A new wave of pessimism seems to be washing over the economy. Its source is hard to pinpoint but there is no shortage of candidates: rising unemployment (if a declining rate of rise), second thoughts about the recovery of the stock market and even the Administration's rhetoric which in recent days has shifted away from a relentless focus on jobs. I would like to suggest another potential cause, however. So far there is little evidence of an igniting factor in the economy, in other words, a new engine of economic growth. Replacing the tens of thousands of jobs lost in auto manufacturing, finance and construction to this recession will require more than a modest uptick in consumer spending. It will require new innovation and new industries. One such igniting factor might be clean technology and infrastructure. However, green jobs have yet to materialize in substantial numbers so much so that Democratic pollster Stan Greenberg recently called on Democrats to stop talking about green jobs to lower expectations.
I do not share Greenberg's pessism about green jobs. However, I do believe that to realize their full potential as a job creating machine, enough to power a new wave of prosperity, clean energy and clean technology will require important policy changes, changes that have yet to occur.
Why? The energy industry, in particular, electricity, at the center of the clean technology promise, remains perhaps the most regulated industry in America. Its very potential as a catalyst for economic growth is a function of its slow rate of adoption of new technology for decades. Over the last thirty years, a series of industries underwent regulation, including transportation, telecommunications and financial services and all became engines of economic growth. Energy, in particular electricity, however, remains frozen in a largely transitional state of deregulation that came to an abrupt halt in the 1990s. Before clean energy can realize its full potential, it is likely to require a new regulatory framework to unlock its economic potential.
One policy reform that many believe can help accelerate adoption of clean, renewable energy and clean technology is putting a price on carbon. Legislation to do just that in the form of the American Clean Energy and Security Act (ACESA) is now working its way through Congress, however, its impact will not be felt for a number of years.
Another type of policy reform likely to be equally critical is revisiting the state of our electricity network. Currently, the grid whose very name reflects its creaky status is too often outdated, undersized for today's energy needs and dumb, making inadequte use of information technology. Legislation to improve security, expand transmission capacity and upgrade the grid's information capability is also making its way through Congress and many provisions are part of the ACESA bill. However, measures as seemingly straightforward yet critical to creating clean technology jobs as creating a common interface for solar hookups remain controversial. Congress has yet to pass a national Renewable Electricity Standard.
The problem with our highly regulated electricity network is that it leaves the decision to deploy new clean technologies to a small group of buyers, utilities who may in their area be the only customer in town. Trade in electricity, meanwhile, is hindered by lack of transportation capacity. While electricity can cross the country in about 1/60th of a second--the same speed as computer bits at the speed of light--it is impossible, currently to buy electricity outside one's immediate area, due to capacity constraints. Compare that with the global growth unleashed by being able to purchase everything from softballs to software globally.
To be sure policy changes must be well considered. The examples of Enron and the banking crisis on Wall Street show that not every regulatory change is good. On the other hand, to hold to the past is no answer if it impedes innovation and job creation.
In short, to ignite not only the immediate economy but also the economy of the next ten years, the Administration and Congress need to move forcefully to remove barriers to the clean economy. Truly green shoots may be the key to truly robust recovery.