Bipartisan pressure on Washington

A Republican governor and Democrat governor are teaming up to press Congress to pass the Lieberman/Warner bill, which legislates cuts in greenhouse gas emissions. Environmental Defense enlisted Tim Pawlenty, the Republican governor from Minnesota (the state's two senators both signed on a sponsors of the bill), and Arizona's Democrat governor, Janet Napolitano, for a series of radio ads. It's hard to guess what sort of impact this might have, but it shows the stakes and fractured alliances.

Both Arizona and Minnesota have been in the lead with climate change legislation, and both realize regional solutions are merely placeholders -- just temporary measures while everyone waits for Washington to get involved.

Apparently, the ads focus on the cost to the U.S. economy of not acting now on climate change. They push the point that the United States will lag further behind Europe if Washington can't come up with some sort of law this year to cut emissions.

Meanwhile, President George W. Bush convenes his climate talks with the world's big polluters in Hawaii on Wednesday. He'll try to push the idea of using technology to beat carbon, pushing to open markets for U.S. science to cut emissions in India and China. The longer he waits, the more he risks that those "technology transfers" he craves will clear the way not for U.S. gadgetry, but European expertise.

Chaos isn't good for business

It seems loony greens and their tree-hugging friends aren't keeping executives up at night. Rather, the bogeymen spooking business leaders turns out to be the politicians who promote supposedly 'business-friendly' voluntary approaches to cutting greenhouse gases.

Why? Top execs want clarity on climate change policy and prefer a U.N.-brokered system to the voluntary approach championed by the White House and some leaders in the Republican Party, according to a study. Investors always prefer a nasty known to unknown that offers a glimmer of hope. An established system, even one involving a carbon tax or deep cuts to emissions would clear the way for businesses to adjust their forecasts and plan accordingly, according to the study.

Canadian political leaders are getting the same message. Policy chaos isn't good for business, apparently. The business leaders have no problem with the noble goals of various greenhouse gas policies being developing in Canada, they just wish the country had one national approach rather than a half dozen local ones. Will a uniform emissions policy drive business out of Canada? Just the opposite, apparently.

"This is affecting investment plans," said Tom d'Aquino of the Canadian Council of Chief Executives. "How can you make investment decisions on a 15 or 20 or 25-year horizon if you are living in a country that is totally fragmented on environmental policy? The danger is that of some people saying if Canada can't get it together, maybe we should go somewhere else. People have actually said that to me."

But why stop at national borders? If a national plan is superior to local ones, wouldn't an international policy trump local ones? The Washington Post (registration required) notes the similarity between the European Union plan unveiled last week and Lieberman-Warner bill on the floor of the Senate. The largest businesses in the United States, those with the biggest lobbying clout, already operate under greenhouse gas regulations in Europe. It's hardly a surprise many of these companies are actively pressing for Washington to get on board and bring some conformity to global policy.

Cue President George W. Bush in Monday's State of the Union address:

And let us complete an international agreement that has the potential to slow, stop and eventually reverse the growth of greenhouse gases. This agreement will be effective only if it includes commitments by every major economy and gives none a free ride.

Bush, with his roots in the corporate wing of the Republican Party, is playing catch up to his supposed base. He may try to pitch a voluntary system again this week in Hawaii when he convenes a meeting on climate change. He'll get few takers.

"It's like the wild west"

This lengthy piece in CFO Magazine makes a solid case for buying carbon credits now, on the cheap, in anticipation of rising prices for carbon credits in a few years when regulation looms. It sounds like most of the executives they spoke with see plenty of room for a voluntary market once the caps are in place and expect to use their purchased credits to meet required cuts.

But here's the rub: Everyone seems to agree the available credits vary wildly in quality and obviously doubt many of them will qualify under the eventual cap-and-trade. That should be obvious to anyone who's done much research into the current batch of sellers of carbon credits and the prices they charge.

This demand in cross-border CO2 projects has led to problems. Stories have already appeared in The Financial Times and elsewhere about manufacturers in India purposely building factories with excessive greenhouse-gas emissions so they can sell the reduction credits. In addition, several reports have documented cases in which sellers of credits have miscalculated carbon baselines, thus bumping up CO2 reductions. "You've got guys saying, 'Hey, we'll get you an offset if you give us some money,'" says Clean Air Watch's O'Donnell. "It's like the Wild West."

The article and the executives and specialists quoted are particularly tough on reforesting projects - don't tell the Super Bowl organizers.

The cost of cap-and-trade

Since a cap-and-trade system seems increasingly likely in the United States, it's worth asking what the impact might be.

And since you asked, the the Environmental Protection Agency and the Energy Information Agency have an answer. It's not nearly as dire as critics want everyone to believe, and for good reason.

The good news: "Impacts on economic growth are modest. By 2030, cumulative GDP losses range from -0.02 to -0.07 percent across the different scenarios analyzed by EIA and EPA."

The bad news: "Total greenhouse gas emissions in 2030 fall from 9.1 to 9.7 billion metric tons CO2 in the “business-as-usual” case to 6.9 to 7.3 billion metric tons under S.1766 -- a 24 to 26 percent decrease."

Why is that bad news? That estimated cut in greenhouse gas emissions isn't much of a cut compared to current levels of emissions, which totalled 7.1 billion metric tons in 2006. Compare that to Britain, which is debating an 80 percent cut in emissions by 2050.

But I suppose it's a start.

Lawmaker promises cap-and-trade bill

Powerful Democratic lawmaker, John Dingell, promises at the Detroit Auto Show that he will introduce a bill to launch a cap-and-trade approach to cutting greenhouse gas emissions in the United States, according to Reuters. This is one of several efforts underway and it's unclear whether anything will pass in an election year, but that's not really the point. Dingell has made his reputation as a reliable battler ready to take on the environmentalists. His change of heart is the surest signal that United States is close to adopting a European-style emissions trading system. Wall Street wants this, the green lobby wants it, several states in the Northeast are already committed to it. Even big business wants it. The United States effectively demonstrated how a cap-and-trade might work with the success of a similar system to control sulphur emissions that contribute to acid rain. Dingell may not want it, but he wants to be in control of the debate and like the administration, he knows the country will join the global effort to cut greenhouse gas emissions. This is about having a hand in the way it's done.