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8/14/2019 Global Climate Change Regulation Policy Developments: July 2008-February 2009
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Table of Contents
2 Global Climate Change Regulation
Organization of this paper
In the first section of this paper, we discuss policy positions in the new US Administration and Congress, as well as
economic stimulus plans around the world, through to the passage of the American Recovery and Reinvestment Act of2009 in February, 2009.
Subsequent sections of the paper are organized thematically, rather than regionally, based on the framework we developed
in Investing in Climate Change 2009: Necessity and Opportunity in Turbulent Times(October, 2008). See exhibit 1.
EX 1:There are three broad sets of policy options available
In the second section of this paper, we look at traditional regulatory instruments such as mandated standards and public
education. In the third section, we examine developments in carbon pricing and markets. And in the fourth section, we look
at changes in innovation policy, including knowledge management and adjustment assistance. Within each section, we
organize policy developments regionally to facilitate understanding of how policy measures overlap and work in concert with
each other.
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Table of Contents
3 Global Climate Change Regulation
Editorial and ExecutiveSummary
5 Section 2: Carbon Pricing 45
UNFCC 45
United States 47
European Union 51
Special Focus: New USAdministration and GlobalEconomic Stimulus
11
China 54
Japan 54
United States 11 Thailand 55
European Union 22 New Zealand 55
Norway 24 Australia 56
China 24 Turkey 57
Japan 25 South Africa 57
South Korea 25 Guyana and Norway 57
Israel 25Australia 26
Canada 26 Section 3: Innovation Policy 58
United States 58
European Union 61Section 1: TraditionalRegulation
27China 63
India 64
United States 27
Japan 64
European Union 34 Taiwan 65
China 40 Thailand 65
India 40 New Zealand 65
Taiwan 41 Australia 65New Zealand 41 South Africa 66
Australia 42 Mexico 66
Brazil 42
Canada 43
Russia 43 Bibliography 67South Africa 43
Mexico 44
Ukraine 44
South Korea 44
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Climate Change Investment Research
4 Global Climate Change Regulation
Mark Fulton
Managing Director
Global Head of Climate Change Investment Research: New [email protected]
+1(212) 454-7881
Bruce M. Kahn, PhD
Director
Senior Investment Analyst: New York
+1(212) 454-3017
Mark Dominik
Vice President
Senior Research Analyst: London
+44(20) 754-78943
Emily Soong
Associate
New York
+1(212) 454-9227
Lucy Cotter
Research Analyst
London
+44(20) 754-75822
Jake Baker
Research Analyst
+1(212) 454-2675
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This is the first of a semi-annual briefing on global climate change policy developments. Policy remains a key driver for
investment returns in both public and private markets and across asset classes including:
Public equities, where pricing the carbon externality via cap-and-trade or carbon taxes increases the valuation of
clean businesses. Other regulatory policies such as feed-in tariffs, tax credits and mandatory standards create
demand for green products and services; Private equity and venture capital, where R&D incentives and subsidies support innovation and the scaling-up of
cutting-edge clean technologies;
Infrastructure, where feed-in tariffs and tax credits make climate change-related projects economic prompting
growth while mandatory standards (e.g. Renewable Portfolio Standards) require the scale-up of green
industries.
As our special focus in this issue, we look at the new US Administrations potential policies and the development of green
economic stimulus packages as called for in our Economic Stimulus: The Case for Green Infrastructure, Energy Security
and Green Jobs(November, 2008). We discuss this in the first section of the paper.
A detailed review of new regulation put in place in many countries around the world since the middle of last year reveals a
clear and encouraging trend: Governments have been stepping up the pace of legislation designed to help and support
green industries. The burst of activity on this front by the new Obama Administration in the US is particularly visible and
will provide welcome leadership and focus to similar efforts across the globe. Since his election in November, President
Barack Obama has repeatedly underscored his strong commitment to climate change: In his Inaugural Address and other
speeches, in the $106 billion dedicated to green programs in his economic stimulus plan1, and in the experience of the
people he has appointed to key posts such as Secretary of Energy and EPA Administrator, President Obama has proven
beyond a doubt his commitment to the cause. At the same time, there has been a general ramping up of measures to
counter climate change in countries as diverse as Greece, Britain, New Zealand, and China.
We believe this trend towards greater regulation will provide crucial support to climate change industries during the current
global economic downturn. Our research shows that, contrary to the widespread concern that recession would force
governments to abandon initiatives on this front, governments have in fact been increasing their efforts. Coupled with
increased government spending on key climate change initiatives as part of economic stimulus packages in countries such
as the US and the UK, this should provide a boost to green industries in contrast to other sectors of the global economy
affected by recession.
This study discusses and analyzes over 250 climate change-related policy developments from around the world. See
exhibit 2.
Approximately $85 billion of spending, of which $18 billion is devoted to mass transit, plus $21 billion of tax credits.
Mark Fulton
Global Head of Climate Change Investment Research
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EX 2:Major policy developments since July, 2008
Policy type Geography Total
US EU China ROW
TraditionalRegulation
31 51 10 32 124
CarbonPricing
2 36 2 17 57
InnovationPolicy
21 19 12 17 69
Total 54 106 24 66 250
Source: DeAM analysis, 2009.
This paper also contextualizes the recent US economic stimulus plan within the broader context of green fiscal stimuli. We
define climate-related stimuli as all those fiscal stimulus measures falling in the climate change/environment sector of the
diagram we initially developed in Economic Stimulus: The Case for Green Infrastructure, Energy Security and Green
Jobs(November, 2008). See exhibit 3.
EX 3:Defining green fiscal stimuli
Energy Security
Infrastructure
stimulus
Climate Change/
Environment
Energy EfficientBuildings
Electric Power Grid
Renewable Power
Public transport
Energy
Efficient
Products (e.g.
fuel efficientautos)
Hospital
Bridges
Domestic fossil fuels
Carbon Pricing
Pipelines
Water Roads
Schools
CCS
Energy Security
Infrastructure
stimulus
Climate Change/
Environment
Energy EfficientBuildings
Electric Power Grid
Renewable Power
Public transport
Energy
Efficient
Products (e.g.
fuel efficientautos)
Hospital
Bridges
Domestic fossil fuels
Carbon Pricing
Pipelines
Water Roads
Schools
CCS
Source: DeAM analysis, 2008.
By this definition, the green fiscal stimuli being undertaken globally total more than $200 billion. See exhibit 4.
EX 4:Green measures in global economic stimulus legislation2
Sector Geography
US ($bn) EU ($bn) ROW ($bn) Total ($bn) China ($bn)
EnergyEfficiency
16.4 17.2 20.1 53.7 0
Mass transit 17.7 13.6 3.1 34.4 0
Clean autos 3.3 18.9 4.2 26.4 0
Renewables 9.0 8.4 0.5 17.9 ~29 (power gen.)
Smart Grid 11 0.8 0 11.8 ~70 (total grid)
Water 13 0 17.8 30.8 ~2.9
Research 7.1 1.32 0 8.42 0
Env. Cleanup 7.1 0 0 7.1 ~1.8
Total spending 84.6 60.2 45.8 190.6 ~103.7
Tax credits 21.6 0 0 21.6 0
Total 106.2 60.2 45.8 212.2 ~103.7
Source: DeAM analysis, 2009.
Where sources reported stimulus figures in dollars, those figures were used. Where other currencies were reported, an average conversion rate of January 1, 2009-February 16, 2009 was used. 1=$1.32, 1=$1.45, AUD $1=$0.67, CAN $1=$0.82. Where spending is unclear, attempts have been made to categorize it appropriately.
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We have separated China out from the total, because it remains difficult to classify exactly how much of the Chinese
economic stimulus plan is devoted to green measures, based on the information currently available.
However, as our research demonstrates, the raft of new climate change policy initiatives around the world is beingdeveloped and implemented largely on a country-by-country basis (although much is being done in Europe at an EU level).
Varying initiatives are being launched in different geographies without much international co-ordination. In our view, this
makes an international agreement on global climate policy and carbon markets particularly urgent, with the Copenhagen
talks offering to provide coherence and direction on a worldwide scale.
Across geographies, a set of major themes for investors has emerged from regulatory developments since July, 2008.
