Embracing the Clean Energy Economy

The implications of HR2454 and increasing global economic development competitiveness

Legislation currently pending in the U.S. Senate possesses the potential to create a monumental transformation of the focus of economic development.  This is primarily due to the bill’s provisions for renewable energy usage, new residential and commercial energy efficiency standards, and the creation of a “cap and trade” system for regulation of greenhouse gas emission (GHG).  The bill, H.R. 2454 “American Clean Energy and Security Act of 2009” (ACES) has stirred debate related to our ability to foster economic development and growth under more stringent environmental regulations.  

Strong arguments have been made on both sides, with the opposition stating that bill will: (1) Result in escalating energy costs, (2) Negatively impact the economy due to losses in the manufacturing, mining, housing/real estate industries (among others), and (3) Drive businesses overseas in order to reduce costs.   

Proponents of the bill, on the other hand, believe that the U.S. must begin to minimize its impact on the environment and strive to meet to the challenges of climate change head-on.  Supporters of the bill believe that effective legislation will: (1) reduce our dependence on foreign energy supplies by bolstering domestic renewable energy production; (2) promote energy efficiency and alleviate waste in usage and production; (3) promote growth in new industries supporting “green” technologies; (4) aid in mitigating climate change impacts by reducing carbon output; and (5) reaffirm the U.S. position within the global marketplace increasing its ability to compete and attract new clean energy development.   

This legislation proposes fundamental changes in how our economy operates, and changes of this stature are not always the easiest to swallow.  One option is to “stay the course” and maintain the status quo, or “business as usual” approach, which raises the issue of whether this would mean continuing to rely on obsolete methods of production, inefficient energy practices and wasteful use of our natural resources.  If we continue our present course, which is likely to include profiting from the use of the soon-to-be obsolete practices for the next 10-20 years, some argue that we will find ourselves in the backseat of the global economy in the coming decades.  However, if we embrace change, capitalize upon new market opportunities, we have the potential to bolster local, regional and national economies and strengthen our position in the alternative energy industry sectors.   

In this discussion, and the recurring theme throughout this blog, understanding the long term implications of our policy decisions are paramount.  We need to evaluate these decisions based on their ability to place us in the most advantageous position to maintain to achieve a balance between economic growth and progress, environmental consciousness and social well-being.

To begin, it is important to provide a synopsis of the bill details – 

Renewable Energy Standard (RES)

This section requires retail utility providers that sold more than 4 million megawatt hours of electricity in the previous year to:

• Purchase 6 percent of their electricity from renewable resources by 2012
• Purchase 20 percent of their electricity from renewable resources by 2020, steadily increasing from 2012.  

Energy Efficiency

This section states that new commercial and residential construction will be required to adhere to national building codes that require:

• A 30 percent reduction, by the date of enactment, in energy use relative to a comparable building construction in compliance with a baseline code.
• A 50 percent reduction by 2014 and 2015 for residential and commercial development, respectively, based upon the baseline code.
• A 5 percent reduction thereafter every three years through 2030.  

The baseline code for residential buildings is based upon the 2006 International Energy Conservation Code (IECC) published by the International Code Council.  The baseline code for commercial buildings is based upon the code published in ASHRAE Standard 90.1-2004.

Cap and Trade

The cornerstone of the bill, and most controversial, establishes an economy-wide GHG cap and trade program, which places a national cap on emissions and distributes allowable emissions among sources.  The program allows the trading of emissions credits in order to promote the most economically efficient emissions reductions as determined by comparing permit and mitigation costs.  In terms of emission reduction goals, the ACES aims to reduce GHG emission sources 83 percent below 2005 levels by 2050 with nearer term reduction of 3 percent, 17 percent and 42 percent in 2012, 2020 and 2030, respectively.  A portion of the GHG permits will be auctioned off and the rest will be free, with the ratio of auctioned permits increasing over time – with the funds raised from auction being invested in alternative energy.  

As HR 2454 continues on its path through the legislative process, amendments to the specific requirements, goals and target figures will be forthcoming and inevitable.  The fact that a bill of this magnitude, in terms of sheer scope, has made it into Congress underscores that the concept of establishing sufficient regulations to curb our impact on the environment and address climate change, while promoting a clean energy economy, has a high profile at the federal level.

Benefits from establishing a clean energy economy

This bill has created an opportunity to implement a fundamental transformation in the ways in which our economy operates in order to promote energy independence, BY placing an emphasis on new alternative energy jobs and transitioning the U.S. into a clean energy economy.  

Regulations on energy efficiency for new commercial and residential construction are essential in order to equitably promote sustainable development.  Despite the potential for higher costs, local producers can partner with economic developers to showcase their community’s commitment to producing environmentally responsible products.  Increased energy efficiency standards for new development will also provide substantial benefits for occupants, especially those of lower socioeconomic groups, lowering annual utility bills.  

On the whole the bill represents a bold attempt to promote a more responsible, sustainable built environment while strengthening our long-term economic prospects.  If energy is the driving force behind the global economy; we must consider whether we should become sustainability stewards and lead the way into the clean energy economy of the 21st Century.