How the Obama Stimulus Plan May Help Environmental Projects

Government spending will aim to boost the economy and advance an array of green efforts.

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President-elect Barack Obama has been talking up green jobs, green energy, and green infrastructure for a while, but in the past few weeks, as pressure has mounted for a new economic stimulus package, his push for green spending has acquired a sense of immediacy: If Congress is going to spend hundreds of billions of dollars to boost the economy, as it appears likely to do, how much should be spent on green projects? And do some green projects hold more promise for the economy than others?

There have certainly been many suggestions. Washington, over the past month or so, has turned into something of a holiday showcase for backlogged projects and wishful plans. The National Governors Association and the U.S. Conference of Mayors have each published lists featuring green projects they say are "ready to go"—ready for construction—in 2009. Activists, utilities, and trade groups have offered up their own lists, sending them along to the Senate Energy and Natural Resources Committee, which in turn has turned them over to Democratic congressional leaders.

From what Obama has said thus far about the stimulus package, which is rumored to be in the $700 billion-to-$800 billion-plus range, he is hoping to accomplish two things at once: stabilize and restore the flagging economy while advancing his energy agenda. Observers say that to do so, he will have to strike an appropriate balance between short-term and long-term projects, a balance that delivers quick, tangible aid to the economy but also lays a foundation for transforming the country's energy portfolio.

The "green" proposals being bandied about are a motley bunch. They include calls for fixing old things, such as retrofitting homes and schools and offices with energy-efficient technologies, and for building new ones, such as new power plants, new solar farms, and new fueling stations for flex-fuel vehicles. They cover pitches for large, multiyear projects—new municipal sewer systems and high-voltage transmission lines—and pitches for smaller ones, such as installing windows. And they encompass a range of ideas for distributing the money (grants, tax credits, and loan guarantees, to name a few) as well as a range of recipients, including homeowners, utilities, manufacturers, developers, and city and state governments.

In addition to the calls for investment, there are calls for reform. Many observers say the stimulus package gives lawmakers a rare opportunity to overhaul regulatory policies that have hampered the growth and success of the renewable energy industry (particularly wind power) and set too-lenient efficiency standards for new office buildings. One far-reaching move, they say, would be to give greater control to federal regulators over the construction of new electricity transmission lines across state jurisdictions, thereby overriding fights among states and reassuring wind investors that their energy will find buyers in distant markets.

Of the package's yet-to-be-determined price tag, as much as one third of it may end up being tied to energy; some lawmakers have said they would like to see a minimum of $100 billion in energy-related investment. The big question, of course, is how that money will be divided up.

At the moment, a consensus seems to be building around the notion that energy-efficiency projects will have the quickest impact on the economy, since they are among the easiest to deploy—and they lower utility bills. As Joe Loper, Alliance to Save Energy's vice president, said at a recent hearing, "Transformations have long lead times and many pitfalls. We should not crowd out opportunities for incremental gains."

The group, along with several other organizations, including Edison Electric Institute, the main trade group for the electricity industry, has called for retrofitting 2 million buildings over the next two years and for at least $13 billion for energy-efficiency programs.

Retrofits, of course, tend to be cheaper than infrastructure projects or new plants. Converting a coal plant to biomass, for example, might cost about $100 million; replacing the windows at city hall, about $2 million. But they also only begin to address questions about supply problems. "It's important to recognize that energy makes a huge contribution to our economic recovery, not just through immediate jobs but through providing affordable energy for the future," says Karen Harbert, managing director of the U.S. Chamber of Commerce's Institute for 21st Century Energy. "I don't think we should shy away from something that could create jobs two, three, four years from now. New plants have very long supply chains. Orders need to be placed now for parts. Pieces of equipment take time to manufacture."