Many of these key regulatory developments have either bolstered mandated markets or have provided direct spending
measures for emerging green products and services. As a result, many of the 1,400+ companies we monitor in our listed
equity climate change universe, as well as emerging private companies, will benefit. The size of these developments should
also encourage more and more entrants. See exhibit 5.
EX 5:Major investing themes that have emerged since July, 2008
Investing theme Reinforcing policies
In November, 2008, France pledged to multiply by 400 the amount of solar power used in the
country over the next 12 years as part of its plan to double the share of renewables
(excluding nuclear) in its energy mix to 23% by 2020. The plan is supported by some of the
most generous feed-in tariffs in the world, rising to 0.55/kWh for building-integrated systems.
The UK Energy Bill mandates the creation of a feed-in tariff by November, 2009, which
should prompt the growth of small-scale renewable installations.
The spread of Renewable Portfolio Standards to 34 US states if accompanied by
appropriate enforcement and penalties for non-compliance has the potential to lead to a
significant scale-up in US renewable generation capacity.
Renewable energy is receivingmore support in France, the UKand states in the US, aimed at themassive scale-up of alternativeenergy generation
This is a key driver for thedeployment of renewable energyand is an economic force inelectricity markets.
Bills have been introduced into the US House and Senate that would create a Renewable
Energy Standard (RES) requiring utilities to generate either 20 percent of their power from
renewable sources by 2021 (Senate) or 25 percent by 2025 (House).
The Production and Investment Tax Credits (PTC and ITC) for renewable energy sources
were passed on October 3, 2008 in the $700 billion Emergency Economic Stabilization Act of
2008 under President Bush. The bill extended tax credits (PTC) for wind energy and refined
coal facilities by one year (to 2009), and two years (to 2010) for biomass, geothermal, small
irrigation, hydropower, landfill gas, and trash combustion facilities. The bill also extended tax
credits (ITC) for solar energy by eight years (to 2016) in residential and commercial projects.
US tax credits (PTC and ITC) andcash refund provide significantadditional support for wind andsolar
The action taken by the USCongress to extend tax creditsand to allow these to beconverted to cash refundsprovides valuable support in thisperiod of financial stress for thesolar and wind sector in the US.
We believe this could have animmediate effect on the sector.
As part of the American Recovery and Reinvestment Act of 2009, Congress passed a
number of provisions to help re-stimulate renewable energy financing, including allowing
grant money to be claimed in lieu of tax credits. The PTC has also been extended for another
three years (to 2012 for wind and refined coal facilities and to 2013 for other renewables) anddevelopers are also allowed to claim the ITC in lieu of the PTC.
In October, 2008, Gainesville (Florida) Regional Utilities announced support for a solar feed-
in tariff that would pay PV-system owners $0.32/kWh for all electricity fed into the grid.
In California, presiding members of the California Energy Commission recommended that the
state move towards feed-in tariffs for renewables
In Washington, legislation calling for feed-in tariffs for all renewable energy technologies,
modeled on Germanys Renewable Energy Sources Act, has been proposed.
Exploring state-level feed-in tariffsin the US could lead to significantscale-up of renewables in themedium-to-long term.
Solar power stands to benefitparticularly from these incentives.
In Oregon, Governor Ted Kulongoski has proposed a pilot feed-in tariff program for solar
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energy.
In Hawaii, Governor Linda Lingle has signed an agreement with the Department of Business,
Economic Development and Tourism, the Division of Consumer Advocacy of the Department
of Consumer Affairs, and the Hawaiian Electric Company to implement a feed-in tariff policy
by July, 2009.
In Indiana, the Advanced Renewable Energy Tariffs Act received its first reading on January
16, 2009.
In Michigan, Assemblywoman Kathleen Law has proposed a differentiated feed-in tariff for
solar, wind, hydro, biogas and geothermal, based on Germanys program.
In Minnesota, discussions are ongoing about proposing a feed-in tariff.
Californias Renewable Portfolio Standard was raised to 33% by 2020 from the current target
of 20% by 2010, prompting increased, long-term demand for the development and
deployment of renewable power across the state (enacted under AB 32).
California remains at the leadingedge of the climate change space
Good for companies penetratingthis market.
Encourages innovation. Is a long-term growth story.
The California Building Standards Commission ratified the California Green Building
Standards Code for all new commercial and residential construction projects, which should
prompt demand for energy efficient building materials, water efficiency systems, and eco-
friendly flooring, carpeting, paint, coatings, thermal insulation and acoustical wall and ceiling
panels.
In October, 2008 EU energy ministers invited the European Commission to draft regulations
to phase out the sale of all incandescent and poor performing light bulbs by 2010 within the
Eco-Design Directive. This draft policy echoes similar legislation put forward in the US in
December, 2007, which calls for the phase out of incandescent and inefficient light bulbs in
the US by 2014. The replacement of all incandescent and poor performing light bulbs with
advanced light bulbs should prompt significant growth in advanced lighting.
Chinas White Paper on Climate Change announced an initiative to distribute more than 150
million energy-saving light bulbs, creating a large, state-sponsored, baseline demand for
advanced lighting.
Advanced lighting is a growingsector with a massive end marketworldwide
Significant opportunity due tomandates and state-sponsoredadvanced lighting initiatives.
Long-term growth story formanufacturers, with significantmid-term opportunity fortechnology developers.
New Zealands government announced that it will ban incandescent light bulbs starting at the
end of 2009, further boosting demand for advanced lighting.
$2 billion has been allocated as part of the US economic stimulus plan for the Advanced
Battery Loan Guarantee and Grants Program. The intent of the program is to establish
Americas leadership in transforming the way automobiles are powered, and may lead to a
step-change in the size of the advanced power storage and clean automobile sectors.
$2.5 billion has been allocated as part of the US economic stimulus plan to accelerate
research and development for advanced batteries necessary for the conversion to electric
vehicles and the storage of energy to increase the effectiveness of renewable energy
projects.
$300 million has been allocated as part of the US economic stimulus plan to purchase new
energy-efficient vehicles for the federal fleet.
The European Investment Bank will offer 4 billion in low-interest loans to promote the safety
and environmental performance of cars, as well as 1 billion to support research in green
vehicles, including electric cars, and improved traffic management. These investments will
lead to the more rapid scaling of innovative next-generation automobiles.
Germany is providing a 2,500 credit for the purchase of new vehicles, creating demand for
more efficient autos.
Large flows of governmentinvestment in next-generationautos will accelerate investmentopportunities in supportingtechnologies such as batteries.
Long-term growth story, withimmediate upside for best-in-class vehicles.
France is providing a 1,000 credit for the purchase of new low-emission vehicles, creating
demand for best-in-class cars.
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As part of the US economic stimulus plan, $6.7 billion has been allocated for energy
efficiency projects in federal buildings. This funding which will be rapidly deployed would
boost demand for efficient products in a market where conventional building products are
facing steep declines in demand.
As part of the US economic stimulus plan, $6.2 billion has been allocated to fund
weatherizing low-income homes, boosting demand for products such as insulation and multi-
pane windows.
As part of the US economic stimulus package, a tax credit of $300 will be provided for any
item of energy-efficient building property, prompting consumer demand for efficient products
and appliances.
The drive to increase energyefficiency in buildings will createpromising new markets for
innovative products, especially inthe US and EU
Weatherization, includinginsulation products and efficientwindows, is likely to faceincreased demand.
Low-energy and standby-saverappliances should benefit from atrend of minimizing buildingenergy consumption.
Substantial mid-termopportunities prompted by USand EU government programs,with long-term growth supportedby the green building premium.
In the EU stimulus package, 10.6 billion has been allocated to other green technologies,
such as energy efficiency in buildings, boosting demand for innovative materials and
appliances.
As part of the US economic stimulus plan, $11 billion is being invested in the Smart GridInvestment Program, allowing for demonstration and deployment of innovative grid
technologies.
A portion of a 5 billion EU stimulus package will be spent on grid upgrades, increasing
penetration of advanced grid technologies.
There is potential for a smart gridrevolution due to investments inadvanced power grids in China,the US and EU
Represents significant long-termopportunity.
China has earmarked $70 billion for grid upgrades, pointing to a massive end market for grid
infrastructure and technology.
