President Obama’s White House chief of staff, Rahm Emanuel, is notorious for the maxim: “Never let a good crisis go to waste.”
If you’ve opened a newspaper or turned on the television any time in the last decade, you’ve no doubt seen someone trying to convince you that there is no bigger crisis than global warming. Lots of people have seen it as an opportunity to profit.
One of those people is Emanuel. While working at the investment bank Wasserstein Perella, Emanuel helped put together the merger between Chicago utility company Unicom and Philadelphia utility Peco to create a mega-utility known as Exelon Corporation.
Emanuel made $16.2 million during the two years he worked at Wasserstein Perella, and the Exelon merger was his biggest deal. White House strategist David Axelrod also has done consulting work for Exelon.
Shortly after Exelon was created, the company sold off most of its coal-powered energy plants in order to concentrate on its 17 nuclear reactors. But building new nuclear energy plants is extraordinarily costly, so it’s not exactly a growth industry.
So as big corporations often do, Exelon officials hatched an unusual plan to use government to make their company more profitable: leverage fears about global warming to help federal politicians and bureaucrats hamstring Exelon’s rivals through Obama’s proposed cap-and-trade anti-global warming program.
Since nuclear plants put out mostly water vapor, Exelon recognized that its carbon-producing competitors would have to cope with the huge new tax and regulatory burdens sure to come if Obama’s proposal became law. The competitors would pass their higher operating costs to consumers in the form of higher prices.
But since Exelon wouldn’t have to pay those new taxes, the company also could raise prices and pocket the bigger profits that followed.
Financial analyst Sanford C. Bernstein and Co. estimates those additional Exelon profits could approach $1 billion annually.
That’s quite a handsome return on the $29.8 million Exelon has spent on lobbying contracts from 2000 to 2009.
“It’s an investment we are making that will result in substantial shareholder value,” Exelon’s William Von Hoene recently told Forbes.
Exelon is not unique in having a business strategy pegged to cap-and-trade legislation. Between 1990 and 2004, DuPont slashed its carbon emissions by 65 percent — and, not coincidentally, by 2004 the company had five full-time lobbyists working on environmental and climate change legislation in Washington.
DuPont is just one of many large corporations that are part of the U.S. Climate Action Partnership — a big business lobby aimed at passing climate change legislation. While it is now embroiled in the largest U.S. environmental disaster in history, BP was a founding member of the lobby.
BP’s heavy investments in natural gas — which produces substantially less carbon than coal — stand to pay off handsomely if natural gas power plants suddenly become much more profitable relative to their coal-powered competitors. Other notable corporate members of USCAP include Alcoa, General Motors, General Electric, Duke Energy and Dow Chemical.
While the House of Representatives debated cap and trade legislation last year, Emanuel asked Exelon executives to pressure undecided members of Congress. Asked about this cozy relationship, Elizabeth Moler, who was then Exelon’s top lobbyist, told Forbes, “We are proud to be the president’s utility.”