Waxman-Markey and the Business Case for Strong Climate Policy

In light of the disappointing outcomes at the recent G8 negotiations on climate, many now see the U.S. Senate’s forthcoming deliberations over America’s first-ever cap-and-trade law (the American Clean Energy and Security Act, or Waxman-Markey), as the next big step on the road to Copenhagen.

Strong, networked national policies such as the U.S. bill are required to stem climate change, which has the potential for unprecedented global consequences. The next (and some say last) chance to do this will be in Copenhagen this December, where the world will try to negotiate the next climate treaty. As I have written recently, passage of U.S. legislation like Waxman-Markey will be a critical ingredient on the road to Copenhagen, signaling that the world’s largest economy is ready to take action.

Why should global companies support this legislation—or any other climate policy, for that matter?

* For most companies, the biggest cost of climate policy is not the legislation itself, but uncertainty. Bringing about policies now clarifies where and how carbon will be priced, opening the door to investment.

* Business-friendly policy terms—that is to say, rules that are durable and allow the efficient movement of capital—are options today. But policies can have many manifestations, and there is reason to believe that delaying concrete policies will to lead to less systemic approaches with less certain futures, degrading investment conditions.

* Inherently, climate policy aims to promote more efficient markets by supporting more transparent prices, active marketplaces, and consumer choices, while cutting subsidies that we unintentionally pay to polluters. The fundamental proposition is better business conditions for all.

Regardless what you support, it is becoming just as important to develop an informed picture of the costs and benefits of action—and inaction—of policies, as it is to understand the ins and outs of your operations (and to employ strategies that link the two).

First posted at BSR.

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