Here is the question: Should you throw out your incandescent bulbs and replace them with CFL’s?

The answer (I am told) is yes according to Energystar. The energy savings is substantial enough that it overcomes the climate change affect of the waste.

Next question:  Should you throw out your old inefficient refrigerator or washer/dryer to buy a more efficient one?

The answer is a more tepid yes. More tepid because it starts to get into where the appliance goes. If it goes to the landfill then yes. If instead, it goes to someone else (the more likely scenario) then no. Theoretically, this just adds more energy usage. If the appliance gets recycled, then it is a resounding yes, throw it away. If it goes to the landfill then it is a tepid yest, throw it away. However, the efficiency of new is tremendous.

Next question: Should you replace your SUV with a more energy efficient vehicle?

The answer is propably yes… but how about the appliance answer. It isn’t the same. Although someone will use the SUV the relative climate damage is much higher. The Prius gets 45 MPG versus the Explorer at 15 MPG; in other words three times the efficiency. It would take you three years of Prius driving to equal one year of Explorer. However, when accounting for the manufacturing emissions it becomes more difficult to ascertain.

What do you think?

I read an article in the New York Times in late April that spoke to the fact that opponents of action against climate change actually knew it was a problem. That the groups’”own scientific and technical experts were advising that the science backing the role of greenhouse gases in global warming could not be refuted.” This goes back to 1995! Yet, the lobbyists continued to raise doubts as their funding came from the oil, coal and other large industries.

Then we see the other end of the spectrum: Wal-Mart. Wal-Mart embraced the need to act environmentally in 2005. They had their “Choice Meeting” and chose to be “Green.” This led to efficiencies, less public outcry and a better image. Yes, this counts. From December 30^th 2005 to May 19^th 2009, Wal-Mart stock is up 2.1% compared to -22.1% and -28.4% for the Dow Jones Industrial Average and S&P 500 over the same period. Also, that 2.1% compares favorably to the -24.4% for Target over the same period.

If you embrace what is coming you can succeed. In today’s world of information a company cannot control the message. The truth will come out and when it does and all the delays just bring about public ire. We see many forward thinking companies that adjust to impending rules. For example, Entergy in 2001, CEO Wayne Leonard “said he decided the risks of not acting to reduce his company’s output of greenhouse-gas emissions outweighed the costs of acting unnecessarily, and Entergy became the first utility to voluntarily cap its carbon-dioxide emissions. The company pledged not to generate any more emissions than it did in 2000, and since then it has managed to reduce carbon-dioxide emissions by an additional 17.5 percent, to 43.9 million tons in 2008.” Which utility do you think is going to benefit from legislation, Entergy who acted early and boldly or those that denied and waited?

We met with a utility business this week and had an enlightening discussion. We spoke frankly with a high-level executive who clearly understood carbon emissions and the need to manage/legislate them. However, he said that they could not publicly embrace limits. He also said that he is in a competitive business that would not allow him to take such a position without potentially harming his business. I understand his fears but respectfully disagree that taking action against CO2e creation will hurt his business. It’s a matter of long-term thinking verus the short term.

A business that acts early and boldly will benefit from a corporate image that shows them for the leaders they are. We have all seen the fate of laggards; or more accurately we can only remember the winners: who were Microsofts competitors in 1975. In his book Accidental Empires, Robert Cringley says of the 19 advertisers in the 1979 issue of Infoworld only two, Microsoft and a one-man operation called MicroDoctor, are still in business. Be bold and act now.

“First they ignore you, then they ridicule you, then they fight you, then you win.”

- Mahatma Gandhi

Well, two Republicans and a Democrat are sponsoring a bill that creates a Carbon Tax.

Let’s take a step back here. That means they accept that Climate Change is an important issue and that man is a major contributor to that issue: Republican Congressman Jeff Flake of Arizona said, “Obviously, we want less carbon, so we tax it.”

