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Monday, November 27, 2006

Energy Companies Calling for Federal Climate Change Legislation

[From the Washington Post: "Energy Firms Come to Terms with Climate Change", by Steven Mufson and Juliet Eilperin, 11/25/06:]

While the political debate over global warming continues, top executives at many of the nation's largest energy companies have accepted the scientific consensus about climate change and see federal regulation to cut greenhouse gas emissions as inevitable.

The Democratic takeover of Congress makes it more likely that the federal government will attempt to regulate emissions. The companies have been hiring new lobbyists who they hope can help fashion a national approach that would avert a patchwork of state plans now in the works. They are also working to change some company practices in anticipation of the regulation.

"We have to deal with greenhouse gases," John Hofmeister, president of Shell Oil Co., said in a recent speech at the National Press Club. "From Shell's point of view, the debate is over. When 98 percent of scientists agree, who is Shell to say, 'Let's debate the science'?"

Hofmeister and other top energy company leaders, such as Duke Energy Corp.'s chief executive, James E. Rogers, back a proposal that would cap greenhouse gas emissions and allow firms to trade their quotas.

Paul M. Anderson, Duke Energy's chairman and a member of the president's Council of Advisors on Science and Technology, favors a tax on emissions of carbon dioxide, the most prevalent greenhouse gas. His firm is the nation's third-largest burner of coal.

Exxon Mobil Corp., the highest-profile corporate skeptic about global warming, said in September that it was considering ending its funding of a think tank that has sought to cast doubts on climate change. And on Nov. 2, the company announced that it will contribute more than $1.25 million to a European Union study on how to store carbon dioxide in natural gas fields in the Norwegian North Sea, Algeria and Germany.

These changes come as Democratic leaders prepare to take over key committees on Capitol Hill. Sen. Barbara Boxer (Calif.), who calls global warming "the greatest challenge of our generation," will take the place of Sen. James M. Inhofe (R-Okla.) as chairman of the Senate Environment and Public Works Committee. Inhofe refers to global warming as a "hoax."

Sen. Jeff Bingaman (D-N.M.), the incoming Energy and Natural Resources Committee chairman, said he hopes to "do something on global warming." Even though the Bush administration's expected opposition might make the enactment of legislation unlikely in the next two years, many companies cannot put off decisions about what sort of power plants to build.

Duke Energy, for example, has not added significant power generation in two decades, and customer demand is rising 1 to 2 percent a year. The company has included a price for the carbon emitted in its cost estimates for a new coal-fired generating plant proposed for Indiana.

"If we had our druthers, we'd already have carbon legislation passed," said John L. Stowell, Duke Energy's vice president for environmental policy. "Our viewpoint is that it's going to happen. There's scientific evidence of climate change. We'd like to know what legislation will be put together so that, when we figure out how to increase our load, we know exactly what to expect."

One reason companies are turning to Congress is to avert the multiplicity of regulations being drafted by various state governments. The Regional Greenhouse Gas Initiative, a group of seven Northeastern states, is moving ahead with a proposed system that would set a ceiling on greenhouse gas emissions, issue allowances to companies, and allow firms to trade those allowances to comply with regulations.

California is drawing up its program. Other states are also contemplating limits. Even the city of Boulder, Colo., has adopted its own plan -- a carbon tax based on electricity use.

"We cannot deal with 50 different policies," said Shell's Hofmeister. "We need a national approach to greenhouse gases."

Next week, the Supreme Court will hear arguments on whether the federal government is obligated to regulate carbon dioxide as a pollutant; its decision could force the government to come up with guidelines.

Though many energy firms had already voiced support in recent months for federal regulations limiting greenhouse gas emissions, the coming changeover in Congress has intensified the discussions.

"There have been many more folks wanting to engage on the detailed architecture of climate-change legislation," said Jason S. Grumet, executive director of the bipartisan National Commission on Energy Policy. "The tenor, tone and the detail of discussions has changed in the last couple of months. Nobody's going to want to be the last company to come before the Congress and say, 'I've been opposing you for five years, but now can I have my piece?' "

Some businesses are making new hires based on the assumption that legislative activity on global warming will increase in the coming months. Truman Semans, director of markets and business strategy for the Pew Center on Global Climate Change, said at least half a dozen of the companies that belong to the center's Business Environmental Leadership Council have recently hired staff members focused on global warming.

Not every energy company is planning to curb greenhouse gas emissions in the near future. TXU Corp. is planning to spend $10 billion to build 11 new coal-fired power plants, which would more than double the company's carbon dioxide emissions, from 55 million tons to 133 million tons a year. That increase in emissions is more than the total carbon dioxide pollution emitted in all of Maryland or by 10 million Cadillac Escalade sport-utility vehicles.

In an e-mail to The Washington Post, TXU spokeswoman Kimberly Morgan said that the company supports "a comprehensive, voluntary, technology-based approach to global climate change based on carbon intensity" that is both "flexible and cost effective."

"We are at a point in time where other states and businesses are starting to take global warming seriously," said Colin Rowan, spokesman for the advocacy group Environmental Defense. "California is heading toward the future, and TXU and Texas are sprinting full speed back to the 1950s."

The company's approach may pay off in the short term, but it may not last. "Over the next two years I don't think environmental policy is going to change radically," said Carl Pope, executive director of the advocacy group Sierra Club. But he added, "I think the environmental agenda and conversation will change radically."

Corporate America wants to be part of that conversation. Duke Energy's Stowell said: "Industry is coming together and saying, 'Okay, if we're going to do this, let's do this in a way that won't wreck the economy.' "

Translation on that last line: "Okay, if we're going to do this, let's do this in a way that benefits our company and it's shareholders as much as possible".

With folks like Duke, Shell, Walmart, the Petroleum Industry and others calling for federal legislation, it's probably only a matter of time before something is passed. However, you also know that these companies want to be at the table to ensure the best deal possible for themselves, and not the best public policy, so it's a double-edged sword as well. The public interest/enviro community had better be actively involved and gearing up for a grueling process to make sure we come out with a workable policy.

When it comes to climate change legislation, we need it soon, and we really can't afford to screw up - we just don't have the time to mess around anymore!

I'd be happy to see national legislation on climate change/carbon emissions soon. I think it's a big enough deal that the federal level is probably the place to do carbon legislation - we need an economy-wide/nation-wide cap on emissions, or a suitable high carbon tax, that doesn't leave too many loopholes. But I fear that if federal climate change legislation moves in the next two years (i.e., while Bush the Second still reigns), it will either be:

  • a) a strong policy that gets vetoed by Bush; or

  • b) a weak policy that will pass Bush's desk but will preempt stronger action at the state level.

  • Still, it's good to see some momentum developing at the national level to address climate change, after so many long years of inaction, denial and, at times, outright misdirection/misinformation from some of our 'Congress Critters' [*cough*Inhofe*cough*].

    [A hat tip to Green Car Congress]

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