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CAPAF Recommendations on Green Infrastructure and Economic Recovery

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**This memo has been updated. Please see the most recent version of CAPAF’s strategy for a green stimulus and recovery at http://www.americanprogressaction.org/issues/2008/green_recovery_memo.html

Policy Recommendations:

  • Energy Efficiency and Conservation Block Grants: Appropriate $2 billion annually over five years to fund energy audits and other energy efficiency improvements, and drive resources directly to states, cities, and counties.
  • Green Jobs Act Workforce Investment: Fully fund the Green Jobs Act, authorized in the 2007 EISA at $125 million per year to provide job training and workforce investment in energy efficiency and renewable energy installations.
  • Weatherization Assistance Program: First, fully fund the Weatherization Assistance Program at $900 million, the amount Congress is authorized to spend on the program in FY 2009, and then expand support to cover 1 million homes.
  • Low Income Home Energy Assistance Program: Fully fund LIHEAP at its authorized level of $5.1 billion, and expand the energy-efficiency retro fit component by instructing HHS to allow 25% of funds to go toward retrofits.
  • New Starts Transit Project Investments: The federal New Starts and Small Starts programs (for new fixed-guideway transit lines) should be doubled from $1.57 billion to $3 billion, to keep up with rising demand. Further, $1.7 billion should be allocated in grants to transit agencies for the next two years, to reduce transit fares for commuter rail and buses and expands service.
  • Smart Grid Federal Matching Funds: Congress should fully fund and expand the Smart Grid Title (Title XIII) of the Energy Independence and Security Act of 2007, including Smart Grid Regional Demonstration Initiative, the Smart Grid Investment Matching Grant Program, and establishing a “21st Century Electricity System Security and Modernization Fund”.
  • Renewable Energy Tax Incentives: Extend renewable energy Investment Tax Credits and Production Tax Credits to drive new investment into clean energy projects and create 116,000 U.S. jobs and nearly $19 billion in U.S. investment in wind and solar power. Improve incentives for advanced cellulossic bio-fuel production and infrastructure investments in renewable fuel distribution corridors.

BACKGROUND:

The recent economic downturn makes the need for a recovery package urgent and incontrovertible. August unemployment was at 6.1 percent, a five-year high, and employers cut nearly 84,000 jobs, primarily in manufacturing and employment services.[1] New housing construction continued to slow in July, with privately owned housing starts at a seasonally adjusted annual rate 11.0 percent below the revised June estimates and 29.6 percent below the July 2007 rate.[2] For the 18th consecutive month home prices continued to drop, with the S&P/Case-Shiller 20-city home price index falling a record 15.9 percent for the year through May.[3] Finally, the recent upheavals in financial markets make the case for some sort of recovery package all the more compelling.

Working in partnership with the University of Massachusetts’ Political Economy Research Institute, the Center for American Progress recently released a report entitled, “Green Recovery: A Program to Create Good Jobs and Start Building a Low-Carbon Economy.”  The report outlined a strategy for short-term economic recovery that simultaneously achieves longer-term public purposes by laying the groundwork for a clean, low-carbon economy. Specifically, we outline in our report a program of investment that would inject $100 billion into the domestic economy through near-term spending on energy efficiency and renewable energy. We focus on strategies that would ensure the funds are brought to bear rapidly, within an 18- to 24-four month timeframe.

A program of investment in deploying new clean energy technology and improving building efficiency is good short-term economic policy. It would drive immediate spending into some of the hardest hit sectors of the economy in construction and manufacturing, and ensure that an infusion of near-term spending flows directly toward job creation and domestic investment. A strategy for economic recovery that invests in new energy alternatives and smart public infrastructure provides superior improvements in economic performance and job creation when compared to either rebates or comparable spending on traditional energy sources. Put simply, a green recovery package creates more jobs and more good jobs than any other strategy. It deserves strong consideration at this time.

There are many ways in which government spend ing can stimulate the economy and create jobs as part of a recovery program. Public spend ing directed toward a green recovery, however, would result in more jobs than spending in many other areas, including, for example, on rebates for increasing household con sumption, which was the primary aim of the April 2008 $168 billion stimulus program. Near-term investments in energy efficiency and renewable energy also have the added benefit of moving the country toward the low-carbon future necessary to increase our international competitiveness and national security, and avoid the devastating social, economic, and environmental effects of global warming over the long term.

Support Energy Efficiency to Cut Bills and Create Green Jobs:

The Center for American Progress strongly supports two measures contained in the Energy Independence and Security Act of 2007, which were authorized but have yet to be appropriated. These provisions would go a long distance to helping alleviate the middle class squeeze by directly investing in home energy savings for consumers, and further by ensuring that these investments in building energy efficiency translate into solid career track jobs for U.S. workers.

