Building a New Economy, Part 2: The Green Investment Portfolio

In part one of this two-part post, I suggested four principles that President-elect Obama’s economic team should follow as they create an economic recovery package. To sum up, America needs long-term investments in a new energy economy, with every dollar used strategically to solve several problems at once, including energy security, economic stability and a rapid reduction in greenhouse gas emissions.

Obama clearly understands this prescription. He has announced that he will champion a two-year recovery package to create 2.5 million jobs, in part by "creating the clean energy infrastructure of the twenty-first century." To his credit, he told governors and international leaders meeting in California last week that our economic mess will not deter his commitment to this investment.

"I promise you this," he said in a taped address. "When I am president, any governor who's willing to promote clean energy will have a partner in the White House. Any company that's willing to invest in clean energy will have an ally in Washington. And any nation that's willing to join the cause of combating climate change will have an ally in the United States of America."

The question is whether the Congress and the American people will support a recovery package designed not just for short-term stimulus, but for long-term health.

Obama hasn't said how big his investment package will be, but there is speculation it could climb to as much as $700 billion. Here are some suggestions on how some of that money should be allocated:

Plug the leaks: As I said in part one, Job No. 1 is to stop the hemorrhage of energy dollars from every household and community and from the nation as a whole. That means a big investment in energy efficiency and conservation at every level of the economy.

If hemorrhage seems an exaggeration, consider this: The U.S. Department of Energy estimates that by the end of this year, the United States will have exported more than $1 trillion to oil-producing nations since 2003. The energy wasted by conventional power plants in the U.S. is enough to power the Japanese economy. The United States ranks an embarrassing 22nd among nations in energy efficiency, and American-made automobiles on average are among the least efficient in the world.

If there’s any doubt we can improve, consider this: The American Council for an Energy Efficient Economy estimates our economy could easily save 25 percent, 30 percent or more of our current energy use.

To help cities plug energy leaks, Congress should provide at least $2 billion annually for the Energy Efficiency and Conservation Block Grant program it approved but did not fund last December. It should appropriate $1.4 billion annually to weatherize the homes of low-income families and it should increase federal tax incentives for consumers who purchase high-efficiency vehicles and appliances and who improve the efficiency of their buildings.

Empower states: Twenty states covering two-thirds of the economy have completed or begun implementing their own plans to reduce the greenhouse gas emissions that cause global warming. In a new report, the Center for Climate Strategies estimates that if all states implemented plans to reduce their emissions to 1990 levels over the next decade or so, the economy would achieve cumulative savings of more than $535 billion by 2020.

Congress should allocate at least $1 billion annually for grants to states that develop energy and climate security plans. To qualify for the money, the plans should contain progressive policies that allow utilities to profit from helping their customers save energy, that provide incentives for customers to install renewable energy systems, that make it easy to connect those systems to the electric grid, and that help communities engage in smart growth.

Invest in renewables: Well-placed, sustained investments should be used to accelerate the spread of solar, wind and geothermal power. DOE has concluded the nation could obtain 20 percent of its electricity by 2030 from wind power alone -- if we had sufficient transmission lines. It estimates that capturing this potential would require 12,000 miles of new transmission capacity costing $20 billion in net present value. These new transmission lines should be part of a nationwide smart electric grid that former Vice President Al Gore estimates will cost $400 billion over 10 years, but will pay for itself quickly in energy efficiency and electric reliability savings.

In addition, the government should invest much more in clean energy research than the $3 billion annually it spends now. A yearly investment of at least $10 billion is warranted, with a special emphasis on breakthrough technologies such as plug-in hybrid cars, cellulosic ethanol made from non-food crops, and advanced technologies to store solar and wind power for those times the sun isn't shining and the wind isn’t blowing. Energy storage would allow solar and wind to become base-load power and would help utilities avoid building power plants to handle peak demand.

To facilitate those breakthroughs, the National Renewable Energy Laboratory in Colorado – the government’s premier lab for renewable energy research -- has proposed building a "Campus of the Future," a $500 million zero-carbon facility with 12 new research buildings and 2,500 employees. Congress should fund it.

