Monday, November 14, 2016

Dispatches from COP22: Envisioning International Climate Policy in the Trump Era

By Melissa Powers, GEI Director and Jeffrey Bain Faculty Scholar & Professor of Law, Lewis & Clark Law School

The former head of the U.S. climate change delegation, Jonathan Pershing, held a brief press conference on Monday to discuss the future of U.S. climate policy. Although Dr. Pershing noted at the outset that he could not predict where U.S. international climate policy will go, because Donald Trump has not yet appointed a transition team to navigate the U.S. position regarding the global climate treaty, most of the questions from the press focused on the potential impacts of a Trump Administration. The press asked about U.S. follow-through with its funding commitments, the potential U.S. withdrawal from the Paris Agreement or even the United Nations Framework Convention on Climate Change (the treaty signed by George H.W. Bush and ratified by the U.S. Senate), potential retaliatory responses from the European Union through a border carbon tax if the United States does rescind its climate commitments, and the degree to which any U.S. withdrawal would affect other countries’ compliance. On the positive side, it seems clear that other countries are committed to following through with their own climate mitigation strategies. However, the questions also revealed the extent to which the United States would lose standing on a number of other global issues if it retreats from the climate treaty.

The Paris Agreement is arguably one of the most significant climate achievements of the Obama Administration. Before President Obama took office, the United States had developed a decidedly poor reputation due to the George W. Bush Administration’s repudiation of the Kyoto Protocol and continued resistance to binding climate mitigation commitments. When President Obama took office in 2009, hopes rose that the U.S. negotiating position would change significantly. However, many countries loudly opposed President Obama’s support for and behind-the-scenes negotiations of the Copenhagen Accord, a generally weak document that uses a bottom-up approach for securing countries’ climate commitments. While President Obama walked away from Copenhagen having broken a major logjam in the climate treaty-making process, his focus on negotiating the Accord with only a handful of major emitting countries left many developing countries feeling alienated and betrayed.

Since then, however, the Obama Administration’s persistent efforts to address climate change domestically (through, for example, regulation of greenhouse gas emissions from motor vehicles; support for renewable energy research, development, and deployment; and carbon dioxide emissions limitations from power plants) have strengthened the United States’ standing on the international climate stage. Most significantly, the Obama Administration’s bilateral negotiations with China led to a joint agreement for both countries to reduce greenhouse gases and increase renewable energy development. This agreement paved the way for the Paris Agreement—the first international climate treaty in which nearly all countries of the world have agreed to take action to address climate change.

It is hard to overstate how much the Obama Administration’s efforts have paid off in terms of good will for the United States. It is also hard to overstate how damaging another U.S. retreat from the international climate regime will be—not only to the world at large, but to the United States itself. Good faith participation in the global climate treaty-making process has allowed the United States to exert its influence on many countries in a positive and collaborative way. U.S. funding and support for technology innovations and developing country access to clean energy have allowed the United States to develop and maintain effective working relationships around the world. U.S clean energy companies have also benefitted from access to new markets as more countries increase their own use of renewable energy. If the United States retreats from the climate regime, other countries will step in to fill the gap. These countries will not only provide their own industries ready access to emerging clean energy markets; they will displace the United States as one of the more influential parties in the climate regime. In fact, China’s delegates have specifically said that the U.S. retreat will give China the moral high ground as it moves to occupy the space left vacant by the U.S.

A friend of mine commented the other day that the election of Trump will erode the United States’ status as one of the world’s superpowers, particularly if the Trump Administration follows through with its threats to withdraw from the Paris Agreement and the larger climate treaty regime. Perhaps that’s hyperbole. But at the end of the press conference, the man sitting next to me revealed how happy he is with Donald Trump’s election. “I’m Russian,” he said.

Tuesday, November 8, 2016

Does Regulating for Cleaner Air Push Industry towards Favoring a Carbon Tax?

