Payroll Tax Cut Without Offsets Contemplated By White House, Congress And Norquist

Reported by Sam Stein

 

WASHINGTON — As the United States Senate considers yet another variation of the payroll tax cut, there appears to be little common ground over how the measure should be paid for. Democrats, along with one Republican, continue to argue for a small surtax on millionaires. Republicans either balk at that proposal or say they don’t support extending the payroll tax cut at all.

The impasse is unlikely to be bridged by the time the newest bill comes to the floor on Thursday, leading operatives to suggest that it would simply be easier to pass the payroll tax cut extension without paying for it.

Longtime anti-tax advocate Grover Norquist said he would prefer to see the tax cut accompanied by an equivalent reduction in spending to make up for the decrease in revenue. He and other conservatives said that if spending offsets do not accompany the tax cut, it would be harder for Democrats to argue against other such tax cuts, including a repatriation holiday on corporate taxes.

“No to a tax increase, yes to extending it without a quote, unquote ‘pay for,’ and the preference is to do it with spending cuts as the offset,” said Norquist. “The worst thing you can do would be to extend it with a permanent job-killing marginal tax increase. You would end up with permanent marginal tax rates in exchange for a temporary reduction in tax rates on Social Security.”

When the payroll tax cut was first introduced at the end of 2010, there was no talk about how it would be offset. Instead, it was passed as part of an agreement to extend the Bush tax cut for an additional two years. The estimated $860 billion price tag was simply put on the books.

So why not do the same now, when the price tag is significantly lower — $185 billion to reduce the employee’s share from 4.2 percent to 3.1 percent of wages, along with other tax policy changes — and Republicans have, as a matter of ideological principle, argued that tax cuts pay for themselves?

The question was posed to two senior Obama administration officials during a briefing with reporters yesterday. And while they continued to argue that there were easy ways to cover the payroll tax cut — while needling Republicans for suddenly insisting that tax cuts be offset — they never explicitly said it had to be paid for.

// // “So we still think that the payroll tax, unemployment insurance, any other jobs measures can be paid for in a responsible way,” one said. “The important thing here, though, is that this get done.”

Reminded that, at least as far as unemployment insurance is concerned, the president has consistently held that such emergency expenditures don’t need to be offset, the official replied: “I don’t think the president’s longstanding position on that has changed. But there is a way of paying for it that was put forward in the American Jobs Act.”

And therein lies the problem. While both Republicans and Democrats privately admit that they have been and would be comfortable with letting tax cuts continue without offsets, neither will say so publicly, lest their commitment to deficit reduction be questioned.

Top congressional Republican aides argue that a payroll tax cut extension without offsets isn’t necessarily easier to pass than one paid for by a millionaire’s surtax. But the reasoning behind that argument has more to do with timing than philosophical disputes.

Congress will be voting on major appropriations bills before the Christmas recess. To have them turn around and stack $185 billion on the deficit would be too much to ask, the logic goes.

“The president said in his speech to Congress and in speeches since, that ‘everything’ in the bill will be paid for,” Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.), said in an email. “I think it will be MUCH easier to pass it if they take out the poison pill of a tax hike on job creators; a tax hike, by the way, that has bipartisan opposition.”

A top House aide was more blunt. “I don’t think either would pass the House,” the aide explained, when asked about a payroll tax cut extension without offsets and one that was paid for with a millionaire’s surtax. “So it’s a ‘would you rather burn to death or drown’ type of question.”

New Jersey is now a true solar power

Thursday July 16, 2009

In just a few short years, the Garden State has become the Sunshine State

BY JOE TYRRELL

NEWJERSEYNEWSROOM.COM

As Congress wrestles with national energy policies and gubernatorial candidates tout their plans here, New Jersey officials say the state deserves credit as a leader in promoting solar power.

In just a few years of coordinated efforts, New Jersey has gone from a non-factor to number two among the states in solar installations connected to the power grid. While far behind California, New Jersey currently generates about twice as many solar kilowatt hours as number three Colorado.

While applauding the gains, many in the industry also say the state, like the nation, has fallen well short of performance goals. New Jersey rose to the top of solar charts in a period when there was little competition from other states.

Now, as the federal government begins to pay attention to renewable energy, New Jersey is in the midst of a challenging transition away from an easy to understand program, which gave rebates to install solar power cells.

