Obama's election brightens US prospects
28-Nov-08
Consultancies in the US tell Geraint Roberts how they see the post-Bush era
The US elections on 4 November were a turning point in the development of US environmental and energy policy. Barack Obama has promised to invest $150 billion over ten years in energy efficiency measures and “clean energy”, and establish annual greenhouse gas reduction targets to achieve an 80% emissions cut on 1990 levels by 2050.
When George Bush departs the White House in January, so does his administration, including Stephen Johnson, head of the Environmental Protection Agency. During the years of the Bush administration, when the EPA was pressed by NGOs and some states to regulate carbon dioxide emissions, the agency claimed the Clean Air Act did not give it the authority to do so – until the US Supreme Court dismissed its argument last year.
Another key change was the appointment of the liberal Democrat Henry Waxman as chairman of the House Energy and Commerce Committee, following a secret ballot of House Democrats on 20 November. He replaces John Dingell of Michigan, one of the staunchest supporters of the big three carmakers of Detroit – Ford, Chrysler and General Motors.
In addition, another liberal Democrat with pro-environment views, Barbara Boxer, is chairman of the Senate Environment and Public Works Committee. She recently vowed to introduce two Bills next year: the first will establish a grant programme to cut greenhouse gas emissions under the Clean air Act with “up to $15 billion a year available to spur innovations in clean energy, including advanced biofuels”; the second “streamlined” Bill will direct the EPA to establish a cap and trade system for greenhouse gases. The committee's first hearing, which will take place as soon as possible after Congress reconvenes in January, will be entitled: “How fighting global warming is good for the economy and will create jobs”.
“Obama's election signals a new day for the White House, not just for consultants but also for NGOs and those that have been working for clean energy for many years,” says Kara Rinaldi, a political expert in ERM's Washington DC office. “Our clients will see changes to the regulatory environment and will have to react swiftly to them.But we have the economy against us and there's very strong opposition from those areas with industries that see this as a threat.”
In his environment manifesto, Mr Obama said all of the allowances issued under the emissions trading scheme would be auctioned. “Some” of the revenue raised will be used to invest in domestic energy efficiency improvements and support the development of “clean energy”, partly through a new venture capital fund. And he has pledged to make the US less dependent on foreign oil. But in contrast to his defeated rival, John McCain, he has not spelled out the extent to which nuclear power will contribute to these goals.
Renewables will be given a much more prominent role. The manifesto includes targets to require 25% of US electricity to come from renewables by 2025, and for at least 30% of the federal Government's electricity to come from renewable sources by 2020. “Major investment” is promised in the national grid to allow a “tremendous increase in renewable generation” and to allow smart metering and distributed storage.
On energy efficiency, all new federal buildings will have to be zero-carbon by 2025 and 40% more efficient within the next five years. Existing federal buildings will be retrofitted to make them 25% more efficient within five years. Early adopter grants will be given to states that implement policies to ensure that “utilities get increased profits from improving energy efficiency rather than higher energy consumption”.
Speaking a fortnight after the elections at the “global climate summit” held by California Governor Arnold Schwarzenegger in Los Angeles, Mr Obama repeated his promises to create a cap and trade scheme to fund clean energy investment, and to ensure that the USA “engages vigorously” in the UN negotiations for a post-212 global emissions agreement. He also made a point of backing nuclear power and coal-fired power stations with carbon capture and storage.
Away from energy matters, however, the manifesto offers few environmental measures. It promises to tighten drinking water standards and introduce strict pollution standards for intensive livestock facilities. It also vows to “restore the strength” of the Superfund programme – the US contaminated land regime – “by requiring polluters to pay for the clean up of contaminated sites they create”.
“Certainly Barack Obama's proposals will benefit environmental consultancies and the environment,” says Jan Chizzonite, managing director of WSP Environment and Energy in the US. "But on the other hand we're faced with the worst economic crisis for many years. It's interesting that he's linking his environmental policies to job creation – and some of these will be in consultancy. But there's only a certain amount of money that companies can spend.”
Mr Chizzonite expects 2009 to be relatively flat but after that growth in environmental consultancy could reach 10-15%. The company's current growth areas are carbon footprinting tools, energy management, services relating REACH, the EU chemicals registration regime, and California's new green chemistry initiative. It also has a practice in ecosystem restoration that is “poised for growth”.
Other future growth areas for the company are renewables – its Swedish office has a lot of experience in wind and solar – and energy auditing of buildings.“We are already seeing some jurisdictions, such as Washington DC, introducing standards in this area. Our sister engineering company, WSP Flack & Kurtz does energy efficiency and has accredited engineers, so there's certainly a synergy there.”
Dave Richards, chief executive officer of SLR Consulting, agrees that in spite of the economic downturn, “in general it's going to be good”. But in the short term most growth opportunities will lie with publicly funded programmes. “It's extremely difficult to finance anything at the moment unless you've got a guaranteed revenue stream, so for speculative developers times are hard.”
In addition to the new focus on renewables, there will be no let up in efforts to produce domestic oil and gas, a sector that provides a lot of sustainability and regulatory work for SLR and other consultancies. “I was in Alaska recently and it's busier than it has ever been,” says Mr Richards. “The trans-Alaskan gas pipeline is supported by an unholy alliance of the Republican's vice presidential nominee Sarah Palin and Barack Obama – it's the largest private civil engineering project ever in North America, and the oil companies are already putting together their plans.” He also points out that President-elect Obama has proclaimed a “use it or lose it” policy on old drilling licences – if they are not used, he will take them away and give them to someone who will.
The renewables targets should also be good for business. “As Europe-based consultants we're very well placed to take advantage of this. The US hasn't been pushing these technologies. We've done a lot on all forms of renewables – and there is a good opportunity to sell our skills into the US, using Canada, which has shown more enthusiasm for renewables, as a staging post.”
The flip side of a massive new US investment programme is that it could suck in projects currently planned for the UK and other countries – a point made recently by the Environmental Industries Commission. A recent example, says ERM's Nick Cottam, is BP's decision to cancel its plans to build wind farms and other renewable schemes in the UK and instead focus the bulk of its $8 billion renewables spending on the US.
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