the plan, if implemented, could easily turn into a profit-mongering debacle. They cite Europe’s

$30 billion emissions-trading market, already rife with corruption. Even some of Krupp’s die-hard supporters are skeptical. “My problem is, how in China do you monitor if they’re controlling their emissions?” says Robert Wilson, E.D. ‘s largest individual donor. “There’s so much of the world that is corrupt.”

But the same big-think philosophy that enables Krupp to make deals with corporations and Republicans allows him to hold out hope for China, which, by certain estimates, is on track to surpass the United States as the world’s largest polluter within the year. It may not be an idealist’s vision of environmentalism, but, as Krupp’s track record shows, it can work. And it can change minds. “It’s a tempting idea that there are deeply moral issues on which the world is just black and white,” he tells me. “But the reality is that there are many shades of gray and in order to move people it makes sense to work with them.” Like all of Krupp’s deals, uscap is expertly stage-managed. It is also, for him, a deadly serious affair.

On that unseasonably hot May evening in Washington, as the senators and executives and millionaires file to their tables for dinner in the Hart banquet hall, they find on each place setting a red baseball cap. Just cap it is sewn in large white block letters onto every hat-face.

Krupp finally gets up to speak, that sheepish grin on his face, and, as he does, an E.D. board member leans in and whispers to me. “This organization started around a kitchen table,” he says. “And now look at this--you have senators coming to our house. Because they know that this is where the action is.”

James Verini is a Los Angeles-based writer.