TCS Daily


Thanks, But No Thanks

By Ryan H. Sager - February 11, 2002 12:00 AM

Jim Rogers, CEO of electric and gas supplier Cinergy, is a hell of a guy. He cares about the environment - so much so, in fact, that he's willing to help environmentalists take your money and his competitors' money and give it to him. The scam is called carbon trading, and Rogers and other energy CEOs have jumped on board the increasingly fat-cat laden ship lobbying to make it law.

In short, the grift works like this: Under a carbon trading scheme, a regulatory cap would be placed on carbon dioxide emissions from power plants. Tradable permits would then be issued to companies allowing them a certain amount of emissions. Some companies would wind up with credits to sell. Others would need to buy a large number of credits. All the while energy prices would bolt upward.

Cinergy, of course, would be one of the winners under a carbon trading scheme - otherwise the shareholders would have locked Rogers up and taken away his shoelaces by now. Cinergy has a large investment in (environmentally friendly) natural gas, which could bring them lots of those valuable carbon credits. So they can afford to hop on board. Even better for Cinergy, the carbon trading scheme would serve to kneecap their pesky competitors - heavily coal invested power companies such as Southern Company. And no matter which individual companies win or lose, ultimately the consumer is bound to pay higher prices.

There's a term in economics for this sort of behavior: rent-seeking. It means pursuing regulatory changes that benefit you at the expense of your competitors. But perhaps that's too technical a term. In everyday language we'd probably just call it stealing.

Economist Bruce Yandle has an even better term to explain what's going on with Cinergy and other companies supporting this regulatory scheme. A while back he coined the phrase "Baptists and Bootleggers" to describe coalitions of idealists and opportunists who stand athwart one another as natural antagonists but benefit from the same regulatory system.

There's one party conspicuously left out of these Baptist-bootlegger coalitions however, and that's the consumer. With energy producing bootleggers like Mr. Rogers trying to give an unsolicited backrub to the environmental Baptists, poor Mrs. Energy Consumer might just start to feel a little bit jilted.

Before turning his back on her and taking all her money, perhaps Mr. Cinergy should think a bit more about the mistress he's considering taking up with. Baptist though she may be, Ms. Environment is a woman with expensive tastes. No loose-fitting carbon trading cap will satisfy her for long. Soon enough she'll want a tighter, more expensive cap like the one Miss Kyoto's been strutting around town in, or the one Mademoiselle France got for Bastille Day. After a while she might even want him to cut out that nasty carbon habit altogether and build her some pretty windmills and solar panels. Sure, she'll try to get Uncle Sammy to pay for some of it, but once he's given an inch she'll be damned if she doesn't get that mile.

Politics does make strange bedfellows, and for that reason sometimes its best to sleep at home. Mr. Rogers and his fellow CEOs should learn from the mistakes of other industries that went trolling around downtown Washington, D.C. streets late at night looking for a good time. Tobacco companies tried to buy favor in Washington by making some early concessions and got torn a new filter. AOL lobbied for years for access to other companies' high-speed Internet lines and now finds itself defending against exactly that kind of train hopping on its newly acquired cable network.

Any energy company thinking of even holding hands with the environmental movement should beware a similar fate. After all, environmentalists feel about energy companies pretty much the same way that black widows feel about their mates - seduce them because you can, then kill and eat them. These aren't people who simply want to freeze carbon dioxide emissions -- even someone as "mainstream" as Al Gore has proposed pushing emissions back to 1990 levels.

Until and unless some actual harm can be shown to come from high levels of carbon dioxide emissions -- a highly tenuous prospect -- Mr. Rogers should refrain from conceding this unproven point and stick to a principled defense of his vitally important industry. But of course if he did that, then his little green friends wouldn't help him pick your pockets.

Ryan H. Sager is a freelance writer based in Washington, D.C.
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