Kleinfeld: Allowances Are the Jobs Enabler in Climate Effort

Posted May 12, 2010 at 1:47pm

The Congressional debate on climate change will have consequences far beyond regulating the emission of greenhouse gasses. If done responsibly, the legislation that emerges could reduce America’s dependence on foreign oil and spur job creation in green and renewable industries.

[IMGCAP(1)]However, it is crucial that any climate change legislation produced by Congress give both industry and workers the time they need to adjust to the challenges of tomorrow. To that end, Congress must include a sufficient amount of free carbon allowances in the bill to ensure that our transition to a low-carbon economy is a smooth one.

Climate change is one of the most pressing issues facing our nation and the world today. We simply cannot risk the consequences of a warming planet. However, climate change also presents an opportunity: to grow innovative industries — and thousands of jobs — by taking the lead in developing climate change solutions.

In fact, a comprehensive, common-sense climate change and clean energy bill would be a major boon to America’s economic recovery. It would create thousands of new jobs by linking our country’s traditional manufacturing base with the recyclable energy technologies of the future. Green jobs require the same skills as other manufacturing jobs. That means that our nation’s manufacturing workers can be partners in providing incentives for innovation, energy efficiency improvements, domestic sourcing, research and development, and transition safeguards.

Examples of potential job creation abound. New energy use standards will lead to the manufacturing of wind and geothermal turbines as well as solar panels. Future transportation initiatives can be built with the same skilled labor that builds today’s cars and buses. Additionally, many green buildings use a significant amount of renewable materials, such as aluminum and glass.

However, a poorly designed climate change policy could slow or halt the recovery of significant segments of U.S. manufacturing. We could lose jobs to other countries that are already moving ahead with next-generation green manufacturing. Furthermore, inconsistent global climate change policy could start a “race to the bottom” with companies simply moving production and jobs to areas with low, or no, carbon costs. This could severely damage American manufacturing and curtail jobs. If production were to move overseas, it could also effectively negate many of the potential environmental benefits of the legislation, as U.S. industry is becoming more energy efficient and environmentally friendly every day while foreign producers often lag behind.

To prevent such a damaging scenario, Congress must include robust mechanisms, including free carbon allowances that are critical to a successful transition for energy-intensive and trade-exposed industries. These free allowances, or credits, would be designed to phase out as developing countries implement strong climate change policies of their own. Additionally, they would give American researchers and industry the time they need to make the plethora of new and promising clean-energy technologies economically viable.

Congress should pass comprehensive climate change and clean energy legislation that will reduce our dependence on foreign oil, spur innovation and investments in new technologies, and catalyze American industry’s transition to a clean energy economy. Acting now would make the United States a global leader on this issue and persuade other nations to take initiative as well. American manufacturers and workers are counting on Congress to do what is necessary to ensure that the United States maintains its economic leadership and technological prowess well into the 21st century — and beyond.

Klaus Kleinfeld is chairman and CEO of Alcoa.