March 6, 2009 / 2:35 AM / 11 years ago

Business consensus elusive on cap and trade: CEOs

SANTA BARBARA, March 5 (Reuters) - Although U.S. business leaders say they support a national carbon-capping program to tackle global warming, disagreement over the details bodes poorly for the plan President Obama aims to push through Congress this year.

The chief executives of some of the biggest U.S. companies, at a Wall Street Journal conference in Santa Barbara this week, said they generally support a plan to cap greenhouse gas emissions and require companies that emit more than the limit to buy emissions permits.

But many said they had trouble with the specific plan laid out by the Obama administration last month. Others said they doubted whether legislators would pass such a measure during a deep economic downturn.

“I hope that we can get something done, but I’m not necessarily confident yet,” said Xerox Corp (XRX.N) Chief Executive Anne Mulcahy, who served on Obama’s economic transition team.

Building consensus around cap and trade in the business community is still “a work in progress,” Mulcahy said, adding that the issue of how emissions permits are distributed was critical.

Obama has said he wants a so-called cap-and-trade system that would put a price on emissions of climate-warming carbon. Companies that emit more than the limit would have to buy emission permits; companies that emit less could sell emission credits.

In the European Union’s Emissions Trading Scheme, emissions credits were given away to polluters at first.

The head of the United States’ largest burner of coal for power generation said he was disappointed by Obama’s proposal even though he supports cap and trade in principle.

“If you auction all of the credits, then it’s just a carbon tax,” American Electric Power Co Inc (AEP.N) Chief Executive Michael Morris said on the sidelines of the conference. “So let’s forget the game. Let’s call it a carbon tax, and let’s see if the populace wants to have a carbon tax.”

Morris also said he disagreed with the government’s plan to use a portion of the expected $800 billion in revenue generated in the program’s first decade to make a new tax credit for working families permanent. He would rather see all the revenue used to fund investments in clean energy technologies.

“I just think that’s wrongheaded thinking,” Morris said.

The debate over whether the U.S. should scrap the cap-and-trade plan altogether and simply tax carbon dioxide emissions is still alive.

Autonation Inc (AN.N) CEO Mike Jackson said cap and trade was “complicated, expensive and could introduce volatility” in gasoline prices, a scenario the No. 1 publicly traded auto dealership group “is absolutely opposed to.”

“I would much prefer just straight forward gas taxes, like they’ve done in Europe and Japan, to get the consumer to value fuel efficiency,” he said in an interview. “You don’t need to start them now in the economic recession, but just announce in 2012 or 2011 we’re going to have higher taxes on gasoline. And people will factor it into their decisions today.”

Speaking at the conference, former U.S. Vice President and climate change activist Al Gore said he favored both a carbon tax and a cap-and-trade system, but added cap-and-trade was the best way to create a global market focused on reducing emissions.

Even the CEO of an alternative energy company that stands to benefit from such a program raised doubts about whether such an initiative could be passed during a recession.

“I’ll believe it when I see it,” said Bill Roe, CEO of cellulosic ethanol start-up Coskata. “When you’ve got an economy that hasn’t hit bottom yet, do you do that? Our history says...this would not be a particularly great time to be putting what many will construe as another tax in place.”

Google Inc (GOOG.O) CEO Eric Schmidt, while he didn’t disagree with the idea of a cap-and-trade program, warned that the program would take years to take effect and that more immediate action on climate change was also needed.

“The problem that I see is not that the intent is incorrect but that the implementation of cap and trade or a carbon tax is multi-years away, even if you had it today, because it’s complicated to build,” he said. “We can’t wait.” (Reporting by Nichola Groom, editing by Leslie Gevirtz)

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