$2 billion has been allocated to the Advanced Battery Loan Guarantee and Grants Program
as part of the US economic stimulus plan.
Energy storage and advancedbatteries are receiving substantialgovernment support
Significant potential for disruptivetechnologies.
$2.5 billion allocated to energy efficiency and renewable energy research, development and
deployment may also be used to accelerate research and development for advanced
batteries.
The EU Commission has adopted plans to expand the scope of existing eco design and
labeling requirements to all products with substantial energy consumption. Industry is being
urged to develop benchmarks and voluntary standards for eco-labeling of affected products.
Eco-labeling is an emerging trend,having the potential to shiftconsumer preferences to lowercarbon products, particularly inthe face of carbon prices
Potentially a medium-term growthstory. In California, eco-labeling of all new cars was required as of January 1, 2009.
Water treatment and efficiency hasthe potential to grow to largescale, prompted by measuressuch as the South Koreanstimulus package
Significant long-term growthpotential, with short-term upsidefrom stimulus measures.
$17.8 billion has been allocated to waste, water treatment and pollution control projects in the
South Korean economic stimulus plan.
Source: DeAM analysis, 2009.
Going forward, the major challenge facing investors in climate change will be the state of the debt markets. This has the
potential to constrain the mass scale-up of proven existing technologies. We continue to believe that governments should
and will look at expanding and developing loan guarantee programs, such as US Department of Energys Loan Guarantee
Program and the Green National Infrastructure Bank we proposed in November,3
as a means of addressing issues in the
current debt markets.
Economic Stimulus: The Case for Green Infrastructure, Energy Security and Green Jobs, November, 2008.
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Critical developments to watch for in 2009 The year of expanding carbon price architecture.
In our view, 2009 is a critical year for climate change regulation. The new Administration and Congress in the US, and the
UNFCCC negotiations in Copenhagen, have the potential to be truly transformational. As policymakers shape the agendaover the next six months, we will be focusing on the potential for:
1. Expansion of carbon pricing, We continue to see the establishment of transparent carbon prices as the key
long-run regulatory development to encourage private investment flows. This has been announced by leaders in
both the US House of Representatives and Senate.
2. The acceleration of the UNFCCC negotiating process, as delegations aim to reach a robust global deal to limit
emissions and lay the foundation for carbon pricing by the time they meet in Copenhagen in December, 2009.
3. Further support for the scale-up of renewables, including initiatives to accelerate planning and permitting
processes such as the Infrastructure Commission in the UK.
4. The development of green measures as part of Chinas 12th
5-year plan, including a potential focus on
energy efficiency.
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United States
Barack Obama elected as 44th
President
"To finally spark the creation of a clean energy economy, we will double the production ofalternative energy in the next three years. In the process, we will put Americans to work in new jobsthat pay well and cant be outsourced jobs building solar panels and wind turbines; constructingfuel-efficient cars and buildings; and developing the new energy technologies that will lead to evenmore jobs, more savings, and a cleaner, safer planet in the bargain,"US President Barack Obama, George Mason University in Virginia, January 8, 2009.
With old friends and former foes, we will work tirelessly to lessen the nuclear threat, and roll backthe specter of a warming planet."US President Barack Obama, Inaugural Address, January 20, 2009.
On November 4th, 2008, Senator Barack Obama was elected President of the United States. In his policy platform as a
candidate, Obama articulated a series of energy and climate policies. See exhibit 6.
EX 6:Summary of key Obama patform clean energy policies
Policy type Policy Status
$7,000 tax credit for purchasing advanced vehicles.Implemented(expanded to$7,500)
Investment of $50 billion in car manufacturing facilities to increase fuel economystandards.
Begun (inmodified form)
10-year, $150 billion green stimulus plan, that would invest in a clean energyeconomy and create 5 million jobs.
Begun (inmodified form)
Creating a $25 billion Jobs and Growth Fund, which would invest in energy-efficientschool and infrastructure repairs.
Begun (inmodified form)
Creating a $60 billion National Infrastructure Reinvestment Bank. Not begun
Expanding federal grant programs to help states and localities build more efficientpublic buildings.
Begun (inmodified form)
Creating an Advanced Manufacturing Fund to identify and invest in the mostcompelling advanced manufacturing strategies.
Not begun
Funding
Doubling funding for the Manufacturing Extension Partnership to improve efficiencyand implement new technology.
Not begun
Department of Energy private partnerships to develop five commercial-scale cleancoal plants using carbon capture and storage.
Implemented(in modifiedform)
Proposed federal investment program to nurture clean technology manufacturing.Implemented(in modifiedform)
Proposal to double federal scientific research funding. Begun
Proposal to make the R&D tax credit permanent. Not begun
Investing in producing green technologies in Americas manufacturing centers. Begun
Otherinnovationpolicy
Creating a national network of public-private business incubators. Not begun
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Increasing funding for workforce training programs, and including greentechnologies training in these initiatives.
Begun
Target to have 1 million plug-in hybrids on the road by 2015. Begun
Low-carbon fuel standard that targets reducing carbon in fuels by 5% by 2015 and10% by 2020.
Not begun
Target to produce 10% of electricity from renewable sources by 2012 and 25% by2025.
Begun (inmodified form)
A program to reduce electricity demand 15% from projected levels by 2020 throughdeploying energy efficiency
Begun (inmodified form)
Target to use 60 billion gallons of advanced biofuels by 2030. Not begun4
Weatherizing at least 1 million low-income homes every year for the next decade. Begun
Mandates andstandards
Establishing a goal of making all new buildings carbon neutral by 2030. Not begun
Source: DeAM analysis, 2009.
Since Obamas election, discussions over the proposed policy initiatives have have begun to take shape. Renewableenergy industry leaders are hopeful that the new administration will prioritize alternative energy sources: President-elect
Obama is the first national presidential candidate who has explicitly campaigned for renewable technologies and green
jobs said Scott Sklar, President of the Stella Group, during the presidential campaign.
Key energy and environmental officials appointed
On December 15th, President-elect Obama announced his choices for critical energy and the environment positions:
Carol Browner, President Clintons US EPA administrator, has been chosen to fill a newly created position,
Assistant to the President for Energy and Climate Change, also known as the Energy Czar. The new post is
expected to help coordinate the various federal agencies that have a hand in energy policy.
Harvard Law Professor Jody Freeman will serve as an advisor to Browner.
Heather Zichal, an Obama campaign and transition advisor, has been appointed as Deputy Assistant to the
President for Energy and Climate Change.
Steven Chu, a Nobel Prize-winning physicist from the Lawrence Berkeley National Laboratory, will serve as
Secretary of Energy.
Los Angeles Deputy Mayor Nancy Sutley has been selected as the chairwoman of the President's Council on
Environmental Quality.
Lisa Jackson, the former chief of the New Jersey Department of Environmental Protection, will head the US EPA.
Georgetown Professor Lisa Heinzerling will serve as Senior Policy Advisor on Climate Change to Jackson.
Heinzerling has been a critic of cost benefit analysis of regulation in her academic work.
Robert Susman, Deputy EPA Administrator under the Clinton Administration, will be serving as a Senior Policy
Counsel to Jackson on climate and air pollution issues. Colorado Senator Ken Salazar, who has been an outspoken advocate of renewable energy sources, will serve as
Interior Secretary.
Iowa Governor Tom Vilsack, a strong supporter of ethanol, will serve as Agriculture Secretary.
David McIntosh, former counsel and legislative assistant for energy and environment to Sen. Joseph Lieberman (I-
CT) will serve as Senior Counsel in the EPA Office of Congressional and Intergovernmental Relations, focusing on
climate change.
No significant changes from previous policy have yet been implemented.
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Shaun Donovan, a former commissioner of New York Citys Department of Housing Preservation and
Development and a champion of energy efficient affordable housing, will serve as Secretary of Housing and Urban
Development.
Ron Sims, a former county executive of King County, Washington, who favors public transportation and biofuels,has been appointed Deputy Secretary at the Department of Housing and Urban Development.
In addition, two of the worlds most respected climate scientists, John Holdren and Jane Lubchenco, were appointed
respectively as scientific advisor and head of the National Oceanic and Atmospheric Administration. Lubchenco will oversee
a $4 billion agency whose responsibilities include a lare portion of the federal governments climate change research.
