A global power company that inherited some of Enron’s coal-fired power plants in Africa has also followed the late energy giant in the effort to profit from climate change legislation.
Virginia-based AES Corp. has partnered with General Electric Co. in peddling greenhouse gas offsets while lobbying for policies to make those offsets valuable — the same buy-low, lobby-hard, sell-high strategy tried by Enron. AES simultaneous expansion of coal-fired power in Asia, South America and Africa, however, highlights how environmental regulations can yield profit without necessarily yielding environmental gains.
Before it collapsed in late 2001, Enron was the leading corporate lobbyist for restrictions on greenhouse gas emissions. Former Chief Executive Officer Ken Lay called on both the Clinton and Bush White Houses to ratify the Kyoto Protocol on Climate Change, which one intracompany e-mail declared would be “good for Enron stock.” The company hoped to be the premier dealer in emissions credits that would be required after climate change legislation. Further, Enron’s natural gas pipelines would see increased demand as coal and oil would be made more costly.
At the same time, Enron owned coal-fired power plants in the developing world and was building more. Third World power plants are not covered by Kyoto, and pinching the developed world’s use of coal would make it cheaper to operate the coal plants in Nigeria.
When Enron died, its assets were scattered. Two heirs — taking up both Enron’s power generation and its climate change entrepreneurship — were General Electric and AES. GE got the windmills, and AES got floating coal-fired power plants off Nigeria’s shores.
AES is currently building a new coal-fired power plant in India with an accompanying coal mine. AES has also just opened a diesel-fired plant in southern Chile, adding to its four Chilean coal-fired plants. Last December, Vietnam’s government announced a joint venture with AES for a coal-fired power project there.
But at home, AES’s joint ventures have a greener hue. AES and GE have formed a company called Greenhouse Gas Services. GHGS invests in technologies aimed at reducing the gases blamed for global warming. Some of these products save money through energy efficiency, but many of them have value only if Congress passes legislation restricting emissions — such as the Waxman-Markey bill currently before the House.
GHGS this month registered as a lobbying organization, working on “climate legislation” and operating from AES Arlington offices. AES, meanwhile, recently hired a new lobbying firm, Lighthouse Consulting. Lighthouse and its lead lobbyist, Merribel Ayres, are the organizational firepower behind the U.S. Climate Action Partnership, the business coalition led by GE that has spearheaded the push for cap-and-trade climate legislation.
GHGS is particularly sensitive to how climate legislation accounts for “offsets” — emissions credits granted for activities, such as tree-planting, that reduce greenhouse gas concentrations in the air.
How to account for offsets is a contentious issue. For instance, planting trees absorbs carbon dioxide from the atmosphere, but much of that CO2 will go back into the air when the tree rots or burns. Massive tree-planting to absorb CO2 could also create land-use problems.
Clearly, the final details on Waxman-Markey are crucial to GHGS. Importantly for environmentalists worried about manmade climate change, what’s best for reducing greenhouse gas emissions isn’t necessarily what’s best for GE, AES or their joint venture.
Companies that lobby for and profit from environmental regulations often get a free pass from critics who otherwise rush to assail corporate profits. As Timothy Noah wrote in Slate seven years ago, “the mere fact that Enron stood to benefit financially from the Kyoto Treaty, and therefore was pushing energetically for its passage, doesn’t in itself constitute an argument against the Kyoto Treaty.”
It’s true that corporate profit and environmental gain aren’t necessarily at odds. But the details of how AES and GHGS plan to turn carbon constraints into profits show how the idealistic goals of the environmentalists can be perverted and undermined by businesses looking to turn green into greenbacks.
Waxman-Markey would drive down the price of the coal AES will burn in Enron’s old Nigerian plants and in AES new Chilean and Vietnamese plants. Simultaneously, if crafted the right way the bill would drive up demand for the carbon offsets the company is selling here through its joint venture with GE
Enron may be long gone, but in AES and GE, its spirit lives on.