Last week hundreds of thousands of Americans took to the streets
to protest what they saw as the evisceration of environmental legislation and a
rollback of US efforts to stem the tide of climate change.
Protests in Washington, Boston, New York, San Francisco,
Chicago, Seattle and other American cities coincided with the culmination of
President Donald Trump’s first 100 days. Over that period, most of the political victories that the new
administration has notched have been around environmental and climate science —
chiefly rolling back policies enacted by the previous Obama
Administrations.
As battle lines shift to the states from the federal
government, local political realities and the new foundations of
a profoundly changed US economy may reveal the limits of just how much
power the current administration has to change the country’s course on climate
issues.
On the political front, a majority of adults in every congressional district across the
United States support regulations like limits on carbon dioxide
emissions from coal power plants, a 20% renewable power mandate for state
utilities, and the regulation of carbon dioxide as a pollutant, according to a
study from the Yale Program on Climate Communication.
“States have many many levers,” says Mark Muro, a
senior fellow and the director of policy at the Metropolitan Policy Program
at The Brookings Institution. “The
Public Utility Commissions are state [entities]. They control land use at the
state level and they run arguably our most successful demand-side policies.”
These utility commissions are tasked with controlling the
rates that consumers pay for energy. It’s in their interest to keep prices low
while ensuring that utilities are building enough new power generation to keep
up with demand from homes and businesses.
Energy Costs
In recent years, price controls have come in the form of
energy efficiency initiatives (the demand-side policies that Muro referenced),
more natural gas power plants and renewable energy like wind and solar.
Above all of this is a
changing American economy that is weighted more heavily
to lower emission industries like banking and financial services,
computing, healthcare, retail and services, and telecommunications than on
traditional manufacturing (it’s worth noting that automotive and oil and
gas are still the largest industries in America).
As the US economy becomes less energy intensive, a massive shift in pricing has made
emissions-heavy coal power plants more expensive than other, more
environmentally friendly options.
“We don’t believe the renewable energy industry is exposed
to the volatility of regulation or policies in the U.S. because of the
competitiveness that has been reached through technological improvement,
efficiency and performance,” says Antonio Cammisecra, head of business
development at Enel Green Power.
Still, conservatives in many states are moving forward with legislation to roll back clean
energy friendly initiatives locally.
While there’s a possibility that the removal of enough price
obstacles could bring coal back into the range of competitive pricing with
other power sources over the short term, Muro says, companies that have to
invest in power are looking beyond a four-year (or even eight-year) horizon.
“Because of the current cost structures of natural gas vs.
coal… regulatory rollback is not an immediate block on progress,” Muro said.
“It could become problematic over time or to the extent that natural gas prices
drift upwards, that could make the regulatory rollback more successful in its
aims in reinstating coal.”
For states looking to reinstitute a coal economy in the
interest of job creation, Muro said that any recovery for the coal industry is
likely to be jobless. “That is helpful on the extraction side,” he
said. “Most of the latest practices will help further reduce the number of
employees it takes to extract a ton of coal. Stocks have seen a pop because
they will be unleashed on the extraction side to embrace increasingly
efficient, cost-effective extraction… which means more robots, more automated
trucks, more open pit extraction, more mountaintop removal as opposed to the more
expensive underground work.”
And little of the coal that is extracted will make its way
into the US grid, because the plants that turn that coal into power are
shuttering across the country. Muro doesn’t expect that short-term price
fluctuations will impact the decisions to build new coal plants.
“Very little will happen in a three to five year window,”
says Muro. “Many of these decisions are made for a 40 year window.”
Renewable energy and the case for jobs
Beyond the lower prices that renewable energy and natural
gas power enjoy, politicians in coal-friendly states would do well to note the
overwhelming support that investment in new renewable technologies enjoy
nationwide.
A new report from The Brookings Institute indicates
that this local support may be critical since renewable energy patent claims
(an indicator of new technological progress and potential economic growth) are declining nationwide. Those patents that are being
filed — or innovations being made — are also being snatched up by foreign
companies, the report indicates.
