In the long term, protecting the global climate will require greater use of solar, wind, geothermal, biomass, and small hydropower, which emit no net greenhouse gases. Yet renewable energy firms in the U.S. must actively help shape climate policy to ensure that they benefit. If they do not, U.S. climate policy in the near term will exploit other, non-energy opportunities, and the European and Japanese firms will dominate the long-term global market for clean energy.

In the U.S., an active climate policy might not necessarily benefit renewables, at least in the next decade. To comply with commitments for the year 2012 made by the Clinton Administration in Kyoto, American polluters could rely largely — up to 85% — on deals to control emissions in other countries (for example, by planting trees in Central America) rather than controlling emissions at home. Proponents claim that a trading system could slash emissions more expeditiously after 2012. Opponents, especially in the European Union, retort that it would leave untouched the rich world’s own polluting habits.

Yet the debate over how best to achieve the climate goals of the Kyoto Protocol assumes that the U.S. Congress will ratify the treaty. The Clinton Administration has proposed a $6.3-million Climate Change Technology Initiative which includes, among other elements, tax credits for purchasers of certain renew-able technologies, and accelerated research and development. However, Congress has not only challenged the plan, it has attacked existing government renewable energy programs.

In short, a tangle of obstacles now confronts the U.S. renewable energy industry. A cluster of industries and labor unions perceive themselves threatened by a switch to low-carbon energy sources. Many politicians oppose the Administration’s cautious climate proposals, due both to real concern for the economy and a desire for partisan advantage. This vocal alliance could sabotage even distant prospects for sustainable en-ergy. Meanwhile, the Administration seeks to demonstrate that climate protection will cost very little and hurt not at all, raising the prospect of short-term climate action based on cheap emission credits gained elsewhere — at the expense of building a strong, market-based, zero-emission renewable energy industry. And, as American firms struggle merely to survive, the nation’s commercial competitors in Europe and Asia work to ensure the dominance of their renewable energy industries.

A climate-driven market is not a done deal for the U.S. renewable energy industry. To succeed, renewable energy firms must present themselves as the industry of the future, and a potential economic force. They must explain to the Administration and to Congress the threat of losing another growth industry pioneered by American entrepreneurs. And they must explain to unions that more renewable energy means more family-wage jobs. Above all, they must participate in the policy process.

As the scientific consensus around the greenhouse effect solidifies, and atmospheric change enters house-hold discussion, the world will act to protect the climate. Established companies will win the ensuing battle to supply clean energy, and weakened U.S. firms may not benefit. It is up to the industry to explain to America now that deferring the “tough medicine” means abandoning its economic benefits.

Virinder Singh, Research Associate
Adam Serchuk, Research Director and Executive Editor of REPP’s Issue Brief series
Roby Roberts, Executive Director

July 8, 1998