Friday, March 26, 2010

New legislation to Amend Recovery Act & Restrict Overseas Products

Senators Charles E. Schumer (D-NY), Bob Casey (D-PA), Sherrod Brown (D-OH) and Jon Tester (D-MT) requested that stimulus spending on a renewable energy program is discontinued until restrictions are implemented ensuring that the grantees of federal funding for these projects utilize domestic construction materials and products. The senators have cited the fact that nearly 80 percent of $2.1 billion in wind energy U.S. Recovery Act grants were approved for foreign-owned companies. Much of the recent consternation is over a $1.5 billion Texas wind power project that according to Sen. Schumer would create 3,000 green jobs in China but only 300 in the U.S.

This group of senators requested a moratorium on the distribution of section 1603 grant funding and awarding of any further grants until an amendment to the stimulus package is approved by the legislative process. Section 1603 of the Recovery Act allocates 30 percent cash grants for energy property in lieu of federal tax credits. Furthermore, they have authored new legislation entitled the American Renewable Energy Jobs Act, which would amend the Recovery Act and require that stimulus funds be only authorized for clean energy projects that incorporate materials manufactured in the U.S. and/or create a majority of jobs in the country. This is nothing new as “Buy American” legislation intended to benefit the U.S. economy and employment through the use of U.S. government funds has been part of many policies for decades including many infrastructure elements of the stimulus bill but has been impinged upon as the country outsources more of its manufacturing.

The American Renewable Energy Jobs Act proposes to expand the “Buy American” provision to include restrictions on all U.S. trading partners, and to extend the provision to private enterprises. The Department of Energy, which oversees the clean energy stimulus program, stated that suspending the clean energy grants program would require immediate layoffs at U.S. manufacturing plants due to the stoppage of work on major contracts.

What’s more, China is one of the leading global producers of solar panels; many of the power generation projects funded by the stimulus have subsidized the installation of overseas solar products. This is the trade-off for the carbon emissions reductions benefit until the U.S. bolsters its clean energy manufacturing market share, as it is attempting to do by offering more tax credits to companies. Thus, now that health care reform is essentially complete from a legislative perspective, the U.S. has the opportunity to enact comprehensive energy reform to lessen the likelihood of these conflicts from happening in the future.

The development of a clean energy economy is a vague term since it has not been clearly defined whether it means simply the generation and consumption of clean energy power, clean energy manufacturing or both. The Recovery Act was quite good-natured in its intention of funding a fledging alternative energy industry, where many companies struggled to obtain R&D support and competed on an unlevel playing field on the demand side, based on minimal government support from past administrations. However, due to the lack of a sufficient clean technology corporate infrastructure, it was inevitable that much of the funding would aid overseas companies, some of which whom do not even have facilities in the U.S.

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