The Global Clean Energy Race: Ontario’s Opportunity
Remarks to Environmental Defence Canada and the World Wildlife Fund
SOURCE: Center for American Progress
The following are remarks given by John Podesta at an event on July 13, 2010 in Ontario hosted by Environmental Defence Canada, WWF, Blue Green Canada, and MaRS.
Good evening. Thank you, Rick, for that kind introduction, and to Environmental Defence Canada for organizing this event. I bring you greetings from my nation’s capital and the global capital of dysfunctionality. A special thanks also to the World Wildlife Fund, and Blue Green Canada for sponsoring, and to MaRS and Tom Rand for both sponsoring and hosting as well in this fabulous facility.
I know that you’re doing a tremendous amount of work on clean energy here in Ontario, and for the most part, I will leave it to the experts here today to get into the details of that work. What I’d like to do with my time here is to take a step back and look at clean energy investment more broadly, and how Ontario’s work fits into that picture. I’d also like to spend some time talking about what the United States is doing to take our economy down a clean energy path—and, just as important, what we’re failing to do to accelerate the movement down that path.
To start, I’d like to take a moment to lay out the scope of the challenge and opportunity before both our countries. At this moment, the United States, Canada, and the rest of the world are at a turning point in our history—we transition to cleaner sources of energy, and our children and grandchildren can reap all the benefits that accompany that transition, or we continue to rely on 20th century technologies and 19th fuels, and speed the creation of a world with an unpredictably altered climate, dwindling or difficult-to-reach energy resources, and exacerbated geopolitical instability.
The stakes of that choice are high. Last year was the hottest year on record, following the hottest decade on record. In 2010 and 2011 so far, the United States experienced the extreme storms, floods, drought, and wildfires that scientists have long predicted would occur unless we significantly reduced the carbon dioxide pollution linked to climate change. We are just beginning to live with our global warming future.
Avoiding or at least minimizing the most dire outcomes should be reason enough to speed the transformation of the way our energy is produced and consumed, both in the United States and around the world. But just as governments around the world now recognize the reality of climate change, they are also beginning to recognize the energy opportunity inherent in addressing it. In virtually every country, energy sits at the nexus of economic growth, environmental sustainability, and national security. Building a world in which our dependence on high-carbon pollution fuels is reduced will have profound, positive, and progressive effects on all of these interconnected elements. We not only have an opportunity to avoid a worst-case climate scenario, we also have an opportunity to create millions of new jobs worldwide, deploy new sources of energy that are clean and domestically produced, make our economies more efficient, diverse, productive, and competitive, and set our countries down the path of prosperity for many years to come.
I know most of the people here are familiar with that opportunity side of the equation, but when politics get involved it’s easy to lose track of it. This is particularly true in the wake of the global recession, when in both the United States and Canada, families are still understandably anxious and uncertain about their own economic future. Defenders of the status quo have very skillfully played on these fears and turned them against needed change, urging the public to question whether now, when budgets are tight and the future is in doubt, investing in clean energy is the smart thing to do. As a result, they’ve misled many decision makers into embracing the status quo—or, in the case of Ontario, to begin looking backward.
Yet I still have great hope. When I started the Center in 2003, driving the transition to clean energy was one of our founding missions, and the conventional wisdom suggested we’d picked a fight impossible to win. We believed then, and we believe now, that it can be won, and that it must. Because it is central to a strategy for economic growth, a vision for a more prosperous future, and the most straightforward and proven way to get our crippled economy back on track.
For one, building a clean energy economy means diversifying our overall energy portfolio, not simply moving from one system to another. It requires investing both in renewable sources of energy and in our existing energy infrastructure to make it cleaner, more reliable, more efficient, and better able to meet growing energy demand. And it means calculating the real cost of energy by taking into account the impact fossil fuels have on our health, our communities, our climate, and our security when comparing them to the cost of cleaner, renewable fuels.