The new program shifts the focus away from consumers to utility companies and investors by creating a marketplace for renewable energy credits. The concept has its supporters, though many are more hopeful than confident.

Still, at a time when solar businesses believe the technology is on the verge of a belated boom in the United States, recent New Jersey statistics wowed some attendees at a recent industry conference in Philadelphia.

“Making this even more remarkable is that in 2001 New Jersey had only six” solar cell installations connected to the power grid, compared to more than 4,000 today, wrote Bob Haavind of Photovoltaics World.

His report can be viewed here.

During the session, the state’s top regulator, Board of Public Utilities President Jeanne Fox, proclaimed that when it comes to government policy, New Jersey is “the best place to do solar in the country.”

Around the country, many in solar trade groups and businesses credit New Jersey for showing what a small, partly cloudy state can do to grab its place in the sun.

“Obviously what they have been doing has worked,” said Monique Hanis, director of communications for the Solar Energy Industries Association in Washington, D.C.

“What makes New Jersey stand out is the specific language in the state’s energy master plan, calling for the generation of 2.1 percent of its electricity to be coming from solar in 2021,” said Neal Lurie, director of marketing and communications for the American Solar Energy Society of Boulder, Colo.

Closer to home, though, reactions are more muted.

The rebate program “came out of advocacy” by solar power proponents, “it was not a BPU idea,” said Delores Phillips, the society’s Mid-Atlantic executive director.

Even with improving technology and rising costs for fossil fuels, the cost of solar power remains higher than those dirtier energy sources. Solar advocates maintain other forms of energy benefit directly and indirectly from government subsidies, such as state funds to decommission nuclear facilities, or cleanups of coal ash landfills.

New Jersey’s small spurt of solar power materialized during a BPU rebate program that turned out to be too popular for the board’s limited financial commitment. The initial surge in applications eventually bogged down as the release of funds slowed.

So the board decided on an innovative approach, creating financial instruments, solar renewable energy credits, or SRECs. The idea is that investors buy credits from solar producers, each pegged to 1 megawatt of power. The investors help producers expand, while reaping benefits from energy sales to utilities.

“We’re all looking to see how it’s going to make out,” Hanis said.

Compared to the rebates, grants or tax credits offered elsewhere, New Jersey’s approach is more ambitious but “still a little bit vague for some people,” she said.

“It’s not really tried and tested,” Phillips said, adding it requires two inter-related factors to success.

To be attractive to investors, SRECs need to be based on reliable values, meaning utilities must contract for long-term power purchases, she said. To serve those utilities, the investments must finance enough power to meet their requirements for more clean power, she said.

Judged on that basis, “New Jersey’s program is good, but only half as good as they said it was going to be,” said Edward O’Brien, a partner in McConnell Energy Solutions of Wilmington, De. Last year, instead of a projected 90 megawatts of solar power, the state was at 45, the result of continuing uncertainty over credit values, he said.

The theory is simple, O’Brien said. While not completely supplanting the mom-and-pop approach to solar panels, securitizing the solar marketplace should put it on the same funding as other major energy sources.

“Why are you out putting solar panels up on your house, which is hard to do, instead of buying five kilowatts worth of solar power from some producer?” O’Brien said.

In practice, though, the SREC system “has not been fully thought out,” he said.

Added to the current recession, investors are cautious because of America’s patchwork of energy policies and regulations, which vary from state to state, O’Brien said. States have not helped by altering programs, he said.

“Every state is different, and every state has a bait-and-switch,” O’Brien said.

Still, he is optimistic that New Jersey will regain its momentum, and others in the field view the problems as a hiccough in the growth of solar power.

In the short-run, “there could be a shake-out” during the transition from rebates, said Rick Brooke of Jersey Solar in Hopewell. But 25 years in the business and a number of false dawns, this opportunity looks golden.

As long as the state SREC market allows small systems to participate, people who installed solar panels on the roofs of their homes or businesses still have a chance to participate, Brooke said.

Moreover, people in the industry are expecting good things from the energy bill making its way through Congress. Nearby states have launched incentive programs, whether inspired by New Jersey or California, which has roughly two-thirds of the nation’s grid-connected solar systems, Brooke said.

“It’s a good time to be in the business,” he said. “The state is committed to it, they have goals. People are moving ahead with it. Before, the interest came and went, but now it’s here.”

