Chunky U.S. energy policy hard on green biz

An incremental approach is likely to dominate the near future when it comes to forming energy and climate policy. Such a path could end up costing green businesses more.

5 min read

WASHINGTON--President Barack Obama's proposal that U.S. energy and climate policy may be implemented bit by bit means that companies will have less incentive to grow their green-energy businesses.

Obama told Rolling Stone magazine last month that following the Senate's failure to pass comprehensive climate legislation that would have put a price on greenhouse gas emissions, energy policy may have to be done in "chunks."

But if Republicans take control of either house of Congress in the November 2 elections, passing limited energy measures such as a price on carbon emissions only from power companies or a renewable-energy standard, requiring utilities produce minimum amounts of power from sources like wind and solar farms, would be improbable for the remainder of Obama's first term.

Even if Republicans fail to capture either house, and Obama can corral the votes to pass such legislation, piecemeal laws will come nowhere near a comprehensive overhaul and may even be detrimental to making lasting changes in the energy system, increasing energy security, or cutting emissions blamed for warming the planet.

"You are going to adopt policies in the order of their ease of passing rather than in the order of rational policy making," Adele Morris, policy director for climate and economics at Washington-based Brookings Institution think tank, said about taking an incremental approach to energy. "There are a lot of things that are bad ideas but are easy to pass."

As Washington struggles with energy policy, the gap between the United States and China, the world's two largest carbon polluters, is growing ahead of global climate talks in Cancun, Mexico, starting in late November. Here too, an incremental approach will likely dominate.

At the Reuters annual Global Climate and Alternative Energy Summit today through Thursday, top energy and climate officials from the United States, Brazil, and Europe, the U.N. and global companies will give their predictions for how green businesses will fare over the next several years. The experts will also weigh the progress of global climate talks and whether the Kyoto Protocol's binding cuts for most rich countries can ever be renewed or expanded.

To Morris and many businesses, such as General Electric or Duke Energy, the beauty of a comprehensive program of putting a price on emissions is that it allows a polluter to decide which route is cheapest to cut emissions: investing in energy efficiency, switching from carbon-heavy fuels like coal to natural gas, or building renewable power.

Paradigm shift
With the U.S. lacking an overall policy, companies may end up making decisions in response to the chunky bits of individual legislation, increasing their costs.

In addition, dependence on a variety of subsidies and incentives to create high-profile wind or solar farms or energy efficiency jobs may give the illusion that comprehensive changes are being made, changes that are vulnerable if the funding or incentives run out. Uncertainty of future prospects could restrain businesses from making big investments.

"It's easy to be seduced by the fact that you have 50 or 60 programs doing wonderful things and forgetting about whether you're achieving your bottom-line goals," be they cutting emissions or increasing the country's overall energy security, said Michael Levi, a senior fellow on energy and environment at the Council on Foreign Relations in New York.

Gary Skulnik, a co-founder of Clean Currents, a private company based in Maryland that provides electricity from wind and solar power for homes and businesses, said companies like his are dependent on state incentives. They cannot grow much in a state like Virginia which lacks broad incentives.

"To really make a kind of paradigm shift you really do need a national price on carbon, there's just no two ways about it," he said. "Until then you will get renewable-power adoption, but you won't have it at the kind of massive level that's needed."

Of course, doing policy in chunks may be the only choice Obama has right now and some of the programs may bring benefits. The administration has already put in place higher vehicle efficiency standards and is trying to set the bar significantly higher for standards from 2017 to 2025. The Environmental Protection Agency is also trying to put modest regulations on big power plants and factories that emit greenhouse gases.

But the EPA agrees that existing clean air laws are an awkward tool to achieve the deep emissions cuts needed to avoid the worst effects of climate change or lead to innovation to transform the energy business.

Pressure grows
"If you count on going incremental forever than we'll never get to where we need to quickly enough," said Mark Kenber, deputy chief executive of London-based Climate Group.

He said an important driver of the green space will be countries like India and China who lack the diverse energy supplies of the United States and who see green energy more as a key to energy security.

Pressure from Europe, which has a carbon market and many of the world's biggest wind power companies, may help push the United States to adopt a more comprehensive approach when the economy improves and worries about jobs fade.

Brookings' Morris said even putting a moderate price on carbon that would not be implemented for years would at least give business a market signal that big clean-energy investments would face a certain future.

Until then symbolic investments may be the most the United States can count on.

"I frankly think we are not going to get much done either nationally or internationally for the next two years," said Bill McKibben, an activist and author who last month led a group of students to challenge Obama to reinstall solar panels on the roof of the White House. On October 5 the president agreed to so by the middle of next year.

"It doesn't look like the U.S. Congress is going to be in the mood to do anything, chunky or not. I think what we have to do for the next few years is build a movement so the next time politics give us an opening, we are able to get change on the scale that is required."