20 September 2010

A Breakthrough in US Climate Policy?

Climate policy in the United States is moving beyond the serial failures of cap-and-trade focused on putting a high price on carbon.  A hint of where climate policy imay be going can be found in an interview with Reed Hundt, former FCC Director under Bill Clinton:
Reed Hundt is known for being the first chairman of the Federal Communications Commission to lead a spectrum auction, setting the stage for the modern U.S. wireless industry. Hundt is now in his second act as a green policy advocate, and tells me in an interview this week that he, along with John Podesta’s Center for American Progress and Al Gore’s Alliance for Climate Protection, are beginning a project to draft an energy bill for the next Congress.
Hundt has this very interesting comment to make about the focus of the next energy bill:
The bill will focus on jobs and also on “lowering the cost of clean.” Instead of raising the price of carbon initially, we’re going to lower the cost of clean energy, and then in the not-too-distant future, there will be a more welcoming attitude for clean energy, and then we can put a price on carbon. It’s a two-step process: one — jobs and lowering the cost of clean energy, and two — putting a price on carbon.

The government can lower the cost of clean energy by focusing on long-term finance and take advantage of the very cheap borrowing rates that exist today. Borrowing rates are so staggeringly low right now in the government sector. The Treasury is selling debt at 2.5 percent on a 10 year note; it’s just incredible. We’re also talking about scaling out of the breakthrough technologies that the Department of Energy has funded. The DOE is coming to the end of the stimulus package, and the next step is to scale out those breakthroughs. As you scale them out, you lower the unit cost.
Are we seeing a paradigm shift in US climate policy?  Let's hope so.