Clean Energy Financing: First Steps Towards Post-Partisan Effort

Originally published at Americans for Energy Leadership.

Energy reform is headed quickly towards a hyper-partisan stalemate. As the Republican party takes control of the U.S. House, some advocates of a progressive energy agenda are calling for Congressional Democrats to regroup and “conduct guerrilla warfare” against the status quo. A consortium of climate scientists has recently rallied together to “to challenge disinformation and misinformation deployed in the policy wars over global warming.” All signs point to an intensifying battle between “climate hawks” and “climate zombies,” but little progress will be made if advocates continue to reinforce this hyper-partisan environment. Despite rampant cynicism, opportunities for bipartisanship exist, and the greatest potential for aisle-crossing probably lies in financing mechanisms for clean technology innovation.

Public funding and financing for technology-focused clean energy projects present unique political opportunities that other government efforts lack. Unlike pollution regulations and top-down industrial mandates, financing for business has long enjoyed broad support from both ends of the political spectrum. Various policy tools aimed at ramping up federal dollar flow towards clean energy projects include feed-in tariffs, loan guarantees, credit enhancement, direct grants and tax credits. Many of these policies carry the potential for bipartisan support in Congress.

The American Recovery and Reinvestment Act (ARRA) installed probably the greatest federal support for clean technology investment in history. However, as stimulus projects expire, clean technology innovation is approaching a funding cliff that will need to be replenished if Congress is serious about decarbonization. Hypothetical broad-based subsidies and renewable electricity standards will be insufficient in targeting the specific projects required for technological innovation. Vestigial targeting elements of the 2009 stimulus bill have received support from both sides of the aisle. Sec. 1603 of ARRA, for instance, has provided grants for specific clean energy projects in lieu of tax credits. Senators Jeff Bingaman (D-NM) and Olympia Snowe (R-ME) recently co-sponsored a bill (S. 3935) that would extend the tax code calibrations established by the stimulus act. The grants established by this legislation are diverse, but not broad; instead of blanketing industry with blank-check subsidies, they target projects in storage, solar, wind, fuel cell, and other clean energy technologies.

New programs based on tax credits and incentives could also attract Republican co-signers. Sander Levins, the Chairman of House Ways and Means, introduced alternative legislation to cap-and-trade that includes roughly $6.5 billion in tax credits for manufacturing of clean technologies, in addition to extending credits for other alternative fuels. Like S. 3935, Levin’s Domestic Manufacturing and Energy Jobs Act of 2010 would include extensions of stimulus programs, in this case Sec. 48C, another tax credit provision of ARRA. As Daniel J. Weiss reported recently, “the 48C programs is also included in S. 2857, co-sponsored by Bingaman, Hatch, Lugar, and Debbie Stabenow”–two Democrats and two Republicans. Unlike past efforts by Democrats such as health care, in which they crafted legislation and then courted Republicans, programs like S. 3935 and S. 2857 can trace bipartisan support to their original authorship.

These initiatives are certainly smaller-scale than the original and subsequent drafts of the American Power Act, this summer’s climate/energy effort spearheaded by Senators Kerry, Graham and Lieberman. Despite its “tri-partisan” coalition of authors, APA was a stark demonstration of the political intractability of cap-and-trade. Even with a high-profile Republican working on the bill for six months and concessions by Democrats on nuclear and clean coal technology, conservatives in the Senate dropped the bill before picking it up. Instead of pursuing an agenda built around cap-and-trade with ornaments for conservatives, advocates must encourage their lawmakers to draft innovation-focused legislation from the ground up, with across-the-board political support for various traditionally conservative and progressive financing mechanisms.

Americans for Energy Leadership has already publicized an op-ed in Politico by Senators Stabenow (D-MI), Hagan (D-NH), and Udall (D-CO) calling for a new strategy on energy reform. Citing a report by Third Way, they note that “energy innovation is not a partisan issue–it’s an American imperative.” The path to a decarbonized economy cannot find success if either party adopts energy reform as a partisan agenda, used to re-elect their own members and wedge the ranks of the opposing party. Economic growth, energy security and the protection of our soliders are not partisan issues–they are core American goals.