As Congress considers spending $700 billion of taxpayer money paying for bad debts, what will we get for our money?
Financial meltdown is nearing the end of its first week and Congress is poised to consider $700 billion in emergency legislation. What are the implications for clean energy and climate? Here's my best guess.
1. Automakers will get their bail-out. The automakers want $25 billion, which looks like chump change against the $1 trillion bailout. It looks very much like they'll get it. The question is, what will we get for our $25 billion?
Today Tom Friedman parroted (without acknowledgment) the idea that we developed in 2005 with Barack Obama's staff, "Health Care for Hybrids," calling for strings to be attached -- i.e., higher mileage standards, and hybrid electric cars and trucks -- to any bailout for the automakers.
It's a good idea -- or at least it was back in 2005. Automakers are claiming that Congress promised the bail-out to them in exchange for raising fuel economy standards last December. Given the signals being sent by Senate President Harry Reid, it looks like Pelosi and Reid are indeed making good on some deal they struck last year. In retrospect the deal looks even lousier now. We're giving automakers $25 billion in exchange for 35 mpg fuel economy average by 2020?
If Friedman were to apply his reporting abilities to the domain of politics -- rather than just lamenting that policymakers won't do the politically suicidal thing of raising energy prices -- he might discover new policy ideas before they become moot politically. He might also learn that:
2. Cap and trade is deader than ever. Cap and trade has hemorrhaged support in the Senate since 2003, when it had 43 votes. Had it come up for a vote in July 2008 it would have received 30 or fewer. Senate President Harry Reid killed it before the blood bath happened. The Republican strategy was highly sophisticated: point out that cap and trade would lead to higher gas prices.
3. Any proposal that would raise energy prices (that includes new regulations, revenue recycling like Sky Trust) is dead. All of the grand climate policy ideas about "rebating consumers" -- giving taxpayers some money back from higher energy prices - appear even more hallucinatory in this economic environment than they did in June. Start the Sky Trust Death Watch.
4. A credit squeeze could be very bad for clean tech industries. The Economist and others have argued that the rush to clean energy investments is a bubble. That will almost certainly prove to be the case over the next few weeks as investors move their money into safer areas in droves, and as they realize that climate change legislation is not forthcoming. The credit squeeze will likely hurt smaller and riskier (read: clean tech) businesses.
5. Recession could be good news for conservation and efficiency. Using less energy becomes more attractive during economic slow-downs, and advocates of new efficiency legislation (for buildings and appliances, probably not for automakers) could find themselves in an advantage relative to business opposition.
6. Public investment in technology, infrastructure, and jobs may get new life. Yes, yes, I know: "There's no money to invest in clean energy!" I've been told this line by my wise elders in the environmental and progressive movement since the late 1990s. Since then America: spent $1 trillion on Iraq; $275 billion on economic stimulus; and will spend well over $1 trillion on financial bailouts.
Political advocacy for spending a lot on clean energy was hard before this crisis -- energy R&D is just $3 billion a year -- and it's hard to see it getting much harder. We have no built in constituency. Greens and clean energy firms have been single-mindedly focused on pollution regulations or tiny tax credits.
The good news is that if we hit a serious recession, government investment is a key lever to get things moving again. Conservatives will oppose the new spending, as will many mainstream economists. But if We The People are buying some of the bad investments of the world's largest investment institutions, shouldn't we have some say over what gets invested in? If we are now an "Investor Society" as Dalton writes, then can't we as investors point a small amount of money (say $50 billion per year) into building transmission lines for wind and solar energy, R&D for universities and private labs, a National Energy Education Act?
I am always amazed on how there is always money for bailouts (and money for investors to waste in the first place...), but never for infrastructure changes. I guess folks are too often enamored with the prospect of quick and easy money. Energy investment is too boring?
Posted by: R Margolis at September 22, 2008 12:46 PM