Chairman Waxman's ascension could have a major impact on the energy sector and climate change legislation.
The wave of "change" sweeping Washington, D.C., was felt on November 20, 2008, in the House Democratic Caucus, as members narrowly voted to replace a 28-year leadership veteran and one of the longest-serving members of the House as chair of the influential Energy and Commerce Committee. The 137-122 vote to install Representative Henry Waxman (D-CA) over incumbent John Dingell (D-MI) dealt a serious blow to the seniority system that has steered the caucus for decades, and potentially has major implications for the roughly 40 percent of the U.S. economy regulated by the Committee, including the energy, health care, pharmaceutical and biotech industries, and agencies as diverse as the U.S. Food and Drug Administration (FDA), the U.S. Securities and Exchange Commission (SEC) and many others. Waxman is vacating the chairmanship of the Committee on Oversight and Government Reform, where he earned a reputation as a dogged and aggressive legislator.
The impact of this leadership change on the energy sector, renewable and energy efficiency industries, and the climate change agenda looks to be particularly significant, as these topics were already expected to be fast-tracked by the incoming Obama administration. The rise of Chairman Waxman, widely considered to be to the left of Dingell on these issues, and his replacement of Dingell, a champion of the U.S. auto industry and considered relatively sympathetic to business, is likely to expand and accelerate government efforts to spur the "green economy," and may also bring quicker, more aggressive action to fight global climate change.
Which Comes First: Green Jobs, Cap-and-Trade...or Both?
In light of the economic conditions he will face upon taking office, some have predicted that President-Elect Obama will temporarily set aside plans to implement a national cap-and-trade system until the economy recovers, and will instead focus early environmental efforts on initiatives to create what his campaign called "five million green jobs" to bolster the economy. Modeled on FDR's Depression-era public works programs, such an effort would seek to put Americans to work improving the electrical grid, constructing new "green" buildings and improving the energy efficiency of existing infrastructure. This effort would be fueled by large government investments in renewable energy and other "green" technologies.
Others have predicted, however, that President-Elect Obama will seize the inherent momentum of his first days in office to push aggressively ahead with his proposed "cap and trade" program to reduce U.S. carbon dioxide emissions, as well as his pledges to implement tough new Corporate Average Fuel Economy (CAFE) standards for automobiles, and to increase U.S. production of hybrid cars. Chairman Waxman's ascension might lend significant support to these predictions.
Waxman has long advocated for tougher auto emissions standards, implementation of a national cap-and-trade program, and aggressive targets for carbon emissions reductions. Indeed, it is in these areas that he differed most starkly with the long-serving Dingell. In part to blunt criticism that he has been too cozy with his home-state auto industry, Dingell's office recently conducted a comprehensive review of the science and likely economic impact of climate change, and in October 2008 produced a 461-page discussion draft known as the Dingell-Boucher bill. Praised by the mainstream environmental movement as well as the business community for its measured approach to climate change, until November 20, 2008, that piece of draft legislation was widely expected to form the foundation for efforts in the 111th Congress to tackle climate change. The Dingell-Boucher draft bill envisioned a regime of gradual emissions standards intended to minimize the immediate economic impact while effectuating an 80 percent reduction in green house gas emissions by 2050 (as compared to 2005 levels). In marked contrast, Waxman's own climate change legislation, captioned the Safe Climate Act of 2007 (filed in March 2007, with no action) set forth a far more aggressive "economy-wide cap-and-trade" plan to immediately freeze emissions levels, and then cut levels by 2 percent per year until 2020 and 5 percent per year thereafter, with a target of 80 percent below 1990 levels by 2050. Waxman's legislation is comparatively vague, totaling only 21 pages, and leaves the details of implementation of the plan to the U.S. Environmental Protection Agency (EPA) Administrator. He has also proposed an absolute ban on new construction of coal-fired power plants that do not incorporate carbon-capture technology.
If Chairman Waxman moves aggressively on these issues, President-Elect Obama may be compelled to go along, or take the lead. While the emissions targets set forth in Dingell-Boucher (80 percent below 2005 levels by 2050) are consistent with President-Elect Obama's stated goals, Obama is not likely to accept preemption by Waxman on the key campaign issue of global climate change. Despite the economic downturn, the rise of a climate change crusader to the helm of the Energy and Commerce Committee may push Obama to move faster on cap-and-trade, perhaps introducing his "green jobs" initiatives as part of an overall environmental package. In this regard it is also worth mention that Obama has appointed Phil Schiliro, a former top Waxman staffer, as his liaison to the House. This may enhance coordination between Waxman and Obama on these issues. Either way, it is a safe bet that both incentives to spur the "green economy" and some variant of a national cap-and-trade program will be high on both the congressional and the executive agendas as 2009 kicks off. For a more detailed look at President-Elect Obama's Energy Policy Proposals, see McDermott On the Subject "Obama Presidency Signals Change in U.S. Energy Policy," published November 17, 2008.
Practical Impact: Government Incentives More Robust, More Attractive?
Whether or not a cap-and-trade program is implemented in 2009, Chairman Waxman's ascension does nothing to dilute the near certainty of significant enhancements and additions to existing government programs intended to encourage the development of renewable energy sources and other "green" technologies. Because of the relative lack of available credit in the private sector, such programs, heretofore often viewed as prohibitively bureaucratic and burdensome, will likely become increasingly attractive to "green" technology companies seeking capital infusions. For example, the U.S. Department of Energy (DOE) is currently accepting applications for its $38.5 million advanced technology loan guarantee program. Specifically, the DOE is dividing $10 billion among energy efficiency, renewable energy and electric transmission projects, and up to $8 billion advanced fossil fuel technologies.
This sort of funding support for technological innovation in energy production and transmission is entirely consistent with President-Elect Obama's stated policy goals and those of incoming-Chairman Waxman. Accordingly, companies involved in this sector can reasonably expect programs of this variety to proliferate and possibly even become more user-friendly.
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