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The Ultimate CEOs: James E. Rogers, Chairman, President and CEO, Cinergy

The CEO Power Forum: Not all utility CEOs are created equal...

Fortnightly Magazine - June 2005

acid rain, based on a cap-and-trade of CO 2. This is the least cost, most economically efficient way to deal with emissions. The last thing we want is a mandate to apply a particular fix. With a market-based approach, the emission just becomes part of the financial calculation and pollution goes down.

The path for CO 2 has to be to slow, stop, and then reverse growth of emissions - you don't want to just slam your car in reverse while cruising down the highway at 65 miles per hour. Therefore, we like an approach that has received a lot of attention by some prominent economists at Resources for the Future and the Kennedy School of Government and the bipartisan National Energy Commission-mainly a cap-and-trade, with an escalating price cap during the early years of the program. This would make the emissions cap "soft," meaning it could be exceeded in the early years of the program. This is much more cost-effective, lowers the risk of economic shocks and political rollback, and in the long run achieves 90 percent of the reductions of a pure cap.

Fortnightly What is your view on administration efforts to deal with the global warming issue?

Rogers The administration is actually doing quite a lot. Voluntary programs like President Bush supports are a terrific start. We've pledged to reduce our emissions to 5 percent below our year-2000 level by 2010. These programs get companies to begin thinking about the problem without forcing premature action. Forward-looking firms have begun to act. A voluntary program though will only get reductions that probably should have been made anyway-small items with some profit potential because of energy savings. No one will make the big money investments needed to build an entirely new energy system that the climate change problem will ultimately require unless they have a CO 2 price signal that makes this a profitable move.

The administration is also working to provide funding for new technology development, sort of priming the pump to give us a head start. These technologies will be further developed and then ready to be widely deployed once we are required to make significant reductions, which will happen eventually. It is unlikely though that these new technologies will be widely adopted outside of a CO 2 control regime because they often can't compete with current generation technologies that are well understood and fairly reliable. The administration is also providing a good deal of funding for ongoing climate research, and they should be applauded for this too. People may not like some of what is happening, but they should be willing to provide credit where credit is due.

Fortnightly One of the chief complaints by those that oppose U.S. action on global warming is that China and India, two of the biggest contributors to climate change, are not talking of participating. What is your view of this criticism, and how could they participate?

Rogers China and India have to be brought on board. We must be able to source carbon offsets (or create reductions) from these countries