Why Businesses Want an Energy-Climate Bill Now
Companies that make everything from computer chips to potato chips, search engines to jet engines, rubber tires to rubber soles, have stepped up this year to publicly support passage of comprehensive clean energy and climate change legislation. Why are companies calling for increased regulation? Isn’t that akin to a teenager arguing for an earlier curfew, or a second grader demanding an end to recess?
Actually, no. The days when businesses could be counted on to reflexively oppose all environmental regulations are over, and that’s a good thing. Nowhere is this shift more evident than in the case of climate change policy. American Business for Clean Energy tracks nearly 6,000 businesses, both large and small, that support energy and climate legislation. Dozens of companies, representing trillions of dollars in revenue, have signed on to letters and paid advertisements calling for prompt action on such legislation. These companies have determined that a clear and consistent national framework to begin reducing emissions is good for the economy and good for their industries. Our new brief, The Business Case for Climate Legislation, details the reasons why.
The most commonly cited rationale is the need for regulatory certainty. Most companies understand that some form of climate policy is inevitable, but they don’t know exactly what it will look like or what will be required of them. This creates uncertainty, which complicates business planning decisions, especially for industries like electric utilities that build and operate long-lived, capital-intensive assets. As a result, utilities and others are delaying investments until the policy picture becomes clearer. A long-term regulatory roadmap would remove this uncertainty and help unlock investment, stimulate economic activity, and create jobs.
The second major reason why a growing number of companies are supporting climate change legislation is that they see significant market opportunities for products and services that reduce greenhouse gas (GHG) emissions. Clean energy is projected to be one of the great global growth industries of the 21st century. Many U.S. companies have the desire and capability to tap into these new markets, and many are in fact doing so. But the absence of a clear policy framework that incentivizes the development of low?carbon technologies has left U.S. firms at a disadvantage vis?à?vis their international competitors. The longer the United States waits to enact such a framework, the greater the likelihood that American companies will fall further behind their Chinese, German, and Indian peers.
Lastly, companies see clear reputational benefits in supporting sound climate change and energy policy. Active support for policies that reduce GHG emissions signals a commitment to broader societal change that can help burnish a company’s corporate reputation. This is important as customers, shareholders, employees, and other stakeholders are increasingly pushing companies to demonstrate social responsibility and environmental stewardship. In addition, companies that have taken a leadership role on this issue report tangible business benefits such as better employee morale, higher worker retention, and stronger ability to recruit new talent.
While an unprecedented number of businesses have voiced their support for climate change and clean energy legislation, this will not necessarily translate into unanimous support for a specific bill. Climate policy is inevitably complex and bound to affect different companies in different ways. As a general rule, however, policies that achieve the greatest level of emission reductions at the lowest possible cost will attract the greatest level of business support. For this reason, companies have largely coalesced around cap-and-trade as the preferred instrument to reduce emissions. Several GHG cap-and-trade bills have been introduced in the U.S. Congress, and the Senate is currently debating a way forward on climate and energy legislation. As the Senate and the White House consider their next steps, they should take their lead from these members of the corporate community that the time to act is now.
Andre de Fontaine is the Markets and Business Strategy Fellow