Climate: where government and business intersect
For the panelists gathered at the “Climate Change and the Corporation” session, the discussion about climate change has moved well beyond whether it is real or not to what role both business and governments need to play in addressing it.
The clear consensus was that the cap and trade policies as set forth by the Obama administration and currently weaving its way through the legislature have fallen way short in appropriately addressing the challenges posed by climate change.
“It’s time to rethink a market focus centering on innovation,” Daniel Esty, Professor of Law and Environment, Yale University said. “Let’s fix this economic burden and allow countries to move at their own timeframe.”
According to Tracy Wolstencroft, Head of Environmental Markets for Goldman Sachs, it is estimated that $10 trillion will be necessary in order to stem further dangerous warming of the climate. “We have a goal to de-carbonize the economy and it will require a lot of tools, including policy, technology and capital.”
He offered the following assessment: policy needed to be clear, consistent and something people understand, the technology needed to be shaped by innovation, and it has to be understood that the capital required will be a “significant” number.
Within this framework he outlined the opportunities for growth and expansion. “By moving from high carbon to low carbon, this could represent one of the largest emerging markets we have ever seen,” Wolstencroft said.
To dramatize how other countries are doing a much better job at this than the U.S., Wolstencroft pointed out that Toshiba quickly mobilized to spend $5 billion acquiring Westinghouse. This was in response to China unveiling a five-year plan to grow its nuclear energy capacity — an area where Westinghouse is a world leader.
In an environment where there is a clear policy, he and the other panelists agreed that businesses are prepared to put their capital at work.
“We will not be able to unleash our capital if our policy is not in place,” Wolstencroft said. “We will continue to lag behind the Chinas of the world, and that is critical to job creation.”
For Stuart Eizenstat, Partner, Covington & Burling, and former chief U.S. negotiator on the Kyoto Protocol, the response to the question of climate change is not cap and trade, but cap and rebate. He stressed that the United States government both domestically and internally has to take the lead in dealing with the cost issue.
“A U.S. company can meet their allowance by paying Brazil and Indonesia to save their rainforests,” Eizenstat said. He explains by doing so, Brazil and Indonesia are incentivized to do a better job managing their climates, as they would in turn sell the credits back to the United States. “You want a global international trading system. Establish price and rebate the value.”
James Connaughton, Executive Vice-President, Constellation Energy, stressed that what’s needed is a restructuring of the system that is currently in place to address carbon emissions and clean energy, rather than the need for new technology.
“We have gobs of policy,” Connaughton said. “The question is not whether but how do we organize it?”
