Today we continue with the third part of our “A Change in Climate” series, examining potential Obama administration goals and policy solutions to address American greenhouse gas emissions. Today we examine one of the broad pathways that a policy would likely take: green investment and economic stimulus.

­­­————

As we have outlined in this series, the current conditions in the credit markets and the global economy necessitate a massive stimulus package; with priorities directed towards the economy, a emissions reduction program will likely be delayed. Any economic stimulus, however, can have a definite effect on the nation’s climate change policy, by investing in the development of clean technologies, energy efficiency and renewable energy. During his campaign, Barack Obama consistently supported a series of programs centered around clean energy investment, which he said would allow American workers to “build the high-demand technologies of the future.”

President-elect Obama has continued to advocate for this program after his election; in one of his weekly post-election radio addresses, the President-elect stated that he had “directed [his] economic team to come up with an Economic Recovery Plan that will mean 2.5 million more jobs by January of 2011,” a plan involving, “building wind farms and solar panels; fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.”

Investment in clean technology can potentially be an avenue for significant job growth. According to a report from the Center for American Progress, an investment of $1 million in clean tech creates 17 new jobs, as compared to only 4.5 new for jobs for a similar investment in oil. Even that investment is made budget neutral—by cutting spending in the oil industry—the economy still gains 12.5 jobs. In that same report, researchers predict that $100 billion in new spending could spawn as many as 2 million new jobs. That investment would be significantly smaller than the likely size of the new stimulus, which the President-elect has signaled could reach $775 billion.

Investment will likely focus on a couple of areas: energy efficient buildings, the electricity transmission grid, renewable energy and mass transit. Energy efficiency in buildings represents the “low hanging fruit” of green investment. Buildings account for 30-40% of global energy usage, building retrofits (or construction of new energy efficient buildings) are labor-intensive, and these improvements largely pay for themselves through lowered utility bills after a relatively short period of time. While this sector represents the most easily accomplished energy savings, government investment can help to overcome the challenges associated with the up-front costs of these projects.

While we discuss the revamping of the nation’s electricity transmission infrastructure in more depth later in this series, from a green stimulus perspective, expanding and modernizing the grid presents a major opportunity. As the grid exists now, there are significant efficiency losses and barriers to the addition of clean power to the nation’s electricity supply. Because areas of high renewable potential are often far from population centers, the grid would need to be expanded to make those areas viable for energy production. Even where the grid reaches those areas, bottlenecks-where the capacity for electricity transmission is exceeded by the current or potential supply-make “plug-in” of renewable generation sources difficult. Modernizing the grid will not only provide crucial benefits to the renewable energy industry but also to the economy as a whole—one government estimate predicts 1 million new jobs created in construction before 2030.

Public transportation is another area where government investment could have both advance green and broader economic interests. In late September, the House of Representatives passed the Job Creation and Unemployment Relief Act of 2008, which set aside $30 billion for transportation and infrastructure investment. While that bill has not passed the Senate, it serves as a guidepost for the importance of transportation investment in the next round of stimulus bills, which President-elect Obama has indicated he will sign on the day of his inauguration. Even an investment of $30 billion would have a significant job creation effect; the Transportation and Infrastructure Committee estimates an investment of that size would create or sustain 834,000 jobs. While not all of that money would go into public transportation—significant amounts would be directed towards road and bridge maintenance—there would still be opportunities for significant investment. Because stimulus money needs to be spent quickly to provide a needed effect, most infrastructure money would be funneled towards “ready to go” projects: projects that have completed environmental review and other pre-construction phases and just require injections of capital. The American Public Transportation Association, in a report released in October, identified over 550 such projects, totaling $8.03 billion in potential investment.

If the President-elect moves with the speed that his public statements have suggested, a stimulus program including investments such as these could be a reality by early February, 2009. This program will have a significant effect on all companies operating within the alternative energy/clean technology space, as direct investment, along with tax credits and other incentivizing policies, change the ways that companies find financing, and what they are capable of accomplishing.

For further information about this topic, please contact Akin Gump.