The Success of a Climate Change Strategy
By: Bart Mongoven, Stratfor.comMay 11, 2007
The Success of a Climate Change Strategy

The Senate Commerce Committee approved a bill May 8 that calls on automakers to increase average fuel economy to 35 miles per gallon by 2020. The bill, sponsored by Sen. Dianne Feinstein, D-Calif., requires that every company's average vehicle -- including light trucks and sport utility vehicles -- be counted in computing compliance with this target. A move to 35 miles per gallon would be difficult, but the measure does not stop there. It also requires that the fuel efficiency of cars, light trucks and SUVs improve by 4 percent per year from 2020 to 2030. The automobile industry calls the bill unworkable. Environmentalists wonder whether it is strong enough.

The Feinstein bill is one of two measures in Congress addressing automobile efficiency, and one of dozens of energy- and climate-change-related bills submitted in the past three months. Some of the bills being drafted in the name of climate change and energy independence address narrow segments of the economy and others would encompass large swaths or the entire economy. Together they present business with a mess of overlapping, conflicting and occasionally counterproductive proposals.

This flood of bills is a clear indication of environmental groups' success in pushing the climate change issue onto the public stage. Even more telling, however, it means an eight-year-old strategy has played out just the way its authors intended.

The strategy has two primary objectives: the passage of climate measures at the state level and the creation of a strong sense of uncertainty in the business community over the future direction of climate regulation. The Supreme Court decision in Massachusetts v. Environmental Protection Agency (EPA) was the culmination of the state-by-state phase of the grand climate change strategy. When coupled with the success of the "climate risk" argument, the current proliferation of climate change bills on Capitol Hill appears to be building toward the culmination of the second phase of the strategy. That the proposals make little sense and have little chance of success on the floor is immaterial compared to their impact in showing corporate players that the future is unclear.

As a result of this success, the groups most responsible for placing business in this predicament are in a position to decide whether they should now give in and let business have a significant hand in drafting the national climate policy. The question for them is whether their message is strong enough to maintain pressure on industry for years to come. The risk of holding out for a year is that they could lose momentum and never again have as much public support as they will have the summer of 2007. The risk of letting business settle the debate right now is that they could lose a golden opportunity to dictate the most important piece of environmental legislation since the 1990 Clean Air Act amendments. In the final analysis, despite the rapid movement of business toward resolving this issue, environmentalists appear united in their desire to get as much as they can, and will likely let the issue play out for at least another year. It is a high-risk strategy.

Hands on Energy Policy

In the wake of the December 1997 signing of the Kyoto Protocol in Japan, one of the environmentalists' lead spokesmen expressed great joy, saying, "We finally have our hands on U.S. energy policy." Had the protocol been ratified, just having influence on U.S. energy policy in 1997 would have marked a significant victory for groups that have long viewed stemming the burning of fossil fuels as one of their chief concerns.

Ten years later, the United States remains outside the Kyoto system, though there is no question that environmentalists will have their hands on U.S. energy policy. Regardless of what Congress passes in the coming months, U.S. environmental groups, by using the successful two-part strategy, are on the cusp of winning a significant victory. Developed by a coalition led by influential donors, including the Pew Charitable Trusts and the Energy Foundation, and by large national environmental groups including Environmental Defense and the Natural Resources Defense Council, the eight-year-old strategy depends on business acting just the way it is right now. Part one required passage of numerous state-based climate laws that would at once bring climate change regulation to the forefront of policymaking and at the same time threaten business with a growing pastiche of laws and regulations that made compliance a nightmare.

When the Supreme Court upheld Massachusetts' ability to regulate carbon in tailpipe emissions under clear air laws in Massachusetts v. EPA, states received a green light to adopt their own climate policies. On May 9, less than a month after the court decision was released, 31 states came together to form a common greenhouse gas registry, which shows that a majority of states have the political will to support climate change policies.

The second part of the strategy, building on the success of the first, required that industry begin to fear the unknown, especially how the federal government would react to the increasing pressure for action. The strategists hoped that the growing uncertainty, combined with the business community's unhappy experience with hastily developed government regulations in the past, would drive business to demand a comprehensive, predictable and transparent national climate policy.

