Mike Pence Says USCAP Businesses Should 'Keep Their Powder Dry'
From the Wonk Room.
Speaking at an event meant to oppose Democratic clean energy legislation, Rep. Mike Pence (R-IN) warned corporations calling for the United States to take action on global warming to “keep their powder dry.” Grist’s Kate Sheppard asked Pence after the GOP mock climate hearing yesterday what he would say to the corporations in the U.S. Climate Action Partnership (US-CAP) who have testified that a mandatory cap on global warming pollution is needed. Pence told companies that support a green economy to “keep their powder dry” as the GOP attempts to preserve Bush-era energy policy:Um. I, I just would say that any American who is prepared to endorse a national energy tax that there’s a better solution. Uh, that they should keep their powder dry. And uh, take their case to the American people that they don’t need, particularly during this very difficult time in the economic life of our nation, to raise the energy cost on our businesses and on American families.Watch it:
As Grist noted, “the House heard the leaders of Duke Energy, ConocoPhillips, and DuPont ask for a cap as recently as April 22.” Politico reports that Nike has been telling the U.S. Chamber of Commerce “to take a more progressive stance on the issue of climate change.” And Exelon Corporation, one of America’s largest electric utilities and another US-CAP member, is featured in a new advertisement today from the Environmental Defense Action Fund calling for a carbon cap as a part of comprehensive clean economic policy:
U.S. Climate Action Partnership Presents Outdated Climate Plan 1
From the Wonk Room.
Today, in the first hearing of the House Energy and Commerce Committee under the leadership of Rep. Henry Waxman (D-CA), a coalition of corporations and environmental organizations renewed their call for an industry-friendly cap and trade system. The U.S. Climate Action Partnership made a tremendous splash two years ago by coming out in favor of a cap-and-trade system to limit greenhouse gases. Though their recommendations overly benefited polluting industries, USCAP’s call for mandatory action changed the political tide in Washington. They deserve credit for moving past conservative rhetoric that denies the need to act, and for stating that “action by the U.S. should not be contingent on simultaneous action by other countries,” a common excuse for delay.
But climate change science and politics have moved on in the past two years, and USCAP has lost its mantle of leadership. Their proposal fails to satisfy the scientific, economic, and societal principles that must underlie any “framework for legislation to address climate change”:EMISSIONS TARGETS. USCAP’s recommended emissions limits are insufficient to prevent catastrophic climate change. They call for U.S. emissions to be reduced by at most 7 percent below 1990 levels by 2020. However, as Center for American Progress fellow Joseph Romm indicated in a recent report, “A U.S. climate bill should set a target of reducing U.S. greenhouse gas emissions 20 to 30 percent below 1990 levels by 2020.” Furthermore, USCAP calls for “generous limits on the use of offsets” of two to three billion tons of CO2 a year, which means actual emissions wouldn’t have to begin reducing until 2030.MONEY. USCAP calls for provisions to prevent emissions permits from exceeding a “threshold price” and for “a significant portion of free allowances should be initially distributed to capped entities and economic sectors.” In other words, polluters should be protected from paying the cost of compliance with the already fatally weakened cap. This will lead to windfall profits for polluters at the expense of consumers. President-elect Barack Obama and other progressive leaders have joined the Center for American Progress in calling for full auction of emissions permits to fund public investments and protect low-income consumers from economic hardship.
USCAP members include major global warming polluters in multiple industries—chemical (Dow, DuPont, Johnson & Johnson), oil and gas (Rio Tinto, Shell, BP America), manufacturing (Alcoa, Caterpillar, Siemens, GE, Boston Scientific), automotive (Ford Motor, GM, Chrysler, Deere), and utilities (Duke, PG&E, Exelon, FPL, PNM), as well as the financial services industry that would administer a cap-and-trade system (AIG, Marsh, Xerox).
