A Green Stimulus for the People
By proposing a $100 billion "green stimulus" package to create jobs and cut carbon emissions, President-elect Obama has wisely decided not to let the economic crisis get in the way of addressing climate change. He may even see the crisis as a way of tackling climate change faster. In September his campaign's energy adviser, Jason Grumet, told a Harvard crowd that the conversation about climate change would be transformed when legislation addressing it is seen as "the next big American stimulus package."
That's good news. But so far Obama has stuck to the well-worn path of top-down subsidies for wind and solar energy, infrastructure investment and a modest revival of a home weatherization program for the poor. The problem with this plan is that it turns energy consumers as well as power producers into supplicants. Energy-industry subsidies are notoriously poor public investments--yielding few jobs or jobs of short duration because the government money can make the industry too dependent to be sustainable. Subsidies for specific technologies often benefit the well heeled--as with California's Million Solar Roofs initiative. Green is a luxury, out of reach for many Americans struggling with rising energy bills. Energy consumers get the message that they're victims of high prices rather than actors who could play a powerful role in moderating energy demand.
But with a bolder plan to make working families the agents of change, Obama can take a historic opportunity to remodel the way we generate, transmit and use energy, stimulating the economy in the short term and building a broad green constituency of workers and industry in the long term.
For a green stimulus plan to achieve its goals, Obama needs to popularize environmentalism and empower Americans to control their energy use. Instead of a million solar roofs and hundreds of thousands of pricey Priuses, we need 30 million well-insulated ceilings and 15 million Chevy Cobalts (or similar cars that get thirty mpg or more) for the majority of American households that make less than $60,000 a year. A populist energy-efficiency stimulus plan will create jobs as it reduces energy use and costs, eliminates emissions and puts families in charge of their energy consumption. The stimulus package also needs to address the inadequacies and inequities of our system of generating, transmitting and consuming electricity so that the greatest burden does not fall disproportionately on working families. An ambitious overhaul of America's power grid would have short-term stimulus benefits while kicking off a long period of technological and commercial innovation.
At the heart of this green stimulus opportunity is recognizing that rising energy prices have been particularly unfair to low- and moderate-income Americans, draining their finances and putting them at the mercy of fluctuating global energy markets. While the average family spent about 4 percent of its income on gasoline in 2006, those making $15,000 to $40,000 spent 9 percent, and by this past summer they were spending 10 to 14 percent of their income on gas. Better-off families were able to change jobs or houses or buy a more efficient car, but those with lower incomes had few options. In a cruel trick of the market, rising gas prices made the least efficient gas guzzlers the cheapest cars available. Chained to high energy expenditures, low-income families saw their credit and standard of living erode so that by last summer 70 percent of them told the National Energy Assistance Directors Association that rising energy prices had changed their food-buying habits. Many said they skipped payments on credit cards, utilities, mortgages and auto loans to pay for gas, which meant that rising energy costs had spilled over into already shaky mortgage and credit markets. In 2008 utilities cut off 8 percent of accounts for nonpayment.
What recourse do strapped households have? Since the 1970s Washington has offered partial help paying utility bills to very low-income families through the chronically underfunded Low Income Home Energy Assistance Program. However, neither direct payments nor proposals such as $1,000 stimulus checks or a gas tax holiday will reduce the underlying hemorrhage of fuel, money and greenhouse gas emissions from leaky homes. Crucially, direct payments perpetuate a cycle of dependence and wasted energy without giving households the power or access to capital to manage their energy use.
Helping poor and moderate-income families invest in energy efficiency will not only strengthen their finances; it will benefit the economy as a whole. The Energy Department estimates that 15 million homes owned by poorer Americans could be weatherproofed for less than $3,000 each, cutting their energy use by 20 percent--in effect creating an annually recurring stimulus payment of about $400. This weatherization opportunity should be extended to moderate-income families making up to $75,000 a year, allowing them to install energy-saving technologies like programmable thermostats and energy-efficient refrigerators. And weatherization creates jobs--fifty-two direct jobs and twenty-three indirect jobs for every $1 million invested, according to the Energy Department. Vouchers and low-interest loans to drive this investment would help correct working families' disproportionate share of the energy burden. Low-interest loans for energy efficiency--which have a history of reliably increasing homeowners' ability to make payments--should be part of the mortgage bailout plan as well.
Another way to make moderate-income families agents of change can be found in their cars. While the price of gas has fallen from its heights, wildly fluctuating energy prices are clearly part of the future. Giving low- and moderate-income households access to very low-interest loans for cars that get thirty mpg or more, sweetened with vouchers and incentives to scrap old gas guzzlers, would reduce the strain of commuting while cutting pollution and carbon emissions. Such subsidies should be a part of any bailout of the auto industry. They may seem extreme, but in the past they were made available to the well-off in the form of the $3,150 tax credit offered to Prius buyers.
While Obama's plan includes money for mass-transit projects, we might move more people to work by encouraging flexible transit--vanpools, paid carpool services or other programs to serve far-flung exurbs. Americans who take mass transit to work are outnumbered three to one by those who carpool, bike or walk. More may be persuaded to leave their cars at home if their schedules and routes are accommodated, and if they are rewarded with a green voucher. Businesses whose transit choices reduce traffic congestion and emissions would also benefit from reduced expenses, good PR and on-time employees. Wal-Mart, which has more than a million workers, might be enticed to provide vanpools for its employees, which would benefit workers, the company and the surrounding community.
While insulation, compact cars and vanpools may not supply the sort of whiz-bang jobs associated with the fantasy of a green economy, they have the advantage of being quick to implement and relatively inexpensive.
