Corporations Push Congress on Climate Policy

The U.S. Congress has begun to grapple with climate change.

This new interest isn't necessarily reflected in the street parking around the Capitol. Stroll through the areas where senators and top staffers park, and you'll see a big Cadillac from Oklahoma, and a GMC Envoy SUV from New Hampshire. You might see one or two Ford Escapes — SUV hybrids.

But as the climate change debate gets serious, lawmakers are more likely to be interested in vehicles like Les Goldman's Toyota Prius.

The shiny, black Prius has a newly designed nanophosphate battery pack that turns it into a plug-in hybrid. If you could buy the car — which you can't — you could recharge it from a wall socket; there's a plug in the rear bumper.

A company called A123 Systems invented the battery pack. Les Goldman is the lawyer hired by the company to represent it in Washington. He has been bringing the Prius up to Capitol Hill, singing its praises to senators and staffers. He tells them it gets 100 to 170 miles per gallon — "and that includes charging the battery every 40 miles or so. And one charge, which takes about four hours, will cost you at the electricity rates in the Washington metropolitan area, at night at about 55 or 60 cents."

What A123 Systems wants is a tax break, not for itself, but for consumers. A decade ago, Congress approved tax credits worth up to $2,000, for buyers of new hybrids. It helped dealers sell thousands of the high-mileage cars. Now, Goldman asks the senators, why not do the same thing for these new battery packs?

"My favorite line is if it paid to spend a couple thousand bucks in credits to go from 15 miles per gallon to 45, it certainly pays to do that to go from 45 to 150," he says.

Washington is awash with ideas like this. That's because corporate America believes this Democratic-controlled Congress really is going to act on climate change — maybe not until after the 2008 elections, but the groundwork is being laid now.

"I think they understand that this is a problem that is going to be dealt with," says Eileen Clausen, president of the Pew Center on Global Climate Change. "They'd like a seat at the table so that they can be part of the solution."

Clausen works with corporations as a leader of the United States Climate Action Partnership, or US CAP. She says the "seat at the table," a common phrase in Washington deal-making, is a relatively new idea in the climate change debate. Several years ago, she says, a colleague from the Pew Charitable Trusts went to the White House and asked who would be invited to "sit at the table" for the climate change negotiations.

"The answer that they got was there is no table, there is nothing to discuss here," Clausen says. "Well, I think actually at this point, there is a table. [And] I think it's got a lot of chairs, and the number of chairs is increasing."

It helps that the table now has a big pile of federal money on it — dollars that Congress seems ready to shove at companies that say they can help reduce greenhouse gases. At a recent Senate hearing on greenhouse gas reduction technology, after pitches from A123 Systems, Wal-Mart, and General Electric, among others, Sen. John Warner (R-VA) asked bluntly, "Do you want a grant program out here, direct federal grants? Subsidies? Do you want tax relief?"

None of this surprises Andy LaPerriere, a Washington-watcher for the Wall Street advisory firm ISI Group. He says it's not just about getting federal dollars; corporations want to sit at Congress' policy-making table. There's a sense of urgency because the Supreme Court ruled this spring that greenhouse gases are pollutants that can, and should, be regulated by the Environmental Protection Agency.

With that decision hanging over the debate, LaPerriere says, corporations feel that "it's better to work with Congress, work with some of the members of Congress they know, and try to come up with a compromise that Democrats and Republicans can live with, rather than just rolling the dice and seeing what the EPA comes up with. "

What many companies want, LaPerriere says, is a cap-and-trade system for controlling greenhouse gases. That marketplace concept is already popular on Capitol Hill. Under cap-and-trade, the government would give a company credits for the greenhouse gases it generates. If the company reduces emissions, it can sell its excess credits to other polluters.

But that's easier said than done. LaPerriere's first question: How would Congress distribute the credits?

"Do you give them away or do you sell them? I think what you'd see is most companies are going to want them to be given away, because it's a windfall that they would receive. But economically, I think you're going to see economists argue that they ought to be auctioned off."

In this debate of economic theory versus business bottom-line, one big advocate of cap-and-trade is US CAP, the alliance of 21 corporations plus some environmental groups.

Economist Bruce Yandle, dean emeritus of the business school at Clemson University in South Carolina, calls it a union of "bootleggers and Baptists." Yandle refined the "bootleggers and Baptists" theory of government regulation years ago. He named it in honor of those most dedicated to closing small-town liquor stores on Sundays.

"The bootleggers love it because it gives them a market one day of the week, and the Baptists like it because of a fervent belief that a diminution in the consumption of alcohol would be a good thing."

Nowadays, the environmental groups are Yandle's "Baptists," and the corporations are his "bootleggers." And if cutting America's thirst for fossil fuels is a good thing, the corporate "bootleggers" want to help set the agenda.

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