A Free-Market Energy Blog

"THIS AGREEMENT WILL BE GOOD FOR ENRON STOCK!!" (Enron's infamous Kyoto memo 14 years ago)

By Robert Bradley Jr. -- December 12, 2011

It is perhaps the most revealing ‘crony capitalism’ memo in American history–at least that is in the public domain. (I ask others to submit nominations for this (dis)honor to see if this memo does not take the prize.)

It was written from Kyoto, Japan in the afterglow of the Kyoto Protocol agreement by Enron lobbyist John Palmisano. The global green planners were euphoric that, somehow, the world had embarked on an irreversible course of climate control (and thus industrial and land-use control). Palmisano’s memo reflects that as well as the specific benefits for first-mover ‘green’ Enron.

Parenthetically, I was lucky to have received this memo back at Enron to share it with posterity. Palmisano had me in the “To” list but but purposefully did not email it to me (we were foes on ‘green’ energy issues). My free-market colleague at Enron, Jim O’Neill (now with the Thiel Foundation) called me in amazement for my reaction to Palmisano’s work of art, and he sent me a copy when I told him I did not receive it.

The memo was shared with the Washington Post soon after Enron’s demise, which resulted in the piece, “[Enron]  Chairman Pushed Firm’s Agenda With Clinton White House” (Dan Morgan: January 13, 2002).

Where is Palmisano now? Like a number of Enron refugees tied to climate alarmism, he has bounced around with ‘green’ groups such as the now-defunct Evolution Markets and Carbon Positive (see the end of the post).

Here is the entire memo, ten years old today!


To: Terry Thorn, Joe Hillings, Cynthia Sandherr, Jeff Keeler, Fiona Grant, Hap Boyd, Bill Shoff, Dan Badger, Tom Kearney, Lynda Clemmons, Bruce Stram, Mike Terraso, Rob Bradley, Jim O’Neill, John Hardy

From: John Palmisano

Date: December 12, 1997

Subject: Implications of the Climate Change Agreement in Kyoto & What Transpired

This memo summarizes the implications of the agreement reached in Kyoto and also describes what I was doing and provides some observations.


If implemented, this agreement will do more to promote Enron’s business than will almost any other regulatory initiative outside of restructuring of the energy and natural gas industries in Europe and the United States. The potential to add incremental gas sales, and additional demand for renewable technology is enormous. In addition, a carbon emissions trading system will be developed. While the trading system will be implemented by 2008, I am sure that reductions will begin to trade with 1-2 years. Finally, Enron has immediate business opportunities which derive directly from this agreement.

On the policy-front: There will be a great number of country-specific and international meetings related to every aspect of this agreement. I do not think it is possible to overestimate the importance of this year in shaping every aspect of the agreement.

Three issues of specific importance to Enron are: (1) the rules governing emissions trading, (2) the rules governing joint implementation within Annex-1, and (3) the rules governing the proposed clean energy fund (which promises to dwarf the GEF as a fund for wind, solar, and power plant conversions.)

On the business front: During the next year there will be intense positioning of organizations to capture an early lead in a variety of carbon trading businesses.

The endorsement of joint implementation within Annex-1 is exactly what I have been lobbying for and it seems like we won.

The clean development will be a mechanism for funding renewable projects. Again, we won. (We need to push for natural gas firing to be included among the technologies that get preferential treatment from the fund.)

The endorsement of emissions trading was another victory for us.

Highlights of the Agreement

38 developed countries are required to reduce greenhouse gas emissions to or below 1990 levels by 2012.

The U.S. reduction objective is 7%, the European Union is 8%, and Japan is 6%; therefore, it is not possible (or at least credible) that Congress can say the United States is at a comparative disadvantage vis-à-vis its main trading partners or competitors since the EU and Japan have higher control targets and are more “carbon-lean” than are we.

Six gases are included (CO2, CH4, N2O, HFCs, PFCs, and SF6).

Emissions trading is included. Details of an international system are to be worked out in 1998.

A “clean development fund” is included. The fund would allow for emission offsets from projects in developing countries.

Joint implementation for Annex-1, developed countries and the transitional economies, is included. This means that Enron projects in Russia, Bulgaria, Romania or other eastern countries can be monetized, in part, by capturing carbon reductions for sale back in the US or other Western countries.

