When Moving Forward May Be Bad

Today the Regional Greenhouse Gas Initiative (RGGI) became the first mandatory, market-based effort in the United States to enforce the reduction greenhouse gas emissions. Ten Northeastern and Mid-Atlantic states will cap and then reduce CO2 emissions from the power sector 10% by 2018.

On the surface it appears to be a big win to combat climate change and initiate regulation to alter company behavior and drive innovation in alternative energy. In fact, even most liberal and environmental publications and think tanks hail the plan as a positive step forward. And, to be fair, it cannot be taken lightly at the ability of ten states to work together to implement a structured auction of carbon output.

However, when you look a little closer this might be one of the worse pieces of legislation for the environment. I think everyone will agree that a 10% reduction over the next 10 years that only covers power plants will not be sufficient to have any signifcant impact on climate change or ensure that similar policies extend to other industries or countries. But, the appearance of success of the program will actually prevent the federal government from feeling the urgency to pass a necessary national cap and trade system across the entire economy.

Already, even the "environmentally-friendly" Barack Obama is suggesting the government invest $150 billion over 10 years in alternative energy. $1.5 billion a year??? That is pocket change and about what we spend in Iraq in a single week. What is that exactly going to accomplish when ExxonMobil is earning $46 billion alone?

No, while everyone is jumping on the "green" bandwagon, no one is taking it seriously and actually trying to drive meaningful, strategic change. As more and more "piecemeal" regulations get implemented and baby steps are taken, the giant leap becomes less and less probable. We don't want to wait for another Katrina, or further advance of the arctic ice cap, or further detriment of human conditions in the pollution-infested areas of rural China.

Some people argue that climate change isn't real, or it isn't man-made. This really doesn't deserve an argument as nearly every scientist has proven this false, but for the sake of argument say the debate still exists. Think again about the risks. If climate change exists and we don't act - destruction of our entire ecosystem, if climate change doesn't exist and we do act - billions of dollars of investment that further improves our economic efficiency and hopefully quality of life (hey we're willing to put together $700 billion for a bailout, my guess our environmental investment gets an even better ROI than these mortgage-based assets).

So if you think about the risks, the need for an all-encompassing set of legislative acts is a must. Yet, these small "band aids" will only inhibit the ability for such legislation to occur. Regardless of how you feel about federalism, climate change affects all 50 states and should be regulated at the national level to create an equal playing field. The argument will be made to expand this equally around the globe to further prevent arbitrage, which in an ideal world will eventually occur. In the meantime, bring the Western Climate Initiative and the Regional Greenhouse Gas Initiative together and jump start the Energy Revolution (coined by Thomas Friedman).