Environmentalism doesn't work without subsidies from government, business leaders say at conference

Environmentalism doesn't work without subsidies from government, business leaders say at conference

June 22nd, 2011 by Ellis Smith in Business Around the Region

Former Michigan Governor Jennifer Granholm, right, talks with local officials and business leaders as Tennessee Sen. Bo Watson-R, looks on with Oak Ridge National Laboratory's Ray Boeman Tuesday at Green Spaces. Granholm urged support for clean energy, electric vehicles and energy independence.

Photo by Tim Barber/Times Free Press.

It would be nice to have an economy based on renewable goods, zero dependence on foreign oil and a fleet of electric cars transporting workers to and from their job, local officials agreed Tuesday.

But empty government coffers are little help in funding expensive green projects, which are generally unprofitable for private business to pursue without subsidies, attendees told former Michigan Gov. Jennifer Granholm in a Chattanooga visit.

Granholm, a senior adviser to the Pew Charitable Trusts' clean energy program, is working to ignite a grassroots effort by businesses and consumers to spur the creation of a national energy policy based on homegrown green energy and electric vehicles, she sold a group of manufacturers, energy executives and politicians.

While U.S. leaders debate the pros and cons of a national energy policy, countries like China plan to spend $17 billion by 2020 on electric vehicle infrastructure, which puts the U.S. at a competitive disadvantage, she said.

"What would be such a shame is if we substitute our reliance on foreign oil for a reliance on foreign batteries," she said.

Her idea is for Congress to legislate more electric vehicles and fuel-efficient cars and transform the economy into one that produces 20 percent of its energy from renewable sources by 2025.

Using what Green Spaces Executive Director Jeff Cannon called a "carrot and stick" approach, industry would receive rewards for green projects and penalties for energy inefficiency.

Consumers not ready

But the problem, according to Volkswagen Group of America spokesman Guenther Scherelis, is that consumers don't want to pay more in either additional taxes or higher prices for a greener economy.

"Volkswagen has offered electric cars; we have also offered products like natural gas-powered cars," Scherelis said. "But people are very hesitant to use the car and spend their money on it. You have to convince the customer."

In Scherelis' native Germany, the government convinced consumers to be green with a "a lot of state intervention," he said.

But "without the government, in Germany it wouldn't work."

Mohawk Industries, one of the world's biggest carpet makers, has done much to trim manufacturing costs in environmentally friendly ways, said Mohawk Home President Bill Kilbride. But consumers by and large don't want to pay more for products simply because they're environmentallyl friendly, he said.

"We've had great success in energy efficiency in the business-to-business world, but it's lacking in the business-to-consumer world," he said.

Mandates from government also have to avoid driving industry out of the country, business leaders warned.

Manufacturing is interested in energy efficiency, but the cost of competing in a global economy makes each dollar spent on a green project with little return on investment a dollar that can't be spent on outselling a foreign competitor, said Tim Spires, president and CEO of the Chattanooga Regional Manufacturers Association.

Wejun Robinson, general manager of Chattanooga-based Top Flight, a paper products company, agreed that without government subsidies, few businesses would spent money on infrastructure like solar panels because it takes over 15 years to recoup the investment.

"It has to be cost effective," Robinson said. "You can't do solar on your own."

Solutions

These economic realities are exactly why legislators have been hesitant to make sweeping changes, state Sen. Bo Watson said.

"Every solution you come up with, you discover five or six problems," Watson said.

The most palatable solutions to near-term energy independence, he said, are those that exist already.

"Why aren't we tapping all the resources we have in America?" he asked, referring to the nation's oil and natural gas reserves.

As the country transitions to a greener economy in the long term, any solutions that emerge to free America from trading with dictatorships with underground oil reserves have to focus on market solutions, said Tom Decosimo, CEO and managing principal of Decosimo Corporate Finance.

"If energy or manufacturing is at risk, those jobs are going to move to China," he said. "Businesses have to focus on making money."

Kurt Reiman, head of thematic research at UBS Financial Services who studies macroeconomic trends for the financial industry, said fossil fuels will remain dominant for the foreseeable future even as alternatives such as wind energy, solar power and natural gas gain traction.

"The way we see it developing is coming from market effects, not from some grand energy policy," Reiman said. "Business just want to know what the policy is going to be, but right now the policy isn't coming."

Contact staff writer Ellis Smith at esmith@timesfreepress.com or 423-757-6315.