By Joni Sliger, Energy Fellow
Carbon tax supporters collected signatures to get Measure 732 on the ballot.
Credit: Washington Secretary of State Blog

Tonight, Washington could become the first state in the nation to enact a carbon tax. Ballot Measure 732 proposes an escalating tax on carbon emissions, with complementary tax reductions for what is meant to be a revenue-neutral measure (though there is some debate on that front). While there are still too many undecided voters to call it, Ballotpedia reports that four polls on the measure show support for the tax slightly edging out the opposition but still within the margin of error (averaging 41.75% to 37.45% with a +/- 4.45% margin of error). Notably, that support does not include many of the state’s environmental groups, whom the Seattle Times reports are working on an alternative proposal. So how is a carbon tax on the verge of passing despite industry opposition and a divided environmental community?

A carbon tax or “carbon pollution tax” imposes a tax on fuels in proportion to the amount of greenhouse gas emissions they emit. Suppliers of gasoline or coal thus would pay the state for the expected emissions of the product they sell. Consumers may expect suppliers to raise prices accordingly. In Washington, Measure 732 proposes to cut other taxes, such as the state sales tax and the business and occupation tax, and to protect low-income families by raising the Working Families Tax Credit. On the balance, these changes aim to be revenue-neutral, meaning the state would neither lose nor gain money with the Measure versus the current tax structure. The overwhelming majority of economists have repeatedly supported a carbon tax as the most economically efficient way to take action against climate change.

Proponents of the measure—led by the Washington State Chapter of the National Audubon Society—have outraised and outspent industry opponents: proponents raised almost $2.8 million and spent about $2.5 million while opponents raised less than $1.5 million and spent less than $800,000. Why are industry opponents—including such deep-pocketed players as the American Fuel & Petrochemical Manufacturers and the Koch Brothers—not fighting harder against Washington’s carbon tax measure?

Perhaps industries facing sector-specific climate change regulations would prefer a carbon tax.

Washington just finalized its Clean Air Rule (Rule), as my fellow Energy Fellow, Ed Jewell, blogged last month. This new regulation is more stringent than the federal Clean Power Plan (CPP). The Rule went into effect in mid-October, requiring the state’s 24 largest emitters to reduce greenhouse gas emissions by 25% below 1990 levels by 2035 or pay compliance credits for reductions. Over time, the qualifying cap defining who is regulated by the Rule will decrease, effectively covering more and more emitters. The Washington Department of Ecology has compiled a list of the 68 entities potentially subject to the Rule. The state’s economic analysis estimates that entities may pay as little as $410 million or as much as $6.9 billion over 20 years to comply, depending on how they decide to comply. Again, these costs will fall primarily on only 68 entities (and then indirectly to their consumers).

Economists generally favor a carbon tax because it can spread the costs of taking action against climate change across the entire economy. An industry player, such as power producers, may prefer that the costs of regulation be spread across all economic players rather than only themselves. This is one reason why the EPA, in the CPP, provided the use of a carbon tax as one option for states to use in compliance. In Washington, the Rule already is more stringent than the CPP, but unfortunately both the Rule and the CPP are locked in legal battles. If the Rule fails but the CPP survives, a carbon tax like that proposed by Measure 732 might be the best way for Washington to comply. 

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Friday, November 4, 2016

PURPA Haze Begins to Clear

By Ed Jewell, Energy Fellow
A recent opinion from the District Court of Massachusetts may help clarify an important provision in the Public Utility Regulatory Policies Act of 1978 (PURPA), an important law for renewable energy development. The case is Allco Renewable Energy v. Massachusetts Electric Co., and the provision at issue establishes a “legally enforceable obligation” (LEO).

PURPA is the original instigator of renewable energy grid interconnection in the United States. It is long running, under-appreciated, and is still as important as ever. PURPA provides an energy generating facility that meets certain size and resource restrictions (a qualifying facility or “QF”) with a set of guarantees. PURPA requires the utility in whose service area the QF is constructed to 1) allow the QF to plug into the utility’s grid, 2) buy the electricity generated by the QF, and 3) pay avoided cost rates for the electricity purchased.

