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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's (GE) 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.
Clean energy advocates were angry but not surprised on July 22, when Reid said he was pulling the plug on the carbon cap. Powerful utilities were withholding support. President Barack Obama wasn't trying to forge a compromise. And key Democratic senators had no appetite for a bill that might cause a modest, short-term increase in electricity prices—potentially endangering some 20th century manufacturing jobs—even if it helps create many more 21st century jobs by making clean energy competitive with coal. The disappearance of the renewable energy standard, however, was a shock. Both the House and Senate have passed RES bills in the past, yet it has never become law. With elections looming, this may be the last chance for years to set the rules of the road for energy investment.
While the carbon cap, at this intensely partisan moment, has exactly zero Republican supporters, at least four GOP senators have signaled support for the RES. Proponents are hoping to introduce it as a floor amendment—and whether or not they have the votes to pass it, this is a debate worth having.
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. Utility chief executive officers such as Lew Hay of NextEra Energy (NEE), Ralph Izzo of PSEG, and Jim Rogers of Duke Energy (DUK) have all said they are ready to invest in clean energy just as soon as Congress establishes a carbon cap that creates a clear, steady price signal for dirty fuel—in effect, pricing in some of the social costs of carbon pollution that have never been part of America's energy bill.
The scissors is missing a blade. The Senate has made clear it is not ready to cap carbon, and President Obama has made clear that he won't go to the mat for it now, either. On July 24, when some of the clean-tech industry's leading executives gathered in Aspen, Colo., for a Clean Energy Economy Roundtable sponsored by the Aspen Institute, the group was perplexed. "The deployment rate of renewable energy projects in America is withering," said Andy Karsner, CEO of Manifest Energy and a former Assistant Secretary for Energy Efficiency and Renewable Energy during the George W. Bush Administration. "Projects announcements are happening, but largely at the end of a federal check."
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