Issue November 4, 2009

Brave new world

I was honored to be invited to the White House for the Green Energy Economy Forum to discuss “American competitiveness in the clean energy economy” two weeks ago. A “select group of business leaders, nonprofit experts, members of the academic community, and White House staff” were in attendance.

The big take-away from the day was that the Waxman-Markey Cap-and-Trade bill, which passed in the House and is awaiting a Senate vote, is necessary to ensure our economic competitiveness down the road. Most people see energy independence as important for our national security and understand that getting us off foreign oil from unstable lands will improve the environment as well. Acting to reduce emissions will incur some costs. However, as Secretary of Energy Steven Chu said at the event, “the cost of inaction will be horrendous.”

The issue that may be less clear, however, is that if we do not create this cap-and-trade system, or some kind of regulation on carbon, we will miss out on all the innovation that is stimulated by such a move. The bill provides rules and clarity — the two things all innovative entrepreneurs need to start and maintain the huge investments that will be required to kick off our century’s green industrial revolution.

Chu reminded us that solar panels were invented in the U.S. but perfected for residential and business use in Japan. I have also heard that the third-richest man in China is a solar panel company owner. I only know two people involved in solar energy in Kentucky, and one involved in hydroelectric.

In terms of getting our metaphorical carbon clock cleaned, Chu reminded us that China is spending $12 million an hour on clean energy and developing a 1 million volt, high-transmission line that transports energy from the West (where China’s renewables are plentiful and harvestable) to the population centers of the East. For those of us worried about how to present this to the business community, he also recalled that a similar cap-and-trade, market-based system solved the problem of acid rain. It did not destroy the economy, as some in the business community had feared. By 2007, sulfur dioxide (SO2) emissions were reduced by 50 percent from 1980 levels. The Waxman-Markey bill is the same type of carbon emissions/cap-and-trade bill.

Another successful example is Sweden. In 1991 they passed a carbon tax, which is considered less business-friendly than cap-and-trade, and the Swedish economy has since boomed. Carbon emissions have decreased, and they have innovated and developed new, low-carbon energy technologies. In 1991, I didn’t even know what carbon was. We are already playing catch-up.

As Chu said, “one of the most important steps we can and must take to create new jobs and ensure America’s competitiveness is to pass comprehensive energy legislation to create a system of clean energy incentives.” So please, let your legislators know that you don’t want to be left behind in the new global economy. Please also let your friends at our local chamber of commerce, Greater Louisville Inc., know. On June 25, the day before the House vote, GLI sent out a “call to action” e-mail to all its members (myself included) saying, “This cap-and-trade bill would create a de facto energy tax on businesses and families, dramatically raising energy costs across Kentucky. The bill limits the amount of traditional energy needed to run our economy while failing to ensure adequate substitute sources. This will drive up the cost of energy for everyone, threatening jobs and reducing household income.”

For me, this is equivalent to the decades of car companies lobbying Congress to not raise gas-mileage standards. The result was the catastrophe we saw unfurl over the last 12 months. If we had demanded that our representatives not kowtow to the car lobby and make incremental changes over the last 30 years, we would still have a vibrant and enduring car manufacturing business today in Louisville and in the U.S. Instead, Toyota, a foreign company, is selling hybrids and Priuses, and America spends billions of taxpayer dollars on programs like “Cash for Clunkers” in an attempt to prop up the failing domestic industry.

The bill is not perfect; no bill ever is. More importantly, however, it is a step in the right direction for America to remain a world leader, both for our businesses and in the innovation that will create more jobs and more wealth for our citizens. I say, let us not act like Chicken Little! Let us be brave and embrace this new world!