House Select Committee on Energy Independence and Global Warming

At a Policy Crossroad for Clean Energy Technologies

The United States is at a crucial crossroad in its stance on clean energy policy. Once the leader in emerging clean technology markets, the U.S. now trails European nations and China in the research, development, and deployment of many new energy technologies. Financial analysts and industry insiders presented a stark choice at a standing-room only hearing hosted by the House Select Committee on Energy Independence and Global Warming last week: either we can adopt and extend policies that promote domestic growth of clean energy industries, or we can continue to fall further behind other countries around the world in our ability to compete in the markets of the 21st century. Chairman Ed Markey (D-MA) echoed the experts in saying that without clear long-term and short-term incentives, companies will invest clean energy dollars in other countries, most notably China. In effect, we will be trading our addiction to Middle Eastern oil for an addiction to Asian clean energy technologies.

Clean energy technology markets are already substantial in scope and are likely to grow in the coming decade. According to Bloomberg New Energy Finance, global investments in new forms of clean energy have already surged from under $50 billion in 2004 to more than $170 billion four years later. And as mentioned in our brief on Clean Energy Markets, annual investments in global renewable energy could reach $424 billion a year in 2030.

The panel of expert witnesses advised the Committee that if the United States wants to be a leader in clean energy, it needs to foster innovation by extending successful programs like tax credits, loan guarantees and grants, and adopt a renewable energy standard (RES). Tom Carbone, Chief Executive Officer of Nordic Windpower, said firms like his need clear market signals, such as a price on carbon or a RES, so they can respond to market demand.

Michael Liebreich, Chief Executive of Bloomberg New Energy Finance, emphasized the importance of market signals. Under an RES, the government would require that a certain percentage of utilities’ power plant capacity or generation come from renewable sources by a given date, and mechanisms such as credit trading would allow flexibility in meeting this requirement. However, the RES needs both to be ambitious and to have stiff penalties for noncompliance in order to be successful. Such a policy solution could help create the market demand clean energy firms need to establish footholds and ultimately achieve significant, self-reinforcing growth.

Mark Fulton, Global Head of Climate Change Investment Research at Deutsche Bank, urged the adoption of policies that are transparent, have longevity, and have certainty (TLC) in order to ensure the United States has a competitive advantage in global energy markets. Investors want transparent policies that clearly define the rules and create a level playing field. So to attract private funding, these policies should be in place for the length of the investment and should not be subject to the kind of frequent and uncertain renewal that has stymied the production tax credit and investment tax credit.

In addition to their environmental benefits, Ravi Viswanathan, General Partner at New Enterprise Associates, believes that these policies are exactly what are needed at this uncertain economic time. Mr. Viswanathan argued that clean energy investments can lead to job creation and energy independence. If we have the right incentives, clean energy jobs would be created domestically rather than abroad. Innovation has long been a source of our competitive advantage. Other countries, such as China, have speed, capital, and scale, and they are exercising their manufacturing advantage. Now, these countries are beginning to do something that investors had not anticipated: foster innovation. Once other countries start innovating in earnest, unless the United States takes action, the economic benefits associated with these technologies will go elsewhere.

In his closing statement, Chairman Markey highlighted the role government has played in fostering innovation and developing new markets, citing examples from the Manhattan Project to the internet. In all past cases, the United States showed leadership in developing a national plan that incentivized private investment. We need a similar plan today in the energy sector that incorporates Fulton’s principles of TLC and harnesses the power of the markets to spur innovation. As mentioned in our Clean Energy Markets brief, well-crafted climate and clean energy policy can give nascent clean energy industries a foothold by creating domestic demand and spurring investment and innovation. The time to act is now: through policy leadership at home and abroad, the United States can position itself to become a market leader in the industries of the 21st century.

The Other Carbon

Most development and analysis of climate change policies have focused on reducing carbon dioxide and other greenhouse gases (GHGs), which are widely recognized as the major contributors to climate change. And as we blogged about last year, far less attention has been given to black carbon (BC). However things may be changing. Inspired by University of California – San Diego professor Veerabhadran Ramanathan’s Foreign Affairs article, “The Other Climate Changers,” the United States House Select Committee on Energy Independence and Global Warming held a hearing last Tuesday to investigate the impacts of black carbon pollution. The takeaway message from this hearing is that BC policies should be complementary to efforts to reduce GHG gases. Reductions in emissions of black carbon would have near-term effects on reducing global warming that are not possible from actions directed at carbon dioxide and other long-lived gases. Reducing BC is good for the environment, public health, and creates jobs. We recently published a detailed primer on BC science and policy.

Both professors Ramanathan and Tami Bond of University of Illinois at Urbana-Champaign gave an overview of the science of black carbon – uncombusted materials like soot and smoke. A growing body of evidence indicates that soot and smoke are major contributors, possibly second only to carbon dioxide, to human-induced global warming. BC warms the air by absorbing sunlight in the atmosphere, changes rainfall patterns and, when deposited on snow and ice, accelerates melting. According to Professor Ramanathan, BC’s warming effect is around 40 to 70 percent of that of carbon dioxide. However, unlike carbon dioxide, black carbon does not accumulate in the atmosphere; it stays in the atmosphere for a few weeks, so the impacts are more concentrated in the areas where they are produced, and reducing BC emissions would have near-term benefits in those areas.

BC is produced by both natural processes and human activity from the incomplete combustion of fossil fuels, biofuels, and biomass. According to Professor Ramanthan, the regional effects of BC are particularly large over the Arctic, Africa, and Asia. BC leads to increased melting of snow and ice in the Arctic, Sahelian drought, and decreased monsoon rainfall. Primary sources include diesel engines, small industrial sources, residential coal and solid biofuels for cooking and heating, and agricultural and forest fires.

Since the impacts of BC are regional, there are significant local environment, public health, and economic benefits of reducing BC emissions. Reducing BC emissions in India for example, would not only produce environmental benefits of cleaner air and negate rainfall loss, but would also save lives. Professor Ramanathan’s calculations indicate that replacing cook stoves in India with advanced biomass stoves could prevent 2 million deaths from the reduction of particulate matter produced by traditional stoves. Mitigating BC emissions would also prevent reduced rainfall and reduced agriculture yields.

According to another panelist, Conrad Schneider, Advocacy Director of the Clean Air Task Force, reducing BC emissions can create clean jobs here in the United States. Even though BC isn’t much of a climate forcing in the U.S. and a potentially expensive source of reductions, there is a billion dollars worth of work to reduce diesel’s BC emissions. For example, retrofitting 11 million diesel engines in the U.S. today could achieve the same environmental benefit as removing 21 million cars from the road, would save approximately 7,500 lives through reduced particulate matter pollution, and create tens of thousands of domestic jobs.

In order to get the environmental, economic, and public health benefits of reduced BC emissions, all the witnesses agreed that action must be taken. For more information, please check our white paper on the climate impacts of black carbon.

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