Remembering ‘Green’ Enron (Part I: The Kyoto Moment)
[Ed. note: This week marks the 10th anniversary of Enron's bankruptcy filing (December 2, 2001). Enron's view of energy sustainability drives the Obama Administration's "green 'dream' team" today, so such a look back at Enron's crony capitalism is merited.]
Beginning in the late 1980s, global warming became a bread-and-butter issue for Ken Lay, Enron’s leader and up-and-coming industry visionary. Enron in the 1990s became a full-fledged “green” company, practicing “energy sustainability” with its investments in solar power, wind power, energy-efficiency services, and environmental services.
No U.S.-based company sounded the tocsin over climate change more than Enron. What John Browne did as head of the international energy major BP, Ken Lay did in the United States, working with interest groups and political leaders to push the energy industry and public toward carbon dioxide (CO2) regulation.
Lay had his reasons—seven in terms of company profit centers, all of which stood to gain from government restrictions on carbon emissions. They involved:
· Natural gas production (relative to oil and coal),
· Natural gas transmission (relative to oil and coal),
· Natural gas-fired electric generation (relative to oil and coal),
· Energy outsourcing (a/k/a energy efficiency) services,
· Renewable energy generation (wind and solar),
· CO2 emissions trading (joining company trading in sulfur dioxide and nitrogen oxide), and
· Environmental outsourcing (a/k/a environmental services).
Of these, Enron’s natural gas activities were core, profitable activities (and “win, win” economically and environmentally, in their important applications). But the last four areas were problematic from the start and never profitable, even with special government favor. In retrospect, almost no amount of government subsidy would have been enough for these nascent businesses.
Kyoto Protocol To “Monetize” Enron ‘s Agenda
But there was always hope.
In late 1997, an elated Enron climate lobbyist reported that a climate-change accord was reached in Kyoto, Japan, among 38 Annex 1 countries (the developed world) to reduce their collective greenhouse gas emissions by 5.2 percent by 2008–12 compared to base 1990 levels. The United States, itself committed to a 7 percent decrease, at least in principle, would need new waves of government intervention to reduce its emissions, which meant more subsidies and new mandates for politically correct renewable energies (wind and solar, not hydropower) and energy conservation programs.
Thus Enron’s John Palmisano infamously wrote from Kyoto:
If implemented [the Kyoto Protocol] will do more to promote Enron’s business than will almost any other regulatory initiative outside of restructuring of the [electricity] and natural gas industries in Europe and the United States…. The endorsement of emissions trading was another victory for us…. This agreement will be good for Enron stock!!
It was time to turn deeds into dollars, he added:
Enron now has excellent credentials with many ‘green’ interests including Greenpeace, WWF [World Wildlife Fund], NRDC [Natural Resources Defense Council], GermanWatch, The US Climate Action Network, the European Climate Action Network, Ozone Action, WRI [World Resources Institute], and Worldwatch [Institute],” reported Palmisano. “This position should be increasingly cultivated and capitalized on (monetized).
Enron was popular at Kyoto. Palmisano spoke on panels and received an award from the Climate Institute on behalf of Ken Lay and Enron. And the praise continued. Worldwatch Institute’s State of the World 1998 identified Lay’s company as a key player in a coming “energy revolution.” The authors explained: “Enron, originally a large Texas-based natural gas company, has made a strong move in the renewables field with its acquisition of Zond, the largest wind power company in the United States, and its investment in Solarex, the second largest U. S. manufacturer of photovoltaic cells.”
While closely associated with both Bush Administrations, Lay was ideologically closer to another political figure on the issue of climate change. “In Earth in the Balance, Senator Al Gore stated: ‘Higher taxes on fossil fuels … is one of the logical first steps in changing our policies in a manner consistent with a more responsible approach to the environment’,” stated Lay. “I agree.”
This post is taken from Robert Bradley, Capitalism at Work: Business, Government, and Energy (2009), pp. 306–308.