As Congress nears final approval of an economic stimulus package, it should be clear on one point: Major investors want a bold, green plan that will spark clean energy investment and allow America to shape its financial and energy future.
The bottom line is that emerging clean-tech industries such as renewable energy and energy efficiency need the support of economic stimulus and other long-term government policies to thrive in the low-carbon global economy evolving in response to man-made climate change. Investors need the reassurance that strong market signals from Congress will provide.
Even as other sectors of the economy sink, a green stimulus package will send a strong market signal to investors that clean energy will be a critical component of Americas future. For example, the wind industry has been hamstrung by tax credits that Congress has been renewing nearly every year. If a green stimulus package could extend the credits by five years or more, investors will be more confident placing funds in this burgeoning industry.
Green incentives that foster energy efficiency also will provide a boost to company bottom lines and investor returns. A study last year by the McKinsey Global Institute, the economics research arm of McKinsey & Co., concludes that major investments in energy efficiency in the coming years could earn double-digit rates of return for investors while cutting energy demand growth by at least half. That boost would mean substantially lower energy bills for U.S. companies. It would also help this country avoid having to build hundreds of new and costly fossil-fuel power plants.
To be fully effective for investors, though, a green stimulus plan must be accompanied by comprehensive national legislation with mandatory limits on greenhouse gas emissions. Such a mechanism that leads to a price on carbon emissions will enable solar, wind and other alternative energies to become economically competitive with fossil fuels.
By providing these incentives, Congress could achieve two goals: assert Americas leadership in the emerging clean-tech global economy and create millions of jobs.