While I do not have the final version of the agreement, I do have the first and second versions. The latest version is not on the world-wide web.

What I Was Involved In

I gave three speeches and received an award on behalf of Enron. The speeches dealt with emissions trading, energy efficiency/renewable, and the role of business in promoting clean energy outcomes. The award came from the Climate Institute and was for Ken Lay and Enron for our work promoting clean-energy solutions to climate change. The other recipients were Sven Auken, MP and Minister for Energy and Environment in Denmark, and MP and former Environment Minister for the UK, John Gummer.

I have met Gummer and Auken several times before and it was nice for them to hear Enron praised so much. (I gave a speech with Gummer last Saturday and it was the third time we have been on the podium together. He is someone who still retains considerable influence in the UK and Europe and someone Enron might want to cultivate.)

I was also involved in a press conference.


I believe that it will be impossible to separate electricity restructuring from climate change as a domestic political issue. The administration has signaled its view that the two issues are intertwined.

At yesterday’s White House press conference, this connection was underlined by the comments from Tom Kasten, President of Trigen Corporation who spoke in favor of the climate change agreement and its linkage to restructuring. His remarks had to be cleared by the White House.

These remarks are entirely consistent with every other signal from the Administration’s climate change team.

Through our involvement with the climate change initiatives, Enron now has excellent credentials with many “green” interests including Greenpeace, WWF, NRDC, GermanWatch, the US Climate Action Network, the European Climate Action Network, Ozone Action, WRI, and Worldwatch. This position should be increasingly cultivated and capitalized on (monetized).

(Parenthetically, I heard many times people refer to Enron in glowing terms. Such praise went like this: “Other companies should be like Enron, seeking out 21st century business opportunities” or “Progressive companies like Enron are….” Or “Proof of the viability of market-based energy and environmental programs is Enron’s success in power and SO2 trading.”)

Developing countries have acquired substantial negotiating power. The shift in negotiating power to India, Brazil, China, and the G-77 has been gradual and pronounced.

The EU negotiated as a group. Until two years ago, they negotiated as individual countries. While there are still individual country interests, the EU retains substantial power when working together. It was this cohesiveness that lead to a more stringent agreement.

EU delegates asked for my input into the agreement to oppose some of the positions espoused by some US delegates. In particular, the US was advocating no rules governing the trading of carbon emissions because rules would “inhibit trading.” My position is that rules defining who owns what reductions, how reductions are traded, how they are tracked, and liability rules will help promote trading since rules give both buyers and sellers more confidence in the commodity.

While some companies and trade associations continue to criticize developing countries for not doing more, no company wants to be specific on this issue. To the extent any company does, they will hide under the shield of a trade association. I think that shield will soon be pierced. I believe that some companies will soon break from the line that developing countries should do more. It is a weak position in terms of equity and suicidal in terms of their commercial interests in these countries.

An increasingly ugly trend has become evident to the environmental NGO community and the delegates from developing countries. They see the argument about developing country participation as a thinly disguised recycling of the early twentieth century fear-mongering characterized by the so-called “yellow-peril” or invasion of the US by Asian peoples.

The developing country delegates see the argument of the carbon lobby that the US will lose markets to developing countries as empty and racist—they see energy-intensive imports to the US coming from Japan and Germany in terms of automobiles (and these are high cost energy areas), while economic growth in developing countries is fueled by local growth or Western industries requiring low cost of labor, low cost for land, or permitting flexibility for new plants.

Enron should not participate in any argument like this because it hurts our credibility with developing countries, NGOs, and developed country governments.

I should have a copy of the agreement today.

The next year will be very intensive because the structure of the agreement exists, business opportunities are being defined, the rules governing emissions trading will be developed, and identifying, financing, and managing JI projects will be important.

One final point, Terry, if you remember, I predicted an agreement that would yield a 5% reduction by 2010; we got 7% by 2012. I now predict ratification within 3 years. I predict business opportunities within 18 months. I predict this agreement will have very significant influences on the energy sector within OECD and transitional economies and will accelerate renewable markets in developing countries.

This agreement will be good for Enron stock!!


