White House

Obama's Climate Plan to Ditch Coal Will Be Good for Business. Really


Obama's Climate Plan to Ditch Coal Will Be Good for Business. Really

Photograph by Alex Wong/Getty Images

“Every time, they were wrong,” President Obama said today in rolling out his Climate Change Action Plan (PDF) to diminish the nation’s use of coal and other fossil fuels and invest in renewable sources of energy. He was, of course, referring to those who’ve opposed environmental regulations on the grounds that measures such as the Clean Air Act, or the 1988 agreement to curb acid rain, kill jobs and harm the economy.

Even before Obama began his speech, Count on Coal, an industry lobby, noted that seven U.S. governors, including Bob McConnell (Virginia), Phil Bryant (Mississippi), and Steve Beshear (Kentucky), had each written to the president urging him to back off from an April 2012 Environmental Protection Agency rule that would set a limit of 1,000 pounds of carbon dioxide released for every megawatt of power generated. The governors protest that the rule would force the closure of several older plants (kill jobs) and make it more expensive to build new ones (harm the economy). Daniel P. Schrag, a Harvard geochemist and scientific adviser to Obama, put bluntly what the president has tried to put delicately: “Politically, the White House is hesitant to say they’re having a war on coal,” he told the New York Times in the lead-up to Obama’s speech. “On the other hand, a war on coal is exactly what’s needed.”

In his speech, outside at Georgetown University, Obama highlighted several of his goals while mopping his brow with a handkerchief in the 90-degree heat. (Global warming?) He’d like to double the number of U.S. homes that rely on wind, solar, and other renewable sources of power; add three gigawatts of renewable energy on U.S. military bases; and have all federal offices drawing at least 20 percent of their power from renewable sources. Disappointing some, he did not broach the subject of a carbon tax, which many economists argue would be the clearest, most effective way to reduce carbon emissions, but he surprised many by meandering into an assurance that the carbon impact of the proposed Keystone XL pipeline was “relevant” as he considers whether to OK it. Just as tougher emissions standards for automobiles have led to innovation, he expects efficiency standards for buildings and appliances to do the same.

Yet, while he did allow that shifting away from coal would take time and wouldn’t be easy, he downplayed how painful it will be for many Americans. At nearly 40 percent, coal remains the single largest source of power in the U.S., and there’s no question the EPA’s new standards will make its use more expensive. “The societal case for cutting greenhouse gas emissions may be clear, but I wouldn’t exactly say there is a business case,” says senior energy analyst Rob Barnett, author of “The Twilight of Coal Power?,” a Bloomberg Government white paper. “Regulations aimed at reducing carbon will add new costs to producing (and thus consuming) energy. If low-carbon energy technologies were economic, businesses and consumers wouldn’t need new regulations to nudge them toward investments that help to reduce [greenhouse gas] emissions.”

Keith Crane of the RAND Corp.’s Environment, Energy and Economic Development Program agrees, up to a point. “Those who say that there won’t be costs associated with changing from coal to cleaner sources of energy do us all a disservice,” he says. “There will be, of course. But that’s the wrong way to look at it. You have to look at, why are we all worried about climate change? It’s because [Hurricane] Sandy will come to be seen as small in the future. So we’re being conservative, and taking measures now to avoid higher costs later—to the economy, to loss of life.”

There may be both a near- and long-term economic case for cutting carbon. The near-term argument points to the U.S. government’s costly subsidies to fossil fuel companies, which Obama says he wants to discontinue. “Coal producers get 30 to 40 percent subsidies on leased federal land. Those numbers are what keep the price of coal down,” says David Brodwin, co-founder of the American Sustainable Business Society. “If you really compared the subsidized numbers vs. the unsubsidized numbers, you’d find that renewables could be far more competitive.”

Long term, Brodwin argues, “Every company in every industry at some point has to decide what business it’s going to be in. Not many of the companies that made large computers made it in the PC business. Today’s energy companies have to decide if they’re an energy company or a particular fuel company. Sooner or later, if they don’t decide, it will get decided for them.”

Ultimately, the arguments for and against Obama’s plan come down to deciding who will choose when to get serious about the inevitable transition away from fossil fuels. “Does anyone think we’d be better off if we let legacy industries dictate what we’re going to do?” Brodwin asks. “The railroads weren’t cheering us on while the government built airports and interstates, but we built them anyway.”

Wieners_190
Wieners (@bradwieners) is an executive editor for Bloomberg Businessweek.

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