Rebates and SRECs are not the only way to support the growth of solar power. This month, Gov. Jon Corzine and Republican challenger Chris Christie each highlighted their support for renewable energy.

Democrat Corzine was able to announce the availability $20 million in federal grants for projects at public institutions in the state. Christie promised to create a new agency to promote clean energy technology and jobs, and would remove those functions from the BPU.

The Republican’s approach seemingly echoes Phillips’ complaints about the board’s “antiquated” procedures and primary purpose to regulate rates. But she said members of her association “were very underwhelmed by Chris Christie’s plan,” because it looks at the big picture and avoids the nitty-gritty.

While the Corzine Administration has set laudable goals for increasing clean energy, Phillips said most of the growth in solar power can be traced to his predecessor, former Gov. Jim McGreevey. There’s been “some stagnation” in state efforts since then, she said.

“Everybody likes to talk about clean energy job creation, but nobody explains how they’re going to do it,” she said.

Whether the New Jersey approach catches on remains uncertain. Around the nation, some communities are coming up with their own answers. Many solar advocates are looking beyond America to more successful programs abroad.

For more information on state incentives for renewable energy, visit njcleanenergy.com.

Our Perspective:

NJ has made great strides to join the alternative energy evolution. Not to say it is perfect, but for the first time people can see an acceleraed return on their investment that makes sense.

Rebates for systems under 5okw and the REC program has allowed funding to help underwrite these investments. Add the Federal incentives of a 30% tax credit and accelerated depreciation and the market is positioned to take off.

Would you like to know more? Contact us 856-857-1230 or email george@hbsadvantage.com.

We can provide an overview of your return on investment and help to develop the opportunity and make it become a reality.

Visit us on the web www.hutchinsonbusinesssolutions.com

NJ: New Program Supports Manufacturing of Innovative Clean Energy Technologies

As reported in SNJ Business People

06/02/09

The second solicitation for financing by the State of New Jersey under the Clean Energy Manufacturing Fund began on June 1. The recently launched program was specifically designed to support companies looking to site or materially expand a Class I renewable energy or energy-efficient product manufacturing facility in New Jersey, and will enable the state to take a leadership role in the clean technology industry by promoting new green jobs and growth while addressing the goals of Governor Jon S. Corzine’s Energy Master Plan. The program is funded by the New Jersey Board of Public Utilities (BPU) and administered through the New Jersey Economic Development Authority. The solicitation period opened June 1, and is scheduled to close on July 15.

 “The Clean Energy Manufacturing Fund will contribute greatly to the cost-competitiveness of renewable energy and energy efficiency in New Jersey while also supporting the creation of green collar jobs in the Garden State,” said Caren S. Franzini, chief executive officer of the EDA.

 “Our continued partnership with the EDA will create jobs, ensure energy security and help achieve Governor Corzine’s mandate to reduce greenhouse gas emissions and combat global warming,” added BPU Board President Jeanne M. Fox.

Through the Clean Energy Manufacturing Fund, New Jersey clean technology manufacturers can receive funding under two separate components: project assessment and design, and project construction and operation. In total, a qualified manufacturer of Class I renewable energy or energy efficiency systems, products or technologies may be eligible to receive up to $3.3 million in grants and interest-free loans. Up to $300,000 is available as a grant to assist with the manufacturing site identification and procurement, design, and permits. Up to $3 million is available as a zero-interest, ten-year loan to support site improvements, equipment purchases, and facility construction and completion.

To take advantage of this program, a company must be a for-profit entity that is planning to manufacture eligible products in New Jersey and be entering or expanding within the manufacturing stage of commercial development. A minimum 50-percent cash match of total project costs from non-state grants, loans, or equity, is required for both program components. Preference will be given to those projects that demonstrate a greater percentage of the project being designed, manufactured, processed, assembled or made ready for commercial sale at the company’s project facility in New Jersey. Eligible technologies for funding include energy efficiency equipment and technology, Class I renewable energy and other technologies or equipment that can demonstrate their integral nature to the development of Class I renewable energy and energy efficiency technologies. Class I renewable energy is defined as electricity derived from solar energy, wind energy, wave or tidal action, geothermal energy, landfill gas, anaerobic digestion, fuel cells using renewable fuels, and, with written permission of the New Jersey Department of Environmental Protection (DEP), certain other forms of sustainable biomass.

