New Economy, Part 2: The Green Investment Portfolio

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"New Economy, Part 2: The Green Investment Portfolio"

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In part one, I suggested four principles that President-elect Obama’s economic team should follow as they create an economic recovery package. To sum up, America needs long-term investments in a new energy economy, with every dollar used strategically to solve several problems at once, including energy security, economic stability and a rapid reduction in greenhouse gas emissions.

Obama clearly understands this prescription. He has announced that he will champion a two-year recovery package to create 2.5 million jobs, in part by creating the clean energy infrastructure of the twenty-first century.” To his credit, he told governors and international leaders meeting in California last week that our economic mess will not deter his commitment to this investment.

“I promise you this,” he said in a taped address. “When I am president, any governor who’s willing to promote clean energy will have a partner in the White House. Any company that’s willing to invest in clean energy will have an ally in Washington. And any nation that’s willing to join the cause of combating climate change will have an ally in the United States of America.”

The question is whether the Congress and the American people will support a recovery package designed not just for short-term stimulus, but for long-term health.

Obama hasn’t said how big his investment package will be, but there is speculation it could climb to as much as $700 billion. Here are some suggestions on how some of that money should be allocated:

Plug the leaks: As I said in part one, Job No. 1 is to stop the hemorrhage of energy dollars from every household and community and from the nation as a whole. That means a big investment in energy efficiency and conservation at every level of the economy (see “Energy efficiency is THE core climate solution, Part 1: The biggest low-carbon resource by far“).

If hemorrhage seems an exaggeration, consider this: The U.S. Department of Energy estimates that by the end of this year, the United States will have exported more than $1 trillion to oil-producing nations since 2003. The energy wasted by conventional power plants in the U.S. is enough to power the Japanese economy. The United States ranks an embarrassing 22nd among nations in energy efficiency, and American-made automobiles on average are among the least efficient in the world.

If there’s any doubt we can improve, consider this: The American Council for an Energy Efficient Economy estimates our economy could easily save 25 percent, 30 percent or more of our current energy use.

To help cities plug energy leaks, Congress should provide at least $2 billion annually for the Energy Efficiency and Conservation Block Grant program it approved but did not fund last December. It should appropriate $1.4 billion annually to weatherize the homes of low-income families and it should increase federal tax incentives for consumers who purchase high-efficiency vehicles and appliances and who improve the efficiency of their buildings.

Empower states: Twenty states covering two-thirds of the economy have completed or begun implementing their own plans to reduce the greenhouse gas emissions that cause global warming. In a new report, the Center for Climate Strategies estimates that if all states implemented plans to reduce their emissions to 1990 levels over the next decade or so with strong efficiency programs, the economy could achieve cumulative savings of more than $535 billion by 2020.

Congress should allocate at least $1 billion annually for grants to states that develop energy and climate security plans. To qualify for the money, the plans should contain progressive policies that allow utilities to profit from helping their customers save energy, that provide incentives for customers to install renewable energy systems, that make it easy to connect those systems to the electric grid, and that help communities engage in smart growth.

Invest in renewables: Well-placed, sustained investments should be used to accelerate the spread of solar, wind and geothermal power. DOE has concluded the nation could obtain 20 percent of its electricity by 2030 from wind power alone (see “Wind Power — A core climate solution“) – if we had sufficient transmission lines. It estimates that capturing this potential would require 12,000 miles of new transmission capacity costing $20 billion in net present value. These new transmission lines should be part of a nationwide smart electric grid that former Vice President Al Gore estimates will cost $400 billion over 10 years, but will pay for itself quickly in energy efficiency and electric reliability savings.

In addition, the government should invest much more in clean energy research than the $3 billion annually it spends now. A yearly investment of at least $10 billion is warranted, with a special emphasis on breakthrough technologies such as plug-in hybrid cars, cellulosic ethanol made from non-food crops, and advanced technologies to store solar and wind power for those times the sun isn’t shining and the wind isn’t blowing. Energy storage would allow solar and wind to become base-load power and would help utilities avoid building power plants to handle peak demand.

