Still stricken by economic uncertainty and public unrest, in spite of the promising market outlook lately, the U.S. has been struggling to find an effectively working strategy when it comes to fostering its green economy. The country has failed to leverage the financial potential of environmentally-friendly innovations by making them an integral part of its economic recovery.
A debate among energy experts in the NY Times last week brought up insightful points about effective solutions to the U.S.’s poor environmental policy. Two of the expert solutions suggested subsidising consumers rather than large corporations and shifting energy companies’ focus away from government loans and onto consumer dollars. To achieve these goals, the U.S. government can learn a valuable lesson from two functioning schemes already implemented in the UK — the government-backed feed-in tariff system and the Renewables Obligation program.
Last month, the Obama administration shut down the Environmental Protection Agency bill, which would have put in place federal regulations aimed at reducing greenhouse gas emissions. The decision made more than a few environmentalists and international leaders unhappy. Around the same time, Solyndra, the American solar panel manufacturer, filed for bankruptcy, slashing more than 1,000 jobs and burning through $535 million in federal loans it received back in 2009 from the Department of Energy. Solyndra’s bankruptcy solidified the position of reluctant politicos, who were already certain that government-backed environmental projects are more likely to result in economic burden on taxpayers rather than fruitful results. In an email made public last week, Lawrence Summers, the White House economic adviser at the time the Solyndra loan was made, called the government “a crappy VC” [venture capitalist].
It seems like the U.S. government always ends up as the losing party in the green game. On the one hand, if the government funds green companies and these companies go down in flames, so does lawmakers’ enthusiasm for further backing low-emission technologies. On the other hand, if it tries to stay neutral and lets the green economy in the country take its course as directed by capitalist market forces while free of compliance regulations, it makes the U.S. look like the colossal polluter, who gets away with being unconcerned and irresponsible about the environment.
So where is the happy medium? How can the U.S. further its green efforts while minimizing the risks and maximizing the benefits both for the struggling economy and the job market?
According to Lisa Margonelli, director of the Energy Policy Initiative at New America Foundation, “rather than financing big energy producers and concepts, the government should make many smaller loans to the consumers of these products to stimulate a market, while reducing our energy dependence.”
Her proposition that tax dollars be aimed at consumers rather than green energy companies resembles an initiative introduced by the UK government last year — the feed-in tariff system for renewable energy. Although the system doesn’t offer up-front loans for installations, it does provide an attractive payoff. The scheme is designed to buy back at a fixed price all excess electricity from solar PV panels for 25 years after their installation. The tax-free export tariff is currently set at 3.1 pence per kWh. There are also generation tariffs, which differ among installation types and are paid based on the total output of the PV solar panel installations. Unlike the feed-in-tariff, the generation tariff covers both excess electricity and electricity already used by the consumer.
“American [energy] manufacturers need to change their sights from competing for government loans to competing for consumers’ dollars,” Margonelli further advises. To achieve this, the U.S. can certainly look to another UK renewable energy program – the Renewables Obligation Certificates (ROCs) scheme. ROCs are similar to the Renewable Energy Certificates (RECs) in the U.S. They are issued by the government’s Office of Gas and Electricity Markets to accredited renewable energy generators. Under the Renewables Obligation program, electricity suppliers are required to produce a certain percentage of their energy from renewable sources. Suppliers, who fail to generate a sufficient amount of ROCs to cover their obligatory rates, make a payment into a buy-out fund for each megawatt of shortfall.
Some U.S. states do have REC trade programs in place. RECs are also sometimes treated as carbon credits, although there is a significant difference between the two concepts. Carbon credits represent GHG emission reductions, while RECs represent the energy produced from renewable sources. Some might argue that CER production contributes to carbon emission reductions by displacing an equivalent amount of conventional carbon-producing electricity from the local grid, thus, performing the function of carbon credits. There is still controversy, however, about whether CERs truly lead to “additional” emission reductions, which is a distinctive characteristic of carbon credits.
The implementation of an obligatory REC system in the U.S. can benefit the country’s renewable energy sector by rewarding electricity providers for increased production of renewable energy. RECs can also help electricity companies attract additional consumer dollars. They can offer RECs for sale to consumers as a way of reducing their carbon footprint, although not in the same way as carbon credits. It’s a win-win approach where consumers achieve carbon neutrality while energy companies generate revenue to expand their renewable energy production.
Examining functional government policies successfully implemented in other countries is key for finding a balanced government involvement in the U.S. It will not only bring in environmental and economic benefits to the nation, but can also protect against spending millions of taxpayer money in all the wrong places.