U.S. Climate Action Partnership: Wall Street’s Oscar the Cat

Kimberley Strassel’s If the Cap Fits: Why our CEOs are warming to Kyoto shows that the U.S. Climate Action Partnership (USCAP or CAP for short) includes many companies that seek corporate welfare in the form of government-mandated purchases of their services or products. Many of USCAP’s members do not, in fact, even claim to produce a product or service, and are dependent on donations or grants. The recent performance of USCAP’s portfolio also suggests that the Climate Action Partnership is Wall Street’s Oscar the Cat: a harbinger of bankruptcy, desperate mergers, and generally poor business performance.

Let’s begin, however, with what Kimberley Strassel has to say.

    There was a time when the financial press understood that companies exist to make money. And it happens that the cap-and-trade climate program these 10 jolly green giants are now calling for is a regulatory device designed to financially reward companies that reduce CO2 emissions, and punish those that don’t.

    Four of the affiliates–Duke, PG&E, FPL and PNM Resources–are utilities that have made big bets on wind, hydroelectric and nuclear power. So a Kyoto program would reward them for simply enacting their business plan, and simultaneously sock it to their competitors. Duke also owns Cinergy, which relies heavily on dirty, CO2-emitting coal plants. But Cinergy will soon have to replace those plants with cleaner equipment. Under a Kyoto, it’ll get paid for its trouble.

    DuPont has been plunging into biofuels, the use of which would soar under a cap. Somebody has to cobble together all these complex trading deals, so say hello to Lehman Brothers.

    …Finally, there’s General Electric, whose CEO Jeffrey Immelt these days spends as much time in Washington as Connecticut. GE makes all the solar equipment and wind turbines (at $2 million a pop) that utilities would have to buy under a climate regime. GE’s revenue from environmental products long ago passed the $10 billion mark, and it doesn’t take much “ecomagination” to see why Mr. Immelt is leading the pack of climate profiteers.

Now let’s take a look at USCAP’s members. We have highlighted those that have made financial history or, in Lehman Brothers’ case, become history, during the past several months.
* Alcoa
* American International Group, Inc. (AIG)
* Boston Scientific Corporation
* BP America Inc.
* Caterpillar Inc.
* Chrysler LLC
* ConocoPhillips
* Deere & Company
* The Dow Chemical Company
* Duke Energy
* DuPont
* Environmental Defense [non-producing entity]
* Exelon Corporation
* Ford Motor Company
* FPL Group, Inc.
* General Electric [down at least 57% from its high in 2007]
* General Motors Corp.
* Johnson & Johnson
* [Lehman Brothers, out of business]
* Marsh, Inc.
* National Wildlife Federation [non-producing entity]
* Natural Resources Defense Council [non-producing entity]
* The Nature Conservancy [non-producing entity]
* NRG Energy, Inc.
* PepsiCo
* Pew Center on Global Climate Change [non-producing entity]
* PG&E Corporation
* PNM Resources
* Rio Tinto
* Shell
* Siemens Corporation
* World Resources Institute [non-producing entity]
* Xerox Corporation

Twenty or thirty years ago, the companies on this list would have understood the need to make money the old fashioned way: earning it by designing and delivering reliable, high-quality, and cost effective products. As an example, if General Electric could design and bring to market inexpensive solar panels that could be wired into home and business electrical systems, it would not need government mandates to get people to buy these products. Everybody would want them. If Philips (surprisingly not on this list) could develop an eye-friendly compact fluorescent light, it would not need the government to ban incandescent lights. If DuPont could sell bio-diesel or bio-gasoline for $2.00 a gallon, it would be able to sell every drop it produced.

Lehman Brothers, meanwhile, wanted to be paid for the organizational equivalent of breathing, by getting commissions for trades in carbon credits. Perhaps it was under the organizational impression that the world owed it a living, which recent events showed to be a very bad impression.

We note that Toyota is not on the list. Toyota does not need government mandates to get people to buy its Prius hybrid electric vehicles, because they save a lot of money in stop and go driving. When we last checked, Toyota was in fact having trouble keeping up with the demand for Priuses. Toyota is following Henry Ford’s very simple advice to get the product’s price down to what people are willing to pay. If you give your customers value for their money, you don’t need the government to make them buy your products.

While several of CAP’s members do have reputations for high-quality products, it is clear that many of the others have a lazy and indolent management attitude that they should be paid for merely existing, through government-mandated purchases of their products. The bottom line of this attitude is eminently clear in Lehman Brothers’ bankruptcy, AIG’s need for a government bailout, and GM’s impending arrival at what looks like death’s door. This reinforces our perception that the Climate Action Partnership is the stock market’s Oscar the Cat, and that investors should take a good hard at its corporate members before investing.

Bottom line: If your “green” products save consumers and businesses money by using less energy, or producing energy from renewable resources, you don’t need the government to force people to buy them. You need government mandates only when your products or services cannot justify themselves economically, which means perhaps that your company cannot justify its existence.


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2 Responses to “U.S. Climate Action Partnership: Wall Street’s Oscar the Cat”

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