Today the European Union’s 27 members reached a compromise deal to reduce carbon emissions 20% by 2020. The compromise lays out a plan for achieving the 20% reduction, but also remains quite contentious. The costs to industry, unfair burden placed on certain sectors
of the economy, and the true ability to achieve environmental goals without adversely affecting economic growth are some of the ongoing debates in the European Union. Also today, it is being reported that the state of California has set an aggressive greenhouse gas emissions plan set forth by the California Air Resources Board (CARB). The new law in California will mandate that the state reduce emissions to 1990 levels by 2020. The law includes measures to create a carbon-credit market and to bring new renewable energy generation on-line.The EU and CA are two examples of where the regulatory market is heading in the New Year. Like many casinos, the house always wins. In this case the “house” is the planet. The gamblers are corporations. The “pit manager” is the new carbon markets, like the Chicago Climate Exchange or the Regional Greenhouse Gas Initiative (RGGI) which is the first mandatory, market-based effort in the US to reduce greenhouse gas emissions. Through RGGI, ten Northeastern and Mid-Atlantic states will cap and then reduce CO2 emissions from the power sector 10% by 2018. RGGI is enabling regional CO2 auctions, watching the “casino floor”. And, no casino is ready for operation without governing rules and regulations, e.g., states like CA or the EU.
I purposefully use the metaphor of “Regulatory Roulette” - a gamble and game of chance, associated with carbon
trading and the emerging carbon game. The current state of the carbon game is very confusing however. It is as if dozens of games, with the same general purpose, have been created. Each game has similar rules, but different strategies can be used to “win” the game. And winning the game is relative because you put your winnings into keeping the game going. It’s like being addicted to gambling when what you really need is direct intervention and to be put on a path to recovery. So, to the extent that the carbon game is only about trading and making money, it is futile and ultimately will run its course. However, to the extent the carbon game is much more complex, and involves strategies that change the course of the game over time (for example California is focusing on demand and supply side measures – focusing on enhancing energy efficiency and conservation while simultaneously incentivizing more renewable generation and implementing a low-carbon fuel standard) then the carbon game can become much more lasting and perhaps worth the gamble.Like a roulette wheel the carbon game is currently seemingly a game of chance for many companies. If the ball drops into number 21 we win! Right now companies have to play a game of roulette within the rules that are being tightly bound together by pit managers and governing boards. And that is logical, and it works. But for
the carbon game to result in a big win for the house “the planet”, the game has to evolve from a game of chance, to one that more rooted in strategy that is tied to the success and reward of the players involved. Gambling for the sake of gambling for a decade or two – to see where the ball will land is a game of chance. Gambling knowing where the ball will eventually land is creating your own destiny. It is not that the existing efforts to create carbon markets are futile, it is that we are putting perhaps to much emphasis on trading schemes that keep players playing, but don’t necessarily lead to a win for the house.Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com
Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.
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