Catching up on my blogging, I wanted to add some commentary on our membership and participation in the launch of BICEP, or Business for Innovative Climate and Energy Policy.
In the US we spend over $1T a year on energy, so it is a major part of our economy. It seems obvious to say, but energy price and availability of energy effect the delivery of every good and service that makes up our economy.
Obviously energy efficiency measures will help the situation. They should drive down prices and ease constraints on availability. Just witness the effects in the US of a downturn in the economy – suddenly oil is below $60 a barrel again, and gas a the pump is under two dollars, based on a decrease in demand in the 5% – 6% range over 2007. If we had dropped our consumption through efficiency the same amount, we would have had the same effect.
But energy efficiency will only get us so far, and then we’re going to need a supply of clean energy. Early indications from the incoming Obama administration are encouraging, signaling an interest in putting real measures in place to reduce CO2, including discussions of cap and trade systems, investment in green energy sources, etc.
So given that, why bother with BICEP? The answer is because there are lots of ways to design these programs, and the detailed decisions may lead to very different results for specific industries or the economy overall. Because of this, we, the BICEP founders, felt that it was important to give a voice to energy-using companies who will have to operate within the frameworks that are developed.
As an example, lets look at a one important decision in designing a cap and trade system. Are the credits handed out based on historic emissions, are they auctioned off, or somewhere in the middle? These choices may effect the ability for new companies to get involved, since giving credits to historic emitters creates a barrier to entry for potential low-emissions options that haven’t historically emitted. They also dramatically effect the flow of money in the overall system (and remember, we’re talking about big flows of money here). For example, auctioned credits bring revenue to the government that can be used for energy programs elsewhere, but builds the price into the energy economy much more like a tax.
We’ve only just scratched the surface of this one question, and, more importantly, this is only one question of many. The details matter here, big time.
Companies who aren’t in the energy business could look at all of this, conclude that discussing legislation in another industry isn’t a good idea, so decide not to participate in the discussion. And up until this year, that’s the point of view we took at Sun. However, the thing that really changed my mind was the realization that Sun is already in the energy business, and so are all of our customers. Our businesses depend on the the future, ready availability of clean energy.
Because of we decided to become more active in the discussion, and selected BICEP as the primary vehicle for getting our voice heard.
Its great that we’re getting top level movement, but the details will matter. We’re all in the energy business to some extent, and its time to dig into the details and have a voice in how this turns out.