The environmental organizations in the partnership are the Natural Resources Defense Council, the Environmental Defense Fund, the World Resources Institute, the Pew Center for Climate Change, and the Nature Conservancy. However, the National Wildlife Federation has left the partnership, saying that it instead will work to “enact a cap-and-invest bill that measures up to what scientists say is needed and makes bold investments in a clean energy economy.”
Responses below:
Put simply, the proposal would reward corporate polluters with hundreds of billions of dollars of giveaways, and its near-term pollution reduction targets are far weaker than what scientists have called for. The proposal is further weakened by its massive carbon offset loopholes. Were such a proposal to be enacted into law, it would fail to achieve the emission reductions we need in the U.S. and would undermine our ability to meaningfully and credibly engage in international climate negotiations. This is a dead-end approach that policymakers should reject.
1Sky’s Gillian Caldwell:
In order to create a 21st century green economy we need bold action, not loopholes. Under this proposal, 40% of the dirtiest polluters would be allowed to keep polluting. 1Sky and its allies urge the members of the House Energy and Commerce Committee to draft effective energy policy that closes loopholes, and auctions 100% of pollution allowances.
ClimateProgress’s Joe Romm:
This proposal is a dead end — and an even deader starting point. Shame on NRDC, EDF, and WRI for backing it. With this proposal, the U.S. Climate Action Partnership has officially made itself obsolete and irrelevant.
The U.S. government’s chief climate scientist, James Hansen, once said that the CEOs of big fossil fuel industries should be tried for crimes against humanity. USCAP is their initial bid for a plea bargain.
Climate disclosure, focusing on measuring financial risks and opportunities
- Dr. Gary Yohe, Professor of Economics, Wesleyan University
- Mr. Jeffery Smith, Partner in Charge of Environmental Practice, Cravath, Swaine, and Moore
- Ms. Mindy Lubber, President, Ceres
- Mr. Russell Read, Chief Investment Officer, California Public Employees’ Retirement System
Senate Banking Committee takes up corporate disclosure of financial risk from climate change By Nicholas Rummell October 31, 2007Several leading Democrats on the Senate Banking Committee say they want to push for greater disclosure from companies about the financial risk they face from climate change.
The move by Democrats is largely the by-product of a petition sent to the Securities and Exchange Commission last month. That petition requested that the SEC require companies to spell out material losses from climate change, such as the impact of new fuel regulations on automakers.
According to the petitioners, who include regulators in 11 states as well as institutional investors and advocacy groups, companies are currently required to delineate such risks under accounting rules, but they often fail to meet those requirements because of poor regulatory guidance. Business groups often argue that such information is confidential.
A Banking Committee hearing on the topic late last month was sparsely attended, by only Democratic members, but it shows congressional interest in the financial risks argument. Sen. Robert Casey (D-Pa.) said he thinks the federal government should act to “chart a new course” for stopping climate change and improving financial returns for companies, which he called “two ends of a problem.”
A bill being marked up in another Senate committee reportedly would require new SEC regulations to require public companies to inform shareholders about financial disclosure of and economic impact of global warming on the company. The bill, sponsored by Sens. Joseph Lieberman (I-Conn.) and John Warner (R-Va.), places caps on carbon emissions.
Current climate change disclosures are inconsistent, which makes it difficult for investors to compare one company’s disclosure with others, said Russell Read, chief investment officer at the $259 billion California Public Employees’ Retirement System. Mr. Read said the SEC currently can require greater disclosure, but that it probably needs “prodding” by Congress to do so.
Some feel additional disclosure would lead to more inconsistent filings. Gary Yohe, an economics professor at Wesleyan University, said that, depending on whether a company evaluates risk to customers or the entire social cost of carbon use, “you get a wide range of numbers.”
Such guidance should focus only on companies that would be significantly impacted by climate change. “It would be a mistake for everyone to say something,” said Jeffrey Smith, lead partner in the environmental practice at law firm Cravath Swaine & Moore. Flooding the market with insignificant disclosure would hurt investors, he said, noting that companies should be “poised” to address useful information in filings. “Fake numbers are bad.”
