For climate legislation, it will all come down to money

The US military is showing leadership by highlighting the energy security issues surrounding cleaner energy. Here, the US Navy's Green Hornet, a jet being tested on biofuels

As Congress returns from the July 4 recess this week for the final stint before the summer break, there will be much talk about climate and energy legislation.

Will a bipartisan Senate Bill be successful?

There’s a lot of good arguments being put forward by the likes of Senators John Kerry, Joe Lieberman, Harry Reid and others about the environmental benefits of cleaner energy and less pollution.

Never mind the catastrophe in the Gulf of Mexico – ultimately in recession politics, it is going to come down to money.

Lawmakers supporting a cap-and-trade scheme will have to persuade opponents and those sitting on the carbon fence that limiting emissions from industry can prove an economic opportunity as much as it can represent a cost.

Jobs

As far as the economy goes, for all those power companies and manufacturing firms forced to find new ways to carry out their business in a less damaging way, there will more companies creating jobs to help them clean up their acts.

Many companies will find reducing their energy consumption and generating more of their own energy will even save them money in the short term, let alone the long term.

For the ordinary consumer, it comes down to whether their local utility will charge them more for the same power they are getting.

Many ordinary Americans facing tough financial times can’t afford to pay more for the same product.

Lawmakers do need to protect the person on the street from affairs that are out of their control. But, they also need to look ahead to the future, to protect people against future recessions.

The trouble is, much of the economic arguments for more renewable energy being put forward at the moment rely on promises that it will get cheaper, while coal, oil and gas prices will get more expensive. Many people find it hard to take that purely on trust.

Republicans generally want less government control over their lives, and believe investing in renewable energy means higher taxes and therefore bigger government.

But how about no government control over your energy supplies at all?

Generate your own renewable electricity and heat, and that is what you could achieve.

Energy security

Energy security is another big reason in favor of investing in renewable energy. Never mind the theories that the Iraq War was started over oil. More than 75% of world oil and gas supplies are owned by national governments, some of which may not be too friendly in future.

In Europe, which has been throwing money at renewable energy infrastructure over the last 10 years or so, energy security as an issue is critical. Sitting on Russia’s doorstep, much of the energy required for day-to-day business in Europe is under direct control of the Kremlin. After decades on the front line of the Cold War, that’s not a comforting thought for them.

In recent years, when Russia has been arguing with the Ukraine over gas supplies, which saw gas pipelines transporting energy to Europe switched off. Energy prices skyrocketed – and were affected worldwide. And Russia shows every intention of continuing to use its ample gas supplies to affect policy in foreign countries.

The thing is, even if we don’t get our gas from the Russians, and we have some favorable terms with the Middle East at the moment, any geopolitical incident elsewhere in the world can have knock-on impacts on the price of oil and gas here.

If you cut off energy supplies to Europe, they’ll pay more to grab hold of supplies from elsewhere, and that will mean US consumers will be forced to pay more for their energy.

It is interesting to see the US military now working hard to source more of its energy from renewable supplies – it underlines the importance of energy security.

Price of carbon

One of the possible solutions for a Senate climate and energy bill, whether it turns out to be the American Power Act or an alternative, is to scrap the central cap-and-trade idea.

Just throw a little money at the problem now, maybe it will go away.

The trouble is, setting up a few tax credits here and some loan guarantees there will not make the major shift in society needed to tackle the energy problem.

If you just keep passing out carrots, industry will take a few steps forward and then stop to wait for some more carrots. You need a little of the stick to compel constant progress.

It is complicated issue, and unfortunately arguments about a price of carbon can easily be turned circular – a price of carbon might be needed to promote renewable energy to guard against future fossil fuel prices, but those fossil fuel prices would then rise as the result of that price on carbon.

Looking at similar cap-and-trade programs for acid rain pollution, suggests that if a carbon cap and trade is set properly, the price of carbon allowances could fade over time anyway.

A price of carbon is not just about boosting clean technologies – it is about including some of the damage caused by fossil fuels within the upfront costs of those fossil fuels.

Because there’s all kinds of financial benefits in moving away from a fossil fuel economy that can easily be overlooked in the cut and thrust of economic concerns.

You might not believe climate change will mean higher utility bills and greater clean-up costs, but cleaner energy means cleaner air and in our increasingly urban society that translates into comparatively lower healthcare cost.

Investing in renewable energy is a gamble, as is any political decision. What if fossil fuel prices don’t go up? Well, you’ve still received the benefits of cleaner air, and you’ve invested in infrastructure to cut your utility bills from there on.

State governments as well as Congress are pondering whether to invest in renewable energy.

Either way, you’ll still end up paying for your energy supplies. Coal, oil, gas and nuclear infrastructure still costs a lot of money and mean rising utility bills, and needs to be replaced after a few decades or less. Then you’re shoveling money towards fuel suppliers from then on.

Renewable energy needs a big upfront push, and then it’s easier from there.