Bill Allowing Oil Exports Gives Bigger Lift to Renewables and the Climate
Who drove the harder bargain in the federal budget compromise this week: Republicans who ended the ban on exporting crude oil from the United States, or Democrats who extended tax breaks for wind and solar power?
As news of the quid-pro-quo spread, celebration and remonstrance broke out on both sides of the partisan Congressional schism on climate questions.
And when neither side is wholly satisfied, it is usually a sign of a square deal. But this time there is good reason to believe that the green side gained more than it gave, assuming the package goes through as expected.
“There is a lot to be said, pro and con, about this agreement, but I believe the extension of tax credits for solar and wind energy is a game-changer,” said Sen. Barbara Boxer of California.
“Extending the wind and solar tax incentives for 5 years would eliminate over 10 times more carbon emissions than lifting the oil export ban would create.”
Her fellow Democrat, Sen. Ed Markey of Massachusetts, saw it differently, as did many environmental campaigners.
“Today is a great day to be an oil company in America,” he said scornfully on the Senate floor. “It will be a disaster for our economy, for the climate, for our national security, for our consumers.”
Environmentalists have a hard time swallowing the end of the oil export ban, because it is antithetical to the latest climate science that decrees most fossil fuels ought to be left in the ground.
The concession to Big Oil was especially stinging, coming on the heels of the new Paris Agreement that augurs the end of the fossil fuel era sometime in this century.
But it’s hard to count this is as a clear Republican win. Basically, the Democrats were putting their money on an up and coming industry, and the Republicans on one that looks down and out.
That seemed to be how Wall Street saw it. On Wednesday the stocks of Solar City soared, while ExxonMobil’s sagged.
In addition, what the Democrats gained in exchange for allowing crude exports went well beyond the tax credits for renewables.
The “omnibus” bill, as the grab-bag budget legislation is known, also ensured financing for land and water conservation and beat back anti-environmental policy riders. It also gave the green light for President Barack Obama to begin making the contributions he has pledged to the Green Climate Fund, a crucial element of the United Nations climate program and a down payment on the financing goals of the new Paris Agreement.
The legislation’s boost to investments in renewables is especially significant in light of that new climate treaty, which Republicans in Congress have been trying to thwart at every turn.
Investments in wind and solar are crucial toward meeting the U.S. pledges to steeply reduce emissions under by 2025.
Robust investments in renewables between now and 2020, when the treaty takes full effect, are particularly essential, because the treaty calls on nations to review their progress and their pledges as early as 2018, and to ratchet up their ambitions quickly after that. Even though the new tax credits are not permanent, the investments they spark couldn’t come at a better time.
Had the generous tax credits for wind and solar not been extended now, most analysts say, new investment would have almost certainly have stalled. This happened every time the credits were interrupted in the past.
According to a new update by GTM Research that takes the omnibus provisions into account, the solar industry should grow 54 percent more in the next five years under the new law.
“More solar will be installed each year than was added to the grid cumulatively through 2014,” said GTM’s Shayle Kann.
GTM analyst Corey Honeyman said the tax credit extension “will likely result in utility-scale solar contracts being signed for less than 4 cents per kilowatt-hour on a regular basis over the next two years.”
Tom Kiernan, chief executive of the American Wind Energy Association, said that “our industry will get a break from the repeated boom-bust cycles that we’ve had to weather for two decades of uncertain tax policies.
“This plan will drive more development, and near-term prospects look strong.”
The solar industry’s trade group said solar power would triple by 2022, and “offset 100 million metric tons of CO2 annually.”
The tax extension breathes new life into wind and solar just when they are cementing their role as the leading source of new electrical generation.
Nearly 70 percent of planned additions to U.S. electric capacity from the fourth quarter of this year through 2016 are from wind and solar, the Energy Information Administration reported this week.
In contrast, it is hard to predict how much extra oil would be pumped for the new export markets in the immediate future, and what the resulting carbon footprint will be.
Unlike wind and solar, the oil business is suffering under low prices, and energy analysts expect the international oil glut to persist for at least a few years. And in the long term, the Paris treaty’s goal of zero net additions of carbon dioxide to the atmosphere in just a few decades is as much a threat to oil demand as it is a boost to renewables.
House Speaker Paul Ryan said that the opening of export markets might eventually boost U.S. production by a million barrels per day.
But Michael Levi, an energy expert at the Council on Foreign Relations, citing projections by the Energy Department, said that “its best guess of reality” was that lifting the ban might make no difference at all. If oil resources turn out to be greater than expected, production of oil might go up by 220,000 barrels a day.
Levi also wrote that he expected no more than 10 million tons a year of extra carbon dioxide emissions over the next decade, or roughly 0.2 percent of all U.S. emissions. Policies like the new Clean Power Plan, protected under the budget agreement from a legislative repeal, “dwarf the impact on carbon emissions of allowing oil exports.”
Rhea Suh, president of the Natural Resources Defense Council, said the group would respond to the “major disappointment” of the oil export provision by stepping up the fight against offshore and Arctic drilling and on other fronts.
Even so, she said, “It protects funding for the Environmental Protection Agency and increases funding for the Department of Interior; it removes numerous obstacles sought by Republican leaders to block progress on climate change, clean air, clean water, land protection and endangered species; and it extends essential incentives for solar and wind power long enough to provide some real certainty for those industries. As a result, the public will be healthier and the U.S. will continue making progress on climate change.”
Even Thomas Pyle of the pro-fossil fuel American Energy Alliance said the minority Democrats had gotten the better of the majority Republicans.
“Republican leadership paid too high a price, capitulating on nearly every demand from the Left,” he said.
He called the tax credits for renewables and the money for the Green Climate Fund “a down payment on Obama’s climate agenda.”
“There’s no such thing as a perfect bill,” said Rep. Steny Hoyer, the majority whip, on the House floor on Thursday afternoon. “No one, as never happens will get everything they want or prevent everything they oppose from being included.”
These were words heard many times from negotiators in Paris. Especially in the context of those historic climate talks, this legislation seems more like an incremental advance than a hypocritical retreat.