Green Guccis
Can business be trusted in the climate change fight? With most large corporations now accepting the realities of climate change, teasing out motives becomes important. Businesses will always seek profit opportunities and the emerging climate change industry appears to offer many ways for making money. This, as Martha Stewart would say, is a good thing. We should never ask business to adopt altruistic goals. Skeptics, however, have noted that many of the latecomer businesses happen to operate in high carbon-emitting industries, and are only turning green because they read the writing on the wall. Much of that writing will soon take the form of regulations and these companies want a seat at the table. Based on the history of Congress in resisting the pleas of big business, this newly-discovered interest in discussing climate change may not be such a good thing. So, when it comes to the greening of big business, we have the good, the bad and, if you consider the some of the alternative technologies Congress believes to be “renewable,” I’d say we have the ugly too.
The awakening of the business giant to the potential of alternative energy has produced a flurry of innovation. As this week’s The Economist highlights, the business community is investing billions in new technologies that will likely transform during our lifetime how we generate and use energy. This optimism is not misplaced, in large part due to the unleashing of the American entrepreneurial spirit:
California is buzzing with clean-technology projects: breakthrough energy-storage systems; devices for making electricity grids more intelligent; enzymes that chomp their way through lignin to make ethanol; algae that can be turned into fuel. As the home of some of America's best universities, it is a natural place for such ideas to flourish. The notion of man-made climate change has been accepted for years in most universities, and the climatologists' work has influenced other academic departments. Stanford and the University of California at Berkeley both have big clean-energy programmes.
The challenge is establishing a proper framework of regulations and incentives to maintain and even accelerate the momentum of the business community. Those who think that the leadership shown by the private sector in fostering alternative energy projects proves that government involvement is not necessary miss a critical subplot to the story: most businesses not only expect new regulations but are counting on them. Businesses now understand that there is a cost to carbon emitting behavior and are willing to build that cost into their models as long as a level playing field exists. The U.S. and other national governments have an obligation to reward, if you will, businesses that adopt more sustainable practices by ensuring that free riders are punished. So the question is not whether government needs to be involved but how. Unfortunately, when big money is involved and lobbyists descend on Washington, the product is rarely enlightened policy. Consider the momentum, courtesy of former representative and now lobbyist Dick Gephardt, already gathering for liquefied coal, which could produce twice the greenhouse gas emissions of petroleum.
Due to the glaring lack of expertise within Congress on alternative fuel technologies, R&D funding for everyone’s pet projects is a likely outcome. Of greater importance are the choices made for an overall framework for reductions in greenhouse gas emissions. The allergic reaction by legislators to any form of carbon tax suggests that a cap and trade system is inevitable. Yet with business now occupying so many seats at the table and clueless congressman so appreciative that their big campaign contributors are asking to be regulated, the resulting caps could be harmless. The first caps on greenhouse gas emissions instituted in Europe suffered from this flaw, and haven’t produced any declines in carbon emissions. The member governments of the E.U. all proved unwilling to hold their own businesses accountable for greenhouse gas emissions. I would posit that the only way to be certain that any caps are sufficiently aggressive is if the business community is pissed off. Somehow I doubt that will happen in the U.S.
So here’s what we are likely get from all this business involvement: a ton of innovation, subsidies for energy alternatives with no promise for reducing carbon emissions, some spineless regulation, and maybe a few gems of policy. The true revolutions in energy policy, like a swapping of the payroll tax for a carbon tax, will never see the light of day. A typical day at the office in Washington. Renewable energy advocates shouldn't take any of this personally. This is just business as usual when business decides to show up.
Photo Credit: Jason Reed/Reuters