To learn more about the Clean Energy Manufacturing Fund, call 866-534-7789 or visit www.njeda.com\CEMFApplication.

EPA: Recession Won’t Stop Clean Energy Revolution

ANGELA CHARLTON | May 28, 2009 05:01 PM EST |

PARIS — The top U.S. environment official says it’s time for the United States to shed its energy-wasting image and lead the world race for cleaner power sources instead.

After several years with a relatively low profile under President George W. Bush, the U.S. Environmental Protection Agency “is back on the job,” EPA Administrator Lisa Jackson told The Associated Press on Thursday during a trip to Paris.

What the EPA does domestically this year will be watched closely overseas. Nations worldwide are working toward a major meeting in Copenhagen in December aimed at producing a new global climate pact. The U.S. position on curbing its own pollution and helping poor countries adapt to global warming is seen as key to any new pact.

Jackson was in Paris for international talks on how rich governments can include global climate concerns in overall development aid.

She dismissed worries that economic downturn was cutting into aid commitments or investment in new energy resources. She said the United States should take the lead on clean energy technology, recession or no.

“We have to get in the race now _ and win it,” she said. “I don’t expect a moving backwards because of recession.”

At climate talks in Paris earlier this week, European environment ministers welcomed greater U.S. commitment to environmental issues under the Obama administration _ but said it still wasn’t aiming high enough in its targets for cutting U.S. emissions.

Jackson said a shift in the American mindset is only beginning.

Talking about energy efficiency and saying companies should pay to pollute _ “that’s a revolutionary message for our country,” she said.

For a long time, she said, “People didn’t even expect the EPA to show up” at events, much less set policies that could be seen as examples for the rest of the world.

“Now it seems like every day we’re rolling back or reconsidering a Bush era policy on clean air,” she said.

She said it was time for the United States to take a more active role in limiting chemical pollutants, after falling behind Europe in that domain.

The U.S. also has lessons to learn from countries such as the Netherlands, she said, after visiting its low-lying, flood-prone lands to study ways cities like her native New Orleans can better manage water.

Our Perspective:

It is good to hear the administration making positive comments about our energy’s future. Alternative energy is a growth business and the correct path for insuring our future energy indepenence.

Let us know your thoughts? You may leave a comment or email george@hbsadvantage.com

Would you like to know more about the financial opportunities that drive this investment. Feel free to contct us.

Wind Power Finally Getting Its Due

Written by T. Boone Pickens

Earlier this month I made a point of going to WINDPOWER 2009, the world’s largest conference on wind energy. Yes, it was in the Windy City, but the truth is it’s not always in Chicago. Next year’s conference will be here in Dallas and you need to put it on your calendar.

A decade ago you could have packed everyone who showed up at an event like this in a pint-sized 7-11. Those days are gone. Last year, attendance at this event topped 13,000. This year? More than 23,000. And it wasn’t just exhibitors (though there were close to 2,000 of them there as well). The roster of key policymakers who participated at WINDPOWER 2009 was impressive, including Interior Secretary Ken Salazar, Energy Secretary Steven Chu, and FERC Chairman Jon Wellinghof. All of them echoed the statements made by President Obama that alternative energy and renewables are important elements in this administration’s energy plan.

That’s not just sound energy policy but it’s good for the economy as well. Business is booming in the wind energy sector, and you know who is most keenly aware of that? America’s governors. Over the last year as I’ve been promoting the Pickens Plan, I’ve met wind state governors such as Brian Schweitzer of Montana, Bill Richardson of New Mexico, and Jon Huntsman of Utah. Back when she was Governor of Kansas, Health and Human Services Secretary Kathleen Sebelius hosted the very first Pickens Plan Town Hall Meeting in Topeka.

But what really stood out was the governors who attended WINDPOWER in Chicago were not from traditional wind power states. They were from Michigan, Wisconsin, Iowa, Ohio, and of course, Illinois. If you take a look at the Energy Department’s wind map, you’ll see that these states are not in the Wind Corridor, which runs the length of the Great Plains from the Texas Panhandle to the Canadian border. Yet, they are profiting from wind energy, thanks to the enormous number of job that are being created to manufacture turbines and other equipment, build infrastructure, and improve efficiency. These states have a vested interest in wind energy.

