Climate Change Efforts May Be Refocused On Jobs And Growth

With expectations dimming for a binding climate change agreement in Copenhagen, U.S. policymakers and industry leaders may be looking to recast domestic cap-and-trade efforts as a new green-oriented stimulus package that invests in clean energy, employs Americans, tackles Chinese competition and banishes carbon emissions—all at once.

Global Warming
Global Warming

“I do hear that, ‘Can this be a jobs bill?’” says Kyle Danish, a partner at the law firm Van Ness Feldman, about quiet efforts to possibly repackage pending carbon emissions legislation into something with more economic impact.

Though Danish praises the Obama administration’s new carbon emissions reduction targets as well as the president’s decision to attend the UN climate change summit in Copenhagen Dec. 7-16, he says the White House could be in for a legislative slog on cap-and-trade at home.

Growing concern about the budget, however, appears to be fueling a climate change in Congress.

“Biting off healthcare then going onto greenhouse gases—when the issue everyone is concerned with is jobs—is a lot," says Danish, who coordinates his firm's of climate change and emissions trading practice. "That could be hard."

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The Obama administration has previously said it would like to see 5 million jobs created from $150 billion investment in clean energy.

The Center for American Progress, a left-leaning think tank estimated in late 2008 that a $100- billion investment in clean energy would create 2 million jobs.

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Further complicating the issue is that the U.S. is already in catch-up mode with its major trading partners on cleantech investment.

An October report by Deutsche Bank Climate Change Advisors group showed $52 billion in capital flowing into the clean energy sector in the US from 2000 to 2008, with $15 billion of that in 2008.

By comparison, China invested $42 billion during the same period, with $16 billion coming in 2008--even though its GDP is one-quarter the size of the US.

Future spending plans also indicate a sizable gap, according to a recent report of the Breakthrough Institute, a non-partisan think tank, which compares that of the U.S., China, Japan and South Korea.

Including the cap-and-trade legislation passed by the House of Representative in June and provisions for cleantech investment in the stimulus package earlier in the year, the U.S. will invest $172 billion over the next five years. China, however will invest $397 billion, a more than four-to-one ratio on a per-unit-of-GDP basis.

"We’re in danger of having to import all of our cleantech products from China if we don’t step up, says Jesse Jenkins, the institute’s director of energy and climate policy. “There’s a lot of push-back that says the government shouldn’t be picking winners and losers,” he says. “But that ignores hundreds of years of U.S. economic activity.”

The Carbon Challenge: A CNBC Special Report
The Carbon Challenge: A CNBC Special Report

From railroads to satellites to the Internet, government policies have supported infrastructure development deemed vital to our national economic and security interests, which eventually spurred whole new industries.

“It’s less about picking winners and losers than it’s about creating the conditions for these to arise,” he says.

At the same time, Jenkins and others say the conventional wisdom of carbon reduction for the sake of carbon reduction is fundamentally wrong. He calls the pollution control approach of cap-and-trade an effective one for smaller-scale issues—like acid rain-causing smokestack emissions in the ‘80s and ozone-depleting chloroflurocarbons in the ‘90s—but of insufficient scale for climate change emissions.

"We’re talking about something transformative, and that’s a different challenge and requires different solutions," says Jenkins. "What we need is a clean energy economic effort, not a pollution control effort.”

And that will require costly investment but hopefully generate valuable jobs.

Nicholas Parker, executive chairman of the research and consulting firm Cleantech Group, calls the situation a new "space race."

“The race to reinvent the world has officially started, and we believe this will become increasingly apparent in 2010 as global economies recover,” Parker says in his firm’s “Ten Predictions for 2010” report on the cleantech sector, released earlier this week.

"Those who do not adapt, innovate and change will be left behind,” says Parker. “Fasten your seat belts.”