It was announced on November 20th, 2008, that Rep. Henry Waxman (D-California) would become the next Chairman of
the House Energy and Commerce Committee. The announcement came after a ballot vote of the House Democratic
Caucus, which favored Waxman to former Chairman John Dingell (D-Michigan) in a vote of 137-122.
On January 8th, 2009, the House Energy and Commerce Committee announced that Rep. Ed Markey (D-MA) will replace
Rep. Rick Boucher as chairman of the Subcommittee on Energy and Air Quality. Boucher will fill Markeys current position
as chairman of the Telecommunications and the Internet Subcommittee. Markey is also the chair of the Select Committee
on Global Warming.
Upcoming legislation
Obama reconfirmed his commitment to clean energy in his address to the Governors Global Climate Summit hosted by
Governor ArnoldSchwarzenegger on November 18th
, 2008. Obama stated the following: My presidency will mark a new
chapter in Americas leadership on climate change that will strengthen our security and create millions of new jobs in the
process. That will start with a federal cap and trade system. We will establish strong annual targets that set us on a course
to reduce emissions to their 1990 levels by 2020 and reduce them an additional 80% by 2050. Further, we will invest $15
billion each year to catalyze private sector efforts to build a clean energy future. We will invest in solar power, wind power,
and next generation biofuels. We will tap nuclear power, while making sure its safe. And we will develop clean coal
technologies.
There are a number of clean energy items on agenda for 2009 in order to implement the vision Obama has articulated.
Creating a Renewable Energy Standard, passing cap-and-trade legislation as well as signing up to the post-Kyoto Protocol
agreement are some of the other top clean energy goals for the new Administration.
On January 15th, 2009, Waxman announced a goal to move a climate change and energy bill through his committee by
Memorial Day, 2009 (May 25th): Our committee will be acting quickly and decisively to reduce global warming and end our
dependence on foreign oil. US industries want to invest in a clean energy future, but uncertainties about whether, when and
how greenhouse gas emissions will be reduced is deterring these vital investments, Waxman said. Our environment and
our economy depend on congressional action to confront the threat of climate change and secure our energyindependence.
On February 3rd
, Sen. Barbara Boxer (D-CA), Chairman of the US Senate Environment and Public Works Committee,
released a set of principles for the development of climate change legislation that are expected to guide policy formation
going forward. The principles state that legislation should:
1. Reduce emissions to levels guided by science to avoid dangerous global warming.
2. Set short- and long-term emissions targets that are certain and enforceable, with periodic review of the climate
science and adjustments to targets and policies as necessary to meet them.
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3. Ensure that state and local entities continue pioneering efforts to address global warming.
4. Establish a transparent and accountable market-based system that efficiently reduces carbon emissions.
5. Use revenues from the carbon market to:
Keep consumers whole as our nation transitions to clean energy; Invest in clean energy technologies and energy efficiency measures;
Assist states, localities and tribes in addressing and adapting to global warming impacts;
Assist workers, businesses and communities, including manufacturing states, in the transition to a clean
energy economy;
Support efforts to conserve wildlife and natural systems threatened by global warming; and
Work with the international community, including faith leaders, to provide support to developing nations in
responding and adapting to global warming.
6. Ensure a level global playing field, by providing incentives for emission reductions and effective deterrents so that
countries contribute their fair share to the international effort to combat global warming.
In addition to other benefits, these actions will help avoid the threats to international stability and national security posed by
global warming.
Sen. Jeff Bingaman (D-NM) has drafted a proposal for a Renewable Energy Standard that would require utilities to generate
20 percent of their power from renewable sources by 2021. A hearing was held on this legislation on February 10th, 2009.
After the hearing, Bingaman said that he believed he had enough votes in Congress to pass a federal Renewable Energy
Standard into law.
During Bingamans hearing, former Assistant Secretary of Energy Efficiency and Renewable Energy Andy Karsner stated in
his testimony that it is likely that a clean energy bank would be formed as a new Energy Title is authored this year.
On Febraury 4th
, 2009, Representative Edward Markey (D-MA), who chairs the House Select Committee on Energy
Independence and Global Warming, introduced a federal requirement that large utilities rely on renewable sources for 25
percent of their electricity by 2025. There would be a series of interim targets, beginning with a 6 percent mandate in 2012.
On February 20th, Senate Majority Leader Harry Reid announced that he is planning to push for Senate action on global
warming legislation by the end of summer 2009. In an interview with the Associated Press, Reid reconfirmed his previously
announced commitment to tackle energy legislation in the next few weeks "and then later this year, hopefully late this
summer, do the global warming part of it."
Taken together, the legislative agenda on the table for the current Congress has the potential to lead to a significant scale-
up of green industries in the US.
American Recovery and Reinvestment Act of 2009
On February 17th
, 2009, President Obama signed a $787 billion economic stimulus package into law. With approximately
$504 billion of total spending measures included, the bill comprises approximately $84.6 billion worth of green spending,
including appropriations for mass transit capital spending programs.
The bulk of green spending is aimed at increasing research into renewable energy and climate change, uptake of energy
efficient products and services, and deployment of renewable energy technologies. In addition, renewable energy tax relief
is a key component of the $283 billion of the economic stimulus package that is geared towards tax provisions.
Approximately $21.6 billion of tax incentives for renewable energy over the next 10 years is included, including the
manufacturing investment tax credit. Solar, wind and geothermal will be key beneficiaries of the extended tax credits,
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including the three-year extension of the Production Tax Credit. These technologies will also be eligible for grants of up to
30% of the cost of building a new renewable energy facility in lieu of federal tax credits (refundability).
All together, the bill aims to create and save 3.5 million jobs in the US, many of which will be in the clean energy sector.Congress estimates that the investment made in smart grid, energy efficiency and advanced batter technologies will create
nearly 500,000 jobs. Another 375,000 jobs will be created through investment in clean water, flood control and
environmental restoration.
The following section analyzes the following: (1) clean energy and climate change-related provisions included in the bill, and
(2) renewable energy-related tax provisions included in the bill.
The bill targets a number of key clean energy and energy efficiency areas, focusing both on research and the transition
towards a low carbon future. The majority of green funding falls under the following categories:
Clean, Efficient, American Energy: To put people back to work today and reduce our dependence on foreign oil
tomorrow, the bill strengthens efforts directed at doubling renewable energy production and renovates public
buildings to make them more energy efficient. See exhibit 7.
Transform our Economy with Science and Technology: Our nation needs to put scientists to work looking for
the next great discovery, creating jobs in cutting-edge technologies, and make smart investments that will help
businesses in every community succeed in a global economy. See exhibit 8.
Modernize Roads, Bridges, Transit and Waterways: To build a 21st
century economy, contractors must be
engaged across the nation to create jobs rebuilding our crumbling roads, and bridges, modernize public buildings,
and put people to work cleaning our air, water and land. See exhibit 9.
Renewable energy-related tax provisions are summarized in exhibit 10.
EX 7:Summary of clean, efficient, American energy Green focused provisions of the American Recovery and
Reinvestment Act of 2009
Green focused provision Allocated funding Description
This funding will provide for research and development, pilo
projects, and federal matching funds for the Smart Gri
Investment Program to meet the goal of a modern electric grid
enhance security and reliability of energy infrastructure, and
facilitate recovery from disruptions to the energy supply.
The Smart Grid Investment Program includes a regiona
demonstration initiative. The program is intended to quantif
costs and benefits, verify technology viability, and validate new
business models at a scale that can then be replicatethroughout the country. Also included is a matching gran
program which would provide funding for qualifying smart gri
investments.
Power Grid Investment $11 billion
Energy consultants KEMA estimate that an investment by th
Federal government of $16 billion over four years would resu
in a private sector investment of $64 billion over the same
period, creating 280,000 new jobs. In the first year alone, a
estimated 150,000 projects could be initiated.
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$100 million of the funding allocated to the grid is for worke
training.
The Energy Efficiency & Conservation Block Grant Program
will assist states, local governments and Indian tribes iimplementing strategies to reduce fossil fuel emissions created
as a result of activities within the jurisdictions of the eligibl
entities and aims to reduce the total energy use. The U.S
Conference of Mayors has identified over 944 ready-to-go
energy infrastructure projects that could be started in cities in
just two calendar years.
