Energy & Environmental Policy

The Intersection of Climate Change and Recovery


On Friday, April 8, the U.S. Congress dodged a government shutdown by striking a budget compromise, undoubtedly crushing the dreams of the news outlets gleefully throwing countdown clocks and “what if?!” statements around. What the media have largely failed to cover, however, are the follow-up discussions that continue to adjust the budget.

One of these discussions centers on an interesting piece of climate-related legislation – penned by Republicans and signed by President George W. Bush in 2005. As expected for something coming out of a party well-known for its skepticism on climate change, the program is not technically a climate change mitigation program, but rather a piece of energy legislation to create jobs and promote the alternative energy market. The program provides a way for renewable energy projects to apply for loans from the Department of Energy.

The New York Times’ Green blog  quotes the Department of Energy on the program’s impact, stating that since its creation, the program “has provided loan guarantees or made preliminary commitments of more than $18 billion for 20 projects,” with another 25 projects on the verge of completing the application process. Proposed cuts to the program could eliminate funding for those 25 loans not yet finalized. Interestingly, Democrat senators have come to the defense of this Republican bill, arguing for its role in the economy recovery.

The Wall Street Journal quotes alternative energy developers and executives saying that this program is “crucial” for projects seeking to go commercial, filling a financing gap that private lenders are still reluctant to fill in an industry they are inexperienced with. These loans act as guarantees for renewable energy projects, decreasing the risk of investment for private capital. The projects already approved or nearing approval for the loans that are at risk of losing their funding “are estimated to put more than 25,000 Americans to work,” according to a spokeswoman for a private clean energy firm.

Renewable energy projects are difficult to disagree with, politically. They stand for stronger environmental standards, lower pollution and climate change mitigation, as well as more jobs and a stronger economy. Whether or not a politician agrees that we should decrease our emissions for the sake of climate change, he or she can agree with one of the other benefits of a stronger and more innovative renewable energy sector.

However, renewable energy is still iffy for private capital. The sheer amount of capital that must go into a project before it can be commercially viable is off-putting for private lenders and financiers, who cannot be sure that a project will work or that the market in which it is situated is one that can support an alternative energy project. It is not time yet to put this industry at the mercy of the market.

Texas, a leader in renewable energy, developed the Renewable Portfolio Standard, which the State Energy Conservation Office describes as a program that “ensures that the public benefits of renewable energy, such as wind and solar, continue to be recognized as electricity markets become more competitive.” RPS requires electricity providers to generate a certain quantity of renewable energy based on their market share of energy sales, and has been wildly successful. The RPS met its 10-year goal for renewable energy provision in six years, and Texas has seen an investment of $1 billion in wind power, “creating jobs, adding to the Texas Permanent School Fund and increasing the rural tax base,” according to SECO’s Web site. Plans for expansion of the RPS are currently in various stages of creation and legislation.

There are two lessons to be learned here. First, if Texas can implement programs to bolster the renewable energy industry until it can face the market on its own, why can’t federal congressmen and senators see the impact this program could have on our economy if properly funded? It is clearly not an issue of whether a politician’s political priorities include climate change mitigation or whether the party sees the benefit of the program – Texas is a very conservative state that has successfully and wholeheartedly backed the growth of the renewable energy industry. Republicans (and climate-skeptic Democrats) can support this program without supporting a cause they don’t believe in.

Second, this program and the Texan experience show that there can be market-based solutions to climate-related problems, but that in order for those solutions to be viable we must be willing to invest in the initial phase – provide capital, create a demand, subsidize materials or products, whatever the case may be. This investment into climate change mitigation is worth it because it provides substantial economic benefits as well.

Really, who doesn’t win with this type of program?


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