Four Bright Green Spots in the Budget
As I’ve mentioned before, I’ve been spending a lot of time this year helping clients see how the American Reinvestment and Recovery Act (ARRA) can help support their environmental initiatives.
But last week, when the President sent Congress the fine print of his proposed Fiscal Year 2010 budget, even I had a start: Never before has US government set out to make its spending so green. Not even the stimulus.
Here’s a list of Four Green Bright Spots:
1. Pouring Money Into Water. The Environmental Protection Agency’s funding will increase roughly 30 percent from the $7.6 billion in the fiscal 2009 omnibus to $10.5 billion.
There’s a massive increase for water infrastructure, including $2.4 billion for the Clean Water State Revolving Fund, a low-interest wastewater loan program that helps states construct water treatment facilities. (The fund received just $689 million in fiscal 2009.) The Drinking Water State Revolving Fund would receive $1.5 billion, up from $829 million this year.
2. Carbon Infrastructure. The EPA will dedicate $17 million to the development of a GHG registry for US greenhouse gas emissions. As we’ve written before, this is a necessary first step toward regulating carbon emissions.
3. Oil is Out. Over at the Department of Energy, the proposed spending is flat from last year. Of course, that doesn’t include the nearly $40 billion showered on the department from the stimulus law for alternative-energy and efficiency initiatives. There are significant changes in emphasis on spending, though when it comes to fossil fuels. The budget completely cuts funding for the oil research and development program authorized by the 2005 Energy Policy Act. Finally, a budget that leaves behind the perverse incentives supporting fossil fuels that are costing us so much more than their sticker price.
4. Adaptation Gets Attention. State Department is contributing $600 million to two World Bank funds, one that supports clean technology in the developing world and the other that helps spur adaptation solutions in countries struggling with climate change. Over at Interior, the department is touting $183 million in increases for clean energy and the mitigation of climate impacts on the home front.
I’m sure there’s more to find, but the four points give some sense of this extraordinary bright green spending plan that, if adopted, will change the federal government’s impact on the economy.
A Business Model Stimulus
Most companies, naturally, are choosing to tighten their belts in this recessionary economy.
In this week’s New Yorker, James Surowiecki makes a compelling case for ramping up spending in a downturn. He cites Kellogg’s success launching and marketing Rice Krispies during the Great Depression.
I don’t know of many companies doubling down on consumer marketing right now, but I know plenty of companies looking to understand how the federal stimulus plan might be relevant to their business.
Since becoming law in February, the American Reinvestment and Recovery Act (ARRA) has dominated my conversations with my clients. Everyone from cement producers to plastic laminate manufacturers to defense contractors ask me how they can obtain stimulus funding. The answer, more often than not, is to go green.
The stimulus legislation is packed with incentives, not just for renewable energy and smart grid technology, but weatherization, energy efficiency, and transportation.
That’s causing corporate planners to alter their thinking about the sustainability of their products and services, to reappraise their markets, and to adjust their thinking – so they can get access to this money available right now.
Some liken the stimulus to a wave that washes through the economy just once. I see the effort more like a river (especially when you consider the President’s 2010 budget and the prospect of a second stimulus) steadily shaping the contours of the economy, helping turn America’s business landscape in a more sustainable direction.
A Glimpse from the Bright Side
I am at the RETECH conference in Las Vegas, which captures all of the challenges facing green technology in these heart-in-the-throat times -- and the opportunities as well.
Many of the large companies that enjoyed such significant profiles at gatherings like this in the recent past were absent. Instead, when I participated in a panel, the room was packed with hopeful green technology entrepreneurs. It reminded me of Tom Friedman's admonition that the US needs thousands of inventive minds working on green technology at thousands of workbenches to put the United States back on track. This moment clearly belongs to those who are willing to start out with less.
Our discussion yesterday, chaired by Obama transition figure Howard Learner, explored how a variety of high profile initiatives -- from the recent stimulus package (the American Reinvestment and Recovery Act or ARRA) to a proposed renewable electricity standard to cap-and-trade legislation -- will affect green technology development. There was general agreement that a virtuous cycle is developing: the stimulus package should help pave the way for cap-and-trade because it will help build the constituency for it. Meanwhile, energy efficiency investments will provide a bit of momentum toward GHG reductions in the near future.
More than a plank in a shipwreck, ARRA will make available specific tens of billions of dollars at the very time green technology might have faltered. We spent a great deal of time talking with car battery innovators, solar installers, wind energy project developers, fuel cell companies, energy efficiency retrofit and system designers, and others who have carved out a niche in the green creativity space that more than justifies Friedman's hopes for a sustainability-powered era for US technology.
Yet, we also explored the dark side of this improving picture. Plowing so much money into “shovel-ready” projects so quickly will inevitably benefit some not-so-green projects. Those stimulus expenditures will help entrench an infrastructure that has to be greened all over in the future.
But for now, the bright side seems, here in Las Vegas, to be ascendant.
How Will Obama Cut the Deficit? He's Thinking Carbon.
With the President’s stimulus enacted and more crisis-related spending on the horizon, everyone wants to know how the Obama administration can actually make good on the goal, articulated Monday, to cut the size of the budget deficit in half by the end of the President’s first term. When the 2010 budget is released today, it will make clear that the administration hopes a major source of revenue will be from a proposed carbon cap-and-trade system. But that may not be as easy as it looks.
Many observers focus on the costs of cap-and-trade to the economy. Less appreciated is the revenue that could be generated if the government chooses to auction off pollution permits in such a system. The Washington Times reported the administration expects $300 billion to come in by 2022 from cap-and-trade revenues. Obama wants to put this money to drawing down the deficit.
But Congress will need to go along with his plan and therein lies the wrinkle.
As Andrew Revkin noted last night, lobbying activity around climate change is booming: he cites a report from the Center for Public Integrity that says in 2008 “more than 770 companies and interest groups hired an estimated 2,340 lobbyists to influence federal policy on climate change.” Without question those number are rising this year as well. Many of those lobbyists are no doubt arm-twisting Congress people to get a piece of that money.
Can the Obama team can manage to push through such ambitious legislation without divvying up some of the spoils? We’ll find out.