Cultivating Uncertainty

One only has to look to Capitol Hill to understand the uncertainty facing major industries. The number of bills being offered is indeed astounding -- though few have much chance of success. Feinstein's bill is one example. Moving entire vehicle fleets from an average of 24 miles per gallon to 35 is a tall order. As efficiency increases, engineers find it more difficult to squeeze each additional mile per gallon out of an automobile design and performance -- there is, after all, a finite amount of energy available in a gallon of gasoline. Thus, particularly the Feinstein bill's 4 percent year-on-year increase in fuel efficiency represents a far more difficult engineering task then even moving from current levels to 35 miles per gallon. With the backing of the automobile industry, Sen. Carl Levin is unlikely to let such a bill pass without a filibuster, and a successful cloture vote seems unlikely.

Another example is the large slate of biofuel bills that either have been introduced or are coming soon. Most of these bills satisfy few outside the farm states because they tend not to deal with the central problem with biofuels -- that though they are an interesting concept, environmentally beneficial biofuels do not yet exist, especially in terms of carbon emissions. Measured over its lifecycle -- taking into consideration the energy needed to plant, cultivate and transport corn, and then refine it into ethanol -- a British thermal unit (Btu) of energy from corn-based ethanol has equal or greater carbon emissions than a Btu of gasoline. Until a better biofuel is invented -- cellulosic ethanol or even butanol from corn and switchgrass seem the most likely successes -- biofuels are not a panacea.

Typical of the recent biofuel bills is one offered by Sen. Jeff Bingaman, D-N.M., which has been condemned by both the American Petroleum Institute and Friends of the Earth. Bingaman's bill relies on the use of corn-based ethanol, and does not encourage switching to more environmentally benign forms of ethanol should they come along. It also does not call for an end to the escalating requirements for biofuel use if no substitutes to traditional corn-based ethanol are found.

Though farm-state senators and those looking for ways to reduce U.S. reliance on foreign energy sources might support a switch to ethanol without regard to its environmental implications, the majority in Congress will not support a bill that does not press for evaluations of new technologies and safety valves that would kick in if new technologies were not available.

Business Reacts

Though it appears sloppy, the swarm of climate and energy bills introduced in Congress this year offers just the type of uncertainty the strategy's architects wanted -- and it is generating the predicted response. On May 8, the same day Feinstein's bill passed through committee, 11 more companies joined the leading business climate-change lobby, U.S. Climate Action Partnership (U.S. CAP), which wants a cap-and-trade system for greenhouse gas emissions. U.S. CAP supports a coherent economy-wide approach to climate and energy issues, an approach that could dramatically improve business' vision of the future requirements of climate policy.

Fitting the strategy perfectly, General Motors was one of the 11 new members, saying essentially, "Let's do this once, and let's do it right."

With both sides of the strategy fully in operation, the organizations behind it now face a key strategic decision: whether to let industry have its way in the development of a final bill or whether to reach for a perfect bill. The key variables in this decision are time and the 2008 election. Environmentalists remain convinced that they will benefit from waiting until at least the end of summer -- and probably until 2008 -- before they tackle an economy-wide climate proposal. In the meantime, they will work with Democrats to float as many proposals as the committees can take -- like the Feinstein bill. The proposals serve a dual purpose: First, they allow members of Congress to satisfy an influential lobbying group and show concern over an emerging issue. Second, for the environmentalists, they maintain the momentum on the climate issue and add to the sense of uncertainty for business.

Business, meanwhile, has begun to play its hand by supporting moderate bills in Congress that address climate and energy issues in a way that forces change but does not significantly harm their key interests. Many in business hope the public's interest in the climate change issue will flag by summer and that, if Congress passes a moderate climate policy, it will satisfy voters' desire to see the issue addressed.

The vast majority of the proposals floating around Capitol Hill will not emerge from committee and few, if any, will pass both houses of Congress. The bills are serving their purpose, however, as more and more companies are coming together to demand a single coherent policy.

Stratfor is a private intelligence company delivering in-depth analysis, assessments and forecasts on global geopolitical, economic, security and public policy issues. A variety of subscription-based access, free intelligence reports and confidential consulting are available for individuals and corporations.

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