Right now the U.S. Senate is
conducting a master class on the perils of legislation by
rearview mirror. On July 27, when Majority Leader Harry Reid
unveiled the “Clean Energy Jobs and Oil Company Accountability
Act,” the two most powerful clean energy provisions were
missing: a cap on carbon emissions from the electric power
sector and a national Renewable Electricity Standard (RES),
which would require utilities to generate at least 15 percent of
their electricity from renewable sources by 2021.
For years, business leaders from General Electric Chief
Executive Officer Jeff Immelt to venture capitalist John Doerr
have warned that if America failed to pass a comprehensive
climate-and-energy bill, the country risked losing the clean
energy race to China -- sacrificing the jobs of the future in a
timid, ill-fated effort to preserve the jobs of the past. Now
those warnings are coming true.
Clean energy advocates were angry but not surprised on July
22, when Reid said he was pulling the plug on the carbon cap.
Powerful utilities were withholding support. President Barack Obama wasn’t trying to forge a compromise. And key Democratic
senators had no appetite for a bill that might cause a modest,
short-term increase in electricity prices -- potentially
endangering some 20th century manufacturing jobs -- even if it
helps create many more 21st-century jobs by making clean energy
competitive with coal.
The disappearance of the renewable energy standard,
however, was a shock. Both the House and Senate have passed RES
bills in the past, yet it has never become law. With elections
looming, this may be the last chance for years to set the rules
of the road for energy investment.
Partisan Moment
While the carbon cap, at this intensely partisan moment,
has exactly zero Republican supporters, at least four GOP
senators have signaled support for the RES. Proponents are
hoping to introduce it as a floor amendment -- and whether or
not they have the votes to pass it, this is a debate worth
having.
In a meeting with business leaders and environmental
advocates early last year, Obama economic adviser Larry Summers
described a “scissors” approach to economic recovery,
according to several people who were present but not authorized
to discuss it publicly.
The first blade of the scissors, Summers explained, was the
stimulus package and its tens of billions for clean energy
deployment. The second blade would be a mandatory, declining cap
on carbon, which would remove the investment uncertainty that
has hobbled the energy market, and draw billions of private
dollars off the sidelines.
Dirty Fuel
Utility chief executive officers such as Lew Hay of Next-
Era Energy, Ralph Izzo of PSEG, and Jim Rogers of Duke Energy
have all said they are ready to invest in clean energy just as
soon as Congress establishes a carbon cap that creates a clear,
steady price signal for dirty fuel -- in effect, pricing in some
of the social costs of carbon pollution that have never been
part of America’s energy bill.
The scissors is missing a blade. The Senate has made clear
it is not ready to cap carbon, and President Obama has made
clear that he won’t go to the mat for it now, either.
On July 24, when some of the clean-tech industry’s leading
executives gathered in Aspen, Colorado, for a Clean Energy
Economy Roundtable sponsored by the Aspen Institute, the group
was perplexed. “The deployment rate of renewable energy
projects in America is withering,” said Andy Karsner, CEO of
Manifest Energy and a former assistant secretary for Energy
Efficiency and Renewable Energy during the George W. Bush
Administration. “Projects announcements are happening, but
largely at the end of a federal check.”
Better Prospects
Instead of funding U.S. projects, banks and venture
capitalists increasingly are putting their energy money into
China, where the market is large and secure, thanks to
government mandates. In the second quarter, for example, China
attracted more clean-tech asset financing than Europe and the
U.S. combined, according to data compiled by Bloomberg New
Energy Finance.
Financing of wind turbines, solar panels, and low-carbon
technology in China climbed to $11.5 billion, a 72 percent jump
from the year-earlier quarter. U.S. investment in clean energy
for the quarter measured $4.9 billion; Europe’s, $4.5 billion.
“Where investors are placing their bets,” says BNEF Chief
Executive Michael Liebreich, “is changing rapidly.”
On the same day that Reid pulled the plug on the carbon
cap, China Daily announced that the People’s Republic would
begin an experiment in carbon trading -- a policy mechanism
invented in America, used by Republican George H.W. Bush to
fight acid rain, and vilified by today’s GOP as “cap and tax.”
China’s Spending
China may spend $738 billion over the next decade
developing cleaner sources of energy, according to Jiang Bing,
head of the planning and development department for China’s
National Energy Administration. “The government is taking the
issue of cleaner energy seriously for the reasons of climate
change (and) energy security,” says Barbara Hon, an analyst at
China Everbright Securities in Hong Kong. “It’s already meeting
some of its targets for sectors like wind power well ahead of
schedule.”
It may already be too late to catch the Chinese, though
there are ways the U.S. could stay in the game. The carbon cap
would be Plan A, but that’s off the table for now. Plan B would
begin with passage of the RES and other measures also not being
considered in current legislation.
‘Green Bank’
One such idea is a “Green Bank” that would leverage
Treasury Department money for low-interest loans to projects
that can’t attract conventional financing because their path to
profitability is too long. “I don’t know if it really amounts
to a Plan B,” says Kenneth Berlin, a Green Bank proponent and
cap-and-trade supporter who heads the environmental practice at
Skadden, Arps, Slate, Meagher & Flom. “It’s more like Plan D,
but it would be far, far better than nothing.”
Twenty-eight states and the District of Columbia already
have RES laws, many with much higher targets than the one cut
out of the Senate bill.
Colorado voters approved one in 2004, and the state has
increased the standard twice: The current target is 30 percent
by 2020, double the one left out of the Senate bill. Colorado
now generates almost 6 percent of its electricity from wind, and
its commitment to clean energy has helped develop a solar
industry as well: from 100 companies in 2007 to more than 400
today, according to the governor’s office. When Vestas Wind
Systems, the Danish turbine maker, chose to build its North
American manufacturing plants in Colorado (a $1 billion
investment that was good for 2,500 new jobs), it called the RES
a major factor in the decision.
Early Adopter
Another early adopter is Texas. Its RES, signed into law by
Governor George W. Bush in 1999, has helped the state become a
major producer of U.S. wind power, adding almost 10 gigawatts
(up from 0.2 in 1999) and thousands of new jobs in the decade
since the law was enacted. Although Texas has reduced its carbon
emissions as a result of this push into wind energy, Bush and
his fellow Texans didn’t create the industry because they were
worried about global warming. They did it because there was
money to be made.
There still is. And if Congress doesn’t hurry, most of it
is going to be made in China.
(Eric Pooley is deputy editor of Bloomberg Businessweek and
author of “The Climate War: True Believers, Power Brokers, and
the Fight to Save the Earth.” This column will appear in the
magazine’s Aug. 2 edition. The opinions expressed are his own.
To contact the author of this column:
Eric Pooley in New York at
epooley2@bloomber.net
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