Jason Barton

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The Profitability and Economic Advantage of Renewable Energy

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“[Then Gov.] Bush and his fellow Texans didn’t create the [renewable energy] industry because they were worried about global warming. They did it because there was money to be made.
There still is. And if Congress doesn’t hurry, most of it is going to be made in China.”

With the August recess just a few days away, and politicians focused on the most important mid-term elections in at least a decade, I have little faith that anything substantive will happen with energy legislation before the new year. And with Republican prospects as strong as they are and a lack of Republican support for rewriting the way our government influences our energy usage, the chances don’t look much better in 2011.

I suggest not a quantitative change in government intervention, unless it’s a decrease, but a qualitative shift. In other words, this is not a call for increased government intervention or market distortions, but a change in the way the government intervenes. Today’s regulations hamper the ability of people in the free market to find the most efficient solutions to our energy challenges. Not good.

The best bet would be for the government to set the standards, as with Renewable Electricity Standards (RES), bring pricing in line with the externalities associated with different forms of fuel, so that issues such as healthcare costs incurred as people get sick from breathing air that’s been polluted by coal, and then let firms work within this transparent framework to deliver reliable power at the best possible price. These RES would offer much better prospect for people in later generations to enjoy more of the options we have presently, without forcing us to make unrealistic sacrifices now.

Without these measures, we face a number of serious problems, including an economy plagued by dependence on foreign energy, air that continues to be dirtied by coal and petroleum, and more jobs going to places like China as those visionaries who know that renewable fuels are going to bring big returns on investment flock to the countries that encourage, and benefit from, this necessary and lucrative innovation.

Senate Inaction Cedes U.S. Energy Race to China

By Eric Pooley – Jul 29, 2010 7:00 PM MT

Right now the U.S. Senate is conducting a master class on the perils of legislation by rearview mirror. On July 27, when Majority Leader Harry Reid unveiled the “Clean Energy Jobs and Oil Company Accountability Act,” the two most powerful clean energy provisions were missing: a cap on carbon emissions from the electric power sector and a national Renewable Electricity Standard (RES), which would require utilities to generate at least 15 percent of their electricity from renewable sources by 2021.
For years, business leaders from General Electric Chief Executive Officer Jeff Immelt to venture capitalist John Doerr have warned that if America failed to pass a comprehensive climate-and-energy bill, the country risked losing the clean energy race to China — sacrificing the jobs of the future in a timid, ill-fated effort to preserve the jobs of the past. Now those warnings are coming true.
[…]

In a meeting with business leaders and environmental advocates early last year, Obama economic adviser Larry Summers described a “scissors” approach to economic recovery, according to several people who were present but not authorized to discuss it publicly.
The first blade of the scissors, Summers explained, was the stimulus package and its tens of billions for clean energy deployment. The second blade would be a mandatory, declining cap on carbon, which would remove the investment uncertainty that has hobbled the energy market, and draw billions of private dollars off the sidelines.
[…]
Instead of funding U.S. projects, banks and venture capitalists increasingly are putting their energy money into China, where the market is large and secure, thanks to government mandates. In the second quarter, for example, China attracted more clean-tech asset financing than Europe and the U.S. combined, according to data compiled by Bloomberg New Energy Finance.
[…]
On the same day that Reid pulled the plug on the carbon cap, China Daily announced that the People’s Republic would begin an experiment in carbon trading — a policy mechanism invented in America, used by Republican George H.W. Bush to fight acid rain, and vilified by today’s GOP as “cap and tax.”
[…]
Colorado voters approved one in 2004, and the state has increased the standard twice: The current target is 30 percent by 2020, double the one left out of the Senate bill. Colorado now generates almost 6 percent of its electricity from wind, and its commitment to clean energy has helped develop a solar industry as well: from 100 companies in 2007 to more than 400 today, according to the governor’s office. When Vestas Wind Systems, the Danish turbine maker, chose to build its North American manufacturing plants in Colorado (a $1 billion investment that was good for 2,500 new jobs), it called the RES a major factor in the decision.
[…]
Another early adopter is Texas. Its RES, signed into law by Governor George W. Bush in 1999, has helped the state become a major producer of U.S. wind power, adding almost 10 gigawatts (up from 0.2 in 1999) and thousands of new jobs in the decade since the law was enacted. Although Texas has reduced its carbon emissions as a result of this push into wind energy, Bush and his fellow Texans didn’t create the industry because they were worried about global warming. They did it because there was money to be made.

Read the entire article here.

Written by Jason

July 30th, 2010 at 6:56 pm