Climate Change Politics in the US – 2/15/16

The few months have seen major developments in the climate change debate on Capitol Hill and the US proper. In December, quiet passage of extensions for both the investment tax credit (ITC) and the production tax credit (PTC) gave renewable energy an unexpected boost.  Even more surprisingly, Supreme Court justices made the decision to put a stay on enforcement of the Clean Power Plan only weeks before the passing of conservative Justice Antonin Scalia. Now political forces on both sides prepare for the one most consequential political seasons the issue of climate change has ever seen.

Wind- and solar-energy companies benefit from the ITC and PTC extensions in two ways: (1) direct subsidies for production and installation and (2) increased certainty and confidence on the part of investors.

According to Solar Energy Industries Association, the impact of the solar ITC on the 6500% growth of solar installation over 2006-2014 and the fall of utility-scale installed costs by more than 64 percent since 2010 was significant. For the larger wind energy industry, the American Wind Energy Association (AWEA) attributes to the PTC an increase in U.S. wind power of over 300% since 2008. The AWEA also attributes innovation in turbine technology to the PTC which has lead to a fall in wind’s costs of 66% over six years.

Beyond the obvious monetary incentives, the extensions will make it easier for projects to secure financing and other support necessary for large projects and insulation from boom and bust cycles that have afflicted solar and wind in the past.

Halting enforcement of the Clean Power Plan without discussing its merits, the Supreme Court put the landmark climate program in a precarious position. While some states — California, Colorado, New York, Virginia and Washington — continue to address targets laid out by the new rules, others — Texas and West Virginia — are vocal in their opposition to new regulations aimed at cutting CO2 emissions to 32% of 2005 levels by 2030. Although 26 states brought the lawsuit against the new rules to the federal court, regulators in many prepare to comply with the Clean Power Plan if only to avoid an EPA-designed plan should the suit fail. Some governors are even acting independently to promote clean energy industries based on their increasing importance as sources of jobs.

When a 5-4 majority issued a stay on the Obama administration’s Clean Power Plan, the program seemed likely to fail before the Supreme Court when the justices made an actual ruling. Now that Scalia has passed away the Court’s 4-4 split may leave a final ruling in the hands of a lower court which previously refused a request to freeze implementation. In this instance, the stalemate would probably result in the plan being approved.

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