Campaign season is in full swing, so candidates are running around saying the kinds of things candidates say, including on the topic of climate change. Meanwhile, last year, Congress passed a budget that included important provisions for US energy and climate policy.
As part of the deal, tax credits for renewable power — both wind and solar— were extended for five years. Wind power gets a subsidy for every kilowatt hour of power it produces, while solar will be subsidized as a function of its investment. Both of these energy sectors were facing the expiration of these tax credits, which have been important in accelerating the deployment of these technologies.
Historically, especially for wind energy, when the tax credits expire, investment for new facilities tends to drop off, says Joe Aldy, who teaches energy and environmental policy at the Kennedy School at Harvard University.
“It's been a big challenge for those who are trying to develop new wind farms, because the development timelines typically are on the order of several years, and when you have the policy on the books only for one to two years at a time, that is very difficult for planning and for financing,” Aldy explains. “Now they have a five-year window that provides much more certainty than they've had really since the 1990s for project planning."
“As a result," Aldy continues, "I think we should see more and more wind deployment and certainly more and more solar deployment, and I think that's going to be a critical part of the US power system, implementing and complying with the Clean Power Plan that President Obama advanced in 2015.”
That plan recently withstood a key legal challenge.
The renewal of tax credits for clean energy was part of a “grand bargain” on Capitol Hill that also permitted oil exports for the first time in 40 years. Given where the negotiations were earlier in 2015, this was a pretty good compromise for the environment and for energy policy, Aldy believes.
“To be honest, I think, in the near term at least, lifting the oil export ban isn't going to have a meaningful impact on the US economy, on production,” Aldy says. “Low oil prices are probably having a negative effect right now on production regardless of whether a domestic oil driller could move that oil into a foreign market.”
In addition, he says, none of the GOP threats to keep the administration from implementing major regulations survived. The EPA budget was kept at its current level. The Department of Energy actually received more funds than in 2014, much of it related to research and development — even for zero carbon technologies like renewables and nuclear.
The budget deal gives Aldy some optimism that the US may be able to meet its obligations under the recent Paris accord and continue to robustly expand the nation’s climate program.
“I think that the actions that the Obama administration has taken in the last few years have really put the US on the right trajectory,” he says. “Whether it's fuel economy standards, the Clean Power Plan or advancing appliance efficiency standards. They’re looking at trying to address methane emissions from oil and gas drilling. I think all this can help move the US on the right trajectory and certainly will get the US to meet its 2020 goal, and it has US in the ballpark to reach its 2025 goal.”
Significant obstacles remain, however, including the need for more investment in innovative technologies.
“I think we'll need more public policies to drive the deployment of those technologies, and that's going to be a key task I think for the next administration,” Aldy says. “I think the framework coming out of Paris is one that, if we can demonstrate that progress and do so in a transparent manner, our major partners in this exercise will do so as well.”
“So I am, I would say, cautiously optimistic,” Aldy concludes. “It's a tough challenge. This is a tough challenge technologically. It's a tough challenge politically, diplomatically. I mean, it is a really tough issue to address. But I think we're making progress now in a way that we haven't really in the past two plus decades of the global effort to try to address climate change.”