To facilitate those breakthroughs, the National Renewable Energy Laboratory in Colorado — the government’s premier lab for renewable energy research — has proposed building a “Campus of the Future,” a $500 million zero-carbon facility with 12 new research buildings and 2,500 employees. Congress should fund it.

Low-carbon mobility: If we really want to reduce global warming emissions and oil imports, we need to help cities and regions invest rapidly in mass-transit. We need state-of-the-art high-speed rail service between the nation’s major cities. We need intermodal transportation systems that provide travelers with easy connections between airports and passenger trains, which produce lower emissions than regional jets.

In its own “green recovery” plan, the Center for American Progress notes that Congress already has approved $20 billion to $30 billion in local transit projects, but has not allocated the money.

Longer term, Congress needs to reform federal transportation policy, which now favors road-building over mass transit. The federal government pays 80 percent of the cost of new roads, but only half the cost of mass-transit projects. Congress should shift the emphasis to reducing the miles traveled by private passenger vehicles.

An additional investment of $35 billion is needed to modernize the way air traffic controllers route flights. In recent years, 10 airlines have closed down and others are cutting services, most recently because of high fuel costs. But according to the Associated Press, U.S. airlines could save 10 percent of their fuel costs — or about $5 billion this year — if the nation replaced its 50-year-old airline routing system with a modern GPS system. Fuel savings would pay off the investment in just seven years, according to the AP.

Federal bail-outs: Congress should not hesitate to attach strings to its bailout of private companies. In fact, it should attach a rope and drag failing industries into the 21st century.

We should require the Big Three automakers to show how they’ll manufacture not only fuel-efficient cars and light trucks, but also the low-carbon buses, light rail equipment, high-speed trains and the alternatively fueled, energy efficient heavy-duty trucks we need to reduce emissions from freight hauling.

Super-efficient vehicles are needed for the military, too. The Department of Defense’s non-tactical fleet of nearly 190,000 vehicles used 97 million gallons of gasoline in 2006. In Iraq alone, 20,000 U.S. troops and contractors are involved in meeting the fuel requirements of the U.S. military, with 2,000 trucks supplying fuel every day in convoys vulnerable to attack.

Now that the taxpayers own Fannie Mae and Freddie Mac, we should require them to offer lower mortgage interest rates and/or breaks on mortgage insurance to families that buy energy efficient homes or retrofit existing homes. Lower mortgage interest should be awarded, too, to homes located near mass transit.

Zero-energy buildings: The U.S. Green Building Council, the American Institute of Architects and other respected members of the building industry have endorsed the goal of achieving zero-energy buildings by 2030. By that year, all new residential and commercial buildings would produce at least as much energy as they consume. Toward that goal, Congress should require DOE to develop a model zero-energy building code, set new energy standards for publicly funded buildings, expand tax incentives for building efficiency improvements and help states and localities train more code officials.

Carbon sequestration: We need healthy forests and conservation-minded farming techniques to allow soils and forests to play their critical role in storing carbon emissions. Carbon sequestration gets too little attention in the global warming conversation. The Obama administration should create and Congress should fund a 50-year plan to restore America‘s soils and forests while making rural America our principal source of renewable energy and carbon capture. Congress should provide funds to reforest the public and private woodlands being destroyed by wildfires and pests.

Green collar jobs: We should invest at least $125 million annually to train new and displaced workers in green trades, and additional funds for a Green Corps, today’s version of the Civilian Conservation Corps. We should identify climate enterprise zones where workers will be most negatively affected by climate change and climate policies — for example, the workers in coal country — and provide special incentives for manufactures of renewable energy equipment to locate there.

Federal energy efficiency: The federal government is the world’s largest single energy consumer. When it invests in clean energy, it can move markets. The Alliance to Save Energy estimates that to meet its clean energy targets, the government needs to invest $1.3 billion annually between now and 2015, but Congressional funding typically has been in the $100 million to $300 million range. Congress should fully fund the government’s efforts to meet its goals. After all, the money the government spends on energy is taxpayer money.

