Ralph Izzo -- Cap-and-trade climate legislation would be good for business
As a citizen, a father and a physicist, climate change tops my list of worries. As chief executive of the Public Service Enterprise Group (PSEG), one of the country's largest energy companies, I'm also finding it to be a formidable business challenge.
PSEG has a 106-year history in New Jersey, where we serve more than 2 million electric and gas utility customers. We also own and operate a fleet of power plants in several states, with roughly half of our power coming from nuclear energy, most of the rest fueled by coal and natural gas, and a small but growing percentage generated by renewable sources.
Because we produce a substantial amount of nuclear energy, we have a smaller carbon footprint than many of our peers. But we are nevertheless part of an industry that represents the largest U.S. source of greenhouse gases: Power production accounts for 40 percent of the country's carbon emissions.
My company has a clear responsibility to combat climate change -- and we're ready. Utility executives are used to making multibillion-dollar investments with time horizons of 40 years or longer, but to make these investments, we need to know the rules. We must be told that there will be a price on carbon, and we need to know how it will be set.
Even in the absence of a comprehensive nationwide program, PSEG has already taken steps toward lowering greenhouse gas emissions. We've started energy-efficiency programs for low-income customers as well as more sophisticated energy audits and efficiency measures geared toward businesses and hospitals. We are putting $750 million into a range of solar energy initiatives, including an effort to mount grid-connected solar units on 200,000 utility poles and a loan program to help customers finance their own solar installations. And we are exploring offshore wind farms and new energy-storage technologies.
New Jersey's policies have enabled many of these investments, even as uncertainty at the national level has hindered others. Our state has set tough targets for carbon reduction and has established mechanisms that allow utilities to earn a return on investments in energy efficiency and renewables -- an approach previously limited to traditional pipes-and-wires investments. Such policies are a key reason that New Jersey has the highest concentration of solar installations of any state and a growing, jobs-producing green energy sector.
It's no accident that most green activity across the country is occurring in states that have renewable energy standards. But a patchwork of state efforts is not enough.
Congress must pass a strong climate bill. The House took an important step in June when it passed a measure with broad carbon-reduction provisions. Now the ball is in the Senate's court. No one, regardless of political ideology, will be completely satisfied with the final legislation, but this should not hold up progress. In the decades to come, Congress will need to revisit climate change many times and adjust the law as necessary.
For now, the most important thing is to put a price on carbon, a price that reflects the true cost to the planet of emitting greenhouse gases. This is why a cap-and-trade system -- whereby overall emissions are limited, and companies may buy and sell emissions allowances from one another -- must be the cornerstone of climate legislation.
Cap-and-trade could be called cap-and-innovate. Setting a price for carbon emissions won't just build momentum for an international climate accord; equally important, it will give companies an economic foundation for investments in energy efficiency and clean energy, unleashing the innovation that only a well-functioning market can provide.
Unless such a climate bill becomes law soon, our country will slip further behind in the competition to shape the world's energy future. Renewable energy technology is advancing quickly in Europe and Asia, giving other countries critical first-mover advantages. Germany and Great Britain have robust offshore wind industries. Israel and Denmark are deploying electric vehicle infrastructures. China is becoming the world's primary source for solar panels. Of the more than 50 nuclear plants under construction around the world, only one is in the United States.
We have heard all sorts of reasons for delaying action on climate change, from the business community and from beyond. Some say it is too expensive, even though the best estimates place the costs of a comprehensive greenhouse-gas-reduction strategy at a tiny fraction of the world's economic output per year. Some say global warming isn't occurring, despite overwhelming evidence to the contrary, from melting glaciers to the disappearance of vast stretches of Arctic sea ice. Some say progress is impossible, because nations such as China will not shoulder their share of the burden -- but this ignores the things that these countries are doing to improve their environmental practices and to invest in wind, solar and other green technologies.
If we take steps to combat climate change now -- starting with cap-and-trade legislation -- we will come out ahead in many respects. We will become less dependent on foreign energy. We will create green jobs. And we will foster technological innovation that can be applied elsewhere.
But if we do nothing, not only will we face ecological catastrophe, we will likely suffer economically as well. We will remain excessively dependent on foreign oil, and we will lag in the emerging global green economy. Addressing climate change won't be free, but the cost of not taking action will be far greater.
Ralph Izzo is the chairman, president and chief executive of the Public Service Enterprise Group, an energy company. He began his career as a research scientist at the Princeton Plasma Physics Laboratory.