In order to ensure the short- and long-term health of the economy and the environment, the government must renew the promise of the nation's electrical system. Dating back to the early twentieth century, our power system is increasingly unstable and unprepared to handle greater consumer demand or inputs of green power. The cost of power outages has risen to as much as $180 billion a year, while the energy wasted during transmission has doubled since the 1970s. Moreover, in a partially deregulated market, the price and quantity of electricity is kept hidden from consumers through an archaic purchasing system that gives them no control and leaves lower-income customers subsidizing high-quantity users. This antiquated grid and patchwork system of regulation means wasted power and money. Energy that could reduce our carbon footprint by a fifth is lost at industrial and farm sites around the country. America cannot limit carbon emissions without reinventing the grid, and that investment is also a chance to correct the basic unfairness of the system.
The first priority is to let people control how much power they buy, when and at what price by integrating every house into a "smart grid." Smart grids, which should really be called value grids, allow customers to see the price and origin of their electric power throughout the day and give them the means to reduce usage when rates are high. Pilot programs in Boulder, Colorado, and Washington's Olympic Peninsula have found that installing a $100 "smart meter" allows homeowners to save between 10 and 40 percent on electricity. Giving them the ability to reduce usage during peak periods also cuts down on power outages and can eliminate the need to build expensive "peak" power plants. A RAND study estimates that we could save as much as $130 billion by installing smart meters in all homes.
To understand the potential of the smart grid, we need to look at Franklin Roosevelt's waffle iron campaign. In the late 1920s, when he was governor of New York, Roosevelt led a drive for cheaper, nationalized power generation so every family could have appliances like waffle irons. Later he extended a version of this promise across the country with New Deal programs like the Tennessee Valley Authority and rural electrification drives. The dream of hot homemade waffles in the morning sounds quaint now. Didn't Roosevelt know about frozen toaster waffles? Of course not--the toasters, microwaves, home freezers and food chemistry that created ready-to-eat waffles spilled from that electrical plug installed in every home.
Similarly, installing smart meters could change the way households use electricity--enabling them to reduce waste and expect more of their appliances. Plug-in vehicles are already being tested for their ability to support a smart grid. Someday you may be able to charge your car with cheap, clean wind power at night, drive to work and lease your battery to your utility company while you're there. This innovation alone could dramatically reduce carbon emissions, create new ways to earn money and shake up the relationships among automakers, oil companies and utilities.
The key to making the smart grid happen is recognizing that it's not for "smart" people, green people or elites; it's a basic right. FDR's promise was that everyone, rich or poor, should have access to electricity. Obama can promise that everyone will be able to know the price--in dollars and carbon--of the electricity they use and to control their use for their benefit.
The second priority is broadening the definition of green power to include low-carbon power recycled from industry, farms and sewage--call it gray power. Like green power, energy from waste reduces emissions, but it also supports existing jobs in industrial zones and farm states. McKinsey Global Institute estimates that industry could make $50 billion a year in profits simply by turning lost heat, gases and pressure into electricity. A study by Lawrence Berkeley National Laboratory estimates that harvesting these profits could cut US greenhouse gas emissions by a fifth. Gray power creates jobs. It also protects existing jobs by shoring up the sagging balance sheets of older plants.
Power from manure and sewage is another opportunity that's ignored. In 2005 only about eighty farms captured bio-gas from their manure. The EPA estimates that 7,000 farms could turn their manure pools into fuel and money. This would prevent greenhouse gas emissions from the manure and reduce water pollution. Landfills and sewers offer further possibilities along the same lines.
Why aren't we recycling these energy sources already? Unlike solar, most of the technology is at least a generation old and relatively cheap. But onerous regulations, standby charges and discriminatory pricing keep some small-scale generators off the grid. A business culture that favors investing in energy production rather than energy efficiency, combined with subsidies for energy use, further prevents companies from exploiting opportunities within their own walls. Making national connection standards and regulations that favor distributed generation--green and gray--will encourage the rapid growth of renewable energy and an entrepreneurial power sector.
The final step in the stimulus plan should let the public do what utilities won't: build a national backbone grid to move power from one end of the country to the other. To extend the promise of steady, sustainable power to future generations, investing in a common carrier backbone is essential. A national grid will allow power to be wheeled between states, evening out prices and breaking down regional monopolies. If we're to integrate renewable power into the grid, it's a necessity. Established utilities invest very little capital in infrastructure; the project would make a great public investment. The payback for grid investments is $3 to $7 for every dollar invested, according to University of Minnesota professor Massoud Amin.
Building a national grid addresses another unseen problem: when the government enacts greenhouse gas legislation, the cost will not fall on everyone equally. Recent studies, including one from Oak Ridge National Laboratory, suggest that putting a price on carbon through a tax or cap-and-trade system will fall unfairly on poor, rural residents and people in the South and Midwest who depend on coal-fired power. Because the deregulation of the electrical industry occurred in a patchwork across the country--and only about a third of it is deregulated--the costs of a national greenhouse gas policy would vary widely depending on regulation in any given area. Building a national grid will enable a fairer greenhouse gas policy. Without these changes the burden of avoiding climate change will fall unfairly on some Americans through no fault of their own.
For Obama's economic stimulus and green agenda to succeed, energy must be democratized, conceived as a shared responsibility and right. This is not just a program of green jobs that can be plugged into the economy like kinetic Legos, or subsidies sprinkled from on high, but a full re-envisioning of energy and our relationship to it. Decades of cheap power have encouraged complacency, waste and squandered opportunities for innovation. (The electrical industry famously spends as much on research as the dog food industry.) Presented with this opportunity to let Americans take charge of their energy use, Obama must not fall back on the same old politics of power and subsidies.