Greentech investors and entrepreneurs are guardedly optimistic that the Environmental Protection Agency’s ruling that greenhouse gases are harmful to human health will provide a boost to their industry.
Friday, EPA Administrator Lisa Jackson signed the agency’s 133-page endangerment finding, legally obligating the agency to regulate carbon dioxide and related greenhouse gas emissions. The landmark decision could force the automotive industry and electric utilities, which together account for one-half of such U.S. emissions, to take drastic steps to cut emissions.
If the EPA’s endangerment finding is upheld following a 60-day public comment period, the agency is likely to begin the process of requiring automakers, utilities and a vast swath of U.S. industry to spend billions of dollars on technologies to slash C02 emissions that many scientists say contribute to global warming.
“This is the stick that will force industry to do things to clean up greenhouse emissions that they might not have done otherwise,” says Wilbur James, chairman of Rockport Capital Partners, a cleantech venture capital firm in Boston. Electric utilities have been regulated for decades on emissions of pollutants such as sulfur dioxide, the principal cause of acid rain that once denuded forests and killed Adirondack lakes. But lacking similar legislation to cut the production of carbon dioxide, utilities have limited their investment in anti-greenhouse technology to small test projects.
One potential beneficiary of EPA’s climate ruling could be Powerspan, a Portsmouth, N.H., developer of technology to remove carbon dioxide from the emissions of coal-fired electric generators. Powerspan’s system compresses carbon dioxide so it can be stored underground in a process known as sequestration, thereby preventing the gas from entering the atmosphere. Powerspan and a dozen or so other companies with similar technologies have installed demonstration projects, but there have been no large-scale carbon capture installations because the technology is expensive.
“A coal-fired plant that today produces electricity for 5 cents per kilowatt-hour might produce for 8 cents with carbon capture technology in place,” says Powerspan CEO Frank Alix, who in March testified on carbon capture before the House Subcommittee on Energy and Environment. “To justify that cost, you need regulation that says you have to do it, or you need to put a price on C02.”
Yet it’s far from clear how and when the EPA will act. “Even if the EPA proposes rules on coal plants in the next year, the cycle of public comment and potential litigation against those rules means that it could take three to five years before anything takes effect,” says Alix. “But the psychological effect of the EPA’s ruling is outstanding, because you know the end is in sight.”
The EPA’s ruling could also pressure Congress to pass legislation that would regulate carbon dioxide emissions. House Democrats Henry Waxman and Edward Markey have included climate legislation in the American Clean Energy and Security Act, the energy bill which they hope to complete by Memorial Day. The House is likely to pass the legislation; the Senate so far looks to be 15 votes short on any climate bill.
Yet President Barack Obama and EPA Administrator Jackson have both stated they prefer legislation over an EPA mandate as the best way to regulate greenhouse gases. “Everyone agrees that the best way to balance interests from companies and the government is through legislation that’s negotiated with all interested parties at the table,” says Alix. “You can do that with a congressional bill, but it’s much harder to do that with EPA action.”
“This is everybody’s plan B if Congress doesn’t act,” says Dan Weiss, director of climate strategy at the Center for American Progress, a liberal think-tank.
One way or another, the EPA’s endangerment finding appears to be a point of no return toward greenhouse gas regulation, whether through agency mandate or a cap-and-trade carbon market.
Utilities that rely heavily on nuclear power, such as Chicago-based
Less obvious sectors could benefit too. “This is going to open up opportunities in energy transmission and storage, and could create demand for advanced materials to replace things like cement, the manufacture of which is a major source of greenhouse gasses,” says John Balbach of the Cleantech Group, a trade organization.
The EPA’s move could also reignite venture investment in clean energy technologies, which fell off during the last six months after a record $150 billion in global investment in 2008, when cleantech was the largest recipient of venture funding. To fill that gap, governmental commitment to clean energy development has risen to $200 billion in 2009, in part to create jobs in a faltering global economy.