Business Priorities

Andrew J. Hoffman, a Professor of Sustainable Enterprise, recently posted an article titled A New Era of Climate Change Consciousness in which he presents an interview with David Hone, Shell’s climate change advisor. There is one excerpt I would like to point out in which Hone is asked his opinion on climate change policy.

Q. Hoffman: How important is the Senate bill on climate change (sponsored by Kerry Boxer) to ongoing action on climate change? What happens if it does not pass? Do you think the U.S. Senate is critical to global action on climate change?

A. Hone: Whether it is Kerry-Boxer or Waxman-Markey or a hybrid isn’t overly important — what is important is that the Congress delivers a clear and unambiguous piece of legislation designed to drive the economy along the emissions reduction pathway that President Obama has now announced. Ideally this should be a market based cap-and-trade approach as this delivers the outcome at lowest overall cost to the economy and provides business with the clear price signal that it needs to underwrite investment. In answer to the second part, yes, the U.S. is pretty important in the grand scheme of things. Just look at the change in overall momentum on this issue under the new administration, not only inside the USA, but also outside. Without a clear direction from the USA, adding to that already provided by Europe, the world could struggle to address the issue of climate change.

Seeing how global warming mitigation is inseparable from the business sector, it is crucial to seriously consider what businesses think. I’m not trying to imply that protecting the environment is something that should be solely left to the private sector, I’m just saying that they should have a big voice at the table. Therefore, we should consider what Hone said in this interview that it does not really matter which bill gets passed so long as we pass something.

However, we also need to keep in mind that what businesses want and what environmentalist think is necessary for a successful cap and trade are two different things. Here is a chart showing just that. On one side you have the suggestions from the US Climate Action Partnership which is a group of mostly businesses (including Shell) and a few environmental organizations. On the other side you have the suggestions from the Friends Committee on National Legislation.

USCAP

    1. A significant portion of allowances should be initially distributed free to capped entities and economic sectors
    2. Policies to mitigate cost to people and business
    3. 3 billion tons of offsets
    4. Regulation Local Distribution Companies
    5. No mention of price floor
    6. No mention of reserve pool

FNCL’s 6 Keys To Cap and Trade

    1. Auction 100 percent of the pollution permits
    2. Rebate the majority of revenue back to the people
    3. Eliminate or strictly limit offsets.
    4. Cap at the first point of sale
    5. Create a price floor
    6. Create a permit reserve pool

In conclusion, I think many people agree that we need to pass something, but it has to be effective. What businesses want might jeopardize the efficacy of a cap and trade system and while they should have a big voice at the table, we must keep in mind that ultimately, businesses and environmentalist have different priorities.

-Jason

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