We all do. Right now there are wind farms and manufacturing facilities in 48 out of 50 states. While our country is fighting its way out of a recession, this industry and others in the burgeoning green economy are bright spots, creating permanent, good-paying jobs, putting people to work, and helping America cement its status as a global leader in the energy industry.

This is one of the basic principles of the Pickens Plan, and it goes straight to the heart of what I’ve been talking about since I launched the plan last July. Right here in America, we’ve got plenty of energy waiting to be tapped. The only problem is that for the last four decades we haven’t had the leadership to harness it or develop it or drill for it. Instead, we took the easy way out. Cheap imported oil became the crutch that everyone leaned on, only now we know it’s not cheap anymore.

Last year, as our economy stalled, we spent $475 billion on imported oil. Can you believe that? I can’t. Half a trillion dollars. The greatest transfer of wealth in recorded history. And to make matters worse we still haven’t learned our lesson. According to figures just released, our trade deficit on oil imports widened in March for the first time in eight months. We’re still importing more than two-thirds of the oil we consume, and that’s got to stop.

The purpose of the Pickens Plan was to put a lot of ideas on the table in order to help our country develop the energy plan it so desperately needs and deserves. Wind energy is one of the best, and if you don’t believe me come to Dallas next year and see for yourself at WINDPOWER 2010.

Homeowners Associations: The Enemy of Solar?

May 15, 2009, 8:15 am

By Kate Galbraith

Kirk J. Condyles for The New York Times Not all homeowners associations approve of this sort of thing.

John Wood, a homeowner in Woodbury, Minn., wanted to put solar panels on his roof. Last month, his homeowners association rejected his application.

“I felt extremely disappointed,” Mr. Wood said by telephone.

He added: “It made me think that homeowners associations are in place to do only one thing, and that is to maintain the status quo, and they have no interest in any sort of change whatsoever.”

Al Rudnickas, the president of the board of the Wedgewood Association, the homeowners’ group, said that the board was open to less obtrusive technologies like solar shingles. But in this case, “The feeling of the board was that what was proposed wasn’t aesthetically pleasing in keeping with the standards of the community,” he said.

Mr. Rudnickas said that the association invited Mr. Wood to submit a modified application, but Mr. Wood — who is the first homeowner in the association to apply for solar panels — said he was not sure whether he will do so.

Mr. Wood’s case, first reported in the Woodbury Bulletin, has echoes around the nation.

 

In Somerset County in New Jersey, a homeowner was ordered to take down 28 panels.

In California, another homeowner, Marc Weinberger, sued his homeowners association last year after his efforts to put solar panels on his roof were rejected.

Mr. Weinberger and his lawyer, Michael McQueen, have since told Green Inc. that their motion for summary judgment was granted, and Mr. Weinberger installed a system early this year.

In another California case, Marty Griffin, a homeowner in Santa Clarita, applied to put solar panels on a hillside on his property. The association said no, but he went ahead anyway and got sued.

The litigation has been under way for more than a year. Mr. Griffin says the association did not respond in a timely way to his application; a lawyer for the association, Ricardo Cestero, told Green Inc. that Mr. Griffin “did not follow correct procedures.”

Mr. Griffin details his saga, including legal documents, on his Web site.

For solar installers, the roadblocks can be frustrating. John Berger, the chief executive of Standard Renewable Energy, a Houston-based firm that designs and installs solar systems for homes, said that the homeowner associations’ prohibitions had already cost him more than $1 million in business.

“It is a big problem,” he said.

Lawmakers in Texas are considering a bill that would prevent homeowner associations from banning solar panels, and similar laws are already in place in a dozen or more states, according to the Database of State Initiatives for Renewable Energy — including Arizona, Colorado, Florida and California, among others.

Mr. Wood said he planned to contact his state legislators in the hopes of enacting this type of law in Minnesota.

The laws, however, are rarely comprehensive, as some of the California cases suggest.

Rusty Haynes, a project manager at the North Carolina Solar Center, which manages the D.S.I.R.E. database, said that some applied only to new construction, and others might be vague or limited in scope.

In Arizona a few years ago, a homeowner was challenged over the color of her panels (they were apparently too dark), despite a state law intended to smooth the process.

