Frameworks of Environmental Policy

THE INTRODUCTION OF THE AMERICAN RENEWABLE ENERGY ACT; known also as: H.R.890.

The analysis of the environmental problem addressed in H.R. 890 is going to be defined as a multidimensional issue that affects American lifestyle in several and distinct dimensions. In order to solve a problem, you must first define it, which allows for understanding and measuring it (Cohen). In order to conceptualize the environmental issue of renewable energy use and generation, the policy analysis framework developed in “Understanding Environmental Policy” by Steven Cohen is utilized. It is hoped that the conceptualization of this issue allows for the definition of goals or targets that ought to be pursued by the American people, allows for the understanding of the problem, and allows us to measure (or create actions that result in measurement data) solutions for this problem. It is expected this analysis will help while writing the Final Paper for this class, which is to discuss feasible public & environmental policy related to use and generation of renewable energy.

Values Framework

The United States of America experienced an attack to their pattern of life in the 1970s (1) . A number of factors combined in 1973 which affected the behavior portrayed by Americans, as they had become accustomed to plentiful supply of inexpensive fossil fuels: coal, petroleum and natural gas. America had built its economy dependent on these fossil fuels, but also on their relative low cost (2) . The U.S. also exhibited patters of urban growth that were responding to how inexpensive it was to drive many miles a day. The average price of a barrel of oil in 1973 was $2.70 (3) and the average cost of gasoline at the pump was 35 cents a gallon.

The 1970s oil embargo is the most obvious of those contributing factors that attacked the U.S. way of life. This embargo was the result of the decision made by the Arab members of the Organization of Arab Petroleum Exporting Countries (OAPEC) to cut back on its export of petroleum to many countries of the world. This is known as the 1973 oil crisis.

The world economy was already stressed as a result of the August 15, 1971, where the U.S. pulled out of the “Brentton Woods Accord” which regulated the value of the dollar as pegged to the price of gold. This resulted in the dollar to “float” or increase in value. Shortly Britain and other industrialized nations pulled out of Brentton. The result was a depreciation of the U.S. dollar and other currencies of the world. Since oil was priced in dollars, this meant that oil producers were receiving less real income for the same price. The end of Brentton Woods and the Arab oil embargo set on a path of a series of recessions and high inflation that persisted until the early 1980s, and elevated oil prices until 1986.

The United States government went to desperate measures to improve the situation that America faced. Congress issued a 55 mph speed limit in highways. Daylight savings time was issued year round in an effort to reduce electrical use. Tax credits were offered to those who developed and used alternative sources of energy including solar and wind power (4) . President Nixon ordered the Department of Defense to create a stockpile of oil in case the country needed the military during the crisis era. Emergency rationing books were printed and the Energy Department was formed. This Department was deemed critical to the existence and security of the U.S. that it became a cabinet office. This department developed the National Energy Policy and made plans to make the United States, energy independent (5) .

Electric utilities have been subject to comprehensive federal and state economic regulation since the enactment of the Public Utilities Holding Company Act of 1935 (PUHCA) and the Federal Power Act. This regulatory framework did not change much from 1935 to 1978. The oil embargoes of the 1970s created a need to secure the U.S.’s electricity supply, which resulted in the enactment of the Public Utility Regulatory Policies Act of 1978 (PURPA). PURPA has been amended over the time, as in 1992 by the Energy Policy Act (EPACT) and is to be amended if the proposed H.R. 890 111th Congress 1st Session bill, as presented to the Committee on Energy and Commerce on February 4, 2009, becomes law.

If H.R. 890 becomes law, it may successfully amend title VI of the Public Utility Regulatory Policies Act of 1978 and establish for each of the calendar years (2012 through 2039) a required annual percentage that the retail electric supplier will submit to the Secretary. This bill also establishes the minimum Federal renewable electricity credits. These quantities are equal to the retail electric supplier base amount for the calendar year multiplied by the annual percentage set by the bill. H.R. 890 potential is that it encompasses the US energy investment behavior, and may coordinate efforts of the US Interior Department, the US Energy Department and the Federal Energy Regulatory Commission, federal agencies all voicing President Obama ‘s call for more renewable energy investments and cap on carbon pollution (February 24, 2009 address to Congress). Lastly, the American Recovery and Reinvestment Act (ARRA), better known as the 2009 Stimuli package, is to improve the US competitive position in relation to energy production through the development of the Office of Energy Efficiency and Renewable Energy (EERE) that is to stimuli the US economy (as of March 18, 2009) with $16.8 billion, to be distributed through Energy Efficiency and Conservation Block grants -$3.2 billion, Weatherization assistance program- $5 billion, State Energy program- $3.1 billion, Advance manufacturing grants- $2 billion and miscellaneous provisions -$2.5 billion.