States can use grants to address their energy priorities and to
adopt emerging renewable energy and energy efficienc
technologies.
Energy Efficiency and
Conservation Grants
$6.3 billion
Energy sustainability and efficiency grants and loans will b
made available to school districts, institutes of highe
education, local governments, and municipal utilities fo
projects that will make them more energy efficient.
Renewable Energy and
Transmission Loan
Guarantees
$6 billion This new loan program would provide loan guarantees fo
proven renewable and transmission technologies. The $
billion in appropriated funds is expected to support more than
$60 billion in loans for these projects. The temporary program
is designed to address the current economic conditions of th
nation for renewable and transmission projects and will allow
the subsidy cost of the loans to be made throug
appropriations. The authority to enter into new loa
agreements expires on September 30, 2011.
Weatherization assistanceprogram
$5 billion The Weatherization Assistance Program is designed to assislow-income families reduce their energy costs by sendin
funds to states to weatherize low-income homes. Thi
spending is expected to create job growth in low-incom
communities while energy cost savings will provide more
disposable income for other purposes.
GSA Federal Buildings $4.5 billion Focused on projects that will create the greatest impact o
energy efficiency and conservation for construction, repairs
and operations of Federal buildings. The General Service
Administration (GSA) would make project selections based o
its priority list. Much of this funding is expected to be awarded
within 120 days of enactment.
Fossil Energy Research $3.4 billion $1 billion will be provided for fossil energy research andevelopment programs, $800 million for the clean coal powe
initiative, $1.5 billion for carbon capture and energy efficienc
improvement projects, and the remainder of funding will be
used for research, training and program administration.
Energy Efficiency and
Renewable Energy Research,
Development and Deployment
$2.5 billion Funding for energy efficiency and renewable energy research
development, demonstration, and deployment activities t
foster energy independence, reduce carbon emissions, and cu
utility bills. Funds are awarded on a competitive basis t
universities, companies, and national laboratories.
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Advanced Battery
Manufacturing
$2 billion $2 billion for the Advanced Battery Loan Guarantee and Grant
Program, to support U.S. manufacturers of advanced vehicle
batteries and battery systems. The intent of the program is t
establish Americas leadership in transforming the waautomobiles are powered.
Training for Green Jobs $500 million Funding to prepare workers for careers in energy efficienc
and renewable energy fields.
Electric Transportation $400 million Funding for a new grant program to encourage electric vehicl
technologies.
Smart Appliances $300 million Funding to provide consumers with rebates for buying energ
efficient Energy Star products to replace old appliances, whic
will lower energy bills.
GSA Federal Fleet $300 million Funding to replace older vehicles owned by the federa
government with alternative fuel and plug-in automobiles tha
will save on fuel costs and reduce carbon emissions.
Alternative Buses and Trucks $300 million Funding to help state and local governments purchase efficien
alternative fuel vehicles to reduce fuel costs and carbo
emissions.
Department of Defense
Research
$300 million Funding for research into using renewable energy to powe
weapons systems and military bases.
Diesel Emissions Reductions $300 million Funding for grants and loans to state and local government
for projects that reduce diesel emissions, benefiting publi
health and reducing global warming. This include
technologies to retrofit emission exhaust systems on schoo
buses, replace engines and vehicles, and establish anti-idlin
programs. Last year EPA was able to fund only 27% of the
applications received.Energy Efficiency Housing
Retrofits
$250 million Funding will go towards a new program to upgrade Departmen
of Housing and Urban Development-sponsored low-incom
housing to increase energy efficiency, including new insulation
windows, and furnaces. Funds will be competitively awarded.
Source: Committee on Appropriations, Summary: American Recovery and Reinvestment Conference Agreement, February 13, 2009.
EX 8: Summary of science and technology Green focused provisions of the American Recovery and
Reinvestment Act of 2009
Green focused provision Allocated funding Description
National Science Foundation
Research and RelatedActivities
$2 billion Funding for expanding employment opportunities i
fundamental science and engineering to meet environmentachallenges and to improve global economic competitiveness.
National Oceanic and
Atmospheric Administration
$600 million Funding for construction and repair of facilities, ships an
equipment, to improve weather forecasting, support satellite
development and address critical gaps in climate modeling.
Department of Energy -
Advanced Research Project
Agency Energy
$400 million $400 million is allocated for the Advanced Research Projec
Agency Energy to support high-risk, high-payoff research t
accelerate the innovation cycle for both traditional an
alternative energy sources and energy efficiency.
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Within the funds provided, not less than $250 million will be
used to accelerate the development of the Tier 1 set of Earth
science/climate research missions recommended by the
National Academys decadal survey as being critically importanfor answering key Earth science/climate research questions.
Funds are also provided to restore the Total Solar Irradiance
Sensor to an NPOESS satellite, which measures solar radiatio
and is critical to understanding climate change; and to add
thermal infrared sensor to the Landsat Data Continuity Missio
necessary for water management (e.g., soil moisture and wate
use) particularly in the western states.
National Aeronautics and
Space Administration
Science Research
$400 million
It is estimated by NASA that these investments will support in
excess of 2,600 jobs.
Source: Committee on Appropriations, Summary: American Recovery and Reinvestment Conference Agreement, February 13, 2009.
EX 9: Summary of modernization of roads, bridges, transit and waterways Green focused provisions of the
American Recovery and Reinvestment Act of 2009
Green focused provision Allocated funding Description
Capital Assistance for High
Speed Rail Corridors and
Intercity Rail Services
$8 billion $8 billion has been made available to support the developmen
of intercity high speed rail service.
Federal Transit
Administration Transit Capital
Assistance
$6.9 billion $6.9 billion has been appropriated for distribution to urbanize
areas to be used for public transport infrastructur
improvements.
Fixed Guideway
Infrastructure NewConstruction
$750 million $750 million has been appropriated for Capital Investmen
Grants for new commuter rail or other light rail systems tincrease public use of mass transit and to speed project
already in construction. The Federal Transit Administration ha
$2.4 billion in pre-approved projects waiting for funding.Fixed Guideway
Infrastructure Investment
$750 million $750 million has been allocated to modernizing existing trans
systems, including renovations to stations, security systems
computers, equipment, structures, signals, an
communications. Funds will be distributed through the existing
formula.
Capital Grants to the National
Railroad Passenger
Corporation
$1.3 billion $1.3 billion has been appropriated to the National Railroa
Passenger Corporation, of which $450 million is to be used fo
capital security grants.
The Clean Water State Revolving Fund provides grants
distributed by statutory formulae, to states and territories to
capitalize their revolving loan funds which then finance publicl
owned wastewater infrastructure improvements.
Clean Water State Revolving
Fund
$4 billion
This funding is expected to create over 282,000 construction
related jobs.
Drinking Water State
Revolving Fund
$2 billion $2 billion has been appropriated for loans for drinking wate
infrastructure. The EPA estimates there is a $274 billion
funding gap. The National Governors Association reported tha
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there are $6 billion in ready-to-go projects, which could quickl
be funded and begun.
Rural Water and Waste
Disposal Program
$1.38 billion $1.38 billion has been allocated to the rural water and wast
grant and loan programs, which serve rural areas withpopulations of 10,000 or less and continue to experience high
demand for funding. These programs help communities fund
drinking water and wastewater treatment infrastructure, wit
priority given to smaller and poorer communities.
Corps of Engineers $4.6 billion $4.6 billion in funding has been allocated for environmenta
restoration, flood protection, hydropower, and navigatio
infrastructure critical to the economy. The Corps has
construction backlog of $61 billion.
Bureau of Reclamation $1 billion $1 billion in funding has been appropriated to provide clean
reliable drinking water to rural areas and to ensure adequate
water supply to western localities impacted by drought.
