Waitin’ On A Sunny (and Windy) Day

Lieberman-Warner Climate Security Act would boost clean energy technologies and set America on a path toward a low-carbon economy.

The Senate expects to debate the Lieberman-Warner Climate Security Act, S. 2191, sponsored by Sens. Joseph Lieberman (I-CT) and John Warner (R-VA), this June. The bill would make significant reductions in the carbon dioxide pollution that causes global warming as well as turbo charge investments in clean energy technologies such as wind, solar, and geothermal. It would provide direct assistance for renewable energy, as well as create economic incentives for utilities to invest in clean, carbon-free energy technologies instead of continued reliance on dirty fossil fuels. The boost for renewable energy would create thousands of new jobs in the clean energy industry.

As deliberations over the bill draw near, many opponents will claim that this cap and trade bill would spike electricity prices and cost jobs. Yet the EPA just released a study that found that the bill’s global warming pollution reductions would have almost no effect on long-term economic growth, and only a small effect on electricity prices and jobs. The same claims that opponents are making now were made about the acid rain control program 20 years ago—claims that were all proven wrong.

Special interests’ high decibel claims about the bill’s cost could drown out one of the important benefits from the bill. The bill may not be perfect, but if enacted it would spur significant investment in clean alternative energy sources, including wind, solar, and geothermal power. These and other renewable sources could provide considerable amounts of electricity and create thousands of jobs. The EPA’s recent conservative analysis projected that renewable energy resources could provide enough energy to the grid to power an additional 43.8 million homes by 2050.

The Lieberman-Warner bill would require carbon dioxide emitters to have “allowances” for every ton of pollution they emit. Firms that reduce their emissions would need fewer allowances, and those that don’t would need to purchase more allowances. Companies with extra allowances could sell them to those that need more. These allowances would need to be renewed annually, as they apply on a per year basis.

In Phase I of the system, beginning in 2012, 43 percent of the allowances would be given to polluters, while 26.5 percent would be auctioned. The remainder would mostly be dedicated to public purposes such as direct support for working families to help them pay heating bills. In 2022, the fraction of allowances given for free would be cut to 28.5 percent, and 41 percent of allowances would be auctioned. And in 2031 and thereafter, no allowances would be free—all emitters would have to buy them in the auction.

This bill would achieve greater emission reductions more quickly if emitters had to buy all of their allowances in an auction from the outset, rather than purchasing only a small portion. The Center for American Progress advocates that S. 2191 should include a 100 percent auction of carbon dioxide allowances, starting in the first year of operation.

According to the estimates generated by the Clean Air Task Force the auction process could generate anywhere from $16.4 billion to $110 billion annually in auction revenue. The bill devotes 52 percent of all auction revenue from allowances to “technology deployment.” Within this section, zero- and low-carbon energy technologies are supported by 32 percent of total technology deployment funding; this includes clean renewable fuels and advanced clean-burning fossil fuel technologies. This funding would invest in the generation of clean energy and the manufacture of high-efficiency goods.

The bill also boosts renewables through its Sustainable Energy Program, which receives 25 percent of technology funds. Billions of dollars for investments are expected to be awarded to producers and consumers of renewable energy through this provision. The renewable energy sources identified in the Public Utilities Regulatory Policy Act of 1978 are eligible for this funding, including solar, wind, and geothermal. Based on the Clean Air Task Force’s conservative estimates, S. 2191 could provide $2.4 billion to these sources beginning in 2012.

It is illustrative, though not predictive, to review the amount of renewable energy that this $2.4 billion could buy. Wind energy currently has the greatest potential for growth, and a $2.4 billion investment in wind energy would generate over 3.9 billion kWh of electricity per year. This would power 370,000 households, or all the homes in the state of Montana, and would create a total of at least 2,000 jobs.

The Sustainable Energy Program could also spur growth in geothermal energy—steam heat from the Earth’s core that can generate electricity. A direct $2.4 billion investment in this technology could generate an estimated 6.3 billion kWh per year, enough to power 595,000 homes, which is more than all the homes in the city of Philadelphia. This investment could also create a total of over 3,400 jobs.