Political Framework

An unintended consequence of PURPA was the introduction of competition into a monopoly industry. The federal government opened the electricity generating sector to other entrants and raised questions about the natural monopoly. Questions regarding the justification of monopoly- generation and ownership were answered with regulation (6) . EPACT was enacted to further increase competition in the electric generating sector. One of the issues before Congress (105th and 106th) was whether EPACT injected enough competition into the industry, if so PURPA was no longer necessary. Four bills were introduced in the 106th Congress that would have amended or repealed portions of PURPA: S. 282 (Senator Mack on January 21, 1999), S.516 (Senator Thomas on March 3, 1999), H.R. 667 (Representative Burr on February 10, 1999) and H.R. 971 (Representative Walsh on March 3, 1999). These were some of the resulting bills responding to the call for electric industry restructuring. In the 110th Congress S. 2642, the Renewable Energy Tax Incentives Act was introduced, but was not approved. Sen. Amy Kobluchar tried in June 6, 2007 with SR 1567 and in Feb 14, 2008 with SR 2642 to introduce this bill, but the bill never became law.

Now, the 111th Congress (2009-2010 session) was presented with a bill on Renewable Energy: Complementary Policies for Climate Legislation titled: THE INTRODUCTION OF THE AMERICAN RENEWABLE ENERGY ACT; known also as: H.R.890. The H.R. 890 amends the Utility Regulatory Policies Act of 1978 which provides historical and societal background on the value U.S. has given to energy. But, H.R. 890 (7) as stated above is not the first attempt to update this policy. H.R. 890, as intended by S.1567, is a bill to amend the Public Utility Regulatory Policies Act of 1978 and provide a renewable portfolio standard.

Why now?

Although bills introduced before did not pass, it is expected that H.R. 890 will. The gasoline price increase of 2008 may be an economic reason for the expected passage of H.R. 890. Gasoline prices at the pump jumped as high as $4.00 (8) a gallon. This is of significance because through the political history of the U.S. ,the political party in power when the gasoline prices reach a high are not reelected to hold the up-coming Presidential office term.

Science & Technology Framework

Some of the scientific uncertainties linked to H.R. 890 is whether the bill goes far enough, and whether the bill needs to include targets addressing individual American day-to-day activities.

The Energy and Environmental subcommittee examined the relationship between social and economic behaviors, and energy choices in a presentation titled:”Relationship between Social Behavior and Energy Choices (9) ”. The subcommittee presentation included discussions from Dr. Robert Bordley, Technical Fellow, Vehicle Development Research Laboratory, General Motors Corporation; Dr. Robert Cialdini, Regents' Professor of Psychology and Marketing, Arizona State University; Dr. Jerry Ellig, Senior Research Fellow, Mercatus Center, George Mason University; Mr. John Skip Laitner, Visiting Fellow and Senior Economist, American Council for an Energy Efficient Economy; and Dr. Duane Wegener, Professor of Psychological Sciences, Purdue University.

The presentation started by acknowledging that everyday millions of Americans make decisions involving the use of energy, from what type of car to purchase, whether to take public transportation, what temperature to set thermostats to, or if it’s worth purchasing energy efficient appliances. The Members of the Science & Technology Committee’s Research and Science Education Subcommittee concluded that social and economic behavioral influences affects decisions made regarding energy conservation. Therefore, the energy challenge will only be overcome if there is a successful combination of technological innovation and behavior change that influences the American consumers’ behavior.

One of the reasons why renewable energy use at American homes needs to become part of the public policy discussion is that “U.S. households consume more than one-third of annual U.S. energy consumption. Of that, approximately 60 percent goes into powering homes and the rest into fueling household vehicles. American homes consume 2.4 times as much energy as homes built in Western Europe (10) ”.