Superfund Hazardous Waste
Cleanup
$600 million $600 million in funding has been allocated to clean u
hazardous and toxic waste sites that threaten health and the
environment. The EPA has 1,255 sites on its National Priorit
List, selected based on a hazard ranking system. There are
many Superfund sites ready for construction, but not funded
due to budget shortfalls and over 600 sites with ongoin
construction that could be accelerated.Leaking Underground
Storage Tanks
$200 million $200 million of funding is provided for enforcement and cleanu
of petroleum leaks from underground storage tanks a
approximately 1,600 additional sites. There are an estimated
116,000 sites with the potential to contaminate important wate
supplies.Nuclear Waste Cleanup $6 billion $6 billion in funding has been appropriated for nuclear wast
cleanup at sites contaminated by the nations past nuclea
activities. Accelerating the completion of projects creates job
and reduces long-term costs.
NOAA Operations, Research
and Facilities
$230 million Funding for ready-to-go habitat restoration, research an
maintenance activities.
Brownfields $100 million $100 million of funding has been allocated for competitiv
grants for evaluation and cleanup of former industrial and
commercial sites turning them from problem properties to
productive community use. Last year, the EPA was only able to
fund 37% of Brownfield applications.
Source: Committee on Appropriations, Summary: American Recovery and Reinvestment Conference Agreement, February 13, 2009.
EX 10:Summary of renewable energy tax provisions included in The American Recovery and Reinvestment Act of
2009
Renewable energy tax provision Description
Three-Year Extension and Modification
of Renewable Energy Production Tax
Credit
The bill extends the placed-in-service date for wind facilities for three yea
(through December 31, 2012). The bill also extends the placed-in-service date f
three years (through December 31, 2013) for certain other qualifying facilitie
closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropowe
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landfill gas; waste-to-energy; and marine renewable facilities. This is estimated
cost $13.143 billion over 10 years.
Temporary Election to Claim the
Investment Tax Credit in Lieu of theProduction Tax Credit
Because of current market conditions, it is difficult for many renewable projects
find financing due to the uncertain future tax positions of potential investors these projects. The bill allows PTC-qualifying projects that are placed-in-service
2009 and 2010 to elect to claim the investment tax credit in lieu of the productio
tax credit. This is estimated to cost $285 million over 10 years.
Repeal Subsidized Energy Financing
Limitation on the Investment Tax Credit
Under current law, the investment tax credit must be reduced if the proper
qualifying for the investment tax credit is also financed with industrial developme
bonds or through any other federal, state, or locally subsidized financing program
The bill would repeal this subsidized energy financing limitation on the investme
tax credit in order to allow businesses and individuals to qualify for the full amou
of the investment tax credit even if such property is financed with industr
development bonds or through any other subsidized energy financing. The cost
this is included in the estimated cost of the next provision.
Removal of Dollar Limitations on
Certain Energy Credits
Under current law, businesses are allowed to claim a thirty percent (30%) tax cred
for qualified small wind energy property (capped at $4,000). Individuals are allowe
to claim a thirty percent (30%) tax credit for qualified solar water heating proper
(capped at $2,000), qualified small wind energy property (capped at $500 p
kilowatt of capacity, up to $4,000), and qualified geothermal heat pumps (cappe
at $2,000). The bill would repeal the individual dollar caps. As a result, each
these properties would be eligible for an uncapped thirty percent (30%) credit. Th
is estimated to cost $872 million over 10 years.
Grants for specified energy property in
lieu of tax credits (refundability)
Provides grants of up to 30% of the cost of building a new renewable energ
facilities in the case of wind, biomass, geothermal, solar, landfill gas, trash, hydr
marine, and qualified fuel cells. This is in lieu of federal tax credits, such as th
PTC/ITC, and is meant to address current renewable energy credit markconcerns. This is estimated to cost $5 million over 10 years.
Advanced Energy Manufacturing Base
Investment Credit
Provides a 30% investment credit for qualified property used in a qualifie
advanced energy manufacturing project, such as facilities that manufactu
components for the production of renewable energy, advanced battery technolog
and other innovative next-generation green technologies. This is estimated to co
$1.647 billion over 10 years.
Tax Credit for Plug-In Hybrid Vehicles The bill provides a tax credit for families that purchase plug-in hybrid vehicles of u
to $7,500 to spur the next generation of American cars. This credit is limited
200,000 vehicles. This is estimated to cost $2.002 billion over 10 years.
Clean Renewable Energy Bonds
(CREBs)
The bill authorizes an additional $1.6 billion of new clean renewable energy bond
to finance facilities that generate electricity from the following resources: win
closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropowelandfill gas; marine renewable; and trash combustion facilities. This $1.6 billio
authorization will be subdivided into thirds: 1/3 will be available for qualifyin
projects of state/local/tribal governments; 1/3 for qualifying projects of public pow
providers; and 1/3 for qualifying projects of electric cooperatives. This is estimat
to cost $578 million over 10 years.
Qualified Energy Conservation Bonds The bill authorizes an additional $2.4 billion of qualified energy conservation bond
to finance state, municipal and tribal government programs and initiatives designe
to reduce greenhouse gas emissions. This is estimated to cost $803 million ov
10 years.
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Tax credits for energy-efficient
improvements to existing homes
The bill extends the tax credits for improvements to energy-efficient existing home
through 2010. Under current law, individuals are allowed a tax credit equal to te
percent (10%) of the amount paid or incurred by the taxpayer for qualified energ
efficiency improvements installed during the taxable year. This tax credit is cappeat $50 for any advanced main air circulating fan, $150 for any qualified natural ga
propane, oil furnace or hot water boiler, and $300 for any item of energy-efficie
building property. For 2009 and 2010, the bill would increase the amount of the ta
credit to thirty percent (30%) of the amount paid or incurred by the taxpayer f
qualified energy efficiency improvements during the taxable year. The bill wou
also eliminate the property-by-property dollar caps on this tax credit and provide a
aggregate $1,500 cap on all property qualifying for the credit. This is estimated
cost $2.034 billion over 10 years.
Tax Credits for Alternative Refueling
Property
The alternative refueling property credit provides a tax credit to businesses (e.g
gas stations) that install alternative fuel pumps, such as fuel pumps that dispens
E85 fuel, electricity, hydrogen, and natural gas. For 2009 and 2010, the bill wou
increase the 30% alternative refueling property credit for businesses (capped
$30,000) to 50% (capped at $50,000). Hydrogen refueling pumps would remain
a 30% credit percentage; however, the cap for hydrogen refueling pumps will b
increased to $200,000. In addition, the bill would increase the 30% alternativ
refueling property credit for individuals (capped at $1,000) to 50% (capped
$2,000). This is estimated to cost $54 million over 10 years.
Addition of Permanent Sequestration
Requirement to CO2 Capture Tax
Credit
Last year, Congress provided a $10 credit per ton for the first 75 million metric ton
of carbon dioxide captured and transported from an industrial source for use
enhanced oil recovery, and $20 credit per ton for carbon dioxide captured an
transported from an industrial source for permanent storage in a geolog
formation. Facilities were required to capture at least 500,000 metric tons of carbo
dioxide per year to qualify. The bill would require that any taxpayer claiming th$10 credit per ton for carbon dioxide captured and transported for use in enhance
oil recovery must also ensure that such carbon dioxide is permanently stored in
geologic formation. This is estimated to have a negligible revenue effect.
Parity for Transit Benefits Current law provides a tax-free fringe benefit employers can provide to employee
for transit and parking. Those benefits are set at different dollar amounts. Th
provision would equalize the tax-free benefit employers can provide for transit an
parking. The proposal sets both the parking and transit benefits at $230 a mon
for 2009, indexes them equally for 2010, and clarifies that certain transit benefi
apply to federal employees. This is estimated to cost $192 million over ten years.
Source: Senate Finance, House Ways & Means Committees, The American Recovery and Reinvestment Act of 2009, Full Summary of Provisions, February12, 2009.
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France
In December, 2008, France unveiled a 26 billion stimulus plan that has a substantial green focus. See exhibit 13.
EX 13:Summary of green stimulus measures in the revival plan
Green focused provision Allocated funding Description
Clean Autos $1.72 billion $1.72 billion has been allocated to support the transformation o
the automobile sector in France, including a 1,000 tax cred
for car owners who scrap their old vehicles to buy an energy
efficient cars.
Infrastructure Stimulus $13.9 billion $13.9 billion has been allocated to infrastructure projects,
including constructing four new TGV lines and accelerating
energy projectsSource: Bloomberg; Marketwatch; DeAM analysis.
