An Open Letter to Congress RE: Climate Policy and the US Economy

Dear Congress,
Please pass an energy and climate bill.  Our economy can’t do without one.  Don’t believe the conventional wisdom that says a climate bill is bad for jobs or for consumers.  In fact, the opposite is true.

A good climate/energy bill, including the ones you are currently considering, will address the major problems ailing the economy.

Jobs: By creating incentives for efficiency, clean energy, and alternative transportation you will help build a growing clean technology sector that is on its way to being the industry of the future.  The global energy industry is a massive sector of the economy that produces and delivers energy in various forms.  Making this sector smarter, cleaner, and more efficient and innovative is a huge opportunity to create jobs, wealth, and true sustainability.  For example, clean technology is often local and distributed therefore these jobs cannot be outsourced (Harvest’s organics management facilities receive organic waste from local sources and sell compost and energy back into local markets).  While retraining is sometimes necessary, talented and entrepreneurial people from other industries are able to apply their skills to clean tech.  My sister was an IT professional for a company that made software for banks’ derivatives operations.  Now she’s an IT professional for a company that is investing hundreds of millions of dollars in smart grid software and infrastructure.  I love this story and despite my familial bias, this is a great green jobs example that many people can get excited about.

Consumer confidence: When a consumer has a secure job he or she will spend money.  When a consumer has incentives to invest in more efficient cars and home appliances, he or she will spend money.   When a consumer has a tax refund he or she will spend some of that money.  The bipartisan authors of the various climate bills have designed their policy to refund proceeds from carbon auctions back to consumers and have provided incentives for low carbon consumer and household products.  Additionally, many consumers will ultimately save money as they transition to more efficient energy usage (for example car owners are expected to save $3000 in fuel costs because of increased mileage standards).

Growth driven by investment rather than just consumption: In the economic expansion from 2001 – 2007, growth was driven by a housing bubble , consumer spending, and financial speculation (all three were highly leveraged.)  This clearly proved to be unsustainable.  Our new growth model needs to be driven by investment into projects and technologies that rebuild America’s energy, transport, and communication infrastructure.  Ultimately investments in efficiency, local recycling capacity, and distributed generation lower costs and create jobs, wealth, and value throughout supply-chains and industries.  This investment has started partly because of the American Recovery and Reinvestment Act and a comprehensive energy and climate policy will continue this trend and build on the seeds that have already been planted.

Ending the subsidies for fossil fuels: Fossil fuels are artificially cheap because we don’t pay for the negative externalities that result from burning coal, oil, and natural gas.  This year alone, the gulf oil spill and the West Virginia coal mining explosion are major tragedies that display the true cost of dirty fuels.  When you add in pollution’s negative effect on public health, erratic weather patterns, and oil’s role in geopolitical instability and insecurity, the bill keeps on adding up.  Please price carbon so these true costs are reflected in the price of fossil fuels.  Please allow alternatives to compete on a level playing field.

Business investment: Right now, corporate America has $1.8 trillion of cash sitting on its balance sheets.  That’s astounding to think about.  All that money is just sitting there waiting to be invested.  Unfortunately the business community doesn’t have a lot of reasons to invest.  There is continued pressure on the housing and job markets.  Demand is decreasing as stimulus measures are discontinued and austerity packages are being implemented in Europe by countries concerned about the Greek debt crisis.  The banking system has recovered but the flow of credit is still tight and refinancing risk still exists.  The result is diminished confidence, which is causing companies to be very careful with their capital.  That’s the bad news.

The good news is that corporate America has $1.8 trillion of cash sitting on its balance sheets waiting to be invested.  The government can smartly and carefully leverage this private capital with just a little bit of matching funds and a comprehensive climate and energy bill.  Imagine if there was a policy in place that sent a signal to the market that said “Carbon pollution is going to be a liability starting in a few years.  No more free ride for fossil fuels.  The true costs will be paid via a price on carbon pollution.  We’ll help you transition to a low carbon diet by offering you incentives that will speed up your ROI.  By decreasing the carbon intensity of your business, you will cut operating costs, increase shareholder value, and enhance your brand with your customers & employees.  The power of the private market will be unleashed so it can achieve economies of scale and provide solutions for a global marketplace.  Consumers will have extra cash in their pockets to buy your goods and services because Americans are going to cut their energy bills and because climate legislation gives everyone a tax refund.”

As you imagine the possibilities, don’t forget that the key drivers of great economic expansions in the modern era have been technologies and innovations that have increased productivity and disrupted the status quo.  Also, please don’t forget the US government’s involvement in the development of key technologies and sectors throughout history.  If you pass a real energy and climate bill, businesses will have a good reason to invest their capital in efficiency, R&D, distributed generation, alternative fuels, and new technologies we don’t even know about yet.  Companies, sectors, and supply-chains will grow and Americans will get back to work.  You will create a cycle of growth that will put America back on a path to full employment and allow investors, lenders, and businesses to be confident again.

Be brave.  Lead.  Fix the problems you are responsible for fixing.  Don’t let politics get in the way of rebuilding the economy.  Don’t let demagoguery distort the amazing growth opportunity that lies ahead.  Put ideology aside.  Don’t let the rest of the world continue with its head start.  Instead of being afraid of this transition, be excited by the possibilities and embrace the opportunity to lead the world towards a low-carbon future.

Finally, please communicate this to the American people the right way.  A good energy/climate bill is a national security policy, a jobs bill, a tax cut, an investment in infrastructure, a way to reduce the deficit, a way to make our nation healthier.

The fact that it’s good for the environment is icing on the cake.

Sincerely,
Sameer Rashid
Business Development Manager, amateur economic prognosticator, believer in the future