In order to realize these guarantees, the Federal Energy Regulatory Commission (FERC)—the expert federal agency responsible for the statute—recognized that a QF developer would need to obtain financing in order to construct the project. In order for a QF developer to obtain financing, FERC created the concept of a LEO, which allows the QF developer to lock in what are known as avoided cost rates at the time a LEO is created with the utility. Avoided cost rates represent an approximation of the price that the utility would pay for power if it were to solicit proposals for a least-cost facility or construct such a facility on its own. With the avoided cost rate locked in, the QF developer is able to show a steady and predictable source of income throughout the term of the LEO, which she can take to the bank in order to obtain construction capital.

Quick review: under PURPA, a QF gets a LEO (a concept created by FERC) to show the bank in order to obtain construction capital to build its renewable energy facility. 

PURPA is an example of cooperative federalism, a regulatory model in which the federal government sets a standard that states must implement. However, one person’s implementation is another person’s evisceration. State PUCs have taken a variety of stances on how to implement PURPA ranging from diligent implementation to thinly veiled hostility aimed at slowing the development of renewable energy.

The quintessential example of a state PUC undermining PURPA through crafty rulemaking occurred in Texas, a rule that the Fifth Circuit Court of Appeals deferred to in Exelon Wind v. Nelson. As explained in more detail in GEI Director Melissa Powers’ previous Charged Debate blog post, the Fifth Circuit’s decision eviscerated the PURPA requirement that utilities purchase electricity from “each” QF. The Fifth Circuit did so by upholding a Texas PUC rule that only allowed QFs producing “firm” (ie, guaranteed) power to enter into a LEO with the utility. Solar and wind technologies without on-site energy storage, which is not yet economically available in most markets, do not meet the definition of firm power.

The Fifth Circuit reached this conclusion despite regulations that state “each” QF “shall” be entitled to sell its “electricity or capacity” to the utility. And, as explained in Staff Attorney Amelia Schlusser’s follow-up blogpost on the subject, the Fifth Circuit also failed to apply bedrock administrative law principles such as deference to the expert federal agency that authored the regulations. Exelon Wind thus demonstrates the analytical gymnastics that some state PUCs and federal courts are willing to engage in to maintain a closely held yet unsupported notion of states’ rights at the expense of sensible jurisprudence. The Exelon Wind decision misinterpreted the structure of the LEO provision, gave an undue amount of deference to the state PUC interpretation, and set a dangerous precedent that threatened to undermine the effectiveness of PURPA implementation around the country. 

Given the troubling Exelon Wind decision, it is heartening that the Allco Renewable opinion refused to follow the Fifth Circuit’s flawed analyses on deference and regulatory interpretation and instead decided to hew to a line more faithful to the language and purpose of PURPA and its implementing regulations. In Allco Renewable, the District Court of Massachusetts rejected the main contention of the Texas PUC, accepted in Exelon Wind, that the structure of the regulation that establishes a LEO must be read creatively so as to avoid superfluity. By denying the contention that the plain language of the regulation could not govern, the District Court of Massachusetts freed itself to interpret the language of the regulation sensibly. In doing so, the District Court of Massachusetts recognized that although state PUCs are entitled to “some deference” in implementing PURPA, “whatever latitude the MDPU is given to implement FERC’s PURPA rules does not justify an implementation that plainly conflicts with those rules.”
In order to allow the plain language to control, the District Court of Massachusetts answered—with the help of a FERC amicus brief—the question that stumped the Fifth Circuit, ie why would a QF entitled to a LEO not enter into a LEO? The court sensibly reasoned, “a QF that values flexibility and is willing to keep both upside and downside risks may choose an as-available sale even if a [LEO] is an option.”