Germany
Germany has unveiled a series of stimulus plans, which have a substantial focus on transport efficiency. See exhibit 14.
EX 14:Summary of green stimulus measures in the stimulus plan
Green focused provision Allocated funding Description
Transport Efficiency $11.9 billion Seeks to scale-up transportation efficiency by providing
2,500 credit for people scrapping a car more than 9 years old
and buying a new vehicle.
Source: HSBC The Green Rebound: Clean Energy to Become an Important Component of Global Recovery Plans, 2009; DeAM analysis.
Italy
Italy has unveiled an emergency plan, which has a substantial focus on energy efficiency. See exhibit 15.
EX 15:Summary of green stimulus measures in the emergency package
Green focused provision Allocated funding Description
Energy Efficiency $1.2 billion $1.2 billion has been allocated to energy efficiency initiatives.
Source: HSBC The Green Rebound: Clean Energy to Become an Important Component of Global Recovery Plans, 2009; DeAM analysis.
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Spain
Spain has unveiled a stimulus plan, which funds low-carbon power and energy efficiency. See exhibit 16.
EX 16:Summary of green stimulus measures in the stimulus package
Green focused provision Allocated funding Description
Low-Carbon Power $800 million $800 million has been allocated for low-carbon power projects.
Energy Efficiency $600 million $600 million has been allocated to energy efficiency initiatives.
Source: HSBC The Green Rebound: Clean Energy to Become an Important Component of Global Recovery Plans, 2009; DeAM analysis.
Norway
Norway has unveiled a stimulus package, which funds low-carbon power and energy efficiency. See exhibit 17.
EX 17:Summary of green stimulus measures in the stimulus package
Green focused provision Allocated funding Description
Renewable Energy $200 million $200 million has been allocated to the Norwegian Fund fo
Renewable Energy, the governments vehicle to promote clea
energy projects. The funds are intended to finance rechargin
stations for electric cars, increase the use of bioenergy, and
step up research on offshore wind.
Source: New Energy Finance, January 26, 2009.
China
China unveiled a $586 billion 2-year economic stimulus package in November, 2008, that aims to transform its economy by
promoting economic restructuring and essential green infrastructure. Some details of the plan remain unclear, but 12% of
the stimulus is targeted at direct energy efficiency and environmental improvements. See exhibit 18.
EX 18:Summary of green focused provisions in the Chinese stimulus plan
Green focused provision Allocated funding Description
Electricity Grid Upgrade $70 billion $70 billion is earmarked to upgrade and integrate the nationaelectric power grid. This is in addition to a similar-sized grid
upgrade program that is already underway.
Power Plant Construction $29 billion $29 billion has been allocated for power plants, including
number of nuclear plants and an east-west natural gas pipeline
Water Conservation and
Irrigation
$2.9 billion $2.9 billion is earmarked for water conservation and irrigatio
projects.
Other Environmental
Initiatives
$1.78 billion $1.78 billion will be spent on other environmental initiatives.
Source: Stratfor Global Intelligence; DeAM analysis.
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Japan
Japan has unveiled a stimulus package, which funds energy efficiency projects. See exhibit 19.
EX 19:Summary of key green provisions in the stimulus package
Green focused provision Allocated funding Description
Energy efficiency $11 billion $11 billion has been allocated to energy efficiency projects.
Source: HSBC The Green Rebound: Clean Energy to Become an Important Component of Global Recovery Plans, 2009; DeAM analysis.
South Korea
South Korea has unveiled a green new deal package, which funds energy efficiency and water projects. See exhibit 20.
EX 20:Summary of key green investments in the stimulus plan
Green focused provision Allocated funding Description
Energy efficiency $8.5 billion $8.5 billion has been allocated to energy efficiency projects.
Waste, water treatment and
pollution control
$17.8 billion $17.8 billion has been allocated to waste, water treatment an
pollution control projects.
Source: HSBC The Green Rebound: Clean Energy to Become an Important Component of Global Recovery Plans, 2009; DeAM analysis.
Israel
Israel has unveiled a stimulus package, which funds energy efficiency projects. See exhibit 21.
EX 21:Summary of key green new deal investments
Green focused provision Allocated funding Description
Energy efficiency $100 million $100 million has been allocated to energy efficiency projects.
Source: HSBC The Green Rebound: Clean Energy to Become an Important Component of Global Recovery Plans, 2009; DeAM analysis.
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Section 1: Traditional Regulation
27 Global Climate Change Regulation
While many countries have developed economic stimulus plans in the face of the current financial stress, they have also
been actively developing and implementing traditional climate change regulation, which includes mandated standards and
public education initiatives. In this section, we review the major changes to traditional regulation over the past half-year.
United States
Renewable Portfolio Standards
34 states in the US have adopted renewable portfolio standards (RPS), which specify that electric utilities must generate a
certain percentage of their electricity from renewable sources. Since July, 2008, a number of additional states embraced
RPS requirements. See exhibits 24 and 25.
EX 24:New developments in 2H 2008
State Policy
Missouri
Missouri voters approved the Missouri Clean Energy Initiative on November 4th, 2008,
which requires that 15% of energy be generated from renewable sources by 2021. The
approval represented the nations third RPS to be adopted by a ballot initiative.
Massachusetts
In July 2008, Governor Deval Patrick of Massachusetts signed into law a mandate thatwould require the states RPS to grow by 1% each year beyond the previous 4% standardin 2009. The law implements a 15% RPS by 2020, and 25% by 2030.
Florida
On June 25th
, 2008, Governor Charlie Crist of Florida signed into law a requirement for the
states Public Service Commission to develop a RPS by February 2009. Though this law
does not specify a RPS target, utilities in Florida are required to produce at least 20% of
their electricity from renewable sources, according to state legislation from 2007.
Kentucky
On November 20th, Governor Steve Beshear released a state energy plan known as the
Intelligent Energy Choices for Kentuckys Future. Among the proposed strategies, a
Renewable and Efficiency Portfolio Standard (REPS) would require that 25% of Kentuckys
total energy needs by 2025 be met through a combination of energy efficiency and
conservation measures, new renewable electricity generation, and an Alternative
Transportation Fuel Standard (ATFS). The plan does not have statutory authority, and is
therefore not legally binding until approved by the legislature and signed by the Governor.
MichiganOn October 6
th, 2008, Governor Jennifer Granholm signed into law a requirement
mandating 10% of the states energy come from renewable sources by 2015.
CaliforniaOn November 17
th, 2008, Governor Arnold Schwarzenegger signed Executive Order S-14-
08 which increases the states RPS to 33% by 2020 from the current 20% target by 2010.Source: DeAM analysis, 2009.
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Section 1: Traditional Regulation
28 Global Climate Change Regulation
EX 25:Summary of US States with Renewable Portfolio Standards
Source: The Pew Center, As of November 25th, 2008.
Renewable Fuel Standard (RFS)
Under the Clean Air Act (CAA), the EPA is responsible for determining a renewable fuel standard (RFS) for refiners,
importers and certain blenders of gasoline. This standard mandates the blending of a certain volume of renewable fuels into
the road transport fuel pool. On November 21st, 2008, the EPA raised the 2009 Renewable Fuel Standard to 10.21%
renewable fuels by volume to ensure that at least 11.1 billion gallons of renewable fuels would be blended into road
transport fuels. This includes approximately 0.5 billion gallons of biodiesel, the remainder being comprised of bioethanol.
The 2009 requirement represents a 23.3% increase by volume from the 2008 requirement, which called for 9 billion gallons
of renewable fuels. Some of the major changes enacted include the following:
Expansion of the volume of renewable fuel;
Separation of the renewable fuel volume requirements into four categories:
o cellulosic biofuel;
o biomass-based diesel;
o advanced biofuel;
o and total renewable fuel.
Expansion of the fuel pool subject to the standards to include diesel and certain non-road fuels;
And expansion of the obligated parties subject to the mandate to include refiners.
See exhibit 26.
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EX 26:Summary of Transportation-related standards
Source: The Pew Center, As of August 5th, 2008.
Vehicle Greenhouse Gas Emissions Standards
Sixteen states have adopted, or have announced their intention to adopt, the emissions standards established by AB 1493
in California. See exhibit 27.
