Cleantech & Renewable Energy

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The Obama White House – what can green business expect?

From green transport to cap-and-trade, nuclear to oil imports, BusinessGreen.com asks what can we expect from the new President-Elect?

http://www.businessgreen.com/business-green/analysis/2229791/obama-white-house-green


James Murray, BusinessGreen, 05 Nov 2008
The environment looks set to benefit from Barack Obama's election victory

Now the really hard work begins.

The party might still be going on and my ex-pat US colleagues might have not yet made it into the office this morning after a rather late night. But as the world soaks in the historic implications of Barack Obama's landslide victory, it will also be asking itself what an Obama White House actually means.

For the green and cleantech sectors the question has a certain urgency.

In just 13 months time, the world's leaders will gather in Copenhagen to try and agree a successor to the Kyoto Treaty. If you believe the climate scientists, it is no exaggeration to suggest the future of the planet is at stake and all eyes will be on the new resident of the White House to take a lead and break the deadlock that has dominated talks to date.

Beyond this central question, countless other US domestic green issues ranging from nuclear to renewables, carbon trading to offshore drilling will jostle for attention, and given the US's position as the dominant player in the global cleantech sector, almost all of them will have significant repercussions for green businesses worldwide.

So what precisely can we expect? BusinessGreen.com casts an eye over Obama's policy environmental and energy commitments and offers its predictions for the new Democrat administration.

Post-Kyoto

This is the big one.

Obama has refused to make himself a hostage to fortune, by pledging outright to sign up to a deal that is still being negotiated. But everything about his multilateral foreign policy philosophy and willingness to make climate change and energy security a central plank of his campaign suggests that the chances of a workable deal being agreed have just got a whole lot better.

The commitment to deliver an 80 per cent cut in US carbon emissions by 2050 as part of a cap-and-trade scheme indicates that he will be led by climate science and not shorter term economic concerns. Bringing China and other emerging economies on board will remain a challenge, but there is little doubt the obfuscation and delays that dogged the UN negotiating process throughout the Bush years have ended.

Carbon cap-and-trade

In many ways as significant as Obama's victory is the fact that Democrats appear on track to take control of the Senate and the House of Representatives. There will be no excuse not to deliver on central manifesto commitments and as such, a US-wide carbon cap-and-trade scheme committed to delivering an 80 per cent cut in carbon emissions by 2050 and a return to 1990 emission levels by 2020 looks inevitable.

With the EU scheme now well established, Japan, South Korea and Australia all planning schemes and a US scheme on the cards the future of the global carbon market looks assured.

For US firms, Obama has admitted that a cap-and-trade scheme would result in higher costs for heavy emitters as they are forced to buy in carbon credits and it is likely to also lead to higher energy prices as those costs are passed on to customers.

The move will face opposition from some business groups, but it also makes investments in clean coal technologies and energy efficiency look like a good bet.

Renewables

The renewables sector will undoubtedly prove one of the biggest winners from an Obama administration.

The president-elect has outlined plans to ensure energy suppliers get a quarter of their energy from renewable sources by 2025 and this target is to be backed up by government investment of $150bn (£93m) over 10 years in cleantech R &D. In particular, he has pledged to target investment at biomass, solar, wind, plug-in hybrids and clean coal and carbon capture technologies.

Transport

One of the few areas where Obama attracted criticism from environmentalists, was in his support for biofuel subsidies and farmers growing corn for ethanol producers will continue to enjoy generous hand outs.

However, less contentious aspects of green transport can expect a boost, driven in large part by the commitment to double fuel economy standards within 18 years.

To meet this target, Obama's campaign promised a raft of incentives and targets, including tax credits to help automobile makers fund the development of more efficient cars, $7,000 tax credits for customers buying greener cars, a goal of having one million plug-in hybrids in circulation by 2015, and an increase in the target for second generation biofuels to 60 billion gallons by 2030.

Oil

Central to almost all of Obama's green commitments is a desire to cut oil consumption by 35 per cent by 2030 and effectively end US reliance on Middle East imports.

It is a big ask and as a result, the President-Elect has left himself some room to manoeuvre, executing one of the few u-turns of his campaign by claiming he would allow some expansion of offshore oil drilling.

That said, one of the many results of the end of the Bush era is that there will no longer be a self-proclaimed oil man in the White House and the industry can say goodbye to any chance of drilling in the Arctic National Wildlife Reserve. It will also be bracing itself for a windfall tax designed to help families cope with rising energy prices.

Nuclear

As with oil, Obama left himself plenty of wriggle room on the topic of nuclear. An expansion of the US nuclear sector looks likely, but the scale of that expansion is unclear. He has also pledged to grasp the nettle of nuclear waste disposal and environmentalists will be watching closely to see how he takes on that perennial challenge.

Funding

Obama may have once joked that he was from Krypton, but regardless of the press coverage suggesting the contrary, he is not Superman.

As such, much of his environmental agenda will have to navigate the reality that is the US economic crisis. The cupboard is bare and there is nothing about Obama's green policy programme that looks low cost.

This is the big unknown of the Obama presidency, and while the deficit may all be Bush's fault, the Democrat's dominance of all branches of government mean they will not be able to blame the previous president for long if things don't start to go right.

The likelihood is that some of Obama's green commitments will have to be watered down, but it is hard to imagine too many of them being significantly diluted.

That means that revenue will have to be raised through taxation and, more likely, auctioning of carbon credits in the new carbon market. The knock-on effect will be that higher energy costs become a long-term reality, putting carbon intensive business models under yet more pressure.

For years, analysts and market watchers have predicted this would happen, but now it looks a cast iron certainty and as a result the case for investing in energy efficient and lower carbon technologies and business models has never looked stronger.