Thursday, March 12, 2009

The MGA Conundrum & Successful Journey

It seemed like a good idea at the time: Get the states of the Midwest to work together on increasing the region’s renewable energy and energy efficiency. And, while doing that why not think about reducing greenhouse gas emissions? So, about two years ago Governor Pawlenty and Wisconsin Governor Doyle used the auspices of the Midwestern Governors Association (which Doyle was chairing) to do just that. The result was the Energy Security and Climate Stewardship Platform and Midwestern Greenhouse Gas Reduction Accord signed by most of the governors of the Midwest in Milwaukee, Wisconsin in November 2007.

It did seem like a good idea at the time. Recall 2007. The economy was riding high. That October the stock market set an all-time high. Most states were on renewables bandwagon. Also, remember the frustration on the Federal government’s inaction on climate. Moving thoughtfully, collectively and certainly very ambitiously forward seemed like the correct thing to do.

How the times have changed. The economy is on the ropes; the stock market is tanking, and for better or worse, the Federal government has awoken from its inactive slumber. Thus, what seemed like a good idea once has now turned into a conundrum for the Governors.

Countless hours by hundreds of stakeholders continue to work on the cap and trade analysis and all the other MGA energy activities which are suppose to culminate at a big energy and green jobs summit in September…most likely in Michigan since Michigan Gov. Granholm is the current MGA chair. Yet, as the economy and the President’s actions make clear both achieving the ambitious goals is unlikely and unneeded.

What to do? My answer is to keep plowing ahead, get as far as possible (knowing that it will not be very far) and declare victory! As a great philosopher said: It’s the journey not the destination that matters.”

Another facet of that journey is about to start with the MGA consultants doing two types of model runs. The first set of model runs will be a core policy case, i.e. cap-and-trade plus the complementary action estimates like energy efficiency gains, low carbon fuels, etc. and a pure cap-and-trade case, i.e. no complementary policies/goals. These first policy model runs should be done prior to the next MGA advisory group meeting scheduled for Traverse City, Michigan on March 31/April 1st.

The second set of runs will test sensitivity of various cap-and-trade design parameters like changing offset limits, sectoral coverage, geographic coverage, targets and transportation fuels in or out of the cap & trade. These runs will be done in mid-April.

Despite all this work, will the Governors be able to declare success in September? The answer is “yes, sort of, and no.”

Yes, the MGA climate and energy efforts will be a success; they already are. They have policy leaders, key agency staffers and stakeholders from across the region working together, thinking through issues and learning important things. This cooperation, coordination and communication should not be discounted. It will pay important dividends.

The MGA effort will only be “sort of” a success to the extent that beyond the coordination the groups have not reached agreement on many critical issues. Yet, one should not discount the learning that has occurred on what it takes to create a regulatory regime to reduce GHGs. Understanding issues like offset implications, leakage and boundaries, impacts of including or excluding transportation fuels and the cost impacts of these variations are, while not tangible, successes of a sort that ought not be discounted. While cohesive regional action is unlikely it also puts our region at risk of aggressive Federal action dominated by decisions made in California and New England. These are not regions that have a very different industry, agricultural and energy production profile than our Midwest.

If success is defined as the actual implementation of a regional cap and trade program, then the answer will be “no.” However, this may not be a bad thing given everything that’s going on. In fact, in many respects even in “failure” the MGA energy security and climate effort can be a success. The MGA governors need to keep moving forward; keep working through the issues even if they are intractable. Keep communicating; keep coordinating and keep cooperating. And, throw a big victory party in September because as country singer Rodney Atkins sings--“If you're going through hell, keep on going, don't slow down. If you're scared, don't show it. You might get out…before the devil even knows you're there!”

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