RGGI Founder Pataki Now ‘Extremely Disappointed' in Emissions Trading Program

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Former New York Gov. George Pataki (R) says he is “extremely disappointed” in the execution of the Regional Greenhouse Gas Initiative (RGGI), a nine-state cap-and-trade initiative aimed at reducing carbon dioxide emissions from the power sector that Pataki, himself, initiated. In an interview with Bloomberg BNA reporter Rachel Leven, the presidential candidate also said that while it's clear that human activity is increasing carbon dioxide emissions, it's unclear how much the activity contributes to climate change. Pataki, who served as governor from 1995 to 2006, also said phasing out the renewable fuel standard is appropriate, but states should be able to experiment with their own renewables mandates. Additionally, Pataki questioned the constitutionality of the Clean Power Plan and discussed the future of clean energy and fossil fuels in the United States' energy use. Bloomberg BNA has reached out to all presidential campaigns and will publish other substantive responses in the days ahead.

This interview has been edited for clarity and length.

Bloomberg BNA:

Is climate change occurring and, if so, what role does human activity play in it?

George Pataki:

There are two things that I think everyone has to acknowledge. One is that human activity is increasing the amount of [carbon dioxide] in the atmosphere and that CO2 is a greenhouse gas that—all other factors being equal—will result in higher temperatures. That is something that everyone has to agree on. Given that, I think the answer is yes, it is getting warmer, and yes, human activity is contributing. The question is to how much and to what extent other things, other atmospheric variances or solar flares or other things have an impact. I can't tell you. But the prudent thing to do would be to have intelligent policies, consistent with economic growth and not driving up the costs of energy, to reduce CO2 emissions.  

RGGI and Climate Change

Bloomberg BNA:

You founded RGGI as New York governor, which essentially moves to limit man-made greenhouse gas emissions from electric power plants. If it isn’t clear how big a role human activity plays then why take this action?

Pataki:

The states are supposed to be the laboratories of democracy. I think it was an appropriate approach to take. I did it in a way that actually, unequivocally resulted in lower energy costs in New York state because at the same time we were going forward with the RGGI experiment, I was reducing energy taxes in New York state by over $600 million.

First of all, RGGI was supposed to be revenue-neutral to the state and price-neutral to the consumer. After I left, sadly, the politicians did what politicians do, which is why you can't trust government, which is take huge chunks of it for their own personal uses. But even with that, the energy costs would have been dramatically lower because of it.

But the states are the laboratories of democracy. States should experiment. I think that's an intelligent thing to do. We do know that CO2 emissions are a greenhouse gas. I think it is really absurd to reject that fact. Just as it's absurd for some in my party and some other potential candidates to say that we have to question the value of vaccines, we have to question whether or not to teach evolution. This is the 21st century, and we have to embrace science and technology and be honest about it as we look at all the issues this country faces.

Bloomberg BNA:

What do you think of RGGI’s role now in addressing climate change? How effective has it been, and is this what you envisioned when you started working on it?

Pataki:

I'm extremely disappointed. Within months after I left, the administration that came in completely changed the approach. Then I saw what Congress was trying to ram through with Markey-Waxman and that, in the name of climate, would have raised hundreds of billions of dollars in revenue for the federal government. It had credits and off-sets that would've rewarded cronies and those who had political friends in high places, so I believe the idea that the federal government can pass fair legislation that is revenue-neutral is just something I don't think is the case today.

So I would approach it totally differently. I would approach it from the stand-point of empowering technology and innovation and making sure as we move forward that innovative new energy solutions are economically competitive with other alternatives.

Bloomberg BNA:

Do you support the Clean Power Plan? Why or why not?

Pataki:

No. This is a classic top-down, government-imposed solution. It will result in higher costs of energy, an increase in the vulnerability of the electrical supply, and I think it's just completely wrong.

One of the approaches I had when I was governor was that environmental protection and economic growth are not inconsistent. In fact, they're synergistic when done in an intelligent way. When I left, we not only had led the nation with environmental initiatives, including numerous initiatives in energy, but we had the lowest unemployment rate—4.3 percent in New York state—since they started keeping records.

This approach from the EPA is the opposite. It will hurt the economy, it will drive up energy costs and it doesn't encourage innovation. It just penalizes consumers. I also think it's of questionable constitutionality and legality.

Renewable Fuel Standard

Bloomberg BNA:

How about the renewable fuel standard?

