Road to Kyoto: Letter from Ken Lay to George Bush (April 3, 1992)
“[Enron was] the company most responsible for sparking off the greenhouse civil war in the hydrocarbon business.”
- Jeremy Leggett, The Carbon War (London: Penguin Books, 1999), p. 204.
“The United States fully intends to be the world’s preeminent leader in protecting the global environment. [E]nvironmental protection makes growth sustainable…. [This] recognition … by leaders from around the world is the central accomplishment of this important [United Nations] Rio Conference.”
- George H. W. Bush, “News Conference in Rio de Janeiro, June 13, 1992.
The rise and fall of Enron Corp. is Exhibit A by government advocates for increasing regulation of what is seen as unbridled, market-failure-ridden capitalism. As one economics textbook states: “The story about Enron reminds us of a serious fact of economic life—that markets fail….” 
But upon closer inspection, Enron is Exhibit A against political capitalism, not free-market capitalism. Enron was about the political means, or rent-seeking, rather than about economic means of consumer service.
Enron is a fascinating case study about the perils of interventionism, not the perils of business in a free society.
Ken Lay and Enron set in 1990 set out to become the world’s first natural gas major; the most innovative and reliable provider of clean energy worldwide for a better environment.  The enemy to natural gas was coal, and Lay worked not only to remove artificial advantages of coal over natural gas (Fuel Use Act of 1978; incremental pricing rate design, etc.). He worked to reverse the tilt in favor of gas.
Before Lay and Enron were done, seven profit centers were created around the climate-change issue, or more specifically, pricing carbon dioxide (CO2). And when the Kyoto Protocol was signed in December 1997, a euphoric Enron lobbyist wrote back home: “This agreement will be good for Enron stock!!).
So where did the road to Kyoto begin, both in terms of Enron and the United States?
Just perhaps it began with a three-page, carefully orchestrated letter from Enron’s chairman Ken Lay to George H.W. Bush in April 1992, a few months ahead of a major kickoff UN global warming meeting . A reluctant Bush went, spoke … and the rest is history.
Dear Mr. President:
I am writing to urge you to attend the upcoming United Nations Conference on Environment and Development scheduled for early June in Brazil and to support the concept of establishing a reasonable, non-binding, stabilization level of carbon dioxide and other greenhouse gas emissions.
This stabilization level should serve as a useful public policy guide, not a policy mandate. Moreover, I believe a market-based policy approach is the most cost effective and environmentally beneficial method to achieve greenhouse gas stabilization.
The demagoguery on both sides of this issue has been extraordinary fierce. Frankly, I do not believe the oceans will boil in a few years if we don’t address greenhouse gas emissions, but I also do not believe the U.S. will suffer from economic ruin if prudent steps are taken to reduce CO2 emissions in order to protect the global environment. In fact, if pursued through market-based policies, a reduction in greenhouse gases should result in a cleaner environment, cheaper electricity, and more American jobs.
Among other industries, I am convinced that America’s hard-pressed domestic natural gas industry would benefit substantially from a market-based approach to reducing CO2 emissions. Natural gas is our cleanest fossil fuel and through its increased use in electric power generation could play a major role in reducing CO2 emissions and delivering lower electricity prices to consumers.
For example, as compared to a new coal-fired power plant, a natural gas-fired power plant, a natural gas-fired power plant reduces carbon dioxide emissions by 58 percent (the principal greenhouse gas), produces virtually zero sulfur dioxide emissions (the main cause of acid rain), and cuts nitrogen oxides by 80 percent (one of the main contributors to smog). Of course, a gas-fired plant does not produce any solid waste—ash or sludge.
Natural gas electric power generation is not only cleaner, it is cheaper—at least 30 percent less costly than coal-fired electricity generation over the life of the plant using long-term natural gas prices currently offered by Enron and others. Natural gas power plants have also proven to be significantly more reliable than coal or nuclear power.
In summary, I urge you to provide leadership on this important global environmental issue. Not only will many U.S. industries benefit from measures to reduce greenhouse gas emissions, including the natural gas industry, but with the appropriate market-based policies, the measures will result in a cleaner environment, cheaper electricity, more American jobs, and a reduced trade deficit.
 Enron Corp, 1989 Annual Report, p. 4 (dated March 12, 1990).
 Gary Clayton, Economics: Principles and Practices (McGraw-Hill, 2008), p. 179.