Nuclear-powered fan of 'cap and trade'

John Rowe, Chairman and CEO of Exelon, speaks during the Energy town hall meeting at the National Summit in Detroit on June 15, 2009.

EXECUTIVE SNAPSHOT

Who: Exelon Chairman and CEO John Rowe.

Education: Holds undergraduate and law degrees from the University of Wisconsin.

Personal: He and his wife, Jeanne, live in Chicago.


Kai Ryssdal: Here's a new argument in the debate over how much we need to be doing to control global warming. The International Energy Agency said today if we don't do something to control the pollution that traps heat in the atmosphere, chances are we'll just keep on using more and more of the oil and coal that produces that pollution. And that will eventually drive up both the amount of carbon in the atmosphere and energy prices to boot.

The Senate's working on a climate change bill. One key feature of which is a system known as cap and trade. The government sets a cap on how much of that heat-trapping pollution an industry can produce. The companies then trade whatever part of their quota they're not going to use. Companies that find ways to reduce emissions can sell their pollution permits. Companies that keep on polluting have to buy more of those permits. And so economics drives a drop in greenhouse gases.

Today on Conversations from the Corner Office, a utility company chief executive who favors cap and trade.

John Rowe runs Chicago-based Exelon. It's this country's biggest generator of nuclear power. A technology that doesn't produce many greenhouse gases, by the way, but does have plenty of problems of its own. When we spoke earlier this week, I asked him why he wants the government to give away those carbon permits for free, at least at first.

John Rowe: If you are a large coal burning utility or a customer of a large coal burning utility, you have a huge stake in seeing your utility get some of these initial allowances for free because otherwise you'd have huge short-term price shocks in the early years for the customers of coal burning utilities. It happens it's not as big an issue for my company because we're mostly nuclear.

Ryssdal: So if those permits are given away for free then, Exelon would do pretty well, right? Because your carbon footprint is fairly low. You get the permits and then you trade them.

Rowe: First we wouldn't get as many permits because of that and second, all the permits we get would be given to our distribution companies where the state regulators would use them for the benefit of the consumers.

Ryssdal: Do you think cap and trade has to be part of this energy bill that's making its way through Congress or is there another way that this thing can get passed and work out for the good?

Rowe: The only other way that works out for the good is a tax, and it's very unpopular. Cap and trade is essential because all the other ways that we have of trying to deal with the climate problem are much more expensive for the consumer. We've tried to price in terms of the cost of avoided carbon dioxide, different forms of energy supply. You can mandate we do this with wind; that's $50 to $80 a ton. You can mandate solar; that's $3 to $700 a ton. Whereas the cap in the Boxer cap and trade bill is initially as low as $28 a ton. All the other ways of dealing with the climate change problem costs the customer a lot more, a lot sooner, and create a great deal more economic disruption.

Ryssdal: Exelon is one of several high-profile companies that have left the U.S. Chamber of Commerce, in part at least, over the chamber stance on climate change. Could you give me some insight into your thinking as to that decision?

Rowe: Well I could tell you all of our thinking because it was a decision that we took five minutes on. To us, this was not such a major thing. We have been a member of the chamber for a long time. We've never been active enough to be part of its policy-making body. We believe the chamber plays a constructive role in many issues but the chamber was taking a position that was against our views and our interests on the climate bill. It was stating that position very strongly and harshly, and we didn't think we should be paying dues to an organization that was opposed to us on the issue that's at the absolute top of our priority list. But this wasn't some sort of general discontent with the chamber; they just weren't representing us so we withdrew.

Ryssdal: Just as simple as that?

Rowe: Just as simple as that. And that was a five-minute decision.

Ryssdal: Any dissent around the boardroom as you took the vote?

Rowe: I didn't take it to the board and the dissent is several people have suggested that I should have.

Ryssdal: And you've still got your job, so it worked out all right.

Rowe: It didn't occur to me that membership in a trade association was a board-level issue.

Ryssdal: John Rowe, chairman and CEO of Exelon. Mr. Rowe, thank you so much for your time.

Rowe: Thank you, sir.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

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