TCS Daily

What's Behind Utility Execs Flacking for Caps on CO2?

By James V. DeLong - May 14, 2001 12:00 AM

Flacks for the utility industry scored an apparent coup Thursday, May 10 in the Wall Street Journal. A front -page story sneered at the Administration for rejecting controls on CO2, asserted that these are inevitable in the future, and lauded industry execs for accepting this truth. "Sensible, farsighted utility executives," it reported, "look at the world as it is, not as they wish it would be."

The story winds up with policy advice: The Administration should cap CO2 emissions and then allow trading to promote their most efficient use.

This last part gets to the nub of the utilities' true interest, and it is not in "the world as it is." A cap and trade system would be a bonanza for utilities that derive their power from non-coal sources because they would then get the equivalent of a royalty on every kilowatt hour produced by coal-fired plants. Some utilities have already invested substantially on the assumption that such a system will sooner or later come to pass. But now these bettors have a problem. They actually believed the Al Gore hype about "the science is settled," "a warming trend is established," and so on. In actual fact, the scientific support underlying the assertion that climate change is a crisis is eroding with spectacular speed, and the odds are high that within a couple of years this one will have joined the great global cooling scare of the 1970s and Piltdown man in the graveyard of scientific "oopses."

At that point, the executives who bet billions on the crisis will not look quite so sensible and farsighted.

There is a salvation -- declare the game over and stop inquiry now so that no one will ever learn that the scientific support has turned to mush. And the best way to stop inquiry is to pressure the Administration into declaring policy closure.

The environmentalists will provide help for this strategy because they are even more desperate than the utility executives. The enviros have bet the farm, putting all their chips of honesty and credibility on the climate change line. If public perception about the science ever catches up with the reality, the blow to their public position will be devastating. So the decibels are mounting.

One cannot sell this coalition of industry opportunists and environmentalist CYAers short. They successfully pulled off this trick of closing debate in past controversies over acid rain and the ozone layer, giving us enduring policies that are expensive, foolish, very profitable for selected industries, and scalps for the enviros.

But CO2 is too big a bite. The close-the-debate strategy does not work if the stakes are large enough to compel the continuing attention of the whole society. In such a situation, as the pain of the policy bites people will take a close look at the underlying rationales. They will notice the weaknesses, and if the pain caused by the policy is great enough the ultimate backlash will be severe.

Nonetheless, the utility executives and their allies have a strategy, which is to hope that the Administration is indeed as dumb and disorganized as the enviros and the WSJ claim it is and can be pressured into changing its policy. Then, they hope, the policy will become so entrenched that even subsequent revelation of its lack of a foundation and appalling waste would not cause a reversal.

If this worked, it would be a not-so-long-term disaster for Bush, Cheney and company, but concern about the Administration is low on the priority list of both utility execs and environmentalists.

It seems unlikely that the Administration will fall for the ploy, but Washington is a wacky place. So stay tuned.

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