Massachusetts Global Warming Legislation: Economic Drag or Stimulant?

Opinion

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 currently serves as President for CleanFuture Consulting and was previously Co-Executive Director for the New England Clean Energy Council. Follow @

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