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Clean energy pulled back from the cliff


Wednesday 2 January 2013

I've just returned from two weeks home in the US for the holidays, where anxieties over the looming ‘fiscal cliff' built to a heady crescendo Monday night as lawmakers took negotiations past the deadline before finally agreeing a deal at the last minute before markets opened today.

It wasn't just financial markets that were watching the unfolding political drama with unease. Globally, clean energy companies also had skin in the game. At stake were a wide variety of clean energy incentives and tax breaks without which, the renewables industry warned, production could drastically slow down. The effects would have likely been felt on both sides of the Atlantic. A sudden end to American subsidies on 1 January would have spooked renewable companies in Europe.

The deal reached last night will extend for a year the PTC and Investment Tax Credits for wind farms, and will also extend tax credits for energy efficient homes, biofuels, and subsidies for corn for ethanol. The extension will be a particular relief for wind farm developers. Projects for 2013 have been on hold until the situation became clear. Companies didn't want to commit to starting construction on a project in 2013 until they knew that they would qualify for the tax breaks.

But the last-minute deal will provide only temporary relief. The tax breaks and subsidies have been extended for only a year, and analysts fear there will be another slowdown at the end of this year if there is again uncertainty about the tax situation in 2014.

There was another item of news in the past week that may cast a cloud of uncertainty over renewable energy investors. Lisa Jackson, the head of the US Environmental Protection Agency (EPA), announced she will step down. Jackson has overseen the effective transformation of the EPA from a policy-enforcer to a policy-maker. As the US congress remains frozen in gridlock and any climate or environmental legislation has become impossible to pass, the Obama administration has quietly expanded the EPA's power. They re-defined carbon as a pollutant – the only country in the world to do so – in order to give the EPA the authority to regulate it.

Jackson was therefore not uncontroversial. Business lobby groups and Republicans have been infuriated by the EPA's perceived power-grab and by Jackson's unflinching approach. They have tried everything they could to block the EPA from exercising these new powers, but to no avail. Jackson has outmanoeuvred the congressional Republicans to this point. With Jackson stepping down, there is anxiety among clean energy companies that a new EPA head will not have Jackson's same steely tenacity.

Bob Perciasepe, the deputy EPA administrator, is taking over the leadership role on an interim basis – and he is tipped by some to be appointed permanently by Obama. He would likely continue Jackson's push to expand the agency's power, increasing regulations on carbon emissions and pollution, which in turn provide business incentives to the clean energy industry.

But will the EPA's new head enjoy the same success in beating back congressional attempts to reign in the EPA and reverse what's been done over the past two years? The clean energy industry is anxiously awaiting the answer.

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Observations and comment from European Voice's environment reporter.

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