Businesses Need a Clear Path to Clean Energy, CEOs Tell Obama

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As the economy starts to recover, U.S. businesses will need clear signals from Washington if President Obama hopes to shift them to a more sustainable, clean-energy future, a group of outside advisers from industry, labor and finance told the president today.

The strongest signal would be a price on carbon, several members of the Economic Recovery Advisory Board, including the CEOs of GE and Caterpillar, told the president. But that isn’t the only option.

Congress can provide more incentives, such as grants to develop advanced batteries, smart grid technology and better energy efficiency in buildings and transportation. Potentially more effective, Obama can also use the bully pulpit of the presidency to refocus the goal of industries, the way he did yesterday in announcing tough new fuel efficiency standards for vehicles.

Once entrepreneurs and business leaders are convinced that Washington is investing in clean energy for the long term, they will dive into innovations and business opportunities to meet the challenge, said board member William Donaldson, a former chairman of the SEC.

“People need to recognize that it’s an opportunity that’s not going to go away. That it’s going to be a focus for a long time,” he told the president.

Obama created the economic advisory group to flesh out the challenges facing businesses and workers, and pinpoint the opportunities.

The 16-member board includes former government officials, the heads of major corporations including GE, Caterpillar, TIAA-CREF, UBS and Oracle, and the union leaders of the AFL-CIO and SEIU. With that makeup, the president couldn’t help but hear some of the same protectionist concerns and requests for more government spending that have tied up the climate legislation in Congress.

Richard Trumka of the AFL-CIO urged the president to add “trap doors” to any climate law – escape clauses so businesses won’t have to cut their emissions if the rest of the international community, particularly China and India, don’t go along.

Penny Pritzker, a real estate developer and heir to the Hyatt hotels fortune, suggested that the government spend more on incentives to get property owners to invest in energy efficiency. Job creation – one focus of the White House meeting – would come with that, she added. “The industry’s certainly not against this, it’s just, is it realistic to get it done right now?”

Several members stressed that the United States was falling behind Europe and other competitors in developing alternative energy technology.

Lack of financing, they noted, has been a large part of the problem. Mark Gallogly, founder of Centerbridge Partners, suggested the government find ways to encourage more private investment, particularly in renewable energy development, if the U.S. hopes to meet the greenhouse gas reduction goals being hammered out in Congress.

“You’re going to have to start building soon, really soon, if you’re going to make this goal work,” he warned.

The fastest action on the goals of the meeting – clean energy development and jobs – could come from the president himself.

Obama set the example yesterday when he stood with the CEOs of 10 car companies, government regulators, governors and environmental groups to announce a deal they had worked out to raise fuel efficiency standards for the U.S. auto fleet to 35.5 mpg by 2016. 

Members of the advisory board today suggested Obama’s next target: utilities.

The nation’s power providers could be engines of energy efficiency, but too often they are roadblocks instead. The reason is that in most states, utilities have no incentive to reduce power use – in fact they have financial incentives to encourage their consumers to buy more power instead. Doerr held up the alternative example of California, where power producers have been decoupled from power sellers.

“If you reward utilities for saving electrons, with a small amount of federal money you’ll change their policies forever,” he said.

Obama clearly values agreements like the auto industry deal that bring everyone on board.

The president had a few positive words about the near-term outlook for the economy, as well, telling the board: “We expect there’s going to be some stabilizing of the economy.”

That doesn’t mean an immediate turn around for workers, though, he said: “The concern we have is even in a stabilized situation, there is the prospect of higher unemployment for some time to come.”