Has this happened in your community? Is this an issue for you? Feel free to comment below, or e-mail george@hbsadvantage.com

Solar energy helping Ewing church cut costs

Monday, April 13, 2009

BY LISA CORYELL

Special to the Times

EWING — It may have been God who said “Let there be light,” but it was a couple of business- savvy local church leaders who found a way to turn that divine gift into a money-saving venture for their congregation.

Grace Cathedral Fellowship Ministries church on Calhoun Street has plugged into the sun with a $600,000 solar energy system expected to cut church energy costs in half.

“Parishioners are strained by the economy and churches have cut costs where they can,” said Ronald Cobbs, chairman deacon of the church. “God will do a lot for us, but we have to some things our selves. Churches have to have good business sense.”

Installed by Trinity Solar of Freehold, the 95.13 kilowatt system is expected to produce approximately 120,000 kilowatt hours per year for the church — the largest solar energy system on any church in Mercer County.

The system is expected to generate enough energy to reduce church utility costs by about $40,000 a year. Church leaders say they expect to reap another $70,000 each year by selling Renewable Energy Credits to electricity providers in the state.

“We believe within six years we’ll have this system paid for,” said Bishop Jerome Wilcox, church pastor.

The giant solar panels needed to harness the sun’s energy sit cheek-to-jowl on the rooftops of the sprawling church sanctuary and an adjacent fellowship hall. A massive “inverter” on the north- side of the sanctuary changes the energy from DC power to AC power.

“We use what we need and what we don’t need goes back to the grid for PSE&G to use,” Cobbs said.

While the financial savings are a blessing, the ecological impact is divine, Cobbs said.

“We see the significance of going green,” he said. “If we can take the energy from the sun its much better for the environment.”

Ewing Mayor Jack Ball congratulated Wilcox on the completion of the new system, which is expected to be up and running in the next few days.

“Bishop Wilcox has done some wonderful work in this community through the years and the installation of this clean, environmentally- friendly energy system demonstrates his ongoing commitment to his fellowship and the community at large,” Ball said….

Our perspective:

Bravo! We are currently speaking to 3 different churches regarding the possibility of installing solar.

Maybe God is leading the charge afterall!!!

Should you be intersted in learning more about your own solar solution or solar possibility, give us a call. 856-857-1230.

You mail also email  george@hbsadvantage.com 

We can show you how to structure your solar investment and take advantage of all the federal and state incentives.

China triples wind power capacity goal

As reported in Huffington Green

Mon May 4, 3:54 am ET

BEIJING (AFP) – China has more than tripled its target for wind power capacity to 100 gigawatts by 2020, likely making it the world’s fastest growing market for wind energy technology, state press said.

China is aiming for an annual wind power growth rate of 20 percent for the foreseeable future, Feng Junshi, an official with the National Energy Administration, told a Beijing conference, according to the China Daily.

The new target for 2020 is up from a goal of 30 gigawatts announced by the government 18 months ago, the report said.

China currently has 12 gigawatts of installed wind power, but that is set to grow to 20 gigawatts by next year, the newspaper said.

“China is powering ahead with no visible signs of slow down,” the report quoted Steve Sawyer of the Brussels-based Global Wind Energy Council as saying.

“They intend to become the largest market in the world, very clearly, and they probably will unless things take off in the US again in the relatively near term.”

China is currently the fourth largest producer of wind power after the United States, Germany and Spain.

In addition to vast wind power facilities in its arid north and northwest regions, China is also actively building wind farms off its eastern and southern coasts.

The country is the world’s second largest energy producer, but is struggling to wean itself off its dependency on coal, which is highly polluting and blamed for emitting the greenhouse gases that cause global warming.

Our Perspective:

This is good news. China has been in an expansion mode. I have friends who go there for business and they say that construction is booming.

I am glad they are looking to alternative energy to help support this growth. Should they have relied on fossil energy solutions, they would have had 1 foot in the grave.

There is no one solution that will address our growing energy needs. There will be a combination of viable solutions, when coordinated together, will power America’s future.

Let us know your thoughts?

You may leave a comment or email george@hbsadvantage.com

 

Reset: Making Sustainability the Centerpiece of Our Recovery

Daniel C. Esty

Posted April 20, 2009 | 03:50 PM (EST)  As reported in Huffington Post Green

Talk has begun to turn to the new economy that will emerge from the present collapse. General Electric CEO Jeff Immelt has suggested that the current crisis is not just a recession but a fundamental “reset” of how business gets done. And Time magazine has taken up this theme with a reset cover story. But there has been little discussion of exactly what changes – in principles and practices — should be made so that we rebuild our economy on firmer foundations. As we celebrate Earth Day this week, it is a good time to commit to “sustainability” as a centerpiece of a revitalized regulatory system.

