What does Obama's 'cleaner energy economy' mean for business?

Facing a highly divided Congress in the State of the Union, President Obama said his administration will address climate change with a diversified “all of the above” energy strategy but stopped short of unveiling grand new plans.

Instead, the president pointed to ongoing progress and drew the outlines of his energy strategy, while telling his colleagues in Congress to move faster on climate change because the effects are already being felt with droughts in the West and coastal flooding.

“The shift to a cleaner energy economy won't happen overnight, and it will require tough choices along the way. But the debate is settled. Climate change is a fact,” Obama said. “And when our children's children look us in the eye and ask if we did all we could to leave them a safer, more stable world, with new sources of energy, I want us to be able to say yes, we did.”

Taking action on the climate

In the speech, Obama told Congress that he would use his executive powers to act on climate change, given the slim chance of passing substantive legislation on energy and climate. This year, he recalled his two signature measures: EPA regulations on emissions, including carbon dioxide, from coal power plants; and a national fuel efficiency standard on passenger cars, which he said will be extended to trucks.

In energy, natural gas and solar got top billing. In a fact sheet, the administration called for the creation of “sustainable shale gas zones.” “If extracted safely,” Obama said, natural gas is a “bridge fuel that can power our economy with less of the carbon pollution that causes climate change.” Solar, meanwhile, was singled out for its rapid growth and the jobs it has created. Obama said that a solar panel is installed every four minutes in the United States by a worker “whose job can’t be outsourced.”

Obama noted how the federal government has partnered with local and state governments to improve building efficiency. Repeating a long-pursued Democratic policy, Obama also called for closing $4 billion in yearly tax breaks to fossil fuel industries so the U.S. can invest more in “fuels of the future.” Left out this year were mentions of wind, biofuels or another hot topic among environmentalists: the Keystone pipeline.

For people in business and government, Obama’s remarks on energy and climate, which came early in his speech, signal his ongoing commitment to these issues. But compared to last year, these topics were less prominent, a recognition that sweeping energy laws are unlikely to be passed in this Congress and that existing measures around coal power plants and fuel efficiency will take years to fully implement.

At the same time, the president articulated a belief that economic growth and environmental protection are not at odds. For example, he boasted how the “best most fuel-efficient cars in the world” are being made in the U.S. And to attract businesses to the U.S., he called for further investment in infrastructure and more federal money devoted to funding technology and scientific research. “We know that the nation that goes all-in on innovation today will own the global economy tomorrow. This is an edge America cannot surrender,” he said.

Sustainable business reactions

Sustainable business associations lauded the president for connecting climate-related policies to the country's economic growth plans. The American Sustainable Business Council noted how severe climate events can cause economic harm to infrastructure and disrupt supply chains. “What is needed is strong investment in renewable energy and energy efficiency projects to mitigate the worst effects of climate change, create good-paying jobs and stimulate demand throughout the economy,” the group wrote.

Similarly, the World Resources Institute said limits on power plant carbon emissions can drive innovation and spur creation of new technologies. It also noted how cities are often on the front lines of dealing with climate change, while continuing efforts to grow their economies. “Mayors from all political stripes are taking action to protect their local communities from emerging climate risks. Mayors are pushing past the typical partisan barriers to do what’s right for their constituents,” it said.

Because of the political gridlock around energy and climate, a number of policy makers have begun making recommendations to make progress on climate change and clean energy. In a recent example, the Center for the New Energy Economy, which was founded by former Colorado governor Bill Ritter Jr., last week published a document outlining a number of actions the White House could take to advance clean energy in the U.S.

The report urges the federal government to show leadership in energy efficiency and renewable energy by having agencies, such as the military, procure clean energy products and services. It says the federal government can provide states financing for renewable energy and scientific research, and can push through reforms on the utility industry so they adapt to emerging energy technologies. These types of executive branch actions could provide states and local governments the ability to take a regional approach to climate adaption and energy policies, the reports says.

The president didn't delve into the details in his State of the Union speech, but instead set a general direction that signals the federal government's willingness to work with cities and businesses on climate and cleaner energy. “Taken together, our energy policy is creating jobs and leading to a cleaner, safer planet,” he said.