John Palmisano, Commercial Director, Carbon Positive has more than 30 years’ experience creating and implementing environmental policies. Since 1977, he has advised governments, industry and trade associations on environmental trading related to greenhouse gases, SOx, NOx and other pollutants.

John has been a consultant to the US Environmental Protection Agency (EPA), US AID, US Congress, EU, UN, World Bank and the Russian, Ukrainian and Canadian governments. He created the first emissions brokerage business, AER*X and founded three green NGOs – Russia’s CEEM, Ukraine’s FDEEM and the European Business Council for Sustainable Energy, e5.

Carbon Positive provides consulting and project management services for maritime and land-based emitters of GHGs and other air-borne pollutants. The company develops programs to meet voluntary and mandated emissions compliance requirements

John Palmisano Joins Evolution Market’s Team. NEW YORK — (BUSINESS WIRE) — Jan. 31, 2001 — Evolution Markets, LLC announced today that industry pioneer John Palmisano has joined their management team as Managing Director.

“This is a perfect match for both of us,” said Andy Ertel, President of Evolution Markets LLC of Palmisano’s hire. “John is one of the architects of the emissions trading industry. His experience in and knowledge of the field of greenhouse gas is unmatched by anyone, and he brings an incredibly broad base of both domestic and international contacts with him. John will allow Evolution to meet the growing demand from clients for advisory services on emissions reduction strategies. Together we are going to define service and professionalism in the emissions trading brokerage and consulting business.”

John Palmisano’s career spans the entire spectrum of the emissions reduction field, from his start as a US EPA regulator to both international and domestic commercial activity. Mr. Palmisano founded the first US emissions trading firm – AER*X, in 1984, and over the past 24 years has advised governments, international organizations such as World Bank, and trade associations on how to promote cost-effective environmental and energy policies. He recently founded John Palmisano & Associates LLC and was assisting both industry and governments to develop emissions trading strategies. Until May of 2000, he was Senior Director for Environmental Policy and Compliance at Enron Corp., managing Enron’s greenhouse gas policy and commercial activities.

He is an acknowledged leader in the field of emissions trading, having written many papers, participated in millions of dollars in related policy and commercial studies, and given over 200 presentations on these subjects around the world. He currently serves on the Board of the Emissions Marketing Association and the European Business Council for a Sustainable Energy Future (e5).
“Evolution has the right plan and staff; they are going in the same direction I have been going,” said Palmisano.

“Emissions trading markets are going through an evolution from novelty, to acceptance, to part of a company’s strategic plan. I have seen emissions trading from every side – as a regulator, broker, consultant, Executive Director of a gas industry trade association, and senior manager in a global energy company. Andy Ertel, Pete Zaborowsky, Steve Nesis and the entire team represent the quality service that I expect to give my customers. I will be setting up the Washington, DC office, solidifying our position in California, and working with the Evolution team to provide a full range of greenhouse gas consulting and brokerage services.”

Founded in March 2000, Evolution Markets LLC is a privately-held expert brokerage and advisory service firm that specializes in environmental and over-the-counter coal markets. Their expertise covers various emission credits including SO2 and NOx Emisson Allowance, Greenhouse Gas (GHG) Emissions Reductions, and Emission Reduction Credits (ERCs).


  1. Jon Boone  

    “I believe that it will be impossible to separate electricity restructuring from climate change as a domestic political issue.”

    This is the nub of the policy issue and the justification for government intervention on behalf of technologies that purport to mitigate against the perceived causes of climate change.

    It appears that this position has been adopted by most governments around the world and virtually all multinational companies that have anything to do with electricity production.

    Today, GE’s Jeff Immelt echoes the call for government-raised ecopork: The global economy, and capitalism, will be ‘reset’ in several important ways. The interaction between government an business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.”

    In this Immelt and his now ubiquitous ilk proffer no sense of embarrassment or shame, no sense that they’re betraying basic market principles. They’re simply practical businessmen embracing, even helping to define, a new model for capitalism.

    Which is as old as Stalin….


  2. rbradley  

    Yes Jon, the mandated restructuring of the electricity industry to mandatory open access by U.S. states, beginning with California and prominently including Texas, allowed renewable mandates to come right in.


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  4. Kermit  

    Where does Newtie fit in with Enron?

    [RLB: Not sure he has any connection]


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