For the past three decades, debate has raged over whether and how to deregulate. But while markets offer the prospect of promoting innovation, growth, and prosperity, few now believe that capitalism is self-correcting or that the private sector needs only minimal supervision. From the demise of Lehman Brothers and AIG to the skullduggery of Bernie Madoff and Allan Stanford, the signs of inadequate regulation and market failure surround us.

Two particular forms of market failure underlie the meltdown of the past year and make sustainability the right touchstone for our regulatory reset efforts:

• Externalized costs and risks
• Incomplete information

Both of these problems require that we rethink our approach to regulation — and re-establish the fundamentals of our economy on a more sustainable basis. And note that this principle should apply broadly, not just in the financial arena.

We need regulations which ensure that companies cannot structure their operations so that any upside gains accrue to their owners (or worse yet their managers), while risks or costs get shifted onto society as a whole. In the banking sector, rules against over-leveraging are urgently required. The recently released Turner Report in the UK outlines the first steps in this direction that should be taken. More generally, financial reporting rules must be designed to expose hidden risks and externalized costs.

We should likewise insist that companies which send emissions up a smokestack or out an effluent pipe cease their pollution or pay for the harm inflicted on the community. In our “reset” world, economic success cannot come at the price of harms imposed on the public in the form of contaminated air and water or risk of climate change. Thus while we lay the foundation for a more sustainable economy, let’s similarly adopt rules that provide for a sustainable environmental future. This will require overhauling the traditional approach to environmental regulation which countenances way too much in the way of externalities by offering “permits” up to a certain level of harm.

President Obama’s call for a price on carbon dioxide emissions represents a good first step in the “no externalities” direction. But let’s broaden the push and make polluters pay for all the harm they cause. If companies — and each one of us in our personal lives — had to pay for our waste and pollution, behavior would change. Putting a price on harm-causing creates incentives for care and conservation — efficiency and resource productivity.

More importantly, these price signals will drive a market response. Companies that are positioned to help others reduce their waste or cut their emissions will find customers eager for their goods and services. And where no easy solutions are available, harm charges will motivate “cleantech” innovation as inventors and entrepreneurs recognize the prospect of making money by solving environmental problems.

In parallel with a commitment to internalizing externalities, we must adopt transparency as a watchword. Market capitalism does not work without adequate information about economic actors. This reality has been understood in theory, but now needs to be advanced in practice. Government has a critical role to play in establishing the terms of disclosure about companies, markets, products, investment vehicles, and more. Public officials must also be empowered to ensure that disclosures are complete and accurate.

Well-designed reporting rules make it easier to spot externalized costs or risks and harder to hide malfeasance. Widely available metrics also facilitate benchmarking across companies, which offers a mechanism for assessing performance, highlighting leaders and laggards, and spurring competitive pressures that drive all toward better results. Studying the leaders offers an important way to identify best practices in everything from corporate strategy to pollution control. Likewise, outliers (such as those who make 10% returns year after year without fail) can be isolated for special review and scrutiny.

Such transparency would make it easier to refine our compensation systems to reward superior performance and real value creation. Carefully constructed disclosure rules could help, on the other hand, to unmask mere financial engineering, which should not be credited with outsized rewards.

There is a great deal of work to be done to re-establish prosperity across our country and the world. Smart regulation can channel corporate behavior and individual effort toward sustainable economic growth — that is durable because it rests on solid underpinnings not hidden risks or externalized costs.

Daniel C. Esty is the Hillhouse Professor at Yale University with appointments in both the Yale Law School and the Yale School of Forestry and Environmental Studies. He is the co-author (with Andrew Winston) of the prize-winning book, Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage (just released in a revised and updated edition published by John Wiley). A former Deputy Assistant Administrator at the US Environmental Protection Agency, Professor Esty advised the Obama Campaign on energy and environmental issues and served on the Obama Transition Team.

