Climate change - small steps and rolling stones?

Ian Milborrow, a climate change specialist in PwC's US Sustainable Business Solutions, reports from Washington DC on the US perspective.

In a wide ranging interview with Rolling Stone magazine recently, President Obama referred to what Andrew Revkin of The New York Times has coined the "c-word", namely a reference to climate change and a term that has been absent from the President's vocabulary for quite some time. In discussing the issues surrounding the Keystone XL pipeline and other matters, he implied that debate on the issue should continue.

However, analysts agree that the prospect for legislation in the near term is bleak given that the issue in the U.S. continues to be polarizing, particularly in light of battles underway over the federal deficit, entitlement and tax reform.  The same is true for Cap-and-Trade.  While the EPA has moved forward with regulations on mercury and other air toxins, those, too, are politically polarizing and are topics that candidates are using to distinguish themselves in the November 2012 election.  That is especially true with jobs at stake in states where older coal and oil fired power plants are likely to be impacted by new EPA regulations.

While the legislative and political landscape is challenging, momentum is building around a "home-grown" biofuels industry. Spurred by a range of both federal and state incentives, consortia are forming involving power companies, airlines, private capital and agri' players. This is important to watch, since it is falls within the domain of improving domestic energy security, which has broader political support.

Finally, companies with assets in California are beginning to weigh the impact of rising carbon costs as they await the first auctions of carbon permits scheduled for mid-November.  Now that the regulations are set, a number of lawsuits have been filed that could impact the outcome.

Contact Ian Milborrow via email.