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While Trump targets climate regulations, renewables draw new entrants

Weeks before the 2016 presidential election, attendees at a renewable energy conference in Washington, D.C., kicked around the idea of using a carbon tax to bankroll corporate tax reform and infrastructure spending. That line of thinking, which presumed Democrat Hillary Clinton would win the White House, was dashed by the victory of Republican Donald Trump.

But the recent implosion of a Republican health care bill followed by an executive order aimed at dismantling a major environmental regulation opened the door for a version of a carbon tax that was pitched to the Trump administration in February by former GOP officials, a member of the group said.

The group, which includes former secretaries of State James Baker and George Shultz and former Treasury Secretary Henry Paulson, wants Congress to tax carbon dioxide emissions and distribute the proceeds to U.S. citizens through monthly dividend payments. The scheme is designed to replace federal regulations, including the U.S. EPA's Clean Power Plan that Trump targeted in his March 28 executive order, with a predictable framework more conducive to long-term corporate investment.

Trump, who has said climate change is a hoax, would be an unlikely champion of a carbon tax. But the March 24 healthcare "debacle" — a defeat on the president's first attempt at moving legislation through Congress — showed the perils of trying to repeal "a major national program" without bipartisan support for a replacement, Ted Halstead, CEO of the Climate Leadership Council, which published the carbon dividend proposal, said March 27.

"Right now, the Trump administration is pursuing a repeal-only climate strategy," Halstead said at the Brookings Institution. "There will be a significant backlash, and at that point, Republicans will be looking for a replacement plan. And that is how we are positioning our plan, as the conservative climate answer if and when the Republican party wants to introduce it."

The executive order directs executive departments and agencies to suspend, revise or rescind regulations that "potentially burden the development or use of domestically produced energy resources ... beyond the degree necessary to protect the public interest or otherwise comply with the law." Before the order was issued, Arvin Ganesan, vice president of federal policy at Advanced Energy Economy, said the EPA would still have to regulate emissions absent "legislative action or a rulemaking stating that carbon does not impact or endanger public health."

The Clean Power Plan, an embattled rule to limit carbon dioxide emissions from power plants, was viewed as a potential demand driver for clean energy, particularly in regions without state renewable energy mandates. But the rule was never considered vital for the industry's growth. The U.S. Energy Information Administration last year said renewables will generate about 23% of the country's electricity by 2040. The Clean Power Plan would bump renewables' share up to an estimated 27%, the EIA said. More significant, the Clean Power Plan would function as a "national insurance policy" to sustain the transition away from coal-fired generation in the event that natural gas prices rise, said Ethan Zindler, head of the Americas at Bloomberg New Energy Finance.

"Renewables represent an attractive business opportunity in light of several trends, such as the dramatic drop in the cost of renewables that have made their energy production competitive," AES Corp. President and CEO Andrés Gluski said on a February earnings conference call. "Today, renewables are the dominant type of new generation built across almost all of our markets, and long-term [power purchase agreements] are available for renewables, providing predictable, stable cash flows."

AES, which is acquiring the solar project developer sPower, is working to reduce the carbon intensity of its energy portfolio "while ensuring solid growth in cash flow and earnings," Gluski told Wall Street analysts.

"Every conventional energy company, virtually, says, 'I'm going to be a solar company' or 'I am a solar player' because that's their job, they have shareholders and they have to skate to where the money will be. Clearly, solar is one of the areas where money will be," SunPower Corp. Chairman, President and CEO Thomas Werner said March 15 at a utility industry conference.

Companies outside of the energy sector are also expected to be a source of increasing demand for clean energy. In its annual report to the SEC, Google Inc. parent Alphabet Inc. called climate change "one of the most significant global challenges of our time." The company said it expects to power all of its operations with renewable energy beginning in 2017.

"Sure enough, the demand that was there November 7 is [still] there," Steve Vavrik, chief commercial officer at Apex Clean Energy, said March 16 at a renewable energy conference, referring to the day before the November 2016 election. "More and more buyers are coming. … They want what we're selling, and they'll find a way to negotiate the uncertainty."

The Climate Leadership Council's carbon proposal, which Halstead said is an opportunity to "get a smaller government and far less pollution at the same time," is being presented as a tool to spread advanced energy technologies beyond the ranks of the wealthy. The plan suggests allowing individuals to borrow against future dividends for "clearly defined purposes" such as electric vehicles.