Next, they say that they want a tax as it is simpler. Flake also said “[t]he first axiom of economics is if you want less of something, you tax it.” According to the story, Inglis and Flake oppose the Cap-and-trade measure, saying it would create a huge federal bureaucracy to regulate the sale and trade of carbon credits. So they concede it is an important problem but don’t see it as complex.

We like Cap and Trade for two significant reasons:

1) A straight tax goes into the black hole of government and can be used for anything and won’t necessarily solve issues that contribute to Climate Change.

2) Under Cap and trade, money goes to solve the problem at the source. The U.S. has been an economic success because of our innovation and creativity. Given the right incentives, businesses will create solutions. Some of the solutions are going to come from small startup companies that just need funding, which will rightfully come from the polluters. Other smart companies will get paid to be more efficient. It is negative versus positive - we say to businesses that they should benefit not be punished to a lesser extent.

The quote from Tom Williams, corporate vice president for federal issues with Duke Energy, says it all: “A carbon tax is effective in many respects, but we consider it more of a blunt instrument. Cap and trade is designed to be more surgical.”

A blunt tax will not solve the problem of climate change but will fund overall government spending. We will wake up one morning with increased cost and no efficiencies to show for it. This is how we dug this hole in the first place. Worst of all we will have to look to China and Germany for green solutions.

FPL is the largest renewable energy producer in the U.S. Under the proposed bill they will have to pay less tax. Under Cap and trade they get paid a market rate for their production. It is a significant difference - much like being a stockholder versus a bondholder. Stockholders get upside for investments. This rewards risk taking - like trying new technologies. Taxes are for bondholders who are into preservation of capital. If I were being taxed, I pass it on to my customers as a cost I cannot control. Under Cap and trade I try to reduce aggressively as I benefit more from bold action. We need bold action!

I am not in the “know.” I understand how a bill becomes a law because I watched Schoolhouse Rock as a kid. I vote. I have opinions but I never watch the political process on bills become law, especially contentious ones.  Generally, I think that the congress wants to do the right thing. I have seen enough conspiracy movies to know that they are basically untrue. I also understand that congress is like a sausage factory: meaning you don’t want to see the details that go into a law.

So suddenly I am engrossed by the Waxman Markey Bill. The question is posed to me daily if not more often: “will cap and trade be passed? And when?” I emphatically believe that it will pass and soon. I do because Climate Change is such an important problem I cannot believe anyone who knows the facts would not act.

Now I look at the ridiculous complaints about Cap and Trade. Some blatantly biased pro-fossil-fuel action voices are saying cap and trade is a bad idea. The CEO of Chevron is “skeptical” , the CEO of Exxon Mobil thinks it’s a bad idea.  U.S. Congressman Joe Barton, Representative 6th District of Texas says it shows that we want to be like Haiti or take us back to 1875. Some are even trying to say it is anti-Midwest and point to high Coal usage for the electrical grids in those states, which ignores the fact that the highest coal usage is in N. Dakota, Wyoming, Indiana and New Mexico or that oil and gas grids are only slightly better for CO2 emissions. I don’t know why I am surprised at the amount of baseless fear being served to the public.

What does give me pause on the passage of this important legislation is that a recent Zogby poll shows only 30% support Cap and Trade and 57% oppose it. This is where Washington gets its direction. However, given the full court press anti-cap and trade forces this may not be a terrible rating.  I think if we just polled the survivors of hurricane Katrina, the outcome might flip the other way.

The National Association of Manufacturers also came out against Cap and Trade. One of their members, Duke Power, dropped out of the group in protest. It is the back and forth again.
I was told a few months ago that there weren’t enough votes to pass a Cap- and-Trade bill. That was before Al Franken was seen to be the winner in Minnesota and Arlen Specter was a republican. I have heard that the bill will pass with softened conditions like lower early caps and giving away a percentage of permits instead of auctioning them all off. I have heard that it won’t pass until 2010. I have heard it needs to pass before the Climate Conference in Copenhagen in December 2009. I have heard the bill will come out of committee before Memorial Day. I know that industry does not want the EPA regulating CO2 under the clean air act.

