• WisBusiness

Wednesday, December 16, 2009

Give market forces a chance to meet energy and climate change needs

By Tom Still
Some days, it seems the only certainty about the U.S. economy is uncertainty.

Three of the economy's largest sectors -- health care, finance and energy -- are in varying degrees of flux, in part because Washington seems bent on keeping it that way. President Obama and Congress can't seem to bring closure to the health-care reform debate, the financial industry is under pressure from the Loan Officer in Chief to make more small business loans, and the Copenhagen climate change talks have raised more doubts than confidence.

Layer on a $12 trillion national debt that will be financed by $200 billion in federal debt service payments this year alone, it's a wonder the economy is performing as well as it is.

The growing schism over international, national and even state regulations tied to global climate change -- and how that affects the energy sector -- is a prime example of what's causing heartburn among business leaders.

The Copenhagen climate talks are entering their last phase, but negotiators have made less progress toward reaching an agreement on global greenhouse gas emissions than some would have hoped. With China and India balking and smaller nations adopting a "blame-America-first" stance, perhaps the impasse is no surprise.

Compounding the uncertainty of what an international agreement might hold is the U.S. Environmental Protection Agency's expanding reach over carbon emissions from all sources. The EPA, in response to a 2007 U.S. Supreme Court decision that ruled greenhouse gases are a pollutant subject to the Clean Air Act, appears poised to place greenhouse limits on everything from factories to real-estate development.

National business groups are worried that a command-and-control regime established by the EPA will lead to new and burdensome requirements on manufacturing, the construction industry and other sectors -- driving up energy costs and choking job creation.

In Wisconsin, groups such as the Alliance of Automobile Manufacturers, Wisconsin Automobile and Truck Dealers Association, and Wisconsin Corn Growers Association are voicing their dismay over new standards for car emissions proposed in state climate change legislation unveiled last week.

Those groups believe the state emission standards, which are not unlike those adopted in California, are unnecessary because of a national program on greenhouse gas emissions and fuel economy standards.

"By adopting (the California standards) Wisconsin is implementing a public policy that provides no measureable environmental benefit above and beyond its federal counterparts and creates significant challenges for the ethanol industry," read a letter from the groups to Gov. Jim Doyle and members of the Governor's Task Force on Global Warming.

What's missing in this debate is a commitment to letting the markets work. Capitalism is far cleaner than undemocratic systems of government, as was demonstrated when the Iron Curtain collapsed, revealing a legacy of Communist-era pollution. Now that China has moved toward a market economy, it is slowly cleaning its air and water -- even as its production and consumption grows.

Some of the best examples of land, water and wildlife conservation in the world are private or a blend of private and public incentives, not top-down public solutions. Manufacturers, energy producers and consumers, land owners and other business leaders are as concerned about the possible results of climate change as much as anyone. But they're also worried a command-and-control response will lead to less innovation, not more.

Wisconsin is a state with every reason to enhance production of homegrown alternative energy sources, to conserve energy and to diversify its energy sources. After all, a state that lacks coal, oil and natural gas is largely dependent on others -- whether those others live in Oklahoma, Saudi Arabia or Venezuela.

Innovation is taking place in the state's research and development labs, both public and private, and inside major companies such as Johnson Controls, Rockwell Automation, Kohler and Orion Energy Systems. It's also bubbling up in smaller but emerging firms that are finding better ways to produce second-generation biofuels, wind energy, solar energy and much more. They deserve a chance to work.

Better, cleaner sources of energy are needed. But solutions that value regulation over innovation won't solve the problem without creating more uncertainty in an already uncertain time.

-- Still is president of the Wisconsin Technology Council. He is co-author of "Hands-On Environmentalism," published by Encounter Books, which examined private conservation strategies.


Comments: 18

At December 18, 2009 at 9:05 AM, Blogger dbcm said...

I agree that incentives are better than regulations. You have not suggested any way to provide incentives. All you did was say Give the Market a Chance. So far the market has not done well.

The best incentive would be to internalize the cost of pollution. A carbon tax does that well and the revenues could replace other taxes or simply be rebated on a per capita basis. Read more at http://www.carbontax.org/

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