The question in Allco Renewable was whether the PUC could set an avoided cost rate set according to the prevailing price on the New England ISO spot market. The court decided that allowing the PUC to do so would hollow out the guarantee of PURPA that each QF shall have the option of entering into a LEO with a price set at the time the LEO is entered into. The court recognized the importance of the LEO provision and the fixed avoided cost rate to the bankability of the project, and refused to allow the state PUC rule to undermine the critical function played by a LEO in implementing the mandates of PURPA.
The Fifth Circuit did not have the benefit of hearing from FERC in Exelon Wind. Under PURPA, FERC has the option to bring an enforcement action, either of its own volition or in response to a petition from a QF, intervene as a matter of right if it refuses to bring an enforcement action, or file an amicus brief stating its interpretation of the law. FERC’s failure to engage in any of these options left counsel for Exelon Wind in the awkward position of arguing for deference to a federal agency that did not bother to present itself in any manner before the court. In contrast, the Allco Renewable court makes note of FERC’s presence at the beginning of its opinion, “This Court relies extensively on the Brief of Amicus Curiae Federal Energy Regulatory Commission (“FERC”), which explains the relevant statutory and regulatory background.”

Thus, the Allco Renewable opinion is notable because 1) it cast doubt upon the reasoning of the Exelon Wind majority by diverging analytically and 2) FERC seems to have learned from the Exelon Wind decision that its guidance is necessary. 

PURPA and the FERC regulations implementing it are full of undefined terms, and energy law is a swampy mix of arcane statutes and regulations, economic considerations, and blurry federal/state jurisdictional lines. If FERC wants to disallow states from undermining the purpose of PURPA, it must at least file an amicus brief to explain the regulations and the reasoning behind the language to the judges who are not as steeped in energy law minutiae as FERC. When FERC provides its interpretation of the statute, it makes it much easier for the court to arrive at a logical conclusion.

While it is still too early to tell from one District Court opinion, there is now hope that the PURPA haze created by the Fifth Circuit will be cleared up and the statute will continue to be an important foundation to the renewable energy revolution. With a little bit of help from FERC, that is. 
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Thursday, October 27, 2016

Turning Up the Heat: Nations Cut Use of AC Chemicals to Stop Climate Change

By Joni Sliger, Energy Fellow
President Obama has pushed a strong climate change agenda,
including renewable energy deployment and international action.
Credit: The White House

Earlier this month, even as U.S. efforts to  address greenhouse gas emissions from the energy sector remained locked in a legal battle, the U.S. and almost 200 other countries formed a new international agreement to combat climate change. In Kigali, Rwanda, world leaders met this month for the 28th Meeting of the Parties to the Montreal Protocol and agreed to monumental cuts in the use of potent greenhouse gases known as hydrofluorocarbons.

Hydrofluorocarbons, or HFCs, are popular refrigerants used for air conditioning systems and refrigerators. HFCs have been the primary chemical replacement for ozone-depleting chlorofluorocarbons, which themselves were eliminated by the Montreal Protocol (although a new NASA study notes that HFCs also deplete ozone). However, HFCs are also known for their strong greenhouse gas effects; HFCs are 120 to 12,000 times as potent as greenhouse gases than carbon dioxide.

Under the Kigali Accord, countries agreed to specific timetables for freezing HFC production and for reducing consumption thereafter. The timetable varies: by 2019, developed countries must reduce use by 10% from 2011–2013 levels, and by 85% by 2036; many developing countries (including China and Brazil) agreed to peak use by 2024, and other developing countries (including India and Pakistan) agreed to freeze use by 2028. The relaxed timetable for some countries recognizes in part that air conditioning could be more expensive with chemicals besides HFCs or CFCs and that air conditioning may be a necessity rather than a luxury in heat-stricken areas. Admirably, many developing countries voluntarily joined the midlevel timetables rather than the lowest level they could have chosen; leaders noted that combatting climate change had become a greater prerogative than expanding access to luxuries like air conditioning or refrigeration. 