I would like to emphasize that it is needed for Congress and Public Policy makers to combine ARRA and H.R. 890 targets, and create a good policy that understands and manipulates the primary drivers of decision-making. If not, Congressional policies may still fail. Social and economical factors have to be understood and included, when crafting energy policies. Understanding these factors has proven to be the most critical scientific uncertainty.

Policy Design Framework

As suggested above, Congress and Public Policy makers must combine ARRA and H.R. 890 targets, and create a good policy that understands and manipulates the primary drivers of decision-making. If not, Congressional policies may still fail. The bill has also to include the use of renewable energy at American homes for U.S. households consume more than one-third of annual U.S. energy consumption. Of that, approximately 60 percent goes into powering homes and the rest into fueling household vehicles. It is proposed that when creating this policy, it includes tax incentives (section I) as well as behavioral incentives (Section II).

I. Tax Incentives: (1) for renewable energy and (2) energy efficiency

Tax Incentives for Renewable Energy

Tax incentive programs (11) to encourage renewable energy are designed to facilitate the purchase, installation, or manufacture of renewable energy systems, equipment, and facilities. The goal of these programs is to reduce the investment costs of acquiring and installing renewable energy systems and equipment. They reward investors with tax credits, deductions, and allowances for their support of renewable energy sources.

Tax Incentives for Energy Efficiency

Tax incentives are used to help purchasers overcome the relatively high front-end costs of energy efficiency equipment. These programs serve to reduce the investment costs of acquiring and installing energy efficiency products and reward investors with tax credits, deductions, and allowances for their support of these products.

II. Behavioral Incentives

With this incentive I am proposing creating a consolidated energy policy for the U.S. that combines H.R. 890, ARRA, PURPA and EPACT. This incentive would incorporate what public policy and sociologists have identified as items needed to improve individual American energy conservation behavioral choices: Educational and Informational campaigns. The policy alternatives’ goal would be to improve the quality of choices (As well as the number of options) available to Americans when making energy use decision in every-day-life. No abrupt of expensive change in lifestyle is proposed.

According to Salt River Project (SRP) (12) a typical home in the desert southwest have the following 5 top energy users ( In the desert southwest home energy users may rely in air conditioning units, however in other U.S. states heating may be the top energy user) so this list may be applicable to all American homes. These top home energy users are:

• Heating & Cooling (51%)
• Pool Pump (13%)
• Water Heating (12%)
• Refrigerator (5%)
• Electric Dryer (4%)
• Other (15%)

Therefore, a policy is proposed that incorporates educational and informational campaigns that not only include targets for utility companies for reaching a quantifiable production of renewable energy, but also includes energy saving solutions targeting individual homes. Such inclusion is necessary for U.S. households consume more than one-third of annual U.S. energy consumption.

Management Framework

I believe there is a shift in American politics and American lifestyle to include and strengthen the organizational capacity to encourage the use of renewable energy, and produce more nationally. President Obama (13) , on February 9, 2009 pushed for more investment in solar and wind energy, concluding that the country that can make renewable energy sources price-competitive with traditional fossil fuels will become the economic superpower of the future. Obama acknowledged that while the cost of producing electricity by wind and solar has declined, it is still cheaper to generate power from plants fueled by coal and natural gas. The President also stated that renewable energy companies needed to develop tax breaks and loan guarantees in order to provide incentives for firms to manufacture and customers to purchase solar and wind energy. Obama concluded that he desires the government to invest every year in new technologies to drive down renewable energy costs over the long term. He stimulus package (14) includes billion of dollars in tax breaks and other financial incentives to boost the use of renewable energy. Obama’s call for action may positively push Congress to pass into law a bill making its way through the 111th congressional session, which requires United States’ utilities to generate a certain amount of their electricity supply from renewable sources. This bill (H.R. 890) sets that amount of U.S. electricity supply coming from renewable energy resources and it would gradually increase from 4 percent in 2012, 8 percent by 2015, 12 percent by 2018, 16 percent by 2020 and 20 percent by 2039 (15) .

