William Sloan is of counsel with the law firm Morrison & Foerster in San Francisco. He sits on the Climate Change Advisory Committee for the California Manufacturers and Technology Association. He formerly held positions in the U.S. Department of Environmental Protection and the Department of Justice
BF: Assuming “cap-and-trade” legislation now before Congress becomes law, what will be the primary impact on major industrial concerns? Will this force companies to significantly change the way they evaluate decisions about expansions, relocations or new facilities?
WS: If the legislation does reach the finish line, it tells us a lot about the new regulatory regime that will govern major industrial concerns, but it doesn’t quite get us to the “Holy Grail” for business decisions-namely, the price of carbon. For example, a price of $6 per ton, as opposed to $60 per ton, will drastically change how businesses make strategic choices for their operations. Once businesses know what it will cost to emit a ton of carbon, then businesses can meaningfully evaluate the cost of expanding operations or relocating to other countries with a different regulatory landscape.
BF: Will businesses be able to adjust quickly to the reality of carbon credits?
WS: For businesses that feel behind the curve, perhaps one of the best steps they can take now, for risk assessment purposes, is to comprehensively evaluate their carbon footprint, and be sure to include a supply chain/lifecycle analysis of their business operations. Even if a business itself doesn’t produce significant emissions, it can still be vulnerable to new regulation if its suppliers will be a target of regulation, if its waste disposal costs are already a substantial expense, or if its operations are energy intensive. In the end, it all comes down to who will ultimately be saddled with paying for the cost of the emissions.
BF: Do you expect state economic development agencies to broker large-scale agreements among key players regarding carbon-credits, or will each company negotiate on its own behalf?
WS: In terms of credits, the primary center of market activity will be on exchanges selling at whatever is the current trading price, so I don’t see large-scale novel agreements proliferating. Depending on how the offset marketplace shapes up, you could see some new alliances and partnerships created for the purpose of developing large offset-generating projects. I have been involved in CDM projects and voluntary-offset projects where a variety of players have all collaborated, bringing their own unique expertise whether it’s finance, real estate, agriculture or energy. These collaborations have included governmental participation and public-private partnerships. Government participation can lend an additional amount of “bona fides” to a project that might otherwise be subjected to extraordinary levels of scrutiny. In terms of information sources and meeting places for businesses with similar concerns or interests, there is no shortage of industry groups that have coalesced around carbon issues, and I would certainly expect that many of them will remain viable once actual regulation commences.
SAVE THE ELECTRONS!
What do the president of Alliance to Save Energy, the president/CEO of Duke Energy, the director of programs from the Natural Resources Defense Council, the vice president of the American Chemistry Council, and the owner of home-building company Sundancer Creations have in common?
This quintuplet has formed the Building Energy Efficient Codes Network (BEECN), a coalition that will launch an integrated national campaign with advocacy and educational outreach initiatives to strengthen codes that will reduce energy used by homes and commercial buildings, American’s largest energy users.
Kateri Callahan, president of the Alliance to Save Energy, says buildings exhaust up to “40 percent of the total energy…more than 70 percent of the electricity consumed in the U.S., and [produce] 40 percent of the nation’s greenhouse gas emissions.”
The BEECN advises that strong codes for new buildings are an affordable and convenient way to enhance national energy security, strengthen the economy, and deal with climate change. They believe regulations will benefit new homebuyers, low-income homeowners, state and local communities, manufacturers and businesses, workers, the environment, and the nation.