A clean energy economy also means an inherently stronger and more diverse economy, one leveraged not to fund speculative investments in real estate and finance—as the United States unfortunately has done in the past—but on robust new industries that span all sectors of the economy. From research, development, and commercialization to manufacturing, operations, and maintenance, clean energy offers unparalleled opportunities for creating new business and new jobs on both sides of the border. The Brookings Institution put out a report today that finds there are now 2.7 million clean tech jobs in the United States, and job growth in that sector is almost twice as fast as in the economy as a whole. And because many of these businesses will be focused on innovation and invention, they’ll lay the groundwork for the businesses and jobs of the future as well.
And, of course, building a clean energy economy means outfitting each of our countries to take part in the highly competitive, global clean energy market that is projected to be worth $2.3 trillion by the end of the decade.
Given the slow pace of global recovery, this last potential benefit is particularly compelling. Clean energy is rapidly emerging as one of the world’s largest and most lucrative markets with a vast potential for future growth. Last year, it attracted $243 billion in total investment, a 30 percent increase over 2009 even in the wake of the Great Recession.
In both the United States and Canada, how large a share of this market we claim rides on whether we can drive the investment needed to compete in it. And when we look around the world to see what other countries are doing to push that investment, China is clearly a leader, and one that dominates much of our discourse on how best to compete. So I want to take a moment to talk about China, because I think that apart from the sheer amount China is spending, it’s also a powerful example of clean energy’s economic promise—as well as public policy’s unique ability to harness it.
The tremendous scale of China’s investment is indeed remarkable. In 2010, China attracted $54.4 billion in public and private investment to its clean energy sector. That’s almost 63 percent more than the United States spent last year; $13.2 billion more than Germany spent, at second place; and almost 10 times as much as Canada invested in clean energy overall.
Of course, China’s political economy looks very different than ours, and I am in no way endorsing China’s “state capitalism” model. China’s mercantilist energy policies give state-owned and domestic companies an unwarranted edge in China’s booming clean energy market, and induce foreign companies to hand over their clean energy technologies as a condition of doing business in the country.
But these very fair criticisms aside, what is impressive about China—and what the country is doing extraordinarily well—is how closely the country has integrated clean energy into its broader economic strategy. Their infamous Mao-era five-year plans have morphed into precise blueprints for strong, innovation-led economic growth. And if you look at their latest five-year plan, you see that it has two parallel tracks: one focused on building a 21st century energy system that is more diversified, more predictable, and causes less harm to its citizens, and one focused on advancing Chinese industries, occupations, and workers in a way that also grows China’s ability to lead the global clean energy race.
In other words, China is investing in clean energy not just to corner the world export market but to grow its own economy as well, and is using smart, targeted public policies—albeit often biased ones—to drive that investment forward.
The result: China is now the world’s leading manufacturer of wind turbines and solar modules, producing almost half the global shipments for these products last year. China’s robust renewable energy standard, aggressive clean energy deployment targets, and guaranteed financing for clean energy projects have built up a strong domestic market for clean energy in China as well. The country already boasts twice as much installed clean energy capacity as the United States, including 17 GW of wind capacity built last year. The United States, by comparison, built just over five. And China is rapidly investing in the building blocks of innovation like education, basic science, workforce training, infrastructure, and research and development. While U.S. investment in R&D has shrunk to nearly a third of what it was in 1980, for example, in recent years China’s spending on research and development has risen at nearly twice its rate of economic growth.
In short, it’s no accident China’s out-running us in the clean energy race. It’s driven by policy. This is an obvious argument, but an important one, particularly for the United States. The prevailing wisdom amongst Washington conservatives today is that the government hobbles businesses’ ability to compete, that policymakers have to cut spending in order to grow our economy, and that the power of American innovation is such that it performs best when the public sector has no role at all. But looking at countries like China and how rapidly they’re transforming their economies through clean energy, it’s clear they have very effective national strategies that challenge that prevailing wisdom. I might add as President Clinton’s former chief of staff that the United States’ impressive economic performance in the ‘90s challenges that as well.