President Obama (16) in his address to the nation (February 24, 2009) set the stage for how investment in clean energy will be the catalyst in reviving the nation’s economy. "We have known for decades that our survival depends on finding new sources of energy," Obama said. "Yet we import more oil today than ever before."
The President said the American Recovery and Reinvestment Act (ARRA) provides a key investment opportunity that will save or create 3.5 million jobs, including jobs "constructing wind turbines and solar panels…and expanding mass transit." He also said the ARRA will double the United States' supply of renewable energy within the next three years. Claiming that "the country that harnesses the power of clean, renewable energy will lead the 21st century…It is time for America to lead again." "But to truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy (17) ."

On February 17, 2009 President Obama signed ARRA. This amounts to the largest one-time domestic spending program in the United States history that is to work together with a massive program of tax reliefs. The main goal of ARRA is to stimulate the nation’s economy, and specifically to create or save 3.5 million jobs during the first two years of Obama as President.

ARRA (18) includes $54 billion to encourage the production of energy from renewable sources and to upgrade the transmission grid, as well as to weatherize public buildings and homes and raise energy efficiency. And it would provide $10 billion for science facilities and research, and $6 billion for broadband service in rural areas. Renewable energy funding is great because it creates a market that can’t really be outsourced.

References

1. http://www.bookrags.com/printfriendly/?gale&u=oil-embargo-enve-02[3/11/2009 4:05:01 PM]
2. http://www.bookrags.com/printfriendly/?gale&u=oil-embargo-enve-02[3/11/2009 4:05:01 PM]
3. http://www.bookrags.com/printfriendly/?gale&u=oil-embargo-enve-02[3/11/2009 4:05:01 PM]
4. “The 1973 Oil Crisis” Sarah Horton. Internet [3/11/2009 5:54:32 AM]
5. “The Arab Oil Embargo of 1973-74” Arab Oil Embargo. Internet [3/11/2009 5:54:32 AM].
6. http://ncseonline.org/nle/crsreports/energy/eng-50.cfm[3/9/2009 6:54:45 AM]
7. http://www.govtrack.us/congress/bill.xpd?bill=h111-890
8. http://www.salon.com/opinion/feature/2008/03/10/four_dollars_a_gallon/ [3/12/2009 2:30:05 PM]
9. http://www.baird.house.gov/index.php?option=com_content&task=view&id=354&Itemid=107
10. http://www.baird.house.gov/index.php?option=com_content&task=view&id=354&Itemid=107
11. http://apps1.eere.energy.gov/states/alternatives/tax_incentives.cfm
12. http://www.srpnet.com/energy/topusers.aspx
13. http://www.reuters.com/article/environmentNews/idUSTRE51876P20090209?feedType=RSS&feedName=environmentNews
14. Also known as the American Recovery and Reinvestment Act (ARRA)
15. Ibid
16. http://www.treehugger.com/files/2009/02/investment-clean-energy-top-priority-economic-recovery-obama.php
17. http://www.motherearthnews.com/Renewable-Energy/Obama-Clean-Energy-Economy.aspx
18. http://www.takepart.com/blog/2009/01/15/house-dedicates-54-billion-of-stimulus-package-to-renewable-energy/

Week #9 - General Questions:

1. Do you think that currently developing countries have the right to exploit forests (and other resources) as Europe and the U.S. did to increase their economic well-being?

Born and raised in Colombia, I became very much aware of the environmental, social and economic problems related to the exploitation of the Amazon jungle, and the use and distribution of petroleum. I do believe developing countries have the right to use their resources, for their government’s main objective should be to improve the quality of life of their residents. In this monetary driven-global world, that means that in order to achieve improvements to healthcare, education, and human food standards, among some of the quality of life measures, you must have the capacity to initiate trade with other nations or buy resources from others.

Why should some countries have the right to enjoy all the phases, as portrayed in the Environmental Kuznets Curves of pollution and economic development?

The premise of the curves is that developing countries are nations were pollution grows rapidly for the nation is more interested in jobs and income than in clean air and/water. The nation, at this stage, may be too poor to pay for abetment, or the environmental regulation is weak. If rich countries want to help, by all means, they should. I agree that more is known about the toxicity of some human actions, and developing governments should act and achieve their citizen’s interests. However, I do not think anyone has the right to dictate developing countries not to evolve as the industrialized counterparts have done. I agree with Hardin that rules and morals should be single in nature; meaning that the same rule applied yesterday, applies today and tomorrow. It is hoped that as income increases in the developing countries that a balance between pollution and growth is achieved. It is desired that nation’s industrial sectors will become cleaner and its society gains a higher value for their environment. Quality of life is more than income; it encompasses their environment and its quality and health.

