Lessons from the global warming industry
Enron, joined by BP, invented the global warming industry. I know because I was in the room. This was during my storied three-week or so stint as Director of Federal Government Relations for Enron in the spring of 1997, back when Enron was everyone’s darling in Washington. It proved to be an eye-opening experience that didn’t last much beyond my expressing concern about this agenda of using the state to rob Peter, paying Paul, drawing Paul’s enthusiastic support.
In fact, this case was not entirely uncommon in that the entire enterprise was Paul’s idea to begin with. Which left me as the guy on the street corner muttering about this evil company cooking up money-making charades, to nothing but rolled eyes until the, ah, unpleasantness and the opportunity it afforded to take a few gratuitous swings at George W. Bush. Buy me a beer and I will regale you with tales of reporters from Newsweek and the Washington Post desperately seeking assistance to spin, respectively, Enron as having urged Bush away from the Kyoto agenda as opposed to having crafted it, and Enron’s global warming activism as its one redeeming feature.
The basic truth is that Enron, joined by other “rent-seeking” industries — making one’s fortune from policy favors from buddies in government, the cultivation of whom was a key business strategy — cobbled their business plan around “global warming.” Enron bought, on the cheap of course, the world’s largest windmill company (now GE Wind) and the world’s second-largest solar panel interest (now BP) to join Enron’s natural gas pipeline network, which was the second largest in the world. The former two can only make money under a system of massive mandates and subsidies (and taxes to pay for them); the latter would prosper spectacularly if the war on coal succeeded.
Enron then engaged green groups to scare people toward accepting those policies. That is what is known as a Baptist and bootlegger coalition. I sat in on such meetings. Disgraceful.
Flashing forward in time, these companies’ flagship agenda item, cap and trade, has passed on to its final resting place. But the global warming industry presses on, joining President Obama in his call to find “other ways to skin that cat” (an inventory of which is found here).
Addressing such taxpayer-funded boondoggles bestowed by pals in government, Holman Jenkins has an item in today’s WSJ bringing readers’ attention to the substantive issues providing context for a prurient email scandal unfolding in Indiana. This involves cozy relations between Duke Energy and a state regulator cum Duke Energy executive, himself also briefly tenured thanks to said email revelations.
The following excerpt should remind us of the juvenile “inevitability” canard employed (by people like Duke’s Jim Rogers, a former Enron VP under Ken Lay who took the business plan to Cinergy and now Duke) to weaken what little principled opposition to cap and trade, etc., remained within the regulated community. It should also remind us of the folly of rent-seeking businessmen thinking they can finally be the ones to ride the political tiger of climate politics and not end up inside with the rest:
Hovering over all is Duke’s Edwardsport coal-gasification plant, whose high-tech white elephanthood is a direct product of Mr. Rogers’s attempt to position his company to prosper in the age of climate politics.
The plant, which is nearly $1 billion over budget, was always destined to mean higher prices for consumers compared to the low-tech coal plants it would replace. But it was sold to the locals as supplying not just electricity but a “clean coal” future for Indiana’s “dirty” coal-mining industry. More to the point, the plant’s economics were supposed to be rescued when Congress passed cap and trade, dramatically hiking costs for traditional coal power plants.
Mr. Rogers here was betting on Mr. Rogers, the closest thing to a celebrity CEO in the utility business, profiled in the New York Times magazine two years ago as a “green coal baron.” No executive has lobbied as noisily or consistently for a national price on carbon output. His wish seemed certain to come true after both major parties nominated climate worrywarts in the 2008 presidential contest.
But something about a 9.8% national unemployment rate has now made politicians less keen on imposing higher utility bills. Nor did Mr. Rogers count on what we’ll boldly call the public’s growing sophistication about climate science. Where the public was once prepared to believe in a pending climate meltdown because “scientists” said so, now it entertains the possibility that “scientists” are human, capable of mistaking theory for fact, of confusing belief with knowledge.
Back in July 2007 I wrote:
Now, this post also prompts me to remember a telephone call I received from a White House aide the night in December 2006 that incoming chair of the Senate Environment Committee Barbara Boxer supposedly broke it to Duke Energy’s Jim Rogers that no, he shouldn’t now expect a cap-n-tax bill to reward his loyal support with billions in rents. It seemed that the issue was too important to have against Bush, and for ’08 [NB: unless, implausibly, climate warrior John McCain somehow won the Republican nod] ….
She, apparently like the New York Times now, saw it as more important to have the issue than the law. The greens got wind of this, however — Rogers, so my caller said, was beside himself and ringing everyone in town he could in outrage, so it was hard not to get wind of it — and demanded what proved to be the Boxer-led disastrous vote last summer in which the bill had to be pulled from the floor in a matter of hours.
It does appear that Rogers and Duke have made a habit of picking the wrong horse to bet on, all arising from their decision to build a business plan around, and then lobby for, energy scarcity. Sticking with principle is usually a better bet. Here’s to hoping the next Congress actually rolls this agenda back.
Christopher Horner is a senior fellow at The Competitive Enterprise Institute.