Getting California Business to Clean Up Its Act

Melissa Block talks with Fred Krupp, director of the nonprofit group Environmental Defense. Krupp explains how California's new climate-change initiative will be implemented.

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MELISSA BLOCK, host:

If California's climate change initiative is carried out as planned, carbon dioxide emissions in the state will be 25 percent less than they were predicted to be by the year 2020. So how exactly can California make that happen?

We want to put that question to Fred Krupp. He's president of the group Environmental Defense. He also served on the president's environmental commissions under the first President Bush and President Bill Clinton. Thanks for being with us.

Mr. FRED KRUPP (Environmental Defense): Delighted to be here.

BLOCK: The tool that everybody is talking about to do this is carbon credit trading. How would that work?

Mr. KRUPP: Well, the sources of greenhouse gases would each be allocated an amount that they could legally throw up into the atmosphere. And what would happen next is there would be an incentive for those sources, those companies to reduce their emissions as much as possible. And if they successfully reduced under their quota, they would have an extra credit that they could trade to another company that perhaps was lagging behind.

BLOCK: Kind of a market approach there.

Mr. KRUPP: It is a market approach, because it's markets that so far have not taken into consideration environmental values. That's why the planet's in the fix it's in. This builds those environmental values right into the market.

BLOCK: And we should say that you helped develop a cap and trade program like this for sulfur dioxide emissions earlier.

Mr. KRUPP: Yes, in the first Bush administration.

BLOCK: So you think these work?

Mr. KRUPP: Well, the history is that they do work when they're well designed. Absolutely.

BLOCK: Where else has this been tried and how successful has it been?

Mr. KRUPP: Well, the European Union set up a cap and trade system for greenhouse gas emissions and that is beginning to provide the incentives for companies to innovate. But the American example on acid rain is the biggest, best example and the longest running example since the Clean Air Act amendments that set it up were passed in 1990.

BLOCK: There are businesses, though, who say, you know, I don't want to spend the money trying to do this. I'm going to go out of state where there aren't these caps and I can operate more freely.

Mr. KRUPP: Well, I think they would not be very far sighted because more and more states are setting up programs. There's 30 states now that have adopted some type of greenhouse gas regulation or commission to study what regulation there should be.

BLOCK: What kinds of changes are Californians themselves likely to see? For example, will their utility bills be higher and what about car inspections, things like that.

Mr. KRUPP: Well, there'll probably be more efficient cars, high mileage cars, more efficient lighting appliances, more efficient appliances of all sorts. Once you get the incentives right, it's amazing what entrepreneurs can do.

BLOCK: But if, say, power plants are required to or end up investing in new technology, aren't they going to be passing the cost of that on to the consumers?

Mr. KRUPP: Well, it depends how successful they are. But the most successful ones will figure out whole new ways of generating energy without greenhouse gases or ways to sequester greenhouse gases - meaning to pump it up underground and lock it up. The most successful ones will find ways to profit. So there will be lots of opportunities that get opened up.

BLOCK: Apart from this cap and trade idea, what other things are being considered in California to try to get these emissions levels down?

Mr. KRUPP: Well, the law gives the governor the tool first to harvest any easy reductions that are possible and that can happen within the next couple of years. The California Air Resources Board is empowered to just write regulations that requires X or Y to reduce their emissions.

I think what you're going to find, though, is that businesses really prefer the cap and trade system. One smart thing about the law is that it provides that the California Air Resources Board should try to integrate California's system with the European system and with other regions in the country, like the northeast that's also adopted a similar system. So that'll be very interesting as these credits start to be swapped from the northeast and even internationally.

BLOCK: Well, Fred Krupp thanks for talking with us today.

Mr. KRUPP: Thank you, Melissa.

BLOCK: That's Fred Krupp, president of Environmental Defense, speaking with us from New York.

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