Twenty years ago, when I was fighting to protect coastal areas from overdevelopment, the reigning stereotype of environmentalists was that we never met a regulation we didn’t like. The counterpart to that type-casting was that businesspeople saw every regulation as a direct attack on the bottom line.
It’s a sign of the changing times that last week I read this sentence in Business Week: “Thanks to smart regulation, Germany has become a global powerhouse in green energy.”
That’s right, smart regulation enhances the bottom line. In Germany it has given rise to a green energy sector that generates $33 billion in annual sales and employs more than 235,000 people.
Germany isn’t the only nation trying to bolster the clean energy market, but what makes its regulations so smart is consistency and long-term planning: Germany ensures that wind and solar power generators will be guaranteed an above-market price for electricity for as long as 20 years.
The Business Week article writes: “The crucial point,’ says Paul Buchwitz, a Deutsche Bank fund manager who focuses on renewable energy, is ‘you know how much you will get in advance.’”
Compare that to the regulatory situation in the United States, where the main green energy incentive--the renewable energy tax credit--has to be extended every 1 to 2 years. It has been allowed to lapse three different times since 2000, prompting some investors to leave the market. It’s up for renewal right now, and its future is uncertain. If it expires again, the U.S. could loose 75,000 jobs in the wind sector in one year alone.
Businesses crave predictability. If you are a fund manager deciding whether to invest $100 million in a plant that manufactures silicon solar panels for the U.S. solar market, you have very few sign posts telling you what the landscape will look like in 5 years, never mind 20.
It doesn’t have to be that way in the United States. We can write the rules of the game so business can scale up clean energy solutions quickly and profitably. We can give investors greater clarity, so they know what the rules will be for a long period of time.
Ideally regulations that spur market growth should be so successful that they become redundant. Japan passed green energy regulations similar to Germany’s, and the sector has expanded so dramatically that solar power is already cost competitive with conventional power. The government has largely phased out subsidies for the residential sector.
It’s true that 20 years ago some of my battles over coastal regulations ended up in acrimony or court. But today, I spend a lot of time in board rooms talking with CEOs about national policies that will help bring cheaper solar panels and more efficient appliances to market.
Smart regulations--those that are both environmentally sustainable and good for investors--are something we can agree on and need to make happen.