EX 27:Uptake of Californias emissions standards
Source: The Pew Center, As of November 10th, 2008.
Clean Air Interstate Rule (CAIR)
On July 11th, 2008, the US Court of Appeals for the District of Columbia struck down the Clean Air Interstate Rule (CAIR), a
piece of legislation originally passed in 2005. CAIR was created to address the interstate transport of sulfur dioxide (SO 2)
and nitrogen oxide (NOx) emissions, and would have allowed states to participate in SO2 and NOx cap-and-trade programs.
The Court ruled that there were a number of flaws and loopholes associated with CAIR:
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1. The EPA failed to explain how emissions from each covered state met specific level standards;
2. CAIR may have omitted states that should have been subject to regulation;
3. SO2 and NOx budgets were believed to be arbitrary;
4. CAIRs 2015 compliance deadline failed to guarantee that states would reduce their emissions in sufficient time to
allow downwind states to attain the relevant air quality standards.
Following this decision, the SO2 and NOx markets collapsed, and the EPA petitioned for a rehearing in September 2008.
On December 23rd
, 2008 the US Court of Appeals for the District of Columbia announced that it would modify its decision
rejecting CAIR. Rather than immediately overturning CAIR as the court had originally done, the modified decision allows
CAIR to continue in effect temporarily, giving the EPA time to amend the program to address the concerns identified by the
court.
State-led climate change regulation
Regulators have been active in establishing greenhouse gas emissions targets, climate action plans, and adaptation plansat the state level. Targets establish long-term caps on statewide emissions. Climate action plans establish integrated
programs to tackle the local challenges of a warming planet. And adaptation plans lay out a framework for climate-resilient
development, risk mitigation and disaster management. See exhibit 28.
EX 28:Summary of state-led regulation in the US
As of September 25th, 2008 As of November 19
th, 2008
Source: The Pew Center As of September 15th, 2008
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California
On July 17th, 2008, the California Building Standards Commission ratified the California Green Building Standards Code for
all new commercial and residential construction projects state-wide. The code sets standards for:
Energy efficiency;
Water consumption;
Dual plumbing systems for potable and recyclable water;
Diversion of construction waste from landfills;
And use of environmentally sensitive materials in construction and design, including eco-friendly:
o flooring;
o carpeting;
o paint;
o coatings;
o thermal insulation;
o and acoustical wall and ceiling panels.
The new code will be voluntary until 2010, when its terms are expected to become mandatory.
On November 4th, 2008, there were a total of twelve ballot propositions that were voted on statewide in California during the
general election. Of the twelve propositions, seven were approved by voters. One of propositions that was defeated was
known as California Proposition 7, which received 35.4% of the vote. Proposition 7 would have required all electric utility
companies in the state to generate 50% of their electricity from renewable energy sources by 2025, with the ability to waive
penalties for non-compliance.
On November 17th, 2008, Governor Arnold Schwarzenegger signed Executive Order S-14-08 which increases the states
RPS to 33% by 2020 from the current 20% target by 2010. In addition, the EO mandates that state agencies should
expedite the process of creating renewable generation facilities. Furthermore, the EO establishes the Renewable Energy
Action Team (REAT), a partnership between the California Energy Commission and the states Department of Fish andGame. The REAT agencies will review renewable energy projects for state approval in order to streamline the application
process. The REAT will also be responsible for identifying strategic locations for renewable energy development.
On December 11th, 2008, the California Air Resources Board unanimously approved a plan that aims to reduce emissions
to 1990 levels by 2020. Based on the Global Warming Solutions Act of 2006, otherwise known as AB32, the plan includes:
A renewable portfolio standard for utilities of 33% by 2020;
A public goods charge on water use that would help raise funds for capture and storage of water;
A fee on some hazardous industrial gases;
Increasing energy efficiency programs;
And a motor vehicle emissions standard.
Eco-labeling for all new cars also came into effect on January 1, 2009.
And President Barack Obama has directed the EPA to reconsider the decision, made under the Bush administration, to
deny California a waiver under the Clean Air Act to allow regulation of greenhouse gas emissions from passenger vehicles.
Illinois
On September 18th, 2008, Chicagos Mayor Richard Daley announced a plan to reduce the citys carbon emissions 25%
below 1990 levels by 2020. To accomplish this, the city will roll-out:
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Renewable energy technologies;
Energy efficient buildings;
Improved transportation;
And reduce industrial pollution.
The city has also taken the initiative to produce its own models to show the local effects of climate change.
And as one of his last acts before impeachment on January 29th, 2009, Governor Rod Blagojevich signed into law
legislation that creates gradually more restrictive standards for CO2 emissions for coal power plants. The law requires any
new plant constructed in the state to capture at least 50 percent of its CO2 emissions, rising to 70 percent for plants
beginning operation after 2015 and 90 percent after 2017. The law also expands the states renewable portfolio standard for
utilities to also cover merchant and wholesale electricity suppliers.
Kentucky
On November 20
th
, 2008, Kentucky Governor Steve Beshear released a state energy plan known as Intelligent EnergyChoices for Kentuckys Future. Among the proposed strategies, a Renewable and Efficiency Portfolio Standard (REPS)
would require that 25% of Kentuckys total energy needs by 2025 be met through a combination of energy efficiency and
conservation measures, new renewable electricity generation, and an Alternative Transportation Fuel Standard (ATFS). The
plan also includes efforts to examine carbon capture and sequestration, coal-to-liquids and coal-to-gas technology.
According to the energy plan, full implementation of the strategies would reduce greenhouse gas emissions by 20% from
1990 levels by 2025 and create 30,000 to 40,000 new green jobs. The plan will need approval by the legislature and will
need to be signed by the Governor before it becomes law.
Maryland
On August 27th
, 2008, the Maryland Commission on Climate Change released the final version of its Climate Action Plan.The Climate Action Plan proposes a progression of GHG reduction targets beginning with a 10% reduction from 2006 levels
by 2012 and culminating in a 90% reduction by 2050. The plan also includes 42 measures to reduce emissions with
projections showing that full implementation of these measures would achieve a 50% reduction in emissions by 2020.
Michigan
On October 6th, 2008, Michigan Governor Jennifer Granholm signed into law three pieces of climate change legislation. See
exhibit 29.
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EX 29:Key provisions of new climate change legislation in Michigan
Provisions Details
RenewablePortfolio
Standard
Establishes an Integrated Renewable Portfolio Standard (RPS) of 10% by 2015. The
standard must be met through renewable sources such as biomass, solar PV, solar thermal,
wind, hydroelectric, geothermal and landfill gas capture.
EnergyEfficiencyResourceStandard
Mandates that electricity providers must improve efficiency by 0.75% per year and naturalgas utilities must improve efficiency by 0.5% per year by 2011.
Energy StarTax Credit
Allows consumers of Energy Star products to claim an income tax credit equal to 10% of the
cost of the product.
Public ServiceCommission
Expands the authority of the state Public Service Commission to monitor utilities, oversee
rate increases, and manage long-term generation plans. It also requires utilities to
implement net metering programs to harness consumer-generated electricity.
Net MeteringRequires utilities to implement net metering programs to harness consumer-generated
electricity.Source: DeAM analysis.
New Jersey
On October 22nd
, 2008, New Jersey Governor Jon Corzine released an updated Energy Master Plan, which focuses on
renewable energy and energy efficiency measures as part of an initiative to increase energy security, decrease consumer
costs, and reduce greenhouse gas emissions. The plan aims to maximize energy efficiency and conservation through utility-
driven programs, reduce peak demand through incentives and the use of advanced metering technology, develop and
modernize electricity infrastructure, and increase investment for research and job training in the energy sector.
New York
New York Citys Mayor Michael Bloomberg announced on July 7th
, 2008, that the city would spend $2.3 billion to reducegreenhouse gas emissions from municipal buildings and operations. The plan targets a 30% reduction over the next 30
years, mainly through energy efficient strategies such as improving heating/cooling systems and water treatment plants.
The plan will be financed with 10% of the citys energy budget, which currently stands at about $100 million.
Pennsylvania
Pennsylvania Governor Edward G. Rendell signed legislation to help save Pennsylvanians $500 million on energy over the
next 5 years. Among the pro