By cutting production and consumption of HFCs by over 80% by 2050, the Kigali Accord promises to avoid more than 80 billion metric tons of CO2-equivalent, possibly avoiding up to 0.5°C of climate change. That is a significant amount for the world to avoid. Recall, for comparison, that under the United Nations Framework Convention of Climate Change, nations agreed that a rise of 2°C over preindustrial levels is the amount of change the world must avoid to prevent catastrophic climate change. Unfortunately, earlier this year, the atmospheric concentration of CO2 exceeded 400 ppm, the level scientists say is necessary to avoid 2°C of climate change. Even though the world may already be on set to exceed the 2°C goal, however, the scenarios predicted by the Intergovernmental Panel on Climate Change become increasingly catastrophic with greater temperature increases. The Kigali Accord may not be enough for the world to reach its original goal of avoiding 2°C, but it still represents a significant and major action in the fight against climate change.

Proponents note the Kigali Accord could have as much or more impact than last year’s Paris climate deal. Secretary of State John Kerry said, “It is likely the single most important step we could take at this moment to limit the warming of our planet and limit the warming for generations to come.” In large part, this is because the agreement represents a mandatory action for nations: specific and clear cuts in HFCs. In contrast, under the Paris agreement, countries’ actions to greenhouse gas emissions are purely voluntary.

Although only voluntary, the Paris Agreement is legally binding as an international treaty; it is not, however, a treaty under the U.S. Constitution. By framing it instead as an executive agreement under U.S. law, President Obama avoided having to seek the Senate’s ratification of the Paris Agreement.

Unfortunately, President Obama might need to seek the Senate’s unlikely and reluctant ratification of the Kigali Accord. Legally, it is unclear whether he needs to. The Kigali Accord amends the Montreal Protocol; the U.S. already signed and ratified the Montreal Protocol. Some reporters claim that an amendment to an already ratified treaty does not need to be ratified. Others note that it is unclear whether the Obama administration believes it needs ratification. A State Department representative commented that the Department is currently reviewing the Accord to assess whether President Obama needs to submit it to the Senate or not. Several law professors cited in the news say that ratification is necessary, both under international law and U.S. precedence. Others say it only needs ratification to be legally enforceable under U.S. domestic law. One law professor summed up the debate this way: “The president is going to have to go to the Senate or face a lot of political heat.”

Even without ratification, President Obama can push for compliance through more executive actions. Indeed, the White House has already celebrated getting commitments to reduce HFC use from the private sector. With or without ratification, observers expect HFC reductions to continue.

While the U.S. Clean Power Plan languishes in the courts, President Obama is continuing to push his climate change legacy. The Kigali Accord promises real, measurable avoided emissions in the years to come.

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Tuesday, October 18, 2016

Economic Dynamism and Renewable Energy

By Ed Jewell, Energy Fellow

Photo Credit:
On October 8, 2016, President Barack Obama published an article in The Economist titled "The Way Ahead," in which he laid out four "major structural challenges" to the U.S. economy that must be addressed in order to restore faith in the nation’s economic (and by extension, political) system. The four major structural challenges identified by the President include: 1) boosting productivity, 2) reducing inequality, 3) reducing unemployment, and 4) building a resilient economy that will continue to grow.

President Obama has demonstrated—by leading the U.S. out of the worst economic crisis in over eighty years, saving the auto industry, and establishing an economy which gained 15 million private-sector jobs since 2010—that he has the requisite understanding of how a functioning economy works. President Obama’s strategies for creating economic dynamism promote the role of government in providing a stable landscape for investment, as well as a direct role in stimulating and guiding specific economic sectors that are crucial for overall societal functioning.

