Cap and trade's prospects, and does it really matter much, internally?

Within the last month, there has been plenty of action around climate change policy, including the formation of a draft bill in the U.S. Senate with provisions for cap & trade, and news that the Environmental Protection Agency intends to regulate heavy emitters of greenhouse gases (GHGs).

Such public policy shifts around GHG reduction could hold profound impact for manufacturers, especially those in energy-intensive sectors with sites large enough to fall under the EPA’s focus on heavy emitters. And if cap & trade passes, it’s expected to raise energy prices and put cost pressures on energy-intensive manufacturing industries, especially after 2025 when proposed mechanisms that are designed to cushion the impact for vulnerable sectors would expire. So the prospects for cap & trade–on the one hand–seem to be a pretty big deal for manufacturing enterprises.

But even if cap & trade legislation stalls or fails, which some observers see as a distinct possibility, is it really going to make much difference in terms of the systems and technologies that manufacturers need to put in place to manage emissions and drive sustainability goals? The short answer to that question, in my view, is no. There are various reasons, including the intent the ERA has to regulate heavy emitters, but the biggest two are that systems for sustainability tend to save costs, and powerful buyers like Walmart, Apple, and Dell are driving green supply chain goals and programs that will nudge industry toward greener practices no matter what happens with public policy.

Cap & trade policy still matters, of course, and is a serious issue for energy-intensive verticals. Over the next couple of weeks, I’ll be following the topic from home, but not blogging about it, as I’m having total knee replacement surgery tomorrow, and will be taking a brief hiatus from the blog. But I’m interested how other people involved with manufacturing feel about questions surrounding cap & trade, so please post a comment here, or email me at rgmichel@gmail.com. Among the many questions:

• Do you agree that regardless of whether cap & trade legislation passes in Congress, manufacturers will still need to invest as heavily in systems and projects for sustainability and emissions management?
• Is cap & trade really a “jobs killer,” and will this be its political undoing? (Most studies, such as the one by the Congressional Budget Office, as well as one from the National Association of Manufacturers, show that cap & trade would lead to some job loss, especially after cushioning mechanisms run out in 2025.) On the other hand, can cap & trade’s proponents overcome this criticism through arguments such as “energy security” or convincing the public that we need to put serious incentives into the clean energy industry now, so we can become leaders in what will be a growth industry in the decades to come?
• If cap & trade does pass, will U.S. manufacturing sites in industries like paper, oil & gas, or aluminum processing likely have to overhaul their facilities with highly advanced and expensive emissions reduction technologies like carbon capture, or face closing down their U.S. plants? Or, do you think cap & trade will have a softer impact on such energy-intensive sectors, perhaps requiring incrementally more efficient and cleaner conventional equipment like new boilers, along with “best available control” technology, but not carbon capture & sequestration at the plant level?

I don’t want to turn this blog into a political blog over public policy issues, but cap & trade can’t be ignored when it comes to discussing green technology and sustainability issues for manufacturers. There are valid arguments on either side of the economics of the cap & trade issue, as seen in this insightful collection of opinion pieces from the Council on Foreign Relations‘ Web site. For me, two of the practical questions for industry are, “what systems and technology do we need to have in place,” and “how will public policy impact those systems requirements?”