Pataki:

I'm in favor of phasing it out. The idea that the government should mandate a particular amount for an extended period of time for any fuel ultimately doesn't work. Government politicians can't predict the future, can't predict technological breakthroughs. I mean, fracking's been a clear example of that. I would say, you don't just eliminate something instantaneously that an industry has come to rely on, but it should be phased out.

Bloomberg BNA:

When would you phase it out? How quickly?

Pataki:

I would have to take a more detailed look at that. You don't want people who have invested based on a law to have the rug pulled out from under them. On the other hand, you don't want to continually subsidize a mandate—people purchased something that the market says is either overpriced or they don't want. Whatever would work to allow for either the development of a natural market for the products under the [renewable portfolio standard] or whether they could reduce their cost-structure to be competitive. I think at some point that will happen. In fact, I'm working with a company right now that is making enormous strides towards turning the starches and the residue after you produce ethanol into second-generation ethanol, and I think we will see technological breakthroughs in the process that will dramatically lower costs. When that will happen, I don't think anybody can predict.

Bloomberg BNA:

Under your lead, New York adopted its own renewable portfolio standard that required 25 percent of the electricity in New York state to come from renewable resources by 2013. Did you have a change of heart on this? Why the shift?

Pataki:

No, no—not at all. As I said earlier, I think states are the laboratories of democracy, and I think in New York state, we clearly had the resources and the ability to reach that goal without distorting the market or driving up costs. No, I think states should be free to make those decisions as they choose.

Clean Energy

Bloomberg BNA:

What role do you think clean energy and renewables should be playing in our power supply?

Pataki:

I think it is a very important role. First of all, there's domestic sources of supply. Second of all, they're clean. It allows for diversification of our energy sources. I think the idea that we can empower the next generation of technology that will make renewables not just cost-competitive, but maybe cost-beneficial is real. They play an important role today. In all likelihood, they will play an even more important role in the future.

Now, can I just say something about the Obama-Clinton approach to energy?

Bloomberg BNA:

Sure, go ahead.

Pataki:

I've been thinking about this, and if you think back to a hundred years ago, you know what the big environmental problem facing this country was? The crisis of the moment?

As the cities grew in population and became more dense, they were going to be overwhelmed with piles of horse manure that made life unlivable in the cities. The Clinton-Obama approach would be to regulate the number of horses you have or tax horses that come into the city or give hundreds of millions of dollars to your friends to develop a more efficient horse that poops less. My approach is let's develop the next automobile. Let's make the problem go away, not through increasing costs or trying to regulate, but by innovating and developing the technologies that will allow us to have cleaner, greener, less expensive, more reliable energy.

Just as an example, solar panels today get generally 16 to 18 percent efficiency. There are companies out there getting 46 to 48 percent efficiency on solar panels. This type of innovation is what America has always done best. In the case of a hundred years ago, the automobile. In the case of the 21st century, we don't know. But I just believe that if we have the right policies—and let me give you a couple of those policies: one is maintaining the research and development tax credit so that we do innovate, the second being allowing the immediate extension of capital investments so that you lower the costs of making this type of investment—I have no doubt that the next century will be cleaner, greener and that we can have more reliable energy at a lower cost.

Fossil Fuels, Open Spaces

Bloomberg BNA:

How about the role of fossil fuels? Do you see that as a lasting part of our energy supply?

Pataki:

In all likelihood, yes. I don't think that this part of energy is something that we should ban. It's kind of like banning horses. It has to be economically competitive. I believe there are tremendous innovative possibilities for the capture and reuse of carbon in a way that not only makes fossil fuel plants economically efficient but makes them clean. I think the same thing can be done for oil.

I think we have to look at this, not just from the standpoint of the environment, which is obviously very important, but also from the standpoint of the economy. I worry that too often they pit this paradigm where it's okay to raise costs to reduce the use because we're achieving a greater social goal. Well, if you're a middle class person and your heating bill goes up, or your cost of commuting to work goes up, or your cost of electricity goes up, that takes a disproportionate amount out of your paycheck. I do not want to see that happen.

Bloomberg BNA:

Thanks so much for your time. Anything else you'd like to add?

Pataki:

Yeah, I know we're talking mostly about energy and things of that nature, but one of the best ways to reduce greenhouse gases is by preserving open spaces. When I was governor of New York, we preserved over a million acres of land for future generations. As you know, the open space, the forests, sequester CO2 and release oxygen. We did it in a way without ever using the power of eminent domain. It's that type of synergistic impact that improves the quality of life, doesn't increase costs and that results in a cleaner environment that makes all the difference.

To contact the reporter on this story: Rachel Leven in Washington at rleven@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com