Mindy Lubber, president of environmental advocacy group Ceres, testified that insurers face quantifiable financial risks from prolonged droughts and wildfires, energy companies face climate-change litigation and other companies face risk from greenhouse gas regulations. She cited recent investment bank research reports as evidence that Wall Street is starting to pay attention to the costs attributed to climate change.
Ms. Lubber said the petitioners don’t want “an onerous new disclosure regime,” but rather to tighten up current accounting standards on physical risks that can be evaluated, such as litigation or losses due to hurricanes. Petitioners in recent years have repeatedly asked the SEC to issue guidance, but the SEC has ignored such requests, she said.
The clamor for financial disclosure related to climate change has also made for strange bedfellows. Steven Milloy and Thomas Borelli, climate change skeptics and mutual fund managing partners, filed a petition for rule-making with the SEC earlier this month. They want companies to have to disclose the business risks of laws and regulations that address global warming.
The two activists, critical of the global warming movement and attempts at regulation, found that of 21 corporate members of the U.S. Climate Action Partnership, only five disclosed that global warming regulation is a business risk. USCAP is a group of 33 companies and environmental groups that calls for significant reductions in greenhouse gases. “USCAP members,” Messrs. Milloy and Borelli wrote in their petition, “are keeping shareholders in the dark.”
Case in point, the two say, is the impact on General Electric’s labor force of the proposed shift to compact fluorescent light bulbs from incandescent bulbs. GE manufactures the environmentally friendly compact bulbs in China, which has caused friction with the company’s U.S. employees. The petition also targets PepsiCo, Du Pont and Caterpillar—also members of USCAP—for not disclosing financial risks adequately, as well as Wal-Mart, which is not a member.
“Global warming regulation represents a serious risk to publicly owned corporations, yet this threat to corporate earnings and shareholder value is not being disclosed to shareholders,” the petition stated.
According to Ms. Lubber and supporters, companies actually could reap benefits by addressing climate change. One analysis cited by Ms. Lubber found that U.S. electric power companies that have not prepared for the future cost of carbon regulations could see losses in earnings of up to 17%. Conversely, the same analysis found that companies with less polluting fuel mixes could see earnings increase by as much as 15%, she said.
The SEC has not issued a response on either petition and is not required to do so, though staffers may review them.
Environmental proxy proposals seeking more data on financial risk from global warming have come into vogue (see “Green Proxies to Be Red Hot This Season,” FW, Oct. 29). Last year, environmental activist shareholders filed a record-breaking number of green proposals; even more are planned for the 2008 season.
U.S. Climate Action Partnership Report
USCAP is a group of businesses (Alcoa, BP, Dupont, etc.) and environmental organizations (Environmental Defense, NRDC, Pew Center, etc.) that have come together to call on the federal government to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions. Their report: A Call for Action.
The report advocates a cap-and-trade system plus R&D support with the following targets for GHG emissions:
- 100-105% of today’s levels within 5 years of enactment
- 90-100% of today’s levels within 10 years
- 70-90% of today’s levels within 15 years
Witnesses
- Chad Holliday Chairman and CEO , Dupont
- Fred L. Smith Jr. President, Competitive Enterprise Institute
- Jonathon Lash President, World Resources Institute
- Kevin Book Senior Analyst/Vice President, Friedman Billings Ramsey & Company, Inc
- Peter Darbee Chairman, CEO, and President, PG&E Corporation
- Harold G. Hamm Chairman and CEO, Continental Resources, Inc.
- Steve Elbert Vice Chair, BP America
10:56 Fred Smith of the EII is anti-cap-and-trade. “Even if one accepts the alarmist view of global warming.” His opening statement is going too long.
10:59 Harold Hamm, Continental Resources (mid-size oil & gas exploration company). “While I do not believe the science of global warming is proven or settled…” he does support energy efficiency. “I strongly disagree with” cap-and-trade. He’s equivalating it with Pres. Clinton’s proposed BTU tax which was killed by the oil & gas lobby.
