Those of us who watch television, use the internet or live within the reach of 24-hour reporting have, in recent weeks, certainly heard a thing or two about the impending “fiscal cliff”. If it comes to pass – it’s due to take effect on January 2nd – this self-imposed catastrophe will impact our economy across the board. Will clean tech be hit as hard as everything else? I’m a fan of nuanced answers, but in this case: Yes.
In simple terms, going over the fiscal cliff will mean incurring a budget sequester, initiating automatic spending cuts of $1.2 trillion over nine years. This amounts to a reduction of about 8.2% for the fiscal year that started on October 1st, meaning that in real terms the cuts will be even greater (in order to make up for the three months of spending that will have already happened). Defense spending would take the biggest hit, but would still only account for less than half of the cuts. Several environmental organizations released a report identifying the major impacts the sequester would have on environmental and conservation programs, generally categorized as non-defense discretionary spending. Many of these cuts have to do directly with government support for renewable energy, energy efficiency, and other “clean” technologies.
For starters, the White House Office of Management and Budget (OMB) released a full report about the impacts of the sequester, and predicts cuts of $148 million from DOE’s Energy Efficiency and Renewable Energy program (you can find a simplified breakdown of all predicted cuts by department here). These cuts would come from research and development, and other programs that are directly responsible for technology development and implementation. For renewable energy projects that do get off the ground, the Department of the Interior has been identifying “low conflict zones” for utility-scale solar energy development. Identifying these zones will help streamline projects while ensuring that development occurs in areas with low environmental impact (among other benefits). The sequester will likely chip away at this program, as well, which will almost certainly slow the permitting process and reduce funding for identifying low impact sites for utility-scale renewable energy projects. And you can say goodbye to the Production Tax Credit, the lifeblood of wind energy in the US (and which I discussed in a previous post).
A range of other impending cuts stands to impact clean tech industries by significantly reducing government support at all stages of development and implementation. Another example is the Treasury Department’s Renewable Energy Grants program, which helps finance renewable energy projects and will be reduced (though not eliminated) by sequestration. While numerous cuts have been explicitly identified, there is still a good deal of uncertainty surrounding the fiscal cliff and our unprecedented charge toward it. No one is sure exactly how every program would be affected, nor how the cuts would impact the sectors they support. We do know, however, that the fiscal cliff is something we should avoid at all costs, even if we can’t outline every downstream impact. I can make a similar claim about climate change, but I sincerely hope we choose a different course of action with respect to sequestration. For now, following our behavior regarding the former would leave us hurtling toward the cliff, all the while incoherent about why we haven’t acted.
The Verdict: Going over the fiscal cliff would have severe impacts across the board. Just like our economy, the growth of many clean tech industries is fragile and a blow of this magnitude could leave them reeling for years (not to mention the delays in critical research and development). Failure to avoid the cliff is unnecessary and inexcusable – and, unfortunately, quite possible.