When I lived in Mexico, OJ Simpson was arrested. My Mexican friends said he won’t go to jail because he is rich and famous. I told them that they were wrong; in the US the law is for everyone. They shook their heads at my naiveté. I guess they showed me.

I spoke to a colleague in Canada who is confident that the US will pass a Cap-and-Trade bill as Obama has committed to it and it would be unbelievable if we did not do it. I spoke to someone in Europe who similarly has complete faith in Obama getting the law passed.

I believe we will have a Cap-and-Trade bill passed in the US this year. I believe it will have all sorts of compromises and loopholes and be really ugly. But it will pass. 

Here’s the fourth and final post regarding the American Clean Energy and Security Act (”ACES”).
1)    Clean Energy
2)    Energy Efficiency
3)    Global Warming
4)    Transitioning - protects everyone until adoption

Part 4 - Transitioning - Protects Everyone until Adoption

The first piece of Section 4 refers to rebates - “sectors that use large amounts of energy, and produce commodities that are traded globally, would be eligible for the rebates.” This assures U.S. industries don’t become disadvantaged relative to international companies. For example, Steel is a very energy-intensive product leading to high carbon dioxide emissions. Equally, Steel is an international commodity that is relatively fungible. So, a U.S. Steel company that needs to account for CO2e emissions may be at a disadvantage against a Chinese Steel Company which would not need to account for CO2e emissions. Here is the issue - not only is this against international trade laws, it also assumes other countries aren’t paying for emissions. It is another example of “easy out” provisions in the bill.

 The second portion focuses on provision for training, retraining, and adjusting to a new renewable energy economy. This I love. This is what government is supposed to do - externalities. I like adding funding for universities and student loans to learn new skills. This is a way the money spent yields dividends.

Another portion supports funding to help developing nations that institute climate change policies deploy clean technologies. This is a tricky provision. It could sound like “why fund actions in other countries?” The answer: It’s a clever way for the U.S. to create more customers internationally to buy our green products and services.

The last section refers to creating a council to study how climate change legislation is going, which is a waste of money.

Another onslaught of the “Climate Change is a Myth” rhetoric has begun. I was going to write a rebuttal in this blog until I realized why waste the space. Anyone reading this believes the science or if you don’t, nothing I will say will change your mind.

I spoke at an event last night hosted by TwinEngines. The group included business owners and industry professionals. There was a lot of fear, misunderstanding and trepidation about Cap & Trade. When explaining the details it becomes clearer and less overwhelming.

Let’s start with a simple fact: we cannot proceed the way we have been going. Why not? Well besides Climate Change, there is dependence on foreign oil, depletion of fossil fuels, drought/water depletion and other environmental destruction that is coming to a head. The second and third are never attacked by deniers, yet never addressed either.

Change is not fun if you fight it. If you were in the steel industry in Pittsburgh in the 1960’s you can attest to this. If you are in Detroit in the auto industry today it is the same thing. However, if we are to continue to grow and succeed as an economy we need to move to a new energy structure. The US did not do this voluntarily when the 1973 oil crisis occurred. France moved to nuclear power and now can set foreign policy with the middle-east, based on a different agenda.

Cap and Trade is the perfect solution. Emitters pay based on the amount they create and better yet, the money goes to exactly to the problem. Money from cap and trade does not go into the government, it goes to efficiencies and offset projects. If I said that you could decide where your taxes go: 10% to police, 20% to education, 15% to armed forces, etc. It would probably be preferable. In cap and trade the money goes to fix the problem. I think of it as a toll road. My toll is based on my usage and the money [should] go to build and maintain the road.

The cost of Cap and Trade, if done right, has been quoted as low as 0.4% of GDP. This is negligible when it starts to pay off in 3 to 5 years. Also, there are advantages to embracing change.  Companies that become more efficient with their energy benefit in the long-term. Companies that put up solar panels will have years of energy benefits. Companies that switch to more efficient vehicles will pay less for fuel later.

Cap and Trade is an opportunity. Change is an opportunity. Embrace change and you will win. Fighting change is a losing proposition