Climate Change Legislation and the Midwest

by Richard T. Stuebi

As virtually every reader of this blog probably knows, Congress has recently made more progress on climate change legislation than it had ever before achieved. The House has now passed the American Clean Energy and Security Act (H.R. 2454), more commonly known as the Waxman-Markey bill.

The path forward for this bill is likely to be torturous. In the Senate, conventional wisdom is that passage is within reach if all Democratic Senators vote for a bill (augmented perhaps by a few Republican votes). But there’s a significant swath of Democratic Senators who are, at best, “on the fence” about supporting climate legislation.

Many of these swing votes reside in the Midwest, where a group of Senators loosely called the “Gang of 16” have publicly raised concerns about the prospect of climate legislation. As you might expect, their concerns largely stem from the potential economic harm that might be borne by Midwestern interests — through higher electricity prices and reduced global competitiveness in industrial markets — as a result of policies adopted by the U.S. to reduce carbon emissions.

Against this backdrop, over the past year, the Chicago Council on Global Affairs convened a Task Force, comprised of regional thought-leaders in the private, academic and non-profit sectors, to consider the challenges facing the Midwest in moving to a carbon-constrained world. The goal: to make a public statement to elected officials from the Midwest on appropriate directions for climate policy.

In June, the Task Force released its report “Embracing the Future: The Midwest and a New National Energy Policy”, which represented a synthesis of the perspectives of the Task Force members (of which I was privileged to be one).

The report is based on the presumption that human-induced climate change is occurring, and a national policy to mitigate emissions contributing to climate change is appropriate to put in place. The report offers no safe haven to those who believe climate change is bunk — or even if real, is not worth doing anything about. Rather, the question that the report wrestles with is what kind of climate policy should be put in place that will maximize opportunities for Midwestern economic revitalization while minimizing the downsides to the Midwest, given the region’s inherited assets and liabilities.

The summary findings of the report contain little that is groundbreaking:

1. “The Midwest can and must turn the challenge of changing energy and climate policy to its economic advantage.”
2. “Prompt enactment of national climate change legislation is essential to the Midwest’s future prosperity and competitiveness.”
3. “Regional and local action [in the Midwest] is likewise essential.”
4. “Addressing carbon emissions will not be cheap.”

To the last point, the report emphasizes the urgency of capturing the full range of economically-attractive energy efficiency opportunities — many of which are available at negative cost to society — or else the costs of climate policy are likely to be much higher. Ditto, the report advocates that emissions offsets be allowed in climate policy so as to enable economic sectors (e.g., agriculture) offering low-cost emission reduction possibilities to contribute to the overall solution at reduced societal cost.

Arguably, more important than what the report says is who the Task Force represents. The Task Force was co-chaired by John Rowe, Chairman and CEO of Exelon (NYSE: EXC), and included active participation by senior executives from such industrial stalwarts as Arcelor Mittal (NYSE: MT), Caterpillar (NYSE: CAT), Duke Energy (NYSE: DUK), Ford (NYSE: F), and Johnson Controls (NYSE: JCI).

Opponents of Waxman-Markey, or of any climate change legislation, will have difficulty claiming that these Midwestern industrial employers don’t accurately reflect the interests of old-line manufacturing concerns. If these companies are saying we can cost-effectively — and therefore should — do something to address climate change, it adds a lot of credibility to the position of taking definitive action.

Would it were that more Midwestern companies had the type of visible and proactive leadership exhibited by Mr. Rowe. At an event publicizing the release of the report on June 8 in Chicago, Mr. Rowe stated his strong support of Waxman-Markey (notwithstanding its imperfections), and urged those with close friends in D.C. to enlist more support. In the Senate, this means solidifying the positions of the Midwestern Gang of 16.

It will be an interesting summer here in the Midwest — the key battleground for the fate of climate change legislation.

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become Managing Director of Early Stage Partners.

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