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Gloria Gonzalez

Gloria Gonzalez

Gloria is a writer for Environmental Finance.Environmental Finance is the leading global publication covering the ever-increasing impact of environmental issues on the lending, insurance, investment…

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Republican Victory Could Spell Trouble for the Clean Energy Sector

A day after a landslide Republican victory in the US House of Representatives, President Barack Obama pledged to work with his opponents to find common ground on energy issues, but exactly what that means for the clean energy sector remains unclear.

Republicans will take over the House in January after gaining at least 60 seats. The Democrats managed to retain control of the Senate, albeit with a slimmer majority, after losing at least six seats.

In a mixed day for carbon regulations, California voters overwhelmingly defeated a ballot initiative to scupper the state’s emissions trading plan, but the Republican inroads have made a national programme unlikely.

But clean energy issues such as a federal renewable electricity standard (RES) and a ’green bank’ to finance projects have substantial bipartisan support in the current Congress. Legislators on both sides of the aisle have also advocated for a ‘3P’ bill that addresses sulphur dioxide (SO2), nitrogen oxides (NOx) and mercury emissions and provides a legislative fix for the embattled Clean Air Interstate Rule (CAIR) programme.

But the major question is whether the two parties can compromise after an intense, partisan battle for control of Congress. In a post-election speech, President Obama pledged to find areas of compromise with the new Republican House Majority, specifically citing natural gas, energy efficiency and electric cars.

“The first policy issue he brought up was energy,” said Paul Bledsoe, director of communications and strategy for the National Commission on Energy Policy, a unit of the Bipartisan Policy Center think-tank. “It does signal clearly that the president sees energy as a key issue he can work with Republicans on. Both parties realise how critical energy is to long-term US competitiveness and job creation.”

But Republicans made opposition to Obama’s healthcare overhaul and financial regulatory reform a central part of their platform, Manik Roy, director of congressional affairs at the Pew Center for Global Climate Change in Virginia, told attendees of the Carbon Markets Insights Americas 2010 conference in New York this week.

“I’m much less optimistic on constructive engagement,” he said. “The tactic of the Republican leadership was to oppose his initiatives and I think that will be even stronger from the new people coming in. They’re coming to send a message and the message is less government.”

Emboldened Republicans are likely to bring their own ideas to the table. Federal RES proposals, for example, could morph into a low-carbon electricity standard that includes nuclear and natural gas.

Renewable energy advocates put a positive spin on the election results, saying the Republican takeover of the House will likely increase support for extending tax credits, a position that is compatible with the agenda of expected speaker John Boehner.

But Republicans were successful in the mid-term elections largely due to promises to restrain out-of-control spending. “There is a tension between their desire to create economic growth and their pledges to cut government spending, and a lot of energy industries, especially clean energy, involve government programmes,” Bledsoe said.

Meanwhile, the 3P legislative debate could return to the forefront as the Environmental Protection Agency moves forward with regulations for hazardous air pollutants that could require costly retrofits, the first-ever coal ash regulation and the proposed Transport Rule to replace CAIR. 

These proposed rules are creating liability concerns and encouraging the utility sector to seek more time to comply, said Christine Tezak, senior analyst in the energy and policy research division of private equity firm Robert W. Baird & Co.

“We could see the return of a multi-pollutant conversation on Capitol Hill,” she said.

By. Gloria Gonzalez

Source: Environmental-Finance

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