Climate:

Former U.K. energy official MacNaughton discusses impact of EPA regs on businesses

With several companies leaving the U.S. Climate Action Partnership last week, how are U.S. CAP members reacting? During today's OnPont, Joan MacNaughton, senior vice president of power and environmental policies at Alstom and a former senior energy official in the United Kingdom, gives her company's take on the recent U.S. CAP departures. She also explains how EPA regulation of emissions will affect the business community.

Transcript

Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Joan MacNaughton, senior vice president of power and environmental policies at Alstom and a former senior energy official in the U.K. government. Joan, thanks for coming on the show.

Joan MacNaughton: It's a pleasure.

Monica Trauzzi: Joan, ConocoPhillips, BP, and Caterpillar recently left the U.S. Climate Action Partnership citing some issues with U.S. CAP's lobbying on climate change. As a member of U.S. CAP, what is Alstom's reaction to these departures?

Joan MacNaughton: Alstom joined U.S. CAP because we believe in the mission and the mission is to secure climate change legislation which will help secure the energy independence of the U.S., create clean technology jobs, and help to tackle climate change. That mission remains valid and so Alstom remains a very committed and active member of U.S. CAP.

Monica Trauzzi: Are there certain industries that are being treated more fairly than others though in the legislation that's currently being discussed in the Senate?

Joan MacNaughton: There are several different versions of legislation in the Senate and so I think one would have to look at the detail of that to answer your question fairly. And, by the way, as you know better than I, the legislation changes as it goes through the House. I think the point I'd make is that in tackling climate change, overall, it's going to be to the advantage of this country and to the economy. Of course, in the short term, there could be some impacts, there could be some winners and losers, but, overall, I think it will become win-win. Now, if you're in an energy intensive industry, clearly you would be concerned about the impact of pricing carbon and the impact that might have on your energy prices, but that is a manageable situation. That is a situation, for example, which the European Union faced when it introduced its emissions trading legislation, that's European for cap and trade, and they managed that situation through giving free allowances to the affected industries. So, does it have to be managed? Yes. Can it be managed? Yes. And does it need to happen in order to put a price on carbon and tackle the climate change problem? Yes.

Monica Trauzzi: Looking at Europe as an example, should the U.S. be selling this differently, especially to the American public, considering our current economic climate?

Joan MacNaughton: Obviously, everybody is very focused at the moment on the issue of jobs and economic growth. I would say that in the medium to long-term you have to think in terms of clean technology jobs. I mean would you want to be an economy in years to come which has relied on traditional conservative approaches to business or would you want to be among those economies which have invested in innovation, in clean technologies, in highly skilled jobs and tackle climate change while making sure of the competitiveness of your economy for the future? I think you'd want to be up with those countries which are putting a lot of emphasis on investing in the high skilled, clean technology jobs.

Monica Trauzzi: Congressional climate talks have slowed and many would argue that we probably won't see legislation passing the Senate this year, but many parties are still engaging on the issues. So, how would you qualify the talks now? Are they dead, are they still moving in the right direction, and what do you think the likelihood of seeing perhaps an energy-lite piece of legislation coming out are?

Joan MacNaughton: Well, I hope very much that the legislation isn't dead and I hope it's not confined to energy, because I don't think you can really separate out energy and climate change now. I think these two things are woven together and if you tackle them together you're liable to get a better result for both. So, for example, if you want to reduce your dependence on imported oil, then let's have investment in renewables. Let's have investment in carbon capture and storage for coal and gas power generation so that we can have clean power without dependence on imported fuels to the extent that exists now. So, I think the energy and the climate piece do march together. I hope very much there can be federal legislation, because, really, it's going to be the best way to do it. It's going to be best for investment and best for those people who are making those difficult investment decisions for the future if there's clear, federal level legislation.

Monica Trauzzi: And the other option is regulation through EPA and EPA announced this week that it will adopt greenhouse gas regulations this spring, but it will delay implementation regarding stationary sources until January. What does this do for the business community in terms of certainty?

Joan MacNaughton: Well, obviously, if we had a bill that would be the best outcome in terms of certainty. I mean I think the uncertainty is not great news for people who are having to make investment decisions. In terms of regulation versus legislation, I think legislation, particularly legislation which embodied cap and trade, would be the best outcome. Let me just say why. A cap and trade actually leaves the firms the option of taking decisions to invest where they think they can have the most effect and where they can be most affordable. And, actually, that's what the market is good at, is taking the investment decisions. Government is good at setting the framework and if government sets the framework in a very prescriptive, top-down way, that doesn't really incentivize innovation in the market and that's what's likely to make it affordable and likely to be best for the economy in the long term.

Monica Trauzzi: So, taking the discussion globally, we have the next set of U.N. climate talks in Cancún later this year. We know that Copenhagen was a disappointment for most. Where do you see the international discussion going this year? I know that the U.S. has said that it will try to get a treaty signed, but is that likely, especially if domestically nothing gets done?

Joan MacNaughton: We all know there are constraints on what the United States administration can do internationally if it doesn't have domestic consensus, particularly legislation, or a clear indication what that legislation is going to contain. So, we hope there will be the legislation to enable the U.S. to play a leadership role. I think one of the main objectives for Cancún is to restore trust and confidence in the parties to try to secure a deal. People have been thinking about this as if it's an old-fashioned type of negotiation and if I put something more in, you get some benefit and I don't. It's not like that. This isn't a zero-sum game. Actually, if we can get a deal it's going to benefit everybody and if we don't get a deal we're all going to suffer.

Monica Trauzzi: OK, we'll end it there on that note. Thank you for coming on the show.

Joan MacNaughton: Thank you.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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