  • ENERGY EFFICIENCY AND CONSERVATION BLOCK GRANTS: The top priority for infrastructure investments in a new economic recovery package should be to fully fund the Energy Efficiency and Conservation Block Grant Program. These block grants authorize $2 billion annually over five years to fund energy audits and other energy efficiency improvements, and will drive resources directly to states, cities, and counties to do the work of home energy audits and weatherization. This block grant program has been authorized, but is awaiting the allocation of funds. It is poised to be a centerpiece of driving new recovery funds directly into communities where it can do the most good, and should receive the highest level of attention in designing a program of economic recovery
  • GREEN JOBS TRAINING: In addition, the Center for American Progress strongly supports full funding of the Green Jobs Act, authorized in the 2007 EISA at $125 million per year. It would provide job training and workforce investment to build a skilled workforce to undertake energy efficiency upgrades and renewable energy installations. The Green Jobs Act could support smart workforce development that ensures a skilled and ready workforce to provide jobs in the construction of green infrastructure, the installation of energy efficient technologies, and the building of a renewable energy industry. It is smart policy, and would put money directly into the pockets of workers and invest in their skills for participating in the workforce in a rapidly changing and increasingly green economy.

Expand Investment in Energy Assistance and Weatherization:

  • WEATHERIZATION ASSISTANCE: Fully fund the Weatherization Assistance Program at $900 million, the amount Congress was authorized in the Energy Independence and Security Act of 2007 to spend on the program in FY 2009. Further, a recovery package should increase funding to allow for the rapid scale up to retrofit 1 million homes next year, and a sustained program to retrofit 1 million homes each year moving forward. WAP has provided weatherization retrofits to 5.6 million low-income families over the past 29 years .Yet there are still 34 million families whose income levels make them eligible, with 15 million of these estimated by the Department of Energy to be good candidates for cost-effective weatherization. By DOE’s calculations, WAP produces enormous benefits: an estimated $1.53 in energy-related benefits, plus $1.16 in ancillary benefits (for a total of $2.69), for every $1.00 in federal funds invested. WAP reduces low-income energy bills by an average of 21 percent (or $358 per year, based on 2005 spending levels), and creates 52 direct jobs for every $1 million of WAP funding, as well as additional jobs for subcontractors and material suppliers.[4] However, WAP is consistently underfunded. In fiscal year 2008, WAP was authorized at $700 million, but only funded at $227.2 million.[5] It is a highly effective program that also serves the neediest Americans.
  • LIHEAP: Fully fund the Low Income Home Energy Assistance Program at its authorized level of $5.1 billion, and expand the energy-efficiency retro fit component. Under LIHEAP, states may allocate up to 15 percent of their basic grant for low-cost residential weatherization or energy-related home repair, and in some cases up to 25 percent, with authorization from Health and Human Services. Fully funding LIHEAP and instructing HHS to allow states to use up to 25 percent of grants for home energy retrofits would leverage money immediately. This program cuts heating and cooling costs for families, and relieves energy price pressures for all Americans by cutting demand for energy. While the Energy Policy Act of 2005 authorizes LIHEAP funding at $5.1 million dollars per year, President Bush’s 2009 Budget request to Congress asked for a mere $2 billion dollars, a 22 percent cut from FY2008 funding. As part of the 2008 Economic Stimulus Package, a bipartisan group of Senators led an effort to offer $3.6 billion in additional funds, and Senators Sanders and Snowe offered an amendment to authorize an additional $1 million to the program. The Center for American Progress believes that Congress should fully fund LIHEAP, in addition, eligibility should be expanded to reach higher up the income scale at this time of increasing economic hardship due to rising energy costs, while the proportion of money dedicated to the long term fix of home energy weatherization should be dramatically expanded as part of a national commitment to cut energy use in American homes.

Increase support for Transit, Grid, and Renewable Energy Investments:

  • TRANSIT: The funding of federal transit projects dramatically lags behind demand created by worthy projects around the country. The federal New Starts and Small Starts programs (for new fixed-guideway transit lines) should be doubled from $1.57 billion to $3 billion, to keep up with rising demand. In fact, demand for New Starts funding is so great that most cities offer far more than the required local match to secure federal funds. There are currently 16 projects under construction, yet roughly 300 transit projects are authorized in the current federal transportation bill, and funding is far below the need, resulting in a highly competitive, time consuming process to achieve federal approval. As a result, only about a dozen projects receive funding every year. Increasing funding to meet demand should be a critical federal priority, and the existing pipeline of approved projects insures that funds could be rapidly moved into construction of projects. The recent energy bill passed by the House also included a key provision for transit, the Saving Energy Through Public Transportation Act (H.R. 6052, passed by a vote 322-98, with 91 Republicans, Vote 467, 6/26/08), which reduces transit fares for commuter rail and buses and expands service through $1.7 billion in grants to transit agencies for the next two years. These funds could also be used for the escalating operating costs of public transportation and would be available to both rural and urban areas. In addition, moving these urgently needed transit funds should be included in a near term package of stimulus spending. Overall, efforts should be made to fully fund federal transit programs in 2009 at the $10.3 billion level authorized by SAFETEA-LU as well, in the effort to drive economic stimulus and recovery at the local level.
  • SMART GRID: Regional smart grid projects are increasingly being pursued around the country, yet they would benefit enormously from an influx of public investment. A smart grid combines advances in information technology with innovations in power system management to create a significantly more efficient distribution system for electrical energy. Smart grids help defer construction of unnecessary new generation by actively managing electricity loads; reduce costs from outages through active grid management; and increase demand-side efficiencies using advanced controls and diagnostics. Congress should fully fund and expand the Smart Grid Title (Title XIII) of the Energy Independence and Security Act of 2007. Funding the Smart Grid Regional Demonstration Initiative, provides up to a 50 percent cost share to utilities for qualifying smart grid technology investments included in a demonstration project (up to $100 million per year for the next five years). Increasing support for the Smart Grid Investment Matching Grant Program, provides reimbursement of one-fifth (20 percent) of the cost of qualifying smart grid investments. Establishing a “21st Century Electricity System Security and Modernization Fund” will further help to rapidly deploy smart grid technologies. In addition to stimulating jobs and investment, the environmental and energy savings benefits of the smart grid are enormous. A Pacific Northwest National Laboratories study estimates that the value of an energy system transformed with smart grid technology could yield savings in excess of $80 billion over the next 20 years.[6] A study by the independent RAND Corporation identified potential benefits exceeding $100 billion over the next 20 years in two of the five smart grid deployment scenarios it examined.[7]
  • RENEWABLE ENERGY: The House recently passed the Comprehensive American Energy Security and Consumer Protection Act (H.R. 6899), which included the Renewable Energy Tax Credit Package (similar to provisions passed in H.R. 5351, passed with bipartisan support, 236-182, Vote 84 2/27/08 and H.R. 6049, passed 263-160, with 35 Republicans votes, Vote 344, 5/21/08). The extension of the Investment Tax Credit, and the Production Tax Credit are critical to drive new investment into energy projects that will create good jobs and build new markets for American technology. Allowing these tax credits to expire could cost 116,000 U.S. jobs and nearly $19 billion in lost U.S. investment in the wind and solar industries alone. Generous and stable federal tax incentives and credit subsidies are necessary in the near term, to encourage private investment during the nascent stages of these industries, which are sources of manufacturing, installation, and service jobs in all corners of the country. Further, for solar, Congress should allow the credit to be used to offset the alternative minimum tax, and remove the existing limitation that prevents public utilities from claiming the investment tax credit. In addition, it should fund and expand the following programs established in the 2007 Energy Independence and Security Act to help build advanced biofuels infrastructure: Renewable fuel infrastructure grants for retail and wholesale dealers, and Pilot grant programs to invest in renewable fuel distribution corridors, as well as providing federal loan guarantees for the next generation of advanced biofu els, and creating a cellulosic biofuels small producer tax credit of $0.30 per gallon for the first 30 million gallons[8].

 Endnotes

[1] Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey,” available at http://www.bls.gov/CPS/.

[2] U.S. Census Bureau and U.S. Department of Housing and Urban Development Joint News Release, September 17, 2008, available at http://www.census.gov/const/newresconst.pdf (New construction data available Wednesday, September 17th at 8:30am EST.

[3] Les Christie, “Home prices post record 15% drop,” CNNMoney.com, available at http://money.cnn.com/2008/06/24/real_estate/home_prices_CaseShiller_April/index.htm

[4] Weather Assistance Program information can be found at http://www.waptac.org/si.asp?id=1029.

[5] U.S. Department of Energy, “Sources of Funding for the Weatherization Assistance Program,” available at http://www.eere.energy.gov/weatherization/source_fund.cfm.

[6] For more information, see GridWise at Pacific Northwest National Laboratories homepage, available at http://gridwise.pnl.gov/moreinfo/faqs.stm

[7] RAND Corporation, “Estimating the Benefits of the GridWise Initiative” (2004), available at http://www.rand.org/pubs/technical_reports/2005/RAND_TR160.pdf

[8] Jake Caldwell, “Fueling a New Farm Economy” (Washington: Center for American Progress, 2007), available at http://www.americanprogress.org/issues/2007/01/farm_economy.html

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