Low-carbon mobility: If we really want to reduce global warming emissions and oil imports, we need to help cities and regions invest rapidly in mass-transit. We need state-of-the-art high-speed rail service between the nation’s major cities. We need intermodal transportation systems that provide travelers with easy connections between airports and passenger trains, which produce lower emissions than regional jets.

In its own "green recovery" plan, the Center for American Progress notes that Congress already has approved $20 billion to $30 billion in local transit projects, but has not allocated the money.

Longer term, Congress needs to reform federal transportation policy, which now favors road-building over mass transit. The federal government pays 80 percent of the cost of new roads, but only half the cost of mass-transit projects. Congress should shift the emphasis to reducing the miles traveled by private passenger vehicles.

An additional investment of $35 billion is needed to modernize the way air traffic controllers route flights. In recent years, 10 airlines have closed down and others are cutting services, most recently because of high fuel costs. But according to the Associated Press, U.S. airlines could save 10 percent of their fuel costs -- or about $5 billion this year -- if the nation replaced its 50-year-old airline routing system with a modern GPS system. Fuel savings would pay off the investment in just seven years, according to the AP.

Federal bail-outs: Congress should not hesitate to attach strings to its bailout of private companies. In fact, it should attach a rope and drag failing industries into the 21st century.

We should require the Big Three automakers to show how they’ll manufacture not only fuel-efficient cars and light trucks, but also the low-carbon buses, light rail equipment, high-speed trains and the alternatively fueled, energy efficient heavy-duty trucks we need to reduce emissions from freight hauling.

Super-efficient vehicles are needed for the military, too. The Department of Defense’s non-tactical fleet of nearly 190,000 vehicles used 97 million gallons of gasoline in 2006. In Iraq alone, 20,000 U.S. troops and contractors are involved in meeting the fuel requirements of the U.S. military, with 2,000 trucks supplying fuel every day in convoys vulnerable to attack.

Now that the taxpayers own Fannie Mae and Freddie Mac, we should require them to offer lower mortgage interest rates and/or breaks on mortgage insurance to families that buy energy efficient homes or retrofit existing homes. Lower mortgage interest should be awarded, too, to homes located near mass transit.

Zero-energy buildings: The U.S. Green Building Council, the American Institute of Architects and other respected members of the building industry have endorsed the goal of achieving zero-energy buildings by 2030. By that year, all new residential and commercial buildings would produce at least as much energy as they consume. Toward that goal, Congress should require DOE to develop a model zero-energy building code, set new energy standards for publicly funded buildings, expand tax incentives for building efficiency improvements and help states and localities train more code officials.

Carbon sequestration: We need healthy forests and conservation-minded farming techniques to allow soils and forests to play their critical role in storing carbon emissions. Carbon sequestration gets too little attention in the global warming conversation. The Obama administration should create and Congress should fund a 50-year plan to restore America's soils and forests while making rural America our principal source of renewable energy and carbon capture. Congress should provide funds to reforest the public and private woodlands being destroyed by wildfires and pests.

Green collar jobs: We should invest at least $125 million annually to train new and displaced workers in green trades, and additional funds for a Green Corps, today's version of the Civilian Conservation Corps. We should identify climate enterprise zones where workers will be most negatively affected by climate change and climate policies -- for example, the workers in coal country -- and provide special incentives for manufactures of renewable energy equipment to locate there.

Federal energy efficiency: The federal government is the world’s largest single energy consumer. When it invests in clean energy, it can move markets. The Alliance to Save Energy estimates that to meet its clean energy targets, the government needs to invest $1.3 billion annually between now and 2015, but Congressional funding typically has been in the $100 million to $300 million range. Congress should fully fund the government’s efforts to meet its goals. After all, the money the government spends on energy is taxpayer money.

The prescription for genuine and lasting recovery is aggressive, multi-tasking investment in a new energy economy. It’s just what the doctor ordered.

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