The Danger of Green Stimulus

Barack Obama's final appointments in December indicate a strong
commitment to action on climate change. Steven Chu as Energy Secretary,
Carol Browner as Energy & Climate Czar, John Holdren as Assistant
for Science and Technology -- just to name a few recent selections --
are all proponents of vigorous action to cut U.S. global warming
pollution and take leadership on a new international climate treaty.
And Hilda Solis, Obama's new Labor Secretary, is a champion of "green
jobs."

All is well on the climate front, it seems. Except that it's not.

Carbon cap and trade regulation remains the top federal policy priority
for the majority of environmental groups. But in June, cap and trade
legislation failed in the Senate, and sixteen Democratic Senators from
coal and manufacturing-heavy states voiced their opposition
to high carbon pricing. The policy faces even greater obstacles in
today's economic climate, since it would increase the energy bills of
the American public.

Despite Obama's appointments, climate advocates are thus left to worry:
is Obama really prepared to expend his political capital championing a
policy that will increase U.S. energy prices in the midst of a
recession?

Not likely. Until recently Obama voiced support for carbon regulation,
declaring at a governors' climate conference in mid-November that his
climate agenda "will start with a federal cap and trade system." But
since then, as the recession has deepened, he has said little to
nothing about cap and trade. His apparent change of heart may reflect a
larger global trend, with European nations increasingly voicing opposition to their Emissions Trading Scheme and Canadians rejecting the Liberal Party's proposed carbon tax in their October election.

Does Obama have an alternative climate strategy? So far, he appears to
be wrapping his climate policy into a "green stimulus" plan, focusing
on public investments to create "green jobs" in the construction of
energy efficient infrastructure. He has even mentioned some investment
to build renewable power plants. But the large majority of the stimulus
seems set to go toward short-term investments that will quickly create
jobs -- retrofitting buildings and constructing traditional
infrastructure projects like highways and bridges.

Replacing sustained climate legislation with a short-term "green
stimulus" program to create green jobs and perform energy efficiency
retrofits is a dangerous possibility. Increased energy efficiency can
only satisfy a portion of the necessary reductions in global warming
emissions, and it will not help develop and deploy the low-carbon
energy technologies that are essential to transform U.S. and global
energy systems. Yet with green jobs now positioned as "the solution" to
both the economy and the climate, Obama has cover to take the
politically expedient route of short-term green stimulus while ignoring
serious climate policy.

Avoiding this outcome demands a shift from green jobs to a broader
focus on green technology. The single greatest obstacle to creating a
"green energy economy" is the high cost of low-carbon energy
technology. Technologies like solar photovoltaics, plug-in hybrids, and
advanced geothermal are all more expensive than their conventional
market competitors.

A serious alternative to cap and trade would therefore focus on making
clean energy cheap, prioritizing major, sustained public investments to
drive down the price of green technologies as quickly as possible. This
would require federal investments on the scale of $500 billion over the
next decade to support and accelerate each stage of the energy
innovation pipeline: research, development, demonstration, and
deployment.

Obama has made it increasingly clear that public investment is his
preferred climate policy mechanism. What Obama has not made clear is
whether or not he will embrace the type and scale of investments necessary to seriously confront the climate challenge.

If cap and trade is a no-go in today's economic climate, Obama must
redouble his commitment to public investment in clean energy, investing
at least $500 billion in green technology over the next ten years. And
while cap and trade may still be the preferred policy mechanism of most
environmental groups, new political circumstances demand new tactics.
Public investments in green technology are clearly more viable, and
climate advocates should embrace them, while remaining vigilant that
Obama's climate agenda does not stop with efficiency and green jobs.

The prosperity and security of the United States in the 21st century
will depend largely on the course of action set by the nation's new
leadership. The scale of our climate challenge is great, and so is the
scale of public investment needed to overcome it. The Obama
administration and 111th Congress must seize the moment not only to
stimulate short-term economic recovery and job creation, but also the
long-term technology innovation and deployment that will make clean
energy cheap and secure our nation's energy and climate future.