Friday, April 8, 2011

US budget battles make European energy and climate policy look easy

I’m sure Barack Obama doesn’t wish he had been born a European. There is enough speculation as it is over the origins of the 44th president of the United States from ‘serious’ politicians and trashy magazines who love to cast aspersions the origins of this Kenyan/Muslim/terrorist sympathiser.

But Obama must glance towards his allies across the Atlantic from time to time and wish he could slip into David Cameron’s English Oxfords and enjoy the Westminster system. He would then have the unifying force of a three line whip or even a one line whip – even one supportive Democratic voice would help amid the Republican clamour.

He would also have the Racial and Religious Hatred Act 2006 which would defend him against racial abuse, and libel laws that would deter newspapers from publishing malicious falsehoods. Did the founding fathers really intend the first amendment to defend the indefensible by inviting bigots and racists to say anything they like, even if it's factually incorrect, ethically wrong or incites acts of horrible violence?

Pastor Jones was warned by General Petreus not to burn the Koran as he had threatened because it would put lives at risk, including those of US forces. And so it came to pass in the deadliest reprisal in Afghanistan since 2009.

However, it's unlikely that Obama’s British counterpart would like to slip into his shoes, or even his presidential holiday flip flops.

The UK’s government took a beating in the press over the “greenery” in last month’s budget, the coalition’s first. The Guardian’s commentator George Monbiot ridiculed the “greenest government ever”, calling it the “blackest budget” and a disaster for the environment.

George Osborne, the British chancellor, set a carbon floor price of £16 a tonne from 2013, rising to £30 by 2020, the first country to do so. But nuclear and renewable energy companies will scoop huge windfall profits, according to the Guardian, because of compensating businesses by raising the Climate Change Levy electricity discount from 65% to 80%. Even Deloitte noted in its budget summary ambiguity over who these changes really benefited – large corporations or the green economy:

“The measure is expected to raise £3.1bn by 2014/15, although it is not currently clear whether the proceeds will be earmarked for reinvestment in low carbon energy projects.”

When I first arrived in San Francisco, I practically had to scrape the head of the Northern California Chapter of the US Green Building Council off the floor after I told him about the UK commitment to build only “zero carbon” homes from 2016. But the UK budget weakened this commitment by excluding cooking and electrical appliances such as televisions which account for between one third and half of a home's total emissions.

Landfill tax will increase from £8 to £64 a tonne by 2012. A blanket tax rise such as this would be impossible in the US, as municipal level "fee" increases are subject to public votes.

The Green Investment Bank had its market capitalisation raised from £1bn to £3bn, with the potential to raise up to £18bn by 2014/15. Although critics say the fire sale of environmental agencies in the UK is too high a price to pay and complain that its capacity to raise capital have been weakened.

Deloitte concluded: “Overall this is an encouraging budget for low carbon businesses and investors, although these measures have to be viewed in combination with other factors such as the recent announcements on feed in tariffs as well as the electricity market reform which is ongoing. The announcements have also inevitably added to the complexity of the low carbon policy environment.”

Commentators may be right in holding the UK government to account for its poor green record. But to President Obama, the UK’s budget is a laundry list of clean energy policies that would seem like magical thinking in US politics.

The House of Representatives voted yesterday in favour of Fred Upton’s Energy Tax Prevention Act which would prevent the EPA from regulating emissions. It will fail to pass the Senate, much as a similar bill to gut the Clean Air Act failed yesterday. But it is worrying how easy it is to repeal major policies – or at least waste the time, energy and federal funding of the US legislative process.

But good news came from the Cleantech Group this week. Its latest quarterly report found that global investment in US clean technology has reached its highest level since 2008. Global investment in the UK has slumped from third to 13th, according to a report by the Pew Environment Group. But the same report relegated the US to third place behind China and Germany:

The US saw $34 billion in private equity invested in the sector last year, a 51% jump from 2009, but China received $54.4 billion, increasing the lead over the U.S. since 2008. Germany last year passed the U.S. with $41.2 billion invested in clean energy.

And just the US struggles to define any kind of energy policy, let alone a coherent one on clean energy, Europe’s climate action commissioner has arrived in Washington as a reminder that things don't have to be this way. Perhaps if she had arrived at any other time, the US press may have taken more interest. But Washington is consumed by the threat of government shutdown over ideology and religion in the budget.

Connie Hedegaard has had a full schedule in the US: on Tuesday she met with California’s Governor Jerry Brown and Mary Nichols, who chairs the California Air Resources Board, to discuss the possibility of linking the EU ETS with the Californian carbon market.

The day before, Hedegaard had caused ripples on the blogosphere during a panel discussion at the FORTUNE Brainstorm Green conference in southern California where she is alleged to have said: “Is cap and trade too complicated? It might be for the Americans. It’s not for the Chinese.”

I doubt very much that she meant that Americans were too stupid to grasp carbon trading. This is, after all, the nation which produces many of the world’s smartest people and designed the world's first cap and trade scheme for sulphur dioxide to prevent acid rain. Hedegaard’s English is good, but her fluency sometimes belies nuances in what she actually means. It has caused confusion in the past.

After her trip to Sacramento, Hedegaard attended a closed meeting on Wednesday in San Francisco with California’s energy regulators, business groups and NGOs. On Thursday she met with Republicans in Washington.

Hedgegaard was also due to trade notes with her almost counterpart Lisa Jackson, the head of the Environmental Protection Agency, which has been targeted by Republicans, and Congressmen Henry Waxman and Edward Markey, authors of the US’s failed climate legislation.

Today, she was due to speak at the Carnegie Endowment for International Peace in Washington. Its website introduced the discussion on Climate Security and Green Technology: An EU-US Perspective:

“Climate change presents common threats to the security, economy, and environment of the European Union and United States. At the same time, the transition to a low-carbon economy has the potential to provide a major boost in innovation, investment, and enhanced competitiveness. While facing similar challenges, the EU and United States have taken significantly different approaches to capping greenhouse gas emissions.”

Those different approaches may cost the US economy and the disconnect between financial benefits and environmental legislation arises so frequently that I am left thinking that the attitude that regulation is bad for business prevails throughout the US. But America's loss is a gain in other countries, not just in China and Germany.

When Congress finally rejected a federal cap and trade scheme last year, London became the capital of the carbon finance by default. But there could be other wins for the UK as the US flounders without energy and climate policies.

The Carbon Trust has already seen an opportunity to help US businesses become more competitive through energy efficiency and best practice in regulatory compliance and has plans to open a California office next year.

Last week, Greg Barker from the Department of Energy and Climate Change led a trade delegation of British companies to the US to discuss business opportunities for Jupiter Asset Management, RES Group, a renewable energy project developer, brewers Adnams among them.

Republicans led by John Boehner are incredibly successful at two things:

• blocking lawmakers in doing the actual work they were elected to do which is legislating for policies, not wholesale repeal of 70 years of US lawmaking as Vermont Senator Bernie Sanders described last night on MSNBC.

• jamming the US airwaves with rhetoric about the budget, ringing the death knell for regulations including those that boost GDP by protecting the well-being of the workers that keep the economy going.

But drafting bills that will be popular with ordinary Americans and reassure the country's European partners that a coherent energy policy will emerge from this budget crisis eludes the GOP. Representative Paul Ryan of Wisconsin this week announced a plan that would eliminate "welfare funding for energy companies" without cutting back on tax subsidies for fossil fuel companies.


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