U.S. President-elect Barack Obama’s credentials may be green, but gathering financial gloom means fixing the economy will take priority on his agenda before dealing with national carbon trading and clean-energy investment.
Analysts and carbon brokers believe Obama’s support for an emissions cap-and-trade scheme and plans to create millions of “green” industry jobs send exactly the right signal for carbon trading and the burgeoning renewable energy industry.
But don’t expect miracles overnight, they said. Depleted government coffers, rising unemployment and plunging profits across most industries could prevent him from making sweeping changes in his crucial first year.
“We’re guessing until he goes and checks his bank account and finds out how much in debt he is,” said Michael Hopkins, energy derivatives manager at TFS Energy Asia-Pacific, referring to the hundreds of billions of dollars pledged by the Bush administration to stabilize the financial markets.
Pushing through a national emissions trading scheme won’t be the top item on Obama’s hit list, Hopkins said in Singapore. “I think he has other issues to deal with before tackling the environmental side of it,” he added.
Obama wants to cut carbon dioxide emissions to 80 percent below 1990 levels by 2050, reduce emissions to 1990 levels by 2020 and require fuel suppliers to cut carbon content of their fuel by 10 percent by 2020.
He also wants to invest $150 billion over 10 years in low-carbon energy sources that will help create 5 million jobs, and double research and development spending on biomass, solar and wind resources.
A plan to cut emissions, whether a cap-and-trade program, a carbon tax, or new energy technology, was likely to raise costs for consumers, at least in its first years, said Robert Stavins, director of Harvard University’s environmental economics program.
That would push back enactment of a bill on cutting emissions economy-wide from next year to 2010, or even later, Stavins told Reuters recently.
But while it seems likely an Obama administration will usher in a cap-and-trade system, it was crucial that he announce his intentions sooner rather than later, market players said.
“I think once the United States indicates they will move to a global carbon price over time there are fewer excuses for the rest of the world,” said Connell Burke, head of Australian power at Westpac’s commodities, carbon and energy group in Sydney.
For the moment, most analysts were wary.
Leading Australian environmental and sustainable energy analyst Mark Diesendorf said he was cautious about Obama, drawing a parallel with the Australian government’s failure to meet some of its 2007 clean energy election pledges.
“He has promised renewable energy $150 billion over 10 years — I’d like to see the first $15 billion funded in his first budget. One hopeful sign is that during the election campaign Obama didn’t surrender to all the demands of the coal industry,” said Diesendorf, of the Institute of Environmental Studies at the University of New South Wales in Australia.
He said the Australian government was elected partly on its promises to cut greenhouse gases and expand renewable energy. “However, in its first budget in May 2008, it funded almost none of its promises to renewable energy,” he added.
Hopkins of TFS believed an Obama administration would not push the United States to ratify the Kyoto Protocol immediately.
President George W. Bush pulled out of Kyoto in 2001, saying emissions curbs would hurt U.S. industry and that the pact unfairly excluded big developing nations such as China and India from binding caps during its first phase, which expires in 2012.
“I honestly believe that Obama is committed to paying attention to the environment and reducing emissions. But I don’t think it means he is going to get involved in Kyoto in the foreseeable future,” he said.
The carbon market is anxiously awaiting the outcome of talks at the end of next year meant to agree on a broader pact to replace Kyoto. Getting the United States to make substantial pledges on emissions and funding for clean technology is regarded by many developing nations as crucial to the talk’s success.
Failure could derail a U.N.-backed carbon trading scheme worth billions a year through investment in clean-energy projects in developing nations.
(Additional reporting by Tim Gardner in New York) (Editing by Clarence Fernandez)
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