11:03 Sen Carper is up. Darbee (PG&E) is neutral on cap-and-trade since their profit margin is already regulated. What’s your motivation? “In short, it’s to do the right thing.” The company had no official position on global warming when he became CEO two years ago. They studied it, had roundtables, and decided that anthropogenic global warming is real and the time to act is now.
11:08 Kevin Book: review of acid rain mercury/sulfur rules. (Paraphrasing) it worked.
Peter Darbee: there is merit in breaking up the problem into discrete components. US-CAP believes in an economywide program but it may be reasonable to start going industry by insdustry.
Holliday: DuPont used an internal cap-and-trade like program by rewarding internal programs that were more efficient.
Carper: What can Congress do to get industry ready?
Holliday: It’s understanding the total legislation that comes is important. Companies will be like DuPont: our employees and shareholders are asking us to take action. Change has come in the last two or three years.
11:14 Sen. Lamar Alexander questions Darbee. “There’s no coal-fired plants in California?” Some coal-powered energy comes in from outside the state, but even though 50% of US energy comes from coal, nearly none of California’s energy is coal-based. It’s almost entirely hydro, nuclear, and natural gas.
11:21 Elbert is interested in a national, mandatory program that covers all sectors of the economy.
11:56 Kit Bond (R-MO), a big cap-and-trade opponent. It’s fun watching a Republican trying to attack big corporations like those represented by the panel. He’s actually bringing up Enron as why cap-and-trade is evil. “They would profit off the pain of other companies and consumers.” Companies are willing to work for environmental goals because it pads their bottom line. Big Oil will make money in any scenario. Some on this committee, but not me, would consider their profits ill-gotten windfalls. But hey, they’re there to make a profit. He’s twisting himself into knots being a pro-mega-corporation populist.
The future is clear in cap-and-trade: less coal, more natural gas, higher profits from higher costs. Am I here to blame the companies today? No, I expect you to return value to shareholders. Let’s not get that competitive advantage by sticking it to the people.
Ah, the struggling middle-class workers.
“Don’t saddle the Midwest - our workers, our farmers, our poor - with outrageously expensive natural gas caused by carbon caps.”
He throws it to Fred Smith to attack cap-and-trade.
Boxer basically says Smith’s claims about Europe’s situation is a bunch of hooey.
12:08 Sen. Sanders (I-VT) in his remarkable accent is talking about the Boxer-Sanders legislation. “While the political will in Washington has been lagging the American people, the technology is moving forward.” How could it be that MPG has gone down in the last twenty years? We are at the cusp of a solar energy revolution. All of the technologies are sitting there waiting to go forward. Sanders knows Lash from Vermont.
What is the economic implication if we do not move away from fossil fuels.
Lash says that Paul Volcker gave a speech a week ago: moving away from greenhouse gases won’t be that bad, but if we don’t, the economy will go down the drain in the next 20-30 years.
12:12 Darbee (PG&E): regulations on our industry were great for California and just fine for our company. Similarly the acid rain cap-and-trade worked faster and was cheaper than expected. “The cost of not [dealing with GHG] could be catastrophic.”
Darbee: I’m very concerned about energy security here in the United States. Plug-in hybrid cars can make use of the unused night-time generating capacity than even already exists. The leap to the plug-in hybrid is not very far. Toyota is leading.
Sanders: Despite the significant amounts of corporate welfare we have given Detroit, Toyota and Honda are ahead on hybrid cars. I find that very unfortunate.
Holliday (DuPont): hooray for corn ethanol!
12:17 Inhofe up to make his closing statement. I can’t deal with it, honestly, it hurts my head to hear him.
Inhofe: hero of marginal and stripper wells everywhere.
12:35 Boxer: Don’t compare companies that are sitting here today with Enron! Don’t use Enron as a way to defame people who support action on global warming.