Massachusetts Global Warming Legislation: Economic Drag or Stimulant?

7/21/08

In case anyone didn’t get the memo, energy prices are going up.

This trend will most likely continue for two very simple reasons: Worldwide energy demand is rising, and global fossil fuel supplies are tightening.

Add to this the need for critical action on the part of all nations to reduce their greenhouse gas (GHG) emissions in response to what is now a preponderance of evidence that continued reliance on fossil fuels will result in catastrophic changes to our climate and eco-systems.

It has been prophesied by some that taking state-level legislative action on climate change by capping allowable GHG emissions would place a tremendous burden on our local economy—especially at a time when the economic outlook is not all that rosy to begin with. The thesis is that, by forcing our businesses to pursue energy-saving measures, and adding more expensive renewable energy into the supply stream, we will greatly add to their expense burden, thus reducing their competitiveness.

Don’t believe it. And here’s why:

Let us, for a moment, take a cap on GHGs off the table, and look at the long term. Assuming a continued, steady rise in energy prices over the coming decades (something many experts now predict), our businesses are going to be faced with a sizable expense burden as energy prices become a larger and larger line item on their balance sheets. What’s worse, there is nothing to suggest that it will level off—and why should it? The basic laws of supply and demand dictate that that when supply is constrained in the face of surging demand, prices shoot skyward.

While Bay State businesses will inevitably respond to these market signals by implementing energy efficiency measures on their own, there is an opportunity here to move faster—and in doing so, provide our businesses and our economy with two substantial benefits.

So let’s now put GHGs back on the table, and talk specifically about why Massachusetts should pass the Global Warming Solutions Act (GWSA, or Senate Bill 2531)—which calls for a reduction in greenhouse gas emissions to 20% below 1990 levels by 2020, and 80% below 1990 levels by 2050.

Benefit number one: Global competitiveness.

If we simply wait until federal legislation caps GHGs for us (and I think we all know federal legislation is coming), then the bulk of Massachusetts companies will move with the crowd. Under the GWSA, our companies will be ahead of the curve, streamlining their operations in advance of the federal mandate, and gaining first-mover advantage in the process. As energy prices rise, our companies will be better prepared to keep energy expenses under control through early action and better planning. The bottom line: our companies will ultimately be stronger and healthier competitors as a result of this legislation.

Furthermore, as the GWSA (and the Green Communities Act, Massachusetts’ comprehensive energy bill now in conference committee) substantially increases the amount of electricity derived from renewable energy, we will start to create a hedge against rising fossil fuel prices. While it won’t happen tomorrow, renewable energy will, at some point, be cheaper than traditional sources, and having a strong local supply of clean energy will allow us to pay less (perhaps significantly less) in the future.

Benefit number two: Sector leadership.

Energy transformation is non-optional—at the state level, at the national level, and worldwide. In short, we must develop technologies to replace fossil fuels not only because of climate change, but because they are finite resources. But here’s the good news: If we implement a cap on GHGs, we will unleash what is perhaps the greatest economic asset of the Commonwealth of Massachusetts—our ability to innovate.

The Global Warming Solutions Act, the Green Communities Act, and the Green Jobs Act (which includes funding for clean energy R&D and entrepreneurship) will catalyze a tremendous increase in clean energy investment and new venture creation, which in turn will create jobs and grow our local economy.

Skeptical? Consider this: In a report to Governor Schwarzenegger and the Legislature, a multi-agency Climate Action Team led by the California EPA projected that California’s Global Warming Solutions Act of 2006 (AB32) will increase Californians’ personal income by roughly $4 billion and create approximately 83,000 jobs.

Worldwide, clean energy was a $77 billion market in 2007, and is expected to grow to $1 trillion by 2030. Roughly a dozen U.S. states are working aggressively to claim their piece of this prize; while Massachusetts certainly boasts all of the ingredients required to compete, let us not be complacent.

The Global Warming Solutions Act, the Green Communities Act, and the Green Jobs Act will substantially up the odds that we will establish a strong, growing cluster of clean energy companies here in the Commonwealth, and emerge as a leader in what will inevitably one of the largest technology markets in history.

Nick d'Arbeloff is President of the New England Clean Energy Council. Follow @

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  • http://www,peachhomeloans.com.au Nicholas Gruen

    This is a pretty silly argument. It might be right that imposing higher energy costs on some firms will lead them to become more competitive. But if ‘competitiveness’ is your focus, it does that by making them less competitive in future. If imposing costs on firms makes them more competitive, why there are lots of ways you can do that.

    If you want to get technologies going to improve energy efficiency, why not subsidise R&D on that directly – a lot more efficient.

  • Scott Loring

    Sector Leadership and Global Competitiveness … born out of STATE LEGISLATION???

    Pretty confident Mother Russia tried that one a few times …

  • Philip

    Give me all your money – that will make you more competitive.

  • http://normanhooben.blogspot.com/ Norman E. Hooben

    Nothing in your commentary can convince me of anything but how insane this whole controversy is…
    Number one…the government should stay out of global warming issues…it is after all, a non-issue. Global warming is a natural cyclic event and has nothing, that is NOTHING, to do with man.

    Number two…you cannot legislate technology. Here again, big government is dictating policy…and we don’t need any more dictators. All dictorial governments eventually fail and if you stop and look around you will find that the United States is on the failing side of the scale…too many dictates!

    Number three…Most so-called green-house gases are also naturally occurring and disapate naturally. There are numerous examples but one only has to look back at the Mount St Helen’s eruption. Tons (literaly) of g-h-g entered into the atmosphere and within days, poof! all gone!
    Where did they all go to?

    It’s not nice to fool Mother Nature so leave her alone she will do just fine without the government meddlin into her affairs.

  • Leonard

    Why is Messachussttes so totally Foulked up?? Do they Not read Actual and Factual Scientific papers that disclaim all of the Gore and Kerry Untruths?? I could have sworn that with all the Universities and Colleges that Abound in Mess.. somebody developed Inquisitive minds instead of … NOT!

  • http://normanhooben.blogspot.com/ Norman E. Hooben

    Re: Leonard

    Massachusetts has probably the most corrupt group of politicians in America. They find ways to fool the taxpayers into thinking their tax dollars are well spent. In one case they invented an organization that used taxpayers dollars to construct a building to accomodate that organization. Then (with the aid of Barney Frank) they turned around and gave the enitre complex to Kopin Corp (Taunton,MA) under the guise of keeping the corp. in Massachusetts.

    Another scheme is the Massachusetts Dairy Board…an organization whose sole purpose is to create hack jobs for politcal payback.
    Between the USDA and the State Health Department there is more than enough oversight in the dairy industry but they use this agency to control the price of milk which in turn pays the hacks salaries…all at the expense of the taxpayers who (the last figure I had) have to pay around fifty-cents more for a gallon of milk than other states.

    And the shafting goes on…and this green-house gases issue will cost the naive taxpayers a bundle over the long term.