One observation from my recent experience with climate policy in California is that businesses – even energy intensive ones – are uncertain how to engage in the public debate. Climate policy is a messy space with many competing options, and it’s hard to know what to wish for. With that in mind, here’s a quick survey of what various business groups are saying.
Companies must consider how different external GHG policies can affect their business objectives. At the most basic level, this means monitoring and anticipating pending government actions. Beyond that, companies must be aware of the policy options being considered and decide which would most benefit their own business strategy. At the highest level, companies will want to gain (and maintain) a seat at the table when future regulations are designed.
Their survey results indicate that,
- All companies acknowledge the tight link between government policy and business strategy and see a strong need to participate in policy development. …
- Nearly all companies (90 percent) in this report believe that government regulation is imminent, …
- There is broad agreement among companies about several key aspects of prospective policy: market-based trading, sequestration credit, the need for federal regulation to supersede a growing ‘patchwork quilt’ of state regulations, and credit for early action. …
The report notes that government doesn’t have all the answers, and needs business participation to make good regulatory decisions:
While companies consider it a business opportunity to advocate their desired policy, some also believe their participation is necessary for good policy. According to DuPont’s Fisher, ‘It is important for industry to help government find cost-effective solutions to the climate change issue. Government can’t do it alone. They don’t have the capacity to understand all the implications of the different policy options.’ Carolyn Green, Vice President of Health, Environment and Safety at Sunoco, goes further, citing ‘how little environmental regulators and advocates know about the energy intensity of their requirements.’
I’d go much further than that. It’s not just government that can’t understand all the implications of policy options. Everyone is in the dark together to some extent, particularly where novel policies like California’s Low Carbon Fuels Standard are concerned. A colleague quotes Alice in Wonderland on this topic:
- “Would you tell me, please, which way I ought to go from here?”
- “That depends a good deal on where you want to get to,” said the Cat.
- “I don’t much care where ’“” said Alice.
- “Then it doesn’t matter which way you go,” said the Cat.
- “’“ so long as I get somewhere,” Alice added as an explanation.
- “Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
Participation in the policy process is not just a matter of businesses helping government to see what’s possible. It’s about jointly discovering and resolving the unintended consequences of policies before they occur – a task for which models are well suited. It’s vastly cheaper to experiment in a simulated world prior to launching policies in the real world. For that to work, decision makers need a broad understanding of the system within which they operate, which in turn requires broad participation, not just involvement of a few stovepipes proximate to the problem. There is a big win-win opportunity here for the public (which gets policies that work) and businesses (which avoid policy debacles that are potentially much more costly than reasonable emissions controls).
The US Climate Action Partnership outlines principles on its front page:
Our Six Principles
- Account for the global dimensions of climate change;
- Create incentives for technology innovation;
- Be environmentally effective;
- Create economic opportunity and advantage;
- Be fair to sectors disproportionately impacted; and
- Reward early action.
USCAP’s Call to Action report favors mandatory, economy-wide emissions policy, which they basically translate to upstream cap & trade, with complementary policies like R&D. They wisely recognize some of the pitfalls of trading, and identify some cost containment principles:
The USCAP’s Call for Action recognizes that a robust, market-based cap-and-trade approach is the best way to contain the cost of reducing GHG emissions over the long term. At the same time, it recognizes additional cost containment measures may be needed to guard against excessively high and volatile allowance prices. The need for explicit cost containment measures will be especially important during the initial years of a cap-and-trade program as low-carbon technologies are developed, become commercially available and deployed; and, as financial tools and strategies for managing volatility and risk are fully developed.
In addressing this need, USCAP believes that explicit cost containment measures should be based on the following principles:
- Measures should be predictable, effective and easy to administer;
- They should achieve the legislation’s overall GHG emission budget and should ensure that needed reductions are achieved in a timely manner;
- They should, to the maximum extent possible, provide objective, clear and predictable information about the factors influencing future allowance prices;
- They should not supplant or interfere with the development of commercially available financial tools and strategies for managing volatility and risk;
- They should not create opportunity for manipulation of market prices by market participants;
- The use and impact of several of the measures should be designed to diminish over time, to allow market forces to spur investment in the most cost efficient, long-term solutions for reducing GHG emissions; and
- In the context of the entire program (inclusive of complementary measures), the measures should not encourage near-term investments in significant new high-emitting sources that would “lock in’ high carbon emission streams and make future emission reductions even more difficult to achieve.
Of course, you wouldn’t need all that stuff with a carbon tax.
The Business Council for Sustainable Energy supports the enactment of federal climate change legislation that provides long-term market signals for clean energy deployment and energy efficiency.To be most effective, a federal program should integrate energy and environmental policy. This will maximize energy sector and emission reduction investments. Further, the Council believes that any federal climate change program should place existing clean energy technologies at the center of compliance strategies. This will reduce compliance costs, mitigate fuel price increases and achieve the complementary objective of enhanced energy security. More specifically, the Council supports a federal climate change policy that includes the following elements:
- Is national in scope;
- Promotes a financial value from allocating allowances under a greenhouse gas trading program to clean energy and energy efficiency technologies. This can be achieved through an output-based allowance allocation method, a clean energy set-aside allowance pool or other revenue-generating mechanism;
- Involves a mandatory, economy-wide and market-based approach;
- Expands the development and use of clean energy sources, including wind, solar, hydro, biomass, geothermal, fuel cells, advanced battery systems and natural gas;
- Expands the development and use of energy efficiency and natural gas technologies, including the direct use of natural gas, on-site generation from combined heat and power, and energy efficiency for demand reduction;
- Establishes near-term and long-term targets that are consistent with investment cycles
- Promotes compatibility with voluntary renewable energy, energy efficiency, and greenhouse gas markets so non-capped businesses and households can continue to support markets that result in actions that are above and beyond mandatory obligations; and,
- Establishes linkages with international programs
The National Petroleum Council Hard Truths report, Chapter 5, outlines a pretty green agenda for an association that’s often characterized as representing the evil empire:
Approaches to reducing CO2 emissions could include the following elements:
- Energy efficiency and demand reduction
- Better and more efficient use of energy in all sectors, including transportation, buildings, industrial energy use, and power generation
- Improved efficiency will need to be translated into reduced energy demand rather than solely into increased performance
- Use of lower-carbon fuels
- Shift from coal to natural gas
- Use of non-carbon based power (‘decarbonization’)
- Nuclear power
- Wind power
- Solar power
- Ocean and geothermal power
- Use of ‘carbon neutral’ energy sources
- Biomass to augment power generation
- Biofuels to augment hydrocarbons used for transportation
- Carbon capture and sequestration
- Preventing the release to the atmosphere of CO2 generated by the combustion of fossil fuels.
Note the mention of rebound effects (translating efficiency into demand reduction, not performance) – they’re a step ahead of many pushing technology policy for climate. The presentation that accompanies the report offers a more concrete set of actions:
Actions to Address Carbon Constraints
- Develop legal and regulatory framework to enable carbon capture and sequestration.
- As options are considered to reduce CO emissions:
- Provide effective global framework for carbon management
- Establish transparent, predictable, economy wide cost for CO2 emissions
Is that last line a hint at a broad carbon tax?
I’ve linked a few more resources under Business+Climate.