2. What expectations do you think industrialized nations should have for developing nations in the climate-change debate?

I believe climate change affects us all, for the environmental problems cannot be compartmentalized, for they affect and cross areas across political and geographical boundaries. Industrialized nations must research and improve the human activities that are harming earth........independently of it being caused by poor or rich nations’ actions. With this said, the developing countries need to consider the consequences of their actions, and engage in minimizing negative impacts they may be causing. They must be open to solutions. If the proposed solutions are costly, or may affect economical growth and development, they must seek alternative corrective solutions. We are all in this together, and environmental catastrophic events affect rich and poor, without discriminating.

I do not think that equal participation (at least monetarily) should be the goal of this debate; neither should be it the goal of any corrective proposals. The goal of climate-change debates should be that of fostering equity between industrialized and developing countries. We all have similar social and political rights and responsibilities as all others. How we implement or develop these in our daily-life, depends on the area and the society we are part off. However, private ownership and sovereignty are values that are to be kept front and center in the debate. By acknowledging these, any proposal achieved in this climate debate, may have the possibility of implementation and success.

Developing countries must acknowledge all the technical and technological advances, and data that others may be willing to share. It is important that development of emission standards is part of the debate, however these standards may be implemented differently between nations. The calendar years of implementation may be farther in the future for developing countries that those of the standards set for richer or more industrialized countries. The target quantity is the same, although the year of implementation can be different and tailored uniquely for the existing-nation’s conditions. The solutions cannot be tailored or equal for all. The nation’s well-being must be composed of environmental health, economic growth, health care and quality of life.

Description of the bill to use for the final paper.

The final paper will analyze the US 111th Congress Bill on Renewable Energy: Complementary Policies for Climate Legislation. The bill is titled: THE INTRODUCTION OF THE AMERICAN RENEWABLE ENERGY ACT ( 1); known also as: H.R.890.The Subcommittee on Energy and Environment held a hearing titled, “Renewable Energy: Complementary Policies for Climate Legislation” at 9:30 a.m. on Thursday, February 26, 2009 were an introduction of this bill was brought forward to the Congress. Dr. Howard Gruenspecht (2), Acting Administrator for the Energy Information Administration of the U.S. Department of Energy introduced this bill, and spoke of the role of renewable electricity generation in the Energy Information Administration’s (EIA) Annual Energy Outlook 2009 (AEO2009) projections. This outlook provides a brief overview of the renewable resource base, and discusses key findings from earlier EIA analyses of proposals for a Federal renewable portfolio standard.

Research will focused on the impacts electricity generated by renewable resources, such as wind, solar, biomass, and geothermal, will play in the role of reducing U.S. greenhouse gas emissions, enhancing energy security, and promoting domestic economic development and job growth. Analysis will establish if the bill is to guide the U.S. in meeting greenhouse gas reduction targets under climate legislation and the role that complementary policies will play, such as a federal renewable electricity standard, in expanding renewable electricity and spurring technological development.

Today only two and a half percent of our electricity comes from all non-hydro renewables. The U.S. has tremendous renewable energy resources that are just starting to be tapped. The Department of Energy recently issued a report showing that the U.S. could get 20% of its needed electricity from wind alone by 2030 (3). According to the Mr. Waxman, Chairman of the Committee on Energy and Commerce, 2009, “every region of the country has renewable resources that could be tapped to achieve U.S.’s national goal of expanding renewable energy generation and reducing global warming pollution. More renewable energy also means more good jobs right here in the U.S. Over the last few years, the wind industry has been an engine of job growth (3)”…... last year, “wind companies created 35,000 new jobs. Some climate solutions require big technological breakthroughs. But renewable energy is something that we can deploy today. We can ramp up wind, solar, biomass, and geothermal, electricity production now. As the deployment of clean energy increases, the cost for this technology will continue to decline (3)”.

References:

(1) (http://energycommerce.house.gov/index.php?option=com_content&task=view&id=1504&Itemid=95)

(2) http://energycommerce.house.gov/Press_111/20090226/testimony_gruenspecht.pdf

(3) http://energycommerce.house.gov/Press_111/20090226/hawopen_ee.pdf