The prescription for genuine and lasting recovery is aggressive, multi-tasking investment in a new energy economy. It’s just what the doctor ordered.

– Bill B.

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6 Responses to New Economy, Part 2: The Green Investment Portfolio

  1. John Mashey says:

    This is all well-taken, but at the risk of repeating what I’ve written here before, it would be really good if people would be more careful with terms like “research” and “breakthroughs”.

    See comments here in July, or specifically mine on never scheduling breatkthroughs and “progressive commitment”.

    Put another way, we need to spend more money, but we really have to spend it wisely.

  2. red says:

    The Houston Chronicle has an editorial “Stimulus can help NASA reach goal” with a similar theme – using the economic stimulus to take care of other problems at the same time. NASA’s Johnson Space Flight Center is in Houston, so you might expect the article to advocate efforts like continuing the Shuttle. In fact, the Center for American Progress report that advocates keeping the Shuttle is briefly mentioned. However, surprisingly the suggestions aren’t of that (bad, IMHO) sort at all. A number of them propose to either increase NASA’s contributions to solving environment and energy problems, or increase encouragements to commercial space, a progressive policy which is likely to lower launch and other costs and thus indirectly help enable environment and energy space efforts (among others). I agree with those suggestions (although I’d broaden them a bit); the NASA Science (including Earth observation), Aeronautics, and R&D budgets has suffered a lot in recent years to shore up expensive government manned rockets (Shuttle, Ares), and should be made whole again.

    Here’s the key part of the article from:

    http://www.chron.com/disp/story.mpl/editorial/outlook/6138224.html

    The Obama space policy provides a blueprint for leveraging increased NASA funding to meet the new administration’s broader economic, innovation and environmental goals. Key areas for stimulus investments might be:

    Increasing research and technology funding for exploration that not only will aim at addressing the challenges in completing the next generation of space vehicles but developing the innovations needed to look beyond the moon to further destinations in our solar system;
    Funding commercial space capabilities that will enable NASA to forgo low earth cargo transport and focus squarely on its core mission of exploration and discovery;
    Building a robust R&D community around the ISS that will leverage this unique resource to seek advances in energy independence, public health and technology development;
    Conducting leading edge research in materials and technologies that will create cleaner, greener, and safer aircraft for the future;
    And implementing the most comprehensive Earth observing and climate monitoring network in the world that will be a vital component to understanding and addressing the most pressing problems of our own planet.

  3. The first investment needs to be in attitude change.

    Americans have a century of advertising messages that glorify carbon fuel products. Only recently this has become a heavily funded PR campaign. Totally contrary to our long term interests.

    This is an easy choice to make if we use logic, or if we decide as a species whether we want a future. However, we are cursed by our persistenly nurtured emotional, delusional, reptilian thinking.

    The first thing we need is to learn to think clearly.

  4. I completely agree with your comments on the current energy crisis along with the current economic crisis. The only way for us to deal with both these issues is to have a robust economic stimulus plan which encompasses both!

    I do though believe that we want to make sure their is not as much pork as the last one. Unfortunately, when reading through the last economic stimulus plan – it had SOO much pork that had nothing to do with economic stimulus. I always do get scared of large robust stimulus plans.

    So what do I think? I think that we need to create economic stimulus plans that are piece by piece that get passed. That way we can test the waters with the first part, based on its results we can pass the second one. When they are smaller I believe their is a better chance that they won’t have as much pork!

    Thanks for a great post!

    Prabhjit Singh

  5. Ron Robins says:

    Since you’re interested in green investing, I have one of the most popular sites on the web on the subject. It also covers the latest related global news and research too. It’s at http://investingforthesoul.com/

    Best wishes, Ron Robins

  6. jennfer b says:

    Green Collar Jobs need more than $125 million a year. Green Collar Jobs should figure more prominently in your scheme. All income levels have to see the benefit in the massive investment talked about here.