It’s November 8 – the dust has settled – and this is what we know:
Barack Obama has been reelected President with over 300 electoral votes, and he is the only Democratic candidate since Franklin Roosevelt to win a majority of the popular vote twice. The Democrats will hold a 55-seat majority in the Senate. The House will remain in Republican hands, with only a handful of seats lost to Democrats.
Congress…Does Party divide portend continued gridlock? Maybe, but maybe not. The very publicly stated goal of Republican Party leadership in the last four years was to keep Obama from having a second term; that has failed. So what will the new organizing principle be for the Republicans in the House and Senate? Will the Republicans determine that it is in their best interests to reach out to more diverse voter constituencies? Will they be willing to work with the President and the Democrats in the Senate on major legislation, securing victories for some of their priorities while enacting some of the President’s initiatives? Or will they continue to oppose the President’s priorities, risking a potential blowback and losses in the 2014 mid-term election? We will see which path Republican leadership in Congress chooses.
To Filibuster, or Not…Democrats in the Senate are facing a choice as well – about the filibuster rule that has made basic discourse on legislation a practical impossibility. Will the Senate choose to modify the rule to reduce the everyday use of filibusters and instead allow a simple majority in the Senate to vote on legislation? This change could be made by majority vote at the start of the new Congress; leadership will be weighing the short and long-term consequences of such an action.
Second Term Agenda…On his part, President Obama has an ambitious agenda for his second term, focused on three major areas: (1) budget and taxes, (2) energy, and (3) immigration. The 38 North Solutions team breaks down this agenda into potential policy initiatives we will watch for and participate in for our clients.
Fiscal Cliff…Important to the entire context of the Congressional and Administration priorities is that the current Congress faces expiration of the Bush tax cuts on December 31; the trigger of the defense and domestic budget sequesters (the so-called “fiscal cliff”) in January; the probable need to increase the national debt ceiling sometime early in 2013; and a tax-extenders bill (which includes the wind Production Tax Credit) awaiting action by the full Senate and House. Things might take a different course, but the betting is that during the lame duck session of this Congress they will vote to “punt” these issues to the next Congress, by
1) Extending the Bush tax cuts;
2) Delaying the fiscal cliff triggers; and
3) Agreeing to an increase in the debt ceiling.
Any of these steps would require legislation and the President’s signature. It is unclear at this point if the President would be willing to walk back from the protracted negotiations he undertook during the debt ceiling crisis to sign anything other than a clean debt-ceiling increase. Any of this potential legislation could become a vehicle for a tax extenders package as long as leaders in the House and Senate are willing to take them up during the lame duck session.
SO, what does all this mean for clean energy and innovation?
“Venture capitalists invest in the future…And innovation now means something different: It used to be about being smart and snappy … but now it’s about what we need as a country to survive in a global marketplace.” Lorna Randley, McKinsey
Policymakers on both sides of the aisle have recognized the need to foster innovation through public policy–to create jobs for the 21st Century, to increase energy independence, to protect the environment in a changing climate, and to preserve U.S. competitiveness in the global market. Achieving those goals requires a suite of thoughtful, and often complex policy solutions across industry sectors, across federal and state jurisdictions, and across regional resource interests. Here are some of the policy ideas that we think could find a way into an innovation agenda in the coming Congress:
Competitiveness
For the U.S. to maintain a competitive edge in the global economy while spurring job growth, the Administration may focus on boosting our science and technology education; maintaining leading-edge research and development; ensuring a level playing field for trade practices; identifying new financing mechanisms for investment; and providing incentives for clean energy deployment.
Policy opportunities:
- Tax incentives for clean energy, assuming Congress takes on broader tax reform, clean energy may be part of the picture with far-reaching and long-term implications for solar, wind, energy storage, biomass, and geothermal.
- Trade policy that would negotiate for higher purchases of American goods by fast-growing trading partners like China and India in high-potential growth sectors like clean energy
- Robust funding for ARPA-e, Department of Defense R&D, National Science Foundation, and other federal programs that support R&D; the “hub” and “challenge” models have been very successful recently and could receive greater attention as funding becomes increasingly scarce.
- Financing tools for clean energy such as Master Limited Partnerships, Real Estate Investment Trust, and the Clean Energy Deployment Administration or other mechanism that reforms the DOE loan guarantee program.
- Net neutrality, and cyber security policies that require interagency action with Homeland Security, FCC, DoD, and DOE and that are critical to grid and telecommunications innovation.
Jobs
The Administration has a goal of adding one million new manufacturing jobs in the U.S. by 2016. This could be accomplished through a cabinet-level focus, through a national infrastructure initiative, and through workforce development programs.
Policy opportunities:
- Business cabinet level function that folds business-relevant agencies into one umbrella cabinet-level agency, and enables more focus on growing new business.
- Infrastructure and jobs bill that includes education and workforce training as well as grid modernization with smart grid and distributed energy technologies.
- Manufacturing innovation institutes, public-private partnerships to leverage federal research efforts with private sector expertise.
- Corporate tax incentives, reducing the corporate tax rate for domestic manufacturers of innovative technologies.
- Funding for manufacturing research and development, leveraging existing federal R&D funding through NASA, DoD, DOE, and others.
Environment
The focus of the Administration’s environmental policy thus far has been the implementation of statute through EPA rulemaking. While this will continue in the second term, we believe the President will place a high priority on moving energy legislation, through a package or set of smaller bills tied to other goals–like jobs–that can deploy clean energy resources and reduce the impacts of climate change.
Policy opportunities:
- Clean Energy Standard, the most aggressive and specific policy the President has publicly supported could be the centerpiece of an Administration energy package.
- Carbon legislation could become a part of a larger debate on tax reform. Think tanks on both sides have revived discussions on the impacts and policy dynamics of some form of carbon legislation, most recently as a tax.
- Shale gas regulation, with EPA scheduled to release a draft study in late 2013 on the effects of hydraulic fracturing on climate (methane leakage) and water quality, that could change the federal regulatory dynamic for what is currently state-driven.
- Energy efficiency goals, historically popular on both sides of the aisle, could be enhanced for more engagement in the Federal buildings and operations; for commercial and industrial applications, including increasingly energy intensive data centers; and for household consumers who want more control over their own energy use.
- Electronic waste management through the Administration’s National Strategy for Electronic Stewardship to begin implementing policies to capture and retain wealth from reuse and recycling of our electronic waste.
Energy Independence
Steps to address energy independence could include improved energy efficiency of transportation fuels through CAFE standard implementation; transition from petroleum-based chemicals to biochemicals; and increased displacement of petroleum through reliance on the electric grid with electric vehicles.
Policy opportunities:
- FARM Bill, expired and needing reauthorization, includes incentives for biobased-products and biofuels in the energy title. The House failed to pass its own version of a Farm bill this fall, so the Senate version could be used as a vehicle for both sides to debate.
- Department of Defense could increase their already strong commitment to reducing petroleum dependence with clean energy technology deployment in defense operations at facilities here in the U.S. as well as in the field.
- Highway Bill could be another short-term extension or long-term change that includes a gas tax and incentivizes transportation alternatives.
Overall, we think the President’s direction during the first term—promoting the use of clean energy technologies and innovation to grow the economy–will continue on course with major structural shift. Enacting policy to foster innovation is complex and takes on many shapes and sizes. The 38 North Solutions team is here to help you make sense of them, find where you fit in, and help tailor creative policy solutions to fit specific needs.
