Former Energy Secretaries: Cap and Trade Is Bad for Business

In the bubble of the Bay Area it’s easy to forget that there’s not a consensus on carbon regulation out there. At the opening dinner for the Forbes Energy conference on Tuesday night in New York, three former secretaries discussed their opinions about necessary energy and climate change policy, and at least two of them were in strong agreement that a cap-and-trade system in the U.S. would be bad for business.

Both James Edwards, who was Secretary of Energy under President Reagan from 1981 to 1982 and John Herrington, Secretary of Energy under Reagan from 1985 to 1989, said a cap-and-trade system won’t work, will raise costs for consumers, and hurt business.

Edwards and Herrington have long Republican political careers and oppose cap-and-trade systems, which set up a limit and market system to reduce companies’ green house gases, partly because they believe in lighter government interference. But both were very vocal about how they think a cap-and-trade system will hurt the U.S. economy in these difficult times. Cap and trade is “an industrial manager’s nightmare,” and will “destroy industry in America,” said Edwards, who was also the Governor of South Carolina from 1975 to 1979. Herrington said cap and trade is “the wrong direction to go,” for this country.

The third Secretary of Energy on the panel, Spencer Abraham, who served between 2001 to 2005 under President George W. Bush, also expressed his reservations about a cap-and-trade system, but acknowledged that a system would likely be implemented eventually in the U.S. The business community has started to get behind this because they see it as inevitable, and no one wants to pass a carbon tax, said Abraham, who has also had a long Republican political career.

Implementing some sort of cap-and-trade system in the U.S. has gained widespread support over the past year. During the recent presidential campaign both Barack Obama and John McCain ran on a platform that supported implementing a cap and trade system. At this point it’s unclear when, or if, President-elect Obama will push for adoption of such a system, but we’ll learn about how realistic his election pledges were in 2009 as he sets his agenda. Regardless, based on the assumption that such a system will emerge in the U.S., major banks Citigroup, J.P. Morgan Chase and Morgan Stanley drew up The Carbon Principles earlier this year, aimed at guiding the way in which they could finance coal plants and other forms of electricity generation.

While Edwards and Herrington were riled up over cap and trade, Abraham’s biggest issue was actually with people who fight both climate change and nuclear power. It’s impossible to fight both, and nuclear will need to be a big part of the clean power equation, Abraham said. The other Secretaries agreed that nuclear was very important but said that they didn’t think anything would get done on that front in the next four years.

The Republican panelists were in agreement on one issue, which they expressed to the company executives and investors in the room: they weren’t too happy with the fact that Democrats are now largely in control of the country’s future for at least the next four years. That’s somewhat of a different sentiment then we’re used to hearing over in the Bay Area and Silicon Valley.

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