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Regulate Me, Please!
Patrick Rollens, 27 Sep 07
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The concept of large corporations pleading for government regulation sort of defies imagination. But that's literally what took place on a panel at the Corporate Climate Response conference in Chicago.

Corporate Climate Response is in its third year, and it was fascinating to watch the speakers addressing a conference hall packed with corporate sustainability officers and big energy reps. The September 25 forum (a tad pricey at $1100 to attend) was put on by Green Power Conferences, a UK-based firm that's hosted green events worldwide.

The topic of carbon pricing came up during a panel debate on regulatory uncertainty. The participants were all members of the U.S. Climate Action Partnership (USCAP), a group of businesses and NGOs that have essentially petitioned the U.S. government to mandate carbon regulations--thereby giving them a tangible goal to work toward.

In truth, the idea of levying a tax on egregious carbon pollution offenders is nothing new. The concept forms the core of the carbon cap-and-trade initiatives, which are prevalent overseas and gaining strength in the US. Most models place a financial burden on companies that operate with large carbon footprints.

The collective opinion of the panelists (who included representatives from BP, Caterpillar and Exelon) was that regulation is a virtual certainty within the next five years, and that sensible corporations should already be factoring a future "carbon tax" into their long-range plans.

BP, for example, tacks on estimates ranging from $10 to $20 per ton of CO2 to its' long-range expansion plans. Bill Gerwing, director of environmental policy for BP America, acknowledges that the carbon tax may well exceed $40 per ton by 2030.

"Corporations manage risk," Gerwing said. "What we must have is regulatory certainty."

But what if you turned the concept on its head? That's the idea behind "border carbon adjustment," a model that levies a tax on imports from countries that lack progressive greenhouse gas regulations. Instead of penalizing the offending companies, the global community leverages the market itself by placing tariffs on the goods they produce. If companies want to sell their good competitively, they must acquiesce to the market's demands. In theory, this would involve moving faster than the legislative regulatory process.

Border carbon adjustment plays right into the environment of increased regulation that corporations today seem to be clamoring for. With an universal setup, governments or companies can quickly assign real dollar values to the requisite costs that might be incurred to patronize polluting companies.

There are detractors, however. John Disharoon, director of sustainable development for Caterpillar Inc., called the policy "backdoor China bashing." His comments weren't off-base; China would be hugely penalized under any sort of carbon tariff. But the concept of using the free market to leverage progressive climate change action is appealing.

It makes growth, long considered the anathema of sustainability, somewhat more palatable when juxtaposed opposite a universal carbon policy. Most importantly, it gives corporations and governments alike a goal, something to "keep their eye on the ball" during the difficult economic transition that's looming in the future.

Of course, border carbon adjustment isn't an answer unto itself. It still needs to be reconciled with carbon leakage, and it's sure to rankle plenty of groups--but it stands as one more item for the toolbox that will eventually remake the entire basis of our global economy.

Image: flickr/micahmonkey

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