A free-market energy blog
Random header image... Refresh for more!

Ken Lay to California I: BLOCK the PROP (A.B. 32 is ‘An Ounce of Global-Warming Prevention’)

“It’s time to stop debating the issues surrounding climate change initiatives and focus instead on simple, realistic, cost-effective solutions. This is one area where an ounce of near-term prevention will be worth considerably more than a pound of cure later on.”

- Ken Lay, “Let’s Have an Ounce of Global-Warming Prevention,” December 1997.

“An ounce of global warming prevention is worth a ton of CO2 cure.  There are no emergency rooms for a sick planet.”

- Edward J. Markey (D–MA), “Second Life Remarks to the Virtual Bali UN Climate Conference,” December 2008.

The New York Times and other media outlets have identified the principled free-market advocates Charles and David Koch as supporters of California’s Prop. 23, a measure to suspend the Global Warming Solutions Act of 2006 (AB 32).

Given this publicity, it is only fair to resurrect the argument used by the late Ken Lay for doing just what AB 32 supporters want. After all, Lay and his political capitalism model for Enron and America is just the opposite of the Koch’s  ideal of free-market economy and Principled Entrepreneurship™ for America and business.

Lay Op-Ed: December 1997

An op-ed published by Ken Lay in the Houston Chronicle on  December 5, 1997 (p. 47A–no longer available*) provides a case study of misdirection by a corporate CEO to benefit his profit centers. “Let’s Have an Ounce of Global-Warming Prevention” portrays Enron and like companies as having the climate solution at their fingertips when, in fact, a pound of government was not worth an ounce of prevention or cure. Indeed, in the most widely read post in the history of MasterResource, Chip Knappenberger calculated that an 83% reduction in U.S. CO2 emissions by 2050 (the aspirational goal of the Waxman–Markey bill) was worth less than one-tenth of one degree of avoided warming from the alarmists’s own climate models.

And the temperature effect is even more de minimis California, which produces 6.2 per cent of U.S. CO2 emissions and 1.4 percent of global CO2 at present.

Here is the Lay op-ed from the pre-Kyoto days.

“Let’s Have an Ounce of Global-Warming Prevention”

- by Kenneth L. Lay, Chairman and CEO, Enron Corp.

The international climate change treaty negotiations in Kyoto offer the chance to prevent, at surprisingly low cost, a global warming scenario that might otherwise prove extremely expensive. Unfortunately, the career naysayers will attempt to confuse the debate, while companies that neither challenge nor support the scientific foundations for near-term action could waste a tremendous opportunity to stimulate realistic climate solutions.

Since, for most companies, control of greenhouse gas emissions is not an important issue, incremental and flexible regulatory programs would have negligible near-term impacts on the U.S. economy. Exports, for example, would suffer little, because of their relatively small energy component and the likelihood that energy prices will not increase significantly. Additionally, the cost of carbon reductions will decline as mass production meets the growing domestic and overseas market for “green” technologies. According to the Alliance to Save Energy, smart regulatory programs could even create as many as 800,000 new jobs.

There are three reasons why regulatory action is warranted. First, the science—although not conclusive—is substantial, and the absence of ironclad certainty does not justify apathy. Although industry has frequently opposed environmental or health regulations that were later justified by proof measured in deaths, illness and injury, industry has not always cried wolf—productivity and competitiveness can be hindered by poorly designed regulation. This is why we should rely on systems such as emission credit trading to mitigate the impact of climate change.

Second, the cost of obtaining “dead certain proof” could be high. Even if one argues that the science is not perfect, one must also acknowledge that the cost associated with certainty could be measured in more heat waves, pest infestation, storm damage and rising sea levels. A realistic regulatory program would set in motion public and private sector initiatives to capture the cheap reductions as soon as possible, while we continue to validate the science.

Third, the cost is low for insurance that takes the form of new national regulatory programs. With the right policies, such as a carbon credit trading program and incentives to start reducing carbon emissions sooner rather than later, the cost of control for the next five years would be negligible.

Stephen Decanio, an economist with President Reagan’s Council of Economic Advisers, has pointed out that to cut emissions from 1990 levels by 20 percent, eight climate economic models show gross domestic product losses of .9 percent to 1.7 percent, but that a 1.0 percent loss of GDP would amount to “less than six months of normal economic growth.” This means a half year’s delay in reaching the standard of living that would have been achieved without emissions curtailment—hardly the end of Western economies.

Why is there so much confusion about costs? When economic modelers use different assumptions, the models yield a wide array of results. But when Robert Repetto of the World Resources Institute recently analyzed many of the economic models forecasting impacts of a carbon control program, he found that when they used the same assumptions, the models gave generally similar results, namely a small and potentially favorable macroeconomic impact. This makes sense, since for 95 percent of U.S. industrial employment, energy costs are less than 5 percent of the value of total output.

The regulatory flexibility currently advocated by the more pro-active members of industry builds on 20 years of experience with air pollution credit trading in the United States. The General Accounting Office and U. S. Environmental Protection Agency have documented that between 1976 and 1995 these programs saved U.S. industry billions of dollars, as compared with alternative command and control regulatory schemes. Current economic studies show that carbon-control costs could be reduced by 70 percent if international credit trading is employed.

The keys to success are simplicity, incrementalism and an early start date. Steady reductions of 1 percent to 2 percent per year from our currently high emissions base will prompt a clear demand for solar power, wind power, fuel cells and other 21st century technologies, thereby creating a demand for efficiency in energy and manufacturing.

To solve the climate change problem, we need to implement those systems that reward people for saving energy, reducing emissions and building a culture that identifies and corrects inefficient use of resources. Meanwhile, low-cost carbon reductions will be achieved, as well as nitrogen dioxide, particulate and sulfur emissions reductions. If the problem turns out to be a mirage, we can stop. If the problem is more severe than expected, then we can phase in larger reductions.

It’s time to stop debating the issues surrounding climate change initiatives and focus instead on simple, realistic, cost-effective solutions. This is one area where an ounce of near-term prevention will be worth considerably more than a pound of cure later on.

* The Houston Chronicle does not have live links to much of its historic content. The Houston/Gulf Coast-based Citizens Environmental Council (CEC) referenced Lay’s piece here.

1 comment

1 SID { 10.08.10 at 11:22 pm }

this should be encouraged , good concept to clean the environment

Leave a Comment