October 15, 2008
Waxman: Carbon revenues should "by and large" be invested in clean technology
Congressman Henry Waxman says, "by and large," the revenues from climate and clean energy legislation should be reinvested in clean energy technologies, Bloomberg News reported Friday.
The statement is a marked improvement over Congressman Waxman's appearance on PBS' Tavis Smiley show last Monday, when he seemed to indicate that the primary driver of clean energy technology innovation and deployment would be the higher prices on dirty fuels set by proposed cap and trade legislation and made little mention of the critical role public investments in clean energy can and must play in accelerating the birth of a clean, prosperous energy economy.
Like Speaker of the House Nancy Pelosi's prior statements that cap and trade is designed to "pay for some of these investments in energy independence and renewables," Waxman's latest remarks could indicate a growing consensus among House leadership that carbon revenues should be primarily used to spur clean energy technologies and accelerate the transition to a clean, new energy economy.
Congressman Waxman, who chairs the House Energy and Commerce Committee set to draft climate and clean energy legislation over the coming weeks, was also openly critical of President Obama's proposal to send the bulk of revenues raised from a proposed cap and trade system back to taxpayers in the form of middle class tax cuts. Bloomberg quotes the Congressman as saying:
"I don't think that's the best use of it [carbon revenues]," Waxman said. "By and large" it should be spent on green technologies, he said, and part of it could be used to "help consumers with higher energy costs" and hard-hit industries, "especially coal."
The draft climate and clean energy bill circulated three weeks ago by Congressman Waxman and Congressman Edward Markey (D-MA) (who chairs the subcommittee taking the first crack at the bill beginning this week) made little commitment to the public investments necessary to spur clean energy innovation and accelerate the deployment of clean energy technologies. Waxman's statements last week indicate that commitment may be coming soon, as Markey and Waxman begin the real work of drawing up the climate and energy legislation they hope to send to the House floor by Memorial Day.
At stake is the tens of billions of dollars that would be raised annually if Congress establishes a cap on carbon emissions and begins auctioning emissions permits to polluters. President Obama's draft budget outline released in March conservatively estimated that a cap and trade bill would raise on the order of $80 billion annually.
Obama's budget outline allocated $15 billion annually of this new revenue stream to scale up investments in clean energy innovation and R&D. That's the right scale for a renewed national commitment to clean energy R&D and consistent with the Breakthrough Institute's recommendations for a step-change increase in the scale of federal energy R&D investment. That level of investment in energy R&D would be enough to meet today's energy innovation imperative with the same kind of commitment the nation mustered to meet historic innovation challenges including the Manhattan Project and the Space Race, and it would be consistent with how much we currently invest in other top priority innovation areas like health care and defense research.
However, the President's draft budget allocated the remainder of expected cap and trade revenues, about 80%, to fund a permanent extension of the President's "Making Work Pay" tax cut for middle-class Americans. That left insufficient funds on the table for the kinds of critical public investments needed to accelerate the demonstration and deployment of clean energy technologies and the construction of critical enabling infrastructure like a 21st century clean energy smart grid. For that, public investments on the scale of $50 billion annually (including the $15 billion for R&D) would be needed.
It appears that Congressman Waxman may be preparing to flip this situation on it's head, dedicating the carbon auction revenues "by and large" to clean energy technologies, with a smaller (and more appropriately scaled) portion used to provide targeted assistance to low-income residents and hard-hit regional economies. That move may signal both a stronger commitment to the scale of our energy innovation challenge as well as a repudiation of the implicit logic behind the proposal to rebate auction revenues to taxpayers -- the same logic behind the Cap and Dividend proposal advanced by Peter Barnes.
The reasoning behind these tax rebates, as well as Barnes' proposal to use 100% of auction revenues to fund per capita dividends to every American, is that buying off the public with promises of checks in the mail will help cap and trade secure the broad political support that carbon pricing proposals have lacked so far. Unfortunately, I have seen no public opinion evidence to support this logic, leaving little to make make climate advocates confident that carbon dividends or tax rebates fundamentally change the political dynamics of carbon pricing proposals.
One thing can change those political dynamics though: reinvesting the carbon revenues to kick-start the clean energy economy, increase America's energy security, smooth the transition away from fossil fuels in carbon-intensive states, and create new clean energy jobs, technologies and industries.
There's plenty of evidence that Americans strongly support large public investments in clean energy technology and see these investments as a major economic boon. Those are critical assets when climate legislation is likely to live or die based on how well it's advocates are able to convince a skeptical public and on-the-fence policymakers that their proposals will help pull America out of deep economic recession (a simple proposition we've dubbed, "the Recovery Test").
It seems Henry Waxman may now recognize the critical political asset clean energy investment represents (and that he has so far neglected). According to Bloomberg, the Chairman may already be using the political appeal of clean energy investments to make new headway with reluctant Democratic colleagues:
Waxman said Representatives John Dingell, a Michigan Democrat who once chaired the committee, and Rick Boucher, a Democrat from Virginia's coal country, will support his 20 percent reduction [in greenhouse gas emissions by 2020] even though they have previously called for a reduction of just 6 percent.
Dingell and Boucher may be willing to accept the higher reductions in part because of Waxman's proposal for allocating the permit revenue.
Is this the sign of a new and long-overdue shift in climate and clean energy strategy? Is Chairman Waxman prepared to put clean energy investment at the center of the policy and political agenda as he shepherds climate legislation through the U.S. House of Representatives? Will the investments themselves be designed to effectively spur clean energy innovation, or will they be seen as just another pot of money useful only to buy off political opposition? Finally, how will President Obama respond to this new agenda? Will the President recognize Waxman's new strategy as a key opportunity to build on his historic stimulus plan with bold, long-term investments in a prosperous clean energy economy?
We'll find out as the House Energy and Commerce Committee starts fleshing out climate and clean energy legislation over the weeks ahead. Stay tuned...