The European Union, for example, similarly has strong public policies to grow its clean energy economy. By the end of the decade, the EU has committed to cutting their greenhouse gas pollution by 25 percent, increasing renewable energy usage to 20 percent, and investing in efficiency to reduce total energy use by 20 percent overall. They’ve already doubled their renewable energy share to 9 percent, and through fuel economy standards that will require vehicles to get 65 miles per gallon by 2020, are aiming to dramatically reduce oil use and imports as well.
Increasingly, Canada also lists among the world’s clean energy leader. That’s a position Canada has staked out relatively quickly: last year, total clean energy investment in Canada grew 61 percent over the year before, when investment went up by 80 percent over the year before that—almost doubling during a year where, thanks again to the recession, global investment in clean energy fell overall. And it’s a position that Ontario, due largely to the Green Energy Act passed two years ago, can very much take credit for helping Canada to reach.
Nevertheless, I understand that in Ontario, the Green Energy Act is making quite a few headlines, and remains controversial. Complaints range from the international community, for example, about the domestic content requirements to whether recent price increases are the result of the act. Clean energy opponents have used the speed of Ontario’s transition to stir up the kind of misguided fears and concerns I mentioned earlier, including the particularly pernicious and unfounded fear that wind turbines pose a threat to public health. I don’t believe that fear is even remotely justified, but imagine how the neighbors of coal and nuclear plants must feel.
Now is a good time to have these discussions, and to have an honest debate over clean energy that gives members of the public room to voice their concerns. And improve performance. But having that discussion in no way means Ontario’s Green Energy Act should be repealed. Taking such extreme action now, when Ontario is making such progress and the act is driving so much growth and investment, seems incredibly misguided. Policymakers should look for ways to improve and strengthen the Green Energy Act—not repeal it.
As we look down that road, it might be appropriate to start with a few facts. First, the Green Energy Act has sparked a tremendous amount of investment in Ontario. Just last week, Ontario’s energy ministry determined that $21 billion in private sector investment has flooded into Ontario because of the incentives the Green Energy Act established. The feed-in tariff has been particularly effective, sparking the same burst in investment, infrastructure deployment, and clean energy capacity China, Germany, and Italy experienced through feed-in tariffs of their own. And as the most sophisticated renewable energy policy in North America, the feed-in tariff has put Ontario on the map not just as a leader in Canada but as a model for the world as well.
Second, the Green Energy Act is creating jobs: as many as 20,000 already, which is set to more than double in just a few years. Many of these jobs are in new businesses that are coming to Ontario because the Green Energy Act expands the clean energy market and helps them compete. As Rick Smith wrote earlier this year, Canadian Solar opened its first plant in Ontario and put 500 people to work making solar panels. In Toronto, Celestica opened a new solar panel facility, and they expect to hire 300 workers. Silfab opened a manufacturing plant in Mississauga that at full capacity will employ 200. One out of ten jobs created in Windsor is a direct result of the Green Energy Act, according to an economic development officer in that city. To these businesses, Ontario’s clean energy policies aren’t creating business uncertainty, as opponents claim—they’re giving them the certainty they need to open their doors and put people to work.
To be fair, the rising cost of energy is a real concern in Ontario. In the wake of the great recession, household budgets are already tight, and families are worried that any price tag for clean energy is going to be passed on to them. But while energy costs in Ontario are going up, rising utility rates are mostly due to the cost of making much-needed and long-overdue investments in Ontario’s aging energy infrastructure. Anyone who remembers the costly blackouts of 2003 knows how sorely these upgrades are needed to make Ontario’s energy infrastructure more reliable, efficient, and secure after years of inaction.
Another reason the feed-in tariff can’t be blamed for higher rates is because most of the renewable energy projects it sparked are still under construction. And a longer-term and perhaps more important consideration is that the cost of conventional energy is going up, and will keep going up, while the cost of clean energy will continue to fall. Investing in clean energy today means investing in having cheaper, more reliable energy for many years to come.