The history of federal involvement in the renewable energy industry demonstrates that direct federal spending is greatly beneficial to fledgling industries for at least three purposes: 1) researching and developing new technologies, 2) providing the early investment necessary to allow the new technologies to mature to a point in which they can stand on their own in a competitive market without federal subsidies, and 3) stepping in when economic conditions deteriorate.

Further, the history between the federal government and the renewable energy industry illustrates that when the federal government tries to substitute tax credits for direct federal spending, the major beneficiaries are the largest and wealthiest banks and mutual funds in the country, a result that does not encourage economic stability or promote the general welfare.

In sum, direct federal investment in renewable energy technologies should be increased under the next administration, and industry reliance on tax credits should be gradually reduced—as currently planned—in order to maximize societal and economic benefits of renewable energy development. 

I.             Boosting Productivity 

Strong public investment in renewable energy—much of which came as a response to the financial crisis—has benefited the renewable energy industry in multiple ways, and the renewable energy industry has returned the benefits to the American people through technological innovations, reduced carbon emissions, and living-wage jobs. The successes of these federal investments demonstrate that the federal government should continue and enhance these investments in emerging renewable energy and energy storage technologies.

A handful of provisions in the American Recovery and Reinvestment Act of 2009 (the stimulus package) were critical to enabling the fledgling renewable energy industry to survive and even grow through the financial crisis.

Section 1603 Treasury grants, provided for in the stimulus package, funded 30% of project costs for renewable energy projects from 2010 to 2014. In the wake of the financial crisis, nearly $25 billion of stimulus money was paid out through the program. These federal grants helped fund 105,178 renewable energy projects that brought 21,633 MW of wind power capacity and 8,283 MW of solar power capacity online in the U.S., creating 75,000 construction jobs and 5,000 long-term jobs in the process.

The stimulus package also established the Section 1705 loan guarantee program, which provided loan guarantees for renewable energy projects that employed "new or significantly improved" technologies that were not yet in commercial use. The loan guarantee program effectively launched the utility-scale solar industry in the United States. As Energy Secretary Ernest Moniz recently noted, the federal loan program helped spur the deployment of 1.5 GW of utility-scale solar capacity in the U.S.

Aside from the financial stimulus package, the federal government has historically been a major funder of research and development in the renewable energy field, such as through the SunShot Initiative and the various other R&D projects undertaken through the National Renewable Energy Laboratory. However, more funding is necessary to adequately mitigate the threat of climate change. From 1978 to 2014, federal funding for renewable energy research and development (R&D) accounted for only 17% of total federal energy-related R&D funding. The Executive Director of the International Energy Agency recently called on world leaders to triple the amount of funding for renewable energy R&D.

In addition to funding research and development, the government should play a major role in infrastructure development—an idea that, as President Obama pointed out in his article—used to share wide bipartisan acceptance. The President noted the need for bridge and airport upgrades, to which I would add the need to make major investments in the electricity transmission system to facilitate a transition to a renewables-based grid.

The federal programs created by President Obama’s stimulus package, as well as his administration’s enhanced investment in R&D, have successfully boosted productivity in the renewable energy sector. The incoming administration should continue to invest in emerging renewable energy technologies.   
II.            Reducing Economic Inequality
The tax incentives authorized by Congress for renewable energy projects have been a main driver of the renewable energy industry for years, and therefore are responsible for a great amount of societal good through lower carbon emissions, living-wage jobs, and technological development. However, a decent argument can be made that this incentive structure furthers economic inequality—at least to a small degree—by allowing a small group of the largest financial institutions in the country to capture an economic benefit from nearly every renewable energy project developed.

While there are numerous drivers of economic inequality throughout the economy, and the tax credits for renewables play a small and perhaps insignificant role in the overall level of economic inequality, it is worth noting that the tax incentive structure—which has been a primary driver of the renewable energy industry—is perhaps less than ideal from an overall economic health perspective.