N.J. sets ambitious goals for wind and solar power production

by Brian T. Murray/The Star-Ledger

Sunday April 05, 2009, 7:12 AM

The relicensing last week of the Oyster Creek Nuclear Generating Station, the nation’s oldest nuclear power plant, guarantees that nuclear energy is here to stay in New Jersey, for at least a few more decades, even as state officials continue to push alternative sources of energy.

The Garden State draws about 53 percent of its electricity from four nuclear plants — a reliance on nuclear energy far above the national average of about 20 percent, according to the U.S. Department of Energy. Along with Oyster Creek in Lacey Township, which was cleared by federal regulators for a new license on Thursday to operate another 20 years, the state’s electricity flows from the Hope Creek and the twin Salem Creek reactors in Salem County.

 

“Right now, one of every two households in New Jersey gets its electricity from nuclear energy. If you take nuclear energy off line, where will the energy come from?” said David Benson, a spokesman for Oyster Creek.

Gov. Jon Corzine has vowed to have 30 percent of the state’s electricity produced through wind and solar power by 2020 — an initiative that even his supporters call ambitious.

Renewable sources, including solar, wind and landfill gases, currently provide only 3 percent of New Jersey’s electrical energy. Coal-burning plants generate 20 percent, natural gas generates 21 percent and petroleum plants generate 16 percent.

Even critics acknowledge that New Jersey’s nukes are not about to be replaced.

“We know it will take at least 20 years, maybe longer, for us to generate enough power to replace them. We would like it to be quicker, but we know they are not going away anytime soon. … Our issue is, we need to find cleaner, safer, more reliable sources,” said Jeff Tittel of the New Jersey Sierra Club.

Sierra and the New Jersey Public Interest Research Group allege Oyster Creek is unsafe because of corrosion found in the late 1980s in the drywell liner or shell that encases the reactor. Federal regulators contend the problem has been repaired and the plant is safe.

Regardless, NJPIRG contends renewable power is safer — and that all four nuclear plants could be replaced by 2,139 windmills.

“That being said, efficiency improves every year in wind turbine technology, unlike nuclear generation, and over the next decade will increase dramatically, making it highly unlikely that we would need anywhere near that number,” said Jacob Koetsier of NJPIRG.

“In 2005, Congress passed a subsidy bill that included $5.7 billion in operating subsidies for the nuclear industry and $2 billion to insure companies for costs in delays in getting licenses for six new reactors. If that kind of money had been switched to renewable energy back then, we’d already be up and running,” he added.

DIFFERENCE OF OPINION

But windmills require miles of space, and plans to begin erecting about 300 of them off the Jersey Shore have divided even environmental groups, with some organizations fearing a negative impact on marine life. The potential costs pose a greater obstacle.

“The Department of Energy’s own numbers estimate the cost of offshore wind will be more than twice that of coal, twice that of advanced nuclear, with or without government subsidies. There is reason you don’t have a lot of wind power — it is more expensive,” said Dan Kish, senior vice president for policy at the Institute for Energy Research, a Washington, D.C. research group that supports free-market models for energy production.

The statistics were cited as projected consumer costs in the Department of Energy’s Annual Energy Outlook for 2009. While market prices on energy may fluctuate, Kish said windmill power also faces the added financial complexities of bringing the new electrical power into the nation’s existing power grid — the national system by which power is delivered to households and businesses.

The problem is being realized in Texas, which is leading the nation in developing renewable energy sources, but must expand its grid to deliver it.

“To anybody who believes New Jersey is going to be 30 percent on solar panels and wind power by 2020, I’ve got a bridge to sell you. It’s just not going to happen,” Kish said.

Additionally, the wind does not always blow and the sun does not always shine. That raises concerns about what is known in the energy industry as “baseload” — the ability to constantly generate electrical energy, as do nuclear and coal plants.

“But that is more of an issue for land-based wind-turbines,” Tittel countered. “The further offshore you go, which New Jersey plans to do, the steadier the wind. The efficiency increases 60 percent offshore, as opposed to 30 percent on land.”

While building windmills may have obstacles, so does a future reliance on nuclear energy, experts say.

The nation’s 104 existing plants are operating at about 90 percent, and no new ones are being built largely because federal officials have not determined where to bury the radioactive waste and there is a 30-year-old federal prohibition against reusing it.

There also is the growing price-tag on building new reactors — $7.5 million for a 1,000 megawatt facility such as the ones in Hope Creek and Salem Creek, according to Federal Energy Regulatory Commission figures released last year.