Based on this evidence, the case for the Green Energy Act seems clear: it’s good for consumers, good for businesses, good for workers, and good for Ontario. But Canadians don’t need a lecture from an American about what’s good for their economy. Ask any clean energy manufacturer who came to Ontario because of the promise of strong government support. Rick quoted two in the same article that listed all the factories opening in Ontario. One said that a Green Energy Act repeal would mean, “basically, that we would close our factory and leave.” Another said that his company “would have no more basis to operate here… It would have a devastating effect.” These businesses know what good for their bottom line, and the Green Energy Act is near the top of that list.
What I can offer you, as an American, is my own country’s experience pushing back against similar political and economic challenges—and a commitment to working together to help both our countries move forward.
Just as Ontario has taken the lead on clean energy in Canada, some U.S. states have become clean energy leaders in their own right. Like Ontario, California approved smart public policies to dramatically lower their global warming pollution and expand the state’s market for clean energy projects and businesses. And like Ontario, a well-organized opposition arose, financed by entrenched special interests, that spread misinformation and fear about the impact those policies would have on California.
Ultimately California voters overwhelmingly rejected this attack on their clean energy policies. They did so because clean energy advocates were better organized than the opposition, and particularly members of the business community made a resounding and persuasive case for the economic benefits those policies delivered. My policy center was proud to help make that case, and I am confident that Ontario can similarly make theirs.
In fact, one of the Obama administration’s biggest accomplishments on clean energy thus far was made possible by early aggressive action by California. Last year, the U.S. Environmental Protection Agency and Department of Transportation set new auto efficiency and tailpipe emission standards that will reduce United States oil consumption by 1.8 billion barrels and save the average consumer $3,000 in fuel costs over the lifetime of the program.
These drastic improvements would not have been possible had California not aggressively pushed for higher standards of its own, lobbied other states to do the same, and sought a waiver under the U.S. Clean Air Act to put these higher standards in place. Because of California’s staunch commitment to setting a higher standard, the Obama administration was in a position to bring the entire nation up to California’s level, and today, the United States is on track to make cars roughly 30 percent cleaner and more efficient by 2016 while the administration is looking to even stricter rules for cars made after that year. Looking back at this progress, it’s clear that California and the states that joined its push forced the whole country forward—a model, I think, Ontario also follows as it leads Canada’s transition to a cleaner energy path.
Yet there is much the United States can learn from Ontario as well, for despite the president’s leadership and the progress being made in the states, when it comes to clean energy America has faltered. The sad truth is too many politicians in the United States, led by big oil and coal companies along with others who profit from the status quo, are still looking backward in a futile effort to preserve an outdated, 19th century economic model. As a result, U.S. policies to boost clean electricity remain largely an array of short-term or state-based measures that, at best, add up to an on-again-off-again approach to clean energy investment. To be frank, if the United States doesn’t adopt more policies to invest across the value chain—if we don’t develop a comprehensive policy that focuses also on commercialization, production, deployment, and export—we will look up in 10 years and find ourselves not the great leader on clean energy, but the great buyer of it.
Fortunately, while the political stars haven’t aligned for the United States to develop that comprehensive national policy legislatively just yet, there is still an enormous amount the United States can do right now to move clean energy forward. The best strategies, I think, look to harness the power of the private sector to build a more robust clean energy market, improve access to financing, and develop the world-class infrastructure businesses need to succeed. These are areas where Ontario has already shown great leadership, as have China, Germany, and much of the EU, and where I see the United States focusing in the months ahead.
First, public policies should be used to create demand for clean energy technology that supports a robust private market. In Ontario, for instance, the commitment to phase out coal-fired power in 2014 coupled with 20-year contracts offered under the feed-in tariff program have sparked enormous regional demand for clean energy. Businesses know that, if they invest in wind, solar, biomass, or small hydropower projects, they’ll continue to see a return on their investment for many years to come. That’s why Ontario has 3,500 MW of renewable energy infrastructure under development, and more than 8,000 MW in the immediate pipeline.
