Climate Change, the Stimulus Bill, and how CleanTech will benefit

With less than a year left before the international community reconvenes to tackle climate change in Copenhagen this December, many unanswered questions remain.  Chief among them is whether the US can begin to patch together a flurry of legislation targeting reduced greenhouse gas (“GHG”) emissions in time to signal a renewed commitment to leading the international community on environmental issues.  Doing so will focus the spotlight on China, which together with the US, accounts for 40% of the world’s GHG emissions.

If the US had ratified Kyoto it would have joined 37 industrialized countries and the EU in an effort to reduce GHG emissions between 2008-2012.  With the US sitting on the sideline, the rest of the world has forged ahead with an assortment of policy and incentive experiments with varying degrees of success.  Meanwhile, between 1992 and 2007, the US has experienced a 20% increase in GHG emissions.

While the effect of the US pullout of Kyoto was to leave many climate issues unresolved, the global financial crisis may result in a dampened enthusiasm for aggressive climate action within the world community and a reluctance to strike an enduring deal in December.

It appears, however, that with Obama’s signing of The American Recovery and Reinvestment Act (“ARRA”) into law on Tuesday, the US is intent on putting climate change back on the table, and the CleanTech sector stands to benefit.

More than just an economic recovery bill, the ARRA injects roughly $60 billion worth of green initiatives into the economy and carves out $20 billion in green tax incentives.  Targeted projects include energy efficiency, renewables, smart grid transformation, transmission upgrades, advanced vehicles, battery storage, and others.

Some clear winners include green retrofitting (75% of federal buildings are slated for energy efficiency upgrades under the bill), smart grid companies (which include demand response products and advanced metering producers), renewables (not just solar and wind, but also biomass), and battery technologies.

Who will ultimately see this money?  It is difficult to tell, but it might be worth considering the following:

To date, most states have led the way on climate change policy and green initiatives in the US by setting aggressive Renewable Portfolio Standards, establishing regional cap-and-trade programs, and capitalizing on energy efficiency gains (the low hanging fruit).  Many states are also incorporating programs and incentive structures that have already enjoyed some success abroad (see Feed-in Tariffs: The Good, the Bad, and What Utilities Need to Know).  One can assume that the diffused stimulus dollars will chase the programs and technologies that have a proven track record of success thus far.  Finally, as ARRA is an economic stimulus package, look for projects that will create jobs.

The following is a sampling of CleanTech-related dollars in the ARRA that signal a commitment to take on climate change in the US:

Appropriation Highlights

Direct Spending:

• $16.8 billion in direct spending for renewable energy and energy efficiency
• $4.5 billion to develop a smarter grid
• $4.5 billion to make 75% of federal buildings more energy efficient
• $2.5 billion for research and development, and demonstration projects
• $2 billion for advanced battery grants
• $5 to weatherize homes
• $8 billion for high speed rail projects
• $19 billion for water infrastructure and clean up

Tax Incentive Highlights

• Includes a major CleanTech-related provision that establishes a 30% investment tax credit aimed at jumpstarting the struggling domestic renewable energy industry and designed to make the US a more attractive place to manufacture solar, wind, and other green technologies
• Renewable energy production tax credits are extended for energy produced from wind, geothermal, hydropower and landfill gas
• Tax credits for purchases of energy-efficient furnaces, windows and doors, or insulation
• Tax credit for families that purchase plug-in hybrid vehicles

As Jeff noted in his post, the Stimulus Watch, is a useful website to monitor how the stimulus dollars are rolled out; check out the links page for some more resources, let us know if we should add some.  In the meantime, check back to CleanTechies for more analysis on the specific provisions.