Sunday, April 26, 2009
“Seriously, sweetie, I bought it only for the articles!” But when my wife caught me at JFK airport last Friday with my Vanity Fair magazine in my backpack (what did you think it was?), she only saw the cover with the lovely supermodel Gisele baring her nice smile. While the cover was certainly a plus for me, it was the subtitle “What Obama can learn from Teddy Roosevelt” that caught my eye.
“TR” is one of my all time favorite presidents. But I really wished he engaged in his passion for hunting more in Ohio than out West. It was such love for the outdoors that caused him to set aside 230 million acres of wilderness across the nation, but especially from Wyoming to California. That reverence to the environment now permeates the culture of those states, particularly in their economic policies. As a result, the economies of these western states are in a much better position to deal with the Obama administration’s forthcoming cap-and-trade policies. Ohio needs to take action.
Carbon tax
It is apparent that some form of a carbon tax or a cap and trade will be coming to the United States around 2012. The Environmental Defense Fund (edf.org) gives a nice explanation as to what a carbon cap is: “A national limit on carbon pollution is set and carbon allowances (emission permits) are auctioned or allocated to companies. Companies that can reduce their emissions cheaply can make money by selling their extra allowances to others.” Some critics argue that this system will place an undo cost onto American companies, and low-cost manufacturing countries such as China and India will not share these same burdens. There is some truth to that. But it’s hard for America to be a leader in global environmental issues if we don’t drink our own medicine. More importantly, as it stands there is no economic incentive for America to leapfrog Europe and Japan, whose companies are ahead of ours in terms of technologies for alternative energies.
Ohio coal
The carbon cap system will most visibly impact utilities, which disproportionately rely on carbon-generating sources for power. In Ohio, that means coal, which is currently 86 percent of the source of power generated for the state. When a carbon cap is placed on utilities in America, Ohio will feel the pain via increased cost of energy in a relatively greater way than a state like Texas. Based on 2006 data, Ohio is 41st in electricity generated by renewable power. That is deplorable.
Ohio is doing something about it. By 2025, 25 percent of electricity sold by Ohio’s electric distribution utilities must be generated from alternative energy sources. But here’s the catch — only half of those sources have to be located in the state of Ohio. Other states have higher standards. This is a lagging compromise that seems to be protecting our old ways instead of addressing the future economy. Now there is the possibility that implementing “clean coal” technology will be a positive for Ohio’s allowances within carbon caps. But that technology is proving to be expensive to implement on existing plants, and raises other issues regarding greenhouse gases. I am a fan of clean coal as it is a practical solution, but it is not the complete answer.
Alternative energy sources
The answer is simply increasing alternative sources of energy generation. How sad is it when we can count the number of wind turbines operating in Ohio on one hand, when Lake Erie to the north could provide near unlimited wind power? A state like Ohio that has both rural and urban sectors would be ripe for biomass energy development. I was proud that Ohio is listed as one of 12 states on the EDF’s Web site that lists companies that have an interest in building a green economy (10 are located in the 17th and 6th congressional districts). That shows one of Ohio’s strengths — small to medium enterprises that have a manufacturing footprint that can be flexible in adopting the needs of the 21st century. But the clock is seriously ticking for the state to help these firms.
When cap and trade comes (and it will), the cost of doing business in Ohio will increase. Ohio has to quit following behind the Colorados and Montanas if it wants to attract modern investment.
X Eric Planey, a Mahoning Valley native, is a bank vice president in New York City and has worked in Bank of Tokyo-Mitsubishi offices in Japan and China.