What does the election outcome mean for climate policy?

The Gunther Report

What does the election outcome mean for climate policy?

President Obama

The renewable energy and clean tech industries let loose a collective sigh of relief Wednesday. President Obama’s re-election means they still  have a friend in the White House.

Clean energy was a big winner yesterday,” said Frances Beinecke, president of the Natural Resources Defense Council. “American voters not only re-elected a president who made green jobs a cornerstone of his first term and his campaign, they also rejected some of the shrillest champions of Big Oil and Big Coal.”

As Nick Robins, HSBC’s climate research analyst, said today:

Obama’s victory essentially protects key climate policies from repeal, particularly the regulation of carbon dioxide by the EPA, most notably in the power and auto sectors. It also offers the chance of extending the Production Tax Credit for wind energy when it expires at the end of this year.

True enough, but the today’s inefficient, hodge-podge collection of EPA rules, clean-energy subsidies and state mandates -- while better than nothing -- is no substitute for a rational economy-wide policy to deal with climate change.

Could this election usher in a carbon tax or cap-and-trade regulations to limit global warming pollution? That’s impossible to know, but there’s no evidence that climate action has climbed to the top of the president’s to-do list.

Obama made a passing reference to climate change in his acceptance speech, saying: “We want our children to live in an America that isn’t burdened by debt, that isn’t weakened by inequality, that isn’t threatened by the destructive power of a warming planet.”

But his all-but-absolute silence about global warming during the campaign means that he has no mandate from voters to act on the issue. Worse, he has made close to zero effort to persuade Americans that the issue matters, a failure that will surely cast a shadow over his legacy if it isn’t rectified during a second term.

To see what’s next for climate and green business after the election, I reached out to some smart people in the business world and in Washington to see what opportunities, if any, they see.

The first, and maybe the best, opening will arise when the president and the lame-duck Congress face the so-called fiscal cliff in the next 60 days. The government will need revenue to avoid painful spending cuts and tax increases, and a tax on carbon emissions could become an option.

David Crane, the CEO of NRG Energy, who was actively in the late, lamented US Climate Action Partnership, told me by email:

I would say that a carbon tax is ONLY likely as part of fundamental tax reform although, even in that context, it is unclear how coal state senators from both parties will go for it. I think if a carbon tax is on the table the two keys from an industry perspective are: (I) making sure a significant portion of the revenue raised goes directly into clean energy infrastructure funding; and (ii) if the carbon tax is going to be set at a meaningful level, making sure that it only ramps up to that meaningful level over time so industry players have the time to make intelligent long term capital investment decisions with respect to the type of plants that we build.

Eileen Claussen, president of the Center for Climate and Energy Solutions, also said the budget talks could create an opening:

If you’re speaking about legislation, I think there is only one opportunity and it’s a small one. As Congress comes to grips with deficit reduction, avoiding steep defense and domestic cuts, tax reform and entitlement reform, there’s some chance that people will accept the idea of a carbon tax because they’re going to be looking for revenue. Nobody’s keen on raising revenue, but we’re going to have to find some.

Interestingly -- and we should be wary of reading too much into this -- House Speaker John Boehner said on election night that the return of the Republican majority in the House means that “the American people have also made clear that there is no mandate for raising tax rates.” A carbon tax would not raise tax rates; it could even, over time, generate revenue that could be used to reduce them.

Joe Mendelson III, who oversees climate policy at the National Wildlife Federation, says Hurricane Sandy -- particularly the cost burdens that it places on the government -- could help persuade lawmakers that it’s time to get serious about climate mitigation. When I stopped by his office, he said:

Climate change impacts are costing the federal government too much money right now. Carbon is not priced, so the externalities of climate change are being paid for by the federal government and taxpayers.  Sandy brings that home in spades, and Sandy’s just the tip of the iceberg.”

A mixed metaphor, alas, but you get the point. It’s not just Sandy, of course, but last summer’s droughts and wildfires that end up costing taxpayers money. “All these problems are linked to climate, the costs are coming out of the federal till, and the polluters are getting off scot-free,” Mendelson said.

Over at the Environmental Defense Fund, advocates would like to put a carbon tax on the agenda. In a commentary at the Business Week website (to which I was referred by my friends Eric Pooley and Gernot Wagner), EDF economist and v.p. Nat Keohane wrote:

The most scientifically sound and economically efficient policy step is to limit carbon pollution via a cap or tax. A $20-per-ton carbon price -- collected as a tax or by auctioning carbon allowances -- would raise on the order of $100 billion per year while creating powerful economic incentives to curb pollution in the most cost-effective manner (and develop new technologies to do so). A carbon price is also an ideal way to help address the coming “fiscal cliff”: Using some of the revenue to pay for lower taxes on labor or capital would provide a double dividend by reducing distortions in our tax system. For that reason, a carbon price enjoys broad support from economists across the political spectrum, from N. Gregory Mankiw, Douglas Holtz-Eakin, and Arthur Laffer on the Right, to Paul Krugman, Joseph Stiglitz, and Jeffrey Sachs on the Left.

Much will depend on the business lobby, as it always does in Washington. Increasingly, the biggest and smartest companies (GE, IBM, Walmart, Google, many more) recognize the threat posed by global warming. They need to speak up more forcefully.

Andrew Shapiro, the founder of Green Order consulting firm and now the CEO of investment firm Broadscale Group, is optimistic on that score. He told me by email:

Between Hurricane Sandy and the election, Washington lawmakers now have the political capital to create a comprehensive U.S. energy and climate policy, which most leading corporations and investors want.  No business leader likes uncertainty and most want to do the right thing.

But can we deal with the earth’s climate in today’s political climate? Adam Lowry, the founder of green cleaning company Method, thinks not. He writes:

Obama’s #1 priority should not be policy change, but cultural change in Washington.  Obama needs to focus his leadership on fighting obstructionism on both sides of the aisle, and I believe his success or failure on green business and broader climate issues rests almost entirely on his ability to be effective in driving this cultural change that will eradicate obstructionism from Washington.  This is something that a single individual can do, but it will require a shift in Obama’s leadership from where he’s been focused (on policy, and the American people policy impacts -- a noble pursuit) to leading his colleagues in Washington much the way a CEO leads his company, by exemplifying the behavior he/she wants modeled, and making it unacceptable to bicker, fight, or undermine progress in the name of partisanship or personal gain.  If he’s successful in that, then the policy change we need on climate and green business issues is possible.  Without it, unfortunately, it is not.

Adam has more to say on this, and I’m going to try to persuade him to do a guest post soon. I think he’s right that the buck stops on the president’s desk.

In her own blog post today, Eileen Claussen wrote:

No one is better placed than the president to help Americans understand both the risks of a warming climate and the opportunities of a clean-energy transition. With the election now behind him and Sandy’s lessons still fresh, now is the time.

It won’t be easy, goodness knows, but real leadership never is.

Photo of President Obama against a blue sky provided by Rusty Dodson via Shutterstock