A construction worker looks at site plans.
This piece was co-written with Dr. Morgan Bazilian, Professor and Director of the Payne Institute for Public Policy at the Colorado School of Mines.
The current COVID-19 pandemic has both public health and economic dimensions and the two are deeply interconnected. Some consensus on various key policy stages are emerging from initial lock-downs, from ensuring massive testing and mobilization of manufacturing for items like ventilators and personal protection equipment, to emergency stabilization, and economic stimulus. Many, including Presidential candidate Joe Biden are putting out rather detailed plans.
The last time that the economy ground to a halt during the Great Recession, Congress passed the American Recovery and Reinvestment Act of 2009 (ARRA), which injected over $830 billion through tax cuts and credits, and infrastructure spending. A similar, and likely greater response, will be required this time. How to best design such economic stimulus (after initial emergency stabilization funding) has arisen as a focus of legislative proposals as well as numerous Op-eds and essays. How that fiscal and monetary stimulus is designed can help influence the post-pandemic global economy.
This is first and foremost a medical pandemic that requires a swift public and individual health response. As Senator Murphy noted on Twitter, some clear prioritization is needed: “This is a health crisis that created an economic crisis. If you don't fix the health crisis, there's no amount of stimulus that will work.”
An "Emergency" Sign in front of a hospital in the early evening
Looking forward, we are also going to have to spend a lot of money to get the economy back on track, and we should ensure that the investments provide for higher levels of resilience across all sectors. There are already many calls for the coming economic stimulus to be green—and some have already been critiqued for being “tone deaf”.
Towards Resilient and Just Energy
Professional worker installing solar panels.
Congress already passed a $100 billion dollar short-term coronavirus relief bill, and the Senate is now poised to pass a two trillion plus dollar bill with some direct funding and industry-specific bailouts. How best then to use this opportunity wisely, and invest energy in infrastructure and industries that make us more resilient in the future?
While there has been considerable coverage of the related crisis facing the global oil market, less time has been spent considering impacts on other parts of the energy sector.
As Fatih Birol, the head of the International Energy Agency has noted, it is useful to think how the money can be best spent to help enable a low-carbon energy transition. He notes, “Governments can use the current situation to step up their climate ambitions and launch sustainable stimulus packages focused on clean energy technologies.”
The pandemic has driven down energy and transportation demand and given us a glimpse of what increased efficiency and energy conservation might do for air pollution (which kills almost 5 million people per year), carbon emissions, and cleaner water. While this pandemic is not a useful analogy for climate action, we can learn something about impacts of demand destruction on the environment and the economy.
Over 75% of new power plants that were scheduled to be built this year are wind and solar projects. Some of these projects must meet certain deadlines to receive the tax credits that are backed into their finances. However, a temporary loss of workers could hurt their chances of meeting those dates, so they should be extended. Congress should also consider extending the tax credits for new renewable energy projects and including energy storage and geothermal projects to accelerate the project pipeline.
These sectors create the jobs, and associated tax revenues, of the future and we should encourage them all the more now. This aligns well with calls for a “just energy transition”. The responses to the pandemic will all have socio-economic issues at their core. As many lose their jobs, and have a difficult time meeting bills.
A related area that we should vastly expand are weatherization programs and tax credits for new and retrofitted buildings. Retrofits are particularly labor-intensive and can create many jobs as the majority of buildings could use some form of upgrade. These types of programs stimulate both labor and manufacturing.
Energy retrofits are labor intensive.
The IRS should clarify the carbon capture sequestration and utilization (CCUS) tax credits so that project developers can have certainty to their use and move forward with billions of dollars’ worth of waiting projects. Congress should consider expanding the credits themselves to make more early-stage projects viable and move the industry further down the learning curve to make CCUS more economical.
Finally, the national-scale HVDC super-grid that many major credible grid integration studies tells us will drive down costs and increase investment in a clean future should be enabled. This project would be a massive undertaking, touching almost every state, and that is just the type of large blue-ribbon project that would put multitudes to work. Additionally, such a project would require massive amounts of steel and could easily fire up dormant US steel mills. It would also require a massive change in how people create the social license to operate and build infrastructure projects.
High-voltage power lines could connect the entire country together.
Strings Attached
Bailouts for the travel industry should come with resilient, low-carbon energy strings attached. We can help ensure that planes fly, but emergency funds should make sure that the industries not only come out stronger and more resilient, but cleaner as well. A radical efficiency and updated scheme to get the most polluting planes out of the sky and fill up Boeing’s order books for years would again increase domestic production and, if large enough, could spur investments in additional manufacturing capacity.
Major US automakers are retooling to manufacture and sell a larger variety of electric vehicles, but demand for vehicles of all types is likely to face sharp declines. Extending EV tax credits and instituting a graduated income and trade-in vehicle fuel efficiency “cash for clunkers” program for EV sales that would give more money the lower the trade-in fuel efficiency and income of the new car buyer could stimulate more sales and remove the least-efficient vehicles from the roads altogether.
We should double down on electric transportation.
The current health and economic situation is multi-faceted and extremely complex, but some economists and epidemiologists have been studying and preparing for such pandemics for many years. It is critical to heed their advice.
This challenge is going to require the best of us all. The federal government can help by making the right investments that not only make a difference now, but put us on a better footing to face an ever more uncertain future.
