Navigant Research Blog

In Disasters, Cleantech Opportunities

Dexter Gauntlett — December 26, 2012

In recent weeks, to the surprise of many, carbon tax legislation has re-entered the debate at the federal level.  Given the revenue raising opportunity the tax would provide, and with cuts to the sacred cows of Medicare and Social Security off the table for both parties for now, many wonder if the carbon tax could win new support as part of, or a consequence of, the fiscal cliff negotiations.

This would be a remarkable turnaround, considering that a cleantech championing Democrat-controlled Senate and House in 2009 could not even pass the American Clean Energy & Security Act that called for a 20% national renewable energy target.   Indeed, there has been little enthusiasm on Capitol Hill to renew the federal wind power production tax credit (PTC), which has been successful in terms of deploying wind power and creating jobs, in blue and red states alike.  The effect of the PTC expiration will be to stop wind power development in its tracks.

The renewed talk of a carbon tax stems from one little-noted fact: cleantech has always fared well in the wake of national disasters.  The combination of Hurricane Sandy and the fiscal cliff could form just the tonic that cleantech supporters need to achieve meaningful legislation to support clean energy deployment in the United States.

Consider the following political gains made by the cleantech industry in the past 12 years:

During the George W. Bush administration, despite federal inaction, several states emerged as leaders for deploying clean energy.  Between 2001 and 2008, 24 states established renewable energy targets or standards, enacting a wave of incentive schemes to fill the void at the federal level.  Thirty states plus Washington, D.C.  have enacted such targets and standards today (although many are currently under attack and may not survive).

Bush’s Boldness

A little more than a year after Hurricane Katrina, with oil prices around $70 per barrel, the prospects for advancing clean energy industries in the United States seemed dim.   In his 2007 State of the Union speech, though, George W.  Bush made the bold statement that our country is addicted to oil, shocking many of his fossil fuel industry supporters with increased investment in clean technology research and the introduction of the U.S. renewable fuel standard, which led to significant public and private investment in biofuels, in particular.  The prospects for achieving the targets for advanced renewable fuels (cellulosic biofuels) are low, but Bush’s move helped move the industry into a new phase.

In 2009, with the U.S. economy contracting, the newly elected Obama Administration unleashed $770 billion in cleantech stimulus funding that has been the single most effective investment for the U.S. cleantech market ever.

These examples underscore the herky-jerky nature of cleantech support and deployment in the United States, which has hamstrung the competitiveness of investors, companies, and the nation.  I personally think that the 2-15 Washington Wizards (a disaster of an NBA franchise) located only a few miles away, have a better chance of winning the NBA title than the carbon tax has of being passed on Capitol Hill.  Nevertheless, the prospects for positive action on federal support for clean energy are better than they’ve been in years, thanks partly to disasters both natural and manmade.

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