In order to realize the financial benefits of the Investment Tax Credit (ITC) or Production Tax Credit (PTC), project developers must find investors who have a large enough tax appetite to take advantage of the tax credits. Because large-scale solar and wind farms cost tens to hundreds of millions of dollars, and the ITC and PTC can only be used to offset “passive” income, there are only a handful of large banks and hedge funds that are capable of monetizing the benefits of the tax credits.

Renewable energy development—even with the tax credit incentive structure—creates broad-based economic gains that combat economic inequality. Installation of renewable energy technologies cannot be outsourced, and installation jobs pay living wages for skilled workers in local communities. Additionally, farmers and ranchers can receive royalty payments for the use of their land while continuing to produce their primary products, and overall, entrepreneurship is encouraged in the dynamic renewable energy industry. However, other forms of incentives that do not depend on financing from only the largest financial institutions and instead rely on financing structures that do not limit the pool of investors to only those with outrageous levels of “passive” income, are certainly possible.

The ITC and PTC are scheduled to gradually phase down in the coming years, mitigating the influence of the credits and reducing the contribution of renewable energy to income inequality. The next administration should ensure that there are adequate incentives for renewable energy development, and explore options that reduce economic inequality as well as encourage renewable energy development.

III.            Reducing Unemployment 

Renewable energy development helps reduce unemployment by creating new jobs in a growing industry. In addition to job creation, renewable energy development has the potential to provide secondary employment benefits as well.  As long as tax incentives are not over-utilized, the placement of high capital technologies in local jurisdictions can increase the tax base. An increased tax base generates revenue for the local government, allowing it to provide greater social services that in turn fight societal ills that sap lives and workforces.

As President Obama pointed out, social problems, such as opioid abuse and entry and recidivism in the criminal justice system, negatively affect unemployment rates as well as overall societal health. A renewable energy-based economy can help combat these problems by creating more living-wage jobs and expanding the tax base. Further, job training programs and other social opportunities could be made available because of the benefits created by renewable energy development. 

The solar industry already employs 77% more Americans than the coal industry, and these jobs are spread across communities throughout the country. While certainly the transition from fossil fuels to renewable energy will hit specific communities hard, the economic benefits, including a reduction in unemployment rates on a national scale, will be shared widely.

IV.            A More Resilient Economy 

President Obama specifically addressed the need to align the national economy with ecological limits. “[S]ustainable economic growth requires addressing climate change. Over the past five years, the notion of a trade-off between increasing growth and reducing emissions has been put to rest.”  

The decoupling of emissions from economic growth is absolutely critical if both the capitalist system and the ecological systems of the planet are to continue to co-exist. The International Energy Agency estimates that on the global level, “the annual rate of reduction in global energy intensity needs to more than double – from 1.1% per year today to 2.6% by 2050.” Thus, while our gains in decoupling are important, they must be increased. Our society is locked in to a capitalist system, and as the President points out, “it is important to remember that capitalism has been the greatest driver of prosperity and opportunity the world has ever known.” Therefore, decoupling emissions from growth has to be a bedrock principle for growing the economy.

The President writes of an economy that "grows sustainably without plundering the future at the service of the present." There is no better single way to make a massive stride toward achieving such an economy than through the development of renewable energy.

In sum, President Obama effectively advocates for a strong role for the federal government in creating a structurally sound economy. The example of renewable energy development provides a good case study of President Obama’s principles being applied—e.g., stimulus package investments, R&D, and infrastructure—but also show that the renewable energy industry could make a greater overall contribution to the health of the economy if the incentive structure was adjusted to depend less on tax credits and more on direct federal spending.

Whether moving away from a dependency on tax credits in the renewable energy industry is politically possible is another question altogether. A reliance on direct federal spending carries with it its own perils, but renewable energy cannot prosper at the expense of the greater economy. Likewise, the overall economy cannot continue to grow without rapidly adopting renewable energy technology. The relationship is reciprocal and important to get right and will largely fall to the next administration. Be sure to vote.