But in the United States, that certainty is missing. Economic incentives come and go, leaving investors wary of moving capital into the clean energy market when other countries are doing so much to attract their business. One way of overcoming this barrier is through a “clean energy standard” that would create a mandate for utilities to generate clean energy over the next 25 years. The Center for American Progress has proposed a standard we think could win broad bipartisan support by both requiring utilities to generate 35 percent of their electricity by renewables, and giving regions flexibility to meet the rest of the requirements through other clean fuels.
Second, targeted public programs that give clean energy businesses access to low cost financing should strengthened and expanded. In the wake of the financial collapse of 2008, private capital lending for clean energy is scarce. That means that around the world, private sector investments will not materialize at nearly the scale necessary without an initial dose of public investment, which can leverage $3 or more in private investment for every $1 in federal seed money. Ontario understands this challenge, and has effectively used small amounts of government investment to attract a much larger private one. The highest profile example is the $7 billion deal Ontario struck with Samsung last year. Because of the steady stream of public financing Ontario offered, Samsung is making Ontario a base of operations to both manufacture wind and solar equipment, and deploy these technologies to produce clean energy across the province. All told the Samsung investment should create 16,000 clean energy jobs in Ontario by 2015.
In the United States, we’ve similarly used an array of financing programs—primarily tax incentives and loan guarantees—to mobilize private clean energy capital. Yet most of these programs need to be expanded or reauthorized—and they need an overarching strategic vision that unites them. One of the best ways to provide this vision is through a Clean Energy Deployment Administration, or green bank, that would use a wide range of support tools to leverage private capital in support of clean energy development. We are hopeful that a clean energy deployment administration proposal will pass the Senate Energy Committee later this month.
Third, the public sector can help plan and finance regional infrastructure so that businesses have the transmission, transportation, and other advanced infrastructure they need to compete in the global market. New, more efficient transmission lines are essential to bringing clean electricity from where it is generated to where it’s needed, and emerging smart-grid technology will enable homes and businesses to use that electricity much more efficiently. Ontario for one is making great progress developing these technologies through its partnership with GE, which will research, develop, and manufacture smart grid products to help Ontario reduce its energy use. And through Canada’s landmark infrastructure plan, your country is leveraging the power of public-private partnerships to build the roads, bridges, and power lines clean energy businesses need to prosper and compete.
As the United States seeks to fulfill all three parts of this framework and move our clean energy transition forward, it is just as important that we also begin directing investment away from high-polluting conventional fuels. That goes for both our countries, despite Ontario’s tremendous progress on clean energy. And that’s why, when we step back and look at the bigger energy picture and our strategies for making our clean energy vision a reality, I have, as some of you know, questioned the wisdom of the Keystone XL pipeline slated to carry oil from Canadian oil sands to refineries in the United States’ Gulf Coast. At so critical a juncture along our clean energy path, we should be making smarter choices that steer our economy away from continued reliance on dirty fuels and toward clean and renewable fuels.
To help us both to make those smarter choices, the United States and Canada should join in partnership to put in place clean energy policies that will help us harness sources of energy that can’t risk catastrophe and never run out. Fortunately, President Obama and Prime Minister Harper have already prioritized this by setting up a Clean Energy Dialogue soon after President Obama took office. Since then, the dialogue has continued to make progress, issuing earlier this year a Second Report to Leaders outlining the work the United States and Canada have done together to advance 20 clean energy projects. Our two countries should continue and expand this effort, leveraging our unique relationship to devise solutions to the full range of energy challenges our future demands, including Canadian exports of clean energy to meet U.S. demands.
Given the remarkable progress Ontario has already made, I’m confident it will play a significant role in that work. Ontario’s leadership on clean energy is one all of Canada should look to follow, just as the United States looks to leadership coming from the states, and to our northern neighbor as well. So I have tremendous hope that Ontario’s commitment to clean energy will continue, and that Ontario will carry on as example we can all applaud and admire for many years to come.
Thank you for having me here today. I’m happy to take your questions now.
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