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Obama’s Environmental Programs Offer Business Opportunities

Date

March 15, 2009

Read Time

7 minutes

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Despite the financial downturn, President Obama continues to place a high priority on environmental protection and development of alternative energy. In fact, the President cites the economic crisis as additional grounds to reduce our dependence on foreign oil, create jobs, spur new energy technology and improve the nation's global standing.

This is good news for business people looking for new opportunities. This article explores Obama's energy and environmental initiatives since taking office.

On the campaign trail, Obama's goals included:(a) reducing U.S. carbon dioxide emissions by eighty percent; (b) increasing electricity from renewable sources to twenty-five percent; (c) investing $150 billion in renewables;(d) improving energy efficiency by fifty percent; (e) making all new buildings carbon neutral;and (f) reducing the nation's oil consumption by at least thirty-five percent. Economic conditions have, if anything, heightened the President's efforts to achieve these milestones.

A. Energy, Retrofitting and Green Collar Jobs

In his first week in office, the President focused on the nation's automobiles, which emit about ten percent of the world's greenhouse gases. Obama directed the Environmental Protection Agency (EPA) to reconsider a prior ruling barring California from setting its own more stringent fuel efficiency standards. Obama also ordered the Transportation Department to issue new national regulations. In advocating more stringent fuel standards, Obama looked to the future. He stated that his goal is not to further burden an already struggling industry, but to nudge American automakers to thrive by building the cars of tomorrow.

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act, commonly known as the stimulus bill. The bill allocates more than $110 billion to alternative energy, conservation and transportation projects. Major funding includes:

(a) Energy-efficient buildings – Buildings account for as much as forty percent of energy costs. The stimulus bill funds efficiency upgrades in federal buildings. It provides money to weatherize 2 million homes for low income owners, as well as taxpayer credits up to $1500 for all homeowner weatherization projects;

 

(b) Alternative energy – The bill provides federal loan guarantees to spur development, and funds up to thirty percent, of solar and wind projects. The Solar Energy Industries Association anticipates creation of over 65,000 jobs from the stimulus bill;

 

(c) Smart energy grid – Under our current grid, large amounts of produced electricity dissipate without use. A smart energy grid will upgrade distribution and long distance transmission capacity and encourage energy use at non-peak times. It will make alternative energy more viable, as energy generated in rural areas will be more easily conveyed to cities;

(d) Public transportation – The bill funds public transportation, including Amtrak upgrades and construction of high-speed rail lines. Potential routes include upgrading service between Chicago and St. Louis and new routes connecting Chicago and Minneapolis.

 

Robert Pollin, a professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts, said the green investment portion of the stimulus bill should yield about 1.7 million jobs, about thirty percent of them in construction. Funds for energy efficient buildings will provide opportunities to real estate companies focusing on green renovation and development. These projects will not only create "green collar" jobs, but will, at the same time, reduce the nation's energy consumption.

B. Science-Based Decisions

Obama has promised that science, not politics, will govern his decisions. Many of Obama's high level environment and energy appointees have a scientific background. As with many of Obama's cabinet appointments, these officials have historically taken moderate positions.

Obama chose Steven Chu as Secretary of Energy. Chu, a Nobel laureate physicist, recently headed the Lawrence Berkeley National Laboratory, a national science laboratory. An expert in renewable energy, it is anticipated that Chu will direct research into those projects which are most practical. Lisa Jackson is the Administrator of the EPA. Jackson is a chemical engineer and formerly chief of the New Jersey Department of Environmental Protection. In her hearings, Jackson vowed that science will guide the EPA's approach to climate change. Carol Browner, who served as head of the EPA under Bill Clinton, is the assistant to the President on energy and climate change, and former moderate Colorado Senator Ken Salazar is the new Secretary of the Department of Interior.

C. Cap and Trade

In his address to the joint session of Congress on February 24, Obama continued to advocate federal global warming legislation, which is now supported by many large companies, including, most recently, Exxon-Mobil. In late January, Barbara Boxer, chair of the Senate Environment and Public Works Committee stated that she anticipated a Senate draft bill regulating greenhouse gases in a matter of weeks. Though the Administration believes that climate legislation will spur new, more efficient technologies, the nation now relies substantially on relatively inexpensive coal. Weaning the public away from traditional energy sources may take time. EPA Administrator Jackson recently stated that "we're doing everything we can to explain to people we understand the issues of climate, energy and the economy are interrelated."

Obama advocates a cap-and-trade system for greenhouse gas emissions. Under the program, companies will be required to buy at government auction greenhouse gas allocation permits from a limited pool (the cap) of available pollution rights. If a company is unable to meet its permit allocation, the company is required to purchase ""credits"" from others who have not used their entire purchased permit allocations. Trading pollution rights makes sense economically and has successfully reduced acid rain. If one company can reduce emissions more cheaply than another, that company has a marketable commodity it can sell. Emissions are reduced at the lowest possible price.

In his proposed budget, Obama anticipates that the government will raise about $80 billion per year from the auctions beginning in 2012, some of which the government will use to support research on renewable energy. As with other commodities, there will be markets to facilitate pollution trading. In fact, the Chicago Climate Exchange already exists to assist a wide number of large companies who, in anticipation of federal regulation, have already committed to reduce their emissions and are using the market to insure their voluntary compliance. Additionally, companies will be motivated to obtain valuable credits by, for instance, growing new forests that reduce carbon dioxide, or using technologies to destroy methane, a potent greenhouse gas. They can sell these credits to other companies unable to meet their credit allocations.

A federal global warming law will initially regulate utilities and other large manufacturing companies and then move to smaller industries. A manufacturer with as few as one hundred employees could be regulated in five years. For some companies, greenhouse gas legislation could result in significant changes in business operations. A utility, facing substantial permit costs to burn coal to generate electricity, will have an incentive to switch to wind or other carbon-neutral technologies. To reduce a company's greenhouse gas footprint, owners will retrofit their buildings and purchase green energy.

Obama has vowed to work with other nations to reduce greenhouse gas emissions worldwide. The United States will likely sign the international climate change treaty, to be negotiated in December 2009 in Copenhagen. According to the President, American companies can be worldwide leaders in developing new carbon neutral technologies that can be exported to other countries to improve our economy and trade deficits.

D. Public Knowledge

In his first full day in office, Obama spoke about transparency in government. Under his plan, the public will have greater access to scientific studies relating to the environment, including the impacts of pollutants on health. New information, in addition to an increased EPA budget of more than thirty percent in 2010, should increase enforcement and spending on projects such as wastewater plants that will protect public health.

Implications

President Obama has not retreated from this campaign promises to change the nation's energy and environmental policies. He is directing taxpayer money to create ""green collar"" jobs which, in his view, will create new technologies worldwide, will reduce the nation's dependence on foreign oil and reduce greenhouse gas emissions. Like many who subscribe to the concept of sustainability, Obama believes that environmental stewardship is consistent with, and indeed necessary, for the success of businesses and commerce and society as a whole. His green agenda will play a major role in turning around the nation's economy.

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