The share of U.S. cleantech patents owned by foreign
companies has grown over the years, raising concerns about the global
competitiveness of U.S. companies. In 2001, both U.S. and foreign-owned
companies generated about 47 percent of cleantech patents each. By 2016, 51 percent
of all cleantech patents were owned by large foreign multinationals, while only
39 percent were generated by U.S. companies. This trend reflects the
globalization of cleantech industries, particularly in developed and developing
Asian economies urgent about reducing carbon emissions and cornering growing
markets for cleantech.
As renewable energy and efficiency becomes an increasingly
big business, Japanese, Chinese, and Korean companies are all in and trying to
purchase this IP, Muro said.
“Globally this is a huge market,” said Muro. “Truly making
America great again is about capturing major positions in the major unfolding
industries in the world. This is one where we have a clear path to a strong
competitive position and it would be a shame to forego it. These are industries
that can drive local employment. They can produce significant innovation going
forward and they can contribute to the trade balance and this is a source
of U.S. manufacturing expertise.”
Indeed, renewable energy has produced more jobs in the power
generation sector in recent years than oil, coal, and natural gas combined, according to a recent New York Times report.
Manufacturing for components for renewable energy production
is also, increasingly, a local game, according to the Enel executive,
Cammisecra.
“It must be said that most of the industry is local,” said
Cammisecra. “Turbines are manufactured in the U.S., and other components are
manufactured in the U.S. I don’t see what could drive a policymaker to hurt the
industry in the U.S.,” by cutting renewable energy programs.
State’s rights
The Trump Administration’s policies are being celebrated in
some states, but in two of the most populous US states, climate change
issues are top-of-mind.
Because of the size and strength of their economies
California and New York could very well set de facto policies for the nation.
California has long been a leader in renewable energy policy, and any company
looking to sell products and services in the state need to comply with what are
the nation’s most rigorous environmental standards.
This has already led to conflicts with previous administrations that didn’t
share California’s environmental zeal.
Thirteen other states have adopted California’s clean air standards (representing
about one-third of the US auto market). So even if the broader national
standards are rolled back under the Trump Administration, automakers may well
decide to maintain their emissions reduction programs.
Industry weighs in
Beyond policy and pricing, many US businesses are already
taking climate change into account.
At the Berkshire Hathaway annual shareholder meeting this
weekend in Omaha, Warren Buffett once again reiterated his firm’s appetite for investment in renewable energy projects.
As CNBC reported:
“We have got a big appetite for wind or solar,” Buffett said
Saturday at Berkshire
Hathaway‘s annual shareholders meeting.
“If someone walks in with a solar project tomorrow and it
takes a billion dollars or three billion dollars, we’re ready to do it,” he
said. “The more there is the better.”
Reducing energy and materials consumption also slashes
manufacturing costs which is leading many companies to institute sustainable
policies regardless of federal requirements.
“Many of these are built in as best practices almost
independent of regulatory requirements,” said Muro. “Much of the cleantech,
advanced-economy-focused companies already embraced these practices as
relentlessly trying to drive carbon and pollution out of their supply chains.
They see it as a broader consumer appeal and are moving ahead irregardless of
the immediate regulatory scrimmaging at the moment.”
Wall street banks and big insurance companies are also
pushing policies that encourage businesses to take their climate responses into
account.
The insurance industry is beginning to see losses rise from climate related
events, and they’d like to encourage customers to do more to address those
impacts.
Meanwhile investment funds are beginning to drop fossil fuel stocks. A December report in
the New York Times indicated that many big investors smell trouble in their
traditional energy portfolios for a number of reasons.
“There’s a whole movement of concern in the investor
community for stranded assets,” said Muro. “Climate change is a critical
concern of the investor community in many areas… there is a lot that’s not
being debated anymore but is being priced in by the investment community or
insisted upon by the investment community.”
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