The prospects for a comprehensive U.S. climate bill are at an all time low. Senator Gregg (R-NH) recently handicapped its chances of passage in 2010 at “zero to negative ten percent.”  In retrospect, the climate bill died last August when the Senate acknowledged that the Health Care debate would stretch into the fall. As a consequence, the climate bill debate was pushed to an election year when controversial legislation is rarely passed. 

Since last August, the climate bill’s prospects have only gotten worse. Democrats lost two Governorships in November due, in part, to the party’s strong support of controversial proposals like cap and trade. In December, the UN failed to meet even low expectations for the Copenhagen climate summit and the integrity of its global warming research came under fire. 

Most recently, the Democrats lost their supermajority in the Senate with the special election of Scott Brown (R-MA).  President Obama reiterated his desire to pass climate legislation in his State of the Union address, but his remarks were brief and came after more pressing proposals.

There are efforts for a compromise on climate legislation, but they may be too little too late. Senators Boxer (D-CA), Graham (R-SC), and Kerry (D-MA) are working on a bill that would attract bipartisan support by replacing cap and trade with softer emission caps and add incentives for nuclear power and offshore drilling.

Unfortunately, the House has already passed cap and trade and will not drop it with out a fight, just as it fought to keep the public option in health care legislation. Representatives will point out that removing the climate bill’s centerpiece will weaken President Obama’s ability to negotiate a global climate treaty when the UN meets later this year in Mexico City. Another problem is that Congress is scheduled to leave Washington on August 7, which leaves only six months to get substantive work done this year.

The jobs bill, financial industry regulation, and a health care bill are all above climate on the majority party’s list of priorities.  Even a bill that has the Senate votes may not be able to pass due to the short and crowded calendar.

Another compromise on climate would be to pass a standalone clean energy bill. The energy bill would include a federal Renewable Portfolio Standard (RPS) and provisions for smart-grid infrastructure, but not a cap and trade system. A version of the bill, the American Clean Energy Leadership Act of 2009 (S.1462), was passed by the Senate Energy Committee on June 17, 2009. 

Like the Boxer-Graham-Kerry compromise, this bill would be opposed by the House, and difficult to pass with a crowded calendar. Also, the federal RPS by itself has limited support in the Senate. In December 2007, an RPS was removed from the Energy Independence and Security Act of 2007, after receiving only 59 Senate votes.  Democrats have increased their majority since then, but support is still fragile due to higher unemployment and lower fossil fuel prices.

The most likely 2010 victory for cleantech lobbyists is the jobs bill, which was the focus of President Obama’s State of the Union. The House’s Jobs for Main Street (HR.2847) includes $2b billion for the Department of Energy (DOE) Loan Guarantee program which would provide $20b in loans to cleantech companies. This program has been criticized for only facilitating one loan since it was established in 2005. 

The House bill attempts to address this problem by lowering the credit requirements for smaller companies, and adding a new category for energy efficiency projects. The additional $2b in funding would replace what was taken from the program’s budget last summer in order to extend the more popular “cash for clunkers” program. 

The White House supports the House’s bill, but recommends adding $5b to the Advanced Energy Manufacturer’s Tax Credit (MTC), and creating a new “cash for caulkers” program. The MTC program recently awarded $2.3b in tax credits to 183 upstream cleantech companies in a solicitation that was oversubscribed three to one.  It is a far more successful program than the loan guarantees because the tax credits do not trigger a burdensome environmental review. The MTC has awarded 100% of its stimulus bill funding versus 0% for the loan guarantee program. The proposed “cash for caulkers” program is a new idea that would provide rebates for individuals that make energy efficiency improvements to their homes.

Additional cleantech provisions may also surface as the jobs bill is drafted in the Senate. At the top of the wish list from the renewable energy industry is an extension of the Treasury Grant program which is currently unavailable to projects that break ground after 2010. This stimulus bill program addresses the project financing bottleneck currently plaguing wind and solar project developers by converting tax credits into cash grants.  Since it was launched last August, the Treasury Department has distributed more than $2.3b to 240 projects, and there is no cap on the program. Extending the grants through 2012 would appeal to utility-scale project developers with long lead-times that have little use for the current program.

Today cleantech lobbyists have more influence than ever, but there are limited opportunities to expand subsidies in 2010. The smart play is to put the best eggs in the jobs bill basket.

Robert Lahey is the Senior Legislative Analyst at Ardour Capital Investments, LLC, and can be reached at rlahey@ardourcapital.com. Founded in 2002, Ardour Capital is the leading research and investment-banking firm exclusively focused on energy technology, alternative energy and power, and clean & renewable technologies. Ardour Capital publishes in-depth company coverage and industry specific research. Ardour Capital offers private and public companies a full range of corporate finance, investment banking and capital market services. Ardour Global Indexes is a family of pure play alternative energy indexes that is the primary measure of cleantech equity performance.