White House: Economic Recovery May Stall Without CO2 Bill
16 März 2010 - 9:23PM
Dow Jones News
Senior White House and Obama administration officials say they
are worried the nation's economic recovery could stall if Congress
doesn't pass a climate bill this year.
The officials warn that investors are so uncertain about the
future cost of emitting greenhouse gases that they are sitting on
capital rather than pouring it into "clean" technology, new power
plants or energy-intensive manufacturing.
The administration has for months been moving away from
advocating climate legislation primarily as an environmental issue
and toward a jobs-creation argument. But the comments are a marked
shift to a stronger rhetoric: fears of prolonging the recession.
The White House says spurring "clean," or
low-greenhouse-gas-emitting energy, can help lay the foundation for
the 21st-century U.S. economy.
"Right now there's a lot of money on the sidelines," said Energy
Secretary Steven Chu. "Capital on hold means investments not being
made, investments not being made means jobs not being created," he
said at an Export-Import Bank conference last week.
Companies that could capitalize on a carbon-constrained economy,
such as General Electric Co. (GE), Alstom SA (ALO.FR), Areva
(CEI.FR), Babcock & Wilcox, a unit of McDermott International
(MDR), Siemens AG (SI), Chesapeake Energy Corp (CHK) and First
Solar Inc. (FSLR), say policy clarity will focus investment. So do
emitting businesses that will need to adapt, such as American
Electric Power Co. (AEP) and BP PLC (BP).
Ambiguity, however, breeds risk, which begets financiers'
reluctance.
The White House is attempting to revive legislation that would
effectively curb emissions of greenhouse gases such as carbon
dioxide. A bill that passed the House last year stalled in the
Senate, and the administration is working to pump life into
alternative proposals. However, many lawmakers, officials and
pundits say the prospects for a climate bill this year are
increasingly dim.
Meanwhile, the Environmental Protection Agency is moving ahead
with regulations to cut greenhouse gases under existing law,
regulation that industry fears is too blunt and may damage the
economy.
But without certainty on how--and how much--greenhouse gases
will be curbed, the energy industry has little idea how to factor
the potential price of carbon into their cost expectations or even
demand. It cuts both ways: Financiers are wary of investing both in
conventional as well as new technology.
"The economic team ... is very concerned about the chilling
effect on investment of not having legislation," said Joseph Aldy,
special assistant to the president for energy and environment, at
an event here last week.
The ambiguity of how EPA regulations will affect industry is
exacerbating the investment problem, he said. The EPA has said it
would delay regulation of the largest emitters, planning to phase
in other sources later. The regulations are expected to be
challenged, and it's unclear if, like rules for air pollutants such
as sulfur dioxide, they will later be discarded.
"There's significant concern that as we're trying to get the
economy up and going again, that this kind of uncertainty may stall
things some," Aldy said.
Kevin Walsh, managing director of power and renewable energy at
GE Energy Financial Services, said the financing community is
"grappling for a steady footing to invest" under policy confusion.
Legislation or regulation that puts a price on carbon would be a
"shot in the arm" for the low-emitting energy industries. But the
failure of lawmakers to pass a low-carbon electricity
standard--tied up in the politics of the climate bill--is also
arresting investment.
Conventional energy sectors are also affected. Although Congress
is increasingly unlikely to pass a climate bill this year, the
Energy Information Administration has lowered its forecast for new
coal-fired power plants based on a future carbon price risk. The
EIA historically bases its long-term forecasts only on existing
laws, but this year it factored in a three-percentage point rise in
the cost of capital for coal-fired power plants based on the
"implicit hurdle" of potential policy.
Senior officials at both American Electric Power and BP have
said the planned EPA greenhouse-gas regulations may delay refinery
plant modifications and accelerate coal-fired power plant
closures.
For example, Bruce Braine, head of strategic policy analysis at
American Electric Power, said the Clean Air Act rules are "going to
be litigated like crazy." Without certainty on the rules or
flexibility to use market-based programs, many companies are likely
to wait for the courts before making modifications, including those
that would improve pollution controls.
The White House is also concerned that without the climate bill
spur, the U.S. may lose capital and competition for clean energy to
countries in Europe and Asia, particularly China.
"People need to realize this is a global market for our
capital," GE's Walsh said. "Our money is going to go where we see
long-term certainty ... and if Europe has a better framework,
that's where our money's going to go," he said.
-By Ian Talley, Dow Jones Newswires; (202) 862 9285;
ian.talley@dowjones.com;
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