Traditional solar photovoltaic energy currently generates less power per dollar of investment due to higher technology costs and lower efficiency rates. Yet great advancements are possible with steady investments for advanced developments. Even assuming today’s technological constraints in the production of photovoltaic cells, a $2.4 billion investment in solar energy could generate 1.1 billion kWh of electricity per year, enough to power 104,000 homes, which is the equivalent of a city the size of Newark, New Jersey. This would create a total of 930 jobs.

Solar energy can be harnessed for electricity generation through another means as well, known as concentrating solar power. Thermal solar plants operate by using specialized mirrors to focus the energy of the sun onto a collector, such as a fluid-filled tube or tower. The heat from the mirrors warms the fluid, which can then be converted to electrical energy. These plants are particularly strong contenders to provide energy to areas with hot, sunny weather such as several of the southwestern states. There are already such plants in operation. California’s Solar Electric Generating System, or SEGS, combines the power of nine plants in the Mojave desert to generate 354 MW of energy, providing power to about 380,000 homes. The CSP plant project of Seville, Spain will provide enough power for the entire city of 710,000 people. Two new solar thermal projects in Southern California are estimated to provide power to an additional 300,000 homes, significantly contributing to meeting the renewable electricity standard there. The higher level of efficiency of concentrating solar power over photovoltaics means that a $2.4 billion investment could generate 2.5 billion kWh of electricity, enough for 238,000 households. Employment growth would be an estimated 271 high quality jobs.

In addition to the direct investments in renewable energy funded by dedicated revenues from the auction of allowances, renewable electricity would benefit in many other ways from the Lieberman Warner bill. Once a cap on greenhouse gas emissions imposes a cost on companies’ pollution, there would be an economic incentive to develop low carbon methods to generate electricity. This should significantly boost companies’ investments in efficiency and renewable energy. The recent EPA analysis of the Lieberman Warner bill projects that renewable electricity would grow by 61 gigawatts by 2025—enough to power approximately 50 million homes, depending on the capacity of the mix of energy sources. This would be in addition to the funds for renewables noted above.

As it becomes more expensive to pollute, the bill would simultaneously make it less expensive to use clean energy. Current estimates for the potential of S. 2191 to spur electricity generation by wind, solar, and geothermal are certain to be low relative to what would actually come to pass because they are based on today’s costs and efficiency rates. As continued innovation makes the technology both more efficient and less expensive, the gains would likely be much higher.

There are other policies that also would spur investment in renewable energy if implemented in conjunction with a cap on emissions. Already, 26 states have taken the initiative by implementing renewable electricity standards that require utilities to generate a certain portion of their electricity from renewable energy resources. A federal renewable electricity standard of 15 percent was included in the final version of the Energy Independence and Security Act brought to the Senate floor. But even with majority support, the Senate was forced to drop the provision because it lacked a super majority of 60 senators to pass it due to opposition from the Bush administration and conservative senators.

Critical existing tax incentives for renewable electricity are due to expire at the end of this year. Congress attempted to include them in the 2007 energy law, but the Senate failed to muster 60 votes, falling one vote short. The Senate also attempted to include the extension of the production and investment tax credits for renewable in the 2008 economic stimulus package. This also failed by one vote. On February 27, the House once again passed a bill to extend these renewable incentives by closing a relatively small tax loophole for big oil. Hopefully, enough Senate conservatives will ignore opposition from the Bush administration and vote for these incentives when the Senate debates this bill in the spring. All of these measures would significantly increase renewable energy and create thousands of good clean energy jobs.

The Lieberman-Warner Climate Security Act, combined with these other policies, should dramatically speed the development and deployment of clean energy renewable technologies. This would speed the transition from a high carbon economy that relies on fossil fuels to a low carbon economy that uses clean alternative energy technologies and efficiency measures to meet our energy needs and create jobs. The Senate should enhance and pass this bill in June.

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Daniel J. Weiss

Senior Fellow