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(originally published by Booz & Company)


An Optimist’s Case for Climate Policy

Alcoa has a plant in Indiana that would have been shut down, with 2,100 jobs lost, had it not been for the fact that it could use demand response to its advantage in a big way. The company came up with a plan to cycle the plant’s electricity use up and down very quickly, so that it’s not using power during periods of peak electricity demand and can cycle up when demand is low. That kind of service is extremely valuable to utilities and to the stability of the grid, and it made business sense for Alcoa.

S+B: Given the partisan opposition to cap and trade, do you think it will continue to be the preferred approach for reducing greenhouse gases?

WAGNER: I’m under no illusion that we’ll see cap and trade happen in D.C. anytime soon. It’s simply too toxic. There is hope for a carbon tax as part of fundamental tax reform. What is clear is that an increasing number of businesses are seeing that the alternative — direct EPA regulation — simply isn’t the answer.

In the end, I’d say the reason it’s a partisan issue is essentially a misunderstanding of what it is all about. Cap and trade is a classic libertarian approach — conservative in both the lowercase and uppercase senses. It is not about stopping capitalism; it’s about creating markets, making sure everyone pays for the pollution they create. And we know that it works. The best example we have is the U.S. cap and trade system for acid rain that was put in place in the mid-1990s. It solved that problem in a cost-effective, bipartisan way. The cap and trade systems being put in place around the world — in Europe, Australia, China, and also California — are all using that system as a point of departure.

Author Profile:

  • Rob Norton is a freelance writer and editor based near New York, and a contributing editor to strategy+business.


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