Why Climate Change Legislation Is Turning Corporate America Green

What's the "green" driving some high-profile corporations to break with the country's largest business lobbyist over climate change? Hint: It's not the environmental kind.

This is a precarious moment for supporters of a measured approach to carbon emissions legislation. On Thursday, Nike became the latest prominent U.S. company to break from the U.S. Chamber of Commerce over its fierce opposition to the cap-and-trade bill now languishing in the Senate. Nike resigned its seat on the board just a few days after Exelon announced its intention to quit the Chamber altogether, painting the nation's largest business lobby as scientific obstructionists.

The Obama administration took the opportunity to open up a second front against cap-and-trade opponents. Concerned that Congress might not produce legislation before the December Copenhagen climate change summit, it announced that the Environmental Protection Agency will regulate greenhouse gas emissions with or without Congressional approval. That's another direct rebuke of the Chamber, which has been on the forefront of groups challenging the EPA's expanding regulatory authority over climate issues.

Europe's version of cap-and-trade not only hasn't cut emissions as forecast; it's evolved into the most "costly climate policy program in the world."

Two years ago, the U.S. Supreme Court ruled that the EPA has the authority to regulate greenhouse gases under the Clean Air Act, by labeling them as a pollutant. Since all sides recognized that any EPA regulations would likely be complex and unwieldy, the administration had the EPA hold its fire as Congress debated comprehensive legislation. But that's stalled, and Obama's environmental team apparently has decided to raise the stakes.

Earlier this week, the president authorized the EPA to compel large power plants and industrial facilities--including 400 new facilities and thousands more coal plants and refineries undergoing renovation--to prove that they have the "best available" technology for reducing greenhouse gas emissions or face sizable fines or delays in licensing, with the rules taking effect as early as next year.

The New York Timescharacterized the announcement as a "cudgel to push lawmakers to reach agreement" on a cap-and-trade bill, but it's more like a tactical bomb threat. The administration appears to be trying to split the corporate community, which up until recently has remained somewhere between hostile and skeptical of the Democrats' climate change strategy, and the 1,400-page pork-filled bill, known as Waxman-Markey, that passed the House last summer.

The chamber has proved an easy target, in part because of its own blunders. Exelon's exit followed earlier departures by PG&E and PNM Resources. Two of the nation's largest companies, General Electric and Johnson & Johnson, have made it clear they think the chamber is out of step on climate change, though they've retained their membership. Duke Energy, while also remaining in the Chamber, said in May that it would not renew its ties to the National Association of Manufacturers, another Waxman-Markey opponent.

These resignations have environmentalists and their supporters in Congress crowing. Jay Inslee, a House Democrat from Washington State and a member of the Energy and Commerce Committee, says, "It's an earthquake." Ceres, a liberal-lobbying group that supports the bill, called it a "game-changer."

That's too soon to know.

Last week, when John Rowe, Exelon's CEO, slammed the Chamber's "stridency against carbon legislation," he was clearly casting his company as a green knight.

But as is often the case in such high-profile public policy spats, the story behind the story speaks more to opportunism. Environmentalists are trying to divide and conquer the business community by splitting it into two camps: self-proclaimed "progressive" green-minded companies, egged on by campaigning environmentalists, vs. greedy, Neanderthal defenders of the status quo.

This is ideological politics and hard-nosed business, pure and simple. The New York Times bluntly reported on what's likely driving some businesses in the Northeast and West to break with cap-and-trade skeptics like the Chamber and sing the bill's praises.

"The utilities and other companies that are supporting climate change legislation tend to be those based in more liberal parts of the country and believe that being viewed as environmentally responsible is a good marketing strategy, energy and business analysts said. The utilities tend to be dependent on sources like nuclear power that emit fewer greenhouse gas emissions than their competitors. Before, 'voicing their good fortune among higher- carbon colleagues was seen as impolite,' said Paul Bledsoe, director of communications and strategy at the National Commission on Energy Policy, a bipartisan research organization. 'Now that legislation seems imminent, these companies are stepping up to support legislation because it helps their bottom lines.'"

Despite the attempt by some environmentalists to paint the U.S. Chamber as an anti-science climate denier, the business group has acknowledged the reality of greenhouse gas emissions and the need for a coordinated response. "We're challenging Waxman-Markey's cap-and-trade bill, not the need for a legislative response to climate change," says Karen Harbert, head of the Chamber's Institute for 21st Century Energy. "Our position is being grossly mischaracterized. Climate change has to be addressed. But we think the bill will be hugely disruptive, shed jobs, raise energy prices, unfairly target selective industries in this country and put China at a competitive advantage. There are alternatives."

Call the Chamber realists. Europe's version of cap-and-trade not only hasn't cut emissions as forecast; it's evolved into the most "costly climate policy program in the world." Forgive the Chamber for not recklessly embracing a legislative option that promises to neither cut greenhouse gas nor preserve U.S. competitiveness.

Support for Waxman-Markey is tepid in large measure because it's loaded with so much special-interest giveaways for environmental programs and favored companies--which helps explain why the Chamber has emerged as today's punching bag. The bill's fine print makes it clear who the winners and losers will be if a version of Waxman-Markey becomes law. For example, corporations that rely heavily on carbon-free nuclear energy, which would be showered with financial hand-outs, clearly fall in the first camp. (Read: Exelon.)

Smelling blood in the water and an opportunity to breathe new life into the flailing bill, the National Resource Defense Council and other environmental backers of cap-and-trade are now increasing efforts to peal away from the Chamber other corporations, such as General Electric. GE makes nuclear generators and should profit handsomely if Waxman-Markey survives relatively intact, so its support of the bill is hardly a surprise.

"Some companies are being tactical," suggests Harbert. "They have little invested in the Chamber and a lot to gain financially, and they earn a lot of points from environmental groups that will have a lot to say about the future of their businesses."

Shed no tears for the Chamber in this messy brouhaha, however. It brought this embarrassment on itself when William Kovacs, its senior vice president for environment, technology and regulatory affairs, told the Los Angeles Times that it might seek a full trial of the scientific consensus on man-made climate change to block the EPA's regulatory agenda, which it believed was illegal, unless there were Congressional hearings. "It would be evolution vs. creationism," said Kovacs, drawing a bizarre parallel with the famous 1925 Scopes trial on the validity of the theory of evolution. "It would be the science of climate change on trial." Kovacs never addressed who would play the role of Darwin and science.

There are legitimate legal and policy gripes about the EPA's expanding power--it declared in April that it believed it had the right to regulate greenhouse gases under the Clean Air Act. But Kovacs' comments were political and scientific lunacy. It certainly opened the door to accusations that the Chamber was indeed standing with the anti-science Luddites denying the basics of climate change science. The real issue, at least temporarily overshadowed, is the cost/benefit analysis of the various proposals to control the human contribution to climate change.

The Chamber's ill-timed and reckless interview also threatens to undermine the growing support for a thoughtful legislative alternative to cap and trade. The Chamber is hardly alone in concluding that the Christmas-present-for-everyone approach known as Waxman-Markey is a holy mess. It's a view shared not only by many conservatives but also by many on the left, including Al Gore's former policy adviser and co-founder of the U.S. Climate Task Force, Harvard lecturer Elaine Kamarck, who wants to return to Gore's original carbon tax tied to a payroll tax cut.

The renewed clamoring to rush through Congress a European-style climate bill before the international climate talks convene in Denmark in December has at least temporarily shoved aside debate over whether alternative carbon control strategies, such as a carbon tax, might be a better choice both economically and environmentally.

Jon Entine is a visiting fellow at AEI.

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